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Monitoring and Routine Controls of Financial Management Systems

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Monitoring and Routine Controls

Financial Management Systems for Health

Purpose

Reduce risk of losses through fraud, theft and sub-optimal decision making. The controls also create an environment which discourages corruption, and enable frauds and thefts to be detected and quantified.

Routine controls are the detailed internal controls which are embedded within the operations of the company. They consist of prevention and detection / monitoring controls. Prevention controls restrict an unintended activity from occurring. Detection controls aim to identify activities that have occurred but were not planned.

Controls can also be considered as organisational, physical and personnel based. Organisation controls, set the structure of the entity and ensure adequate segregation of duties to minimise fraud and collusion. Physical controls ensure the safeguarding of assets, transactions are authorised and approved and arithmetic accounting controls. Personnel controls include ensuring that the recruitment of suitably qualified personal, adequate supervision and management oversight.

UNDP’s Offer

UNDP has assisted health programmes to improve monitoring and routine controls in Africa, Asia and the Caribbean.

  • UNDP support helps to realise the benefits of monitoring and routine controls such as reducing the risk of losses through fraud, theft and bad decision making
  • UNDP has developed specific tools, methodologies and good practices in response to high corruption within the health sector
  • UNDP works with Ministries of Health to utilise existing national systems and procedures to establish a robust system of monitoring and routine controls within health programmes
  • Where weak controls are identified, UNDP works with National Partners to develop an action plan, proposing interim alternative arrangements, while the measures to support the long-term goal of strengthening the overall financial controls are being implemented
  • UNDP provides technical support to CSOs and Governments to
    • design and implement cost effective monitoring and controls systems ensuring compliance with national legislation as well as international best practice
    • develop manuals, guidelines and standard operating procedures (SOPs) to establish routine internal controls for inducting new staff as well as training existing staff members
  • UNDP has developed a capacity assessment tool which helps to identify areas for strengthening monitoring and internal controls within health systems
  • UNDP works with Government Health Systems as well as Civil Society Organisations to development milestones and indicators, including training needs to measure improvements in the internal control environment

Guidance

UNDP is able to bring global experience tailored to the country context

  • Typical controls in a finance setting include:
    • Controls over cash and bank
      • Dedicated bank accounts (or sub-activities) where appropriate
      • Physical controls over petty cash, including restricting the amount of petty cash held
      • At least two signatories required for payments
      • Preparation of monthly bank reconciliations
      • Review of bank reconciliations
      • Regular petty cash counts
    • Controls over fixed assets
      • System for identifying fixed asset needs
      • Systems to ensure physical security of assets
      • Procedures to monitor use of assets, particular vehicles and computers and highly sensitive diagnostic equipment
      • Insurance of assets in case of theft or damage
      • Maintenance of fixed assets register
      • Periodic asset verification and reconciliation to fixed assets register
    • Segregation of duties
      • Segregation of duties should ensure that no single individual has sole responsibility for any single transaction from authorisation to completion and review.
      • While acknowledging that this may be challenging in small or rural settings, segregation of duties is an important tool for the deterrence as well as the detection of misuse of funds or assets

Suggested indicators

UNDP has utilised clear indicators to measure improvements in monitoring and routine controls

  • Policies and procedures manuals are approved and available
  • The policies and procedures are reviewed and updated every 3-5 years
  • 100% staff confirm awareness of the whistle-blowing policy
  • The financial systems and procedures are reviewed by the external audits and assessed as good or satisfactory
  • 100% Finance staff have been trained in key SOPs
  • 100% of all bank accounts (including inactive accounts) are reconciled regularly and monthly bank reconciliations are available with evidence of review
  • A surprise petty cash count reveals no errors
  • 100% fixed assets are insured
  • An inventory of fixed assets is available, and a physical verification has been undertaken in the last 12 months
  • New staff members are inducted within 2 weeks of arrival