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New commission to follow the money trail in charities

A new charities regulator offers donors more transparency in where money is going. But while the Australian Charities and Not-for-profits Commission vows to cut red tape, some aren’t so sure, says Crikey intern Alex Burgess.

Ever wondered where the money you donate to charities winds up? The new Australian Charities and Not-for-profits Commission claims to make it easier to find out.

After decades without a regulator, Australia now has a national, government body to take hear complaints about charities and compare financial information. At her Docklands office in Melbourne, ACNC Commissioner Susan Pascoe told Crikey Australian charities have few scandals compared to other countries, but a national regulator is important to reduce red tape and reassure those who donate.

Here, there’s by and large pretty high levels of public trust and confidence in charities. It’s more the broad view of the public that they just don’t know,” Pascoe said. ”So if someone thrusts a tin under their chin and asks for a donation, how do they know if it’s a real charity or a scammer?”

Before the ACNC, regulation of charities fell to the Australian Tax Office, the states and to the voluntary industry codes of peak bodies affiliated with the sector. Pascoe says national standards, accessible information online and better regulation will create a more transparent charity sector.

A 2008 survey by consumer advocates Choice found 94% of Australians are concerned about how much of their donation reaches the cause and how much is spent on other costs like administration. But Pascoe says it’s hard to get an “exact metric” around what an appropriate split is.

She says donors have to understand administration is a “legitimate cost” and different charities have different requirements. Charities must “add a narrative” to their financial figures online so donors can understand spending decisions.

There’s tiny charities that operate out of someone’s kitchen, but lots of the charities actually need to hire a premises, turn on the lights, have basic facilities for the staff,” she said.

An online database of charity information is a major focus of the ACNC. Donors can go to the ACNC website and find out governance standards and financial figures of charities. Annual reports were available but the ACNC site will make it easier. “[Donors] can come to us, instead of having to go to thousands of websites to find that information, it’s all on the one website,” said Pascoe.

Currently the ACNC website only lists basic facts about organisations. Over the course of next year this will gradually be updated with information about charities’ purposes, the people who run them and governing rules. Detailed financial information won’t be available until 2014.

The commission will audit financial reports and investigate complaints. Pascoe says education is the preferred way to deal with any missteps, but the commission does have the power to seek injunctions and deregister charities.

Pascoe calls the ACNC a “work in progress”, with a number of its measures still being finalised and discussed.

The federal government and ACNC has released a consultation paper asking for public contributions to define what the governance standards for charities registered to the ACNC should be. They’ll hold charities to account with principles and rules which they will have to comply with in order to remain registered. A number of peak bodies, like the Australian Council for International Development, already have voluntary codes which their members become signatories to, and the ACNC plans to look to these for guidance.

ACFID is the peak body for Australian charities operating overseas. It has a code of conduct committing members to “high standards of integrity and accountability”. However, ACFID members self-assess their compliance with the code and very few organisations are deregistered. Last year the council received 11 complaints and cancelled the membership of two organisations —  Muslim Aid Australia and African Enterprise Australia — for not submitting annual financial reports.

Anyone can make a complaint to the ACNC and after two weeks of operating it has so far received a “handful”. Of these one was legitimate but considered a minor breach. ”That was very simply handled: phone them up and say, ‘look, there’s a mistake in your website, we suggest you correct it’, so you don’t need to make these things bigger than Ben Hur,” Pascoe said.

The ACNC vows to slash red tape for charities, but some organisations believe the new regulator is creating even more paper work. Fundraising Institute of Australia CEO Rob Edwards told Crikey that until all the states agreed to defer their powers to the ACNC, the commission represents even more red tape. So far South Australia is the only state to agree to amend its legislation.

Edwards says in the current system some charities went through 38 separate registration processes in order to operate nationally, seriously affecting their ability to operate efficiently. He says the notion of a single regulator has “some attraction” but thinks the creation of the ACNC has been “rushed” and needs the support of the states to be effective.

An ACNC spokesperson insists charities will benefit from “ongoing gradual reduction” in red tape. “Already, progress in this area has been made with the South Australian government, Commonwealth grant providers, ASIC and the Department of Education Employment and Workplace Relations all undertaking work with the ACNC that will help us to reduce duplication and unnecessary regulation for charities,” they said.

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