The Zone transcript: David Crosbie

Michael Short: David Crosbie, welcome to The Zone and thank you for your time. You are chief executive of the Community Council for Australia – and we will talk about the council presently. You are here primarily to talk about the regulatory body that was set up a few years ago, the Australian Charities and Not-for-profits Commission, after a big number of studies over many years indicated the not-for-profit sector needed to be become more accountable, transparent and efficient. The other thing that you think the sector needs to do is become a little bit more robust and prominent as an advocate for itself.

The Coalition said ahead of the election it would abolish the ACNC and fold its functions back into the Australian Tax Office and the financial markets watchdog. Since winning government they have moved towards doing that, but in recent days the bill has been referred to the Senate Economics Legislation Committee for an inquiry, and I want to talk about that too.

It is a very interesting development. Many, including you David, believe it would be a false economy and a retrograde step to abolish the commission. So, let's start please by setting out the big picture, the arguments for keeping the commission.

David Crosbie: There have been about two decades of inquiries. Under prime minister John Howard in 2001 there was a major inquiry into charities that recommended having an independent regulator. The Productivity Commission inquiry into the contribution of the not-for-profit sector in 2010 made a similar recommendation. The Henry tax review agreed. So there has been a consistent push for establishing it.

The draft legislation that came out was met with mixed responses from across the sector, and over a period of three inquiries through the Senate and re-drafting we ended up with an Australian Charities and Not-for-profits Commission that I think represents best practice in charity regulation around the world.

MS: So why get rid of it?

DC: I don't know. I honestly don't know. I find it really difficult to understand why you would do that because it really provides genuine benefits both to the sector and to the community and it is relatively cheap. There is no great cost saving in returning it to the ATO.

MS: The government is strongly promoting the idea in the community of the end of entitlement, the era of responsibility. That links into the fundamental tenets of public policy, which the government is very supportive of – accountability, transparency, fairness and efficiency. Do you think that there is an opening here to present carefully the argument for the continuation of the commission as something that buttresses all of those ideas?

DC: I think all governments around the world and in Australia, including our current federal government, support a reduction in red tape and an increase in transparency. They all want to strengthen civil society and the not-for-profit sector. It is a shared agenda. In fact, there is a lot more shared than disagreed over when it comes to policy in this area.

It is really a question of how you go about it and I fail to see that dismantling a body that is already proving to be beneficial to the sector and to the community achieves the Coalition's policy goals of reducing red tape, strengthening the sector and building civil engagement in our organisations.

MS: So, the opening is there now with the referral to the Economics Legislation Committee for an inquiry to present an argument that on a very carefully constructed, rational, cost/benefit basis shows that if you want to get transparent and efficient outcomes you should keep the commission?

DC: It is a fantastic platform, having a Senate inquiry, because it allows people, whether they are individuals or organisations, to make submissions and on the basis of those submissions to appear before the Senate inquiry and to lay out what it is that is important about the ACNC and how it serves their needs or how it doesn't. The more light we can shine on this issue, the brighter we can highlight the dilemma.

In some ways, the ACNC only came into existence because of what some would describe as chronic market failure. The existing regulators were a dog's breakfast of regulators. And yet there was no regulation and no accountability, while an incredible level of compliance and red tape was being imposed on the sector. Previously, if Michael Short and David Crosbie decided to set up a charity and we managed to get it registered and raised $10 million and then we decided we wanted to be a private organisation and transferred that $10 million across to Crosbie and Short Holdings we could have actually done that through ASIC as a procedural issue.

You can no longer do that through the ACNC because you have to provide a justification for the money that you collected being used for the purpose that it was collected for. Regulators that are being established now, for instance, in Ireland have come about because of massive concerns and major scandals about what was happening in the not-for-profit sector. We have not had those major concerns and massive scandals. But it is so useful having a regulator there to head off the need to go through that pain.

MS: You said a moment ago David that the ACNC is helping to make things work better. Can we look at that further? What is the evidence of that?

DC: The evidence is really clear – 3000 new charities have now been registered since the ACNC was established and when you talk to those charities and get feedback from them, the feedback is incredibly positive and the service that they receive from the regulator is far better than the service they received from a similarly costing set of staff based at the Australian Taxation Office.

When you look at having a national register of over 50,000 charities with detailed information about those charities, it is the first time ever we have had that information available to the public. So just in terms of ease of being able to identify and give to a charity, there is a new information source that is readily accessible. If you look at reducing red tape, already South Australia and the ACT have agreed that you won't any longer have to separately qualify for fund-raising. If you are registered with the ACNC it will be accepted that you can do fund-raising in their jurisdiction.

The ACNC is also aligning their registration with other regulators so that we reduce duplication. The Commonwealth Grants Commission has said that if the ACNC collects information from an organisation, then Commonwealth departments have to use the ACNC's information rather than for asking for it again. They are massive steps forward already. If we could actually say to the ACNC, look you have this regulation job in an ongoing way, you have had your trial and you have made steps forward, then we can get all the states aligned around fund-raising and around registration of charities and those kinds of issues and it would be a massive saving.

And the bottom line Michael is if I am representing a charity and I want to get a concession to use a church hall or get a rates concession from my local council or get a payroll tax exemption from the state government or run a fund-raiser in this state or on the internet, I need every state's approval. Or if I want to get funding from a private ancillary fund or I want to get some sort of tax concession from the ATO, if I want to do any of those kinds of things, at the moment I have to establish who I am as an organisation. And how do I do that? At the moment I have to show them copies of letters from the ATO.

With the ACNC, all I have to do is show I am a registered charity and all my details are up there and they are searchable and here's my charity number and here is the website and you can download all the basic information about our organisation. Why would we go back to having to carry a whole range of information about ourselves rather than carrying a passport that is a summary and a testament, our bona fides if you like? Other countries have it.

They have regulators and people can look up the register of charities and find out about you. To not have it just creates multiple regulators, multiple layers of red tape and multiple layers of compliance. It is hardly rocket science.

MS: And as we have been discussing at lunch, it is a very significant sector. I can go through the numbers and you can go through the numbers and we will put them in the story: there are 600,000 registered organisations that generate 5 per cent of gross domestic product and create one in 12 jobs etcetera. It is a very important part of the economy and the community. Why was it in such a mess and why was it in such need of transparency, accountability and efficiency? Why were there these repeated inquiries and calls for change?

DC: Again Michael, that is a fantastic question because you have to wonder how the sector got to the point where it is. The answer is because most parts of the sector were doing well without having to be advocates for the broader sector. The sector had been growing at over 5 per cent a year for more than a decade.

So if you just kept doing good work you could get increases from philanthropy because it was growing by over 5 per cent a year and you could get increased government funding because it was going at over 5 per cent a year. The idea that you had to attend to your longer term future or the regulation impacting on the broader sector or what the projections were for increasing or decreasing income across the sector, these issues were simply not that important to you or your organisation.

The reality since the global financial crisis is that philanthropy has stalled, government income has stalled and the way that the whole charities and not-for-profit sector operated is now being challenged because you can't just go on privately doing good work and each year getting a bit more money to do that work. As a consequence, people have started thinking about the future and thinking about the sector and how it survives.

We currently turnover $100 billion. Will we turnover $200 billion in 2020? And if we do, where will that $200 billion come from? People understand this is a sector that has no forward plan. There is no strategy. There is no blueprint. We are not like so many other industries – tourism, the car industry, agriculture. We do not have a forward plan because we have been growing faster than any other sector, with the possible exception of the mining industry, without having a plan. So we haven't really needed one. I think now we need one.

MS: You mentioned post-GFC, David, and I know that you have been intimately involved in the examination of future financing for the not-for-profit sector. I know that you think that the sector has been punching below its weight, as it were. The rise of social enterprise and impact investing fits very much into this context, doesn't it? Would the continuation of the ACNC help buttress and foster that very interesting coming together of the best of market theory and the best of social change?

DC: One of the other things that the ACNC has done very effectively is become a source of information for the community and for not-for-profits themselves. And they have more than a dozen key guides about how to strengthen the sector.

A lot of the leadership within the charities and not-for-profit sector could best be described as amateur leadership in the sense that it is often local people who have been involved in running organisations and developing corporate strategies. So as a sector starting to embrace a new way of operating and finding new capital, not just relying on increasingly government funding and philanthropy, we need to develop and part of that development is about being better informed, better able to structure our organisations, better able to operate.

The other part is about building greater trust and confidence from the broader community and from potential investors, whether they are superannuation funds or high-wealth individuals or whatever it is. Part of building public trust and confidence in our sector is having transparent information available about what we do.

Good organisations want to be more transparent, they find transparency helps build public trust and confidence. It becomes part of their prospectus, part of their ways of attracting investment. So increasing transparency across the sector will increase the capacity to get investment and it will also strengthen our governance and our organisational leadership because that sort of information and basic guidance is being provided through the ACNC.

MS: It is probably a good time when you are talking about this to talk about the Community Council for Australia. What is its role? You have been there since 2010. And after that perhaps we can tack on the question of "well you might say that mightn't you?". How do you wrap all that up?

DC: I co-chaired a group that was looking at developing a National Compact between the federal government and the not-for-profit sector. Compacts exist all over the world between the not-for-profit sector and governments about how they will treat each other and work with each other constructively.

When we were doing this in Australia we found that really we had no way of connecting across the whole sector. There were no unifying peak bodies or umbrella groups. There was no clear voice, as there is in many other countries. Also we felt the sector needed to be stronger in advocating for itself, and not just as little parts or islands within a sector. So we created the Community Council for Australia and I think there were about 15 founding members.

We tried to do it by amalgamating a few of the existing groups but, as often happens, personal politics and other things got in the way. We looked at getting some government funding and again what happened was that it became a bit difficult. So we decided we needed to put our own money on the table as a sign of our maturity; that we invest in our own peak body as most other industries do.

So we did. We started putting our own money on the table and creating an organisation and it started off very small with just 15 members and income of less than $200,000. It has now got over 60 members and its income has more than doubled and it is still growing quite quickly. Perhaps more importantly, it has started to have an impact as a voice across the sector. It doesn't claim to represent every organisation in the sector or speak for every part of the sector. It is a sector leadership and advocacy group putting forward a view that benefits our community by enhancing the work of the not-for-profit and charities sector.

MS: So an analogous situation might be the Business Council of Australia, which does not necessarily represent every big business or significantly-sized business but is focused on more than just the interests of that sector. It is focused on public policy outcomes that work for the community, partly because of enlightened self-interest. It is the same for your council. They are sort of a mirror, aren't they, in that you can not have prosperous high streets without healthy backstreets? The business council and your council are dealing with high streets and backstreets.

DC: That is a very good analogy. The Business Council of Australia restricts its membership to the top 100 companies. We do not have the same restriction, but I do think CCA has become a council that represents across a sector, advocates for policies that will help the community, focuses on creating regulations that work for rather than against that sector, all so the sector can better serve the community.

In some ways, if you look at the mission statements of the BCA and CCA they would not be too far apart and some of the issues that we address would be very similar. For instance, if you ask the people from small business or big business what is the most important thing government can provide they will often say certainty.

Well, I can tell you that in the not-for-profit sector we would love some certainty, because we're not certain about our regulator and we are not certain about future funding, about our tax concessions and we're not certain about the kind of narrative that this government has for the sector. So I think there are some very good parallels – and some slight nuances.

MS: All those things you were talking about, certainty and outlook and finance, are tied up with the situation at the moment. So dare I ask what you think the likelihood is, now there has been the referral to the committee for inquiry, of the continuation of the ACNC, even perhaps in a reworked or slightly re-engineered structure?

DC: It is really hard for me Michael to envisage not having an ACNC-type of body because it just makes sense. It makes sense for the sector and for the community and for the government. I think the inquiry will again demonstrate that, as have all the previous inquiries.

Anybody looking at the evidence and looking at the structures and the previous market failure and returning to the ATO as the regulator will say that is not an improvement. What I would hope is that we will look at where the ACNC is, how we could strengthen it, how we could grow it, rather than even just keeping it. It is a good first step and I think there are other steps we need to be taking to strengthen the whole charities and not-for-profit sector.

MS: So in other words this inquiry could come out with an opportunity for the government, particularly through Prime Minister Abbott and the relevant minister, Kevin Andrews, to say actually what we have learned allows us to adjust the situation in such a way that it satisfies our desires and provides the optimal outcome for the community, and everybody wins. That now becomes the prospect doesn't it?

DC: I think that is the positive prospect in where we are. There is a prospect to say the ACNC has taken a really good first step, let's build on that. I do not think enough states and territories have come on board with the ACNC and I think one of the things we should be trying to do is leverage where we are with South Australia and the ACT with other jurisdictions.

And maybe we need to look at how we configure things so that can happen. The current situation is still absurd. It still beggars belief that the charities and not-for-profit sector have to operate in a system that seeks to restrain trade and acclivity rather than encourage it. You know, you want to do a fund-raiser and you put something up on the internet and you have to apply to eight governments to do that. Some governments require police checks, some governments require proof of ID.

I had to send a copy of my passport over to someone in Western Australia the other day, for example, because I am on the board of a charity undertaking a national fund-raiser. Ons state requires you to advertise in newspapers in advance of doing anything. And then you have to report to them afterwards. And you have to do that across eight jurisdictions. You talked about the Business Council of Australia previously. If this kind of restraint of trade was happening to any industry group that employed 1 million Australians and turned over $100 billion and we went to government and said "oh please this is absurd" I think they would listen very carefully and respond.

We have been saying that for a decade. COAG has been fiddling around the edges for almost two decades since an inquiry in 1995 asked them to address this issue and nothing has happened. So I do think there is capacity to say what is still wrong with where we are, how can we build on what the ACNC has already achieved and create an even stronger regulatory environment for the sector.

MS: Within that context – and you had mentioned the number of charities that have been registered with the ANC, which is part of the evidence of the robust growth of the sector, the other part being in the dollar numbers and the employment numbers and volunteer numbers etc – do you think that there might be too many charities and not-for-profit organisations and that part of the benefit that the ACNC can bring to the community would be some consolidation and some shared back office and some reduced ratios of admin funding to money delivered on the ground, all of that sort of stuff?

DC: This is where the comparison with the business world falls over a bit because if you or I saw three companies that if we could put them together we would increase profitability by 50 per cent, we could invest in those three companies or develop a merger proposal and create that increased wealth and we would get a share of it and so would all the shareholders and we could actually make a lot of money doing that sort of deals, as happens around the world. Those intermediaries get financially rewarded.

If I go into a community and can see three groups who are all doing work with the same kind of population group and I think they could achieve better outcomes for that group if they worked together, there is no incentive for that to happen at the moment. There are no intermediaries working at that, or very few, in our sector who go around and look at that. So I think there is a case to say you need to be better serving your community and if you can do that by merging and collaborating you need to look at that, but ultimately the real driver of what exists or what doesn't exist in our community is our community.

And a civil society wants both small organisations and big. We know from the research they like the kind of brand-name big charities and are happy to support them, but they also like the small local group which they know the president or the staff member and know the work that they do. They like both big and small organisations and there's nothing to say we should not have both.

It is a bit harder for the middle groups who are not brand names and trying to operate across a larger scale, to get that kind of community support. But local communities do tend to support both local groups and brand-name charities and they are the ones in the strongest position to survive.

I also think there is huge potential through social impact investing to increase the level of capital available to the sector, but we have quite a lot of work to do to bring substantial new capital into our sector and to develop new forms of investment.

MS: You talk with Minister Andrews' office on this sort of stuff. What is your relationship like with the minister? Do you feel that there is a constructive and collaborative open-minded situation that you're part of here? Are you part of what is perhaps a dialectic process but a process which is functioning and functional?

DC: It is really difficult at one level because we disagree. I publicly defend the fact that the minister does talk to the sector, because I think in the past 12 months we have had four meetings with the minister and we have met with his staff probably more frequently across that period, so it's not that we don't get access or they don't listen to what we have to say. They just do not want to hear what we are saying.

It is not consistent with what they want to do. And that makes it difficult, because it's not so much about the relationship as about having different views about what should happen. From our perspective it is also about not having our views respected. We believe Minister Andrews is trying to do the right thing by the sector and we believe his staff are trying to do the right thing by the community. We just have very different views about how that should be done. Of course, our views are not about politics, ideology, or academic arguments, but about trying to do better for our organisations and the communities they serve.

MS: Sorry to interrupt, but you don't have different views about what the outcomes should be in the sense that it should be an effective part of the community and the economy delivering necessary services etcetera. So there seems to be great potential for a coming together, perhaps through this inquiry, in a way that everybody can win here.

DC: I think that is true. I think the agenda of the Coalition government is to strengthen civil society. Our agenda as an organisation is to strengthen civil society, as is the agenda of most civil society organisations. So I do not think there is a difference in what we're trying to achieve or where we're going.

I think there are differences in what that means in practice, and how we implement it and how we achieve it. Some of the initiatives that this government have taken have been a breath of fresh air for us. They got rid of the tax requirements around income-producing activities of charities which were hanging over us.

We had this potential for having to answer questions about any activity that was about raising money or any type of business activity. Even running a car park at the footy on the weekend or running a car wash or something like that could have been seen as running a business and therefore we could have lost our charitable status for that activity.

All the proposals to potentially withdraw tax concessions for income producing activities have been shelved by the then assistant treasurer Arthur Sinodinos. And we appreciate that support. We support the community business partnership that the government are going to establish and we support the creation of a research driven centre of excellence for the sector. So there are many agenda issues where we strongly agree with the government. We just disagree about how you go about regulating the sector and creating an environment of public trust and confidence in the sector.

MS: We are out of time. I want to ask you the final question, but I wish you very well with those discussions and with the outcome because I think it is clearly in the interest of all that the best outcome occurs here. David, the final question to every guest in The Zone is: what is the hardest thing you have ever had to do, with the caveat that it is something you are willing and able to talk about here.

DC: At a professional level, when I was first an advocate and I was in my early 30s, I was representing the alcohol and other drugs sector and I attended the reconciliation convention in Melbourne. It was a very moving experience.

Part of the reconciliation conference was allowing us, the recent arrivals, to apologise to an indigenous person for the harms done and I had apologised. For me I realised that I carried this kind of guilt that I think many of us who are white middle-class lately arrived people in this country feel, this unresolved feeling of not properly dealing with our heritage in this country, and I had personally apologised to an indigenous woman and she had held me while I cried and released my grief. For me it was very emotional and I saw lots of people going through similar things. Then prime minister [John] Howard came and spoke and it was not a great interaction between the crowd and prime minister Howard. I was a bit upset at the time. I couldn't understand why we would not apologise to indigenous Australians.

The next day I had a meeting with prime minister Howard and I had to go in and advocate for the alcohol and drug sector. I had to put aside my views about what should happen with indigenous affairs at the time to deal with the job I was there to do, which was to talk about measures to strengthen the alcohol and drugs sector and reduce drug-related harm. I found it incredibly difficult. It was my first major meeting with the prime minister as an advocate.

Having to put aside my own personal views, my emotions, and focus on my role – I still remember that as being the most difficult advocacy job I ever did. Most of the time when I am an advocate and I am talking to politicians and the community or not-for-profits I can honestly say my values and the work I am doing are aligned. Invariably I believe in what we're doing what I am advocating for, and where we're going.

On that occasion it was the only time I have felt that I was behaving like a sort of superficial advocate who had to put aside my own principles and values. In the long run it benefited the alcohol and other drugs treatment providers and I have to say that prime minister Howard became a supporter and friend to the alcohol and drug treatment sector, but it was a really tough meeting. I still feel the emotions of that time, and it still raises that question about whether you should ever compromise yourself in some way in order to achieve a higher goal.

MS: It is one of those classical philosophical conundrums, isn't it? And I should imagine that experience will stand you in good stead in coming months. David, thank you so much for your time today.

DC: Thank you, Michael.

This story The Zone transcript: David Crosbie first appeared on The Sydney Morning Herald.