November 2016

November 2016 Newsletter

This Issue

Admin Woes – Good administration is becoming a survival skill for NFPS.

CCA Workload  – Thanks for your patience, and thanks to our funders.

GST and Accounting Software – Accounting software needs your ongoing input to handle GST correctly.

ACC – How Does it Work – Just as with Kiwisaver there’s an employer and an employee contribution.

 

Courses

Not-For-Profit Education at Hagley in 2017

Enrolments are now open for Hagley’s 2017 ‘After 3’ programme. These are full-year evening classes running during term time for a one-off enrolment fee of $60 – no other costs.

CCA’s Harald Breiding-Buss will be running the Not-for-profit Administration and Management course again on Tuesday nights, covering a range of issues such as the legal environment, governance, financial matters, employment, strategy and much more. For more info see here.

In addition, Harald is running a bookkeeping and accounting course at Hagley for NFPs as well as small businesses. For more info see here.

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Email info@commaccounting.co.nz to be added to the newsletter mailing list.

Web

commaccounting.co.nz

Contact

80/82 Fitzgerald Ave, PO Box 13 625; Ph. 669 0542;

Harald: harald@commaccounting.co.nz; Rhys: rhys@commaccounting.co.nz; Yvette: yvette@commaccounting.co.nz; Nick: nick@commaccounting.co.nz

Downsizing your Admin Function?

Many of our clients are unhappy about the extraordinary amounts of money they are spending on administrative functions, which in small organisations can be the biggest salary expenditure item. This means that a large portion of the funds an organisation receives are not going directly into the organisation’s mission but seem to just ‘disappear’ with no visible benefit.

It is often only when organisations are seriously downsizing the admin function, for example trying to run it with volunteers instead of paid staff or not replacing an administrator that has left, that they suddenly find things falling apart. It usually seems to work alright for a few months, maybe even a year, until the organisation finds it no longer has financial information at hand for funding applications, accounting and auditing bills have skyrocketed, and IRD penalties are piling up.

And these are not the only costs. Stress piles up as deadlines, such as for filing to Charities or getting funding applications in, become harder to meet, funders demand accountability reports that are overdue, and more time has to be spent chasing things up.

To be sure I’ve been seeing the other extreme as well: large amounts of administrator time spent on entering tracking information that is not being used, overly involved monthly accruals, and monthly financial reports that are so complex that they are not being understood, and therefore disregarded.

The consequences of too little administrative effort are much direr than of too much, however. Many organisations are trying to save costs in order to maintain the same service levels even when funding or income is declining, and the ‘invisible’ administrator is a popular target. While administration has to be efficient, like everything else, it generally doesn’t lend itself to big cuts. Big changes in this area almost always initially require more time to be spent to get new systems established before savings can be made.

As the compliance environment also becomes ever more tight I would urge organisations to place a high priority on financial skills when recruiting new staff that are required, as part of their job, to do bookkeeping, accounting or financial management. Good knowledge in this area is too often overlooked by Boards and Committees when recruiting managers or coordinators especially, but increasingly, and in the face of skyrocketing fees by commercial accountants, this is becoming a survival skill to have for any not-for-profit.

Harald

CCA Workload

There is a flurry of last-minute jobs coming in at the moment but overall the backlog is now gradually declining for us.  However, any work coming in now will not get done before Christmas.

The first year of implementation of the new Charity reporting rules was always going to be hard, but the second year will bring its own challenges and we are not sure that it will be any easier. We are now starting to see organisations whose Charity returns are overdue and who are at a complete loss about what is required. These changes are especially hard on small ethnic groups.

A big thank you to both the City Council and the Lottery Grants Board, who are continuing to give us good support although being under financial pressure themselves. This allows us especially to spend the necessary time with those organisations who need a bit more help, and it means that our support and education function does not take second place. There is always time to answer your questions, train your board and give a bit of hands-on support where needed without having to be forced to recover all of the cost of this from you.

GST and Accounting Software

One of the irritating thing about GST is that you need to turn on your brain when inputting or coding transactions in your accounting software, including CCA’s Accounting 4.0.

GST fields are overwriteable in all accounting software for a simple reason: Transactions that ‘normally’ have GST sometimes may not and vice versa. Your accounting software does not know which transactions are GST-liable – only you do.

Let’s say you have a ‘supervision’ account which you use for payments to counsellors for your staff and volunteers. The account is set to deduct GST at the normal rate from these payments by default. However, many counsellors in private practice are not registered for GST. For payments to such counsellors you need to change the GST field of the transaction: in Xero from ‘15% GST on expenses’ to ‘no tax’; in MYOB from ‘S15’ to ‘N-T’, in CCA Accounting 4.0 from ‘True’ to ‘False’.  You don’t need to change the GST setting for the account, only for that particular transaction.

How do you know if a supplier is GST-registered or not? If they are they must supply you with an invoice headed ‘Tax Invoice’, containing their GST registration number and business name. Without such a tax invoice you are not allowed to claim GST on this transaction!

Not changing the GST field in software is by far the biggest source of GST mistakes for our clients, sometimes amounting to thousands of dollars where GST is paid on exempt grants or where it is claimed on not-registered contractors.

Where GST is underpaid in any given GST period by $500 or more Inland Revenue will charge use-of-money interest on the amount, which accumulates the longer the mistake remains undiscovered or unreported.

ACC: How Does It Actually Work?

Every now and then we come across a fairly outrageous ACC bill that has been paid by the organisation without blinking an eye. On closer inspection it turns out that the organisation has been charged on the basis of their staff working in construction or similar…

When an organisation registers as an employer it is asked for a BIC or Business Industry Code. This can be found here: https://www.businessdescription.co.nz/#/home. If this field is left empty Inland Revenue will apply a default code which is usually based on a trade classification. This employer portion of the ACC levy can vary between as little as 0.1% and as much as about 6% depending on that classification. So it is important to pay attention to your BIC.

If you think you are paying too much ACC it is worth checking out whether ACC has your right BIC. You can look up your BIC through your IRD online services.

The ACC system is not too different to Kiwisaver in that there is an employee and an employer contribution. The employee contribution is part of the PAYE rates, which are made up of Income Tax and ACC, and is set at 1.21%. So if your marginal tax rate is 17.5%, your PAYE rate will be 18.71%. Because the rate is integrated into the PAYE system this is often hidden from employees and they may not realise that they contribute to ACC in this way.

The employer rate is variable according to what industry you work in, as explained above. Unlike Kiwisaver it is not collected through the tax deduction system but ACC invoices you separately.

Payroll Sharing Agreements

Some of our clients have their payroll done through another agency, meaning their employees’ gross pay is paid to another organisation, which handles their employees’ net pay, tax deductions etc.

ACC is sometimes forgotten in such arrangements. If you pay another organisation to pay your staff you need to pay them their Gross Pay plus their Annual Leave entitlement (8%) plus (if applicable) the Kiwisaver employer contribution (usually 3%) plus the ACC employer’s levies.