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Independent charity regulator is long overdue

By Andrew Hewett

Posted August 28, 2008 12:12:00
Updated August 28, 2008 12:13:00

The Australian landscape is densely populated with charities, a positive feature in light of the two million Australians who live in poverty, the one billion people globally who live on less than a dollar a day, and the millions more who need assistance that only the not-for-profit sector can provide.

Organisations within the charitable sector have a proud history of achievement and inject the inherently Australian notion of a "fair go" at home and overseas.

Oxfam Australia began in Melbourne's suburbs in 1953 as a group called Food for Peace Campaign, sending weekly donations to a small health project in India. We are now one of the biggest international aid and development agencies in Australia, and like other not-for-profit organisations, we have grown rapidly - but unfortunately the federal regulation of the charitable sector has not developed with us.

Australia is years behind other nations in our standards of regulation of charities and not-for-profit organisations. Thankfully, a Senate Inquiry into disclosure regimes for charities and not for profit organisations is currently underway. Oxfam welcomes this initiative as an opportunity for the Australian Government to adopt key aspects international best practice in this area.

One of the key recommendations in our submission to the Senate enquiry will be the establishment of an independent Australian Charities Commission.

Australia should look to develop a model based in part on the Charity Commission for England and Wales, which has been in operation for more than five 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.

But as well as acting as a watchdog, the UK Charities Commission works in partnership with charities to encourage innovation in the 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.

An independent charity regulator also needs to ensure that monitoring and reporting requirements are adapted relative to the resources of the charitable organisation. The last thing we need is a counter-productive level of regulation and reporting that cripples the ability of under-resourced charities, particularly smaller organisations, to carry out their stated mission and compromise their services to the community.

To achieve this, an Australian Charity Commission would need to be adequately resourced. Failure to do so risks it becoming a toothless tiger generating cumbersome bureaucracy for Australian charities. This year's budget of the UK Charity Commission is in excess of $60 million, which is an indication of the resources required.

The reliance of not-for-profit organisations on public donations rightly places scrutiny and debate on the origin of those funds and how exactly they are spent. Oxfam sees our work as a partnership with Australian donors and government where we, together, assist communities across East Asia, South Asia, Southern Africa, the Pacific and Indigenous Australia overcome poverty and injustice. We remain committed to utmost transparency in that relationship.

Oxfam has independent auditing systems in place and report publicly on our spending every year in compliance with a strict industry code developed by the Australian Council for International Development (ACFID). 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.

But there is work to be done to ensure that similar standards exist across our sector, and that these are consistent and robust. 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 which must comply with separate fundraising legislation in each State and Territory. One set of national laws would same time and reduce compliance costs which are ultimately borne by donors.

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

Organisations within the charity 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, welcomes such reform.

Andrew Hewett is the executive director of Oxfam Australia.

Tags: international-aid-and-trade, business-regulation, community-and-society, federal-government, charities, australia

Comments (30)

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• johno:

  28 Aug 2008 12:32:39pm

  people shouldnt give these charities money they spend it all on adverts anyway

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  • GregS:

    28 Aug 2008 1:04:51pm

    Yes, there ought to be a system which tracks how much money donated makes it those it was donated for. Charities should get a rating based on that per cent.
    
    Charities that are dramatically under performing (through excessive advertising, paying executives too much or whatever) should have their special legal status revoked.
    
    The legal defintion of charity also needs reform. Some causes that currently qualify as charitable ought not.

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    • bark:

      28 Aug 2008 1:31:01pm

      Greg,
      
      There are organisations which give 100% of their donated income to charity, both in the local community and to alleviate the effects of disasters outside Australia. They do this by their members actually paying to belong and by using the members labour to raise money.
      
      They include Lions Clubs International, Rotary and Apex. Unfortunately many of their donations are unheralded, such as the $500 000 sent by Lions in aid to Aceh immediately after the tsunami and similar amounts to China after the earthquake.

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      • GregS:

        28 Aug 2008 2:06:18pm

        Why is this important?
        
        If it's the case that some organisations manage 100% then they'll get the best possible rating. That, in turn, will encourage people to give to those organisations over less efficient ones.

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    • Tony:

      28 Aug 2008 3:37:42pm

      Do you think that people who work for NGO's shouldn't be paid well? NGO jobs are some of the lowest paid for their level in the country, and the hardest working.
      
      Do you think that you can raise money without the profile that comes from advertising?
      
      Loose the ideology and think about the consequences of your opinions.

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  • tony:

    28 Aug 2008 1:28:04pm

    Johnno - how many times have you looked at the financial statements of some charities? While I certainly get concerned about the amount of money spent of prime time advertising, the financial statements of most organisations would show that this is a relatively minor part of their budget. If you ever visit a soup kitchen you will see where the money really goes!
    

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• alldaylong:

  28 Aug 2008 1:00:34pm

  I for one would like less charities. I'm sick and tired of being constantly called by them or harassed by them knocking at the door. I pay taxes and enough that goes to charities anyway.

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  • RuAlright:

    28 Aug 2008 1:57:28pm

    I wouldn't say less charities all in all but an amalgamation of all similar charities would be good

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  • Alan:

    28 Aug 2008 2:09:49pm

    I think you would find that if there were fewer charities, your taxes would go up substantially. Charities in Australia play a major role in propping up the health system, the education system and the social security system, which is why the government is happy to encourage charitable donations by offering tax deductibility.

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  • David Ferstat:

    28 Aug 2008 6:53:16pm

    I, for one, would like there to be less NEED for charities.
    
    Unfortunately, this seems many years away, and so, given that we DO need charities, I support any move that would make those we do have more effective and transparent, whic would also serve to make donating to them more attractive.

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• ferret:

  28 Aug 2008 1:03:22pm

  I worked for an NGO but decided to find employment which offered a realistic salary. Because of the nature of the work - so many sad stories out there - staff "burn out" occurs quickly. If salary matched what is required of staff in NGOs there may be less turnover, less training costs, etc. These are all added costs to NGOs who could better spend the money servicing clients. Perhaps the proposed Australian Charities Commission could keep an eye on those sorts of issues too. Most definitely need NGOs though, especially in this time of high homelessness levels.

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• dragon:

  28 Aug 2008 1:08:04pm

  What a great idea !
  Add to the list of criteria an amount actually going to the right place (eg. 30 c out of every dollar).
  I'm reluctant to give to charities doing overseas work because of the non-transparent nature of their creative book keeping.
  And when I found out that the cold0callers asking for donations on the telephone were getting a piece of the pie, I was further outraged.

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  • Alan:

    28 Aug 2008 2:01:22pm

    Do you think that people employed in call centres shouldn't get paid to work for charities? There are very few charities that can afford the infrastructure to run their own call centres, its just not efficent use of their money.
    
    I agree with Ferret's comments, most charities have a big problem with burn out, salary levels in charities are substantially lower than equivalent positions in for-profit companies.

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    • dragon:

      28 Aug 2008 2:19:43pm

      Oh BooHoo for the workers ....... They have a way of getting another job !
      The poor and destitute and ill do not have that choice !

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      • JayR:

        28 Aug 2008 4:39:55pm

        Yeah they dont - even less when there's no NGOs/charities that couldve been helping them.

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  • Root:

    28 Aug 2008 2:03:19pm

    Dragon hits the nail on the head.
    
    Yes, most charity collectors on the street and on the telephone are salaried.
    
    That is, they are paid a percentage of what you donate. I have NEVER found this to be disclosed by any charity collectors. This is also the case with Greenpeace, I understand the collectors get $14 per hour - I understand they also get the corporate sales hassle if they don't sign up enough punters. For real interest, go to Greenpeace's web site and download their financial report and see where the money actually goes. After reading this document I suspended my monthly donation to Greenpeace.
    
    The worst I've encountered are the salaried collectors for the Fred Hollows Foundation - rude, ignorant, pushy. I note the strategically planned approach to Fred Hollows Foundation in Burwood, NSW, where the main street has several bus stops adorned with the image of Fred Hollows treating a small child. The street between this strategically placed set of posters is the most common haunt for Fred Hollows Foundation collectors. This is structured, demographic based marketing. Those poor old ladies actually think that $2 is going to help a blind person... hmmm... perhaps 20C of it?
    
    Charities, that is charities with salaried donation seekers, are also more active in rural areas than city areas.
    
    They are not charities anymore - they are big business and too much of the money you believe you are giving to the needy is funding the lifestyles of the people who run them.
    
    Caring: a simple victim of a profitable job creation scheme.

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    • Tony:

      28 Aug 2008 3:41:39pm

      If you think that working for an NGO organisation is simply an easy "lifestyle" choice then you are sadly mistaken. See Ferret's comments above - very very true - burn out and poor salaries are a huge problem for most organisations trying to do charity and advocacy work to protect the poor, the disadvantaged and the environment.
      
      It certainly is not big business.

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• chris:

  28 Aug 2008 1:08:56pm

  I've always thought it ironic that donations to charities, over a certain value, are tax deductible. It's so much giving to charity as legally laundering money.

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  • tony:

    28 Aug 2008 1:55:42pm

    another point of interest with regards to foreign aid is that only 5% of the overseas aid budget goes to NGOs working with the poorest of the poor - the rest of the money goes to wealthy Australian corporations.

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    • BErtrand:

      28 Aug 2008 4:33:24pm

      Wealthy Australian Corporations which happen to build bridges roads and hospitals, which most NGO's do not have the expertise or the research to do.

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  • Stop_the_madness:

    28 Aug 2008 2:33:29pm

    I'm not quite sure how you can equate making a charitable donation to money laundering - in the end, you still end up out of pocket by an amount of 40 - 70% of what you gave (depending on your tax bracket).

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• Green:

  28 Aug 2008 2:38:16pm

  Given the amount of cynicism evident on this forum, perhaps some charities need to think about restructuring the way they work so that people can have more confidence their money is going where it is needed.
  
  The Big Issue is a great example of a different approach to charity - when you hand over your $5 you get to talk to the person who most of the money is going to help, you know that it is actually helping them financially and socially, and you get to read an entertaining magazine to boot. I like that kind of transparency.

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• henalf:

  28 Aug 2008 2:58:29pm

  It is certainly time some check was made on these assorted charities ,foundations etc. I believe an enquiry into some so called charities in USA found many only used 5% of the collection to actually help the cause,the rest went to the usual free loaders.Please remember Kevin that charity begins at home and our oldage pensioners could do with some of the cash flung to oversea places.

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  • Sandy:

    28 Aug 2008 3:18:06pm

    I think it is common knowledge that most of what is handed over to public known charities is spent on other things other than what it was given for. I now no longer donote to charities who make a direct approach towards me (in the steet, over the phone or via ads).
    
    I wait till an issue touches me then I look for some way to give my donation so that it MOST DIRECTLY reaches the reason for the donation. I dont believe in freebies or thank you gifts given back to you so I guess my overall donation patterns is down.
    
    I also dont believe there would be any good outcome from an inquiry or another government funded inquiry into what we all KNOW is happening. Just like the last grocery enquiry by the ACCC - the result was totally predictable and then Woolworths annouce another profit into the billions. Be realistic folks and dont waste more money on a known outcome.
    
    The last substantial donation I gave was to a person I knew travelling to the area when I wanted to make the donation. The cash was handed directly to the organisation concerned in a foreign land. See you can make a difference without resorting to feeding the blood suckers at the local charity shops.
    
    Give with you heart - but dont throw it away.
    
    

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• NT boy:

  28 Aug 2008 3:04:54pm

  I donate only to those that dont come banging on my door or calling my home.. if they can afford random phone calling they dont need my money.
  Boyshome get most of my support... big groups like the salvo's & red cross etc can take a long walk off a short pier, as i see the money spent on them and not who there say they are raising for.. ie tsunami victims

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  • Malnar:

    28 Aug 2008 3:43:37pm

    Earlier this year there was an Olivia Newton John cancer appeal, which for reasons unknown to me involved a bunch of celebrities walking a portion of the great wall of China.
    
    Driving to work one day I saw one of those a huge billboard signs advertising 'MixFM' (Melb radio staion). The ad was encourging people to tune into MixFM in the mornings to hear how one of their breakfast team was going on his great wall walk. There wasn't anything clearly stating that he was part of the ONJ trip.
    
    I checked out the website for the ONJ/Great wall appeal & sure enough the bloke from MixFM was listed as one of the participants.
    
    I looked around the website for details of who was funding this (very costly sounding) China trip but it was very lacking in specifics. It said something like all proceeds after expenses go to the charity. I didn't take it any further but I'd like to know how the financials of these events work.

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• sally:

  28 Aug 2008 3:49:57pm

  We need less regulation, not more. Why? Because inevitably the task will be given to a new government agency and history shows the best way to make a hash of anything is to let governement run it. Forget Hewett's proposal.

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• Stop_the_madness:

  28 Aug 2008 5:27:09pm

  I find it sad seeing some of the hugely worthwhile causes that, due to a lack of alternative funding, have to resort to asking for charitable donations. The Cancer Council and the Tasmanian Devil Appeal are two that instantly spring to mind. How is it that groups like this aren't adequately funded by government?

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• Jeremy:

  28 Aug 2008 6:56:13pm

  I work for a charity, and we were nearly bankrupt a few years ago, and made the decision to employ professionals in all areas, including fundraising. Our telemarketing team now has a ROI in excess of 200% and we have a budget in the tens of millions.
  
  People who have a problem with charities spending money on fundraising and advertising need to understand that charities that spend money on those things have a great deal more money to spend on their actual causes.
  
  A great example is World Vision, which is the biggest charity in Australia, spends by far the most money on advertising and fundraising schemes, but also has by far the most amount of money to spend on their actual cause.
  
  The reality of the matter is that most people don't give money to charities unless they're prompted to. Charities that don't spend money on making money don't make money and so can't help their cause.

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• Transparency:

  29 Aug 2008 7:18:20am

  Charities are dependent upon donations and as such have an obligation to those who donate to be transparent in everything they do - so that donors can be confident their money is being used as they intended it to be used.
  
  Transparency incorporates many factors, not just financial transactions, eg; corporate links - sponsorships, partnerships, and relationships - is one of those factors that requires much greater transparency.
  
  For example, what happens to intellectual property when charities fund research that results in 'discovery' or 'invention' or 'innovation' that has commercial potential or ends up as a commercial venture in one form or another?
  

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