Not For Profit enterprises in the Pacific: Is your organisation compliant?
By Dirk Heinz
“Not-for-profit” is a phrase that can be used to describe all sorts of enterprises, including charities, NGOs and others. They all have at their core the requirement that they do not operate for profit. These entities can be incorporated almost anywhere and have a long history of operating in the Pacific. If you’re part of such an organisation (which we will call below an ‘NGO’) and have spent time living in the Pacific region, you’ll be acutely aware of just how important the role of aid funding can play in improving quality of life for many Pacific peoples. In the face of a growing threat from climate induced natural disasters and as efforts to close the gap between emerging island economies and the developed world continue, NGOs are more important than ever.
However, NGOs are often under-resourced and very busy carrying on with their missions. Sometimes it is easy to forget about the regulatory and operational requirements of your NGO. No matter the level of “goodness” behind your intentions and deeds, government departments and national corporate regulators across the Pacific still require that you abide by certain regulations which apply to all entities operating in each jurisdiction, no matter your social or commercial aims.
Aside from reputational risks that come with non-compliance hefty fines can follow. So, it's integral that you comply with filing and ongoing disclosure requirements in accordance with the laws of the country you operate in and your constitutional framework.
Committee members and board members of NGOs should also be intimately familiar with their corporate governance requirements and have a sound understanding of their obligations to the NGO – this should include understanding the financial position of the NGO.
Similarly, failures by the NGO to take regular audits, including of employee entitlements, property and asset holdings and liabilities or insurance policies to ensure they are fit-for-purpose, can jeopardise the sound functioning of your NGO, the security of assets held and potentially expose your organisation to significant financial loss.
Typically when working with NGO clients, we ask a number of key questions including:
Is your organisation validly incorporated or properly registered as a ‘charitable organisation’? No matter where you sit on the not-for-profit spectrum, whether you’re just setting up or have established operations, your organisation will be required to lodge and maintain certain documentation with national regulators which set out your ‘mission statement’ and provide the legal framework for your operations.
Is your organisation complying with its disclosure obligations to the national regulator? All registered NGOs have ongoing disclosure requirements to ensure up-to-date information is provided to national regulators and, amongst the hundreds of other (and let’s face it, more important) matters that your organisation needs to deal with, it is easy to overlook these requirements.
What are your tax obligations and are any exemptions available? While registered charities are ordinarily entitled to income tax exemptions, not all not-for-profits are automatically exempt from paying income tax. In many countries this will be determined on a case-by-case basis, having regard to the mission and objectives of the not-for-profit and whether it prohibits distributions to shareholders. Further income tax is not the only factor to consider in terms of tax. For example, do you know if you have VAT or withholding tax obligations? Depending on where you operate, tax concessions may be available to your organisation.
Are you complying with your employer obligations? The COVID-19 pandemic is presenting new and unprecedented challenges for employers across the Pacific and, in many respects, a lot of current legislation across the region is not well designed to deal with the potential effects of COVID-19. If you employ local staff, is your organisation meeting its employer obligations? Are all employee entitlements, superannuation and other benefits being paid and recorded? If you employ expatriate staff, do they hold the appropriate visas and work permits to enable them to lawfully work in the country? If you need to stand down staff for a period of time, what are your legal rights and obligations? These are all questions which any employer needs to consider.
If your organisation owns or leases property or assets, is your title secure? Do you have a written lease, is it properly registered and has it been executed properly? If you have offices or land interests in the Pacific, you know land law is a complex issue.
Are insurance arrangements current and is your coverage Pacific-relevant? Are you aware of the compulsory insurance obligations which exist in the countries that you operate in? Many countries have compulsory worker’s compensation insurance requirements. However, there are also a raft of other insurance products your NGO should have as a matter of good housekeeping, for example, public liability insurance. Have you paid your premiums and are your policies up-to-date and do the existing policies you currently hold, cover you for all of the key risks that working in the Pacific region presents?
Are your internal policies adequate to ensure compliance with laws concerning anti-bribery, AML/CTF laws? Given the nature of their work, NGOs are expected to uphold a gold standard in operating ethics. However, as legislation to combat crime and corruption evolves to deal with those who seek to exploit the region, an organisation that aims to do good also needs to ensure that it doesn’t inadvertently fall foul of changes to the legal landscape. Some legislation in the region goes so far as to include charities as AML/CTF reporting entities and places proscriptive requirements on charitable NGOs. Are your internal policies robust enough to protect you? Are you aware of all your obligations under AML/CTF laws?
If you are an Australian charity with overseas operations in the Pacific do you have external conduct standards and are you aware of the modern slavery requirements? If you have supply chains that extend throughout the Asia-Pacific, this region is often identified by international labour organisations as being a ‘high risk’ region and it is important that entities falling within the ambit of the Modern Slavery Act 2018 continue to take steps to marshal the necessary information required to fulfil their reporting obligations under the Act. Have you sought advice as to whether these reporting requirements apply to you?
So, ask yourself, are you compliant? And for relatively little trouble, are these issues really worth ignoring?
With offices and affiliates of experts in Australia, Vanuatu, Fiji, Papua New Guinea, Solomon Islands, Samoa, New Zealand, American Samoa, Tonga, Timor Leste, Cook Islands, New Caledonia, French Polynesia, Hawaii, the Marshall Islands, Northern Mariana Islands and Palau, PLN is able to provide the coordinated legal and business advice on compliance issues for your operations across the Pacific to ensure your organisation can continue to focus on doing the things that matter and improving the quality of life for all in the Pacific.
For more information on how we can assist your Not For Profit enterprise, please contact us.