Financial reporting

The purpose of financial reporting is to provide information about the OWNP that is useful to participants, both for accountability and for decision making. As described in Section 12.1, financial reports should compare actual expenditure with the budget that was set. The OWNP requirements are that financial reports should be prepared and submitted quarterly (four times a year) by WoFED, BoFED and MoFED. WoFED reports to BoFED and BoFED reports to MoFED. MoFED compiles these reports and submits a consolidated report to its development partners. The financial reporting at each level provides information to the fund providers on how much of the budget has been spent over the specified time period and for what purposes. This is used to inform the decisions about setting budgets and the disbursement of funds for the following phase.

Disbursement of funds by MoFED and BoFEDs to the implementing agencies follows a regular pattern. Initially, each implementing agency receives a first quarter and second quarter advance based on its approved annual work plan and budget. At the end of the first quarter (three months), the agency prepares a report on expenditure during that quarter, together with a request for replenishment of the funds to cover the amount budgeted for the third quarter, less the amount of unused funds from the first quarter. This ‘rollover’ system means that implementing agencies always have in hand their budget for the forthcoming quarter. The system is shown diagrammatically in Figure 12.5.

Figure 12.5 Quarterly financial reporting and funding system. (Q5 and Q6 are the first and second quarters of the next financial year.) (WIF, 2011)

To give an example, imagine that a region has a 4 million birr budget (one million birr for each quarter) for the current year to implement WASH activities in their region. Based on the approved budget plan, the region has received 2,000,000 birr for the first two quarters (six months) to fund the initial phase of the programme. After three months, the regional BoFED compiles a financial report on funds used by the regional water, health and education bureaus. Let’s say this compiled report of all first quarter expenditure was 650,000 birr. BoFED reports this figure to MoFED and asks them to disburse the 1,000,000 birr for the third quarter. However, MoFED deduct the unspent 350,000 birr from this figure, and therefore disburses only 650,000 for the third quarter instead of one million birr.

The complete process of reporting is illustrated in Figure 12.6.

Figure 12.6 Financial reporting arrangements. (POM, 2014)

This diagram shows the interconnections between the upwards reporting on WASH activities undertaken by the implementing agencies and how this feeds into the financial reporting from the woredas and regions to MoFED.

Last modified: Wednesday, 24 August 2016, 3:51 PM