FISCAL ACCOUNTABILIT Y PLAN FOMILENIO II

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FISCAL ACCOUNTABILITY PLAN

FOMILENIO II

Effective June 15, 2020

Fiscal Accountability Plan –FOMILENIO II

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Index 1 General Provisions ........................................................................................................... 5

1.1 The MCC’s Fiscal Accountability Framework ................................................................................. 6 1.2 MCC Cost Principles ....................................................................................................................... 8 1.3 Fiscal Agent .................................................................................................................................. 10 1.4 Authorized Parties ....................................................................................................................... 11 1.5 Authorized personnel for Procurement, Financial and Administrative Management Affairs ..... 12 1.6 Updates to the FAP ...................................................................................................................... 12

2 Budgets ......................................................................................................................... 14 2.1 Initial Budget................................................................................................................................ 14 2.2 Start and Approval of Budget Changes ........................................................................................ 14

3 Financial Plans, Disbursement Requests and Report Packages ........................................ 15 3.1 Multi-Year Financial Plan and Adjustments to the Multi-Year Financial Plan ............................. 16 3.2 Disbursement Requests and Reporting Packages ....................................................................... 20 3.3 SAP Procedures ............................................................................................................................ 27 3.4 Indefinite Delivery / Indefinite Quantity Contracts (IDIQ Contracts) .......................................... 28

4 Permitted Bank Accounts and the Common Payment System ......................................... 29 4.1 FOMILENIO II Local Banking Accounts ......................................................................................... 30 4.2 MCC’s Common Payment System (CPS) ...................................................................................... 31 4.3 Fiscal Agent’s responsibilities – Permitted Accounts and Common Payment System ................ 31 4.4 Exclusive Nature of the Accounts ................................................................................................ 32 4.5 Interest on Permitted Accounts .................................................................................................. 32

5 Budget Implementation & Financial Control ................................................................... 32 5.1 Control System ............................................................................................................................ 33

6 Procurement .................................................................................................................. 33 6.1 Public Procurement Plan ............................................................................................................. 34 6.2 Procurement Implementation Plan (PIP) ..................................................................................... 34 6.3 Procurement Performance Report (PPR) .................................................................................... 34 6.4 Launching the Procurement Process ........................................................................................... 35 6.5 Requisition of Purchase/Requisition Form .................................................................................. 35 6.6 Requisition of Purchase Evaluation and Approval ......................................................... 35 6.7 Small value purchases not included in the MCC Public Procurement Guidelines (NPC purchases)36 6.8 Charges for Tender Related Documentation ............................................................................... 38 6.9 Crosschecking a Supplier/Provider’s Eligibility ............................................................................ 39 6.10 Record of Financial Contractual Commitments ........................................................................... 39


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6.11 Distribution of Contract documents and Record Management .................................................. 40 6.12 Awarding Bids / Offers over the Estimated Budget ..................................................................... 40 6.13 Advance Payments ...................................................................................................................... 41 6.14 Reconciling the Commitment’s Information ............................................................................... 42 6.15 Delivery Certificates of Goods or Services ................................................................................... 42 6.16 SAP procedures ............................................................................................................................ 43

7 Payment Processing ....................................................................................................... 45 7.1 Common Payment System (CPS) ................................................................................................. 48 7.2 Payments ..................................................................................................................................... 50 7.3 Deadline to Pay Providers ............................................................................................................ 53 7.4 Payment Authorization Limits ..................................................................................................... 54 7.5 Expiration of Payment Authority at the End of a Period ............................................................. 55 7.6 Reinstating the Payment Limit Authority .................................................................................... 55

8 Taxes ............................................................................................................................. 56 9 Cash Management ......................................................................................................... 57

9.1 Estimating Cash Requirements .................................................................................................... 58 9.2 Disbursements ............................................................................................................................. 59 9.3 Banking Reconciliation................................................................................................................. 60 9.4 Petty Cash .................................................................................................................................... 61 9.5 Fuel Vouchers .............................................................................................................................. 64

10 Accounting and Submitting Reports ............................................................................... 65 10.1 Accounting System ...................................................................................................................... 65 10.2 Account Catalogue ....................................................................................................................... 66 10.3 Accounting Regulations ............................................................................................................... 66 10.4 Monthly Reports .......................................................................................................................... 66 10.5 Quarterly Reports ........................................................................................................................ 67 10.6 Special Reports ............................................................................................................................ 67 10.7 Programming, Purpose and Publishing Reports .......................................................................... 67 10.8 Ret Withholding of Records ......................................................................................................... 68 10.9 Publishing Financial Reports ........................................................................................................ 68 10.10 SAP Procedures ............................................................................................................................ 68

11 Travels and vehicle use .................................................................................................. 69 11.1 Official International travels ........................................................................................................ 69 11.2 Official Local travels ..................................................................................................................... 72

12 Payroll and Personnel Administration ............................................................................ 76 12.1 Staffing plan ................................................................................................................................. 76 12.2 Definition of Management Team (Key Personnel) ...................................................................... 76 12.3 Appointment................................................................................................................................ 77 12.4 Terms of Employment ................................................................................................................. 77 12.5 Payroll .......................................................................................................................................... 78


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12.6 SAP Procedures ............................................................................................................................ 80 13 Asset Management ........................................................................................................ 80

13.1 Legal Requirements for Assets Management .............................................................................. 81 13.2 Labeling assets ............................................................................................................................. 81 13.3 Record and maintenance of the Fixed Asset Register ................................................................. 81 13.4 Inventory ..................................................................................................................................... 82 13.5 Insurance ..................................................................................................................................... 83 13.6 Use of Assets................................................................................................................................ 83 13.7 Removing Fixed Assets due to damages, obsolescence, or robbery ........................................... 83 13.8 Asset Control during Compact Closure ........................................................................................ 84 13.9 Reassignment of Fixed Assets from one employee to another ................................................... 84 13.10 Transferring Assets and Terms of Use for Implementing Entities ............................................... 85 13.11 Handover process ........................................................................................................................ 85

14 Audit/Reviews ............................................................................................................... 86 14.1 Internal Audits ............................................................................................................................. 86 14.2 Other Audit Reviews of FOMILENIO II ......................................................................................... 86 14.3 External Audits ............................................................................................................................. 87 14.4 Submitting reports on the Improper Use of FOMILENIO II Funds or Assets. ............................... 87

15 Additional guidance on specific expenditures ................................................................. 88 15.1 Public Outreach and Events ......................................................................................................... 88 15.2 Resettlement Action Plan and Rights of way Payments .............................................................. 90 15.3 Payments to members of the Dispute Adjudication Boards (Conflict Resolution Tables - MRC) of FIDIC contracts. ......................................................................................................................................... 91

16 Annex List ...................................................................................................................... 91 16.1 ANNEX 1 – Approval and Support Matrix .................................................................................... 91 16.2 ANNEX 2– MCC Procedures to Submit Reports on Fraud and Corruption Allegations ............... 94 16.3 ANNEX 3 – Accounting and finance Codes .................................................................................. 96 16.4 ANNEX 4 – Petty Cash Counts ...................................................................................................... 99 16.5 ANNEX 5 – Delegation of Responsibilities Memo ...................................................................... 100 16.6 ANNEX 6 – Request for fuel voucher – Implementing Entities .................................................. 101 16.7 ANNEX 7 – Resettlement Action Plan (RAP) Payment Process .................................................. 102 16.8 ANNEX 8 – Special Reports (Data Call)....................................................................................... 105


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1 General Provisions The Fiscal Accountability Plan (henceforth FAP) is a document focused on implementation, drafted as defined in section 3(a)(i) of Annex I of the Compact and Section 2.2 of the Program Implementation Agreement (PIA), meant to be used by FOMILENIO II, which is an Autonomous Institution created through Legislative Decree number 839, dated October 31st of 2014, to establish the principles, mechanisms and procedures meant to ensure an appropriate auditing process throughout the use of all funds provided by the Millennium Challenge Corporation (MCC). The FAP shall comply in every aspect with the MCC’s Cost Principles, and must include, amongst other things, the principles, mechanisms and procedures for the following core issues: (a) budgeting, (b) accounting, (c) cash management, (d) financial transactions (billing and payment), (e) opening and managing permitted accounts, (f) personnel management and payroll, (g) travel, allowances and the use of vehicles, (h) assets and inventory control, (i) audits and (j) reports. Essentially, the FAP is a financial operations manual, and is applicable to every activity financed by the MCC and/or the Salvadoran Government while at the same time serving as FOMILENIO II’s Internal Control Manual. All operating units (meaning, Management, the projects themselves, Fiscal Agent, the Procurement Agent, implementing partners, consultants, vendors and contractors) must follow and implement the policies and procedures described in this document. Therefore, this document will become the basis to evaluate both performance and development during FOMILENIO II audits conducted by internal and external auditors as well as the Fiscal Supervision Agent. At no time will any provision be able to go against the contents of the Compact or any other supplementary agreement. The FAP will be formally updated every six months to include any amendments to existing policies or to add new policies which may have been approved, as well as to compile work experiences throughout the implementation process taking place between each of the revisions. If necessary, it may also include provisional amendments (between each six month revision period) which will then be formalized and shared with FOMILENIO II personnel through “Administrative Memos” signed by the Executive Director. The Fiscal Agent will ensure these amendments are later brought up for approval, in the manner later determined by this document.


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1.1 The MCC’s Fiscal Accountability Framework

The term “Fiscal Accountability” refers to the proper use and tracking which must take place of all financial Program Resources. It is based in a solid internal control system which is able to properly register, classify and report on every expense made. FOMILENIO II honors the trust and needs of all stakeholders given its responsibility over the Program’s vital resources.

Source: GAO MCC Data Analysis Note: MCC audits and reviews may occur anywhere within the framework. MCC may disburse the Convention funds directly to FOMILENIO II through the US Treasury Department System, or to the contractual parties, such as contractors, suppliers or project managers, with the approval of FOMILENIO II. Alternatively, MCC may disburse funds to the permitted accounts of FOMILENIO II, of which FOMILENIO II may reimburse the funds to its contracted parties.

http://www.gao.gov/new.items/d1052.pdf

http://www.gao.gov/new.items/d1052.pdf


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The different stages of financial management, including budgeting, treasury, payments, accounting and all reporting will be conducted in accordance with the Accounting Standards Generally Accepted by Government Institutions. Deviations from Generally Accepted Accounting Principles FOMILENIO II has adopted certain accounting conventions that are deviations from generally accepted accounting principles for the following expenditures:

• All asset purchases are recorded as final expenditures and not recorded on the balance sheet. No depreciation is recorded.

Method of Accounting FOMILENIO II will follow the modified cash based accounting method for the recording and reporting of financial transactions

FOMILENIO II implemented SAP, a procurement and accounting managing system standardize by MCC which serves as the basis for audit and financial reports. FOMILENIO II shall produce auditable reports for audits of FOMILENIO II and for all other interested parties through this system. SAP shall be utilized by the FISCAL AGENCY UNIT to carry out the accounting and financial records of FOMILENIO II and to comply with MCC information requirements for the issuance of Financial Statements, Quarterly Financial Reports and other regulatory reports, as well as the information requirements specific to FOMILENIO II and the Government of El Salvador. MCC authorized the use of the informatics application SAFI while implementing SAP, since the SAFI Act is not applicable according to the Agreement. Manual registration, according to FAP principles are allowed for the implementation of 609g funds. Accounting mechanisms shall have:

• Record commitments to obligate budgeted funds; • Record disbursements, and assets and liabilities; • Generate reports as requested including current summary statement of accounts and

ad-hoc reports and in the formats specified by FOMILENIO II; • Produce financial reports for FOMILENIO II on the administration and management of

the Program; • Produce financial reports to MCC as specified;


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• Ensure data security, and, where possible, provide on-line user-friendly access to FOMILENIO II and MCC.

1.2 MCC Cost Principles The MCC has a guiding principle which determines the cost principles applicable to an Accountable Entity, and Implementing Entity, a Fiscal Agent or a Procurement Agent, funded in whole or in part, by donations provided by MCC, unless otherwise specified in writing by the MCC directly. FOMILENIO II will base its operations in the Cost Principles established on the MCC Cost Principles for Government Affiliates, currently available in the following link: https://www.mcc.gov/resources/doc/guidance-cost-principles-for-government-affiliates The Cost Principles provide a framework in which cost elements may be identified or determined as “allowed” by the Donations being provided by the MCC, while also fulfilling the following criteria: 1. Be necessary and reasonable for the performance, monitoring and evaluation, or oversight

of a Program funded by a MCC Grant and be allocable thereto under these principles.

A “Reasonable Cost” are all those costs, that by its nature and amount, it does not exceed that which would be incurred by a prudent person, considering their responsibilities to the MCC Grant Agreement and the public-at-large, under the circumstances prevailing at the time the decision was made to incur the cost. In determining the reasonableness of a given cost, consideration must be given to: a) whether the cost is of a type or amount generally recognized as ordinary and necessary for the operation of the Government Affiliate and the proper and efficient performance of the MCC Grant, b) the restraints or requirements imposed by such factors as sound business practices, arm's length bargaining, applicable United States and Recipient Country laws and regulations, and the terms and conditions of the MCC Grant Agreement, c) market prices for comparable goods or services that are commercially reasonable for the geographic area; and, d) whether the Government Affiliate significantly deviates from established practices and policies of the Recipient Country Government regarding the incurrence of costs, which may unjustifiably increase cost. A “Necessary Cost” are all costs incurred in to fulfill the project’s purposes. All necessary costs must conform to: (a) the terms in the program’s funding agreement, as well as any other arrangements made, including advanced negotiations concerning any cost item; (b) all program regulations concerning costs; (c) all policies and procedures applicable to FOMILENIO II; and (d) all generally accepted accounting principles (GAAP). An example of a necessary cost would be the payment of airline tickets for FOMILENIO II personnel attending a workshop to discuss program objectives. An example of a non-necessary cost would be paying for airfare for the Manager’s family so they can visit the tourist sites of the location where the workshop will be held.

https://www.mcc.gov/resources/doc/guidance-cost-principles-for-government-affiliates


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2. Conform to any limitations or exclusions set forth in this Policy, the Program Procurement

Guidelines, or any other provision or guidance required as part of the MCC Grant Agreement as to types or amount of cost items.

3. Be accorded consistent treatment in not being charged more than once to an MCC Grant. A cost may not be assigned to an MCC Grant as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the MCC Grant as an indirect cost.

4. Be allocable. A cost is allocable to a particular MCC Grant if the goods, works, and services involved are chargeable or assignable to that MCC Grant in accordance with relative benefits received. To be allocable, a cost must meet one of the following criteria: a) Is incurred specifically for the development, implementation, or closeout of the MCC

Grant Agreement; b) Benefits both the Program funded by the MCC Grant Agreement and other activities of

the Government Affiliate, and can be distributed in proportions that may be approximated using reasonable methods; or

c) Is necessary for the overall operation of the Government Affiliate and is assignable in part to the MCC Grant Agreement in accordance with this Policy.

A cost is “allocable” to a program if it is incurred specifically for the project/program, or if it is a shared cost which can be distributed to the program in reasonable proportion to the benefit received by the program. The Administrative and Financial Management/ Fiscal Agency must be careful when allocating cost to project or activities. The cost must be necessary in carrying out the program objectives and have a direct connection to the program activities. It is prohibited to charge cost based on estimates.

5. Be accounted for based on internationally accepted accounting practices or policies and

procedures of the recipient country;

6. Be incurred within the MCC Grant period, or as may be otherwise provided in the MCC Grant Agreement.

7. Be properly documented; and


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The only acceptable proof that a charge to a project is allocable, reasonable, and necessary is adequate documentation. The documentation trail begins with the program agreement, and includes others supporting documentation, including vendor bids, receipts, etc. that document a clear link between the authorization and the expenditure. This could be either paper or paperless trail. FOMILENIO II offices must also document their unusual and customary business practices related to payroll, purchasing, vendor bids, internal controls, and other key financial management policies. Expense vouchers must describe the purpose of the expenditure, be properly approved, show sector source codes, project codes, account codes, activity codes, and have appropriate supporting documentation to substantiate the charge to the program.

8. Not be excluded as an unallowable cost under Section 5.3 of the Cost Principles for

Government Affiliates, or represent payment to an ineligible source per requirements of the Program Procurement Guidelines.

Depending on the facts and circumstances, certain cost elements of the Program may not be completely allowable. Therefore, it’s important that the Cost Principles for Government Affiliates are read and clearly understood, and that all updates to said Principles are also included in the FAP, as well as any amendments which may take place from time to time.

1.3 Fiscal Agent For the majority of Accountable Entities the Fiscal Agent is an outsourced unit, which given its independence is able to provide a degree of financial control. FOMILENIO II has therefore included a Fiscal Agent unit (from hereinafter referred to as a “Fiscal Agent”) within its Financial Management Unit, alongside the Manager of Finances, also acting as a Fiscal Agent. A certain degree of independence is maintained structuring the services for the Financial Department or the Financial Management as a whole. The contract’s terms of reference for the MF/FA, establish the role of the Fiscal Agent as a service provider as follows:

• Act as a Fiscal Agent for the Financial Management Unit and certify key documents identified in the Fiscal Accountability Plan (FAP) and public procurement guidelines for MCC’s program.

• Act as an authorized firm to manage all MCC funding. • Manage budget reallocations (re-distribute the budget between activities) as well as the

corresponding presentation and justification before FOMILENIO II’s senior management for a final approval.

• Carry out all activities pertaining to financial management in areas such as Treasury and Accounting.


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• Carry out the role of financial management based on the Compact. • Comply with all internal control guidelines as well as with all of the Financial

Management Unit’s rules and regulations.

1.4 Authorized Parties Individuals authorized to partake in affairs concerning the financial administration on FOMILENIO II’s behalf are all those mentioned in ANNEX 1 – Approval and Support Matrix, who may only be replaced with MCC’s prior approval. All financial administration activities require signed approval from the authorized individuals. Document approval during procurement processes, as well as managing the resulting contracts within the Procurement Plan’s Framework is all regulated within Annex 1. Approval Requirements established by the MCC Program Procurement Guidelines. Other non-explicit approval activities within the Guidelines and for Procurement activities not included in PPG will be carried out by the delegated authorities based on ANNEX 1- Approval and Support Matrix. Approval authority cannot be delegated to a subordinate official except to provide back-up as a result of absence, leaves, medical incapacity, vacations, travel abroad, etc. In said cases, approval authority can only be delegated to a subordinate official at an immediate lower level and must be registered in writing, providing detailed information as to the fact that this is only a back-up due to temporary absence. In absence of an authorized subordinate official to approve a given transaction, an approval may always be delegated to the immediate superior level, to a supervisor without requiring written approval ANNEX 5 – Task Delegation Memo. For any and all delegation of authority, whenever the authority to sign is entrusted to someone else, the official entrusted with said task must sign their own name and the name of the person they’re signing on behalf of ie. “[Name of person 1]” on behalf of [Name of Person 2].” The person signing must never directly use the name of the official delegating approval authority. Role assignment and authorized transactions by role are documented in the positions and roles matrix (FOM II - SOD - SAP Positions and Functions). The final approved version can be found in Annex 1 of the IT Administrative Procedures and Policies.


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1.5 Authorized personnel for Procurement, Financial and Administrative Management Affairs

Individuals authorized to participate in financial, procurement and financial administration affairs on behalf of FOMILENIO II are the following:

a) The AF will serve as the main official within FOMILENIO II responsible for the agency’s financial administration and fulfillment of the FAP and any Agreements here mentioned. In his or her absence, the Deputy Manager of Financial Administration is the principal official responsible for financial management and the administrative activities related to the compliance with the FAP.

b) The Public Procurement Manager / Procurement Agent will act as the main official

within FOMILENIO II responsible for any activities concerning procurement and fulfillment of the Public Procurement Guidelines for MCC’s program (PPG) and Procurement guidelines for low value procurement not included in PPG. The Public Procurement Manager/Public Procurement Agent will be responsible of managing the flow of procurement activities under the FOMILENIO II Program. The main role of the Public Procurement Manager/ Public Procurement Agent shall be to coordinate procurement activities conducted by FOMILENIO II, MCC and other entities, keep records of all procurement activities and report on the progress of said activities. In his or her absence, the Procurement Specialist – Consultants is the principal official responsible for procurement activities and the fulfillment of the Public Procurement Guidelines for MCC´s program (PPG).

c) The Administration and Finances Deputy Manager (SGA) is responsible for managing

FOMILENIO II’s Human Resources and Assets, managing the revolving fund, or petty cash the per diem policies and the coordination, among other activities.

1.6 Updates to the FAP Biannual updates to the FAP Given that FAP is a guideline for all financial and administrative activities, it is highly likely that during its implementation, some aspects require to be modified. Any issue faced during direct


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application, for example, situations concerning procedures, will be described in writing by the person responsible of that particular area in FOMILENIO II for later review. Any amendments to FOMILENIO II’s basic documents (for example the main Compact or in the Supplementary ones) may also give way to changes in the rules and regulations included within the FAP. The FAP will be formally updated every six months, based on experience and the ever changing institutional environment. Every official biannual FAP update must be duly approved by FOMILENIO II’s Board of Directors, and there must be no objections issued by the MCC. Suggested modifications must be made in writing and go through a series of internal checks to guarantee their compliance with the terms of the main Compact as well as with the supplementary ones. Anyone requesting changes within the FAP must:

a) List the discrepancies between reality in the field and ongoing procedures; b) Provide the above mentioned list to an immediate supervisor; c) Suggest alternatives, referencing the governing documents (Main Compact,

supplementary agreements, legislation, etc.), procedures used in similar projects operating in the same area, legal practice in the field, etc; and

d) Forward said list and the above mentioned alternatives to the Fiscal Agent.

The Executive Director, Fiscal Agent, Procurement Agent and Legal Advisor with the support of MCC Fiscal Director:

1. Shall review suggested modifications and analyze them in light of the governing documents (Compact, Supplementary agreements, Legislation);

2. Shall carry out consultations and collect additional information from applicants to verify that the suggested modifications adequately address their request;

3. Shall submit proposed changes to the MCC’s Fiscal Director for an informal review; 4. Shall include MCC’s comments and modifications in the proposed revision; 5. Shall submit a revised draft of the FAP for approval of FOMILENIO II’s Board of Directors 6. Shall submit a revised draft of the FAP to the MCC for a formal non-objection;

After this procedure, the updated FAP shall enter into effect and replace all previous versions, being the only valid document in force.

The MCC’s Fiscal Director and the Fiscal Agent will guarantee that the FAP is periodically updated, in order to reflect the program’s operational changes. Provisional Updates to the FAP through Administrative Memorandums


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Between each semi-annual FAP review and update, it may be required to issue amendments for existing policies or to issue completely new policies in answer or anticipation of changing circumstances. These amendments must be issued through a formal notice (Administrative Memorandums) issued by the Executive Director and with the MCC’s non-objection. During the FAP’s bi-annual update, these provisional Administrative Memorandums will be included in the FAP, forming a full instructions manual, filled with provisional instructions. Once the stipulations of the provisional Administrative Memorandums are included in the following FAP review, said Memorandums will expire, and be rendered ineffective.

2 Budgets

2.1 Initial Budget Original budgets are shown in the “Financial Grant Plan 609(g)” included in Annex II of the 609 (g) Donation Agreement and the “Multi-year Financial Plan” (MYFP) included in Annex II of the Compact, where the budget to finance the execution of the project is detailed (CIF) and the budget of the Compact.

2.2 Start and Approval of Budget Changes Changes on the budget for 609g section funds, as well as CIF/Agreement Budget funds must comply with the MCC’s approval requirements, as later described. There is no possibility of increasing the general amount of funds for the MCC, 609g and the CIF/Agreement, therefore, any increases experienced by any given activity must be compensated by and equivalent reduction in other activities. In a normal procedure, the sequence for the start and approval of budget activities will begin by updating the Detailed Financial Plans (DFP). Said sequence will be as follows: a) The requesting unit will determine any variation of the total estimated costs for a specific

sub-activity from the original (or revised) budgets. The requesting unit will then provide FOMILENIO II, after discussing it with the Procurement Manager/ Public Procurement agent and all stakeholders, shall provide to the General Manager, a revised estimate for all expenses during a given period based on the 609g Agreement or the CIF/Agreement, alongside an explanation of the reasons for the changes experienced and the steps taken or that may be implemented to avoid any further increase in costs. This will thus become a request for variations in the budget.


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b) Any changes which may have an effect on staff remuneration (salary or benefits) will be quantified by the Administration Deputy Manager (SA).

c) The Project Manager will issue his recommendations to FOMILENIO II’s Fiscal Agent (AF). d) The Fiscal Agent will review all proposed changes and recommendations by the Project

Manager and determine if said modifications are reasonable and necessary. If this is the case and it implies an increase of the total expenses for an activity/sub-activity, the Fiscal Agent will also explore other aspects of the MCC Program or the CIF/Agreement budget and develop a drawdown proposal (or an array of reductions) within other activities/sub-activities, enough to compensate the proposed increase and draft the Budget Adjustment proposal. Fiscal Agent will have 3 working days to perform these activities.

e) The Budget Adjustment proposal will be sent to Project Managers, which will have 3 days to send any corrections to the budget adjustment proposal, including a technical justification. If Fiscal Agent doesn’t have any comments or request of possible modification/correction within the 3 days, the Fiscal Agent will be presented to the Executive Director for final approval.

f) In case any of the proposed Budget Adjustments are at an Activity level or even higher, they will need to be presented before the Board of Directors for their approval.

g) If approval is granted by the Board of Directors, the proposed changes will be presented to the MCC for their non-objection as part of the Disbursement Request, and then shown in Schedule A of the Quarterly Financial Report, alongside an explanation justifying said change.

h) If proposed changes impact the GOES budget, all procedures involved for said change will be the direct responsibility of the Fiscal Agent.

i) If the suggested changes are approved by the MCC, said proposals will be sent to the Ministry of Finances, who will in turn implement all necessary modifications within the GOES Budget in order to reflect budget variations.

3 Financial Plans, Disbursement Requests and Report Packages Financial plans are the means to plan future costs and achievements and to offer a basis meant to control said costs and identify problems which may arise, such as variations from the financial plan during the course of implementation. Financial plans exist at two levels:

a) The 609(g) Financial Plan, and the Compact’s Multi-Year Financial Plan show estimated costs for the whole term of the 609(g) agreement and the CIF/Agreement budget.


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b) The Detailed Financial Plans (DFP) show both the commitments as well as the real expenses to date, plus future commitments and expenses for the remainder of the 609g and the CIF/Agreement quarters in greater detail.

3.1 Multi-Year Financial Plan and Adjustments to the Multi-Year Financial Plan

The initial financial plans were the “Program under section 609(g) Financial Plan” included in Annex II of agreement 609g and the CIF/Agreement’s “Multi-Year Financial Plan” (MYFP) included in Annex II of the Compact.

3.1.1. The Multi-Year Financial Plan (MYFP) The Multi-Year Financial Plan (MYFP) presented in Annex II of the Compact, establishes the estimated costs during the five years of the Convention breakdown by project, and the activities within each Project. It establishes the maximum expenditure limits on an annual basis. While annual project ceilings may be modified from time to time through the Quarterly Disbursement Request (QDR) on the basis of the review and planning of the Programs and Projects, the overall total amounts for the 5 Years, by activity, should not be higher than those established in the Compact. The most recent and approved Multi-Year Financial Plan is included in Annex A of the last approval of the Quarterly Deduction Request.

3.1.2. The Detailed Financial Plan (DFP) The Detailed Financial Plan (DFP) reflects the funding that the FOMILENIO II expects to commit and the cash it expects to need to meet obligations to vendors with respect to the Work Plans. The DFP breaks down FOMILENIO II commitments and cash requirements to the Sub-Activity level (or beyond, as dictated by the Work Plans) on a rolling quarterly basis for the upcoming four quarters, and on an annual basis for the remaining years of the Compact. The DFP consists of two spreadsheets, one for Commitment projections and another for Cash Requirement projections. The Fiscal Agent, with the support of and MCC Fiscal Accountability staff, is responsible for assisting the FOMILENIO II in developing a standard DFP format, including the level of detail and


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the categories of expenses that will be consistent across projects and activities through the life of the Compact. This general categorization of expenses disaggregates the MYFP by Projects, Activities, and Sub-Activity. FOMILENIO II also subscribes agreements with Implementing Entities and gives them budgetary support via providing direct or physical item support. These agreements are shown in the DFP under the activities to which they relate and costs are broken down into the following two categories: (1) In-Kind Support; and (2) Direct Support. The direct funding only refers to salaries and other recurring operational expenses. While the other kinds of support are classified as “In Kind”.

3.1.3. The Quarter Each Quarter shall begin on the first day of January, April, July, and October for the purposes of the Detailed Financial Plans and Payment Requests. The first quarter starts with the date of Entry-into-Force (EIF), and ends either at the end of that same current quarter or at the end of the next quarter, whichever is most appropriate. The first Disbursement Request for Compact funds shall cover the same period as the first quarter (although disbursements may occur earlier under a 609g or CIF agreement).

3.1.4. The Quarterly Financial Report (QFR) The Quarterly Financial Report is intended to provide an overview of the financial developments since the last disbursement period and to explain and justify any proposed cash or funds requested (Payment Authority) for the next period. The QFR proposes adjustments to the MYFP to reallocate funding from one Project or Activity to another, reports actual expenditures, provides a cash reconciliation, and presents a summary of interest accrued at the MCA. The QFR must be submitted for the CIF and 609(g) grants until all funds are exhausted, or, in the case of CIF funds, until un-used budget and un-liquidated commitments are “rolled over” into the Compact QFR. Any final QFRs must be clearly marked as “FINAL”, after which there is no further need to submit QFRs for that particular funding source.

3.1.5. Modifying the Multi-Year Financial Plan


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The Compact acknowledges the possibility of modifying the Multi-Year Financial Plan during its period of validity, as provided by section 6.2 of the Compact, Amendments and Modifications, which determines:

a) The Parties may only amend this Compact if done in writing. Said written agreement will also include the way in which these amendments will enter into effect. Additional Representatives will not represent the Parties for said purposes.

b) Regardless of the provisions of section 6.2(a), the Parties may amend any Annex, through a written agreement signed by the Parties, that will enter into effect immediately after being signed to (i) suspend, terminate or modify any Project or Activity; (ii) modify fund allocations as determined by Annex II, starting on this date, (iii) modify the implementation framework provided in Annex I, (iv) add, modify or remove any indicator, point of reference or projection, or any other information provided in Annex II starting on this date, subject to the MCC’s control and evaluation policy, and based on said policy, or (v) add, remove or exempt any condition previously described in Annex IV; as long as in each case, said modification (A) is consistent in every material aspect with the Program’s Objectives and the Project Objectives, (B) does not increase the amount of Program Financing above the total amount determined in section 2.1 (which may be modified through section 2.2(e), (C) does not represent an increase in the Funding required to Implement the Compact above the total amount established in section 2.2(a), (D) does not reduce the responsibilities or provision of Resources by the Government required within the framework of section 2.6(a), and does not extend the Compact’s term.

3.1.6. Requesting Reallocation of Funds

Requesting Reallocation of Funds during the normal Quarterly Reporting Cycle All reallocations of funds among or between the line items that are identified in the Multi-Year Financial Plan must be approved by the Board of FOMILENIO II and have a non- objection statement from MCC. Such reallocations shall be initiated by the SAF/AF, approved by the Executive Director, approved by the Board of FOMILENIO II and be granted the non-objection of the MCC, through the Quarterly (or periodic) Disbursement Request package. The reallocation of funds between the line items levels identified in the Multi-Year Financial Plan summarized in Annex II of the Compact, should be initiated by the person responsible for each corresponding Project, with the approval of the /AF and FOMILENIO II’s General Manager. Every reassignment of funds below the level of the items located within the Multi-Year Financial Plan summarized within Annex II of the Compact, may also be requested by FOMILENIO II’s Board of Directors. However, if such approval is not requested by the Board of FOMILENIO II, such changes shall in still be communicated to the Board of FOMILENIO II on a periodic basis. Reallocations concerning the Multi-Year Financial Plan and the Detailed Financial Plan must be document based on the table below and signed by FOMILENIO II’s Executive Director, and FOMILENIO II’s Board of Directors will be periodically kept up to date in writing. The original


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reassignment document will be kept on file by /AF after securing all required approvals, and who will also be in charge of conducting all necessary modifications on the Detailed Financial Plan and the Multi-Year Financial Plan. Reassignments to the Detailed Financial Plan will be reflected within the Fiscal Agent’s accounting system.

Form: A reallocation of funds is documented in Schedule A of the Quarterly Financial Report. Justification: Any reflection of reallocation of funds contained in the Quarterly Financial Report must be in compliance with Annex II of the Compact and must have a clear and concise explanation of the unfunded requirement, a cost analysis, an explanation of the impact on the project/activity from where the funds are coming, and why the reallocation of funds across project/activity lines is necessary at this point. A justification statement or memorandum is required for all reallocations of funds regardless of whether such reallocation requires MCC approval, including for those Compact activities that allow reallocation of a dollar amount below a certain percentage threshold. Unfunded funds: A detailed description of an emerging project requirement identified to receive a budget increase must include the time sensitivity of funding the requirement; why the requirement was not anticipated; what level of decision-making authority has agreed to the value of this new requirement, and all alternative funding levels options must be disclosed. Cost Analysis: A detailed description of the requirement will include a detailed analysis of how all costs associated with the requirement are calculated; the anticipated procurement activity associated with this requirement; specific critical timelines related to this new requirement; and the priority of need recognized by the FOMILENIO II management. Impact: A clear explanation must be secured by the Project Manager of the project/activity from where the funds are coming, which verifies that the reallocation of fund from the project/activity will not in any way jeopardize or put at risk the remaining activities of the project/activity in order to meet the Compact goals for that Project.

MCC prefers and expects that potentially excess funds stay in the original MYFP budget for the Project until a majority of projects are under contract (e.g., usually in years 3 or 4) and there is limited possibility that other projects or activities will require additional funding. There should never be the creation of new projects or activities to absorb any excess funding, unless through a formal amendment to the Compact; and therefore, reallocations should be made sparingly, prudently, and responsibly. Budgets for Program Administration, Audit, and similar areas are not to be used to fund other projects/activities. It should be noted that audit costs typically rise greatly over time, and thus a low cost in the base year is not necessarily indicative of audit costs in later years.


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Requesting Reallocation of Funds outside of the normal Quarterly Reporting Cycle The request for reallocation of funds requiring MCC approval is submitted with the Quarterly Reporting package. However, requests for reallocation of funds may be submitted within the course of a quarterly disbursement period to supplement or amend an existing approved disbursement request via an “Out-of-Cycle Disbursement Request”. For more information, MCC Guidance on Out-of-Cycle Disbursement Requests, currently available at the following URL: https://assets.mcc.gov/guidance/mcc-guidelines-outofcycledisbursementrequests.pdf

3.2 Disbursement Requests and Reporting Packages No Disbursement Request shall be executed unless it is in accordance with the Compact. Disbursement Requests shall outline the cash needs over the next quarter. FOMILENIO II shall submit to MCC on a quarterly basis a Disbursement Request and Reporting Package for all sources of funds to include 609(g), CIF, and Compact financing. The Disbursement Request (DR) identifies resources needed for program implementation in the upcoming quarter specific for each funding source as mentioned above. The accompanying package of materials submitted in the Disbursement Request and Reporting Package (DRRP) is designed to offer MCC the information necessary to approve the Disbursement Request. The package provides information on execution of program activities, financial management, procurement actions, progress towards compact goals as defined in M&E indicators, and status of conditions precedent to disbursement. MCC granting Spending Authority through a Disbursement Request will be contingent on the Disbursement Request and Reporting Package being satisfactory, in form and substance. The Disbursement Request and Reporting Package (including all reports listed below) shall be submitted prior to the start of the quarter for which funds are requested, even for quarters in which the MCA is making a request of zero dollars. The DRRP is to be submitted to MCC twenty (20) calendar days prior to the end of each quarter (or by March 10, June 10, September 10, and December 20). Within the DRRP, the MYFP shall will be reviewed and adjusted quarterly no later than the 10th calendar day of the month preceding the quarter for which it covers and shall be submitted by FOMILENIO II to MCC for approval using Schedule A of the Quarterly Financial Report (QFR). Schedule A must be submitted even if no changes to the MYFP are proposed.

https://assets.mcc.gov/guidance/mcc-guidelines-outofcycledisbursementrequests.pdf


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Templates for all components of the Disbursement Request and Reporting Package are currently available at the following URL: https://assets.mcc.gov/guidance/guidance-2010001039401-qdrp.pdf 3.2.1 The Disbursement Request and Reporting Package (QDRP) The Disbursement Request and Reporting Package are made up of seven basic documents required through the funding sources as follows:

Document Requested by 1 Narrative Report Compact funds only 2 Disbursement Request Compact, CIF and 609(g) funds if MCA managed 3 Quarterly Financial Report (QFR) Compact, CIF and 609(g) funds 4 Detailed Financial Plan (DFP) Compact, CIF and 609(g) funds

5 Procurement Performance Report (PPR) Compact, CIF and 609(g) funds 6 Indicator Follow-up Table (ITT) Compact funds only 7 Preceding Conditions Report (CP) Compact and CIF funds (if applicable)

In accordance with the Compact, FOMILENIO II will present all Work Plans with the third quarter’s Disbursement Request Package, if required. In some cases, the MCC will require that FOMILENIO II also present additional planning documents (such as updates to the Multi-Year Financial Plan, or the follow-up and evaluation of the Plan and the FAP) with the Disbursement Request package. Based on the Compact and the Supplementary Agreements, all pertinent Certificates, applicable to the Fiscal Agent, Procurement Agent (if applicable) as well as all administrative certificates, will be included as part of the Quarterly Disbursement Request Package (QDR). 3.2.2 Narrative Report The Narrative Report provides an explanation of the key factors for requested funding, as well as of how said funds will be used during the course of the following quarter, if the previous quarter’s disbursement and all activity projections were met or why they weren’t fulfilled. Similarly, it also explains any variations or changes in the Work Plan, Procurement Plan, Quarterly Financial Report or the Detailed Financial Plan. This report will not be considered a public document.

https://assets.mcc.gov/guidance/guidance-2010001039401-qdrp.pdf

https://assets.mcc.gov/guidance/guidance-2010001039401-qdrp.pdf


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3.2.3 Disbursement Request (DR) The Disbursement Request is a document meant to represent a request from a FOMILENIO II Accountable Entity so that the MCC will create an account against which payments may be made to contractors or employees, or so that the MCC makes cash payments to a Permitted Account. The Disbursement Request is provided before every quarter for which funds are being requested, even for those quarters in which FOMILENIO II is requesting zero dollars. The Disbursement Request is the means which FOMILENIO shall utilize to request the Authorized Payments for the following fiscal quarter or any other term agreed upon by the MCC. The Disbursement Request is performed through the signatures of FOMILENIO II’s Executive Director as additional representative of the Government, FOMILENIO II’s Board of Director’s President and the Fiscal Agent. Within the Common Payments System (CPS), the Disbursement Request distinguishes between disbursement requests directly from the MCC to suppliers and cash disbursement requests from the MCC to the FOMILENIO II’s Permitted Account(s). 3.2.4 Quarterly Financial Report, (QFR) This financial report provides a summary of all FOMILENIO II’s financial activities in relation to the previous quarter, while also documenting and justifying any cash request for the following quarter. Furthermore, it is also a tool to present periodic financial information, request spending limits and justify disbursement requests. The Quarterly Financial Report is also used to notify the MCC of proposed adjustments to the Multi-Year Financial Plan (MYFP). The Quarterly Financial Plan includes the following programs:

• Schedule A – Request Application to Adjust the Multi-Year Financial Plan; • Schedule B - Summary of Adjustments to the Multi-Year Financial Plan, to date; • Schedule DPF-Commitments – Commitment Forecast Report (next period); • Schedule DFP-Cash – – Forecasted Program Cash Requirements (next period).

Schedules A and B account for proposed and executed reprogramming (reallocation) of funds across projects and/or activities within projects. 3.2.5 Detailed Financial Plan (DFP)


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Schedules DFP-Commitments and DFP-Cash correspond to the Detailed Financial Plan, which reflects the funding that FOMILENIO II expects to commit and the cash (in the form of payments authority) it expects to need on hand to carry out the tasks included in the Work Plans. For planning purposes, the DFP-Commitment and DFP-Cash schedules break down the budget/financial categories to the activity level (or beyond to the Sub-Activity, where appropriate, given the level of detail included in Compact’s MYFP) on a rolling quarterly basis for the upcoming four quarters, and on an annual basis for the remaining years of the Compact. The level of detail of the DFP shall be determined by program planning needs. Different sectors within MCC will review the DFP to varying levels of specificity. The DFP must follow a format that allows for the Sub-Activity detail to be “rolled-up” to the Project/Activity level. The Fiscal Agent, with the collaboration of the Fiscal Agent and the MCC Fiscal Accountability staff, is responsible for assisting FOMILENIO II in developing a standard Detailed Financial Plan format, including the level of detail and the categories of expenses that will be consistent across Projects and Activities through the life of the Compact. Separate financial reports (i.e., separate QFRs) are required for all MCC funding sources:

• Compact; • Compact Implementation Funding (CIF); and • Compact development 609(g) grants.

For 609(g) and CIF funds, the DFP template is the same as for compact funds, but MCAs should distinguish between funding sources by developing independent DFP sheets. In countries for which 609(g) grant agreements require a detailed budget, this budget can serve as the quarterly DFP. 3.2.6 Procurement Performance Report (PPR) The Procurement Performance Report (PPR) is an integrated planning and reporting tool for procurement actions initiated by the MCA. The report is cumulative, so as to provide an overview of all completed and ongoing procurements. The PPR should include all approved, initiated, ongoing, and/or completed procurement actions valued at or above USD $25,000. This includes actions in the currently active and approved Procurement Plan, even if these actions have not yet begun. The PPR includes unique IDs for each procurement action for easy sorting.


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The purpose of the PPR is for each MCA to provide MCC with a summary of the current status of procurements across its Program and thereby assist MCC in monitoring MCA compliance with the Program Implementation Agreement (PIA), Procurement Agreement, and the Procurement Plans. The PPR has six sections:

• Procurement Information; • Expression of Interest/Pre-Qualification; • Bidding/Solicitation Documents; • Evaluation of Bids/Proposals/Quotes; • Contract Award; and • Implementation.

3.2.7 Indicator Tracking Table (ITT) The Indicator Tracking Table (ITT) is an integrated planning and reporting tool that displays performance targets (projections) and tracks progress against them (actual performance). The ITT is designed to help MCC and MCAs track interim progress toward Compact goals. All performance indicators that are included in the latest approved M&E Plan for the Compact should be included in the ITT. This includes indicators at all levels of the results hierarchy including lower level output and process milestone indicators. Most indicators have annual performance targets associated with them in the M&E Plan. The ITT breaks these down into their quarterly components in order to facilitate more regular performance tracking. The process of breaking down the annual targets into quarterly targets takes place at the beginning of each compact year. Quarterly targets are only set for those indicators that are required to be reported on a quarterly basis, as per the M&E Plan. However, quarterly targets are no longer required as part of the reporting template to MCC. Instead, reporting actual performance on a quarterly basis (to be assessed against an annual target) is required where specified in the M&E Plan. A complete ITT provides detailed information that shows (1) quarterly, (2) annual and (3) five year end-of-compact basis targets for each performance indicator. The actual progress towards these targets is to be recorded quarterly. In addition, a column for current quarter actuals has been added to the ITT template so that MCC and MCA management receive more up-to-date information on indicator performance. The ITT should only report against indicators and targets approved in the M&E Plan. Modifications to indicators and targets may not be made in the ITT.


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3.2.8 Conditions Precedent Report (CP report) The Conditions Precedent (CP) report is designed to summarize progress toward meeting CPs to disbursement. The CP report is a table designed to capture information about the timing, associated project activities, status and relevant documentation for each CP. The CP report lists all Compact CPs relevant for disbursement and tracks all CP deferrals or waivers requested by the MCA. It is important for MCAs to be specific about the documentation providing evidence of CP satisfaction, and to include a justification for any CP deferral requests. 3.2.9 Payment Authority for Approved Disbursement Requests

Approval Process for establishing a Payment Authority for each Disbursement Period FOMILENIO II submits a Disbursement Request and Reporting Package (Disbursement Request, Quarterly Financial Report, Conditions Precedent Report, Detailed Financial Plans and such other documents and reports as MCC may require in accordance with the applicable supplemental agreements and MCC policy) no later than 20 days prior to the commencement of each disbursement period. The package is circulated through the relevant MCC staff, including the Regional Point of Contact and the Department of Administration and Finance, for final approval, which then authorizes FOMILENIO II to begin making payments through the Common Payment System (CPS). MCC sends a disbursement response letter to FOMILENIO II detailing the amount of funds approved for the relevant disbursement period and any waiver or deferral of conditions precedent. MCC retains the authority to adjust the amount of funds to be disbursed for the applicable disbursement period based on progress achieved on the implementation of the projects and activities to be funded by the Compact, CIF agreement, and/or 609(g) grant agreement. Expiration of the Payment Authority at the End of the Period FOMILENIO II’s authority to submit payment requests to IBC relating to payments for expenditures included in an approved Disbursement Request shall expire on the last day of the applicable quarter covered by such Disbursement Request, except as otherwise provided in the section “Restoring Authorized Expenditures Limited Payment Authority” of this FAP. The Internal Business Center (IBC) or MCC shall notify FOMILENIO II in writing of the expiration of the authority to submit requests for payment to said Center (IBC), not less than ten business days before the final end of said quarter according to the approved disbursement request.


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If a new Disbursement Request is not approved by the first day of the next quarter, FOMILENIO II will not have the authority to submit requests for payment to IBC for any expenditures relating to the approved Disbursement Request for the previous period, except as provided in the section “Restoring Authorized Expenditures Limited Payment Authority” of this FAP (both of which provide for an additional 30 days). At the end of that 30-day period, IBC must halt payments until such time as MCC approves a new Disbursement Request Package and/or IBC and receives notification from MCC’s Department of Administration and Finance that they can continue making payments. Reinstatement of Limited Payment Authority After the expiration of the payment authority at the end of the period previously described in the “Expiration of payment Authority at the End of the Period” section, MCC may authorize in exceptional circumstances only a temporary reinstatement of payment authority to cover specific payments. The total amount of the reinstated payment authority may only be as high as the unused spending authority from the prior period, and is only available during the first 30 days after the close of that period or until the date of approval of the next Disbursement Request submitted to MCC, whichever is earlier. The reinstated payment authority may be used only for expenditures that were approved by MCC in the most recent Detailed Financial Plan, but for which inadequate funds were budgeted or whose timing for payment is later than originally anticipated. The reinstated payment authority may not be used for expenditures for which Conditions Precedent to disbursement were not met, and the expense to be paid with the reinstated spending authority may not be included in the Detailed Financial Plan of the next period. Requests to use such funds are to be submitted to IBC using the following procedure: The Fiscal Agent submits a Special Payment Request Form authorized by the usual signatories and the MCC Resident Country Director (or its proxy). The Fiscal Agent should state the reason for the request in column 13, “Additional Information” of said special form. A Special Payment Request Form must be approved by the MCC RCD, and must be utilized if: • Upon occasions where goods or services, which were approved in the QFR, and are

delayed in delivery and/or the presentation of invoice falls into the next quarterly time frame, a one-time “Special Payment Request Form” must be utilized if the payment of this invoice falls above USD $500,000; or


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• An invoice comes in during the current quarter for an activity which had been foreseen in the last quarter, the current quarter's QFR is not yet approved by MCC and the funds requested do not exceed USD $500,000.

3.3 SAP Procedures

a) Changes in the MYFP should be registered through FMBB, the capacity and authority to make these changes belongs to the Finance Management/ Fiscal Agency, these changes also require updating of the Quarterly Financial Reports (QFR-A/ QFRB) Through ZQFRA and ZQFRB. Any change in MYFP under an activity does not require MCC approval, but changes between each activity must be supported by prior MCC approval. b) Preparation of QDRP 1. Creation of Funds Reservation (FR) The program team provides quarterly estimates at Sub Activity level (in SAP it is called WBS), with this information the Finance Management/ Fiscal Agency creates a FR with the date of the first day of the relevant quarter for each Sub Activity through FMX1. 2. Creating the Purchase Requisition (PR)

With the FR number, the program team creates a PR, which will serve as a basis for the Public Procurement Management / Procurement Agency to subsequently create the Purchase Order or Contract (PO) through ME21N

3. Creation of the Financial Plan Detailed (DFP)

When creating the PR the program, the team should carefully set the dates on which they expect to receive the deliverables, taking into account that the date of the nearest deliverable (first line) is the date (Month/quarter) that SAP will use to schedule the COMMITMENT For the total amount of the PR), which will be reflected in the Commitment Financial Plan (DFP) and the dates of the deliverables of the subsequent lines will determine in which date (Month/ quarter) is being scheduled DISBURSEMENTS (payments) in the Financial - Detailed Plan (DFP - Cash). Once the program team finishes creating the PR, the Finance Management/ Fiscal Agency generates the DFP-Commitment through ZDFPCOMMIT and the DFP-Cash through ZDFPCASH reviewing and validating the information to be sent to probation Of MCC.

c) Establishment of Approved Quarterly and Payment Authority Commitments (After MCC approval)


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The Commitments and Payment Authority approved by MCC are called in SAP “Payment Budget” and must be updated by the Finance / Fiscal Agency through ZF2_BUDCASH and ZF2_BUDCOMMIT d) Affecting the Commitment (Current Commitment)

The date of creation of the PO is the date (day, month, quarter) in which the Commitment is recorded in SAP, for purposes of the DFP-Commitment. At this time, the dates of the deliverables detailed in the PO lines are the dates on which the disbursements will be scheduled in the DFP-Cash and will replace the dates mentioned in the PR. The PO is created through ME21N. The dates of the deliverables that are included in the SAP System are for the purposes of financial planning.

e) Creation of the Fund Commitment

With the FR number, the Finance Management/ Fiscal Agency must also create the Fund Commitment through FMZ1, which will be used to record invoices that do not correspond to Purchasing Processes (NoN PO Invoices)

f) Quarter Closing Activities

The Finance Management / Fiscal Agency, at the end of each quarter should review the balances of the FR, the open PR and the POs in order to coordinate with the program team and the Public Procurement Management / Public Procurement Agency to make the necessary adjustments to the PR / PO deliverables dates in order to update the Schedule of commitments and disbursements. At the same time, it must review and adjust the funds of the funds commitments, so that the unused Payment Budget (Commitments and Disbursements) is returned to MYFP

g) Year-end activities

At the end of the year, in addition to the closing activities of each quarter, the Finance Management / Fiscal Agency must transfer the available balances of each MYFP sub-activity to the following year through FMEDDW.

3.4 Indefinite Delivery / Indefinite Quantity Contracts (IDIQ Contracts)

IDIQ contracts are those entered into with one or several providers, when what is needed has been established, but the delivery and quantity cannot be defined in advance nor the service time expected.


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An IDIQ contract is the result of a brief procurement process which has taken place by using open, fair, and competitive procedures used transparently, as per any of the different procurement methods based on the Guidelines for public procurement within the framework of MCC’s Program. IDIQ Contracts are awarded based on the fulfillment of the evaluation criteria established by each tender document, such as works experience, or providing goods or services similar or equal to those required by FOMILENIO II, according to the Terms of Reference Provided and the Illustrative Work Order examples (meaning, only with indicative scopes and amounts). This type of contracts are originally entered into for specific terms and an exemplary global amount (common availability to be shared amongst the different Contractors based on later individual awards of Work Orders) without specifying neither the amount of works to be done, nor the date and/or terms required, meaning, they only include a previous agreement and the future availability of said Contractors to deliver what is being required from them. Later on, once the scopes, amounts and terms of the required works or services are determined, Contractors may be assigned by FOMILENIO II through work orders (PO) issued individually for each Contractor, as determined by the simplified award and requirement evaluation procedures established for the group of Contractors qualified to compete for each work order. Entering into an IDIQ Contract must not affect the budgetary commitments, until such a time as when the work orders (PO) are issued; being required to keep control of the availabilities assigned to IDIQ contracts, through one or several Purchase Requisition (PR) linked to a Fund Reservation (FR) created specifically for each IDIQ contract. One or several PR may be linked to the lines or deliverables for one or several POs, this division will be done accordingly with the assignment of multiple funding sources or multiple Projects/Activities associated to an IDIQ, which will allow showing the planning of commitments and disbursements in the DFP-Cash/Commitment in the different report periods.

4 Permitted Bank Accounts and the Common Payment System MCC uses two payment processes for banking and cash management. One payment process uses local banks to receive monthly grant disbursements from MCC and then makes re-disbursement payments from the local bank accounts. The other payment process requires the


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Fiscal Agent to use the MCC Common Payments System (CPS) to transfer funds directly from the U.S. Treasury to the vendors of goods, works, and services received by FOMILENIO II. CPS may be used to process payments in U.S. Dollars or local currency directly to vendors, or to transfer funds to a Permitted Account used as a transit account enroute to a vendor.

4.1 FOMILENIO II Local Banking Accounts Two (or more, as described below) Permitted Accounts shall be opened at a local bank to manage selected MCA-El Salvador program funds: COMPACT FUNDS

• First – Permitted Account to Manage Funds for MCC funding • Second – Permitted Account to Manage Funds belonging to Government Counterpart

funds.

TAXES • Third – Permitted account to Manage Funds advanced by Government for tax

reimbursement.

No other bank accounts under FOMILENIO II’s name will be allowed, except with the express approval of MCC. The existing balance on Permitted Accounts should only serve to fulfill FOMILENIO II’s immediate cash needs and shall never exceed ONE MILLION DOLLARS (USD$1,000,000.00), except in the case of transit funds and funds in Fiscal Reimbursement Program accounts. Transit funds should NOT remain in the Permitted Account for over 72 hours. Any disbursement request made to the Permitted Account is coded as “NA/NA” at the PRF instead of assigning projects and activities. JUDICIAL GARNISHMENT

• Fourth – Permitted account to deposit funds provided by the garnishment of employee’s wage. The amounts discounted are not part of FOMILENIO II’s availability, however, they must be deposited and kept in a bank account separate from the other FOMILENIO II accounts and be available at all times to be pay or be transferred to the creditor or plaintiff as per the Judicial Order.


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Control over these funds will be conducted separately from ordinary accounting procedures and will not be part of FOMILENIO II’s financial statements.

NON COMPACT FUNDS

• Fifth – Permitted Account for the management of other funds different than the financing of the Compact, arising from compliance with legal provisions in procurement processes and as a result of disputes or claims that FOMILENIO II must receive.

4.2 MCC’s Common Payment System (CPS) References the system used by MCC to process payments in United States of America dollars, or to process payments in foreign currency directly to asset, works and service suppliers and received by FOMILENIO II, or received by the Implementing Entities on behalf of FOMILENIO II. There are two types of systems, the International Treasury Services, ITS and the Secure Payment System, SPS, described in Section 7 below.

4.3 Fiscal Agent’s responsibilities – Permitted Accounts and Common Payment System

Individuals allowed to sign and who hold a primary level of responsibility within Permitted Accounts and the payment process through the Common Payment System are the following:

• Executive Director; • Finance Manager/Fiscal Agent • General Manager; • Administration and Finance Deputy Manager;

The Finance Manager, as a representative of the Fiscal Agency, will be an authorized account holder on all accounts, while the other three officials will only have the ability to co-sign or countersign. The individual with the authorized signature and alternative responsibility on Permitted Accounts and payment processes through CPS for the Fiscal Agent will be:

• Deputy Manager of Financial Administration


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The Finance Manager, as a Fiscal Agent representative or the person designated to this end, will watch over to make sure there are two of those signatures available at all times to fulfill the needs of FOMILENIO II’s local checking account.

4.4 Exclusive Nature of the Accounts Permitted accounts will remain fully independent. MCC financing funds will not mix with the Government’s counterpart funds, Tax reimbursement funds or with any other funds belonging to any other source, previously authorized by the MCC.

4.5 Interest on Permitted Accounts Permitted bank accounts will earn interests based on the provisions of the Banking Agreement. All interests on the MCC financing’s permitted bank account will be reimbursed on a quarterly basis. The amount of said interests will not be included within accounting records.

5 Budget Implementation & Financial Control Budget Implementation includes several activities both related and sequential, including:

a) Determining necessary resources (assets, Works and services) to implement each project.

b) Enter into assets, works and service contracts after ensuring the contractor is not in the Excluded Parties List, as determined by the MCC Program’s Guidelines for Public Procurement.

c) Include all commitments on the budget system to guarantee the funds will be available to fulfill all contractual payments.

d) Verify the delivery of assets and services. e) Authorize and issue payments to assets and services providers.

Different FOMILENIO II officials, the Fiscal Agent as well as the Procurement Agent, as described in the sections found below, will assume responsibility for all these activities accordingly. The officials that are responsible for contracting and financial management for the implementation related to each intervention, inclusive at the level of sub activity are:


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• The General Manager, or • Those directly responsible, been these Managers, Advisors or Deputy Managers. • In the case of the Infrastructure Projects for the Sub Activity Improvement of the

Quality of Basic and Media Education, it will be the Coordinator of School Infrastructure Projects

5.1 Control System

a) Expenditure control takes place systematically and according to a sequence based on

effective legislation. b) The different ways to control expenditure are part of an integrated control system in which

each separate entity has full independence. c) The above mentioned integrated control entities are the Fiscal Oversight Agent and the

External Auditor. d) The Detailed Financial Plan will be supervised in various levels:

• Per Program • Per Project • Per Activity • Per Sub-Activity • Per Funding Entity • Per Type of Fund

e) Expenses not included within the Detailed Financial Plan at a Sub-Activity level will not be approved. Cash advances will only be sanctioned to move resources towards the implementation of program activities.

6 Procurement The principles, regulations and procedures that will control the development and administration of procurement over assets, works, consulting services and non-consulting services of any supplier, consultant, contractor and subcontractor which need to be hired to implement the Program, are determined in the Public Procurement Guidelines for the MCC Program (from hereinafter PPG), and in the Procurement Operations Manual (POM) approved by MCC which includes all regulations and procedures for all procurement processes of FOMILENIO II. Paragraph (a) of Section 3.6 of the Compact, determines that FOMILENIO II will ensure that all procurement takes place in accordance with the Public Procurement Guidelines for the MCC Program, and therefore neither the Public Administration Procurement and


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Contracting Law (LACAP), the corresponding executive decree or any other Salvadoran law or regulation related to procurement will be applicable. The Technical and Planning Secretary of the Presidency, as President of FOMILENIO II’s Board of Director or the Executive Director of FOMILENIO II as additional representative to the Government and as determined in Section 4.2 of the Compact, have the power to approve in writing the implementation of any agreement for the supply of goods, works or services, as well as any amendment, modification, termination or suspension of any said agreements. The FAP and the Procurement Operating Manual (POM) will be used as an internal procedures guideline for FOMILENIO II in order to ensure the fulfillment of all MCC’s Procurement Policies

6.1 Public Procurement Plan The Procurement Agent will use SAP System to generate and update the Procurement Plan of FOMILENIO II and to follow up the processes, as established in numeral 6 of the Procurement Operations Manual POM.

6.2 Procurement Implementation Plan (PIP) The Procurement Management/Procurement Agency will make sure that all steps, milestones and approvals concerning any procurement process are included within the Procurement Implementation Plan (PIP) according to the numeral 6.5 of the POM

6.3 Procurement Performance Report (PPR) The Public Procurement Manager / Procurement Agent will draft a Procurement Performance Report (PPR) whose main objective is to serve as a tool through which FOMILENIO II will supervise all procurement activities, and through which the MCC can monitor FOMILENIO II’s focus on performance and the progress of specific achievements throughout the procurement process. The objective is helping the MCC monitor FOMILENIO II’s compliance with the PPG. FOMILENIO II must draft the PPR using the format provided by the “Procurement Guidance Preparing the Procurement Performance Report (PPR)” which may be found at


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FOMILENIO II must submit the PPR as part of the Quarterly Disbursement Request Package within the MCC’s Management Information System (MCC MIS); furthermore it will also serve as a performance record for the PP, in concordance with the section 6.6 of the POM

6.4 Launching the Procurement Process Even if a procurement process is included within the approved PP, the Public Procurement Management/Procurement Agent must be provided with a written request to open said procurement process signed by the Requesting Unit and the Fiscal Agent. This request must include the TOR or scope and specifications to be able to launch the procurement. Units must always bear in mind the dates in which their processes have been programmed for their timely compliance with their project’s objectives.

6.5 Requisition of Purchase/Requisition Form Requesting Units will initiate a procurement request by creating a Requisition of Purchase itemizing the description and amount of all goods, works and/or services to be acquired and the PP code data approving said purchase. Furthermore, they must also develop all specifications or terms of reference for all goods, works and/or services being required. The Project manager of the requesting unit shall print and sign the requisition of purchase and its specifications in two counterparts.

6.6 Requisition of Purchase Evaluation and Approval The Finance Manager/ Fiscal Agent or its designee will review the requisition of purchase based on the budgeting process within the requisition format, thus attesting to the fact that the request is in compliance with the Detailed Financial Plan (DFP) and that it is now possible to authorize the procurement in question. Once the Finance Manager/ Fiscal Agent’s signature has been granted, the Project Manager will submit two original copies to the Public Procurement Manager/ Public Procurement Agent, alongside any additional information (TOR/Technical Specifications/Scope of Services, potential bidders, if the process will take place through invite only, etc., accordingly). The Public Procurement Manager/Public Procurement Agent will make sure the Purchase Requisition (PR) meets the requirements of the corresponding Procurement Plan. Once said


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compliance is verified the two originals will be signed, while if it does not, the responsible Project Manager will be notified and the procurement stopped. The corresponding Procurement Specialist will then proceed to verify that the information provided matches an authorized procurement and includes all necessary data from the corresponding Procurement Plan. All documents provided will need to be reviewed within a maximum term of three (3) business days. In case of there being small omissions or rectifiable observations, the specialist may contact the applicant to have them solved within a maximum term of two (2) business days. If however, the procurement specialist does not feel said inconsistencies may be overcome during the above mentioned term given that the information must be redrafted, new authorizations are required, or certain aspects to be overcome must be redefined, the Requisition of Purchase should then be returned to the Requesting Unit, listing all observations, so that once said issues are solved the request is once again presented, or in case it is necessary the process is restarted. On the contrary, if there are no issues with the Requisition of Purchase, the information is received, approved and the requested total is disbursed based on the available balance on the Procurement Plan, the Public Procurement Manager/Public Procurement Agent’s signature is requested to authorize starting the procurement procedure. The respective Procurement Specialist will keep the two counterparts of the requisition. One of them to be returned to the Administration and Finance Management /Fiscal Agent, alongside the signed contract or purchase order, once the contracting process has been finalized. Requesting Units must take into consideration that if the implementation strategy on the procurement process had considered putting out a publication of the call for proposals in local and international means, the approval for said publication must be simultaneously requested along the requisition for purchase.

6.7 Small value purchases not included in the MCC Public Procurement Guidelines (NPC purchases)

Procurement not covered by MCC Public Procurement Guidelines refers to purchases of items that are necessary for FOMILENIO II to conduct its day-to-day operations, including some items, operational services and public services. For this type of articles, usually of low cost, the use of the PPG is impractical. These items will be referenced as purchases not covered by the


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Procurement Guidelines (NPC) in accordance with the Procurement Guidance Note: MCA Small Value Purchase issued by the MCC on September 12, 2016. NPC Purchases described in this section are considered procurement activities not subject to the application of the PPGs, so it is not required that these purchases be included in the Procurement Plan of FOMILENIO II. Notwithstanding the foregoing, under the Coordination of Public Procurement Management/ Public Procurement Agency, NPC Purchasing Analyst of FOMILENIO II or whoever performs its functions, will prepare quarterly a Procurement Plan for Purchases not Covered by the Procurement Guidelines (PP-NPC). In any case, the PP-NPC will not require prior approval from the MCC, but will be approved by the Public Procurement Manager / Public Procurement Agent and in his or her absence, the Procurement Specialist – Consultants, to be audited ex post by the MCC. POM will establish the procedure, the publication requirements, as well as the information to be contained in the PP-NPC. NPC procurement list includes the items listed below:

• Public services (electricity, drinking water, telephone, etc.) • Rental of office space and complementary services that can be included as part of office

rental, such as maintenance, parking, security, etc. • Remodeling, retrofitting and purchase of office furniture • Publications of Procurement Notices according to PPG • Notices or Publications in national or international press • Subscriptions to newspapers, magazines, websites and others. • Postal and courier services • Courier charges • Routine expenses for the maintenance, repair and operation of vehicles (such as fuels,

oil changes, tires, batteries, car wash, etc.) • Supply of cleaning and kitchen supplies (soap, coffee, sugar, napkins, bottled water) • Taxi or other car rentals • Purchase of travel tickets for local and international travels • Other travel and accommodation costs • Training and certifications • Registration to attend conferences, workshops or seminars • Assessment and evaluation services for recruitment of personnel. • Short-term technical assistance • Short-term mission experts on legal issues and translators • Internships • Maintenance and Repair of FOMILENIO II equipment (non-recurring maintenance) • Office relocation costs


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• Impressions, publications and reproductions. • Organization of events and public activities (catering services, hiring of premises, audio

and video, furniture and equipment, etc.) • Temporary administrative support • Software licenses for FOMILENIO II. • Advertising and publicity services for FOMILENIO II activities. • Equipment and computer accessories for FOMILENIO II. • Any other small value purchase that is required for the needs of the FOMILENIO II office.

FOMILENIO II may acquire any of the items in the list of NPC purchases with an estimated cost of up to US $ 25,000.00 per acquisition, using the following two methods of procurement, as established in the current Procurement Manual (POM). 1) Simplified Operational Procedure (SOP), clause 9.4.1; and 2) Direct Procurement (DO), clause 9.4.2.

6.8 Charges for Tender Related Documentation 1 To promote the maximum participation possible throughout competitive tender processes, FOMILENIO II should, to the extent possible, avoid charging for tender related documentation. In some cases, a fee may be charged to recover the cost of impressions and shipments (for example: courier services) – particularly constructions specs which may be voluminous and cannot be sent via email. As a general rule, Consultancy procurements, which don’t usually entail printing blue prints, are free of charge. If a charge is made for tender related documents, said charge should be reasonable and reflect not only the cost of its impression, delivery and related costs to possible bidders, and it also shouldn’t be so high as to discourage potential qualified bidders/participants. This charge should be paid in a local FOMILENIO II bank account and be reimbursed to the original budget account.

1 P1.A.2.11 of Procurement Guidelines.


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6.9 Crosschecking a Supplier/Provider’s Eligibility During the contracting process, a crosscheck of eligibility will take place based on PPGs, and POM. The verification procedures that the Public Procurement Management/ Public Procurement Agency must implement to comply with PPG regulations determine the following: Partial Verification of Eligibility. Verify the eligibility of consultants or contractors simultaneously while conducting the administrative review of compliance at the beginning of a tender or the proposal evaluation process. Full Verification of Eligibility. After completing a review or technical evaluation, the panel’s recommendation is approved, the Public Procurement Management/ Public Procurement Agency shall conduct a “full verification of eligibility”, which consists in the same eligibility verification process conducted during the first review, with two exceptions: (a) only the consultant or contractor with the best evaluation scores will be reviewed, and (b) this review will also include all key personnel and sub-contractors included in the consultant’s or contractor’s offer or proposal. The Public Procurement Management/ Public Procurement Agency conducts and documents all eligibility verifications on bidders/competitors and potential providers/contractors/consultants for those actions included within FOMILENIO II’s Procurement Plan and for NPC purchases.

6.10 Record of Financial Contractual Commitments Contracts will be entered into by the contracting parties in four (4) counterparts. Purchase Orders will be signed in three (3) counterparts. A copy of said documents will be provided to the Public Procurement Management/ Public Procurement Agency, and shall facilitate a copy to the Finance Management/Fiscal Agency who will then process the contracted commitments in the records of FOMILENIO’s SAP system. If the contract includes optional periods or arrangements concerning open-ended deliveries/ open-ended amounts, only the value on the baseline period must be included within the Multi-Year Financial Plan (MYFP) of the month in which said contract was entered into. The value of each optional term will be registered until the following MYFP quarter, based on the time in which the option is exercised.


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Payment terms on the contract should be negotiated so that they match the plans for quarterly disbursements, whenever possible.

6.11 Distribution of Contract documents and Record Management All four (4) counterparts of the signed contracts will distributed as follows: one will be delivered to the Provider/Contractor, a second one to the Finance Management/ Fiscal Agent, a third one to the Legal Advisor and the fourth will be kept in the procurement records. All three (3) counterparts of the purchase orders will be distributed as follows: one for the Provider; the second for the Finance Management/ Fiscal Agent, while the third one to the Public Procurement Manager/Public Procurement Agent. A copy of the contract, any amendment or purchase order (this also can be done via email) will be provided by the Public Procurement Management / Public Procurement Agency to the Requesting Unit and, at least three days after signing the documents. The Public Procurement Manager/Public Procurement Agent will be responsible of keeping originals of these Contracts and keeping a file of all procurements, contracting requests, records, contracts and amendments based on the PPG and POM. All biddings, quotes and proposals, as well as any and all documents pertaining procurement evaluation procedures will be kept and protected against the unauthorized disclosure of information for the exclusive and confidential use of selection sources.

6.12 Awarding Bids / Offers over the Estimated Budget If during the evaluation stage of offers/proposals within a particular procurement process it is determined that the offer exceeds the estimated amount of funds provided in the PP, the Offer Evaluation/Review Panel must report this to the Requesting Unit through the Public Procurement Manager/Public Procurement Agent, so the former may decide if an increase in funds should be requested to the Finance Management/Fiscal Agency, as long as it is possible to prove the reasonability on the prices provided through any of the procedures established within the PPG.


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If even with said increase, the Price is reasonable, the Requesting Unit, with the support of the Panel, will draft a justification and request from the Finance Management/Fiscal Agency an increase of allotted funds2 If feasible, the Finance Management/Fiscal Agency may authorize the increase in allotted funds for said procurement, based on the provisions of the current FAP for “Changes to Financial Plans”. Once all corresponding approvals have been gathered, the Requesting Unit will report and deliver all originals of said authorizations to the Public Procurement Manager/ Public Procurement Agent to go on with the process. The Requesting Unit may ask that all offers are rejected if once aware of the need for additional funds, believes the prices stated on the offers/proposals are not reasonable or they are substantially higher that the originally estimated proposal; or if either the Finance Management/Fiscal Agency or the Board of Directors do not authorize the additional funds requested. In this case, the Public Procurement Manager/Public Procurement Agent will reject all offers based on the provisions established within the PPG3.

6.13 Advance Payments 4 If advance payment or a prepayment is required (to cover initial mobilization fees for large civil works, for made to order goods or long-term consultancy programs which require installing certain applications for users) to enable the procurement in question, each Project Manager should justify the request, and the Public Procurement Manager/Public Procurement Agent will then review the reasons provided, the prepayment amount requested and recommend either to approve or to reject. 2 If the contract value increase is greater than 10% of the amount programmed within the PP, said increase will

also require approval from the Board of Directors.

3 P1.A.2.74 of the PPG: Works, assets and consulting services. Rejecting the offers is justified whenever effective competition is lacking, offers don’t answer to what was substantially required, prices are not reasonable or they’re substantially higher than the MCA’s estimated value. Consultancy’s and Individual Consultants. P1.B.2.21: In case of higher prices, the feasibility to increase budteting or reduce the scope of the firm’s services must be investigated in consultation with the MCC. In the majority of cases, based on Annex 1 of the PPG, to reject all offers/proposals requires the non-objection from the MCC.

4 PPG: Paragraphs from P1.A.2.41 to 43 for works, assets and non-consulting services. Paragraphs P1.B.4.14 to 16 for consulting services and individual consultants.


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The amount paid in advance should not exceed 15% of the contract for the procurement of goods or works, nor 10% of the contract for consulting services or non-consulting services, unless the MCC specifically approves a special exemption to raise the above mentioned percentage in accordance with the provisions of the PPG. Whenever a prepayment is applicable, the tender/public contest documents must establish: (a) The amount of the advance payment being made as a percentage of the contract (b) the guarantee being required; and, (c) the way in which the advance will be settled against future payments billing; generally, deducing the same percentage awarded off each programmed payment.

6.14 Reconciling the Commitment’s Information All contract or contract’s amendment representing an increase in the amount should have an additional available funds certificate and its sources of financing signed by the Finance Management/Fiscal Agency or the designated person to that effect. The Public Procurement Manager/Public Procurement Agent must provide updated information of all financial commitments assumed (through contracts or purchase orders) to the Finance Management/Fiscal Agency, either monthly or whenever considered convenient to facilitate the development of Program activities. Both units will reconcile the total amount of formalized contracts based on their own records, and any differences should be solved or properly explained. This conciliation should be made with physical information of SAP records.

6.15 Delivery Certificates of Goods or Services

a) It is the supplier’s responsibility to deliver the goods, services or Works under the terms assigned in the contract or purchase order subscribed with FOMILENIO II such as amounts, deadlines and quality. It is the responsibility of FOMILENIO II units assigned in the contract to receive accordingly.

b) Once these units corroborate they’ve received the goods or services as determined within the contract or purchase order, they will issue two counterparts of a Receipt of goods and/or services report when it refers to consultancies or construction works, it


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should be necessary to issue an acceptance certificate, as deemed convenient. In the case of suppliers whose contractual domicile is abroad, they may sign the acceptance certificate digitally, being the responsibility of the Contract Administrator to verify that said signature satisfies the requirements of the digital signature definition, all other signatures of the act must be in original. One counterpart shall be handed over to the supplier on the same day on which the goods or services are approved or received, and the other shall be delivered to the Finance Management/Fiscal Agency on the following day after the report was issued.

Prior to the delivery of the respective copy of the acceptance report to the Finance Management/ Fiscal Agency, FOMILENIO II Units or the Contract Administrators should ensure that the corresponding registration of the reception (GR) in SAP system, and must add a print- out of the same. For payment processing FOMILENIO II recognizes as a valid document in the payment file, the report that has been prepared manually, in this sense GR printing of SAP is a single verification that the registration has been made, if case the reference does not include in the manual report.

c) On Tuesdays and Thursdays, the suppliers will provide their invoices to the Finance Management/ Fiscal Agency alongside an original copy of the receipt report previously delivered. The Finance Management /Fiscal Agency will then review all invoices received and issue any observations, in case there were any, no later than five (5) business days after having received them.

d) Once the invoices, their reports and deliverables have been approved, the Finance Management/ Fiscal Agency will go on to prepare and gather the necessary authorizations required by the Payment Authorization Form (PAF) to move on with the corresponding payment procedure.

6.16 SAP procedures

a) Create Purchase Requisition (PR) The program team or assigned person must create a PR through ME51N The program unit prints the requisition via ZF2_PRN b) Procurement Plan (PP) The Procurement team will consolidate a Procurement Plan in SAP, based on the PR created by the program team, through ZMCC_PP_RPT c) Approval of PR


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The PR must be approved by the Project Manager, Public Procurement Manager/ Public Procurement Agency and Finance Manager / Fiscal Agent d) Create the Purchase Order or Contract (PO) The Public Procurement Management / Public Procurement Agency will create the PO through ME21N. Before creating the PO, you should check whether the Supplier or Vendor has been created in SAP, otherwise proceed to create or update it according to the Form for such purposes through XK01. When the PO to be created corresponds to quotations received in foreign currency, this value must be converted into United States dollars, using the exchange rate that FOMILENIO II recognizes as official, published in https: //www.fiscal.treasury.gov/fsreports/rpt/ treasRptRateExch /currentRates.htm. A line item at the end of the PO will be added with an amount equivalent to 10% of the total value of the acquisition (USD) as "Contingency to cover price increases due to exchange rate fluctuations". e) PO approval The Public Procurement Management/ Public Procurement Agency, The Technical and Planning Secretary of the Presidency in his capacity as Chairman of the Board of Directors of FOMILENIO II or the Executive Director as the Additional Government Representative may approve PO according to Limits established in this FAP. f) Distribution of approved POs The Public Procurement Management/ Public Procurement Agency will print and distribute the POs authorized pursuant to Section 6.11 of this FAP, if it is a PO that must additionally generate a contractual document, both documents must be delivered simultaneously. Please include the PR when delivering the copy to the Finance Management/ Fiscal Agency. g) Creation of Framework Agreements (BPA) The Public Procurement Management/ Public Procurement Agency will create, where appropriate, a general procurement framework agreement (BPA). BPAs will not generate resource commitments and may be set by price or by quantity. In order for resources to be committed, purchase orders must be released against BPAs, in accordance with prices previously agreed upon through ME31K. h) Registration of Reception / Acceptance of Goods and / or Services (GR) FOMILENIO II Units as designated in the Contract must proceed to register the GR in SAP through MIGO and its corresponding printing through MB90.


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7 Payment Processing Both the Compact and supplementary agreements require that all invoices be paid within the following thirty (30) calendar days after receiving said invoice. All FOMILENIO II Project Managers or their representatives are the only ones responsible of authorizing payments. The Fiscal Agent is the one solely responsible for making payments as well as authorizing them, but only if they comply with the requirements established within this FAP. The objective of the payment process is to organize all activities so that payments can be made within the following thirty (30) days after having received the invoices. This procedure involves the following: • Invoice receipt • Payment authorization • Invoice and payment file review • Invoice payment and record by the Fiscal Agent a) Invoice Receipt

Invoicing instructions to vendors shall indicate that they are to present invoices directly to the FISCAL AGENT, with a copy to the PROJECT MANAGER. The Fiscal Agent will date stamp the invoice and make the initial verification and register invoices in a log book. The invoice must be accompanied by an acceptance certificate for the goods, works, or services provided; otherwise the Fiscal Agent will return the invoice unprocessed to the vendor. Each invoice is required to be date-stamped upon its receipt by the Fiscal Agent. The Fiscal Agent is required to enter the first date stamped on the invoice (“Payment Period Start Date”) into a tracking system in order to ensure tracking of compliance with the Payment Period. Failure of the Fiscal Agent to correctly date stamp the invoice will result in using the date of the invoice as the Payment-Period Start Date. In no case can the Payment-Period Start Date precede the date of the acceptance of the goods, works, or services provided. A preliminary review of the invoice submitted through the Secured Payment System shall verify that the following elements are present:

• Invoice date (the date the invoice was issued by the vendor); • Name of vendor; • Address (and if available telephone number) of the vendor; • Invoice number;


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• Shipping (where applicable) and payment terms; • Contract number (where applicable); • Description of goods/services purchased; • Quantity of goods/services received; • Sub-total due; • Applicable taxes (detailed at the end of the description of the goods/ services purchased

and value of the tax); • Total amount and currency; and • Numerical correctness (multiplication of quantities and sum of positions) of the invoice.

All invoices that fail to have any of the above mentioned elements will be sent back by the Fiscal Agent to be corrected and subsequently forwarded once they’re correctly filled out, if everything is fine,. Furthermore, when using the Secure Payment System it’s important to make sure:

• the availability of budget funds for said invoice and it identifies the Project/Activity/Sub-activity from which payment will originate;

• If there were any prepayments or advance payments made, the GAF must confirm the amount which needs to be deducted from the amounts payable.

b) Approval/Rejection from the Fiscal Agent The Fiscal Agent checks and confirms through its signature that the invoice is in compliance with all contract terms, tariff programming and deliverables. The Secure Payment System will also check the integrity of all presented documentation as well as its compliance with all pertinent conditions and authorizations required by the Compact and other pertinent supplementary agreements. Overall, the Secure System Payment must verify that:

1. The invoice was approved by FOMILENIO II’s Project Manager or its authorized representative to approve this specific invoice in regards to the amount and budgetary codification;

2. Both the budget and other codes were confirmed by the GAF, and if the originally provided budgetary code was modified per request of FOMILENIO II’s Project Manager, the Secure Payment System must also confirm that there are enough budget funds available (Further ahead see invoice management which surpass the available budget). This includes determining if there are enough payment authorizations for the quarter at an activity level, within the Disbursement Request Forms and in the Detailed Financial Plan-Cash for the payment in question;


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3. The invoice does not list elements which may not be purchased with MCC funds based on the provisions of the Compact and Supplementary Agreements;

4. Payment instructions; 5. All additional documentation is available; and

6. The beneficiary is not included in any of the “Excluded Parties” lists from Section 7.2.1. Below.

The Fiscal Agent must confirm this by printing two lists of “Excluded Parties” as possible and state that lists have been checked as well. Simultaneously, the Fiscal Agent may check the beneficiary against a listing such as World-Check ® for example. But regardless of the method used, some type of control needs to be in place regardless of the amount, beneficiary or payment frequency. For recurring payment beneficiaries, the Fiscal Agent may determine a procedure which allows for the permanent review of beneficiaries in “Excluded Parties” lists. In case of deviations and discrepancies, the Fiscal Agent will deliver to FOMILENIO II’s Project Manager an exceptions report, itemizing all deviations or discrepancies, and copy the MCC’s Resident Country Director on it. If an invoice for an amount that surpasses the budgeted total is sent, and the following is possible, FOMILENIO II’s Project Manager will make all reasonable efforts so the invoice is annulled and the products returned to the supplier. If the above is not possible, and payment cannot be delayed until the necessary measures have been taken to efficiently adjust the budget line in question, the Executive Director, and the General Manager will provide written confirmation, stating that the signatories are aware of the budget increase and will do all in their power to take the necessary steps to adjust the budget line in question in order to cover said increase. The Fiscal Agent will provide a copy of said confirmation to the MCC’s Resident Country Director and pay for the invoice. The Fiscal Agent will sign the Transmission Note, showing that all the documentation is in order as far as the Fiscal Agent is concerned and to the extent of his knowledge, and will also keep all original and authorized information. The Fiscal Agent will also fill in the necessary entries within the accounting system and save all records. Any sanctions imposed due to late payments shall be borne by the responsible party, meaning MCC, FOMILENIO II, the Fiscal Agent, or the Public Procurement Agent, and will be subject to the terms of the Compact, Supplementary Agreements and terms of the contract. c) Invoice Rejection An invoice will not be considered valid unless it includes all necessary approvals and back up documentation from all FOMILENIO II’s interested parties. If an invoice is rejected after being forwarded to the Fiscal Agent as a valid invoice, the thirty (30) day payment period will stop and


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only begin again once a valid invoice is submitted. Rejecting an invoice should be done fair and transparently, in cooperation with FOMILENIO II’s Project Manager, and may also be subject to reassessment by the Finance Management/ Fiscal Agency. Some examples of fair and transparent rejections include the following, without limitation:

• Invoices that do not include all pertinent information, such as the invoice’s recipient, the supplier’s information, type and amount of goods/works/services provided;

• Numerically inaccurate bills; or • Rejecting an invoice presented by the supplier for the payment of goods, works

and services that still haven’t been received or don’t comply with the rules, specifications or deliverables agreed upon within the contract.

The Fiscal Agent is bound to notify the supplier the invoice has been rejected no later than seven (7) calendar days after determining its invalid, making him aware of all the reasons why it was rejected and how said deficiencies may be resolved, if applicable. This notification may be made to the email address provided by the provider in the payment instructions or to the email of the authorized representatives.

7.1 Common Payment System (CPS) Overview of the Common Payment System The Common Payment System (CPS) refers to the system used by the MCC to process payments in dollars of the United States of America or foreign currency payments directly to those supplying goods, works and services for FOMILENIO II or the Implementing Entities receiving the goods, works and services on behalf of FOMILENIO II. The CPS is used within every MCC country eligible in which to disburse payments related to the Compact funding, CIF and 609 (g), directly from the U.S. Treasury to suppliers, service providers and employees. The MCC’s Financial Service Provider, the Interior Business Center (IBC) uses the CPS to transfer payments in dollars of the United States of America or other foreign currencies directly to the suppliers in order to pay for goods, works and services lent and received as well as for MCA employee costs for effectively rendered services. The CPS is made up by two systems, the International Treasury Services (ITS) and the Secure Payment System (SPS) described below. The CPS requires that every party associated to a FOMILENIO II payment are:


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• Identified through the delegation of authority described within this FAP, and which includes the roles and responsibilities of each individual, for example, the Fiscal Agent, , etc;

• CPS document signatories, including a signature card required by the Interior Business Center (IBC) and the confirmation and signature of the “Rules of Conduct” list provided by the U.S. Treasury Department. All signature cards with original signatures must be sent via mail to the MCC’s Fiscal Responsibility Director for their formal transfer to the Interior Business Center (IBC), through the MCC’s Administration and Finances Department;

• Available to receive payment confirmation reports by the Interior Business Center (IBC); • Aware of all methods used to investigate processed payments; and • Knowledgeable on the issue of the MCC’s Common Payment System operations manual.

The CPS is designed to comply with the MCC’s formal process included within the Quarterly Financial Report (QFR). The CPS will reflect the structure of the Multi-Year Financial Plan Agreement, with a code of the Program/Project assigned in CPS for every level of each Program/Project, within the Multi-Year Financial Plan. The Fiscal Agent will resume these budgetary items at a program/Project level and will write down the code of the Program/Project assigned by the Interior Business Center (IBC), which assigns a Country Code meant to remain in place during the Compact’s validity. Both codes, the Country Code and the Program/Project Code, are important for each payment request. As determined by the “Payment Request Form”, these codes should be used for each payment request and allow that the MCC updates each payment against the corresponding Project area. As each payment is coded, a record of payment history is created, to be included within MCC reports and used to answer any official internal or external request for financial reports. 7.1.1 International Treasury Services, (ITS) This service is a Treasury web based interface allowing Federal Agencies to issue payments in foreign currency via direct deposit, wire transfer or bank draft (in certain cases and it may vary depending on the country) to banks outside the United States in over 150 countries. Furthermore, it allows for agencies to transfer currency at an international level without the need of a U.S. correspondent financial institution within the country. There are no charges for the use of this system. 7.1.2 Payment Secure System (PSS) The Payment Secure System (PSS) has a dual purpose. It is on the one side used for: (1) disbursing funds to banks within the U.S.; and (2) supporting the payment process of the


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International Treasury System (ITS), given that it’s a way to certify payments created within the ITS. All ITS payments are certified by the Interior Business Center (IBC) within the Payment Secure System. The PSS certification is a certification summary used to guarantee the validity of payments registered within the ITS.

7.2 Payments 7.2.1 Payment Authorization The Fiscal Agent will double check to make sure the beneficiary is not included in any of the following excluded parties lists:

1. System for Award Management (SAM): https://www.sam.gov/portal/public/SAM/?portal:componentId=1f834b82-3fed-4eb3-a1f8-ea1f226a7955&portal:type=action&interactionstate=JBPNS_rO0ABXc0ABBfanNmQnJpZGdlVmlld0lkAAAAAQATL2pzZi9uYXZpZ2F0aW9uLmpzcAAHX19FT0ZfXw**

2. World Bank Debarred List: http://web.worldbank.org/external/default/main?theSitePK=84266&contentMDK=64069844&menuPK=116730&pagePK=64148989&piPK=64148984

3. US Treasury, Office of Foreign Assets Control, Specially Designated Nationals List (SDN): http://sdnsearch.ofac.treas.gov/

4. US Department of Commerce, Denied Persons List: http://www.bis.doc.gov/dpl/default.shtm

5. US Department of Commerce, Entity List: http://www.bis.doc.gov/entities/default.htm 6. US State Department, Directorate of Defense Trade Controls, Debarred Parties List:

http://www.pmddtc.state.gov/embargoed_countries/index.html 7. US State Department, Terrorist Exclusion List:

http://www.state.gov/j/ct/rls/other/des/123086.htm In replacement of the previous lists, the Fiscal Agent may verify excluded parties within the system of any online consultation services provider which meets the requirements established by FOMILENIO II. This review will help confirm that the beneficiary has not been added to the lists since the contract was awarded. The Fiscal Agent will need to comply with the periodic verification requirements for the eligibility of all those persons or legal entities involved in contracts or effective payment processes from January 1st to July 1st of every calendar year.

https://www.sam.gov/portal/public/SAM/?portal:componentId=1f834b82-3fed-4eb3-a1f8-ea1f226a7955&portal:type=action&interactionstate=JBPNS_rO0ABXc0ABBfanNmQnJpZGdlVmlld0lkAAAAAQATL2pzZi9uYXZpZ2F0aW9uLmpzcAAHX19FT0ZfXw**




http://web.worldbank.org/external/default/main?theSitePK=84266&contentMDK=64069844&menuPK=116730&pagePK=64148989&piPK=64148984

http://web.worldbank.org/external/default/main?theSitePK=84266&contentMDK=64069844&menuPK=116730&pagePK=64148989&piPK=64148984

http://sdnsearch.ofac.treas.gov/

http://www.bis.doc.gov/dpl/default.shtm

http://www.bis.doc.gov/entities/default.htm

http://www.pmddtc.state.gov/embargoed_countries/index.html

http://www.state.gov/j/ct/rls/other/des/123086.htm


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The CPS payment process begins by sending the approved invoices and the Payment Request Forms. All FOMILENIO II invoices are approved and certified based on the policies and procedures provided by this FAP. Once the invoice is approved and certified, the Fiscal Agent prepares and submits the corresponding Payment Request Form (PRF). There are two different forms which may be submitted: (1) Non-American Bank Payment Request Form (For ITS disbursements); and/or (2) American Bank Payment Request Form. If FOMILENIO II requests both disbursement types (U.S. and non-U.S. Banks), both forms will need to be submitted. Payment Request Forms (PRF) must be approved by two Fiscal Agency representatives, and in certain countries due to additional internal controls, they must also be approved and signed by FOMILENIO II’s GAF (or another delegated official, depending on the case). And for flexibility’s sake the Payment Request Forms have a space for optional signatures. Officially, the Interior Business Center (IBC) will only verify that there is a name and a signature from the person preparing the payment; and a name and signature from the person authorizing the payment, meaning, the Fiscal Agent. 7.2.2 Determining the Method of Payment

These are the payment methods allowed:

7.2.2.1 Direct Payment/CPS or Payment through a Permitted FOMILENIO II account These funds will be received within a Permitted Local Bank Account, but they will be distributed to the corresponding Fund/Project/Activity included in the Payment Request Fund (PRF) to be requested whenever a valid invoice is in the Fiscal Agent’s possession, and the exact payment amount is confirmed. The Fiscal Agent will enter the corresponding invoice amount within the Payment Request Form as well as the Permitted Local Bank Account information in each invoice. All funds will be received within the Permitted Local Account and then disbursed by the Fiscal Agent. This payment method works best for those suppliers which the Fiscal Agent needs to pay through check or those providers without a bank account, or for payments where the beneficiary has a valid reason for requiring quick access to cash (for example, prepayment required to provide per diem to an employee).


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7.2.22 Payment via Transfer or Cash For all payments through the Permitted Account, the Fiscal Agent will issue a check and let the provider know it’s ready to be cashed, or he will send a transfer order to the Bank. Both forms of payment require two signatures from the personnel that has been duly authorized by the Fiscal Agent. The Fiscal Agent must then confirm that the transaction was completed through the ordinary account control procedures. In exceptional cases, and within allowed boundaries (for example, in Section 9.5, Petty Cash) disbursements could also be made from FOMILENIO II’s Petty Cash, in which case the Administrative Deputy Manager will make the provider aware that the amount is ready to be collected and will provide the owed amount against a receipt provided by one of the supplier’s authorized representatives. This method may be used for payments where the beneficiary of the funds does not have a bank account or when, due to specific circumstances, a payment through other than cash would not be practical. However, under no circumstances will payment ever be made for an amount greater than the limit determined by Section 9.5 Petty Cash. Payments for compensation of damages resulting from the execution of FOMILENIO II projects, duly approved in the Resettlement Action Plan (RAP), shall be made through bank transfers to the accounts of those affected. In this sense, the Finance Management/ Fiscal Agency in coordination with the RAP area and the Bank that provides banking and financial services to FOMILENIO II, are authorized to open bank accounts to those affected for such purposes.

7.2.3 Payment Process through the Common Payment System (CPS) Processing a payment through CPS takes five more business days, from the moment when the Fiscal Agent transfers the payment request to CPS until the time when the National Business Center issues payment instructions. According to the Fiscal Agent Agreement, this requires that invoice approval from the corresponding contract’s Project Manager, its subsequent approval by FOMILENIO II, and the generation of a Payment Request Form (PRF) by the Fiscal Agent, must all take place no later than twenty four (24) calendar days after the start date of the payment period. The CPS will then disburse the funds within another five to seven business days. For the majority of countries, the payment system should not take longer than the above mentioned term.


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The Fiscal Agent must follow all these procedures when using CPS: 1. Prepare the payment form for its approval by using the delegation of authority matrix; 2. Introduce payment dates in CPS by using accounting data provided by MCC accounting data

in the Payment Request Form; 3. Make sure that the Payment Request Form is signed by two authorized CPS parties; 4. Prepare, scan and send the Request to the MCC’s Financial Services Provider (Interior

Business Center, IBC) at [email protected], to verify that the payments being shown are:

a. Authentic; b. Within the approved Budget and Quarterly Financial Report (QFR) for said period;

c. Within the Procurement Plan approved for said period; d. In compliance with the Compact and the Program Implementation Agreement; e. In compliance with any other Implementing Entity Agreement or Related Supplementary Agreement; f. Not being paid to fund beneficiaries included in any of the Excluded Party lists; g. In compliance with the Contract or Purchase Order; h. Showing invoices and receipts that have been kept and filed, and i. In compliance with the FAP.

5. Confirm payments using the MCC’s Detailed Payment Report issued by the SPS within MCC and the International Treasury System (ITS) reports; and

6. Reconcile all balances within FOMILENIO II’s Accounting System with the MCC’s Central Financial System, and

7. Solve payment issues directly with the Interior Business Center (IBC) through a standardized investigation process.

The Interior Business Center (IBC) has three (3) business days to process all payments in within the proper systems since the moment when the PRF is submitted. Furthermore, the U.S. Treasury has two (2) business days to process and disburse all corresponding payments.

• NOTE: Payments outside the U.S. will NOT be processed by the Interior Business Center (IBC) during the last four (4) business days of the month.

The Fiscal Agent will periodically check the state of the payment request through the web-based system and/or through the payment confirmation process, conducted by the Interior Business Center (IBC) via email.

7.3 Deadline to Pay Providers

mailto:[email protected]


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The Compact and supplementary agreements determine that invoice payments are to be honored within thirty (30) calendar days after submitting a valid invoice. This term begins the day that the Fiscal Agent or FOMILENIO II (whatever happens first) is handed the valid invoice (“Start Date of Payment Period”). If the invoice is turned in before its due date, the Start Date of Payment Period will then be the original due date, in the case of basic services. The Fiscal Agent is also mandated to ensure that payments all take place within the established periods (“Payment period”), as follows:

a) Through transfers from Permitted Accounts in Local Banks. Written or email instructions need to reach the Local Bank ensuring that the date of transfer will still be within thirty (30) calendar days after the invoice was accepted.

b) Through cash or check. The recipient needs to be notified during business hours, within thirty (30) calendar days from the Start Date of the Payment Period, that the check/cash may be collected either at FOMILENIO II’s offices, or those of the Fiscal Agent, accordingly.

Any of the above mentioned payment mechanisms may be used at any given time, at the Fiscal Agent’s discretion, based on operational needs. At all times, FOMILENIO II will follow Invoice Flow procedures, and adhere to the specific terms determined in said Flow to certify each invoice so payment may be made.

7.3.1 Urgent Emergency Payments Under certain extraordinary circumstances, an unplanned requirement may be deemed as necessary, and said supplier may need to receive their payment in a shorter period of time than the one determined in the approved invoice flow diagram. Under these circumstances, the Finance Management/ Fiscal Agency, or his representative, will be authorized to determine if said payment could take place outside the approved invoice flow diagram. Additionally, he will also be held responsible for all internal controls and account renditions tied to that payment.

7.4 Payment Authorization Limits Payments to a single supplier under USD$200,000.00 may be approved by FOMILENIO II’s Project Manager.


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Payments greater than USD$200,000.00, will need additional approval by the General Manager and in his/her absence, they could be approved by the Executive Director.

7.5 Expiration of Payment Authority at the End of a Period FOMILENIO II’s authority to submit disbursement requests associated to the payment of expenses included within an approved Disbursement Request will expire on the last day of the corresponding quarter covered by said Disbursement Request, unless other measures are taken at a later time. If a new Disbursement Request is not approved for the first day of the next quarter, FOMILENIO II will not have the authority to submit disbursement requests to the PRF for any of the expenses associated to the Disbursement Request approved for the former period and for a maximum period of thirty (30) additional days. At the end of this 30 day period, all payments must stop until the MCC approves a new Disbursement Request Package and/or the MCC issues instructions to continue making payments.

7.6 Reinstating the Payment Limit Authority After the payment authority expires at the end of the period, as described above, the MCC will have the power to authorize, under exceptional circumstances, the temporary reinstatement of the payment authority to cover certain specific payments. The total amount of the reinstated payment authority may only be as high as that of the expense authority not used the previous period and will only be available during the first 30 days after the end of said period or until the next Disbursement Request submitted to the MCC, whichever comes first. The reinstatement of payment authority may only be used on expenses approved by the MCC within the context of the most recent Multi-Year Financial Plan and for which inadequate funding was budgeted or whose term will be longer than originally anticipated. Said reinstatement of authority may not be used for expenses which did not comply with the disbursement’s Precedent Conditions and the expenses paid through the reinstatement of the payment authority cannot be included in the Multi-Year Financial Plan for the following period. 7.7. SAP procedures The Finance Management/ Fiscal Agency shall record all financial transactions in SAP according to the following detail: (a) Receipt of invoices


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The Finance Management/Fiscal Agency will validate the invoice with the information of the payment file and will make the accounting record of the invoice through MIRO for invoices with PO and FB60 for invoices without PO. The date of the accounting record in SAP corresponds to the date of receipt of the invoice in accordance with the provisions of section 7 (a), as of the date that the 30-day follow-up period has started. (b) Invoice approval The Finances Management/ Fiscal Agency will proceed to create the Payment Authorization Form (PAF) with the information of the invoices registered in SAP, through ZMCC_PAF. When there are several invoices of the same sub-activity and the same source of financing, a multiple PAF can be elaborated through ZMCC_MPAF. (c) Selection of Payment Method The Finance Management/ Fiscal Agency will review the availability in the permitted accounts according to the source of financing and if the funds are sufficient will proceed to carry out the programming of payments, otherwise it will create the Payment Requisition Form (PRF, in English) through ZMCC_PRF, which will be sent to IBC through CPS. Before sending the PRF to IBC, the Fiscal Agency will review that the PRF generated through the SAP transaction code ZMCC_PRF, complies with all the coding requirements stated in the "Common Payment System Policy and Procedures" for the payment method, being able to make changes in the generated documents, as long as the document number or its total amount is not modified. (d) Payment of Invoices The Finance Management/ Fiscal Agency, according to the dates on which payment has been made at the Bank, must record the payment of invoices through F110

8 Taxes All funding from the MCC Donation is tax exempt. Based on section 2.8 of the Compact, any assistance lent by the United States of America, acting through the MCC, on behalf of the Salvadoran Government is exempt of any and all existing or future taxes, fees, tariffs, contributions or similar charges (“Taxes”) from the Government of El Salvador (including taxes issued by national, regional or local authorities, or by any other Salvadoran government or fiscal authorities). This provision applies to: (i) the Program, (ii) Compact Funding (MCC, Government counterpart funding, and any other source previously authorized by the MCC) (iii) interests or profits earned from the Compact’s funding, (iv) any of the Program’s Projects or activities, (v) FOMILENIO II, (vi) goods, works, services, technology and other assets and activities within the framework of the Program or Project; (vii) persons and entities that provide these goods,


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works, services, technology and assets or that are engaged in these activities, and (viii) proceeds, benefits and related payments. To ensure the Salvadoran Government’s compliance with their commitment to guarantee that all Compact Funding will be exempt from payment or the imposition of any kind of tax, fee, levy, special contribution or similar charges either now or in the future of El Salvador or in El Salvador, the following mechanisms have been approved:

a) Recognition of tax exemptions granted in accordance with the applicable law; b) A payment by the Government to FOMILENIO II or the MCC in benefit of the Program,

for an agreed amount, representing all taxes levied on the items described in Section 2.8 (a) of the Compact;

c) A tax refund or return by the Government to the MCC, FOMILENIO II and every Provider, Covered Provider, Implementing Entity, Contractor (Main Contractors and Sub-contractors), Consultant, Private Investor under the Secondary Activity of the El Salvador Investment Challenge (ESIC) and other exempt entities or individuals that receive MCC funds or from Government counterpart funds, directly or indirectly, in furtherance of the Compact; and

d) The reimbursement of taxes paid in contrast to the provisions of Section 2.8 (a) of the Compact or in the Program Implementation Agreement.

The applicability of the above mentioned mechanisms must be thoroughly described in the Fiscal Agreement entered into between FOMILENIO II and the Salvadoran Ministry of Finances (Ministerio de Hacienda de El Salvador), whose main objective would be to enforce the tax component and the mechanisms to implement the tax exemptions included in the Millennium Challenge Compact. At least at a monthly basis, the amount of tax paid by FOMILENIO II, under Acquisitions carried out in a determinate period; Fiscal Agent must make the repayment of that amount no later than the last day of the month, using funds provided by the Government to tax reimbursement. In exceptional cases, when the current spending authority for the quarter is not sufficient to cover the net amount plus taxes to be paid on an invoice, the Fiscal Agent may make simultaneous refunds of taxes, for which purpose, transfer before payment of the invoice, the amount of taxes to be reimbursed simultaneously.

9 Cash Management


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9.1 Estimating Cash Requirements Estimates of cash requirements will be made quarterly in conjunction with the Detailed Financial Plans (DFP) and taking into account the following responsibilities:

9.1.1 FOMILENIO II With the support of the Finance Management /Fiscal Agency, and the information provided by the Project Managers, FOMILENIO II will prepare a consolidated Detailed Financial Plan and an estimate of the cash requirements for the following quarter in preparation for the Disbursement Request. FOMILENIO II will consider:

a. Cash estimates for the following quarter of the Detailed Financial Plan presented by the Project Managers;

b. Estimates of commitments for the following quarter of the Detailed Financial Plan, DFP;

c. All unused amounts, estimated still to be unused at the end of the quarter underway;

d. The amount of interests expected for the following quarter, and e. Other sources of funds, such as tax returns and reimbursements from the

Government of El Salvador. Tax reimbursements, under any shape and form, are considered as MCC donation funds, given that taxes previously anticipated to the government are reimbursed to the programs.

Estimates concerning required cash will be made by FOMILENIO II in the section “DFP-Cash” (Detailed Financial Plan – cash), included in the Disbursement Request. The main way to guarantee cash availability is to confirm that at the time of registering a commitment, there is sufficient cash money to make the payment through the Common System Payment, or that said cash payment belongs to a subsequent quarter, and that said commitment is included within the “DFP-Commitments”.

9.1.2 Fiscal Agent The Finance Management / Fiscal Agent must control the amount of funds available in each Permitted Bank Account, and the amount of budgeted funds for Program and Project activities during the current and subsequent quarterly Disbursement Periods, or with a greater frequency as considered fitting, to guarantee enough available cash within the Payment Authority for the period in question.


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The Finance Management/ Fiscal Agent must provide a monthly certification (or more frequently, as provided) to FOMILENIO II for fund implementation. All estimates regarding cash and budget requirements will be made in dollars.

9.1.3 Project Managers Project Managers will provide a rolling quarterly estimate for the Compact’s remaining term, level of commitments and cash requirements to liquidate said commitments and face other expenses where there are no previous commitments and submit this estimate to FOMILENIO II.

f. Project Managers will consider the time required for procurement, contract implementation and supplier delivery when determining cash payments which may be required.

Combination of Funds

The funds provided by the MCC should not mix with other sources, except as expressly provided by the MCC.

9.2 Disbursements

No Disbursement Request may be executed unless it is in compliance with the Compact, other supplementary agreements and has the necessary authorizations as determined by this FAP. All disbursement requests will include cash needs during the following quarter, broken down per month throughout the quarter. Disbursement Requests will be presented along the Quarterly Financial Reports, and even more frequently if the MCC allows it. Disbursement Requests will be submitted to the MCC twenty (20) calendar days before the end of that quarter, as described in Section 5 above, Guidelines for Disbursement Requests and Report Presentation Packages. FOMILENIO II will submit to the MCC in writing their assigned account number and the bank transfer instructions for the Permitted Account no later than ten (10) calendar days before the MCC’s initial Disbursement. If the changes to the Permitted Account during the Term of the Compact or the Permitted Account’s information were to change in regards to said account, FOMILENIO II will submit in writing to the MCC any changes to said Permitted Account Information filed with the MCC as soon as possible, and under no circumstance any later than ten (10) calendar days before the MCC’s last immediate Disbursement.


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FOMILENIO II will notify the bank to refrain from depositing MCC Disbursements in a closed Permitted Account, and will immediately report to the MCC the reasons for closing said Account. Once the Disbursement Request is approved by the MCC, or even if it isn’t, if a new disbursement is not being requested, the MCC will report to the Interior Business Center (IBC) the amount approved by the MCC for the quarterly Authorized Expenditure within the Disbursement Period. The Interior Business Center (IBC) will then authorize all Payment Request Forms for up to the maximum amount of Authorized Expenditures. And during the Disbursement Period, any Payment Request Forms which exceed the total amount of the approved budget within the Multi-Year Financial Play for a specific Project or Activity will be rejected by the Interior Business Center (IBC). Cash transfers to Local Accounts will be carried out by the Fiscal Agent every time the account’s funding levels need to be replenished. The Fiscal Agent must update the accounting system based on the Detailed Financial Plan reviewed for the current fiscal year.

9.3 Banking Reconciliation As part of the cash control measures, once a month and no later than 10 days after the end of the month, the Finance Management/ Fiscal Agency will prepare a Bank Reconciliation (CB) for every permitted bank account, meant to explain the differences between the bank statement balances and the cash balances in their accounts. Said reconciliation will describe:

a) Bank Statement balances at the end of the month b) Deposits in transit; c) Pending transfers; d) Bank charges; e) Balance per account at the end of the month

The bank reconciliation will be carried out by a staff member of the Finance Management/ Fiscal Agency who is not involved in the reconciled accounts payments. The designated Specialist will send the Bank Reconciliation Statements to the Fiscal Agent for his review and comments alongside a Report. And if ever an unexplained discrepancy/difference is detected, said situations should be explicitly addressed in a report.


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Within the first three (3) days after receiving the Bank Reconciliation Statements, the Fiscal Agency will issue his/her observations in writing, if applicable and/or will grant its approval to the referred reconciliation.

9.4 Petty Cash From time to time FOMILENIO II may need to pay small, local and non-recurring expenses efficiently and expeditiously. Under these circumstances, FOMILENIO II will set up a petty cash box to fulfill these needs. Said account will be established separately from the Permitted Account(s). FOMILENIO II will have a petty cash system under the following terms: a) All specific instructions concerning the use of petty cash will be determined within the

“Procedures Guideline for the Administration of the Petty Cash fund”, which will be approved under the requirements detailed in section 1.5 of the FAP.

b) This fund is the Administration Deputy Manager responsibility; however, due to practical reasons the fund’s daily management will be entrusted to a specific custodian and/or cashier. The Fiscal Agent should never, under any circumstances manage the petty cash himself. Furthermore, the person requesting petty cash funds, may not approve their own request.

c) The amount kept for petty cash 1 will be USD$2,000.00 charged against MCC funds, and also can count up to an additional USD$ 1,000 for goods and administrative services payments against GOES funds, plus the allocation for tax payments. In the case of petty cash 2, in addition to USD $2,000, you can also count up to an additional USD $1,000 for per diem payments against the GOES funds and the allocation for tax payments.

d) Petty cash funds may only be used to pay individual expenses that do not surpass USD $300.00

e) Petty cash funds may cover the expenses of urgent meetings, or programmed Board of Directors, Committee for Regulatory Improvement, Investment Committee and Sectoral Committee meetings, however all alcohol expenses will be deducted. Petty cash may also cover at any time expenses on refreshments, cookies and non-alcoholic drinks for said meetings.

f) The Executive Director is authorized to request up to USD$500 a month for Meal expenses (alcohol costs will always be deducted) in order to attend exceptional and urgent meetings concerning the achievement of FOMILENIO II’s goals. All unused balances will not be transferred from one month to the other.


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g) Petty cash can cover the cost of the rental of premises, reasonable costs of refreshments and non-alcoholic beverages for a conference.5

h) Petty cash can cover Meal expenses and beverages, excluding alcohol, for Participación Ciudadana meetings.

i) Back up documents for petty cash purchases can be invoices/original receipts and tickets which provide a description of the services provided or goods supplied, as well as the total amount, date, name and signature of the petitioner.

j) Surplus pending settlement: any staff member with an amount pending liquidation, cannot withdraw any more petty cash funds until said total has been settled.

k) Deficit pending settlement: any staff member who underestimates the original amount requested may be reimbursed for pending amounts for a total of up to US $300 after providing an invoice showing the superior cost from the original estimate.

l) At least once a month when paid expenditures add up to 70% of the total amount of the fund, the latter will be replenished by submitting a financial report to the Fiscal Agent including all invoices/receipts and tickets and a balance showing all fund movements.

m) The Fiscal Agent will authorize for the fund to be replenished. n) At least once a month, the Internal Auditor will perform a cash count, whether it’s been

pre-programmed or not.

To ensure the appropriate use of the petty cash, the following specific requirements must be accepted in full; specific guidelines pertaining FOMILENIO II must be provided to all personnel authorized to handle petty cash and furthermore, make sure it’s consistent with the report requirements also determined by FOMILENIO II. Any discrepancies within petty cash funds must be immediately reported to the General Manager. The petty cash fund entails the following mandatory aspects:

• Be very clear regarding the delegation of authority is different to the Administration Deputy Manager. Multiple petty cash funds may be needed in accordance with the Program’s requirements. If that were the case, different funds may be assigned different top expenditure levels for each transaction or even different amounts for each fund.

5 A “conference” is a meeting or workshop with the primary purpose of disseminating programmatic information that is necessary and reasonable for successful performance of the MCC Grant. A conference does not include day to day working meetings and discussions amongst Government Affiliate staff in the implementation of the MCC Grant, for which no significant costs may be incurred;


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• Set clear limits for each disbursement as well as the total amount of the Petty Cash. In the majority of cases, the limit for each transaction must not exceed the equivalent of THREE HUNDRED 00/100 U.S. DOLLARS (USD$300.00)

• Set clear limits regarding what can be charged to Petty Cash. Said funds are ordinarily used to make smaller payments, such as parking charges, office supplies, etc. Petty Cash funds shouldn’t be used instead of traditional disbursement procedures, and therefore item such as salaries, rentals, public services, outbound travel advances, etc. will not be reimbursed through these funds.

• Each petty cash request must be submitted using a specific Request Form for Petty Cash, designed by FOMILENIO II, containing the necessary approval signatures, which must include at least the Project Manager or Responsible Assigned, the applicant or the Administration Deputy Manager for administrative purchases and the fund manager. The request for reimbursement will always require proper receipts to be filed prior to any disbursement of funds when appropriate. Any petition for petty cash must be consistent with the plans of the approved FOMILENIO II program.

9.4.1 Petty Cash Fund Amounts

• The total fund float will be the MAXIMUM LOCAL CURRENCY LIMIT and will operate based on advance payments.

• Fund replenishment will be established in such a way that the funds never goes below the minimum operating level. However, said minimum should suffice to provide enough cash to cover a petty cash box’s ordinary needs

Petty Cash Fund 1 – Goods and Administrative Services Amount: US$2,000.00 (Goods and services, free of tax) – MCC US$1,000.00 (Goods and services, free of tax) - GOES US$1,000.00 (VAT, taxes, levies and registration fees) Petty Cash Fund 2 – Local per diem Amount: US$2,000.00 (Meal, transportation and lodgings) – MCC US$1,000.00 (Meal, transportation and lodgings) – Counterpart GOES US$390.00 (VAT and related taxes) 9.4.2 Petty cash custody

• This fund will be kept STRICTLY in a lockable lockbox. Access to the keys of the safe will only be available to the designated custodian / teller.


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• Each petty cash fund be kept in a separate safe separately. • The petty cash fund must publish a schedule of specific operation. • Transactions will include refunds and cash advances. • For Petty Cash Fund 2 no limit cash for each transaction, although the Administration

Assistance Manager shall record the amount of per diem paid monthly and make known the General Manager.

9.5 Fuel Vouchers

The Administration Deputy Management will be responsible for managing the regular and controlled use of all fuel vouchers in regards to necessary travel connected to pursuing FOMILENIO II’s goals. The fuel voucher fund involves all the following mandatory aspects:

a) Specific instructions to use fuel vouchers will be determined in “FOMILENIO II’s Operations Manual”

b) The fuel voucher fund is the Administration Deputy Manger’s responsibility; however, due to practical reasons, a custodian and/or person in charge may be assigned to handle the fund’s daily movements. The Fiscal Agent must not handle the fuel vouchers at any time.

c) Fuel vouchers are exclusive for the purchase of gas and diesel for official vehicles. d) The Administration Deputy Manager, or whomever the latter assigns, must keep a

control log to keep track of fuel voucher distribution and fuel use in terms of volumes and values, dates, mileage, plate numbers, voucher numbers (correlative), and any other relevant information related to the vehicle; regardless if the vehicles are owned or rented. Said control log will serve to prepare the monthly consumption liquidations, which must be accompanied by the documents described in literal f), and also it has to include the liquidation of fuel vouchers that have been granted pursuant to literal i).

e) When providing fuel vouchers to those who have requested them, the Administration Deputy Manager, or whomever they assign, will also keep record within the voucher log of all fuel vouchers delivered.

f) The documents to back up fuel use must include: a) original invoice under FOMILENIO II’s name, including a description of the services provided, the amount, date, plate number and correlative number of the vouchers used and b) the mission’s authorization format duly signed (only for those cases that apply).


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g) Fuel vouchers will be STRICTLY kept in a safety box under lock and key. Access to the safety box will only be available for the custodian/person in charge.

h) There is no fuel voucher limit per transaction, although, the Administration Deputy Manager or the custodian/person in charge will need to keep track of all vouchers paid.

i) Under certain circumstances, vouchers may be provided to Implementing Entities to help reach the Compact’s goals. In these cases, an Agreement must be subscribed between FOMILENIO II and the Implementing Entity in question, fuel voucher requests must be submitted, approved by the Project Manager and authorized by FOMILENIO II’s Administration Deputy Manager (Annex 6).

All payments made through fuel vouchers will need to be backed up with the following information:

• Invoice under FOMILENIO II’s name • Vehicle log • Official mission report • Fuel voucher payment report, in case of unused vouchers, a

memorandum must be attached describing said vouchers and the amount they are made up for.

j) At least once a month, the Internal Auditor will make a count of the fuel voucher

fund, either previously programmed or without previous notice.

10 Accounting and Submitting Reports The Finance Management /Fiscal Agency will be responsible of managing all accounting from MCC’s financial transactions.

10.1 Accounting System The accounting system kept by the Finance Management / Fiscal Agency will adjust to the principles, regulations and procedures of general accepted accounting principles. All MCC activities will determine and use the program, projects, activities, sub-activities, funding entities and the fund type.


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The register of operations in the modules of the Integrated Financial Management System (SAFI) shall be recognized in accordance with the MCC’s rules (cash), and in compliance with government regulations completing the cycle of execution of the obligations undertaken.

10.2 Account Catalogue The Finance Management /Fiscal Agency will keep an account catalogue approved by the MCC, which shall be based in an account structure authorized by the Government Accounting Department with variables of the SAP system. Each Project and Activity will be coded within the Finance Management /Fiscal Agency’s system in order to identify related policies, plans and strategies (609g, CIF /Compact, etc.). This will be used to submit reports. All CIF and Compact identification codes both for MCC Projects and Activities and the chart of accounts utilized in SAP are shown on ANNEX 3 – Accounting Codes.

10.3 Accounting Regulations Accounting regulations should be coherent with the International Federation of Accountants (IFAC), given they’re being applied to public sector organizations.

10.4 Monthly Reports The Fiscal Agent must submit the following monthly reports:

• Account Rendition Statement (Statement of Income and Expenses) for month and year ended;

• Certification of conciliation between FOMILENIO II’s accounting records and bank statement(s);

• Certification of conciliation between FOMILENIO II’s accounting records and CPS statement(s) (MCDR);

• Certification of conciliation between FOMILENIO II’s accounting records and the MCC’s accounting records (MCDR);

• Project cumulative payments to date from a single provider, regardless of the Contract, project, activity or project sub-activity;

• Follow-up report on mandatory compliance with provision that payments to suppliers are made within thirty (30) calendar days;


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• Monthly follow-up report on budget implementation. 10.5 Quarterly Reports

The Fiscal Agent must submit the following quarterly reports:

• Account Rendition Statement every quarter, finalizing on March 31, June 30, September 30 and December 31

• Quarterly Financial Reports; • Detailed Financial Plan; • Disbursement Requests.

10.6 Special Reports As may be needed, the Fiscal Agent will also provide other special reports requested by FOMILENIO II and the MCC. For example, the Fiscal Agent may be required to draft other analysis and reports for FOMILENIO II’s administration, to help decision making at an operative level, throughout every sector of the program.

10.7 Programming, Purpose and Publishing Reports

Report type or name Responsible for

the Report Due date Recipient Publication

Monthly Report Account Rendition Statement (Income and Expenses)

Fiscal Agent 14 calendar days after the end of the month

FOMILENIO II No

Monthly Budget Report Fiscal Agent 14 calendar days after the end of the month

FOMILENIO II No

Bank Reconciliation Fiscal Agent 14 calendar days after the end of the month

FOMILENIO II No

Common Payment System –CPS reconciliation (MCDR)


FOMILENIO II No

MCC reconciliation (MCRD) Fiscal Agent 14 calendar days after the end of the month

FOMILENIO II No

Budget performance report Fiscal Agent 14 calendar days after the end of the month

FOMILENIO II No

Supplier Report Fiscal Agent 14 calendar days after the end of the month

FOMILENIO II , MCC y PA

No

Prompt payment report


FOMILENIO II No

Bank cash balance (Bank statement)

Bank 5 calendar days after the end of the month

Fiscal Agent No


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Transactions report Bank 5 calendar days after the end of the month

Fiscal Agent No

Audit information Fiscal Oversight Agent

Every 30th after the end of the month

MCC, Executive Director and Fiscal Agent

No

MCC accounting information MCC Financial Services Provider

5 calendar days after the end of the month

FOMILENIO II and Fiscal

Agent

No

Quarterly Reports Quarterly Financial Reports FOMILENIO II with

the Fiscal Agent’s Support

20 calendar days before the beginning of the

following quarter

FOMILENIO II Board and the

MCC

Yes

Detailed Financial Plan FOMILENIO II with the Fiscal Agent’s

Support


following quarter

FOMILENIO II Board, MCC

Public Procurement

Agent

No

Narrative Report FOMILENIO II with the Fiscal Agent’s

Support


following quarter

MCC No

Annual Reports Annual Fiscal Oversight Agent Presentation

Fiscal Oversight Agent

30 calendar days after the closure of the contractual year

FOMILENIO II Board and MCC

No

Yearly Account Rendition Statement (FAS)

Fiscal Agent 20 calendar days after the end of the year

FOMILENIO II Yes

10.8 Ret Withholding of Records The Finance Management/ Fiscal Agency will keep electronic and paper records of all Project transactions until the end of the Compact; while the Salvadoran Government will keep electronic and paper records of al Project transactions for a period of up to five years after the Compact’s expiry or termination, or for even a longer term if necessary.

10.9 Publishing Financial Reports No later than 30 days after the MCC approves the quarterly financial reports, they will be uploaded and published within FOMILENIO II’s website.

10.10 SAP Procedures


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As required, the Finances Management/ Fiscal Agency shall generate monthly, quarterly, or annual reports through the SAP System in accordance with Section 3 - Definition of Financial Statements and Reports, Annex 3- Accounting and Finance Catalog.

11 Travels and vehicle use Travel shall only take place in furtherance of Compact objectives and shall not be used for the personal benefit of any employee or individual. All travelers (employees of FOMILENIO II, staff of the Implementing Entity or others directly involved in the implementation of the Compact) irrespective of rank must adhere uniformly to the following guidelines.

11.1 Official International travels 11.1.1 Approvals for International Travels All FOMILENIO II travelers must fill out a Travel Authorization Form, describing the reasons for the trip, a detailed budget and all advances for travel expenses required and the MCC approval. Each travel must obtain prior approval from the Executive Director and General Manager at least 7 business days before the beginning of the trip; a shorter notice may be acceptable in case of emergency and the payment will be via reimbursement. Said Travel Authorization Form, duly authorized, shall be provided to the Finance Management /Fiscal Agency for making the necessary arrangements at least one week before the date of travel for payment. A copy of the form shall be provided to the Public Procurement Management/ Public Procurement Agency with the respective requisition of airline ticket. 11.1.2 Travel Advances All travel advances may be claimed through the Travel Advance Form duly approved, the expenses than can be paid through the travel advance are: travel costs, meals, air ticket, land transportation ticket, terminal expenses and other participation costs. Once said travel advance has been approved, the Finance Management /Fiscal Agency shall grant an advance payment to the traveler’s designated account by bank transfer or bank check. 11.1.3 Allowable travel expenses – International Travels


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While with the following exceptions all means of transport can be utilized:

• Travelers shall aim to always seek the most cost-efficient means of transport. • Business class air travel is only permissible for travel durations (including flight

connections) exceeding 14 hours, as measured from time elapsed between scheduled departure of first flight and scheduled arrival time of last flight.

• First class air travel is not permissible, unless there are no flight alternatives in economy class due to lack of availability of space, as long as it is approved by MCC Director of Fiscal Responsibility.

11.1.4 Rates of Meals, Incidentals and Lodging Meal and incidental fees are included in the per diem, said amount is calculated based in the duration of the official travel. Lodging expenses include the rate of hotel rate for each night (including taxes). The applicable rates to the per diems for traveling internationally for Fomilenio II staff and consultants must not exceed the scales used by the United States Department of State (USDOS) for national and international travel. USDOS per diem tables are listed in the website: http://aoprals.state.gov/web920/per_diem.asp. Lodging expenses for travel in the continental United States will be reimbursed according to the U.S. Government Federal Travel Regulations promulgated by the U.S. General Services Administration (www.gsa.gov). Lodging expenses are reimbursable for actual expenses incurred up to the limits set forth, according the following: (i) by the international per diem rates established by the United States Department of State (www.state.gov) for travel outside the United States, (ii) by the U.S. Government Federal Travel Regulations promulgated by the U.S. General Services Administration (http://www.gsa.gov/) for travel within the continental United States, or (iii) by written agreement between MCC and the Government Affiliate. In the event that there is not possible to obtain a Government rate at the Hotel, the traveler is entitled to receive the amount of loading at the rate offered by the Hotel, even though it is higher than the international per diem established by USDOS or GSA. This rare exception must be approved in advance by MCC´s Fiscal Director. Miscellaneous expenditures (such as internet usage, business use-only telephone costs, costs to obtain a visa or renew/obtain a passport, insurance, taxis, etc.) which may be required for

http://aoprals.state.gov/web920/per_diem.asp

http://www.gsa.gov/


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successfully achieving the purpose of the trip., are reimbursable if they are documented and necessary to achieve the specific travel purpose. In Addition, terminal expenses incurred for each required trip between the airport or other point of arrival or departure and the hotel or other place of dwelling shall be paid in a fixed amount (US$38 per each route), against submission of invoices and receipts. 11.1.5 Travel Liquidation Travel expenses including advance payments must be settled after returning to the place of work. With the exception of per diem (meals and incidentals), all expenses must be documented, and documents such as (plane tickets, boarding passes and hotel invoices) must be presented to justify a reimbursement request due to travel expenses. Under certain and exceptional circumstances, such as the loss of said documents, the travel will be able to provide a substitute receipt, explaining the reasons why the original documents were not provided. The hotel invoices is presented to reconcile advances / claim reimbursement, although the total daily reimbursement shall not exceed the maximum amount specified in the travel policy. In cases where the amount of the invoice is less than the allowance for accommodation, reimbursement will be based on the amount of the invoice. Every Traveler is responsible of preparing the following documents: 1. Mission Report 2. Prepare the Cash Advance liquidation t Report after the trip, providing details of all

expenses made throughout its duration; 3. Attach all hotel invoices and receipts, airfare tickets/boarding passes/vouchers in an

orderly fashion, pasting them in a sheet of bond paper to avoid misplacing them; 4. Forward the above mentioned document to the General Manager for his approval. In the

case of the General Manager, the reports will be approved by the Executive Director. The Executive Director will present a biannual report of International Travels to the Board of Directors;

5. Every traveler, including the General Manager and the Executive Director, will submit to the Fiscal Agent the documents mentioned in numerals 2 and 3

The Finance Management/ Fiscal Agency will verify the settlement report’s accuracy. If the expense is greater than the requested advance, the Fiscal Agent will deposit the additional amount to the traveler’s bank account. In case the cash advance is greater than the expenses made, the traveler will refund (by cheque or cash) all exceeding funds to FOMILENIO II.


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Unless an express written approval is provided by the Executive Director, the Finance Management/ Fiscal Agent is bound to reject advance requests if the previous advance has not been settled. Under no circumstances will a travel advance be given to someone who has not reconciled and settled the previous advance. Checks for travel advances not picked within a thirty day period will automatically be canceled and returned to the permitted account by the Fiscal Agent. Any surplus advance of funds will be returned to the Finance Management/ Fiscal Agency FOMILENIO II, within seven (7) days after the return trip calendar, presenting the settlement form along with the amount to be refunded. The Fiscal Agent will received refunds and deposit it in the bank account permitted. Authorized exchange rate The exchange rate that FOMILENIO II recognizes as an official to carry out the calculation of travel expenses settlement is the one published at https://www.fiscal.treasury.gov/fsreports/rpt/treasRptRateExch/currentRates.htm, except that the invoice details the exchange rate applied. 11.1.6 Travel per invitation Every once in a while, the Project will request that third parties outside FOMILENIO II accompany Project Implementation Unit (PIU) members to field visits or conferences to reach Compact objectives. The approved FOMILENIO II travel form and all current regulations will be used by said individual throughout their trip. Travel invites will be backed up by a Formal Letter of Invitation including the following details:

• Ends and Objectives; and • Travel terms and conditions, including the passenger(s) name(s), duration of the trip, cost details, report submission and other appropriate requirements.

11.2 Official Local travels

11.2.1. Per diems

FOMILENIO II will pay in cash advances or will recognize reimbursements for local travels, to cover expenses for its employees and Implementing Entity Personnel or others involved directly


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with the Compact implementation, which consider expenses for meals and lodging, whenever the work assigned requires on-field visits (on an exceptional case by case approval) and when said expenses are not provided directly by FOMILENIO II, all will be paid through the Petty Cash Account for perdiems with the prior authorization.

For the payment of travel expenses, applicants must submit a receipt detailing if it is an advance or reimbursement. Under no circumstances travel reimbursement may be made without the prior authorization of the official mission.

FOMILENIO II will cover the following:

a. Pay US$21.00 for one full day of meals: US$5.00 for breakfast, US$8.00 for lunch, and US$8.00 for dinner, these amounts will be paid for official mission of at least 12 straight hours of durations or when required overnight. In the case of official missions with a minimum duration of 8 hours, only US$8.00 for lunch will be paid.

b. In cases where the official mission has a duration of more than 8 hours, but less than 12 hours, it will be recognized as follows: a) if the departure from the office (or the place of departure) is before or at 6:00 am, US$5.00 will be recognized for breakfast; b) if the return to the office (or the place of return) is later or at 6:00 pm, US$8.00 will be recognized for dinner, in addition of US$8.00 for lunch.

c. The minimum distance to cover the payment of meal should be 40 kms., taking as starting point the offices of FOMILENIO II to the place of the mission.

d. BPA Contracts between FOMILENIO II and lodging service providers can be signed in order to negotiate corporate rates.

e. Pay for all the public transportation fees, whenever it occurs, according to the requirements of the task or activities; and,

f. Normally, FOMILENIO II will provide the transportation means to all national destinations outside of FOMILENIO offices, and an extraordinary reason should happen to approve the employee’s personal vehicle use; acknowledging the following expense:

i. FOMILENIO will pay US$0.34 per kilometer traveled outside of the capital San Salvador; according to the following table.

Acajutla 85 La Libertad 35 Santa Ana 65


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Ahuachapán 100 La Unión 185 Santa Rosa de Lima 180

Atiquizaya 90 Metapán 90 Sensuntepeque 90

Chalatenango 80 Puerto El Triunfo 110 Sonsonate 65

Chalchuapa 80 Quezaltepeque 30 Usulután 110

Cojutepeque 35 San Miguel 140 Zacatecoluca 55

Jiquilisco 100 San Fco. Gotera 165 Santa Ana 65

Juayúa 80 San Vicente 60

ii. The employee’s vehicle used in this form of transportation shall have insurance policy for accident, loss or theft, and third parties´ casualties; failure to comply with this requirement will free FOMILENIO of any liability in case of any risk or accident event.

iii. All national travel in employee´s vehicles shall follow the same administrative

procedures for monitoring time and kilometers travelled used by FOMILENIO II to monitor its own vehicles.

11.2.2. Liquidation of local travel expenses

It is the responsibility of each employee to prepare cash advance liquidation report after the mission, only for accommodation expenses must submit the corresponding invoice in the name of FOMILENIO II (either for settlement of advances or reimbursements).

It is the responsibility of the Deputy Manager of Administration to validate the vehicles’ logbooks when authorizing the liquidation of the perdiem to safeguard against any audit finding the veracity of the duration of the travel and perdiem.


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11.2.3. Use of vehicles Vehicles may only be used for the purpose of complying with Compact objectives and will not be used for the personal gain of any employees or third parties. Vehicle use is managed as follows: The official use fleet will be under the Administration Deputy Manager control, and whenever required, its use will be subject to the Executive Director’s approval, his representative or any other individuals assigned to the specific Project Implementation Units. The Administration Deputy Manager will ensure that logbooks are kept for every vehicle, and include the daily mileage and all maintenance and operation costs. Logbooks and gas receipts must be reviewed and compared amongst each other periodically by the car driver supervisor. 11.2.4 Non-compliance with Travel Policies In case an employee is unable to manage, settle or reconcile advances made, the following actions will be taken:

• No more advance payments are to be given to said employee; • Settle advance payment through monthly salary deductions; • Warning letter about performance or personnel action, and • Other actions that the Executive Director considers necessary.

11.2.5 Transportation allocations for events This allowance’s objective is to pay travel expenses for beneficiaries, delegates or delegations arriving from different locations to participate in one day activities organized by FOMILENIO II. If the delegates don´t arrive in an institutional vehicle, with the prior approval of the Deputy Manager of Administration, the allowance may be paid to each delegation sharing the same vehicle by presenting the corresponding invoices (for example, for gas, vehicle rental or driver fees). If the delegates arrive in public transportation or ordinary private transportation (for example a rented vehicle), the amount paid by the delegate will be refunded upon presentation of a receipt.


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If individuals arrive in their own personal vehicles, they will not be eligible to receive the allocation or reimbursement. 11.2.6 Responsibilities of the Finances Management/ Fiscal Agency for Travel Advances The Fiscal Agent may keep a record of all travel advance requests, with the pending travel form. Furthermore, the Fiscal Agent will reconcile the balance of delivered amounts against what’s pending settlement by the employee, informing the Supervisor that the employee will make its best efforts for paying the pending balance.

12 Payroll and Personnel Administration All FOMILENIO II employees will be hired through individual labor contracts. To hire the Key Personnel (as provided for by the Compact) the approval of the Board of Directors and MCC’s non-objection will be required, not so for the other positions. Just like with all contracts that represent a financial commitment for FOMILENIO II, the Administration Deputy Manager will ensure that there is sufficient budget availability before a new labor contract is implemented.

12.1 Staffing plan FOMILENIO II staff will be integrated by qualified experts from the public and private sector necessary to fulfill its duties as provided for by the Compact, and will include:

a) Executive Director; b) Management Team; c) Support personnel.

12.2 Definition of Management Team (Key Personnel)

• Executive Director • General Manager • Legal Advisor


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• Public Policy and Communications Advisor • Internal Auditor • Finance Manager / Fiscal Agent • Procurement Manager / Public Procurement Agent • Logistical Infrastructure Manager • Environment and Social Performance Manager • Gender & Social Inclusion Manager • Monitoring and Evaluation Manager

12.3 Appointment

a) FOMILENIO II’s personnel may only be hired after an open and competitive recruitment and selection process.

b) The Executive Director may be hired and terminated by the Board of Directors, with the previous written approval of the MCC.

c) Appointment and dismissal of key personnel (Management team) as previously defined shall be subjected to the previous approval by the Board of Directors and MCC’s non- objection.

d) All FOMILENIO II personnel outside the Executive Director, will be hired and terminated by the Executive Director.

12.4 Terms of Employment The terms of employment (including reference and compensation terms) of all FOMILENIO II personnel are included in the individual labor contract, whose terms will be approved by the Board of Directors and the MCC (for labor contracts for key personnel). All Internal Work Regulations will rule jointly with the individual labor contract over all labor relations between the institution and its employees. All compensations FOMILENIO II grants its personnel must be in compliance with the latest version of the MCC’s Costs Principles. The overtime payment will be recognized for the operational team of FOMILENIO II with a monthly salary under $950.00. The procedure is described in the policy of overtime payment in the Operation Manual of FOMILENIO II.


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12.5 Payroll

a) Timesheets All FOMILENIO II personnel, except for the Executive Director, must fill out Timesheets. Timesheets will need to be signed by each employee and approved by the supervisor. Timesheets must be submitted to the Administration Deputy Manager on the 20th of each month or on the previous business day. The timesheets will be the basis for all adjustments or corrections to the next month’s payroll. The HHRR assistant will guarantee that all timesheets presented are properly prepared, authorized, registered and include all necessary attachments. The amount of leave days will be clearly determined to be deducted from each employee’s monthly salary depending on the amount of days requested per month. b) Payroll justification Managing the institution’s payroll is the assigned responsibility of the Administration Deputy Manager, and it will be their duty to determine the monthly payroll. c) Calculating the Payroll Based on the timesheet or system report, the HHRR Assistant will assess an individual payroll request for each staff member based on their basic monthly salary, bonuses in case there were any and number of worked days. The HHRR Assistant will draft a Payroll Summary for all staff members and their corresponding salaries that month to be submitted to the Deputy Manager for his/her approval. The Administration Deputy Manager shall verify that the payroll is according to the monthly budget and shall proceed to sign the same.


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The payroll will be sent to the Finance Management/Fiscal Agency no later than 3 business days before the payment period. The payment of the payroll must be made no later than the 25th of each month in accordance with the Internal Work Regulations. Afterwards, all documentation will be presented to the Fiscal Agent. d) Review and Payment by the Fiscal Agent Before any payments take place the approved payroll will be compared by the Fiscal Agent against the available budget after which all necessary deposits will be made and record in SAP system. The Fiscal Agent will then prepare the payment orders and issue instructions to transfer all salaries to the staff’s individual accounts within the local Bank. Said activity should take place no later than the 25th of every month. Once confirmation is received by the Bank, the Fiscal Agent will enter all payroll related income into the accounting system in SAP e) Taxes and Social Security All documentation required by fiscal authorities regarding taxes and social security agencies, such as periodic reports, lists, etc. will be approved and presented by the Finance Management/Fiscal Agency to said authorities. MCC funding is limited to the amount determined in every employee’s individual labor contract, or similar contracts, and there is no available additional funding which can be provided by the MCC for social security payments or contributions or to any other similar programs, in all cases, it should be executed according to available funds of the Government counterpart. f) Proof of Payment to FOMILENIO II employees Documentary evidence of payments shall be as follows: - Proof of payment to bank account - Sending payslip via email


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12.6 SAP Procedures The Finance Management/ Fiscal Agency will carry out the accounting record of the payroll to employees of FOMILENIO II in the SAP system, through FB60 and proceed to create the Form of Authorization of Payment (PAF) with the Information of the Forms registered in SAP, through ZMCC_PAF or ZMCC_MPAF. The Finance Management/ Fiscal Agency will review the availability in the accounts allowed according to the source to which the Payroll is credited and proceed to carry out the scheduling of payments, otherwise it will prepare the Payment Request Form (PRF, in English) through ZMCC_PRF, which will be sent to IBC through CPS. Payments for Payroll are considered local payments and must be required under the NA NA coding. The Finance Management/ Fiscal Agency, according to the dates on which the payment of the Form in the Bank has been made, must register the payment through F110

13 Asset Management FOMILENIO II’s Administrative Deputy Manager will keep a record of assets to keep tabs on all assets acquired regardless of its location. Assets acquired with MCC Donation funds will be used solely on behalf of the Donation’s goals and will not be available for the personal and exclusive purposes of an employee or a consultant. This policy is applicable to all entities operating in coordination with FOMILENIO II (meaning FOMILENIO II’s employees, projects, Fiscal Agent, Public Procurement Agent, Executing Entities, consultants. Fixed Assets are defined as those assets with a service life of more than one year and which are valued at less than SIX HUNDRED DOLLARS OF THE UNITED STATES OF AMERICA (usd$600.00). Assets with a value lower than SIX HUNDRED DOLLARS OF THE UNITED STATES OF AMERICA (USD$600.00), but over ONE HUNDRED DOLLARS OF THE UNITED STATES OF AMERICA (USD$100.00), or with a service life of less than one year are considered as “limited value assets”.


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13.1 Legal Requirements for Assets Management All assets acquired with Compact financing will be solely used for the compact’s objectives. Occasionally, personal and incidental use of said assets is allowed as long as it does not represent an additional significant cost. Said assets may include, but will not be limited to:

• Vehicles • Communication equipment (mobile phones, pagers, etc.) ; • Computers; • Scanners; • Photocopy and fax machines; • Etc.

In the eventual case in which due to the reckless use or as a result of existing infractions related to vehicle use or FOMILENIO II’s asset regulations the insurance company refuses to provide coverage, the employee will answer directly FOMILENIO II’s claim and cover the costs of repair in a timely fashion, based on FOMILENIO II. Repeat offenses from employees or consultants in these type of practices, will open the possibility of other penalties by FOMILENIO II’s administration.

13.2 Labeling assets All assets must be included within the assets register and be permanently labeled to show they were acquired as part of the Project and issued and issued a unique ID number that matches the register. The Administration Deputy Management will keep a Fixed Asset Register as an internal record of said assets, which will register the inventory of all fixed assets per asset category in the Institutional System of Fixed Assets (SIAF, in Spanish). When fixed assets have been assigned to a specific employee, they will be registered in SIAF and will from that point forward assume responsibility over said asset. When the work contract comes to an end, the employee will officially return the asset to FOMILENIO II and their name will be withdrawn from SIAF as a responsible party.

13.3 Record and maintenance of the Fixed Asset Register


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The Fixed Asset Register will be embedded within SIAF and will be kept by the Administration Deputy Management. The Fixed Asset Register will be entered in USD and local currencies and will include the original cost and date of purchase based on MCC cost principles (that all goods acquired are part of the expenses), therefore, depreciations shall not be recorded. Non-accounting records will document each asset, accordingly: a) Unique Identification Number (which will also be physically placed on each asset); b) Brief asset description, such as brand, model number; c) Date in which the asset was purchased; d) Asset value at the time of purchase; e) Fixed Asset’s custodian; f) Name of the Project and activity to which the Fixed Asset was assigned; g) Fixed Asset’s history, including current location. The Off records Fixed Asset Register will include the following information:

• Unique Identification Number (which will also be physically placed on each asset) • Summarized description • Date of purchase • Value • Assigned employee • Asset’s history

In case a fixed asset is assigned to a specific employee, the latter will be mandated to sign a memo including the description and unique identification code for said asset, thus assuming responsibility over it. This memo should later be added to staff files as applicable.

13.4 Inventory The ordinary inspection and physical inventory of all assets (meaning, the Inventory of the Program’s Assets) will take place at least once a year by at least two accountants selected by the Executive Director or whoever he delegates and will prepare and sign an internal order determining the name of the individuals assigned to conduct said physical inventory or will issue instructions to procure the physical count of the Program Assets.


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The results of said process together with information regarding account expenditures specific for assets records, included in FOMILENIO II financial statements will be cross-referenced by the Fiscal Agent. A memo describing the results of the physical count will need to be drafted, and it will include details of each asset’s current location and condition, plus a reconciliation with the numbers on the accounting registries. In case of discrepancies, the memo should document the reasons identified during the count and describe the necessary adjustments which need to be made. Any adjustments made on the accounting records must be approved by the Finance Management/ Fiscal Agency. If a fixed asset is stolen, said event will be registered in the SIAF along with a police report of said incident. The Administration Deputy Manager will notify FOMILENIO II’s insurance companies and file the claim to replace a lost asset. While last but not least, will also report any and all robberies to the MCC’s corresponding personnel, including the Resident Country Mission (RCM).

13.5 Insurance FOMILENIO II will make sure all equipment, furnishings and vehicles are insured against: a) Fire and explosions; b) Robbery, including external robberies, as well as those perpetrated by contractors or

employees; c) Natural accidents (Storms, floods and earthquakes); d) Energy risks (damage to equipment as a result of energy fluctuations) and e) Travel insurance for local and foreign personnel;

13.6 Use of Assets

Assets acquired with Compact’s funds will only be used to support the Program’s objectives, and aside from any casual use described in section 13.1 of this FAP, may not be used to benefit employees, consultants or any particular companies or executing entities.

13.7 Removing Fixed Assets due to damages, obsolescence, or robbery


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When a fixed asset is damaged or is deemed obsolete, its custodian will need to file a Request to Remove a Fixed Assets Form, which will include said Asset’s unique identification number, description, physical condition and the reason why its removal is being requested. The Executive Director, or whomever has been assigned to act on his behalf, along the asset’s custodian must inspect the asset. Both will be required to sign the Request to Remove a Fixed Asset Form, if it is determined the asset indeed no longer has any value. If the fixed asset was stolen, its custodian or the person assigned by the Executive Director, will establish the circumstances of the robbery and write a memo describing the incident to the Executive Director. All robberies will be reported to the police and all corresponding police reports will be filed. The Request to Remove a Fixed Asset Form will be completed, approved by the Executive Director and a copy shall be sent to the Fiscal Agent. The Fiscal Agent must include the corresponding entry within the automated accounting system, based on the appropriate form and proceed to remove the asset in question from the Fixed Asset Register.

13.8 Asset Control during Compact Closure Any remaining fixed asset by the Compact’s end will continue being considered as FOMILENIO II’s responsibility. However, if these assets continue being used, and are therefore under the control of an Implementing Entity, FOMILENIO II and the MCC should start the necessary and specific procedures to transfer ownership of said Assets, alongside the necessary instructions for responsible use and required maintenance, consistent with the MCC Guidelines for Compact Program Closure, currently available at: https://assets.mcc.gov/guidance/guidelines-compact-programclosure.pdf

13.9 Reassignment of Fixed Assets from one employee to another The reallocation of fixed assets from one employee to another, can only be done with the authorization of the Administration Deputy Manager. The Fixed Asset Administrator must prepare the asset allocation format indicating the description and the unique identification number. Both the outgoing custodian as the new individual who will be assuming responsibility for the Fixed Asset must sign the asset allocation format.

https://assets.mcc.gov/guidance/guidelines-compact-programclosure.pdf


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13.10 Transferring Assets and Terms of Use for Implementing Entities Depending on the terms established on each Implementing Entity Agreement with FOMILENIO II, an Implementing Entity may be allowed to use certain fixed assets throughout the Compact’s implementation. In said cases, FOMILENIO II will acquire these assets and may deliver or transfer them to the Implementing Entity so it may fulfill its assigned responsibilities. However, until said Fixed Assets are officially transferred to the Implementing Entity, for example, through a formal plan at the end of the Compact’s finish, FOMILENIO II will retain all ownership rights and responsibilities for each asset. FOMILENIO II, in accordance with its Program Closure Plan, may officially transfer ownership of the assets assigned for custody and use of the Implementing Entities before the end date of the Compact, through Asset Transfer Agreements, with the prior approval of the Asset Disposition Plan with the respective Policy, by the Board of Directors and MCC’s no objection.

13.11 Handover process After all purchase processes have been completed, FOMILENIO II will register all Fixed Assets internally and then continue with the handover process to the Implementing Entity; whom when receiving said assets will assume the responsibility of using them effectively, efficiently, economically and transparently to achieve the Program’s goals. However, the Entity will acknowledge at all times, that FOMILENIO II will retain ownership of said assets until the time when they are officially transferred. As a minimum requirement, the Implementing Entity will follow the procedure below:

1. Establish and keep a proper registry of all fixed assets received from FOMILENIO II as provided in Section 13.3 Register and Maintenance of the Fixed Asset Register according to the FAP.

2. Properly safeguard all fixed assets against robbery, waste, misuse and obsolescence. 3. Implement prevention mechanisms and procedures to ensure that these assets are

being provided regular maintenance to extend their service life. 4. Report every six (6) months to FOMILENIO II on the existence and operating

conditions of said fixed assets. 5. Conduct a physical verification of all fixed assets, as provided by Section 13.4

Inventory, and report all findings to FOMILENIO II’s Executive Director.


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6. Reassigning fixed assets from one employee to another, or from one location to another, as provided for in Section 13.9 of the FAP, and only after the Implementing Agency’s Program Coordinator has green lighted said changes.

8. 7. All assets must be used exclusively to fulfill FOMILENIO II objectives. FOMILENIO II will retain the rights and responsibility of ownership of each asset (including maintenance) until the assets are transferred or delivered in property to the Executing Agency

The handover process will begin when FOMILENIO II’s corresponding Project Manager partially fills out an Asset Transfer Notice, and the Implementing Entity fills out the rest, when said assets are delivered to them. The full list of identified elements within the Executing Entity Agreement as well as the register certificates are both attached to the above mentioned Notice. The FOMILENIO II Administration Deputy Manager will compare the Asset Transfer Notice against the components included within the Implementing Entity Agreement to either authorize or reject the transfer. The Implementing Entity’s representative will authorize the handover by filling out the corresponding section of the Asset Transfer Notice. And the original document of the above mentioned Asset Transfer Notice will be filed at FOMILENIO II, while the Implementing Entity will be provided with a copy.

14 Audit/Reviews

14.1 Internal Audits FOMILENIO II has a full time internal auditor. Said individual will be responsible of auditing all financial, accounting and operative records, as well as of conducting other special reviews requested by FOMILENIO II’s Board of Directors. At the same time, prior to a written designation by the Executive Director of FOMILENIO II, the Internal Auditor may review and accept the deliverables of the External Auditing Firm of FOMILENIO II.

Said position is also subject to all MCC’s general principles, guidelines and other provisions.

14.2 Other Audit Reviews of FOMILENIO II


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Compliance with the PRF and other appropriate documents is reviewed by a Fiscal Oversight Agent (FOA). The FOA’s role and responsibilities are established within the Fiscal Oversight Agreement. The FOA will submit monthly audit reports to FOMILENIO II’s Executive Director, the MCC’s Fiscal Accountability Director and the Resident Country Director of the MCC.

14.3 External Audits FOMILENIO II will develop and implement an external audits plan, based on the Auditing Guidelines. The Auditing Plan will be drafted to the MCC’s satisfaction both in form and content, and it must be developed no later than sixty (60) days before the end of the period meant to be audited. The audits to be carried out should be in accordance with the Government Auditing Standards of the United States Comptroller General (Yellow Book) and Generally Accepted Auditing Standards (GAAS) and the terms of the agreement signed between FOMILENIO II And the external audit firm. FOMILENIO II will ensure that the MCC’s authorized representatives, the MCC Inspector General’s Office, the U.S. Government’s Accountability Department, or any other auditor responsible of an audit included within the Agreement or in support of the Agreement, as well as any employees, contractors, agents or authorized representatives that participate in them, have (i) the opportunity to audit or inspect any activities being financed through MCC Funds, the use of goods and services financed with MCC Funds, and the books, records and other documents related to this agreement; and (ii) access to directors, officials, employees, affiliates, contractors, advisors, agents or any relevant government representatives as well as to any other entity receiving MCC Funds.

14.4 Submitting reports on the Improper Use of FOMILENIO II Funds or Assets.

MCC takes seriously all suspicion of fraud and corruption. The MCC Policy on Prevention, Detection and Correction of Fraud and Corruption in MCC Operations is available at the following address: http://www.mcc.gov/documents/guidance/mcc-policy-fraudandcorruption.pdf MCC requires that all beneficiaries of MCC funds, including entities operating under FOMILENIO II (i.e., employees of FOMILENIO II, projects, the Fiscal Agent, Public Procurement Agent Executing Entities and consultants, as well as bidders, suppliers , Contractors and subcontractors) to observe the highest ethical standards during the execution of the Program.


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15 Additional guidance on specific expenditures

15.1 Public Outreach and Events Grant Funds provided under the Compact may be used to host official public outreach events, receptions, lunches, dinners, and similar events, and to otherwise extend official courtesies to the stakeholders of FOMILENIO II. Generally, such events (both external and internal) may include:

• Conferences6; • Official Receptions; • Official Ceremonies; • High level meetings as needed in furtherance of the Compact; • Events associated with the Public in furtherance of the Compact; • Events associated with the Media in furtherance of the Compact; and • Any similar activity deemed necessary by FOMILENIO II Executive Director and in

the best interest of FOMILENIO II Program implementation. The use of the Grant shall be monitored closely by the Project Managers and General Manager to ensure that expenditures made for official hosted functions in connection with official events are appropriate, reasonable, necessary, managed in a manner that minimizes the costs charged against the Compact’s fund, consistent with the policy objectives of the FOMILENIO II Compact, are within amounts clearly budgeted for these purposes in the Detailed Financial Plan, and are not prohibited by any other law, rule, or regulation.

15.1.1 Restrictions on the Use of Grant funds for Public Outreach and Events

Certain specific restrictions and responsibilities apply to the use of Grant funds for public outreach events, as noted below:

6 May include the following allowable costs: rental of facilities, conference fees, speakers‘ fees (for individuals not acting in their official capacity on behalf of the Recipient Country Government or the Government Affiliate), reasonable costs of meals and refreshments, travel costs, and other items incidental to such conference unless further restricted by the terms and conditions of the MCC Grant Agreement.


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• Grant funds shall not be used to pay for the cost of meals or refreshments for FOMILENIO II employees in connection with routine working meetings;

• The number of conferences, meetings, workshops, official or ceremonial events, and the number of participants for each should be reasonable, cost-effective, and aligned with the purposes and objectives, as well as the terms and conditions, of the MCC Grant Agreement. Likewise, the locations of conferences, meetings, workshops, official or ceremonial events must be determined on the basis of lowest total cost (including all travel and organizational costs) while still meeting the minimum mission critical requirements of the Program. While there may be instances where a location other than the lowest cost for holding an event may individually conform to a standard of reasonableness due to some mission critical requirement, the Government Affiliate must consider the frequency of such proposed deviations across the Program to ensure prudent overall management of the MCC Grant.

• The costs for conferences, meetings, workshops, and official or ceremonial events are allowable only when the events are hosted or sponsored by an authorized and appropriate senior representative of FOMILENIO II.7

• Allowable costs for inviting stakeholders, beneficiaries, and the donor community are limited to those participants who are necessary for the implementation of the MCC Grant.

• Grant funds shall not be used to pay costs of entertainment, including amusement, diversion, gratuities, gifts, and social activities and any associated costs are not allowable, except where specific costs that might otherwise be considered entertainment have a programmatic purpose and are authorized by MCC in advance in writing.

• Grant Funds may not be used to purchase alcoholic beverages.

15.1.2 Documentation of the use of Grant funds used for Public Outreach and Events

The Fiscal Agent must ensure that all funds used for public events and meetings are duly budgeted and that each event is properly documented. Additionally, back up information must be provided, including the event’s location, the requests to hold the event or event plan with all previous approval of expected costs, payment method used for each receipt, as well as attendee positions and organizations they belong to.

7 Principal and authorized representative: Executive Director, General Manager and those directly responsible, whether they are Managers, Advisors or Deputy Managers.


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Charges to MCC Grants for costs of conferences, meetings, workshops, and official or ceremonial events must be set forth in records that accurately reflect the names, titles, contact information and affiliations of all participants at each event, as well as the specific purpose of each such event. These records must:

i. be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated;

ii. be incorporated into the official records and documentation of the Government Affiliate; and

iii. comply with the established accounting policies and practices of the Government Affiliate. Where necessary and when approved in advance by MCC, these policies may include exceptions for the documentation of participant requirements when and where impractical (e.g. – ground-breaking ceremony with wide geographic participation not necessarily determined in advance). Under no circumstances, however, may the Government Affiliate incur charges on behalf of an individual or direct payment of any kind to a participant without documentation of participant information.

15.2 Resettlement Action Plan and Rights of way Payments

The fiscal Agency will follow the procedures in Annex 7 for any payment related to property acquisitions, including in the case of physical relocations. All dossiers submitted to the Fiscal Agent for payment must comply with all legal requirements and appropriate endorsements before being delivered for payment. The Fiscal Agent will reject any deficient or incomplete dossier within 7 days through an internal memo. Payment methods through “Endoso Restringido”, which consists in the beneficiary or affected party authorizing FOMILENIO II to pay the amount they are owed to a third party as long as the following situations are present:

• When advance payments are made by one of FOMILENIO II’s authorized contractors. • When the property’s seller to which the beneficiary or affected party has agreed to

be resettled, awards the sale of said property through a Public Deed legalizing the sale in favor of the beneficiary or affected party.


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15.3 Payments to members of the Dispute Adjudication Boards (Conflict Resolution Tables - MRC) of FIDIC contracts.

Agreement funds may be used to pay in full the invoices of Members of the Dispute Adjudication Boards (Conflict Resolution Tables - MRC), duly appointed through the Conflict Resolution Agreements of the FIDIC contracts, and the Contractor shall reimburse FOMILENIO II (client) half of the amount paid, within a period not exceeding 15 days after notification of the reimbursement request, these payments may include but are not be limited to: a) Fixed amount per calendar month b) Daily fees for each day of travel from the member's home and the site c) Daily fees for each day of work at sites visited d) Daily fees used in reading allegations to prepare evidence tests and / or attestations e) Reasonable expenses related to the Member's obligations In relation to travel expenses, accommodation, food and unforeseen expenses, these will be paid in accordance with the provisions set forth in section 11.1 of this FAP. It is the responsibility of the Contract Administrator together with the Legal Advisor of FOMILENIO II, to manage the reimbursement of the funds within a period of not more than 3 working days after receiving the notice of the payment by the Fiscal Agency. If the contractor does not reimburse half of the amount of the invoices paid to the Member within the established deadline, FOMILENIO II will discount from the following payments to be made to the Contractor (in the valued ratio, according to the provisions established in the contractual documents).

16 Annex List

16.1 ANNEX 1 – Approval and Support Matrix

Document/ Description Approved by:


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Procurement Request (PR) Within the Procurement Plan

For the Requesting Unit General Manager, Unit Managers, Deputy Manager of Administration or Authorized Personnel8

For budget availability Fiscal Agent or representative, or Deputy Manager of Financial Administration

For FOMILENIO II/ Public procurement Public Procurement Manager / Public Procurement Agent or representative, or Procurement Specialist-Consultancies

NPC Purchases For the Requesting Unit General Manager, Unit Managers, Deputy

Manager of Administration or Authorized Personnel9

For budget availability Fiscal Agent or representative, or Deputy Manager of Financial Administration

For procurement NPC Public Procurement Manager / Public Procurement Agent or representative, or Procurement Specialist-Goods and Services

Contract Administration10 Contracts General Manager, Units Manager,

Administration Deputy Manager or its

8 Based on how the Compact’s Budget is Structured, those authorized to request purchases within the

Procurement Plan are: General Management, Human Capital, Investment Climate, Logistical Infrastructure, Planning Monitoring & Evaluation and the Administration Deputy Management. The remaining units must do so through the Budget Units supplying their resources, 9 May request NPC purchases with resources from the Project, Management, all Managers/Unit Chiefs, Advisors, etc.

9 May request NPC purchases with resources from the Project, Management, all Managers/Unit Chiefs, Advisors, etc.

10 Refers to activities supervising the implementation, supervision, receipt, evaluation and aproval of deliverables, or payment approval based on contractual terms. Any amendments or revisions to non-administrative contracts that need to be made based on the provisions of the Procurement Guidelines. For administrative contracts, standardizing these guidelines, the level of approval granted the Procurement Manager will also be held by the Administration and Finances Manager, and those actions which step over this threshold, will need to be approved by the Executive Director. All suspensions, sanctionatory processes and terminations will need to be approved by the Executive Director with the support of the Legal Advisors.


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designee. NPC Purchases General Manager, Units Manager,

Administration Deputy Manager or its designee.

Certification of Goods and/or Services Delivery (GR)

Accept / Authorize General Manager, Units Manager, Administration Deputy Manager or its designee.

Payment Authorization Form (PAF) Finances /Fiscal Agency Fiscal Agency or its designee For FOMILENIO II General Manager, Units Manager,

Administration Deputy Manager or its designee. The General Manager or Execution Director within the limitations established (Section 7.4 FAP)

Travel Plan General Manager, Units Manager, Administration Deputy Manager or its designee

Event Plan General Manager, Units Manager, Administration Deputy Manager, Public Policy and Communication Advisor or its designee

Payroll Administration Deputy Manager Quarterly Disbursement Requests and out of the cycle (QDR/OOC DR)

For the Board of Directors President of the board or Executive Director as Additional Representative to the Government

For FOMILENIO II Executive Director For Finances Fiscal Agent or its designee

CPS Payment Request Form (PRF) For Finances/Fiscal Agent Fiscal Agent or its designee, Deputy

Manager of Financial Administration or Financial Specialist authorized. It shall require 2 signatures.


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16.2 ANNEX 2– MCC Procedures to Submit Reports on Fraud and Corruption Allegations

The MCC takes very seriously all reports of suspected fraud and corruption. The MCC’s policy on the Prevention, Detection and Correction of Fraud and Corruption on MCC Operations is currently available through the following link:

http://www.mcc.gov/documents/guidance/mcc-policy-fraudandcorruption.pdf The MCC requires that all MCC fund beneficiaries, including all entities operating under Fomilenio II (meaning the Fomilenio II administration, its projects, the Fiscal Agent and the Procurement Agent, Implementing Entities and consultants, as well as the bidders, suppliers, contractors and subcontractors) observe the highest ethics standards throughout the implementation of the Program. In order to help immediately and accurately process reports of suspected fraud and/or corruption in an MCC program or project, all MCC or Fomilenio II employees, contractors and consultants as well as the general public may report any cases of suspected squandering, fraud or abuse of Fomilenio II’s funds or assets, directly to the MCC by clicking on the following link:

https://www.mcc.gov/pages/activities/activity/fighting-corruption

It is also Fomilenio II’s policy to use the Hotline to the Office of the Inspector General (OIG) at the USAID as a mechanism to report squandering, fraud or abuse. Employees, contractors, consultants and the public in general may report cases of squandering, fraud or abuse of Fomilenio II funds or assets via phone, email or regular mail by visiting the following link:

http://www.usaid.gov/oig/hotline/hotline.htm The purpose of the Office of the Inspector General’s Hotline is to receive complaints of suspected Fraud, Squandering or Abuse in any of Fomilenio II’s programs or operations, even warnings concerning bad management or a disregard for the laws, rules or regulations by employees, consultants, contractors (even the Implementing Agents) or program participants.

HOTLINE How to file reports Contact Information Confidential

Phone 1-800-230-6539

o +1-202-712-1023

YES, if requested

E-mail [email protected]

[email protected]

NO

http://www.mcc.gov/documents/guidance/mcc-policy-fraudandcorruption.pdf

https://www.mcc.gov/pages/activities/activity/fighting-corruption

http://www.usaid.gov/oig/hotline/hotline.htm




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Regular Mail

US Agency for International Development Office of Inspector General Investigations (USAID/OIG/I)

P.O. Box 657 Washington, DC 20044-0657

YES, if requested

The OIG is in charge of supervising all USAID programs and operations, the Millennium Challenge Corporation, the U.S. African Development Foundation, the Inter-American Foundation, and per request, the Overseas Private Investment Corporation. Complaints may be received directly from employees, program participants, consultants, contractors or the general public. The Inspector General Act and other relevant laws provide for the protection of individuals presenting complaints through the Hotline. Individuals may opt to present their complaints either via phone, U.S. Post Mail, Internet or E-Mail. However, if an individual chooses to file a complaint via Internet or E-mail, the OIG cannot guarantee full confidentiality given the non-secure nature of electronic systems. * Fomilenio II will make sure this policy is included within its Fiscal Accountability Plan, published in its web site and placed in a public area throughout all Fomilenio II facilities.


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16.3 ANNEX 3 – Accounting and finance Codes The SAP system has separated the different types of budget by funds, in order to separate the records of the same, according to detail: - 2000 funds for the CIF budget - Funds 3000 for the Compact budget - Funds 4000 for GOES and - 5000 Funds for GOES TAXES In the same way programs have been separated by numerical hierarchy, according to detail:

DIGIT CONCEPT

2 (1-9)

PROJECTS

PEP ELEMENT NAME 5100000 INVESTMENT CLIMATE PROJECT 5200000 HUMAN CAPITAL 5300000 INFRASTRUCTURE - LOGISTICS 5400000 MONITORING AND EVALUATION 5500000 ADMINISTRATION

3 (1-9) ACTIVITY

51100000

4 A 5 (01-99) SUB-ACTIVITY

5110100

6 and 7 (01-98) TASK

CPS, SAP y SAFI codes chart.

MCC- FUNDING SOURCE


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MCC SAFI SAP # PROYECT Project Code Activity

Code COMPACT CIF SAP

5100000 INVESTMENT CLIMATE PROJECT 5110000 Regulatory Improvement activity

BUS DEVEL 0389 40757 40730 5110100 Investment Climate Reform Unit Sub-Activity 5120000 Partnership Development Activity

BUS DEVEL 0401 40758 40731 5120100 Public-Private Partnerships Sub-Activity BUS DEVEL 0401 40759 40732 5120200 El Salvador Investment Challenge Sub-Activity

5200000 HUMAN CAPITAL PROJECT 5210000 Education Quality Activity

HUMAN CAP 0277 40760 40733 5210100 Strengthening the National Education System Sub Activity

HUMAN CAP 0277 40761 40734 5210200 Implementation of Full-Time Inclusive Model Sub-Activity

5220000 TVET System Reform

HUMAN CAP 0400 40762 40735 5220100 Integrated TVET Governance System Sub-Activity HUMAN CAP 0400 40763 40736 5220200 TVET Continuous Labor Demand Assessment Su-

Activity 5300000 LOGISTICAL INFRAESTRUCTURE PROJECT 5310000 Coastal Highway Expansion Activity

INFRSTRE 0123 40778 N/A 5310100 Works sub-activity INFRSTRE 0123 40779 N/A 5310200 Design & Works Supervision sub-activity INFRSTRE 0123 40780 40737 5310300 RAP,Environment,Social,Gender&Pub Consul INFRSTRE 0123 40781 N/A 5310400 Project implementation support sub-activ

5320000 Border Crossing Infraestructure Activity

INFRSTRE 0437 40782 N/A 5320100 Works sub-activity INFRSTRE 0437 40783 N/A 5320200 Design & Works Supervision sub-activity INFRSTRE 0437 40784 40738 5320300 RAP,Environment,Social,Gender&Pub Consul INFRSTRE 0437 40785 N/A 5320400 Project implementation support sub-activ

5400000 MONITORING AND EVALUATION(M&E) 5410000 Monitoring & Evaluation Activity MON & EVAL 0016 40767 40739 5410100 Monitoring & Evaluation Sub Activity

5500000 PROGRAM ADMINISTRATION 5510000 Program Admin Activity

PGM ADMIN 0017 40751 40724 5510100 Personnel Sub-Activity PGM ADMIN 0017 40752 40725 5510200 Additional Technical Services Sub-Activity PGM ADMIN 0017 40753 40726 5510300 Comunications And Outreach Sub-Activity PGM ADMIN 0017 40754 40727 5510400 Administration And Utilities Sub-Activity PGM ADMIN 0017 40755 40728 5510500 Audit Sub-activity PGM ADMIN 0017 40756 40729 5510600 Fiscal Oversight - Sub activity

GOES - FUNDING SOURCE

SAFI SAP # PROYECT COMPACT / CIF

5100000 INVESTMENT CLIMATE PROJECT 50097 5120200 Government Contribution ICP

5200000 HUMAN CAPITAL PROJECT

50099 5210100 Government Contribution HCP


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5300000 LOGISTICAL INFRAESTRUCTURE PROJECT

50098 5310100 Works sub-activity 5310200 Design & Works Supervision sub-activity 5310300 RAP,Environment,Social,Gender&Pub Consul 5310400 Project implementation support sub-activ 5320100 Works sub-activity 5320200 Design & Works Supervision sub-activity 5320300 RAP,Environment,Social,Gender&Pub Consul 5320400 Project implementation support sub-activ

5500000 PROGRAM ADMINISTRATION 50095 5510100 Personnel Sub-Activity

5510200 Additional Technical Services Sub-Activity 5510300 Communications and Outreach Sub-Activity N/A ALL PROYECTS

50096 N/A GOES Taxes Payment

CODIFICATION BY REGISTRATION At the moment of making the following registration, the system provides different types of posting numberation according to the type osf transaction made, for example:

TCODE POSTING NUMBER

MIRO ( Contracts and Purchase Orders) 5100000XXX

FB60 ( Without contract or purchase order)

1900000XXX

F110 ( Registration of payments) 2000000XXX

F-47 ( Advance payment request) 1700000XXX F-52 (Liquidation of advance payments) 1500000XXX

F110 (Requested income) 1300000XXX

ACCOUNTING STRUCTURE In order to be able to generate financial information for the Government from SAP system, it was taken with basis in the SAIFI accounting catalog with some variables in its use.

DIGITS ITEMS

21 Assets 30 Equity

41 Liabilities

85 Income

25 Expenditures


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16.4 ANNEX 4 – Petty Cash Counts


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16.5 ANNEX 5 – Delegation of Responsibilities Memo

MEMORANDUM

FROM: NAME OF OFFICIAL POSITION FOMILENIO II TO: NAME OF OFFICIAL DATE: MONTH, DATE 201X

CARGO FOMILENIO II SUBJECT: DELEGATION OF RESPONSIBILITIES

The reason for this memo is to leave a record that I am hereby delegating unto this memo’s recipient all the necessary authority to (describe assigned task) XXXX, during (NAME OF OFFICIAL DELEGATING AUTHORITY)’s absence, for (duration of absence) _____________.

All of the above as provided for in the Fiscal Accountability Plan in effect and other related documents. Official’s Signature: NAME OF OFFICIAL Date: POSITION


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16.6 ANNEX 6 – Request for fuel voucher – Implementing Entities

FUEL VOUCHER REQUEST

We hereby request Fuel Vouchers for a total of $________________ (in writing) (consider vouchers are available in multiples of $5.00) to be used in (official vehicle(s) with plate number: (describe vehicle plate number), make: class: within the framework of the Implementing Entity Agreement entered into by and between FOMILENIO II and XXX, to be used from the period from ______________ to ____________. All vouchers will be paid against invoices presented under FOMILENIO II’s name, vehicle logs, official missions reports and fuel voucher payment reports. In case of unused vouchers, attach memorandum reporting the existance of said vouchers as well as the amount they are worth. San Salvador, XXXX XX, 201X. Requested by: Signature and stamp__________________ NAME POSITION INSTITUTION Approval: Signature ________________________ NAME OF PROJECT MANAGER POSITION – FOMILENIO II Authorization: Signature _____________________ NAME Administration Deputy Manager – FOMILENIO II


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16.7 ANNEX 7 – Resettlement Action Plan (RAP) Payment Process

A. RAP payment must include the following requirements before they can be presented to the Fiscal Agent for payment:

g. Beneficiary Receipt stating the amount to be paid in both figures and letters. It will include as well: full description of the property being paid, date, ID number from the person receiving payment or the designated party entitled to do so, and payment instructions.

h. Payment authorization signed by the relevant Project Manager (budget owner) for payments regarding to constructions and additional works;

i. Photocopy of ID document and Tax ID card from the property owner;

j. Property assessment;

k. Public Deed establishing property ownership; and

l. NOL from MCC for the land segment claimed for payment.

B. In some instances the beneficiary will name a third party (other than the contractor) to collect his/her payment. Under those circumstances the additional documents to be presented will be:

m. Photocopy of ID document and Tax ID card from the delegated party; and

n. Power of Attorney.

C. “Endoso Restringido” Process

i. Due to the nature of construction works, the contractor will pay in full for certain segments and will later claim a reimbursement from FOMILENIO II, presenting the following documentation in addition to those listed in Annex 17, Section A, above:


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o. Photocopy of ID document and Tax ID card from the beneficiary;

p. Written authorization from the beneficiary including a full description of the property, works and fixtures affected, and value of the property paid from the contractor to the beneficiary. With this documentation the contractor will request FOMILENIO II reimburse the contractor, via “endoso restringido”, naming a representative to collect and cash the payment. All these documents must be properly notarized by a lawyer.

q. Designation of authorized party, appointed by contractor, that is entitled to receive endorsed check on the company’s behalf; and

r. Proof of payment made to the beneficiary—photocopy of check issued and receipt signed in acceptance of payment.

All these requirements entitle FOMILENIO II to pay the beneficiary by endorsing each check for collection by the contractor (as the beneficiary has granted to them collection rights through a Power of Attorney document).

The "Endoso Restringido" procedure is also allowed when land sellers has issued the Public Deed that establishes the property ownership in favor of the beneficiaries or affected of the FOMILENIO II projects.

ii. If such payments from the contractor to the beneficiary are made via cash the following requirements must also be fulfilled:

s. The cash amount paid must not exceed $300.00;

t. A note, from the contractor, explaining the reasons behind each cash payment instead of another form of payment; and

u. ACTA NOTARIAL (Public Deed document), signed and sealed by a notary, stating the beneficiary has expressed under oath that the payment was received in cash releasing FOMILENIO II and the contractor from further claims.


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D. It is the responsibility of FOMILENIO II’s RAP management to assess, validate, and authenticate every RAP dossier received by the Fiscal Agent before a payment request is submitted. The Fiscal Agent will review each dossier to determine if it fulfills all the requirements applicable to it. Otherwise, it will be returned to the sender and FOMILENIO II will not resume the payment process until the missing documents are provided.

E. The Fiscal Agent can request additional information, not listed above, if it deems necessary to support properly any particular case.

F. The Fiscal Agent will not accept the following payment methods under the “endoso restringido” process:

v. Partial payments;

w. Payments in-kind (PIK);

x. Deferred payments (e.g., advances, or payments for compliance with a future obligation);

y. Cash payments above $300.00; or

z. Payments via post-dated checks.


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16.8 ANNEX 8 – Special Reports (Data Call)

Based on the guidelines provided by MCC, the Finance Manager / Fiscal Agent will periodically provide information on accruals, retentions and advances payments to MCC. This information must be sent to MCC no later than 10 calendar days after the end of each quarter, or in some other period established by MCC in the last guideline received for such purposes. The type of information requested, although not limited, is detailed below:

1. Accruals 1.1 The first category of information required under the Accruals is called invoices "IN HOUSE",

which consists of invoices received by FOMILENIO II corresponding to work performed before the last day of the current quarter or past quarters, which have not been or do not reach paid within the current quarter. This category includes the invoices received up to the date of submission of the final report to MCC.

1.2 The second category of information consists of calculating all the estimates of works that will be completed within the current quarter or that have ended in previous quarters, and that have not yet been invoiced or approved, this category is called "ACCRUALS", these estimates should be prepared by the Contract Managers and validated by each Manager or Direct Coordinator of the sub activity, and sent to the Finance Management / Fiscal Agency on the last day of the current quarter. The estimate of goods, works and services provided, but not invoiced, must be reasonable, including all contracts regardless of their value. The documentation that supports the estimates provided to the Fiscal Agency must be kept in the Contract Administrator's file since they will be subject to subsequent revisions.

1.2.1 Works. For construction works, the estimates should be based on the specifications of the contract, the estimated amounts that will be recorded as "Accruals" should correspond to the valued of the estimated works completed at the end of the current quarter. 1.2.2 Goods. The estimate of "Accruals" in the acquisition of goods must include the total amount of the goods received before the end of the current quarter, even if they do not have payment approval. 1.2.3 Services (consultancy and non-consultancy). The calculation of the estimate must be based on the value of the services received provided prior to the end of the quarter, although the preparation of the activity report for the period is in the process of being prepared, or the product, deliverable or service is in the process of being approved.


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1.2.3.1. Services with multiples deliverables. For contracts with multiples deliverables/activities where all deliverables/activities must be met for payment, the accrual will begin when the last mandatory deliverable is completed.

2. Retentions The Fiscal Agent in coordination with the procurement agent of FOMILENIO II must present a detail of the contracts, their modifications, amendments and their status during the current quarter. The fiscal agent present the quarterly ending retention balances at the contract level. These amounts represent a percentage retained by the contractor according to the contractual terms of the approved invoice (s) and paid (s).

3. Advance payments The Fiscal Agent will report quarterly ending advance balance at the contract level, as well as the amounts amortized during the current quarter.


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16.9 ANNEX 9 – Finance Management /Fiscal Agency Procedure – Emergency Protocol COVID-19

This procedure establishes the relevant steps to be taken due to the prevailing conditions of COVID-19 in our country. The following is a detailed description of the emergency protocol to ensure the control of the financial activities of FOMILENIO II.

Objective:

To ensure the flow of financial operations and timely payments during the emergency phase.

Requirements:

It is required that the finance team and the staff in charge of the signature of documents have access to the software for digital or e-signatures to guarantee the proper operation of all approvals. Also, to ensure that staff has access to an internet connection, and access to the shared files from the Z/server and the VPN link to access to the records in the SAP System.

1-BUDGET – PURCHASE REQUISITIONS

• The Project Manager or its designee will submit the purchase requisition duly signed (e-

signature) in PDF format, to the Financial Planning Specialist. • The Financial Planning Specialist will perform a detailed checking according to the

following steps: 1. Check that the information included in the purchase request is complete and correct.

This review includes, but is not limited, to the verification of the following items: - It is consistent with the Procurement Plan. - Check that the purchase requisition includes the budget for each requested item. - Check that the purchase requisition includes the terms of reference or the detailed

specifications of the goods or services. - If the amount of the purchase requisition is a “bag”, check that it includes a memo

detailing the list of the goods or services that are intended to be purchased. - The purchase requisition must be consistent with the approvals of the MYFP and the

relevant QDR. 2. Check that the purchase requisition includes the correct GL Account, or make the necessary

corrections if required. 3. If all the information contained in the purchase requisition is correct and it includes all the

supporting documents required, the official will signed it (e-signature) and will send it by e-mail to the Fiscal Agent.


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4. The Fiscal Agent will review the supporting documentation, will signed (e-signature) the purchase requisition and will send it to the Project Manager or to the person that requested the purchase requisition’s approval.

5. Through the reports from the System and jointly with the Procurement Area that manages the status of the purchase requisitions issued in SAP that have already reviewed by the Fiscal Agency, the Financial Planning Specialist will perform the following: - Check the balance of the purchase requisitions - Check the status of the purchase requisitions.

Contact for the approval of purchase requisitions: Alba Esperanza [email protected]

2-BUDGET – COMMITMENTS

• The Procurement Agency must send a notice by e-mail regarding the contracts, purchase

orders, amendments and other documents that have been signed, indicating the file11 that contains the digital version of the document.

• The Financial Planning Specialist will perform all a detailed review though the following steps: 1. Review the commitments according to the contracts on a daily basis:

- Every Friday, send the detail of the PO and PR that are due to the units involved requesting the updating of all the documents expired in the System.

2. After receiving the digital PO from the procurement team, it is required to: - Check that the physical or digital information is consistent and correct with the record in

the SAP. - Check if the sub-activity, the funding source, amount of the commitment, detail of

deliverables are correct. - Check that the contract includes the signature and the information is correct and

complete: purchase requisition (original) and amendment, and when applicable, the bank account statement.

- Check that the PO contains the correct GL Account, and if it is not correct, request the procurement area by e-mail to make the relevant changes.

3. Confirm that the balances of the SAP contracts are consistent with the payment follow-up and make the necessary corrections.

11 The Financial Area must have access to the file in the server that contains all the contracts, purchase orders and amendments signed.



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4. Follow up on Agreements signed with implementing entities and update upon receipt of contracts.

• Keep an updated record of the expenses made under each Agreement. 5. Through the reports from the System and jointly with the Procurement Area, carry out an

updated inventory of the PO issued in SAP that has been received and reviewed by the Fiscal Agency.

6. Review the FC and its availabilities on a daily basis.

• If all the validations are correct, the Financial Planning Specialist will download the digital file

and place it in the public file Z/: finanzas – contratos recibidos. Then, will send an acknowledgment of the digital file to the Procurement Area and will notified to the financial team that the regarding documents have been received and their location.

• The Financial Planning Specialist will check the verification of contracts eligibility (suppliers) and

will update in the Z/ file the relevant outcomes. Temporarily, the prints of the consultations will be filed digitally in the correlative of the consultation date.

Contact for the submittal of contracts: Alba Esperanza [email protected]

3- VENDORS REVIEW

• The Financial Specialist – Treasury will receive the notice from the Financial Planning Specialist

about the POs that have been received including the information of where has been digitally filed.

• The Financial Specialist - Treasury will performed the following steps: 1. The Financial Specialist - Treasury will perform the following:

- Check the correct creation of the vendors and, - Check the payment information.

2. The Financial Specialist – Treasury, must notified to the procurement area by e-mail about all requests for change on vendors.

3. The Financial Specialist – Treasury must digitally sign on the backside of the Statement of Accounts confirming that the vendor and payment information is accurate and complete.



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4. The Financial Specialist – Treasury must notified to the Financial Planning Specialist about the confirmation of vendors of the PO, and will save the file in the same place where he found it.

Contact for vendors confirmation and payment information: Ana Elsy Alvarado [email protected]

4- INVOICE RECEIPT

• Contract managers must send with at least one day in advance of the invoice’s reception date,

the reports, acceptance memo, good receipt and approval of payment and other information/ documentation that supports the payment file, to the Fiscal Agency to the following e-mail addresses [email protected] and [email protected] with a copy to [email protected] and the vendor. Reports or acceptance memo of good receipt may be digitally signed.

o If the deliverables or the supporting information/documentation of the payment file is too large to send it by e-mail, the contract managers will upload the files in P:\Todos\Finanzas\Entregables, choosing the relevant sub-file of the project. The file will be named adding the contract number/PO, the abbreviated name of the vendor, the number of the product/deliverable and the relevant payment, and will notify that the document has been uploaded to the following e-mail addresses: [email protected] and [email protected] with a copy to [email protected] and the vendor.

o In the case of the Infrastructure projects, they additionally must include the Interim Payment Certificate and the ratio of work done (relación valorada), and send them by e-mail or upload in the deliverables file, as stated in the above paragraph. The infrastructure file must be named with the contract number/PO, Contractor´s name, and the number of the Interim Payment Certificate.

• Contract managers will send the payment file to the Fiscal Agency and in the same e-mail, they

will also request the vendor to send the invoice by e-mail to the following address: [email protected] to start the preliminary review as described below: 1. The Financial Analyst will receive invoices on Tuesdays and Thursdays of every week and

will check the correct issuance of thereof, as established in the FAP. 2. The Financial Analyst will check if the invoice information is included in the list of the

documentation received by the Accounting area.








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- If it is not included, the Financial Specialist – Accounting and the Administrative Assistant of the Fiscal Agency will request to the Contract Manager the pending documentation.

- If the Contract Manager is not able to complete the information, the vendor will be notified that the invoice will be returned if the pending documentation is not received in the terms established in the FAP.

3. The Financial Analyst will record the invoices in the Invoice Control and deliver them to the Accounting area for the review of the payment file.

• After the Fiscal Agency conducts the review of the invoice (scanned), and if it is correct, the Financial Analyst will update the payment tracker, will signed the invoice and will save it in the file Z/Finanzas/Facturas Recibidas, and will request the vendor to deposit the original invoice (duplicate-client that corresponds to FOMILENIO II according to the VAT Law) in the “invoice mailbox” located in the reception entrance of FOMILENIO II. If the acceptance memo and/or the payment approval for the infrastructure cases and/or the Interim Payment Certificate and the ratio of work done (relación valorada) do not include an e-signature, or if it was sent with a scanned signature, they must also be deposited with the original signatures attached to the invoice.

The invoice (and the memos with the original signature, if there is no an e-signature), must be sent in a sealed envelope labeled with the following information:

*INVOICE REFERENCE *No_______ *Contract No._____ / *PO No._____ *Contract name____________ *Contract manager _____________

Deliverable / Deliverable Name (percentage or o billing term) Amount without VAT__________________ VAT __________________________

Information for notices *Name: ___________________ *E-mail address: __________ *Phone number: ___________________ *Mandatory fields

• The process for the approval of payment will begin with the (scanned) invoices and the confirmations described in the following steps: 1. The accounting area will request by e-mail, with a copy to the Manager´s Unit, the digital

documentation of the invoice received (if there is any).


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2. The accounting area will review the invoices according to the FAP check list. - Inform about any differences and request the additional information within the established

time frame. - If everything is correct, continue to post invoices.

• Notes: 1) The same procedure is applicable for all payments received by the Fiscal Agency, including, but not limited to petty cash, tax reimbursement, fuel liquidation, utilities, premises leases, and resettlement files sent by the PAR management; 2) The Fiscal Agency may make changes or adjustments to the Reception of Invoices’ Procedure during the National Pandemic Emergency period - COVID 19, which will be notified to all the staff by email.

Contact for the reception of acceptance memo and payment files: Claudia Soriano [email protected]

Contact for the reception of invoices: Rossy Padilla [email protected]

5- INVOICE POSTING

COVID-19 PROTOCOL • All the reviews described below, will be carried out with the digital contractual documents

validated by the Financial Planning Specialist, the payment control is Z:\Finanzas\Presupuestos2\Presupuestos 2020, the file sent by the Contract Manager and the (scanned) invoice sent by email by the vendor:

Clarification: The duplicates of deliverables attached to the payment certificate approval and that are kept with the invoice in the file of the Fiscal Agency, must be temporarily kept by the contract manager, and must deliver to the Finance Area or the Auditors as an integral part of the payment file in the required date (whichever comes first), to complete the physical file.




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1. Review the invoices along with the contractual documents, receipt of goods, supporting documents, etc. - according to SAP. 2. If the documentation is complete, post the invoices in SAP. 3. If the documentation is not complete: - Send to each person in charge an email requesting to complete the information, with a copy

to the Manager of each area, and set a deadline to provide the missing documentation according to the deadlines detailed in the FAP.

- If the information is not completed within 7 days, the invoice will be returned according to the FAP procedure.

Contacts for invoice posting: Gloria Alas [email protected]

Edwin Cuéllar [email protected]

6- PAF

COVID-19 PROTOCOL • The payment authorization form (PAF) may be issued and printed in PDF, and it must be digitally

dated and signed. The official that issues the PAF is responsible for the addition of the supporting documentation of the invoice posting, and will create a file which will be named as follows:

PAF XXXXXX - PAF full number XXXXXX – last 6 digits of the invoice XXXXXX - invoice posting date (day/month/year)

• The person responsible for the posting will send the PAF e-file (PAF will include an e-signature) according to the following steps: 1. The Accountant will carry out a final review, and she will complete and sign the PAF

checking list. 2. The Financial Planning Specialist must perform a regular review of:

- The correct budget application of the account entry. - Complete and sign the PAF checking list. - Confirm the vendor´s eligibility and,




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- Place the file ready for Treasury in the file Z/Finanzas/ PAFs APROBADOS - Sign the checking list on page 2 of the PAF and send Treasury an e-mail with a copy to

the Fiscal Agent and to the Deputy Manager of Financial Administration to inform that the PAF has been uploaded in the said folder.

• Next, the Financial Specialist – Treasury, will classify the PAF by Sub-Activity and process the relevant authorization by e-mail. Upon the approval, will print the PDF and add it to the payment file. 1. Upon the reception of the PAF, the Financial Specialist – Treasury must perform the

following: - Review the payment method requested by the vendor. - Check that the copy of the invoice and the Good Receipt Report/Acceptance memo

are attached for verification and that it includes the file for the tax reimbursement to the permitted account of FOMILENIO II – Taxes, when applicable.

- Classify and organize the documents by local payments and direct IBC payments through the CPS.

- Review the balances of the permitted accounts and send notice of insufficient funds. - Request PAF’s authorizations by e-mail to the Project Managers. - Download from SAP system to schedule payment runs, and prepare a summary table

for Funding Source, Sub-Activity, Total Amount, Net Amount and Tax Amount to be reimbursed.

- Update the control tables for payments and the files of auxiliary obligations by Funding Source and Banks.

• Perform physical verification of the invoice and the payment file, so the Finance Specialist -

Treasury will develop the payment request form (PRF) - under the guidelines described in number 7- PRF- then it will be printed, dated, and signed in PDF and added to the payment file.

1. The Deputy Manager of Financial Administration must check that the payment file is

complete and certify with the e-signature that it is correct and complete. 2. The Fiscal Agent will certify and authorize with his e-signature the payment of the invoices

included in the PAF and the payment method. • For local payments, Financial Specialist - Treasury will develop a local payment run according to

the guidelines described in number 8- LOCAL PAYMENTS


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7- PRF

Step

No.

Description Responsible

1. Check that the information of the beneficiary Banks (name, codes, countries) is correct and (double-check) the information of the vendors before the development of the PRF

Deputy Manager of the Financial Administration

Financial Specialist - Treasury

2. Review the funds available in the permitted accounts and NA NA request funds.

Deputy Manager of the Financial Administration


3. - Upon receiving the transfer’s confirmations or direct

payments to IBC / NBC providers, the Financial Specialist - Treasury must:

- Notify the Accounting area about the relevant entry of payment.

- Transfer the document for archive.


Accountant

Financial Specialist – Accounting

4. If the PRF is required for local payments (NA NA), upon the reception of funds, the Financial Specialist – Treasury must:

- Send the relevant notice to the Accounting area about the reception of the funds to record the income in the permitted account.

- Transfer the documents for archive.


Accountant



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Step

No.


5. Upon receiving the payment’s confirmations from IBC/CPS (ORACLE), the following must be carried out:

- Upload the information in the SAP, and - Prepare the PRFs conciliation.

- All discrepancies or inconsistencies will be promptly informed.

- Propose remedy actions.

The follow-up of the corrections, amendments, or discrepancies in the PRFs will be conducted jointly with the IBC/CPS by e-mail.

Deputy Manager of Financial Administration

8- LOCAL PAYMENTS

Step No.


1. Check that the information of the beneficiary Banks (name, codes, countries) is correct and (double-check) the information of the vendors before creating the payment files upload in the Electronic Banking formats.



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Step No.


Enter the check information into the check printing program.

Financial Specialist – Treasury

2. With the information in the loading templates, it is mandatory to check the accounts on the Bank's platform. If the local payment is made through the ACH System, the information on the template must be checked.

Develop the upload of payments and send confirmation files for the signature authorization.

Develop / Print the check and send them for signature.



3. Check the information uploaded and approve the payments based on the authorization levels and notify their authorization.

Review the check and proceed to sign it, and then return it to the Financial Specialist – Treasury for safekeeping.

Signers

Co-signers

4. Carry out the e-payment, and print the vouchers.

Arrange the delivery of the check with the supplier.

Notify the Accounting area to record the payment.

Transfer the documents for archive.


• Send an email to the Fiscal Agent and the Deputy Manager of Financial Administration detailing the PRF that have been generated and the local payment runs.


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COVID-19 PROTOCOL • At least once a week, jointly or separately, the Fiscal Agent, the Deputy Manager of Financial

Administration and/or the Financial Analyst, will collect the invoices deposited in the “invoice mailbox”, and if everything is right, they will send the PRF to the IBC through the CPS. If the original invoice has not been received or has observations, it will be returned requesting corrections.

• For local payments, the original invoices will be added to the PAF, and the payment charges will be approved; if the invoice has not been received or has observations, it will be returned requesting the corrections.

9- PAYMENT RUNS

COVID-19 PROTOCOL • At least once a week, the Financial Specialist – Treasury will transfer to the Accounting Area the

supporting documentation for the record of the payment and will make the arrangements with the vendors that have requested the delivery of checks.

• At least once a week, the Accountant or not later than the one day after the notification from the Financial Specialist – Treasury, regarding the transfer of payment files, will record the relevant payment in the SAP System, and will safe keep the supporting documentation in the files of the accounting office in FOMILENIO II.

No. Paso


1. Make the payment run in SAP according to the documentation prepared by Treasury.

Accountant

10- PAYMENTS REVIEW

Step No.



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Step No.


1. INVOICE REVERSAL (FB08 y MR8M)

- Send an e-mail to the Fiscal Agent explaining the reasons for the reversal and request her authorization.

- After receiving the authorization of the Fiscal Agent, the accounting area will perform the reversal of the invoice in SAP.

Fiscal Agent

Accountant


2. PAYMENT REVERSAL (FBRA)

- Perform reversal of payment in SAP

Accountant


.


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ACRONYMS AND DEFINITIONS

English SPANISH Acronym/Word Definition Acronym/Word Definition Board Board of Directors for Fomilenio II Junta Directiva Junta Directiva de Fomilenio II BPA Blanket Purchase Agreement CM Contrato Marco BRS Bank Reconciliation Statement CB Conciliación Bancaria CIF Compact Implementation Funding CIF Financiamiento para la Ejecución

del Convenio Compact Millennium Challenge Compact Convenio Convenio del Reto del Milenio CP Condition Precedent CP Condición Precedente CPS Common Payment System CPS Sistema de Pago Común FM Finance Manager FM/FA Finance Manager/Fiscal Agent GM General Manager GM General Manager ADM Administration Deputy Manager SGA Administration Deputy Manager DFP Detailed Multi-Year Financial Plan PFP Plan Financiero Plurianual DR Disbursement Request SD Solicitud de Desembolso ED Executive Director DE Director Ejecutivo FA Fiscal Agent AF Agente Fiscal FAP Fiscal Accountability Plan PRF Plan de Responsabilización Fiscal FAR Fixed Assets Register RAF Registro de Activo Fijo FD Finance Department DF Dirección Financiera FOA Fiscal Oversight Agent ASF Agente de Supervisión Fiscal Fomilenio II Accountable Entity for second

compact of El Salvador Fomilenio II Entidad Responsable para el

segundo Convenio de El Salvador GOE Government-Owned Enterprise Empresa Propiedad del Gobierno GoES Government of El Salvador GOES Gobierno de El Salvador Grant Collective reference to 609(g), CIF

and Compact funds Donación Referencia colectiva al 609(g), CIF y

financiamiento del Convenio HR Human Resources RH Recursos Humanos IE Implementing Entity EE Entidad Ejecutora IEA Implementing Entity Agreement AEE Acuerdo de Entidad Ejecutora ITS International Treasury System ITS Sistema Internacional de Tesorería Key Staff Executive Director and other

specified senior staff PC Personal Clave

M&E Monitoring and Evaluation M&E Monitoreo y Evaluación M&IE Meals and Incidental Expenses C&OG Comidas y Otros Gastos MCA-MIS SAP management and accounting

system MCA-MIS Sistema de administración del SAP

y contabilidad MCC Millennium Challenge Corporation MCC Cuenta del Reto del Milenio MCDR Monthly Commitment and

Disbursement Report CMRD Compromiso Mensuales y Reporte

de Desembolsos MYFP Multi-Year Financial Plan PFP Plan Financiero Plurianual


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English SPANISH Acronym/Word Definition Acronym/Word Definition IBC Interior Business Center IBC Centro Interior de Negocios OIG Office of Inspector General OIG Oficina del Inspector General PA Procurement Agent AA Agente de Adquisiciones Públicas PM Project Manager GP Gerente de Proyecto PIA Program Implementation

Agreement AEP Acuerdo para la Ejecución del

Programa PP Procurement Plan PA Plan de Adquisiciones Públicas PPG Program Procurement Guidelines DPA Directrices de Adquisiciones

Públicas para el Programa de la MCC

PPR Procurement Performance Report REA Reporte de Ejecución de Adquisiciones

PRF Payment Request Form FSD Formulario de Solicitud de Desembolso

QDRP Quarterly Disbursement Request Package

PSTD Paquete de Solicitud Trimestral de Desembolso

QFR Quarterly Financial Report RFT Reporte Financiero Trimestral AFU Administrative and Finance Unit UAF Unidad de Administración y

Finanzas RCD Resident Country Director for MCC DRP Directora Residente de País de MCC RCM Resident Country Mission for MCC MRP Misión Residente de País de MCC RF Requisition Form FR Formulario de Requisición

FISCAL ACCOUNTABILIT Y PLAN FOMILENIO II

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Transcript of FISCAL ACCOUNTABILIT Y PLAN FOMILENIO II