Will a national not-for-profit regulator bring pain or gain?

Given the NFP sector’s already strong commitment to high standards of governance, in responding to the Federal Government’s Scoping Study for a national not-for-profit regulator we see it as an imperative that any change reduces the sectors current compliance costs so that its ability to focus its limited resources and efforts towards its mission is enhanced. In addition a key goal of any change must see a new regulatory structure being an enabler in adding value to the growing importance of the sector, the value it provides to the community through direct action and from philanthropic support, and the funding of its activities, rather than simply adding to the regulatory burden.

With any proposed change to models which currently work effectively for many NFPs, it is important that these are improved where necessary rather than simply removed. As with for profit organisations it is essential that there are a range of regulatory options available for NFPs to operate within that match their particular needs as well as addressing appropriately their specific reporting and regulatory obligations. This would continue to allow the effective operation of the range of organisations currently within the sector including recognising their differing levels of public and private interests.

Due to the continuing trend and requirement for many NFPs to operate throughout Australia, in broad terms we support the streamlining of regulation for the sector along the lines of a national regulatory structure. This includes the goals set out in the Scoping Study, with the following key issues to be addressed;

• Size should not be the primary criteria used to determine the level of reporting obligations that would apply; rather this should be based on the public versus private interests of NFPs.
• The new structures should seek to enhance the development and funding of NFPs including allowing for new forms of social enterprises and quasi equity arrangements.
• Tax concessions should not be the primary guide for determining the level of regulation and reporting obligations for NFPs; the sector’s responsibilities to the public should be seen in a much broader context.
• Thus the Australian Taxation Office, given its primary responsibility as a collector of tax revenue, would be an inappropriate body as the national NFP regulator.
• Regulatory requirements should be minimal for NFPs with little or no government funding or with limited public interest operating primarily for their “members”.
• A critical matter to address for NFPs with public reporting obligations is to ensure the existence of a ‘report once, use often” model. This is not the position at present.
• Much of the present accounting standards framework was developed to ensure good governance, transparency and public accountability for entities whose primary goal was profit. As the goals of NFPs are in stark contrast, applying the present framework is often ineffective, costly and inappropriate for many NFPs.
• In any new regulatory structure it is critical that a financial reporting framework is developed that addresses the specific needs of the sector.
• Many NFPs currently operate within structures that involve both their “private/members” interests and activities that include the receipt of public funds for which they have public accountability. Any new structures and reporting obligations need to allow for this differing level of public accountability within organisations. 

In our view, given the national perspective that now exists for many NFPs, the gains for the sector from streamlining the current arrangements and implementing a national not-for-profit regulatory structure are substantial.

While this will come at some cost, as the vast majority of NFPs operate with very limited resources and provide valuable services to the community at a very low cost and often with much voluntary labour, it is critical that these NFPs do not bear this cost. If the new model ensures that the regulatory and reporting burden for NFPs is no greater than at present it should be possible to find a mechanism that balances the funding needs of the Federal Government and savings from the current structures with a minimal direct contribution from the sector. 

In seeking to implement a national structure it is important that the Federal Government demonstrates the financial costs and benefits for the sector from any such changes, including as an enabler of improved funding models. This is yet to occur and is a critical outcome of this Scoping Study prior to any clear proposals being outlined.

Please feel free to call us to discuss any aspect of our submission in further detail.   

Joe Shannon
Partner
Moore Stephens Sydney


Contact

Joe Shannon
T +61 2 8236 7700
jshannon@moorestephens.com.au

www.moorestephens.com.au