ACNC: the facilitative regulator — a case study of proactive reform

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Historically, the not-for-profit sector in Australia has not generally benefited from any strategic and wide-ranging NFP sector specific regulatory reform. Although over the years certain subsectors have benefited from particular reforms, there has been a clear lack of broad-based and comprehensive reform focusing on the key structural components of NFP regulation.

Where reform has taken place, be it at a Commonwealth level or state and territory level, it has tended to be ad hoc and piecemeal. The establishment of the Australian Charities and Not-for-profits Commission, which took place between 2011 and 2013, was an attempt to shift away from such an approach to NFP sector reform.

As an adviser to the former Assistant Treasurer during 2012 and 2013, I was closely involved with the establishment of the ACNC. The experience provided me with a unique perspective on the ACNC reform process ‘on the inside’, with some of my key reflections outlined below.

One of the main criticisms directed at the proposed ACNC was that there was no crisis which justified establishing it. However this overlooked the point that reactive regulation in response to a crisis is not an ideal way to make regulatory policy, and can lead to poorly informed kneejerk reactions. Rather than wait for a crisis to happen and react, the establishment of the ACNC was an example of proactive reform which would support Australian charities.

This facilitative role for the ACNC was a key rationale for its establishment, and is codified in the second object of the Australian Charities and Not-for-profits Commission Act 2012: ‘to support and sustain a robust, vibrant, independent and innovative Australian not-for-profit sector’. The ACNC is a regulator, but it’s not just a ‘cop on the beat’ – it’s more than that, and was always intended to be so.

This does make the ACNC quite unique, and certainly shapes the way it conducts itself. But it also necessitates the careful balancing of a facilitator role with the need to act firmly where it is in the public’s interest to do so — these two approaches are not mutually exclusive and indeed can reinforce one another positively. Judging by the performance of the ACNC so far, it is getting that balance right.

Cultivating an environment for successful reform

The ACNC reform process was underpinned by an intention to proceed with a new approach to government and NFP sector collaboration and engagement. This approach was formalised in the National Compact. There has often been a relationship of mistrust between government and the NFP sector, so the National Compact was a kind of circuit breaker without which the ACNC reform process would have been much more difficult.

The actual establishment of the ACNC happened quite quickly, and was characterised by intense engagement. It was announced in the 2011 Budget, and was up and running in late 2012. Some consultations had short time frames, and this understandably created some consternation amongst stakeholders. The government at the time did decide to slow things down a little, whilst not losing reform momentum. People often complain that government takes too long to do things, but sometimes it also needs to know when to take its time where possible.

When announcing the proposal to establish the ACNC on Budget night in 2011, the government also announced a new and unpopular taxation measure, ‘Better Targeting of NFP Sector Tax Concessions’. The measure would have imposed more regulatory burden on NFPs — contradicting a key rationale for establishing the ACNC, and it was announced with no consultation – contradicting the principles of the National Compact. In hindsight, seeking to progress contentious taxation reform alongside the establishment of the ACNC was not a good decision. The implementation of the measure was subsequently delayed, and the current government decided not to progress it further.

Co-production and the importance of regulatory culture

Elements of the ACNC reform process provided opportunities to demonstrate that ‘co-production’ is not just a buzzword — the development of the ACNC Governance Standards is an example. A draft discussion paper was prepared by the Treasury, which was then the subject of a roundtable convened by the NFP Sector Reform Council. The discussion resulted to a number of changes to the draft governance standards before they were released for wider public consultation.

Too often consultation consists of government preparing a consultation document with little or no direct input from stakeholders at an early stage. But this kind of early engagement can not only identify issues that can be rectified before wider public consultation takes place, it also cultivates an atmosphere of openness as well as mutual respect and trust, which was a shared principle of the National Compact.

One particularly important lesson from the ACNC reform process was that the culture of the prospective regulator is critical. It’s very hard to legislate regulatory culture – whilst many things can be specified in legislation, stakeholders may still be uncertain or concerned about how this legislation will be administered. One way to address this uncertainty is to effectively establish a ‘regulator in waiting’.

This is what the government did when it established the ACNC Implementation Taskforce in July 2011, headed by the eventual ACNC commissioner, Susan Pascoe. Through its work engaging with stakeholders and laying the groundwork for ACNC, the taskforce provided a clear indication to stakeholders of what to expect once the ACNC was formally established, and demonstrated that the ACNC reform process was truly about establishing a facilitative regulator. It is arguable that without the presence of the taskforce, the establishment of the ACNC would not have been realised.

The road ahead

Ultimately, the ACNC can be regarded as a success. It was strongly opposed by the opposition at the time — despite this and other challenges, it was established. It is a product of constructive cross-sectoral collaboration between government and stakeholders from the NFP sector and beyond, and enjoys broad support from these stakeholders.

As a person closely involved with its establishment, I am of course very pleased with the new government’s decision to retain the ACNC. Support for the ACNC across the political spectrum will make its work much easier.

Part of the promise of the ACNC relates to streamlining the regulatory framework for the charitable sector, including the inconsistent regulation of fundraising and associations across our federation. So there is much work to do but also further opportunities for constructive cross-sectoral collaboration to keep moving things forward.

This article is an adaptation of Krystian Seibert ’s chapter in the recently released book The Three Sector Solution – Delivering public policy in collaboration with not-for-profits and business, published by the ANU Press and the Australia and New Zealand School of Government . The book can be downloaded for free here.