Moves Afoot to Save the ACNC from Going Up in Smoke
15 May 2014 at 9:14 am
The Australian Charities and Not-for-profits Commission (ACNC) may yet be saved from a "bonfire of legislation" after a bill to repeal it was referred to the Economics Legislation Committee for an inquiry, according to a recent article from the Australian Institute of Company Directors' member-only Boardroom Report newsletter.
As part of the introduction of Repeal Day legislation, Minister for Social Services Kevin Andrews introduced the first of two Bills to implement the government’s election promise to repeal the ACNC, claiming the regulator had not proved to be the best use of government funding and had created unnecessary red tape.
However, he said the first Bill would not take effect until the enactment of the later Bill, which would contain details of the arrangements replacing the ACNC. It is set to be tabled in Parliament’s Winter sitting (June-July).
In a last ditch attempt to save the ACNC, more than 40 peak bodies recently wrote a letter to the Prime Minister.
Andrews rejected the letter as not being representative of the more than 600,000 players in the NFP sector and noted that through his ongoing consultations with major stakeholders, he had heard overwhelming evidence that the ACNC needed to go.
He added: “The New Zealand Government has abolished its regulator and in the UK, the Charities Commission has been criticised by its National Audit Office as ‘not regulating charities effectively’ and ‘not delivering value for money’.
“We believe that the role of government is to support civil society, not to control it or bind it in more red tape.”
On 26 March, the Selection of Bills Committee referred it to the Economics Legislation Committee to consider the impact the repeal of the ACNC would have on the NFP sector and to ensure adequate stakeholder consultation occurs. Submissions closed on 2 May and the committee’s report date is 16 June 2014.
Both the Federal Opposition and the Australian Greens have said they would not support the repeal of the ACNC.
For her part, Anne Robinson, a principal of Prolegis Lawyers, believes it would be unfortunate to abolish the ACNC before it has a chance to demonstrate the effectiveness of a national regulatory regime.
“I hope the new government will consult widely with the sector before undoing the careful work that has been undertaken over the past six or more years with bipartisan input from a wide representation of charities and NFP organisations,” Robinson says.
Robinson adds: “The ACNC represents added bureaucracy only in the same way that the introduction of the Australian Securities and Investments Commission (ASIC) did, and it is as fair a criticism as it would have been to stop the process of corporate law reform before each of the state Corporate Affairs Offices had been closed.”
She says the great progress in red-tape reduction which has benefitted business over the past decade or two has completely by-passed the Not for Profit sector. “Stopping the reforms when they are only half-way complete would be unfortunate. The Australian Taxation Office does a great job at administering the tax law. It is unreasonable to expect it to be able to provide the kind of proportionate regulation and facilitation of charitable activity that the ACNC can provide.”
However, Ewen Crouch, chairman of Mission Australia, understands the federal government's approach.
“The implementation of the ACNC did not reduce red tape and only added to the compliance burden. There is considerable scope for a better regulatory framework for the NFP sector. However, that requires a whole of government agreement through the COAG process rather than imposition of further regulation at a federal level,” he says.
“The debate on regulation should encompass what reporting should be mandatory and what regulation can be light touch to encourage innovation in service delivery and efficient scale for the sector. Directors will have a point of view on these issues and a willingness to think beyond the organisation they direct.”
In the meantime, Vera Visevic, a partner at Mills Oakley Lawyers, says NFP directors should keep abreast of developments to ensure their respective charities are compliant at all times.
“This can be as simple as knowing which regulator to report to – the ACNC, ASIC, Australian Tax Office or Office of Fair Trading (and its equivalents in other states),” she says.
“As far as directors’ duties are concerned, they are principally the same under both the Corporations Act 2001 and the ACNC legislation, so any change to the regulatory system should not result in any significant changes to how directors behave and conduct themselves in their role as directors of charities.”
Visevic adds that it would be helpful for directors to be aware of what changes they have made to their operations and governance models since the establishment of the ACNC so that if the ACNC is abolished, directors are cognisant of what changes they need to make to comply with the new regime (which will effectively be the same as the regime which existed pre-ACNC).
For example, if directors abolished their annual general meetings (AGMs) after the ACNC regime’s governance standards came in, they will need to start holding AGMs again if the ACNC is indeed abolished.
“This may involve some pre-planning. So the more prepared directors are for these sorts of changes, the easier it will be for them to transition back to the old regime,” says Visevic.
She expects Australia to probably revert back to the same regulatory system it had prior to the establishment of the ACNC “that is, for companies, reporting to the ATO and ASIC, and for other organisations, such as incorporated associations, to continue reporting to their state Office of Fair Trading and the ATO”.
“We may also find that the ATO will not be happy with some of the legal structures which were accepted by the ACNC. For example, the ATO always insisted on charitable funds having the form of a trust, whereas the ACNC had no such stipulation. It will be interesting to see if the ATO is happy to accept charitable funds which have different structures (for example, a company structure) when it has always insisted on a trust. Will the ATO require those charitable funds to change their structure in order to remain eligible for tax concessions?,” asks Visevic.
Professor David Gilchrist, director of the Not-for-profit Initiative at Curtin University, says directors should expect to continue to provide data as the government has not yet decided to abandon the ACNC register.
“They currently have a legislated responsibility for submitting an annual information statement,” Gilchrist says.
“The dissolution of the ACNC will not necessarily mean the sector goes back to where it was pre-December 2013 and the provision of data is still something that directors should contemplate.”
Gilchrist believes NFP directors also need to continually look to enhance their practices in financial reporting, governance maturity and service delivery quality.
“Gaining an understanding of the true cost of service delivery and the clinical risks remain constant areas where boards should focus. The current time is no different. Regardless of the reporting or regulatory requirements put in place, if boards focus on better practice, the gap between what they do and what might be required will be narrowed if not closed.”
He believes the replacement arrangements are likely to include a register of some kind, a centre of excellence and a continuation of the taxation and ASIC requirements that existed prior to December 2012.
“Directors should prepare for ongoing uncertainty as the requirements of ASIC, the ATO and other agencies are reset and as the states attempt to reduce their administrative impact on NFPs. Only a federal initiative can reduce red tape effectively in Australia.”