The International Journal
of Not-for-Profit Law

Volume 1, Issue 1, September 1998

The Accountability of Charities and Sporting Bodies Working Party was formed in 1995 in response to media concern about the accountability of charity fund-raisers for ensuring that funds were used for the purpose stated. Concern was also expressed over levels of administration and fund-raising costs in proportion to funds spent on service delivery.

The increasing use of trusts by local government as a management structure for cultural and recreational services and the range of Maori organisational structures (trust boards, iwi/tribal social services, Maori corporations etc) suggests that it is also time for a review of organisational forms.

The three major issues relating to the accountability of charities are:

• the definition of what is a charity;
• the appropriate legal organisational form for charitable organisations; and
• monitoring compliance with the requirements of being a charity.

The Working Party has focused on accountability (monitoring compliance). The other issues also require attention and the Working Party suggests that the appropriate government departments should review existing legislation accordingly. For example, whether the use of charitable trusts, incorporated societies and un-incorporated bodies is appropriate in the current environment. If a new self-regulation agency is set up it would provide input into these reviews.

The Working Party has made the recommendations set out below and envisages that the code and self-regulation body will be developed through an evolving consultative process with the sector. To be effective it is essential that any changes to current procedures are sector driven. These proposals are being discussed with Government agencies to gain support for the implementation of a sector based self-regulation system.

Code of practice and self-regulation agency

The Working Party’s report is concerned primarily with monitoring how charitable organisations operate, regardless of their legal structure.

This requires the development of a code of practice and a system for monitoring compliance with the code. The content of a proposed code and details of a proposed self-regulation body are included in an extensive report which is available from the Federation of Voluntary Welfare Organisations, PO Box 9517, Wellington, New Zealand.

An earlier round of consultation with the voluntary sector raised the need to keep a balance between education, promotion and monitoring. Organisations require information and support to assist them be accountable; monitoring compliance with a code should not be the sole focus of self-regulation.

Code of practice

Although there are numerous codes of conduct and best practice guidelines already in operation both in New Zealand and overseas they usually cover a particular function such as fundraising, service provision or grant-making. This report suggests that a generic code should be developed covering issues relevant to the whole sector. Individual sub-sector codes and existing codes of practice should be compatible with this code.

Items to be included in the code would cover:

1. Governance; accountability for maintaining values.

2. Programmes; accountability for standards of service.

3. Organisational integrity.

4. Management practices and human resources; accountability for operations and administration.

5. Financial; accountability for funds.

5.1 Fund-raising.
5.2 Financial accounting for expenditure of funds.

6. Communications; ensuring open information to the public.

Self-regulation approach

Self-regulation is based on a situation where rules are developed, administered and enforced by the people whose behaviour is to be governed. Therefore any self-regulation body must have the mandate or authority to make and enforce these rules.

Self Regulation Agency

Initially it was suggested that a code of practice could be implemented by existing co-ordinating bodies such as the NZ Sports Assembly and Federation of Voluntary Welfare Organisations. The Working Party considered this option carefully before recommending an independent structure to implement and monitor a code of practice.

This agency would not have responsibility for the legal registration of charities or provision of tax exempt status. It would have a supervisory role in relation to compliance with an agreed code of practice and would monitor legislative requirements affecting the sector.

Membership

The core membership of a self-regulation agency could be drawn from the following groupings within the charitable sector.

Community and Social Services – Federation of Voluntary Welfare Organisations, NZ Council of Social Services, NZ Council of Christian Social Services.

Arts and Culture – to be identified by the sector, e.g. Amateur Arts Assembly, Arts Roundtable.

Recreation and Sports – NZ Sports Assembly.

International Development – Council for International Development.

Grant-makers – Association of Philanthropic Trusts.

Fundraisers – Fundraising Institute of New Zealand.

It would also include members of the general public representing the interests of donors and consumers. Ongoing liaison with Government would be ensured either through direct membership of the agency or through a formal contact system with relevant departments.

Response to non-compliance

The self-regulation agency would have:

Authority to publish information on agencies that do not comply with the adopted code of practice.
The right to remove its endorsement from a non-complying organisation.
The capacity to educate and advise on how to implement the code.
The agency would also act as a contact-point where the community (including the media) could refer issues of concern.

The Accountability of Charities and Sporting Bodies Working Party has three key recommendations that it taking to the voluntary sector for comment and/or agreement:

Recommendations

That a code of practice for voluntary organisations be adopted.
That an agency be established to implement the code.
That the appropriate government departments review existing legislation covering the definition of what is a charity.
The following aspects require particular attention.

1. The content and level of detail to be included in a code of practice.

2. The purpose, functions and priorities of a self-regulation agency.

Development and revision of a code of practice.
Monitoring of compliance with the adopted code of practice.
Promotion of the sector.
Education about the sector.

3. The preferred form of a new self-regulation agency.

Implement an agreed code through existing umbrella bodies forming a consortium providing support and advice, with the monitoring carried out by the umbrella groups.
Create a new self-regulation body with members drawn directly from the sector and from the public and government.

4. Membership of a self-regulation agency.

Are the six groupings identified appropriate or should there be separate representation from the health sector?
Should there be representation from the public (donors and/or consumers) and Government in addition to the charitable sector?
How should the public members be selected?

5. Funding; should the development and implementation of a code be funded through.

A levy on members.
A core government contract.
Corporate funding.
Separate grants and contracts from individual departments and agencies.
A mix of the above.

6. The level and form of monitoring to be carried out directly by the self-regulation system and what can be done through other procedures such as.

Self-monitoring guidelines.
Peer review.
Co-operation with or sub-contracting to other agencies.