Govt Revises ACNC Draft Legislation
Friday, 6th July 2012 at 5:00 pm
The Gillard Government has made major revisions to the draft legislation around the new Charity Regulator, the ACNC.
The revised legislation will go to the House of Representatives Standing Committee on Economics for an inquiry over the Winter Parliamentary break.
"The Australian Charity and Not for Profit Commission legislation reflects the outcomes of an extensive consultation process beginning with the 2011 Consultation paper Scoping Study for a National Not?for?profit Regulator," the Minister for Social Inclusion Mark Butler said.
"In addition, extensive public and targeted consultation on the ACNC Bills was conducted in December 2011 and May 2012. The Gillard Government would like to thank stakeholders for their important and constructive input throughout the consultation process so far.
"Referring the ACNC Bills to the House Committee for an inquiry over the Winter Parliamentary break provides for appropriate Parliamentary scrutiny and also allows for further public consultation on the ACNC legislation.”
The Government said it will then consider any recommendations the Committee makes, before introducing the legislation later in the year, ahead of the ACNC's 1 October start date this year.
The Government announced on 17 May 2012 the financial reporting framework and governance standards, including the external conduct standards, will commence on 1 July 2013. This follows further public consultation on the content of financial reports and the governance and external conduct standards.
The two-staged approach means that the financial reporting requirements and governance standards for registered charities will not come into effect until 1 July 2013.
The Government said the extended start date will give more time for charities to transition to the new regulatory framework and for the ACNC to provide guidance materials to help with the transition. The first financial reports will not need to be lodged with the ACNC until 31 December 2014.
Public consultation on the ACNC Bills was conducted in December 2011 and May 2012. During these consultation processes, the Government said stakeholders raised a number of issues which have been addressed in the revised legislative package.
Not for Profits are encouraged to comment on the changes to the draft legislation via written submissions or letters on all or part of the draft document. The deadline for comment is July 20th to firstname.lastname@example.org
A summary of key changes to the Bills since the December Exposure Draft are set out below.
The circumstances under which entities are entitled to registration have been clarified. The categories of types and sub-types have also been clarified, so that they only apply in respect of charities. These categories may be expanded later to include other Not for Profit entities.
The provisions governing entitlement to registration have been clarified, including by noting that the determination of 'charitable purpose' is to be undertaken in accordance with the existing traditional common law meaning of the term.
The ACNC Commissioner will only be able to revoke registration if the ACNC Commissioner is satisfied that certain circumstances are present, having considered a number of factors. These factors require the ACNC Commissioner to balance different considerations to ensure that any decision to revoke an entity's registration is proportional and appropriate in all circumstances.
The factors include consideration, wherever possible, of other options to help promote compliance, such as education, before an entity's registration is revoked.
The circumstances in which the Commissioner may revoke registration have been narrowed, for example, where a liquidator or trustee in bankruptcy has been appointed, rather than upon insolvency.
The information that will be placed on the ACN register has been clarified and expanded. For example, the Commissioner must publish the details of any enforcement action taken under the legislation, a summary of why such action was taken, and a summary of the details of any resolution or response to the matter.
In May 2012, the Government announced that it would consult further on the governance standards and progress these standards through regulations. As part of this process, the standards are expected to be refined to minimise duplication. The governance standards will apply from 1 July 2013.
In May 2012 the Government announced that it would consult further on the financial reporting requirements applying to registered entities, and progress these requirements through regulations.
The first financial report will relate to the 2013-14 financial year and will need to be lodged by 31 December 2014.
The first annual information statement will relate to the 2012-13 financial year, and will need to be lodged by 31 December 2013.
The thresholds for reporting have been revised, so that they are based solely on revenue and exclude consideration of DGR status. This will further minimise compliance burden for those entities with DGR status.
Registered entities may apply to the ACNC Commissioner to report on the basis of a substituted accounting period (SAP), and certain entities that currently report under an Australian law on the basis of an existing SAP will have their SAP grandfathered upon notifying the ACNC.
The Commissioner may approve a new type of reporting, referred to as 'joint' and 'collective' reporting, which will enable entities to report along certain lines of activity, rather than on an entity-by-entity basis. There are a number of factors the Commissioner must consider before deciding whether to allow a particular group of entities to report in this way.
The category of individuals that can conduct a review has been significantly expanded to allow any member of a professional accounting body with the relevant designation of that body to conduct a review. The category of auditors has also been expanded from registered company auditors, to also include audit firms and authorised audit companies.
Information gathering and monitoring powers
The scope of, and use of, information collected under the ACNC's information gathering and monitoring powers have been clarified.
The scope of information that the ACNC can gather includes information relevant to determining whether a registered entity is complying with regulatory responsibilities, and whether information a registered entity has given the ACNC is accurate and correct.
The ACNC's powers have also been altered to ensure that any self?incriminating information gathered cannot be used to prosecute the individual that provided the information.
The application and use of the ACNC's enforcement powers have been clarified. In particular, the statutory thresholds have been made clearer, more objective and consistent across the powers.
The ACNC will be able to use enforcement powers where Federally Registered Entities have contravened a provision of the legislation, or have not complied with a governance standard.
The ACNC would be able to use enforcement powers where any registered entity has failed to comply with an external conduct standard.
Federally Regulated Entities are entities that the Commonwealth has clear Constitutional power to regulate and include constitutional corporations and a body corporate that is incorporated in a Territory.
The range of powers the Commissioner is able to exercise have been constrained to outcomes that directly address the issue the Commissioner was looking to address. The provisions also require the Commissioner to consider a standard range of policy matters to ensure that broader considerations are taken into account when deciding whether to use enforcement powers, and the way in which these powers are used.
Disclosure provisions in the secrecy framework have been altered for clarification and limited to circumstances where there was potential for disclosure of personal information. In particular, the 'disclosure to increase public transparency and accountability of the sector' has been limited, so that it now only applies for the purpose of disclosing information onto the ACNC Register. The secrecy framework was also restructured to align more closely with secrecy regimes in other Commonwealth legislation.
Review and appeals
The review and appeals framework was not part of the Exposure Draft Bill in December 2011.
However, as per the fact sheet that was released with the exposure draft materials, the review and appeal framework in the ACNC Bills was largely modelled on the existing review and appeal provisions in Part IVC of the Taxation Administration Act 1953 (TAA).
As foreshadowed in the fact sheet and supported by feedback from the consultation, the review and appeal framework was drafted to allow entities to make a joint application where they seek to have a decision of the ACNC Commissioner reviewed at the same time as a related decision of another government agency or department.
Application of the Bill to certain entities
The framework dealing with the application of the legislation to certain entities was not part of the Exposure Draft Bill in December 2011, although the Exposure Draft foreshadowed the inclusion of this framework, based on similar provisions contained in the TAA.
The revised legislation imposes certain obligations, liabilities or offences on specific entities, referred to as 'covered entities' that are responsible for managing the primary entity. This will ensure that covered entities are accountable for complying with the new law.
In respect of unincorporated entities and trusts, this framework is based on the equivalent framework contained in the TAA. However, the framework contained in the Bill has been narrowed and streamlined in respect of the imposition of personal liability on directors of bodies corporate.
Several penalty provisions have been lowered to provide greater consistency with similar offences and ensure they are set at an appropriate level.
A targeted exemption from the governance standards and financial reporting requirements has been provided to "Basic Religious Charities," as defined in the draft legislation.