Financial Reporting Standards of ILRI By Mesfin Hailu ILRI-N2Africa Project Financial/Grant...
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Transcript of Financial Reporting Standards of ILRI By Mesfin Hailu ILRI-N2Africa Project Financial/Grant...
Financial Reporting Standards of ILRI
By Mesfin Hailu
ILRI-N2Africa Project Financial/Grant Management Training Workshop October 16, 2015
Info center, Addis Ababa
Overview
• Financial Report Template Clarify purpose of each budget lines, discuss new
requirement i.e. detail expenditure listings
• Overview on finance related sections of the agreement (CRA)
Payment installments, budget shift, amendments, report due date
• Financial Reporting, Use of fund, Audits and Cost principle
Reporting, Detail expenditure listings, internal controls, Audit, Documentation, cost principle, Cost sharing, currency exchange losses/gains,
To create awareness on the minimum standards that are necessary to meet donor requirement in the financial administration and reporting of grant funded projects.
Use of Fund and Audit
Grant fundGrant funds MUST be used for the intended project purpose as described in the proposal/agreement document
No portion of the grant funds will be used to support and political or lobbying activity.
The major portion of a ILRI’s revenue is normally derived through the receipt of Donor grants – either “Unrestricted” or “Restricted”.
Grant cont’d…..
Restricted Grant: Restricted Grant revenue arises from a transfer
of resources to an entity in return with compliance relating to the
operating activities of the entity.
Unrestricted Grant: revenue arises from the unconditional
transfer of cash or other assets
to entity.
Utilization of fund
Unutilized funds shall be remitted to ILRI within thirty days from the end date
of the contract or on or before the submission of the final financial report.
Up to 10% budget variance is allowed. Prior written approval from ILRI will be
required for expenditure variance greater than 10%.
REPORTING
Partners are expected to submit;
1. Summarized Financial report on the template provided
2. A certified list of all line items (=transactions) per budget line, matching with
the totals reported of that period
Hence, the donor can randomly select a few (5-10) transactions from that list and request
them each time to provide scanned or copied documentation (invoices, bid doc, pay.sheet
etc.) for those transactions selected. N2 Africa 2015-Financial reporting Format.doc
Expenditure Category.docx IIT025-IWMI.xlsx
Financial report should be:
Accurate, current and complete
Records that identify adequately the source and application of funds.
Comparison of disbursement with budget amounts for each Award activity.
Written procedures for determining the reasonableness, allocability and allowability of costs
Accounting records that are supported by source documentation (correct project name at the source documents/invoices)
Satisfactory to ensure that the grant funds utilized and reported can be distinguished from other funds and accounted for separately
Reporting cont’d….
In case there is anything suspicious about any of
them, the donor can request more or initiate an
audit. Line item reporting format.docx
Receipts, PO’s, agreement document, payroll sheet,
invoices, wage pay documents, attendance sheet
Effective financial management and internal
control
•Accurately record all financial transactions and balances;
•Disburse grant funds in a timely, transparent and accountable manner;
•Prepare timely and accurate grant financial statements;
•Comply with all donor requirements related to the grant.
•Facilitate effective and suitable auditing arrangements
Internal control Audit
• Ensuring that charges to the program are proper and supported.
• Managing cash on hand and in bank accounts.
• Procuring goods and services that are authorized.
• Cost allocation system for allocations to the various funding sources
• Managing personnel functions such as timekeeping, salaries and benefits, attendance sheet
Bank Account
- Another useful tool to mitigate risks is to let the partner open up a separate dedicated bank account for receiving and spending project funds:
- This enables the partner to provide a bank reconciliation each reporting cycle, to show that total received funds minus reported costs equal the remaining bank balance.
Tips to Handle Audits
Understand what the auditor wants Assign one employee in your entity to work with
the auditors to facilitate the audit process Meet regularly with the auditors to discuss findings
Be clear and precise and be transparent in your discussion with the auditors
Prepare all documents/reports required for the review and arrange them in a way that can facilitate the audit process
What are common findings on Internal Control
Segregation of duties and organizational structure
Variation of expenditure reported from the system and source document
Bank reconciliation and follow-up on outstanding checks
Control Over Assets
Fixed Asset register
Physical inventory
Most Common Audit Findings cont’d…
Lack of adequate accounting system/record keeping
Unsupported costs
Costs incurred before start date and after end date of the project
Budget overruns
Un authorized costs
Most Common Audit Findings cont’d…
Wages, consultant fees or salaries not supported by time sheets or attendance records
Grant fund used for other purposes
Travel costs not supported by travel expense reports or adequate documentation
Lodging not supported by hotel/lodging receipts
Per Diem paid to residents or unauthorized persons
Training courses, workshops, and seminars not supported by signed attendance sheets,
Procurement of capital items not specifically included in the procurement plan/grant document
Payments made without an invoice or evidence of payment
What do we need to minimize audit risk
Support your costs/ Documentation
Description of the documentation that auditors will expect to find attached to a voucher
in order for it to be considered "supported”
Approved document describing the need for incurring the cost with a reference to a
specific budget element
Contractual documents (e.g., contracts, assignment letters, purchase orders, etc.)
describing the expected goods and services, duration, and related costs by rate or unit
price
What do we need to minimize audit risk
Evidence of receipt of the goods and services, signed by the authorized
cognizant person(s)
Clear calculation of the payment expected
Review and approval signatures
Need for quotations for any material purchase
What do we need to minimize audit risk
All original receipts and invoices need to be stamped with [name project-
PAID] stamp, if possible.
Invoices can never include costs for alcoholic beverages
Keep appropriate documents for any cost share contribution, if any
Project records will be maintained for minimum of seven years after end of
the Project.
List of Basic Files That Should Be Maintained
1. Original agreement files and amendments
2. Original budgets and modifications
3. Payment vouchers file that is sequentially numbered
4. Personnel files
5. Purchase order and contract files
6. Financial policies and procedures
7. Payroll and time attendance files, 8. Audit files, 9. Financial reports
Procurement Forms
Purchase Request Form
Purchase/Delivery Order Forms
Receiving and Inspection Report
Form
Warehouse Receipt/Issuance Forms
Work Order/Request for Services
Forms
COST PRINCIPLES
Why Cost Principle?
Determine costs that are acceptable as per the
award
A cost is considered acceptableif it is Allowable under general rules and
regulations of the award.
Factors affecting Allowability of costs
Reasonable
Allocable
Consistent with policies and procedures
Reasonability means
It does not exceed, in its nature or amount, that
which would be incurred by a prudent person.
Reasonable Costs are
Ordinary and necessary
Allocability Means
Incurred
specifically for the
award
Recruitment
Procurement
Travel
Losses (whether actual
or estimated) arising
from uncollectable
accounts and claims,
related collection costs,
and related legal costs.
Telephone Calls
Fax
Postage
Costs of alcoholic
beverages are explicitly
Costs of amusement,
social activities, and
ceremonials are
PartyPartyPartyPartyPartyParty
Capital expenditures - such as expenditures for the
acquisition or improvement of land, buildings, or equipment - are UNALLOWABLE except
with the prior written approval of Donor.
Cost of renting facilities,
meals, speakers' fees,
and the like if
specifically budgeted
pursuant to a detailed
financial plan and
authorized in the award.
.
Real PropertyVehicles
IF real property rental cost rates are reasonable in terms of market conditions, alternative available, etc.
IF vehicle rental
cost rates are
required in the
contract
Travel costs are allowable when they are directly attributable to specific work under an award.
Travel costs include transportation, lodging, subsistence, and related items incurred by employees who are in travel status on official business of the recipient.
Foreign travel is defined as any travel outside of country.
Air travel by other than economy class is UNALLOWABLE, unless otherwise authorized.
Costs of donations and contributions to others are
UNALLOWABLE
Costs of fines & penalties resulting
from violations of laws and regulations
are UNALLOWABLE
.
COST SHARING
1. Definition
2. Types of Cost Sharing
3. Principles
4. Guidelines
5. Conclusion
DefinitionCost Sharing is:• Contribution to the program cost• Value of goods and services directly
benefiting the program;• Means of mobilizing additional
resources for the program;• Usually described as a percentage of
total award cost.
Types of Cost Sharing1 Cash Contribution
Cash/money2 In-Kind Contribution
Real Property - LandExpendable Property - Supplies
Principles
Percentage is applied to the total award.
Verification is based on total expenditures at the end of each funding period (annual or life-of-project).
Guidelines
necessary and reasonable
allowable under the cost principles
approved in the budget
verifiable from the records
not included as contributions for any other similar program
Contributions Must Meet the Following Criteria:
Conclusion
• Keep deadline for financial and technical reporting• Timely use project funds to avoid underspending • Make sure that reported costs are incurred with in the
project period• Keep your financial documents for at least seven years • Timely check your burn rate (Spending Vs Budget)• Proper documentation is necessary for cost sharing• Agreement documents should be checked for proper
contributions
- If the recipient has expended the cost share amount less than the agreed amount or percentage of total expenditures, the donor may apply the difference to reduce the amount of incremental funding in the following funding period. - If the award has expired or has been terminated, the donor may require the recipient to refund the difference.
Conclusion cont’d…..
THANK YOU
The presentation has a Creative Commons licence. You are free to re-use or distribute this work, provided credit is given to ILRI.
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