Ducks, Elephants, the ACNC and the Senate

Is the outcome of the Senate inquiry into the Australian Charities and Not-for-profits Commission (Repeal) (No 1) Bill 2014 just a foregone conclusion, asks Professor Ann O’Connell, from the Not-for-profit Project, Melbourne Law School who listened in on the day-long public hearing in Canberra last Friday. And when is consultation not consultation?

The Minister for Social Services, Kevin Andrews, has been stating publicly for some time that a coalition government would abolish the Australian Charities and Not-for-profit Commission (ACNC) when elected.

The reason given for the abolition was that charities and Not for Profits (NFPs) did not need additional red tape (presumably referring to the reporting obligations under the ACNC Act 2012).

It was also said that governance rules were unnecessary because if the directors of a charity acted inappropriately it was a matter for the members to deal with. The suggestion appeared to be that the governance requirements were an example of ‘big government’ and that NFPs should be allowed to get on with carrying out their charitable purposes.

The Australian Charities and Not-for-profit Commission (Repeal) (No 1) Bill 2014 was introduced into the House of Representatives on March 19, 2014 and referred to the Senate Economics Legislation Committee on March 27, 2014 for inquiry and report.

Submissions to the Committee closed on May 2 and a public hearing at which only a few people were invited to appear was held in Canberra on Friday, May 23.

Several aspects of the inquiry suggest that the outcome of the inquiry is a foregone conclusion – that is, that the Committee report will follow party lines and recommend passage of the legislation. For example, there are concerns about the treatment of some submissions; the choice of persons invited to give evidence to the Committee not representing the balance of the submissions and the notion that the Department of Social Services has been engaged in consultation about the proposal.

The Not-for-profit Project at the Melbourne Law School made a submission to the Senate inquiry two days before submissions closed (ie April 30). Despite other submissions being lodged after that time, the submission of the NFP Project was only uploaded on 24 May and part of the submission was redacted. Strangely the section redacted was publicly available information about tax avoidance in the UK and the use of charities in a number of those schemes. Apparently, no other submission to the inquiry was treated in this way although a further submission was withheld from publication to allow a sectional interest holder an opportunity to respond to it and at least one other submission has not appeared.

The Senate Committee invited 12 persons or bodies to appear to give evidence as well as the Department of Social Services (having responsibility for the Bill). Although an analysis of the 148 submissions uploaded in a timely manner revealed that approximately 10 per cent favoured abolishing the ACNC (as opposed to approximately 80 per cent against with 10 per cent expressing no opinion) the invitees (excluding the DSS and ACNC) included more than 50 per cent of persons or bodies in favour of the Bill.

The members of the Committee in attendance were Senator David Bushby (Liberal Party – Chair); Senator Mark Bishop (ALP); Senator Rachel Siewert (Greens); and Senator Sam Dastyari (ALP – described as a participating member). Senator Dastyari attended in place of Senator Ursula Stephens who withdrew for family reasons.

The hearing itself was both disturbing and fascinating. There were representatives of the community sector (ACOSS and the Community Council of Australia); representatives from representative bodies such as the Universities, Medical Research Institutes and the Financial Services Council. Where were the lawyers? Where were the researchers who have spent many years working to achieve a balance between the desire for transparency and the compliance this might entail?  Where were the accountants?

Senator Bushby adopted an aggressive line of questioning with the CEO of the respected Community Council of Australia, making the point that he is a member of the ACNC Advisory Board (does that mean he has a vested interest in the continuation of the ACNC?) and quizzing him about statements made in a speech that ‘powerful sectional interests’ were behind the proposal to repeal the ACNC Act. The CCA has been a long-time supporter of the ACNC and so it is not clear why a personal attack was regarded as appropriate rather than questioning the reasons why the ACNC should be retained.

Representatives of the Universities sector and the Medical Research Institutes both made cases that they were already well regulated and resented any changes or compliance activities they might have to do to be part of the ACNC.  Some Senators seemed to be considering the possibility of excluding these sectors from ACNC supervision although this would be regrettable given that the main advantage of the ACNC register is to provide information for donors rather than accounting to government for grants received or compliance with educational standards.

Perhaps there are two types of groups supporting the Bill – those who do not want to make any disclosures and those who feel they make enough disclosure already. This second group may be amenable to simply passing on existing information to the regulator. The ACNC has been flexible in accepting reports prepared for other purposes and presumably this possibility could be considered.

Robert Fitzgerald (Chair of the 2010 Productivity Commission Inquiry into the Not for Profit sector) noted that in the previous decade or so that he had been involved in the debate about the regulation of the NFP sectors, concerns by these bodies had not been raised.

Perhaps the most surprising person asked to provide evidence was an individual who was described as an accountant from a small chartered accounting firm, who by his own evidence has not participated in the reform debates previously and did not appear to represent the views of any broader group.

Why was the ICAA not invited to provide a broader perspective?

The Financial Services Council represents the trustee companies who manage funds bequeathed for charitable purposes. The main argument they gave for supporting abolition of the ACNC was that these were private arrangements and subject to supervision by the State and Territory Attorneys General. As Robert Fitzgerald pointed out, it is inappropriate to regard these as private arrangements as the money has been bequeathed for charitable (not private) purposes.

It is also unrealistic to expect the Attorneys General to take action for wrongdoing, especially where there are no reporting requirements in place for trustees of charitable trusts. The Financial Services Council came in for aggressive treatment from Senator Bishop who wanted evidence to support the claims about excessive compliance costs.

In addition to support for the ACNC from bodies such as ACOSS and CCA who gave evidence perhaps the strongest support for the retention of the ACNC came from Robert Fitzgerald, the chair of the Advisory Board and Susan Pascoe, Murray Baird and Sue Woodward from the ACNC.

Robert Fitzgerald outlined the long gestation of the ACNC and the reasons behind the recommendations that lead to its establishment. He was well placed to do so given his involvement in several reports into the NFP dating back to 1995. The officers of the ACNC demonstrated the calm and measured approach that has made them a regulator that is well-liked by a large number of entities subject to their regulation. It was instructive to hear that the ACNC had not been subject to consultation about their abolition or about any transitional measures to move functions to a ‘successor agency’.

But perhaps the most enlightening submission was from the Department. The Departmental officers were quizzed by Senator Siewert about ‘consultation’ and had to concede that there had not been broad, public consultation about the proposal to abolish the ACNC or about any replacement arrangements. They did refer to the fact that the Minister had engaged in his own form of consultation with some stakeholders and that the Department had provided a list of persons to the Senate Estimates Committee that they regarded as having been consulted. As one of the persons named on that list, I can only say that being told that the decision had been made and that any representations to achieve a different outcome would be futile, this does not fit within any definition of consultation that I have encountered before.

You can call an elephant a duck, but it is still an elephant.

About the Author: Professor Ann O'Connell is a member of the Not-For-Profit Project at the Melbourne Law School at University of Melbourne. She was also a member of the NFP Tax Reform Working Group.