The Federal Government is consulting on a voluntary ‘Transparency Code’ for the Australian Charity sector in relation to funds received from the public for natural disasters (such as the ‘Black Summer’ bushfires in late Dec 2019 and early 2020). A key issue is a mismatch between the expectations of donors around how their funds would be used and the obligations of the charities to use funds in line with their charitable purpose (and the extent they are consumed in administration costs). Submissions are due 13 August 2021.

See below for further details.

[Tax Month – July 2021]

 


 

The Australian charity sector has historically played a key role in times of natural disaster. Charities deliver programs that support individuals and communities in need, both in the immediate aftermath of disasters and in medium and long-term recovery phases.

These activities are funded by the generous support of the Australian public, who recognise the sector’s key role in recovery efforts and donate to fund crucial activities. This support is underpinned by the public’s trust and confidence that their donations are funding critical recovery activities. Transparent communication from charities to the public around the use of donated funds is vital to providing this assurance and supporting public understanding of the disaster recovery process.

The Government has tasked a working group of charity representatives (the Australian Red Cross, BlazeAid, the Minderoo Foundation and RSPCA Australia) and Treasury officials to consider the merits of developing a voluntary code to improve the transparency of the use of charitable donations during natural disasters (the Transparency Code), and to develop its key features. The Transparency Code will provide charities which choose to become signatories with a framework for transparent reporting of disaster recovery fundraising and activities.

In developing early thinking on the Transparency Code, the working group has identified five features that it considers will be key to ensuring the Code is an effective solution to improving transparency. This paper seeks your views on these features, which will be used to shape the final proposal presented to Government.

Why improved transparency is needed

During the Black Summer bushfires of 2019-20, the public generously donated more than $640 million for charities’ relief and recovery efforts.

However, early into the recovery process it became evident that there was a mismatch between the expectations of donors around how their funds would be used and the obligations of the charities to use funds in line with their charitable purpose. It also became clear that there was a gap between donor expectations around the speed with which funds should be distributed and the challenges charities face in ensuring funds are used to support people in genuine need through both the immediate and long term impacts of a natural disaster, whilst operating in an uncertain environment.

Key features of a Transparency Code

The working group has identified five potential features of the Transparency Code that will be key to achieving the objectives outlined above. These features are as follows:

  1. The Transparency Code will require that signatories publish an appeal intent outlining how donated funds will be used in response to the natural disaster.
  2. The Transparency Code will prescribe specific information for signatories to report.
  3. The Transparency Code will set out minimum reporting frequencies for signatories to meet.
  4. The Transparency Code will be voluntary and target charities involved in the response to a natural disaster and in receipt of substantial public donations.
  5. The Commonwealth will facilitate but not administer or enforce the Transparency Code, with compliance driven by signatories.

Consolidated list of consultation questions

  1. Would an appeal intent similar to the example provide sufficient information for donors? What additional information should be included?
  2. Do you think the reporting elements proposed are appropriate?
  3. Is there additional information that should be reported under the Transparency Code?
  4. Would your charity have the capability to publish the proposed reporting content during a natural disaster?
  5. Should administration costs be included in the Transparency Code? Do you have suggestions for what should be included in the definition of administration costs?
  6. Do you consider the quarterly minimum reporting will meet donors’ expectations of transparency? Would you suggest a different approach?
  7. Should there be an expectation that charities who receive donations in excess of $3 million from a disaster specific appeal should be a signatory to the Transparency Code?
  8. Are there sufficient incentives for charities involved in disaster responses to adopt the Transparency Code voluntarily?
  9. Do you see any risk with allowing signatories to self-regulate compliance with the Transparency Code?
  10. Is there anything further you think the working group should take into account in developing a proposal for the Transparency Code?

Conclusion

The voluntary nature of the Transparency Code means that charities can choose to comply based on the benefits of enhanced trust. Given these benefits are likely largest for those charities heavily involved in response activities and receiving substantial amounts of donations, this will target the administrative burden to those charities with the greatest capacity to absorb it. Given that reporting will be published on individual charity websites, there will be no need for charities to develop new IT systems. Importantly this will allow for swift implementation.

SUBMISSIONS are due by 13 August 2021

[Treasury website: Information Page, Consultation Paper; LTN 135, 16/7/21]

 

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