REPUBLIC OF KENYA. Ministry of Education State Department of Basic Education PROJECT FINANCIAL MANAGEMENT MANUAL

Transcription

1 REPUBLIC OF KENYA Ministry of Education State Department of Basic Education SECONDARY EDUCATION QUALITY IMPROVEMENT PROJECT [SEQIP] PROJECT FINANCIAL MANAGEMENT MANUAL July-2017

2 ABBREVIATIONS AND ACRONYNS AIA AIE ASAL ASALs AWP&B BOQ CBK CDE CEMASTEA CEO CFO CoB CPC CPCU CRA CRV DA DLR DPC ECS EEP EFT EMIS ERS FAR FM FMS FPE FY GER GOK GPE HAU HQs IAD ICB IDA IFAC IFMIS IFR IPSAS ISA KCPE KCSE KEMI KENAO KESSP KICD KNEC KSG KSG-eLDi Appropriation in Aid Authority to Incur Expenditure Arid and Semi-Arid Land Arid and Semi-Arid Lands Annual Work Plan and Budget Bills of Quantity Central Bank of Kenya County Director of Education Centre for Mathematics, Science and Technology Education in Africa Chief Executive Officer Chief Finance Officer Controller of Budget County Project Coordinator County Project Coordination Unit Commission for Revenue Allocation Counter Receipt Voucher Designated Account Disbursement Linked Result Deputy Project Coordinator Education Cabinet Secretary Eligible Expenditure Program Electronic Funds Transfer Education Management Information System External Resource Section Fixed Assets Register Financial Management Financial Management Specialist Free Primary Education Financial Year Gross Enrolment Rate Government of Kenya Global Partnership for Education Head of Accounting Unit Headquarters Internal Audit Department International Competitive Bidding International Development Association International Federation of Accountants Integrated Financial Management Information System Interim Financial Report International Public Sector Accounting Standards International Standards on Auditing Kenya Certificate of Primary Education Kenya Certificate of Secondary Education Kenya Education Management Institute Kenya National Audit Office Kenya Education Sector Support Program Kenya Institute for Curriculum Development Kenya National Examinations Council Kenya School of Government Kenya School of Government e-learning and Development Centre i

3 Kshs Kenyan Shillings LPO Local Purchase Order LSO Local Service Order MDAs Ministries, Departments and Agencies MDG Millennium Development Goals MoE Ministry of Education MPC Ministerial Procurement Committee MTC Ministerial Tender Committee MTP Medium-Term Plan NCB National Competitive Bidding NER Net Enrolment Rate NESP National Education Sector Plan DPC&D National Project Coordinator NT National Treasury O&M Operations and Maintenance PAC Principal Accounts Controller PAD Project Appraisal Document PC Project Coordinator PDO Project Development Objective PFP Project Focal Point PFSs Project Financial Statements PIM Project Implementation Manual PMC Project Management Consultant POC Project Oversight Committee PPA Project Preparation Advance PPDA Public Procurement and Asset Disposal Act 2015 PPDR Public Procurement and Disposal Regulations 2006 PPOA Public Procurement Oversight Authority PS Principal Secretary PSC Project Steering Company PSP Payment Service Provider PV Payment Voucher RFP Request for Proposal SA Social Accountability SACMEQ Southern Africa Consortium for Monitoring Educational Quality SBOM School Board of Management SCOA GOK Standard Chart of Accounts SEQIP Secondary Education Quality Improvement Project SLA Service Level Agreement SMC School Management Committee SOE Statement of Expenditures SRC Salaries and Remuneration Commission TAC Teacher Advisory TAD Teacher Appraisal and Development TORs Terms of Reference TSA Treasury Single Account TSC Teacher Service Commission TTL Task Team Leader UNDP United Nations Development Programme USD/USD United States Dollars WA Withdrawal Application WB World Bank ii

4 Table of Content ABBREVIATIONS AND ACRONYNS... I FOREWORD... VI ACKNOWLEDGEMENTS... VII 1. INTRODUCTION PURPOSE AND SCOPE OF THE MANUAL OBJECTIVES OF THE MANUAL BASIS OF THE MANUAL STRUCTURE OF THE MANUAL REVISION OF THE MANUAL NON-COMPLIANCE WITH THE MANUAL SUMMARY OF PROJECT INFORMATION PROJECT DEVELOPMENT OBJECTIVE PROJECT BENEFICIARIES PDO-LEVEL RESULTS INDICATORS PROJECT COMPONENTS AND FINANCING SUMMARY HIGH-LEVEL INSTITUTIONAL AND IMPLEMENTATION ARRANGEMENTS OVERALL FINANCIAL MANAGEMENT ROLES AND FUNCTIONS KEY FIDUCIARY IMPLEMENTATION RESPONSIBILITIES KEY PROJECT FM PERSONNEL ROLE OF PROJECT STEERING COMMITTEE ROLE OF DIRECTORATE OF PROJECT COORDINATION & DELIVERY ROLE OF PROJECT COORDINATOR ROLE OF DEPUTY PROJECT COORDINATORS ROLE OF TSC, KNEC, KICD AND CEMASTEA ROLE OF COUNTY PROJECT COORDINATION UNITS ROLE OF TSC COUNTY DIRECTORS ROLE OF BENEFICIARY SECONDARY AND PRIMARY SCHOOL HEADS OVERVIEW OF KEY FINANCIAL MANAGEMENT ELEMENTS PROJECT PLANNING AND BUDGETING OVERVIEW OF KEY PLANNING AND BUDGETING GUIDING PRINCIPLES GENERIC BUDGETING AND BUDGETARY CONTROL PROCESSES ANNUAL PLANNING AND BUDGETING CYCLE OVERVIEW OF KEY RESPONSIBILITIES FOR ANNUAL WORK PLANNING AND BUDGETING ANNUAL WORK PLANNING AND BUDGETING AT MOE & ASSOCIATED DEPARTMENTS ANNUAL WORK PLANNING AND BUDGETING AT TSC ANNUAL WORK PLANNING AND BUDGETING FOR SCHOOL-LEVEL ACTIVITIES IN-YEAR WORK PLAN AND BUDGET REVISIONS AND REALLOCATIONS BUDGETING UNDER AIA AND REVENUE MODES BUDGET EXECUTION MONITORING AND CONTROL SUPPLEMENTARY PROJECT BUDGET ESTIMATES PROJECT FUNDS FLOW AND DISBURSEMENT ARRANGEMENTS OVERVIEW OF KEY PROJECT FUNDS FLOW GUIDING PRINCIPLES PROJECT DISBURSEMENT METHODS PROJECT DISBURSEMENT CATEGORIES HIGH-LEVEL FUNDS FLOW DIAGRAM FOR THE PROJECT MAIN MOE AND TSC PROJECT ACCOUNTS AT CBK OVERVIEW OF REQUIREMENTS FOR REQUESTING FUNDS FROM IDA iii Page

5 5.7 FUNDS FLOW TO MOE PROJECT ACCOUNTS A AND B AT NT/CBK REPORT-BASED (IFR) DISBURSEMENTS AT MOE RESULTS-BASED (DLI/DLR) DISBURSEMENTS AT MOE PROCEDURE FOR REQUESTING FUNDS FROM NT BY MOE FUNDS FLOW TO MOE-ASSOCIATED IMPLEMENTING AGENCY-LEVEL PROJECT ACCOUNTS DETAILED PROJECT FUNDS FLOW DIAGRAM AT MOE FUNDS FLOW TO TSC PROJECT ACCOUNT C AT NT/CBK REPORT-BASED (IFR) DISBURSEMENTS AT TSC RESULTS-BASED (DLI/DLR) DISBURSEMENTS AT TSC PROCEDURE FOR REQUESTING FUNDS FROM NT BY TSC OPERATION OF PROJECT BANK ACCOUNTS OPERATION OF MOE PROJECT BANK ACCOUNTS OPERATION OF TSC PROJECT BANK ACCOUNT OPERATION OF CEMASTEA PROJECT BANK ACCOUNT OPERATION OF KICD PROJECT BANK ACCOUNT OPERATION OF KNEC PROJECT BANK ACCOUNT OPERATION OF COUNTY-LEVEL PROJECT BANK ACCOUNTS FOR MOE ACTIVITIES OPERATION OF COUNTY-LEVEL PROJECT BANK ACCOUNTS FOR TSC ACTIVITIES OPERATION OF SCHOOL-LEVEL PROJECT BANK ACCOUNTS PROJECT ACCOUNTING AND STAFFING ARRANGEMENTS PROJECT ACCOUNTING SYSTEM AND RESPONSIBILITIES STAFFING CAPACITY OF THE ACCOUNTING UNITS ISSUANCE OF AIES AND VOTE BOOK EXPENDITURE CONTROL MAINTAINING ACCOUNTING RECORDS/DOCUMENTS PROJECT OPERATIONAL COSTS POTENTIAL INELIGIBLE EXPENDITURES AND CONSEQUENCES PROJECT INTERNAL CONTROL AND OVERSIGHT ARRANGEMENTS OVERVIEW OF THE NATURE OF INTERNAL CONTROL OVERVIEW OF KEY INTERNAL CONTROL GUIDING PRINCIPLES APPROVAL AND AUTHORISATION OF EXPENDITURE EXPENDITURE AT MOE DPC&D EXPENDITURE AT TSC, KNEC, KICD AND CEMASTEA EXPENDITURE AT PARTICIPATING COUNTIES FOR MOE ACTIVITIES EXPENDITURE AT PARTICIPATING COUNTIES FOR TSC ACTIVITIES EXPENDITURE AT BENEFICIARY SCHOOLS MAINTAINING PROJECT BOOKS OF ACCOUNT ILLUSTRATION OF CASH BOOK PREPARATION OF BANK RECONCILIATION STATEMENTS ILLUSTRATION OF TYPICAL BANK RECONCILIATION OPERATION AND CONTROL OF IMPREST ADVANCES TYPES OF IMPREST AND GUIDING PRINCIPLES STANDING IMPRESTS TEMPORARY IMPRESTS PROJECT ALLOWANCES AND PER DIEMS CONTROL OVER STOCK/INVENTORY CONTROL OVER FIXED ASSETS PROJECT INTERNAL AUDIT AND OVERSIGHT INTERNAL AUDIT AND OVERSIGHT AT MOE AND ASSOCIATED DEPARTMENTS INTERNAL AUDIT AND OVERSIGHT AT TSC SCHOOL LEVEL INTERNAL AUDIT AND OVERSIGHT FORMATION AND DUTIES OF AUDIT COMMITTEES PROJECT FINANCIAL REPORTING ARRANGEMENTS OVERVIEW OF KEY FINANCIAL REPORTING GUIDING PRINCIPLES IN-YEAR FINANCIAL REPORTS iv

6 8.2.1 RESPONSIBILITIES AND REQUIREMENTS ILLUSTRATIVE QUARTERLY STATEMENT OF SOURCES & USES OF FUNDS YEAR-END FINANCIAL REPORTS RESPONSIBILITIES AND REQUIREMENTS ILLUSTRATIVE ANNUAL RECEIPTS AND EXPENDITURE STATEMENT PROJECT EXTERNAL AUDIT ARRANGEMENTS OVERVIEW OF KEY EXTERNAL AUDIT GUIDING PRINCIPLES SUBMISSION OF ANNUAL AUDIT REPORT OBJECTIVES OF THE EXTERNAL AUDIT SCOPE OF THE EXTERNAL AUDIT AUDITOR GENERAL S MANAGEMENT LETTER IMPORTANT DOCUMENTS FOR AUDIT FM ARRANGEMENTS FOR SCHOOL BURSARIES & SCHOLARSHIPS OVERVIEW OF PROJECT DESIGN FOR BURSARIES/SCHOLARSHIPS PLANNING AND BUDGETING FOR STUDENT BURSARIES/SCHOLARSHIPS FUNDS FLOW FOR STUDENT BURSARIES/SCHOLARSHIPS ACCOUNTING AND REPORTING FOR STUDENT BURSARIES/SCHOLARSHIPS DEPLOYMENT OF A SUITABLE MANAGEMENT INFORMATION SYSTEM RECONCILIATION OF STUDENT BURSARIES/SCHOLARSHIPS SERVICE LEVEL AGREEMENT FOR STUDENT BURSARIES/SCHOLARSHIPS ANNEX 1: DISBURSEMENT-LINKED RESULTS DISBURSEMENT SCHEDULE ANNEX 2: DISBURSEMENT-LINKED INDICATOR MATRIX v

7 FOREWORD [Placeholder for PS-State Department of Basic Education] vi

8 ACKNOWLEDGEMENTS [Placeholder for acknowledgements at conclusion of the manual] vii

9 1. INTRODUCTION 1.1 Purpose and Scope of the Manual 1. This manual is intended for use by SEQIP (the project) implementers at MoE HQs, SAGAs, Counties and Sub-Counties. It is an expression of GoK s commitment to ensuring that resources allocated to the provision and management of education in Kenya are used for the intended purposes efficiently, effectively and economically. The manual is also intended for use by project auditors and other independent reviewers of the project s financial management (FM) operations. 2. The purpose of this manual is primarily to streamline FM practices and strengthen the general FM environment affecting the project. The manual therefore, supplements, but does not replace the existing GoK financial management regulations, policies, and procedures in the implementation of the project. 3. This manual deals with the following important aspects in the project s FM environment; (a) institutional arrangements and management roles; (b) planning and budgeting; (c) funds flow and disbursement management; (d) accounting and record-keeping; (e) internal control and oversight arrangements, including internal audit; (f) financial reporting; (g) external audit arrangements; and (h) FM arrangements for student bursaries/scholarships. Important Note: This manual does not include detailed project procurement arrangements, as these are deemed to be outside of its scope. These will be included in a separate Project Procurement Manual. However, basic procurement issues and/or documents are mentioned where these are considered necessary for the proper understanding of an underlying financial management concept. 1.2 Objectives of the Manual 4. Sound FM arrangements should be designed and implemented with the aim to ensure the achievement of the following four key objectives, which are inter-related: a) Project funds are used for the intended and approved purposes in an efficient and economical manner; b) Project financial reports are prepared in an accurate, reliable, and timely manner; c) Project assets are safeguarded from loss, abuse, or malicious damage; and d) Project FM operations are in compliance with applicable laws and regulations. 5. In pursuit of these objectives, the implementation of and adherence to this manual is intended to achieve the following specific project objectives: a) Establish clear institutional and fiduciary reporting relationships among the project s governance and implementing entities, including oversight arrangements and the fiduciary roles of key project personnel; b) A framework for the maintenance and generation of understandable, relevant, reliable, complete and timely financial information to enable all implementers, financiers and other stakeholders to plan, implement and monitor project activities within agreed procedures and facilitate appraisal of progress towards the achievement of stated objectives; c) Ensure that regular reports to GoK, IDA and other stakeholders are complete and useful and are in accordance with agreed content and formats; d) Ensure that financial management arrangements for project implementation are in compliance with and meet both GoK statutory and IDA financing requirements; Page 1 of 92

10 e) Secure a system of consistent recording, classifying and reporting of financial transactions and information across the education sector at project implementing schools, SAGAs, MOE HQs and facilitate timely, efficient and effective financial information low and consolidation at all relevant levels; f) Provide all heads of education institutions implementing the project with a guide to assist them in establishing systems of internal accounting and administrative controls that comply with the GoK and IDA standards of financial management; g) Equip project auditors, officers providing supportive supervision and other stakeholders with information and tools for evaluating the implementation of the generally accepted and laid down financial policies and regulations in public education institutions; h) Enable the heads of education institutions implementing the project make effective and speedy checks on the rate of project expenditure and related financial and administrative controls; i) Enhance financial governance and anti-corruption structures in the management of education institutions implementing the project; and j) Entrench a culture of sound financial governance in project implementation, including public participation and social accountability mechanisms, where appropriate. 1.3 Basis of the Manual 6. This FM manual is largely anchored on, and serves to strengthen, country FM systems as already established in the Constitution, relevant GoK statutes, regulations, policies and procedures, with a number of re-alignments and modifications necessary for the effective implementation of the project and to accord with: (i) the special institutional arrangements for the project; and (ii) WB s FM policies, procedures and requirements. 7. The key sources of principles and foundations for this manual, which embody sound FM arrangements include: a) Project Appraisal Document (PAD) b) Project Financing Agreement c) World Bank Disbursement Letter d) World Bank guidelines on financial management and disbursements e) Constitution of Kenya, 2010 f) Public Finance Management Act, 2012 g) Public Finance Management (National Government) Regulations, 2015 h) Public Finance Management (County Governments) Regulations, 2015 i) The Basic Education Act, 2013 j) The TSC Act, 2012 k) Public Audit Act, Structure of the Manual 8. The manual follows a systematic flow of FM arrangements from planning and budgeting, through receiving of funds, spending control and recording, to financial reporting and external audit activities. Accordingly, the Manual is presented in the order of the following generic topics: a) Institutional and implementation arrangements b) Planning and budgeting c) Funds flows and disbursement management d) Accounting and information system e) Internal control, including internal audit and management oversight arrangements Page 2 of 92

11 f) Financial reporting g) External audit arrangements h) FM arrangements for student bursaries/scholarships 9. For a proper and complete understanding, this manual should be read in its entirety, and in conjunction with the underlying sources of principles as outlined under sub-section 1.3 above. 1.5 Revision of the Manual 10. Being a living document, this manual will be reviewed continually to accommodate changes in GoK and/or WB regulations, as well as changes in PFM legislation where these have significant implications on the project s FM environment. 11. To this end, all users of this manual are encouraged to provide continuing feedback and lessons learned from their on-the-ground experiences to the DPC&D through written memoranda via electronic ( ) or other appropriate communication means. 12. The DPC&D, in consultation with the PS, will liaise with the NT and WB and other relevant MoE departments to discuss and formalise the desired changes to this manual. 13. All approved revisions will be disseminated to all project implementing entities, as appropriate. A single revision or a few revisions need not lead to the re-writing of the entire manual, but should be issued as clearly numbered guidelines amending specified provision/s of the manual and indicating the effective date of the revision/s. All approved amendments will be referenced and filed in a Manual Amendment File at the DPC&D. 1.6 Non-Compliance with the Manual 14. Non-compliance with this manual will constitute a breach of duty and those responsible shall be liable to disciplinary action under the prevailing Public Service Code of Regulations and other relevant existing laws and regulations. 15. It will be the responsibility of the PS, through DPC&D, to provide the necessary guidance for ensuring full compliance with this manual, and to institute appropriate action to deal promptly with any and all identified or reported cases of non-compliance. 16. In the event of conflict between existing GoK FM policies and procedures with this manual, appropriate-level consultations, including consulting with the WB, will be held to resolve the conflict. All real or perceived procedural conflicts should be resolved promptly and should never be allowed to fester. Page 3 of 92

12 2. SUMMARY OF PROJECT INFORMATION 2.1 Project Development Objective 17. The project development objective (PDO) is to improve student learning in secondary education and transition from primary to secondary education, in targeted areas. 2.2 Project Beneficiaries 18. The project will benefit approximately 600,000 students in upper primary grades 7 and 8; 600,000 students in the four grades of secondary level, Form 1 4; and about 17,000 primary and 8,500 secondary science, mathematics, and English (SME) teachers in the targeted schools. These beneficiaries are from 7,852 public primary schools and 2,147 public secondary schools in the targeted 110 sub-counties in 30 counties, which are educationally and economically disadvantaged. These sub-counties have been identified based on their high incidence of poverty, low retention rates at primary level, and low transition rates from primary to secondary level. 19. In addition, the project institutional beneficiaries include TSC, KICD, KNEC, and CEMASTEA. 2.3 PDO-Level Results Indicators 20. The PDO will be measured by the following key performance indicators, measured both in aggregate and separately for boys and girls: a) Average student test score in science subjects at Form 2 at public schools in targeted subcounties; b) Average student test score in mathematics at Form 2 at public schools in targeted sub-counties; and c) Transition rate from primary to secondary education in targeted sub-counties 2.4 Project Components and Financing Summary 21. The project comprises the following 4 components and 9 sub-components and is financed with a credit of USD.200 million from IDA/WB as summarised below (figures in USD million): Project Components and Sub-Components Project Cost Component 1: Improving Quality of Teaching in Targeted Areas 36 Sub-component 1.1: Reducing Teacher Shortage 8 Sub-component 1.2: Enhancing Teachers Professional Development 15 Sub-component 1.3: Provision of Textbooks 13 Component 2: Improve Retention in Upper Primary and Transition to Secondary in Targeted Areas 132 Sub-component 2.1: Improve School Infrastructure 82 Sub-component 2.2: Improve Retention in Upper Primary and Transition to Secondary of Poor and Vulnerable Students 50 Component 3: System Reform Support 20 Subcomponent 3.1: Development and Introduction of a Competency-Based Curriculum 12 Page 4 of 92

13 Project Components and Sub-Components Subcomponent 3.2: Strengthening of National System for Monitoring Learning Progress and National Examination Project Cost 8 Component 4: Project Management, Coordination, and Monitoring and Evaluation 12 Subcomponent 4.1: Project Management, Coordination, and Communication 8 Subcomponent 4.2: Research, and Monitoring and Evaluation 4 Total Costs High-Level Institutional and Implementation Arrangements 22. At the national level, MoE in general, and the State Department of Basic Education, in particular, will be responsible for the overall project delivery. The MoE-PS in-charge of the State Directorate of Basic Education, who is also MoE s accounting officer, will have the primary responsibility for efficient and effective implementation of the project for achievement of the stated development objectives. All the key decisions, including financial and procurement, related to the project implementation will be vested with the PS. 23. The existing GPE-PRIEDE Project Steering Committee (PSC) chaired by the Education Cabinet Secretary will function as the apex body to monitor the implementation progress of the project, provide strategic policy guidance, ensure effective interagency coordination as required under the project, and resolve high-level strategic issues affecting project implementation. The PS, Basic Education, functions as the Secretary of the PSC. The DPC&D will act as the Secretariat for the PSC. 24. The diagram below depicts the overall organogram of the high-level institutional and implementation arrangements for the project. PSC=Project Steering Committee CS=Cabinet Secretary (Education) PS=Principal Secretary DPC&D=Directorate of Project Coordination and Delivery PC= Project Coordinator DPC=Deputy Project Coordinator PSC [Chaired by CS MoE-PS Director DPC&D Project Coordinator] DPC Component 1 DPC Component 2 DPC Component 3 DPC Component 4 Sub-Comp 1.1 TSC Sub-Comp 1.2 TSC/CEMASTEA Sub-Comp 1.3 MoE Sub-Comp 2.1 MoE Sub-Comp 2.2 MoE Sub-Comp 3.1 KICD Sub-Comp 3.2 KNEC Sub-Comp 4.1 MoE Sub-Comp 4.2 MoE 25. The DPC&D will be responsible for project implementation and management and its capacity will be augmented by external technical assistance, which will yield dual benefits one, expedite Page 5 of 92

14 implementation by filling in the skills and knowledge gaps in the DPC&D and two, build the capacity of the MoE officials in the process of working together with the external technical experts. 26. The project will involve several agencies, both autonomous and semiautonomous, in implementation of project activities. The key implementation agencies are TSC (an autonomous agency) and KNEC, KICD, and CEMASTEA, which are semiautonomous agencies. Component roles are as follows: a) TSC will be responsible for implementation of Sub-components 1.1 and 1.2; b) MoE through the DPC&D will be responsible for implementation of Sub-components 1.3, 2.1, 2.2 and Component 4; c) KICD and KNEC will be responsible for implementation of Sub-component 3.1; and d) KICD and KNEC will be responsible for implementation of Sub-component However, inter-agency coordination and collaboration is critical for implementation of the project for achievement of the PDO. The DPC&D will work closely with the respective agencies for ensuring essential coordination and collaboration. 28. Each agency will designate a high-level competent staff as the project focal point. The project focal point person will be assisted by some designated officials, including a finance officer, accountant, and procurement officer. 29. At the county level, the county and sub-county education offices are required to play a key role in facilitating and monitoring overall project implementation. The existing County Project Coordination Unit (CPCU) set up under the GPE PRIEDE project will be responsible for SEQIP activities, too. The CPCU will be expected to work closely with the county and sub-county education offices. 30. The TSC county and sub-county offices will work along with the CPCU for implementation of activities related to alleviation of teachers shortage and teachers professional development. Page 6 of 92

15 3. OVERALL FINANCIAL MANAGEMENT ROLES AND FUNCTIONS 3.1 Key Fiduciary Implementation Responsibilities 31. The overall fiduciary responsibility for the project rests with the PS-MOE, as the MoE s accounting officer, through appropriate authority delegation to the Director-DPC&D. 32. At the TSC, which is constitutionally autonomous of the MoE, the Director of Finance & Accounts will have overall financial management responsibility for the project component activities implemented by TSC. The responsibility of the Director will be to ensure that throughout implementation there are adequate FM systems in place which can report adequately on the use of project funds. However, in carrying out this mandate, the specific day-to-day transaction processing and reporting will be assigned to a dedicated Project Accountant within the TSC Finance/Accounts Directorate who will be supervised by the Director. 33. While simultaneously respecting institutional autonomy, the MoE and TSC, as the two key project implementing agencies, will work closely in a seamlessly coordinated manner to ensure project FM and other reports/documents (e.g. work plans and budgets, quarterly IFRs and annual financial statements) are compiled and consolidated in a timely fashion and submitted to the PSC, NT and WB as stipulated in this manual. 34. Project fiduciary responsibilities and commensurate authority will be appropriately and formally delegated to the heads of the implementing entities receiving project funds at the national, county and school levels. The PS-MoE shall, however, remain responsible for any expenditure incurred as a result of this delegation. 35. The head of each of the implementing entities will be responsible for fiduciary management and reporting of funds disbursed to the entity that they head. 36. While the DPC&D will be responsible to the NT and to the WB for overall accountability of funds disbursed to the project, including ensuring timely and reliable financial reports, the head of each of the other non-tsc entities will be responsible to the DPC&D for accounting, controlling, and reporting of the funds received by their respective entities. 37. The project FM arrangements will primarily follow country systems both at the ministry level as well as at each of the other implementing entities. 38. The accountability of any project officer vacating a project office shall not be completed until the financial and accounting records kept by him/her have been properly handed over in writing to an officer taking over his/her duties and attested by their supervisor. To this end, the DPC&D (for MoE components) and TSC CEO (for TSC components) will take all reasonable precautions to ensure the necessary steps are taken to ensure accurate and complete hand-over of all project records and assets by vacating officers. 39. The figure below shows a further breakdown of the project institutional fiduciary implementation and oversight organogram. Page 7 of 92

16 WB NT Provision of project funds PSC PS-MOE Strategy and direction DPC&D PC Coordination, monitoring & control TSC Entities MoE Entities TSC Itself CEMASTEA KICD KNEC 30 Counties Downstream project implementation [Institutional beneficiaries] 110 Sub- Counties 2,147 Sec. Schools 7,852 Pri. Schools Primary project beneficiaries 3.2 Key Project FM Personnel 40. Project fiduciary staff will include those appointed or seconded from the civil service from MoE, TSC, KNEC, KICD, CEMASTEA, and County Education Offices, in accordance with current civil/public service rules. 41. Consultant staff, if needed for the project s fiduciary duties, will be recruited competitively, based on criteria agreed with the WB and in accordance with WB Selection and Employment of Consultants Guidelines. 42. Except for fiduciary consultants who may be hired on a need-basis, all other project fiduciary personnel will be devoted to project activities on a full-time or part-time basis, as the project s financial activities may reasonably demand. 3.3 Role of Project Steering Committee 43. The PSC referred to under sub-section 2.5 above will normally meet once in a quarter, but it can be convened by the chair as and when required. It will be responsible for: a) Providing strategic direction to the project b) Endorsing the project annual work plan and budget (AWP&B) c) Ensuring effective coordination among the implementing agencies at the national level for smooth implementation d) Reviewing project implementation progress, and e) Resolving any policy and coordination issues requiring high level interventions. 44. The composition of the PSC will include: a) CS-Education functioning as Chair of the PSC Page 8 of 92

17 b) PS-Basic Education - functioning as Secretary of the PSC c) Key MoE Directorates such as: i) Policy ii) Planning iii) Basic Education iv) Secondary Education v) Quality Assurance vi) School Audit vii) ICT viii) Chief Finance Officer ix) Chief Procurement Officer, and x) Other senior MoE officials d) Chief Executive Officers of: i) TSC ii) KICD iii) KNEC e) Chair of the Education Development Partners Core Group 3.4 Role of Directorate of Project Coordination & Delivery 45. The DPC&D will be directly responsible for SEQIP implementation. The directorate is expected to be well-positioned to forge practical inter-departmental, inter-institutional, and inter-ministerial coordination and convergence. The core functions of the DPC&D are to: a) Prepare the AWPB and present it to the PSC b) Coordinate with the NT and CBK and the MoE s internal Finance Department for timely flow of funds c) Submit withdrawal applications to the WB for timely disbursements d) Ensure compliance with fiduciary and safeguard requirements of the project, including quarterly and year-end financial reporting e) plan and organize need-based capacity-building activities for the MoE officials using project funds f) Conduct assessments and policy research g) Carry out necessary M&E under the project on time h) Coordinate implementation and compliance with the environmental and social safeguards and the implementation of the VMGF i) Prepare and implement communication strategy for communicating with internal and external stakeholders regarding the project, and j) Establishing and operationalising a grievance redressal mechanism 46. The DPC&D will be appropriately empowered by the PS to take all day-to-day decisions required for project implementation and adequately staffed with the necessary skills and knowledge. To this end: a) A Project Coordinator (PC) will be appointed at the level of deputy director b) The PC will be assisted by a minimum of four Deputy Project Coordinators (DPCs) at the level of senior assistant director, each responsible for one component c) Each DPC will be assisted by two officials at the level of assistant director d) The DPC&D will have two finance officers, two accountants, two supply chain/procurement officers, one safeguard in-charge, and one M&E in-charge Page 9 of 92

18 47. The Director-DPC&D will formally approve any requests for budgetary re-allocations within the project vote heads, and the approved requests will be authorised by the MoE s Chief Finance Officer Role of Project Coordinator 48. The Project Coordinator, working under the Director-DPC& will also work to deliver the following roles, in addition to those included under the foregoing sub-section: a) Gathering all data necessary for annual work planning, work programming, and budgeting, and consolidating the project annual implementation plan and budget; b) Coordinating and working closely with the other implementing entities to prepare, consolidate and submit disbursement forecasts to the NT and WB based on approved annual work plans, budgets, procurement plans; c) Ensuring the project budgetary estimates are submitted to the NT in the manner and format to be issued by the NT; d) Consulting with the NT and WB and circulating to all project sub-implementers a list of all local commercial banking institutions acceptable to the WB for purposes of disbursement of project funds; e) Ensuring that all required project bank accounts are opened and operated in a controlled manner, and ensuring timely and efficient disbursement of funds to all implementing agencies; f) Issuing sub-aies to the appropriate responsible project officers at national- county- and schoollevel implementing agencies in accordance with PFM regulations; g) Monitoring project FM activities on an on-going basis, identifying bottlenecks and providing solutions to address any challenges that may be arise from time to time; h) Through periodic supportive supervision visits, ensuring that the other implementing agencies have and continue to maintain adequate FM arrangements for proper records regarding receipts, expenditures and assets; i) Gathering and consolidating relevant financial information into quarterly and annual financial reports on project funds and expenditures, in the prescribed format and content, and submitting the reports to the NT and WB within the stipulated deadlines; j) Ensuring all project-related audits (both internal and external) and other authorised independent reviews are undertaken in a smooth and efficient manner by providing the necessary documents and other assistance; k) Planning and organising needs-based capacity building activities for relevant project FM personnel as appropriate; l) Leading all project-level risk management and response strategies, including conducting ongoing project risk monitoring and reduction efforts; m) Maintaining a comprehensive register of all project AIE Holders at all levels of project implementation; and n) Ensuring overall on-going compliance with all fiduciary safeguard requirements of the project Role of Deputy Project Coordinators 49. The DPC in charge of a component will be responsible for: a) Preparing AWP&B for their specific components b) Coordinating with other DPCs and other implementing agencies - TSC, KICD, KNEC, and CEMASTEA - as necessary for implementation c) Ensuring timely implementation of the AWP&B d) Conducting regular monitoring, and e) Identifying implementation issues and taking steps to address the issues on time; and reporting periodically as specified to the PC. Page 10 of 92

19 50. The DPC in-charge of each component will also assist the PC on an on-going basis to ensure the PC is able to fulfil his/her functions in a continuous manner. 3.5 Role of TSC, KNEC, KICD and CEMASTEA 51. In order to ensure better coordination with the DPC&D and ensure effective implementation of agency specific activities, each of these agencies will designate a reasonably high level competent staff as the Project Focal Point. 52. Each agency - TSC, KICD, KNEC, and CEMASTEA - will appoint a Project Focal Point person who will be assisted by the institution s finance and supply chain officers and accountants. 53. The Heads of these institutions will designate an appropriate senior official as the Project Focal Point (PFP), who will be assisted by some designated officials, including a suitably qualified and experienced accountant. 54. The Heads of these institutions, through the appointed PFP and head of finance/accounts, will be responsible for ensuring that: a) Project funds received by them are used for the purposes intended efficiently, effectively and economically b) A separate non-commingled sub-project bank account is opened and operated for the project in accordance with this manual c) All project documents and reports, such as plans, budgets, and periodic financial reports, required to be submitted to the DPC&D are actually submitted within the established timelines. 3.6 Role of County Project Coordination Units 55. SEQIP will support CPCUs with relevant operational costs and capacity building. The CPCUs will coordinate with the MoE following the well-established mechanisms under the GPE-PRIEDE Project. SEQIP will provide appropriate support to the CPCUs with operational costs and necessary capacity building. 56. Each County Project Coordinator (CPC) will be responsible for accountability over project funds disbursed to the county for downstream supervision activities. To this end, the CPC will be responsible for: a) Ensuring a separate non-commingled bank account is opened and operated at a suitable commercial bank, for ease of tracking, accounting and reporting of project funds b) Ensuring all project expenditures at county and sub-county levels are initiated and processed following laid down GoK procedures and as may be modified in this manual c) Gathering and consolidating annual secondary and primary school work plans and budgets, and transmitting them to DPC&D through the CDE within established deadlines d) Collecting and collating bank account details, including authorised signatories, from beneficiary secondary and primary schools, and submitting them to DPC&D through the CDE, to facilitate direct disbursement of project funds to schools e) Working closely with the County and Sub-County Education Offices, for periodic supportive supervision visits to beneficiary secondary and primary schools to provide project FM implementation guidance and support, as may be identified as necessary f) Providing appropriately summarised quarterly and annual school supervision reports to the DPC&D through the CDE, highlighting any significant fiduciary weaknesses identified and remedial recommendations deemed appropriate Page 11 of 92

20 g) Compiling and consolidating county-level and sub-county-level quarterly and year-end financial reports (excluding beneficiary schools) in the prescribed format and content, and submitting the same within the prescribed deadlines 57. In the event that separate project bank accounts are, for convenience, operated at the sub-county level, the CPC will be equally responsible for all accountability of project funds at that level. 3.7 Role of TSC County Directors 58. The TSC county and sub-county offices will work along with the CPCUs for the implementation of activities related to the alleviation of teachers shortage and teachers professional development. For this purpose, the TSC will, under the project, provide to its county and sub-county offices with appropriate support for operational costs and necessary capacity building. 59. For each participating county, the TSC County Director will be responsible, on behalf of the Secretary, TSC, for: a) Accountability over project funds disbursed to the county; b) Ensuring that a separate non-commingled bank account is operated at a suitable commercial bank, for ease of tracking, accounting and reporting of project funds; c) The preparation of annual work plan and budget for the county through delegated responsibility to the TSC County Accountant; d) SEQIP rollout activities at the school level; and e) All TSC-related results monitoring and reporting at county level. 60. The TSC County Director will work closely with the Sub-County Directors and Curriculum Support Officers for regular (preferably quarterly) professional support and supervision visits to benefitting schools to provide project implementation guidance and support, as may be deemed necessary. 61. The TSC County Director will provide summarised quarterly and annual school supervision reports to TSC headquarters through the County Project Coordinator, highlighting any major fiduciary weaknesses noted and remedial recommendations deemed appropriate 3.8 Role of Beneficiary Secondary and Primary School Heads 62. The Head Teachers/Principals of project beneficiary schools will be responsible for accountability over project funds disbursed to their institutions. To this end, they will: a) Ensure that a separate non-commingled bank account is opened and operated at a suitable commercial bank, preferably where their other school funds are kept b) Provide the school s bank account details, including authorised signatories, to the CPC for onward submission to DPC&D through the CDE, to facilitate direct disbursement of project funds to schools c) Ensure project funds received by the school are used only for the approved purposes and separate books of accounts (e.g. cash book) are kept for all project receipts and expenditures d) Cooperate with the CPC and other County and Sub-County Education Officers in promoting the fiduciary management of project funds and the protection of assets and materials acquired from the funds e) Ensure adequate cooperation with and facilitation of the work of school fiduciary oversight organs, including the School Audit Unit and other internal or external reviewers of project fiduciary operations Page 12 of 92

21 f) Formally respond to and address any issues of concerns raised by the various school fiduciary oversight organs. 3.9 Overview of Key Financial Management Elements 63. The financial management (FM) cycle elements represent six integrated and closely coupled components, summarised in the diagram below. External constitutional, legal, policy and regulatory environment Planning and Budgeting Funds Flow & Disbursement Management Commencement of Project implementation, monitoring & evaluation follows the flow of funds External Audit Project Institutional Arrangements Accounting & Management Information System Financial Reporting Internal Control and Management Oversight 64. The FM elements above are briefly explained in the table below. 1. Planning and budgeting is concerned with how project resources are to be mobilised and distributed within/across activities and time and committing to these plans. Budgeting helps to determine which contracts should be pursued, taking into consideration priorities that have been defined with involvement of the communities. If/when liquidity becomes severely constrained; the budget may also provide guidance regarding which payments are to be executed first. However, for budgeting to be realistic and relevant, it must periodically receive feedback from the accounting function. 2. Funds flow and disbursement management deals with mechanisms of ensuring that mobilised funds are availed in a timely and adequate manner to meet the planned/budgeted project needs. Treasury management deals with the custody and management of assets and liabilities/commitments, including bank accounts, petty cash, etc. The funds flows element also provides important information to the accounting component that supports its recording, reconciliation and reporting tasks. 3. Accounting: Accounting provides the framework for feedback and implementation of the other elements. Without proper accounting, the project would not have any clear idea of how well it is performing financially, whether it is becoming more solvent or more indebted, whether it will likely have sufficient funds to meet its obligations, and whether financial activities are being executed roughly according to the plans. Furthermore, without proper accounting, it becomes impossible to state whether funds entrusted to the project have been used for the purposes intended. Robust accounting systems serve as management information systems that provide accounting information for decision making. Hence, without an adequate accounting function, there cannot be any viable financial reporting, and external audit would also be impossible. 5. Financial reporting deals with summarising and analysis and reporting the financial transactions, assets and liabilities of the project for purposes of ensuring external Page 13 of Internal control and oversight comprises all resources, systems and tools, including people that help to ensure that the project and its FM functions operate as intended. Internal controls also help to prevent errors, misstatements, misappropriations, and other forms of loss. Internal control includes internal auditing, undertaken by internal auditors who report to management, and regular management monitoring activities, including reconciliation of balances and analysis of variances from planned/budgeted performance. Sound and effective internal controls imply that the entity is operating efficiently and effectively. However, the cost of instituting and implementing internal controls should not exceed the accruing benefits. 6. Auditing is an independent monitoring component undertaken by external auditors (Auditor General - Kenya), and involves a scope of work focused on

22 accountability. Without external financial reporting, it would be impossible for management to demonstrate its stewardship of project resources entrusted to it. It is a critical financing covenant and it has major effects on subsequent availability of funds. attestation/certification of annual entity/project financial statements. All of the other five financial management elements above are subject to review by the external audit function. 65. More detailed descriptions of the project s specific arrangements for these FM elements are provided, respectively, below under sections 4 through 10 of this manual. Page 14 of 92

23 4. PROJECT PLANNING AND BUDGETING Overall FM element objective to ensure that project planning and budgeting are realistic, prepared with due regard to government policy, and implemented in an orderly and predictable manner. 4.1 Overview of Key Planning and Budgeting Guiding Principles 66. For planning and budgeting purposes, the project must at all times be taken as one un-fragmented whole, implemented by different entities at several levels towards the eventual achievement of one or more cherished goal/s. Consequently, intense considerations of institutional autonomy should not be pursued or allowed overshadow the pursuit of project goals/objectives, with an enduring focus on the project s primary beneficiaries. 67. Project plans and budgets will be drawn at all levels of project implementation and consolidated into one plan and one budget at the MoE/DPC&D for review and approval through the established project governance organs. 68. In order to ensure plan and budget comprehensiveness, care should be taken to assure that no implementing entity sub-plan and budget is omitted from the overall one plan and one budget approach. 69. Each implementing entity sub-plan and budget should be reviewed and approved by the highest approving authority of that entity before being submitted to next level of review and consolidation. This ensures process and product ownership at entity level, a key principle in project implementation. 70. The project will be assigned budget codes on the basis of the GoK SCOA and captured in the IFMIS as appropriate. This is critical as the SCOA is already in use for budgeting, accounting, budget monitoring, and financial reporting. 4.2 Generic Budgeting and Budgetary Control Processes 71. A budget is an estimate of an entity s (or project s) sources of funds and expenditure for a future set period of time, and budgeting is about providing for a particular amount of money in a budget. 72. After work plans have been assembled, they will enable the preparation/formulation of the project budget. The project budgeting and budgetary control processes will typically involve the following five generic and sequential activities. Start 1. Budget preparation/ formulation 5. Budget reporting 2. Budget approval Finish 4. Budget monitoring & control 3. Budget implementation & coordination Page 15 of 92

24 73. The budgeting process activities above are briefly explained below. 1. Budget preparation/formulation No public funds can be appropriated without a development and expenditure plan covering both long and medium terms Identify the project s key activities - based on user requirements for the year Prioritise activities - to ensure high priority activities are allocated available resources first in budget rationalisation Communicate sub-budget requirements for the year to the higher budget consolidating authority (where applicable) early enough within stipulated deadlines Determine the expected receipt of funds - based on realistic projections of expected project funding and a realistic assessment of the costs of goods and services to be used Determine target expenditures for the period - based on the estimated funding and standards agreed in the preceding points In the planned inputs, clearly show the expenditure type, quantity and rate - important in reviewing and justifying the reasonableness of the amounts requested Ensure that the individual staff/department requirements are discussed, rationalised and consolidated into a final project budget 5. Budget reporting On quarterly basis, compare actual funds received and costs incurred for the period with budgeted funds and costs based on actual performance achieved Include clear explanations for the major variances in the quarterly external accountability report (IFR) and how to address the variances going forward 2. Budget approval The project budget should be discussed and approved by the highest internal authority and then: Submitted for further approval or ratification by the relevant external authority/authorities as per the law and regulations (e.g. WB, National Assembly, etc) No deficit budget should be allowed ensure a balanced budget where expected funding receipts are equal to estimated expenditures No expenditure allowed until appropriated by National Assembly or PFM law/regulations 3. Budget implementation and coordination Ensure timely and optimal procurement decisions Ensure timely flow of funds to all implementing entities Use budget resources on planned and approved activities, and proper authorisations Record usage of budgetary resources according to budgeted sub-components, vote heads and items 4. Budget monitoring and control Check that various activities take place as scheduled and within approved financial limits by using the finance/accounting function to provide required budget feedback Regularly check funds absorptive capacity of project activities and take remedial steps Organise monthly or quarterly meetings with implementing entity staff to review actual performance against budgets, using information from accounting records, commitments and contract registers Ensure timely investigation of variances and determination of their implications Determine the most appropriate action for addressing unfavourable variances - budget should be flexible enough to ensure high priority activities are effectively accomplished 4.3 Annual Planning and Budgeting Cycle 74. The annual project planning and budgeting process will follow GoK established medium-term and long-term procedures and typically commences with the National Treasury (NT) issuing a Budget Circular by the end of August in each year. A Budget Circular is a statement from the NT to GoK ministries, departments and agencies, as well as counties, outlining policy and technical guidelines on how to prepare the budget for the forthcoming fiscal year, including timelines/deadlines and prescribed compilation formats. 75. More budgeting details can be obtained from the National Government PFM Regulations, 2015 and the most recent Budget Circular. The annual project planning and budgeting activities can be summarised as shown in the diagram below. Page 16 of 92

25 Oct-Dec SEQIP Technical Committees approve the AWPs and budgets from participating institutions Sept Annual stakeholders review workshop for project planning activities Dec SEQIP Work Plans (incl. procurement plans) & budgets in MTEF format presented to the PSC and WB SEQIP Start Aug NT gives planning and budgeting guidelines by end of August Jan-Mar SEQIP MTEF budgets submitted to Cabinet then presented to the NT after approval End Jun Printed Estimates approved by Legislature as necessary. Budget execution & monitoring follow Apr-May SEQIP budget reflected as part of MOE annual budget, in the draft GOK National Budget 76. By law, the NT manages the budgeting process at the national level and the timelines are strictly enforced to ensure legal and constitutional timelines are not missed due to potential adverse domino effects. 77. Accordingly, the annual project planning and budgeting process must be managed and coordinated judiciously to guarantee necessary comprehensiveness since subsequent revisions involve lengthy and often onerous procedures, and full success is not always guaranteed. Also, frequent budget revisions do not always have a helpful effect on the reputation of project management. 4.4 Overview of Key Responsibilities for Annual Work Planning and Budgeting 78. Since SEQIP is a national project implemented at the national, county and school levels, the PS-MOE will be the overall project budget holder. 79. The acute importance, completeness and accuracy of planning and budgeting should be particularly emphasised because the initial project plan and budget will be used to estimate the required financing to be received from the WB to finance project activities for the first six months after the project has been declared effective. Hence, special attention must be paid to properly align project activities with estimated budgetary resources. 80. The annual project work plan and budget (AWP&B) will be sufficiently comprehensive to include all projected activities envisaged to be undertaken in the coming financial year (FY) including procurement plans, training plans, travel plans, etc. If practicable, the plans will include activity implementation pathways in the form of Gantt Charts. 81. Respecting institutional autonomy, there will be two critical document packages for AWP&B for purposes of overall consolidation of the project AWP&B one from MoE and the other from TSC. This Page 17 of 92

26 overall consolidation will be centrally completed and finalised at MoE under the authority of the Director-DPC&D, on behalf of the PS-MOE. 82. In putting together the two document packages, there will be two levels of initial annual consolidation mechanics - at MoE and at TSC for their respective project components. Then the two consolidated plans and budgets will be further consolidated at the MoE to produce one overall consolidated project AWP&B as provided in the foregoing paragraph. 83. In order to enhance overall consolidation efficiency and effectiveness at the MoE, the DPC&D and TSC Project Focal Points will work in close collaboration to ensure that, as practicably as possible, identical plan and budget formats are used and that project work plans and sub-budget submissions are properly attuned to the projected activities to be undertaken during the coming financial year. 84. The Director-DPC&D will formally submit the overall consolidated project AWP&B to the PS-MOE for review and approval, and subsequent onward submission to the PSC for further review and endorsement. The consolidated project AWP&B will be revised or amended in line with recommendations, if any, from the PSC, as may be formally communicated. 85. Thereafter, the re-submission to the PSC will retrace the procedural steps followed at the initial submission. This iterative review process will be pursued until the final and formal PSC endorsement is obtained expressing PSC s satisfaction with the project AWP&B. The PSC-approved project AWP&B will be then officially shared with all key stakeholders as appropriate, through the PS-MOE. Among the key stakeholders to which this sharing/submission will be done are: a) The WB both for: (i) prior no-objection approval; and (ii) reference purposes to ensure that the planned activities are in line with the Project Objectives; and b) The NT for reference purposes as the GoK s non-implementing executive representative and for inclusion in the National Budget Printed Estimates. 86. The financing agreement will specify the time period the project AWP&B should be submitted to the WB for prior no-objection review/approval. So, it will be crucial for the DPC&D to pay particular attention to this time period. 87. Once the AWP&B has been given a go-ahead by the WB under the foregoing paragraphs, the AWP&B cannot be subsequently amended or changed without the prior no-objection approval in writing by the WB. 88. Sub-sections through below further expand on the annual planning and budgeting arrangements at the two key national-level project implementing agencies, MoE and TSC, and the annual sub-project plan and budget consolidation modalities deemed appropriate for the project at each of these two autonomous GoK institutions Annual Work Planning and Budgeting at MoE & Associated Departments 89. Annual project planning and budgeting activities at MoE will follow the normal GoK procedures as anchored on the MTEF process. This is undertaken with stakeholder involvement under the Sector Working Group levels, which fits into the MTEF negotiation process where budget ceilings are negotiated and established. 90. Like all GoK MDAs, MoE follows the budget preparation guidelines as issued by the NT by 30 th August of each financial year, indicating key dates by which various exercises are to be completed. Prior to Page 18 of 92

27 the start of the budget cycle the DPC&D will have discussed the various activities and work programs with the respective implementing and beneficiary agencies and this will form the basis for preparing detailed annual work plans and budgets (AWP&B). 91. Annual sub-project work plans and budgets from non-tsc implementing entities at national and county levels will be prepared and submitted to the MoE/ DPC&D within the stipulated MTEF deadlines (or earlier dates as may be communicated by the DPC&D in order to meet the MTEF deadlines). To this end, the DPC&D will formally and in a timely fashion communicate the work plan and sub-budget submission deadlines to the non-tsc implementing entities, as well as the required form and content of such submissions. Adopting similar formats improves consolidation efficiencies at the DPC&D as consolidation will undoubtedly to be mammoth task. 92. For the avoidance of doubt, 33 sub-project AWP&Bs will be prepared and submitted to the DPC&D (for consolidation) by: a) DPC&D for its own project activities b) KICD c) KNEC, and d) All 30 participating counties [excluding school-level plans and budgets) 93. The DPC&D and Project Focal Points at KICD and KNEC and at each of the CPC at participating counties will be responsible for the preparation and submission of AWP&B for their project subcomponents or activities. The Focal Points and CPCs must ensure that the stipulated submission deadlines are strictly adhered to. 94. The DPC&D will collate and consolidate all of these sub-project plans and budgets to produce one MoE-wide (excluding TSC) annual project work plan and budget. This will be submitted to the PS-MoE for approval and await further consolidation with the TSC-level project AWP&B Annual Work Planning and Budgeting at TSC 95. Annual project planning and budgeting activities at TSC will, like any other GoK MDAs, also follow the normal GoK procedures as anchored on the MTEF process in accordance with annual guidelines issued by the NT. 96. Annual sub-project work plans and budgets from TSC itself and CEMASTEA will be prepared and submitted to the TSC Project Focal within the stipulated MTEF deadlines (or earlier dates as may be communicated by the DPC&D in order to meet the MTEF deadlines) for consolidation and production of one TSC-level project AWP&B. 97. To this end, the DPC&D will formally and in a timely fashion communicate the work plan and subbudget submission deadlines to the TSC and CEMASTEA Focal Points, as well as the required form and content of such submissions. Adopting similar formats improves the final consolidation efficiencies at the DPC&D as explained under sub-section 4.1 above. 98. The consolidated TSC-level project AWP&B will be forwarded to the TSC Director of Finance/Accounts and then submitted to the TSC CEO for approval and submission to the MoE/ DPC&D for final overall consolidation with the MoE-level project AWP&B to produce one overall project AWP&B. Page 19 of 92

28 4.4.3 Annual Work Planning and Budgeting for School-Level Activities 99. For the implementation of project activities at school level, the DPC&D will work closely with the County Project Coordinators (CPC) and County Directors of Education (CDE) to obtain the required information for work planning and budgeting for delivery of school-level activities. Such information may include, but not limited to the following: a) School enrolment figures for boys and girls for the relevant classes; b) Priority lists of each target school s needs; c) Mapping of distances between target schools and nearby towns/county project offices; d) School bank account details (if disbursement of grants to schools is envisaged; etc) 100. School head teachers and principals, as well as SBOM, will be appropriately consulted as necessary to provide the information required or deemed necessary for planning and budgeting purposes The CPC will collate and consolidate school-level information in an appropriate format as may be communicated by the DPC&D from time to time. The consolidated information will be relayed to the DPC&D within the stipulated timelines. The DPC&D will further collate and consolidate all school-level information from the counties and generate an overall school-level work plan and budget, which will at a minimum show: a) Each beneficiary school by name; b) The county and sub-county of school location; c) School activities to be funded; d) Activity-driven budgeted costs; e) Activity delivery timelines; f) Organ/institution to deliver the activities; g) If applicable, the bank account into which funds will be disbursed, etc 102. The final budget document for school-level activities will clearly indicate the following information in an appropriate cascading and methodical manner: a) The total for the each beneficiary county and a total for all counties; b) The total for the each beneficiary sub-county and a total for all sub-counties; c) The total budget for each beneficiary school and a total for all beneficiary schools by subcounty and county of location; d) The overall total budget should arithmetically equal to each of the arithmetic totals under items (a) to (c) above The DPC&D will sign each page of the final budget document generated under the foregoing paragraph and submit it to the PS-MoE for approval. The PS-MOE will signify his approval by similarly signing on each page of the document. This signing procedure is intended to serve as a reasonable and practical safeguard against possible fraudulent subsequent amendments or revisions to the approved list of beneficiaries The approved final budget document will serve as the required documentary authority against which funds will be mobilised and disbursed for the implementation of school-level project activities. 4.5 In-Year Work Plan and Budget Revisions and Reallocations 105. It is often the case that occasionally, some project activities may be inadvertently over-budgeted or under-budgeted or some planned project activities may not occur as scheduled due to circumstances Page 20 of 92

29 beyond the control of project management. Also, some planned project activities may be postponed for various reasons or some budgeting assumptions may change over time. Such occurrences may necessitate plan and/or budget revisions/reallocations within the overall project budget. These will be processed as explained below Upon a formal written request from the DPC&D, sufficiently justifying the reasons for the requested revisions/reallocations, the PS-MoE may approve revisions/reallocations of funds between and among the appropriated project activities or sub-votes in the project budget for a financial year if: a) There are provisions in the project budget or specific sub-votes which, in his/her informed judgement, are unlikely to be utilised or under-utilised during the financial year (FY); b) A request for the revision/reallocation has been made to the NT explaining the reasons for the revision/reallocation and the NT has approved the request; c) The total sum of all revisions/reallocations made to or from the project budget or sub-vote does not exceed ten percent of the total expenditure approved for the project or sub-vote for the related FY; d) The revision/reallocation has received written WB no-objection approval; and e) The budget allocations internally ring-fenced by the MoE/DPC&D for a specific project purpose (e.g. school bursaries/scholarships) may not be used for other purposes The Project Focal Point at any of the project implementing agencies at national and county levels may make formal requests for revisions or reallocations within the project budget or sub-votes through the DPC&D, who will collate and consolidate such requests, and submit them to the PS-MoE for review and approval, and through other authoritative processes The PS-MoE will then arrange for the requests to be submitted to the NT for final approval and to WB for no-objection approval, and subsequent implementation of the revisions/reallocations. No revisions/reallocations will be executed before the NT s and WB s formal approvals have been obtained. 4.6 Budgeting under AIA and Revenue Modes 109. Certain project heavy or large scale procurements under any of the Components will be budgeted under the Appropriation-in-Aid (AIA) mode of payment (direct payment disbursement method). This mode of disbursement ensures that the project will be able to implement large scale procurements without significant cash liquidity challenges and ensure low operational risks as the WB will make payments directly to the suppliers of goods and services However, the project s management costs which include operational costs will be budgeted under the Revenue mode of budgeting following the laid down GoK procedures relating to revenue-based funds flow arrangements. 4.7 Budget Execution Monitoring and Control 111. The overall execution of the project budget will be monitored through the Vote Book mechanism at the MoE/DPC&D, TSC, KNEC, CEMASTEA and county levels on the basis of a regularity that will be communicated by and agreed with the DPC&D, preferable monthly and/or quarterly. This will require deliberate and on-going focus by Project Focal Points on project expenditures against planned/budgeted activities at the detail level. Page 21 of 92

30 112. More details on vote control procedures are provided in this manual in sub-section 6 under project accounting arrangements Budget monitoring and control will be a formal process to be properly documented and submitted to internal entity project management for review, discussions and concurrence before being submitted further to the DPC&D for collation and consolidation To facilitate this process, the DPC&D may communicate internal budget execution and monitoring reporting timelines within which the other project implementing agencies should submit their reports to DPC&D. In order to enhance the prospect for timely delivery of these reports, all implementing agencies will have to work closely with their accounting functions, as only the accounting function is able to provide useful feedback on budget utilisation and hence the funds absorption capacity of the implementing agencies At a minimum, the budget execution and monitoring reports, which should be signed by the Project Focal Point and the institution s head of finance/accounts, should contain the following information preferably in columnar form: a) Project component b) Project sub-component c) Summary of approved budget figures set against actual expenditures classified appropriately. [This classification may be by activity or type or both may be agreed with the DPC&D] d) Variance between approved budget figures and actual expenditure e) Explanation for significant variances, both favourable and unfavourable variances f) Remedial measures, if any, planned to address the situation going forward g) A summary list of commitments made but not yet paid (pending payments) as at the reference date. [Since project accounting is cash-based, this information is important as expenditure is recorded only when cash is actually paid out] Typically, in interpreting what a significant variance should be taken to mean, management informed judgement or discretion is required based on the underlying item or issue at hand. To guide such judgement or discretion, management may issue threshold guidelines so that project personnel do not focus too much energy and effort on unimportant or obvious variances/issues. For example, it may be required to explain any variances 5% or 10% above or below the budget level, etc At the level of beneficiary schools, where applicable, budget monitoring will be undertaken by the County Project Coordinator, working with the County and Sub-County Education Offices, during their regular, preferably quarterly or semi-annual, school supervision visits Further budget execution monitoring will be done through unaudited quarterly Interim Financial Reports (IFR) submitted to IDA/WB. An analysis of significant variations between the budgeted and actual financial performance will be conducted every quarter and compiled into a report that will form part of the quarterly project IFR. In providing variance explanations, the information required under the foregoing paragraphs will be included in the IFR. 4.8 Supplementary Project Budget Estimates 119. The DPC&D will, if deemed necessary, within the guidelines of the supplementary budget circular and in conformity with budget guidelines issued by the NT, prepare revised project budget estimates in the format to be issued by the NT. Page 22 of 92

31 120. Prior to incurring any expenditure under the project supplementary budget, the DPC&D will, through the PS-MoE, seek the approval of the NT and WB, and if approval is given, it shall be communicated to the PS-MoE through a notification which will procedurally be copied to the Auditor-General and the Controller of Budget by the NT The purpose for which approval is sought for a supplementary budget may be: a) Unforeseen and unavoidable, in circumstances where no budget provision was made; b) Unavoidable, in circumstances where there is an existing budgetary provision which, however, is inadequate; 122. A supplementary budget may also be sought if planned expenditure cannot be met by budget reallocations as described under sub-section 4.5 above. This request will be presented in a format that facilitates comparison with the original budget and will contain all of the information necessary to enable a decision on the request to be reached and will include: a) The vote, project and broad expenditure category which it is desired to supplement, the original sum voted thereon and any supplements which may have since been added; b) The actual expenditure and the outstanding liabilities or commitments against the item on the date when the request is made; c) The amount of the supplement required, the reasons why the supplement is necessary and why it has not been possible to keep within the voted provision; d) The basis for the calculations underpinning the supplementary; e) The proposed source of financing for the additional expenditure; f) An analysis of the impact of the additional expenditure, or of the implications, if any, for the planned outputs and outcomes of the affected project; g) Any implied deviation from the MTEF and the financial objectives, if any; and h) The latest project budget projections. Page 23 of 92

32 5. PROJECT FUNDS FLOW AND DISBURSEMENT ARRANGEMENTS Overall FM objective to ensure that adequate and timely funds are made available to finance eligible project activities and expenditures at all implementation levels. 5.1 Overview of Key Project Funds Flow Guiding Principles 123. Timeliness and adequacy of funds flow at all levels are both all-encompassing principles to be strictly observed in the funds flow processes and procedures to be adopted both in attitude and in practice at all project implementing entities. These attitudinal standards are underpinned by the provisions in the following paragraphs of this sub-section The project will adopt the normal GoK exchequer funds flow system for accessing project funds from the WB and onward disbursement to MoE and TSC for onward release, as appropriate, to other connected implementing agencies under their respective jurisdictions for downstream project implementation. This means that the standard GoK documentation, procedures and timelines commonly used in accessing and disbursing project funds will be strictly employed, modified slightly to accommodate WB funds flow requirements As per the constitution, the PFM Act and supporting Regulations, applications for funds (Exchequer Requisitions) will be submitted to the NT for review and then forwarded to the Controller of Budget (CoB) for authorisation to draw funds from all public accounts. Once CoB authority is granted, the NT should ensure the timeliest release of adequate funds (as requested) to MoE and TSC. The release of reduced Exchequer Requisition amounts will be treated as an unacceptable and a puzzling outcome of the NT s expected facilitative role since project funds are not dependent on GoK tax collections Similarly, the MoE and/or TSC should also ensure the timeliest release of adequate funds to downstream implementing agencies, based on their approved work plans, budgets and cash forecasts. This means that all efforts should be made to eliminate or at worst, reduce to a minimum, any funds flow delays within the Exchequer process at the NT, and within both MoE and TSC internal processes In keeping with the spirit embodied in the foregoing paragraph, when all implementing agencies receive and record project funds in their accounting records, payments to suppliers of goods and services should not be unduly delayed, but should be made on a timely basis once all conditions for payments have been met to the satisfaction of the responsible project authority The actual practice adopted for funds flows described in the foregoing paragraphs will be assessed regularly both by internal and external reviewers with a view to evaluating the efficiency and effectiveness of the overall project funds flow process at every implementing agency to determine the specific point where unnecessary and avoidable delays (habitually) occur. Unnecessary funds flow delays can lead to a change in the disbursement method to a more rigorous method It should be emphasised that, in implementing the principles above, a fundamental and cross-cutting standard is that only properly and legally authorised AIE-holders can approve or authorise the release of, or expenditures from, project funds at all levels of project implementation. This is such a critical standard that any violation thereof will automatically result in a declaration of ineligible expenditure at the first instance of occurrence. Page 24 of 92

33 130. All project funds will be used by the project for eligible activities and expenditures as defined in the Financing Agreement and further detailed in the respective approved annual work plans and budgets (AWP&B). The mechanisms involved in accessing funds by MoE and TSC are described in the subsections below. 5.2 Project Disbursement Methods 131. The project design features will have a hybrid funds flow structure, involving a combination of two distinct disbursement methods. These are: a) A results-based (DLI/DLR) financing approach for Component 1.3 and 2.2; and b) A traditional investment project financing (IPF) approach using the report-based disbursement arrangements to cater for all other components being implemented by, or under, the MoE Other available disbursement methods under the IPF approach, which can be used in conjunction with the foregoing methods are: a) Direct payment method: This is used where the MoE requests the WB to make payments directly to a third party. Such requests should meet the minimum threshold for direct payments agreed with the WB. Where direct payments are to be made by the WB, the MoE will provide full documentation showing that such expenditures have been incurred at the time a request for payment to the third party is made. b) Special commitments: The MoE may request the WB to pay third parties for eligible expenditures under special commitments entered into between the project and a third party on terms and conditions agreed between the WB and the GoK. Payments are made to a financial institution for the cost of project expenditures covered by a special commitment. A special commitment is an irrevocable commitment entered into by the WB in writing to pay such. The financial institution provides confirmation that such expenditures have been incurred at the time a request for payment is made. The financial institution would provide a confirmation that documents have been received and are acceptable, and that payment has been made or is due and will be made promptly to the beneficiary covered by the special commitment. 5.3 Project Disbursement Categories 133. Based on the project design there will be three (3) disbursement categories as summarised in the table below. Disbursement Category 1. Eligible Expenditure Programme for Components 1.1 and 1.2 implemented by TSC 2. Eligible Expenditure Programme for Components 1.3 and 2.2 implemented by MoE Amount of the Credit Allocated (USD) 23,000,000 63,000,000 Percentage of Expenditure to be Financed (inclusive of Taxes) Up to 100% of each DLR amount set out in the Disbursement Linked Indicator Schedule Up to 100% of each DLR amount set out in the Disbursement Linked Indicator Matrix 3. Goods, works, non-consulting service, consulting services, training and operating cost under all other components 112,011, % 4. Refinancing of the PPA 1,988, % TOTAL 201,988,515 Page 25 of 92

34 5.4 High-Level Funds Flow Diagram for the Project 134. The following diagram depicts the high-level funds flow USD and Kshs project accounts at CBK as described in the foregoing paragraphs. IDA (WB) Credit [$200M] NT/CBK funds flow level accounts DA-A [USD.63M] MoE Comps 1.3 & 2.2 only PA-A [Kshs] MoE DA-B [USD.114M] MoE Comps 2.1, 3.1, 3.2 & 4 PA-B [Kshs] MoE DA-C [USD.23M] TSC Comps 1.1 & 1.2 PA-C [Kshs] TSC 135. The MoE and TSC will subsequently, as deemed necessary for downstream project implementation, open or authorise the opening of more Kshs project accounts for other implementing agencies under their respective jurisdictions. Such accounts may be opened at CBK or commercial banks approved by the NT and acceptable to the WB. 5.5 Main MoE and TSC Project Accounts at CBK 136. For ease of implementation, the MoE will have a USD-denominated Designated Account for the project to cater for the traditional investment financing approach activities and a USD denominated separate account to cater for DLRs based payments TSC will also have a USD denominated separate account for its DLRs based payments. The designated and separate accounts will be opened by the NT at CBK The 3 DAs will opened at the CBK in line with the Treasury Single Account (TSA) requirements in accordance with the PFM Act, 2012 and supporting PFM Regulations, 2015, and will be operated by the NT in line with the existing GoK Exchequer procedures The three USD accounts are summarised below together with related project sub-components. a) Designated Account A (MoE) - for Sub-components 2.1, 3.1 and 3.2 and Component 4.1 &4.2 b) Separate Account A (MoE) - for Subcomponents 1.3 and 2.2 c) Separate Account B (TSC) - for Subcomponents 1.1 and To support implementation and ensure adequate funding, there will be local currency (Kshs) operational accounts Project Accounts to support the payment of eligible expenditures The Project Account currently used for processing and maintaining the Project Preparation Advance will be used as one of the accounts for the MoE once the project is declared effective. The PA will be opened after project effectiveness. Page 26 of 92

35 142. There will be at least two mandatory signatories to each of the project DAs, who are specified by name and title by the Cabinet Secretary for the NT and formally communicated to the IDA/WB. These signatories are ordinarily officers of the External Resources Department (ERD) of the NT responsible for WB-funded projects The WB will release funds in USD from the credit account to the 3 project USD accounts following the processes and procedures to be described more fully in the WB Disbursement Letter on how funds will flow to the project, including minimum disbursement thresholds The three (3) corresponding Kshs Exchequer Project Accounts at the CBK will be identified in such a way that will directly match them to the connected USD accounts by adopting an identical numbering such as A, B and C or 1, 2 and Overview of Requirements for Requesting Funds from IDA 145. For project funds to flow from the WB credit account to the project DAs, MoE and TSC will submit withdrawal applications (WAs) to the WB through the NT using the online WB platform called Client Connection accompanied by relevant reports or documentation The WB, in collaboration with the MoE and TSC, will organise appropriate training for the relevant FM personnel in the use of the Client Connection platform Depending on the applicable disbursement modality for particular components and sub-components, a WA will be supported either by: a) Report-based financing based on DLIs/DLRs achieved accompanied by a third-party verification report. For documenting advances incurred under those components using DLR/DLI-based disbursements, all of the following information will be required by the WB: i) Documentary evidence of the achievement of the relevant DLR as provided by the Independent Verification Agency; ii) EEP Spending Report showing GoK contribution to the overall programme; iii) Evidence of the TTL/Bank s acceptance of the evidence as provided by the Independent Verification Agency; and iv) Interim Financial Report b) For those components not using the DLR/DLI approach, the following set of documents will be required by the WB (as part of the quarterly IFR package, among other information): i) Quarterly unaudited IFR; ii) DA reconciliation statement; and iii) Six Months forecast of cash requirement 148. Any other report/s or supporting documents as may be requested by the WB as per the Disbursement Letter, e.g. contracts subject to prior review, or listing of grant beneficiaries etc The above methods of accessing/requesting funds from the WB are described in more detail in other sub-sections below. Page 27 of 92

36 5.7 Funds Flow to MoE Project Accounts A and B at NT/CBK 150. The MoE s PA-A and PA-B, funded from their corresponding USD accounts, will exclusively serve the MoE and the other non-tsc MoE-associated beneficiary agencies involved in project implementation and will be for exclusive project activities under the project components and sub-components as summarised in the table below: Designated A/c USD DA-A USD DA-B Associated PA [Kshs] PA-A PA-B Component/Sub- Component Sub-Component 1.3 Sub-Component 2.2 Sub-Components 2.1 Sub-Components 3.1 Sub-Components 3.2 Components 4 Component/Sub-Component Description Provision of Textbooks Improve Retention in Upper Primary and Transition to Secondary of poor and vulnerable Students Improve School Infrastructure Development and Introduction of a Competency Based Curriculum Strengthening of National System for Monitoring Learning Progress and National Examination 4.1: Project Management, Coordination, and Communication 4.2: Research, and Monitoring and Evaluation 151. The exclusive linkage between the USD accounts and PAs will entail that funds from one USD account cannot flow to the unrelated PA unless a formal application has been made to, and formally approved by, the WB The MoE project accounts (PAs) at CBK will have two mandatory signatories in the following categories, who must be formally communicated to the IDA/WB by name and title, and any subsequent changes thereto should similarly be communicated: a) Category 1: Accounting Officer The PS-MoE as the Accounting Officer is the signatory here but may delegate this role to his designated and clearly identified representative by name and title. b) Category 2: Accounts Department Staff i) The MoE s Head of Accounting Unit (HAU), or ii) Any of 3 designated MoE Accountants as per existing PFM Regulations. c) Any two (2) of the above signatories (one from each category) can sign cheques or electronic funds transfers for making payments from the MoE PAs. It is a time-honoured practice for the HAU to sign for any funds requests and to authorise all payments from MoE accounts. If practical, this practice should be observed under the project It is emphasised for clarity that every payment or instruction for payment out of any of the project accounts shall be strictly on the basis of the approved estimates of budget and project financing agreement Report-Based (IFR) Disbursements at MoE 154. Within the MoE, other than disbursements under component 1.3 and 2.2, all other components (Components2.1, 3.1, 3.2, 4.1 and 4.2) funds flow and disbursement arrangements will be Page 28 of 92

37 implemented under the principles of traditional investment project financing arrangements using the report based disbursement arrangements Under this approach, the initial disbursement will be an advance from WB to the applicable USD account based on the consolidated expenditure forecast for the first six months, subject to the WB s (TTL and FMS) approval of the estimates Subsequent replenishments of the USD account will be quarterly, based on the forecast of the net expenditures for the subsequent half-year period using interim financial reports (IFRs) prepared by MoE and/or generated from the IFMIS (if achievable) and cleared by WB s TTL and FMS The processing of expenditures will be undertaken through accountants seconded to the DPC&D under the supervision of the MoE s HAU. The IFRs (including the procurements subject to prior reviews and DA reconciliation statement ) will serve as the basis for requesting advances and subsequent replenishments, as well as for documentation of reported expenditure The recommended quarterly IFR template, showing format and content, is provided under section 8 on financial reporting arrangements. For quarterly report-based disbursements, the following process steps will be applicable: Process Step Process Description MoE/DPC&D prepares a consolidated quarterly IFR at the end of each calendar quarter Draft IFR internally reviewed by HAU for concurrence Draft IFR repackaged as necessary, signed by DPC&D accountant and submitted for signature by PC DPC&D-approved IFR submitted to Director-DPC&D for further approval/signature Director-approved IFR submitted to PS- MoE for final approval/signature plus a cover letter (if necessary) Approved IFR returned to DPC&D accountant who completes WA (form 2380) and attaches to IFR for scanning for Client Connection purposes DPC&D accountant accesses Client Connection and files IFR+WA, and submits online NT/ERD reviews IFR+WA and authorises package online for WB attention and action At WB, IFR is reviewed by TTL and FMS for clearance if satisfactory for further attention/action by WB Disbursements Dep t WB Disbursements Dep t reviews IFR+WA for clearance if satisfactory Responsible Officer Unit/Dep t Project Accountant HAU DPC&D Accountant/ PC Director-DPC&D PS-MoE DPC&D Accountant DPC&D Accountant NT/ERD WB TTL/FMS WB Disbursement Officer or Outcome Draft IFR Reviewed and concurred draft IFR PC-approved IFR Directorapproved IFR PS-approved IFR Scanned IFR including WA Client Connection filing of IFR + WA Client Connection authorised IFR+WA TTL-FMS cleared IFR+WA WB-cleared IFR+WA Comments on Standard Timelines Complex consolidation mechanics at MoE should be managed cautiously This role may be delegated to a senior accountant to ensure deadline not missed DPC&D signature assigns responsible on the PC Provides ministry-level ownership of IFR Final ministry-level ownership - this step may not always be possible due to PS availability Must be done within 45 days of end of quarter DPC&D may contact NT/ERD to alert them of filing of IFR+WA Any delays here can be tracked online. System gives alerts as to the status of IFR+WA Usually within 2-3 days If not cleared here, all of the above steps may have to be retraced but official review comments are given to MoE Page 29 of 92

38 Process Step 11. Process Description WB Disbursements Dep t releases project funds from the credit account to the Designated A/c Responsible Officer or Unit/Dep t WB Disbursement Officer Outcome Release of project funds Comments on Standard Timelines Usually within 2-3 days 159. In order to speed up overall project report-based disbursements from the WB, the following two conditions will be observed: a) If cash grants are provided to project beneficiary schools, such grants will be treated as expenditure at the point of disbursement at MoE. This is intended to speed up disbursements to schools (without necessarily requiring periodic school-based financial accountability returns for disbursement purposes), but overall school-level accountability and value-for-money reviews will be monitored by the County Project Coordinators and reinforced by periodic School Audit Unit examinations; and b) All project-responsible MoE s (and other implementing agencies ) officers must ensure comprehensive completeness and accuracy of the IFR both at the detailed agency level and at the consolidation stage, through a thorough process of well-coordinated and exhaustive internal quality reviews. Such reviews will eliminate or significantly reduce the potential risk of having the quarterly IFRs being returned by the WB for mundane error corrections Results-Based (DLI/DLR) Disbursements at MoE 160. The total resource allocation to be implemented by the MoE under the result based (DLI/DLR) financing approach is for Component 1, split between sub-component 1.3 and sub component Disbursements under these sub-components will be based on the achievement of DLIs which will be measured and valued in monetary terms for each respective year through a set of identifiable and measurable DLRs over the 6-year period For each sub component, the respective DLI has been has been defined into a number of achievable DLRs which have been translated into variable prices as the equivalent value for achieving the DLR in each year of implementation Meeting the defined DLRs as identified in the results framework and monitoring table and also in the Financial Agreement will constitute the primary basis for triggering credit disbursements under the Project The total number of DLRs has been individually priced, and as such the eligible disbursement amount will be the sum of the achieved DLRs multiplied by the unitary monetary value (price) as per the Disbursement Schedule, which has been reproduced in Annex 1 for ease of reference The underlying principle will be to disburse, after project effectiveness, and based on a forecast of the funding required to potentially achieve the set of DLRs in each year, at least half of the funding requirement as an advance to MoE Subsequently on a half yearly basis the MoE will provide satisfactory documentary evidence including (i) acceptable IFR, (ii) EEP Spending Reports and (iii) evidence of independent verification of the set of DLRs for that particular year which have been achieved. These reports will then form the basis of Page 30 of 92

39 documenting the advances made. Subsequent advances will be made on the approval by the WB of the next six months forecast of expenditure It must, however, be noted that in subsequent years and beyond the first year, only one DLR relating to the prior year, can remain unmet to allow for disbursements of any further advances against the potential for meeting future period DLRs. This means that while non-compliance/non-achievement with a DLR in a period will result in funds associated with that DLR being withheld, disbursement associated with the achievement of other DLIs will not be affected Where GoK is able to meet any of the DLRs beyond the value of the total advances granted, GoK can request such values as a reimbursement into any government account other than the Designated Account Where achievement of a DLR cannot be certified, an amount equivalent to the unitary DLR price will be withheld or considered as undocumented and an outstanding obligation on the GoK. This amount will be paid at any later date, during project life, and at the discretion of the WB s task team when such achievement can be verified. The task team may consider that a later achievement of the DLR performance would not qualify for disbursement against the unmet DLR if it determines that the onschedule achievement of the DLR is critically fundamental to achieving the overall objectives of the project. A schedule of the DLI/DLR matrix with the indicative DLR value is included in Table 5 Disbursement Linked Indicator Matrix The overall government program of expenditures to be supported under the component is as below. For MoE the EEP is the School Capitation Grants and the TSC is Teachers Salary. As the selected EEP item in the chart of accounts of the Government is not a procurable item, the expenditure will not attract any procurement actions under the World Bank s Procurement Guidelines. Such EEP would be verified by the independent verification agency as part of the documentation for achieving DLRs All internal documentation supporting the demonstration of achieved DLIs/DLRs, as well as DLI/DLRs not achieved during the target/reference period of reporting will be signed by the following MoE officers for MoE-implemented components and sub-components: a) PS-MoE b) Director-DPC&D c) PC d) Respective component Project Focal Points 172. Copies of all approved documentation under the foregoing paragraph will be submitted to the following under MoE letter-head: a) NT b) WB TTL c) Appointed/contracted third party verification institution 173. The signed final documentation containing third party-verified DLI/DLR achievements will be sent by the third party to the following: a) NT b) WB TTL c) PS-MoE d) Director-DPC&D e) PC Page 31 of 92

40 174. If the WB TTL approves and clears the final documentation from the third party verifier, the MoE will use the cleared documentation to draw up a withdrawal application (WA) to request disbursement from the WB, through the NT, in relation to the clear DLIs/DLRs The WA will be submitted online through the Client Connection platform following the steps below. Process Step Process Description WB informs PS-MoE of approved/cleared DLIs/DLRs PS-MoE instructs DPC&D to prepare related WA Project accountant completes WA (form 2380) and attaches to WB approval/clearance, and scans for Client Connection purposes DPC&D project accountant accesses Client Connection and files WA package, and submits online NT/ERD reviews WA and authorises package online for WB attention and action At WB, WA is reviewed by TTL for clearance for further attention/action by WB Disbursements Dep t WB Disbursements Dep t reviews WA package for clearance if satisfactory WB Disbursements Dep t releases project funds from the credit account to the relevant Designated A/c Responsible Officer Unit/Dep t WB TTL PS-MoE DPC&D Accountant DPC&D Accountant NT/ERD WB TTL or WB Disbursement Officer WB Disbursement Officer Outcome Clearance of DLIs/DLRs Instruction to prepare WA Scanned WA and approval/ clearance Client Connection filing of WA Client Connection authorised WA TTL-FMS cleared WA WB-cleared WA Release of project funds Comments on Standard Timelines After review of 3 rd part verifier s report As soon as practicable As soon as practicable DPC&D accountant may contact NT/ERD to alert them of filing of WA Any delays here can be tracked online. System gives alerts as to the status of WA Within 2-3 days Usually within 2-3 days Procedure for Requesting Funds from NT by MoE 176. For applying for the release of project funds from the NT to the MOE s PAs, the MoE will initiate/raise an Exchequer Requisition which is signed by the PS-MoE (or designate) and the HAU, once the budgetary voted allocations have confirmed by the MoE s Chief Finance Officer (CFO), who is responsible for budget matters The following table illustrates a summarised version of the standard procedures/steps employed and the officers or official organs responsible in the application for funds from the NT. Process Step Process Description Formal Letter sent by PS-MoE to NT supported by an Exchequer Requisition NT verifies request against approved budget NT forwards the Requisition to the CoB indicating the project s bank account/s that the issued amounts should be paid to Responsible Officer or Unit/Dep t PS-MoE Page 32 of 92 Outcome Request for Release of funds Comments on Standard Timelines Usually quarterly as project funds are not dependent on taxes- or more frequently depending of project funds absorption rates NT/ERD NT-level review Usually within 2-3 days. NT NT-level approval Usually within 2-3 days

41 Process Step Process Description CoB reviews requisition and approves funds release as per constitution, 2010 CoB returns the approved Requisition to the NT for funds release processing NT receives approved Requisition and authorises funds release through official communication to CBK CBK releases funds from the MoE DA to the MoE PA NT/ERD informs MoE of release (exchequer issue) of funds MoE/DPC&D uses funds to implement project activities through the payments from PA MoE/DPC&D authorises further release of funds to other implementing agencies bank accounts MoE/DPC&D also issues AIEs to Project Focal Points Implementing agencies use funds to implement project activities Responsible Officer or Unit/Dep t CoB CoB NT CBK NT MoE/DPC&D PS-MoE/DPC&D/HAU PS-MoE/ DPC&D Project Focal Points and Project Accountants Outcome CoB approval CoB approval NT authority release Release of project funds Availability funds Project payments of Further release of project funds Authority to incur expenditure Project implementation and monitoring Comments on Standard Timelines Usually within 2-3 days Usually within 2-3 days Usually within 2-3 days Immediately 1 day but often MoE must keep following up with NT for this information Continuing - based on approved work plans & budgets Based on approved work plans & budgets Accompanies release of funds Continuing - based on approved work plans & budgets 178. In order to speed up the project funds flow processes at NT, the PS-MoE/DPC&D/HAU may from time to time, engage with the NT, as a key stakeholder, to mutually agree on a workable service standards charter setting out increasingly enhanced timelines for the delivery of project funds once the MoE submits an Exchequer Requisition This course of action should be particularly pursued if funds flow delays are experienced and attributed to NT-level bureaucracies or NT staff issues. On their part, the MoE/ DPC&D/HAU should always ensure that project Exchequer Requisitions are prepared and submitted to the NT in a timely fashion, because any submission delays would lead to more knock-on delays Funds Flow to MoE-Associated Implementing Agency-Level Project Accounts 180. Funds will be released from the MoE s main Kshs PAs at CBK to the individual non-tsc implementing agencies based on approvals from the NT and the MoE/ DPC&D following established normal GoK exchequer procedures Separate non-commingled bank accounts will be opened (at commercial banks approved by the NT) and operated by all project implementing agencies at national and county for purposes of ensuring effective tracking and accountability of project funds and their expenditure Notwithstanding the foregoing paragraph, the DPC&D will not need to open a separate commercial bank account but will process payment of all eligible project expenditures from any of the two MoE Main PAs (as appropriate) using the IFMIS platform under the G-Pay EFT-T24 TSA system (internet banking system). Page 33 of 92

42 183. The initial disbursements to the separate implementing agency bank accounts will be made on the basis of their individual approved work plans and cash forecasts for the initial six-month period of the project being declared effective for implementation. Project payments will be made from these separate bank accounts to finance eligible expenditures incurred by the implementing agencies Subsequent disbursements to implementing agency bank accounts will based on their individual approved quarterly work plan-driven cash forecasts for the subsequent six months, as well as satisfactory accountability returns over previous disbursements (except for schools, whose disbursements might be per school term to align with other existing school-level funds flow arrangements) All withdrawals from the MoE/DPC&D and sub-implementers project bank accounts will be made only for approved and eligible project expenditures, and disbursements at all levels of the project will be made promptly and without undue delays Detailed Project Funds Flow Diagram at MoE 186. It is emphasised for greater clarity that every request for funds and any payment or instruction for payment out of any of the project account/s at any level of project implementation will be strictly on the basis of the approved work plans and budgets, and not because they appear sensible The following diagram reflects a further decomposition of the MoE-related funds flow arrangements of the high-level funds flow diagram shown under section 5.4 above. IDA/WB Credit [NT/CBK] DA-A [USD] [NT/CBK] DA-B [USD] [NT/CBK] MoE PA-A [Kshs] [NT/CBK] MoE PA -B [Kshs] DPC&D School-Level Disbursement Schedules KNEC Commercial Bank A/c [Kshs] KICD Commercial Bank A/c [Kshs] County-level Commercial Bank A/cs [Kshs] School-Level Disbursement Schedules KNEC Commercial Bank A/c [Kshs] KICD Commercial Bank A/c [Kshs] County-level Commercial Bank A/cs [Kshs] 3rd Party Intermediaries Sub-County Commercial Bank A/cs 3rd Party Intermediaries Sub-County Commercial Bank A/cs Detailed Beneficiary School Lists Beneficiary School Lists Beneficiaruy School-Level A/cs Note: Disbursements to schools will mainly involve bursaries and scholarships to benefit identified poor, vulnerable and marginalised students. MoE will have to specify the school a/c the funds will be disbursed to. Beneficiaruy School-Level A/cs Note: Due to long distances in the target counties and sub-counties, it might be necessary to have operational accounts at sub-county level. Disbursements to these accounts can come from MoE directly or from county-level accounts. Page 34 of 92

43 5.8 Funds Flow to TSC Project Account C at NT/CBK 188. The TSC s project account at CBK will be funded from its corresponding USD account and will exclusively serve the TSC- and CEMASTEA-based project implementation activities While TSC may spend directly from the PA for its project activities, it will authorise CEMASTEA to open a dedicated project account at an acceptable commercial bank into which CEMASTEA-related funds will flow from the main project account to finance CEMASTEA-based eligible project activities Notwithstanding the foregoing paragraph, TSC may also choose to open a project-dedicated commercial bank account which will receive funds from main project account for TSC-based eligible project activities The TSC s USD account and the connected main project account at CBK will be for the exclusive use to finance project activities under the TSC-implemented sub-components as summarised in the table below: Designated A/c USD DA-C Associated PA [Kshs] PA-A Component/Sub-Component Sub-Component 1.1 Sub-Component 1.2 Component/Sub-Component Description Reducing teacher shortage Enhancing teachers professional development 192. The TSC project account at CBK will have two mandatory signatories in the following categories, who must be formally communicated to the IDA/WB by name and title, and any subsequent changes thereto should similarly be communicated: a) TSC CEO/or designated alternate b) TSC Director Finance/ or designated alternate c) TSC Director Accounts/ or designated alternate 193. Any two of the three signatories are required to sign for any funds requests and to also authorise all cheque and/or EFT payments from TSC project account/s Report-Based (IFR) Disbursements at TSC 194. This disbursement method is not available to TSC as the two sub-components TSC will be implementing are entirely under the results-based disbursement method However, for quarterly reporting purposes, TSC will be expected to prepare a quarterly IFR and submit it to MoE/DPC&D for consolidation and onward submission to the NT and WB. The mechanics involved in this process are detailed in section 8 on financial reporting Results-Based (DLI/DLR) Disbursements at TSC 196. Proceeds of the facility allocated to TSC will be made available for eligible expenditures as defined in the financing agreement and further detailed in the respective annual work plans and budgets. The TSC will be responsible for implementing sub-components 1.1 and 1.2 and, in line with the design, disbursements under these sub-components will adopt the results-based financing using DLI/DLRs Meeting the defined DLRs as identified in the results framework and monitoring table will constitute the primary basis for triggering credit disbursements under the project. The total number of DLR s has Page 35 of 92

44 been individually priced, and as such the eligible disbursement amount will be the sum of the achieved DLRs multiplied by the unitary monetary value (price) as per the Disbursement Schedule this is included in Annex 2 for ease of reference All TSC internal documentation supporting the demonstration of achieved DLIs/DLRs, as well as DLI/DLRs not achieved during the target/reference period of reporting will be signed by the following TSC officers for the TSC-implemented component and its sub-components: a) CEO b) TSC Project Focal Point c) CEMASTEA Project Focal Point d) Any other officer that the CEO may approve 199. Copies of all approved documentation under the foregoing paragraph will be submitted to the following under TSC letter-head: a) NT b) WB TTL c) PS-MoE d) DPC&D e) Appointed/contracted third party verification institution 200. The signed final documentation containing third party-verified DLI/DLR achievements will be sent by the third party to the following: f) NT g) WB TTL h) PS-MoE i) DPC&D 201. If the WB TTL approves and clears the final documentation from the third party verifier, the TSC will use the cleared documentation to draw up a withdrawal application (WA) to request the eligible disbursement from the WB, through the NT, in relation to the clear DLIs/DLRs The WA will be submitted online through the Client Connection platform following the steps below. Process Step Process Description WB informs TSC CEO/Focal of approved/cleared DLIs/DLRs TSC CEO instructs Focal Point/Project accountant to prepare related WA Project accountant completes WA (form 2380) and attaches to WB approval/clearance, and scans for Client Connection purposes TSC accountant accesses Client Connection and files WA package, and submits online NT/ERD reviews WA and authorises package online for WB attention and action At WB, WA is reviewed by TTL for clearance for further attention/action by WB Disbursements Dep t Responsible Officer Unit/Dep t WB TTL TSC CEO DPC&D Accountant DPC&D Accountant NT/ERD WB TTL or Outcome Clearance of DLIs/DLRs Instruction to prepare WA Scanned WA and approval/ clearance Client Connection filing of WA Client Connection authorised WA TTL-FMS cleared WA Comments on Standard Timelines After review of 3 rd party verifier s report As soon as practicable As soon as practicable TSC accountant may contact NT/ERD to alert them of filing of WA Any delays here can be tracked online. System gives alerts as to the status of WA Within 2-3 days Page 36 of 92

45 Process Step Process Description WB Disbursements Dep t reviews WA package for clearance if satisfactory WB Disbursements Dep t releases project funds from the credit account to the Designated A/c Responsible Officer or Unit/Dep t WB Disbursement Officer WB Disbursement Officer Outcome WB-cleared WA Release of project funds Comments on Standard Timelines Usually within 2-3 days Procedure for Requesting Funds from NT by TSC 203. When applying for the release of project funds from the NT to the TSC s PAs, the TSC will initiate/raise an Exchequer Requisition which is signed by the CEO-TSC (or designate) and the Director of Finance/Accounts, who will have confirmed agreement with and availability of the project budget The following table illustrates a summarised version of the standard procedures/steps, which largely emulate those at the MoE, to be employed and the officers or official organs responsible for each step in the application process. Process Step Process Description Formal Letter sent by TSC to NT supported by an Exchequer Requisition NT verifies request against approved budget NT forwards the Requisition to the CoB indicating the project s bank account that the issued amounts should be paid to CoB reviews requisition and approves funds release as per Constitution, 2010 CoB returns the approved Requisition to the NT for funds release processing NT receives approved Requisition and authorises funds release through official communication to CBK CBK releases funds from the TSC DA to the TSC PA-C NT/ERD informs TSC of release (exchequer issue) of funds TSC uses funds to implement project activities through the payments from PA-C TSC authorises downward release of funds to CEMASTEA bank account CEMASTEA uses funds to implement project activities Responsible Officer or Unit/Dep t TSC-CEO/Director of Finance Outcome Request for Release of funds Comments on Standard Timelines Usually quarterly as project funds are not dependent of taxes- or more frequently depending of project funds absorption rates NT/ERD NT-level review Usually within 2-3 days. NT/ERD NT-level approval Usually within 2-3 days CoB CoB NT CBK NT/ERD TSC Director- Finance/Project Focal Point CEMASTEA CEO/ TSC Director- Finance TSC Director- Finance/Project Focal Points CoB approval CoB approval NT release authority Release of project funds Availability funds of Project payments Further release of funds Project implementation Usually within 2-3 days Usually within 2-3 days Usually within 2-3 days Immediately 1 day but often TSC must keep following up with NT for this information Continuing- based on approved work plans & budgets Based on approved work plans & budgets Continuing- based on approved work plans & budgets Page 37 of 92

46 5.9 Operation of Project Bank Accounts Operation of MoE Project Bank Accounts 205. It is not expected that the MoE will have a need for opening another non-cbk bank account (in addition to the 2 PAs) for MoE-level operations. If, however, in the unlikely event that it is deemed absolutely essential to do so, then the MoE will seek the NT s authority for this action as provided by the PFM Act and Regulations. If authorised by NT, the account/s will be operated in a manner exactly identical to that for the main MoE project PAs The Director-DPC&D will be the primary delegated AIE holder for the project funds and will approve all underlying documentation for transfer of funds from the 2 main Kshs Project Accounts at CBK to downstream MoE-associated implementing agencies. Such documentation will be authorised by the HAU and PS-MoE before being submitted to the NT for the release of funds to those project implementing agencies The DPC&D will, on behalf of the PS-MOE, be primarily responsible for accountability of all project funds released to all to third party intermediaries contracted to delivery various goods and services to identified beneficiary secondary and primary schools, including detailed school-level disbursement lists and schedules To this end, the DPC&D will ensure that adequate and reliable payments and disbursement records are kept at MoE HQs for subsequent audit and other internal or independent reviews Operation of TSC Project Bank Account 209. The TSC Kshs project account at CBK will be operated as elaborated in section 5.8 above In the event that TSC chooses to open a separate project account at a suitable commercial bank acceptable to the NT and WB, this account will be exclusively funded from project funds from the main PA-C and will also be operated in the same way and with the same signatories as applicable to the main PA-C Operation of CEMASTEA Project Bank Account 211. With TSC CEO s authority, CEMASTEA will open and operate a non-commingled local currency (Kshs) project bank account at a reputable commercial bank acceptable to the NT and WB. This account will be exclusively funded from project funds from the main PA-C for financing eligible project implementation activities The initial transfer of funds from the main PA-C to the CEMASTEA project account will be based on the approved quarterly work plan and budget as submitted to, and approved by, the TSC CEO and the TSC Director of Finance Subsequent transfers of funds from the main PAs to these project accounts will be based on satisfactory return accountability over previously disbursed funds, supported by approved work plans and budgets The TSC CEO will formally delegate authority to incur expenditure to the CEMASTEA CEO and/or officer designated as Project Focal Point for the CEMASTEA sub-component activities. Page 38 of 92

47 215. The signatories to these project bank accounts will follow the normal established/existing institutional signatory arrangements for operating bank accounts. However, no payments will be made from these accounts without the approval of the Project Focal Point at each of these project implementing agencies. The usual account signatories at CEMASTEA that will operate the account are: a) CEMASTEA CEO or designate (mandatory signatory) b) CEMASTEA Board Member representing Ministry of Youth and Gender c) CEMASTEA Board Member representing NSSF d) CEMASTEA Board Member representing Kenyatta University 216. Any three signatories will sign for project payments provided that the CEMASTEA CEO or designate will be a mandatory signatory to all cheque or EFT payments Operation of KICD Project Bank Account 217. KICD will open and operate a non-commingled local currency (Kshs) project bank account at a reputable commercial bank approved by the MoE s HAU and acceptable to the NT and WB. This account will be exclusively funded from project funds from the main PA-A and/or PA-B, as appropriate, for project implementation purposes The initial transfer of funds from the main PAs to the KICD project account will be based on the approved quarterly work plan and budget as submitted to, and approved by, the PS-MoE and the MoE s HAU Subsequent transfers of funds from the main PAs to these project accounts will be based on satisfactory return accountability over previously disbursed funds, supported by approved work plans and budgets The PS-MoE (or DPC&D) will formally delegate authority to incur expenditure to the KICD CEO/Director for the KICD sub-component activities The signatories to the KICD project bank account will follow the normal established/existing institutional signatory arrangements for operating bank accounts. However, no payments will be made from these accounts without the approval of the KICD Project Focal Point The usual account signatories at KICD that will operate the account and authorise all project payments are: a) KICD CEO/Director (alternate, deputy director curriculum services) b) Senior Deputy Director - Corporate Services (alternate, Senior Deputy Director Media & Extension Services) c) Chief Finance Officer (alternate, Deputy Chief Finance Officer) 223. All three signatories are required, as a mandatory provision, to sign for project as well as other KICD payments Operation of KNEC Project Bank Account 224. KNEC will open and operate a non-commingled local currency (Kshs) project bank account at a reputable commercial bank acceptable to the NT and WB. This account will be exclusively funded Page 39 of 92

48 from project funds from the main PA-A and/or PA-B, as appropriate, for project implementation purposes The initial transfer of funds from the main PAs to the KNEC project account will be based on the approved quarterly work plan and budget as submitted to, and approved by, the PS-MoE and the DPC&D Subsequent transfers of funds from the main PAs to the KNEC project account will be based on satisfactory return accountability over previously disbursed funds, supported by approved work plans and budgets The PS-MoE (or DPC&D) will formally delegate authority to incur expenditure to the KNEC CEO for the KNEC sub-component activities The signatories to the KNEC project bank account will follow the normal established/existing institutional signatory arrangements for operating bank accounts. However, no payments will be made from this account without the approval of the KNEC Project Focal Point The usual account signatories at KNEC that will operate the account and authorise all project payments are: a) KNEC CEO or designate b) KNEC Financial Controller c) Project Focal Point/Manager 230. All signatories must sign for project payments, both cheque and EFT payments Operation of County-Level Project Bank Accounts for MoE Activities 231. The PS-MoE may authorise all or some of the participating counties to each open and operate a noncommingled Kshs project bank account at a reputable commercial bank acceptable to the NT and WB. Typically, this will be the commercial bank where other county accounts are currently held. Important note: This issue should be considered very prudently against whether it is critically important to track the usage of project funds for reporting purposes. Commingling with other public funds means project funds will lose face and therefore any subsequent requirements for separate reporting would be untenable. Also, due to the very large distances involved in accessing banking services in the targeted counties and sub-counties, consideration may also be given to operating downstream accounts at the sub-county level. This may have a positive impact on operating costs by reducing travel time and associated costs, leading to potentially greater implementation efficiencies If county project accounts are authorised and opened, then they will be exclusively funded from project funds from the main MoE PAs A or B, as appropriate, for project implementation purposes, and subsequent transfers of funds from the main PA to the county bank accounts will be based on satisfactory return accountability over previously disbursed funds, supported by approved work plans and budgets The initial transfer of funds from the main PAs to the county-level project accounts will be based on the approved quarterly work plan and budget as submitted to, and approved by, the PS-MoE or DPC&D. Subsequent transfers of funds from the main PAs to these project accounts will be based on Page 40 of 92

49 satisfactory return accountability over previously disbursed funds, supported by approved work plans and budgets Since the GPE PRIEDE County Project Coordinators (CPC) will be responsible for SEQIP as well, the PS- MoE or DPC&D will formally delegate authority to incur expenditure (AIE) to the CPC, who will be primarily responsible for all fiduciary operations at the county level If sub-county bank accounts are opened, the PS-MoE or DPC&D will delegate appropriate AIE to the responsible sub-county project officers The signatories to these county and sub-county project bank accounts will follow the already existing county-level signatory arrangements for operating bank accounts for the existing GPE PRIEDE project. All payments from these accounts will be approved by the CPC at the county level and the project AIEholder at the sub-county level At the county level, any two of the following signatories can sign for project cheque or EFT payments, provided the County/(District) Accountant (or designate) is a mandatory signatory for all cheque and EFT payments: a) County Project Coordinator b) County Director of Education (or designate) c) County/(District) Accountant (or designate) 238. At the sub-county level, any two of the following signatories can sign for project cheque or EFT payments, provided the County/(District) Accountant (or designate) is a mandatory signatory for all cheque and EFT payments: a) The appointed sub-county AIE-holder b) County Director of Education (or sub-county designate) c) County/(District) Accountant (or designate) Operation of County-Level Project Bank Accounts for TSC Activities 239. Each participating county will open and operate a non-commingled local currency (Kshs) bank account at a commercial bank approved by the TSC and acceptable to the WB The TSC county project account will receive project funding from the main TSC project account for regional and zonal training, and school-level supervision, and monitoring purposes The initial transfer of funds from the main TSC PA to the county bank account will be based on the quarterly work plans and budgets approved by the CEO TSC Subsequent transfers of funds from the main TSC project account to the county bank account will be based on satisfactory return accountability over previously disbursed funds, supported by approved work plans and budgets The Commission Secretary will formally delegate authority to incur expenditure (AIE) to the TSC County Director, who will be primarily responsible for all fiduciary operations at the county level There will be three authorised signatories to the county project bank account as follows: a) TSC County Director functioning as a mandatory signatory to all payments Page 41 of 92

50 b) Deputy County Director/Alternate c) Human Resource Officer/Alternate 245. To enhance accountability at county level, two signatories must sign against any withdrawals from the county project bank account Operation of School-Level Project Bank Accounts 246. The PS-MoE may authorise all or some of the targeted beneficiary schools to each open and operate a non-commingled KShs project bank account at a reputable commercial bank acceptable to the NT and WB. Usually, this will be the bank where other school accounts are currently held If it is deemed unnecessary to open school-level bank accounts, then the PS-MoE, through the DPC&D will clearly specify the existing school-level bank account into which school grants, if any, will be deposited and the purposes for which such grants are being disbursed to specific schools The initial transfer of funds from the main PAs to the project school accounts will be based on the approved quarterly work plan and budget as submitted to, and approved by, CPC, the DPC&D and the PS-MoE The signatories to the school project bank accounts will follow the existing school-level signatory arrangements for operating school-level bank accounts. No payments will be made from these accounts without the approval of the Head Teacher or Principal (as the case may be) at each of the project implementing school. The authorised signatories are as follows, with the Head Teacher or principal being a mandatory signatory: a) Head Teacher or Principal (or Deputy if in the absence of Head Teacher or Principal) b) Chairperson, SBoM c) Treasurer, SBoM d) Elected Parents Representative Page 42 of 92

51 6. PROJECT ACCOUNTING AND STAFFING ARRANGEMENTS Overall FM objective to ensure that: (a) adequate project financial records are maintained, (b) appropriate accounting staff capacity is deployed, (c) suitable expenditure controls are in place, and (d) appropriate budget monitoring reports are produced and disseminated for project decision-making and management. 6.1 Project Accounting System and Responsibilities 250. Given that the project s FM arrangements will follow the country systems, the PS-MOE will be responsible for overall fiduciary aspects of the various components during implementation. The primary responsibility of the PS will to ensure that throughout implementation there are adequate FM systems in place which can account and report adequately on the use of project funds Designated accounting officers at all project implementing entities are all required, as an overarching fiduciary duty, to ensure public resources (project funds are public funds) are used in a way that is lawful and authorised and in an effective and efficient manner Project financial and accounting records may be maintained in manual and/or electronic form. In particular, the project accounting system at MoE DPC&D will be on the IFMIS accounting platform. However, due to periodic system downtime or shutdown, the DPC&D, with active consultation with the MoE PAC or CFO, will establish alternative and appropriate manual and spread-sheet based accounting records to ensure that project accounting activities are conducted in a timely and reliable fashion, and ensure separate tracking of the receipt and usage of project funds at all times The accounting system adopted at all other national-level project implementing agencies will follow the already established institutional accounting platform (electronic and manual), appropriately modified to accommodate the project accounting requirements At the participating counties level, the County Treasury, working closely with the County Project Coordinator, will establish a suitable project accounting system (automated or manual), capable of ensuring the separate tracking of project receipts and expenditures to underlying accounting records and supporting documents, and to allow timely bank account reconciliation At the beneficiary secondary and primary school levels, the Head Teacher or Principal, as the case may be, will establish simplified manual project accounting system capable of separately tracking project receipts and expenditures to underlying accounting records and supporting documents, and to allow timely bank account reconciliation The project accounting system at all spending units will be maintained on the cash basis of accounting, which entails the recording of income when funds are actually received in cash and the recording of expenditures when cash is actually paid out The project financial year will be the same as that of the GOK, that is, 12 months from July to June of the following year The project will use the standard GOK standard chart of accounts (SCOA) and other accounting policies and procedures for recording, classifying, analysing and reporting project receipts and Page 43 of 92

52 expenditures, appropriately modified, as appropriate, to accord with the project s eligible expenditure classifications The DPC&D will be primarily responsible to ensure that all necessary and adequate accounting records and documents are maintained and kept up-to-date at all project implementation stations (DPC&D and non-tsc sub-implementers) at all times The DPC&D, working closing with the MoE PAC or CFO, will also be responsible for the selection and application of appropriate accounting policies for the project. The PAC or CFO will deploy a dedicated and sufficiently qualified and experienced Project Accountant to the DPC&D The designated Project Focal Points at TSC, KNEC, KICD and CEMASTEA will be responsible for their portion of accounting, but will report directly to the entity s CEO/Director. These entities will also deploy a Project Accountant for accounting purposes Standard GoK-prescribed accounting books and records will be used to ensure that a clear transaction trail of receipts and payments can be established without difficulty; these include a cash book, a vote book, payment vouchers, imprest registers, and so on It will be the responsibility of each designated accounting officer at each of the project implementing entities to take all appropriate and reasonable precautions to guard against damage, destruction of or falsification of any financial record Important Note: It is expected that all project sub-implementers at national and county levels, other than schools, will have elaborate accounting records. Due to capacity constraints, benefitting primary schools will be expected to have at least a separate project cash book, separate payment vouchers, asset registers and other basic records to support all project expenditures. 6.2 Staffing Capacity of the Accounting Units 265. The accounting unit of the DPC&D and the TSC will be headed by a full-time and fully qualified Project Accountant (deployed by the PAC or CFO) with the requisite skills and experience in WB-supported projects, to execute all the accounting and other financial management functions under the project To ensure some reasonable level of segregation of accounting duties, the Project Accountant at the DPC&D will be supported by a full-time Accounts Assistant both at DPC&D and TSC. These personnel should be able to interact with the WB FMS on project accounting and financial management issues as and when this becomes necessary. To this end and, in consultation with the WB, appropriate FM training/re-training may be provided to seconded project FM personnel to ensure effective interaction with the WB FMS, reliable project accounting records and resultant financial reports Reporting to the Head of the Accounting at MoE or TSC (as the case may be), the Project Accountant will be responsible for allocating duties to, and supervising the work of, the Accounts Assistant. Project accounting activities at the KNEC, KICD and CEMASTEA will be undertaken by a dedicated Project Accountant or Accounts Assistant At all participating counties, project accounting activities will be undertaken by a dedicated accountant or accounts assistant from County/District Treasury, who will administratively report to the County Project Coordinator and functionally to the County/District Accountant. Page 44 of 92

53 269. All project financial management (FM) personnel will be taken through inductive and continuing training in the FM arrangements embodied in the following authorities, among others: a) GOK FM Regulations and Procedures (PFM Act and Regulations); b) World Bank FM and Disbursement Procedures; c) This FM manual; and d) Any other sources of FM knowledge deemed relevant for project FM duties. 6.3 Issuance of AIEs and Vote Book Expenditure Control 270. All national and county level implementing agencies (excluding schools) will maintain the standard GOK Vote Book control concept for expenditure control purposes, which shall be kept up to date at all times Before any payment is approved, the Project Accountant will regularly review the Vote Book to ensure that budget allocations have not been and will not be exceeded as a result of the payment/s about to be approved Any expenditure in excess of the authorised budget ceiling or budgetary re-allocations will be considered ineligible expenditure unless approved/authorised by or through the DPC&D and the CFO in accordance with the relevant PFM regulations Any project officer who holds any post involving, in any degree, the management of project funds, and in particular every project officer to whom is delegated the power and authority to expend or receive project funds shall in the project and public interest and in his/her own interest, be aware of the following essential provisions of vote control procedures: a) No project officer can spend or commit funds until he or she has been properly authorised by means of an AIE to do so; b) AIE holders must understand that the limit to which they may spend is that prescribed by the AIE and not their expectations, however justified or reasonable these may seem; c) There cannot be divided responsibility and only the officer to whom the AIE has been issued is permitted to commit or incur expenditure against it; d) As per PFM Regulations, the AIE issued to a project officer shall in the minimum contain: i) The AIE number and to whom it is issued; ii) The authorised total expenditure; iii) A description of the expenditure item; and iv) The account code to which the expenditure is to be recorded (debited); 274. When the AIE is issued by any project implementing agency, the allocation shall be entered as a commitment in that agency s master vote book so as to ascertain at all times the availability of uncommitted funds Project accounting officers whose votes cover field activities and/or sub-projects will issue AIEs to their field officers, as appropriate, not later than the 15th day of each quarter, with information in writing that the actual expenditures should not exceed the limits authorised in the AIEs It is a violation of the law and this manual for a project officer of an implementing entity to authorise payment to be made out of funds earmarked for specific project activities for purposes other than those activities. Page 45 of 92

54 6.4 Maintaining Accounting Records/Documents 277. A record is created for each financial transaction. Some are created by the project (e.g. payment vouchers or orders for goods/services, etc); others are created by entities with which the project deals (e.g. suppliers invoices, bank statements, etc) Accounting records must be preserved and classified for easy access because they provide the paper trail on which the accounting system is based. A good record-keeping system facilitates financial accounting and reporting, internal control, general project management and subsequent auditing The DPC&D, assisted by the designated Focal Points of project sub-implementers, will ensure that a proper and systematic document custody and filing system is established at all project implementing agencies for all accounting documents (payment vouchers, imprest warrants, LPOs, LSOs, S11, S13, etc) All payment vouchers, attached to their supporting documents, will be numbered and filed systematically and successively by their dates to enhance ease of retrieval and review by management, internal and external auditors, as well as by other independent reviewers Only original documents should be used as the original evidence of financial transactions, as they provide critical information for accountability and transparency. To retain and secure these critical documents, the DPC&D, assisted by the designated Focal Points at sub-implementers, will ensure that secure filing and storage equipment is made available and used, including fire proof safes and/or cabinets, as appropriate All project accounting and other documents, as well as all resultant accountability reports will be retained appropriately and systematically for the required statutory period A good or sound document filing and retrieval system is illustrated below alongside a poor filing system. A sound document filing and retrieval system A poor document filing and retrieval system (no system really) Page 46 of 92

55 6.5 Project Operational Costs 284. At all project implementing entities, the operational costs for the project will include all costs and expenses that are budgeted for as necessary for project implementation, operations and maintenance. Such operational costs will include, but are not limited to, the following normal costs: a) Communication, including office telephone, internet, airtime b) Electricity and water c) Insurance cover for equipment, motor vehicles, furniture, and project staff d) Media advertisements e) Motor vehicle maintenance, fuel and lubricants f) Non-GOK staff salaries and authorised casual labour g) Consultancy fees h) Office and field stationery items i) Office services and cleaning j) Office tea/coffee/water k) Per diems at approved rates for official travel outside duty station as per GOK regulations l) Postal services courier m) Security n) Travelling, including bus and taxi costs 285. It will be the responsibility of the DPC&D, supported by the Project Accountant to maintain strict control rules on the project s operational costs generally, but especially over those that are susceptible to abuse, such as mobile phone airtime and travel-related and accommodation costs The Project Accountants at the DPC&D and at all sub-implementers will take steps to ensure that the project s operational costs are carefully and diligently recorded and classified in the accounting records in accordance with the GOK SCOA so as to: a) Classify similar costs and expenses together; b) Avoid mixing different expense types; c) Enable a clear appreciation of the level of expenditure in each cost category from a review of the accounting records and financial reports; and d) Enable the preparation of reliable financial statements and reports from the accounting records. 6.6 Potential Ineligible Expenditures and Consequences 287. In terms of the WB, the term Ineligible Expenditure is construed to mean amounts withdrawn from project funds that are used to finance expenditures that are not eligible (that is, do not qualify) for project financing pursuant to the provisions of the legal financing agreement Ineligible expenditures may arise from questionable expenditures that are subsequently confirmed to be ineligible: for financing following an often iterative and confirmatory follow-up process. During its authorised reviews or audits, the WB or internal and external auditors may question expenditures on various grounds, such as: a) An apparent violation of the terms of the financing agreement; or b) A finding that, at the time of the review or audit, the expenditure was not supported by adequate documentation. Page 47 of 92

56 289. To be eligible for financing, all project expenditures must comply with the PFM Act, PFM Regulations, Treasury Circulars, this Manual and where required, WB requirements and procedures. Any breach of any of the provisions of any of these instruments would render such expenditure initially questionable and eventually declared ineligible unless acceptable justification can be provided To prevent the potential occurrence of questionable or ineligible expenditures, it will be the duty of all payment approving and authorising project personnel to take steps to ensure that all expenditures are within the approved limits, approved project work plans and budgets, are adequately supported, are procedural and adhere to relevant legislation and/or regulations Examples of ineligible expenditures include, but are not limited to: a) Use of duplicate invoices; b) Payments in excess of reasonable commercially available market rates; c) Payments made in advance of receipt of goods or delivery of services, unless these payments are consistent with contract provisions and/or established normal commercial practices; d) Fictitious payments payment to fictitious suppliers, using fictitious documents, etc e) Payments unrelated to the project f) Payments outside the approved budget, work-plan, procurement plan, training plan, etc g) Inadequately supported payments e.g. missing some documents h) Supported by inconsistent documentation e.g. inconsistent dates, supplier details, etc i) Payments supported by/with photocopies j) Payments for undelivered or under-delivered goods/services k) Lack of clear evidence of value-for-money received e.g. shoddy construction works, etc l) Inadequately approved/authorised payments m) Payments beyond the approved rates n) Unreasonable payments e.g. well above known market rates o) Expressly prohibited payments e.g. salary top-ups p) Payment supporting evidence not provided within the set time period after audit or review q) Single-sourced suppliers against the procurement regulations 292. If ineligible expenditures are found to have been made from the Designated Accounts, the GoK will be obligated to refund same, and IDA/WB will have the right, to suspend disbursement of the funds if reporting requirements are not complied with as provided for in the Financing Agreement. The WB s FM team will periodically assess the adequacy of financial management systems and this will form the basis of any change in disbursement methods. Page 48 of 92

57 7. PROJECT INTERNAL CONTROL AND OVERSIGHT ARRANGEMENTS Overall FM objectives to ensure there are satisfactory arrangements to (a) exercise control and stewardship over project funds; (b) prevent errors, fraud and misstatements,; (c) ensure project assets are safeguarded from misappropriations, and other forms of loss; (d) ensure financial transactions are processed in a manner that complies with applicable laws and regulations; and (e) effective fiduciary oversight structures are in place at all project implementation levels. 7.1 Overview of the Nature of Internal Control 293. Internal control is the process effected by project management and other personnel, designed to provide reasonable (but not absolute) assurance as to the achievement of objectives regarding the reliability of financial reporting, the effectiveness and efficiency of operations, safeguarding of assets, and compliance with applicable laws and regulations People are the most fundamental component of the project s internal control because they establish the objectives, put control mechanisms in place, and operate them. The project may have policy and procedures manuals, standard forms, computer-controlled information and accounting processing, and other key features of control, but people will make the system work at every level of its operation Since people operate the controls, breakdowns can occur intentionally or unintentionally. Human error, deliberate circumvention, management override, and collusion among people who are supposed to act independently can cause failure to achieve the project development and fiduciary objectives Internal control within the project can only help to prevent and detect these people-caused failures, but it cannot guarantee that they will not happen. The concept of reasonable assurance recognises that the costs of controls should not exceed the benefits that are expected to flow from the controls. Internal control is a process, not an end in itself, but a means to ends; it is a dynamic function that is expected to operate every day within the project structure and operations. 7.2 Overview of Key Internal Control Guiding Principles 297. It will be the duty of any project officer signing any document or record pertaining to a financial transaction to read and satisfy himself/herself that it is proper to give his/her signature and his/her signature will be conclusive evidence of acceptance of responsibility for the document, whether the project officer read it or not To this end, the Heads of all project implementing agencies will maintain adequate internal controls and supporting documentation for all project transactions geared towards addressing real and potential inherent risks, both organisational and operational risks, through mechanisms that will accord with the following principles: a) Maintaining properly documented and known policies and procedures for approval and authorisation of all project transactions, and ensuring that all approvals and authorisations are made in writing by the appropriate officers; b) Ensuring that all pre-numbered accounting documents (e.g., receipt books, cheque books and LPO and LSO books) are used sequentially by checking that only one pre-numbered accounting Page 49 of 92

58 document is in use at a time. All new issues should be made only after the fully used ones have been returned and verified. c) Reasonably satisfactory segregation of duties so that no one single individual is responsible for a transaction process from initiation, authorisation, execution, recording and reconciliation without the active the involvement of another person(s); d) Any payment in connection with or supported by any document bearing an alteration, obliteration or erasure is be refused by the approving and/or authorising project officers at all project locations; e) Ensuring that no project officer is able to approve and/or authorise his/her own claims; f) Having effective management oversight bodies at all levels of the project. This should include audit committees, procurement committees, etc; g) Instituting appropriate management monitoring and control activities, including budgetary control systems, random or spot checks, and periodic reconciliation of balances; h) Regular conduct of internal audit (post-transaction) verifications and social/community accountability mechanisms, especially at beneficiary school level including adequate disclosures on public notice boards and institutional websites; i) Instituting measures to ensure project assets and stores are safeguarded from damage, loss, abuse and malicious damage; and j) Ensuring compliance with project financing agreement, and applicable laws and regulations e.g. through the use of tailor-made quick-to-use checklists; 7.3 Approval and Authorisation of Expenditure Expenditure at MoE DPC&D 299. Expenditure approval and authorisation will follow established GoK/MoE procedures, but specifically, all project financial transactions (payment vouchers, imprest warrants, etc) will be approved by the DPC&D and by the PS-MOE (as appropriate). The MoE HAU will then authorise all properly approved payments In order to enhance transparency, a claim by the PC should be approved by the Director-DPC&D or PS-MOE or his/her designate, as may be appropriate Payment Vouchers (PVs) will be initiated by the DPC&D Accounts Assistant who will also maintain an up to date record in the cash book. The Project Accountant will check the PVs and the cash book on a regular basis (say, weekly or monthly) for accuracy and completeness The DPC&D Accounts Assistant will, under the supervision of the DPC&D Project Accountant, ensure that the filing of the PVs and supporting documents is properly sequenced and systematically organised Expenditure at TSC, KNEC, KICD and CEMASTEA 303. Expenditure approval and authorisation will follow established institutional procedures, but specifically, all project financial transactions (payment vouchers, imprest warrants, etc) will be approved by the designated Project Focal Points and authorised by the Head of Finance/Accounts or his/her designate. Page 50 of 92

59 304. The designated Project Focal Points at TSC and KNEC should, however, not approve their own claims; instead, the approval should be provided by the institutional CEOs or the DPC&D or their designate, based on the nature and location of expenditure Payment Vouchers (PVs) will be initiated by the designated Project Accountant or Accounts Assistant who will also maintain an up to date record in the cash book. The designated Project Focal Points will check the PVs and the cash book on a regular basis (say, weekly or monthly) for accuracy and completeness. They may also delegate this responsibility to a suitable senior officer who is not involved in the day-to-day accounting and bookkeeping activities The designated Project Accountant or Accounts Assistant will, under the supervision of the designated Project Manager, ensure that the filing of the PVs and supporting documents is properly sequenced and systematically organised Expenditure at Participating Counties for MoE Activities 307. All project financial transactions will be approved by the County Project Coordinator and authorised by the Head of the County/District Treasury or his/her designate The County Project Coordinator should, however, not approve his/her own claims; instead, the approval will be provided directly by the Head of the DPC&D or through the County Director of Education, as circumstances may dictate Payment Vouchers (PVs) will be initiated by the designated Project Accountant or Accounts Assistant at the County/district Treasury who will also maintain an up to date record in the project cash book The County Project Coordinator will check the PVs and the project cash book on a regular basis (say, weekly or monthly) for accuracy and completeness The designated Project Accountant or Accounts Assistant at the County/District Treasury will, under the supervision of the County Project Coordinator, ensure that the filing of the project PVs and supporting documents is properly sequenced and systematically organised Expenditure at Participating Counties for TSC Activities 312. All county-level TSC project financial transactions will be approved by the TSC County Director The TSC County Director should, however not approve his/her own claims; instead, the approval should be provided by the alternate AIE holder Payment Vouchers (PVs) will be initiated by the designated county or sub-county Accountant or Accounts Assistant at the county who will also maintain an up to date record in the project cash book The designated Project Accountant or Accounts Assistant at the county or sub-county will, under the supervision of the TSC County Director, ensure that the filing of the project PVs and supporting documents is properly sequenced and systematically organised Expenditure at Beneficiary Schools 316. All project financial transactions will be approved by the Head Teacher or Principal, as appropriate. Page 51 of 92

60 317. The Head Teacher or Principal should, however, not approve his/her own claims; instead, the approval should be provided by Chairperson of the School Board of Management or the County Project Coordinator or his/her designate Payment Vouchers (PVs) will be initiated by the designated school bookkeeper (or Head Teacher at primary schools) who will also maintain an up to date record in the project cash book The County Project Coordinator or his/her designate will check the PVs and the project cash book on a regular basis (say, monthly or quarterly) for accuracy and completeness The designated school bookkeeper (or Head Teacher at primary schools) will, under the supervision of the Head Teacher or Principal or his/her designate, ensure that the filing of the project PVs and supporting documents is properly sequenced and systematically organised. 7.4 Maintaining Project Books of Account 321. The project bank accounts that should be opened and operated as provided in the relevant sections of this manual A proper cash book will be maintained and kept up to date for the bank accounts at the DPC&D and at each of the project sub-implementers. Receipts and payments will be recorded in the cash book sequentially by their dates of occurrence Where a manual cash book is kept, it must be written in pen (not pencil), that is, all financial records and documents shall be written up in indelible ink Any incorrect entries made in an accounting record (e.g. cash book) or document must be crossed out with one line rather than being whited-out, deleted or erased completely or written over. The correct and incorrect cancellations are illustrated below: 1,028,500 1,028,500 Correct cancellation Incorrect cancellation Illustration of Cash Book 325. The table below illustrates a typical layout of one month s cash book and the balance that should be reconciled with the bank statement balance at the end of each month. Project Receipts Date 1-Jul-17 Received From Receipt No. Description Project Payments Amount Cheque Amount (Kshs) No. or (Kshs) Paid Account PV Date Cash To No. No. CASH BANK Payment CASH BANK Ref No. Page 52 of 92

61 TOTALS at 31-Jul-17 X-1 Y-1 TOTALS at 31-Jul-17 X-2 Y-2 Notes (X-1) (X-2) = Cash in Hand (Y-1) (Y-2) = Cash Book Balance to be reconciled with Bank Statement Balance Preparation of Bank Reconciliation Statements 326. The cash book balance will be reconciled with the bank statement at the end of each month and reviewed for accuracy and completeness by a senior project officer as appropriate. The preparer and reviewer of the reconciliation will sign and date the reconciliation to evidence these actions The Bank Reconciliation Statement will be among the mandatory monthly reports to be generated at the DPC&D and at each of the other national- and county-level sub-implementers Regular bank reconciliation statements assist in: a) Avoiding over-expenditure and monitoring payments by ensuring that the amount in the bank corresponds with the positive balance reflected in the cash book b) The detection of error and/or fraud from either the bank or at the spending unit level 329. It is, therefore, imperative that accurate monthly bank reconciliation statements are compiled promptly and without fail at the end of each calendar month. To this end: a) At the DPC&D, the Project Accounts Assistant will prepare monthly bank reconciliation statement by the 15 th day of the following month. The reconciliation will be reviewed and signed by the Project Accountant without fail. b) At other national-level implementing agencies, the designated Project Accountant or Accounts Assistant will prepare monthly bank reconciliation statement by the 15 th day of the following month. A senior accounts officer at each agency will review and sign the reconciliation. c) At the participating counties, the designated Project Accountant will prepare monthly bank reconciliation statement by the 15 th day of the following month, and a senior County/District Treasury officer will review and sign the reconciliation. d) At the beneficiary schools, the designated school bookkeeper (or Head Teacher) will prepare monthly bank reconciliation statement by the 20 th day of the following month. If the bookkeeper is not the Head Teacher, then the latter should review and sign the reconciliation Illustration of Typical Bank Reconciliation 330. The following illustrates a typical bank reconciliation statement in form and content. Bank Reconciliation as at (insert the date) Kshs Kshs Balance per bank statement xxx Add: (i) Deposits in transit (cash on way to bank) (ii) Un-deposited receipts (cash awaiting banking) xx xx (iii) Bank errors - understatement of deposits on (date) xx xxx Sub-total xxx Page 53 of 92

62 Deduct: (i) Outstanding/un-presented cheques (listed below) (ii) Bank errors - overstatement of deposits made on (date) (iii) Direct deposits by staff not yet recorded in CB (xx) (xx) (xx) Sub-total (xxx) Correct Cash Book Balance (Balance Per Cash Book) xxx 331. The following chart summarises the standard bank reconciliation processes and procedures. Finish File the bank reconciliation statement Obtain bank statement from the bank Start Sign and submit reconciliation statement for review Compare bank statement balance with cash book balance Record other differences in the reconciliation statement until the bank statement balance is equal to the cash book balance Prepare payment voucher for them and record in cash book If no discrepancy found, file bank statement 7.5 Operation and Control of Imprest Advances Types of Imprest and Guiding Principles 332. Under the PFM Regulations, there are three types of imprest, namely a) Standing imprest/petty cash, b) Temporary/safari imprest, and c) Special imprest 333. For project implementation purposes, special imprests are expressly disallowable; any that is given will be considered irregular and declared ineligible expenditure at the first instance The project officer authorised to hold and operate an imprest shall make a formal application for the imprest through an imprest warrant Funds disbursed for imprest shall not be kept or held in an official bank account, but in a separate or personal bank account operated by the imprest holder or in the form of cash under safe. Page 54 of 92

63 7.5.2 Standing Imprests 336. An imprest is a form of cash advance or a float. At all project implementing agencies (national and county and school levels), the operation of petty cash floats/standing imprests will follow the already established regulations and procedures for advances, float limits and related documentation, with the following minor modifications Standing imprest is intended to be in operation for a time and requires bringing the cash float level of the advance continuously up to the agreed fixed level by systematic re-imbursement of expenses paid out of the advance According to the PFM Regulations, the Accounting Officer or AIE holder will approve the establishment of an imprest facility including the maximum amount for the specific purpose of that facility. For the purposes of SEQIP, the following standing imprest levels will be used Implementing Entity Level National County School Project Spending Unit Petty Cash Float Ceiling (Kshs) Remarks MoE/DPC&D 50,000 - TSC 30,000 - KICD 30,000 - KNEC 30,000 - KICD 30,000 - County 20,000 The target counties are very large, with Sub-County 20,000 tough terrain, so need to have 2 levels Secondary School Nil Schools are target beneficiaries with little Primary School Nil project payments at that level 339. However, float levels may be increased or reduced based on reliable daily experience supporting either that float replenishments are too frequent or float replenishments are rarely done due to the high level of the float Care should be taken to ensure that the standing imprest at all project implementers does not exceed one month s estimated expenditure on the intended purposes An imprest shall be issued for a specific purpose, and any payments made from it, shall be only for the purposes specified in the imprest warrant 342. Flowing from the foregoing paragraph, it is emphasised for absolute clarify that an imprest involves personal responsibility as it will be issued to an officer in his or her own name, and not to the holder of an office The DPC&D, CEOs and designated Project Focal Points at national- and county-levels will take steps to ensure that the established individual payment limits from petty cash floats are not exceeded through such irregular schemes as transaction-splitting, procurement splitting and such other financial improprieties The standing imprest floats will be replenished from the spending unit s bank account when the float balance reaches or drops below the established thresholds Project petty cash floats/standing imprests and replenishments thereof will be approved as follows: Page 55 of 92

64 a) By DPC&D at the MoE level for the DPC&D; b) By the Project Focal Points at TSC, KNEC, KICD & CEMASTEA) and c) By the County Project Coordinators at the county-level 346. The physical custody and accountability over project petty cash floats/standing imprests will be under the following project officers: a) Designated Project Accountant or Accounts Assistant at the MoE level for the DPC&D; b) Designated Project Accountant or Accounts Assistant at TSC, KNEC, KICD & CEMASTEA); and c) Designated Project Accountant at the county-level 347. The physical custody and accountability over project petty cash floats/standing imprests at the beneficiary secondary and primary schools will be under the Head Teacher or Principal In addition to the Imprest Register, each project spending unit will maintain a full-fledged Petty Cash Book in structure and form similar to the main cash book Petty cash will be kept in a lockable office safe, preferably fireproof, under the custody of assigned responsible project officer. In the event that this officer is absent for prolonged periods, the Head of the project spending unit will designate another appropriate officer for that purpose, which will include maintenance of the Petty Cash Book The Head of each project spending unit or another suitable senior officer will regularly, preferably on monthly basis, but also at random spot checks, review the Petty Cash Book for accuracy, completeness and for reconciliation of the book balance with the available physical cash, and will take steps to conclusively address and resolve any discrepancies noted, including recovery of shortages from the salaries of the guilty officers At the imprest accountability stage, if the implementing entity s project focal point or accountant is satisfied that the expenditure has actually been incurred, that it has been incurred for the intended purposes, and there is no irregularity in the payment vouchers, they will arrange for the analysed expenditure to be posted to the various heads and items, and arrange for the cash to be transferred to the imprest holder so as to top-up his or her fund Temporary Imprests 352. A temporary Imprest is issued for specific purposes, usually to cater for official travel expenses, intended to provide officers with funds with which they can meet travelling, accommodation and incidental expenses. Any payments made from the funds must be only for the specified eligible purposes Unless there are compelling reasons to do otherwise (which must be provided to and accepted by the approving officer), temporary imprests will be issued to project staff through direct transfers to their personal bank accounts. Important note: Since in most projects of this nature imprests are a high risk area, the PS-MoE will provide adequate guidance on what the temporary imprests will be used for and the circumstances under which imprests will be made. As a general rule, therefore, imprests must be restricted to the barest minimum. Page 56 of 92

65 354. Before approving and issuing temporary imprests, it will be a requirement for the NPU and the designated Project Focal Points or AIE-holder at all project implementers, to ensure that: a) Adequate funds are available for the intended item of expenditure; b) The imprest applied for is for approved project activities as per the approved work plan; c) The specific objective of the journey cannot be achieved through other cheaper means; d) The applicant does not have any outstanding imprests; 355. A temporary imprest holder is required to account for or surrender the imprest within 7 working days of returning to the duty station or after performing the task for which the imprest was issued. If an imprest holder fails to do this, the responsible higher authority (accounting officer or AIE-holder) must take immediate steps to recover the outstanding amount from the guilty officer s salary at the prevailing CBK rate of interest. Appropriate disciplinary action should also be taken against the officer concerned for the abuse of the imprest Imprest cash surrendered should be deposited intact in the project bank account and the deposit slip submitted together with the imprest accountability return All other imprest accountability requirements will be in accordance with already established GoK guidelines and regulations (as may be most recently amended and issued by the NT or other relevant lawful authority) Project Allowances and Per Diems 358. As a permanent rule, the rates of personnel allowances and per diems applicable to projects staff at all MoE-associated and TSC-associated implementing agencies will be those prescribed and gazetted by the Salaries and Remuneration Commission (SRC). These rates are prescribed according to respective public/civil service job groups. Any deviations from the SRC rates will be deemed irregular and declared ineligible expenditures In order to minimise potential incidences of ineligible expenditures due to misunderstanding involving project staff allowances and per diems, the following guidelines in respect thereof will apply at all levels of project implementation: a) Travel and transport costs Receipts for all authorised local travel and air travel will be required to support such travel and other incidental costs in submitting imprest surrenders and accountabilities; b) Purchase of fuel for personal vehicles will not be reimbursable; c) Salary top-ups to civil/public servants are not allowed under the project; d) Honorarium, internal consulting fees by civil servants on GoK payroll and sitting allowances are all not allowed for attending workshops and/or any committee or any other kind of meetings. However these allowances, if authorised under GoK regulations, may be paid from non-project GoK funds; e) The rates of per diem for contracted consultants will be negotiated and reflected in their consultancy contracts or an addendum thereto Where more or further clarity is needed in matters of personnel allowances and per diems, the DPC&D will consult with the PS-MoE or, through the PS-MoE, with the NT and/or WB Notwithstanding the foregoing paragraphs in this sub-section, normal meeting allowances may be paid out of project funds during a meeting of a beneficiary secondary or primary school s SBOM at which the only agenda for deliberation involves SEQIP implementation activities. However, for such Page 57 of 92

66 allowances to be eligible, they must have been included in the school s approved work plan and budget. 7.6 Control over Stock/Inventory 362. It will be the responsibility of the DPC&D and the designated Project Focal Points at each of the subimplementers to take adequate measures to control and safeguard any stocks and inventories that are acquired using project funds Stocks or inventories acquired from project funds may include textbooks, teacher guides, and items of stationery, equipment, consumables and other items that need to be stored and issued regularly for repeated use On receipt, goods should be verified against the local purchase order (LPO) in terms of quantity, price and quality specifications. Where necessary, their physical condition should be verified with the help of a technical expert A Counter Receipt Voucher (S13) 1 must be prepared and certified by the receiving officer to confirm that the goods ordered have been received in the right condition and as per order specifications Issues from stores should be signed against the Consumables Stock Register 3 by the issuer and the recipient. All requisitions shall be recorded in the Counter Requisition and Issue Voucher (S11) or equivalent record Access to stocks/inventories kept in stores must be restricted to authorised personnel and must be kept under lock and key at all times Stocks must also be protected from unnecessary exposures that accelerate their deterioration such as unfavourable weather conditions, dampness, insects, excessive sunlight, etc. Stocks should therefore be regularly checked to ensure their continued good condition All effort will be made to ensure that all store/inventory items are properly and systematically arranged for ease of identification and inspection, including the conduct of independent physical counts All stock/stores control procedures not included above will follow already existing GoK regulations. 7.7 Control over Fixed Assets 371. The DPC&D and the designated Project Focal Points at each of the sub-implementers will be responsible for ensuring that all fixed assets acquired using project funds and placed under their care are safeguarded against misuse, theft or malicious damage Access to project fixed assets will be restricted to authorised project personnel only. Procedures will be put in place to ensure evidence of such authority such as the use of motor vehicle work tickets. 1 Or equivalent receiving record at all implementing agencies Page 58 of 92

67 373. A fixed assets register (FAR) in the general form and content as provided in the table below will be maintained and kept up to date at both the DPC&D and at each of the sub-implementers (where fixed assets are acquired) to provide a reasonably comprehensive record of all the fixed assets of the project at each spending unit All fixed assets should be entered in the FAR, which should be updated promptly with every new fixed asset purchase and/or disposal Although they may appear as fixed assets on account of their ability to benefit many financial years, small-value items such as staplers, paper punches, drinking glasses and trays, thermos flasks, wall clocks, and such items need not be included in the FAR as fixed assets, as they would needlessly clutter the register. Rather, they should be treated as expenses under the appropriate category in the GoK SCOA. However, they need to be equally controlled and safeguarded The project fixed assets will be reported in memorandum form in the annual project financial statements. To this end, the DPC&D will, on annual basis, consolidate the FARs from national- and county-level implementing agencies with its own to produce one comprehensive FAR The FAR may be adopted from the following general format. Project Name: P.O. Box: Tel: Fixed Assets Register from (date): to.. Main Date of Receipt Asset Class 2 Item Description Tag/Code No. Serial No. CRV No. Location Original Cost (Kshs) Assigned Officer Condition of Use 378. All project fixed assets will be uniquely tagged with appropriate project labels for ease of identification Any losses of assets (fixed assets, cash or stocks) should be promptly reported to the DPC&D and other relevant authorities for necessary action The DPC&D will take steps to ensure that appropriate insurance cover is taken for all high-value fixed assets The purchase, replacement and disposal of items of fixed assets during the project's life will follow the currently established GoK regulations and procedures. Total 2 For project purposes, the main fixed asset classes may include: Furniture & Fittings, Computers & Related Equipment, Office Equipment (photocopiers, telephones, calculators, etc), Motor Vehicles, Motor Cycles and Bicycles. Page 59 of 92

68 7.8 Project Internal Audit and Oversight Internal Audit and Oversight at MOE and Associated Departments 382. The MoE internal auditors will be responsible for the project s internal audit activities at the participating national- and county-level project implementing agencies. They will conduct periodic (preferably, semi-annual) audits of project s operations, systems and financial transactions The MoE internal auditors will work closely and coordinate with internal auditors at TSC, KNEC, KICD, CEMASTEA and Counties, as part of internal control to provide reasonable assurance that the resources provided to the project at that level have been put to proper and intended uses. The internal auditors will adopt a risk-based and value-for-money audit approach and attitude The internal audit ToRs will be drawn from all relevant sources, including, the project legal financing agreement, the PAD, regular GoK and WB FM regulations, this Manual, and the internal auditors judgement as to sound FM and control practices Internal auditors will comply with the International Professional Practices Framework as issued by the Institute of Internal Auditors from time to time and will conduct audits in accordance with policies and guidelines issued by the Public Sector Accounting Standards Board (PSASB) to ensure uniformity and consistency across the project The DPC&D and the designated Project Focal Points at other national- and county-level project agencies will take all necessary steps to ensure that the internal auditors have unhindered access to project sites, premises, assets and records, and are properly facilitated to conduct their duties. A finding to the contrary would constitute a serious limitation of scope and a severe violation of agreed project FM control principles and protocols, which may occasion grave sanctions from the NT and WB Before completing the any reports, the internal auditors will discuss their draft reports with the respective management of the project sub-implementers under audit so as to secure their responses on audit findings and recommendations included in the internal audit reports At a minimum, the internal audit reports will contain a presentation reflecting the following matters in continuous prose (with sub-headings) or columnar style: a) Audit observation or finding or weakness; b) Impact or potential impact; c) Recommendations for improvement; and d) Project management comment/response 389. Important Note: Time allowing, the internal audit report/s incorporating management comments, should be reviewed and discussed with the respective institutional Audit Committees, if functional. The DPC&D, the designated Project Focal Points at KNEC, KICD and Counties, as well as the Internal Auditors (and other project officers, as deemed appropriate) should attend the meeting with the Audit Committee. The audit reports may be revised in accordance with the Committee s recommendations or approval. Page 60 of 92

69 390. The finalised individual semi-annual internal audit reports will simultaneously be submitted within 45 days after the end of audit period, (e.g., an audit report covering the period Jul-Dec should be submitted by 15-Feb) to: a) PS-MOE b) Director-DPC&D c) National Treasury d) WB (TTL and FMS) e) CEOs of the other national-level implementing agencies f) Project Focal Points of the other national-and county-level implementing agencies 391. The DPC&D and the designated Project Focal Points will be primarily responsible for ensuring that appropriate corrective actions are taken to address and conclusively resolve the issues or concerns raised by the internal auditors Subsequent internal audits will follow up and confirm whether previous audit recommendations have been implemented satisfactorily, and indicate this in their subsequent audit reports The WB reserves the right, on its own initiative, to regularly assess the role of the internal audit department during supervision missions by reviewing their reports and management responsiveness to their findings. This is intended to ensure that the audit role adds value to the overall project control environment through risk assessment Internal Audit and Oversight at TSC 394. The TSC Internal Audit Director (with 19 personnel), who reports to the TSC Audit Committee will be responsible for the internal audit of project component activities undertaken both by TSC and CEMASTEA. If practicable, it will be useful for project internal audit examinations to be conducted on a semi-annual basis, but at worst should be done annually The internal audit ToRs will be drawn from all relevant sources, including, the project financing agreement, the PAD, existing GoK and WB FM regulations, this Manual, and the internal auditors judgement as to sound FM and control practices The TSC CEO and the designated Project Focal Point (and equivalent officers at CEMASTEA) will take all necessary steps to ensure that the internal auditors have unhindered access to project sites, premises, assets and records, and are properly facilitated to conduct their duties. A finding to the contrary would constitute a serious limitation of scope and a severe violation of agreed project FM control principles and protocols, which may occasion grave sanctions from the NT and WB Internal audit reporting and report sharing mechanisms for the project will largely follow similar protocols as those elaborated in sub-section above, except that the finalised individual semiannual internal audit reports will simultaneously be submitted within 45 days after the end of audit period, (e.g., an audit report covering the period Jul-Dec should be submitted by 15-Feb) to:. a) PS-MOE b) TSC CEO c) Director-DPC&D d) National Treasury e) WB (TTL and FMS) f) TSC Project Focal Point g) CEO and Project Focal Point of CEMASTEA Page 61 of 92

70 398. Any variations in the foregoing reporting protocol, if deemed desirable, can only be add but not to deduct, and will be discussed and mutually agreed by the TSC Director of Audit with the TSC CEO, PS- MoE and DPC&D The designated TSC Project Focal Point, working closely with the DPC&D for guidance, will be primarily responsible for ensuring that appropriate corrective actions are taken to address and conclusively resolve the issues or concerns raised by the internal auditors Subsequent project internal audits will follow up and confirm whether previous audit recommendations have been implemented satisfactorily, and indicate this in their subsequent audit reports Project internal audit and institutional FM oversight will be reinforced by the existence of a fully functional Audit Committee. With 4 members in the TSC Audit Committee, two being outsiders, with a representation from the NT and the Commission, and the committee meeting twice quarterly, it is expected that during project implementation and in line with the use of country systems, the TSC Internal Audit Department will include the review of the project s control environment as part of their audit routines and periodic annual work planning, and that the Audit Committee will also include the project as an integral part of their review universe The WB reserves the right, on its own initiative, to regularly assess the role of the internal audit department during supervision missions by reviewing their reports and management responsiveness to their findings. This is intended to ensure that the audit role adds value to the overall project control environment through risk assessment School Level Internal Audit and Oversight 403. The project s beneficiary secondary and primary school will be audited by the School Audit Unit (SAU), at least once during each financial year of the project s lifespan or more frequently as may become necessary to respond to identified risks The SAU (with its 200+ personnel) will develop a rotational plan for audit coverage to ensure that most, if not all, beneficiary secondary and primary schools are covered within the lifespan of the project The SAU will work closely with respective Head Teachers, Principals and County Project Coordinators and the officer designated as the bookkeeper, if different from the Head Teacher/Principal at school level The school auditors will adopt a risk-based and value-for-money audit approach and attitude to their work and their TORs will be drawn from all relevant sources, including (as appropriate), the project legal financing agreement, the PAD, GOK and World Bank FM regulations, this Manual, the internal auditors judgement as to sound FM practices, etc The Head Teacher or Principal, working with the County Project Coordinator and the County Director of Education (CDE) will take all necessary steps to ensure that the SAU auditors are allowed unhindered access to project sites, premises, assets and records, and are properly facilitated to conduct their duties. Page 62 of 92

71 408. Before completing school-level audit reports, the SAU Auditors will discuss their draft reports with the Head Teacher/Principal and the BSOM (if practicable) so as to secure their responses to audit findings and recommendations included in the SAU reports At a minimum, the annual SAU report for each beneficiary primary school will contain narratives (in prose or columnar style) regarding the following matters: a) Audit observation or finding or weakness; b) Impact or potential impact; c) Recommendations for improvement; and d) Head Teacher s/principal s comments 410. The finalised individual school-level SAU reports will be shared with the following officers within 45 days of the end of the audit for the period covered (e.g., an audit report covering the period Jan-Dec should be submitted by 15-Feb of the following year): a) PS-MOE b) Director-DPC&D c) DPC&D d) County Project Coordinator e) County Director of Education f) School Head Teacher/Principal 411. It will be the responsibility of the DPC&D, working with County Project Coordinators and Head Teachers/Principals, to take appropriate steps and coordinate school-level efforts to ensure that agreed SAU remedial recommendations are implemented to address and conclusively resolve all audit issues and concerns raised. 7.9 Formation and Duties of Audit Committees 412. If not already constituted, the Audit Committees at MoE and TSC will be formed in strict adherence to the provisions of the PFM Act (2012) and PFM Regulations (2015). The PFM Act states that every national government public entity shall establish an audit committee whose composition and functions shall be as prescribed by the regulations The PFM Regulations require that: a) There shall be a minimum of 3 members, excluding a person who shall be appointed to represent the NT in each audit committee and a maximum of 5 members. b) The chairperson of an audit committee shall be: (i) independent of the national government entities, (ii) be knowledgeable of the organization, (iii) have the requisite business and leadership skills, and (iv) not be a political office holder. c) Majority of members appointed to the audit committee shall not be past or present employees of the entity, and shall not have served as an employee or agent of a business organisation which has carried out any business with the concerned entity in the last two years. d) All members of an audit committee shall: (i) have a good understanding of government operations, (ii) have a good understanding of financial reporting or auditing; and (iii) have a good understanding of the objects, principles and functions of the entity to which they are to be appointed. e) Audit Committee members shall be persons of integrity and meet the requirements of Chapter 6 of the Constitution. Page 63 of 92

72 f) The Accounting Officer of a national or county government entity shall not be a member of the audit committee, but shall attend a meeting of the audit committee by the invitation of the chairperson of the committee 414. The PFM Regulations provide for duties of audit committees as follows: a) Support the Accounting Officers with regard to their responsibilities for issues of risk, control and governance and associated assurance but the responsibility over the management of risk, control and governance processes remains with the management of the concerned entity; and b) Follow up on the implementation of the recommendations of internal and external auditors Greater understanding of the PFM Regulations on audit committees can be obtained from Regulations 174 through 182 with regard to: a) Establishment of audit committees; b) Terms of appointment; c) Vacancy of office; d) Meetings of the audit committees; e) Code of conduct; f) Remuneration and compensation; and g) Capacity building for audit committees. Page 64 of 92

73 8. PROJECT FINANCIAL REPORTING ARRANGEMENTS Overall FM objective to ensure there are satisfactory arrangements for the submission of stipulated project financial reports in an accurate, reliable, and timely manner. 8.1 Overview of Key Financial Reporting Guiding Principles 416. Only through financial reporting (external) can project management effectively communicate with GoK, WB and other outside stakeholders to demonstrate its project management responsibilities. Therefore, the submission of accurate, timely and complete financial reports within the stipulated deadlines is a fundamental requirement for the project, and the continued funding of project activities will be dependent upon the submission of both in-year and year-end financial reports as required The responsibility for the preparation of overall project financial statements (PFSs) including adequate disclosures rests with the MoE/DPC&D. The DPC&D will prepare the PFSs in accordance with International Public Sector Accounting Standards (IPSAS) To this end, the DPC&D will have primary responsibility for ensuring that all project in-year and yearend financial reports and statements are prepared accurately and on a timely basis, and submitted as required within the stipulated deadlines All project financial reports and statements will be generated from the project s underlying accounting records so that an internal or external reviewer is able to trace the reported financial information back to the underlying books of account without difficulty Project financial reports will be a critical element in the continued smooth implementation of project activities, as they will provide reasonable assurance regarding the efficient and effective stewardship of public resources channelled to the project The presentation of expenditures in the financial reports will be according to the eligible expenditure category descriptions and sub-components contained in the Disbursement Letter and financing agreement, with clear explanatory notes and analyses to enable a flawless understanding of the expenditures The WB has the right to suspend disbursement of project funds if reporting requirements are not complied with as provided for in the financing agreement. The Bank s FM team will periodically assess the adequacy of the project financial management systems used to generate project financial reports, and this will form the basis of any change in disbursement methods. 8.2 In-Year Financial Reports Responsibilities and Requirements 423. The quarterly unaudited Interim Financial Reports (IFR) is a critical in-year external financial report useful tool both for internal and external financial monitoring for GoK and WB. Page 65 of 92

74 424. The DPC&D will be primarily responsible for the preparation of consolidated in-year quarterly IFR which will be submitted to the WB, through the NT, within 45 days after the end of each calendar quarter In order to meet this deadline, all national- and county-level sub-implementers (excluding beneficiary schools) will be required to submit their quarterly reports to the DPC&D within 30 days after the end of each calendar quarter For the purposes of the quarterly IFR, disbursement of grants to beneficiary schools, if any, will be treated as expenditure at the point disbursement (at MoE). As such no quarterly financial reports will be required from the schools. As noted elsewhere in this manual, accountability at school level will be monitored and reported through the School Audit Unit (SAU) The quarterly IFR will cover the entire project financial transactions within the quarter at both the DPC&D and all sub-implementers. To achieve this, the DPC&D will require and receive from the subimplementers their receipts and expenditure reports, as well as relevant supporting explanatory notes and analyses for the quarter for consolidation purposes The designated DPC&D Project Accountant will have prepared the HQs portion of the IFR for the quarter. This will be consolidated with the reports from the sub-implementers to produce one comprehensive consolidated project IFR for that quarter The consolidated project Statement of Source and Uses of Fund (or receipts and expenditure statement) for the quarter will be tailored to fit into the agreed format and content of the quarterly IFR. For this purpose, the DPC&D and the sub-implementers will prepare the reports in the same report formats to simplify the consolidation mechanics at the DPC&D For the avoidance of doubt, TSC will consolidate its own IFR with CEMASTEA s IFR, and submit the TSC-consolidated IFR to MoE for consolidation with the MoE-consolidated IFR. On its part, MoE/DPC&D will consolidate IFRs from itself, KICD, KNEC, the 30 participating counties. Each county will have consolidated its own IFR with those of its participating sub-counties It should be observed that the deadline period of 45 days presents a thin window within which to ensure the largely manual consolidation mechanics are carried out efficiently and effectively. It therefore, behoves all responsible project officers are made critically conscious of the crucial need to strictly observe the 30-day internal deadline for submitting their individual quarterly IFRs to the DPC&D. For this purpose the DPC&D should institute and communicate suitable sanctions against officers that may fail to observe and meet this deadline The quarterly IFR will be signed by the DPC&D Project Accountant, PC, the Director-DPC&D and the PS-MOE as a statement to signify concurrence and that project resources have been used efficiently, economically and effectively for the intended project purposes The quarterly IFR will contain the following information in an orderly and properly paged document package, and any other supporting documents that may be required or deemed necessary: a) A Statement of Source and Uses of Fund for the quarter showing expenditures grouped both by sub-components and by disbursement categories, and the closing cumulative expenditure for each expenditure category. Page 66 of 92

75 b) The statement in (a) will show a reconciliation of opening bank/cash/imprest balances, receipts during the quarter, the quarter s expenditures, cumulative figures for project life to date, and closing bank/cash/imprest balances; c) A statement explaining any significant variations between the actual expenditure and the approved budgetary allocations; d) A summary list of WAs submitted to and supporting WB replenishments to the Project Designated Accounts; e) A summary list of any direct payments made by the WB on behalf of the project; f) A reconciled statement of each of the USD denominated Project Accounts; g) USD project accounts statements from CBK; h) Bank reconciliation statements for the Kshs project accounts at the end of the quarter in support of the closing bank balances at DPC&D and other national-level sub-implementers; i) A summary list of petty cash and outstanding imprest balances held at each implementing agencies at the end of the quarter; Illustrative Quarterly Statement of Sources & Uses of Funds 434. The quarterly IFR will be in form and content agreed with IDA. An illustration of the quarterly project Statement of Sources and Uses of Funds, which should separately show expenditure by: (a) subcomponents; and (b) disbursement categories, is provided below. Interim un-audited Financial Report (IFR) Project Name: SEQIP Statement of Sources and Uses of Funds For the Quarter Ended. (In Kshs) Current Quarter Ended Cumulative for Project Life to Date Ref to Annex Actual Planned Variance Actual Planned Variance SOURCES OF FUNDS i ii i-ii iii iv iii-iv Opening Bank/Cash Balances Project Main Account A Project Main Account B Project Main Account C National-Level Project Account (attach list) County-Level Project Accounts (attach list) Petty Cash and O/S Imprests (attach list) Sub-total a Add: Receipts During the Quarter Replenishments to Project Main Account A Replenishments to Project Main Account B Replenishments to Project Main Account C WB Direct payments (attach list by DAs) Sub-total b Total Financing (Opening Bals. + Receipts) c=a+b LESS: USES OF FUNDS Category 1 (also show separately for components) Category 2 (also show separately for components) Page 67 of 92

76 Interim un-audited Financial Report (IFR) Project Name: SEQIP Statement of Sources and Uses of Funds For the Quarter Ended. (In Kshs) Total Expenditure Expected Closing Bank/Cash Balances Actual Closing Bank/Cash Balances Project Main Account A Project Main Account B Project Main Account C National-Level Project Account (attach list) County-Level Project Accounts (attach list) Petty Cash and O/S Imprests (attach list) Actual Total Closing Bank/Cash Balances Current Quarter Ended Cumulative for Project Life to Date Ref to Annex Actual Planned Variance Actual Planned Variance d e=c-d f Note: Total balance e should be equal to total balance f. 8.3 Year-End Financial Reports Responsibilities and Requirements 435. At the end of each financial year; the DPC&D will prepare for the entire project, accurate, reliable and comprehensible annual project financial statements (PFSs) that consolidate the financial statements prepared by all national- and county-level project implementing entities (excluding schools), in accordance with formats prescribed by the NT through the Public Sector Accounting Standards Board (PSASB) and agreed to by the WB The DPC&D will include in the consolidated financial statements all monies paid into and out of the all Project Accounts, classified as appropriate by components and disbursement categories The consolidation mechanics similar to those used in the preparation of the quarterly IFR will be adopted in putting together the draft PFSs If all quarterly IFR are prepared well and accurately, the year-end consolidated should only involve the simple process of straight-line summation of all four IFRs, with very minor modifications to accommodate information not ordinarily included in the quarterly IFRs It will be the responsibility of the Director-DPC&D to have the PFSs prepared, signed and submitted to the Auditor General, in respect of each financial year, within 3 months after the end of the financial year (that is, by 30-September of each year), consolidated PFSs The financial statements will be prepared in a format prescribed by the PSASB, but appropriately modified to accord with WB project requirements The draft PFSs will be signed by the same MoE officials responsible for signing the quarterly IFR. Page 68 of 92

77 442. In addition to any other information and contents that may be prescribed by the PSASB, the PFSs will also include: a) Statement of Receipts and Expenditure: A statement of funds received and of expenditures incurred in line with eligible category descriptions, including comparative figures for the previous financial year. b) DA Activity Statement: A summary of the activity in the USD Designated Accounts; c) Balance Sheet: A statement of financial position (if deemed necessary); d) Accounting Policies: A summary of the principal accounting policies that have been adopted; e) Explanatory Notes: Explanatory narratives, tables and the make-up of amounts appearing in the principal financial statements, deemed necessary to provide greater clarity to readers of the PFSs; this will include a statement explaining any variations between the actual expenditure and the approved budgetary allocations; f) List of Project Assets: A list of material fixed assets acquired or procured to date with project funds classified by the main asset classes; g) Outstanding Obligations: A list of outstanding liabilities/commitments at the end of the financial year; and h) Annex: As an Annex to the PFSs, a reconciliation of the amounts as received by the project from the WB, with those shown as being disbursed by the Bank Illustrative Annual Receipts and Expenditure Statement 443. A suitable illustration of the annual consolidated project statement of receipts and expenditure, a key component of the annual consolidated project financial statements, is provided below. Annual Consolidated Project Financial Statements Project Name: SEQIP Consolidated Receipts and Expenditure Statement For the Financial Year Ended 30-June-2018 (In Kshs) Descriptions Explanatory Note Page 69 of 92 Current Financial Year Ended 30-Jun-18 PROJECT RECEIPTS i ii Opening Bank/Cash Balances Project Main Account A Project Main Account B Project Main Account C National-Level Project Account (attach list) County-Level Project Accounts (attach list) Petty Cash and O/S Imprests (attach list) Sub-total Add: Receipts During the Quarter Replenishments to Project Main Account A (attach list) Replenishments to Project Main Account B (attach list) a Previous Financial Year Ended 30-Jun-17

78 WB Direct payments (if any, attach list) Sub-total b Total Financing (Opening Bals. + Receipts) c=a+b LESS: EXPENDITURE BY ELIGIBLE CATEGORY Category 1 (also show separately for components) Category 2 (also show separately for components) Total Expenditure d Expected Closing Bank/Cash Balances e=c-d Actual Closing Bank/Cash Balances Project Main Account A Project Main Account B Project Main Account C National-Level Project Account (attach list) County-Level Project Accounts (attach list) Petty Cash and O/S Imprests (attach list) Actual Total Closing Bank/Cash Balances f Note: Total balance e should be equal to total balance f. Page 70 of 92

79 9. PROJECT EXTERNAL AUDIT ARRANGEMENTS Overall FM objective to ensure there are satisfactory arrangements to ensure annual project financial reports are independently audited and relevant audit reports submitted in a timely manner as stipulated. 9.1 Overview of Key External Audit Guiding Principles 444. By law, the Office of the Auditor General (OAG) is responsible for the audit of all public funds. Accordingly, the external audit of the draft year-end consolidated PFSs will be conducted by the OAG The DPC&D will be responsible for all external audits and, as required by law, he/she will take all necessary steps to ensure that the external auditors have unhindered access to project sites, premises, assets and records, and are properly facilitated to conduct their duties The external auditors will conduct the annual audit in accordance with the International Standards on Auditing (ISAs), and in the course of their audit examination work, the auditors will be expected to visit the project sites and offices, and interview project personnel as appropriate Each audit of the PFSs will cover the period of one fiscal year of the project (01-July to 30-June), commencing with the fiscal year in which the first withdrawal was made under the Preparation Advance for the Project. 9.2 Submission of Annual Audit Report 448. The Auditor General will issue an opinion on the PFSs. The annual audit report on the PFSs should include a separate paragraph highlighting key internal control weaknesses identified during the audit, and a separate paragraph on any material cases of non-compliance with the terms of the project financing agreement and other applicable laws and regulations The audited annual PFSs, incorporating the audit opinion/report, will be submitted to the WB, through the NT, within six (6) months after the end of the financial year, that is, by 31-December of each year. This is a critical element of the WB financing agreement and non-compliance may result in suspension or cancellation of project funding It will be a key responsibility of the PS-MoE, through the DPC&D, to follow up and ensure the annual audited PFSs, incorporating the audit report/opinion, are submitted to the WB. 9.3 Objectives of the External Audit 451. The principal objective of the annual external audit of the PFSs is to enable the Auditor General to express an opinion on the financial position of the project at the end of each financial year, and on funds received and expenditures incurred in that year The Auditor General will verify that the PFSs have been prepared in accordance with the agreed accounting standards (IPSAS) and whether they give a true and fair view of the financial position of the project at the end of the financial year and of project s resources and expenditures for the financial year ended on that date. Page 71 of 92

80 453. In addition to providing his/her audit opinion on the PFSs, the Auditor General has a responsibility to state clearly whether reasonable assurance exists on the effectiveness of project internal controls, risk management and overall governance at national and county levels for the generation of complete, accurate and reliable project financial statements. 9.4 Scope of the External Audit 454. As part of the audit process, the audit will include such tests and auditing procedures as the Auditor General may consider necessary under the circumstances and the auditor may request from the DPC&D and the sub-implementers written confirmation concerning representations made in connection with the audit The Auditor General s work will cover all project implementing agencies at national and county levels. Although the Auditor General is encouraged, if practical, to include project beneficiary schools, school-level financial statements are not expected to be included in the annual PFS (except disbursements to schools which will be captured as expenditure at HQs level) The Auditor General will pay special attention as to whether: a) WB financing has been used in accordance with the conditions of the project financing agreement, with due attention to economy and efficiency, and only for the purposes for which the financing was provided; b) Goods, works and services financed have been procured in accordance with the financing agreement including specific provisions of the WB Procurement Policies and Procedures; Important Note: Depending on the complexity of procurement activities, the auditor may consider involving technical experts during the audit engagement. In cases where such experts are involved, the auditor is expected to comply with provisions of International Standard on Auditing 620: Using the Work of an Expert. Consideration to use the work of experts should be brought to the early attention of the DPC&D and the WB for mutual agreement and appropriate guidance. c) All necessary supporting documents, records, and accounts have been maintained in respect of all project activities. The auditor is expected to verify that respective reports (e.g. IFRs) issued during the period under review were in agreement with the underlying books of account; d) The project designated accounts (DA) have been maintained in accordance with the provisions of the financing agreement and funds disbursed out of the DA were used only for the purposes intended in the financing agreement; e) National laws and regulations have been complied with, and that the financial and accounting procedures approved for the project (including this manual.) were followed and complied with; f) Financial performance of the project is satisfactory; g) Assets procured from project funds exist and there is verifiable ownership by the implementing agency or sub-implementers in line with the financing agreement; and h) Ineligible expenditures are identified and separately noted in the audit report In complying with ISAs, the auditor is expected also to pay attention to the following matters: a) Fraud and Corruption: Consider the risks of material misstatements in the PFSs due to fraud as required by ISA 240: The Auditor s Responsibility to Consider Fraud in an Audit of Financial Statements. The auditor is required to identify and assess these risks due to fraud, obtain Page 72 of 92