-: Hello and welcome to this short clip
on ACNC guidance and government standards.
And we're looking at part E of module three.
So the big picture, charities in Australia as you can see,
are regulated or guided or looked after by the ACNC,
the Australian Charities and not-for-profits commission.
And they have some rules.
So you've got to meet their governance standards
to not only be registered but you have
to keep submitting reports and following procedures
to remain registered over time.
And so although there's a little subsection
where it doesn't apply the Basic Religious Charities,
this governs 10's of thousands of charities in Australia.
So why, why do we need this?
We're looking at governance, lots of theory,
but let's look at a tangible example
and see why it's so useful and important.
So there was an investigation the ACNC did this
as well as the ombudsmen, and there was a school,
Bendigo South East College and what we had was
the principal of this school, running the college
as a personal fiefdom, like a kingdom, your personal kingdom
you can employ and promote family members,
you can do whatever you want.
You didn't have to follow any rules, is this okay?
And then it says his actions,
this is from the report from the ombudsmen,
show little regard for policy, legislation, regulations,
code of conduct,
or this key one, avoiding conflicts of interest.
Now earlier in module three, we've looked at that important,
those duties of directors, you've got to do the right thing
by the organisation, not by yourself.
So here's an example maybe of an ethical egoist,
who's doing whatever they want for themselves
and has done this for many, many years.
So a couple of examples,
his wife was employed as his personal assistant,
even though she didn't apply for the position.
One of his sons got the
athlete development programme manager role,
even though there was a better qualified candidate.
So these are the examples of misuse and abuse
that can happen in the not-for-profit sector
and that's why having governance rules is just as important.
So how does the ACNC regulate?
Well they are going to get a lot of concerns
or complaints raised and here are some
from their annual report.
Now this isn't in the study guide,
but I want to show you a real example.
In the annual report 716 complains raised in 2017/18,
look at it jump, now that doesn't mean in 2018, 2019,
twice as many people acted badly,
it means that more information is out there
about regulating effectively and if something goes wrong,
put your hand up, make a phone call, lodge a complaint.
So we can see that these issues are linked
to people getting private benefits instead
of looking after the organisation
poor quality governance, criminal activity is taking place.
Harm to beneficiaries, disqualifying political purposes,
so when a not-for-profit starts lobbying
and becoming very political.
This is relevant to the accountants, the reporting issues
and poor quality record keeping.
So these are the kinds of issues that are being lodged
as concerns so then the ACNC can regulate.
So what kind of outcomes were there?
Well over 100 investigations finalised
in the last financial year and then 12 charities
had their registration cancelled, revoked.
So they've got serious power, saying,
"No you can no longer do this".
Notice is served, forcing people to undertake compliance
and this type of activity.
And interestingly, in this financial year,
no penalties, but if you look in the previous years,
quite a large number of entities received penalties.
So this is how it's regulated,
so we have to have good governance
and failure leads to action.
So here's a case study that was published
in the ACNC annual report as well,
they didn't give you the names,
but here's a scenario that they'll look at
and why we need regulations in place.
So commence an investigation, a medium sized charity,
that does religious and educational activity
and it looks like there are
people vulnerable people at risk.
So the charity of course, should make sure it's safe
and there's no harm for other people,
have clear standards of conduct and behaviour,
but what were the issues?
Gaps in the way the charity managed risks.
Safeguarding and handling complaints.
So if a complaint happened,
it looked like it slipped through the cracks.
And they were not satisfied
that the charity's responsible person,
so that's a bit like the directors, of a corporation,
well here we have responsible persons.
Were they acting with care and diligence?
Doesn't seem so.
So the charity however wanted to fix things.
So this isn't just a big slap penalty, it's like,
"Hey, we've investigated, we've got problems,
"you better lift your game, otherwise we will come back
"and we will revoke your status if you don't fix this."
So what kind of standards apply?
So these are going to apply to your responsible persons
to the charity, slightly similar to the directors duties,
so five standards.
The purpose of the charity and it's got to fulfil
it's purpose of it's not-for-profit nature,
it cannot go and do other things
like make private benefit to a responsible person.
They are accountable to the members
in the same way that an organisation
should be properly accountable to the shareholders.
Needs to comply with Australian laws.
Their responsible people,
the people in charge should be suitable.
Because of course if you're dishonest,
then a great way to bring money in is to setup a charity
and have the funds roll in and then keep it for yourself
and drive that beautiful sports car.
And finally, duties of responsible persons.
Now this ties in of course very similarly,
to our directors duties that we looked at
for corporations earlier in module three
and this is identical,
act with reasonable care and diligence.
Act honestly in the best interests of the charity.
So very, very similar.
Do not misuse your position, identical.
Do not misuse information.
So these are virtually identical
to the corporations act directors duties.
You need to disclose any conflicts of interest.
Make sure the financial affairs are managed responsibly
and just like our insolvent trading provisions,
do not allow a charity to operate while insolvent.
So we can see a good crossover between what a director
of a corporation should do
and what a responsible person of a charity should do.
So I hope that overview with some practical examples
helped you see that governance in the public sector
is just as important and just as highly regulated
as the corporate sector.
Thank you.