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Code of Practice - Part Four
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| Receipts (section 5) | Payments (section 6) |
| 1. Scheduling | 1. Approval |
| 2. Invoicing | 2. Receipt of goods or services |
| 3. Receipting | 3. Invoice checked |
| 4. Banking | 4. Invoice paid |
| 5. Cashbook | 5. Cashbook |
| 6. Monthly bank reconciliation | |
| 7. Monthly financial report to committee | |
| 8. 2-monthly GST return to the Association office | |
| 9. Annual financial statement preparation and a | |
2. SUMMARY OF TREASURER'S DUTIES
Each Region and SIG must have a treasurer responsible for the financial affairs of the organisation.
The duties of the treasurer should include the following:
1. To maintain the books of account on a day-to-day basis.
2. To bank monies received and to issue receipts.
3. To seek authorisation for disbursements and to draw cheques accordingly
4. To pay the accounts for any approved expenditure incurred.
5. To control the bank account,
6. To maintain a petty cash float.
7. To give periodical Treasurer's reports to meetings of members and/or of the committee.
8. To produce an annual financial report.
9. To make the necessary arrangements for the annual review or audit of the accounts to be carried out.
10. To send out accounts for monies due to the organisation. Depending on the circumstances, other duties could relate to:
(a) The soliciting of donations,
(b) The drafting of submissions seeking grants.
11. To prepare bimonthly GST returns and send them to the Association Office for processing. (see Section 8 and Appendix 2 for examples of the GST return form)
12. The annual financial report, together with the required supporting documentation should be sent to the Association Treasurer by the end of July each year, and would normally comprise:
(a) A statement of receipts and expenditure showing the surplus or deficit on the operations of the financial year; the statement should also contain the statement of receipts, expenditures and balance for the preceding year for the purposes of comparison.
(b) A balance sheet showing the assets, liabilities and accumulated funds as at the end of the financial year (see Section 9 and Appendix 3).
(c) Bank and term deposit statements, bank reconciliation records and copies of payment vouchers exceeding $500.
(d) A statement (see Appendix 4) signed by the Treasurer that the statement of accounts is a true and accurate record.
13. Where cash reserves exceed $25,000 and an audit may be required, the Association Treasurer must be notified of this before the end of July.
14. Once the review or audit is completed and approved, each Region and SIG shall forward a copy of its annual report and reviewed statement of accounts to its members and to the Association office no later than the end of September each year.
3. FILE SET-UP
In addition to the cashbook, cheque book, bank deposit book, invoice book and receipt book, the Treasurer should maintain a file containing:
1. Budget
2. Financial statements and monthly reports
3. Bank statements
4. Bank reconciliation
5. Revenue schedule
6. Paid invoices (in cheque number order)
7. Unpaid Invoices and flints relating to invoices expected but not yet received
8. Outstanding issues (for example, disputed items)
9. Committee minutes (highlighting resolutions relating to approval of payments)
10. Correspondence
4. CASHBOOK
Cash inwards, and cash outwards, details should be recorded in separate cashbooks or in separate parts of the same book (for example, cash outwards details are recorded from the front and cash inwards details are recorded from the back). This facilitates financial statement preparation, GST return preparation, bank reconciliation, and the annual review or audit.
Cashbook examples appear at Appendix 1.
Each cashbook is comprised of two halves:
1. DETAILS, which relate to Date, Payee, Cheque or Receipt number, Cheque or Receipt amount of the transaction.
2. ANALYSIS, which relates to GST portion and category or categories to which the payment or receipt relates. After all necessary adjustments for accruals, these categories should ultimately be reported directly into the financial statements.
Suggested analysis categories:
| Receipt Categories | Payment Categories |
| 1. GST | 1. GST |
| 2. Region/SIG Meeting | 2. Region/SIG Meeting |
| 3. Christmas Function | 3. Christmas Function |
| 4. Breakfast | 4. Breakfast |
| 5. Conference | 5. Conference |
| 6. Seminars/Workshop | 6. Seminars/Workshop |
| 7. Continuing Education | 7. Continuing Education |
| 8. Association Grant | 8. Communications, Stationery, Advertising |
| 9. Subscriptions | 9. Donations, Gifts, Sponsorships |
| 10. Fundraising, Donations, Gifts, Sponsorships | 10. Bank Fees, Cheque Duty |
| 11. Interest (net of RWT) | 11. Auditor |
| 12. Balance Sheet Item (for example Petty Cash float closure; inventory or asset sale) | 12. Balance Sheet Item (for example, Petty Cash float set up; inventory or asset purchase) |
| 13. Miscellaneous | 13. Miscellaneous |
There may be instances where a major or one-off transaction or group of transactions should be reported under a separate and appropriately narrated category, A rule of thumb as to what constitutes "major" may be whether the item is greater than 5% of the total amount of revenue or expenditure for the financial year.
Travel costs should be categorised in respect to the purpose for that travel, for example, if a payment were made to enable a member to travel to Conference, then the travel costs would come under "Conference".
Both Analysis and Details parts of each cashbook should be totalled at the end of each month both for that month and for the financial year to date.
5. PROCESSING RECEIPTS
A schedule should be maintained for revenue such as membership subscriptions. The schedule would show:
Who paid what amount(s) and up to when the payment relates. This would enable reconciliation between membership records and financial records. Revenue schedules also assist the auditor in forming an opinion as to whether the revenue disclosed in the financial statements is complete and fairly stated.
An invoice should be issued for most categories of income (except income such as interest). The invoice should comply with Tax Invoice requirements listed in the "Goods and Services Tax" section in this document.
Invoices should be consecutively numbered.
A receipt should be issued when payment is received. Cash and cheques should be banked promptly.
Inwards cash should be recorded in the inwards cashbook (see inwards cashbook example at Appendix 1).
6. PROCESSING PAYMENTS
Although most minor payments are usually approved by the Committee after payment has been made it is preferable that, before the Region or SIG incurs contractual liability for the transaction, the Treasurer has confirmed that funds are available and that the transaction is either minor or routine. Major or non-routine items should be referred to the Committee before any contractual liability has been incurred on behalf of the Region or SIG.
All payments should be approved by minuted resolution of the Committee. Payments can be approved either payment-by-payment (preferred for major or non-routine payments) or as a group (for example, "That payments for [month) totalling $[ ] GST-inclusive be approved").
On receipt of an invoice, if the supplier has charged GST then the Treasurer should confirm that the invoice compiles with Tax Invoice requirements as listed in the "Goods and Services Tax" section in this document.
The Treasurer should confirm that the invoiced goods or services have been received, and have been invoiced at the agreed price. The invoice total should be consistent with unit prices and quantities.
On payment, the cheque butt should contain the following details: Date, Payee name, Brief description of purpose of payment, Amount of payment, initials of both cheque signatories to denote that cheque butt details agreed to the cheque itself.
On payment, the invoice should be marked "PAID" with the cheque number recorded on the invoice. The invoice should be filed in cheque number order.
Payments should be recorded in the outwards cashbook (see outwards cashbook example at Appendix 1).
7. CASH FUNDS
7.1 Bank reconciliation
All bank accounts should be reconciled at least monthly. By using totals from the payment column of the cashbook to reconcile the bank account there is a check performed on cashbook addition.
Bank Reconciliation example:
| Reconciled opening bank balance (as at 1 July) | 2,798.50 |
| + Total cashbook receipts since 1 July (GST-incl.) | 10,812.40 |
| + Bank statement deposits not in cashbook (for example interest received) | 2.30 |
| Sub-total | 3,613.20 |
| – Total cashbook payments since 1 July (GST-incl.) | 8,799.25 |
| – Bank statement withdrawals not in cashbook (for example, cheque duty) | 1.50 |
| Cashbook balance as at [reconciliation date] | 4,812.45 |
| + Unpresented cheques (itemised elsewhere) | 1,022.23 |
| Sub-total | 5,834.68 |
| – Uncredited lodgement | 20.00 |
| Balance agreed to bank statement balance page [x] dated [date] | 5,814.68 |
It is the "Cashbook balance" figure that represents the reconciled bank balance figure. If the bank account is correctly reconciled, then this amount is the one included in the financial statements.
The Treasurer should ensure that all bank statement items (for example, automatic payments, cheque duty, and interest) are recorded in the cashbook.
7.2 Bank account operation
There should be two signatories jointly (for example, from 3 or 4 nominated authorised persons). A minuted resolution of the committee should specify these details.
The Treasurer's file should contain a copy of the specimen signature cards as supplied to the bank.
Cheque butts should be initialled by both signatories to evidence that the details on the cheque butt have been agreed to the details on the actual cheque.
The chequebook should be kept in a secure place.
7.3 Cash
If the Region or SIG resolves to operate a petty cash imprest there should be a petty cash register set up. The register effectively acts as an invoice summary – to which all the supporting documentation should be attached – and is used to support the reimbursement of the petty cash imprest.
The register should record:
Date, Purpose or Description of goods or services paid for, Voucher/ reference
number, Amount, GST content. Each payment should be signed by both cheque
signatories and not exceed $50.00.
The cheque payment creating the imprest should be recorded in the "balance sheet" analysis column of the cashbook. Consequent reimbursements are then expensed and analysed in the appropriate columns of the cashbook (including the GST column).
The total of the receipts and cash on hand should equal the imprest. Under no circumstances should IOU's be included in the imprest!
The amount of any reimbursement should equal the total of the vouchers (that is, the payments since the previous reimbursement).
8. GOODS AND SERVICES TAX
8.1 History
GST was introduced on 1 October 1986 at a rate of 10%. The rate was increased on 1 July 1989 to 12.5%
8.1 Required content for a Tax Invoice
An invoice for which GST has been included shall contain:
1. Vendor's name and GST number.
2. Identification of the purchaser (that is, the Region or SIG or their agent).
3. A date.
4. The words "Tax Invoice" and either separately identify the GST component or include reference that GST has been included in the total price.
5. Description of the goods or services supplied.
If an invoice does not contain all of these requirements, then it is not a GST invoice and therefore can not be included in the two-monthly GST return. In this case the cashbook item should have a zero in the GST analysis column.
8.3 Tax Invoice amount threshold
The Inland Revenue Department does not require Tax Invoices for payments of less than $50. However, to claim GST on payments of less than $50.00 there must be reasonable assurance that the vendor of the particular goods or services be registered for GST (i.e. a commercial enterprise based in New Zealand) and that the goods or services are taxable supplies (i.e. not exempt supplies such as bank fees, cheque duty and interest).
Invoices are always required for accounting and audit purposes irrespective of the amount.
8.4 Reporting requirement
The Treasurer is required to send the Association Office a GST report for each two-monthly period, ending 31 August, 31 October, 31 December, 28 February, 30 April and 30 June. Ideally, the GST report should be with the Association Office within a month of the end of the two-monthly period. If the cashbook is working effectively then this timing should be possible.
8.5 Preparing the GST report
The cashbook has been accurately completed, kept up to date, and totalled for the two-monthly period.
The GST report (see Appendix 2) can be completed from GST-inclusive receipts and payments details contained in the cashbook.
To complete the cashbook entry on completion of the GST report, one of the following applies:
If GST payable (recorded in the Cash Inwards book) exceeds GST receivable (recorded in the Cash Outwards book) then transfer the payable to the Cash Outwards book on payment of the GST payable.
If GST receivable (recorded in the Cash Outwards book) exceeds GST payable (recorded in the Cash Inwards book) then transfer the receivable to the Cash Inwards book on receipt of the GST receivable.
9. FINANCIAL STATEMENT PREPARATION
The cashbook has been accurately completed, kept up to date, and totalled for the year. The financial statement amounts (GST-exclusive) and narratives can be drawn directly from the cashbook, subject to identifying and applying any required accruals (that is, adjustments to the cash transactions);
For example:
| Item | Treatment |
| Deposit | Item treated as a prepayment asset and included on the Statement of Financial Position instead of appearing on the Statement of Financial Performance. The amount appears on next year's Statement of Financial Performance |
| Subscriptions for next financial year received from members this financial year: | Item treated as a prereceipt liability and included on the Statement of Financial Position instead |
| Goods and Services Tax: | Item included on the Statement of Financial Position |
| Unpaid audit fee: | Provide for the audit fee by adding the fee to expenses and to liabilities. Ignore any GST content until the fee is paid |
| Last year's accruals: | Reversed |
(See Appendix 3 for sample financial statements.)
10. FINANCIAL STATEMENT REVIEW OR AUDIT
10.1 Annual Financial Statements
The Association requires that the annual financial statements of all regions and SIGs be reviewed by the Association Treasurer. Each region and SIG is required to submit to the Association Treasurer by the end of July each year the statement of accounts for the previous financial year and any supporting financial documentation as the Association Treasurer shall require.
Where the cash reserves of the Region or SIG exceed $25,000 the Association may require the annual accounts of the Region or SIG to be audited by a member of the Chartered Accountants of New Zealand. The Region or SIG is responsible for the arrangement and fees of the audit.
The SIGs and Regions financial statements form part of the LIANZA Accounts which are subject to Audit.
10.1.1 SIG and Region Accounts
A worksheet is available as a template for use in completing the input for the year end Financial Accounts of SIGs and Regions.
The simple excel spreadsheet enables SIGs and Regions to analyse the entries on bank statements while keeping a track of the bank balance.
The opening bank balance at 1 July each year should be entered correctly in cell B9. Note that this should agree to the last closing balance from the previous year end accounts.
This schedule will only include cash transactions. If a SIG or Region has debtors or creditors at year end these should be listed below the schedule.
If a SIG or Region has more than one bank account, create an additional worksheet and copy the schedule across to it.
Example entries have been included on the schedule which need to be deleted before starting. Income is to be entered as a positive and payments as a negative.
An alternative approach to prepare your accounts can be used by those who are confident and have done the accounts before.
For queries, contact the LIANZA Treasurer
10.2 Statement of Accuracy
The Statement of Accounts and supporting documentation sent to the Association Treasurer for review must be accompanied by a statement signed by the Region or SIG Treasurer that the accounts presented are a true and accurate record. (See Appendix 4 for the statement)
Non-profit Organisations – Financial Statement Audit
Accounting records required for audit purposes are not necessarily limited to the following:
• Draft financial statements for the financial year (or period), including:
- Statement of Income and Expenditure,
- Statement of Financial Position (Balance Sheet);
- Statement of Accounting Policies.
• Schedules in support of certain financial statement items, including:
- Analysis of Accounts Receivable and Prepayments;
- Analysis of Accounts Payable and Receipts in Advance;
- Reconciliations for all bank accounts as at balance date and previous balance date;
- Reconciliation between GST Returns, the cashbook and the financial statements. (This requirement only applies to organisations registered for GST).
• Audited financial statements for the previous financial year (if auditor auditing Region/SIG for the first time)
• Cashbook containing all details in respect to inwards and outwards cash.
• Invoices in support of all payments and balance date liabilities. In general, photocopied or faxed invoices are not acceptable. "Tax invoices" are required for GST purposes if the organisation is registered for GST.
• Statements for all bank accounts for the financial year and for the period since balance date. Photocopies are acceptable.
• Chequebook presently in use and chequebook stubs relating to the financial year.
• GST Returns for the financial year and the last GST Return for the previous financial year. (This requirement only applies to organisations registered for GST).
11. BUDGETING PRINCIPLES
The following principles apply in respect to preparing, approving, maintaining and reporting against budgets;
1. The budget for the financial year should be prepared and tabled at a Committee meeting prior to the commencement of the financial year.
2. The budget should be approved (as amended if necessary) at the Annual General Meeting.
3. Budget does not constitute approval to spend.
4. The budget should be reported against during the year by way of Treasurer's monthly reports to the Committee and at the Annual General Meeting following the end of the financial year. Reasons should be given for any significant variances between budget and actual, To enable reporting variances, it is important to be aware of the underlying factors behind the budget (for example, if the membership revenue is budgeted at $2,000, thenthe underlying factor may be 50 members at $40.00 each)
Appendix 1 – CASHBOOK FORMAT AND EXAMPLES
Download a PDF version – Click here
(Section 4 of this document refers)
Download a PDF version – Click here
(Section 8 of this document refers)
Appendix 3 – FINANCIAL STATEMENT FORMAT
Download a PDF version – Click here
(Section 9 of this document refers)
Appendix 4 – FINANCIAL STATEMENT REVIEW
Download a PDF version (24 KB) – Click here
(Section 10 of this document refers)
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