Structure, Sunshine, and the ACNC: A Board’s 90-Day Fix
Small charities and NFPs can operate complex structures without complex problems—if boards shine a light on funding flows, control, and related parties, and then document, document, document.
1) The Wake-Up Call: “Show us the flows.”
After the ACNC’s guidance on complex structures landed, a small charity with a trading subsidiary and a fundraising foundation faced a blunt question from a major funder: “Can you show how dollars move—and who decides?” The board realised this goes to Governance Standard 2 (accountability to members) and Standard 5 (duties of responsible persons, including managing conflicts and acting in the charity’s best interests). Opaque arrangements risk ACNC enquiries, directions or enforcement—and, just as damaging, erode funder confidence.
Chair: “If we can’t explain it on one page, we probably shouldn’t be doing it.”
2) Challenge: Funding Flows Were Opaque
Money moved between the charity, a foundation, and a social enterprise arm. Inter-entity loans, shared staff, and cost allocations were handled case-by-case, leaving little traceability.
Action Taken
- Built a transaction map: all income sources to end-use programs, including intra-group transfers and donor-restricted funds.
- Tagged each flow with purpose, approval authority, and documentation location.
- Stood up a monthly “cash flow and purpose” dashboard for the finance committee.
Result
Funding flows became explainable in minutes, not days—reducing risk and speeding up decisions.
3) Challenge: Control Arrangements Were Fuzzy
Who controlled what? The charity owned the subsidiary but had informal decision paths. Minutes didn’t always reflect delegation boundaries, blurring “best interests of the charity” with “commercial convenience.”
Action Taken
- Refreshed constitutions and board charters to align with GS5 duties and clarify delegations.
- Documented reserved matters and service-level agreements between entities.
- Recorded in minutes every time the parent board considered subsidiary issues—explicitly weighing charity purpose and risk.
Pro Tip
Publish an up-to-date structure chart on your website, and attach it to board packs as a standing page. If a director can’t trace control lines, a regulator won’t either.
4) Challenge: Related Parties and Conflicts Lacked System
Directors had ties to partner suppliers and a donor-advised fund; conflicts were disclosed verbally, not tracked consistently. That’s a GS5 hazard.
Action Taken
- Adopted a board-approved related-party policy aligned to ACNC guidance.
- Implemented a conflicts register with live updates and meeting-time declarations.
- Required independent quotes for related-party services; where used, documented market rationale.
Mantra: No policy, no purchase. No register, no resolution.
Result
The board can now evidence decisions that are fair, recorded, and in the charity’s best interests.
5) Challenge: No Single Source of Truth
Remote staff and volunteer directors stored forms and approvals across inboxes. Turnover threatened continuity—“who knows where the donor restrictions letter went?”
Action Taken
- Established a governance wiki as the single source of truth: policies, structure chart, approvals matrix, registers, and templates.
- Standardised naming and version control; restricted edit rights, open read rights.
- Embedded checklists in workflows so remote workers follow the same instructions every time.
“Document your business or get out.” It’s harsh—but systems beat heroics, especially with distributed teams.
Artifacts Created
- Board-approved related-party policy
- Conflicts of interest register
- Structure chart (dated and owner-assigned)
- Funding flow map and approvals matrix
6) Challenge: Disclosure Gaps in Reports
The Annual Information Statement (AIS) and financial report didn’t consistently show material intra-group transfers or donor-restricted funds. With new reporting requirements and AASB proposals, thousands of NFPs are reassessing tax-exempt self-assessment and disclosure practices—this charity was no exception.
Action Taken
- Disclosed material intra-group transfers and the rationale in the AIS and financial report notes.
- Segregated and reported donor-restricted funds with opening/closing balances and movements.
- Added an accounting policy note indicating compliance with recognition and measurement, and whether AASB guidance proposals were early-adopted or considered.
- Aligned narrative reporting to Governance Standards and the ACNC Governance Hub language for consistency.
Result
Auditors signed off without qualifications; funders praised the clarity; due diligence time dropped by half.
7) Turning Point: From Risk to Confidence
By month three, the board could answer hard questions quickly and confidently.
Before vs After
- Before: Unclear approvals, ad hoc transfers, and verbal conflict disclosures.
- After: Documented flows, formal delegations, a live conflicts register, and transparent disclosures.
What Changed
- Reduced risk of ACNC enquiries or enforcement actions tied to opacity.
- Improved governance culture—directors now ask “where is it documented?” as a reflex.
- Funder confidence rebounded, unlocking multi-year grants.
8) Your Playbook: Make It Transparent, Keep It Current
Complex structures aren’t the problem—undocumented ones are. Start with sunshine and systems, then keep them current.
30–90 Day Checklist
- Publish a current structure chart and name an owner to update it quarterly.
- Approve a related-party policy; stand up a conflicts register; train directors.
- Map all funding flows (including intra-group and restricted funds) and link each to approvals.
- Update AIS and financial report notes to disclose transfers and restrictions clearly.
- Centralise documents in a governance wiki—your single source of truth for remote teams.
If you can’t evidence it, it didn’t happen. Shine the light, then keep it on.