1. Reducing transparency

In most cases charities are forced to disclose financial information on the NZ charities register even if they don’t want to.  Transparency is the price they pay for being registered charities with tax exemption benefits and public support.

However the regulator allows charities to withhold information in certain circumstances.  Charities also have the option of filing “grouped” accounts which will minimise transparency while still including their financial totals on the register.

Withheld Information

The reasons why the Charities regulator can withhold information are outlined on this ‘restricting information’ webpage.

One instance where a charity will not have to disclose financial accounts is if disclosure “may unreasonably prejudice the commercial position of the charity…”  That means there may be some significant businesses which have had their financial information withheld from the register on the basis that they are commercially sensitive.

It is not possible to easily identify all of the charities which have had information withheld based on the register search engine.  However, examples can be found using individual charity searches.  

The multinational, Christchurch-based communications business Tait Radio is one example.  This corporation has permission from the regulator to have its business accounts withheld.

As reported in a media article posted on Tait’s own website, in 2011 Tait’s revenue exceeded US$150 million (NZ$187m), of which 95 percent was earned offshore. It appears that most of this revenue was earned by Tait’s registered charities, or overseas subsidiaries of the registered charities, but it has been withheld from the public register.  As can be seen by this one example, withholding financial information will have understated the aggregate totals on the register by a significant amount. 

Analysis of data on the register can be even more problematic if the regulator allows different approaches from one year to the next.  The Tindall Foundation is an example where its financial data summary has been supplied in 2009 and 2010 but formally withheld in 2011.  The Tindall Foundation's assets were $131m in 2009 and $144m in 2010, so omitting 2011 figures can make trend analysis challenging.

Grouping Accounts

Unlike Tait Radio and the Tindall Fourndation, the Seventh Day Adventist Church does not have formal approval to withhold its accounts.  However it has elected to group all of its entities together and report on total group figures. 

There are two Seventh Day Adventist groups on the Register: Seventh Day Adventist Church in New Zealand 1 and Seventh Day Adventist Church in New Zealand 2.  The 2011 financial accounts show that Group 1 controls assets of $50m as at 30/06/2011 and Group 2 controls assets of $157m as at 31/12/2010.  Total group revenue is approximately $112m.

Sanitarium Health Food Company is mentioned in the notes to the accounts of Group 1.  It is one of a number of legal entities in that group which includes entities that run community development projects in NZ and overseas, retirement villages and hospitals.  No individual financial details are provided for any of these activities. 

Conclusion

In comparing these examples, the public may have no insight into the profits or distribution policy of Sanitarium Health Food Company, but at least we know that its financial information is included in the publicly available data totals.  That is not the case with Tait Radio or the Tindall Foundation (for 2011) where we are in the dark about knowing what assets are and are not used for charitable purposes.

The lesson here?  Beware of taking financial totals from the charities register at face value.  Some of the important information is either hidden in aggregate totals or not provided to the public at all.