What are they?
The Governance Standards for charities are set out in the Australian Charities and Not-for-profits Commission Regulation 2013 (Cth).
The Governance Standards are a set of core, minimum standards that provide a framework for governance and compliance for those running a charity. An organisation must meet the Australian Charities and Not-for-profits Commission (ACNC) Governance Standards to be registered and remain registered as a charity. Compliance with these standards is monitored by the ACNC.
The Governance Standards require charities to:
- operate in fulfilment of their charitable purpose, and
- operate lawfully and be run in an accountable, transparent and responsible manner.
The Governance Standards help charities to remain trusted by the public to undertake their charitable mission to benefit society and the world.
Who must comply with the Governance Standards?
All registered charities must comply with the Governance Standards. The only exception is a limited category of charities classified as ‘Basic Religious Charities’.
What do the Governance Standards cover?
The ACNC's six Governance Standards cover:
- Purposes and not-for-profit nature,
- Accountability to members,
- Compliance with Australian laws,
- Suitability of Responsible Persons (i.e. Directors or Committee Members),
- Duties of Responsible Persons, and
- Maintaining and enhancing public trust and confidence in the Australian not-for-profit sector.
Any charity operating overseas must also meet the External Conduct Standards.
What do the Governance Standards require?
Standard 1: Purposes and not-for-profit nature
A charity must:
- be not-for-profit,
- operate for public benefit not private benefit, and
- work towards its charitable purpose.
A charity must be able to demonstrate this and provide information about its purposes to the public. Usually, this is found in various clauses in their Constitution, and is evidenced by their activities, programs and strategic plans.
Standard 2: Accountability to members
A charity that has members must take reasonable steps to be accountable to its members and provide them with an adequate opportunity to raise concerns about how the charity is governed. Usually, this requirement is met by having regular meetings where the members hear reports on the activities of the charity, and have an opportunity to ask questions and be informed.
Standard 3: Compliance with Australian laws
A charity must not commit a serious offence (such as fraud) under any Australian law, or breach a law that may result in a penalty of 60 penalty units or more.
Standard 4: Suitability of Responsible Persons
A charity must take reasonable steps to:
- be satisfied that its Directors or Committee Members are not disqualified from managing a corporation under the Corporations Act 2001 (Cth),
- be satisfied that its Directors or Committee Members are not disqualified from being a Responsible Person of a registered charity by the ACNC Commissioner, and
- remove any Directors or Committee Members who do not meet these requirements.
Standard 5: Duties of Responsible Persons
A charity must take reasonable steps to make sure that its Directors or Committee Members are subject to, understand, and carry out the following duties:
- to act with reasonable care and diligence,
- to act honestly and fairly in the best interests of the charity and for its charitable purposes,
- not to misuse their position or information they gain,
- to disclose conflicts of interest,
- to ensure that the financial affairs of the charity are managed responsibly, and
- not to allow the charity to operate while it is insolvent.
For more information, the ACNC provides details surrounding the purpose of Governance Standard 5 and ways of meeting this standard, as well as providing additional resources and guides.
Standard 6: Maintaining and enhancing public trust and confidence in the Australian not-for-profit sector
A charity must take reasonable steps to become a participating non-government institution under the National Redress Scheme for Institutional Child Sexual Abuse Act 2018 (Cth). If the charity is or is likely to be identified as being involved in the abuse of a person applying for redress, or identified in information given in response to a request for information.
What does my charity have to do to comply with the Governance Standards?
The Governance Standards are a set of high-level principles, not precise rules, so each charity must decide how it will comply with them. We recommend a bespoke Constitution, with:
- a clear statement of charitable purpose,
- charity not-for-profit and winding up clauses,
- clauses referring to the Governance Standards,
- setting out a conflict of interest procedure, and
- other matters required, depending on the particular purpose and work of your organisation, e.g. conflicts of interest policy, register of interests, policies and procedures, to comply with external conduct standards.
How can Sharrock Pitman Legal help?
If you are seeking to establish a charitable organisation and obtain charity registration with the ACNC, please contact our Not for Profit team for advice on the Governance Standards and what your organisation may be required to do to take reasonable steps to seek to meet these standards. Contact us on 1300 205 506 or fill in the contact form below.
The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.
Liability limited by a scheme approved under Professional Standards Legislation.
For further information contact
Dan is a Legal Practitioner at Sharrock Pitman Legal.
He deals with areas of Charities & Not for Profit Law and Commercial Law. For further information, contact Dan on his direct line (03) 8561 3325.