The HACT Framework has 3 MODALITIES FOR TRANSFERRING CASH TO IPs:
- DIRECT CASH TRANSFERS: Funds are transferred by agency to IP before the partner incurs obligations and expenditures to support activities agreed in the work plan.
- DIRECT PAYMENTS: Funds are directly paid to vendors and others third parties by the agency for obligations and expenditures incurred by the IP to support activities agreed in the work plan.
- REIMBURSEMENTS: Funds are provided by the agency to the IP for obligations made and expenditures incurred in support of activities agreed in the work plan.
- FACE form is used by the IP to: request for funding to be disbursed, report to the agency the expenditures incurred in the reporting period and certify the accuracy of information provided. Each FACE form is accompanied by an itemized cost estimate (ICE) for each activity.
The capacity assessment consists of macro and micro assessment
The MACRO ASSESSMENT focuses on the overall public financial management system of the country. It is a review of the country’s public expenditure, procurement and financial accountability system.
The MICRO ASSESSMENT focuses on financial management capacities of specific implementing partners in the country. The micro assessment assesses the IP’s financial management capacity to determine the overall risk rating. The assessment primarily consists of interviews and a review of relevant documentation.
During the assessment, the micro assessment questionnaire is completed. The micro assessment results in an overall risk rating for the partner. There are four risk levels:
- HIGH - indicates an underdeveloped financial management system and control with a significant likelihood of a negative impact on the implementing partner’s ability to execute the programme in accordance with the work plan.
- SIGNIFICANT – Indicates an underdeveloped financial management system or control framework with a significant likelihood of a negative impact on the implementing partner’s ability to execute the programme in accordance with the work plan.
- MEDIUM – Indicates a developed financial management system and control with a medium likelihood of a negative impact on the IP’s ability to execute the programme in accordance with the work plan.
- LOW – Indicates a well-developed financial management system and functioning control framework with a low likelihood of a potential negative impact on the IP’s ability to execute the programme in accordance with the work plan.
ASSURANCE ACTIVITIES
Assurance is the term that is used to describe the process of determining whether the funds transferred to IP were used for their intended purpose and in accordance with the established procedures. Assurance activities are the core of the HACT framework risk management approach. Planning assurance activities is critical to a successful implementation of the HACT framework. The type, number and frequency of assurance activities is determined based on the risk rating of the IP and volume of cash transfers, in line with agency guidelines.
The higher the risk rating, more assurance activities are required.
3 mechanisms to obtain assurance on transferred funds to IPs:
Programmatic monitoring – process of tracking progress against plans, identifying constraints to implementation and solutions to address them (site visit to the programme location and review of progress)
- performed by programme staff on an ongoing basis throughout the programme cycle per agency guidelines. A minimum of one programme monitoring visits should be completed each programme year
Spot checks – periodic on site review of financial records of an IP. Assess the accuracy of the financial records in relation to programme implementation status and any change in the internal control environment.
- Performed by qualified agency staff of by a third party service provider
Audits – to determine whether funds transferred to the IP were used for the intended purpose and in accordance with the work plan. Audits can be:
- Scheduled audit is systematic and independent review of data, statements and records of IP related to cash transfers received. A schedule audit can be internal control (reviews the effectiveness of internal controls and a sample of expenditures) or financial audit as per agency guidelines (provides independent opinion on the financial statements). One scheduled audit is required for all IPs that have received more than US$500,000 during programme cycle.
- Special audit is conducted when significant issue arises during the programme implementation. Both scheduled and special audit are conducted by a third party service provider. Audits cannot be performed by UN staff.
SIMPLIFIED FINANCIAL MANAGEMENT CHECKLIST - UNICEF-specific tool that may be used to establish the risk rating of implementing partners that are below the UNICEF micro assessment threshold.