Directors Put Case for NFP Reform

The peak body for company directors in Australia is calling for a national reform agenda for Not for Profit organisations around regulation, the harmonisation of the definition of “charity” across all jurisdictions and five year government funding agreements.

The Australian Institute of Company Directors (AICD) has released a new report, Governance of the Nation: A Blueprint for Growth, which details reform priorities that could be implemented over the next two years to generate better economic and social outcomes.

In terms of the Not for Profit sector, the blueprint recommended improved funding certainty with a best practice model of five year cycles, 12-month notice periods, freedom to voice their concerns in public debates and an investment in internal capabilities.

“NFPs are subject to fractured and complex regulatory and funding arrangements,” the AICD’s Managing Director and Chief Executive Officer, John Brogden, said.

“Financial sustainability continues to be the number one concern for NFP directors, consistently highlighted by the AICD’s annual NFP Governance and Performance Study.

“Short-term and fluctuating funding cycles work against long-term planning and good governance.”

The AICD report said it was also concerned about the risks that NFP directors incur as funding arrangements are changed, withdrawn or delayed, exposing entities to the potential for insolvent trading.

“To foster an innovative and responsive sector, NFPs need a regime that is flexible, fit for purpose and geared towards improving productivity and outcomes driven results,” the report said.

It recommended national fundraising law reform as part of COAG’s national reform agenda including the adoption of the “report once, use often” model across federal agencies within a year, and a greater use of and access to aggregate government data to improve outcomes measures and enhance benchmarking of effectiveness.

“NFP organisations navigate a changing operating environment while managing the expectations of stakeholders from government, regulators and the community,” it said.

“This is a challenging environment for NFP boards. A focus on longer-term strategy and decision-making is difficult while dealing with funding uncertainty and regulatory change.”

The report said a stable and certain national regulatory system was essential for national harmonisation.

“The AICD welcomes the government’s withdrawal of the ACNC Repeal Bill and the commitment to support the role of the ACNC as the national sector regulator,” it said.

“To foster an innovative and responsive sector, NFPs need a regime that is flexible, fit for purpose and geared towards improving productivity and outcomes-driven results.”