financial management part 2. an initiative of the nsw government fm ii: end of year cash vs accrual...
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Financial ManagementPart 2
An initiative of the NSW Government
FM II:End of Year
Cash vs Accrual Accounting
Auditor
Audited Financial
Statements
Acquittals
An initiative of the NSW Government
How does financial management ‘fit in’?
Financial Management
Operational Management
Strategic Management
An initiative of the NSW Government
What is financial management?
Strategic Goals
Planning
Reporting Forecasting
An initiative of the NSW Government
Just a Reminder…Board members must be able to:
»Read financial reports
»Understand compliance requirements
»Ensure compliance
»Set financial direction
»Monitor and review finances
An initiative of the NSW Government
Cash vs Accrual Accounting
An initiative of the NSW Government
Cash vs Accrual Accounting
An initiative of the NSW Government
My Income Statementfor the Fortnight ended 31 March 2007IncomeWagesBirthday MoneyTotal Income
Expenditure BookshelfDeliveryRentFoodPhone BillTotal Expenditure
Surplus/Deficit
$1,000
$1,000
$400$50
$450
$550
CA
SH
AC
CO
UN
TIN
G
An initiative of the NSW Government
My Income Statementfor the Fortnight ended 31 March 2007IncomeWagesBirthday MoneyTotal Income
Expenditure BookshelfDeliveryRentFoodPhone BillTotal Expenditure
Surplus/Deficit
$1,000
$1,250
$400
$50
$100
$50
AC
CR
UA
L A
CC
OU
NT
ING
$250
$500
$150
$1,200
An initiative of the NSW Government
Accountant vs Auditor
An initiative of the NSW Government
What to expect from your auditor
» A good track record
» A pre-audit meeting
» List of required information
» Explanations of any issues
» Audit management letter
» Independence
An initiative of the NSW Government
Changing auditor
» Not as easy as you might think…
» Determined by basis of incorporation (NSW or ASIC)
An initiative of the NSW Government
What do they do?
They don’t look for fraud
They do:
» take samples
» review and test internal controls
» look at trends and ratios, and investigate anomalies
An initiative of the NSW Government
Internal Controls
An initiative of the NSW Government
Audited Financial Report
1. Directors’ Report
2. Auditor’s Declaration
3. Audited Financial Statements
4. Notes
5. Directors’ Declaration
6. Auditor’s Report
An initiative of the NSW Government
Directors’ Report
» Period being reported
» Names of directors
» Principal activities
» Review of operations
» Significant changes
An initiative of the NSW Government
Auditor’s Declaration
» Standards inferred from basis of incorporation
» Professional conduct
An initiative of the NSW Government
Audited Financial Statements
A closer look…
An initiative of the NSW Government
Audited Financial Statements
» Statement of Comprehensive Income – P & L
» Statement of Financial Position – Balance Sheet
» Statement of Cashflows – Cashflow Statement
» Statement of Changes in Equity
An initiative of the NSW Government
Profit and Loss Statement
Reports income and expenditure over a period of time
» Income – what we earn
» Expenditure – what we spend
An initiative of the NSW Government
An initiative of the NSW Government
The Balance Sheet
» Lists assets and liabilities at a given date
» Asset – we own it
» Liability – someone else owns it
» Called a balance sheet because the two sides balance
An initiative of the NSW Government
An initiative of the NSW Government
Cashflow Statement
» Cash in and out over a period of time
» Revision – cash and accrual accounting
» Turns P&L from an accrual basis to cash
An initiative of the NSW Government
An initiative of the NSW Government
1.
An initiative of the NSW Government
Equity Statement
» Movement in net assets/equity position
» Affected by annual profit/loss
An initiative of the NSW Government
STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 30 JUNE 2010
2010 2009 $ $
Accumulated surplus/(deficit) at the beginning of the year (33,682) (47,780)
Surplus for the year 17,517 14,098
Accumulated surplus/(deficit) at the end of the year (16,165) (33,682)
An initiative of the NSW Government
Notes
An initiative of the NSW Government
Directors’ Declaration
» “True and fair view”
» Solvency statement: “The Directors have reasonable grounds to believe that the organisation is able to meet its debts as and when they fall due”.
An initiative of the NSW Government
Auditor’s Report» Scope
» Audit opinion
» Independence
» Statement of Compliance
An initiative of the NSW Government
Auditor’s Report
An initiative of the NSW Government
ADHC Acquittals
» ADHC acquittals to be completed annually
» Or else…
» ADHC resources: Acquittal Guide, Acquittals Hotline
1800 739 872
An initiative of the NSW Government
Type 1 Service Providers
Less than $100,000 funding
• Signed Acquittal Summary Statement• An Income and Expenditure Statement for each
Acquittal Group• ADHC Statement of Expenditure for each group• Reconciliation statement (if required)• Surplus Retention form (if required)• Completed Checklist
An initiative of the NSW Government
Type 2 Service Providers
Greater than $100,000 funding• Audited Financial Statements• Asset Register (if required)• Signed Acquittal Summary Statement• Income and Expenditure statement for each group• ADHC Statement of Expenditure for each group• Reconciliation statement (if required)• Surplus Retention form (if required)• Completed Checklist
An initiative of the NSW Government
Acquittal Requirements
» Signed Acquittal Summary Statement
» Surpluses
» Standard Chart of Accounts
An initiative of the NSW Government
Next steps
» IYB Checklists
» Tailored consultancy
» Register for “Quality”
» Your suggestions
» 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 [email protected]