ACFID Member Explainer: the ACNC’s External Conduct Standards

Jocelyn Condon

23 Jul, 2019

Incoming Government regulation can be hard to get a handle on. We’ve heard from our members that getting across what is required of your organisation under the ACNC’s incoming External Conduct Standards (ECS) has been challenging. Here, we seek to answer some of your questions about the new standards, how they will work, and what you might already be doing under ACFID’s Code of Conduct that is going to put you ahead of the game in understanding how you can comply.

What are the External Conduct Standards?

When the Australian Charities and Not-for-Profits Commission was Established in 2012, a provision was written into the legislation for the newly formed Commission to enact ‘External Conduct Standards’ – a broad set of requirements that would regulate the operations of Australian charities directing funds overseas in the pursuit of their charitable purpose. Fast forward to November 2018 and, following some consultation with the sector around what kinds of activities the ACNC should seek to govern through these standards - the required regulations amendment was tabled in parliament.

The resulting ECS, due to take effect on 23 July, govern how a registered charity must manage any activities and resources outside of Australia. The standards themselves comprise a fairly broad set of descriptors that a charity must use to satisfy themselves that they are operating in keeping with. These are grouped under four categories: activities and control of resources (including funds); annual review of overseas activities and record keeping; anti-fraud and anti-corruption; and protection of vulnerable individuals. Many of these terms will already be familiar to ACFID’s members.

Similar to the governance standards, which have been in effect for a number of years and which these standards operate in addition to, the standards will require that the charity ensures that a standard of reasonable oversight has been met, they do not prescribe an exact set of steps that must be taken.

Who needs to comply with the ECS?

All of ACFID’s members will need to comply with the External Conduct Standards. However, these standards will also apply to any and all Australian charities that direct funds overseas (that is, not just those who undertake development and humanitarian work). This includes charities currently sending funds overseas who have Public Benevolence Institution (PBI) status, those operating under the Overseas Aid Gift Deduction Scheme (OAGDS) register, those charities registered with the ACNC operating abroad without tax deductibility status, as well as smaller church groups who have previously been granted the basic religious charities exemption. Importantly, an organisation does not need to be sending funds or conducting activities overseas as its primary purpose to be captured by the ECS requirements. Charities that send only a small amount of money abroad and charities that conduct activities through a third party must still comply.

ACFID’s members should consider whether there are other parts of their organisation that may be impacted by the introduction of the ECS outside of international development and humanitarian activities.

My organisation is compliant with the ACFID Code, does this mean we’re already compliant with the ECS?

We have worked with the ACNC to agree a map of the ACFID Code to the ECS, which has now been released onto the ACNC’s website here. The Code team have also worked to produce an additional map for the use of ACFID’s members that shows this alignment in greater detail. You can find it here or download using the link below.

Our mapping shows that while there is a high degree of alignment between the ECS and the ACFID Code, they do not map across each other in an exact way. This is to be expected as the ECS speaks to four key considerations for all charities operating abroad, whereas the Code of Conduct has been developed specifically for NGOs working in international development and humanitarian response. However, in almost all areas what your organisation is asked to do under the Code goes beyond compliance required under the ECS.

However, ACFID’s members should be aware that how you comply with the ECS is different to how you may conduct a self-assessment of your compliance with the Code. To be compliant with the ECS it would not be sufficient just to have a policy in place – your policy must be operationalised effectively so that your organisation has sufficient records of compliance. ACFID’s Code of Conduct is voluntary and self-regulatory. When you complete a Code Self-Assessment, you, and ACFID, are assessing that your organisation has sufficient evidence in place to demonstrate compliance with each Commitment, using the descriptors of evidence provided by the Quality Assurance Framework.While members are asked to provide a description of how policies are being implemented, how well this is being done in practice is not assessed as part of the Code Self-Assessment.

This is particularly relevant under External Conduct Standard 2 – overseas activities and record-keeping. According to this standard, your organisation is required to have sufficient records to prepare a summary of its operations outside of Australia if required. This standard requires that information can be provided about the types and details of activities outside Australia, monitoring procedures and processes undertaken, third parties worked with, and all expenditure on a country-by-country basis. Across Quality Principles 4 and 8, the ACFID Code requires members to have monitoring and evaluation processes, prepare code compliant financial statements, and publish an annual report. With these processes in place and reporting produced, members should have all of the data needed to report on their development and humanitarian activities outside of Australia. However, the Code does not require members to organise this information on a country-by-country basis, and members may need to reorganise record-keeping processes to ensure they are able to easily disaggregate records in this way if required. Members will also need to consider record-keeping processes for activities outside of Australia that are not governed by the Code.

A difference between the External Conduct Standards and the Code that ACFID’s members should be aware of is External Conduct Standard 3 – Anti fraud and anti-corruption – requiring charities to take reasonable steps to identify and document any perceived or actual material conflicts of interest for employees, volunteers, third parties and Responsible Persons outside Australia.  The Code also has requirements around conflicts of interest at compliance indicator 7.4.3, which covers conflicts of interest within your organisation but this does not extend out to cover third parties, such as partners and suppliers.  ACFID’s members are advised to check that policies, procedures and practices address third party conflicts of interest, particularly in identifying and documenting the conflict, including documenting how it is managed so as not to impact on your decision making. The ACNC has provided some tips and guidance here (https://www.acnc.gov.au/node/4855051)[JC2]

For these reasons, while your organisation is likely to be meeting the External Conduct Standards through Code compliance, there are a number of factors that could impact this assessment that will be determined by the nature and scope of your organisation’s operations. Your organisation should conduct its own internal assessment to ensure it is compliant, and is maintaining adequate records to demonstrate this.

Sounds like additional reporting?

Actually, there is no additional reporting. The ACNC has advised that there is no intention for charities to be required to submit anything to the ACNC to demonstrate compliance with the ECS. Rather, the ACNC will only request this information from a charity if they have information that the charity is not meeting the standards. This request could be made at any time and, if required, a charity must be able to produce evidence of compliance.

So, our organisation could do nothing?

No additional reporting should not be misconstrued as no need to act. Your organisation should act now to assess its compliance and ensure adequate record-keeping to demonstrate compliance with the ECS. In keeping with its regulatory approach, the ACNC will likely only ask your organisation to provide evidence of compliance if there is reason to do so. However, in the event that non-compliance is found, penalties may apply.

New External Conduct Standards, changes to the ACFID Code of Conduct, DFAT introduces PSEAH policy *head explodes*??

The introduction of the ECS has coincided with changes to the ACFID Code, and new policy on PSEAH from DFAT. Especially for our smaller members, this is likely to be creating some internal stress and additional compliance burden while your organisation adjusts to the changes. The ACFID Code team is happy to assist with enquiries and feedback about how we can better support your organisations to meet these requirements effectively. We’re currently finalising new guidance to support you in meeting your compliance obligations for the Code’s changes and will have this available on our website in early August. If there are other things we can do to assist you, don’t hesitate to get in touch.

ACNC Map: https://acfid.asn.au/sites/site.acfid/files/ECS%20mapped_to%20compliance%20indicators_09-08-2019.pdf

  • Jocelyn Condon
    Jocelyn Condon

    Jocelyn Condon, Director of Development Effectiveness, ACFID

    Jocelyn leads ACFID’s effectiveness and engagement team, which manages NGO membership, work under the ACFID Code of Conduct, and ACFID’s learning and innovation program. She has recently returned from four years in Timor-Leste where she worked with the International Labor Organisation, and is studying a masters of Development Policy at ANU. Prior to moving to Timor, Jocelyn worked as a Business Risk Consultant at Deloitte.


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