New charity regulations could cost sector $150 million

“Not only will these changes crack down on the free speech of charities across Australia, the burdensome red tape will affect service delivery”

The federal government’s proposed reform of charitable governance standards could cost the charity sector up to $150 million in its first year, according to new analysis.

The amendment of the Australian Charities and Not-for-profits Commission’s (ACNC) governance standard 3 would expand the reasons a charity can be deregistered beyond serious offences to include more minor offences such as trespassing, theft, or vandalism.    

It would require charities to “maintain reasonable internal control procedures” to ensure their resources were not used to promote unlawful behaviour.    

Independent modelling by consulting firm ACIL Allen has found there could be a significant cost to complying with the regulations. 

Using data sources including Pro Bono Australia’s Governance Standard Survey, ACIL Allen estimated that the changes could leave the sector facing $109.5 million in one-off costs, with a total ongoing cost of $40.4 million a year.  

This would mean the first year of the regulations would cost the sector $149.9 million.

The anticipated administrative burden is significantly greater than what the federal government has estimated. 

An explanatory statement on the changes from Assistant Treasurer Michael Sukkar forecast a $1.4 million cost for 9,500 large charities, assuming they only needed to undertake a one-off two-hour review of internal control procedures.

This document added that “a handful of activist charities who engage in unlawful protest action” will also need to review their internal controls and potentially curb unlawful conduct.  

“Due to the small number of such charities the additional regulatory burden is expected to be immaterial both with respect to transitional and on-going costs,” the statement said. 

But ACIL Allen’s analysis makes clear the burden on the sector would be far greater than this.

The report noted that charities would likely need to analyse the amendments, review and update their policies and procedures, undertake staff training, conduct due diligence before working with other charities, and continually monitor compliance with the standards.

Even taking a more conservative estimate, the report outlined a $77.9 million one-year cost to the sector and a $24.3 million expense each year afterwards.

“This is approximately 55 times the estimate provided within the [explanatory statement], even without accounting for ongoing costs,” the report said.

Charity advocates fear looming red tape burden for the sector  

The analysis has prompted renewed calls from charity leaders for the regulations to be scrapped.

Ray Yoshida, a coordinator for the Hands Off Our Charities alliance – which commissioned the analysis – said these “oppressive regulations” would harm charities already struggling to operate amid the COVID crisis.

“Not only will these changes crack down on the free speech of charities across Australia, the burdensome red tape will affect service delivery,” Yoshida said.

“As charities and not for profits, it’s our members’ job to advocate for people without a voice. These regulations will have a chilling effect on the sector as charities will be too scared to speak out for fear of being deregistered.”

Lin Hatfield Dodds, CEO of The Benevolent Society, said she was strongly opposed to the proposed changes.

“Providing the best quality support to our clients and keeping our people employed is our absolute priority,” Hatfield Dodds said. 

“This is at risk if regulations that bring additional costs and complexities to our operations are introduced.”

The Coalition government has long maintained that the regulations are needed to crackdown on “activist organisations masquerading as charities” and do not impose a new burden on charities already compliant with Australian laws.

But concerns around how the changes would affect the sector were raised in July by the Senate Committee for the Scrutiny of Delegated Legislation – chaired by Liberal Senator Concetta Fierravanti-Wells.

Late last month, the committee recommended the proposal be scrapped and revealed it will give notice of a disallowance motion for the amendments on 18 October.

If this motion is successful, it would mean the government could not introduce identical regulations for the next six months.