Annual Accounts for Xero users (and others) 30 June 2014

The end of the Financial Year is arriving very quickly and the four accountants in the Connexional Office will be entering their very busy season.  We have about 35 sets of annual accounts to prepare and most of these need to be audited or reviewed by external auditors. The auditors are arriving in the middle of July and not leaving us until the end of August.

Although we will be more than happy to answer questions and provide help, our time will be limited and therefore we would ask for your patience when it comes to replying to e-mails and providing support calls.

There are four ways that this year’s annual accounts can be prepared by you:

  1. Do as you have done in previous years;
  2. Produce a Profit and Loss (also called a Statement of Financial Performance) and a Balance Sheet (also called a Statement of Financial Position) from Xero and then add a set of Notes to the Financial Statements using either Word or Excel.
  3. Produce a Profit and Loss (also called a Statement of Financial Performance), a Balance Sheet (also called a Statement of Financial Position) and a set of Notes to the Financial Statements using “Annual Accounts”.  In Xero, you have to be an Advisor rather than a Standard user and you will also need an understanding of how this report pack works in Xero.
  4. Determine if you a Tier 3 or Tier 4 reporting entity under the new financial reporting system which will become mandatory from 1 April 2015 and start using that for the annual accounts to 30 June 2014.  That way you will have a better idea on what to do next year when it becomes a mandatory requirement.

Not producing any annual accounts is not an option as it is a requirement of Conference that annual accounts are prepared and sent to the General Secretary. I would refer you to Section 10:1.3.1 to Section 10:1.3.4 of the Methodist Law Book.

Option 1 does not require an explanation from me as you can simply do what you did last year.  If this is your first year using Xero and you want to use the Xero Profit and Loss and Balance Sheet as a basis for your annual accounts, then please do so.  If you are unsure how these work, then firstly read the help files in Xero or give us a ring and we will walk you through it.  Having said that, I need to warn you that from 1 April 2015 you will NOT be able to continue with what you have done in the past.  For most of you, you will need to determine if you are a Tier 3 or 4 reporting entity (see below).   Xero are working on report packs that will allow Xero users to produce Tier 3 and 4 annual accounts but this will not be ready until the end of this calendar year.

For Option 2, there are standard layouts for Profit and Loss and Balance Sheets in Xero that can be used directly or exported to Excel and then “tidied up” as you see necessary and then Notes to the Financial Statements produced and attached in either Word or Excel.  If you do not know what the notes to accounts look like, then let me know and I will send you a set of what they look like and you can adapt them, otherwise, look at the guidance notes for Tier 3 and 4 standards.

 For Option 3, you need to have a different level of access in Xero as this gives you access to an annual accounts report pack.  However, this report pack will need to edited and saved.  They are standard reports for trusts, companies, etc. and therefore do not fit into our needs (this will change next year!!!).  You may decide it’s too much work, given the changes that will happen next year.

 Option 4 is the best option moving forward as you are going to be required to follow these new accounting standards from 1 April 2015 anyway.  I have attached the Tier 3 and 4 Standards and Guidance Notes for you as well as an Excel template for you to use.

As already stated, we understand Xero are working on producing the new tier structure templates so from the next financial year you should be able to produce the new tier reports directly from Xero.

Am I tier 3 or 4?

In general and without going into too much detail, if your operating payments are under $125,000 to 30 June 2014 then you are Tier 4.  If your operating expenditure is between $125,001 and $2,000,000, then you are Tier 3.  If you are under $125,000 you can use Tier 3 if you want.


Tier 3 PBE SFR-A (NFP) – The Actual Standard in PDF format

Tier 3 Explanatory Guide A5 – PBE SFR-A (NFP) – Guidance Notes for the Standard

Tier 3 Template for PBE SFR-A (NFP) – UNProtected XLS Version MASTER – Excel Spreadsheet

Tier 4

Tier 4 PBE SFR-C (NFP)  – The Actual Standard in PDF format

Tier 4 Explanatory Guide A6 – PBE SFR-C (NFP) Final to Issue – The Guide in PDF format

Tier 4 Template for PBE SFR-C (NFP) – UNProtected XLS Version MASTER – Excel Format

Happy New Financial Year!!!!

5 thoughts on “Annual Accounts for Xero users (and others) 30 June 2014

  1. This is an e-mail I received from a Parish (from Admin):

    Hello Peter.
    Reading through your notes, it has had me wondering that if we are to be accounting within our own accounts our investments/assets of MTA and CB&L, that to make it much easier for us, that they should be accessible within Xero. Therefore when a balance sheet report is generated, they are automatically included.
    With the Tier 3/Tier 4 report, surely Xero can generate a report that is compliant and removes human error/guessing as to which categories they should go to.
    As a side note, is the desire of the External Review Board to force all registered charities to use an accountant to fill in their annual accounts. I understand the basics, and even quite a bit of advanced accounting principles. Yet for the Tier 3/Tier 4 reports, it is far more involved. Maybe part of the problem is accountants wrote the report in a language specific to accountants that for an non-accountant seems alien.

    1. This is my reply (admin):

      Good question and I will put it onto the accounting blog site I have.

      The MTA and CBL system is internal to the Church and not a “Xero Bank” like BNZ, ANZ, etc. and therefore cannot be automatically loaded into Xero. The entries that appear on the statements you received from the Connexional Office need to be manually journal in at present. There is a way that it could be automatically put in using a piece of technology called an “API” but it would be costly to do and would need to be contracted out as it would require a bit of IT expertise.

      Xero is currently working on the report pack required to produce Tier 3 and 4 annual accounts to the standards required to the External Reporting Board.

      Xero have indicated that this work will be completed by the end of the calendar year. I have mentioned to them that we are happy to test them out, if they are looking for a test site. You will appreciate that each registered charity is slightly different and therefore the content will be different. Xero will be able to set up the framework but each parish will need to deal with their own specifics.

      I agree with your comments about accountants writing it for accountants. We tried to change this in our submissions but what we got is what we got and therefore need to develop workshops to help parishes to understand what is required and how to make it work.

    2. We are not able to generate the MTA and CB&L reports in Xero nor the transactions at this stage. It may be possible through a thing called an API (application programme interface) but this would take time and a bit of money to implement as we do not have the technical expertise to do the work ourselves.

      What we will do is write a howto on how you should do the journals in Xero to get the balances correct. For some users of Xero, this will be easy but for others it may not be as easy so a step by step howto may be the quickest option.

  2. Hi Peter

    I am hoping you can advise me?

    Recently we acquired a credit card for church usage and it raised another issue incidently!
    The bank informs us that our treasurer can’t do online banking on her own, unless we change the account to her signature only (or to allow one signature sign-off – others could be on this)
    We don’t have a problem with this, as we trust her, but as a Parish Council we were wondering whether that would expose us to unnecessary risk.
    Although we trust her, we are thinking of her and are wanting to do ‘due diligence’ regarding this

    She has been doing online banking for several years and we have 2 signatures on the account, but apparently this had gone ‘under the radar’ and now that it has been highlighted, it needs to be addressed!

    Would you be able to advise us regarding this issue?
    Have other parishes had this problem and how did they resolve it?

    Thanks for your anticipated help

    1. The issuing of Church based credit cards is not done as it exposes the Church to a high degree of risk and also will not meet the Laws and Regulations of the Church.

      When considering the payment of expenses, the Law Book provides in Section 3:13. 6 that “All bank accounts shall require at least two signatories.” I am unaware of any credit card that requires two signatures. In the main, if payment is required by a credit card, then it is put onto a personal credit card and then reimbursed by the Church based entity.

      The other question raised is really about the same issue. The BNZ (and I assume other major banks) have systems in place that allow two electronic signatories on payments that are made by some form of funds transfer/payments through the internet. we can help with setting up the BNZ system and I understand that this is at no cost to the Parish. Send me an e-mail directly and I will make the necessary arrangements to have you set up.

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