Transcript Slide 1

This presentation does not contain, and shall not be held to
contain, any professional advice. The presentation does
not constitute legal advice. Accordingly the matter of the
presentation may not be relied upon for any professional
purpose and independent legal opinion should be obtained
before taking action as a result of any matter or thing
contained in this presentation.
Government funding
for transfer of
Community Service
Obligations
Corporate Funding Philanthropy,
Corporate
Conscience
Where is the money
coming from and
what are the Terms
it comes on ?
Fund Raising Public Expectations
Perceived Promises
Terms & Conditions of Grant
Funder specific formats
Contractual Arrangements
Specific formats
Public Persona / Reputation
Statutory Reporting “fall back”
position
Periodic
reporting in
prescribed form
Financial & nonfinancial criteria
Monitoring and complying
with auspice
arrangements
Range of requirements – usually
linked to the value of the Grant
Some Grant acquittances require
‘surrender” of original corporate
documents
Conflict with record requirements
of regulatory legislation
Acknowledgement
Publicity
Challenges for
records integrity
Problem is common to a vast range of entities
Solutions are diverse
How to select the solutions most appropriate for your circumstances?
Driven by:
Your funding sources
Your type of entity/incorporation
Public accountability on a variety of levels;
Your Members
Your Customers/Clients
Your suppliers/business partnerships
General Public “probity” concerns
WHERE TO START?
Generally best to start with WHO we are discussing.
Non Government Organisation – NGO’s
CORE Government activities are:
Health,
Education
Defence
and
Transportation infrastructure
The Australian Federal and State Governments now deliver
more than half of their “non-core” Community Service
Obligations using “Not for Profit” intermediaries.
Public reliance on “NGO’s”
CHARACTERISTICS OF NGO’S
INCORPORATED ENTITIES:
Legal existence, capable of holding asset title, capable of being sued
Governance requirements and enforceable accountability UPON Management
Committees
Meets governance requirements of Funder
Legislative framework provides minimum levels of confidence to all concerned in
activity/objectives
VOLUNTARY MANAGEMENT & FREQUENTLY OPERATIONAL STAFF:
Commitment to objectives, needs or service to be delivered – not “just a job”
Restricted time available
Limited skills base
Limited economic capacity to “buy” skills required
CHARACTERISTICS OF NGO’S
LOCAL TO THE AREA OF DELIVERY:
Capacity for prompt and directed response to delivery
Not subject to all the daily “red tape” of Public Sector
Focus can be very tight, ONLY one sector of community
Restricted to resources WITHIN the Community in which
functioning
Inadequately resourced for “compliance” with “red tape”
Can cease to function very quickly
Politicalisation
Clerical collapse
Incorporated associations:
Each State/Territory has its own legislation – minor variations
Enabling Act – Associations Incorporation Act 1981 (Queensland) –
amended 30 October 2006
body corporate with perpetual succession
has a seal
may sue or be sued in its own name
(S21)
Members not liable to contribute to winding up beyond the property of the
incorporated association in a person’s hands (S27)
If a “winding up” becomes necessary – Corporations Law applies (S90)
Incorporated associations:
Requirements to:
have a management committee
hold an Annual General Meeting
have an audit of financial affairs conducted
lodge copies of specified reports, including audited financial report
with regulator
Office of Fair Trading
Funding Bodies – Public & Commercial
General “Public Interest”
Incorporated associations:
Statutory enforcement of minimum standards of corporate governance and
internal control over financial affairs.
Including:
Minimum for number of members of management committee
(3)
Minimum requirement to meet at least once in each 4 months
Lodgment of certain changes within one month
(S 60-69)
Minimum Public Liability Insurance $1,100,000 (S70)
Protection of rights of Members (S71)
Incorporated associations:
Flexibility by way of Rules:
-Adopt “Model Rules” or “Write Your Own”
BUT!!
– Model Rules have Legislative override
- some provisions cannot be dropped or
Rules will not be approved
- certain changes to the Model Rules will override any
specific “write your own” provisions that may have been
approved in the past – generally “equity” or “common law”
basis
Incorporated associations:
Management Committee Members have to know the Model Rules and where
these are the same as or conflict with the Association’s own rules.
S61 – MUST have a MINIMUM of Three members
One member MUST hold office of President
One member MUST hold office of Treasurer and NOT also hold office as
President
S66 – Associations MUST have a Secretary
may be elected by the Association
may be appointed by Management Committee
and in that case need not be a member of the association
Associations MUST advise of changes in Secretary within One Month
Incorporated associations:
Officers of Associations are deemed servants
S123
“strict liability”
Liability Protection of Act is negated by willful act or negligence opening
Members of Management Committee – and non-member Secretaries- become
liable for loss suffered
Observance of Good Governance practice can assist to demonstrate due care
and so preserve limitation of liability in most circumstances
Incorporated associations:
ACT – CONCEPT and Equity
2 to 5 year minimum to effect changes
REGULATIONS – PRACTICAL – can be changed by Regulator within a
few months
REGULATIONS:
Rules, Records and Accounting requirements
Part 3
Regulation 9 RECORD KEEPING
Regulation 10 ACCOUNTING REQUIREMENTS
Regulation 11 AUDITED RETURN
Regulation 12 ADDITIONAL ACCOUNTING REQUIREMENTS
Schedule 5
Incorporated associations:
Statutory Reporting Obligations
Simple – Income & Expenditure Statement agreeing to Cash Balances
So what makes these more complex:
When “Cash” is not the only asset
When it is not adequate to operate on a cash basis.
Significant Operations, Owe to Creditors, Owed by Debtors
Terms & Conditions of Grant:
Contractual requirements:
Australian Equivalents to International Financial Reporting Standards
(AEIFRS)
Australian Equivalents to International Financial Reporting Standards (AEIFRS)
apply to “general” purpose financial reports.
“Reporting Entity”
where the persons making economic decisions have ONLY the statutory financial
report to base decisions on.
Usually not applying to Incorporated Associations because:
Close membership;
Management drawn from memberships;
Other funders, bankers, Government Departments have the power to
obtain detailed information on request.
Denial of these rights would force transition to “general purpose”
Member request to move to “general purpose” or
Funding body may make “general purpose” a Grant requirement
Terms & Conditions of Grant:
Generic requirements:
Audit of financial statements
Financial reporting against funded budget lines
Controls over process of acquisition of “capital” items or
expenditures in excess of $1,000
Key Performance Indicators (KPI’s)
Periodic reporting on projects
Right of entry to records to conduct their own review if they wish
Greater cost of compliance with accounting requirements
Philanthropic Entities:
Commercial Enterprises seeking to display a “public conscience”
Needing to display effective Corporate Governance and satisfy “general
purpose” reporting standards of their own.
Pressure on Not-For-Profits to be clearly accountable in comparable
formats
Significant reliance on audit opinion, additional requirements in audit
plan
Must be considered if seeking the Corporate $
Funding is less constrained to specific uses, programmes
More reliance on PROBITY
Management Reporting:
“Statutory” and “Grant/Financier” Reporting are both wholly historical,
already fixed because it has happened
Management reporting has to be current and, at its best, forward and
active
They have to be reconcilable to each other to prove the integrity of
their results
Most effective if they come from the same data
Multiple files are a severe risk of undetected error and fraud,
Cost more to maintain and
As EACH record has to be audited, more records mean more cost
BUSINESS TRANSACTION
EQUITY
CONTRIBUTED
INWARD
OUTWARD
ASSET SALES
REVENUE
EXPENSES
EQUITY
RETURNED
ASSETS
ACQUIRED
CASH - "BANK"
ACCOUNT
DEBTORS
CREDITORS
RECEIPT
INVOICE/
STATEMENT
CHEQUE
ACCOUNTS
RECEIVABLE
INVOICE/
STATEMENT
ACCOUNTS
PAYABLE
GENERAL LEDGER
OPERATIONAL STAFF
REPORTS
MANAGEMENT REPORTS
GRANT FUNDER
REPORTS
CORPORATE SPONSOR
REPORT
STATUTORY REPORTS
Revenue
Expense
Profit]
Equity
High Level Summary
=
Assets
Liabilities
FINANCIAL
STATEMENT
DISCLOSURE
STATUTORY LEVEL
REPORTING
Approved Budget Lines
GENERAL LEDGER
SUMMARY
account level
MANAGEMENT COMMITTEE REPORTS
Budget Report Montioring operational
OPERATIONAL STAFF REPORTS
Item by item
GENERAL LEDGER DATA BASE
Item by item
Operational
Control Lines
TRANSACTIONS
FUNDER / FINANCIER REPORTS
CORPORATE GOVERNANCE IN A VOLUNTARY ORGANISATION
The big “untruths”
– As this is voluntary everyone can make their own rules
– The rules made by the strongest personality win
– The longest serving person has to be recognised as the
strongest
– New blood and ideas have to be better than what we have been
doing
– People with Certificates and Degrees know more than anyone
else
–People we pay to do things cannot do them as well as volunteers
can
CEO /Administrator
Legislators/
Supervising Bodies
Management
Committee
Funding
Bodies
Trades
people/suppliers
Members Users
Participants
Chairperson
CEO/ Administrator
Committee
Trades
people/
suppliers
Senior Management
Staff
Other Stakeholders
Members
Staff, suppliersetc



CEO
DECISIONS
MEMBERS

CHAIRPERSON
OTHER STAKEHOLDERS

STAFF


CONFIDENTIALITY AREA
GENERAL PUBLIC

LEGISLATIVE FACTORS
Management
Committee
BUSINESS
LEGISLATIVE FACTORS
GENERAL PUBLIC
CONFIDENTIALITY AREA
CORPORATE GOVERNANCE IN A VOLUNTARY ORGANISATION
Agree to a Code of Practice that suits your organisation
Especially where Management Committee members may also
have a “hands on” volunteer role be clear about the
separation of the two roles
Be clear about what you “delegate” to employed staff
Set out clearly what you really need to monitor how they use
your “delegation” and in what circumstances you will
withdraw that privilege – then
Leave them to it
CORPORATE GOVERNANCE IN A VOLUNTARY ORGANISATION
This then allows you to reduce the volume of data, financial
and otherwise, that bombards you
The framework you set assists to identify what you need to be
sure things are “on track”
You can see where each “external” prescription impacts on
what you do and how they can be used to assist you to
manage
Everyone can at least come to row in the same direction even
if not at the same speed.
You build the capacity for your organisation to grow, expand
and become self perpetuating,
including planning for future governance when voluntary
doesn’t work any more without losing your ethos (character)
WHERE DOES “AUDIT” FIT?
statutory monitoring function
legal requirement to report on “breaches”
Regulatory/funding body review processes
to reduce their workload by
transfer of responsibility to
someone else (i.e. “the auditor”)
Audit reports ON Management
Audit reports to “Owners” “Regulators” and “Funders” and to anyone
else who can establish their right to the information and obtain
consent of owners/managers
WHAT IS AN AUDIT?
an assessment of transactions and actions measured
against a set of standards and requirements
WHAT DOES IT DO?
identifies which rules apply to you
examines how and what you have done
considers the adequacy and process of how you did it
compares the “rules” and “reality”
reports to the identified group(s) on the comparison
reports on risks identified, especially those not adequately
addressed.
WHAT DOESN’T AUDIT DO
Audit is only permitted to assist you in extracting your financial
statements in very limited circumstances
even though it will be involved in ensuring you prepare the right
ones in the right way
Audit will not make decisions about what you do or how you
should do things
even though it may advise you on what you should NOT do or
what is best practice
discover fraud
even though it can tell you how it happened and often how to
prevent it and have probably warned you it could happen for
years
FRAUD
most fraud is discovered by you, often when one of the parties
to it gets honest or falls out with partners in crime.
Except where collusion has allowed the fraud, if you have to wait
for audit to tell you fraud has occurred we can be sure that:
your records are in a mess;
your committee has not been effective in controlling your
activities;
it will be almost impossible to pursue the culprit(s) or
recover any money.
Fraud destroys “trust” and many voluntary organisations will
never recover from it
The best DEFENCE against fraud is to have clear Procedures,
good reporting from delegates and strong monitoring at
Committee level
This can only happen if the Management Committee can
understand what the reports they receive are meant to show
WHY DOES AUDIT COST SO MUCH?
The smaller and more restricted the administrative resources
are the poorer the records tend to be
Where operations are complex and accounting processes are
not or do not match the organisation the records will either
be inadequate to answer the questions or there will be several
sets being kept to answer the questions
If clear directions about what has to come OUT of an
accounting process are not identified the records probably
won’t give you what you want
UNDERSTANDING!
ACCOUNTING PROCESS – USE OF COMPUTER SOFTWARE
Computer software is designed to allow the user to be in control, save
money on accounting costs
Computer software, set correctly, can overcome the limitation of access
to skills of bookkeepers and accountants
Computer software, set incorrectly, will consistently do everything
wrong
Computer software, used incorrectly, cannot provide a trustworthy
result
This will increase audit costs because of the need to sort out frequent
errors, reversals, simple incorrect usage and potential deliberate
misuse
ACCOUNTING PROCESS – USE OF COMPUTER SOFTWARE
It is important to know what you need OUT of your computer software
What the computer software within your budget CAN do
What level of skill your operator has to use program flexibilities
Where you can use the computer software, and other information you
maintain, to work together to overcome program/user skill limitations
This requires and understanding of:
– what your activities and objectives are
– what are the real measures of achievement
– what is imposed upon you that you can use with minimum extra
effort
ACCOUNTING PROCESS – USE OF COMPUTER SOFTWARE
The most expensive system and the cheapest one work on the same
basis
–Transactions recorded according to type
–Accumulated in a summary record
–Reports available from that summary
And, most importantly
RIRO
Rubbish In –Rubbish Out
The best system will be defeated by poor use!
ACCOUNTING PROCESS – USE OF COMPUTER SOFTWARE
If you do not match your needs with the capacities of the software and
the abilities of the user it is unlikely you will be able to obtain the
output you require.
People can be trained, output formats can be adjusted and sometimes
you have to accept that what you really want is not possible
So – what can you expect any accounting software program to be
capable of?
BANK
RECONCILIATION
CONSOLIDATED
JOB PROFIT &
LOSS
RECONCILE
CASH BASIS
BANKING
PAYMENTS
GENERAL
LEDGER
RECEIVE
JOB
REPORTS
JOB
REPORTS
STANDARD
BALANCE SHEET
JOB
REPORTS
GENERAL JOURNALS
ACCRUAL BASIS
TRIAL BALANCE
PAYABLES
RECEIVABLES
PAYROLL
STANDARD
PROFIT & LOSS
ASSETS
RECAPITULATION:
Be clear about:
What OTHER people/organisations want from you
What you REALLY need to MANAGE/MONITOR properly
What the CONFLICTS between those criteria are
What is the best use of your resources to RESOLVE the conflicts
What the EFFECTIVE DIVISION of responsibilities and “powers” need
to be
Your COMMITMENT to good Governance is the key to good
management, good operations and
The ability to sleep soundly at night!
RESOURCES FOR ASSOCIATIONS, COMMITTEES & MEMBERS:
These slides
Associations Incorporation Act Regulations:
Regulation 33
Schedule 5
Places to go for more information:
Office of Fair Trading – www.fairtrading.qld.gov.au
follow the links to the Legislation and advisory publications