1. SPOT CHECKS 2016

2. Overview
1. What is HACT 2. HACT Assurance Activities 3. Spot Checks - Preparation - Field Work - Documentation

3. HACT Framework
The HACT Framework Represents A Common Operational (Harmonized) Framework For Transferring Cash To Government And Non-governmental Implementing Partners (IPs) The purpose of assurance activities is to determine whether the funds transferred to IPs were used for their intended purpose and in accordance with the work plan

4. Three Mechanisms To Obtain Assurance Of Transferred Funds To IPs:
1. Periodic On-site Reviews (Spot Checks) Of The IP’s Financial Records Of Cash Transfers. These May Be Performed By Qualified Agency Staff Or Third Party Service Providers; 2. Programmatic Monitoring Of Activities Supported By Cash Transfers, Which Provides Evidence Regarding The State Of Programme Implementation And Use Of Agency Resources; 3. Scheduled And Special Audits (Financial Or Internal Control) Of The IP’s Financial Records And Internal Controls

5. Planning Of Spot Checks Is Guided By:
Risk Rating from HACT Micro-Assessment - Assessment of the IP’s financial management capacity (i.e. accounting, procurement, reporting, internal controls, etc.) Amount of cash transfer per year (specific thresholds may vary between Agencies $30-$50k)

6. The spot check process
From the Spot-check guidance and tool.

7. Preparation for Spot Check
Obtain and review the following documents
Micro assessment (to familiarize yourselves with the high-risk areas identified and major recommendations)
Work-plan (to understand the programme background, activities and objectives)
Progress report (to familiarize with the status of programme implementation)
The last four FACE forms submitted by the IP (It means that at least one FACE form relates to expenditures from the previous calendar year)
COGNOS report on aging OFA
CDR for monitoring report
Results of previous audits or spot checks

8. Sample selection
Minimum coverage 15% - 20% up to max 80% of the actual expenditure reported on the FACE form
Risk-based approach
Cover different expense categories (those cumulatively equal to or exceeds 5-10% of the actual expenditures reported)
Focus on larger valued items, but also include some smaller valued items.
Select unusual or high risk items, including, but not limited to:
Description of the expenditure is not appropriate for the expense category or for the activity of the work plan;
Description of the expenditure is general or vague;
Date on which the expenditure was incurred or reported is not appropriate for the reporting period on the FACE form;
The amount of the expense is unusual for the type of expense (round number or large number)
The same expense and amount is recorded multiple times (duplication)

9. Fieldwork 1 Changes to Internal Controls / IP interview
Note any control deficiencies and recommendations from assurance activities (micro assessment, previous audits and spot checks)
Follow up on the status of the recommendations
Inquire about any changes in the organization
Obtain evidence during expense testing
2 Bank reconciliation
If IP maintains separate bank account for UNFPA funds, ensure that the bank account is reconciled to the IP’s accounting system and OFA
If this is not the case, obtain sufficient evidence that transactions selected for testing have been actually paid
Note any control deficiencies and recommendations from micro-assessment and previous spot checks or audits.
Conduct an interview with the finance and programme management of the IP to understand if they have implemented the recommendations and obtain evidence during the expense testing.
Inquire the management if there have been any changes in the organization, including:
Changes in the organization structure and key programme or finance management positions
Changes to the internal policies or procedures
Changes to the financial management processes
Changes in the accounting or reporting systems
Determine if any of the changes increase the risk of successful and timely programme implementation or the accuracy of the financial reporting of the IP.

10. Fieldwork – 3. Test of expenditures
Use the Spot check tool (template)
For each expense selected, perform and document the following testing procedures:
Expenditure matches activity and budget in signed work plan
Expenditure on the FACE forms reconciles with IP accounting records and bank statement
Expenditure is correctly coded in the FACE form
Sufficient and appropriate supporting documents are on file
The payment is signed by the authorized Official
Stamped PAID by (UNFPA, UNICEF etc.)
CAN YOU HERE DEMONSTRATE HOW TO FILL IN THE SPOTCHECK TOOL? INSERT A LINK TO THE TOOL IN EXCEL, OPEN IT AND RUN THROUGH IT. THIS WOULD SUBSTITUTE THIS AND THE NEXT SLIDE AND BE MORE HANDS ON.

11. Fieldwork – Test of expenditures (cont.)
Expenditure represents services received during the period covered by the FACE forms
Price is reasonable (= compared to market price) and determined through competitive bidding process
Expenditure recorded is exclusive of VAT
For personnel costs only: the salaries and fees applied are within established rates and there is clear cost apportionment for shared costs
There was segregation of duties between staff ordering the goods/services and those making the payment
Goods/Assets/Services are used for the intended purposes
In bold attributes from UNICEF which were not in the original UNFPA spot check tool

12. 3 Fieldwork – Test of expenditures (cont.)

13. Documentation and follow-up
Fill 4 mandatory templates (in the guidance)
Annex A – Check list
Annex B – Spot Check Report
Annex C – Test of expenditure
Annex D – Detailed Findings and Recommendations

14. Documentation and follow-up
Share and discuss findings with the IP (if significant findings are detected, spot checker may decide to share findings with IP after consultation with Office management, see next bullet)
The spot check team meets with the Programme Officer and with the HACT focal point in order to discuss the findings
The group determines whether the observations represent any change in the risk of working with the partner and how it impacts on the successful programme implementation
Monitoring recommendations including clearance of unsupported expenditures detected
The group decides on whether additional assurance activities are required and the HACT focal point updates the assurance plan accordingly