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?
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
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
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.
__________________
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.
