Another Observation by the Owl – Educating Incorporated Societies members on reading Financial Statements
I am using the MUNZ Trust as an example as all information is in the public domain.
The MUNZ Trust has provided the MUNZ Union the following income as per their audited accounts:
2008 $150,000.00
2009 $104,000.00
2010 $80,000.00
2011 $50,000.00
The Auditors statement identifies the MUNZ Trust and says in it notes that they do not need to be incorporated into the Accounts.
As a Trust can be private I have no problem with this and support the Auditors notes to the accounts. I also support MUNZ’s identifying it in their notes as well. (As you know the Owl is balanced) However thinking this through there are three interesting points.
- The Balance Sheet shows a MUNZ Trust asset and liability line which identifies there is some sort of transactional event happening between the Trust and the Union over and above the income sponsorship.
- Who owns the Trust? – If it is the members of the Union who are the overriding owners of the Trust then the members should have access to the audited accounts of the Trust. Maybe they do.
- If I was a member of an organisation who received such large income streams then I would ask the question of the validity of the income stream and how this income stream is derived for peace of mind.
Finally there is a diminishing income every year and that could indicate any of the three things to the members:
- The Trustees have determined what they can and can’t afford to pass onto the Union.
- That the asset base which generates the income from the Trust is declining.
- The Trustees have determined a new strategic or business plan and maybe re-investing their capital return.
The Owl’s observation
There seems to be liberal accounting policies regarding incorporated societies while company, personal and public department accountings laws are quite rigid.
As I have gone on this journey uncovering the world of incorporated societies I have found how much variation there is on what is recorded and available.
I have been analyzing the information provided by the National Party accounts and am happy/unhappy to say it is also an interesting read. The Greens have an interesting format – I couldn’t find the NZ Labour Party accounts and Mana Party, couldn’t find it at all.
I actually believe incorporated societies generally act within the law and do their best with limited resources.
The Charity Commission looks like it has a good system going where basic information is required to be filed e.g. number of staff, a front sheet of income and expenditure etc.
- Is it time for an overhaul of the system?
- How does the government educate the members of incorporated societies to read their financial statements and what they mean? Is a simple questionnaire front sheet format the way to go that all incorporated societies must fill in?
Note: All information is sourced from the public domain. The Owl always apologises if an error has been made and also want to say very publicly that this is not a review of MUNZ – it is just a very good example to use and to be fair on MUNZ there are a number in the same boat – left and right side of the political spectrum.