Are we at a tipping point for not-for-profit regulatory reform?

PILCH Matters August 2010 

- Nathan MacDonald, Lawyer, PilchConnect - PILCH’s specialist legal service for not-for-profit community organisations 

The past 15 years represents an era of frustration for those involved in Australia’s $43 billion not-for-profit sector. Countless recommendations to reduce the regulatory burden on the sector have all too frequently been followed by inaction by successive governments. 

The vast majority of recommendations from back-to-back inquiries, studies and reviews have been placed in the ‘too hard’ basket, even though they all highlight the unnecessary complexity and red tape for not-for-profits.  The Australian Centre for Philanthropy and Nonprofit Studies estimates there have been more studies, reports and recommendations about the Australian charity sector than any other charity sector in the world. 

At a recent PilchConnect forum, Productivity Commissioner Robert Fitzgerald neatly summarised the sector’s frustration when he observed that it is “unacceptable that a sector that is so strong, so important, should have to argue and beg at the table of public policy in the way that it currently does”.

Since PilchConnect’s establishment in 2008, we have made in-depth submissions to over eight Federal and State inquiries, each with the broad goal of easing the regulatory burden that currently exists for not-for-profits.  PilchConnect’s policy work is informed by its pro bono referrals and telephone advice service. Our submissions use empirical, case-based evidence to identify the main legal barriers hindering the important work undertaken by not-for-profit organisations, particularly those that assist marginalised and disadvantaged people in the community.

Three of the most significant Federal inquiries of late have been the Senate Standing Committee on Economics' inquiry into ‘Disclosure regimes for Charities and not-for-profit organisations’ (2008), the Productivity Commission study into the ‘Contribution of the Not-for-Profit Sector’ (2010), and the independent Henry Review into ‘Australia's Future Tax System’ (2010).  One recommendation common to each of these reports is the establishment of an independent body tasked with monitoring, regulating and supporting not-for-profit organisations.  The establishment of an independent regulator in Australia – similar to overseas models such as the UK, Ireland, Singapore and New Zealand – has been a priority focus of PilchConnect’s policy work since our inception.  Other key recommendations arising from the various reviews into the sector include calls for harmonisation of state-based fundraising laws and legislative codification of the common law definition of charity.

So, what are the recent developments which give us a glimmer of hope that there might finally be some reform, after 15 years of inaction?  Slowly but surely, momentum seems to be gathering for reducing the regulatory burden on NFPs, including the following key developments in 2010:

  • The signing of a National Compact between Federal Government and the community sector (March 2010);
  • The Council of Australian Government agreeing to adopt a Standard Chart of Accounts for the not-for-profit sector, as well as implementing a harmonised approach to fundraising (April 2010); and
  • The introduction of a tiered reporting for not-for-profit companies limited by guarantee based on their annual revenue and tax status (June 2010).

However, perhaps the strongest indication that policy makers are taking notice of the demand for smarter regulation of not-for-profits is the Australian Labor Party’s (ALP) recent election commitment to implement ‘historic reforms to Australia’s not-for-profit sector’ if re-elected. The ALP has promised to establish a new Office for the Non-Profit Sector, a Non-Profit Sector Reform Council and work towards a national 'one-stop-shop' regulator for not-for-profits. The Greens have agreed to keep Labor to this commitment. PilchConnect hope that the move towards a specialist regulator for the sector will attract bi-partisan support.

With these developments, PilchConnect hopes that Australia’s $43 billion not-for-profit sector, which plays a critical role in local communities across Australia, will at last be given the attention it deserves. The Productivity Commission’s comprehensive report appears to have raised awareness amongst the political parties that support for our valuable community sector is a good investment, both in terms of votes and public policy.  Or perhaps it is simply the sheer weight of government endorsed reviews into the not-for-profit sector, and their 98 combined recommendations over the past 15 years, which is finally leading to a tipping point for a move towards smarter regulation.

Regardless of the motivating factors, there is no doubting the growing appetite for reform, and the regulatory landscape for Australian not-for-profits is primed for an exciting journey ahead.