MODULE 5 PLANNING, REPORTING & ACCOUNTABILITY ADB Private Sector Development Initiative Corporate and Financial Governance Training Solomon Islands Dr Ann Wardrop La Trobe University

Acknowledgement These materials were produced by the Asian Development Bank’s Pacific Private Sector Development Initiative (PSDI). PSDI is a regional technical assistance facility co-financed by the Asian Development Bank, Australian Aid and the New Zealand Aid Programme.

Module 5 Outline  Planning, reporting and accountability  Plans: Strategic Business Asset management Human resources Risk Financial  Reporting to stakeholders The annual report SOEs: annual report, half yearly report

Introduction In this module we are going to look at the board’s role in planning and how it connects to reporting, and accountability. It mixes both aspects of the board’s performance and monitoring role.  Why should the board plan and what types of plan should the board oversee?  How must the results of the company’s performance be reported externally?  External reporting is linked to accountability (good corporate governance)

Why Planning?  Devising and monitoring strategy has been described as “the heart of business success and failure” and therefore central to corporate governance (the business argument)  Strategic planning also seen as part of directors’ duties (the legal argument)

What role does the board have?  Precise role and extent of board’s role in devising strategy will depend on the company’s size;  Directors of small companies deeply engaged in strategy  Directors of large companies only able to review and test strategy devised by management

The strategic plan A strategic plan is an aspirational document that communicates the long term goals of an organisation describing at a general level the actions required to achieve those goals and setting high level measurable targets against which achievement of the plan’s goals may be measured.

The strategic plan  Has an “end in mind”  Sets framework for 3-5 years or more  Typically in three parts  Vision statement  Key Initiatives to achieve the vision  Translation of strategic initiatives into the budget

The strategic plan  ‘Budget’ refers to the first year of the plan; forecasts are provisional  Strategic plan will require detailed plans that set out precisely how the strategic objectives will be achieved.

The strategic plan  The more detailed documents include:  The annual business plan – how the company will achieve annual milestones on the way to the overall strategic goal;  Plans for division of the business that relate to annual business plan All of these plans should be aligned with the overall strategic plan

The business plan  Business plan can be used for different purposes.  As mentioned above, it can be used in the context of the strategic plan;  Can also be used to support an application for finance, government grants or to attract investors

Kind of information in a business plan  Description of your business  Description of the target market  Analysis of the competition  Description of the management team and staff  Operations  Marketing  Financial performance

Kind of information in a business plan*  Financial performance  Include a SWOT analysis  This analysis useful for all sorts of planning

Example of SWOT analysis Strengths Recently updated technology Reliable suppliers Quality product Reputation for customer service Weaknesses Insufficient working capital Inadequate cash flow Opportunities Market opening up in different geographical area Demand is increasing Competitor weak in a particular area Threats Downturn in the economy New competitor Threatened regulatory change that will increase costs

The financial plan and importance of financial forecasts  [insert name of trainer] will be dealing with these [insert when].  [insert name of trainer] will show how to do these plans, how to evaluate them and how they become a mechanism for control and evaluation of the strategic plan.

Asset management plan  Object to ensure the company’s assets are used efficiently and promote profitability.  They set out “how physical infrastructure assets will be managed over a specific period of time” to achieve asset management objectives defined in a strategic plan or business plan.

Asset management plan  Asset register (record of all assets and what happened to them)  Define level of service expected  Identify assets critical to operation  Forecast demand for various asset categories  Include possible alternative delivery progams  Provide financial information about the assets  Include strategies to manage funding gaps  Include schedule for asset performance and review

The asset register  Very important  For tax purposes – ensuring assets are being correctly depreciated;  For financiers – can value assets of company; and  If you wish to sell the company

Other plans  Human resources plan  Risk management plans  Review and adjustment of plans  Monitoring discussed in next module  Review should make adjustments to plan if necessary

Reporting to Stakeholders  External reporting is part of the governance process  Reporting is an important legal and business requirement  Reports provide accountability, providing they are true and honest, not misleading  Part of the governance process is to ensure that correct data is collected to include in the reports

Reporting: Companies Act  Public company must send an annual report about the company within 20 days after it’s required to complete its financial statements.  Private company and a community company don’t have to provide an annual report unless a shareholder gives written notice requiring one if their rules say so.  However, if they don’t prepare an annual report they have to send a notice to each shareholder to that effect within certain time limits

Contents of the annual report  You should refer to the Companies Act and the company’s rules to determine what should be included.  Legal requirements in the Act are it must be:  In writing and be dated;  Include financial statements that comply with the Act  Include an auditor’s report if required

Contents of the annual report  Include the names of the directors and previous directors during relevant accounting period;  Contain any other information required by the regulations or the rules  Be signed on behalf of 2 directors, or if there is only 1 director by that director

Contents of the annual report  Additional requirements for public companies:  State separately the total remuneration and value of other benefits received by each director or former director;  Total amount of donations made by the company during the period;  Audit fees, and other amounts payable to the auditor

The annual report as a marketing document  Opportunity to communicate the company’s vision, include headline achievements for the year, a snapshot of the company  What community service projects  Chair’s statement and CEO’s strategic review

SOE reporting  Also required to provide an annual report but also a half-yearly report;  Reports tabled in parliament  Government assistance to be disclosed  Statement of corporate objectives  Include board’s estimate of the current commercial value of the Crown’s investment in the SOE group and a statement of the manner by which that value was assessed