It's a complex world of regulation for not-for-profit fundraising, but following the commencement of a review into the Australian Consumer Law, things may be changing?
Charities collect $6.8 billion in revenue every year through donations and bequests. This is a colossal number and accounts for a significant proportion of charitable income. For smaller charities, fundraising can account for as much as 32 per cent of total revenue.
For many not-for-profits (NFPs), revenue raised through fundraising supplements government funding which is often short-term and outputs-focused. Fundraising revenue is free of the limitations placed on government contracts, and can be applied to long-term goals, developing organisational capacity and building financial sustainability. It is an essential part of the sector’s operating environment.
Despite this, a report prepared for the Australian Charities and Not-for-profits Commission by Deloitte Access Economics found that $15.08 million in revenue for charities alone is lost to meeting regulatory requirements around fundraising. In their report, Cutting Red Tape: Options to align state, territory and Commonwealth charity regulation, Deloitte demonstrate that fundraising is the greatest source of regulatory burden for NFPs.
The issue stems from a much broader problem: NFPs are still subject to second-rate regulation in many areas.
In Australia, fundraising is regulated by state and territory governments. Between jurisdictions, requirements are duplicative, inconsistent and complex. In addition to the millions wasted in compliance costs, these regulations cause significant delays, add unnecessary complexity and, in doing so, stifle the sector’s ability to fundraise effectively and innovatively.
But there may be a light at the end of the tunnel.
The Australian Government recently commenced a review into the Australian Consumer Law. Among other things, the review has posed the question: should consumer law apply to charities and not-for-profits?
Another way to think about it is to ask: are donors consumers?
Consumers are afforded legal rights that seek to ensure that they get what they pay for and have recourse if they don’t. These protections enable consumers to transact confidently with traders regardless of where they are in in Australia. Shouldn’t donors be able to expect the same?
When someone is approached by a fundraiser asking for donations for a certain cause, they should be able to feel confident that their donation will be applied for that purpose. This should be at the heart of how fundraising is regulated.
Instead, NFPs are slugged with highly prescriptive regulations focused on licensing and registration, reporting and operational procedure. As a result of the outdated regulations, the regime lacks the flexibility to accommodate growing innovation within the sector.
Digital fundraising, now common among NFPs, is not effectively covered by the current system. NFPs that use digital platforms to undertake fundraising could, arguably, be required to meet the regulatory obligations of every state and territory, even if they only operate in one. Australian businesses would never accept this kind of operational impediment to ‘doing business’, and NFPs shouldn’t either.
Not surprisingly, many NFPs find it difficult to meet the myriad of requirements imposed on them. This means that some may simply choose not to fundraise, while others, intentionally or otherwise, fail to comply. This has led some, including Community Council of Australia CEO David Crosbie, to suggest that NFPs engage in ‘civil disobedience’, deliberately not complying with these obligations, until reform is achieved.
The review of the Australian Consumer Law presents an ideal opportunity for all Australian governments to significantly improve the regulatory environment for NFPs. Minor changes could provide a foundation for state and territory regimes to be effectively lifted, dramatically reducing the regulatory burden for NFPs.
Most governments are anxious to express their support for the NFP sector and their commitment to cutting red tape for NFPs, but real steps towards this goal are rarely seen. The review of the Australian Consumer Law represents an easy way to take a massive step towards better regulation and the AICD will be advocating for government to seize the opportunity it presents.
Looking to share your views?
Are you a non-executive director or a senior executive off an NFP? Participate in Australia’s largest and longest running study on NFP governance. The study is an important initiative that helps to identify the current challenges and opportunities facing the sector.
Click here to complete the survey.