Introduction
The Australian Charities and Not-for-profits Commission (ACNC) is increasing its scrutiny of the not-for-profit sector, with a rise in public concerns leading to more formal ACNC investigations. For any charity, receiving a notice for a compliance review is a serious governance matter, as these actions are typically reserved for issues that pose a significant risk to public trust and confidence.
A well-managed response is essential for maintaining ongoing compliance and protecting your charity’s registration, as a failure to meet an ACNC Governance Standard can lead to severe outcomes. This guide provides crucial information on how to handle an ACNC compliance review, from the initial notice to the final resolution, and highlights the importance of consulting an experienced not-for-profit lawyer early in the process.
Your First 48 Hours After Receiving an ACNC Notice
The First 48 Hours & Your Internal Response
Upon receiving a notice of an ACNC compliance review or investigation, your charity must act swiftly. An ACNC notice typically requests an extensive range of documents and information, often with a short deadline of only a few weeks. The ACNC may refuse to grant an extension, making immediate action critical.
To respond effectively:
- Inform all responsible persons, such as the board, committee, or trustees, as soon as possible.
- Circulate the notice to every member and convene a meeting without delay.
- Instruct trusted staff or volunteers to begin collating the requested material immediately, even before the board has formally met, to get ahead of the tight timeframe.
Involving Your Board & Professional Advisers Early
Responding to ACNC investigations is a governance matter, not merely an operational task, and it highlights the need for strengthening your charity board processes. A charity’s responsible persons must be actively involved in deciding how to respond and in settling any formal written communication with the ACNC. This ensures that the response aligns with the charity’s obligations under the ACNC Governance Standards.
Engaging professional advisers early is a crucial step, as a great deal is at stake during ACNC compliance actions. An experienced not-for-profit lawyer can provide essential assistance throughout the process. Their expertise can help your charity with several key aspects of the response, including:
- Understanding the scope of the ACNC’s request for documents and information.
- Assisting the organisation to articulate and explain its context and operations.
- Identifying any existing areas of non-compliance with ACNC governance standards.
- Recommending improvements to address shortcomings and strengthen ongoing compliance.
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Why the ACNC Can Investigate Your Charity
The Investigation Spectrum from Compliance Review to Formal Investigation by the ACNC
The ACNC uses a proportionate approach to regulation, meaning its response will match the seriousness of the issue. The ACNC can investigate a charity using several methods, which exist on a spectrum from collaborative assistance to formal enforcement.
The ACNC’s compliance activities generally fall into one of three categories:
| Compliance Activity | Description |
|---|---|
| Self-audit | A proactive process where the ACNC helps a charity identify and resolve potential governance problems before they escalate. |
| Compliance review | A broader assessment of a charity’s overall adherence to the Australian Charities and Not-for-profits Commission Act 2012 (Cth) to address any identified risks. |
| Investigation | A formal investigation, which is the ACNC’s most significant response to non-compliance and is reserved for higher-risk, complex, or serious matters. |
State-Level Triggers & How Breaches of State Laws Can Trigger an ACNC Investigation
Concerns that trigger ACNC compliance action can originate from various sources, including information received from state and territory government agencies.
While the ACNC is a federal regulator, its oversight is connected to a charity’s conduct at the state level through the ACNC Governance Standards. One of the key ACNC Governance Standards requires a charity to comply with all applicable Australian laws. This means a breach of a state-based law can also constitute a breach of the ACNC Governance Standards.
If a state agency informs the ACNC of such a breach, it can trigger ACNC scrutiny and may lead to a compliance review or a more formal investigation into the charity’s governance.
Parallel Regulators & Understanding ACNC Information Sharing Protocols
The ACNC does not operate in isolation and actively shares information with other government departments and law enforcement agencies. This data exchange is a key part of its risk-identification framework and helps ensure consistent regulation across different government bodies.
This information sharing is authorised under the Australian Charities and Not-for-profits Commission Act 2012 (Cth). As a result, a concern raised with one regulator can lead to involvement from another.
For instance:
- The ACNC may refer a matter to another agency that is better placed to handle it.
- It may launch its own ACNC compliance review based on information it receives.
Given the complexities of these interactions, it is wise to consult an experienced not-for-profit lawyer early to help manage the process.
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The Commonwealth Powers of the ACNC From Informal Requests to Formal Enforcement
From Informal Requests to Using Formal Enforcement Powers
The ACNC typically begins its compliance activities with informal measures. These may include:
- Providing regulatory advice
- Requesting that a charity voluntarily discloses information
This approach is based on the principle of proportionate regulation, which allows charities a chance to correct honest mistakes. However, if a charity is unwilling to cooperate or if there are cases involving serious non-compliance, the ACNC will escalate its response and use formal enforcement powers.
When significant breaches of the Australian Charities and Not-for-profits Commission Act 2012 (Cth) occur, the ACNC can use a range of enforcement powers to ensure ACNC compliance. These powers are reserved for situations where there is:
- Serious mismanagement
- A deliberate breach of the law
- A risk to vulnerable people or charitable assets
An experienced not-for-profit lawyer can provide crucial assistance in responding to these actions.
The ACNC’s formal enforcement powers, specified in Part 4-2 of the Australian Charities and Not-for-profits Commission Act 2012 (Cth), include:
| Enforcement Power | Description |
|---|---|
| Warnings | The ACNC may issue a formal warning to a charity detailing the non-compliance and outlining the further action it may take. |
| Directions | A direction can be given to compel a charity to act, or to stop acting, in a certain way to ensure it complies with a Governance Standard or an External Conduct Standard. |
| Enforceable Undertakings | Voluntary, court-enforceable agreements where a charity commits in writing to take specific actions to rectify non-compliance. |
| Injunctions | In serious and urgent cases, the ACNC can apply to a court for an order requiring a person or charity to do or not do something. |
| Suspension & Removal of Responsible Persons | The Commissioner has the power to suspend or remove a Responsible Person (e.g., a board member) if there is a reasonable belief the charity has seriously contravened the law. |
Understanding Section 70-5 Notices & Monitoring Warrants
To assess a charity’s compliance with the Australian Charities and Not-for-profits Commission Act 2012 (Cth), the ACNC has specific information-gathering and monitoring powers. These tools allow the regulator to obtain the evidence needed to conduct a thorough compliance review or investigation. The ACNC will only seek information it reasonably believes it requires to administer its legislation effectively.
A key tool is a formal notice under section 70-5 of the Australian Charities and Not-for-profits Commission Act 2012 (Cth). The ACNC can issue this notice if it reasonably believes an entity, including the charity itself or a third party, has information or documents needed for an investigation. The notice can legally require an entity to:
- Give specific information to the Commissioner
- Provide relevant documents
- Attend an interview to give evidence, sometimes under oath
The ACNC also has monitoring powers under Division 75 of the Australian Charities and Not-for-profits Commission Act 2012 (Cth), which permit ACNC officers to enter a charity’s premises. Entry can only occur in one of two ways:
- With the occupier’s consent
- Under a monitoring warrant
Before entering with consent, an officer must inform the occupier that they can refuse or withdraw consent at any time.
If consent is refused or if seeking it is unreasonable, the ACNC may apply to a magistrate for a monitoring warrant. A warrant allows officers to:
- Enter premises to search
- Inspect documents
- Take photographs
- Copy files
While officers can secure items for up to 24 hours, they do not have the power to seize property.
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Protecting Your Charity During the Review Process
Legal Professional Privilege as Your First Call & Protecting Your Internal Review
When your charity receives a notice from the ACNC, one of your first considerations should be protecting your internal review process through client legal privilege. This common law right, also known as legal professional privilege, protects confidential communications between a charity and its lawyer when seeking or receiving legal advice.
The privilege belongs to the client—the charity—not the lawyer. Its purpose is to ensure you can speak freely and frankly with your legal adviser without fear of compulsory disclosure.
To establish this protection, it is crucial to engage an experienced not-for-profit lawyer early. Any internal investigation or assessment of your ACNC compliance conducted under their direction may be covered by this privilege. This ensures:
- Your charity’s analysis of its own shortcomings remains confidential.
- Your strategy for responding to the ACNC compliance review is protected.
The ACNC acknowledges this right and, under section 70-5 of the Australian Charities and Not-for-profits Commission Act 2012 (Cth), must inform you of your right to claim privilege when it issues a formal notice for information.
Five Common Mistakes Regarding What Not to Say or Do in Your ACNC Response
During ACNC investigations, certain actions or inactions can cause the regulator to escalate its response, leading to more severe outcomes. Avoiding common pitfalls is essential for managing the ACNC compliance process effectively and protecting your charity’s registration.
Here are five critical mistakes to avoid when responding to the ACNC:
| Mistake to Avoid | Explanation |
|---|---|
| Ignoring the Notice or Failing to Cooperate | An investigation will not disappear if ignored. Failing to respond or missing deadlines will almost certainly cause the ACNC to escalate its compliance action. |
| Treating it as Only an Operational Matter | ACNC compliance is a governance matter. The charity’s responsible persons (board, trustees) must be informed immediately and be actively involved in the response. |
| Obfuscating Facts or Providing Unclear Information | Vague, misleading, or incomplete information can be interpreted as a deliberate attempt to hide non-compliance. Information must be clear, comprehensive, and honest. |
| Failing to Tell Your Story | Context is critical. A charity should explain its specific circumstances (purpose, size, operations) to provide context for conduct that might otherwise appear to be a breach. |
| Delaying Professional Advice | Waiting too long to engage an experienced not-for-profit lawyer can be a costly error, as they provide essential assistance from the outset. |
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Strategic Responses & Negotiating Outcomes
Negotiating with the Regulator for Strategic Goals & Enforceable Undertakings
Instead of waiting for the ACNC to impose sanctions, a charity can proactively work towards a better outcome. Taking a considered and strategic approach during an ACNC compliance review can help mitigate the risk of severe compliance action. One effective option is to enter into a voluntary agreement with the regulator.
These agreements serve as constructive alternatives to more severe enforcement actions and can take different forms, such as:
| Agreement Type | Description |
|---|---|
| Compliance Agreements | Voluntary action plans developed with the charity, outlining the steps needed to fix a breach. The ACNC monitors the charity’s progress. |
| Enforceable Undertakings | More formal, court-enforceable agreements where a charity voluntarily commits in writing to take, or refrain from taking, specific actions to rectify non-compliance. |
Engaging an experienced not-for-profit lawyer is crucial in this process. They can assist in negotiating the terms of an undertaking and ensure the charity’s response is well-articulated, which helps achieve a more favourable resolution to ACNC investigations.
Potential Outcomes from No Action Letters to Revocation of Charity Status
The outcome of ACNC investigations can vary significantly, depending on both the severity of the non-compliance and the charity’s willingness to cooperate. The ACNC adopts a proportionate approach, ensuring the response matches the seriousness of the issue.
Following a compliance review, the ACNC may finalise the matter in several ways, ranging from educational measures to serious enforcement actions. Potential outcomes include:
| Potential Outcome | Description |
|---|---|
| No Further Action | If no evidence of a breach is found, the ACNC may close the matter without taking any steps. |
| Regulatory Advice | The ACNC may provide guidance to the charity to help it address issues and improve its ongoing compliance. |
| Warnings | A formal warning may be issued, detailing the non-compliance and outlining further action the ACNC may take if issues are not addressed. |
| Directions | The ACNC can direct a charity to act, or stop acting, in a certain way to ensure compliance with a Governance or External Conduct Standard. |
| Suspension or Removal of Responsible Persons | In cases of serious contraventions, the Commissioner has the power to suspend or remove a Responsible Person. |
| Revocation of Charity Status | In the most serious cases of misconduct or non-compliance, the ACNC can revoke a charity’s registration. |
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Conclusion
Effectively managing an ACNC compliance review requires a clear understanding of the investigation process, your obligations under the ACNC Governance Standards, and the potential outcomes. A strategic response, which includes protecting your charity through legal professional privilege and avoiding common pitfalls, is essential for ensuring ongoing ACNC compliance and safeguarding your registration.
If your charity is facing an ACNC investigation, seeking expert legal guidance is a critical step in protecting its interests and achieving a favourable resolution. Contact the experienced not-for-profit lawyers at LawBridge today for specialised assistance in managing the ACNC compliance review process and upholding your governance standards.
