Understandability and Transparency of the Financial Statements of ...

The focus of the Charities Commission in its early years has been on the first function
of registering charities. However, as the majority of organisations choosing to register
as charities has decreased, so has the Charities Commission focus turned to their other
two functions. In relation to the second function of education, the Charities
Commission has stated that they are now “scoping our ability to provide charities with
access to education” (Charities Commission, 2009b, p. 2). The Commission‟s role in
relation to monitoring charities has only recently been developed, as seen by recent
headlines regarding the Charities Commission‟s decision to de-register several charities,
including Greenpeace, as their investigations determined that these charities existed for
advocacy purposes, which is specifically excluded under section 5(2) Charities Act
2005 (Collins, 2010a, 2010b; Rudman, 2010). It is positive for the sector that the
Charities Commission has become more proactive in its third role. Next, the registers in
which some charities are listed are identified.
2.4.4.2 Registers
There are four registers in which charities can be registered: Charities Register;
Charitable Trusts Register; Incorporated Societies Register; and Companies Register, all
of which will be discussed next.
REGISTERED CHARITIES
Those organisations that the Charities Commission have approved for registration are
listed on the Charities Register at
http://www.register.charities.govt.nz/CharitiesRegister/. The potential success in
regulating the charities sector hinges on ensuring that a substantial number of charities
within the sector do register.
The Charities Commission is trying to encourage registration by emphasising the
benefits for charities (Charities Commission, 2006b), which include the transparency of
the Register as a depository for charities‟ information that potential donors and funders
can access. Also the mere fact of being registered ensures charities are exempt from
income tax as per the Income Tax Act 2007 sections CW41 & CW42 (Charities
Commission, 2006j).
Section 41 of the Charities Act 2005 requires each registered charity to file an Annual
Return (Charities Commission, 2008b) each year. Question 25 of that return asks for
specific financial information on income and expenditure; assets and liabilities and
equity. This information is broken down into several categories, including: membership
27