Financial Management (Accounts)

 

Financial Reporting to Health Board

The administrator should present monthly and quarterly financial statements to the health board for its consideration and endorsement. The information presented should be appropriate for the level of financial literacy (ie knowledge and understanding) of the board members.

It should include income and expenditure statements and a balance sheet. It should also provide an indication of whether the health service has overspent or underspent the total funds available for the year, and the allocation of amounts to particular budget lines. The administrator should highlight any issues requiring the health board’s consideration and decision. The health board may require other information to be provided. The board may also require that any expenditure over a certain amount receive specific board approval.

Back to Top

Audit

An annual audit of the organisation’s finances is part of the requirements of incorporation. The audit must certify whether the organisation’s income and expenditure statement and balance sheet are true representations of the organisation’s financial affairs. The audit should also comment on whether the methods of record keeping and systems in place are adequate and comply with standard accounting practices. The organisation’s auditor, appointed by the AGM, performs the audit.

Back to Top

Assets

Assets are any materials or equipment, eg computers, motor vehicles, medical equipment and furniture, that are purchased wholly or in part with the organisation’s funds. It is common to define assets as anything that cost over, say, $300. This is then used as a figure for depreciation purposes. The HS is responsible for ensuring the assets used in the conduct of its business are maintained to a high standard, serve their purpose and continue to be reliable so that staff do not have to tolerate breakdowns and consequent disruption to the normal flow of their work.  That means that the HS needs to replace assets and sell or otherwise dispose of assets that become surplus to requirements.

Assets Register

It is usual to maintain an assets register, which should record the item, brand name and model, any serial numbers, location, date of acquisition, value at time of acquisition, date of disposal and value at time of disposal. Once a year, check all assets on the register. Note any existing assets that are not on the register and any assets in poor condition or in need of repair. Report the results of the asset check to the health board and have appropriate action authorised, such as organising repairs or scrapping assets.

Back to Top

Asset Acquisition

The OATSIH funding agreement stipulates that where the purchase price of an asset or service is equal to or greater than $5,000, including GST, the organisation must either obtain written quotes or publicly invite tenders from at least 3 suitable suppliers. The Organisation may proceed with fewer than 3 quotes in circumstances where it is not possible or practicable to obtain 3 or more quotes, but must inform the Department within 30 days of doing so.Check other appropriate funding agreements.

Assets Disposal

Assets can be disposed of in a way determined by the health board, provided it is in accord with:

• the constitution of the health service, which usually requires that such actions are in the interests of the organisation; and
• contractual obligations with the funding body that provided the funds for the purchase of that asset.

It is usual to provide at least a local tender process that gives people an opportunity to acquire the asset.

Surplus assets are sold without warranty - buyers are responsible for ensuring that the goods they bid for are in working order and are suitable for the purpose for which they are purchased. The HS should at all times attempt to recoup the full market value of surplus assets and allocate the recovered amount to the relevant capital budget.  Goods with a low estimated net market value may be donated to organisations that may have a use for them.

Check funding body requirements.

1. Present proposal for disposal to health board, including justification for disposal.
2. Organise tender/bidding process according to the requirements of the board and the funding body that provided funds to buy that asset.
3. Inform insurance company of change, if necessary.
4. Record funds received from sale of asset as income.
5. Remove asset from Assets Register.

Writing Off Damaged, Destroyed or Stolen Assets

Assets should be written off when the asset has been lost, stolen or damaged. Prior approval may be required from the funding body, depending on the value of the asset.

1. Present the proposal for writing off assets (because they have been lost, stolen or damaged) to the health board.
2. Where necessary, obtain approval from the relevant funding body.
3. Organise for damaged asset to be disposed of, obtaining any possible scrap value, and record the receipt of any monies received.
4. Remove the asset from the Assets Register.

Back to Top

Bank Accounts

The health service should operate a bank account with a cheque book. If the health service has the status of a Public Benevolent Institution (PBI), then it should be exempt from government financial institution taxes and bank charges. Check with your bank about these details.

Cheques or electronic transfers should require two or three signatures. If two signatures are required, they should both be health board members. If three are required, two should be health board members, and one could be the administrator. Five or six people should be authorised signatories to increase the chance that signatories are available when needed.

Never sign a blank cheque.

Back to Top

Bookkeeping

Keeping the books requires three types of record:

• cash receipt book
• cash payments book
• wages book

Many computer programs incorporate these into an easy to use software that can also generate income and expenditure statements and balance sheets. They also facilitate reconciliation with bank statements. Such programs include Quicken, Mind Your Own Business(MYOB) and Money Story, which is useful for providing reports in graphic form. The health service’s accountant should be able to assist the service to develop a computerised system that facilitates the administrator’s work, reporting to the board, reporting to the funding body and the accountant’s responsibilities.

Back to Top

Budget

An annual budget should be developed by the accountant, treasurer and administrator in consultation with staff for presentation to the health board in the first month of the financial year. Common funding body guidelines separate capital funding from wages and salaries and from other recurrent expenditure. This means that monies provided for one area cannot be used for other areas without funding body approval. However, monies can be moved within these categories as is appropriate for the running of the health service.

Back to Top

Receipts

Generally the following steps should be made on receiving monies.

Step 1.

Write a receipt and give/send to whoever provided the money.

step 2.

Enter details into a Cash Receipt Book.

step 3.

Deposit money into bank account.

step 4.

Reconcile the Cash Receipt Book with the monthly bank statement.

Some funding bodies suggest that their funds should be deposited in a separate bank account. However, if the health service has the capacity to separately account for all incoming and outgoing funds for that project, the funding body may allow the one account to be used for all grants.

Back to Top

Purchases

All purchases (other than small items through petty cash) must be organised through a purchase order book that is usually held by the administrator. The purpose of the purchase order system is to ensure some control of purchasing that prevents duplication of purchases, and ensures that purchasing remains within the service’s budget. Thus the administrator must finally approve any order that has been initiated by other staff. The original of the purchase order is provided to the supplier of the goods or services being purchased. A copy is kept by the health service as their record.

Purchase orders are numbered and this number is quoted on invoices for payment and other correspondence relating to that particular purchase.

Purchase orders should include the price of the goods or services to be supplied. For items over a certain amount, eg $500, two or three quotes should be obtained where possible. Funding bodies usually have guidelines as to when particular procedures must apply.

The administrator’s role is to:

• co-ordinate purchases
• manage purchase documentation including the Assets Register
• obtain quotes for capital items over a designated value (eg $500)
• manage the purchase order system
• negotiate purchases with funding body when necessary.

Back to Top

Payments

All payments (except wages and petty cash) are:

1. Made by cheque or electronic transfer.
2. Made in accordance with the approved budget and funding agreements.
3. Authorised in writing.
4. Made on presentation of an invoice consistent with purchase order or other contractual arrangement.
5. Made only after the goods or services have been satisfactorily delivered.

Steps to be taken are:

Step 1. Check received invoice with purchase order or contract.

Step 2. Check that goods or services have been delivered and are satisfactory.

Step 3. Complete a payment voucher – include the date, payee, purchase order number or contract reference, goods or services delivered, cheque details and budget line to charge against.

Step 4. Fill out a cheque and attach with invoice and payment voucher.

Step 5. Present to cheque signatories for signing.

Step 6. Send cheque with copy of invoice or payment advice to payee.

Step 7. Enter details of the payment in the cash payments book.

The cash payments book is reconciled with the bank statements each month.

A financial statement needs to be put together using information from the cash receipt and cash payment books and presented to the health board.

Back to Top

Petty Cash

Petty cash systems are to allow for the purchase of small items, such as tea, coffee, stamps, and small items of stationery. This can be achieved through either an imprest system involving a petty cash float, or a reimbursement system where staff are reimbursed for monies spent. It is advisable for health services to operate an imprest system as this provides more control over purchases, and less argument with staff about reimbursements.

An imprest system can be set up with

• a small lockable petty cash tin
• petty cash vouchers
• petty cash book.

It is advisable that only one person has access to the petty cash tin, and that a list of acceptable purchases from petty cash is kept and adhered to. Petty cash should not be used to lend money to staff, or assist people in need (eg for meals or clothes). If the health service is to provide such support to the needy, then a separate system should be established and maintained.

An amount of, say, $100 is advanced to petty cash and held by the administrator.

Access to petty cash is as follows:

Step 1. Request access through the administrator, stating what the purchase is for.

Step 2. Complete a petty cash voucher including date, amount and the category of item purchased (as per the cash payment book categories).

Step 3. Receive cash required and make purchase.

Step 4. After purchase, attach receipts to the voucher, and return any change to the petty cash float.

At all times the amount of cash plus the total amount on vouchers in the tin should equal the total amount of the float.

Purchase items from stores that include the GST on their receipts otherwise GST inputs cannot be claimed.

When the petty cash float is regenerated, all details on petty cash vouchers must be recorded in the petty cash book, and transferred to the cash payments book.

Back to Top

Records

Financial records must be kept for five years and include:

• receipts for money received
• cheque butts and invoices for payments made
• receipts for petty cash items
• records of bank accounts
• bank statements and correspondence
• monthly financial reports
• annual financial statements and reports from auditors
• annual budgets
• taxation records
• Business Activity Statements
• personnel records
• funding submissions
• official correspondence
• insurance policies and claims.

Back to Top

Wages

Employees usually record the time they have worked on time sheets, or through punch cards. Wages are generally calculated using this information, including rostered on-call, approved overtime and call-outs.

No wage advances should be allowed. If some staff are unable to manage their money from one pay day to the next, the service may consider more frequent pay periods. However, amounts paid should be only those amounts earned.

Only make deductions from wages if properly authorised either by the employee or a court order (see below). The health service should not deduct amounts that are owed to the community store, motor vehicle payments or anything else, unless properly approved by the employee.

Common authorised deductions may include union fees, rent, motor vehicle repayments, electricity bills etc. The health service should co-operate with community attempts to encourage better budgeting and financial responsibility amongst community members.

Wages are calculated and entered into the wages book either weekly or fortnightly depending on how often wages are paid. Income tax is also calculated at this time and is usually paid to the tax office every three months through Pay As You Go (PAYG).

A payment voucher must be completed for the total net wages to be paid, and must include how much each staff member is being paid and any out of the ordinary payments, such as annual leave loading. These details must also be entered into the cash payment book.

The preferred method of paying wages is electronic transfer. Every effort should be made to avoid cash payments.

All employers covered by WorkChoices must keep written records in English which must be retained for seven years, and be made available for inspection by workplace inspectors if required.

Back to Top

Payroll Deductions

Payroll deductions must be authorised by the employee signing a Payroll Deduction Authority form for each separate item that specifies the amount to be paid and the frequency, or number of payments. Any variation requires a new authorisation. Hold one copy in the personnel record and give one copy to the employee.

Attempts by debtors to garnish an employee’s wages must be either accompanied by a court order, or voluntarily authorised by the employee.

Back to Top

Superannuation

Superannuation legislation requires that all employers must pay a superannuation contribution on behalf of their employees who are full-time, part-time and casual. The employer must pay 9% of employees’ gross salary into an approved superannuation fund. This amount is on top of the gross salary, not deducted from it. Superannuation does not have to be paid on behalf of employees who are:

• under 18 years of age and working less than 30 hrs a week
• paid wages from CDEP grants
• earning less than $450 a month.

Contributions are based on ordinary earnings of wages not including:

• annual leave loading
• overtime
• lump sum payments on termination for accrued leave
• payments in lieu of notice.

Superannuation Payments

Superannuation guarantee contributions must be paid at least once each quarter, as follows:

Cut-off dates for superannuation guarantee contributions

Quarter dates		Cut-off date
1 July – 30 September		28 October
1 October – 31 December		28 January
1 January – 31 March		28 April
1 April – 30 June		28 July

Choice of Superannuation Fund Legislation

The Federal Government’s Choice of Fund legislation came into effect 1 July 2005, and means certain employees can choose which fund their superannuation contributions are paid into.

Employers must:

• Provide a Standard Choice form to:

• eligible employees employed at 1 July 2005 – before 29 July 2005
• new eligible employees – within 28 days of their start date.

• Act on the employees’ choice by paying their superannuation guarantee contributions to their chosen fund two months after an employee has made a choice to the chosen fund.

• Nominate a workplace ‘default fund’ into which the employee’s superannuation guarantee contributions will be made if they do not return a completed standard choice form.

• Keep records for five years after cessation of employment that show:

• payments have been made
• eligible employees have been offered choice of superannuation fund and been provided with a Standard choice form
• the employees’ choice of superannuation fund has been acted on and
• contain information about the employer fund.

Eligible employees

Employees in the NT are covered by the federal workplace relations system. Thus employers must offer a choice to:

• an employee engaged under a federal award whether or not that award requires contributions to be made to a specific superannuation fund
• staff not covered by an award or registered agreement (subject to some exceptions).

Ineligible employees

Those receiving superannuation contributions under:

• a certified agreement or an Australian workplace agreement made under the Federal Workplace Relations Act 1996 or the Industrial Relations Act 1988
• a state award or industrial agreement
• certain defined benefit funds.

The Superannuation Guarantee Act imposes a charge on an employer not making sufficient contributions for their employees.

Assistance

Back to Top

Taxation

Health services may be entitled to various rebates or exemptions depending on their status. This is currently a confused area, with the government revising definitions of charities. It is important, therefore, that each health service checks with the Australian Taxation Office (ATO), bank and accountant about what specifically applies to them.

Income Tax

Income tax is deducted from employees’ wages and paid to the ATO on their behalf. This is known as PAYG Withholding. The ATO provides tax tables that show how much to withhold from people’s wages.

Employees must complete a Tax File Number (TFN) Declaration. Where the employee does not give a fully completed Tax File Number Declaration tax must be withheld at the highest marginal tax rate plus the Medicare levy (48.5%).

The employer must provide payment summaries to the ATO and to each employee at the end of the financial year.

The PAYG Withholding also binds the health service to withhold 48.5% of fees from organisations or individuals contracted to provide goods or services who do not quote an Australian Business Number (ABN). This also applies to people hired for short periods, for example, interpreters or community facilitators if they do not have an ABN.

Amounts withheld are paid to the ATO after adjustments are made for GST and fringe benefits liabilities/refunds every three months when a Business Activity Statement (BAS) is submitted to the ATO. So the BAS incorporates PAYG Withholding, fringe benefits tax and GST.

Zone Rebate

People residing in some remote or isolated areas can claim a zone rebate. These remote areas are called Zone A and Zone B. There are also ‘Special Areas’ within these zones. Contact the ATO to clarify which Zone or Special Area applies.

Back to Top

Fringe Benefits Tax (FBT)

Fringe benefits tax is a tax payable on any benefits an employer provides to an employee that are not subject to income tax. This may be part of a salary sacrifice or salary packaging exercise, or the provision of other benefits apart from the salary. The employer is responsible for paying this tax. All fringe benefits provided above $1,000 must be shown on the employee’s payment summary. The employee will not pay tax on the fringe benefits but they will be taken into account in working out entitlements to means tested benefits and liabilities for Medicare levy surcharges and superannuation. The amount to be shown on the payment summary is the grossed up taxable value of the fringe benefits.

Employers that have Public Benevolent Institution (PBI) tax-free status can provide fringe benefits of up to $30,000 ‘grossed-up taxable value’ per employee. Fringe benefits tax must be paid on benefits amounting to more than $30,000 ‘grossed-up taxable value’.

Not-for-profit incorporated organisations without PBI status must pay tax on the value of benefits but can claim a rebate. This is included on the fringe benefits tax return form submitted annually on 30th March. The FBT year runs from 1 April to 30 March.

FBT Exemptions

Tools of trade (including, for example, a mobile phone if used mainly for work) and housing provided by an employer in remote areas of Australia are exempt from fringe benefits tax.

For more information on fringe benefits tax contact the Fringe Benefit Tax Enquiry Service – 13 11 42 or 13 28 66.

Back to Top

Payroll Tax

Payroll tax is a NT tax assessed at 6.2% on the wages paid by an employer.

From 1 July 2005, an employer which is not a member of a group of businesses, will not be liable for payroll tax if its total Australian taxable wages are less than $1,000,000. If an employer is a member of a group, the total taxable wages paid by all members of the group determines whether the employer has a payroll tax liability. Types of wages excluded from payroll tax are CDEP wages, probationers and trainees, and graduates employed under trainee arrangements.

Most health services are, therefore, not subject to payroll tax. Applications for exemption should be made to the NT Co

Insurances

The HS is required to maintain the following insurances:

• Business Insurance (Fire, property, etc.).
• Worker’s compensation insurance.
• Public liability insurance for an amount of not less than $10M.
• Professional indemnity insurance to cover liability  arising out of the following:

• Non clinical work
• Clinical work by non-medical practitioners
• Clinical work by medical practitioners
• Vicarious liability.

Disclaimer

Back to Top

© Copyright 2009