It often comes as a surprise to people to hear that, in Australia, the nonprofit sector contributes a larger percentage of GDP than agriculture, communications, or defence. In fact, our charities are both major providers of employment and major service providers for the most economically disadvantaged in our communities.
With this in mind, it has been particularly unsettling to watch Federal Social Services Minister Kevin Andrews proceed with his commitment to abolish the Australian Charities and Not-for-Profits Commission (ACNC), the national regulatory body for the sector established under the previous Labor government.
The ACNC was established largely as a result of a 2010 Productivity Commission report that criticised the existing regulatory regime, in which charities were overseen by a combination of ATO, ASIC, and the states, as cost-inefficient and unnecessarily complex. Moreover, the Productivity Commission deemed the preexisting system as insufficient for ensuring transparency in the allocation of funds by charities.
It is not only the Productivity Commission, however, that supported the move to an independent, specialist regulatory body for the charity sector. Last year, Pro Bono Australia, an independent information agency for the sector, conducted a survey of 1500 non-profits. The survey found that 80% of respondents supported the ACNC.
Why would charities support a regulatory body? Doesn’t this simply add an extra layer of bureaucratic red tape for them to deal with? Quite the opposite. One of the major issues that charities were facing prior to the introduction of the ACNC was the duplication of paper work due to the absence of a ‘one-stop shop’ for regulatory matters. In many ways, the ACNC works for the interests of the charity sector, rather than against them.
Nevertheless, the Coalition is choosing to abolish the ACNC, and replace it with a register of charities and an ill-defined ‘centre for excellence’. The move reflects a blind ideological crusade against regulation that shows a lack of understanding of how the charity sector operates. In ignoring the research of the Productivity Commission and statements from the charity sector itself, the Coalition will actually succeed in increasing the regulatory burden on charities and increasing the cost to the government. Once the ACNC is abolished, its oversight work will be reallocated to the ATO and ASIC. The cost saving will be trivial, and the new system will be less efficient as the job of overseeing charities is transferred away from those with specialist knowledge of the sector.
The step forward would be to actually…allow [charities] to report only to the one national regulatory body.
Where should Labor stand on this issue? The Coalition’s policy represents a step backwards in terms of regulation of the sector. The step forward would be to actually expand the role of the ACNC by abolishing the requirement for a charity to submit its financials to its respective state or territory government, and instead allow them to report only to the one national regulatory body. This would further reduce the cost of compliance for charities, and let them get back to focusing on their important work. Any charity manager would tell you that compliance is easily one of the most burdensome interferences in their job.
The charity sector is a vitally important component of our economy. By providing for the needs of the most vulnerable, the sector plays a crucial role in helping to create a society that is just and fair. Labor has a proud record of standing up for the sector, and shouldn’t be afraid to champion the ACNC against the impending government axe.
Thomas is a management consultant with a leading global consultancy firm. He has worked as a pro bono consultant for a number of Australia’s largest charities, and wrote his economics honours thesis on the topic of charity regulation.