Understandability and Transparency of the Financial Statements of ...

CHAPTER 2: REGULATORY & CONCEPTUAL FRAMEWORKS
2.1 Introduction
Before investigating some specific complexities with transparency and
understandability it is important to contextualise the problems within the regulatory and
conceptual frameworks in which New Zealand charities operate.
As well as New Zealand the regulatory and conceptual frameworks of Australia,
England and Wales will be covered. John Key‟s joint announcement with Kevin Rudd
on closer ties to Australia (Ministry of Economic Development, 2009b) has direct
relevance for the New Zealand charities‟ conceptual framework, as the intention is for
charities to utilise a single set of accounting standards and prepare only one set of
financial statements (Ministry of Economic Development, 2009c). However, Australia
does not have a similar regulatory framework to New Zealand. Hence England and
Wales will be included for comparison as they have a similar structure to New
Zealand‟s Charities Commission with a Charity Commission that considers both
English and Welsh charities (Charity Commission, 2008d).
This chapter initially looks at what constitutes a charity and the myriad of legal
structures charitable organisations utilise. The chapter will then investigate the
regulatory framework, including the conceptual framework, for charities within
Australia, England and Wales, New Zealand and internationally, identifying some of the
problems. Next the chapter will examine the agencies that monitor compliance with this
regulation.
2.2 Charitable purpose
The key element in determining what constitutes a charitable organisation is whether the
reason for the organisation‟s existence relates to a „charitable purpose‟. The discussion
relating to charitable purpose can be traced back over four hundred years initially to the
Elizabethan Statute of Charitable Uses 1597 (39 Eliz., c.6) closely followed by the 1601
Statute of Charitable Uses (43 Eliz., c. 4). The Preamble to this 1601 Statue provides the
first legal definition of charitable purpose. At that time all organisations must be
deemed to be of public benefit to meet the definition, with the relief of poverty being
the prime reason for charity in the 1600s (Fishman, 2007).
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