KDRDIP Sub-Project Financial Guidelines
Financial Management refers to the process of planning, controlling and making prudent decisions on the use of funds to maximize returns or benefits on the subproject /investment. In the case of KDRDIP, the National Project Implementation Unit (NPIU) processes the fund requests and disburses the funds to community group bank accounts through the County Integrated Project Implementation Units (CIPIUs) as per the approved annual work plans, budget and disbursement schedules. Disbursement of funds is done as per schedules for the sub-projects.
Good Financial Management has the following advantages:
- Timely achievement of subproject objectives/results
- Ease of accountability for Project resources
- Minimizes suspicion and conflict among stakeholders
- Helps in winning confidence of the Financiers and hence increasing opportunities for similar support in the future
The Role of Community Project Management Committees (CPMCs) in Financial management
- Lead the community in the preparation and review of subproject budgets
- Prepare financial reports.
- Prepare physical progress reports.
- Present accountabilities (financial and physical progress reports) to the beneficiary community at least quarterly during the public baraza.
- Submit accountabilities (financial and physical progress reports) to the relevant PIST at least once every month.
- Initiate requisitions for subsequent tranches (in case of subprojects with more than one tranche).
- Approve requisitions for funds for eligible expenses.
- Process payment for approved requisitions.
The Role County Integrated Project Implementation Units (CIPIUs) in Financial management
- Capacity building for the community
- Introduce communities to the commercial banks
- Consolidation of AWPB
- Timely disbursement to sub projects
- Administrative oversight over use of sub project funds by communities.
- Support and review community accountabilities
- Receiving, reviewing and consolidation of financial reports from communities
- Internal audit review of sub projects
- Custodian of sub project records
- Supporting communities in carrying out social audits.
- Manage the Subproject Bank Accounts.
- Maintain financial records.
- Facilitate the subproject audit processes (both internal and external).
Planning and Budgeting
Planning and budgeting is led by communities supported by community facilitators, social mobilizers and project implementation support teams, village level committees, ward level committees, and sub county committees. Others are county integrated project implementation unit, county technical committee, county steering committee, National project implementation Unit, national technical committee and national steering committee.
This is the cost of the community sub-project. It is prepared with the support of the relevant Project Implementation Support Teams (PIST) i.e. for a Water sub-project the water engineer.
Operational and Administration Costs
This is the cost for operations by the CPMC and CGMC, this is 7.5% of the activity cost or Kshs. 100,000 whichever is lower per Sub-project, however, for livelihood program it should not exceed 7.5% or Ksh (37,500) This money is to cover the following;
- Stationery and
- Night out
Key Dates in the Planning Cycle
When preparing the Annual Work Plan and Budget (AWPB), the communities should ensure they are in line with the National Treasury budget timelines. The budget should meet the budget deadlines as follows:
Village Level Committees (VLCs) should have prepared the budgets by the 31st of March and submit to the Ward Level Committees (WLCs). The WLC aggregates the budgets from all the VLCs and submits to Sub-County Committee by 30th April. Sub-County Committee aggregates all the Ward AWPBs and submits to the CIPIU by 15th of May. CIPIU, County Technical Committee (CTC) and County Steering Committee (CSC) processes the budgets by 15th of June and submits to National Project Implementation Unit (NPIU). This enables incorporation of sub-project budgets requirements into the National Treasury budget whose cycle starts on August 15th.
The Project Implementation Support Team (PIST) provides technical assistance in costing of the sub-projects.
The Community groups will be allowed to vary or reallocate their sub-project budget allocations up to 10% of the total sub-project budget allocation. For the community group to do the reallocation, they need a recommendation from the PIST and the relevant component sub- committee. The County coordinator will approve the reallocation and inform the NPIU.
Flow of Funds
- Each approved Community subproject will open Community Subproject Account in the name of the sub-project managed by the CPMC/CGMC.
- The sub-project account should where possible be in the same bank as the County Project Account
- The County Coordinator authorizes the opening of sub-project Account (Public funds)
- The Subproject Account must be reconciled every month.
- The Subproject Account will be closed immediately after subproject completion, satisfactory accountability and commissioning
- Communities shall operate Current Accounts for the subproject grants
- Communities may open a savings account to carry on with their own activities to sustain their investments.
- The Account Title should be consistent with the Subproject Name.
Signatories to Community Project Account
- Signatories: Chairperson, Secretary and Treasurer of the CPMC. (Gender representation must apply)
- The CIPIU shall issue letters of introduction of the CPMC to the Bank to facilitate the opening of the Account.
- The County Coordinator will not be signatories to the account but shall have powers to access information on accounts operation and suspend the use of the accounts in case of abuse by the Community.
Conditions for Disbursement of Funds
For funds to be disbursed to community groups, the following conditions must be met:
- Registration certificate
- Existence of a constitution and by-laws that govern the group operations and management
- Bank account details
- Names of the Authorized bank signatories and minutes of General meeting detailing the authorization of such persons as bank signatories and their contacts.
- Community Project business plans. /LIPW/CPMC Plans.
- Training of office bearers on basic financial management, record/book keeping and procurement skills.
- Approved Community annual implementation, work plans, budget, disbursement schedules and Procurement plan
- Filled KDRDIP Funding Requisition Form
- A checklist to be used by communities is provided by the project (Annex…)
- Community groups will acknowledge receipt of funds by writing to the County Coordinator
- Community groups are required to display on public notice boards the amount of money received for the sub-project for accountability
- Subsequent disbursements will only be issued after 75% accountability of the previous disbursement
KDRDIP Guidelines on Use of Sub-Project Funds
- Subproject funds must not be used for any other activities other than those approved in the subproject work plan.
- Borrowing from the project under any other circumstances, is not permitted, and will be a ground for suspension of disbursement to the offending actor.
- The community should not borrow any funds to implement subproject activities
- Subproject funds cannot be used on expenditures for activities funded by other funding agencies.
- Subproject funds shall not be used to pay sitting allowances for any community meetings
- The community should avoid making payments for work not done or goods not supplied.
- The CPMC should always make payments by cheque as much as possible
- The CPMC should avoid keeping cash because it can lead to loss.
- Cash withdrawn must be only for specific activity and spent immediately.
- CPMC can withdraw from the account several times within the month as long as previously withdrawn funds are fully accounted for
- No other funds should be banked in the subproject account.
- Any payment should have a requisition and authorization approved by the Chairperson, Treasurer and Secretary.
- Payments must be backed by requisition forms, authorization forms, invoices, purchase orders, certification by sector experts, delivery notes, goods received notes, and other support documents including community minutes endorsing the request for payment.
- All payments must immediately be recorded in cashbook.
Use and Management of Cheque Books
- The cheque book must be kept by the Treasurer under lock and key.
- For each cheque written the counter foil/stub must be filled to enable one trace the person paid, reason for payment, date and amount paid. The Chairperson, Treasurer, Secretary should initial or sign the counter foil/stub.
- Any cheque that bounces must be reversed and replaced
- All cheque issued must be photocopied and attached to the payment voucher.
- Where payment to a contractor or supplier is to be made by cheque, the cheque must be prepared in the names of the contractor (the name that appears on the contract). Each of the signatories sign the cheque once.
- Where payments are to be made in cash, the cheque is prepared in the name of the treasurer. Each of the signatories signs the cheque two times.
- All payments made to persons or institution either by cheque or cash must be backed by an acknowledge receipt by signing the voucher/authorization form and/or issuing an authentic receipt on receiving the payment.
- Don’t overwrite or cancel letters or figures on cheque to avoid cheque bouncing and therefore loss of money.
- All signatories should have consistent signatures to avoid bouncing of cheque and loss of money.
Accounting Records at Community Level
- Communities under the project will maintain simple standard accounting records that are easy to update.
- A simplified Cash Book and standard accounting forms and support documents shall be the minimum required accounting records (see community accounting forms).
- KDRDIP subprojects beneficiaries however will be encouraged and supported to keep relevant financial records including:
- Cash books
- Bank statements
- Stores records i.e. ledger card
- Payment requisitions, purchase requisitions, authorization, payment vouchers, invoices, receipts etc.
- Financial reports/accountabilities.
What Constitues Community Accoutability?
- Physical progress report (where possible include photographs).
- Cash book (Income expenditure statement) (template provided)
- Accountability summary (template provided)
- Bank statement.
- Photocopies of cheque for each payment
Requisitions backed by Payment vouchers/authorization form with all the relevant support documents (e.g. contract agreements, purchase orders, delivery notes, goods received notes, invoices, requisition forms, certification by sector experts, receipts/acknowledgement of payment as applicable
Flow of Community Accountability Documents
- CPMC with support from CF prepare monthly report and accountability by first week of the month and present to the sub-project members
- The community thereafter shall submit original copies of accountability documents to the CIPIU with photocopies of the same retained in the community file.
- The County Coordinator shall submit the file to the Project Internal Audit for verification of the accountability.
- Each subproject will have a file at the sub-county level.
- The CIPIU project accountant shall in addition keep a register of when the subproject accountabilities are submitted to the Project Internal Audit Department and when they are returned.
- All the original copies of the Subproject Accountabilities shall be kept in the office of the Sub County Accountant from where they will be audited by external auditors.
- Each submission of accountability by the community shall be registered in accountability registers stationed at both the sub-county and county.
- NPIU and CIPIU
- Annual fiduciary review
- Social Audits
- External Audit
- Access to records and provision of explanatory information
Remedies for Non-Compliance or Misuse of Funds
- Stop all the withdrawals from the sub project account by the CIPIU;
- No project proposals will be awarded or received from the village
- Review and investigation by the internal audit.
- Recovery of lost funds from signatories and other involved members.
- If the funds are not paid within the stipulated time, the CIPIU will initiate the process of suspending or terminating the sub-project activities.
- Prosecution of culpable culprits.