Written by David Cantrick-Brooks in an article which first appeared in The Australian, December 2019. David highlights some interesting issues to consider when working in this sector.
Whilst registered as charities, universities have some very unusual characteristics, compared with many other not-for-profit organisations. As such, In-House Legal Counsel recruitment and Company Secretary recruitment and Executive Search firms such as Greenfields which specialise in this space, need to ensure that candidates fully understand some of the key differences and potential challenges.
The Australian Charities and Not-for-profits Commission (ACNC) was established in 2012 to regulate Australian charities and not-for-profit organisations (at a national level), including their governance arrangements and practices and fundraising activities. The ACNC administers the Charities Act 2013 (Cth). The definition of ‘charity’ includes advancing education for the public benefit. Charities need to be registered with the ACNC in order for them to be entitled to tax exempt status (which includes an exemption from GST), as well as certain other exemptions and benefits, such as the ability to give tax deductible receipts (which is important for donors).
As a general proposition, it is suggested that many Australian universities view the ACNC as simply adding another and somewhat duplicated and unnecessary layer of regulation and bureaucratic red tape, and that apart from updating the corporate details from time to time (as and when required), the submission of the financial report and Annual Information Statement (AIS) is the only obligation. The Company Secretary needs to be aware that such a view is an oversimplification of the requirements imposed by the ACNC. Whilst it may be true that institutions which adopt and adhere to the highest standards of corporate governance (based on their own acts and internally developed governance standards, having regard to various generally accepted principles of good governance and voluntary codes, etc.) will almost certainly comply with the basic and fundamental requirements of the ACNC, they still need to assess themselves against the guidelines issued by the ACNC. If nothing else, the ACNC pronouncements will provide the basis for a helpful self-assessment and good governance health-check, as an added assurance that things are in order. For In-House Legal Counsel, the Governance for Good guide and Governance Toolkit are particularly helpful in this regard. Charities must promptly notify the ACNC of any significant / material breaches of the ACNC Act or Governance Standards. Query how many universities do this?
A task for the Company Secretary of any University registered with the ACNC should be to review their ongoing obligations under the ACNC Act, including how their existing governance arrangements compare with those advocated by the ACNC. Interestingly, the ACNC emphasises that charity board (council) members have a duty not to allow the charity (of which they are a director / councillor) to operate while it is insolvent, which is often missing as a requirement in university acts. This duty is in addition to ensuring that the financial affairs of the charity are managed responsibly. In-House Legal Counsel should be aware that this is salient in the context of the current reliance (and risks) that many universities have on income received from full-fee-paying Chinese students. The conduct of operations outside Australia (covered by the ACNC External Conduct Standards) is also noteworthy, especially for universities with significant offshore campuses and arrangements with third party service providers. The tenets of the ACNC Governance Standards apply (including the need for transparency and accountability, aimed at promoting public trust and confidence in charities).
In-House Legal Counsel recruitment and Company Secretary recruitment can be challenging in this sector, yet very rewarding, considering the blend of commercial imperatives and social purpose, combined with political overlays.