1. FBO Workshop - May 13-15, 2003, Addis Ababa
Financial management and
Funds disbursement
Principles and Experiences under National HIV/AIDS Programs in Africa
Nadeem Mohammad
World Bank ; AIDS Campaign Team for Africa (ACTafrica)
FBO Workshop - May 13-15, 2003, Addis Ababa

2. Objectives of the presentation
Understanding applicants.
Financial management (managing money)
Disbursement management (flow of money)
FBO Workshop - May 13-15, 2003, Addis Ababa

3. Understanding applicant groups…
In a National HIV/AIDS Program, there are typically 4 applicant groups:
Grassroots level civil society groups
Community Based Organizations and Local Non-Government Organizations (CBO/LNGO/FBO)
Organized, large NGOs, FBOs, private sector organizations and similar organizations; and
Public-Sector agencies or line ministries.
Financial management requirement are easiest at the lowest levels!
FBO Workshop - May 13-15, 2003, Addis Ababa

4. Financial Management…
It is a process which brings together planning, budgeting, accounting, financial reporting, internal control, auditing, procurement, disbursement, and the physical performance of the subproject with the aim of managing resources to achieve its development objectives.
It’s a mouthful definition of financial management – but it is comprehensive!
FBO Workshop - May 13-15, 2003, Addis Ababa

5. Financial Management…
Strong financial management systems provide: 
Essential information to those who manage, implement and supervise projects;
Comfort to lenders and the donor community that funds have been used efficiently and for the purpose intended;
A deterrent to fraud and corruption, because they incorporate strong internal control and transparent financial reporting systems which identify unusual occurrences and deviations.
FBO Workshop - May 13-15, 2003, Addis Ababa

6. Financial Management…
At a minimum the financial management system of FBO should:
Reliably record and report all assets and financial transactions of the project including commitments;
Provide sufficient financial information for managing and monitoring project activities; and
Have in place appropriate audit arrangements to provide for an annual independent audit of its financial statements.
FBO Workshop - May 13-15, 2003, Addis Ababa

7. FBO Workshop - May 13-15, 2003, Addis Ababa
FM: Key aspects
Applicable to all applicants in one form or other:
Accounting method;
Books of account;
Financial statements;
Reporting cascade (if applicable);
Internal audit and control; and
External annual audit.
Let’s take each of these aspects and apply them to the lowest level CBOs and to the national level entities.
FBO Workshop - May 13-15, 2003, Addis Ababa

8. FM: a) Accounting method
Lowest community level
Use local language
Sub-project proposal to include estimate of community contribution in cash or in kind (if there is) and is reported in financial reports;
Transactions recorded in simple formats- probably a list of cash payments
National level FBOs
Double entry bookkeeping;
Historical cost accounting;
Computer or manual system
FBO Workshop - May 13-15, 2003, Addis Ababa

9. FBO Workshop - May 13-15, 2003, Addis Ababa
FM: b) Books of account
Lowest community level
Cash issued register
Supporting documents retained (receipts)
As few forms as possible
Register of in-kind contributions maintained
Minutes of community sub-project committee meetings
National level FBOs
Cash payment & receipt book Petty cash book
Stores records
Cheques issued register
Cash issued register
Journal for non cash transactions
Fund replenishment register and Register of expenses
General ledger
FBO Workshop - May 13-15, 2003, Addis Ababa

10. FM: c) Financial Statements
Lowest community level
Monthly (or a suitable period) cash statement
Fund Replenishment Request as required
Annual Cash statement in predetermined cost categories (e.g., goods, services, overhead)
Milestone report
National level FBOs
Monthly bank statement(s)
Fund Replenishment Request
Physical progress report
Fiscal year Balance Sheet
Fiscal year Income and Expenditure statement
Summary of sources and uses of funds
Budget for next fiscal year 3 months before year ends.
FBO Workshop - May 13-15, 2003, Addis Ababa

11. FM: d) Reporting cascades
Lowest community level
All fund activities
National level FBOs
All Fund activities financed directly;
Sum of all fund activities financed (implemented by other lower levels under the supervision of the national FBO or under a sub-contract)
FBO Workshop - May 13-15, 2003, Addis Ababa

12. FM: e) Internal audit and control
Lowest community level
Random review of financial management procedures
National level FBOs
Annual review of financial management procedures
FBO Workshop - May 13-15, 2003, Addis Ababa

13. FM: f) External annual audit
Lowest community level
Random selection
National level FBOs
Random selection for accounts with less than $50,000 annual expenditure
Full annual audit for accounts with $50,000 or more annual expenditure
FBO Workshop - May 13-15, 2003, Addis Ababa

14. FBO Workshop - May 13-15, 2003, Addis Ababa
FM: Controls
Control procedures may be categorized in many different ways but one way is as follows:
Information processing controls;
(a) General controls
(b) Application controls
- Proper authorization
- Documents and records
- Independent checks
Segregation of duties;
Physical controls; and
Performance reviews.
FBO Workshop - May 13-15, 2003, Addis Ababa

15. Disbursement… Flow of money
Coordination and Management Secretariat of National AIDS Council
Funds received from the World Bank in "Special Accounts"
Line Ministries
NGOs, FBOs & Private Sector organizations
Community groups
Sub-national, decentralized HIV/AIDS Councils
FBO Workshop - May 13-15, 2003, Addis Ababa

16. Disbursement… Flow of funds and channels NAP Subnational govt entities
FBOs
Communities
Suppliers of goods and services
FBO Workshop - May 13-15, 2003, Addis Ababa

17. FBO Workshop - May 13-15, 2003, Addis Ababa
Disbursement…
Account/expenditure categories generally include:
Goods,
Civil works,
Consulting services,
Operating costs
FBO Workshop - May 13-15, 2003, Addis Ababa

18. FBO Workshop - May 13-15, 2003, Addis Ababa
Disbursement…
Disbursement procedures
Transaction based: Requires the submission of supporting documentation each time FBO requests the disbursement of proceeds from the NAP.
Report based: A estimate of expenditures is agreed between FBO and NAP for 2 periods (e.g. quarters). After this, the forecast amount of 1st period is released by NAP. Supporting documentation for these disbursements is submitted with the next report and reviewed by the NAP to confirm eligibility
FBO Workshop - May 13-15, 2003, Addis Ababa

19. FBO Workshop - May 13-15, 2003, Addis Ababa
Lessons learned
There is no ‘special’ accounting requirements for NAP – it is simply universally agreed accounting practice!
Where NGO/CBOs do not have the services of an accountant on a full-time basis, the quality of proposal (budgeting), financial reports and timely reporting is significantly compromised; leading to delays at all levels;
At the grassroots levels, if not an accountant, the involvement of a bookkeeper makes a major difference.
An accountant (or a person with sufficient financial management background) is the key person to undertake the procurement responsibilities.
FBO Workshop - May 13-15, 2003, Addis Ababa

20. FBO Workshop - May 13-15, 2003, Addis Ababa
Lessons learned
Sub-national level government agencies do not have sufficient capacity to provide assistance;
Generally, larger FBOs/NGOs have satisfactory accounting system in place;
Where Financial Management and its advisory service is contracted out by NAP to a professional organization; the quality of financial reporting is better and flow of funds is faster.
FBO Workshop - May 13-15, 2003, Addis Ababa