Key strategic decisions are made in the boardroom.

Governance is defined as “pertaining to the direction, control and accountability of an organisation”. Within the NFP sector, the concept of strong organisational governance, is now becoming increasingly critical as more organisations deal with the complexities introduced by consumer directed funding under the NDIS.

 

Defining the Role

With any successful organisation, there is a solid distinction between governance and management. A strong board is responsible for setting the broader roadmap while implementation of the plan itself falls to the CEO and senior management. Decision-making is based on financial intelligence. This balance can sometimes create a difficult and tenuous situation when board members, appointed due to their experience in defined areas, are not fully versed in the complexities of finance.

The beauty of a solid CEO/Boardroom relationship, however, balances the lack of direct knowledge with robust internal reporting. This delivers key information which is easily understood and can be actioned to maintain commercial directives.

 

Stepping Up

The new funding scheme has now pushed many in the Not-for-Profit sector towards a complete overhaul of their organisational systems. The traditional handballing of financial data from the board to the company accountant or a single board member (with financial acumen) is now being questioned. With a growing understanding that effective membership of a board requires members to attain much higher levels of financial literacy. The board, as a group, holds the ultimate responsibility to ensure that the organisation remains sustainable and most of all avoids trading while insolvent.

The growing commercial requirement when working in areas such as the NDIS, requires the board as a whole, to possess at least a minimum standard of financial literacy. The underpinning knowledge encompasses the understanding of the following financial documents:

The Balance Sheet

  • Assets
  • Liabilities
  • Equity
  • Reserves

The Statement of Cashflows

  • Operating activities
  • Finance activities
  • Investment activities

The Income Statement

  • Income
  • Expenses
  • Profit

 

Getting it Right

The emergence of performance driven organisations is a new and interesting phenomenon. The opportunities available for NFPs under the new funding regime can present avenues of expansion that were traditionally not available under the old block funding model. The delivery of strong financial results can be directly attributed to a strong boardroom, backed up by communicative and pro-active management. As with most successful ventures, it falls to the CEO to ensure engagement at all levels of the organisation is maintained.

Geelong based service provider Leisure Networks, is a shining example of an organisation willing to take an honest look at their internal systems and make effective and proactive decisions in order to ensure their sustainability and future growth. Governed by an open-minded and literate board, backed up with a strong executive team and committed managers, this organisation has successfully transitioned from a history of block-funding to actively embrace a fee-for-service delivery under the NDIS. A testament to their success over the past four years, Leisure Networks are in the process of expansion into other regional areas while constantly reviewing and adapting their internal systems under the close scrutiny of the board and management team.

 

If you are interested in “Getting it Right” check out the Leisure Networks Story.