In a perfect accounting world, all climate finance projects would be handled in a separate accounting entity in the accounting software. All projects over 100,000.00 USD, would have a bank account created solely for that project’s disbursements and expenses. Once the project is completed, then the project bank account would be closed. The project budgets would get entered in this new accounting entity created specifically for the climate finance project in the accounting software. All spending would be tracked based on the project budget heads and subheads. The amount remaining for each budget head would always be available in that accounting entity, which would avoid overspending the project budget. It would also ensure segregated duties as each user would have specific permissions and duties relating to their role. Every detail of the project expenses would be logged in this separate entity and physical supporting document scanned and attached.
This design would ensure climate finance project audits, accounting reviews and management is an efficient, transparent and an accurate process. All disbursements and payments would be completed in the same project bank account. Full transparency in projects spending from inception to completion. All possibilities of co-mingling eliminated. This process will ensure proper management of climate finance disbursements.
This is one of the areas, capacity needs to be strengthened in climate finance accounting. This will eliminate the accounting confusion created when an implementing agency manages multiple projects.