* OAS Indirect Cost Recovery (ICR) Policy and Procedures (Ver. 1)

SAF Transformation and Modernization Project04/10/23 OAS Indirect Cost Recovery (ICR) Policy and Procedures (Ver. 1) 1

SECRETARIAT FOR ADMINISTRATION AND FINANCENOV. 2007

Ver.7

SECRETARIAT FOR ADMINISTRATION AND FINANCENOV. 2007

SAF TRANSFORMATION AND MODERNIZATION PROJECT (STAMP)Secretariat for Administration and Finance (SAF)

Presentation to the Committee on Administrative and Budgetary Affairs (CAAP)

November 15, 2007

SAF Transformation and Modernization Project

What is covered in this presentation?

I. Is Modernization Necessary?

II. The Transformation Path

III. Managing the Transformation Successfully

IV. Next Steps

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SAF Transformation and Modernization Project04/10/23 3

IIs Modernization Necessary?


An Evolving OAS

▪ The General Secretariat translates mandates from Member States into programs and projects, initiatives, services. Well-executed programs and the trust of Member States and the international community are essential elements to sustain and increase support for OAS’ mission.

▪ OAS needs to evolve into an integrating agency and strategic alliance builder that must maintain its competitive advantage as it seeks scarce donor resources to implement programs.

▪ Good internal governance is fundamental to successful program execution and increased member state/international community support.

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An Evolving OAS / A Static Resource Management Structure

▪ OAS and all other multi-laterals have not kept pace with industry standards and trends.

▪ OAS’ General Standards, Budgetary and Financial Rules, Administrative Memoranda, Procurement and Personnel guidelines adopted decades ago were consistent with the industry standards at the time. International accounting standards were in their infancy.

▪ Changes to the standards since then have been minimal and/or piecemeal with a focus on solving crises or specific issues, not the overall management of resources. The results are often OAS-specific and limit management and partners from being able to benchmark and compare OAS’ results to other institutions.

e.g., Employee/Contractor hiring mechanisms have become unwieldy and unintelligible over time in order to deal with hiring for specific fund programs. One or two mechanisms have grown to eleven.

▪ Business processes are rigid and rules-driven. Each transaction is treated as though it poses the same level of risk. As a result, transaction costs are high.

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An Evolving OAS / A Static Resource Management Structure

▪ Management and Donor Reporting was mainly financial, focused on inflows and outflows, lacked analysis and a meaningful link between the use of resources and intended outcomes.

▪ Despite a significant investment in a modern enterprise resource management system, Oracle’s E-Business Suite (internally named “OASES”) was being configured to fit an outdated resource management model. The full strategic capability of OASES was underutilized.

▪ External systems were being developed independently by program areas and not as part of an well-defined organizational approach to managing resources. The Organization’s IT resources were not aligned with the core business of the OAS.

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What Do Our Donors/Strategic Partners Expect?

▪ A meaningful way to measure performance based on common standards. Good quality, credible standards enhance the reliability, consistency and transparency of

resource management information. Standards are more credible when the standard-setting process is independent of any particular body.

▪ Proper accountability Timely, understandable reports that link the use of resources to the accomplishment of

strategic goals and objectives; not just transaction reporting.

▪ Resources to be used effectively and efficiently to accomplish objectives Minimize transaction costs, simplify and streamline rules and business processes, less

bureaucracy.

▪ Quality service and results Modern, responsive and flexible administrative infrastructure focused on delivering value.

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How Are Other International Organizations Adjusting?

▪ All other international organizations, public-sector entities and NGOs are adapting their resource management standards and systems to meet member state and partner expectations and evolving priorities.

▪ The United Nations, World Health Organization, Pan American Health Organization, International Monetary Fund, Inter-American Development Bank, The World Bank, The Commonwealth Secretariat have all undertaken transformation initiatives.

▪ Standardization and simplification and a focus on value is driving change in the way that all resources are managed: human, financial, real property and information.

▪ They are adopting new resource management standards such as International Public Sector Accounting Standards (IPSAS), human resource and procurement standards.

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Consequences of Maintaining the Status Quo

▪ OAS will be the only major international/multilateral organization trying to implement programs/projects in the 21st century with 20th century administrative mechanisms.

▪ OAS will lose its competitive edge if it cannot demonstrate to partners that it can effectively manage resources in a modern way, demonstrate accountability for those resources, and meaningfully report results.

▪ OAS will not be able to develop meaningful strategic plans and implement results-based management as managers/donors/partners will continue to have only a “moment-in-time” snapshot of Organizational resources.

▪ No benchmarking will be possible with similar institutions to measure the effectiveness and efficiency of the OAS.

▪ OAS will continue to have dual approaches to managing Regular and Specific fund resources.

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IIThe Transformation Path


OAS’ RESOURCE MANAGEMENT FRAMEWORK

•Performance Reporting•Cost Management•Investment Management

•Internal Controls•System Security and Integrity•Training/Skill Sets

•Roles and Responsibilities•Code of Ethics•Administrative Support Model

RISK MANAGEMENT

OAS’ GOVERNANCE STRUCTURE

RESOURCE MANAGEMENT STANDARDS AND SYSTEMS

•Accounting/Reporting Standards•Hiring Standards•Procurement Standards

•Policies and Procedures•Business Processes•Enterprise Resource Planning System

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Str

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Professional Development

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RESOURCE MANAGEMENT STANDARDS AND SYSTEMS•Accounting/Reporting Standards•Hiring Standards•Procurement Standards


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Resource Management Standards and SystemsThe Transformation Path

Adoption of International Public Sector Accounting Standards

▪ This is not just an accounting issue – it defines the way we manage and report on all resources including fixed assets, human resources, buildings, equipment, etc. Reporting will be integrated and standardized across all funds of all types, allowing greater transparency and better decision-making.

▪ Adoption will align OAS accounting practices with independent and internationally-recognized accounting standards and will improve the consistency and comparability of financial statements, internally and externally. Similar to the approach used by other IO’s/Multilaterals, we will gradually introduce changes to our resource management standards.

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Resource Management Standards and SystemsThe Transformation Path

Adoption of International Public Sector Accounting Standards

▪ Follows from instructions to General Secretariat via General Assembly Budget Resolution AG/RES.2353 (XXXVII-O/07) and Board of External Auditors recommendations.

▪ Accrual accounting means that the OAS for the first time will recognize past, present and future obligations against Organizational resources. There is nothing new here. These are not new obligations but under OAS-specific accounting rules they remain largely un-quantified; rendering them “invisible” and/or under-reported.

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OASES Becomes the Definitive Enterprise Resource Management System

▪ OASES is the definitive source of all resource management and performance reporting

▪ Eliminate external applications and build solutions within OASES; Maximize use of existing Oracle functionality

▪ Integrate redefined, optimized business processes into OASES

▪ Implement new modules where needed to reduce risk and enhance resource management capability:

Project Management Public Sector Budgeting Fixed Assets Time and Labor Self-Service Human Resources

▪ Move set of books to an accrual basis

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Resource Management Standards and Systems

The Transformation Path


Business Process Reengineering (BPR)

▪ The objective is to move away from a rigid, transaction-oriented and “silo” approach to a more flexible, adaptable and horizontally-integrated way of managing resources.

▪ Focus is on easing the administrative burden and reducing manual transaction processing by fully integrating solutions into OAS’ enterprise resource management system (OASES), and

▪ Simplifying and standardizing policies, processes and terms. What is a performance contract? When should it be used? Who is an employee? How should we hire/contract short-term vs. long-term human resources? How should we hire/contract individuals financed with project specific funds? What are appropriate contracting mechanisms?

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Resource Management Standards and Systems






RISK MANAGEMENT




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Develop a Risk Management Framework

▪ Performance Reporting Reports link resource use to results and are relevant, understandable, comparable to

established standards, timely, consistent and reliable Quarterly Resource Management Reports Board of External Auditors Reports Develop a reporting strategy

▪ Cost Management Develop and deploy good costing models and budgets for projects, activities

▪ Investment Management Not just about money; manage the Organization’s investments in all resources: cash,

buildings, people

▪ Internal Controls

Achieve the proper balance between controls and risk; leverage technology and reduce manual controls, raise the level of consciousness to internal controls within resource management team; partner with OIG’s Office in proactive identification and mitigation of risk

▪ System Security and Integrity Enforce risk management policies

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Risk Management



Develop a Risk Management Framework

▪ Training Training programs must be in place to prepare and equip staff with the skills and tools

necessary to both navigate the transformation process and to operate within a modernized OAS

Role-based training programs:

First stage is training and AGA certification in governmental financial management for finance/budget/administrative personnel.

About 60 administrative and financial staff are participating in the Certified

Government Financial Manager Training Program

Oracle business-analyst training for OASES module managers

IPSAS training

Career and succession planning

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Risk Management






•Roles and Responsibilities•Code of Ethics

•Administrative Support Model

RISK MANAGEMENT

OAS’ GOVERNANCE STRUCTURE




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Professional Development

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Strengthen OAS’ Governance Framework

▪ Includes clear definitions of roles and responsibilities and lines of accountability and the development of a corporate code of values and ethics.

▪ CAAP and Political Bodies▪ Administrative Model▪ Program and Evaluation Committee (PEC)▪ Handbook on Specific Funds▪ Indirect Cost Recovery (ICR)▪ STAMP▪ Staff Committee▪ Building a corporate culture

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OAS Governance Structure



OAS Governance Structure The Transformation Path

Governing Bodies

Central Administration (SAF)

OAS Country and Project Offices

Program Area Financial and Administrative Staff

Continuous CommunicationContinuous

Communication

Continuous Communication

Shared Administrative

Responsibility

Continuous Communication


IIIManaging the Transformation Successfully


Managing the Transformation Successfully

▪ Commitment Requires high-level vision and commitment to modernization effort

Secretary General’s Agenda Board of External Auditors Recommendations All of OAS Initiative CAAP Member States, Key Stakeholders/Partners

Requires everyone involved in change effort to have a cohesive vision and strategy. All modernization initiatives should harmonize with the Organization’s strategic direction and the transformation plan.

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Managing the Transformation Successfully

▪ Communication Strategy Builds a shared vision of the need to modernize OAS’ resource management

structure Communicates modernization plan throughout the Organization Keeps donors and stakeholders informed about plan progress Provides a forum for stakeholders to provide feedback

▪ Cross-Functional Team SAF Transformation and Modernization Project (STAMP) team has been tasked to

lead the change effort.

The STAMP team has representatives from all SAF Departments/Offices, Program Areas, Office of the Inspector General, and the Staff Association

▪ Training Strategy Ensures that those involved in and impacted by the change effort have the

necessary skills and tools to successfully plan and implement changes.

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IVNext Steps


Where are We and Where Do We Need to Go?

We have started on the journey towards new standards; e.g.:

1. Dramatically improved quarterly reporting2. Specific Fund Handbook3. Indirect Cost Recovery 4. Project Evaluation Committee5. Results-Based Management6. STAMP Implementation Team has been formed (BPR is underway)7. Oracle being upgraded (Technical Upgrade is the first phase)8. Updated Staff and Procurement Rules9. OAS has joined the UN IPSAS Task Force in order to keep abreast of developments,

share knowledge and develop solutions10. Some professional development (AGA)11. Information Management Plan

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Where are We and Where Do We Need to Go?

CAAP and the Governing Bodies’ role is now pivotal in moving this modernization agenda forward. In the not-too-distant future, we will be coming with an integrated proposal to modify and update the General Standards, particularly in the following areas:

Adoption of IPSAS Staff Rules Information Management Policies Procurement Rules Real Property Strategy

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CP19144E

* OAS Indirect Cost Recovery (ICR) Policy and Procedures (Ver. 1)

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