Treasury’s consultation paper on governance standards for charities to come into effect 1 July 2013 under the new Australian Charities and Not-for-profits Commission (ACNC) has the right approach and should provide all of us with increased confidence that our donations and tax dollars are in good hands.

The paper draws on existing legislative principles for corporations to strengthen the accountability of management of charities and not-for profits and puts them in line with other business sectors.

Here is a very quick overview of the six governance standards, You can visit the ACNC website where there is additional guidance material.

• Purpose: This standard is set out simply and clearly. As a charity you are required to have a stated charitable purpose and you need to be able to communicate it to stakeholders and demonstrate your activities are in keeping with the purpose.
• Accountability to members: This one is even more simply put. If the charity has a membership then those managing the charity should be accountable to them. There must be modes for members to query or raise concerns about the governance of the charity.
• Compliance with Australian laws: You might think this one is a “no brainer”, however, there is a little more to it. The ACNC wants to maintain some flexibility here to be able to take regulatory action against illegal activities without necessarily causing the charity to lose its charitable status. That is, if the situation can be corrected and the charitable purpose resumed, the ACNC wants the leeway to help make this happen.
• Responsible management of financial affairs: Like the first two, this is cut and dried: be fiscally responsible.
• Suitability of responsible entities (an individual, corporation or trustee): This standard draws on the approach of other regulators such as ASIC and APRA and holds the charity accountable for ensuring potentially unsuitable people are not in positions of authority. For example, it draws on disqualification under the Corporations Act as an example of an improper person.
• Register of disqualified responsible entities: Again the ACNC is seeking additional scope. The ACNC will have the ability to disqualify an entity and maintain a published register of all those they disqualify. This will allow them to take action where the Corporations Law and other laws do not come into effect. Assuming they apply their powers appropriately, the register will be an additional protection for stakeholders of charities.

IN ESSENCE – The standards are not onerous and generally bring charities in line with other organisations we do business with. To meet the standards’ objectives, charities will need to do enough to demonstrate compliance without creating a bureaucratic nightmare that significantly increases the ratio of administration costs to the funds directly employed for the charitable purpose.