By Ron Thomsen

Ron Thomsen, Non Executive Director and Principal Advisor at One Direct Advisory Pty Ltd

In this guest post, Ron Thomsen – Principal Advisor at One Direct Advisory P/L, provides an overview of what NFP’s should be considering with respect to financial, strategic and governance business planning for the year ahead.

One Direct Advisory provides for-profit and not-for-profit businesses access to an experienced team of advisors with extensive backgrounds in finance, legal and business strategy.

With most people returning to work in mid-January, there are some important but easy steps to check the organisation’s well being.

A. Common sense reminder to start the year:

1. Review Risk Matrix to ensure that COVID related influences are addressed, such as staff shortages , vaccination policies and supply chain delays of essential supplies.
2. Consider contingency plans, in conjunction with 1 above, for staff working from home flexibility and possible shortages
3. Review the Strategic Plan, especially if it was formulated over 12 months ago , to see if the strategies, objectives and implementation timings remain relevant after the prolonged lockdowns.
4. Review collegiate relationships to consider if the association objectives remain true and consistent with the original goals.
5. Keep an eye on receivables and debtor ageing to ensure that there is no drift in payments, which often happens after holidays/lockdowns , and as other relationships have revenue collection problems.

B. Financial considerations and the timing of Revenue bounce back:

Most economists suggest that the Australian economy will have a good bounce back in 2022, but each business must consider the prospects for the sector of the economy in which they operate.

The Australian Institute of Company Directors annual survey of NFP Directors survey in November 2021 indicated, amongst other things, 40% of respondents said that it will take at least two years to recover from the pandemic.

For those NFPs who relied heavily on Government stimulus over the last two years, it is essential to consider how quickly the business revenue streams will bounce back to pre-COVID levels.

TIMING OF REVENUE HAS ALWAYS BEEN IMPORTANT BUT IT IS EVEN MORE IMPORTANT IF THE BUSINESS IS IN A RECOVERY MODE.

Financial modelling of revenue and expenditure, with “what if” sensitivities, is required to allow for the best planning for the business.

Monthly cash flow forecasting has always been the key indicator of how the business will meet its commitments.

Assumptions change, and indeed Government funding, and for the Department of Health and possibly other Government Agencies, the timing of payments from in advance to in arrears does impact cash flow considerations and needs careful financial considerations.

A critical review of funding needs and reserves capacity should be undertaken to ensure that the business is in a safe and comfortable financial position to fund existing programs and any future committed plans.

The Board should consider the purpose of their financial reserves and what amounts could be used in a worst-case scenario, or for support of unfunded programs and activities.

If it is established that there will be a prolonged period for the business to reestablish the business it is very important to review operating and capital expenditure budgets and any existing commitments, especially with respect to payment timings.

Any contracts, such as rental agreements, should be assessed for possible escalations in payments.

Overall, if there is any financial concern about the ongoing viability of the business all stakeholders should be informed, as appropriate, and the remedial action to be implemented, especially to the Funding Agency and the Auditor, documented. Communication is paramount and “no surprises” is the requirement.

C. Economic “Right-Sizing”:

It is probable that the economic viability of some programs or non-core business functions has become uneconomic whilst the business has been supported by Government Stimulus.

The Management and Board should consider each program’s purpose, client need and how quickly the program revenue will bounce back to cover expenditure. It may well be that it is decided to fund the program/s by Company reserves until revenue increases.

However, those programs which are nice to provide but have no economic future need to be seriously assessed how the costs of the program could impact the economic viability of the business as a whole, and in the provision of core services.

It is possible that Grant funding may become harder during the next few years as Government and Corporate sources of funds could be inundated by demand for the same or fewer resources, and Grant funds should not be relied upon as core income.

It is a good time to have a serious review of all activities, staffing and operations and to ask the question “is this function really necessary?” Or “does this fit with our purpose and vision?”

Also economic considerations such as the outsourcing of Administration functions like Payroll, Payments, HR may provide economic relief and could be a worthwhile consideration.

One Direct Advisory will be visiting Regional Centres in New South Wales to provide presentations on Financial Management and Outsourcing Administration to Aged and Community Care organisations from March 2022. For further information…

D. Collegiate Relationships:

Should the Board decide that using Reserves is inappropriate, and revenue recovery could be prolonged, then it could be appropriate to seek out organisations with common purpose and culture to work with to ensure the ongoing viability of the organisation.

The underlying criteria must be what is in the best interests of preserving the best service to existing clients, as the main stakeholder.

A collegiate relationship could be achieved by joining a group of like purpose organisations in a “hub” to gain economies of scale with staffing and administration expenditure.

By Sean McKeown 

ODA Advisory (ODAA) and Paul Sadler Consultancy have signed a MOU, which will see the two organisations expand their reach into the aged care sector.

ODA Advisory (ODAA) and Paul Sadler Consultancy have signed an MOU: memorandum of understanding, which will see the two organisations expand their reach into the aged care sector.

ODAA has contributed a number of expert articles to Inside Ageing in areas to do with legal, finance and governance – Read them here.

Paul Sadler has extensive experience in aged care, both as a past CEO of Presbyterian Aged Care NSW & ACT, and more recently as interim CEO of Aged and Community Services Australia (ACSA) and the newly formed Aged & Community Care Providers Association (ACCPA). Mr Sadler played a key role in representing the sector in proposals to the government and in submissions at the Aged Care Royal Commission.

He is an acknowledged expert in understanding the aged care reform agenda, government policy and the future of aged care. 

ODAA is a philanthropic advisory firm, and a subsidiary of the PBL Law Group, with experienced advisors covering a range of disciplines, including financial management, accounting, mergers and acquisitions, high-level HR advice, legal, and corporate structuring. All advisors provide their advisory services pro bono to ODAA – with little overheads – ODAA is more than competitive on fees for service.

All fees earned by the ODAA advisory team are for the ultimate benefit of a small number of needy charities, through an annual donation. 

In a statement, Mr Sadler commented, “I’m delighted to partner with ODA Advisory Pty Ltd. Together we look forward to supporting smaller to medium-sized aged and community care providers, especially not-for-profit organisations.” 

“This is a time of tremendous change for the aged care sector. We know providers will need trusted and experienced support to make sensible strategic decisions in this environment.” 

In welcoming the MOU signing, Ron Thomsen, Managing Director of ODAA said “ODAA’s capacity to provide a range of experienced Advisors in implementing transactions is complementary to the aged care expertise Paul Sadler Consultancy will bring to the partnership.” 

The new partnership is focused on addressing the needs of the aged care sector, with support for boards and management across strategic and operational areas.

Flowing from a Strategic Planning Session in April this year, which focused on how to expand the One Direct Advisory Business, both geographically and for market penetration, the ODA Advisory team have announced a planned move to be part of the PBL Law Group.

The business model, which ODA has successfully operated by the pro bono Advisors will remain unchanged in that the purpose of the Advisors activities will be philanthropic, and entirely for the financial benefit of NFP charities.

ODA Advisory and PBL Law have had a Joint Venture arrangement since 2020, and the move to formalise this relationship will be more efficient for both parties. 

Raea Khan, Principal of PBL Law, has said that with the Advisors joining PBL Law, it will allow for the expansion of the existing PBL Law Pro Bono legal activities and enable a wider range of Advisory Services to be offered to clients. 

The administrative and formal establishment of this combined team is well advanced and an official launch date will be advised shortly.

In terms of the Advisors focus, the key benefits and changes will be:

• One Direct Advisory Advisors will join PBL Law Group, under the business name of ODA Advisory Pty Ltd.(ODAA).
• The ODAA Advisors will operate from co shared offices at Gosford, and in George Street, Sydney, with the PBL Law teams. The ODAA Advisors and the PBL law teams will enjoy a closer and beneficial professional relationship in servicing clients.
• Whilst ODAA will be a wholly owned subsidiary of PBL Law, it will be independently managed, with its own Board, and with the sole establishment purpose to generate surpluses to be distributed to charity.
• All ODAA advisors will continue to provide their services on a Pro Bono basis to ODAA in meeting client needs.
• The charitable beneficiaries of the ODAA activities will be expanded to a small number of needing charitable NFPs, who will receive annual donations from fees flowing from ODAA Advisory activities.
• The advisory services provided by the ODAA are largely unchanged, but will have greater legal service availability, including:
  • Mergers and Acquisitions, including Legal Due Diligence
  • Corporate Structuring and Transactions, and legal impacts
  • Legal contract/law guidance 
  • Strategic Planning
  • Governance
  • Corporate Finance Advice / structuring and restructuring
  • Dispute Resolution
  • Executive Human Resource Advisory Services.
• We expect activities in our target market sectors of small to medium Corporate businesses and in NFPs, especially those operating in the Aged and Community Care sectors, will be expanded considerably.
• ODAA embraces collaboration and in regard to the Aged and Community Care Sectors, ODAA has negotiated a new high level relationship which will significantly enhance joint activities in this sector.  Look for a media announcement shortly. 

Ron Thomsen, Director of ODAA, said that he welcomed this next stage of development of the philanthropic business.  The planned expansion will better use the growing pro bono advisory team resources, add enhanced legal advice to the service range and meet wider client and Community needs.

Further details will be available, including a new web site, in the coming month.

Contacts for further information: 

Ron Thomson
ODA Advisory
ron.thomsen@bigpond.com

Raea Khan
PBL Law Group
raea@pbl.legal

By Ron Thomsen and Peggie Pantsos

In this guest post, Ron Thomsen and Peggie Pantsos (joint venture parties in One Direct Advisory and PBL Law), provide timely advice to aged care businesses when selecting Board members and reviewing current ones, especially those Directors who may not have the time to participate fully.

As Not For Profit (NFP) Boards approach their Annual General Meetings (AGMs) in late October/November, considerations are directed, about this time, to Board Director replenishment and successions.

Much has been written about the desired Board Director Compositions, in regard to balance of gender, age, experience and skills etc. The latter skills needs can be determined after a Board skills matrix and gap analysis is conducted.

From our experiences, two considerations which are worthy of input into your selection criteria and interview process is the time availability of the new Director applicant, and who from the Board has the experience and time to step into temporarily managing the business, in a worst case scenario, should there be an important need, such as an unexpected loss of the CEO.

Maybe a Director’s time availability and who can and will step up in a worst case scenario are interrelated, but we believe that they are separate considerations in the selection process.

In regard to time availability, the prospective new Director should be alerted to their responsibility’s in undertaking the Board role, and they should be advised that their commitment could go well beyond the preparation and attendance for the monthly Board meeting.

How many times have Board Directors explained repeated non delivery of a committed task or in answering emails, by saying that they are busy and don’t have the time? We suggest that those Directors should not have joined the Board in the first place, as they are not complying with their responsibilities, and are letting their fellow Directors down.

A Board year end review might encourage the time spare Director to remedy their lack of Board commitment but if you are in regional areas, where maybe the Board Director talent pool is limited, then this review exercise may only result in the loss of a Director. It is much better from the outset, in the interview of the new Director, for both parties to understand time availability and Board requirements.

One group which we have found to be time frustrated is the relatively younger Board Director, maybe a first time Director, who is desirable for longer term succession thoughts, but have the high priorities on a young family and a rising work career.

Whilst these people generally have good intent and purpose, there will be a need for more senior Directors to step up and cover more of the Board Executive functions, to nurture and mentor the young new Director. Our experience is that generally young Directors don’t remain on the Board for reasonably long terms, as new family members and work promotions dictate their time allocation to the NFP Board, and they will move on.

Underestimating the workload and responsibilities of a NFP Board role is generally a common problem, especially by the younger applicant.

Now, for the Board worst case scenario, and possibly a contingency Board plan, for say the loss of a CEO, or indeed the CEO needing support for a special project. Some Boards do have an emergency procedure/plan for this circumstance, but the problem is when the event happens, and who from the Board will step up and implement the temporary replacement.

Over recent years, most Boards have been taken by surprise by the unexpected impact of COVID and lockdowns. Some sectors, like residential aged care, have been disproportionately affected with pressures on management and staff, and absences through illnesses.

We think that as a consequence of the uncertainties we have experienced, it is now important for Boards to have a Director worst care contingency plan where a Director/Directors can step in to fill, say, the CEO absence, temporarily for up to possibly 4 months.

The emphasis on Board composition balance, we think, needs to have allowance for Directors who have time availability, maybe retired or semi-retired Directors, who have Business Management experience, and who can hold the fort until an external recruitment can be undertaken to permanently fill the necessary role.

This step up Director, may or may not be the Chair, but should have a good knowledge of the NFP operation, through induction and ongoing knowledge of management/staff/volunteers, and the business stakeholder commitments and responsibilities, like for funding agreements.

The importance of the Board having a thorough knowledge of the small to medium NFPs business has never been more important, and starts with a thorough new Director induction.

Inductions

The success and longevity of a NFP is largely dependent on a properly functioning Board. For a Board to operate effectively, it is vital that new Board Members understand the role of a Board generally, the specific obligations of their role and how it differs from the obligations of other Board Members.

As outlined above, before a prospective Board Member is selected, the organisation should broadly consider:

1.         Whether the individual will fit into the culture of the Board;

2.         Undertaking good due diligence on the prospective Board Member; and

3.         Ensuring that the individual understands what commitment is required to serve on the Board.    

Once a desirable candidate is selected, making sure that an effective Board induction process is established and implemented is an important way to ensure that new Board Members comprehensively understand their responsibilities and the expectations of the organisation, and that they are suitably prepared take on this role.

 The induction process should include the following:

–           visits to all operating sites;

–           meeting management, and understanding all stakeholder interests,

–           social integration with other Board Members; and

–           specific training or professional development in relation to the role.

Even if a new Board Member is experienced, it is important that they stay up to date and refresh their governance knowledge, specifically in relation to the NFP they have been newly appointed to.