6. Grants and contracts procedures

This section is intended to assist in the administration of grants, contracts and fund allocations.   The goal is to minimise the time diverted from the mainstream of the implementation of projects while complying with contractual, regulatory and reporting provisions. This is done by focusing on the required coordination procedures and relationships between field-based staff and the Country Office/Head Office.

All fund allocations, grants and contracts available for programming must be listed in the Funding Portfolio Matrix (Annex 17.10) by programme sector and by Project Number (PN) and subsequently a Cash Budget Form (Annex 17.2) that indicates:

• the amounts available for expenditure
• funding timeline-effective start and end date
• expected rates of expenditure-by when does the bulk of expenditure need to be incurred?

These calculations must be made for each fund code and must be prepared by the Country Office/Head Office Finance Department, reviewed by the CO Leadership Team and approved by the Country Director. In addition, cash budgets must be officially communicated to the Team Leader, Emergency Managers, and support departments such as Human Resources and Procurement.

The Funding Portfolio Matrix is designed to monitor the status of all funding sources available and expected. It also indicates the funding timeline and the funding distribution by programme sector. Two versions of the Funding Portfolio Matrix are available under Annex 17.10.  Option A-B (Blank Form and Example, respectively) is for COs with the capability to produce expense reports and contract status reports on demand at any time. Option C-D (Blank Form and Example, respectively) is for COs with scheduled or limited expense reporting.

The Funding Portfolio Matrix highlights several important financial indicators that should be monitored carefully. For example:

• gaps and excesses in funding
• monitoring expenditure rates against the budget from the start of funding to the present
• contract expired time and actual monthly expenditure rate against required monthly expenditure rates
• valuable contract information including reporting schedule.

This document should be prepared and updated by the CO Grants and Contracts/Finance Controller with input from budget preparers, and should be circulated to Team Leaders and other field-based staff at least twice a month.

The following are the steps to calculate the amount available for expenditure at the emergency site(s), and is to be documented in the Cash Budget Form (Annex 17.2) and referenced in all cash requests. From the contract amount:

• subtract ICR and/or Adret (Internal Cost Recovery/ Administrative Retention)
• subtract Shared programme costs (SPC) and other administration cost pools that are not related to field operations
• calculate and subtract all major procurement items and headquarters-earmarked items that will be procured by the CO headquarters Procurement Department
• calculate and subtract employee salaries not disbursed at the emergency site-for example, international staff salaries
• calculate and subtract employee benefit line items not paid in cash during the life of the grant but must be accrued by the CO (pension, annual leave, etc.)
• identify and list all budget deficits/excesses detected during the process. For example, overestimate/underestimated direct staff salaries and benefits
• identify and list all required cost items that are not included in the budget. This is common in grants where, due to donor expense restrictions, certain staff benefit costs were not considered or covered.

Once the amount available for expenditure at the emergency site has been calculated, a detailed Cash Budget must be developed by itemising all expenditures to be incurred at the emergency site(s). It is important to note that Cash Budgets are just subsets of the total grant budget and therefore final donor reporting must be prepared where the complete set of accounting books is maintained.

Cash Budgets are prepared using the attached Cash Budget Form by project and by allocating project costs to the different funding sources. In addition, all identified budget deficits and excesses detected must be listed in the Cash Budget to be resolved by the CO Leadership Team.

The Country Office Finance Department is responsible for providing the Team Leader and other Emergency Managers with an executive summary for each fund allocation, grant and contract.  This information should be explicit in terms of:

• allowed and disallowed expenditure
• duration of funding, including effective funding start and end dates
• reporting requirements and frequency
• budget line item flexibility, if any (or indicate if there is no flexibility)
• process for calling forward funds and process acquittal of contract funds (Who is responsible for the requisition of funds? What is the process to follow? What is the number of instalments?)
• any special requirements that may affect operations-for example:

• donor involvement in procurement bidding procedures
• unusual internal control requirements (special stamps, etc.)
• disbursement of funds tied to special conditions such as audits, reporting, etc.
• original receipts for all financial transactions are to be forwarded to the donor at the end of the project period (this affects how filing is done).

To the extent possible, this summary should not exceed 1-2 pages and existing Contract Review forms (Short List) should be attached. The Internal Audit Department should also be responsible for ensuring that any special requirements are interpreted, communicated and implemented correctly.

The key to ensuring budget compliance is to implement activities and process accounting transactions in line with the terms and conditions in the contract. In those instances where donors require expenditure reporting in a non-CARE format, it is necessary to adjust accounting practices to accommodate these requirements in the daily routine, so as to avoid addressing these at a later stage. The main changes in the accounting practices are:

• Cash disbursements procedures require that donor line items are included in the account code string for each transaction at the time that the transaction voucher is prepared, and before it is authorised and approved.
• Approvers must verify/certify that these accounting entries are consistent with contract line items to achieve programme objectives.
• To ensure that complete sets of records are available, it is required that the Transaction Ledgers, which are maintained at emergency operation sites, are to be uploaded into Sun/Scala/Serenic once a week.
• If the CO does not have the required reporting systems in place to allow the preparation of donor reporting in the donor format, it is recommended that the Grants and Contracts Unit be assigned additional staff and resources to keep up with reporting needs.

Furthermore, because the overall financial position of an emergency programme can change very quickly, the following are the required tasks to be carried out or coordinated by the CO Finance Department to ensure regular donor reporting:

• Update the Funding Portfolio Matrix and inform the CO Leadership Team of changes that affect existing Cash Budgets.
• Prepare/review/update Cash Budgets for review by the CO Leadership Team.
• Upload transactions into Scala/Sun/Serenic at least once a week to ensure that the record sets used for reporting are accurate and conform to the donor line item structure.
• Upload budget type 2 (Life of Grant Budget) to the Scala/Sun/Serenic budget module, and reconcile uploaded figures to ensure that budgeted amounts are consistent with contract amounts and any subsequent amendments
• Review transaction codes at least once a week. Ensure that donor codes are used where necessary and identify transactions that fail to meet donor reporting criteria. Investigate the reasons for the exceptions, and inform the Finance Manager as to the cause of and solution for the issues.
• Coordinate grants close-out procedures by maintaining close coordination with the Team Leader and project staff, and ensure that all financial close-out activities are also considered. Request and ensure that the activation/deactivation of fund codes has been carried out at all sites (main office and sub-offices) so that project expenditure is also discontinued. Communicate all contract close-out steps and activities in writing.
• Coordinate the preparation of CARE-to-donor coding sheets and instructions, and provide the required documentation to field-based finance staff at the same time as the start-up of project activities.
• Provide ad hoc training and support to field staff when they are having problems using donor coding sheets.
• Participate in new proposal writing efforts by providing guidance, tools and cost information to speed up budget preparation and mapping to the required donor format. Identify and document all funding deficits/excesses, and present these to the Finance Manager to be resolved at the CO Leadership Team level.

The main objective is to ensure that emergency operations receive the required monitoring, guidance and support from the Country Office/Head Office Finance and Audit Departments, and not be left alone to improvise and assume complete accountability of what is happening in the field. Emergency operations must be supported consistently by CO Finance and Audit Departments as part of their regular responsibilities.

The auditing support that is required in emergency operations should focus on understanding the systems in place, their operation and how they maintain the integrity of CARE’s assets, and to ensure proper service delivery to beneficiaries. This is different from what a regular compliance audit is designed to accomplish, but ensures positive audit results in compliance with donor contract terms. The following are the required tasks:

• Identify potential financial and administrative risk areas, and recommend corrective actions to ensure that the potential impact is kept to an acceptable level.
• Review staff job descriptions and identify issues concerning segregation of duties, and recommend compensatory controls.
• Participate in cash counts, spot checks and other reviews in which an independent opinion is sought or required.
• Review coordination lines between finance and administrative functions (procurement, logistics), and identify and recommend actions required to comply with contract terms and regulations.

The Country Office/Head Office Finance Department must also be responsible for providing direct support to field operations. The following are the required tasks:

• Provide back-up support to field-based staff.
• Provide training (start-up, refresher) to all field-based staff dealing with finance and accounting matters.
• Review and ensure cash management and disbursement procedures are responsive to the needs of the field operation. Suggest and implement changes where appropriate.
• Review all internal and compensatory controls systems in place, and advise management on staff and material requirements to compensate losses in control.

Continuously inform management about the contract status, identify issues, and suggest and facilitate required actions.