Charting 25 Years of Charity Regulation – And its Impact on the Future

Charity regulators around the world including Australia will have to develop and hone new regulatory tools, driven by fiscal restraints, increasing performance metrics, and new technologies to remain relevant, according to a new book.

The book, Charting 25 Years of Charity Regulation, sees charity commissioners and leading charity policy reformers from across the world reflect on the aims and objectives of charity regulation, what it has achieved and predictions for the future.

The publication was produced by Professor Myles McGregor-Lowndes, the founding director of the Australian Centre for Philanthropy and Nonprofit Studies at the QUT Business School, and Bob Wyatt, the executive director of the Muttart Foundation, a private Canadian foundation that has engaged in issues of charity regulation for more than two decades.

“Regulating charities represents an insider’s review of the last quarter century of charity law policy and an insight for its future development,” McGregor-Lowndes said.

“The collection brings together major charity regulation actors and will be of great interest to anyone concerned with contemporary third sector policy-making, public administration, and civil society. It’s a ‘warts-and-all’ analysis.”

The book looks at the establishment and progress of charity regulators in the UK, Canada, the US, New Zealand and Australia which has the youngest regulator with the introduction of the Australian Charities and Not-for-profits Commission in 2012.

“Our sense is that charities and government will continue to be sparring partners. This is so even in jurisdictions that have a most liberal drawing of the advocacy boundaries,” McGregor-Lowndes and Wyatt said.

“So what is in the contemplation of regulators and sector leaders for the future? In Australia, New Zealand, and the United States, matters dealing with the regulator’s form and daily existence predominate.

“For the new charity regulators in Australia and New Zealand, their immediate concerns are consolidating their operations and managing revision of their legislation to correct unintended consequences of the initial legislative drafting. The sector contributors in Australia and New Zealand are intent on pursuing these legislative revisions.”

In Australia, former Labor Senator Ursula Stephens warned in the book that the sector would need to “protect the ACNC’s role as a capacity-building agent from conservative forces trained against it”, and that it also faced a taxation reform agenda that is yet to be implemented.

McGregor Lowndes and Wyatt said: “We expect that charity regulators will develop and hone new regulatory tools driven by fiscal restraints, increasing performance metrics, and new technologies. Behavioural nudging that some regulators are starting to experiment with is cheaper, better, and faster than current command-and-control regulation, and holds great promise for achieving desired behaviours with minimal disruption.

“Digital technologies will be critical for regulators to drive efficiencies in their regulatory functions. It will be central to their communications with charities and the public, and for gathering intelligence to detect wrongdoing, but will require significant ongoing investment.

“Those regulators caught in the IT legacy systems of tax agencies face significant challenges to transfer paper-based systems to fit-for-purpose IT platforms. At the same time, digital technologies provide new avenues for fraudulent charity behaviour and new objects of regulation.”

The pair cautioned that if social media platforms and the financial system could remove the need for a not-for-profit intermediary to complete gift transactions, this may have a “profound effect” on both charities and regulators.

“For charities, it may mean oblivion, unless they can demonstrate how they add value over and above social media’s person-to-person contact. For regulators, the challenge of patrolling numerous episodic individual transactions in the wilderness of jurisdictions covered by the internet is enormous and requires ever more novel and dynamic approaches,” they said.

“The last 25 years have seen a widening in the boundaries for viewing purposes as charitable, and we expect that the fitful, incremental expansion will continue.

“Advocacy and the political-charitable boundary will continue to be contested terrain in our view and are likely to be problematic in the near future.”

The authors said that there appeared to be no sign of globalisation slowing.

“It will inevitably draw charities further into achieving their missions across state boundaries.

Charity regulation to address international fundraising fraud, a legal form that transcends state boundaries, international accounting and reporting standards, and mutually recognised philanthropic charity tax concessions are all possibilities,” they said.

They concluded that: “Whatever the future holds for charity regulation, the last 25 years is likely to be regarded as merely the prelude to an era of increasing change and development. Those who were involved on the frontline have recounted the story, and now a new generation of regulators and sector leaders will have to face the next 25 years of challenges.

“We hope that lessons may be drawn from the experiences narrated in this book to assist future regulators as they guide charities and other organisations in their efforts to provide public benefits for the greater good of their communities.”

The book is being launched Thursday by productivity commissioner Robert Fitzgerald AM who produced the 2010 report on the Contribution of the Not-for-Profit Sector, which recommended the establishment of an Australian charity regulator.

Regulating Charities: The Inside Story is available here.