PROGRAM FINANCIAL

MANAGEMENT CYCLE

An outline of important financial steps for

managing program funds

Prepared by Mark Misomali

PROGRAM FINANCIAL MANAGEMENT CYCLE
PRE-SOLICITATION
1. Proposal development
2. Designing budget templates
3. Attending pre-proposal conference, if any
4. Resource planning (staff, office, equipment)
5. Synergy consideration and collaboration with potential partners

SOLICITATION
1. Program description
2. Evaluation criteria
3. Budget
4. Timeline
5. Cost and Technical proposal development

PRE-AWARD
1. Updated policies and procedures
2. Manuals and reference guidance prepared
3. Due diligence, including sub-recipients, especially in the following areas: -
a. Financial management
b. Procurement
c. Personnel management
d. Travel and Transportation
e. Property management
f. Audit and financial reviews
g. Internal control
4. Staffing and office set up
5. Opening bank accounts

AWARD
1. Approved budget
2. Project codes establishment
3. Accounts set up and opening of project files
4. Project registration with host Govt for tax purposes
5. Designation/clarification of responsibilities and project point of contact
6. Internal and External reporting requirements
7. NICRA
8. Payment/Funding method
9. Training/orientation for all project staff
IMPLEMENTATION
1. Financial reviews/monitoring
2. Audit management and resolutions
3. Reporting – monthly/quarterly
4. Burn rates and expenditure tracking
5. Forecasting
6. Invoicing
7. Limitations and restrictions

CLOSE OUT
1. Close out plan
2. Demobilization plan (staff, activities, transferring assets, records storage)
3. Reconciliation of records – bank, payables, receivables, inventory
4. Property disposition plan
5. Cost share reporting
6. Final NICRA and adjustment of claims
7. Close out audit, if required
PRE-SOLICITATION – This is the solicitation phase where a funding agency announces
intention to issue a solicitation. This provides advance notification of the requirements of the
upcoming solicitation. This notice may ask interested applicants to submit their organization information
to assist the funding agency determine if there are qualified applicants to perform the work scope. The
applicants should consider the following: -
1. Proposal development – Do we have the technical competence to perform the proposed task?
2. Designing budget templates – Are there tools or templates to draw and submit a budget in the
acceptable format?
3. Attending pre-proposal conference, if any – Sometimes the funding agency holds a conference
for potential applicants to clarify and answer any questions before issuing a solicitation
4. Resource planning (staff, office, equipment) – Consider availability of the required financial,
labor, and material resources to accomplish the task
5. Synergy consideration and collaboration with potential partners – consider whether the task
requires to work with other partners, and identify your best role in the partnership

SOLICITATION - This is when the funding agency requests applicants to submit proposals
1. The technical proposal should be developed independently from the cost proposal
2. Make sure you understand the program description and the evaluation criteria. Ask for
clarification where necessary
3. Check that the narrative information, and the activity budgets correspond to the financial
budget
4. Check that the formulas and any links referenced to the budget are correct
5. Verify the reporting requirements and overhead rate to be applied, considering your own
resources

Tips for Responding to a Solicitation

1. Read the scope of work, evaluation criteria, eligibility information, and more.
2. Review the Technical Expertise, Staffing, Experience and Capabilities, and Past Performance.
3. Be sure to check dates and times and ensure to consider time zone differences.
4. Build on lessons learned to prepare a substantive and knowledgeable submission.
5. Explain how your proposed costs are competitive; include a detailed narrative on how costs
were developed.

PRE-AWARD - An evaluation of a prospective contractor’s capability to perform a proposed contract.

At this time the funding agency would like to gather information to determine the financial and
management competency of the potential recipients of the award. They may conduct a desktop or a
formal risk assessment of the applicant’s systems and procedures. The key areas tested include the
following: -

a. Financial Management
i. What accounting system do you use?
 ii. Is the system capable of segregating and aggregating costs?
iii. Is there a coding system?
iv. How are budgets compared with actuals?
v. What are the lines of authorization and approval?
vi. How can the system or procedures detect ineligible or questioned costs?

b. Procurement
i. What is the ethical code of conduct in the procurement process?
ii. Is competition required in order to obtain value for money?
iii. Are there procedures for sub-award management?
iv. How are procurement records maintained, accessed, and organized?
v. Do you maintain a system for identifying debarred or blacklisted vendors?

c. Personnel Management
i. What are your policies and procedures on personnel processes such as
recruitment, performance management, overtime, retirement, pension,
discipline, and dismissal?
ii. Does the HR system maintain updated personnel records to guard against ghost
workers and other payroll errors?
iii. What are the training and development policies?
iv. Is the salary structure clearly defined and reflecting the governance structure?
v. How are employees communicated on the policies and procedures?

d. Travel and Transportation

i. Are travel policies and procedures help to ensure that only necessary and
approved travel cost is incurred?
ii. Are the per diem rates reasonable and within the budget?
iii. What are the travel advances policies and procedures?
iv. How are travel budgets maintained and controlled?
v. What is the policy on use and maintenance of official vehicles?

e. Property Management
i. What are the policies on acquisition, management and disposal of property?
ii. What are the capitalization policy and procedures for classification of assets?
iii. What are the inventory control procedures, and how are inventory records
maintained?
iv. Does the fixed asset register include columns for the identification, location, and
condition of the asset?
v. What are the property maintenance procedures and reporting requirements?

f. Audit and Financial Reviews

i. Are there provisions for audit and financial reviews?
ii. Are previous audit findings and recommendations adequately addressed?
iii. Is there a tracking system for the audit and financial review findings?
 iv. How independent is the audit function?
v. Are there any delinquent audits?

g. Internal Control
i. What is the internal control structure?
ii. Are systems, processes, and procedures implemented as designed?
iii. What is management’s responsibility on internal controls?
iv. How are lines of responsibility, accountability, and reporting established?
v. Is there a risk management plan?

h. Fraud and Risk Management

i. Is there a fraud policy, and are staff aware of it?
ii. If there were past fraud incidences, how were they handled?
iii. What procedures or practices are put in place for the prevention, detection, and
handling of fraud?
iv. What are the fraud reporting procedures?
v. Are staff well trained in fraud skills management?

AWARD
The stage where the applicant receives the offer of an award. Some considerations at this stage include
the following: -

1. Approved budget
2. Project codes establishment
3. Accounts set up and opening of project files
4. Project registration with host Govt for tax purposes
5. Designation/clarification of responsibilities and project point of contact
6. Internal and External reporting requirements
7. NICRA
8. Payment/Funding method
9. Training/orientation for all project staff

IMPLEMENTATION
1. Financial reviews/monitoring
A financial review is an assessment to ensure compliance with the terms and conditions of the
award. This is not an audit and has a limited scope. It can be contracted out, but it is usually
carried out by the internal staff. While a financial monitoring focusses on direct finance and
accounting areas such as cash and banking, advance management etc., a financial review, on the
other hand, is wider in scope and includes an examination of non-direct finance areas such as
procurement, property management. A financial review is usually carried out by a team of
Finance and Procurement or Program people while a Financial Monitoring is performed by the
Finance team only.
 2. Audit management and resolutions
This includes audit planning, initiation, and resolution of audit findings. Preparation for audit
should start early in the fiscal year to ensure that it is completed by the due date.

3. Reporting – monthly/quarterly
4. Burn rates and expenditure tracking
5. Forecasting
6. Invoicing
7. Limitations and restrictions

CLOSE OUT
1. Asset disposition plan 
a. Does the project have an agreed upon disposition plan? 
b. Is the asset register update and accurate? 
c. Any property or equipment at local or sub-office or partner’s location? 
d. Is some property returning to the donor, government, or another partner? 
e. Inventory disposition and reconciliation 
f. Branding and marking 
2. Project demobilization plan 
a. Scaling down activities 
b. Staff termination plan 
c. Project hand over 
3. Reconciliations 
a. Cash advances 
b. Bank reconciliations 
c. Staff advances and vendors reconciliation 
d. Closing bank accounts 
4. Closeout reports 
a. What close out reports are required by the project and when is the due date 
b. Is there a closeout schedule indicating the timeline and responsible persons? 
5. Project evaluation 
a. Is a project evaluation required? 
b. Any lessons learned for a follow-on activity? 
 

Additional Notes:

Opening an office 
1. Availability of Power(electricity) and back up 
a. Check if there is enough power for the office and equipment 
b. Consider a backup generator (run on diesel) 
c. Cost and availability of fuel for the generator 
2. Security concerns 
a. Security assessment 
b. Security equipment 
c. Security personnel 
3. Compliance with local labor laws and regulations 
 a. Company registration and tax policies 
b. Recruitment of expatriate staff, and work permit requirements 
4. Accounting system and compatibility 
a. Is there an existing financial accounting system? 
b. Is the accounting system compatible with the headquarters system? 
c. Establish if the coding system would suit the budget structure? 
d. Would the accounting system support donor reporting requirements? 
5. Required Personnel and their availability 
a. Would some positions require expatriates? 
b. Who are the key personnel required for the start up? 
c. What is the labor market like? Easy or difficult to recruit staff? 
6. Political climate to determine risks 
a. Determine the fragility of the country and its impact to the program 
b. Any history of political instability? 
c. Are we prepared to take the risk?  
7. Office location and accessibility 
a. Ease of banking, meetings, access to essential utilities 
b. Security issues 
8. Stakeholder presence in the country 
9. Operation dynamics – will operations be centralized or decentralized? 
10. Anticipated project period and the strategic plan