So What Does the Second Object of the ACNC Act Mean?

Krystian Seibert explains the context behind the second object of the ACNC Act, in light of an ongoing consultation process seeking to define it.

The Australian Charities and Not-for-profits Commission (ACNC) is undertaking a consultation process seeking to define the second object of the Australian Charities and Not-for-profits Commission Act 2012. That object states that one purpose of the ACNC is to “support and sustain a robust, vibrant, independent and innovative not-for-profit sector”.

The other two objects in the act are relatively clear. But that’s not the case for the second object, which isn’t defined either in the act, the explanatory memorandum, or the minister’s second reading speech.

This is where I need to accept some responsibility – as I was the adviser managing the development of the ACNC legislation within the minister’s office back in 2012. I should’ve made sure this was covered off when the explanatory memorandum and second reading speech were being finalised.

Although I didn’t do that, I can now explain what the context for the second object is.

Back in late 2011, the Australian government released the draft ACNC legislation for stakeholder comment. The consultation period ran over the Christmas and New Year period, and there was understandably some consternation because of that.

But there was probably even more consternation about the fact that the draft ACNC legislation seemed unduly harsh – it seemed to approach the task of regulating the sector using a “deficit model”, whereby it was presumed that there were all sorts of governance and other deficiencies within the sector, and that a new regulator was needed to rectify them. This view is conveyed by many of the submissions in response to the consultation.

When my minister, the Hon David Bradbury MP, was promoted to the role of assistant treasurer in early March 2012, I took on responsibility for the establishment of the ACNC within his office, which included managing the development of the ACNC legislation.

I vividly remember my first meeting with a large group of stakeholders from the not-for-profit sector to discuss the draft legislation. It was held later that March from memory, at the Australian Taxation Office’s Moonee Ponds office in Melbourne.

One by one, stakeholders expressed their concerns with the draft legislation. It quickly became apparent that I had to intervene, and ended up effectively chairing the meeting. Stakeholders were consistently making a very valid point. Yes, the ACNC was to be a regulator of the NFP sector, focusing on charities at first. However, the intention behind the regulator was not that it would be the kind of regulator based on the “deficit model” I describe above.

The intention behind the regulator was that it would be a facilitative regulator (something I discuss in more detail in a book chapter from 2016). It would of course take action where there was misconduct, but it would also have a strong focus on supporting charities so that they could achieve their purposes through good governance and embracing transparency.

After some further examination of the commitments made in relation to the ACNC and some additional consultation, my minister made the decision to include the second object, to effectively codify this intention.

In that sense, the second object is not so much about the sector – it’s about the ACNC. It’s about the regulatory approach which the ACNC adopts, and how it positions itself in relation to charities. That’s why it includes the words “support and sustain” so prominently.

The object is about how the ACNC engages with charities, about how it prioritises education and guidance, about how it ensures that through its regulation, the varied and diverse organisations within the sector are better positioned to achieve their objectives and maximise their contribution to the common good. In short, it’s about the ACNC genuinely “caring” about the organisations it regulates (I know that sounds a little cheesy).

That of course doesn’t mean that the ACNC shouldn’t take swift and firm action against an organisation where needed – if there is wilful wrongdoing, it’s certainly the ACNC’s job to address that.

Last year, the ACNC commissioned Tulipwood Economics to prepare a report about the second object which: “… draws on a literature review to provide clarity on the definitions of ‘robust, vibrant, independent and innovative’, and suggests a range of measurements to help assess the health of the sector, and how that health changes over time.”

Unfortunately, the report is way off the mark because in seeking to define the object, it does not take into account the origins of the ACNC legislation and the process of its development.

It floats a range of measures, extracted below, which could be used to assess progress against the object, however these are based on the flawed understanding of the object.

I can confirm that when the object was included in the ACNC legislation, we weren’t thinking about the number of mergers in the sector or the number of new programs charities are operating. What we were thinking about is how the ACNC can operate as a facilitative regulator. So I would suggest measures which focus on what the ACNC does, and not on what’s happening within the sector.

The added benefit of this is that the ACNC can then be held accountable for how it performs in relation to the object. The ACNC will have little ability to influence the measures which are currently being floated, in which case what’s the point of them if the ACNC can’t and shouldn’t be held accountable for how they track?

The better approach is to use measures based around the ACNC’s regulatory approach. These could cover matters such as the provision of education and guidance, the number of outreach events held with charities, as well as the ACNC’s contributions to any policy development processes in relation to the sector. There are just some ideas, and I’m sure that stakeholders will have other suggestions, which the current consultation process can help draw out.

Adopting such an approach would hold true to the real intention behind the second object of the ACNC Act.

About the author: Krystian Seibert is an Industry Fellow at the Centre for Social Impact at Swinburne University of Technology and has a strategic advisory role with Philanthropy Australia.