Preparing annual reports for a charity involves more than printing a profit and loss report from Xero. There are specific reporting requirements, information to gather about your activities and sometimes an audit to fit in before the filing deadline.

Getting organised early gives you time to gather the information, work through any questions and have the reports reviewed before they’re due.

Which reporting tier applies?

New Zealand’s not-for-profit reporting framework has four tiers. The tier your organisation can use depends on its size and other criteria, including whether it has public accountability.

The smallest eligible organisations can use Tier 4, which uses cash accounting. Tier 3 uses accrual accounting and is available to eligible organisations with annual expenses of $5 million or less. Larger organisations use Tier 2 or Tier 1. Your accountant can help confirm which framework applies and whether a simpler option is available.

Why do charity accounts look different?

For organisations using Tier 3, the annual Performance Report includes:

• Information about the organisation.
• A Statement of Service Performance.
• A Statement of Financial Performance – the income and expenditure statement.
• A Statement of Financial Position – the balance sheet.
• A Statement of Cash Flows.
• Accounting policies and explanatory notes.

The format of these reports is quite prescriptive, and very different from an ordinary set of business accounts. The main statements summarise information in pre-determined categories, with the notes showing which income and expense lines make up those totals.

Unspent grants need some thought

Recording unspent grants can be tricky. The year-end treatment depends on the funding agreement and the applicable reporting requirements – not simply how much money is left in the bank. Have your agreements, spending records and project progress information ready so your accountant can assess how much income to recognise and whether any should be carried forward.

For practical ways to track grant balances throughout the year, read our Keeping track of grants and restricted funding blog.

Tell your story – with figures you can support

Your Statement of Service Performance tells the story of what your organisation has achieved during the year. Your team needs to provide the information and keep records supporting the figures. Gather this alongside your financial information, allowing time for any required audit.

For guidance on choosing meaningful measures, keeping evidence and telling your organisation’s story, read our Service performance reporting blog.

Work backwards from the deadline

Registered charities must file their annual return and accompanying report with Charities Services within six months of balance date. That time needs to accommodate preparation, management and board review, any required audit, and final approval.

Get started as soon as you can after balance date, making sure all bills have been loaded before your accountant starts on the reports. Gather the grant and service performance information at the same time.

A few months beforehand, reach out to your auditor to schedule when they’ll be able to do the audit. Make sure it fits with your deadlines, board meetings and how busy your team will be at that time of year.

There’s nothing wrong with being ahead of the due date. Leaving it until the last two weeks makes it much harder to fit in preparation, review and audit.

If circumstances outside your control do cause a delay, contact Charities Services before the deadline to request an extension. Extensions are considered individually and your existing deadline applies until a new date is confirmed. Being busy alone will not normally justify an extension.

At The Accounting Hub, we help charities and other not-for-profits prepare their annual reports, work through grant balances and coordinate with their independent auditors. Get in touch early so we can agree what’s needed and put a realistic timetable in place.