Dr Gary Johns, the commissioner of the Australian Charities and Not-for-profits Commission (ACNC), was the speaker at the 2020 Hopscotch Accounting NFP Client Luncheon in November.
In his presentation and during the Q&A session, Hopscotch clients heard about ACNC progress during 2020, how Australian charities were being managed financially during a challenging year, and governance lessons arising from bushfire donations.
Dr Johns highlighted several areas in the recent work of the ACNC and his comments flag some important issues for those involved with the sector.
Powers to remove charities
Dr Johns highlighted the very current matter of legislation currently before Parliament. which would enable the ACNC to name charities that haven’t taken steps to join the National Redress Scheme and “the power to remove that charity if it doesn’t join the redress scheme.”
NFPs that are removed from the ACNC register will lose their charity registration and not be entitled to a range of Commonwealth charity tax concessions.
Revealing the sources of government-funded charities in financial reporting
According to Dr Johns, with more than 58,000 Australian charities on the ACNC register, more work is being done to examine their financial reporting. The simple premise that underlies this work is asking from the donor’s perspective: ‘What do you do?’. To obtain useful answers, government-funded charities and NFPs will be required to explain the source of funding – local, state, or federal – for their different grants/programs. This supports potential donors, “to see what you do and who you do it for,” says Dr Johns.
The drive for transparency of funding sources will make it easier for potential donors to make informed decisions about where they donate their money. It is also in line with best practice in financial reporting.
New software detailing charity programs increases public access to charity sector members
Each year the ACNC asks registered charities to provide details that in essence cover:
- What is your main activity?
- Who do you do it for?
- Where do you deliver it?
Dr Johns explained that to increase the quality of responses provided, the ACNC will require charity to provide activity details by asking them to list programs. The ACNC has developed software that will collate data on all the programs – charities themselves simply list the name, location delivery and categorisation of each program they run. The program-based search criteria will put charities of all sizes on an equal footing.
Dr Johns emphasised that database should create positive new paths, “It is an opportunity for charities to be found for what they do.” As well as enabling potential donors and the government to learn more about the work of potential charities, the database will provide comparable charities with a chance to contrast and compare or even talk to each other, especially charities in the same region.
Again, this development is about helping a potential donor find out what they want to know about a charity’s activities, which will encourage greater transparency within the NFP sector.
Secrecy lifted regarding removal of charities from ACNC register
The ACNC is anticipating recommended changes to secrecy provisions in the
ACNC Act that will give them powers to release more detail about decisions to remove charities from the register. This lifting in secrecy provisions would bring the ACNC in line with the arrangements of charity commissions in England and Wales. The ACNC will release short, sharp decisions explaining why they took the step of deregistering a charity or removing a responsible person. One important benefit of explaining key decisions is that “everyone can learn what the rules are,” says Dr Johns.
Deductible Gift Recipients overhaul
With the 2017 decision that all deductible gift recipients (DGRs) must be charities, the ACNC is progressing with its task to work through, “The backlog of all the DGR entities sitting on our register that may not be charities.” The current focus is on Public Benevolent Institutions in Australia, as these receive the most generous tax concessions. In 2020–2021, the ACNC will review approximately 500 Public Benevolent Institutions for continued entitlement to registration as a charity and charity subtype.
Dr Johns noted two key risk elements that the ACNC identifies in institutions receiving DGR which are under the spotlight
- Lack of a public governing document
- Listing none or only one or two ‘Responsible Persons’.
Organisations would be given 12 months to change their articles in accordance with charity requirements. It is likely that many of these would relinquish their DGR status as they don’t want to comply with charity regulations.
ACNC report on bushfires published – illuminates natural disaster financial aid
While more detail about the ACNC’s October review of the bushfire charity sector is available in the report Bushfire Response 2019-20 – Reviews of three Australian charities, Dr Johns touched on some of the lessons from the ACNC’s investigation of the bushfire donations. He revealed that the three charities investigated – Australian Red Cross Society, NSW Rural Fire Service Trust, and WIRES (Wildlife Information, Rescue and Education Service Inc.) – were contacted in January and readily agreed to an ‘on the records’ approach to the investigation, as “They were confident they were doing the right thing.”
Their stories underscored what experienced organisations in the charity sector have long known, but the public wasn’t fully aware of until massive donations highlighted sector practices. Dr Johns gave examples of several important points that are now better understood since the bushfires:
- It is the trust into which a charity’s money goes and its rules that determines how public donation money is used
- In the aftermath of natural disasters it is common to spend public donation money slowly to be effective. For instance, you may have to help some people for up to three years, or a disaster-affected family might resist help for six months and only seek aid when they have no savings left (for example, some 850 new applicants affected by the January bushfires only came to charities in June).
The exercise demonstrated the experience of the charities, “You have to manage your money in a particular way across the relief and then the recovery phase, and then the phase of latecomers,” observed Dr Johns.
We would like to thank Dr Johns for his time and our NFP clients who attended the event in person and online.
If you would like to watch the video recording of the presentation you can do so here.