Time for an upgrade
Is your finance function suited and booted to properly support you?
FINANCE
Image: Istock
Eddie Magowan
Senior associate consultant, Campbell Tickell
In Ireland the Housing (Regulation of Approved Housing Bodies) Act 2019 was signed into law on 23 December 2019 and the new housing regulatory authority will begin work from early 2022. The new Act provides for the establishment of an Approved Housing Bodies Regulatory Authority to oversee the effective governance, financial management and performance of all voluntary and co-operative housing bodies, and replaces the voluntary framework, which has been in place since 2013. What can housing providers expect and how can finance teams provide support?
Those AHBs that have been complying with the voluntary Regulation Code and associated Financial, Performance and Governance Standards will have experienced the rigour of regulatory return and assessment processes, and the consequent demands that these place on finance functions to deliver timely, robust and credible data, both historical and forecast.
The global pandemic, meanwhile, has brought a swift and sharp focus to the need for boards and leadership teams across the sector to be alert to current and emerging risks that will or could impact their organisations. And also to have in place mitigations and controls which ensure an agile response and improve resilience in the face of such threats.
The value of ‘what if’ analyses in such exercises to assess potential financial impacts and inform response plans is already well accepted, to the point where formal stress-testing of financial plans now forms part of regulatory compliance in some jurisdictions.
Modern finance function
The days, therefore, when the finance function simply collected rents, paid staff and suppliers, and ‘kept the books’ are fast disappearing – if they have not already vanished. While these remain vital transactional activities in support of the wider business – and must continue to be subject to appropriate controls and regular audit – much more is now expected from the finance function in terms of producing ‘value-adding’ information for management and regulatory purposes.
Where the emphasis in the past was on reporting historical performance, often weeks after the relevant period, finance teams are now expected – partly due to a greater awareness of the capabilities of digital technology – to produce current information. Financial forecasts, for example, are often expected to reflect the very latest update on development plans, with changes synchronised so that every subsequent report produced reflects the revised baseline.
“Where the emphasis in the past was on reporting historical performance, finance teams are now expected to produce current information”
Even for larger organisations with ‘enterprise’ financial systems incorporating strong reporting capabilities this can be a challenge. For smaller bodies there is an onus on board members – particularly those charged with oversight of finance and audit matters – to ensure a proportionate level of resourcing, both in terms of staff and systems, so that the finance function is properly equipped to provide the requisite degree of support increasingly expected.
In doing so, boards might wish to consider:
- Are there sufficient skills and experience within the team to perform both the transactional and ‘valuing adding’ roles? – e.g. is there an over-reliance on one or more team members to produce key reports which others could simply not generate in their absence?
- What systems are used by the team and how well do these support information processing needs, e.g. is there an undue reliance on spreadsheets to produce reports and supporting analyses?
- What is the level of understanding within the board regarding the process by which data is collected and reports produced? Is the degree of analysis sought proportionate to the risks being managed, or could reporting be refined to a more meaningful and manageable level?
- If resources are limited, what opportunities are there to outsource transactional services (e.g. payroll) to allow staff to be redeployed, or share financial services with a partner organisation?
More rigorous regulation is imminent for AHBs. A well-prepared finance team will be an invaluable asset in years to come.
