Monthly Archives: September 2014

Charities Services – XRB Training – Tier 3 and 4 Financial Reporting Standards

New Reporting Standards – additional seminars in October

The External Reporting Board (XRB), in conjunction with Charities Services are holding seminars to update registered charities on the new accounting requirements that become mandatory in 2015.  I would strongly encourage you to attend or become part of the webinar.

The XRB is managing the registration process for the seminars. Click here to go to XRB’s website for seminar locations and times, and to register for a seminar.

Webinar 29 October

There will also be a two-hour webinar on Wednesday the 29th of October at 9am. This is a live web broadcast of the presentations that will be made at next month’s seminars. Anyone can register for the webinar, and once you are registered you will be able to ask questions during the broadcast. You can register at the webinar registration page. The webinar will be published at a later date on the XRB website.

About the seminars

The free, two-hour seminars are aimed at registered charities with annual operating expenditure less than $2 million. These charities will be able to report using Simple Format Reporting standards.

The seminars will include:

  • The new legislative requirements for registered charities to follow XRB Accounting Standards from 1 April 2015
  • An overview of the Simple Format Reporting Standards
  • How the final standards differ from the proposed standards as a result of consultation with the sector during 2013 (which was the focus of the last seminar series)
  • What charities need to do now to get ready to apply the Simple Format Reporting Standards next year, and
  • Future opportunities to learn more about the standards and how to apply them.

Registration queries

If you have any questions about registering for these seminars, please email the External Reporting Board at enquiries@xrb.govt.nz

Accounting Treatment – Housing Allowance – Presbyter Living in a Parsonage

I have received a small number of queries about the accounting treatment of the housing allowance when a presbyter is living in a parsonage.

Most people will know that as part of the remuneration of a presbyter who is living in a parsonage, a housing allowance is added to the gross earnings of a presbyter and then deducted again after tax.  The same value is given as an allowance and subtracted off as a deduction.

As set out in Information Leaflet No. 25 this is done purely for tax purposes to ensure that presbyters and the Church meet their tax obligations under the Income Tax Act.  NO CASH CHANGES HANDS.

Some parishes do an entry in their accounts that debits a housing expense code and credits income received from a parsonage.  The net effect is nil on the bottom line of the Statement of Financial Performance (Profit and Loss Account) is zero.  The entry has no practical accounting affect but in some cases may disadvantage a parish from a compliance point of view.

Why do I say this?

The current Audit Policy of the Church provides for a review to be undertaken when operating revenue as reported in the annual financial accounts is $125,000 or over.  If the above entry is done in the accounts for presbyters housing it takes the operating revenue shown in the accounts closer to the $125,000 than is necessary.  In some cases it may tip them into requiring a review when they may not need one.

In relation to the new accounting standards which come into effect next year, if the entry is done, it takes the total operating expenditure closer to the Tier 3 cut off, which also happens to be $125,000.

From an accounting perspective, it is over stating your income and it is also over stating your expenses.

The notional value of a parsonage, as calculated in the Information leaflet is NOT a proxy for a market value of the rental of the parsonage so it cannot be used for calculating income lost due the parsonage not being able to be rented out on the open market.

My recommendation is that no entry is undertaken in the accounting system to record a housing allowance as income, then show a housing expense of the same value where a presbyter is living in a parsonage as provide under “Calculations for a Minister Living in a Parsonage” in Information leaflet No. 25.

Annual Returns to Charities Services

This is my annual reminder that for all registered charities whose end of financial year is the 30 June 2014 (99% of all Methodist entities), that they are required by the Charities Act to make an annual return by 31 December 2014.

You can do this either online or by downloading the Annual Return Form (Form 4) from Charities Services website (www.charities.govt.nz).  The cost of filing online is lower than filing a paper based return.

You will need your annual accounts completed when you make the annual return as these have to be attached and sent to Charities Services also.

If Annual Returns are not filed, then the registered charity could be deregistered.  If this were to happen, then it places that registered entity at risk from not being a “donee” organisation for tax purposes (cannot issue donation receipts for offering, bequests and other donations) and also may impose income tax obligations on the Officers of the deregistered entity due to recent changes in the Income Tax Act.

For those entities within the Church who do not lodge their returns by the 31 December, the Church has introduced a new protocol to ensure that Annual Returns are made.  The protocol requires me to inform the General Secretary, the Synod Superintendent (or similar person if the entity does not report to a Synod, such as the Chairperson of the Board) that an Annual Return has not been completed by the due date.  In addition, I will be required to report this to the Board of Administration at their next meeting.