Presentation on theme: "Simplifying Internal & External Financial Reporting at all PS levels David Spearritt Director, ORION Consulting Network Pty Ltd."— Presentation transcript:
Simplifying Internal & External Financial Reporting at all PS levels David Spearritt Director, ORION Consulting Network Pty Ltd
Outline The real purpose of financial reporting Beyond financial reporting Trends in reporting methods, styles Checklist of issues to consider when developing reports How to find out what report readers need/want Why less is more?
Purpose of Reporting? Statutory requirement? Good practice? It’s my job?
The Real Reason Financial information is Information for decision making
Decision Making Who are the decision makers? What decisions do they need to take? What does success/failure mean?
Internal Reporting Widespread dissatisfaction with internal reporting Financial management & knowledge management A key feedback systems for organisational learning & improvement Needs to link to organisational objectives Shift towards holistic reporting eg KPI’s/BSC Eg. Balanced scorecard/ KPI’s/ QBL
Relevant MDA Practices Management Discussion & Analysis (MDA) Australian MDA driven by Corporate concise reporting option Widely utilised by listed companies. Optional Shareholders can elect to receive full AR, concise or none at all. Now a key part of Public Sector Reporting Still only half the equation financial)
Public v Private Sectors Organisational objectives Private Sector Financial returns on financial investments Only Govt Businesses have similar objectives Public Sector Community Returns on Taxes Some variations Risk / Return relationship differs
Basis of financial reporting Private Sector Financial Return Financial Investment Public Sector Social Returns Taxes or Revenue or Social Returns Community Investment
PS Reporting Dilemma Financial results are only part of the equation What was done with the money is just as important Eg. – value for money. Commitments achieved etc. This is why PS budgets are more important than financial results
Examples Investors need to know whether to invest or sell in a company Managers need to know whether to cut back costs, kick butt etc What about public sector? Choose to pay taxes???? Who to vote for? Accountability for taxes spent??
Accountability Definitions Pooled funds – taxes spent for purpose raised Line item controls Program budgeting MFO/ Output budgeting Inputs -> Outputs matrix
Private/Public Sector Difference Private Sector All of the return on investment equation is in the financial statements Focus on financial returns and risks Public Sector Financial results are only part of the ROI equation Need to match with services/achievements
Framework Organisations need to monitor and report on: Operating capacity Financial risks long term solvency liquidity Achievement of community objectives
Sector Reporting Focus Financial / Community Returns Returns Internal Business Unit Government Corporation Private Sector Company Financial Performance Service Performance Financial Performance, Fin Risk, CSO’s Financial Performance, Fin Risk Share Returns/PE Budget Funded Department Statutory Authority Whole of Govt/ Local Govt/ NFP Community objectives, Budget compliance Contribution to Op capacity Community objectives Fin Risk Op capacity/ Performance Fin Risk (Debt) Works & Services Operating capacity Tax/Rate levels Lower Risk -------------------------------- Higher Risk Copyright – David Spearritt
Financial Reporting Bugbear Clients never happy, but don’t know what they want!! Need to understand their business drivers and report on that Internal consulting Simplified, non-numeric reporting Trial and error
Internal Reporting Management –limited ability to assimilate information Reports must support decision making Accurate, timely, reliable, Include analysis and insights on implications Forward looking (forecasts, etc) Reports must support decision making (Cont) Language of reader (non-numeric, graphs, ratios, charts, explanations and analysis) Short reports by exception/ pertinent issues Peer comparisons/benchmarking
Best Practice Fin Reports Short – not the full ledger Language of reader (non-numeric) Graphs, ratios, explanations Exceptions – decisions required On-line – drill down “Accounting is information for decision-making” (What Decision?) Blend with non-financial info (community returns)
Reporting Survey Accrual accounting widely accepted, But overly complex and too compliance dominated Managers are feeling the pressures of cost increases revenue pressures increasing community expectations need to manage their existing assets Executives spend small proportion of time reviewing financial reports average 1 hour per week mainly trying to identify any issues for concern Reporting needs: short, simple to understand timely
Report Reader Preferences Shorter reports (5-10 pages); Simpler variance reports by exception major timing issues highlight problems for review (not “seek and ye shall find”) More use of trend and other graphs; Links between expenditure & services/works performed Matching revenue / expenditure items Simpler terminology and additional training Online enquiries with drill-down capability Reduced statutory requirements Improved internal reporting Customised reports to individual readers not same standard report.
Less gives more Focus on decisions to be addressed Highlights areas of concerns Makes best use of management time
Key themes From - Compliance-based external reporting applied to internal reporting To - Good internal reporting leads to good external reporting Shift from compliance external reporting to assessing value for money Shift from ‘selling’ the organisation to balanced reporting
Key Themes (cont) Reporting = communication, not numbers Simplification = making it simpler for readers of financial information to make informed decisions Simplification, not = simplifying requirements for report preparers More is required, not less, in terms of reporting and value adding advice
Checklist Identify business drivers Identify each managers decision framework Identify tolerances Identify relevant non-financial data to join Ensure chart of accounts has necessary info Negotiate exception report framework Styles to suit readers Trial & error
More Information Website including this paper: www.orionco.net (also includes SFR report for LGAQ) To contact David Spearritt firstname.lastname@example.org 1300 767 466