Get Rid of Secrecy Provisions, Charity Regulator Says

The Australian Charities and Not-for-profits Commission wants to see secrecy provisions that prevent it from revealing details about charity wrongdoings removed in this year’s review of the ACNC Act.

The ACNC’s second Charity Compliance Report, released Wednesday, said there were many lessons charities could learn from compliance matters and sharing this information would contribute to a “robust, vibrant, independent and innovative sector”.

While the report on ACNC activities from 1 January 2015 to 31 December 2016 included the names of 28 charities that had their registration revoked, two charities that entered into enforceable undertakings and one charity that received a statutory warning, further details could not be provided.

The case studies and other statistics, including the ACNC’s 69 finalised investigations, relied on aggregated data and de-identified information.

ACNC assistant commissioner David Locke told Pro Bono News the current secrecy provisions were “not satisfactory”.

“To be honest, the secrecy provisions that the ACNC has in the legislation really gives us difficulty in carrying out our purposes properly,” Locke said.

“What we would like to do is to be able to, at the conclusion of the case, set out what the findings were and what the basic facts were around that.

“We think that would provide much better accountability for us to the community, and people would be able to understand what’s going on, whereas actually it’s very hard. Journalists are digging around trying to see what actually is the case here, and we’re not able to say anything.

“So we think it’s not satisfactory.”

He said it was one of the issues the ACNC would like to have looked at when the act is reviewed in December.

“Built into our legislation is a five-year review, and we’ve got a list of things that we think could be significantly improved, one of them is this,” he said.

“We think at the conclusion of an investigation we should be able to set out what our findings are and what some of the facts are.

“Of course when we open an investigation, some of these can take months… sometimes… the organisation effectively ceases in the meantime, or actually everything’s wound up.

“But it’s still right that we actually, where there’s serious concerns, make findings as to whether they are proved or disproved.

“If there’s allegations that somebody’s stolen money from the charity, it’s right that the regulator identifies whether that’s the case or not.”

Locke said the secrecy provisions were just one item on a list of improvements the ACNC would like implemented.

This includes the scope of punishment when a charity has its status revoked and the ACNC’s compliance powers.

“The ACNC can revoke a charity status but actually the charity is able to continue operating, it just isn’t able to access Commonwealth tax concessions,” Locke said.

“In some jurisdictions, such as New Zealand and Canada, there are provisions in tax legislation that require the entity to be wound up within the defined period of time, and the assets transferred over, so I think things like that really need to be looked at.

“The ACNC’s powers in respect of compliance, many of them are limited to whether a charity is federally regulated or not, and that’s a constitutional question that requires legal advice.”

The regulator also wants to see the act changed to allow improvements to its Charity Register, benefiting both charities and the wider community.

Currently, the register can only include information that’s specifically outlined in the ACNC Act and regulations.

“For example, the register doesn’t show whether a charity is a DGR or not,” Locke said.

“But actually if you’re looking at it as a member of the public and wanting to give money, then that would be a very useful piece of information on there.

“The regulations don’t say you can put the charity’s charitable purpose on the register, which is clearly an oversight.

“We’ve got a piece of work that we’ve started at the moment looking at how we can significantly improve the register, but we’d need a change to the regulations to be able to do that.”

Locke said another important change would be regulations around who can be a board member of a charity.

“If you look at the people who are disqualified from being a board member of a charity, really it’s anybody who has been removed as a board member by ASIC or by the ACNC commissioner or is disqualified under the ASIC legislation,” he said.

“That means people who are undischarged bankrupts or who’ve got serious convictions for dishonesty are disqualified.

“But somebody isn’t automatically disqualified even if they have, for example, convictions for child sex offences or convictions for terrorist-related activity.

“So we do think there’s probably a need to have a look at whether the list of disqualifying offences is sufficient really because obviously those would be issues of serious concern in terms of harm to beneficiaries’ application of charitable funds.”

The report highlighted the increased media scrutiny the charity sector has faced over the last several years, which includes a Fair Work investigation into third-party fundraisers.

Over the two-year scope of the report, the ACNC received 1,872 concerns about charities, mostly from the public or people working in the sector.

In the foreword, ACNC commissioner Susan Pascoe AM said this was a “significant increase” from the previous two years when the regulator received 1,307 concerns.

The ACNC opened 149 per cent more investigations in response to the additional concerns.

Locke put the increase in complaints down to greater awareness of the ACNC.

“I don’t think it’s a big surprise, I think there’s a bit of a lifecycle with charity regulators and probably other regulators as well,” he said.

“The first few years, really, you’re concentrating on… education, guidance, explaining to the community and to charities what the new regime means, what organisations have to do.

“And then it’s really about, as we’ve done, go through the process, identify which charities are active, and tidy up the register, and then, as charities are filing reports and providing financial information, you have much more information and intelligence about where the risks are in the sector and what’s going on.

“And also… as the agency gets higher-profile, then you get more complaints and concerns. So for us, we’ve always realised there’d be more compliance activity over time.”

He also reiterated that the vast majority of charities do the right thing.

“What this concentrates on is the cases where things have gone really badly wrong in organisations, and you can see from the numbers that we’re not talking about massive numbers of organisations, considering there’s over 54,000 charities on the register,” he said.

“It’s about getting it into proportion… yes, this concentrates on where there’s big issues, big governance failings or where there’s fraud and corruption, but actually it needs to be read in the whole context of the sector.”

However, in light of increased media and public scrutiny of the sector, he warned that the Australian charity sector was not necessarily immune from the charity trust crisis happening in the UK.

“A lot of the issues that have happened in the UK… have been to do with fundraising and to do with either the use of donor’s data information, or to do with fundraising methods, and third-party providers,” he said.

“Do I think that we’re immune here? I don’t.

“I think that there is a real need for charities to take seriously the governance of the information that they hold about people, and also in terms of the fundraising methods that they undertake.

“In short I’m saying there’s a real need for us to learn the lessons from the UK and not repeat the mistakes.”

Over the next 12 to 24 months, the ACNC said its compliance focus would be on fraud and financial mismanagement, terrorism, harm to beneficiaries and political activities.