The Australian Charities and Not-for-Profits Commission (ACNC), established in 2012, has played an important role in regulating the not-for-profit (NFP) sector, made up of about 600,000 NFPs, which have predominantly been concerned with charities. These economically significant entities, which make up 8 per cent of Australia’s gross domestic product, merit strong regulation and the ACNC achieves this regulatory regime as part of its objectives under the principal ACNC Act 2012.
However, the Institute of Public Accountants (IPA) is concerned the act has a broader remit, which the ACNC is unable to properly fulfil given the fragmented regulatory framework in Australia for NFP entities.
While the ACNC has worked towards eliminating duplication, recent research by the Australian Accounting Standards Board (AASB) notes multiple regimes with multiple regulators and different reporting and audit requirements create an inefficient, confusing and suboptimal regulatory environment.
Single regulatory regime needed
The IPA believes the current objectives of the ACNC legislation remain relevant and valid but would be better supported by a single national regulatory regime for registered NFP entities.
Such a regime would mean that only one set of criteria for the review or audit of NFP entities would be needed, thus streamlining legislative requirements and providing clarity to practitioners on whether they meet the requirements (or what further requirements are needed) to be eligible to audit NFP entities.
However, a review of ACNC’s current legislation cannot be fully undertaken without a broader analysis by the federal, state and territory governments of all regulations affecting NFP entities. The policy outcomes should be the referral of legislative powers related to the regulation of incorporated associations and similar bodies from the states and territories to the commonwealth, ensuring the same compliance requirements apply to incorporated associations across the country.
The IPA encourages the federal government to work with all stakeholders to ensure a seamless transition from multiple regulatory regimes to a single national regulator, and consider funding further research into all governance and financial reporting practices of NFP entities, including those in other legislated regimes.
There will be NFP entities, such as unincorporated associations or trusts, that may not fall within the scope of any regulatory regime at a federal, state or territory level, except where they conduct a regulated activity such as the operation of a charity. This limitation of scope should not be considered as a basis to set aside the concept of creating one comprehensive regulatory regime of NFP entities.
NFPs and terror financing
Redesigning the national regulatory regime so there is one comprehensive reporting and compliance regime for charities and NFPs could also make it more efficient for national security, intelligence and enforcement agencies to investigate suspected terror financing or money laundering activity.
Regulatory authorities worldwide acknowledge one means terrorist groups use to access finance is through the diversion of funds to terror organisations from charitable bodies. Bringing NFP entities under one umbrella means there is only one set of contemporary data that needs to be investigated by security agencies rather than having to access multiple databases.
Transparency and financial statements
A key feature of the ACNC regulatory regime is the transparency of financial information lodged by registrants as part of their compliance with their legal obligations. These financial statements are freely accessible to all interested stakeholders.
However, free access to the financial statements of other NFP entities is not readily obtained by interested stakeholders, who must pay a fee to the relevant agency.
The IPA believes it’s time to consider whether access to information collected by the Australian Securities and Investments Commission (ASIC), for example, should be free to the community in the same way as it is freely available on the ACNC website, given the purpose of all legislation is consideration of the public interest. If the latter is found to be common ground between the ACNC and ASIC in this review of the ACNC legislation, then it is difficult to sustain an objection to allowing free access to registers maintained by government bodies.