FinMAT. Assessment Tool

Transcription

1 FinMAT the Financial Management Assessment Tool

2 Other Publications by Management Sciences for Health Cost Revenue Analysis Plus (CORE Plus), a Tool for Cost and Revenue Analysis: User s Guide Cost-Estimate Strategy for Reproductive Health Commodity Management: User s Guide Guide to Using the Primary Health Care Costing Tool Health Systems in Action: An ehandbook for Leaders and Managers HOSPICAL, a Tool for Allocating Hospital Costs: User s Guide Human Resource Management (HRM) Rapid Assessment Tool for Public and Private Sector Health Organizations: A Guide for Strengthening HRM Systems Management and Organizational Sustainability Tool for National TB Control Programs (MOST for TB) Management and Organizational Sustainability Tool (MOST): A Guide for Users and Facilitators, 2nd edition, revised and expanded The Manager. Assessing Your Organization s Capacity to Manage Finances The Manager. Understanding and Using Financial Management Systems to Make Decisions The Manager. Using Cost and Revenue Analysis Tools

3 FinMAT the Financial Management Assessment Tool

4 Management Sciences for Health Tel: Memorial Drive Fax: Cambridge, MA USA Website: by Management Sciences for Health All rights reserved. Published Users may photocopy the FinMAT assessment guide and forms without prior permission, for noncommercial use only. Any translations or adaptations of this guide or of the FinMAT forms require prior written permission from the publisher. The trademarks or service marks used in this guide, including Microsoft, Excel, and Word, are the exclusive property of Microsoft Corporation. FinMAT is not a product of, nor is it endorsed by, Microsoft Corporation ISBN: Funding for the predecessor of this publication was provided by the Office of Population and Reproductive Health, Bureau for Global Health, US Agency for International Development, under the terms of the Management and Leadership Program, award number HRN-A The opinions expressed herein are those of the authors and do not necessarily reflect the views of USAID.

5 Contents Acknowledgments Preface How This Guide Is Organized vi vii vii Introduction to the Financial Management Assessment Tool 1 Who Can Use This Tool 1 What Is the Financial Management Assessment Tool? 1 Determining Your Initial Financial Management Goal 2 How The Financial Management Assessment Tool Is Organized 2 FinMAT Assessment Form 3 Determining Your Goal 6 Option 1 6 Pre-award Auditing 6 Option 2 7 Applying FinMAT in the Public, Private, or NGO Sectors 8 Using The Financial Management Assessment Tool Instrument 10 Step 1: Determine your end goal 10 Step 2: Form the Core Team and the Data Collection Team (Option 2 only) 10 Step 3: Plan the assessment (Option 2 only) 11 Step 4: Hold an initial meeting and develop a schedule 12 Step 5: Review the Financial Management Assessment Tool instrument 13 Step 6: Carry out the assessment and complete the Assessment Form 13 Step 7: Review and complete the summary for each component 15 Step 8: Develop an Action Plan 16 Step 9: Reach consensus on priority actions at a meeting (Option 2 only) 18 Step 10: Link the Action Plan to annual operational planning, budgeting, and monitoring 19 Step 11: Follow-up 19 FinMAT Glossary 20 FinMAT Assessment Forms 23 v

6 Acknowledgments The original Financial Management Assessment Tool was developed by the Management and Leadership Program (M&L) and the earlier Family Planning Management Development Project (FPMD II) of Management Sciences for Health. The original guide was written by Paul Fishstein and edited by Claire Bahamon, and the original QuickStart guide was developed by Natalie Gaul. In late 2009, those tools and guides were assessed for similarities and differences and overhauled to create the current iteration of the Financial Management Assessment Tool. This revision was carried out by Betsy Sylvester and Sara Weinstein, with technical assistance from Melissa Martin and Marisol Mercado. The newly combined tool was field-tested in the Leadership, Management and Sustainability Program in Ethiopia, which is funded by the US Agency for International Development. The FinMAT management team would like to specifically thank Jemal Mohammed, Assefa Gebeyehu, Berhane Kidanemariam, Abraham Yimenu, Jemal Ibrahim, Adanu Zewdu, Sisay Tessema, and Tsegaye Nigussie of the LMS Ethiopia team for contributing to the newly combined tool. The authors and editors would also like to thank Natalie Merlini Gaul, Gerhard Combrink, Liz McLean, and Judith Seltzer for their technical reviews. vi

7 Preface Strong financial management is one of the supporting pillars of organizational sustainability. Specifically, efficient and effective financial management requires clear, well-understood policies and procedures that well-trained staff can follow in a timely manner to not only accurately record and report all financial transactions but also make sound decisions about the use of resources. FinMAT is based on these beliefs. It is designed to help managers assess the current financial management competence of their organizations and identify the steps they can take to improve their organizations financial management capacity. How This Guide Is Organized This guide describes how to use FinMAT and gives the step-by-step instructions you can take to assess your financial management systems. It outlines two ways of using the Financial Management Assessment Tool; which option you choose will depend upon the goal of your organization. Use Option 1 if your organization is preparing either for an internal audit or to receive new external funds. Use Option 2 if your organization has already decided to strengthen its financial management systems and you need a tool to help you decide which component (e.g., Component 5, Payroll) you would like to improve. The assessment instrument itself is the separate electronic spreadsheet file that houses the Assessment and Summary analysis forms for each of ten components as well as a Detailed Summary and Action Plan form. (See the spreadsheets in printed form starting on page 23 of this guide.) The accompanying CD-ROM includes the entire Financial Management Assessment Tool (the guide and the instrument) and two issues of MSH s quarterly publication, The Manager. Assessing Your Organization s Capacity to Manage Finances can help you decide if your organization should assess its financial systems. Understanding and Using Financial Management Systems to Make Decisions suggests ways you could improve your organization s financial management competences and, hence, capacity. vii

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9 finmat Introduction to the Financial Management Assessment Tool Strong financial management can help strengthen service delivery by allowing the program staff in your health organization to focus on their programmatic responsibilities. It also shows donors that your organization can successfully manage external funds and comply with imposed cost principles and reporting requirements. Many health care managers in the public and private sectors would like to improve the financial management competences and capacities of their organizations, but do not know where to start. This guide introduces an easy-to-use tool that you could use as is, or adapt to particular circumstances. Who Can Use This Tool FinMAT is designed for health care managers in any kind of organization or office that performs financial transactions, such as: nongovernmental organizations (NGOs) or private-sector institutions such as laboratories; ministries or other public-sector institutions; central offices or headquarters; subunits, branch offices, or decentralized organizational units at the regional, provincial, or district levels; health service delivery points, such as hospitals or large clinics. This guide and the spreadsheet instrument may be used by either your organization s staff or external consultants to assess your organization s financial management systems and to plan improvements, i.e., build on your competences. While the instrument will be most useful to the individuals collecting the data, senior managers and other stakeholders should read the Preface and Introduction sections of this guide to understand the process of assessing and improving the financial management competencies that they are committing to. What Is the Financial Management Assessment Tool? FinMAT is an instrument that managers and their staff can use to see how competent they are in managing their organization s finances. The instrument can also help them decide which components and subcomponents to work on next. If you are a manager in a health organization, FinMAT can help you: assess which stages of development (levels of competence) your organization has reached in managing its finances; identify changes that you can make to manage your finances more effectively; make a specific Action Plan to implement these changes; monitor resulting improvements. FinMAT, the Financial Management Assessment Tool 1

10 finmat Determining Your Initial Financial Management Goal As described above, FinMAT consists of a spreadsheet instrument and a guide to its use. The spreadsheet instrument stores and summarizes the technical information that you collect about the financial management competence of your organization. The first step is to recognize what your goal is, and that goal will determine which option you use, Option 1 or Option 2: Option Why use the tool? Who applies the tool? 1 Your organization is starting up a new project or preparing for an external audit, and you want to assess how developed your organization or unit s financial management competence is. 2 To reach a consensus about the strengths and weaknesses of your organization or unit s financial management competence and develop an Action Plan that will address the weaknesses that your organization/unit has prioritized. One member of the organization or unit, or an external consultant. A Core Team of both program and finance staff, from junior employees to the directors. Please see the appropriate sections of this manual for further guidance on how to use the chosen option. How the Financial Management Assessment Tool Is Organized FinMAT helps users identify the characteristics and competence of their organization s financial management systems, processes, and procedures. As briefly mentioned earlier, the instrument comprises three types of forms: 1. Assessment Forms (one for each of 10 financial management components) which list the subcomponents within each component; provide (for each subcomponent) criteria that can be assessed and assigned a level of financial management competence Intermediate, Advanced); provide blank boxes for users responses to each criterion; provide blank boxes for users to describe the evidence justifying their responses; 2. Summary Forms, one for each of the ten components; 3. Action Plan form (to copy as many times as needed). Before applying FinMAT, facilitators may need to adapt the Assessment Form to the organization s situation. The form, which covers all ten components, is quite long and may appear intimidating at first. However, facilitators need to review the entire tool to understand each financial management component and subcomponent, and evaluate whether these are relevant and important to the organization s work. Not all components are relevant for all organizations, and some organizations may require additional criterion statements or subcomponents, such as references to government regulations or to specific donor requirements. Facilitators may want to add more space to the forms. Prior to modifying the forms, however, save them to a hard drive as read-only files, and then make your own working copies. Never work directly on original files; save the originals to refer to if necessary. For specific criteria that are not relevant, there is an N/A option that facilitators can select before applying the instrument. 2 FinMAT, the Financial Management Assessment Tool

11 finmat Have the Assessment Form in hand as you interview relevant staff and/or inspect physical space for the YES or NO answers to the statements (criterion) in each subcomponent. (Do not fill out the Assessment Form after your interviews and inspections.) Ideally, during the interview you will use your laptop and the electronic version of the instrument to record responses; the electronic instrument includes programming that helps with the analysis. However, if you do not have a laptop, you can mark responses on a printout and then enter those answers into the electronic instrument later. Developing an Action Plan is a key part of the FinMAT process. For Option 1, one individual, the internal or external consultant, develops an Action Plan to address key issues, and then presents that plan to the organization. If you choose Option 2 and are using the tool at several branch offices or units of a larger office/organization, the Action Plan form is used at two different times. It is used once at the end of a unit assessment for a unit-level plan and then once during the final one-day Action Plan workshop at which the separate unit plans are integrated into one plan for the whole organization. FinMAT Assessment Form There are four key parts to the FinMAT Assessment Form: financial management components (including subcomponents) criteria with assigned levels of competence responses evidence Financial management components. The ten financial management components represent core functions of an effective financial management system, whether the system is in the public, NGO, or private sector. You can use FinMAT to first assess the stage of development your organization has reached in each of the ten components, and later identify steps to achieve greater accountability and transparency. Financial Management Components Assessed by FinMAT 1. Organization and personnel 6. Timely payment and invoicing of goods and services 2. Budgeting 7. Cash management 3. Accounting and record-keeping 8. Stock, inventory, and fixed assets 4. Purchasing and procurement 9. Audit 5. Payroll 10. Use of information Each component (e.g., Component 5, Payroll) is divided into subcomponents. (Payroll has twelve subcomponents.) Each subcomponent has a maximum of three criteria, one of which would categorize the development of its subcomponent as being at one of the four stages of competence that are described immediately below. FinMAT, the Financial Management Assessment Tool 3

12 finmat s of Competence. Applying a set of criteria for each subcomponent, assessors can categorize at one of four levels of competence, a site s ability to manage its finances at the subcomponent level: pre-basic (not meeting the basic stage fully, but still having specific strengths) basic intermediate advanced While some criterion descriptions (statements) within a subcomponent are similar, the intermediate and advanced level criteria meet a more demanding qualitative or quantitative standard of competence than the pre-basic and basic competences do. Starting at the basic stage of development, each successive competence represents all the criteria described at the preceding levels the intermediate competence includes the criteria described at the pre-basic and basic levels of competence, and the advanced competence includes all the criteria of the intermediate, basic, and pre-basic levels. For example, an organization at the basic level of competence might produce regular financial reports, but one at an advanced level of competence would use those financial reports to make decisions about spending. Similarly, an organization at a basic stage of competence might produce expenditure and inventory reports for donors, while one with advanced competence would make further use of those reports to make management decisions. For a number of subcomponents, the next higher criterion may not spell out (include the text of) the prior criterion, but its inclusion in the higher criterion can be assumed. For instance, basic budgeting competence is stated as a requirement at the basic level while it is implied at the intermediate and advanced levels. In the spreadsheet instrument, a subcomponent lists the highest-level criterion first. If you answer YES for this highest-level criterion, then you can skip any lower-level criteria and move on to the next subcomponent. As stated earlier, each subcomponent has a maximum of three criteria that represent four levels of functioning (competence). Some subcomponents may have only two or even one criterion because the highest criterion for that subcomponent is intermediate or basic. In these cases, the competence level for the subcomponent will be either intermediate or basic, but do not despair! The instrument is designed to highlight these cases, and the team or consultant analyzing the results will easily see that the organization meets the highest criteria for the given subcomponent. The Excel-based instrument includes a pie graph that shows how each subcomponent s results compare with the highest possible results for that subcomponent. Each criterion number indicates first, the number of the component (1 10); second, the sequential number of the criterion within each component (e.g., 3); and finally, the level of competence (A=Advanced, I=Intermediate, B=Basic). For example, criterion number 1.3A indicates that the third criterion under Component 1: Organization and Personnel reflects an advanced competence. s. The individual or team indicates YES or NO to whether the site/organization fulfills each stated criterion. The individual or team formulates a response based on their knowledge and understanding of the site/organization s situation. Most responses are objective. In some cases, if Option 2 is being used, and therefore the instrument is being administered by the FinMAT team, some team members and site staff may have differences in interpretation. Facilitated discussion can resolve these differences and enable the group to reach consensus. Note that for some subcomponents, the instrument criteria make a distinction between the existence of a certain set of policies and procedures and a manual that documents these policies and procedures. If an organization has established 4 FinMAT, the Financial Management Assessment Tool

13 finmat its policies and procedures but has not documented those in a manual that staff could be trained on and refer to regularly, that subcomponent would likely be at the basic level. For an example, please look at criterion 2.3B in the Policies and Procedures subcomponent of Component 2: Budgeting. Evidence. The Data Collection Team or the internal or external consultant documents the evidence that justifies all YES responses. Examples of evidence include: verification of documents and records, such as annual and long-term plans, personnel records, job descriptions, organizational charts, financial reports, financial statements, and bank statements; examination of system tools and manuals, such as registers, vouchers, receipt books, purchase requests, inventory forms, policies and procedures manuals, and supporting forms; physical examination of facilities, such as storerooms, warehouses, and other facilities that maintain inventory. Where actual physical evidence is not available, responses need to be substantiated by interviews with staff. FinMAT, the Financial Management Assessment Tool 5

14 finmat Determining Your Goal As noted, FinMAT can be applied in two ways. Option 1 is for organizations that are preparing either for an internal audit or to receive new external funds. Option 2 is for organizations that have already identified financial management as a function to strengthen, and need a tool to help them identify specific competences to improve, i.e., to build their financial management capacity. This section goes into more detail about each option. Option 1 Option 1 is meant to be a rapid assessment of an organization s financial management competence. This option can be implemented in several hours or several days, depending on the size of the organization being assessed, the number of finance staff and departments, the purpose of the assessment, and the possible financial risks. For example, the assessment of your organization s financial management systems for a potential award of $25,000 would likely require less time and in-depth analysis than an assessment required for a potential award of $3,000,000. The implementer(s) should have a background in finance, accounting, and business management, since it will take this expertise to assess the evidence presented. FinMAT Option 1 is not intended as an audit tool and may be used with clients who are already anxious about upcoming audits or donor pre-award surveys. Best results are often achieved by keeping the tone conversational and educational. Rather than focusing on deficiencies, it is wise to focus on easily achieved small steps to improve the financial health of the organization. The criteria statements and answers on the assessment tool can and should be shared with the organization being assessed. FinMAT Option 1 has many uses: Pre-award Auditing International donors are a major source of funds for nongovernmental organizations (NGOs) doing humanitarian aid and development work. Increasingly, donors are focusing on using local organizations to implement their programs, through direct funding or through grants and partnerships from international NGOs. If the donor intends to directly fund an organization, it will likely conduct a pre-award survey or audit, to ensure that the organization has the capacity to adequately manage the funds and comply with imposed cost principles and reporting requirements. FinMAT Option 1 can provide an organization with an overview of the stage of development it will be assessed at (the capacity it will show) during such an audit, as well as point out areas that can be quickly addressed and improved before auditors arrive. If the results of the survey are largely positive, it can also boost confidence and alleviate anxiety. 1) Assessing the financial management competence of new local partners An international NGO could use FinMAT Option 1 to assess local organizations that might become subrecipients of donor funds. The results of such surveys would identify weaknesses in an organization s financial and operational systems that might require additional capacity building, oversight, or imposed controls. 6 FinMAT, the Financial Management Assessment Tool

15 finmat 2) Assessing needs for technical assistance FinMAT Option 1 can also provide a quick baseline for determining the technical assistance and capacity-building needs of client or partner organizations, in the areas of finance and business operations. 3) Assessing financial management and business operations Organizations may elect to use FinMAT Option 1 to do an internal assessment of their financial management and business operations in preparation for audits or as part of an improvement, or competence-enhancing, initiative. Option 1 uses the standard FinMAT forms, i.e., YES or NO statements about subcomponent criteria. These provide a script for reviewing systems in a logical, orderly framework and may be easily modified to eliminate sections or questions that don t apply to your situation. However, always be careful when eliminating criteria; make sure those are truly inapplicable, i.e., N/A. To the greatest extent possible, attempt to schedule the assessments for periods when the finance and operations staff can take the time to answer questions fully and honestly. Avoid month-end and year-end periods, when finance staff members are often busiest. Holiday periods are also difficult; an office may be short-staffed or its personnel preoccupied. When possible, ask diverse people within the organization to reply YES or NO to the same statements (criteria). Perceptions across the organization often differ, and seeking a range of responses often gets at the truth. Once the assessment is completed, the implementer(s) should prepare a findings report that includes an overall assessment of the financial systems and internal controls, as well as proposes (including illustrative time frames and budgets) changes and improvements. The report can become the basis for a technical assistance and capacity-building work plan, if appropriate. If the organization is an intended grant recipient, the report should feed into the plan for overseeing and managing the grant. Option 2 FinMAT Option 2 builds on the Management and Organizational Sustainability Tool (MOST), a process that Management Sciences for Health (MSH) developed so that managers could assess their organization s management capabilities and make concrete plans for improvement. A MOST assessment often leads to more detailed assessments of particular management components, such as financial management, so MSH developed supplementary assessment and planning tools to guide these processes. The Financial Management Assessment Tool helps managers explore their organizations financial management competences and overall capacity in depth and focus on priority management areas that need improvements. The financial management assessment process assumes that the most effective way to initiate organizational change in the medium and long term is to involve staff members and other important stakeholders in an open assessment and consensual planning. Option 1 can quickly identify areas that can be improved prior to a specific event (i.e., a new project start-up or an external audit by a donor). The organization or unit that has recognized its financial management weaknesses uses Option 2 to ask its entire organization to identify and prioritize these weaknesses and then address these in a sustainable way. FinMAT, the Financial Management Assessment Tool 7

16 finmat Use FinMAT in preparing for the assessment, conducting the assessment at sites, and integrating the results into organizational activities. Within these phases, follow the ten steps detailed in the next section (Using the Financial Management Assessment Tool Instrument). A Core Team plans the assessment, monitors its progress, leads the development of an organizationwide action plan to make improvements, and advocates for institutionalizing the plan within the organization s planning and monitoring systems. The Core Team should contain a cross-section of program and finance staff. If the Core Team is large and FinMAT is being used to assess a large organization or office, a Data Collection Team may be formed. This Data Collection Team is a subgroup of the Core Team plus one or two staff members from the site being assessed (but includes the extra one or two staff only if that site is a branch office or subunit of a central unit). The Data Collection Team moves around the site, engaging staff and reviewing documents to determine which subcomponent criteria the financial management systems meet. Together with the organization s staff, they summarize the data for each component. To be manageable, the Data Collection Team should be limited to 5 7 people. If the organization s key decision-makers are not on the Core Team, it may be a good idea to form a group of key Stakeholders to attend both an initial meeting and a final workshop led by the Core Team. These Stakeholders should review the summarized findings, the contributing causes, and the proposed actions. They can help develop an organization-wide integrated Action Plan to make improvements in areas that are assessed as weak, i.e., good targets for capacity-building. Option 2 is particularly useful for organizations or programs that have branch offices or subunits and are interested in building the capacity of their decentralized units. Implementers should spend some time discussing with the Core Team what the mandate of the decentralized units is, and how much control the decentralized unit has over certain financial management practices. Organizations may especially want to consider using FinMAT Option 2 when they are: receiving increased funding from donors or other sources, including an increased emphasis on funds flowing to subsidiary levels; decentralizing management functions to subsidiary levels; undertaking initiatives to strengthen overall management. To effectively use FinMAT, managers throughout an organization need to: commit to the assessment and to the process of strengthening financial management capacity at different levels, including dedicating sufficient human and financial resources to carry out the assessment and the follow-up plan, as appropriate; distinguish those areas of financial management that are within their scope to change and improve, and those that will require, at a future time, wider or more senior-level commitment to change. Applying FinMAT in the Public, Private, or NGO Sectors While NGOs and public-sector institutions vary in their specific practices and organization, most are responsible for carrying out similar financial management functions. This guide was written for managers in both types of institutions. Even if the position titles referred to in the guide are different from those in your institution, those managers generally perform similar functions to staff in your organization or program. Some differences between the NGOs and the public sector should be kept in mind when using this 8 FinMAT, the Financial Management Assessment Tool

17 finmat tool. Where and how specific functions are carried out will vary. For instance, in a centralized system, the payroll function is often carried out by a central body, and subunit managers may not have much control over staffing levels. Perhaps the biggest difference lies in the steps that institutions can take to improve their capacity. In part because they are smaller institutions, NGOs often have more options for action and can act more quickly. For example, many ministry subunits are still governed by government-wide regulations; in such cases, the national civil service commission or even the national parliament may have to act to effect certain changes. This guide offers alternatives when these differences affect the use of FinMAT, especially at the stage of taking action for improvement. FinMAT, the Financial Management Assessment Tool 9

18 finmat Using The Financial Management Assessment Tool Instrument Whether you have chosen Option 1 or Option 2, you will answer YES or NO to the criterion statements in each of the instrument s ten components. The instrument itself is an electronic Excel spreadsheet that has an introduction tab and then two tabs for each of the ten components. One tab lists a component s subcomponents and its criterion statements (with boxes for responding YES or NO). The other tab summarizes the YES and NO answers of each subcomponent s criteria, indicating the subcomponent s stage of development, i.e., Advanced, Intermediate, Basic, or Pre-Basic. This section of the guide provides detailed instructions for using both options of the Financial Management Assessment Tool instrument. Step 1: Determine your end goal Use the previous section of this guide to determine whether you are using Option 1 or Option 2 of FinMAT. If you choose Option 1, skip to Step 4 below. Step 2: Form the Core Team and the Data Collection Team (Option 2 only) Before getting started, you will need to assemble a Core Team to plan and lead the FinMAT assessment. It is essential that you include some staff with technical knowledge in financial management. However, because both program and finance staff are needed to support and build strong financial management capacity, the Core Team must also have one or more nonfinancial program staff; be sure to consider persons who are interested in the performance of the financial management system. They will be particularly important if you feel that there may be bias, conflict of interest, or a commitment to a highly optimistic (or pessimistic) outcome without them. A team that is objective in its assessment will be more credible to staff and donors. The Core Team should all be from the same unit or office, so that there is no confusion as to what financial processes are being analyzed. Whether you are assessing your head office or your subunit, a typical core team for the FinMAT assessment would consist of the following staff members: executive director, minister, or deputy minister for finance and administration to set overall direction, allocate staff and other resources, provide leadership and moral support, review results, and monitor the implementation of improvements; finance manager to provide technical input, ensure consistency throughout the organization, review results, and monitor the implementation of improvements; accountant from the head office to help modify the FinMAT Assessment Form and provide technical input during data collection and discussions; accountant from a subunit to provide technical input and a second perspective during data collection and discussions; program staff (one or two) to provide the perspective of programs and finance data users; consultant (optional) to facilitate and provide technical expertise and overall guidance during data collection and discussions. Not all Core Team members will participate in all assessment activities, but the entire team should plan the assessment, receive updates as the assessment progresses, and help develop and implement an integrated Action Plan for the organization. 10 FinMAT, the Financial Management Assessment Tool

19 finmat The Data Collection Team is a subgroup of the Core Team, and should be limited to 5 7 people. This team will be responsible for and complete the assessment, reach consensus on each response, indicate evidence for all YES responses, and analyze results. It is up to you whether you want the full Core Team or just the Data Collection Team to develop the Action Plan. Step 3: Plan the assessment (Option 2 only) While institutions should review their entire financial management systems, some may want to first focus on any components that need immediate attention, such as budgeting or procurement. You also need to decide whether you will concentrate on the head office or also assess the subunits. Documenting your decisions about the components and sites you wish to assess helps clarify your thinking and communicate your decision to others. Beginning Your Assessment in the Head Office The head office is a good place to begin your financial management assessment. Scheduling your first assessment there can help you take advantage of the head office s: Comprehensive oversight. Since head office managers are responsible for overseeing the subunits, they need to understand the central-level s strengths and weaknesses before reviewing the subunits. Experienced staff. Generally, the head office will have the more experienced staff and technical resources. Once familiar with the methodology and process, these staff members can better support and guide the subunits. Broad scope of financial activities. The scope of financial management activities at the head office is usually broader and more complex. Starting in the head office will cover most aspects of the organization s financial system. Visibility. An assessment at the head office would be more visible, which could encourage participation at other levels and a broader commitment to change. Organizational example. An initial assessment at the subunit level could be perceived as a punitive audit. Starting at the head office sends the message that what is healthy for the head office is healthy for the whole organization. It is useful to have a formal scope of work that specifies the Core Team s work in detail. The Core Team generally consults with key finance staff and senior managers who develop a scope of work that can be used to communicate to stakeholders especially staff directly affected by the assessment the team s purpose, schedule, and intended outcomes. The Core Team s scope of work should include: the rationale for the assessment; the anticipated outcomes, including deliverables and recommended improvements; a budget; a timeline; the anticipated in-house and external human resources needed to carry out the assessment. FinMAT, the Financial Management Assessment Tool 11

20 finmat Before beginning, the Core Team should designate one of their members as their leader, who will manage the team s work, and from five to seven of their members as the Data Collection Team subgroup. Also, as noted above, you should give some thought to potential conflicts of interest. You may also need to educate nonfinance staff about the tool and some financial management concepts. Step 4: Hold an initial meeting and develop a schedule If applying Option 1, the consultant or the external staff person will hold an initial meeting with the organization to discuss and plan the assessment. For Option 2, the Core Team leader will call the Core Team together in advance of the actual assessment to discuss their roles and develop a schedule. Team members will negotiate any adjustments in their scope of work with senior management. You should also consider having an organizational workshop or holding a discussion at a regular staff meeting to explain the upcoming assessment process. At a minimum, staff should be well informed about the assessment and understand its purpose. If necessary, hold a meeting with Stakeholders to ensure that they understand the goal and process of applying the tool. In finalizing their assessment timeline, the Core Team will need to factor in the schedules of their team members and the schedules of interviewees at the sites being assessed. Usually, the team assesses the head office first, so the head office schedules will be considered first. If subunits are included, send them a letter fully explaining the assessment process and saying that the Data Collection Team is planning to visit their subunit. Follow up with a phone call to arrange a convenient date. A FinMAT assessment may require up to two and one-half days per site when all documents and respondents are available, but if you plan your time carefully or assess fewer than the ten components, it may take less time. Step-by-Step Instructions for Completing FinMAT s Excel Instrument 1. Save a read-only copy of the file to your computer. 2. Go to the Intro tab and fill in the organization and the date. This information will automatically copy to all worksheets. 3. Go to the first data entry tab, called Comp1 Qs. 4. Start answering the criterion statements. Answer YES or NO, and the appropriate competence level will automatically fill in. 5. Within each subcomponent that has at least two criterion statements, selecting YES for the first criterion statement will automatically gray out (skip) subsequent statements within that subcomponent, so you will move to the next subcomponent. If you select NO for a subcomponent s first criterion statement and YES for the second statement, the tool will automatically gray out any subsequent statements, and you will know to move to the next subcomponent. 6. Once you have said YES or NO to all the criterion statements within a component, go to its summary tab, e.g., Comp1 Summary, to see a summary of the component, including a pie chart that compares the completed assessment with the highest possible levels for the component. 7. Proceed to the next component. 12 FinMAT, the Financial Management Assessment Tool

21 finmat Step 5: Review the Financial Management Assessment Tool instrument The FinMAT instrument is an Excel-based tool that makes analyzing results easy. It is important to learn the Financial Management Assessment Tool Excel instrument well and understand how it works. See the box Step-by-Step Instructions for Completing FinMAT s Excel Instrument. Before you begin the assessment, practice using the tool; see how it fills in competence levels automatically, how different answers to the criterion statements change the results, etc. Before you interview the people within the organization being assessed, you should be very comfortable with the Excel instrument. The Data Collection Team or consultant s next task is to review the FinMAT instrument with the requirements of the organization being assessed in mind. If necessary, modify the Assessment Form to fit the organization. You will see that each component is divided into subcomponents. FinMAT will cover most situations, and criteria that are not relevant should be marked N/A (not applicable) so that they are not considered when analyzing the results of each component. It is important to be careful when choosing N/A as a response. Since the assessment is lengthy, it may be tempting to eliminate many criterion statements or entire subcomponents or components. However, remember that the tool is designed to help organizations identify their strengths and weaknesses and prioritize areas for improvement. Discarding criterion statements, subcomponents, or components should be done carefully. Designate criterion statements as inapplicable (N/A) only when those are not important to the organization s functions. For example, if the organization does not manage or store supplies, statements about warehouses can be marked as inapplicable. However, if an organization does not have a personnel policy manual, it is not appropriate to indicate N/A for statements about a personnel manual. In addition, some organizations may wish to add criteria that reflect specific concerns. Before making any changes to the forms answering YES or NO or adding your own criteria first save the FinMAT forms from the CD-ROM to your hard drive as a read-only file, then make a working copy that you can modify. Since FinMAT organizes assessment criteria into levels of financial competence Intermediate, or Advanced), you will need to assign a level for each new criterion statement you add, and program the Excel spreadsheet to accurately designate the correct level. You can safely assume that an addition is Basic if it represents an adequate level but leaves room for improvement. To modify the FinMAT Assessment Form, you may require input from experienced financial management staff or consultants. Depending on the number of units at which you plan to apply FinMAT, you may wish to field-test your modified instrument to be sure that you have covered all the important areas of your organization and that the criteria are clear within the context of your financial systems. Step 6: Carry out the assessment and complete the Assessment Form In beginning your assessment at the head office, notify in advance all staff members who need to participate in the assessment so that they can prepare for it and make time available. Depending on the components you will assess, you will typically include the Finance Manager, Administrative Manager, selected program staff, stock or inventory staff, the Human Resource Manager, and procurement staff as assessment participants. Small NGOs and some subunits of ministries of health may not have all of these positions, but someone is responsible for their functions. If a team is carrying out the assessment, some of these staff will already be on the Core Team. Staff at the assessment site will assist in data collection for the components about which they have knowledge. Some will also be participants in the meeting at the end of the site assessment so that they can contribute their perspectives in listing and prioritizing needed improvements at the site. FinMAT, the Financial Management Assessment Tool 13

22 finmat The Data Collection Team may choose to conduct the assessment in a 2 3 day off-site meeting, going methodically through each component, responding to each criterion statement, and indicating evidence for each YES response. If this step is done off-site, the Data Collection Team then must go to the office, looking for evidence to substantiate the YES responses. If the Data Collection Team decides to conduct the assessment on-site, the team will sit with department staff and go through the criteria for all those components, asking whether the department meets the criteria and requesting evidence. You may choose to fill out the assessment either directly in the Excel instrument or on a printed copy that you take to the meetings with the organization s staff. The Excel instrument is programmed to skip questions as appropriate, so where possible, it may be easier to use the electronic instrument. If you are using a hard copy of the Assessment Forms, everyone involved should have a copy that they read and use to make notes, but one person from the Data Collection Team should be designated as the recorder. In cases where the response to a criterion is obvious, the recorder quickly marks the response. Where a criterion does not apply, the recorder chooses the N/A option. Again, be very sure that a particular criterion really does not apply. If there is disagreement, the group must discuss until they arrive at consensus. A critical aspect of the FinMAT assessment process is the reliance on evidence. The Financial Management Assessment Tool defines evidence as a fact or concrete document that supports the answer to a specific management criterion. Evidence is something that can be seen or known and that will ground the discussion in facts instead of perceptions. Whether using Option 1 or Option 2, it is very important that participants note the evidence that supports the answer for each subcomponent criterion. The evidence will also be the basis for determining future improvements. The following table illustrates typical recorded evidence for criteria in different components. Examples of Recorded Evidence Component Criterion Evidence Found Organization and Personnel 1.5B (ethical behavior standards) The written policies and procedures for ethical behavior are found in the files. Accounting and Record-Keeping 3.9I (chart of accounts) A written and approved chart of accounts with account codes for appropriate expenses. 3.19A (trial balance preparation) Trial balances prepared monthly are in the files. Purchasing and Procurement 4.11I (recording) All purchase orders are included in a register. 4.14B (separation) The purchasing function is separate from the payment function. Timely Payment and Invoicing of Goods and Services 6.3I (payments to vendors) Authorized payments to vendors are made within 60 days of receiving invoices. 14 FinMAT, the Financial Management Assessment Tool

23 finmat Stock, Inventory, and Fixed Assets Use of Information 8.12B (record-keeping) The stores have stock card records showing quantities of items, balances, amounts received, and amounts issued. Separate Stores, etc. 10.7B (donor reports) Donor reports are submitted on time with accurate information. Important information for Option 2: For some criteria, the group will have differing viewpoints. The role of the leader of the Data Collection Team is to facilitate discussion so that all staff can present their own perspectives, and no one, including senior staff, dominates the discussion. The leader should emphasize the importance of using evidence to reach consensus on whether each criterion is met. If the group cannot reach consensus, the recorder marks NO. The importance of reaching consensus is based on three assumptions: No single participant in the implementation possesses the complete truth about the organization and its financial management; instead, every person possesses some part of the truth. An accurate picture is best obtained by pooling these individual perceptions. Each participant s observations about his or her knowledge of a particular financial management component can broaden the perspective of all the participants. The evidence the participants offer to support their opinions helps the group come to agreement on what may initially seem to be incompatible viewpoints. Decisions that are reached by consensus are more likely to be implemented because a broad group of people participated in making those decisions. Step 7: Review and complete the summary for each component The Excel instrument automatically creates a Summary Form that lists the level of competence for each subcomponent of a component. Most subcomponents have at least three criterion statements that determine the subcomponent s level of competence; however as noted, some subcomponents have just one or two criteria. The tool is programmed so that if your organization answers YES to the highest criterion in a subcomponent, then that subcomponent is rated at the highest possible level for that subcomponent (could be Advanced, Intermediate or Basic). If an organization answers NO to the advanced criterion and YES to the intermediate criterion, then the subcomponent is rated as Intermediate. As noted, this rating of competence levels is programmed into the electronic Excel instrument, so there is no need for the assessor to fill in the levels by hand. Once all criterion statements in a given component have been assessed, go to the Summary Form for that component and you will see that the level of competence for each subcomponent has been automatically pulled to the form. If a particular subcomponent is not at the highest level of competence, its result will be highlighted in bold and the cell with the result will be outlined. Also, you will see a graphical representation of the results below the table. The pie chart on the left shows the results of your assessment, and the pie chart on the right shows the highest possible outcome. As you analyze these results, keep these two pie charts in mind. For example, if the pie chart on the right is approximately 75% green (indicating that the highest possible result for 75% of the subcomponents is Advanced), and your results show 25% green, then you know that you are not at the highest possible competence level for this subcomponent. Before you begin the assessment, you may want to experiment with the criterion statements, so that you fully understand how the instrument works, how the pie charts change with different answers. FinMAT, the Financial Management Assessment Tool 15

24 finmat Tips for Prioritizing Actions within a Component To identify priority actions, consider which of the proposed actions will have the biggest impact on your organization s effectiveness. For many organizations, this will include cash control and anything related to donor reporting. You can divide tasks as follows: tasks that can be accomplished quickly and require few resources; tasks that may take longer but will have the biggest impact on organizational goals; tasks that will provide a basis for many other tasks. In the Finding spaces provided, briefly describe the characteristics of that component. You should try to summarize what the problem areas are, based on the group s understanding of the site assessed and the evidence given for the criteria answered with a NO. To offer a fuller picture of a component s stage of development, include some strengths from the subcomponents assessed as being performed at the higher levels of competence. The Data Collection Team leader should facilitate discussion in developing the summary. Step 8: Develop an Action Plan The consultant Data Collection Team applying FinMAT will need to prioritize subcomponents in order to develop the Action Plan. For guidance on prioritizing, please see the box Tips for Prioritizing Actions within a Component. For Option 1, at the end of the site assessment, the consultant will analyze the data in more detail and produce a list of specific actions that will address the findings of each component. The consultant may not be able to complete the full Action Plan because the organization itself will need to prioritize components and actions to take, assign responsibilities, and determine deadlines. For Option 2, the Data Collection Team develops the Action Plan. First, review the Financial Management Assessment Tool Summary Forms and the evidence for the subcomponents that are at a Pre-Basic level of competence. Then transfer the criteria assessed at Pre-Basic levels onto the appropriate columns of the Action Plan template. Because many of the criteria are related, it is not necessary to list each one separately; rather, participants should group related criteria and summarize these under Identified Weaknesses. Insert the criterion numbers in the column on the far left, so that you can refer to the criteria at a later stage. If there are many subcomponents at the Pre-Basic level, it may not be feasible to address all of them in the Action Plan. Organizations may find that they need to prioritize general areas or components first, and then develop the Action Plan around the prioritized areas. On the other hand, if a clear pattern emerges or if there are a limited number of Pre-Basic subcomponents, the organization may choose to include all of them in the Action Plan, and then prioritize specifications. Next consider the actual source or main contributing causes of the weakness. In the Why Does This Situation Exist? column, participants would explain their understanding of the real reason each problem exists. The Team Leader s role is to encourage discussion to try to unearth the real reasons for the weakness, before moving on to remedies. The leader should continue to ask why until the group feels that it understands the contributing causes. In doing this, you may want to keep the following points in mind: 16 FinMAT, the Financial Management Assessment Tool

25 finmat The perceived source of a weakness is often a symptom, while the real cause lies elsewhere. The problem may not be limited to financial management, but may stem from other systems, supervision, or the organizational culture. If so, remedies, such as training or upgrading the accounting system, will be ineffective. Personal or organizational incentives may exist for maintaining ineffective systems. Remedies that don t address these incentives will be ineffective. The organization may have unwritten or even unspoken traditions for working a certain way. Without a full understanding of these traditions, it may be hard to identify the fundamental cause of a given problem. Identifying Possible Improvements in the Public Sector and Large NGOs Ministries, their subunits, and even large NGOs often have elaborate policies and procedures and are governed by government-wide systems (e.g., human resources, procurement, and accounting). In some cases, these systems cannot be modified or can only be modified after receiving authorization through a time-consuming process. These institutions may also lack financial resources for improvements. When selecting improvements, consider: actions that can be taken locally, without seeking permission from other units; actions that can be taken locally, without requiring additional financial or human resources; actions that require approval from other units, and the steps needed to obtain this approval. Finally, in the column labeled Specific Actions Required for Improvement, participants should identify actions that need to be taken to remedy the areas of weakness. There may be more than one action for each weakness. In other instances, some single actions (e.g., improve documentation of policies and procedures) may apply to more than one weakness in several components. While improving competence and strengthening capacity may require staff time and money as well as authorization from proper authorities, significant improvements can often be made without these. Therefore, you should identify what changes can be made immediately, without additional resources or authorization. Remember to make the actions specific. For example, do not list as an action get upper management on board with necessary changes. A better action would be hold a meeting with upper management to discuss changes. After identifying priority actions, state the timeline within which to complete each action, the people responsible for implementing the action, and the resources they will need. Identify the indicators of achievement that will signal to the unit that the action has been completed. If FinMAT has been applied at several branch offices or units, the Data Collection Team will review the actions recommended for each unit or branch office, and organize these into unit-level action plans using the Action Plan form. Organizers should plan three days for Steps 6 8. Action planning will take approximately a half day. FinMAT, the Financial Management Assessment Tool 17

26 finmat Step 9: Reach consensus on priority actions at a meeting (Option 2 only) The Data Collection Team will need to present the Action Plan to the Core Team, as well as to key Stakeholders if they are not on the Core Team. The Stakeholders should include senior officials, subunit managers, and board members. It is important that these Stakeholders understand the results and agree to the Action Plan. At the beginning of the meeting, schedule time to discuss the accuracy of the findings. Decisionmakers may want to backtrack to some specific evidence or criteria which led to the proposed actions. Have copies on hand of the units completed Financial Management Assessment Tool Assessment Forms in case questions arise. Explore different interpretations of the areas of weakness. For instance, staff may have differing views of how the organization s culture, supervision, and shortages of human resources might affect performance, such as late reports. They may also have varying opinions on any proposed changes to policies and procedures. Key decision-makers need to review the Detailed Summary and Action Plan form, then develop a consensus on priority areas for improvement, focusing on not only what needs to be done, but how. Senior-level and organization-wide commitment is critical at the end of the assessment since many improvements have associated costs and can be time consuming. You cannot address all the suggested actions in the short-term, so prioritizing and developing sustained commitment will keep the assessment from losing its momentum. Supporting Action Plans of Subunits From the perspective of accountability and performance, an organization will only be as strong as its weakest unit. Once individual units have developed their proposed Action Plans, the head office should bring all the plans together to get an overall organizational picture. To help create a larger organizational picture out of the individual subunits, Action Plans at the subunit level should: identify the resources, training, and authorization needed from the central level; identify types of improvements that staff can make on their own at the subunit level without external assistance or resources. Working with representatives of the subunits, decision-makers at the head office will then need to: review individual plans to determine what is essential for the entire organization; identify and allocate necessary human, material, and financial resources to the subunits; provide feedback and confirmation of head office support for the subunit Action Plans, suggesting changes to individual plans as necessary; integrate into the head office s Action Plan specific activities that will support the subunits in implementing their own Action Plans (see Step 10). Suggestions for the meeting with Stakeholders Have small groups review the Action Plans from all the units (or the single Action Plan, if just one office was assessed) to identify the actions that fit the considerations above. Have the groups record their recommended actions for later discussion in a plenary session. As part of their review, they 18 FinMAT, the Financial Management Assessment Tool

27 finmat should consider questions such as: Is the related problem that prompted the action significantly affecting the performance of the organization as a whole or of several assessed units? Does the proposed action directly target the identified problem? Are resources (financial, material, and human) readily available to make the change? Would the change be acceptable to the staff? Does political support exist for the change? What are the barriers to making the change? How much time is required to make the change? Do you have sufficient authority to make the change? After the small group and plenary session, the full group of participating stakeholders should reach agreement on the priorities for action and commit to making human and financial resources available. The meeting with Stakeholders could take a full day. In some cases, you may have to hold a separate meeting to present the recommendations to board members or other stakeholders. Work toward a consensus on these recommendations. Step 10: Link the Action Plan to annual operational planning, budgeting, and monitoring Once the Stakeholders have agreed on the final Action Plan, it is time to start implementing it. One person should be assigned the responsibility of ensuring the Action Plan is implemented. After an initial burst of activity, staff may slip back into their daily routines, and the strengthening activities may lose their immediacy. While you may hire outside consultants to help maintain the momentum, you must institutionalize the activities in your organization s planning, budgeting, and monitoring systems. Make sure to incorporate the Action Plan into all organizational and group work plans. The Core Team can do this by advocating for the inclusion of these activities. Also, make sure that supervisors include the objectives in their performance reviews of individual staff members. For instance, you can: incorporate the Action Plan s achievement indicators into the performance review of the person responsible for that activity; report regularly on the progress of all Action Plan activities in your monthly, quarterly, or annual meetings. By remaining committed to making the changes you have identified in your assessment, you can help your financial management systems achieve transparency and accountability. Your commitment will more easily attract the funds you need to provide your clients with high-quality services. Step 11: Follow-up Several months into the Action Plan, the Core Team should meet to measure progress and make any necessary adjustments to the Plan. The Core Team may decide to conduct the assessment again, six months or one year after the initial application, to measure progress and see if any other areas of weakness are identified. FinMAT, the Financial Management Assessment Tool 19

28 finmat FinMAT Glossary Adverse audit opinion: Independent auditor s written view (with supporting reasons) that the financial statements of an organization (1) do not fairly present its actual financial position, (2) are not in conformity with Generally Accepted Accounting Principles (GAAP), and/or (3) the required information was either not disclosed, or (if disclosed) was inadequately disclosed or was inaccurate. 1 Burn rate: Speed at which a program or department is spending money on a monthly basis. Capital expenditures: Money spent to acquire or upgrade physical assets such as buildings and machinery. 2 Capital projects: Long-term investment project requiring relatively large sums to acquire, develop, improve, and/or maintain a capital asset (such as land and buildings). 3 Cash box: a small, strong box for keeping cash in. 4 Chart of accounts: System of accounting records developed by every organization to be compatible with its particular financial structure, and in agreement with the amount of detail required in its financial statements. It consists of a list of ledger account names and numbers showing classifications and sub-classifications and serves as an index to locate a given account within the ledger. 5 Conflict of interest: A situation in which an individual or organization is involved in multiple interests, one of which could possibly corrupt the motivation for acts in the other. Criminal history: Documentation from an appropriate authority regarding any violations of the law committed by an individual. Custodian: Individual responsible for safeguarding specific assets. Direct report: An individual who is responsible to a specific supervisor. Expense ratios: Financial measure that, in nonprofits, compares a specific category of expense to the total amount of expenses. Often, this is used to compare the total amount of program expenses to the total overall expenses after removing the indirect costs to identify the overall percentage of costs that are directly program-related. Financial measures: Ratios or other financial data used to evaluate the financial health of an organization, department, or program. FIFO: First-in, First-out method of inventory management in which items that arrive first to a storage site are distributed first. Fixed Assets: Land, buildings, and equipment expected to be used for at least a year. Fringe pool: A type of indirect cost pool that commonly is established for the purpose of accumulating employee fringe benefit costs. Common costs accumulated in such pools include those for compensated absences, health insurance, bonuses, retirement plans, and payroll taxes (May 4, 2010) 2 (May 4, 2010) 3 (May 4, 2010) 4 (June 7, 2010) 5 (May 4, 2010) 6 (May 4, 2010) 20 FinMAT, the Financial Management Assessment Tool

29 finmat Fringe rate: An indirect cost rate which expresses the relationship between costs accumulated in a fringe pool and the related base for allocating such costs, for a given period of time. 7 Imprest fund: A fund with a fixed balance above which the fund cannot rise. Indirect cost: Expenses (such as rent, maintenance, security) incurred in joint usage and, therefore, difficult to assign to or identify with a specific department or program. Indirect cost rate: An indirect cost rate is a mechanism for determining what proportions of indirect costs each program/project should bear. An indirect cost rate represents the ratio between the total indirect costs and benefiting direct costs, after excluding and/or reclassifying unallowable costs, and extraordinary or distorting expenditures. In the United States context, the indirect cost rate is negotiated between the organization and the cognizant Federal agency. 8 Manual: Comprehensive and step-by-step guide to a particular topic for both beginners and practitioners that also serves as a reference book. A manual details what is given and what is required, explains how to put the presented information into practice, and instructs how to solve problems as they occur. This term is commonly used interchangeably with handbook. 9 On-the-job training: Training provided informally when an individual is in the process of beginning a new job. Organization chart: Visual representation of how an organization intends authority, responsibility, and information to flow within its formal organizational structure. It usually depicts different management functions (accounting, finance, human resources, etc.) and their subdivisions as boxes linked with lines. 10 Out-of-pocket expense: Incidental cash expenditures in business, often minor while traveling. 11 Paper trail: Can be paper or electronic documentation of a step-by-step history of a transaction. It enables someone to trace the financial data from a general ledger to the source document (invoice, receipt, voucher, etc.) The presence of a reliable and easy to follow audit trail is an indicator of good internal controls instituted by a firm. 12 Payables: Money owed to creditors, lenders, employees, or government (taxes), presented as a liability in the balance sheet of a firm. 13 Qualified audit report: A qualified opinion suggests that the information provided was limited in scope and/or the company being audited has not maintained GAAP accounting principles. 14 Receivables: Accounting term for amount due from a customer, employee, supplier (as a rebate or refund), or any other party (May 4, 2010) 8 (May 4, 2010) 9 (May 4, 2010) 10 (May 4, 2010) 11 (June 7, 2010) 12 (May 4, 2010) 13 (June 7, 2010) 14 (May 4, 2010) 15 (June 7, 2010) FinMAT, the Financial Management Assessment Tool 21

30 finmat Salary: Agreed-upon and regular compensation for employment that is, in common practice, paid on a monthly or biweekly basis and is not based on an hourly, daily, weekly, or piece-work basis. 16 Service mix: The combination of programs offered by an organization. Signatory: Person who binds himself or herself, or the entity he or she is authorized to represent, by his or her signature to the terms of an agreement. 17 Signing off: To give approval for a specific transaction or activity. Stock: Consumable items kept in a significant number in order to conduct programmatic activities. Stock card: An inventory control document that lists the available quantity of a particular product. 18 Structured orientation: A formal series of trainings. System: Set of detailed methods, procedures, and routines established or formulated to carry out a specific activity, perform a duty, or solve a problem. 19 Trial balance: In double entry bookkeeping, aggregate of all debit and credit balances at the end of an accounting period that (1) shows if the general ledger is in balance (total debits equal total credits) before making closing entries, (2) serves as a worksheet for making closing entries, and (3) provides the basis for creating draft financial statements. 20 Wage: Monetary remuneration computed on hourly, daily, weekly, or piece-work basis. 21 Unqualified audit report: Independent auditor s declaration that he or she has no reservation in certifying that the audited firm s financial statements (1) adequately disclose material information, (2) present fairly its financial position, and (3) show results of its operations in conformity with GAAP. Also called unqualified opinion or clean opinion (May 4, 2010) 17 (May 4, 2010) 18 (May 4, 2010) 19 (May 4, 2010) 20 (May 4, 2010) 21 (May 4, 2010) 22 (May 4, 2010) 22 FinMAT, the Financial Management Assessment Tool

31 FinMAT Assessment Form Component 1: Organization and Personnel This component covers the elements of organizational structure and human resource management functions that support financial management functions. Indicate YES or NO in response to whether your organization meets each criterion, and enter the evidence on which you base your response. Signatories Ethics Wage & Salary Scales 1.1I An official document outlines authorized signatories, and all signatories are aware of their responsibilities. 1.2B All signatories are aware of what it means to have signatory authority. SIGNATORIES 1.3A The organization has written policies and standards for ethical behavior that are provided to all staff members. Policies are in line with local labor law. Training is provided on standards for ethical behavior to all employees as deemed appropriate. 1.4I The organization has written policies and standards for ethical behavior that are provided to all staff members. Policies are in line with local labor law. 1.5B The organization has written policies and standards for ethical behavior. Policies are in line with local labor law. ETHICS 1.6A Actual wages and salaries are set based on established scales based on job types. Scales are available to all staff members within those scales. 1.7I Actual wages and salaries are set based on established scales based on job types. 1.8B Wage and salary scales exist and are based on job types. WAGE AND SALARY SCALES FinMAT, the Financial Management Assessment Tool 23

32 FinMAT Assessment Form Component 1: Organization and Personnel (cont.) CFO Experience Criminal Check Finance Staff Experience 1.9A The Chief Financial Officer has 10 years of financial management experience and appropriate educational credentials. 1.10I The Chief Financial Officer has at least 8 years of financial management experience, or 5 years of financial management experience and appropriate educational credentials. 1.11B The Chief Financial Officer has at least 5 years of financial management experience. CFO EXPERIENCE 1.12I The organization checks the credit and criminal histories of individuals hired for financial positions to ensure that they have clean records, in accordance with available information and local laws. CRIMINAL CHECK 1.13A Other than the CFO, at least 90% of financial staff have 2 years of relevant experience, and some staff have relevant professional qualifications. 1.14I Other than the CFO, at least 75% of financial staff have 2 years of experience, and some staff are studying for their professional examinations. 1.15B Other than the CFO, at least 50% of financial staff have 2 years of experience. FINANCE STAFF EXPERIENCE 24 FinMAT, the Financial Management Assessment Tool

33 FinMAT Assessment Form Component 1: Organization and Personnel (cont.) Fin Mgmt Perf Mtgs Job Descriptions Orientation 1.16A Managers hold monthly meetings to review financial management performance objectives and resolve related issues. 1.17I Managers hold at least quarterly meetings to review financial management performance objectives and resolve related issues. 1.18B Managers establish basic performance objectives for financial management performance (e.g., quarterly report deadlines). FINANCIAL MANAGEMENT PERFORMANCE MEETINGS 1.19I Written job descriptions describing responsibilities and listing tasks exist for all types of finance jobs. Staff members have copies of their job descriptions; the job descriptions reflect what people actually do. 1.20B Written job descriptions describing responsibilities and listing tasks exist for all types of finance jobs. JOB DESCRIPTIONS 1.21A Staff participate in an organized orientation and training which includes financial management topics. 1.22I Staff receive on-the-job training related to financial management. ORIENTATION FinMAT, the Financial Management Assessment Tool 25

34 FinMAT Assessment Form Component 1: Organization and Personnel (cont.) Performance Measures Performance Reviews 1.23A Each finance staff member s individual annual work plan specifies their performance objectives, and how their performance will be measured; and these performance measures are agreed on. 1.24I All staff have individual annual work plans that specify individual objectives for the year. 1.25B All staff have individual annual work plans that describe activities to be carried out during the year. PERFORMANCE MEASURES 1.26A Annual performance reviews assess staff performance against performance objectives. Annual performance reviews contribute to decisions regarding promotion or salary increases. Situations of low performance are actively addressed and resolved through the supervisory system. 1.27I Supervisors complete staff appraisals at least annually and note areas for improvement. Situations of low performance are actively addressed and resolved through the supervisory system. 1.28B Supervisors complete staff appraisals at least annually and note areas for improvement. PERFORMANCE REVIEWS 26 FinMAT, the Financial Management Assessment Tool

35 FinMAT Assessment Form Component 1: Organization and Personnel (cont.) Conflict of Interest 1.29A The organization has written policies against engaging in transactions which pose a conflict of interest, and all staff must certify their agreement. 1.30I The organization has written policies against engaging in transactions which pose a conflict of interest. CONFLICT OF INTEREST FinMAT, the Financial Management Assessment Tool 27

36 FinMAT Summary Form Component 1: Organization and Personnel Your Highest Possible Notes SIGNATORIES INTERMEDIATE No ADVANCED option ETHICS ADVANCED WAGE AND SALARY SCALES ADVANCED CFO EXPERIENCE ADVANCED CRIMINAL CHECK INTERMEDIATE No ADVANCED or BASIC options FINANCE STAFF EXPERIENCE ADVANCED FINANCIAL MANAGEMENT PERFORMANCE MEETINGS ADVANCED JOB DESCRIPTIONS INTERMEDIATE No ADVANCED option ORIENTATION ADVANCED No BASIC option PERFORMANCE MEASURES ADVANCED PERFORMANCE REVIEWS ADVANCED CONFLICT OF INTEREST ADVANCED No BASIC option Your Highest Possible Advanced Intermediate Basic Pre-Basic Advanced Intermediate Basic Pre-Basic 28 FinMAT, the Financial Management Assessment Tool

37 FinMAT Summary Form Component 1: Organization and Personnel (cont.) Finding 1) Findings: Analyze evidence and competence level of subcomponents (as above) in order to develop findings. Finding 2) Finding 3) Finding 4) Finding 5) FinMAT, the Financial Management Assessment Tool 29

38 FinMAT Assessment Form Component 2: Budgeting This component covers the budget process, approval, control, and reporting; it also links to annual operational planning and to multiyear strategic planning. Indicate YES or NO in response to whether your organization meets each criterion, and enter the evidence on which you base your response. Policies and Procedures 2.1A A policy and procedures manual exists for budgeting, and is readily available to all staff members involved in budgeting. The established budgeting policies and procedures meet generally accepted management practices and cover the critical areas of: roles and responsibilities review and approval processes reporting processes variance detection and analysis The staff members involved in budgeting are systematically oriented or trained in the contents of the policy and procedures manual. 2.2I A policy and procedures manual exists for budgeting, and is readily available to all staff members involved in budgeting. The established budgeting policies and procedures meet generally accepted management practices and cover the critical areas of: roles and responsibilities review and approval processes reporting processes variance detection and analysis 30 FinMAT, the Financial Management Assessment Tool

39 FinMAT Assessment Form Component 2: Budgeting (cont.) Policies and Procedures Budget Templates Annual Budgets 2.3B The established budgeting policies and procedures meet generally accepted accounting practices and cover the critical areas of: roles and responsibilities review and approval processes reporting processes variance detection and analysis POLICIES AND PROCEDURES 2.4B Staff members have the budget templates and related report formats they need to record, track, and document activities and expenses. BUDGET TEMPLATES 2.5B The organization has an annual budget development process in place, including steps for review and approval. Annual budgets are directly tied to the organization s annual operational plans. ANNUAL BUDGETS FinMAT, the Financial Management Assessment Tool 31

40 FinMAT Assessment Form Component 2: Budgeting (cont.) Annual Budgets & Operating Plans Multiyear Budgets Budget Process 2.6A The annual budgets are able to meet the donors needs in regard to segregation of programs and costs. Annual budgets are directly tied to the organization s annual operational plans and are developed by program and/or department. 2.7I The annual budgets are able to meet the donors needs in regard to segregation of programs and costs. Annual budgets are directly tied to the organization s annual operational plans. 2.8B The annual budgets are able to meet the donors needs in regard to segregation of programs and costs. ANNUAL BUDGETS & OPERATING PLANS 2.9A A multiyear budget is developed with the involvement of all senior managers. The multiyear budget is linked to multiyear strategic plans and guides the annual budgeting system. 2.10I A multiyear budget is developed with the involvement of all senior managers. MULTIYEAR BUDGETS 2.11A The budget process covers projected: ongoing revenues and expenditures occasional or special revenues (like grants) and expenditures (like those incurred to carry out specific activities) capital expenditures BUDGET PROCESS 32 FinMAT, the Financial Management Assessment Tool

41 FinMAT Assessment Form Component 2: Budgeting (cont.) Indirect Cost Rate Benefits Acctg System 2.12A The organization can identify and track expenses related to the indirect costs associated with managing programs. The organization has established a methodology for allocating the indirect costs across the programs that are benefitted and successfully recovers the indirect costs from donors. 2.13I The organization can identify and track expenses related to the indirect costs associated with managing programs. The organization has established a methodology for allocating the indirect costs across the programs that are benefitted. 2.14B The organization can identify and track expenses related to the indirect costs associated with managing programs. INDIRECT COST RATE 2.15B The organization budgets for expenses related to benefits. BENEFITS 2.16A Budgets are integrated into the accounting system. ACCOUNTING SYSTEM FinMAT, the Financial Management Assessment Tool 33

42 FinMAT Assessment Form Component 2: Budgeting (cont.) Expenditure Reporting Budget Reporting Capital Projects 2.17A Budget performance reports are produced. Variances (both deficits and surpluses) are identified. Reasons for variances are determined, and recommendations for corrective actions are developed and implemented. 2.18I Budget performance reports are produced. Variances (both deficits and surpluses) are identified. Reasons for variances are determined, and recommendations for corrective actions are developed. 2.19B Budget performance reports are produced. Variances (both deficits and surpluses) are identified. EXPENDITURE REPORTING 2.20I Budget performance reports are produced at least: monthly 2.21B Budget performance reports are produced: quarterly BUDGET REPORTING 2.22B The costs of capital projects are fully researched and approved by an authorized senior official. CAPITAL PROJECTS 34 FinMAT, the Financial Management Assessment Tool

43 FinMAT Summary Form Component 2: Budgeting Your Highest Possible Notes POLICIES AND PROCEDURES ADVANCED BUDGET TEMPLATES BASIC ANNUAL BUDGETS BASIC ANNUAL BUDGETS & OPERATING PLANS ADVANCED MULTIYEAR BUDGETS ADVANCED No BASIC option BUDGET PROCESS ADVANCED No INTERMEDIATE or BASIC options INDIRECT COST RATE ADVANCED BENEFITS BASIC ACCOUNTING SYSTEM ADVANCED No INTERMEDIATE or BASIC options EXPENDITURE REPORTING ADVANCED BUDGET REPORTING INTERMEDIATE No ADVANCED or BASIC options CAPITAL PROJECTS BASIC Your Highest Possible Advanced Intermediate Basic Pre-Basic Advanced Intermediate Basic FinMAT, the Financial Management Assessment Tool 35

44 FinMAT Summary Form Component 2: Budgeting (cont.) Finding 1) Findings: Analyze evidence and competence level of subcomponents (as above) in order to develop findings. Finding 2) Finding 3) Finding 4) Finding 5) 36 FinMAT, the Financial Management Assessment Tool

45 FinMAT Assessment Form Component 3: Accounting and Record-keeping This component covers the chart of accounts, vouchers, the trial balance, the general ledger and journal entry adjustments, management accounts, and financial statements. Indicate YES or NO in response to whether your organization meets each criterion, and enter the evidence on which you base your response. Manual 3.1A A policy and procedures manual exists for accounting and record-keeping and is readily available to those staff. The established policies and procedures meet generally accepted accounting principles (GAAP) and cover the critical areas of: roles and responsibilities (including separation of duties) review and approval processes reporting processes processing financial transactions The staff members involved in accounting and record-keeping are systematically oriented to and trained in the contents of the policy and procedures manual. 3.2I A policy and procedures manual exists for accounting and record-keeping and is readily available to those staff. The established policies and procedures meet generally accepted accounting principles (GAAP) and cover the critical areas of: roles and responsibilities (including separation of duties) review and approval processes reporting processes processing financial transactions FinMAT, the Financial Management Assessment Tool 37

46 FinMAT Assessment Form Component 3: Accounting and Record-keeping (cont.) Manual Retaining Financial Records 3.3B The established policies and procedures meet generally accepted accounting principles (GAAP) and cover the critical areas of: roles and responsibilities (including separation of duties) review and approval processes reporting processes processing financial transactions MANUAL 3.4A Written policies exist for retaining financial records and supporting documents, are compliant with local laws and/or donor requirements, are available to all staff, are followed consistently, and are reviewed as necessary to ensure validity. 3.5I Written policies exist for retaining financial records and supporting documents, are compliant with local laws and/or donor requirements, are available to the relevant staff and are followed consistently. 3.6B Written policies exist for retaining financial records and supporting documents, are compliant with local laws and/or donor requirements, and are available to staff members in those areas. RETAINING FINANCIAL RECORDS 38 FinMAT, the Financial Management Assessment Tool

47 FinMAT Assessment Form Component 3: Accounting and Record-keeping (cont.) Access to Records Chart of Accounts 3.7B Accounting records are maintained on computers, and limited access is provided only to those needing to process transactions. ACCESS TO RECORDS 3.8A A written chart of accounts exists that accurately reflects categories of income, expenditures, assets and liabilities. The chart of accounts includes account codes for all possible budget line items and is approved by the appropriate senior official. The chart of accounts structure has multiple levels, so that staff can examine important details (for instance by organizational units, regions, or projects/programs). 3.9I A written chart of accounts exists that accurately reflects categories of income, expenditures, assets and liabilities. The chart of accounts includes account codes for all possible budget line items and is approved by the appropriate senior official. 3.10B A written chart of accounts exists that accurately reflects categories of income, expenditures, assets and liabilities. CHART OF ACCOUNTS FinMAT, the Financial Management Assessment Tool 39

48 FinMAT Assessment Form Component 3: Accounting and Record-keeping (cont.) Forms Payment Vouchers Adjustments 3.11B Staff members have the accounting forms, journals, registers, and ledgers they need to record and file transactions and create a paper trail for audits. 3.12B Payment vouchers are filed per payment reference number with supporting documentation. All transactions are supported by vouchers approved by an official who did not prepare them and works outside the voucher system. FORMS PAYMENT VOUCHERS 3.13A Vouchers are properly coded in accordance with the chart of accounts. The review of year-end journal entry report does not reveal numerous, large, or unusual adjusting entries. Any necessary reclassifications were completed within 2 months of the original transaction. 3.14I Vouchers are properly coded in accordance with the chart of accounts. The review of year-end journal entry report does not reveal numerous, large, or unusual adjusting entries. 3.15B Vouchers are properly coded in accordance with the chart of accounts. ADJUSTMENTS 40 FinMAT, the Financial Management Assessment Tool

49 FinMAT Assessment Form Component 3: Accounting and Record-keeping (cont.) Trial Balance Preparation Trial Balance Journal Entries 3.16A The trial balance is prepared at least: monthly 3.17I The trial balance is prepared at least: every six weeks 3.18B The trial balance is prepared at least: quarterly TRIAL BALANCE PREPARATION 3.19A The trial balance is balanced within: 4 weeks of the end of the month 3.20I The trial balance is balanced within at least: 6 weeks of the end of the fiscal period 3.21B The trial balance is balanced within at least: 3 months of the end of the fiscal period TRIAL BALANCE 3.22B A sequential record of all journal entries is maintained. Journals are entered sequentially into the transaction journal. JOURNAL ENTRIES FinMAT, the Financial Management Assessment Tool 41

50 FinMAT Assessment Form Component 3: Accounting and Record-keeping (cont.) Journal Entry Review Financial Reporting Policies 3.23A The Chief Accounting Officer (or the person designated by him or her) reviews for validity all journal entries that exceed a certain amount. All other journal entries are checked for validity and approved by an appropriate accounting officer. 3.24I The Chief Accounting Officer (or the person designated by him or her) reviews all journal entries for validity. 3.25B All journal entries are checked for validity and approved by a senior accounting officer. JOURNAL ENTRY REVIEW 3.26A Written policies exist for external financial reporting, are followed consistently, and are reviewed as necessary. 3.27I Written policies exist for external financial reporting, are available to the relevant staff members, and are followed consistently. 3.28B Written policies exist for external financial reporting and are available to the relevant staff members. FINANCIAL REPORTING POLICIES 42 FinMAT, the Financial Management Assessment Tool

51 FinMAT Assessment Form Component 3: Accounting and Record-keeping (cont.) Frequency of Financial Reports Financial & Program Mgmt Reports 3.29I Financial reports for different management areas (e.g., departments) are prepared: monthly 3.30B Financial reports for different management areas (e.g., departments) are prepared: quarterly FREQUENCY OF FINANCIAL REPORTS 3.31A Management reports, showing both financial and nonfinancial indicators (e.g., service statistics and activities indicators) for different management areas are prepared: monthly 3.32I Management reports, showing both financial and nonfinancial indicators (e.g., service statistics and activities indicators) for different management areas are prepared at least: quarterly FINANCIAL & PROGRAM MANAGEMENT REPORTS FinMAT, the Financial Management Assessment Tool 43

52 FinMAT Assessment Form Component 3: Accounting and Record-keeping (cont.) Timeliness of Reports Report Analysis 3.33A Management reports are issued within: 1 month of the end of the fiscal period 3.34I Management reports are issued within at least: 6 weeks of the end of the fiscal period 3.35B Management reports are issued within at least: 3 months of the end of the fiscal period TIMELINESS OF REPORTS 3.36A Management reports are analyzed comparing financial and nonfinancial indicators, such as expense ratios and service statistics. REPORT ANALYSIS 44 FinMAT, the Financial Management Assessment Tool

53 FinMAT Assessment Form Component 3: Accounting and Record-keeping (cont.) Annual Financial Statement Production 3.37A Annual financial statements are prepared in accordance with international accounting standards and are issued and approved within: 2 months of the end of the fiscal year 3.38I Annual financial statements are prepared in accordance with international accounting standards and are issued and approved within at least: 3 months of the end of fiscal year 3.39B Annual financial statements are prepared in accordance with international accounting standards and are issued and approved within at least: 6 months of the end of the fiscal year ANNUAL FINANCIAL STATEMENT PRODUCTION FinMAT, the Financial Management Assessment Tool 45

54 FinMAT Assessment Form Component 3: Accounting and Record-keeping (cont.) 3.40A The annual financial statements include a balance sheet and an income statement. Annual Financial Statements The annual financial statements report information about expenses for specific program services, supporting services, and donors (in ways that meet donors reporting requirements). The annual financial statements include a statement of cash flows. 3.41I The annual financial statements include a balance sheet and an income statement. The annual financial statements report information about expenses for specific program services, supporting services, and donors (in ways that meet donors reporting requirements). 3.42B The annual financial statements include a balance sheet and an income statement. ANNUAL FINANCIAL STATEMENTS 46 FinMAT, the Financial Management Assessment Tool

55 FinMAT Summary Form Component 3: Accounting and Record-keeping Your Highest Possible Notes MANUAL ADVANCED No INTERMEDIATE or BASIC options RETAINING FINANCIAL RECORDS ADVANCED ACCESS TO RECORDS BASIC CHART OF ACCOUNTS ADVANCED FORMS BASIC PAYMENT VOUCHERS BASIC ADJUSTMENTS ADVANCED TRIAL BALANCE PREPARATION ADVANCED TRIAL BALANCE ADVANCED JOURNAL ENTRIES BASIC JOURNAL ENTRY REVIEW ADVANCED FINANCIAL REPORTING POLICIES ADVANCED FREQUENCY OF FINANCIAL REPORTS INTERMEDIATE No ADVANCED option FINANCIAL & PROGRAM MANAGEMENT REPORTS ADVANCED No BASIC option TIMELINESS OF REPORTS ADVANCED REPORT ANALYSIS ADVANCED No INTERMEDIATE or BASIC options ANNUAL FINANCIAL STATEMENT PRODUCTION ADVANCED ANNUAL FINANCIAL STATEMENTS ADVANCED FinMAT, the Financial Management Assessment Tool 47

56 FinMAT Summary Form Component 3: Accounting and Record-keeping (cont.) Your Highest Possible Advanced Intermediate Basic Pre-Basic Advanced Intermediate Basic 48 FinMAT, the Financial Management Assessment Tool

57 FinMAT Summary Form Component 3: Accounting and Record-keeping (cont.) Finding 1) Findings: Analyze evidence and competence level of subcomponents (as above) in order to develop findings. Finding 2) Finding 3) Finding 4) Finding 5) FinMAT, the Financial Management Assessment Tool 49

58 FinMAT Assessment Form Component 4: Purchasing and Procurement This component covers procurement policies and procedures, purchase orders and requisitions, receipt of goods and services, and monitoring of purchases and payments. Indicate YES or NO in response to whether your organization meets each criterion, and enter the evidence on which you base your response. 4.1A The established purchasing and procurement policies manual meets good management practices and covers the critical areas of: roles and responsibilities review and approval compliance with donor rules and regulations procurement tracking Policies & Procedures Policies are systematically and consistently applied in the purchase of goods and services. The staff members involved in purchasing and procurement are systematically oriented to or trained in the contents of the policy and procedures manual. 4.2I The established purchasing and procurement policies manual meets good management practices and covers the critical areas of: roles and responsibilities review and approval compliance with donor rules and regulations procurement tracking Policies are systematically and consistently applied in the purchase of goods and services. 50 FinMAT, the Financial Management Assessment Tool

59 FinMAT Assessment Form Component 4: Purchasing and Procurement (cont.) Policies & Procedures Approved Budgets Forms 4.3B The established purchasing and procurement policies meet good management practices and cover the critical areas of: roles and responsibilities review and approval compliance with donor rules and regulations procurement tracking POLICIES & PROCEDURES 4.4B All proposed purchases are reviewed against approved budgets before a purchase is initiated. APPROVED BUDGETS 4.5B Staff members have the purchasing and procurement forms, documents, and registers they need to record and file activities and transactions and to create a paper trail for audits. FORMS FinMAT, the Financial Management Assessment Tool 51

60 FinMAT Assessment Form Component 4: Purchasing and Procurement (cont.) Timely Procurement 4.6B Goods and services are procured in a timely manner to avoid tying up resources in unnecessary stock and to prevent stock-outs that hinder completing immediate activities. TIMELY PROCUREMENT Vendors 4.7B Appropriate procurement procedures have been developed that encourage or ensure competition among vendors and are appropriate for the organization s market circumstances, funding, and required volumes. VENDORS Purchase Orders 4.8B Purchase requisitions and purchase orders are properly completed for all purchases and prepared by authorized persons only. PURCHASE ORDERS 52 FinMAT, the Financial Management Assessment Tool

61 FinMAT Assessment Form Component 4: Purchasing and Procurement (cont.) Authorizing Purchases Recording POs Receiving Goods & Services 4.9I All documents are signed by authorized officials. The person authorizing the purchase requisition is not allowed to also authorize the purchase order. There are clearly defined levels of authority for approving different values of purchases. 4.10B All documents are signed by authorized officials. The person authorizing the purchase requisition is not allowed to also authorize the purchase order. AUTHORIZING PURCHASES 4.11I All purchase orders are recorded in a register per policies and procedures. RECORDING PURCHASE ORDERS 4.12B A Goods Received Note is completed by an authorized official for all goods received. All discrepancies between the goods or services ordered and those received are recorded in a register, and each entry is signed by the agent making the delivery. RECEIVING GOODS & SERVICES FinMAT, the Financial Management Assessment Tool 53

62 FinMAT Assessment Form Component 4: Purchasing and Procurement (cont.) Use of Donor Funds Capital Projects Separation Purch. & Payment Prices 4.13B Prices on each supplier s invoice are matched with the contract or purchase order. 4.14B The purchasing function is separate from the payment function. PRICES SEPARATION OF PURCHASING & PAYMENT 4.15B Any increases in the costs for capital projects are investigated and paid only if approved by an authorized senior officer. CAPITAL PROJECTS 4.16B Existing systems and practices ensure that all donorfunded purchases are acquired according to the terms specified by each donor. USE OF DONOR FUNDS 54 FinMAT, the Financial Management Assessment Tool

63 FinMAT Summary Form Component 4: Purchasing and Procurement POLICIES & PROCEDURES APPROVED BUDGETS FORMS TIMELY PROCUREMENT VENDORS PURCHASE ORDERS AUTHORIZING PURCHASES RECORDING PURCHASE ORDERS RECEIVING GOODS & SERVICES PRICES SEPARATION OF PURCHASING & PAYMENT CAPITAL PROJECTS USE OF DONOR FUNDS Your Highest Possible Notes ADVANCED BASIC BASIC BASIC BASIC BASIC INTERMEDIATE BASIC BASIC BASIC BASIC BASIC BASIC Your Highest Possible Advanced Intermediate Basic Pre-Basic Advanced Intermediate Basic FinMAT, the Financial Management Assessment Tool 55

64 FinMAT Summary Form Component 4: Purchasing and Procurement (cont.) Finding 1) Findings: Analyze evidence and competence level of subcomponents (as above) in order to develop findings. Finding 2) Finding 3) Finding 4) Finding 5) 56 FinMAT, the Financial Management Assessment Tool

65 FinMAT Assessment Form Component 5: Payroll This component covers the labor information system, payroll policies and procedures, staff remuneration, and payroll control. Indicate YES or NO in response to whether your organization meets each criterion, and enter the evidence on which you base your response. Policies & Proc Manual Payroll Policies and Procedures Manual 5.1I A policy and procedures manual exists for payroll. 5.2B Clear policies and procedures for payroll have been established by the appropriate office or officer and communicated to all applicable staff. POLICIES & PROCEDURES MANUAL 5.3A There is a manual documenting established payroll policies and procedures which meet generally accepted accounting practices (GAAP) or IFRS and cover the critical areas of: roles and responsibilities review and approval implementation monitoring and reporting segregation of duties The payroll policies and procedures are readily available within the work area of all staff members involved in payroll. The staff members involved in payroll are oriented to or trained in the contents of the policy and procedures manual. FinMAT, the Financial Management Assessment Tool 57

66 FinMAT Assessment Form Component 5: Payroll (cont.) Payroll Policies and Procedures Manual Operations 5.4I There is a manual documenting established payroll policies and procedures which meet generally accepted accounting practices (GAAP) or IFRS and cover the critical areas of: roles and responsibilities review and approval implementation monitoring and reporting segregation of duties The payroll policies and procedures are readily available within the work area of all staff members involved in payroll. 5.5B The established payroll policies and procedures meet generally accepted accounting practices (GAAP) or IFRS and cover the critical areas of: roles and responsibilities review and approval implementation monitoring and reporting segregation of duties PAYROLL POLICIES AND PROCEDURES MANUAL 5.6B Payroll operations are carried out according to the established policies and procedures. OPERATIONS 58 FinMAT, the Financial Management Assessment Tool

67 FinMAT Assessment Form Component 5: Payroll (cont.) Separation of Files Check Distribution Terms Forms 5.7B Staff members have the payroll forms, documents, and registers they need to record and track activities and transactions and to create a paper trail for audits. FORMS 5.8B All employees have written terms regarding rate of pay and applicable withholdings. TERMS 5.9B Payroll checks are distributed by someone who did not prepare the actual check. When an individual is suspended, retires, resigns, leaves, or dies, the details are promptly communicated to the payroll processing department, whose staff members stop future payments. CHECK DISTRIBUTION 5.10B Personnel records are kept separately from payroll department records. SEPARATION OF FILES FinMAT, the Financial Management Assessment Tool 59

68 FinMAT Assessment Form Component 5: Payroll (cont.) Compensation Non-salary Comp. Time & Attendance System 5.11B Each new appointee s compensation level is approved by an authorized official and communicated to the payroll processing department. COMPENSATION 5.12B Nondirect salary items paid to personnel, such as overtime, travel allowances, housing benefits, and merit awards, conform to established policies and procedures, including approval by an authorized official. NON-SALARY COMPENSATION 5.13A A time and attendance system is used and supports salary and wage payments. The time worked is approved by the staff member s supervisor. Through the time and attendance process, staff members analyze leave and absenteeism to ensure that employees only claim and are paid what has been approved in line with policies and regulations. 5.14I A time and attendance system is used and supports salary and wage payments. The time worked is approved by the staff member s supervisor. 5.15B A time and attendance system is used and supports salary and wage payments. TIME & ATTENDANCE SYSTEM 60 FinMAT, the Financial Management Assessment Tool

69 FinMAT Assessment Form Component 5: Payroll (cont.) Overtime Allocating Time 5.16A Supervisor approval is required for payment of overtime. Overtime payments are reviewed and monitored. There are controls in place to minimize overtime payments and overtime payments are reviewed and monitored on a monthly basis. 5.17I Supervisor approval is required for payment of overtime. Overtime payments are reviewed and monitored. 5.18B Supervisor approval is required for payment of overtime. OVERTIME 5.19I There is a system for allocating time to projects, activities, or departments. ALLOCATING TIME FinMAT, the Financial Management Assessment Tool 61

70 FinMAT Summary Form Component 5: Payroll POLICIES & PROCEDURES MANUAL PAYROLL POLICIES AND PROCEDURES MANUAL OPERATIONS FORMS TERMS CHECK DISTRIBUTION SEPARATION OF FILES COMPENSATION NON-SALARY COMPENSATION TIME & ATTENDANCE SYSTEM OVERTIME ALLOCATING TIME Your Highest Possible Notes INTERMEDIATE ADVANCED BASIC BASIC BASIC BASIC BASIC BASIC BASIC ADVANCED ADVANCED BASIC Your Highest Possible Advanced Intermediate Basic Pre-Basic Advanced Intermediate Basic 62 FinMAT, the Financial Management Assessment Tool

71 FinMAT Summary Form Component 5: Payroll (cont.) Finding 1) Findings: Analyze evidence and competence level of subcomponents (as above) in order to develop findings. Finding 2) Finding 3) Finding 4) Finding 5) FinMAT, the Financial Management Assessment Tool 63

72 FinMAT Assessment Form Component 6: Timely Payment and Invoicing of Goods and Services This component checks that all payments are made and all invoices are sent out in a timely manner. Indicate YES or NO in response to whether your organization meets each criterion, and enter the evidence on which you base your response. Payroll Payments to Vendors Discounts/Penalties 6.1B All payroll payments are paid on a timely basis, in compliance with applicable labor laws. 6.2A Authorized payments to vendors are made within 30 days of receiving invoices. 6.3I Authorized payments to vendors are made within 60 days of receiving invoices. 6.4B Authorized payments to vendors are made within 90 days of receiving invoices. PAYROLL PAYMENTS TO VENDORS 6.5I A procedure exists to ensure that payments are made within a time frame to take advantage of any applicable vendor discounts and to avoid penalties. DISCOUNTS/PENALTIES 64 FinMAT, the Financial Management Assessment Tool

73 FinMAT Assessment Form Component 6: Timely Payment and Invoicing of Goods and Services (cont.) Reimbursements Invoices 6.6A All reimbursements for authorized employee travel and out-of-pocket purchases are made within 15 days 6.7I All reimbursements for authorized employee travel and out-of-pocket purchases are made within 30 days 6.8B At least 90% of reimbursements for authorized employee travel and out-of-pocket purchases are made within 30 days. REIMBURSEMENTS 6.9A The organization invoices donors and customers within the month when goods or services are provided. 6.10I The organization invoices donors and customers within 15 days following the month when goods or services are provided. 6.11B The organization invoices donors and customers within 30 days following the month when goods or services are provided. INVOICES FinMAT, the Financial Management Assessment Tool 65

74 FinMAT Assessment Form Component 6: Timely Payment and Invoicing of Goods and Services (cont.) Outstanding Receivables Outstanding Payables 6.12A There are procedures for regular follow-up on outstanding receivables. OUTSTANDING RECEIVABLES 6.13B There is a system for regular follow-up on outstanding payables. OUTSTANDING PAYABLES 66 FinMAT, the Financial Management Assessment Tool

75 FinMAT Summary Form Component 6: Timely Payment and Invoicing of Goods and Services PAYROLL PAYMENTS TO VENDORS DISCOUNTS/PENALTIES REIMBURSEMENTS INVOICES OUTSTANDING RECEIVABLES OUTSTANDING PAYABLES Your Highest Possible Notes BASIC ADVANCED BASIC ADVANCED ADVANCED BASIC BASIC Your Highest Possible Advanced Intermediate Basic Pre-Basic Advanced Intermediate Basic FinMAT, the Financial Management Assessment Tool 67

76 FinMAT Summary Form Component 6: Timely Payment and Invoicing of Goods and Services (cont.) Finding 1) Findings: Analyze evidence and competence level of subcomponents (as above) in order to develop findings. Finding 2) Finding 3) Finding 4) Finding 5) 68 FinMAT, the Financial Management Assessment Tool

77 FinMAT Assessment Form Component 7: Cash Management This component covers receiving and depositing monies, controlling cash and the use of checks and receipts, and reconciling cash and bank statements. Indicate YES or NO in response to whether your organization meets each criterion, and enter the evidence on which you base your response. 7.1A A manual outlines established policies and procedures for cash control, banking, and cash flow that meet generally accepted good management practices and cover the critical areas of: roles and responsibilities (including segregation of duties) review and approval processes implementation monitoring and reporting safeguarding of assets Manual The manual is readily available to all staff. The staff members involved in cash control, banking, and cash flow are trained or oriented in the contents of the manual. 7.2I A manual outlines established policies and procedures for cash control, banking, and cash flow that meet generally accepted good management practices and cover the critical areas of: roles and responsibilities (including segregation of duties) review and approval processes implementation monitoring and reporting safeguarding of assets The manual is readily available to all staff members. FinMAT, the Financial Management Assessment Tool 69

78 FinMAT Assessment Form Component 7: Cash Management (cont.) Manual Forms Receipts 7.3B The established policies and procedures for cash control, banking, and cash flow meet generally accepted good management practices and cover the critical areas of: roles and responsibilities (including segregation of duties) review and approval processes implementation monitoring and reporting safeguarding of assets MANUAL 7.4B Cash control, banking, and cash flow are generally no carried out according to the established policies and procedures. Staff members have the forms, documents, and registers for cash control, banking, and cash flow that they need to record and file activities and transactions and create a paper trail for audits. FORMS 7.5B Pre-numbered receipts are issued in sequence for all monies received. Receipts indicate whether payment was made in cash, check, credit card, or other (with a description provided for other. ) RECEIPTS 70 FinMAT, the Financial Management Assessment Tool

79 FinMAT Assessment Form Component 7: Cash Management (cont.) Separation of Duties 7.6B The person handling cash receipts does not sign checks, reconcile bank statements, reconcile cash deposits to receipt books, or post to the General Ledger. Check Security Key Security Bank Accounts SEPARATION OF DUTIES 7.7I An authorized official locks up the unused stocks of receipts and checkbooks. Whenever the authorized official issues stocks of receipts or checkbooks, the recipient must sign for them. A control register is maintained for the checks issued. CHECK SECURITY 7.8I A policy is in place and enforced regarding key usage. KEY SECURITY 7.9B A bank account can be opened or closed only if the chief executive officer or the board authorizes it. BANK ACCOUNTS FinMAT, the Financial Management Assessment Tool 71

80 FinMAT Assessment Form Component 7: Cash Management (cont.) Separate Accounts Authorized Signatories Signatory s 7.10B Funds from each donor are deposited in a separate bank account when the agreement or contract requires it. SEPARATE ACCOUNTS 7.11B Authorized signatories on bank accounts are limited to a few key individuals within the organization. AUTHORIZED SIGNATORIES 7.12I One or two senior officers not involved in purchasing can sign checks over a predetermined amount. For checks under the predetermined amount, the officer(s) may have delegated this responsibility to a less senior individual. 7.13B One or two senior officers not involved in purchasing can sign checks over a predetermined amount. SIGNATORY LEVELS 72 FinMAT, the Financial Management Assessment Tool

81 FinMAT Assessment Form Component 7: Cash Management (cont.) Deposits Endorsing Checks Regular Deposits Review 7.14B Purchase orders, receiving reports, and vendor invoices are attached to the payment vouchers and are presented with checks for the signer's review. REVIEW 7.15B All cash and checks received are deposited regularly (daily or weekly) in a bank account after being reconciled to receipts. The amount of undeposited cash kept in the office is minimal and is kept in a safe. All receipts and payments are recorded in the transaction journal at the time that the cash comes in and goes out. REGULAR DEPOSITS 7.16B Checks received are restrictively endorsed by the person opening the mail (i.e., stamped For Deposit Only with the name of the organization and bank account number.) ENDORSING CHECKS 7.17B The official who reconciles cash deposits to receipt books is different from the individual who receives and deposits the cash. DEPOSITS FinMAT, the Financial Management Assessment Tool 73

82 FinMAT Assessment Form Component 7: Cash Management (cont.) Check Management Use of Cash Cash Flow Acctg for Money 7.18B On a regular basis, an individual not involved with cash management verifies that all monies received are accounted for. ACCOUNTING FOR MONEY 7.19I Staff prepare a monthly forecast of cash flow to ensure that adequate funds will be available to meet commitments. CASH FLOW 7.20B Cash received is registered prior to making direct payments or transferring it to the petty cash box. USE OF CASH 7.21B All checks are issued in sequence and accounted for. Signed blank checks and checks issued to cash or to the bearer are strictly prohibited. CHECK MANAGEMENT 74 FinMAT, the Financial Management Assessment Tool

83 FinMAT Assessment Form Component 7: Cash Management (cont.) Register Reconciliation Irreconcilable Entries 7.22I The transaction journal is reconciled to bank statements on a monthly basis. 7.23B The transaction journal is reconciled to bank statements on a quarterly basis. REGISTER RECONCILIATION 7.24B All items that could not be reconciled are investigated and resolved. IRRECONCILABLE ENTRIES Review of Reconciliation 7.25B A senior authorized official reviews the bank reconciliation and signs it. REVIEW OF RECONCILIATION FinMAT, the Financial Management Assessment Tool 75

84 FinMAT Assessment Form Component 7: Cash Management (cont.) Cash Box 7.26I There are written policies regarding: The size and circumstances under which items may be purchased with petty cash from the cash box. The timeliness of refills of the cash box to ensure adequate cash for small expenses. The location of the locked cash box in a secure place. The limited access to the cash box to one authorized individual. The recording of cash box receipts in ink. The responsibility of the person managing the cash box for any short balances. There is an established formal handover of the cash box when the person usually responsible for the cash box will not be available for a period of time. 7.27B There are written policies regarding: The monetary size of and the circumstances under which items may be purchased with petty cash from the cash box. The timely refill of the cash box to ensure adequate cash for small expenses. The secure location of the locked cash box. The access to the cash box limited to one authorized individual. The recording of cash box receipts in ink. CASH BOX 76 FinMAT, the Financial Management Assessment Tool

85 FinMAT Assessment Form Component 7: Cash Management (cont.) Cash Reconciliation Petty Cash as Imprest Fund 7.28I The cash box is reconciled to cash box receipts on a monthly basis. 7.29B The cash box is reconciled to cash box receipts on a quarterly basis. CASH RECONCILIATION 7.30A Petty cash is treated as an imprest fund (a fund with a fixed balance). PETTY CASH AS IMPREST FUND FinMAT, the Financial Management Assessment Tool 77

86 FinMAT Summary Form Component 7: Cash Management Your Highest Possible Notes MANUAL ADVANCED FORMS BASIC RECEIPTS BASIC SEPARATION OF DUTIES BASIC CHECK SECURITY INTERMEDIATE No ADVANCED or BASIC options KEY SECURITY INTERMEDIATE No ADVANCED or BASIC options BANK ACCOUNTS BASIC SEPARATE ACCOUNTS BASIC AUTHORIZED SIGNATORIES BASIC SIGNATORY LEVELS INTERMEDIATE REVIEW BASIC REGULAR DEPOSITS BASIC ENDORSING CHECKS BASIC DEPOSITS BASIC ACCOUNTING FOR MONEY BASIC CASH FLOW INTERMEDIATE No ADVANCED or BASIC options USE OF CASH BASIC CHECK MANAGEMENT BASIC REGISTER RECONCILIATION INTERMEDIATE IRRECONCILABLE ENTRIES BASIC REVIEW OF RECONCILIATION BASIC CASH BOX INTERMEDIATE CASH RECONCILIATION INTERMEDIATE PETTY CASH AS IMPREST FUND ADVANCED No INTERMEDIATE or BASIC options 78 FinMAT, the Financial Management Assessment Tool

87 FinMAT Summary Form Component 7: Cash Management (cont.) Your Highest Possible Advanced Intermediate Basic Pre-Basic Advanced Intermediate Basic FinMAT, the Financial Management Assessment Tool 79

88 FinMAT Summary Form Component 7: Cash Management (cont.) Finding 1) Findings: Analyze evidence and competence level of subcomponents (as above) in order to develop findings. Finding 2) Finding 3) Finding 4) Finding 5) 80 FinMAT, the Financial Management Assessment Tool

89 FinMAT Assessment Form Component 8: Stock, Inventory, and Fixed Assets This component covers policies and procedures for receiving, storing, and controlling stock; stock records and counts; and the custody, recording, and inspection of fixed assets. Indicate YES or NO in response to whether your organization meets each criterion, and enter the evidence on which you base your response. Policies & Procedures 8.1A A manual outlines established policies and procedures for stock management, inventory and fixed assets that meet generally accepted good management practices and cover the critical areas of: roles and responsibilities review and approval processes implementation monitoring and reporting The manual is readily available to all staff. The staff members involved with stock management, inventory, and fixed assests are trained in or oriented to the contents of the manual. 8.2I A manual outlines established policies and procedures for stock management, inventory and fixed assets that meet generally accepted good management practices and cover the critical areas of: roles and responsibilities review and approval processes implementation monitoring and reporting The manual is readily available to all staff. FinMAT, the Financial Management Assessment Tool 81

90 FinMAT Assessment Form Component 8: Stock, Inventory, and Fixed Assets (cont.) Policies & Procedures Policy Implmentation Forms 8.3B Established policy and procedures exist for stock management, inventory, and fixed assets, and meets generally accepted practices and cover the critical areas of: roles and responsibilities review and approval processes implementation monitoring and reporting POLICIES & PROCEDURES 8.4B Stock, inventory, and fixed asset management is carried out according to the established policies and procedures. POLICY IMPLEMENTATION 8.5B The appropriate officer has the forms, documents, and registers for stock management, inventory, and fixed assets that are needed to record and file activities and transactions and to create a paper trail for audits. FORMS 82 FinMAT, the Financial Management Assessment Tool

91 FinMAT Assessment Form Component 8: Stock, Inventory, and Fixed Assets (cont.) Safeguarding Stock Manager 8.6B All consumables are safely stored in a separate, secure area, following protocols for safeguarding against heat, water, theft, or other loss, and are insured as appropriate. SAFEGUARDING 8.7I An individual has been appointed or designated as stock manager, with complete responsibility for consumables. The stock manager follows First In First Out (FIFO) stock protocols. Stock management, inventory, and fixed assets are generally carried out according to established policies and procedures. 8.8B An individual has been appointed or designated as stock manager, with complete responsibility for consumables. The stock manager follows First In First Out (FIFO) stock protocols. STOCK MANAGER FinMAT, the Financial Management Assessment Tool 83

92 FinMAT Assessment Form Component 8: Stock, Inventory, and Fixed Assets (cont.) 8.9A Independent officials undertake periodic stock counts and compare their results to stock records. Physical counts of stocks that cycle quickly or that are of high value are done monthly to ensure that the physical items agree with the amounts and values recorded in the policies and procedures manual and/or computer system. Staff members follow up all discrepancies between the physical count and recorded figures. Adjustments to the recorded stock figures require the approval of an authorized senior manager. 8.10I Independent officials undertake periodic stock counts and compare their results to stock records. Physical counts of stocks that cycle quickly or that are of high value are done monthly to ensure that the physical items agree with the amounts and values recorded in the policies and procedures manual and/or computer system. 8.11B Independent officials undertake periodic stock counts and compare their results to stock records. STOCK COUNTS 8.12B The stores have stock card records showing quantities of items, balances, amounts received, and amounts issued. Separate Stores Requisitions or Consumable Order forms need to be completed and authorized before consumables are issued from the stores. RECORD-KEEPING Stock Counts Record-keeping 84 FinMAT, the Financial Management Assessment Tool

93 FinMAT Assessment Form Component 8: Stock, Inventory, and Fixed Assets (cont.) Computer System Fixed Assets Custodian 8.13A Stock records are maintained as part of a computerized system which provides informational reports on minimum and maximum stock levels, prompts for re-order levels, and notes expired items. 8.14B There is a system in place to record deliveries to and from the warehouse. COMPUTER SYSTEM 8.15B An individual has been appointed or designated as custodian with complete responsibility for fixed assets. FIXED ASSETS CUSTODIAN FinMAT, the Financial Management Assessment Tool 85

94 FinMAT Assessment Form Component 8: Stock, Inventory, and Fixed Assets (cont.) System Listings 8.16A Fixed assets are recorded in a register or computerized management system. For each asset, it lists: The date the asset was acquired Description Original cost Location Custodian Unique tracking number Accumulated depreciation Book value Supplier Related maintenance contracts 8.17I Fixed assets are recorded in a register or computerized management system. For each asset, it lists: The date the asset was acquired Description Original cost Location Custodian Unique tracking number 8.18B Fixed assets are recorded in a register or computerized management system. For each asset, it lists: The date the asset was acquired Description Original cost Location Custodian SYSTEM LISTINGS 86 FinMAT, the Financial Management Assessment Tool

95 FinMAT Assessment Form Component 8: Stock, Inventory, and Fixed Assets (cont.) Fixed Asset Inventory 8.19B Fixed assets are periodically inventoried, and all missing items are followed up. FIXED ASSET INVENTORY FinMAT, the Financial Management Assessment Tool 87

96 FinMAT Summary Form Component 8: Stock, Inventory, and Fixed Assets Your Highest Possible Notes POLICIES & PROCEDURES ADVANCED POLICY IMPLEMENTATION BASIC FORMS BASIC SAFEGUARDING BASIC STOCK MANAGER INTERMEDIATE STOCK COUNTS ADVANCED RECORD-KEEPING BASIC COMPUTER SYSTEM ADVANCED No INTERMEDIATE option FIXED ASSETS CUSTODIAN BASIC SYSTEM LISTINGS ADVANCED FIXED ASSET INVENTORY BASIC Your Highest Possible Advanced Intermediate Basic Pre-Basic Advanced Intermediate Basic 88 FinMAT, the Financial Management Assessment Tool

97 FinMAT Summary Form Component 8: Stock, Inventory, and Fixed Assets (cont.) Finding 1) Findings: Analyze evidence and competence level of subcomponents (as above) in order to develop findings. Finding 2) Finding 3) Finding 4) Finding 5) FinMAT, the Financial Management Assessment Tool 89

98 FinMAT Assessment Form Component 9: Audit This component covers internal and external audits, including authorized audit personnel, the audit charter, reporting responsibilities, auditing emphasis and support, follow up on discrepancies, and staff training. Indicate YES or NO in response to whether your organization meets each criterion, and enter the evidence on which you base your response. Audit Validity of Annual Reports 9.1I The organization is audited by a certified public accounting firm or by government officials as required by government regulations. An internal audit function exists. 9.2B The organization is audited by a certified public accounting firm or by government officials as required by government regulations. AUDIT 9.3A Annual financial statements comply with the appropriate international standards in all respects and are issued with a formal statement from an independent audit firm that the annual accounts truly reflect all financial activities. The Comptroller (or designee) is required to sign a formal statement confirming that the annual accounts are a true reflection of all financial activities. 9.4I Annual financial statements comply with the appropriate international standards in all respects and are issued with a formal statement from an independent audit firm that the annual accounts truly reflect all financial activities. 9.5B Annual financial statements comply with the appropriate international standards in all respects. VALIDITY OF ANNUAL REPORTS 90 FinMAT, the Financial Management Assessment Tool

99 FinMAT Assessment Form Component 9: Audit (cont.) Internal Audit Audit Charter Lines of Reporting Audit Results 9.6A The organization has unqualified annual financial statements for the last 5 years. 9.7I The organization has unqualified annual financial statements for the last 3 years. 9.8B The organization has unqualified annual financial statements for the last year. AUDIT RESULTS 9.9A The internal audit function reports directly to the Board of Directors. 9.10I The internal audit function reports to the Chief Financial Officer or Director of Finance. LINES OF REPORTING 9.11A There is an internal audit charter that establishes the mandate and line authority for audits. The head office has approved the internal audit charter. 9.12I There is an internal audit charter that establishes the mandate and line authority for audits. AUDIT CHARTER 9.13A Comprehensive internal audit procedures exist. The internal audit procedures are periodically reviewed and strengthened. 9.14I Comprehensive internal audit procedures exist. INTERNAL AUDIT FinMAT, the Financial Management Assessment Tool 91

100 FinMAT Assessment Form Component 9: Audit (cont.) Audit Planning Auditor Preparation/Training 9.15I Areas that are at high risk for fraud and of high value are identified in the planning process. The internal audit effort emphasizes these areas. 9.16B Internal audits are carefully planned in advance. AUDIT PLANNING 9.17A The internal audit manager and deputies have received advanced training, including overseas exposure if such training is not available within the country. 9.18I The internal audit staff receive sufficient training (both formal and on the job ) to carry out their duties effectively. 9.19B The internal audit staff are properly briefed before going into the field. AUDITOR PREPARATION/TRAINING 92 FinMAT, the Financial Management Assessment Tool

101 FinMAT Assessment Form Component 9: Audit (cont.) 9.20I Procedures exist for independently logging and verifying totals for financial controls (e.g., batch and document counts). Verification Audit Report Review Discrepancies are followed up, and losses of information are investigated. All discrepancies and instances of noncompliance are properly documented, investigated, and either resolved or included in internal audit reports. 9.21B Procedures exist for independently logging and verifying totals for financial controls (e.g., batch and document counts). VERIFICATION 9.22I The audit report is reviewed by the Chief Financial Officer or Finance Director. AUDIT REPORT REVIEW FinMAT, the Financial Management Assessment Tool 93

102 FinMAT Assessment Form Component 9: Audit (cont.) Staff Experience Use of Computers 9.23A The internal audit unit is staffed by adequately experienced officials: The Audit Manager has at least 6 years of experience in auditing. All other staff have at least 3 years of experience in auditing. 9.24I The internal audit unit is staffed by adequately experienced officials: The Audit Manager has at least 4 years of experience in auditing. All other staff have at least 2 years of experience in auditing. 9.25B The internal audit unit is staffed by adequately experienced officials: The Audit Manager has at least 2 years of experience in auditing. STAFF EXPERIENCE 9.26A The internal auditors audit the computerized accounting controls and use computer-assisted audit techniques where possible and necessary. USE OF COMPUTERS 94 FinMAT, the Financial Management Assessment Tool

103 FinMAT Summary Form Component 9: Audit Your Highest Possible Notes AUDIT INTERMEDIATE VALIDITY OF ANNUAL REPORTS ADVANCED AUDIT RESULTS ADVANCED LINES OF REPORTING ADVANCED No BASIC option AUDIT CHARTER ADVANCED No BASIC option INTERNAL AUDIT ADVANCED No BASIC option AUDIT PLANNING INTERMEDIATE AUDITOR PREPARATION/TRAINING ADVANCED VERIFICATION INTERMEDIATE AUDIT REPORT REVIEW INTERMEDIATE No ADVANCED or BASIC options STAFF EXPERIENCE ADVANCED USE OF COMPUTERS ADVANCED No INTERMEDIATE or BASIC options Your Highest Possible Advanced Intermediate Basic Pre-Basic Advanced Intermediate Basic FinMAT, the Financial Management Assessment Tool 95

104 FinMAT Summary Form Component 9: Audit Finding 1) Findings: Analyze evidence and competence level of subcomponents (as above) in order to develop findings. Finding 2) Finding 3) Finding 4) Finding 5) 96 FinMAT, the Financial Management Assessment Tool

105 FinMAT Assessment Form Component 10: Use of Information This component covers the use of information to develop budgets, assess performance, and make management decisions. Indicate YES or NO in response to whether your organization meets each criterion, and enter the evidence on which you base your response. Use of Actual Expenditures Use of Financial Performance Measures 10.1B Actual expenditures are used to develop new budgets. USE OF ACTUAL EXPENDITURES 10.2A Financial measures are integrated with nonfinancial performance measures to evaluate performance of managers or functional units, consistently. 10.3I Financial measures are used to evaluate performance of managers or functional units, consistently. 10.4B Financial measures are used to evaluate performance of managers or functional units, but not consistently. USE OF FINANCIAL PERFORMANCE MEASURES FinMAT, the Financial Management Assessment Tool 97

106 FinMAT Assessment Form Component 10: Use of Information (cont.) Data for Decision-Making Donor Reports Analysis of Budget Perf 10.5A Managers analyze budget performance to make decisions about modifying activity plans. Managers analyze information, such as expense ratios, trends, and burn rate, and use their results to prepare budgets and make key decisions about service mix, staffing patterns, expansion of services, etc. 10.6I Managers analyze budget performance to make decisions about modifying activity plans. DATA FOR DECISION-MAKING 10.7B Donor reports are submitted on time with accurate information. DONOR REPORTS 10.9A Managers analyze information on financial performance on an ongoing basis, looking for a high percentage of donor funds spent before the end of the project and a low percentage of rejected expenses from expense reports to the donor. ANALYSIS OF BUDGET PERFORMANCE 98 FinMAT, the Financial Management Assessment Tool

107 FinMAT Summary Form Component 10: Use of Information Your Highest Possible Notes USE OF ACTUAL EXPENDITURES BASIC USE OF FINANCIAL PERFORMANCE MEASURES ADVANCED DATA FOR DECISION-MAKING ADVANCED No BASIC level DONOR REPORTS BASIC ANALYSIS OF BUDGET PERFORMANCE ADVANCED No INTERMEDIATE or BASIC levels Your Highest Possible Advanced Intermediate Basic Pre-Basic Advanced Intermediate Basic FinMAT, the Financial Management Assessment Tool 99

108 FinMAT Summary Form Component 10: Use of Information (cont.) Finding 1) Findings: Analyze evidence and competence level of subcomponents (as above) in order to develop findings. Finding 2) Finding 3) Finding 4) Finding 5) 100 FinMAT, the Financial Management Assessment Tool

109 Detailed Summary and Action Plan Make as many copies of this form as as you need. Based on the summaries for each component and the responses to the criteria, list the unit s identified weaknesses, explain why this situation exists, and indicate what specific actions are required for improvement. You may want to group and analyze the identified weaknesses for several criteria from several different components together. Criterion Nos./Area Identified Weaknesses Why Does This Situation Exist? Specific Actions Required for Improvement Timeline Person(s) Responsible Resources Needed Indicators of Achievement Date Completed FinMAT, the Financial Management Assessment Tool 101

110 Detailed Summary and Action Plan (cont.) Criterion Nos./Area Identified Weaknesses Why Does This Situation Exist? Specific Actions Required for Improvement Timeline Person(s) Responsible Resources Needed Indicators of Achievement Date Completed 102 FinMAT, the Financial Management Assessment Tool

111 About Management Sciences for Health Management Sciences for Health (MSH) is an international nonprofit organization, dedicated to closing the gap between what is known about the overwhelming public health challenges facing many nations and what is done to address those challenges. Since 1971, MSH has worked in more than 100 countries with policymakers, health professionals, and health care consumers to improve the quality, availability, and affordability of health services. We work with governments, donors, nongovernmental organizations, and health agencies to respond to priority health problems such as HIV/AIDS, tuberculosis, malaria, child health, and reproductive health. Our publications and electronic products augment our assistance in these technical areas. MSH s staff of more than 1,300 from almost 70 nations work in its Cambridge, Massachusetts, headquarters; offices in the Washington, DC, area; and more than 25 country offices. Through technical assistance, research, training, and systems development, MSH is committed to making a lasting difference in global health. For more information about Management Sciences for Health, please visit our web site at For a catalog of MSH s publications, please contact: MSH Bookstore 784 Memorial Drive Cambridge, MA Telephone: Fax: [email protected]