NFP reform reversal will create confusion

The government’s proposals

The Federal Government has committed to abolishing the Australian Charities and Not-for-profits Commission (ACNC) along with the dedicated regulatory framework which accompanied it, as part of a broader deregulation agenda. Policymakers are now considering submissions from the public on what arrangements should replace the ACNC but consultation has been limited to the following issues:

• introduction of self-reporting requirements to ensure public accountability
• returning determination of charitable status to the ATO with a framework to ensure independence of decision-making
• a proportionate compliance framework, and
• appropriate transitional arrangements.

Need for guidance on the new laws

In our submission, Governance Institute pointed out that the NFP sector has been subjected to dramatic regulatory change in recent years. The establishment of the ACNC in December 2012 and the streamlined reporting and governance framework it introduced were major and profound reforms. Now, 18 months down the track, NFPs are again being asked to brace for further upheaval, as the ACNC framework which they have adapted to and positively embraced, is dismantled.
The replacement regime will create significant confusion for a sector that is under-resourced and largely staffed by volunteers. Many charities will simply not have the means or capacity to get on top of and implement the new laws. Given this, we have recommended that once the measures are finalised, the government should provide comprehensive instructions to every registered charity on:

• what regulatory changes will occur and when
• what they will mean for each type of charity
• what each charity needs to do to comply with the new regime, and
• where to go for assistance.

If this guidance is not provided, it will be sink or swim for charities, as unlike the last round of regulatory reforms, there will be no one oversight body (the ACNC) providing consistent, friendly assistance to help charities navigate the changes.

Quality and consistency in self-reporting

We have also stated that if a new self-reporting regime is introduced, it should be accompanied by guidelines to help charities to observe minimum standards of quality reporting and consistency so there is transparency and comparability between NFPs. Accountability is essential for the success of the NFP sector. Donors, volunteers and members of the public need to have confidence in the organisations they support and good reporting encourages that.

While the overwhelming majority of Australian charities operate professionally and honestly, it is also the case that the ACNC received more than 900 complaints about various charities since December 2012. Without the ACNC, there will be no regulator to turn to if the public has concerns about a charity, making it even more important that these organisations receive instructions on self-reporting, so that the expected standards are clear.

NFP proposals will not unravel ‘red tape’

But to get back to fundamentals, our submission openly stated that ultimately, the best interests of both the NFP sector and the community would be served not by any of the options proposed by the government but by the retention of the ACNC. Governance Institute has been a strong supporter of the ACNC since its inception and specifically of the robust yet practical governance framework it established.

The ACNC has improved transparency and accountability through quality and common-sense reporting to stakeholders. The agency’s focus as a ‘light-touch’ regulator with an emphasis on education and consultation has also had a positive impact in lifting NFP governance. It has brought visibility to the sector, as for the first time information on all charities can be found in one place. And with 80 per cent of NFPs professing support for the ACNC, according to a survey by ProBono Australia, the agency is certainly well-respected by its main constituents.

Governance Institute is keen to assist the government to navigate the practicalities of implementing its proposals for NFP regulation. However, at the end of the day, we believe that returning the charities sector to being heavily and ineffectively regulated is misconceived and will ultimately undermine the goal of reducing red tape.

Read our full submission.

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