New Year, New Rules
Editorial – Harald Breiding-Buss
Published January 24
Happy new-ish year everyone. As the new government is certainly making a splash and a lot of noise, we can expect some changes this year that will impact community organisations. It’s probably safe to say that the not-for-profit sector overall can have a bit of a tense relationship with National-led governments, and I have been getting some rather gloomy messages from people in the sector. But it’s worth remembering that the Key government in its first term (2008-2011) set new records in social spending, especially of the kind that was made available to community organisations and Maori social services. They also increased marine protected areas, and the ‘Predator-free NZ’ initiative started with the active support of a National-led government.
In terms of your planning, if you are an organisation that is heavily dependent on government funding, it would be prudent to make plans for the possibility that this will reduce or dry up from July or so onwards. This really applies to any government change – maybe get out the old ‘SWOT’ analysis out (Strengths-Weaknesses-Opportunities-Threats) to be prepared. It happens far too often that this isn’t done, organisations get into financial trouble due to changing government priorities, and it’s usually staff that end up missing out on what they’re owed as the organisation struggles in vain to make up the shortfalls from an overall reduced funding pot.
But regardless of political leanings, it is rare for an incoming government not to want to tackle social issues, they just have different ideas of what works. There are always opportunities as well. Traditionally, National-led governments favour job-focused initiatives and those that promote financial self-sufficiency and have been known to put good money behind it.
At least one coalition partner (ACT) has promoted themselves as anti-red tape. This might be the time to ask the government to look into whether all this regulation of the not-for-profit sector is really necessary, particularly the re-registration requirement for Societies and the compliance with accounting standards (NZ is alone in the world with that latter one).
So, let’s keep an open mind, and let’s keep working together for the common good.
Do You Need a Financial Policy?
Policies are meant to give guidance and set some dos and don’ts in specific areas. To have any usefulness at all, the people affected by the policy need to be aware of its existence and content, and it needs to be reviewed every now and then.
In practice, policies are often no more than documents that an organisation pulls out when someone external (an auditor or funder, for example) asks. It is very rare that, after a policy is written, anyone puts any thought into how this will be complied with on a day-to-day basis.
Most organisations have at least some rules around handling of money, but they may not be written down in a policy. They may be a series of committee or board decisions, and may be perfectly acceptable, but these decisions should be put into a separate document that can be found easily and referred to rather than only be documented in the meeting minutes.
A written policy is a good idea where the consequences of rules not being followed are potentially quite significant. This involves most scenarios where a board or committee delegates some or most of their financial responsibilities to someone else, such as a manager, or even the Treasurer of the committee. A breach of a policy is somewhat more serious than a breach of an undocumented (or possibly misunderstood) rule and can give a committee a better handle on taking action.
Policies can be, and should be, in plain English. It is good to describe the intention of the policy, but the main bit should be quite specifically about what is and what isn’t allowed, as well as who is and isn’t allowed. Who exactly (generally defined by their position rather than a specific person) is responsible for what is the core part of any policy.
In financial terms, the most important policy is the one about your internal controls: your internal checks that prevent fraud and make sure your accounting system gives you an accurate picture. Since internal controls are largely based on separation of duties and the ‘four eyes’ principle, the policy needs to define quite specifically which role is responsible for which task to be useful. A lot of policies assign specific tasks to ‘the Board’ (rather than a role on the Board), which has the detrimental effect that nobody on the Board actually feels responsible.