The following is supplementary information to the Counsel: The Charities Commission – not a one-stop shop
Part 1 of the Charities Act, which creates the new Charities Commission, has already come into effect, however the remainder of the Act will not be brought into force until a later date to be fixed by Order in Council. We understand that registration with the Charities Commission will not start until March 2006 at the earliest. The taxation provisions of the Act (which will deprive unregistered charities of their tax-exempt status) are not expected to take effect until some time in 2007, though a specific date is yet to be fixed.
Changes from the Bill
The Charities Commission is to be an autonomous Crown entity to maintain its independence.
There has been an increased emphasis on the Charities Commission’s education and support functions (though this is not readily apparent in the Charities Act).
There has been a commitment from the government to fund the set-up of the Charities Commission and the initial costs of registration for charities (in the short term).
The aims of the Charities Act:
- To establish a Charities Commission to register and monitor charitable entities to ensure that those entities receiving tax relief continue to carry out charitable purposes and to provide a clear public benefit.
- To create a registration system, which provides a mechanism for improving the transparency and accountability of charitable entities.
- To provide ongoing monitoring (for example, through annual returns) to enhance public confidence.
- To provide education and assistance to the charitable sector.
- To provide advice to the government on charity related issues.
The process for registration
- Charities seeking registration will be required to complete a registration form and to attach copies of their foundation documents including the rules governing the organisation.
- Charities will be required to provide certification from prospective officers of the entity (officers includes trustees) that they are not disqualified persons. (Disqualified persons include undischarged bankrupts, minors, certain disqualified persons under the Companies Act 1993 and persons convicted of dishonesty offences (as defined in section 2(1) of the Crimes Act) within the last 7 years).
- Charities will be given a unique registration number, which may be displayed on fundraising materials, such as collection tins used to solicit donations from the public.
- Charities must prove to the Charities Commission that they are carrying out charitable purposes and activities and are providing a clear public benefit. The Charities Commission has powers of inquiry to ensure that this continues to be the case.
- Any decision by the Charities Commission to refuse registration or to deregister a Charity will be open to review both internally by the Charities Commission and by the High Court.
Ongoing obligations and enforcement
- Charities will be committing an offence if persons soliciting donations by way of the Internet or telephone do not provide, on request, the registration number of the entity.
- Once an organisation has been registered it will be required to submit an annual return outlining its charitable purposes and activities. The return must provide basic financial data such as an organisation’s income, outgoings and net worth.
- At this stage we understand annual return fees will be set at $50 (including GST) for online filing, and $75 (including GST) for paper filing. The Charities Commission will have the power to exempt an organisation from any of the filing requirements and/or fees payable under the Charities Act.
- Details provided on registration and in annual returns will be publicly available from the Charities Commission.
- The Charities Commission will have enforcement powers including the power to impose administrative penalties, warning notices, publicise non-compliance and initiate formal investigations.
- The Charities Commission will also have the ultimate sanction of deregistering a charity for a persistent failure to meet its obligations.
- It will be an offence to use the term “registered charitable entity” or similar if an organisation does not register under the Charities Act.
- The Charities Commission has the power to disqualify persons from acting as an officer of charitable entities.
- We understand that the enforcement powers of the Serious Fraud Office, the Police, and IRD will also be retained.
- Charities may apply for umbrella registration (i.e. a parent may register on behalf of a number of subsidiary entities) provided all of the entities meet the qualification requirements of the Charities Act.
- An entity may give effect to ancillary purposes that are not charitable provided these are ancillary, secondary, subordinate, or incidental to the charitable purposes of the entity.
- The Charities Commission may supply information and documents to the Inland Revenue Department and to any other person exercising powers or functions under any other enactment.