The Australian Charities and Not-for-profits Commission has released new guidance aimed at helping charities that wish to provide gifts or honorariums to people in their organisation. The principles can also be applied to other NFP entities.
The new Gifts and Honorariums guide urges charities to approach the issue with care and diligence, and to consider their own unique circumstances when deciding to provide a gift or honorarium.
A gift is typically given in appreciation of an individual’s charitable service. An honorarium is typically a payment made to honour charitable service.
Some charities refer to payments of this nature as ‘allowances’ or ‘ex-gratia payments’. Although the names may sometimes be different, the considerations for a charity in the guidance still apply.
Charities’ ‘responsible persons’ need to consider the issues and concerns about providing gifts or honorariums and encourage their organisations to have formal policies on the matter.
The guidance details the ACNC’s expectations on the issue – including that gifts or honorariums should generally be token in nature – as well as outlining legal considerations. It also contains a useful series of questions charities should ask themselves before providing a gift or honorarium.
The ACNC generally expects that gifts or honorariums will be of a token nature. They should not provide anyone with a sizeable or significant personal benefit.
Charities breaching this provision risk failing to comply with their purpose and character as a not-for-profit entity.
It is up to a charity’s responsible persons to determine an acceptable value of gifts and honorariums, taking into account the charity’s financial position and its ability to carry out its charitable purposes.
Charities need to consider the legal implications of providing gifts and honorariums. To remain registered as a charity with the ACNC, an organisation must:
- Be an NFP entity
- Comply with its purposes and character, and
- Be accountable to its members.
A charity should take reasonable steps to ensure that its responsible persons are subject to, and comply with, obligations to:
- Act in good faith in the charity’s best interests and to further its purposes
- Disclose perceived or actual conflicts of interest
- Ensure that the organisation’s financial affairs are responsibly managed, and
- Ensure that decisions to provide a gift or honorarium does not risk breaching these requirements.
Charities that prepare financial statements may also need to disclose gifts or honorariums to certain individuals (such as responsible persons) in accordance with AASB 124 Related Party Disclosures. Related parties include a charity’s key management personnel (defined in AASB 124). This may include a responsible person or a close member of a responsible person’s family.
The ACNC annual information statement asks medium and large-sized charities whether they have related-party transactions and if they have documented policies concerning them.
The guide can be found at: www.acnc.gov.au/gifts.