As a further element of the Not for Profit reform agenda Treasury has published a Consultation Paper and Fact Sheet on a Review of Not-for-profit Governance Arrangements. The published material can be found here.
“It is envisaged that there will be some high-level principles-based mandatory requirements for registered entities, as well as some good practice guidance. There may be a number of instruments used, for example, primary and delegated legislation, but it is intended that all the organisation governance requirements for NFP entities will be centralised through the ACNC.”
The new requirements are planned to be in place by 1 July 2012 and are intended to apply to all not for profits regardless of entity type.
The new uniform governance requirements are intended to replace the governance requirements for companies limited by guarantee in the Corporations Act.
Time for arrangements for State referral of powers for the regulation of State incorporated associations for example is likely to see some duplication of governance requirements for a period of time.
RESPONSIBLE INDIVIDUALS’ DUTIES
The first five (out of 10) consultation questions on the responsibilities of the “leadership” of NFPs (responsible individuals) shows that the sector needs to engage with this particular consultation.
- Should it be clear in the legislation who responsible individuals must consider when exercising their duties, and to whom they owe duties to?
- Who do the responsible individuals of NFPs need to consider when exercising their duties? Donors? Beneficiaries? The public? The entity, or mission and purpose of the entity?
- What should the duties of responsible individuals be, and what core duties should be outlined in the ACNC legislation?
- What should be the minimum standard of care required to comply with any duties? Should the standard of care be higher for paid employees than volunteers? For professionals than lay persons?
- Should responsible individuals be required to hold particular qualifications or have particular experience or skills (tiered depending on size of the NFP entity or amount of funding it administers)?
DISCLOSURE REQUIREMENTS AND MANAGING CONFLICTS OF INTEREST
What is especially on the radar here is the disclosure of remuneration and benefits to responsible individuals. This could mean that salaries of senior leadership will be on the public record.
RISK MANAGEMENT – Internal and external reviews
It is reasonable to expect to see some tiered external review and audit process simular to what is required for companies by guarantee.
MINIMUM REQUIREMENTS FOR AN ENTITY’S GOVERNING RULES & RELATIONSHIPS WITH MEMBERS
What is proposed here are minimum governing rules and member rights. This will have significant implications for unincorporated associations as especially churches whose Constitutions are reflective of their understanding about how their spiritual association should be ordered.
– New Governance requirements for all charities (proposed) – our paper presented at the Annual CMA Conference in June 2012 in Melbourne