Important updates for the Charitable and Not-for-Profit sector

We hope you all enjoyed the Easter holiday and you were able to spend some time relaxing with family and friends over the break. 

Our latest Advisory Update enclosed focuses on the not-for-profit and charitable sector, including recent changes that have taken effect which will impact upon the sector.

I thought I would start this edition with a shout-out to one of our valued clients – North Shore Riding for the Disabled (NSRDA). Last month, I attended the official opening of NSRDA’s new Arena Roof which was a very uplifting and fun event to be a part of. Please read the article below to get to know a little bit about NSRDA and their huge accomplishment to open the new Arena Roof. 

When Grand Designs meets NSRDA…

North Shore Riding for the Disabled (NSRDA) is one of 50 affiliated groups across New Zealand delivering therapeutic riding to people experiencing difficulty in life through a range of physical, mental or emotional challenges.

Based in Stillwater/Silverdale covering an area of 17 acres, NSRDA have been operating for almost 50 years. They are largely a volunteer-based organisation, with a small number of employees, supported by over 60 local people who give very generously of their time to provide a fun and safe environment to riders who come to their therapy sessions each week.

The provision of an all-weather space to allow riding sessions any time of the year – rain or shine – is a game-changer for NSRDA, avoiding the need to cancel riding sessions due to bad or extreme weather. It has had a massive impact for riders, staff, volunteers and all involved at NSRDA.

This was no small undertaking and has involved considerable time, effort and endeavour to raise the large sums of money needed to build an arena roof of this size and capability - all designed to exacting standards in an environmentally sustainable way including rainwater capture and use.

The new arena was officially opened by Tim Lofts NSRDA President and Tom Webster, Host of Grand Designs NZ, and several NSRDA riders who provided us with an amazing riding display, all demonstrated in the new Arena. Tom Webster delivered a “Grand Designs” closing commentary (just like the TV show) about the new Arena Roof which was very cool! 

All in all, it was a brilliant event and a hugely significant day for everyone at NSRDA.

If you would like to understand more about NSRDA and the amazing work they do – please do visit their website.

The Grand Opening of the new Arena at North Shore Riding for the Disabled
Pictured (from left): Errol Burn, Lynch & Associates, Tom Webster, Host Grand Designs NZ, Tim Lofts, President North Shore Riding for the Disabled.

Financial Reporting Tiers have changed for Not-for-Profits (NFP)
Following consultation with the sector, the External Reporting Board (XRB) have changed the size of financial reporting tiers for Not-for-Profit entities as follows:

Tier 1 entities        Total expenses over $33 million (previously $30m)
Tier 2 entities        Total expenses over $5 million (previously $2m)
Tier 3 entities        Total expenses between $140,000 - $5 million (previously $2m)
Tier 4 entities        Total expenses up to $140,000 (unchanged)

The effective date of March 2024 means that entities whose financial year ends on 31 March 2024 can apply the new tier sizes immediately.

The tiers have not been changed since they were originally set in 2012 and clearly the new tiers incorporate an element of future-proofing to ensure the updated reporting tiers remain appropriate for several years to come. 

The change will particularly impact upon the Tier 3 entity group where the threshold has been increased from $2m to $5m. The change means that some entities may be eligible to move from Tier 2 to Tier 3 reporting standards, with a notable reduction in reporting requirements.  
  
New Financial Reporting standards for Tier 3 and Tier 4 entities 
 
Last year, the XRB issued new reporting standards for Tier 3 and Tier 4 not-for-profit entities. 

The new standards must be applied for accounting periods beginning on or after 1 April 2024.

The new Tier 4 Standard is now less complex, including no longer requiring a Statement of Resources and Commitments. A dedicated webpage on the XRB website for Tier 4 entities is available which includes:

•    a simplified reporting template (along with short guidance video)
•    guidance notes that will be developed and added to over time

The new Tier 3 Standard changes some existing requirements and adds some new changes. 
There is a webpage on the XRB website for Tier 3 entities including reporting template and guidance notes. Some of the key changes include:

• Service Performance Reporting - the terms “outcomes” and “outputs” for service performance reporting have been removed and replaced with terms that are more aligned with the Tier 2 Standard. Further guidance has been provided around reporting service performance information.
• Asset valuation - property, plant and equipment, investment property and financial investments that are publicly traded can now be revalued without opting up to Tier 2 Standards.
• Accumulated Funds - new requirement to disclose information about how an entity is managing its reserves including providing a description of the purpose of each reserve, the entity’s plans for applying the reserve, and when the entity expects the reserve will be applied to advance the entity’s objectives.
• Revenue recognition – a new model for recognising revenue based on “documented expectations” has been implemented. The previous revenue recognition model based on “use or return” conditions has been removed. Instead a significant grant, donation or bequest with a “documented expectation” over its use, the funding may be recognised over time as the expectation is satisfied.
• Revenue and expense categories – clearer categories for classifying revenue and expenses are more clearly defined.

Annual reporting to Charities Services - changes coming soon…
 
Changes to annual reporting to Charities Services arising from the Charities Amendment Act 2023 are coming soon – including the new annual return forms and additional information required to be completed are anticipated from Charities Services around mid-2024. Keep an eye out for communications from Charities Services around this time detailing the changes. 

Incorporated Societies and the new Act – just a reminder…

The new Incorporated Societies Act 2022 brought in a wide raft of changes which fundamentally impact upon all incorporated societies. The changes take effect progressively over a period of time from when the Act become effective leading up to 5 April 2026, which is the final date for re-registration for all existing societies.

Please see our comprehensive update on the major changes under the Act which we sent out last year in October 2023 – you can find a copy on our website.

Re-registration of your incorporated society is now open with the Registrar of Incorporated Societies. You can visit their website to both re-register and read all the resources and guidelines available to prepare for and complete re-registration. See the Companies Office Incorporated Societies information hub.

We have assisted many societies in understanding how the changes specifically impact upon their society and arranging for re-registration – feel free to contact us if you need any help.

What to do next? 
 
There are a myriad of changes impacting upon charities, incorporated societies and other not-for-profit entities which have taken effect or become effective over the coming period.

Lynch & Associates are well placed to assist you in understanding how any of these changes specifically impact upon your charity or not-for-profit organisation and we are here to help.

We are always available to assist you with any questions, queries or help you may need – please do contact us if you need any help.