ACNC takes first step toward greater transparency

The reasoning behind the decision published by the Australian Charities and Not-for-profits Commission (ACNC) did not include any detail that could identify the organisation that had applied for registration.

The publication of the decision was the first under the ACNC’s Secrecy Reforms Project, which will see the regulator release more information relating to its regulatory and compliance activities.

In the case of registrations, the information will be published in the form of de-identified reasons for decisions to approve or refuse organisations’ applications to register as charities.

ACNC commissioner Sue Woodward said she hoped sharing the rationale behind decision-making would help anyone thinking of registering a charity to have a better understanding of the regulator’s approach.

“The new resources we are developing through this project will improve transparency and provide educational benefits to the charity sector,” said Ms Woodward.

“The aim is to provide greater insights into our work and processes.”

The inaugural deidentified decision published this week involved the application for registration as a charity by an organisation structured as a proprietary company limited by shares.

The ACNC said it assessed the organisation as having charitable purposes for the public benefit.

However, the organisation’s structure and governing document demonstrated that it was not required to operate as a not-for-profit.

Concerns were also raised about whether it complied with the ACNC’s Governance Standard 5, which requires charities to take reasonable steps to ensure responsible people act in the best interest of the charity and don’t misuse their position.

The ACNC said a proprietary company limited by shares – commonly known as a Proprietary Limited or Pty Ltd – can be registered as a charity as long as its governing document makes clear that it must operate on a not-for-profit basis and that it doesn’t allow shareholders to receive private benefits.

A charity’s governing document is the formal document that:

• sets out its charitable purpose or purposes
• ensures it operates on a not-for-profit basis
• sets out the way its governing body makes decisions and consults any members.

The regulator said any governing document generally appropriate for a Pty Ltd company would need significant amendments for it to also be appropriate for use if that organisation sought registration as a charity.

For this reason, the ACNC said it encouraged anyone thinking about setting up a charity to consider whether the Pty Ltd company was the best legal structure to establish.

In this case, the regulator said it had worked with the organisation in question to make changes to its governing document to ensure it was suitable and provided sufficient controls to ensure the organisation operated as a not-for-profit, making it eligible to be registered as a charity.

The publication of the decision falls under a wider suite of reforms announced by the federal government in the 2023–24 budget and designed to increase transparency and accountability in the charity sector.

They include legislative changes to the ACNC Act designed to lift the veil of secrecy that prevents the regulator from disclosing details of investigations into charities.

The changes would allow Commissioner Sue Woodward to disclose:

• information about the existence of an ongoing investigation into a charity where disclosure was necessary to prevent public harm
• finalised compliance investigations that did not result in formal compliance action, where disclosure was in the public interest

• summary reasons for revocation of a charity’s registration.

More information

Charities minister Andrew Leigh reveals details of transparency push