September 2014 Newsletter

This Issue

Course at Hagley – Finally a course about NFP administration.

Kaikoura Training Day – Because Christchurch is a little too far for some.

Accounting Standards Update – Don’t get all worked up …yet.

Credit Cards – Accounting treatment and internal controls.

NFP Accounting + Admin Course at Hagley

A full-year evening course titled Not-for-Profit Administration and Management course will be offered by Hagley Community College in 2015 during term time (36 sessions in total). It will be facilitated by Harald on behalf of CCA and covers:

Legal structures, rules/constitutions and governance
Funding and accountability
Not-for-profit bookkeeping and accounting (including financial reporting)
Requirements for registered Charities
Management and policy for small/medium organisations

Key learning outcomes include that participants will be able to produce fully compliant financial reports and are able to make confident decisions about their structure and way of operating. It targets people working or volunteering for small to medium not-for-profits and those thinking of setting one up, but would also be suitable for those working in larger ones who want to have a better foundation about these issues.

The cost is a one-off enrolment fee of $40. Hagley Community College will issue their 2015 ‘After 3’ prospectus in October, but enrolments are already accepted (course code: A3NFP). Ph 379 3090 Ext 800 or email after3@hagley.school.nz

We think there is a pretty big gap in educational opportunities for people working in the not-for-profit sector, and we’re quite excited about Hagley taking this on.

Kaikoura NFP Training Day

CCA will run a full-day workshop titled Accounting and Financial Management for Community Groups in Kaikoura on 28 November at 10am at the local Heartlands.

This will be a combination of several of the workshops we run in Christchurch and cover:

Understanding financial statements
Analysing financial information
Grants and Government contracts
GST/Payroll
New financial reporting rules

Please register through Tewhare Putea, ph 03-9099294, tewhareputea@xtra.co.nz

Accounting Standards Update

Charities Services and the External Reporting Board (XRB) are holding 2-hr seminars on the new financial reporting standards (Tier 3 and 4 only) in October. The Christchurch date is 15 October, and three time slots are offered (10-12, 2-4pm and 6-8pm). There is also an online seminar on 29 October 9-11am.

The new standards appear to be a world-first: CCA is not aware of any similar attempt to regulate small charities in other countries such as the UK, US, Canada, Australia or Western European countries in this way.

CCA will assist registered charities (the standards do not apply to other not-for-profits) through twice-yearly seminars on compliance, as well as a gradual flow of information about aspects of the new reporting regime through this newsletter and our web site. We plan to develop a modified version of our spreadsheet which will produce Tier 4-compliant reports, and we will also continue to talk to key funders in Canterbury about the sector’s increasing compliance burden and how they might be able to help. CCA is part of a network of not-for-profits that help other community groups, and we will make an effort to rally a coordinated response that will make the transition as smooth as possible.

The most common questions we are asked about the standards at the moment are a) whether organisations need to change their day-to-day bookkeeping, and b) from when they have to comply. Our advice at the moment is:

a) Do not change your day-to-day bookkeeping or accounting system. The Standards refer to the presentation of your accounts (and some other information) only, they do not mandate how you do things for your own purposes. Your financial systems needs to meet your internal needs first, and external reporting needs second.

However, if you are a new organisation just setting up it may be of advantage to set up your account categories in a similar way to the templates issued by XRB.

b) The first reports required in the new format are for those organisations with a financial year ending 31 March 2016. If your financial year ends in June or December, it will be June 2016 or December 2016. For those with financial years ending in January or February (some sports clubs and others), you will not be required to report under the new format before January/February 2017. There is little you could or should do before those dates.

Organisations may also want to re-consider whether the benefits of Charities registration outweigh the additional compliance burden in their particular case, and possibly seek advice on this. The key benefit of registration, income tax exemption, is also available for non-registered not-for-profits under certain conditions, and most funders do not insist on Charities registration at this point in time.

Credit Cards

Many community organisations have credit cards for key staff members and to be able to make online purchases. This saves the staff member having to advance money for expenditure while travelling for the organisation, and it also gives extra flexibility to respond to short-term discounts (the ‘today-only, never-to-be-repeated’ offer).

There are two principal ways to account for credit card expenditure:

1.) Treat the card account like any other bank account.

This system works especially well if you have accounting software with a live (or imported) bank feed. You simply code and reconcile transactions as for the other bank accounts. Unfortunately, bank feeds for credit cards are often error-prone in both Xero and MYOB.

2.) Treat the credit card statement as a bill.

Rather than running a separate ledger for the credit card, you can also simply code each monthly credit card statement as an expense (split into different categories). This is usually the easier way, but there are two issues to be aware of: a) if you do accrual accounting, an end-of-year adjustment will be required for any as-yet unpaid amounts and b) you will likely become confused when you transfer money to your credit card (for example to load it up for expected expenditure which exceeds your credit limit).

Because credit cards circumvent the two-signatory rule it is important that a credit card holder is barred from making inter-account transfers. This would enable them to load the card up beyond their normal spending limit and bypass your other internal safety mechanisms. Many organisations allow transfers between their bank accounts to be authorised by only one person, which can create a loophole.

Some organisations, who may not qualify for a Credit Card (or be uncomfortable with one), set up a second transactions bank account with an eftpos card. The same safeguards need to be applied as for credit cards (i.e. no inter-account transfers).