The Financial Basics module will provide you with the financial know-how to manage your club’s fiscal responsibilities.
Financial Basics Module 5 download
The true meaning of ‘not-for-profit’
The term ‘not-for-profit’ can be quite confusing, with many people believing that not-for-profit organisations are not allowed to turn a profit. Obviously, any organisation that either breaks even or loses money each year will have limited long-term viability!
‘Not-for-profit’ simply means that an organisation cannot distribute surplus assets (or profit) amongst members. Instead, any profits generated through the activities of a not-for-profit organisation must be reinvested in the fulfilment of the organisation’s objects, as outlined in its constitution.
Your not-for-profit club or association is a business. Good business thinking and business systems should therefore be applied in all financial decision making. Remember, not-for-profit is very different from ‘no profit’.
In an incorporated organisation, the entire management committee is accountable for financial management; not just the treasurer. Indeed, the treasurer may have day-to-day responsibility for managing the club’s money, however all management committee members share equal accountability for every financial decision. This is why the Associations Incorporation Act 1981 and your constitution require all payments made by your club to be either approved or ratified at a management committee meeting.
Properly managing your organisation's money should include:
Keeping accounts and records
Financial reporting (monthly and annually)
Setting prices (based on sound business principles)
Collecting fees (on time)
Although a club's treasurer is typically the primary controller of the money, this person shouldn’t need to work alone. If everyone on the management committee has a good grasp of financial management, the tasks listed above can be better shared.
Financial record keeping
According to the provisions of the Associations Incorporation Regulation 1999, your incorporated organisation must keep the following records:
A cash book or statement of amounts received and paid
A receipt book
All association bank statements
A register of assets
A petty cash book
Your records should be easy to find and easy to understand. Bookkeeping systems vary from very simple to very complex. It is becoming much more common that bookkeeping is carried out using software on a computer and cloud computing solutions offer the benefits of accessibility and regular backups. All financial records for your incorporated association must be kept on file for at least seven years.
When it comes to establishing and maintaining and up-to-date asset register, assetTRAC will help to keep your club compliant. For further information, see the Asset Management module on the clubCOACH online resource hub.
All not-for-profit organisations can benefit from preparing and operating according to an annual budget. A budget can be very simple and can be prepared based on actual income and expenditure in recent years, as well as known or likely changes for the coming year. It is wise to be conservative when estimating your income and realistic when estimating your expenditure.
It is also important to monitor your budget, to keep on track. A comparison between budgeted expenditure and actual expenditure should be completed each month and discussed at management committee meetings. Changes to the budget can mean a change to the organisation's bottom line – and if this is the case, you need to know about it.
Annual return and AGM
Following the end of each financial year, your management committee must prepare annual financial statements, present these to members for adoption at the annual general meeting (AGM) and lodge an annual return with the Office of Fair Trading (OFT). Your AGM must be held within 6 months of the end of your organisation’s financial year and the annual return must be lodged with OFT within 1 month of your AGM.
The annual return must include a copy of the financial statements presented at the AGM, signed and dated by either the president or treasurer, as well as:
A profit and loss statement (income and expenditure)
A balance sheet (assets and liabilities)
All mortgages, charges and securities that affect any of your incorporated organisation’s property at the close of its financial year
A copy of the accountant or auditor’s report, or the verification statement, signed in accordance with your incorporated association’s reporting requirements
For the purposes of financial reporting to the Office of Fair Trading, an incorporated organisation may be classed as a level 1, level 2 or level 3 association, depending on its current assets and turnover. Current assets are those that are easily turned into cash; they include cash itself, shares, accounts receivable and short-term investments. Current assets do not include property or depreciable assets. Total revenue is an incorporated association’s total income during its most recent financial year, before any expenses are deducted.
The three levels of association have different financial reporting requirements, as below:
Current assets of more than $100,000
total revenue of more than $100,000
A certified accountant or auditor must audit the financial statements.
Current assets between $20,000 and $100,000
total revenue between $20,000 and $100,000
A certified accountant or auditor, or a person approved by OFT, must verify the financial statements.
Keep in mind that if your Level 2 or Level 3 incorporated association’s activities are also governed by another piece of legislation (such as the Gaming Machine Act 1991), then you may be required by the other legislation to have your financial statements audited.
Current assets of less than $20,000
total revenue of less than $20,000
The President or Treasurer may verify the financial statements.
If you need to have your financial statements audited or verified, your accountant, auditor or verifier must be appointed at each AGM for the current financial year and cannot be:
A member of your incorporated association’s management committee
An employee of the incorporated association
A business partner, employer or employee of a management committee member
A spouse or dependant of any of the above