How Your Charity Should Handle ACNC Compliance Review & Investigations

Introduction

The Australian Charities and Not-for-profits Commission (ACNC) is observing a significant rise in concerns reported by the public, indicating that charities are facing increased scrutiny. As public awareness of the ACNC’s powers grows, most reported issues focus on charity governance and the conduct of board members, leading to formal investigations and, in serious cases, revocation of charitable status.

Given this environment, understanding how to manage complaints and respond to an ACNC compliance review is crucial for any charity aiming to maintain ACNC compliance and public trust. This guide offers practical information on developing internal complaint handling policies and navigating the formal investigation process to ensure your organisation meets its ACNC requirements and can respond effectively if the ACNC can investigate a concern.

Understanding the ACNC’s Investigation Powers & Compliance Focus

What Triggers an ACNC Investigation or Compliance Review for a Charity

The ACNC generally only takes action on concerns that present a serious risk to public trust and confidence in the sector. These concerns must relate to a charity’s compliance with the Australian Charities and Not-for-profits Commission Act 2012 (Cth).

An ACNC investigation or compliance review can be triggered by several serious allegations. The ACNC is particularly concerned and has the power to investigate if a charity is alleged to have:

Triggering Allegation	Description & Examples
Failure to Meet Governance Standards	Includes failures in accountability to members, non-compliance with Australian laws, and not ensuring Responsible People are suitable and carrying out their duties properly.
Use of Funds for Non-Charitable Purposes	Involves situations where charitable funds or assets are used for the private benefit of members or have been stolen.
Involvement in Fraud or Criminal Activity	These matters may require advice from criminal lawyers and also involve other agencies, such as the police.
Failure to Provide Accurate Information	A charity must meet ACNC requirements to provide correct details, such as financial information or the names of its Responsible People.
Failure to Maintain Appropriate Records	Charities are obligated to keep adequate financial and operational records as part of their ACNC compliance.
Unauthorised Political Advocacy	Charities must be aware of the limits on their ability to engage in political campaigning/activities.
Involvement in Money Laundering or Terrorism Financing	The ACNC has made it clear it will crack down on such behaviours.

For charities that operate overseas, additional obligations apply under the External Conduct Standards. The ACNC can investigate if such a charity has failed to:

• Properly manage its overseas activities
• Keep proper records
• Implement anti-fraud measures
• Protect vulnerable people it works with

ACNC’s Approach to Regulation & Enforcement for Australian Charities

The ACNC’s regulatory approach focuses on working with registered charities to help them understand and meet their obligations. The commission acknowledges that most people involved with a charity are honest and aim to do the right thing. Where appropriate, it will work with them to resolve any compliance issues.

However, the ACNC will act quickly and firmly when there is evidence of:

• Serious mismanagement
• Deliberate breaches of the Australian Charities and Not-for-profits Commission Act 2012 (Cth)
• Situations where vulnerable people or significant charitable assets are at risk

In these serious cases, the ACNC has broad enforcement powers that allow it to:

• Gather information
• Issue warnings
• Seek enforceable undertakings
• Apply for injunctions
• Impose administrative penalties
• Disqualify responsible persons
• Revoke a charity’s registration (in the most serious cases)

It is also important to note the limits of the ACNC’s power. The ACNC cannot act on matters such as:

• Internal disputes
• Contractual issues
• Employment matters like unfair dismissal

These issues fall outside its regulatory responsibility.

Developing an Internal Complaint Handling Policy & Procedure

Key Principles for Your Charity’s Complaint Handling System

A charity committed to good governance and ACNC compliance should build its complaint handling system on a foundation of core principles. These principles ensure the process is fair, accessible, and effective, which can help build public trust and prevent minor issues from escalating.

An effective system is modelled on fairness, accessibility, responsiveness, and efficiency. Your charity’s approach should be guided by the following key principles:

Principle	Description & Key Actions
People-Focused and Accessible	Actively seek and welcome feedback. The process must be free, accessible to everyone (including those needing assistance), and allow for representation by an advocate.
Fairness and Objectivity	Address each complaint with integrity and in an unbiased manner. The person handling the complaint should be different from any staff member involved, and conflicts of interest must be managed.
Responsiveness and Early Resolution	Acknowledge complaints promptly (ideally within five working days). Aim to resolve issues at the first point of contact and keep the complainant informed of progress and timeframes.
Confidentiality and Protection	Protect the identity of the complainant where practical. Accept and investigate anonymous complaints if sufficient information is provided, and ensure complainants are not adversely affected.
Empowerment and Continuous Improvement	Empower and train staff to resolve complaints promptly. Regularly analyse complaint data to identify systemic issues, monitor the system’s effectiveness, and make continuous improvements.

The Five Stages of an Effective Complaint Management Procedure

A clear, documented procedure provides staff with a consistent framework for managing complaints from receipt to resolution. This ensures that every complaint is handled efficiently and thoroughly.

An effective complaint management system involves these five key stages:

Stage	Key Activities
1. Receive	Record the complaint and all supporting information, including contact details, date, specific issues, desired outcome, and assign a unique tracking identifier.
2. Acknowledge	Promptly acknowledge receipt (preferably within five working days), offering an explanation or apology if appropriate and setting a professional tone.
3. Assess and Investigate	Conduct an initial assessment to confirm the issues, understand the outcomes sought, and determine the best course of action (e.g., explanation, further information gathering, or formal investigation).
4. Determine Outcome	Contact the complainant to advise them of the findings, the reasons for the decision, any remedy being offered, and options for internal or external review (such as approaching the ACNC).
5. Close the Complaint	Formally close the file by documenting how the complaint was managed and its outcome. Analyse the data to identify trends and contribute to the charity’s ongoing improvement.

What to Expect & How to Respond During an ACNC Investigation

The Formal Australian Charities and Not-for-profits Commission Review & Investigation Process for a Charity

If the ACNC decides to conduct a compliance review or investigation into your charity, the process begins with a formal notification. The ACNC will send a letter that clearly outlines the scope of its review, detailing the specific areas of concern and requesting relevant information. Throughout this process, the ACNC may seek further details from:

• Your charity
• Its representatives
• Third parties

This comprehensive approach helps the ACNC gather a complete picture of the situation.

Most compliance reviews aim to be completed within three months, while investigations typically conclude within six months. The outcome of an ACNC compliance action can take several forms, including:

Potential Outcome	Description
Regulatory Advice	Guidance to help the charity address identified issues and improve ACNC compliance.
Recommendations	Specific steps the charity should take to rectify non-compliance with ACNC requirements.
Further Reporting	Requirements for the charity to have accounts audited or submit additional reports.
Enforcement Powers	For serious or deliberate breaches, the ACNC may issue warnings or impose penalties.
Revocation of Status	In the most severe instances of misconduct, the ACNC can revoke the charity’s registration.
Referral	If the concern falls outside the ACNC’s jurisdiction, it may be referred to another government agency.
No Further Action	When no evidence of a breach is found, the ACNC may decide to take no additional steps.

Your Charity’s Obligations for Self-Reporting Non-Compliance

Registered charities have a responsibility to ensure they meet their obligations under the Australian Charities and Not-for-profits Commission Act 2012 (Cth). This includes a duty to self-report certain issues to the ACNC to maintain ongoing compliance.

Proactively notifying the regulator demonstrates good governance and a commitment to transparency. A charity must notify the ACNC if it discovers specific types of non-compliance, including situations where the charity:

• Is failing to meet its obligations in a significant way that could affect its entitlement to be registered, such as not complying with the ACNC Governance Standards or External Conduct Standards.
• Has identified a material error in its submitted Annual Information Statement (AIS) or financial reports.
• Realises it has made a false or misleading statement to the ACNC.

Proactive Steps for Ongoing ACNC Compliance

Adhering to the Australian Charities and Not-for-profits Commission Governance Standards for Your Charity

To avoid facing the ACNC’s enforcement powers, it is essential that your charity’s board members and responsible persons are fully aware of their legal obligations. All organisational policies should be centred on adhering to the ACNC’s five governance standards, which are fundamental to maintaining ACNC compliance.

These standards require that:

Governance Standard	Requirement
1. Charitable Purposes & Not-for-Profit	The organisation must be run for a charitable purpose and operate on a not-for-profit basis.
2. Accountability to Members	The charity must ensure there is clear accountability and transparency in its dealings with members.
3. Compliance with Australian Law	The charity is obligated to follow all applicable Australian laws and regulations.
4. Suitability of Board Members	Individuals responsible for governing the charity must be appropriate for their roles and not disqualified.
5. Responsible Conduct of Board Members	Those in charge must act with reasonable care and diligence, honestly, and always in the best interests of the charity, which is why understanding risks and responsibilities is crucial.

Using the ACNC Self-Evaluation Tool for Your Australian Charity

A key part of maintaining ongoing compliance is proactively assessing your charity’s governance. The ACNC encourages registered charities to use its self-evaluation tool to help them determine if they are meeting their obligations under the Australian Charities and Not-for-profits Commission Act 2012 (Cth).

This tool is designed to help your charity identify any potential issues that may prevent it from fulfilling its ACNC requirements. Using this resource allows you to find and fix problems with your governance before they escalate into more serious matters that could trigger a compliance review or formal investigation.

Conclusion

To maintain public trust and meet ACNC requirements, it is crucial for every charity to implement an effective internal complaint handling policy and understand the formal ACNC investigation process. Proactively adhering to the ACNC Governance Standards and knowing how to respond during a compliance review are essential for ensuring ongoing ACNC compliance.

For trusted expertise in managing these complex obligations, contact our experienced not-for-profit and charity lawyers at LawBridge. Our team offers specialised legal support tailored to help your organisation achieve and maintain full compliance with ACNC regulations.

Frequently Asked Questions