Fundraising Regulation – Where to Next in Reform?

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Note: The following is an abridged version of Andrew Lind’s Fundraising Regulation paper. To receive the full copy, please use the form below.

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Justice Connect Statement on Fundraising Reform

Despite some clarification by CAANZ, Justice Connect argues that the ACL still needs to be altered to clarify the application of the ACL to fundraising. Currently, $15 million is spent in charity compliance each year.[1] For larger charities this is troublesome; donations are being directed towards compliance (usually in administration costs) rather than service delivery.[2] For smaller charities and NFPs, there is a high risk of inadvertent non-compliance. Justice Connect notes that:

The current regime creates risks for donors, losses to productivity, barriers to innovation, and negatively impacts the sector’s sustainability and growth.[3]

The case study included in Justice Connect’s Statement on Fundraising Reform demonstrated that in order to run a national fundraising campaign, or a campaign over the internet, an organisation would have to:

  • 60 days out from the campaign apply to the NSW regulator to be able to fundraise;
  • At least two months before fundraising apply to register as a charity in Queensland and advertise the application within seven days of submitting it for at least a month;
  • Apply to register in Victoria at least 28 days before fundraising as well as to South Australia for a fundraising licence;
  • Apply for fundraising authority for the person or organisation in NSW;
  • Apply for a licence and obtain authority in the ACT;
  • Apply to register and obtain a sanction or authority from a person or organisation in Queensland;
  • Apply for fundraising authority in WA;
  • Seek fundraising approval in TAS.[4]

In addition an organisation would need to submit numerous financial statements at various times to each State and Territory body at various times.

In its Statement on Fundraising Reform, Justice Connect sought three main changes to the ACL in order to overcome these issues with compliance. These were:

  • “Clarification and minor amendments to the Australian Consumer Law (ACL) to ensure application to fundraising activities is clear and broad;
  • Repeal of fragmented State and Territory fundraising laws; and
  • Work[ing] with regulators and self-regulatory bodies to provide guidance to fundraisers to continue to improve fundraiser conduct”.[5]

In its submission in response to the Interim Report Justice Connect provided more detail as to how this could be implemented. Two options were proposed.[6]

Option 1

Option 1 proposes to alter the ACL to expand the meaning of ‘in trade or commerce’ and also provide regulator guidance. Justice Connect believes that this would ‘address issues such as crowd funding and peer-to-peer arrangements, which are evolving rapidly and growing in popularity’. Under Option 1, Justice Connect suggests that sections 18, 20 and 50 should make express reference to ‘fundraising activities’ to provide greater clarity. Justice Connect also recommends that a new section, section 29A, be inserted headed ‘False or misleading representations during a fundraising activity’. In line with this, Justice Connect also proposes that ‘fundraising activity’ be defined in the ACL as well. [7]

In addition to legislative changes, Justice Connect supports the introduction of a single voluntary code which will be applicable to all fundraising activities.

Option 2

Option 2 proposes that if the above changes cannot be made to the legislation, then the Australian Government should add a Legislative Note to ‘clarify the definition of ‘trade or commerce’ and make it clearer that the ACL does apply to many NFP activities, including fundraising, and provide regulator guidance.’

Justice Connect suggests that a legislative note could appear as:

“trade or commerce” means:

  • Trade or commerce within Australia; or
  • Trade or commerce between Australia and places outside of Australia;

And includes any business or professional activity (whether or not carried on for a profit).

Note: Many activities of not-for-profits, including fundraising, conducted by or on behalf of not-for-profit groups or organisations are considered to be a ‘business or professional activity (whether or not carried on for a profit)’.

Peak Body Guidance: Fundraising Institute of Australia

The Fundraising Institute of Australia (‘FIA’) is the largest representative body for the charitable fundraising sector in Australia. In 2017, the FIA published a Draft Exposure Code (‘the Code’) to help regulate the sector, but does not purport to be subordinate legislation. Under the Code each Member must comply with particular ethical conduct. This could be a proactive step towards achieving the voluntary code suggested by Justice Connect. The Code requires adherence to behaviour also required under the ACL.

For example, under section 3, each Member has an obligation not to bring Fundraising into disrepute; to act honestly, openly, and with responsibility for public trust; to act with respect for professional Fundraising, the Charitable Cause that they represent, Donors and Beneficiaries; to not exploit relationships with Donors; and to be open and honest about the work that they do, how funds are raised and disbursed.

Each member also has an obligation under section 4.10 to refrain from conduct including harassment, undue influence, intimidation or coercion, which appears to overlap with the ACL’s section 50 (which prohibits harassment and coercion) and section 168.

Under the Code 4.11(a)-(b) prohibits promotional material which is not factually accurate, truthful or likely to mislead or that fundraising activities are carried out at no cost. This also has an overlap with the ACL’s sections 18 (Misleading or Deceptive Conduct) as well as section 21 (Unconscionable Conduct).

Regulator Guidance

CAANZ has also proposed to issue regulator guidance as soon as possible to the charity and NFP sector.

The Australian Consumer Law Review – Final Report

In April 2017 the Australian Government released the ‘Australian Consumer Law Review – Final Report’. In it the Government suggested that the ACL applies to a wide range of fundraising activities already. It acknowledges, however, that there is still widespread uncertainty within the industry even amongst industry professionals as to what fundraising activities are regulated by the ACL.

As a solution, the Government supports CAANZ’s proposal to issue regulator guidance as soon as possible instead of legislative reform. Between 2019 – 2020, after a significant amount of time has elapsed, CAANZ will assess whether this guidance has been successful. After this, CAANZ will assess whether the ACL requires amendment.[8] Alterations to the ACL could therefore be three or more years away.

References

  • [1] Justice Connect, Submission to Consumer Affairs Australia and New Zealand, Australian Consumer Law Review – Interim Report, 9 December 2016, 3.
  • [2] Justice Connect, ‘Statement on Fundraising Reform’ (Law Reform Statement), 3.
  • [3] Justice Connect, ‘Statement on Fundraising Reform’ (Law Reform Statement), 3
  • [4] Ibid 8-9.
  • [5] Ibid 7.
  • [6] Justice Connect, Submission to Consumer Affairs Australia and New Zealand, Australian Consumer Law Review – Interim Report, 9 December 2016, 2.
  • [7] Ibid 2 – 3.
  • [8] Commonwealth of Australia, ‘Australian Consumer Law Review – Final report’ 97.