December 2016

December 2016 Newsletter


This Issue

Taking pride in being a Not-For-Profit

CCA Workload Update 

Unbalancing Xero

Taking stock of your fixed assets



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Taking Pride in Being a Not-For-Profit

As a not-for-profit, when you use an accountant it is easy to feel a little unwelcome. This may not be intentional – for almost all accountants not-for-profits are only a small proportion of their client base, but they require quite a bit of specialist expertise. This means accounting work for not-for-profits is more time-consuming for them, and they are often unable to charge for all the time used.

The new rules for Charities have made not-for-profits an even more unattractive proposition for many accountants, and I am hearing especially from clients in rural areas that local accountants are pulling out, often leaving no local option for them to go to.

Although NFPs engage in business activities, and some businesses exist primarily for not-for-profit or even charitable purposes, there is a clear difference that separates NFPs from businesses, and that is the role of money. For businesses, generating revenue is the goal, and this goal requires expending some money. For not-for-profits, applying money to a common activity, cause or charitable purpose is the purpose, and this requires raising funds to do so. NFP is business upside-down.

But generally, NFPs are treated as though they were simply a variation of the ‘normal’ business model, and as a result not-for-profits are still told to follow business principles, with some allowances for the not-for-profit nature of the ‘business’. The new Charity reporting rules are no different.

This is reflected in the language used in the new reporting standards. It is full of the word ‘performance’, a term treated with much suspicion in the sector as it has connotation of competition rather than collaboration, and monetary efficiency rather than service effectiveness. As feminism has taught us, language is not just communication – it can be a tool to perpetuate inappropriate social, or in this case economic, norms.

When CCA prepares accounts we use different titles for the Statements and some headers to help the reader look for the important things in not-for-profit accounts and not to treat them like the financial statements of a business. This is permitted, even under the new reporting rules for Charities. See here if you want to know more about what we do different, and why.

To me, this is one small contribution to raising awareness about not-for-profits as an alternative model to doing things, and taking pride in it, too.

Enjoy your holiday break – assuming you’re having one – and have a great start to the new year.



CCA Workload Update

There has been a slight change in requirements when applying for Lottery grants this year in terms of financial information, which meant a few organisations were caught out when trying to meet the early December application deadline but didn’t have full financial reports for the past year yet. Lottery is now following the Charities Services rules, which require registered charities to have their financials sorted out within six months of the end of the financial year. There were a hectic few days for us in early December because of this – hopefully we’re all wiser next year.

We have had five volunteers working for us over the past few weeks, all of them students with University of Canterbury, and this has helped. There are a few jobs that are close to completion where we are just waiting for you to get back to us with the information requested.

It seems that some people are a bit hesitant to contact us for help as they know how busy we are. Don’t hesitate to contact us for issues with training, software, general accounting support or implementing better systems. There are employment hours specifically set aside for this.

A big thank you to Rata Foundation for their support for our work, financial and otherwise.

Unbalancing Xero

Yep, it can be done. Even if you have bank feeds activated, and Xero shows you the green tick indicating you are fully reconciled, your actual bank balance may still be different to the one Xero shows you.

Xero itself recommends to occasionally check an actual bank statement against Xero – for good reason. The bank balance that Xero shows in the Balance Sheet or on the dashboard is not the figure imported from the bank statement. It is the balance of Xero’s bank ledger accounts.

Sometimes people choose to delete a transaction during the reconciliation process or at some other time. Xero then erases this transaction from your bank ledger, even though it appears on your bank statement. Since the transaction no longer shows up in the bank ledger, it no longer requires reconciliation, so Xero doesn’t see an issue.

This is actually fairly common, and the difference has occasionally amounted to a few thousand dollars. By now we have a bit of experience fixing this particular issue, but it is not an easy one to work out when you are first confronted with it, so contact us if you find your Xero balance does not agree with your bank statements.

On the face of it it seems strange that Xero allows transactions to be deleted that were imported directly from the bank. The reason for this is that Xero cannot be certain that its import function is 100% accurate, and it does very occasionally omit or duplicate imported lines. This error is more common with some banks than others, and also with particular types of accounts. For this reason the user must have the option of correcting those errors.

Taking Stock of your ‘Fixed’ Assets

‘Fixed’ assets can be a very significant part of your Balance Sheet and for many organisations are the core of what they do. Yet we see rather a lot of libraries without books, toy libraries without toys or sports clubs without equipment or uniforms on their statements.

This is probably because these are the kind of ‘fixed’ assets that are quite mobile. There are also generally rather a lot of them, which means they are rather hard to keep track of individually. So even though they are not ‘consumables’ and provide economic or service value for a few years they are more often than not treated like any other expense by the organisation.

There are some fairly simple approximations that can be used to calculate a reasonable value for such items, even if they are not being kept track of individually, but an organisation still needs to know how many of such items there are. It is not a bad idea to count them at the end of the financial year, just like you would in a stocktake.

Another problem that we often strike is that organisations have no record of what the ‘fixed asset’ figure in their financial statements actually stands for. These are assets purchased some time ago, which keep being depreciated in bulk even though no-one knows what they actually are.

In that case the best approach is to create a new list of all the assets you own. If necessary, their value can be estimated by finding similar items for sale on TradeMe.

Best practice to prevent this from happening is to record newly purchased items in your asset register in a more identifiable way. For example just putting ‘computer’, ‘laptop’ or ‘new desk’ will not allow you in a few years’ time, when you replace or dispose of this item, to identify exactly which one it was.

The other main benefit of a well-maintained asset register is knowing what you have, as this makes it less likely for items to disappear without this being noticed.

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. Enrolment and course options are available here:

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.