You’ve Got 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.
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 issues – being told you’ve got more issues!
The more issues could include
- Communication issues
- Personality issues
- Self-centred issues
- Unrealistic expectations issues
- Too much time on social media issues – there is only so many memes and cutesy animal videos you should view!
We said in the last article we would be back with more issues with the format of Tier 3 & Tier 4 charities’ financial statements, and WOW! here we are.
The list of issues is almost as long as the line to get a Fergburger! (They are so yummy but that’s another issue).
More Common Issues
Statement of Financial Position
- A Statement of Financial Position is also known as a Balance Sheet. Believe or not this means it actually needs to balance! It is surprising the number we’ve seen that haven’t.
- Incorrect Trustees down for signing. This is usually due to a change in trustees during the year. This is a reminder that you also need to inform Charities services of a change in trustees by updating your charity on the Charities Register.
- Items being in the wrong category.
As we have mentioned in Common Issues – Part 1, XRB templates for Tier 3 and Tier 4 charities are available.
If you’re unsure where something needs to be, check the lists on these sites:
- Wrong terminology for Accumulated Funds.
For example, the term ‘Owners Equity’ being used instead as that is the terminology used for financial statements for a Sole Trader for-profit business. Charities’ financial statements are a lot less common than for-profit financial statements, so accounting systems don’t necessarily have the correct format. That means other formats are doctored to suit and errors can arise.
Statement of Resources and Commitments (Tier 4)
This is similar to the Statement of Financial Position but this time it isn’t meant to balance. That’s because it doesn’t have Accumulated Funds.
But it does have similar issues with:
- Incorrect Trustees down for signing
- Items being in the wrong category
Statement of Cashflows (Tier 3)
This is probably the hardest thing to get right.
The purpose of then Statement of Cashflows is to show how much cash actually went through a charity’s bank account(s). It is quite possible to have an accounting surplus but see less ‘actual’ money in the bank.
Issues with a Statement of Cashflows Include:
- Not balancing to cash balances.
- Fudging the figures to make it work!
- Items in wrong categories and going in the wrong ‘direction’ (whether cash was ‘applied to’ or ‘received from’).
- Including items that didn’t actually go through the bank, such as depreciation.
- Not including non-income and expense items like:
- asset purchases and sales
- loan principal repayments and loan advances
- If the Charity is GST registered, simply entering GST as the balancing figure. Once again, this figure should be what actually went through the bank account.
- If operating on a payments basis for GST, the figure should be just the GST payment/refund owing in the GST Return at the last balance date less the one at this balance date.
Statement of Receipts and Payments (Tier 4)
This is similar to a Statement of Cashflows (Tier 3) and is also a summary of transactions that have gone through the bank account. It then follows that this will have predominantly the same issues
BAM! Lots more issues.
Holy Crap, Batman! That’s a big list!
(just like the guy on the 8am infomercials) … ‘But wait, there’s still more…’
Stay tuned – we’ll be back 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.