ACNC Registration Decision Highlights the Importance of Managing Private Benefits in Charities

The Australian Charities and Not-for-profits Commission (ACNC) recently published a de-identified case study, highlighting the need for charities to have effective processes in place to manage private benefits when carrying out their activities. 

The de-identified case study is part of the ACNC’s Secrecy Reform Project, aimed at providing more information to the public about the ACNC’s regulatory activities. 

Summary of the ACNC Decision 

The ACNC received an application for charity registration from an organisation (which we refer to as the Applicant) aimed at supporting the social and economic development of Indigenous and Torres Strait Islander peoples. 

Whilst the ACNC recognised the Applicant’s charitable purposes and compliance with governance standards, the ACNC raised concerns regarding the Applicant’s plan to partner with (and potentially acquire) a business owned by one of its Responsible Persons, in order to carry out its activities. 

The concern was that the Responsible Person may receive private benefits in the form of a financial gain either through referrals from the Applicant or from the purchase of the business. 

The ACNC required the Applicant to explain how it would manage potential conflicts of interest and related party transactions. It became clear to the ACNC that the Applicant’s Responsible Persons were unsure how to identify and manage conflicts of interest.

The ACNC provided guidance to the Applicant on how to identify and manage different kinds of conflicts of interest, and also provided information on how the Applicant could ensure that any private benefits that were provided were incidental to achieving the Applicant’s charitable purposes. 

After discussions, the Applicant chose not to proceed with the business purchase or collaboration, and ultimately secured its charity registration.

You can read the ACNC’s reasons for registration decision here.

Key Takeaway 

Charities (and prospective charities) should have clear policies and procedures in place to identify and manage potential conflicts of interest and related party transactions. A charity should be aware that it may only confer a private benefit if the benefit is incidental or ancillary to achieving its charitable purpose.

Assistance from Jackson McDonald

Jackson McDonald’s highly experienced team can assist your organisation with registration as a charity or provide advice in relation to the management of private benefits within your charity. If you would like more information, or if you would like assistance, please contact Emma Chinnery or David Murphy.