Performance failures at the charities regulator

The performance of the ACNC has gone backwards when it should have been improving, writes David Crosbie, who argues the latest ACNC Annual Report is disappointing at best.

It took many years of advocacy and hard work to establish the Australian Charities and Not-for-profit Commission (ACNC). As with most important achievements, it is not possible to identify all the people whose contributions enabled success to be realised.

What is beyond dispute is that the initial leadership from the first ACNC commissioner, Susan Pascoe AM, and assistant commissioners David Locke and Murray Baird, was outstanding. Their accomplishments are made even more remarkable when you take into account the significant pressure the Abbott government exerted in their attempts to close the ACNC. I should also note the steadfast leadership of Robert Fitzgerald AM, the inaugural chair of the ACNC Advisory Board.

If I had to identify one aspect of the initial operations of the ACNC that stood out, it was the very strong focus on fulfilling the regulatory role and grounding the core regulatory purpose within a well-articulated performance culture.

The ACNC is first and foremost a regulator. It is not an accreditor. The ACNC does not and cannot tell anyone whether a charity does good work or not. That is not its role, just as the Australian Securities Investment Commission (ASIC) does not seek to judge which companies are worth investing in. Regulators are ultimately service organisations collecting and publishing information, and ensuring compliance with regulations.

Good regulators, whether they are Liquor Licensing Commissions or ASIC, seek to actively engage with the groups they are regulating to make it easier for compliance to be achieved and reported on. When regulators are not clear about their requirements or have inefficient engagement and services, compliance will inevitably diminish.

It is within this context, and the understanding of what makes a good regulator, that we need to consider the performance of the ACNC.

The most recent ACNC Annual Report for the 2020/21 financial year was tabled in Parliament this week. 

There is some good news. Staff retention has now reached above 90 per cent. This is a welcome outcome considering previous reports of poor staff morale. Prior to the appointment of the current ACNC commissioner Gary Johns, staff retention was around 85 per cent, although it is important to note that staff had been facing a very uncertain future with the Abbott government opposed to the continued operation of the ACNC. This is the first-year under the new commissioner that staff retention has returned to these kinds of levels.

The bad news is that the ACNC continues to fail too many critical performance measures. These measures are mostly about the way the ACNC operates, the services it provides, the engagement it delivers for charities and the public. This is not about political views or the role of charities, it is about whether the regulator is delivering the services it is funded to deliver. 

In the 2016/17 ACNC Annual Report, 78 per cent of phone calls to the ACNC were answered within two minutes. In 2020/21, only 70 per cent of phone calls were answered within four minutes. This is more than doubling how long people wait on the phone to get through to someone at the ACNC.

We know that waiting for a significant amount of time is a real deterrent to engagement, which is why the original performance measure at the ACNC was set at under two minutes. 

In 2016/17 the average wait time on the phone was 62 seconds and responses to written correspondence were provided within five days in 96 per cent of cases. Indications are the current ACNC performance is well below these benchmarks based on their annual reports.

In 2016/17, 64 per cent of all ACNC investigations were finalised within six months. In 2020/21 it took double that time to achieve a 63 per cent finalisation of investigations. This means that over a third of charities under investigation by the ACNC are having to deal with the ongoing threat and concern of an ACNC investigation for over a year. 

New charity registrations in 2016/17 were completed within 15 business days once all the paperwork was submitted for 95 per cent of applicants. In 2020/21 this dropped to 79 per cent of new charity applications being processed in 15 business days from having submitted all requirements.

Perhaps of most concern is that in 2016/17 there was a 90 per cent completion rate for charity Annual Information Statements being submitted within six months of the end of the year. In 2020/21 this dropped to 69 per cent, down from 75 per cent in 2019/20. If charities no longer have the same level of support or commitment to the regulator, it becomes more difficult for the regulator to fulfill its role.

Some CCA members have sent me correspondence indicating the ACNC has been less than willing to engage with them in key areas like reducing red tape. There have also been some concerns expressed about the cases the ACNC has chosen to pursue. While these could be one-off examples, it does seem that charity trust in the ACNC has diminished as has the sector view of how responsive the ACNC is.

In terms of performance targets, it is interesting to note that in critical areas like those outlined above, the ACNC continues to revise expectations and performance targets down. Previously the ACNC sought to set higher performance targets year on year.

Over the last four years we have heard many excuses offered by the ACNC commissioner to explain why the performance of the ACNC has fallen away so significantly since he took charge. First there was the ongoing installation of new IT systems, staffing changes, the changes to the charity register, then bushfires, then COVID. I am sure all these factors have made life more difficult for many people at the ACNC, but they are challenges many other regulators have more than successfully met.

The ACNC is no stranger to adversity. Prior to the appointment of the current ACNC commissioner, the ACNC was working for a government and a minister actively seeking to shut the ACNC down. The capacity of the ACNC to engage externally was severely impeded. Most jurisdictions, regulators and government departments dismissed the role of the ACNC because the government that funded it was committed to closing it down. Some charities were initially reluctant to engage with the ACNC. And yet, despite these very significant challenges, the relatively new ACNC of five years ago easily outperformed the current well established and well-resourced ACNC.

It is now increasingly obvious that under the management of the current ACNC commissioner, the performance of the ACNC has gone backwards when it should have been improving. The latest ACNC Annual Report only confirms the diminishing level of ACNC services across critical areas. 

The charities sector worked hard over many years to establish a responsive regulator that would encourage and support good practice. It was recognised that a stronger, more effectively regulated charities sector would benefit many Australians. Turning a blind eye to poor performance is not an option, especially in a regulator whose function is primarily about enabling charities to better serve their communities.