Support to Farmers Organisations in Africa Programme (SFOAP) Main Phase Start-up Workshop Fiduciary Aspects Addis Ababa, March 2013

Transcription

1 Support to Farmers Organisations in Africa Programme (SFOAP) Main Phase Start-up Workshop Fiduciary Aspects Addis Ababa, March

2 FM Seminar Overview FM and Fiduciary Responsibilities Overview; AWPB (Jean Bosco); Flow of Funds and Disbursements; Accounting and Financial Recording; Financial Reporting; External Audit; Procurement; Internal Controls (including Records Mgmt & FM Manual); IFAD FM Learning/KM Tools; FM Issues/Lessons Learned from Pilot Phase (Jean Bosco); Q&A. 2

3 Financial Management (FM) Definition of FM: Programme/project FM is a process which involves planning, budgeting, accounting, financial reporting, internal controls, auditing, disbursement, with the aim of managing Programme resources efficiently, effectively and for intended purposes and achieving the Programme s development objectives in a sustainable manner. Why is FM important? It is a critical ingredient of Programme impact and sustainability, providing: Essential information for those who implement and supervise the Programme; Comfort needed by development partners that funds have been used efficiently and for the purposes intended; A deterrent to fraud and corruption, since it provides internal controls and the ability to quickly identify unusual occurrences and deviations; Evidence of strong correlation between good FM practices and positive Programme/project impact! 3

4 Fiduciary Responsibilities IFAD s Fiduciary responsibilities: Proper use of IFAD/SF funds: proceeds used for intended purposes; Economy and efficiency to maximise impact and sustainability -VFM!; Ensure equity, integrity, transparency, good governance and provide value for money (VFM) in procurement processes. Other Key Fiduciary Roles: Programme Director/Coordinator: manages the Programme; Programme Financial Manager/Officer (FO): manages Programme funds, supported by accountants; IFAD Task Manager: endorses eligibility of expenditures of withdrawal applications (WAs) in relation to procurement (nonobjection) and approved Annual Work Plan and Budgets (AWPBs); IFAD Controller s and Financial Services Division (CFS): reviews WAs in relation to disbursement conditions, availability of resources, financing ratios, exchange rates, and overall use of funds. CFS monitors and reviews audits and financial reports, and is involved in other elements of Programme cycle, including design. 4

5 Flow of Funds and Disbursements Funds from SFOAP financiers (EC, IFAD, SDC, AFD) channeled through IFAD to individual RFOs through a single grant agreement denominated in EUR; Pooled funding at RFO level (IFAD funds converted in EUR); Disbursements/Financial Reporting currency from/to IFAD is EUR (as well as from/to donors); IFAD disbursements to RFOs on a yearly basis based on regional AWPBs approved by IFAD; Annual advances; Disbursements from RFOs to NFOs based on respective sub-agreements/contracts and national AWPBs. 5

6 Flow of Funds and Disbursements First Disbursement: RFOs shall open a dedicated SFOAP bank a/c in EUR; From Grant Agreement Effective Date, RFOs may request yearly withdrawals from IFAD in the form of advances during Programme implementation period by providing to the Fund in satisfactory form and in original: Two (2) copies of Grant Agreement countersigned by authorised representative of the RFO; Completed Bank Account Certification Form (Schedule 3A) (in original, signed & stamped by Bank officer) certifies authorised signatories allowed to operate bank a/c, sign WAs/SOEs; Duly filled Withdrawal Application (Schedule 3B) signed by authorised signatory (Grant No., WA No., ccy, amount, AWPB); AWPB approved by IFAD; ESA Loan & DSF Grant Portfolio Amount requested/advanced is up to 95% of approved AWPB; Special case: Retroactive Financing (details to follow). 6

7 Flow of Funds and Disbursements ESA Loan & DSF Grant Portfolio 7

8 Flow of Funds and Disbursements ESA Loan & DSF Grant Portfolio 8

9 Flow of Funds and Disbursements Some important clarifications: Implementation Period ( ): from Effective Date to Programme Completion Date, which is 21 December 2017 Eligibility of Expenditures (AWPB + Works completed, Goods purchased, Services rendered by this date); Grant Closing Date is 30 April 2018: only winding-up expenditures (settlement of contracts, PCR, audit, reduced staff costs, etc.) and submission of Final Report to IFAD; **UMAGRI: completion is 31/12/2014; closing 30/06/2015; Expected timing of disbursements: Apr 13 Dec/Jan 14; Three people allowed to operate bank a/c (using principle of double signature): President, CEO, FO; NFOs will also open dedicated SFOAP bank a/c. 9

10 Flow of Funds and Disbursements Subsequent Disbursements: Relevant AWPB approved by IFAD - should exclude any unspent amount from previous advance (carry forward); Withdrawal Application (in original) requesting up to 95% of expenditures included in relevant AWPB; Bank Account Certification Form (in original); Statement of Expenditures (Schedule 4 in original and certified by authorised signatory) justifying at least 70% of previous amount advanced (and 100% of preceding advances), both by categories of expenditures and Programme components, as per Schedule 2; Annual Technical and Financial Progress Report describing progress achieved by the Programme (to be cleared by IFAD); NB: Submission of RFO s Audited Financial Statements within 6 months after end of FY (specific reference to the Grant + Audit Opinion Letter on SOE Schedule 5) Exception at Closing: within 4 months! 10

11 Flow of Funds and Disbursements 11

12 Flow of Funds and Disbursements 12

13 Flow of Funds and Disbursements Subsequent Disbursements (some clarifications): Each disbursement will be made only if and to the extent that the relevant co-financing funds from the other donors have been duly received by IFAD; SOEs should be accompanied by: SFOAP EUR Bank Account Statement (as end of reporting period); Bank Account Reconciliation Form (to be provided in FM manual); Detailed list of SOE aggregated expenditures (form in FM manual); NB: For reconciliation purposes, the exchange rate (local currency/eur) to be applied for reporting expenditures (remember SOE and financial reporting is in EUR!) is the same rate used to convert into local currency amounts received by IFAD in EUR bank a/c opened for SFOAP. 13

14 Flow of Funds and Disbursements Subsequent Disbursements (some clarifications cont d): IFAD does not consider as RFO expenditure the disbursements to NFOs. Thus the SOEs should reflect actual expenditures both at regional and national level; Detailed statements accompanying SOEs, must provide details of expenditures both at regional and national level; Relevant expenditures supporting documentation (e.g. contract documentation, bills, invoices, purchase orders, receipts, evidence of payments, etc.) should NOT be submitted to IFAD (or RFOs), but originals should be retained in the RFOs/NFOs offices and made available for review by external auditors and IFAD supervision missions; Remember! Such documentation to be retained for 5 years. 14

15 Flow of Funds and Disbursements Final Disbursement (Schedule 6.6/6.7 + special provisions): Reimbursement (not advance); Submission in satisfactory form of Final Report by Grant Closing Date, including: Programme Completion Report (to be cleared by IFAD); Final SOE for the totality of expenditures incurred (by category of expenditure and Programme component Schedule 2); Final Consolidated Programme Audit Report (to include Audit Opinion Letter on the Final SOE). NB Important clarifications: Reporting period shall be up to Programme Completion Date!; Reimbursement up to total amount justified (not total grant amount); 15

16 Flow of Funds and Disbursements Disbursements to NFOs: NFOs will open dedicated SFOAP bank a/c (not EUR); NFOs to send requests for disbursements (WAs) to RFOs based on AWPB at national level; Requests for disbursements to be accompanied by an SOE for expenditures at national level with a copy of supporting documentation (originals to be kept by NFOs for audit purposes); Workshop expenditures at NFO level to be justified within two (2) weeks with a summary report/supporting docs to be sent to the RFO s CEO (copy to FO); RFOs to decide frequency of withdrawals by NFOs (based on provisions of agreement/contract to be signed between RFOs and NFOs) but it is recommended to have at least two disbursements to NFOs per year; Issue of disbursement currency from RFOs to NFOs, which is linked to issue of exchange rate; 16

17 Accounting and Financial Records Accounting is the method of recording, classifying and summarising the financial transactions of a Programme, and analysing, verifying, as well as reporting the results; RFOs shall maintain separate accounts and records in accordance with internationally accepted accounting standards to reflect the sources and use of funds; Double-entry; cash/accruals basis (IFRS or IPSAS); RFOs/NFOs to keep original invoices/receipts for SFOAP expenditures incurred at regional/national level respectively; Regular back-up and filing; Accounts and records to be maintained at all levels for at least five (5) years after Programme Completion Date; 17

18 Accounting and Financial Records Accounting Systems (RFOs use Tompro/Pastel software): Critical tool in FM for collecting, analysing, storing, and disseminating vital information for decision-making. Enhances transparency and accountability of Programme activities; provides timely reports; helps to detect errors & shortfalls during implementation; Whenever a financial transaction takes place, it should be recorded and processed using the accounting software in accordance with the date of occurrence; Access to the accounting system should reflect the TORs of the respective staff, preventing unauthorised access to the system and an adequate level of protection against input of false data or destruction of records (user ID); Access levels: i) active use for input/editing of data; ii) read-only rights; or iii) no access. 18

19 Accounting and Financial Records Accounting Systems (design): Identify different kinds of financial reports to be generated by the system, based on different stakeholders requirements; List transactions and activities to be accounted for; Design specific accounting books, including a chart of accounts (appropriate headings and grouping of financial data) and records to be maintained, transactions to be recorded, and accounting entries; In order to produce relevant technical and financial reports, the structure of the Chart of Accounts should capture data by: i) Programme components, sub-components, activities; ii) expenditure type under each component, sub-component, activity; iii) IFAD expenditure category; and iv) sources of funds; Systems to produce specific reports in terms of receipts, expenditures, commitments, inputs, outputs, sources of funds, budgets vs. actuals; Resolve accounting issues (if any) rising from the fact that the Programme is being implemented and expenditures are being incurred in different locations (e.g. exchange rate issue). 19

20 Accounting and Financial Records Payments must be made by bank transfers and cheques. All checks must be documented by a complete Cheque Requisition, original invoice from vendor, & original receipt; RFOs will operate a small petty cash account in local currency with a limit of 200 equivalent. The purpose is to allow payments for low value items (e.g. minor supplies); The FO/Accountant will manage and reconcile the petty cash a/c at least on a monthly basis for replenishment. The amount replenished will be equivalent to total disbursements made since last replenishment (balance at original level); Petty cash disbursement may be made in the form of an advance or reimbursement. Requesting staff fills out a petty cash requisition form. Cash is placed and locked in a safe. 20

21 Accounting and Financial Records Fixed assets management is an important process that tracks fixed assets for the purposes of financial accounting and to facilitate preventive maintenance, and theft deterrence. Fixed assets management includes: All goods purchased should be clearly tagged with a unique, sequential asset number and recorded in the fixed asset register within the accounting software or maintained elsewhere; A verification count of all goods recorded in the fixed assets register is performed at least once a year, including the following checks: i) verify that all goods are still held in the location recorded in the register; ii) check that goods are still in a reasonable state of repair; iii) discrepancies between the verification exercise and the fixed asset register should be investigated; Verification review must be performed by different staff from those that normally use the equipment/goods to ensure segregation of duty. 21

22 Financial Reporting Periodic technical and financial progress reports are a formal requirement of the Grant Agreement (as well as of Contributions Agreements signed with SFOAP cofinanciers); FM reports: sources and use of funds for the reporting period, cumulative by component + category of expenditure, assets, commitments, inputs and outputs, budget vs. actual; Sufficient and timely information must be made available about how money is spent, how much is spent and results; Main financial reports include: AWPBs, SOEs, bank a/c reconciliations, periodic financial progress reports, supervision reports, annual financial statements and audits. Physical progress reports: link outputs to related costs; Procurement reports: compare actuals with plan and status 22

23 Financial Reporting Specific SFOAP Requirements: Annual technical and financial progress report covering previous twelve (12) months, to be submitted together with certified SOE/supporting documentation, usually together with next year s AWPB and Withdrawal Application; All financial reports (as well as SOEs and audit reports) must consolidate and reflect all SFOAP activities, regardless of the donor, but should apply/acknowledge % of IFAD contribution, provided in para. 1 of Grant Agreement, against total actual expenditures reported upon (except PAFO grant) Income generated from Grant funds (e.g. interests, if any) shall be disclosed in the various financial reports and used exclusively for Programme activities. 23

24 External Audit Purpose: provide accountability and verify compliance; Each participating RFO and NFO shall have their accounts related to SFOAP activities audited in accordance with International Standards on Audit (ISAs) every year, either separately or within the annual institutional audit exercise of the organisation s financial statements; RFOs shall be audited by external independent auditors hired by RFO (auditor TORs to be cleared by IFAD/CFS); According to Schedule 6.7/special provisions of the Grant Agreement, RFOs submit Audited Financial Statements within 6 months after end of FY (specific reference to the Grant + Audit Opinion Letter on SOE using Schedule 5); Should apply/acknowledge % of IFAD contribution, against total actual expenditures reported upon. 24

25 External Audit 25

26 External Audit Management Letter: prepared by auditors, summarising observations on internal control issues (other than those affecting their opinion on Financial Statements), including: Comments and observations on the accounting records, systems and internal controls examined during audit; Specific deficiencies and areas of weakness in systems and internal controls and recommendations for improvement; Reports on level of compliance with financial provisions in grant covenants, & with procedures included in FM manual; Operational Audit: examination of the Programme s management techniques and performance. Identifies implementation issues and recommends remedial actions to improve effectiveness of operations and efficiency; Management must reply in writing within 30 days. 26

27 External Audit External Auditors TORs (change auditors after 3 years): Responsibilities of the Parties to the Engagement; Subject of Engagement; Reason for the Engagement; Engagement Type and Objective; Scope of Work (including any specific requirement depending on SFOAP Programme Design); Reporting; Periods covered and reporting deadline to satisfy IFAD s and co-financiers specific requirements; Sample TORs to be provided by IFAD; (IFAD Audit Guidelines: 27

28 External Audit (NFOs) Accounts related to activities implemented at national level to be audited by auditors hired at national level, normally in connection with the NFO s annual institutional audit exercise; Exception to basic principles: When NFOs have not carried out or provided to the RFO an external audit of their accounts, they should submit a Statement of Responsibility to the RFO, signed by the authorised representative of the NFO, as per model provided in the FM Manual (but if >$200k they must provide audit opinion!); Based on the Statement of Responsibility, the regional external auditor may carry out sample checks of expenditures at national level. 28

29 External Audit (NFOs) 29

30 Procurement According to Article 10.2 of the EC Contribution Agreement, for the acquisition of goods, services and works, and award of grants, applicable procurement procedures are IFAD s; IFAD stipulates that procurement of works, goods and services financed by IFAD shall be carried out in accordance with the provisions of Borrower/Recipient s procurement regulations, to the extent that these are consistent with IFAD Procurement Guidelines; SFOAP Programme activities will be carried out in accordance with procurement rules and modalities described in RFOs manuals already accepted by IFAD (pilot phase); A Procurement Plan is required in cases where procurement is worth more than US$200,000 (Schedule 6.4); Contract register (forms in FM Manual). 30

31 Procurement SFOAP Programme-specific IFAD procurement principles: Carried out in accordance with Grant Agreements and any changes following IFAD s missions (e.g. supervision reports, MTRs, BTOs, aide-memoires, correspondence); Universal procurement (not just IFAD member states); Procurement conducted within implementation period; Consistent with AWPBs and grant funds allocated/available; Provides best Value for Money (efficiency); ICB mandatory if contract value is >$200k for goods, >$1 million for civil works, and >$100k for services (less: national thresholds or specifically agreed Programme thresholds); IFAD non-objection required if contract value is >$200k for goods and works, and >$100k for services; 31

32 Internal Controls What is meant by Internal Control System? Internal control is a dynamic and integral process that is effected by an entity s management and personnel at all levels. It is designed to address risks and to provide reasonable assurance in order to achieve the following objectives: executing operations in a systematic, ethical, economical, efficient and effective manner; ensuring accountability including the reliability of financial reports; complying with the applicable laws and regulations including the conditions set forth in the financing agreement; protecting resources against loss, misuse and damage. 32

33 Internal Controls (main areas) Risk Identification: Based on the identified risks, the Programme management must put in place a set of controls to mitigate these risks; Authorisation levels: Authorisation controls require certification that a transaction or event is acceptable for further processing. The delegated authority of staff should ensure efficient implementation while mitigating related risks. Authorisation levels of Programme staff should be in line with their underlying roles; Reconciliations and checks: Reconciliations between independent, corresponding sources of data are a key control for identifying errors and discrepancies in balances. Monthly reconciliations should be done on: the SFOAP bank a/c balance; reconciliation of accounts balances; non-reconciling or balancing amounts should be promptly cleared. Unusual/long outstanding reconciling items should be investigated. The FO reviews and signs all reconciliations as evidence of review; Physical checks should also be performed on assets and petty cash. 33

34 Internal Controls (cont d) Segregation of duties: a key element in a control system is the separation of those duties which would, if combined, enable one individual to record and process a complete transaction (e.g. an Accountant prepares a document, but it should be reviewed/cleared by the FO, and then approved by the Programme Director). It is the FO s responsibility to ensure that duties are segregated, including preparation, authorisation, execution, custody, recording and systems operations. Restricted access: all data, records and assets should be kept in a physically secure environment. Petty cash and cheques, where used, should be kept secure. Financial data and other records should be protected by back-up procedures and copies stored securely off site. Monitoring and review: periodic financial reports must be prepared and submitted to IFAD during the Programme. For the purposes of internal control, the same information should be prepared and monitored on a monthly/quarterly basis. Where necessary, corrective action should be taken where the authorised budget and procurement plan are exceeded. 34

35 Records Management & FM Manual Records management is another important control activity. Financial records must be created and chronologically filed for each financial transaction performed by the Programme. These records are used for the purposes of financial audit and reviewed by the Fund during the supervision missions and/or as requested. In accordance with IFAD s rules, the Recipient has to maintain original records for a minimum 5 years after Programme completion. Storing data: financial data must be stored in original format and electronically within the accounting software and as scanned copies. To avoid loss or damage of financial data, the information should be kept in locked cabinets and on a computer server. Access to the files by external persons is prohibited except for auditors, IFAD s and other relevant staff. SFOAP Manual of Procedures: serves as a key instrument in internal control promoting compliance with IFAD Guidelines and procedures and reducing risk of misuse and fraud. Key document for the Programme Implementation Team, providing guidance in its daily actions. 35

36 IFAD FM Learning/KM Tools CFS is currently engaged in FM capacity building of Programmes and Projects financed by IFAD/SF resources (e.g. training), including: FM Resource Pack on IFAD website (developed by CFS): tailored to Loans but provides useful insights to those not familiar with FM or with IFAD specific FM requirements. (Link: ) FM E-Learning Tool developed by CFS, to be launched soon, along the lines of the FM Resource Pack. Currently only in English, but soon in French as well! FM-specific training workshops for IFAD-financed Projects staff at IFAD HQ (in English and French). 36

37 Questions & Answers Alessandro Lembo, IFAD Finance Officer (CFS) THANK YOU! 37