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Financial Management Introduction
Purpose
The organization's ability to achieve its mission is based on sound financial management practices that ensure efficient, data-informed use of its resources.Introduction
Note:COA’s Financial Management standards do not apply to for-profit organizations. For-profit organizations see COA’s Administration and Financial Management (AFM) standards.
Note: Please see the FIN Reference List for the research that informed the development of these standards.
Note: For information about changes made in the 2020 Edition, please see FIN Crosswalk.
Financial Management (FIN) 1: Governing Body Financial Responsibilities
- approves the annual budget and any revisions to the budget;
- reviews quarterly and annual financial statements/summaries provided by management;
- reviews accounting policies and procedures;
- reviews recommendations of the organization’s auditors, and management's response to the recommendations;
- annually evaluates the executive director’s management of the organization’s financial affairs; and
- reviews and approves the IRS Form 990.
- One of the elements is not fully addressed.
- Two elements are not fully addressed; or
- One element is not addressed at all.
- Three or more elements are not fully addressed;
- Or at least two elements are not addressed at all.
Financial Management (FIN) 2: Internal Control Environment
- conducting ongoing monitoring of the effectiveness of internal control policies and procedures;
- management review by more than one individual;
- assuring that management directives are carried out;
- prevention of error, mismanagement, or fraud;
- safeguarding and verification of assets; and
- segregation of duties to the extent possible.
- One of the elements are not fully addressed.
- Two elements are not fully addressed;
- One element is not addressed at all.
- Fraudulent practices or serious financial mismanagement have occurred, and problems have not been remediated; or
- Three or more elements are not fully addressed; or
- Two elements are not addressed at all.
Financial Management (FIN) 3: Revenue and Investments
FIN 3.01
- The organization makes active efforts to diversify or strengthen resources but still relies primarily on one or two major funding sources.
- Minimal efforts have been made to expand, diversify, or strengthen the organization's resource base.
- The organization has no “fallback” position and has made little or no effort to protect itself from the consequences of dependence on a single source of revenue.
FIN 3.02
- follows, and biennially reviews, an investment policy that outlines acceptable levels of risk, criteria for contracting with investment advisors or firms, and protocols for making investment decisions;
- oversees and reviews both the investment of funds and the management, purchase, or sale of real estate, securities, and other assets;
- ensures practices conform to applicable legal and regulatory requirements; and
- reports the status of investments and investment recommendations to the governing body.
- Investment policy was last reviewed and/or updated between two and three years ago.
- The investment policy has not been reviewed or updated within the last three years.
- The governing body plays no role in investment oversight; or
- There is no investment policy.
Financial Management (FIN) 4: Financial Planning
FIN 4.01
- the organization’s mission and strategic priorities;
- performance improvement and outcomes data;
- direct and indirect operating expenditures;
- contractual requirements;
- changing costs and conditions; and
- anticipated revenue for the program year.
- Relevant parties participate in budget planning that considers strategic priorities, a realistic appraisal of funding, and costs, but the process could be made more comprehensive or changing conditions could be better addressed.
- The budget planning process is not comprehensive or formalized in one of the standard's elements; or
- Either the governing body or management does not participate; or
- There is no documentation of review by either the governing body or management team.
FIN 4.02
- current financial performance and any anticipated problems;
- shifting strategic priorities and their financial implications;
- a review of budget projections and areas of risk; and
- discussion of other financial matters, as necessary.
- Element (a) or (b) is not fully addressed.
- Element (a) or (b) is not addressed at all; or
- Reports are provided less than quarterly.
FIN 4.03
- a monthly and annual analysis of financial performance against budget projection with budget-to-actual variance analyses performed on interim financial statements of activities;
- cash reserves in alignment with an operating reserves policy;
- service revenues and actual service delivery costs; and
- an annual inventory of significant assets, including securities.
- The organization routinely analyzes financial information but is not always stringent about comparing it with data about actual service delivery costs; or
- Financial analyses are conducted at least quarterly and annually.
- Analysis of financial performance is not performed at least quarterly; or
- An annual analysis is not conducted; or
- The organization does not analyze service revenue information and service delivery costs.
- The organization makes no attempt to either keep adequate service revenue information or to analyze it.
Financial Management (FIN) 5: Financial Accountability
An audit provides the highest level of assurance on an organization's financial statements. An audit provides assurance that an organization's financial statements are free of material misstatement and are fairly presented based upon the application of generally accepted accounting principles. An audit includes:
- confirmation with outside parties;
- testing selected transactions by examining supporting documents;
- completing physical inspections and observations; and
- considering and evaluating the internal control system of the organization.
A compilation provides no assurance on an organization's financial statements and does not meet the requirements of the standard.
Organizations seeking reaccreditation have completed audits or reviews of financial statements for each intervening year since their last accreditation.
- The organization undergoing reaccreditation completed an audit or review of financial statements for the most recent auditable fiscal year; however, it did not conduct one for any or all the intervening years since their last accreditation; or
- The organization undergoing accreditation for the first time completed an audit or review of financial statements in the most recent auditable year; or
- The organization completed the audit or review; however, it was not completed within eight months of the end of the fiscal year, but the organization implemented procedures to ensure timely completion for future audits.
- The audit or review for the most recent auditable year is scheduled but has not been completed; or
- The most recent audit or review was completed more than eight months after the end of the fiscal year, and no plan is in place to ensure timely completion of future audits.
- An audit or review for the most recent auditable year has not been completed nor has one been scheduled.
Financial Management (FIN) 6: Financial Management System
Currently viewing: FINANCIAL MANAGEMENT SYSTEM
VIEW THE STANDARDS
FIN 6.01
- timely reconciliation of the bank statement and subsidiary records to the general ledger;
- up-to-date posting of cash receipts and disbursements;
- monthly updating of the general ledger; and
- review of the bank reconciliation by a person other than the person who performs the reconciliation and is not authorized to sign checks.
- The organization has an occasional, minor problem in compliance such as short delays in posting receipts and disbursements or slightly overdue updates to the general ledger.
- Bank reconciliation is not regularly reviewed by two people as required.
FIN 6.02
FIN 6.03
- a financial officer or business manager to maintain the financial accounts who has prior accounting and bookkeeping experience or an accounting degree, C.P.A. credential, or other recognized accounting/financial certification, as appropriate to the size and complexity of the organization; and
- all personnel who use the system to receive initial and ongoing training on its use.
- Ongoing staff training needs strengthening.
- The organization has a qualified financial officer, but the system is deficient in some significant regard, such as lack of training for some personnel.
FIN 6.04
Interpretation: Organizations should manage client funds in accordance with applicable rules and regulations. This may include for example:
- daily deposits of client funds;
- credit balances on accounts;
- uncashed checks;
- funds left in client deposit accounts; and
- trust account reconciliation.
Interpretation: Fiduciary responsibility refers to an individual’s or organization’s responsibility to act in good faith on behalf of another person. The fiduciary is legally or ethically trusted to make decisions in the best interest of the person and may not use their role to benefit themselves. Examples of fiduciary relationships include those of a guardian and ward or representative payee and beneficiary.
NA The organization does not assume fiduciary responsibility for, or disburse client or non-fee-for-service funds to service recipients.
Examples: Examples of the types of funds that organizations may assume responsibility for or disburse to clients include:
- allowances for children and youth in out-of-home care;
- funds under the control of the organization in guardianship cases; and
- social security or SSI benefits when the organization serves as representative payee.
- Procedures for segregation of funds or protection of client assets need strengthening.
- One of the elements is not addressed at all.
- The organization has no written procedures, and adequate protection and guidelines have not been developed to protect assets of persons served; or
- There have been instances in which funds for which the organization had a fiduciary responsibility appear to have been misused, e.g., assets or funds have been inappropriately co-mingled or disbursed inconsistently.
FIN 6.05
- has a process for verifying the accuracy of network services billed by subcontracting service providers; and
- maintains a formal mechanism through which subcontracting providers can appeal payment denials and that includes timely written notification of the resolution and an explanation of any further appeal, rights, or recourse.
NA The organization is not a network management entity and is not assigned the Network Administration (NET) standards.
NAThe network management entity does not manage contracts.
- Procedures for verifying accuracy of billing or for appealing payment denial need strengthening.
- There are reported concerns about the process for verifying billing or for appealing adverse decisions; or
- Written procedures for one of the standards elements are weak or nonexistent.
FIN 6.06
NA The organization is not a network management entity and is not assigned the Network Administration (NET) standards.
NA The network management entity does not manage contracts.
- Procedures for informing providers need strengthening.
- There are reported concerns about the process for informing providers; or
- Written procedures are weak or nonexistent.
Financial Management (FIN) 7: Fundraising
- Staff are unaware of the organization's fundraising policies and/or procedures; or
- Fundraising practices may pose a risk to the organization.
FIN 7.01
- accurately describes the purpose for which solicitations are being made;
- spends funds for the purposes they were solicited, with the exception of reasonable costs for administration of the fundraising program;
- maintains accounting segregation for restricted funds; and
- respects donor confidentiality requests, and ensures that such donors’ names are not published in publicly available documents.
- One of the elements is not fully addressed, but the organization has taken steps to strengthen practice; or
- The organization has a system of controls that may need strengthening; however, contributions are appropriately recorded and acknowledged.
- There have been some violations of donor requests for confidentiality; or
- One of the elements is not addressed at all.
- Unethical or deceptive practices regarding costs in relation to funds raised exist; or
- The organization does not accurately describe the uses of the funds; or
- Two or more of the standards' elements have not been addressed.
FIN 7.02
- Some fundraising costs are not sufficiently reviewed for full analysis.
- Some fundraising costs are not sufficiently reviewed for full analysis.