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Why we’re advocating against the latest charity regulation changes

27 Apr 2021

The Australian Government Treasury have recently completed their public consultation on a new Australian Charities and Not-for-profit Commission (ACNC) Regulation that would amend Governance Standard 3. Here’s why we’re concerned these changes could harm charities and community organisations, make it more confusing and complex to comply with the law, and bury charities in paperwork and expenses beyond what is expected of other sectors.

What we know about the proposed changes to charity regulation

The current ACNC Governance Standards prohibit charities from committing serious criminal offenses, known as an ‘indictable offence’ or a ‘civil offence’, attracting a fine in excess of $13,300.

The proposed changes will add a suite of more minor ‘summary’ offences relating to property or people. They will cover charitable funds, responsible persons (including board members) and websites or social media accounts, even if another entity commits the offence. For instance, a charity could be caught by the new provisions for agreeing to fund a tree planting event when asked by a volunteer and subsequently find out the event is hosted by a new political candidate, against Federal electoral laws.

These provisions would significantly broaden the scope of the ACNC Commissioner’s enforcement powers, such as injunctions, penalty notices and deregistration, which are triggered if the Commissioner reasonably believes a breach of the Governance Standard will occur. Because of constitutional law limits to the powers of the ACNC, for many charities the only enforcement power that can be used is the blunt (and mostly fatal) deregistration power.

The problem with these proposed changes

No data on illegal activities by charities was included in the consultation papers. The Federal government has argued that these new regulations will give the public confidence that charities are abiding by the law. But charities (just like people and businesses) must already comply with laws that cover many of these issues, which is why the ACNC independent Review Panel recommend that Governance Standard 3 be abolished because it’s unnecessary − for example, charities that breach employment laws can be sued.

Why it’s important for all charities to pay attention to the proposed changes

Across the sector, there is widespread consensus that, as drafted, the changes would capture activities that go far beyond encouraging activist actions that harm people or property such as farm or factory break-ins.

These actions – which were the impetus behind the reforms – are already unlawful. But the proposed changes will allow the ACNC Commissioner to take blunt enforcement action against a charity for failing to take reasonable steps to stop its resources being used to support a minor offence (for example, tweeting in support of protesters standing in the forecourt of a government building).

As experts in not-for-profit law, we are concerned that if the regulatory changes proceed in their current form they will stifle the advocacy that is a legitimate part of furthering a charity’s purpose. We are also concerned that the amended Governance Standard would be unworkable, placing an unreasonable burden on volunteer charity committee and board members.

Why we’re advocating against the changes

We recommended to Treasury that the Regulation not proceed for the following three reasons.

1) Uncertainty created by broad drafting makes compliance very difficult

The broad drafting of the Regulation will create enormous uncertainty and confusion for charities, which makes the changes difficult to understand and comply with. The current Governance Standard (while unnecessary), is at least specific. In contrast, the proposed amendments introduce phrases like ‘reasonable steps’ to ensure ‘resources’ are not used to ‘promote or support’ a vast range of summary offences.

Charities will need legal advice on what these broad phrases mean in their particular circumstances, and may decide not to carry out lawful activities for fear of unintended breach. This will further inhibit their capacity to make meaningful impact in the community.

2) Additional administrative burden

The burden of compliance on charities will go far beyond what can reasonably be expected in terms of administrative resources.

In an explanatory statement, charities are expected to have ‘processes’ and ‘safeguards’ in place to ensure compliance, as well as conducting regular reviews and audits. Charities will also need to document and assess activities to prove reasonable steps were taken should they need to notify the ACNC of any ‘significant’ non-compliance required by the Act. They may even have to monitor their employees’ activities after work and on social media.

Many volunteer board members may decide this is too significant and not want to be involved with charities given the time, costs and legal risks associated with these changes.

3) Fear of disproportionate penalties will suffocate advocacy

The possible commission of a single summary offence may be sufficient, even if the charity itself is not involved but rather one of their ‘resources’ has been used.

That the Commissioner only needs a reasonable belief the Governance Standard will be breached is far beyond the regulation on other sectors such as government and corporate. What if time and due process shows that no offence was committed, but in the meantime the charity has been shut down because it was deregistered and lost access to being able to access tax deductible donations?

The approach is also at odds with the ACNC’s own regulatory approach statement:

The ACNC understands that most people involved in charities are honest, act in good faith and try to do the right thing. If mistakes are made, they are usually honest mistakes, or due to a lack of knowledge, expertise or capacity.

What is Justice Connect doing about the proposed amendments?

Joining the likes of Hands Off Our Charities and the Law Council of Australia, we have lodged a submission to Treasury to express our concerns for what the proposed amendments will mean for Australia’s charities.

Read our submission

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