As a volunteer treasurer or a board representative, you must be familiar with the legal obligations that your NFP needs to meet.
For those not familiar with the Not For Profit Law Guide, Justice Connect gives a wonderful breakdown on the key legal duties required to be carried out. These include:
- - the duty to act in good faith and for a proper purpose
- the duty to act with reasonable care, skill and diligence
- the duty to not misuse information or position
- the duty to disclose and manage conflicts of interest, and
- consequences of breaches of duties.
The guide covers the legal duties of not-for-profit committee members, directors and office holders and discusses in easy to understand terms, your terms of compliance.
It is common to have questions about the legal obligations – after all, you want to ensure you skate within the guidelines and rules set out by the law. Failing to do so can have catastrophic consequences for your NFP.
Here are some commonly asked questions:
Should your incorporate the charity?
While some NFPs do carry out their day to day activities without incorporating, failure to do so can limit your access to funding. Incorporation is recommended to enter into contracts and obtain insurance, although it does bring with it a lot of additional rules and regulations. Following incorporation, a non-profit needs to report to the government and comply with their laws down to the letter.
Should you register as an NFP?
Much confusion lies within the general public when it comes to the term “not for profit.” Basically, it refers to the fact that any profit made by the organisation is put back into the company to further the aims of the organisation. To differentiate, a for-profit social enterprise organisation can make cash distributions to shareholders or investors.
What is the difference between a charity and a deductible gift recipient?
A charity is an organisation which is registered with the Australian Charities and Not-for-profits Commission. To be eligible to receive tax deductible donations, your business must register with the Australian Taxation Office. Again, there is quite a bit of red tape to making this happen so additional legal advice may be necessary.
What information does a charity have to disclose to donors or potential donors?
If your foundation is requesting donations, then the charity must collect contact details of the donor including name, address, website and telephone numbers. Donors should be well-informed regarding the NFP and must understand the intended use of the donation and the charity mission. Any and all information requested by the governing body must be provided.