Minimum categories (Tier 3)

The Tier 3 standard sets out minimum categories that must be used in preparation of the statement of financial performance and statement of financial position. For each statement these would be:

Statement of Financial Performance


Revenue categories
  • Donations, fundraising and other similar revenue
  • Fees, subscriptions and other revenue from members
  • Revenue from providing goods or services
  • Interest, dividends and other investment revenue
  • Other revenue

Expenses categories
  • Expenses related to public fundraising
  • Volunteer and employee related costs
  • Costs related to providing goods or services
  • Grants and donations made
  • Other expenses

These minimum categories show what must be kept separate in the Statement of Financial Performance. They are designed to make it simple for readers of the performance report to quickly and easily understand where revenue came from and expenses went. Presenting the information in this way helps to tell your charity’s story.

Statement of Financial Position


Asset Categories
Current Assets
  • Bank accounts and cash
  • Debtors and Prepayments
  • Inventory
  • Other Current Assets

Non-Current Assets
  • Property, plant & equipment
  • Investments

Liabilities
Current Liabilites
  • Bank Overdraft
  • Creditors and accrued expenses
  • Employee costs payable
  • Unused donations and grants with conditions

Non-Current Assets  
  • Loans
  • Other non-current liabilities

These minimum categories show which types of assets, liabilities and accumulated funds must be separately distinguished.  They are designed to make it clear to readers of you performance report the main types of assets available for use by the charity and the liabilities and accumulated funds which have claims against these assets. Presenting this information provides a picture of the health of your charity at the date of your financial statements. 

What if we want to provide more detail?

The notes section of the Performance Report can be used to provide more detailed information. For example, the amount included in the ‘Donations, fundraising and other similar revenue’ category can be broken down into separate fundraising events. These might include street collections, postal appeals, or raffles. A charity may choose to do this so it can compare the success of different fundraising events over time. Similarly Investments may be presented in one line on the statement of financial position and then broken down into separate investments within the notes. This could then detail the amount of investment in shares, bonds, and long term deposits. Displaying this information can make it clear where a charity has invested its funds and its strategy for managing its finances.

Can we change or delete the categories?

You can’t change the type of information that must be reported within each category. However, you can split a category or rename it to make it more meaningful for your charity, or to help readers better understand the information.  For example, a charity that provides classes and sells education books, might want to rename the category ‘Revenue from providing goods or services’ and change it to ‘Class fees and book sales’. Or, a charity that only holds inventory as promotional materials for distributions at fundraising events might want to rename the inventory category materials for fundraising events.

A long list of items will make it difficult for readers to understand your overall story, so only make changes which are important and useful to your charity. Remember that the notes section is where you can add extra details.

If a category doesn’t apply to your charity and there is nothing to record, you can simply delete the category. For example, if your charity doesn’t have members, the ‘Fees, subscriptions and other revenue from members’ category will not be relevant and could be deleted.

It is important that any changes you make to the categories are used consistently in the future so that the information can be compared over time.

Examples for Revenue Categories

Revenue categories

Type of change

Example of change

Donations, fundraising and other similar revenue

No change

Donations, fundraising and other similar revenue

Fees, subscriptions and other revenue from members

Split

Separates any important aspects  within the category

Membership fees

 

Other revenue from members

Revenue from providing goods or services

 Rename

Makes the category more applicable to the charity

Class fees and book sales

Interest, dividends and other investment revenue

No change

Interest, dividends and other investment revenue

Other operating revenue

 Delete

If it’s not relevant to the charity and if there is no revenue for the category

 

 

Examples for Asset Categories

Asset categories

Type of change

Example

Bank accounts and Cash

No change

Bank accounts and Cash

Debtors and Prepayments

Delete

 

Inventory

 Rename

Materials for fundraising events

Other Current Assets

Split

Other Current Assets

Short Term Deposits

 

What types of transactions are included in the categories?

The tier 3 guidance notes and the Tier 3 standard include information about what type of transactions and items should be reported in each of the categories. A charity will need to read this information and use its best judgement to decide which category a particular item or transaction best fits in. What’s important is that information is reported consistently so it can be compared over time.

Here are some examples:

Revenue

Expenses

Donations, fundraising and other similar revenue

  • Donations and koha
  • Grants for the general operation of the charity (including for capital purchases)
  • Fundraising received from:
    • Annual appeals
    • Cake stalls and sausage sizzles
    • Lotteries, raffles and auctions
    • Fairs, festivals and galas
    • Fundraising dinners, concerts, quiz and trivia evenings
    • Fundraising sales – chocolates, cookies and calendars
    • Garage sales, jumble sales and car boot sales
  • Pledges and bequests

 

Fees, subscriptions and other revenue from members

  • Membership fees and subscriptions
  • Donations, koha or offerings from members
  • Fundraising received from members
  • Revenue from sales of goods or services to members (e.g. club merchandise or bar sales)

 

Revenue from providing goods or services

  • Income from contracts
  • Grants that are, in substance, a contract for the delivery of goods or services
  • Revenue from sales to the public
  • Lease or rental income

 

Interest, dividends and other investment income revenue

  • Interest
  • Dividends

 

Other revenue

  • Insurance payouts
  • Royalties received

Expenses related to public fundraising 

  • Promotion and marketing
  • Venue hire
  • Koha for equipment borrowed
  • Cost of prizes
  • Fees or commissions (e.g. paid to third party fundraisers)

 

Volunteer and employee related costs

  • Salaries and wages
  • Honoraria for board member duties
  • KiwiSaver contributions
  • ACC Levies
  • Staff training and professional development
  • Staff recruitment

 

Costs related to providing goods or services 

  • Utilities (rent, rates, power, telephone)
  • IT (computer) costs
  • Insurance, repairs, and maintenance
  • Stationery
  • Photocopying/printing
  • Postage/courier costs
  • Software costs
  • Cleaning
  • Inventory sold, written down and written off

 

Grants and donations paid

  • Grants paid 
  • Scholarships paid
  • Donations made
  • Other philanthropic giving

 

Other expenses

  • Interest costs
  • Affiliation fees
  • Audit fees
  • Depreciation
  • Bad debts

 

 

Assets

Liabilities

Accumulated Funds

Bank accounts and cash

  • Chequing Accounts
  • Savings Accounts
  • Petty Cash

Bank Overdraft

  • Amounts drawn down on available overdraft facilities

Capital contributed by owners or members

  • A charity establishes a Trust and each trustee gives $10

Debtors and Prepayments

  • Invoices raised during the year but not yet paid at year end
  • Insurance policy paid ahead of year-end and unused

Creditors and accrued expenses

  • Invoices received during the year but not yet paid at year end
  • An estimate of a bill for services completed which is not yet received

Accumulated surpluses or (deficits)

  • The surplus or deficit for the current year is added to the previous years’ totals

Inventory

  • Supplies to be used/distributed for fundraising events
  • T-Shirts printed for sale

Employee costs payable

  • Wages payable
  • ACC, PAYE and Kiwisaver Payable
  • Holiday pay owed

Reserves

  • A charity is putting money aside for a building project

Other Current assets

  • Short term deposits with less than 12 months to maturity

Unused donations and grants with conditions

  • A grant is received to build a garden shed. The contract requires it to be returned if not used. If at year end $1,000 is not spent it is recorded here.

 

Property, plant & equipment

  • Buildings
  • Motor Vehicles
  • Computer Equipment
  • Furniture and Fittings

Loans

  • A loan is taken out to purchase a vehicle or building. Amount borrowed plus interest payable

 

Investments

  • Stocks
  • Bonds
  • Long Term Deposits with maturities of more than 12 months

Other non-current liabilities

  • There is a make-good provision in the lease contract or the premises that a charity rents. The charity is unsure of how much this will cost or when they intend to vacate the premises so the provision is their best estimate at the time

 

 

Recording GST

If your charity is registered for GST, you can choose to record amounts in the Performance Report as including GST or excluding GST. Once you decide how your charity will record GST, you’ll need to be consistent throughout the Performance Report, and from each financial year to the next. If your charity isn’t registered for GST, record all amounts with the GST included. You may find it easier to record all amounts with the GST included even if you are registered for GST because these are the amounts that actually come in and out of your bank account. This will make preparing the Statement of Cash Flows in the Performance Report a bit more straightforward.

You’ll also need to state in the Statement of Accounting Policies in the Performance Report whether you have recorded amounts in the Performance Report as including or excluding GST.