Understandability and Transparency of the Financial Statements of ...

legislation and monitoring. Of particular interest in legislation was the fact that New
Zealand‟s definition for charitable purpose does not include advocacy, which many
within the charities sector consider an important part of a charity‟s role. There is a need
for the Charities Commission to reconsider the limitation of charitable purpose into only
four heads of charity, especially with many of the advocacy groups being refused
funding due to them not being registered charities.
Another problem arose with regards to charities having similar names: this needs to be
considered by the New Zealand Charities Commission when they next review the
registration of charities to limit confusion by stakeholders. The ease by which charities
can be established, and whether this is appropriate, will be considered in Chapter Eight
(section 8.4.5).
Attention was also given to the legal structure of charities and in particular whether
companies and incorporated societies, with their shareholders and members, are
appropriate legal vehicles for charities. There is a need to be transparent about the main
aim of the business being its charitable purpose rather than satisfying the demands of
their shareholders and members, and it is doubtful whether these legal structures meet
this aim.
The final aspect of legislation looked at the need for charities to acknowledge the
taxation benefits they gain and be accountable for justifying them, especially with
regards to charities that have chosen not to register, such as an unregistered charitable
trust.
Once again the issue of poor professional standards, raised in Chapter Six, was
considered, this time in relation to Charities‟ Board members and charities‟ auditors.
Well-meaning people may be constraining charities‟ ability to achieve their mission
effectively by considering that they are „giving to the community‟ by sitting on a
Charity Board without experience, or by accepting audit roles without an understanding
of the technicalities of risk-based auditing. These people must be up-skilled to lessen
the potential harm done to the image and functioning of the charity.
The altruistic nature of charitable organisations often leads to the assumption that the
people within them are honest and this negates the need for any form of control. This
research noted the battle taking place in some charities as some interviewees attempted
to implement internal controls, to the horror of those in the charity who considered they
were not being trusted. There needs to be a balance between trust and internal controls.
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