Standards for private organizations

2020 Edition

Financial Management (FIN) 6: Financial Management System

Positive financial outcomes are achieved through a financial management system that receives, disburses, and accounts for funds consistent with sound financial practices.
2020 Edition

Currently viewing: FINANCIAL MANAGEMENT (FIN)

VIEW THE STANDARDS

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.
Note: See RPM 5: Security of Information for more information on appropriately limiting access to financial records to protect against destruction, modification, and unauthorized use. 
1
The organization's practices fully meet the standard, as indicated by full implementation of the practices outlined in the FIN 6 Practice standards.
2
Practices are basically sound but there is room for improvement, as noted in the ratings for the FIN 6 Practice standards.
3
Practice requires significant improvement, as noted in the ratings for the FIN 6 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 6 Practice standards.
Self-Study EvidenceOn-Site EvidenceOn-Site Activities
  • Financial management and accounting procedures
  • Job description of the person responsible for managing financial accounts
  • Resume of the person responsible for managing financial accounts
  • Procedures regarding protection of client funds and assets
  • Network procedures for verifying accuracy of services billed
  • Network procedures regarding provider appeal of payment denials
  • Network procedures for informing providers of a possible delay in payment
  • Documentation tracking staff completion of training on the accounting system 
  • Interviews may include:
    1. Governing body 
    2. CEO
    3. CFO
  • Relevant personnel
  • Observe reporting and accounting system
  • Network interviews may include:
    1. Directors of subcontracted organizations

Fundamental Practice

FIN 6.01

Accounting records are kept up-to-date and balanced on a monthly basis, as demonstrated by:
  1. timely reconciliation of the bank statement and subsidiary records to the general ledger;
  2. up-to-date posting of cash receipts and disbursements;
  3. monthly updating of the general ledger; and
  4. review of the bank reconciliation by a person other than the person who performs the reconciliation and is not authorized to sign checks.

Interpretation

 
Subsidiary records include, but are not limited to: accounts receivable, accounts payable, and fixed assets.
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 has an occasional, minor problem in compliance such as short delays in posting receipts and disbursements or slightly overdue updates to the general ledger.
3
Practice requires significant improvement; e.g.,
  • Bank reconciliation is not regularly reviewed by two people as required.
4
Implementation of the standard is minimal or there is no evidence of implementation at all.

FIN 6.02

The organization uses the accrual method of accounting, at least at the end of the year.
1
The organization's practices reflect full implementation of the standard.
2
Practices are basically sound but there is room for improvement.
3
Practice requires significant improvement.
4
Implementation of the standard is minimal or there is no evidence of implementation at all.

FIN 6.03

Oversight and management of the organization’s accounting system require:
  1. 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
  2. all personnel who use the system to receive initial and ongoing training on its use.
1
The organization's practices reflect full implementation of the standard.
2
Practices are basically sound but there is room for improvement; e.g.,
  • Ongoing staff training needs strengthening.
3
Practice requires significant improvement; e.g.,
  • The organization has a qualified financial officer, but the system is deficient in some significant regard, such as lack of training for some personnel.
4
Implementation of the standard is minimal or there is no evidence of implementation at all.

Fundamental Practice

FIN 6.04

An organization that assumes fiduciary responsibility for, or disburses client funds:
  1. segregates client funds from other organization funds; and
  2. protects client assets.

Interpretation

Organizations should manage client funds in accordance with applicable rules and regulations. This may include for example:
  1. daily deposits of client funds;
  2. credit balances on accounts;
  3. uncashed checks;
  4. funds left in client deposit accounts; and
  5. trust account reconciliation.
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:
  1. allowances for children and youth in out-of-home care;
  2. funds under the control of the organization in guardianship cases;
  3. social security or SSI benefits when the organization serves as representative payee.
1
The organization's practices reflect full implementation of the standard.
2
Practices are basically sound but there is room for improvement; e.g.,
  • Procedures for segregation of funds or protection of client assets need strengthening.
3
Practice requires significant improvement; e.g.,
  • One of the elements is not addressed at all.
4
Implementation of the standard is minimal or there is no evidence of implementation at all; e.g.,
  • 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.

Fundamental Practice

FIN 6.05

The network management entity:
  1. has a process for verifying the accuracy of network services billed by subcontracting service providers; and
  2. 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.
 
NA The network management entity does not manage contracts.
1
The organization's practices reflect full implementation of the standard.
2
Practices are basically sound but there is room for improvement; e.g.,
  • Procedures for verifying accuracy of billing or for appealing payment denial need strengthening.
3
Practice requires significant improvement; e.g.,
  • 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.
4
Implementation of the standard is minimal or there is no evidence of implementation at all.

FIN 6.06

Contracted providers are informed in a timely manner if delays in payment to the network by the purchaser may result in delays in payment to providers.
NA The organization is not a network management entity.

NA The network management entity does not manage contracts.
1
The organization's practices reflect full implementation of the standard.
2
Practices are basically sound but there is room for improvement; e.g.,
  • Procedures for informing providers need strengthening.
3
Practice requires significant improvement; e.g.,
  • There are reported concerns about the process for informing providers; or
  • Written procedures are weak or nonexistent.
4
Implementation of the standard is minimal or there is no evidence of implementation at all.