The Proposed Repeal of the National Charities Regulator
The government has recently taken the first steps towards abolishing the Australian Charities and Not-for-profits Commission (“ACNC”), by seeking to repeal the Australian Charities and Not-for-profits Commission Act 2012. The ACNC acts as a central and easily accessible outlet for members of the public to obtain information about individual charities.
The ACNC’s objectives are to:
maintain, protect and enhance public trust and confidence in the not-for-profit sector through increased accountability and transparency
support and sustain a robust, vibrant, independent and innovative not-for-profit sector
promote the reduction of unnecessary regulatory obligations on the not-for-profit sector.
To satisfy these objectives, the ACNC’s remit includes:
maintaining a public register of Australian charities, currently numbering more than 60,000
registering new charities and deregistering those which are no longer eligible
collecting information on charities, primarily through an Annual Information Statement
receiving and acting on complaints about registered charities
monitoring charities for compliance with legal requirements and, if necessary, issuing charities with directions to comply
driving the reduction of unnecessary or duplicate regulation and reporting (red tape) in the sector, in cooperation with other agencies
providing advice and guidance to the sector and the public, to enhance the transparency and good governance of the sector.
Why is the ACNC being abolished?
According to the new government the main reason for the abolishment of the ACNC is to remove an unnecessary compliance burden from the not-for-profit sector. Kevin Andrews, the Minister for Social Services, believes that the government will accomplish its plan to reduce red tape by:
Avoiding duplicate regulations which is stifling both creativity and initiative.
Reducing the high cost of regulation every year.
Allowing the Department of Social Services to move towards a single comprehensive contract model with each organization that delivers services on its behalf.
Simplify the auditing process so that only one financial report will be required annually from each contracting organization.
Streamlining reporting arrangements, asking organisations to report on a small number of key outcomes through automated processes where possible.
A National Centre of Excellence
The government’s plans have not yet been finalised and more will be known about its plans later this year. It had been thought that all responsibilities of the ACNC would pass to either the Australian Taxation Office (“ATO”) or the Australian Securities and Investments Commission (“ASIC”), however, the government has suggested that it may establish a National Centre of Excellence instead.
The vision for this National Centre for Excellence is to focus on education, training and development rather than on forcible compliance and regulation. The Centre will support a wide range of organisations that make up civil society including charities and associations that focus on areas such as social welfare, the arts, environment, health, medical research, animal welfare and education.
Support for the planned abolition
A number of organisations, small and large, have come out in support of the government’s plan to abolish the ACNC. Their complaints about the ACNC include:
The ACNC has imposed reporting obligations on the trustees of charitable will trusts that they previously did not have.
The ACNC has almost duplicated the governance standards imposed on the trustees of charitable will trusts by the Corporations Act.
The Commissioner of the ACNC has been granted excessive powers in regards to suspension, removal and replacement under the ACNC Act.
The ACNC has no benefit for medical research organisations, many of which are companies limited by guarantee.
Companies limited by guarantee are already sufficiently regulated by ASIC.
Catholic schools consider that the ACNC powers are not fit for purpose and they are already adequately regulated.
Hospital and elderly care services are already highly regulated.
Independent schools are already over-regulated and the ACNC is not offering beneficial regulation
A voluntary organisation funded by one state does not need even more regulation.
Support for the ACNC
The decision by the new government has caused much consternation within the sector. The ACNC was established following decades of extensive consultations and engagement with charities and other stakeholders. The majority of publicly available submissions supported the establishment of the ACNC and feedback since its establishment has been largely positive. It is believed that the ACNC Act and associated legislation, including the Charities Act contains essential protections for the sector that should not just be dismissed. These include:
Acceptance of the independence of the charitable and not-for-profit sector
The right of the sector to undertake political activities
The ability to call for the reduction of overbearing regulatory obligations
The need for regulatory oversight to be conducted on the basis of necessity, risk and proportionality.
Those in favour of keeping the ACNC point to its transparency, a transparency that did not exist with previous bodies. For example, in its first 16 months of operation, the ACNC received 686 complaints which resulted in over 250 investigations. Most of these investigations have been resolved through various forms of mediation and working with the charities themselves. Previously if anyone complained to the ATO about the behaviour of a charity the outcome was not made public.
A major criticism of the plan is that the long-term benefits of the ACNC as a central reporting body for the charitable sector are obvious, and it is too soon to reject them out of hand. The ACNC has not been operating long enough for many of the benefits to be fully realised and it should be allowed to continue to pursue its goal.
What will happen next?
The government’s plans have invoked much uncertainty within the non-for-profit sector, and we will continue to monitor those plans and ascertain the effects over the next few months.
In the meantime, contact You Legal if you have any questions about the proposed repeal of the ACNC or charity reporting and regulation in general.
* This blog is for general guidance only. Legal advice should be sought before taking action in relation to any specific issues.