1. Understanding your Budget, P&L statement and Balance Sheet
September 2017
Bob Campbell
Registered Auditor, Registered Tax Agent,
CA,CPA, MSW MAICD
Director, Australian Audit Pty Ltd.

2. SOMEONE ELSE PROBABLY HAS THE SAME QUESTION
OUTLINE
UNDERSTANDING YOUR FINANCIAL STATEMENTS
DEVELOPING A FINANCIAL MODEL OF YOUR ORGANISATION
DEVELOPING A BUDGET FROM THAT FINANCIAL MODEL
MONITORING KEY PERFORMANCE INDICATORS
COMMUNICATING YOUR FINANCIAL RESULTS.
IF YOU HAVE A QUESTION
SOMEONE ELSE PROBABLY HAS THE SAME QUESTION
SO PLEASE ASK IT AS WE GO.

3. YOUR ANNUAL FINANCIAL STATEMENTS Basis of preparation – Cash or Accrual
Cash – receipts are recorded during the period money is received, and expenses are recorded in the period in which money is actually paid.
Statement of receipts and payments
Statement of reconciled bank account balances
Statement of assets and liabilities.
Note- explaining that the cash basis of accounting has been adopted
Accrual - revenue and expenses are recorded when obligations are incurred.
Accounting Standards are applied to recognise Assets, Liabilities, Income & Expenses
Statement of Profit or Loss & Other Comprehensive Income
Statement of Financial Position
Statement of Cash Flows
Statement of Changes in Equity
Notes – explaining the accounting standards & policies adopted & the accrual basis

4. YOUR ANNUAL FINANCIAL STATEMENTS Special Purpose or General Purpose ?
General Purpose - designed for any reader – accrual basis and all relevant Australian Accounting standards apply
Special Purpose – designed for particular readers
Your members and in the form required by your constitution
Your regulatory body – Department of Commerce or ACNC
ACNC: If your revenue is less than $250,000, you may use Cash basis
ACNC: If your revenue is greater than $250,000 ACNC require Accrual basis
AASB 101, Presentation of Financial Statements
AASB 107, Statement of Cash Flows
AASB 108, Accounting Policies, Changes in Accounting Estimates and Errors
AASB 1031, Materiality
AASB 1048, Interpretation of Standards
AASB 1054, Australian Additional Disclosures.

5. YOUR ANNUAL FINANCIAL STATEMENTS Are they reliable?
Financial Statements are normally reliable if internal controls are effective
Internal controls include but are not limited to:
Preparation by competent qualified bookkeeper & reviewed by an accountant
Bank reconciliation by bookkeeper & review by another person for errors
Two signatories / authorisers of all transactions.
Must include all the transactions for the period
Very relevant to all significant accrual transactions such as
Accrued Wages , Accrued Expenses & Prepaid Expenses.
Leave provision movements
Income received in Advance – such as grants & fees

6. YOUR ANNUAL FINANCIAL STATEMENTS The Annual Board Report & Declaration
States the Surplus or Loss for the Year
Describes the major activities for the Year
Points out that the accounting policies applied are set out in Note 1 to the accounts.
The Annual Declaration by the Board
That the financial report is a true & fair view of the financial position & performance of the Organisation
That operations have been conducted in accordance with the constitution
There are reasonable grounds to believe that the Organisation will be able to pay its debts as and when they fall due.

7. YOUR ANNUAL FINANCIAL STATEMENTS The Statement of Profit or Loss and Other Comprehensive Income

8. YOUR ANNUAL FINANCIAL STATEMENTS The Statement of Financial Position

9. YOUR ANNUAL FINANCIAL STATEMENTS The Statement of Cash Flows

10. YOUR ANNUAL FINANCIAL STATEMENTS The Statement of Changes in Equity

11. Uncommitted funds Current assets less Current liabilities
Current Assets: The funds you have or have a right to receive as income in the next 12 months
Less
Current Liabilities: The funds that you have a present obligation to pay out in the next 12 months
These are your savings to manage financial risks
You would expect to have at least enough to cover 90 days planned expenditure.
This increases if you make a surplus and decreases if you make a loss
It is what you draw upon to buy property plant & equipment

12. YOUR ANNUAL FINANCIAL STATEMENTS The Statement of Financial Position

13. Understanding your Budget
Your budget indicates how much you expect to spend in the next period (usually the current financial year)
Your expected Income
Your expected Staff costs
Your expected Program costs
Your expected Administration Costs
Your expected financial surplus or financial loss
As a Guide as a minimum it should be 5% to 10% of your Income.

14. Your Budget Prepared before the end of your current financial year
Approved by the Board or Management Board
States the assumptions for income and expenditure
Should reflect either the accrual or cash basis of accounting used
Your bookkeeper must understand which you are using.
Compares the current year to the next year & explains the difference
Used to compare actual and budgeted income and expenditure
Explains why there is a difference each month.

15. MONITORING KEY PERFORMANCE INDICATORS

16. MONITORING KEY PERFORMANCE INDICATORS

17. COMMUNICATING YOUR FINANCIAL RESULTS.
Use Summaries rather than detailed reports
Treasurer or Finance Board to review detailed reports
Highlight major issues in the Financial Summary
Identify any proposed corrective actions
Use Graphs where possible (eg Uncommitted Funds)
Check that people understand your financial reports
Have a seminar to explain how to use the financial report

18. Questions