In respect to financial responsibilities, while management has the day to day operational role, the board has the governance role of overall responsibility. Financial monitoring and reporting can be particularly daunting for non-accountants on boards.
Seven Factors to be aware of
For the MCH family of boards (and other crown connected organisations), there are seven key factors to be aware of. We briefly summarise these below. They are dealt with in greater detail in a very relevant memorandum in the appendix which has been prepared by Chartered Accountant and experienced Crown entity board member, Roger Taylor of Wellington. These factors are particularly relevant to Crown entities but the principles apply to other Crown connected boards. The headings below are also dealt with, in a general sense, throughout this manual. The references below are specifically in regard to financial monitoring and reporting.
Letter of Expectations
This document from the relevant responsible Minister sets out the main expectations for the forthcoming financial year within the appropriate parameters. Board members need to be aware of its contents as other subsequent documents including Budgets and business plans need to be consistent with and flow from the Letter of Expectations.
Statement of Intent
The SOI is a strategic document and, for Crown entities, is in a prescribed form. It covers a three year period. Again board members need to be cognisant of this document as it impacts on the form and substance of financial plans and reporting.
Statement of Performance Expectation
Introduced with 2014 Crown Entity reforms.
Annual Budget and Business Plan
The board signs off these documents which detail the ways the entity will achieve the requirements set by the above documents.
Management will provide monthly reporting to the board, if requested, and it will provide the record of how the entity is meeting its financial objectives. The reports will include the period end profit and loss, balance sheet and cash flow statement.
Risk management is dealt with as a separate topic but it clearly has a special relevance to financial oversight. Many boards have an Audit and Risk committee to ensure appropriate monitoring.
Annual Financial Report
The financial report is signed off (for Crown entities) by two board members and includes a statement of objectives and service performance.
- The memorandum prepared by chartered accountant, Roger Taylor is here.
Updated on 7th March 2017