Is it legal for a charity boss to pay themselves a ‘high’ wage?

The NSW volunteer started helping the charity with their accounts – and that’s when she saw the eye-watering wage of her boss.

Welcome to Sisters In Law, news.com.au’s weekly column solving all of your legal problems. This week, our resident lawyers and real-life sisters Alison and Jillian Barrett from Maurice Blackburn advise on who has to pay when a shared fence needs replacing.

Question:

I have been volunteering for 10 years at a local charity that raises money to send vulnerable children on fun day trips. I started by assisting on the days out and more recently started doing admin and a bit of accounting. This means I've had access to the finances and can see what donations come in and how they're used.

I was shocked to see that the head of the charity pays themselves a wage so high that it takes over 70 per cent of the charity’s incomings. I knew their job wasn’t voluntary but this figure shocked me.

Is what they’re doing illegal? I know so many people who donate to the charity as they want to help vulnerable kids but really they’re just lining this person's pockets! – Anon, NSW

The boss is paying themselves a generous wage by taking 70 per cent of the charity’s donations. File photo.

Answer:

Firstly, thank you for volunteering your time. There are many charities that can only operate with the support of generous volunteers like yourself.

You may, however, be surprised to know that more than half of all charities have paid staff.

For charities to employ quality staff, they need to be able to pay people fair wages for their skills, knowledge and experience.

You haven’t mentioned what the charity is and whether it is registered with the Australian Charities and Not-for-profits Commission (ACNC).

If the charity is registered with the ACNC, then it must operate on a not-for-profit basis.

This means it must not operate for the personal gain, profit or other benefit of people such as the charity’s members, employees, “Responsible Persons” or their friends or relatives.

“Responsible Persons” are those responsible for governing the charity, usually the board or committee members, or trustees.

Their duties include acting honestly and fairly in the best interests of the charity, and ensuring the financial affairs are managed responsibly.

A concerned volunteer reached out to news.com.au for legal advice.

As such, the Responsible Persons need to ensure the charity head is paid appropriately, and they will likely have set the salary.

In working out whether the wage of the charity head is reasonable, there will be a number of things to be considered.

It is important to determine whether the charity would be able to continue operating without paying the wage of the charity head.

Perhaps the charity head is the person that brings in all the donations and without them, the charity would not be funded.

You also haven’t mentioned the total amount of annual donations the charity receives.

If the annual donations are modest (for example, $50,000) and the charity head is paid 70 per cent of that amount, it may be considered reasonable if it is a full-time position for them working 35 or more hours each week.

The charity volunteer said everyone is unaware that most of their money ends up in the pockets of the boss.

If you remain concerned about the high wage that is being paid to the head of the charity, you should:

– Speak to the Responsible Persons

– Conduct a self-evaluation using the ACNC’s self-evaluation tool to assess if the charity is meeting its obligations or to identify any issues that may prevent it from doing so, or

– Contact the ACNC. If there is evidence that administration costs or salaries are unreasonably high, it may look into the charity’s operations to establish that it is being run in accordance with its governance standards.

If there is a concern of fraud, whether that be with the charity head or the Responsible Persons, then you should contact the police.

This legal information is general in nature and should not be regarded as specific legal advice or relied upon. Persons requiring particular legal advice should consult a solicitor.

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Originally published as Is it legal for a charity boss to pay themselves a ‘high’ wage?