Bank Guidance · 2016-05-03 · Bank Guidance, “Accreditation Framework for Implementing Entities...

Bank Guidance

Accreditation Framework for Implementing Entities Under Financial Intermediary Funds

Bank Access to Information Policy Designation Public

Catalogue Number DFi2.02-GUID.04

Issued and effective February 9, 2015

Content Guidance on accreditation frameworks proposed by the relevant decision-making body to determine eligibility of new Implementing Entities under Financial Intermediary Funds

Applicable to IBRD and IDA

Issuer Vice President, Development Finance

Sponsor Director, Development Finance Trust Funds and Partnerships

Bank Guidance, “Accreditation Framework for Implementing Entities under FIFs”

Catalogue Number DFi2.02-GUID.04 Page 1 of 20

SECTION I – PURPOSE AND APPLICATION

1. This Guidance: (a) provides a background on accreditation frameworks proposed by the relevant decision-making bodies to determine the eligibility of new Implementing Entities under FIFs; and (b) describes considerations and recommended courses of action in determining whether proposed accreditation frameworks are acceptable to the Bank.

2. This Guidance applies to the Bank in its capacity as Trustee.

SECTION II – DEFINITIONS

As used in this Guidance, the capitalized terms or acronyms have the meanings set out: (a) in Section II of the FIFs Directive; (b) in Section II of the FIFs Procedure; or (c) below:

1. CSO: civil society organization.

2. FIFs Procedure: Bank Procedure, “Management Framework for Financial Intermediary Funds”, February 9, 2015, Catalogue Number DFi2.02-PROC.01.

3. GEF: Global Environment Facility.

4. MDB: multilateral development bank.

5. NGO: non-governmental organization.

6. OECD: Organisation for Economic Co-operation and Development.

7. UN: United Nations.

SECTION III – SCOPE

1. Background

a. The Bank as Trustee transfers funds to outside Implementing Entities, without the Bank as Trustee playing an operational role in those FIF-funded projects or programs. Many FIF-supported PPs have made use of UN agencies and MDBs as Implementing Entities through which their funded programs are delivered. These Implementing Entities, which often includes the Bank in a role separate and distinct from its Trustee role, take on supervisory responsibility for having arrangements in place to ensure that the funds are used for the purposes for which they were granted. This Guidance does not apply to transfer arrangements with UN agencies, the OECD and MDBs.

b. Recently, there has been a growing demand from the governing bodies of several FIF supported PPs to expand the number and eligibility of Implementing Entities beyond the traditional multilateral agencies, to include national entities in recipient countries, NGOs, CSOs, bilateral donors or their aid agencies, etc.

c. FIF-supported PP governing bodies may determine the need to expand the number and eligibility of Implementing Entities in cases where other organizations might be better



positioned or better suited to carry out the proposed activities. Expanding the number and eligibility of Implementing Entities may yield important benefits, including capacity building and country ownership. However, expanding the eligibility of Implementing Entities and introducing new Implementing Entities including national governments expose FIF-supported PPs to risks. The risks include engaging with partners who may not have the capacity to deliver results or have arrangements in place to ensure that the funds are used consistent with the terms of the agreements.

d. In order to mitigate these risks, FIF-supported PP governing bodies seek to establish their own fiduciary and other standards and to develop, manage and oversee an accreditation process for new entities. The Bank as Trustee has no supervisory relationship over the other Implementing Entities and does not assume fiduciary or operational responsibility for the FIF funds once they are transferred. In cases where the Bank serves as the secretariat for FIF-supported PP governing bodies, the secretariat also does not assume any responsibility for the funds once they are transferred to an Implementing Entity.

e. However, misuse or ineffective use of funds by the entities to which funds are transferred can result in negative impact to the Bank’s reputation. Therefore, if expanding the number and eligibility of Implementing Entities is contemplated in a program supported by a FIF, the Bank as Trustee assesses and determines that an appropriate accreditation framework is in place so that third parties to whom funds are transferred have in place acceptable fiduciary and management policies, procedures and capacity.

f. The Bank as Trustee does not participate in the selection of Implementing Entities and instead follows instructions from the FIF-supported PP governing body with respect to who receives funds when and in what amounts. The PP governing body is ultimately responsible for the selection of Implementing Entities and any related standards. Implementing Entities are directly accountable to the program governing body for the use of funds transferred to them. If the Bank is also serving as the PP secretariat, the secretariat may support administratively the accreditation process, at the direction of the program governing body, which makes the final accreditation decisions. The Bank as Trustee does not take part in the accreditation decisions.

g. This Guidance describes considerations and recommended courses of action for Bank staff in advising Bank management whether the accreditation frameworks proposed by FIF-supported PP governing bodies are acceptable to the Bank as Trustee. Best practice includes the following components in the overall accreditation framework. If one component is lacking, others have to be stronger.

2. Legal Capacity of the FIF-Supported PP

a. There are many dimensions to take into account before setting up a new legal entity (e.g. aid architecture, articulation with existing vehicles, running costs, etc.). From a strict risk-management perspective, on the specific issue of expanding the number and eligibility of Implementing Entities, the best approach to manage risks to the Bank as Trustee is to have the FIF-supported PP or its governing body or external secretariat established with legal capacity to sign legal agreements with recipients directly as well as with the Bank with respect the trustee role. Such legal capacity allows that entity to take direct action and seek recourse against those recipients, if necessary.



b. If the FIF-supported PP entity does not have legal capacity, then the Bank as Trustee typically enters into agreements with Implementing Entities setting out the procedures for commitment and transfer of FIF resources by the Trustee. Such agreements include steps to be taken by the PP governing body in case of misuse of funds.

3. Fiduciary Standards

a. The central pillar of an acceptable accreditation framework is the establishment of a set of minimum standards against which the Implementing Entity is assessed. Regardless of legal status and capacities of governing bodies, the Bank as Trustee endeavors to ensure that such minimum standards are in alignment with recognized good practice.

b. Annex I contains the minimum standards approved by the GEF Council for accreditation of its Implementing Entities, and has been recognized by the Bank as a good example of minimum fiduciary standards. These standards can be used as reference when assessing the soundness of new minimum fiduciary standards of FIFs.

c. Annex II contains the minimum standards approved by the Adaptation Fund board for accreditation of its Implementing Entities and the minimum fiduciary standards approved by the Global Partnership for Education Fund. These standards derive from the GEF’s and illustrate acceptable variations from the standards approved by the GEF.

4. Accreditation Procedures

a. It is critical that the PP has a well-functioning and rigorous accreditation process overseen by its governing body to assess the fiduciary and other capacities of the entities to which the Trustee is instructed to transfer resources. There are a number of approaches that may be taken to expanding the number and eligibility of Implementing Entities, including:

i. Accreditation by the governing body. The FIF-supported PP governing body chooses to appoint an entity or body, such as an “accreditation panel” to review applicants for accreditation. The governing body chooses to hire an outside expert—such as an international accounting firm—to undertake the review of applicants for accreditation. If the FIF-supported PP governing body does not have a legal capacity and the Bank is the program secretariat, the Bank is asked to hire an outside expert as a consultant. The Bank as Trustee in cooperation with the secretariat checks that the outside expert is a reputable entity whose terms of reference, contracts and interests ensure independent review of the applicants.

ii. Acceptance of accreditation under other schemes expanding the number and eligibility of Implementing Entities. The FIF-supported PP governing body chooses to accept accreditation from another entity without going through the PP governing body accreditation process, if it determines that that entity’s accreditation scheme meets PP governing body’s standards. The Bank, as Trustee, has also to determine that that entity’s accreditation scheme is acceptable (e.g. “Nordic Plus” - Nordic Plus donors (UK, The Netherlands, Finland, Sweden, Norway, Ireland, and Denmark) have accepted their respective procedures to delegate cooperation).

b. FIF-supported PP governing bodies introduce criteria that set the bar high to ensure that only organizations with a record of achievement apply for accreditation (e.g.



demonstrated experience managing bilateral or multilateral donor-funded projects in excess of a certain amount, and in more than one country). FIF-supported PP governing bodies consider including negative criteria (e.g. not debarred by the Bank, etc.).

c. Governing bodies can have a multi-step accreditation process. They first determine whether the applicant entity is an appropriate partner from a programmatic perspective, and then whether they have appropriate institutional capacity and fiduciary controls in place in order to be an effective implementing partner (e.g. GEF employs a two-stage process where the applicant first demonstrates its core value-added to the GEF mission in a “stage 1” application, then, if approved, the Implementing Entity provides additional in-depth information about its fiduciary capacity). This approach is effective and efficient, as entities that are judged not to be appropriate partners do not go through the rigorous “stage 2” application process.

5. Review of Accreditation Framework

a. The Bank, as Trustee, has to be satisfied that the accreditation framework is acceptable. For new programs supported by FIFs, accreditation frameworks are part of the Bank’s assessment of the overall risks of the FIF to the Bank, and discussed in the Concept Note during the FIF approval process.

b. Accreditation frameworks:

i. Specify that the PP governing body, and not the Bank as Trustee, is responsible for selecting its Implementing Entities;

ii. Have clearly articulated goals and objectives;

iii. Specify the types of entities that can apply for accreditation;

iv. Define the types of activities undertaken by the accredited entity;

v. Specify how an entity reviewed for accreditation is “nominated” or apply for accreditation;

vi. Specify the minimum standards against which the entity is measured, and that those standards are assessed by the Bank as satisfactory;

vii. Specify the information that is gathered from the entity reviewed for accreditation in order to determine whether it has met the minimum standards;

viii. Direct that assessments be carried out by an independent, objective and qualified third party to the Bank;

ix. Specify the implications for governance documents and other legal documents, if any;

x. Specify the estimated costs of undertaking the assessment, and specify what party bears those costs; and



xi. Specify the process for the periodical review of the accreditation frameworks, which the Trustee is consulted on without being involved in evaluating the accreditation framework or assessing the experience with the accredited Implementing Entities.

c. Bank staff review the accreditation framework, including minimum fiduciary standards, roles and responsibilities and accreditation modalities following this Guidance as an input for Bank management to determine whether these are acceptable to the Bank.

SECTION IV –EFFECTIVE DATE

This Guidance is effective February 9, 2015.

SECTION V – ISSUER

The Issuer of this Guidance is the Vice President, Development Finance.

SECTION VI – SPONSOR

The Sponsor of this Guidance is Director, Development Finance Trust Funds and Partnerships.

SECTION VII – RELATED DOCUMENTS

1. Operational Policy 14.40 - Trust Funds

2. Bank Procedure 14.40 - Trust Funds

3. “Management Framework for World Bank Partnership Programs and Financial Intermediary Funds: Strategic Engagement, Oversight and Management”, SecM2013-0286 and IDA/SecM2013-0368. June 14, 2013

4. Bank Directive, “Management Framework for Financial Intermediary Funds”, February 9, 2015, Catalogue Number DFi2.02-DIR.01

5. Bank Procedure, “Management Framework for Financial Intermediary Funds”, February 9, 2015, Catalogue Number DFi2.02-PROC.01

6. Bank Guidance, “Initiation of Financial Intermediary Funds”, February 9, 2015, Catalogue Number DFi2.02-GUID.03

7. Bank Guidance, “Communications for Financial Intermediary Funds”, February 9, 2015, Catalogue Number DFi2.02-GUID.05

8. Bank Guidance, “Terms of Reference for Bank Staff representing the Trustee in Financial Intermediary Fund Governing Bodies”, February 9, 2015, Catalogue Number DFi2.02-GUID.02



Questions regarding this Guidance should be addressed to the Sponsor.

ANNEXES



Annex I: GEF Minimum Fiduciary Standards (GEF Policy Paper July 2007)

http://www.thegef.org/gef/agencies_accreditation

http://www.thegef.org/gef/sites/thegef.org/files/documents/C.41.06.Rev_.01_GEF%20Minimum%20standards%20paper.pdf

GEF Policy on Agency Minimum Standards on Environmental and Social Safeguards (GEF/C.41/10/Rev.1)

http://www.thegef.org/gef/sites/thegef.org/files/documents/C.41.10.Rev_1.Policy_on_Environmental_and_Social_Safeguards.Final%20of%20Nov%2018.pdf





Annex II: Adaptation Fund Minimum Fiduciary Standards Accreditation Toolkit https://www.adaptation-fund.org/about/accreditation-panel

Financial Integrity and Management

(a) Capability required: Accurately and regularly record transactions and balances in a manner that adheres to broadly accepted good practices, and are audited periodically by an independent firm or organization.

1. Production of reliable financial statements that are prepared in accordance with internationally recognized accounting standards.

2. Production of annual external audited accounts that are consistent with recognized international auditing standards.

3. Production of detailed departmental accounts.

4. Demonstration of use of accounting packages that are recognized and familiar to accounting procedures in developing countries.

5. Demonstrate capability for functionally independent internal auditing in accordance with internationally recognized standards.

Good example on audited financial statements:

The application contains audited financial statements with an unqualified opinion from KPMG for each of the two years of operation being 2008 and 2009. The financial statements are in accordance with auditing standards issued by the Auditor General of the country. The applicant uses integral Administrative Management software that includes an accounting module marketed by Datalogic which is a local firm aiming to develop the product for the region. The application provided a link to the software company so that the Accreditation Panel could verify the appropriateness of the software.

Marginally acceptable example on audited financial statements:

The applicant is a government ministry and its accounts are audited together with those of the government as a whole by the Auditor General. His latest report on the 2008 financial accounts shows a multitude of examples of improper recording, non-compliance with rules and fraud. Only few comments relate to the applicant. A separate letter from the Auditor General for the ministry also has no significant issues outstanding. This would be acceptable for accreditation provided the other parts of the application show strong governance systems and a strong internal audit.



Acceptable example on internal audit:

While there is no internal audit function for this small organization there is, each year, a management review done by the external auditor. The management letter relating to 2009 covered the organizational structure of the applicant and a review of procedures regarding procurement; and accounting / cash. The applicant takes the observations seriously and fixed the weaknesses and provided a status report showing the actions they had taken.

Poor example on internal audit:

The application makes reference to internal audit provisions and these are adequate and contained in Section 36 of the country’s Financial Regulations. The Auditor General in his report for 2008 is critical about the internal audit effectiveness within the country. The organization chart of the applicant has a few auditors but gives no information on the internal audits done, the content of the annual report or audits planned. Nor is it clear whether aspects of the applicant’s projects, contracting and disbursements are audited. With this information, the Fiduciary Standards are not met and accreditation would not be recommended by the Accreditation Panel.

(b) Capability required: Managing and disbursing funds efficiently and with safeguards to recipients on a timely basis.

. A demonstration of use of a control framework that is documented with clearly defined roles for management, internal auditors, the governing body, and other personnel.

2. Production of financial projections demonstrating financial solvency.

3. Demonstration of proven payment / disbursement systems.

Good example on an Internal Control Framework:

The institutional form of the applicant is that of a government corporation. According to its application, they have 54 employees recruited through competitive examinations, with an average age of 35 years, and all managers have a university degree. It is the first regional agency of its kind to have been certified in one hundred percent of its processes through the Certification of the Quality Management System according to ISO 9001:2008. One of the documents created as part of that process are Quality Guidelines (QGs). ISO certification would mean that the applicant has a strong capability to translate customers’ needs into their own systems and procedures and that the various authorities are described in written documents and this was demonstrated with examples.

Good example on an Internal Control Framework:



The applicant has its own accounting system and its financial statements are prepared under the US GAAP (thus consistent with IFRS). While its own accounting system is not a “recognized accounting package” the applicant is large enough to have a bespoke system and the 2009 annual report shows an unqualified opinion issued by PwC. Included is a statement on the adequacy of internal controls based on the COSO criteria issued by management and referred to by the auditors as fairly stated. Thus, the Accreditation Panel can have confidence in the accounting system.

Inadequate example on an Internal Control Framework:

The applicant is a government ministry and referred to various documents in the application such as the Financial Regulations that contain the duties and responsibilities of officials in relation to financial management such as those of: cabinet ministers, the Secretary General, and the Secretary to the Treasury, the accountant General, the Chief Internal Auditor, Chief budget managers and public officers, and various committees. This would only be an acceptable framework if it is accompanied by a demonstration from internal audit or another external source that it is adhered to. Without that assurance, the fiduciary standards would not be met and accreditation could not be recommended for the ministry.

Good example on a disbursement system:

One of the attachments of the application is a Project Disbursement Handbook. It contains policies, guidelines, practices, and detailed instructions how to handle project disbursements and repayments. It is written for the applicant staff, borrowers including project staff from executing agencies. It demonstrates that disbursements are managed in accordance with the principles and procedures that are applicable to the investment projects or programs.

(c) Capability required: Producing forward looking financial plans and budgets.

1. Evidence of preparation of corporate, project or departmental / ministry budgets.

2. Demonstration of ability to spend against budgets.

Good example on spending against project budgets:

The applicant maintains a website which enables the stakeholders to monitor the overall financial status of projects. Greater details as well as the status of individual disbursement transactions are available to donors. It demonstrates that the applicant has an ability to budget against projects and correctly account therefore.

(d) Capability required: Legal status to contract with the Adaptation Fund and Board.



1. Demonstration of necessary legal personality in case it is not a government department / institution.

2. Demonstration of legal capacity/authority and the ability to directly receive funds.

Good example on a legal status:

The applicant is a recently created government organization being its own legal entity. It was created by Presidential Decree in 2008. According to the Decree the “Fund shall be an instrument for financing programmes and projects aiming at rational management of the environment, improvement of living environment and promotion of sustainable development in the country. To this regard, it shall be responsible for:

• Mobilizing subsidies granted by the Government, as well as externalities and fines

collected as part of the fight against environment pollution;

• Mobilizing external resources relating to its missions;

• Building and developing institutional and operational capacities of national partners in

the field of environment management;

• Promoting practices of sustainable management of natural resources;

• Supporting programmes and projects relating to environment protection and

improvement of populations’ living environment;

• Following and assessing the execution of funded projects and their impact on the

environment.

• According to an Article in the Presidential Decree, the Fund shall cooperate with public,

private and non-governmental entities, whose activities contribute to the implementation

of the national environment management strategy. This makes the applicant a logical

NIE for the AF with the right legal status.

Requisite Institutional Capacity

(a) Capability required: Procurement procedures which provide for transparent practices, including competition.

1. Evidence of procurement policies and procedures at national levels consistent with recognized international practice (including dispute resolution procedures).

Good example on how to procure:

One of the attachments to the application is the sixty five pages Procurement Guidelines. The purpose of these Guidelines is to inform those carrying out a project that is financed in whole or in part by an applicant loan, grant, or fund of the policies that govern the procurement of goods, works, and services required. Topics covered include International Competitive Bidding such as



opening and evaluation of bids, and other methods of procurement and also mentions aspects of Fraud and Corruption.

Good example on how to procure:

The application gives the reference to its procurement guidelines that are consistent with international procurement guidelines used by international community. The guidelines describe the basic principles of procurement that apply to projects funded by them including the various procurement methods, policies and procedures for competitive bidding on goods and work and related services. The selection of consulting services is also covered. Contracts, including dispute resolution, are under national jurisdiction. The applicant gets into the procurement cycle of its executing agencies by giving a “non-objection” to contracts for its projects and there is a full dispute resolution mechanism in place. These guidelines are available on the web.

Example of inadequate procurement practices:

The applicant is part of a government structure and therefore subject to the country’s Public Procurement Authority. A report issued in June 2009 on a procurement review of the applicant concluded that unless the recommendations of the review are implemented the applicant will not comply fully with the Public Procurement legislation and the associated regulations and directives and punitive measures are considered. In this case accreditation cannot be recommended until the Public Procurement Authority comes to a positive conclusion on the basis of a full review and this should be supplemented by some mechanism to give assurance to the Accreditation Panel that the appropriate systems and procedures in place for procurement and adherence thereto is expected to continue to be in place for the duration of the accreditation period.

(b) Capability required: Capacity to undertake monitoring and evaluation.

1. Demonstration of existing capacities for monitoring and independent evaluation consistent with the requirements of the Adaptation Fund.

2. Evidence that a process or system, such as project-at-risk system, is in place to flag when a project has developed problems that may interfere with the achievement of its objectives, and to respond accordingly to redress the problems.

Good example on how to monitor:

The application included project guidelines on preparing a design and monitoring framework that is primarily for design teams government and ministries, nongovernment stakeholders, applicant staff, and consultants. The guidelines are a hands-on tool kit that describes—step-by-



step—the participatory process to develop the design and monitoring framework and explains how to apply participatory design tools. The guidelines are practical with examples. There is also technical assistance available to prepare projects. These together with other manuals such as for disbursement and the semiannual monitoring make it clear that the applicant has the required capacity to meet this Fiduciary Standard. Monitoring reports from several projects demonstrate the system is working.

Good example on evaluation:

The applicant has an independent Evaluation Group that is directly responsible to the Board and links to its Evaluation Committee. They have their own section on the applicant web site that includes its annual report and summaries of the reports issued. There was an external peer review done of its evaluation function and that came out positively and is available under the documents of the latest Executive Board.

Poor example on risk management within projects:

The application mentions that risk assessment is embedded in the project log-frames and in the project design document template envisaging sections on risk analysis and exit strategy and post-project sustainability. While that may be the case, the risk identification at project design could be stronger. For example, many appraisal documents do not include a section on risk management with suggested mitigating actions, for many others the treatment of risks and mitigation could be stronger. The focus on risk is so minimal that it does not meet the minimal AF Fiduciary Standards.

Good example on a monitoring / accounting for projects:

The application includes audited financial statements for several donor funded projects of the Institute as of 2008. It involves opinions of KPMG, a local auditor and the auditor general of the country. All opinions are positive and give confidence that project expenditures and procurement actions adhere to the loan provisions and national legislation. Example of inadequate monitoring practices:

The application states that it has the technical capacity to monitor and evaluate projects through the Monitoring and Evaluation Committee but does not demonstrate this or give further information or examples. When asked for additional examples the applicant provides quarterly monitoring reports done by the donor organizations. For accreditation purposes, the monitoring capability has not been demonstrated and accreditation cannot be recommended.

(c) Capability required: Ability to identify, develop and appraise projects.

1. Demonstration of availability of/ access to resources and track records of conducting appraisal activities.

2. Evidence of institutional system for balanced review of projects, particularly for quality-at-entry during the design phase.



3. Evidence of risk assessment procedures in place.

Good example on identification, development and approval of projects:

The main purpose of the applicant is to define the strategy for the country. Since donor funding is a significant part of the country budget, the applicant is heavily involved with the identification of projects. It does so through working with all the government bodies and other partners. Steering committees are created as projects are identified, developed, and appraised and these are usually chaired by applicant staff. Projects that pass the steering committee are sent for approval to cabinet. In case of approved programmes, the Steering committee approval is sufficient for a new project. The applicant provided documents that demonstrate that it has an extensive capability to identify the right projects and see them through its development and appraisal stages working in full partnership with all the stakeholders.

Inadequate demonstration of identification, development and approval of projects:

The applicant explains that it has a planning cell who initiates the project appraisal after receiving projects from different agencies/departments. This follows a prescribed document for new projects called Development Project Performa/Proposal (DPP). The DPP includes the basic project proposal elements such as objectives; budget and timing; pre-appraisal or investment feasibility study; a result based monitoring framework; and a procurement plan. The explanation and the form are all contained on two pages and no examples are given. From an accreditation viewpoint there is not sufficient demonstrate of a system and evidence that the system is working. There is a pro-forma list of a Departmental Project Approval Committee (DPAC) made up of some 12 senior staff members of different government ministries and divisions but there is no example of how they work. Thus, the application needs to be expanded and provide evidence on these systems before accreditation can be recommended.

(d) Capability required: Competency to manage or oversee the execution of the project/programme including ability to manage sub-recipients and to support project/programme delivery and implementation.

1. Demonstration of an understanding of and capacity to oversee the technical, financial, economic, social, environmental and legal aspects of the project and their implications.

2. Demonstration of competence to execute or oversee execution of projects / programmes.

The examples under monitoring above apply. The demonstration of the capacity to oversee the technical, financial, economic, social, environmental and legal aspects of the project and their implications requires a demonstration of staff qualifications, experience and education.

Inadequate demonstration of capacity to manage or oversee projects:

The application states that the various technical wings of the organization together with some of the technical directorates of ministries, whom they work together with, puts them in a unique



position to oversee the technical, economic, financial, social, environmental, and legal aspects of projects and their implications. It states that usually a Steering Committee is formed drawing members from relevant institutions to provide such oversight responsibility. It gives as an example a project being executed but is only one example and it is very different from adaptation type of projects. Better examples need to be given to be considered sufficient demonstration for accreditation.

Transparency, self-investigative powers, and anti-corruption measures

(a) Capability required: Competence to deal with financial mismanagement and other forms of malpractice.

1. Demonstration of capacity and procedures to deal with financial mismanagement and other forms of malpractice.

2. Evidence of an objective investigation function for allegations of fraud and corruption.

Good example on an antifraud practice:

The applicant’s management set up an investigation function as part of the internal audit function. The policy is contained in a rather legal document but is neatly summarized on the website. The policy is mainly focused on fraud and corruption but taken together with the published core values it is clear that mismanagement and other forms of malpractice are equally covered. There is an annual report on investigation that is on the website and this demonstrates the nature of the cases and that all complaints received are taken serious and are acted upon. It is important to note that the investigative activities equally cover any behavior related to the applicants’ projects done by third parties. For example, fraud related to tender documents would be covered.

Inadequate example on an antifraud practice: The application refers to the various national systems such as the Ombudsman, the Auditor General, the

National police, the Prosecutor General, the Revenue Authority and the Public Procurement Authority.

The underlying message is that the national systems work. There is certain evidence through websites

that the system works. For example, the former Director of the national procurement agency was tried

for corruption. Nevertheless, it does not demonstrate how the applicant works with the various national

entities and how it has a no fraud tolerance at the top or how it deals in a preventive and reactionary

fashion with financial mismanagement and other forms of malpractice on projects. There is no

information on a whistleblower policy. Neither does it deal with the role of the organization to prevent,

initiate and monitor investigations of fraud and corruption within projects they manage. Also details on

a code of conduct for staff is missing



Annex III: GPE Minimum Fiduciary Standards for Approval of New Supervising and Managing Entities

Core Principles

1. All Global Partnership for Education Supervising Entities (SEs) and Managing Entities

(MEs) should have sound financial management practices and procedures.

Internationally recognized fiduciary standards should be utilized and met, where

possible. In addition, Supervising Entities should conduct appropriate due diligence of

the financial and procurement systems of a developing country partner government or

other entity receiving funds under a Grant Agreement as per the Proposal approved by

the Board

2. Practices and procedures are measurable and transparent. Policies and procedures are

written and well understood by staff.

3. Fiduciary review functions are appropriately independent and objective in the execution

of their respective duties.

4. Procedures are in place that establish periodic monitoring and ensure that issues raised

in reviews are dealt with effectively.

5. Procedures focus, as appropriate, on ensuring that the maximum benefit, for the

resources expended, has been obtained from goods and services acquired or provided.

Standards

I. Financial Management

1. Financial Management and Accounting Systems

Required capability: Robust financial management and accounting systems ensure accuracy of financial management and reporting. The entity has adequate systems, including systems for cash management and production of budgets, and for the production of reliable financial statements prepared in accordance with internationally recognized accounting standards.

Illustrative means of verification:

The entity produces reliable charts of accounts, which are prepared in accordance with recognized accounting standards, and provide the necessary level of detail to monitor expenditure.

Robust and reliable accounting systems are integrated with other Financial Management systems, in order to facilitate reconciliation with budget, and reporting requirements.

Budgeting procedures are robust, and provide donors with assurances related to appropriate expenditure.

Banking arrangements provide for effective cash management.

Based on available information, the entity's credit risk is acceptable.



2. External Financial Audit

Required capability: The external financial audit function ensures an independent (if possible, as defined by the International Federation of Accountants (IFAC)) review of financial statements and internal controls. An independent auditor audits the entity’s financial statements according to appropriate internationally recognized auditing standards.


The entity has appointed an independent external audit firm or organization.

The work of the external audit firm or organization is consistent with recognized international auditing standards, as appropriate.

There is a transparent and competitive process for the selection of a suitable external auditor.

3. Control Frameworks

Required capability: An internal control framework (if possible, as defined by internationally recognized frameworks such as COSO, Cadbury and CoCo) is a risk-based process designed to provide reasonable assurance and feedback to management regarding the achievement of financial management objectives. The entity’s control frameworks are in place, documented, and have clearly defined roles for management, internal auditors, the governing body and other personnel.


The entity's accounting and finance organizational structure is clearly defined, with documented roles and responsibilities and sufficient segregation of duties, including for implementing any Global Partnership for Education grants.

There are adequate policies and procedures in place to guide activities and ensure staff accountability.

4. Internal Audit

Required capability: Internal auditing is an independent, objective activity designed to add value and improve an organization's operations. It helps an organization to accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. The entity demonstrates capability for functionally independent internal auditing in accordance with internationally recognized standards (such as International Standards on Auditing (ISA)).


The entity has an internal audit mechanism in place and its activities are subject to review by an internal audit unit.

The internal audit function is independent and objective, and its findings are disseminated to management, who follow up on recommendations.



II. Institutional Capacity

1. Legal Status

Required capability: The entity must have the appropriate legal status and legal authority to enter into contractual arrangements with GPE and other third parties, and must have the legal authority to receive funds.


The entity is a legally registered organization.

The entity has the authority to enter into legal agreements and receive funds.

2. Project Appraisal

Required capability: The entity has the ability to identify, develop and appraise projects. Project appraisal functions include the establishment of standards and appropriate safeguards that are used to determine whether projects and activities will meet their development goals before funds are disbursed.


The entity has a good track record for timely implementation of similar projects, and has a good track record of achieving appropriate programmatic results.

3. Management and Organization

Required capability: The entity’s organizational structure and quality of management enables it to competently manage or oversee the execution of funded projects, including through management of sub-recipients.


The entity has a board of directors that meets regularly and has statutes or terms of reference for its functions.

The entity has a management structure that is suitable for undertaking funded projects.

The entity is well acquainted with the work of the Global Partnership for Education and the grant work involved.

The entity's staff - at all levels - have the requisite skills and experience to undertake funded projects.

The entity's physical assets - including IT systems - are adequate to undertake funded projects.

4. Oversight of Sub-recipients

Required capability: The entity’s organizational structure and quality of management enables it to competently manage or oversee the execution of funded projects through management of and program delivery and implementation support to sub-recipients.




There are adequate procedures and criteria in place for a transparent selection of sub-recipients.

The entity has adequate plans and resources in place to ensure sub-recipients have the capacity to implement the proposed activities and safeguard grant funds.

The entity has had previous experiences with managing sub-recipients and disbursements of similar magnitude.

The entity has Operational Procedures and plans in place for managing sub-recipients, including for monitoring the program implementation at sub-recipient level, reviewing sub-recipients’ financial and program reports for completeness and technical soundness and ensuring the safeguarding of assets held by sub-recipients.

5. Procurement Procedures

Required capability: The entity’s procurement procedures, covering both internal/administrative procurement and procurement by recipients of funds, include written standards based on widely recognized processes and an internal control framework to protect against fraud, corruption and waste.


Documented procurement processes include the following: (1) a code of conduct to avoid occurrence or perceptions of conflicts of interest; (2) methods of procurement and when different methods should be applied; (3) procedures for requests for tenders; (4) procedures for bid evaluation; (5) procedures that are transparent and competitive.

Procurement approval systems are in place, with certifying and approving officers; and there are appropriate segregation of duties and levels of delegation.

Procedures are in place to ensure that the goods/services delivered are of an acceptable quality.

6. Monitoring, Evaluation and Project-at-Risk Systems

Required capability: The entity can demonstrate existing capacities for monitoring and independent evaluation of projects and evidence that a process or system, such as project-at-risk system, is in place to flag when a project has developed problems that may interfere with the achievement of its objectives, and to respond accordingly to redress the problems.


The entity has Operational Procedures and plans in place for monitoring the program implementation at both the entity and sub-recipient levels and reviewing entity and sub-recipients’ financial and program reports for completeness and technical soundness.

The entity has systems in place for early identification of problems/capacity gaps at the entity and sub-recipient levels and for initiating effective remedial actions.



III. Transparency, Self-Investigative Powers and Anti-Corruption Measures

1. Misuse of Funds Procedures

Required capability: In accordance with GPE’s Policy on Misuse of Trust Funds, which requires that the Board only choose agencies with robust policies and procedures for addressing Misuse to act as Supervising Entities or Implementers, the entity can demonstrate competence to deal with financial mis-management and other forms of malpractice.


The entity has clear written policies and procedures regarding issues of misuse of funds. There is a system of adequate safeguards to provide reasonable assurance as to the protection of assets, including the Global Partnership for Education grant, from loss, fraud, waste and abuse at every step of the grant life cycle.

The entity has the ability to investigate allegations of misuse

The entity has terms and conditions in its agreements with sub-recipients and contractors in relation to the ability to recover funds in cases of misuse.

2. Protection of Whistle-blowers

Required capability: The entity protects individuals from retaliation due to providing information in relation to misuse.


The entity has policies and procedures in place in relation to whistle-blowing and the protection of employees or contractors.

Bank Guidance · 2016-05-03 · Bank Guidance, “Accreditation Framework for Implementing Entities...

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Transcript of Bank Guidance · 2016-05-03 · Bank Guidance, “Accreditation Framework for Implementing Entities...