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How to do Year End Financial Reporting?

While it may be some time away charities need to prepare now for year end financial reporting so when the time comes you will not be left with a big problem.

Tuesday 28th January 2020

New reporting standards are not required until 2021, however collection of this data for reporting will need to start in the 2020 year and all affected organisations will need to have systems in place to measure the desired Outcomes and Outputs they are seeking to achieve during 2020.

Since Tier 1 and 2 Organisations are large they may require more sophisticated analysis and recording of their outcomes and outputs than Tier 3 or 4 Organisations. In order to avoid panic at the end of the Financial Year it will be best to get organised, upskilled and recording now. Plan what your outcomes and outputs need to be then you can plan how you are going to record them. Systems such as infoodle enable you to gather and record the required information to demonstrate your charities outcomes and outputs.

(The information in this article is gathered from Charities Services Website https://www.charities.govt.nz/ and reproduced here for your information)

Service Performance Reporting for Tier One and Two Charities

From 1 January 2021, Tier 1 and Tier 2 charities will need to include non-financial information alongside the financial statements they file with Charities Services. Together, the financial and non-financial information is referred to as a Financial Report. This is because the External Reporting Board (XRB) has issued a new financial reporting standard: Service Performance Reporting (PBE FRS 48) .

  1. Instead of attaching financial statements, an annual report or any other form of financial information to your annual return, you now submit a “Performance Report”.
  2. The format and content of your Performance Report is prescribed in the standard for the Tier which is relevant for your charity. The smaller your charity is, the simpler the requirements are.
  3. The Performance Report contains financial and non-financial information, which is why it has been re-named.
  4. The annual return form has been re-written to reflect the changes as a result of the new reporting standards.

All Tier 1 and Tier 2 charities will be required to report service performance information, there are no reduced disclosures allowed in the standard for Tier 2 entities. Preparers need to apply the principles in the standard when deciding how much information to report, this may be more or less, depending on the size of the charity.

Although the standard only becomes a requirement from 2021, charities may begin applying it at any time. Even if not adopted early, thinking about the standard now will help a charity decide what information it needs to collect to meet the new requirements.

What about Performance Reporting for Tier Three and Four Charities?

The standard has been introduced because, as with Tier 3 and Tier 4 charities, non-financial information is important for accountability and decision making as well as telling the story of the charity. In some cases, the non-financial information may be considered to be more important than the financial results.

For these reasons the standard has been written to provide readers the information they need to get a full picture of what a charity has been able to achieve in the past year with the resources available to it.

What needs to be reported?

The Tier 1 and 2 Service Performance Reporting standard is less prescriptive than the Tier 3 and Tier 4 standards. Rather than specifically defining and referring to outcomes and outputs, the standard provides a set of principles to be used by a charity in deciding what should and should not be reported.

The standard does however guide charities to report information that answers questions similar to those found in the Tier 3 and 4 standards. The information must tell the reader:

  • Why the charity exists, what it wants to achieve, and how it wants to do that in a general sense
  • What the charity actually did during the year to move closer to these goals

Therefore, to put it simply the charity needs to report if it achieved the goals (outputs and outcomes) it set out to do. So you need to know what these are and be able to capture the data so you can prove what happened. e.g. you plan to give away 25 food parcels to people in need, so you need to capture the data on when and to whom they were given.

This information has been put together by one of our infoodle partners - Phil Major FCA

PJ Major Chartered Accountant, Qualified Auditor