Commission raises bar for NFPs

The body charged with national oversight for the NFP sector is gradually winning over critics, but needs support from all states and territories.

There have been significant changes in the not-for-profit sector in Australia in recent years.

Western Australia has played a leading role in the sector’s development, having been among the first jurisdictions to establish legislation allowing associations to incorporate (in the mid 1890). Since then, the NFP sector has slowly but inevitably increased in social and economic significance, and complexity. The pace for change quickened when the sector was captured more formally in the new Australian taxation arrangements, established in 1999-2000.

Importantly, this change resulted in the Australian Taxation Office becoming the de facto regulator for the sector at the national level. For both the sector and the ATO, this was not a great fit.

In the period leading up to the 1999-2000 tax change, a number of organisations developed and published reports describing a need: for the establishment of a national regulator; for more substantial regulatory and reporting arrangements; and for uniform national legislation for such things as charitable collections.

However, it was not until 2010 when the Productivity Commission published its report examining the contribution of the NFP sector that there was sufficient national political support for the establishment of an independent Australian Charities and Not-for-profits Commission, or ACNC.

The ACNC began operations as national regulator for charities (a subset of the broader NFP sector) in December 2012. Its legislation is framed to achieve three key objectives: to support and encourage a sustainable sector; to maintain and increase public trust in the sector; and, to reduce red tape.

These are laudable aims. They frame the regulatory role of the ACNC and allow the commissioner, Susan Pascoe, to build a one-stop-shop for charities, establish a report-once-use-often reporting regime, and to establish both financial reporting and governance regulations.

Importantly, these objectives also frame the debate about whether or not the ACNC is the right vehicle for this and whether the balance is right with regard to regulation, supervision, and support for the sector.

The ACNC has undertaken considerable work in the short period that it has existed, including establishing the financial reporting and governance regulations, issuing 52 guides and fact sheets, and holding face-to-face presentations attended by more than 4,000 people Australia-wide.

However, there are some in the sector who believe the commission has increased rather than decreased administrative burden. Some also remain concerned that the establishment of a regulator at the national level has increased the risk facing directors and officers of NFPs caught by the ACNC’s legislation. Additionally, the description of key director responsibilities in the law has also highlighted the risk facing directors.

This response is to some extent not unexpected, as the ACNC was established without states and territories signing up to it; and while there has been some progress in this area, there is still a long way to go. Additionally, there is some confusion as to the difference between regulatory reporting and acquittal of funds. The ACNC is charged with establishing a single portal for acquittal of funds but, to date, this only pertains to funds provided by Commonwealth government agencies.

To be effective, any national portal needs to have all states and territories sign up. If the states were to accept the idea of a single portal for acquittal information there is no doubt that the red tape burden would indeed be significantly reduced.

By and large, there is both sector and wider community support for the establishment of the ACNC. While some industry leaders are concerned about the burden of regulation, it would seem that there is evidence that broader community and ‘street-level’ sector support exists for the ACNC and its aspirations.

The ACNC’s own research, undertaken by research firm ChantLink, identifies that the broader community supports the ACNC and its objectives, and a significant number of respondents placed a high importance on a regulator. These views were supported by independent research published by ProBono Australia called the ‘Not-for-profit Sector Election Survey’.

Curtin University’s research in this area has found that the ACNC is generally well supported. However, given the NFP sector’s need to respond to other significant change, it is not something NFPs are sweating over. For most, the issues of increasing income and delivering services in new frameworks are of more concern.

Collectively, this research would indicate that the sector is keen to continue with the establishment of the ACNC, for it to pursue the aspirations that are encompassed in its legislation, and to establish its framework. Policy makers and politicians may wish to consider these findings before making further change at a national level.

However, more evidence and the description of a longer term set of actions designed to achieve those goals would go a considerable way to establishing the right way forward and to ensuring the sector, government and the broader community are able to retain support for a regulator that has a set of aspirations that are critical to the long term sustainability and resilience of the NFP sector

David Gilchrist is director of the Curtin Not-for-profit Initiative in the Curtin Business School