9 th Annual Public Health Finance Roundtable November 3, 2012 Boston, MA

1. Accreditation and PHUND$: Using PHUND$ to Establish Standards for a “Risk-focused Surveillance Approach” to Financial Management Systems 9th Annual Public Health Finance Roundtable November 3, 2012 Boston, MA Peggy Honoré

2. Describing Accreditation Accreditation can be described as a process of ensuring acceptable levels of quality in an institution that are consistent with industry criteria. Standards are an integral component of an accreditation system and serve as assessment criteria to evaluate institutional conformity with industry-wide goals for quality that are influenced by shared principles and values. Standards can also be viewed as a reflection on the accreditation agency’s capabilities to effectively measure the ability of the organization under review to meet quality assuring criteria.2

3. Defining Accreditation Public health department accreditation is defined as the development of a set of standards, a process to measure health department performance against those standards, and reward or recognition for those health departments who meet the standards.

4. Risk-focused Surveillance Approach • Must be supported by a sound system of financial management • Should be supported by appropriate standards • Availability of timely and reliable data to self-monitor for financial strengths and risk continuously • Risk-mitigation strategies to prevent the disruption of programs and services

5. What is Financial Management Financial management involves the “application of theory and concepts to help managers make better decisions”.8(p.5) It includes the routine blending of accounting, finance, and management concepts into organizational practices as a means for minimizing the risk of financial loss.9 An effective system of financial management should enhance the decision-making process by providing the appropriate tools.8 A critically important tool is financial information.10

6. Objective of Financial Management OMB states that a key feature of these financial management systems is to “provide complete, timely, reliable and consistent information for decision makers and the public”.12(Sec 6) Ensuring transparency by providing relevant and timely financial and operational data that can be turned into information to inform decision making is a critical component of financial management. Also, it is consistent with the national public health quality aim of Transparency.13

7. Objective of Financial Management Another basic objective of financial management involves the allocation of organizational resources and the tracking of performance resulting from such allocations.11 In public service organizations, decisions are oriented to accomplishing a multitude of organizational goals while assuring a satisfactory financial position.10 A quantitative evaluation mechanism widely used in private industry and the public sector to measure financial health is ratio and trend analysis. Ratio and trend analysis are valid techniques for comparing data over multiple periods. The utility of these methods increases exponentially when data are compared industry-wide such as in benchmarking of peer institutions.

8. Examining Higher Education Standards The assessment for quality in the financial management systems used by the six Higher Education Accreditation agencies closely resembles a “risk-focused surveillance approach”14, a concept widely used in other accreditation processes. Quality is assessed by quantitatively measuring, through a review of agency financial information, financial stability, the allocation of financial resources consistent with institutional mission, and sound financial planning as a risk-mitigating strategy to prevent the disruption of programs and services.

9. Higher Education Financial Standards and Key Assessment Criteria • Standard: Planning, Resource Allocation, and Institutional Renewal • Review of Resource Allocation procedures and their relationship to planning, purpose, mission, goals, and objectives • Sound financial planning • Plans for financial contingencies • Program additions and deletions are consistent with the availability of resources • Provides sufficient resources to sustain and improve programs • Standard: Institutional Resources • Sound financial planning • Corrective action plan to strengthen financial position • Administration • Provide adequate information to support decision making

10. Higher Education Financial Standards and Key Assessment Criteria • Policy Compliance Review • Annual analysis of institution’s financial health • Organizational Governance • Board monitoring for fiscal solvency • Financial Planning • Resources to support mission and goals • 5 year history of financial stability • Adequacy of financial reserves to meet fluctuations • Report of financial adequacy • Financial Management • Resources to support mission and goals • Corrective action plan to strengthen financial position • 5 year history of financial stability • Adequacy of financial reserves to meet fluctuations • Report of financial adequacy • Diversification of revenue sources • Realistic plan to eliminate deficits • Demonstrates control over financial resources

11. PHUND$ Features to Support Strengthening of Standards • Ratio and Trend Analysis • Total Margin • Operating Surplus/Deficit • Revenue and Expenditure ratios • One-time and dedicated revenues • General Fund Balance trends • Leave liability • Financial competence of staff • Cash Flow • Other measures of financial health/stability • Program Sustainability Module • Benchmarking • Product line analysis • Dashboard • Financial Performance (Risk) Index (Exploring) • Definition of Financial Health (Exploring)

12. Current Financial Management Standards Are the PHAB measures and documentation guidance sufficient enough to make either quantitative or qualitative assessments of financial management systems?

13. PHAB Standards Domain 11: Maintain Administrative and Management Capacity Domain 11 focuses on health department management and administration capacity. Organizational administration and management is the process of organizing, leading, and controlling the efforts of organizational human and other resources to make decisions and achieve organizational goals. Health departments must have a well-managed human resources system, be competent in general financial management, have data management capacity and capability, and be knowledgeable about public health authorities and mandates.

14. PHAB Standards Standard 11.1 Develop and maintain an operational infrastructure to support the performance of public health functions A strong operational infrastructure is necessary in order to administer public health services efficiently and effectively to meet the needs of the population. By maintaining a strong organizational infrastructure, the health department can assess and improve its operations, staffing, and program support systems.

15. PHAB Standards Standard 11.2: Establish effective financial management system Sound financial practices are basic to any organization. They are required to manage resources wisely, to analyze present and future needs, to sustain operations, and demonstrate accountability. This standard measures the capacity of the health department to manage the organizations finances

16. PHAB Standards • 11.2.1 A Measure • Manage grants and contracts Purpose • Access ability to manage grants and contracts and compliance with requirements Documentation • Audited financial statements • Program reports • Full disclosure of adverse auditing findings or communications related to higher than usual level of oversight or control from funding agency

17. PHAB Standards 11.2.2 A Measure • Written agreements with entities from which the health department purchases, or delegates services, programs, interventions Purpose • Assess management of agreements with other organizations Documentation • Contracts/MOUs/MOAs

18. PHAB Standards 11.2.3 A Measure • Financial management system Purpose • Assess the LHDs ability to manage finances Documentation • Approved health department budget • Financial reports

19. PHAB Standards 11.2.4.A Measure • Resources sought to support agency infrastructure and processes, programs, and interventions Purpose • Assess the LHD activities to increase financial resources and to enhance or develop processes, programs, interventions Documentation • Formal efforts to seek additional financial resources • Communications concerning the need for financial support to maintain and improve infrastructure and services

20. PHAB Standards Standard 5.3: Develop and implement a health department organizational strategic plan Strategic planning is a process for defining and determining an organization’s roles, priorities, and direction over three to five years. A strategic plan sets forth what an organization plans to achieve, how it will achieve it, and how it will know if it has achieved it. The strategic plan provides a guide for making decisions on allocating resources and on taking action to pursue strategies and priorities. A health department’s strategic plan focuses on the entire health department. Health department programs may have program-specific strategic plans that complement and support the health department’s organizational strategic plan.

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