June 2015 Newsletter
This Issue
Good One, Guys – Our survey reveals how much we’re appreciated.
CSBEC Winding Up – A capacity-builder closes its doors.
The Road to 2016 – A donation is a donation is a donation?
Claims and Facts – Accountants are sometimes wrong. A couple of corrections.
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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
You are so NICE!
Our recent client survey, returned by over a third of our clients, returned overwhelmingly positive results. According to you, we are doing particularly well in training (workshops or support visits) and phone or email support: you feel comfortable asking questions, they get answered satisfactorily and you feel that we understand your situation.
I was particularly pleased with the excellent ratings for the quality of our work and our expertise. All respondents agreed that CCA’s services are of high quality, and 84% agreed ‘strongly’. Amongst the four of us working here there is a real spirit of continuous professional improvement and growth, and perhaps a bit of a pioneering spirit as well, as we try to find a better fit between the essentially business-driven rules of accounting and the needs and responsibilities of not-for-profit organisations. 97% of you agreed that CCA understands not-for-profits better than most accountants.
This newsletter is also much appreciated, and again quality rated highest. The ratings and comments also suggested, however, that at times there can be a bit of an information ‘overkill’, and some information is more relevant to some than to others. The formatting was also commented on, and is something I will think about.
There were a couple of ‘outliers’, i.e. less happy respondents, and these were in the area of responsiveness and timeliness in the context of audits. This is noted and not glossed over. While overall you were happy with the time their jobs took, you were clearly not as happy as with everything else. I think turnaround times will gradually improve as we are fine-tuning how we do things and all become more and more experienced.
We also asked you to estimate how much money we saved you both in direct and indirect (efficiency gains; less time spent on admin/bookkeeping tasks) costs. We already knew that the average savings in audit costs alone amounts to about $1,000 per organisation on average per year. Adding all savings up, your average estimate was $1,700 per organisation (which includes $0 amounts for organisations who said they couldn’t estimate or that the amount would be very small). If this is representative, then our current clients will save a total of almost $300,000 in the current year. Imagine all the good that is done with those dollars…
Harald
Eulogy for a capacity-builder
We received the sad news that the directors of the Small Business Enterprise Centre (CSBEC) have made the decision to wind up the organisation, and a liquidator has been appointed.
CSBEC has been around for 25 years and predominantly focused on helping small businesses and sole traders succeed. Many of their services were free (enabled by funding from Canterbury Community Trust and contracts with Ministry of Social Development), and their accounting offshoot Barefoot Accounting helped make accounting and tax work affordable for those who are just trying to make a living. In the not-for-profit sector CSBEC was maybe best known for its exceptionally successful Aspire series seminars.
CSBEC’s vision was very close to CCA’s: it was about making essential but very expensive education and financial services accessible and available to those who can otherwise not afford them, but who provide much of the backbone of our society. CSBEC was doing for small businesses what CCA is trying to do for small not-for-profits: upskilling and capacity-building.
There are attempts to rescue some aspects of what CSBEC was doing, such as the Aspire series, provided funders are happy to continue supporting it under a different umbrella.
CSBEC was unusual in that it was set up with a company structure (i.e. shareholders and directors) and incorporated under the Companies Act, but was also a registered Charity.
The Road to 2016
Monthly feature to prepare for the new Financial Reporting Standards for Charities.
Donations and Fees
Unclear separation between genuine donations and fees for providing a service are unfortunately somewhat epidemic in the not-for-profit sector. For GST-registered organisations there is a tax advantage for calling something a (tax-exempt) donation rather than a (GST-liable) fee. Inland Revenue is quite clear, however, that it is not fooled by cosmetics: to be exempt from GST a donation has to be an unconditional gift for which the giver can expect nothing in return for themselves.
In the context of the new Financial Reporting rules, donations must be reported in a separate category from all other service income. Again, any payment in return for a service (attendance of a workshop or event, receiving counselling or personal support, payment of sausages during a sausage sizzle, team fees etc.) is not considered a donation. Neither can membership fees be considered donations (these, in fact, must also be reported separately).
Sometimes unspecified donations (‘gold coin’ or a ‘suggested donation’) are asked for certain events. In order for these to be true donations, people must be able to attend without paying anything, i.e. there cannot be any obligation to pay, or any additional benefits for those who do.
There would be very few, if any, charities amongst our clients that do not have a separate donations account. The art is to properly identify them.
Accountants in Uncharted Waters – Setting it Straight
There has been a number of occasions in the past few weeks where we have been made aware of dubious or incorrect information given to not-for-profits by their accountants. We would like to clarify two of them here, because they may be of wider interest:
- Advice: One of New Zealand’s largest accounting firms has mailed out a newsletter-style email to their Charity clients advising of the new accounting treatment for donated goods. In it they stated that for Charities reporting under Tier 4 “there is no need to account for donated goods”.
Fact: Section 85 of the Tier 4 financial reporting standard clearly states that an organisation must report a current value (where obtainable) for each donated resource. When made aware of their error, the accounting firm replied that they will not issue a correction because they do not consider such reporting of values ‘accounting’.
- Advice: A Charity using not-for-profit titles for their financial statements (such as ‘Statement of Funding’ instead of ‘Statement of Financial Performance’) has been instructed by their auditor to change the titles back to the business titles because they had used those titles last year and were not allowed to change under the old GAAP rules, which are still in force.
Fact: Both the old accounting rules (NZIAS) and the new ones explicitly state that an organisation can choose their own titles for Statements. No mention is made in either set of standards that a title, once chosen, must not ever change in the future (the standards are otherwise quite particular about what aspects can and cannot change).