Regulator Enters Second Enforceable Undertaking With Muslim Charity

The national charity regulator has entered into a second enforceable undertaking with the Australian Federation of Islamic Councils, also known as Muslims Australia, after significant outstanding compliance issues were not addressed.

The Australian Charities and Not-for-profits Commission (ACNC) said on Friday it had an ongoing investigation into the activities and operations of AFIC.

The ACNC first entered into an enforceable undertaking with AFIC in August 2016 where an independent auditor was appointed to examine the charity’s governance and record keeping practices.

At the time the ACNC said it was “concerned that AFIC’s responsible persons may not have made decisions in the best interests of AFIC and to further its charitable purposes”.

“Conflicts of interest have not been disclosed or appropriately managed and AFIC’s financial affairs have not been responsibly managed,” the ACNC said.

The ACNC said that in May 2017 an election facilitated by an independent third party resulted in a new AFIC board being elected and Dr Rateb Jneid named as the new president.

Jneid replaced controversial president Keysar Trad as the third president in less that 12 months.

The ACNC said on Friday it had worked closely with the new board and had agreed to enter into a second enforceable undertaking to ensure the significant outstanding compliance issues identified by the ACNC during its investigation were addressed.

The ACNC said the enforceable undertaking set out a series of actions that AFIC must take to maintain registration as a charity. The undertaking is enforceable by the courts.

The issues highlighted by the enforceable undertaking include:

• the not-for-profit nature of the charity;
• the charity’s accountability to its members;
• the charity must take reasonable steps to ensure their board members comply with their duties, including to not misuse their position, to disclose conflicts of interest, and responsible financial management; and
• the charity must keep appropriate and accurate financial records.

ACNC assistant commissioner of charity services, David Locke said he welcomed AFIC’s commitment to rectifying the range of issues highlighted by the ACNC.

“In August 2016, AFIC entered into an enforceable undertaking with the ACNC that required the charity to appoint an approved auditor to review their finances and operations and produce a report with key recommendations,” Locke said.

“AFIC complied with the requirements of that enforceable undertaking. This was the first step in improving the governance within the charity and increasing transparency of their activities. The audit was conducted and recommendations were made.”

Locke confirmed that while the membership of the charity’s board changed in May a number of key governance issues remained.

“The ACNC has agreed to enter into a second enforceable undertaking with AFIC to ensure that the charity is operating as a not-for-profit organisation, and that conflicts of interest are being appropriately managed. It is important that the charity can ensure that it is fully in compliance with the ACNC Act and the governance standards,” he said.

“We have agreed that the charity will appoint a governance expert to assist them in implementing the auditor’s recommendations,and the charity’s board members are also required to undertake governance training.”

Jneid told Pro Bono News he had been the president of AFIC for less than three months and had already met with the ACNC to “move ahead with addressing the governance issues”.

“I want to do it the right way, so we agree and we are working through all the policy procedures and also we are [undertaking] professional development,” Jneid said.

“We are doing what the ACNC wants. We have started already. I don’t see any issues or problems with that. We have already engaged consultants.”

Locke said that enforceable undertakings were one of many enforcement actions available to the ACNC.

“The ACNC is able to provide guidance, issue warnings and directions, remove responsible persons, enter into enforceable undertakings, and ultimately revoke charity registration status,” Locke said.

“The ACNC takes a proportionate approach to compliance. Where appropriate we will work with charities to address concerns and to ensure charities understand and comply with their obligations.

“An enforceable undertaking is one of the powers we may use prior to revocation of charity registration status to ensure the charity has the opportunity to rectify any issues that we have highlighted during an investigation.

“Our priority is to ensure charities are well-run and accountable to their members and the public.

“We will not hesitate to revoke charity registration status if charities are purposely failing to meet their obligations under the ACNC Act and governance standards.”

A list of all ACNC compliance decisions can be found here.

A summary of the AFIC enforceable undertaking is available here.