Are you a Public Sector Entity as well as a Registered Charity?
Charities take many forms and have been established in many different ways. This article has been written for the very few charities that are public sector public benefit entities. These entities are those that are defined in the Public Audit Act 2001, and all Offices of Parliament.
Many charities will still be working through a process of confirming what requirements they need to follow under the new Accounting Standards Framework. One
question raised recently is which set of accounting standards should a registered charity follow if it is also a public sector entity?
If you are a public sector entity as well as a registered charity, Charities Services expects that the financial information you file with us will be prepared in accordance with the accounting standards that are appropriate for public sector entities.
To explain this concept further, it’s useful to have a basic understanding of the Accounting Standards Framework in New Zealand. The framework is divided into two parts. Entities report either as public benefit entities (PBEs) or
A PBE is a reporting entity whose primary objective is to provide goods or services for community or social benefit, rather than for a financial return to equity holders. So, rather than generating profit for shareholders (like ‘for-profit’ entities), a PBE’s value is measured by its contribution to society. By definition, if an entity is not a PBE, it is a for-profit entity.
For PBEs there are two sets of accounting requirements: one for public sector entities, and one for not-for-profit
entities. Public sector PBE entities are PBEs that are “public entities” as defined in the Public Audit Act 2001, and all Offices of Parliament. If you are a public sector PBE, you will most likely know about it and your audit will be carried out on behalf of the Office of the Auditor-General (by Audit New Zealand or an appointed private sector firm). The diagram below summarises the structure.
In a few cases, public sector PBE entities may also be registered charities. Some examples are the Museum of Transport and Technology (MOTAT) and The University of Auckland. If you are a public sector PBE that is also a registered charity, then you should use the appropriate set of PBE accounting requirements for public sector PBEs. These can be found on the External Reporting Board website.
For both public sector and not-for-profit PBE entities there are
four tiers of standards developed to provide appropriate accounting requirements for different sized entities. If you are a public sector PBE, the tier that you report under will depend on the size of your organisation. Consideration should also be given to the legislation that you operate under, which may in some cases require a higher tier of reporting. The External Reporting Board has developed optional Excel templates to support the Tier 3 and Tier 4 PBE accounting requirements for public sector PBEs, which are also available on their website.
If you are a public sector entity, it
is highly likely that you will have already adopted the new accounting standards applicable for public sector entities for your 2015 financial year. If this is the case, this is the report you submit to Charities Services. We do not expect you to do anything additional.
*The vast majority of charities will report using the accounting standards applicable to PBEs. However, in limited circumstances some charities will report under the accounting standards applicable to for-profit entities.