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Standing Committee on Economics
27/07/2012
Australian Charities and Not-for-profits Commission Bill 2012 and an associated bill

CROSBIE, Mr David William, Chief Executive Officer, Community Council for Australia

NEIL, Ms Heather, Officer, RSPCA Australia

FLETCHER, Mrs Tanya Jean, Legal Counsel, World Vision Australia

Committee met at 09:21

CHAIR ( Ms Owens ): I declare open this second public hearing of the House of Representatives Standing Committee on Economics inquiry into the exposure draft legislation for charities and not-for-profit organisations. These organisations make an important contribution to Australia. Today the committee will talk to bodies in the welfare and religious sectors as well as financial and legal experts and philanthropists.

I remind witnesses that, although the committee does not require you to give evidence under oath, this hearing is a legal proceeding of parliament and warrants the same respect as proceedings of the House. The giving of false or misleading evidence is a serious matter and may be regarded as contempt of parliament. The evidence given today will be recorded by Hansard and will attract parliamentary privilege. Before introducing the witnesses, I refer members of the media who may be present at this hearing to the need to fairly and accurately report the proceedings of the committee.

I now welcome representatives of the Community Council for Australia, the RSPCA and World Vision to today's hearing. Do you have anything to say about the capacity in which you appear before the committee?

Ms Neil : I am also on the board of the Community Council for Australia.

CHAIR: Although the committee does not require you to give evidence on oath, I should advise you that these hearings are legal proceedings of the parliament and therefore have the same standing as proceedings of the respective houses. I will now give you an opportunity to make a short opening statement before we proceed to questions.

Mr Crosbie : I will make an opening statement on behalf of the Community Council for Australia. The Community Council for Australia is an umbrella group of not-for-profit organisations. It is a very diverse group, as is the not-for-profit sector itself. Our board includes not just Heather, from the RSPCA, and Tim Costello, from World Vision, but also Dennis Young, from Drug ARM; Stephen Judd, who is head of HammondCare, an aged-care provider; Jayne Meyer-Tucker, who is head of a youth welfare organisation; Toby Hall, from Mission Australia; Mary Jo Capps, from Musica Viva; Brett Williamson, the head of Surf Life Saving Australia; Steve Perrson, the head of the Big Issue; Ann Hollonds, the head of the Benevolent Society; and Reverend Dr Keith Garner, the head of Wesley Mission. So we are a very diverse group and include parts of the sector that are often not engaged in broader policy debate.

I think policy debate around the not-for-profit sector tends to be dominated by the welfare sector, who tend to get more of their funding from government and therefore have more interaction with government. It is also dominated a bit by those who service the sector—accountants, lawyers and others. This is a very big sector, with a $100 billion turnover. It is a big market for service industries and the larger charities, who tend to have a capacity to provide policy input.

We see the sector and even charitable organisations as being much broader than that. We try to represent those views as well as representing the views of the larger not-for-profit organisations and the welfare groups.

For us, this bill is a fundamental structural reform that is long overdue. Consistent with the recommendations of the Productivity Commission and previous inquiries, we think one of the important parts of creating reform for the not-for-profit sector is creating an independent and responsive regulator. The current situation is bizarre, but we have adapted to it. Because we have adapted to it, we kind of accept it. Whenever a not-for-profit wants to engage with any level of government—whether it is hiring a school hall or a local council hall, looking at their rate exemption, trying to get a payroll tax exemption, trying to register for fundraising or trying to apply for a grant from a trust or a government agency—they have to establish their bona fides. They have to say who they are and establish their charitable status. The idea that that has to be done over and over and over again is ridiculous. The concept of having a charitable organisation passport, for us, offers genuine scope to reduce the inefficiency of the ways not-for-profits currently have to operate.

We do not expect that if this bill goes through that the world will change for not-for-profits overnight. It is, in many ways, a beachhead. It is the start of a broader reform. Despite the size of the sector and its scope, it has not been subject to the significant level of reforms that other areas of industry and other sectors have been. While this itself is not a total reform for the not-for-profit sector and it is not going to deliver a whole lot of instantaneous changes, it is a fundamental part of the recipe to get an independent and responsive regulator.

We see the benefits as not only reducing duplication and allowing organisations to establish the bona fides but also creating an information portal and database that will be useful for people into the future. The real benefits of the establishment of the ACNC probably will not flow through for three or five years and probably will not be fully realised until even later on—maybe 10 years time. It is a structural reform that will create real opportunities for improved engagement between government and not-for-profits. It will change the relationship between government and not-for-profits. While there are parts of the bill that we feel could possibly be looked at to make minor changes, we do feel that it is very important that this bill gets through so we can begin the real work of not only establishing the Australian Charities and Not-for-profits Commission but also better supporting not-for-profits in their engagement with government and with the community.

Mrs Fletcher : World Vision Australia is a Christian relief, development and advocacy organisation that works with children and families to overcome poverty and injustice as part of a broader World Vision partnership around the world that works in about 90 countries. It is also Australia's largest aid and development organisation. We are also proudly expanding our work with Indigenous Australians.

In terms of funding, just for a bit of background, over 70 per cent of our money comes from Middle Australia. They are mum-and-dad donations. A lot of it is through our flagship donation program, Child Sponsorship. About 20 per cent of our funds come from government, multilateral and private grants. That includes both AusAID and FaHCSIA at a Commonwealth level. The remaining eight per cent is donations of food and goods from corporates.

For us, the purpose of this reform is, firstly, a shift in regulation from de facto regulations as currently undertaken by the Australian Tax Office to the ACNC. This is important because the ACNC will be independent and not inherently conflicted in its aims.

The tax office is there to try and maximise revenue for government, so there is an inherent conflict in the tax office playing that role as well as determining charitable status.

The second thing we are very hopeful about with this reform is the reduction in red tape. We believe that the establishment of the commission is a key to driving the momentum here. We relate with four Commonwealth agencies—some as regulators, some as grant recipients—and we relate with six state fundraising regulators, so we are very keen for the reductions that will flow over time.

Thirdly, World Vision strongly supports transparency and accountability, so we support the reforms in this area as well and look forward to the public portal.

Ms Neil : Governments have been talking about reforming the not-for-profit sector and putting in place opportunities for change for more than a decade. I think the reason the RSPCA has been behind the establishment of a one-stop-shop, or what is now the ACNC, is to try and bring all that talk into action. As charities, that is what we do; we talk about change and changing people's lives—and, in our case, animals' lives. The community expect us to deliver on that talk. I think governments have talked about change, talked about reducing red tape and talked about efficiencies, and this is the great opportunity to deliver on all of that talk.

It will not be perfect initially, but we need to get started. Some of the submissions that organisations have put forward have given some really sensible amendments that could be considered by this committee and parliament to get the ACNC up and running and perhaps then addressing some of those points of contention. But let's just get it up and running.

The community are increasingly asking us as a recipient of their money to be very efficient and to reduce the amount of money we spend on administration. Although for the RSPCA that administration in meeting our regulatory obligations is much smaller than for those who receive government contracts or government money, we still have to apply in every single state for fundraising legislation. We have to keep track of all of those charities license dates, and every state requires a different piece of information. I am not at all convinced that all of those states even look at those bits of paper. I am not even sure if they tick off that it has been received.

If the system we currently have in place, where we are repeating what we do over and over again, was being proposed in legislation today, I think this committee would not be accepting it as an ideal model. I think the ACNC has been recommended in various ways by various organisations over a long time, and we would like to see this committee and the parliament get behind it and turn it into a reality.

CHAIR: Thank you. We have about an hour. I would like you to have the opportunity to talk about the things that you would like to be better, but I would also like to raise a few things that other people have raised and get your responses. Let's start with the areas where you would like to see it improved and your responses to other suggestions that you think are good ones.

Mr Crosbie : That only area that I have had any ongoing discussion with my members about—and I would have to say that it is a minority of members but it is a significant concern; and I note the Institute of Company Directors are presenting later today—is the question of whether or not the bill increases director liability and the difficulty of ensuring that we do make engagement in not-for-profits as easy as possible.

We like to think about engagement not just with the kinds of people who are clients of not-for-profits but also with staff and with board directors. Board directors form a critical part of the not-for-profit landscape, and we need good board directors engaged in not-for-profits. There has been expressed to me some concern that the one provision where directors can be held liable for the behaviour of the entity—which is around noncompliance with instruction of the ACNC commissioner—is something that perhaps we need to look at and consider whether there is a better way of expressing that, so that individual directors are not held liable for the actions of the entity.

I think in most other areas my members are very supportive of the bill. It has been very positive seeing the changes that have happened to the bill through the consultation processes. We have to remember that this entity was first proposed almost 18 months ago. We were part of the group that pushed that it not be part of the Australian Taxation Office and that it be independent. When the first exposure draft came out, we had quite a lot of concerns. Initially we had trouble getting Treasury to acknowledge those concerns. I think we now have had those concerns acknowledged, and the redrafting of the bill as is currently is addresses many of those concerns.

CHAIR: Can I just stay on that one for a minute. My understanding—and I think it matches with yours—is that, in terms of director liability, a liability payable under the bill by a corporate body is payable by a director only if the liability arose because of the director's dishonesty, gross negligence or recklessness or a direct act of omission by the director. Is there a concern with that part of it?

Mr Crosbie : No. That is not the concern.

CHAIR: It is the next one, the offences?

Mr Crosbie : The concern is about—and I have not got the clause in front of me—

CHAIR: I think I do. It is the offences one. There is only one offence for a director—

Mr Crosbie : Yes, the one offence.

CHAIR: being an offence against the requirement to comply with a direction from the ACNC commissioner. There are two defences, but there is that single offence. That is causing concern?

Mr Crosbie : It is causing concern because it is the only place in the bill—I think the only provision—where directors could be held liable for the actions of the entity rather than their own actions. I think directors accept that they have fiduciary responsibilities and they need to execute those responsibilities and discharge them appropriately and, if they do not, they have not fulfilled their obligations. But, in terms of whether a liability exists, which is a higher level of concern than obligation, I think the concerns around the behaviour of an entity in not following the directions of the ACNC commissioner should not result in a director having a liability, a penalty, imposed on them personally.

As with most of this legislation, I suppose, I would doubt that in practice the ACNC commissioner would pursue individual directors because they failed to comply with the directions to an entity. And I would doubt that that would succeed in the courts, if the director had been discharging their responsibilities appropriately and they had taken reasonable steps to see that the entity was behaving appropriately. So I doubt that it is a major issue in practice, but the question is: why it is needed in the bill? If it is possible to look at that clause and make recommendations about redrafting that so that the individual director is not personally liable but the entity is liable and the director remains liable for discharging their responsibilities, then I think some of my members would certainly find that a positive change.

CHAIR: Are there other areas where you think the legislation can be improved? That question goes to any of you. Ms Neil, you said that there were some suggestions in other submissions that you thought were quite sensible.

Ms Neil : People like World Vision have been through the legislation in a great deal of detail and pointed out some of the things that perhaps might be simpler to take out for now or to address, as David talked about, just to get the ACNC up and perhaps then look at those things once we have got an organisation in place. Perhaps I will defer to Tanya to talk in a bit more detail about that.

Mrs Fletcher : Our submission sets out a number of areas where we believe the legislation could be improved. I guess what we have tried to do is look at it from the point of view of what we need to get an entity enacted that can register and perform its basic roles as a regulator, but we do have some concerns with some areas that we think should be reviewed, if not now then after the legislation is enacted, in the sense that some of the enforcement provisions still have quite a heavy-handed tone to them. We still have some concerns around the penalties provisions, especially in relation to keeping records.

In relation to the registration provisions, we would just like to see some very minor adjustments, really just to bring home the point that registration is about the charity passport that David talked about—giving charities that number, that badge of honour, if you like, that can be used in multiple situations to represent that they are a charity. At the moment the bill still ties that very heavily to access to tax concessions, when, from the sector's point of view, that badge of honour as a charity is about a bit more than that.

The other point I would like to specifically make that is of particular relevance to World Vision is that we do not believe that the external conduct standards are an appropriate place to regulate counterterrorism measures. Our view is that the Attorney-General's Department and the legislation that comes out of there is the appropriate place for this, and we are not quite sure why that should be needed in this legislation as well. There is already a regime for dealing with those sorts of issues. Bringing it in here as well would also add the extra layer that an entity could have its registration revoked. That just does not seem to sit well with the sector and the nature of the sector, especially as counterterrorism measures are not a huge issue for the sector at the moment.

Mr Crosbie : Could I perhaps amplify one of the concerns raised by World Vision and. Some people have expressed concern about the obligation to impose a penalty, and then the commissioner having the right to revoke the requirement to pay that penalty. It would be better if that was reversed, in a sense. At the moment the way that the bill is worded—and I am sure there are much better legal minds than mine who have looked at this—seems to imply that the commissioner is obligated to impose the penalty and can then choose to remit or have the payment cancelled. That to us seems a strange way of doing it. It would be much better to give the ACNC the capacity to choose whether or not to impose a penalty rather than having to impose one and then being able to remit it in certain circumstances.

CHAIR: Can I just go back to the charity passport issue and the way, at the moment, it is linked to the tax issue. People have said they want red-tape reduction to be more of a headline issue in the bill. For you, is the charity passport about reduction of red tape?

Mrs Fletcher : Absolutely.

CHAIR: So in a sense you want a refocus of it?

Mrs Fletcher : Yes.

CHAIR: In terms of your priority areas it also sounds like that is the first thing you do, because that has the biggest impact in the short term. Is that right?

Mrs Fletcher : That is right.

Mr Crosbie : I do not know whether you should put that in the bill. It is very clear in the implementation report that that is what the ACNC will be doing and will be held to account for in its report to parliament and its report to the sector. I see the bill as enabling the ACNC to operate and outlining its powers, the scope of those powers and how it can apply them. I do not think you necessarily need to talk about its operations. Some of the submissions I have read seem to confuse enabling legislation with operational guidelines. We see the operational guidelines of the ACNC as having been outlined in the implementation report, and I can assure you that the not-for-profit sector, and certainly our organisation, will be holding the ACNC to account to achieve those goals. And I think the parliament should be holding them to account to achieve those goals. I do not know that you need to put operational guidelines into enabling legislation. My word of caution is that there is already some reference to duplication in the legislation but I do not think you need to say how the ACNC will operate in a bill that is really just establishing the scope of its powers.

Most of us have some experience of trying to maintain databases of organisations and to keep those databases accurate, relevant and timely, and that is an incredible task.

I do not envy the ACNC trying to have 55,000 records of charities that are more accurate than, or at least as accurate as, other government registrations of those charities. Maintaining that database so that the integrity of the database is very strong—strong enough for us to be able to refer other government agencies to—will be a very big task in itself. If all we can do is establish that the Australian Charities and Not-for-profits Commission has a very accurate and reliable dataset of all the charities in Australia with some basic information about them, and that, when a charity applies for a grant or some kind of concession or is engaged with some level of government or regulation, they can just provide the link to the data that is on the ACNC website as the reference point for their core information—if we can get to that point, that will make a massive difference in the first instance. I do see that as being a lengthy process. I think that is at least a couple of years, maybe three years, of work before that level of information and that level of reliability are established. But, once it is, the potential for it to benefit the sector is enormous. I do not think people quite realise how often charities have to demonstrate their bona fides, and the capacity to do that, by having the equivalent of a charities passport, has incredible appeal.

CHAIR: Once we move past that stage into the broader aspects of governance et cetera and registering not-for-profits as well as charities, it is an incredibly diverse sector. We are hearing views from really large organisations that are comfortable with Corporations Law and have armies of people who administer it, little tiny organisations that are currently state based that do not interact with the federal government at all at this point, statutory authorities that are charities that will not be registered, religious organisations—there is this army of variety, if you like. How do you see the ACNC working through and finding the path that works for this incredible range of cooperatives and not-for-profits and charities?

Ms Neil : Perhaps I could start on that and then David and Tanya can give a lot more detail. For an organisation like the RSPCA, representing a non-human service charity, one of the great benefits of the ACNC is that it is not part of the Department of Human Services or linked in with human service provision government departments at federal or state level. Whenever people are talking about reform of charities or saying, 'Let's improve things,' or 'Let's improve the relationship between government and charities,' it is always put in the context of human service provision, and one of the really good things about the long-term benefits of the ACNC for us is that at last there will be a voice for all of those in this diverse sector. It is recognition by government that, across our very broad community, we have lots and lots of organisations doing lots of great things in this diverse range, whereas at the moment that regularly gets forgotten. When people talk about charities they revert to human services and they revert to those charities that receive a significant amount of money from the government, be it state or federal. That is not the case for the RSPCA. Most of our money—almost all of it—comes from the community. So, from a reputational point of view, and actually having somebody who is representing the voice and the diversity of the sector, I think the ACNC is setting the foundation to be able to do that very well.

Mr Crosbie : The first thing I would say is that we want good regulator. We do not want someone looking at the behaviour of every not-for-profit and sending out people to decide whether or not the work that is being done in that sector is of value or not. The fact that you are registered with ASIC does not mean you are a good business. I wish it did! What we want is a regulator who can actually have accurate data and provide accurate data back to the sector and be a reference point for providing some level of support for people to comply with that regulator. I think in terms of things like liquor licencing commissions.

If you apply for a licence to run your one-off event from a liquor licensing commission, a good commission will provide you with information on how to run that event—what to do about transport, glassware, security, traffic or whatever. Guidelines will be given to you as you apply for that licence. You will be granted that licence provided you meet certain requirements.

A bad regulator does not provide anything; he just says yes or no. So there is an educative role, but that educative role is really about providing guidance around being registered and providing information that is required to be registered. I think we need to be very careful about expanding the role of the ACNC because I think the challenge of doing exactly what you were talking about, being able to accurately register the diversity of the sector, is a massive challenge in itself.

Another point I would make is that we in the sector are not passive recipients of government or community actions; we are actually a very powerful sector. We employ over one million Australians. We have some of the leading commentators and people who have a capacity to command media presence. If we as a sector choose to hold a group accountable, we can hold that group accountable. In a sense, it is up to us to get the regulator that we need. There is a notion that, in some way, not-for-profits are kind of victims of the way that government is behaving or the way others are behaving. We are not; we are actually a very powerful group. If the regulator is not doing what it should be doing or is behaving in a way that challenges the wellbeing of our sector, not only will our sector give that regulator a hard time but you guys will be hearing from us politically and in the media. This is not a regulator that will go unmonitored independent of its formal monitoring back to parliament.

CHAIR: I came from the arts sector when I first moved into politics. I have always said that politics was a breeze compared to the arts.

Mr CIOBO: Mr Crosbie, thank you for your comments this morning. To put some context around them from a committee perspective, there is in very broad terms support for the ACNC. There are obvious synergies that can be achieved and obvious benefits that flow from an erosion of the duplication that currently exists. But, as always, the devil is in the detail and as a committee a number of witnesses have raised some concerns. I noted, for example, that Ms Neil, from RSPCA, made the comment that taxpayers expect us to be very efficient and reduce our amount of administration. As a committee, this is the friction point for us.

In many respects previous witnesses have indicated that their concern is that, without the buy-in of the states and an actual referral of powers and the ability to do that, contrary to the ambition of reducing red tape we will in fact increase it. And, contrary to the ambition of reducing compliance, we will increase it. I am mindful of your aspiration. It is great to have the aspiration, but what we need is actual execution. My question is: in the absence of an actual by-in from the states and in the absence of a lot of the detail and regulation—and I am mindful of what the gentleman from the Community Council of Australia said—could you please outline your firm recommendations to the committee about what the committee ought to do with respect to whether we push for this information to be provided upfront and incorporated into the bill as other witnesses have indicated. If that is not the case, why not? Why is just having an aspiration enough?

Secondly, would you also outline for the committee your views with regard to those elements that you would like to see satisfied before the House of Representatives would approve the bill?

Mr Crosbie : My first reaction is that you have to be joking if you expect the states and territories to sign on to something that does not exist. It would be a bizarre kind of request.

I do not know whether you know the history of the fundraising legislation COAG process, but I think it was over two years of meetings between states and territories just to harmonise fundraising legislation. It was chaired by Victoria and went on for two years, and at the end they gave up. The capacity of states and territories to come together in the common interest has not been well demonstrated for the not-for-profit sector; quite the contrary. It seems to me that to expect or even to request or suggest that the Australian Charities and Not-For-Profits Commission should not exist until all the ducks are lined up and every state and territory has signed up is a recipe for ensuring that there never is an ACNC. That is our experience as not-for-profits even trying to get little things like police checks recognised interstate. We cannot. You have no idea of the kind of minefield—I am sure you do, actually—that not-for-profits have to go through in dealing with that.

I also think that the notion that the ACNC is going to impose a massive new burden is a bit bizarre, if you actually read what they are going to ask us to provide to qualify for the charities passport. Any organisation that does not have that information should have it. I just find it ridiculous to suggest that you cannot provide that information. I do not know of a single organisation, certainly none of our members, which could not provide that information in less than five minutes. It is basic information. I can tell you that, when I was CEO of Odyssey House, in Melbourne, for seven years, I would get a contract from DoHA and it would have 50 pages for $80,000, and I would get a contract from Westpac that had two pages for the same amount of money. I would wonder what government were doing. Our experience is that what the ACNC are asking for in terms of information is miniscule compared to the kinds of compliance requirements that currently exist. For us, getting it up and getting a capacity to simply provide the information that they are asking for once will be a massive step forward. I think that, if we were to have to wait until all these groups have agreed, that would be ridiculous.

I just want to end on one point. I said before that the sector are not victims here. If you create the ACNC for us and we provide our information and then the states and territories are playing, watch what happens. It is up to us then to say to the states and territories: 'Why do we have to provide this information to you? Here's the link to the information. Use it.' We are quite happy to have that fight. We are quite happy, as a sector, to engage in a genuine, ongoing battle to try and reduce red tape. I think we have just had enough. If states and territories do not play, and the ACNC exists and is operational, we will become the force that ensures that states and territories do, because that is what we should be doing as a powerful sector in our community.

Mr CIOBO: Can I ask then, being devil's advocate, if it is the case that you have that power, why hasn't that occurred previously?

Mr Crosbie : Because the ACNC does not exist.

Mr CIOBO: I realise that, but I get the impression from what you are saying that you are putting a lot of faith in the ACNC to suddenly become a lightning rod that will enable the sector to muscle up to the states and territories and pull them into line. What I am asking is: what is it about the ACNC that is going to enable you to achieve that when you have not been able to achieve it in the past?

Mr Crosbie : Let me go back to the fundraising example. When the Treasury put out a fundraising discussion paper and said we were going to have national guidelines, guess what? The states and territories suddenly said, 'We want to play in that space,' and some states and territories actually said, 'We want to harmonise our legislation.' These are the same states and territories that, through COAG processes, have said they cannot. Again, I think our experience is that, when things do not exist and you engage people in the design process, everybody wants to design it slightly differently and put their own spin on it. If it exists and they can participate, then it is much easier for us to say: 'We are already doing this. This already exists. Why don't you use it?' It is a completely different argument. I think that is true of a lot of policy developments at a federated level. When the Commonwealth takes the lead and creates the capacity, states and territories are much more likely to buy in than if they are engaged in a process of bidding and arguing about how they can influence the shape of what is being designed.

Mrs Fletcher : Can I just add something to that. I think that at the Commonwealth level, for World Vision, one of the things that the conversations that have been taking place have done is that they have had AusAID and FaHCSIA involved in it and actually talking to each other in a way that, from World Vision's lobbying point of view, we could not get to happen. I guess it is another example even at a Commonwealth level that , with the momentum of the regulator being created, it is allowing those conversations to happen.

Ms Neil : I will just perhaps summarise all of that by using that well-used quote: 'If you build it, they will come.' I think we have to just build it and then sort out some of these details. We just have to build it. We have talked about building it for a long time. Until there is something there, all of this is speculation. I think the reason why things have not happened in the past is that there has been no leadership. We certainly are looking for the Commonwealth to take the lead.

Mr CIOBO: Is your only concern about the current state of the legislation draft with respect to directors' liabilities?

Mr Crosbie : We would say that directors' liability needs to be looked at. We would say that the processes around how penalties are applied need to be looked at because the kind of default 'apply a penalty' approach seems to us to be the wrong way round. Wherever there is capacity to give scope to the regulator, we should be giving scope to the regulator rather than prescribing the actions of the regulator, because, from a sector perspective, we want the regulator to be responsive to what is required in a given situation. I know from experience that the more specific we are in the legislation, the tighter the legislation will need to be, because it needs to cover off—

Mr CIOBO: So principles based rather than codified?

Mr Crosbie : Yes.

Mrs Fletcher : I would add as well that, for the sector, this legislation is about establishing the ACNC to do the registration. This is not regulation because there is something really wrong with the sector and there are a whole lot of rogue people out there that we are trying to get off the radar. I guess the balance in the bill around that is perhaps a little bit off. From World Vision's point of view, it is actually a factor of where it has come from and who it has been drafted by. We are shifting regulation out of the tax office, out of Treasury, into something independent, so that explains to me the tone in the bill. My hope is that over time that will be adjusted as it becomes clearer what sort of regulator the ACNC is actually going to be.

Mr CIOBO: The Independent Schools Council yesterday made the case that they wanted to be exempted from this in entirety. Their view is that they already have so much compliance and they already have so many check-balances—a number of the points that you have raised in your testimony today—that they do not see any benefit whatsoever from being under this umbrella. What is your response to that?

Mr Crosbie : We have had discussions with some schools, and the principals association is a member of ours. The position that has been communicated to me from the educational perspective is that it would be a benefit because the charities passport requires very little input in terms of information provision but creates a capacity for schools to apply to trusts and foundations and even other government departments, in some cases even for international funding, and to provide a bona fides about the status of the organisation that is independently verifiable. The costs are very negligible. The benefits for some will be negligible as well, but for many the benefits will be significant.

Mr CIOBO: I am not attempting to prod you but just trying to get clarity. The Independent Schools Council said they wanted to be exempted, so they want a carve-out. I have heard what you said—that your impression is that schools are broadly supportive. Basically the exact opposite yesterday was the evidence of the Independent Schools Council. I am interested in your response to their request for a carve-out.

Mr Crosbie : I am not sure why you would want that. I did not hear their evidence, so I am not in a position to comment.

Mr CIOBO: I realise that.

Mr Crosbie : I am not sure why you would want a carve out. Providing the information is a minimal requirement. The only people who I have talked to who have requested to not be included in the coverage from the ACNC are those seeking not to be transparent. And sometimes that is for good reason. We have talked with some representatives of private trusts and some high wealth individuals who have established their own private ancillary funs and they would not like their personal details to be publicly available, for instance. This issue of how the information that is collected is used is a very sensitive part of the activities of the Australian Charities and Not-for-profits Commission. The commissioner needs to have scope to say, 'If we publish this information, it will reveal that David Crosby of Deakin has contributed this much to AIDS research overseas or whatever and it may not be in the public interest for their home address and exactly how much they have given to be released.' The only cases that have been put to me about the need to avoid having to provide information to the ACNC have more related to the transparency that comes with that; the publication of information. I note that as the bill has evolved the provision for the ACNC commissioner to not public information has been included.

Dr LEIGH: I want to get a better sense of the administrative burden. Have you broken down the reporting requirements by Commonwealth and state and territory? How much of the paperwork ends up being state and territory paperwork?

Ms Fletcher : Most of our state and territory paperwork is to do with fundraising. There are four states that we have to re-register with at varying times. There are four states—not the same four states—that we have to do annual returns for. They are the main bits at the state and territory level. At the Commonwealth level you have all the reporting that we have to do under our individual funding agreements. We have to report to ASIC. We have to liaise with the tax office, obviously. We have at the moment four different DGR endorsements, for example, that we have to set up at various times to cover what we do.

Dr LEIGH: Why do you have four DGR endorsements?

Ms Fletcher : Why four?

Dr LEIGH: Yes. I would have thought that there would be a single DGR arrangement to cover World Vision.

Ms Fletcher : That is a really good question. There is one endorsement that covers our overseas aid work. There is another endorsement called the Neccessitous Persons Fund, which years ago covered the sorts of stuff that we did in Australia. Recently, we have found that not to be the case, so we applied for endorsement as a public benevolent institution to cover the expanding work that we are doing in Australia. After the Japan earthquake, we had to apply for a separate endorsement to enable us to collect donations for emergency relief for that, because that was in a developed country as opposed to a developing country, which would be covered by our overseas aid endorsement.

Mr Crosbie : One of the things that is really interesting about World Vision—and I hope that Tanya does not mind me raising this—is that they ended up in the Federal Court because one of their DGRs was not considered adequate to cover their work with Indigenous people. The ATO said that they were not eligible to provide tax deductions for people contributing to that, despite them having the other DGR registrations. Not many organisations can afford to take the ATO to the Federal Court. That highlights one of the fundamental issues attached to the difficulties that charities face: the regulator by default at the moment in terms of concessions and often in terms of your reputation and engagement with the community is the ATO. What scope does a small organisation that the ATO rules is not a charity have? Can they go to the Federal Court? As Heather Neil said at the opening, if we tried to establish a system that was bad for not-for-profits we would go with the current system. If we tried to impose it on not-for-profits, I guarantee that you would get a lot more submissions than you have currently and people would be much more strident in saying that they would not accept that system. The current system is ridiculous.

Dr LEIGH: I can see that. Clearly, this bill is not going to deal with some of the issues that you have raised. Pushing you a little bit more on the state-territory regulatory balance, is the paperwork 50-50?

Mr Crosbie : I will give you an example. I am CEO of Odyssey House. We got funding from the Attorney-General's Department, DoHA, DEEWR and FaHCSIA. We also got funding from four different state bodies. We also got concessions from five different councils. Some of those were rate concessions; some of them were property concessions. We also had fundraising operating nationally. I have lost count already. What is that? Six jurisdictions had fundraising, four Commonwealth departments, four state bodies and five councils, because we had properties in different areas.

CHAIR: 19.

Mr Crosbie : We have to go and establish our bona fides with every one of those. We have to say who we are and try to get a concession. When people talk about a charity's passport, they have no idea of what you have to do. Almost every time that you have to engage with somebody you have to establish who you are and provide evidence of that.

Dr LEIGH: Thank you. Do any of you have views about how the educative role of the ACNC and how that is set out in the bill?

Mr Crosbie : It is good that it is in there, but I want the regulator to be a good regulator. First and foremost, let it regulate. Let it get the data; let it get the registration process working. The education goes along with that and good regulators do good education. But I do not want the sector to see the ACNC as the place to go to to work out how best to do what you do. That is not their role. It should not be their role. I would be very concerned if it became their role.

Ms O'DWYER: I am interested in exploring some of the testimony that you gave earlier around conflict in the tax office and the application for DGR status. Could you give some practical examples of where there is a conflict now. How do you think that this new legislation will be able to deal with the conflict?

Ms Fletcher : A lot of it turns on the case that David talked about. I would probably have to take that on notice and give you some written evidence in relation to that rather than talking about it openly. The general point, the one that I made, is that the ATO's primary mandate is to bring in money to the government coffers. When it is looking at exemptions for charities it is going to have that at the forefront of its mind—that is its job. It is not coming at it from the point of view of, 'Is this charity doing good work and should we endorse it because it is out there doing what charities should be doing?' That is the relational sort of question that the ACNC will be able to ask that the ATO has not been able to ask. I wonder whether a matter of history the ATO would choose to do this role if it did not have to. We are where we are with this because of the connection with tax concessions.

Linking that into the DGR endorsements, what it has resulted in is a system in which you have to fit into a specific bucket to get your DGR endorsement. As I have illustrated, even within one organisation there can be four different buckets; even as an organisation, we cannot stick everything in the one bucket. Does that answer your question?

Ms O'DWYER: I suppose that I have a slightly different perspective. I understand the complexity. I and I think everyone on the committee would agree that the complexity and the layers of regulation are things that we need to be able to resolve.

But I suppose what you are suggesting is that, for anybody who wants to call themselves a charity, the default position should be that you grant the special concessions rather than make people go through a series of hoops. There is a very special and privileged position that people are being granted when they are given these tax concessions, which are very significant. The Australian taxpayer obviously bears a burden in relation to that, which is why there is a degree of process that people need to go through. Given that World Vision operate in other countries as well, are there some overseas examples that you can see where what we are proposing here is in line with world's best practice? Is this something that you see as a result of this legislation?

Mrs Fletcher : The example that comes to mind is that the US gives all its charities a number. Where that hits us on a practical level is that I get phone calls all the time from people saying, 'I'm applying to such and such an organisation for grant funding in the US. They want a charities number; what do I give them?' I say, 'We do not have one. You actually need to explain our tax endorsements.' I guess that is an area where the US has done that. There is a 'badge' there. There is a number that can be put forward. It gives the foundation or whatever it is that level of comfort that someone has done a level of analysis on the worthiness of the charity and they can then rely on that.

Ms O'DWYER: My second question is on your submission. It is regarding counterterrorism and external conduct standards. I wondered whether you might talk a bit about that because you wanted to excise one of the divisions of the bill and I just wondered whether you could give us a little bit more information as to why you think that is appropriate.

Mrs Fletcher : In very general terms I can. If you need more information, please let me know. The General Counsel of World Vision has had more input into this area than I have. But the basic point is that counterterrorism is looked after by the Attorney-General's Department. There are already laws in place in relation to that. World Vision just cannot see the point in having it in here as well. We cannot see what it adds to anything. If there is an issue with the application of World Vision's funds then that is something that is taken up through the other laws. This would add on an extra layer and we could actually end up in a situation where we might not be in breach of those other laws yet we could potentially be in breach of whatever is in here and potentially lose our registration. That is obviously quite concerning. It appears to be reasonably out of step with what is proposed in other forums. My understanding is that there was a previous draft of the bill that was circulated that had a whole lot more detail in it. I have not actually seen it, so I cannot speak to that. But I know from looking at some of the other submissions that what was proposed there went far and beyond what is being discussed in other forums in relation to counterterrorism. I am not sure whether David can add anything to that or not.

Mr Crosbie : It is a concern that has been raised with me. We have a number of members who are international aid groups. Tanya has outlined the concern that relating the establishment of the ACNC differently in any way to the provisions that already exist elsewhere around the way not-for-profits use their resources in relation to terrorism seems unnecessary. Again, we would not have thought in practice that it will ever actually be called upon, so the question is: why is it there? We do not have a major fear that suddenly the ACNC is going to be coming out and looking at this area—

Mrs Fletcher : No. It is more that we are not sure why it has been put in in the first place, especially in the context of a reform that is about enabling and not being concerned that there is a whole lot of bad stuff going on that needs to be stopped.

Ms O'DWYER: Drawing on some of the comments that you made a little bit earlier regarding the bona fides of charities and effectively having a one-stop shop, surely this is an element that would be important in any one-stop process, particularly in light of the fact that, referring to other legislation, we have had governance standards for aeons under the corporations laws and in the Corporations Act. Obviously we are looking at creating a whole new set of governance standards here, so why is this different?

Mrs Fletcher : I am not saying that it is different; I am saying that it is already regulated and it is already regulated by a regulator who knows a lot about this area, so why would you expect the ACNC to get on top of this? It is not that they cannot tap into whatever else is happening. If there is a breach of criminal law, it should not have an impact—I am not saying that. All I am saying is: 'Don't add an extra layer of deliberation and put the ACNC in a position where it has to make independent assessments around counterterrorism stuff when that is already within the ambit of the Attorney-General's Department.'

Mr Crosbie : The bill very clearly prescribes the basis, and my understanding was that it was partly about ensuring that the funds of not-for-profits were not being directed inappropriately to organisations that may be seen as having terrorist activity internationally. We have just been through a very significant process of consultation and review around the in-Australia process and I would have thought those provisions automatically apply.

Mrs Fletcher : The other point is that, as far as we are aware, there are only two examples of terrorism financing within the not-for-profit sector and both of them were in situations where they would not be registering with the ACNC in the first place under this act because they did not access tax concessions. So, even if there were an issue, history tells us it is very small and it is in relation to entities that would not be picked up by this regulator anyway.

Mr Crosbie : I will just quickly go to the ATO issue. I think there have been some fantastic people at the ATO, like Michael Hardy and others, and their team has been really good. We are not trying to be critical of the ATO. But there have also been some very negative experiences from not-for-profits, particularly smaller not-for-profits. If you look at how quickly one of our members, Goodstart, got concessions through the ATO, it was remarkable, and payroll concessions nationally, although they did have to go to every state and territory to get them. That whole process was established and operational within six months. But I can also take you to church-run childcare agencies that have been trying to get DGR status for a long time and still do not have it. They are certainly doing equally good to what the ABC Learning programs are, so why is it? When you talk to these groups about why they have or have not applied, it is because it is an intimidating process. It requires a lawyer, or that is their perception. Engagement with the ATO is not something that Australians see as really desirable. Unless you have a good lawyer and get the right ATO person, it can be a quite involved and engaged process, and it favours larger organisations who can employ people like Tanya and it favours those organisations who can come and see people like you. There are so many smaller not-for-profits that should be able to claim charitable status that just find the process too difficult.

I have had two complaints in the last month. One was a charity ringing me to see whether the fact that they were now raising almost 50 per cent of their own money meant that they were going to lose their charitable status. I asked, 'Who told you that?' They said, 'This guy at the ATO. We rang them and they said we can't be a charity if we're raising more than 50 per cent.' That is just not true. There are examples of people who feel that, when the ATO engages with them, their capacity to actually engage in a real discussion about what is happening for their organisation is non-existent. It is an ATO ruling; that is it; you go to court, you accept it or you do not. As I said, if we tried to impose the ATO as the group that determined charitable status in the sector, I can only imagine that there would be a massive outcry, if there were not already.

Ms O'DWYER: Because a lot of people are refused DGR status? Is that why there is the outcry?

Mr Crosbie : No, it is not so much that. Whether or not the ATO think it is, it is not a transparent process. If you go around this town, why are some peak bodies DGR and others not? How does that happen? The answers are actually quite complex. They are about lawyers, they are about political connections, they are about who knows whom and who got which person at the ATO?

When I talk to lawyers who do this work full time, they say it is a bit like going to Magistrates Court, where, if you walk in and you get the wrong magistrate, you adjourn the case in the hope that, the next time you come back, you will get the right magistrate. That can happen in the ATO. There are people that people like dealing with and there are people that people do not like dealing with. The lawyers know which ones are which. You pay the right lawyers so that you get the right access.

Ms O'DWYER: It sounds to me, from what you are saying, that you think that people are paying lawyers to get particular outcomes delivered by the Taxation Office.

Mr Crosbie : Yes.

Ms O'DWYER: You think that, if you can pay certain lawyers, you can get particular decisions out of the Taxation Office?

Mr Crosbie : When people come to me and say, 'I'm interested in becoming a charity,' or 'I'm interested in gaining DGR,' I would say to them, 'You have a better chance if you go with this lawyer than with that lawyer.' I would actually say that, because I think there are lawyers who do this very well.

Mr STEPHEN JONES: That is not a question of maladministration, though, is it?

Mr Crosbie : No, no.

Mr STEPHEN JONES: That is a question of the expertise of the lawyer, which I think is where Ms O'Dwyer was coming from.

Mr Crosbie : At times within the ATO you can have a good process and at times you can have a difficult process. The people who regularly engage with the ATO know the kinds of ways to use the provisions within the ATO to get better outcomes. It is the same as going to a good tax adviser who knows how to word things for the ATO. I am not suggesting that people in the ATO are deliberately behaving inappropriately or can be bought or are behaving without integrity. I am suggesting that, if you know the system and know the people in it and know how it works, you will do much better than if you do not. That means that it favours groups who can buy that access. I am sure that, as an economics committee, you know that, whether it is infrastructure approvals or anything else, there are similar processes around people who are better at working those systems to get outcomes.

Ms O'DWYER: In terms of transparency, given what you have said about the ATO, would you think that it is important for the commissioner to provide written decisions in relation to determinations that the commission makes? That is not currently a provision in this legislation.

Mr Crosbie : The level of transparency within the ACNC is already at a much, much higher level than within the ATO. My understanding is that, where the ACNC commissioner issues some kind of direction, that does have to be made public.

Ms O'DWYER: But, in circumstances where determinations are made regarding particular charities, would you want to see written decisions from the commissioner so as to provide—

Mr Crosbie : I do not know that you would want to see the individual cases, but I would want to know the number that are being applied for, the number that are being denied and the basis on which they are being denied. I would certainly want to see that level of transparency. I do not know that I would want to see individual organisations named. But we would expect to get a summary report saying, for example, 'Five hundred organisations have applied; 450 got it; the 50 that did not get it did not get it for these reasons.' The bill enables the ACNC to do that at the moment. Whether or not you put that in the bill, when it is really about the way they operate and how accountable we as the sector hold them and the parliament holds them, is another question. I can tell you now that, if the ACNC put out a report that did not report that, we would be asking for it. But whether or not that needs to be in the bill is another question.

CHAIR: Thank you very much for your attendance here today. If you have been asked to provide additional material, would you please forward it to the secretary. You will be sent a copy of the transcript of your evidence, to which you can make corrections of grammar and fact. Thank you very much for a great contribution.

Mr Crosbie : Thank you.