Governance a key concern in charity complaints

A report from the Australian Charities and Not-for-profits Commission (ACNC) has revealed a sharp increase in the number of complaints received about charities in the past year.

Its recently-released Charity Compliance Report noted a 42 per cent increase in complaints compared with the previous year. The regulator received 1,695 complaints in 2017, up from 1,192 in 2016.

Since 2013, the number of complaints has steadily increased year-on-year, and reading the headlines about not-for-profits in the past twelve months, you could be forgiven for thinking that misconduct is endemic across the sector.

Despite this, the vast majority of Australia’s charities and not-for-profits are well-meaning organisations who meet their obligations under their law and deliver essential services to the community.

Sadly, headlines such as “treasurer steals thousands from community club” are simply more exciting than “everything ship shape at homelessness charity.”

Cause for alarm, or business as usual?

Although there is a significant volume of complaints about charities (as much as five a day), this is not likely owing to an increase in misconduct.

Firstly, the ACNC has now been in operation for five years, and as it has moved out of its establishment phase and into maturity as a regulator, and its intelligence-gathering and compliance functions have become more sophisticated. Detection of misconduct has increased, even though the amount of misconduct may not have changed.

More influential still may be the public’s growing awareness of the charity regulator’s existence. Where once a concern about a charity might have gone unreported, growing awareness of the ACNC has caused these issues to surface to the attention of the regulator in the form of formal complaints.

Newly-installed charity commissioner the Hon. Dr Gary Johns said, “As awareness of the ACNC has grown over the last five years, we have seen a steady increase in the number of concerns raised about the activities and operations of charities.”

Despite the volume of complaints received about charities, very few are serious enough to merit the attention of the regulator or to warrant enforcement action.

Of the 1,695 complaints received by the ACNC in 2017:

• over 1,000 of them were able to be resolved by the ACNC’s frontline advice staff, or otherwise assessed as being outside the ACNC;
• 321 went on to be formally assessed;
• 200 progressed to investigation; and
• 82 investigations were finalised.

These investigations resulted in a meagre 26 charities having their charitable registration being revoked, and 16 entering into “compliance agreements” with the ACNC.

Who complains about charities?

Most complaints about charities are raised by individuals (79 per cent) with a small number being referred by other government agencies (13 per cent) or detected by the ACNC through its own intelligence functions (8 per cent).

Most concerns are raised by members of the public who are not closely associated with the charity (23 per cent) followed by:

• Other government agencies (13 per cent);
• Donors, funders and volunteers (10 per cent);
• A charity’s own board members (9 per cent);
• The media (9 per cent); and
• Employees (8 per cent).

Other sources of complaints include beneficiaries, charities themselves and anonymous complaints.

Governance a major source of complaints

The most common types of complaints concerned fraud, lack of transparency and mismanagement. However the great majority were about governance issues.

42 per cent of complaints concern directors’ duties, which also resulted in the highest number of investigations (52 per cent of the ACNC’s total investigative activity).

The next most common complaint (29 per cent) concerned charities carrying out their charitable purpose or operating on a not-for-profit basis.

ACNC secrecy provisions

The legislation that establishes the ACNC includes robust ‘secrecy provisions,’ which prevent the regulator from disclosing the context or rationale for its enforcement decisions.

This means that except in limited circumstances (such as to correct misinformation on the public record) the ACNC is not able to inform the public about the misconduct it has detected, or the steps it has taken to address it.

Being able to assure the public that misconduct has received an appropriate regulatory response is a critical component of the ACNC’s role in ensuring public trust and confidence in the sector.

The ACNC is currently undergoing its statutory five year review and the secrecy provisions have received significant attention in this context. The AICD, in its submission to the public consultation, has put forward the view that the ACNC Commissioner should have the power to disclose the context and rationale for enforcement decisions.