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MSH financial mgmt asst tool 2010
FinMAT The FinAnciAl MAnAgeMenT AssessMenT Tool 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” FinMAT The FinAnciAl MAnAgeMenT AssessMenT Tool Management Sciences for Health Tel: +1.617.250.9500 784 Memorial Drive Fax: +1.617.250.9090 Cambridge, MA 02139-4613 USA Website: www.msh.org © 2010 by Management Sciences for Health All rights reserved. Published 2010. Users may photocopy the FinMAT assessment guide and forms without prior permission, for non- commercial 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. 16 15 14 13 12 11 10 1 2 3 4 5 ISBN: 978-0-9819616-3-7 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-00-00-00014-00. The opinions expressed herein are those of the authors and do not necessarily reflect the views of USAID. v conTenTs Acknowledgments vi PrefAce vii How This Guide Is Organized 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 vi Acknowledgments The original Financial Management Assessment Tool was developed by the Management and Leader- ship 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 car- ried 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 Develop- ment. 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. vii PreFAce Strong financial management is one of the supporting pillars of organizational sustainability. Spe- cifically, 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 com- petence 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 Assess- ment 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 Deci- sions” suggests ways you could improve your organization’s financial management competences and, hence, capacity. FINMAT FinMAT, the Financial Management Assessment Tool 1 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 ex- ternal consultants to assess your organization’s financial management systems and to plan improve- ments, 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 Introduc- tion sections of this guide to understand the process of assessing and improving the financial man- agement 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 FinMAT, the Financial Management Assessment Tool 2 deTerMining your iniTiAl FinAnciAl MAnAgeMenT goAl As described above, FinMAT consists of a spreadsheet instrument and a guide to its use. The spread- sheet instrument stores and summarizes the technical information that you collect about the finan- cial 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. One member of the organization or unit, or an external consultant. 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. 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 finan- cial management competence (Pre-Basic, Basic, 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 orga- nization’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 regula- tions 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. [...]... possible levels for the component 7 Proceed to the next component 12 FinMAT, the Financial Management Assessment Tool 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... http://www.businessdictionary.com/definition/auditor-s-adverse-opinion.html (May 4, 2010) http://www.investorwords.com/703/capital_expenditure.html (May 4, 2010) 3 http://www.businessdictionary.com/definition/capital-project.html (May 4, 2010) 4 http://lexicon.ft.com/term.asp?t=cash_box (June 7, 2010) 5 http://www.businessdictionary.com/definition/chart-of-accounts.html (May 4, 2010) 6 http://www.lectlaw.com/def/f080.htm (May 4, 2010) 1 2 20 FinMAT, the Financial Management... FinMAT, the Financial Management Assessment Tool 23 FinMAT Assessment Form Component 1: Organization and Personnel (cont.) Criterion to Assess Component 1.9A CFO Experience # 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. .. 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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... interviews with staff FinMAT, the Financial Management Assessment Tool 5 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... to measure progress and see if any other areas of weakness are identified FinMAT, the Financial Management Assessment Tool 19 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... 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 . 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. Using Financial Management Systems to Make Decisions” The Manager. “Using Cost and Revenue Analysis Tools” FinMAT The FinAnciAl MAnAgeMenT AssessMenT Tool Management