Following the reports of both Parliamentary Committees, the ACNC and In Australia Bills are currently before Parliament. As this is the last sitting week of Parliament before the planned commencement date for the ACNC of 1 October 2012, they would need to be passed this week for this to occur.
We will provide you with an update of the outcome of this process once the Bills have progressed. We will also provide you with detail in the coming weeks of our seminar series on this significant piece of reform.
The Committee reports in relation to the ACNC are promising in that they incorporate a number of recommendations from the submissions and public hearings. Both Committees recommended the passing of the legislation with dissenting reports from the Coalition. It is interesting to note that the Greens, whose support will be required to have the legislation passed, and Senator Xenophon made a number of specific recommendations to be included in the legislation. The recommendations of the Greens reflect matters raised in many submissions and to the public inquiries. These are outlined in detail in our full article. Specifically they recommended that the ACNC Bills should only be passed after the concerns raised have been addressed. Where this leaves the progression of the Bills is difficult to say.
Joe Shannon, the Chair of the Moore Stephens NFP Group provided evidence at both inquiries in which he gave qualified support to the establishment of the ACNC subject to the matters raised by the sector being appropriately addressed. These included more robust requirements around the 'one-stop' shop objective, increasing the reporting thresholds, more clarity around the governance and financial reporting framework including for joint and collective reporting, clarifying the Commissioner's discretion to accept financial reports already lodged and a number of key matters in respect to the exemptions for Basic Religious Charities. Please click here for further details on what Joe spoke about in his appearance at these inquiries.
For our comments on the original Bills please click here.
In Australia Special Conditions Bill
The Parliamentary Joint Committee on Corporations and Financial Services broadly brushed aside many of the concerns raised by the NFP sector on the grounds that the matters raised are overstated and that Treasury and the ATO are to provide greater clarity in the Explanatory Memorandum and other guidance material regarding the application of the legislation. Moore Stephens welcomes these statements by the Parliamentary Joint Committee of the need for greater clarity and expects Treasury and the ATO to be held accountable in the future against this standard.
The principal concerns were in relation to tracing provisions, the not-for-profit entity definition and changes from the law as it presently stands. Once again the Greens recommended that this Bill not be passed until further work has been undertaken to resolve the concerns of the NFP sector.
The main issues addressed in the Joint Parliamentary report relevant to the "In Australia" special conditions are:
Counter Terrorism Laws
It was reasonable to contain counterterrorism laws in this bill. The committee thereby contests World Vision's argument that the this Bill unnecessarily duplicates Australia's existing counter-terrorisms regulations.
Tracing provisions not onerous
The committee believes that the concerns of those submitters who claim the tracing provisions in the Bill will be too onerous and too complex are overstated. The committee highlights the EM's clear guidance that 'the requirement should present no greater an obligation on entities than already exists under charity law and the existing ATO endorsement framework. The committee does believe that the ATO should release guidance material for the not-for-profit sector on the tracing provisions. This material should clarify that a not-for-profit entity that passes funds to another need not rigorously check the use of those funds by the recipient for a prolonged period to meet the 'in Australia' conditions. This material should be developed in consultation with stakeholders.
Definition of not-for-profit entity
Does not distribute its profits to its members
There were concerns raised by the Salvation Army and others regarding the requirement not to distribute profits to members. The example given by the Salvation Army was of a church congregation where the members of the church are the users of the church 'property' and recipients of the benefits of the organisation on a frequent and regular basis. This particular issue does not appear to have been directly addressed by the committee. Presumably this is because the Committee believes that this interpretation is incorrect.
The committee believes that the EM's definition of the words 'similar purpose' makes clear that this encompasses a charity that gives to another regardless of their individual charitable purposes. It clearly states that a charity can utilise a different not-for-profit as a means to carry out or give effect to its charitable purpose.
Therefore, we would expect that similar purpose would be considered in a broad context and not be narrowly defined.
Deductible Gift Recipients
The committee did not address concerns that we had regarding tracing in the DGR context. Therefore, if passed NFPs that have concerns may have to consider obtaining endorsement as an International Affairs Organisation.
Greens Proposed Amendments
Many of the recommendations of the Greens are sensible amendments to the Bills as they would provide greater clarity and protection for many charities. The main recommendations put forward by the Greens are that:
- The Bill includes clauses to ensure that the governance standards cannot now or in the future be used to prevent a charity from advocating for its charitable purpose.
- Relevant Commonwealth legislation be amended to ensure that Commonwealth contracts are prevented from containing 'gag-clauses' that restrict a not-for-profit organisation in its advocacy or criticism of Government policy or other issues relating to its mission or purpose.
- Governance standards and external conduct standards be added to the legislation as a schedule of amendments once appropriate sector-wide consultation has occurred.
- The requirement for robust, public consultation be inserted into the text of the Bill including in respect to governance standards..
- The government further clarify the definition of more-likely-than-not as a trigger of some power for the Commissioner.
- The government further clarify how and in what context the Commissioner may have regard to 'public trust and confidence'.
- The Government clarify the circumstances in which warning notices will be posted online and have regard for the reputational risk this imposes on charities that are acting in good faith.
- The text of the Bill be amended to give the ACNC Commissioner specific responsibility for upholding the objects of the Act and advising the Minister on its implementation.
- The protections already in place in the Bill, that minimise the liability that volunteer individual directors of unincorporated entities will face if their organisation breaches the legislation, should be further described in the Explanatory Memorandum.
- The Government further investigate the opportunities to strengthen the protections available to not-for-profit directors, particularly those who represent unincorporated entities, and consider carving out more protections for volunteer directors.
- The Bill should include a statement to the effect that, 'Where a registered entity is required to provide an annual financial statement to the ACNC, that entity will no longer be required to provide a financial audited statement for any individual grant or grants provided by an Australian Government Agency unless that Agency has reason to suspect fraud in relation to the use of the grant money.'
- The ACNC establish a timeline for reducing unnecessary regulatory obligations on the Australian not-for-profit sector and table an annual report to Parliament that details its progress against that timeline.
- The Government should give an undertaking in the Explanatory Memorandum, or through some other mechanism, confirming that for all Commonwealth Departments the Commissioner will accept a report to a Department as sufficient for an organisation to meet its obligations under this legislation and vice-versa: a report to the Commissioner will be sufficient to meet Departmental reporting obligations.
- The appropriateness of the reporting thresholds that define small, medium and large entities be evaluated as part of the five year review.
In Australia Special Conditions Bill
- The definition of not-for-profit is insufficient and that it should be both amended within the text of the Bill and further clarified in the Explanatory Memorandum.
- The definition of a not-for-profit be reviewed in the context of reviewing and reforming the statutory definition of a charity.
- The application of the In-Australia rule should be resolved through further consultation with the sector and the obtaining of expert advice.
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