Establishment of the Australian Charities and Not-for-profit Commission (ACNC)

Executive Summary and Recommendations

CCA has taken the view that the best way to approach the Exposure Draft Legislation to establish the Australian Charities and Not-for-profit Commission (ACNC) and the Consultation Paper on governance of not-for-profit organisations is to reinforce the fundamental role of the ACNC including how the not-for-profit sector would like to see it operate and the areas where the ACNC needs to take a lead role.  The final framing of the establishment legislation must enable the operational guidelines and principles outlined in this submission to be fully realised.

It is important to note at the outset that the not-for-profit sector is a highly credible, transparent and accountable sector.  In fact it is arguable that the sector is much more accountable to the community than any other, which is why it enjoys such a positive standing within the Australian community.

The assumption that imposing more onerous reporting requirements on not-for-profit organisations makes it more accountable or transparent, or even more effective, is difficult to justify.  The best form of accountability is community engagement.  In most not-for-profit organisations across Australia, members of the community the organisation serves have direct input into how the organisation operates and responds to community needs.

It is also important to note that most not-for-profit organisations are more transparent and accountable than their for-profit comparators.

The goal of the ACNC should not be primarily about accountability, but enhancement of the invaluable role played by not-for-profit organisations in Australian communities.  If we can strengthen our not-for-profit organisations through reduced duplication, compliance costs and red tape, not-for-profit organisations will be able to focus more on doing what they are established to do, serve their community. 

Within this broader context, CCA has made 41 recommendations.

Recommendations

1. The independence of the ACNC must be enshrined in legislation.  This includes a capacity to recruit staff and develop its own operations and procedures to ensure the ACNC reflects an understanding of the sector and a commitment to the invaluable role of not-for-profit organisations in Australia.
2. The ACNC should report to the Australian Federal Parliament on an annual basis.
3. The scope of the ACNC should be restricted to those organisations receiving or seeking tax concessions.  Other (smaller) NFPs may be given the option to register with the ACNC, but registration should not be compulsory.
4. The establishing legislation should make reference to the National Compact and provide a set of guiding principles that reflect the need to enhance the role of not-for-profit organisations in Australia.
5. The ACNC should adopt a ‘light touch’ reporting framework that draws upon information already collected by or readily available to NFPs.
6. The ACNC Advisory Board should be given powers to advise on any issue it considers relevant to the effective operation of the ACNC.
7. The ACNC Commissioner should be required to take note of and respond to the advice that the ACNC Advisory Board provides.
8. ACNC Advisory Board Members should only be terminated by the Minister if there are grounds for that dismissal such as: end of term of appointment, insolvency, incapacity, inadequate attendance or performance.
9. Appropriate levels of confidentiality must be in place to ensure organisations and individuals are able to provide information to the ACNC with minimal risk. 
10. De-identified information collected by the ACNC should be readily available to legitimate researchers and others seeking to use the information to provide a better understanding of the Australian not-for-profit sector.
11. Other government and regulatory agencies should be encouraged to draw on the reports and information collected by the ACNC subject to appropriate approvals from both the ACNC and the NFPs involved.
12. Threshold income of not-for-profit organisations that impact on levels of reporting should initially be set at $2 million for larger organisations, and $500,000 for smaller organisations.  Organisations with income below $500,000 should require very minimal reporting.
13. The ACNC Commissioner should have the power to change any threshold amounts based on consultation, reviews and further development of reporting practices.
14. Increased consistency with reporting requirements by State and Territories should be a priority in developing the ACNC operations.  A harmonised national regulatory framework should be the goal.
15. The ACNC should also have the power to develop a more flexible framework for reporting in conjunction with the not-for-profit sector and the ACNC Advisory Board.
16. The ACNC Commissioner should have the discretion to lessen or increase the reporting requirements of a specific organisation with good reason.
17. Enforcement should be a last resort following education, investigation and deliberate attempts to address non-compliance through negotiated resolution.
18. CCA supports ‘graduated’ and ‘proportional’ enforcement, with clear guidance for organisations about their obligations, right of appeal and responsibilities.
19. The ACNC must be able to protect not-for-profit assets in the case of deregistration.
20. The ACNC must be adequately resourced to enable it to fulfil an effective educative role, thereby reducing non-compliance and enhancing reporting practices.
21. The ACNC should be enabled to draw on the expertise and networks of other organisations in fulfilling its educative and information provision role.
22. Organisations must have a right to protect the privacy of their donors. 
23. The ACNC Commissioner should have the power to exclude the provision of information in the public interest if there is risk of harm to individuals, risk of harm to the entity or risk of confusing or misleading the public.
24. The on-line portal needs to be both accessible and able to provide information about the sector that is accurate, relevant, meaningful and responsive to community and not-for-profit expectations.
25. The goals of reducing not-for-profit red tape and compliance costs should be a key driver in determining reporting requirements.
26. The vast majority of not-for-profit reporting should be self-report consisting of brief compliance statements from a responsible person within the organisation against guidelines and principles.
27. The Commissioner should be given powers to determine how large organisations report for multiple entities including discretion to determine simplified reporting where appropriate and where group reporting meets regulatory requirements.
28. A step-by-step guide should be made available for all organisations transitioning to the new regulatory regime.  A reasonable transition period should exist to test the impact of the ACNC on red tape reduction and better regulation.
29. The performance of the ACNC needs to monitored against the goals of the National Compact, particularly in relation to red tape reduction and streamlined reporting.
30. Harmonisation of not-for-profit reporting requirements should be a priority in the ongoing development of the ACNC reporting framework.
31. The ACNC must ensure there are clear provisions for procedural fairness in all ACNC actions.
32. The ACNC should determine the charitable status of not-for-profit organisations.
33. The ACNC should establish a principles based governance compliance requirement that provides guidance rather than prescribing set governance arrangements (drawing on good practice in the United Kingdom and elsewhere).
34. The unique nature of not-for-profit governance and engagement with community should be enhanced by the ACNC governance principles.
35. The obligations of the responsible person within a not-for-profit should be appropriate to their role within the organisation and be limited to those acting as directors or equivalent.
36. The capacity to revoke the registration of a not-for-profit needs to be framed by a commitment to procedural fairness, appropriate scaling of sanctions, and transparency of de-registration requirements.
37. Risk management and insurance may be alluded to in the ACNC governance principles but should not be a separate requirement.
38. Financial reporting should be based on the current procedures within not-for-profit organisations.
39. For larger organisations, one annual financial report should meet all the ACNC requirements.
40. Any requirements to report on fundraising or commercial activities should be incorporated into the one financial report.
41. The ACNC must work to reduce duplication of not-for-profit reporting requirements across State and Territory governments, and across all Federal government departments.  This includes duplication of reporting to the ACNC and the ATO which should be eliminated as a priority first step.