Government Response To The Australian Charities and Not-For-Profits Commission Legislation Review 2018

Anticipated Law Reform But No Fix To Fundraising

It is pleasing to see the release on 6 March 2020 of the long awaited Government response to the 2018 ACNC legislation review panel report.

The ACNC legislation, which sets the purpose and framework of the national charities regulator, was required to be reviewed after five years of operation. This five-year review took place by a review panel in 2018 and the resulting Report released in August 2018. The Report made 30 recommendations aimed at finding “a balance between supporting the sector, reducing red tape, enhancing accountability and addressing misconduct”.

The federal Government has now considered that Report and on 6 March 2020 released its response, in which it supports 18 of the recommendations (although we only count 10 are being responded to with potential law reform).

The report and response can be found at the following links:

The purpose of this brief publication is to note the areas that charities and not-for-profits should anticipate some law reform in.

  1. The powers of the Commissioner to replace a responsible person

The Review Panel recommended (Recommendation 5) that this power be removed. The Government did not wholly support that recommendation and has decided instead as follows:

[To] mandate additional criteria that the Commissioner will be required to consider when making a decision to remove or replace a responsible person.

The Government will also broaden the power of appeal to allow both the ACNC registered charity and the responsible person the right to appeal a decision relating to a Commissioner’s decision to remove or replace a responsible person.

The additional safeguards and appeal rights will enhance the protections for those responsible persons affected by a decision of the ACNC Commissioner.

The Government will consult on the detail of the changes.

It should be noted that the Commissioner has not used the power of replacement to date. While the intended changes do not go as far as recommended by the Review Panel, the proposed changes are welcomed.

  1. The ACNC Act should be amended to give the Commissioner broader powers to delegate functions or powers to staff (Recommendation 7)

Government response:

The Government supports the recommendation to allow the Commissioner to delegate functions or powers to staff if satisfied the person performing the delegated functions has an appropriate level of expertise.

The change will enhance the efficiency and quality of the ACNC’s administrative decision-making process.

The Government will implement this recommendation by changes to legislation.

This proposed reform is welcomed.

  1. The Corporations Act 2001 (Cth) should be amended to ‘turn on’ the officeholder duties and other provisions previously ‘turned off’ (Recommendation 11)

Government response:

The Government will release a consultation paper seeking the views of the sector on the merits and risks of “turning on” the directors’ duties under the Corporations Act for charitable companies.

This intended consultation is welcomed.

  1. Registered entities should be required to report based on size, determined on rolling three-year revenue, with thresholds of less than $1 million for a small entity, from $1 million to less than $5 million for a medium entity, and $5 million or more for a large entity. (Recommendation 12)

Government response:

The Government supports the recommendation, balancing red tape reduction for charities with transparency.

To avoid unintended consequences for charities, the Government is consulting with states and territories on the appropriate level of revenue thresholds for minimum reporting requirements, before proceeding with legislative change.

This response is welcomed.

  1. Minimum reporting requirements for small registered entities should be amended to allow in an Annual Information Statement an option to provide a simplified balance sheet or a statement of resources. (Recommendation 13)

Government response:

The Government supports the recommendation.

Over 18,000 charities which currently use cash accounting will now have the flexibility to provide a statement of resources to the ACNC. This will reduce regulatory burden for small charities.

The ACNC will make changes to the Annual Information Statement requirements for small charities.

This response is welcomed, and will result in a red tape reduction for small charities.

  1. Registered entities should be required to disclose related party transactions. (Recommendation 14)

Government Response:

The Government supports all registered entities being required to disclose related party transactions.

To minimise the compliance burden on small charities, the Government will require small registered entities to make a simplified disclosure involving a brief description of a related party transaction.

The Government will implement this recommendation by changes to regulations. The start date for this measure will align with any change to the revenue thresholds for financial reporting requirements.

It should be noted that this is proposed to apply to ALL charities (small, medium and large), albeit in proposed scaled down version for small charities. Query: Will there be an exemption for Basic Religious Charities and if not how will this work with the current exemption they enjoy from the Governance Standards? We wait and see.

  1. Large registered entities should be required to disclose the remuneration paid to responsible persons and senior executives on an aggregated basis. (Recommendation 15)

Government Response:

The Government supports the recommendation.

Large registered entities will be required to disclose remuneration paid to responsible persons and senior executives on an aggregated basis.

This disclosure will only be required from entities with two or more key management personnel to accommodate privacy concerns.

The start date will align with any change to the revenue thresholds for minimum reporting requirements.

It seems that this should be read together with the proposed reform that the revenue threshold test for a “large” charity is proposed to be reviewed, to an anticipated level that is not yet clear. See point 4 above.

  1. The Commissioner should be given a discretion to disclose information about regulatory activities (including investigations) when it is necessary to protect public trust and confidence in the sector. (Recommendation 17)

Government response:

The Government supports the recommendation.

The change will allow the Commissioner to release information about ACNC regulatory activities in the public interest. It will strengthen public trust and confidence in both the sector and the regulator.

The Government will consult on the detail of the change, including the triggers for and bounds of the Commissioner’s discretion.

The Government will implement this recommendation by changes to legislation.

This change is welcomed but will need some careful balancing especially during the investigation phase.

  1. The Commissioner should be authorised to collect the personal details of responsible persons involved in unlawful activity. (Recommendation 18)

Government response:

The Government supports the recommendation as it will enhance the ACNC’s capacity to detect breaches of its governance standards and external conduct standards.

This response is welcomed.

  1. The Australian Charities and Not-for-profits Commission Regulation 2013 should be changed to disqualify a person from being a responsible person if they have a conviction for terrorism, terrorism financing, money laundering, fraud, importation or distribution of illicit drugs or a child sexual offence under Commonwealth, state or territory law. (Recommendation 23)

Government response:

The Government supports the recommendation.

While proven instances of criminal misconduct in the sector remain low, illicit activity could severely damage public trust and confidence in the sector and harm the communities they are working to assist.

This recommendation will enhance the accountability of responsible persons, thereby reducing the risk of charities becoming involved in serious criminal misconduct.

The Government will implement this recommendation by changes to legislation.

This response is welcomed.

  • ‘Advocacy’ is still in focus

The Government response notes on page 5:

Strengthening Trust

… Measures to enhance transparency, clarify permissible advocacy and share information with the public go a long way towards strengthening the trust and confidence the sector needs. (p5)

Policy Law committees of both the Queensland Law Society and the Law Council of Australia that I serve on will continue to monitor developments and be actively involved in submission work in these areas.

  • Some rejected recommendations

No changes to Basic Religious Charity exemptions – The Government did not support Recommendation 16 to review reporting exemptions currently in place for Basic Religious Charities. The Government currently has no plans to review Basic Religious Charity exemptions.

#FixFundraising campaignRecommendation 25 (that the Australian Consumer Law should be amended to clarify its application to charitable and not-for-profit fundraising, and a mandatory Code of Conduct for fundraising activities be developed) was not supported by the Government on the basis that “the Australian Consumer Law is not an appropriate mechanism to harmonise laws in the NFP sector”. Instead, the Government will continue to support efforts by the states and territories to harmonise state and territory fundraising laws. This is really disappointing and continues to see significant charitaile resources diverted into disparate red tape soup navigation at a state and territory level (and the ACL) rather than front line charitable services. Those of us who regularly advise in the sector cannot see the so called ‘regulatory gaps’ that are only spoken of in general terms.

No consolidation of the ACNC Acts – The Government did not support Recommendation 30 to consolidate all of the ACNC Acts into one Act.

Have questions on how this affects your Charity?

If you have any questions around these reforms and how they might affect your charity, please feel free to contact our office.

This article was written by Andrew Lind & Nina Flewell-Smith (Directors) on 9 March 2020.

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