1 PROCESS I wanted to take this opportunity to explain a bit about - - PDF document

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PROCESS I wanted to take this opportunity to explain a bit about how we assess charitable purpose. When we assess a charity, whether it is during registration, or during a review of a registered charity, there are two types of law we use. The legislation set by Parliament, the Charities Act, which sets up Charities Services, and the law developed in the courts. As Lesa said, what is charitable under the law is not necessarily what the public mean by the word. In New Zealand the Charities Act contains a definition of what is charitable, and it refers to the court cases, which develop principles deciding what is and what isn’t charitable. This means the definition of charity changes, and Lesa’s description of our housing review is a good example of how we apply the developments in cases to the Register. If you apply, or you are being reviewed, usually because there has been a change, we will first explain what we need to know, and why we need to know it. We try to use plain English, sometimes it can be useful to get a lawyer, but we try to make it easy so you do not have to. Approximately 89% of all charities that apply are eventually

• registered. Many of these are straightforward, but sometimes it can take more than a year
• f working with the group, for example helping an entity to split its non‐charitable purposes

into a separate group. A good example of this is the Sensible Sentencing Group Trust, which was initially declined as a non‐charitable advocacy organisation. We worked with the trust to separate out its advocacy work from its charitable victim support work. Now the Sensible Sentencing Trust does the advocacy work, and is not a registered charity. The Sensible Sentencing Group Trust supports victims, and is a registered charity. 2

Sometimes organisations do not want to change their activities, or split. In these cases, after discussion back and forth, we will take a recommendation to the independent Charities Registration Board for their consideration. The Board must apply the law from the courts, and will consider everything the organisation has told us before making a decision. An example is the recent Rowing New Zealand decision; a change in their rules document highlighted its significant expenditure on elite athletes. As Lesa outlined earlier, the promotion of success in elite athletes is not charitable. It may be a worthy cause to promote

• ur best athletes. However, the charitable public benefit in most sporting organisations is in

the public participation in healthy sport, not the benefit of elite athletes. After a number of exchanges, including suggesting the organisation split its activities, we recommended the Board remove the organisation from the Register and the Board agreed. This decision, as well as all seven Board decisions made in the last year, are available on our website. If an organisation disagrees with the Charities Registration Board’s decisions, it can appeal the decision to the High Court, but we understand this is difficult and expensive for a lot of

• groups. That’s why the Board and Charities Services takes its time working through the

process with entities to try to get it right first time. We understand it is important to protect the integrity of the register and public’s trust in charities by only having charities that meet the charity test on the register, but we try to put the effort in to be adaptable to the needs of applicants and registered charities wherever possible. For example: Because of the new reporting standards, a lot of bigger organisations are struggling with the concept of control of sub‐groups within their organisations, from an accounting perspective. We have recently been working with bigger church bodies directly, so that their component churches can be registered independently. We are happy to be adaptable in registration processes, especially if you represent a big group of charities. If you need some information or don’t know whether you qualify, feel free to give us a call on our information line, or send us an email before you submit an application. I will be available afterwards for any specific questions you have about charitable purpose, or

• ur processes.

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[speaking points] Most of you will know that registered charities are required to report annually to Charities Services. Charities are required to prepare both an annual return, and submit accompanying financial statements, within 6 months after the end of their financial year. You have heard a lot about the new reporting standards. These set out the minimum categories of information that must be included in your charity’s financial statements. The annual return form also asks for key financial information. We want to make it easier for charities by ensuring that the financial questions we ask in the annual return align with the information that charities must report under the new

• standards. This is not the case with the current annual return form.

You may be wondering why we need charities to complete both an annual return and submit financial statements. The annual return process helps populate summary information from the financial statements, plus other information, on the charities register. This information can be viewed on an individual charity’s page on the charities register. It can also be searched across the whole of the register, which allows us and others to find

• ut certain information at a sector‐wide level.

The financial statements cannot be searched in this way as they can only be downloaded from the register as separate pdf files. The new annual return process also has two other important functions – firstly, it will support Charities Services’ ongoing regulatory work. 3

For example, we will ask questions to help identify charities that may have obligations under tax or anti‐money laundering legislation. We will also ask for additional identifying information about officers, including date of birth and home address information. This information will not be publicly available. Secondly, the annual return process will help ensure the overall accuracy and integrity of the information on the charities register. For many charities, the only time they make contact with us is at annual return time. Charities will be asked to confirm that the key information we hold (including, for example, details of officers and contact information for the charity) is accurate and up‐to‐date. The new annual return form has been developed in consultation with a focus group that included representatives of the sector. We strongly encourage charities to complete the new annual return form online. This will be easier for charities, as some of the information will be pre‐populated (saving you time). And there will be useful help boxes and further information online to support charities to complete the new return. Some charities will be testing the new process to ensure that the new format is accessible and easy to use. We appreciate that it will take charities longer to complete the new form. We have thought hard about the information that we ask for in the new form, and have

• nly asked for information that is important for transparency and accountability purposes.

The new annual return form will be available from April 2016, from when charities will be required to report under the new standards. There will be a transition period, so that charities that are not yet required to report under the new standards can still complete the current annual return form. We will keep the sector updated about the introduction of the new annual return form through our regular newsletters. 3

Investigations Over the last few years, we have made a conscious decision to operate in the space where there is significant and wilful serious wrongdoing in the sector. This usually involves:

• Theft/Fraud
• Private benefits
• Gross mismanagement
• Harm to beneficiaries; or
• Reputational risk to the sector

We are focusing on these areas because this is where the greatest harm to the sector lies and where the most damage to public trust and confidence is made. Our investigations are typically complex involving numerous elements, a wide range of people and will often involve working with other government agencies. We aim to remove those engaged in serious wrongdoing from the sector and to let you and the public know who they are. Some recent examples are:

• The Southern Cross Charitable Trust where there was significant conflicts of interest

allowing for private benefits; and

• Ranui Boys Incorporated, an early childhood educator, where the governance was so

poor, it allowed for the charity to be taken over by an individual. That individual then misappropriated large amounts of the charity’s money to fund their personal lifestyle.

• We also deregistered two charities that failed to provide requested information while

under investigation. NRS Compliance 4

We have fielded a number of queries and concerns about how we will encourage, and where necessary enforce compliance with the new reporting standards. This past year in particular, we have taken an engagement approach to assist charities to apply the new reporting standards. Going forward, we will continue to provide support as we do understand that charities will be coming to terms with the new requirements. We do believe that the vast majority of charities will do their best to comply. We will not be coming after charities with the ‘big stick’ for making mistakes or having a misunderstanding around certain obligations. However, significant non‐compliance will be taken seriously, but I do want to be clear that significant non‐compliance means those few charities that deliberately don’t comply with the standards, and in doing so provide false or misleading information in order to facilitate serious wrongdoing. We have a team of experienced investigators who know the difference between those that are doing their best to comply, but are having some issues and those that don’t want to comply. As we start to receive charities’ financials under the new reporting standards, we will be doing a variety of compliance checks, ranging from the basic to the very detailed. We will collect information from these checks in order to help us understand where charities are having issues and where non‐compliance is greatest. Where we have identified risk, those charities will remain on our radar. This information that we obtain will be feedback to charities to inform where they are having difficulties and also help us to focus where more education or assistance is required. 4