Organisational transparency in the third sector

As our sector grows, understandably so too does the public scrutiny on where and how we spend money. But unfortunately, the federal regulation of the charitable sector has not developed with the growing number of Australian charities and the increased public debate about our operations.

Currently there is no harmonisation of laws and standards to promote transparency, nor a uniform framework through which charities can disclose their use of public and government funds.

The consequences of this are twofold. First, this results in considerable red tape for national charitable organisations that must comply with separate fundraising legislation in each State and Territory. One set of national laws would save time and reduce compliance costs, which are ultimately borne by donors.

Second, the absence of uniform disclosure requirements makes it more difficult for individuals to compare charities (apples with apples) and make informed decisions about best practice and bad practice in different organisations.

In December 2008, the Senate Economic Committee released its findings from an enquiry into the disclosure regimes for charities, and while it saw much needed rigorous debate on how operations across the sector could be improved, almost twelve months later we are still waiting for the major policy reforms it recommended.

Last month, the Productivity Commission also released a draft report on the sector that affirmed many of the Senate Inquiry’s findings, including the importance of harmonising state and territory fundraising legislation.

One of the recommendations of the Productivity Commission’s draft report and the 2008 Senate Inquiry, as well as Oxfam’s submission to it, is for the establishment of an independent Australian Charities Commission, based in part on The Charity Commission for England and Wales, which has been in operation for more than six years.

This UK body ensures that charities meet legal requirements and names charities that have seriously defaulted on legal obligations, such as not submitting their annual report and accounts.

As well as acting as a watchdog, the UK Charities Commission works in partnership with charities to encourage innovation in the third sector. It helps them increase their efficiency and, in the process, builds public confidence and trust in their operations.

It is crucial that a similar commission in Australia also assist in growing public understanding of the not-for-profit sector. There are some fundamental differences between the for-profit sector and not-for profit sector, because our accountability is to both those who fund us and those whom we seek to assist.

Oxfam Australia, for example, sees its work as a partnership with Australian donors and governments. Together, we assist communities across East Asia, South Asia, Southern Africa, the Pacific and Indigenous Australia to overcome poverty and injustice.

Oxfam Australia has independent auditing systems in place and reports publicly on our spending every year in compliance with a strict industry code developed by the Australian Council for International Development. This code is internationally recognised as a best practice example of voluntary regulation and sets minimum standards of accountability and is monitored by an independent committee.

Oxfam has a long-standing commitment to organisational transparency and was a finalist in the PricewaterhouseCoopers Award for Transparency in 2007 before winning the award in 2008.

With almost 500 staff, Oxfam Australia is of course on the larger end of the Australian not-for profit spectrum, and an independent regulator must ensure that monitoring and reporting requirements are adapted relative to resources. The last thing we need is a counterproductive level of regulation and reporting that cripples the ability of smaller charities to carry out their stated mission and compromises their services to the community.

This is one of the many reasons why an Australian Charity Commission would need to be adequately resourced. The 2008 budget of the UK Charity Commission was in excess of $60 million, which is an indication of the resources required to ensure that such a commission does not become a toothless tiger generating cumbersome bureaucracy for Australian charities.

Organisations within the third sector will continue to be major providers of essential services to people within Australia and overseas long into the future. Any reform that increases their efficiency and gives them due public recognition should be of precedence.

Oxfam, for one, waits with anticipation for such reform.