Australia update: Charities in the Spotlight, the Big 4 Banks and MPs’ “Entitlements”

Australian charity governance in the spotlight - ACG Australia updateOur latest review of corporate governance developments in Australia places charities in the spotlight, following another scandal involving underpayment of so-called “chuggers” (street collectors or “charity muggers”), checks progress in the banking sector since the parliamentary review and comments on the expenses furore that has led to the resignation of the health minister. By Malcolm Sealy, Australia Correspondent.


THE CHARITIES INDUSTRY IS BIG BUSINESS

We know where charity begins but where does it end ?  This is the question being raised through a series of revelations which are not of the prettiest.  Australia is rightly renowned for its community spirit – be it for bush fire-fighting or a multitude of local, national and international charity fund-raising efforts.   The 2014 Charities Report calculated total income at $103 billion broken down as follows:- $54.5 billion from income and revenue; $42 billion from government grants and $8 billion is from other donations and bequests/legacies.

Concern over governance by the Charities, the method of collection and administrative costs has been highlighted in the media.   Most kind-hearted donors probably think that their money goes directly to the charity for distribution – but this would be naive.  Taking into account TV media adverts, call-centre unsolicited ‘phone calls, mail-outs and the ever-present “chugger’ (charity mugger) near the shopping malls, the funds raised must come at a considerable cost.

As this cost comes at a price it has attracted the attention of a number of national and international direct marketing organisations.  Appco – a branch of Cobra International – is in the news for under-paying its collecting staff – not so much under-paying as using them as charity-fodder.  They are often recruited as self-employed contractors and are paid on a percentage of the money they raise.

It turns out that most Charities – Australian and international – use their services along with other direct merchandisers.  Their reaction is that they are not responsible for the governance of firms they employ.  However,  this is a weak “at a distance” argument and there are signs that some Charities are beginning to re-think the morality of this arm’s length attitude.  But, as the charities concentrate on maximising income it is easy to forget the methods in use.

The Fair Work Ombudsman is reviewing the activities of charities and charity collectors  – this being part of a national inquiry into the not-for-profit business sector.  The Ombudsman warned against calling a worker a “contractor” as it would not be a defence against under-payment of genuine employees.

This comes at a time when Appco is reported to be facing a very expensive class action in the sum of at least $80 million deriving from claims of underpaying its work force by defining them as contractors and not employees.

Adding to this general questioning of charity-raising means, are allegations of breach of duty by the top managers of the RSL.  The Returned Servicemen’s League may be likened to the British Legion in that, apart from providing care for military veterans it organises the annual Remembrance Poppy Appeal.  Allegations, as yet unproven, of ‘consulting fees’ have resulted in the resignation of the State President and this has caused a great deal of concern nationally – that is putting it mildly – as the RSL is at the heart of Australia’s military history and culture.

THE BIG 4 AUSTRALIAN BANKS

Since the Parliamentary Inquiry finished, there has been, what can only be described as gentle rumblings in this area although it is clear that there are changes to ‘vertical integration’ afoot.  The reasons for this probably derive from the Wells Fargo publicity plus the fact that the ‘Wealth Sector’ is no longer producing the profits of a few years back.

Last year National Australia Bank sold 80% of its Life Assurance business to Nippon Life  and ANZ has signalled the divestment of life assurance, financial advice and investment businesses – the CEO is reported as wanting to make a cultural shift and that there is no need for the Bank to manufacture life and investment products.

Whilst there is political pressure in the air, most financial commentators see the reduction in promoting wealth products as a response to the internal financial pressures of cross-selling.  It is noticeable that an increasing amount of TV direct selling of Life and Funeral Insurance is developing.

ENTITLEMENTS

But what has taken the heat off the Banks is the public shaming of one Federal Cabinet Minister for over-cooking her expense claims – and resignation – followed by an announcement of a review of all MPs ‘entitlements’ as the one individual excess has raised public ire and looks likely to trap more in the net.

The Prime Minister, Malcolm Turnbull, has announced that he will overhaul the parliamentary entitlements system by establishing a new independent body to oversee MPs’ expense claims.  It is said to be akin to the system in the UK.

On Friday Turnbull also promised improved transparency with monthly disclosure of parliamentarians’ expenses in a searchable format.

The reforms come on top of the announcement on Tuesday by the Acting Special Minister of State, Kelly O’Dwyer, that the government would implement all 36 recommendations from last year’s review of the expenses system, including clarifying what constitutes “official business”.

It is fascinating how the word entitlements as opposed to expenses is applied to Politicians and Public Servants.  It has the ring of something superior to genuine expenses as though the use of taxpayers’ money should be less accountable.  One might have thought that the elected representatives and their staff should be setting a good example and able to self-regulate in the public interest.

So we are back to Juvenal and quis custodiet quis custodes   and we shall observe the review members – the guardians of the guardians – of the new independent body with interest.

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