12 Jul 2022

What makes a charity a charity?

From The Detail, 5:00 am on 12 July 2022

The Supreme Court's ruling that Family First doesn't qualify for charitable status has put the spotlight back on the rules that govern the sector - which organisations make the cut, and which don't? 

Generic money.

Photo: RNZ / Rebekah Parsons-King

Last year, New Zealanders gave more than $4 billion to the country's 28,000 registered charities. 

The overall income they bring in is far higher than that - more than $21 billion, which is comparable to the value of the country's dairy exports. 

Charities employ about 145,000 people and more than 200,000 of us volunteer for them. 

But what exactly is a charity? 

The Family First ruling 

The reason charities are back in the spotlight is the Supreme Court's decision last month that Family First doesn't qualify for charitable status. The judgment follows a lengthy legal process lasting almost a decade.  

Back in 2013, the Charities Registration Board decided Family First no longer qualified for charitable status, because its main purpose was political.  

Following a Supreme Court decision in 2014 involving Greenpeace, which determined that having a political purpose wasn't a bar to being a charity, the board was directed to reconsider its position on Family First.  

It came to the same conclusion and Family First went to the High Court to challenge it. 

The High Court dismissed Family First's appeal, but the Court of Appeal ended up reversing the group's deregistration. However, the latest Supreme Court ruling is the end of the road for Family First.

Family First national director Bob McCoskrie has criticised the decision, saying the court's got it wrong and when it comes to whether charities can advocate for political purposes, it just wants a level playing field. 

What exactly is a charity? 

The foundations of New Zealand's charity law date back to Elizabethan times - yes, Elizabeth I - and the English Statue of Charitable Uses Act 1601. 

The four heads of charity are used to decide what is and isn't a charity, and they come from an English court case, decided in 1891. 

They are the relief of poverty, the advancement of education, the advancement of religion, and any other purposes beneficial to the community. 

The four heads of charity have been included in New Zealand's Charities Act, passed in 2005. 

But it's really been left up to the courts to decide what is and isn't a charity. 

BusinessDesk senior journalist Oli Lewis says that's essentially how charities law has developed for centuries. 

"[The Charities Act] is left open to interpretation, it's got four quite broad categories that charities can apply to be charitable under, but it's left to the courts to thrash out what actually falls under those categories. 

"You have this body of case law developing where the courts essentially say, 'yes we agree this is charitable, this isn't' and that helps define what is considered a charity in New Zealand." 

Who makes the cut? 

"I think there's a little bit of misunderstanding amongst the public about what constitutes a charity," Lewis says. 

"Universities, for instance, are charities in New Zealand, iwi entities like the Ngāi Tahu Charitable Trust are charities. 

"You've got these really big players that make up the lion's share of the assets and the income which is coming into the sector.  

"And then you've got your small community groups that plant some trees at the weekend, which are the more commonly thought of charities." 

But some charities are a bit more left field - there are charities registered in New Zealand that are researching how to stop the ageing process with cryonics.  

A push for greater transparency 

The government is also making moves to ensure big charities are more transparent about their accumulated cash and assets.  

The changes, announced last month, follow a review of the sector which got underway back in 2018. 

There are also proposals to reduce the administrative burdens on smaller charities, and an easier way for charities to appeal decisions. 

"The government wants to make it really clear to charities that they need to be justifying in their annual returns why they have accumulated funds," Lewis says. 

"The rationale behind that is that people give to a charity and they expect that their donation is going to be used to fund charitable services, which is what happens.  

"But in a lot of cases, charities also want to keep strategic reserves or they might run a different operating model which essentially requires them to maintain a big asset base." 

Basically, the government wants charities to explain and justify to the public why they're holding on to their money and not spending it. 

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