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By John Vaughan-Williams, Associate
There has recently been much discussion of harmonisation of charitable fundraising laws in Australia, with the South Australian and Australian Capital Territory jurisdictions having taken steps to no longer require charities which are registered with the Australian Charities and Not-for-profits Commission (ACNC) to separately go through the application processes to obtain licences.
However, in other states, there is still a standalone fundraising regime in place, which is independent of registration with the ACNC. For charities operating in these states, there can often be uncertainties as to their obligations in certain situations, given that the fundraising legislation is often out of date, and has not been considered judicially.
New South Wales is one state which has not yet harmonised its fundraising regulations with the ACNC. However, NSW Fair Trading has recently taken the useful step of publishing new Charitable Fundraising Guidelines (Guidelines), which help charities to understand their obligations. Whilst the legislation, being the Charitable Fundraising Act 1991 (NSW) (NSW Fundraising Act) and the Charitable Fundraising Regulation 2015 (NSW) – as well as any conditions specifically attached to a licence – will always take priority over guidelines, the Guidelines are a good aid to charities when ambiguities arise.
This article will summarise some of the main sections of the Guidelines of which licensed charities in New South Wales should be aware.
Clarification of who is a Trader
In New South Wales, when a licensed fundraiser conducts an appeal in conjunction with another person who is in trade or business, or who otherwise receives benefit from the appeal (known in New South Wales as a “trader”, but in some other jurisdictions as a “commercial fundraiser”), there are specific obligations which arise under the NSW Fundraising Act.
One common method of charities collaborating with businesses is where a business sells a product on the basis that a percentage of sales of that product will be donated to a charity. There had previously been ambiguity as to whether such a business is considered to be a “trader” under the NSW Fundraising Act, as on one interpretation, that business is simply making a donation to the charity.
However, the Guidelines now explicitly state that these types of arrangements are covered by the “trader” provisions of the NSW Fundraising Act.
Contracts with Traders
It has long been the policy of NSW Fair Trading (and its predecessor regulators of fundraising law in New South Wales) to require charities to enter into a written agreement with a trader, before that trader fundraises on its behalf. It was also the policy of regulators to require those agreements to include certain details. However, the details for those agreements were not expressly included in the NSW Fundraising Act, and were normally included in the conditions attached to a licence.
The requirements for these written agreements are now set out in the Guidelines. While there are numerous requirements, some of the most significant clauses which must be included in such agreements are the following:
- the amount of donated funds which will reach the charity;
- the amount of any commission to be received by the trader;
- reporting obligations on the trader, as well as records that it must keep;
- dispute resolution procedures; and
- insurance responsibilities of each party.
Any such agreement should be carefully drafted to ensure that it satisfies the requirements of the Guidelines, and it is recommended that any existing agreements be reviewed.
The Guidelines also set out that a licensed charity must inform NSW Fair Trading within 28 days of engaging a new trader, or the details of a trader change. Since this obligation is on the charity, rather than the trader, charities should be regularly checking as to whether the details that they have provided to NSW Fair Trading on a trader are accurate.
Receipts by Charities
The Guidelines now specifically state that if an appeal is conducted by a licensed charity with a trader, the charity cannot pay more than one third of the gross money obtained to the trader in the form of a commission.
The NSW Fundraising Act states that all proceeds of a fundraising appeal must be applied towards the charitable purposes or objects that were the subject of representations made during the appeal, save for “lawful and proper expenses”.
The Guidelines now give examples of the types of expenses which are not lawful and proper. Furthermore, the Guidelines set out that a licensed charity must use reasonable endeavours to ensure that its expenses do not exceed 50% of the gross incomes received. Expenses can span more than traders, and may include any other types of service providers which are used in the appeal (for example, marketing companies, graphic designers, and reimbursements to staff members for costs incurred during the appeal).
These are important restrictions to be considered, as they are not specifically included in the NSW Fundraising Act.
Conflicts of Interest
The Guidelines provide that all licensed charities must have mechanisms for dealing with any conflicts of interest that may occur in relation to its fundraising activities, both between members, and also between officers.
This means that it may not always be sufficient for a charity to have a general conflicts of interest policy in place, and there may need to be specific clauses included regarding the resolution of fundraising disputes. This also may be an issue for charities to deal with in their constitutions.
The Guidelines form a timely and useful tool for charities to better understand their obligations regarding fundraising in New South Wales. All licensed charities, especially those which use traders, should familiarise themselves with the Guidelines, and consider whether any of their existing agreements need to be varied in order to comply.