Future Research Leaders Program

1. Future Research Leaders Program Module 5 Financial, Resource and Risk Management

2. Objectives for this Workshop To enable you to: • Reinforce your understanding of the basic principles of financial management in particular in relation to costing, • Relate the online generic materials to your home university practices, and • Share experiences and best practice with colleagues.

3. Introductions – One minute please! • Name and Role • Existing financial skills • Something about you which we could not tell by just looking at you • Next

4. Setting the Scene • Sharing experience • Agenda • Housekeeping – phones etc. • Flexibility, feedback and formality Please ask questions at any time – there is no such thing as a stupid question

5. Topic 1Understanding financial information and reports • Understanding personal finances • Understanding business finances • Key financial statements • Analysing financial statements

6. Understanding financial information and reports The Typical Family’s Finances

7. The Key Financial Statements Profit and Loss Account / Income Statement Answers the question – “How did we do?” Summarises the revenue and expenses of an organisation for a period, and shows the overall profit and loss (Operating Result).

8. Profit and Loss Account/Income Statement Revenue – Expenses = Net Profit/(Loss) (Operating Result)

9. The Key Financial Statements Balance Sheet Answers the question “Where do we stand?” Summarises the sources of funds provided to a organisation by shareholders and others as at a particular date, and how those funds have been used to invest in fixed/non current assets and working capital.

10. Balance Sheet Assets – Liabilities = Equity

11. Balance Sheet Terminology • Current assets • NonCurrent Assets • Current Liabilities • Non Current Liabilities • Equity • Depreciation

12. The Key Financial Statements Cash Flow Statement Answers the question - “What happened to the cash?” Shows the funds received by a business during an accounting period, and the ways in which those funds have been used.

13. Cash Flow Statement Cash from/for: • Operating activities • Investing activities • Financing activities

14. Cash Accounting versus Accrual Accounting

15. Cash Accounting versus Accrual Accounting Cash Accounting • Receipts • Payments

16. Accrual Accounting • Revenues and Expenses – matched • Assets • Liabilities What are the items in your projects which would show the most significant difference if they were accounted for on a cash basis rather than an accruals basis?

17. Topic 2 Costing Using the Project Case Study example, list all the costs which you would need to include when costing your Grant Application. ( No numbers needed – just the cost description)

18. Understanding Cost Behaviour • A change in the level or ‘volume’ of an activity is likely to result in a change in the cost of that activity • Different cost elements will respond in different ways. • The key concepts are • Fixed cost • Variable cost, and • Total cost

19. Melbourne University Costing Approach Not all costs are allocated to the project. So to understand the true cost of the project, identify: • Direct Costs of the Project, and • Be aware of all the Indirect Costs Which are the costs for which are you likely to receive funding?

20. Group Discussion Questions Given that we have not been granted the full amount requested • What costs could be reduced or eliminated ? • What extra funding could be resourced?

21. Topic 3 Preparing and Managing Budgets

22. Purposes of a Budget • Sets a Direction • Allows Planning and Coordination • Allocates Resources – often scarce • Allows Review, Monitoring and Control • Can Identify Problem Areas early • Assigns Responsibility and Accountability

23. What can go Wrong? • Budget Figures Over/Understated • Lack of Communication • No Ownership • Conflicting budgets • Additional costs due to inaccurate forecasting • Lack of proper monitoring • Lack of corrective action

24. Timing and Nature of Reports • Timely • Compare Actual to Budget • Identify Variances - Give Reasons • Action to be taken – By whom/when

25. Topic 4 Risk Assessment and Management

26. Risk assessment and management

27. Risk Assessment

28. Internal Control Internal control is concerned with the protection of university assets and revenue, the accurate recording of transactions and the classification and control of expenses

29. Types of Internal Control • Organisation • Segregation of Duties • Physical • Authorisation and Approval • Arithmetical and accuracy • Personnel • Supervision • Management What internal controls are appropriate to your projects and how might these work in practice?

30. Topic 5 Financial Reporting for Audit Purposes

31. Actual versus Budget • Review the actual expenditure to date and answer the following: • Do you understand each line? • Is the expenditure allowed for in the grant? • Which items would you want analysed further? • Which variances are due to volume, price or • timing variances?

32. Acquittals What can go wrong at this stage?

33. Summary and Conclusion

34. Summary Strong Financial management is vital for every project. • Start with clear objectives • Set the key measures • Plan towards, and assess performance against, those key measures Understanding the language of finance, and having the skills to perform basic financial analysis, are critical steps towards a successful project.