Introduction

The objective of this standard for Good Financial Grant Practice (GFGP) is to standardize, simplify and strengthen the financial governance of grant funding. For grantors, they can use the standard as a minimum requirement for their grantees. For grantees, they can claim compliance with this Standard to support applications for grants from grantors. This standard establishes a consistent approach to the management of grants throughout the grant life cycle, for the benefit of grantors and grantees.

Potential benefits of this standard include, but are not limited to the following:

1. reduce the cost and administration time for both grantors and grantees;

2. reduce the multiple of audits and financial assessments that grantees have from different grantors;

3. increase the confidence of grantors to fund directly to grantees;

4. reduce the risk of corruption, bribery and fraud; and

5. enable targeted financial capacity building by grantors

This standard is designed to codify and provide requirements on established good practice. It is a quality standard and not an accounting standard. The GFGP standard provides a common framework for how grantees shall financially manage grants. It provides details of the requirements, specifications and criteria to be applied, to implement good financial grant practice.

Grantors and grantees are very diverse in nature, and range from:

1. being very small to very large;

2. operating in safe to risky environments;

3. being quite simple to very complex;

4. having different levels of risk they are willing to accept;

5. being shorter to longer term in nature;

6. governmental to private foundations and individual entities;

7. being national, regional or international in nature: and

8. mature to emerging.

This standard is designed to be inclusive of all the above by having four tiers from bronze to platinum. Table 1 is illustrative only and gives some indication of the types of organizations that might fit into each tier.

The tiers are cumulative from bronze through to platinum. For an organization to achieve silver compliance, it will be required to comply with all the requirements within the bronze and silver tiers. For an organization to achieve gold compliance, the organization will be required to comply with all the requirements within the bronze, silver and gold tiers. To achieve platinum compliance, organization will be required to comply with all the requirements in this Standard.

The four tiers have been designed to encourage grantees to progressively strengthen their financial grant practices as their organization develops.

The four tiers also enable grantors to manage their exposure to risk as some grantors may choose to specify that grantees comply with a certain tier, or parts of a tier, depending on the size or nature of the grants that they manage. Grantors may, after an assessment, decide to award the grant, even if the grantee does not meet their requirements and may mitigate their risk by putting in place additional financial controls, or provide capacity strengthening funding to bring the grantee up to the required level.

This Standard addresses the seven principles of good financial grant practice, which are:

1. accountability;

2. stewardship;

3. compliance to standards;

4. transparency;

5. viability;

6. integrity; and

7. consistency

In turn, these principles are supported by four key pillars of good financial grant management, which, if correctly applied, will provide the evidence to support compliance with good financial grant practice. These are:

1. internal controls

2. record keeping

3. planning

4. monitoring

Further detail on both the principles of good financial grant practice and four key pillars of good financial grant management can be found in Annex A.

Table 1— Organization activity indicative of GFGP tiers

1 Scope

1.1 This Standard specifies requirements to be met by grantees (the organization) in order to demonstrate good financial grant practice (GFGP). These requirements are categorized into four main practice areas accordingly:

1. Financial management:

   1. planning and budgeting;

   2. income management;

   3. expenditure management;

   4. property, plant and equipment management;

   5. cash, bank and treasury management;

   6. inventory management;

   7. travel expenses;

   8. sub-grantee management;

   9. financial management systems; and

   10. financial reporting.

2. Human resources:

   1. human resource management and payroll; and

   2. staff development.

3. Procurement:

   1. planning; and

   2. contract management.

4. Governance:

   1. grant management and compliance;

   2. audit; and

   3. risk management.

1.2 This Standard does not cover:

1. assessment;
2. non-financial elements of project management ;
3. research management; and
4. external audit.

1.3 This Standard is for use by all organizations of any type, size and complexity. In particular, it will be of interest to those individuals responsible for managing the risk of a financial grant or the management of grants within grantee organizations. It will also be of interest to grantor organizations as a tool to specify grant award conditions.

NOTE It is intended that the correct application of this Standard will help with:

1. a) accountability;
2. the reliability of information; and
3. improving transparency and trust.

2 Normative references

The following documents are referred to in the text in such a way that some or all of their content constitutes requirements of this document. For dated references, only the edition cited applies. For undated references, the latest edition of the referenced document (including any amendments) applies.

There are no normative references in this document.

3 Terms and definitions

For the purposes of this document, the following terms and definitions apply.

3.1
access
ability, right, or permission to approach, enter or use

3.2
accountability
willingness, ability and obligation of an organization, or function within an organization, to be liable and responsible for all its activities and disclose the results in a valid, accurate and transparent manner

3.3
accrual basis
where income is recognised when it is earned and expenses recognised when they are incurred in a given period/year.

Note 1 to entry: See related definitions for cash basis, expenses, expenditure and costs.

Note 2 to entry: In accrual basis reporting, expenses can be recognized in financial reports prior to the cash for the expenses being paid and income can be recognized even if the cash has not been received

3.4
asset
item owned by the organization which has value and is available over a period of time to help deliver projects, activities, grants or contracts

3.5
assessment
periodic review of performance against set objectives

3.6
award
act of giving, making or approving

3.7
award letter
formal document from the grantor to the grantee which details the terms and conditions for which the grant has been awarded

3.8
bank account
an arrangement made with a financial institution whereby one may deposit and withdraw money and in some cases, be paid interest. Mobile money accounts are considered a bank account for the purposes of this standard.

3.9
back-up
copying and safe storage of electronic records in use to be restored in case of any data loss

3.10
bids
a set of documents issued by the procuring entity, inviting offers (proposals or quotations) for the selection of suppliers, contractors or service providers to fulfil specific requirements

3.11
bribery
offering, promising, giving, accepting or soliciting of an undue advantage of any value (which could be financial or non-financial), directly or indirectly, and irrespective of location(s), in violation of applicable law, as an inducement or reward for a people acting or refraining from acting in relation to the performance of that people's duties.

3.12
budget
estimate of the cost of a project, grant, activity or contract, including the assumptions used in calculating the estimate, the basis of the expenditure, and the specified period.

3.13
capacity building
planned development of an organization’s skills, management, governance, infrastructure and other capabilities.

3.14
capital grant income
amount of money received to cover the costs of acquiring, operating and maintaining an asset.

3.15
cash
money in the form of physical coins, bank notes or any ‘cash equivalents’ such as a pre-paid card

3.16
cash basis
accounting method where income is recognised when the cash is received and expenses are recognised when the cash is paid in a given period/year.

Note 1 to entry: This is as opposed to accruals basis (see 3.3).
Note 2 to entry: For cash accounting there is no difference between expenses and expenditure.

3.17
code of conduct
set of rules outlining specific behaviours that are required or prohibited as a condition of on-going employment

Note 1 to entry: A code of conduct applies the code of ethics to a host of relevant situations. A particular rule in the code of ethics can state that all staff will comply with the law; a code of conduct might list several specific laws relevant to different areas of organizational operations, or industry, that staff need to comply with. The code of ethics can state that the organization is an equal opportunity organization and the code of conduct can forbid sexual harassment, racial intimidation or viewing inappropriate or unauthorized content on company computers.

3.18
code of ethics
set of principles to guide staff behaviour and decision making

Note 1 to entry: When faced with ethical dilemmas or debatable situations, what is articulated in the code of ethics can help guide decision making. The code of ethics is sometimes referred to as a value statement.

3.19
competent people
individual with ability to apply their skills, knowledge and experience to achieve the intended results, including the associated risks.

Note 1 to entry: This requirement can be demonstrated by a role having documented criteria or a role description which lists the competencies and experiences required.

3.20
contributions in kind
non-monetary resources received or provided by the organization

3.21
corruption
abuse of entrusted power or privileges for private gain

Note 1 to entry: Corruption is an insidious plague that has a wide range of corrosive effects on societies. It undermines democracy and the rule of law, leads to violations of human rights, distorts markets, erodes the quality of life and allows organized crime, terrorism and other threats to human security to flourish. This evil phenomenon is found in all countries — big and small, rich and poor — but it is in the developing world that its effects are most destructive. Corruption hurts the poor disproportionately by diverting funds intended for development, undermining a government’s ability to provide basic services, feeding inequality and injustice and discouraging foreign aid and investment. Corruption is a key element in economic underperformance and a major obstacle to poverty alleviation and development.

Note 2 to entry: Corruption can be classified as grand, petty or political, depending on the amounts of money lost.

3.22
costs
expenditure or expenses that are incurred to carry out the grant, contract or activity, or to run the organization

3.23
cost allocation
methodology used to allocate expenditure or expenses to specific activities such as a project, grant, contract or activity

Note 1 to entry: Cost allocation is often used where there is no direct one to one match of the cost incurred to the job or task.

3.24
depreciation
allocation of the cost of an asset to expense over the useful life of the asset

Note 1 to entry: The useful life might be the length of the grant if there is no use for the asset once the grant has been completed. However, it might be longer than the length of the grant if the organization has a use for the asset after the grant has ended.

3.25
disposal
act of removing an asset from use within an organization by selling, discarding or donating an asset, whether or not it has been depreciated over its useful life

3.26
expenditure
payment or disbursement of cash

Note 1 to entry: Where the payment and the use of the item being purchased is within the same period, such as employment, then expenses will equal expenditure for that item (see 3.27).

Note 2 to entry: For cash accounting there is no difference between expenses and expenditure.

3.27
expenses
cost that was necessary in order to carry out the grant, contract, project or activity during the time period indicated in the financial report

Note 1 to entry: All expenses are also expenditure. An example of the difference between an expense and expenditure is when accrual accounting is being used. A company makes an expenditure of $255,500 to purchase equipment. The expenditure occurs on a single day and the equipment is placed in service. Assuming the equipment will be used for seven years, under the straight-line method of depreciation the cost of the equipment will be reported as depreciation expense of $100 per day for the next 2,555 days (7 years of service with 365 days each year).1)

3.28
financial management
efficient and effective management of money in such a manner as to accomplish the objectives of the organization

Note 1 to entry: Financial management includes the planning, directing, monitoring, organizing, and controlling of the monetary resources of an organization and is a key responsibility for the top management and governing board.

3.29
financial report
record of the financial activities and financial position for either the whole organization, individual activities or grants or groups of grants as required by key stakeholders

Note 1 to entry: Key stakeholders include grantors and governing boards.

Note 2 to entry: Financial reports are usually produced for internal management decision making, or for monitoring financial performance, and might differ in format and principles from financial statements.

3.30
financial statements

periodic records of the financial activities and financial position of the organization produced in the format and to the principle of applicable financial reporting standards’.

Note 1 to entry: These are usually audited to both financial reporting standards and/or government regulations.

3.31
financial management system
system that records transactions on an individual basis and manages costs, expenditure, payment processing, budgeting and reporting

Note 1 to entry: The system can be:

1. a physical or electronic cash book;

2. an excel spreadsheet; or

3. a computerized system either off the shelf or be spoke that links all accounting data related to historical financial

   transactions as well as all cash transactions of payment and receiving, linked with budgets.

1) SOURCE: www.accountingcoach.com/blog/difference-expense-expenditure

3.32
forecast
financial projection of how the organization, project, contract or activity will perform within a given period

Note 1 to entry: The organization can perform the projection against the budget.

Note 2 to entry: The forecast can be for a grant or activity or for the whole organization for a specified period.

3.33
fraud
any intentional false representation, including failure to declare information or abuse of position that is carried out to make gain, cause loss or expose another to the risk of loss

3.34
governing board
group of individuals appointed to jointly oversee and safeguard the interests of the organization and stakeholders

3.35
grant
amount of money provided by the grantor to a grantee for a particular purpose

3.36
grantee
organization or individual that has been awarded a grant from a grantor

3.37
grant conditions
restrictions and limits to the use of grant income

3.38
grant cycle
end to end process of acquiring, receiving, managing and closing down a grant

3.39
grant income
revenue and/or cash received by a grantee as a result of implementing the grant

3.40
grantor
individual or organization that awards a grant to a grantee

3.41
indirect cost recoveries
method for calculating and allocating indirect costs that are incurred by the grantee in delivering a grant, activity, project or contract.

Note 1 to entry: Generally, cost recoveries are recovering the costs of expenditure that cannot be directly matched to an individual activity, grant, project or contract.

3.42
indirect expenditure
cost that cannot be directly matched to an individual activity, grant, project or contract

Note 1 to entry: Indirect costs usually include overheads and can be fixed or recurring.

3.43
internal auditor
competent professional who provides an objective examination of evidence for providing an independent assessment on governance, risk management and control processes for the organization.

3.44
inventory
raw materials, work in progress or finished goods that will be used in a future period to undertake the activity for which the grant or income is provided

Note 1 to entry: This use could be in the:

1. ordinary course of business of delivering the activity for which the grant or income is being received;

2. process of production for activity for which the grant or income is being received;

3. form of materials or supplies to be consumed in the production process; or

4. rendering of services.

3.45
invitation to bid
process of seeking out prospective contractors to carry out a specific activity or project

3.46
invitation to tender

a.) foropentendering:makingtheinformationontheprocurementpubliclyavailable,including related assessment criteria; and

b.) forrestricted/selectiveandnegotiated/limitedmethods:publishinginformationonhowto qualify in a readily available medium within a time frame and in a manner that would reasonably allow eligible suppliers to apply.

3.47
monitoring
supervising activities in progress to ensure they are on-schedule in meeting the grant conditions or other objectives and performance targets

3.48
organization
group of people structured and managed to meet a need or to pursue collective goals

Note 1 to entry: Organizations are likely to have a management structure that determines relationships between the different activities and the members, and subdivides and assigns roles, responsibilities, and authority to carry out different tasks.

Note 2 to entry: Organizations are likely to be legally registered entities with not- for-profit status.

3.49
organogram
diagram that shows how an organization is structured

3.50
overrun
continue beyond or above an expected or allowed time or cost

3.51
per-diem
daily allowance which is distributed to the traveller from which they will fund their expenses

Note 1 to entry: Travel allowances are sometimes known as per diems3.52 period
number of weeks, months, years that relate to the content of the report or activity

Note 1 to entry: The period can be for part of the whole lifecycle of a grant, project contract or activity. Typically, a period is monthly, quarterly and annually.

3.53
procedure
documented step by step instruction which guides those doing the work to consistently apply the same approach each time the action is repeated

Note 1 to entry: Where more than one role is required to carry out a procedure it is segmented into roles and responsibilities.

Note 2 to entry: Processes can be documented as a series of procedures

3.54
process
a documented series of activities which states what needs to be done and, where relevant, in what order to achieve the objective or output.

Note 1 to entry: A process document can include any procedures relevant to the activities it covers

3.55
procurement
overall process of acquiring goods, civil works and services which includes all functions from the identification of needs, selection and solicitation of sources, preparation and award of contract, and all phases of contract administration through the end of a services’ contract or the useful life of an asset

3.56
programme
set of related grants, projects or activities with a shared purpose or long-term aim

Note 1 to entry: These might be funded from a range of grants and funding sources.

3.57
project
a unique set of processes consisting of coordinated and controlled activities with start and finish dates, undertaken to achieve project objectives.

3.58
policy
an approved document that states top management’s commitment, intention and direction of an organization

Note 1 to entry: A policy can be a single document or in some cases may also include any processes and procedures relevant to the activities it covers.

Note 2 to entry: Note 3 to entry: Note 4 to entry:

It is intended that the procedures, processes and policies required by this standard are cumulative. An organization can have one document that covers several requirements of this standard.
It is good practice for a policy to have the following:

1. who the policy applies to;

2. who is responsible for it; and

3. the frequency with which it is to be reviewed.

3.59
purchase order
request to a supplier or company to supply goods or services, and that gives details such as the amount, price to be paid and the method and date of payment

Note 1 to entry: a purchase order can be electronic as part of the functionality of the financial management system or it may be a paper based system.

3.60
quotes
a request for quotation (RFQ) whose purpose is to invite suppliers into a bidding process to bid on specific products or services. RFQ generally means the same thing as IFB (Invitation For Bid). An RFQ typically involves more than the price per item.

3.61
reporting cycle
recording, processing and communicating financial or other information relating to a certain period of time.

3.62
reserves
funds that an organization has set aside from surpluses produced in previous years

3.63
risk management
process of identifying and forecasting possible risks, together with the identification of procedures to avoid or minimize their impact

3.64
risk register
tool for documenting risks to the organization, project, grant or activity and the actions to manage each risk.

3.65
segregation of duties
where a task is divided into stages and different people are required to be responsible for the different stages involved in completing the task

Note 1 to entry: The separation of sharing by more than one individual in one single task is an internal control intended to prevent fraud and error.

3.66
staff
employees, who are being paid wages or salary by their employer, including contractors and volunteers and other people who work for an organization but who are not paid a wage or salary

3.67
sub-grant
grant awarded by a grantee to another organization to carry out part of their activity or project

3.68
sub-grantee
organization that is awarded a sub-grant

3.69
top management
people or group of people who directs and controls an organization at the highest level

Note 1 to entry: Top management are the individuals at the highest level of the organization who have responsibly for day to day tasks of managing that organization.

Note 2 to entry: Top management has the power to delegate authority and provide resources within the organization.

3.70
travel allowance
payment made to staff to cover accommodation, food, drink or incidental expenses they will incur during business related travel

Note 1 to entry: In some organizations, travel allowance is sometimes referred to as travel advance. A travel advance is cash given to an individual prior to travel to cover the expenses they will incur. Typically travel allowances are paid to employees before or after they have incurred this expenditure

Note 2 to entry: Travel allowances are sometimes known as per diems

3.71
whistle-blowing
act of drawing attention to perceived illegality, wrong doing or misconduct within the organization

Note 1 to entry: Corruption, fraud, bullying, health and safety violation, cover-ups and discrimination are common activities highlighted by whistle-blowers.

4 Claims of compliance

An organization seeking to claim compliance with this Standard shall clearly state the level at which they are claiming compliance in accordance with the following:

1. For bronze compliance, the organization shall comply with all the requirements in this Standard that fall under a ‘bronze compliance’ heading;

2. For silver compliance, the organization shall comply with all the requirements in this Standard that fall under a ‘bronze compliance’ heading, plus those that fall under a ‘silver compliance’ heading;

3. For gold compliance, the organization shall comply with all the requirements in this Standard that fall under ‘bronze compliance’, ‘silver compliance’ and ‘gold compliance’ headings;

4. For platinum compliance, the organization shall comply with all the requirements in this Standard.

NOTE It is intended that the processes, procedures and policies required by this Standard are cumulative. Where an organization has a policy covering a particular activity, a separate procedure which relates to the same activity is not required. Where an organization has a procedure a separate process which relates to the same activity is not required.

(informative)

The seven principles of good financial grant management and four key pillars of good financial grant management

A.1 The seven principles of good financial grant management

A.1.1 Accountability

All stakeholders, including grantees, have the right to know how financial and other support has been used to meet objectives. Grantees have an operational, moral and legal duty to explain their decisions and actions, and make their financial reports open to scrutiny.

A.1.2 Stewardship

Financial stewardship involves organization and/ or grant leadership that safeguards assets and investments. The top management and governing board ensures there are adequate governance structures, procedures and controls in place to demonstrate that the grant funding is being put to the use as per the grantor conditions.

A.1.3 Compliance to standards

The recording and reporting of financial transactions and documentation should observe accepted accounting principles. A qualified accountant from anywhere around the world should be able to understand an organization’s financial accounting records.

A.1.4 Transparency

The organization and grantees should be open about their work, providing information about activities and plans to their stakeholders. This includes preparing accurate, complete and timely financial reports.

A.1.5 Viability

To be financially viable, a grantee’s spending can be kept in balance with money coming in, both at the operational and the strategic levels. Viability is a measure of the grantee’s financial continuity and security. The governing board and management can prepare a financing strategy to show how the organization should meet all its financial obligations and deliver its strategic plan.

A.1.6 Integrity

On a personal level, individuals should operate with honesty and propriety. For example, managers, top management and the governing board should lead by example in following organizational policy, or declare personal interests that might conflict with their official duties. The integrity of financial records and reports is dependent on accuracy and completeness of financial records.

A.1.7 Consistency

Consistent use of financial policies and procedures are important for efficient and effective operations. For example, a clear procurement procedure should help staff to follow the correct process and ensure compliance with grantor rules. Consistent use of accounting codes in financial records and budgets produces financial reports that are consistent and transparent to key stakeholder.

A.2 The four key pillars of good financial grant management

To provide further guidance to grantors and grantees as to which tier they may wish to be compliant, Table A.1 describes the activities within internal controls, record keeping, planning and monitoring which would be occurring at bronze, silver, gold and platinum levels of compliance.

A.2.1 Internal controls

Internal control is a system of common sense controls, checks and balances designed to manage internal risk and safeguard the organization’s money, equipment and other financial assets. The purpose of internal controls is to minimize losses, such as through theft, fraud, corruption, bribery or incompetence. An effective internal control system also protects staff, an organization’s most important asset.

A.2.2 Record keeping

Every organization should keep an accurate and complete record of all financial transactions that take place during the financial year so they can show how grants have been used. Accounting records include both the physical paperwork (such as receipts and invoices) and the ‘books’ of account where the transactions are recorded and summarised.

A.2.3 Planning

Linked to the organization’s strategic and operational plans, budgets are the cornerstone of financial management and play an important role in monitoring the use of grants. The financial planning process includes building longer-term plans, such as a financing strategy, and shorter-term budgets for projects, grants and programmes, and cash flow forecasts.

A.2.4 Monitoring

Provided the organization has kept accurate and timely accounting records, and has set its budgets, it is possible to produce financial reports for use by different stakeholders. For example, budget- monitoring reports help managers to monitor the progress of their projects or grants, and annual financial reports provide accountability to external stakeholders.

Table A.1 – The GFGP tiers and the four pillars of good financial grant management

Development of this standard was hosted by the African Academy of Sciences, Nairobi, Kenya. Acknowledgement is given to the following organizations that were involved in the development of this Standard as members of the technical steering committee:

African Organization for Standardization
African Academy of Sciences
Bill & Melinda Gates Foundation
Botswana Harvard AIDS Institute
Centre de Recherches Medicales de Lambarene (CERMEL) Chartered Institute of Management Accountants (CIMA) Department for International Development (UK)

European & Developing Countries Clinical Trials Partnership Inside NGO
International Rescue Committee
Kenya Accreditation Service (KENAS)

Mango
Medical Research Council (UK)
Medical Research Council (Uganda)
Medical Research Council (South Africa)
Moi University – School of Medicine, Kenya Nigerian Institute of Medical Research
Price Waterhouse Coopers (Kenya)
Swedish Development Cooperation Agency, (Sida) Wellcome
Wellcome Trust Sanger Institute

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