In April of this year the Ministry of Economic Development released a discussion paper titled “Auditing and Assurance for Larger Registered Charities”. The purpose of the paper is to seek submissions regarding the need for audit and assurance of the larger registered charities’ financial statements.
For anyone interested in the subject the closing date for submissions is 20 July 2012 and the paper is available from med.govt.nz.
Regardless on views regarding whether the accounts of larger, or any, registered charities should be audited, the paper makes interesting reading for anyone with an interest in the charitable sector.
Perhaps not entirely for the obvious reasons around transparency and accountability, but more because of the story behind the numbers.
Less than 95% of New Zealand’s registered charities have expenditure of $2 million or more. By contrast 35% have total expenditure of less than $10,000. These figures highlight the large number of registered charities that have limited funds with which to carry out their objects. These charities are required to provide financial statements as part of the annual return required to maintain registration. However, these returns are not required to be audited, and the Ministry of Economic Development (since merged into the new Ministry of Business Inovation and Employment) believes this appropriate due to the financial burden auditing would impose.
A different question though, is, how good are these charities? If the charity is too small to be able to afford professional advice and assistance, unless freely given, are these charities able to carry out their objects effectively and efficiently? Is it possible that higher barriers to registration would result in a smaller number of more effective and efficient charities?
New Zealand has 1 registered charity for every 176 people. By contrast this figure is 1 for every 300 in the United States, 1 for every 344 in the United Kingdom, 1 for every 435 in Canada and in Australia 1 for every 470 people. However, note that where possible these figures are based on registered charities and there are other figures available for Australia that suggest there could be as many as 1 charity in total (including registered and un-registered) for every 38 people in Australia.
What these figures indicate is that New Zealanders’ love affair with trusts seems to be mirrored with charities. Although not all charities are trusts (just over half of the registered charities are societies) arguably the same facility that has lead to New Zealanders’ adoption of trusts also applies with societies.
The concern remains, are the founders of these organisations, of which there are so many, able to aquit their responsibilities adequately, or would the charitable sector and the ultimate beneficiaries be better served by a smaller number of better funded and operated charities?