The implications of new financial reporting standards on New Zealand charities

This research aims to analyse the impact of new reporting standards on NZ charities. The research specifically focuses on the implications of new reporting standards of charities in areas like transparency, convenience for practitioners and accounting costs under new reporting standards. The research covers transparency aspects by trying to find the difference in truthful and accurate representation of charities in their annual financial reports after the introduction of new standards, compared to when charities were self-regulated under Generally Accepted Accounting Principles. The research also covers the aspect of practitioners’ convenience, by investigating whether new reporting standards made accounting practices for charities easier and clearer, or more complicated. Lastly, research was conducted to ascertain the increase or decrease in accounting cost for charities to comply with new financial reporting standards. The study used qualitative methodology for research. The data was collected through semi-structured interviews to gain in-depth knowledge of the impact of new reporting standards on charities. There were four participants in total, accountants working for different charities. The duration of each interview was approximately 20 minutes, and were conducted at the charity organisation’s premises. The method of analysis used for the research was content analysis. The findings of the research suggest that the new reporting standards and statutory audit requirements have generally increased transparency within the charity sector in New Zealand. On the other hand, accounting costs have gone up for charities, especially Tier 2 and tier 3 charities. Charities that previously complied with IFRS have to face minimal effect on accounting cost. The convenience for practitioners has decreased since smaller charities are finding it difficult to comply with new reporting requirements and preparation of service performance reports which are now part of annual reporting. New financial reporting standards have provided a much-needed reporting structure, especially to Tier 3 and Tier 4 charities. Charities that complied with IFRS for their annual reporting found it easy to make the transition to the new reporting standards. In conclusion, the new reporting standards are a step in a right direction. However charities services need to hold regular workshops in every region for charities in order to provide more awareness about new reporting requirements to help charities through this transition phase. Small charities usually operate on a very limited budged, so templates and training for service performance reporting should be provided these are now a part of annual reports for Tier 3 and Tier 4 charities

Putting our money where their mouth is: alignment of charitable aims with charity investments - tensions in policy and practice

Given the values-driven nature of the mission of most charities, it might be expected that investment behaviour would be similarly values-driven. This paper documents the ethical investment policies and practices of the largest UK charities and explores how these are aligned with the charitable aims, drawing upon accountability, behavioural and managerial perspectives as theoretical lenses. The study employs two distinct research methods: responses to a postal questionnaire and follow-up semi-structured interviews with selected charities. The evidence indicates that a significant minority of large charities do not have a written ethical investment policy. Charities with larger investments, fundraising charities and religious charities were more likely to have a written ethical policy. We suggest that there is a pressing need for improved alignment between charities' aims and their investment practices and better monitoring of investment policies

A critical analysis of the development of the public benefit requirement of charitable purposes under English and Welsh charity law, from Re Compton [1945] 1 Ch 123 to R (Independent School Council) v Charity Commission [2012] Ch 214

The enactment of the Charities Act 2006 in November 2006 introduced the first statutory definition of charity into English and Welsh law. Under the provisions of the Act, charitable status requires that an institution must be established for charitable purposes only and that the charitable purposes must be of public benefit. Although, generally, well received the Charities Act 2006 has been criticised as ‘flawed’ on the public benefit requirement of charitable purposes. The Charities Act 2006 was passed with the principle aim of modernising existing charity law, which was considered outdated and unclear. However, unlike charitable purposes, which are set down within the provisions of the Act, a definition of public benefit is not provided. Section 3(3) of the Charities Act 2006 merely provides that ‘reference to public benefit is a reference to the public benefit as that term is understood for the purposes of the law relating to charities in England and Wales’. This lack of a definition as to what constitutes public benefit and statutory reliance upon the charities’ regulator, the Charity Commission, to interpret and provide guidance on the public benefit requirement for charitable purposes has led to criticism that the Charities Act 2006 has raised as many uncertainties as it sought to clarify. In critically evaluating the impact of the Charities Act 2006, and its successor, the Charities Act 2011, upon English charity law, this assessment places the legal definition of charity within its complex and, at times, vague historical context. Thus, providing an ideal backdrop in which to explore the policy objectives behind the Charities Acts and assess the effectiveness of the Charities Acts in achieving those objectives

Impact of new reporting requirements on local charities in the Waikato region

This study is designed to analyse the impact of new reporting requirements on local charities in the Waikato Region. A charity can be defined as an entity that is established to provide a public benefit. In New Zealand, there are 27,000 registered charity organisations. Prior to 2013, it was not a mandatory requirement for charities to prepare financial statements. There was evidence of a lack of accountability. The Financial Reporting Act, 2013 was introduced to improve transparency in financial reporting of charities. All charities are now required to follow the accounting standards implemented by XRB (External reporting board). XRB divides the charities into four tiers which are based on volume and size of expenses. Due to new reporting requirements, it is difficult for the charities to understand the new requirements. Semi-structured interview was the method chosen for data gathering purposes in this research. Sample size for this interview was three accountants. From findings, one out of three accountants thinks that the new reporting requirements are restrictive in nature, as past reporting requirements were flexible. According to the second accountant, the reporting requirements are positive because they increase the accountability and comparability of charity organisations. All accountants of the charities commented that the new reporting requirements are complex and increased costs. In conclusion it can be said that the amendments of the new reporting requirements are challenging for some charities but these changes are designed to for improve the accountability and transparency of financial reporting of charities in New Zealand

Cross-Border Issues in the Regulation of Charities: Experiences from the UK and Ireland

Drawing on the specific experiences of the three authors across the jurisdictions of England and Wales, Scotland, Northern Ireland, the Republic of Ireland, this article outlines the new legal-regulatory framework for charities in each jurisdiction, providing an overview of their respective treatments of external charities (i.e. non-domestic charities operating in a host jurisdcition) before assessing the operational challenges posted by these regimes for such cross-border charities. It shows that the treatment of external charities across the four jurisdictions in not the product of a fully coordinated and coherent joint approach by the four sets of legislators. The article concludeds by offering some preliminary recommendations intended to address the burdens caused by these overlapping regulatory systems

The impact of new reporting requirements on local charities in the Waikato region

Charities play a significant role in society. Over 27,000 charities work in New Zealand for the welfare of the community. Prior to 2015, there was no mandatory requirements for financial reporting; however, some charities used “the for-profits standards”. But there was evidence of poor accounting standards. Since 2015, there was a significant change in reporting requirements issued by XRB. The main purpose of new reporting standards was to improve transparency, accountability and public trust. The new accounting standards brought more transparency and disclosure of non-financial information. There were a few negative impacts of this new regime as charities had insufficient knowledge about new standards, which resulted in deficient quality of reports. This research seeks to investigate the impacts of new reporting requirements on local charities in the Waikato Region. The method carried out for the research was semi-structured interviews. Under this method the accountants of three different charities in the Waikato Region were interviewed. The findings of the study were arrived at based on the analysis conducted. Some of major findings of the study criticised the new changes as they increased the workload of charities and created other related issues. There were some issues related to revenue recognition, and the outcomes were long term. It was a mixed review by the charities on the effectiveness of the “Charity Services”. The study concluded that the aim of new regime was for increased accountability, which may not have eventuated, as according to the research the charities instead face issues of workload, outcomes and revenue recognition

Australian charities 2013

The Australian Charities 2013 Report reveals that Australian charities employ nearly 1 million people.  Additionally, charities manage around 2 million volunteers. The sector has a combined total income of more than $100 billion, growing by 2 per cent annually since 1990 Over 90 per cent of these are employed by only 10 per cent of charities. Of the charities, 10% account for 90% of the income and jobs and up to 30% may be low income or inactive.  It is a complex sector, in which nearly 70% of charities carry out more than one activity, and the administrative burden is born by 10% of the organisations. &nbsp

Bringing the Provinces Back In: Creating a Federated Canadian Charities Council

Canadian charities need a new regulatory system. Currently, charities are regulated primarily at the federal level by the Canada Revenue Agency (CRA). But because charities, by virtue of the donation tax credit, can reduce the tax base, the CRA’s regulating them conflicts with its mandate to protect the tax base.Canada Revenue Agency (CRA), charities, charitable sector

Bringing Candor to Charitable Solicitations

The American public donates a staggering amount of money to nonprofit charities. These charities routinely solicit and receive money from donors for specific, earmarked purposes. Often, however, charities ignore their obligations to use money for these designated uses. In many circumstances, even a seemingly benign redirection of earmarked gifts for other charitable purposes could constitute fraud and misrepresentation. Breaking the implicit or explicit promise to use money in a designated manner harms donors, charities, and the public. Prospective donors assess the value of charitable donations in a manner similar to the way they value consumer goods and services and can be swayed by false claims. Accordingly, allowing distortions of perceived value misleads donors when they are directing their charity. In light of detailed examinations of charitable-organization spending practices, this Article will propose that charities should adhere to a new, higher level of candor in their public communications. Maintaining a renewed, scrupulous approach to disclosure would, in Chief Justice John Marshall’s parlance in Trustees of Dartmouth College v. Woodward, ensure “that the charity will flow . . . in the channel” that the donors expressly choose

Charities’ new non-financial reporting requirements: preparers’ insights

The purpose of this paper is to obtain insights from preparers on the new Performance Report requirements for New Zealand charities, in particular the non-financial information included in the ‘Entity Information’ section and the ‘Statement of Service Performance’ for Tier 3 and 4 charities. Semi-structured interviews were conducted with 11 interviewees, each involved with governance and reporting of one or more Tier 3 or Tier 4 charities. These interviews were analysed in terms of accountability and legitimacy objectives, which motivated the regulators to introduce the new reporting regime. Key findings are summarised under three themes. Manageability relates to perceptions and suggestions regarding implementation of the new requirements. Scepticism concerns some doubts raised by interviewees regarding the motivations for performance reports and the extent to which they will be used. Effects include concerns about potentially losing good charities and volunteers due to new requirements making their work ‘too hard’, although increased focus on outcomes creates the potential for continuous improvement. The subjectivity that is inherent in thematic analysis is acknowledged and also that multiple themes may sometimes be present in the sentences and paragraphs analysed. We acknowledge too that early viewpoints may change over time. Themes identified may assist regulators, professional bodies and support groups to respond to the views of preparers. Findings will also be of interest to parties in other jurisdictions who are considering the implementation of similar initiatives. This paper provides early insights on new reporting requirements entailing significant changes for New Zealand charities for financial periods beginning on or after April 2015. The focus is on small charities (97% of all New Zealand charities) and key aspects of the Performance Report: Entity information and the Statement of Service Performance.fals