New law demands greater accountability from large charities

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Community and Voluntary Sector Minister Priyanca Radhakrishnan (INL Photo)

Venkat Raman
Auckland, June 4, 2022

Charitable Societies and similar organisations that have large, accumulated funds will be obliged to be more transparent and explain how such monies came into their accounts as the government introduces new legislation to Parliament shortly.

Community and Voluntary Sector Minister Priyanca Radhakrishnan has since long believed that the country’s Charities Act needs to be modernised to reflect the changing needs of communities and address the inherent inadequacies. However, the review of the Act was undertaken by the Department of Internal Affairs.

The new law will increase the transparency of the charitable institutions while at the same time, reducing the burden on smaller charities, she said.

Access to the services of the Justice Ministry and other law enforcement authorities will also become easier, she added.

“The changes will include reduced reporting requirements for very small charities, increased transparency on accumulated funds and a more accessible tribunal for charities that want to appeal decisions. There are about 28,000 registered charities that contribute greatly to New Zealand society, we want to ensure that our legislative settings are fit for them to continue supporting our communities into the future,” Ms Radhakrishnan said.

According to her, the role of charities came under the spotlight since the country was hit by Covid-19 two years ago. The new legislation will bring about substantial changes to support these organisations and ensure the retention of public trust and confidence in the charities sector.

Ms Radhakrishnan said that very small charities will have the benefit of relaxed conditions of financial reporting requirements.

Accumulated funds need explanation

“This will free up resources to allow volunteers to spend more time focused on communities and doing the work about which they are passionate. The changes will lead to greater transparency from larger charities with annual operating expenses over $140,000, requiring them to declare and explain any accumulated major funds such as cash, assets or other resources. Many of New Zealand’s largest charities have significant unexplained accumulated funds. It is important they are transparent about the reasons for holding on to a large quantity of funds, including donations, Transparency builds trust, and the public need to be able to trust charities responsible with their tax-free income” she said.

The government has allocated $1.7 million in its Budget 2022 to charities to appeal to a wide range of decisions. Appeals to significant decisions will be made to an expanded Taxation Review Authority instead of the High Court, in response to calls from the sector to make the process less expensive and time-consuming.

“The new appeals process will improve access to justice by allowing charities to self-represent and have more relaxed rules of evidence, while the timeframe for lodging an appeal will be extended from 20 days to two months. I want to make it easier and less costly for charities to appeal decisions,” Ms Radhakrishnan said.

“It is important that our system does not just work for those who have the resources to navigate it. The same service and the same access must be available to everyone,” she added.

Ms Radhakrishnan said that a Bill will be tabled in Parliament later this year seeking amendments to the Charities Act. The public will have an opportunity to provide their views through the Select Committee process.

The Charities Act Amendment Bill will mark the completion of a significant phase of work.

After taking action on immediate changes, the Minister will consider a process to address more fundamental issues raised in the review.

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