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Acting for You, August 2019

Strategy for engaging with regulators

Governance Institute has recently partnered with LexisNexis® to co-author a green paper, ‘Strategy for Engaging with Regulators’. The green paper discusses the findings from a survey of our members and a roundtable discussion of members and other key stakeholders at which the challenges of engaging with regulators in a post banking royal commission environment were debated.

As part of this project, Professor Jason Harris FGIA, The University of Sydney Law School and John Price, Commissioner, Australian Securities and Investments Commission joined me to discuss strategies for engaging with regulators in a 30 minute podcast.

I encourage key stakeholders and other interested parties to participate in this discussion by lodging a submission to the green paper. Submissions are due 28 August 2019. Submissions and feedback will be treated as confidential unless you indicate that you are prepared to have your response made publicly available.

The link to the green paper, the free podcast and the location where you can make your submission is on our website.

Please take a few minutes to give us your views.

ASIC Industry Funding Model: Final CRIS released

As mentioned in our May edition of Acting for You, Governance Institute lodged a submission with ASIC expressing our concerns over the increasing costs for the ASIC funding model for 2018–19 as detailed in the draft Cost Recovery Implementation Statement (CRIS). ASIC sought stakeholder feedback on how ASIC planned to implement the industry funding model and recover both its fees for service and the costs of ASIC’s regulatory activities from each industry sub-sector.

ASIC has now issued its final CRIS for the ASIC funding model for 2018–19.

There are no changes to the amounts which will be charged to ASIC’s regulated population from the draft CRIS.

One issue referred to in our submission which concerned many of our members was the large variation in industry funding model levies for listed entities for the 2017/–2018 year.

The levy for listed corporations will be $4000 plus 39 cents per $10,000 of market capitalisation above $5 million. The maximum levy will be $785, 654 for entities with a market capitalisation of greater than $20 billion.

Unlisted public companies will be charged a flat levy of $96, large proprietaries $352 and small proprietaries will be charged an extra $4 for their annual review fee.

New fees for service commenced on 1 April 2019.

Interestingly ASIC has provided details of their stakeholder engagement and in particular provided a response to concerns raised by stakeholders who lodged submissions (including Governance Institute) to the draft CRIS.

One issue referred to in our submission which concerned many of our members was the large variation in industry funding model levies for listed entities for the 2017/–2018 year.

ASIC has advised that when it prepared the estimated costs for the subsector for the 2017–2018 year it could not predict with certainty the outcome of its focus during 2017–18 to proactively identify and mitigate harms to consumers, investors and markets. Accordingly, the increase in supervision and surveillance costs is attributable in part to an increase in supervision and surveillance activity in relation to listed entities and an increase in reports of misconduct received by ASIC.

Our submission also asked what ASIC was doing with the additional funds allocated to it by Treasury. ASIC’s response was that the additional funding announced in March 2019 will be provided over a four-year period commencing in 2019–20. The budgeted costs in the current CRIS relate to the 2018–19 budget, which is not affected by the additional funding. Future versions of the CRIS will reflect the increased funding once appropriated and the amount that will be recovered in each subsector in the relevant period.

ASIC has not indicated that it will change the model of the industry-funding levy to incorporate a form of risk weighting attached to the market capitalisation metric which we suggested in our submission as a fairer method of apportioning costs. ASIC will however, provide updated information on estimated and actual expenses as part of its efforts towards meeting the principles of transparency and accountability.

Members are advised of the following key events and estimated dates for industry funding:

Key events Estimated dates
ASIC portal open for 2018-19 annual returns July to September 2019
ASIC Corporate Plan for 2019-20 to 2020–23 published August 2019
ASIC Annual Report 2018-19 published October 2019
Legislative instrument with business activity details published December 2019
2019-20 CRIS published by ASIC for consultation  January 2020
Invoices issued for 2018-19  January 2020
Consultation on fees for service Every 3 years from June 2018, or earlier (if there is an unforeseen change or material variance in the cost and revenue)

Governance Institute will continue to keep members updated on this important matter.

ACNC seeks feedback on objective 1 (b) of the ACNC Act

The ACNC has sought feedback on the workable metrics that could capture the objectives listed in object 1 (b) of the Australian Charities and Not-for-Profits Commission Act 2012 (ACNC Act) ie ‘to support and sustain a robust, vibrant, independent and innovative Australian not-for-profit sector.’

Governance Institute is a long-time supporter of the ACNC. Our support is based on ACNC’s constructive presence as a regulator, its effectiveness in raising the accountability and governance standards of charities, and providing the sector with visibility.

In our submission we stated that while there are challenges involved in requiring charities to provide additional information though the Annual Information Statement (to support workable metrics) we would support changes requiring charities to demonstrate their governance practices as we consider that good governance is a key indicator of a vibrant, robust, independent and innovative not-for-profit sector.

Our submission stressed the importance of ACNC continuing to support and sustain a robust, vibrant, independent and innovative not-for-profit sector and acknowledged the significant work which the ACNC undertakes to help charities understand and meet their obligations through information, advice and guidance.

We recommended that the ACNC undertake (and in many instances continue to undertake) the following activities:

  • Providing advice and guidance to the sector
  • Providing education on capability enhancement
  • Encouraging rationalisations and mergers amongst organisations in the sector by making better use of the data on the charities register
  • Supporting reform of fundraising laws
  • Mining the data provided in the AIS to provide helpful information to the sector
  • Collecting feedback from the sector about the challenges organisations are facing and issues not being adequately addressed by the ACNC.

The ACNC is continuing to engage with the sector on this issue and we will continue to keep members updated.

Redtape reduction for charities in the Northern Territory

In good news for charities, from 1 July 2019 registered charities that are also incorporated associations in the Northern Territory will be exempted from lodging annual returns to both ACNC and licensing NT. They will only have to submit an annual return once to the ACNC. This agreement is the latest in a series of measures that ACNC has implemented with state and territory agencies to harmonise duplication of reporting for charities.

Governance Institute has long advocated for this type of red tape reduction and will continue to do so.

Recent advocacy activity

Indicators of object 1 (b) of the ACNC Act — 4 July 2019


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