External Conduct Standards for Charities with Overseas Activities

The Australian Charities and Not-for-profits Commissions (ACNC) introduced, in 2019, a set of standards, called the External Conduct Standards (EC Standards), with which charities ‘operating outside of Australia’ must comply.

Charities and Purpose-Driven Institutions

December 18 2024

by Jonathan Green, Senior Associate

The Australian Charities and Not-for-profits Commissions (ACNC) introduced, in 2019, a set of standards, called the External Conduct Standards (EC Standards), with which charities ‘operating outside of Australia’ must comply. The EC Standards govern how charities manage their activities and resources outside of Australia and require charities to take reasonable steps to ensure appropriate standards of behaviour, governance and oversight are adopted when undertaking activities or providing funding overseas.

A charity operates outside of Australia if it:

conducts activities overseas, even if such activities are:
- a minor part of the activities it undertakes; or
- undertaken by a third party; and/or
sends or spends funds overseas, once again, even if this is only a small amount.

Charities that do not operate outside of Australia are not subject to the EC Standards and do not have to comply with the EC Standards.

The EC Standards are comprised of four separate standards. These standards are:

Standard 1: Activities and control of resources;
Standard 2: Annual review of overseas activities and record keeping;
Standard 3: Anti-fraud and anti-corruption; and
Standard 4: Protection of vulnerable individuals.

The requirements of each of these standards and how charities can meet each standard are discussed in further detail below.

Standard 1: Activities and control of resources

Standard 1 of the EC Standards requires that charities:

take reasonable steps to ensure their activities outside of Australia are consistent with their charitable purpose’s and are conducted in accordance with their not-for-profit requirements;
maintain reasonable internal control procedures to ensure that funds, equipment, supplies and other resources, used outside of Australia, are used in a way that is consistent with their charitable purpose’s and character;
take reasonable steps to ensure that funds, equipment, supplies and other resources provided to third parties outside Australia, or within Australia for use outside Australia, are applied:
- in accordance with their charitable purpose’s and character; and
- with reasonable controls and risk management processes in place; and
comply with Australian laws while operating overseas (i.e., regarding money laundering, financing of terrorism, slavery etc) and put in place reasonable internal control procedures to ensure compliance with such laws.

Charities can take steps to meet this standard by identifying how their overseas activities or funding could be at risk of misuse and developing a plan to manage such risk. This might include, but is not limited to, taking steps such as:

ensuring that policies and procedures are in place to manage such risk;
making sure overseas activities and funding requests are properly approved;
checking the reputation and experience of third parties before engaging them overseas;
putting in place written agreements with third parties and regularly monitoring their activities; and
ensuring a whistleblower process is in place, to detect wrongdoing.

Standard 2: Annual review of overseas activities and record keeping

Standard 2 of the EC Standards requires charities to obtain and keep sufficient records for their overseas activities, on a country-by-country basis. Such records must:

include information necessary to be able to prepare a summary of their activities and related expenditure outside Australia in relation to each overseas country in which they undertake activities; and
be kept for each financial year in which they:
- operate outside of Australia; or
- give funds or other resources to third parties for use outside Australia.

Charities can meet this standard by ensuring that they keep suitable records of their operations outside of Australia. Such records should include details such as:

the types of activities undertaken and how those activities achieve the charitable purpose’s of such charities, on a country by country basis;
details of overseas expenditure, on a country by country basis;
how activities overseas are monitored;
the third parties such charities work with overseas; and
records of any claims of inappropriate behaviour by the personnel of such charities.

Standard 3: Anti-fraud and anti-corruption

Standard 3 of the EC Standards requires charities to:

minimise any risk of corruption, fraud, bribery or other financial impropriety by their personnel and by third parties they work with outside of Australia; and
identify and document any perceived or actual material conflicts of interest outside of Australia, in relation to their personnel and third parties that they work with outside Australia.

Charities can take steps to meet this standard by identifying and assessing the risks of fraud or other financial impropriety they face when carrying out their work overseas and developing a plan to manage such risks. This might include, but is not limited to, taking steps such as:

ensuring that policies and procedures (including a suitable conflicts of interest policy) are in place to manage such risk;
making sure overseas activities and funding requests are properly approved and conflicts of interest are identified and documented;
ensuring thorough recruitment processes are put in place in relation to personnel of such charities;
checking the reputation and experience of third parties before engaging them overseas;
putting in place written agreements with third parties and regularly monitoring their activities; and
ensuring a whistleblower process is in place, to detect wrongdoing.

Standard 4: Protection of vulnerable individuals

Standard 4 of the EC Standards requires charities to take reasonable steps to ensure the safety of ‘vulnerable individuals’ (those under 18 and/or those unable to protect themselves from harm or exploitation) overseas. It applies where individuals are:

provided with services or accessing benefits under programs provided by such charities (whether directly or through collaboration with third parties); or
engaged by such charities, or third parties in collaboration with such charities, to provide services or benefits on behalf of such charities or third parties.

Charities can take steps to meet this standard by identifying and assessing the risks of vulnerable people associated with their overseas activities and developing a plan to manage such risks. This might include, but is not limited to, taking steps such as:

ensuring that policies and procedures are in place to manage such risk;
ensuring thorough recruitment processes are put in place in relation to their personnel;
checking the reputation and experience of third parties (including their ability to ensure the safety of vulnerable people) before engaging them overseas;
putting in place written agreements with third parties and regularly monitoring their activities; and
ensuring a whistleblower process is in place, to detect wrongdoing.

If your charity conducts activities overseas and needs assistance to ensure compliance with the EC Standards, our team can assist with reviewing your compliance with the EC Standards and ensuring ongoing compliance with the EC Standards.

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