Standard 8: Timely and comprehensive project financial set-up.

Set up a project financial management system based on updated activity plans that supports a quick start-up and effective financial management throughout the project.

Work with partners to set up project-specific financial management and reporting processes, formats, and schedules, and orient partner staff on them.

Why
Project financial management is a fundamental project management discipline, but it can be confusing and a source of misunderstanding and tension between CRS and subrecipient partners. Working with partners to set up project-specific financial management and reporting systems is an important step in project financial start-up and project partnership. This process:
- Clarifies roles, responsibilities, and requirements for project financial management.
- Facilitates partners’ compliance with CRS and donor financial requirements.
- Establishes effective management of and accountability for funds received and expenditures made against that funding.
- Helps with appropriate consolidation of financial data to facilitate financial monitoring and analysis and related project decision-making.
- Reduces the risk of errors and/or disallowed costs.

Who
- Primary responsible: Project manager or chief of party (PM/CoP)
  - The PM/CoP leads the process of working with partners to set up their project financial management systems.
- Others involved: Finance manager (FM) and/or other assigned finance staff; partner staff; IDEA staff; regional finance officer (RFO) and/or deputy regional director for management quality (DRD/MQ)
  - The FM or other assigned finance staff provides subject-matter expertise to support the PM/CoP in the partner financial management set-up process; partner staff work with the PM/CoP and FM throughout the process.
  - As needed and requested for externally-funded projects, IDEA staff and/or the RFO and/or DRD/MQ review tools and templates developed, to ensure they comply with CRS’ policies and systems and that they generate the right information for CRS to meet donor requirements.

When
- As a part of signing sub-agreements and prior to transferring project funds to partners; early in the start-up phase if partners are scheduled to implement activities in the first few months of the project.
- For externally funded projects: Start the process upon receipt of the draft donor agreement.
Adjustments and additional orientation during implementation: During project implementation, CRS and partners may identify additional aspects of financial management that require improvement or the need to revise certain aspects of project financial management and reporting. Work with partner to make the necessary changes and orient staff to the revised processes, formats, and/or schedules. It’s also important to arrange orientation for any staff who join the project team after the start-up orientation.

How
Follow these steps to help partners set up and orient partner staff to project-specific financial management and reporting:
1. For externally funded projects: The PM/CoP consults with the head of operations (HoOps) and head of programming (HoP) to determine if any adjustments are needed to CRS’ sub-recipient agreement template. These adjustments may be needed to “flow-down” donor requirements, based on the terms of the final donor agreement.
- Follow the CRS Agreements Policy and Procedure, including the Agreement Process Map, to ensure the appropriate review of the sub-recipient agreement, including any modifications.
- In addition to terms from the donor agreement that CRS must incorporate into the sub-recipient agreement, pay attention to especially complex aspects of financial management identified during the HoOps and FM review of the draft donor agreement. While these may not require adjustments to the sub-recipient agreement template, CRS will need to keep these requirements in mind when working with partners to set up financial management processes and schedules.
1. The PM/CoP, HoOps, and HoP also determine if any new procedures are needed to support partners’ compliance with the terms of the agreement.
TIP: Consider including all partner financial reporting schedules, content requirements, and templates in the text of the sub-recipient agreement or as an annex. This helps confirm all requirements in writing, from the beginning of the project.
1. The PM/CoP, working in collaboration with finance staff and the HoOps, supports the partner to develop new tools, templates, or processes as needed, or adjust existing ones, to accommodate project-specific requirements. Adjustments are most frequently needed to financial liquidation report templates, to capture specific information required by the donor(s). Financial report template adjustments and other adjustments may include:
- Creation of new templates to capture information required by the donor which CRS and partners do not typically track.
- Development of project-specific guidance for project expense coding, to facilitate reporting per donor requirements.
- Adjustments to typical liquidation report submission and review timelines to ensure CRS can meet its commitments to the project donor(s).
- Adjustments to partner internal processes and staff responsibilitiesIn some cases, partners may need to hire new staff to ensure appropriate segregation of duties. to ensure proper segregation of duties.
- Be sure to set up partner financial reporting templates to include tracking of partner accounts receivable, to ensure a complete picture of the partner’s spending and commitments. This will facilitate project close-out.
When setting up project-specific financial management and reporting tools, templates, and processes, look first to build on and enhance partners’ existing skills and systems (e.g., existing organizational forms and reports, a particular financial software package or Excel-based system), rather than simply replicating CRS’ templates and systems.
1. If the CRS and partner team develops any new or revised financial management and reporting processes, the PM/CoP consults with the RFO and/or DRD/MQ and/or IDEA staff, to ensure that the changes are consistent with the terms of the sub-recipient agreement and donor rules and regulations.
Depending on the complexity of the project (e.g., number of partners and countries involved, donor requirements, project length), the project team may wish to develop a partner compliance manual for use across all partner organizations (see AIDSRelief Point of Service Management Guide or CRS Moldova Partner Compliance Manual as examples).
1. The PM/CoP, with support from the FM or other designated finance and operations staff, prepares and delivers a financial management and reporting orientation for staff and partners.
- Conduct this orientation either during the overall project start-up workshop (see Standard 7, key action 2 and the Start-up Building Blocks), or during individual CRS-partner start-up meetings.
- Plan early for these orientation sessions to ensure availability of CRS finance staff and avoid conflicts with commitments like month-end close.
1. The PM/CoP and FM accompany partners and monitor partners’ compliance with the financial management and reporting processes and schedules to determine if any adjustments in the tools, templates, or procedures are needed or if additional capacity strengthening is required.
- Focus on mentoring, on-the job training or other capacity strengthening techniques.
- Plan sufficient time and staff support to accompany partners as they implement new, project-specific financial management and reporting processes and systems, particularly in cases of complex donor requirements, and/or if the project is funded by a donor new to the partner.
- Keep in mind that orienting new partners on financial management processes and formats requires more intensive support from CRS, particularly finance staff.

Partnership
- Partners are involved as full participants in this key action.
- Carry out activities to strengthen financial tools and processes and build partner staff financial management capacity in accordance with CRS’ partnership principles.
- Although the process above typically applies to partners who are subrecipients of grants or cooperative agreements and operate on an advance and liquidation basis, the process may also apply to other types of arrangements including reimbursement-based agreements and a variety of subcontracts (fixed price, cost-reimbursable, etc.), though adjustments to the tools, templates, procedures, and orientation may be more significant in a contracting arrangement.
When CRS is a sub-recipient
- Follow the same process when CRS is a sub-recipient.
Emergency projects
- Follow the same process for emergency projects, telescoping as needed to account for shorter timeframes.
- In many cases, the steps above may be combined with other emergency project start-up activities.
- When possible, work with existing partners, ideally those with emergency project experience. This will help streamline the set-up of financial management and reporting processes.
- Emergency projects often have multiple donors and multiple reporting schedulesFor donors supporting a larger emergency response, CRS should seek to negotiate and harmonize donor reporting schedules/report cut-off dates as well as donor financial reporting templates (see Standard 10, key action 1 for guidance). . Where possible, consider making one financial reporting template and schedule that will accommodate most donors, to simplify processes for CRS and partners.
- If you are working on a large-scale emergency where several Caritas Internationalis (CI) Members are responding and/or supporting a response of the national Caritas, please refer to the Protocol for CI Coordination in Emergency Response, Emergency Framework and Toolkit for Emergency Response documents on the CI Baobab website. These documents provide guidance on coordination and the process of developing, implementing, monitoring and reporting on an Emergency Appeal for funding via the CI Network. If you are not registered on the CI Baobab site, please register here.When registering for the CI Baobab site, CRS staff should select "Caritas United States - CRS" as their organization and list the Humanitarian Response Department and [email protected] as the reference contact. If you have any questions, please contact CRS’ Humanitarian Response Department ([email protected]).

Standard 8: Timely and comprehensive project financial set-up.

Key resources

Tools and templates

Policies and procedures

Other resources