The basic components of a fiscal management system include:

1. Financial planning: the process of identifying the resources that are needed to implement the strategic plan. A financial plan is similar to the organization’s budget because it identifies revenues and expenses. However, the financial plan usually covers a time period of two to five years while the budget is usually a one-year plan.

2. Budget management: the system for developing, approving and managing the budget. Each organizational unit or program area is responsible for working with the chief executive officer (CEO) and/or the chief financial officer (CFO) to develop or request its budget for the coming year. The budget is approved by the board of directors (the board) or the governing body. The CFO is responsible for monitoring revenues and expenses and for identifying variances from the budget.

3. Cash management: the system for ensuring that the organization has sufficient cash to meet its needs. Employees reconcile and review bank statements and account balances regularly to ensure accuracy.

4. The accounting system: a system that conforms to fiscal policies and procedures approved by the board or the governing body. The accounting system operates with a chart of accounts that matches revenue and expenses to funding sources, organizational units and/or multiple sites.

5. Payroll: the operation of compensation of employees. It includes controls on hiring, firing and salary adjustments. Payroll requires documentation of time and effort. Payroll accounts for time off, advances or loans to employees, employees’ withholding taxes and employer taxes.

6. Accounts receivable: the system used to manage the amounts owed to the organization by its customers. Most providers of human services meet with customers to determine customers’ fees based on a sliding scale. The accounts receivable system usually includes billing to third party payers such as Medicaid or Medicare.

7. Accounts payable: the system for managing the amounts paid out to the organization’s vendors. Accounts payable usually requires approval of purchase orders for large items or employee travel reimbursement and the co-signing of checks.

8. Purchasing and fixed assets: the systems that control the buying of and accounting for assets or equipment. A periodic inventory of assets is performed. Depreciation, which is the decline in the value of an asset over time, may be tracked in a system of accounting for fixed assets.

9. Grants management: the system for ensuring compliance with requirements of grants or contracts. Usually, the grant or contract specifies expenditure or line item controls, performance measures, deliverables and reporting requirements. Cost allocation plan: the method for allocating revenue and expenses to the organizational divisions or functional areas. The cost allocation plan ensures that each organizational program area bears a proportionate share of administrative costs of the organization. The cost allocation plan tracks employee time and effort to ensure that labor costs are charged to the appropriate organizational unit.

10. Reporting: the system that presents all fiscal information in formats that are useful for decision making. Reporting includes internal reports, reports to the board or governing body and reports to grantors or other funding sources.