LEADERSHIP & MANAGEMENT IN HEALTH

Importance of Financial Management

Ms. Danae Hollowed, USA

My name is Danae Hollowed and I am the Director of Finance at the International Training and
Education Center for Health, in the University of Washington’s Department of Global Health. A
big part of my job is helping to define, implement and oversee the financial controls that are
used in our network of offices around the globe. When financial controls are carefully planned
and followed, you prevent possible problems that can take enormous amounts of time, energy
and money to correct.

The risk of poor financial controls are huge. One risk of poor financial controls is the
opportunity for your program to be the victim of theft or fraud. Let’s use the example of an
employee that needs to go into the field to run a training class and who needs to take cash to
pay for the venue and per diems for the participants. This trainer is given a cash advance and
will return with receipts and a reconciliation of how the funds were spent.

Good financial controls require the trainer to carefully compile a budget to calculate how much
cash they will need and to do this with plenty of time available for a budget manager to review
and approve the trainer’s request for cash. A finance person provides the cash and records the
amount that is given. The trainer should bring back original legitimate receipts and turn their
reconciliation paperwork back to the finance staff within days of the training.

We all get busy and hurried and It would be easy to not worry about some of these seemingly
small items and to not strictly enforce every step. Sometimes there are lost receipts, or a
traveler wants additional time to do their reconciliations or maybe their budget manager isn’t
available to approve a request because the traveler wants to make a last-minute request. But
every one of the financial controls I’ve mentioned is important, and the separation of duties
among several staff members is critical.

While I truly believe that most people are honest, unfortunately fraud is fairly common. You do
not want to provide any opportunity or temptation for fraud. If you make it easy for the
traveler to take out funds without getting permission from their budget manager, or do not
require them to return all of their original receipts, or allow them to reconcile months later, it is
easy to lose track of the money and you run the risk of losing funds. This impacts your work in
many ways – not only do you lose the money that could have been spent on your programs, but
lax controls tend to grow and eventually they will be exposed. This can lead to employment
dismissals, disruption and moral issues in the office, audit findings and a loss of confidence from
your funder.

It takes an enormous amount of time and effort to strengthen systems after they have been
allowed to become lax. It is much better to define clear controls up front and confirm regularly
Leadership & Management in Health online course
University of Washington 1
that all the processes are being following. A smooth running system of financial controls
requires support from the highest levels of management to empower everyone at every level to
stay in compliance. The finance clerk asking for the reconciliation needs the full support of their
management in order to enforce compliance.

All leaders need basic training in financial management. Each person has a responsibility and a
role to play. Leaders need to understand the system of financial controls in place and make it
clear who is responsible for each step and hold staff accountable to do their part. Adopt a
culture of compliance. Take any issues seriously and follow up. Don’t ever get too busy to pay
attention to the finances. A well-run system of financial controls provides the foundation on
which a successful program operates.

Leadership & Management in Health online course

University of Washington 2