Babies and Bathwater – Repealing is Not the Same as Fixing

While many in the Not for Profit sector appreciate the Coalition Government has made political promises with regard to the ACNC, it should not throw out the baby with the bathwater, but approach the issues so that the fall-out is reduced as far as possible, writes David Gilchrist, from WA’s Curtin University.

“Repeal Day”, the targeted day in late-March when the Government plans to introduce legislation into the national Parliament seeking to repeal a miscellany of the previous Government’s legislation, will likely include measures designed to disband the ACNC and to repeal the Charities Act 2013.

While it is clear that many do not agree with the Government’s policy position in relation to the reversal of the previous government’s reforms of the NFP sector, there are also a number of unintended consequences that are likely to flow out of the government’s proposed actions and which can be avoided even if the government pursues its policy framework.

In short, I believe the government should not use a very blunt instrument to reverse those aspects of the current arrangements.

Unfortunately, notwithstanding promises to the contrary, the government is not seeking to consult widely with respect to its intended removal of the Charities Act from the statute books or of the disbanding of the ACNC.

In the case of the Act, this includes an apparent refusal to consult with the legal fraternity. While the government is yet to answer the obvious question as to why the Act needs to be removed in the first place, and despite the government’s belief to the contrary, the removal of the Charities Act from the statute books will not return the legal position of the Charities Sector to the position it was in before the Act was passed last year.

Importantly from a practical perspective, the current Act provides clarity for most people involved in the setting up and running of charities in Australia. To be sure, there are a number of amendments that could be made to the periphery (what legislation is perfect out of the blocks?) but, overall, the Charities Act is of great benefit to the sector and its removal does not seem to represent an advance for the government’s policy objectives unless there is something the government is not telling us with respect to advice it has received from the Department or elsewhere.

Setting aside the fact that many have seen the Act as a real advance clarifying legal aspects of the definition of charities for many including managers, board members and advisors, and trainers, the repeal of the Act will likely see a number of complications apply to the sector.

For instance, the existence of the presumption of public benefit is in doubt if the Act is removed as common law developments, particularly in the UK courts, have seen this presumption endangered.

If so, charities would need to prove they are of “benefit” to a “sufficient section of the public”. Further, the right to advocacy for charities will be less well defined, although a return to common law may mean that these rights are much wider than under the Act.

There will also be some bodies that have become charities under special legislation but would not qualify at common law. For instance, entities that have been unable to satisfy the public benefit requirement at common law (for example, contemplative religious bodies and non-profit child care bodies) may well be excluded from being charities unless some saving legislation is introduced.

The removal of the ACNC also seems to be the result of confused policy.

On the one hand, the government is seeking to remove the ACNC in order to ‘reduce red tape’ for the sector and reduce costs to the government. The reduction of red tape is, of course, a sentiment that many can have some sympathy with but this measure is really only a very short term response.

However, at the same time the government wants to retain the register, establish a ’Centre for Excellence’ and return the regulatory processes to the ATO (and ASIC and State authorities) while, at the same time, removing the one body with a legislated remit for reducing red tape in the sector.

Thus, the abolition of the ACNC will mean that the gains made with respect to the fast and efficient registration process, the transparency inherent in a publicly accessible national Register, the collection of data that can be used for capacity building and the capacity for one agency to undertake all of these processes efficiently will be lost.  

Additionally, while the meagre ongoing budget of the ACNC of approximately $14 million (servicing a sector turning over what some estimate to be around $43 billion) will no longer be spent on the ACNC, it will be spent on the other agencies that will take up aspects of the ACNC’s current role.

Staff will also likely transfer back to other agencies and so the savings argument seems a little thin. It is a red herring to suggest that the disbanding of the ACNC somehow saves money – the current policy of the government will simply see these costs transferred and less transparent.

Finally, the information to be collected via the Annual Information Statement reporting process is of a proportionate nature and for most charities fairly minimal. The collection of information by a national body and the investigations undertaken by the ACNC increase our knowledge of the sector and can contribute to the capacity of governments and the sector to make informed policy decisions.

Peak bodies, government and the sector itself have been seeking information to assist in decision making and to raise understanding. The discontinuation of the collection of data combined with the disaggregation of the various roles currently embedded in the ACNC will mean that stakeholders do not know what is happening in the sector and that lessons learned, understandings gained and experience hard won will not benefit the sector or the wider community to the degree possible. It is inefficient and ineffective to have disparate entities undertake elements of the regulation and support of one sector.

While many in the sector appreciate the Government has made political promises with regard to the ACNC, we implore the government not to throw out the baby with the bathwater, but to approach the issues in a nuanced way so that the fall-out from its policies is reduced as far as possible.

About the Author: 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, Standards and Quality in Western Australia. Early in 2011, David was appointed to the position of Industry Professor within the School of Accounting at Curtin University where he researches in the areas of government and Not for Profit performance, regulation, governance, financial reporting and economic history.