FIN 301 Chapter 1 An Overview of Financial Management doc

FIN 301 Chapter 1 An Overview of Financial Management doc -...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
1 INTRODUCTION The Queensland Water Industry manages over $20 billion in water service infrastructure assets (Qld Commission of Audit Report, June 1996, Chapters 12 and 14) (Reference 1). An estimated $800 million is spent annually on the maintenance and operation of the network. Much of this asset base is earning a minimal (or negative) rate of return. In the case of the rural water industry alone, the net result of the negative rate of return is a loss to the state of between $150 million and $200 million per annum. With such massive investment in the industry, sound financial planning and management of WSPs is a key priority. In the urban context $10 000–$15 000 worth of water supply and sewerage infrastructure exists for each household. Each year approximately $200–$400 million of water- related infrastructure is developed by the public or private sector. The Financial Management Overview and Implementation Guide will help Queensland Water Service Provider (WSP) organisations to focus on achieving financial sustainability of maintaining and improving the quality of their services. Total management planning will provide the framework within which a financial management strategy is developed. This strategy will encourage best practice by WSPs as well as helping them to meet their commercial and statutory obligations (particularly consistency with COAG and NCP policy initiatives). Smaller WSPs often have limited resources and are more constrained in achieving these aims than larger, more commercially oriented WSPs. In recognition of this, a hierarchy of approaches to developing a financial management strategy has been established, to suit WSP organisations of different sizes. These guidelines have been prepared so as to be compatible with the new legislative framework for regulation of the Queensland water industry. 2 THE ROLE OF A FINANCIAL MANAGEMENT STRATEGY The financial management strategy comprises a Financial Management Plan and a Financial Model. The Financial Management Plan is a qualitative document that describes what capital works need to be undertaken and why; a Financial Model uses this information to create a quantitative document (i.e. forecast of revenue and expenditure). To be effective, the financial management strategy needs to: • give effect to strategies identified in the Corporate and Operational Plans, and the TMP Business Management Plan; • demonstrate the long-term viability of the organisation;
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
• be integrated with the organisation’s broader financial management planning; • be an iterative process (i.e. regularly reviewed and revised); • comply with legislative and administrative requirements (including QCA, DERM and DIP); and • provide mechanisms for effective monitoring and review.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 10

FIN 301 Chapter 1 An Overview of Financial Management doc -...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online