Exploring the Review of the Charities Act 06 Feb 2019 Post by: Steven Moe
A review of the Charities Act 2005 (the “Act”) has been talked about for many years. Originally an intention was expressed that a review happen a few years after the Act had been implemented in order to work out what needed changing. In fact, 13 years have passed without such a review. Some might also argue that if you look at the history of the Act itself that it was rushed through and originally needed more time to work out what it was aiming to achieve and so now a “first principles” review is really what is needed. Whatever the history and reason for delay, a review is now under way.
Before the Charities Act
Prior to 2005 there was no formal registration of charities and therefore no list that could be referred to. The Act introduced such a system, although registration is not compulsory. Therefore, we need to distinguish between charities and “registered charities”, as some charities are not registered. Furthermore, there are many not for profits doing good and yet they would not qualify as charities.
There are also reporting obligations for charities. Since new reporting standards were introduced a few years ago there are four reporting tiers, each of which have different standards to meet:
- Tier 1: Over $30 million annual expenses (less than 1% of all charities);
- Tier 2: Under $30 annual expenses (6% of all charities);
- Tier 3: Under $2 million annual expenses (36% of all charities); and
- Tier 4: Under $125,000 annual expenses (58% of all charities).
The statistics on the percentage of charities in each tier comes from the latest annual report from Charities Services for the period 1 July 2017 to 30 June 2018 (https://www.charities.govt.nz/assets/Resources/2018-Annual-Review-Report).
That report also notes that Charities Services received 1,087 applications in that period (815 approved, 268 withdrawn, 4 declined). In the same period 1,069 were deregistered (506 for failure to file returns, 563 voluntarily). These figures do explain why the total charities on the Charities Services site seems to hover around the 27,000 mark at present because as new ones are approved, a similar number are deregistered.
Reasoning behind the review
In the Terms of Reference of the Charities review, the rationale for it was set out as follows and this provides some context:
“Stakeholders in the charitable sector have sought a review of the Act for a number of years. The Government agrees that it is timely to review whether the Act is working effectively for the charitable sector, volunteers, our communities (including Māori) and the wider public, the Government, and others with an interest.
“The review will take into account the experiences of stakeholders over the last 13 years, and lessons from other jurisdictions …
“The purpose of the review is to ensure that the Act is effective and fit for purpose. This comprehensive legislative review will focus on substantive issues arising under the Act, while recognising and building on the Act’s strengths.”
The scope of the review
The review does not go back to first principles. A review of that sort would be costly and time consuming. Rather, policy statements have made it clear that the fundamental aspects of the Act, such as a registration system and public access to information about charities, are sound. The Act is ‘fit for purpose,’ hence the review is about refining the Act and how it works in practices, rather than completely overhauling it.
Specifically, the scope of the review focuses on “substantive policy matters,” as set out in Appendix One of the Terms of Reference. This considers whether additional purposes of the Act itself are necessary; matters of refinement and editing of regulatory framework; registration related content; the obligations of individuals working on the boards and in senior management positions of registered charities and the interrelationship of the Act with other legislation such as the Incorporated Societies Act 1908 and how they all align.
Operational issues are not going to be included in the review
If you are interested in more detail then we suggest you look at the Department of Internal Affairs website which is devoted to the review and has extensive material (accessed here).
Who will carry out the review?
Six external experts, representing a diverse range of backgrounds, experiences and cultures, consulted by the Department of Internal Affairs will be involved in the review of the Act.
They are - Sue Barker (Director of Sue Barker Charities Law); Charmaine Brown (Director of Creating Success and Trustee of Autism Intervention Trust); Donna Flavell (Chief Executive Officer of Te Whakakitenga o Waikato Incorporated and Trustee of Waikato Raupatu Lands Trust); Anaru Fraser (General Manager of Hui E! Community Aotearoa); Everdina Fuli (Research Advisor at Te Whare Wānanga o Aotearoa); and Dave Henderson (former positions include Chair of Kidney Health New Zealand and External Relations Manager for Hui E! Community Aotearoa).
When the review will occur
Originally planned for at the end of 2018, the consultation will now occur in March and April of this year. Input from the charity sector, stakeholders and the general public is invited and will provide information crucial to the review. During the consultation, there will be community meetings and hui, held throughout the country, where people can give feedback and ask questions to learn more about the review process and the charity laws of New Zealand.