Strengthening for Purpose: Australian Charities and Not-for-Profits Commission Legislation Review 2018

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By Alison Sadler, Law Graduate

The Strengthening for Purpose: Australian Charities and Not-for-Profits Commission Legislation Review 2018 was tabled in Parliament on 22 August 2018. The review panel included Mr Patrick McClure AO, Mr Greg Hammond OAM, Ms Su McCluskey and Dr Matthew Turnour. The report makes 30 recommendations aimed at finding a balance between supporting the sector, reducing red tape, and enhancing accountability.

This article will set out some of the key recommendations in the report.

Part A: Objects, Functions and Powers

The panel considered the submissions made by various organisations and concluded that the objects in the Australian Charities and Not-for-Profits Commission Act 2012 (Cth) (ACNC Act) continue to be relevant and should not be amended.

However, the panel recommends that the ACNC’s education and research function should continue to be a priority, and that the ACNC Act should clearly articulate the functions of the Commissioner and those functions should align with each object.

In relation to federally regulated entities, the panel recommends the removal of the Commissioner’s powers to replace responsible persons of a registered entity, as this power is out of step with the powers of other regulators.

The report also recommends a number of ideas to ensure best practice internal governance of the ACNC:

  • establish an Executive Committee, comprising the Commissioner and the Assistant Commissioners;
  • allow the Commissioner to delegate powers more broadly to ACNC staff; and
  • amend the role of the Advisory Board to allow for engagement with both the Minister and the sector.

Part B: Regulatory Framework

The panel approves of ACNC Governance Standards 1, 2 and 4. The panel recommends that Standard 3, which requires charities to comply with Australian laws which impose significant penalties, be repealed. The Panel also recommends that ACNC Governance Standard 5 be retained, but the word ‘perceived’ with respect to conflicts of interest be removed as the term is unclear.

The report recommends that a registered entity should be presumed to be in compliance with ACNC governance standards if it already applies a separate set of comparable governance requirements.

The panel recommends that the directors’ duties provisions which are ‘turned off’ under the Corporations Act 2001 (Cth) should be ‘turned on’. This will help to clarify the obligations of directors, and the rights of others to take action against the directors where the duties have been breached.

The panel calls for the revenue thresholds to be increased to:

  • less than $1 million for a small registered entity;
  • from $1 million to less than $5 million for a medium registered entity; and
  • $5 million or more for a large registered entity.

This means more charities will fall within the small registered entity category, with less onerous reporting requirements.

The panel also recommends that all registered entities be required to disclose related party transactions and that large registered entities be required to disclose its remuneration practices.

Currently, basic religious charities (BRCs) are exempt from disclosing financial information in their Annual Information Statements, and complying with the ACNC Governance Standards. The panel recommends that if the revenue thresholds are increased,  the Commissioner’s power to replace a responsible person is removed, and a registered entity be presumed to comply with the ACNC governance standards were adopted, then all the BRCs exemptions should be reviewed.

The panel has called for the relaxation of the secrecy provisions in the ACNC Act. The provisions were described by the panel as overly restrictive, and should be amended to allow the Commissioner to disclose information in a wider range of circumstances. This amendment aims to better serve the public interest by providing more information about the ACNC’s registration and revocation decisions.

The panel supports the role of charities in advocacy to promote or oppose changes to any matter of law, policy or practice that is linked to their charitable purpose. However, there is ambiguity around the threshold between issues-based advocacy linked to a charitable purpose, and political advocacy that may constitute a disqualifying purpose. The panel concludes that there should be resourcing to enable appropriate test cases to be conducted to clarify the law on advocacy and other areas of public interest.

The panel recommends that the ACNC regulatory framework be extended beyond charities to include not-for-profits with annual revenue of $5 million or more, and that this be a requirement in order for such not-for-profits to access federal tax concessions. When the ACNC was first created as a concept, it was intended to oversee not-for-profits and charities.

Part C: Red Tape Reduction

In relation to fundraising law, the panel recommends that the Australian Consumer Law be amended to clarify its application to fundraising, and a mandatory code of conduct be developed. If these recommendations are implemented, then this will significantly reduce the administrative burden on the sector.

The panel recommends that the Commonwealth Government mandate that Commonwealth departments and agencies are required to use the charity passport and must not seek information from registered entities that is already available through the charity passport.

Next steps

The next step is to wait for the government’s response to the report as to whether any legislative amendments will be made to the ACNC Act. In the meantime, the ACNC will consider implementing any recommendations made in the report which do not require legislative change.

For further information, please do not hesitate to contact us.

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