AICD Calls for Action on NFP Regulatory Reform

A new report card has found that progress on removing the regulatory burden for the not-for-profit sector has been slow, with further reform needed to develop a “fit-for-purpose” regulatory regime and improve funding cycles.

On Thursday, the Australian Institute of Company Directors released their Blueprint for Growth Report Card.

This report measured progress on recommendations from AICD’s 2017 Blueprint for Growth document, which contained a number of reforms to improve the not-for-profit sector.

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These reforms included setting best-practice targets of five-year government funding cycles and to develop a “fit for purpose” regulatory environment, with nationally consistent definitions and reporting systems and less duplication.

AICD’s report card gave progress in both those areas a grade of “C”, noting that funding cycles and duplication remained key challenges, despite “slow, but positive” progress on regulatory consistency.

“While some progress has been made, greater national priority must be placed on these proposals,” the report said.

With the Australian Charities Report revealing that 43 per cent of charitable revenue came from federal, state and territory governments, the report card highlighted the importance that government funding practices had on the sustainability, effectiveness and governance of NFPs.

“Many NFPs are subject to short-term, precarious funding arrangements which undermine their ability to plan effectively and to deliver the essential services on which our community depends,” the report said.

“Since this document was published in 2017, there has been some improvement. The Northern Territory government has announced an intention to move towards five-year funding cycles, while in South Australia, a government-wide funding policy, announced in July 2017, recommended rolling funding contracts of three years.

“The AICD recommends that all Australian governments adopt five-year funding cycles where practical and include sufficient notice prior to termination or renewal of agreements.”

AICD managing director and CEO Angus Armour, said that overall progress had been slow.

“Our business sector could not sustain the same red tape and regulatory burden as our charities and NFPs continue to endure,” Armour said.

“Australia’s NFP sector makes a substantial contribution to both our economy and our social fabric. Charities, which themselves comprise only 10 per cent of the sector, employ over 1.3 million Australians and have a combined annual revenue of over $142 billion.

“For these charities, reform is needed to remove the precariousness and short-term horizons associated with government funding agreements, which inhibit charities from investing in their own long-term capacity and impact on community outcomes.”

The report card noted however, that significant progress had been made towards achieving a fit-for-purpose regulatory regime, largely through work done by the Australian Charities and Not-for-profits Commission.

“Streamlined reporting is now either achieved or underway for a majority of incorporation types (including state and territory regulators of incorporated associations), as is the establishment of common audit thresholds,” it said.

“Queensland however, has yet to take action to reduce red tape for their incorporated associations.”

The report card also said some progress had been made in fundraising reform, with dedicated guidance released regarding the application of the Australian Consumer Law for fundraising in 2017, as well as a commitment for further consultation this year.

“However legislative change is required in order to create a truly fit-for-purpose fundraising regime,” the report said.

“Most state and territory fundraising regulators have yet to take action to streamline regulatory obligations for charities that undertake fundraising.

“Duplicative reporting and inconsistent regulatory standards, as well as unnecessary licensing fees continue to plague fundraisers across Australia. Governments in Tasmania and the Australian Capital Territory are leading the way in this regard.”

Armour said further “commitment and action” was needed in order to improve the rate of progress.

“There also has been progress towards achieving a fit-for-purpose regulatory regime for the NFP sector, with streamlined reporting underway for most NFPs and the establishment of common audit thresholds,” he said.

“However, a real opportunity to reduce red tape for charities stands to be lost unless governments take action to provide legislative certainty about the application of the Australian Consumer Law to all fundraising activities.

“Focusing on the long-term is a key element of good governance. We need commitment and action now if we’re going to set Australia up for a prosperous future.”