ACNC Regulatory Approach
statement for consultation
December 2012
Updated January 2013 to include Appendix A
© Commonwealth of Australia 2012
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with the exception of the Commonwealth Coat of Arms, the Australian Charities and Not-for-profits
Commission logo, photographs, images, signatures and where otherwise stated. The full licence terms
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Source: The Australian Charities and Not-for-profits Commission
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any way, then the ACNC prefers the following attribution:
Based on The Australian Charities and Not-for-profits Commission data
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Introductory note
We invite comments from the public on this preliminary statement of our regulatory approach. This
approach has been developed based on public consultations held between November 2011 and February
2012.
While your comments will not result in a radical change to our underlying approach, as much of this is
set out in legislation, we are interested in hearing:

whether the statement clearly communicates our approach

whether it reflects an accurate understanding of charities and the appropriate approach the
ACNC should adopt

general suggestions for improvement.
In this document, we have highlighted the sections that we are most keen to get your feedback on.
There are specific questions relating to these sections, which you may like to complete.
How to participate
There are several ways you can participate in this consultation:

complete the online survey – this is the
preferred option for written
submissions

attend one of our community
presentations – at most of these events
you can also participate in Treasury’s
consultation on governance standards

different day during the consultation
period
call us on 13 ACNC (13 2262) on
Wednesday 20 February, our dedicated
consultation phone in day, or on a

enter your feedback in this word
document and email it to
[email protected].

send your feedback via post to:
ACNC Regulatory Approach Consultation
C/O Joyce Chia
Level 1, 747 Collins Street
Docklands, 3008
Closing date for submissions: 1 March 2013.
Our commitments to you
We understand that charities are being consulted on a range of matters, both in relation to not-for-profit
reform and on other policy areas relevant to their work. We appreciate your participation and we
recognise that it is a voluntary contribution of valuable time.
If you provide a written submission, we will publish it after it is received (usually within two weeks),
unless you ask us not to.
After this consultation has closed, we promise to publish:

an analysis of feedback

finalised statements on our regulatory approach in a way that shows the revisions made as a
result of feedback and includes comments on other suggestions provided through the
consultation

a review of the consultation process.
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Contents
Introductory note .......................................................................................................................................... 3
1
Our role ................................................................................................................................................. 5
2
Purpose of statement ........................................................................................................................... 6
3
ACNC’s approach .................................................................................................................................. 6
4
Fairness ................................................................................................................................................. 7
5
Accountability ....................................................................................................................................... 8
6
Independence ....................................................................................................................................... 9
7
Integrity ................................................................................................................................................ 9
8
Respect ................................................................................................................................................. 9
9
When and how we will act ................................................................................................................. 10
10
What we can do .................................................................................................................................. 14
11
Further information ............................................................................................................................ 15
Appendix A
How the ACNC intends to act – some examples ................................................................. 16
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1
Our role
1.1
The Australian Charities and Not-for-profits Commission (ACNC) is established by, and
administers, the Australian Charities and Not-for-profits Commission Act 2012 (Cth) (‘ACNC Act’)
and associated legislation.
The objects of the ACNC Act are to:

maintain, protect and enhance public trust and confidence in the Australian not-for-profit sector

support and sustain a robust, vibrant, independent and innovative Australian not-for-profit
sector

promote the reduction of unnecessary regulatory obligations on the Australian not-for-profit
sector.
1.2
1.3
To further these objects, the ACNC will:

register charities and publish a free online register that contains information about these
charities

provide advice, guidance and education to enable charities to understand and comply with their
obligations

work with other government agencies, sector organisations and, where relevant, other parties
(such as foundations) to streamline reporting

actively identify new and emerging risks and opportunities within the sector (for example,
developing resources jointly with the sector to address known issues)

take action under the ACNC Act when charities do not meet their obligations or are not acting as
charities.
The ACNC initially regulates charities (including public benevolent institutions) across Australia
that are registered for Commonwealth tax concessions and other benefits. There are, however,
other bodies at Commonwealth, State and Territory levels that also regulate and affect charities.
This regulatory approach statement applies only to charities registered with the ACNC.
Does this paragraph make the role of the ACNC clear to you?
[If not, tell us what isn't clear and, if possible, how you would improve it].
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2
Purpose of statement
2.1
This statement sets out the ACNC’s preliminary regulatory approach and explains to charities and
other stakeholders how ACNC staff will approach their work. We will consult widely on this
approach before adopting a final statement in early 2013.
2.2
This statement guides ACNC staff in making appropriate and consistent decisions and sets out
the relationships between the ACNC’s values, regulatory approach and decision-making
processes.
3
ACNC’s approach
Understanding charities
3.1
The foundation of our approach is an understanding of charities. We recognise that the purpose
of charities is to benefit the public. We understand that charities contribute to our society in vital
ways, including by addressing disadvantage, enabling us to live meaningful and rich lives and in
strengthening the fabric of our communities.
3.2
We also understand and respect the fact that charities will pursue diverse goals in different
ways. Their goals, activities, sizes, legal structures, and types are different, and result in varying
needs and challenges.
3.3
We recognise that charities enjoy, and rely upon, the trust and confidence of the public. This
trust is essential in attracting and maintaining funds, volunteers, and staff. The misconduct of a
few can endanger confidence in others.
3.4
We know that charities want to spend their resources on their mission, not on regulation.
3.5
As this statement explains, our regulatory approach reflects the five key values of the ACNC:
Fairness, Accountability, Independence, Integrity and Respect (FAIIR).
Does this reflect your understanding of charities? If you have suggestions for improving this, let us
know.
[Please tell us what you do not agree with or would like to be clearer, and any suggestions you have for
improving the text.]
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4
Fairness
4.1
Fairness is at the heart of our regulatory approach. We will generally let you know if we think
there is a problem and give you a chance to explain and to make it right. We will address issues
consistently and in proportion to the need for action.
Presumption of honesty
4.2
The ACNC understands that most people involved in charities are honest and are trying to do the
right thing. If mistakes are made, they are usually honest mistakes, or because of a lack of
knowledge, expertise or capacity. If a charity is having problems, we will look at whether the
conduct was intentional and whether those responsible for the charity (such as committee
members, directors, or trustees) knew about or participated in the conduct. We will consider the
extent to which the charity is cooperating with us, and the willingness and ability of those
responsible to take action to remedy the problem.
Do you agree with this statement? Would you change it in any way?
[Let us know if you have any improvements.]
Providing support
4.3
We will provide general advice, guidance and education to help charities meet their obligations.
This support will be timely and accessible to different audiences and will be provided using a
variety of methods. We recognise the diversity of charities and will draw upon the existing work
and resources of relevant bodies.
Fair procedures
4.4
The ACNC’s procedures reflect principles of procedural fairness. Before we make decisions, we
will generally contact the charity or, in some cases, those affected by the decision, to clarify
matters or raise concerns. In exceptional cases, we may not contact a charity where this would
limit our ability to investigate or place a person or assets at risk.
4.5
We will give people a reasonable opportunity to address our concerns, give reasons for decisions
and tell charities how they can challenge ACNC decisions.
Do you understand our position on fair procedures? If you have suggestions for improving this, let us
know.
[Please tell us what you do not agree with or would like to be clearer, and any suggestions you have for
improving the text.]
Proportionality and consistency
4.6
The ACNC will match its actions with the seriousness of the problem and the risks involved. We
will assess concern by examining factors such as:

the type of problem

what or who is at risk

the likelihood that the issue will arise or recur

the potential impact of the issue

the risk profile of the charity (see bullet point under 9.7 for a description of what this is)
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
the size and capacity of the charity, and

the behaviour of those responsible for the charity.
4.7
ACNC staff will assess these factors in light of the objects in the ACNC Act (including maintaining,
protecting and enhancing public trust and confidence) as well as the objects of any other
relevant laws.
4.8
We will design processes for consistent decision-making and we will seek to work with other
regulators, including State and Territory regulators, to ensure that the right regulator deals with
the regulatory issue involved.
These paragraphs are explained in more detail below. If you have suggestions for improving this, let us
know.
[Please tell us what you do not agree with or would like us to be clearer, and any suggestions you have
for improving the text.]
5
Accountability
5.1
We are accountable to others for our processes and our work. We will be transparent about our
procedures, decisions and actions.
Accountability
5.2
We will be accountable through regular consultation and feedback opportunities, and more
formally through quarterly meetings with sector representatives and with the ACNC Advisory
Board. We will establish a complaints procedure so that people can give us feedback if they
encounter problems in their dealings with us, or give us advice on how we can perform better.
5.3
Under the ACNC Act, we are accountable for most of our formal decisions to the Administrative
Appeals Tribunal and the courts. We are also accountable for our conduct to others including the
Commonwealth Ombudsman, Auditor-General and Parliament.
Transparency
5.4
The ACNC will publish its Annual Report and strategic plan online and communicate its policies,
procedures, and decisions in a variety of ways, including in meetings, events, online and through
social media.
Service quality
5.5
We will publish service standards so charities know what they can expect from our services. We
will also publish our performance against these standards. We will respond to feedback to
improve our services.
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6
Independence
6.1
The ACNC Commissioner is an independent statutory office-holder. Our independence is
reflected in our organisational structure and our impartial decision-making.
Organisational independence
6.2
Staff are appointed by and report to the Commissioner of the ACNC. We have our own budget
held in a statutory special account and we report annually to Parliament. We are governed by
our own legislation, the ACNC Act. ACNC staff have a mix of backgrounds from the not-for-profit,
public and private sectors.
Impartial decision-making
6.3
Within the ACNC decisions will be based on evidence, including that given by charities
themselves. We will impartially apply the ACNC Act, other laws and ACNC policies. We will
publish a conflict of interest policy to manage apparent and actual conflicts of interest with staff.
7
Integrity
7.1
The ACNC is committed to acting with integrity, adhering to Australian laws, policies and values,
and the Australian Public Service’s Code of Conduct. The ACNC Act sets boundaries on when and
how we can act.
8
Respect
8.1
The approach of the ACNC is founded on respect for charities and those who work with and for
them. We recognise the unique nature and diversity of charities, and respect their autonomy.
Engaging with charities
8.2
We will listen to, learn from, and work with charities. Staff training includes sessions to enhance
understanding of the distinctive context of charities. We are developing a stakeholder
engagement strategy, including a regular consultative forum. Our Advisory Board will hold
community consultations across all Australian jurisdictions within a two-year period. We will
work with the Not-for-Profit Reform Council, in partnership with the Office of the Not-for-Profit
Sector in the Department of Prime Minister and Cabinet.
Do you have other ideas for how we should engage with charities? Have you had any engagement so
far with the ACNC? If so, how did you find your interactions?
[Tell us any ideas you have for engagement, or give us feedback on any interactions you have had so far.
If you have not had any engagement, tell us how best to give you the information, advice and support
you would like.]
Respecting autonomy
8.3
We respect the freedom of association that underpins the role of charities. We understand that
charities are an important part of civil society, not part of government or the private sector. It is
for charities to determine their own goals and to decide how they should best fulfil them. It is
-9-
not for the ACNC to manage or administer charities. This is the role of those responsible for their
governance.
Do you agree with this statement? Do you have any suggestions for improvement?
[Please tell us what you do not agree with or would like to be clearer, and any suggestions you have for
improving the text.]
Respecting capacity and accountability
8.4
The regulatory approach of the ACNC will take into account the capacity of charities and the level
of administrative burden. We will take into account accountability mechanisms, especially for
charities already accountable to their stakeholders through existing, policies and practices. to
their diverse and multiple stakeholders (for example, those who benefit from their services, their
members, staff, volunteers, funders and the public).
8.5
Some charities go further and participate in self-regulation or accreditation schemes. We
encourage such participation and recognise that these schemes have benefits beyond that of
government regulation. Many charities are also regulated by other government agencies or by
funders, and we will take into account this regulation when designing our processes and deciding
whether, and how, we should act.
Do you agree with this statement? Tell us about any existing accountability or self-regulatory or
accreditation schemes you are participating in and how useful you find them.
[Please tell us what you do not agree with or would like us to be clearer with, and any suggestions you
have for improving the text.]
9
When and how we will act
9.1
The ACNC will act in a way that reflects both the risks and the evidence before us. We will begin
by assuming that people are acting honestly, give people a chance to address our concerns, and
use the least coercive powers that are sufficient to address those concerns. We will, however,
act firmly in cases of gross negligence or serious misconduct.
Do you agree with this statement?
[Please tell us what you do not agree with or would like us to be clearer, and any suggestions you have
for improving the text.]
When we will not act
9.2
The ACNC Act generally limits us to acting only in cases where a charity has not complied with
our Act or regulations made under it. We can also act where it is more than likely that a charity
will not comply, but we will do so only in serious cases such as where we need to protect the
personnel or property of the charity.
9.3
It is not the role of the ACNC to run charities. We will not become involved in internal differences
of opinion or employment disputes in charities. We also do not regulate the service quality of
charities.
- 10 -
9.4
There will be times where another regulator is already acting to address the problem. There will
also be times where we do not have legal powers to act. Our aim in these cases is to ensure that
our concerns are addressed consistently with our regulatory approach, so we will seek to work
with the responsible regulator wherever possible.
Does this make the role of the ACNC clear to you?
[If not, tell us what isn't clear and, if possible, how to improve it.]
When and how we will act
9.5
The ACNC’s preliminary regulatory approach is summarised in the regulatory pyramid shown on
page 13. Our approach is to begin at the bottom of the pyramid by providing information,
guidance and advice and move upwards only when circumstances require it.
9.6
The ACNC will be alerted to concerns about charities through the regular reporting of charities,
from complaints and from referrals from other agencies. We will also actively seek to identify
risks, vulnerabilities and good practice in partnership with the sector.
9.7
In determining whether further investigation or action is required, we will employ a consistent
and cross-agency process of assessing risks. We have identified the following factors as
important in this process:

Type of problem: Some problems will be minor or technical and will not affect the operation of a
charity or its mission. Others might indicate poor governance or management. Other problems
might indicate serious criminal behaviour or a misuse of the charity itself. The type of problem
will affect the priority we give to the problem.

What or who is at risk: Some issues will directly affect the clients or assets of a charity. Other
issues might affect the broader public trust and confidence in charities generally.

Likelihood and frequency of occurrence or recurrence: If a charity has failed to comply because
of a very unusual set of circumstances, we will be less likely to act. If there is a continued failure
to comply, we will graduate our response by considering stronger action. In some cases, the
issue may require urgent action to prevent harm.

Potential impact on particular people and on charities generally: If the issue might harm
particular people we will consider the nature, extent and duration of the harm, and the extent to
which those people can protect their interests. If the issue could undermine public trust and
confidence in charities, we will consider the nature of the harm, the profile of the charity,
whether the issue is part of an emerging trend or precedent, and whether other charities or
charities in general will suffer harm because of the issue.

Risk profile of the charity: This will include factors such as the size of a charity, its area of
operation, whether it has vulnerable stakeholders or clients, the existence and strength of
internal or external accountability mechanisms, and its history of compliance and cooperation.

Behaviour of those responsible for the charity: This will include consideration of whether those
responsible reported the issue or knowingly participated in conduct of concern, and their
willingness and ability to take action.
- 11 -
9.8
We will assess these overall factors in relation to the objects of the ACNC Act as well as the
objects of any other relevant laws. In some cases, limits to our legal powers mean that we will
not be able to suspend or remove individuals or impose graduated and proportionate sanctions.
9.9
Under the ACNC Act, some of our powers can only be used in respect of ‘federally regulated
entities’, which are generally entities the Commonwealth Parliament has constitutional power to
regulate. For other charities, we will seek to refer and assist a collaborative approach of referral
to other regulators with the aim of achieving a consistent approach to all registered charities.
The ACNC is developing a compliance risk framework that identifies risks and prioritises risks. The
framework also identifies appropriate responses to address and evaluates the effectiveness of those
responses. Are there factors in addition to the points in 9.7 that you think we should include in our risk
framework, or factors we should remove? What do you see as the important risks to public trust and
confidence?
[Include other factors or tell us why some factors should be removed. Nominate up to 5 important risks
to public trust and confidence.]
9.10
Our decision-making process will include keeping good records of the decisions we make to
enable us to review the consistency and effectiveness of our decisions.
- 12 -
Regulatory pyramid of support and compliance
Examples: Misuse of charity for serious criminal
purposes (including financing terrorist activities) or
significant private benefit
Examples: Entry into financial transactions that risk
insolvency; Involvement in illegal activity; Private
benefit obtained by a board member.
Examples: Evidence of excess financial benefit to
owners; evidence of tax evasion.
Examples: Repeated failure to lodge documents on
time; innocent mistake as to how many board
members are needed to make a decision.
Examples: Forgetting to lodge a statement or report;
making a minor mistake in a financial report; common
mistakes or misunderstandings.
10
What we can do
10.1
The ACNC’s approach begins with an emphasis on providing education and advice to support
charities to meet their regulatory obligations. Some charities may need further assistance, and a
smaller number will warrant intervention.
10.2
Our proportionate approach means that we will take the minimum action required to address
the issue. If a lesser option does not resolve the issue at first, we will take progressively stronger
action until the issue is resolved. We will usually give you a chance to explain and consider any
explanation seriously before we use our formal powers. Our options include:

Advice, education and support: We may tell charities informally how they can comply; refer an
individual or charity to our education and guidance materials; give advice on the available
options under the legislation or on how to comply with the law; or develop education or
guidance resources if we think others may be confused or make the same mistake.

No-action letters: We may provide a letter expressing our intention not to act. These letters do
not prevent us from taking action later.

Referral: We may, if permitted by law, pass on information to another regulator for action.

Administrative penalties: We may decide to issue non-criminal penalties for late reporting or
notification, or for false or misleading statements.

Warnings: We may formally warn a charity that it is not complying with its obligations if it
doesn’t respond to informal advice or education and support.

Enforceable undertakings: We can make voluntary agreements with charities for them to take
certain action or stop certain action. If the charity breaches that agreement, a court can enforce
the agreement. For example, if those responsible, on taking office, discover that a charity has
breached the Act or governance standards, we can agree with them that they will take specific
action to address these concerns.

Directions: We can direct a charity to act or stop acting in a certain way to make sure they
comply with the law. For example, we could direct a charity to amend a serious error in a
financial report if they don’t respond to our advice to do so.

Injunctions: We can ask a court to order a person to do or not do something to make sure they
comply with the law. A court can also make such orders by the consent of the ACNC and the
person or charity. For example, we might ask a court to stop illegal activity or prevent a
transaction that will jeopardise the interests of clients.

Suspension and removal: In exceptional cases, we could suspend or remove a member of a
charity’s governing body. For example, we could suspend or remove a person who has, in a
serious and persistent way, misdirected funds.

Revocation: We can revoke the registration of a charity on certain grounds. We expect that this
would happen rarely. For example, it would be appropriate to revoke the registration of an
organisation that has been established as a charity merely to launder money or as a front for
conducting serious criminal activity.
Do you agree with the examples given here? Does this text make clear to you what our powers are?
[Tell us if you don't agree with any of these statements or think it could be made clearer.]
Publication of actions
10.3
Where we use our formal powers under the Act, we usually have to publish this information on
the register. However, we can only publish this information after we have given the charity at
least 14 days to respond. We must also publish the charity’s response and actions that have
been taken to fix the problem. We can also remove this information after five years if we think it
is no longer in the public interest to keep it.
10.4
When we use our formal powers, we will tell the charity how long they have to respond before
we publish this information on the register. If we think that the problem is resolved, we will
make this clear when we publish this information on the register. We must publish the context
of the issue as well and our reasons for making our decision or not making a decision to use
other powers.
11
Further information
11.1
The ACNC will consult on this preliminary statement with charities before finalising our
regulatory approach. We invite charities and others to share their thoughts on this approach
formally or informally before we finalise and adopt our regulatory approach at the beginning of
March 2013. We welcome feedback on this approach at any time.
11.2
We will publish a list of other policy statements developed by the ACNC on our website as well as
other educational material on our website.
Do you have any further comments on other parts of the statement?
[Give any further comments.]
- 15 -
Appendix A
How the ACNC intends to act – some examples
Example 1: Internal disputes
The ACNC receives a complaint from the treasurer of a charity about the election of board members. The
ACNC is satisfied that the problem centres on personal difficulties between board members and that the
charity’s funds, assets, services and clients are not at risk.
We think:
We should not take further action, as it is not the ACNC’s role to intervene in internal disputes. We would,
however, refer them to relevant resources on our website and suggest that they consider a mediation
service, such as the free service provided by their state government. We would also ask if they are a
member of a peak body, which may be able to assist.
Do you agree with our approach? Are there other things you suggest we do?
[Enter response here.]
Example 2: Concerns about service delivery
The ACNC receives a complaint that a charity that provides accommodation and meals to people
experiencing homelessness is not meeting mandatory food quality standards. However, the complaint
does not appear to raise any larger issues concerning the running of the charity.
We think:
We should not take further action, as we do not have power to regulate service quality. We would,
however, give the person who made the complaint details of the regulatory authority monitoring food
quality and health standards.
Do you agree with our approach? Are there other things you suggest we do?
[Enter response here.]
Example 3: Natural disasters
A natural disaster strikes overseas. The ACNC circulates educational materials to explain to charities how
they can lawfully help disaster victims. Through media monitoring, the ACNC becomes aware that
several charities are fundraising for the disaster although the purposes of these charities are established
to address disadvantage in Australia.
We think:
We should talk to the charities and give them advice as to how they can lawfully raise funds for the
disaster. If we are satisfied that they will follow our advice and there are no other risk factors, we would
not take further action, except to check at a later date that had followed our advice.
Do you agree with our approach? Are there other things you suggest we do?
[Enter response here.]
Example 4: Failure to file annual information statements
- 16 -
The ACNC publicises in various ways the need for registered charities to lodge their annual information
statement. However, it becomes aware through its regular monitoring that a number of charities are late
in lodging their statements.
We think:
We would talk to the charities and ask them why their statements are late. If they are unaware that they
need to lodge them, we would explain how to do it and give them a reasonable time to do so. If there
have been circumstances outside their control that have made them late, we will usually give them a
reasonable time to do so and follow up afterwards. If a charity simply refuses to lodge their statement for
no good reason, it will need to pay administrative penalties. If the charity continues to fail to lodge, we
will consider using our enforcement powers in a graduated way.
Do you agree with our approach?
What would you expect us to do if a charity continues to fail to lodge its report?
[Enter response here.]
What do you think is a reasonable time to give to file a report?
[Enter response here.]
Example 5: Conflict of interest
The ACNC becomes aware that a number of board members on a charity have failed to disclose a conflict
of interest to other board members. The conflict of interest relates to a supply contract for new
equipment. The contract has resulted in the board members receiving material personal benefits. The
charity is a federally regulated entity under the ACNC Act.
We think:
We would first talk to the charity and the board members to find out how this happened and what the
consequences are. If other board members can think of ways to address the issue, the ACNC may agree to
a proposed course of action and follow up. If not we may take further action (see below).
What measures do you think the ACNC should accept as addressing the issue? For example, should the
ACNC accept an agreement by the board members to repay the personal benefits and by the board to
adopt a conflict of interest policy in the future?
[Enter response here.]
If an agreement is not offered, should the ACNC direct that this be done?
[Enter response here.]
Alternatively, should the ACNC require the responsible board members to resign?
[Enter response here.]
What do you think is a reasonable time to give to file a report?
[Enter response here.]
Example 6: Non-charitable purposes
- 17 -
The ACNC receives a complaint that a charity registered for the purposes of research has conducted no
research. After an investigation, the ACNC learns that the main expenses are for luxury items for the
personal use of the staff and, after assessing all the evidence, it becomes clear that the charity's activities
do not match their stated purpose.
We think:
This organisation is not and was never intended to be a charity, so there is no reason to use our powers to
‘get them back on track’. So, after giving them notice and a chance to explain, and not receiving an
acceptable explanation, we would revoke their ACNC charity registration retrospectively and refer the
matter to the Australian Taxation Office (ATO).
Do you agree with our approach? Are there other things you suggest we do?
[Enter response here.]
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