Proposed code on charity donations is an unnatural disaster

Posted on 28 Jul 2021

By Denis Moriarty

Every now and then in Australia something goes badly wrong for a not-for-profit in full view of the public and a cry goes up for something to be done.

DenisMoriarty_CIC2021_PennyS
Our Community group managing director Denis Moriarty

Australian governments generally react to these calls in one of two ways:

  1. They make a narrowly-focused change to the law that deals with that case and that case only, declining to engage with any general principles. This is why the not-for-profit sector labours under a vast constraining undergrowth of laws, rules and regulations that’s administratively costly, largely ineffective, and almost totally unrelated to its mission.
  2. They rummage in the bottom drawer for a law restricting the activities of the sector – one that they’ve been wanting to pass for a while – and try to attach that to the current brouhaha.

This time round they’re going for the second option.

The original stuff-up came during last bushfire season, when comedian and Instagram celebrity Celeste Barber – a private citizen having nothing to do with any charity – made a passionate call for donations for the victims of the fires. Her appeal went viral and people in Australia and around the world donated an impressive $51 million. So far, so good. However, she specifically asked people to donate to the NSW Rural Fire Service (RFS), a government-funded agency staffed by volunteers, and the RFS doesn’t have any responsibility for people who’ve lost their houses or livelihoods, or koalas with serious burns, or injured wallaby joeys.

The RFS was conscious that most of the people who’d given them money had thought it would be going straight to those victims, and it offered to split the money accordingly. A state court ruled that no, it couldn’t; it had to keep the lot, whether it could find anything to spend it on or not.

The case revealed the lamentable lack of flexibility in Australian fundraising regulation, where what everybody agreed was the right thing to do was made impossible by charities law. In the words of the working group the government set up to address the issue, “The Black Summer bushfires highlighted the loss of trust and confidence in the sector that can eventuate where charities are unable to use donations for the purpose the public intended.”

A sincere effort to fix this problem would certainly have difficulties to overcome. We want donors’ wishes to be heeded, but we don’t want someone who raises money for charity online to be able to spend it exactly as they wish, either. Getting the balance right would take time and effort. This may be why those concerned with reform decided to look at a completely unrelated problem instead, and put up recommendations to fix that.

A federal Treasury group called the Transparency Code Working Group has circulated a consultation paper under the banner “Developing a voluntary code for charities to improve the transparency of charitable donations during natural disasters.” The paper advises burdening the charity sector with a transparency code “designed to ensure charities which become signatories provide the public with a detailed understanding of how and why their donations are being distributed for disaster response activities”.

What has that got to do with the Barber case? The problem wasn’t that the RFS was misleading people about what it did, the problem was that Celeste Barber didn’t really look, and none of the donors looked either. Her intentions were of the best, of course, and she showed just what generosity the Instagram generation is capable of, but social media values immediate expressions of sympathy, not calls to tedious research.

The working group suggests that “signatories to the Transparency Code should publish an appeal intent on their webpage when they become involved in a natural disaster response. The appeal intent should indicate the natural disaster that the charity is responding to and outline the types of activities the charity will support with donated funds.”

How would that have helped during the Black Summer? The RFS didn’t launch an appeal; Celeste Barber did. Even if by some miracle she’d heard about the Transparency Code, she wasn’t a charity herself and couldn’t have signed up to it. Why are we making charities responsible for the flaws of social media influencers?

And why is this only a problem in “declared emergencies” as the consultation paper proposes? What happens if someone raises $50 million for children with cancer, and by mistake channels it all to something like the RFS that can’t use it? Not everything is about bushfires. (If that did happen, it would probably see the government respond by asking charities to make bi-weekly reports on their photocopying budget).

In any case, what the working group is asking for is that any charity having something to do with an emergency should take on itself a cartload of new reporting.

The new Transparency Code says these charities should tell the public

  • the name of the natural disaster in question
  • a link to the fundraising appeal
  • a summary of the charity’s role in the recovery process
  • amount of donations received to date
  • donations received since the last report
  • funds distributed to date, split by response activity, with relevant context
  • funds committed to future response activities, with relevant context
  • funds not yet committed, with relevant context
  • spending on administration costs.

The charity should make these reports quarterly for the next two years, or if possible more often. Well, you’ll have no trouble fitting that into your diary, with all the spare time you have at work.

What’s more, the working group suggests that charities should not only say what they will do with any money coming in but also what they won’t do with it: “Importantly, our trust deed does not allow us to use donations for grants, spend on rebuilding community infrastructure or redistribute donations to other charities.”

This is frankly bizarre. Just as an exercise, try writing down a short account of everything in the universe that you’re not going to do tomorrow morning. Write on both sides of the paper if you have to.

The saving grace of the Working Group’s proposals is that all this extra work is to be purely voluntary, presumably because any move to make it compulsory would have to pass the Senate. To make a submission and add your voice to the debate anyway, visit the Treasury website here.

Denis Moriarty is group managing director of OurCommunity.com.au, a social enterprise helping Australia's 600,000 not-for-profits.

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