Posts Tagged ‘financial governance’
3 policy and procedure tips for effective financial governance
It’s often hard for a not-for-profit organisation to work out the role a board should have in the financial management of the organisation versus the role of management. Policies and procedures are vital!
At the Policy Place Ltd, we help organisations with online and bespoke policies and procedures to guide boards and managers in the effective financial management of an organisation. Financial management policies are required by a range of accreditation and compliance systems including the Social Sector Accreditation Standards, Health and Disability Standards and NZQA.
Here are our tips on how policies and procedures can help you work through the thorny divide of financial management and financial governance in your agency.
Tip 1
The Board is about governance so it needs to be able to satisfy itself that all tenets of effective financial management are in place. Financial policies and procedures about the following are therefore key:
- Financial delegations
- Financial controls around expenditure
- Financial records and reporting
- Budget planning, approval and monitoring
- Investment planning
- Prevention and detection of fraud
- Auditing
- Policies
- Management of assets and resources
- Criteria to guide fundraising decisions
Tip 2
The board needs to understand and act within the parameters of the organisation’s Constitution/ Trust Deed. Constitutions are typically concerned with :
- managing any conflict around financial interests
- a board’s power to delegate
- a board’s power to invest organisational funds
- provision for annual planning and auditing processes.
The board does not usually have to manage the day-to-day financial detail of the organisation. That’s the manager’s job.
However, one of its core functions is to protect and safeguard the long-term financial viability of the agency. Policies and procedures, therefore, need to ensure that a board has sufficient oversight of operations from a financial viewpoint, that financial milestones are being reviewed and updated, financial records are being kept, expenditure and income is on track and within budget, and that the board is getting enough information to ensure the organisation’s financial longevity.
Tip 3
The board needs to be transparent and accountable for its decisions. So it needs to make sure, through the organisation’s policies and procedures, that:
- roles in the financial management of the organisation are clear and accounted for
- everyone understands their responsibility to prevent and report concerns about fraudulent behaviour
- there are clear processes for koha and donations
- there are regular internal and external audits
- staff understand when and how they can be reimbursed for work-related expenses
- there is regular reporting on budget milestones and variance from budget lines.
- ensure that at all times, proper accounting records are kept that correctly record the assets, transactions, and financial affairs
- reimbursements to board members for reasonable expenses incurred through role-related duties are transparent.
Without policy and procedure to guide financial management, your organisation is unlikely to meet its compliance requirements. Worse, it is likely to be highly unstable.
Don’t delay. If you think you need more guidance as an organisation about the board’s role and financial governance responsibilities, contact us. We can help!