Productivity Commission Releases Draft Report

There is a need for wide-ranging reforms and a reduction in compliance costs faced by the Not for Profit sector, according to a much anticipated draft research report released by the Australian Productivity Commission.

The Commission proposes a ‘one-stop shop’ for Commonwealth-based regulation in the form of a Registrar for Community and Charitable Purpose Organisations in a bid to consolidate regulatory oversight, and enhance public transparency.

This follows the Commissions finding that the current regulatory architecture does not serve the sector well:
– that regulatory reporting can be disproportionate, complex and costly
– some legal forms are unsuited to purpose, especially for national organisations, with no coordinated central regulatory oversight to support transparency
– fundraising legislation is inconsistent across jurisdictions and has yet to be harmonised
– the ‘standard chart of accounts’, which would allow for robust comparison, has not been adopted nationally
– there is a perceived conflict for the Australian Taxation Office (ATO) in assessing eligibility for some tax concessions and
– there is no central body to drive badly needed reforms.

The report says there is also untapped potential for greater social innovation through collaborative ventures between NFPs and business, but the enabling environment for social investment and social enterprise activity needs to be strengthened.

Putting the Commission’s case for reform, Presiding Commissioner, Robert Fitzgerald, says the proposed reforms would bring together the multiplicity of governance, taxation, and fundraising regulatory requirements to create a much stronger foundation for this expanding sector.

Further, he says proposed changes to government funding arrangements will reduce compliance costs and burdens, leading to significant gains in service delivery efficiency and effectiveness.

The report makes a number of other draft recommendations aimed at:

– Building a better knowledge base through a national measurement framework and a Centre for Community Service Effectiveness for the promotion of best practice evaluation

– Smarter regulation including a more coherent endorsement process for tax status to be administered by the proposed Registrar and a new definition of charitable purpose

– Promoting giving through broader scope of gift deductibility, the promotion of planned giving and national harmonised fundraising regulation

– Facilitating social innovation and sector development through a variety of initiatives
reforming government purchasing and contracting arrangements

– Building more effective relationships with governments, including through the establishment of an Office for Not-For-Profit Sector Engagement to implement reforms.

The Commission says the draft research report has been released to encourage public discussion and to inform the Commission’s Final Report. Submissions are due by 24 November.

In March 2009, the Productivity Commission was commissioned by the Federal Government to carry out a study on the contributions of the Not for Profit sector.

The study was asked to focus is on:
– improving the measurement of the sector’s contributions
– removing obstacles to maximising its contributions to society.

The Commission has been asked to adopt a broad definition of the sector to encompass most types of Not for Profit organisations, including Australian based international aid and development agencies.

It is also to have regard to the findings of the Government’s Taxation Review headed by Dr Ken Henry and the Inquiry into the Definition of Charities and Related Organisations (2001).

To download the draft report go to: www.pc.gov.au