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Transcript of 2014 © Her Majesty the Queen in Right of Canada, Foreign Affairs, Trade and Development Canada...
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2014
© Her Majesty the Queen in Right of Canada, Foreign Affairs, Trade and Development Canada
DON’T FRET!
MANAGING FIDUCIARY RISK
AT DFATD
EDRMS 7340883
by Luc BélangerDirector, Financial
Management of G&C
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AGENDA
What is FRET? What is Fiduciary Risk? Why a risk assessment? What is Fiduciary Risk Management at DFATD? Who does what? Where does it fit in the assessement of a proposal? How does this affect me? What is the difference between a Grant or a
Contribution? Questions/comments
FRET? Fid. Risk? Why? At DFATD? Who? Where? How? Grant/Contribution? Questions?
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The FRET is short for Fiduciary Risk Evaluation Tool
The tool is designed to assess the fiduciary risk of the recipient as well as the project
4 risk levels: Low, Medium-Low, Medium-High and High
What is FRET?
FRET? Fid. Risk? Why? At DFATD? Who? Where? How? Grant/Contribution? Questions?
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1. Funds are not used for their intended purposes.
2. Funds are not properly accounted for.
3. Goods and services delivered are not commensurate to the funds transferred.
Fiduciary risk accounts for the possibility that …
Corruption, fraud, mismanagement.
Bad bookkeeping, poor financial tracking.
Poor value for taxpayer’s money.
WHAT IS FIDUCIARY RISK?
FRET? Fid. Risk? Why? At DFATD? Who? Where? How? Grant/Contribution? Questions?
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KEY POLICY DRIVERS Independent Blue Ribbon Panel on Grant and Contribution
Programs (2006):o Simplify the administration of federal grants and
contributionso Improve accountabilityo Reverse the culture of risk-aversiono Reduce red tape and adapt administrative requirements to
the level of risk
Moving government funding away from a one-size-fits-all, risk-averse approach
WHY : CONTEXT
FRET? Fid. Risk? Why? At DFATD? Who? Where? How? Grant/Contribution? Questions?
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TB Policy on Transfer Payments (2008)o Requires all grants and contributions (G&Cs) to be
managed using a risk-based approach:
• To reduce administrative burden on recipients where the recipient and project risk is low;
• To balance control with flexibility; and• To have a systematic approach within and across programs and
departments.
TB Policy on Financial Management Governance (2009)o Requires a sound financial management governance
structure
WHY : CONTEXT(continued)
FRET? Fid. Risk? Why? At DFATD? Who? Where? How? Grant/Contribution? Questions?
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Policy on Fiduciary Risk (currently for Development Portfolio only)o DFATD has defined roles and responsibilities for all funding
modalities and put in place the necessary tools to manage its initiatives by using a risk-based approach
Aid Effectivenesso Efforts are underway to develop common tools and
methodologies between donors
WHY : CONTEXT(continued)
FRET? Fid. Risk? Why? At DFATD? Who? Where? How? Grant/Contribution? Questions?
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• Independent Blue Ribbon Panel on Grant and Contribution Programs
2006
WHY : CONTEXT(continued)
FRET? Fid. Risk? Why? At DFATD? Who? Where? How? Grant/Contribution? Questions?
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An internal due diligence process in which Programs:
Identify and assess fiduciary risk
Respond to the risk
Use risk-based management approach in project management
Monitor risk and respond as required
WHAT IS FIDUCIARY RISK MANAGEMENT AT DFATD?
FRET? Fid. Risk? Why? At DFATD? Who? Where? How? Grant/Contribution? Questions?
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DFATD’s Risk Management Tool which:
Produces a consistent and systematic assessment of fiduciary risk to improve the quality of risk management across DFATD programs
Allows for flexibility to include considerations that are unique and contextual
Provides an evidence base for all risk assessments
Documents and tracks risk responses overtime
Helps determine appropriate financial instrument, based on sound risk analysis
FIDUCIARY RISK EVALUATION TOOL (FRET)
FRET? Fid. Risk? Why? At DFATD? Who? Where? How? Grant/Contribution? Questions?
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FRET - CR FRET - IO FRET - PO
Country Recipients International Orgs,Other donors,
Multi-donor Trust Funds
Partner Organizations (Canadian & Non-
Canadian)
Three versions, with a common risk factor structure with evaluation criteria tailored to type of recipient
THREE TYPES OF FRET
FRET? Fid. Risk? Why? At DFATD? Who? Where? How? Grant/Contribution? Questions?
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Consistent and systematic assessment of fiduciary risk across all DFATD Development Gs and Cs $100,000 and above
Where possible uses international benchmarks, indicators & data sets (e.g. OECD, World Bank, IMF, PEFA, MOPAN)
FRET Structure of Risk AssessmentRecipient Risk Profile
Risk 1: Recipient Governance and StabilityRisk 2: Results Performance HistoryRisk 3: Recipient Financial Viability and StabilityRisk 4: Corruption & Fraud Control
Initiative/ Project Risk
Risk 5: Capacity of Local Responsibility CentresRisk 6: Recipient Procurement CapabilityRisk 7: Complexity Risk 8: Materiality
Overall Project Fiduciary Risk Level
HOW DOES FRET FUNCTION?
FRET? Fid. Risk? Why? At DFATD? Who? Where? How? Grant/Contribution? Questions?
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EXAMPLE OF FRET FOR PARTNER ORGANIZATION
FRET? Fid. Risk? Why? At DFATD? Who? Where? How? Grant/Contribution? Questions?
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RESPONSIBILITIES ROLESProgram Officer/ Manager • Manage risks (risk assessment, monitoring, mitigation and
reporting) Sector/ Thematic Specialists • Provide technical advice on relevant risk factorsFinancial Management Advisor (FMAs ) and Contracts Officers
FMAs and Contract Officers:• Provide technical advice and help review the FRETs• Ensure that fiduciary risks are appropriately taken into
consideration and that risk response measures are actions aiming at reducing or monitoring risks
• Complete CFOB Initiative Assessment regarding Fiduciary Risk
Contract Officers:• Review RBAM (both the administrative requirements and
the FRET’s risk response measures) with Development Officers
• Ensure risk response measures that prevail over administrative requirements are respected
• Draft and finalize agreements based on the RBAM
WHO : ROLES AND RESPONSIBILITIES
FRET? Fid. Risk? Why? At DFATD? Who? Where? How? Grant/Contribution? Questions?
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Financial Risk Assessment Unit (FRAU)
• Perform FRET Quality Control, ensuring FRETs are completed properly
• Ensure that recipient financial risks are appropriately taken into consideration
• Complete FRET Financial Section (Risk Factor 3) for Partner Organizations and International Organization Recipients
• Administer FRET Database, ensuring risk information is properly shared
• Prepare the RBAM template
Fiduciary Risk Practices Development Unit (FRPD)
• FRET and RBAM maintenance • Coaching and Training Support • Fiduciary Risk Corporate Annual Reporting• Liaison with OGDs and other donors on fiduciary risk
management practices
Financial Compliance Unit (FCU) • Establish compliance audit plans based on risk• Coordinate, review, follow up on compliance audits• Plan, review and follow up on Financial Capacity Building
Activity (former Initial Visits)
WHO : ROLES AND RESPONSIBILITIES(continued)
FRET? Fid. Risk? Why? At DFATD? Who? Where? How? Grant/Contribution? Questions?
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Complete FRET and initiate RBAM
AUTHORIZED PROGRAMMING PROCESS (APP)
The FRET is required for all grantsand contributions $100,000 and higher (excluding contracts)
FRET? Fid. Risk? Why? At DFATD? Who? Where? How? Grant/Contribution? Questions?
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How does this affect me?
FRET? Fid. Risk? Why? At DFATD? Who? Where? How? Grant/Contribution? Questions?
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Low risk Reduction in administrative burden
• Cash management Less restrictive• Reporting Fewer reports• Audit Save it for riskier initiatives• Monitoring Lower level of effort
• Approved in April 2012• Revised and automated in April 2015• Applies to all Gs & Cs (Development) $100,000 and over• Performed before final approval
RISK-BASED ADMINISTRATION MATRIX (RBAM)
FRET? Fid. Risk? Why? At DFATD? Who? Where? How? Grant/Contribution? Questions?
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FRET: Level of Overall Residual Fiduciary Risk
FRET Assessment
Low - 1 Medium Low - 2 Medium High - 3 High - 4
Financial instrument
Grant or Contribution
Grant or Contribution Contribution Contribution
Advances One annual payment
Semi-annual payments Quarterly payments No advances or monthly advances
Financial Reporting
Grants: N/A Contribution: Annual project financial report
Grants: N/A Contribution: Semi-annual project financial report
Quarterly financial project reports and accounting for advances
Monthly financial project reports / monthly substantiation of expenses incurred
Narrative Reporting
Grant: One annual report Contribution: One annual Report
Grant: Semi-annual report Contribution: Semi-annual report
Quarterly reports Monthly reports
RISK-BASED ADMINISTRATION MATRIX (RBAM)
FRET? Fid. Risk? Why? At DFATD? Who? Where? How? Grant/Contribution? Questions?
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GRANT• Must be used for the intended purpose• Do not require annual work plan• Are not subject to being accounted for
and not normally subject to audit• DFATD can suggest the reallocation for
the residual amount• Payments are unconditional• Require sufficient grant ceiling
CONTRIBUTION• When deemed necessary to:
Closely monitor progress and results
Receive an accounting of the use of funds, and
Have the right to carry out a recipient audit.• Residual amount and
disallowed expenditures must be repaid• Control over types of expenditures• Payments used for the intended purposes
WHAT IS THE DIFFERENCE BETWEEN A GRANT AND A CONTRIBUTION?
FRET? Fid. Risk? Why? At DFATD? Who? Where? How? Grant/Contribution? Questions?
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Luc Bélanger
Director, Financial Management of Grants & Contributions
Alla Mozol Laporte
Manager, Fiduciary Risk and Practices Development
Lynn Hogan
Manager, Financial Risk Assessment
QUESTIONS / COMMENTS?
FRET? Fid. Risk? Why? At DFATD? Who? Where? How? Grant/Contribution? Questions?
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Thank You