Members are required to ensure they have appropriate mechanisms to assess, manage and mitigate the risks relevant to the financial wrongdoing requirements of this compliance indicator and verifier when working with partners. 

Policy, procedure or guidance documents that address: 

• Risk management and control mechanisms. 
• Financial wrong-doing, especially fraud, corruption, bribery, terrorism financing and money-laundering and violation of sanctions imposed by the Australian Government. 
• Checks of individuals and organisations receiving funds against the Australian National Security Listed Terrorist Organisations and the DFAT ASO Consolidated List of all persons and entities listed under Australian sanctions laws. 
• Appropriate and effective internal controls. 

Guidance

Having a policy, procedure or guidance document that outlines a Member’s financial systems and controls is very important to help ensure it runs effectively. The ACNC has developed a basic guide to setting up financial controls, which can be found in the resources section. 

Tools4Development have a how-to-guide to prevent fraud and the ACNC has a briefing page for NGOs working overseas which addresses fraud. These can both be downloaded in the Resources Section below. 

ACFID has also developed guidance for developing a financial wrongdoing policy that addresses fraud, counter terrorism, money laundering and violation of sanctions, which can be found in the resources section. There is further guidance on risk management at Compliance Indicator 4.2.2. 

Members should also refer to the World Bank Listing of ineligible firms and individuals, the Asian Development Bank Sanctions List; the Attorney General Department’s List of Terrorist organisations; and DFAT’s consolidated list of individuals and entities subject to targeted financial sanctions, including relating to terrorism. 

• Evidence of consideration of cost effectiveness during activity planning, implementation and review. 

Guidance

Evidence of consideration of costs will take multiple forms and will vary between members. Examples might include budgeting processes, procurement policies and processes, financial acquittal processes, the use of volunteers and in-kind services, travel policies, delegations and expenditure approval processes. Policy templates and guidance in these areas of financial management are included in the Resources Section below. 

• An accounting system that is appropriate to the member’s operational, legal and structural requirements, and is adequate to the scale, capacities and risks of the organisation. 
• Detailed accounting records that are structured to enable forecasting, measurement and review of income, expenditure, assets, liabilities and equity. 

Guidance

Members should implement systems that are appropriate to the size and capacity of your organisation. A large, sophisticated member organisation would be expected to use accounting software in its financial management, and have documented policies, controls and systems. It may have dedicated financial staff, monthly management reports, internal websites, an audit committee and internal audit functions. A small member organisation may keep largely manual or spreadsheet-based accounts and rely, in part, on honorary officials in its financial management. It may have one staff member or volunteer accountable for finances, an honorary treasurer, and quarterly meetings of a committee or the Board to oversee the processes. Providing the arrangements are demonstrably appropriate to the risk, they would be compliant with this Code. 

Members must have the following in place: 

• Full financial reports that comply with accounting standards 
• ACFID Code-compliant financial statements (see 8.3.2) which are independently audited by a qualified accountant in accordance with relevant Australian auditing standards. 
• Publish in the full audited financial statements, a declaration by the governing body stating that the financial statements are in accordance with the relevant legislation, accounting standards and provide a true and fair view of their financial position and performance. In addition, companies and trustee companies include in that declaration, that the organisation can pay its debts as and when they become due. 
• Review and approval of the Member’s financial statements by the Member’s governing body, evidenced in governing body meeting minutes – this does not need to be published.  

 The audit report that specifically relates to the full financial report must: 

• Accompany the full financial report. 
• Be signed by the auditor and include their identity, qualifications and contact details.  

 The audit report that specifically relates to the Code of Conduct Summary Financial Report must: 

• Be included in the Annual Report. 
• Be signed by the auditor and include their identity, qualifications and contact details.  

The auditor will be, at a minimum, a qualified accountant who is a member of CPA Australia, Chartered Accountants Australia and New Zealand, or the National Institute of Accountants, or be a registered company auditor. 

Guidance

ACFID’s Mandatory Guidance on Financial Reporting can be found in the Resources Section below.

A documented due diligence process which: 

• Assesses the partner’s capacity to apply funds or resources in accordance with the member’s charitable purpose, promise to the donor, the member’s strategy, and the specific instructions of the member. 
• Includes reference to checking partners against prohibited entities listings.  
• Assesses the partner’s capacity to manage and control funds. 

Guidance

Undertaking due diligence and capacity assessments is a mechanism that enables Members to identify potential risks and inform their approach to working with partners. An example assessment can be found in the resources section.