For many NFPs, it will be extremely difficult - if not impossible - to financially withstand the impact of COVID-19 without substantial government support and regulatory relief. This is the case given NFPs typically have scarce monetary reserves and limited ability to access other sources of capital such as finance.
Increased demand for services, decreased donations, loss of access to volunteers, inability to hold fundraising events and in some cases significant loss of operating revenues are other examples of the difficulties this sector is facing.
We believe directors (many of whom are volunteers) and senior management should be focused on providing services to their vulnerable clients, looking after employees and volunteers, and maintaining relationships with stakeholders.
Over recent weeks, the AICD has been advocating to both federal and state and territory government across a range of issues, including an urgent relief package for the NFP and charities sector. In short, we want comprehensive measures to support their financial sustainability and a clear and nationally consistent regulatory approach.
This article highlights the key issues that governments need to focus on.
To recognise the extreme funding challenges in the sector, the AICD has put a proposal to governments recommending an urgent relief package for the NFP and charities sector to support their financial sustainability. We have suggested that the following issues be addressed:
- Accelerated funding: Bring forward the payment of committed government funding as soon as possible and extend funding commitments for an initial 12 months to give organisations certainty and capacity to address current cash flow constraints. This should be provided at Commonwealth, State and Territory levels.
- Default application of government packages to NFPs: The default position should be that any measures aimed at supporting businesses should automatically apply to NFPs as well. This has not been the starting case in some instances.
- Access to credit: Ensure NFPs and charities have access to credit on favourable terms. Currently, many NFPs and charities will not be able to access credit from banking institutions as they fall outside institutions’ lending guidelines.
- Charitable donations: Additional tax incentives that support charitable giving at this time.
- Government taxes, charges and fees: A 12-month moratorium at all levels of government from all tax liabilities, charges and rental fees (where relevant).
- Additional funding: Additional direct funding being provided to NFPs and charities, building on measures announced to date in broader economic stimulus packages.
Nationally consistent regulatory approach
While the ACNC has addressed certain concerns regarding AGMs and Annual Information Statements, the measures proposed do not apply to charities and NFPs regulated at the State and Territory level.
The AICD is urgently recommending a clear and nationally consistent statement regarding the regulatory approach that the ACNC and all States and Territory regulators will take during the COVID-19 crisis to NFPs and charities (whether they are incorporated associations, co-operatives or companies limited by guarantee). In particular, we have advocated for the following matters to be addressed:
- Insolvent trading safe harbour: While the AICD welcomes the extension of the temporary relief for directors from personal liability for trading while insolvent to charities (enacted as part of the Government’s Coronavirus Economic Response Omnibus Bill 2020), this should also be extended to cover State and Territory regulated incorporated associations.
- Fundraising: A consistent approach to fundraising laws to ensure that red tape is not an obstacle to fundraising, to support the continued existence of many charities. This could include facilitating the use of new online fundraising campaigns by registered charities through a temporary, nationally consistent minimum code of conduct for non-face to face fundraising activities.
- Financial reporting and other regulatory filings: A consistent approach to extensions for submitting financial statements and other regulatory filings (e.g. an additional two months for reporting).
- Holding of annual general meetings: State and Territory regulators clarifying that they will not take action against a charity or NFP if it delays or postpones its AGM because it cannot conduct it safely due to COVID-19. Notably, the ACNC has already provided this comfort to ACNC regulated charities.
Get in touch
The regulatory environment is evolving quickly. The AICD will continue to keep you updated with the latest insights through this time and welcomes your feedback on areas of concern. Please get in touch with the team at email@example.com.
For more COVID-19 information and tools please visit our Resource Hub.
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