Everything you need to know about the new XRB reporting thresholds for your PBE entity

As a long-time board member, I’ve learned a lot about the difference a well-functioning board can make to the success of an organisation. I’m currently a Chair/Trustee for a national not-for-profit (NFP) that helps young people to thrive, develop confidence and positively contribute to our communities. It’s wonderful to see what can be achieved for our young people through an organisation with an effective board and team. Based on my own experiences, these are my tips for NFP board members. Align your board appointments with causes you are passionate about For most NFPs, board members are unpaid, so being personally aligned with the purpose of the entity is essential to keep you motivated and engaged. Volunteers who lack engagement won’t add value to the charity’s mission, purpose and overall impact. If you don’t feel strongly about the cause, leave the board position for someone who has the passion needed to be productive and enjoy their role. Foster a positive environment where everyone can express their opinions If nobody is willing to speak up with different opinions and ideas, you will make very little progress. Equally unhelpful, but more stressful, is a meeting filled with conflict, where everybody disagrees and no consensus can be reached. You need to find a balance. All boards will have times where there isn’t consensus. The key to achieving a resolution starts with everyone feeling comfortable about expressing their opinions regardless of whether they’re popular. This involves creating a safe environment where everyone has the freedom to be authentic and bring their true opinion to the table. I have personally experienced times where there have been disagreements among board members. When this happens, everyone needs time to express their views, and to respect everyone’s differences in opinion. This way, a consensus is reached faster, and when everyone supports the final decision it’s an extremely positive experience. If you bring a problem, also bring a solution It’s not uncommon to sit on a board or committee with someone who likes to turn up and throw a problem or two on the table. This negativity will make everyone else feel like there’s an extra weight on their shoulders as they try to solve the problem. A far more powerful and productive approach is to by all means raise your issue, but also put some thoughts together about potential solutions to show that you are willing to work collaboratively as a team to find a resolution. Encourage diversity of thought Diversity isn’t just about ticking boxes. It’s not about ‘Do we have a woman on the board?’. It’s about ‘Is the person opposite me going to challenge me? Are they going to bring different perspectives and see the issues through a different lens?’. Look for people who fill gaps in thinking or perspective to help represent various points of view, so you can cover as many angles as possible and ultimately get the most out of every discussion. Roll up your sleeves and get involved Boards for large businesses might be purely strategic. But NFP boards need more than just top-level engagement. As a charity trustee board member, expect to roll up your sleeves and delve into operations from time to time. If your approach is, ‘That’s not really the role of the board, I don’t want to help with that,’ you’re not likely to win any friends as the rest of the board members knuckle down and start working on day-to-day problems. It can also give you some useful insights into the culture and operations of the organisation. Be prepared for each meeting When board members arrive at a meeting without doing their homework, it means they’re not able to contribute fully to the conversation. Ensure you are prepared for every meeting, whether that’s having ticked off your to-do list, read the paperwork, or researched the topics that are up for discussion. And it’s not enough to be physically present, you also need to be mentally present and engaged. If you’re daydreaming or playing wordle during meetings, you’re not bringing much value to the organisation. You also need to be prepared to dig deeper and go beyond what is presented to you. For example are you following the board’s rules and workplan? Or, is there anything missing from the agenda that you need to raise? Follow through on your commitments Board members who turn up at each meeting having ‘forgotten’ to do what they promised impact the whole group. Be accountable and reliable: if you say you’re going to do something, get it done. It’s hard to push volunteers to complete work; the charity has no leverage to make you achieve everything on your task list. It falls on you to walk the talk, do what you have promised, and cast a positive leadership shadow. Be selective when recruiting new members Recruiting for an unpaid position can mean small charities take whoever they can get. However, ideally you don’t want to simply sign up the first person who expresses an interest. A bad apple will rapidly make the whole board dysfunctional. Try using a formal skills matrix to identify areas where the board needs extra expertise, then recruit for those specific skillsets. This has the added benefit of everyone knowing their position on the field, so to speak. For example, on my current Board financial issues come to me; legal issues to the lawyer; HR issues to the HR expert. It creates clear roles and happier board members. You can also trial prospective members. Try to find out if they will be a good fit, by inviting them to a meeting to see whether they’re prepared, engaged and passionate. Use trustee rotation for fresh perspectives There should be an exit strategy for board members as it will need fresh blood, the members may want to move on, and it provides an opportunity to disestablish members who aren’t bringing value to the organisation. New members prevent the board from becoming stale, bring in new ideas, and provide extra knowledge and skills. Getting it right leads to better outcomes for everyone As a trustee I have found my board role extremely rewarding. You can make a big impact on the community by donating your time and professional expertise. If you can get it right, being on a well-functioning board will be an enjoyable experience for you and your co-trustees, boosting your personal development and driving better performance and outcomes for a cause you are passionate about.

Becoming a trustee for a local charity is a wonderful step to take. You’re doing something meaningful for an excellent cause and you’re helping make the world a better place. However, if you are considering becoming a trustee of a charity, go in with your eyes wide open. It’s vital to understand these roles come with certain responsibilities and duties. Although trustees generally have the very best intentions, some inadvertently don’t follow the rules. These issues are particularly common with new trustees, or people who don’t have any experience with governance or running an organisation. People are enthusiastic about becoming a trustee, but don’t fully grasp the obligations that come with their new role. Five mission-critical areas of focus for trustees Do you know how to play by the rules? Every charitable trust has a board of trustees, comprised of at least two trustees. The board will likely operate under a Trust Deed. The Trust Deed typically sets out the following rules and guidelines including, but not limited to: the organisation’s charitable purpose the structure of the board how to appoint and remove trustees trustee duties and obligations how the board will operate how trust assets will be managed. As a trustee, it’s your responsibility to make yourself familiar with the Trust Deed and ensure the rules are being adhered to. Don’t assume that what the trustees have done in the past is compliant, or that trustees who have been on the board longer than you have this under control. The charity rules are readily available to trustees and to the public on the Charities Services website. Do you understand the sector’s legal and regulatory environment? When you become a trustee, you may be signing up to legal obligations such as becoming an employer, being party to contracts for services, as well as needing to lease property, plant and equipment. You need to be aware of what you are signing, and how these obligations impact you as a trustee, or even how you can become personally liable under these contracts. For example, if you sign a long-term lease and the trust cashflow is insufficient, are you liable for this cost as a trustee? There will be certain laws and regulations that apply to your charity, and you must be across all of these to avoid the financial and reputational risks of non-compliance. For example, our latest research report about the sector revealed that while 90% of charities surveyed are aware of the Privacy Act 2020, over a third hadn’t aligned their policies with the new legislation, and only 22% had reviewed third-party contractual agreements with providers who store or process personal information they receive from these organisations. A further 40% didn’t have a suitable privacy officer in place – a key requirement for any organisation that holds personal information and data about people. It is important that you understand and comply with your obligations under the Charities Act 2005, Trusts Act 2019 and the Charitable Trusts Act 1957 where relevant. I don’t need to worry about tax – do I? This is a big yes for all trustees. Many tend to know charities are exempt from tax provided the charity has met the requirements of the tax exemption process, but they don’t always understand this is only limited to income tax – it’s not a blanket exemption. Trustees must continue to consider and comply with other indirect taxes such as Goods and Services Tax (GST), and Employee Deductions (PAYE). Why does my charity need to confirm how it spends money? If your trust applies for grants, these often come with obligations to undertake accountability reporting. When you apply for these grants, they are normally tagged to cover a very specific type of expenditure, and declarations are often required at the end of the funding period to confirm the money was spent in accordance with the conditions of the grant. There’s also a flipside to each coin a charity has to spend – and this involves demonstrating funds are invested in advancing the cause of the organisation. Our research contained a word of caution for charities carrying large reserves, as this requires the need to articulate to all stakeholders and funders why the reserve are being held and what they’re going to be used for. In fact, last year’s Charities Act review recommended organisations with annual operating expenses over $140,000 will be required to disclose information about the reserves they hold, and why they hold them. This information will also be available to the media and general public. Are you confident around finances and understand your reporting requirements? From time to time we see challenges arising from trustees who lack confidence when it comes to finances including year-end reporting. This could include not having an audit when required by legislation or your own deed. The trustees must understand their charity’s financial metrics, how they align with their charity’s strategy and goals, and how they link this information through into the statement of service performance. Charities are obliged to file an annual return with Charities Services. This is due six months after balance date. These disclosures will include: Ensuring the charity’s contact details, purpose, structure, and officers’ details are up to date, and providing details of paid and unpaid work undertaken for the charity. The trustees must present the charity’s financial statements which must be compliant with the relevant reporting requirements. There are different tiers of reporting which are fit for purpose depending on the size of the charity. You must confirm you have prepared the financial statements according to the required reporting tier. Some charities will require these financial statements to be audited. This may be governed by the Trust Deed rules, it may be a requirement of the funders of the charity, or it may be a legislative requirement due to the size of the charity. The financial statements will likely need to include a Statement of Service Performance, a report which uses both written and numerical information to demonstrate what were the outcomes of the trust’s activities for the year. What are the potential outcomes of getting it wrong? Your organisation could be the subject of a Charities Services review. Much like a tax audit, this would be a fairly labour-intensive and costly process. You certainly want to avoid this if you can. You could also potentially lose your charitable status. This would be catastrophic, as your entity is then liable for income tax and donations would no longer be tax deductible to your donors. Even minor mismanagement by trustees can lead to reputational damage. People like to donate to well-managed charities, because it gives them confidence their funds are being put to good use. If the community loses faith in your organisation, it could lead to a major reduction in funding, donations and volunteers, and other organisations may no longer wish to be affiliated with yours. Financial reporting compliance is not only a problem for charities, but will increasingly be a concern for incorporated societies under the new requirements. You should by no means be discouraged from becoming a trustee of a charity. You just need to ensure you know what the obligations of your new role are, so your efforts strengthen the organisation rather than steering it into choppy waters.

Service reporting is all about your non-financial performance – the data that showcases the most meaningful parts of what your entity does. The standard is designed to help everyone see the fantastic work your charity is doing, and you might be surprised at the potential benefits of non-financial reporting. This service report tells all of your stakeholders: