The Accreditation Panel set up by the Adaptation Fund Board (AFB) has reviewed a number of accreditation applications submitted by potential NIE. The Panel, as part of its recommendation to the AFB, provides detailed comments on the competences and capabilities of the potential NIE that has submitted the application based on the supporting documentation provided.

This section contains an example put together by the Panel of its review of some past and ongoing applications. Intention is to help potential NIEs as it provides a good example of how the Panel reviews the applications.


Financial Integrity and Management

 

(a) Capability required: Accurately and regularly record transactions and balances in a manner that adheres to broadly accepted good practices, and are audited periodically by an independent firm or organization.

  1. Production of reliable financial statements that are prepared in accordance with internationally recognized accounting standards.
  2. Production of annual external audited accounts that are consistent with recognized international auditing standards.
  3. Production of detailed departmental accounts.
  4. Demonstration of use of accounting packages that are recognized and familiar to accounting procedures in developing countries.
  5. Demonstrate capability for functionally independent internal auditing in accordance with internationally recognized standards.

Good example on audited financial statements:

The application contains audited financial statements with an unqualified opinion from KPMG for each of the two years of operation being 2008 and 2009. The financial statements are in accordance with auditing standards issued by the Auditor General of the country. The applicant uses integral Administrative Management software that includes an accounting module marketed by Datalogic which is a local firm aiming to develop the product for the region. The application provided a link to the software company so that the Accreditation Panel could verify the appropriateness of the software.

Marginally acceptable example on audited financial statements:

The applicant is a government ministry and its accounts are audited together with those of the government as a whole by the Auditor General. His latest report on the 2008 financial accounts shows a multitude of examples of improper recording, non compliance with rules and fraud. But only few comments relate to the applicant. A separate letter from the Auditor General for the ministry also has no significant issues outstanding. This would be acceptable for accreditation provided the other parts of the application show strong governance systems and a strong internal audit.

Acceptable example on internal audit:

While there is no internal audit function for this small organization there is, each year, a management review done by the external auditor. The management letter relating to 2009 covered the organizational structure of the applicant and a review of procedures regarding procurement; and accounting / cash. The applicant takes the observations seriously and fixed the weaknesses and provided a status report showing the actions they had taken.

Poor example on internal audit:

The application makes reference to internal audit provisions and these are adequate and contained in Section 36 of the country’s Financial Regulations. The Auditor General in his report for 2008 is critical about the internal audit effectiveness within the country. The organization chart of the applicant has a few auditors but gives no information on the internal audits done, the content of the annual report or audits planned. Nor is it clear whether aspects of the applicant’s projects, contracting and disbursements are audited. With this information the Fiduciary Standards are not met and accreditation would not be recommended by the Accreditation Panel.

Financial Integrity and Management

 

(b) Capability required: Managing and disbursing funds efficiently and with safeguards to recipients on a timely basis.

  1. A demonstration of use of a control framework that is documented with clearly defined roles for management, internal auditors, the governing body, and other personnel.
  2. Production of financial projections demonstrating financial solvency.
  3. Demonstration of proven payment / disbursement systems.

Good example on an Internal Control Framework:

The institutional form of the applicant is that of a government corporation. According to its application they have 54 employees recruited through competitive examinations, with an average age of 35 years, and all managers have a university degree. It is the first regional agency of its kind to have been certified in one hundred percent of its processes through the Certification of the Quality Management System according to ISO 9001:2008. One of the documents created as part of that process are Quality Guidelines (QGs). ISO certification would mean that the applicant has a strong capability to translate customers’ needs into their own systems and procedures and that the various authorities are described in written documents and this was demonstrated with examples.

Good example on an Internal Control Framework:

The applicant has its own accounting system and its financial statements are prepared under the US GAAP (thus consistent with IFRS). While its own accounting system is not a “recognized accounting package” the applicant is large enough to have a bespoke system and the 2009 annual report shows an unqualified opinion issued by PwC. Included is a statement on the adequacy of internal controls based on the COSO criteria issued by management and referred to by the auditors as fairly stated. Thus the Accreditation Panel can have confidence in the accounting system.

Inadequate example on an Internal Control Framework:

The applicant is a government ministry and referred to various documents in the application such as the Financial Regulations that contain the duties and responsibilities of officials in relation to financial management such as those of: cabinet ministers, the Secretary General, and the Secretary to the Treasury, the accountant General, the Chief Internal Auditor, Chief budget managers and public officers, and various committees. This would only be an acceptable framework if it is accompanied by a demonstration from internal audit or another external source that it is adhered to. Without that assurance the fiduciary standards would not be met and accreditation could not be recommended for the ministry.

Good example on a disbursement system:

One of the attachments of the application is a Project Disbursement Handbook. It contains policies, guidelines, practices, and detailed instructions how to handle project disbursements and repayments. It is written for the applicant staff, borrowers including project staff from executing agencies. It demonstrates that disbursements are managed in accordance with the principles and procedures that are applicable to the investment projects or programs.

Financial Integrity and Management

 

(c) Capability required: Producing forward looking financial plans and budgets.

  1. Evidence of preparation of corporate, project or departmental / ministry budgets.
  2. Demonstration of ability to spend against budgets.

Good example on spending against project budgets:

The applicant maintains a website which enables the stakeholders to monitor the overall financial status of projects. Greater details as well as the status of individual disbursement transactions are available to donors. It demonstrates that the applicant has an ability to budget against projects and correctly account therefore.

Financial Integrity and Management

 

(d) Capability required: Legal status to contract with the Adaptation Fund and Board.

  1. Demonstration of necessary legal personality in case it is not a government department / institution.
  2. Demonstration of legal capacity/authority and the ability to directly receive funds.

Good example on a legal status:

The applicant is a recently created government organization being its own legal entity. It was created by Presidential Decree in 2008. According to the Decree the “Fund shall be an instrument for financing programmes and projects aiming at rational management of the environment, improvement of living environment and promotion of sustainable development in the country. To this regard, it shall be responsible for:

  1. Mobilizing subsidies granted by the Government, as well as externalities and fines collected as part of the fight against environment pollution;
  2. Mobilizing external resources relating to its missions;
  3. Building and developping institutional and operational capacities of national partners in the field of environment management;
  4. Promoting practices of sustainable management of natural resources;
  5. Supporting programmes and projects relating to environment protection and improvement of populations’ living environment;
  6. Following and assessing the execution of funded projects and their impact on the environment.

According to an Article in the Presidential Decree the Fund shall cooperate with public, private and non governmental entities, whose activities contribute to the implementation of the national environment management strategy. This makes the applicant a logical NIE for the AF with the right legal status.

Requisite Institutional Capacity

 

(a) Capability required: Procurement procedures which provide for transparent practices, including competition.

  1. Evidence of procurement policies and procedures at national levels consistent with recognized international practice (including dispute resolution procedures).

Good example on how to procure:

One of the attachments to the application is the sixty five pages Procurement Guidelines. The purpose of these Guidelines is to inform those carrying out a project that is financed in whole or in part by an applicant loan, grant, or fund of the policies that govern the procurement of goods, works, and services required. Topics covered include International Competitive Bidding such as opening and evaluation of bids, and other methods of procurement and also mentions aspects of Fraud and Corruption.

Good example on how to procure:

The application gives the reference to its procurement guidelines that are consistent with international procurement guidelines used by international community. The guidelines describe the basic principles of procurement that apply to projects funded by them including the various procurement methods, policies and procedures for competitive bidding on goods and work and related services. The selection of consulting services is also covered. Contracts, including dispute resolution, are under national jurisdiction. The applicant gets into the procurement cycle of its executing agencies by giving a “non-objection” to contracts for its projects and there is a full dispute resolution mechanism in place. These guidelines are available on the web.

Example of inadequate procurement practices:

The applicant is part of a government structure and therefore subject to the country’s Public Procurement Authority. A report issued in June 2009 on a procurement review of the applicant concluded that unless the recommendations of the review are implemented the applicant will not comply fully with the Public Procurement legislation and the associated regulations and directives and punitive measures are considered. In this case accreditation cannot be recommended until the Public Procurement Authority comes to a positive conclusion on the basis of a full review and this should be supplemented by some mechanism to give assurance to the Accreditation Panel that the appropriate systems and procedures in place for procurement and adherence thereto is expected to continue to be in place for the duration of the accreditation period.

Requisite Institutional Capacity

 

(b) Capability required: Capacity to undertake monitoring and evaluation.

  1. Demonstration of existing capacities for monitoring and independent evaluation consistent with the requirements of the Adaptation Fund.
  2. Evidence that a process or system, such as project-at-risk system, is in place to flag when a project has developed problems that may interfere with the achievement of its objectives, and to respond accordingly to redress the problems.

Good example on how to monitor:

The application included project guidelines on preparing a design and monitoring framework that is primarily for design teams government and ministries, nongovernment stakeholders, applicant staff, and consultants. The guidelines are a hands-on tool kit that describes—step-by-step—the participatory process to develop the design and monitoring framework and explains how to apply participatory design tools. The guidelines are practical with examples. There is also technical assistance available to prepare projects. These together with other manuals such as for disbursement and the semiannual monitoring make it clear that the applicant has the required capacity to meet this Fiduciary Standard. Monitoring reports from several projects demonstrate the system is working.

Good example on evaluation:

The applicant has an independent Evaluation Group that is directly responsible to the Board and links to its Evaluation Committee. They have their own section on the applicant web site that includes its annual report and summaries of the reports issued. There was an external peer review done of its evaluation function and that came out positively and is available under the documents of the latest Executive Board.

Poor example on risk management within projects:

The application mentions that risk assessment is embedded in the project log-frames and in the project design document template envisaging sections on risk analysis and exit strategy and post-project sustainability. While that may be the case the risk identification at project design could be stronger. For example, many appraisal documents do not include a section on risk management with suggested mitigating actions, for many others the treatment of risks and mitigation could be stronger. The focus on risk is so minimal that it does not meet the minimal AF Fiduciary Standards.

Good example on a monitoring / accounting for projects:

The application includes audited financial statements for several donor funded projects of the Institute as of 2008. It involves opinions of KPMG, a local auditor and the auditor general of the country. All opinions are positive and give confidence that project expenditures and procurement actions adhere to the loan provisions and national legislation.

Example of inadequate monitoring practices:

The application states that it has the technical capacity to monitor and evaluate projects through the Monitoring and Evaluation Committee but does not demonstrate this or give further information or examples. When asked for additional examples the applicant provides quarterly monitoring reports done by the donor organizations. For accreditation purposes the monitoring capability has not been demonstrated and accreditation cannot be recommended.

Requisite Institutional Capacity

 

(c) Capability required: Ability to identify, develop and appraise projects.

  1. Demonstration of availability of/ access to resources and track records of conducting appraisal activities.
  2. Evidence of institutional system for balanced review of projects, particularly for quality-at-entry during the design phase.
  3. Evidence of risk assessment procedures in place.

Good example on identification, development and approval of projects:

The main purpose of the applicant is to define the strategy for the country. Since donor funding is a significant part of the country budget, the applicant is heavily involved with the identification of projects. It does so through working with all the government bodies and other partners. Steering committees are created as projects are identified, developed, and appraised and these are usually chaired by applicant staff. Projects that pass the steering committee are sent for approval to cabinet. In case of approved programmes, the Steering committee approval is sufficient for a new project. The applicant provided documents that demonstrate that it has an extensive capability to identify the right projects and see them through its development and appraisal stages working in full partnership with all the stakeholders.

Inadequate demonstration of identification, development and approval of projects:

The applicant explains that it has a planning cell who initiates the project appraisal after receiving projects from different agencies/departments. This follows a prescribed document for new projects called Development Project Performa/Proposal (DPP). The DPP includes the basic project proposal elements such as objectives; budget and timing; pre-appraisal or investment feasibility study; a result based monitoring framework; and a procurement plan. The explanation and the form are all contained on two pages and no examples are given. From an accreditation viewpoint there is not sufficient demonstrate of a system and evidence that the system is working. There is a pro-forma list of a Departmental Project Approval Committee (DPAC) made up of some 12 senior staff members of different government ministries and divisions but there is no example of how they work. Thus the application needs to be expanded and provide evidence on these systems before accreditation can be recommended.

Requisite Institutional Capacity

 

(d) Capability required: Competency to manage or oversee the execution of the project/programme including ability to manage sub-recipients and to support project/programme delivery and implementation.

  1. Demonstration of an understanding of and capacity to oversee the technical, financial, economic, social, environmental and legal aspects of the project and their implications.
  2. Demonstration of competence to execute or oversee execution of projects / programmes.

The examples under monitoring above apply. The demonstration of the capacity to oversee the technical, financial, economic, social, environmental and legal aspects of the project and their implications requires a demonstration of staff qualifications, experience and education.

Inadequate demonstration of capacity to manage or oversee projects:

The application states that the various technical wings of the organization together with some of the technical directorates of ministries, whom they work together with, puts them in a unique position to oversee the technical, economic, financial, social, environmental, and legal aspects of projects and their implications. It states that usually a Steering Committee is formed drawing members from relevant institutions to provide such oversight responsibility. It gives as an example a project being executed but is only one example and it is very different from adaptation type of projects. Better examples need to be given to be considered sufficient demonstration for accreditation.

Transparency, self-investigative powers, and anti-corruption measures

 

(a) Capability required: Competence to deal with financial mismanagement and other forms of malpractice.

  1. Demonstration of capacity and procedures to deal with financial mismanagement and other forms of malpractice.
  2. Evidence of an objective investigation function for allegations of fraud and corruption.

Good example on an antifraud practice:

The applicant’s management set up an investigation function as part of the internal audit function. The policy is contained in a rather legal document but is neatly summarized on the website. The policy is mainly focused on fraud and corruption but taken together with the published core values it is clear that mismanagement and other forms of malpractice are equally covered. There is an annual report on investigation that is on the website and this demonstrates the nature of the cases and that all complaints received are taken serious and are acted upon. It is important to note that the investigative activities equally cover any behavior related to the applicants’ projects done by third parties. For example fraud related to tender documents would be covered.

Inadequate example on an antifraud practice:

The application refers to the various national systems such as the Ombudsman, the Auditor General, the National police, the Prosecutor General, the Revenue Authority and the Public Procurement Authority. The underlying message is that the national systems work. There is certain evidence through websites that the system works. For example, the former Director of the national procurement agency was tried for corruption. Nevertheless it does not demonstrate how the applicant works with the various national entities and how it has a no fraud tolerance at the top or how it deals in a preventive and reactionary fashion with financial mismanagement and other forms of malpractice on projects. There is no information on a whistleblower policy. Neither does it deal with the role of the organization to prevent, initiate and monitor investigations of fraud and corruption within projects they manage. Also details on a code of conduct for staff is missing