1 Financial administration and management of IFAD-funded Directly supervised projects Rural Finance Institution-building Programme – RUFIN Start-up Workshop Abuja, 1-5 February 2010 

2 Financing Agreement (and amendments) Minutes of Negotiations between IFAD and the Borrower Project Appraisal Report IFAD Loan and Grant Administration Operational Manual General Conditions applicable to IFAD loans Letter to the Borrower Project Implementation Manual/Plan Procurement Guidelines Audit Guidelines Reference Documents 

Objective of presentation IFAD’s role Project documents Procedures and principles for Withdrawals Processing WAs Financial Statements and Audit Procurement methods

4 IFAD has opened a Loan and a Grant Account and credited SDR into the Loan account and SDR into the Grant Account. IFAD processes Payments from the Loan and the Grant Accounts between the date of Loan Effectiveness i.e. and the Loan Closing Date i.e. IFAD approves the Projects’ AWPB and procurement plans IFAD reviews the Financial Statements of the Projects for each Fiscal Year IFAD reviews the Annual Audit Reports, and Management Letter addressing accounting and internal control systems IFAD Loan No. 699-NG and IFAD Grant No. 870-NG 

Schedule 2 of Financing Agreement CategoryDescriptionLoan (SDR) Grant (SDR) % of Eligible Expenditures to be financed I.Vehicles % net of taxes II.Equipment % net of taxes III.Training % IV.Research, Studies and Technical Assistance % net of taxes V.Guarantee Fund % VI.Salaries and allowances % VII.Operation and Maintenance % VIII.Unallocated TOTAL

Financing Plan (in USD) IFAD Loan: IFAD Grant: Ford Foundation: Federal Republic of Nigeria: Beneficiaries: Participating Institutions: TOTAL

IFAD’s Role Supervise project Administer IFAD loan and grant Implementation support to ensure smooth functioning of programme activities Ensure financing conditions are respected Approve AWPB Examine and approve procurement and procurement plans Examine and approve WAs Payment of disbursement for loan and grant Examine financial statements for each fiscal year Examine audit reports and management letters Approve amendements to the financing agreement Debt servicing – send statements due for repayment

8 Date of Approval by the IFAD Executive Board 14/09/2006 Date of Signature of IFAD – Federal Republic of Nigeria Financing Agreement 26 August 2008 Date of Programme / Loan Effectiveness 20 January 2010 Loan Completion Date 31 March 2017 Loan Closing Date 30 September 2017 Important Dates 

9 Initial Deposit Replenishment Recovery Special/Grant Bank Accounts 

10 The Special and Grant Bank Accounts are opened and maintained in: A Commercial Bank acceptable to the Borrower and Fund and denominated in USD. The Special and Grant Bank Accounts shall be protected against set off, seizure or attachment on terms and conditions proposed by the Borrower and accepted by the Fund The maximum authorized allocation (advance from IFAD) is of USD to a maximum of USD for the Special Account and USD for the Grant Bank Account ; Upon loan effectiveness and/or other conditions as specified in the financing agreement, the Government submits a Withdrawal Application to IFAD requesting the initial advance of the authorised allocation to the special account IFAD will replenish the Special and Grant Bank Accounts from time to time as requested by the Government Is to be used exclusively to finance IFAD share of Eligible Expenditures Recovery of the Special and Grant Bank Accounts will begin 6 months before Loan Completion Date or when the undisbursed amounts in the Loan and Grant Accounts are inferior to twice the Authorized Allocation to the Special and the Grant Bank Accounts to ensure no funds are left in the account by Project Closing Date. Special/Grant Bank Accounts 

11 IFAD monitors that the Loan/Grant proceeds are used to finance: a) Programme activities described in the approved Annual Work Plans and Budgets, and according to the Project Implementation Manual (or Plan), and Loan/Grant Financing Agreement b) In conformity with administrative, technical, financial, environmental, agricultural and rural development practices and good governance Eligible expenditures

12 Customs duties Taxes Goods/Works/Consulting services – From non-member countries – Not acquired according to IFAD procurement guidelines (or applicable regulation/legislation) – That are not consistent with programme descriptions or components or categories – Committed before loan effectiveness or after project completion date Ineligible expenditures

13 CONDITIONS (before and during programme implementation): Loan effectiveness Written Application from Government (original signed by Authorized Representative) Sufficient Balance in the Loan Account Above Minimum Threshold (not less than USD 20,000 or equivalent IFAD Disbursement Conditions Eligibility of Expenditures Cost allocation by Categories Statements of Expenditure - SOE limits Reconciliation of Special Account Withdrawal of funds 

14 Withdrawal Applications (WA) must be: Signed by an authorized person (or persons) For eligible expenditures Only for purposes intended under the project Conformed with IFAD’s procurement guidelines For expenditures from a member country For one beneficiary and in one currency Supported by documentation Disbursement Procedures

15 Replenishment of Special Account Direct to a Third Party Special Commitment to a Bank Reimbursement to the Government Modes of Payment

16 If the expenditure amounts are small and the documentation is voluminous, IFAD will accept to reimburse the Borrower on the basis of a withdrawal application supported by a statement of eligible expenditure (SOE). SOEs are acceptable: For payments of eligible expenditures with small amounts ex.  Training, allowances Where documentation would be too large For contracts below SOE threshold The Project retains the supporting documentation (purchase orders, invoices, original receipts) and makes it available for verification (i.e. Supervision Missions/ Audit, etc) Statement of Expenditures 

17 Loan/grant declared effective. Letter on authorized signatories received. Evidence of opening of the Special and Grant Bank Accounts Disbursement condition/s met. AWPB and Procurement Plan approved. Withdrawal Application found in order. PARTIES INVOLVED: Borrower IFAD - Operational Division/CPM-PA-RSU - Loans Unit (FC). - Treasury (FT). International Banking Channels. TO SUMMARISE: First Disbursement - requirements 

18 Article V of financing agreement The Central Programme Management Unit - CPMU shall prepare the financial statements of the operations, resources and expenditures related to the Project each Fiscal Year. Fiscal Year: 1 January to 31 December Financial Statements to be submitted 3 months after every semester of each fiscal year, i.e. 31 March and 30 September of each year Financial Reporting 

19 Minimal IFAD requirements are:  The yearly and cumulative statement of sources and application of funds (IFAD loan and grant funds disclosed separately from those of other donors)  The Special account/Grant Bank Account statements presented in the denomination currency, or in the denomination and local currency where the programme/project financial statements are expressed in local currency  The yearly and cumulative withdrawal applications schedule. This should be organized by category of expenditure, provide details relative to the amount submitted for reimbursement and the amount reimbursed and be sub-divided by disbursement method (i.e. replenishment to the special account, special commitment, reimbursement for prefinanced expenditures and direct payment)  The Balance Sheet  Financial statements are to be prepared preferably on the basis of the International Accounting Standards, using as reference the International Financial Reporting Standards (IFRS) or the International Public Sector Standards (IPSAS). The accounting standards applied should be disclosed in the notes.  Most programmes will prepare the financial statements on a cash basis or a cash-modified basis  Financial statements should include a comparison of actual amounts with budgeted amounts Financial Statements: Minimal IFAD Requirements

20 Section 5.02 of Financing Agreement Section 9.03 of General Conditions Audit Guidelines (Borrower, IFAD) Certified copy of Audit Report: Should be submitted no later than 6 months after the end of the Fiscal year – Suspension is now mandatory if not received by the prescribed date. Report may be waived by IFAD in the first year of Project implementation to avoid excessive auditing costs for the Borrower. Audit Report 

21  Audit Report must also include a separate opinion of the Auditor on: – The Programme Financial Statements – The Special Account and the Grant Bank Accounts – The Statement of Expenditures – Any other concerns of the CPM related to project implementation  The audit package should also include the Auditor’s management letter which addresses the adequacy of the Programme/Project’s accounting and internal control systems. It is also recommended that the management reply together with the eventual implementation dates of the auditor's recommendations is delivered to the Fund together with the management letter. Audit Requirements

22 Different types of audit opinions: Unqualified Qualified Adverse Disclaimer Audit Opinion 

23 PREPARED FOR 18 MONTHS for all: – Goods, Works and Consulting Services – Describing Method of Procurement for each of the above – Consistent with IFAD Guidelines Procurement Plan

24  Withdrawal Applications may continue to be submitted up to closing date (six months after completion date)  Only payments made or payments due for goods, works and services which have been provided prior to the completion date qualify for disbursement  Special Account and Grant Bank Accounts recovery should begin early enough to ensure that no material balances remain in the SA/GBA at the closing date Payments After Completion Date:

25 Final Statement of Accounts Initial Deposit completely recovered/ Balance reimbursed Final Audit Report Project Completion Report Loan Closing:

26  The Federal Republic of Nigeria will repay the Outstanding Principal Amount of the Loan in 59 equal semi-annual installments and one final installment (Sections 2.06, 2.07 and 2.08 of the Financing Agreement)  Repayments will start on 1 March 2017 and end on 1 September Loan Repayment:

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