14 December 2009
General Manager
Accounting Standards Review Board (ASRB)
P O Box 12 197
WELLINGTON 6144
Competition, Trade and Investment Branch
Ministry of Economic Development (MED)
P O Box 1473
WELLINGTON
Dear Sir or Madam,
Submission on ‘The Statutory Framework for Financial Reporting’ and ‘Proposed Application of
Accounting and Assurance Standards’
Trust Waikato wishes to make a submission on the September 2009 discussion document The
Statutory Framework for Financial Reporting (MED) and the companion document Proposed
Application of Accounting and Assurance Standards (ASRB). This submission – which covers both
documents – was approved following the Trust’s 14 December 2009 meeting and has been duly
authorised by the Chair and Chief Executive on behalf of Trust Waikato.
1
Trust Waikato (the Waikato Community Trust)
Trust Waikato was established by government statute in 1988 to hold the shares of Trust Bank
Waikato. These shares were sold in 1996 and the Trust now holds a range of international and
domestic investments. Each year the Trust distributes a percentage of its profits generated from the
global investment portfolio.
Trust Waikato's purpose is to help organisations carry out charitable, cultural, philanthropic and
recreational projects of benefit to people in the Greater Waikato. Our funding area includes the
districts of Thames/Coromandel, Hauraki, Matamata Piako, Waipa, Waikato, South Waikato,
Waitomo,Otorohanga, Ruapehu and Hamilton city. A map is included at Appendix One.
Our vision is for resilient and vibrant communities and, over its 20 years, the Trust has donated
around $100 million dollars to the greater Waikato community. Our five core principles are:
Principle One
Valuing and respecting Maori as Tangata Whenua
Principle Two
Valuing and recognising cultural diversity
Principle Three
Valuing the current and future worth of the Trust’s resources
Principle Four
Valuing and promoting a community development approach
Principle Five
Valuing and supporting community organisations
Trust Waikato (The Waikato Community Trust)|P O Box 391 Hamilton 3240|Phone 0800 436 628
We focus on projects, programmes and organisations which contribute to the well-being of
communities. We’ve traditionally had funding priorities around increasing participation in
community activities; youth development; preserving our history and cultural identity and
encouraging groups to work together and to share facilities for community benefit. We also have a
particular focus on working with Maori, Pacific peoples and ethnic communities and their
supporters.
Trust Waikato is a member of the Combined Community Trusts of New Zealand and Philanthropy
New Zealand (PNZ). Under the Community Trusts Act (1999 – refer to s13), the Trust must comply
with certain aspects of the Financial Reporting Act (1993).
The Trust has chosen to prepare a submission on the Financial Reporting Framework as a member of
the philanthropy sector, a funder, an advocate for community organisations and as a supporter of
ANGOA (Association of Non-Governmental Organisations of New Zealand). We hosted the
ANGOA/MED –sponsored workshop on this topic in Hamilton and have also reviewed the
preparatory response published by the Not-for-profit Sector Advisory Committee of the New
Zealand Institute of Chartered Accountants (dated 9 November 2009) to assist with the preparation
of this submission.
2
Specific comments on the discussion documents
Trust Waikato requests that the ‘not-for-profit sector’ terminology is replaced with the ‘Tangata
Whenua, Community and Voluntary sector’.
2.1 Are the standards required?
The Trust supports the establishment of Financial Reporting Standards developed specifically for the
Tangata Whenua, Community and Voluntary (TWCV) sector. The sector should be, and does wish to
be, both accountable and transparent. Currently there are no consistent standards for reporting and
those developed for the commercial sector are not always applicable. The International Financial
Reporting Standards (IFRS) focus on profit, and on meeting legal obligations. For the TWCV sector,
the emphasis is on answering non-financial questions regarding the achievement of social or
environmental objectives, as well as on accounting for income and expenditure.
Compliance costs for organisations to meet reporting obligations is also of concern to Trust Waikato.
Feedback from community groups indicated that the cost of carrying out a full audit for some
organisations was becoming prohibitive – in the region of several thousand dollars. Early in 2009 the
Trust advised donation applicants that the requirements for audited accounts had been relaxed, and
that, for smaller organisations, the Trust would accept a limited review or agree-upon procedures1.
Trust Waikato therefore suggests a range of reporting standards – including a simplified reporting
format which may be adopted voluntarily by smaller organisations – up to a full audit. The reporting
framework should include guidelines for financial and non-financial (service) reporting information.
It is pleasing to hear that ANGOA and the ASRB are keen to begin work on these requirements in
2010 – in advance of any legislative change - if there is general agreement from the sector that this
would be desirable. Through this process, the sector must have input on the reporting
requirements. For genuine consultation to take place participants would need to be supported with
resources such as time, money and expertise.
1
Refer to the Trust’s January 2009 newsletter, Puawai, available on request.
Trust Waikato Submission on The Statutory Framework for Financial Reporting
Page 2
The Trust also notes that a necessary corollary to agreed standards for reporting is the development
of agreed standards for assurance processes (such as reviews and audits).
An element of public education and awareness is also required during this process, so that any
terminology used is clear and consistent. For example there seems to be confusion over what
constitutes an ‘audit’, and a great deal of debate over ‘accountability’ and ‘evaluation’ – the latter
being a whole new field of required research and application!
2.2 Who should report?
Trust Waikato notes that a three-tiered system for distinguishing reporting requirements is
proposed – based on annual expenditure. Trust Waikato supports the concept of a tiered system.
At the workshop, there was a great deal of discussion over ‘expenditure’. For example, because a
largely voluntarily-run, project-based, organisation may have varying income and expenditure levels
each year, an average or historic assessment of the level of expenditure may need to be counted,
say over three years. It would be administratively cumbersome if a group were on or around a
suggested threshold and so their annual reporting requirements may change dramatically. The
notion of differential reporting was also suggested, whereby an organisation might meet two out of
three factors to fit a particular reporting requirement.
With regard to the threshold levels suggested for the three tiers, $20,000 seemed to have been
arbitrarily chosen – why not the $60,000 threshold for GST registration? And is it necessary to set
the dollar figures in law (which may require more frequent updating)? Could, for example it be
worded so that the minimum level is that set for GST registration?
There was general agreement that those organisations receiving public funds should prepare some
kind of report, but may not ‘fit’ other criteria from this proposed framework, or the Charities
Commission, and therefore may be exempt from reporting. We maintain that all organisations
should be encouraged to at least prepare a simple annual report, which may be subject to no
assessment, a limited review or a full audit, depending on agreed thresholds.
The Trust strongly disagrees with the proposal that the proposed public reporting requirements for
community trusts and licensing trusts should not apply to Gaming Machine Societies, as there is little
difference between them and Licensing Trusts. They distribute a significant community resource
and there is a high level of public interest in their activities. The reports of Gaming Machine
Societies should be tabled in Parliament and published in a community forum. We also question the
omission of Energy Trusts from these requirements.
2.3 Who needs the information?
If one of the aims of this process is to reduce compliance costs – and it should be – then more
thought must be given to the proposed requirement to make the information publicly available. If
the organisation does not have a website and has no funds for newspaper advertising, then having a
report available to members and to any member of the public requesting one should be enough.
The reporting standards must also be meaningful to users, for example; funding organisations,
government agencies (for service contracts) and the general public (who may be making decisions
about supporting a particular group). Trust Waikato maintains that there ought to be agreement
across funders, charity commission, government departments etc. to use the new standards.
Trust Waikato Submission on The Statutory Framework for Financial Reporting
Page 3
Perhaps key groups could be involved in the informal development of the simplified reporting
framework, as suggested by ANGOA, to ensure that the needs of all users are met. Trust Waikato is
interested in being part of any local pilot.
3
Trust Waikato’s Position
In summary, Trust Waikato:
• Supports the establishment of Financial Reporting Standards developed specifically for the
Tangata Whenua, Community and Voluntary (TWCV) sector.
• Advocates for the Tangata Whenua, Communty and Voluntary sector involvement in the
development and setting of the standards.
• Requests that the aim of reducing compliance costs for organisations be a priority.
• Suggests a range of reporting standards with, at minimum, a simple annual report
framework being developed in conjunction with the sector.
• Considers the proposed threshold levels to be arbitrary and asks for additional work on this
aspect.
• Asks that further consideration be given to the requirement for ‘public notification’ of
information.
• Argues that the Gaming Societies (and Energy Trusts) should have the same reporting
requirements as the Licensing Trusts and Community Trusts.
• Urges all relevant authorities to commit to using the agreed standards and to be actively
involved in their development.
Thank you for the opportunity to make these comments. On a final note, Trust Waikato wishes to
express its concern over some aspects of this consultation. While the discussion documents were
released at the end of September, many organisations potentially affected by these proposals were
not aware of this process until publicity regarding the November/December workshops organised
and delivered by ANGOA was distributed, for example, in Trust Waikato’s case, to not-for-profit
organisations on its donation database. Many organisations could not realistically prepare a
submission until after these workshops, yet with a closing date of 29 January, many would not be
meeting formally during that time. Trust Waikato’s own meeting timetable meant that this
submission had to be prepared in early December and there has been little opportunity to consult
with others in the sector.
Trust Waikato has no objection to the release of any information contained in this submission and
agrees to its publication on the Ministry’s website (and other websites as appropriate).
Yours sincerely
John Kilbride
Chair
Bev Gatenby
Chief Executive
bgatenby@trustwaikato.co.nz
Trust Waikato Submission on The Statutory Framework for Financial Reporting
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Appendix One – Trust Waikato Strategic Plan page 2 http://www.trustwaikato.co.nz
Trust Waikato
Purpose
Trust Waikato was established by government
statute in 1988 to hold the shares of Trust Bank
Waikato. These shares were sold in 1996 and the
Trust now holds a range of international and
domestic investments. Each year the Trust
distributes a percentage of its profits generated
from the global investment portfolio.
Trust Waikato's purpose is to help organisations
carry out charitable, cultural, philanthropic and
recreational projects of benefit to people in the
Waikato-Tainui region.
Our funding area includes the districts of
Thames/Coromandel, Hauraki, Matamata Piako,
Waipa, Waikato, South Waikato,
Waitomo,Otorohanga, Ruapehu and Hamilton city.
The Trust acknowledges that this area includes
much of the lands of the Tainui waka and thus the
people of Waikato, Raukawa, Hauraki and
Maniapoto.
The population of the greater Waikato area is estimated at 385,000 or 9.4% of New
Zealand’s total population. In the Waikato area, around 57% of people live in urban areas.
The population is expected to grow by 15% over the 20 years to 2026 to reach around
426,800. The region’s ethnic mix is characterised by higher proportions of Maori (nearly
20% compared to 14% nationally), but lower proportions of Asian and Pacific Island peoples
than nationally. The regional population has a slightly younger average age than New
Zealand as a whole.
Although rich in resources and capacity to address social, cultural, economic and
environmental wellbeing, the size, diversity and inequalities of the area present challenges
for some groups and communities.
Trust Waikato Submission on The Statutory Framework for Financial Reporting
Page 5