Financial control

What financial controls can help manage risk and how?

Sound finance and transparency in financial management are essential to effective sports organisations. Financial control measures help ensure that your organisation maintains a strong financial basis for the delivery of the sport and other services and operations. Good financial control also helps manage risk in your organisation.

Financial compliance with legal requirements

Financial probity dictates that organisations must exhibit undeviating honesty, integrity and competence in financial matters. Organisations must be fully accountable to their public funders for the management and use of funding, demonstrating how they have applied it to achieve the purposes for which it was given. They must therefore account for every public penny, with annual accounts including sufficient disclosure of public income and expenditure. Larger organisations (including NGBs, national partners and others) must make independently audited accounts available to stakeholders and the public.

All accounting designations are the culmination of years of study and rigorous examinations, combined with a minimum number of years of practical accounting experience. There are regulatory bodies that set accounting standards.

Basic accounting principles are understood and accepted by practising accountants. The major principles applied by accountants are:

prudence
accruals
going concern
consistency
substance over form
separate determination

Accounting policies are concerned with:

recognising;
selecting measurement bases for; and
presenting assets, liabilities, gains, losses and changes to shareholders’ funds.

Put simply, accounting policies determine which facts about an organisation are to be presented in financial statements and how those facts are to be presented, while estimation techniques are used to establish what those facts are. In the UK, all private limited companies, at the end of their financial year, must prepare full statutory annual accounts and a company tax return in line with the accounting policies outlined above. There are exemptions to this if a company is classed as ‘dormant’ or ‘small’ or is registered as a charity. However, even companies such as this still have to file information relating to financial performance through an annual return, abbreviated accounts or, at the very least, provide a breakdown of income and funding streams. This information also has to be consistent with the relevant accounting policies and standards.

Financial controls

Financial controls are formal processes, policies and procedures that are implemented to manage finances. They are crucial to achieving your organisation’s financial goals and meeting obligations of corporate governance, fiduciary duty and due diligence. Controls may be implemented with accountabilities, responsibilities and automation. The following are illustrative examples of financial controls with supporting information.

Adopting an accounting standard, with knowledgeable staff who are accountable and responsible for its implementation, is particularly important when considering the different types of organisations across different sectors (public, private and voluntary) and different sizes (small, medium and large) of organisations. Despite the influence of accounting standards, not every standard will fit with each organisation, so it is important that staff are knowledgeable about each one and can align them with best practice within their organisation.

FRS 102 is a single financial reporting standard that applies to the financial statements that are intended to give a true and fair account of the entity’s financial position and profit or loss for a period.

The standard sets out the principles to be followed in selecting accounting policies and the disclosures needed to help users to understand the accounting policies adopted and how they have been applied. An organisation must also consider the appropriateness of accounting policies to its particular circumstances against the objectives of relevance, reliability, comparability and understandability. All material items should be categorised and conform with giving a true and fair view. Policies adopted should be reviewed regularly to ensure they remain appropriate and that the financial statements and the information disclosed enable users to understand the accounting policies adopted and how they have been implemented.

For more on UK accounting standards, visit https://www.icaew.com/library/subject-gateways/accounting-standards/knowledge-guide-to-uk-accounting-standards

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