When an executing agency is handling more than one project for multiple donors, the requirements for audits, reviews and financial reporting should be even more detailed. If the person committing fraud knows that the donors are not reviewing the bank accounts, then co-mingling will go unnoticed and large debits and credits won’t be questioned. The more accounting controls and compliance mechanisms implemented by the donor agencies, the less the risks of fraud. Accounting and compliance controls by donor agencies sets the tone for executing agencies to be honest and ethical. If every donor becomes more detailed in their risk management and compliance controls, executing agencies will have to ensure spending is based on the budget. One of the reasons for controls and segregation of duties in an organisation or business is to spot an issue if it exists, with one of the mechanisms put in place. Accounting confusion shows lack of proper management of funds.
My requirements for reviewing climate finance financial statements:
- Monthly or quarterly expense report and financial statement reviews.
- Supporting documents for each budget head and sub head. If fifty thousand dollars is reported spent for the period for a financial controller, I want to see the supporting documents such as the contract, resume and bank confirmation of payment.
- The approved procurement list showing committee approvals and approved purchases for the period.
- Bank statements. I would need to confirm each approved payment in the bank account for the project. I would also need to verify the amounts reported spent for each budget head.
- Invoices and contracts must be provided for every purchase for each budget head so that the amounts reported spent can be verified.
- To ensure due diligence was carried out also, I would need the purchase requisitions and purchase orders. This is needed to ensure there was no fraud committed in the procurement stage.