External Conduct Standards and the ACFID Code

Jocelyn Condon

27 Mar, 2019

In late November 2018, the ACNC’s much anticipated proposed external conduct standards were tabled in Parliament. Unless disallowed, they will take effect in the second half of this year. Whilst the ACNC has undertaken that duplicative reporting requirements will be abolished when the DGR registers and Overseas Aid Gift Deduction Scheme (OAGDS) are integrated with the ACNC charity register, the start date for DGR reforms has been revised to 2020, and thus for now at least, another layer of regulation has been introduced. The external conduct standards operate in addition to the existing ACNC governance standards. For ACFID’s members, who already comply with the ACFID Code and undertake annual reporting and continuous internal governance and compliance work to uphold our own rigorous self-regulatory Code, it’s easy to understand how additional regulation is frustrating. And, given that this is an addition of compulsory external regulation, how the easiest way to reduce the burden would be to opt-out of compliance with the ACFID Code, and consequently membership of our sector’s peak body.

Choosing to comply with ACFID’s Code (whilst acknowledging its status as a pre-requisite for some funding mechanisms such as the ANCP) is just that – a choice. Given this, it’s important to recognise both the work that it takes to be compliant, and why an ACFID member chooses to do this even in the face of potential additional reporting burdens such as the external conduct standards. To explain the reasoning fully, it’s useful to first understand the key differences between the external conduct standards and the ACFID Code.

The first and perhaps the most significant point of difference is scope. Whilst all charities operate in pursuit of a charitable purpose, this does not necessarily mean that all charities operating overseas direct funds to development and humanitarian activities. Many charities fundraise in Australia and send the funds raised to other developed nations where it is programmed for and expended accordingly. Examples could include some health and research charities. ACFID membership is only open to agencies conducting humanitarian and development activities overseas, and the Code applies to this work. In this sense, the standards will now catch a lot of charities who would never have been members of ACFID. This is a good thing – it means that all Australian charities sending money abroad must now do so in accordance with these standards and are accountable to the giving public for the funds through their entire supply chain including work delivered by partners.

However, broad application also brings a number of drawbacks. A one size fits all approach to the conduct of agencies funding activities outside of Australia means the standards are necessarily broad and under-defined within the tabled legislation. Their application at this stage in terms of reporting and compliance remains unclear and will rely on the development of comprehensive explanatory materials. This is an important point. It had been a widely held assumption that the external conduct standards would serve to close the ‘PBI loophole’– a gap created by precedent that allows charities with PBI status to send funds abroad, where this had previously only been assumed to be possible if an agency had OAGDS status. Whilst the external conduct standards do certainly expand this coverage, the present lack of distinction between development work and funds sent abroad for other purposes means there is arguably still a sizeable gap between these standards and the OAGDS criterion.

The second point of difference is intent. Like most Government regulation, the external conduct standards set a minimum standard for compliance and practice that an organisation must not fall below. Whilst the standards are certainly more prescriptive to the operations of a charity than any pre-existing regulatory measure, their intent is to set out a minimum level of accountability, transparency, good governance and safeguarding practices that must be in place. This is not and has never been the intent of the ACFID Code. In choosing to regulate ourselves, ACFID’s members also choose to pursue compliance with a standard that is much higher than government regulation. In choosing to be compliant with the Code, ACFID’s members acknowledge that the bar has been set necessarily high and in accordance with our much broader collective pursuit of a world without poverty. The ACFID Code is created for members, by members. By creating the Code, our members engaged with the necessary minimum level of assurance required, as well as articulating the full breadth of commitment to quality development and humanitarian action through their approach, processes and supporting systems. The implicit acknowledgement is that a minimum standard is simply not sufficient, and we must do better than this. It is within this acknowledgement that the Code finds its value and its point of difference.

Importantly, the enactment of external conduct standards should not impact the current standard of work conducted by ACFID’s members. The external conduct standards comprise four standards. These are:

  • Activities and control of resources (including funds)Extern
  • Annual review of overseas activities and record-keeping
  • Anti-fraud and anti-corruption
  • Protection of vulnerable individuals

These are all areas of an organisation’s practice extensively covered through compliance with the ACFID Code, (especially noting the new Commitment to the safeguarding of vulnerable persons that took effect for ACFID’s members on 1 January. As such, ACFID members should take comfort in the fact that they are positioned to meet and exceed the external conduct standards. In effect, the risk to ACFID’s members then is red-tape. In this regard, the impact of additional compliance reporting to a small, already resource constrained and/or highly volunteer-dependent charitable organisation should not be lightly dismissed by the ACNC or by ACFID. The ACNC Act contains explicit objects to both maintain a robust, vibrant and innovative sector, as well as to reduce unnecessary regulatory burden on charities. These objects must be given due consideration in the pursuit of greater public trust and accountability. The recent review of the ACNC Act also called on the Government to consider options for presumption of compliance where compliance with an equivalent standard had been established. Accordingly, ACFID is committed to actively working with the ACNC to ensure both consistency within the standards and their reporting requirements and explore options to minimise duplicative reporting for our members.

Regardless of your view, it’s important to take some ‘time-out’ from the forest of regulation and reflect the power of a membership that share a collective best-practice approach to their work, which is validated annually. This is the enduring value of self-regulation in our sector.

  • 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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