In Conversation: Dr Gary Johns

Dr Gary Johns is the commissioner of the Australian Charities and Not-for-profits Commission (ACNC).

He was appointed to take over the role in December 2017, in a move that sparked a degree of  animosity and surprise from the charity sector.

Johns – who previously served as a Labor minister in the Keating government and as a senior fellow at conservative think tank the Institute of Public Affairs (IPA) – has been a vocal critic of charities in the past.

Just days after he was appointed a petition was launched calling for his resignation.

But he has since defended his appointment and committed to trying to offer Australians greater transparency about charities.

Johns previously held roles as a director of the Australian Institute for Progress, and an adjunct professor at the Queensland University of Technology Business School.

He has served as a member of the Prime Minister’s Community Business Partnership, and has wide-ranging experience in regulation, public service and policy, serving as an associate commissioner of the Productivity Commission and representing the electorate of Petrie in the federal government from 1987 to 1996.

Johns was also a columnist for The Australian, and has authored a number of books on charities and the not-for-profit sector.

Three months in to his new role, Johns talks to Pro Bono News about his plans for the ACNC, putting data back in the hands of the people, and why he is the best man for the job.

You are three months into the new role, how is it going?

Very well. I’ve got a good feel now for the organisation. And there are a hundred good souls here with good experience and good technical knowledge. And we all seem to get on well. So that’s a good base to work with.

What was it about the role that attracted you to it?

Well look, the key thing was I’d been observing the sector for a long time and like anyone else who researched in the area, until five years ago you couldn’t find a thing. It was just a tax office. It was not a big deal for tax so they weren’t that interested.

So I was in the camp that lobbied, if you like, to set up the commission and I was in the camp that helped save the commission when it was under attack. So when the position became vacant I thought well let’s step inside now and see if we can’t do what was part of the original proposition, which was to get a much better view of how this market operates. So that’s the step, to go from the early years which was registration and compliance, and then the thing that really gets me greatly interested is to say how does this market operate? Could it operate more efficiently and effectively?

Your appointment has proved quite controversial and there has been a lot of concern particularly around comments you have made previously about charities. Do you think you’re beginning to address some of those concerns and show why you got the job?

Yes and no. I mean with great respect I don’t care for those people or their views. They’re like any politically active people, they have a point of view and they’re most welcome to that. But what they’ll get from me is someone who applies the law. I used to be a lawmaker and a political activist and now I apply the law. But I’m very conscious that I have a certain amount of money, $14.5 million dollars, and about 100 staff and the law. And I’m going to use those things to open up the market to greater scrutiny and the main tool I have, I call people donors at large but they might be researchers, donors, tax payers, other charities, and it’s those eyes that will bring to bear on the market. And the whole idea behind this is that I’m going to lower the price of finding out information. So I’m going to make it easier for whoever wants to look at charities and what they’re doing and how they’re operating and compare and contrast and make that easier. Now that’ll take some years, and I’m not asking government for any more money, but if we can achieve that I think that will be a fine contribution. I think that will be very useful.

You have talked about putting data in the hands of the public and encouraging the charity market, how do you see that making the sector more efficient?

You have to think in terms of 55,000 charities across the gamut of charitable interests and causes, so this is not just about an individual charity and how it operates. That in a sense is none of my business, I say in a sense there might be a compliance issue, but in the normal course of events it is none of my business. But it might be possible that once people come to the website and search for instance by a charitable purpose or their interest, it will start to reveal how many charities are operating in one area or one field, or how few charities are operating in one area or one field. And I just think that will start a whole conversation about shifting resources between charitable interests, charitable fields, causes which you couldn’t get previously. So that’s what I mean by efficiency. It really is, economists would call it allocative efficiency, is the money getting to the right areas?

Governments can’t decide that, charity regulators can’t decide that, only the people who give the money can and should decide that. But at the moment it’s very difficult for them to do it. Strictly speaking you could go to our website if you spent a lot of money and had a lot of time you could find out the sorts of things that I think would be of interest. But it’s just too difficult, so the point is to make it easier.

Do you think that donors approach charitable giving in the same way as an economic transaction or is it more of an emotive decision?

We mustn’t confuse the two things. Now it is probably an emotive decision. So I give to a particular charity, have done for many years, because they saved my life. It’s a fairly strong emotional attachment. And many of us give to things where there’s a personal connection and so on and so forth. But it doesn’t mean to say that you might not shift your charitable giving if there are many charities doing the same thing. So this is the bit about standard setting and efficiency.

No one can tell a donor what is the basis on which they should make this decision. But if a donor in time, comes to our website and finds that there are 10 charities doing very similar things, they’re bound to ask which one would do it better. And that’s when it gets interesting.

Now will they go straight for the financials? I don’t know. It’s up to them. They might actually just stop at that point, they’ll say “I’ll just keep giving to the one I know”, but at least they should be aware that there are other players in the market. And you only need small movements in any market, small shifts, to change investment if you like, and it is a charitable investment. It’s just a few people who change each year that can make a big difference in a marketplace. Yes charity is special. It’s often emotive, but it doesn’t mean to say that people are not rational.

So many people tell me and so many people make the comment and all the studies say, donors are interested in how much of their dollar gets to the purpose. They’re actually quite rational, it’s just that it’s not worth their while finding out, spend $10, what are you going to do, spend $100 to find out whether it gets the point. It’s not rational. So the whole point is to make it as easy as possible to at least search and ask questions. But beyond that, it’s up to the donor and we do know that some people do look around, there are studies on that.

A concern when talking about the sector as a market is that many of the issues charities are trying to tackle have arisen due to market failure. Do you see any issues with treating the charity sector as a market?

No. People tend to use the term market failure incorrectly. Just because charities are there it doesn’t mean to say the market failed, it means to say that people are not willing to give to someone else for a cause, that’s not a market mechanism. It’s perhaps a matter of you not being able to convince me that my cause is more worthy than [someone else’s]. That’s not a failure. I am very cautious that, let’s say the charitable or social sector has picked up the language of economics but that’s about it.

What is a market, is that donors buy or have charitable intentions and they buy a relationship with the charity, the charity says it will do something with that money, so that’s the bit of the market, and the charity represents the interests of poor, the environment, animals etc. So that’s good. It’s just this relationship we’re talking about, the donor is buying an assurance from a charity that they will do what they said they would do. The question is, is the assurance good enough, is the information good enough, is it opaque? That’s the bit of the market we’re working on. Charities will always have more information because they organise themselves. They got together and remember they preceded the hospitals and built them, they preceded the universities and they built them, so they’ve been a great engine for significant and good work in this country and many others. Although they have pretty much been overrun by government now, charity is a very small beast compared to government and that’s why charity spends a lot of its time working around government to see if it can get more of what the government has, which is taxpayers money.

So if you like, this is not market failure, this is a pure political contract between charities who are now a small player on the block and they used to be a big player. And they see the big player as government so they want to spend a lot of their time talking to government, winning government contracts, convincing government about what they do. All of which is perfectly legitimate.

In terms of my making a market more open, I would want to publish the proportions of monies that each charity receives from government by way of contract or grant and then the donor is aware of that. That’s all. And a lot of economic studies say some donors are quite reassured that a charity receives government money, it suggests to them that they’re good. It’s a bit like being registered with us, they must be okay. But other donors don’t, they say “you’ve had a fair go so I won’t give you my money”, because the donor’s money is over and above generally, what others have given and what taxpayers or government give. So you can see I’m just trying to bring clarity to it, without setting rules. I have very few rules in a sense, they’re sort of registrations, governance standards and so on. So I think the most powerful thing here is to allow people to see what’s going on and if we get down to the financial side, we don’t really have comparable measures on expenditure, proportions that charities might spend in getting to their charity purpose and I don’t think we’ll have that from a long, long time.

I’m not going wait. I’ll keep talking to the various parties about whether we have a national standard in financial accounts for the sector. Of course we will, but I’ll be a very old man by the time it happens. What I can do I think is use the instrument of the annual information statement to ask questions that will be comparable, will be useful. Some of them might be financial but I think a lot of it will be around governance, how well responsible people are informing their membership or their donors, and I don’t think they will be necessarily specific, I’ll be trying to seed questions you know, questions you should ask your board, or have you reported, and we’re only thinking about that now, we don’t want to overload the sector, we don’t want to ask lots of questions but there may be bits and pieces which we find that are very useful to a donor that we can make available on our website. So that’s the work ahead of us.

How do you see that fitting in with the three core objectives of the ACNC?

The first objective, that sort of confidence objective, in fact all of it the three of them, tend to be interpreted in a legal sense. If charities play up and someone takes money, there’d be distrust and a loss of confidence. That’s true. But what if there’s an enormous amount of waste in the sector, what if it’s not very effective or efficient. That to me is a confidence problem. The difficulty we have is, how do I measure that? How do I assign a regulator? How do I assign a particular task to that? Now that’s when we get into the second objective which is a series of laudable words about the dynamism of the sector and you think, what does that mean? And how do I measure it? How do I assign measures to it? And you might say “well, hang on does it mean that there should be a certain number of charities for it to be viable and ongoing and all the rest? Does it mean that there should be more or fewer charities entering and others falling out? Should there be more mergers and acquisitions? Should I see CEOs only last five years rather than 25 years?” So there are all sorts of measures of how markets are operating. But we really don’t have them in this market.

We’re talking to someone at the moment who has been analysing failed businesses for many years and he looks at not just the financials, he looks at the number of governance issues, a board that’s been there forever, a CEO that’s been there a long time, and he’s starting to find patterns there which indicate that people just take their eye off the ball, or they’re more likely to take their eye off the ball. So, long story short, we’re looking to find insights that we want to share with charities as to where the risks might lie. Now that’s a compliance thing, but it’s not that legal compliance. For instance, we now have five years of data that we have gathered from 55,000 charities so there’s a mine in there of good information. We’re going to start working through it, looking for areas where we think there is risk or we think there’s not a lot going on in this category of charities.

A classic one would be, half a million dollars coming in, three salaries and not a lot going out the other end. You’d think, literally what’s the purpose of this? Say we go through our data and we might pick up the fact that there are 5,000 of those sorts of charities, well we’re not going to knock on the door of 5,000 charities or even write them letters but we might publish an advisory, a bit like the tax office does, and say “look, these charities look to us as if they may not be that effective”. They may be, but we’ll just start a discussion. We’re not naming names, we’re not calling people out. That I think would be a significant contribution to a discussion around the second objective. What is a dynamic sector? There are four descriptors or five, let’s have a discussion about what those words actually mean.

Now get to the third one, the regulatory impost. There’s some good work being done between ourselves and the states about trying to minimise the double signup of charities, being the responsibility of state and federal entities, we keep barring away at that, we’ve still got one or two more states to pull in and that will happen in time. But a lot of the regulation that is imposed on charities is proper regulation. They write contracts with government. I hope there’s a contract in place, I hope it’s a very explicit contract that says “we’ll give you X amount of money you have to do Y with it”. And so I say to charities I’m not their lobbyist in Canberra, I’m not there to do their bidding and to help them in the sense of bringing down the number of reports they have to have, if they write 25 contracts with any government, state or federal, then there should be 25 contracts. I can’t bring it down to 15 or one. It is not my business. So people need to understand that I am the regulator, I am neither friend nor foe, as I’ve written a few times. The objects say that I should try to help reduce unwarranted regulation and of course I will because I hate filling out forms, I like as little regulation as possible but when you’re dealing with public money, either government or donor money, you really have to be able to explain to people what you did with the money. So there’s that lovely tension between being a responsible entity that tells people what you do and not being overloaded with massive reporting. I understand the tension, and we’ll always err on the side of pulling regs down, but there’s a minimum level of reporting which you must have.

In your submission to the ACNC Legislative review you called for more powers to regulate effective use of resources. How would you measure that?

There was a nice bit of confusion around that, it does not mean that you look at the effectiveness or efficiency of an individual charity. Again it’s about the wider market. And you will get, I think, a more effective and efficient sector if a lot of people know a lot more about it. It is as simple as that.

Now I was asking for the review to consider two more objects. Around effectiveness and transparency. Community Council Australia uses that language in its various reports, it knows that there is as much money to be gained out of being more efficient and effective, than there is from asking more dough from a donor. There are two ways to get more money, you keep asking or you use what you have to better effect. So it’s the second one that I might say certain people in the Community Council of Australia raised with me five or six years ago. And it was a better use of assets, and the whole issue of mergers and acquisition, they call it cooperation. Now we may be able to help there, only in the sense of we may be able to undertake surveys of charities that simply ask questions and we share the answers with the sector.

We know there are some researchers that are interested in merger and acquisition activity and I’m very excited, I rang one recently and I said “show us what you’ve got”, and that person said “I don’t have a lot really, only a couple of case studies”, so I’m very disappointed. I’m asking that person in to say “well hang on, I can write to 55,000 charities, email them, it is pretty cheap”. Maybe at the next AIS or at another time, a separate survey, we could do something here. So that person’s got a couple of case studies and Community Council of Australia has got its own, we might be able to prime some questions at very low cost, not more regulation, where we get a really big response from the sector. Now we know and I asked people in here a few weeks ago just to say, do we have any measures on acquisition activity in the sector, we cross matched names and we figured there may have been only 400 mergers or acquisitions across the last five years. Now that’s tiny. I don’t know why it’s tiny because [we don’t have the data]. So I think we might ask questions to try to get a more accurate picture of the numbers that did take place, because we’re only using proxies, and then some questions around did it stall halfway through, what are the reasons you stopped. Now we know a lot of the reasons why,  again we would just share that information. We would just put it out there. The university can publish it, but more importantly lots of people will start to ask about it and they might then go to government and say “look, I think this is a legal problem”, I don’t know. It may be something to do with trust, but you’ll get to the nub of it. You may be able to find the sector itself then says “I think we can create a lot more efficiency and effectiveness in the marketplace if we could change a few rules”. I don’t know, they may be able to find out courtesy of 55,000 emails and one survey.

We are the premier data agency in the sector in Australia. The thing we really haven’t been able to do at this point, because it’s a lot of work just to set the thing up over five years, is now to turn the data over, to put in the hands of more people.

In terms of the ACNC review are you optimistic about the outcome and see it streamlining the ACNC?

We don’t need much, as I’ve said elsewhere. For instance those two objectives I was after were literally taken from the UK charity commission. And the words are actually in our act, they’re just not in the objectives, but the instructions to me are all about informing the market and transparency and effectiveness. So they’re already there, I just wanted to make them more obvious. To tell you the truth, if nothing happens, it will make no difference because I have enough guidance in the act now to do all these things that I’m describing. So it was more to get the debate going.

Now the other thing that I would like to see though and I’m sure this will happen, not because I do want it but because many people want those secrecy provisions to be slackened off a bit. It is frustrating that as a regulator I cannot explain my actions. Now I understand the caution, for instance, in saying that I want to investigate a charity. That could go badly wrong if a regulator wants to be a big bad bully and put out press releases on Sunday night and get a nice piece in the Monday papers saying “I will investigate X charity”. You shouldn’t do that. It’s not like the ACCC going out and bashing the oil industry because tomorrow everyone will still fill up their petrol tank. So it’s sort of nice to do. But if you start hitting charities the money dries up like that. So you have to be very cautious about announcing investigations. I think you should keep strong rules around that. But, when I’ve actually investigated and we’ve got some arrangement with a charity or I have taken them off the register or revoked the registration, I should be able explain that. In fact I must explain that so that everyone knows why, so they will have a look, and say are you doing the following things that got this charity into an arrangement or revoked. So we’re very hopeful that I should be able to do what is just normal practice now, write out the decisions and I love reading the decisions on the UK site because I think “that would be nice”.

How would you summarise how you see your role?

It’s a bit wet but I’m a facilitator. I am a regulator, we register charities. So in order to register them, I have to ask a lot of questions about them and what they do. Those questions are pretty much the questions that a donor asks but in a lot less detail. So the trick for me is to turn that information over to the donor, facilitate questions that donors would think about, sometimes ask of charities and that’s it, let them sort it out. It’s not a matter for me to do anything other than prime, if you like, a much more open discussion between donors and charities.

Has your opinion changed of the sector since taking on this role?

No, but it’s too early to tell. My focus has been internal trying to work out the tools, resources I have to do the things that I think are important within the law. And so as I get out and about we’ll see I’m sure. I mean despite my age I’m still learning. And I’ll keep learning. But maybe there’ll be refinements around this theme of transparency and priming many people. Putting tools in their hands to ask the questions. And that’s a far more powerful tool than any regulator will ever have and in fact ought to ever have. We don’t want big beasts of regulators. We want regulators who just draw the charities in, put them on the register, giving certain assurances and then put as many of the tools of regulation if you like into the hands of the donors and I think that’s just a far more powerful way to raise the confidence of the public in the charitable sector because they’ll know a lot more about it.

You’re on the record previously saying that you don’t think it is always the place for charities to advocate. Is that still your position?

Well one, the law controls that not me. But the thing all charities have to think about is you need to go back constantly to your purpose, are you really trying to achieve the purpose for which you were established or have you become another sort of organisation? An organisation that likes to hear its own voice. An organisation that knows that there is more money to be had out of government than out of private donations. And I treat charities as very savvy, very mature organisations. They are highly motivated but they also want to last, the same as any other institution whether it’s a university or a hospital or a church or a political party, they all want to at least maintain their position. So I don’t have a view about advocacy per say it’s more that you have to keep referring back to your purpose. That’s the whole point of the exercise.

And I’ll just make this point and I have said this to the review of the act. We’re currently called the Australian Charities and Not-for-profits Commission, we don’t do not for profits, we have never regulated them. I’d rather we were called the Australian Charity Commission for two reasons, one I think we should preserve the essence of charity. Not for profit is just one element of any charity, charitable purpose is everything. So if we have a regulator that overlooks a very large number of organisations, some of which don’t have a charitable purpose, I think we’d lose the really important part of the game which is charitable purpose. So in this period of review mine is a plea to government to say think about the importance, the distinctiveness of charity and its purpose.

So when it comes to advocacy, all my debates around that are really the same, it’s to think about what your purpose was. Is it distinctive? And I know charities worry about it themselves. They tell me, they say “gee, we’re really in the hands of government now because we’ve spent years getting very good at lobbying government to get money but we’re not quite sure whether we’re just a subcontractor anymore or a charity”. And I say “well, that’s your choice”. But I understand why they think about those things, because you’ve got to say “well, who’s pulling the strings?” So that’s always been my, if you like, insight into the advocacy aspect, some people get a bit upset about it, but it’s really a reminder to say “why don’t you think about what you’re doing?” It may not be the best return on your effort. It looks good, gets you a run in the paper and you become a public figure but is this the best thing you could be doing for your purpose? Now we’re all good at rationalising, no doubt a person will say “I think it is”, but it may not be. I have a number of charities that talk to me and say “yeah I think we’ve been out and about too long, maybe we should just get back to the tools, we should go back to the things where we believe we can make a difference and not be heroes on a larger public stage”. Which ultimately draws you into the political realm, and maybe it’s a million miles from where you started. Those are not bad reflections. These are good debates that we should have.

To repeat a question you were asked in Senate Estimates last week, do you believe you are the best man for the job?

Oh yes, no doubt about that. It was a very cheeky question from the senator. With great respect, I’ve been in politics and thinking about public policy since I was about 18 and that was quite a long time ago and I’ve had quite a deal of experience from inside a political party, from inside government, from think tanks from the Productivity Commission, and now here at the commission. And I’m very familiar with the Commonwealth Public Service and its operations having dealt with it since 1975, but never been a public servant. This is familiar territory.

It’s a thrill for me to have won the position and I did win it. I was interviewed by the Secretary of Treasury, Secretary of Finance and the chairman of the board of the commission. It’s a great opportunity to put a lot of my work and thoughts and research into practice and to do it in a very disciplined way. I can’t write opeds anymore, I can’t write books anymore and I really don’t mind because my hands are quite busy here, just thinking through the mechanics of let’s call it the transparency or the data sharing objective.

And so I have a strategy. We’ll roll it out in the next few years. I think it’s perfectly rational, perfectly doable, perfectly reasonable. Given that I brought all that to the job I think I can say that I am the best person for the job.