Explanatory Memorandum
(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)Chapter 10 The Commission and the Advisory Board
Outline of chapter
10.1 This Chapter:
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- explains the establishment and functions of the Australian Charities and Not-for-profits Commission (ACNC);
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- explains the establishment, functions and powers of the Australian Charities and Not-for-profits Commission Commissioner (ACNC Commissioner);
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- sets out the terms and conditions of appointment of the ACNC Commissioner, and the ACNC Commissioner's powers of delegation; and
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- explains the establishment, functions and powers of the Advisory Board, including the membership of the Advisory Board.
Summary of new law
10.2 The ACNC is a new Commonwealth statutory office which will be responsible for the regulation of the not-for-profit (NFP) sector.
10.3 This Chapter addresses how the ACNC is established, as well as the terms and conditions of appointment of the ACNC Commissioner, and the ACNC Commissioner's powers of delegation, in order to administer the national regulatory framework.
10.4 The ACNC will also provide assistance and support for the NFP sector through the provision of educational material and other guidance.
Detailed explanation of new law
The Australian Charities and Not-for-profits Commission
10.5 This Bill establishes the ACNC. [Section 105-5]
10.6 The ACNC consists of:
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- the ACNC Commissioner; and
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- any staff assisting the ACNC Commissioner that are engaged under the Public Service Act 1999 and are subject to the directions of the ACNC Commissioner.
[Section 105-10]
10.7 Staff assisting the ACNC Commissioner are provided by the Commissioner of Taxation; however, they will be officers of the ACNC and report to the ACNC Commissioner in respect of all matters for which the ACNC Commissioner is responsible.
10.8 The function of the ACNC is to assist the ACNC Commissioner in the performance of his or her functions. [Section 105-15]
10.9 The ACNC enjoys the same privileges and immunities as the Crown. This means that the ACNC is legally and financially part of the Commonwealth. This confers on the ACNC the non-statutory privileges and immunities of the Crown, and the benefit of the presumption that legislation does not generally apply to the Crown. [Section 105-20]
The ACNC Commissioner
10.10 This Bill establishes the position of the ACNC Commissioner. [Subsection 110-5(1)]
10.11 Once the Bill is enacted, the ACNC Commissioner has the general administration of the law, and the other powers and functions that this Bill, or any other laws, confers on the office. [Subsection 110-5(2)]
10.12 The ACNC Commissioner has the function of assisting registered entities in complying with and understanding the Bill, by providing them with guidance and education. [Subsection 110-10(1)]
10.13 The ACNC Commissioner also has the function of assisting the public in understanding the work of the NFP sector, in order to support the transparency and accountability of the sector, by giving the public relevant information on the ACNC's website. This function does not limit the ACNC Commissioner's other functions. [Subsection 110-10(2) and (3)]
10.14 The ACNC Commissioner has the power to do all those things necessary or convenient to be done for, or in connection with, the performance of his or her functions. However, this power does not extend to the spending of public monies without a proper delegation in place. [Subsection 110-15]
10.15 This means that the ACNC Commissioner is able to administer general activities associated with the Bill such as the running of a website and the provision of educational information to the sector, as well as other powers and functions as described in detail in the Bill.
10.16 The position of ACNC Commissioner is an independent statutory office. In the exercise of his or her functions, the ACNC Commissioner is not subject to the direction or control of any Minister or of another government department or agency.
10.17 The ACNC Commissioner may have regard to the advice and recommendations of the Advisory Board (see paragraphs 10.58 to 10.70 below) in carrying out his or her functions and exercising his or her powers, but he or she is not obligated to act in accordance with this advice. [Subsection 110-20(1)]
10.18 These provisions mean that the Advisory Board is not a decision-making body. While the Advisory Board can provide advice and suggestions, it is the ACNC Commissioner who is responsible for making decisions on behalf of the ACNC.
10.19 The ACNC Commissioner may attend Advisory Board meetings only upon an invitation from the Chair of the Advisory Board. [Subsection 110-20(2)]
Terms and conditions of appointment
10.20 The Bill sets out the terms and conditions of the ACNC Commissioner's appointment.
10.21 The Governor-General is responsible for appointing the ACNC Commissioner by written instrument. [Subsection 115-5(1)]
10.22 The ACNC Commissioner is to be appointed on a full-time basis. [Subsection 115-5(2)]
10.23 The written instrument of appointment contains the period of appointment, which must not exceed 5 years. [Section 115-10]
10.24 The person currently occupying the office of ACNC Commissioner is eligible for re-appointment. [Section 115-10 note]
10.25 The Bill provides for circumstances when there needs to be an Acting ACNC Commissioner. The Bill gives the Minister the power to appoint an Acting ACNC Commissioner when there is a vacancy in the office, or if the ACNC Commissioner is out of Australia or unable to perform the duties of the office. The rules that apply to acting appointments are set out in section 33A of the Acts Interpretation Act 1901 . [Section 115-15]
10.26 The Remuneration Tribunal is responsible for determining the remuneration and leave entitlements of the ACNC Commissioner. The regulations may prescribe a remuneration amount that is to apply in the absence of a determination by the Remuneration Tribunal. The regulations may also prescribe any allowances due to the ACNC Commissioner. [Section 115-20]
10.27 Recreation leave entitlements of the ACNC Commissioner are determined by the Remuneration Tribunal. The Minister also has discretion to grant the ACNC Commissioner a leave of absence. The Minister may grant a leave of absence, for example, if the personal circumstances of the ACNC Commissioner require it. [Section 115-25]
10.28 The ACNC Commissioner must disclose to the Minister, in writing, all interests, pecuniary or otherwise, that the ACNC Commissioner has or acquires which may conflict with the proper performance of the ACNC Commissioner's functions. [Section 115-30]
10.29 The ACNC Commissioner is not allowed to engage in other paid employment without the Minister's approval. [Section 115-35]
10.30 The above two conditions ensure that the ACNC Commissioner is not compromised by other interests in his or her duties.
10.31 The Minister may set other terms and conditions of the ACNC Commissioner's office which are not covered by the Bill. This may include setting out additional specific leave entitlements. [Section 115-40]
10.32 The ACNC Commissioner may resign from the office by giving the Governor-General a signed notice of resignation. The ACNC Commissioner's resignation will take effect from the day the notice is received by the Governor-General, unless the notice specifies another day in the future, in which case resignation will take effect from the later day. [Section 115-45]
10.33 The Bill provides for the Governor-General to terminate the ACNC Commissioner's appointment:
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- for misbehaviour or incapacity (either physical or mental) [Subsection 115-50(1)] ; or
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- if the ACNC Commissioner:
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- becomes bankrupt;
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- applies for bankruptcy;
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- compounds with his or her creditors; or
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- assigns his or her remuneration for the benefit of creditors [Paragraph 115-50(2)(a)] ; or
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- if the ACNC Commissioner is absent without a leave of absence [Paragraph 115-50(2)(b)] ;
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- if the ACNC Commissioner engages in paid employment without approval [Paragraph 115-50(2)(d)] ; or
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- if the ACNC Commissioner fails to comply with any terms or conditions of employment provided for by the Bill or by the Minister in accordance with the Bill [Paragraph 115-50(2)(c)] .
10.34 This standard provision is included to ensure that the ACNC Commissioner is able to perform his or her duties without interference, while acknowledging that there may be circumstances where it is both appropriate and warranted for the ACNC Commissioner to be replaced to ensure the proper function of the office of ACNC Commissioner.
10.35 The ACNC Commissioner's appointment may be terminated in cases where her or his personal finances have been compromised. These circumstances are included to ensure the ACNC Commissioner's ability to perform her or his duties is not compromised by his or her personal financial situation.
10.36 The ACNC Commissioner is able to delegate his or her powers or functions in accordance with this Bill. The delegation must be in writing, and must be to a person holding the position, or performing the duties, of a Senior Executive Service (SES) employee working at the ACNC. [Subsection 115-55(1)]
10.37 Delegates must exercise their powers in accordance with any lawful written directions provided by the ACNC Commissioner. [Subsection 115-55(2)]
10.38 Lower level staff of the ACNC will be involved in the day-to-day decisions of the ACNC; however, decision-making authority will rest with the delegate. This is in line with the practices of most Commonwealth authorities. Consistent with those practices, other Australian Public Service (APS) staff may act as an agent of the delegate in carrying out the ACNC Commissioner's functions.
10.39 Before signing or executing any notice, determination, instrument or other document which gives rise to a reviewable decision, officers must ensure that they have been authorised by a delegate of the ACNC Commissioner to exercise the power in question on his or her behalf, and in accordance with any instructions given to the officer acting for, and on behalf of, the delegate.
Staffing and consultants
10.40 The Bill provides details of the staffing of the ACNC, and the ability of the ACNC to engage consultants.
10.41 The ACNC Commissioner has members of staff which are engaged under the Public Service Act 1999 . The staff are provided by the Commissioner of Taxation, however, they are responsible to the ACNC Commissioner when performing their duties under their employment. [Section 120-5]
10.42 This ensures that staff provided to the ACNC Commissioner by the Commissioner of Taxation are accountable to the ACNC Commissioner in the performance of their duties under the ACNC Bill and act independently of the Commissioner of Taxation in making decisions about the registration and regulation of entities under this Bill. [Section 120-5 and section 120-5 (note)]
10.43 This Bill does not displace the existing common law duty of employees to comply with lawful and reasonable directions by the employer, or the existing duty of APS employees to comply with a lawful and reasonable direction under the APS Code of Conduct as set out in section 13 of the Public Service Act 1999 .
10.44 In the rare event that a conflict should arise between a direction from the Commissioner of Taxation and the ACNC Commissioner, staff must comply with the directions of the ACNC Commissioner.
10.45 The ACNC Commissioner may engage consultants to assist in the performance of the ACNC's functions. These consultants will be engaged on behalf of the Commonwealth. [Subsection 120-10(1)]
10.46 The ACNC Commissioner is not allowed to engage a member of the Advisory Board as a consultant [Subsection 120-10(2)] . This is to ensure that Advisory Board members provide independent advice to the ACNC Commissioner to assist him or her in carrying out the functions of the ACNC. To have a member of the Advisory Board engaged as a consultant has the potential to interfere with this independence.
Special account for the ACNC
10.47 A Special Account for the purposes of the Financial Management and Accountability Act 1997 (FMA Act) is established by the Bill. This will be the Australian Charities and Not-for-profits Commission Special Account (Special Account). [Section 125-5]
10.48 The Special Account is an appropriation mechanism that sets aside amounts within the Consolidated Revenue Fund for expenditure for special purposes, which, in this case, relates to expenditure for the special purposes of funding the operations of the ACNC.
10.49 The Special Account sits within the Australian Taxation Office's (ATO) portfolio budget statements; however, it is accounted for as its own item, similar to how the Tax Practitioners Board is reported on in the ATO's portfolio budget statements.
10.50 A memorandum of understanding (MOU) is proposed to exist between the Commissioner of Taxation and the ACNC Commissioner. This will set out in detail how the two agencies will work together, including how the ACNC Commissioner will independently manage the ACNC budget.
10.51 However, the ACNC Commissioner must comply with the requirements of the FMA Act. [Section 110-15 note]
10.52 The FMA Act sets out the way in which officials must handle public money, public property and other resources of the Commonwealth. It also sets out general integrity rules that apply to the financial management of other Commonwealth regulators such as Australian Securities and Investment Commission (ASIC) and Australian Competition and Consumer Commission (ACCC).
10.53 The Special Account may be credited by amounts equal to the following:
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- amounts received by the Commonwealth in connection with the performance of the ACNC Commissioner's functions under the Bill;
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- amounts of any gifts or bequests made for the purposes of the account; and
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- amounts received by the Commonwealth in relation to property paid for with amounts debited from the ACNC Special Account.
[Section 125-10]
10.54 The Special Account is used to pay or discharge costs, expenses and other obligations incurred by the Commonwealth in relation to the performance of the ACNC Commissioner's functions; to pay for remuneration or allowances to persons in accordance with the Bill; and to meet any expenses associated with administering the Special Account. [Section 125-15]
Reporting
10.55 The ACNC Commissioner must provide an annual report to the Minister as soon as practicable after the end of the financial year (1 July to 30 June) for presentation to Parliament. The report provides details on the ACNC Commissioner's operations during that year. [Subsection 130-5(1)]
10.56 The report must also include an evaluation of the ACNC's overall performance during the year. [Subsection 130-5(2)]
10.57 The provisions about annual reports in section 34C of the Acts Interpretation Act 1901 apply in relation to the presentation of the ACNC Commissioner's annual report. For example, subsection 34C(2) provides that the ACNC Commissioner must furnish the report to the Minister within six months after the end of the financial year. This means that 'as soon as practicable' is read to mean no longer than six months. [note in subsection 130-5(1)]
10.58 Subsection 34C(4) of the Acts Interpretation Act 1901 also applies so that the ACNC Commissioner may apply to the Minister for an extension of the period if the ACNC Commissioner is of the opinion that it will not be reasonably possible to comply with the six-month time requirement.
The Advisory Board
10.59 The Bill establishes an ACNC Advisory Board. [Section 135-5]
10.60 The Advisory Board consists of two to eight general members. Collectively, the general Advisory Board members must have expertise relating to charities and NFP entities, or experience and appropriate qualifications in relation to law, taxation or accounting. Each member may have expertise and experience in a number of these areas. [Paragraph 135-10(b)]
10.61 The members are expected to have a detailed knowledge of the NFP sector and how it operates.
10.62 The Advisory Board may also consist of a number of ex officio members as determined by the Minister. [Paragraph 135-10(a)]
10.63 The Advisory Board's function is to provide advice and make recommendations to the ACNC Commissioner in relation to the ACNC Commissioner's functions under this Bill. The Advisory Board is to provide advice to the ACNC Commissioner in response to a request for such advice from the ACNC Commissioner. [Subsection 135-15(1)]
10.64 The Advisory Board cannot provide advice that is not in response to a request from the ACNC Commissioner.
10.65 The Advisory Board can do anything which is necessary or convenient in connection with performing its function. [Subsection 135-15(2)]
10.66 However, this broad power does not extend to the spending of public monies without a proper delegation in place. The Advisory Board must not spend money without a delegation from the Commissioner of Taxation. However, it is not expected that the need will arise for the Advisory Board to spend public money, and therefore, no delegations for the spending of public money are likely to be put in place. These matters are to be set out in the MOU between the Commissioner of Taxation and the ACNC Commissioner.
10.67 The ACNC Commissioner is not bound to act in accordance with any advice from the Advisory Board because the Advisory Board is not a decision-making body. [Subsection 135-15(3)]
10.68 The Advisory Board is a body that can provide sector-specific advice to the ACNC Commissioner, to assist the ACNC Commissioner in his or her decision-making role. The Advisory Board is not a governing body and has no operational oversight role.
10.69 The Advisory Board has no decision-making power. It is intended to be a resource for the ACNC Commissioner as it can provide the ACNC Commissioner with a pool of broad knowledge and experience in the NFP sector, law, accounting and taxation which the ACNC Commissioner can draw on to assist him or her to effectively fulfil the role of ACNC Commissioner.
10.70 For example, the ACNC Commissioner may request the Advisory Board to consider the implications of certain decisions on the sector, what the next piece of guidance material that the ACNC Commissioner releases should be or what sort of education and support for the sector is necessary to assist the sector in response to emerging issues.
10.71 Commonwealth regulators are normally structured in this way so that mechanisms to ensure accountability are in place.
Appointment
10.72 The Minister may appoint a general member of the Advisory Board by written instrument. [Subsection 140-5(1)]
10.73 The term of appointment for general members is as specified in the written instrument, however the period must not exceed 3 years. [Section 140-10]
10.74 Members of the Advisory Board are eligible for reappointment. [Note in section 140-10]
10.75 A member of the Advisory Board is appointed on a part-time basis, and must be an ordinary resident in Australia. [Subsections 140-5(1) and 140-5(2)]
10.76 One of the members of the Advisory Board is to be appointed by the Minister as the Chair of the Advisory Board. Another member is to be appointed as the Deputy Chair. [Subsection 140-5(3)]
10.77 A person's appointment as a general member, the Chair or the Deputy Chair is not invalid merely because of a defect or irregularity in connection with the person's appointment. This protects the ACNC in the event that they would receive advice from a possibly, and only technically, mis-constituted board. [Subsection 140-5(4)]
10.78 A defect or irregularity could include such things as an incorrect date, a signature in the wrong place or incorrectly numbered pages.
10.79 A general member of the Advisory Board is not an 'officer' for the purposes of Appendix E of the Legal Services Directions . This means that the Commonwealth will not be liable to pay the costs if a member of the Advisory Board is sued in their capacity as Advisory Board member.
Remuneration
10.80 The remuneration of the general members of the Advisory Board is determined by the Remuneration Tribunal. If no remuneration determination is in place, general members are paid in accordance with the remuneration amounts set out in the regulations. [Subsection 140-15(1)]
10.81 The regulations may prescribe any allowances payable to the general members [subsection 140-15(2)] . Any regulations have effect subject to the Remuneration Tribunal Act 1973 [subsection 140-15(3)] .
Disclosure by members
10.82 Members of the Advisory Board must provide the Minister with written notice of all interests, pecuniary or otherwise, that the member has or acquires which may conflict with the proper performance of their functions as Advisory Board members. [Subsection 140-20(2)]
10.83 A member must disclose these interests to the Minister as soon as practicable after becoming aware of a possible conflict of interest. [Subsection 140-20(2)]
Other terms and conditions
10.84 The Minister may determine, in writing, other terms and conditions to limit the operations of the Advisory Board and its members. [Subsection 140-25]
Resignation and termination
10.85 General members of the Advisory Board may resign from their position on the Board by giving the Minister a signed notice of resignation. [Subsection 140-30(1)]
10.86 The Chair and the Deputy Chair are able to resign from those positions while remaining a general member on the Advisory Board. [Subsections 140-30(2) and 140-30(3)]
10.87 A resignation takes effect on the day it is received by the Minister, unless the notice specifies a day in the future, in which case resignation takes effect on the later day. [Subsection 140-30(4)]
10.88 The Minister has the power to terminate a member's appointment at any time. [Section 140-35]
Meetings of the Advisory Board
Holding meetings
10.89 The Chair of the Advisory Board has additional responsibilities in relation to the convening of meetings.
10.90 The Chair must convene at least four Advisory Board meetings in each financial year but can call additional meetings if these are necessary for the efficient performance of the Advisory Board's function. [Subsection 145-5(1)]
10.91 For example, the Chair may convene an additional meeting to respond to a request for advice from the ACNC Commissioner.
Procedure of meetings
10.92 The Advisory Board can determine for itself how it operates. However, it must comply with any written matters determined by the ACNC Commissioner in relation to the operation of the Advisory Board. [Subsection 145-5(2) and (3)]
10.93 A determination made by the ACNC Commissioner in this regard is not a legislative instrument. [Subsection 145-5(9)]
10.94 The Chair must ensure that minutes of the Advisory Board meetings are kept. [Subsection 145-5(4)]
Disclosure of interest by a member
10.95 If a matter arises during a meeting to which a member of the Advisory Board has a direct or indirect financial interest, being an interest that could conflict with the proper performance of the Advisory Board's function, then the member must disclose that interest to the other Advisory Board members as soon as possible. [Subsection 145-5(5)]
10.96 This duty relates specifically to meetings, and does not override the duty which requires members to give notice to the Minister of all interests, pecuniary or otherwise, that could conflict with the proper performance of the Advisory Board's function (see paragraphs 10.82 to 10.83 above).
Disclosure to be recorded in the minutes of the meeting
10.97 An interest that arises during a meeting, and the subsequent decision made by the Advisory Board, must be recorded in the minutes of the meeting. [Subsection 145-5(6)]
10.98 The member with the interest must exclude themselves from the discussion and any subsequent advice provided by the Advisory Board, unless given permission by the Chair to participate. [Subsection 145-5(7)]
10.99 If the member with the interest happens to be the Chair of the Advisory Board, then the ACNC Commissioner must give permission for the Chair to participate in the discussion and any subsequent decisions relating to that member's interest. [Subsection 145-5(7)]
Attendance by ACNC Commissioner
10.100 The Chair of the Advisory Board may invite the ACNC Commissioner to attend all or any part of an Advisory Board meeting. [Subsection 145-5(8)]
10.101 The ACNC Commissioner must not attend an Advisory Board meeting without such an invitation.