Harmonized Approach to Cash Transfers to National Implementing Partners
Mar 27, 2015
Harmonized Approach to Cash Transfers to National Implementing
Partners
Objectives of the new approach:
Lower complexity of procedures and reduce transaction costs of development cooperation;
Improve capacity of national partners to effectively manage aid;
Minimize risks related to the utilization of funds and increase overall effectiveness
! NB:
Harmonization of procedures for cash transfers is just the first step;
Harmonization of procedures for procurement, recruitment and other aspects of UN operations will follow.
The new approach is based on the following principles:
National ownership - Governments are in the driver’s seat
Strengthening capacity – reliance on Government systems
Risk Management Assessments and assurance activities
Risk Management
Assessment of financial management capacity;
Appropriate cash transfer procedures;Awareness of the implementing
partner’s internal controls through assurance activities
Determination of risks
Macro assessment:
– a review of existing assessments of the national public financial management system;
– once per cycle, preferably during the CCA preparation
Determination of risks (cont.)
Micro assessment: – assessment of the adequacy of the
implementing partner’s financial management systems;
– once per programming cycle;– threshold: US$ 100,000 collectively from UN
Agencies
Assessments: Objectives
Assist the Government to identify strengths and weaknesses in the PFM system and practices;
Identify/coordinate areas for capacity building (development);
Assist in the identification of appropriate cash transfer procedures (fiduciary)
Assessments: Basic Principles
Not meant to impose conditionality; No rating for macro assessment is designated; Contribute to capacity development; Government should be involved;
Assessments: Basic Principles (cont.)
Existing assessments to be used; If macro assessment not available, UN
encourages Government to initiate one; UNCT jointly interprets the available diagnostic
work, with experts’ assistance
Current modalities for transfer of financial resources:
Modality Obligation Payment
Direct Cash Transfer
Government/NGO Government/NGO
Direct Payment Government/NGO Agency
Reimbursement Government/NGO Government/NGO
Agency Implementation
Agency Agency
Harmonization:Modalities or Procedures?
Mix of modalities provides for flexibility; Choice of modality depends on assessment of
risk and experiences; Agencies may agree on a preferred modality, but
decide individually which one to use; Diverse procedures generate high transactions
costs; Agencies will use same forms and reporting
procedures
Procedures to be harmonized:
Disbursements (basis and periodicity)
Reporting on cash utilizationAssurance
Disbursements
Based on activities described in AWPs;
Requested by Implementing Partner, as part of the Funding Authorization and certificate of Expenditure (FACE);
Disbursements periodicity:
– Direct cash transfers are requested and released on a quarterly basis (max.) to cover expected expenditures;
– Direct payments are released based on the authorization of an appropriate designated official;
– Reimbursements are requested and released following the completion of activities (could be quarterly)
Reporting:
Direct payments: reporting based on agreements with Government;
Reimbursement/Direct cash transfers: reporting by implementing partner (FACE) to Agency;
Agency implementation: reporting by the implementing UN Agency to the Government and funding agency
Assurance Activities:
Coverage, type and frequency of AA is guided by the level of risk and magnitude of cash transfers to an implementing partner (IP);
Strongest AA will be directed to IP with the weakest financial management practices
Assurance Activities include:
Periodic on-site reviews: spot-checks and special audits;
Programmatic monitoring of activities and results;
Scheduled Audits
Scheduled Audits
Audits by private firms contracted by Agencies (Government should be informed of the arrangement);
IPs that receive more than US$500,000 collectively from UN Agencies per cycle - audits scheduled at least once in the programme cycle;
IPs that receive less than US$500,000, if necessary audit plans will be prepared by the UN Agencies
Scheduled audits: supreme audit institution
Macro assessment establishes the capacity of the institution
FACE
Certifies expenditures and provides a basis for the disbursement of funds for the next period;
Permits disbursement on quarterly, not transaction basis;
Cash disbursed, but not utilized – reprogrammed/refunded;
No accompanying back-up documentation
Conclusions
Reduces the most burdensome transaction costs for government counterparts;
True harmonization in the area of assurance Simplification of both programme and financial
operations
THANK YOU!