1. LFA Work in Countries with UN / International Organizations as PR and Fiscal Agents LFA Finance Training Workshop, 2013 October -November 2013

2. Agenda (1) UN / INTERNATIONAL ORGANIZATIONS AS PR – IMPACT ON THE LFA WORK  A: PR = INTERNATIONAL ORGANIZATION? → OPN: HQ COSTS & INDIRECT COST RECOVERY (ICR)  B: UNDP & SHARING OF INFORMATION  C: SHARING OF EXPERIENCE AND LESSONS LEARNT (2) FISCAL AGENTS AND THE ROLE OF LFA 2

3. A: PR = INTERNATIONAL ORGANIZATION? → OPN: HQ COSTS AND INDIRECT COST RECOVERY Purpose:  For services/support provided by HQ (incl. Regional Offices) when located in another country, in order for the in-country organization to fulfil its activities. Eligibility  INGOs with strong HQs involvement in their operations.  i.e. does not apply to nationally-run organizations Expected HQ Services covered by ICR include:  Management support and oversight;  Financial accounting, treasury management and reporting support;  Human resources administration support;  Legal support & IT support;  Internal audit;  Routine technical assistance and capacity building of in-country staff and structures;  Procurement services. Not eligible for funding  Costs related to HQs’ own marketing, proposal development and fundraising activities.

4. A: PR = INTERNATIONAL ORGANIZATION? → OPN: HQ COSTS AND ICR ? Additional direct HQ costs in budget? Principle:  No direct costs related to Regional Offices or HQ are expected in budget. Exception:  If the activity is more cost-effective if done by HQ rather than locally. Requirements:  Justification as to why these costs/activities are not part of services already covered with ICR %.  Detailed description of activity, detailed budget & evidence that it is not included in ICR %.

5. A: PR = INTERNATIONAL ORGANIZATION? → OPN: HQ COSTS AND ICR Summary of Applicable Percentages: PR INGO:  3% on health products but if a procurement agency is used it is 1% max;  1% on health products if directly procured by SR;  5% on other SR costs, if SR not INGO;  2% on other SR costs, if SR is also INGO;  7% on any other direct costs SR INGO:  3% on health products but if procurement agency is used by SR it is 1% max;  5% on SR direct costs. Additional Safeguard Countries → All the same except:  PR can also charge max of 7% on SR direct costs  SR INGO can charge max 7% on their own direct costs & PR can charge max 3 % on SR INGO direct costs (SR ICR to be excluded)  If SR is INGO of UN agency it can charge max 7% on their own direct costs

6. A: PR = INTERNATIONAL ORGANIZATION? → OPN: HQ COSTS AND ICR LFA Role during grant negotiations and implementation: Policy Compliance:  ICR budget in line with maximum % as per Policy;  Budgeted Services under ICR are eligible  Detailed narrative description of services charged as ICR, and the commitment to provide the services mentioned in the Annex 2.  Note: no cost breakdown required, the PR only needs to provide detailed narrative description of services included and explain the percentage amount Additional direct HQ costs in budget?  Principle: no other HQ costs in the budget for services already included in the ICR %  Detailed budget review of any additional HQ costs by LFA, & recommendation to the CT on their justification and reasonableness Grant implementation:  •ICR charged as per agreed rates in budget and as % per actual casg expenditure  Review of any additional direct HQ costs  Note: specific assessment of PR HQ will be coordinated by TGF if and as required

7. Agenda (1) UN / INTERNATIONAL ORGANIZATIONS AS PR – IMPACT ON THE LFA WORK  A: PR = INTERNATIONAL ORGANIZATION? → OPN: HQ COSTS AND ICR  B: UNDP & SHARING OF INFORMATION  C: SHARING OF EXPERIENCE AND LESSONS LEARNT (2) FISCAL AGENTS AND THE ROLE OF LFA 7

8. B: UNDP & SHARING OF INFORMATION PR Assessment: Principle: PR = UNDP = to meet the Minimum Capacity Requirements for PRs GF accepts the general capacity and systems of UNDP as adequate for GF grants Focus of PR assessment by LFA: on the specific capacity and arrangement to be implemented for GF grant; e.g.: –Staff and implementation structure specific for GF grant for managing additional work load –Capacity & system set up re SR management and SR reporting to UNDP –Procurement capacity & structure in relevant office –An assessment of the UNDP plans to build the capacity of national entities to take on the PR role in the future Access to, e.g.: –Program and operations policies, procedures manuals, Internal Control Framework, Global Fund Operations Manual, SOP etc. –SR manual and assessment tools –Organograms, TOR 8

9. B: UNDP & SHARING OF INFORMATION Grant Implementation (budget reviews, progress updates, etc.): Access to –Atlas printouts of expenditure and project cash balance –Workshop documentation incl. list of participants (but not where participants signed for attendance allowance) –Detailed assumptions on forecasting and quantification methods as in PSM plan No access to –UNDP supporting documentation, e.g. invoices, staff contracts, quotations, cost estimates, UNDP contracts No restrictions regarding SRs of UNDP – if non UN organizations  SR financial information, manuals, supporting documentation to be available  SR audit plan, SR Audit reports Audits: UNDP – Office of Audit and Investigation (OAI) publishes country audit at http://audit-public-disclosure.undp.org/  Not annually in each country  UNDP submits an annual statement of income and expenditure, certified by its internal Comptroller  Single Audit principle 9

10. B: UNDP & SHARING OF INFORMATION GF is following up with UNDP: progress made: Input into UNDPs 2014 audit planning by GF expected → Restricted access to program information specifically supporting financial transactions → Use of GF PR assessment tools & → LFA & FPM/CT work closely re scope of work Share Experience & Lessons Learnt 10

11. C: LFA experience when the PR is an international organizations LFA presentation to share experience addressing the following questions: Questions: 1.What challenges/difficulties have you come across and how did you approached and overcome them in your work? 2.What are your observations regarding the application of ICR? If, what system have you developed for the review of ICR charges? 3.What are the lessons learnt and recommendation from your experience? (What would you do differently? What advice/recommendation can you give?)

12. Agenda (1) UN/INTERNATIONAL ORGANIZATIONS AS PR – IMPACT ON THE LFA WORK  A: PR = INTERNATIONAL ORGANIZATION? → OPN: HQ COSTS AND ICR  B: UNDP & SHARING OF INFORMATION  C: SHARING OF EXPERIENCE AND LESSONS LEARNT (2) FISCAL AGENTS AND THE ROLE OF LFA 12

13. Fiduciary Arrangements in High Risk Countries 13 October -November 2013

14. Global Fund contracted Fiscal Agents in high risk countries The Global Fund needs to ensure the continuity of programme implementation in high risk environments whilst mitigating the risk of fraud or misuse of grant funds. To achieve this the Global Fund has contracted directly with fiscal agents to provide hands on support to Principal Recipients in a number of pilot countries - Burkina Faso, Sierra Leone, Benin, Niger, Chad, Guinea Bissau, Guinea Conakry, Central African Republic, Swaziland, Malawi, Cambodia and Georgia. The mandate of the fiscal agents is to: Ensure effective controls are in place over the use of Global Fund grant monies and that all payments are legitimate, justified and represent value for money; Ensure that financial records for all transactions are maintained accurately and on a timely basis; Ensure that financial reporting to the Global Fund is accurate, timely and in accordance with the Grant Agreement and the applicable policies and regulations of the Global Fund. Expected benefits include: The costs of the Fiscal Agents will be outweighed by reduced OIG Recoveries; More timely disbursement of grant funds; Improved value for money with respect to the use of grant funds; Most importantly, it will significantly reduce the reputational risk for the Global Fund. 14

15. Current Fiduciary Arrangements (1/2) Receipt of Funds (i.e. bank account)PR Payment: - PR ExpendituresPR - Disbursement to SRsPR Recording & AccountingPR Reporting: - FinancialPR - ProgrammaticPR Verification of Expenditures:- PR LFA (Ex Post)* - SR PR (Ex Post)* 15 Global Fund PR SR 1SR 2 LFA Funding Reporting Verifications FIDUCIARY ARRANGEMENTS (Current Model – Without Fiduciary Agent) * After Payment of Expenditures

16. Current Fiduciary Arrangements (2/2) 16 * After Payment of Expenditures. Global Fund PR SR 1SR 2 LFA Funding Reporting Verifications Fiduciary Agent (GF Contracted) FIDUCIARY ARRANGEMENTS (Future Model – With GF contracted Fiduciary Agent) Receipt of Funds (i.e. bank account)PR Payment: - PR Expenditures PR (FA Control) - Disbursement to SRs PR (FA Control) Recording & Accounting PR (FA Support) Reporting: - Financial PR (FA Support) - ProgrammaticPR Verification of Expenditures:- PR LFA (Ex Post)* - SR PR (Ex Post)*

17. PR Segregation of Duties – PR, Fiscal Agent, LFA (1/2) 17 LFASR 1SR 2 Global Fund Fiscal Agent Bank 3 rd Party Suppliers Contract & Work-order Quarterly Reporting Periodic Reporting (PU/DR, EFR, …) Payment Requests Periodic Reporting (LFA Reports) Payment Authorizations (PR & SRs) Payment Instructions (PR & FA Signatures) € Disbursements € Payments (PR/SR Suppliers) Payment Requests (Variable Costs) € € € Fixed Costs Disbursements (Quarterly) - HR - P&A - Overheads Variable Costs Disbursements Work-order Instructions FA - All instructions from GF LFA - All instructions from GF Verifications FA- Desk review - GF advises on additional work required LFA- Spot-checks at PR and SR Levels

18. Segregation of Duties – PR, Fiscal Agent, LFA (2/2) 18 RoutineOnce Every 3/6 MonthsOnce a Year PR Submit to FA supporting documentation for payments and non-health procurements Co-signs all payment instructions (with FA) Maintain books of accounting Perform monthly bank reconciliations Perform accounting close-out procedures Implement recommendations from FA, External Auditors and the Global Fund Prepare PR Financial Statements Review and verify SR reports Conduct spot-checks at SR levels Ensure compliance with internal control procedures Submit PU/DR Report to the Global Fund Receive disbursements from the Global Fund Prepare and submit EFR Report to the Global Fund Collaborate with the External Auditors Conduct fix asset inventories and reconciliations Fiscal Agent Verify payment requests (for PR and SRs): i) coherence with WP, Budget, M&E/PSM Plan ii) compliance with Procedures Manual iii) document completeness & accuracy Counter-sign all payment instructions (to the bank) Support PRs in: i) maintaining books of accounting ii) performing monthly bank reconciliations iii) performing accounting close out procedures Verify non-health procurements (integrity, transparency and competitiveness) Approve quarterly disbursements for SR fixed costs (Salaries, P&A and Overheads) Support PR’s preparation and submission of Financial Statements Support PRs in generating PU/DR Reports Support the LFA and external auditors by providing the necessary information and documents Review agreements btw/ PR and SRs Review PRs Procedures Manual Support PRs in generating EFR Reports Support PR in conducting fixed asset verifications Conduct PR staff capacity assessment and recommend strengthening measures Report on measures taken for tax exemptions LFA Review PU/DR submitted by the PR Cross-check financial information with FA Carry-out additional field checks, if required (following discussions with the Global Fund). Submit LFA Report to the Global Fund Review External Audit arrangements Review Audit Report findings and PR follow-up Conduct on-site data verifications Review EFR Report submitted by the PR