- Union Governance Training -

1. - Union Governance Training - Session 4 Audits Complaints and investigations

2. Session 4.1 Audits

3. Obligation to have an auditor Section 558 Obligation to have auditor (1) An organisation must appoint a competent person as its auditor to— (a) inspect and audit the organisation’s accounting records for each financial year for which the auditor is appointed; and (b) make a report (an audit report) to the organisation within 4 months after the end of each financial year. “Accounting records”,includes the financial disclosure statement and mid-year financial disclosure statement for the financial year.

4. Who can be an auditor Section 558 Obligation to have auditor (3)…competent person, for an audit or audit report for an organisation, means a person who is— (a) a registered company auditor under the Corporations Act, section 9, definition registered company auditor; and (b) not an officer or a member of the organisation; and (c) not employed by the organisation, other than as its auditor. NB:(2) A person, other than a competent person, must not— (a) accept an appointment as an auditor; or (b) continue in an appointment to perform an audit or prepare an audit report.

5. Removal of auditor Section 559 How auditor may be removed An organisation’s auditor may only be removed— (a) if the auditor was appointed by its management committee—with the agreement of a majority of the members of the committee; or (b) if the auditor was appointed by a general meeting of the organisation—by a resolution passed at a general meeting by a majority of its members voting at the meeting.

6. Requirements for audit report Section 560 Requirements for audit report An audit report must state whether, in the auditor’s opinion— (a) the organisation kept satisfactory accounting records for the financial year, including records of— (i) the sources and nature of the organisation’s income, including membership subscriptions and other income from members; and (ii) the nature of and reasons for the organisation’s expenditure; and (b) the accounts for the year were properly drawn to give a true and fair view of the organisation’s— (i) financial affairs at the end of the year; and (ii) income and expenditure and surplus or deficit for the year; and

7. Requirements for audit report (c) the accounts for the year were prepared under this Act; and (d) the financial disclosure statement and mid-year financial disclosure statement for the year were prepared under this Act; and (e) the organisation has the policies it is required to have under section 553A(1); and (f) the organisation’s spending for political purposes, if any, contravened the requirements of section 553F; and (g) there was a deficiency, failure or shortcoming (an accounting deficiency) for a matter mentioned in paragraphs (a) to (f); and (h) information and explanations required from the organisation’s officers or employees were given.

8. Auditor’s duties Section 561 Audit report must not be knowingly false or misleading (1) An auditor must not state anything in an audit report the auditor knows is false or misleading in a material particular. (2) It is enough for a complaint for an offence against subsection (1) to state the statement made was ‘false or misleading’ to the auditor’s knowledge. Section 562 Auditor must notify registrar of contravention An auditor performing auditor’s functions for an organisation must immediately notify the registrar if the auditor— (a) becomes aware a provision of this part has been contravened; and (b) is of the opinion that the matter can not be adequately dealt with by comment in the auditor’s audit report.

9. Auditor’s powers Section 563 Auditor’s powers (1) An organisation’s auditor has the right— (a) to full and free access at all reasonable times to the organisation’s records about its— (i) payments or receipts; or (ii) acquisition, receipt, custody or disposal of property; and (b) to ask the organisation’s employees, members or officers for information or explanations required for the audit. (2) The auditor may authorise another appropriately qualified person (an authorised person) to exercise the rights.

10. Auditor’s powers • It is an offence for a person to: • obstruct an auditor or authorised person in the exercise of their powers • not provide a document in their custody or control when required to do so by the auditor or authorised person • Unless have a ‘reasonable excuse’, which includes that the document may tend to be incriminating of the person

11. Auditor may attend meetings Section 567 Notice of meetings to auditor • Auditor must be informed of committee and general meetings at which the report is presented Section 568 Auditor may attend meetings • Auditor or authorised representative is entitled to attend meetings • It is an offence to obstruct the auditor from attending the meeting • The auditor is entitled to speak at the meeting and is it is an offence to obstruct the auditor from speaking

12. Protection from defamation Section 564 Auditors have qualified privilege (1) An auditor may make a statement or comment that is defamatory if it is— (a) made in good faith; and (b) made in the course of performing the auditor’s functions as an auditor under this Act; and (c) relevant to the auditor’s functions. (2) A person may print or publish in good faith a document that contains defamatory matter, if it was— (a) prepared by an auditor for an audit under this Act; and (b) required to be filed or made to the registrar.

13. Filing and publishing requirements Section 570 Report and statement must be filed and published Within 14 days after the report and statement are presented (or a longer time allowed by the registrar) an organisation must: • File a copy of the audit report and financial disclosure statement for each of its financial years, and a certificate by its president or secretary stating the originals of the report and statement have been presented to a general meeting or management committee meeting of the organisation; and • Publish a copy of the audit report and its financial disclosure statement. These must continue to be published for a period of 2 years.

14. Session 4.2 Complaints and investigations

15. Breaching the IR Act has consequences • Civil and criminal penalties • Penalty provisions applicable to both organisations and individual officers • Registrar and chief executive have powers to receive complaints, conduct or order investigations, appoint their own auditor • Severe shortcomings may lead to the organisation being placed under administration or even deregistered.

16. Investigations by Registrar Investigations by registrar (Ch 12, Pt 12, Div 5, Sdiv 2) The Registrar must investigate whether an organisation has complied with Part 12 (Accounts and Audit) of the IR Act (section 571): • If the audit report identifies an accounting deficiency or the registrar considers the matter should be investigated; • The registrar reasonably suspects, based on information or knowledge that the organisation has contravened Part 12; • If asked to do so by the chief executive; • If asked to do so by the required number of members of the organisation.

17. Investigations by Registrar • The registrar has the power to obtain information from current or former auditors, employees or officers of the organisation (section 572). • The registrar also has the power to obtain information from third parties who are not current or former auditors, employees or officers of the organisation (section 572A). • The registrar must report the results of the investigation to the chief executive. The report must include if the registrar reasonably suspects the organisation, its employee(s) or officer(s) of committing an offence against an Act or law of another State or Commonwealth and make a recommendation whether the matter should be referred to another law enforcement agency (section 574A).

18. Complaints and investigations • A person may make a written complaint to the chief executive about an organisation if the person believes the organisation has ceased to function effectively (section 636A). • The chief executive’s options when dealing with a written complaint include any or all of the following (section 636C): • Require the complainant to give further particulars about the complaint; • Refer the complaint to an industrial inspector for investigation; • If the complaint relates to conduct concerning accounts and audits under chapter 12, Part 12, refer the matter for investigation by the registrar; • If the complaint relates to a possible breach of another State or Commonwealth law, refer the matter for investigation to an interstate law enforcement agency; or • Notify the Minister of the complaint.

19. Complaints and investigations • Organisations or Officers will be notified if the chief executive decides to take action by referring the matter for investigation to the industrial inspectorate, the registrar, a law enforcement agency or notifies the Minister (section 636D). • Organisations or Officers will be invited to make a written representation about the complaint. • The Minister may also direct the chief executive to refer a complaint for investigation to an industrial inspector (section 636E). • Industrial inspectors charged with investigating an organisation must provide the chief executive with a written report on the findings of the investigation (section 636K).

20. Complaints and investigations • The investigation report may recommend that an auditor is appointed to examine the financial records of the organisation (section 636L). These audit costs would be borne by the State (section 636N). • The chief executive may appoint an administrator if reasonably satisfied, based on the investigation or audit complaint report that the organisation has ceased to function effectively, and there is no effective means under the rules of the organisation for the organisation to function effectively (section 636O).