Financial Reporting Bill

I want to put a couple of questions that were raised with the Minister of Commerce in the first speech on Part 1 of the Financial Reporting Bill. I note that he has not taken a call in the hour that we have been debating this bill. I think there has been a bit of barracking from the other side, but no actual substantive speech about the legislation. The first question is in respect of the amendments in respect of charities, the amendments to the Charities Act 2005. I said previously that the Commerce Committee members, from both sides of the House, to be fair, laboured long and hard as we went through these provisions to ensure that there were appropriate standards and levels of transparency. Although we are all in favour of transparency and accountability and appropriate accounting standards for charities, we all acknowledge, I think, that many charities are made up vastly of volunteers, and many charities are of varying sizes and have varying capabilities in terms of administrative and accounting control functions. As I say, although we were keen to ensure that there were appropriate standards and levels of transparency, we were also keen to ensure that we were not overburdening charitable organisations with bureaucracy and with compliance costs, because many of our charities, such as the Cancer Society, the Salvation Army, and others, do pride themselves on the donations that are provided by the public, the vast majority of which go directly to the stakeholders that require it—whether it be medical research, whether it be assisting those less fortunate—and are not sucked up into onerous administrative requirements.

I do note though in new section 42B in clause 77 that there are some very substantial penalties for those who fail to comply. It states: “A charitable entity and every officer of the charitable entity commits an offence and is liable on conviction to a fine not exceeding $50,000 if—(a) the financial statements of the charitable entity referred to … fail to comply”—with relevant standards, in summary—“and the charitable entity or officer (as the case may be) knows, at the time that the financial statements accompany the annual return when it is sent or delivered under section 41, that the financial statements fail to so comply.” No one would disagree with that in terms of somebody knowingly committing an offence and knowingly contravening not only the legislation but their obligations. But what I would like to hear from the Minister of Commerce is the view he has from the submissions, which presumably he has read, as we did on the Commerce Committee, as to whether he still believes that those penalties, substantial as they are, are pitched at the right level and are appropriate.

Further to that, and just as important, are the transitional provisions in clause 78(1) and (2)—there have to be appropriate levels of transitional provisions. More so, I think, for the charitable sector. We had submissions from, I recall, churches and others. Many of the churches have individual entities. They are not one conglomeration; they are individual incorporated societies or entities around parishes, or whatever. For many of those organisations there will be a substantial transition to move to these standards—even though, from memory, there was substantial support for them—to further professionalise the financial standards and transparency of charities. It will not be as a business, if you like, with one entity transitioning across. It will be many entities and sub-entities within those charitable organisations. So I would be grateful if the Minister would look to take a call and in this Committee stage, just for the record in the future, give us some assurances around those two issues.

Just a quick call on a couple of issues that have arisen. The member Clare Curran asked a question before about the size of Supplementary Order Paper 376. The Supplementary Order Paper is basically the revision-tracked version of the Financial Reporting Bill. There are one or two kind of Supplementary Order Paper - type amendments in there, and one of them is the point the member raised around the thresholds for large—or not—companies that are overseas-owned and operating here in New Zealand. So the size of the Supplementary Order Paper is no reflection of changes. In fact, there are not too many changes, as per the good work that the Commerce Committee did. I do acknowledge the fine work and the cooperation and acknowledgments from speakers about how we have got to this point and the very good ownership of the bill.

Just one point on charities, which the member just asked about before—yes, I am very aware of those issues, and the select committee also did good work. I think, in fact, that the committee itself raised the threshold from $40k to $125k for charities reporting, anyway. Actually, the professional organisations such as the New Zealand Institute of Chartered Accounts and the Certified Practising Accountants are themselves undergoing quite a bit of educative work out in the voluntary sector for public good and social good, to ensure and to just try to alleviate some of the concerns that the member did raise.

Another point that was raised just in general conversation in regard to charities—in fact, now there is the availability for organisations to have quite sophisticated and structured accounting packages online. Even though some of the members who have traditionally done some bookkeeping may not be all that comfortable working online with some of those cloud-type accounting packages, actually the ability for an organisation to produce quite robust, fair, and transparent accounts is now much more apparent than it was. But I do acknowledge the concerns. I have heard those, and I think the Commerce Committee also did a good example of those. We have to contrast that, though, with exactly what we have now, because some not-for-profit organisations actually do have some quite substantial assets, and it is only fair for those members who raise funds, or who donate or give to them, or who work for them that we do actually improve the current situation, which is more like do-it-yourself bookkeeping. There is no checking, really, of some of the robustness or the integrity of the accounts, as well-intentioned as many of them may be. As the previous member noted, the committee spent a lot of time on this and it came to pretty good conclusions, as is now reflected in the bill.

The question was put that the amendments set out on Supplementary Order Papers 376 and 393 in the name of the Hon Craig Foss to Part 4 be agreed to.

Amendments agreed to.

Part 4 as amended agreed to.

The question was put that the amendments set out on Supplementary Order Paper 376 in the name of the Hon Craig Foss to schedule 1 be agreed to.

Amendments agreed to.

Schedule 1 as amended agreed to.

The question was put that the amendments set out on Supplementary Order Paper 376 in the name of the Hon Craig Foss to schedule 2 be agreed to.

Amendments agreed to.

Schedule 2 as amended agreed to.

The question was put that the amendment set out on Supplementary Order Paper 376 in the name of the Hon Craig Foss to insert new schedule 3 be agreed to.

Amendment agreed to.

Clauses 1 and 2