19. NZ charities that receive income from government

 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

Exactly one quarter of New Zealand’s registered charities received income from central or local government in 2012 (that’s 5,283 out of 21,096 registered charities which filed a 2012 return with the charity regulator).  Income from government made up 38% of total gross income for the registered charitable sector in that year ($5.9 billion out of a total of $15.6 billion). Who were those charities and are there lessons for future grant and government contract payment applicants in 2014? 

Summary

If you would like your charity to benefit from government funds in the future, here are 10 helpful hints based on returns filed with the New Zealand charities regulator for the 2012 financial year:

1. Don’t just rely on government income:  Don’t expect to rely on government to provide all the income for your charity – find income from other sources as well.  Each year only about 100 - or 2% of charities which receive government funding - are 100% government financed.  Most of these are either fire brigades or primary health organisations.

2. Non-government grants and sponsorship:  If you are going to apply for grants, approach both government and non-government funders.  Fifty-eight percent of charities which received funds from government agencies also received funds from non-government grant and sponsorship providers in 2012.  Don’t forget that some non-government funders are prepared to provide untied funds, or funds to spend on new or high-risk areas, which may not be available from a government agency.

3. Government grants and payments distributed by region:  Charities that operate nationwide received the largest amount of government funds in 2012 - $2.2 billion or $4 million per charity.  If your charity operates exclusively in one region, then it’s best to be in Wellington – Wairarapa, where charities received the highest average government payment per charity, followed by Auckland and the Bay of Plenty.  Expect the smallest payments if you operate exclusively in the West Coast, Taranaki or Nelson - Marlborough – Tasman.

4. Size of government grants and payments for services:  In 2012 about half of registered charities funded by government received less than $100,000 in government grants and contract payments, and the other half received more than $100,000 in government grants and contract payments.   It is just as rare to receive less than $1,000 from the government as it is to receive over $10m (2% of charities fall into the former and 2% into the latter category), so if you are applying for less than $1,000 make sure it is worth the effort before you fill in the paperwork.  About a quarter of government payments were in the $10,000 to $50,000 range and a fifth were in the $1,000 to $10,000 range. 

5. Sectors likely to receive government funding: You're most likely to receive government funding if your main sector is employment (56% of charities operating in this sector receive government funding), emergency and disaster relief (50%) and social services (47%).   You are least likely to receive government funding if your main sector of operation is fund raising (3% of these charities received government funding), religious activities (5%) and care and protection of animals (12%).

6. Sector dependence on government funding:  If you do receive government funding, then you are likely to be heavily dependent on this funding if your main sector is people with disabilities (government funding made up 81% of total income for these charities), health (78%) and social services (61%).  On the other hand, you will be least dependent on government if your main sector is employment (government funding made up 3% of total income of these charities), care and protection of animals (8%) and charities with international activities (12%).

7. Average sector payments from the government: If your goal is to get the most money from the government, then your charity would be better off in the health sector (where the average government funding to a charity was $3.1m), followed by the people with disabilities sector ($2.0m) and the education / training / research sector ($1.7m).  Don’t get your hopes up if your charity is involved with emergency and disaster relief (the average government funding to these charities was about $25,000), care and protection of animals ($31,000) and marae on reservation land ($83,000).

8. You don’t need to look poor:  About 52% of charities that received government grants in 2012 had accumulated reserves of at least half of their total asset value.  So you don’t have to be poor before you qualify for government funding.  Having said that, 82 or 1.5% of registered charities that received government payments had negative equity and appeared to be insolvent, yet even that did not stop the government from funding them in 2012.

9. Preparing for new accounting standards:  90% of charities that receive government funding in 2012 either fell within the new definition of a Tier 4 charity (with operating payments below $125,000) or a Tier 3 charity (with operating payments between $125,000 and $2 million).  If you fall into these categories your government payments are likely to average $26,000 or $331,000 respectively and you will be able to report using simple format reporting standards from 1 January 2015.  Based on 2012 figures and using the new review and audit operating expenditure thresholds, 71% of charities that receive government funding will not require any independent review or audit (unless it is required in their constitution); 11% will require a review (because their operating expenditure is between $500,000 and $1m) and 17% will require an audit (because their operating expenditure exceeds $1m).   So be prepared!

10. Government agencies which provide funding:  Finally, remember that there are a large number of government funding providers.  In 2012 the top charities within each sector received funding from about 30 agencies.  Depending on what services you provide, consider applying to the Ministry of Health, the Ministry of Social Development, the Ministry for Primary Industries, Te Puni Kokiri, NZ Police, NZ Search and Rescue, the Ministry of Business, Innovation and Employment, GNS Science, NIWA, the Parliamentary Commissioner for the Environment, the Ministry for Culture & Heritage, Creative NZ, Sport New Zealand, Child, Youth and Family, Work and Income, the Accident Compensation Corporation, the Ministry of Justice,  the NZ Qualifications Authority, Public Health Organisations, various NZAID funds managed by the Ministry of Foreign Affairs and Trade, district health boards, city and regional councils, NZ Lotteries, the Department of Internal Affairs Community Organisations Grants Scheme (COGS), the Social Housing Fund, the Housing Innovation Fund and the Tertiary Education Commission.  If in doubt, look on the register to see how similar charities to yours obtain their funding.

 

The details

The following analysis focuses on registered charities which have recorded income under the category "Government grants / contracts" in their Form 4 Annual Return for a charitable entity.  The financial information help notes supplied by the regulator contain the following explanation: "Include all income you received from central and local government sources including grant payments or payments for contracted services. For example, Lotteries Commission, SPARC, COGs, WINZ."

The charities regulator publicly states that it does not verify information supplied by charities.  Therefore it is likely that some charities have misclassified their government income and their errors have not been rectified by the regulator or identified in preparing this blog.  Government payments for providing services may be particularly susceptible to misclassification because they tend to be disclosed separately to government grants in financial accounts.  For example, the upcoming charity accounting standards require government grants to be classified under a "donations, fundraising and other similar receipts" category whereas grants received from the government that are in substance a contract for the delivery of goods or services are to be recorded in a "receipts from providing goods or services" category.

In preparing this blog I discovered one charity alone had misclassified $46 million of government contract payments as "income from service provision / trading operations" rather than "government grants / contracts".  I contacted the charity and they explained they wished to distinguish government grant payments from their contract payments.  However they agreed to reclassify the amount into the government income category.  So the bottom line is - allow for a margin of error when you interpret this information on the register.

1. 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 just under 12% per annum in the value of government funding received by registered charities.  The amount of government income reported by registered charities rose from $4.24 billion in 2009 to $5.92 billion in 2012.  However, the number of registered charities receiving government funding has risen at a lower rate - by an average of 4% per annum, from 4,716 in 2009 to 5,282 in 2012.

Graph A

 

 Setting aside the universities, which are discussed in section 4 below, over the four years from 2009 to 2012 the most successful charities to consistently obtain the most government funding are shown below (total government funding over the four-year period is also listed):

1.      Idea Services Limited (IHC) - $861 million

2.      The Priory In New Zealand of the Most Venerable Order of the Hospital of St John of Jerusalem (St John) - $453 million

3.      Health Research Council Of New Zealand - $325 million

4.      Wise Group (mental illness) - $225 million

5.      Royal New Zealand Plunket Society Incorporated - $209 million

6.      Access Homehealth Limited - $187 million

7.      The Salvation Army New Zealand Group - $184 million

8.      Spectrum Care Trust Board - $158 million

9.      Nurse Maude Association - $148 million

10.   Presbyterian Support Central - $147 million.

2. Size of government grants and contract payments

About half of registered charities that are funded by government receive less than $100,000 of government grants and contract payments, and the other half receive more than $100,000 of government grants and contract payments. 

It is just as rare to receive less than $1,000 as it is to receive over $10m (2% of charities fall into the former and 2% into the latter). 

As shown in Graph B, the majority of government funded charities either receive $1,000 to $10,000 (20%), $10,000 to $50,000 (23%) or $100,000 to $500,000 (26%).

Graph B

3. Government funding broken down by sector

Based on returns filed by registered charities for 2012, 36% of the value of all government grants and contract payments went to the education / training / research sector, followed by 28% to the health sector, 10% to the disabilities sector and 7% to the social services sector.  That is 81% of government funding being injected into just four sectors.  Every other sector (apart from ‘other’) received 2% or less of total government funding.

The three sectors that received the smallest proportion of the value of government grants and contract payments, all less than 1%, were maraes on reservations (48 marae received a total of $4m), fund-raising charities (18 fund-raising charities received $1.8m) and charities responsible for the care and protection of animals (19 of these charities received $600,000). 

The sector breakdown, along with the names of charities in each sector which received the highest government grant and contract income, are shown in Table I.  Table I also indicates the nature of the government funding, based on explanations in the financial accounts, annual report or charity website. 

Table I: 2012 Government funding by sector

 

4. New Zealand Universities

New Zealand’s universities dominate the registered charitable sector because of the size of their revenue.  As a group, they received one quarter of the funding government provides to registered charities - $1.5 billion in 2012 out of total government funding of $5.9 billion. 

There are eight official “universities” in NZ, including Auckland University of Technology (AUT) but not Manukau Institute of Technology (MIT).  The former is not a registered charity and the latter is a registered charity.  Table II, below, draws on information in the charity register to show all nine tertiary institutions and the government funding they received over the four years 2009-2012. Victoria University registered as a charity on 23/8/11 so its first return to the charity regulator was for 2012. 

The figures highlighted in blue for Victoria University and AUT have been extracted from public annual reports for comparative purposes.  Because these two universities were not registered charities in these years, their financial information is not on the charities register. 

Table II: Government funding received by NZ Universities and Manukau Institute of Technology from 2009 to 2012

 

5. Charities solely reliant on government income

Each year about 100 or 2% of charities which receive government funding indicate they are 100% government financed.  Many of these (about 40%) are fire brigades.

Excluding the fire brigades, about 51 charities on the register have been 100% government financed for more than one year between 2009 and 2012.  The three with the most multiple-year government funding are all in the health sector: The Maori Primary Health Organisation ($3m in 2009, $6m in 2010); Te Hauora o Turanganui a Kiwa Limited ($5m in 2009, $5m in 2011 and $6m in 2012); and Cosine Primary Care Network Trust ($3m in 2011 and $5m in 2012).

6. Geographical distribution of government grants and payments

Table III shows government payments made to charities which are operating nationwide, operating exclusively within one of the 13 regions in New Zealand, operating in a cluster of multiple regions including overseas countries, and operating in a cluster of multiple regions within New Zealand.

Using these categories, charities which operated nationwide received the most funds from government, $2.2 billion, which equates to $3.9m for each nationwide charity. 

In respect of the specific regions, charities that operated exclusively in Auckland received the most funds from government ($551m), followed by Wellington-Wairarapa charities ($476m) and Otago – Southland charities ($206m).  The West Coast charities received the least ($16m).  However, on a per-charity basis, Wellington – Wairarapa charities received the highest average per charity ($987,000) followed by Auckland charities ($723,000) and Bay of Plenty charities ($513,000).

As shown in Table III, the three types of charities that operated exclusively in a region and received the largest government payments were universities, primary health organisations, and kindergarten associations.

Table III: 2012 Government funding to charities with specific areas of operation within NZ

 

7. Accounting matters

For accounting purposes, government grants tend to be recognised as revenue upon completion of services for which the grant was made. Where obligations are attached to a government grant, a liability is recognised. Once the obligation is discharged, the government grant is recognised as revenue.  Capital grants tend to be recognised as income over the estimated life of the asset purchased.

8. The approach across the Tasman

An Australian Productivity Commission Research Report released in 2010, “Contribution of the Not-For-Profit Sector”, noted that government funding represents 33% of the Not for Profit sector income in Australia, 25% in New Zealand, 40% in the USA and 43% in the UK (see pp.72-73).  The NZ percentage differs significantly from the 38% identified in this paper due to a number of factors:  the productivity report figures were based on the not-for-profit sector rather than just registered charities; it focused on large not-for-profits rather than the whole sector; and its percentages are based on older data (ie the Australia percentage was based on data that relates to 2006/2007).

At present, the Australian Charities and Not-for-profits Commission (ACNC) is collecting its first year’s worth of Annual Information Statements from registered charities for 2013.   However it will not be until after 1 July 2014, when the 2014 Annual Information Statements are filed, that grant funding information will be collected and made publicly available like it is in New Zealand.  The 2014 Annual Information Statement requires all charities – small, medium and large – to disclose their government grant income (with the exception of ‘basic religious charities’ which are exempt from providing any financial information).  The ACNC defines government grants as follows:

“Government grants include money, assets or services received from government so that the charity can provide goods or services to others in accordance with the terms of the grant. Include all grants your charity receives or is receivable from the Commonwealth, state or territory, or a local government body in the 2014 financial year. This includes general purpose grants as well as grants received under a contract with government to provide specified services”

Finally, it is useful to know that the Australian government has issued Commonwealth Grant Guidelines which establish the requirements and key principles that apply to all Commonwealth grants.  The guidelines discuss registered charities in the grant acquittal process.  They state that any agency which provides a grant must not request information during its acquittal process that the charity has already provided to the ACNC.  This is an initiative to reduce red tape – saving registered charities the hassle of having to provide financial information to both the ACNC and its Commonwealth funders to satisfy grant acquittal requirements.

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Disclosure: I am currently the Acting Director of Compliance at the Australian Charities and Not-for-profits Commission.   The above analysis is prepared in my personal time.  Any errors are mine and opinions do not represent the views of the ACNC.

18. NZ charities that receive bequest income

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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?

 Summary

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.

 Size of bequests

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.  

 Bequests vs donations

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.

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* 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.  

17. Australia vs New Zealand: Comparing information charities provided to the regulators

 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. 

Last week the Australian Charities and Not-for-profits Commission (ACNC) shared its first insights into the charitable sector based on the initial 3,000 Annual Information Statements filed by Australian registered charities. 

These first 3,000 returns only give an indicative view of the sector - the ACNC is expecting about 57,000 returns in total between now and mid/late 2014.  But it’s interesting nonetheless to compare these insights to information provided by New Zealand’s 24,321 registered charities in their most recent returns.  What stands out is how similar the charitable sector statistics are between the two countries, based on the limited amount of data released by the ACNC so far. 

SUMMARY

Charity sizes: Australia reported that 74% of its charities fall into the small category and 11% fall into the large category, with the remaining charities falling into the medium category.  New Zealand's equivalent is 81% small charities and 7% large charities, using the same criteria.  The proportion of small, medium and large charities is therefore fairly similar between the two countries – with New Zealand having slightly more small charities and Australia having slightly more large charities.

Beneficiaries:  Both countries list the general public and children/youth as two of their top three charity beneficiary categories.  Australia also lists the elderly in their top three, but New Zealand lists religious groups as the third most common beneficiary group (the elderly come in at number seven). However, beware of the problems with capturing charity beneficiaries on the regulator form – the approach differs markedly between the two countries.

International assistance: 16% of Australian charities and 13% of New Zealand charities work to help people internationally. 

Charity volunteers and paid staff: By coincidence, 42% of Australian charities and 42% of New Zealand charities reported that they solely rely on volunteers.  At the end of their 2013 reporting period, Australia’s 3,000 charities reported a total of 225,000 volunteers, along with 13,000 full-time employees and 18,000 part-time employees.  New Zealand’s 24,321 charities reported a total of 413,000 volunteers, 112,000 full time and 440,000 part time employees.  However, once again, beware of the problems with capturing information about charity employees and volunteers.  The New Zealand information suggests that up to 16% of registered charities may be failing to complete the “your people” questions despite engaging paid or volunteer staff, so the aggregate totals could be materially understated.

The extent of red tape and reporting: 29% of Australian charities that have submitted an Annual Information Statement indicated how much time per annum they spent on reporting to Commonwealth, or state and territory departments and agencies. Small charities indicated that they relied heavily on volunteers, with volunteers completing 70 hours of government reporting, compared to 16 hours by paid staff.  Large charities, on the other hand, indicated that they relied heavily on paid staff, with paid staff spending an average of 288 hours and volunteers spending 20 hours reporting to government.  New Zealand does not ask these questions so there are no comparable figures.

THE DETAILS

Charity sizes (based on total revenue)

The ACNC reported that 74% of the 3,000 charities which have filed their 2013 Annual Information Statement were small charities (with annual revenue of less than $250 000), 15% were medium (with annual revenue of $250 000 - $999 999) and 11% were large (with annual revenue of $1m and over).

In New Zealand the figures are surprisingly similar if you apply the Australian thresholds to the New Zealand charities’ gross income.  Approximately 81% of New Zealand’s 24,321 filers would be small, 12% would be medium and 7% would be large.

The only noticeable difference is that New Zealand has slightly more small charities and slightly less large charities than Australia.  Which is what you might expect based on Australia’s population compared to New Zealand – Australia would naturally have more charities in the ‘large’ category.

Beneficiaries

The top three beneficiaries listed by the Australian charities were children and young people, the general community in Australia and elderly people. This is out of a total of 19 possible options (excluding ‘other’).

The top three beneficiaries listed by the New Zealand charities were the general public in New Zealand, children/young people, and religious groups.  This is out of a total of 11 possible options (excluding ‘other’ which I have mostly recategorised).

Initially this may lead you to conclude:

(1) New Zealand has a bigger charitable focus on religious groups than Australia, and

 (2) New Zealand is far less charitable to its elderly people compared to Australia (elderly people are actually ranked seventh out of 11 New Zealand beneficiary types).

However, on closer inspection, the conclusion about religion is incorrect.  Australia’s annual charity form does not even have a beneficiary category for religious groups.  Instead, it identifies religious-related charities through its purpose question (the advancement of religion) and its activities question (religious activities). So we still do not know whether New Zealand is more focused on religious groups compared to Australia, because the beneficiary data between the two countries is not comparable.  [I have published more information about New Zealand's religious charities in my September 2012 blog "Religious Charities".]

The smaller proportion of charities helping older people in New Zealand is not so easily explained.  One theory is that many elderly New Zealanders belong to religious groups, so charities may have nominated religious groups, rather than older people, as the appropriate beneficiary category.  In any case, it’s worth keeping an eye on how the figures compare with Australia as more Australian charities file their returns.

There’s one final point worth noting about beneficiaries.  The questions used by regulators to elicit charity beneficiaries are likely to have a high error rate in both countries for the following reasons:

·        Too many beneficiary options: There are a lot of boxes to tick to identify the relevant beneficiaries (19 in Australia and 11 in New Zealand) – so some charities may simply give up and tick one or two, whereas more categories may be appropriate.

·        Temptation to identify the widest possible number of beneficiaries:  Some charities may be tempted to tick all of the boxes to show they are really there for the general community (even though both countries provide a specific ‘general community box).

 

·        Odd beneficiary categories:  Both countries suffer from odd beneficiary categories.  New Zealand's category for 'family'whanau' came in as the fourth most common beneficiary, but what does it mean in the charitable context?  New Zealand also has a category for "people of a certain ethnic/racial origin" - without explaining exactly what a certain ethnic/racial origin is.  Are Pākehā a certain ethnic/racial origin?  Who knows.  But less than 2% of charities have ticked that box, so I doubt that is how charities are interpreting it.  Australia also has its foibles.  For example, it has separate categories for 'Children' and 'Young People' without telling us what the difference is between the two (New Zealand combined these categories).  It also goes to the trouble of having separate 'men' and 'women' categories but unlike New Zealand it doesn't have a category for animals.

 

·        Excessive use of the ‘other’ beneficiary category.  Perhaps one of the advantages of Australia’s long list of beneficiaries is that charities are less likely to create their own ‘other beneficiaries’ category.  In New Zealand almost 4,000 or 16% of charities listed an ‘other beneficiary’ as their main beneficiary (though well over half of these unnecessarily repeated one of the official beneficiary categories).  The remaining “other” categories described by New Zealand charities are specific and varied.  There are common themes, some of which tend to match the additional Australian categories.  For example, a lot of charities which used an "other" category identified their main beneficiaries as:

-         “school children/students/university students”

-        “schools/universities”

-        “artists/musicians”

-        “women/women and children”

-        “hospital/hospice patients/people with cancer”

-        “offenders/ex-offenders”

-        “the local community”

-        various sports club members (such as golf, tramping, deerstalking, bowling, croquet, canoeing, squash, bridge, rowing, triathlon, equestrian, football, and motorsport)

-        commercial industries (such as deer farming, dairy industry, pastoral farming, fruitgrowers, and oil and gas). 

There is also the occasional unusual beneficiary category, such as “income accumulation” or “land owners” or some rather annoying references to other documents such as “see section 4.1 of trust deed”.   Income accumulation is unusual if it is at the extreme end of the scale.  For example The Charitable Foundation Of The Bishop Of Dunedin listed its main beneficiary as “Nil current beneficiaries - still establishing capital base”.  The foundation had $11m gross income in 2012, assets of $152m and equity of $119m, so potential beneficiaries may well be left wondering when its capital base will be established so it can start helping the community.

·        No use of “main beneficiary” or “date of change” box in Australia: The New Zealand charity regulator seems to take the beneficiary question very seriously – not only do charities have to identify their beneficiaries but they also have to identify their ‘main’ beneficiary and if any of the beneficiaries changed, or if the main beneficiary changed, they must specify the effective date the beneficiaries changed (they have three months to notify the regulator after they become aware of this change).  Australia takes a much more relaxed approach and only requires charities to identify who was helped by the charity – there is no ‘main beneficiary’ category and no date of change required. 

International assistance

16% of Australian charities said they worked to help people internationally. Over 150 countries were listed, with New Zealand, the US, India, the Philippines and Papua New Guinea the most popular.

New Zealand is not far behind with 13% of New Zealand charities saying they either sent a percentage of their funds overseas, made grants overseas, conducted international activities or had an overseas area of operation (or a combination of these factors).

The New Zealand regulator asks charities to list the continent they operate in, rather than a specific country (note to the New Zealand regulator: it would be great if that could change in the future – country information provides more useful insights!)  The continents listed in order of frequency are Oceania, which includes Australia and the pacific islands (1,139 charities), Asia (995 charities), Africa (542 charities), Europe (405 charities), North America (297 charities), South America (282 charities) and Antarctica (45).

The most unusual insight here is that Australian charities list the US as the second most common country that they operate in, whereas it might be reasonable to expect poorer countries to rank above the US.   New Zealand’s priority list is less surprising, with North America ranking behind Oceania, Asia and Africa, as you might expect.

Volunteers and employees

42% of Australian charities reported that they solely relied on volunteers. At the end of their 2013 reporting period, these 3,000 charities reported a total of 225,000 volunteers, along with 13,000 full-time employees and 18,000 part-time employees. These figures will increase as more Annual Information Statements are submitted.

By coincidence, 42% of New Zealand charities also reported that they solely relied on volunteers.  That is, they did not record any paid (full time or part time) employees, but they did record one or more volunteers or volunteer hours.  However the surprise statistic from New Zealand is that 18% (4,491) of total registered charities recorded that they had neither volunteers nor paid employees.  Out of the 4,491, 3,900 still received some type of income.  For example, Rescare Homes Trust recorded no details about employees or volunteers, but disclosed gross income of $9m (and a salary expense of $7m) for the year ending 31 March 2013.  It is therefore likely that up to 3,900 (16% of total charities) are not completing the volunteer and employee statistics when they should be, so aggregate employee and volunteer numbers on the register could be materially understated.  A further 591 charities (2%) appear to be inactive with no income and no paid employees or unpaid volunteers.   

The New Zealand register shows an aggregate of 413,000 volunteers, 112,000 full time and 440,000 part time employees.  But as mentioned above, these figures are likely to be understated due to a significant number of charities not completing the “your people” questions on the annual form.

The extent of red tape and reporting

29% of Australian charities that have submitted an Annual Information Statement indicated how much time per annum they spent on reporting to Commonwealth, or state and territory departments and agencies.  This is an optional section in the form, so 29% seems to be a good response rate.

Large charities indicated that paid staff spent an average of 288 hours and volunteers spent 20 hours reporting to government. For medium charities these figures were 135 hours by paid staff and 94 hours by volunteers. Small charities relied much more heavily on volunteers, with non-paid staff completing 70 hours of government reporting, compared to 16 hours by paid staff.

How does New Zealand compare?  We don’t know because the New Zealand regulator doesn’t ask the question.  Perhaps that’s where Australia’s regulator really stands out compared to New Zealand.  The ACNC is focused on reducing red tape for charities, so it has an interest in measuring what the burden is today and how it changes over time.  Or is there simply an assumption by the New Zealand government that charities do not have a red tape problem?  It would be interesting to know the answer.