Politics not doing any favours for the NFP sector

The passage of the legislation to establish Australia’s first NFP regulator, the Australian Charities and Not-for-profits Commission (ACNC), is embroiled in party politics.

The Coalition has confirmed that it will not support the legislation to establish the ACNC. This is very unfortunate for the NFP sector, which has the right to ask if politics is getting in the way of the policy settings that will best support it.

The Coalition is of the view that the mischief that the bill seeks to address has not been adequately identified. It does not accept that the current Commonwealth regulatory regime, based on the activities of the Australian Securities and Investments Commission (ASIC) and the Australian Taxation Office, is broken, and therefore does not accept the premise for establishing the new regulator.

Yet there have been five major inquiries over a decade into the NFP sector, including one by the Productivity Commission. Each report has noted that the current regulatory framework for the sector is complex, lacks coherence, sufficient transparency, and is costly to NFPs. Each inquiry recommended a dedicated regulator for the sector. The majority of NFPs want a dedicated regulator and have said so over many, many years. They are still saying it.

Importantly, NFPs also keep saying that the ATO is not an appropriate regulator of the sector due to a conflict of interest — it is a revenue-raising body. The NFP sector deserves to be regulated by a body with expertise in directors’ duties, governance frameworks and financial reporting.

So why not ASIC? ASIC’s focus is on for-profit companies, with a regulatory framework to ensure accountability for the deployment of investment. This is very different from the NFP sector, where dividends, share buy-backs and many other concepts have no relevance.

If we really want to support the NFP sector, the best way is to establish the ACNC, fulfilling the promise of all those inquiries and the stated desire of the majority of the NFP sector. Once the ACNC is established, prompt engagement with stakeholders to devise the governance and reporting requirements for the sector is a must. The ACNC can be part of that, which helps it get closer to the sector and assists it to fulfil its educational role.

CSA has been a long-term supporter of the new regulator. We genuinely believe that it can be a one-stop shop regulator for all NFPs, which will reduce red tape.

But we also know that the only way to ensure that red tape is reduced is for the states to refer powers to the Commonwealth. Such a referral of powers has already been successfully undertaken with company regulation. Given that the precedent exists (the Corporations Act), there is no strong argument that can be put forward as to why the NFP sector should not benefit from the same approach provided to the private sector, but should have to suffer being treated as a second-class sector. Which is precisely what will happen if the current regulatory framework remains in place.

According to the chair of the National Roundtable of Nonprofit Organisations and CEO of Jobs Australia, David Thompson, ‘...there are now more than 12 million words on 39,000 pages on the public record on the case for and the nature of necessary and desirable NFP regulatory reform in Australia’. Many of our Members serve as officers of NFP organisations and they have contributed their considerable expertise to that extensive set of words and pages calling for reform. They know the sector needs first-class treatment.

It would be a disservice to the sector and the nation if politics were to take precedence over good policy.

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