What is the real intent behind plans to abolish Australia's charity regulator?

This government does not like campaigning and advocacy organisations, and the removal of the ACNC as an independent regulator simply exposes those organisations to attack.  

Greg Ogle

Excellent piece by Greg Ogle,  Independence of Charities Under Threat,  on the real intent behind Abbott Governments plans to repeal the national charity regulation body — the 18-month old Australian Charities and Not-for-Profit Commission (ACNC)- and hand back the regulation of charities to the Australian Tax Office. 

Ogle argues that repeal of the ACNC paves the way for a return to the political attacks of the Howard Government years (1996-2007), particularly attacks on environmental and campaigning groups involved in public advocacy, direct action and activism.

The Australian Charities and Not-For-Profits Commission (ACNC) was set up less than 18 months ago by the Federal Labor government to regulate the charitable sector. The governing legislation for the ACNC ensured the independence of charities and their right to advocate for charitable causes.

The objects of the Act that established the ACNC committed to ensuring a “robust, vibrant, independent and innovative” charity sector. The legislative provision ensured that the governance standards required to be met by charities did not constrain advocacy. 

In essence, the legislation gave charities some protection for pursuing advocacy and activist campaigns that challenge Government policy or corporate malfeasance.

Ogle reminds us of the Howard Government's direct attack of advocacy and campaigning by charities and NGOS: 

Under the Howard government, the tax office was used to attack and pressure charities who were advocated for policies the government didn’t like. This was at a time of recurring public and parliamentary attacks on those charities by senior Liberal politicians like George Brandis, Brett Mason and Eric Abetz, echoed by industry groups and right wing think tanks. The pressure meant that between 2004 and 2007 The Wilderness Society, for instance, faced at least 20 different public calls for them to be stripped of their charity status. They passed the three Tax Office audits of their “political” activity, but other groups like AidWatch had long court battles to secure their tax charity status.

In a separate article, Andrews leads fight to abolish Charities Commission, Mike Seccombe shows how the campaign to abolish the ACNC was driven by the self interest of the financial services sector (who administer charitable trusts) and influential parts of the Catholic Church, who are concerned about revealing financial details of the Church. 

Seccombe notes how Cardinal Pell, former Head of the Catholic Church in Australia and confidant of Prime Minister Abbott and Minister Andrews, made it clear that he opposed the ACNC.

Although there were some initial concerns among charities about the likelihood of increased compliance and regulatory costs, the majority of the charity sector now support the ACNC. Seccombe describes the campaign waged by the powerful financial services industry to abolish the ACNC

While the financial services industry claimed they are concerned about the cost of complying with its financial disclosure requirements, Seccombe shows that their real concern is the likelihood of scrutiny by the ACNC of their  administration of charitable trusts, that would reveal the grossly excessive fees they take for looking after the bequests of philanthropists.

Seccombe quotes Tim Costello CEO of World Vision Australia and Chair of the Community Council of Australia: 

“It’s pretty apparent there are only two main groups that are strongly opposed. The trustees, who handle dead people’s money, are a major source of opposition because they don’t want transparency about what they charge. The other is the Catholics".

Ogle refutes the Minister's claim that the abolition of the ACNC is designed to reduce red tape, by highlighting  other ways that the Federal Government could reduce red tape, but refuses to do so.

 Ogle gets to the heart of the matter:

This government does not like campaigning and advocacy organisations, and the removal of the ACNC as an independent regulator simply exposes those organisations to attack.

Spot on!!! 

Regulator of the Australian not-for-profit sector is in doubt

Excellent and timely piece here by El Gibbs in New Matilda on the Federal Government's  plan to set up an Australian Charities and Not-for-Profit (NFP) Commission to improve regulation of the not-for-profit sector.

The Federal Government's legislation to set up up the Australian Charities and Not-for Profit Commission to  manage all aspects of NFP governance and require annual financial reporting by organisations across the country went through the House of Representatives last week and is due to come before the Senate in the next sitting of Parliament.

The relevant bills have been through an extensive consultation process, including a formal review by a Senate Committee. The Greens, who hold the balance of power in the Senate, support the legislation in broad terms, but intend to move amendments in the Senate and may block the legislation if their amendments are not adopted.

The Opposition Liberal National Parties currently oppose the creation of the Commission. and provided over 30 speakers against the Bill when it came before the House of Representatives last week.

As El points out the main industry bodies representing the not- for- profit sector in Australia have been calling for the streamlining and improvement of the regulation of the not- for- profit sector for some considerable time and there is widespread support for the Commission.

However, despite this level of support there remain concerns that, without support from the states and territories, the impact of the Commission will be to increase, rather than decrease, the administrative burden on NFP groups, particularly smaller agencies.

I have cited El's piece in full:

Will a Charity Commission cut Red Tape 
by El Gibbs

A proposal to regulate and oversee a section of the Australian economy that employs 8 per cent of workers and comprises over 600,000 different organisations went through the House of Representatives last week. It’s due to come before the Senate in the next sitting of Parliament.

The proposed legislation will set up a commission to manage all aspects of governance and require annual financial reporting by organisations across the country.

The Australian Charities and Not-for-profit (NFP) Commission is a long-standing goal of the NFP sector and has been recommended in a series of reports into the sector since 2001. Currently, charities and NFP groups report to a myriad of government agencies. They often have to report a number of times and in different ways, creating a great deal of red tape. 

"We are at the altar of the reforms we want and need and we ask for the support of our national parliament and of the states and territories to deliver for us better and smarter regulation. We don’t want to be jilted yet again," David Thompson AM, Director of the National Roundtable of NFP Organisations, told New Matilda. 

The Commission will also oversee future changes to the definition of what is a charity and which organisations are able to claim the lucrative Deductible Gift Recipient (DGR) status, that allows donations to be tax-deductible — this has an impact on the kind of fundraising an organisation can do. The Commission could also frame the unique place the NFP sector holds in relation to the government and business sectors. 

The CEO of ACOSS, Dr Cassandra Goldie has said:

"Our sector is overly but ineffectively regulated. For the reams of paper and hours of analysis that charities put in to reporting the same information to multiple funders and regulators, we know little about the activities, size or scope of this essential sector."

The proposed Commission will, according to Senator Ursula Stephens, have three main objectives.

"Its first object is to maintain, protect and enhance public trust and confidence in the NFP sector. Its second object is to support and sustain a robust, vibrant, independent and innovative NFP sector. The third object underlines the important role that the ACNC will have to promote the reduction of unnecessary regulatory obligations on the NFP sector."

In a statement from the State, Territory and National peak groups for the sector, Goldie states that "the creation of the Australian Charities and Not-for-profit Commission is the culmination of a long process and has broad support from the community and social services sector. 

UnitingCare Director, Lin Hatfield-Dodds, told New Matilda that the opportunities offered by the Commission could be of great benefit to the community and to the sector:

"It’s important that funders can quickly and easily get an objective and transparent look at the community groups they support. The Commission could also act as a ‘Report once, use often’ tool, so that community groups report to one agency across all government. When we are spending public money, we have to be transparent. However, there is a risk that we spend more time and administration on reporting, rather than delivering innovative services."

However, there are concerns that, without support from the states and territories, the impact of the Commission will be to increase, rather than decrease, the administrative burden on NFP groups. Currently, organisations can either incorporate, and be regulated by ASIC, or form an association, which is regulated by state-based Departments of Fair Trading. The addition of a Commission, with no corresponding reduction in state-based regulation, is of concern to many groups. COAG is due to consider these issues early in 2013. 

In the interim, the Commission could drive reform of red tape within the federal government by streamlining reporting requirements across departments and agencies. For example, each time a group applies for a grant, they have to start from scratch, rather than being able to register with the Commission once for all other agencies. 

The relevant bills have been available for public scrutiny for some months, and have been through an extensive consultation process, including a formal review by the Senate Community Affairs Committee.

 The current legislation is the result of many changes, however there are still concerns held by the Greens, who intend to move amendments in the Senate in the next sitting of Parliament. 
"As I outlined in my dissenting report on this legislation, the Greens remain concerned that there’s not enough detail about gag-clauses for advocacy groups, and we think there needs to be more consultation on the governance arrangements and independence for the sector to advocate on behalf of those they look after," Greens Senator Rachel Siewert told New Matilda:

"Not-for-profit groups are an essential part of civil society and it’s important that this legislation gives transparency in dealing with government. We also want to see the Commissioner given more power to drive the red-tape reduction agenda."

The Greens confirmed to New Matilda that they will consider blocking the legislation if their amendments are not adopted by the Government. However, they stated their commitment to working with the Government to improve the bills to address the remaining issues of concern to the NFP sector.

The LNP currently opposes the creation of the Commission. Despite the broad sector support, the LNP provided over 30 speakers against the Bill when it came before the House last week. Kevin Andrews, the Shadow Minister for Families, Housing and Human Services, stated  that "this is legislation which has been foisted upon the charitable sector in Australia which they do not want, which there has been no case made by the hapless minister at the table." 

"This is simply not true," said Thompson, who leads the sector’s peak body. "The evidence is in the thousands of words in submissions from the sector, calling for this reform. The Government has taken on board a significant number of issues raised in submissions." 

Other LNP members quoted a range of charitable and NFP groups’ concerns about the Bill. However, some of these quotes were from submissions about a much earlier version of the legislation and many of these concerns have now been remedied. Several sources have confirmed that there has been considerable disquiet among those groups named by LNP members in the debate. 

One, the Australian Institute of Company Directors, is quoted as having concerns regarding the impact of the legislation on board members, most of whom are volunteers. In a recent statement, the AICD said: "if suitable amendments giving effect to these changes were to be made to the current Bill, and subsequent to our review of the revised Bill wording, we would support its passage through Parliament." They support the amendments that the Greens will be putting to the legislation. 

The Bill has been introduced into the Senate and is due to be debated in the next sitting, starting 9 October. If the legislation is not passed, Thompson says "it will be back to the drawing board in the quest to get the regulator we want. We have waited a long time and an enormous effort has been put in to get it this far."

The Federal Budget and the not for profit sector

The Gillard Government's Federal Budget contains a raft of proposals relevant to the Australian not- for -profit sector. A detailed guide to the measures can be found here.

Third Sector e-news identifies three major provisions in the Budget relevant to the regulation and governance of the sector:

These provisions are: the introduction of a statutory definition of 'charity' to be used in all Commonwealth laws to take effect from 1 July 2013, the establishment of an Australian Charities and Not for profits Commission and the implementation of a not-for-profit income tax.

‘Charity’ definition The definition of ‘charity’ will be based on the 2001 Report of the Inquiry into the Definition of Charities and Related Organisations, taking account of the findings of recent judicial decisions, such as Aid/Watch Incorporated v Commissioner of Taxation. The Government will also consult with the states and territories with the intention of developing and introducing a definition of 'charity' that can be adopted by all jurisdictions.

Not-for-profit Commission $2.8 million over the next four years will be contributed to the new Australian Charities and Not for profits Commission. It is expected that the commission will develop guidance for the sector, implement system changes, and re-assess the charitable status of entities on the basis of the new statutory definition. It is also expected that the Commission will reduce red tape and improve transparency and accountability of the sector.

Not-for-profit tax reform Tax reforms will be introduced to ensure that concessions provided to not-for-profit entities are targeted only at those activities that directly further altruistic purposes. As such, any income retained from commercial activities that is not directed towards altruistic work will not be tax exempt. The new arrangements will commence on 1 July 2011 and will initially affect only new unrelated commercial activities that commence after 10 May 2011

Of particular interest is that the Gillard Government has allocated $53.6 million  to establish a single independent national regulator for the not-for-profit sector.

The Federal Government's Office for the Not for Profit Sector reports that:

The Australian Charities and Not-For-Profit Commission (ACNC) will improve the accountability and transparency of the sector while removing reporting overlap for general reporting requirements at the Commonwealth level.

The ACNC will be responsible for determining charitable, public benevolent institution and other NFP status for all Commonwealth purposes. It will provide education and support to the sector and implement a report-once use-often general reporting framework.

An implementation taskforce will be operational from 1 July 2011 to prepare for the commencement of the ACNC on 1 July 2012 and consult with the public, the sector and state governments on general reporting and public information portal requirements.

Will we ever see a National Charities Commission in Australia?

Another Federal Government Inquiry has called for the setting up of a National Charities Commission to regulate the charitable and not-for-profit sector, particularly those charities and church groups that enjoy tax free status.  A link to the Senate Inquiry report is here.

The Senate Inquiry Report recommends that such a Commission would have the power to remove the tax free status of any organization found to be in breach of the rules, or not acting in the public interest (by applying a public benefit test).

This Senate Inquiry was instigated by Independent Nick Xenophon as a result of serious concerns about churches such as the Church of Scientology and Hillsong Church, who benefit significantly from their tax free status. 

The Senate Inquiry found that no agency- not the Productivity Commission, not the Taxation Office, not Treasury- could identify the value of tax concessions to charities and churches, although a conservative estimate is between $1-$8 billion.

This is the fourth Senate inquiry into the not for profit sector in a decade that has recommended greater scrutiny of churches and not- for- profits with charitable status.  The recent Productivity Commission Inquiry and the Henry Taxation Review also called for a similar Charities Commission. 

However, there has been no action on any of those Inquiries, although the Labor Party has committed to establish such a Commission.

In a previous post on this issue (here) I noted the double standard inherent in the current situation where politically active groups like AIDWATCH can have their tax free status removed by the Australian Government because they criticize Australian Government policies, whilst breaches of the code and rules by Churches are ignored

Churches, political activity and the need for an Independent charity regulator in Australia

The power of the churches in Australia to circumvent charity and taxation law to serve their own purposes is amply demonstrated by Cardinal George Pell's intervention in the Federal Election campaign.

Cardinal Pell described the Greens as "anti-christian and encouraged Catholic voters not to support the Greens in the Federal election, in defiance of rulings that churches and not-for-profits who have charitable status should avoid engaging in party political activities or encouraging the public to vote against a political party.

As not-for-profit legal specialist Derek Mortimer points out in this article, in which he discusses the legal implications of Pell's statement, it is interesting to compare the inaction against the Catholic Church with the Australian Government's relentless pursuit of the small advocacy group AID Watch. The Australian Government (through the ATO) has used the court system to uphold a decision to remove the charitable status of AID Watch because it was deemed to be a political organization.

The Pell intervention reinforces the need for the introduction of an Independent charity regulator in Australia, along the lines of the UK Charity Commission, as recommended by the recent Productivity Commission Inquiry into the Not-for- Profit sector.