Key Actions by:

Standard 13: Effective financial management during project implementation.

Achieve financial consistency, accountability and stewardship through adequate, continuous financial planning, monitoring, controls and reporting.

Analyze monthly budget/forecast comparison and aging reports to review spending against the detailed implementation plan, and make decisions accordingly.

  • Why

    Project managers and chiefs of party (PMs/CoPs) are responsible for managing the triple constraint of scope, time, and cost, and the effect of these different elements on project success. Budget/forecast comparison reports and aging reports are key tools for PMs/CoPs to analyze and manage project costs, and ensure an appropriate balance between scope, time, and cost. Regular analysis of financial reports promotes accountability, proper stewardship and timely, adaptive management.

  • When
    • Monthly, with budget comparison and aging reports circulated within 5 days of month-end financial close.
    • Quarterly reviews coincident with re-forecasts are also opportunities for financial analysis and decision making.

    Reclassifications: Identify expenses requiring reclassification each month, and ensure that adjusting entries are posted into the financial system before the last day of the respective month. Pay special attention to reclassifications in the last month of the fiscal year. This helps ensure project financial data for the fiscal year is accurate before the year-end close.

  • How

    Follow these steps to analyze financial system reports for timely project decision-making:

    Prepare timely, comprehensive and accurate reports

    1. The FM prepares and distributes budget comparison reports (BCR) and aging reports each month to all budget managers and the country program senior management team (SMT). As requested by the budget manager, the FM also prepares detailed transaction reports. At a minimum, reports should include the following information:

    Keep budget managers informed about financial trends and risks: In addition to sharing BCRs and aging reports, finance and the HoOps must inform budget managers about any major financial trends and risks which could impact their budgets. These could include anticipated changes in allocated direct costs, currency exchange rate gain/loss, policy changes, etc.

    Analyze reports

    1. The budget manager reviews actual spending against expense forecasts, in consultation with other members of the project programming team (this review can take place during regular project team check-ins). As part of the analysis, the team analyzes spending in light of project accomplishments and completion of project activities per the project detailed implementation plan (DIP). Specifically, the budget manager and team analyze financial reportsFor externally funded projects, the team analyzes both donor award and CRS cost share reports and spending/projections. to ensure that current and projected expenses are:
    • Accurate and comprehensive:
      • Do the transactions for posted expenses and commitments reflect actual incurred costs for the project during the BCR period?
      • Do any of the transactions belong to a different DSPN?
      • Are any amounts inaccurate? 
      • Are any expenses or commitments missing?
    • In line with budget by timing:
      • Is spending to date timely relative to the CRS budget (FY), donor obligations (ITD), and award total?
      • Is spending on track relative to the projected final spending for the FY (CRS spending forecast), for the existing obligations, and for the total award?
      • What is driving variances, including programmatic changes (reference the DIP)?
      • Can mismatches between what is expected (for the fiscal year, life of obligation, or life of award) be addressed? If the variances are inevitable, what changes in projected spending are needed and do they imply award modification (e.g. CRS will not be able to spend donor funds within the life of the award and should seek a no-cost extension)?

    Document and make adjustments based on financial analysis

    1. The budget manager documents any follow-up actions (e.g., with partners on outstanding advances) and proposed adjustments to human resource, material resource and project activity plans to address over or under-spending. This may include revising the project DIP (see Standard 11, key action 4 for guidance on quarterly and annual DIP review) and/or expense forecasts.
    1. The budget manager follows up with finance, the HoP and HoOps regarding any questions or issues regarding transactions, burn rates and corrective actions required.
    • Even if all transactions are correct and spending is on track, it is best practice to formally document this, for example, in the notes from the country program BCR review meeting.
    • If a budget manager is unable to attend the BCR review meeting, he/she should send an email to finance (with a cc: to the HoP and HoOps) documenting that he/she has reviewed the BCR and that no action is required. 
    1. The SMT reviews the YTD and ITD BCRs for financial trends and risks and reviews other information the FM will prepare in support of the BCR report data. The SMT review should at a minimum include:
    • Burn rates, particularly on projects approaching expiration
    • Significant changes in allocated direct costs
    • Gain/loss on exchange rates
    • Delinquency on sub-recipient advances (over 90 days old)
    • The age of the unsupported sub-recipient expenses in GL 6170 and 6909 (Over 90 days?)
    • Accuracy and completeness of personnel costs charged to the projects (are time sheets complete and accurately charged?)

    Hold monthly cross-discipline BCR review meetings: Good practice is joint program, finance, and senior management review of the BCRs and the action plans for individual projects which the budget manager prepared under step 3. Document these meetings and review follow-up at the next meeting.  

    1. The CR determines whether risks and issues identified during BCR analysis require discussion with regional leadership or donor engagement staff and ensures the appropriate communication as needed.

    Inform staff with donor engagement responsibilities about budget variances: For externally funded projects, update staff responsible for higher-level donor engagement (e.g., IDEA colleagues) at least every quarter regarding any significant over- or under-expenditure and the factors driving these variances. Keeping these staff informed helps CRS identify when and how to discuss budget issues with the donor (see Standard 15, key action 2 for additional guidance).

  • Partnership
    • BCRs are internal CRS financial management tools. However, action planning and project adjustments following BCR review frequently include actions related to partner-managed activities and resources. Use regular project planning and review meetings with partners (see Standard 11, key actions 1 and 3 for guidance) to discuss and follow-up on issues arising from financial analysis.
    • Partner advances are expensed at the time of the advance. PMs must work with partners to ensure prompt liquidation of partner advances to minimize the delinquency rate.
  • When CRS is a sub-recipient
    • Follow the same process when CRS is a sub-recipient.
  • Emergency projects
    • Expenses need to be monitored frequently in short-term projects.