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Financial year end reporting for charities

Financial reporting is one of the important aspects of managing finances and something that all organisations need to do to keep things in order. However, as we discussed in our previous post, it is no small task! We hope that this post will serve as a reminder to begin preparing for your next year’s reporting as early as possible.

When to start preparing for annual reporting
Even though the data may not be required until the financial year end, collection of this data for reporting needs to happen throughout the entire year. To ensure this data is collected and well-organised, organisations need to have systems in place to measure the desired outcomes and outputs they are seeking to achieve.
To avoid panic at the end of the financial year, it is best to get organised, upskilled and recording beforehand. Plan what your outcomes and outputs need to be then you can plan how you are going to record them. Reliable systems (such as infoodle) enable you to gather and record the required information to demonstrate your charities outcomes and outputs.

What needs to be considered
It is also important to remember that for charities of different sizes requirements might differ. Since Tier 1 and Tier 2 nonprofit organisations are large, they may require more sophisticated analysis and recording of their outcomes and outputs compared to Tier 3 or Tier 4 organisations.

Where to find more information
For this article, we gathered the information from Charities Services (Nga Ratonga Kaupapa Atawai) that supports charities across New Zealand. They provide a variety of helpful resources for completing annual reports and preparation that needs to happen beforehand, as well as the information regarding the latest developments and changes in reporting standards.

Service performance report for Tier 1 and Tier 2 Charities

According to Charities Services, all Tier 1 and Tier 2 charities are required to report service performance information:
“From 1 January 2022, 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.

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

Click on this link to find a list of questions regarding the information that needs to be presented in the annual report. Considering these questions and recording the date as early as now, at the start of the new financial year, will benefit you and your organisation greatly at the end of the financial year.

What about Performance Reporting for Tier 3 and 4 Charities?

For Tier 3 and Tier 4 charities, non-financial information is also 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. The questions here are similar to those for larger charities: why the organisation exists, what its goals are and what the charity did during the year. To put it simply, the charity needs to report if it achieved the goals (outputs and outcomes) it initially set out to do.
To be able to record the necessary data, you need to know what these goals are and what actions were taken, so you can prove what happened. For instance, if you plan to give away 25 food parcels to people in need, you need to capture the data on when and to whom they were given.
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. Click on the links below to identify what information is required from your organisation:
Tier 3
Tier 4 
In addition, Charities Services provide a large number of resources that can be consulted in preparation for your annual reporting. They include multiple templates, example reports, webinars and get started videos, as well as a comprehensive section with Frequently Asked Questions explaining the latest changes in reporting standards, how to identify your tier, how to complete a performance report and more.
We hope that this round up of resources will be helpful to you not only as you’re finalising your 2020 reports, but as you prepare for next year as well!