Saturday, July 19, 2008


Next in the series according to the COA website:



"Sound financial management begins with an organization's commitment to providing high quality services relative to its mission or purpose. Leadership creates a culture of honesty and ethics in all areas of organizational practice, including the management of the organization's finances and the manner in which it conducts financial affairs. Accountability is established through clearly defined lines of authority and responsibility, and personnel receive a clear message from the top that internal control responsibilities are to be taken seriously. Additionally, the attention and commitment of the governing body and its audit committee to their fiduciary responsibilities are essential to ensuring that the organization's financial practices enable it to achieve operational effectiveness and efficiency, accurate and reliable financial reporting, and compliance with applicable laws and regulations."

1. Governing Body Financial Responsibilities. The governing body must do the following:
  • Approves the annual budget and any revisions to the budget.
  • Reviews fiscal summaries at least quarterly to evaluate expenses against revenues.
  • Ensures that budget-to-actual variance analyses are performed after year end numbers are finalized.
  • Reviews fiscal policy and the recommendations of the organization's auditors.
  • Annually evaluates the executive director's management of the organization's affairs.
They want to make sure that the adoption agency is a financially sound organization.

2. Internal Control Environment.

The organization establishes an internal control system that includes mechanisms for:
  • Review by the governing body's audit committee.
  • Management review by more than one indivdual.
  • Assurance that management directives are carried out.
  • Prevention of error, mismanagement, or fraud.
  • Safeguarding and verification of assets.
  • Segregation of duties to the extent possible.
Most of this is about quality assurance which is to prevent issues from happening or change policy if there is an issue. However, there is a great expectation of trust. With international adoption, there is a great deal of money ($7.3 billion dollars). Too many of these adoption agencies have family members that help them cover for everything.

A. The governing body's audit committee (I want to know who is the audit committee for most of these adoption agencies. If it is members of the board or the adoption agency, again we are expected to have a huge ability to trust. It just isn't there for me.):
  • Selects and meets with an independent auditor.
  • Reviews the annual audit.
  • Makes a recommendation to the full board.
  • Reviews findings of the auditor's evaluation of the organization internal control system.
I know that here in Texas that adoption agencies are inspected at the minimum of once a year. I know that not all states inspect adoption agencies. In most states, there is not public access record of complaints against adoption agencies. In Texas there is.

B. Audit committee members cannot also serve as a top manager of the organization or receive compensation for professional services that they provide as consultants.

C. The principal executive and financial officers certify in writing that the financial statements are accurage and fairly represent the financial condition and operationss of the organization.

3. Financial Risk Assessment.

The governming body and management evaluate the organization's financial capacities, risks, and resources needed to provide services.

4. Stable Predictable Revenue.

The organization pursues stable, predictable sources of revenue through diversification and balances in funding streams consistent with its mission and programs. (I wonder if this includes lobbying of legislators to give them certain state contracts for foster care. I wonder if this includes targeting certain women into relinquishing their children. In the back of my mind, I wonder also about the new restrictions on contraception, abstinence only policies, and abortion. Is this going to feed the adoption mill? I have heard stories that at the NCFA conventions, they discuss the best markets to find "product." Yes that is how it is discussed amongst them.

5. Financial Planning.

Planning for the current fiscal cycle is an organization-wide and involves key stakeholders.(Again this word again - this needs further clarification in adoption. We have way too many conflict of interests.
  • An annual budget serves as a plan for managing the organization's financial resources.
  • The budget planning process includes participation of management, the governing body and other relevant organization participants is based on:
  1. Direct and indirect operating expenditures.
  2. Contractual requirements.
  3. Performance improvement data.
  4. Changing costs and conditions.
  5. Anticipated revenue for the program year.
  • The executive director reports to the governing body on the organization's finances including: a.) Current financial status and any anticipated problems. (Like when you might get sued by an adoptive or natural parent) b.) Financial planning and planning alternatives.
  • Financial information is routinely analyzed and the information includes the following:
  1. A monthly analysis of financial performance against budget projection with budget-to-actual variance analysis performed on interim financial statements of activities.
  2. Service revenues and actual service delivery costs.
  3. An annual inventory of significant assets, including securities. (Make sure you count those babies.)
  • The organization conducts a cost analysis of its various services and can identify the following:
  1. The fixed and variable costs of each unit of service at each program and service delivery site.
  2. The average costs or charges of treatment for identified groups of consumers. (Who is the consumer in this equation?)
  3. The contribution of services to the overall revenue base.
  • The cost analysis is conducted at intervals established by the organization and information is used to:
  1. Analyze operational effectiveness and efficiency.
  2. Monitor trends, current experiences and changes in cost.
  3. Contract, bill, and charge fees for its services.
  4. Budget for the current fiscal cycle.
Financial Accountibility

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

  • Upon request the organization provides an annual report of fiscal, statistical and service data that includes summary information regarding its financial position (Guidestar gives you that information for free. I think its important for both adoptive parents and natural parents to access this information. It will help you make a better decision.) Interpretation as per the COA: Organizations receiving in excess of $300,000 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 Management and Debt 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.
  • The organization with annual revenues at or in excess of $500,000 or one that is otherwise require 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. (Again expecting a great deal of trust here.)
  • The audit committee of the governing body:
  1. Meets with the independent auditor to review the findings of the audit or review of financial statements accompanying financial information, and any accompanying management letter.
  2. Reviews and formally accepts such reports within 180 days of the close of the fiscal year.
  3. Reports the findings at the next of fiscal meeting of the governing body.
  4. Works in partnership with the executive director to promptly act on recommendations.
Financial Management System.

Positive financial outcomes are achieved through a financial management system that receives, disburses, and accounts for funds consistent with sound financial practices.
  • Annual financial statements are prepared in accordance with Generally Accepted Accounting Principles.
  • The organization's financial system is capable of providing information that is:
  1. Is useful in making business and economic decisions.
  2. Is understandable and will aid in predicting future cash flows. (Can we say baby selling?)
  3. Includes data economic resources, claims to those resources (obligations) and the effects of transactions, events, and circumstances that change resources and claims to resources.
  • Accounting practices and procedures include:
  1. Prompt, accurate, and complete recording of revenues and expenses.
  2. An exclusive and descriptive chart of accounts.
  3. Information on all funds, including source information and pertinent regulations.
  4. Timely payment of financial obligations.
  5. Policies for recognizing revenues and expenses.
  6. Disbursement and receipt of monies.
  • The organization seeks to conserve its fiscal resources by (How do you conserve your fiscal resources in adoption?):
  1. Taking advantage of tax exemptions, where applicable.
  2. Maintaining sound practices regarding purchasing and inventory control. (How do you count babies or how do you count expectant mothers? This is just wacked here. We are talking human lives. If they are accrediting EAP programs, Debt Consolidation and adoption agencies, explain to me where the human factor is in this "inventory and purchasing control."
  3. Coordinating the purchase of goods or services among internal divisions.
  4. Using competitive biddings , when applicable according to governing body policy and law or regulation.
  • Accounting records are kept up to date and balanced on a monthly basis as demonstrated by:
  1. Reconcilation of the bank statements and subsidiary records to the general ledger.
  2. Up to date posting of cash receipts and disbursements.
  3. Monthly updating of the general ledger.
  4. Review of the bank reconciliation by at leats two personnel, one of who is not involved in maintaining the accounting records.
  • The organization uses accrual method of accounting, at least at the end of the year.
  • Oversight and Management of the organization's accounting system requires:
  1. A fiscal officer or business manager who is responsible for maintaining the financial accounts has prior accounting and bookkeeping experience and accounting degree or C.P.A. credential, as an appropriate to the size and complexity of the organization.
  2. All personnel who use the system to receive initial and on going training on its use.
  3. A proper audit trail.
  4. Secure access, controlled by user IDs, passwords, and permissible login times.
  • Where applicable, the organization makes timely payments to or provides proof of exemption from the following taxing authorities:
  1. Internal Revenue Service
  2. State and Local employment tax bodies
  3. FICA
  4. Property tax assessors
  • An organization that assumes fiduciary responsibility for clients funds or disburses client or non fee for service funds to service recipients (Not applicable the organizatino does not assume fiduciary responsibility for, or disburses client or non fee for service funds to service recipients:
  1. Segregates client funds.
  2. Complies with applicable legislative, regulatory, judicial, and governmental requirements.
(Who are we talking about here? Are we talking about the EAP providers, debt consolidation companies or adoption agencies? Who again is the client which is the service recipient? According to the COA, the definition is one and the same. )
  • The organization that provides services as a vendor (an organizaton that sells services) establishes safeguards against over- and under- billing that include:
  1. An accurate account of units of service provided.
  2. Timely submission of invoices and required documents
  3. Compliance with applicable regulation.
Not applicable - The organization is not a vendor of services. (If you think about all of the organizations accredited by the COA they are vendors of services. They all provide services to their clients. One sells emotional health services to clients, one helps the client clear up their debts, and the other gets babies for adopters. There is no clear definition of services for adoption. )
  • The organization determines the basis for any denial of coverage or payment under insurance or contractual agreements and follow ups with timely appeals and communication with service recipients as applicable (NA - The organization only accepts fee for service clients) Okay is the client here adoptive parents? The COA predominately accredits adoption agencies.
  • The Network management entity:
  1. Has a process for verifying the accuracy of network services billed by subcontracting service providers. (A majority of adoption agencies contract their services out. I have heard stories where adoptive parents have gotten bad homestudies because they have questioned the agency practices. On the other end of the spectrum, the adoption agency has passed homestudies that should not have passed.
  2. Maintains a formal mechanism through subcontracting providers can appeal payment denials and that includes timely written notification of the resolution and explanatory of any further appeal rights on recourse.
  • Contracted providers are informed in a timely manner if delays in payment to the network by the purchaser may result in delays in payment to provider.

Payroll practices comply with federal and state wage and hour laws.

  • Payroll practices include:
  1. Review and approval of payroll expenditures.
  2. Documentation of changes in time and overtime records.
  3. Authorization of payment for new hires and severance for terminations.
  4. Oversight for mandatory deductions and pay rates.
  5. Separation of payroll funds.
  • The organization assures annual reconciliation of gross pay, FICA withheld, and employer FICA with Federal W-2 forms.
One thing that I notice here that bugs me is the treatment of adoption agencies and the efficiency and effectiveness of business resources. I am not sure if they mean resources already earned or the incoming resources. I think adoption agencies should not be allowed to actively recruit natural parents in order to get them to relinquish their children. These agencies do discuss adoptees and their natural parents in terms of products and producers. They are always looking for new markets. They are wanting the laws changed to allow them into high schools around the country. An example of that has been in Ohio and in the case of Stephanie Bennett. A high school counselor should be concerned with a student's best interests and that should also include the parents of that student. A high school counselor should be throwing in their opinions and thoughts about adoption into the equation.

In the telecommunications industry, statistics are vitally important to make a company run efficient and effective. It is the same for the sales industry as in many industries. The adoption industry is dealing with the human element and human lives. In this it should be regulated more cautiously than the telecommunications.

No comments: