Not-for-profit sector developments in July – changes to be mindful of and plan around
The transition into a new financial year presents a number of important changes not just for businesses to be mindful of, but also entities operating in the not-for-profit (NFP) space.
Set out below are a number of changes directly impacting the NFP sector that have either come into effect or are expected to come into effect in July 2019.
Should you require any further information or assistance in respect of any of these changes, please feel free to contact Macpherson Kelley’s NFP team.
Organisations providing services to children – incorporation and insurance
From 1 July 2019, non-government organisations that are funded to deliver services to children by the Victorian Government are required to be:
- incorporated as separate legal entities – meaning NFPs that operate as an unincorporated structure will no longer satisfy Victorian funding requirements; and
- appropriately insured to cover child abuse claims – insurance must be obtained on an ‘occurrence’ basis, at a minimum of $5 million per claim.
These changes are the result of the Betrayal of Trust Report of 2013 – an inquiry into the handling of child abuse by religious and other non-government organisations. The Inquiry found survivors of institutional child abuse were often unable to find a legal entity to sue, or that legal entities did not have enough assets to be sued and properly compensate victims.
The new requirements apply to new or varied funding agreements entered into from 1 July 2019 with any Victorian Government department, covering all non-government organisations responsible for the supervision of, or authority over, children (including the provision of care, education or other services or activities involving children).
Minimum standards and requirements for schools
Earlier this year, the Victorian Registrations & Qualifications Authority (VRQA) updated the Guidelines to the Minimum Standards and Requirements for School Registration (Guidelines). The Guidelines form part of the legal framework for the registration and regulation of schools in Victoria, describing the information, documentation and other evidence the VRQA requires for it to be satisfied that a school meets the minimum standards for school registration.
From 1 July 2019, all schools must now comply with these updated Guidelines. In the update, the VRQA placed more stringent expectations for schools to satisfy the standard that it must exist as a ‘not-for-profit’ (as that term is defined in Victoria’s education law framework).
Schools must now ensure that they have in place (and are prepared to provide to VRQA as part of any audit or review) legally binding written agreements for any loans or arrangements for the delivery of services to the school or its student.
This includes, in particular, arrangements where the counterparty is a related entity or otherwise affiliated with the school or the school proprietor, regardless of whether or not that counterparty is itself a not-for-profit entity (for example, covering typical lease or loan arrangements between schools and their affiliated religious groups).
New whistleblower protections have been introduced pursuant to the Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019 (Cth), which came into effect on 1 July 2019.
Under the new laws, all public companies limited by guarantee are required to adopt a compliant whistleblower policy no later than 1 January 2020, and make that policy available to all employees and officers of the company. Failure to do so constitutes an offence under the Corporations Act 2001 (Cth).
Given many NFPs are structured as companies limited by guarantee, these new requirements have direct impact on the NFP sector. Directors are encouraged to consider the adoption of a compliant whistleblower policy as soon as possible.
External conduct standards
Charities that work overseas are soon likely to be subject to new standards of governance – named External Conduct Standards – expected to come into effect on 23 July 2019.
The new standards will apply to the overseas activities of charities as well as their management of funds and aid sent overseas, and are designed to combat corruption, money laundering and other concerns that can arise from overseas activities. Failure to comply with the standards puts at risk an entity’s charity registration.
The administrative burden of complying with the new standards is substantial, and charities that operate overseas are encouraged to start reviewing their overseas activities and consider any changes that need to be made to their operations, in light of the proposed standards (which are available albeit not yet legally effective).
Annual Information Statements
Charities that account on a calendar year basis must now submit their 2018 Annual Information Statement (AIS) if they haven’t already done so, with the due date for the calendar year reporting period having passed on 30 June 2019.
DGR reforms delayed
The Federal Government’s major reforms to the administration and oversight of organisations with Deductible Gift Recipient (DGR) status announced in 2017 have been further delayed, and are now expected to commence 1 July 2020.
The reforms propose that all non-government DGRs, not just charities, be registered with the ACNC, and that existing DGR registers (such as the Register of Environmental Organisations, Register of Cultural Organisations, Overseas Aid Gift Deductibility Scheme and the Register of Harm Prevention Charities) be integrated with the ACNC Charity Register to abolish duplicate reporting requirements.
Currently, there are various Commonwealth Government departments involved in the regulation and oversight of DGRs depending on the relevant DGR’s category of endorsement, and this red tape challenge will continue to plague some existing DGRs, and organisations seeking to apply for new DGR endorsement in a relevant category, for at least another year.
This article was written by Craig Gibson, Principal Lawyer – Commercial.