The Accountability of New Zealand's Charities: Meeting the Needs of Charity Stakeholders through Information Disclosure

Abstract

For decades, New Zealand’s charity sector has been able to operate, unfettered by regulation and with low levels of accountability. For this reason, gaining any information from charities about the work they do has been historically difficult, because charities have not been required to provide any reports. The New Zealand government sought to increase the accountability from the charity sector with the introduction of the Charities Act (2005) and basic reporting requirements, but ultimately, the accountability from the sector continues to be an issue. With limited charity disclosure literature in the New Zealand context, and no information disclosure practice model to guide New Zealand’s charities, the current provision and the quality of the information disclosures from charities are low, leaving the information needs of charity stakeholders unmet. The overall aim of this investigation is to improve the accountability from New Zealand’s charities by developing a charity information disclosure practice model from a charity stakeholder perspective. This was achieved by three main objectives: 1. To develop a qualitative disclosure index from the perspective of charity stakeholders 2. To assess the extent and quality of the information disclosure made by thirty registered charities 3. To make recommendations to improve the accountability by New Zealand’s charity sector To achieve this purpose, a disclosure index, which contained 136 information items was created with the assistance of 86 charity stakeholders. The index was then applied to three publications from thirty charities that were randomly selected from the Charity register. The three publications used in this investigation are the Charity register, the charity’s website and the charity’s annual report/annual review. The collected data was then quantified and analysed to determine the extent and the quality of the information disclosures from the charities. The investigation findings indicated that the current level of charity disclosures was poor both in extent and quality and that there was an information gap between the expectations of charity stakeholders and the actual disclosure practices of the charities. It was found that the top-performing information items were the mandated and the best-practice information items were either missing or inadequately disclosed. No charity within the sample managed to achieve an index score of 50%. The annual return summary found on the Charity register was the best disclosure document for both financial and non-financial information items from a charity stakeholder perspective. However, this document, along with the other publications still lacked sufficient detail to be useful for a charity stakeholder. To improve the accountability of the New Zealand’s sector, it is recommended that the New Zealand Parliament look at expanding the current annual return summary to include information items more relevant to charity stakeholders. Finally, it is recommended that the charities should be compelled to produce an annual report and use the disclosure index created by the charity stakeholders in this investigation to improve their current information disclosures.