Not-for-profit Law
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Review of the ACNC legislation

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The Federal Government is required to undertake a review of the Australian Charities and Not-for-profits Commission Act 2012 and the Australian Charities and Not-for-profits Commission (Consequential and Transitional) Act 2012 after five years of operation.

The Australian Charities and Not-for-profits Commission review panel report was tabled in Parliament on 22 August 2018. It makes 30 recommendations aimed at finding a balance between supporting the sector, reducing red tape, enhancing accountability and addressing misconduct.  

Overall, in our view, it is a clear, sensible and well-written report that supports our campaign to #fixfundraising in Australia. It recommends that the Australian Consumer Law (ACL) be amended to clarify its application to charitable and not-for-profit fundraising and a mandatory Code of Conduct be developed to sit alongside the ACL. While it is music to our ears to have yet another independent report attest to what we, and many other organisations and peak bodies, have long been calling for, the time for action is now. Yet another welcome recommendation is that the exemption from financial reporting for basic religious charities (BRC) be reviewed. In our submission (in more detail below), we called for the removal of the concept of BRC, as it's not clear what special attributes BRC organisations have which justifies a lower level of regulatory oversight (no financial reporting or compliance with ACNC governance standards). We will be watching closely how Government responds to this recommendation.

We've put together a video unpacking some of the key recommendations in the 144-page report.

Watch the video here.

 

Our submission

Not-for-profit Law is pleased to be providing its submission into the review of the Australian Charities and Not-for-profit Commission (ACNC) legislation (the Review).

In the decade of the existence of our specialist service, we have campaigned for a single, independent, specialist national regulator for charities and other not-for-profits (NFPs). It remains our view that such a regulator is ‘critical' infrastructure to support a healthy NFP sector; a sector that is the heart of our civil society. We supported the formation of the ACNC, provided input to its development and were fervent in our support for its continuation when legislation tabled in the Parliament would have led to its abolishment.

It is with this backdrop, and our commitment to ensuring the ACNC is best placed to continue as a world class charities regulator for the next decade and beyond, that we have spent considerable time on our submission (and contributing to the Law Council of Australia’s submission), including analysing the submission of the ACNC and its Advisory Board.

In short, we believe the ACNC has been a success story for the sector. Its ability to deliver on red tape reduction has been slower than hoped, due in a large part to matters outside its control (such as attempts to abolish it and the consequent reluctance to engage by state and territory governments). But on all other measures, the ACNC has been effective against its objects, with the establishment of a verified public register and its client-focussed registration and advice service, being quite extraordinary.

The Review (which the sector advocated for at the time of the ACNC’s establishment) is an opportunity to tweak and improve, but not for wholesale change. It is also an opportunity for mapping a path for significant new opportunities such as fundraising law reform.

Our submission is set out in three Parts. The first part (Part A) deals with our response to the ACNC’s own submission to the Review and the ACNC Advisory Board’s submission to the Review. The second part (Part B) sets out our key recommendations with a particular focus on the ACNC’s objects, its regulatory approach including discussion on the governance standards, the extension of the ACNC to NFPs, and fundraising. The final part (Part C) addresses our response to the ‘focusing’ questions (where we have not otherwise answered them) accompanying the Terms of Reference to the Review.

Recommendations

We make six recommendations to the Review Panel, one of which includes the removal of s205.35 - the category of basic religious charity - from the ACNC legislation. The category is problematic for a number of reasons and there appears to be a lack of clear policy rationale for the existence of the category.

  • Firstly, there is no valid reason why charitable organisations that are established for one charitable purpose (i.e. advancing religion) should be exempt from certain reporting obligations. It is not clear what special attributes such organisations have which justifies a lower level of regulatory oversight. 
  • Secondly, there is no size requirement in the definition of basic religious charity. Some entities that are basic religious charities may in fact be ‘large registered entities’.  Under the ACNC legislation the fact that larger charities have more robust reporting requirements recognises that greater regulatory oversight, and greater financial accountability and responsibility, is justified where more money is involved.  This principle is undermined by the basis religious charity category since a large charity that qualifies as a basic religious charity is excused from financial reporting obligations and has less regulatory oversight than a small charity with a different charitable purpose.
  • Thirdly, some charities registered under this category may enjoy the benefits of legal status (they are incorporated by Acts of Parliament).
  • Finally, an exemption from income tax on the basis of charitable status is also a benefit funded by the public (through tax forgone) that warrants public accountability.  If organisations do not want to be subject to the ACNC regulatory framework, they can choose not to register with the ACNC, and forgo the tax benefits that registration provided.

We also note that community expectations concerning the level of transparency and accountability that religious organisations should adhere to and be subject to, has likely changed over the last 5 years. 

Our six recommendations are as follows:

  1. The review panel agree (in part, in principle, with limitation or qualification) to the recommendations by the ACNC in its submission except for Recommendations 2 and 28 (as set out in our Attachment A)
  2. The risk-based and proportionate approach adopted by the ACNC in its first five years as reflected in its Regulatory Approach Statement be continued
  3. The ACNC be funded in a manner that enables it to undertake activities necessary to achieve all three of its objects
  4. The ACNC be preserved with only minor changes as outlined in this submission, including the removal of the concept of ‘basic religious charity’ under the ACNC legislation and be subject to further review in five years
  5. The Panel accept the recommendations made by the Law Council of Australia in its submission to the Review, noting we endorse the submission (with only two minor points of difference at outlined above in Endorsements)
  6. The ACNC progress its removal of red tape agenda, by promoting the resolution of the most significant regulatory burden, the fundraising regime, by forming an Advisory Committee of all States and Territories to give urgent consideration to #fixfundraising.

​You can read our full submission below:

All submissions received by the Review Panel can be found on the ACNC legislation review website

Other coverage

Pro Bono News covers Not-for-profit Law's supplementary submission in Calls for mandatory fundraising code under ACL, 24 April 2018.

Pro Bono News covers Not-for-profit Law's submission in Calls to abolish basic religious charity category from ACNC legislation

Justice Connect’s acting CEO Sue Woodward, told Pro Bono News she supported the abolition of the basic religious charity (BRC) category even if it was amended to cover only smaller religious charities.

“I believe even if it were to be amended so that it was based on say, annual revenue size, the exemption should still be removed,” Woodward said. “They should just be treated like any other registered charity.”

Last Updated: 28 February 2018

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