Presentation on theme: "Technical and financial management of the project"— Presentation transcript:
1Technical and financial management of the project Estonia Latvia RussiaENPI CBC ProgrammeProject Management and Implementation training20&21 February 2012
2Sound project implementation For a sound technical and financial management of your project you need:a monitoring systema financial plana project accounting systema procurement planLet’s see these in details now! These need to be set up and regularly updated
31. Monitoring system Why a monitoring system? To keep track of how a project is progressing in terms of resource use, implementation, delivery of results and the management of risksTo support effective decision making with systematic and continual collection, analysis and use of management information
4Monitoring system Monitoring is: An information system Performed on a systematic, regular basisBased on indicatorsConcerned with the facts!Concerned with both financial and operational progress informationThe information needed for monitoring should be identified when the project is first designed and/or when reviewed
5Setting up the monitoring system Good monitoring depends on having reliable, relevant and timely information about the activities, outputs and outcomes of your project. This may be achieved by:Setting up a shared, internet-based (intranet), information tool including the control of deadlines, activities, deliverables and indicators using available project management softwareRequiring the project manager for each partner to submit a regular, short monitoring report to the Beneficiary providing information about the progress being made in implementing the project.
6Sources of information for monitoring The grant contract (your logframe, workplan…)Contracting information (sub-contracts)The record of project indicators at the levels of activities, outputs and resultsThe financial records – bookkeeping systemSpecial reports like quantitative surveys, questionnaires
7Elements of Financial Monitoring The value of the grant, the co-financingThe expenditure and revenue budget and the actual financial position for the reporting periodExpenditure & revenueCash flowsCash flow forecastBank balancesExpected reimbursement claims for next period
8Specific financial items to highlight Actual expenditure significantly more than budgetActual expenditure significantly less than budget (eg savings on procurement)Delays in submitting payment requestsUnexpected ineligible costsSignificant change in exchange rates (effect on budget)Any other unexpected financial issues
9Content of Operational Monitoring Synopsis of the Grant contractContracting (secondary procurement)Input / activity/ output monitoring (efficiency)Results monitoring (effectiveness) and impactRisk monitoringSustainabilityHorizontal and cross-cutting issuesGood practicesPrognosis for futureSee annex on Operational MonitoringSee document attached for more information
11The monitoring reportMonitoring is based on a standard template adapted to the projectMonitoring reports are usually collected on a regular basis (monthly, bi-monthly)Report is based on tables – very little narrativeBut with the possibility of highlighting unusual good or bad eventsA good monitoring report is easy and quick to readMonitoring will feed in project reportingMonitoring is no double work, will need to do it anyway for reporting – but adds great value
122. Financial planning (1)Why should you revise project financial planning?Is it not enough with the project budget approved?Even though you prepared a budget including expenditure and sources of funding when preparing the application form, you have to take into consideration that:The budget doesn’t include an accurate monthly estimate for the whole project durationThe approved budget does not have any forecast of the timetable for receipt of the sources of fundingNot all expenditure imply an additional cash-flow, as they correspond, for example, to staff already working in your organisation
13Why should you revise project financial planning? Even though there is a 90% grant contribution, the balance will only be received after the project closure. The pre-financing may not avoid completely some cash deficits during project’s lifetime.Therefore, it is important to make an accurate plan of receipts and payments in order to:Avoid any setbacks in project implementation due to cash shortage;Avoid misunderstandings among partners;Encourage partners to spend in time and contribute to a timely reporting and payment claim to JMA/JTS.
14Steps for project financial planning Review your budget in detail to identify needs for minor adjustments in the initially estimated amounts;Confirm your sources of funding and, in particular, the dates of expected receipt of contributions by external donors;Prepare a monthly (or bi-monthly) forecast of all project expenditure;Estimate when you will be able to submit and receive further pre-financing;Prepare a project cash flow forecast.
15Let’s see a practical example Our simplified case study will be a project with:Beneficiary and one partner24 months durationNo additional donors, no direct revenue, no in-kind contributionA limited number of budget itemsLet’s see the project budgetSee tables annexed
16Planning and adjusting expenditure Staff costsConfirm which persons will be working for the project and see if they are already contracted or they have to be recruitedConfirm the estimated monthly cost (as “month” is the unit of time in budget)Find out in which month the persons will start working and on what basis, if not full timeUnit cost 2000 in real life 500 each month – compare to budget, total is OK
17Planning and adjusting expenditure Staff costsCalculate the monthly cost
18Planning and adjusting expenditure Other categoriesRevise the estimated amounts and other necessary assumptionsIdentify when invoices for services and goods will be paid, according to the delivery dates and credit terms (usually X days after delivery)Make a monthly estimate of paid expenditure for each categoriesExclude “contingency reserve” and “administrative costs” from these estimationsLet’s see a couple of examplesSee tables annexed
19Planning and adjusting expenditure Other categories
20Planning and adjusting expenditure Other categories
21Planning payment claims Take the amounts of the first pre-financingCalculate the thresholds of minimum expenditure in order to be allowed to submit payment claims for further pre-financing (see your contract)Estimate the date for submission of payment claims and the receipt of the grant after the approval of the financial report by JMA/JTSLet’s see an example in two tables:
22Planning payment claims Do not forget to take into account the administrative costs to estimate when you will reach the threshold!
23Planning of cash flows Prepare a final table with: The revenues and their month of receipt;“Additional” foreseen expenditure paid for the project;Monthly and cumulative cash flow and surplus/deficit taking into account the “additional” expenditure;Other payments already budgeted in your organisation, such as permanent staff or administrative costs;Monthly and cumulative cash flow and surplus/deficit taking into account all expenditure
24Final remarks on financial planning As with all estimates, the financial forecast is only useful if reviewed and updated on a regular basisDiscuss the planning with your partners, get information from them and reach a consensus on commitment for expenditure and paymentsCash forecasts tend to be optimistic; revenues arrive later and expenditure on time or earlierBe prudent and ensure that no partner is blocked in their contribution to project implementation for lack of liquidity of fundsThe tables and assumptions shown in this presentationare just an example
253. Accounting system requirements Art of General Conditions (annex II to the contract):The Beneficiary and partners shall keep accurate and regular accounts of the implementation of the project, using an appropriate accounting and double-entry bookkeeping system. The system:May be either part of the beneficiary’s and partners’ regular system or an adjunct to that systemShall be run in accordance with the accounting and bookkeeping policies and rules that apply in the country concernedAccounts, expenditure and revenue relating to the project must be identifiable and verifiableDetails on interest accruing on funds paid by EC have to be providedAgain, accounting different from project reporting!
26What is an accounting system? Accounting IS NOT a list of expenditure and revenue.An excel file is not an accounting system.General definition of accountingThe systematic recording, reporting and analysis of the financial transactions of an entity.Common provisions on accounting by Financial Regulation (Article 132 of EC Regulation 1605/2002)The institution’s accounting system is the system serving to organise the budgetary and financial information in such a way that figures can be input, filed and registeredThe accounts shall consist of general accounts and budgetary accountsObvious to your accountant? Maybe not so for non experienced
27General requirements on accounting All partners need to have a general accounting in conformity with national rulesThe project accounting has to be organised as a budgetary accounting in all partnersThe project accounting has to be kept in the national currency, as the translation to Euro will only be necessary for the financial report to JMA/JTS.
28Use of exchange rates in the project Conversion:PurposeWhich exchange rateBank transferActual rate applied by bankReimbursement of subsistence costs to staffNational bank daily ratePayment of invoices in foreign currencyTranslation:PurposeWhich exchange rateReportingAverage of monthly rates for the reporting period from InforeuroDecision on procurement procedure (verification of threshold)Inforeuro rate of the month of launch of the procedure
29What is double-entry bookkeeping? Definition of double-entry bookkeepingAn accounting technique which records each transaction in at least two different accounts, as a credit and as a debit. Credit entries represent the sources of financing, while debit entries represent the use of this financing.Let’s see an example of expenditure in a project-dedicated accounting:The debit will indicate to which category of expenditure the invoice has to be imputedThe credit will indicate if the invoice was paid by the beneficiary or a partner. In case of non-dedicated bank accounts, the entry should also indicate which one was used.
30Reconciliation with reports Article of General Conditions also indicates that:The financial report has to be properly and easily reconciled to the accounting and bookkeeping system and to the underlying accounting and other relevant records.For this purpose, the beneficiary shall prepare and keep appropriate reconciliations, supporting schedules, analyses and breakdowns for inspection and verification.
31Setting up your accounting system Ensure that it is in conformity with the requirements of art of General ConditionsDesign it to provide the necessary information for the interim and final reportsUse it periodically to allow a proper follow-up of the project budget and enable you to identify any major deviations beforehandEnsure that there is shared understanding by all partners. If it is a separate system, use the same for all the partnership; if it is included in the partners’ accounting, check its adequacyAsk support to the auditors on the conformity of the system by all partners several months before the first reportingProject monitoring
32Archiving of supporting documents Requirements of your archiving systemAll transactions in accounting are referred to the necessary supporting documents (see presentation on eligible expenditure)The originals of the supporting documents have to be kept by each partner institution, but copies (either scanned or physical) are easily available by the Beneficiary in order to facilitate the financial controls by authorized bodies. A web-based document repository shared by all partners may be very useful for this purpose.The documents have to be archived in a way that they are easily accessible after the project closure. (7 years after receiving the balance payment)
334. Procurement planDelays in procurement procedures is one of the main risks for not keeping the working plan. Therefore:Identify which are the procurement procedures to be launched during the project implementation and who is the responsible partnerIdentify the applicable legislation and specific procedures and deadlinesInsert the timing of the procedures in the working plan and ensure that no activity will be delayed for this reasonInclude the procurement plan in your monitoring system