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Introduction
Many small charities struggle to find regular donation
income. Then, if they are lucky, they receive a large bequest and they never look back. For the first time they put in place
initiatives that they couldn't dream of doing before.
Bequests can be game-changers for many charities. It's like winning lotto - especially if there
are no conditions attached and the charity can use the money as it sees fit.
According to the most recent returns filed by registered New Zealand charities (which include a mixture of 2012 and 2013 financial years), 798 or 3% of total charities received bequests totaling $176 million.* That is an average of $221,000 for each of the lucky 798 charities. So is it easy money, or are there lessons hidden in the data on the charities register?
According to the most recent returns filed by registered New Zealand charities (which include a mixture of 2012 and 2013 financial years), 798 or 3% of total charities received bequests totaling $176 million.* That is an average of $221,000 for each of the lucky 798 charities. So is it easy money, or are there lessons hidden in the data on the charities register?
If you would like your charity to join the 3% of charities which
receive bequests, here are 10 helpful hints based on returns filed with the New
Zealand charities regulator:
1. Be an incorporated association or a trust. About two thirds of charities which recorded
bequests in their most recent return fell into these two categories. Don't be a limited liability company - only
six received bequests last year.
2. It helps to have a longstanding history and name recognition.
3. Don't be greedy and insist that all the money from an estate
goes to your charity. Just under half of
charities that received bequests reported receiving $10,000 or less.
4. You're likely to receive more bequests if you operate in the
health sector, followed by the religious sector, disability sector or education
/ training / research sector. If you
operate in the sport / recreation sector your probability of receiving bequests
is slim.
5. If you are going to receive a bequest you will already have
attracted donors who provide you with regular donation income (unless your
charity is going to be set up with a bequest).
6. Don't rely on regularly receiving bequests as your only source
of income. Only one charity has managed
to do that so far.
7. Don't assume New Zealanders are actively looking for new
charities to leave their money to. Over
the last four years the number of registered charities receiving bequests has
only grown by 1.8% per annum. So you are
going to have to work hard to stand out from the crowd.
8. Remember that bequests
can be challenged in the courts. Don't
recognise bequest income until you've received the cash or the donated assets
have come under your control.
9. If you employ one or more paid staff you're more likely to
receive a bequest and the value of bequests you do receive will be larger. However all is not lost if you just rely on
paid volunteers - these charities accounted for 26% of total charities that
received bequests, and they received 7% of the total amount of bequests.
10. You're mostly likely to get a bequest if your postal address
is in Auckland, although if your postal address is in Wellington your average
total bequests will be larger. If your
postal address is in Malborough or Darfield you might get something too, though
don't expect too much.
The details
Since 2008, the amount of bequest income received by New Zealand
registered charities has been published on the charities register. That puts New Zealand one step ahead of
Australia in terms of providing an insight into bequests. Across the Tasman, registered charities will
only start reporting their income to the charities regulator from 2014. Even then, they will just report bequest
income as a combined total of bequest and donation income, and Basic Religious
Charities will be exempt from reporting requirements altogether.
For accounting purposes, bequest income is not usually recognised
until cash is received by a charity, or when donated assets come under control
of a charity and can be reliably measured. This avoids problems that could
arise if bequest income is recognised earlier and is subsequently contested by
other estate claimants.
Four-year trends
As shown in Graph A, the trend in New Zealand over the last four
complete years from 2009 to 2012 has been an average increase of 7.3% per annum
in the value of bequests received by registered charities. The amount bequested to registered charities
rose from $114m in 2009 to $139m in 2012.
However, the number of registered charities receiving bequests has not
increased at a similar rate, rising only 1.8% per annum from 706 in 2009 to 744
in 2012.
Graph A
The same charities tend to benefit the most from bequests. Just ten charities receive about one third of
the total value of bequests each year. Over the four years 2009-2012 the most
successful six charities to obtain bequests have consistently been:
1. Royal New Zealand Foundation Of The Blind
2. The Salvation Army New Zealand Group
3. The Priory In New Zealand of the Most Venerable Order of the
Hospital of St John of Jerusalem
4. Cancer Society Of New Zealand Auckland Division Incorporated
5. National Heart Foundation Of New Zealand
6. The Society for the Prevention of Cruelty to Animals Auckland
Incorporated
It is not surprising that these successful charities have a
longstanding history and are well known to the New Zealand public. Presumably the average person who leaves
money to a charity in their will wants to be confident it is going to a charity
that has proven itself to be a safe pair of hands with money and can be relied
on to make a positive difference in the community.
With just 10 charities accounting for one third of bequest income,
this suggests many charities receive quite small amounts of bequests. In fact, as shown in Graph B, 12% of
charities that receive bequests actually receive less than $1,000. About 1/3rd receive total bequests of
between $1,000 and $10,000. And at the
other end of the scale, about 1/4 of charities that receive bequests, receive
total bequests of $100,000 or more. (This graph includes returns for the 30
deregistered charities and it also includes the bequest of $44m made to the
Joyce Fisher Charitable Trust).
Graph B
Popular sectors
Based on all returns filed since the NZ Charities Regulator began,
21% of the value of all bequests went to the health sector, followed by 16% to
the religious sector, 13% to the disability sector and 13% to the education /
training / research sector. The three
sectors that received the smallest proportion of the value of bequests, all
less than 1%, were the accommodation/housing sector, emergency/disaster relief
sector, and sport/recreation sector. The
sector breakdown, along with the names of charities in each sector which
received the highest bequest income, are shown in Graph C and Table I.
Graph C
Table I
Legal structures
The most common entity type to receive a bequest was incorporated
associations (293 or 37% of the 798 bequest-receiving charities). They were followed by trusts (180 or
23%), unincorporated churches or
parishes (75 or 9%), foundations (49 or 6%), committees of St John (46 or 6%),
charitable trusts (43 or 5%), unincorporated societies (15 or 2%),
unincorporated associations (9), diocese (8),
limited liability companies (6), unincorporated institutes (4), fire
brigades (4), unincorporated centres (4) and estates (1). 61 charities did not give any indication of
their entity type.
Normally you might expect that charities which receive bequests
will also receive donations. In fact
only 666 or 83% of the 798 charities in receipt of bequests also received
donation income. That left 132 charities
where members of the public did not donate money to them when they were alive,
but left $40m to them when the passed away.
However that is not as unusual as you may think. Most of those charities had only just been
established and the bequest was the reason they existed. Others transferred legacy funds from one
entity to another (usually into a Foundation).
For example the IHC transferred $14m of accumulated legacy funds from
IHC Incorporated to the IHC Foundation in 2013.
Paid staff and volunteers
Out of the 798 charities which received bequests in their last
financial year, 529 (66%) employed one or more paid staff; 204 (26%) just
relied on volunteers, and 65 (8%) recorded no paid or volunteer staff at
all. Based on the total of $176m of
bequests received in the most recent returns, $145m or 82% of this amount of
bequests went to charities that employed one or more staff, $12m or 7% went to
charities which just relied on volunteers, and $19m or 11% went to charities
which recorded no paid or volunteer staff.
Geographic location of bequests
Using the postal addresses supplied to the charity regulator, Auckland
charities accounted for 176 or 22% of the 798 total charities that received
bequests, receiving $71m or 40% of the $176m total bequests. They were followed by charities in Christchurch
which made up 124 or 16% of bequest charities (receiving $18m or 10% of total
bequests). Then came Wellington with
110 or 14% of charities (receiving $48m or 27% of total bequests). Out of the three cities, Wellington
charities received the highest total bequests on average - $436k, compared to
$403k in Auckland and $145k in Christchurch. Other towns and cities with
individual bequests over $1m were Gisborne, Hamilton, Havelock North, Lower
Hutt, Manukau, North Shore and Tauranga. Some of the most modest bequest
locations included Marlborough (total bequests were $10) and Darfield
(total bequests were $85).
Unusual charities
In any piece of analysis on the charities register it is possible
to find 'unusual' charities. Analysis of
bequest income is no exception. For
example, the Kingdom Legacy Trust is the only charity that has recorded
bequests as its only source of revenue for the last five years ($1.3m, $176k,
$242k, $155k and $242k). It also has
significant transactions with related parties. The trust's officers are Jasu
and Jagdish Govind and Graeme Skeates (a senior partner in Skeates Law
Ltd). Back in 2009 it had received
loans from the Jasu Govind family trust and the Jagdish Govind family trust,
and lent this money at a nil interest rate to NZ Nail Industries, a company
also owned by Jasu and Jagdish Govind and Graeme Skeates. In its most recent
return the trust has used its bequest income to pay off the debt to the family
trusts and has total assets of $4.4m now invested in land in Epsom and
Kaeo. Although the charity reports
making charitable grants for religious purposes of $103k-$186k each year and
says 10% is spent overseas, it is unclear who received the grants or whether
there was any personal benefit from the related party transactions. Nor is there any explanation why people are
making bequests to this charity each year.
__________________
* 829 charities recorded bequest income in their most recently
filed return to the regulator. However,
unless otherwise stated, this blog analyses results from 798 charities. The 798 total excludes 30 deregistered
charities and it excludes the Joyce Fisher Charitable Trust. The latter received a bequest of $44m in the
year ended 31/03/2012. This trust
operates in the fundraising sector and the bequest has been excluded on the
basis that its bequest is so big it skews all of the sector results.
