NOTICE UNDER SUBSECTION 439 – 20(1) OF THE CORPORATIONS (ABORIGINAL AND TORRES STRAIT ISLANDER) ACT 2006
DELETED
WHEREAS an examination of the books of DELETED ( the corporation ) was completed under section 453 – 1 of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 ( CATSI Act ) by authorised officers, Mr Danny Keep and Mrs Natasha Keep (the examiners) from the Tasmanian based firm of Business & Community Pty Ltd in 2019.
AND WHEREAS after considering the findings of the examination, I, Kevin Vu, a delegate of the Registrar of Aboriginal and Torres Strait Islander Corporations (the Registrar) suspect on reasonable grounds that the corporation has not complied with provisions of the CATSI Act and/or the corporation’s constitution (i.e. the current rule book dated 13 February 2015) namely:
A. Approval of applications for membership
Contrary to rule s 5.2 .2 and 5.2.3 , persons have been admitted as members without being nominated in writing by one of the 12 outstation communities 1 and providing an application in writing.
The examiners reported that:
• the current process is that interested individuals apply directly to the corporation by way of completion of an application for membership which is then subsequently tabled at the next directors’ meeting for a decision.
1 Rule 5.2.2 , a person who is eligible to apply for membership must be an individual who is nominated in writing by one of the 12 outstation communities.
B. The names and details of new members were entered on to the register of members after notice of an annual general meeting ( AGM ) was given by the corporation
Contrary to sub section 144 – 10 (8) of the CATSI Act and rule 5.2.5 (b), names and details of new members were entered on the register of members after notice was given for an AGM and prior to the conclusion of the meeting.
The examiners reported that:
• notice for the AGM for the year ended 30 June 2018 was given on 5 November 2018 and held on 29 November 2018
• two members’ applications for membership were approved by resolution at a direcors’ meeting held on 8 November 2018 and entered on the register of members on same day
• one of these people was subsequently appointed as a director at this AGM.
C. Minutes of AGMs and directors’ meetings not signed
Contrary to subsection 220 – 5 (4) of the CATSI Act and rule 14.2 .1(d), minutes of the AGMs for the years ended 30 June 2016, 30 June 2017 and 30 June 2018 , and minutes of directors’ meetings held after 1 July 2016 were not signed by the chair of the meeting, or chair of the next meeting, within a reasonable time after each meeting.
The examiners reported that:
• the minutes of the AGMs held on 3 November 2016 , 9 November 2017 and 29 November 2018 were not signed by the chair of the meeting, or chair of the next meeting, within a reasonable time after each meeting
• the minutes of each directors’ meeting have not been signed by the chair of the meeting, or chair of the next meeting, within a reasonable time after each meeting.
D. Signed consents to act directors not obtained
Contrary to section 246 – 10 of the CATSI Act and rule 8.2.3, the corporation did not obtain a signed consent, to act as a director, from all of its current directors prior to their appointment.
The examiners reported that:
• the corporation was unable to produce signed consents from four of the directors at the time of the examination for inspection during the examination.
E. Secretary not appointed by directors of corporation and did not give signed consent prior to appointment
Contrary to sections 257 – 15 and 257 – 20 of the CATSI Act, and rule s 12.3 and 12.1.2, the current secretary of the corporation may not have been appointed by the directors an d they have not given the corporation a signed consent, to act as secretary, prior to their appointment.
The examiners reported that:
• they could not locate any evidence to show the secretary at the time of the examination was appointed as secretary of the corporation by resolution passed at a directors’ meeting
• they could not locate any evidence to show the secretary had given the corporation a signed consent, to act as secretary, prior to their appointment
• they subsequently found evidence that shows that the secretary was reappointed as secretary of the corporation by a resolution passed by members at the AGM held on 3 November 2016.
F. Loans to members, directors and other persons
Contrary to rule 14.1, corporation funds have not been used to carry out the corporation’s objectives.
The examiners reported that:
• loans have been provided to members’ directors and other persons
|
GL 2 – 2500 (One – Off Non – employee) |
Balance owing at date of examination |
|
Member s |
$ 1,099.67 |
|
Directors |
$ 3,346.28 |
|
Unaccountable transactions |
$ 5,266.49 |
|
Non – Member/Non – Employee |
$ 1,200.62 |
|
Total |
$10,913.06 |
|
GL 2 – 2450 (Other employee loans). Informed this GL relates to members or directors’ loans. Unaccountable transactions. |
$ 4,795.91 |
|
Total unaccountable loan balance GL 2 – 2450 |
$ 4,795.91 |
• the total outstanding balances of these loans is $15,708.97 as at the date of the examination
• they were advised that loans (to directors) are approved by either chief executive officer (CEO) and/or the general manager
• it was evident during examination that loans to directors had not been recorded appropriately (as the examiners reported they were unable to obtain accurate information on director loan balances).
G. Staff loans
Contrary to rule 14.1, directors are not using corporation funds to carry out the corporation’s objectives.
A review of the examiners’ report and documents obtained by the examiners revealed that:
• the corporation has given a number of loans to the employees of the corporation (this balance total led $34,363.71 at the time of the examination) and the provision of loans to employees has been a common practice
• loans do not appear to have been managed properly, with some loans to staff have been written off as ‘funds have not been recouped’.
• some loans are excessive amounts and have had little change to amounts owing to the corporation and some continue to have small draw down amounts added with only small repayments which results in little change to outstanding balances.
• the issuing of loans was raised in the auditor’s management letter to the directors for the year ended 30 June 2018. The auditor’s management letter advised that:
• there was no evidence that the loans provided to employees had been approved by the directors
• no signed loan agreements were in place between the corporation and staff
• the absence of written approvals from the corporation’s directors increases the risk that loans are not obtained with the full and prior consent of the directors
• the absence of appropriate loan documentation, together with processes to monitor loans and enforce repayment terms, increases the risk that loans may either not be timely repaid adversely affecting the corporation’s cash flow, or not be recovered causing financial loss to the corporation respectively
• the auditor’s management letter recommended the directors:
• take appropriate steps to ensure that all existing loans are supported with loa n agreements that are signed by employees. … should set out the particulars of the loan including the initial loan amount, the amount and dates of repayments made up to the date of the agreement, the remaining term and required dates and amounts of repayment of the outstanding loan balance. … should also include a clause that gives the corporation authority to deduct any outstanding loan amounts from unpaid wages and accrued leave entitlements in the event that the employee discontinues employment
• obtain formal taxation advice with respect to any potential FBT liability.
• the auditor’s management letter also records management comments as follows:
The Corporation has taken steps to implement some of the above recommendations. These include execution of employee loan agreements and interest being applied to outstanding loan amounts in accordance with ATO guidelines.
Management have also advised that there are sufficient leave entitlements to cover outstanding loan amounts in the event that senior management cease employment.
We note that the Corporation has taken steps to implement some of these recommendations subsequent to our discussions held.
H. Payments out the corporation’s money are being approved by persons without the proper delegated authority
Contrary to section 274 – 10 of the CATSI Act and rule 10.5, payments out of the corporation’s money are being approved by persons who do not have the delegated authority to do so.
The examiners reported that:
• the corporation allows a former employee, now an external bookkeeper, to authorise EF T bank payments when the CEO or general manager are unavailable
• there was no evidence that the directors had delegated their authority by a resolution passed at a directors’ meeting to this person to make and approve payments.
AND WHEREAS after considering the results of the examination, I suspect on reasonable grounds that there are other irregularities in the affairs of the corporation namely:
I. Inadequate procedures and controls over the payments out of the corporations’ money
• the corporation does not ensure there is adequate supporting documents for all payments out the corporation’s money
• the corporation does not ensure all payments are made for the purpose of carrying out the objectives of the corporation
• the daily transaction limits on accounts (including credit cards limits) were last updated 18 June 2009.
J. Credit card use
In relation credit card expenditure, the examiners reported that :
• a number of the payments sampled were not adequately supported with appropriate documentation
• a number of credit card transactions relate to expenditure of a personal nature which appear to be then added to current staff loans ( i.e. these transactions included Tatts Lotto and Oz Lotto purchases).
Based on a review of the examiners’ report and supporting documents obtained by the examiners, it does not appear the corporation has a credit card policy in place.
TAKE NOTICE that, under subsection 439 – 20(1) of the CATSI Act, and for the purpose of complying with the CATSI Act and the rules of the corporation, I require the corporation and its directors to take the following actions by the dates specified below:
1. Approval of membership and entry onto the register of members
Immediate action: The directors must review the process for members applying for membership. Under rule 5.2.2, a person who is eligible to apply for membership must be an individual who is nominated in writing by one of the 12 outstation communities, and t here shall be a maximum of three nominated people from each of the 12 outstation communities.
By the close of business on Friday, 31 July 2020: Send a written report with any relevant supporting documents to the Registrar’s delegate which sets out what action has been taken to ensure:
• a nomination process is in place that document s how outstation s should nominate individuals to be the representative member of their outstation
• all applicants applying for membership complete a written application for membership of the corporation (and applications for membership are kept as corporation records)
• applications for membership must be approved or rejected by a resolution passed by th e directors at a properly convened directors’ meeting or by a circulating resolution
• details of all new members are entered on the register of members within 14 days of the acceptance
• applications for membership are not considered or approved at AGMs or general meetings.
2. Sundry non – compliance matters
By the close of business on Friday, 31 July 2020: Send a written report with any relevant supporting documents to the Registrar’s delegate which sets out what action has been taken to prevent the sundry matters of non-compliance set in this notice from reoccurring, in particular:
• the minutes of all AGMs, general meetings and directors’ meetings are signed by the chair of the meeting, or the next meeting, within a reasonable timeframe
• the corporation obtains a signed consent, to act as a director, from each person before they are appointed as a director of the corporation
• any future appointment of the secretary of the corporation will be approved by resolution at a directors’ meeting and a signed consent, to act as secretary, will be obtained prior the person’s appointment.
3. Review of the corporation’s financial delegations
Immediate action: The directors must take immediate action to review and determine whether any formal delegations are place for the corporation’s financial management.
The review should determine:
• whether there are any financial delegations in place that have been approved by the directors by resolution at a properly convened directors’ meeting to approve payments:
• if there are no financial delegations in place, the directors need to determine whet her they want to delegate any of their powers for the approval of payments out of the corporation’s money including financial delegation limits by passing a resolution at a directors’ meeting
• if the directors decide not to delegate any of their powers, payments must not be authorised by any other persons other than the directors of the corporation in accordance with rule 10.4 of the corporation’s rule book.
By the close of business on Friday, 31 July 2020: Send a written report to the Registrar’s delegate on the findings of this review and the action, if any, taken as a result of the review including any relevant supporting documentation.
4. Loans to directors, members, staff and other persons
The Registrar’s delegate is of the view that there are inconsistencies between the findings outlined in the corporation’s auditor’s management letter, the corporation’s response to the auditor’s findings and the examiners’ findings. The corporation’s response to the auditor’s management letter indicates that loan agreements have been executed with staff members however, it appears this has only occurred with two staff members. It also appears that loans by these two staff members have been redrawn the and balance of the loans have not decreased over a two year period.
The Registrar’s delegate also considers the practice of providing loans to directors, staff, members and other persons is a breach of the corporation’s rule book and the practice of providing such loans must cease immediately.
Immediate action: The directors must review the recommendations made by the auditor with respect to loans provided by the corporation, in line with the findings under item G of this notice, and determine whether:
• all people that have outstanding loans with the corporation have an executed loan agreement in place that sets out the particulars of the loan including the initial loan amount, the amount of dates of repayments made up to the date of the agreement, the remaining term and required dates and amounts of repayment of the outstanding loan balance
• the directors pass a resolution that providing loans to directors, staff, members and other persons is a breach of the corporation’s rule book and the practice must cease immediately
• persons with loan agreements in place already have been meeting the loan repayments as outlined in the loan agreements.
By the close of business on Friday, 31 July 2020: The directors must provide a written report to the Registrar’s delegate outlining the findings and conclusions from the review. If the corporation does not implement the recommendations made by the corporation’s auditor, the corporation must provide a detailed written report to the Registrar outlining why the corporation has not implemented the recommendations made by the corporation’s auditor. The report must also detail what alternate actions the corporation has taken to address the issue of providing loans to directors, staff, members and other persons and how the corporation intends on recovering the money owed to the corporation.
5. Additional reporting to the Registrar on corporation meetings
Within 14 days of each corporation meeting (i.e. general meetings, AGMs and directors’ meetings): Send to the Registrar’s delegate copies of the:
• notice of the meeting
• minutes and papers of the meeting.
This increased reporting requirement applies from the date of this notice. The corporation must lodge the notice, minutes and papers for each corporation meeting within 14 days of the date of the meeting to which they relate.
This increased reporting requirements ends when the Registrar’s delegate advises the corporation in writing that the corporation is no longer required to send these documents.
AND TAKE FURTHER NOTICE THAT, for the purpose of rectifying the other irregularities, I require the corporation and the directors of the corporation to take the following actions by the dates specified below:
6. Review the corporation’s policies and procedures manual and financial policies
By the close of business on Friday, 31 July 2020 : The directors must review the corporation’s policy and procedures document (dated 15 September 2017) and financial policies consisting of a purchasing policy, asset disposal document, travel reimbursement policy and payroll procedures. The directors must ensure the policy and procedures promote accountability, transparency and proper processes.
The review must consider whether:
• the corporation’s policy and procedures document should be reviewed annually
• the current corporation’s policy and procedures document promote s accountability, transparency and proper processes or whether the document needs to be revised
• there are sufficient policies and procedures in place such that all payments made by the corporation are all supported with adequate documentation an d staff are made aware of the requirements
• references to financial delegations are consistent with what has been approved by the directors under action item 3
• signatories to the corporation’s bank accounts are consistent with the delegations made by the directors under action item 3
• credit card limits (last updated in June 2009) need to be revised.
By the close of business on Friday, 31 July 2020 : Send a written report to the Registrar’s delegate on the findings of this review and the action, if any, taken as a result of the review including any relevant supporting documentation.
7. Credit card policy
The directors must develop a credit card policies and procedures document to guide the corporation’s oversight and management of its business credit cards. The policies and procedures must incorporate the following principles and matters:
• promote accountability, transparency and proper processes
• details on the approval for the allocation and termination of the corporation’s business credit cards to directors and /or employees
• include details of stronger oversight of the use of the corporation’s business cards
• policies and procedures for the expenditure and acquittal of credit cards
• details of the documentation required by the credit card holder (e.g . tax invoice) to validate transactions as part of the acquittal process
• state that business credit cards cannot be used for personal expenditure
• details of the action (if any) that will be taken by the corporation if a card holder is found have misused the corporation’s credit card.
By the close of business on Friday, 31 July 2020: The directors must table the credit card policy at a properly convened directors’ meeting and pass a resolution to approve the credit card policy once the directors are satisfied the policy is ready for approval.
Within 14 days of the directors’ meeting: The directors must send a copy of the minutes of the directors’ meeting to the Registrar’s delegate where the resolution was passed including a copy of the approved credit card policy and procedures document.
The requirement to take the above action is for the purpose of complying with the CATSI Act and the corporation’s constitution (i.e. the current rule book dated 13 February 2015 ) and to rectify any other irregularities mentioned in this notice.
Note: The decision to issue this notice is a reviewable decision under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) and you have the right to have the decision reviewed under Part 15 – 4 of that legislation. Should you wish to avail yourself of that right, you will need to comply with the requirements of section 620 – 5 of that legislation.