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.
FINMAT
FinMAT, the Financial Management Assessment Tool
3
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 instru-
ment 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 catego-
rize the development of its subcomponent as being at one of the four stages of competence that are
described immediately below.
FINMAT
FinMAT, the Financial Management Assessment Tool
4
Levels 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 compe-
tence 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 spend-
ing. 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 ad-
vanced 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 instru-
ment 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 sequen-
tial 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.
Responses. 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 under-
standing 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 proce-
dures and a manual that documents these policies and procedures. If an organization has established
FINMAT
FinMAT, the Financial Management Assessment Tool
5
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 re-
cords, job descriptions, organizational charts, financial reports, financial statements, and bank
statements;
•
examination of system tools and manuals, such as registers, vouchers, receipt books, pur-
chase 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
FinMAT, the Financial Management Assessment Tool
6
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 orga-
nization 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 manage-
ment 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 assess-
ment 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 organiza-
tions 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 organiza-
tion’s financial and operational systems that might require additional capacity building, oversight,
or imposed controls.
FINMAT
FinMAT, the Financial Management Assessment Tool
7
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 op-
erations.
3) Assessing financial management and business operations
Organizations may elect to use FinMAT Option 1 to do an internal assessment of their financial man-
agement and business operations in preparation for audits or as part of an improvement, or compe-
tence-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 state-

ments (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 il-
lustrative 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 in-
tended 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 assess-
ment often leads to more detailed assessments of particular management components, such as finan-
cial 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 organi-
zational change in the medium and long term is to involve staff members and other important stake-
holders 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
FinMAT, the Financial Management Assessment Tool
8
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 organization-

wide 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 orga-
nization 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 summa-
rize 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 im-
prove, 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 differ-
ent 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
FINMAT
FinMAT, the Financial Management Assessment Tool
9
tool. Where and how specific functions are carried out will vary. For instance, in a centralized sys-
tem, 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 gov-
erned 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
FinMAT, the Financial Management Assessment Tool
10
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 state-
ments 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, indicat-
ing 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 Manage-
ment 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 assess-
ment. 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 commit-
ment 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 over-
all 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.
FINMAT
FinMAT, the Financial Management Assessment Tool
11
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, indi-
cate 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 sub-
units, 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 of-
fice 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 partici-
pation at other levels and a broader commitment to change.
Organizational example. An initial assessment at the subunit level could be perceived as a puni-
tive 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 assess-
ment—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
FinMAT, the Financial Management Assessment Tool
12
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 sub-
group. 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 as-
sesses 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 Col-
lection 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 com-
ponents, 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 subcom-
ponent, 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 sum-
mary 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.
FINMAT
FinMAT, the Financial Management Assessment Tool
13
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 situa-
tions, 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 choos-
ing N/A as a response. Since the assessment is lengthy, it may be tempting to eliminate many criteri-
on 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 func-
tions. For example, if the organization does not manage or store supplies, statements about ware-
houses 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 work-
ing copy that you can modify.
Since FinMAT organizes assessment criteria into levels of financial competence (Pre-Basic, Basic,
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 mod-
ify 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, Administra-
tive 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 carry-
ing 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
FinMAT, the Financial Management Assessment Tool
14
The Data Collection Team may choose to conduct the assessment in a 2–3 day off-site meeting, go-
ing 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 depart-
ment 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 ap-

ply. 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 an-
swer 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.

FINMAT
FinMAT, the Financial Management Assessment Tool
15
Stock,
Inventory, and
Fixed Assets
8.12B (record-keeping) The stores have stock card records showing quantities
of items, balances, amounts received, and amounts
issued. Separate Stores…, etc.
Use of
Information
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 organiza-
tion 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 manage-
ment component can broaden the perspective of all the participants. The evidence the partici-
pants 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 auto-
matically 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 pos-
sible 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
FinMAT, the Financial Management Assessment Tool
16
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 any-
thing 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 as-
sessed 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 be-
ing 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 Priori-
tizing 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 consul-
tant 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 Man-
agement 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 summa-
rize 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 rea-
sons 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:
FINMAT
FinMAT, the Financial Management Assessment Tool
17
• 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 ac-
counting 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 authori-
zation 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 indi-
cators 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.