The Hutt Mana Charitable Trust’s persistent late filing of financial returns risks it being struck off by the Charities Commission, losing its tax exemption status.
The trust looks after about $35 million of assets – the last remnants of the carve-up of power boards in the 1990s – on behalf of Hutt Valley, Porirua and north Wellington people. Its own deed requires a set of financial accounts to be audited and an annual meeting held within five months of the end of its financial year (June 30).
Charities Commission rules allow six months to file returns.
Trust chairman Ian Hutchings said the 2010-2011 accounts were finally signed off last week – nine months after the nominal balance date.
Hutt News put it to him that since the inception of HMCT and its forerunner the Hutt Mana Energy Trust, the accounts and annual meeting have always been late.
Hutt News Story by Simon Edwards. 03 April 2012
“I’m not sure that’s right,” he said. “For most of the years I’ve been involved they have been late at times – in my view far too late sometimes. I continue to become frustrated when we outline our expectation we want to have the accounts done within three months and hold our AGM, and they [accountants and auditors] all smile nicely and say they’ll do their best.”
He said the problem this year was the liquidation last September of the HMCT-owned insulation installation company EnergySmart.
In November the estimated loss to HMCT was put as high as $2.5 million so there is particular interest in the 2010-2011 accounts.
Mr Hutchings said there had been a great deal of discussion “back and forward” between the accountants and auditors on how to account for the EnergySmart “impairment”.
The liquidator had also been involved.
His view was that the delay had not hindered trustees’ ability to have a clear view of the trust’s financial position, on which to base decisions such as the distribution this month of $301,000 in community grants.
“We’ve had to put some numbers on paper and they’ve been there since November. The debate has been about finding adequate documentation the auditors are satisfied supports that.”
Charities Commission chief executive Trevor Garrett said charitable organisations registered with it that had not filed returns six months after the end of their financial year were sent a reminder letter. They get a more “strongly worded” reminder a month or two later and at around three months overdue – which is where HMCT is – “we get to the stage where we look at de-registering. That’s how seriously we take it.”
There might be problems with a charity’s change of secretary, or information not being passed on, but such organisations had obligations to the public and the media, who were entitled to view that financial information, he said.
A stand-down period of some years for re-registration can be applied to a charity where there is proof of gross negligence or money going missing. Mr Garrett said there was potential for a similar stand-down for “persistent non-compliance”.
“We haven’t got to that stage yet but we might have to review that.”
Dr Carolyn Cordery, of Victoria University’s School of Accounting and Commercial Law, took a quick look at HMCT’s trust deed last week and said to be four months’ overdue on filing and holding an annual meeting was “poor”.
However, in a general sense and not particular to HMCT, her concern with “striking off” charities that did not meet such deadlines was that they would no longer be under the commission’s purview. She had talked to colleagues in Britain, where a similar “black hole” existed.
When a charity was struck off the official register, “it goes private . . . underground. Who is actually watching to make sure it continues to handle charitable assets in a way commensurate with its trust deed? The implications of this are something we need to have a robust discussion about in New Zealand”.
Mr Garrett agrees.
Before establishment of the commission in 2005, charities claiming hundreds of millions of dollars in tax e exemptions a year – “if not a billion dollars a year” – flew under everyone’s radar to an extent. They could build up considerable unspent assets.
Some of them refused to make financial information available to the public and media.
– Hutt News