Senate Estimates opening statements

Sue Woodward AM, ACNC Commissioner
Senate Estimates Economics Committee

We have just published our 2023-24 Annual Report, and I would like to provide an overview of key achievements.

In 2023-24, there were 19 million clicks on the Charity Register, as people searched for key data about charities, including financial information and the names of charity leaders.

The Charity Register is a critical source of truth for the public, the charity sector and government.

Much of our work is to confirm the Register is accurate and up-to-date, with data drawn from information that charities submit to us. On-time reporting improved, with 73% of charities submitting required information on time. We contact charities that are late to remind them of their obligations. At the end of September, 90% of charities had submitted their latest required Annual Information Statement.

Our website provides guidance for charities and the public — it received 3.8 million views in 2023-24. We updated guidance and developed new education resources. This year we worked with the Australian Signals Directorate to update our cyber security guidance and to produce a joint podcast. We also hosted webinars on related party transactions and the Annual Information Statement. Our advice services team responded to 21,663 calls and 8,695 written queries from charities and the public.

In 2023–24, there were 2,309 concerns about charities raised with us, a 10% increase on the previous financial year. More than 1,000 of these concerns (45%) came from the public: 26% related to private benefit (the use of charity money for personal gain) and 21% related to mismanagement of charity funds. Additionally, we have a comprehensive daily media monitoring system which, with other proactive intelligence, informs our risked based compliance approach.

We use a number of strategies to support charities in meeting their obligations. A self-audit requires a charity to respond to questions related to their compliance with Governance Standards and, where applicable, External Conduct Standards. Depending on the response, we may provide tailored regulatory advice that supports the charity to comply with their obligations. Of the eight self-audits completed in 2023–24, six resulted in regulatory advice.

We completed 59 investigations, revoking the charity status of nine organisations due to compliance action, and referring 36 charities to other government agencies when they were able to act. There were several joint investigations and other activities with Australian and state agencies, many of these are complex matters.

Our core work is to register eligible charities. This work has been impacted by changes to the reporting requirements of not-for-profit organisations (NFPs) that self-assess as income tax exempt.

To be income tax exempt, all NFPs that meet the legal definition of a charity must be registered with the ACNC and then endorsed by the Australian Taxation Office (ATO). The new ATO self-assessing reporting requirement has surfaced many groups which are eligible to be registered charities and this, in turn, has led to a significant rise in applications to the ACNC.

In the 2023-24 financial year we received 6,286 registration applications. That is a 14% increase on the previous financial year ̶ the highest number received since the ACNC was established in 2012. We expect the application rates to remain at this level (or even increase further) as awareness grows about the new reporting requirements for self-assessing income tax exempt organisations in the lead up to the lodgement deadline of 31 March 2025.

If projections about the number of NFPs that will need to register with the ACNC are correct, we may see up to a 25% increase in the number of registered charities: from 60,000 currently to about 75,000 over time.

Despite increased demand, we are currently managing our registration queue effectively: applications are being allocated within 3 months with many similar applications done more quickly as part of bulk processes. Various measures we have implemented during the year are working. These measures included recruitment and training of 20 additional staff (with financial support provided by the ATO), working closely with the ATO on guidance and communications, liaising with more than 60 peak bodies to provide clarity on whether their members are eligible to register, implementing a new bulk registration form for these organisations, and a new online tool for groups to check likely eligibility for charity registration.

I am proud of these achievements. We will continue to strive for best practice in supporting transparency and accountability in Australia’s charity sector, a sector that relies on public confidence to ensure it can continue to provide programs to those most vulnerable in our community, and for a range of important causes significant to communities across the nation.

Sue Woodward AM, ACNC Commissioner
Senate Estimates Economics Committee

The operating context for charities continues to be complex. The tenth edition of our Australian Charities Report, published on 5 June 2024, confirms that cost of living increases are affecting charities, with expenses increasing more than revenue in percentage terms.

Although charity revenue hit a record high – topping $200 billion for the first time – charity expenses grew by $22 billion, which was more than the $11 billion in revenue growth during the same period.

Employee expenses increased nearly 10% compared to the previous reporting period and accounted for more than half of the sector’s expenses (55%). A significant jump. This reflects the need for charities to compete for staff in a tight labour market, affecting charity funds and the ability to deliver services in times of high demand.

Charities continue to be a major employer. Charity staff comprise 10.5% of the Australian workforce. Yet most charities still rely on volunteers – more than half of all charities reported operating with no paid staff.

Nearly a third of Australian charities are extra small, with revenue of $50,000 or less. The majority of those, close to 90%, operate without any paid staff. Our focus on these charities shows that they have been impacted the most by cost-of-living increases and their revenue is not keeping pace with inflation. In the five years between 2017 and 2022, extra small charities experienced a substantial decrease in staff (-18%) and volunteers (-17%).

On a positive note, volunteers increased to 3.5 million, a gain of 320,000 compared to the last reporting period. Although volunteer numbers are not yet back to pre-COVID levels of 3.77 million.

We continue to support charities, and our recently published cyber security podcast, a joint production with the Australian Signals Directorate, offers practical advice to organisations of all sizes to manage risks and respond to any breaches.

Due to the seriousness of the risks of cyber crime, we have identified cyber security as one of our compliance priorities for 2024-25. In our compliance reviews, we will assess how charities are protecting themselves from cyber risk.

I announced this and our other priorities for 2024-25 in March at the Australian Institute of Company Directors conference – a critical message for those charged with overseeing organisational governance.

We will also be focusing on charities with complex structures that seek to misuse these structures to obscure fraud or non-compliance. Our colleagues overseas and in other agencies have also identified this as an area of emerging risk.

A key part of our core business is registering eligible organisations as charities. We are seeing registration applications continue to increase largely driven by the Australian Taxation Office’s implementation of new reporting requirements for self-assessing income tax exempt organisations. From 1 July 2023, if an organisation is eligible to be registered as a charity, they must register with the ACNC to continue to be eligible for income tax exempt status.

In April and May this year, the number of applicants applying to the ACNC was 71.5% higher than for the same period last year.

This increase in demand has, unfortunately, led to longer times for new applications to be allocated for assessment. We have taken measures to reduce this processing time and it has been reduced considerably. We have also recently launched a new registration form which we anticipate will also streamline the registration process.

We continue to strive to find ways to assist charities to understand and meet their reporting obligations and to embed effective governance structures.

Sue Woodward AM, ACNC Commissioner
Senate Estimates Economics Committee

In December 2023, I completed my first year in the role as Commissioner, with the ACNC now being 11 years old.

Our work registering charities and supporting them to meet their reporting and governance obligations remains our core focus. Supporting this work are some new initiatives.

We commenced our Secrecy Reform Project publishing deidentified registration decisions – work enabled by funding in the 2023-24 budget. Over time, we will build a library of decisions, which will offer real life insights into the process of charity registration.

We are working to help charities understand and know where they might be able to get help with cyber security issues, as part of supporting contemporary good governance. We are collaborating with key agencies including the Office of the Information Commissioner and the Australian Signals Directorate. For example, the ASD is assisting us to update our cyber security guidance for charities and we will support an upcoming charity cyber security campaign they are running in March (tailoring it for the charity audience).

Our decisions can be, and are, challenged at times – this is a critical element of procedural fairness and a way to clarify the law. We publish our response to court and tribunal rulings in our Decision Impact Statements – most recently we outlined our understanding of an AAT ruling on Equality Australia’s eligibility for status as a Public Benevolent Institution. This is a sought-after categorisation as it confers significant tax benefits and concessions, but the term ‘Public Benevolent Institution’ is not defined in law. We welcome test cases that help clarify the law that we administer.

Our overarching purpose is to bolster trust and confidence in the sector and encourage donors to use the ACNC Charity Register to find legitimate charities. This is the cornerstone of our major annual Safe Giving media campaign which we ran successfully in December.

We continue to deliver resources and webinars for charities, especially on new reporting obligation such as related party transactions.

Our core work has pressures on it.

We are dealing with more complex, large compliance investigations. There are increased demands as part of legislation changes requiring self-assessing entities with tax exemptions to register with the ACNC if they are eligible. We have seen a sustained uptick in registration applications that has created longer wait times for applications to be assessed. Also, these applicants often require significant support as they are from small not-for-profits with limited resources, which are unfamiliar with the process and unsure if they are eligible for charity status. We have a range of strategies to manage this workload as efficiently and effectively as possible.

Finally, we know charities are not immune to world events - 6% report that they work overseas - with many of them working to deliver services and support disasters. The new international program search on our Charity Register allows people to locate charities operating overseas. These charities must abide by our External Conduct Standards. We have worked with DFAT to publish advice for donors (and charities) wishing to support delivery of humanitarian aid overseas to people affected by current conflicts.

In my second year, I remain committed to supporting charities to operate effectively in an increasingly complex environment.

Key facts:

• There are approximately 60,000 registered charities.
• Charities employ 10% the Australian workforce.
• There are more than 3 million charity volunteers.
• The ACNC 2023-24 appropriation is $18.2million.
• The ACNC employs 114 full-time equivalent staff.

Sue Woodward AM, ACNC Commissioner
Senate Estimates Economics Committee

Since last appearing, the ACNC has had a busy and productive time. True to our commitment to sharing charity data we launched the Australian Charities Report 9th edition and created a Charity Data Hub on our website. We understand how critical data is to decision-making and continue to look for ways to analyse and share our data with the sector, the public, researchers and policy makers.

The latest Australian Charities Report featured additional analysis on grant-making and philanthropy to support work being done by the Productivity Commission Philanthropy Inquiry.

I have now been in the role 10 months. An early priority was to meet with regulators and sector representatives. I have also presented at several significant sector conferences and the ACNC Sector and Adviser forums. I have been keen to understand the sector from the perspective of my new role – what charities want from me and the ACNC to help them meet their obligations and to deliver on their mission.

While I have done many virtual and hybrid events, it has also been important to have a physical presence at sector events in different states to help show that I want an open, and cooperative relationship. The ACNC has a national role. The ACNC is accessible.

Continuing that theme, the ACNC has maintained a commitment to consultation to ensure our projects and products, including guidance, hit the mark. In August, after significant consultation we published our updated Commissioner’s Interpretation Statement on Public Benevolent Institutions to help charities understand eligibility for this much sought-after classification. This has been anticipated by sections of the sector and was well received.

We have hosted our annual Regulator’s Day bringing together state, territory and overseas regulators in discussions that were shared with the sector. Our digital-by-default reporting system was affirmed as a world leader, admired by overseas authorities.

In July the Government announced funding to change our secrecy provisions so that the ACNC could publish de-identified registration and compliance decisions. While the compliance disclosures await legislative change, we have begun the foundational work that will allow us to publish de-identified registration decisions. This will help organisations applying for charity registration, leading to a more efficient process.

Most recently our annual report was tabled in Parliament, with many of these achievements documented within it. The report also makes plain the challenges for a small agency when demand peaks. We have just over 100 staff regulating 60,000 charities. Recent increases in registration decisions and some large multi-charity investigations have stretched our resources. Our focus for the 2023-24 year is on improving efficiency and harnessing technology to help us manage these challenges, while continuing to recruit, train and retain high quality and passionate staff.

Sue Woodward AM, ACNC Commissioner
Senate Estimates Economics Committee

I would like to update the Committee on the ACNC’s work since my last appearance.

Some of our key activities since February have included:

• consulting with charities on how we will collect information about related party transactions in their next Annual Information Statement. Based on the results of that consultation we have settled the form of the questions, updated our guidance and notified all charities of the changes via a direct mailout
• issuing guidance for charities wanting to advocate on the referendum on an Indigenous Voice to Parliament
• revoking the registration of more than 700 charities for persistent non-reporting
• making a range of submissions on issues affecting charities, including written submissions to the Productivity Commission on Philanthropy and the Australian Accounting Standards Board (available on our website)
• undertaking meetings with State, Commonwealth and international regulators
• presenting keynote addresses at prominent sector events including Volunteering Australia’s conference, the Connecting Up digital innovation conference and the Victorian Neighbourhood House conference
• in the context of documents being tabled in the Parliament about allegations against the Hillsong Church, issuing a statement (with the charity’s consent) confirming that the ACNC is investigating, and explaining that the ACNC does not have legislative power to provide whistleblower protections
• adding further search options to the Charity Register, continuing to improve the usability for charities, donors, philanthropists and the public
• finalising our flagship publication the Australian Charities Report which will be released soon. This will be the 9th edition and is an annual analysis of the information charities report in their Annual Information Statements, and
• reaching 9,000 enrolments in our online learning program of free short courses for charities.

As mentioned above, one of our key priorities has been helping charities understand how they could participate in advocacy on the referendum on an Indigenous Voice to Parliament. We have shared our guidance widely through the media and on our social media channels. I recorded a podcast (available on our website) and highlighted it to every registered charity via our monthly e-newsletter ‘The Charitable Purpose’. Recently, I also presented with the Australian Electoral Commission on advocacy and the referendum in a webinar convened by sector peak bodies.

This guidance is available on our website. The main points are:

• charities can and do advocate
• we recognise advocacy is an activity that can help charities achieve their purposes. As with other activities, charities need to consider how their advocacy furthers their particular charitable purposes
• charities also need to ensure that their advocacy activities are lawful, respectful and fair so that they continue to meet their obligation to comply with the ACNC Governance Standards.

The range of activities that could be considered as advocating are broad. Not every charity will actively campaign. Some charities may simply want to make a statement of support for a ‘yes’ or ‘no’ case. An example of this would be a message added to the signature block of a charity’s email messages or on their website. Doing this will not jeopardise the charity registration with the ACNC.

On the red tape front, we welcomed the announcement in February of the agreement between the Commonwealth, State and Territory Treasurers to a set of nationally consistent charitable fundraising principles. This national approach to fundraising and subsequent red tape reform will save Australia’s charity sector millions of dollars annually. Charities will be able to direct those savings toward helping the people who rely on them instead – which is excellent news for the sector.

I am happy to elaborate on these and other matters.

Sue Woodward AM, ACNC Commissioner
Senate Estimates Economics Committee

I would like to introduce myself as the new Commissioner of the Australian Charities and Not-fort-profits Commission, and to outline priorities to support the sector.

I was delighted to start as the ACNC Commissioner on the 12th of December. I have come full circle as I was involved in informing the policy that established the ACNC and was the inaugural Policy and Education Director.

As the Chief Adviser for Not-for-profit Law at Justice Connect for many years, I have an intimate understanding of charity law and the Acts I now administer.

There are now around 60,000 registered charities, and the sector has a substantial economic and social impact.

Our latest data shows it generates revenue of more than $176 billion, attracts $12 billion in donations and employs 1.38 million people – more than 10% of Australia’s workforce. But it is largely powered by volunteers – around 3.4 million. More than half of all charities have no paid staff at all.

Our role as the regulator is critical to support a vibrant sector that inspires public trust. We help charities stay on track with governance, assisting them to meet reporting and other obligations. We weed out bad actors who could potentially taint the reputation of the whole sector.

We are a rich source of data, provided by charities in their annual reporting. It confirms the significant economic value charities add to our economy and allows us to see trends across volunteer numbers, charity size, purpose, activities, and locations.

We are committed to sharing data, and we do that in several ways. For example, anyone can search for information about charities for free on their phone or computer using the Charity Register. Millions of people do each year.

This year, we will publish the ninth edition of the Australian Charities Report, an annual comprehensive overview of the sector, with an interactive data tool that allows researchers and policy makers to dive deeper.

The ACNC does not develop law or policy – we administer it, using the strong legal framework of the Charities Act and the ACNC Act, and in accordance with our Regulatory Approach Statement that explains how we approach our role as a regulator. The law outlines which entities can be registered, the purposes that are deemed charitable and the rules charities must operate within.

Charity advocacy has at times been a concern to Senators and the public. To be clear, I will restate our longstanding guidance, available on our website. Charities can advocate to promote or oppose a change to any matter of law, policy or practice – as long as it furthers their charitable purpose. ‘Charitable purpose’ has a special legal meaning that is associated with charity registration. Charities cannot have a purpose to promote a political candidate or party.

Senators and the public can be assured that checks and balances exist.

Disasters, the COVID-19 pandemic and cost of living rises have affected the sector. Demand for charity services is rising, even while many charities struggle with workforce and volunteer issues.

One of my priorities is to focus on continuing to reduce red tape for charities so that they can focus their resources and efforts on their missions. We have worked with states and territories to harmonise fundraising red tape, with the latest reforms taking effect in Queensland late last year.

In December, the ACNC reached a milestone 10-year anniversary. It is a great point for me to take the reigns as we move into the next decade and the ACNC becomes a mature regulator.

I am passionate about this sector, and I am privileged to be in this role.

I want to be transparent about our work, and I want to support charities to be transparent and vibrant, so they can get on with their job of serving the community. And I will strive to cement the ACNC’s place as a world-class regulator