Tuesday 18 September 2012

7. NZ's Religious Charities

 If you think the information on this blog is useful, please click on the advertisements on this webpage (at the right) before you leave.  If you really like the blog you can click multiple times!  Every ad click – which earns me about 14 cents - helps pay for the late night coffees I went through writing it and is much appreciated J .  You can also check out the CharityWatchNZ contents page if you want quick access to all my charity blog topics.  

Why look into religious charities?

Entities which have “advancing religion” as a purpose will generally be entitled to register as a charity in New Zealand.  According to UK case law, the validity or value of the religion itself is not relevant, however it is essential that the proposed purpose reflect a belief in a supernatural being and there is an expression of belief in that supreme being through worship.

The interpretation of whether an entity meets the religious definition isn’t always easy.  The Church of Scientology is a good example – New Zealand has registered it as a religious charity whereas the charities regulator in England and Wales found that it was not charitable because members did not worship a supreme being and it was not established for the public benefit.   Wikipedia reports that the Church of Scientology has received full recognition as a religious charity in the US, Italy, South Africa, Australia, Sweden, NZ, Portugal and Spain, however some countries, mostly in Europe, regard it as a potentially dangerous cult or have not considered that it meets the criteria for being considered a religion-supporting organisation.

Unlike the situation in New Zealand, where religious charities have no special treatment under the Charities Act, the new Australian charities and not-for-profits legislation has provided basic religious charities with significant exemptions. They will be exempted from complying with governance standards, they will not need to file annual financial reports, and the Commissioner will have no power to suspend or remove their directors or trustees.  The rationale for this is to reduce the financial reporting burden for churches and to recognise that church governance is unique with respect to the different structures of churches.  The term “basic religious charities” is restricted to those charities whose purpose is solely the advancement of religion.  In addition, it will not include religious charities which receive grants from government agencies above $100,000 in a year, or charities which have deductible gift recipient status for tax purposes, and the charities cannot be body corporates or incorporated associations.

With such a focus on religious charities occurring across the Tasman, and the variety of  definition interpretations as demonstrated by the Church of Scientology example, can the New Zealand charities register provide any interesting insight into religious charities?   

Summary

Out of the 25,279 registered NZ charities, 28% (7,189) are involved with religion in some way.  This means they either have a religious activity (4,736), a religious beneficiary (5,797), they operate in a sector that involves religion (6,011) or a combination of these factors. 

6,324 of the religious charities have filed at least one return with the regulator.  This can be broken down into 20 groups, 3,939 trusts, 129 companies, and most of the balance of 2,236 are incorporated and unincorporated associations.  

The financial contribution of religious charities is significant, with gross income of $3b, assets of $15b and accumulated funds of $11b.  In these three categories the largest religious charities are The Salvation Army New Zealand Group, Seventh Day Adventist Church in New Zealand, The Selwyn Foundation Group (retirement care), Roman Catholic Diocese of Auckland Group and Dilworth Trust Board (funders of Dilworth school).

In their most recent returns the religious charities recorded $654m donation income and $498m government grant income (which includes $33m of government grants to Maori Television Services because it recorded religious groups as a beneficiary). 

Based on the names of the charities, there are approximately 158 Samoan religious charities on the register, 52 Korean religious charities, 33 Chinese religious charities and 13 Islamic charities.  Prisoners are beneficiaries of at least 26 religious charities on the register.

A high proportion of religious charities have had their financial details withheld by the regulator in the past, although the number has sharply decreased in the most recent year.

There are 19 religious charities which appear to be merely conduits, passing 100% of their donation income on to other entities in the year of receipt.

The 129 companies which are religious charities are involved with a variety of business activities including technology research and development, property investment, orchards, retail, paint supply and joinery to name just a few.  There are two religious nominee companies on the register.

Financial details for well known churches such as Destiny Church (with assets totalling $11m) and the Church of Scientology (with assets totalling $12m) are available on the register.  The latter involves one entity, whereas the former involves at least 11 separate charities and some related party transactions.

Approximately 24% of religious charities carry out some of their purposes overseas (1,520/6,324). 732 paid grants overseas totalling $95m in the most recent year.

Conclusion

The charities register shines a light into the financial aspects of the significant religious sector in NZ which we never had access to before. 

Although the regulator appears to have tightened-up its criteria for withholding financial details of religious charities over the last four years, there is still some opaqueness due to poor (minimalist and unaudited) financial accounts and grouping provisions. 

Unfortunately it is often difficult to fully understand the nature and extent of religious activities being conducted, because the financial accounts and the charity returns seldom explain what activities are being carried on.  This is especially frustrating when the charities are in business, make no or minimal distributions, are part of complex structures, have related-party transactions, pay relatively high salaries and are controlled by a small number of individuals.

Overall it was pleasantly surprising to find out how large and diverse the religious charities were.  And despite looking closely for unusual activities which may have pushed the boundary of what ‘religion’ might be considered to be, nothing stood out during this review. 

______________________________________________

The Details

Religious charity aggregate totals

The financial accounts for the 6,324 religious charities, based on their most recent returns, can be aggregated to show the following totals on the register.  For the purpose of this analysis, the University of Auckland and the Manukau Institute of Technology have been excluded from the totals.  Even though they identified that one of their activities is to provide religious services (Auckland University) and that one of their sectors is religious activity (MIT), this is a minor part of their overall activities.  If  they are included they dominate several categories including government grant income, total land, total assets and total accumulated funds.

$654m total donations income: The largest are the Church of Jesus Christ of Latter-Day Saints $32m, the Salvation Army $31m, and the National Assistance Fund $29m

$498m total government grant income: The largest are The Salvation Army $48m, Maori television services $33m (which indicated that a beneficiary is religious groups), Presbyterian Support Central $32m and Sisters of Mercy Ministries New Zealand $29m.

$3.0b total gross income:  The largest are The Salvation Army New Zealand Group $156m, Seventh Day Adventist Church in New Zealand (1&2) $112m and The Selwyn Foundation Group $82m.

$95m total grants paid overseas and $246m total grants paid in NZ: The largest overseas grant payers are World Vision $39m, The Evangelical Alliance Relief Fund $8m, the Salvation Army $3m and the NZ Rotary Clubs $3m (which indicated that one of its sectors is religious activity).   The largest NZ grant payers are National Assistance Fund $30m, McAuley Trust $16m, ASB Community Trust Charitable Purposes Limited $14m (which indicated that one of its beneficiaries are religious groups).

$296m total net surplus ($437m gross surplus for 3,772 charities, $141m gross deficit for 2,209 charities): The largest surpluses are The Selwyn Foundation Group $42m, The Tindall Foundation $27m, and the Salvation Army $22m.  The largest deficits are The Roman Catholic Diocese of Christchurch Diocesan Trust ($13m), Laidlaw College Incorporated ($13m), McAuley Trust ($10m).

$2.8b total land: The largest land owners are Roman Catholic Diocese of Auckland Group $368m, The Roman Catholic Archdiocese Of Wellington $92m,  (Anglican) Diocese of Christchurch $75m and McAuley Trust $64m.

$4.9b total investments: The religious charities with the largest investments are Central Lakes Trust $334m (which indicated that both its beneficiaries and sectors involve religion), Dilworth Trust Board $330m, and Saint John's College Trust Board $245m.

$15b total assets: The largest asset owners are Roman Catholic Diocese of Auckland Group $791m, the Salvation Army $475m and Dilworth Trust Board $393m.

$11b total accumulated funds: The religious charities with the highest accumulated funds are  Roman Catholic Diocese of Auckland Group $695m, the Salvation Army $426m and Dilworth Trust Board $391m.

Charities with religious activity recorded as their only activity

If the definition of religious charities was restricted to just those charities which recorded “Provides religious services / activities” as their one and only activity, the number of religious charity filers reduces from 6,324 to just 793.

22 of these charities received government grants totalling $1.8m, with the largest being Seventh Day Adventist Church in New Zealand ($879m). 

706 of these charities recorded donation income totalling $105m, with the largest being Seventh Day Adventist Church in New Zealand ($12m), C.L.C Auckland Trust Board ($10m) and (Anglican) Diocese of Christchurch ($6m).

Total accumulated funds were $575m, with the largest being (Anglican) Diocese of Christchurch ($161m), The New Zealand Anglican Church Pension Fund ($95m) and Seventh Day Adventist Church in New Zealand ($43m).

Using charity names to identify similar purposes

It can be difficult to extract specific information about such a large population of charities.  However filtering words in their names can provide an interesting, but not always complete, insight.  Here are some examples:

Samoa – 158 religious charities have ‘Samoa” in their name.  They received donation income of $16.3m, paid total grants of $1.8m (of which $1.1m was paid outside NZ, including $589k by the Samoa Tsunami 2009 Appeal Charitable Trust) and controlled assets of $124.7m.  These charities estimated that they had 1,911 volunteers, 125 full time and 29 part time employees.  Salary expense totalled $2.4m.

Cook Islands – 10 religious charities have ‘Cook Islands” in their name.  They received donation income of $185k, paid total grants of $1,000 (all within NZ) and controlled assets of $3.9m.  These charities estimated that they had 99 volunteers, 3 full time and 4 part time employees.  Salary expense totalled $133k.

Korea – 51 religious charities have ‘Korea” in their name.  They received donation income of $6.4m, paid total grants of $193k (of which $61k was paid outside NZ) and controlled assets of $20.6m.  These charities estimated that they had 597 volunteers, 50 full time and 24 part time employees.  Salary expense totalled $1.6m.

China – 33 religious charities have ‘China” in their name.  They received donation income of $3.9m, paid total grants of $123k (of which $25k was paid outside NZ) and controlled assets of $23.3m.  These charities estimated that they had 552 volunteers, 28 full time and 21 part time employees.  Salary expense totalled $1.5m.

Islam – 13 religious charities have ‘Islam” in their name.  They received donation income of $390k, paid total grants of $324k (all of which was paid in NZ), controlled assets of $16.6m and had accumulated funds of $11.5m.  These charities estimated that they had 70 volunteers, 9 full time and 3 part time employees.  Salary expense totalled $312k.

Society of St Vincent de Paul - 19 religious charities have ‘St Vincent de Paul” in their name.  They received donation income of $388k, paid total grants of $1.4m ($20k of which was paid overseas), controlled assets of $14.9m and had accumulated funds of $8.1m.  These charities estimated that they had 1,093 volunteers, 50 full time and 30 part time employees.  Salary expense totalled $1.2m.

Prisoners: 26 religious charities have ‘prisoners’ in their name or listed as one of their beneficiaries.  They received donation income of $1.3m, paid total grants of $500k ($25k of which was paid overseas), controlled assets of $5.7m and had accumulated funds of $2.4m.  These charities estimated that they had 2,550 volunteers, 77 full time and 67 part time employees.  Salary expense totalled $3.9m.  Two of the 26 charities had gross income above $1m - Prison Chaplaincy Service Of Aotearoa New Zealand Charitable Trust Board ($2.2m) and The Prisoners' Aid and Rehabilitation Society of the Auckland District Incorporated ($1.2m).

Restricted Information

There were a number of religious charities which came to my attention during this research that had part, or all, of their financial accounts restricted from public view by the regulator for unspecified reasons.  Here are two examples, both controlled by Ian and Wendy Kuperus. Ian Kuperus owns firm Tax Management New Zealand and has been cited in recent media articles as an Auckland entrepreneur and philanthropist.

The Wilberforce 21 Trust is an Auckland charity settled by Ian and Wendy Kuperus in 2007 for a wide range of charitable purposes with its main sector being religious activities.  It has approved Inland Revenue donee status.

The trust had all financial accounts withheld from public view apart from the year ending 31/12/10.  In that year the trust disclosed gross income of $7.7m of which $7.6m was donation income, grants paid in NZ of $1.3m, a surplus of $6.4m, total assets of $9.7m, and total accumulated funds of $9.7m.  Assets included $6.8m loan advances (to unspecified parties) and $2.5m shares in Terminator Holdings Ltd which is owned by Ian and Wendy Kuperus, Angus Robson, Elizabeth Keane and “Equipement Technologie” based in Luxemburg.  The special purpose, unaudited financial accounts did not include any related party disclosures. 

The Carpe Diem Trust is an Auckland charity also settled by Ian and Wendy Kuperus in 2009.  It also has a wide range of charitable purposes including religion although its main activity is social services.  One key difference between this and the Wilberforce 21 Trust is that the Carpe Diem Trust sends 90% of its funds overseas to Africa, Antarctica, Asia, Europe, North America, Oceania and South America.  It does not have approved Inland Revenue donee status.

The trust had all financial accounts withheld from public view apart from the year ending 31/03/11.  In that year the trust disclosed gross income of $58,706 of which $58,328 was donation income, grants paid outside NZ of $157,529, a deficit of $98,913, total assets of $57, and total accumulated funds of $57.  The special purpose, unaudited financial accounts did not include any related party disclosures. 

Conduit religious charities

There are 19 religious charities which made grants that exactly totalled the amount of donations they received.  The largest were:

·         The Leprosy Mission New Zealand Incorporated: $2.7m was received in donations.  It paid grants of $48,705 in NZ and the balance of $2,651,423 was paid overseas.
·         Leadership Development International received $630,480 in donations.  It paid grants of $71,497 in NZ and the balance of $558,983 was paid overseas to over 20 different organisations.
·         The Atlas Foundation, which is controlled by the NZ rich-lister Friedland family members.  It received donations of $100,000 in 2011 (and $150,000 in 2012) and paid them out as grants in NZ in the year they were received.  There is no information about who paid or received the money and the trust deed has broad charitable purposes.

Corporate religious charities

129 religious charities are limited liability companies. Here are some specific examples to get a flavour of the type of companies on the register.  In some cases the extent of religious activity is not obvious, especially when their ultimate shareholders are individuals as opposed to a religious organisation.

Digital Sensing Limited: This Albany company received a $178k grant and paid salaries of $266k to 2 full time and 1 part time employee to develop technology to combat disease and promote the Christian faith. The shareholders are Andrew Haynes, Ashleigh Haynes and Feilding Properties Ltd (a registered charity with one shareholder – Wesley Garratt).

Building Futures Limited: This Christchurch company is in the business of property investment with the intention of distributing surpluses to charitable purposes.  The accounts show a $254k streamside villa held for resale was sold in 2011 for a $3,541 loss.  No distributions were made to charity. The shareholders are Paul Costley and Barrie Woods.

Kennedy Road Investments Limited: This Auckland company has an orchard business on a $1.7m property and a $1.9m loan.  One director is the director of the NZ Baptist Savings and Development Society.  The shareholders are BSDS Strategic Trust and The Baptist Union of NZ (both being registered charities).

Musgroves Limited:  This Christchurch company founded in 1942 provides a retail outlet for recycled building materials.  It made a $289k net surplus and accumulated funds were $1m as at 30 June 2011.  The notes to the accounts indicate that donations were mainly made to Rhema Broadcasting Group as sponsorship of programmes on Shine TV but the amounts are not specified.  The return shows the charity made grants totalling $22,262.  The shareholder is Recycle Kingdom Investment Trust, a registered charity settled by George and Joyce Vickers in 2006.

Gaynor Charitable Nominees Ltd (Lower Hutt) and Barat Nominees Ltd (Auckland) are two nominee companies on the register which have stated they conduct religious activities.  They have accumulated funds of $1.3m and $10.3m respectively.  The Barat Nominees Ltd financial accounts were withheld in 2009 and 2010 and in 2011 they were not provided, so it is not possible to see who controls it, what its activities are or who its 2011 grants of $166,738 were paid to. Gaynor Charitable Nominees Ltd does disclose who its $102,800 grants were paid to, however it also appears to have related party transactions such as a $1m investment in a Gaynor Dally partnership.

Colourworks Paint Supplies Limited:  This Tauranga company had all financial accounts withheld apart from the year ended 31 December 2010 when it disclosed gross income of $6.3m, surplus of $319,833, assets of $4.1m and accumulated funds of $870,848.  It made grants totalling $11,500 which went to World Vision and the Breast Cancer Research Trust.  The Constitution includes a statement of (religious) doctrine and a shareholder must relinquish shares if he is unable or unwilling to reaffirm his belief in the statement of doctrine.  The shareholders are Carolyn and Dennis Carson who are also directors along with Lloyd Brewerton (see Colourform Joinery Limited, below).

Colourform Joinery Limited.  This Waikato company had its 2009 accounts withheld, and filed consolidated reports in 2011 after joining the Hunt Foundation Group from 1 April 2010.  However its 2010 financial accounts are published and they show gross income of $1.5m, surplus of $300,420, assets of $2.7m and accumulated funds of $675,387.  Charitable distributions were $23,835.  The shareholders are Michael and Elisabeth Taylor.  The Hunt Group comprises Colourform and four other charities – MK Hunt Foundation Ltd (shareholders are Lloyd Brewerton, Ernest Yeoman and Vyvyan Hunt) and three of its 100% owned subsidiaries - Archers Auto Springs Ltd, Transportect Ltd and Elite Business Systems Ltd.  The constitution of the MK Hunt Foundation Ltd states the object is to carry on business for the Stewards’ Trust of NZ Incorporated which is part of the brethren community.

Consolidated financial reports for the Group are not publicly available, however the consolidated return summary data shows the Group has gross income of $17.2m, net surplus of $438,419, assets of $9.9m and accumulated funds of $5.2m.  It paid 2011 grants of $228,460. 

Nature by Design Limited:  This nationwide wholesaling and retailing company disclosed 2011 gross income of $4.6m, surplus of $24,021, assets of $4.8m and accumulated funds of $1.8m.  It received donations of $250,000 and paid grants of $22,245 to ‘charitable organisations’.  The balance sheet includes goodwill of $2.4m and the shareholders are Alexander and Vikki Pflaum.  There are media articles from the 1990’s which explain how the retail shops promote both nature and creation.

Two well known religious charities – Destiny Church and the Church of Scientology

The Church of Scientology

The Church of Scientology of New Zealand Incorporated was registered as a charity in 2008.  Its current officers are Marion Moffat and Michael and Lauren Ferriss who are not listed on the register as officers for any other charities.  The 31/12/11 special purpose unaudited financial accounts show total donation income of $420k, gross income of $842k, a surplus of $44,458, total assets of $12.2m (which includes land and buildings of $10.2m) and total accumulated funds of $1.9m. It is not clear from the accounts who the $8.6m long term liabilities were owed to, although with interest expense of just $6,168 they are possibly related parties (there were no related party disclosures).  The liabilities may also be causing the foreign exchange gains and losses, which were significant in past years (in 2008 the exchange loss was $3.2m and in 2009 there was an exchange gain of $2.3m). The low salary expense of $39,717 was surprising, given that it was $151,418 the previous year and there were 30 paid full time staff and 5 paid part time staff, as well as an average of 19 unpaid volunteers.

Destiny Church

11 religious charities have ‘Destiny’ in their name and are linked to the Destiny church:
·         Destiny International Trust
·         Destiny Church Wellington
·         Destiny Church Whangarei
·         Destiny Church Auckland Trust
·         Destiny School
·         Destiny Church Taranaki
·         Destiny Church Christchurch
·         Destiny Church Whakatane Trust
·         Destiny Church Nelson
·         Destiny Church Tauranga Trust
·         Destiny Church Hamilton

These 11 charities received donation income of $4.5m, government grants of $133k (which were paid to Destiny School in the year ended 31/12/10) and total gross income of $6.1m, paid no grants, controlled assets of $11.3m and had accumulated funds of $9.2m.  They estimated that they had 1,155 volunteers, 43 full time and 26 part time employees.  Salary expense totalled $2.1m. 

The three most significant Destiny entities appear to be Destiny Church Auckland Trust, Destiny International Trust and Destiny Church Hamilton.  The information from their returns is summarised below.

Destiny Church Auckland Trust was registered as a charity in 2008.  Its current officers are Hannah and Samuel (Brian) Francis Tamaki, Tania Pene and Te Tuhi Renata.  It has filed three returns, the most recent being for the year ended 28 February 2011.  The special purpose unaudited financial accounts (which contain no explanatory notes) show total donation income of $1.7m, gross income of $2.2m, a surplus of $111k, total assets of $2.4m (which includes investments of $483k and property of $1.8m) and total accumulated funds of $1.1m. The trust indicated that 5% of its NZ sourced funds are sent overseas.

Destiny International Trust was registered as a charity in 2008.  Its current officers are Hannah and Samuel (Brian) Francis Tamaki, Peter Hunt and Jean Hunt.  It has filed three returns, the most recent being for the year ended 28 February 2011.  The special purpose unaudited financial accounts (which contain no explanatory notes) show total donation income of $339k, gross income of $558k, a surplus of $32k, total assets of $6.5m (which includes investments of $6.2m – the nature of which is not stated, however they appear to be equity investments in Te Hahi o Nga Matamua Holdings Ltd, see below) and total accumulated funds of $6.4m. The trust indicated that 5% of its NZ sourced funds are sent overseas to Oceania.

Destiny Church Hamilton was registered as a charity in 2008.  Its current officers are Samuel (Brian) Francis Tamaki, Richard Lewis, Leon Samuels, John and Alison Ferris.  It has filed four returns, the most recent being for the year ended 29 February 2012.  The special purpose unaudited financial accounts (which contain no explanatory notes) show total donation income of $453k, gross income of $487k, a surplus of $53k, total assets of $1.7m (which includes property of $1.6m) and total accumulated funds of $1.3m.

In addition to the Destiny charities, Samuel (Brian) Tamaki and Hannah Tamaki are officers of the following charities:

·         The Movement Youth Trust (gross income $133k, assets $24k, accumulated funds $0)
·         Te Roto Taone Nui Trust (govt grants $392k, gross income $735k, assets $102k, accumulated funds $0)
·         Te Hahi o Nga Matamua Holdings Ltd (donations $1.1m, gross income $1.8m, assets $13.4m, accumulated funds $4.9m).  Its assets are property of $10.8m and investments of $2.0m. This company’s sole shareholder is Destiny International Trust.  On its constitution filed with the Charities Commission it is called Simpatico Holdings Ltd.
·         Healing Hands Charitable Trust (gross income $6k, assets $30k, equity $10k).

Religious charities with overseas purposes

The 6,324 returns show that 1,354 recorded percentages of funds sent overseas, a further 73 did not record a percentage but showed an area of operation that is outside NZ, and a further 93 did not record an overseas percentage or overseas area of operation but did record grants paid overseas.   That means approximately 24% of religious charities carry out some of their purposes overseas (1,520/6,324).

Normally Inland Revenue donee status will not be granted to charities that do not spend their funds wholly or mainly on NZ charitable purposes, so donations will not qualify for a tax credit for many of these 1,520 religious charities.  However there are two exceptions – either the charity obtains specific approval from Parliament (which is not an option for religious charities) or they maintain a separate fund to demonstrate NZ donations are spent exclusively on NZ purposes.  There are many examples of this, for example the charity SIM NZ received donations of $1.9m in the year ending 30/9/11 and indicated that 66% of its funds were sent overseas for missionary projects.  This religious charity’s trust deed requires it to keep two bank accounts so it can demonstrate donations are spent on NZ purposes and in its advertising it states that donations to it will be tax deductible.

Data quality

Overall the quality of the data provided by the charities in their charities returns looked very accurate when compared to their financial accounts.  The only significant mistake I encountered was The Faith Fijian Assembly of God which recorded donation income of $38,600.28 in its financial accounts, however it incorrectly transposed this as $3,860,028 in its return.

The quality of financial accounts was a different story – the majority were unaudited, special purpose accounts (as opposed to general purpose accounts).  Their notes were often either limited or absent, which meant their accounting policies and related party transactions were not possible to ascertain.  Some provided financial accounts which had virtually no more information than the data extracted into the annual charity regulator return.  At the smaller end, it was not uncommon for bank statements to be attached in lieu of financial statements.

Tuesday 4 September 2012

6. NBR Rich Listers & Charities

 If you think the information on this blog is useful, please click on the advertisements on this webpage (at the right) before you leave.  If you really like the blog you can click multiple times!  Every ad click – which earns me about 14 cents - helps pay for the late night coffees I went through writing it and is much appreciated J .  You can also check out the CharityWatchNZ contents page if you want quick access to all my charity blog topics. 

Introduction

High wealth individuals often attract media attention for their charitable activities.  “Services to philanthropy” bring honours such as Queen’s Service Medals and “patron of the arts” or “Foundation donors” are terms associated with many Knights and Dames. 


On the other side of the coin, the media also pays attention to the lack of tax paid by wealthy individuals.  Last week the Sunday Star-Times reported that Inland Revenue found less than half of wealthy individuals worth more than $50m are paying the top personal tax rate.   When rich lister, successful businessman and philanthropist Owen Glenn told Kim Hill on National Radio in July that he lived in Monaco to avoid capital gains tax so he would have more money to help the less fortunate, he asked her “there’s nothing wrong with avoiding tax, is there?”  He went on to explain that he doesn’t think the government is spending its taxes wisely when government organisations like NASA can spend $60,000 on a toilet seat.   Many listeners of that interview may have been left wondering whether philanthropists really deserve the public adoration they court if their wealth is founded on principles of tax avoidance and distrust of government.

So what insight into wealth and philanthropy can the charities register provide? 

It is useful to bear two points in mind when reviewing the charitable activities of high wealth individuals. Firstly, many rich listers are publicity shy and keep their philanthropy outside the public view.  They may donate directly to charities or support charities without having a personal ownership interest.  In these cases the charities register will provide no window on their generous philanthropic behaviour.  Secondly, NZ has no specific laws for charities controlled by high wealth individuals.  This makes us different to countries like Australia, where Private Ancillary Funds are created to encourage private philanthropy but also to set out rules that high wealth individuals must comply with.  These rules include making a minimum annual distribution of 5% of net assets, not soliciting donations from the public, ensuring the financial accounts are audited each year and not acquiring assets from or providing financial assistance to related parties.  According to the Australian Tax Office tax statistics, as at June 2010 there was $2.3b invested by 879 of these funds.

Notwithstanding these limitations, a search across the charities register for the top 50 2012 NBR rich listers brings a number of issues into focus. 

Summary

Approximately one third (15) of the top 50 NBR rich listers have a registered charity that they directly control.  The accumulated funds for 12 of these 15 charities total $346m.  The remaining three charities have not filed a return yet so the total amount of accumulated funds could be substantially higher.

A further eight rich listers are recorded as officers of registered charities which they do not control.  This brings the total proportion of rich listers directly involved with registered charities to 23 - just under half of the rich listers reviewed.

Eight of the 23 rich listers involved with registered charities have some charitable purposes conducted overseas.  The Jasmine Charitable Trust, controlled by Sam Morgan, has recorded the highest overseas percentage (92%).

Six of the 12 charities directly controlled by the rich listers (which have filed returns) distributed less than 5% of their net assets in the most recent return.  5% is the minimum annual distribution required for the Australian Private Ancillary Funds.

At least one rich lister controls charities with significant related party transactions. 

Eleven rich lister controlled charities had their financial statements published. They were prepared in a variety of ways and only three were audited: Six were unaudited special purpose financial statements that did not comply with generally accepted accounting practice; Two were unaudited but prepared in accordance with generally accepted accounting practice that adopted differential reporting exemptions; Two were audited special purpose financial statements that did not comply with generally accepted accounting practice;  One was audited and prepared in accordance with generally accepted accounting practice that adopted differential reporting exemptions.

Two rich listers control charities which have yachts and maritime vessels in their balance sheet.

Four rich listers did not have their charity financial accounts available on the register in the most recent year.  The register does not clearly state whether the financial accounts had been deliberately withheld by the regulator or whether they simply were not filed.  One rich lister provided financial accounts that contained scarcely more information that the summary financial data captured in the return.  On the positive side, all five did have their summary financial data included in question 25 of the return so it was at least available for analysis at this summarised level. 

Conclusion

So what is the overall conclusion?  With half of NZ’s top 50 wealthy individuals directly involved with charities and probably more of them supporting charity in non-public ways, the overall message about their philanthropy is a good one.  The $346m accumulated funds in just 13 charities is impressive. 

Transparency is generally good, although it would be helpful to know if absent financial accounts are formally withheld by the regulator or a sign of a non-compliant charity.

Unfortunately there are some examples of behaviour which the Australian rules for Private Ancillary Funds have been created to prevent – seven out of 13 charities had low distributions, at least one had significant related party transactions and eight out of 11 supplied financial statements that were unaudited. 

And are the high wealth philanthropic individuals tax avoiders?  That is not a question that can be answered by information contained on the charities register, unfortunately…

The Details

Charities controlled by rich listers

The directly controlled charities that were identified for this analysis (along with their most recent accumulated funds) are:
1.       $120m – The Tindall Foundation
2.       $81m – The Douglas Goodfellow Charitable Trust (The 2904 Charitable Trust)
$4m – The Goodfellow Foundation
3.       $36m – Friedlander Foundation
4.       $32m – Hugh Green Foundation
5.       $21m – The Jasmine Charitable Trust (Sam Morgan)
6.       $18m - The Todd Foundation
7.       $15m – PH Masfen Charitable Trust
8.       $13m – David Levene Foundation
9.       $2m – Robert Horton Memorial Trust
10.   $1m – Eamon Cleary Charitable Trust
11.   $0.2m – The Ben Gough Trust
12.   $0.2m – Michael Hill International Violin Competition Charitable Trust
13.   Unknown – The NZ Russia Foundation (Stephen Jennings – return not filed)
14.   Unknown – The Glenn Family Foundation Charitable Trust (Owen Glenn – return not filed)
15.   Unknown – The Bill Richardson Truck Museum (Richardson family – return not filed)

Charities supported by rich listers

The following rich listers are recorded on the charities register but the charities do not appear to be directly under their control:

1.       Goodman family – The Suter 2000 Appeal Trust
2.       Peter Cooper – The Britomart Arts Foundation; Mountain Landing Trust
3.       Alan Gibbs / Jennifer Gibbs – The University of Auckland; Auckland Contemporary Arts Trust; The Auckland Art Gallery Foundation; The Britomart Arts Foundation
4.       Anne and David Norman – The Lukemia and Blood Foundation of New Zealand (supporters only, not listed as officers)
5.       Fulton family – The St Margaret’s College Trust Board; Marlborough Civic Centre Trust
6.       Sir Colin Giltrap – The Starship Foundation; The Bruce Mclaren Trust
7.       The Talley family – Friends of Motueka Hospital Trust
8.       Adrian Burr – Auckland City Sculpture Trust

Some rich listers control smaller charities and/or are recorded on the charities register for charities that are not directly under their control:

·         Michael Friedlander – The Britomart Arts Foundation; Auckland Contemporary Arts Trust; Atlas Foundation; The Harriet Friedlander Scholarship Trust
·         Goodfellow family – Auea Charitable Trust; NZ Sailing Trust Board; Tino Rawa Charitable Trust Board; Ipipiri Bay of Islands Restoration & Kiwi Conservation Charitable Trust Board; Bruce and Marion Goodfellow Charitable Trust; Auckland Medical Research Foundation; St Kentigern Trust
·         Peter Masfen: NZ Olympic Foundation; Woolf Fisher Trust; The Kings College Trustees; Pahi Tere Charitable Trust
·         Sam Morgan: The Jasmine Charitable Trust No.2
·         Gough family: The Halberg Trust
·         Sir David Levene: Sunderland Foundation
·         The Horton family: NZ Breast Cancer Foundation; The Starship Foundation; Athlae Lyon Starship Research Trust; The World Child Cancer Charitable Trust

Offshore Activities

Most rich lister charities have 100% of their charitable purposes conducted in NZ.  The exceptions are:
·         The NZ Russia Foundation (Stephen Jennings) indicated that its charitable activities are carried out in NZ, Asia and Europe
·         The Glenn Family Foundation Charitable Trust indicated that 50% of its charitable activities will be carried out in Asia
·         The Auea Charitable Trust (William Goodfellow) indicated that it operates in NZ, Europe,  Oceania and North America
·         The Woolf Fisher Trust (Peter Masfen) has 80% of its activity carried out in Europe and North America
·         The Jasmine Charitable Trust (Sam Morgan) has 92% of its activity carried out in Oceania, Asia and South America
·         The David Levene Foundation indicated that 1% of its activities are carried on overseas
·         The Sir Michael Hill International Violin Competition charitable Trust indicated that 25% of its activity is carried out in Asia, Europe, North America and Oceania.
·         The Tindall Foundation indicated that 1% of its activities are carried on overseas.

Proportion of grant distributions / net assets

The charities which are directly under the control of rich listers distributed the following proportion of their net assets in the most recent year
1.       26% - The Todd Foundation
2.       12% – The Jasmine Charitable Trust (Sam Morgan)
3.       10% – David Levene Foundation
4.       9% – Friedlander Foundation
5.       9% – Eamon Cleary Charitable Trust
6.       6%  – The Tindall Foundation
7.       4% – The Goodfellow Foundation
4% - The Douglas Goodfellow Charitable Trust (The 2904 Charitable Trust)
8.       3% – Robert Horton Memorial Trust
9.       2% – Hugh Green Foundation
10.   1% – PH Masfen Charitable Trust
11.   0% – The Ben Gough Trust
12.   0% – Michael Hill International Violin Competition Charitable Trust

Related Party Transactions

The only notable related party transactions appear to involve the two David Levene charities – the David Levene Foundation and the Sunderland Foundation.  The former recorded a $12,222,000 advance to Lewis Holdings Ltd.  The latter recorded related party advances from Lewis Holdings Ltd of $960k, School Properties Ltd of $663k and SCP 2009 Ltd of $943k.  The Sunderland Foundation accounts filed with the regulator were not audited and had an unusual goodwill asset of $1,652,225 in the December 2009 year which was not mentioned in the December 2010 year.  

Unusual Investments

The only curious assets identified in this brief review were the yachts owned by the Goodfellow family charities and a Peter Masfen charity.  The Goodfellows have an interest in The NZ Sailing Trust Board which owns a maritime vessel and the Tino Rawa Charitable Trust Board which restored eight yachts.  The Peter Masfen charity Pahi Tere Charitable Trust accounts referred to the Royal Akarana Yacht Club (building feasibility report and architect plans). 

Limited Transparency

A number of rich lister charities have been withheld from the public in the past, although it appears the regulator has changed its view over time and more accounts are published today than they were three years ago.  In all cases the financial data in question 25 of the return has been published and it is only the financial accounts which have been limited in their transparency.  For example:

·         The Goodfellow Foundation did not attach its accounts in 2012.  There is no indicator on the register to suggest they have been withheld by the regulator.
·         The Douglas Goodfellow Charitable Trust did have its 2011 financial accounts published.  However it is noteworthy because it was particularly difficult to identify.  The official name is “The 2904 Charitable Trust” on the Charities Register and it is only on the Annual Return Summary webpage for 2011 where Douglas Goodfellow is mentioned.  Financial accounts were withheld for the two previous years and the March 2000 trust deed has had all names deleted including the name of the charity.  The only officer listed on the register is the NZ Guardian Trust Ltd.
·         Anne and David Norman are reported to be associated with the The Lukemia and Blood Foundation of NZ, although they are not recorded as officers.  This charity did not attach its financial accounts in 2011 (though in the last week it filed its 2012 return with accounts attached).
·         The Hugh Green Foundation accounts were restricted in 2009 and 2010.  They were attached in 2011 although they provided very little detail, scarcely more than the data supplied in question 25 of the return.
·         The PH Masfen accounts were also restricted in 2009 and 2010.  They did not attach their accounts in 2011.  There is no indicator on the register to suggest they have been withheld by the regulator.
·         The Tindall Foundation accounts were not attached in 2012, 2010 and 2009 although a limited financial summary was provided in 2011.  There is no indicator on the register to suggest they have been withheld by the regulator.

Financial Reporting

Twelve rich listers directly controlled 14 charities which have filed returns.  Three had their accounts withheld, leaving 11 with financial statements available for public view.  Their accounts were prepared on the following basis.  Note that Special Purpose Financial Statements are not prepared in accordance with generally accepted accounting practice and are for management purposes only.   

1.      The Tindall Foundation: Financial statements withheld
2.       The Douglas Goodfellow Charitable Trust (The 2904 Charitable Trust): Special Purpose Financial Statements: Unaudited
The Goodfellow Foundation: Financial statements withheld
3.       Friedlander Foundation: Special Purpose Financial Statements: Unaudited
4.       Hugh Green Foundation: Special Purpose Financial Statements: Unaudited
5.       The Jasmine Charitable Trust (Sam Morgan): Special Purpose Financial Statements: Unaudited
6.       The Todd Foundation: Special Purpose Financial Statements: Audited
7.      PH Masfen Charitable Trust: Financial statements withheld
8.       David Levene Foundation: Accounts prepared in accordance with generally accepted accounting practice.  Adopted differential reporting exemptions.  Audited.
Sunderland Foundation: Accounts prepared in accordance with generally accepted accounting practice.  Adopted differential reporting exemptions.  Unaudited.
9.       Robert Horton Memorial Trust: Special Purpose Financial Statements.  Unaudited
10.   Eamon Cleary Charitable Trust: Special Purpose Financial Statements.  Unaudited
11.   The Ben Gough Trust: Accounts prepared in accordance with generally accepted accounting practice.  Adopted differential reporting exemptions.  Unaudited
12.   Michael Hill International Violin Competition Charitable Trust: Special purpose financial statements: Audited.

<Disclaimer:  In preparing this analysis I have taken reasonable steps to verify whether the officers listed on the charities register are in fact the high wealth individuals on the NBR rich-list.  However because the identity detail on the charities register is often limited, it is possible that charities controlled by some individuals have been omitted or they have been incorrectly attributed.>