Standards for private organizations

2020 Edition

Financial Management (FIN) 4: Financial Planning

Planning for the current fiscal cycle is data-driven, organization-wide, and involves key stakeholders.
2020 Edition

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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.
1
The organization's practices fully meet the standard, as indicated by full implementation of the practices outlined in the FIN 4 Practice standards.
2
Practices are basically sound but there is room for improvement, as noted in the ratings for the FIN 4 Practice standards.
3
Practice requires significant improvement, as noted in the ratings for the FIN 4 Practice standards.
4
Implementation of the standard is minimal or there is no evidence of implementation at all, as noted in the ratings for the FIN 4 Practice standards.
Self-Study EvidenceOn-Site EvidenceOn-Site Activities
  • Budget planning procedures
  • Annual Budget
  • Most recent executive report on organization finances
  • Sample of monthly analysis of financial performance
  • Operating reserves policy
  • Governing body minutes reflecting budget planning and review of financial reports for the previous 12 months
  • Interviews may include:
    1. Governing body
    2. CEO
    3. CFO

 
Fundamental Practice

FIN 4.01

The annual planning and budget cycle includes participation of management, the governing body, program personnel, and other relevant stakeholders and is based on:
  1. the organization’s mission and strategic priorities;
  2. performance improvement and outcomes data;
  3. direct and indirect operating expenditures;
  4. contractual requirements;
  5. changing costs and conditions; and
  6. anticipated revenue for the program 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.
1
The organization's practices reflect full implementation of the standard.
2
Practices are basically sound but there is room for improvement; e.g.,
  • 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.
3
Practice requires significant improvement; e.g.,
  • 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.
4
Implementation of the standard is minimal or there is no evidence of implementation at all.

 

FIN 4.02

The chief executive officer provides a quarterly executive report on the organization's finances to the governing body that includes:
  1. current financial performance and any anticipated problems;
  2. shifting strategic priorities and their financial implications;
  3. a review of budget projections and areas of risk; and
  4. discussion of other financial matters, as necessary.
1
The organization's practices reflect full implementation of the standard.
2
Practices are basically sound but there is room for improvement; e.g.,
  • Element (a) or (b) is not fully addressed.
3
Practice requires significant improvement; e.g.,
  • Element (a) or (b) is not addressed at all; or
  • Reports are provided less than quarterly.
4
Implementation of the standard is minimal or there is no evidence of implementation at all.

 
Fundamental Practice

FIN 4.03

Financial information is routinely analyzed and the information 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;
  2. cash reserves in alignment with an operating reserves policy;
  3. service revenues and actual service delivery costs; and
  4. an annual inventory of significant assets, including securities.
1
The organization's practices reflect full implementation of the standard.
2
Practices are basically sound but there is room for improvement; e.g.,
  • 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.
3
Practice requires significant improvement; e.g.,
  • 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.
4
Implementation of the standard is minimal or there is no evidence of implementation at all; e.g.,
  • The organization makes no attempt to either keep adequate service revenue information or to analyze it.