Category Archives: Audits of Annual Financial Statements

This section deals with the formal “audit” of annual financial statements rather than a “review”.

Financial Reporting for Small Charities

The XRB and Charities Services invite you to join them for this free webinar.

Designed for accountants and preparers of annual accounts of small charities adopting Tier 3 and Tier 4 standards, this webinar will cover:

  • How the not-for-profit standards fit into the overall financial reporting framework in New Zealand;
  • Differences between the current and former financial reporting requirements;
  • Some detailed aspects of the Tier 3 and Tier 4 standards; and
  • New assurance requirements for charities.

Charities Services has so far received more than 500 financial reports. Learn from the regulators about some common misunderstandings to make sure you can provide compliant financial reports for your clients.

We will be running more webinars for charities in the near future on selected topics. Be sure to keep an eye out for these.

Webinar dates and times:
Tuesday 26 July 2016 at 10.00am-11.30am
Tuesday 26 July 2016 at 1.00pm-2.30pm
Wednesday 27 July 2016 at 7.00pm-8.30pm

Register in advance on the XRB website (click here).

Methodist Church Templates for Tier 3 and 4 Reporting Entities – 30 June 2016

The Annual Financial Accounts for 30 June 2016 are required to be completed and delivered to the Connexional office by the 14th October 2016.  This is much later than previous years due to two main reasons, one being that this year is the first year that all registered charities are required by law to have their financial accounts meet the requirements of the Charities Act and secondly, Conference is much earlier.  On balance it was felt that we should provide all Methodist entities time to produce their annual accounts as required by the Charities Act.

Annual Financial Account templates have been modified by the Connexional Office to suit the general needs and requirements of Methodist parishes and are available in three different formats for Tier 3 and Tier 4:

  • Excel spreadsheet,
  • Word document or,
  • Xero template (only applies if Xero is used for the parish’s accounting).

The Excel and Word templates can be found on the accounting blog site (accounting.methodist.org.nz) under Resources.  There are also the latest XRB guides (as at 24 June 2016) relating to the applicable tier being completed.  Also on the same Resources page (http://accounting.methodist.org.nz/?page_id=628) are the instructions on how to complete the new Xero Annual Report template.

  • Xero Templates

If you’re using Xero as your accounting software you can use this template to complete the annual financial accounts.  In the long term this will be a quick way to complete the financial statements as the balances are drawn directly from the general ledgers in Xero.  Therefore there is no need to manually add up each revenue, expense code, etc. However, there is still the need to ensure that the financial statements and the wording within the financial statements relate to your parish.

To use these templates in Xero please email Christinec@methodist.org.nz and she will set you up in Xero and make sure that templates are ready to be used by you.  Christine will NOT complete the annual financial statements for you unless you ask her to do so.  More on this later.

As stated above these are new templates and although they’ve been tested by the Connexional Office, as with any new system, there will be a few teething issues to be dealt with.  As these issues are found we’re feeding them back to Xero support so they can fix them or we may update the standard template to make them work better.

As a result we would suggest that if you’re in the following situations you should be cautious about using the Xero templates:

  • Fixed Asset Disposal – If your parish has disposed of fixed assets in Xero’s fixed asset register during the current or previous financial year, the Xero generated journals do not feed into the Statement of Cash Flows
  •  Those Parishes who were added to Xero in the 2015 Financial Year – When a parish is added into Xero the conversion balance doesn’t feed through properly into the Statement of Cash Flows for the 2015 financial year.
  •  Comparative Difference if you’re a parish which is reviewed or audited – balances for the 2015 financial year might be different to those produced in the Xero report because the template has been set up for Methodist Parishes as a whole and doesn’t take into account individual differences. This will not be an issue for those parishes who are not reviewed or audited but for those that are, the presentation can be adjusted to suit your parish.  This is covered in the Xero guide.

 Please email Christinec@methodist.org.nz if you are in any of the above situations and still wish to use the Xero templates.

Excel and Word Templates Tier 3 & 4

The layout is very similar to that used last year but there are some additions/changes to the templates:

  • Word Document – This has been created for those who prefer to use Word instead of Excel. In this document, balances and information need to be entered manually into each sheet.

 There’s also a Tier 3 Cash Flow Worksheet which accompanies the Tier 3 Word document to help you calculate the cash movements for the Statement of Cash Flows.  Once completed the balances need to be manually copied into the Statement of Cash Flows in the word template.

If you prefer to write in the numbers rather than typing them in then you can do that but you still need to make sure all the numbers add and cross add and reconcile correctly.

  • Approval of Financial Statements – An approval sheet has been added to the templates to ensure the Parish Steward and the Parish Treasurer are happy with the completed balances in the financial statements. Once this form has been authorised there should be no further amendments to the financial statements.
  • “CF Workings” Spreadsheet in the Excel Template– This tab has moved to sit at the end of the sheets that need to be printed off, i.e. beside “Note8-14”. Once the cash flow movements have been entered into this sheet, the balances will still flow through to the Statement of Cash Flows. Please to do not print this sheet and include it with the annual return.  It is a workings sheet only and is used only to make the Statement of Cash Flows calculate correctly.
  • Alternative Notes – Included this year are alternative notes in the Notes to the Performance Report. Please read these carefully and make sure you understand the requirements.  After deciding which note is the most appropriate, delete in Word, (or hide in Excel), the note that does not apply to the parish.
  • Content – Again these templates have been created to cover most situations for a high proportion of the parishes. They aren’t specific enough to include every situation for every parish.  Please adjust the content to suit your own parish’s needs.
  •  Presentation – The annual report should be presented as neat and tidy as possible. Once the information in the templates has been finalised, please delete or hide any rows that are empty.  Please check the page layout of each sheet so when they’re printed off they will continue to look tidy.

An example of a complete set of an annual financial statements will be posted on the Resources Page of the accounting blog site next week (week beginning 28 June)  to help show you what a finished set should look like.

  • Help to Complete the Annual Reports

Once again this year we’re offering the services of a contract accountant to assist you in preparing the annual reports.  The cost is $500.  Please email Christinec@methodist.org.nz if you are interested in this service.

Please remember this is not an audit or review of the accounts it is simply a service to help you compile your annual financial statements.

AUDIT AND REVIEW

Just a reminder that if your operating expenditure as shown on the Statement of Financial performance is over $500,000 but less than $1,000,000 then you will need a review undertaken or you can elect to have an audit.

If the operating expenditure shown in the Statement of Financial performance is over $1,000,000 then you will need an audit.

Both the review and audit will need to be conducted by a qualified person.

The Connexional Office will be checking to make sure that the person signing the review or audit is a qualified person.  The people qualified to undertake an audit or review can be found at http://charteredaccountantsanz.com/en/Site-Content/find%20an%20accountant.

Independent Assurance Policy (former Audit Policy)

The Board of Administration has approved an updated Assurance Policy (was formally known as the Audit Policy).  This has moved away from looking at operating revenue to basing the decision making based upon operating expenditure.

The Board of Administration agreed to adopt the Independent Assurance Policy for any entity that reports to the Conference of the Methodist Church of New Zealand for financial years ending on or after 1 January 2015 and therefore it will apply for most Methodist entities this year.

The policy has been developed to line up with the legal requirements of registered charities also.

In general, look at the constitution first to see what it provides for, look at funding agreements with funding providers, refer to the policy document and then what the Law provides but (subject to what i have just said)  if the operating expenditure of the entity is lower than $500,000 over the last two financial years, then you will not be required to have an audit or review (but you can still have one if you so choose).

Click on the link below to download a copy of the new policy document.

Any questions or comment about this issue, please let me know.

Peter van Hout

Independent Assurance Policy – Methodist Church of New Zealand

Annual Accounts – Audit or Review

We are getting a few people asking if a parish needs an audit or review for the annual accounts to 30 June 2014.  As posted in June, the Audit Policy of the Church has not changed from last year and I have attached the current policy to this post.

If the parish has total operating revenue of LESS than $125,000 for the 12 months ending 30 June 2014 then the Church does not require the parish to have an audit or review but you could have decide to have one, if you choose to have one.

If the parish has total revenue of the parish is between $125,001 and $2,500,000 then you need to have a review as set out in the Audit Policy.

If the parish has total revenue greater than $2,500,000 then you need to have an audit.

Audit Policy Final 15 May 2013

Audit Policy – Methodist Church

The Audit Policy of the Methodist Church will not change this year and therefore the requirements for the format, review or audit of the annual accounts have not changed from last year.  A copy of the Audit Policy would have gone out with the Annual Statistic Forms.  If you require a copy then e-mail Peter van Hout, peterv@methodist.org.nz.

However, in light of changes proposed by Government, the Board of Administration is in the process of making changes to the policy so that annual accounts prepared on or after 1 April 2015 will need to meet new cut off points for either a review or audit engagement.

Audit and review of Registered Charities Annual Accounts

The Government have announced that Charities with annual expenditure of $500,000 or more will be required to have their financial statements reviewed by a qualified accountant.

Charities with annual expenditure over $1 million will be required to have their financial statements audited.

The intention is that it will become the law  (in 2015) to have an audit or review and that it will need to be completed by a qualified accountant and meet the requirements set out by the Financial Reporting Bill and no doubt the ethical obligations of the Institute of Chartered Accountants.

There is a bit of water to go under the bridge yet as we have the term “operating payments” and “annual expenditure” being used in different pieces of proposed legislation.  This terminology will need to be addressed as it could make a difference between an audit or review or no review at all.