You’ve Got Issues!

You’ve Got Issues!

By Frank Lieshout | 5 min read

In our previous articles, we mentioned some helpful advice regarding the preparation, audit and review of your financial statements.

Today we are going to look at common issues with the format of charities’ financial statements.

“You’ve got issues.”

Now there is a three-word line that you don’t want to hear, especially from someone close to you.

These issues could include:

  • Trust issues
  • Jealousy issues
  • Anger management issues.
  • Unaffordable shopping issues
  • Binge-watching tv too much issues – maybe watching reruns of Batman?

Some say in response to being told you’ve got issues, you could either

  1. Simply ignore the comment and hope the issue goes away – probably unlikely to go away!
  2. Try to refute the issue by saying something like, “Don’t worry, I don’t think that’s a problem.” – likely will just make the situation worse!
  3. Delve into the comment and learn more about the underlying concern.

We are going to choose option 3 and look at the issues relating to the format of Tier 3 & Tier 4 charities financial statements over the next few articles.

 Why the need for consistent reporting standards?

Stakeholders require relevant performance-related information.

This is the major reason behind reporting standards.

The information needs to be disclosed in a way that is easily accessed and understandable, and in a consistent manner.

Remember there are different types of stakeholders (trustees/donors/members/ funders etc.) with different levels of understanding of financial information.

 Common Issues

Using XRB Templates

As we have mentioned in an earlier article, XRB templates for Tier 3 and Tier 4 charities are available.

However, issues that we have noticed when using these templates include

  • Needing to tailor them to your specific requirements, including those pesky red dots that were also mentioned in that article
  • The wrong template being used, remember the criteria for each tier is
Tier Standard to Use Criteria
3 PBE SFR-A No public accountability; and Expenses ≤$2m Expenses ≤$2m
4 PBE SFR-C No public accountability; and Operating payments <$125k
  • Not all reports done, for example Tier 3 requires a Statement of Cashflows

Entity Information

Various Information is missing or not updated

  • Entity structure has changed since last year and an outline of the new structure is not showing.
  • Charities Registration Number not disclosed.
  • If the charity trades as a different name to its legal name this is not disclosed   e.g. The Budgeting Centre is the name on the financial statements, but it should be stipulated that it’s New Zealand Budgeting Services Trust trading as The Budgeting Centre.
  • A change to the purposes of the trust. A purpose may have been added, removed or amended so this needs to be updated.

Statement of Service Performance (SSP)

Also as mentioned in an earlier article, the key to preparing a SSP is setting outcomes and outputs that are relevant to the organisation, while also being simple and measurable.

Other issues include:

  • Just rehashing information elsewhere, like for example figures that are in the Statement of Financial Performance (Tier 3) or Statement of Receipts and Payments (Tier 4).
  • Simply copying and pasting measures from the last few years. It’s a good idea to freshen it up with new measures.
  • Although not required, having budget figures will enhance stakeholders/readers understanding and how the charity is tracking.

Statement of Financial Performance (Tier 3)

The main issue here is Items being in the wrong category.

If unsure check the Lists tab on the Tier 3 & Tier 4 template

KAPOW! That’s a lot of issues.

So, heaps to talk about.

But wait, there’s more.

To be continued ………… Next time – same Bat time, same Bat email channel!

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.

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