1. Risk Differentiation in LFA Deliverables LFA Finance Training October-November 2013

2. Objective of this session Clarity on the expectations Roles and responsibilities See the implementation through illustrations

3. 3 Clarity : QUART Risk Framework Risk LevelsLOWMEDIUMHIGH/VERY HIGH/ Low Absorption or Over- commitment 1.Well organized financial management (easy tracking of supporting documentation and good archiving system); 2. No significant issues in financial management; 3. No instance of fraud as per latest OIG and audit report; 4. Usually good quality and timely reporting; 5. Good SRs oversight; 6. The latest audit report is of good quality, less than 12 months old and does not have material findings; 7. Conditions and management actions are properly and timely managed by PR. 1.Frequent issues in financial management; 2. Instance of fraud (cash and non-cash); 3. Instance of some ineligible and unsupported expenditures; 4. Reporting lacks quality and is sometimes provided late; 5. Inadequate SRs oversight; 6. Issues noted in financial management organization (tracking of supporting documentation and archiving system need to be improved); 7. Audit and EFR reports provided with delay and of questionable quality; 8. Spending not aligned with the budget; 9. Some unfulfilled conditions and management actions. 1. Frequent significant issues in financial management; 2. Instance of fraud (cash and non-cash); 3. Instance of material ineligible and unsupported expenditures; 4. Lack of quality in reported financial data and reports are significantly delayed; 5. Poor SRs oversight, and/or complex implementation arrangements 6. Poor financial management organization (poor tracking of supporting documentation and poor archiving system); 7. Audit and EFR reports not provided on time and/or of poor quality; 8. Poor spending and/ or spending not aligned with the budget; 9. Large number of unfulfilled conditions and management actions. Poor Financial Efficiency Fraud, Corruption or Theft of Funds Theft or Diversion of Non- Financial Assets Market and Macroeconomic Losses Poor Financial Reporting

4. 4 Roles and Responsibilities - Accountability Partnership and working together for collective improvement CT to be clear about the expectations LFA to deliver timely information LFA provides high quality deliverables in response to expectations

5. 5 Case 1 : PU/DR Risk Based Approach- Instructions for Group Work Instruction: Each table works as a group Information provided: There are two scenarios presented Time allocated for group work: 30 minutes Task: What are the specific procedures that will be undertaken in reviewing the cash outflows based on the information provided

6. 6 Report Back on Group work: What was the CT looking for? The risks the LFA identified would be based on context and working with the grants at country level Ineligible expenditure needs to be clearly defined between CT and LFAs Defining materiality should be supported by assumptions and agreed to between the LFA and the CT Quality of the supporting documentation needs to be clearly communicated in terms of what is acceptable Review from authorization to payment including processing needs to be done in order to ensure systems are working LFA needs to pro-actively suggest implementation improvements Non-financial asset management is part of the PU/DR review directly and indirectly Management of advances is crucial for efficient cash flow

7. 7 Spot checks What does it entail? Addressing risks that exist within a grant Flexibility to respond to implementation needs Procedures that will be directed to understand the level of the risk Strategically focus on areas for improvement Long term impact in improved delivery of services

8. 8 Case 2 : Spot Check Instructions: Each table will work as a group. We will ask three groups to present their outcomes Information available: Three different scenarios related to spot checks Time allocated for Group work: 10 minutes Report back by each group: 10 minutes including Q & A for each group and wrap-up Task: What is the proposed ToR for each spot check?

9. Questions that the CT needs to have answered What is the additional information the LFA requires from the CT? Be pro-active and let us know what you need to complete deliverables What are the areas of risk that the LFA would need to cover? LFA and CT need to work together combining sources of information How do you assess management systems? Innovation in working to find solutions to improved implementation How does the LFA establish materiality? Joint effort and a necessity to ensure appropriate use of resources What are the factors that render a transaction ineligible? Formalized and to be recorded between the LFA and CT How does the LFA establish quality and completeness of documentation? This needs to be established between the CT and LFA How to manage and monitor findings ? Integration into work plan of deliverables

10. 10 Conclusions Not a one size fits all in the LFA deliverables Different approaches to LFA deliverables based on risk, context and professional judgment We need to manage expectations and be clear in our communication