Most small charities experienced the revised reporting standards as a relief. The External Reporting Board issued updated Tier 3 and Tier 4 not-for-profit standards in May 2023, mandatory for accounting periods beginning on or after 1 April 2024, with early adoption permitted for periods ending after 15 June 2023. For a Tier 4 organisation — one with annual operating expenses under $140,000 — the new standard is meaningfully less demanding than the one it replaced. That is a good outcome for boards run by volunteers.
It also removed something quietly useful.
What Changed in the Standards
The revised standards apply to registered charities and to incorporated societies that have re-registered under the Incorporated Societies Act 2022 and are not classified as small. Tier 3 covers organisations with annual expenses under $2 million; Tier 4 covers those under $140,000. Both tiers prepare a Performance Report rather than a full set of financial statements.
Two changes matter for the purposes of this article. The service performance section dropped the terms "outcomes" and "outputs" in favour of language aligned with the Tier 2 standard, which is a presentational improvement rather than a substantive one. More consequentially for Tier 4 entities, the standard no longer requires a Statement of Resources and Commitments.
Separately, the Charities Amendment Act 2023 gave the Chief Executive of the Department of Internal Affairs power to exempt very small charities from preparing general purpose financial reports in accordance with the standards altogether. Those charities still file an annual return containing basic financial information, but the reporting burden drops again.
Why the Statement of Resources Mattered
The Statement of Resources and Commitments was never intended as an insurance document. It asked an organisation to list what it owned and what it was committed to — land and buildings, vehicles, significant equipment, investments, and on the other side, loans, leases, and guarantees. It was a plain-language inventory, prepared annually, reviewed by the board, and filed publicly.
For a great many small charities it was also the only moment in the year when anyone sat down and wrote out a list of the organisation's physical assets. Preparing it surfaced the marquee bought two years ago, the trailer donated by a member, the sound system upgraded after a fundraiser, the kitchen refit at the hall. Whether or not the treasurer then thought about insurance, the list existed, and it was the natural thing to hand a broker at renewal.
Without that annual prompt, nothing in the reporting cycle asks a Tier 4 board what it owns. The sums insured on the policy stay where they were set, renewal after renewal, while the asset base moves underneath them.
How Underinsurance Actually Develops
Underinsurance in the community sector rarely arrives through carelessness. It accumulates through three ordinary processes.
The first is acquisition without registration. Donated and grant-funded assets enter an organisation outside the normal purchasing path. Nobody raises a purchase order for a trailer someone gifted, and nobody tells the broker.
The second is replacement cost drift. Construction and equipment costs have moved substantially over the past five years. A hall insured for a rebuild figure set in 2020 may be materially short of what rebuilding it would cost today, and the gap widens every year the figure is not revisited. This bites hardest on exactly the buildings communities can least afford to lose — halls, clubrooms, marae facilities, heritage churches — because their rebuild cost bears little relation to any market valuation.
The third is scope creep in activities. An organisation that added a food rescue operation, a van, and a commercial-grade chiller has changed its risk profile in ways a property schedule written for an office and a photocopier does not reflect.
Where a policy carries an average or co-insurance clause, the consequence of underinsurance is not simply that a total loss pays out less than the rebuild cost. A partial loss can also be reduced in proportion to the shortfall. An organisation insured for 60 percent of true replacement value may recover 60 percent of a partial claim, which is the point at which a manageable event becomes an existential one.
The Governance Review Is the Obvious Place to Do This
Registered charities must formally review their governance procedures before 5 October 2026, and at least every three years after that. Charities Services has indicated the annual return will ask whether the review has been done and when. That review is a compliance obligation with a deadline, which means it is one of the few pieces of work a volunteer board will reliably schedule.
It is also the right container for an asset and insured-values check. A governance review that examines financial oversight without asking whether the organisation's assets are adequately insured has looked at half the picture. The practical version takes an hour: list what the organisation owns, note what each item would cost to replace today rather than what it cost to buy, flag anything acquired since the last renewal, and identify any building where the sum insured has not been revisited in three years or more.
Building the Register the Standards No Longer Require
An asset register does not need to be sophisticated. A spreadsheet with a description, an acquisition date, a current replacement estimate, and a location column covers most of what a broker needs. Buildings warrant more care: a formal replacement-cost valuation is worth commissioning every three to five years for any structure the organisation could not operate without, and insurers will generally accept a professional valuation as the basis for a sum insured without further argument.
Keep the register with the governance review documentation rather than in the treasurer's personal files. Volunteer boards turn over, and the value of a register lies in the next committee being able to find it.
A Reporting Simplification, Not a Risk Reduction
The revised standards reduced what small organisations must report. They did not reduce what those organisations own or what it would cost to replace it. Boards that relied, even unconsciously, on the annual reporting cycle to keep asset information current now need to create that prompt deliberately.
If your organisation has not reviewed its sums insured since the reporting changes took effect, the governance review deadline is a natural moment to do it. To have your property schedule and replacement values reviewed alongside the rest of your cover, get a quote from one of our specialist charity insurance brokers.
About the Author
The CharityInsurance Crew — the CharityInsurance crew are your friendly insurance geeks on a mission to make specialist cover simple and accessible for every NZ charity, sports club, and community organisation.