Self-Regulation and the Not-for-Profit Sector

Abstract:     
This paper examines the notion of self-regulation and whether, and how, it can be applied to the Not-for-Profit (NFP) sector in Australia in the context of the Victorian Government's 2007 review of NFP regulation undertaken by the State Services Authority. The focus of this review is on NFPs that perform services for government or are in receipt of government grants. The paper argues that effective, efficient and legitimate government regulation will encourage, enable, and enforce open self-regulation by entities and sectors wherever possible. 'Open self-regulation' is the situation where an entity or sector regulates itself in a way that also achieves democratically defined objectives or standards and is open to public accountability.

Part 1 of the paper points that all individuals, organizations, and sectors regulate themselves, whether formally or informally, to some extent. The issues are whether they do so in a way that is open and responsive to democratically defined objectives and community values or not, and to what extent governments should seek to shape and influence the way they self-regulate. This part of the paper summarises the notion of open self-regulation as a policy goal, and its advantages and disadvantages.

Part 2 provides a brief overview of the principles by which government can encourage, enable and enforce open self-regulation in practice by reference to various examples used in different sectors and areas of regulation in Australia. It shows that there is movement in a range of areas of government regulation towards seeking to catalyse open self-regulation at the entity and sector level rather than relying solely on command and control regulation.

Part 3 argues that the principles of open self-regulation are equally if not more applicable to the NFP sector as to the commercial sector. It goes on to set out some ideas as to regulatory mechanisms that governments might use to encourage and enforce open self-regulation in that sector including the need for principle-based regulation and for harmonisation and consistency of regulation of NFPs to enable meta-regulation, and the possibilities of a responsive multi-track regulatory approach to NFPs with different capacities for open self-regulation, the setting and monitoring of standards for self-regulation processes and the opportunity for government to help build skills and capacity for open self-regulation in the sector.

Keywords: regulation, charities, self-regulation, not-for-profit

JEL Classifications: K20, L30

Working Paper Series