Commitment 7.1:
We are not-for-profit and formed for a defined public benefit.
Compliance Indicators
Compliance with the Commitments will be assessed against the following Compliance Indicators. All of the applicable Compliance Indicators must be met by every ACFID Member to be considered compliant with the Code. Each of the Compliance Indicators has one or more compliance Verifiers. Verifiers are the description of evidence that is required to substantiate compliance with each Compliance Indicator. Guidance is also provided.
7.1.1 Members define their public benefit and specify the rules to ensure that they operate as a not-for- profit entity.
A governing instrument which outlines the relevant rules for a not-for-profit entity and is available on the organisation’s website.
Guidance
Different organisations operate under different structures. While ACFID does not advocate the adoption of any particular model, the ACFID Code of Conduct requires that the structure of the signatory organisation is clearly documented through a governing instrument, with a clear statement of purpose that seeks to provide a benefit to the public, and clauses or rules that relate to charitable purpose or not-for-profit nature. A not-for-profit entity is one that does not operate for the profit, personal gain or other benefit of particular people.
The following are example clauses that would show that the organization is not-for-profit:
- Not-for-profit clause: The assets and income of the organisation shall be applied solely in furtherance of its objects and no portion shall be distributed directly or indirectly to the members of the organisation except as bona fide compensation for services rendered or expenses incurred on behalf of the organisation.
- Dissolution or Winding up clause: In the event of the organisation being dissolved, the amount that remains after such dissolution and the satisfaction of all debts and liabilities shall be transferred to another organisation with similar purposes which is not carried on for the profit or gain of its individual members.
Some Commonwealth, state and territory incorporating regulators provide template or ‘model’ governing documents for charities with certain legal structures.
The ACNC also provides a template constitution for a small company limited by guarantee with charitable purposes which can be found in the Resources Section below.
Good Practice Indicators
The following Good Practice Indicators describe a higher standard of practice than that set out in the Compliance Indicators. While Members do not need to meet the Good Practice Indicators to be considered compliant with the Code, they will self-assess against these indicators once every three years. This provides a clear pathway for Members to strengthen and improve practice over time.
- Remuneration policy or guidelines that set conditions on payments or expenses paid to governing body members is in place.
- Periodic review of compliance with organisational governing instrument is undertaken by the governing body.
Good Practice Guidance
Here are some practical suggestions for your organisation to further deepen and improve practice over time.
Not-for-profit status
- Include clauses in your governing instrument which clearly establish the non-for profit status and practices of your organisation
- Being not-for-profit relates to how profits or surpluses are used. A not-for-profit organisation can still make a profit (or surplus), but assets and income can be used solely towards achieving the organisation’s objectives and not distributed among members.
- Include a clause in your governing instrument describing how you would use any surplusÂ
Governing body
- Include clauses in your governing instrument which clearly establish the voluntary status and practices of your organisation.Â
- If any member of the governing body was paid for work performed in a capacity other than as a member of the governing body, the organisation must disclose the payments made in their annual financial statements.
- The inclusion of additional clauses in the governing instrument or the development of a governance policy or board charter could elaborate on the clauses within the governing instrument by detailing the reimbursement of any reasonable expenses incurred for governing body members for costs associated with attendance at meetings or in the conduct of their duties; and how governing body members carrying out other professional functions for the organisation such as a consultancy, will be remunerated.Â