Why does your club need a capital plan?

18.11.17

Sport is about unifying people; it is about passion, hope, commitment, and fulfilment. Sporting clubs are the backbone of our society and part of our community.

Good corporate governance plays a vital role in underpinning the integrity and efficiency of any sporting code.

Some see Governance in sport a painful obligation but really one should consider it a platform for growth?

If we accept that the status quo is no longer viable, then it makes sense for clubs and sports bodies to look to other sectors, such as business and non-profits, for governance lessons especially in capital planning and reinvesting in our facilities for the future.

Capital planning can take many forms such as human capital, funds capital or physical assets.

Capital assets have a longer life than a year – such as buildings, motor vehicles, furniture, machinery and equipment.

Capital planning is part of good corporate governance in particular asset management.

An effective Asset Management Policy is one way in which a board or committee can add substantial benefit to its organisation in what is a rapidly changing business environment.

While traditionally risk management policies have focussed on avoiding and/or mitigating the impact of threatening events, a more enlightened view will recognise that risk management is essentially strategic in nature, and can be the source of competitive advantage.  Effective risk management supports better decision making because it develops a deeper insight into the risk-reward trade-off decisions facing a company.

A club should use a pro-active strategic approach to asset management, which sees the Asset and Risk Management, Strategic and Business Planning process all closely linked.

The management of the club’s facilities is a key responsibility of the Management Committee and is essential if the club is to maintain members, participants, sponsors and the general public in a competitive environment.

To enable improved asset management, Clubs should maintain Fixed Asset Registers which detail a comprehensive list of the club’s physical assets. It should include all capital items that the club has purchased or acquired since its inception and has not disposed of.

The club should have an asset policy and threshold limit that it capitalises the asset i.e. $2,000 rather than right off the asset as an expense in the year of the purchase.

A club should develop an asset management plan

The objective of an Asset Management Plan (AMP) is to provide the physical asset status of the club in the current state and future development and is a forward-looking document.

The AMP will aim to optimise the efficiency for maintenance and capital programmes for major buildings/structure.

An AMP is a plan developed for the management of one or more infrastructure asset classes with a view to operating, maintaining and renewing the assets within the class in the most cost-effective manner possible, whilst providing a specific level of service.

The asset management plan should
  1. clearly identify the asset,
  2. service level (date of last upgrade / repair and maintenance),
  3. date of next review,
  4. risk of repair (rating of importance),
  5. cost estimates,
  6. improvement schedule.

 A club should also prepare an Annual Maintenance Program to demonstrate that it is maximising the use and lifespan of current assets. The club also needs to demonstrate how the club is leveraging its existing assets and infrastructure for maximum value and return on investment.

Clubs should be forward looking to assist with budgeting, cashflow forecasts and master planning should prepare a 3-year Capital Expenditure Plan to ensure the club’s committee can review the financial viability and approve the capital works or appropriate investment for the Club.

This is important to support the strategic plan, business plan and budget process to ensure that Poor governance does not affect the sport image as well as the sponsors and funders and the members and city who want to be associated with the sport.

To sum it up the importance of why your club needs a capital plan is: 
  1. To reinvest back in the facility to increase membership and patronage and improve the customer experience.
  2. That it guides the club committee
  3. Essential for the progress and prosperity
  4. It protects the rights of members and sponsors, donors and the governing body along with protecting the long-term objectives of the sporting code.
  5. Limits reputational risk
  6. Assist with cashflow planning

Quote from Justin Chon

"In life, try your best to do the right thing. Have fun while you're alive. Take advantage of every asset you have. Don't take anything for granted."

 If you love this article please share. If your club needs assistance let Adam  know on 0400 761 700 or info@carmalkconsulting.com.au

Adam Carter | Carmalk Consulting

Chief

M: 0400 761 700

W: (07) 3869 2573

E: info@carmalkconsulting.com.au

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