Updated PU/DR Guidelines and Annual Funding Decision LFA Finance Training October – November 2013

Content 1.Case study 2.Principles on most frequent issues –Reporting of cumulative expenditure –Reporting of cumulative expenditure after phase 2 –New forecast template –Definition of commitment –Restatement of financial information reported previously –Change in currency 3. Other recurrent issues

Principles on most frequent issues Reporting of cumulative expenditure –Grant consolidations: If grant consolidation occurs during Phase 1 or Phase 2 between two existing grants, PU/DRs prepared under the consolidated grant should cumulate all financial information reported from the start date of the continuing grant PU/DRs prepared under the RCC program term should not cumulate previously reported Phase 1 and Phase 2 financial information If grant consolidation happens during the RCC phase or with a newly approved grant, it is sufficient to consolidate the budget and expenditure data from the beginning of the RCC term –SSF: PR should report any remaining expenditures related to liabilities assumed by the constituent grants and which has not been reported in the last PU/DR of the constituent grant Cumulation of budgets and expenditures should start from zero from the SSF start date.

Principles on most frequent issues Accounting for cumulative budget after phase 2 General case Total grant amount = phase 1 + (phase 2 – phase 1 unused funds) = phase 1 – phase 1 unused funds + phase 2 = phase 1 expenditure + phase 2 So at Q10, the cumulative budget will be phase 1 expenditure (+ commitment)+ Q9 budget+ Q10 budget Extension Costed extension: cumulative budget = phase 1 + costed extension budget No cost extension: cumulative budget = phase 1 budget Known for both PU/DR and EFR. Add commitment if any From phase 2 budget

Principles on most frequent issues Program Implementation PeriodQX1QX2 Calendar Periodxx/xx/xx - yy/yy/yyxx/xx/xx - yy/yy/yy2 (A) Approved PR Budget*4,900,6611,386,869 (B) Contractual Commitments159,913 (C ) Cash outflows carried over to this Disbursement Period875,982 (D) Advanced from future budget periods (E) Projected Overspending6,394 (F) Projected Savings and Cancelled Activities (please insert as negative amounts)-81,380-73,000 (G) Cash outflows pushed to future budget periods (please insert as negative amounts)-990,000 (H) Cash outflows paid for in prior periods (please insert as negative amounts)-796,452 SUBTOTAL Forecast of PR Outflows4,075,1181,313,869 include expenses that have been delayed from the previous periods, and for which the cash outflows will occur in this disbursement period cannot exceed total cumulative and projected savings “Advanced from future periods” in the past disbursement periods Same principles for PR and SRs New forecast template

Principles on most frequent issues Definition of commitment –Short-term liabilities for which a payment will be made within days of the reporting date. –The amount to be paid is certain and is based either on an invoice received from a supplier, acceptance of goods and services that have been delivered, or a signed contract (only in cases of prepayments or advances against a contract). –Grant agreements signed with sub-recipients should not be treated as commitments.

Principles on most frequent issues Restatement of financial information reported previously In certain cases, past expenditure and budget information reported in one or several previous PU/DR(s) may need to be updated to correct any material errors. Adjustments made in the subsequent PU/DR to correct the reported cumulative and actual cash outflow and budget amounts may require updating current cash balances. Following such adjustments, the PR should issue an official letter to the Global Fund indicating the correct cumulative and actual cash outflow and budget amounts, as well as a description of the adjustments and reasons for these adjustments

Principles on most frequent issues Change in currency In case of currency change at Grant Renewal, the budget, expenditures and ending cash balance reported up to the date of the currency change (as per the grant agreement) will need to be converted into the new grant currency. For this one-time conversion, the appropriate exchange rates should be a two-year Phase 1 average exchange rate for cumulative budgets and actual expenditures, and the average spot exchange rate on the date of reporting cash balances. If the PR has information systems able to convert using actual rates, this is also acceptable for the purposes of reporting to the Global Fund.

Other Reccurent issues: Programmatic and CPs:. –LFA validates programmatic results that are not in line with the PF –LFA does not verify the source of documents for the reported results –LFA includes results not from GF funding –CPs list inconsistent with Annex A –CPs’ status inconsistent with rationale –Lack of verification of CPs or comments do not address the conditions' requirements

Other Reccurent issues LFA_Total PR Cash Outflow_3A (E.g.) –Budget figures inadequate –Lack of proper explanation on variances –LFA does not realise the PR is reporting accruals –GF disbursements to third parties not considered by the LFA in the expenditures and cash balance report. –PR’s payments on behalf of SRs treated as PR’s expenditures instead of disbursements to SRs

Other Reccurent issues LFA_Total PR Cash Outflow_3A (E.g.) –Inconsistency between descriptive and quantitative information in the report. E.g. the LFA detected a wrong expenditure, but reported maintained the same PR amount in the cell –Inconsistent cumulative information (amounts, explanations, etc) –Procurement’s section not reported, verified or inconsistent information provided

LFA_Cash Reconciliation_5A (E.g) –Inconsistent information on cash balance inconsistent with previous report –GF disbursements to third parties not considered by the LFA in the expenditures and cash balance report. –Exchange rates and variances not analyzed –SRs. Cash balances not verified and/or considered in the disbursement recommendation.  Cash in transit not reported Other Reccurent issues

LFA_Disbursement Recommend_5B(E.g) –Programmatic results achieved with a given expenditures level not considered in forecast. –Recommending expenditures for overachieved activities –PR’s capacity, grant’s rating, or external factors, no being take in consideration –Not providing due consideration to audit matters in PUDR disbursement recommendations. –Inadequate forecast’s period

QUESTIONS?