Update newsletter: September / October 2011
Charities Commission to be disestablished, functions transferred
Cabinet has confirmed a plan to disestablish the Charities Commission, and transfer its core functions to the Department of Internal Affairs (DIA).
A three person statutory board will be established with decision-making powers concerning registration and de-registration functions. The aim is for the changes to come into effect in the middle of 2012.
Details are yet to be confirmed, but the Commission is working with DIA to ensure the transition is as smooth as possible, and that any impact on charities and the public is minimised.
Charities should continue to comply with the Charities Act, and will be kept informed as more detail becomes known.
For more, see the Minister's announcement and the Crown Entities Reform Bill disestablishing the Commission, which was introduced to the House on 29 September, and had its first reading on 4 October. The Bill has now been referred to the Government Administration Committee.
Return to top
Can you set up a charity to benefit only one person, or a family / whanau?
The Commission has recently received a number of applications for registration from organisations whose rules and activities show they will benefit only one person, or that they are likely to benefit only a very small number of people (and because of the way they are worded, would exclude anyone else).
A recent example is where a group decided to apply to register as a charity so they could fundraise to pay a particular person's medical bills.
However, one of the requirements for being "charitable" is that a charity must provide a "public benefit" – that is, the benefit they provide must be available to the general public, or (at least) an appreciable section of the public.
As an example, an organisation set up to provide support and assistance to the sufferers of a rare disease will be charitable, even if there are only a few people who actually suffer from that disease. This is because the charity is open to benefitting all sufferers of that condition regardless of how many there might be.
However, an organisation set up to benefit an individual, or named people (even if they were the only sufferers of the same rare disease in New Zealand) would be unlikely to provide sufficient public benefit, because they would not be based on inclusive and objective criteria, and would exclude anyone else who might develop the disease.
For more, see our information sheet Guidance on the 'public benefit' test
Return to top
Annual Meeting – you're invited!
Mark your diary!
The Charities Commission's 2011 Annual Meeting will be held:
Wednesday 30 November
Salvation Army Citadel (92 Vivian Street)
Representatives of charities are welcome to attend.
The meeting will be addressed by three invited speakers:
- David Hanna – Wesley Community Action
- Theresa Gattung – Eva Doucas Charitable Trust and Wellington SPCA
- Chris Clarke – World Vision
We will send invitations (including an RSVP) to registered charities closer to the time, and look forward to seeing you there.
Return to top
Online (fundraising) traders – the good, the bad, and the
Many charities raise funds by advertising and selling goods online, and there are also many individuals who sell goods and advertise that all or part of the proceeds will go "to charity".
However, some sellers are often not very clear about which charity (or charities) they are fundraising for, how they will pass on the money they raise, what proportion of funds raised will be passed on to charity, and what will happen to the funds.
Some traders do make it clear though, by spelling out:
- the name of the charity they are fundraising for
- an explanation of what the charity does, and how the funds raised will be used
- details of the charity's registration number (so buyers can look up the charity's details on the Charities Register, and be assured it is registered)
- details of the dollar amount or percentage of funds raised that will be donated to the charity
Here are some examples of good fundraising disclosure that you might like to use or refer on to your online fundraisers:
Return to top
Keep your rules simple and relevant
Sometimes, the Commission's registration team receives applications that include rules that give the governing body of the organisation many unnecessary or inappropriate powers or duties.
We suggest keeping the rules of your charity as simple and relevant as possible, and making sure they are focussed on exactly what your charity does.
If you employ a professional advisor (such as a lawyer) to draft your charity's rules, be specific in your instructions to them, and ask them to ensure that the rules document:
- has a legal name that is not misleading or offensive and
- has exclusively charitable purposes that fall within one of the four purposes set out in section 5(1) of the Charities Act and which provide a public benefit and
- does not have powers clauses which would allow the organisation to undertake non-charitable activities and
- is not carried on for the private financial benefit or profit of an individual and
- restricts distributions on winding up to charitable purposes.
You should also ask them to be sure that the rules do not include any additional powers that are inappropriate for charities or governors of charities.
It's also wise to ask them to include clauses which define what a "conflict of interest" is and which explain what to do if a conflict arises.
You might also like to look at the Commission's information sheets Rules and the Charities Act, Helpful tips for writing rules and our examples of acceptable "plain language" wording for purpose clauses:
There is also very helpful guidance and a sample trust deed template on the CommunityNet website.
Return to top
Plain language alternatives for legal jargon
If you are writing or updating your charity's rules, and want to make sure they are as simple and easy to understand as possible, you might find this free downloadable booklet – Unravelling legal jargon – helpful.
It suggests plain language alternatives for commonly-used legal terms – for example:
|Use ||Instead of |
|treat as, consider ||deem |
|put off, delay ||defer |
|death ||demise |
|appoint, show ||designate |
|stop ||desist |
Return to top
"We need two signatures, so we can't pay our Annual Return fee online." Oh yes you can!
The Commission's education advisor, Carol Cunningham, is always looking for ways to make compliance easier for charities. After hearing from a number of people that they couldn't pay their Annual Return fee to the Commission online because they need more than one signature to authorise the payment, Carol decided she'd better find out more.
After a spot of surfing, internet style, and a few phone calls, Carol found that the major banks offer 'multiple authorisation' for online banking payments. This means that one person can set up the payment online and then let others know that they can log in and authorise the payment. As long as signatories have access to the internet, there is no need for them to 'meet in the supermarket car park after work' to sign cheques so that the charity's bills can be paid. After a quick email, txt or phone call to let them know that a payment needs their authorisation, they can log in and complete the transaction.
As well as learning more about online banking, Carol also discovered that some banks have very good educational resources on their websites. Examples include resources explaining how to write a customer questionnaire and how to develop a marketing plan. While these are mostly aimed at profit making businesses they are also relevant to many not-for-profit businesses such as charities.
Carol suggests that you take a look at your bank's website to see what they can offer your charity – free accounts, easy to manage online banking, training, funding information, funding and more.
At least one bank is offering Trustee Governance training courses specifically for trustees and Carol would like to hear from anyone who has received training from their bank. You can contact her on firstname.lastname@example.org
Return to top
Financial reporting standards for charities
Commerce Minister the Hon. Simon Power has announced proposals to simplify the financial reporting framework for small and medium-sized businesses and registered charities.
The Charities Act doesn't specify any accounting standards for charities, although charities may be bound by other legislation or their own rules to comply with particular accounting standards. When the new reporting framework is agreed for registered charities (likely to be from 2014, although charities can opt-in earlier if they wish), it will become the new standard for filing Annual Returns and financial statements.
Following the Minister's announcement, the External Reporting Board (XRB) has released a Position Paper and two Consultation Papers outlining the proposals for a new Accounting Standards Framework.
It proposes three main tiers of reporting that would apply to charities:
|Tier ||Threshold |
|1 ||Expenses over $30 million |
|2 ||Expenses between $2 million and $30 million |
|3 || |
- Expenses under $2 million
- A cash sub-tier for Not-for-Profit Public Benefit Entities with operating payments under $40,000
What basis of reporting is proposed for each tier?
|Tier ||Proposed reporting basis |
|1 ||NZ Public Benefit Entity (PBE) Accounting Standards. Based on International Public. Sector Accounting Standards (IPSAS) but modified as appropriate for the NZ context and for Not for Profits (NFPs) |
|2 ||NZ PBE Accounting Standards as for Tier 1, but with reduced disclosure requirements |
|3 || |
- Simple format reporting based on accrual accounting
- Simple format accounting for NFPs with expenses under $40,000, based on cash accounting
The position paper says that a significant number of registered charities will be required to prepare General Purpose Financial Reporting (GPFR) for the first time once the legislative changes comes into force (this is expected to be sometime after 2014).
This will be a substantial change for many charities, and planning for the transition to the new accounting standards framework is expected to take this into account.
The closing date for submissions on the Consultation Papers is 16 December 2011. Submissions should be emailed to email@example.com
The XRB plans to run seminars in Auckland, Hamilton, Wellington and Christchurch in early November 2011 to outline its proposals and discuss them with interested parties from all sectors. Arrangements for these seminars will be posted on the XRB website closer to the dates.
For more, please read the news release and papers published by the Minister and the External Reporting Board:
Return to top
Requests to withhold information from the Charities Register
We have revised our information sheet Restricting public access to your information on the Charities Register, which has been published in our information sheet library.
The Commission is required by s.24 of the Charities Act to publish registered charities' financial statements on the Charities Register.
The Commission can only make an exception to the requirement to publish charities' information if it can be proved that withholding the information is in the public interest (a legal test, as set out in s.25 of the Charities Act).
The "withholding" provisions in the Charities Act don't make any distinction between charities that seek funds from the public and those which don't, for example, or between those that generate income from service provision or from investment.
Other facts that have no bearing on whether financial information can be restricted in the public interest include:
- the size of an entity's asset base (large or small)
- whether a charity's funds are subject to investment guidelines and/or independent review by another body or other individuals
- whether other entities which are not registered need to publish their information
- whether more people are likely to contact the charity
If the Commission does not agree to your request to withhold information, you may decide to change your request so that only part of the information is restricted. In all cases, however, you should provide evidence to support your claim that withholding the information will be in the public benefit.
Return to top
2011 general election – guidance for charities
If your organisation undertakes political activities, you should read the Commission's two new information sheets - Political purposes - General guidance and Political Activities and registration under the Charities Act 2005.
General guidance on political purposes explains the legal definition of "political purposes", whether charitable entities can undertake political activities, and how the Commission decides whether an organisation has a non-charitable political purpose.
Political activities and registration under the Charities Act 2005 raises issues that charitable entities should take into account when considering whether to get involved in political activities and it provides examples of political activities that may affect charitable status and those that are unlikely to affect charitable status.
Return to top
Inland Revenue Alert – donations that aren't true gifts
Inland Revenue has published a "Revenue Alert" highlighting their concerns that some people are claiming tax credits for "donations" where there may not have been a true gift of money to a charity. A "donation" means that the giver has no expectation of receiving anything in return.
The arrangements that have come to Inland Revenue's attention generally involve smaller, locally-based charities, and typically involve a payment being made in the expectation that the donor would receive something in return.
Any payment of over $5 to a charity can potentially qualify for a donations tax credit if it is a gift. To be a gift it must:
- be made voluntarily
- provide a material benefit to the recipient without imposing a countervailing detriment (that is, there must be no reciprocal obligation on the part of the charity receiving the payment)
- be for no consideration (that is, the giver must receive nothing in return)
- provide no material benefit or advantage to the giver in return.
You may wish to read Inland Revenue's Revenue Alert, to be sure that your charity is complying with tax laws, and (if your charity is also a donee organisation) that your donors are able to claim tax credits when they make donations or gifts.
For more information about donee organisations, see: http://www.ird.govt.nz/non-profit/np-donee/
Return to top
Multi-year grants now permitted for gaming societies
The Minister of Internal Affairs, the Hon Nathan Guy, has announced that Gaming Societies will be allowed to make multi-year grants from 15 September.
Until that date, non-casino gaming machine (for example, pokie machine) societies could only make annual grants to the community.
The Gambling (Class 4 Net Proceeds) Regulations 2004 have been amended so that societies can make commitments in-principle to multi-year grants.
Commitments can only be in-principle because societies must still comply with the Gambling Act 2003 before grants can be made.
There are currently 50 gaming machine societies operating in commercial venues, and in 2010/11 they raised around $250 million for community purposes.
The Department of Internal Affairs will provide further information to gaming machine societies and to community groups that are potential grant recipients.
Return to top
Techsoup – support for earthquake-affected charities
TechSoup New Zealand provides donated and discounted technology products and services from companies such as Microsoft, Symantec and Xero to eligible New Zealand charities.
Organisations directly affected by the Christchurch earthquakes, or working directly with earthquake-affected individuals, families and communities may be eligible for a special donation to help rebuild.
Find out more about how Microsoft and TechSoup New Zealand are supporting Christchurch earthquake affected organisations.
Return to top
Emergency procedures vital
How will your charity stay in operation in the event of a disaster? How will you access information about your staff and volunteers, your beneficiaries, and your supplies and assets, in order to maintain continuity and keep operating?
The Health and Safety in Employment Act 1992 requires all employers to plan for an emergency situation. Employers must have emergency procedures in place and ensure that employees know these procedures.
A lesson learned from the earthquakes in Canterbury has been the importance of keeping electronic and hardcopy backup files of essential information. Workplaces became inaccessible and organisations that didn't have staff contact details were unable to check their immediate safety and wellbeing. In many cases, organisations were unable to resume normal work because essential data was lost.
The Department of Labour and the Environmental Protection Authority have designed a set of simple forms to help you identify and manage your emergency procedures.
Their emergency procedures for general workplaces templates cover:
- Chemical spills
- LPG gas leaks
- First Aid
- Natural Disasters
You can download and print as many templates as you need, and together with your staff and volunteers, work out the most appropriate procedures and who should have responsibilities for them.
You must also ensure that all staff and volunteers know about your emergency procedures, including where you will keep relevant information, and where emergency equipment is stored.
Return to top
The Department of Internal Affairs administers the Community Internship Programme (CIP), which funds hapū, iwi or community groups with identified development needs to employ skilled professionals from the public, iwi, private or community sectors as interns for three to six months.
The programme is designed to achieve specific capacity-building outcomes for host hapū, iwi or community organisations, and relationship-building outcomes between the public, private, iwi or community sectors.
The programme focuses on skill-sharing and the exchange of knowledge between sectors, while building ongoing relationships which continue after an internship ends.
Return to top
Calling all new charity trustees – questions you might like to ask yourself
With more than 25,500 charities, and around 131,000 currently registered officers listed on the Charities Register, there are plenty of diverse and interesting opportunities for contributing to the governance of a charity.
There is a wealth of online information available to anyone considering becoming a trustee of a charity (including the links on the Charities Commission website, and our Officer kit), but before you agree to take on a role, you might like to ask yourself some questions, to help you make your decision.
Trustees are ultimately responsible for everything a charity does, and can be held legally accountable for the decisions they make. If you are considering becoming a trustee of a charity, make sure you understand the possible risks and liabilities and to do some homework before accepting a role.
Here is some guidance and suggested questions that trustees should ask before accepting a role:
- Be clear about the rules and responsibilities you are taking on – who makes what decisions? Where does the decision-making power lie – with the chief executive or the board?
- What is the organisation's leadership style? Is the chair a team player? Do the chief executive work and board work constructively together?
- What is the charity's strategic direction and objectives? Is there a plan in place? Who drives it?
- What are the charities' resources? What are its liabilities?
- What are the training and induction processes for new trustees?
- Every charity has a governance document containing rules for trustees. Make sure you see this at the outset, as it is your duty to comply with these rules and you may be held responsible if you don't. Charities' rules are published on their summary page on the Charities Register
- What are the time commitments expected? Every charity will have different expectations.
- Remember, you will need to put the organisation first if there is a crisis or urgent need. As a trustee, it is your duty to put the charity before other commitments – are all the other board members also committed to this?
- Understand who the charity's beneficiaries are, as this is where your organisation's loyalty should lie.
- Be very careful about collective decisions made by the board. If you do not agree with a decision, you must register your disagreement in the minutes. If you are not at a meeting, read the minutes and make sure you have your say.
There are some benefits in being a trustee, and for many people it can be a life changing experience or the route to different career path. However, any new trustee should also do their homework and be aware of the challenges and opportunities first.
Return to top
TV recycling programme
The Ministry for the Environment is working on a programme to increase the recovery and recycling of old cathode-ray tube televisions, now that many people are replacing them with more modern flat-panel screens.
As part of this programme, it has learned that many charitable second-hand shops are struggling to dispose safely of unwanted televisions donated by households.
It has released a tender asking for expressions of interest from organisations that can provide services for collection, recovery and recycling, and programmes to educate and raise awareness and branding, marketing and promotion of the programme.
The Ministry will be contacting the national offices of charities that run second-hand shops, to encourage them to collaborate with other organisations to arrange for the safe disposal of old cathode-ray tube televisions.
Return to top