You’ve Got Even More Issues!
By Frank Lieshout | 6 min read
In our previous articles, we mentioned some helpful advice regarding the preparation, audit and review of your financial statements.
- Money-saving tips in terms of complying with financial reporting regulations.
- How to get the most out of your time and money spent on the reviewing and preparing of your financial statements
- Why it’s actually not that painful preparing your financial statements and getting them reviewed.
- Common issues with the format of Tier 3 & Tier 4 charities’ financial statements – Part 1 and Part 2
Today we are going to look at further common issues with the format of charities’ financial statements.
What’s worse than being told you’ve got more issues – being told you’ve got even more issues!
The even more issues could include:
- Loud chewing Issues
- Lack of personal hygiene issues
- Flatulence issues
- Spatial awareness Issues
- Toilet seat being left up (or down) issues – the fight for equality is real!
We said in the last article we would be back with even more issues with the format of Tier 3 & Tier 4 charities’ financial statements, and WHAMM! here we are.
The list of issues is almost as long as the line to get toilet paper just before lockdown! (but that’s another issue).
Even More Common Issues
Most of the remainder of the common issues relate to the Notes to the Financial Statements.
Statement of Accounting Policies
It is important that the basis of preparation tells readers which tier and standard(s) the charity has elected to report under and what makes it eligible to do so. A common issue is that the Statement of Accounting Policies refers to the wrong basis. For example, it states:
- Tier 3 PBE SFR-A (NFP) Public Benefit Entity Simple Format Reporting – Accrual (Not-For-Profit), on the basis that it does not have public accountability and has total annual expenses of equal to or less than $2,000,000.
but should state:
- Tier 4 PBE SFR-C (NFP) Public Benefit Entity Simple Format Reporting – Cash (Not-For-Profit) on the basis that it does not have public accountability and has total annual expenses of equal to or less than $125,000.
Quite often we see some accounting policies are missing, these include:
- Income tax
- Goods and Services Tax (GST)
- Property, Plant and Equipment
It is fundamental that the accounting policies are correct, so the financial statements are read in the context that they have been prepared. For example, fixed assets are probably recorded at cost, but a property owned for a period of time would quite likely be worth more than cost.
Issues with notes themselves
Amounts not tying up – The notes have amounts that don’t tie up to the Statement of Financial Performance or Statement of Financial Position. This is simple stuff but you would be surprised how often it happens!
Specific notes missing or incorrect
- Commitments – Not disclosing that there are some, or even if there are none, you still need to say there are none.
- Contingent Liabilities – Same issues as Commitments.
- Events after balance date – Need to show whether there are any that have a material impact on the financial statements.
- Covid 19 Note – Potentially, a Covid 19 note is required to show the effect on the main part of charity activity in the future which will materially affect the charity’s financial performance and financial position. E.g., a charity holds a festival every year and have decided not to hold one next year due to the uncertainty of Covid 19.
- Related Parties Note – A note is normally required regarding related parties providing goods and services to the charity. This is to give transparency to stakeholders, for example potential current funders/donors, etc. The note needs to show the:
- Name of related party
- Nature of goods or services provided
- Amount paid for the period
Budget Figures – Although not required, having budget figures will enhance stakeholders/readers understanding and how the charity is tracking.
- Figures not adding up
- Note numbers not tying up between Statement of Financial Performance/ Statement of Financial Position/Notes
- Red dots from template not removed. Refer to our earlier article Common Issues – Part 1, regarding the XRB templates for Tier 3 and Tier 4 charities that are available
WHACK! Lots more issues.
HOLY COW, Batman! How did you know it was such a big list?
Alfred told me.
If you’d like to know more about the variety of ways we can support your team, get in touch with us for more information.