Our vision, aim and methods

The ROC’s vision is to be valued by the community for the way we regulate and foster the efficient management and accountability of registered organisations. We aim to:

• proactively educate registered organisations about financial and other reporting responsibilities
• encourage democratic control and improved financial and disclosure compliance practices by registered organisations; and
• undertake inquiries and investigations into suspected contraventions with an evidence and risk-based approach.

How we influence organisations

Education activities

The provision of compliance and governance education to registered organisations, supported by practical resources, is a priority for the ROC. Our education activities have been developed in consultation with organisations and their peak bodies, and are continuously refined in response to feedback.

Since the inception of the ROC, we have held face-to-face information workshops in most capital cities. In 2018–19 this included Darwin, Perth, Brisbane, Sydney and Melbourne. Over the past two years, there have been more than 400 attendees at these sessions, representing 76 of 106 registered organisations, other interested bodies and audit and accounting firms. This included 233 attendances in 2018–19. Feedback from participants has been overwhelmingly positive with 97% of workshop participants responding to ROC surveys indicating they would attend and benefit from future ROC workshops.

The ROC has released further education tools throughout the year, including quarterly ROC newsletters. Topics covered included common areas of non-compliance in financial reporting, new reporting guidelines, corrupting benefits legislation guidance, new whistleblower resources, compliance reminders, financial training audit information, officer and related party disclosures (ORPs) and frequently asked questions.

The ROC website (www.roc.gov.au) continues to provide information and tools to assist organisations with compliance. In 2018–19, we received 182,825 visits to the website and 20,620 documents were downloaded. Subscriber numbers to our emails have increased. We now have 1003 subscribers who receive email communications from the ROC, including our quarterly newsletters, educational material and event information. We also conducted seven webinars, which attracted 188 participants, and 56 one-to-one meetings with organisations and peak bodies about compliance.

In 2018–19, we delivered 22 major education activities targeted at organisations and their members. These campaigns covered topics including information about whistleblowing, ORPs, annual returns, prescribed information for elections and financial reporting.

Table 7: ROC education activities provided to employer and employee organisations and their members, July 2018 to June 2019

Implementation of a new case management system

The ROC implemented a new case management system during 2018–19 to manage all of the matters we handle. We invested in an ‘off-the-shelf’ software solution that was then customised to meet the ROC’s unique requirements. The system will be a single source of ‘truth’ for all cases that we manage and is a foundation we can build upon in the future to provide a portal for organisations where they will be able to lodge and access information. This was a major project for the ROC. Some 7000 staff hours were spent over 10 months to make this new system a reality. This involved scoping out requirements, testing the software when it was delivered and ensuring all required system standards were met.

Promoting effective governance and financial transparency

In 2018–19, we promoted effective governance and financial transparency within organisations by:

• sending tailored, organisation specific reminders about upcoming statutory obligations
• assessing financial reports
• seeking to ensure all auditors are registered; and
• approving financial management training for office holders.

Reminders and alerts

As a service to registered organisations, the ROC actively emails specifically tailored reminders to them and to their reporting units prior to their obligations arising. This is designed to assist them with the timely meeting of their compliance obligations. In 2018–19, we issued more than 1550 such reminders and alerts, a 73% uplift on the previous financial year, comprising:

• 701 reminders about the requirement to lodge an officer and related party disclosure statement
• 160 reminders about the requirement to lodge an annual return of information
• 398 reminders about the requirement to lodge a financial report
• 212 reminders about lodging statements of loans, grants and donations
• 86 reminders about the requirement to lodge information for an election; and
• 515 alerts about training for office holders.

Officer and related party disclosure statements

The requirement for organisations and branches to lodge a copy of their officer and related party disclosure statement came into effect in 2018–19. The statements provide information about remuneration received by the top five-ranked officers of organisations and branches, including remuneration received by officers from a board or a related party of the organisation. Certain payments made by organisations and branches to related parties and declared persons or bodies are also required to be disclosed.

The ROC developed a range of comprehensive educational materials to help organisations comply with these new requirements, including fact sheets, guidance notes and webinars. We also presented panel discussions about these new requirements at each of our information sessions and workshops. This provided a means for organisations to take a more collaborative approach in understanding these new requirements by discussing and exploring issues and learning from one another, as well as to seek guidance from the subject matter experts in the ROC. The ROC also engaged directly with organisations and branches on 126 occasions about how the provisions are applicable to their circumstances.

More than 92% of organisations and branches lodged their statements with the ROC within the statutory timelines, which we consider to be a good result given the provisions had only been recently introduced. As familiarity with these statements improves, the ROC expects that compliance with lodgement timeframes will increase in future reporting periods.

Annual returns of information

Annual returns provide information about office holders, election requirements, branches and an organisation’s membership numbers. It is important for the democratic control of organisations for these returns to be accurate, lodged and published in a timely manner, so members can easily determine who their officers are and when elections are due.

In 2018–19, we are pleased to report that all organisations lodged their annual returns within the statutory deadline of 31 March. While the ROC continues to intervene in the period immediately prior to 31 March by directly engaging with organisations that have not yet lodged, it is anticipated that our intervention will diminish in future years and that voluntary compliance, with minimal intervention, will be achieved.

Figure 2: Percentage of annual returns of information lodged within statutory timelines

Note: In 2016 and 2017 annual returns of information were lodged with the Fair Work Commission (FWC). They were lodged with the ROC from 2018.

Financial returns

Financial returns include lodgements by organisations and their branches of financial reports, applications for exemptions from financial reporting and applications for reduced reporting requirements. Timely lodgement of accurate returns and publication of these documents promotes financial transparency.

Compliance rates for the lodgement of financial returns within the statutory timeframe have incrementally improved over four years. Following our proactive intervention, encouragement and the deployment of our model financial statements, 99% of reporting units lodged financial returns on time in 2018–19.

Figure 3: Percentage of financial returns lodged within statutory timelines

Note: Prior to 2 May 2017 financial returns were lodged with the FWC. On and from 2 May 2017 they were lodged with the ROC.

Assessment for compliance and publication for transparency

When assessing documents against compliance requirements (including annual returns of information, financial reports, election information and officer and related party disclosure statements), the ROC takes a risk-based approach which is designed to direct resources to areas where the risk of non-compliance is highest. In 2018–19, 1638 regulatory matters were subject to risk-based assessment and closed. This was a 13% increase over the previous financial year. Most documents lodged by organisations are published on our website.

Improving financial reporting compliance

The contents of all financial returns are assessed against key compliance requirements (primary review), while 20–25% are subject to a further review (advanced review). Over a five-year period, each reporting unit has been subjected to an advanced review at least once (more often if circumstances warrant). To be considered compliant, a financial report must meet the key compliance requirements in the primary review. This includes whether:

• significant disclosure requirements under the reporting guidelines are met
• statutory timeframes are met
• appropriate notes regarding preparation of accounts are made
• related-party disclosures are made
• concise reports contain all disclosure requirements within the reporting guidelines (if applicable)
• key components of the auditor’s report are met, including whether the General Purpose Financial Report (the GPFR) is ‘unqualified’; and
• the report is audited by a registered auditor.

Applications for exemptions from financial reporting (s. 271 of the RO Act) and applications for reduced financial reporting (s. 269 of the RO Act) are reviewed against all required legislative criteria that must be satisfied.

As at 30 June 2019 not all financial returns with a 2018 year end had been lodged. Of those that had been lodged and assessed for compliance, 84% met the compliance measures, compared to 73% in 2017, 70% in 2016 and 56% in 2015.

Table 8: Initial compliance of financial returns with financial year-end 2015, 2016, 2017 and 2018

Note: Prior to 2 May 2017, financial returns were lodged with the FWC. On and from 2 May 2017 they were lodged with the ROC.

Registration of auditors

All auditors of organisations’ financial reports are required to meet criteria specified in the RO Act and be registered with the Commissioner. As at 30 June 2019, the Commissioner had registered 290 auditors since registration commenced on 2 May 2017. This was a 9% increase in registrations over the number at 30 June 2018. In 2018–19 all financial reports, but one, lodged with the ROC have been audited by a registered auditor. In the previous year, three were not audited by a registered auditor. These three matters were each the subject of an inquiry, and one proceeded to an investigation, see Table 10.

Office holder training

The RO Act requires holders of office with financial duties to undertake financial training that has been approved by the Commissioner, within six months of taking office (s. 293K). Twelve training packages have been approved and are listed on our website. During 2018–19, the ROC began a major project to look at compliance with this requirement, extensively mapping office holders with financial duties across all organisations and branches. We have been engaging with organisations with the aim of reaching a common understanding about which officers have financial duties and whether they have undertaken training. This audit process has been voluntary, and is expected to increase awareness of this legislative requirement to undertake training as well as broaden officers’ understanding of their financial duties.

An office holder can be exempted from training if the Commissioner is satisfied that the office holder has a proper understanding of their financial duties based on their experience as a company director, as an officer of a registered organisation or other professional qualifications and experience (s. 293M). In 2018–19, 30 exemptions were granted by the Commissioner.

ROC's regulatory role

Driving compliance through regulation

Helping organisations to remedy non-compliance with the RO Act is a priority for the ROC. To do this, we have implemented a stepped approach for assessment of probable contraventions, taking into account the nature and history of an organisation’s compliance, as well as any remedial actions the organisation has undertaken.

Whenever we begin an inquiry or investigation, we seek to work with the organisation and relevant persons to remedy any non-compliance and promote good governance. This includes consultation with the organisation and assessing whether any harmful conduct has occurred, and if so, whether it has, or can be, remedied. The degree of cooperation by an organisation and actions taken to remedy harmful conduct informs how we progress alleged non-compliance. The vast majority of the matters we assess and our inquiries and investigations do not result in litigation. However, we will commence court proceedings if, after consideration of all the circumstances, it is warranted and in the public interest.

Inquiries

The Commissioner has the power to make inquiries into or conduct investigations as to whether financial obligations or civil penalty provisions in the RO Act have been contravened by registered organisations. We seek to take a collaborative approach to inquiries and aim to work with registered organisations to make sure compliance is achieved and any harms, so far as is possible, are remedied.

Table 9: Inquiries initiated and closed under chapter 11, part 4 of the RO Act in 2018–19

		No. open as at 30 June 2018	No. commenced during 2018–19	No. concluded during 2018–19	No. open as at 30 June 2019
Inquiries		3	0	3	0

Table 10 details the inquiries undertaken during the reporting period.

Table 10: Inquiries under chapter 11, part 4 of the RO Act 1 July 2018 to 30 June 2019

*s. 330: inquiry as to whether contravention of financial obligations and/or civil penalty provisions

Investigations

If satisfied there are reasonable grounds for doing so, the Commissioner is empowered to conduct investigations into compliance by registered organisations with their financial obligations, or to ascertain whether there has been a breach of a civil penalty provision. Table 11 provides an overview of investigations that commenced or were continuing during 2018–19.

Table 11: Investigations initiated and closed under chapter 11, part 4 of the RO Act in 2018–19

	No. open as at 30 June 2018	No. commenced during 2018–19	No. concluded during 2018–19	No. open as at 30 June 2019
Investigations	3	5	1	7

As at 1 July 2018, the Commissioner was conducting three investigations (under ss. 331 and 332 of the RO Act) into organisations about alleged contravention of financial and/or civil penalty provisions. During 2018–19, five further investigations were commenced and one concluded, under s. 331. See table 12 for details of investigations.

Table 12: Investigations under chapter 11, part 4 of the RO Act in 2018–19

*Types – s.331: alleged contravention of financial and/or civil penalty provisions, s. 332: arising from the auditors’ report.

Investigations: whistleblowers

The Commissioner is required to investigate qualifying protected disclosures made by whistleblowers (s. 337CA). The whistleblower scheme, introduced in May 2017, expanded the categories of people protected when whistleblowing about potentially unlawful conduct by officers and employees of registered organisations. Criminal penalties also apply for taking a reprisal against a whistleblower.

The ROC coordinates the regulatory approach under this scheme across Commonwealth agencies and law enforcement bodies receiving, allocating or investigating whistleblower disclosures under the RO Act. We meet regularly with those agencies to ensure a consistent approach to each aspect of the scheme.

To ensure a best practice approach, the ROC has consulted with stakeholders, including academics and representatives of whistleblower groups, and we continue to refine our processes as our experience grows and the scheme matures. For example, in 2018–19 as part of our education strategy, we have developed, promoted and made extensive whistleblower materials available to organisations to enable them, if they so choose, to develop their own internal whistleblower policies and a positive in-house ‘speak-up’ culture. A decision to do so does not displace the statutory whistleblower scheme.

Table 13: Protected disclosures under chapter 11, part 4A of the RO Act 2018–19

No. open at 30 June 2018	No. opened 1 July 2018 – 30 June 2019	No. closed 1 July 2018 – 30 June 2019 because ineligible disclosure	No. closed – ROC did not consent to allocation	No. allocated to authorised official external to ROC	No. allocated to the RO Commissioner 1 July 2018 - 30 June 2019	No. closed with no investigation conducted 1 July 2018 – 30 June 2019	No. closed with investigation completed 1 July 2018 – 30 June 2019	No. closed with investigation discontinued 1 July 2018 – 30 June 2019	No. open as at 30 June 2019
15	64	16	1	0	47	6	44	1	11

Royal Commission into Trade Union Governance and Corruption

The Final Report of the Royal Commission into Trade Union Governance and Corruption (TURC) was tabled in Parliament in December 2015. It made 30 referrals to the FWC of which 24 were transferred to the ROC in May 2017. All of these have been completed, or are in progress, save for one, which is in abeyance pending criminal proceedings.

Table 14: Status summary of referrals from the Royal Commission into Trade Union Governance and Corruption

Referred to the ROC	Before the Federal Court	Subject to formal investigation by the ROC under s. 331 of the RO Act	Closed by the ROC with no further action	In abeyance, pending police investigations or criminal proceedings	Completed Court action
24	10*	9**	3	1	1

* There is one TURC-related matter before the Federal Court. The proceedings against the AWU and Mr Melhem are based on 10 referrals from the TURC.

** The matter relates to one reporting unit and a range of its officers and is the subject of one investigation

Enforcing provisions of the RO Act

The ROC’s approach to enforcement is that it will proceed where the evidence takes it. If the evidence leads the ROC to conclude that enforcement of compliance obligations is warranted and is in the public interest, we will commence proceedings where it is appropriate to do so.

In 2018–19, two penalties were imposed as the result of the ROC’s court action: $29,250 on the Australian Midwifery and Nursing Federation for the failure of the Western Australian Branch to lodge financial returns over three consecutive years, and a further penalty of $6630 on its Western Australian Branch Secretary, Mr Olson, for failing to discharge his duties with the degree of care and diligence that a reasonable person in his position would exercise.

As a result of a TURC referral, proceedings against the Transport Workers Union (TWU) concluded on 21 November 2018 following an appeal by the TWU against the initial judgment. The outcome was that $163,000 in penalties were imposed against the TWU.

The allegations, orders sought and outcomes (if finalised) of legal action are detailed in table 15.

Table 15: Alleged contraventions and orders sought under s. 310(1)(a) of the RO Act (completed 2018–19 and still ongoing)

Action taken against the ROC

On 20 October 2017, the ROC commenced an investigation into allegations concerning donations made by the Australian Workers’ Union (AWU). The investigation is currently on hold pending the outcome of proceedings commenced by the AWU challenging both the ROC’s jurisdiction in general and the decision to commence the investigation in particular. Following a trial conducted in February and March 2019, the court has reserved its decision.

Service standards

The ROC works to ensure that annual returns, financial reports, elections and auditor registrations are assessed and dealt with in a timely manner. In 2018–19, all timeliness targets were met or exceeded.

Financial reports, annual returns and elections were previously regulatory functions of the FWC and transferred to the ROC on 1 May 2017. Consequently, comparisons in the tables below include comparisons with the FWC service standards where relevant.

Financial reports

Our service standard for financial reports is that, of those lodged under the RO Act, 95% are assessed for compliance within 40 working days. Assessing a financial report for compliance means that the financial report has been reviewed against a primary review checklist or an advanced review checklist (see page 36). For the assistance of organisations and their auditors, primary and advanced review checklists are published at www.roc.gov.au.

Table 16: Performance of financial reports function against timeliness target

Year and agency	Number assessed	Number within KPI	Result
2018–19 ROC	370	370	100%
2017–18 ROC	369	369	100%
2016–17 FWC/ROC	375	375	100%

Annual returns

The service standard for annual returns of information required to be lodged under the RO Act is that 95% of those lodged are assessed for compliance within 40 working days. Assessing an annual return for compliance means that it has been assessed against the ROC checklist for compliance with the RO Act. For the assistance of organisations, the annual return checklist is published at www.roc.gov.au.

Table 17: Performance of annual returns function against timeliness target

Year and agency	Number assessed	Number within KPI	Result
2018–19 ROC	106	105	99%
2017–18 ROC	109	109	100%
2016–17 FWC/ROC	109	109	100%

Elections

The service standard for the ROC to deal with prescribed information for elections lodged by registered organisations or their branches is that 95% are dealt with within 40 working days. Dealing with prescribed information for elections means that the Commissioner (or Delegate) made arrangements for the conduct of an election, or decided not to make arrangements, or the prescribed information was withdrawn.

Table 18: Performance of election function against timeliness target

Year and agency	Number dealt with	Number within KPI	Result
2018–19 ROC	235	223	95%
2017–18 ROC	211	210	99%
2016–17 FWC/ROC	223	221	99%

Registration of auditors

The service standard for applications for registration by auditors is that 95% are dealt with within 40 working days. Dealing with applications for registration means that the Commissioner (or Delegate) registered an auditor, or decided not to register an auditor, or the application was withdrawn.

Table 19: Performance of the registration of auditors function against timeliness target

In addition to meeting all of our timing targets in 2018–19, comparison with previous years shows constant achievement of 100% timeliness for the assessment of financial reports. Dealing with applications for registration of auditors within 40 working days rose from 99% to 100%. Our ability to meet or improve upon our timing targets means that documents lodged by organisations are promptly assessed and published, ensuring ‘real-time’ transparency of lodged information.