Vol 7 Issue 20 October 21 2009

  • Date:21 Oct 2009
  • Type:Boardroom Report

Test case shock for NFPs

A recent test case decision which applies a very restrictive definition of what a “charitable” organisation is for tax purposes will have ramifications throughout the charitable sector.

On appeal, the full Federal Court found in favour of the Australian Taxation Office (ATO) and stripped charitable status from a small charity, Aid/Watch, that monitors Australia’s international aid programs.

The dangers of growth

Directors of small to medium-sized enterprises (SMEs) have been warned to keep a watchful eye on cash flow as business conditions begin to improve.

Bibby Finance’s Asia Pacific CEO, Greg Charlwood says winning a large new contract or gaining a rush of new sales could have disastrous implications for them. Unless the business has the cash to fulfil the order, the increased demand for its products or services could lead to serious cash flow problems and even insolvency.

This risk is likely to become a problem for more businesses as the economy recovers, with some sectors, such as wholesale, expected to rebound strongly.

The benefits of Side A D&O Cover

Many directors are not aware of what directors’ and officers’ (D&O) insurance cover they have and how their cover can be taken from their grasp at the time when it matters most, says Alistair Sandilands, ACE Insurance’s corporate manager and D&O product head.

“Litigation is not the time for surprises or knowledge acquisition,” he says, noting that the philosophy of D&O insurance has been changing in recent years.

Donors to get more information on NFP

Donors and others interested in not-for-profit (NFP) organisations are likely to be provided with financial reports that are more useful and easier to understand, as the result of a project recently approved by the Australian Accounting Standards Board (AASB).

Called Disclosures by Private Sector Not-for-Profit Entities, the project will initially explore what information is not currently required to be disclosed by NFPs – such as non-financial information about service performance – and consider whether to develop requirements or guidance to fill the gaps.

The project will identify current disclosures that, on cost-benefit grounds, should be removed or re-oriented to meet the specific needs of NFPs.

Getting that great plan executed

Nine out of 10 companies that have strategies fail to execute them, so business success is not about having a good strategy, but about good execution of that strategy.

This was the view of Dr David Norton, founder of Palladium Group and co-author of the Balanced Scorecard system, when he spoke at an AICD breakfast for ASX 200 members last week.

He says Palladium’s research has found that only half of organisations have a formal approach to managing strategy and that those that do have a 70 per cent likelihood of outperforming their peer groups.

 

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