The not-for-profit (NFP) sector is quite significant to the economy and recent reported cases have raised questions about the extent of fraud in this sector. There are over 700,000 NFPs across Australia and New Zealand, with a combined income of $76 billion, holding approximately $138 billion in assets and contributing approximately 4.1% to GDP. The sector covers a diverse range of organisations in areas such as: culture and recreation, education and research, health, social services, environment, development and housing, law and politics, philanthropy, religion and business and professional associations.

There is concern about the damaging effects fraud can have on NFPs. The community already has questions about what portion of public and donated funds actually benefit the intended recipients. Reports of fraud can affect the community’s willingness to donate funds, but also reduce NFPs’ ability to obtain funding and grants from various agencies.

The main lessons for the NFP sector are for the Board to practice strong governance and risk management, establish a fraud control policy, implement and promote a strong ethical culture through a code of conduct, establish a whistle-blower policy and establish and monitor internal controls.

This is an interesting article written by James Thomson, the editor of SmartCompany.com.au, who draws upon some interesting observations and commentary from Melbourne work place lawyer Andrew Douglas.

Mr Douglas comments “We are inclined to deal with problems when they percolate to the surface. What we miss is that performance management is a daily task.” Your-Call has been particularly successful in this area with its behaviour monitoring tool which operates 24/7 in the background as the regulator of acceptable conduct in accordance with the company or organisations code of conduct/ethics polices.

The independance, security and anonymnity provided by Your-Call’s processes helps meet the objective Mr Douglas sees as imperative, namely “companies need to work hard to have a culture where particularly junior staff feel safe enough to actually make a complaint, regardless of the perpetrator’s seniority.”

Increasing the pace of small initiatives to integrate governance, risk and compliance is critical in helping Boards with their capacity to gather and manage real-time data on strategic risks – including compliance risks that can impact upon their legal and/or community license to operate, according to Alf Estaban, general manager of SAI Global.

Visibility of these strategic risks is essential for Boards to undertake their core functions, said Estaban, who noted that regular discussions about the adequacy and effectiveness of programs, coupled with an active review of compliance reporting, are key tools in ensuring Boards are confident in managing compliance risks.

He added that Boards also need to actively promote a culture of ethics and compliance through clear policies and other activities which inform staff about desired behaviours.

“Importantly, Boards should promote a culture of openness and provide access to independent whistleblowing services to reinforce that [they are] serious about wanting to know and address serious breaches or incidents,” said Estaban.

Chris Merritt, Legal affairs editor The Australian

The federal government has accelerated its push for a more open system of government by introducing the first federal law protecting public servants who reveal maladministration.

It plans to reverse decades of government secrecy by protecting public servants who reveal serious wrongdoing to the media.

The new scheme is intended to encourage whistleblowers in the federal public service by giving them the nation’s most extensive system of legal protection and support.

Cabinet secretary Joe Ludwig, who unveiled the scheme in parliament yesterday, was praised last night by whistleblowers and legal academics for delivering a scheme that goes beyond the more limited schemes in force in the states. “It is close to world’s best practice,” said legal academic A.J. Brown.

“It will change the culture of government,” said Peter Bennett, president of Whistleblowers Australia.

The scheme will be contained in a planned public interest disclosure act that will fulfil Labor’s promise to address the problems in the legal system highlighted by the case of convicted whistleblower Allan Kessing.

A recent Drake International survey of over 800 Australia-wide employees has revealed bullying is still rife in Australian workplaces . More than 50% of survey respondents had witnessed bullying behaviour and over 25% had been a target of bullying themselves. Poor management of the issue by Organisations was also revealed as only 30% of bullying targets and less than 50% of witnesses were satisfied with their organisations handling of the situation. More than 50% also noted the bullying behaviour had been going on for over 6 months.

The document provides recommendations for the scope, disclosure procedures, protection, enforcement, and legislative structure of whistleblower policy. The group agreed on 27 guiding principles for developing whistleblower legislation.

Accompanying the release of the draft principles is an analysis of the whistleblower legislation in ten European countries.

Report of the Inquiry into whistleblowing protection within the Australian Government public sector

By the House of Representatives Standing Committee on Legal and Constitutional Affairs.

On Wednesday 25 February 2009, the House of Representatives Standing Committee on Legal and Constitutional Affairs tabled its report on the inquiry into whistleblowing protections within the Australian Government public sector entitled Whistleblower protection: a comprehensive scheme for the Commonwealth public sector.

This book presents results from a program of empirical and comparative legal research into public interest whistleblowing in Australian public sector agencies, undertaken in 2005–08 through the Australian Research Council-funded Linkage Project ‘Whistling While They Work’.

The study was the largest of its kind ever undertaken in Australia, and one of the largest per capita ever undertaken in the world. It has involved six Australian universities, a number of international collaborators and 14 partner organisations, including many Australian public integrity and public sector management agencies.

The ASX Corporate Governance Council (Council) undertook an extensive review of the first edition of the Principles of Good Corporate Governance and Best Practice Recommendations and carried out a public consultation process between November 2006 and February 2007.

On 2 August 2007 the Council released:

The revised Corporate Governance Principles and Recommendations (Second Edition Corporate Governance Guidelines)
Council’s response to submissions (PDF 930KB)
A document setting out the differences between the 2003 and 2007 editions of the Principles and Recommendations (PDF 433KB)
Updated and revised Guidelines for Notices of meeting (PDF 50KB)
Media Release (PDF 64KB)
Speech by Eric Mayne, Chair of the ASX Corporate Governance Council, at the launch of the revised Corporate Governance Principles and Recommendations (PDF 44KB)
Speech by the Hon. Chris Pearce, Parliamentary Secretary to the Treasurer, to launch the revised Corporate Governance Principles and Recommendations (PDF 40KB)
The Council released Revised Supplementary Guidance (PDF 76KB) in June 2008 (see also comparison (PDF 101KB) August 2007 and June 2008).

The documents can be dowloaded from:

http://www.asx.com.au/supervision/governance/revised_corporate_governance_principles_recommendations.htm (please copy & paste link to your browser)

Note:

Effective date

The effective date for the Second Edition Corporate Governance Guidelines is a listed entity’s first financial year commencing on or after 1 January 2008.

Where an entity’s financial year begins on 1 January, disclosure will be required in relation to the financial year 1 January 2008 – 31 December 2008 and will be made in the annual report published in 2009.

Where a listed entity’s financial year begins on 1 July, disclosure will be required in reltion to the financial year 1 July 2008 – 30 June 2009 and will be made in the annual report published in 2009.

Listed entities are encouraged to make an early transition to the Second Edition Corporate Governance Guidelines.