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The development of financial management practices as a necessary rationalisation for the support of mission in an Australian nonprofit organisation
Anne Abraham University of Wollongong
Abraham, Anne, The development of financial management practices as a necessary rationalisation for the support of mission in an Australian nonprofit organisation, PhD thesis, Department of Accounting Finance, University of Wollongong, 1999. http:/ro.uow.edu.au/theses/865
This paper is posted at Research Online. http://ro.uow.edu.au/theses/865
The Development of Financial Management Practices
as a Necessary Ratíonalisation for the Support of Mission
in an Austraiian Nonprofit Organisatíon
A thesis submitted in fulfilment of the requirements for the award of
the degree:
DOCTOR OF PHILOSOPHY
from the
UNIVERSITY OF WOLLONGONG
by
ANNE ABRAHAM
Bachelor of Science (University of Sydney), Graduate Diploma in
Education (Sydney Teachers' College), Master of Accountancy
(Charles Sturt University), Master of Commerce (University of
Wollongong), Graduate Certiíîcate in Higher Education (University of
New South Wales)
Department of Accounting and Finance
1999 Certlficate
I, Anne Abraham, certiíy that this thesis has not been submitted previously as part of the requirements of another degree and that it is the product of my own independent research. Dedication
For Ross
Two are hetter than one ... and a threefold cord is not
quickly broken
Ecclesiastes 4:9,12
m Acknowledgement
It is with a heart overwhelming with gratitude that I acknowledge the love, patience, understanding and encouragement of my husband
Ross and my children, Raewyn, Michael, David and Peter.
I wish to thank my superviser, Michael Gaff kin, for his willingess to allow me the freedom of discovery as I stumbled through the maze of research. I thank him for helping and encouraging me during the low times and rejoicing with me in the highs.
The Girl Guides Assocation has played a major part in various stages of my life, none less than in allowing me the access that made this thesis possible. In particular I would like to thank Barbara, Liz, Mil and Roger of Guides NSW and Margaret Courtney, archivist of Guides
UK.
IV Note
As far as possible, I have used the original spelling, grammar, punctation, abbreviations and formatting in my quotations from documents.
On 14 February 1966, Australia changed its currency base. Before that date, money is recorded in Pounds (£), Shiliings (s) and Pence (d) where 12d = Isorl/- and 20/- = £1.
After that date, money is recorded in Dollars ($) and Cents (c) where $1 = lOOc.
At the time of the currency change,
£1 = $2
1/- = lOc
Id = lc Abstract
This study concems the development of fînancial management practices in a nonprofît organisation, Guides NSW, an organisation which has its mission as its central focus, and, like other nonprofit organisations, is permeated by its history, its culture and its traditions.
In particular, the study addresses the two phenomena of the organisational attitude to fînancial matters and the dichotomy between short term and long term fînancial management. As organisational phenomena, it is appropriate to investigate them in their social context. Although contemporary phenomena, their roots are deeply entrenched in history. Thus, this case study involves both fîeldwork in terms of participant observation and engagement, and also historical analysis of archival records and artifacts.
The members and management of the Association view its mission as sacred, but money as secular. Consequently, the consideration of fînances can only be rationalised when the mission is endangered.
Guides can be viewed as a game of life built on the foundation of the
Boy Scouts, and influenced by the preferences and predilections of the Founder of both, with players, spectators and umpires all endeavouring to maintain the essential ethos of the game.
VI Table of Contents
Page
CERTIFICATE ii DEDICATION iii ACKNOWLEDGEMENTS iv NOTE V ABSTRACT Vi TABLE OF FlGURES XÍ TABLE OF TABLES xii
CHAPTER1 mXRODUCTION 1 1.1 OBJECTIVES 1 1.2 SIGNIFICANCE 4 1.3 METHOD 11 1.4 RESEARCHSITE 12 1.4.1 THE ORGANISATION 12 1.4.2 ACCESS 16 1.5 THEMES 19 1.5.1 ACCOUNTING IN CONTEXT 19 1.5.2 SACRED-SECULAR CONFLICT 19 1.5.3 EMBEDDED ORGANISATIONAL MODEL 21 1.5.3.1 Financial Control System 21 1.5.3.2 Organisational Structure 23 1.5.3.3 Organisational Culture 24 1.5.4 SPORTING METAPHOR 25 1.6 ORGANISATION OF THE THESIS 26
CHAPTER2 RESEARCH METHOD 30 2.1 INTRODUCTION 30 2.2 QUALITATIVE RESEARCH THEMES 31 2.2.1 NATURALISTICINQUIRY 31 2.2.2 INDUCTIVE ANALYSIS 33 2.2.3 DlRECT PERSONAL CONTACT 33 2.2.4 A HOLISTIC PERSPECTIVE 34 2.2.5 A DYNAMIC, DEVELOPMENTAL PERSPECTIVE 35 2.2.6 UNIQUE CASE ORIENTATION 35 2.2.7 EMPATHIC NEUTRALITY 37 2.2.8 CONTEXT SENSITIVITY 39 2.2.9 DESIGN FLEXIBILITY 39 2.3 ETHNOGRAPHY, CASE STUDY, FIELDWORK OR HISTORY? 40 2.3.1 DEFINING THE TYPE OF RESEARCH 40 2.3.2 EXAMINING THE MAJOR FEATURES OF THE RESEARCH 42 2.3.2.1 Contemporary phenomena 42 2.3.2.1 Detailed examination in real-life context 43 2.3.2.3 Phenomena embedded incontext 45 2.3.2.4 Multiple sources of data 46 2.3.2.5 Longitudinal analysis 47 2.3.2.6 Triangulation 47 2.4 THEORY-METHOD LlNKAGE 49 2.4.1 GROUNDED THEORY 50 2.4.2 THEME DEVELOPMENT 51
vn 2.4.3 HERMENEUTICS 52 2.4.4 ETHNOMETHODOLOGY 53 2.5 CONCLUDING COMMENT 54
CHAPTER 3 PROLOGUE: THE BEGINNING OF THE RESEARCH 56 3.1 INTRODUCTION 56 3.1.1 DAY-TO-DAY FINANCIAL MANAGEMENT 57 3.1.2 BROADERFINANCIAL MANAGEMENT 58 3.2 ASSOCIATION MANAGEMENT SESSIONS 62 3.2.1 SESSION 1: IDENTIFYING CONCERNS 61 3.2.1.1 Consideration of thetrend chart 62 3.2.1.2 Consideration of current cash assets 63 3.2.1.3 Considerationofexpenditurechart 64 3.2.1.4 Consequences of cash decline 65 3.2.2 SESSI0N2: IDENTIFYING SlGNIFICANT COSTDRIVERS 65 3.2.2.1 Identifícation of expenditure items 65 3.2.2.2 Division of items into "musts" &"wants" 66 3.2.3 SESSI0N3:GENERATINGALTERNATIVES 67 3.2.4 SESSI0N4: EVALUATING ALTERNATIVES 68 2.2.5 SESSI0N5:MAKINGDECISI0NS 70 3.3 PROPOSED ACTIONS REVISITED 74 3.3.1 EXPENDITURE REDUCTION 74 3.3.2 INCOMEGENERATION 76 3.4 THE OPEN DOOR 80 3.5 CONCLUDING COMMENT 81
CHAPTER 4: THE HISTORY OF THE ORGANISATION 83 4.1 SCOUTS 84 4.1.1 THEFOUNDER 84 4.1.2 THE FOUNDATION 90 4.1.3 CONCLUSION 94 4.2 GUIDES IN ENGLAND 96 4.2.1 BEGINNINGS 96 4.2.2 CRYSTAL PALACE RALLY 97 4.2.3 EARLYDAYS 99 4.2.4 CONCLUSION 105 4.3 GUIDES Dí AUSTRALIA 107 4.3.1 NEWZEALAND 111 4.3.2 TASMANIA 112 4.3.3 QUEENSLAND 114 4.3.4 SOUTH AUSTRALIA 116 4.3.5 VICTORIA 117 4.3.6 WESTERN AUSTRALIA 120 4.3.7 NEW SOUTH WALES 121 4.3.8 CONCLUSION 126 4.4 GUIDES IN NSW 127 4.4.1 THEBEGINNING 127 4.4.2 EARLY MEETINGS 128 4.4.3 CONCLUSION 131 4.5 CONCLUDING COMMENT 132
CHAPTER 5 THE CONTRIBUTION OF THE EARLY LEADERS 133 5.1 INTRODUCTION 133 5.2 FIRST FINANCIAL DECISIONS 137
viu 5.3 THE FIRST WOMEN 139 5.3.1 BRITISH HERITAGE 139 5.3.2 FlNANCIAL AND BUSINESS EXPOSURE 141 5.3.3 FEMINIST ISSUES 144 5.3.4 CONCLUSION 147 5.4 THE FIRST CHAIRPERSONS 148 5.4.1 LADY MARGARET DAVIDSON 148 5.4.2 LADY LlLY CULLEN 150 5.4.3 LADY ALICIA KELSO KlNG 152 5.4.4 LADY CAROLE^E DAVID 153 5.4.5 LADYEVA JULIUS 157 5.4.6 CONCLUSION 160 5.5 THE FIRST TREASURERS 160 5.5.1 MISS M ETHEL TROUTON 161 5.5.2 MISS JESSIE HELLICAR 163 5.5.3 MRSNOELLE E. BRENNAN 165 5.5.4 MlSSMAUDE F. WATSON 167 5.5.5 MRS L. O'MALLEY WOOD 175 5.5.6 CONCLUSION 189 5.6 CONCLUDING COMMENT 190
CHAPTER 6 ACCOUNTS, ACCOUNTING AND ACCOUNTABILITY: 192 6.1 INTRODUCTION 192 6.2 THE INTERNAL NEED FOR ACCOUNTABILITY 194 6.2.1 BY ORGANISATIONS IN GENERAL 194 6.2.2 BYNONPROFITORGANISATIONSINPARTICULAR 196 6.3 THE EXTERNAL DEMAND FOR ACCOUNTABILITY 199 6.4 THE DEVELOPMENT OF ACCOUNTABILITY MEASURES 201 6.4.1 BANKACCOUNTS 202 6.4.1.1 State Headquarters Accounts 203 6.4.1.2 CampAccount 209 6.4.1.3 Glengarry Account 210 6.4.1.4 Unit and District Accounts 214 6.4.2 INSURANCE 215 6.4.2.1 Property Insurance 216 6.4.2.2 Employees Insurance 217 6.4.2.3 Public Risk Insurance 218 6.4.2.4 Accidentand Sickness Insurance 219 6.4.3 CONTROL OF CASH 220 6.4.3.1 Receipts 221 6.4.3.2 PettyCash 222 6.4.3.3 OrderBooks and Accounts 223 6.4.3.4 Daily Banking and Mail Clearance 225 6.4.4 INVESTMENT ININVENTORIES 226 6.4.5 AUDITORS 232 6.4.6 FlRST FlNANCIAL CRISIS 234 6.4.7 ANNUAL REPORTS 236 6.4.7.1 First Annual Report 237 6.4.7.2 First Financial Report 238 6.5 CONCLUDING COMMENT 241
CHAPTER7: MISSION AND FEVANCIAL VULNERABILITY 244 7.1 INTRODUCTION 244 7.2 MISSION 245
IX 7.2.1 CHANGING EXPRESSIONS OF MISSION 245 7.2.2 FlNANCIAL SUPPORT FOR MISSION 248 7.3 OVERVIEW OF ANNUAL FINANCIAL RESULTS 257 7.4 A MODEL OF FlNANCIAL VULNERABILITY 263 7.4.1 EQUITY BALANCES 266 7.4.2 REVENUE CONCENTRATION 268 7.4.3 ADMINISTRATIVE COSTS 269 7.4.4 OPERATING MARGINS 271 7.5 APPLICATION OF THE MODEL 272 7.5.1 VALUES FOR OPERATIONAL CRITERIA 275 7.5.1.1 Equity Balances 275 7.5.1.2 Revenue Concentration 276 7.5.1.3 Administrative Costs 279 7.5.1.4 Operating Margins 281 7.5.1.5 Conclusion 284 7.5.2 COMPARISON WITH "AT RISK" NONPROFITS 286 7.6 CONCLUDING COMMENT 288
CHAPTER 8 FINANCIAL PERFORMANCE AND THE SUPPORT OF MISSION 289 8.1 INTRODUCTION 289 8.2 FINANCIAL RATIO ANALYSIS AND MISSION 292 8.3 LlMITATIONS OF FlNANCUL RATIO ANALYSIS 294 8.4 A MODEL OF FINANCL\L PERFORMANCE ANALYSIS 298 8.4.1 ARE FINANCIAL RESOURCES SUFFICIENT TO SUPPORT THE MISSION? 300 8.4.2 WHAT FINANCIAL RESOURCES ARE AVAILABLETO SUPPORT THE MISSION?.... 301 8.4.3 HOW ARE FINANCIAL RESOURCES USED TO SUPPORT THE MISSION? 303 8.4.4 ARE FINANCIAL RESOURCES APPLIED EFFICIENTLY AND EFFECTIVELY TO SUPPORT THE MISSION? 304 8.5 APPLICATION OF THE MODEL 308 8.5.1 ARE FINANCIAL RESOURCES SUFFICIENT TO SUPPORT THE MISSION? 308 8.5.1.1 Retum on Net Assets Ratio 309 8.5.1.2 Viability Ratio 310 8.5.1.3 Primary Reserve Ratio 312 8.5.1.4 Net Income Ratio 313 8.5.2 WHAT FINANCIAL RESOURCES ARE AVAILABLE TO SUPPORT THE MISSION?.... 315 8.5.2.1 Operating Income Ratio 315 8.5.2.2 Contributed Income Ratio 317 8.5.2.3 Capital Financing Ratios 319 8.5.3 HOW ARE FlNANCIAL RESOURCES USED TO SUPPORT THE MISSION? 319 8.5.4 ARE FINANCL\L RESOURCES APPLIED EFFICIENTLY AND EFFECTIVELY TO SUPPORT THE MLSSION? 321 8.5.4.1 Quality 322 8.5.4.2 Membership Satisfaction and Retention 324 8.5.4.3 Productivity 326 8.5.5 CONCLUSION 328
CHAPTER 9 CONCLUSION: WHERE TO FROM HERE? 333 9.1 THE END OF PLAY NOT THE END OF THE G AME 333 9.2 THE THESIS ENDS 333 9.3 THE GAME CONTINUES 336 9.3.1 FORTHESOCIALCONSTRUCTIONOFKNOWLEDGE 336 9.3.2 FORGUIDESNSW 339 9.3.3 FORTHERESEARCHER 343 BIBLIOGRAPHY 345 Table of Fígures
Figure Ll The division between the "sacred" andthe "secular" 20 Figure L2 Embedded organisation framework 22 Figure 2.1 My 4 periods of personal involvement with the organisation 44 Figure 3.2 Guides NSW - Assets consumed by operations 62 Figure 3.3 Guides NSW - Expenditure items 64 Figure 3.4 Gridof expenditurereductionoptions 70 Figure 3.5 Grid of income generation options 71 Figure 4.1 The Guide promise and law 106 Figure 4.2 The beginnings of Guides in AustraHan and New Zealand 110 Figure 6.1 The management accoimting process 195 Figure 6.2 Statewide reporting structure of GuidesNSW 202 Figure 6.3 Guides NSW - First balance sheet 239 Figure 6.4 Guides NSW - First income and expenditure statement 240 Figure 7.1 GuidesNSW: Net operating results for 1924-1997 259 Figure 7.2 Guides NSW: Income and expenditure for 1924-1965 260 Figure 7.3 GuidesNSW: Income and expenditure for 1966-1997 261 Figure 7.4 GuidesNSW: Membership figures for 1924-1997 262 Figure 7.5 A model of the fínancial health of an organisation in relation to four operational criteria 265 Figure 7.6 Ratio of net assets to total income for 1924-1998 276 Figure 7.7 Changes in revenue concentration index for 1924 - 1998 277 Figure 7.8 Ratio of annual administration costs to total costs for 1924 - 1998 280 Figure 7.9 Ratio of operating margin to total income for 1924 - 1998 281 Figure 7.10 Ratio of operating margin to total income for 1978 - 1998 283 Figure 8.1 Model of financial performance in relationto mission 293 Figure 8.2 Retum on net assets ratio for Guides NSW for 1986-1997 310 Figure 8.3 Viability ratio for Guides NSW for 1986-1997 311 Figure 8.4 Primary reserve ratio for Guides NSW for 1986-1997 313 Figure 8.5 Net income ratio for Guides NSW for 1986-1997 314 Figure 8.6 Operating income ratio for Guides NSW for 1986-1997 316 Figure 8.7 Membership of Guides NSW for 1986-1997 317 Figure 8.8 Contributed income ratio for Guides NSW for 1986-1997 318 Figure 8.9 Membership services and support ratios for 1986 -1997 321 FigureS.lO Girlsperleadertatios forGuidesNSWfor 1986-1997 322 Figure 8.11 Membership trends ratios for Guides NSW for 1986-1997 324 Figure 8.12 Financial productivity for Guides NSW for 1986-1997 327 Figure 8.13 Annual change in girl membership for Guides NSW for 1986-1997 327
XI Table of Tables
Table 1.1 Characteristics of nonprofit organisations that affect accounting 5 Table 1.2 Typesof nonprofitorganisations 6 Table 1.3 Volimteering and giving to nonprofit organisations in Australia 10 Table 2.1 Qualitative research themes 32 Table 2.2 Major features of this case study 42 Table2.3 Multiple sourcesof datausedinthis study 46 Table3.1 Key figures for Guides NSW 63 Table 3.3 Summary income and expenditure figures 64 Table 3.3 Consequences of cash decline 65 Table 3.4 Expenditure: "musts" versus "wants" 66 Table 3.5 Expenditure reducing ideas 67 Table 3.6 Revenue generating ideas 68 Table 3.7 Expenditure reduction scores 69 Table 3.8 Income generation scores 69 Table 3.9 Proposed actions to decrease expenditure 72 Table 3.10 Proposed actions to generate income 73 Table 6.1 Examples of nonprofit fraud 197 Table 7.1 Financial characteristics of nonprofit organisations 264 Table 7.2 Comparison of ratios for Guides NSW and Tuckman & Chang (1991)..286 Table 8.1 Role of financial ratios in financial analysis 295 Table 8.2 Ratios that indicate whether financial resources are sufficient to support mission 301 Table 8.3 Ratios that indicate what financial resources are available to support mission 302 Table 8.4 Ratios that indicate how fmancial resources are used to support mission303 Table 8.5 Ratios that indicate whether financial resources are applied efficiently and effectively to support mission 307 Table 8.6 Ratios for Guides NSW for 1986-1997 that indicate whether fmancial resources are sufficientto support its mission 309 Table 8.7 Ratios for Guides NSW for 1986-1997 that indicate what fmancial resources are available to support its mission 315 Table 8.8 Ratios for Guides NSW for 1986-1997 that indicate how financial resources are used to support its mission 320 Table 8.9a Ratios for Guides NSW for 1986-1997 that indicate whether financial resources are applied efficiently and effectively to support its mission ..323 Table 8.9b Ratios for Guides NS W for 1986-1997 that indicate whether financial resources are applied efficiently and effectively to support its mission ..323
Xll CHAPTER 1
INTRODUCTION
This thesis is about a game - a game with rules, equipment,
players, umpires, spectators. More than that, it is about the
survival of the game, about the resources that support the
game, that enable its objectives to be met.
1.1 Objectives
This thesis concerns the development of accounting practices in an organisational context (Burchell et al, 1980; Chua, 1988; Hopwood,
1983, 1987). It analyses the way in which accounting practices unfold over time in a nonprofit organisation, the Girl Guides
Association of New South Wales, Australia. Accounting practices are viewed as social constructions by the players in an unfolding drama set within an organisational culture, a culture permeated by histoiy and environment. Thus, this thesis is a study of accounting as it is intertwined with organisational functioning (Hopwood, 1987), and as such, seeks to add to the increasing body of knowledge on the research of accounting in its organisational context (Hopwood, 1983,
1986; Nahapiet 1988; Preston, 1986; Ezzamel and Boum, 1990). Chapter 1 - Jntroduction page 2
Much research of accounting in organisations has emphasised the accounts an organisation needs, and the potential influence accounting may have (Hopwood, 1987). The relationship between accounting systems and organisational decision making practices has stimulated the analysis and development of normative accounting roles and potential solutions (Burchell et al, 1980). Researchers have identified that accounting systems play a role in both decision making (by providing relevant information and thus improving the rationality of the decision making process) and also in maintaining control systems within the organisation. Burchell et al (1980) csdled for "the study of accounting as a social and organizational phenomenon to complement the more prevalent analyses which operate within the accounting context" (1980, p. 22). They identified a need for historical and organisational studies of the development of accounting, addressing the various social issues and other conditions that have influenced the emergence and development of accounting systems, together with an understanding of how such systems become involved in other aspects of organisational life.
To answer this call, this study addresses the conditions which gave rise to accounting systems, rather than merely focusing on their uses. It seeks to address the question "... how ... has accounting become implicated in the functioning of the modern large scale, hierarchical organizations? How have particular systems arisen out of Chapter 1 - Introduction page 3
organisational processes and actions?" (Burchell et al, 1980, p. 23).
This study investigates two contemporary phenomena: organisational
attitude to finances and the dichotomy between short term and long
term fînancial management. To do this, it study traces the
development of accounting practices in the Girl Guides Association,
from its formal beginning in 1920, by analysing the influences of
organisational structure, culture and history, together with the
external environment in which it has operated.
Therefore, this study seeks to ground accounting in its organisational
and social context, which focuses attention on the nature of the
organisational objectives. A nonprofît organisation is chosen as the
focus of interest because its objectives or mission, which by very
defînition are not profît oriented, are central to its culture, and thus
the objectives and the determination of organisational effectiveness is
not driven purely, if at all, in monetaiy terms. This allows the
influences arising from intertwining of accounting and the various
facets of the organisation to be better understood. The study has a
critical thrust in that it recognises that accounting control systems
"are not just the consequences of exogenously determined forces, but
are also the agents of social change" (Neimark and Tinker, 1986, p.
391). It attempts to identiíy the structure of values and power relationships which underlie the systems of social control (Willmott,
1989). Chapter 1 - Introduction page 4
Therefore, the objectives of the study are to:
(i) examine how accounting practices arise and unfold over
time through organisational processes and actions of a
nonprofît organisation;
(ii) analyse the influence of organisational structure, culture
and history on the development of accounting practices;
(iii) identiíy patterns in the environment, organisation or its
culture that might explain the emergence of accounting
systems, and
(iv) evaluate the fînancial performance of the organisation in
the context of its mission.
1.2 Significance
Anthony and Young (1994, p. 47) defîne a nonprofît organisation as
"an organisation whose goal is something other than earning a profît for its owners. Usually its goal is to provide services". This defînition highlights the major difference in management control problems and organisational effectiveness between nonprofît and for-profît organisations. In the latter, management decision making is intended to increase or maintain profîts and the size of the profît is a signifîcant measure of the success of the organisation. However, in a nonprofît organisation, success is measured by the fulfîlment of a Chapter 1 - Introduction page 5
mission, usually the delivery of services, and thus management decision making is intended to provide services in the best possible manner.
The unique characteristics of nonprofît organisations make them a
fruitful avenue for studying the infîltration of the fînancial control
systems into an organisation. The general characteristics of
nonprofît organisations that may affect their fînancial control
processes are listed in Table 1.1. Because they start with a central
mission, usually a commitment to service, they do not necessarily
establish a business plan at the commencement of their operations.
Thus, an examination of how financial practices develop in such an
organisation will call in the various players such as culture, people
and history.
Table 1.1
Characteristics of Nonprofit Organisations that Afíect Accounting
The absence of a profit measure. Different tax and legal considerations. A tendency to be service orgamsations. Greater constraints on goals and strategies. Less dependence on clients of f nancial support. The dominance of professionals. Differences in govemance. Importance of poUtical influences. A tradition of inadequate management controls. Chapter 1 - Introduction page 6
Mission is central to the existence of a nonprofît organisation (Bryce,
1992) and social obligations should be reflected in the statement of mission (Herzlinger and Nitterhouse, 1994). Good planning principles means that an organisation should also express the objectives it must obtain in order to accomplish its mission. The effectiveness and effîciency with which these objectives are met wiU then determine the extent to which an organisation has accomplished its goal.
Handy (1988) suggests that nonprofit organisations are often defined by what they are not: that is, not profît-seeking, not government run.
He distinguishes fîve overlapping types of nonprofît organisations shown in Table 1.2. The key distinction appears to be that the
"people are there because they want to be there" (Handy, 1988, p. 2), because they have a personal commitment to the goals of the organisation.
Table 1.2
Types of Nonprofît Organisations
TYPE EXAMPLE ~ Service providers Australian Red Cross Research and advocacy Green Peace Self-help groups Alcoholics Anonymous Clubs and societies for leisure interests Little Athletics Association ntermediary bodies Australian Council of Social Services Chapter 1 - Introduction page 7
The Financial Accounting Standards Board of the United States suggests that the major distinguishing features of nonprofît organisations include:
(a)receipts of signifîcant amounts of resources from resource providers who do not expect to receive either repayment or economic benefîts proportionate to resources provided; (b) operating purposes that are other than to provide goods or services at a profît or profît equivalent; (c) absence of defîned ownership interest that can be sold, transferred or redeemed, or that convey entitlement to a share of a residual distribution of resources in the event of liquidation of the organization. (FASB, 1980, p. 3)
McCrae (1982) adds a fourth characteristic: the operations of nonprofît organisations are generally not subject to the operation of market forces.
The nonprofît sector forms a signifîcant segment of the Australian private sector ranging from small local groups to multi-miUion doUar establishments covering a wide variety of social, sporting and service clubs, educational, religious, welfare and health organisations, and professional associations. They possess diverse sources of funding: grants from various levels of government and other associations, fees, donations, corporate sponsorship, income from trading activities and investment income. The legal forms of the nonprofît organisations are also characterised by diversity. They many be either incorporated or unincorporated. Incorporated associations may be registered as Chapter 1 - Introduction page 8
companies limited by guarantee or cooperative societies; they may be incorporated by a royal charter or a special Act of Parliament, or they may be registered as incorporated associations under an Association
Incorporations Act of an Australian state or territory (Sievers, 1989).
The selection of nonprofît organisations is warranted because such organisations form a sector of society whose importance is becoming recognised worldwide (Lyons and Hocking, 1998). It is claimed that
To varying degrees, nonprofît organisations are sustained by millions of ordinary people, through gifts of time and of money, or volunteering and giving. They are also generously supported by governments and business, though in both cases, there is often an element of reciprocity to this support: governments fund nonprofît organisations to provide services that might otherwise by provided by government directly; business looks to obtain favourable publicity and sales through an association with well known nonprofîts. (Lyons and Hocking, 1998, p.2)
In Australia in 1995/961, nonprofît organisations spent between $27 billion and $43 biUion in operating expenditure (depending on the
1 This data was collected as part of a collaborative project between the
Centre for AustraHan Community Organisation and Management (CACOM) at the University of Technology, Sydney and the Australian Bureau of
Statics. The data provides two sets of estimates. The core definition includes organisations that are "undeniably private" (Lyons and Hocking,
1998, p. 2) that do not distribute proí ts to individual members in any form.
The extended definition includes organisations such as non-private Chapter 1 - Introduction page 9
defînition used) - equivalent to between 6.2 per cent and 9.8 per cent of the gross domestic product. Using even the lower of these two figures means that turnover of the nonprofît sector was larger that the communications industry or the accommodation industry, cafes and restaurants. By using the larger defînition, the turnover was larger than that of the mining industry. Even by the lower defînition, the nonprofît sector was as large as the NSW and Victorian govemments combined. The Australian nonprofît sector employed between 564,000 and 668,000 people in 1995/96. This represented between 11 per cent and 13 per cent of private sector employees, and between 6.8 per cent and 8.1 per cent of the total workforce. The distribution of the 374 miUion volunteer hours and the $2.8 biUion donations to the sector are shown in Table 1.3.
The key to the survival of a nonprofît organisation is through continued support by its membership of its mission. Thus, the main organisational problem is to ensure that membership is maintained, and even increased. Since the members join the organisation primarily because they have a personal commitment to its goal, in order to maintain the membership, the management of the organisation must ensure that the organisation remains focussed on its objectives, that it keeps its mission central. Morgan (1990) universities, trading cooperatives, and mutual finance and insurance organisations. Chapter 1 - Introduction page10
identifîes this as the key feature that distinguishes nonprofit organisations from capitalist fîrms and the main basis for their resistance to the processes of rationalisation.
Table 1.3 Please see print copy for image
(Source: Lyons and Hocking, 1998, p. 4) Chapter 1 - Introduction page 11
1.3 Method
This study uses a single case study approach with embedded multiple units of analysis (Yin, 1989). It also adopts a grounded theory approach with an underlying game metaphor. The central idea of the theory-method linkage means that how an organisation is studied determines what is learnt about the organisation (Patton,
1990). It is thus a hermeneutic ethnomethodology since a hermeneutic approach is taken to the large amount of historical data in this study, and the research is an ethnomethodology in that it
gets at the norms, understandings, and assumptions that are taken for granted by people in a setting because they are so deeply understood that people don't even think about why they do what they do. (Patton, 1990, p. 74)
This research adopts a paradigm of choices (Patton, 1990) by which methodological orthodoxy is rejected in favour of methodological appropriateness. Situational responsiveness is thus a key to the design of the research study and appropriate methods relate to the purpose of the enquiry, the research questions and the resources available.
In summary, the method adopted is a single case study, which is ethnographic in nature, and takes a grounded theory, or theory- method linkage approach, rather than starting out with a Chapter 1 - Introduction page 12
preconceived theoretical stance. The research method is discussed in greater depth in Chapter 2.
1.4 Research Site
1.4.1 The Organisation
The chosen research site was the Girl Guides Association of New
South Wales (NSW), Australia. It had informal beginnings as early as
1910, but was formally established in 1920, and has operated continuously ever since. It had its roots in a British organisation, which was formed a few years earlier, and which grew out of the military training techniques of its founder. Its members wear uniforms, subscribe to a code of behaviour and make certain promises upon joining. The activities of the members follow a program, designed to develop the individual's character and public service, while providing the individual with fun, fellowship and a sense of purpose. The organisation is part of an international affîliation of similar organisations, this affîliated body being the largest of its type in the world.
Membership of the Australian organisation is currently around
50,000. Its counterpart organisation in the United States has over three million members. Although started around the same time and from the same roots, their development has been quite different, both Chapter 1 - Introduction page 13
in the past and more recently. The major differences have revolved around history, geography and population size. Today, Australia has less than eight percent of the population of the United States, despite the land mass of Australia being a comparable size to the contiguous states. Further, the centre of Australia is largely desert and uninhabited, with 40 percent of the population living in the two major cities. By 1910, the United States had 400 years of history behind it, transportation throughout the country was established and growing rapidly; the population was of a significant size. On the other hand,
Australia only came into nationhood in 1901, and so in 1910, it had a very new history. Distances were vast, and transport was usually by sea, since roads and railways did not exist across the country.
The population was veiy small and tended to congregate on the eastern and southern seaboards, with those choosing to live in the interior being extremely isolated. These distances and isolation meant that growth of the organisation was considerably slow. In the early days, the Australian organisation maintained strong links with its British parent, with correspondence between them taking over three months by ship each way.
In the late 1970s, the United States organisation employed a new
Chief Executive Offîcer (CEO) who found
a somewhat dispirited organization. Some of the members feared that the days of its former gloiy were gone. ... membership were waning and revenues dropping. ... The Chapter 1 - Introduction page 14
organization had a strong sense of its heritage, one it was reluctant to change. (Herzlinger and Nitterhouse, 1994, p. 3-4)
The new CEO implemented sweeping changes centring around
fînancial analysis and managerial control, so that by the early 1990s
the organisation "was completely tumed around: membership at an
all-time high, positive staff morale, and stable fînances" (Herzlinger
and Nitterhouse, 1994, p. 4).
The Australian organisation has not experienced this transformation,
but is currently struggling to remain fînancially viable. The
organisations is asset-rich, cash-poor and has a declining
membership, a similar state of affairs to the United States
organisation in the 1970s. Its management structure, and thus its
accounting systems are permeated by its rich historically-derived
culture, as are so many other voluntary organisations. It is thus an
interesting case in which to investigate the relationship between the
effects of organisational environment and organisational culture on
the financial management of a voluntary organisation.
Another significant factor in the choice of the Girl Guides Association
of NSW is that Guiding developed uniquely in Australia in Chapter 1 • Introduction page 15
comparison with other countries.2 Large distances and poor transport meant that each State developed independently. In other words, each state developed as if it were a national organisation. The members are all members of the States not of the Federal body. The
Federal body only has the States as its members. Thus to study the development of a State organisation is like a microcosm of a national organisation in any other country. Thus, this provides the ability to study development of fînancial management practices without the additional diffîculties of distance.
The mission of the Girl Guides is related to character building and service. The Association is unique in that members must make a promise to serve God, Queen, country, keep Guide law, and help other people. There is personal commitment to the ideology of the organisation - membership is not merely obtained by paying a monetary contribution. Indeed in the early days, no monetary contribution was required nor expected.
Such member-based organisations have received relatively little attention in the accounting literature. What does exist either normatively or uncritically seeks to prescribe "appropriate"
2 The Boy Scout Association of Australia is unique amongst world scouting organisations, in that it, too, developed íirst as State Associations, and later formed a federal body of autonomously operated Associations. Chapter 1 - Introduction page 16
accounting practices. There are a number of monographs on accounting for nonprofit organisations, but most are American, and therefore set within a legal reporting framework. The absence of such strict reporting requirements for nonprofit organisations in Australia means that the genesis of financial management practices in the
Guide Association can be seen in relation to intemal rather than merely external factors. Further, these monographs start with the necessity of planning, because mission requires money. They do not follow an organisation from its actual conception. They do not consider its reason for existence, the commitment of its members, nor the way in which the accounting practices that have developed have been influenced by mission, culture and history.
1.4.2 Access
It is generally agreed that one of the major issues in case study research is organising access (Burgess, 1982; Yin, 1989). At the time that it was necessary to select the focal nonprofit organisation for this study, I was invited to join the Finance Committee of the Girl Guides
Association (N.S.W.). This arose as a result of a key note address I delivered on financial reporting issues for nonprofit organisations, and a subsequent publication (Abraham, 1995).
While participating on the Finance Committee, I discovered that the
Honorary State Treasurer had recently resigned and that the Chapter 1 - Introduction page 17
Association was actively seeking an appropriate person to take on this responsibility. After discussion with a number of office bearers and staff, I agreed to accept nomination for the position. My nomination was welcomed and unanimously supported by the
Executive Committee. My appointment as Treasurer was officially recorded as 1 December 1995 (GNSW AR, 1996) so that I could sign off on the financial accounts for the period ending 31 December
1995. However, the first meeting I attended in the capacity of
Treasurer was the Executive Committee weekend in Febmary 1996, at which I acted as a facilitator in relation to a two-day workshop on fmancial management issues. It was during these sessions that I became acutely aware of the organisational attitude to finances, the difficulties that this posed and the organisation's ensuing potential as an interesting research site.
By accepting the position of Treasurer, I was able to attend all meetings of any committee of the organisation as an ex-officio member, which would not have been possible in another capacity. In addition, I approached the organisation asking permission to access archival records and minutes books, which was granted. Thus, the major reason for selecting the NSW Guides Association was that access was available, there was a strong positive response from the management of the organisation and that the distinct difference in management of short term and long term financial affairs posed a Chapter 1 - Introduction page 18
fmitful research site. This difference is discussed further in Chapter
3.
Another access issue was in relation to the selection of only the NSW
Guide Association for study. As mentioned previously, members belong to State Associations, and NSW is the largest of these, representing around one third of all members in Australia. It is thus of the more significance than any other State, or the Federal body.
Records were held in Sydney, that capital of NSW, and I lived at
Mittagong, 110 kilometres away, and so reasonable easy access was possible.
Focusing on the NSW Guide Association was also justified from an organisational perspective. The Girl Guides in Australia has what is fundamentally a federation type stmcture. The major units in its governance stmcture are the seven State Associations: New South
Wales, Victoria, Queensland, Westem Australia, Tasmania, Western
Australia and the Northern Territory. Each State Association has its own constitution and is self governing, with total responsibility for its own financial management practices. This was the same as other countries - in a sense the seven states act as mini-countries, but are federated for the purposes of common representation at World level, and common Australian programs. Chapter 1 - Introduction page 19
1.5 Themes
1.5.1 Accounting in Context
As already mentioned in Section 1.1, the concept of "accounting in practice" is central to this thesis, that is, the understanding of accounting practices in the social context in which they operate
(Roberts and Scapens, 1985; Hopwood, 1987; Roberts and Scapens,
1985; Laughlin, 1988, Humphrey and Scapens, 1996). The social context is that of an Australian nonprofit organisation, as it is situated within in its environment, and displays the results of its history, its culture and it stmcture. Accounting is not described in a vacuum but traced as it develops alongside the needs of the organisation. The common theme is to identify the financial imperatives that develop in an organisation with non-financial incentives.
1.5.2 Sacred-Secular Conflict
Laughlin (1984, 1988) argued that the division between the sacred and the secular underlying social dynamic at work in all churches.
He expressed this division in terms of a fundamental separation between the sacred, the dominant spiritual issues, and the secular, the secondary systems used to support the former. Booth (1991,
1993) also recognised this sacred and secular divide as being useful Chapter 1 - Introduction page 20
for understanding the tension that exists between religious ideas and secular ideas. This tension
sets up dynamic processes of resistance to the intmsion of secular practices such as accounting into sacred domains, which act so as to marginalize such activities (Booth, 1993, p. 58)
The conflict between the sacred and secular does not only belong in the arena of churches but can be extended to other nonprofit organisations, which exist solely to fulfîl a mission. The mission is often conceptualised as "sacred", with the more mundane systems needed to support it, such as accounting, being viewed as "secular" and of little signifîcance (see Figure 1.1), except in times of crisis.
Figure 1.1
The division between the '^sacred^ and the "secular"
Sacred Division sustained by Secular (dominant) (secondary) centrality of mission
Supports pursuit Dynamic processes Necessary of mission- of resistance support activities oriented activitíes e.g., accounting, over all otliers to "secular" activities intruding into strategic planning the "sacred" domain
These dynamic processes of resistance to the intmsion of accounting is a recurring theme throughout this thesis. Time and time again, Chapter 1 • Introduction page 21
there is opposition to budgeting, planned fînancial management, and long-sighted use of resources. What the mission needs now, it needs now. Financial matters only come to the forefront in times of recognised crisis, and they quickly drop into the background.
1.5.3 Embedded Organisational Model
Running through this thesis are the concepts of organisational history, organisational culture, organisational stmcture and their relationship to fînancial management control systems. The concentric relationship between accounting and control in an organisational context used by Flamholtz (1983) has been adapted to represent an embedded organisational model appropriate to this thesis. Figure 1.2 depicts how each layer of the model is embedded within another.
1.5.3.1 Financial Control System
At the core of the model is organisational control, defîned in this thesis as any action or activity that will increase the probability that people will behave in a manner which will promote the attainment of organisational goals (Flamholtz 1983, Otley and Berry, 1980).
Organisational control is concerned with both strategic and operational issues (Emmanuel, Otley and Merchant, 1990), where strategic issues represent the position of the organisation in relation Chapter 1 - Introduction page 22
to its environment and operational issues refer to the effective implementation of plans designed to achieve organisational goals.
The diffîculty within the concept of organisational control arises from a lack of goal congmence between the individuals and the organisation, and thus the resulting order "evolves from the collectivity of interactions" (Emmanuel, Otley and Merchant, 1995, p.
6). In order to attempt to control individual behaviour, organisations will use various mechanisms such as mles, job descriptions, standard operating procedures, budgets, standards and performance measurements systems. Thus, the "accounting system provides a uniíying core to which managers can relate other types of information" (Anthony and Young, 1994, p. 22).
Figure 1.2
Embedded Organisation Framework Chapter 1 - Introduction page 23
1.5.3.2 Organisational Structure
Otley and Berry suggested that an "organization can itself be viewed as a control process, occurring when groups of people feel the need to co-operate in order to achieve purposes which require their joint actions" (1980, p. 232). This may be because
Activities -the same activities - conducted under the canopy of a formalized stmcture conforming to a rational framework will be taken more seriously, will be regarded as more legitimate by both internal and external participants than those carried out using a more traditional or informal stmcture. And existing organizations that incorporate available rationalized components - accountants, personnel systems, legal representatives - wiU be more likely to reap the rewards of good opinion and increased confîdence from a variety of internal and external constitutes.. Formal stmcture signals rationality and thereby increases legitimacy in the views of many different internal and external parties in contemporary society. (Scott and Meyer, 1994, p. 115)
Organisational stmcture can be described as relations between individuals, groups, and larger units. This may include the assignment of individuals to various positions (and the respective authority, responsibility and privileges of these positions) and the grouping of these positions in larger units. It may also involve standard operating procedures and other established mechanisms for handling coordination and human resource management.
The organisational stmcture is more static than the central core, in that it takes a longer to change and is more diffîcult to change. The Chapter 1 - Introduction page 24
stmcture develops in response to the management culture of the organisation and wiU change and adapt in response to its environment. The stmcture may also be affected by the centraJ core, particularly in times of crises, but the movement will not be as quick as the change may be in the core itself.
1.5.3.3 Organisational Culture
Organisational culture has been variously defîned. In its most general sense it can be defîned to mean
shared norms, values, beliefs and assumptions, and the behavior and artifacts that express these orientations - including symbols, rituals, stories, and language. Culture includes norms and understandings about the nature and identity of the organization, the way work is done, the value and possibility of changing or innovating, relations between lower and higher ranking members, and the nature of the environment. (Harrison, 1994, p. 30)
Thus, culture is a collection of behavioural patterns and beliefs that comprise
standards for deciding what is, standards for deciding what can be, standards for deciding how one feels about it, standards for deciding what to do about it, and standards for deciding how to go about doing it. (Goodenough, 1971, pp. 21-22)
Culture has both an ontological aspect, in that it assigns reality to the organisational players and their actions, and also a signifîcatory aspect in that it legitimises the roles of those players and actions
(Meyer, Boli and Thomas, 1987). Thus, the organisational culture is Chapter 1 - Introduction page 25
a medium by which the actions of the members of the organisation are influenced. Organisational culture, as influenced by its history and the environment in which it operates, is therefore, a determining feature of the stmcture and the central core.
1.5.4 Sporting Metaphor
The Girl Guide movement can be perceived as a game of life. Just as
Rugby League was built on the foundation of Rugby Union, so Girl
Guides was built on the foundation of Boy Scouts, and was influenced by the preferences and predilections of the Founder of both. Like any game, Guiding has an objective, one for which the words have changed over the years, but today is expressed as its mission statement:
Helping girls and young women grow into confident, self- respecting, responsible community members. (GNSW AR, 1998, inside cover)
Guiding has mles, mles that have evolved over time, and are now somewhat different to what they were originally, as the organisation changes to compete for membership and be culturally relevant in its social environment. The game has followers and leaders, it has players and captains. It has supporters who work for its interests to provide the resources necessary to carry on, in terms of volunteers- hours, equipment and money. It has spectators, who observe the game, who appreciate what it brings to the community, but who do Chapter 1 • Introduction page 26
not choose to participate. The game has umpires, those independent outsiders, such as auditors, legal offîcers and others, who call it to be accountable. It has equipment, without which the game cannot be played. It also has that stmggle between being an amateur or a professional game. Part of this stmggle is realising how far it can go from one before it becomes the other, and recognising what this will do to the essential ethos of the game.
These various facets of a sporting metaphor follow through this thesis, as it moves from the prologue in Chapter 3, back to the nineteenth century in Chapter 4 and then forward again in later chapters as it traces the development of accounting practices in this nonprofît organisation.
1.6 Organisatíon of the Thesis
Chapter 2 is concerned with the research method used in this thesis and the theoretical framework that supports it. It highlights the appropriateness of the case study method for this study, and the need for both qualitative and quantitative data. It discusses the need for theory-method linkage, that is, the concept that how an organisation is studied determines what is leamt about the organisation, as opposed to theoiy generation by logical deduction from a priori assumptions. Chapter 1 - Introduction page 27
Chapter 3 acts as a prologue to the organisational study in the sense that it is set in time later than any other part of this thesis. It is that this time that I became fîrst aware of the almost suffocating affect of history, stmcture and culture on the organisation's fînancial management. The chapter discusses a financial planning workshop, the end result of these plans, and the dichotomy between day-to-day financial management and longer term strategic planning. This dichotomy necessitates the presentation of the financial data in two distinct forms - the microview of Chapters 5 and 6 and the macroview of Chapters 7 and 8.
Chapter 4 is concerned with the history of the organisation, history that continues to affect the organisation's management today. The life of the Founder influenced the organisation he founded, and so the chapter commences with a summary of the life of Baden-Powell, and is followed by the development of the Scout Association. Its outgrowth into the Guide Association is followed fîrst in England, and then in Australasia, as girls picked up the banner and ran, fîrst informally and then in an established manner. The chapter concludes with the fîrst meeting of the NSW Guide Association.
Chapter 5 is a chapter of fîrsts - the fîrst fînancial decisions, the fîrst women, the fîrst chairpersons and the fîrst treasurers. It is through Chapter 1 - Introduction page 28
these that the culture and stmcture of the organisation is illustrated, together with its affect on the fînancial management development of the Association.
Chapter 6 is concerned with accountability and takes a microview of the fînancial operations of the organisation. It reflects on the development of day-to-day fînancial management practices, practices that grew on an exigency basis in response to the organisation's history, culture and stmcture, and which form the basis of the short term fînancial practices of today. Through all this mns the concept of the centrality of mission, and the need for fînancial matters to bow to the objectives of the organisation and the beliefs of those voluntary workers exercising management roles.
Chapter 7 adopts a macro-perspective and considers the fînancial vulnerability of the organisation and its relationship to mission. A model of fînancial vulnerability is discussed and applied to the
Association, with the results indicating positions that it would behove management to adopt.
Chapter 8 also presents a macroview, but this time it is in relation to the use of fînancial ratio analysis as a tool to detect the Association's use of financial resources in relation to its mission. The model is specifically applied over the past twelve year period. The results are Chapter 1 - Introduction page 29
explained in relation to the organisational embedded model of Figure
1.2. The chapter also presents implications of the analysis for the future of the Association.
Chapter 9 presents a summary of the project and suggests that the intertwining of mission, culture and history with financial management in the Guide Association is similar to that in other nonprofit organisations, and that an awareness of this interaction will promote better financial decision making and ensure financial viability.
Thus, I come to the next chapter, the development of my method and the evolution of my theoretical perspectives which came "only by the act of doing research" (Covaleski and Dirsmith, 1990, p. 565). CHAPTER 2 RESEARCH METHOD
2.1 Introduction
This thesis is a piece of qualitative research, and yet it also encompasses quantitative analysis. It could be called variously a case study, an ethnography or a history.^ It concerns a single organisation but many people, a single mission with many expressions and the concept of accounting as it has evolved and changed within the organisation. The next section discusses the various themes of qualitative research and how they relate to this study. The third section considers the specific features relevant to the approach adopted by this research. The fourth section investigates the method-theory linkage of grounded theory. The chapter concludes with a summary.
3 Yin considered that case studies "are a form of inquiry that does not depend solely on ethnographic or participant-observer data" (1989, p. 22), and that an ethnography is a specific method of data coUection. Rather, than merely a data coUection method, ethnography has been defined as an end product, "the art and science of describing a group or culture"
(Fetterman, 1989, p. 11) or "the result of fieldwork" (Van Maanen, 1988, p.
4). Chapter 2 - Research Method page 31
2.2 Qualitative Research Themes
A number of interconnected themes form the foundation upon which
qualitative research inquiry is built (Bogdan and Taylor, 1975;
Patton, 1990; Strauss, 1987). Each of the themes, summarised in
Table 2.1, is relevant in some way to this thesis. The remainder of
this section discusses the application of these themes to this study.
2.2.1 Naturalistic Inquiry
My research design is naturalistic because it is an attempt to understand the naturally unfolding relationships, processes and
interactions within the organisation, without having set any predetermined course (Patton, 1990). The apparent conflict of interest between this claim and my involvement as Treasurer is not a problem. I am a relative latecomer on the scene - my involvement has spanned less than four years in a history of almost 80. While I have indeed contributed to discussions, and made suggestions, it was not as a researcher attempting to reduce variation in extraneous variables or to manipulate a phenomenon in order to study it, but rather as a player in the game, or more appropriately, a linesman.
My contributions and suggestions, and reactions to them are recorded as part of the whole picture of the place of the Treasurer in the organisation. Chapter 2 - Research Method page 32
Table 2.1
Qualitative Research Themes
Naturalistic Lack of predetermined constraints; open to enquiry situation as it emerges
Inductive analysis Immersion in data to discover details; open questions rather than testing theoretically derived hypotheses
Holistic The whole organisation is understood as a perspective complex system that is more than the sums of its parts; not reduced to a few discrete variables
Qualitative data Detailed, thick description; direct quotations capturing perspectives and experience
Personal contact Direct contact with organisation; researcher's and insight personal experience and insights important part of understanding
Dynamic systems Assumes change is constant and ongoing
Unique case The case is special and unique. Inquiring involves orientation respecting and capturing details of case
Context sensitivity Findings placed in social, historical and poHtical context
Empathetic Objective is to understand organisation in its neutrality complexity; inquiry includes personal experience and empathic insight as a part of relevant data; neutral non-judgemental stance towards whatever content may emerge
Design flexibility Open to adapting inquiiy as understanding changes; avoids ridge designs
Reflexive process Ongoing process of change as understanding of organisation emerges from data; this understanding then affects subsequent inquiry, which further affects understanding
Adapted from Patton (1990, pp. 40-41) Chapter 2 - Research Method page 33
2.2.2 Inductive Analysis
My research method is inductive in that it "begins with specific observations and builds toward general patterns" (Patton, 1990, p.
44) thus allowing multiple interrelationships, patterns, themes and categories to emerge from the data without presupposing the dimensions or nature of these. Thus the findings are grounded in real world patterns. Theory is developed by bringing out the
"underlying uniformities and diversities, and [using] more abstract concepts to account for differences in the data" (Glaser and Strauss,
1967, p. 114).
2.2.3 Direct Personal Contact
Most of the data sources used in this study are historical. However, I have ventured into the present to have direct contact with the people, the mission and the culture of the organisation. I have spoken to people who were Guides or Guide leaders, as far back as the 1930s, people who are able to give me a personal understanding of the "feel" of the organisation. My involvement as Treasurer over the last few years enables me to understand the processes that were currently in place and to appreciate how to interpret what I read in minutes of meetings. It has allowed me to experience first hand the tug-of-war between the mission and the money. It has allowed me to understand the background of the people who are in the leadership Chapter 2 - Research Method page 34
positions and to understand their inexperience with financial matters. Thus, direct personal contact has been a central activity of this inquiry.
Furthermore, I was a Girl Guide in the 1960s and a Guide Leader in the 1980s. In the 1980s and 1990s I was the parent of a Guide.
Thus as a player, a captain, a member of the crowd and a manager, I have been able to take hold of the game, to understand its peculiarities and to appreciate its organisational culture from various perspectives.
2.2.4 A Holistic Perspective
My research approach assumes that an understanding of the social, environmental, cultural and historical context of the Association is essential for an overall understanding of what I observed, both from documents and from fieldwork. My approach assumes that "the whole is understood as a complex system that is greater than the sum of its parts" (Patton, 1990, p. 49). Such a holistic approach allows attention to focus on the organisational context, interdependencies and complexities. Chapter 2 - Research Method page 35
2.2.5 A Dynamic, Developmental Perspective
The world is constantly changing, and thus it is appropriate for research to be dynamic, to consist of present inquiry informed by historical perspectives. A qualitative, naturalistic approach assumes that change is a "natural, expected, and inevitable part of human experience" (Patton, 1990, p. 53) and as such this research remains open to change. The whole story is one of change. It is about development - financial management practices developed to support organisational mission. As such it is concerned with exploring the effects of change on the game and its participants.
2.2.6 Unique Case Orientation
A contextual case study approach is particularly useful where there is the need to understand a particular problem in depth, although whether this should be called a case study, an ethnography or historical research is developed in the next section.
Such an approach is appropriate for my research inquiry because an accounting system should be studied in conjunction with other parts of the organisational control system, such as organisational structure, culture and histoiy. Viewing the accounting information system within its context is appropriate for three reasons: Chapter 2 - Research Method page 36
• An appropriate accounting information system will be influenced
by the overall aims of the organisation as well as the control
processes.
• Organisational performance may not only be affected by control
processes but also by variables such as the ability and personaiity
of the managers and intra-organisational arrangements.
• Effective organisational performance should be measured in terms
of the objectives of the organisation, and not merely by some
externally imposed standard.
Thus, there is the need, first, to study accounting control systems
within their organisational context. By so doing, the researcher is
better able to understand the depth of the total control system and
the various influences. The researcher needs to grasp the culture
which permeates the organisation's structure, and thus affects its
control systems. Secondly, the concept of organisational
effectiveness must be considered in the light of the objectives of the
organisation and to the extent to which an organisation's accounting
systems has aided its organisational performance. Thirdly, it is
inappropriate to expect to reduce all information into quantitative
terms to which statistical methods of analysis can then be applied.
The complexities of an organisation defy the ability to be successfully reduced to quantitative surrogates. The interactions and the power structures within an organisation call for closer involvement. Time is Chapter 2 - Research Method page 37
necessary for the research to become steeped in knowledge of the organisation, thus increasing confîdence in the reliability of the observations and the validity of the results. Thus, it is fitting that I have used the case study method, since it has enabled me to explore the context of the organisation, to develop more relevant research questions and adopt a longitudinal approach where changes over time have been observed and examined.
2.2.7 Empathic Neutrality
Critics of qualitative enquiry and participant observation claim that such a research method is too subjective, because the researcher is both the collector and the interpreter of the data. They argue for objectivity, for a hands-Iength approach. But when the quantitative researcher is coUecting data to "prove" an hypotheses, is there not subjectivity in the very choice of collection, if not in the hypotheses development itself? One must wonder whether neutrality is actually an issue of objectivity or subjectivity or whether, rather, there is some other measure. At the heart of the debate about subjectivity and objectivity, is the desire for credibility. To be credible, a research strategy requires that 'the investigator adopt a stance of neutrality with regard to the phenomenon under study" (Patton, 1990, p. 55).
This means that the researcher is not endeavouring to prove a particular perspective or to manipulate data to arrive at some preconceived notion. Rather, the task is to understand the Chapter 2 - Research Method page 38
complexities and the multiple perspectives of the organisation, without entering the arena with a theory to prove or predetermined results to support. Since the researcher is both the data collector and the interpreter of the data, it is essential that the researcher reflects and reports potential sources of bias and error. In order to produce credible and accurate (true to the phenomenon) data, various techniques need to be used in qualitative research. These include such techniques as systematic data-collection procedures, multiple data sources, triangulation and external reviews.
The qualitative researcher views human behaviour as how people interpret their world and attempts to capture the process of this interpretation (Bogdan and Taylor, 1975). Such a grasp requires what has become known in qualitative research as verstehen, an empathic understanding or an ability to reproduce the feeling, motives and thoughts behind the actions of others (Weber, 1968).
The illustrative data is thus used to deliberately convey the viewpoint of the actors (Strauss, 1987).
This is what I have sought to do here. To understand the game, one must understand the rules. To understand the rules, one must understand their cultural setting, their background, their influences upon the players. Thus, this study does not start with the formal founding of the Girl Guides in NSW in 1920, nor does it even start Chapter 2 - Research Method page 39
with the first Boy Scouts' rally in 1907, but it goes back further to try and understand the character of the founder, Baden-Powell, and the influences on his life, thus enabling the researcher "to tiy to picture the empirical social world as it actually exists to those under investigation" (Filstead, 1970, p. 4).
2.2.8 Context Sensitivity
Qualitative research must be placed in a number of contexts - social, historical, cultural - whatever is necessary to understand the research. The multi-faceted approach of this study in terms of historical data analysis, participant observation in meetings and social interaction with various players, has enabled my interpretations
to be grounded in context and consistent with the chronological ordering of events and interactions. (Dent, 1991, p. 711)
2.2.9 Design Flexibility
Qualitative research design unfolds as fieldwork progresses. While it is possible to speciíy an initial focus, the inductive nature of the research makes it inappropriate to specify operational variables and thus the researcher changes direction as these variables are discovered and subsequently investigated. This is part of the reflexive process: design and discovery, discovery and design until Chapter 2 - Research Method page 40
theory emerges from the data. Qualitative research requires a high tolerance for ambiguity and uncertainty (Patton, 1990, p.62) possibly involving multiple methods and certainly design flexibility.
This research has been an evolving process. Like Dent, I discovered that
the research seeks gradually to develop an empathy with the data, to understand what they tell of participants' realities and the process through which they unfold. The researcher must constantly constmct alternative interpretations ... until he or she is satisfied that the representation is a fsdthful account. (Dent, 1991, p. 711)
2.3 Ethnography, Case Study, Fieldwork or History?
2.3.1 Defining the Type of Research
As mentioned in Chapter 1, one of the themes running throughout this thesis is the embedded organisational model of which organisational culture is an essential part. Thus, this research is ethnographic in that "the idea of culture is central to ethnography
(Patton, 1990, p. 67).
However, the distinction between an ethnography and a case study is not clear cut. Burgess (1982b) considered both expressions as synonyms for field research and fieldwork. Yin (1989) defined ethnography as a data-collection method that could be used in case Chapter 2 - Research Method page 41
study research. Van Maanen (1988) regarded an ethnography as the written product. In this thesis, since "in one sense each qualitative study is a case" (Patton, 1990, p. 225), I have taken case study to mean the study of the organisation (the game, its players and all it entails), fieldwork to be my data-gathering process, and ethnography to describe my written thesis.
The purpose of case and field study research has been defined as
To study intensively the background, current status, and environmental interactions of a given social unit: an individual, group, institution, or community. (Isaac and Michael, 1981, p. 48)
The concept of studying the background, implies the need to
understand the organisational structure and culture. To do this
adequately, it is necessary to delve into history, to
reconstruct the past systematically and objectively by collecting, evaluating, verifying, and synthesising evidence. (Isaac and Michael, 1981, p. 45)
To this end, this study used a single case study with embedded
multiple units of analysis research design (Yin, 1989) with both
historical and contemporaiy components. Within this design, data
collection and analysis were both qualitative and quantitative. This
approach has been taken because of its suitability for understanding
the development of accounting as it is situated in an organisational Chapter 2 - Research Method page 42
and social context and as it is affected by the organisational culture
and environment in which the organisation operates.
2.3.2 Examining the Major Features of the Research
A number of features of this project consistent with those attributed
to case study research (Brownell, 1995; Yin, 1989; Isaac and Michael,
1982) are summarised in Table 2.2.
Table 2.2
Major Features of This Case Study
Phenomena are contemporary Detailed examination is within real-Hfe context. Phenomena are embedded in their context. Multiple sources of data are used Longitudinal analyses are adopted. Phenomena are studied through triangulation.
2.3.2.1 Contemporary phenomena
This research began with two contemporary phenomena - the
organisational attitude to financial matters and the dichotomy
between short and long term financial management, as discussed in
Chapter 3. An understanding of these phenomena required me to
delve back into the past. To appreciate the organisational attitude
necessitated an understanding of organisational culture, a culture
embedded in history. To comprehend the dichotomy of fînancial Chapter 2 - Research Method page 43
management involved tracing its development from the earliest days of the organisation.
Thus, the research is grounded in history, and yet it is research of contemporary phenomena. The historical element sets the scene, the contemporary element examines the social situation as it unfolds.
2.3.2.1 Detailed examination in real-life context
This case study involves detailed examination of the phenomena within their real-Iife context. To that end, it is necessary to have an understanding of the culture in which the organisation is steeped.
The detailed description of Chapters 3 and 4 enables comprehension of that organisational culture and sets the scene for the detailed examination of the fînancial management dichotomy presented in later chapters.
In providing depth of analysis, breadth has necessarily been limited to one organisation. However, an understanding of the cultural and historical forces at work in that organisation may assist other organisations to understand their own fînancial management dilemmas.
The context of the case is a combination of both the specifîc empirical context that is analysed and the wider context in which the case is Chapter 2 - Research Method page 44
set.. Thus, the context relates to my own personal involvement as well as to archival records and other sources of data. The boundaries of the case must therefore extend beyond the immediate period of the study over the last four years, to encompass all my dealings with the organisation. My personal involvement with the organisation incorporates four distinct roles and is shown on the time line in
Figure 2.1. This involvement has meant that I could not remain neutral. As I sorted my way through the wildemess of data, method, theory, observation and distortion, I discovered that
analysis of ethnography is as much a test of the ethnographer as it is a test of the data (Fetterman, 1989, p. 88).
Figure 2.1 My 4 Periods of Personal Involvement with the Organisation
G U 1 1966 D E 1 1 19fiR
_ i 1 1986 IJ J p 3 < ' 1990 A R D Jul 1995 Jnvited to ioin Finance Committee ~ E E M -Appointed Honorary State Treasurer A R Feb1996 N Oct1996 A G Dec1997 -End of last financial year in study E R Dec 1998 -End of study period Chapter 2 - Research Method page 45
I brought to the study my own personal biases and idiosyncrasies, which of necessity must influence both my selection and interpretation of the data. I do not claim, as do Richardson, Cullen and Richardson that an "analytical distance was sustained" (1996, p.
9). Rather I recognise that the plurality of my roles within the organisation fostered the development of reflexivity in my research.
2.3.2.3 Phenomena embedded in context
The phenomena under investigation are embedded in their context.
Consequently, it is difficult to define the boundaries between context and phenomena. Neither context nor phenomena are studied in isolation, nor is any attempt made to distinguish them. Rather, this case study focuses on the intertwining of the two. The concentric model of Figure 1.2 depicts how accounting systems, organisational structure, organisational culture and organisational history are embedded within each other.
Similarly, spectators of a game have difficulty in specifying just what it is that draws them. It may be the history and atmosphere of the game; it may be the rules of the game; it may be the performance of the players; it may be the location; it may be loyalty to a team. The reason is generally a combination of many aspects, because what may be considered the externals of the game have actually become part of the context, and are difficult to isolate. Chapter 2 - Research Method page 46
2.3.2.4 Multiple sources ofdata
The ability to deal with a full variety of evidence is a case study's unique strength over other research methods (Yin, 1989). Data coUection has involved a combination of both qualitative and quantitative techniques.
Table 2.3
Multiple Sources of Data Used in Study
Data Source Details Location Documents NSW minute books Sydney NSW annual reports NSW archives Australian Guide publications
UK minute books London UK annual reports UK archives UK Guide publications
Monographs Various
Artifacts Photographs Sydney and Shields and medals London
Observation Committee meetings (Executive, Sydney Finance, Budget, Management) Planning Days
Conversations'^ Previous treasurers Various Committee members Accountant, CEO and other staff Guide leaders
^* Like Dent, I collected data "through casual conversations and by simply
'being around' " (1991, p. 711). Chapter 2 - Research Method page 47
These in turn have been applied to a variety of data sources: direct observations, conversations, archival documents and artifacts in an attempt to capture the complexity of the phenomena and their context. The various sources of data that used in this study are shown in Table 2.3.
2.3.2.5 Longitudinal analysis
Detailed examination of the phenomena and their context involved longitudinal analysis. The concem with the unfolding of a social situation lead to an emphasis on the phenomenon in process, and thus the explicit attention to the time dimensions of the case study.
This can be seen both in the continuing collection and analysis of data over the study time period, and in the attention to history as part of the understanding of current context.
2.3.2.6 Triangulation
A research study is strengthened through triangulation (Isaac and
Michael, 1982; Patton, 1990). It involves testing one source of information against another to enhance ethnographic validity
(Fetterman, 1989). It is a concept derived from land surveying: knowledge of a single landmark only locates the survey somewhere on a line; knowledge of two landmarks allows bearings in two directions and location at their intersection; knowledge of three landmarks consolidates and confirms the position. Chapter 2 ~ Research Method page 48
Denzin (1978a, 1988) identified four basic types of triangulation
• data triangulation,
• method triangulation,
• investigator triangulation^, and
• theoiy triangulation.
Data triangulation, or the use of multiple sets of data, involves the use of different sources of information to investigate a single phenomenon. To this end, I have gathered people's impressions, read monographs, examined archival records and participated in meetings and conferences as recorded in Table 2.3.
Method triangulation refers to the use of multiple methods to study a single phenomenon. In my research I have employed a variety of methods that have been drawn from each of the four principles for using multiple methods outlined by Lazarsfeld (1972):
(1) For any phenomenon one should have objective observations as well as introspective reports. (2) Case studies should be properly combined with statistical information. (3) Contemporary information should be supplemented by information on earlier phases of whatever is being studied.
5 Investigator triangulation, or the use of several different researchers in partnership or teams, was not appHed in this study. Chapter 2 - Research Method page 49
(4) 'Natural and experimental data' should be combined. By experimental I mean mainly questionnaires and soHcited reports, while by natural I meant what is now called 'unobtrusive measures' - data derived from daily life without interference from the investigator. (Lazarsfeld, 1972, p. xvi cited in Burgess, 1982c, p. 164)
I have utilised theoiy triangulation, or the use of multiple theoretical perspectives. The different lenses through which the data has been viewed have produced different images, which together are more elucidating that any one image in isolation. Each theoretical approach I have used, whether grounded theory, theme development, hermeneutics or ethnomethodology, has used qualitative methods to stay grounded in the empirical data. These approaches, their appropriateness to this research and the linkage between theory and method are discussed in the next section.
2.4 Theory-Method Linkage
The central idea of a theory-method linkage means that how an organisation is studied determines what is leamt about the organisation (Patton, 1990). The emphasis is on inductive strategies of theory development in contrast to theory generation by logical deduction from a priori assumptions (Glaser and Strauss, 1967). Chapter 2 - Research Method page 50
2.4.1 Grounded theory
Grounded theoiy is an inductive, theory discovery process
that permits the researcher to develop theoretical accounts of general features of a topic while grounding the account in empirical observations or data. (Martin and Turner, 1986, p. 141)
The form of grounded theory may be independent of the process by which it was generated. It has been argued that that
Grounded theoiy can be presented either as a well-codified set of propositions or in a running theoretical discussion, using conceptual categories and their properties. ... The form in which a theory is presented does not make it a theory; it is a theoiy because it explains or predicts something. (Glaser and Strauss, 1957, p. 31)
Being grounded in the empirical world, means that the generation of hypotheses "requires evidence enough only to establish a suggestion"
(Glaser and Strauss, 1967, pp. 39). Consequently, early in the research, hypotheses may seem unrelated, but
as categories and properties emerge, develop in abstraction, and become related, their accumulating interrelations form an integrated central theoretical framework - the core of the emerging theoiy. The core becomes a theoretical guide to the further collection and analysis of data. (Glaser and Strauss, 1967, p. 40).
This research began with the observation of the two phenomena previously mentioned, the organisational attitude to the finance and the dichotomy between financial management in the long and short Chapter 2 - Research Method page 51
terms. I had no initial theory, because I did not really know what was happening. I found that
the veils are lifted by getting close to the area and by digging deep in it through careful study (Blumer, 1978, p.38) and that
[t]he emerging theory points to the next steps - the sociologist does not know them until he is guided by emerging gaps in his theoiy and by research questions suggested by previous answers (Glaser and Strauss, 1967, p. 47).
2.4.2 Theme development
The themes discussed in Chapter 1 appeared as the veil lifted, first being seen dimly as in a mist, but gradually becoming more defined as the picture became clearer.
1. The first theme "accounting in context" arose because of the
necessity of understanding the development of accounting within
the organisation in which it was operating.
2. The literature on the "sacred-secular conflict", the second theme,
has previously related to churches and religious organisations,
but turning the data showed the holiness of the mission in
another form of nonprofît organisation. Chapter 2 - Research Method page 52
3. Early in the study, I toyed with the concept of contingency theoiy,
but was not happy with a linear model - it just did not fit my data
- it did not reflect what I perceived. It was much later that the
third theme of the "embedded organisational model" suggested
itself. I say suggested itself, because it was there all along. It was
after the adoption of this theme that the writing of the
ethnography became easier. The theme pointed the way to
structure the fînished work.
4. The fourth theme, the "sporting metaphor" was implicit in many of
the foundations of the organisation - Baden-Powell believed that it
was appropriate to be "a good chap", to do the right thing, to have
fun, to play the game of life and to live by the mles.
2.4.3 Hermeneutics
A hermeneutic approach has been taken to the large amount of historical data in this study. This approach assumes that in order to make sense of historical documents, the researcher must seek to understand what the author wanted to communicate, to understand intended meanings, and to place the comments in their historical and cultural context (Palmer, 1969). Hermeneutic researchers are described as those who "use qualitative methods to establish context and meaning for what people do" (Patton, 1990, p. 85). Chapter 2 - Research Method page 53
Hermeneutic inquiiy is a form of reflexivity in that "the interpretation of meaning is characterized by a hermeneutical circle, or spiral"
(Kvale, 1987, p. 62). Understanding is a reflexive process with the text being revisited, and other data sought to illuminate it until a coherent meaning is possible. This form of discoveiy was applied to the many historical documents in this study. The meaning of the separate parts was considered in order to determine a global meaning.
2.4.4 Ethnomethodology
Ethnomethodology has been defined as "members' methods of making sense of their social world" (Wallace and Wolf, 1980, p. 263).
Since
Ethnomethodology gets at the norms, understandings, and assumptions that are taken for granted by people in a setting because they are so deeply understood that people don't even think about why they do what they do (Patton, 1990, p. 74), it is an appropriate response to the current financial crisis being experienced by the Guide Association. Presenting data from an ethnomethodological viewpoint forces the players to rationalise what they have previously taken for granted about the game. Such an awareness may
create a programmatic self-awareness that would, in principle at least, facilitate program change and improvement (Patton, 1990, p. 75). Chapter 2 - Research Method page 54
2.5 Conciuding Comment
This chapter has described, discussed and analysed the research method I adopted for this study. Primarily it is a piece of quaHtative work which encompasses quantitative analysis. It has its roots in both historical and contemporaiy phenomena. It focuses on a single organisation (of many people), a single mission (with many expressions) and the development of accounting as it has evolved and changed.
I have avoided confining the definition of the research method to a single expression, realising that qualitative research encompasses many terms and many features. This chapter has discussed a large number of such themes of qualitative research as they apply to this study.
While the actual written thesis may be labelled an ethnography
(Fetterman, 1989), the research preceding it may be described as a case study (Patton, 1990), with field work being the data-gathering process (Van Maanen, 1998).
Central to this chapter have been the concepts theoiy-method linkage and reflexivity. The discussion of the nature of qualitative enquiry Chapter 2 - Research Method page 55
and the features of this study are unwritten by the reflexive nature of social enquiiy. I have found that
[t]he process of research not only requires the researcher to reflect critically on the process, but to be open to being changed by it; the investigator, the participants, those who read and communicate the results, will all have their awareness changed (Blaikie, 1993, p. 91).
It is now appropriate to move to the scene of the research, to where it all began, The next chapter, set largely in 1996, details my initiation into the project; a project, which then required me to first go back to the nineteenth century to grasp an understanding of the present. CHAPTER 3
PROLOGUE: THE BEGiNNING OF THE RESEARCH
or
A Change of Batsman
3.1 Introductíon
It all started when the chairman of the Finance Committee of Guides
NSW telephoned me and said that my name had been put forward for
that committee, and asked whether was I interested.
I had been a Guide as a teenager, and had been a Guide leader when
my daughter was younger. I enjoyed the camaraderie and friendship
of the organisation, and thought that if my professional background
could help, I would be only too pleased to join. So I attended my first
monthly meeting of the Finance Committee in August 1995. Within a few months this was followed by my nominations as Honoraiy State
Treasurer, a subsequent interview, and appointment to the position in December of that year.
I quickly discovered that the organisation had a problem - its expenses had exceeded its income for a number of years. As I Chapter 3 - Prologue page 57
became more involved with the organisation, I noticed that that there
was a dichotomy between short term (or day-to-day) and long term (or
broader) financial management.
The remainder of this section discusses this dichotomy. The second
section outlines a weekend conference of the Guide Executive
Committee at which I was asked to "do something about the budget".
Although largely descriptive, this section is central to understanding
the ability and the commitment of the members of the Executive
Committee in relation to financial management and problem
resolution. The third section revisits the proposals of that weekend
three years later, and looks at what has or has not been done, and
what differences these have made to the financial position of the
Association. It is in the Hght of this subsequent inactivity or even, at
times, unwillingness to act, that I raise questions in the fourth
section, and thus define the focus of the remaining chapters of the
thesis in the concluding comments.
3.1.1 Day-to-day fînancial management
The day-to-day cash management, banking, and payment of salaries
and other expenses seemed to be carried out in a reasonably efficient
manner. There were some anomalies - such as receipts were being
written at the time the cash was received, and not stating the item for which cash was received. For instance, when I paid some money for Chapter 3 - Prologue page 58
photocopying, and asked for a receipt, I was told I would have to wait until the next day. The handwritten receipt I finedly received stated the sum of money, received from "cash" and the date - there was no mention of my name or the purpose for which it was paid.
With the exception of matters of internal control such as this, other parts of the cash management appeared good. There was separation of duties - with different people receiving cash to those banking and recording it. There was daily banking. The accountant prepared monthly cash flow statements, so that he knew if there would be enough cash or whether a bank bill would have to be redeemed. He knew if the expected income for the current month was significantly greater than necessary to cover the expenses of the period and whether it would be appropriate to purchase a bank bill, or even put money on term deposit. He seemed to have his finger on the day to day management of the money.
3.1.2 Broader fînancial management
However, there seemed to be definite problems in relation to the broader financial management. There were difficulties in determining what should money be spent on, and in the determination of priorities. There appeared to be no overall plan showing how things fitted together. Chcq}ter 3 - Pro ogue page 59
My first involvement with the organisation as Treasurer was to facilitate a number of sessions on financial management at the annual Executive Committee planning weekend in Febmary 1996.
The centrality of this Committee is shown by the organisational reporting stmcture in Figure 3.1. The Executive Committee consisted of 23 members: the State Commissioner and three deputies, the State Executive Officer (SEO), the Honorary Treasurer, the six advisers or chairpersons shown in Figure 3.1 and ten elected members of State Council. It was a supposedly policy making body, but in actuality a body of interested people who were required to adopt the financial statements and constitutional changes, and ratiíy the appointment of the State Commissioner every five years.
The State Team, consisting of the State Commissioner and deputies, was particularly worried because the budget planned for 1996 was another deficit, and they felt this was inappropriate and so the budget for the current year (Januaiy to December) had not as yet been passed by Executive, even though it was already Febmary. I understood the ethos of the organisation, the desire to put the members first, to have a good quality program and well trained leaders. I knew the value that many saw in an organisation to which membership was by making a promise to keep certain commitments
(the promise and law), rather than merely by payment of financial dues. i o co i o i
4 i Tar a Tingir a Terriga l Aralue n Propert y Glengarr y Cliairma n
(0 (/> O) 3 .2 R a> a> co •o *; -^ . .>c >1 û- a>5 o o
< u d a:< <
°- E 0) c 2 3 •rô ra o ro •— O t_ ^ 3 e o .t (A ra a> x: íO C/5 O
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t«
4-a>« 3 Q. 0) » « Tea m ^ ran d a> 0) ^ Art s c Advise r -*-»lU Progra m o Environmen t (0 Specia l co Wate r Activiti e Fait h Awarene í (n i i Outdoo r Activit i E E o O o f M Bo x ^ Worl d Centre s Pos t Advise r Friend s Internationa l Chapter 3 - Prologue page 61 I was unfaxniliar, however, with some of the things that they perceived as essential. What was meant by "pooled fares"? What was "quota"? Why were so many staff employed? Why was the Executive Committee so large?^ I facilitated a number of sessions to enable the members of the Executive Committee to decide priorities, and therefore to decide what could be cut in order to balance the budget. These sessions and their proposed results are of particular value in identiíying the skills, commitment and expertise of Executive Committee in helping solve the budget problem. The organisational attitude to financial matters also emerged during these sessions, an attitude that reflected the culture and structure of the organisation and had its roots in history. The next section contains a description of the five sessions I organised to consider Association Management and the conclusions that were reached by the participants. The third analyses the extent to which these recommendations were enacted by the Executive Committee. The fourth section discussed the open door for research that was presented to me. 6 I was told the the size had been reduced by five members in the past year before that there had been 28 people tr^dng to make decisions by consensus! Chapter 3 - Prologue page 62 3.2 Association Management Sessions 3.2.1 Session 1: Identifying Concerns 3.2.1.1 Consideration of the trend chart I presented the trend chart shown in Figure 3.2. Figure 3.2 GGA (NSW) ASSETS CONSUMED BYOPERATIONS ^OO -L n a> •o o> a> a> a> o> o> o> c o> o> o> o> _c o» o> (0 UJ m The group decided that it was necessary to plan to reverse the trend; that is, to get the line to move upwards for 1996 not downwards as in chart. Chapter 3 - Prologue page 63 3.2.1.2 Consideration ofcurrent cash assets I presented the figures in Table 3.1 to the group. Table 3.1 Key Figures for Guides NSW Current cash assets $2.1 million Budgeted operating loss in 1996 $309 000 Budgeted operating loss plus capital requests $674 000 The group considered how long it would take to consume cash assets at the present rate. This problem was compounded by the fact it was recognised that investment income is the Association's second largest source of income. The participants came to the conclusion that the Association cannot afford to make these losses. However, the group recognised that change is uncomfortable and that would be necessary to make some hard decisions in order for this weekend to be a success. Chapter 3 - Prologue page 64 3.2.1.3 Consideration of expenditure chart I presented the graph of expenditure items (Figure 3.3) shown as percentage of total budgeted income and summarised the position in terms of the figures shown in Table 3.2 Figure 3.3 GGA (NSW) EXPENDITURE ITEMS (by percent of income) Table 3.3 Summary Income and Expenditure Figures 1996 Projected income $1.2 miUion To break even: need 25% cut 1996 Proj ected expenditure $1.5 miUion Chapter 3 - Prologue page 65 The participants concluded that unless the Association has a dramatic, huge increase in income, expenditure must be cut to avoid "crashing". Due to their size, it is necessary to cut expenditure on administration and properties. 3.2.1.4 Consequences ofcash decline The group was asked to suggest what they predicted would be the results of a cash decline. The consequences suggested by the group are listed in Table 3.3. Table 3.3 Consequences of Cash Decline Effect on mission and membership Effect on properties More difficult to operate Run down More pressure on regions Depleted Training would decrease Unused Girls would suffer Lack of creativity Lack of support for leaders Lack of credibility Membership restricted to more affluent 3.2.2 Session 2: Identifying Signiíîcant Cost Drivers 3.2.2.1 Identifîcation of expenditure items The group divided into four subgroups and each subgroup compiled a list of items which caused operating expenditure. These items were further considered by the whole group. Chapter 3 - Protogue page 66 3.2.2.2 Division ofitems into **musts** &"wants » The group recognised that some expenditure items were essential, but that others, although very important and desirable, were not absolutely essential to the mission. The group also recognised that some expenditures were essential this year because the Association was already committed to them, but that they would not necessarily be essential next year. In addition, the group acknowledged that expenditure on some of the "musts" could be reduced. These items are marked with an asterisk (*) in the Table 3.4. Table 3.4 Expenditure: "Musts" versus "Wants" MUSTS WANTS Quota Admin manager Insurance * Shop Water * Property admin Electricity * Handyperson Phone * Some staff Postage * AGM venue Photocop^ông * Region grants (some) Printing * Hospitality SEO Property maintenance (some) Training expenses Guide House cleaning AGM Administration of State Council State Council meeting Mobile shop Annual report * Equipment - new Region grants (some) Computers - new Pooled fares Magazine subs Security * Conference fees Air conditioning Stationery Travel/ expenses/ allowances Equipment maintenance Shop stock Auditor's fees Bank charges Guides' Own venue Property maintenance (some) Chapter 3 - Prologue page67 3.2.3 Session 3: Generating Alternatives The group recognised that there were two ways to solve the financial problem.: • Reducing expenditure AND/OR • Increasing income The group divided into four subgroups once more and each subgroup listed various ideas to reduce expenditure and increase income. Options which could be adopted in 1996 were marked with an asterisk (*). Table 3.5 shows the expenditure reducing ideas suggested by the groups. Table 3.5 Expenditure Reducing Ideas Implement "waste management' Introduce voicemail * program * Reduce unnecessary calls to Reduce property admin budget security company * by one staff salary * Review role of all employees Reduce admin budget by one Review current work practice staff salary * and re-deploy to other areas Use volunteer staff as Advisers' where needed secretary * Introduce staff appraisal and Reduce region grants * development Adopt DX system * Job descriptions necessary "Public Education" of phone and Use volunteer staff wherever utilities * possible Rationalise mailouts * Cost jobs before doing Sell part of camping property * Staff keep daily logs and Tum off men's urinal * start/finish time records Clean HQ less often * Monitor phone use Appeal for less photocop^ång * Consolidation of regions Combine Concord 06 Oct. Region Shop around for insurance Comm. meeting * Regions be more accountable for funds Chapter 3 - Prologue page 68 Table 3.6 shows the revenue generating ideas generated by the group Table 3.6 Revenue Generating Ideas Holiday activity weeks - number and Grants * marketing * Employ somebody to raise big $$$ * Lamington Drive * Adult membership fees * Increase garage rental area - remove Sell some property Market our partition * expertise in adventurous activities Increase rental for dental assistants* Separate column for Accounting for Market and run Earthkeepers biscuit sales Program * Market biscuits Sell wooden toilet seats * Rent out Guide House and move to Create office space for rental - smaller place downstairs at HQ * Market leadership skills training Increase fees for "Like to do's" * Sponsorship Sponsorship for Annual Report * Rationalise Guide hall property Increase membership by 5% * Run musters at a profit - eg Improve retail opportunities - open sponsorship on shirts HQ shop door * Education of membership re how Close HQ shop and rent out space * they can help Run more camps on State properties 3.2.4 Session 4: Ehraluating Alternatives Sheets were distributed on which were listed all the income generating and expenditure reducing ideas which were considered possible for 1996. Each item was then given a score on a scale from 0 to 10 for both DESIRABILITY and FEASIBILITY. This was done individually first, and then in subgroups. Clarification was sought and given on any areas about which people were uncertain. The subgroup scores were then averaged to give the scores in the Table 3.7 and Table 3.8. Chapter 3 - Prologue page 69 Table 3.7 Expenditure Reduction Scores Idea Desirability Feasibility A Implement "waste management' program 8.5 8.5 B Reduce property admin budget by one 8.5 10 staff salary C Reduce admin budget by one staff salaiy 8.5 10 D Use volunteer staff as Advisers' secretary 1 3 E Reduce region grants 6 8.25 F Adopt DX system 7.75 7 G "Public Education" of phone and utilities 8.25 9.5 H Rationalise mailouts 10 10 I Sell part of camping property 4 3.25 J Tum off men's urinal 10 10 K Clean HQ less often 9.5 8.75 L Appeal for less photocopying 7.75 8.75 M Combine Concord and October Region 1.75 4.25 Commissioners' meeting N Introduce voicemail 3.5 3.5 O Reduce unnecessary calls to security 8.75 9 company Table 3.8 Income Greneration Scores Idea Desirability Feasibility A Holiday activity weeks - number and 10 9 marketing B Lamington Drive 6 9.5 C Increase garage rental area - remove 8.75 7.75 partition D Increase rental for dental assistants 8 9.5 E Market and run Earthkeepers Program 10 9 F SeU wooden toilet seats 10 10 H Create office space for rental - downstairs 4.75 5.5 atHQ I Increase fees for "Like to do's" 3.75 4.25 J Sponsorship for Annual Report 9.75 3.25 K Increase membership by 5% 10 6 L Improve retail opportunities - open HQ 10 10 shop door M Close HQ shop and rent out space 3.25 4 N Run more camps on State properties 10 10 0 Grants 7 7 P Employ somebody to raise big $$$ 7.5 7.75 Q Adult membership fees 5.5 1 R Sell some property 6.25 6 Chapter 3 - Prologue page 70 2.2.5 Session 5: Making Decisions Two grids were presented, one for expenditure and one for income. The desirability and feasibility scores for each item were plotted on the grids. The grids were divided into four sections and the items in the top right quadrant, those that were considered by the groups to be most desirable and most feasible, were listed and discussed. Figures 3.4 and 3.5 show the grids for the expenditure reduction and income generation options respectively. Figure 3.4 Grid of Ebcpenditure Reduction Options H 10 n K IBILIT Y 5. 4- I • DESI R •N 3- 2 - •M 1 - *D 0- 1 \ 1 1 H 1 -+- 1 1 H 4 5 6 10 FEASIBILITY Chapter 3 - Prologue page 71 Figure 3.5 Grid of Income Generation Options 4 5 6 10 FEASIBILITY From Figure 3.4, consideration was given to expenditure decreasing options J, H, K, B, C, O, A, G, F, L and E. Table 3.9 shows the decisions that were taken. From Figure 3.5, consideration was given to income generating options F, L, N, A, E, D, C, K, P, O, B and R. Table 3.10 shows the decisions that were taken in relation to these options. Chapter 3 - Prologue page 72 Table 3.9 Proposed Actions to Decrease E^penditure Option Action By whom By when J Men's urinal to be tumed off SEO 23.2.96 H Mailing to be rationalised SEO & IL Progressive K Cleaning contract and requirements to SEO July, 1996 be reviewed for incorporation into 1997 budget B Salaries budget to be cut by 10%; i.e. SEO 23.2.96 C from $64,700 to $582,300. The group believed this to be consistent with membership receipts of $585,700/ 0 Calls to security company to be SEO 30.8.96 monitored for 6 months and then report given to Exec A "Waste mgt" program to be SEO & JC 30.8.96 implemented. G "Public education' drive on all state SEO & BP Progressive L properties to encourage reduction in costs of utilities 86 quantity of photocopying F DX system to be investigated SEO 23.2.96 E Region Grants to reduced by 50% in State 23.2.96 1996 to $18,000 and zero based Team budgeting used in future I circulated a report of these sessions and the conclusions to all members of the Executive Committee at the March meeting. The actions suggested in Session 5 were revisited over a number of monthly meetings. Some ideas just fell by the wayside; some were unworkable; only a few were actually implemented. It is an interesting exercise, three years later to revisit these and see what has been done. Chapter 3 - Prologue page 73 Table 3.10 Proposed Actions to Generate Income Option Action By whom By when F Plan for selling wooden toilet seats to be IL 23.2.96 formulated L Shop door at HQ to be opened to SEO 23.2.96 encourage sales N Encouragement of more camps on state JMC and 23.2.96 properties - consistent with "girl AT ownership" in action - realistic results with SEO to be indicated in doUars A Holiday activity weeks to be better KH, PR, Progressive marketed State Team, Region Com E Earthkeepers program to be got under RH way D Dental assistants' rental and the use of SEO 23.2.96 HQ as meeting place for other groups to be investigated C Investigation re legal position of SEO 23.2.96 increased garage rental area if partition removed. 2 additional spaces be rented if poss. K Investigate membership figures and State 23.2.96 revise if possible Team and SEO P Investigate feasibility of employing a IL 23.2.96 fundraiser O Investigate possibilily of obtaining RH gr ants / funding B Sale of biscuits to be reported SEO Immediate separately each month R Consideration of sale of property:- Finance WentworthviIIe: invest v rent Committee Guide House: interested buyers SEO Tara - posn in reln to flight path SEO Properties cost $384,000 ($260,000 in SEO 23.2.96 overheads) and contributing income of $198,000. Property overhead to be cut by 10% to $243,000 AII budget centres to undertake total SEO 23.2.96 budget review. If any centre does not respond, 10% cut wiU be made. Chapter 3 - Prologue page 74 3.3 Proposed Actions Revisited 3.3.1 Expenditure Reduction Men*s urinal still leaks, despite attempts "to turn it off'. There were a couple of people genuinely concerned about this issue; others treated it as.an humorous aside. It is worth noting here that there is only one employed male who works in the building and very few male visitors. Mailing rationalisation appears to have disappeared - I stiU receive two separate mailouts for Executive and Finance meetings - often received on the same day. Cleaning contract - This was to be investigated when the next one came due, but I do not think anything was changed. Because it could not be done immediately, it was "forgotten". Salaries. There was a lot of resistance to change here, with the SEO eventually retrenching some people. However, when people have left due to natural attrition, they have been replaced, rather than their jobs being revisited and redistributed. A number of the staff had been put on reduced hours, but they have all been returned to full load. Retrenching people also results in extra short-term costs due to redundancy payouts. Overall, the stafíîng situation does not appear to be any better today, than it was in Februaiy 1996. There is diff culty Chapter 3 - Prologue page 75 with at least one appointment in that the person has no direct supervision, and has been given no plan of action. She not a manager or a "plan-deviser", but for want of supervision and direction, has had to assume that role. This appears an inappropriate use of resources. Security monitoring did not produce any reduction in costs - I am not even sure that it was reported on after 6 months as requested. Waste management prograniy although perceived as being very feasible and very desirable, never happened. It was dependent on the services and time of a voluntary member of the Executive Committee, who suggested it, but did not seem able to find the time. Public education drive on conservation resources resulted in some signs going up in various places. Results are diffîcult to measure, and probably insignificant anyway in light of organisation's overall expenses. A DX system was found to be unfeasible. Region grants were abolished except in cases of application on grounds of need. However, in the 1999 budget it was suggested that money should be included again. Chapter 3 - Prologue page 76 3.3.2 Income Generation Sale of wooden toilet seats left over from a muster a number of years ago proved to be not feasible. It was originally intended that they would make good "rustic" picture frames. From time to time, when there was a gathering of leaders in the building, the shop door was opened outside normal shop hours. However, no attempt was made to ascertain whether sales increased as a result. Encouragement of more camps on Guide properties. This has certainly been pushed by some people, but has signifîcant difficulties. To help the State finances, it is State guide properties that we would like to see used. But regions also have properties, and these are closer for the girls. AIso, it is not reasonable to expect region properties to suffer in order to get more occupancy at state properties. The issue then is to encourage conferences and camps to be held at state properties, rather than those owned by other organisations. Objections to this are in the light of the standard of accommodation offered at state properties - the organisers of some events appear to prefer the smaller rooms and less communal facilities, with beds instead of bunks of dormitories. It becomes a catch-22 situation. To upgrade guide properties requires money - but is this the best use of the money? Chapter 3 - Prologue page 77 However, if they are not upgraded, they will not bring in the money that they could. Holiday activity weeks. These seem to be increasing, but any extra income is reinvested in the program at this stage and not available for general use. Rentalfor use of meeting room Dental assistants' rate was raised in 1996. I am not sure what has happened since. Other groups do not appear to have been attracted the use of the facilities . This is of course difficult because of the number of meetings the organisation itself needs to hold. Rental of car parking space. This cannot be increased under current local govemment legislation, given our facilities. There has been some talk about the moving partitioned room to the inaccessible back comer, but there would be a cost involved, and no one appears to actually be prepeired to make the decision to do it. Investigate membership numbers. This has been done continuously, but can be fraught with danger from a financial perspective. For example, the numbers in the second half of 1997 (when no money was collected) appeared higher than the numbers which were received with money in the first half the year. The 1998 budget figures were based on Chapter 3 - Proíogue page 78 this higher membership figure rather than on the actual amount received. This resulted in a collection substantially below budget in 1998. The 1998 receipts were $85,000 less than 1997 receipts, but $175,000 less that the 1998 budgeted receipts, leaving a significant hole in the budget. Feasibility of employing a fundraiser. This idea was developed by the person concerned and put to the committee, but the committee was reluctant to act. They could not see beyond the initial expense of the salary. Where is the balance between spending more to make more? How can that balance be found? Possibility of obtaining grants/fundraising. Nothing has been forthcoming here. Sale of biscuits is reported separately now, but does nothing to help income increase. Consideration of sale ofproperties A property review committee was established in late 1996 to investigate all the properties, and make recommendations about whether they should be retained or sold. The review committee returned with the considered recommendation that one particular property should be sold. They presented a reasoned rationale supported by income and expenditure figures and use of Chapter 3 - Prologue page 79 property over the past 20 years. However, the Executive Committee appeared unable to make a decision. There were many with "heart- interests" in this particular property, which prevented them from seeing the decision from the perspective of the organisation as a whole. Consequently, a meeting was called of all who were interested in the future of this property. Again, these were people with vested interests in maintaining the property. No business plans were forthcoming, no consideration of expense versus revenue, just good intentions. The Executive Committee felt that it could not act against the desires of this group, and many members did not want to anyway. The motion presented to the Executive Committee did not come from the floor, but rather from the Chair, with members being asked who would like to move the motion that this property not be sold for two years? This was despite the insistence of the property chairman that such a freeze was inappropriate, because many things had to be considered and the process of rezoning, etc could at least be started. I believe that the motion being put in the terms it was from the Chair, was the reason for it being passed, although certainly not unanimously. Property overhead by cut by 10%. This was implemented to some extent in the revised budgets. But then property committees brought unbudgeted items to the Executive Committee during the year, which Executive Committee proceeded to pass without consideration of the change this was making to revised budget, and the effect on the 10% Chapter 3 - Prologue page 80 cut. The general feeling was "they need it, so they must have it". This has been a fairly consistent occurrence, with expenses considered on an individual basis, in isolation from the larger picture. All budget centres to be reviewed. This was implemented, but the 10% cut not actually taken, with many members of the Executive Committee claiming that "in all faimess" it really could not be done. Again, each instance was considered in isolation, without seeing the big picture. 3.4 The Open Door I have actually jumped ahead of myself, by considering what has been done three years later. At the time, the discussion at these sessions and the subsequent inactivity, or even unwillingness to act, left me with a number of questions. • Why was the day to day financial management more effective than the broader financial management? • Had the short-term and long-term practices developed distinctly from each other? If so, why? • What factors had influenced the development of both types of financial practices and policies? Chapter 3 - Protogue page 81 • Who was really in control? The Executive Committee was supposedly the decision making body, and yet they refused to take decisions or act on those decisions. • The employees seemed to be the power people, even though the Executive Committee employed them. How had this occurred? One would have thought the power would rest with the one paying the salaries. Was it the result of a change in the organisation or a change in society? Could the difference in part be that the women on the early committees were used to employing servants and controlling them, while women on the later committees were not used to dealing with household staff? These questions encompassed two phenomena 1. The organisational attitude to financial matters, and 2. The dichotomy between long term and short term financial management. 3.5 Concludíng Comment To address phenomena, I needed to consider a number of things. First, the history of the organisation. What were its roots? What was its mission, its reason for existence? What was the place of finances and financial planning in the history of the organisation? Chapter 3 - Proíogue page 82 Secondly, how did internal control practices and other short-term fmancial practices develop? Thirdly, what has been the big picture in the organisation? What have been the financial trends? What factors have influenced these? What has been in the influence of a change of players? Or even a change of rules? Chapter 4 traces the history of the organisation from its earliest beginnings, as far back as its Founder and his early life and how this influenced the development of the organisation. Chapter 5 describes the contribution of the strategic people in the early days of the NSW organisation, whether players, coaches or umpires. Chapter 6 provides a microview of development of accounting and accountability practices by the early NSW organisation. Chapters 7 and 8 look at the broader picture, the macroview of financial management and financial trends within the organisation in relation to the support of its mission, with Chapter 7 addressing financial vulnerability and Chapter 8 analysing financial performance and financial trends. CHAPTER 4: THE HISTORY OF THE ORGANISATION or The Beginnings ofthe Game Long ago in the Paleolithic period of the Guide History, little groups of girls in quaint clothes of many colours, might have been seen marching along with haversacks, waterbottles and broomsticks. Their dress was quaint, their manner wild, but their backs were straight, and a look in their faces of fixed determination; someone was calling, in a way that no one had ever called before. The Pied Piper had piped, and the boys had dropped their books and their toys, and foUowed him outinto the woods, and the girls were following, too. "Go home," said the grown-ups, "it is not for you." "Go back," said the boys, "this is ourgame, notyours." "Go away," said the Piper, "I am piping to the boys," but the girls had caught the strains ofthe music, and they had to follow, all that they had read in their story books, all that they had dreamed in their dreams, was happening before them, their own brothers were tuminginto frontiersmen, explorers, "Scouts"; itwas too late to go back, and so it happened that as early as September, 1909, at the first Scout Rally at the Ciystal Palace, some girls, braving rídicule, managed to worm their way in among 8,000 Scouts to see the great chief, whom they claimed as their Chief, too. Nor were they to be disappointed, for though the Piper was busy with the boys, he had to be true to himself, and if the girls had followed to the tune of his music, then the magic would work for them, too, thus he wrote in the last page of a small pamphlet on Scouting: "A similar scheme might be started for girls, and they might be called Guides." (Maynard, 1920, p. 250) The first biennial report of the World Association of the Girl Guides and Girl Scouts (WAGGGS) contained a history of the Guide Chapter 4 - History page 84 Movement wrítten by Katharine Furse, the Director of the World Bureau of Girl Guides and Girl Scouts (Furse, 1930b). After studying the history through documents, reports, newspaper clippings and early publications, Furse was left with two impressions. The first was of "a mushroom growth which proved to [her] ... that the game conceived by the Chief Scout appealed to the imagination, to the sense of adventure, as well as to the altruistic instincts of the boys and girls of the world in a way in which nothing else had ever appealed to them before" (Furse, 1930b, p. 12). Her second impression was that "there is no limit to the good which could come of Guiding and of Girl Scouting" (Furse, 1930b, p. 12). 4.1 Scouts The Guide Movement has its roots in the Scout Movement and thus to consider the history of Guiding it is necessary to begin with the history of Scouting, for they had the same aims, the same methods and the same Founder. 4.1.1 The Founder [T]he Chief was a man of great versatility, Author and Artist, Architect and Sculptor. ... He was ambidextrous, drawing equally well with either hand and even at times with both hands together. He was a gardener, a fisherman, a stalker and a sportsman; infact, he was essentiálly an outdoor man. ... He was a man who believed in bringing religion into life in practice ... He was a man who loved babies, flowers and Chapter 4 • History page 85 birds ... he was a man who made his way from small begirmings ... He was a man of infinite humour and could always see the bríght side of veiy situation ... He was an extremely humble man ... He was a man who was loved in every country in the world. He often said that he was the happiest man in the world, and I can weU believe it because no one in this world has given more happiness to others. His influence in the world can never die. (Everett, 1941, pp. 57-58) Robert Stephenson Smyth Baden-Powell was bom in London, England on 22 February 1857. He was one of ten children, with six older brothers and a younger sister surviving infancy. His father, a clergyman and a professor, died in 1860 leaving the family with a very limited income. His mother, Henrietta Grace Baden-Powell nee Smyth (1824-1914), was a pioneer for the Girls' Public High Schools in Great Britain and opened her house to a wide variety of people such as Thomas Hardy, the novefist, Robert Browning, the poet and Thackeray, the writer. She taught her children herself from a veiy early age and helped develop in them a love of nature, an independent spirit and a trained mind. The esteem with which Baden-Powell valued his mother, and her influence on the formation of the Guide movement is demonstrated in his article in the Girl Guide Gazette written just after her death in 1914: Chapter 4 - History page 86 I am anxious to express to the Girl Guides the deep gratitude which my family and I feel towards them for their kind sympathy which was so touchingly expressed on the death of my dear mother. ... When I first put forward the idea of the Girl Guide Movement, I was not so veiy hopeful about it myself, until my mother, with her ripe experience and plucky spirit urged me to go ahead with it. Her feeling might have been expressed briefly thus: "Push on with it - suggest it to the girls, and they, with their spirit, will do the rest." (Baden-Powell, R., 1914, p. 7) Her influence on his life, both in terms of surviving on a limited income and in terms of helping others, was given further testimony in 1933 when Baden-Powell wrote: The whole secret of my getting on lay with my mother. How that wonderful woman managed to bring us all up, so that none of us did badly; and how she did not kill herself with the anxiety and strain I do not know and cannot understand. Not only did she, though a poor widow, feed, clothe and educate us, but she found time to do other work in the world particularly as one of the founders of the Girls' High School Movement, which has done so much for our womanhood to-day. It was her influence that guided me through life more than any precepts or discipline that I may have learned at school. (Baden-Powell, R., 1933, in Orans, 1997, p.l) Baden-Powell first attended the Rosehill School at Tunbridge Wells and then in 1870 won a scholarship to the Charterhouse Boarding School. After leaving school in 1876 he was unsuccessful in the entrance examinations for both Balliol CoIIege and Christchurch. However, he performed well in the entrance examination for the army and received a commission into the 13th Hussars. On 6 December Chapter 4 - History page 87 1876 he sailed with his regiment on the Seraphis bound for Bombay, India. Unlike many fellow army officers, Baden-Powell had no private income with which to supplement his meagre army pay. To make ends meet, he economised by giving up smoking and not accumulating debts in the mess hall. In addition, he broke and trained his own polo ponies, selling some to fellow officers, and thus earning himself extra income. While in India Baden-Powell gained rapid promotion to Lieutenant. He spent months at a time on the North-West Frontier where he and his men were responsible for guarding the frontier against raiding mountain tribes. The regiment to which he was attached at this station was known as the Guides, because its duty was to go ahead and reconnoitre for others to foUow. Baden-Powell was particularly impressed with the men of this regiment. They were physically fit, courageous and cheerful. They could cook meals in any situation, they were adept at signalling and they had a good knowledge of first aid. Furthermore, they had a simple faith in God. It was from this group of men that he was later to take the name "Guides" and apply it to the sister movement of "Scouts". Chapter 4 - History page 88 Over the next few years, Baden-Powell served in Afghanistan and then in South Africa, where he was ordered to undertake an accurate survey of the various routes through the Drakensburg mountains. He obtained the information he needed for this by disguising himself as an itinerant reporter and trekking over nine hundred kilometres. In 1884 he published his book Reconnaissance and Scouting. In 1886 Baden-Powell was ordered back to England with his regiment where he wrote Cavalry Instruction. During this time he was also involved in intelligence work in Russia and Germany investigating the efficiency of Russian searchlights and machine guns. In 1887 the now Captain Baden-Powell was seconded to go to Capetown as ADC with his uncle, General H.A. Smyth. Soon after his arrival, trouble broke out with the Zulus under their chief, Dinizulu. Baden-Powell was / ^ Wr \ instmmental in quelling the rebellion, and in 1!l#-f. j addition, acquired the Chiefs ceremonial . ^P"Åé^ÉÊÊ necklace of a thousand wooden beads. In 1889 ^^ÍJÍ^ Sir H.A. Smyth was appointed as Acting Govemor of Cape Colony, and Baden-Powell automatically became Acting Military Secretary to the Governor. In 1890 Baden-Powell was transferred to Malta as Military Secretary to Sir H.A. Smyth (Governor of Malta). The following year he was Chopter 4 - History page 89 appointed Intelfigence Officer for the Mediterranean and was involved in more intelligence work in Italy, Albania, Greece, Turkey, Tunis and Algeria. After that he returned to his old regiment, the 13th Hussars and was stationed in Ireland, where he had the opportunity to demonstrate his resourcefulness in troop manoeuvres. As a result, in tAir A poLonrs aiLiTAirr firiucs 1895 he was sent to Africa again, this time during the Ashanti uprisings. For his service 8A0EN-Pt>WEl.L'» Al US •?v> he was promoted to Brevet Lieutenant-Colonel. S('0|:TI.\« N-C.Os «r MEN After further victories in the Matabele Campaign, Baden-Powell was appointed Colonel in command of the 5th Dragoon Guards stationed in India. During this time, Baden-Powell published Aids to Scouting, the book which he had written for the use of his Scouts of the 5th Dragoon Guards. In 1899 he was again posted to South Africa and instmcted to raise and train two mounted regiments within a few months to defend Rhodesia (Matabeleland) and Bechunaland against the Boer settlers. Baden-Powell recognised the strategic importance of holding Cape Colony's largest town and the siege of Mafeking lasted 217 days until on 17 May 1900, Mafeking was relieved. Queen Victoria promoted Baden-Powell to the rank of Major-General. Baden-Powell was next called to raise and train the South African Constabulary, the body of Chapter 4 - History page 90 men that were to take over the policing of the whole country, Transvaal and Orange Free State when the war ended in 1902. 4.1.2 The Foundation When Baden Powell returned to Britain from the South Africa in 1903, he discovered that his book Aids to Scouting was being used to train boys in some schools and also by Boys' Brigade officers. In addition, it had been published as a serial in The Boys' Own Paper, a magazine popular with both boys and girls. Baden-Powell was invited to act as Chairman at the annual Rally of the Boys' Brigade, which numbered many thousands of members. He was encouraged by these boys and, wishing to see many others trained in the same way, promised his friend, Sir WiIIiam Smith, the founder of the Boys' Brigade, that he would devise an appropriate training scheme that could be used by the Brigades. Baden-Powell realised "that something was needed to enable boys to counteract the effects of modem life in so far as these prevented young people from enjoying the beauties of Nature and from exercising their powers of facing her elements" (Furse, 1930b, p 21). Having found that Scouting had been useful for the character training of his soldiers in the 5th Dragoons and in the South African Constabulary, he began to write out his ideas for how the same methods could be applied to boys in Britain. Baden-Powell aimed to give ideas to help Brigade officers in their work and to this Chapter 4 - History page 91 end his first suggestions were published in the Brígade Gazette in 1906. In order to test the concepts of scout training himself, he decided to hold an experimental camp and was given the use of Brownsea Island in Pool Harbour, Dorset, by Mr and Mrs Charles Van Raalte. He invited twenty four boys from various backgrounds, "from the East End of London, from places near Bournemouth, and from some of the big Public Schools" (Everett 1938, p. 45) and they pitched their tents on 25 July 1907. Baden-Powell "grouped them into patrols with their own leaders; surprised them with 'Scouting' challenges, taught them by Campfire Yarns" (Swinburne, 1978, p. 3). The camp was so successful that Baden-Powell began to seek out a means by which he could make his scheme of scouting more widely known. C. Arthur Pearson, the head of the publishing firm of the same name, agreed to sponsor Baden-Powell on a lecture tour to audiences of interested people throughout Britain. He also agreed to pubHsh the book that Baden-Powefl was writing (an adaptation of Aids to Scouting, specifically for boys) and to start a paper, The Scout, to which Baden-Powell contributed a weekly yarn for many years. Pearson rented a room in WindmiII on Wimbledon Common, London, to allow Baden-Powell to write his book, Scouting for Boys, free from Chapter 4 • History page 92 intermptions. Scouting for Boys was first published as a fortnightly magazine, with the initial instalment appearing on 15 January 1908 at a cost of four pence. There were six ^*.n 1 fnw ft- •n SOOlPItNG fortnightly parts published from January to "BP March 1908 with the first complete edition i f^ \ being published in May 1908. Thousands of boys mshed to the bookstalls each fortnight to purchase their copies (Swinburne, 1978, p. 4). Boys throughout Britain formed themselves into patrols and chose their leaders. Baden-Powell's original intention had been that existing clubs and organisations such as the Boy's Brigade or Young Men's Christian Association (YMCA) would absorb his ideas on scouting into their own training methods (Swinburne, 1978, p. 4; Miine et al, 1985, p. 13). However, many boys who took up "scouting" had never belonged to any of these clubs and, because their numbers grew too rapidly to allow them to be absorbed into the existing organisations, it became necessary to establish Scouts as a sepgirate body. At a public meeting in the Birkenhead YMCA Hall on 24 January 1908, the Boy Scout movement was officially launched. Again Pearson helped financially, this time by providing a one-room office, to be used as a centre for the Boy Scouts. By the end of 1908 there were 60,000 Scouts enroUed, but probably more were in training but Chapter 4 - History page 93 yet to be brought in touch with the new Headquarters (Reynolds, 1943). But it was not only the boys who were reading Scouting for Boys. While the boys read of famous people who had served their country and their fellow men, such as Raleigh, Drake, Captain John Smith, Captain Cook, Lord Clive, Speke, Baker, Livingstone, Davis, Franklin, Ross, Scott and Shackleton, the girls read of the women who had had a part in history: There have been women scouts of the nation too, such as Grace Darling who risked her life to save a ship-wrecked crew; Miss Kingsley, the African explorer; Lady Lugard in Africa and Alaska, and many devoted lady missionaries and nurses in all parts of our Empire. These have shown that girls, as well as boys, may well learn scouting while they are young and so be able to do useful work in the world as they grow oider (Baden-Powell, R., 1908, in Thompson, 1990, p. 3). On 4 September 1909 the first Scout rally and conference was held at Crystal Palace in South London with the object of showing the public the aims of the Scout Movement and how it had progressed since the first Scout camp on Brownsea Island (de Beaumont, 1944, p. 45). To this rally came 11,600 boys from all over Britain. Baden-Powell was amazed at the response declaring it "a bit Chapter 4 - History page 94 of a bombsheir (Swinbume, 1978, p. 11). By the end of that year membership had risen to about 100,000. 4.1.3 Conclusion Robert Stephenson Sm^^h Baden-PoweU, the military hero of Mafeking, became "the beloved leader of hundreds of thousands of boys and girls" (Milne, Wells, Payne, Downes, and Marriott, 1985, p. 13). The organisations he founded had definite miHtaristic overtones as can be seen from the military titles assumed by leaders, the disciplined stmcture and the wearing of uniforms by both adult and youth members. The organisations were very much products of their time, reflecting duty to God, duty to family and duty to the British Empire. This reflection is seen Baden-Powell's last message to the general public: I would like, before I go home, to say now grateful I am to hundreds, aye thousands, for kindnesses they have rendered to me. I have been deeply touched from time to time by the jolly goodwill which I have met with from brother Scouts and from fellow subjects of all stations in life throughout the Empire. Nor has this goodwiU been confined merely to fellow countrymen, for men of other nationalities have given me their friendliness in the same way. ... I do hope that that same kindly spirit will be inculcated and developed stiU more widely in the next generation so that more lives will be made the happier and the practice, not merely the precept, of the Christian ideal of peace and goodwill among men may become general. (Baden-PoweU, R., 1940, in Milne et al, 1985, p.56) Chapter 4 - History page 95 At no time was Baden-Powell in a "comfortable" financial position. His family was poor, he was educated on scholarships, he abstained from expensive habits and he obtained extra funds by writing books and breaking horses. In the same way, finances were never central in the establishment of the Boy Scout Movement. Baden-Powell was able to mn camps, because the sites were borrowed and the equipment given. He went on speaking tours because he was financially supported by the publisher, Pearson. Scouting for Boys was written because Baden- Powell was provided with a house in which to write it. Scouting for Boys, together with many other books and pamphlets on Scouting and Guiding, were published because of the financial support of other people. This section has reviewed the life of Baden-Powell and the founding of the Scout movement. It has also provided a hint of the beginnings of the Guide movement, by suggesting that girls were also reading Scouting for Boys. The next section considers the early beginning of the Guide movement in England and its subsequent spread to other countries. Chapter 4 - History page 96 4.2 Guides in England Thus, starting upon the initiative of a few enthusiastic girls, the movement has, like Topsy, automatically "growed". (Baden-Powell, R., 1933, in Orans, p. 7) 4.2.1 Beginnings It was not only boys who were motivated by Baden-Powell's book to develop their powers of observation and learn tracking and stalking. Girls realised that they, too, "would ike to play this new game, so they borrowed their brothers' shirts and shorts and adopted 'Scouting for Boys' as their text book" (Furse, 1930b, p. 21). Thus, although the Girl Guide Association was not officially formed until 1910, the Movement began by girls reading Scouting for Boys, and immediately getting down to business claiming "anything boys can do we can do better" (Girl Guides Association, 1970, p. 6). The girls realised "with unerring instinct they had realized that their brothers had found something very good, and naturally they wanted to share in it" (Merivale, 1931, p. 1). These girls called themselves Girl Scouts and adopted a uniform consisting of a Scout's hat, scarf and belt, and a pole, marked in feet and inches. This pole symboUsed their new-found freedom, but also had practical uses such as for jumping ditches, controlling crowds and improvising stretchers. The Scout hat could double as a bucket Chapter 4 - History page 97 for watering a horse or as a fan for a fire. Their Scout scarf kept the sun off their necks and also provided a ready-made triangular bandage. Thus these girls were well prepared. They organised themselves into patrols, one of the earliest being the Wolves. 4.2.2 Crystal Palace Rally At the first Scout Rally at the Crystal Palace in September 1909, when Boy Scouts came from all over Britain to meet their Founder, they were joined by a small group of Girl Scouts, who were "uninvited, unexpected and unwanted" (Coleman, 1980, p. 5). Baden-Powell knew of the existence of such girls because many had written to him. However, he had given them no encouragement due to his fear of offending the sensibilities of Edwardian parents by tuming their daughters into tomboys, and also because of the resentment of the boys and his fear of the Scout Movement being open for ridicule if girls were engaged in Scout activities. Thus, the attendance of these girls at the Rally caused him considerable surprise. Chapter 4 - History page 98 When Baden-Powell caught sight of the girls, he went over to them, smiled and said: "Who are you, and what are doing here?" I, as the patrol leader, stepped forward and saluted: "Please, Sir," I said, just a little frightened and shy, "we are the Wolf Patrol of the Girl Scouts, and we want to do Scouting like the boys." (de Beaumont, 1944, p. 45) On further questioning, Baden-Powell discovered that 6,000 girls were already registered as Scouts. They had been able to do this by signing letters with only initials and a surname. A few had already appeared at Boy Scout rallies in their local areas. De Beaumont suggested that Baden-Powell may have thought "why ... deprive these girls of being women scouts of the future, of living this grand life. It was quite clear already that they were trying to prepare themselves by reading the camp fire yarns in Scouting for Boys, and carrying them out practically every day, by being Girl Scouts in the face, sometimes, of ridicule" (1944, p. 45). Initially, Baden-Powell was somewhat daunted by the appearance of these girls. This was not because he was against the idea of girls scouting, for had he not written of such women in Scouting for Boys? The difficulty was the threat the girls posed to his Boy Scout Scheme. Forbes (1985) suggested that If girls got in on the act, boys might think Scouting 'girlish' and that would be that - if parents saw that Scouting was a Chapter 4 - History page 99 co-educational scheme (and remember that the scheme included camping and other activities unheard of for girls - just what kind of girl was this that joined the Scouts?!) - that would also be that - and finally the girls who had taken up Scouting had not always attracted favourable comment. At least one national paper had desired General Sir R.S.S. Baden-PoweU to "stop this mischievous new development" (Forbes, 1985, p. 1). 4.2.3 Early Days Shortly after the Crystal Palace Rally, Baden-PoweU invited Marguerite de Beaumont, the patrol leader of the Wolf Patrol, to his house in London where he told her stories of his soldiering days in India and how he was trying to think of a name for the girls who wanted to be involved in Scouting. Telling her about the famous regiment of Guides in India, he asked These men were called the Guides and that is what I am going to call you. Do you think you can live up to it and stick to their traditions? (de Beaumont, 1944, p. 46). The name "Girl Guides" met with opposition from those girls who had already registered themselves as Scouts. However, many girls who had not been Scouts joined the new Movement by registering on a special list of interested girls, kept at Scout Headquarters, and most of the others were gradually absorbed. From the beginning, Baden-Powell recognised the desirability of the girls being organised separately, so that the public could not Chapter 4 - History page 100 condemn them as tomboys nor ridicule the movement (Furse, 1930b, pp. 21-22). To this end, he wrote "The Scheme for Girl Guides", which appeared in the Boy Scout Headquaríers Gazette in November 1909. This was succeeded by a thin green pamphlet which he entitied The Aim of Scouting for Boys, with a suggestion for a similar scheme of character tiaining for girls. He persuaded his younger sister, Miss Agnes Baden-Powell, to help mn a separate organisation for girls so as to avoid both the disapproval of parents and the antagonism of the Boy Scouts. Thus, Agnes Baden-Powell became the first President of the Guide Movement and remained so until 1920. Her wide interests in life made her an excellent choice for she was "a naturalist, botanist and astronomer" who "was also interested in many of the new inventions such as motor cars and hot air balloons" (Thompson, 1990, p. 4). A contemporary wrote that Miss Baden-Powell is very highly accomplished, she has a knowledge of eleven languages. ... She plays the organ, violin and piano, and is a skilful artist and metal worker, and a good writer, besides being able to make piUow lace and do finest needlework. She is an authority on astronomy and other sciences, and an enthusiastic naturalist. ... She is an adept at outdoor sports and when cycling was general she could do practically anything on her bicycle. She is also fond of swimming, driving and skating. Last, but by no means least, she is a first rate nurse, an excellent cook and a very clever house-keeper. (Benson, 1914, p. 10) Chapter 4 - History page 101 The next two Guide publications, Pamphlet A and Pamphlet B, were published under the joint names of both Robert and Agnes Baden- Powell and told of the aims and methods of the new Movement. Although these pamphlets were undated, it is considered that they were the first to be printed about Guiding, and therefore must have been published in 1909 or soon after (Furse, 1930b, p. 22). Pamphlet A suggested how the Guides should be organised at a local level, and Pamphlet B provided information about the subject of training. Pamphlet B also included correspondence between a mother in India and her daughter at boarding school in England. It showed the mother's objections to her daughter being involved in Scouting, but it also raised her daughter's objections to giving it up. In addition, it demonstrated how Guides could be useful in various ways and their mission in life as seen at the end of the Victorian períod. It concluded with thirty first chapter of Proverbs, describing the virtuous woman as the ideal for Guides to achieve. With the growing numbers, it soon became evident that the Girl Guides were operating independently of the Boy Scout administration and that it would be necessary to provide some sort of Headquarters control. Thus, at the request of Baden-PoweU and of his sister, a Committee was formed by six women^ who were already interested 7 Mrs Paget (Chair), Miss Swaine (Hon. Sec), Mrs Lumley HoIIand, Mrs Benson, Mrs Hayes Saddler and Miss Rogers. Chapter 4 - History page 102 and who saw a future for Guiding. This smal group of pioneers had "no easy task, and they met with every kind of opposition, both from men and women" (Maynard, 1920, p. 250). A small office and an equipment depot were established in May 1910 at the end of a narrow passage at 116 Victoria Street, London, with Baden-Powell lending £100 as capital. A secretary, Miss Macdonald, was engaged, to register Guides and Patrols, write letters, listen to callers and sell equipment. Within a year there were 8000 girls registered as Girl Guides. Agnes Baden-Powell began to adapt Scouting for Boys specifically to suit girls and in 1912 How Girls can Help Build up the Empire, was pubUshed under the joint authorship of Agnes and Robert Baden- Powell. The second Guide handbook, Girl Guiding, was written and published by Robert Baden-Powell in 1918. The Guide Movement received increased recognition and respectability when in 1912 the position of Patroness of the Movement was accepted by H.R.H. Princess Louise. Furse records that "this recognition by Royalty did much to prove to the British public that the Girl Guides were recognised as a safe organisation for girls to join" (1930b, p. 26). Chapter 4 - History page 103 The Headquarters' Committee met each week in the same small room, with the Secretary having to move to the corridor outside to interview callers. At the meeting on 15 March 1911 The Hon. Sec. read a letter from the Hon. Treasurer, stating that there was a credit of £205.18/6 at the Bank, the Committee considered that they would be justified in returning the one hundred pounds lent by the Founder in the preceding April, to start the Girl Guide Movement, and the Hon. Sec. was requested to write to the Hon. Treasurer to this effect. (GGUK EM, 15 March 1911) However, other expenses, such as badges and books meant that this loan was not repaid but rather extended, with the minutes of the 31 March 1911 recording that A letter was read (at the request of Miss Baden Powell) from the Hon Treasurer thanking Sir Robert Baden Powell for the further loan of £100. It was March 1912 before the Association was in an appropriate fînancial position to repay the loan which had been made nearly two years previously. The minutes of 7 Febmaiy 1912 record this as foUows: Return of Loan. The Committee subsequently agreed that the Finances of the G.G. Movement were in a sufficiently satisfactoiy condition to aUow of their refunding the £100 which had been generously placed at their disposal as a further loan in the preceding month of April by the Founder. The Hon. Secretaiy was asked to write to the Hon. Treas. to this effect, and to beg the President to convey to Sir Robert Baden-Powell their thanks for his kind assistance. Chapter 4 - History page 104 A postscript to this minute was added on the opposite page noting that "The cheque for £100 was sent to Miss Baden-Powell at the beginning of March 1912". A fire caused by the fusion of an electric light burnt down the original Headquarters and forced the Association to move to larger premises at 76 Victoria Street, even though the premises were "bigger, we thought, than we should ever require; but it was that or nothing" (Maynard, 1920, p. 274). The Association then proceeded to open a shop for Guide equipment in Victoria Street. This venture "made us hold our breath, for the Guide Movement had no money; it was only, thanks to energy and devotion of the London officers, who got up Rallies, Displays and Sales, that even the current office expenses and salaries were paid" (Maynard, 1920, p.274). In the early days the Committee was pleased if the shop realised £10 in a month. However the shop rapidly became the main support of Guiding, rather than the cause of bankmptcy as feared by some. Guiding quickly spread overseas, initially under a variety of names. By Febmary 1911, representatives in Australia and New Zealand had written to Imperial Headquarters in London asking that the name be changed from "Girl Guides" to "Girls of the Empire". However, Baden-Powell expressed that "any changes found necessary should originate from Head Quarters at home, and that the 'Girl Guides' and Chapter 4 - History page 105 'Girl Aids' could work together, as long as they had some Imperial aim in view - without the necessity arising of changing the name" (GGUKEM, 15 Febmaiy 1911). A later suggestion that the name be changed to "Girl Scouts" was strongly rejected by the Executive Committee, with their resolution being published in the Girl Guides Gazette. They resolved That the Committee deprecate any change of name from "Girl Guides" to "Girl Scouts" on the following grounds:- 1. To give girls a distinct organisation of their own. 2. That the word "Scout" is misleading description of the kind of work for which the Girl Guides Organisation was formed i.e. The Girl Guides are encouraged in every way to retain their womanliness so that they may be good mothers and good Guides to the next generation. (GGUK EM, 29 July 1914) In 1918 Baden-Powell's new book, Girl Guiding, replaced How Girls Can Help to Build Up the Empire, and was written for the girls themselves. It contained the threefold Guide Promise and Guide Law shown in Figure 4.1. 4.2.4 Conclusion The Girl Guide Movement grew from its small beginnings at the Ciystal Palace Rally in London, England, in 1909 to over 250,000 members, throughout the world by 1920. As far as its finances were concemed, [t]he Guide Movement was no charity, financed by the rich and backed by Royalty, but a lot of girls who proved their Chapter 4 - History page 106 value, till the Government sent them out to Paris to help in the Great War as tmsted messengers; till, in 1920, the Princess Mary consented to become their President. (Maynard, 1920, p. 274) Figure 4.1 The Guide Promise and Law THE GUIDE LAW 1. A Guide's honour is to be trusted. r/jr/jv/Æ/er/jv/jr/JX'/jV/jr'/Ar/M/ar/.å^ ^/j r/Ær/M/j)f/^'^/ai'/jíir/jaf/^,,>/'iHf//ít/jiF//x',^iy 2. A Guide is loyal. t í í í 3. A Guide's duty is to be useful, THE GUIDE PROMISE ! and to help oliiers. I 4. A Guide is a friend to aU, and a I On my honour, I promise that sister to every other Guide, no II wiU do my best - matter to what creed or country, To do my duty to God and or class the other belongs. the King; 5. A Guide is courteous. To help other people at aU 6. A Guide is a friend to animals. times; 7. A Guide obeys orders. To obey the Guide Law. 8. A Guide smiles and sings under aU difficulties. I 9. A Guide is thrifty. i lO.A Guide is pure in thought, word i and deed. i Å '4 iíy/ai>yJityjipyjÊr/^/jÊr/Æ>yj /jByÆ^/ør/^^ In 1926 the Honorary Treasurer of the Girl Guides Association wrote two articles in The Girl Guide Gazette on keeping accounts. He began the articles by declaríng that The Girl Guides' Association is legally bound to keep proper accounts. These are duly audited each year by a firm of accountants and are published in the Annual Report. (Everett, 1926a, p. 152) Chapter 4 - History page107 He suggested that there were a number of important reasons for proper accounts being kept at all levels of the organisation. These were 1. When money is received from the public, the public has a right to know how their money is spent; 2. The public is more likely to subscribe to an organisation that keeps proper accounts than to one whose financial position is unclear, and 3. The keeping of accounts is an excellent training in business like metíiods (Everett, 1926a, p. 152). The next section follows the spread of Guiding to New Zealand and across the Tasman Sea to Australia. 4.3 Guides in Australia Guiding in Australia is very closely associated with the great mother organisation of England; any differences that occur are only adaptations due to climate and conditions of life, which cause us to emphasise the Guide activities which seem most natural to us. ... Guiding has been received with the very greatest enthusiasm throughout Australia ... In the matter of organisation each state is entirely responsihle for its own affairs, with its own Headquarters in the capital city. (Andrews, 1925, p. 208) Chapter 4 - History page 108 The distinguishing feature about the Guide Movement in Australia is that it started by itself as a result of girls reading Scouting for Boys and putting it into practice. Scouting for Boys was available in AustraUa by the middle of 1908 but it was not until May 1910 that the official Girl Guides Association was formed in Britain. Thus, girls who took up scouting in Australia called themselves, and were known by, various names. Among the early organisations were Peace Scouting for Girls, The Australian League of Girl Aids, Florence Nightingale Girl Aids, Girl Scouts and Baden-Powell Girl Guides. Guiding spread quickly to Australia, despite the distance from Britain. It was recorded that "the first countries besides England which write of starting Girl Scouting as early as 1910 are Australia, Suomi-Finland and South Africa" (Furse 1930b, p. 24). Agnes Baden-Powell established a means of communication with these girls as early as August 1910: Dear Girl Guides,- How I wish I could see you all, but, as you are so scattered over the Empire, shall we communicate with each other in this paper? Home Notes wiU reach you all, however far away - South Africa, or Australia, or wherever you are. I shall be so pleased to hear what you are doing, and hope to get news of you. Agnes Baden-Powell (Baden-Powell, A, 1910a, p. 310) Chapter 4 - History page 109 Later the same month, Agnes Baden-Powell wrote more specifically of the need for Guiding in Australia as understood from a recent letter she had received: From the Colonies I understand that Girl Guides are much wanted in Australia. A friend writes: "... We are anxious to do some good to the girls of the place, and this association seems to be the means to do it. Our object is to take up the young girls of the poorer and working classes from the ages of twelve to sixteen, to teach them something useful in their leisure hours, such as cooking, sewing, first aid, etc, and giving them some healthy amusements as well as to keep them out of harm's way, particularly from the dangers of wandering aimlessly about the streets and falling into evil ways before they have the sense to know the meaning of the danger they mn. ... One thing we wish to avoid is the imitating of boys' manner and dress. We are anxious to make it purely a womenly movement." Companies of B.-P. Girl Guides are being started in Brisbane and Queensland and also in Melboume. (Baden-PoweU, A., 1910b, p. 359) Australian Guides were also specifically included in the Agnes Baden- Powell's Christmas message to all Guides in Home Notes in December of that year: MY DEAR GUIDES OF THE EMPIRE, At this festive season all our thoughts are turned to our friends and dear ones, near and far - this countiy, or Canada, or Australia, New Zealand, or South Africa. Guides eveiywhere! You all have my heartiest good wishes, and I hope you will have a veiy enjoyable Christmas, with many delightful remembrances from old friends and relatives, much happiness, and not much indigestion. (Baden-Powell, A., 1910e, p. 40) Chapter 4 - History page110 Although these early greetings were sent to all Australian Guides, Guiding started in each Australian State independently (see Figure 4.2), and it was not until 1926 that the Australian Association was bom. In 1908, when Scouting for Boys arrived in Australia, the total population of Australia was only about four and a half million people, and historically, was only seven years further on from being the six separate colonies they were before Federation on 1 January 1901. Most. interstate travel was by sea, or rail which linked the three eastem mainland states. Motor cars were unreliable for long distances and even mail from one side of the continent to the other took over a week to arrive. Some time was to pass before groups of early Guides leamt that there were others elsewhere in this large countiy. Figure 4.2 The Beginnings of Guides in Australian and New Zealand Chapter 4 - History page 111 4.3.1 New Zealand When Baden-Powell heard that Scouting had started in a new country or region, he appointed a Commissioner or Chief Scout to organise the Movement formerly. In New Zealand he appointed, as Chief Scout, his fellow officer in the Boer War, Major (later Lieutenant-Colonel) Cossgrove of Christchurch. By September 1908, Cossgrove's daughter Muriel, together with a number of her friends, were also "scouting". Cossgrove enrolled twenty four of them as "Girl Peace Scouts" and began, with the help of his wife and a committee of ladies, to write a special book for them, Peace Scouting for Girls. He received permission from Baden-Powell to use any of the ideas from Scouting for Boys. The finished book, published in June 1910, had a New Zealand focus in relation to pioneers, patrol names, code words and bushcraft, such as using native fiax for lashing camp gadgets. The book encouraged Scout mistresses in other countries to write their own extra sections for the book with a particular focus on their own countries, especially in relation to woodcraft, their flag and their music. Copies were presented to Baden-PoweU and Agnes Baden-Powell, and others sent to Girl Peace Scout units in Tasmania and South Africa. Other requests came from a Peace Scout unit in Bmnswick, Victoria and Chapter 4 - History page 112 from Japan, from Church of England clergymen at missions in Yokohama and Tokyo. Publishers in the United States wrote to ask for permission to adapt the book for their needs. 4.3.2 Tasmania In 1909, correspondence referring to Girl Peace Scouts was exchanged between Sir Harry Barron, Governor of Tasmania, and Lieutenant-Colonel Cossgrove in New Zealand. As a result, Lady Barron and Mrs Dobson, the wife of a former Tasmanian Premier and a woman with wide community involvement, took a great interest in the Movement. Through Mrs Dobson's initiative, three patrols of Girl Peace Scouts were enrolled in the Hobart area. It was to these units that Colonel Cossgrove sent copies of Peace Scouting for Girls after its publication in 1910. In June 1911 Sir Harry and Lady Barron invited interested parties to attend a meeting to discuss the future of units of Baden-Powell girls in Tasmania. Among those invited were community leaders, ciergy and leaders of the Girl Peace Scouts. After hearing of the progress of the Girl Guide Movement in England and also in South Africa, a large majority of those present voted that "A Girl Guide Association be formed for Tasmania" (Swinburne, 1978, p. 21). Lady Barron consented to be patroness of the fledgUng Association, a committee was appointed based on that already involved with the Girl Peace Chapter 4 - History page 113 Scouts and it was agreed that the patrols of Girl Peace Scouts would become Girl Guides. Meanwhile, Mrs Dobson was in London where she took the opportunity to visit Agnes Baden-Powell and give her news of the Girl Peace Scouts in Tasmania. Agnes Baden-Powell appointed her as State Commissioner for Girl Guides for Tasmania and she sailed home unaware that Lord and Lady Barron had already initiated the beginnings of the Guide Movement in Tasmania. This was not surprising considering that a trip to England often lasted six to twelve months, with sea travel between England and Australia taking about three months each way (Coleman and Darling, 1989, p. 8). The Guide Movement in Tasmania grew steadily. In September 1915 Agnes Baden-Powell wrote: We have received a most excellent report of the Girl Guides in Hobart, Tasmania. Great progress has been made under the Commissioner, Mrs. Dobson. They are doing practical work, drilling, bandaging, bandage roUing, while classes to teach the girls to cut out and make their uniforms are held. (Baden-PoweU, A., 1915, p. 15) She also reported that in Hobart there were "three Patrols which have been working for the last six years, and are, therefore, now helping the newly formed Companies" (Baden-PoweU, A., 1915, p. 15). It was further reported that by September 1915 other patrols were active in West Hobart, Central Hobart, North Hobart, Lew Town, Batteiy Point, Chapter 4 • History page 114 Glenorchy, Sandy Bay, Lindisfame, Cascades, Launceston, Devonport, Ulverstone, Hagley, Sheffield and Latrobe. In June 1916, Agnes Baden-Powell wrote that "(t)he Commissioner, Mrs. Dobson, reports from Hobart Town that the movement is making great strides in Tasmania" and that "(t)he Governor's wife, Lady EUison-Macartney, has been most sympathetic and helpful. Companies of Guides have started in a further twenty-three localities" (Baden-PoweU, A., 1916b, p. 92). 4.3.3 Queensland One company of Girl Scouts met for about a year in Milton around 1909 or 1910 (Coleman and Darling, 1989, p. 15) and were instmmental in helping the local fire brigade to raise money to buy their first vehicle. However no written evidence remains. There is recorded interest in Guiding in Queensland in the Minutes of the Baden-Powell Girl Guides Central London Committee, later known as the Executive Committee of Imperial Headquarters. In the minutes of 6 July 1910, only three months after the Committee was established, it was recorded that The President showed to the Committee a letter she had received from Lady MacGregor, wife of the Govemor of Queensland, expressing a wish to form a contingent in that country. Miss Baden-PoweU is making arrangements to Chapter 4 - History page 115 reply by telegram free of charge, though the agent general, 86 to endeavour to attach them to Head Quarters. It is interesting to note that this was also the first that either Agnes Baden-Powell or the London Committee would have heard of Guiding in Australia, Mrs Dobson of Tasmania not visiting London until a year later in 1911. Lady MacGregor may weU be the "friend" who wrote about the need for Guiding in Australia, to whom Agnes Baden- PoweU referred in August 1910 (Baden-PoweU, A., 1910b, p. 359). By July 1910 Lady MacGregor had sent to London Headquarters "for aU the m es and regulations of the B.-P. Girl Guides", and had "received out in Australia a whole mass of all our Badges and equipment for the Australian Guides" (Baden-PoweU, A., 1910d, p. 132). Her daughter had "called a meeting of about twenty of the daughters of the leading people of Brisbane to work together, as she says it is girls' work, and young girls know the feelings of girls and can influence them best" (Baden-PoweU, A., 1910d, p. 132). The next record of Guiding in Queensland was in 1919 when a group of girls discovered a copy of How Girls Can Help Build up the Empire in a Brisbane bookshop and approached Miss Marjorie Grimes asking her to become their leader. When Miss Grimes agreed, Scoutmaster A. Cribb of Ipswich instmcted the girls in Scout driU, knotting, fire lighting, stalking, tracking and signalling, and enrolled them as Girl Chapter 4 - History page 116 Scouts. Miss Grimes wrote to England to discover if there were any other Girl Scouts in Australia and was told that there were Girl Guides in South Australia. On further enquiiy, she was advised to contact Government House in Brisbane. But it was not until the end of 1919 that Guiding was officially established in Queensland. On 15 November 1919 the wife of the Governor, Lady Goold-Adams called a meeting of a number of respected citizens of Brisbane who agreed that the Girl Guides Movement should be established in Queensland. Lady Goold-Adams became the first State Commissioner and Miss Grimes' Girl Scouts were the first to be enroUed as Girl Guides. 4.3.4 South Australia Towards the end of 1909 some girls attending Nailsworth School wrote to the South Australian Chief Commissioner of the Boy Scouts and asked him for permission to form a Scout Patrol. This was not approved, supposedly because they did not have a leader (Swinburne, 1978, p. 9). However, by the time of Baden-PoweU's visit in May 1912, two companies has been organised by Miss EUie Wemyss. Miss Wemyss corresponded directly with Agnes Baden-Powell and continued under the supervision of Imperial Headquarters in London until 1921. Chapter 4 - History page 117 In addition, and independently, Baden-PoweU Girl Guides Voluntaiy Aid Patrols had also started by 1914. In June it was recorded that The South Australian B.P. Girl Guides, in fuU uniform, attended the formal swearing in of the new Governor, Sir Lionel Galway. Lady Galway has consented to become a patron of the Guides. (Baden-PoweU, A., 1914, p. 16) Over the War years (1914-18), the Girl Guide Gazette carried a number of reports about these South Australian Guides, their growth and their involvement in war work. Between 1916 and 1917 another independent patrol was established at Mount Barker, with the leader, Miss Alice Barker (later Lady Wonderly) writing to London to request registration. However, it is thought that the letter was lost as result of enemy action and so the group was never officially registered. It was not untU 1921 that Girl Guides began officially in South Australia with Lady Hacket as the first State Commissioner and with the new State Association encompassing all these individual companies. 4.3.5 Victoria When Scouting for Boys arrived in Victoria, seventeen year old Wynifred Gipps of South Yarra adopted the suggestions and formed a patrol of girls known as Florence Nightingale Girls Aids. In 1910 she Chapter 4 - History page 118 wrote to Agnes Baden-Powell in London explaining that her patrol would like to become Guides. They were given permission to use the name "Baden-Powell Florence Nightingale Girl Guides". In April 1912, when she was 21, Wynifred received her warrant as Captain of the Ist Melbourne Baden-Powell Girl Guides, the first leader's warrant issued to Australia from London (Swinburne, 1978, p. 21). Meanwhile, in Hawthorn, another group of guides were established by Miss Louie Kerr, previously a helper in the Boy Scouts. She wrote to Agnes Baden-Powell for permission to start the unit and was sent permission to be a captain of the Baden-Powell Girl Guides and instmctions for leading her unit. Ten girls attended the initial meeting in response to the following notice in the Hawthom and CamberweU Citizen on 3 Febmaiy 1911: A meeting wiU be held on Monday evening Febmary 6th at 7.45 sharp, at 306 Burwood Rd., Glenferrie, to enrol members of the Austraiian Girl Guides: Ist Hawthom Troop. Besides the usual work followed by Baden-Powell Girl Guides in England, needlework, cooking, ambulance work, nursing and physical culture will be taught. Captain Louie Kerr wishes it understood that the troop will be kept strictly select and only girls of good character and respectability will be allowed to join, (Quoted in Coleman and Darling, 1989, p. 11) By 1912 other companies of Guides were also established at Richmond and Fitzroy. At least three of these companies were present at the rally attended by Baden-Powell when he visited Chapter 4 - History page 119 Eastem HiU Fire Brigade Station on 13 June 1912. In a letter to his mother, he wrote: I inspected three companies of Girl Guides here yesterday. (a) The Captain was young but veiy keen. The uniform inclined too much to sergeants' stripes, lanyards, cowboy hats and they even had a dmmmer. (b) Rather more sober uniform. (c) Veiy young Captain. (Quoted by Swinburne, 1978, p. 26) Swinburne (1978) suggests that these companies may have been (a) Ist Melbourne with Miss Gipps, (b) Ist Hawthorn with Miss Kerr and (c) possibly Fitzroy. In 1916, Miss Riva Pozzi led a company of Girl Scouts at Daylesford with the support of both the local community and the Boy Scouts. In 1917 a company was started at Fintona school in Camberwell by Miss MiUer, a teacher who had recently arrived from England. In 1919, Joyce Russell was disappointed to find no Guides when she arrived home in Skipton after attending school in England where she had been a patrol leader. Although being officially "ticked ofr (Swinbume, 1978, p. 38) for being too young, she and her sister led a company at Skipton for a number of years. These various units were operating independently of each other, receiving individual advice from London. Guiding did not become centralised in Victoria until 1922 when the wife of the Governor, Lady Chapter 4 • History page 120 Stradbroke, was appointed by London as the first State Commissioner and the first Victorian Executive Committee was formed. 4.3.6 Western Australia Although there was a company of Guides at Albany led by Miss Selby-Lowndes by 1910, the official launching of Guides in Westem Australia took place at a public meeting at Perth Town Hall on 28 June 1915. The meeting was a direct result of a letter from a Scoutmaster to Westem Women, a local periodical, asking if anyone could help the girls who were constantly asking him when and where they could join the Girl Guides. In reply to this letter, the editor, Miss Frances Wells, published an article on the Movement and invited women to come forward to lead the girls. The public meeting was arranged by the leaders of the Women's Service Guild in response, to this appeal. At the meeting, presided over by the mayor of Perth, it was moved by Sir Hariy Barron, seconded by Archbishop RUey and carried "That a Girl Guide Association be formed in this State, and that we apply to the Headquarters of the Girl Guide Association of Great Britain for the warrant" (Swinburne, 1978, p. 34). Lady Barron, whose husband was now the Governor of Westem Australia, was appointed as Chief Guide and Mrs Osborn Wilson as honorary secretary. Early the following year, Agnes Baden-Powell Chapter 4 - History page 121 wrote of the meeting and the launching of the Association in the Girl Guide Gazette: Western Australia.- A new Association has been started in North Perth. A closely packed meeting presided over by the mayor, was held in the Town Hall, when the hon. secretary of the Red Cross Society spoke of the aims and aspirations of the Girl Guide movement, after which the resolution for starting a Girl Guides' Association was proposed and seconded with hearty applause. Mrs. Osbome Wilson, the hon. secretary, writes that 300 girls have already joined, and that she has "At Homes" for them every Tuesday evening. Sometimes as many as 70 are present. The Govemor, Sir Harry Barron, and Lady Bsirron, have consented to accord the Western Australian Girl Guides their patronage, and were present at the meeting. (Baden-PoweU, A., 1916a, p. 30) In the 1917 Annual Report of Girl Guide Association of Great Britain (p. 11), the Western Australia Association is mentioned as growing. It is reported that Owing to the war and the consequent delays in correspondence, it has been difficult to get complete reports of the progress in Australia. In West Australia, at any rate, is most satisfactoiy, while the other States, including Tasmania, are all at work and developing. Here again no accurate return of numbers has been possible. 4.3.7 New South Wales In 1909 Mrs Hugh Dixson, a Vice-President of the Boy Scouts Association, organised the Australian League of Girl Aids in Sydney Chapter 4 - History page 122 with a promise and law adapted from Scouting. The following year, Mrs Dixson visited Miss Baden-Powell in London and the record of their meeting indicates the affiliation between the Girl Guides and the Girl Aids. The following excerpt appeared in the Guiding Pages of Home Notes: Austrcãian Girl Guides Miss Baden-Powell had the great pleasure of welcoming to our shores the head of the Girl Guides in Sydney, Mrs. Hugh Dixson. Both organisers evinced the keenest interest in the success of the movement on the opposite sides of the globe, and were mutually eager to assist one another's undertakings. The B.-P. Girl Guides were presented with a handsome gift by Mrs. Hugh Dixson, and as she is very shortly returning to Australia, Miss Baden-Powell had begged her to convey to the Australian girls a present in the shape of a large framed portrait of General Sir R. Baden-Powell, the founder of the Girl Guide movement. (Baden-PoweU, A., 1910c, p. 407) When Baden-PoweU took his first world tour as Chief Scout in 1912, he visited Sydney. He recorded in this diary on 21 May that "I inspected Girl Aids under Mrs. Dixson, who gave me a flag for the Giri Guides of Britain". The gift of the flag was discussed at the London Executive Committee meeting on 7 Januaiy 1913 and minuted as follows: AustraUan flag. It was decided that the hand-sewn Union Jack sent by the Australian Girl Guides to the English Committee should be given as an annual challenge trophy to the company reporting the best, percentage of attendance for the year, & that if possible, it should be presented publicly by the troop holding it one year to the troop winning it the next. It was suggested that in return for this Chapter 4 - History page 123 gift, the President should send to the Australian Girl Guides her photograph signed, and an autograph letter. The Guides in Britain were asked for their suggestions about a return gift a month later in The Golden Rule, the paper which had recently replaced Home Notes as a source of Guide news. Miss Baden-Powell wrote Austrcdia. - You have all heard what sisterly love the Australian Girl Guides have shown us in sending you a beautiful large flag with their kind greetings. It is a red flag with the Union Jack on one side, and the white stars of Australia on it. Now, do you not think we ought to show them some kindness in return, and prove to them that we like their loving thought? What do you wish to do for your Australian Sister Guides? Let me know what your plan would be. (Baden-PoweU, A., 1913, p. 47) In 1914 Miss Baden-Powell presented the flag to the 2nd Birmingham Guides for the best attendance record for the previous year. The retum gift was an ornate shield for use in a competition, which was sent to Mrs Dixson in Sydney. In May 1914 a raily was held in the ballroom of Government House because it could not be held outside due to inclement weather. Captain Paynes was presented with the shield by Lady EdeUne Strickland but no name was inscribed on it. With the onset of World War I in August that year, the Girl Aids gradually phased out and the shield disappeared untU, in August 1965, Annie Payne (now Mrs Fyfe) found it in a cupboard at her home where it had been "tucked away all this time and thought [Guides] Chapter 4 - History page 124 should have it" (GNSW, archive file, 1965) together with a newspaper clipping about the rally. Mrs Fyfe's memories added more information about the Girl Aids and Baden-Powell's visit to Australia. She remembered that When BP [Baden-Powell] came to AustraUa, he had a rally at Wardell Road, Dulwich HiU, which Girl Aids attended - had formed as a result of Scouts being formed. Wore navy pleated skirt and blouse with badge, (map of Australia and 'BeReady'onit.). Shield never competed for as War broke out and girls joined Red Cross Units etc. No follow on to Guides. No-one to organised it when War ended. (GNSW, archive file, 1965) There is still another link between the Girl Aids and the Girl Guides. The "First Public Display of the Australian League of Girl Aids was given at "Greenoaks", Darling Point on 12 November 1910 (ALGA, 1910, p. 1), the family of home of Elsie Smith (noted by Joy Stacy, State Secretary, in GNSW, archive file, 1965), an early leader in the Guide movement in NSW. Elsie Smith's early involvement with Girl Guides in NSW is evidenced by the comment in the 1926 Annual Report that We are delighted to welcome back Miss Elsie Smith, at the end of May, after nearly two and a half years' absence. Miss Smith is a keen traveller, and visited many interesting and out-of-the-way places, but in spite of having exceptional opportunities for other tours, she relinquished them in order to devote a generous proportion of her time to Guiding. Miss Smith is our second New South Wales Guider to win the Blue Cord. Before she left England, Imperial Headquarters solicited her help at various camps. Chapter 4 • History page 125 and for training days in different parts of the country. This arrangement gave the Guide authorities at Home the service of an energetic and capable Guider, and also put Miss Smith in the way of gaining much valuable experience. She has retumed fuU of vigor [sic] and enthusiasm, to take charge of the Training Classes, and has been Head of Training since the end of June. (GNSWAR, 1926, p. 6) She remained involved until 1943, when she resigned "owing to her work in the Land Army, which took all her time now" (GNSW EM, 19 August 1943). The next report of guiding activities in New South Wales arose in 1917 when Elsie Lee moved to a rented house in the countiy town of Tamworth owned by a family which had included two teenage boys, who had left a number of books on some shelves in a store room. One of these books was Scouting for Boys. Elsie considered that "the book was too good to keep to myseir (Lee, 1973, p. 1) and so she gathered together five or six friends as her patrol, and developing their activities and uniform from the suggestions in the book, they "scouted" in the hills behind Tamworth. This continued until Elsie went to boarding school in 1918. Then, in 1919, her family moved to Japan where she was able to become a member of the Ist Tokyo Guides led by one of teachers at the English Mission School. This was most Ukely the same Mission that had requested a copy of Peace Scouting for Girls hsick in 1910 (Swinburne, 1978, p. 16). Chapter 4 - History page 126 Despite these early beginnings, it was not until August 1920 that the Girl Guide Movement became official in New South Wales. 4.3.8 Conclusion Baden-Powell expressed his surprise that [r]apid as has been the rise of the Scout Movement, and surprising as has been the measure of its adoption by foreign countries, the Girl Guide movement has surpassed it in both these particulars. (Baden-PoweU, R., 1933, in Orans, 1998, p. 6) The Guide Movement spread quickly to Australia, despite both distance from England and the vastness of the countiy itself. The official formation of Guiding in each State was preceded by many years of informal Guiding, v^th groups of girls all over the country joining together to implement the precepts of Scouting for Boys. The next section describes the commencement of formal Guiding in one State, New South Wales, including an abortive early attempt and its eventual estabUshment as the basis of the organisation today. Chapter 4 • History page 127 4.4 GuidesinNSW 4.4.1 The beginning In 1920 Dame Margaret Davidson, the wife of Sir Walter Davidson, the Governor of New South Wales, called a special meeting of prominent Sydney women with the object of interesting them in starting the Guide Movement in New South Wales. These women decided that guiding was not necessary because Australian girls already had suffîcient opportunity to be out of doors (Swinburne, 1978, p. 51). This was apparently not the fîrst contact Dame Margaret had with the Girl Guides. In her private journal, Olave Baden-PoweU, the wife of the founder, Robert Baden-Powell, recorded that I had written to Dame Margaret previously [to 1920], and she had told me that they had already got "Junior Red Cross and did not want to start Guides"; but she changed her mind later, and though never really keen she did support its beginnings. (Baden-PoweU, O., 1931, unpubUshed joumal) However, while the correspondence between Dame Margaret and Olave Baden-PoweU had been private, this public meeting and subsequent lack of interest in Guiding was reported in the press. The report was read by a young woman, Nella Levy, who had joined the Girl Guides in 1908 while at boarding school in England and also attended the Ciystal Palace Rally in 1909. "The Lev", as she was Chapter 4 - History page 128 affectionately known, had "a fîrm belief in the principles of guiding, was young, keen, a dynamic personality, had a great sense of humour and fun, but was also a disciplinarian" (Coleman, 1980, p. 5). She wrote to the newspaper protesting that Guides were necessaiy in Australia. As a result, Dame Margaret invited her to tea at Government House and told her that "Queen Maiy would like to see Girl Guides in New South Wales, and I want you to start it" (Merivale, 1970, in GNSW, archival file). Nelly Levy responded enthusiastically to this invitation and thus became the first organising commissioner for Guides in New South Wales. She travelled widely, recmiting volunteers, enrolling Guides and encouraging the formation of Guide Companies. The first enrolment of 26 Guiders (Guide leaders) was held on 23 September 1921 at Government House in Sydney. These women had come from both cities and country towns to be enrolled by Dame Margaret Davidson. The following year another 70 Guiders were enrolled at the Sydney Showground, which also marked the first State Rally. 4.4.2 Early meetings The Annual Report for 1923 records that the "The Girl Guide Movement started in N.S.W. at an Inaugural Meeting held at Govemment House in August, 1920" (GNSW AR, 1923, p. 3), however Chapter 4 • History page 129 no written record of that meeting has survived. This date is supported by biographical information on Sir Walter Davidson which provides the following information about his wife: For her work with the Red Cross Society, both in Newfoundland and Sydney, Lady Davidson was appointed D.B.E. in 1918. In August 1920 she presided at a meeting to inaugurate the State branch of the Girl Guides' Association. (Nairn and Serle, 1983, p. 229) The first recorded meeting of the NSW Girl Guides was an Executive Committee meeting held at Government House three months later on 28 October 1920 with Dame Margaret Davidson, State Commissioner, in the Chair. There were seven other ladies present and three apologies as follows: Present Apologies Dame Margaret Davidson D.B.E. Mrs Alfred Lee Miss E. Grace Mrs Kelso King Miss V. Mort Miss Levy Mrs Bennett Miss Merivale Miss Trouton Mrs Cree Miss Walsh The minutes of this meeting were recorded by hand in the back of a notebook belonging to Miss Grace, who acted as Secretary. The book was quite small, about 12 cm by 20 cm, with a blue cover and red tape on the spine. The first leaf bears the name "Elizabeth C. Grace" and the date "Dec 5^ 1915", but once the page is turned there are handwritten stubs showing where seven pages have been cut out. On the inside back cover there is the heading "MINUTES" and on the Chapter 4 - History page 130 next page "GIRL GUIDES" with the minutes of the meeting on 2 December 1920 directly underneath. The meeting passed four resolutions: 1. It was decided to put a notice in daily papers re the formation of the Girl Guide Movement. 2. That this present Executive Committee is provisional for six months. 3. To write to already formed companies to enquire if they are already registered, 06 request them to send in their company warrants for inspection. 4. To pay registration fees to national Headquarters in London, 85 later to appoint a Representative on National Council. From the nature of the resolutions, the absence of prior written records and the character of the minute book, it is reasonable to assume that this was actually the first meeting of the Executive Committee since the Inaugural Meeting in August. The next meetings were held on 2, 6 and 9 December. Only the resolutions passed are recorded in the minutes, but it would appear that various appointments had been made, such as the President, Vice Presidents, Treasurer and Equipment Officer. The need for financial support and ability to pay expenses arose early. The minutes of 2 December 1920 record the resolution "That Vice Presidents' subscriptions shld be caUed in as from November 1«^". These subscriptions would be the first monies received by the fledgling Association and so on 6th December it was recorded that Chapter 4 - History page 131 "Miss Trouton asks for Dame Margaret's sanction to call in subscriptions from those already asked to be V.P.s". At this meeting it was agreed to lease an office at 161 Castlereagh St "at a rental of 25/- per week including lighting', and "M^s Kelso King kindly undertakes to coUect £52 towards Rent of Office". At the meeting on 9 December Mrs Kelso King (later Lady Kelso King) also guaranteed to collect all working expenses for the first year. The first meeting in 1921 was held on 16 March with subsequent meetings being held at fortnightly intervals. 4.4.3 Conclusion Thus, the Guide Association started in Sydney, with no financial backing, and littie thought of obtaining it. Their first minute book was a discarded notebook and their first meeting places were the homes of various committee members. The Committee generated expenses prior to discussing income. However, these expenses were necessary to sustain the mission, and throughout its history, the Executive Committee has always looked to mission first and finances only as a necessaiy buttress to support that mission. Chapter 4 - History page 132 4.5 Concluding Comment This chapter has considered the beginnings of Guiding, right back to the influences on the early life on the Founder. Without a consideration of the history of the organisation, any attempt to understand the development of its financial practices, must be sorely limited. The organisation has developed an ethos, arising from the background of its Founder. It has traditions, heritage, a political bias, militaristic perspective and sexist undertones. Essentially, it has developed its own culture, which has influenced the management of the organisation, the control of its assets and the development of its financial information systems. The next chapter discusses the people who have contributed to this culture and the influences they have had on the organisation. It is a stoiy of different managers and management techniques. It is a story that is influenced by many people: those who play the game, those who watch and those who referee. CHAPTER 5 THE CONTRIBUTION OF THE EARLY LEADERS or Team, Captains and Coaches 5.1 Introduction The NSW Girl Guide Association began as an organisation with a mission, an organisation to consolidate and spread the concept of Guiding as it had been expressed in England, right back to Scouting forBoys, the book so eagerly adopted by girls as well as boys, and not by English girls only, but also by those from far-flung parts of the British Empire, such as Australia, who had grabbed the idea and mn with it. So it was that Lady Margaret Davidson attempted to draw together those first threads in NSW. After first finding a young woman, NeUa Levy, who was willing to be out in the field organising the girls, she then organised a committee of women to oversee the mnning of this fledgling organisation - to establish its parameters, to set its guidelines, to keep the Guiding spirit aflame. Chapter 5 - Barly Leaders page 134 The Association's first published report (GNSW AR 1923) states that the Inaugural meeting of The Girl Guide Movement was held at Govemment House in August 1920. However no record of that meeting survives. The first recorded meeting of the Executive Committee was held at Government House on 28 October 1920. Dame Margaret Davidson, DBE, is recorded as being the State Commissioner, and also the Chairman of the Executive Committee. Seven other women were present and three sent their apologies. The business recorded in the minutes indicates that this was probably the first formal meeting of the Committee that was to govern the Association throughout its history, right up until today. There were four resolutions passed at that meeting. The first was that "It was decided to put notice in daily papers re the formation of the Girl Guide Movement", thus indicating that this was a veiy early meeting of the Committee. The second resolution indicated that this was likely to have been not only an early meeting, but indeed the first meeting for it was recorded "That this present Executive Committee be provisional for six months". Having taken care of publicity and govemance, the committee them moved on to membership, its third motion being, "To write to already formed companies and enquire if they are already registered, and to request them to send in their company warrants for inspection". Ties with Great Britain were strong. Some of these women were English; others, although Chapter 5 • Barly Leaders page 135 Australian-born, perceived Great Britain as "home". In terms of Guiding, they saw that their roots and their first allegiance belonged there, and so the final resolution of that first meeting was "To pay registration fees to National Headquarters in London, and later appoint a Representative on National Council". Thus, the first financial decisions of the Executive Committee were made and recorded, not with any financial plan in mind, but rather because of the need to advertise and the desire to belong to the mother organisation. The first published report of the Girl Guides appeared in 1923, but it did not contain any financial statements. However, there was a paragraph acknowledging the work of the woman who was the Association's Honorary Treasurer from its formation in 1920 until her death in May 1923. It was recorded that It is with veiy deep regret that we have to report the death of our splendid Hon. Treasurer, Miss M. E. Trouton. Only those who were closely associated with her in her work at Headquarters know the value of her services. She was far more than a Treasurer, and although her connection with the Red Cross and other Societies made many calls on her time, her energies were at the disposal of the Girl Guides whenever they were needed. (GNSW AR, 1923, p 4) The day to day financial records of the Association no longer exist. Thus, to discover the financial practices of the Association, it is Chapter 5 - Early Leaders page 136 necessary to consider the minute books of the Executive Committee in conjunction with the annual reports. The minutes of the early meetings suggest that the first Executive Committee consisted of women who were not overly fajniliar with the appropriate procedures for operating a business. However, there is no record of duties being explained until the meeting of 24 August 1922 at which it is recorded that Dame Margaret, Miss Levy, Mrs Lightoller, Miss Trouton, Miss Board, each addressed the meeting on the various duties of Commissioners, badges, finance and Mrs Taylor, equipment, Miss CuIIen on Lone Guides. The development of financial management practices was influenced by the organisational stmcture, culture, environment and history, together with socially existing pattems of the times. If this organisation were not a non-profît organisation, or had it been founded at some other point in history, the factors influencing it may have been quite different, and thus it would have developed quite differently. As mentioned in Chapter 3, there appear to be two distinct phases in its fînancial management: the day-to-day control and the broader control. The organisation appears to be largely successful at the former, but have a varied performance on the latter. Analysis of the broader picture, the macroview, is addressed is Chapters 7 and 8, whUe Chapter 6 deals with the development of day- to-day fînancial management control and policies, or the microview. Chapter 5 - Ekirly Leaders page 137 The remainder of this chapter considers the stmcture of the organisation, a factor strongly influencing Association management and more specifîcally fînancial management. The next sections consider the committee stmcture, and the people who sat on those committees. 5.2 First Financiai Decisions As previously mentioned, the fîrst fînancial decisions made by the Executive were at its fîrst recorded meeting on 28 October 1920, where the resolutions were passed to pay registration fees to London Headquarters and to advertise the Guide Movement in the daily newspapers. This was before the Association actually had any members, funds or even a bank account. Having decided to pay registration fees, and having incurred advertising expenses, the Association had to look to ways to raise money. One of these was by means of subscriptions. Invitations were extended to a number of interested women to become Vice- Presidents of the Association, which, together with the honour of having their names printed in the annual report, ensured the Association would receive an annual subscription of £1/1/0 from each. By the next meeting on 2 December 1920, the Executive Committee had extended these invitations and decided "that Vice Presidents' subscriptions shld be called in as from November l^t." Chapter 5 - Early Leaders page 138 One might expect that, having passed this resolution and recognising the need to obtain money, that these subscriptions would now be requested. However that is not what occurred. Rather, further discussion followed at the next meeting on 6 December, at which it was agreed that "Miss Trouton [the Treasurer] ask for Dame Margaret's sanction to call in subscriptions from those already asked to be V.Ps.", Dame Margaret "being out of town". This appears a strange state of affairs given that Dame Margaret had been present, and indeed chaired, the previous meeting at which this collection had already been confirmed. One wonders why coUections had not yet begun, and why the matter needed be raised again, and indeed why a further "sanction" from Dame Margaret was necessary. This meeting also recognised the need to establish a headquarters in Sydney, and thus it was agreed "that we lease office at 161 Castlereagh St from Miss Bolton at a rental of 25/- per week including lighting". One member of the Executive, Mrs Bennett, undertook to enquire about fumiture for the offîce, while "M''^ Kelso King kindly undertakes to collect £52 towards Rent of Office". The same ground was again covered at the next meeting only three days later on 9 December when resolution were passed "That it is decided to rent an office at 161 Castlereagh St temporarily at a rental of 25/- weekly including lighting" and that "M^s Kelso King Chapter 5 - Early Leaders page 139 guarantees to coUect all working expenses for first year". The meaning of this second resolution is uncertain. Was Mrs Kelso King agreeing to coUect moneys from others, or to actually act as gUEirantor for the rent money for the first year? This habit of repeating resolutions from previous meetings reflects the unfamiliarity of these women with business matters. The short time that elapsed between meetings makes it difficult to believe that they had forgotten the previous motions. Indeed, the fact that the previous minutes had been signed and dated by the Chairman of the next meeting, indicates that these minutes had been read and approved by the Committee, although no formal motion to that effect is recorded. Therefore, it is appropriate at this point in the story to consider the type of women who comprised this first Committee and the cultural influences to which they were exposed. 5.3 The First Women 5.3.1 British Heritage For many years, the Executive Committee met at 11 am on a week- day, indicating that its members were women of independent means, not needing to work for their livelihood. As at the first meeting, they Chapter 5 - Early Leaders page 140 commonly referred to England as "home", although most were actually born in Australia. Of the original Committee members, at least three were either the daughters or wives of men who were later knighted by the Queen. An English observer in Australia in the early 1900s noted that England was still regarded as home "to the infinitesimal fraction of the Australian population which is able to take trips to the Old Country" but that "to an ever-increasing percentage of the inhabitants of the Britain beyond the Seas the word 'Home' is becoming reserved for the land of their birth" (Matthews, 1901, p. 282-3). The repeated references in the Executive Committee minutes to England as "home" and to trips "home" by various members, indicates that those responsible for organising Guiding fitted into "the infînitesimal fraction", where those to whom they were ministering fitted into the latter category. In the early 1900s Australians largely depended on English books, joumals and magazines for both education and leisure reading. Indeed, some considered that Australians were too exclusively influenced by the ideas of England from whence come all their books, their telegraphed news, their information of every kind. That is why they have quite naturally assumed that the summit of wisdom and virtue is comprised in English middle class opinion and have set out to attain it. They had had no other model for comparison. (Métin, 1901, quoted in Ward and Robertson, 1980, p. 89) Chapter 5 - Barly Leaders page 141 5.3.2 Financial and business exposure The women on these early Executive Committees would have been likely to read an English joumal such as Good Housekeeping. Conseqently, in order to understand the perceptions of women in relation to finances and budgets, it is valuable to consider the articles in this joumal that touch upon these matters. Lady Violet Bonham- Carter contributed an article "Are you a Good housekeeper?" to the November 1928 edition. In the five column article, she was halfway through the fifth column before she addressed the issue of household expenditure and declared that "I regretfuUy admit that I think one ought to "do" weekly books if one wants to learn anything at all about one's household expenditure" (Bonham-Carter, 1928, quoted in Braithwaite and Walsh, 1995, p. 74). Bonham-Carter concluded that My advice to would-be economists: "Conquer the grocer's book". Once you have laid that many-headed hydra low the game is yours with the reluctant respect of your cook thrown in. (Bonham-Carter, 1928, quoted in Braithwaite 85 Walsh, 1995, p. 74) This article indicated a class division in which cooks were those of the working class employed by the women of the middle and upper classes. Further, there is the implication that the women of the working classes understood household budgeting better than the other classes, who would be well advised strive to master the subject as well. Chapter 5 - Early Leaders page 142 From time to time Good Housekeeping also contained articles about how other people lived and managed. Such an article was published in the April 1934: "A Fifteen-Roomed House and an Income of £376 (per year)" and was subtitled "How the wife of a Cornish vicar manages her household without the help of a maid". The additional expense of sending a son to boarding school had meant that the family needed to dispense with the services of their cook-general help. The wife wrote: I had no practical experience at all of housework, cookery, washing or dressmaking. I have learnt all I know about cooking and management from Qood Housekeeping, which I have taken ever since I married, eleven years ago, and from one or two women's papers which I have had lent to me lately. In spite of my inexperience we have now managed by ourselves very happily and satisfactorily for nearly a year. {Good Housekeeping, 1943, quoted in Braithwaite and Walsh, 1995, p. 126) In Januaiy 1936 an article appeared in Good Housekeeping which discussed "Real-Life Budgets coUected from among interested readers during the past year". This article consisted of details of six budgets from families of various sizes with various incomes. These budgets were prefaced by some general comment on economy and budgeting. The article acknowledged the assistance that could be gained by observing "real-life budgets", but also added comments qualiíying their constmction: How other people face their problems is always a fascinating and interesting study, and it is hoped that the Chapter 5 • Early Leaders page 143 budgets pubUshed here, all of which have been submitted by readers, wiU prove of help to others. We do not necessarily consider them exceptionally weU-balanced, but have refrained from adjusting them, as we think that other readers wiU prefer to see the actual figures which, if not theoretically ideal, have at least passed the test of practical experience. (Garbutt, 1934, quoted in Braithwaite and Walsh, 1995, p. 145) Judging from the content of these articles, the women comprising the early Executive Committees probably knew a lot about managing household staff, but Uttle about the logistics of actually doing the work of the house. The household budget probably held little direct concern for them, particularly for the young single women, who still resided at home. Hence, it is not surprising that these women knew little about mnning a business or operating a budget. The part of their home life that led them to make decisions without first considering from where the money would come, also influenced their approach to financial management in Guiding. It was written of the Davidsons, that Despite a reduction by Premier Holman in the governor's allowances, the Davidsons entered enthusiastically into the round of gubernatorial duties, with speeches, official openings and vice-regal functions. (Nairn and Serle, 1983a, p. 229) Chapter 5 • Early Leaders page 144 5.3.3 Feminist issues It is interesting to note that the feminist movement in Australia began in the last quarter of the nineteenth century, with the leading feminists generally being well-educated middle-class women who were "deeply concerned to protect their poorer sisters from dmnken and profligate husbands" (Ward and Robertson, 1986, p. 303). These women agitated for women's franchise and believed that women would vote for the suppression of trading in alcohol. As a result of the level tone of Australian politics, these early feminists won the vote for Australian women in 1908, with New Zealand being the only other country in which women could vote at the time. After World War 1 (1914-1918), women's movements continued to support the temperance movement. However, the addition of a number of working class women as members of the various women's organisations changed the focus to more economic matters. An example of their reformist zeal was reported in The Sydney Moming Herald on 26 September 1922 when [a] deputation of women representatives of the Citizen's Association, the Women's Union of Service, the Women's Reform League, the Professional Women's Association, and other women's organisation waited on the Premier yesterday in support of the introduction of a child endowment scheme. Chapter 5 - Early Leaders page 145 The women who served on the early Guide Executive Committees were also women with reformist zeal, the minutes recording that many of the women had served on Committees of other women's organisations. These women believed that [t]he rapid growth of the Movement shows that Guiding supplies a very real need for Australian girls. The girl of the city, of the country town, and of the bush, present very divergent types, though in all three cases the shortage of domestic help tends to produce a higher percentage of reliability, adaptability, and experience in the average young Australian Girl than the average English girl of the same age, though we cannot boast an increased liking for household management! In this respect, however, Guiding is of real service to over-worked mothers. The unwritten law of "a good deed eveiy day", and the realization that "a Guide does her duty with smile", go a long way in the accomplishment of uncongenial tasks, and in inducing parents to encourage their daughters to join. (GNSW AR, 1923, p. 4) In the first half of the century the majority of married women did not work in paid employment outside the home. Only 6 percent of Australian married women between the ages of 19 and 64 worked before World War II (1939-1945). This had rísen to 18 percent by 1961, to 35 percent by 1971 and to 44 percent by 1980. The basic belief in many households, was that a husband should provide for his wife both during their marríage and after his death. This belief was illustrated in an advertisement for Life Assurance in a magazine in the 1920s in which the father told his son "Dick, my boy: when I married your mother I was getting very much less money that you are getting. It wasn't until we'd settled down in our little home and you had arrived that I realised that the greatest moral obligation of my life Chapter 5 • Early Leaders page 146 was to make the future safe for her - in case anything happened to me" (Braithwaite and Walsh, 1995, p. 62) In the early days of Guiding, a woman was thought of having two main roles in life: being a good wife and a good mother. As late as 1940, these sentiments were stiU held by the Founder, Baden-Powell. In his final message to Guides he wrote: So, do you see, you are the chosen servants of God in two ways; first to cariy on the race, to bring children into the world to replace the men and women who pass away; secondly, to bring happiness into the world by making happy homes and by being yourseives good, cheeiy comrades for your husbands and children. That is where you as Guides especially come in, by taking an interest in your husband's work and aspirations, you can help him with your sympathy and suggestions and so be a guide to him. (Baden-PoweU, R., 1940, quoted in GGA, 1970, p. 32) While most members of the Executive Committee were married women, Guide leaders in the field were largely single women without the first priority of loyalty to husband and children. This situation was weU illustrated in the Annual Report of 1931 where it was recorded that: Quite a matrimonial epidemic broke out among Commissioners last year. We offer our best wishes to Mrs. Merivale (Miss Levy), Mrs. Riordan (Miss Rutherford), Mrs. Alastair Henderson (Miss Beale), and Mrs. Foott (Miss Anderson). At the same time, we wish to inform the respective husbands that we owe them a deep gmdge, for either they have carried off their brides from N.S.W., or else they have advanced unkind objections to their Guide activities, We want to point out to these tyrants that their Chapter 5 • Early Leaders page 147 wives were our Commissioners first, and we consider that we have a prior claim. (GNSWAR, 1931, p. 7) 5.3.4 Conclusion This section commenced by considering the first decisions made by first Executive Committee. The apparent lack of business planning and repetition of the same business from one meeting to other, without canying out determined actions, then led to a discussion of the type of women who occupied roles on this Committee and the social influences upon them. Although these women did not appear to have an understanding of strategic planning, one must however concede that they did bring with them the experience of working on Committees. These are interesting spectacles through which to view the growth of day-to-day finamcial management practices. These practices appeared to develop on an exigency basis; as the need arose, an issue was considered. Ideas were welcomed from within their own committee, from their employees, from their husbands, and also from their auditors. They appeared to perceive men to have a particular financial expertise which they themselves did not possess. The next sections look at the women who occupied the influential positions of State Commissioner (and thus Chairperson of the Executive Chapter 5 - Early Leaders page 148 Committee) and Honoraiy Treasurer over the first thirty years of the Association's history. 5.4 The First Chairpersons Since the foundation of the Guide Movement in NSW, the Chairperson of the Executive Committee has also been the State Commissioner, the most senior uniformed person in the State. The first women to hold these positions were well known for their charitable works and their outstanding contributions to society. They ranked among the more educated, upper class of Australian society. In later years, the State Commissioner was chosen for her background in Guiding, the contríbution she had already made, and the potential she brought. This changed reflects the changing face of Australian society. However, the early State Commissioners brought their cultural baggage with them as they came to their tasks. The type of person they were, and their backgrounds influenced the functioning of the Association. 5.4.1 Lady Margaret Davidson As already mentioned, the first President of the Executive Committee was Dame Margaret Davidson. She was bom Margaret Agnes Fielding on 21 Apríl 1871, the fourth daughter of General the Honourable Sir Percy Fielding (1827-1904) by his wife Lady Louisa Chapter 5 - Early Leaders page 149 Isabella Harriet Thynne (1834-1919), daughter of Sir Henry Frederíck Thynne, third Marquess of Bath (1797-1837). Sir Percy Fielding was the second son of WiUiam Basi Fielding, seventh Earl of Denbigh (1796-1865). Because of her work during the World War I (1914- 1918), Dame Margaret was appointed a Daughter of Grace of St John of Jemsalem (D.G. St.J.) and, as previously mentioned, was created Dame of the British Empire (D.B.E.) in 1918 because of her work with the Red Cross, both in Sydney, and previously in Newfoundland from 1913 to 1916. Dame Margaret was the second wife of Sir Walter Edward Davidson (1859-1923), marrying him on 21 October 1907 in London, after which she bore him two daughters. Sir Walter, with his family, arrived in Sydney on 17 Febmaiy 1918 to take up the position of Govemor of NSW. After Sir Walter's death on 16 September 1923, Dame Margaret and her daughters returned to England. Thus, Dame Margaret was never a member of Australia's supposedly "classless society. She was born and married into the Brítish upper classes. She did not need to earn her own income. Apart from her duties as a wife and a mother, her time was her own for what leisure and charitable affairs interested her. Given this background, it is not surprísing that, whereas she was reluctant to establish the Girl Guides at Agnes Baden-PoweU's request (Baden-PoweU, O., 1931, Chapter 5 - Early Leaders page 150 joumal), she was pleased do so at Queen Maiy's request (Merivale, 1970, in GNSW, archival file). 5.4.2 Lady Lily CuUen After the departure of Dame Margaret Davidson to England on the death of her husband, Lady CuUen became the new State Commissioner. Born Eliza Jane White in 1865, she was the daughter of an Australian bank manager and politician, Robert Hoddle Dríberg White (1838-1900). She married Sir WiUiam Portus CuUen (1855- 1935), Australian Chief Justíce and politician, on 17 December 1891 at Port Stephens, NSW. Lady Cullen was well-known for her charitable and educational work. She was the President of the Australian Red Cross Society from 1916 to 1917, the first President of the Victoria League, the NSW Vice-President of the Bush Book Club, and she was also prominent in the organisation of the England Grammar School in Forbes Street, Sydney. Lady CuUen was the first Australian bom State Commissioner of Girl Guides in Australia, holding the position from 1923 to 1928. Two years after her term fmished, she retired from public life due to Ul-health and died in the NSW country town of Leura on 10 June 1931. She appears to have had littíe input into the management of the Association as recorded in the Executive Minutes, but this could be because she was absent overseas for a year of her term and also Chapter 5 - Early Leaders page 151 suffered from iU-health. Mention of these issues was made in several Annual Reports. The Annual Report of 1925 recorded that Sir WiUiam and Lady Cullen were farewelled by Scouts and Guides prior to their departure for England for twelve months. Lady CuIIen is recorded as being "on leave of absence" from her position as State Commissioner, and the report also mentions that we are delighted to hear of the happy time she is having, and especially to know that her interest in Guiding is keener than ever. She was at Foxlease [an English Guide property] when Princess Mary paid her second visit there, and sent an entertaining account of the day GNSWAR, 1925, p. 2). The 1926 Annual Report recounted her return as "a welcome event" and that she was "looking splendidly well and happy after a delightful trip" (GNSW AR, 1926, p. 5). However, the following year she suffered a "long and trying illness" (GNSW AR, 1927, p. 5) and in Apríl 1928, resigned from the position of State Commissioner due to continuing iU-health. The Annual Report of 1928 pays her tribute by declaríng that Since 1920 ... Lady CuUen has taken a deep interest, doing all in her power to further the movement. ... In spite of her long and tiying iUness, Lady CuUen maintained her interest, and helped the Executive with her sympathetic counsel. Only continued iU-health could have caused her to sever her connection with the movement, or have induced the Association to accept her resignation. (GNSW AR, 1928, pp. 5-6) Chapter 5 - Eiarly Leaders page 152 5.4.3 Lady Alicia Kelso King Although not strictly a State Commissioner, Lady Kelso King was a foundation member of the Executive Committee and, as Deputy State Commissioner, took on the role of State Commissioner duríng both the absence and the illness of Lady Cullen. Born Alicia Martha Kirk, Lady Kelso King was a cousin of Eliza Halis, who became her guardian when she was orphaned at the age of fourteen. In 1907 in Melboume, she became the second wife of Sir George Eccles Kelso King (1853-1943), a prominent Australian businessman. Both Sir George and Lady Kelso King were active in charitable and community organisations. While Lady Kelso King was involved with the Guide movement from 1920 until her death in 1956, Sir George was chairman of the Executive Committee of the NSW Boy Scouts' Association from 1922 to 1943. His elder sister, Georgina King (1845-1932) was a fellow of the Royal Anthropological Society of Australia, a founder of the Women's Club and the Women's Literaiy Society, and pubUshed pamphlets and artícles in the press on geology and anthropology (Nairn and Serle, 1983b, pp. 593-594). 8 it is interesting to note that generous donations have been made to the Guide Association each year, right up untU today, by the trustees of the Walter and EUza HaU Tmst, the first donation being mentioned in the annual report of 1923. Chapter 5 - Barly Leaders page 153 Their daughter, Olive Kelso King was also involved in the Guide Association. She was a member of the Executive from the very early days, and stood in for her mother as a signatoiy on Association cheques duríng her absence. Olive Kelso King was also the Honorary State Secretary of the Guide Association from 1925 to 1931 and Assistant State Commissioner for many years. Lady Kelso King was often mentioned in the minutes of the Executive Committee. She and the Treasurer were the first co-signatories on the Association accounts (GNSW EM, 26 Apríl 1921). It was her initiative that lead to the introduction of duplicate records being kept and to the purchase of a safe (GNSW EM, 6 December 1923). The Annual Report of 1925 acknowledges that she was a sympathetic and hard working Deputy [State Commissioner]. Her intense interest in Guiding and warm support have been most helpful and stimulating. She has shown herself ready to be consulted at any time over problems perplexing to her fellow Commissioners or to Headquarters staff, and her sound advice and far-sighted policy are veiy helpful to all who seek her aid. (GNSW AR, 1925, p. 2) 5.4.4 Lady Caroline David With the resignation of Lady Cullen, Lady David was chosen by Lady Baden-PoweU to be the next State Commissioner of Guides in NSW. Bom Caroline Martha Mallett in England in 1856, she was orphaned while young and went to Whitelands CoIIege in London to train as a Chapter 5 - Barly Leaders page 154 teacher, and then lecture as a teacher trainer (David, 1975). She applied and was accepted by the NSW Government as Principal of the Hurlstone Training CoUege for women teachers and sailed for Sydney in October 1882 on the SS Potosi On the voyage she met Tannatt WiIIiam Edgeworth David (later Sir Tannatt), a young geologist. They married in 1885 in the Sydney suburb of Canterbuiy, and travelled in country NSW living under canvas while Sir Tannatt was prospecting coal seams. They returned to Sydney in 1891 when Sir Tannatt accepted the fîrst Chair of Geology at the University of Sydney. When Lady David became involved in the Guide movement, fîrst as Division Commissioner (1922-1928) and then as State Commissioner (1928-1938), she brought with her a wealth of experience and adventure. In the 1880s she had helped her husband translate de Koninck's book on Palaeozoic fossils. In 1897 she lived in Funafuti in the Ellice Islands for six months while her husband researched Darwin's theoiy about coral atolls. During that time she wrote a book, Funafuti, published by John Murray of London, which became prescríbed reading for certain classes at NSW schools. In 1902 Lady David was a foundation member of the Women's Club, Sydney, and four years later became its President. While her husband was working on Mount Kosciusko in 1905 and 1906, she lived there in a tent with him. When Sir Tannatt volunteered for war and was subsequently wounded, Lady David and her daughters, foUowed him Chapter 5 - Early Leaders page 155 to England, where she became the matron of a hostel for girls doing war work in Kirkcudbright, Scotland between 1914 and 1918. Lady David's appointment as State Commissioner was greeted with enthusiasm by the members of the Executive Committee who considered that "this very welcome appointment will mean a great deal in the progress of Guiding" (GNSW AR, 1929, p. 6). Four months after her appointment, it was reported that Lady David had been associated with the movement since its inception in New South wales, and her knowledge and experience, particularly her real understanding of the Guide Spirit, are invaluable assets. ... She brings gifts of organisation and experience, gained in many fîelds, which, with her strong personality and enthusiasm, have already proved the wisdom of the appointment, and causes us to congratulate ourselves on many occasions that we have such an able leader. (GNSW AR, 1929, p. 6) With her wide experience, Lady David knew that the Executive Committee needed expert advice in the management of their fînancial affairs. It was during her term that the fîrst accountant was employed to regularly inspect the bookwork. It was also as the result of her perseverance that the fîrst Finance Committee was established. Intimating this to the executive, Lady David said she thought it would be advisable to form a Financial Committee, which was approved by members, & it was decided to consider the matter. (GNSW EM, 15 July 1937) Chapter 5 - Early Leaders page 156 Four months later, Lady David again raised the issue of the formation of a Finance Committee stressing that "she thought it was most necessaiy to arrange it as soon as possible" (GNSW EM, 4 November 1937). At the foUowing meeting The proposed Finance Committee was again spoken of by Lady David, & it was decided that it consist of Miss Watson, Miss Egan, 85 Mrs. Marshall who should meet to discuss matters of finance, 85 report to the Executive. (GNSW EM, 18 November 1937) At the Executive Committee meeting on 17 Febmary 1938, Lady David announced her resignation as State Commissioner and Chairman of the committee, reminding the Committee that in April she would have completed eleven years as State Commissioner. She had previously sent her resignation to the Chief Guide, Lady Baden- PoweU, in 1936, but had agreed to carry on at that time because no one could be found to succeed her. However she was unable to do so any longer. At the time of her resignation, Lady David was 82 years old. The Executive Committee accepted her resignation with the deepest regret acknowledging that Her enthusiasm and devotion to guiding caused her to undertake duties which were frequently beyond her physical powers, and which could only be accomplished by a great gallantry of spirit which refused to surrender. The inspiration which she put into the Movement is her legacy to the Guides of N.S.W. (GNSWAR, 1938, p. 4) Chapter 5 - Ekirly Leaders page 157 5.4.5 Lady Evai Julius After the resignation of Lady David, the position of State Commissioner was vacant for almost year until Lady Julius agreed to become State Commissioner in Januaiy 1939. Born Eva Droughsia Odieuna O'Connor, she married Sir George Alfred Julius, a mechanical engineer and inventor, in Fremantle, Western Australia, in 1898. Sir George published three important works on the physical characteristics and economic uses of Australian hardwoods, and then moved to Sydney in 1907 as consulting engineer to Allen Taylor & Co. Ltd, timber merchants, at a salary of £550 and the right to private practíce. He invented the racecourse totalisator, fîrst used in New Zealand in 1913, and continually improved it, untU by 1929 it was showing dividends after tax. He was president of the Engineering Association of NSW (1910- 13) and the Electrical Association of Australia (1917-18), a founder of the Institution of Engineers, AustraUa (1919) and chairman of the Standards Association of Austi-alia (1929-39) and the Australian National Research CouncU (1932-37), as weU as serving on numerous other committees. During these appointments [h]e widely promulgated his personal views on fîscal poUcy, unemployment duríng the Depression, industrial standardization and professional qualifîcations. (Naim and Serle, 1983b, p. 529) Chapter 5 - Early Leaders page 158 It was not surprísing, therefore, that his wife, Lady Julius, should become intimately involved in the workings of the Guide Association and the Executive Committee when she became State Commissioner. From the beginning, she urged that the Finance Committee, established by Lady Julius, meet on a regular basis. However, this was not as straight forward as one might hope as the following extracts from the minutes of three Executive Committee meetings indicate: 1 June 1939 It was agreed that the Finance Committee (Misses Watson, Egan and Smith) should meet next Thursday at 10.30 a.m. at Headquarters. 15 June 1939 Miss Watson said a misunderstanding had arisen about the Finance Committee meeting, as she had understood that she was to make the arrangement to meet, with Miss Egan and Miss Smith. The Secretary had thought it was to beheld on Thursday 8^ June, & the result was no meeting was held. It was left in Miss Watson's hands to arrange another date. 29 June 1939 Miss Watson explained that owing to another misunderstanding no meeting of the Finance Sub- Committee had yet been held. These diffîculties were stiU unresolved two months later when Lady Julius said it was important the fînance sub- committee should function, & hold regular meetings, but as the members of it were not present she would postpone the matter tiU next meeting. (GNSW EM, 17 August 1939) Chapter 5 - Ekirly Leaders page 159 In June 1949, Lady Julius suggested that a business man with financial expertise be appointed as a member of the Finance Committee to replace Miss Egan who was not able to attend due to her Red Cross work. However at the next meeting of the Executive Committee "it was agreed not to invite a man to join the Finance Committee at the present time" (GNSW EM, 20 June 1940). On Lady Julius' insistence, the Committee did however agree to the appointment of a third member to the Finance Committee. Nevertheless, it was during Lady Julius' term that the fîrst men were appointed to the Finance Committee. In October 1944 it was proposed that a new Finance Committee be established consisting of Mr Shain, Deputy Governor of the Commonwealth Bank, and either one or both of Mr Jim Ashton and Mr Donald MacKay, together with two women, who were members of the Executive, "the Hon. Treasurer, & one who knows the technical side of Guiding" (GNSW EM, 2 November 1944). It was at this time that Lady Julius also proposed Mrs CMaUey Wood as Honorary Treasurer. Conseqently, from early 1945, the Association appeared to be operating on sounder business prínciples than previously. At the end of 1949, when Lady Julius tended her resignation as State Commissioner "after ten years of devoted and unselfîsh service" (GNSW AR, 1950, p. 8), she was replaced by Mrs B.V. Stacy, the first Chapter 5 - Barly Leaders page 160 non-titled woman to hold this position in the NSW Associatíon in its thirty year history. 5.4.6 Conclusion For the first thirty years of Guiding in NSW, the State Commissioner, and therefore the Chairperson of the Executive Committee was a titled woman. She was well-known for both her own and her husband's charítable works, political affiliations and outstanding contríbutions to society. These women ranked among the more educated, upper class of Australian society. At times it may have seemed as if they were out of touch with the real world of the working person, the real world of the girls they were tiying to reach. However, their experience of life and the increasing freedom available to women, meant that as the years progressed, each had more to offer than the one before. The management of the Association was thus a growing process, as Australian society grew, and as women grew in stature. 5.5 The First Treasurers From the beginning, responsibility for day-to-day financial management was in the hands of the Honoraiy Treasurer - this involved paying salaries and other accounts, receipting and banking, and presenting a regular report to the Executive Committee. The Chapter 5 • Early Leaders page 161 organisation had five Treasurers during its first thirty years of operation, but little is known about these women. Theirs were not among the more well-known names on the Executive Committee, but the comments that were made about them, and the difficulty with which they were replaced indicated that they must have had some experience with finances in order to fîrst be nominated, and secondly, to take on the position. Before looking in detail at the development of daily management practices, the next section considers what mark these early Treasurers left on the Association. 5.5.1 Miss M Ethel Trouton There is no actual record of the appointment of Miss M Ethel Trouton as the first Honoraiy State Treasurer. This probably occurred at the inaugural meeting of the Executive Committee in August 1920, of which no records have been preserved. Her role of Treasurer is indicated both by the recorded minutes from December 1920 and also by her obituary in the first Annual Report in 1923. Miss Trouton is minuted as being present at the first recorded meeting of the Executive Committee at Government House on 28 October 1920. Evidence supporting her appointment as Treasurer was provided two meetings later, on 6 December, when it was Chapter 5 • Barly Leaders page 162 recorded that "Miss Trouton asks for Dame Margaret's sanction to caU in subscriptions from those already asked to be V.P.s". Similarly, on 16 March 1921 the resolution was passed "That Miss Trouton be authorized to pay rental of office for the following month. Further confirmation of the identify of the Treasurer was contained in the minutes of 6 April in which it was recorded that "That Miss Trouton be authorized to open a Banking A/C at the Bank of N.S.W. 85 that the cheques be signed by the Treasurer & Deputy Commissioner." On3 June 1921 [t]he Treasurer reported that a Banking A/C had been opened at the Bank of N.S.W. 85 that there was a balance of £57-2-9 in the bank. The Treasurer subsequently reported the bank balance at each meeting. The first Annual Report in 1923 recorded the great appreciation that the members of the Executive Committee felt toward their first Treasurer: It is with very deep regret that we have to report the death of our splendid Hon Treasurer, Miss M. E. Trouton. Only those who were closely associated with her in her work at Headquarters know the value of her services. She was far more than a Treasurer, and although her connection with the Red Cross and other Societies made many calls on her time, her energies were at the disposal of the Girl Guides whenever they were needed. She lent a willing hand to any of their interests, whether in connection with her own department or whether one of her colleagues needed the assistance she was so qualified to give. Miss Trouton's funeral on the 19th of May was attended by the Chief Commissioner, the Organizing Commissioner, the Chapter 5 - Early Leaders page 163 Headquarters Council, and many Divisions and District Commissioners, as weU as Guides representing nearly all the Sydney Companies. (GNSWAR, 1923, pp. 4-5) No annual reports were printed during Miss Trouton's time as Treasurer, and no copies of her accounts remain. However, her contributions are recorded in the minutes of the meetings of those early years. 5.5.2 Miss Jessie Hellicar Due to Miss Trouton's illness, the financial affairs of the Association were unattended from March 1923 until July 1923. The minutes of the Executive Committee on 7 June 1923 record that it was proposed that Miss Hellicar be appointed Hon. Treas. to Girl. Guides Headquarters. Cheques to be signed by her and Hon. Sec (Miss Burnell) 85 a Deputy Treas. appointed at a later date. Miss Hellicar accepted the appointment and commenced duties in July 1923. Initially, she had to cope with significant diffîculties due to the absence of attention to financial affairs during the period of the vacancy. In the 1923 Annual Report, the Executive Committee indicated their pleasure at having secured Miss HeUicar's appointment as Treasurer: We were for some time at a loss to fînd anyone who could take Miss Trouton's place, but in June were fortunate in securing the services of Miss Jessie Hellicar, who has done Chapter 5 - Ekirly Leaders page 164 much valuable work in connection with the Red Cross. Owing to her absence from town, Miss Hellicar was not able to undertake the Treasurership until July, and so has had a particularly trying experience in straightening out its affairs as the Treasury department was in abeyance for over three months. We appreciate the excellent way in which she has met her difficulties, and offer our congratulations on the success she is achieving. (GNSWAR, 1923, p. 5) The first published Financial Statements of the Association were contained in the 1924 Annual Report. The first Treasurer's Report, written by Miss Hellicar, was included in the 1925 Annual Report. The Executive Committee minutes of 1 September 1925 recorded that The Hon. Treasurer submitted the Balance Sheet, which was received with favourable comments. Proposed Mrs Barnett Seconded Miss Houison That the Balance-Sheet be passed as veiy satisfactory However, there was a deficit result the foUowing year, and Miss Hellicar reported that The finances of the Association have been a somewhat difficult problem during the past year. In order to meet increasing current expenses, inevitable in the expansion of the movement, we have been obUged to sell our War Bond of £500, and are now therefore without a reserve fund. This, it is felt, is not satísfactory, and in consequence we have been reluctantly obliged to make an appeal for funds. (GNSWAR, 1926, p. 11) Chapter 5 - Early Leaders page 165 Miss Hellicar's term as Treasurer came to an end when she left Sydney for an extended visit to England. At the Executive Committee meeting on 9 December 1926 it is recorded that Miss HelUcar stated that she proposed sailing on March 2^, 85 would like to relinquish the Treasurership at the end of Januaiy. Tribute to Miss HelUcar was offered in the 1927 Annual Report, for the way in which she had taken on the job of Treasurer, and handled the difficulties that she inherited: Hon. State Treasurer. - We were very sorry to part with Miss Hellicar in March, when she went to England for an extended trip, after wrestling with our finances for nearly three years. We wish to place on record our gratítude to Miss Hellicar, who came to our rescue when affairs had got into a very chaotic state after the Association had been without a Treasurer for over four months. Owing to the sudden illness which preceded the death of Miss Trouton, our fîrst Treasurer, there was no one to show Miss Hellicar the system, and the interlude of four months made the new Treasurer's task particularly hard. We were most fortunate in securing one whose ability and experience enabled her to put books in good order, and maintain it throughout her administration. (GNSWAR, 1927, p. 8) 5.5.3 Mrs Noelle E. Brennan At the meeting on 9 December 1926, the Secretaiy of the Executive Committee was authorised to approach Miss Norris and invite her to take the positíon of Honorary Treasurer. Appairently, Miss Norris declined, because on 3 Febmaiy 1927 it was agreed "That Miss Maude Watson be appointed Actíng Hon. State Treasurer in place of Chapter 5 - Early Leaders page 166 Miss Jessie HeUicar, resigned". However the minutes of the next meeting (17 Febmary) recorded that "Miss Smith agreed to ask M£§ Brennan to accept the position of Hon. State Treasurer". Miss Watson accepted the position of Treasurer, but explained that she would be absent for a few months later in the year. The minutes of 21 March recorded "that during the absence of Miss Watson, M^ Brennan should act as Treasurer" and it was reported at the 1927 Annual General Meeting that Mrs. Brennan and Miss Watson were appointed to act as Joint Hon. Treasurers, so that when one is absent the other is there to cariy on. (GNSW AR, 1928, p. 7) Miss Watson and Mrs Brennan did not experience the diffîculty of being unfamUiar with the accounting system when they took offîce because "before leaving, Miss HelUcar explained her system of accounts to Miss Watson" (GNSW AR, 1928, p. 8). During the few months of the year before she left for New Zealand, Miss Watson so impressed the Executive Committee with her expertise, that they wrote in their annual report that she had proved herself a very able Treasurer, but as she has been away from Sydney for the winter we enjoyed her services for only a short tíme (GNSWAR. 1927, p. 8). The report also acknowledged Mrs Brennan's ability: We are deeply indebted to Mrs. Brennan, who stepped into the breach and carried on most capably (GNSWAR, 1927, p. 8). Chapter 5 • Barly Leaders ^^g^ ^67 Mrs Brennan was Usted as Honorary State Treasurer on the Annual Report for the period ending 31 July 1927, with the accompanying Treasurer's report being written in similar style to that of the previous two years. Mrs Brennan was able to report that [t]he finances of the Association for the past year show a decided improvement. It wiU be noted from the accompanying balance sheet that our accumulatíon account has risen to £1989, showing an increase of £906 for the year. (GNSW AR, 1927, p. 12) 5.5.4 Miss Maude F. Watson Miss Watson returned to Sydney from New Zealand in November 1927 and resumed the role as State Treasurer. The 1928 Annual Report recognised that "Miss Watson has bome the bmnt of the work this year" (GNSW AR, 1928, p. 7). This same report also acknowledged that The position of State Treasurer is becoming veiy nearly a fuU-time job; if the Movement goes on growing as it has in the last two years the Treasurer wiU eventually require a separate staff to assist her. ... Few people realise the amount of time and effort entailed by this onerous positíon, nor the additional work necessitated by those individuals who habituaUy lose their invoices! (GNSW AR, 1928, p. 7) Chopter 5 - Barly Leaders page 168 The previous year Mrs Brennan had told the Executíve Committee that "the auditor wished the Assocn. to keep another ledger, or day- book" (GNSW EM, 1 September 1927). However, it was decided that the staff employed at the time were insufficient to undertake the additional work involved in such an addition. When Miss Watson notified the Executive (on 5 September 1929) that she would again be absent New Zealand, it was agreed that she should write to Mrs Jack Manning and invited her to join the General Council and to act as Treasurer during Miss Watson's absence. The meeting of 19 September 1929 heard that "M^s Manning is unable to take the Treasurership, &> Miss Watson had not been able to get anyone else". As a result, the Secretaiy suggested that "an accountant should be engaged to keep the books during her absence". Given the absolute necessity of having a competent person handle the accounts, the Executive Committee agreed to the proposal, and the Secretaiy said that she would try to engage Mr Phil Vernon. At the next meeting on 3 October 1929, The Sec. reported that M Phil Vernon had not been able to undertake the Treasurer's work. The Sec had seen M£ RusseU Crane, who agreed to send one of his clerks, M£ Rouse, who had come several evenings 85 worked back with Miss McCuUoch. The meetíng heard that Mr Rouse thought he could do the work for 10/- per week, and agreed to engage him. Mr Rouse not only kept Chapter 5 - Early Leaders p^ge 169 the account books up to date and prepared financial statements for presentatíon at Executive meetings, but he also contributed a number of improvements to the internal control system of the Association. After the first few eveningis he had spent on the accounts, he recommended that it is veiy inadvisable to leave money on the premises, & advised banking it every day. AIso that cheques, M.O.'s [money orders] and P.N.'s [postal notes] should be endorsed by any one of three authorized persons. (GNSW EM, 3 October 1929). On 19 December 1929 the Secretary reported to the Executive Committee that M^ Rouse considered it unwise to leave letters lying in an open letter-box while the office is closed, & had offered to call in every few days, collect the letters, 86 hold them until the office re-opened. The Executive Committee "gratefully accepted this offer" and also asked Miss McCuUoch to purchase 8& attach a large, lock-up letter- box which would only need a weekly clearance. At the meeting on 6 Febmaiy 1930, it was reported that Miss McCuIIoch had been unable to obtain a satisfactory lock-up letter-box, and that, consequently, Mr Rouse had collected the letters daily during the holidays and locked them in the safe. Chapter 5 - Early Leaders page 170 Miss Watson returned from New Zealand early in the 1930 prepared to take over the books from Mr Rouse. At the meeting on 6 Febmary she reported that she had not been able to see Mr Rouse, but that he had told her that he was anxious to leave the books up-to-date before handing them over to her, and that is was only "owing to his chief s absence [that] he had been too busy to attend to them". Soon after her return, Miss Watson informed the Executive Committee of her ill- health and that "under orders of her oculist, she was reluctantly compelled to tender her resignation" (GNSW EM, 3 April 1930). The minutes record that The Ex. was distressed, 86 accepted her resignation with very great regret. A Sub-Committee consisting of Miss Watson, M^s Brennan, Miss Egan, Miss Hellicar, 85 Miss King was appointed to discuss future arrangements &, report to the next Ex. meeting. The sub-committee reported to the next Executive meeting on 17 April that they had discussed the advisability of employing a book-keeper Treasurer, to attend daily. The sub-committee thought that the half-day would be sufficient, 86 proposed to offer 30/- per week. The sub-committee had already investigated one possible person, who was unavailable due to iU-health. Other names were suggested, but no definite decisions were reached. The meeting of 15 May heard that the Secretaiy had interviewed Miss Grace Paterson, who would be glad to accept the position of Treasurer's clerk or secretary at a salaiy of 30/- per week. However, this proved unsatisfactory even Chapter 5 - Barly Leaders p^ge 171 though Miss Watson agreed to spend time with Miss Paterson, explaining the system of accounts to her. On 29 May The Treas. reported that she had spent Monday moming explaining the books 86 system to Miss Grace Paterson, who, however, found she was unable to manage the work, 86 had refused even to give it a trial as she felt it would be quite useless. The Executive Committee was extremely worried, given Miss Watson's need to retire, and the Association's need of a bookkeeper. The Chair of the Committee received a letter from Miss McCuUoch, the Equipment Manager, in which she offered to undertake the duties of assisting the Honoraiy Treasurer. The Committee discussed whether, if the offer were to be accepted, it would advisable to increase Miss McCulloch's salaiy or possibly alter the name of the position she held. However, while acceptíng Miss McCuUoch's offer of helping with the work in the Treasurer's Department, they decided that the name of "Equipment Manager" should stand and that no increase in salaiy was necessaiy at the present time. Nevertheless, they did agree to note Miss McCuIIoch's suggestion "that should increased staff be necessaiy later in the shop, it should be done by the appointment of a junior to be trained as a sales assistant" (GNSW EM, 29 May 1930). Further, it was reported that "this was carried unanimously, the Executive finding it a happy solution to the problem". It is not surprising that the Executive Committee was Chapter 5 - Barly Leaders page 172 happy: they had increased the workload of an employee without increasing her pay. With Miss McCuIIoch keeping the accounts, Miss Watson agreed to stay on as Treasurer. She actually remained in the position for almost seventeen years untíl her resignation in Januaiy 1944. She was thus the Treasurer through the Great Depression and through most of World War II. The arrangement with Miss McCuIIoch acting as both bookkeeper and equipment manager ran into difficulties by the end of 1931, when the Executive Committee heard that a letter was received from the Auditors stating that the books had not been balanced before being handed over for the audit, 86 suggesting that an effort should be made to improve the book-keeping. It was suggested (1) that a girl should be employed to keep the books, or (2) that Miss McCuUoch should be given all the bookkeeping 86 reUeved from work in the shop, 86 that another girl should be employed in the shop. (GNSW EM, 15 October 1931) The Executive was not prepared to accept the first suggestion, because the salaiy could not be found for award rates for a girl trained in book-keeping. However, as the auditor had expressed the opinion that Miss McCuUoch was quite capable of keeping the books if she could have sufficient time to do so intermpted, it was agreed tiiat Miss McCulIoch should be given entire charge of the books untU Chapter 5 - Ekirly Leaders page 173 the end of Febmary, and that further help should be obtained in the shop for that period. This system appeared to be a significant improvement, because it was almost two years before the Auditor complained again. It was reported to the Executive on 11 September 1933 that a letter had been received from the auditor, Mr Russell Crane, saying the accounts were not being kept satisfactorily 86 thus taking up too much of his firm's time. It was recommended by the auditors that the private ledger be balanced monthly, 85 that all moneys received by the Association be paid into the general account, 85 transferred from there to the special accounts when required, that only two accounts by kept if possible viz at Bank of N.S.W. 86 Commonwealth Savings Bank. The Executive decided that the Association needed the services of an accountant to balance the private ledger on a monthly basis, with Miss McCuUoch working with him. In Febmaiy 1934, Miss Watson reported that an accountant, Mr PhU Vernon, had been working to bring the books up to date, and that he anticipated that once this was done, one night a month would be sufficient for a monthly audit. The Executive agreed to remunerate Mr Vernon as per his letter setting out his terms for writing up the Ledger as from Januaiy pt 1934, 86 drafting annual account for presentation to the Auditors - viz £5.5. per annum. (GNSW EM, 15 March 1934) Chapter 5 • Ekirly Leaders page 174 From that time, an accountant was responsible for the preparation of monthly reconcUiations of the accounts, the remuneration continuing at five guineas until the end of 1941, when a firm of accountants, Messrs H.B. Allard, Way and Hardie, accepted the position of Honorary Accountants, and agreed to send an accountant once a month to go over the books, but requested that no honorariums be paid to any member of their firm. In April 1942, correspondence was received from Messrs. H.G. Allard, Way, 86 Hardie, saying the Cash Book had not been effectively kept during the last few months. It was reported that Miss Levin [Miss McCuIIoch's replacement] felt she could not cope with it as she had not sufficient experience in book-keeping, or enough time with her other work. Miss Watson said she would discuss the matter with her, 86 report to the next meeting. Miss Watson told the next meeting that she had offered to help with the bookkeeping, that the books were now up to date, and that Miss Levin had agreed to tiy and manage until the end of June. By early June, Miss Watson reported that she was now doing the bookkeeping herself. Further loss of staff due to the War meant that Equipment Department faced increased difficulties, but Miss Watson said that "she would do her best to see that the books were in readiness for the audit at the end of the month" (GNSW EM 1 July 1943). At the Executive Committee meeting on 2 September 1943 Chapter 5 - Barly Leaders page 175 A letter from Miss Watson to Messrs. Allard. Way, 85 Hardie. was read, apologising for trouble with the books on account of loss of former staff, 86 asking what it would cost to have the book-keeping work put on a business footing in future. Their reply was that they were averse to making any charge to a body such as ours, 86 provided they were not called upon to carry out too much work at present, in view of their limited staff, they would be happy to give us all reasonable assistance. They also offered to send one of their staff one morning per week for the next month to give our staff the necessaiy instmctions as to the manner in which the Cash Book should be kept - 86 after this a visit one moming per month should be sufficient to reconcUe the Cash Book monthly. Towards the end of 1944 Miss Watson resigned from the position as Treasurer, requesting that her resignation take effect from the end of November. However, she agreed to remain as Treasurer until Januaiy, because the Executive explained that at the moment "there would be no one then ready to cany on the work of Hon. Treasurer" (GNSW EM, 16 November 1944). At this meeting, Lady Eva Julius, the State Commissioner, indicated that she "would like to ask Mrs CMalIey Wood to take the post of Hon. Treasurer", a matter which Mrs CMalIey Wood agreed to consider. 5.5.5 Mrs L. O'Malley Wood The departure of Miss Watson and the arrival of Mrs CMalIey Wood to the position of Treasurer is mentioned blandly in the Annual Report of 1945: During the year Miss M.F. Watson resigned as Hon. Treasurer of the Association, a position she had held for Chapter 5 - Early Leaders page 176 sixteen years; Mrs. CMalIey Wood, elected to the Executive Committee last year, was appointed in her stead. (GNSW AR, 1945, p. 5) Mrs CMalIey Wood's time as Treasurer seemed to marked by change, by things being brought into businesslike order. However, the minutes do not portray any closeness between her and the other members of the Executive Committee. After five years, when she offered to stand aside, they very quickly decided "yes, she should be replaced". Certainly, the Association was undergoing a financial crisis at the time, but one must wonder whether, in their short- sightedness, the Executive Committee held Mrs CMalIey Wood responsible, despite the fact that they had refused to take her advice or that of the Finance Committee. The remainder of this section analyses the time of Mrs CMalIey Wood's treasurership, the changes it brought to the management of the Association and the revelations it provides about the managers. Mrs CMalIey Wood began her first year as Treasurer by investigating cash management practices in the Association. Before presenting her recommendations to the Executive Committee, she consulted with the Association's auditors and then told the Executive Committee that she would like to make the following changes - Chapter 5 - Ektrly Leaders page 177 1. Miss Needham [the bookkeeper] be authorised to endorse cheques. 2. The shop takings, also petty cash, be given to Miss Needham each moming and checked. 3. A locked letter-box on the door, 86 2 people to open the letters together. 4. Salaries to be paid on Fridays, when they are due, instead of on Tuesdays as heretofore. 5. Glengariy [the Guide camping property] and the Waratah [the Guide magazine] to have their own banking accounts. (GNSW EM, 1 Febmaiy 1945) The Executive Committee approved of these suggestions. The new Treasurer's next action was to investigate the profitability of the Trading sectíon of the Association. At the Executíve Committee meetíng on 12 Febmaiy 1945, it is recorded that Mrs CMalIey Wood reported the shop Takings for each Saturday morning since November 1944, in support of a suggestion for closing this shop on Saturdays in future. Despite the low returns, the Executíve Committee were not prepared to agree to Saturday closing at this time, and [a]fter a lengthy discussion [it was] proposed that the Shop be opened as usual with a skeleton staff and after investigation at a later date the decision to be re- considered. Notwithstanding, there is no record in the minutes of such an investigation, not the reconsideration of the proposal. Mrs CMalIey Wood worked closely with the reformed Finance Committee, the fîrst meeting of which was held on 15 March 1945. Chapter 5 - Early Leaders page 178 The 1945 Annual Report included a sectíon on Finance written by Mrs CMaUey Wood, in which she acknowledged that [s]ince the beginning of 1945 the Treasurer has been assisted by a Finance Sub-Committee, of which Mr. G.M. Shain, Deputy Governor of the Commonwealth Bank, is the Chairman. Other members are Mr. James Ashton and Miss M.L. Deer. (GNSW AR, 1945, p. 7) She reported that [m]eetings are held regularly and the consideration given to Guide fînancial policy has helped to put affairs on a much sounder basis. The interest and assistance of this Committee has been invaluable. (GNSW AR, 1945, pp. 7-8) Decision making and account keeping were decentralised to several departments, such as the Glengarry Committee (property committee), the Waratah (Guide magazine), and the War Relief Depot, because of their growth and importance. In the interest of wise fînancial management, the Treasurer and the Finance Committee were unanimous in recommending to the Executive Committee that only gifts and not loans by accepted from people outside the Movement (GNSW FM, 12 September 1945). The report on Finance in the 1946 Annual Report was written by Mr Shain, the Chairman of the Finance Sub-Committee, rather than Mrs CMalIey Wood. Mr Shain comments that Chapter 5 - Early Leaders page 179 [i]t is indeed pleasing to record that, as in other fîelds, the Association has experienced another veiy successful year, fînancially. ... The Finance Sub-Committee has various matters under consideration whereby the Associatíon's fînances may be assisted, and these wiU be implemented at the appropriate time. (GNSWAR, 1946, p. 9) It is interesting to note that for the remaining three years of Mrs CMalIey Wood's term as Treasurer, there is no written financial report included in the Annual Reports, only the bare financial statements. A reason for this is not given, but as one reads the minutes of the Executive and Finance Committee meetings, one may be lead to assume that the Executive Committee do not in general support the recommendations of the Finance Committee and thus there was frictíon under the surface. In 1945 and 1946 the Association returned a net surplus. However, expenditure overtook income in 1947, with the deficit of £1012 being almost as large as the surplus of the previous year. At the final meeting of the Finance Committee for 1947: [i]t was agreed that a Bond be sold to clear all Accounts and that a fresh start be made in 1948. Mr Ashton urged that stock be taken of the financial position and that every effort be made to raise funds and so not have to touch our Reserves. (GNSW FM, 16 December 1942) At the beginning of the Executive Committee meeting on 12 Febmaiy 1948, the Treasurer asked that the Executive Committee send out an Chapter 5 - Ekirly Leaders page 180 appeal letter to all General Council members soliciting financial support. It was decided that the Mrs O'MalIey Wood "go ahead and prepare an appeal letter". The foUowing month, the Executive Committee again discussed how to raise funds but the minutes record that "after lengthy discussion on how to raise funds for the Association, no definite plans were made" (GNSW EM, 4 March 1948). Mrs CMalIey Wood indicated to the Executive Committee that the Trading Department was continuing to operate in a financially unsatisfactoiy manner. Large amounts of inventory were being held (worth approximately £4000), despite relatively low sales (averaging £125 per week). Mrs O'Malley Wood presented a schedule of daily sales for a two week period in Febmaiy, showing a gross profit of only £52.18.11. The Executive Committee agreed that payment for any large orders in the near future be made over a three month period if possible, and that the Equipment Secretaiy consult with the Treasurer before placing any large orders. Mrs CMaUey Wood continued to monitor sales and in July informed the Committee that the Receipts for June from Shop Sales were £676. The Sale Price of goods being investigated by Mr M. WUson and proper Stock Sheets being prepared. (GNSW FM, 1 July 1948) The Finance Committee agreed that Chapter 5 - Ektrly Leaders page 181 each item should be considered on its merits as in some cases it was not possible, in the interest of members of the Movement, to add ordinary retail profit (GNSW FM, 1 July 1948), but that the Finance Committee should be given a schedule of costs and charges at regular intervals and that the Accountant be requested to give a defînite idea of overhead expenses to charge on all items. Soon after this, Mrs CMalley Wood offered to submit her resignation as Treasurer because she "was confîned to her home as a result of iUness and would not be able to resume her work on behalf of the Association for at least a month" (GNSW EM, 24 August 1948). The Executive Committee agreed that a letter be forwarded to Mrs CMalIey Wood conveying sympathy in her illness and assuring her that her services are most necessaiy and that is was sincerely hoped by members of the Executive Committee that she would be able to resume her activities on behalf of the Girl Guides Association in about a month's time. (GNSW EM, 24 August 1948) Mrs CMalIey Wood recovered, and retumed to discover that the potential defîcit for 1948 was going to exceed that of 1947 by more than 50 percent. Therefore, at the December meeting, she explained to the Executive Committee that money was needed urgently for the mnning of Headquarters and so she was submitting a Notice of Motion Chapter 5 • Ekirly Leaders page 182 That a request be submitted to Local Associations, Companies and Packs that a percentage of all monies raised by them be contributed to the HQ. Fund annually. (GNSW EM, 7 December 1948) On being assured that a letter would be sent to the Local Associations asking for help by 30 June, Mrs CMalley Wood agreed to waive her Notice of Motion for the time being. She did however ask for suggestions from members of the committee for altemative means of raising money, but no suggestions were forthcoming. The increasing seriousness of the fînancial position was reported to the Finance Committee at their meeting on 8 Febmary 1949 when FINANCIAL STATEMENT for the months of December 1948 and January 1949 was presented, showing a debit balance as per Cash Book at 31/1/49 of £39.1.2. BiIIs £2,100.0.5 (including salaries £338.11.4) were confîrmed. The Hon. State Treasurer informed the Committee that cheques totalling £325, included in the £2100.0.5, had not yet been presented and that this amount plus BiUs to be paid, as per Ust, including salaries of £200, and totalling £873.18.8 were to be met. The Financial position was veiy serious - the position is that approximately £1200 was owing and the only income of any size expected in Febmary was approximately £500 from the Shop. (GNSW FM, 8 Febmary 1949) The Finance Committee decided that the accounts should be paid as soon as possible, depending on their importance and at the discretion of the State Treasurer. They agreed that the State Treasurer should inform the Executive Committee of the seriousness of the fînancial position, which seems a fairly strange decision, given how much Mrs Chapter 5 - Barly Leaders page 183 CMalIey Wood had already warned the Executive Committee. But this decision of the Finance Committee probably indicates that the matter had not as yet been taken seriously by the Executive Committee. Later that same afternoon, Mrs O'MalIey Wood spoke to the Executive Committee about the fînancial position of the Association. She was asked "why we had suddenly gone back - a short while ago our fînances appeared to be quite good" (GNSW EM, 8 Febmary 1949). This question was surprising given the regular monthly financial reports presented by the Treasurer, together with the past two years' deficit. One is lead to ask whether the members of the Executive Committee were totally unable to understand financial matters. Mrs CMalIey Wood explained that the deficit position was caused by the heavy accounts we had to meet; further we had used £300 from a special account to meet a bill which allowed a considerable discount if met immediately. This £300 had to be repaid into that special account. (GNSW EM, 8 Febmary 1949) After considerable discussion, the Executive Committee agreed that something had to be done without delay to devise means of bringing in funds. However, their only ideas were to suggest that Generai CouncU needed to face up to its responsibilities and that the individual members should be asked to raise funds for the Chapter 5 - Barly Leaders page 184 Association. The matter was again considered by the Executive Committee two weeks later when it was moved that "adult members of the Association may use their discretion as to how they raise Funds for the Association. The children are bound by mle 27(f) of P.O. 86 R. and may not organise or assist with Raffles or Games of Chance" (GNSW EM, 22 Febmary 1949). The minutes record that the motíon "was put the meeting and passed on a show of hands - 8 to 3". Conversation continued. In March, when Mrs O'MaUey Wood suggested that members of the Movement be asked to raise 2/- each towards Headquarter Funds, the suggestion was deferred untU later. In April the Finance Committee suggested an increase in membership fees. At the end of May, the same suggestions (increased membership fees and appeal for funds) were stiU being discussed, this time as the result of formal resolutions submitted by Mr Ashton (on behalf of the Finance Committee) for the approval of the Executive Committee. On 8 June 1949, the Executive Minutes recorded that the suggested increase in subscription (to 2/- for Guides and Rangers, and 1/- for Brownies, per half year) had been met with understanding by the Commissioners' Conference and would take effect from 1 August 1949. Chapter 5 • Barly Leaders page 185 Mrs CMalIey Wood also reported that the Accountant had inspected the Association's eight month statement to 31 March 1949 and [i]t was expected that the Association would be £2,300 in debt at 31st July, 1949 and would not have the ready cash available. (GNSW EM, 8 June 1949) On 6 July 1949 members of the Finance Committee recommended that the Executive Committee make an arrangement with the Bank of NSW for a temporary overdraft of £500, with the right to increase it to £1200 later on if necessaiy. This recommendation was accepted by the Executive Committee that afternoon, and confirmed by the Bank on 3 August 1949. Meanwhile, the Appeal letter had gone through a number of drafts and was finally approved. By 7 September 1949, 400 Appeal letters had been mailed and £55 had been received. By 5 October, £240 had been received, with donations coming in steadily every day. The Auditors recommended that a sub-committee be established to investigate how the annual loss on the Guide magazine The Waratah could be reduced in the coming year (it showed a loss of £200 as at 31 July 1949). However, the Executive Committee decided to make no change in the control of The Waratah at that time, but to revisit the matter in March 1950, "as it was expected that as a result of our present special appeal for annual donations and increased Capitation Chapter 5 - Barly Leaders page 186 Fees, we would by that date be on a more sound financial basis" (GNSW EM, 13 September 1949). Mrs CMalley Wood and the Finance Committee continued to seek for ways to improve the financial position of the Association. They noted that the profit from trading had fallen to around £500 for the year, but that financing the Association necessitated a minimum shop profit of £1000 per annum. Thus, they again recommended to the Executive Committee that the Price List of Stock, for sale be overhauled very thoroughly and a reasonable profit be allowed on every article to be sold ... that the mark up on all goods be increased by at least 10%. (GNSW FM, 5 October 1949) On 15 November 1949, Mrs O'MaUey Wood informed the Executive Committee that she been Treasurer for five years. She offered to withdraw from the meeting room while the Committee discussed whether she should continue. After discussion, it was agreed that a change should be made, with Mrs W.H. Relton being appointed Honorary Treasurer. The minutes of the same meeting also record the foUowing: In discussing our financial position, members felt that our present "drift" commenced with the publication of "MISS", which had been such a heavy loss. It was known by aU that the publication of this Magazine was proceeded with against the Honorary Treasurer's wish, and the Executive Chapter 5 - Early Leaders page 187 Committee was very grateful to Mrs O'MalIey Wood for remaining with the Association in spite of this. (GNSW EM, 15 November 1949) Interestingly, this paragraph has been scored through and has a handwritten note "Delete M.T.S" next to it. It would appear that the State Commissioner decided that this was an inappropriate comment to appear in the minutes. Mrs CMalIey Wood's resignation was veiy soon foUowed by the resignations of both Mr Swain and Mr Ashton. In the light of the serious financial position, the Finance Committee advised that no salaried assistance or secretarial help be appointed to departments, and that the current salaried camp recorder and minute secretaiy, Miss Marks, could no longer be afforded. Since Miss Marks "would not be available on a voluntaiy basis" and that change as this stage "would completely disorganise the Camping Department" (GNSW EM, 13 December 1949) it was decided to reappoint Miss Marks and not to accept the Finance Committee's recommendation for the time being. At the beginning of Febmaiy 1950 the Finance Committee again expressed the opinion that expenses at Headquarters must be reduced, with the various Departments using voluntaiy help as far as possible. At the end of the month the Finance Committee once more recommended that in the view of the Association's present fînancial Chapter 5 - Early Leaders page 188 position, voluntary help should be used in the office to reduce mnning expenses. However, the Executive Committee Minutes record that it was proposed that it be conveyed to the Finance Committee that the Executive Committee feels it is not possible to do with less paid staff than we have at present. (GNSW EM, 21 Febmaiy 1950) The Finance Committee then recommended that the Executíve Committee be asked to discuss finance at its meeting on 14 March and make some suggestions for decreases in Headquarter expenses to come into effect within a month. Mr Ashton suggested that the amount of the cut should be £500 per annum, or at least £10 per week. The Executive Committee made three recommendatíon in response to the call for immediate curtailment of expenditure: 1. No alteration could be made as regards salaried staff at present. 2. A Fete would be held later in the year 3. It is hoped that "The Waratah" may be able to be printed at no cost to the Association. The minutes of the Finance Committee of 29 March 1950 record that Mr Ashton felt veiy disturbed that the Executive Committee had not accepted the Finance Committee's recommendation re an immediate cut in expenses and the minutes of 26 April 1950 record the reading of letters from Messrs J.H. Ashton and G.M. Shain in which they tendered their resignations from the Finance Committee. Chapter 5 • Barly Leaders page 189 This left a veiy depleted Finance Committee, void of financial experience. The end result of this situation was that Mrs Relton and Miss Deer, the remaining members of the Finance Committee were given permission to seek the advice of Mr Relton and Mr Deer, one member's husband and the other's brother. 5.5.6 Conclusion From the earliest days of the Guide Association in NSW, the Honorary Treasurer was responsible for the day-to-day management of the financial affairs of the organisation. As the Association grew, so did the need for intemal control, cash management, responsible planning and auditíng. The job became too big for one person, and a bookkeeper and, later, an accountant had to be employed. The story of the early Treasurers is thus the story of a beginning - the beginning of the establishment of financial management and accountability practices - practices that grew on an exigency basis, as prompted by organisational demand and as generated by the personality and diligence of the Treasurer herself. Chapter 5 - Early Leaders page 190 5.6 Concluding Comment Central to the development of the Guide Association is the concept of mission. Financial matters have always taken a subservient place to the mission. They have been seen as existing for the support of the mission, with no importance of their own. There was an almost mystical belief in the concept that everything would work out - that the Association may be going through a hard time, but it would not mn out of money. The Executive Committee did not feel that they could make any decisions that were contrary to the mission or the traditions of the Movement. Both mission and tradition were regarded as sacred. The extent to which these sacred cows were offered depended largely on the people in the most influential positions. In the early days, the first of these would have to be the Chairperson of the Committee, the current State Commissioner. The second would be the Treasurer, the person solely responsible for the financial management of the Association. Individual influence, beUefs, customs, and way of life, thus strongly influenced the development of accounting practices in the evolving Guide Association. The next chapter discusses the development of day-to-day financial management in the organisation. It is veiy much a microview of poUcies as they develop and change. It is a story of growing accountabiUty, of mles that emerge and then are modified. It is a Chapter 5 - Early Leaders page 191 story that is influenced by many people: those who play the game, those who watch and those who umpire. CHAPTER 6 ACCOUNTS, ACCOUNTING AND ACCOUNTABILITY: A MICROVIEW or Defining and Refining the Rules 6.1 Introduction The lack of clear goals is often a frustiating problem to managers, board members, and supporters of nonprofit organizations. Nonprofits mustleam to thinkin business-Hke ways, including looking to a bottom line. Because most nonprofit organizations accept broad and unquantifiable ideas as goals instead of setting clear-cut objectives, many nonprofits drift into activities that can diminish and divide the organization. Key managers and board members must define - and redefine - what it is they are trying to achieve, and they must be able to develop measurements that will indicate whether they are succeeding. Among the reasons that cleargoal definition is elusive in the nonprofit world are: 1. fear of accountabiliíy, 2. projects continuing without serving the organization's goals., 3. fundraising for its own stake, 4. reluctance to take a business approach, 5. activities thatdo notfurthergoals, 6. lack of progress reports. (Hanrey and Snyder, 1987, p. 14) With the increase in the scope and size of the voluntary sector have come calls for the need for increased accountability (Anon, 1995; Chapter 6 - Accounts, Accounting and Accountability page 193 Blickendorfer and Janey, 1988; Courtney, 1994; Herzlinger, 1996; Industiy Commission, 1995). The public, in the role of volunteers, donors and taxpayer, have made a significant contribution to the development and resources of the voluntary sector and are thus entitled to effective systems of accountability. Since "accountabiiity relies upon the provision of up-to-date, accurate and relevant information relating to the operations and finances of organisations" (Industry Commission, 1995, p. 201), it is appropriate to focus on effectiveness of accounting systems in order to gain this increased accountability. To understand these systems, it is necessary to consider their development. This chapter focuses on the microview - the development of financial management and accountability practices in the Guide Association. Chapters 7 and 8 take a macroview by considering financial vulnerability and financial performance measures respectively. The next section discusses the need for accountabUity in general, and more specifically by nonprofit organisations, from an intemal organisational perspective. The third section considers the demand for accountabiUty by resource providers. The remainder of the chapter then charts the development of financial management strategies in the Guide Association in NSW by providing a microview of the evolution of a number of these processes, the factors which Chapter 6 - Accounts, Accounting and Accountability page 194 influenced their development, and the opposition their proponents encountered to their introduction. As discussed in the previous chapter, the organisational culture, stmcture and histoiy of the Guide Association meant that these issues were dealt with as they arose, rather than being estabUshed at the organisation's foundation. 6.2 The Internal Need for Accountabílity 6.2.1 By Organisations in General From an intemal perspective, accountability systems can be linked to appropriate internal monitoring or controlling of financial affairs. AII organisations must have systems to record their transactions, to ensure that fînancial statements are accurate and to safeguard their assets. The management accounting process that maintains these records and the intemal control systems in place in an organisation ensure the provision of reliable accounting information necessaiy for responsible financial management. The management accounting process starts by recording basic financial actions and events, and then uses an accounting model to accumulate, classify and communicate the financial effects of these actions and events. The object of doing this is to aid decision making, the outcomes of which are in turn observed and measured and reported. Management accountíng systems provide systems by which managers are assisted to make decisions (decision-facilitating outcome) and control Chapter 6 - Accounts, Accounting and Accountability page 195 activities (decision-influencing outcome). This process is summarised in Figure 6.1. Figure 6.1 The Management Accounting Process Results Decisíon Making and Choices Reports Actions and Events An appropriate internal control system, a subset of the total management accounting system, consists of plans, methods and procedures designed to ensure adherence to management polices, the safeguarding of assets, the prevention and detection of fraud and error, the accuracy and completeness of the accounting records, amd the tímely preparation of reliable information (Statement of Auditing Practice, AUP 12) It is generally agreed that the requirements for good intemal management control include competent personnel, assignment of responsibility, division of work, separation of accountability from custodianship, adequate records and equipment, rotation of personnel, intemal auditing and physical protection of assets (Anthony and Young, 1994; Gaffikin, 1993; Herzlinger and Nitterhouse, 1994). However, accountabUity expectations extend Chapter 6 • Accounts, Accounting and Accountability page 196 management control into areas of planning and budgeting, raising funds, allocating resources, record keeping, monitoring and evaluating, reporting and auditing (Elkin, 1985). 6.2.2 By Nonproflt Organisations in Particular A nonprofit organization is a business. All businesses, to be well managed, need intemál monitoring, or controlling. Once you set up a control system, you will find it inváluable in keeping you on track. Controls provide current data on where your organization is and projected data on where you want to be. These benchmarks are essential in eváluating results and mapping outplans. (Sopher, 1998, p. 45) Such controls are also essential for nonprofit organisation because although "most nonprofit leaders tmst that people will 'do the right thing' ... errors and fraud do occur if proper controls aren't in place" (Lambert, Main and Lambert, 1998, p. 46). Many potential problems can be overcome if appropriate accountability procedures are adopted. Intemal control systems provide measures which prevent and detect errors and frauds by implementing various checks and balances. Errors may arise as acts of both commission (such as handling cash incorrectly) or omission (such as faiUng to obtain funding by being late with grant applications), while fraud occurs because of misplaced tmst. Table Chapter 6 - Accounts, Accounting and Accountability page 197 6.1 provides recent examples of nonprofit fraud that specifically arose due to inadequate intemal control procedures. Table 6.1 Examples of Nonprofît Fraud The Individual The Crime The Problem The treasurer of a local Embezzling His duties included cheque police association with $200,000 over 6 authorisation, cheque ISyears service years signing and bank reconciUations. The financial director of Embezzling $85,000 Her background had not a state branch of the over 13 months by been properly investigated. American Cancer writing 58 cheques It was subsequentiy Society to herself discovered that she was on probation for embezzling $800,000 while engaged as the accountant for a firm of real estate agents. A treasurer of a Depositing When members complained nonprofit organisation members cheques about large balances being but pocketing their over due, goveming board cash pa^onents. accepted the assurance of the treasurer that everything was under control and faUed to investigate any further. A staff member of a Embezzling Two key existing intemal national nonprofit $265,000 in cheque controls were disregarded organisation theft through and the accounting forgery manager was allowed to handle accounts payable and daily deposits, as weU as reconcUing monthly bank statements. An executive director of Misappropriating The director was able to a nonprofit organisation $244,100 offunds override the intemal control stmcture by a dominating management style. Sources: Barton et al (1996), Lambert et al (1998) and Smith (1997). Chapter 6 - Accounts, Accounting and Accountability page 198 While many of the financial management practices of business "are useful and long overdue in the nonprofit world" (Langan, 1998, p. 75), the combination of unique forms of governance, heavy reliance on volunteers, vaiying tax and legal consideratíons, and the absence of a profit motive, mean that there are also important distinctions in financial practices between for-profit and nonprofit organisations. Frequent turnover of nonprofit leadership, due to the voluntary nature of the organisation, may lead to delays and confusion in implementing various financial strategies. The nature of the nonprofit organisation's mission and the sources of its revenue demand a high degree of accountability which in tum demands a sound intemal control system. Langan (1998) suggests that it is the organisation's treasurer that is charged with primary responsibility in this area, to ensure the policies and procedures are in place that will guarantee that assets are safeguarded and that transactíons are recorded in an accurate and tímely manner. Such procedures were not put in place at the commencement of the Guide Association, but rather grew as the need arose. However, this was not always without opposition. As a voluntaiy organisation, there was a tendency for it to emphasise participatory democracy, dispersions of power and consensus management (O'ConnelI, 1988). Given that the Guide Movement, and in partícular the women on the Chapter 6 - Accounts, Accounting and Accountability page 199 Executive Committee, had goals that were altmistíc, qualitative, intangible and non-monetary (Gerard, 1983; Kramer, 1981), they would often tend to reject the more 'objectíve' accounting control measures mentioned above because they were seen as more appropriate to a "business" organisation. This resistance to the introduction or increase in management control strategies that appear not to further their service goals is common to nonprofit organisatíons (Stanton, 1989; Weiss, 1988). 6.3 The External Demand for Accountability Resource providers expect a nonprofit organisation to utilise resources in a manner that is consistent with its mission. Thus, there is a fiduciary duty between the resource providers and the managers of a nonprofît organisation. In addition there is a demand for accountability from the public, from potential donors and from the media. This is consistent with accountability being defined as not only the formal processes and channels for reporting to a higher authority, but the wide spectmm of pubUc expectations dealing with organization performance, responsiveness, and even morality (Kearns, 1996, p. 9). CampbeU (1998) reported three studies which showed that donors to nonprofit organisations rank the importance of financial accountabUity almost as high that of the actual services the organisation performed. The 800 participants in one study were Chapter 6 • Accounts, Accounting and Accountábility page 200 asked to choose which of five pieces of information would most motivate them to give. Almost one third (32 percent) selected the services the organisatíon performs while almost as many (28 percent) selected how the donations were spent. In a second study in which donors were asked to rank a set of organisatíonal characteristics, 88 percent ranked the purpose of the organisatíon first, with financial accountabiUty close behind at 78 percent. The third study asked both current donors and prospective donors about the types of information of which they would like to receive more. In both cases, the desire for financial information was more than twice that for information about accomplishments. In addition to donors, there are other stakeholders of nonprofit organisations such as employees, clients, the media and the general public. Efficient and effective accountability measures help build good-reputation insurance. Clary (1997) suggests that this can be done by meeting external financial expectations, using power widely, having written policies, heeding laws and regulations, providing accounting controls and making sure that all payments are approved by competent, ethical, financial managers. The use of a framework as an appropriate base for analysing accountability (for example: Keams, 1994; Romzek and Dubnick, 1987) would be a useful tool for investigating the various dimensions Chapter 6 • Accounts, Accounting and Accountability page 201 of financial accountability in the Guide Association today. However, such a model is not applicable to the earliest days of the Associatíon, when there were neither impUcit or expUcit accounting requirements. Rather, accounting and accountability have developed over time on an exigency basis. The remainder of this chapter considers the development of accountabUity measures in the Guide Association. Although changes have occurred in later years, with such things as incorporation under an Act of Parliament, the establishment of budget committees and the voluntaiy application of professional accounting standards in fînancial reports, most of the practices developed in the first thirty years of the Association's history. 6.4 The Development of Accountability Measures This section addresses the development of seven different areas of financial management that arose in the early days of Guiding: banking, insurance, cash controls, inventory levels, auditing, handling crises and reporting. The genesis of each is discussed, together, with particular attention given to their adoption, or otherwise, into the normal business operations of the Association. Chapter 6 - Accounts, Accounting and Accountability page 202 6.4.1 Bank Accounts AII organisations must operate bank accounts. In common with many organisations, the Guides Associatíon needs to operate them at a number of levels. They need a general account for their Headquarters in Sydney, accounts for special activities, accounts for properties, and accounts at the outer level, in the units and districts and divisions. The need for these separate accounts can be seen more clearly by considering Figure 6.2, which shows the State-wide stmcture of the organisation, with each level operating independent financial accounts. Figure 6.2 Statewide Reporting Structure of Guides NSW STATE I 1 REGION REGION REGION REGION I 1 DIVISION DIVISION DISTRICT DISTRICT DISTRICT I UNIT UNIT (Leaders and Girls) (Leaders and Girls) Chapter 6 - Accounts, Accounting and Accountability page 203 The minutes of the Executíve Committee provide insight into establishment and operation of the various bank accounts, as discussed in the next sections, 6.4.1.1 State Headquarters Accounts At the meeting on the 9 December 1920, the Executíve Committee tumed its attentíon to the management of accounts by deciding "that any two members of the Committee may sign cheques". It appears that the women were unfamiliar with the concept of having designated signatories, and it was to be another four months before they actually opened a bank account. The next meeting was not held for over three months, on 16 March 1921, when it was resolved "That Miss Trouton be authorized to pay rental of Office for the forthcoming month". There is no indication of when, if at all, authorisation for the payment of the three previous months' rent expense had been received. There is certainly no ratification of such an actíon recorded in the minutes. This, again, is consistent with women who knew very little of either business procedures or meeting protocol. To some extent the latter is surprising, given that a number of these women had served on other committees such as Red Cross and Young Women's Christian Associatíon (YWCA). Chapter 6 • Accounts, Accounting and Accountability page 204 By the next meeting on 6 April 1921, it was finally deemed necessaiy to open a bank account and thus it was agreed "That Miss Trouton be authorized to open a Banking a/c at the Bank of N.S.W. and that cheques be signed by the Treasurer and Deputy Commissioner". No mention was made of the fact that this contradicted the motion passed the previous December about the identities of the signatories. Being without a bank account or a cheque account up until this point, and in the absence of written records, one must assume that all previous transactions had been of a cash nature. It must also be assumed that the Treasurer had received the subscriptíon money from the Vice-Presidents and that she had paid the advertising account with the newspaper and also the rental of the office premises. At the meeting on 26 April 1921, some member of the Committee notíced the anomaly that still existed in relation to the two motions about the signatures on cheques. To settle this matter, the Committee "Resolved that resolution of Dec 9* that cheques be signed by any two members of the Committee be rescinded and that of April 6* that cheques be signed by Treasurer and Deputy Commissioner adopted". Contraiy to previous practice in the minutes, and possibly to indicate the gravity of the matter, to this resolution was added "Proposed by M^^ Lee 86 seconded by Miss Levy". Chapter 6 - Accounts, Accounting and Accountability page 205 From that point, the Committee was careful always to stipulate the persons who could sign the cheques. For instance, in June 1921 it was recorded that Mrs Kelso King would sign in place of Mrs Sargood, and in December 1921 "that the Hon. Sec. should sign cheques, in the absence of a Finance Member". Considering that the original authorisation to open a bank account was given to the Treasurer on 6 April 1921, and that meetings were held fortnightiy, it is surprising that it was not until 3 June that the Treasurer reported that "a Banking A/C had been opened at the Bank of N.S.W.". She reported that balance in the bank was £57-2-9, and continued from that time to report the bank balance at each meeting. From this time, the Treasurer also requested authorisation for accounts to be paid or reported on those which she had already paid during the month. For instance, on 3 June when she was authorised "to pay the rent for the months of May, June, July"; one might surmise that this authorisatíon was in part a ratífication of a past payment. An example of the recording of accounts for payment in the minutes is shown below: The following A/C's have been passed for payment Refund to Equipment Officer £2-14-3 Rent £5 Anthony Horderns £10-17-2 Mrs Maughan moved that A/C be initialled & paid. The motion was adopted. (GNSW EM, 28 September 1921) Chapter 6 • Accounts, Accounting and Accountability page 206 By May 1922, it was decided that the Committee had sufficient excess funds to warrant the opening of a Savings Bank account. It was agreed that this should be opened with Mrs Hugh Denison and Miss Trouton as tmstees. In May 1924 both accounts were altered to reflect the recognition that the Girl Guides was now classified as an Association. The minutes of that meeting record the proposal [t]hat the banking accounts at Bank of N.S.W. & Govemment Savings Bank of N.S.W. hitherto under the name of "Girl Guides", should be altered to "Girl Guides Associatíon", 8& that for this purpose the Current accounts should be closed and re-opened under the new name. Given the fact that Mrs Kelso King was often absent from Sydney, it was agreed, on 4 Febmaiy 1926, that an altemate signature of a third person was necessaiy for the signing of cheques. However, this arrangement did not mean that any two of three could sign, but rather a direct substitution for Mrs Kelso King when she was absent. The minutes record the resolution as foUows: During the absence of Mrs Kelso King at any time 85 from tíme to tíme, the Bank be authorised to accept Miss Olive Kelso King's signature in conjunction with Miss Jessie Hellicar's. This authority to be a continuing one, when Miss Kelso King signs the Bank to take it as authority that Mrs Kelso King is absent. Cheques to be endorsed by Miss Hellicar as hitherto. Chapter 6 - Accounts, Accounting and Accountability page 207 It was not untíl June 1940 that a third person's signature was added "so that any two out of three could sign". A letter from Miss McCuIIoch (who was responsible for the bookkeeping) to Lady Julius (the State Commissioner and Chairman of the Executive) explained that such an additíon would be veiy useful because "this would often save posting cheques 85 bills during any absences, & also a routíne day could be arranged for salaries to be paid". It is somewhat surprising to note that such a procedure, now considered routine in the Association and in business, took 20 years to occur. The difficulty over signatories was particularly apparent during change of personnel, even if only for a short time. Given her impending departure for England, the Treasurer, Miss Jessie Hellicar, moved the advisability of passing a resolution to be forwarded to the Bank of N.S.W. giving the Acting Treasurer authority to act. The meetíng resolved That Miss Maude Watson be appointed Acting Hon. State Treasurer in place of Miss Jessie Hellicar, resigned. That Miss Maude Watson be authorised to sign cheques in conjunction with M^s Kelso King or Miss Olive Kelso Kings, 85 that Miss Maude Watson's signature alone be sufficient endorsement for cheques. The Annual Report of 1927 records that before leaving for England "Miss Hellicar explained her system of accounts to Miss Watson, who proved herself a veiy able treasurer, but as she has been away from Sydney for the winter we enjoyed her services for only a short time" Chapter 6 - Accounts, Accounting and Accountability page 208 (GNSW AR, 1927, p. 8). As a result, it was necessary to make arrangements for banking in the absence of Miss Watson. The minutes of 28 April 1927 record that the correspondence was received from the Bank of New South Wales with a copy of the foUowing resolution: Resolved that the Account with the Bank of N.S.W., Sydney, shall be operated upon in the foUowing manner:- a. By Miss M.F. Watson, Hon. Treasurer, in conjunction with either Mr§ Alice Kelso King or Miss Olive Kelso King or b. During Miss Watson's absence by M § N.E. Brennan, in conjunction with either M^ Alice Kelso King or Miss Olive Kelso King. And any of the above-named may endorse cheques and other negotiable instmments for credit of said Account. There was also some irregularity in the decision concerning the identity of the bank at which accounts should be opened. In the minutes of 9 December 1920, a resolution to open a Bank Account at the Commonwealth Bank is recorded, but then stmck through. However, the resolution to actually open a bank account was not passed until 6 April 1921, when it is authorised to open it at the Bank of New South Wales. Initially a cheque account, and later a savings account, were opened at the Bank of New South Wales. In 1930 the Treasurer investigated the differences between the various banks to decide which would be provide the optimum return and conditions for Association money. She suggested that the Chopter 6 - Accounts, Accounting and Accountability page 209 Executive Committee should consider changing to the Rural Bank. On 17 April she reported an interview with the Manager of the Rural Bank Head Office at which she had discovered that the advantages were "that 4% monthly is allowed on current accounts, there is no bank fee & no charge for cheques". It is recorded that the Executive Committee decided that these advantages were "suffîcient to justify the transfer of the account". However, this decision must have been reconsidered because two meetings later on 15 May was recorded that As the Bank of N.S.W. holds the Bonds belonging to the Association 86 coUects interest when due, it was agreed that the small advantage to be gained by transferring the a/c to the Rural Bank would not be worth while, &, it was therefore decided to continue the a/c with the Bank of N.S.W. This appears to be a simplistic understanding of the use of bank accounts, with no thought being given to the possibility of having savings accounts at two different banks for the duration of the bonds, and then consolidatíng them. 6.4.1.2 Camp Account It was on the Bank's suggestion that the Executive agreed to change the name of the Camp Account. It had been previously opened in the names of two individuals, Elsie Smith and Olive Kelso King, but the Commonwealth Savings Bank, at which the account was operated, suggested that the current account should be closed and a new account opened in the name of the Girl Guides Association, NSW. Chapter 6 - Accounts, Accounting and Accountability page 210 6.4.1.3 Glengarry Account The opening of a separate bank account by the Glengariy (Camping Property) Committee was an issue which displayed inconsistency and indecision on the part of the Executive. Although the Executive gave instmctíons, it did not have the controls in place to enforce them. In addition, when faced with awkward situations it might decide to seek advice, but not act on this decision for some time. Early in 1938 Miss Jamieson, the Honoraiy Secretaiy of the Glengarry Committee, wrote to the Executive Committee explaining that it would be more convenient if the Glengarry Committee had separate banking account and asking if one might be opened. On 5 May the Executive Committee replied giving permission for the Glengarry Committee to open a Savings Bank account for fete purposes only, on the condition that the account would be closed after the fete. However, it appears that this account was not closed by the Glengariy Committee, and that no measures were taken by the Executíve to ensure that their instmctions were enforced. The next mention of the Glengariy account is on 2 June 1938, again in reply to a letter from Miss Jamieson. An endowment had been established for Glengarry, with the interest to be used to pay for such items as rates and maintenance. Miss Jamieson wrote to the Executíve explaining that the bills for installation of electricity at Chapter 6 - Accounts, Accounting and Accountability page 211 Glengariy came to £33, which money was to be paid out of the Endowment interest. She asked the Executive Committee to advance these funds, to be repaid when the Glengariy Committee had sufficient money. However, an examination of the passbook of the Glengariy Committee revealed that sufficient funds were already to hand. Thus, the Executive Committee replied "that as the Glengany Committee's pass-book showed a credit balance of £64, this was ample to pay these biUs, and it was not necessary for H.Q. to advance money untíl this balance was exhausted" (GNSW EM, 2 June 1938). It is uncertain what happened to this account, because there are no further references to it. However, it is assumed that it was eventually closed, because on 18 April 1940 the Executive Committee received a letter from Miss Thomas, the Honorary Treasurer of the Maiy Everard and Glengariy Committee, "asking if this committee be allowed to open 85 operate a separate banking account, under certain conditions suggested". These conditions involved the Glengarry Committee being allowed to handle all financial matters concerning Glengarry subject to the Executive Committee's approval for sums over two pounds. The Executive Committee replied that the matter was under consideration. At the following Executive Committee meetíng on 2 May, the Treasurer proposed that she should consult the Auditors and obtain Chapter 6 - Accounts, Accounting and Accountábility page 212 their opinion as to advisability of allowing the Glengariy Committee to operate a separate account. Although this proposal was seconded by Miss Manning and carried, the minutes record that Miss Manning said she did not approve of the request, as she saw no adequate reasons for it, 86 felt the position suggested was inconsistent. By the next meeting, a fortnight later, the Auditors had not been consulted, but the matter was discussed further. The result of this discussion was again the decision to consult the Association's auditors before giving a definite decision, but the feeling of the meeting was that the Glengariy sub committee were justified in asking that the present system be changed. Miss Watson undertook to consult the Auditor when he retumed from holiday in about a fortnight. (GNSW EM, 16 May 1940) On the 4 July, Miss Watson reported that she had not yet consulted the Auditors about the Glengarry account. Further discussion ensued, after which it was resolved, once more, that the Auditors should be consulted "as already decided at the meetíng on May 2"^, 86 that Miss Watson should attend the next meeting of the Glengarry sub-committee to discuss the position after having consulted the Auditors". The minutes record that a letter to this effect was to be sent to Miss Thomas. Chapter 6 • Accounts, Accounting and Accountability page 213 Finally, on 18 July, after three months of deUberation and de ay, Miss Watson reported that she had consulted the Auditor, Mr Rouse, about the proposed Glengarry bank account. Mr Rouse suggested that £50 at a time should be paid to the Glengariy 86 Maiy Everard committee as required, who would bank it under their own name, 86 draw on it by cheque, paying all Glengariy bills except the caretaker's wages, expenditure exceeding £10 for any one item to be first approved by the Executive. Headquarters to furnish the Committee monthly with a statement of monies received for Glengariy 85 paid into the Glengarry tmst account. (GNSW EM, 18 July 1940) Miss Watson also reported that she had attended the Glengany Committee meetíng as agreed at the last Executive Committee meeting and had put these suggestions to the Glengariy Committee. They had approved the decisions and decided to request that the first £50 be paid to them on 1 August. It is recorded that The Executive unanimously agreed that the Glengarry committee's request for a separate banking account be approved under the above conditíons. (GNSW EM, 18 July 1940) The operation of this account was apparently still not clear and accountability procedures had not been put into place. To this end, Miss Thomas wrote to ask if the Glengarry Committee was expected to furnish a monthly statement to Headquarters and secondly, if the committee was to appoint its own Auditor. The Executíve replied, on 1 August, that yes, they did expect monthly statements, and that no, the Association's own Auditor would do the work. Another letter was Chapter 6 - Accounts, Accounting and Accountability page 214 received from Miss Thomas on 15 August seeking further clarification as to the operation of the new account. The minutes record the following questions by Miss Thomas and answers on the part of the Executive: Asking if it was meant that the Committee is to pay municipal rates, telephone rent 86 charges, water 86 electric light charges? Reply, Yes. Enquiring also if the Committee can coUect the money for telephone 85 Ught from Mrs Joukers [the caretaker's wife], 86 pay it into the committee's account? Reply, No - the money must be paid into H.Q., in order to be shown in H.Q. books. (GNSW EM, 15 August 1840) After this interchange, the Glengarry Committee fulfilled its accountability requirements and it is recorded, on the 3 October, that the Executive Committee had received the first statement of receipts and expenditure for the month of August from the Glengarry Committee. 6.4.1.4 Unit and District Accounts From the early days, the Executive Committee placed more stringent mles on the operation of local Unit and District bank accounts than it did on its own accounts. On 30 September 1926 the Executive resolved That the following notice be sent to Commissioners and Local Associations, who wiU please notiíy captains - "It is recommended by H.Q. that any Company having Funds of £20 or over shaU have a Treasurer with proper business knowledge, preferably a member of the L.A. [Local Association], who acts in conjunction with the Company Chapter 6 - Acccmnts, Accounting and Accountability page 215 treasurer 86 the Captain. No money to be withdrawn without the three signatures. It is interesting to note that a resolution that started as a recommendation fînished as an instmction. These requirements were enforced by the Executive as a means of ensuring adequate control of cash. Such requirements were particularly necessary when a Guide Leader decided to operate an account solely on her own. Such an instance is recorded in the minutes of 20 June 1940. A District Commissioner, Miss Gavel "sent a message that she operates her 'District' a/c' herself with no other signatures" and she wished "to know if this was 'still all right"'. The Executive replied in no uncertain terms asking her "to faU into line with the usual practice". 6.4.2 Insurance At its commencement the Guide Association did not own assets of any kind, nor had any employees. With the opening of an offîce, they acquired furniture and fîttings, and with the opening of the Guide shop, they acquired an inventoiy. In addition, they also had employees to consider. Thus, the issue of insurance arose as the Association grew. Chapter 6 - Accounts, Accounting and AccountabiUty page 216 6.4.2.1 Property Insurance The Guide Association moved into its rented premises at 161 Castlereagh St, Sydney, in December 1920. In March 1923, the Association moved to the Commonwealth Bank Chambers at 114 Pitt St, Sydney. At both locations the Association acquired various articles of furniture and also held stock in the shop. However, it was not untU August 1923 that the Executive Committee decided that "our offîce should be insured with aU its effects against fîre". Arrangements were somewhat more speedy in 1925 when the Association extended its Lease to the room next door. The additional office space was leased in July and in August the Treasurer, Miss Hellicar, was asked to have the Insurance Policy adjusted to the cover the new office and extra fittings. In addition, Miss Hellicar was asked to enquire about the cost of the premium for insuring against burglaiy. Although no mention was made of the results of this enquiry, it is assumed that insurance against burglary was taken out some time within the next three years, because in October 1928 the Treasurer asked the Executive Committee whether is was necessaiy to continue the Burglaiy Insurance Policy. The minutes record that "it was decided affîrmatively", but that the Treasurer was asked to enquire whether a Comprehensive Policy could be issued. The answer to that question had to wait two decades. Chapter 6 • Accounts, Accounting and Accountability page 217 It was not until 1945 that the Treasurer, Mrs CMalley Wood was given permission to take out a Comprehensive Policy covering £1000 Stock and £500 on Fixtures and Fittings. (GNSW EM, 15 Febmary 1945) At this time Mrs CMalley Wood also advised the Executive Committee that the insurance cover on camping equipment was only for £112. Realising how little insurance cover this was given the value of the camping equipment, the Executive Committee asked the Director of CEimping, Mrs Swan, to have the cover reassessed. 6.4.2.2 Employees Insurance In 1926, the Executive Committee became aware of the compulsoiy nature of Workers' Compensation Insurance and decided that "insurance on Miss Murray [the only employee at the time] be affected immediately" (GNSW EM, 24 June 1926). Workers' Compensation Insurance was obtained in 1932 in relation to the two Rovers who were receiving sustenance at Glengarry in return for living on the property as caretakers. The previous insurance poUcy taken out by their leader, Captain Blackwood, did not cover them, because, for insurance purposes, they were classified as permanent not casual labourers. However, it was decided that this earlier policy could be used to cover casuals working at the Mary Everard or Glengarry sites. Chapter 6 • Accounts, Accounting and Accountability page 218 6.4.2.3 Public Risk Insurance The necessity for pubUc risk insurance was raised in September 1932. Miss Kelso King submitted to the Executive a copy of the Policy held by the Scout Association. This poUcy insured Scout leaders and other responsible officials against legal liability "in the case of injuiy to Scouts while under their control, or damage to property or injury to persons caused by controlled Scouts, at the rate of 2/- per 100 [Scouts]" (GNSW EM, 1 September 1932). The Executive felt that it was desirable to take out similar insurance and also a second policy indemnifying the Association from accidents to visitors to the Turramurra and Jamberoo campsites. At the following meeting, Miss Kelso King reported that she had been informed that the Scouts' Insurance Policy could be altered for the Guide Association to include visitors to Glengarry, without any extra charge. Within a few weeks the Mercantile Mutual Insurance Company submitted a public risk policy "indemnifying the Association in respect of negligence on the part of any employee whilst in the performance of duties in the Service of the Association - for personal injuiy to Guides etc, 86/or for damage done to persons or property by Guides etc" (GNSW EM, 13 October 1932). The Executive agreed to this proposal with the word "Guiders" being inserted in relevant paragraphs. . Chapter 6 - Acc^nints, Accounting and Accountability page 219 6.4.2.4 Accident and Sickness Insurance On 8 Febmaiy 1949, the Finance Committee agreed that responsible management involved taking out an Accident and Sickness policy for the whole State. In order to fund this, they recommended that the Divisions and Units be levied. At the Executive Committee meeting that afternoon it was decided that "in view of our present financial position, we seek legal and fînancial advice on the matter before doing anything further" (GNSW EM, 8 Febmary 1949). Six weeks later a letter from the solicitor about the matter was circulated and it was suggested that "as this was a veiy complicated matter we should appoint a sub-committee to go into the whole thing" (GNSW EM, 29 March 1949). However the minutes record that Mrs Stacy mentioned that a Mr Chapman, Kent Road, Rose Bay, whom she knew and who was connected with the Boy Scouts Movement, would probably go into the matter for us and submit a report. Agreed that the papers relating to this Insurance be sent to Mr Chapman with the request that he advise us - the letter to foUowed by a call from Mrs Stacy. (GNSW EM, 29 March 1949) Mr Chapman duly submitted a report to the Executive Committee meeting on 26 April 1949. Although the contents of the report are not specifîed in the minutes, it is recorded that the Executive Committee agreed to accept his recommendations. This meant that they needed to wait for a further report from the insurance company. Chapter 6 • Accounts, Accounting and Accountability page 220 The matter was not raised again for a further fîve months, at which time a further report was received from Edward Chapman 86 Co. advising that the Mercantile Mutual Insurance Co. wiU reduce rate from 1/- per member to 6d per member. This means a Premium payable by the Association of approximately £200 per annum. (GNSW FM, 7 September 1949) After much discussion, the Finance Committee advised the Executive Committee that "in view of position at present time the Association would have to defer consideration of this scheme. It is not possible to meet the Premium of £200 per annum" (GNSW FM, 2 September 1949). 6.4.3 Control of Cash Cash is an organisation's most liquid asset. Because it is portable, easily concealed and generally desired by most people, it is the asset most likely to be mishandled or stolen. Therefore, an organisation's accounting control system should ensure that as cash is received, it is properly recorded and preserved. The accounting system should be based on a set of standardised procedures, with built in checks and balances, that prevent most errors from occurring initially, and then facilitate the discoveiy and correction of those errors that do occur. Chapter 6 • Accounts, Accounting and Accountability page 221 6.4.3.1 Receipts At the meetíng on 9 December 1920 it was decided to procure a Rubber Stamp with the address of the offîce and also one with "Girl Guides". It was agreed that an additíonal "Girl Guide" stamp should be obtained for the Treasurer to use in receipting. It was not untU June 1929 that specially printed receipt books were considered. This control was not suggested by the Treasurer nor any other member of the Executive Committee, but rather by the Secretaiy of the Singleton Local Association, who wrote asking whether the Association issued a specially printed receipt book. As a result of this letter, it was decided to order printed receipt books for both Local Associatíons and for Headquarters. However, there was no urgency in acting on this decision, because it still had not been done by 5 Septemberl929, when the minutes recorded that that the Treas. was authorized to arrange for the printíng of receipt books. AIso cheque-books. Although receipt books were subsequently used for Headquarters' business, a complaint by the auditor in 1938 indicates that this practíce did not extend to all other activities. The Treasurer explained to the Executive Committee that the Auditor would not sign the fînancial statements for the Fête, as the receipt dockets were not stamped with the name of the Associatíon, 86 as old receipt-books were used and some dockets had been previously used. (GNSW EM, 1 December 1938) Chapter 6 - Accounts, Accounting and Accountability page 222 Today, printed receipt books and cheque books are accepted as the norm for all Association activitíes. However, the speed with which the receipting is done stiU needs attentíon. It is not done immediately upon the receipt of cash because it has been claimed that the Association does not have a computer system equipped to provide receipts. While this excuse would not appear adequate, it will be interestíng to see what happens when the new computer system is installed and working at the beginning of 2000. 6.4.3.2 Petty Cash At the meeting on 6 April 1921 Miss Trouton was authorised "to pay the Secretaiy £1 for Petty Cash". It appears that Treasurer did not pay this money as requested because, on 26 April, it was resolved "That Miss Grace [the Secretary] be given £2 for Petty Cash and in additíon 11/- be added for her arrears". In August 1923 it was reported that £1 had been stolen from the cash box and replace by Miss Murray (the equipment offîcer) out of her own pocket. The Executive agreed to reimburse Miss Murray for this money. In September they decided that quotations on a safe should be obtained. Three months later, on 5 December, the Executíve decided to advertíse for a second-hand safe, but agreed that if none were suitable that they would buy a new one. Despite the purchase Chapter 6 - Accounts, Accounting and Accountábility page 223 of the safe and the use of a cash box, control over cash was not as tight as necessaiy. On 7 September 1928 thefts were recorded as foUows: The Hon. Treasurer reported that the Petty Cash had suffered a loss of £5 which had been made good by Miss McCuUoch. The Hon. Treas. had herself made good the sum of £10 which had gone from her desk. These thefts were committed some months ago before either of the present assistants were engaged. Mrs Brennan proposed Miss Smith seconded, that the £5 from Petty Cash be refunded to Miss McCuUoch. (GNSW EM, 7 September 1928) 6.4.3.3 Order Books and Accounts The minutes of 5 August 1926 record that the Treasurer considered that an Order Book in which all goods ordered and received by the shop must be entered, would facilitate the checking of accounts. Miss Hellicar was asked to purchase such a book, and the Executive resolved "that no orders for the Guide Shop 86 Offîce be given except by means of an order book" (GNSW EM, 5 August 1926). However, it was not untU 1949 that it was considered appropriate to have authorised accounts signed before handing them to the Bookkeeper for payment. At the Finance Committee meeting on 13 May 1949, it was recommended that the State Secretaiy should initial accounts after they had been passed by the Finance Committee. The Executive Committee agreed to this procedure at Chapter 6 - Accounts, Accounting and Accountability page 224 their meetíng on 8 June 1949 with the addition of the State Treasurer's signature and weU as the State Secretaiy. The issue of appropriate bookkeeping policies also arose in relation to the Guide Camping property, Glengariy. The routine expenses of this property were administered by the Glengariy Committee with a caretaker living on a cottage on the premises overseeing day-to-day maintenance. On 29 March 1949 it was reported to the Executive Committee that some time ago the Glengarry Committee had issued an amount of £7.6.8 to the caretaker, Mrs Jonkers, to pass on to various tradespeople, but this had not been done, and complaints were being received from the tradespeople concemed. Apparently these accounts were being handled on a cash basis, and there were no proper procedures in place to guarantee their payment. The Executive Committee agreed unanimously that Mrs Jonkers was not really a dishonest person, but that she was such a muddler things got out of hand. (GNSW EM, 29 March 1949) They therefore agreed to pay the outstanding amount from Headquarters' Funds and that the Treasurer and two other members of the Executíve Committee would go into the matter with the Glengariy Committee and Mrs Jonkers with a view to introducing a more simple means of bookkeeping for Mrs Jonkers in order to prevent a repetition of the present position. (GNSW EM, 29 March 1949) Chapter 6 - Accounts, Accounting and AccountabiUty page 225 6.4.3.4 Daily Banking and Mail Clearance In October 1929, the accountant, Mr Rouse, suggested that it was inadvisable to leave money on the premises, and advised banking it every day. He also recommended that cheques, money orders and postal notes should be endorsed by any one of three authorised persons, Miss Smith, Miss McCuUoch or Miss Kelso King. With the approach of the Christmas holidays in 1929, Mr Rouse also suggested that it was unwise to leave letters, often containing money, lying in an open letter box while the offîce was closed. He offered to call in eveiy few days over the holidays, collect the letters and hold them until the offîce re-opened. The Executive asked Miss McCuIIoch "to purchase 86 fix a large, lock-up letter-box which would need only a weekly clearance" (GNSW EM, 19 December 1929). However, at the meeting in Febmaiy 1930 it was reported that Miss McCuUoch had been unable to get a satisfactory lock-up letter box, and so Mr Rouse had coUected letters and locked them in the safe during the holidays. The issue of daily banking was not resolved once and for all at that time because in 1943 the Executive Committee minutes record various funds being coUected in boxes and that there had been a loss "from three boxes containing special funds, which Miss Levin thought Chapter 6 • Accounts, Accounting and AccountabiUty page 226 may have occurred when by mistake the boxes were not put in the safe at night" (4 Febmaiy 1943). Today, banking occurs daily just before the banks close, with no "special boxes". Any cash received later in the day is deposited in the safe in the strong room by either the Accountant or the Accounts Clerk. 6.4.4 Investment in Inventories From the time of its establishment in NSW, the Guide Association operated a shop. Over the years it has stocked, among other things, uniforms, books, badges, sleeping bags, camping gear and miscellaneous gadgetry. Quality control and economic order quantity have been issues that have repeatedly arisen. The purchasing of inventory is another area which has been visited and revisited by both the Executive and Finance Committees. As early as 23 June 1921, the Executive Committee minutes record that a major retailer, Anthony Horderns, offered a reduction on material for uniforms if the "whole piece" was taken, an offer accepted by the Committee. The Committee also viewed material for ties and a sample hat and passed them as satísfactoiy. However, it was difficult to find exactly the right material for uniforms. Much of what was imported was too heavy for the Australian climate; and lighter Chapter 6 - Accounts, Accounting and AccountabiUty page 227 material was of a poorer quality. This problem was typified by the foUowing situation: A letter was read from Mrs Snowdon, Orange, complaining of the quaUty of the material supplied for Guide uniforms, 86 refusing to pay for her daughter's uniform. Miss Taylor [the equipment officer] was asked to reply, explaining the difficulties she has had in finding a suitable materíal. (GNSW EM, 9 October 1924) The Association also ran into problems with business houses that refused to take them seriously or treat them fairly. In the middle of 1925, the Executive Committee decided to purchase 4000 Girl Guide Diaries to be delivered by November. When only about the half the order had been received by 18 Januaiy 1926, the State Secretary notified the firm supplying the diaries, Jackson, O'SuIIivan 86 Mortlock, that the late deliveiy meant that they would be unable to taken any more than what they had already received. On 21 Januaiy the suppliers sent the balance of the order by taxi to Headquarters, and refused to take deliveiy when these were returned to them by carrier. Mr Mortiock Junior telephoned Guide Headquarters and promised to report the matter to his Board, but did not suggest any way of settling. The Association's honoraiy solicitor, Mr Jaques, suggested that when the account was received it should be passed on to him. An account was received from the firm on 18 March 1926 for the total number of diaries. On Mr Jaques' advice. Chapter 6 - Accounts, Accounting and AccountabiUty page 228 the Association requested an account for diaries received up to 6 January. Two months later, on 13 May, two letters were received: one from Jackson Mortlock refusing to deal directly with the Girl Guide Associatíon in regard to the payment of diaries; the other from the Boy Scout Association, reporting that the firm held them responsible for the payment of the full amount for both Scout and Guide diaries. At the next meeting, the Honorary Secretary reported that she was stiU unable to get Jackson, O'SuUivan, Mortlock to suggest terms on which their account could be settled. The firm has taken the attitude of ignoring our Association 86 will not reply to letters. The Hon. Sec. suggested she might try a personal interview, subject to the approval of M£ Jaques. (GNSW EM, 27 May 1926) On 8 July, the Hon. Secretary reported her interviews with the Messrs. Mortlock, 86 regretted that she had been unable to persuade them to reduce the amount owing for diaries. (GNSW EM, 8 July 1926) The Executive Committee's solution was to write a letter asking for a full quote for next year's diaries and giving the date when delivery was desired, and wait for the answer to be received before paying the account. When the firm repUed on 5 August agreeing to commence deliveiy of 1927 diaries in October, with delivery to be completed by Chapter 6 • Accounts, Accounting and AccountabiUty page 229 the middle of November, the Executive Committee agreed to pay in fuU the account for the 1926 diaries. Inventoiy levels were raised by the Treasurer in March 1948 when she presented a schedule of Shop Takings from 14th to 20th Febmaiy, 1948, showing a gross Profit of £52.18.11. Average Takings are £125 per week and Stock on hand is approx. £4000. It was agreed that payment for any large orders in the near future be made over 3 months if possible. AIso decided that the Treasurer be consulted by Mrs. Dean [the equipment officer] before any large orders were made. (GNSW EM, 11 March 1948) After Mrs Dean resigned the following month, the Treasurer reported there would still be enough stock on hand for some time without ordering any more. The Executive Committee agreed to her desire to bring one or two business men in to advise us what should be done and how we should buy goods so as to put the shop onto a business footing. (GNSW EM, 22 April 1948) However, in July 1948 the Treasurer reported that an account had been received for goods apparently ordered from Imperial Headquarters in London, but about which she knew nothing. She stressed that "all goods should be put through the offîcial order book for record purposes" (GNSW EM, 27 July 1948). Chapter 6 - Accounts, Accounting and AccountabiUty page 230 Ordering procedures contínued to be thwart with problems, and so the Finance Committee readdressed the matter at the beginning of 1952, suggesting that an Equipment Department Committee be formed and recommending the foUowing terms of reference to the Executive Committee: To be responsible for aU purchases for the Equipment Department, as follows - (a) Sums up to £20 to be spent at the discretíon of the committee (b) Sums over £20 to be referred to the Finance Committee. (GNSW FM, 5 Febmaiy 1952) The Executive Committee agreed that the handling of equipment was too great a responsibility for one person, and that it was "sometimes a matter of unwise buying and that many goods bought were too expensive to have a ready sale in the shop", and that such a committee should be formed. Nevertheless, this did not solve the purchasing issues, because the equipment offîcer stíU persisted in purchasing goods without the approval of the equipment committee, and the Executive Committee was loathe to take any action to rebuke her. An example of this was recorded in the Executive minutes when the Honoraiy State Treasurer reported that six dozen handbags had been ordered by the Equipment secretary without her knowledge. The cost price of these were 15/- and sale price 25/-. a sample was submitted. After discussion, in which it was agreed that the bag was of poor quality, and a suggestion made that rather than sell Chapter 6 - Accounts, Accounting and AccountabiUty page 231 bags of inferior quality in the Guide Shop, it may be possible to dispose of the parcel in bulk. Mrs. Relton and Miss Mitchell to try and dispose of them. (GNSW EM, 22 July 1952) It is important to note that it was to the Treasurer and the State Secretaiy that the Executive Committee gave the responsibility of disposal, not to the Equipment Offîcer as one might believe would be the case. There was also no record that she should be rebuked in any way. To ensure that unauthorised and inappropriate ordering did not occur the Finance Committee decided that quotations for any proposed purchases by all secretaries and advisers, including printing and stationery, to be referred to the Hon. State Treasurer or State Secretary, and if necessary to the Finance Committee. (GNSW FM, 14 August 1952) This is stiU an ongoing problem today, with the Retail Manager often ordering inappropriate quantities. For instance, two years ago $9000 was spent on paper bags with the Guide emblem on them, because they were cheaper in quantity. This was despite the fact that the emblem was subject to change within a few months of the purchase, and that only $500 had been allocated for wrapping in the budget. It appears that the Executive Committee are just as loathe today to criticise such actions as they were in the past. Chapter 6 - Accounts, Accounting and AccountabiUty page 232 6.4.5 Auditors Given the signifîcant contribution of the public to nonprofit organisations, both in terms of financial and voluntaiy support, it is the responsibility of such organisations to provide "up-to-date, accurate and relevant information relating to [their] operations and finances" (Industry Commission, 1995, p. 201). The particular problems with current forms of accountability in the sector have been recognised as a lack of consistent data coUection processes; lack of public access to information, and lack of standardisation of financial reporting and other information. An early accountability measure established by the Guide Association was that of an extemal audit of financial statements. There is no indication in the minutes why the Executive Committee decided to subject their accounts to voluntary audit. Indeed there is no mention of the need for accountabiUty. There was certainly no legal requirement. One might assume that the decision to engage an external auditor, from the earUest days of the Association, was a result of the involvement of these women on committees of other organisations, with already established mles about accountabUity, and in particular, the requirement for audit. For example, Dame Margaret Davidson, the Chairperson of the first Executive Committee, had been involved with the Red Cross for a number of years, both in Australia and in Canada. The appointment of an auditor may have Chapter 6 - Accounts, Accounting and AccountabiUty page 233 also been a way, whether consciously or unconsciously, of legitimising the operations of the Association, despite the lack of business-like process with which it was mn. Since the first auditor was engaged on a voluntaiy basis, it may have simply been because his services were available free of charge. Whatever the reason, it certainly was appropriate that the accounts should be audited and pubUshed, so that both members and the public could see the results of the operations of the Association and that there was no attempt at subterfuge. The Associatíon's first auditor was appointed at the Executive Committee meeting of 26 April 1921. The minutes record that "M^ Docker has kindly agreed to audit the accounts free of charge for the present" and that "Dame Margaret proposed that he be given a vote of thanks from the Committee". Mr P W Docker, who described himself variously as "A.I.C.A." or an "Associate of Commonwealth Institute of Accountants", and latterly as "F.C.A. (Aust.)", contínued to act in the position of the Association's honorary auditor until September 1929. At the meeting of the Executive Committee on 19 September 1929 it was recorded that It was agreed that Auditors, if possible Hon. Auditors, should be appointed by the Council at the Annual Meeting. As M Docker causes such inconvenience by the delay in returning books, it was agreed that he should not be re- appointed, although he does the work at a reduced fee. The Sec. was instmcted to see whether ME Russell Crane would act as Hon. Auditor. (GNSW EM, 19 September 1929) Chapter 6 - Accounts, Accounting and AccountabiUty page 234 Mr Docker's appointment in 1921 and Mr Crane's in 1929 (confirmed in minutes of 3 October 1929) were the foremnners of the auditors who have been appointed annually since that time. The auditors have not operated in an honoraiy capacity for many years, nor have they offered their services at a reduced fee. However, the Association has demonstrated ongoing financial accountability by consistently presenting audited financial statements to its members, before such times as its constitution even required it to do so. 6.4.6 First Financial Crisis By the middle July 1921 the expenses of the Association so outweighed the income, that the need to look for new income sources was discussed. At the meeting on 19 July it was decided that the subscriptions from the Vice-Presidents were insufficient, and that further subscriptions should be sought in order to increase the income base. The minutes record that It was decided that Mrs Kelso King should be asked to tiy and get subscriptions for the Girl Guide Headquarter Fund as our financial position is at present precarious. (GNSW EM, 19 July 1921) At the meeting on 12 December it was agreed "that Local Associations be approached re financial support to HeadQuarters". It was perceived that these Local Associations, established to support Chapter 6 • Accounts, Accounting and AccountabiUty page 235 Guiding in local districts, could also be significant fundraisers for State as weU as local finances. Subscriptions from Local Associations were introduced first on a voluntaiy basis. However, on 11 March 1923 it was proposed that "Local Associations should pay one shilling registration fee to Headquarters". Payment of registration fees from these organisations, now known as Support Groups, continues today. Over several meetings it was reported that the Vice-Presidents had become somewhat negligent about the payment of their £1/1/- subscription to the Headquarters fund. After some discussion, the meeting on 6 December 1923 "decided that Vice-Presidents to be written to about Annual fee". It was further decided that as an inducement to encourage them to pay, "a list of their names [would be] typed 85 included in report". This minute referred to the 1924 Report, in which the names of sixteen Vice-Presidents were duly Usted. However the note under the Balance Sheet (see Figure 6.3) indicates the only six Vice-Presidents had actually paid the fee by 30 April 1924. By the following year, a membership fee of £1/1/- was also required from members of General Council. The Executive Committee minutes do not record exactly when this was introduced, but it was after 30 April 1924, since no such income is recorded in the accounts, but before 6 August 1925, as the minutes of that meeting record that Mrs F. H. King wrote accepting membership of the General Council 86 enclosing fee of £1.1.0. Chapter 6 - Accounts, Accounting and AccountabiUty page 236 Miss Ross and Miss Legge also sent their fees, 86 the latter proposed Miss Roseby, Kambala, Miss MacPhee Quambon, 86 Miss Sanders, Shirley, as members of the CouncU. Miss Houison forwarded membership fee 86 proposed Dr Marjory Little. (GNSW EM, 6 August 1925) Thus, the action taken in the first financial crisis was to raise the money from members by way of subscriptions. This has been a generally accepted method over the years, with membership subscriptíons increased as deemed necessary by the financial position, although in later years, it was decided that notice of a year must be given to raise membership fees. FoUowing this pattem, there have been regular increases in fees during the 1990s, a decade of deficit annual operating results. 6.4.7 Annual Reports Annual reports have been produced by the Association since 1923. Over the years they have been used to recognise people's contributions, both in time and money, to report on the success or otherwise of the organisation, both in terms of members and finance, to cajole the unwilUng, the encourage the hesitant and to congratulate the successful. Chapter 6 - Accounts, Accounting and AccountttbiUty page 237 The change in form of the annual report over the past eighty years reflects the change in society, the change in technology and the change in the abUities of those responsible for its publication, 6.4.7.1 First Annual Report The mission of the Association was of prime importance to the members of the Executive Committee, and financial matters received little attention, unless problems arose, forcing their consideration, such as the "precarious" financial position mentioned previously. Indeed, the members of the Executive Committee did not appear to mind airing their negligence in financial matters. In the 1923 Report, after reporting the death of Miss Trouton in May 1923, it was further noted that the affairs of the Treasuiy department went unattended for a period of three months until the appointment of Miss Jessie Hellicar in July 1923. This was despite the fact that this department was solely responsible for paying wages, paying creditors and banking moneys. It was reported that Miss Hellicar "has had a particularly trying experience in straightening out its affairs, as the Treasury department was in abeyance for over three months" (GNSW AR, 1923, p 5). The Executíve Committee did not view the ensuing problems as their responsibility, but rather as that of the new treasurer, writing that "We appreciate the excellent way in which she has met her difficulties, and offer our congratulations on the success she is achieving" (GNSW AR, 1923, p 5). Chapter 6 - Accounts, Accounting and AccountabiUty page 238 6.4.7.2 First Financial Report The first published financial statements appeared in the 1924 Report and consisted of an audited Balance Sheet and a six month Income and Expenditure account as shown in Figure 6.3 and Figure 6.4. The accounts provided the information that the balance in the Accumulation Account on 31 October 1923, six months earlier, was £915/19/4. The financial statements in the report of 1924 were dated 30 April 1923, with the income statement being for a period of six months. This half-year statement was due to the fact that the financial year of the Association closed at the end of October (GNSW AR 1924, p. 7). There had been no previous mention of a financial year ending date nor any evidence of annual statements prior to these, despite the fact that the first recorded meeting was held in October 1920. However, the keeping of regular financial records was indicated by the paragraph on "The Guide Shop" in which it was reported that After a long stmggle, involving considerable loss, the sales of equipment and literature are beginning to show a satisfactory return. The last half-yearly balance-sheet was the first to show any profit in the shop, and the Equipment Officer and Hon. Treasurer were complimented by the Executive on the happy outcome of their great effort to catch up with arrears. (GNSW AR, 1924, p 9) Chapter 6 - Accounts, Accounting and AccountíibiUty page 239 Figure 6.3 THE GIRL GUIDES' ASSOCIATION (NEW SOUTH WALES BRANCH). BALANCE SHEET AS AT 30th APRIL, 1924. Please see print copy for image The Income Statement for the six months ending 30 April 1924 (Figure 6.4) shows that the annual income of £366/18/4 was primarily from two sources: donations (43%) and trading (51%) with the remaining receipts from subscriptions, bank interest and a special commission. The three largest expenses, apart from special donations disbursed, were salaries, rent and camping. The Association showed a net surplus for the six months of £142/1/4. Chapter 6 - Accounts, Accounting and AccountabiUty page 240 Figure 6.4 THE GIRL GUIDES' ASSOCIATION (NEW SOUTH WALES BRANCH). INCOME AND EXPENDITURE ACCOUNT for the SIX MONTHS ENDED 30th APRIL, 1924. Please see print copy for image There was no accompanying Treasurer's Report in the 1924 Annual Report, but the written report of the Executive Committee made mention of the donation from the Walter and Eliza Hall Trust. In relation to this comment, the limited understanding of fînancial matters was once more made evident, the writer not understanding the difference between a balance sheet and an income and expenditure statement. It was reported that Chapter 6 - Accounts, Accounting and AccountabiUty page 241 Unfortunately our fînancial year closes at the end of October, so we are not able to publish the full balance-sheet in this report. However the half-yearly balance is given, and shows the great assistance rendered to our fmances by the Trust. (GNSW AR, 1924, p. 7) This lack of understanding was an indication of the organisational attitude to fînancial matters. As the members of the Executive Committee were solely responsible for ensuring appropriate fînancial management, it would seem reasonable that all members would exert themselves to obtain some basic understanding of fînancial matters, but this was not the case. This incorrect terminology appeared again in the section of the Report which discussed The Guide Shop, where is written that "The last half-yearly balance-sheet was the first to show any profît in the shop". 6.5 Concluding Comment Today, accurate accounts, appropriate accounting systems and adequate accountability structures are recognised as both necessaiy and crucial in the fînancial management of nonprofît organisations (Anthony and Young, 1994; Herzlinger and Nitterhouse, 1994). The call for accountability in fînancial matters is strong, with it being recognised that Chapter 6 - Accounts, Accounting and AccountabiUty page 242 accountabiHty is an important operational issue for all [not- for-profît]9 organisations. Their supporters and the general public expect and are entitled to information about the fînances and operations of [these organisations] in return for their donations, voluntary activities, and taxation exemptions and concessions. (Industiy Commission, 1995, p. 201) The accounting and accountability systems of the Guide Association have developed over time. They did not start with any mandatoiy requirement, nor an established code, but developed as the Association grew. Changes were made on the recommendations of chairpersons, auditors, treasurers and other interested people. At times there have been difficulties in establishing appropriate financial systems because of opposition from within. At other times they have arisen without comment, simply being introduced. The development of accounts, accounting and accountability has consisted of the established of rules which have been refîned over time as interested parties, the players, the captains, the umpires and the spectators, have seen reasons for change and refînement. In regard to day-to-day management of its affairs, internal control and public accountability, the Association is now in a reasonable position. However, its strategic management, ongoing planning and 9 The Industry Commission report adopts the name Community Social Welfare Organisations when referring to the not-for-profit charitable sector reviewed in its report. Chapter 6 - Accounts, Accounting and AccountabiUty page 243 overall fînancial agenda still need to be drawn together. The next chapter discusses the mission of the organisation and provides a macroview of fînancial trends and an analysis of the broader issues of financial vulnerability. CHAPTER 7: MISSION AND FINANCIAL VULNERABILITY A MACROVIEW OF FINANCIAL MANAGEMENT PART 1 or ''Howzat?" 7.1 Introductîon The fundamental mission or missions of a nonprofit organisation should consist of a specific statement of what role the organisation will play in the segment of society it intends to serve (Hofer and Schendel, 1978). In defining its mission, an organisation may find that it is unable to turn back. It may find itself with an exit barrier (Harrigan, 1980; Porter, 1980). This means that because the mission or service is provided to vulnerable human beings, the organisation may find itself unable to abandon its past commitments. A nonprofit organisation with societal interests has a great deal more difficulty in abandoning a non-profitable market than a private corporation. Externally, exit barriers may be placed on the organisation by local community groups, ethnic or religious groups or by organisations which are convinced that the maintenance of some other activity is dependent on continuing the current activity. Internal pressures Chapter 7 • Financial Vu nerabiUty page 245 arise because of the humane commitment to the cHents themselves. Therefore, the centrality of mission to the operation of a nonprofit organisation may expose it to financial vulnerability in a way that does not occur in for-profit organisations. The remainder of the chapter focuses on mission and financial vulnerability. The second section discusses the mission of the Guide Movement. The third section provides an overview of the Association's annual results since 1923. The fourth section discusses Tuckman and Chang (1991)'s framework of financial vulnerability. The fifth section considers two extensions to the model and analyses them in relation to the financial vulnerability of the Guide Association, 7.2 Mission 7.2.1 Changing expressions of mission The mission of the Guide Association has remained constant over time, despite being expressed in different terms as appropriate to the culture of the day. Reflecting on the mission of Guiding in 1930, Furse wrote It is interesting to note that in 1917 the Aims and Methods of the Guide movement in Great Britain were shown as being just the same as they are now, namely: 'lt is a Movement, on similar principles to those of the Boy Scouts, for the training of girls. It applies to girls of eveiy class in Chapter 7 - Financial VulnerabiUty page 246 town or countiy. It attracts them to take up its ideals and its activities, of which the intention is to develop a better knowledge than theretofore, in practical ways, of Home- keeping, Mothercraft and Citizenship. It is non-class, non-political and interdenominational. The line of training runs mainly in the four directions of: (a) Character and intelligence; (b) SkiII and technical knowledge; (c) Service for others (d) Physical health and development through games and practices planned for the purpose."io (Furse, 1930b, p. 33) Before "mission" became a commonly used term, the Association provided a statement of "What We Try To Do" in many of their Annual Reports: WHAT WE TRY TO DO To train girls through a series of healthy happy activities which, while delighting them will afford them a course of education outside the school in four particular lines. CHARACTER and INTELLIGENCE through games, practices and activities, and tests for promotion. SKILL and HANDICRAFT encouraged through badges for proficiency. PHYSICAL HEALTH and HYGIENE through development up to standard by camp, games and exercises designed for the purpose. SERVICE FOR OTHERS, and FELLOWSHIP, through daily good turns, organised PubHc Service etc. (GNSW AR, 1949-1959, inside front cover) Words such as "character", "handicraft" and "hygiene" have become less used and understood over time. The concepts of "tests for promotion" and "badges for proficiency" are still used, but the 10 There is no indication of who or what Furse is quoting. However, it would probably be from an intemal document explaining the Guide Movement. Chapter 7 - Financial VulnerabiUty page 247 language has changed. Such terminology is no longer acceptable in today's veiy individualistic culture, in which one is encouraged to maximise one's own potential and take responsibility for one's own development. Today, it is recognised that all girls are capable of planning and implementing their own program. ... The girl is central focus of the Program. ... Girls will experience fun and enjoyment through a group orientated non-competitive girl focussed program. (Vernon Reade, 1996, p. 1) This change in terminology, but not intention, is reflected in the aim of the Guide Association as it was recorded in 1989: Its aim is to provide opportunities for the development of character and responsible citizenship, and to encourage service to the community. This is achieved through a programme which gives each girl the chance to: recognise herself as a unique and valuable person develop physical fitness develop a code of behaviour based on informed decision making appreciate the talents of others by exploring the arts develop friendships be ready to be of useful service to the community leam and apply practical and creative homecraft skills develop an enduring appreciation of the natural environment. (Coleman and Darling, 1989, (i)) More recently, this has been succinctly expressed as helping girls and young women grow into confîdent, self- respecting, responsible community members. (GNSW AR, 1998, inside cover) Chapter 7 - Financial VulnerabiUty page 248 The mission has been communicated to members in various ways, but one of the most consistent locations has been a statement on the inside front cover of the annual report. The content has varied, but it has usually included a combination of one or more of the Guide promise, the Guide Law, the Guide Prayer, a quotation from Baden- Powell or a mission statement. 7.2.2 Financial support for mission The fîrst Treasurer's Report, included in the 1925 annual report, recorded the need for regular income in order not to hinder the expansion of the Association. Miss Hellicar wrote In conclusion we should like to thank those good friends of the Movement who have helped us by donations and subscriptions, either for special or general purposes, and we trust that during the coming year many more will show their sympathy and interest in this work so that the expansion of the Movement in New South Wales may not be hindered for lack of funds. (GNSWAR, 1925, p. 11) By 1930, the Association was "endeavouring to build up an Endowment Fund to provide for further expansion of the movement" (GNSW AR, 1930, p. 10). To do this "the most rigid economy is exercised throughout in order that rent and salaries may be paid by our earnings, and all donations applied to the Endowment Fund" so that "gifts are being put to permanent use instead of being swallowed up on current expenses" (GNSW AR, 1930, p. 10). Chapter 7 - Financial Vu nerabiUty page 249 In 1931, the Association recorded the ownership of its first property, a generous donation of land at Turramurra. There was great excitement as the potential of this property, now known as Glengariy, was reported to the membership. The State Commissioner, Lady David, wrote that As will be seen, from the Report by the Head of Camping, the Girl Guides' Association now owns, actually owns, a Camp site. The letter makes the offer of about 20 acres of beautiful bushland, running down to Cowan Creek, covered with native trees and shrubs and flowers, only 15 miles from Sydney, and only 10 minutes walk from a bus stop, sounded too good to be true. "A beautiful Faiiy Story" was the first comment! Our rules forbid Guides to beg, but we may accept presents, and to put it mildly, there has not been a rush of desirable gifts! Hence our astonishment and incredulity. This gift of a Camp Site was so unexpected, so generous, and so beautiful, that words failed to express the joy and gratitude with which the offer was accepted. The donor refuses to have his name mentioned. He wished to do honour to the memory of his mother, and the camp is to be called after her, the "Mary Everard Camp." This fact gives the Camp an added value to all good guides. Very soon now the necessary fencing will be done, and the city water laid on; then will come the Dedication ceremony, and then, during these coming Summer holidays, all the pleasure and profit of camps and hikes and tests, on our veiy own ground. The whole Association joins with the Executive in joyous gratitude to our anonymous benefactor. (GNSWAR, 1931, p. 10) During the following year, an adjacent property of 20 acres became available, and was purchased by the Association for £950, £650 being paid in cash and a mortgage for £300 being taken for the Chapter 7 • Financial VulnerábiUty page 250 remainder. During that year, total income was £1320, of which £1107 was gross profit from trading. In 1936, the Association obtained leases on two blocks of land that adjoined the 40 acres they now owned. In 1956, the Association purchased a further small property adjoining those already owned. Glengany has become the flagship of the Association, today being worth millions of dollars, but not generating enough income to cover its costs, let alone contribute to the revenue of the Association. The financial effect of the Great Depression years (from 1929) was attributed as a possible cause for the fall in numbers (GNSW AR, 1932), with membership continuing to fall in 1933 and 1934, and with the financial result being the worse it was for all the years of the Depression to date. The loss in Guide numbers meant lower income from trading, the main source of revenue. The Association was also obliged to take over the whole of the camping funds, storing of tents, rent of camp sites, and everything connected with this side of the Movement, which is a fairly big item of expense. During the year it was found necessary to build a cottage at Glengany and we were obliged to sell two bonds for this purpose. (GNSW AR, 1936, p. 10) Although membership rose at the end of the 1930s, during the Worid War II (1939-1945) there was another fall in numbers, as units closed because many leaders (largely young single women) took on war Chapter 7 - Financial Vu nerabiUty page 251 work. However, this fall in membership was not the only cause of lower retail sales during these years. In addition the shop "had to wrestle with war-time difficulties, such as rationing, and the great problem of trying to keep up supplies" and "stocks of equipment and literature from England have been well below our requirements" (GNSW AR, 1943, p. 7). Furthermore, costs in general had risen due to the diminished supply of imported goods due to the difficulty of ships travelling safely in war zone waters. The financial deficit of 1948 was attributed to "the growing financial needs, brought about mainly by the rapid expansion of the Movement in N.S.W." in the post war years (GNSW AR, 1949, p. 34). The chairman of the Finance Committee expressed the relationship between mission and financial matters as follows: Having in mind the aims of Guiding and the potent force it is exercising for good in the community, it is surely not too much to ask that all friends of the Guides should take the position in hand with the object of building up an income position commensurate with the growing responsibilities and importance of the Movement. (GNSWAR, 1949, p. 34) Throughout its history, the Association has been most reluctant to refuse an opportunity for growth because of a lack of money. Although [tjhe fînances of the Association are as usual unpredictable, ... opportunities for expansion have been grasped with the knowledge that the Movement is able and willing to support any project undertaken. (GNSWAR, 1957, p. 14) Chapter 7 • Financial VulnerttbiUty page 252 In order to increase financial support, an annual fundraising scheme was introduced in 1953 whereby Guides performed jobs for payment during one week of the year, with part of the money being sent to Headquarters and part remaining in their unit for their own use. This fundraising venture was also important in publicising the Movement and attracting new members, it being noted that Since its inception the annual "WiIIing ShiIUng" drive has played a tremendous part in helping to expand the Movement and to improve services to present members. (GNSWAR, 1965, p. 13) In 1967, the Treasurer again associated fînancial matters and mission by drawing attention to the substantial capital expenditure needed for Glengarry, the need for increasing space at Guide House and the relationship between "our running costs and the potential growth rate of the Association" (GNSW AR, 1967, p. 3) by asking May we anticipate your continued support to ensure the fînancial backing necessary to keep pace with the growth and prosperity of the Girl Guides Association in N.S.W.? (GNSW AR, 1967, p. 3) Members were assured that "we are determined that such cost increases will not be allowed to inhibit the outreach of guiding in this State through the work of training, camping and development, etc." (GNSW AR, 1969, p. 3). Chapter 7 - Financial VulnerabiUty page 253 The Treasurer and the Finance Committee viewed the fînances of the Association as a mirror which reflected the growth of the organisation (GNSW AR, 1971). In raising membership fees and camping fees, they recognised that expansion required funding, and refused to take the easiest course [which] was the negative one, that is to reduce training, camping and development to its old level and retain income similarly, ignoring the future. (GNSWAR, 1971, p. 11) The inflation of the 1970s had a signifîcant affect on the fînances of the Association. In reflection, the Executive Committee wrote How is the year's progress for the Girl Guides Association (New South Wales) to be assessed? Certainly not in terms of fînance or statistics, as this is a Movement concerned with people. Yet how are the intangible benefits to be measured? Frequently during the year the question has been asked, "are we on the right road?" To answer this question we felt the need to reflect and evaluate, especially in terms of Australia's current high inflation rate. Surveys have been carried out to determine the needs of the girl in the Movement, and the resulting information then looked at in terms of the cost and finance available. Development and capital expenditure could frequently not proceed as desired because of lack of finance. This reflection and evaluation has indicated some avenues for re-organisation, and these are now being examined very closely so that the needs of the girl can be better fulfilled. (GNSW AR, 1975, p. 1) By the end of the 1970s, financial affairs had improved and the relationship between money and mission was again indicated by comments in the Annual Reports that Chapter 7 • Financial VubierabiUty page 254 The Movement in New South Wales has a very exciting future. Finances are in good shape, so that the Association can afford to use some of its resources in expanding and developing the Guide Movement. (GNSW AR, 1977, p. 12) and The finances of the Association are in a strong position and with further careful budgeting of these resources, the Association will be able to further expand the activities of the varíous departments and thus develop the Guide Movement in the State. (GNSW AR, 1978, p. 13) Over the years the unavailability of women to train as Guide leaders was frequently lamented and claimed as the major contributor to lower membership numbers. This problem exacerbated in the 1980s because [a]s Australia's population changes much more effort is required to promote to the community the benefits of membership. With the increased ethnic population, single parent families, increased number of women in the work- force and high unemployment of the young and the middle- aged, the number of women available as potential leaders has diminished greatly. (GNSW AR, 1987, p. 2) At the same time it was recognised that increased revenue would also help in membership expansion because [flinancially, the Association is weU managed, but donations from corporate and government sources would enable us to achieve so much more for our members and potential members and so benefit the community as a whole. (GNSW AR, 1987, p. 2) Chapter 7 - Financial VulnerabiUty page 255 The difficulty of maintaining the mission in relation to financial affairs continued as a common theme with the 1988 State Commissioner writing that Every effort is being made to minimise costs and the staff, committees and executive are very conscious of this. However, the need to maintain our properties and support our main responsibilities in training, outdoor activities, programme, development, public relations, as well as supporting the Australian and World Associations, give rise to severe budgeting and planning challenges. (GNSW AR, 1988, p. 3) It was noted that NSW was "the only state in Australia where no financial support is received from the State Government to assist us in our task of preparing girls for citizenship", but that "many local govemment Councils and Shires do offer assistance in their local areas" and "service organisations such as Rotary, Lions, Apex, and others are also great supporters at the local level" (GNSW AR, 1988, p.3). From 1989, the Association expected to have less financial uncertainty because [t]he opportunity presented to the Association to dispose of the Clarence Street property [where Headquarters was located] at the peak of the property market boom and to replace it with a modern office building at a reasonable cost has provided a windfall beyond all expectations, the benefits of which will last for many years. (GNSWAR, 1989, p. 11) Chapter 7 - Financial VubierabiUty page 256 The Treasurer believed that with this relocation "this Association is now well placed to cope with the increased pressures which are to be expected from what has become an uncertain economic environment" (GNSW AR, 1990, p. 13). But it was not only economic uncertainties but a series of natural disasters between 1989 and 1991, which affected both the expansion of the movement and its fînancial position. Notable were the Newcastle earthquake, extensive bushfîres and widespread flooding in various parts of the State, all of which destroyed or severely damaged Guide halls, camping properties and equipment. Added to this was the severe storm damage suffered at Glengarry, causing the property to be closed for all outdoor activities and camping for over six months. Despite a decrease in cash reserves over the next few years, the Executive Committee decided that "given the Association's goals and current structure, to cut costs any further would be detrimental to the Association's ability to meet its goals" (GNSW AR, 1994, p. 15). However, at the same time it was recognised that "for the Association to grow, it needs to have greater financial resources to draw on. The only way that this can be done is by increasing income (GNSW AR, 1994, p. 15). Nevertheless, income sources have not increased over the past four years and any extra revenue is due to increases in membership fees. Chapter 7 - Financial VubierabiUty page 257 Thus, although services have not had to be cut as yet, the Association is still drawing upon its reserves to finance its deficits. 7.3 Overview of annual financíal results There are two factors which make an overview of results from 1924 to 1997 difficult: the very large inflationary changes over the period and the change in currencyii. Figure 7.1 shows an overview of the operating results from 1924 to 1997, with the former currency converted to the latter for the period from 1924 to 1965 to bring it in line with the rest of the graph. However, the inflationary factor in the later years means that the comparative results of the earlier years are extremely difficult to detect. Consequently, the graph is re-presented as two subsets. Figure 7.2 shows the annual income and expenditure for 1924 to 1965 and Figure 7.3 from 1966 to 1997. A comparison of the graphs show larger differences between income and expenditure in Figure 7.3 than in Figure 7.2. In addition, the upward trend in the operating results shown in Figure 7.2 has been replaced by an overall downward trend in Figure 7.3. However, comparison is diffîcult because of the differences in scale from year to 11 On 14 February 1966 Australia changed currency from stirling to decimal; that is from pounds, shillings and pence (£.s.d) to doUars ($). Each pound under the old currency became two dollars under the new. Chapter 7 - Financial VulnerabiUty page 258 year. In order to rectify this, a relative measure, the operating margin ratio, will be used to facilitate comparison in a later section. (See Figure 7.8.) This is the ratio of the operating result to the total income expressed as a percentage. If for example, the operating margin for one year is 20 percent, that would mean that the organisation had a surplus equal to 20 percent of the income for that year. The Association has survived through the Depression years, the second World War, the post-war expansion of the 1950s and 1960s, the high inflationary period of the 1970s, uncertain economic conditions that followed the stockmarket crash of 1989 and natural disasters such as earthquakes, bushfîres, flood and tempest. The Association has also survived changes in membership numbers. Figure 7.4 shows an overview of membership changes, in terms of both girls and adults over the histoiy of the movement in NSW. Ov 0> iH 0\ .S îi & u tí Ml rtu V O •M V 09 ÍS (0 4) •d O sjeiioa ui tinse^ BujtejadoiaN - W61. Z961. 0961. 9961 9961. 10 ^61. VO o\ r-l I 2961. iH - 0961. U a o - 81^61. u .r* 91^61. •o w c o ^61. u e. & •0 ZV61 tt ts g OWl. o o c 8661 • • CQ -9861. •o 1^861 o 2861. 0861 8261 9261. 1^261. spunod uj 3jn)jpu3dx3 pue oui03U| o\ o^ »4 •o fO tí Q> 4> u I •0 c« 4) g o O NH .* I •s O o o o o o o o o o o o o o o o o o o o o o o' o" o' o" o' o' o o o o o o o o •>í o co CM sjeiioa u| ejnjjpuadxg pue auiooui I 0\ 0) 0) M I (A S Chapter 7 - Financial VulnerabiUty page 263 7.4 A Modeí of Financial Vulnerability A nonprofît organisation has been defined as financially vulnerable "if it is likely to cut back its service offerings immediately when it experiences a financial shock" (Tuckman and Chang, 1991, p. 445). The financial vulnerability of the nonprofit sector is of major concern for a number of reasons. 1. The sector is very large and has been growing rapidly, as already discussed in Chapter 1. 2. The sector is a substantial employer. 3. The sector provides services which fill gaps in govemment services, and therefore financial shocks in the nonprofit sector will place increased demands on the public purse. 4. The sector provides alternative delivery modes for public services, is a rich source of diverse ideas and an avenue through which minority demands for public goods can be channelled (Douglas, 1987; Weisbrod, 1988). 5. The sector is an important expression of the pluralistic approach that underfîes Western democracies. It has been suggested that there are four operational criteria which should be considered in relation to the financial vulnerability of nonprofit organisations (Bridges, 1994; Tuckman and Chang, 1991): inadequate equity balances, revenue concentration, low administrative costs and low or negative operating margins. Chapter 7 - Ftnancial VubierabiUty page 264 Tuckman and Chang (1991) reported mean values for certain characteristics of nonprofit organisations (n = 4730) that were classifîed as being "at risk" or "severely at risk" in their study as in Table7.1. Table 7.1 Financial Characteristics of Nonproflt Organisations (Tuckman and Chang, 1991, p. 457) Please see print copy for image Chapter 7 • Ftnanclal Vu nerabittty page26S Tuckman and Chang's framework can be extended to apply to a single nonprofit organisatíon in two ways. Fírst, the four operational criteria can be measured over time, providing a new perspective to the model. Secondly, results for the characteristics of the single nonprofit organisation can be compared with the values for the selected characterístics in the fírst column of Table 7.1 in order to see whether the organisation fîts within the range of values for "at risk* or "severely at rísk* organisations as defined by Tuckman and Chang. Pigure 7.5 A Model of the Pinancial Health of an Organisation in Relation to Pour Operational Criteria FINANCIAL HEALTH High Multiple High Substantial Sources Surplus i ê a •a CQ i •3 2 e; cr ^ m s. o Single Substantial Low Sourge Low Peficit FINANCIAL VULNERABILrrY Chttpter 7 • Financial VubterctbiUty page 266 The four críteria form the basis of the model shown in Figure 7.5. Each críterion operates along a continuum corresponding to the movement between financial health and financial vulnerability. The next section discusses these críteria and their relationship to financial vulnerability. 7.4.1 Equity Balances An organisation's equity is equivalent to its net assets, or the residual amount after its liabilities are subtracted from its assets. A nonprofit organisation's operating equity is deríved solely from its operating income and therefore is equal to its total net operating results (the balance of surpluses and deficits) since its foundation. However, this equity may not only be held in liquid assets such as cash and negotiable securities, but it may also take a non-Iiquid form such as property and other non-current assets. At times a nonprofit organisation may receive a contríbution intended for capital purposes. This type of contribution is a source of equity capital rather than operating capital with equity capital being a restrícted fund and operating capital being an unrestrícted fund.i^ 12 However, all funds are in effect "restricted" in an organisational sense. They can only be used to meet organisational goals. Therefore, the key question underlying the use of all funds is "How wiU this expenditure promote the achievement of our mission?" Chapter 7 • Financial VulnerabiUty page 267 Equity balances are important to the financial health of a nonprofit organisation in a number of ways. 1. Equity balances held in non-Iiquid forms can be used to free up funds, by refinancing an existing property or obtaining a mortgage on a property that was previously debt free. 2. Equity balances held in unrestricted hquid forms can be used to finance the working capital needs associated with a growth in services or to replace, temporarily lost revenues duríng a deficit period. 3. Should an organisation experience a series of deficit periods, unrestricted non-current assets can be sold off and used to offset these losses so that the organisation can continue to operate. 4. Unrestrícted equity balances provide management with flexibility to meet and respond to changing resourcing and financial requirements during the implementation of a program or project. 5. If an organisation has significant restricted equity balances in liquid form, it may alter its mix of services so as undertake activities which are permitted from the restrícted funds, thus freeing unrestricted funds for other uses. Chapter 7 - Financial VulnerabiUty page 268 An organisation with a larger net asset base will have a greater ability to replace revenue used in operations than an organisation with a smaller net asset base. Additionally, extemal assistance may be more available to an organisation with a larger net asset base because there is more expectation of a return on the investment, or at least a retum o/the investment. A relative measure, the ratio of equity to revenue, will be used to operationalise the potential that nonprofit organisations have to find replacement revenues. This measure is generally accepted as an indicator of long-term stability (Gaffikin, 1993; Turk et al, 1995). It is also the measure used by Tuckman and Chang (1991) and thus will facilitate comparíson with their results. 7.4.2 Revenue Concentration Diversification of revenue sources reduces the rísk of financial failure (Biyce, 1992). Conversely, the fewer an organisation's revenue funds, the more financially vulnerable it is to revenue downturns (Tuckman and Chang, 1991). If an organisation only has one source of revenue and that fails, the organisation has a high rísk of financial failure. The greater the diversity in its revenue sources, the greater the probability that all sources will not be affected by the same economic shock. This is particularly the case as varíous revenue sources more equally contríbute to the total revenue figure. If an organisation has Chapter 7 - Financial VulnerabiUty page 269 a number of income sources, but most of the revenue still comes from once source, a financial downtum in the one large source will still leave the organisation is an undesirable position. Therefore, the larger the number of revenue sources and the more equally these sources share the total provision of revenue, the more healthy the organisation. The operational measure used to incorporate both the diversity of revenue sources and the concentration of these sources will be an index produced by summing the square of the percentage share that each revenue source represents of the total revenue (Tuckman and Chang, 1991). 7.4.3 Administrative Costs There are basically two ways of improving a financial position, or balancing a budget: either revenues must be increased or expenditure must decreased. Therefore, if it is unable to raise additional revenue, or if revenues decline, an organisation must look to reducing its expenses. In order to continue to provide services, a nonprofit organisation will not at first consider cutting the direct costs involved in the provision of these services. It is more likely to look to indirect expenditure such as administrative costs. Chapter 7 - Financiál VuínerabiUty page 270 AII nonprofit organisations have administrative costs, but the size and composition of those costs vary depending on a number of factors including the nature of the organisation, its size, the length of time it has been established and its growth rate. Administrative costs often include expenditures for resources that do not produce immediate results, such as training, planning, consultation and fund-raising functions. There are various viewpoints in regard to differing interests and claims on budget allocations of direct (program) and indirect (administrative) costs (Haller, 1982). The need for administrative support is viewed differently by • a donor (who wants to see their contribution going towards direct service provision); • a member of the goveming board (who sees the need to be responsive to the donor and the members and believes that too much money may be "wasted" on administrative salaries and other costs), and • a member ofstaff{who wants an increase in salary - just to keep up with inflation - and who cannot cariy out all the assigned roles because there are just not enough hours in the day). If a nonprofit organisation has relatively high administrative costs, then there is more likelihood that it is able to reduce these expenditures without seriously affecting service deliveiy. However, an organisation with low administrative costs would be expected to Chapter 7 - Financial VubierabiUty page 271 have few opportunities to reduce expenditure before it impacts on its provision of services. Consequently, a nonprofit organisation with lower administrative costs has less room for cost reduction before service provision is affected, and is more likely to be financially vulnerable to declines in revenue, than one with higher administrative costs. Two operational measures of administrative costs will be considered. First, the total administrative costs for each year over a period of time. Secondly, to take into account inflation, the other measure will consider administrative costs as a percentage of total costs. 7.4.4 Operating Margins A nonprofit organisation's financial vulnerability is related to its operating results. Although a comparison over time may indicate a trend in deficits or surpluses, it is difficult to compare individual results because of the change in the value of money over time and change in activities. Therefore, the operating margin ratio will be used to measure and compare operating results over time. The operating margin is the ratio of the net operating result (income less expenditure) to income. It shows the percentage that an Chapter 7 - Financial VulnerabiUty page 272 organisation's net operating result represents of its total income.i^ The operating margin is related to equity balances in that a large operating margin provides the organisation with funds that can be saved to build operational equity. If an organisation has a low or negative operating margin, then it will have little or no cash surplus upon which the organisation can draw before having to cut services. Consequently, a nonprofit organisation with a low or negative operating margin will be financially vulnerable. 7.5 Application of the model This section focuses on two extensions of Tuckman and Chang's model. The first is the use of the model to analyse the Guide Association's financial vulnerability over time, for the period 1924 to 1997. Secondly, this analysis is extended to provide a comparison between the results obtained for the Guide Association, a single organisation, at the "at risk" times in its histoiy, with the results obtained by the study of many organisations. The section concludes with a discussion of the usefulness of the model as it is applied to a single nonprofit organisation. 13 In for-profit organisations, this ratio is often called the profit margin and it measures the net profitability of each dol ar of sales. Chapter 7 - Financiál VulnerabiUty page 273 Table 7.2 Values of Operational Variables for 1924-1998 YEAR SURPLUS/ OPERATING ADMIN EXP OPMARG EQUITY REVENUE DEFICIT RESULT CONCENT- RATION 0 = surplus admin exp: total op result: net assets: index as 1 = deficit exp revenue revenue described 1924 1 198 0.89 0.39 2.88 0.46 1925 0 (86) 1.00 (0.15) 1.71 0.36 1926 135 0.99 0.15 1.17 0.41 1927 717 0.80 0.48 1.06 0.75 1928 457 0.99 0.38 2.01 0.52 1929 0 (87) 0.99 0.18 2.40 0.49 1930 421 0.96 0.61 4.42 0.28 1931 670 0.99 0.33 2.14 0.42 1932 146 0.98 0.11 2.85 0.72 1933 330 0.93 0.21 2.65 0.48 1934 158 0.89 0.06 3.14 0.42 1935 121 0.87 0.10 3.70 0.51 1936 0 (285) 0.85 (0.32) 4.45 0.43 1937 235 0.86 0.11 2.97 0.27 1938 143 0.86 0.06 3.47 0.33 1939 249 0.85 0.11 3.12 0.37 1940 3 0.90 0.00 3.78 0.38 1941 574 0.89 0.29 2.49 0.33 1942 (185) 0.88 (0.19) 4.86 0.48 1943 (116) 0.91 (0.10) 3.90 0.54 1944 95 0.86 0.06 3.19 0.51 1945 570 0.96 0.24 2.28 0.57 1946 4,243 0.96 (0.29) 1.90 0.44 1947 0 (1,012) 0.85 (0.40) 2.91 0.34 1948 0 (1,542) 0.66 (0.42) 1.61 0.42 1949 0 (1,101) 0.80 (0.45) 1.95 0.28 1950 2,362 0.85 0.40 1.23 0.34 1951 579 0.87 0.13 1.73 0.31 1952 919 0.65 0.14 1.47 0.36 1953 4,899 0.65 0.45 1.43 0.25 1954 3,859 0.61 0.33 1.91 0.27 1955 1,644 0.59 0.17 2.45 0.27 1956 0 (23) 0.65 (0.03) 5.19 0.31 1957 1 1,055 0.62 0.08 4.87 0.31 1958 0 (684) 0.61 (0.12) 6.36 0.32 1959 0 (1,406) 0.66 (0.52) 11.15 0.27 1960 0 (2,869) 0.67 (0.33) 7.84 0.44 continued Chapter 7 - Financial VuÍnerabiUty page 274 Table 7.2 Values of operational variables for 1924-1998 (continued) YEAR SURPLUS/ OPERATING ADMIN EXP OPMARG EQUITY REVENUE DEFICIT RESULT CONCENT- RATION 0 = surplus admin exp: total op result: net assets: index as 1 = deficit exp revenue revenue described 1961 5,554 0.61 0.24 3.94 0.29 1962 5,736 0.52 0.20 3.41 0.29 1963 5,249 0.62 0.19 3.76 0.32 1964 11,324 0.67 0.32 3.24 0.29 1965 8,511 0.66 0.25 6.76 0.29 1966 30,103 0.67 0.34 2.79 0.28 1967 1,903 0.63 0.03 4.39 0.31 1968 0 (1,652) 0.46 (0.02) 4.13 0.29 1969 0 (3,781) 0.51 (0.05) 5.32 0.29 1970 0 (11,999) 0.47 (0.13) 5.20 0.32 1971 0 (39,463) 0.39 (0.41) 4.74 0.34 1972 24,610 0.39 0.15 3.27 0.47 1973 0 (7,078) 0.45 (0.05) 4.09 0.29 1974 1,033 0.40 0.01 3.15 0.42 1975 0 (6,331) 0.53 (0.04) 2.93 0.37 1976 120,035 0.52 0.39 2.06 0.40 1977 199,301 0.55 0.45 1.85 0.44 1978 197,913 0.54 0.44 2.19 0.29 1979 108,381 0.53 0.30 2.94 0.38 1980 124,288 0.57 0.32 2.98 0.36 1981 225,110 0.55 0.46 2.64 0.33 1982 182,269 0.55 0.32 2.42 0.31 1983 128,500 0.56 0.21 2.66 0.32 1984 67,989 0.51 0.12 2.98 0.37 1985 63,128 0.47 0.11 2.78 0.41 1986 6,771 0.45 0.01 2.46 0.46 1987 48,212 0.53 0.07 2.39 0.47 1988 194,249 0.52 0.20 2.15 0.31 1989 114,217 0.46 0.12 8.47 0.51 1990 93,849 0.48 0.07 6.08 0.44 1991 0 (107,705) 0.51 (0.09) 6.57 0.40 1992 0 (834) 0.49 (0.00) 7.35 0.48 1993 85,097 0.51 0.08 7.55 0.50 1994 107,661 0.57 0.09 7.09 0.46 1995 86,990 0.53 0.07 7.14 0.44 1996 0 (52,369) 0.53 (0.07) 10.64 0.54 1997 0 (80,074) 0.50 (0.09) 9.78 0.49 1998 0 (59,338) 0.53 (0.07) 9.76 0.54 Chapter 7 • Financial Vu nerabiUty page 275 7.5.1 Values for Operational Criteria The values obtained for the four operational criteria, calculated as above, are shown in Table 7.2. The remainder of this section presents graphs of the values over time and analyses the indications of the financial vulnerability of the Guide Association from these figures. 7.5.1.1 Eiquity Balances The operational criteria used to investigate equity balances was the ratio of net assets to total annual income, and represents the potential the organisation had, at various points in time, to find replacement income. The results demonstrate that this ratio is quite high, and currently increasing, as shown in Figure 7.6, indicating that the Association has significant ability to find replacement income. This is most likely due to the large non-current asset base, much of which has been subject to significant increases in value due to inflation, with the first significant influence of inflation being felt in the 1960S. Nevertheless, whether the Association is prepared to sacrifice these assets in the future is doubtful. They are regarded by many people as a source of intergenerational equity, and thus it would be difficult to dispose of such assets which have assumed emotional symboUsm Chapter 7 • Financial VulnerabiUty page 276 as the heart of the Association. To many people, the sale of these assets would represent the demise of the organisation. Figure 7.6 Ratio of net assets to total income for 1924-1998 12.00 K 2.00 ^" ,<# # ,^ ^^ ^^ ^^ ,# ,# .<#> ,# ,# # # ,# , 7.5.1.2 Revenue Concentration The second operational criteria was an index measuring revenue concentration and diversification. If the Association had equal revenues from many sources the value of its index would be close to zero. However, if it revenues were from a single source it would have an index of one. Consequently, the Association is least financially vulnerable at times when its concentration index is closest to zero. Figure 7.7 shows that the index has remained between 0.25 and Chapter 7 - Financial VulnerabiUty page 277 0.75, implying that in terms of its revenue concentration, the Association has been neither severely at risk nor significantly healthy. Figure 7.7 Changes in Revenue Concentration Index for 1924 - 1998 0.800 It was in the eariiest years of the Association that the index was the highest - these were the years when it relied almost solely on income from donations. The index has fallen in the years when there has also been significant fundraising activity. At its lowest points, the Association had reasonably balanced income sources from membership subscriptions, investment income, trading, donations. Chapter 7 - Financial VulnerabiUty page 278 fundraising, events and other sundiy items. In the last two decades there has been a rising trend in the index. As interest rates have fallen, donations have become harder to obtain, and as more of the Association's traditional fundraisers have entered the workforce, income from these sources have become much less. Thus, membership subscriptions are contributing an increasing proportion to total income. Consequently, at a time when much is known about the need for income diversification, the Association appears to being going backwards in this area. Its Executive Committee, at which such decisions are made, is not composed of any professional managers. There is a reluctance to interfere with the employees in the retail department, which has consistently returned a negative result over the last five years. Although a review has been in place for a couple of years now, nothing has yet been accomplished. There are insufficient liquid assets to enable the development of a property into one more desirable as a conference centre, and thus allowing an increased ability to draw revenue from this source. However, the Executive Committee refuses to act to convert some non-Iiquid assets into liquid form to make this possible. There are many individual agendas that are being imposed at the cost of the organisation as a whole. Chapter 7 • Financial VulnerabiUty ^ 279 7.5.1.3 Administrative Costs The third operational criteria is the ratio of administrative costs to total costs. At times when this ratio is low, an organisation has fewer opportunities to reduce expenditure without having an impact on the services provided. In the early years of the Association, this ratio was very high as would be expected from an organisation relying almost completely on voluntary labour and contributions to cariy out its services. As the Association grew, expenditure increased in service-related areas with the payment of wages and salaries, expenditure on properties and activities, and payment of membership fees to the Australian and World organisations. The ratio of administrative expenses to total expenses thus decreased. The trend line, added to Figure 7.8, has a negative gradient, indicating that this ratio has continued to decline. The ratio is higher directly following times of financial crisis, indicating that the Association has reduced administrative costs at such times in order to attempt to balance the budget. Examples of this can be seen after the deficits of 1936, 1942, 1948-50, 1958-60 and 1968-71. An example of one case where this occurred was reported as follows: Owing to the need for economy, the Executive was obliged to give up half its previous floor-space, and Headquarters departments successfully compressed themselves into the remaining half. (GNSWAR, 1937, p. 5) Chapter 7 • Financial VubierabiUty page 280 Figure 7.8 Ratio of annual administration costs to total costs for 1924 - 1998 120% ^ ^ ^ ,^ ^ ^ ^ ^ ,^ ^*' ^*^ ^*' ,^ ,^ ,^ ,^ ,^ ,^ ,^ # *" ,^ ,^ ,^ N«* It appears that it is only after the deficits of the last decade that the Executive Committee have not reduced administrative costs. However, with the ratio sitting at around 50 percent, the Association still has a significant buffer against reduction in service delivery. Movement in this direction began in 1998 when the Executive Committee decided that the Association would need to reduce space for administrative activities, by relocating all staff and volunteers to the first floor of the building it owns and leasing out the ground floor. Chapter 7 • Financial VubierabiUty page 281 The decision has the dual effect of reducing administrative costs and raising revenue. 7.5.1.4 Operating Margins The fourth operating criteria was a measure of the operating margin, calculated by finding the ratio of the annual net operating result to total income. Figure 7.9 shows the erratic results for the Association's operating margin. Figure 7.9 Ratio of operating margin (net income) to total income for 1924 - 1998 80.00% 60.00% 0) E o 40.00% o _c "o <í^ (0 «) (D O) /i<3 /i'b QN o> ,A riP c ,^ ,^ ,^ ,^ ,^ ,^ ,^ ^. Q. -20.00% O -40.00% -60.00% The negative results indicate times of annual financial deficits, with the trend line indicating a fall over the last 75 years from an average margin of 10 percent to 6 percent. A net income average surplus of 8 Chapter 7 • Financiaí VubierabiUty page 282 percent may at first appear reasonable for a nonprofit organisation. However, such a low surplus does not allow the funding of significant levels of expansion or additional provisions of services. Secondly, this is a very averaged figure given the heights and depths, and therefore, it is appropriate to look more closely at a particular period. If the operating margin is considered only over the last 20 years, the picture becomes clearer and of more cause for concem. As shown in Figure 7.10, the downward trend has been significant from 1978 to 1998 with the average operating margin during this period decreasing from 35 percent to a negative margin of 10 percent. As a result of this, the levels of the operating margin are much lower that in earlier times, and it becomes more difficult for the Association to recover from deficit years. The Association appears to be consuming past resources to provide current services. This raises the issue of intergenerational equity, under which the present generation of an organisation should be "using no more and no less that its fair share of organizational resources (the amount it contributed)" (Herzlinger and Nitterhouse, 1994, p. 5). It is interesting to note that when Frances Hesselbein became Chief Executive Officer of the Giri Scouts of the USA (sister organisation of Guides Australia), she discovered that an analysis of ingenerational equity indicated that the organisation's "losses" reflected a deeper Chapter 7 - Financial VubierabiUty page 283 concern with its ability to perpetuate itself. The issue is similar now with Guides NSW. An operating loss in a given year indicates that members have not provided enough revenues to meet the expenses incurred that year. Future generations will have to make up the losses or the organisation will not be viable. Intergenerational equity means "that each generation, or more specifically each year, should pay its own way" (Anthony and Young, 1994, p. 105). Figure 7.10 Ratio of operating margin (net income) to total income for 1978 - 1998 50.00% 40.00% -10.00% -20.00% Chapter 7 - Financiál VulnerabiUty page 284 7.5.1.5 Conclusion This section has considered the values of the four operational criteria proposed by Tuckman and Chang (1991) as being determinants of financial vulnerability. Each of these criteria has been calculated for the Guide Association on an annual basis over its histoiy. An analysis of these measures leads to the following conclusions. 1. The Association has a significant asset base, but these assets are largely in non-Iiquid forms. Whereas the asset base acts as a buffer against insolvency, it would require a significant difference of heart for the Executive Committee to decide to part with any of these assets. They perceive that the assets contribute to the mission of Guiding. However, there has been neither a cost-benefit analysis, nor a strategic plan created to veriíy this. 2. Although as yet to reach critical levels, the Association does not have sufficient revenue diversity to provide a buffer if one source, particularly a major one, should fail. The paradox here is that the organisation is depending increasingly on membership fees as the major source of income, and yet membership is declining. Thus less members need to pay more. There is a need to investigate alternative feasible Chapter 7 - Financial VulnerabiUty page 285 revenue sources so that the Association is not so vulnerable to downturns in membership. 3. In the past, deficit years have been followed by a decline in the ratio of administrative costs to total costs, meaning that either administrative costs have decreased or total costs have increased. An analysis of the administrative figures, shows that the decline in the ratio has been due to decreased administrative costs. However, over the last two decades this has not been the case. Despite lower membership numbers, administrative costs have remained static or even climbed. Nevertheless, with administrative costs being around 50 percent of total costs, the Association should seriously consider cutting back in this area, so that it is able to continue funding its services to members without operating at a deficit. 4. Generational equity is continuing to be eroded each year that the Association's expenditure exceeds its revenue. The steady fall to a negative operating margin position over the last two decades is further indication that the Association needs to consoHdate its revenue position and re-address its expenses. Chapter 7 - Financial VulnerabiUty page 286 7.5.2 Comparison with "at risk** nonprofits Tuckman and Chang (1991) presented the mean values for four financial ratios of at-risk and severely-at-risk groups. These have been calculated for the Guide Association using 1997 results. Other years have also been considered where they give a meaningful comparison and are shown in Table 7.2. No attempt has been made to make a comparison with the other two characteristics reported by Tuckman and Chang (1991) because both involve US dollar figures, and hence are affected by both exchange rates and inflation. Table 7.2 Comparison of ratios for Guides NSW and Tuckman & Chang (1991)* Guides NSW At risk Severely at rísk 1997 T&C (1991)* T&C (1991)* Long-Term Debt to Total 0.01 0.47-0.44 1.06-0.91 Assets Ratio (max = 0.22) Current Ratio 11.73 16.57-18.58 10.78 (max = 14.94) (min= 0.61) % of Revenue from 79% 81%-76% 97% Program (or service (max = 94%) provision) (avge = 72%) Revenue to Assets Ratio 0.10 1.62-1.57 0.14-0.27 (max = 0.86) (avse = 0.28) The long-term debt to total assets ratio is a financial stability ratio and provides a measure of the percentage of the assets provided by long term creditors and the extent of the use of gearing. This value is minimal in the Guide Association, its assets being veiy large in comparison with its very low non-current liabilities. Chapter 7 - Financial VubierabiUty page 287 The current ratio is a measure of short term liquidity. It indicates the ability of a firm to meet its short term debts from its current assets. For the Guide Association, this fîgure fits between those for the at- risk and severely-at-risk categories, indicating that there are limited liquid assets available to meet short-term liabilities. This is consistent with the fact that a large proportion of assets is held as real estate. The percentage of revenue from its program (or service provision) indicates the extent to which the organisation is dependent upon members for its funding, and thus whether a sudden downtum in membership could leave the organisation financially vulnerable. The Guide Association is vulnerable here because given that its average percentage of revenue from programs was 72 percent, its maximum 94 percent and the 1997 percentage was 79 percent. These figures place it well within the at-risk category and possibly into the severely- at-risk category. The revenue to assets ratio is a profitability ratio that measures the rate of return earned on total assets. This is negligible for the Guide Association, being 0.10 in 1997 and having an average of only 0.28 over 74 years. The only years in which the ratio was high was prior to 1930 when the Association obtained its first camping property. Chapter 7 • Financial VulnerabiUty page 288 Since then it has an extremely high asset base that is not returning any significant revenue. 7.6 Concluding Comment In summaiy, the Guide Association has some financial flexibility in that it has access to equity balances and relatively high administrative costs, while, it has few revenue sources and very low operating margins. Its flexibility is such that in the short term it can survive financial shocks and continue to offer the same level of services to its members. If the same situation continued, the Association would need to consider the sale of non-current assets in order to have cash available to meet operating expenses. It would be better if, before this happened, the Association consolidated its assets so that that it received more return on its investments. The next chapter focuses on the issue of financial performance using ratio analysis, specifically addressing the past twelve years of operation of the Association. CHAPTER 8 FINANCIAL PERFORMANCE AND THE SUPPORT OF MISSION A MACROVIEW OF FINANCIAL MANAGEMENT PART 2 or Ba tting A verages, Bowling Figures and Strike Rates 8.1 Introduction Without money, no mission, no matter now meritoríous, can be achieved. (Biyce, 1992, p. 8) The starting point for a nonprofit organisation is its mission (Drucker, 1989; Oster, 1994). The Guide Association is no different. It has its mission as its central thrust, as its reason for existence, and it generally neglects to use accounting information to facilitate organisational control. The key to this is related to the culture of the organisation. The organisation is not profit-oriented; it is member oriented. It has been successful because it can do certain operational things very well: it can train its leaders and members, provide a Chapter 8 - Financial Performance page 290 program for their use and resources to support them. However, the organisation has always lacked a professional management orientation. By very definition it is a voluntary organisation and thus most of its managers are amateur managers. An annual operating budget is the extent of the financial planning. This budget is developed in isolation and not part of a long term strategic plan. Rather than advance planning, the organisation has tended to react to changing circumstances and events. Its systems have developed as responses not as initiatives; financial management has been reactive rather than proactive. The rise of accounting at various times in the organisation's histoiy appears consistent with times of crises. The organisation has held special meetings, special conferences, and employed facilitators to attempt to improve the situation. This is consistent with Meyer's (1994) conclusion that "accounting arises in partially rationalized (or partially bureaucratized) settings" (1994, p. 129). He argues that When [an] organization is relatively complete, controlling its own definition of reality, accounting becomes less necessaiy, and sometimes intrusive. ... We thus expect to find accountants in greater numbers where [an] organization is not self-sufficient. (Meyer, 1994, pp. 129-130) It would appear that an accounting system can operate in an organisation and yet not function as a control mechanism or as a mechanism to provide accountability. In an organisation that values Chapter 8 • Finandal Performance page 291 informal relationships, voluntary participation and "niceness", the idea of accountabifity is somewhat alien. While the need is acknowledged (because who could say otherwise?), the reality is a different matter. It may be necessaiy to change the organisation's culture so that accountability is incorporated as a positive value. It may be important to introduce some form of professional, rather than amateur management. Thus the use of accounting as a control mechanism is not merely a technical system, but a socio-technical system "because it involves change in the social or cultural system which interacts with the accounting technology" (Flamholtz, 1983, p. 166). Turk et al (1995) suggest that the key to analysis and measurement of the financial and operational control and impact is related to the central question: What is the organisation's mission? Their model reflects the interrelationship between a series of questions about the mission and the financial resourcing and control of the organisation. They suggest that such a framework provides an appropriate analysis for past performance which will help an organisation chart its future direction. The remainder of this chapter analyses financial performance by considering ratio analysis in order to identiíy anomafies and focus attention on matters of significant concern within the NSW Guide Chapter 8 - Financial Performance page 292 Association. The second section discusses the use of financial ratio analysis, and the third section identifies the limitations of such analysis. The fourth section discusses Turk et al's (1995) financial performance model. The fifth section applies the model to the Guide Association. The sixth section suggests directions that the Association can move given the past performance revealed by the analysis. 8.2 Financiai Ratio Anaiysis and Mission Ratio analysis is a well established tool to evaluate an organisation's profitability, liquidity and financial stability (Gaffikin, 1993). As such it can be used to answer a variety of questions. Those proposed by Turk et al (1995) are shown in Figure 8.1 Herzlinger and Nitterhouse (1994, p. 133) use ratio analysis to answer a different set of four questions: 1. Are the goals of the organisation consistent with the financial resources it needs to finance those goals? 2. Is the organisation maintaining intergenerational equity? 3. Is there an appropriate matching between the sources from which resources are derived, and the uses to which they are put? 4. Are present resources sustainable? Chapter 8 - Financiat Performance page 293 This series of four does not mention "mission" per se, but there is the underlying idea of goals and focus for the organisation, which affect and are affected by the way in which resources are handled. Another altemative is to combine a number of the questions and ask: Is the organisation balancing its resources against the current and future needs of its members while providing for the long-term health of the organisation? (Langan, 1998, p. 76). Figure 8.1 Model of Financial Performance in Relation to Mission (Turk et al, 1995, p. 1) Please see print copy for image The emphasis by a nonprofit organisation on its mission is reflected in the statement of Stanley Corfman, former chief financial officer of the YWCA of the USA, that Chapter 8 - Financial Performance page 294 People who are in financial capacities at NPOs [nonprofit organisations] have to understand that we budget for the mission. We don't change the mission to suit the budget. (Corfman, in interview cited by Dennis, 1997, p. 73) Whatever questions are asked, financial ratio analysis formalises and quantifies financial data to facilitate comparison within an organisation. Ratio analysis provides an efficient means by which financial data can be reduced to a more understandable basis for evaluation of financial conditions and operating performance, by which a decision-maker can identiíy important relationships, and by which forecasts can be made of an organisation's ability to pay its debts when due and to operate in a manner consistent with its mission and without leaving a deficit to be covered by future generations. Each ratio is designed to detect a certain type of symptom in relation to the underlying state of health of the organisation, with a collection of symptoms suggesting an appropriate treatment plan. The roles of five of the more commonly used ratios, summarised in Table 8.1, display a degree of overlap between the financial vulnerability measures of the previous chapter and financial performance measures of this chapter. 8.3 Limitations of Financial Ratio Anaiysis Crunching numbers to calculate financial ratios means that one is focussing on individual trees. One also needs to take a step back and Chapter 8 - Financiaî Performance page 295 see the whole panorama of the financial analysis forest. Doing this means recognising the limitations which should be considered when interpreting the results of financial ratio analysis. Table 8.1 Role of Financial Ratios in Financial Analysis after Herzlinger and Nitterhouse (1994, p. 7) RATIO ROLE IN FINANCIAL ANALYSIS Asset tumover Matches assets and goals Slow tumover assets required considerable investment and reduce flexibiUty Profitability and retum Analyses intergenerational equity and the match on invested capital between source and uses of money Neither excessive profits nor losses are desirable Liquidity and solvency Matches sources and uses of financial resources Is the organisation flirting with insolvency in the short-term or in the long-term? Percentage of revenues, Analyses quality of revenues and relation to by source mission Is the organisation excessively dependent on a few revenue sources? Are revenue sources consistent with organisation's mission? Percentage of expenses, Analyses quaUty of expenses and relation to by type mission A large percentage of fixed expenses decrease the organisation's flexibility Are expenses consistent with the organisation's mission? 1. The ratios and percentages that are calculated in financial analysis focus on certain areas in isolation to rest of the organisation. It is important to interpret these figures in the correct perspective, bringing into the examination qualitative Chapter 8 - Financial Performance page 296 factors such as general economic conditions, the unique characteristics of the nonprofit sector and the position of the organisation being investigated within the sector and in relation to its own historical and cultural evolution. 2. There are also inherent limitations in the financial statement data which is used for the calculation of these ratios. Since the Guide Association is not subject to accounting regulation, the way in which its reports have been presented is entirely at the discretion of those preparing them. This means that there may be difficulties with uniformity in reporting. Even the words may be taken to mean different things. A tematively, a term used in a financial report, may not be given the same meaning by the reader as was intended by the preparer. Furthermore, the focus of operations changes over time, making comparisons difficult. 3. It is not just the preparation of the reports which may be different over time, but also the accounting practices used by the organisation. Some examples of such changes in practice are outlined below. • A separate Trading Account Statement was first provided by the Guide Association in 1949. For the previous twenty five years, the trading had been incorporated into the General Chapter 8 - Financial Performance page 297 Account. The separate statement was provided annually until 1953, then reintroduced from 1956-1958. It was again reintroduced in 1967 and has been included in each set of financial statements since then. • When comparative figures were used for the first time by the Guide Association in 1961, adjustments were made to the 1960 figures to make the bases consistent with the current year. • Prior to 1966, separate financial statements were provided for the Parramatta Gift Shop and for Special and Specific Funds. In 1966 these were incorporated into the general accounts. Some years later, funds for specific purposes were included in the Investment and Building Fund rather that in the General Account. In 1996 such funds were shown in the balance sheet, with funds out of which the investment was made being credited to a Special Purpose Funds Reserve and the comparatives being adjusted to reflect this. • A separate Building Pool Account (now Investment and Bmlding Fund) was initiated in 1966 and has been reported separately from the General Account since that date. 4. A further limitation is that of historical cost accounting. There are a number of levels of dollars in the balance sheet, with Chapter 8 - Financial Performance naae 298 assets such as accounts receivable being stated in current dollars and non-current assets such as land being stated at historic cost. This makes comparative analysis across years difficult, particularly with the varying inflation rates of the past eighty years. In the 1920s, inflation rates were not even considered; in the 1970s, inflation was in double digit figures; today, it is between one and three percent. Given these limitations, it is important that the interpretation of financial ratios "be tempered with consideration of the underlying data quality, the effects of flexibiHty in accounting, and the limitations of historical cost accounting" (Herzlinger and Nitterhouse, 1994, p. 170). 8.4 A Modeí of Financial Performance Analysis To measure financial performance in a nonprofit organisation, it is essential to start with a consideration of the organisation's mission (Drucker, 1990; Turk et ai, 1995). It is thus appropriate to answer a series of questions as depicted in Figure 8.1. Each of the questions in the model in Figure 8.1 can be answered by using financial and operational ratios. The analytical capabilities of ratio analysis have an important place in assessing an organisation's current financial state, establishing measures for future strategies Chapter 8 - Financiaî Performance page 299 and tasks to accomplish its mission, evaluating its performance over time, and deciding how the organisation should proceed in the future (Turk et al, 1995, p. 4). Ttirk et al suggest specific ratios that can be used to answer each of the four key questions, but these ratios have been developed so as to be applicable for an independent higher education institution, such as a university or college. These sets of ratios are not directly transferable to a membership organisation such as the Guide Association. Consequently, some ratios have been used as suggested by Turk et al and some have been deleted completely, while others have been modified or reconstructed to reflect the different mission and structure of the Association. The remainder of this section identifies and discusses various financial ratios that are appropriate to answer the questions in Figure 8.1. This is followed by the calculation and analysis of these ratios for the Guide Association. The results of the last ten years are then considered in developing trend analysis for the Association, thus measuring organisational strengths and weaknesses, and identifying planning activities on which it is necessaiy that the organisation focus in order to revive its financial profile in relation to its mission. Chapter 8 • Financial Performance page 300 8.4.1 Are Financial Resources Sufficient to Support the Mission? This question is primarily concemed with the sufficiency and flexibility of financial resources. It is concemed with figures on both the balance sheet and the income statement. The balance sheet is a snapshot of an organisation at a particular point in time, the balance date. Consequently, one can judge not only whether an organisation is healthy at that date, but the extent to which its resources have changed since the last snapshot, the balance date last year. The income statement shows the operating result for a period of time. Whether this results in a surplus or a defîcit indicates whether the organisation has lived within its means or not. If not, then it has been financed by past or future members, rather than the current membership. There are four primaiy ratios that could be used to give an indication of whether the resources of the Guide Association are sufficient to support its mission. These are summarised in Table 8.2. Chapter 8 - Financial Performance page 301 Table 8.2 Ratios that indicate whether flnancial resources are suffîcient to support mission RATIO MEASURES ... FORMULA Retum on net the total economic retum to assets ratio determine whether organisation change in net assets is financially better off over time total net assets Viability ratio the availability of non-current assets to cover debt should net current assets organisation need to settle its non-current liab ities obligations quickly Primary how long the organisation could reserve ratio operate using its current assets net current assets without relying on a surplus total expenses generated by operating activities Net income whether core operating activities ratio resulted in a surplus or a deficit change in net assets total core income 8.4.2 What Financial Resources are Available to Support the Mission? This question is concemed with the issue of long-term financing. It addresses how the organisation uses debt to support its mission and the extent to which it generates both intemal and extemal revenues and resources. It is important for a nonprofit organisation to be waiy of investments that divert resources and focus from its mission to some other activity. An example of this issue has been debated by the Executive Committee and the Finance Committee of the Guide Association for a number of years. There are proponents for the development of conference facflitíes at Guide camp sites who believe that such an investment would provide extemally generated sources Chapter 8 - Financial Performance page 302 oí revenue and also be useful to the Association itself. The opponents of this plan claim that the Guide Association is in the business of youth development and leadership programs, and that therefore, it would be inappropriate to branch out into conference centre management. There are five primaiy ratios that give an indication of what fînancial resources are available to support the mission of an organisatíon (Turk et al, 1995). These are summarised in Table 8.3. Table 8.3 Ratios that indicate what fînancial resources are available to support mission RATIO MEASURES ... FORMULA Operating the extent to which income income ratio from services to members membership service income contributes to the overall expenses from core activities financing of the mission Contributed the extent to which income ratio extemally generated income from contributions resources contribute to expenses from core activities overall financing of core activities Debt burden the cost of borrowing to cost of debt serving ratio overall expenditure total expenditure Debt coverage the extent to which net ratio operating income covers debt net operating income service payments cost of debt servicing Leverage ratio the extent of fmancial unrestricted net assets leverage total fiabiHties Chapter 8 - Financial Performance «-,0 "" page 303 8.4.3 How are Financial Resources Used to Support the Mission? This question focuses on the central economic question of allocation of scarce resources. In considering the mission, the organisatíon needs to identify its core activitíes and its support activitíes, and to determine how resources are used or distributed between these areas. This issue is a contemporaiy one for the Guide Associatíon, which produced it revenue and expenditure statement divided into two classifications, core and non-core activities, for the first tíme in 1997. In the past, all activities have been aggregated, there being no regulatoiy reason to do otherwise. There are two primary ratios that give an indication of how the financial resources of the Guide Association used to support its mission. These are summarised in Table 8.4. Table 8.4 Ratios that indícate how f nancial resources are used to support mission RATIO MEASURES... FORMULA Membership whether core services use a membership services expenses services ratio growing or dwindling share of membership 85 general income resources Membership whether support services use membership support expenses support ratio a growing or dwindHng share membership & general income of resources Chapter 8 - Financial Performance paae 304 8.4.4 Are Financial Resources Applied EfHciently and Effectively to Support the Mission? The fourth questíon concerns issues of accountability and financial performance. It addresses the ways in which resources are used and asks whether there are better ways of meetíng the organisatíon's mission and objectives. It is concemed with an assessment of organisational productivity. Different organisations stress various elements of performance and accountabflity. These major strategic goals require careful measurement to answer any question about efficiency and effectiveness. The common components of a balanced approach for a profit-centred organisation include profitability measures, customer satisfaction measures, innovation measures, and internal measures of efficiency, quality and time (Homgren, Foster and Datar, 1994). However, these elements need to be expressed differently for a nonprofit organisation, because its focus is on mission, rather than profitability. Furthermore, the five strategic goals (quality, customer satisfaction, retentíon, velocity and productivity) identified by Turk et al (1995), while relevant to a nonprofit educational organisation, are not all easily operationalised for the Guide Association. Quality of inputs should focus on the members, the leaders, the program, the activities and the structures, but it is difficult to find ratios by which these can measured in the Association. How does one judge whether quality is high? One can consider the ratio of Chapter 8 - Financial Performance page 305 expenditure on operations and faciUties to total income, or the age of the faciHties, but measuring quality in relation to people or programs is more difficult. One possible measure is the number of girl members per adult, assuming that better quality is delivered when this ratío is smaller. Another measure of quality is in relation to the training of the leaders. The retentíon of membership is a further important goal in measuring the efficient and effective use of resources, but it is also difficult to measure this in the Association. Girls change their sections as they reach a certain age, and the "once a Guide, always a Guide" adage means that they can continue as members of the Movement into adulthood. There are no records tracing an individual's passage through the organisation. If membership figures were to remain static for a year, there is no way of knowing whether the membership itself has been unchanged or whether the same number of new members started as those that officially "left". An attempt at measuring retention rates, could be to use the change in girl membership and the change in adult membership. However, the organisation would be better able to gauge its effectiveness and efficiency in the use of its resources, if it were to collect data that would make possible a clearer measurement of the strategic goal of retention. Chapter 8 - Financial Performance page 306 Turk et al (1995) also considered velocity, the measure of speed involved in completing a service, as a measure of efficiency and effectiveness. Whereas this may be important in educational institutions where students will wish to complete their degree in a timely manner, it is not appropriate to a membership organisation such as the Guide Association, where quafity, not time is the issue. Productívity is another of Turk et al's goals which it is difficult to operatíonalise in the Guide Association. Productivity concerns identifying outputs achieved as the result of inputs of resources, whether human, monetary or stmctural. Therefore, it would valuable to have information such as volunteer hours and use of Guide properties by both members and non-members. However, human resource productivity and financial productivity can be measured by the ratio of girl members to leaders, and the core service costs to the number of members. Thus, four strategic goals are considered as indicators of whether financial resources are applied efficiently and effectively to support the mission. Ratios to measure these are explained in Table 8.5. Chapter 8 • Fínancial Performance page 307 Table 8.5 Ratios that indicate whether fmancial resources are applied efiîciently and effectively to support mission GOAL & RATIOS MEASURES ... FORMULA Quality Girls per leader the average size of change in girl membership ratio operational units change in no. of leaders Membership satisfaction Total the consistency of total members this year membership demand for total members base year trends ratio membership Retention Girl membership the consistency of giri members this year trends ratio demand by girl girl member base year members for Guide program Leader the consistency of adult membership this year membership demand for adult membership base year trends ratio membership by adults Adult the consistency of adult members this year membership demand for adult members base year trends ratio membership Productivity Change in girl the percentage change in girl membership membership ratio change in numbers no. of girl members of girl members Cost per member the financial core operating costs ratio productivity of each total membership doUar spent in the Movement Cost per girl the financial core operating costs member ratio productivity for girl membership each doUar spent in relation to girl members ^___ Chapter 8 - Financial Performance paae 308 8.5 Applícation of the IVIodel The model of Figure 8.1 was appHed to the NSW Guide Associatíon by posing the questions with respect to the Association and calculating the relevant ratíos for the its twelve financial periods from 1986 to 1997.14 The remainder of this section tabulates these results and discusses the trends that are impHed. 8.5.1 Are Financial Resources Suffîcient to Support the Mission? The four ratios outHned in Table 8.2 were applied to the Guide Association from 1986 to 1997. These results are shown in Table 8.6 and discussed individually. 1"* The first nine fínancial periods are of one year's duration and extend from 1 May one year until 30 April the foUowing year. In 1995, the Association changed its balance date. Consequentíy, the tenth financial period is of only eight months duration extending from 1 May 1995 until 31 December 1995. The final two financial periods in the analysis are for calendar years from 1 January to 31 December. Ratio analysis is a relative measure and so the length of the financial period does not make comparison difficult. However, the same membership figures have been used for both financial periods finishing in 1995. Chapter 8 - Financial Performance page 309 Table 8.6 Ratios for Guides NSW for 1986-1997 that indicate whether financial resources are suffîcient to support its mission YEAR RETURN ON NET VIABILITY PRIMARY NET INCOME ASSETS RATIO RESERVE RATIO RATIO 1986 0.3% 7 51% 4% 1987 29.0% 26 89% 11% 1988 277.9% 113 392% 6% 1989 1.2% 133 196% 4% 1990 -2.1% 107 170% -5% 1991 0.4% 101 202% 0% 1992 1.0% 117 280% 4% 1993 9.0% 139 223% -6% 1994 1.0% 210 237% -22% 1995 -1.8% 156 283% -28% 1996 -3.2% 55 213% -5% 1997 1.5% 45 254% -3% 8.5.1.1 Retum on Net Assets Ratio The retum on net assets ratio highlights the issue of intergenerational equity by measuring the organisation's ability to generate net assets given its current capital base. The graphical representation in Figure 8.2 clearly indicates that in most years there is negligible generation of net assets. In other words, apart from 1988, the Association has not been strengthening its future financial flexibflity by increasing its assets base. In some years it has even been depleting it further, thus using the equity contributed by past members. Chapter 8 - Financial Performance page 310 Figure 8.2 Retum on net assets ratio for Guides NSW for 1986-1997 300% 250% 200% 150% 100% 50% 0% -50% CDh^OOaîOT-CvICO^Í-lOCD^- cocooooooîO>0)0>cr>o>OîOî 0)a>G)G>G)0>aia>o>OiOOi The apparent high ratio in 1988 was because the Association sold a property previously recorded at historical cost, making a significant profit on book value, and thus a significant change in assets as property was converted to a term deposit. However, it is inappropriate to consider such a "windfall" as generating new assets. If the organisation were to carry its property at market value rather than historical cost, such anomalies would not occur. 8.5.1.2 Viability Ratio The viability ratio highlights the financial health of the Associatíon at a point in time. There are two issues that need to be considered. The first is the value of the ratio; the second is the trend in tiiat value over time. As to the first issue, tíie fact that the value of the ratio is Chapter 8 • Financial Performance page 311 always greater tiian 1, indicates that the Associatíon is financially healthy. At any balance date in the last twelve years, the Associatíon has sufficient expendable net assets to satísfy its debt obHgatíons. But what about the movement of the ratío during this period? It increased dramatically after 1988 with the sale of the property mentioned in the previous sectíon. This sale meant that the expendable assets of the Association rose from just under $700,000 in 1998 to $3,200,000 in 1999. The mortgage repayment at the time of sale, meant that non-current liabilities were significantiy reduced. Figure 8.3 shows that this ratio dipped and rose again to a peak in 1994, after which it has fallen substantially each year. Figure 8.3 ViabiUty ratio for Guides NSW for 1986-1997 cot^ooooT-osjco'^iocor^ 0O0O0O0OO)CJ>CJiC7>CJ>C3)C3)C7) oo>o>o>o>a>o>o>o>a>o>a> This decrease has been due to the use of cash reserves to meet annual deficits, but it has also been caused by a change in Chapter 8 • Financial Performance paae 312 accounting policy, with the Association accounting for long service leave entitíements by increasing the provision account with each year of an employee's service, rather than only when a person had been employed for at least ten years as previously. 8.5.1.3 Primary Reserve Ratio The primaiy reserve ratio acts as a supplement to the Viability Ratio. The denominator of total expenses acts as a proxy for organisational size, with higher primary reserve ratios indicating financial strength. The ratio of around 50 percent at the beginning of the twelve year period, suggests that the Association had a reasonable degree of financial flexibility to implement or support additional programs in relation to its mission. In 1986, the Association had the ability to cover six months of expenses. Then came the property sale in 1988 which significantly increased the expendable net assets of the Association, and thus the primaiy reserve ratio. The ratio fell over the next couple of years with the increased expenses of settling into the new location. Figure 8.4 shows that since 1991, the ratío has been at an average around 250%. This is reasonably high, indicating that the Association is in a strong position for capital or program expansion. Chapter 8 • Financial Performance page 313 Figure 8.4 Primary reserve ratio for Guides NSW for 1986-1997 500% 400% 300% 200% 100% 0% CD^-OOCnOT-CNICOTj-iOCDh- ooooooooo>c3>ocj>c3>cj>C)aî C35(3>O>CJ>C3)05CJ>0>C3>0)CJ)C7> 8.5.1.4 Net Income Ratio The net income ratio indicates whether the Associatíon lived within its means during the relevant financial period. The overall trend of the ratio during the twelve year period has been one of continuing decline with a pattem of deficit ratios emerging in the latter half of the period. Nevertheless, the last two periods, although still negative, indicate a reversal in the downward trend. This reversal reflects the decision taken at the Association Management weekend discussed in Chapter 3. Until that weekend, despite receiving each year's figures, the Executive Committee had not been aware of the negative trend in results. The State Commissioner recognised that the deficit budget planned for the following year was inappropriate, and so invited me to facilitate the Sessions. But even she was not aware of the overall Chapter 8 - Finandal Performance page 314 picture presented by Figure 3.2. As a result of seeing that graph, the Executive Committee decided that they needed to reverse the trend, but realised that it could not all be done at once. Figure 8.5 shows that for the past two years, they have managed to reverse that trend. Figure 8.5 Net Income Ratio for Guides NSW for 1986-1997 cDr--coc3>OT-cMco'^m However, that reversal has only occurred by continually reminding the Executive Committee about the financial position of the Association, and that often their proposed expenditure was inconsistent with the overall direction they had chosen to go. The members of Executive Committee are rich in skills related to the achievement of Association's mission, but largely, have no experience in financial management, or understanding of business principles. In order to ensure a healthy pattem of retums into the future, rather than depending on crisis management, the Executive Committee Chapter 8 • Finandal Performance page 315 should continue to focus on restmcturing the Association's income and expense streams, as part of a larger strategic plan. 8.5.2 What Financial Resources are Available to Support the Mission? The five ratios outHned in Table 8.3 were applied to the Guide Association for its twelve financial periods from 1986 to 1997 These results are shown in Table 8.7 and discussed individually. Table 8.7 Ratios for Guides NSW for 1986-1997 that indicate what fînancial resources are available to support its mission YEAR OPERATING CONTRIBUTED DEBT DEBT LEVERAGE INCOME INCOME BURDEN COVERAGE RATIO RATIO RATIO RATIO RATIO 1986 106% 2% 0.0% undefined 5.4 1987 109% 16% 0.0% undefined 5.9 1988 108% 6% 0.5% 26.0 2.3 1989 107% 1% 0.3% 23.2 14.2 1990 91% 1% 0.3% (26.6) 9.1 1991 99% 1% 0.2% (0.4) 8.7 1992 106% 3% 0.2% 38.8 20.1 1993 82% 7% 0.7% (14.6) 24.1 1994 61% 5% 0.3% (103.7) 42.1 1995 57% 5% 0.3% (137.2) 22.5 1996 88% 4% 0.3% (28.4) 21.9 1997 91% 2% 0.3% (21.7) 30.5 8.5.2.1 Operating Income Ratio The operating income ratio indicates the performance of the Association from self-generated activities. Apart from the dip in 1990 Chapter 8 • Finandal Performance page 316 and 1991 due to unusually low results from trading operatíons in those years, the line in Figure 8.6 remained relatively constant between 1986 and 1992. However, there was a steep fall to 1995 and then a partial recovery in 1996 and 1997. The consistency of this trend with that shown in Figure 8.5 indicates the large extent to which the Association is dependent on self-generated income. Figure 8.6 Operating income ratio for Guides NSW for 1986-1997 120% 100% CDt^OOO>OT-CNJCOTflOCDI^ ooooooooc3>a>cj>a><3>c3>o>o> o>o>o>a>o>a>c3>a>c3>a>a><3> Despite the fall in membership numbers during this period (see Figure 8.7), membership income continued to rise each year untfl 1993 when increases in fees could no longer cover for the decreased membership numbers. From 1997, membership fees were also introduced for adult members, causing the overall membership income to rise again. Chapter 8 - Finandal Performance page 317 Figure 8.7 Membership of Guides NSW for 1986-1997 oi 30000 GIRL MEMBERS 0 25000 ADULT MEMBERS E 20000 1 15000 ^, ^ 10000 - Q 5000 - z 0 co 00 o CN M- Cû 00 00 O) O) Oi O) O) But it is not only membership fees that are affected by membership size. The ability to generate funds from trading activities and membership events is also directiy related to membership size, with such contributions falling as overall membership numbers fall. This fall in numbers means that the Association displays a weakening financial performance from self-generated activities, and thus must look to other sources of funds, and to rationalising its expenses in order to ensure sufficient financial resources to support its mission. 8.5.2.2 Contributed Income Ratio The Association does not have a good track record of attracting extemal sources of funding. With the exception of the abnormal Chapter 8 • Finandal Performance page 318 profit from the sale of property in 1988 (shown on Figure 8.8 as 198715), extemal contributíons to the Associatíon from grants, donatíons and fundraising ventures are relatively insignificant. However, in the Hght of the Association's recent history of deficit results, they are stfll important. The steady decrease in this ratio in the later years, indicates that the Association must either obtain other sources of funds or decrease operating costs. Figure 8.8 Contributed income ratio for Guides NSW for 1986-1997 20% 15% 10% COI^OOC3>OT-CMCO'^U>CDh^ 0O0OC000(3>(3>C3>C3>(3>O>C3>C3> a>C3>0>C3>C3><3>0><3>0>C3>C3>0) 15 This apparent anomaly is due to the change of balance date of the Association in 1995 from 30 April to 31 December. This meant that there was a set of results for 1994-95 and another for 1995. For simpHcity I have adopted the convention of calling the these "two year spanning" financial periods by the year in which the financial period commenced. Hence fhe year labelled 1987 actually covers the periodl May 1987 to 30 April 1988. Chapter 8 - Finandal Performance oaae 319 8.5.2.3 Capital Financing Ratios The remaining three ratios shown in Table 8.6 all concem the income stream available to cover non-current HabiHties. Since the Association has had littie outstanding debt since the repayment of the mortgage after the sale of the property in 1988, these ratíos do not contribute materially to an analysis of the Association's current finances. However, they do indicate that the Associatíon has a significant debt-free asset base upon which to seek future extemal financing to expand its programs, if it so desired. 8.5.3 How are Financial Resources Used to Support the Mission? The two ratíos outlined in Table 8.4, analysing whether core services to its members and support services to its mission were using a growing or dwindling share of financial resources, were applied to the Guide Association for its twelve financial periods from 1986 to 1997. These results are shown in Table 8.8. These two ratios indicate the proportion of income that is spent specifically on services to members and the proportíon of income that is used to provide support services. The apparent large discrepancy between these two ratios is shown in Figure 8.9 which indicates that direct services have only consumed, at the most 40 percent of income, and have recently begun a downward trend. Chapter 8 • Finandal Performance page 320 Table 8.8 Ratios for Guides NSW for 1986-1997 that indicate how financial resources are used to support its mission YEAR MEMBERSHIP SERVICES RATIO MEMBERSHIP SUPPORT RATIO 1986 34% 59% 1987 33% 47% 1988 37% 51% 1989 28% 65% 1990 30% 79% 1991 31% 69% 1992 24% 68% 1993 28% 68% 1994 33% 75% 1995 39% 82% 1996 40% 70% 1997 36% 71% On the other hand, 1987 (when the large profit from the sale of property was recorded) is the only year in which less than 50 percent of income was spent on providing support, and that trend appears to be increasing again. There may be some argument over what is placed into each of these categories; the division here being what is spent on services that members directiy receive, as opposed to expenditure on support functions such as administration, accounting and pubHc relations. The analysis demonstrates that significantly less resources are devoted to the core activities that are directly related to the mission of the Association, than to activities that are designed merely to assist in canying out these core services. This seems to be the wrong way around for two reasons. First of all, it is inappropriate that less is Chapter 8 • Finandal Performance page 321 spent on the mission than on the "administration" of the mission. Secondly, the Association has suffered a number of deficit years this decade, although there appears to be extra slack available in support expenditure, particularly in the light of the decline in membership over those years. Figure 8.9 Membership Services and Support Ratios for Guides NSW for 1986 - 1997 -4—Membership Services Ratio » - - Membership Support Ratio C5><3)C3iC33CJ>CJ>C3> C33C3)03<3)C3>OîC3>C3)03C33C3>CJ> 8.5.4 Are Financial Resources Applied Efficiently and EfTectively to Support the Mission? Table 8.5 presented four strategic goals for effective and efficient use of financial resources and various ratios which could be used to measure the attainment of these goals. The result of applying these ratios to the Guide Association is shown in Table 8.9a and Table 8.9b. Chapter 8 - Finandal Performance page 322 8.5.4.1 Quality The ratio of girls to leaders was assumed to be an appropriate measure of quality, in that the smaller the ratio, the more time a leader would have to spend with each girl. This ratio has fallen steadily over the twelve year period implying that overall quality has improved, with leaders having more time to work with and listen to individual girls. This trend shows clearly in Figure 8.10. Figure 8.10 Girls per leader tatios for Guides NSW for 1986-1997 12 - 10 i 8 ^ 6 - 4 - 2 - cc a o 199 2 199 4 199 6 198 8 199 0 Another ratio that was considered appropriate to measure quality was the number of trainings attended by leaders. It was unnecessaiy to track the actual numbers for this because the policies for issuing and renewing warrants to leaders are strongly enforced. Leaders cannot be warranted (be put in charge of girls) until they have attended their first training, and must attend another training at least every two years in order to have their warrants renewed. Chapter 8 • Finandal Performance page 323 Table 8.9a Ratios for Guides NSW for 1986-1997 that indicate whether financial resources are appUed efBciently and effectively to support its mission (for goals of quality, customer satisfaction and retention) QUALITY CUSTOMER RETENTION SATISFACTION Girls Total Girl Leader Adult Year Per Membership Membership Membershíp Membership Leader Trends Trends Trends Trends Ratio Ratio Ratio Ratio Ratio 1986 10.0 100% 100% 100% 100% 1987 9.3 92% 93% 100% 89% 1988 9.7 80% 89% 93% 63% 1989 9.6 75% 83% 87% 60% 1990 8.8 68% 78% 88% 51% 1991 11.4 68% 79% 69% 49% 1992 8.9 69% 75% 85% 58% 1993 9.0 64% 69% 78% 53% 1994 7.3 56% 58% 80% 51% 1995 7.3 56% 58% 80% 51% 1996 6.8 52% 52% 77% 50% 1997 6.2 47% 47% 75% 49% Table 8.9b Ratios for Guides NSW for 1986-1997 that indicate whether financial resources are applied effîciently and effectively to support its mission (for goal of productivity) PRODUCTIVITY Change in gírl Cost per member Cost per girl Year membershíp ratio ratio member ratio 1986 -3% $16 $25 1987 -7% $22 $33 1988 -4% $26 $36 1989 -7% $41 $58 1990 -7% $48 $66 1991 1% $40 $54 1992 -4% $35 $50 1993 -8% $44 $63 1994 -20% $52 $77 1995 0% $39 $58 1996 -11% $47 $71 1997 -12% $50 $79 Chapter 8 • Flnancial Performanee page324 8.5.4.2 Membership Satlsfaction andRetention Membership satisfactíon is perceived to be largely related to retention of members and so there is a signifícant overlap in the ratios that are appropriate for each. Trends have been considered in relation to four subdivisionsis of membership in the Association: overall, giris, leaders and adults. Figure 8.11 Membership Trends Ratios for Guides NSW for 1986-1997 •TOTAL •QIRLS •LEADERS •ADULTS 40% 20% 0% -, P -i r CDhs.000>O-i-CJC0"^L0C0l^ 000000000>G)0>0>0>0>G>0> 0>G>0)0>0>0)00)0)0)0)0> 15 There are no actual "levels' of membership in the Guide Associatíon. Any person who has "made her promise* is considered to be a member, regardless of whether or not she is financial. Of course, this raises the issue of when do members stop being members, and the answer usually given is "never". For the purposes of this analysis, the nimibers are those of actíve members provided in annual reports. Chapter 8 • Finandal Performance page 325 The base year has been taken as 1887 and all other years expressed as an index of that year. These four trend ratios are presented graphically in Figure 8.11. Overall membership has fallen steadily from 1986 to around 50 percent in 1997. However, the various subdivisions of leadership have not all fallen at the same rate. The number of leaders has seen the least significant change of the twelve year period, decreasing steadily (apart from the dip in 1991) to an index of 75 percent. The number of adult members (which included leaders) fell sharply to 1990 and has been steady at an index around 50 percent since. The decline in girl membership has reached the same index as the adults (50 percent) but it has been much more evenly spread over the period. Figure 8.11 seems to indicate that the fall in adults has plateaued, but that the fall in girls is still occurring. What does this say about customer satisfaction and retention? It appears that the same proportion of both adults and girls have left the Movement in past twelve years. The adults left faster than the girls, but those adults that remained after the first six years, have continued as active members, apparently satisfied with where the organisation is now. Girl membership is affected by a higher tumover that adult membership, with girls being defined as between the ages of six and eighteen, while leaders are those members over Chapter 8 - Finandal Performance .,04; •* page 3^o eighteen. Thus the attrition rate for the giris is the difference between giris leaving and new members starting. Consequentiy, this decline in giri membership does not necessarily indicate lack of satisfaction of existing members nor low retention rates, but may be due to natural attrition when girls reach the age of eighteen, together with a Movement that for some reason is not attracting as many new members. 8.5.4.3 Productivity Productivity can be considered in terms of quaHty and quantity. With respect to quaHty, the Guide Association has tried to consistently present a high quaHty service. It has done this by ensuring that its leaders are weH-trained, that there is a common, weH-structured program and that there is a network of links available for help and assistance. Quality can also be viewed in relation to the number of dollars spent per member. Figure 8.12 shows that financial productivity has increased over the past twelve years, in that there is have been an increasing trend in average expenditure per girl member. The trend in costs per member (girls amd adults) shows the same re ative increase, indicating that the expenditure per adult member has remained constant. This additional spending on girls, as opposed to adults is consistent with Chapter 8 - Finandal Performance page 327 the mission of the Guide Association being directed towards "girls and young women". Figure 8.12 Financial productivity for Guides NSW for 1986-1997 A— CORT PFR MFMRFP R/f^"^ -- m ' -COST PER GIRL RATIO $90 - $80 - $70 , • . '• • 1 1 $60 . .-•. •' 1 $50 - •' '•-•«-' - •' - $40 . ' $30 - .-•• -*^ 1 $20 ! 1* ^ $10 - $0 - 1 1 : —'1 \ 1 066 1 (í T- Figure 8.13 Annual change in girl membership for Guides NSW for 1986-1997 CDr^oooO'í-cMcO'^incoN. 0OCOCO0OC3îO>O) Quantity can also be considered as a measure of productivity. However, if the number of members serviced is taken as an appropriate measure, ratio analysis demonstrates that the Association is servicing considerably less members than it was twelve years ago (see Figure 8.13). 8.5.5 Conclusion Measurement of financial performance by ratio analysis helps identiíy organisational strengths and weaknesses by detecting financial anomalies and focusing attention on issues of organisational importance. Given that the mission of a nonprofit organisation is the reason its existence, it is appropriate to focus on financial resources in their relationship to mission. The application of this financial performance model to the Guide Association indicates a number of issues which need to be grasped. However, these issues are not purely financial, but bear direct relationships to the culture and traditions of the organisation. 1. Are fînancial resources to support the mission? This is veiy much a "yes" and "no" answer. By considering the primary reserve in isolation, it appears as if the Association is in a strong position for capital or program expansion. The Chapter 8 - Finandal Performance paae 329 value of tíie viability ratio is greater than 1 and so tíie Association is financially healthy in that it can meet all its debts. However, tiie viability ratio is declining, indicating an erosion of assets as a result of recurring deficits. The Association has a large asset base, which it is not using to generate intergenerational equity. Thus, if the Association were to wish to expand, it would need to seU a fixed asset, because, given its current financial situation, it would be unable to service a loan. Selling a fixed asset, such as a Guiding property, and then investing the proceeds in capital or program expansion, wiH be a way of generating additional revenue without continually increasing membership fees, a method which no longer covers the operating expenses. At the moment, the financial resources of the Association are sufficient to support its mission. However, the limited flexibility of these resources will eventually reduce their sufficiency as well. Chapter 8 - Finandal Performance page 330 2. What financial resources are available to support the mission? The Association relies heavily on income from self-generated, member-based activities. Yet, the decline in membership has been responsible for the reduction in the income from membership subscription, trading, surpluses from events and Guide fundraising activities. At the same time, other income sources are also falling, with the result that the Association is having difficulty in covering its operating expenses. 3. How are financial resources used to support mission? It is therefore appropriate to consider to what extent income is being spent on direct membership services, such as training, program, camping properties, region grants and annual reports, as opposed to what is spent on supporting these services. Support includes such items as office administration, computing costs, accounting costs, publicity, insurance and stationery costs for items that never get into the hands of the members. A comparison of membership support and membership service ratios indicates that twice as much is being spent indirectly, mainly as administrative costs, to what is being spent directly on Guiding programs and activities. The ratio of support costs Chapter 8 - Finandal Performance page 331 is increasing, even at a time when membership is in decline, and has been for a number of years. 4. Are the financial resources applied effîciently and effectively to support the mission? The decrease in the number of girls to leaders may indicate higher quality delivery because of smaller group sizes. However, the very fact that girls are leaving at a steady rate, and that the numbers of leaders and other adults members are remaining relatively static indicates that the mission may not actually be supported - in that the Association is appealing more to older women rather than to "girls and young women" as expressed in its mission statement. DoIIars spent per member have increased more than threefold over the last twelve years - a figure in excess of inflationaiy trends. It is difficult to understand any justification for such a rapid increase in costs per member. It is certainly unHkely that members today are being serviced with activities and programs that are three times better than they were twelve years ago. To continue as a viable organisation into the future, the Association will have to deal with some difficult issues, issues that may very well move people out of their comfort zones. The Association needs to Chapter 8 - Finandál Performance page 332 consider Cohen (1999)'s advice on how to say goodbye to services, programs and assets that have outlived their time because it's vitally important in a changing environment, as your customer's or clients' needs change, that you adapt your services to meet their current and future needs. (Cohen, 1999, p. 9) The financial difficulties and dwindling membership that are eating away at the edges remind me of a recent case of a 16 year old friend of my son's who contracted meningococal septicaemia. As a result, she had both her feet and all her fingers amputated. She wrote a letter in the local paper at the end of last year, about a year after the amputations, and the thing she stressed was that she had to focus on what she could do, not what she had lost, and that by looking forward, she was able to enjoy life again. For the Guide Association it may also be appropriate not to look ongingly back at the past, and continue to generate the expenses related to these past glories, but rather, to look forward, to look to where it can go, and to go there. Baden-PoweU was a man of adventure - he was not one who would sit back and rest on his laurels. Let Guides NSW emulate his example. CHAPTER 9 CONCLUSION: WHERE TO FROM HERE? or Pulling Up Stumps 9.1 The End of Piay not the End of the Game In cricket, the stumps are pulled up at the end of the game. But they are also pulled up at the end of each day's play and replaced the next day. Hence the end of play may not be the end of the game. Similarly, the end of this thesis need not be the end of this game. The thesis may end, but play is to be continued tomorrow - but with different teams, different captains and at different locations. 9.2 The Thesis Ends This thesis has been concemed with the development of accounting systems in a nonprofit organisation. It has addressed various historical, cultural and social issues that have influenced the emergence and development of accounting, together with an understanding of how such systems became involved in other aspects of organisational life. Chapter 9 - Conclusion page 334 This thesis had two beginnings - the introduction to the ethnography and the prologue to the fîeldwork.i'^ The prologue (Chapter 3) told of the identification of the phenomena to be investigated. The introduction (Chapter 1) told of how the investigation of these phenomena was conducted. The two phenomena that I identified were the organisational attitude to financial matters and the dichotomy between short term and long term financial management. As organisational phenomena, it was appropriate to investigate them in their social context (Dent, 1991; Laughlin, 1988; Roberts and Scapens, 1985). Although contemporary phenomena, their roots were deeply entrenched in history. Thus, this case study involved both fieldwork in terms of participant observation and engagement and also historical analysis of archival records and artifacts. Chapter 1 put forward the need for the study of accounting in context and the centrality of organisational culture, structure, and history to the development of accounting practices. The chapter also suggested that a nonprofit organisation was a fruitful arena in which to 17 I have used Van Maanen's definition tiiat "an etimography is a written representation of a culture (or selected aspects of a culture)" whereas fieldwork is the method of ethnology (1988, p.l). Chapter 9 • Conclusion p^ge 335 investigate such practices, because mission rather than profit was the central motive of such organisations. The organisation to be studied was identified as Guides NSW and the four themes that flow through this thesis (and the organisation) were introduced: accounting in context, the sacred-secular conflict, the embedded organisational model and the sporting metaphor. Chapter 2 discussed the quaHtative research themes relevant to this thesis and the resulting theory-method linkage approach that was adopted. Chapter 3 told the story of the beginning of the research and the identification of the phenomena to be investigated. Chapter 4 reviewed the history of the organisation and its founder, the centrality of its mission, its self-generating nature, and the lack of emphasis on financial affairs. Chapters 5 and 6 presented a microview of the organisation, its financial practices and the influences that shaped its culture. Chapters 7 and 8 discussed and applied two financial models to the organisation, one in relation to financial vulnerability and the other in relation to financial performance. Chapter 9 now draws this work to a conclusion and foreshadows the outcomes of it. Chapter 9 - Conchision page 336 9.3 The Game Contínues ... 9.3.1 For the social construction of knowledge This thesis has added to the knowledge of accounting in the nonprofit sector. It has added to the limited extant knowledge of management control in nonprofit organisations (Booth, 1996; Harris, 1990; Milofsky, 1988). It has also contributed to the research impact of accounting on the histoiy of nonprofît organisations (Herzlinger and Nitterhouse, 1995; Lyons, 1998; McCarthy, 1998). The thesis has taken two accounting theories and extended their use in the nonprofit sector. Tuckman and Chang's (1991) model of financial vulnerability has been extended so that it could be applied to a single organisation by considering changes in financial position over time, as wefl as at a single point in time. Turk et al's (1995) model was modified and extended to make it applicable to a member- based voluntaiy organisation as opposed to merely a higher education institution. This extension also provides the framework for the use of the model with other types of nonprofit organisations. This thesis has also examined aspects of the relationship between organisational culture, organisational structure and financial control in a nonprofit organisation. It has suggested tiiat tíie influence of accounting is intertwined in the whole organisational culture and Chapter 9 - Conchision page 337 structure, and cannot be seen in isolation as a control system. This has specific consequences on the caU for increased accountabiHty by nonprofit organisations (Industry Commission, 1995; Kenya, 1996; MANO, 1999, Ruiz, 1999). If all that is meant is the provision of financial reports, the present accounting systems may suffice. But, if accountability means responsibility for day to day operations, adoption of a professional business approach, financial activities that are consistent with an organisation's mission, long term planning and progress reports, the accounting system may prove inadequate. It is necessary for the managers of the organisation, whether volunteers or employees, to work together to define, and redefine, the various objectives of the organisation, to devise plans for their achievement and to develop measures by which success can be indicated. The Guide Association is not alone in its struggle for financial accountability, financial effectiveness and financial viability. Accountability has always been perceived as being important - all believe it is necessaiy. Implementing it is another matter. A previous Treasurer commented that This a nonprofit organisation. The people are "nice". I could even say they suffer from "terminal niceness". So how can they rebuke a volunteer for stepping over the line? It is excused by cries of "but they didn't know any better" or "it didn't really matter; even though the spending was unauthorised, they made a profit", or "they have done so much for the organisation, we will have to reimburse them Chapter 9 - Conctusion page 338 for what they have spent even though they bought it without approval". (Recorded at a Guide planning conference, May 1998) The embedded organisational model that permeates this whole thesis can be appHed readily to other nonprofit organisations. It would appear that an accounting system can operate in an organisation and yet not function as a control mechanism or as a mechanism to provide accountability. In an organisation that values informal relationships, voluntaiy participation and "niceness", the idea of accountability is somewhat alien. While the need for accountability is acknowledged, the implementation is a different matter. It may be necessary to change the organisation's culture so that accountability is incorporated as a positive value. It may be important to introduce some form of professionad, rather than amateur management. Thus, the use of accounting as a control mechanism is not merely a technical system, but a socio-technical system "because it involves change in the social or cultural system which interacts with the accounting technology" (Flamholtz, 1983, p. 166). This thesis has also hinted at other issues which influence the culture of the organisation and thus the accounting control system - issues such as coIoniaHsm, gender and social status. While these issues are not central in this research, they have been mentioned briefly because their contribution to histoiy cannot be ignored. Chapter 9 • Conchision page 339 9.3.2 For Guides NSW The Girl Guides Association of New South Wales has existed for almost 80 years and has been successful in achieving its mission of service and character development. Yet, it has had a repeated history of fînancial crisis, followed by financial revival. What has influenced the organisation's lack of formal organisational control, and in particular the failure to use accounting information to facilitate its decision making? This can be explained by its mission, its history and its culture. The organisation came about to plan events, design programs, train leaders and service its members, and it has been successful at doing this. It was established without a professional management orientation, and thus long term planning has never been a part of its culture. There was no budget process until recent years, the only accounting being a cash based receipts and expenditure comparison. Liquidity was defined in terms of ability to meet this month's expenses. If they could not be met, they needed to be prioritised and paid as money became available. If expenses increased, then they would have to be met. The culture of the organisation demanded that the mission not be subjugated to the finances. Chapter 9 - Conclusion ^ ,^- page 340 Financial matters have been put to tíie forefront at times when the mission was threatened. This is consistent with Meyer's (1994) conclusion that accountíng arises in partially rationalized (or partially bureaucratized) settings and that when [an] organization is relatively complete, controlling its own definition of reality, accounting becomes less necessary, and sometimes intrusive. ... We thus expect to find accountants in greater numbers where [an] organization is not self-sufficient. (Meyer, 1994, p. 129) Consequently, my request for access into the organisation to investigate the development of its financial systems was met enthusiastically, because it was anticipated that what I found might be of help to the organisation in its current crisis. I trust that this thesis will serve that end. As Treasurer over the past three years, I have been tiying to steer the Executive Committee along the path of financial responsibility, but now realise that, for all my various involvements with Association, I lacked an understanding of the barrier that organisational culture posed, or even the strength of that culture. I lacked the perception of how deep rooted it was, how entangled in the veiy beginnings of the organisation. I have been frustrated because the same ground seems to be covered and nothing seems to happen. Studying the histoiy of Chapter 9 - Conclusion page 341 the organisation has shown me that I am not the fîrst to feel confusion - it seems many before me have sought to stress the business side of the organisation and think that they can help by transposing their knowledge of fînancial and strategic correctness from the business world onto the Guide Association. Our problem has been that we have expected the organisation to act rationally, along defîned business principles. But the hold of the mission, the sacred, is very strong. It is only at times when this mission is threatened that the organisation can rationalise the need to consider the fînances, the secular. The role of leaders, both past and present, have had signifîcant influence on organisational culture, the expression of mission and the emphasis placed upon fînancial management. Management of the Executive Committee changed at the end of last year, as it does every fîve years. I would like to share some of the advice of Mary Rose Main, the National Executive Director of the Girl Scouts of the USA with those new leaders. Main believes that The top leadership of an organization absolutely must be committed to diversity. There is need to evaluate all structures, systems, and procedures and to see where there are barriers to populations that are different from the traditional population you've been serving. And you have to examine all parts of your culture. What are your traditions, for example? You also have to spend a lot of time listening to all populations and appreciating their differences, recognizing them, making them known, and celebrating them. Chapter 9 - Conclusion page 342 From the veiy beginning, Girl Scouting [and Girl Guiding] has been open to all girls eveiywhere. But as society is changing and demographics are shifting, we need to work at becoming more pluralistic all the time. (Boyers, 1995, p. 44-45) So where should the Association go from here? First of all, take Main's advice and re-evaluate. Consider all activities, all assets in the light of the mission, not in isolation, but hoHsticalIy. Secondly, rediscover the spirit of adventure and be prepared to push and expand boundaries. Accept the challenge offered by change, by diversity, and demonstrate and model to its members the type of people it wants them to be. More specifîcally, the Association would be well advised to consider ways which it can derive additional revenue. The financial analyses of Chapters 7 and 8, showed that most income is self-generated, that is, generated by the members, and yet membership is in decline. Even if this decline were now halted, the self-generated income has been less than the operating expenditure for the last five years. The analyses also showed that the Association was in a strong position as far as the size of its asset base, but a weak position with regard to the income generated by this asset base. To hold these assets without generating income, is to reduce intergenerational equity. The Guides of yesterday are paying for the Guides of today, and one day it might be the Guides of tomorrow having to do so. To Chapter 9 - Conclusion page 343 preserve intergenerational equity, to derive additional income, the Association should put its assets to work. One such course is to rationalise its assets. Which ones can be sold so that others can be developed? Can the same experiences be gained without owning particular properties, but by renting from outsiders and not having the large overheads? Can a property be developed so that it wifl not only be self-funding but also revenue- generating for the Association? Could I urge the Executive Committee to dream? Dream of what Glengariy could be, how it could be developed, what resources it would take. Then dream again of Tara, how it could be developed, what resources it would take. Then compare the dreams. Analyse them in terms of the Association's mission. Examine them in terms of what is possible realistically. Then be bold, be insightful. Draw up the plans. Make the change. 9.3.3 For the researcher The processes of researching and writing this thesis have been ones of reflexivity and self-discovery. When I started the fieldwork, I did not know where it would lead. I expected it to uncover information about the Association, but I certainly did not expect to see how often histoiy repeated itself, how embedded were culture and Chapter 9 - Conclusion page 344 organisational attitudes, and least of aU, how my own methodological understanding would be challenged and expanded. I have discovered much about myself that I did not know. 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