Financial management

Management and control systems

Financial management

Management and control systems

Training for Programme OperatorsMarch 2012

Training for Programme OperatorsMarch 2012

Financial allocation

Allocation within BS

Allocation in programme

Financial model

Pre-financing modelAdvance instalments to POs based on future cash needs

Reporting on use of funds received previously

Pre-financing requests reviewed by FMO and cross-checked against previous requests and reported incurred expenditure

Small amount retained from each claim, released at programme completion

Financial reporting

Interim financial reports and final financial report certified by CA

Fixed reporting periods covering four calendar month every year

Fixed deadline for reporting and fixed payment dates

FMO can withhold payments in case of delayed or incomplete reporting

Financial reporting chart

Financial flow

FMC / NMFA

FMO Certifying Authority

Programmes operated by the FMO

Programme Operators

Donor programme

partners

Project Promoters

Suppliers & Partners

National Focal Point

Small grant scheme operator

Advantages of financial setup

Pre-financing more suitable to the programming approach than reimbursement model

Easier access to liquidity for Programme Operators

De-centralised financial controls can be adapted to the size of grant and type of projects

More predictable workload and more reliable disbursement forecast

Management and control systems – national level (1)

Financial control at national level Responsibility of the Certifying Authority Certification of expenditure declared by POs Exception: programmes operated by the FMO or a DS entity

Certification of financial reports Part of interim financial report and final programme report Certification procedure and method to be designed by CA

Eligible expenditure of a programme Expenditure incurred directly by the PO (programme

management, bilateral funds at programme level, etc.) Re-granting: payments to projects from the PO, and not

expenditure incurred by project promoters

Management and control systems – national level (2)

Management and control functions of the NFP Overall responsibility for reaching the objectives of the FMs Monitor progress and quality of implementation of

programmes Progress towards programme outcomes and objectives Fulfilment of publicity requirements Signing programme implementation agreements with POs

Management and control functions of the AA Audits on effective functioning of management and control

systems both at national and PO level Project audits based on an appropriate sample Annual audit report and opinion Closure declaration

Management and control systems – programme level

Setting up management and control systems Responsibility of the Programme Operator Collecting applications, selecting projects, signing project

contracts Verification of project outputs and project expenditure Ensuring payments to projects Verification of compliance with the Regulation, the

programme agreement, applicable national law and EU law Reporting to the FMO / NFP / CA / Irregularities authority Information and publicity

System design NFP / CA / AA encouraged to give guidance to POs Verification function can be delegated by the POs Consider economies of scale, capacity, past experience

Audit report and opinion (1)

System description by NFP, CA, AA, POs; report and opinion by AA

Compliance with the Regulation and generally accepted accounting principles

Proportionality in relation to the effectiveness of achieving the objectives of the programmes

Assess adequacy of design, not the practical effectiveness

Timing, conditions NFP/CA/AA: before Donor approval of the first programme

or within 12 months of the MoU signature, any payments to programmes are conditional upon Donor review

POs: within 6 months of the submission of the first interim financial report

Audit report and opinion(2)

Approach Formal appointment of relevant entities Approved written procedures covering all areas of

responsibilities foreseen in the Regulation Agreements / acts of delegation of functions, if relevant Detailed verification of procedures can be done at a later

stage during audits on effective functioning of systems

Previous audits AA can rely on previous findings if the entities involved and

the systems are the same Results of SF/CF 2007-13 compliance assessment

Main criticism of FM 2004-09

Trade-off between cost of control and tolerable error rate

Issues to consider when setting up control systems Desk check vs. on-the-spot check 100% verification vs. sample based verification Ex-ante vs. ex-post verification Adequate tools (e.g. IT systems, templates, checklists, etc.) Strict reporting deadlines towards the FMO Adequate payment flow to projects to be ensured

Proportionality

New modalities

Proof of expenditure Option A: invoices or accounting documents of equivalent

probative value Option B: report by an independent and certified auditor Differentiation can be made between project promoters

and donor project partners

Indirect costs (overheads) Project promoters and partners may opt for a flat rate up

to certain limits Methodology to ensure fair apportionment of overall

overheads

Exceptional situations

Specific cases NFP acting as PO PO acting as project promoter DPP acting as donor project partner

Potential risks and issues Financing from different budgets Conflict of interest in project selection Conflict of interest in control functions

Mitigation measures Segregation of functions within the entity concerned Clear responsibilities and reporting lines Transparency, accountability and good governance