Financial reporting
Financial reporting
Monthly financial reports
Actual versus budegted performance (variance)
End of financial year reports
Annual statement of income and expenditure
Annual balance sheet
Auditing
Financial reporting
As well as managing the day-to-day financial operations and coordinating the budget process, the Treasurer is responsible for financial reporting and management. The role is to regularly report the financial situation of the Club (actual performance) to the management committee, as well as comparing actual performance with budgeted performance. Where actual performance varies unexpectedly from budgeted performance the Treasurer might be called on to advise the management committee about managing unexpected financial results.
Monthly financial reports
For regular management committee or executive meetings it is useful to prepare a statement showing the income and expenditure for the past month, as well as a summary of the year-to-date figures, and a comparison to budgeted figures called variance (see example below). Each month a bank reconciliation statement should also be presented to the management committee.
Actual versus budgeted performance (variance)
Variance is a method widely used to compare actual with budgeted financial performance. Variance can be presented in percentage (shown above) or difference terms. In the example above items in the ‘Year to date’ column are divided by the budgeted figures for each item. Variance should be interpreted in light of just what the ‘Year to date’ figures represent (e.g. two, three or six months of the year completed) and whether the Club has seasonal fluctuations (e.g. all shirts are purchased in bulk at the start of the season). If variance is:
Click here for a monthly statement of income and expenditure template.
The management committee may also require a bank reconciliation and a list of creditors (money owed by the Club) and debtors (money owed to the Club). The information contained in these reports enables the management committee to get a clearer picture of its financial position and performance and can use the information in making other types of decisions (e.g. revising the price of membership or choosing an alternate telephone company). In larger Clubs, the management committee may also require a report on its assets and liabilities (balance sheet) at monthly meetings (see example below in ‘End of year financial reports’).
Frequent financial reporting gives a Club a better chance of identifying problems early. It should also help to improve the organization’s overall financial performance and ultimately strengthen its financial position.
End of financial year reports
Most Clubs publish a statement of income and expenditure (profit & loss) and balance sheet as the principal financial reports for presentation to and adoption by its members at the annual general meeting (AGM). These statements summarise and report the financial performance (statement of income and expenditure) and financial position or net worth (balance sheet) of the Club.
Unlike budgets which are estimates or projections where the figures are rounded, financial reports account for every dollar and cent. The reports are based on the receipts and the payments that have been recorded and summarised in the cash book throughout the year by the Treasurer. The constitution of most Clubs requires that the accounts of the Club have been independently audited prior to presentation at the AGM (see ‘Auditing’ below).
Annual statement of income and expenditure
The annual statement of income and expenditure, also known as a profit and loss statement shows how much money a Club has made or lost over the year as a result of its operations. It is a summary of the financial performance of a Rugby Club. The statement is based on figures that the Treasurer has recorded in the cash book. This statement is normally prepared by the Treasurer and verified by an auditor.
Income – Expenses = Profit/Loss
Click here for statement of income and expenditure template.
Annual balance sheet
A balance sheet is a statement of what a Club owns and what it owes, the difference being the net worth or accumulated funds of the Club. It is a summary of the financial position of a Club. In cases when a conventional balance sheet is not prepared, it is advisable to provide members with a report of the Club’s affairs in the form of a statement of assets and liabilities. This will list the Club’s assets and liabilities, arranged in general categories, and show an estimated (e.g. computer or photocopier) or actual value (e.g. cash on hand) for each item. The liabilities when deducted from the total assets show the net worth of the Rugby Club.
Click here for balance sheet template.
Financial management tip:
Including last year’s figures in annual financial reports enables the management committee and the members to see whether the financial performance and position of the Club has improved or worsened since last year. It is possible to compare total income, total expenses, net assets, overall financial performance (surplus or deficit) as well as charges on individual items. In order to make valid comparisons from one year to the next, it is important that radical changes are not made to the accounting system used by a Club.
Filing annual financial reports
If a Rugby Club is incorporated under its state’s Associations Incorporation Act, it is required to lodge a return (copy of the annual accounts) with the appropriate state authority, usually the state Corporate Affairs Office. The accounts are to be accompanied by a certificate stating that they have been approved by the members at the AGM on a particular date, and they must be signed by an officer of the Club
Auditing
The term audited accounts means that the financial records of the Club have been independently checked by someone with recognised accounting qualifications (usually a chartered accountant) as being a true and correct record of the financial operations and position of an organisation at that time.
The Treasurer must be familiar with the rules/constitution of their Club and its obligations, particularly if the Club is incorporated (see filing annual accounts above). For incorporated associations, depending on the complexity of its books, it may be possible to appoint an auditor who is not from a registered company, such as an accountant, bank manager, council clerk or chartered secretary. Some Clubs, because of their constitution, require an honorary auditor to be appointed at the AGM. If the Club is an incorporated association, it is usually a legal requirement to have the organisation's accounts audited prior to the AGM.
The records of all Clubs do not necessarily have to be audited. However, the members of almost any organisation can pass a resolution requesting an audit.
Because auditing can be a costly process, it is not unusual for Clubs to search for an accountant who is willing to audit the Club’s books on a voluntary basis. To ensure that an audit is truly independent, the auditor should be someone that is a not member of the Club. It is good practice to give the auditor plenty of time (e.g. 6 to 8 weeks) to audit the accounts.
The auditor will need to be provided with:
The books of account, consisting of the cash books written up and balanced for the year, and journals and ledger if these records are maintained
Bank statements for the whole year
Copies of deposit slips and cheque butts
Receipt books containing the duplicates of receipts issued as well as cancelled original receipts; the auditor also needs to sight books of unused receipts.
Vouchers for payments made, which should be placed in numerical sequence of cheques drawn
Access to 'paid' cheques from the organisation's bankers - unless receipts have been obtained for all payments made
A copy of the minutes book to enable the auditor to review approvals for major items of income and expenditure
A copy of the last audited statements of account
The financial statements for the year now being subjected to audit, together with all supporting working papers
Any other records or evidence the auditor may request to confirm the accuracy of transactions recorded and the existence of assets and liabilities shown in the books of account and the financial reports
Acknowledgements
Reproduced with permission from the Australian Sports Commission.
