Management Report and Implementing Recommendations
One of the outputs of a financial audit is the Management Report submitted by the Auditors to the organisation. This tool highlights issues and suggestions around improved financial process and policies. Management will have an opportunity to respond in writing on the document itself. These recommendations should be seriously considered and implemented for improvement. While this is not a standard donor document and auditors have used it to place the entity’s issues and how they are dealing with them on file, it is increasingly being requested by potential donors in their funding application package. It is important to ensure that these recommended improvements are being prioritised. It can also serve as a helpful tool for organisational learning and development.
Analyse and Report to the Board
In addition to the Financial Audited Statements being presented at your Board meeting, it is important for the Finance Director to present a separate financial report to the board that covers a financial analysis of activity related to the audited financial statements. What income generating opportunities were successful? What are the explanations of shifts in the financial statements based on line items from the current year compared with the previous year? What trends are developing and how do these compare with a snapshot over the past 5 years? It is always important to gaze back at past financial performance in order to forge constructively ahead. The Finance Director’s report should be shaped around the results of your Audited Financial Statements and presented in a constructive, relevant and visual way in order to inform your Board about key performance areas and recommendations going forward.
The final step in the closure of the audit process is to disseminate. Once your financials are signed, put the document on your website and include this in your Annual Report. The NPO Directorate requires that financial statements are submitted within 6 months of the close of the financial year. Some entities prefer to include a condensed version of their financials in the Annual Report while others prefer to include the whole document. This information is helpful to your stakeholders and provides a level of transparency and governance of the organisation and should therefore be readily accessible.
In conclusion, the audit process need not be a daunting and laboursome one if your organisation is consistent with its recordkeeping throughout the year. The process provides an excellent opportunity to reflect on the organisation; its past, its present and contemplate its launch into the future!
- The External Financial Audit Process Part 1: Preparation
- The External Financial Audit Process Part 2: What to expect onsite
- The External Financial Audit Part 3: Be part of the discussion
Author: Soraya Joonas, Finance Director at Inyathelo. Extract from the article first posted on the Inyathelo Blogspot on 6 June 2016.