Financial Management Guidelines

KDRDIP FINANCIAL GUIDELINES FOR COMMUNITY SUB-PROJECTS

Introduction

The National Project Implementation Unit (NPIU), processes the fund requests and disburse the funds to community Group bank accounts through the County Integrated Project Implementation Units as per the approved annual work plans, budget and disbursement schedules. The disbursement for the sub-projects is done half half-yearly or as per the Disbursement schedules for the sub-projects.

Meaning of 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

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 CPMCs will receive technical support from CF, PIST & CIPIU in the course of executing their roles in financial management.

The Role County Integrated Project Implementation Unit (CIPIU)

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

Training participants were taken through planning and budgeting at the community level for the purses of getting understanding and clarity on how community members will be managing resources entrusted to them by Government and the general public.

Planning and budgeting is led by communities supported by CF (community facilitators), SM (social mobilizers and PIST (project support implementation teams) VLC (village level committees)- WLC (ward level committees) – Sub CC (sub County committees) – CPIU (county integrated project implementation unit) CTC 9 County technical committee)– CSC (county steering committee)– NPIU (National project implementation Unit)– NTC (national technical committee) and national steering committee (NSC).

Activity Cost

This is the cost of the community sub-project. It is prepared with the support of the relevant 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;

Transport,
Stationery and
Night out

Key Dates in the planning cycle.

When preparing the AWPB, the communities should ensure they are in line with the National Treasury budget timelines. The budget should meet the budget deadlines as follows;

VLC – The VLC should have prepared the budgets by the 31^st of March and submit to the WLC

WLC – The WLC aggregates the budgets from all the VLCs and submits to Sub-County Committee by 30^th April. Sub-County Committee aggregates all the Ward AWPBs and submits to the CIPIU BY 15^th of May. CIPIU, CTC and CSC processes the budgets by 15^th of June and submits to NPIU.NPIU, NTC and NSC process the budgets by 15^th of July. This will enable incorporation of sub-project budgets requirements into the National Treasury budget whose cycle starts in August 15^th.

Project Costing

The Project Implementation Support Team provide technical assistance in costing of the sub-projects

Budget Variation.

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.

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 CHEQUES

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 CONSTITUTES COMMUNITY ACCOUNTABILITY

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.

AUDITS

Internal Audit.

NPIU and CIPIU
Annual fiduciary review
Quarterly
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.

COMMUNITY PROCUREMENT PROCESS

objectives of community procurement guideline

Provide guideline for village committees in managing procurement at the community level in line with PPADA 2015 and World Bank Procurement Rules
Outline the key processes and steps to observe in procuring or purchasing using project funds
Provide a simplified procurement document for use by stakeholders interested in community procurement

What is community Procurement?

Community Procurement is a process through which communities acquire goods, works or services at community level

What are the Key principles of procurement at the Community level?

Transparency: Procurement of goods, works and services at community level shall be open and transparent. All goods, works and services to be procured or hired should be prominently published at public places in the villages. Where applicable proper specifications and estimated quantities should be indicated. The processes should be capable of being questioned and everything is above board

This should enable all processes to be monitored, reviewed, commented upon and influenced by stakeholders, and decision makers can be held accountable

Timely -This means that procurement transactions are made and commitments are met within the reasonable time frame.

Equal Opportunity for all: Every interested party should be accorded equal and fair opportunity for supplying goods or works, or render services. The method of evaluation must be uniform and everybody should be well aware of it.

Accountability: Any Procurement Committee member of the Community group remains accountable individually or collectively for all decisions and actions taken.

Any member found to have flouted the procurement rules and regulations shall be dealt with in accordance to the laws of Kenya, and the group’s constitution and by-laws.

Ensuring value for money: Goods, works and services to be procured should meet the required technical specifications, quality standards and at the best price.

Safeguarding the Interest of the community Procurement Committee: In the event that friends or relatives of any member of the procurement Committee is participating in the bidding process the concerned member should declare and excuse himself from the evaluation process, so that there shall not be undue influence.

Ensuring Efficiency and Effectiveness: Procurement processes should be carried out as cost effectively as possible while at the same time meeting appropriate requirements

Something to remember :5Rs

Right Quality
Right Time
Right Quantity
Right Source
Right Price

Contractual disputes– There should exist adequate, prompt and fair ways of receiving and resolving grievances related procurement issues in line with GRM.

What are advantages of community Procurement?

Ensures value for money in the procurement.
Empowers and ensures ownership of the process and assets.
Community is accountable and takes responsibility for their decision,
Communities can deploy local labour, purchase local materials, and use their indigenous knowledge
Communities improve their skills and gain confidence in implementing development projects in a participatory manner
Ensures transparency and accountability within the community

What are the procurement methods under community procurement?

Goods, Works and Non consultancy services

Low Value <10,000
The estimated cost of goods works and services procured by item is less than ten thousand
No benefit would accrue to the community in terms of time or cost implication if the community uses any procurement method
Request for quotation >10,000 – <2,000,000
For goods, works and non-consultancy services that are readily available in the market within the community -sub-county
Local Competitive bidding >10,000 – <1,000,000 Non-Consultancy Services and >10,000 – <3,000,000 For goods and Works
-For goods, works and non-consultancy services that are readily available in the market within the community –within the county

Restricted Tendering (Any value)

For specialized goods, works and services subject to prequalification

Direct Procurement (Any value)

Goods, works and services available from only one supplier, public entity or on emergency

National Open Bidding (<1,000,000 Non consultancy Services<3,000,000 For goods and Works)

Community Force Account

When it is appropriate for the community to purchase materials and hire a contractor (Where labour is to be procured when the community has purchased materials

What are the procurement methods under community procurement?

Consulting services –For providing technical advice to community groups

FIRMS

Consultants’ Qualification Selection (CQS) <30,000,000

Direct Selection (DS) Any Amount

INDIVIDUAL CONSULTANTS

Open Competitive Selection

Limited Competitive Selection

Direct Selection (DS)

Community Procurement Process

STEP1:

From the approved work plan and procurement plan, a requisition is raised in the following manner:

The CPMC/CGMC authorized procurement member, with assistance of the FP and the relevant Project Implementation Support team member, fills out a requisition form with estimates for the approval by the Chairman of the CPMC/CGMC

The Livelihood Program single cycle implementation process

Training participants were taken trough Livelihood program single cycle implementation process to refresh their minds. Livelihood single cycle implementation process begins with identification of existing groups (80%)and new (20%) this is followed by group dynamics management strengthening through training on group dynamics management, leadership, conflict management and five Core principles

The above process is followed by observance of five Core principles (Weekly meetings, weekly saving, inter-loaning, timely repayments and record keeping)
Once all the CGs have completed observance of five core principles for 12 weeks they are graded and those that have passed the grading will continue to the next level and become KDRDIP CGs those that did not pass grading will continue observance of five core principles till the second round of funding
Those that passed grading will undergo enterprise selection process based on the market assessment report and the livelihood Menu
Based on the outcome of enterprise selection process, the CGs will move to the next level of developing Business Plans
Once business plans are developed by individual CGs, the are aggregated at village, ward and appraised and approved at the County level before are submitted to NPIU and the Bank respective fully.
Before fund are released CGs must be trained on financial management and community procurement