Submissions-post

CCA Submission – Reform of the ACNC secrecy provisions

Submissions-post

CCA Submission - Reform of the ACNC secrecy provisions

Introduction

This submission outlines key areas of opportunity and concern for the Community Council for Australia (CCA) in relation to the secrecy provisions of the Australian Charities and Not-for-profits Commission (ACNC).

CCA welcomes the opportunity to engage with The Treasury on this important issue. 

CCA has also consulted with our members (see listing in Appendix 1) in framing this submission, however, it is important to note that this submission does not override the policy positions outlined in any individual submissions from CCA members.  The issue of transparency of the ACNC and the public naming of charities is controversial amongst our members, and while we know this submission is supported by many of our members, some of our members take alternative positions. 

The content of this submission includes a brief background to CCA and the current context for the broader charities and not-for-profit (NFP) sector.  Following this context setting, this submission outlines some of the key issues relating to the Treasury’s discussion paper ‘Reform of the Australian Charities and Not-for-profits Commission secrecy provisions – Recommendation 17 of the ACNC review 2018’; and offers a conclusion. 

CCA welcomes this opportunity to provide input into this Treasury consultation and look forward to ongoing discussions about how transparency of the ACNC decision-making processes might be further enhanced.

The Community Council for Australia

The Community Council for Australia is an independent non-political member-based organisation dedicated to building flourishing communities by enhancing the extraordinary work undertaken by the charities and not-for-profit sector in Australia.  CCA seeks to change the way governments, communities and NFP organisations relate to one another.  It does so by providing a national voice and facilitation for sector leaders to act on common and shared issues affecting the contribution, performance and viability of NFPs in Australia.  This includes:

  • promoting the values of the sector and the need for reform 
  • influencing and shaping relevant policy agendas
  • improving the way people invest in the sector
  • measuring and reporting success in a way that clearly articulates value
  • building collaboration and sector efficiency
  • informing, educating, and assisting organisations in the sector to deal with change and build sustainable futures
  • providing a catalyst and mechanism for the sector to work in partnership with government, business and the broader Australian community to achieve positive change.

Our success will drive a more sustainable and effective charities and not-for-profit sector in Australia making an increased contribution to the well-being and resilience of all our communities.

Background: Current state of the charities and not-for-profit sector

COVID-19 highlighted the critical role played by charities and Not-for-profits (NFPs) in Australia.  The government acknowledged this role in extending a modified form of JobKeeper payments to charities as well as supporting increased giving during the pandemic.  These measures have been important to many charities, but 2021 continues to be challenging for the charities and NFP sector. 

While the history of the NFP sector is framed by growth and reform, the current situation is that many charities are struggling to survive. Research conducted by the Centre for Social Impact (CSI) and Social Ventures Australia suggests around 30% of all charities are now facing serious questions about ongoing viability.  CSI’s latest survey of the for-purpose sector (Pulse of the For-Purpose Sector | CSI ) found that while 8 in 10 organisations had increased demand, 77% of organisations agreed or strongly agreed that the recent events have put considerable strain on their organisation’s finances, 85% reported a reduction in revenue even with JobKeeper, and 52% were worried about their ability to continue to provide services in the current environment.

Some charities have had to hibernate programs and services in the hope of being able to re-establish their income streams in the coming years. For many charities, COVID-19 has meant increased costs, a decline in revenue, reduced access to volunteers, and increased demand for community-based services. While generalisations across all charities are very difficult within the COVID-19 context, the one certainty is that COVID-19 will have a negative impact on thousands of charities and thousands of workers within the charities sector.  

The charities and NFP sector encompass over 600,000 organisations – from large to very small.  Australia’s 55,000+ charities employ over 1.38 million staff (around 11% of all employees in Australia), collectively turn over more than $166 billion each year and hold around $350 billion in assets.  

These facts tell only a small part of the story. The real value of the charities sector is often in the unmeasured contribution to Australian quality of life.  Charities are at the heart of our communities, building connection, nurturing spiritual and cultural expression, and enhancing the productivity of all Australians. Collectively, they make us a more resilient society.  

In Australia there have been various initiatives seeking to: promote social enterprise; reduce compliance costs for NFPs; encourage a diversification of financing options to build a more sustainable funding base; streamline and refine the regulation of NFPs and charities; establish less bureaucratic reporting requirements while building community transparency; increase philanthropy; promote impact investing; and increase sector performance measurement.  CCA supports all these activities. 

The establishment of the ACNC has proved to be a positive step towards red tape reductions, increased transparency, and trust in the community by prospective volunteers and donors.  But there is still a lot of work to do in streamlining and improving the regulation of charities in Australia.

CCA response to The Treasury discussion paper ‘Reform of the Australian Charities and Not-for-profits Commission secrecy provisions – Recommendation 17 of the ACNC review 2018’.

 

Introduction

CCA believe the paper prepared by The Treasury sets out the issues associated with ACNC secrecy provisions well, and provides some useful comparative information in relation to the role of regulators and the application of various secrecy provisions.  The data provided about the numbers of applications and investigations undertaken by the ACNC is also useful in considering the current secrecy provisions. 

CCA is a strong supporter of transparency in relation to the role of the charity regulator.

Wherever possible without creating negative consequences, CCA believes the ACNC should be transparent in its activities.  Transparency is critical to building trust and confidence not only in the regulator, but also in the charities sector it is required to regulate.

As noted in previous CCA submissions, the most important commodity that charities trade is trust.  Trust is built upon clear and authentic communication – which is why charities enjoy high levels of trust compared to governments, insurance companies, and most other institutions.  

Charities also have a strong interest in protecting the charities brand and therefore want to limit inappropriate behaviour by the very small minority of charities that behave badly and undermine community trust and confidence.  This is why charities themselves have been very strong supporters of the ACNC.

CCA has experienced frustration from politicians, policy makers, charities themselves and the general public with the current levels of ACNC secrecy.

It is important to note that CCA’s response is partly informed by a high level of frustration from many different groups in relation to the secrecy provision of the ACNC.

Not many charities do the wrong thing, but if people do have concerns about the way a particular charity is behaving, and they cannot resolve their concerns directly with the charity, making a complaint to the ACNC can be an appropriate action to take.  

CCA have on numerous occasions advised charities and others to lodge complaints where there were what appeared to be valid concerns about a charity not acting appropriately.

The current practice of not confirming or denying any aspect of the registration, investigation or enforcement action involving a charity can produce a level of mistrust in the ACNC, particularly from people who have made complaints (sometimes on the advice of CCA) and then can never find out what happened to their complaint. 

CCA supports making the ACNC more transparent to address some of these concerns.

The three levels of secrecy / disclosure

CCA supports increased transparency around all three aspects of the ACNC’s role from registration to removing a charity from the charities register, but within certain protections of privacy and reputation.

Registration decisions (Area 1)

The ACNC receives around 4,000 applications for registration per year, of which on average 35 applications are refused for reasons other than insufficient information.[1]

CCA see no reason why the ACNC cannot note and name the charities that have successfully obtained charitable registration.  This is in effect what happens given the newly registered charities will appear on the ACNC Charity Register.

As pointed out in the Treasury discussion paper; the UK Charity Commission and New Zealand Charities Services publish full statements about their registration and non-registration decisions, including identifying details about an entity and its application, where the decision is of wider interest and it may educate the charitable sector.[2]

For an applicant denied charitable status or who chooses to withdraw their application, it is appropriate for the ACNC to publicly note: 

  • the number of charities declined registration, 
  • the number who withdrew their application, 
  • the areas of activity the applicants were seeking charitable registration for, 
  • their geographic location, 
  • the reason the applicants were denied or withdrew their application, and 
  • other non-identifying information.

Individuals involved in unsuccessful applications should not be identified, unless they choose to identify themselves.

The names of the organisations denied registration should only be made public by the organisation itself unless it is in the public interest (see later in this submission for public interest considerations).

CCA believe increasing the level of transparency around charity registration applications at a non-identified level and allowing a specific case to be identified when it is in the public interest would improve trust and confidence in the registration decision-making process.

New and ongoing investigations (Area 2)

The ACNC Review concluded that the ACNC’s inability to make any comment in respect of whether it is (or is not) undertaking an investigation regarding a complaint against a registered charity is harmful to the perception of the ACNC as an effective regulator.[3]

CCA supports the ACNC review finding that the ACNC should be able to release basic details about new and ongoing investigations.

The undermining of public trust and confidence is a real issue when the regulator cannot even acknowledge an investigation is taking place.

Complainants need to know that their complaints have been taken seriously by the regulator, or they will feel as though the regulator is not performing its role. 

At the very least the ACNC should be able to acknowledge that a complaint has been received and is being considered.  Both the charity that is the subject of the complaint and the person making the complaint should be informed that an investigation is underway.

In terms of privacy, CCA again believe that the regulator should not be naming any individual or responsible person. 

In terms of broader public disclosure of the name of a charity that may be under investigation, this should only happen if the charity involved agrees to be publicly named, or chooses to name themselves, and where there is public interest in the complaint.

CCA understands that there are many spurious complaints about charities, and most complaints rarely progress to investigation stage, but it might be useful for the ACNC to provide more details about the complaints it receives including: 

  • the number of complaints received, 
  • the number that required further investigation, 
  • the nature of the complaints received, and 
  • other non-identifying information.

CCA believe increasing the level of transparency around complaint handling by the ACNC at a non-identified level and allowing a specific case to be identified when it is in the public interest would improve trust and confidence in the ACNC investigation process.

Finalised investigations (Area 3)

It seems difficult to justify the ACNC not being able to publicly identify why a charity has been removed from the charitable register.

Charities that have been the subject of an ACNC investigation and have had their charitable status revoked should be publicly identified and the reasons for the enforcement action should be noted.

The question of whether an enforceable undertaking should be publicly noted is a little more complex.  As with the two previous areas, CCA believe it is not appropriate to publicly name any individuals.

It is, however, appropriate to name a charity that has been the subject of an enforcement action other than revocation provided the charity involved agrees to be publicly named, or chooses to name themselves, or where there is a public interest in the complaint.

As with previous areas, CCA believes the ACNC could provide more information on completed investigations in the following areas:

  • the number of investigations completed, 
  • the nature of the investigations completed, 
  • the reason complaints resulted in no enforcement action,
  • the reason complaints resulted in enforcement action, and 
  • other non-identifying information.

CCA believe increasing the level of transparency around completed investigations by the ACNC at a non-identified level and allowing a specific case to be identified when it is in the public interest would improve trust and confidence in the ACNC investigation process.

Public Interest Test

Drawing upon the examples of other regulators, circumstances where a disclosure of information could be necessary and in the public interest may include the following:

  • there is significant public discourse about an issue;
  • the information may be of wider public interest or serve to educate the sector and the public;
  • the public record may require correction or clarification;
  • the regulator has made a decision or taken action that could be precedential or significant;  
  • there is evidence of misconduct; and
  • a case raises issues that may pose a risk to other registered charities or the public.[4]

CCA believes all the above factors are important in determining whether or not to publicly reveal information relating to ACNC decisions.  

CCA would add to these considerations the question of materiality – the significance of both the issue or wrongdoing, the magnitude of money or assets involved, the size and reach of the charity involved.  A lack of appropriate record keeping from a small local charity would not pass the materiality test.

CCA would also add the consideration of negative consequences.  Where naming a particular charity might have flow on negative consequences for a significant number of charities or members of the community, the information should not be released.  

CCA would question the inclusion of misconduct as a factor unless misconduct is defined as actual law breaking or the committing of an offence.  Minor misconduct (like failure to keep a record) does not make a decision in the public interest or worthy of public disclosure.

Assuming a set of agreed definitions around these factors in determining public interest as it relates to the ACNC releasing information, the question that arises is what decision-making processes need to be satisfied to ensure a true test of public interest has been applied.

CCA is of the view that the ACNC Commissioner’s discretion in applying the public interest factors to a particular instance is not a sufficient test of public interest.

CCA believes a fairer and more balanced process is required where the ACNC Commissioner may recommend making certain identifying information about an ACNC decision public to an independent panel of representatives that would ideally include at least:

  • one senior official from the Australian Taxation Office not connected to the ACNC, 
  • two representatives of the charities sector, 
  • one experienced independent charity lawyer. 

Provided the application of a public interest test was amended to include the factors CCA believes are important, including materiality and potential negative consequences, and provided the process was independent and accountable rather than subjective or based on the views of the ACNC Commissioner, CCA would support release of additional identifying information by the ACNC in the public interest.

Conclusion

CCA has always supported the ACNC.  Having an effective and respected charities regulator is critical to building and sustaining public trust and confidence in the charities sector.

There is no doubt, as the ACNC review panel found in 2018, the secrecy provisions of the ACNC have diminished the level of public trust and confidence in the ACNC, and thereby, in the charities sector.

CCA would go further and suggest frustration with the ACNC secrecy provisions has driven some politicians and policy makers to advocate for more powers for the ACNC when the proposed new powers were mostly already in existence.

CCA strongly support a more transparent ACNC in all three key areas of decision making: registration, investigation, and enforcement decisions.

At the same time, CCA believes the release of identifying information about an individual charity needs to be governed by the appropriate application of a public interest test.  To this end CCA is proposing a two-stage process with the ACNC making their determination about what identifying information should be released, and an independent panel reviews this information by applying an agreed public interest test to any proposed naming of an organisation in the public domain.

CCA appreciate the opportunity to have input into this Treasury consultation and look forward to ongoing discussions about how transparency of the ACNC decision-making processes might be further enhanced.

[1] The Treasury, Reform of the Australian Charities and Not-for-profits Commission secrecy provisions, p.12

[2] The Treasury, Reform of the Australian Charities and Not-for-profits Commission secrecy provisions, p.12

[3] The Treasury, Reform of the Australian Charities and Not-for-profits Commission secrecy provisions, p.13

[4] The Treasury, Reform of the Australian Charities and Not-for-profits Commission secrecy provisions, p.11

CCA Submission – Reform of the ACNC secrecy provisions Read More »

CCA Submission to Treasury on developing a voluntary code for charities to improve the transparency of charitable donations during natural disasters

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CCA Submission to Treasury on developing a voluntary code for charities to improve the transparency of charitable donations during natural disasters

CCA’s submission outlines key areas of opportunity and concern for the Community Council for Australia (CCA) in relation to ‘developing a voluntary code for charities to improve the transparency of charitable donations during natural disasters.’

CCA welcomes the opportunity to engage with The Treasury on this important issue.

CCA is a member of the fixfundraising coalition, has liaised extensively with Justice Connect and strongly supports their submission.

CCA has also consulted with other members in framing this submission, however, it is important to note that this submission does not override the policy positions outlined in any individual submissions from CCA members.

The content of this submission includes: a brief background to CCA; three other context setting background discussions covering; the current context for the broader charities and not-for-profit (NFP) sector, CCA’s seven informing principles and three recommendations for fundraising regulation reform, and the latest research on charities and fundraising regulations. Following this context setting, this submission outlines some of the key issues relating to the Treasury’s transparency and fundraising discussion paper; and offers a conclusion.

CCA is keen to engage in further discussion with The Treasury and others to address the completely dysfunctional fundraising regulations currently impeding the work of the charities sector.

The bushfires and the pandemic have highlighted the critical role of charities within communities, but when it comes to helping charities respond and better serve their communities, it seems streamlining fundraising regulatory processes is a step too far.

The proposal in the Treasury consultation discussion paper to add another requirement – albeit voluntary – makes no sense when around 40% of charities are already non-compliant with existing letter of the law fundraising regulatory requirements.

Just as importantly, many charities are concerned that not enough is being done to protect public trust and confidence in charities. In terms of the specific fundraising regulations across jurisdictions, they are largely unenforceable and fail to offer the protection of the charities brand that charities have called for.

CCA believe this Treasury consultation should at least acknowledge the widespread existing failures in fundraising regulations and make recommendations that do more than bolt another optional requirement on to what we all know is a rusted out seized up dysfunctional set of regulatory processes.

Read Submission

CCA Submission to Treasury on developing a voluntary code for charities to improve the transparency of charitable donations during natural disasters Read More »

Submission responding to the proposed Changes to the Powers of the ACNC

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Submission responding to the proposed Changes to the Powers of the ACNC

This submission provides an overview of critical concerns held by the Community Council for Australia (CCA) in relation to the proposed changes to governance standard three in the Australian Charities and Not-for-profits Commission Regulation 2013 to expand the scope of impermissible activities that registered charities must not engage in or promote others to engage in.

CCA has consulted with members in framing this submission, however, it is important to note that this submission does not override the policy positions outlined in any individual submissions from CCA members.  CCA has also consulted with charity lawyers and other experts.

CCA has long been a supporter of the need for an independent regulator of charities in Australia.  CCA has advocated for the establishment and retention of the ACNC as a way of delivering increased transparency, accountability, and sustainability for the Australian charities and not-for-profit sector. 

The content of this submission includes: a brief background to CCA; an overview of the current context for the NFP sector; a summary of proposed changes to the ACNC governance standards, some key points about the collective impact of the proposed changes, an outline of specific concerns with six of the proposed changes, and a conclusion. 

CCA welcomes this opportunity to provide input into this consultation on changes to the powers of the ACNC and is keen to engage in detailed discussion about any proposals arising from the Inquiry. 

It is important to note that David Crosbie, CEO of CCA, was one of the founding ACNC Advisory Board members.

The Community Council for Australia

The Community Council for Australia is an independent non-political member-based organisation dedicated to building flourishing communities by enhancing the extraordinary work undertaken by the charities and not-for-profit sector in Australia.  CCA seeks to change the way governments, communities and not-for-profits relate to one another.  It does so by providing a national voice and facilitation for sector leaders to act on common and shared issues affecting the contribution, performance and viability of NFPs in Australia.  This includes:

  • promoting the values of the sector and the need for reform 
  • influencing and shaping relevant policy agendas
  • improving the way people invest in the sector
  • measuring and reporting success in a way that clearly articulates value
  • building collaboration and sector efficiency
  • informing, educating, and assisting organisations in the sector to deal with change and build sustainable futures
  • providing a catalyst and mechanism for the sector to work in partnership with government, business and the broader Australian community to achieve positive change.

Our success will drive a more sustainable and effective charities and not-for-profit sector in Australia making an increased contribution to the well-being and resilience of all our communities.

Context: the state of the not-for-profit sector

COVID-19 highlighted the critical role played by charities and Not-for-profits (NFPs) in Australia.  The government acknowledged this role in extending a modified form of JobKeeper payments to charities as well as supporting increased giving during the pandemic.  These measures have been important to many charities, but 2021 is still going to be incredibly challenging for the charities and NFP sector. 

Research conducted by the Centre for Social Impact (CSI) and Social Ventures Australia suggests around 30% of all charities are now facing serious questions about ongoing viability.  CSI’s latest survey of the for-purpose sector ( Pulse of the For-Purpose Sector | CSI ) found that while 8 in 10 organisations had increased demand, 77% of organisations agreed or strongly agreed that the recent events have put considerable strain on their organisation’s finances, 85% reported a reduction in revenue even with JobKeeper, and 52% were worried about their ability to continue to provide services in the current environment.

Some charities will have to hibernate programs and services in the hope of being able to re-establish their income streams in the coming years. For many charities, COVID-19 has meant increased costs, a decline in revenue, reduced access to volunteers, and increased demand for community-based services. 

While generalisations across all charities are very difficult within the COVID-19 context, the one certainty is that COVID-19 will have a negative impact on thousands of charities and thousands of workers within the charities sector.  

The charities and NFP sector encompass over 600,000 organisations – from large to very small.  Australia’s 55,000+ charities employ over 1.3million staff (around 10% of all employees in Australia), collectively turn over more than $147 billion each year and hold around $300 billion in assets.  

These facts tell only a small part of the story. The real value of the charities sector is often in the unmeasured contribution to Australian quality of life.  Charities are at the heart of our communities, building connection, nurturing spiritual and cultural expression, and enhancing the productivity of all Australians. Collectively, they make us a more resilient society.  

In Australia there have been various initiatives seeking to: promote social enterprise; reduce compliance costs for NFPs; encourage a diversification of financing options to build a more sustainable funding base; streamline and refine the regulation of NFPs and charities; establish less bureaucratic reporting requirements while building community transparency; increase philanthropy; promote impact investing; and increase sector performance measurement.  CCA supports all these activities. 

The establishment of the ACNC has proved to be a positive step towards red tape reductions, increased transparency, and trust in the community by prospective volunteers and donors.  But there is still a lot of work to do in streamlining and improving the regulation of charities in Australia.

While the history of the NFP sector is framed by growth and reform, the current situation is that many charities are struggling to survive. Given the size of the sector and its critical role in our community especially post-pandemic, the Federal Government should very carefully consider the impact of any proposed changes to the powers of the ACNC.  

Our communities, our economy and our country all benefit when charities are enabled to operate effectively to deliver public benefit.  This includes their capacity to advocate for change and seek to improve public policies.

Summary of proposed changes to the ACNC governance standards

The proposed changes to governance standard three within the Australian Charities and Not-for-profits Commission Regulation 2013 seeks to deliver five main outcomes:

  1. Extends a governance standard the ACNC review expert panel recommended should be repealed
  2. Expands the range of activities that can be considered unlawful or potentially unlawful
  3. Expands the range of what might be considered to be supporting or promoting unlawful action
  4. Increases the discretion of the ACNC Commissioner to make a reasonable judgement that an unlawful action might take place in the future
  5. Shifts the emphasis for enforcement action by the ACNC away from whether the charity is pursuing its purpose to an action the charity may be promoting or supporting
  6. Introduces costly administrative requirements that provide no regulatory benefit. 

Key points about the collective impact of the proposed changes

This submission opposes all the proposed changes, each of which is discussed in more detail below.  It is also important to make some key points about the collective impact of the proposed changes.

Politicisation of the ACNC:  These proposed changes allow for the politicisation of the ACNC. For instance, an ACNC Commissioner may be opposed to Indigenous people protesting about inequality.  Local Indigenous groups may plan to march down the main street of their city in protest of their lack of opportunity, creating the potential for a summary offence charge to be laid (e.g., blocking a footpath).  If a local charity (it may be a church, youth group or a health service) offers their support and promotes the event on their website, they may face ACNC enforcement action from an overly zealous ACNC Commissioner – even before the protest has occurred or a summary offence charge has been laid.  

The principles of justice and due process: The proposed approach to enforcement of charitable status is counter to the principles espoused in the acts establishing the ACNC. There are threshold issues here about fairness, justice and due process, none of which are reflected in the proposed changes.  Without a workable appeals process and no real process to challenge the judgment of the Commissioner about potential law breaking, these changes go too far in giving power to the ACNC Commissioner.

Over-reach beyond expertise and capability:  There are serious questions about whether the ACNC Commissioner has, or even should have, the skills, resources or power to determine whether a summary offence may have occurred, let alone whether one might potentially occur.  Police and courts operate in these spaces, and so they should.  They are who the ACNC Commissioner should rely upon to determine if unlawful activity has taken place. The ACNC Commissioner should not pretend an expertise and capability the office of the ACNC does not have and was never set up to have.

The chilling effect:  None of us agrees with every charity.  We do not all support all protests.  Most of us believe consistent law breaking has no place in our communities.  But few of us would argue that the world would be a better place without protest, without communities being able to find a voice, express a view, raise their concerns.  Many major achievements in civil life are a product of charities pushing back against power, protesting, highlighting a better way forward.  The establishment of our system of parliament, women having the vote, the ending of wars, breaking down of walls, saving of unique cultural and environmental treasures, most would not have happened without protest.  This legislation makes all protesting, even the support of one protest, a potential threat to charities and their future.  A country where charities fear raising their voice is not the kind of Australia we want to live in.

Specific concerns with the proposed changes

  1. Extends a governance standard the ACNC expert panel recommended should be repealed

The expert panel appointed to review the ACNC Act observed that registered entities must comply with all applicable laws and recommended that Governance Standard 3 be repealed (page 50). 

Where a charity breaks the law, it can be dealt with not only under the criminal law but also under Governance Standard 5 relating to the duties of responsible persons.  There is no need for these changes.

  1. Expands the range of activities that can be considered unlawful or potentially unlawful

The proposed increase to the range of unlawful actions (a potential summary offence relating to property or people) is too broad.  Examples of an act that might be a potential summary offence charge include: 

  • leaving the gate to a private property open
  • blocking a footpath
  • trespassing on private property (e.g. at the gateway to a building site)
  • not moving on when legally instructed to do so
  • damaging any property (e.g. writing on a public sign or building).
  1. Expands the range of what might be considered to be supporting or promoting unlawful action

Under the proposed new governance standard, charities are required to take reasonable steps to ensure that its resources are neither used, nor continued to be used, to promote or support acts or omissions by any entity.  In practice this means a staff member who tweets support for an action that could possibly be charged as a summary offence (like blocking the footpath in a protest march) could see enforcement action taken by the ACNC against their charity employer if such action was not actively discouraged.  Allowing on-line posts by staff, mentions in websites, promotion through Facebook or twitter by one or more staff to be used by the ACNC Commissioner as offering support or promotion of unlawful activity seems absurd.   This is especially problematic given the ACNC Commissioner can be judging the potential for an action – not actual actions – that could potentially be charged as a summary offence.

  1. Increases the discretion of the ACNC Commissioner to make a reasonable judgement that an unlawful action might take place in the future

It is counter to basic principles of criminal law that the ACNC Commissioner is empowered to form a view on the potential commission of a summary offence without proper evidence, testing of that evidence and without due process.  There is no reference to defences that may excuse the offence.  The Commissioner can act on their own belief without testing that belief against possible mitigating factors or excuses. Previously the Commissioner needed to consider a course of conduct, a pattern of behaviour, not one act.

This potential to focus on one single act is compounded by the lack of a meaningful appeals process.  The ACNC Act grants wide discretions to the ACNC Commissioner that are not reviewable afresh on appeal (de novo review).  Even within the courts, there is little if any scope to challenge the decisions of the ACNC Commissioner.

  1. Shifts the emphasis for enforcement action by the ACNC away from whether the charity is pursuing its purpose to an action the charity may be promoting or supporting 

s.45-10 ACNC Act (Regulations establishing Governance Standards) state:

             (6)  The regulations must not require an entity not to comment on, or advocate support for, a change to any matter established by law, policy or practice in the Commonwealth, a State, a Territory or another country, if:

  1. the comment or advocacy furthers, or is in aid of, the purpose of the entity; and 
  2. the comment or advocacy is lawful.

It is arguable that any protest or advocacy action in support of the purpose of the charity cannot be deemed to have breached a governance standard, unless it can be demonstrated to be unlawful.  The key tests here are not about whether there is a potential summary offence, but whether the charity is pursuing its purpose.  Provided the charity does not break the law (there needs to be evidence of law breaking) or directly advocate for people to vote for a particular candidate or political party, charities are legally entitled to pursue a charitable purpose through advocacy activities, including protests.

The test here is whether the charity is pursuing its purpose.  Offering support for one action that may involve the potential for a summary offence should not be the reference point for enforcement action by the ACNC against a charity.

  1. Introduces costly administrative requirements that provide no regulatory benefit  

Governments are rightly focused on reducing unnecessary administrative burdens on business and the broader community.  If we want a productive nation, we need to spend less time in pointless administrative and compliance work that serves no real outcome.  

Charities are happy to be accountable, but being accountable for potential law breaking by external groups because staff or others connected to the charity express support or promote the cause of people who may engage in a public protest is a real risk that will have to be mitigated. 

Keeping records to show that a charity has not in any way supported actions that may involve the potential for a summary offence charge is going to require new paperwork, new recording processes, new administrative costs.  In some cases – say a charitable community radio station – the very purpose of the charity could be called into question because as part of their core activities they provide information about protests or other activities that could potentially involve summary offences.

The proposed changes will involve introducing various kinds of organisational policies that seek to silence commentary or the voicing of opinions from staff and others connected to the charity.  These types of policies are more commonly applied in countries where free speech is not permitted.  

The proposed changes introduce a new sphere of compliance which charity boards will need to manage.  One of the most fundamental obligations for a charity board is to preserve the charitable status of the organisation – effectively the organisation’s licence to operate.   The introduction of this level of risk to charity boards will and must be taken seriously, adding to the burden of charity directors and creating a minefield of new issues to navigate, e.g. how will organisational monitoring of employees interact with privacy laws and civil liberties and what will be permissible under employment law. 

Conclusion

This submission from CCA sets out critical concerns with the proposed expansion of the powers that may be exercised by the ACNC Commissioner.  The proposed changes are unnecessary and counterproductive.  

CCA is a strong supporter of the need for an independent regulator of charities in Australia.  Charities have little tolerance for rogue charities doing the wrong thing, undermining public trust, and damaging the reputation of all charities.  Sustaining public confidence in charities is critical to our effectiveness as a sector.  CCA has consistently encouraged charities to be accountable and to hold other charities accountable.  

The proposed changes to governance standard three are poorly targeted and will not enhance the capacity of the ACNC to take enforcement action against rogue charities.  They will introduce greater confusion and uncertainty.  CCA believe there is ample scope within existing provisions and laws to prosecute a case against any charity involved in organising events where law breaking occurs or supporting law breaking.  

CCA will happily work with the government if there are clearly identified problems with the current regulation of the charities sector, but no such problem has been raised other than by a small minority of powerful vested interests who have publicly said they would like to prevent protests against their activities.  CCA would hope public policy for all charities is not being framed and informed by the concerns of this small minority who appear to be focused on the actions of less than 0.1% of the 55,000 registered charities in Australia.  The other 99.9% of charities should not have to wear the consequences of these concerns.

The proposed changes are a classic case of regulatory over-reach, something CCA believed the government was seeking to reduce, not increase.  They are counter to good regulation, counter to good public policy and will diminish the impact of active and engaged charities working to improve the lives of all Australians. 

Emmeline Pankhurst said of the Suffragette protests: “We are here not because we are law breakers; we are here in our efforts to become law-makers.”

Threatening increased enforcement action against charities that support public campaigns and protest action is not going to make government stronger, quite the contrary.  

The proposed changes to the ACNC governance standards will diminish our democracy.  They will silence some charities by creating fear about potential repercussions.  They will impose new limitations on staff and others involved in charities and their capacity to express a view.  They will impose significant new regulatory burdens on many charities.  They will not achieve their policy purpose.  They will diminish the capacity of our communities to voice their concerns.  

CCA is strongly opposed to the changes.

Submission responding to the proposed Changes to the Powers of the ACNC Read More »

CCA Pre-Budget Submission 2021-22

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Read CCA Federal Budget Submission

CCA Pre-Budget Submission 2021-22

This submission outlines nine measures the Community Council for Australia (CCA) believes will significantly strengthen Australia’s not-for-profit (NFP) sector to support our communities and drive real economic savings for government over the coming financial year and beyond. These measures have been informed by consultation with CCA members (listed in Attachment A) and key organisations in the NFP sector.

It is important to note that this submission does not override the policy positions outlined in any individual Federal Budget submissions from CCA members.

The content of this submission includes: a brief background to CCA; a listing of proposed measures; an overview of the current issues for the NFP sector; further details about the costing of proposals; and a conclusion.

CCA acknowledges that 2021 will need to be a year that emphasises recovery for Australia as we adjust to the impacts of COVID-19. A government committed to building economic and social resilience across Australia would actively encourage and invest in more effective and efficient charitable organisations delivering better outcomes for our communities.

If Australia is to be a just, fair, resilient and productive society, there needs to be a genuine commitment to supporting reforms across the charities and not-for-profit sector (NFPs) from government and other key stakeholders.

CCA welcomes this opportunity to provide input into the Federal Budget process and to engage in detailed discussion about any issues this submission raises.

The Community Council for Australia

The Community Council for Australia is an independent non-political member-based organisation dedicated to building flourishing communities by enhancing the extraordinary work undertaken by the charities and not-for-profit sector in Australia. CCA seeks to change the way governments, communities and not-for-profits relate to one another. It does so by providing a national voice and facilitation for sector leaders to act on common and shared issues affecting the contribution, performance and viability of NFPs in Australia. This includes:

  • promoting the values of the sector and the need for reform

  • influencing and shaping relevant policy agendas

  • improving the way people invest in the sector

  • measuring and reporting success in a way that clearly articulates value

  • building collaboration and sector efficiency

  • informing, educating, and assisting organisations in the sector to deal with change and build sustainable futures

  • providing a catalyst and mechanism for the sector to work in partnership with government, business and the broader Australian community to achieve positive change.

    Our success will drive a more sustainable and effective charities and not-for-profit sector in Australia making an increased contribution to the well-being and resilience of all our communities. 

Summary of proposed budget measures

The following proposals have been developed through extensive discussions and feedback from CCA members and other key stakeholders. Each measure would deliver real benefits to government over the longer-term and strengthen communities (proposed measures are outlined in more detail on page four).

  1. Provide Deductible Gift Recipient (DGR) status to all registered charities with an initial exemption of organisations for childcare, primary and secondary education, and the advancement of religion.

  2. Create more incentives for giving as Australia experiences the largest ever inter- generational wealth transfer over the coming two decades.

    1. Living Legacy Trusts

    2. Opt-out workplace giving provisions

    3. Superannuation charitable investment options

  3. Fix fundraising regulations.

  4. Boost sector investment and productivity by increasing certainty in government funding, concessions, incentives and regulations.

  5. Develop a Charities Transformation Fund to support sector capacity development through; adoption of technology, staff training and development, research and evaluation, and infrastructure improvements.

  6. Develop a Charities Investment Fund that could provide charities reduced interest loans for impact investment or longer-term line of credit options.

  7. Support a one-stop-shop registration process to enable volunteers to be registered and insured more quickly without the red tape of multi-jurisdictional compliance.

  8. Introduce a targeted ‘estate duty’ for people with estates valued at over $10 million with appropriate incentives for donations to charities, safeguards relating to family businesses and farms, and mitigation of any potential adverse impacts.

  9. Review the generous tax concessions provided to gaming, catering, entertainment and hospitality income for mutual organisations, especially licensed clubs.

Context: not-for-profit reform

COVID-19 highlighted the critical role played by charities and Not-for-profits (NFPs) in Australia. The government acknowledged this role in extending a modified form of JobKeeper payments to charities as well as supporting increased giving during the pandemic. These measures have been important to many charities, but 2021 is still going to be incredibly challenging for the charities and NFP sector.

Research conducted by the Centre for Social Impact (CSI) and Social Ventures Australia suggests around 30% of all charities are now facing serious questions about ongoing viability. CSI’s latest survey of the for- purpose sector ( Pulse of the For-Purpose Sector | CSI ) found that while 8 in 10 organisations had increased demand, 77% of organisations agreed or strongly agreed that the recent events have put considerable strain on their organisation’s finances, 85% reported a reduction in revenue even withJobKeeper, and 52% were worried about their ability to continue to provide services in the current environment.

Some charities will have to hibernate programs and services in the hope of being able to re-establish their income streams in the coming years. For many charities, COVID-19 has meant increased costs, a decline in revenue, reduced access to volunteers, and increased demand for community-based services.

While generalisations across all charities are very difficult within the COVID-19 context, the one certainty is that COVID-19 will have a negative impact on thousands of charities and thousands of workers within the charities sector. The significance of this impact should be acknowledged in the Federal Budget.

The charities and NFP sector encompass over 600,000 organisations – from large to very small – and employs well over 1.3 million staff (around 10% of all employees in Australia). Australia’s 55,000+ charities collectively turn over more than $147 billion each year and hold close to $300 billion in assets.

These facts tell only a small part of the story. The real value of the charities sector is often in the unmeasured contribution to Australian quality of life. Charities are at the heart of our communities, building connection, nurturing spiritual and cultural expression, and enhancing the productivity of all Australians. Collectively, they make us a more resilient society.

In Australia there have been various initiatives seeking to: promote social enterprise; reduce compliance costs for NFPs; encourage a diversification of financing options to build a more sustainable funding base; streamline and refine the regulation of NFPs and charities; establish less bureaucratic reporting requirements while building community transparency; increase philanthropy; promote impact investing; and increase sector performance measurement. CCA supports all these activities.

The establishment of the ACNC has proved to be a positive step towards red tape reductions, increased transparency, and trust in the community by prospective volunteers and donors. But there is still a lot of work to do in streamlining and improving the regulation of charities in Australia.

While the history of the NFP sector is framed by growth and reform, the current level of individual philanthropic giving as a percentage of income has still not recovered to the pre-GFC highs of 2009. The revenue available to governments is effectively falling in real terms against a backdrop of increasing demands and higher community expectations. Competition for fundraising and services has increased. COVID-19 has only compounded these challenges.

Given the size of the sector and its critical role in our community, the Federal Government should prioritise strategic investment in the charities and NFP sector. Supporting the proposals in this submission will ensure the government receives a better return on their investments, strengthens communities, improves well-being, builds connectedness and resilience, and increases productivity for all Australians.

1. Provide Deductible Gift Recipient (DGR) status to all registered charities with an initial exemption of organisations for childcare, primary and secondary education, and the advancement of religion.

The present system of determining Deductible Gift Recipient (DGR) status largely through the Australian Taxation Office (ATO) and Departmental listing favors larger charities that can afford lawyers and lobbyists to assist the progression of their applications. Many smaller NFP and charities do not have the capacity to apply for DGR status, and therefore cannot access the community support that comes when donations are tax deductible. There are up to six government agencies involved in determining DGR status. While reforms have been proposed, they have not been acted upon. DGR is currently a complex, costly and inequitable system – with less than half of all charities having DGR status. The proposed reforms to DGR are a step in the right direction, but it is still difficult to justify the distribution of DGR eligibility given the arbitrary and ad hoc manner in which it has developed. It makes good policy sense that all donations made to registered, complying charities should be tax deductible. This is the practice in comparable countries like the UK and Canada.

The ACNC determining charitable status and DGR will deliver a fairer system and reduce red tape. This policy is economically feasible with the initial exemption of organisations for the advancement of religion and education reducing the likely implementation costs to approximately $130 million per annum. Excluding all schools and all churches for automatic DGR eligibility makes this measure affordable. At the same time the intent is not to deny DGR, so existing DGR exemptions for ministers of religion and other concessions based on religious and educational purposes would continue to apply.

This measure is estimated to be revenue neutral in the first instance. Initial projected expenditure of approximately $130 million is offset by past savings in ending uncapped FBT entitlements.

2. Create more incentives for giving now as Australia experiences the largest ever inter- generational wealth transfer over the coming two decades.

a. Living Legacy Trusts

Over the next two decades $2.4 trillion in wealth is expected to pass from Australian ‘baby boomers’ to the next generation. It is expected that charities will benefit from this wealth transfer through bequests. However, giving by bequest is currently low – in 2012 only 7.6% of final wills had a direct charitable bequest, and charitable bequests accounted for only 2% of the total value of estates.

Living Legacy Trusts involve a donor placing an asset in a trust for the benefit of a charity upon the donor’s passing. The asset is irrevocably committed to the charity, but the donor can still receive an income stream from the asset while they are still alive. In return for irrevocably committing the asset to the charity, the donor receives a tax deduction when they place the asset in the trust, worth a percentage of the asset’s value. This percentage may vary with factors including the donor’s age. There are also models where intermediaries may be established to manage the donations and enable charities access to the donated funds prior to the passing of the donor. This immediate access is particularly important given the current economic climate.

This measure encourages giving and enables intending donors to act on their bequest intentions at the time of greatest need (rather than time of death). It extends the policy intent of DGR concession, while supporting donors to maintain a self-supporting income stream.

This measure will have minimal impact to revenue over the next two years, with its impact increasing as the structure becomes more attractive over time. Modelling undertaken by Deloitte Access Economics in 2016 indicates a cost to revenue of $870 million over 10 years. This will be offset with growth in legacy giving, with the same analysis estimating that over 10 years, for each $1 of tax concessions provided, donations would increase by $1.68.

b. Opt-out workplace giving provisions

When in place, ‘opt out’ systems of workplace giving have ensured much higher levels of success in workplace giving programs.

Less than 2% of working Australians currently donate to charity from their pre-tax income through workplace giving. When in place, the ‘opt out’ approach to workplace can result in 60-70% of employees in an organisation participating. With ‘opt-in’, average participation rates are less than 5%. Uncertainty over provisions in the Fair Work Act are an impediment to more widespread use of the ‘opt-out’ approach. Clarifying the Fair Work Act would help increase the number of Australian employees participating in workplace giving. Growing to 10% of employees donating 0.35% of their pre-tax income, would raise over a quarter of a billion dollars each year through workplace giving. This is a realistic target based on local and international experience that would increase philanthropy and the engagement of Australians in the broader NFP sector.

CCA anticipates there would be limited additional costs to government in this measure.

c. Superannuation charitable investment options

Using employee super contributions to drive improvements for communities is increasingly being adopted around the world. CCA support a model similar that applying in France where all employees are given the option of investing 5-10% of their superannuation into ‘solidarity organisations’ (the equivalent of our charities). In 2008 the French government regulated that all super funds needed to provide this option to employees, and since that time the amount invested has grown to over $5.5 billion. This has stimulated social entrepreneurship, created opportunities to achieve social impact, improved the capital base and capacity of solidarity organisations.

The success of the French 90/10 rule shows what could be achieved if Australia chose to provide employees with some limited choice about how their superannuation contributions are invested. If just 2% of the MySuper funds were invested this way it would generate around $8.5 billion, or enough to significantly reduce homelessness by investing in social housing initiatives that could assist 50,000 Australians struggling to maintain secure and appropriate housing.

This measure could be transformative in encouraging the charities sector to find ways of establishing social enterprises that strengthen our communities. It would also link into the work of the Social Impact Investing Taskforce and provide a boost to impact investing across the charities and NFP sector.

This measure has minimal government impact as costs are almost non-existent – it is simply about enabling a different use of a very small part of Australia’s $2 trillion superannuation investment pool.

3. Fix fundraising regulations.

This measure would save millions of dollars a year in red tape, duplication and dysfunctional compliance activities that provide no benefit to the community. Simply ensuring fundraising activities are covered by the Australian Competition and Consumer Commission (ACCC) and noted through the ACNC would ensure any deceptive or misleading conduct associated with charitable fundraising, whatever the platform, could be closed down and perpetrators prosecuted.

CCA and many other groups have repeatedly called for the fix fundraising solution to be implemented, but still charities languish in a bygone era of accountability that has little relevance or effectiveness, and costs charities millions in wasted effort.

It is now two years since a Senate report recommended harmonization of fundraising regulations. The need to address the barriers created by fundraising regulations has also been highlighted in a recommendation from the recent Bushfire Royal Commission. No real progress has been made.

The recent leadership of the Australian Treasurer to progress a deemed authority to fundraise for ACNC registered charities is a step in the right direction but needs to be expanded to deliver nationally consistent fundraising regulation.

There is no cost to government in ensuring appropriate application of Australian Consumer Law.

4. Boost sector investment and productivity by increasing certainty in government funding, concessions, incentives and regulations.

This measure is focused on achieving a more stable financial and regulatory framework for all not-for- profits, particularly in relation to government funding and interaction with the sector. CEO Forums across the country run by CCA with the support of key organisations have clearly showed that uncertainty of government funding and the failure to cover the full direct and indirect costs of delivering services is a critical barrier to investment in the future sustainability of organisations. CSI’s research found that only 39% of government grants were reported to cover all costs of service delivery. The government needs to actively consider initiatives such as:

  • an agreed notice period of six months prior to the ending of any major government contract, incentive or concession, with limited exemptions for cases of fraud, other criminal actions, etc.

  • increasing the length of government contracts where possible to at least five years

  • more transparent and accessible processes for reviewing the performance of NFPs

  • more transparent and accountable processes for government funding decisions relating to NFPs

  • a commitment to covering the full direct and indirect costs of delivering services.
    These measures would all boost investment in organisational capacity across the NFP sector.

    At the centre of many concerns across the NFP sector is the ability of small and large community organisations to deal with an increasingly uncertain future. While governments are not responsible for all disruptions and challenges to the NFP sector, increasing certainty in government funding is a critical measure that would build capacity and effectiveness. This is especially important given the uncertain times imposed by COVID-19.

    CCA anticipates these measures would produce savings with very limited (mostly internal) outlays.

5. Develop a Charities Transformation Fund to support sector capacity development through; adoption of technology, staff training and development, research and evaluation, and infrastructure improvements.

The Australian government invests billions of dollars in charities and not-for profits to provide critical services and supports to communities across Australia. Unfortunately, there is often little allocation of funding to enable funded organisations to improve their services through capacity development in critical areas like technology, staff training and development, research and evaluation, and infrastructure.

While the government should not be solely responsible for sector capacity, it is important to acknowledge that increased productivity will only come if there is increased capacity to improve organisations and the way they operate.

In the area of technology for instance, COVID-19 has clearly highlighted a digital divide between charities – those with the capacity and know how to develop and adapt their services online and in other innovative ways and those without this capacity who have had to hibernate programs and services in the hope of finding additional funding in the future.

A transformation fund would enable charities to respond to what has become a challenging operating environment and improve services to communities, especially in this time when many communities are experiencing higher needs for support from charities.

CCA believes at least $300 million should be allocated to this fund.

6. Develop a Charities Investment Fund that could provide charities reduced interest loans for impact investment or longer-term line of credit options.

Many charities have had to deal with a sudden loss of income during COVID-19. CSI’s Pulse of the For- Purpose Sector research found that 85% of organisations surveyed reported a reduction in revenue. For some, it is only a temporary situation that will pass as the economy and capacity of people to gather together is restored.

Access to bridging finance is limited within charities and few have established lines of credit to smooth out inconsistent or lumpy income streams.

Establishing a fund that could provide longer term 5-to-10-year loans at subsidised interest rates – possibly with potential first loss risk partly underwritten through philanthropic backing – would enable charities with relatively strong balance sheets to continue to operate and maintain service capacity, even when temporary cash flow issues may otherwise have forced cutbacks and retrenchments.

CCA believes many charities would benefit through such a fund which could also underwrite a level of impact investment within the charities sector.

CCA anticipates the cost to government of supporting this fund would be an initial outlay of $500 million which would be invested in the charities sector and provide a small financial return over time.

 7. Support a one-stop-shop registration process to enable volunteers to be registered and insured more quickly without the red tape of multi-jurisdictional compliance.

COVID-19 has had a devastating impact on levels of volunteering across the charities and NFP sector with over two thirds of volunteers reducing or ceasing their volunteering activities.

Getting volunteers back is proving a challenge, not the least because of the complexity involved in ensuring all regulations, checks and regulatory requirements are met.

CCA believes it is past time to establish a national system for registration of volunteers, a one-stop-shop where various regulatory requirements and checks for people to work with children etc. can be streamlined into what effectively would become a volunteering passport.

Given the need to encourage volunteers back into their volunteering roles post the pandemic, this measure could be aligned with the proposed Re-invigorating Volunteering Action Plan outlined by Volunteering Australia in their Pre-Budget submission.

Individual charities will still need to run their own recruitment, training, and preparation programs for volunteers, but removing the broader regulatory requirements would make volunteering much more feasible.

The cost of this national program would be less than $2 million per annum as it would largely draw on existing capacity.

8. Introduce a targeted ‘estate duty’ for people with estates valued at over $10 million with appropriate incentives for donations to charities, safeguards relating to family businesses and farms, and mitigation of any potential adverse impacts.

National estate duties exist in many countries including: the United Kingdom, Germany, Italy, Belgium, the Republic of Ireland, France, the Czech Republic, Canada and the USA. Not only do these duties provide substantial government revenue, they also increase philanthropy by offering relief from estate duties for any money left to charity. The Henry Review drew on this international experience in supporting estate duties as a taxation measure. Among other benefits, estate duties can apply a small brake on growing levels of inequality in our communities.

Until 1979, many Australian governments gained substantial income through various forms of death or estate duties.

Australia’s growing gap between rich and poor, and the gap between government income and demand for government supported services, can both be partially addressed by applying a form of estate duty on the richest 1% in our communities.

A targeted 35% estate duty on all estates over $10 million (with appropriate exemptions) would raise substantial new government revenue and stimulate philanthropy.

ATO figures suggest over 25,000 people have assets above $10 million. If 4% of these families paid 35% in estate duties, it would equate to a minimum revenue of $3.5 billion.

 

 9. Review the generous tax concessions provided to gaming, catering, entertainment and hospitality income for mutual organisations, especially licensed clubs.

The mutuality principle that rightly applied in the late 1800s in Australia is no longer appropriate or consistent with existing taxation arrangements, particularly for organisations involved in gaming. Large licensed clubs that act as gaming venues should not be able to treat over 75% of their income as tax free, especially when they have not satisfied the basic requirements of being a not-for-profit organisation that exists to provide a public benefit. As pointed out in the Not-for-profit Tax Concessions Working Group Report (May 2013), concerns with the current application of the mutuality principle include:

– integrity concerns about member and non-member receipts;

– competitive neutrality concerns where mutual organisations are trading in competition with taxable businesses;

– social policy concerns about significant gambling and hospitality receipts of some organisations, which are not subject to income tax at the Commonwealth level; and

– concerns about private member benefit.

It is recommended, on public benefit grounds, that the tax law should be amended to treat all member and non-member income of mutual organisations as assessable for taxation purposes in line with normal income tax principles.

If this recommendation is not supported, all income from gaming, catering, entertainment and hospitality trading activities of mutual organisations should be treated as assessable.

It is difficult to justify the hundreds of millions of dollars of tax concessions provided to large licensed gaming clubs based on the mutuality principle. It is time to review these concessions taking into account any unintended consequences on mutual organisations that do provide a real benefit to members.

CCA anticipates this measure could generate significant additional government revenue.

Budget implications (costings)

CCA acknowledges the need to ensure an effective economic framework for all Australian governments that serves the needs of our various communities. We also acknowledge that COVID-19 has created new challenges for governments and for budgets.

In considering the specific budget implications of the nine key measures outlined in this submission, CCA has taken a relatively conservative approach to the projection of new income and expenditure for government. Given the complexity of some of the proposed measures and the lack of data about others, the initial costs and benefits outlined in this submission represent a starting point for further discussion and more detailed economic modelling.

CCA believes the measures proposed in this budget submission will over time generate significant revenue as well as long-term savings for governments, NFPs and the communities they serve.

Conclusion

This submission promotes Federal Government measures to strengthen the charities and NFP sector and deliver real economic and social benefits for governments and our communities.

Never has there been a stronger case for investment in the charities and NFP sector to build more resilient communities through greater engagement in our society and our economy.

Many individual not-for-profit organisations (including CCA members) will be seeking to have the Federal Government fund specific measures for the benefit of their own causes and communities. Most of these budget proposals from the not-for-profit sector are important and have real merit.

It is important to note that CCA does not see increased giving as a cost to government but a benefit to the communities we all live and work in. It is counter-productive to treat increased philanthropy and social impact investment as a government loss of potential tax income or ‘foregone revenue’. The whole community benefits when individuals or organisations choose to direct their resources into strengthening communities, increasing economic and social activity, and improving health and well-being. This is particularly the case if the money involved avoids the significant transfer costs of moving into, through, and out of government. Philanthropy and social investment are about encouraging greater ownership of local issues by enhancing the role of charities and NFPs.

COVID-19 has presented us all with many challenges. Inequality continues to rise in Australia. We need fairer ways of generating income for government and more impact investment to strengthen our communities. Estate duties and the French 90/10 rule are two examples of sustainable policies that have the potential to be transformative.

The NFP sector is too large and too important to be left on the margins of economic debates and major policy reforms within Australia. Government investment in enabling NFPs to be more efficient and effective will ultimately deliver stronger, more resilient and productive communities across Australia.

The Federal Budget is the most important policy document a Federal Government produces. Recognising the role of the charities and NFP sector through implementation of the measures outlined in this submission will translate into a fairer budget that will increase sector productivity and growth, benefitting all Australians.

CCA Pre-Budget Submission 2021-22 Read More »

CCA Submission to the Charitable Fundraising National Working Group on Proposed cross-border recognition model for charitable fundraisers

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CCA Submission to the Charitable Fundraising National Working Group on Proposed cross-border recognition model for charitable fundraisers

Summary Submission

Charitable fundraising regulation has been a major issue for charities across Australia for more than a decade. The Community Council for Australia (CCA) has provided numerous submissions, open letters and participated in many inquiries on this issue. All have failed to improve the situation for charities.

The proposals outlined in the discussion paper: Proposed cross-border recognition model for charitable fundraisers represent a step forward in that they suggest registration with the Australian Charities and Not-for-profit Commission (ACNC) will provide a deemed authorisation for registered charities to engage in fundraising. Unfortunately, this suggestion is so tempered by conditions – including the capacity of any jurisdiction to add whatever conditions it likes on charities before they can legally conduct fundraising activities – that it amounts to no movement at all. In essence the situation is no better than it was prior to the Senate Inquiry into this issue in 2018.

Given this situation, CCA has decided to again raise the same issues as were raised in 2018 by providing you with a copy of our 2018 submission to the Senate Inquiry.

Charities are currently registered and regulated by the ACNC, and fundraising is also regulated by Australian Consumer Law which prohibits misleading and deceptive conduct. There are also privacy laws, the Telecommunications Code and local by-laws about collections. In practice, no other authority is needed. History tells us that these regulations are quite sufficient to pursue the very small minority of charities that do the wrong thing, the scammers, those who mislead, engage in deceptive conduct or misuse publicly raised money. And that is without the various voluntary codes many charities comply with.

CCA understands that the Charities Crisis Cabinet has approved a set of additional Fundraising Principles that could be endorsed by charities engaged in fundraising or that could serve as the single model requirements overseen by States and Territories. While CCA supports this approach, the additional Australian Fundraising Principles are not really necessary if jurisdictions allowed existing regulators to simply do their job.

Attached to this very brief submission for your consideration is:

  1. the Community Council for Australia Submission to the Select Committee on Charity Fundraising in the 21st Century 2018

  2. an article on the urgent need to fix fundraising in Australia published in Pro Bono News on Thursday 17/09/20 written by the CEO of CCA, and available here: https://probonoaustralia.com.au/news/2020/09/now-or-never-time-to-fix-fu…

  3. A copy of the Australian Fundraising Principles as agreed by the Charities Crisis Cabinet.

Thank you for considering this submission including these three additional documents.

Yours sincerely

David Crosbie, CEO, 18 September 2020

Read or download submission here

CCA Submission to the Charitable Fundraising National Working Group on Proposed cross-border recognition model for charitable fundraisers Read More »

Submission responding to Draft Propositions, Royal Commission into National Natural Disaster Arrangements

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Submission responding to Draft Propositions, Royal Commission into National Natural Disaster Arrangements

CCA’s submission emphasises that critical engagement in preparation and response to disasters requires active engagement with local communities who live, work, and interact together.  These communities can be smaller than local councils, but may also cross council or even State/Territory borders. Better coordination and collaboration at all levels of government is required – but if there is no representation of charites and not-for-profits, no ongoing voice about needs within communities, it will not work.

Central government planning for local community needs without the active engagement of local communities and those who work with them is a recipe for wasting time and resources.

Read or download submission here.

Submission responding to Draft Propositions, Royal Commission into National Natural Disaster Arrangements Read More »

CCA Submission to inform the Federal Budget 2020/21

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CCA Submission to inform the Federal Budget 2020/21

This submission outlines nine measures the Community Council for Australia (CCA) believes will significantly strengthen Australia’s not-for-profit (NFP) sector and drive real economic savings for government over the coming financial year and beyond.  These measures have been informed by consultation with CCA members and key organisations in the NFP sector.  

It is important to note that this submission does not override the policy positions outlined in any individual Federal Budget submissions from CCA members.  

The content of this submission includes: a brief background to CCA; a listing of proposed measures; an overview of the current issues for the NFP sector; further details about the costing of proposals; and a conclusion.  

CCA acknowledges both the need for fiscal restraint and the growing demand for government services.  CCA proposes a major government revenue boosting measure (estate duty) as well as incentives to promote philanthropy and strengthen our communities (such as the French 90/10 superannuation rule).  

If Australia is to be a just and fair society where we increase collective ownership of local issues and build flourishing communities, there needs to be a genuine commitment to supporting reforms across the charities and not-for-profit sector (NFPs) from government and other key stakeholders.  This is not about providing more funding to the sector, but about encouraging and supporting more effective and efficient organisations delivering better outcomes for our communities.  

CCA welcomes this opportunity to provide input into the Federal Budget process and to engage in detailed discussion about any issues this submission raises. 
 

The Community Council for Australia

The Community Council for Australia is an independent non-political member based organisation dedicated to building flourishing communities by enhancing the extraordinary work undertaken by the charities and not-for-profit sector in Australia.  CCA seeks to change the way governments, communities and not-for-profits relate to one another.  It does so by providing a national voice and facilitation for sector leaders to act on common and shared issues affecting the contribution, performance and viability of NFPs in Australia.  This includes:

  • promoting the values of the sector and the need for reform 
  • influencing and shaping relevant policy agendas
  • improving the way people invest in the sector
  • measuring and reporting success in a way that clearly articulates value
  • building collaboration and sector efficiency
  • informing, educating, and assisting organisations in the sector to deal with change and build sustainable futures
  • providing a catalyst and mechanism for the sector to work in partnership with government, business and the broader Australian community to achieve positive change.

Our success will drive a more sustainable and effective charities and not-for-profit sector in Australia making an increased contribution to the well-being and resilience of all our communities.

Summary of proposed budget measures

The following proposals have been developed through extensive discussions and feedback from CCA members and other key stakeholders.  Each measure would deliver real benefits to government over the longer-term and strengthen communities (proposed measures are outlined in more detail on page four).

  1. Provide Deductible Gift Recipient (DGR) status to all registered charities with an initial exemption of organisations for the advancement of religion, childcare, primary and secondary education. 
  2. Introduce a targeted ‘estate duty’ for people with estates valued at over $10 million with appropriate incentives for donations to charities, safeguards relating to family businesses and farms; and mitigation of any potential adverse impacts.
  3. Implement the French 90/10 rule providing an option for all Australian employees to invest 5-10% of their superannuation into a not-for-profit social enterprise that benefits the community.
  4. Fix fundraising regulations.
  5. Boost sector investment and productivity by increasing certainty in government funding, concessions, incentives and regulations. 
  6. Develop and impose an additional ‘capacity levy’ on all Commonwealth funding of NFPs set at a minimum of 3% to support sector capacity development through; staff training and development, research and evaluation, and technical infrastructure improvements. 
  7. Increase philanthropy by enabling employers to establish more effective ‘opt out’ systems of workplace giving. 
  8. Work with the CCA and key stakeholders to promote uptake and investment in the future blueprint for the sector currently being developed by CCA and other partners.
  9. Review the generous tax concessions provided to gaming, catering, entertainment and hospitality income for mutual organisations, especially licensed clubs. 

CCA believes these measures could be delivered within the next two years and produce a much stronger government budget position as well as building capacity and resilience in our communities.  Australia cannot afford to ignore growing levels of debt, increased inequality and the need to support flourishing communities as a basis for improved productivity and well-being. 

An economy that does not support real growth in opportunity is not serving the interests of our community.  CCA believes every budget statement needs to be framed by what is going to deliver stronger, fairer, more creative, sustainable and connected communities.

Context: not-for-profit reform

The NFP sector encompasses over 600,000 organisations – from large to very small, and employs well over one million staff (around 10% of all employees in Australia).  Australia’s 55,000+ charities collectively turn over more than $147 billion each year and hold close to $300 billion in assets.  

These facts tell only a small part of the story. The real value of the NFP sector is often in the unmeasured contribution to Australian quality of life.  NFPs are at the heart of our communities; building connection, nurturing spiritual and cultural expression, and enhancing the productivity of all Australians. Collectively, they make us a more resilient society.  

The importance of the NFP sector is now being internationally recognised with many governments putting in place measures to increase NFP investment and productivity.  Smaller government and bigger community is a common theme, driven in part by savings, but also by a commitment to strengthening democracy through greater civic engagement, providing incentives for social entrepreneurship and boosting productivity within the NFP sector.

In Australia there have been various initiatives seeking to: promote social enterprise; reduce compliance costs for NFPs; encourage a diversification of financing options to build a more sustainable funding base; streamline and refine the regulation of NFPs and charities; establish less bureaucratic reporting requirements while building community transparency; increase philanthropy; promote impact investing; and increase sector performance measurement.  CCA supports all these activities. 

The establishment of the ACNC is the first time the NFP sector has had an independent regulator dedicated to serving their needs and enhancing their capacity.  It has proved to be a positive step towards red tape reductions, increased transparency, and trust in the community by prospective volunteers and donors.  The national charities register has until recently also provided invaluable information.

While the immediate history of the NFP sector is framed by growth and reform, new issues are emerging.  The level of individual philanthropic giving as a percentage of income has still not recovered to the highs of 2009.  At the same time, revenue available to governments is effectively falling in real terms against a backdrop of increasing demands and higher community expectations.   Competition for fundraising and services has increased. 

Given the size of the sector and its critical role in our community, the Federal Government can achieve real economic and social benefits if it chooses to strategically invest in strengthening our communities and our NFPs.  There have been numerous reports and recommendations relating to the NFP sector over the last decade, but relatively few have been acted upon.  Governments seem reluctant to change established practices that promote competition between charities, increase compliance costs and contribute to growing uncertainty.  These practices are all counter-productive for government and our communities. 

Supporting the proposals outlined in this submission will make Australia stronger. Achieving a better return on existing government investments should also be a high priority.  In the interests of all Australian communities, government should avoid inflicting any long-term damage on a sector that not only holds a vital place in our economy, but also strengthens communities, builds connectedness and increases productivity for all Australians.
 

Description of proposed budget measures

  1. Provide Deductible Gift Recipient (DGR) status to all registered charities with an initial exemption of organisations for the advancement of religion, childcare, primary and secondary education.  

The present system of determining Deductible Gift Recipient (DGR) status largely through the Australian Taxation Office (ATO) and Departmental listing favors larger charities that can afford lawyers and lobbyists to assist the progression of their applications.  Many smaller NFP and charities do not have the capacity to apply for DGR status, and hence they cannot access the community support that comes when donations are tax deductible.  There are up to six government agencies involved in determining DGR status.  While reforms have been proposed, they have not been acted upon.  DGR is currently a complex, costly and inequitable system – with less than half of all charities having DGR status.  The proposed reforms to DGR are a step in the right direction, but it is still difficult to justify the distribution of DGR eligibility given the arbitrary and ad hoc manner in which it has developed.  It makes good policy sense that all donations made to registered, complying charities should be tax deductible.  This is the practice in comparable countries like the UK and Canada.  

The ACNC determining charitable status and DGR will deliver a fairer system and reduce red tape. This policy is economically feasible with the initial exemption of organisations for the advancement of religion and education reducing the likely implementation costs to approximately $130 million per annum.  Excluding all schools and all churches for automatic DGR eligibility makes this measure affordable.  At the same time the intent is not to deny DGR, so existing DGR exemptions for ministers of religion and other concessions based on religious and educational purposes would continue to apply.

Funding to support this measure could come from savings through the recent capping of FBT entitlements for meals and entertainment expenses.

This measure is estimated to be revenue neutral in the first instance.  Initial projected expenditure of approximately $130 million is offset by recent savings in ending uncapped FBT entitlements.

 

  1. Introduce a targeted ‘estate duty’ for people with estates valued at over $10 million with appropriate incentives for donations to charities, safeguards relating to family businesses and farms, and mitigation of any potential adverse impacts.

National estate duties exist in many countries including: the United Kingdom, Germany, Italy, Belgium, the Republic of Ireland, France, the Czech Republic, Canada and the USA.  Not only do these duties provide substantial government revenue, they also increase philanthropy by offering relief from estate duties for any money left to charity.  The Henry Review drew on this international experience in supporting estate duties as a taxation measure.  Among other benefits, estate duties can apply a small brake on growing levels of inequality in our communities.  

Until 1979, many Australian governments gained substantial income through various forms of death or estate duties.  It is suggested that death duties ended because Premier Joh Bjelke Petersen wanted to attract retirees to Queensland and abolished all death duties.  Other states followed.  Until then the threshold had effectively been lowered over time to a level where many not so rich were also having to pay.  As a consequence of these factors, in the late 1970s an estate duty was no longer seen as fair.  

A better targeted approach to estate duties could address these previous failings and would be consistent with a fair go for all.  Using a revised version of capital gains taxes and only applying it to those with estates above $10 million (excluding family farms and other appropriate asset exemptions) offers a workable option.  

In Belgium estate duties contribute 1.4% of total government revenue which would translate into over $5 billion in revenue per annum for Australia.  

Australia’s growing gap between rich and poor, and the gap between government income and demand for government supported services, can both be partially addressed by applying a form of estate duty on the richest 1% in our communities.  A targeted 35% estate duty on all estates over $10 million (with appropriate exemptions) would raise substantial new government revenue and stimulate philanthropy. 

ATO figures suggest over 25,000 people have assets above $10 million.  If 4% of these families paid 35% in estate duties, it would equate to a minimum revenue of $3.5 billion.

 

  1. Implement the French 90/10 rule providing an option for all Australian employees to invest 5-10% of their superannuation into a not-for-profit social enterprise that benefits the community.

France has required all employees to be given the option of investing 5-10%of their superannuation into ‘solidarity organisations’ (the equivalent of our charities) since 2001. In 2008 the government regulated that all super funds needed to provide this option to employees and since that time the amount invested has grown from $700 million to over $5.5 billion.  This has stimulated social entrepreneurship, created opportunities to achieve social impact, improved the capital base and capacity of solidarity organisations.

The success of the French 90/10 rule shows what can be achieved if Australia chose to provide employees with some choice about how their superannuation contributions are invested.  If just 2% of the MySuper funds were invested this way it would generate around $8.5 billion, or enough to significantly reduce homelessness by providing housing to over 50,000 Australians struggling to maintain secure and appropriate housing.

CCA believes this measure could be transformative in encouraging the charities sector to find ways of establishing social enterprises that strengthen our communities.  It would also link into the work of the Social Impact Investing Taskforce recently established by the government and provide a boost to impact investing into the sector.

This measure has very little government impact as costs are almost non-existent – it is simply about enabling a different use of a very small part of Australia’s $2 trillion superannuation investment pool.

 

  1. Fix fundraising regulations.

This measure would save millions of dollars a year in red tape, duplication and dysfunctional compliance activities that provide no benefit to the community. Simply ensuring fundraising activities are covered by the Australian Competition and Consumer Commission (ACCC) would ensure any deceptive or misleading conduct associated with charitable fundraising, whatever the platform, could be closed down and perpetrators prosecuted.  CCA and many other groups have repeatedly called for the fix fundraising solution to be implemented, but still charities languish in a bygone era of accountability that has little relevance or effectiveness, but costs charities millions in wasted effort.

There is no cost to government in ensuring appropriate application of Australian Consumer Law.

 

  1. Boost sector investment and productivity by increasing certainty in government funding, concessions, incentives and regulations. 

This measure is focused on achieving a more stable financial and regulatory framework for all not-for-profits, particularly in relation to government funding and interaction with the sector.  CEO Forums across the country run by CCA with the support of key organisations clearly showed that uncertainty of government funding is a critical barrier to investment in the future sustainability of organisations.  This applies to not just recurrent government funding, but also tax including the losses associated with changes to FBT concessions and incentive programs.  The government needs to actively consider initiatives such as: 

  • an agreed notice period of six months prior to the ending of any major government contract, incentive or concession, with limited exemptions for cases of fraud, other criminal actions, etc.
  • increasing the length of government contracts where possible to at least five years
  • more transparent and accessible processes for reviewing the performance of NFPs
  • more transparent and accountable processes for government funding decisions relating to NFPs. 

These measures would all boost investment in organisational capacity across the NFP sector.

Experience in other sectors has also shown that where an independent feedback process can be established that does not focus on public blame and retribution, system change in relationships can be driven through active feedback and better information exchange.  CCA supports a national feedback exchange program where all NFPs could provide honest feedback on their dealings with government agencies.  Providing avenues to pursue positive improvements in the relationship between governments and the NFP sector is important. 

At the centre of many concerns across the NFP sector is the ability of small and large community organisations to deal with an increasingly uncertain future.  While governments are not responsible for all disruptions and challenges to the NFP sector, increasing certainty in government funding is a critical measure that would build capacity and effectiveness.

CCA anticipates these measures would produce savings with very limited (mostly internal) outlays. 
 

  1. Develop and implement an additional ‘capacity levy’ on all Commonwealth funding of NFPs set at a minimum of 3% to support sector capacity development through; staff training and development, research and evaluation, and technical infrastructure improvements. 

The Australian government invests billions of dollars in charities and not-for profits to provide critical services and supports to communities across Australia. Unfortunately, there is often little allocation of funding to enable funded organisations to improve their services through capacity development in critical areas like staff training and development, research and evaluation, and infrastructure including technological systems.  While the government should not be solely responsible for sector capacity, it is important to acknowledge that increased productivity will only come if there is increased capacity to improve organisations and the way they operate. While many NFPs invest in their capacity, providing an additional 3% allocation on top of government funding to invest in appropriate and effective capacity building will ensure increased productivity and a better return on government investment into the sector.

CCA believe some of the funding provided through this measure should be used to ensure better co-ordination and sharing of best practice through centralised databases of available opportunities in critical areas like; staff training, program evaluation, systems development, etc.  This centralised information sharing capacity could be seen as facilitating excellence across the sector and might involve a range of existing organisations creating a virtual Centre of Excellence for the NFP sector.  It could also fund research into the NFP sector and support a cross-government advisory body like the NFP Sector Reform Council to improve government and NFP relationships.  The details of how best to develop and apply this levy would need to be worked through with central agencies and government departments. 

The annual budget for this initiative will depend on government allocations to NFPs, administrative budgets and the degree of existing expenditure, but may not require new additional expenditure.
 

  1. Increase philanthropy by enabling employers to establish more effective ‘opt out’ systems of workplace giving.

CCA strongly believes that increased community engagement and philanthropic contributions to NFPs produce a net benefit to governments as well as to the communities NFPs serve.  It is counter-productive to treat increased philanthropy and social impact investment as a government loss of potential tax income or ‘foregone revenue’.  The whole community benefits when individuals or organisations choose to direct their resources into strengthening communities, increasing economic and social activity, and improving health and well-being.  This is particularly the case if the money involved avoids the significant transfer costs of moving into, through, and out of government.  Philanthropy and social investment are about encouraging greater ownership of local issues by enhancing the role of NFPs and reducing the size of government.

When in place, ‘opt out’ systems have ensured much higher levels of success in workplace giving programs.  The experience with the French 90/10 superannuation rule shows that once all employees are given the option, the amount being contributed to charitable purposes increases significantly.  With the current ‘opt in’ for existing employee systems, less than 3.5% of Australian workers are in a workplace giving program.  If this could increase to 10% of Australian employees donating 0.5% of their pre-tax income, over a quarter of a billion dollars would be raised through workplace giving.  This is a realistic target that would increase philanthropy and the engagement of Australians in the broader NFP sector.

CCA anticipates there would be no additional costs to government in this measure.

 

  1. Work with the CCA and key stakeholders to promote uptake and investment in the future blueprint for the sector currently being developed by CCA and other partners.

The future of Australia’s NFP sector is too important to our economy and our communities to grow in an ad hoc manner with little comprehensive planning or strategic investment.  CCA is working with partners to develop a blueprint for the charities sector.  At present there is no plan, no strategy and no real projection about the future viability or even the sustainability of the current levels of growth across the NFP sector.  The effective development of a blueprint will include developing clear goals and measures of what the NFP sector is seeking to achieve.  Additional government support to market and advance the blueprint once completed, would enable the blueprint to be much more than a list of desirable activities and outcomes.

With the Federal Government as a joint partner and supporter (and not the sole contributor), the completed blueprint could become a touchstone for sector investment from government, philanthropists, business and other stakeholders.

CCA anticipates the cost to government of supporting the national campaign to promote the value of investing in charities would be in the order of $350,000.

 

  1. Review the generous tax concessions provided to gaming, catering, entertainment and hospitality income for mutual organisations, especially licensed clubs. 

The mutuality principle that rightly applied in the late 1800s in Australia is no longer appropriate or consistent with existing taxation arrangements, particularly for organisations involved in gaming.  Large licensed clubs that act as gaming venues should not be able to treat over 75% of their income as tax free, especially when they have not satisfied the basic requirements of being a not-for-profit organisation that exists to provide a public benefit.  As pointed out in the Not-for-profit Tax Concessions Working Group Report (May 2013), concerns with the current application of the mutuality principle include:

– integrity concerns about member and non-member receipts;  

– competitive neutrality concerns where mutual organisations are trading in competition with taxable businesses;  

– social policy concerns about significant gambling and hospitality receipts of some organisations, which are not subject to income tax at the Commonwealth level; and  

– concerns about private member benefit. 

It is recommended, on public benefit grounds, that the tax law should be amended to treat all member and non-member income of mutual organisations as assessable for taxation purposes in line with normal income tax principles.  

If this recommendation is not supported, all income from gaming, catering, entertainment and hospitality trading activities of mutual organisations should be treated as assessable.  

It is difficult to justify the hundreds of millions of dollars of tax concessions provided to large licensed gaming clubs based on the mutuality principle.  It is time to review these concessions taking into account any unintended consequences on mutual organisations that do provide a real benefit to members. 

CCA anticipates this measure could generate significant additional government revenue.

 

Budget implications (costings)

CCA acknowledges the need to ensure an effective economic framework for all Australian governments that serves the needs of our various communities.  This budget submission has taken into account the need to increase government revenue through sustainable measures that have minimal impact on productivity, to reconsider inappropriate taxation concessions, and promote measures that will diversify the income of charities and not-for-profits enabling a rebuilding of capital, and an expansion in their capacity, without increasing government expenditure. 

In considering the specific budget implications of the nine key measures outlined in this submission, CCA has taken a relatively conservative approach to the projection of new income and expenditure for government.  Given the complexity of some of the proposed measures and the lack of data about others, the initial costs and benefits outlined in this submission represent a starting point for further discussion and more detailed economic modelling.  

CCA believes the measures proposed in this budget submission will generate significant revenue as well as long-term savings for governments, NFPs and the communities they serve.

 

Conclusion

This submission promotes Federal Government measures to strengthen the NFP sector and deliver real economic and social benefits for governments and our communities. 

Many individual not-for-profit organisations (including CCA members) will be seeking to have the Federal Government fund specific measures for the benefit of their own causes and communities.  Most of these budget proposals from the not-for-profit sector are important and have real merit.

There is a strong case for reform in the charities and not-for-profit sector to build more resilient communities through greater engagement in our society and our economy. Over the past two decades, the NFP sector has had limited support to improve capacity and effectiveness.  This is despite the very considerable contribution the broader NFP sector makes in terms of employment, productivity, individual and community well-being.

The harsh reality for most governments is that government income levels are stalling while demand for services continues to increase.  Part of the solution to this tension is achieving real productivity within government and the NFP sector.  Delivering positive change for NFPs requires an initial investment in time and resources to boost capacity and offer the certainty required for organisational investment.

Inequality continues to rise in Australia.  We need fairer ways of generating income for government and more impact investment to strengthen our communities.  Estate duties and the French 90/10 rule are two examples of sustainable policies that have the potential to be transformative.

The NFP sector is too large and too important to be left on the margins of economic debates and major policy reforms within Australia.  Government investment in enabling NFPs to be more efficient and effective will ultimately deliver stronger, more resilient and productive communities across Australia. 

The Federal Budget is the most important policy document a Federal Government produces.  Recognising the role of the NFP sector through implementation of the measures outlined in this submission will translate into a fairer budget that will increase sector productivity and growth, benefitting all Australians.

CCA Submission to inform the Federal Budget 2020/21 Read More »

Submission to the The Australian National Audit Office (ANAO) Performance review of the Australian Charities and Not-for-profits Commission (ACNC)

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Submission to the The Australian National Audit Office (ANAO) Performance review of the Australian Charities and Not-for-profits Commission (ACNC)

CCA’s submission to the The Australian National Audit Office (ANAO) Performance review of the Australian Charities and Not-for-profits Commission (ACNC) outlines key issues in relation to the performance of the Australian Charities and Not-for-profit Commission (ACNC) as a regulator for Australian charities.

CCA has consulted with members in framing this submission, however, it is important to note that this submission does not override the policy positions outlined in any individual submissions from CCA members. 

CCA has long been a supporter of the need for an independent regulator of charities in Australia.  CCA has advocated for the establishment and retention of the ACNC as a way of delivering increased transparency, accountability, and sustainability for the Australian charities and not-for-profit sector. 

The content of this submission includes: a brief background to CCA; a summary listing of key points within this submission, an overview of the current context for the NFP sector; considering the scope of the review, a more detailed outline of six specific issues to be considered in reviewing the performance of the ACNC, and a conclusion. 

Most of the information referenced in this submission comes from the three most recent self-assessed performance reports produced by the ACNC and Senate Estimates transcripts (see references).

CCA welcomes this opportunity to provide input into this performance review of the ACNC. 

It is important to note at the outset that David Crosbie, CEO of CCA, was one of the founding ACNC Advisory Board members.

The Community Council for Australia

The Community Council for Australia (CCA) is an independent non-political member-based organisation dedicated to building flourishing communities by enhancing the extraordinary work undertaken by the charities and not-for-profit sector in Australia.  CCA seeks to change the way governments, communities and not-for-profits relate to one another.  It does so by providing a national voice and facilitation for sector leaders to act on common and shared issues affecting the contribution, performance and viability of NFPs in Australia.  This includes:

  • promoting the values of the sector and the need for reform 
  • influencing and shaping relevant policy agendas
  • improving the way people invest in the sector
  • measuring and reporting success in a way that clearly articulates value
  • building collaboration and sector efficiency
  • informing, educating, and assisting organisations in the sector to deal with change and build sustainable futures
  • providing a catalyst and mechanism for the sector to work in partnership with government, business and the broader Australian community to achieve positive change.

Our success will drive a more sustainable and effective charities and not-for-profit sector in Australia making an increased contribution to the well-being and resilience of all our communities.

Summary of key points in this submission

  1. The first five years of the ACNC have been remarkably successful

The ACNC initially set the standard internationally for what a charities regulator can and should be. 

  1. Performance metrics have been very positive – but it is difficult to tell if the positive trends are continuing

While we await the latest performance report from the ACNC, there are some concerns about the last performance report self-assessment and what appears to be a declining level of performance information.

  1. The provision of value-add information provided to researchers, policy makers and the charities sector appears to be diminishing

Disbanding support for charity researchers and producing less information for the sector risks undermining the mutuality of information flows between the sector and the ACNC.

  1. The promised Charity Passport is yet to be a reality

Good progress was made establishing the Charity Passport, but many government departments, regulators, funders, and others have not significantly enhanced their use of the ACNC data since 2017.  

  1. There are indicators suggesting a loss of management and leadership skills at the ACNC over the last two years is now negatively impacting performance

While staff surveys are not being released (despite FOI requests), many senior staff have left the ACNC in the last two years and staff morale appears to have declined significantly. The lack of a positive workplace culture combined with a decline in senior management expertise will have a negative impact on ACNC performance.

  1. Charities want the ACNC to focus on being a better regulator

What charities really want is a strong and effective charities regulator.  This means reducing red tape by increasing use of the Charity Passport, thorough investigation of complaints and appropriate enforcement, provision of well targeted advice and guidance, value added information about the sector to inform better policy making, and effective timely service to all who use the regulator and the information it collects.

Background context: the not-for-profit sector

The NFP sector encompasses over 600,000 organisations – from large to very small – and employs well over 1.3 million staff (around 10% of all employees in Australia).  Australia’s 56,000 charities collectively turn over more than $143 billion each year and hold over $275 billion in assets.  In the last decade, sector growth has continued at more than 7% a year, a figure that is higher than any other industry group.  

These facts tell only a small part of the story. The real value of the NFP sector is often in the unmeasured contribution to Australian quality of life.  NFPs are at the heart of our communities; building connection, nurturing spiritual and cultural expression, and enhancing the productivity of all Australians. Collectively, they make us a more resilient society.  

The importance of the NFP sector is now being internationally recognised with many governments putting in place measures to increase NFP investment and productivity.  Smaller government and bigger community is a common theme, driven in part by savings, but also by a commitment to greater civic engagement, social entrepreneurship and productivity within the NFP sector.

For many decades there was no consistent regulation of charities in Australia other than the one-off requirement for those seeking any form of taxation concession to register with the Australian Taxation Office.  For many, the process of working with the Australian Taxation Office to gain charitable status was a negative experience. Once registered, most charities never had any further contact with any regulator.

The establishment of the Australian Charities and Not-for-profit Commission (ACNC) is the first time the NFP sector has had an independent regulator dedicated to providing a one stop shop approach to charity regulation and enhancing their capacity.  The ACNC has already proved to be a positive step towards red tape reductions, increased transparency, and enhancing trust in the community.  The national charities register has also provided invaluable information to millions of Australians.  

It is important to note the ACNC was set up in consultation with the charities sector and sought to support the sector as well as regulate the sector (see this explanation of Object 2 in the ACNC Act https://probonoaustralia.com.au/news/2019/02/second-object-acnc-act-mea).

When there were proposals to disband the ACNC, many charities expressed significant concern.  Surveys conducted between 2012 and 2015 by Pro Bono Australia consistently identified over 75% of charities supported the establishment and maintenance of the ACNC.

The recent history of the NFP sector is framed by growth and reform, but new issues and challenges are emerging. The level of volunteering and individual philanthropic giving as a percentage of income has still not recovered to the highs of 2009.  The revenue available to governments to support the work of charities is effectively falling in real terms against a backdrop of increasing demands and higher community expectations.  Competition for fundraising and services income has increased. 

The level of uncertainty across the charities sector is having a negative impact on medium and longer term strategic-planning, and reducing investment in organisational capacity.  This translates into diminished capacity and limited expenditure on the organisational activities that increase the quality and responsiveness of services provided to communities.

Having a well-functioning high-performance charities regulator is critical to the future credibility and sustainability of the charities sector.

Scope of the ANAO Performance Review of ACNC:  why the six key areas raised in this submission are of importance

The objective of the audit is to assess the effectiveness of the Australian Charities and Not-for-profits Commission’s (ACNC’s) regulation of charities. The ANAO proposes to examine the ACNC’s arrangements for:

  • registering charities and maintaining the Charity Register;
  • supporting charities to meet their ongoing compliance obligations; and
  • reducing the regulatory burden on charities and strengthening the sector.

The actual performance data sets and achievements of the ACNC over the first five years are very clearly in scope for this review, as is the issue of performance metrics in general, how they are being collected and shared.

The provision of value-added information provided to researchers, policy makers and the charities sector is critical to the performance of the ACNC in that it reinforces the benefits of voluntary compliance.  Knowing the information provided by charities to the ACNC will help inform researchers, policy makers and other charities ensures real value is placed upon the information by charities themselves. Charities know that the provision of an Annual Information Statement is not just another form filling exercise to enable information to be collected and filed away for no real benefit to anyone. Not properly drawing on this information diminishes the mutuality of information flows between the sector and the ACNC.  Over time this will lead to poorer compliance which is counter-productive to good regulator performance.

While ACNC staffing and management practices may not be the primary focus of this review, there is no question that the quality of senior staff, the morale of staff in completing their tasks, and the willingness of staff to invest themselves in the organisation, all have a major impact on the performance of the ACNC.  This is particularly true in relation to both the customer service elements of the ACNC performance (registering new charities, advice lines, operating the charities register, investigations and compliance activities); and the charities passport area, where senior management are charged with the task of bringing other agencies on board to the concept and reassuring them about the capacity of the ACNC to provide timely, accurate, validated information.

What charities really want is a strong and effective charities regulator.  The six areas raised within this submission all clearly impact on the performance of the ACNC and all should be in scope for this performance review of the ACNC.  

Key issues in the performance of the ACNC

  1. The first five years of the ACNC were remarkably successful

It is almost inconceivable that the ACNC could have been any more successful in its first five years establishment phase.  In hindsight, this is no accident, but a product of; over 12 months operating as a task force; careful and considered staff selection mixing regulatory expertise with charity experience; extensive consultation with charities, governments, other regulators, and associated experts; a strong focus on sector education and awareness; learning from other regulators around the world; drawing on quality researchers, technical expertise, media and communications; an outcomes based performance matrix; regular engagement and reporting with the Advisory Board, practitioners and sector users.  As a consequence, the ACNC delivered real outcomes including:

2011

2017

Once registered with the Australian Taxation Office, charities not required to report to anyone

Charities reporting annually providing key information on who is involved, income and expenditure, activities in pursuit of mission

No agreed governance standards

Five agreed governance standards

Ad hoc inconsistent advice and support

High level of advice and support for all charities

No public register of charities

Over 13,000 inactive charities de-registered establishing a highly reliable, regularly updated and accessible national register of charities 

A lack of information available about charities in Australia 

Comprehensive information is publicly available about the charities sector that can be cross referenced against; area of activity, location, income levels, staffing levels, etc. 

No single point of reference for key organisational information about a charity for governments, their Departments, regulators, Councils, or donors

Government Departments, regulators in State and Territories, and philanthropists increasingly drawing on ACNC data (the Charity Passport) rather than duplicating information

No clear complaints process for anyone with concerns about a charity behaving badly

Over 1500 complaints lodged and either resolved or investigated drawing on input from multiple regulators and information sources

Little independent research about charities in Australia

Extensive independent research on the state of the charities sector is commissioned on an annual basis

Paper based forms for charity regulation

99% of charities completed their Annual Information Statements online in 2017

No Australian charities regulator

Internationally acclaimed charities regulator with the highest rate of voluntary compliance by charities anywhere in the world

The above list is a truncated snapshot of achievements – so much more could and should be said about the remarkable achievements of the ACNC in its first five years.  

It should also be noted that the initial lack of support from the Federal Government (at times seeking to abolish the ACNC altogether) impeded the capacity of the ACNC to work across governments.  

The leadership of the ACNC throughout its first five years was a critical factor in its success. Not only did the ACNC have an outstanding Commissioner in Susan Pascoe, but also Deputy Commissioners David Locke and Murray Baird provided genuine expertise, knowledge and high-quality management skills.  The senior staff team below this level were also outstanding in their work, despite not having a secure future to look forward to.

What is beyond dispute is that, despite the barriers, in its first five years the ACNC set the standard internationally for what a charities regulator can and should be. 

  1. Performance metrics have been very positive – but it is difficult to tell if the positive trends are continuing

One of the requirements of the ACNC is to provide an annual report to the Parliament and to generally be accountable through processes such as the Senate Budget Estimates questioning of senior officials.  The charities sector, the parliament and many policy and regulatory bodies are rightly interested in the regulation of charities.  The provision of information about the performance of the ACNC was always seen as an important part of enabling the ACNC to fulfil its role as a respected regulator.

Since publication of the 2017/18 performance report no update has been provided.  Many of the examples used to justify positive reporting of performance in the 2017/18 report relate to work initiated or completed previously.  

We do know the number of complaints received about the performance of the ACNC increased significantly from less than 200 in a year in 2016/17 to more than 1200 in 2017/18. While some of this relates to new IT systems, good management should have made any transition to new IT systems less onerous for users of ACNC data.  In many cases links to important data simply disappeared without notice.

There were many more guides and fact sheets published in 2016/17 then there have been since.

Similarly, we know from 2017 there were 76 speaking engagements and 52 sector events run by the ACNC, but this level of engagement has also declined.

It is pleasing to see wait times for phone inquiries averaging less than 40 seconds and processing times for new charity applications below 15 days once all paperwork is submitted for 98% of cases.  

These trends seem a little inconsistent with recent tweets to the sector – e.g. @ACNC_gov_au 26/8/19  Hold the phone! We’re experiencing higher than normal wait times on our 13 22 62 Advice phone line.  If your query is not urgent, please wait until next week to call.  If your query is urgent, thank you for your patience. (Gif Hold the phone).… 

The 47% increase in complaints raised about charities with the ACNC may be a positive indicator that the public are becoming aware of the role of the ACNC, although more information about complaints would be useful.  There is some data suggesting more internally initiated investigations.  CCA would like to see more details and an explanation for any shift in compliance, investigation and enforcement activities.

The fact that only 1 of 26 FOI requests received the full document and 5 of the 26 requests received only a partial release of documents suggests the ACNC FOI policy might need to be reviewed.  Refusing so many FOI requests seems unusual. 

In some areas it is possible to monitor performance over time and see trends, but not all areas, and the lack of a current performance reporting is of concern to the sector.

More timely public reporting processes around key performance metrics would be welcome.

More timely and accurate reporting to the Parliament of Australia would also be welcome. Previously the ACNC Commissioner and Assistant Commissioners would attend most Senate Estimates hearings, often supported by other staff with additional knowledge and expertise. The current Commissioner’s refusal to bring staff expertise to the table for Senate Estimates suggests a lack of genuine interest in providing the best possible information to the Australian Parliament. Sending along a single ACNC staff member with less than three weeks employment experience at the regulator to answer Senators’ detailed questions about the operations of the ACNC showed a level of disrespect for the process of parliamentary accountability. The rationale used that the Commissioner was at a conference where he was not speaking seems inadequate. The suggestion that travel for staff to attend three Senate Estimate hearings each year is too expensive also seems inconsistent given the extraordinary travel costs associated with a Brisbane based Commissioner claiming significant travel expenses for all attendances at the ACNC offices in Melbourne.

  1. The provision of value-add information provided to researchers, policy makers and the charities sector appears to be diminishing

It took a long time for the current ACNC leadership to produce an Annual Charities Report and when it was produced, it seems to be a cut down version lacking the depth of insight and analysis previously provided.  This lack of commitment to the ACNC’s role as a provider of quality information about the charities sector is of concern, especially when it is combined with the discontinuance of support and encouragement for research into the charities sector previously provided by the ACNC.

The 2016/17 ACNC performance report states:

We also maintained the ACNC research network, providing a forum for researchers and academics interested in studying the sector to get together with the ACNC. At network teleconferences, attendees received updates about the ACNC’s research work and shared information about their projects.

The ACNC research network has been disbanded in the last two years.  

The open provision of ACNC data and encouragement to researchers to draw on this data is central to the role of a charities regulator.  For many in the sector it is one of the most important reasons for supporting a charities regulator.  If charities know that the information they provide to the ACNC will inform value-added reports and research, the additional work to provide timely data can be seen as a worthwhile contribution to improving knowledge and policy making for the sector.  

CCA believes the mutual benefit of two-way information flows is one of the reasons the ACNC has enjoyed strong support across the charities sector. The ACNC currently enjoys the highest level of voluntary information provision of any charity regulator in the world.  Less added-value information flow back to the charities sector will undermine this achievement and risks less voluntary compliance. This sense of mutuality will diminish if the ACNC provides less value-add information.  

  1. The promised Charity Passport is yet to be a reality

When charities were being asked to support the new ACNC, one of the positive selling points of the regulator was the capacity to cut red tape by developing a Charity Passport which could be used by government departments, funders, and other regulatory authorities at a federal, state and local level.

Prior to the ACNC, if a charity wanted to book a local community hall, gain a concessional rates approval from a local council, seek an exemption from payroll tax from a state government, apply for funding from a charitable foundation, seek charitable funding through a federal government department, seek approval to fundraise or engage in many other activities, they would have to prove their charitable status (often requiring multiple copies of letters from the Australian Taxation Office) and provide detailed information about their charity to establish their bona fides.  

The Charity Passport is a single document drawn from ACNC data that meets the basic identity and credentialing requirements as well as conveying verified information about the charity.  Adoption of the Charity Passport has the potential to save many millions of dollars of duplicated administrative tasks within charities.

The major barrier to early adoption of the Charity Passport was the determination of the Federal Government to abolish the ACNC.  Once this threat was no longer being made, the ACNC achieved very significant progress in having a broad range of organisations adopt the Charity Passport as meeting basic identification and credentialing requirements.

Unfortunately, it appears progress in advancing the Charity Passport has slowed since 2017 with many charities still reporting multiple duplicated administrative tasks largely providing the same sets of information in different forms to different authorities and government departments. According to the ACNC self-assessment, the number of agencies using the Charity Passport increased by over 25% in 2017 and only 5% in 2018.

Many charities have complained that after several years operation there is still a lack of alignment between ASIC and ACNC databases in terms of maintaining the officers of the company.  This often creates issues with some people still referring to ASIC despite ACNC being the appropriate regulator.

The failure to align fundraising regulations has become a major issue for many charities.  While this in part relates to Australian Consumer Law, the lack of State and Territory regulator alignment to the ACNC creates a huge administrative burden in many charities.

There are many other contributors to red tape in the charities sector, but the failure to gain widespread acceptance and adoption of the Charity Passport continues to represent a major failure in effective charity regulation.

Only by working diligently and authentically with many government departments and regulatory authorities will the barriers to adoption of the Charity Passport be overcome.  

Whether the current leadership of the ACNC can advance this task is now an issue of concern given the poor progress reported in the most recent ACNC self-assessment.

The important point here is that in terms of ACNC performance, this failure to see the Charity Passport more widely adopted is very frustrating and annoying for the charities sector.

  1. There are indicators suggesting a loss of management and leadership skills at the ACNC over the last two years is now negatively impacting performance

In assessing the ACNC performance, the issue of organisational culture and the ability to attract and retain quality staff should clearly be considered as these factors directly impact organisational performance.

Many in the charities sector are concerned with what could be described as a total leadership clean out at the ACNC over the last 18 months. The following senior staff have left the ACNC: David Locke, Murray Baird, Annie Keely; Carolyn Doyle, Prue Monument, Susie Cotterill, Ben Rashid, Sean Lounder.  CCA understand some of the senior positions – including Assistant Commissioners – will remain unfilled.

The Australian Taxation Officer has had to employ a ‘mobility officer’ within the ACNC – so many staff were seeking to leave.  The latest ACNC staff survey has apparently revealed a significant drop in morale since the new leadership was installed, but the full survey has not been released (despite FOI requests).

Concerns have also been expressed about the processes now being employed to award contracts such as the Tulipwood Economics report.  

The ACNC Commissioner has instigated a new project that seems to mirror the way the ‘Donor Inform’ company previously sought to operate.  The Donor Inform company was deregistered two years ago having been unsuccessful in tapping into any demand for this kind of information.   

All of these concerns matter because they suggest an operating environment that is not conducive to the best possible performance within the charities regulator.  

Leading an effective charity regulator requires good management skills, good leadership and a shared vision of what excellence means within the organisation.  A high-performance organisational culture is unlikely to be achieved in a workplace with low staff morale and a lack of senior experienced and respected staff.  There is concern that the required management and leadership skills are in diminishing supply within in the ACNC and this will inevitably translate into poorer organisational performance.

  1. Charities want the ACNC to focus on being a better regulator

It may seem obvious, but it is important to emphasise that what matters most to charities is ensuring the sector is well regulated. Any charity malpractice has the potential to significantly damage the charity brand.  Some charities have indicated that their donations from the public are negatively impacted by stories in the media highlighting how one bad charity has misled donors.  

Ensuring charities are held to account is good for charities, their workers, the people they serve, and the broader community.  This is why charities have been so engaged in pushing for a charities regulator and supportive of the establishment phase of the ACNC.

CCA would like to see the ACNC more actively engaged with the sector, producing more reports, supporting more research, expanding the Charity Passport, recruiting high quality and experienced senior staff to broaden the leadership team, and being more accountable to Parliament and the public for its own performance.  We would like the ACNC focused more on being a good regulator and less on new projects like creating a marketplace for donors.  These measures are critical to good performance.

A good charities regulator is very important for all charities.

Conclusion

The ACNC has been an outstanding success, despite numerous barriers and years of uncertainty about its future.  It enjoys a strong reputation in Australia and around the world as one of the best charity regulators.  The remarkable achievements of the ACNC across the first five years of operation are a testimony to the expertise and resolve of an outstanding group of people working at and with the ACNC during the first five years.  

Maintaining the confidence of the charities sector in the ACNC is important to the effectiveness of the regulator.  This confidence is now not as strong as it was previously largely because the ACNC is providing less information about its activities, services such as telephone advice lines seem to be experiencing declining standards, and advances in critical areas such as the Charity Passport seem to be slowing.  

The performance of the ACNC must be sustained, enhanced and improved, not diminished.

It is to be hoped the ACNC will be held to account to ensure the key achievements of the ACNC in its first five years continue to form the foundation of a very effective charities regulator. 

Submission to the The Australian National Audit Office (ANAO) Performance review of the Australian Charities and Not-for-profits Commission (ACNC) Read More »

CCA Pre-Budget Submission 2019-2020

Submissions-post

CCA Pre-Budget Submission 2019-2020

This submission outlines nine measures the Community Council for Australia (CCA) believes will significantly strengthen Australia’s not-for-profit (NFP) sector and drive real economic savings for government over the coming financial year and beyond.  These measures have been informed by consultation with CCA members and key organisations in the NFP sector.  

It is important to note that this submission does not override the policy positions outlined in any individual Federal budget submissions from CCA members.  
The content of this submission includes: a brief background to CCA; a listing of proposed measures; an overview of the current issues for the NFP sector; further details about the costing of proposals; and a conclusion.  

CCA acknowledges both the need for fiscal restraint and the growing demand for government services.  CCA proposes a major government revenue boosting measure (estate duty) as well as incentives to promote philanthropy and strengthen our communities (such as the French 90/10 superannuation rule).  

If Australia is to be a just and fair society where we increase collective ownership of local issues and build flourishing communities, there needs to be a genuine commitment to supporting reforms across the charities and not-for-profit sector (NFPs) from government and other key stakeholders.  This is not about providing more funding to the sector, but about encouraging and supporting more effective and efficient organisations delivering better outcomes for our communities.  

CCA welcomes this opportunity to provide input into the Federal Budget process and to engage in detailed discussion about any issues this submission raises. 
 
The Community Council for Australia

The Community Council for Australia is an independent non-political member based organisation dedicated to building flourishing communities by enhancing the extraordinary work undertaken by the charities and not-for-profit sector in Australia.  CCA seeks to change the way governments, communities and not-for-profits relate to one another.  It does so by providing a national voice and facilitation for sector leaders to act on common and shared issues affecting the contribution, performance and viability of NFPs in Australia.  This includes: 

  • promoting the values of the sector and the need for reform  
  • influencing and shaping relevant policy agendas 
  • improving the way people invest in the sector 
  • measuring and reporting success in a way that clearly articulates value 
  • building collaboration and sector efficiency 
  • informing, educating, and assisting organisations in the sector to deal with change and build sustainable futures 
  • providing a catalyst and mechanism for the sector to work in partnership with government, business and the broader Australian community to achieve positive change.

Our success will drive a more sustainable and effective charities and not-for-profit sector in Australia making an increased contribution to the well-being and resilience of all our communities.

Summary of proposed budget measures

The following proposals have been developed through extensive discussions and feedback from CCA members and other key stakeholders.  Each measure would deliver real benefits to government over the longer-term and strengthen communities (proposed measures are outlined in more detail on page four).

1. Provide Deductible Gift Recipient (DGR) status to all registered charities with an initial exemption of organisations for the advancement of religion, childcare, primary and secondary education.  This measure will be completely funded by recent changes to Fringe Benefits Tax (FBT) concessions that introduced the capping of meals and entertainment expenses.

2. Introduce a targeted ‘estate duty’ for people with estates valued at over $10 million with appropriate incentives for donations to charities, safeguards relating to family businesses and farms; and mitigation of any potential adverse impacts.

3. Implement the French 90/10 rule providing an option for all Australian employees to invest 5-10% of their superannuation into a not-for-profit social enterprise that benefits the community.

4. Establish a Social Finance Taskforce (as recommended by the Senate Economics References Committee) to promote impact investing and better access to capital for NFPs.  

5. Boost sector investment and productivity by increasing certainty in government funding, concessions, incentives and regulations. 

6. Develop and impose a productivity levy on all Commonwealth funding of NFPs set at a minimum of 3% to support sector capacity development through; staff training and development, research and evaluation, and technical infrastructure improvements. 

7. Increase philanthropy by enabling employers to establish more effective ‘opt out’ systems of workplace giving. 

8. Work with the NFP sector to develop a future blueprint for the sector, including extensive consultation; economic modeling of future scenarios; strategies to capitalise on emerging opportunities; and increased capacity to respond to emerging risks and limitations.

9. Review the generous tax concessions provided to gaming, catering, entertainment and hospitality income for mutual organisations, especially licensed clubs. 
CCA believes these measures could be delivered within the next two years and produce a much stronger government budget position as well as building capacity and resilience in our communities.  Australia cannot afford to ignore growing levels of debt, increased inequality and the need to support flourishing communities as a basis for improved productivity and well-being. 
An economy that does not support real growth in opportunity is not serving the interests of our community.  CCA believes every budget statement needs to be framed by what is going to deliver stronger, fairer, more creative, sustainable and connected communities.  

Context: not-for-profit reform

The NFP sector encompasses over 600,000 organisations – from large to very small, and employs well over one million staff (around 10% of all employees in Australia).  Australia’s 55,000+ charities collectively turn over more than $140 billion each year and hold close to $300 billion in assets.  In the last decade, sector growth has continued at more than 7% a year, a figure that is higher than any other industry group.  
These facts tell only a small part of the story. The real value of the NFP sector is often in the unmeasured contribution to Australian quality of life.  NFPs are at the heart of our communities; building connection, nurturing spiritual and cultural expression, and enhancing the productivity of all Australians. Collectively, they make us a more resilient society.  

The importance of the NFP sector is now being internationally recognised with many governments putting in place measures to increase NFP investment and productivity.  Smaller government and bigger community is a common theme, driven in part by savings, but also by a commitment to strengthening democracy through greater civic engagement, providing incentives for social entrepreneurship and boosting productivity within the NFP sector.

In Australia there have been various initiatives seeking to: promote social enterprise; reduce compliance costs for NFPs; encourage a diversification of financing options to build a more sustainable funding base; streamline and refine the regulation of NFPs and charities; establish less bureaucratic reporting requirements while building community transparency; increase philanthropy; promote impact investing; and increase sector performance measurement.  CCA supports all these activities. 

The establishment of the ACNC is the first time the NFP sector has had an independent regulator dedicated to serving their needs and enhancing their capacity.  It has proved to be a positive step towards red tape reductions, increased transparency, and trust in the community by prospective volunteers and donors.  The national charities register has until recently also provided invaluable information.

While the immediate history of the NFP sector is framed by growth and reform, new issues are emerging.  The level of individual philanthropic giving as a percentage of income has still not recovered to the highs of 2009.  At the same time, revenue available to governments is effectively falling in real terms against a backdrop of increasing demands and higher community expectations.   Competition for fundraising and services has increased.  In the context of recent changes, the NFP sector is slowly but surely finding its voice – building its collective power and seeking real reform that will provide substantial savings to government as well as tangible benefits to the community.  

Given the size of the sector and its critical role in our community, the Federal Government can achieve real economic and social benefits if it chooses to strategically invest in strengthening our communities and our NFPs.  There have been numerous reports and recommendations relating to the NFP sector over the last decade, but relatively few have been acted upon.  Governments seem reluctant to change established practices that foster competition between charities, increased compliance costs and growing uncertainty.  These practices are all counter-productive for government and our communities. 

Supporting the proposals outlined in this submission will make Australia stronger.  While reductions in government expenditure may be economically prudent, achieving a better return on existing government investments should also be a high priority.  In the interests of all Australian communities, government should avoid inflicting any long-term damage on a sector that not only holds a vital place in our economy, but also strengthens communities, builds connectedness and increases productivity for all Australians.  

Description of proposed budget measures

1. Provide Deductible Gift Recipient (DGR) status to all registered charities with an initial exemption of organisations for the advancement of religion, of religion, childcare, primary and secondary education. 

This measure to be completely funded by limiting Fringe Benefits Tax (FBT) concessions; namely capping meals allowances and limiting multiple claiming of FBT concessions.

The present system of determining Deductible Gift Recipient (DGR) status largely through the Australian Taxation Office (ATO) and Departmental listing favors larger charities that can afford lawyers and lobbyists to assist the progression of their applications.  Many smaller NFP and charities do not have the capacity to apply for DGR status, and hence they cannot access the community support that comes when donations are tax deductible.  There are up to six government agencies involved in determining DGR status.  It is a complex, costly and inequitable system – with less than half of all charities having DGR status.  While proposed reforms to DGR are a step in the right direction, it is still difficult to justify the distribution of DGR eligibility given the arbitrary and ad hoc manner in which it has developed.  It makes good policy sense that all donations made to registered, complying charities should be tax deductible.  This is the practice in comparable countries like the UK and Canada.  

The ACNC determining charitable status and DGR will deliver a fairer system and reduce red tape. This policy is economically feasible with the initial exemption of organisations for the advancement of religion and education reducing the likely implementation costs to approximately $130 million per annum.  Excluding all schools and all churches for automatic DGR eligibility makes this measure affordable.  At the same time the intent is not to deny DGR, so existing DGR exemptions for ministers of religion and other concessions based on religious and educational purposes would continue to apply.

Funding to support this measure could come from savings through the recent capping of FBT entitlements for meals and entertainment expenses.

This measure is estimated to be revenue neutral in the first instance.  Initial projected expenditure of approximately $130 million is offset by equivalent savings in ending uncapped FBT entitlements.
 
2. Introduce a targeted ‘estate duty’ for people with estates valued at over $10 million with appropriate incentives for donations to charities, safeguards relating to family businesses and farms, and mitigation of any potential adverse impacts.

National estate duties exist in many countries including: the United Kingdom, Germany, Italy, Belgium, the Republic of Ireland, France, the Czech Republic, Canada and the USA.  Not only do these duties provide substantial government revenue, they also increase philanthropy by offering relief from estate duties for any money left to charity.  The Henry Review drew on this international experience in supporting estate duties as a taxation measure.  Among other benefits, estate duties can apply a small brake on growing levels of inequality in our communities.  

Until 1979, many Australian governments gained substantial income through various forms of death or estate duties.  It is suggested that death duties ended because Premier Joh Bjelke Petersen wanted to attract retirees to Queensland and abolished all death duties.  Other states followed.  Until then the threshold had effectively been lowered over time to a level where many not so rich were also having to pay. 

As a consequence of these factors, in the late 1970s an estate duty was no longer seen as fair.  

A better targeted approach to estate duties could address these previous failings and would be consistent with a fair go for all.  Using a revised version of capital gains taxes and only applying it to those with estates above $10 million (excluding family farms and other appropriate asset exemptions) offers a workable option.  

In Belgium estate duties contribute 1.4% of total government revenue which would translate into over $5 billion in revenue per annum for Australia.  

Australia’s growing gap between rich and poor, and the gap between government income and demand for government supported services, can both be partially addressed by applying a form of estate duty on the richest 1% in our communities.  A targeted 35% estate duty on all estates over $10 million (with appropriate exemptions) would raise substantial new government revenue and stimulate philanthropy. 
ATO figures suggest over 25,000 people have assets above $10 million.  If 4% of these families paid 35% in estate duties, it would equate to a minimum revenue of $3.5 billion.
 
3. Implement the French 90/10 rule providing an option for all Australian employees to invest 5-10% of their superannuation into a not-for-profit social enterprise that benefits the community.

France has required all employees to be given the option of investing 5-10% of their superannuation into ‘solidarity organisations’ (the equivalent of our charities) since 2001.  In 2008 the government regulated that all super funds needed to provide this option to employees and since that time the amount invested has grown from $700 million to over $5.5 billion.  This has stimulated social entrepreneurship, created opportunities to achieve social impact, improved the capital base and capacity of solidarity organisations.

The success of the French 90/10 rule shows what can be achieved if Australia chose to provide employees with some choice about how their superannuation contributions are invested.  If just 2% of the MySuper funds were invested this way it would generate around $8.5 billion, or enough to significantly reduce homelessness by providing housing to over 50,000 Australians struggling to maintain secure and appropriate housing.

CCA believe this measure could be transformative in encouraging the charities sector to find ways of establishing social enterprises that strengthen our communities.
This measure has very little government impact as costs are almost non-existent – it is simply about enabling a different use of a very small part of Australia’s $2 trillion superannuation investment pool.
 
4. Establish a Social Finance Taskforce (as recommended by the Senate Economics References Committee) to promote impact investing and better NFP access to capital.

In its report ‘Investing for good: the development of a capital market for the not-for-profit sector in Australia’ the Senate Economics References Committee recommended the establishment of a high profile Social Finance Taskforce similar to taskforces established in both the UK and Canada.  The following is taken from the Executive Summary of this report: 

‘The Taskforce should build on the work of this inquiry and provide recommendations to government on the capacity of the sector, its access to capital, enhancing the role of intermediaries and simplifying the sector’s legislation and regulations.’

CCA perceives this leadership role as critical in the development of a longer term sustainable strategy to enhance the work of the NFP sector while reducing its dependency on government. This group could also consider the potential use of dead money accounts and unclaimed funds (as happened in the UK) and work with experienced practitioners (such as Social Ventures Australia) and emerging leadership groups in this area (such as Impact Investing Australia).  

This measure would require a two-year investment from government to support establishment, the preparation of initial reports and implementation of recommendations.

Cost to government is estimated to be in the order of $1 million each year for two years.
 
5. Boost sector investment and productivity by increasing certainty in government funding, concessions, incentives and regulations. 

This measure is focused on achieving a more stable financial and regulatory framework for all not-forprofits, particularly in relation to government funding and interaction with the sector.  CEO Forums across the country run by CCA with the support of key organisations clearly showed that uncertainty of government funding is a critical barrier to investment in the future sustainability of organisations.  This applies to not just recurrent government funding, but also tax including the losses associated with changes to FBT concessions and incentive programs.  The government needs to actively consider initiatives such as:   an agreed notice period of six months prior to the ending of any major government contract, incentive or concession, with limited exemptions for cases of fraud, other criminal actions, etc.  increasing the length of government contracts where possible to at least five years  more transparent and accessible processes for reviewing the performance of NFPs  more transparent and accountable processes for government funding decisions relating to NFPs. 

These measures would all boost investment in organisational capacity across the NFP sector.

Experience in other sectors has also shown that where an independent feedback process can be established that does not focus on public blame and retribution, system change in relationships can be driven through active feedback and better information exchange.  CCA supports a national feedback exchange program where all NFPs could provide honest feedback on their dealings with government agencies. 

Providing avenues to pursue positive improvements in the relationship between governments and the NFP sector is important. 

At the centre of many concerns across the NFP sector is the ability of small and large community organisations to deal with an increasingly uncertain future.  While governments are not responsible for all disruptions and challenges to the NFP sector, increasing certainty in government funding is a critical measure that would build capacity and effectiveness.

CCA anticipates these measures would produce savings with very limited (mostly internal) outlays. 
  
6. Develop and impose a ‘productivity levy’ on all Commonwealth funding of NFPs set at a minimum of 3% to support sector capacity development through; staff training and development, research and evaluation, and technical infrastructure improvements. 

The Australian government invests billions of dollars in charities and not-for profits to provide critical services and supports to communities across Australia.  Unfortunately, there is often little allocation of funding to enable funded organisations to improve their services through capacity development in critical areas like staff training and development, research and evaluation, and infrastructure including technological systems.  While the government should not be solely responsible for sector capacity, it is important to acknowledge that increased productivity will only come if there is increased capacity to improve organisations and the way they operate.  While many NFPs invest in their capacity, providing a small leveraged fund to invest in appropriate and effective capacity building will ensure increased productivity and a better return on government investment into the sector.

CCA believe some of the funding provided through this measure should be used to ensure better coordination and sharing of best practice through centralised data bases of available opportunities in critical areas like; staff training, program evaluation, systems development, etc.  This centralised information sharing capacity could be seen as facilitating excellence across the sector and might involve a range of existing organisations creating a virtual Centre of Excellence for the NFP sector.  It could also fund the Satellite Account research into the NFP sector and support a cross-government advisory body like the NFP Sector Reform Council to improve government and NFP relationships.  The details of how best to develop and apply this levy would need to be worked through with central agencies and government departments. 

The annual budget for this initiative will depend on government allocations to NFPs, administrative budgets and the degree of existing expenditure, but may not require new additional expenditure.
 
7. Increase philanthropy by enabling employers to establish more effective ‘opt out’ systems of workplace giving.

CCA strongly believes that increased community engagement and philanthropic contributions to NFPs produce a net benefit to governments as well as to the communities NFPs serve.  It is counter-productive to treat increased philanthropy and social impact investment as a government loss of potential tax income or ‘foregone revenue’.  The whole community benefits when individuals or organisations choose to direct their resources into to strengthening communities, increasing economic and social activity, and improving health and well-being.  This is particularly the case if the money involved avoids the significant transfer costs of moving into, through, and out of government.  Philanthropy and social investment are about encouraging greater ownership of local issues by enhancing the role of NFPs and reducing the size of government.

When in place, ‘opt out’ systems have ensured much higher levels of success in workplace giving programs.  The experience with the French 90/10 superannuation rule shows that once all employees are given the option, the amount being contributed to charitable purposes increases significantly.  With the current ‘opt in’ for existing employee systems, less than 3.5% of Australian workers are in a workplace giving program.  If this could increase to 10% of Australian employees donating 0.5% of their pre-tax income, over a quarter of a billion dollars would be raised through workplace giving.  This is a realistic target that would increase philanthropy and the engagement of Australians in the broader NFP sector. CCA anticipates there would be no additional costs to government in this measure. 

8. Work with the NFP sector to develop a future blueprint for the sector, including extensive consultation; economic modeling of future scenarios; strategies to capitalise on emerging opportunities; and increased capacity to respond to emerging risks and limitations.

The future of Australia’s NFP sector is too important to our economy and our communities to grow in an ad hoc manner with little comprehensive planning or strategic investment.  At present there is no plan, no strategy and no real projection about the future viability or even the sustainability of the current levels of growth across the NFP sector.  The effective development of a blueprint will include developing clear goals and measures of what the NFP sector is seeking to achieve.

Issues to be considered would include; performance and productivity measures, better using existing assets, promoting social enterprise, the NFP workforce, the potential for mergers and collaboration, efficiencies and effectiveness, and capacity building.

CCA has been in discussions with a number of groups who have expressed a strong interest in participating in and contributing to the development of a blueprint for the NFP sector.  With the Federal Government as a joint partner and supporter (and not the sole contributor), a forward-looking blueprint for the NFP sector could be in place within 12 months.

CCA anticipates the cost to government would be in the order of $350,000.
 
9. Review the generous tax concessions provided to gaming, catering, entertainment and hospitality income for mutual organisations, especially licensed clubs. 

The mutuality principle that rightly applied in the late 1800s in Australia is no longer appropriate or consistent with existing taxation arrangements, particularly for organisations involved in gaming.  Large licensed clubs that act as gaming venues should not be able to treat over 75% of their income as tax free, especially when they have not satisfied the basic requirements of being a not-for-profit organisation that exists to provide a public benefit.  As pointed out in the Not-for-profit Tax Concessions Working Group Report (May 2013), concerns with the current application of the mutuality principle include:
– integrity concerns about member and non-member receipts;  
– competitive neutrality concerns where mutual organisations are trading in competition with taxable businesses;  
– social policy concerns about significant gambling and hospitality receipts of some organisations, which are not subject to income tax at the Commonwealth level; and  
– concerns about private member benefit. 

It is recommended, on public benefit grounds, that the tax law should be amended to treat all member and non-member income of mutual organisations as assessable for taxation purposes in line with normal income tax principles.  

If this recommendation is not supported, all income from gaming, catering, entertainment and hospitality trading activities of mutual organisations should be treated as assessable.  

It is difficult to justify the hundreds of millions of dollars of tax concessions provided to large licensed gaming clubs based on the mutuality principle.  It is time to review these concessions taking into account any unintended consequences on mutual organisations that do provide a benefit to members. 

CCA anticipates this measure could generate significant additional government revenue.

Budget implications (costings)
CCA acknowledges the need to ensure an effective economic framework for all Australian governments that serves the needs of our various communities.  This budget submission has taken into account the need to increase government revenue through sustainable measures that have minimal impact on productivity, to reconsider inappropriate taxation concessions, and promote measures that will diversify the income of charities and not-for-profits enabling a rebuilding of capital, and an expansion in their capacity, without increasing government expenditure. 

In considering the specific budget implications of the nine key measures outlined in this submission, CCA has taken a relatively conservative approach to the projection of new income and expenditure for government.  Given the complexity of some of the proposed measures and the lack of data about others, the initial costs and benefits outlined in this submission represent a starting point for further discussion and more detailed economic modelling.  

CCA believes the measures proposed in this budget submission will generate significant revenue as well as long-term savings for governments, NFPs and the communities they serve.
 
Conclusion 
 
This submission promotes Federal Government measures to strengthen the NFP sector and deliver real economic and social benefits for governments and our communities. 
Many individual not-for-profit organisations (including CCA members) will be seeking to have the Federal Government fund specific measures for the benefit of their own causes and communities.  Most of these budget proposals from the not-for-profit sector are important and have real merit.

There is a strong case for reform in the charities and not-for-profit sector to build more resilient communities through greater engagement in our society and our economy.  Over the past two decades, the NFP sector has had limited support to improve capacity and effectiveness.  This is despite the very considerable contribution the broader NFP sector makes in terms of employment, productivity, individual and community well-being.

The harsh reality for most governments is that government income levels are stalling while demand for services continues to increase.  Part of the solution to this tension is achieving real productivity within government and the NFP sector.  Delivering positive change for NFPs requires an initial investment in time and resources to boost capacity and offer the certainty required for organisational investment.

Inequality continues to rise in Australia.  We need fairer ways of generating income for government and more impact investment to strengthen our communities.  Estate duties and the French 90/10 rule are two examples of sustainable policies that have the potential to be transformative.

The NFP sector is too large and too important to be left on the margins of economic debates and major policy reforms within Australia.  Government investment in enabling NFPs to be more efficient and effective will ultimately deliver stronger, more resilient and productive communities across Australia.  

The Federal Budget is the most important policy document a Federal Government produces.  Recognising the role of the NFP sector through implementation of the measures outlined in this submission will translate into a fairer budget that will increase sector productivity and growth, benefitting all Australians.

CCA Pre-Budget Submission 2019-2020 Read More »

Electoral Funding and Disclosure Reform Bill – revised Bill is a good demonstration of how public policy can be improved when the concerns of charities are taken seriously

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Electoral Funding and Disclosure Reform Bill - revised Bill is a good demonstration of how public policy can be improved when the concerns of charities are taken seriously

The Community Council for Australia (CCA) was very concerned about how the original Electoral Reform Bill (2017) would impact thousands of charities who would have faced quite complicated new administrative requirements and restrictions if they chose to make any public statements advocating for their cause or their community. 

The chilling impact of the new requirements and restrictions would have significantly diminished the public voice of charities in Australia. 

Since CCA first raised our concerns about the Bill, the Shadow Minister for Charities Andrew Leigh has been an active advocate for a more sensible approach that would protect issues-based advocacy by charities. 

We are pleased that a more reasoned Bill is now being introduced into the Parliament and would like to acknowledge the ALP, Greens, cross-bench Senators and the government who have all now agreed that electoral reform should proceed without significantly restricting the public advocacy of charities that are pursuing their charitable purpose. 

The revised Bill is a good demonstration of how public policy can be improved when the concerns of charities are taken seriously.  Our democracy is stronger when charities are able to actively represent their causes and ensure the least powerful in our communities are represented. 

CCA made submissions and appeared before the Joint Standing Committee on Electoral Matters.  Catch up here.

Electoral Funding and Disclosure Reform Bill – revised Bill is a good demonstration of how public policy can be improved when the concerns of charities are taken seriously Read More »