PilchConnect Warns on NFP Governance Reforms

Specialist Not for Profit legal service, PilchConnect, says it has serious and fundamental concerns over suggestions raised in the Federal Government’s Not for Profit Governance Paper and wants any changes to governance arrangements deferred.

PilchConnect says much more work is required before any reforms should be introduced and further consultation with both the sector and State and Territory governments is also needed.

PilchConnect expresses its concerns in its submission to the Government’s Consultation Paper – Review of Not for Profit governance arrangements.

"The aim should be for any agreed reforms, such as uniform core legislative duties, to be ready for commencement as part of a more cohesive package of changes on July 1, 2013."

The Federal Government is consulting on what the core organisational governance principles applying to registered NFPs should be. The paper was released in December giving Not for Profits and other interested parties until January 27 to respond.

The Government says the outcomes of the governance review will help form the governance requirements for registered entities in the Australian Charities and Not for Profits Commission legislation, starting from July 1, 2012.

However, the PilchConnect submission says while the organisation supports the promotion of good NFP governance and the establishment of the Australian Charities and Not-for-profits Commission (ACNC), they regret the need to express serious concerns about the timing, scope and content of the proposals set out in the Governance Paper.

The submission says the Governance Paper has created considerable concern and confusion because it does not articulate clearly what “high level principles-based requirements? are and whether they:

• will be subject to legislative enforcement and by whom; and
• will be contained in voluntary codes of best practice and, if so, how they will be developed and what their status is in relation to existing codes and accreditation schemes.

It says the Governance Paper confuses concepts of trust law and company law and the introduction of new terminology like "responsible individuals", particularly at this stage of the NFP regulatory reform process, is unhelpful.

The submission says that in the absence of agreement between the Commonwealth, States and Territories as to uniform, legislated core NFP governance requirements, the ACNC legislation should be limited to matters necessary for its establishment and to undertake its already announced roles (namely, establishing a publicly searchable register, assessing applications for charity, Public Benevolent Institution (PBI) and NFP status, reviewing and monitoring compliance with charitable objects in light of a new statutory definition of charity, and collecting and enforcing new annual reporting obligations).

It recommends an appropriate time-frame for the introduction of any legislative changes and/or a sector-wide voluntary code would be 1 July 2013.

It says this would allow:

• a cohesive package of inter-related changes to be implemented at the one time – namely, the new annual (financial and activity) reporting, the statutory definition of charity, company limited by guarantee improvements and nationally consistent fundraising legislation; and
• time for government agencies within the Commonwealth Government to feel comfortable that the ACNC is the appropriate regulator for governance issues and knowledge transfer from the expertise that resides in the Australian Securities and Investments Commission (ASIC).

The Director of  PilchConnect, Sue Woodward, said: “This last point is very important. With this level of comfort it is more likely that government agencies will not feel the need to “second guess" NFP governance compliance by including detailed provisions in their procurement / grant agreements and accreditation and service standards.

The PilchConnect Submission can be found here (PDF). 

The COSS Submission can be found at here (PDF).
 

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