Regulating registered organisations

Regulating registered organisations involves administering the provisions of the Fair Work (Registered Organisations) Act 2009 (Registered Organisations Act) that deal with the registration and accountability of unions and employer associations. The Registered Organisations Act outlines the standards that federally registered organisations must meet in relation to their finances, financial affairs, rules, elections and the conduct of officers.

During the reporting period, the Commission developed a sector profile of federally registered organisations based on information and data they lodge every year. This will help the Commission to better understand regulated entities, their compliance trends and their vulnerabilities in meeting required standards.

Information gathered to date indicates that federally registered organisations represent more than 2 million members across Australia, receive annual revenue of around $1.3 billion, and own or control more than $2.2 billion in assets.

In 2014–15 the Commission achieved a number of milestones in its regulation of registered organisations by:

  • achieving, for the first time, 100 per cent voluntary compliance with the lodgment of Annual Returns on time
  • recording a high voluntary compliance level of 95 per cent of financial reports lodged on time, which increased to 98.75 per cent following Commission intervention
  • developing a comprehensive risk-based approach to the regulation of registered organisations
  • developing new performance measures against the Commonwealth Regulator Performance Framework for implementation in 2015–16
  • continuing the collection and analysis of data to build a comprehensive profile of registered organisations and a picture of their compliance trends and vulnerabilities
  • using a diverse, proactive and tailored range of communication methodologies to engage with registered organisations and assist in increasing their levels of voluntary compliance
  • continuing to undertake inquiries and investigations, any of which have the potential to result in Federal Court proceedings
  • significantly improving the timeliness for assessing and finalising lodged matters
  • monitoring and reviewing its internal procedures and achievements.

In Focus

Registered Organisations

A significant improvement in voluntary compliance by federally registered organisations in the past 12 months is in part the result of a more proactive and education-focused approach by the Fair Work Commission.

For the first time, there has been a 100 per cent compliance rate for the lodgment of annual returns and a 98 per cent compliance rate for lodgment of financial reports. This is a significant improvement on recent years.

The next step for us is the quality of the information contained within those returns. If we can increase the quality, that's going to give the public and give members of registered organisations a greater sense of confidence.
 
Chris Enright, Director, Regulatory Compliance.

The Commission's Regulatory Compliance Branch oversees more than 100 registered organisations, with around 400 reporting units. These are unions and employer associations that are registered under the Fair Work (Registered Organisations) Act 2009 (Registered Organisations Act).

The improvement in voluntary compliance comes after a change of focus for the Commission.

'Being a reactive regulator wasn't achieving what we wanted to achieve. We're now being proactive and we get out there,' Chris Enright said. 'We're on the phone on a daily basis. People had not known in the past how to increase their own compliance and they haven't known where to go.'

The Regulatory Compliance Branch has implemented a strategy of:

  • creating new education materials to demonstrate proper compliance to registered organisations, and
  • consulting closely with organisations to help them individually achieve compliance.

The Commission also has model financial statements, model annual returns and model reports available to assist registered organisations to meet the requirements of the Registered Organisations Act, available on its website, together with recorded webinar education sessions.

Meanwhile, the Regulatory Compliance Branch is in regular, direct contact with many organisations to assist them to individually achieve compliance and improve the quality of the information provided in returns.

The feedback I get is that they're very positive about it and they see it's not a faceless organisation. We are somewhere they can go for assistance and they know they'll get a positive response.
 
Chris Enright, Director, Regulatory Compliance.

Photo of a traffic controller with a stop sign on the road, surrounded by cars.

Image: The Traffic Management Association is one of the more than 100 registered organisations that are registered under the Registered Organisations Act.

Independent Education Union of Australia

The Independent Education Union of Australia (IEUA) is a complex organisation which has been undergoing a period of change. 'There wouldn't be a month that goes past without us ringing up the Commission for clarification around our reporting obligations,' according to the IEUA's Anthony Odgers.

Many of the union's organisers and delegates are teachers rather than full-time officials. Anthony Odgers said it could often be difficult for them to come to grips with the complexities of the Registered Organisations Act. 'Compliance is a lot harder than it used to be – we don't expect it to get any easier,' he said.

He welcomes the Commission's consultative approach, which allows people from the union to meet with Commission staff and get a simple, immediate response that can help them to move forward.

Traffic Management Association of Australia

The Traffic Management Association of Australia (TMAA) is a relatively new organisation that represents around 70 companies who provide traffic management for building sites, roads and events. It relied heavily on the Regulatory Compliance Branch to ensure its launch structure and procedures were correct and that its ongoing reporting is of the highest possible standard.

'I would certainly recommend any other organisation to pick up the phone and contact the Fair Work Commission for assistance,' the TMAA's Brendan Woods said. 'By contacting the Commission we ensure that we are compliant with rules and regulations. We've also found they've made a lot of contact with us and assisted us with things like rule changes and definitions.'

 

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Risk-based approach

The Commission has developed a comprehensive risk-based approach to the regulation of registered organisations for implementation in 2015–16. This approach aims to effectively manage the risks arising from the regulatory framework of registered organisations, while at the same time minimising the regulatory burden on regulated entities.

In practice, the risk-based approach means that the Commission will focus its regulatory activities and resources on regulated entities and areas where the risks of possible or actual non-compliance are greatest.

The risk-based approach helps to ensure:

  • that the Commission takes a consistent approach to decision-making, and that regulatory responses are commensurate with risk
  • certainty and predictability for regulated entities about Commission decisions because regulatory responses are based on risk
  • increased voluntary compliance because regulated entities will be encouraged to maximise compliance.

The Commission has also introduced a risk-based approach in its regulation of financial reporting by registered organisations. In July 2013 it developed primary and advanced checklists for selective assessment of financial reports on the basis of identifiable risk. Each financial year, around 20 to 25 per cent of financial reports lodged by reporting units of registered organisations are subject to advanced assessment. All reporting units will be subject to an advanced assessment at least once every five years.

Regulator Performance Framework

During the reporting period the Commission developed measures to assess its performance as the regulator of registered organisations. This is in part a response to the government's release of its Regulator Performance Framework, as well as in recognition of the need to more meaningfully assess its performance as a regulator.

The government's framework aims to reduce the cost of unnecessary or inefficient regulation imposed on regulated entities, including organisations registered under the Registered Organisations Act. The government has determined six key performance indicators and all Commonwealth regulators are required to develop their own measures of performance against these indicators for implementation from July 2015.

The key performance indicators and the Commission's performance measures are published on its website.

Intelligence product – Picture of Compliance in Australia

The Commission is building a 'Picture of Compliance in Australia' which provides a profile of federally registered organisations. This new intelligence tool includes information about what federally registered organisations are, who they represent, how they are structured, their financial performance and compliance trends and vulnerabilities.

It aims to build a comprehensive profile of all registered organisations, providing greater insight into levels of compliance and areas of risk. This will inform the Commission's risk-based approach and assist it in determining where best to devote its resources in order to achieve high levels of compliance.

In particular, it will identify where improved education and engagement would be beneficial, as well as areas where the Commission should escalate its enforcement activities.

Engagement

The Commission places a high importance on engaging with registered organisations to help achieve continuous improvement and higher levels of voluntary compliance. Throughout the year it has proactively engaged with a range of stakeholders, including peak bodies and other regulators.

Engagement activities have included knowledge exchange through webinar technology, which has facilitated interactive communication. The Commission knows from the feedback received that stakeholders overwhelmingly consider webinars an appropriate form of communication for it to deliver information and exchange knowledge.

The Commission has committed to engaging with stakeholders prior to implementing significant change. An example of this is how the Commission worked with stakeholders to update its registered organisations web content. During this process the Commission consulted with representatives of registered organisations and other relevant stakeholders to understand their needs prior to developing the content. Stakeholders had a further opportunity to test and provide further feedback on functionality and content before the pages were launched. Post implementation feedback confirmed a seamless and efficient transition to better registered organisations web content.

Streamlining requirements

The Commission publishes template documents on its website for use by registered organisations. These templates streamline processes for registered organisations, making it faster, cheaper and simpler for registered organisations to comply with their regulatory obligations. In 2014–15, the Commission streamlined the application form for work health and safety (WHS) permits to include provision for an electronic signature of the permit holder. This instantly resulted in a more efficient system of permit administration.

The Commission also published model financial statements which enabled registered organisations to step through the vast array of financial reporting requirements with greater ease. The model statements also assist auditors by ensuring that the relevant provisions of the Registered Organisations Act, the Fair Work (Registered Organisations) Regulations 2009, the Reporting Guidelines issued under s.255 of the Registered Organisations Act, and the relevant Australian accounting standards, are clearly identified and therefore more easily complied with. Streamlining these requirements opens auditing opportunities to a more competitive range of auditors, including small business auditors who otherwise may not have had the resources to undertake this niche work.

Proactive enforcement of lodgment deadlines

The Commission's proactive intervention in enforcing lodgment deadlines contributed to 100 per cent of annual returns being lodged within the statutory timeframe in 2015.

This is a dramatic improvement from 2010–11 when only 64.6 per cent of registered organisations lodged Annual Returns on time.

In 2010–11 only 79.3 per cent of registered organisations lodged financial reports on time but in 2014–15 the voluntary compliance rate had increased to 95 per cent, which increased to a further record high level of 98.75 per cent following intervention by the Commission.

Registered organisations are required to lodge information with the Commission by 31 March in each year (the annual return). Figure 15 shows – for each of the last five years – how many Annual Returns were lodged in accordance with the statutory timeframes, how many were lodged after Commission intervention and how many were not lodged. The number of returns that were lodged by 31 March is collected on the first working day in April. If a return was not lodged by 31 March the Commission would actively intervene to enforce lodgment.

At the end of each reporting period, the Commission collates the number of returns that were lodged following its intervention and the number of returns not lodged. This is reported in Table 31 and displayed in Figure 15.

Figure 15: Annual Returns compliance

Figure 15 is a graphical representation of the data relating to Annual Returns compliance in Table 31 below.

Table 31: Registered organisations – Annual Returns compliance
  2009–10 2010–11 2011–12 2012–13 2013–14 2014–151
  No. % No. % No. % No. % No. % No. %
Lodged on time 152 62.81 157 64.61 179 76.50 217 93.94 197 95.17 111 100
Lodged following Commission intervention 89 36.78 85 34.98 54 23.08 12 5.19 8 3.86 0 0
Still outstanding as at 30 June 1 0.41 1 0.41 1 0.43 2 0.87 2 0.97 0 0
  1. In 2014–15 the Commission only accepted Annual Returns from federal organisations. In previous years the figures included Annual Returns from federal organisations and some of their branches, hence the lower figure in 2014–15.

Discrete reporting units within registered organisations are required to lodge a financial report with the Commission, unless the reporting unit has successfully applied for an exemption (based on financial reporting on an alternative basis under ss.245–248 of the Registered Organisations Act).

Prior to the lodgment date, the Commission proactively reminds every reporting unit of its obligation to lodge its financial report each year. Figure 16 shows – in each of the last five reporting years – how many financial reports were lodged in accordance within the statutory timeframes; how many were lodged after Commission intervention and how many were not lodged.

The data regarding lodgment in accordance with the statutory timeframes is collected on the various dates throughout the year by which financial reports must be lodged because not every reporting unit's financial year ends on 30 June. The data regarding the number lodged following intervention by the Commission and the number outstanding were collated at the end of each reporting year.

The Commission analyses and individually addresses each case of non-compliance. This data is reported in Table 32 and displayed in Figure 16.

Figure 16: Financial reporting compliance

Figure 16 is a graphical representation of the data relating to financial reporting compliance in Table 32 below.

Table 32: Registered organisations – financial reporting compliance
  2009–10 2010–11 2011–12 2012–13 2013–14 2014–15
  No. % No. % No. % No. % No. % No. %
Lodged on time 241 60.25 318 79.30 319 80.76 332 86.46 342 88.83 380 95.00
Lodged following Commission intervention 155 38.75 80 19.95 73 18.48 46 11.98 37 9.61 15 3.75
Still outstanding as at 30 June 4 1.00 3 0.75 3 0.76 6 1.56 6 1.56 5 1.25

Proactively improving the quality of financial reporting

The Commission's proactive enforcement of lodgment deadlines is just one quantitative measure of compliance. In 2014–15 the Commission focused on measuring the content quality of financial reports. Measures of quality include that: the reporting unit has appropriately disclosed whether it is a going concern; all statutory timeframes have been met; all required documents are lodged; appropriate notes regarding the preparation of the accounts are made; and subscriptions fees, capitation fees, related party information and employee expenses are disclosed.

The Commission is confident that compliance will further increase through a new focus both on the quality of content as well as continued and intensive engagement and advice to reporting units and their auditors from its financial specialists.

Proactively improving compliance with election obligations

The Commission has implemented a systematic approach to monitoring registered organisations' compliance with their statutory obligations in relation to elections.

In 2014–15, the Commission identified that registered organisations were not achieving high levels of voluntary compliance with the requirement to lodge prescribed information for elections within statutory timeframes. Consequently the Commission has developed a proactive strategy to increase voluntary compliance. This includes engaging with non-compliant organisations to ensure that they understand their obligations, and publishing a range of decisions highlighting its concerns about election compliance as a method of communication and awareness-raising.

Planning is also underway to deliver a webinar in 2015–16 aimed at increasing overall awareness of election obligations.

In addition, the Commission conducted an audit of registered organisations that held election exemptions, the majority of which were granted in the 1980s and 1990s. The Registered Organisations Act allows a registered organisation or branch to obtain an exemption from having its elections:

  • conducted by the Australian Electoral Commission (AEC), and/or
  • conducted by secret postal ballot.

Since 1988 more than 150 AEC and postal ballot exemptions have been granted and, in normal circumstances, an exemption continues until revoked under the legislation.

The Commission is reviewing all of the exemptions that remain in force to establish if the grounds upon which the exemption was originally granted are still relevant. This will require detailed liaison with each of the relevant registered organisations through the next financial year.

Entry permits

In 2014–15 the Commission adopted a new process for dealing with applications for right of entry permits to ensure a more transparent and equitable approach.

Non-routine applications which might benefit from the making of formal submissions or the calling of evidence are now considered by the Registered Organisations Panel. Routine applications continue to be considered by the Delegate of the President.

This provides parties in non-routine matters a better opportunity to be heard at a tribunal hearing and assists the Commission to ensure the efficient management of entry permits.

In 2014–15 three applications for permits were formally refused. The average time to issue a permit from receipt of the application was 17 days.

Table 33 reports the number of applications for an entry permit made under s.512 of the Fair Work Act during the reporting period; the number of entry permits that were issued during that time and the number of entry permits that were refused during the same period.

Table 33: s.512 Fair Work entry permits 2014–20151
  No. Average time to issue an entry permit
Applications for entry permits 1481  
Entry permits issued 1487 17 days
Entry permits refused 3  
  1. The number of permits issued and refused will not equate to the number of applications received in the reporting period, as applications processed includes applications that were received during earlier reporting periods.

The Commission must be satisfied that a proposed permit holder is a fit and proper person to hold an entry permit in accordance with the Fair Work Act. This includes consideration of whether a proposed permit holder has received appropriate training.

The Commission has previously approved a number of training packages, successful completion of which would usually demonstrate that a proposed permit holder had received sufficient and appropriate training.

The Commission has now committed to review the previously approved training packages in 2015–16 to ensure they continue to meet contemporary training requirements.

Inquiries and investigations

During 2014–15 the Commission continued to meet its inquiries and investigations function. As at 30 June 2015, six inquiries and four investigations were ongoing (see Table 34). Two new inquiries were commenced in the reporting period, in March and May 2015 respectively, and five inquiries were concluded.

Table 34: Inquiries and investigations Chapter 11 Part 4 Registered Organisations Act
  No. as at
30 June 2014
No. initiated/recommenced 2014–15 No. closed 2014–15 No. as at
30 June 2015
Inquiries 5 6 5 6
Investigations 6 2 4 4

Four investigations continued through the year, having been carried over from the previous reporting period, while another four investigations were concluded. Of the four investigations that concluded, one investigation had been suspended previously pending the outcome of cancellation of registration proceedings, and another commenced and concluded within the year.

As a result of the investigations, the General Manager commenced Federal Court proceedings against the Australian Nursing & Midwifery Federation, Western Australia Branch in late August 2015. Federal Court proceedings were also commenced against the Musicians' Union of Australia and its Federal Secretary in October 2014.

In addition, the Commission's Regulatory Compliance Branch conducted preliminary assessments of another 13 complaints relating to the actions of registered organisations and/or their officers to determine if the alleged complaints had merit and/or came within its jurisdiction to undertake inquiries.

Action against the Health Services Union officials

Mr Craig Thomson

This proceeding substantially reflects findings of the investigation conducted by the General Manager into Mr Craig Thomson's alleged misuse of union funds during his time as National Secretary of the Health Services Union (HSU). This included alleged expenditure on both personal items and services as well as on his electoral campaign in the seat of Dobell in the 2007 Federal Election.

The Federal Court proceedings in this matter concluded on 10 April 2015, however, at the end of the reporting period, the judgment was still reserved.

The decision was subsequently handed down on 11 September 2015, with a penalty hearing set down for 9 November 2015.

Reference: General Manager of the Fair Work Commission v Craig Thomson [Federal Court] VID 798/2012. See also: General Manager of the Fair Work Commission v Thomson [2013] FCA 380; General Manager of the Fair Work Commission v Thomson (No 2) [2015] FCA 308

Action against the Musicians' Union of Australia

In October 2014 the General Manager commenced proceedings in the Federal Court against the union and its Federal Secretary, Mr Terence Noone. The proceedings are a result of four separate investigations into the Musicians' Union of Australia concerning the Federal Office and the Sydney, Melbourne and Hobart Branches which concluded in February 2014.

The allegations against the union relate to a failure to prepare, lodge and provide to members financial and operating reports for the Federal Office and Melbourne Branch over a number of years.

The proceedings against Mr Noone allege that he did not adequately discharge his duties with the required standard of care and diligence in relation to the financial reporting requirements of the union, specifically the Federal Office, Melbourne and Sydney branches.

In December 2014, Jessup J ordered that the parties participate in mediation. A court conference was held in late June 2015. The matter is ongoing.

Reference: General Manager of the Fair Work Commission v Musicians' Union of Australia & Anor [VID620/2014]

The Commission's performance

The Commission's Organisations Panel deals with various types of applications made by registered organisations, including applications for registration, changes to eligibility rules and cancellation of registration. The Panel also considers non-routine applications for entry permits made under the Fair Work Act.

Table 35 reports the number of matters under the Organisations Panel's jurisdiction that were finalised in 2014–15. Twenty-six matters were finalised in 2014–15, compared with 39 in 2013–14. The numbers in 2013–14 were unusually high, in particular cancellation of registrations, as the Regulatory Compliance Branch referred defunct organisations to the Panel for cancellation. Also many organisations took the opportunity to review their rules, including changes to eligibility rules.

Table 35: Registered organisations – finalisation of matters in the jurisdiction of the Organisations Panel
Application type Section of the Registered Organisations Act No. finalised 2013–14 No. finalised 2014–15
Orders about representation rights to organisations of employees s.137A 0 1
Membership Agreement with State Registered Union s.151(1) 1 1
Change of name s.158(1)(a) 5 1
Changes to eligibility rules s.158(1)(b) 18 11
Registration of association of employers s.18(a) 3 4
Registration of association of employees s.18(b) 4 3
Cancellation of registration s.30 7 5
Submission of amalgamation to ballot s.44(1) 1 0
Total   39 26

The Commission's Regulatory Compliance Branch has continued to ensure high clearance rates of other matters lodged under the Registered Organisations Act as well as routine applications for entry permits made under the Fair Work Act and applications for WHS permits made under the Work, Health and Safety Act 2011. In particular, 388 notifications of alterations to rules and requests for advice were finalised in 2014–15, compared with 280 that were opened (see Figure 17). The Commission finalised 501 Financial Returns1 in 2014–15, compared with 403 opened, and 240 Annual Returns were finalised compared with 124 that were opened (see Figures 18 and 19).

Figure 17: Clearance rate of rules and advices

Figure 17 is a graphical representation of the data relating to the clearance rate of rules and advices contained in Table G10.

For source data see Table G10.

Figure 18: Clearance rate of Financial Returns

Figure 18 is a graphical representation of the data relating to the clearance rate of Financial Returns contained in Table G11.

For source data see Table G11.

Figure 19: Clearance rate of Annual Returns

Figure 19 is a graphical representation of the data relating to the clearance rate of Annual Returns contained in Table G12.

For source data see Table G12.

The Regulatory Compliance Branch measures its performance against targets such as its timeliness in assessing financial reports, alterations to rules and annual returns once a matter has been lodged with the Commission (see Table 36). It also measures the time it takes to issue a permit or make an arrangement for an election after an application or notification has been lodged. In the previous annual report data regarding entry permit targets, the Commission did not distinguish between routine and non-routine entry permits.

In Table 36, the Commission has reported, among other things, the performance target for the 1468 routine permits issued this year. It is noted that an additional 18 permits were referred to and addressed by the Commission. Its timeliness has significantly improved compared with last year. It has also been able to increase performance output as a result of a number of strategies, including implementing a risk-based approach to financial reporting, and improving the quality of documents lodged so that assessment and finalisation is faster and more efficient.

Table 36: Regulatory Compliance Branch performance targets for 2014–15
Performance targets Target Result No.
95% of financial reports required to be lodged under the Registered Organisations Act are assessed for compliance within 40 working days 95% within 40 working days 96.3 392
95% of routine entry permits to be finalised within 40 working days 95% within 40 working days 96.0 1468
95% of WHS permits to be finalised within 100 working days 95% within 100 working days 92.2 47
95% of elections to be finalised within 40 working days 95% within 40 working days 97.1 234
95% of annual returns to be assessed within 40 working days 95% within 40 working days 89.4 101

Not all performance measures have been met. The target for Annual Returns was not met due to a backlog of this kind of work in the first half of this financial year. This was reversed in the second half of this financial year when every annual return was assessed in accordance with the 40 working day target. It is anticipated that finalisation of applications for WHS permits will be more timely with the introduction of a streamlined application form. The measure for finalising WHS permit applications in 2015–16 will be 95 per cent within 40 working days.

Monitoring and reviewing the Commission's procedures and achievements

During the financial year the Commission has reviewed many of its processes and as a consequence implemented a number of changes to the way it will regulate registered organisations. Some changes are quite small, but will have a positive impact on the timeliness in which it performs its work, such as the improvements to the WHS application form. Other changes are significant, such as the adoption of a risk-based approach. This approach will be closely monitored and reviewed to ensure continuous improvement.

In 2014–15 the Commission achieved a considerable improvement in compliance by registered organisations. However there is room for more improvement. A combination of educative, audit and enforcement tools will be used in 2015–16 to ensure compliance continues to improve.

1 Financial Returns includes financial reports lodged under s.268 of the Registered Organisations Act, s.268 of the RAO Schedule to the Workplace Relations Act 1996, as well as applications for s.269 certificates and s.271 certificates.