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Checks and BalancesThe NSCA Story

August 2012

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Walking In

Page Number 2

• $600K Loss YTD (Consolidated)

• Business Unit $300K of that loss

• Three employed resources

• Reputational issues

• Culture issues

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History

Page Number 3

Established 1927

Purpose: Promote Safety Awareness particularly in Industrial Safety

Activities: Industrial safety, Road safety, Sea safety, insurance, trade unions, city councils, federal departments

Make Up: Non-Government / Not-for-profit

Registration: Company Limited by Guarantee

Exception: To omit ‘Limited’ from name

http://www.catchme.net.au/synopsis.html (Trailer 2)

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How it got to this

Page Number 4

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The Reckoning

Page Number 5

• 1988 after 3 years of qualified audit reports

• Board never knew qualified

• Major Trade Debtors and ‘Containerized Safety Equipment’

• Hopelessly insolvent

• Banks - $300M in unrecoverable loans

http://www.catchme.net.au/synopsis.html (Trailer 3)

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John Fredrich

Page Number 6

• Not- Australian

• No record of entry into Australia

• No Birth certificate

• Wanted in Germany for embezzlement

• Security clearance to every Australian Defence site

http://www.catchme.net.au/synopsis.html (Trailer 1)

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1800 655 510

Aftermath

Page Number 7

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How could this happen

Page Number 8

• 4x issues impacting companies limited by guarantee

– Halo Effect

– Precedential cloning

– Statutory rigor mortis

– Inappropriate models of regulation

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Halo Effect

Page Number 9

• NFPs – very nature of what they do

• Ideals of society – Compassion, Sympathy etc (Good Fundraisers)

• Can cause organisations to get lapse (27 Banks) **

• Reduced need for customary caution

• Spread to regulators and policy makers

• Not for personal gain

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Precedential Cloning

Page Number 10

• Meticulous transfer of British law into Australia

• No context considered

• The Companies Act 1863

• 1863 adoption in Queensland States

• Allowed for ‘Limited’ to be omitted

• Opened ability for other states to adopt

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Statutory Rigor Mortis

Page Number 11

• Law and reform enters suspended animation

– Judicial – demonstrated by definition of charity

– Statutory – underdevelopment of company limited by guarantee

• Fear within Australia of antagonizing NFP/Charity (Halo)

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Poor Models of Regulation

Page Number 12

• For-profit regulation inappropriate for NFP

• Limited buying power

• Regulator focus on large companies

• Halo affect

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Industry Reform

Page Number 13

• Australian Charities & Not-for-profit Commission

– Regulate Charity/NFP sector more closely

– Annual Reporting

– Assist entities to meet their obligations

– Educate, Guide and monitor compliance

– Enforce where necessary

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What can you do?

Page Number 14

• Conduct a stress test

– Ask for Annual Accounts

– Ask questions and creditors

– Analyse Cashflow

– Determine level of borrowings and ability to repay

– How are sales and production trending

All available in the annual report

MONITOR

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Walking In

Page Number 15

• $600K Loss YTD

• Business Unit $300K of that loss

• Three employed resources

• Reputational issues

• Culture issues