SPOT CHECKS 2016

Overview 1. What is HACT 2. HACT Assurance Activities 3. Spot Checks - Preparation - Field Work - Documentation

HACT Framework The HACT Framework Represents A Common Operational (Harmonized) Framework For Transferring Cash To Government And Non-governmental Implementing Partners (IPs) The purpose of assurance activities is to determine whether the funds transferred to IPs were used for their intended purpose and in accordance with the work plan

Three Mechanisms To Obtain Assurance Of Transferred Funds To IPs: 1. Periodic On-site Reviews (Spot Checks) Of The IP’s Financial Records Of Cash Transfers. These May Be Performed By Qualified Agency Staff Or Third Party Service Providers; 2. Programmatic Monitoring Of Activities Supported By Cash Transfers, Which Provides Evidence Regarding The State Of Programme Implementation And Use Of Agency Resources; 3. Scheduled And Special Audits (Financial Or Internal Control) Of The IP’s Financial Records And Internal Controls

Planning Of Spot Checks Is Guided By: Risk Rating from HACT Micro-Assessment - Assessment of the IP’s financial management capacity (i.e. accounting, procurement, reporting, internal controls, etc.) Amount of cash transfer per year (specific thresholds may vary between Agencies $30-$50k)

The spot check process From the Spot-check guidance and tool.

Preparation for Spot Check Obtain and review the following documents Micro assessment (to familiarize yourselves with the high-risk areas identified and major recommendations) Work-plan (to understand the programme background, activities and objectives) Progress report (to familiarize with the status of programme implementation) The last four FACE forms submitted by the IP (It means that at least one FACE form relates to expenditures from the previous calendar year) COGNOS report on aging OFA CDR for monitoring report Results of previous audits or spot checks

Sample selection Minimum coverage 15% - 20% up to max 80% of the actual expenditure reported on the FACE form Risk-based approach Cover different expense categories (those cumulatively equal to or exceeds 5-10% of the actual expenditures reported) Focus on larger valued items, but also include some smaller valued items. Select unusual or high risk items, including, but not limited to: Description of the expenditure is not appropriate for the expense category or for the activity of the work plan; Description of the expenditure is general or vague; Date on which the expenditure was incurred or reported is not appropriate for the reporting period on the FACE form; The amount of the expense is unusual for the type of expense (round number or large number) The same expense and amount is recorded multiple times (duplication)

Fieldwork 1 Changes to Internal Controls / IP interview Note any control deficiencies and recommendations from assurance activities (micro assessment, previous audits and spot checks) Follow up on the status of the recommendations Inquire about any changes in the organization Obtain evidence during expense testing 2 Bank reconciliation If IP maintains separate bank account for UNFPA funds, ensure that the bank account is reconciled to the IP’s accounting system and OFA If this is not the case, obtain sufficient evidence that transactions selected for testing have been actually paid Note any control deficiencies and recommendations from micro-assessment and previous spot checks or audits. Conduct an interview with the finance and programme management of the IP to understand if they have implemented the recommendations and obtain evidence during the expense testing. Inquire the management if there have been any changes in the organization, including: Changes in the organization structure and key programme or finance management positions Changes to the internal policies or procedures Changes to the financial management processes Changes in the accounting or reporting systems Determine if any of the changes increase the risk of successful and timely programme implementation or the accuracy of the financial reporting of the IP.

Fieldwork – 3. Test of expenditures Use the Spot check tool (template) For each expense selected, perform and document the following testing procedures: Expenditure matches activity and budget in signed work plan Expenditure on the FACE forms reconciles with IP accounting records and bank statement Expenditure is correctly coded in the FACE form Sufficient and appropriate supporting documents are on file The payment is signed by the authorized Official Stamped PAID by (UNFPA, UNICEF etc.) CAN YOU HERE DEMONSTRATE HOW TO FILL IN THE SPOTCHECK TOOL? INSERT A LINK TO THE TOOL IN EXCEL, OPEN IT AND RUN THROUGH IT. THIS WOULD SUBSTITUTE THIS AND THE NEXT SLIDE AND BE MORE HANDS ON.

Fieldwork – Test of expenditures (cont.) Expenditure represents services received during the period covered by the FACE forms Price is reasonable (= compared to market price) and determined through competitive bidding process Expenditure recorded is exclusive of VAT For personnel costs only: the salaries and fees applied are within established rates and there is clear cost apportionment for shared costs There was segregation of duties between staff ordering the goods/services and those making the payment Goods/Assets/Services are used for the intended purposes In bold attributes from UNICEF which were not in the original UNFPA spot check tool

3 Fieldwork – Test of expenditures (cont.)

Documentation and follow-up Fill 4 mandatory templates (in the guidance) Annex A – Check list Annex B – Spot Check Report Annex C – Test of expenditure Annex D – Detailed Findings and Recommendations

Documentation and follow-up Share and discuss findings with the IP (if significant findings are detected, spot checker may decide to share findings with IP after consultation with Office management, see next bullet) The spot check team meets with the Programme Officer and with the HACT focal point in order to discuss the findings The group determines whether the observations represent any change in the risk of working with the partner and how it impacts on the successful programme implementation Monitoring recommendations including clearance of unsupported expenditures detected The group decides on whether additional assurance activities are required and the HACT focal point updates the assurance plan accordingly