Introductory
I would like to thank you for the opportunity to address the Thomson Reuters Not-for-profit Law & Regulation Conference in Sydney today.
Looking at your conference program for the next three days, it is clear that you have brought together many influential and experienced individuals.
Be they individuals working within the not-for-profit (NFP) sector, those providing services to support the work of the sector or academics and researchers - their knowledge and understanding of the NFP sector will make for what I am sure will be an interesting set of discussions over the next three days.
Of course there is certainly a lot to discuss.
The Gillard Government, working together with the NFP sector, is delivering an ambitious NFP reform agenda.
Many of the speakers will be focusing on this agenda during their remarks at this conference. But, no doubt there will also be many other topics which will be discussed at your conference.
I think this reflects something very exciting but also challenging - the impressive growth of the NFP Sector, and the wide-ranging change taking place in the sector.
Australia's NFP sector is estimated to consist of around 600,000 entities. Of which 400,000 are estimated to have access to Commonwealth tax concessions, and about 56,000 are endorsed as charities.
The NFP sector contributes about 4% of Australia's GDP, and it is growing rapidly.
In addition to this growth, change has arisen both in terms of the role of the NFP sector, and has been driven by forces such as new developments in technology. The impact of online fundraising and the growth of social media are developments of particular relevance in this regard.
Australia's charities and NFPs have always played a key role in our community, supporting and empowering the disadvantaged and helping build a more equitable and fair society. The importance of this work cannot be overstated.
Over recent years in particular, through the work of many individuals and organisations, the NFP sector has grown its voice and presence in our society. It has taken on many new responsibilities in areas such as service delivery to those in need, and also made many valuable policy contributions which have shaped the direction of our nation.
That is an excellent development - because a robust, vibrant, independent and innovative NFP sector is vital in any modern democracy such as Australia.
The words "robust, vibrant, independent and innovative" are significant because they form one of the objects of the legislation to establish the Australian Charities and Not-for-profits Commission (ACNC), a reform which I would like to focus my remarks on today.
The Establishment of the ACNC
The establishment of the ACNC is the key component of the Gillard Government's objective to deliver smarter and more effective regulation of the NFP Sector.
The ACNC is future-focused, structural reform, which the NFP Sector has long called for and has been recommended by review after review.
As the NFP sector grows, it is critically important to support the sector through smarter regulation. This involves designing a regulatory framework which is suited to the NFP sector and addresses flaws in the current approach to NFP regulation.
Under the current arrangements, the Australian Taxation Office (ATO) has the dual and potentially conflicting duties of determining an entity's charitable status as well as the responsibility to enforce the taxation law. At the Commonwealth level, the Australian Securities and Investments Commission (ASIC) also plays a role in terms of its oversight of companies limited by guarantee.
The NFP sector does not want to be regulated by the ATO or ASIC. They have made it clear that they want an independent regulator, which has an understanding of the NFP sector.
The ACNC will be that independent and dedicated regulator.
Designing a regulatory framework which is suited to the NFP sector also requires looking to the future.
The NFP sector is rightly held in high regard by Australian society. Some have argued that a lack of a crisis, or what some refer to as a lack of 'mischief', means there is no need for the ACNC. They say that the current arrangements are just fine and that the ACNC is a solution in search of a problem. I think this is a short-sighted perspective.
As the NFP sector grows, it will be vital to support this growth by enabling the NFP sector to consolidate its standing in the community through improved transparency and accountability.
We are undertaking forward-thinking and evidence based reform now, to avoid a knee-jerk regulatory response to any issues which may arise as the NFP sector grows.
Importantly, designing a regulatory framework which is suited to the NFP sector also requires addressing the complicated and duplicative regulatory obligations imposed on the sector.
This is something I will speak about in more detail shortly, but firstly I would like to make some remarks on the progress of the ACNC legislation through the Parliament.
Progress of the ACNC Legislation through the Parliament
As you will be aware, we are in the process of progressing legislation through the Parliament to establish the ACNC.
The ACNC legislation passed the House of Representatives on 18 September 2012, and is now before the Senate. The legislation is expected to be debated in the Senate in the coming weeks, with an objective to have the ACNC up and running by early December this year.
I have dealt with many pieces of legislation in my time as both a Parliamentary Secretary and now as Assistant Treasurer - and I must say this is the most scrutinised piece of legislation I've had responsibility for.
In draft form it was the subject of an inquiry by the House of Representatives Standing Committee on Economics and once introduced into Parliament it was subject to a further two concurrent enquiries by the Parliamentary Joint Committee on Corporations and Financial Services, and the Senate Standing Committee on Community Affairs. I do commend stakeholders for the time taken preparing submissions and attending Committee hearings.
It's no wonder that many in the NFP sector are so keen for the legislation to now be passed and for the ACNC to commence.
A number of amendments have been made to the ACNC legislation in response to these three enquiries, and a number of further amendments are proposed to be made in the Senate. These Senate amendments have now been made publicly available and, amongst other things, provide for additional Parliamentary scrutiny of governance and external conduct standards to be made under the ACNC legislation and codify the process for public consultation in the development of these standards.
Once these amendments are made in the Senate, I am confident that the necessary support can be secured for the ACNC legislation to pass through the Parliament ensuring that these historic reforms become a reality.
Reducing Red Tape - a Key Deliverable of the ACNC Regulatory Framework
As mentioned earlier, designing a regulatory framework which is suited to the NFP sector requires addressing the complicated and duplicative regulatory obligations imposed on the sector.
One of the key deliverables of the ACNC will be to deliver reductions in the regulatory burden currently imposed upon the NFP sector. This is made clear in the Objects of the ACNC Bill.
At the Commonwealth Level
At the Commonwealth level, the ACNC will administer a 'charity passport' and work to implement a 'report-once, use-often reporting framework'.
The charity passport is a collection of data that charities will report once to the ACNC to meet the baseline corporate and financial reporting requirements of Australian Government agencies, and will be a vital component of how the ACNC will be able to deliver reductions in red tape over time.
I can announce today that the implementation of a 'report-once, use-often reporting framework' will be supported by changes to Commonwealth Grant Guidelines. These guidelines establish the grants policy and reporting framework for all Commonwealth departments and agencies subject to the Financial Management and Accountability Act 1997. The changes will benefit the many organisations that will be registered with the ACNC and are recipients of grants from Commonwealth agencies and departments.
These changes will state that agency staff should not seek information from grant applicants and grant recipients that is collected by other Commonwealth entities and is available to agency staff. In particular, they will provide that agency staff must not request information already provided to the ACNC by an organisation regulated by it.
The changes will also state that when determining whether acquittal or reporting requirements are required for a grant, agency staff must have regard to information collected by regulators, such as the ACNC. The changes will also state that if an entity provides an annual audited financial statement to the ACNC, then a grant acquittal should not be required, unless the granting activity is high risk.
In addition to these practical steps, the ACNC will also be accountable to the Parliament and the NFP sector on its effectiveness in delivering reductions in the regulatory burden.
Upon its establishment, the ACNC will develop and make public a 'red-tape reduction timeline and plan'. In its annual report to Parliament, it will provide details on the performance of the ACNC against this timeline.
The annual report will also include reporting on the development of memoranda of understanding and arrangements with other Australian government agencies, and how these arrangements are operating to reduce red tape.
Although the ACNC does not yet exist, the ACNC Taskforce is already hard at work implementing such arrangements.
For example, they are working closely with AusAID, the government agency responsible for managing Australia's overseas aid program. AusAID has a staff member co-located in the ACNC Taskforce office who will be working with the ACNC to improve the process of NGO accreditation and entry into the AusAID-NGO Cooperation Program.
AusAID will seek to use the data submitted to the ACNC concerning charities' governance and financial management to reduce the reporting burden on ACNC registered charities, and instead increase the focus of AusAID assessments on effectiveness and delivering positive results for Australian aid funds. AusAID and the ACNC will also work together to educate and support overseas aid charities to understand their obligations.
I think this is a positive example of what the ACNC will be able to deliver, and a reflection on the determination of the Interim Commissioner of the ACNC, Ms Susan Pascoe AM, and her team to deliver tangible reductions in red-tape.
Working with the States and Territories
With the establishment of the ACNC, we will have a platform for delivering a national approach to NFP regulation. Significant reductions in regulatory burden will occur with the cooperation of the States and Territories and the Commonwealth is committed to working cooperatively with the States and Territories to deliver this.
With the ACNC in place as a national regulator, there will be an opportunity for States and Territories to align their regulatory frameworks with the ACNC.
With no national regulator, there is no opportunity for that to happen - and that is why a more harmonised, national approach to regulation has not been achieved up to this point.
Last week, I joined with the Minister for Social Inclusion, Mark Butler MP and the South Australian Deputy Premier and Attorney-General John Rau MP to announce that South Australia will be the first State to align their regulatory framework with the ACNC.
South Australia will make amendments to its incorporated associations and charitable collections legislation to harmonise reporting requirements, and authorise charities to collect charitable donations in South Australia, once they have formally registered with the ACNC.
I would like to take this opportunity to commend the South Australian Government for their leadership in this regard and I am certain that the NFP sector will be looking to the other States and Territories to follow its lead.
It is not surprising that this announcement has been widely welcomed by the NFP sector. For example, the CEO of Mission Australia, Toby Hall, said:
'Great to see South Australia is leading the way with a common sense approach towards charity sector regulation that all States would be wise to follow. It will save time and money for both charities and governments.'
The CEO of the Community Council for Australia, David Crosbie, echoed these remarks, saying:
'Governments around Australia talk about wanting to support the charitable sector by cutting red tape and reducing the compliance burden on not-for-profits, but these statements are usually just decorative policy words rather than a commitment to real action. The Federal and SA governments have backed up their rhetoric with action that will actually make a real difference to the sector. Other governments should get on board.'
Some commentators and opponents of the ACNC have argued that a 'referral of powers' is required in order to enable the ACNC to address the regulatory burden on the NFP sector. This is incorrect - the aim of the ACNC is to streamline national regulation of the NFP sector and channel it through the ACNC.
Some States and Territories will choose to align their regulatory and reporting arrangements with the ACNC, some may prefer to 'refer their powers'. The Commonwealth is not concerned with form - we are concerned with substance. This is not a grab for power by the Commonwealth, it is about working together to deliver tangible benefits for the NFP sector.
The Coalition's Opposition to the ACNC
It is unfortunate that instead of supporting proactive and sensible reform, which has been advocated by the NFP sector itself, the Coalition has chosen to oppose the ACNC legislation in the Parliament.
Not only are they opposing the ACNC legislation, but they have also announced that should they win government they would repeal the legislation and abolish the ACNC.
It is important to think about what this means in a practical sense. The establishment of the ACNC is structural reform, it is about designing a regulatory framework which is suited to the NFP sector and addresses flaws in the current approach to NFP regulation.
The Coalition has made it clear that should they win government, it will be back to business as usual. The ATO would again be responsible for determining charitable status and there would be no organisation to drive a reduction in regulatory burden on the NFP sector.
The Coalition's alternative 'Charities Commission' would not be a regulator but rather more of an information and advice body. Their policy is critically flawed - review after review has not identified a lack of information and advice as the key challenge for the NFP sector in Australia.
However, each review has identified the need to address the deficiencies which currently exist when it comes to NFP regulation - namely the fragmented, inconsistent and uncoordinated approach to regulation of the NFP sector.
By opposing the establishment of the ACNC, the Coalition is ignoring the broad support for the ACNC from across the NFP sector. They are ignoring the evidence base for the ACNC. They are not looking to the future, but preferring to ground their policies in the negativity that has been a key characteristic of their approach to Opposition generally.
If the Coalition had their way, there would be no ACNC and no regulatory reform. If you look at what the Newman Government is doing in Queensland right now and what the Howard Government did when they were in power, there would also be 'gag clauses' in Commonwealth contracts with the NFP sector.
The Gillard Government believes in a strong, innovative and independent NFP sector. That is why we recently announced that legislation will be introduced to ban gag clauses in Commonwealth contracts with the NFP sector. This will ensure ongoing positive engagement and open debate between the Federal Government and the NFP sector and build on the Government's other reforms such as the ACNC.
Conclusion
I would like to thank you for the opportunity to address this conference today.
After numerous reviews and reports over many years, extensive consultation and stakeholder engagement, and three Parliamentary Committee inquiries into the ACNC Bill itself, the time has come for this important reform to be enacted.
The ACNC is about the future of the NFP sector in Australia. As I remarked in my introduction today, it is about a robust, vibrant, independent and innovative NFP sector.
As Assistant Treasurer in the Gillard Government, I look forward to continuing to work closely with stakeholders in the NFP sector as we progress the Government's NFP reform agenda and hopefully deliver the ACNC in the not too distant future.