(This policy letter modifies any previous issue which Dept Headsstates or infers that the financial planning for an org is solely the responsibility of the Advisory Council. The major responsibility for financial planning lies with the Executive Council as it is the governing body responsible for the org’s solvency.)
(Ref:
Financial planning means handling the assets of an org and allocating its funds in such a manner as to achieve income greater than outgo.
The basic purpose of all financial planning is to increase the wealth and assets of the organization in order to help achieve its goals and purposes and its expansion.
Financial planning was originally the responsibility of the Advisory Council which, in 1965, was composed of the HCO Exec Sec and the Org Exec Sec and was understood to include the org’s Executive Director. As a result of an evolution in org pattern the Executive Council was formed and the Advisory Council was then made up of the divisional secretaries and any duly elected representatives from other units or areas. (Ref: HCO PLs 21 Dec. 66, Issue I, ADVISORY COUNCIL and Issue II, EXECUTIVE COUNCIL.)
Despite these policies, which clearly state financial planning is a primary duty of Executive Council, with the role of the Advisory Council being to originate, advise and recommend to Executive Council measures for approval, confusion seems to have persisted in some areas as to who actually wears the financial planning hat.
To set the matter straight, the correct datum is
THE EXECUTIVE COUNCIL IS RESPONSIBLE FOR FINANCIAL PLANNING AND ACTS ON THE ADVICES OF THE AD COUNCIL (AND IT, THE AD COUNCIL, IN TURN GETS ADVISED BY THE HEADS OF DEPARTMENTS).
By Executive Council is meant: The council composed of the senior executives of the org — the ED or CO, the HCO Exec Sec, the Org Exec Sec and the Public Exec Sec.
By Advisory Council is meant: The council composed primarily of the heads of the divisions of the org — the divisional secretaries.
(Where a complete Org Officer system exists in an org, the financial planning can be delegated to the Org Officers to do but still requires Exec Council approval before going to the FBO.
Ref: HCO PL 9 May 74, PROD-ORG, ESTO AND OLDER SYSTEMS RECONCILED and HCO PL 7 Mar. 72, Rev. 13 Apr. 72, Esto Series 1R, THE ESTABLISHMENT OFFICER.)
In practice, the department heads of a division would see that any necessary purchase orders from their departments were sent to the div head, along with full CSW and advices as to the department’s needs.
The Advisory Council meets and, taking into consideration the advices from the department heads, does its proposed income planning and financial planning for the week and submits its recommendations to the Executive Council.
The Executive Council, with the solvency and expansion of the org in mind, reviews the proposed income planning and financial planning. It acts on the Ad Council’s proposals and acts as well on any recommendations from the FBO or the Deputy FBO for M.O.R.E. (Ref: HCO PL 3 Sept. 82, Finance Series 35, DEPUTY FBO FOR MARKETING OF ORG RESOURCES FOR EXCHANGE [D/FBO FOR M.O.R.E.] PURPOSE.) It operates on the Bean Theory. (Ref: HCO PL 19 Mar. 71RA, Issue II, Finance Series 7RA, BEAN THEORY — FINANCE AS A COMMODITY.) It sees that plans are made for effective promotion and delivery of the org’s goods and services and that the org’s funds are wisely allocated so that the org makes far, far more money than it spends. On this basis it may add to, subtract from, amend or approve the proposed financial planning, or return it to the Advisory Council for correction or revision.
Once approved by the Executive Council, the financial planning, along with the projected income plan, Accounts Summary, Bills Summary and Income Note Collections Summary, is sent to the FBO. The FBO is the final approval authority for the org’s FP. He would review the FP himself and have the D/FBO for M.O.R.E. check any portions of the FP that concern the hat of the D/FBO for M.O.R.E. The FBO and D/FBO for M.O.R.E. look at FP from the viewpoint of whether the funds proposed to be spent will result in more production and more funds back into the org than are being spent. The FBO is not there to do the org’s financial planning himself. He ensures that the Exec Council wears that hat and verifies that it is being done correctly to buy more income and production. When satisfied that all is in order, the FBO gives the org its allocation.
The line goes from the department heads to the Advisory Council to the Executive Council to the FBO.
Although the FBO is the final approval terminal for the allocation before the FP can be activated, the Executive Council is fully responsible for financial planning for the org. This includes long-range financial planning as well as the weekly FP. In the final analysis, the financial health of the org is in the hands of the Executive Council. This is why the statistic of the Executive Council is org cash/bills, as it is the statistic
which reflects the competence of the Exec Council to manage the finances of the org and bring about a very solvent and prosperous org. If cash/bills is improving by trend, you know that the Exec Council is wearing its financial planning hat correctly.
Where an Executive Council or any member of it is not wearing this hat, responsibility for the org as a whole is missing and it will show in a declining cash/bills spread by trend.
With sound financial management, an active, on-policy, on-hat Executive Council can build a viable, expanding and prosperous org.