Does your Board Reporting process foster trust and inform strategic decision making?
Governance expectations of Directors in the NFP sector continue to be in the spot light following the release of the ACNC’s new governance framework. As a result there is an increasing need for Directors to consider whether the Board Reports they receive provide the necessary information to enable them to properly fulfil their obligations.
In our experience the most effective board reporting processes are underpinned by two key characteristics:
- Clearly defined roles - Directors will have in place very clearly defined roles between the Board and management including having articulated delegations of authority and responsibilities
- Content that builds trust and informs strategy - The content and presentation of information to the Board should inform strategic decision making, enable the Board to monitor accountability and foster a collaborative trusting relationship with management.
The more transparent and relevant the reports to the Board are, the easier it is for the Board to take on a more strategic role and allow management to take responsibility for operational matters. It is not uncommon to see Boards heavily involved in operational matters, leaving insufficient time for strategic input and direction.
Management should objectively review their Board Reporting process to consider the following guidelines:
- General ledger structure that facilitates meaningful analysis – establish a general ledger structure that provides easy access to reliable and sufficiently granular data that can be used to provide meaningful business insight. Management are often constrained by the system or required to perform a significant amount of manual rework to be able to report the right information to the Board
- Detail v summary – focus on the information that Directors need to know, be succinct and relevant, the detail should only be provided as supplementary information if required
- Format – be consistent, make it visually easy to read and consider all relevant aspects of the business that will inform strategic decision making
- Type of reports – include relevant reports only eg. reforecasts, budget v actual, cashflow forecast, P&L, Balance Sheet
- Data integrity – ensure the data reported has integrity – failure to do so will undermine the Board’s trust in management which will then make it very difficult for the Board to avoid getting involved in operational matters
- Recipients – what does the Board want to see? What does the Audit Committee want to see? Do other stakeholders want a different level of detail?
In times when management resources are constrained and the amount of time that Boards have available to devote to their responsibilities as Directors is limited – fast, flexible and relevant Board reporting is critical.
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