Not For Profits: An Introduction to Financial Reporting | Sudoku Bookkeeping

Katia Chehade, Principal at Sudoku Bookkeeping, has worked in the not-for-profit sector for over 25 years. During this time, she developed an understanding of the importance of reporting in the industry.

What is a Not for Profit (NFP)?

NFPs are run by a board or a management committee. They are bound by a registered constitution with ASIC and ACNC if it is a charity. Many reporting requirements within the organisation will need to be presented on a periodical basis (most common are monthly meetings/reporting). Also, EOFY reports to funding bodies, ASIC & ACNC. See examples of reports below:

Budgets

Creating budgets is critical to any business especially for an NFP. They are designed for the overall management of the organisation and budgets for individual projects or grants. A budget allows the organisation to set the income and expenses relating to the projects, as per the grant’s guidelines, and monitor these budgets against the actual income and expenditure showing in the profit and loss reports.

Board

The board members meet frequently as per the organisation’s constitution and the policies and procedures. During those meetings, the Financial Position is tabled. Examples of reports required for the meetings are:

  • Balance sheet – shows the general cash position of the organisation especially showing the liabilities due.
  • Profit & loss – shows all projects’ overall income and expenditure and the organisation’s own cash management position, including all projects. This can be reported as weekly, monthly, quarterly figures
  • Project profit & loss – as above but can be separated to show the income and expenditure for specific projects. This is especially important to monitor and report on grants received for the projects.
  • Profit & loss against budget comparison reports
  • Cashflow monitoring to keep an eye on the $$$ and how if they will move for future short term management
  • Payroll reports including super expenses and liabilities
  • Employee leave accruals and journaling the $$$ value to the balance sheet liability account
  • Reports that should be included in financial risk management, e.g., the low cashflow predicted and if the budget was running above budget
  • A summary of the organisation’s financial position

Funding Bodies

Most NFPs receive grants from government bodies or local organisations including local councils. These organisations will need specific reporting as a condition of the grants. Examples of reports are below:

  • Grant acquittals following grant conditions depending on the frequency of reporting and should the acquittal be audited
  • Breakdown of income and expenses following grant conditions and frequency of reporting
  • Handling of surplus funds at the end of the project –Why was there a surplus? Was the project initially over-budgeted? Should the surplus be paid back to the funding body, or is there a possibility to keep the funds to, e.g., run a mini-event relating to the project?

Australian Charities and Not-for-profits Commission

For charities to retain their registration, they must report annually to the ACNC. There may be extra reports required depending on the type of charity and size. Examples of necessary statements:

Auditor

NFPs do not have to complete an income tax return at the end of their financial year, but their finances will need to be audited as per their constitution. The auditor will require specific reports to carry out the audit, or the auditor can have access to the electronic financial file of the NFP. Examples of reports required by the auditor may include:

  • EOFY year notes to explain anything out of the ordinary
  • Balance sheet
  • Profit & loss reports, including separate project reports
  • Payroll reports including STP reconciliations and finalisation
  • BAS & IAS detailed and summary reports, including submitted reports
  • Super liabilities reports, including submitted reports
  • Any other information as requested
  • Access to the organisations’ accounting software if required.
  • Answer any queries to help finalise the audit

Annual General Meeting

  • Auditor’s financial reports
  • Treasurer’s report

How We Can Help

Sudoku Bookkeeping is here to help you by passing on our knowledge and expertise to take you a step further to achieve your organisation’s goals and support you while you help your communities. We strongly believe in having work, family, and community values.

Our Top 5 Values

  1. Empowerment: we think we have to empower each other to promote optimism and a ‘can-do’ attitude that gets things done faster and better to build healthy families, organisations, and communities
  2. Ethics: Our ethics define who we are. This virtue helps us provide the foundation to make sound judgments when faced with ethical dilemmas for our clients.
  3. Professionalism: A professional environment establishes respect for authoritative figures and clients, and colleagues.
  4. Commitment: Commitment is one of the most important values an organisation must have to meet its goals and stick to its vision. Without motivated individuals, an organisation could lose all that they have earned over the years, be it respect or market position.
  5. Efficiency: Efficiency allows organisations to promote better work practices, reduces stress, and produce better outcomes.

 

LET US KNOW HOW WE CAN HELP YOU TO PUT YOUR NUMBERS IN THE RIGHT SPOT.

Stay tuned for our next blog, in which we talk about the technology stack in the NFP sector.

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