Address by The Hon Lindsay Tanner MP
Minister for Finance and Deregulation
Address to
AUSAE National Third Sector Leaders’ Symposium
Melbourne
Tuesday 28 October 2008
The third sector is a significant feature of the Australian economy and community life, providing charitable, religious, health, education and leisure activities and services to the community and disadvantaged groups. Federal Government records show that, as at the end of June 2007, there were over 40,000 Australian Business Number (ABN) registered NFP organisations in Australia, employing nearly 900,000 people. In addition to paid employees, there were over two million volunteers. Of course, ABN registered organisations are just the tip of the iceberg. There are another 600,000 organisations which do not fall within the ABN system, including unincorporated associations and trusts.
However, as you know, the defining and unifying characteristic of the NFP sector is that your organisations are mission driven rather than profit driven. Any profits must be used to support the organisation’s objectives and in attaining its mission, and cannot be distributed to members. In doing this work, the third sector complements and helps deliver the Government’s vision for a fairer, stronger and more cohesive Australia. It is incumbent on the Government to help rather than hinder that effort. I would like to speak with you today about the Rudd Labor Government’s social inclusion agenda. In particular, I’d like to focus on the Government’s vision for regulatory reform in the sector.
The Rudd Labor Government came into office last year with a promise to promote social inclusion. This includes engaging with and treating the third sector very differently than the previous government. One early action was removing “gag clauses” in government contracts which threatening to cut off government funding and grants if an organisation spoke to the media about government policy. We are in the process of developing an historic National Compact with the non-profit sector. A Compact would formally record the commitment of the Rudd Government to work in partnership with the sector to build stronger communities for all Australians.
The Parliamentary Secretary for Social Inclusion and Voluntary Sector, Senator Ursula Stephens, has been coordinating with ACOSS, extensive first‑stage consultations around the country on the compact. It is clear from these consultations that there is support for a compact.
As we continue to develop the Compact we will be seeking input from a range of stakeholders, including the philanthropic and corporate sector, as well as from all levels of Government. I understand Marilyn Webster from ACOSS will speak in more detail this afternoon about the compact process.
The government has already heard one message loud and clear – stop tying the sector up in unnecessary red tape. As the Minister for Deregulation, that’s particularly interesting to me. I think it is fair to say that under the previous government, red tape reduction in the third sector was not a focus of great activity.
Regulatory reviews such as the Taskforce into Reducing Regulatory Burden on Business; the roll out of the Business Cost Calculator and so on, contributed to a message that the not-for-profit sector was excluded from regulatory reform. The most important message I want to convey to you today is that for the Rudd Labor Government, deregulation is not simply an exercise in removing regulations to benefit for‑profit businesses. Of course, this is important. We know that reducing the burden of regulation will make our economy stronger, raise productivity and ultimately improve the job prospects and living conditions of all Australians. But we also know that better regulation does not always mean less regulation. Our focus is on ensuring regulation is as efficient, adapted and responsive as we can to achieve our policy goals. To do this, we need to get rid of or improve poor, ineffective or unnecessary regulation, where ever we find it.
This work is perhaps even more important in the third sector than elsewhere. Rather than reducing the bottom line return for shareholders, extra red tape on NFP organisations means less time and money can be spent delivering front line services. This is true whether you’re a large organisation providing employment services under a government contract or a parent who volunteers on the weekend to do the books for their kids’ soccer team.
This work is important, and we need to get it right.
Therefore, as well as the National Compact, there are a number of other processes currently underway designed to help us gather detailed information about the regulatory burden on the sector in Australia and what can be done about it.
The Senate Economics Committee is inquiring into the disclosure regimes for charities and NFP organisations. The Committee’s terms of reference include models of regulation, legal forms and other measures that could be taken to improve governance, management and accountability across the sector. The Committee’s report will be tabled before Parliament rises for Christmas this year – so only a few weeks away.
The Henry Review into Australia’s Future Tax System is a comprehensive root and branch review of Australia’s tax arrangements. As such, issues such as tax concessions for philanthropic activities and donations are within the scope of the review.
There is also already underway overseas development of an international simplified accounting standard for unlisted entities including not-for profits. This will complement the June 2007 Commonwealth Treasury discussion paper on financial reporting requirements for unlisted public companies in Australia.
Both the Henry Review and the financial reporting reviews will conclude during 2009.
One reason for taking the time to talk to so many people and organisations across the sector is that we understand the message that the sector is not homogenous.
Third sector organisations not only cover diverse areas of activity, the organisations themselves vary greatly in scale and scope. The sector ranges from very small associations to large multi-million dollar companies.
Regulation of the sector needs to be flexible enough to accommodate these different structures.
I’m sure you would agree that there is no point harmonising regulations or cutting down on the number of regulators if the result is a system that is more detailed and cumbersome than our present one, even if it is the same system for everyone and everything.
In this regard, we should not see regulatory reform of the NFP and for-profit sectors as mutually exclusive. Instead we should be looking to ensure the needs of NFP sector are included in all regulatory reform projects.
For example, the work underway to streamline reporting requirements for all businesses will benefit all organisations that have to report financial information to government. This includes the NFP sector.
The Standard Business Reporting Initiative is a joint project involving Commonwealth and State Governments, as well as the software developers and other services providers such as accountants and book keepers.
SBR will remove unnecessary and duplicated information from government forms through the creation of a common reporting language, based on international standards and best practice.
To help smaller organisations, this common language will be integrated into major retail accounting software such as MYOB and Quicken, as well as a number of specialist packages. Larger organisations with custom-built accounting systems will also be able to modify their systems so they can ‘talk’ directly to government systems.
Organisations will then be able to sign on to a single electronic interface and submit information directly to government from their accounting software.
This one submission will then be directed to the relevant government agencies to meet multiple reporting requirements.
SBR currently covers returns to the Australian Tax Office, State Revenue Offices, ASIC and the Australian Bureau of Statistics. Over time it may be possible for other agencies such as State Fair Trading Departments to be added to the system.
We also need to think not only about laws and regulations, but the red tape government can impose on the people it deals with through lengthy and hard to understand procurement contracts or grant applications.
My Department has commissioned a review of the Commonwealth Grant system to look at ways we can streamline the system for both government and grant recipients. As some areas of the NFP sector such as health organisations obtain up to 65 per cent of their funding from government sources, this should be of particular benefit to not-for-profits.
I acknowledge there are some specific areas of regulation where the impact is disproportionately borne by the NFP sector.
The Rudd Government is committed to tackle these problems.
Due to the Constitution’s division of powers between the Commonwealth and the states and territories, any sensible conversation about regulatory reform in the third sector has to include the states and territories.
Take an example that, as a member of the ALP for over 30 years, I am intimately familiar with – a fundraising raffle!
All six states and the ACT currently regulate fundraising and gaming activities of not-for-profits. However, the regulation differs between jurisdictions, and there is no mutual recognition of fundraising licences issued in other states.
In its submission to the Senate Committee Inquiry the Commonwealth Treasury noted that, in South Australia, the Collections for Charitable Purposes Act 1939 prohibits persons from collecting or obtaining, or attempting to collect or obtain, monies or goods for charitable purposes unless the person holds a licence granted by the relevant Minister.
By contrast, Victoria’s Fundraising Appeals Act 1998 requires people conducting a fundraising appeal to be to be registered by the Director of Consumer Affairs Victoria. However schools, religious organisations, health organisations, and political parties are exempt from these requirements.
Fortunately for you all, Treasury’s examples stop there.
But the point is clear.
Not only does a not-for-profit company undertaking a national fundraising campaign have to apply for and obtain separate licences for each jurisdiction, the requirements on how to apply for permission, how the fundraising must be undertaken and what accounting and reporting requirements must be complied with differ between jurisdictions.
This unnecessarily adds complexity and confusion to the planning of fundraising appeals.
I am not arguing that we do not need to regulate fundraising.
Allowing rogue operators to abuse the good will people have towards the not-for-profit sector would reduce the ability of genuine organisations to raise much needed funds of their own.
Also, there is a legitimate community expectation that donated funds be put to the purpose for which they are collected.
But, are circumstances so different between Ballarat and Bunbury that we need different rules governing raffles in each place?
Can’t we agree on one simple set of rules which protect consumers without tying up the sector in red tape?
Would it be possible for an organisation to seek approval for a national fundraising campaign in their home jurisdiction, and have that approval recognised in other states and territories?
Like so many other areas of Commonwealth-State relations, it has been the Commonwealth that has been behind the times here.
The previous Liberal Government was not really interested in talking to the states about regulatory reform at all, and definitely not in relation the NFP sector.
In fact, several states are out ahead of the Commonwealth and leading the way.
Here in Victoria, the Review of Not-for-Profit Regulation and the Stronger Community Organisations Project provided the basis for the Victorian Government’s 2008 Action plan, Strengthening Community Organisations.
This review identified four areas for reform:
The Queensland University of Technology has established a uniform chart of accounts for all NFP organisations to use when acquitting grants to the Queensland Government. This enables NFP organisations to use the same financial information to satisfy multiple reporting requirements. Similar projects are currently being progressed in New South Wales, Victoria and Western Australia.
In fact, at its most recent meeting in September 2008, the Council for the Australian Federation, the intergovernmental forum of states and territory leaders, acknowledged the importance of states and territories working together to minimise the administrative and regulatory burden faced by the NFP sector. A working group has been set up to identify possible areas for cooperation and harmonisation.
In 2009, we want to bring this focus on harmonisation and reform of NFP into the Council of Australian Governments (COAG) with the Commonwealth an active partner with the states.
The Business Regulation and Competition Working Group, which I co-chair with the Minister Assisting on Deregulation, Dr Craig Emerson, is the natural vehicle in which to discuss and progress these reforms.
Any changes need to strike the right balance between consistency and flexibility in regulation.
There also needs to be a balance between reducing compliance burdens and maintaining and improving transparency, accountability and good governance in the sector.
It is too early to say exactly what set of regulations and regulators will deliver these outcomes. As with the other areas of regulatory reform we are discussing with the states and territories, different issues require different solutions.
We have seen already that a number of submissions to the Senate Inquiry are attracted to a single national regulator, such as the UK Charities Commission.
Others call for greater harmonisation of state laws.
As I mentioned earlier this morning, we should not rule out harnessing information technology to deliver a virtual single regulator by creating one interface with multiple layers of government and between different agencies within the same layer.
As we commence this work we will need to continue to consult with stakeholders such as yourselves to ensure that proposed reforms will work in practice as well as on paper.
I welcome your views, comments and suggestions.
-ends-
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