Welcome to my 3rd blog in the series dealing with the subject of ‘governance in sport’.
This 3rd blog deals with the subject of ‘Financial Management’.
Sometimes in the world of sport we don’t like to talk about the area of financial management! We just want to get on with organising, developing and growing the sport. I totally get that!
But without proper financial management, you run the risk of guessing and hoping it will be all OK at the end of the year or even worse run the risk of being financially unstable; this in turn can lead to cutting costs (programmes, overheads and staffing) and even worse create a poor brand image in the public domain. For me, having strong financial procedures and reporting in place is vital for a sports organisation and therefore should be given a priority at board level and throughout the whole organisation.
There are so many areas to cover on this subject so I will touch briefly on the areas below:
- Financial procedures and policy
- Financial reporting
- Expert staff to manage the financial management alongside an audit, risk & financial management committee
Financial procedures and policies
The primary purpose of financial procedures is to provide guidance and to install best practice regarding the implementation of appropriate financial processes, procedures and systems within the organisation.
The procedures should be approved by the Finance Committee and distributed to all the staff and any other person who might be involved in financial transactions (obligatory reading and signature). They should also be reviewed and adapted on a regular basis to make sure that they are up to date.
Financial procedures outline the rules to be followed by everyone in the sports organisation (both elected and staff) that relate to how the money is attributed, spent and managed. The financial procedures should encompass the following aspects:
- Controls on expenditure: who can spend what and with whose authority;
- Controls on financial assets: who records financial transactions and takes the appropriate actions thereafter;
- Exercising budgetary control: who can spend how much and on what, and what expenditure needs special permission;
- Controls on human resources: who can recruit and for what roles, and what permissions are needed;
- Controls on physical assets: who can authorise the sale and lease of buildings or equipment.
No employee alone should both perform an action and be responsible for the control over it, nor be in charge of all the aspects of a whole financial procedure from start to end.
There are a wide range of reports which should be in place but the key reports are as follows;
- Annual budget
- Monthly income and expenditure- actual v budget
- 3 and 6 month forecast
- Annual set of accounts which include balance sheet , profit and loss accounts
- Balance sheet
- Debtor and Creditors’ Lists
- Cash at bank and cash flow statement
Many sports organisations still manage their accounts manually, through the use of paper journals or very simple electronic tables in Excel or Word. However, the manual approach has its limitations and will not allow your sports organisation to evolve towards a more professional financial management environment. Therefore, I strongly suggests that the sports organisation manage their finances through an accounting software system.
It is important that the sports organisation employs a qualified accountant to manage the finances and to provide reporting to the GS/CEO and board on an monthly basis.
In addition, an audit, risk & financial management committee should be established who serves as a separate body to ensure compliance. It is best practice to have independent representation on this committee.
Now that we have broadly covered the subject, as a reader of this blog it would be good to ensure:
- Monthly financial reporting are in place within your sports organisation – Please refer to the Appendix for a basic income and expenditure template.
- An audit, risk and finance sub-committee is in place with a number of independent members on the committee.
- The sports organisation has written financial procedures and policies in place.
In order to help you, see below the key areas to include in your financial procedures and policy document.
- Accounting policies (investment, depreciation, foreign exchange, etc)
- Record keeping (retention of documents, back up procedures of data, Data security
- Purchasing (quotations, tenders, cost control, purchase orders, suppliers invoices, payment process, delegated levels of spend/authority)
- Income (contracts, ticketing, sponsorship, broadcast revenue, government grants etc)
- Cash management (cash, lodgements, bank transfers etc)
- Expenses (staff payroll, company credit cards, travel policy, board expenses, staff expenses and mileage)
- Budgets (budget procedure, forecasting)
- Monthly and year end procedures
- Fraud and Whistleblowing
A good practical tip is to arrange a monthly meeting with the Finance Director or head of the finance committee to track progress and either at the same meeting or at a follow-up meeting, sharing the forecast and projections with your senior management team to empower them to understand their departmental commitments to the financial objectives and establish their accountability for their department’s budgets.
About Geoff Wilson
Geoff runs his own Sports Consultancy, working with clients such as FIFA, UEFA, AFC and FIBA across the world. He is also on the board of Tourism Northern Ireland. You can follow Geoff on twitter @geoffwnjwilson connect on Linkedin at linkedin.com/in/geoffwnjwilson