Is Your Charity Accountable Enough? A Practical Guide to ACNC Governance Standard 2

Introduction

For any Australian charity with a membership base, ensuring accountability to members is a core requirement under the ACNC Governance Standards. Governance Standard 2 is specifically designed to ensure transparency, giving a charity’s members, who are effectively its ‘owners’, the right to understand how the organisation is working towards its charitable purpose and using its resources.

Meeting this standard involves taking reasonable steps to keep members informed and providing them with adequate opportunities to raise concerns about the charity’s governance. This guide offers practical information for Responsible People and their organisations, outlining the key obligations of Standard 2 and the common steps charities can take to ensure compliance with the governance standards.

Understanding the Purpose of ACNC Governance Standard 2

ACNC Governance Standard 2 is founded on the principle of accountability to members. A charity’s members are effectively its ‘owners’ and are entitled to know how the organisation is using its resources and working towards its charitable purpose on their behalf.

The primary objective of this standard is to ensure transparency, helping members understand their charity’s operations. This includes keeping members informed about:

• The charity’s activities
• Its financial position
• Its progress in achieving its mission

Through this transparency, the standard ensures that charities remain open with those they are meant to serve and represent.

Ultimately, Governance Standard 2 provides an important layer of accountability for the Responsible People running the organisation. It empowers members by giving them adequate opportunities to raise questions or concerns about the charity’s governance, ensuring that the organisation is managed in a responsible and answerable way.

What Governance Standard 2 Requires from Your Charity

Taking Reasonable Steps for Accountability to Members

ACNC Governance Standard 2 establishes that a charity must be accountable to its members, who are considered its ‘owners’. This core principle of accountability requires charities to take reasonable steps to ensure members are informed about:

• The charity’s operations
• How resources are being used
• Progress toward achieving the charitable purpose

Being accountable involves transparently sharing information about the charity’s activities, finances, and the results of its work. This transparency ensures that members can clearly see how their organisation is being managed and how its assets are being applied on their behalf.

For example, members may want to know about the charity’s current financial position or its key focus areas for the future.

Allowing Members Adequate Opportunities to Raise Concerns

The second primary obligation under Governance Standard 2 is to provide members with adequate opportunities to raise concerns about how the charity is governed. This requirement ensures that members have a voice and can actively participate in holding the organisation’s Responsible People to account.

Creating channels for member feedback and questions is a fundamental aspect of transparent and responsible governance. The Australian Charities and Not-for-profits Commission Regulations 2022 (Cth) suggest several ways this can be achieved, including:

• Holding an annual general meeting that includes a dedicated question and answer session
• Providing a formal process for members to propose resolutions for discussion or voting

How Your Not-for-Profit Can Meet This Standard

Holding Annual General Meetings & Other Member Forums

Organising a meeting with members at least once a year is one of the most common ways for a charity to demonstrate accountability to members. An Annual General Meeting (AGM) provides a formal setting for members to:

• Ask questions about the charity’s governance
• Vote on important resolutions

This process is a key step in meeting the requirements of Governance Standard 2.

These forums are designed to give members an adequate opportunity to raise concerns. To facilitate this, meetings should include dedicated time for discussion, such as a question and answer session. Additionally, the Australian Charities and Not-for-profits Commission (ACNC) suggests that allowing members to propose and vote on resolutions is another effective way to meet this standard.

If your charity must delay its AGM for any reason, it is important to consider other methods to remain accountable. You can maintain transparency and engagement by:

• Providing regular updates and information to members about the charity’s activities and finances
• Allowing for other forms of participation, such as virtual question and answer sessions, to ensure members can still raise concerns

Providing Members with Information on Activities & Finances

A fundamental aspect of accountability involves keeping members informed about your charity’s operations and financial health. This ensures they understand how the organisation is working towards its charitable purpose and using its resources.

Providing this information is a key requirement to meet Governance Standard 2. The type and detail of the information can vary depending on the organisation’s size and complexity.

Common methods include:

Method	Description
Annual Reports	A comprehensive annual report can detail the charity’s activities, financial position, and progress toward achieving its purpose.
Financial Statements	Even small charities that are not required to submit financial statements to the ACNC should be prepared to provide some financial information to members upon request.

Ultimately, the goal is to be transparent. Members are entitled to understand the charity’s financial standing and what it is focusing on for the future, which helps build trust and ensures compliance with the ACNC Governance Standards.

Having Clear Processes for Appointing Responsible People

Establishing clear and transparent processes for appointing Responsible People, such as board or committee members, is another crucial step in ensuring accountability to members. These procedures help members understand how leaders are chosen and give them confidence in the charity’s governance.

These processes should ideally be outlined in your charity’s governing document, such as its constitution or rules. For some organisations, this may involve a straightforward appointment process, while for others, it could mean holding formal elections for board positions. Having these rules documented ensures consistency and fairness.

The ACNC recognises that providing for the election of a charity’s Responsible People is a practical way to meet this standard. It reinforces the principle that the leadership of the charity is answerable to its members.

Compliance Considerations for Different Types of Charities

Expectations for Small Charities & Large Charities

The reasonable steps a charity must take to comply with ACNC Governance Standard 2 vary depending on its specific circumstances, including its size. The ACNC recognises that a one-size-fits-all approach is not practical, and the expectations for accountability to members differ between smaller and larger organisations. 

Charity Size	Examples of “Reasonable Steps” for Compliance
Small Charity	Organising an annual general meeting where members can ask questions Providing basic information on the charity’s activities and finances Having a clear process for appointing its Responsible People
Large Charity	Providing formal written notice for meetings within set timeframes Establishing clear rules on how members can add items to a meeting agenda for discussion or voting Distributing a detailed annual report to members that outlines the charity’s financial position Implementing formal nomination and election processes for Responsible People

Rules for Charities Registered as Companies Under the Corporations Act

Charities registered as companies under the Corporations Act 2001 (Cth) have specific compliance considerations. For these organisations, the ACNC Governance Standards replace certain provisions of the Corporations Act 2001 (Cth), particularly those related to member meetings.

The general obligations under Governance Standard 2 take precedence over the detailed meeting rules found in the Act. This has significant implications for the rights of members and the duties of the charity.

The disapplication of these provisions means that:

Implication of ACNC Governance Standard 2	Detailed Explanation
Member Rights to Call Meetings	Members no longer have explicit rights under the Corporations Act 2001 (Cth) to call a members’ meeting or to put a resolution forward at such a meeting.
Obligation to Hold an AGM	There is no longer a strict legal obligation under the Act to hold an annual general meeting, although the ACNC views it as a good way to comply with Standard 2.
Right to Receive Accounts	Members do not have an explicit right to receive accounts under the Corporations Act 2001 (Cth), though the ACNC encourages charities to make financial information available to maintain accountability.

Conclusion

ACNC Governance Standard 2 establishes a crucial framework of accountability, requiring a charity to take reasonable steps to keep its members informed and provide opportunities for them to raise concerns. Fulfilling the obligations of Standard 2 ensures transparency in how the organisation is working towards its charitable purpose and using its resources.

For tailored guidance on navigating these requirements, contact our expert team at LawBridge today. Our specialised services for not-for-profit organisations can provide the trusted expertise you need to ensure your charity maintains full compliance with all ACNC Governance Standards.