This complex question comes from a NSW RFS brigade. Without access to detailed financial manuals and delegations this answer must be very general and, as anyone who reads to the end will see, I cannot come to a conclusive answer. My correspondent tells me that he or she is:
… a member of a volunteer NSW RFS brigade and we are having issues with the brigade spending money on certain items/activities out of our accounts.
One particular event coming up is a significant brigade anniversary. This event includes the anniversary dinner, internal award presentations at this dinner as well as the invitation of dignitaries such as the RFS Commissioner, Members of government, RFS Senior management and District Management.
This dinner has a fee payable per head. The fee or charge includes a three course meal, non-alcoholic drinks and Coffee/Tea only. It does NOT include any alcohol at all. However there is a bar available if members wish to purchase other drinks themselves out of their own pocket.
We have three monetary accounts:
- One which is for profit made from a soft drink fridge and foods
- DGR Acc of which donated monies, profit from raffles etc as well as payment for services rendered such as assisting in local events
- Investment Acc which consist of DGR monies and other monies that has been invested in term deposits
With our brigade anniversary coming up soon and would like to use monies from either the DGR or Investment Accounts to partially subsidise the tickets for the members and their partners (50% subsidy), fully subsidise tickets for dignitaries and Life Members of the brigade.
We have been told by word of mouth from brigade senior management that ‘The brigade cannot spend money on such activities as it is public monies’. We have been referred to RFS Service Standard 1.1.16 quoting in particular:
“2.3 A member of the Service may not, under any circumstances, accept or receive any personal remuneration or reward for, or in relation to, any service they provide as a volunteer member of the Service or which are provided by a brigade.”
Another member, who is also the brigade accounts auditor (yearly audit) also refers to public monies not being able to be spent on social functions. However does not provide points of reference or a source further than above. Several of us had done some homework although only utilising the RFS Service Standards of which we found that two of these apply; SS 8.1.3 Ceremonies and Events (Issue date 13 June 2012)
1.2 Ceremonial events strengthen and develop a healthy service culture for members and their families. maintaining the correct ceremonial protocols and procedures sets a standard of respect, pride and acknowledgement necessary each time NSW RFS personnel come together.
2.1 A Ceremony or event may include, but is not limited to any of the following;
(b) Presentation of internally or externally awarded medals to service personnel
(c) Brigade Anniversaries or similar celebratory/appreciation events
(g) Any event where the Commissioner or a member of Parliament is either invited to attend or hosts.
So by our understanding this Anniversary dinner satisfies at least three of the points listed in the whole SS 8.1.3 as a Ceremony or Event listed by the RFS and therefore if it is classified as such would then become a part of an “associated” fire or emergency service activity.
SS 2.1.14 is Management of DGR …………
3.6 Tax legislation provides that tax deductible donations received by brigades can only be used in support of activities that are ASSOCIATED with the brigade’s volunteer-based fire and emergency services activities.
Our undertaking of this SS is that because it states “used in support of activities that are ASSOCIATED with the brigade’s volunteer-based fire and emergency services activities” and also because of the SS I have listed above that this anniversary dinner actually qualifies the brigade to spend DGR monies for such an event.
I would like to reiterate that:
- There will be no alcohol provided by the brigade or its accounts
- This Anniversary Dinner is an official brigade function as per the relevant SS
We would appreciate your professional opinion at your earliest convenience.
Service Standard 1.1.16 is headed ‘Fundraising Activities (Provision of Goods and Services)’. Paragraph [1.2] says:
This Service Standard applies to services that may be provided to a third party in the context of brigade fund raising activities.
It goes onto say (at [2.3]):
A member of the Service may not, under any circumstances, accept or receive any personal remuneration or reward for, or in relation to, any service they provide as a volunteer member of the Service or which are provided by a brigade.
In context it appears to me that the Service Standard is referring to a situation where a brigade may, for example, set up at a fete to make the fete more attractive for local children. The fete organisers may, in return, give a donation to the brigade. That money must go to the brigade but not to the members who are there with the brigade’s appliance. It is not applicable in this context as this is not a fund raising activity (though it is a fund expending activity).
Service Standard 2.1.14 refers to ‘Management of Deductible Gift Recipient Status for NSW RFS Brigades’. Rural fire brigades can receive gifts that are tax deductible for the gift giver – that makes the brigade a Deductible Gift Recipient or DGR. Tax deductible receipts can only be given
… for genuine gifts/donations (i.e. where the donor does not receive a benefit except for the tax deductible receipt). Proceeds of raffles, charity auctions, fund-raising dinners, sponsorships and commercial activities are not deductible gifts/donations.
If that is the case the DGR account should not have ‘profit from raffles etc as well as payment for services rendered such as assisting in local events’ as that income would not be a tax deductible gift. A gift fund (the DGR account) must not receive any money other than a tax deductible gift (Income Tax Assessment Act 1997 (Cth) s 30.130(1)).
The Income Tax Assessment Act 1997 (Cth) says that money received as a tax deductible gift may be used ‘only for the principal purpose of the fund, authority or institution’ (ss 30.130(2) and 30.130(4)). ‘Principal purpose’ is not defined but in a web based guide to the law, the ATO gives the following example (<Can you be endorsed as a DGR?> 20 July 2015, accessed 1 September 2015):
A local government council that is a DGR for the operation of its public library sets up a fund for donations towards the annual picnic for its library staff. The fund is not for the principal purpose of the public library and so cannot be a gift fund.
Notwithstanding this general provisions, there are specific provisions regarding donations to funds for fire and emergency services. A donation is tax deductible if it is made to a fund maintained by a government agency (which must include the RFS; s 995.1 definition of ‘Australian Government Agency’) and:
(b) the principal activity of the entity is the provision of volunteer based emergency services that are regulated by a *State law or a *Territory law;
(c) the fund is established and maintained solely for the purpose of supporting the volunteer based emergency service activities of the entity (Income Tax Assessment Act 1997 (Cth) s 30.102(12A.1.3)).
Running a celebration for a rural fire brigade may not be the brigade’s ‘principal purpose’ but it is ‘in support of activities that are associated with the brigade’s volunteer-based fire and emergency service activities’ (Service Standard 2.1.14, [3.6]). The brigade members are volunteers, not staff, so their service has to be recognised by means other than salary, and as the RFS recognises, ‘Ceremonial events strengthen and develop a healthy service culture for members and their families’; matters fundamental to maintaining a volunteer brigade (Service Standard 8.1.3, [1.2]).
Service Standard 8.1.3 is headed ‘Ceremonies and Events’ and is supplemented by SOP 8.1.3 – 1 ‘Conducting Ceremonies and Events’. If the RFS is going to have a service standard and SOP on ceremonies, it stands to reason that it is expected that ceremonies will be held, and will be paid for. Unfortunately neither the Service Standard nor its SOP make reference to how the events will be funded.
The RFS accepts, even encourages, ceremonies such as a brigade anniversary celebration. I can see no objection to spending brigade funds that have been raised by selling ‘from a soft drink fridge and foods’ or money raised by raffles or other approved fund raising activities provided it wasn’t said that the funds were being raised for a particular purpose. If, for example, a raffle was run in order to ‘raise funds to buy a new pump’ then the funds should be spent only on that new pump. If however the raffle is for the benefit of the Kickatinalong Rural Fire Brigade then the funds can be spent on any legitimate purposes of the brigade which must include a brigade celebration held in compliance with Service Standard 8.1.3.
If the money has been paid as a tax deductible donation then it must be spent ‘only for the principal purpose of the fund, authority or institution’. The principal purpose of the RFS may be fire fighting but a legitimate purpose of a DGR fund includes ‘supporting the volunteer based emergency service activities’. Minds may differ on what that means. I would have no problem in saying that includes a celebration held in compliance with Service Standard 8.1.3 but others may take a different view. If the money is spent on a celebration and someone alleges that is a breach of the tax laws they would have to satisfy a court that this activity was outside ‘activities that are associated with the brigades volunteer-based fire and emergency service activities’. If the RFS wants to take a cautious view they can determine that those funds cannot be spent that way. It may be that the RFS has direction from the Treasury which they too must comply with.
Without access to treasury and RFS financial policies and delegations I am not able to reach a definitive conclusion. It would be my view however that:
- Unless money has been solicited for a particular purpose, money raised by selling drinks and food from the station fridge, as well as money raised by raffles and other fund raising could be spent on a celebration that is conducted in accordance with Service Standard 8.1.3.
- Money that has been received as a tax deductable donation, again assuming it was not given for a specific purpose, must be spent ‘for the principal purpose of the fund, authority or institution’. I am unable to resolve whether that would extend to a ‘celebration’. To answer that the RFS or the brigade would need to seek advice from a specialist tax lawyer or accountant. Of course if the RFS has a policy position, the brigade would need to comply with that policy determination.
What’s to be done?
The members of the brigade should not rely on ‘word of mouth’. No doubt there is a process to raise the matter with senior management and get a definitive ruling either from them or RFS head office as he RFS can, if need be, seek advice from its lawyers or financial managers. Once an answer is obtained it must be honoured.