Unpacking the Federal Government’s response to the ACNC review

Our Head of Not-for-profit Law, Sue Woodward, explains what the Federal Government’s response to the Australian Charities and Not-for-profits Commission review means for charities.

— Sue Woodward

In December 2017, the Federal Government commissioned an independent panel to conduct a five-year review of the Australian Charities and Not-for-profit Commission (ACNC). This month, we received the government’s response to the review. In this article, I’ll unpack what the government’s response means and how soon changes are likely to happen. I’ve also outlined key recommendations that have not been accepted by the Government, and included my own views along the way.

Some changes are likely to happen soon

1.     Simplified financial reporting for small charities

The Government supports small charities providing ‘a statement of resources’ to the ACNC (recommendation 13). The Government believes this will reduce the regulatory burden for over 18,000 charities that currently use cash accounting.

With good education and templates from the ACNC, this simplified type of financial reporting could help very small (micro) charities who often don’t have an accountant doing their books. We can expect this change to be happen quickly – logically, from 1 July 2020 (UPDATE 24/3/20: The ACNC have advised me that this change won’t be happening this year).

2.     Accessing criminal records

The Government supports the ACNC being able to request details on the criminal records of responsible persons (Recommendation 18). Interestingly the response doesn’t refer to any legislative amendment or regulation to allow this to happen. This suggests they believe the current ACNC Act would allow the Commissioner to do this.

3.     Greater cooperation between intelligence agencies and their databases

The Government supports the ACNC ‘actively building its partnership with ACIC [Australian Criminal Intelligence Commission] and AUSTRAC’ and notes that the ACNC has recently been given direct access to AUSTRAC information by its listing as a designated agency under the relevant Act (recommendation 21).

The Government also ‘supports the ACNC engaging with ACIC to enhance cooperation and integration’ of criminal intelligence databases, but stopped short of offering additional resourcing to do so (as the Panel recommended), and leaving the ACNC to consider an Memorandum of Understanding with ACIC around sharing data (recommendation 22).

4.     Charity passport (‘report once, use often’)

The Government says it ‘supports the ACNC working with Commonwealth agencies to increase the take up of the Charity Passport‘ (recommendation 26). This is disappointingly shy of the actual recommendation to mandate the Charity Passport for these agencies.

Some changes the Government will consult on

One of the bug bears of the transition to the ACNC regime has been the ambiguity surrounding how directors’ duties can be enforced. The Government has responded to the recommendation to ‘turn’ the duties back on by saying it will release a consultation paper seeking the views of the sector. Get your pens ready: in my view they need to be switched back on.

Key changes are supported, but still need legislation

A wise peer once told me ‘not to get out of bed’ for anything less than a Bill actually before the Parliament. That said, the Government has committed to:

• retaining the Commissioner’s power to remove a responsible person but with new additional criteria that the Commissioner must consider when making a decision to remove someone (recommendation 5). I know this a hot topic for many, especially faith-based groups concerned about the Commissioner using the existing power to remove a religious leader
• increasing the reporting thresholds so that ‘small’ will increase from less than $250,000 to under $1 million, medium will increase to $1 million to under $5 million and large will be over $5 million, based on rolling 3-year revenue
•  requiring disclosure of related party transactions (for example, where a director pays a family member for consultancy services) (recommendation 14). There will be ‘simplified disclosure involving a brief description’ for small charities
• disclosure of aggregated remuneration of senior staff and any responsible person (people on the governing body) who are paid, where there are at least two ‘key management personnel’ (recommendation 15)
• allowing the ACNC Commissioner to disclose information about regulatory (enforcement activities) that are ‘in the public interest’ (recommendation 17). This is aimed at overcoming the ACNC secrecy provisions. There has been concern that these restrictions make it harder for the public to have faith that the Commissioner is taking action when needed (for example, the concerns about the NSW RSL)
• disqualifying people with certain serious convictions from being on governing bodies (recommendation 23). The convictions include terrorism, child sexual offences and distribution of illicit drugs. The last category may have implications for support groups and should be considered in light of spent conviction legislation that exists in most states
• removing technical issues between ACNC Act and Corporations Law (recommendation 29). While supported ‘in principle’ it is also stated as not being a priority compared with other reforms. To me this is an odd response. Surely you only want one reform Act, and these very important ‘technical issues’ should be included.

Many recommendations were not supported

The Government has not supported ten of the 30 recommendations, and simply ‘noted’ two others. This is a little surprising given the Government commissioned the report.

No support for fundraising reform

The most disappointing of the rejected recommendations is the lack of support for an amended Australian Consumer Law. We need this as a vehicle to drive a nationally consistent regime for not-for-profit fundraising, something we have been advocating for in our #FixFundraising campaign. The Government’s intention to work with States and Territories to harmonise regulation remains a small glimmer of hope for reducing this significant red tape burden.

Other recommendations the Government has not supported:

• changes to the ACNC’s objects, functions or duties (recommendations 1 and 2)
• repeal of governance standard 3, compliance with Australian Laws (recommendation 9)
• removing the word ‘perceived’ from governance standard 5 (conflicts of interest duty) (recommendation 9)
• presuming compliance with the ACNC governance standards if the charity already complies with other comparable governance standards (recommendation 10)
• changes to the religious charity exemption (recommendation 16)
• test case funding (recommendation 20). The response says they ‘will explore legislative options to address uncertainty in the law’. This might cause concern for those wary of moves to curtail the right of charities to advocate
• extending ACNC registration to include not-for-profits with annual revenue of more than $5 million (recommendation 24)
• moving the responsibility for incorporation and all other aspects of charitable company regulation to the ACNC from ASIC (recommendation 27)
• consolidating the ACNC Act and providing ongoing 5 year reviews of the ACNC (recommendation 30).

The Government ‘noted’ the recommendation (recommendation 28) for a single national scheme for charities and not-for-profits. It says it will ‘work closely with states and territories … to streamline and harmonise charities regulation in three important areas’. These areas include streamlining reporting, reducing the regulatory burden and consulting on a common statutory definition of charity (to replace the 45 existing definitions).

Let’s hope this ‘note’ becomes a high priority, with all Australian Governments collaborating to deliver a modern, tailored regime to support Australia’s charitable and broader not-for-profit sector, including those who donate time and money to it.

Sue Woodward
Head of Justice Connect’s Not-for-Profit-Law team

Follow at @nfp_nerd