Reporting thresholds are changing

This information is to help you understand the recent changes to the statutory thresholds and how this may affect you.

Every eight years, the Ministry of Business, Innovation and Employment reviews the thresholds of the reporting standards, taking into account inflation.

All charities must file performance reports or financial statements with their annual return that meet the External Reporting Board’s (XRB) reporting standards. Which standard you use depends on these reporting thresholds. The thresholds are based on your operating expenses, the money you spend on day-to-day activities, not “capital” purchases like office equipment, cars, land, or investments.

From 1 January 2022, the following changes will come into effect:

• The threshold for Tier 4 (the XRB’s simple format cash reporting standard) moves from $125,000 to $140,000 operating payments.
• The threshold for a required audit goes from $1 million to $1.1 million total operating expenditure.
• The threshold for a required review goes from $500,000 to $550,000 total operating expenditure.

Tier 4 threshold

Small charities can file a cash based performance report according to the Tier 4 standard. This change means that from 1 January you may opt to apply the Tier 4 standard if your operating payments are less than $140,000. This applies to all financial reporting periods from 1 January 2022. 

This means:

• If your financial end of year is 31 December 2021 (with a due date of 30 June 2022), you still apply the old threshold of $125,000.
• If your financial end of year is 31 March 2022 (with a due date of 30 September 2022), you apply the new threshold of $140,000.

If you aren’t sure when your financial end of year date, or if you are up to date with filing, we recommend logging into your Online Account.

If you want to use accrual-based accounting(external link), you can always opt up.

Audit and Review thresholds

The thresholds for whether you need an audit or review are also changing. If your charity’s operating expenditure is over a certain amount for two consecutive accounting periods, you need a qualified auditor to do a statutory audit or review(external link).

From 1 January 2022, the definition for a large sized charity that requires an audit is $1.1 million and the definition for a medium sized charity that requires a review is $550,000.

This means:

• If your financial end of year is 31 December 2021 (with a due date of 30 June 2022), you still apply the old thresholds (for the previous two financial periods).
• If your financial end of year is 31 March 2022 (with a due date of 30 September 2022), you apply the new thresholds. This includes the previous year.

You can elect to have an audit or review at any time, and some funders may require it. These can be costly, so we suggest talking through the benefits for your charity.

If you aren’t sure if you need a review or audit, we recommend talking to your accountant or auditor. You can also book a spot in with our team during our Thursday drop in clinics, and we can talk you through your obligations.

If you rules say that you need an audit or review, we strongly recommend changing your rules to make an audit or review optional.

We also recommend contacting Community Accounting Aotearoa(external link) – who might be able to provide accounting advice for free.