Australian NFPs Falling Behind in Transparency

Australia will fall further behind China and the US in gathering information about Not for Profit organisations without the charity regulator, the ACNC, argues Not for Profit researcher Wesa Chau.

Minister for Social Services Kevin Andrews in late January flagged that something akin to the American independent charity evaluator, Charity Navigator, could replace the Australian Charities and Not-for-Profits Commission (ACNC).  He suggested that voluntary participation of Not for Profits in information provision was preferable to government-mandated compliance for charities and Not for Profits.

This should be good news. Charity Navigator is a great evaluation tool for charities. With the help of Charity Navigator you can find charities, compare them, and evaluate them. It also provides excellent tips for donors.

One problem, however, is that this cannot happen in Australia without the support of an organisation like the ACNC.

I just came back from a trip to China where I spent some time with an amazing American, Holly Chang, founder of the Golden Bridges Foundation.  Holly has extensive knowledge of the Not for Profit sector both in the US and China. We compared how the charity sector works in the US, Australia, and China, to see how they differ.

One significant difference is that our tax laws do not require charities and foundations to file the routine IRS Form 990 that the US Internal Revenue Service requires American Not for Profits to file. The closest thing we have to IRS 990 forms is the newly minted ACNC Activity Statement, an initiative of the ACNC placed at risk by its dissolution.

The IRS Form 990 is a 12-page form that require all US charities and foundations to disclose publicly their financials and other information in readily-compared common formats.  It asks specific questions on governance, financials, program details, compensation to officers, directors and trustees, along with other key information. Every American charity with tax-exempt status must return this form.  There is nothing voluntary about it.

The success of Charity Navigator as an independent charity evaluator is built on the databank assembled from IRS Form 990s. The same goes for other major information providers in the independent American Not for Profit sector, including the equally remarkable Foundation Centre.

In Australia, individuals wishing to donate money need to conduct their own research on the websites of each and every potential charity.  This is not always an easy task. Even when you find the relevant website, you discover that annual reports are not always fully available. Some charities provide annual reports without financial details, others fail to issue annual reports for years on end.  And where you do find full financial reports you discover that every organisation prepares its financials differently, making meaningful comparisons difficult.

If Minister Kevin Andrews is seriously thinking of abolishing the ACNC, where will he find the information databank to create a Charity Navigator equivalent in Australia?

There are many other differences between the US and our system.  In the US, charities do not depend on government funding to the same extent as we do, and there are many more private donors.  Giving is supported by basic information infrastructure (such as the Foundation Center and Charity Navigator), allowing people to make informed choices based on financial and other information made available through IRS regulations.

Australia cannot simply ape the American system but there is much to learn in making basic information accessible to the public.

Philanthropy as a sector is relatively new in China but it is making progress.  In 2008, around the time of the devastating Sichuan earthquake, Chinese non-government organisations were found to lack credibility and accountability resulting in a precipitate decline in public giving to private foundations over following years.

A delegation of foundation leaders then visited the US where they discovered that public access to data is the key to building public trust and credibility.  

On their return these leaders established the China Foundation Center to present financial information on charities and foundations online in English and Chinese.  The Center mirrors the Foundation Center in the US.

Since then, the China Foundation Center has opened opportunities for practitioners to build tools to compare and evaluate charities, and enables donors to make smarter decisions on how they give in China.

Australia has fallen behind China and America in gathering information about Not for Profit organisations and making them accessible to the public. The ACNC is filling this gap.

Building a Charity Navigator without a dataset of the kind that the ACNC can provide is like building an electronic address book without the data.  Useless.

Filling in forms is more than compliance and burden. It is about providing accessible information on charities and foundations to the public, building public confidence and trust, and enabling donors to make informed choices.

About the author: Wesa Chau is a board member of two charities and former senior manager at Action on Disability Within Ethnic Communities (ADEC) and  was honoured as 2010 Young Victorian of the Year. Her visit to China was funded by Director of the Asia-Pacific Centre for Social Investment and Philanthropy at Swinburne University.