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ACWA Conference 2010ACWA Conference 2010

Financial Literacy for Non Profit Boards;

Optional, Desirable or Prerequisite?

Morri YoungMatrix on Board

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Due diligence

Strategy

Risk Management

Financial Literacy for Non Profit Financial Literacy for Non Profit BoardsBoards

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Due diligence

Financial Literacy for Non Profit Financial Literacy for Non Profit BoardsBoards

Responsibility not to break the law

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Due diligence

Financial Literacy for Non Profit Financial Literacy for Non Profit BoardsBoards

“Trading whilst insolvent” is against the law

and it is the Board’s responsibility to prevent it

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Due diligence

Financial Literacy for Non Profit Financial Literacy for Non Profit BoardsBoards

Every Board member has the same level of responsibility

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Due diligence

Financial Literacy for Non Profit Financial Literacy for Non Profit BoardsBoards

Every member of the Board

must be able to read and understand

the Balance Sheet and Cashflow statement.

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Due diligence

Financial Literacy for Non Profit Financial Literacy for Non Profit BoardsBoards

Balance Sheet.

More assets than liabilities

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Due diligence

Financial Literacy for Non Profit Financial Literacy for Non Profit BoardsBoards

Balance Sheet.

Know the value of Assets and Liabilities

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Due diligence

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Balance Sheet.

Know the value of Assets and LiabilitiesReally

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Due diligence

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Cashflow Statement

Be able to pay debts as when they fall due.

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Due diligence

Financial Literacy for Non Profit Financial Literacy for Non Profit BoardsBoards

Cashflow Statement

Be able to pay debts as when they fall due.Rent

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Due diligence

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Cashflow Statement

Be able to pay debts as when they fall due.

Payroll

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Due diligence

Financial Literacy for Non Profit Financial Literacy for Non Profit BoardsBoards

Cashflow Statement

Be able to pay debts as when they fall due.GST

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Due diligence

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Cashflow Statement

Be able to pay debts as when they fall due.

Program Costs

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Due diligence

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Cashflow Statement

Be able to pay debts as when they fall due.

Telephone

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Strategy

Financial Literacy for Non Profit Financial Literacy for Non Profit BoardsBoards

Governance is stewardship

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Strategy

Financial Literacy for Non Profit Financial Literacy for Non Profit BoardsBoards

Governance is stewardship

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Strategy

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The plan... and the means to achieve it

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Strategy

Financial Literacy for Non Profit Financial Literacy for Non Profit BoardsBoards

The plan... and the means to achieve it

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Strategy

Financial Literacy for Non Profit Financial Literacy for Non Profit BoardsBoards

The plan... and the means to achieve it

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Strategy

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The Budget is the cost of the plan

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Strategy

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Every Board member must be able to read,

understand and approve the Budget

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Strategy

Financial Literacy for Non Profit Financial Literacy for Non Profit BoardsBoards

Every Board member must be able to read,

and understand the

Income and Expenditure Report to Budget

each month

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Strategy

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Implementation is not for Boards

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Strategy

Financial Literacy for Non Profit Financial Literacy for Non Profit BoardsBoards

Implementation is not for Boards

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Strategy

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Ratios

Reserves to Expenditure Ratio

25%10%

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Strategy

Financial Literacy for Non Profit Financial Literacy for Non Profit BoardsBoards

Ratios

Working Capital Ratio

3.0

0.5

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Strategy

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Ratios

Cash Reserve (in weeks)

12

3

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Risk Management

Financial Literacy for Non Profit Financial Literacy for Non Profit BoardsBoards

“Risk management is the process of managing an organisation’s

potential exposure to liabilities, preventing them, or

providing funds to meet the liability if it occurs.”

David Fishel: The Book of the Board

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Risk Management

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Financial reports can reveal risks

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Risk Management

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Financial reports can reveal risks

Fraud and theft

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Risk Management

Financial Literacy for Non Profit Financial Literacy for Non Profit BoardsBoards

Financial reports can reveal risks

Reduction in value of assets

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Risk Management

Financial Literacy for Non Profit Financial Literacy for Non Profit BoardsBoards

Financial reports can reveal risks

Mismanagement of resources

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Board Reports

Financial Literacy for Non Profit Financial Literacy for Non Profit BoardsBoards

Readable

Timely

Accurate

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Board Reports

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Readable

Clearly describes performance for the month

comparing actual and budget, and for YTD

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Board Reports

Financial Literacy for Non Profit Financial Literacy for Non Profit BoardsBoards

Readable

Balance Sheet

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Board Reports

Financial Literacy for Non Profit Financial Literacy for Non Profit BoardsBoards

Readable

PayablesReceivables

Bank ReconciilationCashflow

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Board Reports

Financial Literacy for Non Profit Financial Literacy for Non Profit BoardsBoards

Timely

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Board Reports

Financial Literacy for Non Profit Financial Literacy for Non Profit BoardsBoards

Accurate

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Board Reports

Financial Literacy for Non Profit Financial Literacy for Non Profit BoardsBoards

Timely

End of the month is like end of the year

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Financial Literacy for Non Profit Financial Literacy for Non Profit BoardsBoards