The ACNC’s External Conduct Standards are now in force. These standards set out the ACNC’s minimum requirements for a registered charity that conducts any activities offshore. It is important that Boards understand their obligations under the new standards. Board members may well be surprised by the breadth of the standards, the activities that are covered and the compliance required.
The introduction of the standards represent an opportunity for charities to consider the risks they face in relation to their offshore operations and to make positive changes to minimise those risks, while at the same time ensuring they maintain their ACNC charity registration.
Charities subject to the standards
The standards apply to any charity that operates overseas. Operating offshore certainly covers overseas projects, but it also extends to simply sending small amounts of money or other resources offshore.
It applies to a charity that conducts its offshore activities through an unregistered third party. It can even apply to charities that simply purchases goods or services from overseas (an exception might apply if the purchases are small – see below).
The Four Standards
The standards cover the following areas:
- Managing overseas activities and controlling finances and other resources used overseas
- Obtaining and keeping records of overseas activities
- Minimising risk of corruption, fraud , bribery or other financial impropriety and identifying and documenting conflicts of interest
- Protecting children and vulnerable adults overseas
The ACNC does not require charities to submit anything annually to show they are meeting the standards. However, the ACNC can request a charity to provide evidence of its compliance. Charities should keep records of expenditure relating to activities outside Australia on a country by country basis. They should be able to prepare a summary of activities outside Australia on a country by country basis for each financial year, should this be requested by the ACNC.
A new charity seeking registration that intends to have some offshore activities, however small, will be required to describe in detail how it intends to comply with the new standards.
The charity is expected to take reasonable steps to ensure not only its own compliance, but should also consider the compliance of third parties with which the charity works. If the third party is not an Australian registered charity, you must take reasonable steps to monitor not only the overseas activities of that third party, but also any other organisations the third party works with in relation to your project.
Religious charities make up approximately 40% of all registered charities that operate offshore. Unlike the governance standards, there is no exemption from the External Conduct Standards for basic religious charities. Churches which simply send funds overseas to support missionaries are subject to the ACNC’s External Conduct Standards.
ACFID Code of Conduct
The Australian Council for International Development (ACFID) Code of Conduct does not completely align with the ACNC’s External Conduct Standards. However, the ACNC acknowledges that a charity that complies with the ACFID Code of Conduct is likely to meet the External Conduct Standards.
Very Limited Exceptions
Almost all activities that have any overseas connection will result in the charity being required to comply with the External Conduct Standards. The only exception is where:
- The overseas activity is directly related to the charity's purpose in Australia; and
- The activity is incidental to the charity’s operations in Australia.
The examples given by the ACNC are:
- An Australian charity, which helps Australians suffering from cancer, assists a small number of patients to travel overseas for a small part of their treatment.
- An Australian charity, which provides remote rural communities in Australia with sustainable irrigation systems, buys a small amount of the irrigation system supplies offshore.
- An Australian university sends academic staff to an overseas conference.
In summary, if the overseas operations do not solely benefit people or purposes in Australia, the External Conduct Standards will apply. Even if the activities do only benefit people or purposes in Australia, the activities must be small in value and extent before the exception is available.
A charity with any offshore activities should review and document its compliance with the ACNC’s external governance standards. The ACNC has provided some guidance on steps that a charity can take to ensure compliance and these can be found on its website. However, they are examples only and the ACNC has not provided any templates for charities to use. We expect that most charities operating overseas will need to take some additional measures to meet the ACNC’s compliance expectations.
The Explanatory Statement to the Standards states that the steps required will vary depending on the charity’s size, scale of operations inside and outside Australia, the degree of risk of funds being misapplied in the destination country and the location and nature of operations. However, given the ACNC’s current approach to new registrations, it is likely the ACNC will expect a significant level of controls and procedures for any charity that operates offshore.
We would be happy to assist you with undertaking a risk assessment of your overseas activities and implementing appropriate controls and procedures to minimise the possibility of non-compliance with the ACNC’s External Conduct Standards.