How good, clear financial leadership from your board can improve your organisation - slides from Locality's webinar delivered by Neal Trup.

1. Effective Board Governance
understanding your finances
Wednesday 29th January 2014
1pm – 2pm
Neal Trup (Locality)
neal.trup@locality.org.uk

2. Outline of session
1
Development of Strategy and Business Plans
2
Financial reports
3
Decision making

3. Strategy and
Business Plans

4. GOOD FINANCIAL GOVERNANCE IS ABOUT:
• Having a clear and up to date organisational
strategy and one that is led and understood by
the board
• Effective systems, controls, budgets and
management reporting
• Performance and financial information properly
understood by the board with robust challenge
and supporting decision making

5. Reasons for
choosing this session

6. Initial Poll
In the organisation you work for, or trustee or advise,
which best applies to your reasons for attending this
Webinar?
1
Strong financial governance but always
interested in improving
2
Some areas of weakness, but generally
financial governance is good
3
There is a real need to improve some
important areas of financial governance
4
Just attending for personal interest /
development

7. FIVE MOST COMMON ISSUES WE SEE
• Lack of an up to date strategy and/or one where trustees
have little understanding or visibility of performance.
• Unclear or lack of financial reporting (such as cashflow
forecasts, management accounts and balance sheet).
• Loss of a stable source of funding and contracts but without
a strategy for new income sources and/or making savings.
• Ineffective governance and management of a major capital
project (leading to overspends and disputes)
• Over-reliance on one or two people with financial
knowledge.

8. Early Warning Guide
• Questions developed with extensive
consultation with community organisations
• Aimed at senior management and trustees
• Applies to community organisations large and
small
• Has been widely used by a large number of
organisations and with very positive feedback
• Simple to use and highlight potential
weaknesses or areas to address

9. Early Warning Guide

10. ACTIONS YOU CAN TAKE
• Review the your existing strategy (even if informal) at the
next board meeting. Ask how is the organisation performing?
Is the strategy still relevant of does it need a proper update?
• Use the Locality Early Warning Guide and/or conduct a
proper strategic review, possibly incorporating scenario
planning (what if?).
• Review the most recent audit letter, even if not near year
end and ensure points have been dealt with.

11. Questions
?
?
?
?
?
?
?
?
?

12. Financial Reports

13. What do your financial reports look like?

14. Poll
Do you have a good understanding of the financial
reports that you (or the board) receive?
1
Yes, a good clear understanding
2
I understand the main issues but feel less clear
on some specific parts.
3
I am not confident in my understanding but
there are others who do and I (to a lesser or
greater extent) rely on this.
4
There is a general lack of understanding by
myself and/or others

15. Midchester Income & Expenditure
The Midchester Centre
INCOME AND EXPENDITURE AND PROJECTIONS for year to 31st March 2014
Mar-12
INCOME
Grant from MCC
Room hire & Rental income
ABC Trust
Other grants
Service contracts
Cafe
Donations
Fundraising event
Other
Apr-13
£
Actual
May-13
£
Actual
Jun-13
£
Actual
Jul-13
£
Actual
Aug-13
£
Actual
Sep-13
£
Actual
Oct-13
£
Budget
Nov-13
£
Budget
Dec-13
£
Budget
Jan-14
£
Budget
Feb-14
£
Budget
Mar-14
£
Budget
Total
£
Year End
15,000.00
1,675.23
15,000.00
2,607.87
1,751.28
6.87
3.66
36,044.91
1,432.20
4,509.85
2,028.97
250.00
8,221.02
13,897.30
3,102.60
1,867.87
88.00
5.09
18,960.86
15,000.00
895.47
15,000.00
3,058.64
2,405.67
4,513.64
40,873.42
799.32
1,852.36
1,754.00
4,405.68
13,997.20
2,750.80
1,832.34
18,580.34
15,000.00
3,000.00
5,525.00
1,950.00
25,475.00
3,000.00
5,525.00
1,950.00
10,475.00
15,500.00
5,525.00
1,950.00
22,975.00
15,000.00
3,000.00
5,525.00
1,950.00
25,475.00
3,000.00
15,000.00
5,525.00
1,950.00
25,475.00
15,500.00
5,525.00
1,950.00
22,975.00
60,000.00
75,696.72
30,000.00
15,000.00
51,032.12
23,340.13
344.87
4,513.64
8.75
259,936.23
18,125.27
250.00
788.08
268.00
782.36
236.89
324.78
236.78
22.36
87.33
185.26
73.25
187.36
250.32
247.36
1,250.00
2,400.00
127.00
417.96
18,288.69
250.00
913.04
268.00
782.36
755.23
238.90
129.48
1,089.34
87.33
185.26
23.55
118.11
247.36
1,250.00
63.00
230.88
17,987.36
250.00
840.54
268.00
782.36
180.36
178.89
97.66
665.24
87.33
185.26
225.67
5.67
247.36
1,250.00
246.00
111.89
17,268.41
250.00
1,082.55
268.00
782.36
662.31
167.91
167.10
325.00
264.97
87.33
185.26
66.99
302.11
287.41
247.36
1,250.00
986.33
22,687.32
250.00
701.60
268.00
782.36
251.00
123.87
85.97
75.25
87.33
185.26
65.00
26.78
247.36
1,250.00
237.68
16,697.23
250.00
769.58
268.00
782.36
223.65
89.99
56.23
834.67
87.33
185.26
163.74
167.34
247.36
1,250.00
2,500.00
449.99
18,000.00
250.00
585.00
268.00
782.36
200.00
100.00
75.00
2,572.00
250.00
87.33
185.26
150.00
121.89
150.00
247.36
1,250.00
250.00
2,345.00
250.00
17,000.00
250.00
585.00
268.00
782.36
200.00
100.00
75.00
250.00
87.33
185.26
100.00
150.00
247.36
1,250.00
250.00
100.00
250.00
17,000.00
250.00
585.00
268.00
782.36
200.00
100.00
75.00
250.00
87.33
185.26
100.00
150.00
247.36
1,250.00
250.00
100.00
250.00
17,000.00
250.00
585.00
268.00
782.36
200.00
100.00
75.00
250.00
87.33
185.26
75.00
100.00
150.00
247.36
1,250.00
250.00
100.00
250.00
17,000.00
250.00
585.00
268.00
782.36
200.00
100.00
75.00
250.00
87.33
185.26
100.00
150.00
247.36
1,250.00
250.00
100.00
250.00
17,000.00
250.00
585.00
268.00
782.36
200.00
100.00
75.00
250.00
87.33
185.26
100.00
150.00
247.36
1,250.00
250.00
100.00
250.00
26,260.36
24,920.53
23,609.59
24,651.40
27,324.78
25,022.73
28,119.20
22,130.31
22,130.31
22,205.31
22,130.31
22,130.31
214,054.28
3,000.00
8,605.39
3,216.00
9,388.32
3,509.44
1,724.34
1,223.22
2,897.00
4,451.83
1,047.96
2,223.12
365.24
1,589.32
1,755.63
2,968.32
15,000.00
3,900.00
5,781.00
3,934.73
290,635.14
6,442.39 - 2,644.20 - 11,655.31
844.69
3,269.69
3,344.69
EXPENDITURE
Salaries & NI
Rates
Café purchases
Water
Gas & Electricity
Office equipment
Travel expenses
Volunteer expenses
Insurance
Repairs and renewals
Security
Telephones
Bank Charges
Cleaning materials
Stat/printing
Loan interest
Depreciation
Legal/professional
Accountancy & Audit
Other costs
Surplus / Deficit
9,784.55 - 16,699.51 - 4,648.73
16,222.02 - 22,919.10 -
844.69 - 30,698.91

16. Midchester Income & Expenditure (Alternative format)
The Midchester Centre
Summary Income & Expenditure for Board (Actual and Budget for year to 31st March 2014)
Mar-11
UNRESTRICTED INCOME
Grant from MCC
Rental income
Contracts
Other income
Apr-13
£
Actual
May-13
£
Actual
Jun-13
£
Actual
Jul-13
£
Actual
Aug-13
£
Actual
Sep-13
£
Actual
Oct-13
£
Budget
Nov-13
£
Budget
Dec-13
£
Budget
Jan-14
£
Budget
Feb-14
£
Budget
Mar-14
£
Budget
Total
£
15,000
1,675
2,608
1,762
21,045
1,432
4,510
2,279
8,221
13,897
3,103
1,961
18,961
15,000
895
3,059
6,919
25,873
799
1,852
1,754
4,406
13,997
2,751
1,832
18,580
15,000
3,000
5,525
1,950
25,475
3,000
5,525
1,950
10,475
15,500
5,525
1,950
22,975
15,000
3,000
5,525
1,950
25,475
3,000
5,525
1,950
10,475
15,500
5,525
1,950
22,975
60,000
75,697
51,032
28,207
214,936
EXPENDITURE (on Unrestricted activities)
Salaries & NI
16,025
Building & utility costs
1,633
Café purchases
788
Office & other costs
1,472
Loan interest
247
Depreciation
1,250
Legal/professional/Audit
2,527
23,942
16,189
2,536
913
1,427
247
1,250
63
22,625
15,887
2,314
841
486
247
1,250
246
21,272
15,168
2,315
1,083
2,240
247
1,250
22,303
20,587
1,563
702
650
247
1,250
25,000
14,597
2,421
770
912
247
1,250
2,500
22,698
15,900
4,367
585
850
247
1,250
2,595
25,794
14,900
1,773
585
700
247
1,250
350
19,805
14,900
1,773
585
700
247
1,250
350
19,805
14,900
1,773
585
775
247
1,250
350
19,880
14,900
1,773
585
700
247
1,250
350
19,805
14,900
1,773
585
700
247
1,250
350
19,805
188,854
26,014
8,605
11,613
2,968
15,000
9,681
262,736
(2,897)
(14,404)
(2,311)
3,570
(20,594)
(4,117)
(9,330)
3,170
5,595
(9,330)
3,170
(47,800)
15,000
15,000
-
-
15,000
15,000
-
-
-
-
-
-
15,000
15,000
-
30,000
15,000
45,000
2,100
150
68
2,318
2,100
150
45
2,295
2,100
150
88
2,338
2,100
150
98
2,348
2,100
150
75
2,325
2,100
150
75
2,325
2,100
150
75
2,325
2,100
150
75
2,325
2,100
150
75
2,325
2,100
150
75
2,325
2,100
150
75
2,325
2,100
150
75
2,325
25,200
1,800
899
27,899
12,682
(2,295)
(2,338)
12,652
(2,325)
(2,325)
(2,325)
(2,325)
(2,325)
(2,325)
12,675
(2,325)
17,101
Net unrestricted
RESTRICTED INCOME
ABC trust
Other grants and donations
EXPENDITURE on restricted activities
Salaries & NI
Gas & Electricity
Travel expenses
Net restricted
(319)
(30,699)
UNRESTRICTED
Opening balance
Closing balance
34,512
31,615
31,615
17,210
17,210
14,900
14,900
18,470
18,470
(2,125)
(2,125)
(6,242)
(6,242)
(6,561)
(6,561)
(15,891)
(15,891)
(12,722)
(12,722)
(7,127)
(7,127)
(16,457)
(16,457)
(13,288)
RESTRICTED
Opening balance
Closing balance
2,400
15,082
15,082
12,787
12,787
10,449
10,449
23,101
23,101
20,776
20,776
18,451
18,451
16,126
16,126
13,801
13,801
11,476
11,476
9,151
9,151
21,826
21,826
19,501
Total Funds
46,697
29,997
25,349
41,571
18,651
12,209
9,565
(2,090)
(1,246)
2,024
5,369
6,213

17. Midchester Income & Expenditure

18. Midchester Income & Expenditure

19. Midchester Income & Expenditure

20. Looking at things differently
(Example cashflow)
The Midchester Centre
Summary Income & Expenditure Cashflow to 31st March 2014
Mar-11
Apr-13
£
Actual
UNRESTRICTED INCOME
Confirmed / Likely income
Grant from MCC
Rental income
Contracts
Other income
May-13
£
Actual
Jun-13
£
Actual
Jul-13
£
Actual
Aug-13
£
Actual
Sep-13
£
Actual
Nov-13
£
Forecast
Dec-13
£
Forecast
Jan-14
£
Forecast
Feb-14
£
Forecast
Mar-14
£
Forecast
Total
£
15,000
1,675
2,608
1,762
21,045
13,897
3,103
1,961
18,961
15,000
895
3,059
6,919
25,873
799
1,852
1,754
4,406
13,997
2,751
1,832
18,580
15,000
1,250
2,500
1,600
20,350
1,250
2,500
1,600
5,350
13,500
2,500
1,600
17,600
15,000
1,250
2,500
1,600
20,350
1,250
2,500
1,600
5,350
13,500
2,500
1,600
17,600
60,000
64,697
32,882
26,107
183,686
2,536
913
1,427
600
63
5,539
2,314
841
486
600
246
4,487
2,315
1,083
2,240
600
6,238
1,563
702
650
600
3,515
2,421
770
912
600
2,500
7,203
1,425
702
600
600
1,500
4,827
1,425
702
400
600
350
3,477
1,425
702
400
600
350
3,477
1,425
702
400
600
350
3,477
1,425
702
400
600
350
3,477
1,425
702
400
600
350
3,477
21,332
9,307
9,788
7,200
8,586
56,214
14,025
2,682
14,474
19,636
891
11,377
15,523
1,873
14,123
16,873
1,873
14,123
127,473
-
Net before staff and other costs
1,432
4,510
2,279
8,221
1,633
788
1,472
600
2,527
7,020
Committed / Essential costs (excl staff)
Building & utility costs
Café purchases
Office & other costs
Loan repayments
Legal/professional/Audit
1,500
1,500
2,000
2,500
2,500
10,000
(167,354)
(4,500)
New or additional income potential
Salaries and other costs
Salaries & NI
Other costs
(16,025)
-
Net surplus / deficit
Cumulative
Bank balance
Oct-13
£
Forecast
(2,000)
2,000 (2,000)
25,000
23,000
(16,189)
(13,507)
15,507 (13,507)
23,000
9,493
(15,887)
(1,413)
16,920 (1,413)
9,493
8,080
(15,168)
4,467
12,453 4,467
8,080
12,547
(20,587)
-
(14,597)
-
(15,900)
(750)
(13,000)
(750)
(10,000)
(750)
(10,000)
(750)
(10,000)
(750)
(10,000)
(750)
(19,697)
32,150 (19,697)
12,547
(7,150)
(3,220)
35,370 (3,220)
(7,150)
(10,370)
(1,127)
36,497 (1,127)
(10,370)
(11,497)
(10,377)
46,874 (10,377)
(11,497)
(21,874)
4,873
42,001 4,873
(21,874)
(17,001)
8,123
33,878 8,123
(17,001)
(8,878)
(6,377)
40,255 (6,377)
(8,878)
(15,255)
5,873
34,382 5,873
(15,255)
(9,382)
(34,382)
68,764

21. Financial Reports
• Focus on the wider picture and strategic information
• Cut the clutter - “less is more”
• The main substance should be clear to all trustees / managers rather
than everyone seeing things very differently
• Reports should contain cashflow (as a chart), income &
expenditure (actual, budget and forecast), restricted funds,
working capital and a commentary focussed on strategic and
decision making information.
• Capital projects need proper financial and project reports as they are
often accounted for outside of main reports

22. Questions
?
?
?
?
?
?
?
?
?

23. Decision Making

24. Poll
Do you feel you have/are provided with sufficient information to
make informed strategic and board level decisions?
1
Yes, there is a clear rationale for significant
decisions
2
Most of the supporting analysis is available and
combined with verbal detail this is usually fine.
3
Decisions often have to be made urgently and
reliance is placed on senior staff or particular board
members (e.g. chair or treasurer)
4
I/we do not feel that we have sufficient information
and/or analysis to make informed decisions.

25. SUPPORTING DECISIONS
• Decisions for the board should be those of a strategic
rather than detailed operational nature
• Major risks, options, financial implications and
opportunities need to be understood
• The wider context of the impact of decisions need to
be understood as one decisions could have implications
elsewhere
• A consistent approach can help and there needs to be
proper time and space for discussion and challenge

26. ACTIONS YOU CAN TAKE
• Ask board members if they feel that the financial
information they have meets their needs and is effectively
understood. If not, then what improvements would they like
to see. REMEMBER to focus on strategic decision making
information rather than operational detail.
• Encourage board members to ask questions and challenge
information they do not understand. Have a rule “all
questions welcome – none are silly”.
• Set aside some development time for training or have an
external facilitator at a financial discussion

27. Questions
?
?
?
?
?
?
?
?
?

28. FINDING FURTHER SUPPORT
•
•
•
•
Locality www.locality.org.uk
Your accountant
Your trustees
Charities Commission

29. SUPPORTING DECISIONS
THANK YOU

30. More webinars coming up