What Is a Fiscal Intermediary in Self-Directed Care? | Cripptic Learn

To the uninitiated, participant-directed care seems daunting. It appears to demand that vulnerable individuals suddenly become payroll administrators, tax experts, and human resource managers.

This is a misconception. You do not do this alone.

The Fiscal Intermediary (FI)—often interchangeable with the term Financial Management Service (FMS)—is the invisible engine that makes self-direction possible. They act as your administrative back-office, absorbing the friction of being an employer so you can focus on managing your care, not your paperwork.¹

Key Takeaways

You Direct, They Process: You hire the staff; the FI cuts the checks and files the taxes.²
Two Primary Models: Most programs use either the Vendor Fiscal/Employer Agent (VF/EA) model (you are the employer) or the Agency with Choice (AWC) model (co-employment).³
Compliance Shield: FIs protect you from IRS audits by ensuring all tax withholdings and worker's compensation premiums are paid correctly.⁴
Budget Guardrails: They track your spending in real-time to prevent you from overspending your Medicaid allocation.⁵
EVV Management: Modern FIs provide the Electronic Visit Verification (EVV) app your staff uses to clock in.⁵

The Engine of Self-Direction

The core purpose of an FI is to facilitate "Budget Authority" and "Employer Authority."

Without an FI, the state would have to hand you cash and hope you pay your taxes correctly—a legal impossibility for Medicaid funds. Instead, the state sends the money to the FI, and the FI disburses it according to your instructions.⁴

Core Administrative Responsibilities

Payroll Processing: They calculate gross-to-net pay, withholding federal, state, and local taxes.²
Tax Filing: They file quarterly 941s and issue W-2s to your staff at year-end.²
Medicaid Compliance: They ensure every dollar spent matches an approved line item in your spending plan (e.g., "respite" vs "community access").⁶
EVV Compliance: They operate the GPS-enabled timekeeping systems required by the 21st Century Cures Act.⁵

Operational Models: VF/EA vs. AWC

Not all FIs operate the same way. The specific model used by your state waiver determines your legal liability.³

1. Vendor Fiscal/Employer Agent (VF/EA)

Who is the Employer? You (Effectively). You hold the Employer Identification Number (EIN).
FI Role: They act as your "Fiscal Agent," signing tax forms on your behalf.
Best For: Individuals who want maximum control over hiring and firing.

2. Agency with Choice (AWC)

Who is the Employer? Shared. The Agency is the primary "Employer of Record" for tax purposes.
FI Role: They hire the worker legally, but you (the "Managing Employer") select and supervise them.
Best For: Individuals who want help with the employer burden (e.g., if a worker claims unemployment).³

Division of Responsibilities

Who does what? This breakdown clarifies the boundary between "Service" and "Administration."²

Function	Participant (You)	Fiscal Intermediary (FI)
Recruiting	Finds and interviews candidates	Processes background checks
Hiring	Makes the job offer	Verifies I-9 eligibility
Scheduling	Sets daily shifts	Provides EVV software
Pay Rate	Sets wage (within budget)	Cuts the paycheck
Taxes	N/A	Withholds & files taxes
Disputes	Resolves worker conflict	Handles wage garnishments

The Information & Assistance (I&A) Role

Modern FIs are evolving beyond just "payroll processors." Many now offer Information and Assistance (I&A) services.⁵

This includes:

Skills Training: Teaching participants how to interview staff.
Budget Counseling: Helping you understand if you can afford a $2/hour raise for your worker.
Support Brokerage: Connecting you with community resources outside of Medicaid.⁷

Frequently Asked Questions (FAQ)

1. Is an FI the same as an FMS?

Yes. "Fiscal Intermediary" is an older term used heavily in New York and specific Medicaid waivers. "Financial Management Services" (FMS) is the modern federal term used by CMS. They refer to the same function.⁸

2. Does the FI decide how much I pay my worker?

No. You decide the wage, as long as it is above the state minimum wage and fits within your overall budget. The FI simply tells you if you can afford it based on your remaining funds.⁴

3. What happens if I run out of money?

The FI is required to track your utilization. If you try to approve a timesheet that exceeds your budget, the FI will likely block the payment and contact you immediately to adjust your spending plan.⁹

4. Can I seek a new FI?

In some states (like New York's CDPAP transition), you are assigned a single FI. In other states (like California's SDP), there is a marketplace of FMS providers you can choose from. Check your specific waiver rules.⁵

5. Does the FI perform background checks?

Yes. The FI will run the required criminal and abuse registry checks. However, you must often obtain the candidate's consent and review the results to make the final hiring decision.²

Suggested Visuals

Visual Recommendation: Ecosystem Infographic

Center: Fiscal Intermediary (FMS).

Top: State Medicaid Agency (Sends funds).

Right: Participant (Sends timesheets).

Bottom: IRS/Workers Comp (Receives taxes).

Left: Caregiver (Receives paycheck).

Arrows: Show the flow of data vs the flow of money.

Conclusion

The Fiscal Intermediary is not just a bank; they are your partner in compliance. By understanding the distinction between your role as the "Managing Employer" and their role as the "Fiscal Agent," you can avoid administrative pitfalls and focus on the true goal of self-direction: living a life of your own design.

Footnotes

MyCIL.org Guide. Explains the distinct differences between traditional agency care and the self-directed employer model. Reliability: Center for Independent Living. ↩
Nebraska DHHS FI Reference. Uses a simple "bank card" analogy to explain the FI's role. Reliability: State Government. ↩ ↩² ↩³ ↩⁴ ↩⁵
New Jersey DDD SDE Model Guide. Offers an excellent comparative framework for VF/EA versus AWC models. Reliability: Primary State Source. ↩ ↩² ↩³
Medicaid.gov Self-Directed Services. The federal standard definition of FMS duties. Reliability: Federal Agency. ↩ ↩² ↩³
MACPAC 2025 Report to Congress. Provides definitions of employer authority and FMS roles in fraud prevention. Reliability: Federal Advisory Commission. ↩ ↩² ↩³ ↩⁴ ↩⁵
NY OPWDD FI Guidelines. Details compliance frameworks and billing rules. Reliability: Primary State Source. ↩
ACDS Fiscal Intermediary Services. Explains the synergy between Support Brokers and the FI. Reliability: Service Provider. ↩
Michigan MDHHS Glossary. Documents the nomenclature shift from "Fiscal Intermediary" to "Financial Management Services". Reliability: State Government. ↩
Palco Employer Responsibilities Guide. Discusses the participant's role in fraud prevention. Reliability: National FMS Provider. ↩