July 29, 2012

The NFP review and you

What does the Federal Government’s Not-For-Profit (NFP) review, with legislation due to be finalised in October 2012, mean for the healthcare sector? JBWere’s Director of Philanthropic Services gives a lowdown.

Have you thought about how the Federal Government’s Not-For-Profit (NFP) review may impact your regulatory reporting and compliance?

Central to the reform process is a drive to slash red tape and reduce the administration load for NFP entities. For a glimpse into where the process is currently at, we asked JBWere’s Executive Director of Philanthropic Services, David Knowles, to share a summary, below.

The following NFP review measures are under consideration by government, to potentially become law in late-2012.

National regulator to be unveiled

The most major reform being considered is the creation of a national regulator – the Australian Charities and Not-For-Profit Commission (ACNC). The commission will be responsible for determining charitable status, along with helping to educate and support NFPs, and ensuring regulatory and reporting compliance. Initially, the ACNC will only regulate charities, but after 2014, it’s intended that the commission will also regulate other types of NFP organisations.

Launch of a public online portal for transparency and due diligence

The establishment of a standardised online information portal will give the public the opportunity to compare, at a glance, the governance of Australian charities. The portal will ensure the public can measure each charity’s capability when it comes to management of public funds and the degree and ways in which the charity’s work is helping the community.

Creation of a statutory definition of charity

The definition, not yet finalised, will aim to strengthen public confidence in how charities inAustraliaoperate. One idea that looks likely to become reality is that an organisation wanting to operate as a charity will need to pass a ‘public benefit’ test.

Introduction of tax for unrelated commercial activities carried out by charities

The key point of this reform measure isn’t to discourage tax-exempt organisations from earning income from commercial activities. Rather, the tax is set to target commercial profits that aren’t used to support the charity’s altruistic purpose.

Summary: action points for healthcare professionals

Healthcare professionals can prepare for the proposed NFP reform measures by actioning the following:

  • Consult a financial adviser about the likely impacts of the reforms on your business.
  • Apply a continuously measurable and transparent approach to your NFP reporting to effectively manage the proposed reforms. Government funding is becoming increasingly results focused, so NFPs need to ramp up their ability to measure and report their achievements.
  • Take particular care in defining the link between your work and the public benefit.
  • In all communications with the public – including social media – NFPs need to practise greater vigilance to ensure accuracy. This includes disclosing, where necessary, up-to-date information about how funds are being deployed. Make sure your commercial activities are robust enough to survive increased public scrutiny.

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