Third Dimension: "Any reform is better than nothing": The regulation of charitable fundraising in Australia

By Gabriella Janu, Graduate

The Select Committee on Charity Fundraising in the 21st Century (Committee) released a report on the regulation of charitable fundraising in Australia, and the options for reform, on 14 February 2019 (Report). The Report joins a long line of inquiries discussing and reviewing charitable fundraising regulation in Australia over a number of years, notably, a Productivity Commission report in 2010, an Australian Charities and Not-for-profits Commission (ACNC) report in 2013, and an Australian Government independent review of the Australian Charities and Not-for-profits Commission Act 2012 (Cth) and the Australian Charities and Not-for-profits Commission (Consequential and Transitional) Act 2012 (Cth) in 2017. Although the Committee did not recommend a specific regulatory model to replace the current charity fundraising framework, it generally agreed with the perspective of inquiry participants that any reform was better than maintaining the status quo.

The Committee’s findings

The Committee uncovered the “near-universal opinion” that the current system of regulation is inadequate. It is inconsistent, confusing, complex, expensive, and does not lend itself to modern online fundraising practices. By way of background, the current fundraising regulatory model is primarily subject to state and territory regulation. Each jurisdiction, other than the Northern Territory, has legislation regulating charitable fundraising, which can vary significantly in the requirements for registration and ongoing reporting. For example, the definition of ‘charitable purpose’ differs in each jurisdiction. So, if you are seeking to fundraise in more than one jurisdiction, you not only need to apply for licences separately in each jurisdiction, but you need to satisfy a different legal test each time.

Participants to the inquiry proposed that the current system of regulation be replaced by a truly national and harmonised scheme, that is simple and modern, meaningfully reduces red tape, applies to all charities and not-for-profits (NFPs), and tailors to both large and small fundraising activities.

Methods to develop a national model

Multiple law reform proposals canvassed in the Report focused on the expansion of the role of the Australian Consumer Law (ACL) in the regulation of charitable fundraising. The ACL is the national law for fair trading and consumer protection, and is contained in schedule 2 of the Competition and Consumer Act 2010 (Cth).

The ACL currently applies to charitable fundraising activities that occur in ‘trade or commerce’, being those activities that involve the supply of goods or services, the professional fundraising activities of for-profit organisations, or activities that occur in an organised, continuous or repetitive way. Such activities are subject to the ACL’s ‘misleading or deceptive conduct’ and ‘unconscionable conduct’ provisions, as well as provisions that prohibit false or misleading representations, or engaging in unconscionable conduct in relation to the supply of goods or services. In circumstances of breach, the ACL regulators, the Australian Competition and Consumer Commission (ACCC) and state and territory regulators, have multiple enforcement options, including considerable monetary penalties.

To increase consistency in the charitable fundraising sector, participants to the inquiry suggested that the application of the ACL be expanded to specifically capture fundraising activities. The inquiry participants had different ideas about the level of expansion of the ACL, and whether it would involve introducing specific charitable fundraising provisions, or simply removing the ‘misleading and deceptive’ and ‘unconscionable’ conduct provisions from state and territory fundraising legislation to confirm the application of the ACL. However, most participants noted the positive impact that a broader role for the ACL could have on charity fundraising regulation, as an already established and purpose-built body of legislation with significant enforcement capabilities.

Alongside the expansion of the ACL, most participants supported the introduction of mandatory national guidelines on charitable fundraising. The guidelines would regulate a national licence system to be followed in each state and territory, reducing uncertainty, red tape and duplication.

The role of the ANC

The ACNC regulates organisations registered as charities under the Australian Charities and Not-for-profits Commission Act 2012 (Cth) . The ACNC does not currently regulate the fundraising activities of charities. Rather, registered charities have reporting obligations to the ACNC and must comply with governance standards. So, a charity’s fundraising practices may raise questions about its compliance with governance standards, in which case the ACNC may decide to investigate. However, if the ACNC has more general concerns about fundraising activities, these concerns would be referred to the relevant state or territory regulator.

It was proposed in a submission to the Report, by Mills Oakley, that the role of the ACNC be expanded to oversee the assessment of fundraising licences in Australia, as well as the reporting and auditing of charitable fundraising. The ACL framework would then deal with the investigation of poor fundraising conduct. If, for example, the ACCC uncovered a breach of the ‘misleading and deceptive’ conduct provision in section 18 of the ACL, this could be a ground upon which the ACNC could revoke a fundraising licence.

Notably, the ACNC regulates around 56,000 charities, while there are about 600,000 NFPs in Australia, and many more charitable fundraising activities conducted by for-profit organisations and individuals. Accordingly, this reform proposal is not an alternative to the introduction of a national framework for charity fundraising. Rather, it is an additional method of reducing red tape, particularly for resource-poor small charities which can be deterred from undertaking the fundraising activities that are so important to the fulfilment of their charitable purposes, on account of the challenges inherent in the current system.

The next steps

Although the Commission did not promote a particular framework for reform, it did call for a nationally consistent model for the regulation of fundraising activities to be introduced within two years.

Despite the Commission’s recommendations, there has been to date a trend in the fundraising sector for inquiries that discuss charitable fundraising and recommend national reform, to fail to effect any change. Hopefully this trend will end with the Report, and we can finally see some meaningful reform.

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

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Not-for-Profit & Social Enterprise

Third Dimension - Issue 19, Summer 2018