In the pay of the piper: governments, not-for-profits, and the burden of regulation

Communities Social security Financial system regulation Government regulatory policy Australia

When enacting the Australian Charities and Not-for-Profit Commission Act 2012 last year, the Gillard government declared that its reforms of the Australian not-for-profit (NFP) sector were motivated by the need to restore public confidence and trust in charities.

Informed by the 2010 Productivity Commission report Contribution of the Not-for-Profit Sector, the legislation introduced a regulatory framework intended to promote partnership between government and the NFP sector as the best way to address pressing social need.

Some degree of regulation is to be welcomed because NFPs manage money donated privately or awarded from public funds. Even in its first few months of work, the Australian Charities and Not-for-Profit Commission, established by the 2012 Act, has been investigating instances of fraud and misleading behaviour on the part of some NFPs.

But in couching its intentions in terms of shared values and responsibilities, the government has only paid lip service to the commission’s report. In fact, the new regulatory regime imposes new reporting protocols that are likely to add to the administrative burdens already borne by NFPs and make it harder for them to pursue their work effectively.

In addition, the nature of charity and charitable purpose is changing. Charities used to be largely dependent on private, voluntary action. Dependent as they now are on high levels of public funding, NFPs increasingly work in conjunction with the state and run the risk of becoming lobbyists on behalf of the government.

The new Act introduces a broader statutory definition of charity to embrace the expanded range of services now delivered by the NFP sector on behalf of the government. But in setting out to clarify 400 years of common law tradition, the Act threatens to debase the concept of charity.

Dwindling income from voluntary contributions may have provoked fears that the public has lost confidence in charities, but the real problem may be that charities have lost confidence in themselves.

The ‘progressive’ reforms implemented by the Gillard government impose a regulatory burden weightier than anything proposed by the Productivity Commission. They are couched in concern for promoting public trust and confidence, but the reforms amount to little more than a pretext to extend government control over the NFP sector.

The creative chaos of private and voluntary action, which lies at the heart of charitable endeavour in a healthy civil society, is in danger of being stifled. This puts at risk not just the discretion of individual donors and philanthropists but also the spirited involvement of individuals freely choosing to associate and act independently of the power of the state.

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