Feb. 2012
Project Financial Statements &
Quarterly Reports
Introduction
IFAD has a fiduciary role to ensure that its funds are used for the purpose
for which intended

Project Accounting and Audit procedures should be based on best market
practice as per IFAD underlying guidelines. These provide accountability
and credibility as to use of funds

IFAD guidelines require all projects to maintain accounts & records
(separately or within a basket fund)

These accounts should be audited by an independent auditor on an
annual basis within a set timeframe (normally 6 months)

Where possible, national systems should be used
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Project Financial Statements (PFS)
Objective
•
To provide information about the financial position, performance and
resource flows of a project
Basis of Preparation
•
Prepared in accordance with:
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International Financial Reporting Standards (IFRS) (www.ifrs.org)
International Public Sector Accounting Standards (IPSAS) (accruals
or cash basis) (www.ipsas.org)
National standards, if minimum disclosures are provided
•
These standards define what & how to report
•
Cash (when money is actually spent/ received) or accruals (when legal
commitment incurred irrespective of cash) basis, as long as consistently
applied
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Spectrum of Accounting Bases
Cash
Modified Cash
Modified Accruals
Accruals
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Spectrum of Accounting Bases
Cash basis
Modified
Cash basis
Transactions recorded
Cash paid/received
Transactions recorded
cash, payables
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Spectrum of Accounting Bases
Modified
Accruals
Accruals
Transactions recorded
when they occur, with
exceptions
Transactions recorded
when they occur,
without exception
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Financial Accounting & Reporting
Monthly accounting/ reporting
►
Income & Expenditure Statement – by category/component as per legal
agreement, plus resource flows, review actual costs versus budget
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Special account & Bank reconciliations – all accounts
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Fixed assets, Training plan, Withdrawal Applications - received/ claimed
Other tips
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Consolidate data from districts with PMU
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Back up & Business continuity plans
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Adequate filing systems - legally, project records need to be maintained for 10
years post closing
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Financial Accounting & Reporting
Quarterly reporting
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Discussion of Project Progress against AWPB - highlights/ learning tips
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Sources & Uses of Funds Statement
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Uses of Funds by Project Activities (supports the Sources/Uses of Funds)
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Physical Progress Report - physical outputs
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Physical Progress Report - status of large works and services
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Procurement Monitoring Report - narrative and tables
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IFAD has no prescribed formats for Quarterly Reports - World Bank FMR
Formats are recommended
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Sample Quarterly Reports Format (World Bank)
Example of an education project with significant construction activities, equipment
purchases & training. The Sources & Uses of Funds Statement includes a cash forecast
for the next 6 months, to facilitate project planning & monitoring. Physical progress is
monitored by units of output, where practical, & by contract/work progress for
construction activities.
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Discussion of Project Progress
Sources & Uses of Funds
Uses of Funds by Project Activity
Physical Progress Report
Procurement Reports
Procurement Monitoring Tables
Source: WB FMR Pages 17-24 (Annex A Sample)
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IFAD Project Financial Statements (PFS) Formats – Annual reporting
(Cash basis)
•
Project information and performance
•
Statement of project management responsibilities
•
Report of the independent auditor
•
Statement of income & expenditures/ receipts & payments (by category)
•
Statement of income & expenditures/ receipts & payments (by component
•
Statement of comparative budget & actual amount
•
Statement of Special Account Activities & Reconciliation
•
SOE – Withdrawal Application Statement – annual & cumulative
•
Status of funds (in SDR)
•
Notes to the Financial Statements
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PFS – Notes to the Financial Statements (Cash basis)
Suggested Minimum Disclosures:
1. Basis of reporting
–
In accordance with the underlying accounting principles of reference the
notes to the financial statements of an entity should:
• Present any information about the basis of
preparation of financial statements
• Provide additional information which is not
presented on the face of financial statements
2. Significant Accounting Policies
–
–
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Basis of Preparation
Cash Basis of Accounting
Foreign Currency Transactions
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PFS – Notes to the Financial Statements (Cash basis)
3.
Budget – basis of budget
4.
Cash/Fund Balances
5.
Direct Payments
6.
Government Counterpart Funds
7.
Other Donor Funds
8.
Other Receipts
9.
Non-current Assets (for disclosure purposes only)
10. Yearly Procurements
11. Allocation & Use of the Financing proceeds
12. Reconciliation of Funds Disbursed by IFAD & Funds Received by the Project
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Accrual basis of accounting
“The IPSASB encourages governments to progress to the accrual basis of accounting
and to harmonize national requirements with the IPSASs prepared for application by
entities adopting the accrual basis of accounting.” IPSASB
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Accrual basis of accounting
“Accrual accounting was created to fill textbooks since it is more
complicated than cash accounting” -CPA Student
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Highlights of Project Accrual Accounting
FINANCIAL STATEMENTS
1.Statement of Operating performance replaces
statement of receipts and Payments
2.Balance Sheet reflecting project assets, liabilities and
sources of financing
3.Statement of Cashflows
4.Additional disclosures in Notes to the Accounts
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Highlights of Project Accrual Accounting
STATEMENT OF OPERATING PERFORMANCE
 Recognise income when earned, i.e WA approved
by IFAD, NOT when funds are received by project.
 Recognise expenses when incurred, i.e when
billed to the project, NOT when paid.
 Disclose income and expenses by category and
component, same as cash basis
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Highlights of Project Accrual Accounting
• BALANCE SHEET
 Recognise advances and prepayments as current assets in the
balance sheet e.g in cases of replenishment of pre-financed
expenditure
 Recognise Fixed assets at historical cost or re-valued amount,
less depreciation and impairment losses
 Recognise payables as current and non current liabilities (due
after one year)
 Recognise IFAD funds received in advance as deferred income
(e.g in cases of disbursement by revolving fund)
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Highlights of Project Accrual Accounting
STATEMENT OF CASH FLOWS
 Adjustments to recoincile net cash to surplus/deficit
 Changes in working capital
 Cashflows from investing activities
 Cashflows from financing activities
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Benefits to IFAD Project Operations
 Identifies project risks such as credit risk in projects with
significant credit components, e.g in microfinance where
project funds are advanced to beneficiaries
 Identifies cross debts/commingling of donor/counterpart
funds since balance sheet has sources of financing
 Counterpart finances i.e tax exemptions can be
accounted for even when no cash is paid out.
 Analytical review of balance sheet items provides useful
information for risk analysis.
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Accounting Software for IFAD Projects
Capacity Analysis
 Expenditure by components & categories per legal agreement
 Expenditure by Financier
 Ability to print Financial Statements according to Govt/IFAD/IPSAS accounting policy
 Advances utilisation by Service Providers & staff duly aged to facilitate follow-up
 Bank balances held by service providers
 Commitments beyond actual billings/ invoices
 Budgetary control information to ensure expenditures do not exceed set limits
 Bank reconciliation using the system
 Receivables in form of replenishment applications in transit & any refunds that may be due
from Government
 Withdrawal application form automatically produced by the system
 Contract & Procurement plan monitoring
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