	Financial Management

Introduction

Administration and Management

Service Delivery Administration Standards

Service Standards

FIN 6: Financial Accountability*

The organization is accountable for the management of its finances to its governing body, the community, and applicable regulatory bodies.

Interpretation: Please note that "governing body" refers to the organization's owners in the case of privately-held for-profit organizations.

FIN 6.01

Upon request the organization provides an annual report of fiscal, statistical, and service data that includes summary information regarding its financial position.

Note: Audited financial statements and IRS Form 990 should be easily accessible for review.

NA The organization is a private, for-profit organization.

FIN 6.02

The non-profit organization with annual revenues at, or in excess of, $500,000, or the for-profit organization that is otherwise required to, undergoes an audit of its financial statements within 180 days of the end of the fiscal year by an independent, certified public accountant approved by the governing body.

Update: Revised Interpretation - 06/01/10

FIN 6.02 Original Interpretation:

Organizations receiving in excess of $500,000 in federal funds must perform an audit to comply with the requirements of the Single Audit Act, 31 U.S.C. §§ 7501 et. seq. Note that many organizations are required to perform an audit to receive grant monies, lines of credit, or other third-party funding.

All organizations accredited for Financial Education and Counseling Services, Adoption Services, and Intercountry Adoption Services must conduct an audit pursuant to this standard regardless of revenue size. Also, this requirement supplements any federal audit that is required by the government.

Interpretation: Organizations receiving in excess of $500,000 in federal funds must perform an audit to comply with the requirements of the Single Audit Act, 31 U.S.C. §§ 7501 et. seq. Note that many organizations are required to perform an audit to receive grant monies, lines of credit, or other third-party funding.

All organizations accredited for Adult Guardianship, Financial Education and Counseling Services, Adoption Services, and Intercountry Adoption Services must conduct an audit pursuant to this standard regardless of revenue size. Also, this requirement supplements any federal audit that is required by the government. When an organization accredited for Adult Guardianship acts as guardian of the estate, the external audit must include a review of client accounts at least once every three years.

NA The non-profit organization does not have revenues of $500,000 or greater.

NA The for-profit organization is not otherwise required to conduct an audit.

FIN 6.03

An organization with less than $500,000 in annual revenues, or one that is not otherwise required to file an audit, undergoes a review of financial statements that is conducted at the end of each fiscal year by an independent, certified public accountant who is approved by the governing body.

NA The organization is required to conduct an audit.

FIN 6.04

The governing body has an independent audit committee that:

selects an independent auditor;
meets with the auditor to review the findings of the audit, accompanying financial information, and any accompanying management letter;
formally accepts the auditor's report within 180 days of the close of the fiscal year;
reports the findings and makes recommendations at the next official meeting of the governing body;
works in partnership with the executive director to promptly act on recommendations in the management letter, if any; and
does not include organization staff.

Update: Revised Standard, Added First Interpretation - 12/15/11

FIN 6.04 Original Standard:

The audit committee of the governing body:

meets with the independent auditor to review the findings of the audit, accompanying financial information, and any accompanying management letter;
reviews and formally accepts such reports within 180 days of the close of the fiscal year;
reports the findings at the next official meeting of the governing body; and
works in partnership with the executive director to promptly act on recommendations.

Interpretation: In order to receive a rating of 1 for FIN 6.04 the audit committee should be separate and independent from the finance committee and the governing body as a whole. See the interpretation for FIN 1 for a discussion of the functions of the audit and finance committees.

If the audit committee is not fully independent, an organization may be able to receive a rating of 2 if:

the selection and oversight of the auditor is handled by the board's executive committee;
a board member other than the chair of the finance or executive committee is in charge of the board's audit oversight function; and
no organization staff, including the CEO and CFO, participate in any aspect of overseeing the audit process.

The American Institute of CPAs recommends as best practice that an auditing firm not provide both auditing and non-auditing services, such as bookkeeping and actuarial services to the same organization.

Interpretation: Organizations not otherwise required to have a governing body can demonstrate implementation of this standard through meeting with the auditor to review findings, reviewing reports within 180 days of the close of the fiscal year, and promptly acting on recommendations.

NA The organization is not required to conduct an audit.

FIN 6.05

The organization that undergoes a review of financial statements meets with the reviewing firm or CPA to discuss findings and the management letter, as applicable, and promptly acts on recommendations.

NA The organization is required to conduct an audit.

FIN 6.06

The executive director and financial officers certify in writing that financial statements are accurate and fairly represent the financial condition and operations of the organization.

Update: Added Standard, Moved Standard From FIN 2.03 - 12/15/11

Added Standard, Moved Standard From FIN 2.03

Interpretation: The CEO and CFO of nonprofit organizations should review IRS Form 990 before it is submitted to ensure that it is accurate, complete and filed on time.

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	PURPOSE: The organization’s financial accountability and viability are achieved through the application of sound financial management practices that accord with legal and regulatory requirements.

RELATED FILES


	ACCOUNTABILITY The extent to which an organization is answerable for its processes and outcomes to a variety of relevant stakeholders including: consumers, community representatives, governing bodies, and governmental regulators.


	PRACTICE Established actions or ways of proceeding in the regular performance of organizational duties. Policies and procedures often guide practice.


	GOVERNING BODY A person or persons with the legal authority and responsibility to set policy and oversee the operations of an organization. Generally, the governing body is a group, such as a board of directors or board of trustees. While the exact responsibilities of the governing body depend on the nature and character of the organization, the governing body has minimum fiduciary responsibilities to the organization set by statute, regulation, and case law, and typically assume responsibilities for long term planning, risk management, and evaluation and effectiveness of management.


	COMMUNITY A specific group of people living in the same locality and who may share a common culture, values, and norms. Communities can also be defined by race, religion, ethnicity, age, occupation, political status, tribal affiliation, interest in particular problems or outcomes, or other common bonds. The term "community" encompasses worksites, schools, tribes, residential neighborhoods, business districts, recreational areas, and health and human service sites.


	CASE A general term used to designate clients (including individuals, families, and groups) served by an organization for purposes of monitoring the provision of services. A foster care case is generally based on the placement of an individual child, although casework for the child may include services to the child's family. A child protective services case is based on an entire family household if a family assessment model is used; otherwise a case is defined as a child.


	FOR-PROFIT ORGANIZATION An organization that is owned or staffed by professionals and intended to make a financial profit by offering a specific service or set of services. These organizations may provide services similar to those offered by not-for-profit organizations, except that the charges to the consumers may be higher and/or established on bases different than the rate-setting criteria employed by not-for-profit organizations.


	SERVICE One or more organization-operated programs or activities that have a common general objective and deploy the organization's material and human resources in a planned and systematic manner. An organization that publicly promotes or identifies itself in writing as offering a service, is licensed to deliver a service, assigns personnel and/or space to a service, or allocates financial resources to a service is considered to offer that service.


	MANAGEMENT LETTER A letter addressed to an organization containing an auditor's conclusions regarding the organization's accounting policies and procedures, internal controls, and operating policies. The letter evaluates the organization's present system, identifies problems and recommends improvements. It is also referred to as a Letter of Recommendation.


	MANAGEMENT See ADMINISTRATION


	AUDIT See FINANCIAL AUDIT