Published December 2, 2015
A trustee recounted their experience in a trust where the charitable trust administration fell short.
The trust was operated by a service club and was used for fundraising and making grants to worthy charitable causes and projects in the community.
The trust was deregistered because of a simple error – the Annual Return wasn’t filed with Charities Services within 6 months of balance date.
The trustees received no warning they were about to be deregistered because reminders were sent to a former trustee who was no longer a member of the club.
The consequences for a charitable trust being deregistered can be significant.
The trust immediately loses its charitable status. That affects its tax position. It can mean the proceeds of fundraising are taxable.
However, there can also be other unforeseen consequences.
In this case, the trustees found:
Essentially the club concerned had to start again in setting up their charitable trust and applying for charitable status. It was a distraction from all the good things they would normally be doing.
In New Zealand there’s about 27,000 registered charities. I read this week that 1,146 charities were deregistered in 2014-15 just because they didn’t file their Annual Return. That’s over 4%!
So what are the lessons? Five good practices I’d suggest for trustees are:
Good charitable trust administration starts with defining good practices. Trust good practice.
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