COVID19 Financial Information

March 2020

Government Wage Subsidy.

Not for-Profits (do not have to be registered Charities) are eligible for the government’s crisis wage subsidies. They are subject to the same criteria as businesses.

How does it work?  The subsidy application form can be found here. No evidence has to be submitted on application other than a declaration that your income has been affected by 30% and that you have taken steps to mitigate the loss. Fraudulent claims can be prosecuted later – presumably there will be some sample-checking of applications in the coming months. The money cannot be used for anything other than paying wages and salaries. This means this funding must be tracked in your accounting system against the specific employees you are receiving funding for.

To submit the application, you will need names, IRD numbers and dates of birth of the employees you are claiming for.

There is no GST on the COVID wage subsidies. GST must be paid on all other existing wage subsidies you might be receiving.

The subsidy is not available for people you employ as external contractors.

Business Cashflow Measures

These are all run through the income tax system and have no effect on tax-exempt not-for-profits.


Of the main grant makers, only the former Community Trusts (Rata, Foundation North etc) are directly affected by the plummeting financial markets and the overall economic situation. Rata Foundation and Foundation North have both advised that they are expecting to continue funding at current levels, and take a long-term view to their investments.

Funding from some gaming trusts (Pub Charity, Southern Trust, Mainland Foundation and many others) will be affected in the short term, as they do not have any revenue while venues are closed. Note that this applies during risk level 3 as well, which we are likely to revert to after this lockdown.

Overall, gambling, including Lotto, tends to be not affected by economical uncertainty, and these funding streams should not be significantly affected by the crisis in the medium or long term.

If you are 30% or more dependent on gaming machine grants from such funders for your general operating costs, you have a case for a government wage subsidy.

The NFP Sector after COVID

March 2020 – Opinion

by Harald Breiding-Buss

Predictions about what the future will look like are almost always spectacularly wrong, so I will try not to make any. I doubt that any organisation had ‘global pandemic’ in their risk management plan, or health & safety policy, yet here we are. This in itself is a good reminder about the limits of forward planning.

The consensus here at CCA is that there will be difficult economic times ahead that will not stop when COVID is either beaten or has run its course. And, as always when times are difficult economically, the NFP sector plays a crucial role in softening the brunt and holding things together. The government’s coffers are not unlimited: benefit cuts are only ever discussed when unemployment is high and the tax take is low. Very many people are now paid for doing nothing, and this money is (partly) borrowed from the future.

The NFP sector – through sports, arts and all sorts of non-commercial activities – allows us to interact with each other without commercial motive, and acts as a role model for the idea of looking out for each other, no matter how difficult an individual may actually make that for us on occasion.

While philanthropic and charitable funding streams are unlikely to be majorly affected, the income that NFPs generate themselves will be, which in turn means there will be more competition for funding. NFPs will have to do more for less – and we’ll have to be kind to each other as well.

This probably means that more NFPs will get into financial trouble, which is where we come in. Now’s the time to seriously consider what will happen if your income streams are reduced by 30% not just for the next month or three, but for the next year or two. Remember, we’re here to help not just with your end-of-year stuff, but budgeting and all sorts of financial advice as well.

Financial Reporting and Audit in COVID Times

May 2020

Some legislative changes are being made at the moment, which allow registered Societies to defer their financial reporting and audit or review.

The Charities Act and Financial Reporting Act are not being amended, meaning that no relief is given to registered Charities in terms of the annual return. Any delay in reporting needs to be approved by Charities Services (Department of Internal Affairs) and is at their discretion. Financial reports still need to be fully compliant with accounting standards.

Many charities will also have to have additional notes regarding ‘events after balance date’.

Organisations that have claimed the wage subsidy will have to be prepared to show their calculations about their entitlement for this subsidy to their auditor or reviewer. This is because an auditor needs to assess the possibility of this being a liability, if it was claimed in error.

Remember that for the vast majority of not-for-profits, audits or reviews are entirely voluntary, although possibly written into your constitution or rules (which can be amended). This may be the time to have a serious think about whether to continue spending money and time on this.

Don’t Plan for the ‘Recovery’ Just Yet.

July 2020 – Opinion

Harald Breiding-Buss

Government and other places have started to use words like ’recovery’ and ‘post-COVID’ to describe the outlook for the next few months. This is perhaps a bit premature.

Economy 101 tells us that consumer (and business) confidence is more important in creating economic growth than actual spending power, and this is why governments and business leaders are very reluctant to ever convey bad economic news. But community organisations would be wise to plan for a reduction in income not just for the short term.

Government has taken on very large debt, and even the most optimistic economic forecasts say we will not have recovered lost employment and business activity before 2022. This means reduced tax take, and empty government coffers, combined with high debt repayments.

How exactly this will impact on a not-for-profit will vary in each individual case – some stand to gain financially from economic hard times. A good planning tool to start with when considering factors outside of the organisation’s control is the ‘PESTEL’ analysis (see here). PESTEL stands for Political, Economic, Social, Technological, Environmental and Legal, which gives a framework for analysis.

The biggest usefulness of tools like PESTEL is that the user starts thinking about the impact of outside factors on the organisation in specific terms, which is not something we do on a daily basis. That leads to insights, and hopefully some level of preparedness.

I am a little worried that organisations will respond to funding shortfalls by frantically writing more and higher funding applications, or ask the public for more donations. This will put pressure on funders, and will pit organisations against each other in competition at a time when the sector needs to work together to deal with the fallout of the crisis. As I mentioned before, I think this is the time when some not-for-profits should look at their investments (perhaps held by another entity for their benefit) and assess whether, for the greater good, these should be used instead of competing with other organisations for a smaller funding pool.

OPSCO (Otautahi Partnership for Strengthening Community Organisations) is planning an online workshop for financial planning during COVID in October. We’ll keep you posted.

Need to delay your AGM or audit?

July 2020

Legislation passed by parliament after the lockdown (the ‘COVID-19 Response (Further Management Measures) Legislation Bill) gives organisations’ governance members power to alter deadlines and other requirements laid down in their constitutions, if such a change is necessary because of COVID. See here for the wording of this particular section:

This means that, given sufficient reason, your AGM can be postponed beyond the date required in your constitution, and any review or audit requirement can be deferred. Charities Services is happy to grant extensions for filing, and if you do ask for an extension, make sure it is a sufficient one.

If you had difficulties getting people to meetings during the lockdown or after, and/or your accountant (i.e. us)  being under capacity strain because of COVID, are good reasons to do so.

Many organisations are coming to us at the moment with unrealistic timeframes, partly because of their own delay in attending to their end-of-year accounts. Please help us manage this by making use of this.

Wage Subsidy – When Does It Have to be Paid Back?

July 2020

MSD (Ministry of Social Development) has been shifting the goalpost regarding the wage subsidy several times already with regard to situations where the subsidy exceeds a particular employee’s normal wage. This is a situation we find frequently in our clients’ accounts, and we have had many queries about this.

Firstly, the wage subsidy is intended to cover a person’s earnings for a very specific time period, i.e. for the 12 weeks after the application was made. An extension was available for a further 8 weeks under certain conditions. There is no indication that this time period of 12 (or 20) weeks can be exceeded if the wage subsidy is more than 12 (or 20) weeks’ earnings.

If there is a leftover amount, MSD says it can be used to cover another employee’s wages during this 12 (or 20) week period. It is unclear if this other employee also needs to be a wage subsidy recipient.

However, if the wage subsidy exceeds your total payroll in any given week, MSD now says this amount will have to be paid back. It cannot be used to cover other expenses, or a longer time.

A recent article on Stuff, quoting accounting firm Deloitte’s, suggests that the government is beginning to audit the wage subsidy, and advises organisations to make sure they have written consent from employees, and evidence to support their entitlement to the wage subsidy at hand in case they are being audited. It is largely speculation, however, how exactly the government will go about any such audit, and we have been discussing this here at CCA as well.

Having the evidence at hand (i.e. your calculations of a 30% drop in income, or 40% for the extension) is certainly a good idea. Government can check very easily whether a subsidy payment has exceeded a given employee’s normal earnings, as the employee’s IRD number was required on application, and earnings are filed with IRD with every pay run. As yet this hasn’t happened, and indeed MSD may change their policy on this yet again. As such, we have advised our clients to treat these amounts as liabilities, but wait for clearer signals from government about what their expectations are before repaying.

The situation is different where you found that you have made a mistake in your calculations, and you did not actually meet the eligibility criteria for the wage subsidy. In this case you may be considered to have made a fraudulent claim, and we would advise to repay the subsidy as soon as possible. The same applies where you received the subsidy, but the staff member has left (or been made redundant) during the subsidy period. The subsidy cannot be used for any holiday pay or redundancy payout.


Wage Subsidy Troubles

October 2020

We have had to advise a significant number of organisations in the last few weeks that they are legally obliged to repay a part of the COVID wage subsidy they received. Understandably, this is not something most organisations want to hear, and often we are told that they had been advised differently elsewhere.

We have confirmed with MSD – again – that the original wage subsidy can only be used to cover staff costs for a period of 12 weeks. There are no extensions beyond this time, and while you can use the subsidy for other staff, if the subsidy exceeded your total payroll, the difference has to be paid back. The subsidy cannot be used beyond the 12-week period, nor for any other organisational costs.

This also means that if you had grant funding for a staff member, covering their salary specifically for that 12-week period, or a part of it, you could not also claim the wage subsidy.

As part of an audit or review we also have to look at whether you met the eligibility criteria of the wage subsidy at the time you applied, and we have to ask for your calculation.

When we audit or review your accounts, we expect to see any overpaid amounts in the liabilities section of your statements, and we really do not have any wiggle-room here. Please understand that we do not begrudge you the money, or want to be overly harsh. We do not force you to pay the money back, but we have to insist that it is recognised as a liability at this point in time.

COVID Subsidies – A Word of Caution

September 2021 – Opinion

Harald Breiding-Buss

Just before this latest lockdown we saw some evidence that government is starting to ask some questions about the wage subsidies paid out in 2020, and charities, too, are being audited now by the Ministry.

We have also seen the wage subsidy crop up in other places, such as regular audits various government ministries do on organisations that receive regular funding from them and have to meet certain standards of service provision. Questions are being asked where wage subsidies have been claimed for positions fully or mostly funded by the Ministry.

As there is now a new round of subsidies available, organisations should make sure that they really are entitled to this. The main condition for another wage subsidy is that there has to be a 40% COVID-related drop in income over a specific time period, compared to the same period in the previous year. And yes, grants are income. An organisation also has to make a declaration that they mitigated the impact of COVID and looked at other funding sources (such as own reserves or bank loans) before applying.

I know I am not going to make myself popular for saying this, but I have not been impressed with the not-for-profit sector’s response to the wage subsidy. These are emergency government handouts, to be paid for by all New Zealanders, with interest, at some stage in the future. But for the majority of our clients, the subsidies have boosted organisation’s surpluses, and occasionally reserves that were already very sizeable. Overclaimed subsides were not refunded, and in most cases I have seen, organisations that claimed the 8-week extension subsidy were not entitled to it. Frequently, organisations took money from grants to pay for wages already paid for by the subsidy. By and large, the sector will be coming out of the COVID crisis with bolstered, not diminished, reserves, which will have undermined, rather than supported, the government’s economic objective during the pandemic. This is a bizarre state of affairs: if community organisations are not using their reserves in times like this, when will they ever be used?

We all feel passionate about our causes, and want the money to further it – but I believe we also have an obligation to look at the ethical implications of accepting such handouts.

Interesting Times Ahead

December 2021 – Opinion

Harald Breiding-Buss

The COVID pandemic has, of course, presented challenges for the sector, but in most cases these were not financial – to the contrary, many organisations are better off, or were thrown a lifeline, due to be able to access extra funding.

We can expect that the government will manage the spread of COVID for years to come. Some sort of government financial assistance will have to continue over this time.

Massive government spending causes higher inflation, however, which we are starting to see. Inflation eats into people’s earnings and wealth by making their dollars have less buying power. This will trigger pressure on wages and salaries, and community organisations, too, may have to budget for much larger wage increases than they used to. Organisations depending on membership or activity fees, such as sports clubs, may find it harder to collect these, let alone increase them.

At the same time, it is unlikely that government and philanthropic funding will increase by the same amounts. The government has implemented generous programmes for arts and sports, as well as greatly increased  funding for some social causes in the last two years or so. That, too, cannot continue long term, which means many services will have to downscale again. In my experience this does not usually go well – organisations generally try to maintain the higher level of service in these kinds of circumstances, but are not successful in maintaining funding, which more often than not leads to the organisation eventually running out of money and then winding up. Organisations may also have incurred additional ongoing overheads through the growth, such as rent for larger premises and administrative/management/compliance effort that is not needed in a smaller group. This is difficult to reverse.

If government reduces funding (or even simply does not increase it with inflation), the above effect will create additional pressure on funding from philanthropic sources, gaming or local government, creating a flow-on effect to the rest of the sector

You will not have been taught at business school how to manage shrinkage, because the very thought goes against the business and economic model almost everyone believes in. Psychologically it may well feel like failure, rather than merely an organisation’s adjustment to the environment. Organisations may try to mobilise volunteers to do more with less, but maybe we will have to learn to just do less with less.

I may well be wrong, and money may continue to flow like the proverbial milk and honey, but I think it may be prudent to have a discussion amongst the committee or Board what the plan is if the additional funding dries up, or general funding becomes more competitive.

Either way, have a happy Christmas and a great start to the New Year.

Managing Uncertainty

March 2022 – Opinion

Harald Breiding-Buss

Earthquakes, a pandemic, spiking inflation and now a war in Eastern Europe – these are not the kind of things even the most diligent manager would have made any plans for, and they seem to keep coming. We can’t forecast with any certainty how the pandemic will pan out, or what impact the war will have on the economy and prices in the next year or so.  Will it all have settled down again in a few months, or are we in for ongoing high price rises, high refugee numbers, big impacts on the less well-off, a new more lethal variant, government community funding going into a completely new direction?

This is certainly not the time to develop a five-year plan, but should you even try to make forecasts for your organisation for the next 12 months? Both the Canterbury and Kaikoura earthquakes and COVID have shown how carefully crafted organisation budgets had to be abandoned for day-to-day financial management, scrambling for money while trying to keep up with demand, using opportunities that did not exist only months before while managing threats that we only have a vague understanding of at the time.

For example, it is very hard to estimate the cost of managing COVID regulations and impact. There is a cost to people working from home, having to change how we work with people, or staff being absent more. People have other things on their mind, making work difficult and delaying it. There may be a new variant tomorrow, and the government may come up with a completely new set of rules.

Organisations with regular outgoings, such as wages, rent etc, actually now need a budget more than ever, especially if they don’t hold a lot of cash. But it will not be enough to do just one for the year and monitor the variances – it will need to be quickly updated when the situation, and therefore your assumptions, changes. Your assessment of your COVID costs is likely to be incorrect, but it is the best you have right now. The purpose of the updates is to see if, on the most recent information and conservative estimates, there will be enough cash to pay those outgoings for the next few months. If this is doubtful, costs need to be reduced as soon as possible, because some will take a while to take effect.

In a highly volatile environment being able to pay what needs paying for the foreseeable future is far more important than whether you will have an accounting surplus or deficit at the end of the year. The budget needs to be on a cash basis, and give you the basis for decision making in the short term.

Chances are that various government handouts, subsidies and extra funding for whatever crisis needs attending will bring in more money than average for many organisations. If your budget shows this cash accumulating it is just as important to start thinking how this can be used now to help, rather than wait for the next annual budget cycle.

Time for a PEST

August 2022 – Opinion

Harald Breiding-Buss

You may or may not have heard of a PEST (or PESTEL) analysis. This is an analytic tool to identify external factors that may affect your organisation, so you can manage any risks associated with them.

PEST stands for Political, Economical, Social and Technological, with Environmental and Legal often added to the mix. To paraphrase KFC ads: now’s good to get together as a committee, board or management team to have a think about these.

Why now? Because we live in times that are more uncertain than they have been in decades: the economical flow-on factors from government COVID measures such as inflation and staff absence, the greatly increased risk of catastrophic weather events, and the increased risk of military escalations in various areas are just some of the contributors. Parliament’s increasing appetite to regulate the not-for-profit sector, and pile on the compliance, does not help either.

The aim of a PEST(EL) analysis is not to list all the things that are happening, or may happen in future, in the world, but only those that will have a specific effect on the organisation. Some may create opportunities – both COVID and the attacks on Christchurch’s mosques have provided vastly increased government funding for some organisations, for example – but some will threaten the survival of many organisations. Also in the political area of the analysis would be the possibility of government priorities changing.

Economically, there is the effect of inflation and upward pressure on wages because of staff shortages. It is important to think about the big picture here. Trying to apply for more funding to mitigate the effects of wage demands and inflation will not work, if everyone else is in the same situation. The pool of funding is limited.

Socially, COVID has led to some polarisation in society, New Zealand may well be facing international pressure to take in a lot more refugees, and to significantly up our game in responding to climate change, all of which has social flow-in effects that can directly impact on community organisations.

And technologically, the challenges of digitalisation are not restricted to the older population. We are all asked to do more and more complex stuff online, which is constantly changing, and errors have consequences that are more complex. As the role of computing increases, our understanding of what exactly is happening diminishes, and our decision-making may suffer as a result.

This is by no means an exhaustive list of external factors on an organisation, but there is much to discuss. We cannot foresee what happens in the future, but being prepared at least for what is foreseeable will go a long way.