Charity regulator enters into enforceable undertaking with new AFIC board

The national charity regulator, the Australian Charities and Not-for-profits Commission (ACNC), has agreed to enter into a second enforceable undertaking with registered charity the Australian Federation of Islamic Councils.
The ACNC has an ongoing investigation into the activities and operations of AFIC, which is also known as Muslims Australia. The ACNC entered into an enforceable undertaking with AFIC in August 2016. This undertaking saw an independent auditor appointed to examine the charity’s governance and record keeping practices.
In May 2017 there was an election facilitated by an independent third party. A new AFIC board was elected, with Dr Rateb Jneid named as the new president. The ACNC has worked closely with the new Board, and has agreed to enter into a second enforceable undertaking to ensure the significant outstanding compliance issues identified by the ACNC during its investigation are addressed.
The enforceable undertaking sets 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
• The charity must keep appropriate and accurate financial records

ACNC Assistant Commissioner of Charity Services, David Locke, 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.
“The membership of the charity’s board changed in May and a number of key governance issues remain.”
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.
“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,” he said.
Locke explained that enforceable undertakings are 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,” he 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.”