Project Financial Management Procedures (PFMP) Project: Sustainable Rural Market Development in Arid Areas (SRMDAA) IFAD Loan: 1234-ABC Project Financial Management Procedures (PFMP) (Draft Version 1.0) Project Financial Management Procedures (PFMP) Table of Contents 1.0 Introduction ................................................................................................................. 5 1.1 The Project ................................................................................................................................ 5 1.2 The Project Implementation Unit ............................................................................................. 6 1.3 Anticorruption policy ................................................................................................................ 9 2.0 Budgeting and Planning ................................................................................................. 10 2.1 Development of the AWPB ..................................................................................................... 11 2.2 Review of the AWPB ............................................................................................................... 12 3.0 Accounting system ......................................................................................................... 12 3.1 Designing the project accounting system. .............................................................................. 13 3.2 The Selection of an Accounting Software ............................................................................... 14 3.3 Accounting Manual ................................................................................................................. 16 Recording and processing of transactions ............................................................................ 16 4.0 Records Management ................................................................................................ 18 4.1Filing of the financial records ................................................................................................... 18 4.2 Storage of financial records .................................................................................................... 19 4.3 Archiving of financial records .................................................................................................. 19 4.4 Back- up procedures ............................................................................................................... 19 5.0 Internal controls......................................................................................................... 19 5.1 Segregation of duties .............................................................................................................. 20 5.2. Authorization ......................................................................................................................... 20 5.3 Reconciliations and Checks ..................................................................................................... 20 5.4 Restricted Access .................................................................................................................... 21 5.5 Monitoring and Review ........................................................................................................... 21 6.0 Flow of funds, cash and bank account management ...................................................... 21 6.1 Flow of Funds, opening of special accounts and project accounts ........................................ 21 6.2 Petty cash account .................................................................................................................. 22 6.3 Bank reconciliation .................................................................................................................. 23 7.0 IFAD Disbursement Procedures .................................................................................... 24 7.1 Evidence of Authority to Sign Withdrawal Applications ......................................................... 25 Project Financial Management Procedures (PFMP) 7.2 The Designated Account ......................................................................................................... 25 7.3 Withdrawal of Financing Proceeds and Supporting Documentation .................................... 25 7.4 Use of Statements of Expenditures (SOE) and SEO Thresholds .............................................. 27 7.5 Withdrawal of Funds under component 3 –Micro Finance Institutions ................................. 28 8.0 Processing of payments.................................................................................................. 29 8.1 General instructions ................................................................................................................ 30 8.2 Processing of payments for Civil Works and Goods ............................................................... 30 8.3 Processing of payments for Consultants' Services ................................................................. 32 8.4 Processing of Payments for Office Supplies and Other Operating Costs .............................. 33 8.6 Travel Arrangements & Processing of Travel Related Expenditures ...................................... 34 9.0 Financial Reporting ........................................................................................................ 35 9.1 Monthly Reports ..................................................................................................................... 36 9.2 Periodic Progress Reports ....................................................................................................... 36 9.3 Cash Flow Forecast .................................................................................................................. 38 9.4 Annual Financial Statements and Audit Reports .................................................................... 38 10.0 Fixed Asset Management ............................................................................................. 39 10.1 Purchase of Equipment ......................................................................................................... 39 10.2 Asset Register ........................................................................................................................ 39 10.3 Asset Verification Review ...................................................................................................... 39 10.4 Vehicle Maintenance and Fuel .............................................................................................. 40 11.0 Audit Arrangements ..................................................................................................... 40 11.1 The Audit Cycle and Appointing the Auditor ........................................................................ 41 11.2. TORs of the Auditors and the Engagement letter ................................................................ 42 11.3 The Audit Report ................................................................................................................... 43 12.0 IFAD Supervision ........................................................................................................ 44 12.1 Supervision missions by the Fund ......................................................................................... 44 13.0 Loan completion and Closing ...................................................................................... 45 13.1 Recovery plan ........................................................................................................................ 45 13.2 Loan Completion ................................................................................................................... 46 Project Financial Management Procedures (PFMP) 13.3 Loan Closure .......................................................................................................................... 46 Annexes: Annex I: Sample Job descriptions related to Financial Management and Administration Annex II: Sample Annual Work Plan and Budget Annex III: Sample chart of account Annex IV: Sample TORs for an accounting software Annex V: Sample Monthly Budget Execution Report Annex VI: Sample Periodic Financial Progress Report Table 1: Sample Statement of Cash Receipts and Payments by Category Table 2: Financial performance per expenditure category and financier Table 3: Financial performance per component and per financier Table 4: Project Cash Flow Forecast Table 5: SOE-Withdrawal Application Statement. Table 6: Signed Contract Listing Table 7: Physical Progress Report Annex VII: Fixed asset register Annex VIII A: Petty Cash Request Form Annex VIII B: Petty Cash Reconciliation Form Annex IX A: Vehicle Log Annex IX B: Vehicle History Record Annex X : Sample Terms of Reference for the Audit of Project Annex XI: Required Aide Memoire tables for IFAD Supervision missions Table 1: Cumulative expenditures by component and Financier - Table 2: Budgeted Expenditures and Performance against previous year‟s AWPB Table 3A: Financial performance by financier Table 3 B. Financial performance by financier by component Table 3 C: Expenditures by category - Annex XII: Sample recovery plan Annex XIII: Designated account reconciliation statement (Imprest account ) Annex XIV Checklist for Withdrawal Application Annex XV : Sample of financial statements Project Financial Management Procedures (PFMP) Acronyms AWPB= Annual Work Plan