There are more than 27,000 registered charities in New Zealand which are overseen by Charities Services and the Charities Registration Board.
The Charities Board decides whether or not an organisation is qualified to be registered as a charity on the basis of whether it is established and maintained exclusively for "charitable purposes''.
Charitable purposes includes the relief of poverty, the advancement of education or religion, or any other matter beneficial to the community and can include the promotion of amateur sport.
A registered charity may include a non-charitable purpose (for example, advocacy) provided that the non-charitable purpose is "ancillary, secondary, subordinate or incidental'' to the charitable purpose of the organisation.
Registration is important because without it, a charity is not eligible for income tax exemptions or other tax benefits available to charities.
Registration by the Charities Board is certainly not a rubber-stamp exercise. In a recent decision, the Charities Board declined registration to the Foundation for Anti-Aging Research (FAAR) and a related organisation, the Foundation for Reversal of Solid State Hypothermia.
The latter is an organisation that promotes research into "cryopreservation'' and reanimation (freezing dead people until future scientific advances enable them to be brought back to life).
The goals of FAAR are to establish "a facility to accept specimens for the purposes of conducting research aimed at reversing disease, senescence, traumatic injury and de-animation''.
The Charities Board found that the relevant purposes of both organisations were not educational, failed to be a "useful subject of study'' and that their purposes were not of wide enough public benefit to be charitable.
These two organisations appealed to the High Court and then to the Court of Appeal but both appeals were unsuccessful. In September 2015 the Court of Appeal upheld the Charities Board's decision to decline registration.
Charities must file an annual return with Charities Services in order to maintain their registration. This has recently become a bigger task than it previously was with the introduction of new financial reporting standards which took effect from April 1, 2016.
The new financial reporting standards aim to improve the transparency and accountability in the charities sector. They create four tiers which each have different financial reporting requirements.
At the lower end, tier 4 is for charities with annual expenditure of under $125,000 and tier 3 is for charities with annual expenditure of between $125,000 and $2million. At the upper end, tier 1 charities are those with annual expenditure of over $30million.
Charities Services expect that around 95% of registered charities in New Zealand will fall into either tier 3 or 4. From April 1 this year these charities will be required to file a "performance report'' with their annual return.
For tier 4 charities, the performance report will need to include a financial statement prepared on a cash accounting basis. Tier 3 charities will need to use accrual accounting.
Performance reports will also need to include information about the mission or purpose of the charity and the charity's activities during the previous year. Charities that fail to file a performance report with their annual return within six months of their balance date risk being deregistered.
Officers of charities who are not aware of the new reporting standards should read the information on the Charities Service website.
For many smaller charities run entirely by volunteers, operation is becoming increasingly demanding. The impact of the financial reporting standards may lead to some of these charities either winding up or looking to amalgamate with larger charities with similar purposes.
-Stephanie Pettigrew is an associate with Marks & Worth Lawyers Dunedin and specialises in trusts and charities.