hact presentation 20141017
TRANSCRIPT
Harmonized Approachto Cash Transfers to
Implementing Partners
What is the Harmonized Approach for Cash Transfer to Implementing Partners? Adopted in 2005, HACT is a new way of
managing the process of transferring cash to our implementing partners.
The Approach is outlined in a framework that applies to UNDP, UNFPA, UNICEF and WFP– the United Nations Development Group Executive Committee agencies (or UNDG ExCom) – at this stage.
Objectives of the HACT approach:
Lower complexity of procedures and reduce transaction costs of development cooperation;
Improve capacity of national partners to effectively manage aid;
Minimize risks related to the utilization of funds and increase overall effectiveness
HACT principles:
National ownership - Governments are in the driver’s seat
Strengthening capacity – reliance on Government systems
Risk Management Assessments and assurance activities
Accountability and Risk Management UN Agencies rely on system of controls for managing cash
transfers. Partners often have to produce multiple reports in different
formats at different times for the various agencies.
The new system relies on what is called a risk management approach.◦ With trusted long-term partners that have stable management and
strong internal management systems, risk is likely to be low◦ New partner about whom there is little prior information or
experience, risk will be higher.
Agencies adjust their cash transfer method and assurance activities according to the level of risk
Main elements of HACT Macro and Micro assessments are used
to determine risk and assurance activities such as audits and spot checks.
4 cash transfer modalities can be used:◦ Direct cash transfers (advance) ◦ Direct payments ◦ Reimbursement◦ Direct agency implementation.
How do the assessments help partners? The aim of the assessments is to help
government and other partners to identify strengths and weaknesses in their financial management systems.
The assessments are not a form of conditionality – instead they inform how best to work together
HACT as a risk-based management approach is reconfirmed, whether or not several agencies share an implementing partner;
HACT is to be the sole framework for transferring cash to IPs. Emphasis is on standardizing the way UN agencies work with IPs to reduce transaction costs while ensuring joint operationalization with respect to country macro assessments as well as assessments and audits of shared partners.
The agreed principles and processes will be mainstreamed into the adopting agencies’ guidelines, which are aligned with the revised HACT framework with due consideration for the specificity of each agency’s business model and business processes;
Key Elements of Revisions
Accountability and responsibility for applying these procedures and monitoring application lies with each agency. They are promoted and coordinated by the Resident Coordinator with oversight at HQ level.
Further clarification is provided on assurance planning. Financial audit will be added to the menu of assurance activities for higher-risk IPs, while internal control audit will apply to lower-risk IPs and spot checks and programmatic monitoring will apply to all IPs, as per agency procedures.
Key Elements of Revisions Cont…
Implementation of HACT ProcessesImplementation area Implementation Status
Assessments Micro assessments, deemed necessary through micro assessment planning, have been completed or high risk has been assumed.
Assurance Agency assurance plan has been completed and implementation is on track. Adjustments to the plan have been documented as necessary and at least annually.For shared IPs, planned assurance activities have been detailed in the agency assurance plan and implementation is on track. Adjustments to the plan have been documented as necessary.
Capacity development Capacity development has been completed as required and communicated by agency HQ.
Agency HACT focal point Each agency will identify a HACT focal point, who will serve
as the key point of contact for HACT implementation in the agency. This person is responsible for managing or supporting HACT activities and arising issues, according to agency office structure. This role may be suitable for an existing position and may not necessarily require a full-time commitment; this is decided by each agency.
The HACT focal point will also responsible for working with the HACT inter-agency coordinator to share information as necessary for effective coordination and to develop best practices at country level.
Country Level Agency Accountability
Agency Programme Staff Effective implementation of the HACT framework requires
consideration of HACT as part of regular programme planning and monitoring activities. It is important to embed HACT activities in agency programmatic activities, such as by combining financial monitoring procedures with programmatic monitoring activities. This will minimize the burden on IPs and achieve the most efficient use of resources.
Agency programme staff are an important part of the capacity assessment process. Programme staff observations about the IP’s activities should be considered throughout the programme cycle and should inform assurance activities, leading to adjustments if necessary.
Country Level Agency Accountability
Risk rating
Spot checks*
Programmatic monitoring
Audit frequency Audit type
Low 1 per year, excluding year of audit
Third or fourth year of the programme cycle
Internal controls audits May switch to financial audit if significant issues or concerns are identified in spot checks
Medium 1-2 per year, excluding year of audit
Second and fourth year of the programme cycle
Significant Per agency guideline
Per agency guidelines
Annual For shared IPs: Financial audits If IPs receive two sequential audits with unqualified opinion, an internal controls audit should be performed for remaining period Other partners: As per agency guidance
High Per agency guidelines
Annual
*Each spot check reviews a significant amount of total expenditures reported on the selected FACE form for testing (i.e. one FACE form per year for low-risk IPs). The specific amount of expenditures to be selected for testing is based on agency guidance. This assurance activity is not intended to provide 100% coverage of expenditures during the entire programme year or cycle.
Guidance for Assurance Activities
FACE Certifies expenditures and provides a basis
for the disbursement of funds for the next period;
Permits disbursement on quarterly, not transaction basis;
Cash disbursed, but not utilized – reprogrammed/refunded;
No accompanying back-up documentation
Conclusions
Reduces the most burdensome transaction costs for government counterparts;
True harmonization in the area of assurance
Simplification of both programme and financial operations
Help National capacity building for programme implementation
THANK YOU