1. Training: South-central 1 COMMUNITY RECORD-KEEPING, FINANCIAL MANAGEMENT AND PROCUREMENT Hargeisa – September 28, 2009 COMMUNITY-DRIVEN RECOVERY AND DEVELOPMENT PROJECT (CDRD) Based on NSP training documents

2. World Bank General Principles and Aims - CDRD projects 2 Communities must be involved in preparing and implementing subprojects to achieve project ownership and sustainability Procedures should be kept simple, with a high degree of accountability Procedures should be sufficiently transparent Many of the decision making and management responsibilities delegated to communities to strengthening their capacities

3. ROLES AND RESPONSIBILITIES OF ALL PARTIES 3

4. Communities 4 Mobilizing community contribution Monitoring project activities Monitoring implementation (day-to-day progress) Monitoring procurement of materials/services

5. Community Development Committee CDC 5 The CDC is responsible for managing the overall implementation of the subproject including Overseeing procurement Bookkeeping and Accounting Supervision Storage CDC members elect officers to serve as chairman, vice- chairman, treasurer, M&E focal pint and secretary. The CDC needs to form the project management committee and the procurement committee. Nobody is above anybody else. Even the CDC officials are not more important than other CDC members without a specific office.

6. CDC-Project Management Committee …(1) 6 Composition 6-7 members Chairman must have the capacity to facilitate and observe group decision-making processes. helps the group to run meetings that produce good outcomes Treasurer Manages the community fund Trustworthy, reliable, and familiar with accounting procedures it is still possible to appoint competent treasurer assistants outside the CDC Secretary Documents and notes the decisions made during CDC meetings has good writing and reading skills, Capable to presenting reports to the community

7. CDC-Project Management Committee …(2) 7 Operating the project bank account with “Dahabshiil” To be opened only after the IOSC approves the sub-project at least three signatories Use of checks (?) Collecting/monitoring community contributions Can be collected before the implementation begins Can be in the form of cash or in-kind contribution (sand, bricks, labor.) CDC needs to issue receipts (pre-numbered if possible) for the cash received. Cash needs to be deposited in the community bank account (?)

8. CDC-Project Management Committee …(3) 8 Financial Management and bookkeeping Maintaining receipts, labor registers, and other supporting documents for all expenses (all expenses have corresponding documentary evidence) Maintaining a stock register of materials stored for more than 3 days before use Maintaining a cash box and a cash book. Cash to be kept in a secure location with restricted access by a responsible person nominated by the CDC Maintaining a register of all cash, labor, and material contributions from the community

9. CDC-Project Management Committee …(4) 9 Completing project reports periodically to the project financial agent (DRC) Financial reports Internal control checklist Physical progress reports (Engineer) Reporting to CDC regularly Progress reports are provided through community meetings, announcements during prayer meetings (minutes and attendance records of these meetings must be kept) All financial information need to be posted in public places (ex., public notice boards) Making all subproject accounting documents available for inspection Explaining the contents of the MOU to the community members

10. CDC-Project Management Committee …(5) 10 Overseeing construction and monitors day-to-day progress Safe storage of materials Maintaining stock record-keeping system (More than 3 days need to be recorded) Designating persons responsible for stock management recordkeeping of stocks in storage transfers of subproject materials

11. CDC - Procurement Committee…(1) 11 Composition Chair and 3 members The members should not includes the The chairman The secretary

12. CDC - Procurement Committee…(2) 12 Developing procurement plan (with the support of DRC) what is to be purchased when it is to be done and by whom Procurement committee meets only if there is a request and all four members must be present Procuring materials and labor (skilled and unskilled) Plan shopping trips in advance When pricing the materials, Include transport costs Getting at least three quotations Compare and choose the best quality for the best price. Insuring that all the materials needed for each phase of construction are available. Get receipts from vendors for all purchased goods

13. Danish Refugee Council (DRC) 13 The DRC as the “financial agent” will be responsible for all fiduciary responsibilities related to implementing subprojects DRC is responsible for ensuring that sound business practices are applied, which assure competitiveness, cost effectiveness and transparency through Provide capacity building and training for CDC members (with PCU/UNICEF/STIPA) Monitor project implementation Verify subproject expenditures Facilitate timely financial disbursements to communities Provide/coordinate technical supervision visits Oversee procurement of materials/services

14. Project Coordination Unit (PCU) …(1) 14 Providing technical support and guidance to the community throughout the project cycle (e.g., develop standard designs) Assessing the CDC capacity (literacy rates, bookkeeping skills) Carrying out internal audits Developing Management Information Systems to support project activities: Financial Management System Documents Management System Project Management System M & E System

15. Project Coordination Unit (PCU) …(2) 15 Maintaining unit cost database The database is maintained by the PIU and includes costs of all types of items purchased at the community level (in U.S. dollars) It is used as a way of cross-checking prices proposed by communities Prices proposed in community budgets are used to update the database regularly The database must be kept up-to-date and take into account price fluctuations. ( and regional price differences) Maintaining Contractor Database Include details of local contractors such as: performance, prices and contact information The list will help communities with no prior experience working with contractors Black list of contractors is made available to communities

16. CDRD Procurement 16

17. Purchasing vs. Procurement activities 17 “Purchasing” means that a person can spend the money as he or she individually deems appropriate. “Procurement” means that a person wishing to purchase a good must follow certain regulations and rules for making a purchasing decision. For example: a private person may buy sacks of cement at his or her favorite dealer. However, procurement rules in CDRD require that a person must check out at least three dealers and compare prices and quality first, and then come to a decision the person is not allowed to buy at his/her preferred dealer if the price is higher or the quality of the offered product is lower. checking prices and quality of products of at least three dealers is an example of a typical procurement regulation.

18. Procurement Policies – Why? 18 Procurement policies have various benefits: Prevent corruption, cheating, and nepotism Promote honesty, constructive competition, fair pricing of goods and quality of products The purpose of procurement policies is to ensure fairness and transparency: Unity, solidarity and trust are more likely to prevail Conflicts and distrust are less likely to occur A training about CDRD procurement is therefore directly linked to the overall purpose of CDRD, namely to promote transparency and accountability.

19. CDRD Procurement Policy 19 Type of ProcurementDescriptionForms Required Remarks 0 - $199 Single Source / Direct Purchase  below $200  in line with the prices stipulated in the “CDRD Standard Price List” YESCDCs must collect quotations and use quotations evaluation form (see Operational Manual, Annex 3) 1.Collect supplier quotations, using Form 1 (“Quotation Request”) $200 – $15,000 Local Shopping  Between $200 and $15,000.  in line with the prices stipulated in the “CDRD Standard Price List” YESCDCs must use and file CDRD “Local Shopping” Procurement Forms (see Operational Manual, Annex 3) 1.Collect supplier quotations, using Form 1 (“Quotation Request”) 2.Evaluate supplier quotations, using Form 2 (“CDC Bid Evaluation Form”)

20. Questions … 20 What is the purpose or wisdom of requesting the collection of three quotations of three different non-related dealers before making a purchasing decision? What is the purpose or wisdom of requiring consultation between four persons before making a purchasing decision? What is the purpose or wisdom of insisting in the purchase of goods that are not only cheap but also of good quality? What is the purpose or wisdom of procurement regulations in general?

21. Financial Management and Book- keeping At the Community Level 21

22. Memorandum of Understanding (MOU)- Intro 22 The MOU is a contract between DRC and the beneficiary community based on lump-sum The community is treated as a contractor (in case of self- implementation mode) Budget deficit/savings. Budget deficit: Increasing community contributions or reducing subproject scope Budget Savings: communities can utilize budget savings without having to go through the formal process of approvals. future improvement/expansion operation and maintenance any new activity that will benefit the majority of beneficiaries

23. MoU Components 23 Scope of activities to be covered/time frame Amount of funding Terms and conditions of payments Financial management requirements Payment schedules (linked to activity schedules/milestones) Roles and responsibilities of all parties before, during, and after implementation. Any attachments, including bills of quantities (for materials, equipment, furniture, administration), material transport cost schedules, labor cost schedule, community contribution cost schedule, basic price list, works schedule

24. Community Record-Keeping and Accounting 24 At the community level, it is important to keep simplicity as a primary objective. Key principles to apply to the community accounting system include: Use of Somali language all transactions should be recorded in simple formats Supporting documents should be retained As few forms as possible should be used, focusing on the needs of the community

25. Good practices … (1) 25 Segregation of Duties No financial transaction is handled by only one person from beginning to end No individual should be able to initiate, authorize, execute, or record a transaction without the active involvement of someone else For cash disbursements, this might mean that different people authorize payments, sign checks, record payments in the cash book.

26. 26 The measures should not unjustifiably slow the flow of funds or project implementation Accountability should be built at the community level using accountability mechanisms: Participation Use of Somali language for all community records and their communication Putting all information into the public domain in open meetings and posting salient information in public places in Somali language Good practices … (2)

27. Disbursement Procedures 27

28. Tranche System of Disbursing - Intro 28 A “Tranche” is a periodic payment A key monitoring tool that allows for greater control and oversight Ensures that funds are accounted for properly and technical quality is maintained throughout the implementation process

29. Tranche System of Disbursing 29 Several tranches based on physical and financial progress Each tranche is a percentage of total subproject costs Initial Tranche: Released to the community upon signing the MOU 2nd and Subsequent Tranche: Released to the communities upon fulfillment of the conditions stated below: The receipt of written request from he CDC as stated in the MOU Financial report: Justified utilization of at least 70% of the preceding tranche (accompanied by supporting documentation) Internal controls checklist Physical progress report: Up-to-date Copy of the latest bank statement