Session 9b: Next steps on financial management harmonization and alignment

1. Session 9b: Next steps on financial management harmonization and alignment

2. Purpose of Session Share information and seek feedback & advice: • What are benefits? • What are the areas to harmonize and align with country systems? • Is the proposed approach feasible? • What would be the challenges of the proposed approach?

3. Key messages from IHP+ Review More needs to be done to increase the use of country systems • Lack of capacity • Lack of performing systems and lack of transparency More needs to be done to reduce transaction costs • Duplicative processes – multiple assessments and activities • Parallel systems and divergent requirements/mechanisms • Uncoordinated planning, financing, supervision and M&E

4. What is Full FM Harmonization? An approach and partnership for effectiveness and transparency • The goal of FMH is to: • Reduce redundancies, align with country processes if possible • Enhance transparency and accountability • Simplify processes and complexities, and develop common arrangements • Preferably align with country systems • The outcome is that: • DPs and PCs on the same page and on one framework • Use the same system and FM arrangements, preferably that of the government • No more multitude of financial reports and audits • One single action plan and capacity building program

5. What it is NOT about: • Pooling of funds (although that could be part of it) • Creating a mechanism for a small group of donors and excluding others • Additional funding or immediate financing from participating development partners; that could be a mid-term outcome • Weakening of transparency and accountability • Doing a full FM assessment if sufficient information is available

6. What does it involve? • Begins by government/development partners agreement to proceed • Timing is not linked to donor’s immediate financing; it can be done when appropriate and on agreement; it can be linked to retrofit existing funding • Begins by putting together a team to review the existing available information and the country system • Careful scoping for any additional in-country work • Partner Countries and Development Partners come together and follow the process (next two slides):

7. Steps to harmonized and aligned financial management arrangements 2 3 1 At the request of the country, GOV-MOH and active DPs agree to proceed with FM harmonization. FM Team with representatives from donors and government is appointed. Small subset of FM Team (Core FM Team) collects and shares all available, relevant information. Yes, information is sufficient. Field Financial Management Assessment not required, core team produces FM report 6 5 4 Government & donors complete and sign MoU for common FM arrangements. Core FM Team conducts desk review, produces inception report, and meets with the FM Team to determine if information is sufficient. Core FM Team agrees/designs common FM arrangements, drafts MOU, and produces action plan for implementation. Completed in parallel Government implements action plan; DPs follow-up and support implementation. No, information is not sufficient. Field Financial Management Assessment required • In all cases the final report should • include: • Proposed action plan for systems and capacity building • Proposed single accounting system and Chart of Accounts • Content for single set of financial reports • Draft ToRs for single external comprehensive audits • Proposed draft MOU with salient features of the Common Financial Management Arrangement. 4a See Slide 2 “Steps to Producing a Report on FM and outputs (when additional FM assessment is required)” 7 Core Team verifies that the system is up and running and start disbursement .

8. Steps to Producing a Report on FM and Outputs (if partial or full FM assessment required) 4 4a 4b FM Team agrees on level and scope of field work, composition of the assessment team, and expected outputs. Core team fields in-country mission, additional work/ full assessment is completed. FM Team conclusion: The information available Is NOT sufficient. 4c 4d 4e Quality Assurance review takes place. Participating DPs and FM Team provide consolidated comments on the report and outputs. Core Team finalizes the report and outputs. Core Team produces draft report and outputs (all 6 pillars of FM are covered) Resume with steps required for Harmonized Financial Management Arrangements (Slide 1 box 5) • In all cases the final report should • include: • Proposed action plan for systems and capacity building • Proposed single accounting system and Chart of Accounts • Content for single set of financial reports • Draft ToRs for single external comprehensive audits • Proposed draft MOU with salient features of the Common Financial Management Arrangement. 5 Core Team designs common FM arrangements and action plan for implementation.

9. Main recommendations from the FM team: • Form an FM team representing both sides • Decide together whether there is a need to do more FM assessments • Do joint in-country assessments when needed • Establish a joint quality assurance process to ensure acceptability by all donors • Design the framework, systems, arrangements together • Design comprehensive capacity building program

10. Main recommendations from the FM team (2): • DPs to draft model MOU with standard language and optional language • Draft MOU for common arrangements with country/operation-specific parameters • Agree on the action plan to implement mitigating measures, strengthen the system to manage risks • DPs to Support the country to implement action plan • DPs to agree on coordinated/joint FM supervision and monitoring.

11. Expected Benefits • Reduced number of assessments and missions • Reduced number of parallel systems • Enhanced transparency and accountability • Reduced number of set of rules to learn and follow • Better flow of funds and less uncertainty • Reduced number of reports • Reduced number of audit teams • Clarity on units/departments responsibilities and deliverables and transparency on financial results.

12. Challenges • Institutionalization of the joint efforts and formation of the Joint FM teams at country level; • Demand from Country Partners and push back on solo work and parallel systems proposed by DPs • Misunderstanding that this needs to be done when someone has a financing coming up rather than a strategic move • Mobilizing financial support to implement the FM action plans and having one well funded capacity building TA program.

13. Barriers, difficulties, the way forward • Trying to link the harmonization to different processes and timetables/ timing for funding of DPs. • Terminology continues to be an obstacle- things have different meaning to different people. • Existing diagnostic tools often do not look at sectors. • Classifications/Chart of Accounts in the sector needs to be worked on (recommendation of the group). • Sector particularly disadvantaged in terms of FM capacity and needs specific effort for capacity development (sometimes misunderstood by the central ministries) • A Working group to develop a standard MOU for use and completion at country level.