Governance Standard 3 and related party disclosures
In February 2021, the Federal Government proposed changes to the existing definition of the ACNC’s Governance Standard 3 but after further consideration of a notice of motion to disallow the relevant Regulations the Government announced on 24 November 2021 that the changes would not be made.
The aim of the amendment was to safeguard the community against activist organisations masquerading as charities. The Federal Government wanted to ensure public confidence in the operation of all charities, whilst also demonstrating to charities that any acts of violence, unlawful gatherings or property damage would not be tolerated. Critics argued the impact of the drafting could have extended far beyond the intended evil, and because it would also have applied to volunteers, it would have held a charity responsible even when a volunteer may have innocently participated in a protest march, where others inflict injury or damage property.
The changes to the Governance Standard 3 would have extended the obligation to comply with Australian law beyond indictable offences to include summary offences
It remains to be seen whether any further attempts to modify the governance standard are made.
Related Party Transaction for Charities
On 20 September 2021, the Treasury released a consultation paper on a new regulation to require all registered charities to
- disclose related party transactions in their special purpose annual financial reports. (Recommendation14 ACNC legislation review)
- to disclose, if large charities,
remuneration paid to responsible persons and senior executives, unless the charity has only one such person, in their special purpose annual financial reports.
After a submission period, the regulations were enacted on 11 November 2021.
In addition to the new disclosures, charities must now include information about their activities on the ACNC register
For the disclosure purposes, charities may now use accounting standards AASB 124 (Related Party Disclosures). For financial statements generally charities may now use AASB 1060 (General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities) in the creation of their special purpose financial statements.
