Governing NFPs through COVID-19

There are over 115,000 not-for-profit organisations (NFPs) in New Zealand according to a recent Statistics New Zealand report. Many are facing an uncertain future as they grapple with a number of challenges including a decline in the availability of philanthropic funds, an inability to fundraise in the usual manner and a decrease in the number of individuals willing or able to donate money or volunteer. This is a time when NFPs are most needed in our communities and many are experiencing a greater demand for services than ever before. It is testing for those governing NFPs but there are a number of support packages and measures available to help organisations continue to provide services including to our most vulnerable.

What support is available?

1. Economic support

The government has announced a number of economic support packages and relief programmes which NFPs may be eligible for including:

Wage Subsidy Scheme
The Wage Subsidy Scheme is designed to support employers adversely affected by COVID-19, and ensure workers can continue to receive an income even if they are unable to work. It is available to all organisations (including registered charities) who meet the eligibility criteria. This includes having had a 30% revenue drop attributable to COVID-19 and retaining employees for at least 12 weeks. See further details on the scheme
Tax relief
On 25 March a number of tax relief measures were passed in the Taxation and Social Assistance Urgent Measures Act 2020 including allowing the IRD to remit interest on a late payment if a taxpayer had been significantly adversely affected by COVID-19; and increasing the threshold for paying provisional tax. Further tax relief was announced for SMEs on 15 April including giving Inland Revenue the discretion to extend taxation due dates and the introduction of a tax loss carry-back scheme (which may be available to some NFPs).
Insolvency support
The government has announced a temporary insolvency relief package to assist organisations in responding to challenges created by COVID-19. This includes a new temporary regime to enable organisations (including NFPs) affected by COVID-19 to place existing debts into hibernation (ie a moratorium on the payment of debts). For more see our article Temporary insolvency relief for directors and organisations
Package for NGOs and community groups providing essential social services
A $27m package has been provided for social sector services and community groups to ensure they can continue to provide essential support to communities including ensuring people have food and shelter, disabled people are supported and crisis support is available to keep families safe. See more information on how the Ministry of Social Development can help
Funding certainty for sports
National sports organisations’ funding will be rolled over for the current financial year into next year to ensure certainty of funding. The government has also signalled it is working on a sports recovery package for when the pandemic is over, which will include support for community organisations.
Creative New Zealand's emergency response package
Creative New Zealand has announced an initial $16m investment to be distributed to the arts sector through to 30 June, with a second phase being explored to provide support beyond this date. The first phase will consist of resilience grants for eligible artists as well as art practitioners, groups and organisations; and short-term relief for investment clients (the 83 arts organisations currently receiving multi-year funding via the Toi Tōtara Haemata and Toi Uru Kahikatea investment programmes).
Support for Maori and Pacific communities
The government has announced a number of initiatives to help Māori and Pacific communities including:
- a Whānau Māori Community and Mārae package which will reprioritise $10m from the Maori Development vote to support community outreach and partner with whanau, hapū, iwi and communities to give them the tools and resources they need to support a targeted response
- a Māori Health and Whānau Ora response where $30m will be targeted directly to Māori Health services, including providing financial support to Māori provider networks to enable them to meet increased demand and another $15m to Whānau Ora commissioning agencies
- a $17m Pacific Response Package to support health and disability services facing increased demand.

2. Commercial Leases

The government has announced that it intends to introduce a Bill to give commercial tenants more time to catch up on overdue rent before a landlord can evict them. It intends to extend the current 10 working day timeframe that commercial landlords may cancel a lease to 30 working days. Legislation enacting the temporary change is expected to be introduced next week and retrospective.

Some commercial leases have clauses relating to circumstances where a tenant has no access to the premises during an emergency, which may give rise to a rent and outgoings abatement. This is explained further in MinterEllisonRuddWatts’ article COVID-19: What’s fair when it comes to rent and outgoings abatement?

3. Annual meetings, reporting and rules

The government is introducing legislation (as part of the insolvency relief package referred to above) to relax certain statutory deadlines (eg for holding AGMs, and filing annual returns) for some entities including incorporated societies and charitable trusts. There will also be temporary relief for entities that are unable to comply with obligations in their constitutions or rules because of the impacts of COVID-19. Entities will be able to use electronic communications (including electronic meetings) even if their constitutions or rules do not cover this.

Charities Services has provided further information on COVID-19 for charities. It notes “While charities are generally required to follow their rules, we won’t take compliance action against charities that are taking practical steps to prevent the spread of COVID-19. You must prioritise taking steps to minimise social contact, even if this breaches your rules on how you should carry out your AGM or meetings.” Charities Services will also provide extensions for any charities who cannot file their annual return on time due to COVID-19 and won’t take any action on late returns during the lockdown period. Extensions may also be available if audits cannot be completed due to COVID-19.

4. Meeting funding requirements

Many NFPs may have received funding for certain initiatives or projects prior to COVID-19, and now find themselves unable to complete them, or to fulfil their funding obligations. It is advisable for any NFPs in these circumstances to contact their funders as soon as possible to discuss the situation and agree a solution. Many funders have already agreed to change their funding models to assist in supporting the NFPs through the COVID-19 period.

We’ll continue to keep members updated of any significant changes that are relevant to NFP boards.

Also see an article by Steven Moe MinstD Charities, NFPs and Covid-19: Where to? answering our questions on challenges and opportunities facing the sector.