HACT Rules and Regulations

Presentation Layout

– Rules Objective(s)

– Rules and Regulations

– Question and Answer

Objective of HACT Procedures

The procedures are designed and responsibilities established to:

Ensure the effective and efficient use of UNICEF resources;

Manage the risks associated with transferring cash resources, including inappropriate use.

Background

In 2005, UNICEF, UNDP, UNFPA and WFP, the UNDG ExCom Agencies, adopted for use a common operational framework, the Harmonised Approach to Cash Transfers (HACT), for transferring cash to government and non-government implementing partners with the objective that the transaction costs of managing cash transfers might be reduced and implementing partner capacity to manage cash resources effectively strengthened. HACT is based on an assessment of the risks associated with transferring cash to implementing partners, including the risk that cash transferred to implementing partners may not be used or reported in accordance with agreements between the agency providing the cash resources and the implementing partner.

HACT Rules and Regulations

ProceduresTo address the risk of making cash transfers for unplanned and / or inappropriate activities, the basis for any cash transfer under HACT, regardless of the modality, is the agreed upon programmatic activities. These activities and the associated budgets are described in the Annual Work Plan.

In VISION, direct cash transfers (DCT) are recorded in:HACT Manager – for management purposes; andThe General Ledger – for financial reporting purposes.

For most DCT procedures, the management decisions and actions recorded first in HACT Manager and HACT Manager document references are automatically recorded also in General Ledger (through the ‘verification’ process step). For some procedures, specifically those related to refunds, the decisions and actions recorded first in the General Ledger are not recorded automatically in HACT Manager and care must be taken to ensure that General Ledger document references are recorded manually in the corresponding HACT Manager documents.

For impairment of DCT receivables, management decisions and actions are recorded in the General Ledger only.In VISION, direct payment and reimbursement cash transfers are recorded in the General Ledger only (in Accounts Payable).

HACT Rules and Regulations

Transfer ModalitiesHACT comprises four cash transfer modalities:

Direct cash transfers (DCT): where funds are provided to implementing partners for immediate disbursement within a period of three months for the implementation of agreed upon programme activities;Direct payments: where payments are made directly to vendors and other third parties providing goods or services for agreed upon programme activities on behalf of the implementing partner upon request and following completion of the activities;Reimbursements: where funds are provided to implementing partners for actual expenditures incurred by the partner for agreed upon programmeactivities;Direct agency implementation: where the UNDG ExCom Agency makes obligations and incurs expenditure in support of agreed upon programme activities.

HACT Rules and Regulations

DCT:- Periodicity- Issuance of cash transfers- Reporting utilizations- Liquidations- Closure of commitments

Direct Cash Transfer (DCT) Reimbursements Direct

Implementation

Cash Transfers to Sector Wide

Approaches (SWAPS)

Direct Payments

Direct Cash Transfers (DCT)-Periodicity

Periodicity

Direct cash transfers arerequested and released on a quarterly basis,for programme implementation in a period not exceeding three months, and administered on a rolling six month basis.

Therefore, UNICEF will issue direct cash transfers for two successive three month periods on request from the implementing partner. However, UNICEF requires that reporting on the use of the first direct cash transfer has been received before a direct cash transfer for a third three month period will be released.

Direct Cash Transfers….Issuance

Issuing direct cash transfers

The Programme Officer creates a Funds Commitment (FC), type ‘Direct Cash Transfer’, in VISION to reserve the financial resources required for the direct cash transfer to the implementing partner. If there is a PCA or SSFA in place with the implementing partner, the FC should be linked to the Funds Reservation created to record the PCA or SSFA.

The implementing partner requests the direct cash transfer using the Funding Authorization and Certificate of Expenditure (FACE) form. The Programme Officer certifies the FACE form following a review to ensure that:

It has been signed by the official(s) designated by the implementing partner to ensure the activities are aligned with the agreed Work Plan;Where appropriate, it includes confirmation of the satisfactory receipt of the previous direct cash transfer;The programme implementation period does not exceed three months;Detailed cost / budget estimates for the resources requested are attached;The resources requested have not been previously transferred, and are reasonable;The bank account details are correct.

Exception: In Country Offices which are small or have limited staffing, the review and certification function may be delegated to a Programme Assistant.

Direct Cash Transfers….Issuance 2

The Programme Officer / Programme Assistant creates a FACE payment request against the FC and attaches a scanned copy of the certified FACE.

The Programme Manager / Programme Officer approves the FACE payment request following a review to ensure:

the FACE form is signed by the implementing partner’s designated official(s);the FACE form is certified by the Programme Officer responsible for the Intermediate Result (IR) activities; the implementing partner has no direct cash transfers which have been outstanding for more than six months; andthe ‘Alternate Payee’, if selected, has been officially authorized to receive cash transfers by the implementing partner’s designated official.

The Operations Manager/ Finance Officer reviews the accuracy and completeness of the information in the approved FACE payment request and posts it for payment.

Payment is made via bank transfer or cheque payable to the implementing partner or the alternate payee. The Operations Manager/ Finance Officer informs the Programme Officer of the date that payment has been effected.

The Programme Officer notifies the implementing partner of the cash transfer amount approved for payment, the details of the bank transfer or cheque, and the date of payment (which is the date used to determine the period for which the cash transfer is considered ’outstanding’ and referred to as the ‘DCT issue date’).

Confirmation of the receipt of the direct cash transfer is evidenced in the subsequent FACE form received from the implementing partner.

Direct Cash Transfers….Reporting

Reporting on utilisation of direct cash transfers

Implementing partners use the FACE form to report on the utilization of direct cash transfers. The reporting timeline is based on the date of the payment or issuance of the direct cash transfer or the ‘DCT issue date’.Reporting should be received within three months on utilisation and within six months on the full utilisation of the direct cash transfer.If reporting on the full utilisation has not been received within six months of the DCT issue date, no further direct cash transfers will be made to the implementing partner.The Regional Director may approve the release of an additional direct cash transfer where reporting has not been received within six months. The Regional Director may approve the release of an additional direct cash transfer where reporting has not been received within nine months only with the Comptroller’s concurrence.

Direct Cash Transfers….Reporting 2

The approval of the Regional Director should be based on a justification received from the Head of Office which:

Identifies why the planned activity for the additional direct cash transfer is important enough to require action that is contrary to established procedures; andIncludes a report on the outstanding direct cash transfer either from

the implementing partner confirmingthe funded activity has been carried out, the cash resources provided by UNICEF have been fully utilized, the reasons for delay of submission of reporting, and the date by which reporting will be provided; or

the Head of Office explaining the specific reasons for insufficient follow up by the Country Office to previously released direct cash transfers, andmeasures instituted to ensure that direct cash transfer reporting is submitted timely.

While the implementing partner is responsible for reporting on direct cash transfers, the UNICEF Programme Officer is equally responsible for monitoring the programmatic activities financed by direct cash transfers and ensuring that reporting on utilization is received from the implementing partner timely.

Direct Cash Transfers….Reporting 3

Monitoring of the timely reporting on direct cash transfers, or the status of outstanding direct cash transfers, is facilitated through VISION, specifically in the Performance Management system. The status of outstanding direct cash transfers will be monitored on a monthly basis. The Representative is responsible for monitoring the status of outstanding direct cash transfers at the country level, the Regional Director at the regional level, and the Comptroller at the global level.

The Representative must ensure that there is a clear mechanism for timely reporting by and follow-up with implementing partners.

The certification on the FACE for the reporting of direct cash transfers requires that the implementing partner retains for a period of five years from the date of the provision of funds the detailed accounting documents supporting the reported expenditures and makes them available for examination. In cases where the supporting documentation related to the expenditures reported on the FACE is not available with the implementing partner, approval should be obtained (as described in paragraph 41 below) before adjustment is made in the monitoring system in VISION.

Direct Cash Transfers….Liquidation

Liquidation of direct cash transfers

Liquidation describes the process in which direct cash transfers which have been recorded and remain in an ‘outstanding’ status in HACT Manager are recorded as not or no longer outstanding.

The process of liquidation is required when:reporting on the utilisation of a direct cash transfer is received from an implementing partner (‘reported utilisation’);all or part of a direct cash transfer requires adjustment (‘adjustment’);all or part of a direct cash transfer is reprogrammed (‘reprogramming’);the implementing partner refunds part or all of a direct cash transfer (‘refund’);all or part of a direct cash transfer requires write-off (‘write-off’); orthe direct cash transfer is not received by the implementing partner (‘payment reversal’).

Direct Cash Transfers….Liquidation -Reported

Reported utilisation

Basis for liquidation: The approved FACE form confirming implementation of the activities and utilization of cash resources.

Process: The Programme Officer / Programme Assistant creates the ‘reported utilisation’ type liquidation document including the liquidation amount and a brief description of the liquidation and attaches a scanned copy of the approved FACE form.The Programme Manager / Programme Officer

Reviews the liquidation document and the completeness and appropriateness of the approved FACE form, Approves the liquidation document and notifies the Operations Manager/ Finance Officer.

The Operations Manager/ Finance OfficerReviews the liquidation document for completeness and accuracy,Checks that the liquidation document is type ‘reported utilisation’, and Verifies the liquidation document.

Direct Cash Transfers….Liquidation -Adjustment

Adjustment

Adjustment is required when an implementing partner informs UNICEF that the direct cash transfer has been received and utilized but that supporting documentation related to the expenditures is not available with the implementing partner for review/ audit.

Authority to approve adjustments has been delegated toRepresentative - up to $5000, per implementing partner, per year Deputy Director, DFAM Budget - over $5000, per implementing partner, per year

Adjustments should be documented and approved using the ‘Certificate of proper utilisation of UNICEF funds’ form in Section D.

Basis for liquidation: The approved ‘Certificate of proper utilisation of UNICEF funds’ form.Process: The Finance Officer / Finance Assistant creates the liquidation document including the liquidation amount and a brief description of the liquidation and attaches a scanned copy of the approved ‘Certificate of proper utilisation of UNICEF funds’ form or other correspondence approving the adjustment. For adjustments within the authority of the Representative

the Finance Officer / Finance Assistant approves the liquidation document; and the Operations Manager verifies the liquidation document.For adjustments above the authority of the Representative, DFAM approves and verifies the liquidation document.The Operations Manager informs the Programme Officer.

Direct Cash Transfers….Liquidation -Reprogramming

Reprogramming

Direct cash transfers may only be reprogrammed once.

Where all or part of a direct cash transfer is reprogrammed, the date which is used to determine the period for which the direct cash transfer is considered ’outstanding’ is changed from the date of the original issuance (or the ‘DCT issue date’) to the date of the reprogramming. This is also known as ‘resetting the ageing clock’ of direct cash transfers.

Reprogramming may be considered following the completion or cancellation of activities but not delayed implementation. The unused balance of a direct cash transfer may be reprogrammed for a similar activity within the same project, consistent with the purpose and timeframe of the funding source. For direct cash transfers funded by OR, reprogramming may require consultation with and advance approval from the donor.

There are two reprogramming scenarios:the implementing partner may indicate on the FACE form that a request for reprogramming of unused cash resources has already been made and agreed - in which case there is no need to report completion of activities with unused funds;the implementing partner may initially advise UNICEF of its intent to return and then subsequently request reprogramming of unused cash resources - in which case UNICEF will have liquidated the cash transfer (by refund) and recorded a receivable from the implementing partner which must be reversed.

Direct Cash Transfers….Liquidation –Reprogramming 2

Basis for liquidation: The approved FACE form where the implementing partner indicates that activities have been completed and requests for reprogramming of the unused cash resources from the original DCT.

Process:The Programme Officer reviews the request for reprogramming to ensure that

It is for a similar activity within the same project, It is consistent with the purpose and time frame of the funding source, and The cash resources have not been previously reprogrammed.

The Programme Officer / Programme Assistantchecks if the funds to be reprogrammed have been previously reported as a refund, and, in which caseadvises the Operations Manager/ Finance Officer to reverse the receivable that has been recorded,deletes the draft ‘refund’ liquidation document (following receipt of confirmation of reversal of receivable), andcreates the ‘reprogramme’ type liquidation document including the liquidation amount and a brief description of the liquidation and attaches a scanned copy of the approved FACE form.

The Programme Manager / Programme Officer Reviews the liquidation document and the completeness and appropriateness of the approved FACE form, Approves the liquidation document and notifies the Operations Manager/ Finance Officer.

The Operations Manager / Finance Officer checks the completeness and accuracy of the liquidation document,checks that any receivable recorded has been reversed (if the implementing partner initially advised UNICEF of its intent to return)checks that the liquidation document type is ‘reprogramme’, and verifies the liquidation document.

Direct Cash Transfers….Liquidation –Refund

Refund

On completion or termination of the programmatic activity for which a direct cash transfer was made, any unused balance of cash resources must be refunded to UNICEF. UNICEF records a receivable in respect of the refund when the implementing partner notifies UNICEF using the FACE form.

Basis for liquidation: The approved FACE form or official letter which provides information on the unused cash resources and the record of the deposit / incoming payment of the refunded amount.

Process: The Programme Officer / Programme Assistant creates the ‘refund’ type liquidation document including the liquidation amount and a brief description of the liquidation, informs the Operations Manager/ Finance Officer that a refund is expected , and attaches a scanned copy of the appropriate documentation (e.g. the approved FACE form or official letter).The Finance Officer / Finance Assistant creates a receivable in VISION, updates the liquidation document with the receivable reference number, and informs the Programme Officer.Upon receipt of the bank transfer or cheque deposit information from the implementing partner, the Programme Officer informs the Operations Manager/ Finance Officer.

The Finance Officer / Finance Assistant ensures receipt of payment into the UNICEF bank account, clears the receivable, and approves the liquidation document and informs the Operations Manager / Finance Officer.The Operations Manager / Finance Officer checks the completeness and accuracy of the liquidation document, the liquidation document type is ‘refund’ and verifies the liquidation document.If the implementing partner effects payment to UNICEF prior to notifying UNICEF of the refund, the same process is required however commencing with the creation of the receivable.

Direct Cash Transfers….Liquidation –Write-Off

Write-Off

Write-off is required when an implementing partner informs UNICEF that the direct cash transfer has been misused or lost.Requests to write-off all or part of a direct cash transfer may only be approved by the Comptroller.Requests should be documented and approved in the ‘DCT/CAG Write-off Review’ form in Section D.Basis for liquidation: The approved ‘DCT/CAG Write-off Review’ form.

Process:The Finance Officer

creates the ‘write-off’ type liquidation document including the liquidation amount and a brief description of the liquidation, provides the receivable document reference that was created when the implementing partner reported completion of the activities and a balance of unused or misused funds,attaches the ‘DCT/CAG Write-off Review’ form endorsed by Representative, andforwards to DFAM.

DFAM Obtains approval for the write-off from the Comptroller,Records the accounting entries to recognize the write-off of the receivable,reviews, approves and verifies the liquidation document, and informs the Representative.

Direct Cash Transfers….Liquidation –Payment Reversal

Payment Reversal

Payment reversal is required when the direct cash transfer is cancelled due to non-receipt of the chequeor bank transfer by the implementing partner. Notification of non-receipt by the implementing partner or by the Programme Officer must be verified by the Operations Manager / Finance Officer.

If a new direct cash transfer is made to the implementing partner, a new a FACE payment request should be created (with a revised issuance date).

Basis for liquidation: Notification of non-receipt by the implementing partner or by the ProgrammeOfficer (verified by the Operations Manager / Finance Officer).

Process:

The Finance Officer / Finance Assistant creates the liquidation document including the liquidation amount and a brief description of the liquidation, attaches the notification of non-receipt, andapproves and forwards the liquidation document to the Operations Manager.The Operations Manager / Finance Officer checks the completeness and accuracy of the liquidation document, that the liquidation document type is ‘payment reversal’ and verifies the liquidation document and informs the Programme Officer.

Direct Cash Transfers….Liquidation –JVs, Reversals and Commitments Closure

JV correction

JV Correction is used to correct the account assignment of direct cash transfers (i.e. the GL account, WBS, or grant).

JV Correction may be used only for direct cash transfers which have not been liquidated.

Corrections to the account assignment of direct cash transfers which have been liquidated may only be completed by DFAM.

Reverse liquidation

Reverse Liquidation is used to reverse liquidation so that a previously liquidated direct cash transfer would be once again recorded as outstanding.

Closure of funds commitments

The Programme Officer monitors the consumption of the FC created to reserve the financial resources for the direct cash transfer. When all transactions related to the FC have been completed, the FC is marked Set to Complete’. The balance of the reservation, if any, is returned to the budget.

Direct Cash Transfer (DCT) Reimbursements Direct

Implementation

Cash Transfers to Sector Wide

Approaches (SWAPS)

Direct Payments

- Periodicity- Issuing direct payments

Direct Payments

Direct Payments

DIRECT PAYMENTS

PeriodicityDirect payments are requested and made as required in the Annual Work Plan.

Issuing direct paymentsThe Programme Officer creates a Funds Commitment (FC), type ‘Direct Payment’, in VISION to reserve the financial resources required for direct payments to vendors and third parties. If there is a PCA or SSFA in place with the implementing partner, the FC should be linked to the Funds Reservation created to record the PCA or SSFA.

The implementing partner uses the FACE form to:request authorisation to enter into obligations with vendors and third parties, andreport on the utilisation of funds and to request direct payment to be made to the vendors and third parties.

The Programme Officer certifies the FACE form following a review to ensure that:It has been signed by the official(s) designated by the implementing partner to ensure the activities are aligned with the agreed WP;Detailed cost / budget estimates for the resources requested are attached;

The resources requested have not been previously transferred, and are reasonable;

The vendor or third party information and bank account details are correct.For the procedures on making direct payments to vendors and third parties, once certified by the Programme Officer

Direct payments made via bank transfer require no written acknowledgement of receipt. Returned checks serve as receipt when direct payments are made by cheque.

- Periodicity- Issuing reimbursements

Direct Cash Transfer (DCT)

Direct Payments

Direct Implementation

Cash Transfers to Sector Wide

Approaches (SWAPS)

Reimbursements

Reimbursements

Reimbursements

REIMBURSEMENTS

Periodicity

Reimbursements for previously authorized expenditures are requested and released on a quarterly basis or after completion of activities.

Issuing reimbursements

The Programme Office creates a Funds Commitment (FC), type ‘Reimbursement’, in VISION to reserve the financial resources required for reimbursements to the implementing partner. If there is a PCA or SSFA in place with the implementing partner, the FC should be linked to the Funds Reservation created to record the PCA or SSFA.

The implementing partner uses the FACE form to:request authorisation to incur expenditures, andreport on the utilisation of funds and to request reimbursement for expenditures incurred.

The Programme Officer certifies the FACE form following a review to ensure that:It has been signed by the official(s) designated by the implementing partner to ensure the activities are aligned with the agreed WPDetailed cost / budget estimates for the resources requested are attached;

The resources requested have not been previously transferred, and are reasonable;

The bank account details are correct.

For the procedures on making reimbursement payments to implementing partner, once certified by the ProgrammeOfficer, Reimbursements made via bank transfer require no written acknowledgement of receipt. Returned checks serve as receipt when direct payments are made by cheque.

Direct Agency Implementation

Direct Cash Transfer (DCT)

Direct Payments

Reimbursements Direct Agency Implementation

Cash Transfers to Sector Wide

Approaches (SWAPS)

Direct Agency Implementation

DIRECT AGENCY IMPLEMENTATION

Direct agency implementation is applied when UNICEF enters into obligations and incurs expenditure for goods and services in support of the agreed Work Plan.

Cash Transfer to SWAPS

Direct Cash Transfer (DCT)

Direct Payments

Reimbursements Direct Agency Implementation

Cash Transfers to Sector Wide

Approaches (SWAPS)

Cash Transfers to SWAPS

CASH TRANSFERS TO SECTOR-WIDE APPROACHES (SWAPS)

When UNICEF’s engagement in Sector-Wide Approaches results in signing a Memorandum of Understanding (MOU) or similar agreement, and agreements which regulate cash contributions (eg Joint Financing Agreements), cash transfers are based on the HACT framework and made using the DCT modality.

However, the nature of the SWAp relationship with the government partner is such that monitoring of individual transfers is neither practical nor required and refund for non-performance is also not expected. As a result, cash transfers to SWAps are regarded as expense. DCTs into SWAps are liquidated immediately upon disbursement.

ACCOUNTING

ACCOUNTING

Cash transfers are accounted for:

Direct cash transfers: as advances when transfer is made (given that the direct cash transfer is for programmatic activities which have yet to take place and must be returned to the extent that these activities do not take place as agreed) and as expense when advance is liquidated based on reporting on utilization or in good faith, as receivable when refund is expected; as impaired receivable when criteria for impairment are met. Impaired receivable are written off also based on the predetermined criteria;

Reimbursements: as expense when transfer is made (given that the reimbursement is approved for programmatic activities which have already taken place as agreed);

Direct payments: as expense when transfer is made (given that the direct payment is approved for programmatic activities which have already taken place as agreed).

If, on completion or termination of the programmatic activity for which a direct cash transfer was made, the implementing partner notifies UNICEF that there is an unused balance of cash resources to be refunded, the outstanding advance is cancelled and the refund is recorded as a receivable.

Periodically, direct cash transfer receivables are reviewed for impairment.

The following indicators are used to assess whether impairment of a specific receivable or group of receivables is required:An implementing partner defaults on implementation and reporting on programmatic activities and / or payment of refund due to national economic, political or environmental circumstances occurring in the country (e.g. civil or political strife, economic crisis);The implementing partner defaults on implementation and reporting on programmatic activities and / or payment of refund due to bankruptcy;The bank used to transfer funds from UNICEF to the implementing partner and from the implementing partner to UNICEF files for bankruptcy before UNICEF or implementing partner has withdrawn the cash resources transferred.

Direct cash transfer receivables may be written off only with the approval of the Comptroller.

It is important to note that, regardless of the timing of the transfer payment and the cash transfer expense, all cash transfers are charged fully to the budget upon issuance of payment to the implementing partner, vendor or third party. The recording of cash transfers transactions as advances is for statutory financial reporting in compliance with IPSAS. Cash transfers will be recorded as utilisation for reporting on performance and against budget and to donors on the use of their contributions.

HACT Rules and Regulations Objectives Review

You should now be able to:Describe the 4 Cash transfer modalitiesDescribe the Rules and Regulations around these transfer modalitiesDescribe the various types of liquidations processes around DCTDescribe the accounting processes associated with the transfer modalities

Questions