Author Archives: Harald Breiding-buss

Many organisations do not realise that they are entitled to free Microsoft software: Excel, Word, Outlook, Office 365 etc. Microsoft has been donating its software to charitable organisations worldwide for a number of years now. In New Zealand access to free Microsoft software is managed through the charity Techsoup (www.techsoup.net.nz) and has so far been restricted to organisations on the Charities register.

Changes to Techsoup’s eligibility criteria late last year mean that organisations not registered on the Charities register have become eligible. Techsoup only charges an administration fee to pass on the software from Microsoft.

This is good news at a time where not-for-profits are thinking twice about becoming registered as Charities due to the heavy compliance environment.

From the 2019 tax year (starting 1 April 2018) Inland Revenue is introducing some significant changes to the filing of payroll deduction returns. The new system is optional for 2019 but will become mandatory for 2020.

Under the new system, employers will be required to file payroll information after every pay run. This means if you pay your staff weekly, you will be required to file a return every week. Payment of payroll deductions to Inland Revenue will still only be required monthly on the 20th of the month following.

Inland Revenue says the new system is being introduced to make use of advances in software and information technology and to allow Inland Revenue to have more timely information about people’s earnings in case corrections to deductions have to be made.

A large number of small businesses and community organisations do not use e-filing capable payroll software at present, and the changes will mean an increase in compliance costs and effort for small organisations, while at the same time increasing the market for accounting software companies such as Xero or MYOB. Last December, Inland Revenue has taken the unusual step to post letters and emails to businesses and organisations urging them to adopt accounting software.

Thanks to a grant from the Christchurch City Council’s Discretionary Response Fund CCA is able to take on a further 30 new clients.

New enrolments have been stopped in early May because we could not build new capacity as quickly as demand for our services was growing. Even so, we have been taking on some new clients during this time for various reasons. As a result we expect to pass the 300 clients mark later this month, a number we had originally expected to reach in late 2017 or early 2018.

Many thanks for your patience while we are dealing with this onslaught.

As of 7 May CCA has not been taking on any new clients. Growth in demand is unprecedented at the moment and we cannot create new capacity as fast as this demand is growing.

Usually CCA is taking on about one new client per week. However, enquiries from new clients have numbered 2-3 per week in the last two months, and in the last two weeks since the enrolment stop we had to turn away 8 not-for-profit organisations seeking our help. 285 clients are enrolled with us at the moment, about 60 more than this time last year.

The main driver for this appears to be accountants no longer wanting to do work for charities because of the new rules, leaving many charities without an accountant or auditor. This trend seems to worsen as accountants are gradually catching up with the fact that the rules for charities have changed, and that they are very different to how they usually prepare accounts for clients. Charities Services has advised that more than 60% of newly filed returns appear to be non-compliant, which makes it likely that even more accountants will drop charity clients in future as such non-compliant reports will increasingly get rejected.

CCA is employing more accountants, however we are facing the same problem as everyone else in that new staff are initially not familiar with the new reporting rules or, in fact, the not-for-profit sector in general. This means there is a certain lead-up and training time, and we simply cannot do this fast enough at the moment. We do not expect this enrolment stop to last for more than three months or so.

We still encourage organisations who are in serious danger of not being able to meet their legal reporting requirements with Charities Services or the Societies Register to contact us.

CCA’s Workshop Programme for 2017 has been posted on our web site and is open for registrations.

New to the programme is our treasurer induction training. This is in response to many calls we have received from organisations who have had a new treasurer starting, or individuals who have just taken on that role. This runs over two sessions and there is a day and a nighttime option.

While the workshop has a bookkeeping component it focuses on the treasurer’s financial oversight and reporting role, including financial control procedures. See here for more info.

Such procedures are the subject of another new, separate workshop. Financial controls are often the most popular segment of full-day workshops we are doing outside of Christchurch according to the feedback we are getting. The workshop looks at the most vulnerable spots of not-for-profits when it comes to fraud and how you can sensibly protect yourself. See here for more info.

If you are looking for an accounting solution specific for for not-for-profits you may want to consider our Accounting 4.1 spreadsheets. Behind Xero this is the second most popular accounting system used by our clients. We will run two training sessions in 2017 to get you started.

Other workshops include GST, Tier 4 reporting, a technical workshop on generating a Cash Flow statement, and Board-specific workshops. Check it out here.

To help registered Charities with the new compliance requirements, we released an updated version of our accounting 4 spreadsheets for Charities.

The new version allows users to categorise their accounts to correspond with the annual Charities return. Reports can be run in either Tier 3 or Tier 4 format. We are quite pleased with fine-tuning the accounting behind these reports, such as identifying whether GST is an asset or a liability in the given circumstances and identifying asset purchases and sales correctly irrespective of how the user has used their asset accounts for these. These particular algorithms now produce more accurate results than the comparable reports in Xero, MYOB or Quickbooks.

Our method of assigning Charity categories to accounts is also unique and not available in commercial accounting software. The only commercial accounting software producing Charity reports is Xero, however they require you to classify your accounts manually at the end of the year to generate those (and the functionality is not available to all users).

Some further improvements to reporting are planned for the future, as well as the release of training videos on how to use our spreadsheets. You can download the new versions here.

We are more than happy to switch existing CCA clients over to the new versions if they wish.

The External Reporting Board (XRB), creators of the mandatory accounting standards for Charities, have ruled that Charities must use the prescribed titles and terms in Tier 4 reports, even if the same reports have different names in other Tiers.

Tiers 1,2 and 3 are expressly allowed to use their own terms in the standards.

This means that Tier 4 groups must call assets ‘resources’ and liabilities ‘commitments’ in their official reporting. They also must use the title ‘Statement of Receipts and Payments’ for the statement that is identical to the Statement of Cash Flows in all other Tiers.

Christchurch Community Accounting has advocated being consistent in the naming of comparable statements, using statement names that reflect an organisation’s not-for-profit nature, and using terms that are in common use where possible.

We have changed our internal Tier 4 templates to reflect this ruling.

Charities Services (Department of Internal Affairs) has rejected some Tier 4 entities’ reports, telling organisations that their reports are ‘missing’ a Statement of Receipts and Payments and/or Statement of Resources and Commitments when these were present but given a different name. Tier 4 entities whose reports have been rejected for ‘missing’ statements should change the titles (this can be done by hand) and re-submit.

We have also had a report from a Tier 3 Charity that has submitted entirely compliant statements of having those statements rejected. The Charity had not used the XRB templates. When the Charity called, Charities Services had to admit that they had made a mistake and subsequently accepted the statements.

Any Charity that has their Statements rejected would probably be best advised to ask for clarification first as it is possible that a mistake has been made.

Some other accountants that we talked to suspect that Charities Services is trying to enforce the use of the (optional) templates issued by the XRB, probably for administrative reasons, by making it hard for organisations to submit anything else.

CCA is of the opinion that the XRB-issued templates are too confusing for the type of readers generally interested in small charities, and make financial information harder to understand because the key information a reader would be interested in is hidden away in Notes. This view is shared by many of the charities and accountants we work with. Complicated reports generally undermine accountability as fewer people understand the financial situation the organisation is in.

CCA is also critical of preceding financial statements with non-financial information as the templates do.  This draws attention away from financial information at a time when financial information should be the focus, such as when a treasurer tables the report at an AGM.  CCA-generated reports put the financial information first for this reason and use relevant categories on the face of the statement rather than in the Notes.

What do you call your bank account, amounts you’re owed, your computers, vehicles etc? Perhaps you would call them your organisation’s ‘resources’. More likely you would call them your assets – at least that’s what they have been called ever since people first started recording transactions in any organised way.

But Charities Services has been rejecting some Tier 4 reports that call assets’ assets’ and not ‘resources’, saying they are non-compliant with the new reporting rules.

When I protested I was told that, while they agree that using the ‘official’ category names are not mandatory, they considered them misleading as assets and liabilities in Tier 4 are not reported according to accrual principles and therefore they are not really assets or liabilities.

The External Reporting Board, which has developed the Tier 4 standard, seems to disagree.  In section A75 of the standard they explain what ‘resources’ are, and that they are ‘commonly referred to as assets’. Likewise for commitments, which is what Tier 4 groups are now required to call liabilities.

So I have requested that Charities Services seek guidance from the External Reporting Board before rejecting reports on such frivolous grounds. However, the External Reporting Board makes it clear in the explanatory notes to the standard that they relied heavily on Charities Services when developing it in the first place, so they are unlikely to take a stance that would put them at odds with their key resource.

Christchurch Community Accounting is trying to use language that is both understood by people and expresses the not-for-profit nature of the organisation. It is disappointing that this does not find approval with the body that regulates charities.

Perhaps some organisations want to take up a recommendation by my Charities Services correspondent: I was told that if I don’t like their rulings I can go to my MP…

Harald

CCA will be running the not-for-profit administration and management course at Hagley Community College again in 2017. In addition there will now be a course focusing specifically on accounting and bookkeeping for small businesses and not-for-profits.

The courses run for a full year during term time and cost only $60 for the whole year. The NFP admin and management course is designed to fill a gap in training that is not-for-profit-specific rather than predominantly business-focused.

For more info about the NFP Admin course see here

For more info about the Start-up Accounting course see here.

CCA will run two full-day financial administration and management workshops in South Canterbury in November in association with the Volunteering Mid & South Canterbury. The workshops cover the most common issues around grant accounting, cashbook management and financial controls (i.e. fraud prevention).

They are held in Timaru on 12 November, 9-3.30,

and Geraldine on 19 November 9-3.30.

For bookings please contact Lyndal Watt at Volunteering Mid&South Canterbury volmsc@xtra.co.nz