Charities are dealing with national financial reporting changes

Friday, 16 September 2016

Some charities are finding the change of financial reporting standards as a positive development.

Charities are nursing a bit of a headache over new financial reporting standards.

Changes to the Charity Act 2005 required charities to provide in-depth reports and audits dependent on the size and complexity of the organisation.

Staples Rodway director of audit Carolyn Jackson said with time, the new financial reporting standards will become easier for charities.

Though the changes came into effect about 17 months ago, the first round of reports are officially under way and Taranaki's Staples Rodway director of audit Carolyn Jackson said some charities felt overwhelmed.

'The changes to audit obligations have people confused,' she said. 'There's a lot of uncertainty with what needs to be done.'

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In 2005, charities were required to register with Charity Services who then introduced new ways to report financial expenditure.

Changes to the Charities Act 2005 went into effect on April 1, 2015 and introduced statutory audit and review requirements for medium and large registered charities.

Medium charities are classified as having more than $500,000 total operating expenditure while large charitable organisations are identified as those with an expenditure of more than $1 million.

In addition, registered charities with expenditure less than $500,000 who have received a grant could also be made to undergo an audit or review.

The new requirements worked on a tier system, categorising charities from level one to four based on size and complexity.

Previously, there was no minimum standards on the content or quality of financial statements.

Jackson explained the complicated classifications and legislative changes were demanding for smaller charities and volunteers.

'The lack of understanding with financial reporting is one part and the other is whether or not they need an audit,' she said.

'The process is a bit more challenging. There is no 'one-size fits all'.'

Under the new standards, charities with a March 31 balance date would need to file financial statements by September 30, which covered the first reporting period of 1 April 2015 to 31 March 2016.

The timeline continued with a range of deadlines, all dependant on when a charity's balance date was.

With the first report deadline approaching fast, Jackson has had a rush of people coming in with loads of questions.

'It's mostly the volunteers who are struggling with the new requirements,' she said.

'There's been a lot of changes since 2005 and they're doing their best to keep up.'

Some charities who had yet to report said though there was an increase in paperwork, they did not necessarily fear the changes.

Taranaki Environmental Education Trust chair Tiri Porter said it were accountants to struggle with adjustments, but tools were available to assist financial reporting.

'The Charities Office has provided plenty of resources and webinars for people to get to grips with the new changes,' she said.

'It is the statement of service performance that is taking a few organisations a while to complete.'

Porter said despite the statement of service performance slowing down the process, the Charity Office were lenient for organisations in need of a deadline extension.

Other organisations saw no issue with the requirements and believed the changes to be an improvement to how charities were viewed.

Karen Schumacher, chairperson of East Taranaki Environmental Trust, said she embraced the new standards with open arms.

'The new reporting standards are actually asking for a lot more non-financial reporting,' she said.

Schumacher explained the reports needed to include information that covered all aspects to a charity, including activities such as fundraising events.

She said the non-financial reports gave charities an opportunity to share their story, which was then made public for transparency.

'Most of us were already taking care of the financial side of it,' she said.

'So this is just adding a personal touch and I think it's a very positive change.'

Though some organisations were exempt from the financial reporting overhaul, Jackson said audit and reporting changes weren't over yet.

'There's a bill out at the moment that will ask incorporated societies to also abide by the new standards,' she said.

Incorporated societies, like sport clubs, would soon need to submit audits and reports similarly to how charities do.

Jackson said though the changes were overwhelming for some, she believed it would ease with time.

'While organisations cycle through their first filing process, it'll get better,' she said.

'It's all still new. I think with time, it will get much easier for everyone.'