Internal Affairs cracks down on charities

Last updated 05:00 23/09/2012

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The days of sausage sizzles and raffles could be numbered as lawyers and charities accuse the Department of Internal Affairs of putting the letter of the law ahead of good causes.

One lawyer working in the field feared charitable organisations running profitable events like sausage sizzles would be "strangled out".

This year responsibility for those organisations shifted from the Charities Commission to Internal Affairs, and under law, organisations can run profitable events as long as they are "ancillary" to their purpose.

Organisations on the charities register can claim tax exemptions but the lawyer said he had worked on cases where Internal Affairs had run groups ragged for six months, obsessed with potential profitability.

"If a charity incidentally makes money, that does not mean it's not charitable."

The crackdown on charities is nothing new. Since 2005, nine cases have gone to the High Court after organisations appealed the denial of their charitable status. All but one won. Organisations that are no longer "charitable" include Greenpeace and the Canterbury Development Corporation Trust.

Former Ernst and Young chairman Michael Stanley now works for several charities, and says Internal Affairs seems to be "overzealous" when dealing with charity applications.

"Good-thinking people will just give up. It's hard enough to work in the sector without the department putting up barriers."

He said Internal Affairs seemed to be undertaking "detective work" to see what future activities an organisation might undertake. "In most cases it's a pretty grey area. They have to look at the big picture - is this organisation charitable?"

Over the last year 1251 charities have been registered, and 327 have been declined.

Another lawyer said it was only the big organisations that had the time and money to appeal, and it was more likely smaller organisations doing genuine good would give up.

Specialist charities lawyer Sue Barker said the latest fears reflected an increasing commission trend, now run by Internal Affairs, of taking a "black letter view" of the law.

She said good charities could be refused, and as a result lose their funding. It seemed Internal Affairs' attitude was that it was not going to find an organisation charitable if it did not have to.

Department charities general manager Brendan Ward said there would always be those unhappy with what it did as a regulator.

"We are trying to be as open, transparent and consistent as we can."

He said Internal Affairs did look at the big picture of whether an organisation was beneficial, but was constrained by the law, which was explicit about profit.

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He accepted there had been delays of up to six months in working through applications earlier in the year, but said that was down to about eight weeks now.

"A key driver is public trust and confidence."

Internal Affairs says $280 million is lost to the charitable sector every year through fraud, and Barker said that was where the attention should go - "not knocking off good charities".

- Sunday Star Times

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