Special issues of accounting for charities in New Zealand.

The role of the nonprofit sector is increasing because of 'new public management'. Calls for improvements in the accountability of nonprofit organizations led to the sector's inclusion in the FASB's conceptual framework developed in the United States and, consequently, in other conceptual frameworks including New Zealand's, as they have relied on the FASB's model. Application of the conceptual framework to the nonprofit sector has been criticized and claims made that it should not be applied to charities. This research focuses on charities in New Zealand to determine whether there are special issues relating to them. It involves a survey of thirty five charities using a pattern matching approach to determine whether patterns observed overseas match those to be found in New Zealand. Two of the conclusions drawn are likely to apply to all charities. The economic focus of the conceptual framework has not been defined but charities commonly have non-economic objectives and take part in transactions that may not be economic events. Charities rely on receiving resources from lay users of financial reports. The definitions adopted in the conceptual framework together with insistence on 'conceptually pure' financial statements requiring a focus on change in net assets is likely to result in misunderstanding of those financial reports. Consequently such financial reports will not be decision useful. Two other conclusions apply specifically to charities in New Zealand. Supervision of charities and their fundraising practices is lacking and, despite the increased role of the nonprofit sector and dependence on it, opportunities for abuse have the potential to damage the fundraising abilities of genuine charities. The conceptual framework's applications to the nonprofit sector requires an understanding of the sector's fund accounting roots. The development of decision useful standards requires recognition of the place of fund accounting and development of authoritative support for acceptable fund accounting practices