Are you an Australian registered charity operating in the Pacific? Part 4

Make sure you’re complying with the ACNC External Conduct Standards

Sarah Johnson

Many Australian not-for-profit organisations operate in the Pacific region. If you are a charity registered with the Australian Charities and Not-for-profits Commission (ACNC), you are required to ensure you carry out your activities in accordance with the ACNC External Conduct Standards (ECS).

In Part 4 of our series on the ECS, we look at ECS 3 – Anti-fraud and Anti-corruption.

This standard requires charities to take reasonable steps to:

1. minimise any risk of corruption, fraud, bribery or other financial impropriety by its Responsible Persons[1], employees, volunteers and third parties outside Australia; and

2. identify and document any perceived or actual material conflicts of interest for its employees, volunteers, third parties and Responsible Persons outside Australia.

In its guidance on this Standard, the ACNC states that the purpose of this Standard is to give the public confidence that a charity with operations outside Australia is managed in a way that ensures that it is solvent, risks to its assets are minimised, the charity and its resources are furthering its purposes and the charity is operating in a way that is consistent with its purpose and nature as an NFP.

As with ECS 1, the ACNC does not specify what will constitute “reasonable steps”, but instead states that each charity should take into account:

• its size and the number of staff and volunteers it has;

• the effectiveness of policies and procedures that govern its activities;

• the nature, scale and complexity of its overseas activities or funding;

• it's level of knowledge and experience in managing similar projects or activities;

• the location of its activities and actual or perceived corruption levels in those regions;

• its need for permissions, licenses or other approvals from overseas government bodies;

• its work with third parties, particularly arrangements for third party payments;

• how it identifies and manages conflicts of interest; and

• issues with previous overseas activities.

ACNC guidance in respect of Standard 3 provides some examples of actions a charity can take to minimise the risks of fraud and other financial impropriety, including:

1. Having clear policies and adequate controls for proper and ethical financial management and ensuring that staff, volunteers and others that work with the charity are familiar with those policies;

2. Establishing thorough and appropriate recruitment procedures for staff and volunteers, particularly for anyone with financial or project oversight;

3. Supervising staff involved in fundraising, managing money or financial reporting;

4. Keeping detailed financial records and regularly checking financial statements for any signs of financial wrongdoing;

5. Making provision for staff, volunteers and others that work with the charity to report suspected wrongdoing without fear, recrimination or disadvantage;

6. Implementing a clear conflict of interest policy and keeping an updated conflict of interest register. The charity should also address any conflicts of interest when selecting third parties to provide goods or services;

7. Thoroughly checking a third party's reputation and experience before choosing to work with them and including ethical conduct and good financial oversight as a key criterion when selecting partners; and

8. Ensuring there is a clear written agreement with each third party that sets out the functions and responsibilities of the people involved and properly monitors activities.

For more information on how we can assist your Not For Profit to comply with the ECS, please contact us.

[1]Responsible persons are individuals who are responsible for governing a charity. Generally, a charity’s Responsible Persons are its board or committee members but may also include its CEO.