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External Conduct Standards – what do they mean for you?

External Conduct Standards – what do they mean for you

The External Conduct Standards have been on the cards for some time and were recently passed in Federal Parliament.

What do they mean for your organisation, and are you prepared?

Last year the Federal Government announced significant reforms to the administration and oversight of Australian charities with DGR status and overseas operations.

It’s important to note that if you are an Australian charity, operating only within in Australia, the new standards do not affect you.

New Regulations

Charities with overseas operations must comply

If you DO have operations overseas, then there are changes ahead.

The External Conduct Standards have been passed in Parliament and they will come into effect at the start of the next financial year – July 1, 2019.

The Government says the new standards are designed to provide ‘more assurance that charities operating overseas meet appropriate standards of Governance and behaviour in terms of both their activities and their money management’.

The proposed standards cover:

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

For charities which will need to comply, it is a good idea to be reviewing the proposed standards now, to understand any impact on your operations. You can access information here.

The new standards will operate in conjunction with the existing ACNC governance standards.

The burden of compliance

For some charities, meeting the new External Conduct Standards will no doubt be onerous – not just in terms of data gathering (if adequate systems are not already in place to capture, store and report information required), but also in terms of resources – the time and expertise needed to ensure compliance.

For some it could potentially mean the need to invest, to update or implement systems and processes to streamline communication and reporting with overseas counterparts.

Finance implications of the new Standards

Regulatory Compliance

There are a number of finance components to the new Standards.

Standard 1 requires you to have internal control procedures in place to ensure that resources (including funds) used outside Australia are used in a way that is consistent with your charitable purpose. It also requires that entities that you provide funds to for use outside of Australia have reasonable controls and risk management processes in place. In short – you and your overseas partners need to have good internal controls in place.

Standard 2 requires you to maintain records – including expenditure – on a country-by-country basis. You may need to recalibrate your accounting system’s cost centre structure to accommodate this.

Standard 3 requires you to “minimise any risk of corruption, fraud, bribery or other financial impropriety” and this extends to your responsible entities, employees, volunteers and partners outside Australia.

Get ready now

At Accounting for Good, we know you’re operating within funding constraints, often with a mandated ratio of spending on services versus administration, and we have a proven track record in delivering cost-effective accounting systems underpinned by on-going support which makes financial reporting far less cumbersome.

For those charities needing to comply with the new External Conduct Standards, we can offer a thorough assessment of where you are at currently, and where you need to be to comply.

Contact us to make a time to meet. Read more not for profit governance articles.

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