In times of need and crisis, charities rely heavily on support from New Zealanders and we are apparently very good at giving. It’s hardly surprising that with around 27,000 registered charities in New Zealand, charities have a huge impact on our communities.
This could be by the donation of time or money, or people benefitting directly or indirectly via a family member, friend, or colleague, from services provided by charities. The diverse nature of the charitable sector makes it interesting in itself - some charities are small and entirely volunteer led - while others run large national or international organisations, with a paid work force.
The Charities Act 2005 (Act) provides the legal framework for these registered charities. Now, changes are afoot for the Act. In June 2022, the Minister for the Community and Voluntary Sector announced a list of proposed changes to improve the operation of the Act.
Of particular interest to charities in tiers 1 to 3 (for financial reporting purposes), is the proposed change that they be required to report the reasons for holding on to accumulated funds (including cash, assets or other resources). The reporting is intended to provide greater clarity on why funds are held rather than spent on the charitable ‘works’ and to improve public trust and confidence in the charitable sector.
For the most part, charities should already be undertaking this type of analysis for themselves. As always, the first and most important thing for a charity to bear in mind is ‘what is our charitable purpose’ closely followed by ‘how are we fulfilling that purpose on a day-to-day basis’. If your charity has not previously had a formal process to consider those questions, now may be a good time to implement such a process. This should then assist you in completing the proposed new reporting requirements regarding accumulated funds.
Other changes proposed include that for smaller charities it is proposed that there may be an exemption from preparing accounts to the level required by the financial reporting standards, instead allowing them to file an annual return with basic financial information (the threshold for charities in the exemption to be fleshed out in the regulations).
Other proposed changes of note can be found in the link https://www.dia.govt.nz/charitiesact.
We understand a draft Bill is intended for this year with public submissions to the Select Committee as part of the process.
If you have any questions in these matters or need any assistance with your charitable obligations, please contact our specialist team at Norris Ward McKinnon.
Fiona Anthony is part of our Corporate & Commercial team at Norris Ward McKinnon.