Reporting (Charities)

Reporting (Charities)

August-October 2018

Charity Reporting Woes

In the last few months we took on a few registered Charities that have not complied with the new reporting rules since they came into effect. Charities Services can only check a few charities for compliance each year, and a large number of charities – possibly still the majority – are not aware of the new rules and submit non-compliant reports. Occasionally we’re getting surprised looks if we are telling them that there are new rules, and quite a bit of resistance to change.

If this has happened, Charities Services advised us that they will not require an organisation to re-file past years if they start complying from when they become aware of it.

To clarify, a Charities Annual Return has two components:

  • The actual Annual Return, which is an online form. Your responses to this form are posted in pdf format in the ‘Annual Return Summary’ column in the Annual Return tab on the Charities Register.

This form, amongst many other things, asks about some financial figures. These figures are the basis for the ‘Total Income’ and ‘Total Expenditure’ figures in the table in the ‘Annual Returns’ tab.

  • A compliant ‘Performance’ Report, which contains your financial statements as well as other mandatory information about your Charity and your service activity. This report is generated by the charity and must comply with accounting standards. It is posted on the register under the ‘Financial Statements’ column in the ‘Annual Reports’ tab, and can be in any software format. The figures entered into the Annual Return must be based on the Financial Statements.

Occasionally we find that an organisation files a ‘performance’ report with Charities Service based on a template, but approves a completely different set of Financial Statements at their AGM. This is problematic.

The statements filed with Charities Services must be your ‘official’ statements for the general public. There cannot be another set of financial statements for this purpose.

You can have different financial reports for internal use. For example, you may produce accrual-based accounts for your own purposes, but use cash-based reporting for Charities Services, because it is simpler. If these other accounts are presented at an AGM it must be made clear to people attending that these are not the official financial statements of the organisation but financial reports produced for internal purposes only.

For audit purposes, if your rules or constitution says you have to have an audit, then this audit in general must be on the same statements that you posted to the Charities Register, not any other financial report.

 

Review of not-for-profit accounting standards

February 2021

The External Reporting Board (XRB), who is the issuer of accounting standards, including those mandatory for registered charities, is reviewing those applying to Tier 3 and Tier 4 entities. This is of relevance not only to Charities, as it is likely that compliance with these standards will become mandatory for all Incorporated Societies, regardless of whether they are registered or not.

Feel free to make a submission (go to www.xrb.govt.nz). XRB is a government agency, but operates outside government control: its activities cannot be influenced or directed by the government other than through legislation or budget.

CCA accountants will probably make a submission, mostly in the hope to at least avoid a further tightening of the screws. We will advocate for:

  • the removal of the Statement of Service Performance from the standards (not the right place for this kind of reporting, and XRB is the wrong agency for it) and instead making this Charities Services’ business;
  • continuing to allow freedom in the presentation of the components of the statements (within limits), as is international practice for all other accounting standards;
  • replacing the ‘use or return’ definition for certain grants with something more workable, to make grant reporting consistent;
  • allowing the use of project categories in expenditure, rather than always having to separate out wages. We think it is often more useful for an organisation to report how much money have been applied to which projects rather than being stuck with functional categories. This would also better meet the ‘telling a story’ narrative, and would be consistent with the higher reporting Tiers;
  • some simplifications for Notes and Accounting Policy disclosures that add no value to not-for-profits, distract from the important bits, and just make the reader feel dumb.