- Union Governance Training -

-

Union Governance Training
-


Session 3

Financial Management

Understanding Financial Reports

Session
3.1

Financial Management




UNION GOVERNANCE TRAINING

Session Three: Financial Management and Financial Reports

Definition of financial management

Efficient and effective financial management ensures
that the members’ funds and resources are used only
to advance the interests of members and are
protected from misuse



UNION GOVERNANCE TRAINING

Session Three: Financial Management and Financial Reports

Key elements of financial management

•
Qualified and experienced staff

•
Appropriate systems and technology

•
Clear financial policies

•
Clear procedures to implement policies

•
Good planning and budgeting process

•
Regular and readable financial reports



UNION GOVERNANCE TRAINING

Session Three: Financial Management and Financial Reports

Clear financial policies

•
Section 553A: The organisation must have a policy,
complying with requirements prescribed by
regulation, on the range of financial matters listed
(see session 1).

•
Policies must be written and available to relevant
officers.

•
Policies should be consistent across the organisation.



UNION GOVERNANCE TRAINING

Session Three: Financial Management and Financial Reports

Authorised expenditure

•
All expenditure must be authorised and recorded by
authorised officers or others delegated by them

•
Clear descriptions of officers with authority to
authorise expenditure, and of delegated
authorisation at different levels.



UNION GOVERNANCE TRAINING

Session Three: Financial Management and Financial Reports

Examples of expenditure policies

•
Cash Management:
receipts and banking,
signatories, payment authority

•
Purchasing:
goods, tendering and leases

•
Fixed assets/vehicles:
purchasing, controlling,
disposing

•
Expenses:
payment authority, credit card controls

•
Salary structures and employee entitlements

•
Creditors, debtors:
payment and debt collection
policy



UNION GOVERNANCE TRAINING

Session Three: Financial Management and Financial Reports

Clear financial procedures to implement policies

•
How a financial transaction is to be dealt with,
including relevant forms

•
Who has the authority to approve the transaction

•
What records are to be kept of a transaction, and to
which account it should be recorded in the budget
and financial report



UNION GOVERNANCE TRAINING

Session Three: Financial Management and Financial Reports

Cash and accrual accounting

•
Cash accounting:
transactions only recorded when
payments are made or income received


•
Accrual accounting:
income and payments recorded
when the transaction occurs, regardless of when the
actual payment is made or received.



UNION GOVERNANCE TRAINING

Session Three: Financial Management and Financial Reports

Advantages of accrual accounting

•
Income and spending are recorded when the
transaction occurs, not when actual payment is made
or received

•
Matches revenue and expenditure in the correct
accounting period

•
More accurate because it ensures that obligations to
creditors and expected income from debtors are
visible at the time incurred



UNION GOVERNANCE TRAINING

Session Three: Financial Management and Financial Reports

Role of expenditure policies and budgets

•
Expenditure policies and budgets allow planning and cost
control of particular items in advance

•
A budget of expected costs at the beginning of the
financial year can be monitored monthly to control
expenditure

•
Items such as staff salaries and on
-
costs, expenses
including credit cards, rent, travel, motor vehicles,
publications and campaign expenses should be
authorised by senior officials who can check against the
budget allocation

•
These records form the basis of the annual financial
report



UNION GOVERNANCE TRAINING

Session Three: Financial Management and Financial Reports

Obligation to keep accounting records

Section 554 Obligation to keep accounting records

•
An organisation must keep accounting records for its
transactions for at least 7 years after the end of the
transactions they are about.

•
accounting records of an organisation
means financial
documents that explain the methods and calculations about
how its accounts are made up and correctly record and explain
the organisation’s transactions and financial position.

•
Accounting records must be prepared in accordance with
Australian Accounting Standards



UNION GOVERNANCE TRAINING

Session Three: Financial Management and Financial Reports

Obligation to prepare accounts

Section 555 Obligation to prepare accounts

•
An organisation must prepare the accounts and other
statements (
accounts
) prescribed under a regulation for each
financial year as soon as practicable after the year ends.

Required are:

–
Statement of income and expenditure (also known as a
profit and loss statement)

–
Balance sheet (assets and liabilities)

–
Notes to explain the methods by which the accounts have
been prepared

•
The Regulation requires specific details to be included in each.



UNION GOVERNANCE TRAINING

Session Three: Financial Management and Financial Reports

Obligation to prepare accounts

Accounting officer’s certificate

•
An organisation’s accounts must contain a certificate from the
officer responsible for keeping its accounting records attesting
to certain matters, including:

–
the number of financial and
unfinancial

members

–
whether the officer considers the accounts show a true and
fair view of the organisation’s financial affairs

–
whether the officer considers

amounts collected from
members have been properly handled

–
whether the officer considers
each expenditure was
approved in accordance with the organisation’s rules.



UNION GOVERNANCE TRAINING

Session Three: Financial Management and Financial Reports

Obligation to prepare accounts

Management committee certificate

•
The accounts must also include a certificate from the management
committee attesting to:

–
Whether the management committee considers the accounts
show a true and fair view of the organisation’s financial affairs at
the end of the year

–
Whether the committee considers the organisation was solvent
during the whole or part of the year

–
Whether the committee considers the management
committee’s meetings were held under the organisation’s rules



UNION GOVERNANCE TRAINING

Session Three: Financial Management and Financial Reports

Obligation to prepare accounts

–
Whether a committee member knows if any of the
organisation’s records or rules have not been given to members
as required by law or the organisation’s rules

–
Whether the audit report and relevant accounts for the financial
year immediately previous have been presented to a meeting as
required by the Act and given to members as required by the
Act
.


•
A management committee member, if making a comment about
something dealt with in the audit report or financial disclosure
statement (which includes the accounts) must not state anything in
the comment the member
knows is false or misleading in a material
particular.





UNION GOVERNANCE TRAINING

Session Three: Financial Management and Financial Reports

Requests for information

Section 556
Member may apply for prescribed information

•
A
member of an organisation may apply to the
organisation for
information that it must, under a regulation, give
its members. This
includes:

–
Details of donations or grants given to or by the organisation

–
Remuneration paid to an officer of the organisation

–
Profit or loss on sale or revalue of an asset

–
Loans by or to the organisation

–
Non
-
public investments

–
Contingent liabilities





UNION GOVERNANCE TRAINING

Session Three: Financial Management and Financial Reports

Requests
for information

•
The registrar may make an application for a member, in which
case the registrar must then give the information to the
member.

•
The information must be given within 28 days (or 6 weeks if
certain criteria are met) and be given in a prescribed way.

•
The Registrar also has powers to direct an officer of an
organisation to give the Registrar information about the
organisations funds, accounts or accounting records (see
section 557).



UNION GOVERNANCE TRAINING

Session Three: Financial Management and Financial Reports

Reporting requirements

Section 565
Obligation to present to general or committee meeting

An organisation must present its audit report and
financial disclosure
statement for each financial year to a
general meeting
or a meeting of the
organisation’s
management committee
(a presentation meeting)
within 5
months after the end of the financial year;
or if
the registrar has extended
the time to hold
the meeting
—
the
extended time
.


Section
566 Obligation to publish audit report and financial disclosure
statement

An organisation must, at least 28 days before each presentation meeting,
give its members, free of charge, a copy of the audit report and financial
disclosure statement to be presented at the meeting or publish the report
and statement in a journal or newsletter that it gives to its members free
of charge
.




UNION GOVERNANCE TRAINING

Session Three: Financial Management and Financial Reports

Filing and publishing requirements

Section 570
Report and statement must be filed and
published

Within
14 days after the report and statement are presented
(or
a
longer time allowed by the
registrar)an
organisation
must:

•
File a
copy of the audit report and financial
disclosure statement
for
each of its financial
years, and a
certificate by its president or
secretary stating
the originals
of the report and statement have
been presented
to a general meeting or
management committee
meeting of the
organisation; and

•
Publish a
copy of the audit report and
its financial
disclosure
statement. These must continue
to be published for a period of
2
years.

Session
3.2

Understanding financial reports




UNION GOVERNANCE TRAINING

Session Three: Financial Management and Financial Reports

Ignorance is not a defence

•
All officers have the duties described in session
1, meaning they all
need to:

–
Be
informed about the subject matter

–
Exercise
care and diligence

–
Make
judgements in good faith and for a proper purpose

–
Not
have a conflicting personal interest

–
Exercise
their judgement in the best interests of
the organisation

•
All members of management committees must know
how to
read
and assess a financial report, because
they are required to
vote on a
resolution
in relation to the management committee certificate (see
example
).



UNION GOVERNANCE TRAINING

Session Three: Financial Management and Financial Reports

Annual financial reports

•
Financial reports tell members about the financial
activity for
the
previous financial year. They
must contain
:

–
Certificate from
the management committee that the report
is
true
and fair and debts can be paid when
due

–
Certificate from the accounting officer

–
Income and expenditure
statement

–
Balance
sheet or statement of financial
position (profit and loss
statement)

–
Notes
to these
statements (which must
be read because they
contain essential information)

–
Auditor’s
report




UNION GOVERNANCE TRAINING

Session Three: Financial Management and Financial Reports

Income/expenditure statement

•
Shows the income and expenditure for the financial
year by
category, e.g
. salaries
, motor vehicles, campaigns, printing,
etc.

•
surplus

(more income than expenditure) or

•
deficit

(more expenditure than income)

•
A deficit over more than one year may indicate problems

•
Check variations in expenditure on particular items

•
Check notes for explanations,
eg
. moving
membership income
from cash to accrual basis can have a
one
-
off impact
if income
moves from one financial year to
another




UNION GOVERNANCE TRAINING

Session Three: Financial Management and Financial Reports

Balance sheet

Shows what the
union
owns
as assets
, and what it owes
as liabilities at
the end
of the financial year




UNION GOVERNANCE TRAINING

Session Three: Financial Management and Financial Reports

Assets

•
Includes cash, investments, property,
equipment and
money
owed

•
Assets
that can be drawn on in the next
financial year
are
called current assets.

•
Assets
that cannot be drawn on in the
next financial
year are
called non
-
current assets

•
Check notes to see that current and
non
-
current assets
are
classified accurately




UNION GOVERNANCE TRAINING

Session Three: Financial Management and Financial Reports

Liabilities

•
Amounts
owed to creditors, or loans used
to finance
operations

•
Liabilities
due within the next financial year
are called
current
liabilities

•
Liabilities
due after the next financial year
are called
non
-
current liabilities

•
Check notes to see that current and
non
-
current liabilities
are
classified accurately.




UNION GOVERNANCE TRAINING

Session Three: Financial Management and Financial Reports

Net worth or equity report

•
Assets minus liabilities show the net worth of the union

•
Shows
whether the
union
is solvent,
meaning whether
it can
pay its debts when due

•
If liabilities are greater than assets, this indicates
problems
unless
the union has a source to draw on to pay
debts when
due. For example, a branch may be subsidised
by payments
or
guarantees from
the
other
union
structures

•
Notes should contain a statement of
solvency. Check
notes for
this and any reference to subsidies
and guarantees.




UNION GOVERNANCE TRAINING

Session Three: Financial Management and Financial Reports

Changes in equity report

•
Total
of assets minus liabilities,
including the
surplus or
deficit from the
income statement

•
Accumulated
surplus or deficit

•
Note: if there is an accumulated deficit,
does the
union
have a plan to reduce it?




UNION GOVERNANCE TRAINING

Session Three: Financial Management and Financial Reports

Cash flow statement

•
Shows the inflow and outflow of
actual cash
income and
expenditure during
the financial
year, and the cash on
hand
at the
end of the year

•
Note: cash on hand should be able to
meet immediate
payments due




UNION GOVERNANCE TRAINING

Session Three: Financial Management and Financial Reports

Auditor’s report

Usually a statement
that:

•
The
financial report presents fairly
the union's
financial position

•
Complies
with Australian
Accounting Standards
.

•
Complies
with
legislative requirements.

Audit report requirements in Queensland have been expanded to
include:

•
The financial disclosure statement and mid
-
year financial disclosure
statement;

•
The policies required under section 553A(1); and

•
The organisation’s spending for political purposes under section
553D
.