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Economics Legislation Committee
10/02/2016
Estimates
TREASURY PORTFOLIO
Australian Charities and Not-for-Profits Commission

Australian Charities and Not-for-Profits Commission

[12:23]

Senator SIEWERT: I am interested in following up on what progress you have been making in cutting red tape. Some of your key objectives are cutting red tape, building public trust and confidence and strengthening the sector. Can we have a quick update on those three areas?

Ms Pascoe : I will start with red tape, as that is where you started. As you know, red tape reduction is an object in the ACNC Act, and it has been a strong focus of the work that we have done. I think that since the last time we appeared in this committee room the key development has been increased momentum from the states and territories towards streamlining arrangements for charities and working towards harmonisation. If you think about the three areas where there is legislation, we are looking at the legal form of charities, incorporated associations or whatever. We are looking at the taxation arrangements at the state and territory and federal level and at fundraising. In each of those areas there have been developments. We have found that there is an enormous appetite in the states and territories, because we all share the same commitment to simplifying the work of charities and to reducing red tape. There are working parties in all those areas that are involving the jurisdictions and the ACNC. The intent is that ultimately there be a single form of reporting for charities and that in addition to the statutory reporting, where there is currently additional reporting for fund raising, that that could be streamlined into the annual reporting that is done to the ACNC. They are the kinds of discussions that are underway. I would not want to assume their progress at this stage, but they are certainly very encouraging.

In addition to that, the state revenue commissioners, with the lead of one jurisdiction that has engaged with the ACNC, have now developed their own working party with the ACNC to work towards common arrangements in terms of registration, common understandings of the definition of charity. The result is reduced red tape for charities and significant administrative savings for them in the process.

Senator SIEWERT: Thank you for that update. While we are on red tape: are all state and territories engaging?

Ms Pascoe : Yes.

Senator SIEWERT: Secondly, there were a lot of commitments given by the Commonwealth, and a lot of not-for-profits talk to me about the Commonwealth's own red tape. How are you going there? Is the idea of the passport still dead and buried?

Ms Pascoe : No.

Senator SIEWERT: It is back, is it?

Ms Pascoe : The Charity Passport is still alive and operational. There are 40 offices across six Commonwealth and seven state and territory agencies who are accessing the Charity Passport to use in their work. In time we would like to see more, obviously, but it is there and it is definitely a means of reducing the administrative requirements that are made on charities. We are aware that in addition to that a lot of agencies at both Commonwealth and state and territory level access the register as a means of quality assuring before they give grants or engage a charity in a contract. So it is being used informally as well as formally as a means of quality assuring that charities is both bone fide and up to date with its governance and administrative requirements.

I will mention a couple of other things in relation to red tape. We have been accepting the reports prepared for the state and territory regulators as satisfying the ACNC requirements as part of the transitional arrangements. There is a proposal with the government at the moment that that be extended further. Once the work that is happening in the states and territories to harmonise reporting reaches its conclusion, you will no longer need those transitional arrangements. But the proposal is that they be maintained until that point is reached. In addition to that, we have been contributing to the Commonwealth government's deregulation agenda. We contributed $9.8 million of annual deregulation savings in 2014 and $8.7 million in 2015. That was through measures such as accepting the state and territory reports and like measures. So there is still a fair amount happening. I think it is fair to say that if there were certainty about the status of the ACNC we would see some of those things move to formalisation. But that has not dimmed the appetite of the states and territories to progress in this fashion.

Senator SIEWERT: I will come back to the uncertainty issue in a minute. Can we finish up with an update on where we are with building trust and confidence and strengthening the sector?

Ms Pascoe : In relation to building trust and confidence, we see the register as the heart of that work. There are now 54,000 charities on the register. We have registered around 8,000 since we were established in December 2012 and we have withdrawn 13½ thousand charities from the register in that time. They have been withdrawn from number of reasons: some because all the evidence was that they were inoperative, others because they were not meeting their obligations such as reporting. There may be further withdrawals or revocations of charities who do not submit their annual information statement for years in a row.

So the register is at the heart of what we do. If there is an interest I could explain further that we did a lot of work during 2015 to ensure the integrity of the data on the register. It was the first year that financial reporting was required. We found that as the reports came through many of them did contain errors, so we internally reorganised the ACNC. We devoted 12 staff full time to ensuring that the data on the register is accurate. We engaged the university of New South Wales to do a very rigorous data sweep for us, which included establishing a materiality threshold of $200 or two per cent, and we swept through that data and corrected errors in 7,000 charities. But when you take the materiality level to as low as $200 you can be very confident that the data on the register are accurate.

Senator SIEWERT: So this would be the first time we have had such a register?

Ms Pascoe : It is the first time financial reporting to a national regulator has been required. There were a range of errors. Some of them were simple totalling errors, some of them were transcription errors. So, for example, some of the biggest charities, who are used to reporting to government rounded to the nearest $100,000, were transcribing their annual reports across. When we did manual checks—we did audits as they were coming through—we could see the errors, so then we had to do more comprehensive checks. So there were a range of different errors. We would hope that next year that would be significantly reduced, and from 2016 we are writing into the software an automatic error message that goes back and says, 'We think you have made X error; could you go back and correct it.'

The register is at the heart of what we do because that is what the community can use to assure themselves that the charity is bone fide and to get up-to-date information to do their own due diligence on whether they want to give money or time or support a charity in any way. As I mentioned a little earlier, in addition to that we know that government departments are using it as a means of quality assurance themselves, both formally through the Charity Passport and informally. So the register is a very significant heart and part of what we do.

In addition, we have been able to manage the concerns and complaints from the sector. We have had almost 2,000 concerns since we were established and we deal with all of them very seriously. It means that if the broad community know there is somewhere where they can take a complaint and it will be taken seriously, I think that helps to elevate trust and confidence as well. In addition, in terms of trust and confidence, on our website we have a lot of material which is accessible to the broad community as well as to the charities themselves. A lot of the not-for-profits use it, those who are not charities, and that helps to strengthen their practice and build trust and confidence.

That is a bit of a segue into the second object, which is on sustainability. We really see that as the health of the sector. Our contribution to ensuring the health of the sector is providing that education and guidance. There are very practical things, publications such as Governance for good, which is on how boards should run their charity and Protecting your charity from fraud. We have template constitutions that will save time and money for the charities and give them confidence that they are establishing themselves as they should. So there is a lot of material there on the web that anyone can access, not just the charities.

In addition to that we have conducted a fair bit of research, some of which we have mentioned here before—the Ernst & Young research into the red tape at the Commonwealth level. We have had a parallel piece of work done by Deloitte looking at the material benefit to the states and territories of harmonising with the ACNC. That has been very useful research as we have had our bilateral discussions with the states and territories, because we have been able to provide them with a dollar amount as to the benefit it would be to them and also to the charities in their jurisdiction.

Probably the key piece of research that we do now is to analyse the information from the annual information statements. For the last two years we have engaged the Centre for Social Impact at the University of New South Wales—for the first year Curtin University did that work—who have been able to provide for the sector the first insight, because it is close to a census. Indeed, what the University of New South Wales have done is that they have taken the data from the 2013 annual information statement, which is at a 99.8 per cent compliance rate now, and they have updated what was originally provided in the Curtin research.

If you go to the website now, what you see is a effectively a census of the sector. So we now know a huge amount about the sector that we did not know. With the financial information, for example, we now know that 31.5 per cent of the charities have an annual income under $50,000 per annum. When we think about the extraordinary diversity in the sector and the capabilities in the sector, we are informed by that.

If you go into that research on the 2014 annual information statement, in addition to a paper based report, through the ACNC website—acnc.gov.au—they have created a microsite with a data cube that enables you to apply filters. For example, you could look at all Western Australian data; you could look at all education charities; you could look at all of them with an income above $250,000 or whatever. You can put in whatever filter you like.

In addition to that it has a map of Australia with a dot for every charity in Australia. As you run your cursor over it, it pulls up the information on that charity. For people who perhaps have not had access to this kind of information in the past, it is both accessible and very easy for the charities themselves, or for others interested in charities, to manipulate for planning purposes, for policy development and the like.

That kind of research is the sort of research we think helps build the sustainability of the sector. It helps the charities understand themselves, and it helps us explain to the broader community the nature of charitable enterprise.

Senator SIEWERT: You referred to the issue around certainty and uncertainty of ACNC. What is your understanding about where things stand?

Ms Pascoe : Obviously, it is a matter for government. I am not sure if Senator—

Senator SIEWERT: I will ask the minister in a minute. I take from what you said that it is affecting people's confidence in whether they should be interacting with ACNC and reporting and things like that.

Ms Pascoe : What we found with the states and territories is that they are willing to engage anyway. There is a lot that they can do amongst themselves in terms of harmonisation, but they can see the benefit of ultimately getting these nationally harmonised arrangements in place, so they are not waiting, if you like. We have been proceeding on a bilateral basis. It has been the initiative of the states and territories that has created those into national working parties, which I think is commendable. But, apart from South Australia, who have put a bill to their parliament to harmonise with the ACNC, no-one else has shown an appetite to move formally into making an arrangement with the ACNC.

Senator SIEWERT: Minister, can I ask you about where the government are up to in terms of their consideration of the future of the ACNC.

Senator Cormann: The government's public policy position is as previously stated. If there is a change, the responsible minister will make relevant announcements.

Senator SIEWERT: Responsible minister? I am after whether you are going to go ahead with the bill that gets rid of the ACNC.

Senator Cormann: That is obviously a matter for me to announce. The bill is there, and until such time as the government makes a decision otherwise that is obviously the government's position.

Senator KETTER: Mr Morrison is on the record as saying that he that does not believe there is any support in the Senate for a change in relation to the ACNC.

Senator Cormann: You cannot really ask the officer to speculate about what may or may not happen in the Senate now or in the future. That is asking for a political opinion, not even just an opinion on policy.

Senator KETTER: I am not asking that. Ms Pascoe, have you had any further advice from the government about the future of your organisation?

Ms Pascoe : We have ongoing communication with both ministers' offices—the Assistant Treasurer and the Minister for Social Services. It would be fair to say we are not consulted on matters relating to the future of the ACNC. My understanding is that the government is more likely to consult the peak bodies in the sector and the key stakeholders in the sector.

Senator KETTER: When was the last time the senior executive from the ACNC met with the Treasurer, the Assistant Treasurer or the Minister for Social Services?

Ms Pascoe : We met with the Minister for Social Services in November 2013—I can get you an exact date. We will confirm that.

Senator KETTER: In your view is the Australian charities sector still broadly supportive of the ACNC?

Ms Pascoe : That is our understanding. There is the sector press, there is Pro Bono and The Third Sector, and they are publishing at various intervals. Pro Bono do an annual state of the sector, which is much more broadly based than regulatory matters, and they do find that there is sustained support for the ACNC, at around 80 per cent.

Senator SIEWERT: Do you receive complaints—organisations seeking advice on contracts, particularly government contracts—

Ms Pascoe : If someone complained of that we would deem it out of jurisdiction. We would only deal with matters that related to our legislation.

Senator SIEWERT: But have they approached you seeking advice on some of the contracts?

Ms Pascoe : Not to our knowledge. We could double-check with officers in the ACNC but I am pretty sure we would be aware of it—but not to our knowledge.

Senator SIEWERT: You talked about receiving 2,000 complaints. Is that from the community or is it just from those contacts within the sector—

Ms Pascoe : Sixty-seven per cent of the 2,000 come from the public.

Senator SIEWERT: How many of those have led to you having to take action to finally deregister an organisation or any of the other processes you can use under the legislation?

Ms Pascoe : We have dealt with about a third of those in terms of a formal investigation or a review. The areas that we have most commonly dealt with are failing to ensure that they comply with their not-for-profit nature, failing to have appropriate financial management and failing to report. There is a list of issues that are raised but once you get into it that is where they tend to cluster.

CHAIR: Welcome back, the ACNC and Mr Heferen. Senator Canavan?

Senator CANAVAN: Just following on from Senator Siewert's questions, you mentioned there were two organisations that were taken off the list last week. Who were they?

Ms Pascoe : One was Help Save the Furry Ones and the other was White Ridge Rescue Inc.. They were both animal refuge charities.

Senator CANAVAN: Were they taken off for noncompliance with forms or—

Ms Pascoe : They were the subject of allegations. We investigated, and the end result of those investigations was that we revoked their charitable status.

Senator CANAVAN: Okay. You also mentioned an enforceable undertaking.

Ms Pascoe : Yes.

Senator CANAVAN: Which organisation did that involve?

Ms Pascoe : Sure. I will just get that.

Mr Baird : I might be able to assist with that. Yipirinya School Council gave a number of enforceable undertakings.

Senator CANAVAN: And one got a direction?

Mr Baird : That was the New Connection Church of the ACT.

Senator CANAVAN: And there were two warnings, I think?

Mr Baird : They were to the Islamic Society of Belconnen—and, in due course, the New Connection Church was also the subject of a warning.

Senator CANAVAN: Are you able to provide broad reasons for those warnings and enforceable undertakings?

Mr Baird : We publish an annual compliance report. Whilst we are unable to publish the reasons for each of those actions, we do publish examples of the way we deal with certain situations, but they are anonymous. They do give the public an indication of our approach to these matters.

Senator CANAVAN: I am a little surprised. Why should that information be confidential? Do you have some reason for that? These are concluded investigations; they are not ongoing.

Mr Baird : Yes. That is as a result of the secrecy provisions of our act.

Senator CANAVAN: Of the tax act or the charities act?

Mr Baird : No, of the ACNC Act—which were in turn based on the tax act.

Senator CANAVAN: All right. Could you take on notice whatever information you can provide on the reasons for those? I will have to have a look at the act, I suppose. It seems strange that in other areas, like the ACCC, they usually put out a press release on those things.

I wanted to follow up on some investigations you were doing. I wrote to you last year about some of the activities of and advertisements that were done by Greenpeace Australia Pacific Limited and the Wilderness Society (Australia), and you wrote back to me saying you were going to look into it. Do you have an update for me on where that is at?

Mr Baird : Yes, in June 2015, here in this committee, those matters were raised and subsequently raised formally, and we acknowledged them.

Senator CANAVAN: Yes.

Mr Baird : We took action to inquire into them and we have now closed both those matters. Those actions did not result in any publishable outcomes. There are only a certain number of outcomes that we are able to publish—for example, revocations, warnings and enforceable undertakings, as we have discussed. But there are a number of other possible outcomes, such as regulatory advice, voluntary undertakings, no adverse findings or conduct that is regularised, and in those cases we are unable to publish those outcomes.

Senator CANAVAN: Okay. That makes it a little difficult to understand exactly what people can and cannot do. I raised, in that Wilderness Society case, this advertisement that the Wilderness Society issued during the last Queensland state election which had, in big, bold letters in the bottom right corner, 'Put the LNP last'. I raised here the point that that seemed, to me at least, a fairly clear breach of the Charities Act. Is that okay under the charities act at the moment, that particular ad?

Mr Baird : The inquiry that we would make would be as to whether a certain activity goes to the purpose of the organisation. An isolated activity sometimes does not affect the purpose and can be regularised. But the inquiry is into not so much the activity but the disqualifying purpose.

Senator CANAVAN: I do not have the Charities Act in front of me, but I did quote it to you last time. I felt, from memory, there was quite clear prohibition on charities campaigning for an individual or a party or campaigning against a party or a candidate at an election.

Mr Baird : Certainly, if there is a purpose of engaging in activity that promotes or opposes a political party or a candidate for political office—

Senator CANAVAN: So if it engages in activity that promotes or opposes a candidate, how is this not—

Mr Baird : That is, has a 'purpose' of engaging in such an activity is the test in the act.

Senator CANAVAN: So they can do all these other things. They can spend other time doing other things and as long as only some aspect of their activities does those things they are fine.

Mr Baird : Without commenting on a particular case, it of course depends on the nature and extent of the activity at the point at which it tips over into a purpose.

Senator CANAVAN: At what point would that happen? Would it be if 30 per cent of their activities were devoted to this kind of activity? How do you test that anyway? How do you test what is their purpose? Do you ask them?

Mr Baird : You look at all the context. You look at their constitution, their website or their activities as a whole and—

Senator CANAVAN: With all due respect, Mr Baird, this seems like a paper tiger. If I went and asked somebody, 'What's your purpose?' they are, of course, not going to come back with the answer, 'Our purpose is in breach of the Charities Act.' They will tell you that it is not.

Mr Baird : It is certainly not a subjective test. It is an objective test that we make inquiry into, senator.

Senator CANAVAN: How do you judge when someone's purpose is against what they say? What would be the threshold for you to say, 'We don't agree with you. We don't think your constitution properly reflects your purpose'?

Mr Baird : If we were of that view, we would give them a show cause notice and ask for an explanation.

Senator CANAVAN: Basically, this is one giant loophole for our political donation and other laws, because political parties have caps on how much they can accept for a tax-deductible purpose to campaign in those ways. But what you are saying is there are no caps, therefore, on charities which are DGR listed, because as long as it is not contravening their purpose they can accept as many donations as they like for tax-deductible purposes and use those for political campaigning purposes.

Mr Baird : There would be a point at which an activity that was repeated would be deemed to go to purpose.

Ms Pascoe : At a recent meeting of charities regulators in common law countries it was reported that only Canada puts metrics around the quantum that can be received. It is something that is being looked at. We held a forum in Sydney last week where the other jurisdictions were present as well and, because this is a federal election year and there has been some ambiguity around it, we are working at the moment on guidance on political advocacy. It is not clear that we would set metrics around it, because it is not typically the way that we have acted in Australia. For example, when you look at fundraising, only Victoria puts a metric around the distribution of fundraisers. All of the other states and territories have it as a broad category about a suitable amount that should be distributed. So I take your point: I think it is an area that requires clarification and we are working on it. I suppose the other thing that I would say is that it is awkward when we are unable to communicate back to people who have raised concerns, but we operate under the secrecy provisions. But amongst the actions that can be taken are voluntary undertakings where charities agree that they perhaps have been operating at the fringes or beyond the grounds of what is acceptable, and they will agree not to transgress in the future. There are a range of actions. I am mentioning that because you asked us to detail the use of our formal powers. But beyond the formal powers quite often there is an arrangement that is put in place and we then monitor the activities to make sure that the charity is complying in the way that it is undertaken.

Senator CANAVAN: Just so I am clear, it could have been the case that the Wilderness Society said, 'Yes, we've done the wrong thing and will promise not to do it again' to you and you cannot tell me they have said that.

Ms Pascoe : Absolutely.

Senator CANAVAN: I will leave it there for now. Thank you.

CHAIR: Are we all done?

Ms Pascoe : Could I give you, just for the record, the meetings that we have had with the ministers, which was in response to the question?

CHAIR: Sure. Go ahead.

Ms Pascoe : We met with the Assistant Treasurer on 14 November 2013 and we met with the Minister for Social Services on 21 November 2013.

CHAIR: Thank you very much. I thank you for your attendance here today. Shuffle off before somebody else gets some questions.