How to Write an NDIS Financial Management Policy: Governance and Compliance Requirements

What Outcome 2.5 Requires

Outcome 2.5 sits within Quality Indicator Group 2 (Provider Governance and Operational Management) of the NDIS Practice Standards Core Module. The outcome requires that the provider has sound financial management practices that ensure the financial viability of the provider and the proper use of funds.

The quality indicators require providers to demonstrate:

• Documented financial management policies and procedures are in place
• Financial records are accurate, up-to-date, and maintained in accordance with relevant legislation
• Internal financial controls prevent fraud, misuse, and misappropriation of funds
• Conflicts of interest are identified, declared, and managed
• Invoicing and claiming practices accurately reflect services delivered
• Participant money and property are safeguarded and accounted for
• Financial performance is reported to the governing body regularly

The legislative framework includes the NDIS Act 2013, the NDIS (Provider Registration and Practice Standards) Rules 2018, the Corporations Act 2001 (for company directors’ duties), and the Australian Charities and Not-for-profits Commission Act 2012 (for registered charities).

Financial Governance Framework

Your financial management policy should establish a clear governance framework that defines who has authority over financial decisions, at what level, and with what oversight.

Financial Delegation Authority

For small providers where the CEO and sole director are the same person, the policy should still specify delegation limits and include compensating controls such as external accountant review or Board advisory oversight.

Financial Reporting to Governance

Specify the financial reports that are presented to the governing body and the frequency:

• Monthly: Profit and loss statement, cash flow summary, accounts receivable and payable aging
• Quarterly: Budget vs actual variance report, financial risk review, bank reconciliation summary
• Annually: Audited financial statements (where required), annual budget, financial sustainability assessment

Conflict of Interest Management

Conflict of interest management is a critical element of Outcome 2.5. Auditors specifically check for a documented conflict of interest framework.

Types of Conflicts

• Actual conflict: A current financial, personal, or professional interest that directly conflicts with the person’s duties (e.g., a director who also owns a company that supplies goods to the provider)
• Perceived conflict: A reasonable person could perceive that a conflict exists, even if it does not actually influence decision-making (e.g., a support worker whose family member is a participant)
• Potential conflict: A situation that could develop into a conflict in the future (e.g., a board member who is considering investing in a competing service)

Conflict of Interest Register

Maintain a conflict of interest register that records:

• Name and role of the person declaring the conflict
• Date of declaration
• Nature of the conflict (actual, perceived, or potential)
• Description of the conflict
• Management strategy (e.g., recusal from relevant decisions, divestment of interest, increased oversight)
• Review date

Require all staff, management, and Board members to complete an annual conflict of interest declaration, even if they have no conflict to declare (a “nil return” is still recorded).

Participant Money Handling Procedures

SIL providers frequently handle participant money for household expenses, groceries, personal purchases, and social outings. This is one of the highest-risk areas for financial non-compliance and must be addressed in detail.

Key Principles

• Separation: Participant money must be kept separate from organisational funds at all times
• Accountability: Every transaction must be recorded in the Participant Money Register with supporting documentation (receipts)
• Authorisation: Expenditure above a specified threshold (e.g., $50) requires participant consent or, where the participant lacks capacity, nominee/guardian authorisation
• Transparency: Participants (or their nominees) must have access to their money records at all times and receive regular statements
• Reconciliation: Participant money balances must be reconciled weekly (for SIL houses) or at each service episode

Participant Money Register Fields

For comprehensive guidance on all participant-facing documentation requirements, see our guide to NDIS Practice Standards Core Module.

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Invoicing and Claiming Compliance

Accurate invoicing is both a financial management requirement (Outcome 2.5) and a regulatory obligation. The NDIS Commission investigates providers who submit inaccurate or fraudulent claims to the NDIA.

Invoicing Requirements

• Claims must accurately reflect the supports actually delivered — no claiming for services not provided
• Claims must use the correct support item numbers from the NDIS Support Catalogue
• Pricing must not exceed the NDIS Pricing Arrangements and Price Limits
• Claims must be consistent with the participant’s service agreement
• Documentation must demonstrate the link between the claim and the service delivered (progress notes, shift records, timesheets)

Documentation Trail

For every claim submitted to the NDIA, you should be able to produce:

• The participant’s service agreement showing the agreed supports
• Progress notes or shift notes for the period claimed
• Timesheet or roster records showing the worker who delivered the support
• The invoice or claim record with correct support item numbers and pricing

Our free NDIS Notes Rewriter helps support workers produce compliant progress notes that document what was delivered during each shift — creating the evidence trail that links your claims to actual service delivery.

Internal Financial Controls

Your policy must describe the internal controls that prevent financial mismanagement. Key controls include:

Segregation of Duties

No single person should control an entire financial transaction from initiation to payment. For small providers where staff numbers are limited, implement compensating controls such as external accountant review, dual bank signatories, and Board oversight of financial transactions.

Bank Account Controls

• Dual signatories for payments above a specified threshold
• Monthly bank reconciliation prepared by one person and reviewed by another
• No pre-signed cheques or blank authorisations
• Separate bank accounts for organisational funds and participant money (where applicable)

Purchasing Controls

• Purchase orders or approved requisitions for expenditure above the delegation threshold
• Three quotes for expenditure above a specified amount (e.g., $5,000)
• Verification that goods or services were received before payment is authorised
• No payments to related parties without Board awareness and documented conflict management

What Auditors Check and Common Failures

Auditor Checklist

• Financial management policy exists and is current
• Financial delegation authority is documented and followed
• Conflict of interest register is maintained with current entries
• Annual conflict of interest declarations are completed by all staff and Board members
• Participant money is kept separate from organisational funds
• Participant Money Register shows regular transactions and reconciliation
• Claims to the NDIA are supported by matching service delivery records
• Governance meeting minutes show financial performance is a standing agenda item
• Bank reconciliations are prepared and reviewed monthly
• Financial controls (segregation of duties, dual signatories) are in place and operating

Common Failures

Failure 1: No conflict of interest register. The policy mentions conflict of interest management but no register exists, or the register is empty. Auditors expect to see active declarations, even if most are nil returns.

Failure 2: Participant money not reconciled. The Participant Money Register exists but is not regularly reconciled, or there are unexplained discrepancies between the register balance and the actual money held.

Failure 3: Claims not supported by documentation. Invoices submitted to the NDIA cannot be matched to progress notes, shift records, or timesheets. This raises concerns about claiming accuracy.

Failure 4: No financial governance evidence. Governance meeting minutes do not show financial reporting or discussion. This suggests the governing body is not exercising financial oversight.

Failure 5: Single-person financial control. One person handles all financial functions (banking, invoicing, claiming, reconciliation) with no oversight or review. This lack of segregation creates both fraud risk and audit non-conformance.