Funder by the Department of Human Services Auspiced by Our Community

Help Sheet

Risk management for treasurers

The treasurer is responsible for ensuring that the organisation is protected against financial risks.

A risk is any event or action that could harm your organisation's reputation or your ability to achieve your objectives and carry out your operations.

The risk of anything going wrong is usually small, but it can have disastrous consequences. If you do have a financial crisis, face facts immediately, be honest, and keep the information flowing.

Your people are your greatest strength - and your weakest link. The risks include:

There are bound to be risks that your group has that are not listed above.

Have a brainstorming session to identify any potential risks. Questions to ask are:

Once you have identified the risks, analyse and rank them in terms of their likelihood, potential impact and priority. Develop strategies and methods to prevent or minimise risk. Proactive risk management involves identifying risks and taking action to prevent or minimise the risk.

Risk management strategies

One way of managing your risks is through internal systems and checks and balances. For example, ideally no financial transaction should be handled by the same person from beginning to the end - the person who receives the cash shouldn't bank the cash, for example.

You need to decide who can authorise spending, and how much each person can spend before they need to have the spending agreed to by their manager or the committee. This information must be recorded in your procedures manual and included in training programs.

Even if people have spending limits, it is common practice and common sense to have all cheques counter-signed by one or two office bearers. Often one of these people will be the treasurer.

This can be inconvenient, but it is important to have someone responsible for monitoring expenditure to keep a watchful eye on cash flow and prevent any opportunity for fraudulent behaviour.

Some organisations allow any two out of three or four people to sign cheques. While this is a practical and flexible arrangement, it does weaken the monitoring function.

Your bank may ask for a list of office bearers who have signing authority and request that they fill out a form for security purposes so their signature can be checked against future cheques. Remember to advise the bank when your office bearers change.

Your organisation needs a minimum level of reserves to fund working capital and provide a safety net for cash-flow fluctuations.

Many small organisations find it hard to build reserves, but it is worth doing if you can. You can ask your funders and supporters for more money specifically to establish reserves, or budget to put aside an amount each year so reserves accumulate slowly over time.

Have a look at the financial management and financial control policies in Our Community's Policy Bank to see what other types of controls your group should think about putting in place.

Insurance

Certain insurances are mandatory, such as worker's compensation if you employ staff, and third party insurance if you have vehicles.

In addition to mandatory insurances, you may want to consider:

Look at what payment options are available. Can you pay monthly or quarterly rather than a year in advance? Could you get a better deal with a long-term agreement?

Common causes of failure of community organisations

An initiative of Department of Human Services, Developed & Managed by www.ourcommunity.com.au