Light-handed charity regulation: its effect on reporting practice in New Zealand

Internationally, there has been a steady increase in the number of countries instigating charity regulation. While the Charity Commission for England and Wales was established by the Charitable Trusts Acts of 1853, since 2005 the Office of the Scottish Charity Regulator, Charity Commission for Northern Ireland and the Singaporean Charity Council were established almost contemporaneously with New Zealand’s Charities Commission. In other countries (such as Canada and the United States) tax authorities register and monitor charitable activity leading to a perception that charities need regulation if the donating public's trust and confidence is to increase. Public interest theory suggests that regulation increases organisational transparency through reducing information asymmetry, protects (or encourages) a competitive market, leading to a distribution of resources which is in the public interest (Gaffikin, 2005). While these arguments are commonly used to call for regulation in the private (for profit) sphere, nonetheless they may explain the increase in the number of bodies regulating charities internationally. Notwithstanding a need for regulation, the cost of complying with these regimes is often an issue, especially for small and medium-sized charities and therefore regulator tend to take a light-handed approach to small and medium charities' information provision (for example, Hind, 2011; Morgan, 2010a). Responding to the call by Hyndman and McDonnell (2009) for research into charities regulation, its rationale and operation, this paper ascertains the impact of a light-handed enforcement regime on small and medium charities' reporting. In so doing, it analyses the General Purpose Financial Reporting (GPFR) practices of a selection of 300 small and medium-sized charities registered with the New Zealand Charities Commission against the Charities Act requirements and hence the rationale for this regulator. It uses this analysis to predict how the regulator's activities might impact future reporting practices of charities

The Annual General Meeting as an Accountability Mechanism

This review of Annual General Meetings (AGMs) as they evolved historically in English parishes and early joint-stock companies shows the manner in which they provided valuable opportunities to fulfil organisational accountability. AGMs enabled members to call elected governors to account and, in generating forums for organisational construction, supplied models which were foundational in early company law. As faceto- face meetings, AGMs were heterogeneous and presented non-financial information to augment publicly available financial information. Whilst low attendance at AGMs indicates apathy and modern technological advances may enable their replacement, recent calls to revise the legal requirement for an AGM have not gained traction. This paper therefore suggests a recommitment to the process of AGM accountability as practised in early public sector and profit-oriented organisations. This will enable today’s organisations to utilise the potential of the AGM as a formal and transparent mechanism to deliver accountability

Has sector neutrality had its day?

The article reports on the not-for-profit organizations (NFP) issues towards the proposed changes to financial reporting rules in New Zealand. The authors mention that these issues, include the definition of public accountability and the proposed abandonment of sector neutrality. They add that there are no statutory requirements for NFP to be audited, despite many organizations are requested to by their constitutions

Right Place, Right Time Commission: Call to Action

Report of the NHS Providers Commission on delayed transfers of care. The report examines the evidence for best practice in transfers of care across physical and mental health

An Ethnographic Study of Annual General Meetings in Not-for-Profit Organisations

Purpose: Accountability has been described as an institutional social practice to encourage stewardship reflection and as such it is a process that can be observed and reported upon. This paper describes observations of an accountability event, the Annual General Meeting (AGM), which has been largely absent from the literature. The method and results of empirical research as to how accountability was discharged in not-for-profit AGMs is provided. Methodology/Approach: The research utilised a critical ethnographic methodology to explore community-specific accountability. Findings: Sensemaking was identified as an important function of the meeting and accountability processes. Further, accountability was enhanced when not-for-profit entities adhered to foundational rules, provided opportunities for sensemaking, and was seen to be characterised by organisational transparency. Research limitations: This was a pilot study undertaken to develop the observation and coding model. Future research would include expanding this tool into AGMs of other organisational types. Originality: AGMs are required of many organisations, but they have seldom been researched. This paper provides an insight into the characteristics of sensemaking within meeting behaviours, and insights into the role of governors and organisational members in the discharge of accountability

Hegemony, Stakeholder Salience and the Construction of Accountability in the Charity Sector

This research reviews the manner in which accountability may be better constructed in the Charities Sector with detailed stakeholder analysis. This combines the adoption of Hayes’ (1996) four types of accountability by charities with a hegemonic application of the Mitchell, Agle, and Wood (1997) model of stakeholder salience. In applying these tools to a particular transgression event, it is demonstrated that the lower salience of beneficiaries of a charitable activity in crisis is due to their lack of coercive power through a lack of knowledge. This study illustrates the dynamic, myriad and heterogeneous nature of stakeholders in the not-for-profit sector

Small GAAP: a large jump for the IASB

In the last fifteen years, many national standard setters have introduced differential reporting for small and medium enterprises (SMEs). Internationally, SMEs are a diverse and dynamic group which are described under broad characteristics in different countries. SMEs are not issuers or public sector entities and therefore frequently the qualitative criteria of not being publicly accountable may define these entities. Acceptance and imposition of International Accounting Standards (IASs) has reignited the debate on differential reporting, especially since the International Accounting Standards Board (IASB) issued a discussion document in June 2004 on SME reporting. It is apparent the majority of national standard setters support an IASB-generated alternative reporting regime for SMEs, citing that IFRS developed specifically for listed entities are not relevant for SMEs. Benefits would include lower compliance costs for reporters who would face reduced disclosure due to simplified presentation. This would encourage continuing compliance to the IAS regime thus benefiting users when SMEs produce comparable financial information. It is the objective of this paper to provide a review of the diversity in jurisdictional approaches to resolve these issues. This includes a discussion of the two approaches: the ‘top-down’ or the ‘bottom-up’ approach, with examples of each. This research has been motivated by the absence in academic literature of sufficient studies examining the underlying issues fundamental to redefining the balance between the accountability and decision-usefulness functions of general purpose financial reporting. To achieve this objective, this paper considers relevant academic and practitioner literature before undertaking an analysis of the issues this literature raises. Unique SME factors, including close-knit agency relationships, and a tendency to aim for survival and stability over profit maximisation and growth suggest a distinctly different focus to the IASB conceptual framework is required. The prevalence of an unsubstantiated view that SMEs are ‘small entities on the way to becoming large entities’ overshadows the argument on whether and how SMEs should be offered relief from highly technical IAS. Some countries have regulation for SMEs already or are developing a Best Practice Guide for their SMEs. Exemptions may be based on a public accountability test (as in Canada), but Finland finds the Canadian example ‘too vague’ and New Zealand’s sector-neutral stance made the application of this definition too broad. The IASB may limit definition to broad qualitative and quantitative SME boundaries in its struggle to provide a useful suite of SME accounting standards to nation states. Managing different worldviews and the demands of both preparers and users who are unused to lobbying at a high level, will be challenging for the IASB. Although the IASB originally aimed for a single set of conceptually robust SME standards, they must revisit the specific stewardship focus of SME reporting to gain traction in this project. The SME debate appears as a crucible in which the resolution of such tensions may in time be resolved

Differentiated regulation: the case of charities

The increasing number and influence of charities in the economy, allegations and evidence of fraud and mismanagement, and the need for information to inform policy, are all reasons for the establishment of charity regulators. Public interest and public choice provide underlying theories explaining charity regulation which aims to increase public trust and confidence in charities (and thus increases philanthropy), and to limit tax benefits to specific organisations and donors. Disclosure-based regulatory regimes are a common model for charities regulation in many jurisdictions. Nevertheless, these can be resource intensive for the regulator and regulated charities, and growing pressure on government budgets requires efficiencies to be found. This paper proposes regulation differentiated according to charities’ main resource providers. This could reduce cost and increase the regulator’s effectiveness through focusing effort. In addition, this differentiation segments charity types according to the theories that explain why these organisations form and operate. We demonstrate the feasibility of such segmentation by use of cluster analysis of data on New Zealand registered charities and show which charities could benefit from differentiated regulation