Not-for-profit Regulation – A Longer Term View

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In this article, Professor David Gilchrist, Director of the Curtin Not-for-profit Initiative, examines the Commonwealth Government’s intention to scrap the ACNC and argues that there is more value from a national perspective and a director’s perspective in keeping it intact.

 

The Australian Charities and Not-for-profits Commission (ACNC) was established one year and four months ago at a critical point in the national political cycle. Heading into an election year is always a fraught time to establish new initiatives which may well live or die with the government. However, few would argue that the intensity of the political environment leading up to the establishment of the ACNC and its first year of operation was one of the most fraught political periods in our history and one that saw many initiatives pursued by the Gillard government to become tarnished regardless of the value of the particular initiative.

 

The ACNC was certainly a victim of the political cycle. Its prospective demise would seem to be as much a result of its immediate provenance – a major initiative of the Gillard government – as it was found wanting with respect to policy content and rational utility. To be sure, there were and will remain a number of people who have a fundamental issue with the ACNC and, for them, the idea is not valid. However, the dismantling of the ACNC is not supported across the nation and its demise is not supported in history either. Many recent polls have supported the findings of a number of reports published over the last two or so decades – in the case of the polls, there seems to remain a majority of support within the NFP sector for the ACNC while historically the establishment of such a vehicle for regulation and capacity building has been identified as a major step forward. Additionally, there would seem to be a number of internal inconsistencies with respect to the current government’s intended path.

 

For instance, the ACNC had three distinct and widely supported legislated objectives. As many readers will know, these were to build capacity within the sector, maintain and enhance the community’s trust in Not-for-profits and to reduce red tape. All of these objectives are inherently of great value. However, the focus of the debate has been very much on the word “regulator” rather than the full spectrum of roles allocated to the ACNC. This focus has led to arguments being mounted that the ACNC has caused more red tape, costs too much and that we do not need a regulator of Not-for-profits in Australia. However, this is not a nuanced argument.

 

The imposition of the Annual Information Statement requirements does add marginally to the work of NFPs once per year, but, to say it is red tape that must be immediately removed is a short term view. The data gathered is likely to give Australian governments, industry groups and many others in the sector, including directors, a much better understanding of what is happening in it and how it works. Further, the responsibility of the ACNC to build a report-once-use-often reporting system combined with a one-stop-shop for NFP regulation and development as well as its central responsibility for reducing red tape with regard to the sector, are all critical for the sector and conform to the government’s cited policy position. Indeed, the ACNC is the only government agency with a remit for working across government to reduce red tape for the sector. Therefore, its removal will see the demise of the only agency with such a remit and we will rely on multiple agencies to come together to achieve the outcomes notwithstanding they have a multiple of responsibilities, many not relevant to the sector. Additionally, effective red tape reduction can only be achieved via a Commonwealth-led initiative. States cannot reduce red tape unilaterally and the ACNC is the right body to pursue this objective. The likelihood of achieving red tape reduction across government, without a body in place that has red tape reduction as a significant legislated remit, would seem to be very much reduced.

 

Additionally, the focus on this aspect of the role of the ACNC over-emphasises its regulatory work to the detriment of appreciating its work in building capacity within the sector. Much has been made of the cost of the ACNC. However, it would seem that the spending of about $14 million per annum across all of the activities of the agency is a small price to pay for capacity building and the work it does in investigating the hundreds of complaints it has received to date relating to a sector estimated to represent some $43 billion in contribution to our national GDP.

 

Finally, the proposals made by the government regarding the arrangements to be put in place following the ACNC should also be evaluated. The returning of key activities to agencies such as the ATO and the ASIC will ensure costs are not reduced to the extent suggested – these agencies will need to incur costs to undertake their returned roles – that NFPs will need to deal with more than one agency, that information will still be gathered and that there is little hope that the proposed Centre for Excellence will learn from the regulatory, supervisory and other activities of agencies with a view to enhancing the capacity of the sector. Further, the discussion leading to the introduction of the repeal legislation recently included the establishment of US-style league tables and these require information to be collected via a tax return process and setup the sector for poor outcomes following the limited capacity for such tables to report the true contribution of a very heterogeneous sector.

 

Overall, there is much to concern directors of NFPs with respect to the repealing of the ACNC legislation. It is not simply to be a case of returning everything to the arrangements in place before December 2012. The opportunity inherent in the ACNC of a single agency with a single focus of the NFP sector, gathering data and experience for the betterment of all NFPs and the broader community warrants review and deliberate consideration rather than speedy demolition without the consideration of the consequences.

 


Continue the discussion of this issue in the Better Boards LinkedIn discussion group and have your say on “Where do we go from here if the ACNC is scrapped?”


About David Gilchrist

Professor David Gilchrist is Director of the Curtin Not-for-profit Initiative at Curtin University, Western Australia. David Gilchrist is an historian and accountant. He has held a number of senior roles in the not-for-profit and public sectors and, most recently, was Assistant Auditor General in Western Australia. Early in 2011, David established the Curtin Not-for-profit Initiative. Previously, David taught accounting and finance at the London School of Economics and Portsmouth University in the UK and at universities in Australia. He has been president of WACOSS and was a director of the Anglican Schools Commission. David is chairman of the board of Nulsen Disability Services and a director of Volunteering WA.

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