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Charities in New Zealand

  • June 29, 2020
  • admin
  • Business, Business Featured, Property, Property Featured, Trusts and Succession
  • Comments Off on Charities in New Zealand

Charities play an important role in our society to help the disadvantaged, support specific causes or to advance knowledge. In New Zealand we have more than 27,000 registered charities, with 230,000+ volunteers and 180,000 paid staff. Many of these charities are structured as trusts which can be incorporated and run as a trust board by the trustees.

Others are structured as incorporated societies or companies, or as unincorporated bodies. These types of charities are run by a board with specific obligations and responsibilities.

The Charities Act 2005 (which is currently under review) regulates the Charities Register and sets out the statutory rules relating to registered charities. Those rules include a requirement for registered charities to report, on an annual basis, to Charities Services (a division of the Department of Internal Affairs).

Where a charity is a trust, the Charitable Trusts Act 1957 provides for the trust to be incorporated as a trust board so it is similar to a limited liability company. As an incorporated board, the trust has the advantage of being a corporate entity, so that the trust itself (rather than the trustees in their own names) can buy and sell property, have bank accounts, mortgages and own a variety of assets and investments.

A trustee’s role

Whether a charity is a trust, incorporated society or company, the fundamental duties for trustees or board members remain the same. That is to understand the charitable purpose and to comply with the trust deed or constitution (sometimes called the ‘rules’). The charitable purpose of the trust, society or company should be clearly defined in its trust deed or constitution.

A trustee or board member should have a good understanding of the rules within the trust deed or constitution. These documents act as a roadmap for making decisions on how to advance the purposes of the charity and how the charity is to be operated. For example, a charity established to improve the education of children living in poverty could be advanced by supporting a programme that provides breakfast for children in school. There may be limits on how the charity’s funds may be spent, how many board members need to agree on significant investments, how many meetings will be held a year and how the charity’s assets are managed.

In addition to this, the trustees or board members of a registered charity must comply with the Charities Act 2005, and other applicable legislation such as the Charitable Trusts Act 1957, Incorporated Societies Act 1908 and the Companies Act 1993.

Annual requirements

Every charity that is registered on the Charities Register is required to file an annual return with Charities Services within six months of its balance date. This can be filed online.

There are different levels of financial reporting depending on the charity’s ‘tier’; the tier bands are based on their operating payments or expenses over the last two tax years. All reports must include performance reports which show how a charity’s purpose was advanced.

Tier 1 is for charities with more $30 million in expenses or that are publicly accountable (that is, they hold assets or money on behalf of others). Tier 2 covers charities spending between $2 million and $30 million; Tier 3 is for those with expenses within the $125,000 to $2 million range; and Tier 4 is for charities with expenses under $125,000.

Most New Zealand charities (97%) are able to use either Tier 3 or 4. Tier 1 and 2 charities must complete and file financial reports prepared in accordance with accounting standards. There are different, more simplified, formats for financial reports for Tier 3 and 4 charities. Charities Services www.charities.govt.nz has helpful templates and tutorials to guide charities through the different processes of what needs to be included and how to file the reports.

More for trustees

A less tangible trustee duty is to consider the sustainability of the charity and work towards ensuring its long term viability. Risk management also plays a vital role on a board as trustees must not only consider financial risks, but also other risks such as reputational.

As trustee obligations, responsibilities and reporting requirements evolve, boards should ensure they appoint trustees who offer a variety of skills, knowledge and experience.

A trustee role should not feel onerous but should be viewed as helping your charity to pro-vide its community with benefits for years to come.

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