The regulation of registered organisations involves administering the provisions of the Fair Work (Registered Organisations) Act 2009 (Registered Organisations Act) that deal with registration and accountability of unions and employer associations. The Registered Organisations Act outlines the standards to be met by registered organisations in relation to rules, financial reporting, elections, the conduct of officers and other matters.
The Commission achieved a number of milestones in our regulation of registered organisations in 2013–14 by:
- meeting the challenge of steep increases in the number of matters lodged with the Regulatory Compliance Branch, including mandatory amendments to organisations’ rules to increase governance and financial training requirements by 1 January 2014 as mandated by the Fair Work (Registered Organisations) Amendment Act 2012 (the RO Amendment Act)
- dramatically increasing clearance rates of financial returns and annual returns lodged with the Commission
- proactively and successfully enforcing lodgment deadlines for financial returns and annual returns
- developing a range of compliance tools, including model financial reports, and
- continuing to address an unprecedented number of inquiries and investigations any of which have the potential to result in Federal Court proceedings.
Amendments to rules
The number of notifications of alterations to rules and requests for advice lodged with the Commission has steadily increased over the past five years. The number increased from 123 lodged in 2009–10 to 366 in 2013–14, representing an increase of 198 per cent. The Commission has been able to respond to the challenge, finalising 366 matters in 2013–14, compared to finalising 130 matters in 2009–10. This represents a 182 per cent increase in the number of notifications of rule alterations and requests for advice finalised over this five-year period.
Chart 14—Clearance rate of rules and advices
For source data see Table K12.
The mandatory amendments to rules were, of themselves, a major commitment with more than 120 organisations requiring advice and guidance. However the workload was compounded as many organisations took the opportunity while reviewing their rules to amend and update obsolete provisions. Some organisations took the opportunity to substantially restructure their rules and sought further advice and guidance from the Commission to achieve this.
Ninety two per cent of registered organisations incorporated the mandatory amendments in their rules. Of these, 85 per cent were certified. The Commission contributed to this high compliance rate by providing up-to-date information on its website, question and answer sessions, a subscription service as well as one-to-one advice and assistance.
These mandatory amendments required considerable resources which had to be redirected from other activities. This was a major contributor to the Commission not meeting the KPI set out in the Portfolio Budget Statements and our internal KPIs. While the residual impact of this unprecedented event is ongoing, response planning will ensure it is more likely that performance targets will be achieved in the 2014–15 year.
Clearance rate of financial and annual returns
The Commission finalised 572 financial returns in 2013–14 which represents a 94 per cent increase compared to the previous financial year. Further, the Commission finalised 261 annual returns in 2013–14 which represented a 25 per cent increase compared to the previous financial year. In the previous financial year, the Commission had adopted a strategy of postponing the assessment of financial and annual returns in order to deal with the RO Amendment Act mandatory rules amendments and other priorities. This resulted in an inevitable reduction in the number of financial returns and annual returns finalised in that period. As Chart 15 and Chart 16 demonstrate, this reduction was reversed during 2013–14.
Chart 15—Clearance rate of financial returns
For source data see Table K13.
Chart 16—Clearance rate of annual returns
For source data see Table K14.
Proactive enforcement of lodgment deadlines
By proactively enforcing lodgment deadlines for financial returns and annual returns the Commission has achieved a dramatic improvement in compliance. In 2009–10 only 63 per cent of registered organisations lodged annual reports on time, whereas in 2013–14 that figure rose dramatically to 95 per cent. In 2009–10 only 60 per cent of registered organisations lodged financial returns on time and by 2013–14 that voluntary compliance rate had increased to 89 per cent. Taking into account the Commission’s proactive intervention, the lodgment rates in 2013–14 rose to 99 per cent for annual returns and 98 per cent for financial returns.
Chart 17—Financial reporting compliance
For source data see Table K15.
Chart 18—Annual returns compliance
For source data see Table K16.
Development of compliance tools
The Commission has moved to a proactive compliance approach by utilising a range of strategies, including conducting audits across the activities of registered organisations, to confirm compliance with reporting requirements. This proactive approach has required the deployment of additional resources. In addition, the Commission is moving toward a risk-based systemic approach to the analysis of documents lodged with the Commission. For example, the Commission developed primary and advanced checklists for selective assessment of financial reports on the basis of identifiable risk. In order to develop the financial analysis capability of the Commission, all Regulatory Compliance Branch staff undertook in-house financial reporting training.
Compliance was further enhanced by the implementation of financial reporting guidelines and associated model financial statements. The model financial statements are designed to make reporting easier, cheaper and faster for registered organisations. The Commission is also developing a registered organisations Picture of Compliance in Australia (POCA) to identify national trends and patterns across registered organisations’ structures, financial performance and reporting. This information will increase the Commission’s knowledge and understanding of registered organisations and will inform future strategies to maximise voluntary compliance.
Further education tools have been delivered in 2013–14, including presentations and webinars addressing permit applications, reporting guidelines and governance training. Webinars have proved a highly successful communications tool with exceptionally high approval rates in satisfaction surveys.
A primary objective of the Registered Organisations Act is that registered organisations are representative and democratic. To meet this objective, the Commission has developed an election alert system which provides notification in advance of impending elections and allows the Commission to proactively enforce election deadlines to ensure that these are conducted.
As a result of the Commission’s proactive and strategic approach to non-compliance, during the year the Commission cancelled the registration of eight organisations, bringing the total number of cancellations since July 2012 to 11. The majority of these registered organisations were not meeting their obligations under the Registered Organisations Act. Cancellation of registration matters are dealt with by the Commission’s Registered Organisations Panel. For further information on the number and type of applications that were finalised by the Commission’s Organisations Panel this financial year see Table 24.
|Table 24—Registered organisations—finalisations|
|Application||Section of the Registered Organisations Act||Number finalised
|Registration of association of employers||s.18(a)||3|
|Registration of association of employees||s.18(b)||4|
|Change of name||s.158(1)(a)||5|
|Changes to eligibility rules||s.158(1)(b)||18|
|Cancellation of registration||s.30||7|
|Membership Agreement with State Registered Union||s.151(1)||1|
|Submission of amalgamation to ballot||s.44(1)||1|
Also during the year the Commission implemented a significant project to recover a large number of expired entry permits through a proactive audit. The Commission wrote to most unions regarding 334 outstanding permits. Of these, more than 65 per cent of outstanding permits have now been accounted for and further recovery work is ongoing.
Inquiries and investigations
In the previous financial year, the Commission commenced an unprecedented number of formal inquiries and investigations, many of which were necessarily continued in 2013–14 including four investigations into the Musicians’ Union of Australia, which will likely result in Federal Court proceedings being commenced in the coming financial year.
In addition, the Commission concluded three inquiries into registered organisations and commenced one new inquiry and three new investigations into registered organisations during the 2013–14 financial year. As at 30 June 2014 the Commission had six investigations and five inquiries on foot. The Commission had a further investigation into a registered organisation suspended pending the outcome of a cancellation of registration proceeding under section 30(1)(c) of the Registered Organisations Act. Further, the Commission undertook preliminary examination of six complaints relating to the actions of officers of a number of registered organisations in order to ascertain if the Commission had jurisdiction in relation to the complaints.
Action against the Health Services Union (HSU)
In 2012 the Commission commenced proceedings against the National Office of the HSU and against its former National Secretary Mr Craig Thomson. Separate proceedings were also commenced against the HSU and three former officials of the Victoria No.1 Branch.
HSU National Office
On 4 December 2013 the Health Services Union was ordered to pay an agreed penalty of $22 500 for failing to meet financial reporting obligations under the WR Act. Declarations were also made by Justice Middleton that ‘…registers the Court’s disapproval of the contravening conduct’. This is the first concluded litigation of this nature and the first imposition of civil penalties relating to investigations of the HSU National Office during the period in which Mr Thomson was National Secretary.
Reference: General Manager of Fair Work Commission v Health Services Union  FCA 1306.
Mr Craig Thomson
This proceeding substantially reflects findings of the investigation into the HSU that Mr Thomson misused HSU funds during his term as National Secretary. At the end of the reporting period, mediation was continuing.
Reference: General Manager of the Fair Work Commission v Craig Thomson [Federal Court] VID 798/2012.
HSU Victoria No.1 Branch
This proceeding arose from an investigation conducted into the HSU Victoria No.1 Branch and three former officials and reflects findings against the HSU for contraventions of financial reporting requirements and against the officials for breaches of their officeholder duties. The respondents did not contest the contraventions alleged against them. On 10 September 2014 a decision was handed down on penalty and the following civil penalties were imposed on each respondent: the HSU—$38 500; Ms Fegan—$4505; Mr Jackson—$18 262.50 and Mr Hudson—$6720. In addition to the imposition of a civil penalty, Mr Jackson was also ordered to pay compensation to the HSU to the amount of $16 569.88 plus interest of $10 229.52.
Reference: General Manager of Fair Work Australia v Health Services Union  FCA 970.
The Commission’s timeliness in assessing financial returns and finalising entry permits, work health and safety permits, elections and annual returns are set out in Table 25.
|Table 25—Regulatory compliance branch performance targets for 2013–14|
|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||37.7%||161|
|95% of entry permits to be finalised within 40 working days||95% within 40 working days||91.8%||1169|
|95% of work, health and safety permits to be finalised within 100 working days||95% within 100 working days||67.9%||57|
|95% of elections to be finalised within 40 working days||95% within 40 working days||94.2%||195|
|95% of annual returns to be finalised within 80 working days||95% within 80 working days||62.1%||170|
Requirements in the RO Amendment Act created a substantial one-off increase in workload due to:
- each registered organisation being required to amend its rules by 1 January 2014 to include increased governance and financial training requirements
- the Commission seeking to ensure maximum compliance with the RO Amendment Act which required the redirection of resources usually dedicated to assessing financial and annual returns
- resources being redirected toward the development and implementation of new compliance tools, and
- a substantive increase in the resource allocation to inquiries, investigations and Federal Court proceedings.
As these increases were mostly of a one-off nature they are likely to be self-correcting in the subsequent year. However, further measures implemented to mitigate the problem include strategies such as implementing a risk-based approach to the assessment of financial returns.
Future timeliness targets
In future financial years the Commission intends to change the following performance measures in order to be consistent with other measures:
- annual returns performance measure—95 percent to be finalised within 40 working days, and
- notifications of alterations to rules lodged under section 159 of the Registered Organisations Act performance measure—95 per cent to be assessed within 40 working days.