In July the Department of Social Services, (Minister Kevin Andrews), conducted forums in the capital cities to allow interested groups to discuss the Options Paper which the Department published earlier that month. The options it suggests to replace the ACNC are:
- Imposing a self-reporting regime on all charities, hinging on all charities using their own website to publish information.
- Returning the determination of charitable status to the Australian Taxation Office (ATO) (and establishing some independent decision making).
- Ensuring a proportionate compliance framework.
- Appropriate transitional arrangements.
The sector will arguably be given a higher level of autonomy with self-reporting, but unfortunately this will be at the expense of increased compliance costs and a return to the situation where not-for-profits must deal with the ATO, whose focus and understanding of the sector is not as specialised as that of the ACNC.
Four questions have been discussed at the forums:
- How time consuming will self-reporting be?
The forums have identified that many charities do not have their own websites. They will incur the initial time and cost of set up, then ongoing time and cost of keeping their websites up to date.
Charities concede that much of the information that they are presently required to file with ACNC, has probably already been collated, so no additional time will be required to place it on their own website.
However, charities that report in a special format to other government departments, e.g, Education for the MySchool website, Aged Care, Health for hospitals are unsure whether that type of information placed on their individual websites will be useful to anyone searching the site. The argument goes that the ACNC reporting model is uniform, so additional time will be required of each charity to identify how it should publish details on its own website.
- What changes will the average charity have to make?
A change may involve the employment of a person to manage the website or incur a cost to outsource.
- What impediments will the average charity encounter?
Impediments would include a lack of knowledge in the small charities amongst volunteers as to how information is presented and time would be expended engaging external professionals to assist.
- How much transparency will be affected?
Transparency may be reduced because charities on their own website may feel constrained from publishing negative information which ACNC would ordinarily require e.g. that it had not been active in the preceding 12 months.
- Determination of charitable status to revert to the ATO
The Department of Social Security is suggesting:
That charities apply directly to the ATO to be endorsed as charitable, and if the ATO in the first instance, rejects the application, two possible appeals are available:
- appeal to another team within the ATO which has not been involved in the original application; or
- appeal to an independent panel comprising external experts and some members of the ATO.
This internalisation has the perception of lack of independence, but follows the same model of appeal which works in many other government departments.
Since the establishment of the ACNC, it is questionable how much confidence has been lost in the ATO by the sector and whether that confidence can be rediscovered taking note of the positive experience that most charities are publically acknowledging about their relationship with ACNC.
- Proportionate Compliance Framework
Overall the emphasis will be to focus on high risks and impose a proportionate response based on the level of harm that non-compliance can cause.
Enforcement powers and powers to remove responsible persons will revert to the ATO and Australian Prudential Regulatory Authority (APRA). Directors' responsibilities under the Corporations Act (Cth) 2001 which were turned off when ACNC began, will be switched back on.
The powers given to ACNC for small unincorporated charities, of information collection, monitoring and receiving and investigating complaints, will be removed.
The Department also expects the States and Territories to use all their powers to prevent charities undertaking fraudulent activity and misusing public funds.
- Transitional Arrangements Proposed
Transitional Arrangements proposed will apply until 1 July 2015 when ATO and ASIC step back into the sector. Determinations on charitable status that ACNC may have commenced will be transferred to ATO for completion.
Information on the ACNC Register will be archived and available to other regulators, in particular ATO and ASIC, to assist with the transition. The Register will be stored in a manner consistent with Australian Privacy Principles.
ACNC will continue to function until Royal Assent is given to the new arrangement.
Relevant Government Agencies will communicate with the charities presently registered on ACNC prior to the changes occurring.
The new model would allow a charity a presumption of "virtue".
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