Understandability and Transparency of the Financial Statements of ...

perception of fraud in the NFP sector is different from the reality. Thus, while a certain
level of fraud can be expected of commercial organisations the trust inherent in charities
means that any fraud is not acceptable to donors.
There is also a concern that people may establish charities to avail themselves of the
taxation benefits. Hence, there is a need for charitable organisations to be monitored to
ensure they still meet the charitable purpose definition and any anomalies are
investigated. Issues around monitoring will form part of this study of reporting by New
Zealand charities. Next, the various organisations that monitor charities will be
reviewed starting with charities‟ regulatory bodies.
2.6.1 Charities’ Regulatory Bodies
Once a charity is registered, the Charities Commission is able to monitor its activities
and, in particular, investigate complaints (Charities Commission, 2007b). The Charities
Commission‟s 2008 Annual Report states that a framework has been developed for
monitoring activities (Charities Commission, 2008a).
Chris Winstanley, the Charities Commission‟s General Manager of Registration and
Compliance, has noted that at this stage the framework is exception driven rather than
examining every charity. Thus, if someone complains about a charity the Commission
will investigate. This has already seen the removal from the register of some charities
that no longer meet the requirement of charitable purpose or have pecuniary gains
(Personal Communication, 13 May 2009).
This focus on investigating complaints about charities was reiterated by Trevor Garrett,
the Commission‟s Chief Executive, who was interviewed on „Close-up‟ (Television
New Zealand, 27 July 2009) and stated:
You‟re [the public] the ones that are going to put it [charities] under scrutiny
and if there‟s any issues of real concern, you‟ll come to us [Charities
Commission] and say hey, we‟ve got a problem and we will carry out an
investigation into that organisation.
When the interviewer responds by asking “your job is to monitor this stuff. Shouldn‟t
you be assessing charities?” the Chief Executive notes that with 23,000 organisations
registered they are unable to look at every single organisation.
However, in England and Wales the Charity Commission is much more proactive and
considers that “having a regulator that deals swiftly and effectively with abuse when it
occurs and promotes compliance is at the heart of public trust and confidence in
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