New Zealand Not for Profit organisations are preparing well for pending changes to financial reporting and auditing requirements according to a new survey of the sector.
The survey, by Grant Thornton, across 416 Not for Profit organisations in both Australia and New Zealand is one of the most comprehensive studies of its type.
Mark Hucklesby, Partner and National Technical Director, Audit, for Grant Thornton, said that 77% of the New Zealand organisations surveyed were aware of the changes, which was heartening.
“Of those that were aware, 76% had discussed them at board or trustee level, but 15% had not discussed them at all.
“For some organisations the changes will be significant. Now is the time to consider them, particularly in light of the Commerce Minster Craig Foss’s recent announcement that registered charities with annual expenditure of more than $1 million will be required to have their accounts audited, and those with annual expenditure of more than $500,000 per annum will have to get their financial statements reviewed by a qualified accountant,” he said.
Earlier this year, drafts of the impending financial reporting changes affecting small Not for Profit organisations were issued by the External Reporting Board – New Zealand’s accounting standard setter. This Board is now finalising precisely what entities with annual expenditure between $125,000 and $2 million (Tier 3) will have to include in their financial statements and also what those with an annual expenditure below $125,000 (Tier 4) will need to report.
“Directionally, what’s been released so far appears to be very sensible. Much of the feedback I have received has been very positive because it’s clear they have been designed to meet user needs and also takes into account the cost of preparation,” said Hucklesby.
The survey also showed that 27% of respondents thought the new financial reporting and auditing requirements for Not for Profits were completely reasonable. Only 3% viewed them as completely unreasonable.
“Interestingly, one in five said they were unsure about their full impact, indicating a possible lack of understanding which could indicate that more education is required,” he said.
Hucklesby said that the survey revealed that more than a quarter of respondents now ask their stakeholders what information they wished to see in their annual reports.
“This is not unexpected, as many Not for Profits view their annual report as a ‘shop window’ that helps differentiate them from other Not for Profits, in their keen chase for donations.”
Financial challenges are of definite concern to many Not for Profit organisations with funding continuing to be the most significant challenge.
“Forty five percent of New Zealand and 16% of Australian Not for Profits said they could not plan more than 12 months ahead based on their current funding while other very open and honest respondents revealed that they would not survive for more than six months if their current funding was not renewed,” said Hucklesby.
New Zealand respondents (84%) said they were constantly looking for innovative ways to generate revenue with 80% saying that finding consistent, regular sources of funding was increasingly difficult and 59% looked to outside sources to help them find new ways to generate revenue.
“The Australian response was strikingly similar. Eighty-six per cent are constantly looking for new ways to generate funds, 76% report that finding consistent sources of funding is increasingly difficult and 65% look to outside sources to find new ways to generate new funds,” he said.