The Federal Government released its Scoping study for a national not-for-profit regulator in January 2011, and a number of initiatives were announced in the 2011 Federal Budget covering this and other NFP issues. A period of profound change is in store for the NFP sector.
The regulatory framework
In January 2011, the Assistant Treasurer Bill Shorten and Minister for Social Inclusion Tanya Plibersek released a consultation paper on the design of a new national regulator for the NFP sector. The paper, Scoping study for a national not-for-profit regulator, discussed the features of a ‘best practice’ regulatory framework: the goals of national regulation; the scope of national regulation; and the functions and form of a national regulator. The commentary underpinning the scoping paper’s 31 consultation questions suggested higher governance and reporting standards for many NFP entities, as well as more rigorous oversight.
The stated objectives of regulation of the NFP sector should:
- place minimal costs on NFPs to allow better direction of NFP resources to philanthropic objectives
- remove current regulatory duplication
- streamline requirements, including reporting, to provide consistency and minimise compliance costs
- provide a ‘one-stop shop’ for NFP entities, to assist all NFP entities to more easily access information that helps them understand and comply with their regulatory obligations
- be simple, transparent and flexible
- provide NFP entities with certainty as to their rights and responsibilities, and
- be proportional to the size and complexity of NFP entities, and to the public monies and risks associated with NFP entities.
Regulatory issues
Introduction of a national regulator raises a number of issues:
1. Scope of entities regulated. The scope of regulation for a national NFP regulator may include: entities receiving public or government support; ASIC-regulated entities; professional trustee corporations; small unincorporated NFPs; cooperatives or indigenous corporations; churches and religious organisations, those incorporated by special statutes, or by Royal Charter, or branches of international organisations; charitable trusts (some of which are the responsibility of state and territory Attorneys-General, and incorporated associations (state and territory regulated).
2. Reporting. NFP entities within the scope of the NFP regulator could be required to lodge annual information statements. NFP entities would only be required to report-once for standard reporting, and would not be required to report to ASIC or other Commonwealth agencies, requiring the same information.
3. Governance and compliance. A best practice regulatory framework would ensure that appropriate governance arrangements are in place for the NFP sector, and that entities are accountable and transparent. Such a framework would comprise a core set of rules setting minimum governance standards, which could cover: duties of responsible individuals, a model decision-making framework, and an accountability framework.
4. ACNC regulatory powers. Such powers could cover: asset protection; suspension and/or replacement of responsible individuals for any breach of core duties; registration and deregistration of any NFP; enforcement of governance rules; investigative processes to uncover actual or potential malfeasance; and issue warnings and penalties to non-compliant NFPs.
5. Fundraising. The Ministerial Council on Consumer Affairs (MCCA) is undertaking a project to harmonise fundraising legislation under the oversight of COAG’s Business Regulation and Competition Working Group. MCCA will issue a paper exploring the options for harmonised NFP fundraising laws in 2011.
