Compliance for not-for-profit organisations
As a not-for-profit organisation you are governed by laws and must
comply with them.
There are two kinds of laws -- those that deal specifically with
not-for-profits, and those that apply to all enterprises.
You have to observe
requirements of incorporation
in your state (if you're an incorporated association)
These vary from state to state, but they're not particularly taxing; in
most states all you have to do is have an official contact point,
hold annual meetings, and submit annual reports.
requirements of fundraising
in your state (if you're raising funds from the public)
You'll need to register with the relevant authority in your state, and
there will be certain rules about what you can and can't do, but as
you're a bona fide organisation that actually does wish to raise funds
for a good cause these rules aren't likely to interfere with your
operations very much.
requirements of Tax Office status (if your organisation is
eligible for any not-for-profit or charity tax breaks).
You have, of course, to observe all the usual prohibitions in the
criminal law -- don't cheat, steal, or drive recklessly, for example --
but these are in the main applicable to you and your colleagues
personally. As an organisation, however, you also have to observe (among
Your Board is responsible for seeing that the law is observed. There's
an awful lot of law out there, and a surprisingly large amount of it
applies to not-for-profit groups like you. And one of the basic
principles of Australian law is that ignorance of the law is no
excuse, whether you're a good cause or not (There is no excuse for
running an insolvent enterprise. It's true that one of the basic
principles of capitalism is that if your liabilities are greater than
your assets it also doesn't matter whether you're a good cause or not;
you're still busted).
health and safety legislation
Without getting into the details, you're obliged to provide a safe
working environment for your workers (and your volunteers)
In general, and with a few exceptions, you're obliged to avoid any bias
-- in recruitment, or employment, or service delivery,
or in your public statements - against the groups specified in
Federal and State laws.
Whatever your legal form, you need to find out what taxes you're liable
for and pay them. Think particularly of GST and FBT.
You need to ensure that your organisation's assets are protected, that
its liabilities can be met, and that your dealings with it are at arm's
length. You must have provisions in your rules to cover potential and
actual conflicts of interest (see the example below).
You must have a system for ensuring the privacy of personal information
held by your organisation.
More specifically, the Board is responsible for taking all reasonable
steps to ensure that the law is observed. The law doesn't ask that
every member of the Board sits where he or she can look over the
shoulder of every employee all the time; all it asks is that
(a) the Board establish proper
procedures that, if everybody followed them, would be effective in
preventing legal breaches
(b) the Board have a monitoring system that would tell it if its
procedures were being defied or disregarded.
The Board has, of course, its own interest in seeing that the
organisation's employees follow official procedures and do as they're
told, so some form of monitoring system would be necessary in any case
-- particularly as both procedures and monitoring are needed
to ward off the possibility of civil suits by any third party who
claims to have suffered injury or loss at the hands of the organisation.
While compliance with the law will not provide you with immunity from
civil suits, disregard of the law will very probably attract civil
The development of adequate and efficient procedures and monitoring
systems will probably provide evidence of reasonable care both for the
purposes of legislative compliance and for the purposes of avoiding
civil liability. Procedures and monitoring are an essential part
of your organisation's risk management program (along with insurance).
The individual members of the Board need to be able to say that they
have made reasonable enquiries as to what the law is and how well the
organisation is observing them (it should be remembered that while
incorporation protects Board members from the consequences of poor
decisions, it does not necessarily provide a total protection against
accusations of recklessness, and it certainly does not protect you
against the consequences of any actual wrongdoing).
In most cases, and for most organisations, you will be required to
demonstrate that you have made reasonable enquiries and that you are
able to show that you know that all the issues touched on above are
covered in the organisation's policy and procedures manual and that the
Board's supervision of the organisation's management through the CEO is
It is also important that Board members show that their decisions are
made in the best interests of the organisation - and not in the best
interests of the Board members. It is important that there is a strong
stance taken on recognising any conflicts of interests and reacting
Conflict of Interest Policy
- A Board member should avoid any conflict arising between
their personal interests (or the interests of any other related person
or body) and their duties to the organisation.
- A Board member must not take advantage of their position on
the Board to gain, directly or indirectly, a personal benefit, or
an benefit for any associated person (their wife, say, or a
- A Board member shall not make use of inside information.
- The personal interests of a Board member, and those of
associated persons, must not be allowed to take precedence over those of
the organisation generally.
- A Board member should seek to avoid conflicts of interest
wherever possible. Full and prior disclosure of any conflict, or
potential conflict, or the appearance of potential conflict, must be
made to the Board. Once the conflict has been declared to the Board,
the Board must decide whether the Board member should
- Refrain from voting (this is a minimum)
- Refrain from participating in the debate
- Withdraw from the Boardroom during the debate and the
- Suggest that the Board member consider resigning from the
- Where possible, the Board should develop guidelines on what
kinds of appearance of conflict call for what level of care.
(Please note; this helpsheet is
intended as an introductory discussion of the issue of compliance, and
is neither exhaustive in its coverage nor should be taken as legal
advice. It has been written as a prompt to signal some of the areas of
concern for not-for-profit groups and we recommend that each
organisation seek their own legal or professional advice in all matters
of compliance specific to your group.)