If you are a registered Charity, or have to comply with XRB-issued Accounting Standards for other reasons, you may find the resulting reports a bit hard to understand. After the changes to ‘Tier 4’ in 2024, they may not be of much use to you for your own planning, and will be a bit short on detail for your funders.
We think community organisations need better financial reports, and so we have come up with our own Management Report. If you are a ‘Tier 4’ organisation, we’ll give you a Management Report for your own use, or to show to your funders, in addition to the ‘Performance Report’ that you have to file with Charities Services. This allows us to focus on what makes the best sense to you and your stakeholders.
The Management report can be accrual or cash-based, (the example here is accrual-based) and it looks more like what you got before the standardisation. But we have made some modifications to show that not-for-profits are not businesses, and to try to avoid charged language such as ‘deficit’ or ‘surplus’.
Here’s the main features:
Financial Activity Page
In business accounting this is your ‘Profit & Loss’ report, or ‘Statement of Financial Performance’. For not-for-profits, this report needs to show where the organisation put their money, and how it was funded or financed:
Expenses are at the top, showing how they were funded. The ‘bottom line’ shows how much money was accumulated for future use, or any amount of previously accumulated funds used, rather than the misleading terms ‘surplus’ or ‘deficit’.
Reserves Page
This is your Balance Sheet or ‘Statement of Financial Position’. In business it shows how much net worth the owners have, and how liquid it is. In not-for-profit situations it also shows liquidity, but especially how much the organisation has in reserve for future use.
The report has an available funds line. This is the amount of money the organisation had at that date that was not committed to any purpose or funder-determined expenditure. It is a good indicator of how comfy you are financially.
The line for fixed assets is added underneath – it is not usually an important line item in not-for-profits.
The distinction between ‘current’ and ‘non-current’ is not generally useful in not-for-profits, and we do not use it in this report. Instead, stakeholders need to be able to see at a glance how much funds the organisation holds, both in dollars and as investments of any kind, regardless of any investment term durations.
The organisation may have set aside some of its funds for a specific, internal purpose, which will show in the ‘Reserves’ section.
Notes Page
Notes you can actually understand!
We don’t feel we need to impress anyone with fancy language or legalese. Instead we try to give the information needed to understand the report in plain English.
While we follow normal accounting practice, we take a more common sense approach to how things are categorised. For example, we think any investment property or portfolios are different to fixed assets the organisation has for office use or service provision, and need to be made obvious. This needs to be mentioned in the Notes, as a reader may assume something different otherwise.
We also tried to explain the treatment of grants and government contracts a bit better than in ‘official’ reports.
For funders, and your own use, there’s also our signature grants table:
The Notes section might have other info specific yo your organisation – for example, you may not have grants, but want a breakdown of your fundraising efforts or specific project expenditure instead.