1. Changes for Charities What has changed and why? Fit for Funding Taranaki, April 2016

2. Department of Internal Affairs Changes for Charities #1 Accounting standards for the not-for-profit sector #2 Compulsory audit or review levels set #3 Updated Annual Return

3. Department of Internal Affairs Change #1 Accounting standards have been written specifically for the not-for-profit sector All registered charities must use these standards for financial years that end on or after 31 March 2016

4. Department of Internal Affairs Why? Consistency Clarity Comparability Why us? Registered charities – receive tax benefits – report each year to Charities Services to keep their listing on the Charities Register up-to-date

5. Department of Internal Affairs What does it mean? Registered charities change the way they do their accounting and their financial reporting Charities Services develops support for charities, and updates the Annual Return form

6. Department of Internal Affairs What are these accounting standards? Written by the External Reporting Board Developed over time in consultation with the sector, based on current international best practice Outline how to report on your charity at the end of your financial year

7. Department of Internal Affairs What’s new? Tiered framework – One size doesn’t fit all, arranged in tiers depending on the size of the charity Performance Report – New name for Financial Statements Tell the whole story – Include your purpose/mission and the work you did in the past year

8. Department of Internal Affairs 8 Not-for-profit Tier Framework Tier 1 Tier 2 Tier 3 Tier 4 97% of registered charities are in Tier 3 or Tier 4 Tier 4 Below $125,000 Cash accounting 75% of charities Tier 3 Below $2 million Accrual accounting 22% of Charities Tier 1 and Tier 2 Large charities <3% of Charities

9. Department of Internal Affairs Tier 4 Performance Report Service Performance Receipts & Payments Resources & Commitments Notes Entity Information Non-financial Financial Supporting Info

10. Department of Internal Affairs Tier 3 Performance Report Non-financial Financial Supporting Info Service Performance Financial Performance Financial Position Policies + Notes Entity Information Cash Flows 32

11. Department of Internal Affairs Telling our story Non-financial information – adds richness to our story – creates better understanding Who are we? Why do we exist? What did we do? Why those activities? Service Performance Entity Information

12. Department of Internal Affairs Who hears our story? Many different stakeholders are interested in your Performance Report: – Members at the agm – People you provide services to – Funders, sponsors, donors – Members of the public – Charities Services Funders like the way the new report brings together a picture of the whole charity

13. Department of Internal Affairs What do we do first? Decide which tier you will use. Two key questions will help you decide: 1.How much does your organisation spend, day-to- day, across a whole year? – operating expenses, excluding capital expenses 2.Which method of accounting suits you best? – cash or accrual

14. Department of Internal Affairs Cash-based accounting Rule of thumb: records only the cash that comes into and goes out of the bank account during the year At the end of the financial year the Performance Report includes – actual cash received and – actual cash paid out Does not include income earned but yet to be received; or bills yet to be paid Cash book or Excel spreadsheet common ways of recording cash accounting

15. Department of Internal Affairs Accrual accounting Rule of thumb: revenue and expenses are recorded when they occur, regardless of when cash is received or paid out At the end of the financial year the Performance Report includes – income earned but yet to be received and – outstanding bills Includes depreciation Accountants and Accounting software packages use accrual accounting

16. Department of Internal Affairs Then what next? Check out the templates and guidance notes relevant to your tier Compare these with what you currently produce – understand what you need to do differently Think about who else needs to know, or can help you with the work?

17. Department of Internal Affairs What other help is available? www.charities.govt.nz Videos – Overview; Tier 3; Tier 4; Annual Return Tutorials to use Excel templates – Separate tier 3 and tier 4 tutorials Information and guidance – Templates; guidance notes; further guidance People – nrs.charities@dia.govt.nz nrs.charities@dia.govt.nz – 0508 charities (0508 242 748) – DIA Community operations – Your accountant

18. Department of Internal Affairs Recap – Change #1: Standards Accounting standards for not-for-profit sector Arranged in tiers – Tier 4 – less than $125,000; cash accounting – Tier 3 – less than $2 million; accrual accounting Financial statements are now called the Performance Report – Includes financial and non-financial information Help is at hand

19. Department of Internal Affairs Change #2 The law now says when Registered Charities must undertake either a review or an audit

20. Department of Internal Affairs Audit and review requirements This affects charities with: – over $500,000 operating expenses = audit or review – over $1 million operating expenses = audit Must be done by a ‘qualified auditor’ Less than $500,000 operating expenses? – no statutory requirement – consider your rules and conditions of grants

21. Department of Internal Affairs Change #3 Charities Services has updated the Annual Return in response to the standards

22. Department of Internal Affairs Annual reporting Annual reporting to Charities Services includes: – completing an annual return – providing financial statements Performance Report – new name for financial statements; includes non-financial information and financial information Performance Reports must be prepared using the new standards

23. Department of Internal Affairs Why do we do an Annual Return? The Charities Register contains information about charities and is open in order to support transparency The Annual Return keeps your listing on the Charities Register up-to-date and provides for on-going accountability Transparency and accountability of charities is key to creating trust and confidence The Charities Register provides powerful data about the charitable sector

24. Department of Internal Affairs Completing the Annual Return attaching your Performance Report will include … Annual Return Performance Report

25. Department of Internal Affairs What’s different? Have a completed Performance Report Different Annual Returns for each tier – know your tier Office holders name, address & birth date required First time takes a little longer - plan to spend about an hour Can save and come back to it Smart form – built in help; previous information already included

26. Department of Internal Affairs

27. Watch the video

28. Department of Internal Affairs

29. Thank you For your time today For the work you do in the charities of which you are a part For your contribution in helping make New Zealand better for all New Zealanders