2024 Edition

Financial Management Introduction

Purpose

The agency's ability to achieve its mission is based on sound financial management practices that ensure efficient, data-informed use of its resources in accord with applicable legal and regulatory requirements.

Introduction

Sound financial management is the foundation for providing high quality services and achieving the agency’s mission and mandates. Agency leadership must foster a culture of accountability in all areas of practice, including the management of the agency’s finances, while acknowledging that financial capacity and budgets may be determined by external entities. Accountability is established through clearly defined lines of authority and responsibility, adherence to internal control responsibilities, and by making the strategic connection between efficient and effective use of agency resources and improved outcomes. Effective financial management ensures that resources are being directed, in accordance with state mandates, to those programs or interventions that have the strongest impact on individuals and families served.

Note: Please see PA-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 PA-FIN Crosswalk.

2024 Edition

Financial Management (PA-FIN) 1: Internal Control Environment

An internal control system promotes sound financial practices and fosters a culture of accountability at all levels of the agency including mechanisms for:
  1. review and approval by agency leadership;
  2. conducting and/or participating in internal and external risk assessments, as applicable;
  3. management review by more than one individual;
  4. ensuring that management directives are carried out;
  5. prevention of error, mismanagement, or fraud; 
  6. safeguarding and verification of assets; and 
  7. conducting ongoing monitoring to assess the effectiveness of internal control procedures and policies.
NA The agency does not have a finance department.
Related Standards:

Example: Internal controls include "preventive" controls that address the question, "What could go wrong?" which are often part of an agency's risk prevention and management activities. Internal controls also include "detective" controls which address the question, "What did go wrong?" which can be incorporated into an agency's performance and quality improvement activities.

1
Full Implementation, Outstanding Performance
A rating of (1) indicates that the agency's practices fully meet the standard and reflect a high level of capacity.  
  • All elements or requirements outlined in the standard are evident in practice, with rare or no exceptions: exceptions do not impact service quality or agency performance. 
2
Substantial Implementation, Good Performance
A rating of (2) indicates that an agency's infrastructure and practices are basically sound but there is room for improvement.
  • The majority of the standards requirements have been met and the basic framework required by the standard has been implemented. 
  • Minor inconsistencies and not yet fully developed practices are noted; however, these do not significantly impact service quality or agency performance.
3

Partial Implementation, Concerning Performance
A rating of (3) indicates that the agency's observed infrastructure and/or practices require significant improvement.  

  • The agency has not implemented the basic framework of the standard but instead has in place only part of this framework.  
  • Omissions or exceptions to the practices outlined in the standard occur regularly, or practices are implemented in a cursory or haphazard manner.  
  • Service quality or agency functioning may be compromised.  
  • Capacity is at a basic level.
4
Unsatisfactory Implementation or Performance
A rating of (4) indicates that implementation of the standard is minimal or there is no evidence of implementation at all.  
  • The agency’s observed administration and management infrastructure and practices are weak or non-existent; or show signs of neglect, stagnation, or deterioration.
2024 Edition

Financial Management (PA-FIN) 2: Financial Risk Assessment

Agency leadership evaluates financial risks and takes steps to mitigate those risks.
NA State Administered Agency Regional Office

NA The agency does not have a finance department.
 
Related Standards:

1
Full Implementation, Outstanding Performance
A rating of (1) indicates that the agency's practices fully meet the standard and reflect a high level of capacity.  
  • All elements or requirements outlined in the standard are evident in practice, with rare or no exceptions: exceptions do not impact service quality or agency performance. 
2
Substantial Implementation, Good Performance
A rating of (2) indicates that an agency's infrastructure and practices are basically sound but there is room for improvement.
  • The majority of the standards requirements have been met and the basic framework required by the standard has been implemented. 
  • Minor inconsistencies and not yet fully developed practices are noted; however, these do not significantly impact service quality or agency performance.
3

Partial Implementation, Concerning Performance
A rating of (3) indicates that the agency's observed infrastructure and/or practices require significant improvement.  

  • The agency has not implemented the basic framework of the standard but instead has in place only part of this framework.  
  • Omissions or exceptions to the practices outlined in the standard occur regularly, or practices are implemented in a cursory or haphazard manner.  
  • Service quality or agency functioning may be compromised.  
  • Capacity is at a basic level.
4
Unsatisfactory Implementation or Performance
A rating of (4) indicates that implementation of the standard is minimal or there is no evidence of implementation at all.  
  • The agency’s observed administration and management infrastructure and practices are weak or non-existent; or show signs of neglect, stagnation, or deterioration.
 

PA-FIN 2.01

The agency conducts, or participates in, an evaluation of financial risks in relation to its financial capacities and the resources needed to provide services that is:
  1. incorporated into the agency’s annual risk prevention and management assessment; and 
  2. informs the agency’s long-term planning and annual short-term planning processes.
 

PA-FIN 2.02

The agency plans for unexpected resource disruptions by developing a business continuity plan.
Interpretation: Resource disruptions include those events that are likely to lead to unexpected expenses or cuts, such as a natural or man-made disaster, recession, or a significant shift in sociopolitical climate. Examples of ways to demonstrate standard implementation include, but are not limited to: rainy day funds, establishing risk sharing mechanisms, or developing recession budgets. 
2024 Edition

Financial Management (PA-FIN) 3: Financial Planning

Financial planning is data-driven, agency-wide, and involves key stakeholders.

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Examples: Some agencies may develop or utilize a financial planning model to provide a framework for:
  1. clarifying the linkage between strategic planning and resource allocation decisions;
  2. resource allocation that is outcomes-oriented, consumer-centric, and data-driven; and 
  3. supporting and promoting long-term financial sustainability.

1
Full Implementation, Outstanding Performance
A rating of (1) indicates that the agency's practices fully meet the standard and reflect a high level of capacity.  
  • All elements or requirements outlined in the standard are evident in practice, with rare or no exceptions: exceptions do not impact service quality or agency performance. 
2
Substantial Implementation, Good Performance
A rating of (2) indicates that an agency's infrastructure and practices are basically sound but there is room for improvement.
  • The majority of the standards requirements have been met and the basic framework required by the standard has been implemented. 
  • Minor inconsistencies and not yet fully developed practices are noted; however, these do not significantly impact service quality or agency performance.
3

Partial Implementation, Concerning Performance
A rating of (3) indicates that the agency's observed infrastructure and/or practices require significant improvement.  

  • The agency has not implemented the basic framework of the standard but instead has in place only part of this framework.  
  • Omissions or exceptions to the practices outlined in the standard occur regularly, or practices are implemented in a cursory or haphazard manner.  
  • Service quality or agency functioning may be compromised.  
  • Capacity is at a basic level.
4
Unsatisfactory Implementation or Performance
A rating of (4) indicates that implementation of the standard is minimal or there is no evidence of implementation at all.  
  • The agency’s observed administration and management infrastructure and practices are weak or non-existent; or show signs of neglect, stagnation, or deterioration.
 
Fundamental Practice

PA-FIN 3.01

Budget planning is a collaboration between the agency’s administrative, program, field, and budget personnel and is based on:
  1. performance improvement and outcomes data; 
  2. the agency’s mission, and strategic priorities; 
  3. direct and indirect operating expenditures; and 
  4. anticipated revenue for the fiscal year.

Examples: Performance improvement and outcomes data in this context refers to the use of program and client outcomes data in planning and budgeting decisions. Such data may be used, for example, to direct available resources toward programs or interventions that have the strongest impact on individuals and families served.
 
Fundamental Practice

PA-FIN 3.02

Financial information is routinely analyzed and includes:
  1. a monthly and annual analysis of financial performance against budget projection with budget-to-actual variance analyses performed on interim financial statements of activities; and
  2. service revenues and actual service delivery costs.
NA State-administered agency regional office
 

PA-FIN 3.03

The agency conducts cost analyses of contracted services at established intervals and the information is used to analyze operational effectiveness and efficiency and to monitor trends, current experiences, and changes in costs. 
NA The agency is a network management entity.

NA State-administered agency regional office

NA Contracting is managed by an external department.
 
 

PA-FIN 3.04

When necessary, agency leadership advocates for increased funding as part of the budget planning process by:
  1. articulating resource needs as they relate to improved outcomes for individuals and families; and
  2. establishing methods to track and report on annual progress towards achieving long-term goals.
NA State-administered agency regional office
 

Examples: For child and family services agencies, implementation of PA-FIN 3.04 can include tracking and reporting out on the agency's progress toward achieving the outcomes identified in the Child and Family Services Review (CFSR) and the funding that will be required to meet related performance improvement goals.
 
2024 Edition

Financial Management (PA-FIN) 4: Financial Management

Positive financial outcomes are achieved through a financial management system that advances the agency’s strategic priorities and receives, disburses, and accounts for funds in accordance with sound financial practices.
NA The agency does not have a finance department.

1
Full Implementation, Outstanding Performance
A rating of (1) indicates that the agency's practices fully meet the standard and reflect a high level of capacity.  
  • All elements or requirements outlined in the standard are evident in practice, with rare or no exceptions: exceptions do not impact service quality or agency performance. 
2
Substantial Implementation, Good Performance
A rating of (2) indicates that an agency's infrastructure and practices are basically sound but there is room for improvement.
  • The majority of the standards requirements have been met and the basic framework required by the standard has been implemented. 
  • Minor inconsistencies and not yet fully developed practices are noted; however, these do not significantly impact service quality or agency performance.
3

Partial Implementation, Concerning Performance
A rating of (3) indicates that the agency's observed infrastructure and/or practices require significant improvement.  

  • The agency has not implemented the basic framework of the standard but instead has in place only part of this framework.  
  • Omissions or exceptions to the practices outlined in the standard occur regularly, or practices are implemented in a cursory or haphazard manner.  
  • Service quality or agency functioning may be compromised.  
  • Capacity is at a basic level.
4
Unsatisfactory Implementation or Performance
A rating of (4) indicates that implementation of the standard is minimal or there is no evidence of implementation at all.  
  • The agency’s observed administration and management infrastructure and practices are weak or non-existent; or show signs of neglect, stagnation, or deterioration.
 

PA-FIN 4.01

The agency maximizes federal funding opportunities. 
Interpretation: The agency’s ability to maximize federal funding may be limited by the state’s infrastructure. For example, county-administered agencies may have a limited ability to pursue funding avenues without the support of the state. The agency should be prepared to speak to the efforts they have made in this area within the context of the state-wide approach. 
 
NA State-administered agency regional office

Examples: Ways to maximize federal funding can include, but are not limited to:
  1. centralized, ongoing review of eligibility requirements to ensure policies are correctly applied across jurisdictions;
  2. tracking and responding in a timely manner to changes in federal ruling or regulations;
  3. exploring how federal funds can be used to reimburse purchased services;
  4. conducting time studies with staff and contracted providers so eligible activities are reimbursed at the appropriate rate;
  5. using training and supervision to educate staff on critical terminology and processes and continuing to monitor that they are consistently applied; 
  6. incorporating monitoring of federal reimbursements/claims into the agency's overall performance and quality improvement program; and
  7. partnering with leaders across the jurisdiction to explore the availability of alternative federal dollars that may fall outside traditional funding sources. 
 

PA-FIN 4.02

The agency seeks to conserve its fiscal resources by:
  1. taking advantage of tax exemptions permitted for public agencies, where applicable;
  2. coordinating the purchase of goods or services among internal divisions; and
  3. involving staff and other stakeholders in identifying creative ways to use funds effectively and efficiently. 
 

PA-FIN 4.03

The agency’s finance department:
  1. maintains all financial records required to support federal claims; and
  2. complies with all applicable court orders or mandates.
 
Fundamental Practice

PA-FIN 4.04

An agency that assumes fiduciary responsibility for client funds or disburses client funds: 
  1. segregates client funds from other agency funds;
  2. complies with applicable legislative, regulatory, judicial, and governmental requirements; and
  3. plans for meeting the needs of clients in the event of unexpected resource disruptions impacting client funds.
Related Standards:

Interpretation: Fiduciary responsibility refers to an individual’s or agency’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.

Examples: Unexpected resource disruptions that could impact client funds include federal government shutdown or other events that temporarily suspend the agency’s receipt of client funds. 


Examples: Examples of the types of funds that agencies may assume responsibility for or disburse to clients include:

  1. allowances for children and youth in out-of-home care;
  2. funds under the control of the agency in guardianship cases; and
  3. social security or SSI benefits when the agency serves as representative payee.
 

PA-FIN 4.05

The agency’s finance department trains personnel to use the accounting system and adapt to changes in the system as they occur. 
 

PA-FIN 4.06

Payroll practices include:
  1. documentation of changes in time and overtime records; and
  2. separation of payroll funds.
NA State Administered Agency Regional Office
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