Why look into religious charities?
Tuesday, 18 September 2012
7. NZ's Religious Charities
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Why look into religious charities?
Why look into religious charities?
Entities which have “advancing religion” as a purpose will generally be entitled to register as a charity in
. 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. New Zealand
The interpretation of whether an entity meets the religious definition isn’t always easy. The
is a good example – Church of Scientology 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. New Zealand
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
example, can the Church of Scientology charities register provide any interesting insight into religious charities? New Zealand
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,
in Seventh Day Adventist Church , The Selwyn Foundation Group (retirement care), Roman Catholic Diocese of Auckland Group and Dilworth Trust Board (funders of Dilworth school). New Zealand
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
(with assets totalling $11m) and the Destiny Church (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. Church of Scientology
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.
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.
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
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 ( University of Auckland ) 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. Auckland University
$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
Trust Board $245m. Saint John's College
$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
in Seventh Day Adventist Church ($43m). New Zealand
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:
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).
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
entrepreneur and philanthropist. Auckland
The Wilberforce 21 Trust is an
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. Auckland
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
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. Auckland
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
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). Albany
Building Futures Limited: This
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. Christchurch
Kennedy Road Investments Limited: This
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). Auckland
Musgroves Limited: This
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 Christchurch 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 (
) 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. Auckland
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 –
and the Destiny Church Church of Scientology
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. Church of Scientology
11 religious charities have ‘Destiny’ in their name and are linked to the Destiny church:
· Destiny International Trust
Destiny Church Wellington
Whangarei Destiny Church
Destiny Church Trust Auckland
Taranaki Destiny Church
Destiny Church Christchurch
Whakatane Trust Destiny Church
Nelson Destiny Church
Tauranga Trust Destiny Church
Destiny Church Hamilton
These 11 charities received donation income of $4.5m, government grants of $133k (which were paid to
in the year ended Destiny School 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 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.
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.
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.