Financial ManagementPart 1

An initiative of the NSW Government

What it is

Why does it matter?

What can go wrong?

What can we do?

How do we do it?

What we will cover

Financial Management

Financial Management

An initiative of the NSW Government

What’s important for your organisation?Area of concern for your organisation RankingSuccession planning / business continuity ?Staffing issues ?Operational planning ?Reporting to funders ?Partnerships with other organisations ?Mission statement ?Service delivery ?Financial management ?Strategic plan ?Dysfunctional board ?

An initiative of the NSW Government

What is financial management?

Financial management is the use of planning, reporting and forecasting techniques based on

the strategic goals of an organisation.

It can include things such as financial reports, business plans, accounting records (e.g. tax

statements, bank receipts), funding agreements, and policies / procedures for finance.

An initiative of the NSW Government

Why does financial management matter?

Financial Management

Strategic Management

Operational Management

An initiative of the NSW Government

Why does financial management matter?

Good Business

Legal responsibility

Organisational responsibility

Strategic responsibility

Financial responsibility

An initiative of the NSW Government

Recap- What it is and why we care?

• What is Financial Management

• Importance

• Purpose

It makes good business sense!

An initiative of the NSW Government

Your role…

Directors need to be aware of their obligations and responsibilities

with regard to financial management (Chapter 4 AHDC It’s Your Business Manual)

• Be able to read financial reports, be aware of taxation / incorporation requirements and understand compliance requirements

• Set financial directions for the organisation• Ensure organisation complies with financial requirements• Monitor and review finances of the organisation

An initiative of the NSW Government

Some Questions….

1. What are the assumptions behind our budget?

2. What are the key cost drivers for our organisation?

3. What insurance cover is in place?

4. Do we budget for contingencies?

5. What are our biggest financial risks?

6. How often are our assets valued?

7. What else?

An initiative of the NSW Government

End of Financial Year

An initiative of the NSW Government

Expect to see…

• Regular reports against budget

• Reasonable explanations of variances

• Forecast report showing expected position at 30 June

• Action taken on prior year auditor’s letter

An initiative of the NSW Government

What’s due when…Within 3 months of EOFY (30 September):

FaHCSIA and DEEWR acquittals

Within 4 months of EOFY (31 October):NSW Health and Community Services acquittalsLodge financial reports with ASIC (Form 388)

AGM: within 5 months of EOFY for Companies within 6 months of EOFY for Associations (lodge annual statement within 1 month of AGM)

ADHC acquittals: December (pending receipt of acquittal pack)

An initiative of the NSW Government

So what can go wrong?

An initiative of the NSW Government

So what can go wrong?

• Inadvertent issues – examples and discussion

• Deliberate issues, e.g. fraud – definitions, examples and discussion

• Consequences – effects arising from things going wrong

An initiative of the NSW Government

So what can go wrong?

• Consequences – what would this mean for you?

• Case study – HIH insurance

An initiative of the NSW Government

But that could never happen to me, right?

Understand and plan =

plan to succeed

OR

Fail to plan = plan to fail

An initiative of the NSW Government

So what can go wrong?Summary

• Inadvertent issues – poor reporting, ignorance

• Deliberate issues – fraud

• Consequences – internal vs. external

An initiative of the NSW Government

So what can we do?

• Follow guidelines – Ch. 4 AHDC It’s Your Business

• Develop understanding – role of financial management, financial reports, KPIs/budgets

• Systems – policies/procedures for transparency, accountability and effectiveness, delegations.

• Code compliance – funding agreements, legal requirements, reporting entities, etc.

An initiative of the NSW Government

How do we do it?

• Start now – doing a little bit of something is infinitely better than doing nothing

• Be realistic – what is achievable / appropriate with your own organisation’s set of skills

• Don’t be scared – high level of additional expertise in the community

• Measure your own progress – planning, tracking, reporting

An initiative of the NSW Government

How do we do it?

• Accrual vs. cash accounting – don’t be frightened!

An initiative of the NSW Government

How do we do it?

• 3 basic financial reports – these are the ones that show at a glance how an organisation is going

• Balance sheet – snapshot in time of an organisation’s financial position (solvency)

• Profit & loss statement – income and expenditure (fraud)

• Cashflow statement – movement of money (liquidity)

An initiative of the NSW Government

How do we do it?

• Standard Chart of Accounts – this is where all transactions are recorded (QUT & Matrix websites)

• Financial Report – financial statements for the year, notes, directors’ declaration, etc.

• Directors’ Report – review of operations, names of directors, principal activities, significant changes, etc.

• Auditor’s Report – scope of the audit, qualifications, and statement of compliance

An initiative of the NSW Government

How do we do it?Summary

• Plan, track, report – everything from understanding of financial management to budget / actual

• Types of accounting – cash vs. accrual

• Financial Reports – balance sheet, profit and loss and cashflow statement and also using the end-of-year Financial, Directors’ and Auditor’s Reports

• Don’t have to be an expert in everything – plenty of assistance and advice available

An initiative of the NSW Government

Resources• NCOSS Management Support Unit

www.ncoss.org.au/msu

• QUT Develop Your Boardhttps://wiki.qut.edu.au/display/CPNS/Board+evaluation

• National Disability Services NSWwww.nds.org.au/projects/article/47

• PILCH Connecthttp://www.pilch.org.au/legal_info/

• Matrix on Boardwww.mob.com.au

An initiative of the NSW Government

An initiative of the NSW Government

An initiative of the NSW Government

Next steps

• IYB Checklists

• QUT assessment

• Tailored consultancy

• Register for sessions

• Your actions

• Evaluation

An initiative of the NSW Government

Financial services Management support Financial literacy Training (RTO) NFP experienced staff

Thank you!

Matrix on Board provides financial and management support to non-profit organisations

Matrix is part of the NDS Good Governance consultants’ panelContact us on 02 9281 1700 or at admin@mob.com.au

An initiative of the NSW Government

Associations in NSW

• Strategic Plan – vision, mission, goals, strategies, performance indicators

• Annual Budget – to fund the strategies

• Policies and procedures – guidelines for how the organisation functions

An initiative of the NSW Government

Corporations

To provide leadership, safeguard the organisation’s interest,

ensure accountability andand ensure long-term viability.

An initiative of the NSW Government

Corporations

To provide leadership, safeguard the organisation’s interest,

ensure accountability andand ensure long-term viability.

An initiative of the NSW Government

Corporations

To provide leadership, safeguard the organisation’s interest,

ensure accountability andand ensure long-term viability.