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Checks and Balances The NSCA Story

Learn about the history and aftermath of the NSCA financial losses, including the impact on the business unit, reputational issues, and culture problems. Understand how 4 key issues contributed to this situation and the need for industry reform. Find out what you can do to monitor and analyze the financial health of companies like NSCA.

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Checks and Balances The NSCA Story

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  1. Checks and BalancesThe NSCA Story August 2012

  2. Walking In • $600K Loss YTD (Consolidated) • Business Unit $300K of that loss • Three employed resources • Reputational issues • Culture issues

  3. History

  4. How it got to this

  5. The Reckoning • 1988 after 3 years of qualified audit reports • Board never knew qualified • Major Trade Debtors and ‘Containerized Safety Equipment’ • Hopelessly insolvent • Banks - $300M in unrecoverable loans http://www.catchme.net.au/synopsis.html (Trailer 3)

  6. John Fredrich • Not- Australian • No record of entry into Australia • No Birth certificate • Wanted in Germany for embezzlement • Security clearance to every Australian Defence site http://www.catchme.net.au/synopsis.html (Trailer 1)

  7. Aftermath

  8. How could this happen • 4x issues impacting companies limited by guarantee • Halo Effect • Precedential cloning • Statutory rigor mortis • Inappropriate models of regulation

  9. Halo Effect • NFPs – very nature of what they do • Ideals of society – Compassion, Sympathy etc (Good Fundraisers) • Can cause organisations to get lapse (27 Banks) ** • Reduced need for customary caution • Spread to regulators and policy makers • Not for personal gain

  10. Precedential Cloning • Meticulous transfer of British law into Australia • No context considered • The Companies Act 1863 • 1863 adoption in Queensland States • Allowed for ‘Limited’ to be omitted • Opened ability for other states to adopt

  11. Statutory Rigor Mortis • Law and reform enters suspended animation • Judicial – demonstrated by definition of charity • Statutory – underdevelopment of company limited by guarantee • Fear within Australia of antagonizing NFP/Charity (Halo)

  12. Poor Models of Regulation • For-profit regulation inappropriate for NFP • Limited buying power • Regulator focus on large companies • Halo affect

  13. Industry Reform • Australian Charities & Not-for-profit Commission • Regulate Charity/NFP sector more closely • Annual Reporting • Assist entities to meet their obligations • Educate, Guide and monitor compliance • Enforce where necessary

  14. What can you do? MONITOR • Conduct a stress test • Ask for Annual Accounts • Ask questions and creditors • Analyse Cashflow • Determine level of borrowings and ability to repay • How are sales and production trending All available in the annual report

  15. Walking In • $600K Loss YTD • Business Unit $300K of that loss • Three employed resources • Reputational issues • Culture issues

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