Financial administration and management of IFAD-funded Directly supervised projects

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

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Reference Documents

• 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

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Objective of presentation

• IFADs role
• Project documents
• Procedures and principles for Withdrawals
• Processing WAs
• Financial Statements and Audit
• Procurement methods

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IFAD Loan No. 699-NG and IFAD Grant No. 870-NG

• IFAD has opened a Loan and a Grant Account and
• credited SDR 18 500 000 into the Loan account
  and
• SDR 270 000 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

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Schedule 2 of Financing Agreement
Category Description Loan (SDR) Grant (SDR) of Eligible Expenditures to be financed
I. Vehicles 500 000 100 net of taxes
II. Equipment 2 400 000 70 net of taxes
III. Training 7 000 000 75
IV. Research, Studies and Technical Assistance 2 500 000 270 000 90 net of taxes
V. Guarantee Fund 600 000 100
VI. Salaries and allowances 2 100 000 60
VII. Operation and Maintenance 1 500 000 50
VIII. Unallocated 1 900 000
TOTAL 18 500 000 270 000
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Financing Plan (in USD)

• IFAD Loan 27 200 000
• IFAD Grant 400 000
• Ford Foundation 500 000
• Federal Republic of Nigeria 6 200 000
• Beneficiaries 985 100
• Participating Institutions 4 800 000
• TOTAL 40 085 100

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IFADs 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

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Important Dates

• 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

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Special/Grant Bank Accounts

• Initial Deposit
• Replenishment
• Recovery

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Special/Grant Bank Accounts

• 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 500 000 to a maximum of USD 2 000
  000 for the Special Account and USD 200 000 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.

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Eligible expenditures

• 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

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Ineligible expenditures

• 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

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Withdrawal of funds

• 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

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Disbursement Procedures

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

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Modes of Payment

• Replenishment of Special Account
• Direct to a Third Party
• Special Commitment to a Bank
• Reimbursement to the Government

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Statement of Expenditures

• 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)

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TO SUMMARISE First Disbursement - requirements

• 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.

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Financial Reporting

• 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

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Financial Statements Minimal IFAD Requirements

• 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

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Audit Report

• 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.

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Audit Requirements

• 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
  Auditors management letter which addresses the
  adequacy of the Programme/Projects 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.

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Audit Opinion

• Different types of audit opinions
• Unqualified
• Qualified
• Adverse
• Disclaimer

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Procurement Plan

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

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Payments After Completion Date

• 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

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Loan Closing

• Final Statement of Accounts
• Initial Deposit completely recovered/ Balance
  reimbursed
• Final Audit Report
• Project Completion Report

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Loan Repayment

• 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 2046.

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• THANK YOU