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According to the financial data on the charities register, 49 of these million dollar charities more than doubled their asset value in 2012. In fact, the story for these 49 charities appears to be quite dramatic. Collectively, these 49 charities started the year with assets of $235m and ended the year with assets of $ 1.9b – that is an increase in assets of $1.6b in just one year.
Initially I wondered who these 49 mushrooming charities were and what caused their balance sheets to grow so rapidly in such tough economic times.
Then I began to wonder how reliable the data on the charities register really is.
Here is what I found.
Summary
Table A, below, shows six predictable reasons why the asset totals would increase dramatically. Asset revaluations, one-off receipts, mergers and amalgamations, dedicated fundraising to purchase a new asset, settlement of new funds, and temporary timing mismatches are standard reasons for a balance sheet boost.
However, the table also shows that data errors had an impact on the total. As a result, the totals in the register are incorrect by approximately $891b.
All of the data errors appear to be innocent and avoidable. Most involved figures being transposed incorrectly from the financial reports to the annual charity regulator return. There were also examples of “grouped” data being provided one year but “single” entity data the next, so it was unclear which entities were required to report to the regulator; and in one case an extraordinarily poor financial report being provided which did not reconcile with the annual return.
Table A
| ||||||
Reason for high asset growth
|
No. of charities
|
Previous Assets
|
Current Assets
|
Increase
|
% increase
| |
$m
|
$m
|
$m
| ||||
1
|
Land/building revaluations
|
9
|
$31.0
|
$96.0
|
$65.2
|
210%
|
2
|
Significant one-off income receipts
|
5
|
$13.0
|
$36.1
|
$23.1
|
178%
|
3
|
Mergers and amalgamations
|
3
|
$29.2
|
$89.2
|
$60.1
|
206%
|
4
|
Fundraising to purchase a new asset
|
6
|
$18.3
|
$52.9
|
$34.7
|
190%
|
5
|
New funds settled
|
2
|
$9.2
|
$54.6
|
$45.4
|
493%
|
6
|
Temporary timing mis-matches
|
7
|
$53.8
|
$555.8
|
$502.0
|
933%
|
7
|
Data errors on the register
|
15
|
$70.4
|
$961.5
|
$891.1
|
1266%
|
8
|
Other reasons
|
1
|
$9.1
|
$24.1
|
$15.0
|
165%
|
9
|
Uknown
|
1
|
$1.4
|
$3.4
|
$2.0
|
143%
|
TOTALS
|
49
|
$235.4
|
$1,873.6
|
$1,638.6
| ||
Ignoring the charities with data errors, the charities with temporary timing differences, and the charities involved with mergers and acquisitions (which did not really result in an overall increase in assets), table B shows the names of 24 charities which did achieve a significant and permanent increase in asset value in the last year and the reasons for those increases.
Table B
| |
Land/building revaluations
| |
1
|
St Margarets Presbyterian Residential College Council Incorporated
|
2
|
Friars Minor Of
|
3
|
Avondale Union Parish
|
4
|
Maungakiekie Golf Club Incorporated
|
5
|
Tennis
|
6
| |
7
|
The
|
8
|
The Christian Service and Missionary Trust
|
9
| |
Significant one-off income receipts
| |
10
|
Ngati Tama Manawhenua Ki Te Tau Ihu Trust Group
|
11
|
Maniapoto Maori Trust Board
|
12
|
The
|
13
|
Ngati Rarua Asset Holding Company Limited
|
14
|
The Chartwell Charitable Trust
|
Fundraising to purchase a new asset
| |
15
|
Q Theatre Trust
|
16
|
CSO Foundation Trust
|
17
|
The Court Theatre Trust
|
18
|
Te Ahu Charitable Trust
|
19
|
Milarepa Charitable Trust
|
20
|
Otago Theatre Trust
|
New funds settled
| |
21
|
Joyce Fisher Charitable Trust
|
22
|
The Jack Jeffs Charitable Trust
|
Other reasons
| |
23
|
Te Rau Aroha Trust
|
Uknown
| |
24
|
Kaiapoi Co-Operating Parish Methodist-Presbyterian
|
Conclusion
Before looking at the detail, it seemed reasonable to assume that all charities with extraordinary balance sheet growth could face governance pressures. Without good governance, charities could experience problems managing much larger investments and assets. However, this analysis shows that there are a number of factors that cause extraordinary balance sheet growth. Governance is likely to be a consideration for the subset of charities whose growth is due to receiving significant one-off income receipts or a new settlement of funds, and it has the potential to be an issue when charities are part of mergers and amalgamations. However, other reasons for rapid growth – such as the revaluation of assets, temporary timing mismatches and fundraising to purchase new assets - may not raise the same governance concerns.
Comparing data over two years is always a useful way to identify inconsistencies and errors. This analysis has identified data errors for 15 charities on the register that total approximately $891m. Although the charities regulator does use a disclaimer that it does not verify data on the register, there must be ways to assist charities to complete the annual form more accurately. For example, by rejecting balance sheet totals that don’t balance; by explaining what equity is so that it is not omitted from the form; by not accepting returns where the charity is a reasonably significant size but has not provided adequate financial accounts (see the Free Church of Tonga example); and by providing previous-year data on electronic forms so the people who enter data for the current year can easily spot a large variation that may be due to an error. In addition, NZ could follow the Australian example of promoting Standard Business Reporting (SBR ) for the charitable sector and using SBR to extract data directly into the annual return form, which will largely eliminate data errors. If nothing is done, it will be a shame that whilst changes to accounting standards make the financial reports more robust, the quality of data on the register will continue to remain (in a relatively small number of cases) unreliable.
Analysis
Here are the charity details, and some specific commentary, for each of the categories of high asset growth.
1. Land and building revaluations
Table C
| ||||||
Reason for high asset growth
|
Current year ended
|
Previous Assets
|
Current Assets
|
Increase
|
% increase
| |
$m
|
$m
|
$m
| ||||
Land/building revaluations
| ||||||
1
|
St Margarets Presbyterian Residential College Council Incorporated
|
$5.3
|
$27.2
|
$21.9
|
413%
| |
2
|
Friars Minor Of
|
$6.5
|
$15.9
|
$9.4
|
145%
| |
3
|
Avondale Union Parish
|
$2.9
|
$10.3
|
$7.4
|
259%
| |
4
|
Maungakiekie Golf Club Incorporated
|
$2.0
|
$9.4
|
$7.4
|
364%
| |
5
|
Tennis
|
$5.5
|
$12.2
|
$6.8
|
123%
| |
6
|
$2.4
|
$6.4
|
$4.1
|
171%
| ||
7
|
The
|
$2.6
|
$6.6
|
$4.0
|
151%
| |
8
|
The Christian Service and Missionary Trust
|
$2.6
|
$5.6
|
$2.9
|
111%
| |
9
|
$1.2
|
$2.6
|
$1.4
|
112%
| ||
$65.2
| ||||||
Nine of the 49 charities revalued their land and/or buildings, which was the driving cause of their significant increase in asset values. It was curious that two of the nine involved sporting activities – the Maungakiekie Golf Club Incorporated and Tennis Auckland Region Incorporated (the latter owns ASB Bank Tennis Arena in Auckland
2. Significant one-off income receipts
Table D
| ||||||
Reason for high asset growth
|
Current year ended
|
Previous Assets
|
Current Assets
|
Increase
|
% increase
| |
$m
|
$m
|
$m
| ||||
Significant one-off income receipts
| ||||||
10
|
Ngati Tama Manawhenua Ki Te Tau Ihu Trust Group
|
$3.3
|
$12.0
|
$8.7
|
264%
| |
11
|
Maniapoto Maori Trust Board
|
$4.2
|
$10.9
|
$6.8
|
162%
| |
12
|
The
|
$3.1
|
$6.2
|
$3.2
|
103%
| |
13
|
Ngati Rarua Asset Holding Company Limited
|
$1.3
|
$4.2
|
$3.0
|
230%
| |
14
|
The Chartwell Charitable Trust
|
$1.2
|
$2.7
|
$1.5
|
123%
| |
$23.1
| ||||||
Five of the 49 charities recorded significant one-off income receipts which we not distributed for charitable purposes in the year of receipt. Three of these were maori entities which received fisheries claim funding / distribution of fishing quota. The Canterbury Charity Hospital Trust received a significant increase in donations and the Chartwell Charitable Trust, whose charitable purpose is to ‘make a variety of grants’, received an unusually high return on investments in a related entity (a $2.5m investment generated $1.8m income).
3. Mergers and amalgamations
Table E
| ||||||
Reason for high asset growth
|
Current year ended
|
Previous Assets
|
Current Assets
|
Increase
|
% increase
| |
$m
|
$m
|
$m
| ||||
Mergers and amalgamations
| ||||||
15
|
The Order of
|
$26.8
|
$75.3
|
$48.5
|
181%
| |
16
|
VisionWest Community Trust
|
$1.1
|
$9.4
|
$8.3
|
751%
| |
17
|
ROTAB Investments Limited
|
$1.2
|
$4.5
|
$3.3
|
271%
| |
$60.1
| ||||||
Three of the 49 charities noted that mergers or amalgamations caused their high asset growth. Comparative information was restated in the financial accounts. ROTAB Investments Ltd receives, manages and holds fisheries quota under the Maori Fisheries Act for its shareholder the Raukawa Trust Board. In addition to an amalgamation with four other companies, a $1.2m fishing settlement also contributed to its increase in asset values.
4. Fundraising to purchase a new asset
Table F
| ||||||
Reason for high asset growth
|
Current year ended
|
Previous Assets
|
Current Assets
|
Increase
|
% increase
| |
$m
|
$m
|
$m
| ||||
Fundraising to purchase a new asset
| ||||||
18
|
Q Theatre Trust
|
$8.0
|
$22.2
|
$14.2
|
176%
| |
19
|
CSO Foundation Trust
|
$1.2
|
$7.6
|
$6.4
|
527%
| |
20
|
The Court Theatre Trust
|
$2.4
|
$8.0
|
$5.6
|
232%
| |
21
|
Te Ahu Charitable Trust
|
$3.8
|
$9.1
|
$5.4
|
143%
| |
22
|
Milarepa Charitable Trust
|
$1.5
|
$3.3
|
$1.8
|
117%
| |
23
|
Otago Theatre Trust
|
$1.3
|
$2.7
|
$1.3
|
100%
| |
$34.7
| ||||||
Six of the 49 charities fundraised to purchase or build a new asset. Three of these assets were performing arts theatres (Q Theatre Trust, The Court Theatre Trust and Otago Theatre Trust). Milarepa Charitable Trust fundraised to help build a meditation centre. The Christchurch Symphony Orchestra purchased a $5.2m Citadel. And the Te Ahu Charitable Trust, which states that it is a Council Controlled Organisation and a subsidiary of the Far North District Council, received donations and council funding to build a $14m community building in Kaitaia.
5. New funds settled
Table G
| ||||||
Reason for high asset growth
|
Current year ended
|
Previous Assets
|
Current Assets
|
Increase
|
% increase
| |
$m
|
$m
|
$m
| ||||
New funds settled
| ||||||
24
|
Joyce Fisher Charitable Trust
|
$6.4
|
$47.6
|
$41.2
|
646%
| |
25
|
The Jack Jeffs Charitable Trust
|
$2.8
|
$7.0
|
$4.2
|
148%
| |
$45.4
| ||||||
The Joyce Fisher Charitable Trust received a new settlement of $42m. The Jack Jeffs Charitable Trust received a $3.8m distribution from the estate.
6. Temporary timing mis-matches
Table H
| ||||||
Reason for high asset growth
|
Current year ended
|
Previous Assets
|
Current Assets
|
Increase
|
% increase
| |
$m
|
$m
|
$m
| ||||
Temporary timing mis-matches
| ||||||
26
|
$39.1
|
$514.5
|
$475.4
|
1216%
| ||
27
|
Pinnacle Incorporated
|
$8.4
|
$22.3
|
$13.9
|
165%
| |
28
|
$1.3
|
$5.4
|
$4.1
|
307%
| ||
29
|
Oxfam New
|
$1.6
|
$5.5
|
$3.9
|
249%
| |
30
|
2020 Communications Trust
|
$1.3
|
$3.1
|
$1.8
|
132%
| |
31
|
Eastland Network Charitable Trust
|
$1.0
|
$2.8
|
$1.8
|
170%
| |
32
|
Rescare Management Limited
|
$1.1
|
$2.2
|
$1.1
|
108%
| |
$502.0
| ||||||
Seven of the 49 charities had temporary timing mis-matches. The New Zealand Local Authority Protection Programme Disaster Fund dominated the totals due to the Christchurch
Four charities simply recorded income received in advance (Pinnacle – which is a General Practitioners Network; International Pacific College NZQA Student Fee Protection Static Trust Fund – which holds student fees in trust for the IPC; Oxfam and 2020 Communications –which aims to put computers in homes).
7. Data errors on the register
Table I
| ||||||
Reason for high asset growth
|
Current year ended
|
Previous Assets
|
Current Assets
|
Increase
|
% increase
| |
$m
|
$m
|
$m
| ||||
Data errors on the register
| ||||||
33
|
Northland Kindergarten Association Inc
|
$10.8
|
$723.9
|
$713.1
|
6615%
| |
34
|
Anglican Diocese Of Waikato & Taranaki
|
$4.2
|
$50.3
|
$46.1
|
1088%
| |
35
|
$1.8
|
$22.7
|
$20.9
|
1161%
| ||
36
|
$13.2
|
$33.5
|
$20.3
|
155%
| ||
37
|
$2.8
|
$22.4
|
$19.6
|
696%
| ||
38
|
The Totara Foundation
|
$15.2
|
$32.5
|
$17.3
|
114%
| |
39
|
The Free Church of
|
$5.6
|
$20.0
|
$14.4
|
257%
| |
40
|
The Starship Foundation
|
$3.2
|
$13.8
|
$10.6
|
336%
| |
41
|
The Society for the Prevention of Cruelty to Animals
|
$5.4
|
$14.5
|
$9.0
|
166%
| |
42
|
$1.1
|
$5.7
|
$4.6
|
403%
| ||
43
|
Holy Trinity (Otahuhu) Parish Trust Board
|
$1.6
|
$6.0
|
$4.4
|
275%
| |
44
|
Waimate Childcare Centre Incorporated
|
$1.1
|
$4.3
|
$3.2
|
303%
| |
45
|
Manukau New Life Centre
|
$1.0
|
$4.1
|
$3.1
|
306%
| |
46
|
The Clergy Trust Fund For The Roman Catholic Diocese of
|
$2.2
|
$4.9
|
$2.7
|
120%
| |
47
|
$1.2
|
$3.1
|
$1.8
|
150%
| ||
$891.1
| ||||||
Fifteen of the 49 charities made data errors which incorrectly gave the impression that their assets had significantly increased.
The Northland Kindergarten Association Inc dominated the figures because instead of recording property, plant and equipment of $7,203,414 as per its financial accounts, when it completed the annual return it recorded $720,333,414.
The issue with the Northland Kindergarten Association is similar to errors made by many other charities in this table. A mistake transposing a figure from the financial reports to the annual return caused the asset total to add incorrectly. Although this meant the balance sheet in the annual return did not balance, the charities did not notice because there were no warnings or error messages.
An issue with grouping and consolidation also came to light. Three charities filed accounts for different entities in consecutive years. The Anglican Diocese Of Waikato & Taranaki filed accounts (and recorded in the annual return) financial information for the standing committee accounts and parishes in 2011. However in 2010, even through its accounts were also the standing committee and parishes, it only recorded the standing committee figures in the annual return. Similarly, Auckland Grammar School Auckland Grammar School
Out of the 49 charities, the Free Church of Tonga, provided the least useful financial information. The $14m increase in assets is presumed to be an error, however it is unclear because instead of financial statements this charity filed 131 photocopied pictures of receipts and statements. For a charity which may control assets of $20m, this type of financial reporting is hardly useful from a transparency point of view.
Finally, some errors did not appear to be transposition errors per se, but errors that may have arisen because the person responsible for completing the annual charities return did not know what figures to input. The two examples from this small test group are the Manukau New Life Centre, which incorrectly recorded working capital as a non current liability when it completed the annual return, and The Starship Foundation, whose 2010 financial reports showed assets of $12.5m, however only $3.2m was shown in the annual return.
8. Other reasons / unknown
Table J
| ||||||
Reason for high asset growth
|
Current year ended
|
Previous Assets
|
Current Assets
|
Increase
|
% increase
| |
$m
|
$m
|
$m
| ||||
Other reasons
| ||||||
48
|
Te Rau Aroha Trust
|
$9.1
|
$24.1
|
$15.0
|
166%
| |
$15.0
| ||||||
Uknown
| ||||||
49
|
Kaiapoi Co-Operating Parish Methodist-Presbyterian
|
$1.4
|
$3.4
|
$2.0
|
145%
| |
$2.0
| ||||||
The two remaining charities from the group of 49 fall within “other reasons” and “unknown” categories.
Te Rau Aroha Trust provides life insurance and its assets increased largely as a result of an increase in actuarial reserve income.
The Kaiapoi Co-Operating Parish’s 2012 financial report document could not be opened, so it was not possible to verify what the figures really were. The 2011 accounts provided minimal information.
