Prescribed Private Funds Accounting and Audit Issues Graham Reeve

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Prescribed Private FundsAccounting and Audit
IssuesGraham Reeve

• August 2004

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• To give away money is an easy matter in any
  mans power. But to decide to whom he gives it,
  and how large and when, and for what purpose and
  how, is neither in every mans power nor an easy
  matter. Aristotle 384-322 BC
• 2300 years later we add structuring, strategy,
  taxation, accounting, audit, investment,
  financial planning and record keeping.

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Accounting and Audit Issues

• Accounting issues
• Sound accounting
• Meaningful reports
• Cash or accruals basis
• ATO reporting requirements
• Audit issues
• Auditor selection

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Sound Accounting

• Accounting standards
• ICAA recommendations May 2003 report
• special purpose financial reports
• recognition of income and unspent grants
• Record keeping
• donations received
• distributions made
• expenses
• assets liabilities

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Cash or Accruals basis

• Timing of dividends received and receivable
• Timing of imputation refunds
• Include in amount available for distribution at
  30 June ?

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Audit Issues

• ATO requires any PPF to be audited (clause 11.3
  of Model Trust Deed)
• Auditor must be a person registered under Part
  9.2 Corporations Act 2001
• Appoint an experienced auditor
• not just a cheap auditor

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Reports

• Annual financial statements
• Statement of Financial Performance (i.e. Income
  expenditure)
• Statement of Financial Position (i.e. Balance
  Sheet)
• Imputation credit refund return
• ATO Information return

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Imputation refunds

• Very simple form

• Administrative details

• Franked dividends

• Imputation credits

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Information return

• Changes to trustee, responsible person,
  accumulation plan
• Cash or accruals basis audit report
• Details of donations, gifts, grants received
• Details of distributions to DGRs gt1,000

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Information return

• Income - interest, franked dividends, trust
  distributions, unfranked dividends, rents,
  fundraising, realised capital gains
• Expenses - salaries, rent, motor vehicles, fund
  raising other
• Asset values - summary and details

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Instruction sheet
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Detailed instructions
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Practical Issues

• Accounting System
• Shoebox approach
• Simple software (Quickbooks, MYOB etc.)
• Outsource to specialist
• Tracking Gifts
• Manual system
• Spreadsheet
• Outsource to specialist
• Cost
• Amount
• Personal time
• Outsource

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Myer Family Office

• Growth in number and complexity of PPFs
• Encourage philanthropy creation of PPFs
• Family glue
• Created MF Philanthropic Services

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MF Philanthropic Services

• The Myer Foundation Sidney Myer Fund
• Combined assets 150 million
• Combined income 8 million
• Combined expenses 800,000
• 1000 requests for grants per annum
• 250 grants approved per annum

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MF Philanthropic Services

• Act for
• 10 PPFs, plus
• Sidney Myer Fund The Myer Foundation
• Services
• Strategy creation of PPFs
• Accounting
• Imputation refunds
• Information returns
• Investment via
• M F Charities Equities Fund
• M F Income Plus Fund
• M F Cash Management Fund
• External Managers

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MF Philanthropic Services

• Gift advice
• Gift administration
• tracking requests
• tracking payments
• donor agreements
• Administration
• trustee meeting minutes, distribution minutes

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Summary

• Set up systems from the start
• Keep excellent records
• Consider using specialist advice services
• Enjoy being a philanthropist

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Prescribed Private FundsAccounting and Audit
IssuesGraham Reeve

• August 2004