Harmonized Approach to Cash Transfers (HACT) to Implementing Partners

Why HACT? Call from member-states (TCPR): Reduce transaction costs Call from donors (Rome and Paris): Simplify policies and procedures; Progressively align with national systems National ownership, grounded in strengthened capacity and increased use of national systems

HACT: key provisions One for all and significantly simplified set of procedures :on requesting/disbursement/reporting on funds (FACE) and audit Risk Management vs. System of Controls !!! The risk management approach allows to reduce the time spent on administrative processes and focus more on programmatic needs

Risk Management vs. System of Controls Step 1. Upfront assessment of risks (at 2 levels) Step 2. Leveraging identified risks through: Choice of an appropriate cash transfer modality and procedures; Scope and frequency of assurance activities

Key elements/tools of HACT Macro and Micro Assessments Assurance Activities Funding Authorization and Certificate of Expenditure (FACE)

Macro Assessment A review of the national public financial management system Based on existing assessments No formal risk rating; no conditionality Government - part of the process Once per cycle Issues covered by the Macro Assessment include: National budget development & Execution Compliance with public sector accounting standards and internal control mechanisms Control of cash Audit and oversight Strength of the financial systems and staff

Objectives: Management Objective: Development Objective Background for cooperation modalities selection Info on SAI Development Objective Opportunities for capacity development Management objective: Provides background information for selection of appropriate cash transfer modalities & assurance activities Assist in establishing whether the SAI can be relied upon for auditing IPs Development objective: Ensure awareness of PFM environment, including weaknesses & strengths of PFM Identify opportunities for capacity development

Micro Assessment Assessment of the adequacy of the implementing partner’s financial management systems and practices and internal controls; Once per programming cycle done by a PA firm; Threshold: US$ 100,000 collectively from UN Agencies per year

!!! Risk rating, but no “pass or fail” Objectives: Development objective: areas for capacity development of IP Management objective: most suitable CTM frequency and scope of assurance !!! Risk rating, but no “pass or fail” Development objective: Establish strengths & weaknesses of financial management practices of IP Identify possible areas for capacity development Management objective: Assist in identifying the most suitable CTM Guides the decision on frequency and scope of assurance activities Micro Assessment envisages a risk rating, but does not provide “pass or fail” to IPs

Assurance is… Determination whether funds were used for the purposes intended Checking accuracy of partner’s reporting on the use of funds to ensure expenditure is true and fair

Key Principles Scope and Frequency of assurance activities depend on the risk and amount of cash transfers Invest more in assurance activities for weaker partners

Assurance Activities Once in a cycle audits Periodic On-site reviews Spot checks Special audits to address specific weaknesses Programmatic assurance Field monitoring Annual reviews

What’s FACE? One unified form: certification, request, invoice, report Requires no supporting documentation (e.g. invoices, contracts attached, etc.) Same format by all ExCom Agencies, all partners Cash disbursed, but not utilized - reprogrammed Certifies expenditures Provides a basis for the disbursement of funds for the next period Serves as a request to spend, a verification of what was spent and as an invoice Permits disbursements quarterly, not on a transaction basis Supports advances, direct payments and reimbursements

Why Funding Authorization and Certificate of Expenditure (FACE)? To lower complexity and amount of procedures for IPs To save time and effort for Partners and UN Agencies staff Allow more time for focus on programmatic issues Point 2 in answer. One system for all. This reduces the administrative burden on implementing partners.

How does it all come together? Links between HACT and the UN’s Country Programming Process… What to do – When to do it Point 2 in answer. One system for all. This reduces the administrative burden on implementing partners.

More info… www.undg.org