While the devastation wreaked by Cyclone Gabrielle continues to dominate our focus, behind the scenes, political parties continue to develop their manifestos in the lead-up to this year’s general election. Sue Barker, Director of Sue Barker Charities Law, joins us for a series on 10 election policies for charities for 2023. In the sixth part of the series, Sue shares her insight on reinstating the Charities Commission. She will also be presenting in March at the upcoming Charities and Not for Profits Update.
Policy 7: reinstate the Charities Commission
The 2011/12 decision to disestablish the Charities Commission needs to be revisited.
In a democracy, charities have the right to operate independently of government and be critical of government policy and practice. It is therefore essential that the scope of charity is determined independently of the government of the day: an independent civil society is as critical to democracy as free and fair elections, an independent judiciary, and a free press.” Charities’ ability to advocate in furtherance of their charitable purposes must therefore be upheld and enforced by an authority which is independent of government. A mere government commitment to upholding independence of decision-making is inadequate: the status of the government agency must reflect its manifest independence and protect it against improper interference by future governments.
Although the Charities Act requires each member of the Charities Registration Board (“the Board”) to act independently in exercising their professional judgment, the Board’s ability to provide an independent check on Charities Services’ decision-making is compromised by the fact that Charities Services provides secretarial and administrative support to the Board. In practice, the relationship between the Board and DIA staff is too close: instead of the Board acting as an independent decision-maker and reaching its own view on the recommendation of the chief executive, as required by the Act, the Board appears to treat the DIA analysts as its own employees/advisers, and takes a “governance” role of merely approving the decision-making process already undertaken by DIA staff. The result is an unfair process that does not achieve the “two-tiered” consideration of registration decisions required by the Act. While there is no suggestion of Ministerial direction to the Board, the concern is the level of power wielded over the Board’s registration decisions by a government department. As one submitter put it:
“If the executive branch can control civil society institutions via the charities registration process then we don’t really live in a democracy.”
Increasing the number of Board members (as the Charities Amendment Bill seeks to do) will not address the fundamental issue that the Board is inadequately structured and resourced to provide the independent check on Charities Services’ decision-making that was originally intended.
Another difficulty with the current agency structure is that it does not reflect the status and independence of the charitable sector, which in turn undermines public trust and confidence in charities: locating the function of administering the Charities Act within a business unit of a government department effectively sends a message to the public and to other parts of government that the charitable sector is not seen as important. The structure also has flow-on effects in terms of staff retention, as one submitter noted:
“Since the original Charities Commission was disbanded and became a business unit within the Department of Internal Affairs there has been a rate of turnover of staff at the senior leadership level that has been problematic to the charities sector. I have seen first-hand where DIA uses Charities Services as a training ground for Team Leaders, Managers and General Managers. Whilst these people had a genuine warmth towards charities, their first priorities have been career development, as evidenced by their high rate of turnover. A stand-alone Charities Commission is more likely to attract specialist staff with deep experience in the charities sector. With a stable staff, especially at the senior leadership level, the sector can develop quality relationships and develop a level of trust in the expertise, experience and commitment of the leadership.”
Further, the current structure leaves the charitable sector without an agency able to speak up on its behalf in the way the Charities Commission was originally intended to do, making charities vulnerable to negative media narratives that undermine rather than promote trust and confidence. For example, after the mosque shootings of March 2019, a high-profile charity was overwhelmed with unexpected millions in donations, which it struggled to process and forward to affected families. Neither Charities Services nor the Board took steps to reassure the public that the charity was doing its best in extraordinary circumstances, and that distributions would follow in due course (as did in fact transpire); the absence of such reassurance badly damaged public trust and confidence. By contrast, when similar issues arose following the 2020 bushfires in Australia, the Australian Charities and Not-for-profits Commission was able to speak up on behalf of the affected charities, reassure the public that the charities had acted appropriately, and thereby minimise damage to public trust and confidence.
Another key difficulty with the current structure in New Zealand relates to accountability. When the Charities Commission was disestablished, all of the accountability mechanisms provided by the Crown Entities Act 2004, such as a requirement to report annually against a statement of intent, were correspondingly removed. Charities Services is subject to almost no meaningful accountability, beyond minimal passing reference in a 200-page DIA annual report that covers DIA’s comprehensive work across a wide range of areas (including gambling, censorship, countering violent extremism, government recordkeeping, unsolicited electronic messages, anti-money laundering, private security personnel and private investigators). In recent years, Charities Services has proactively produced its own “annual review” document, but of course such document cannot provide meaningful accountability because it contains only the information that Charities Services chooses to include. As one submitter noted:
“It is not appropriate for a government service to be responsible only to itself.”
Lack of proper checks and balances leads to an oracular mindset, and undermines the ability of an organisational culture to foster and reinforce humility.
In most comparable jurisdictions, the agency responsible for administering charities’ legislation is required to report to Parliament, and can expect to be publicly questioned on its strategic direction. There is no formal mechanism in New Zealand by which Charities Services might be similarly challenged. While Charities Services is required to hold at least one meeting each year with representatives of charities, who must be given a reasonable opportunity to ask questions concerning and make submissions on the operation of the Charities Act, such meetings provide very limited accountability in the current climate. One reason for this relates to conflicts of interest: in addition to administering the Charities Act, the DIA also oversees approximately $650 million of grants and other funding; a large number of charities, including members of Sector Group, receive funding from the DIA, a factor which may compromise their ability to raise legitimate concerns for fear of jeopardising not only their charitable registration, but also their funding. More fundamentally, many issues causing difficulty turn on detailed legal interpretations of the definition of charitable purpose that are not particularly well-suited to exploration in such a public forum. Had Charities Services been required to report publicly that it was subjecting every housing charity in New Zealand to a review in the middle of a housing crisis, there could and should have been a public outcry.
It is critical to protect the independence of the charitable sector or we will lose that which makes it distinctive and valuable to begin with. The difficulties inherent in the current structure are not remediable by piecemeal amendment and require bold structural reform. While DIA would clearly prefer that the issue of agency structure is not discussed, submissions indicate it is a key issue of concern for the charitable sector; having decisions about charitable registration effectively made by a business unit of a government department undermines our democracy; it causes a spread of bureaucratic risk aversion that risks turning charities into pale imitations of the government bureaucracy. These factors undermine charities’ key strengths, and are causing people (particularly young people) to turn away from charities and choose other modes of social action.
The original decision to establish a Charities Commission was more than 20 years in gestation: while its interpretations of the definition of charitable purpose were controversial at the time, addressing that issue directly would have been significantly more effective and efficient than dismantling the organisation altogether, a process that did not address the underlying issue and has in fact made the situation worse.
Sue Barker is the director of Sue Barker Charities Law, a boutique law firm based in Wellington, New Zealand, specialising in charities law and public tax law. Since its founding in 2012, the firm has won a number of awards, including Boutique Law Firm of the Year at the New Zealand Law Awards. Sue is a member of Charities Services’ Sector Group and a member of the Core Reference Group for the review of the Charities Act. Sue is also a co-author of the text The Law and Practice of Charities in New Zealand (LexisNexis, 2013) and a contributor to a number of texts, including Charity Law: Exploring the Concept of Public Benefit (Routledge, 2022) and Regulating Charities: the Inside Story (Routledge, 2017). In 2016, Sue was made an Honorary National Life Member of the National Council of Women of New Zealand Incorporated for her work assisting the Council with charities law issues. In 2019, Sue was awarded the New Zealand Law Foundation International Research Fellowship Te Karahipi Rangahau ā Taiao, New Zealand’s premier legal research award, to undertake research into the question “What does a world-leading framework of charities law look like?”. Her report Focus on purpose was released in April 2022 making 70 recommendations for charities law reform in Aotearoa New Zealand”. More information about Sue and the research can be found at www.charitieslaw.co and www.charitieslawreform.nz
Contact Sue at [email protected] or connect via LinkedIn
 Richard Fries, Chief Commissioner of the Charity Commission for England and Wales from 1992 – 1999 The status of the Charity Commission under the 2006 Act unpublished paper, March 2012 at 1.
 Richard Fries, Chief Commissioner of the Charity Commission for England and Wales from 1992 – 1999 The status of the Charity Commission under the 2006 Act unpublished paper March 2012 at 1.
 Charities Act s 8(4)(a), as amended in 2012.
 Charities Act s 8(5), (6).
 See Re The Foundation for Anti-Aging Research (2016) 23 PRNZ 726 (HC) at ,  – .
 Charities Amendment Bill 169-1 cl 30.
 See Report by the Working Party on Registration, Reporting and Monitoring of Charities, 28 Feb 2002 at 11.
 Newstalk ZB Victim Support right to hold off on Christchurch payouts – lawyer 7 May 2019: <www.newstalkzb.co.nz/on-air/mike-hosking-breakfast/audio/victim-support-right-to-hold-off-on-christchurch-payouts-lawyer/>.
 As noted by The Tindall Foundation in its submission to the DIA’s review of the Charities Act at : “Charities Services needs better ways of understanding the positive public impact generated by charities and their enterprises. Rather than trying to build public confidence and trust in the charitable sector by focusing on reporting and regulation, Charities Services should at least balance that by measuring and monitoring the positive impact generated by charities and communicate that to the public”.
 See Australian Charities and Not-for-profits Commission Bushfire response 2019-2020: Review of three Australian charities 24 October 2020: <www.acnc.gov.au/tools/reports/bushfire-response-2019-20-reviews-three-australian-charities>.
 To date, three have been prepared. See Charities Services Ngā Ratonga Kaupapa Atawhai 2020/2021 Annual Review; 2019/2020 Annual Review: <www.charities.govt.nz/assets/Annual-Review-Report-2020.pdf>; and 2018/2019 Annual Review: <charities.govt.nz/assets/Charities_Services_Annual_Review_Report_FINAL.pdf>.
 See Dr Oonagh Breen, Reverend Dr Lesley Carroll, Noel Lavery Independent Review of Charity Regulation Northern Ireland January 2022 at 77: excellence in regulation requires working to “establish an organizational culture that fosters and reinforces humility …” (referring to Cary Coglianese, Listening, Learning, Leading: A Framework for Regulatory Excellence (Penn Program on Regulation, 2015).
 In Australia, Australian Charities and Not-for-profits Commission Act 2012 (Cth) s 130-5 requires the Australian Charities and Not-for-profits Commissioner to report to Parliament. In Ireland, under Charities Act 2009 (Ireland) ss 22 and 23, tŪdarás Rialála Carthanas (the Charities Regulatory Authority) is accountable to the Irish Parliament. In Northern Ireland, Charities Act (Northern Ireland) 2008 sch 1 cls 6(5), 8(4) require the Charity Commission for Northern Ireland’s annual report and statement of accounts to be laid before the Northern Ireland Assembly. Under Charities and Trustee Investment (Scotland) Act 2005 s 2(1)(c), the Office of the Scottish Charity Regulator is required to report to the Scottish Parliament. In England and Wales, under Charities Act 2011 (UK) sch 1 cl 11, the Charity Commission for England and Wales is required to lay a copy of its annual report before Parliament.
 Correspondence from Professor Matthew Harding (14 September 2020): “In Australia, the ACNC Commissioner must face questions regularly from a Senate Committee, and there are audit and other reviews from time to time in which matters might be raised”.
 Charities Act 2005 s 12.
 Maria Robertson, Deputy Chief Executive of Kāwai ki te Iwi, Service, Delivery and Operations, Department of Internal Affairs, comments to Charities Services’ Annual Meeting, 29 October 2021 during the Q&A Session: <charities.govt.nz/news-and-events/past-events/2021-charities-services-annual-meeting/>.
 A concern raised in Report by the Working Party on Registration, Reporting and Monitoring of Charities 28 February 2002 at 11.
 See the social housing case study at S Barker Focus on purpose – what does a world-leading framework of charities law look like?  NZLFRR at 131-134.
 Lord Hodgson of Astley Abbotts Trusted and Independent: Giving charity back to charities – Review of the Charities Act July 2012 at [3.15].
 See, for example, Internal Affairs Modernising the Charities Act 2005: Discussion Document February 2019 at 30: “Any perception that key decisionmakers lack independence could undermine trust and confidence in the charities framework … But structural changes could be disruptive and a distraction, and require significant establishment costs.”
 Australian Productivity Commission Contribution of the Not-for-Profit Sector 11 February 2010 at 309, J3, J4, the latter referring to the submissions of the NSW Meals on Wheels Association Inc and Community Child Care Cooperative Ltd (NSW).
 S Barker Focus on purpose – what does a world-leading framework of charities law look like?  NZLFRR chapter 7.
 See the discussion in S Barker “Charity regulation in New Zealand: history and where to now?” (2020) 26(2) Third Sector Review 28.