Financial management systems should ensure expenditures are incurred in a transparent manner and promptly recorded.

Expenditure systems and processes are an important part of budget execution. It is important to have policies, procedures and internal control systems for incurring expenditures that comply with approved work plans and budgets and optimize value for money. These systems should likewise enable the timely recording and safeguarding of records and supporting documents.

There should also be an internal control system that covers segregation of duties, so that the requisitioner is separate from the purchaser and the person who makes the payments.

UNDP’s approach

UNDP has assisted health programmes to improve expenditure systems by working with ministries of health to improve national systems and procedures to initiate, approve and report expenditure for health programmes. It uses a capacity assessment tool to help identify needs and measures to strengthen policies and procedures for expenditure management in health systems.

In particular, UNDP provides technical support to civil society organizations and governments to:

  • design and implement robust expenditure systems, including transparent recording of shared costs.
  • develop manuals, guidelines and standard operating procedures to authorize and approve expenditures.
  • develop codes of conduct to avoid occurrence or perceptions of conflicts of interest; methods for procurement and document thresholds; standard operating procedures for requests for tenders and procedures for bid evaluation; procedures that are transparent and competitive, and; mechanisms for accountability and tracking of contracts and commitments and ensuring specified goods and services are received.
  • ensure adherence to established policies for project specific costs
  • develop milestones and indicators, including training needs to measure improvements in the timely and accurate recording of expenditure.

Suggested capacity development indicators

Suggested indicators to monitor improvements in expenditure systems include:

  • A financial management system that accurately records and tracks expenditures is in place
  • Policies and procedures manuals are approved and available
  • Finance staff have been trained in standard operating procedures and use of the financial management system
  • Annual signed conflict of interest statements are available
  • There is a certain level of compliance with relevant accounting standards
  • Standardized bidding documents and templates are available and are used
  • Standardized contracting templates are available and are used
  • Expenditures are recorded on a timely basis and properly supported
  • Goods received are inspected in a timely manner (within specified timelines e.g. within three working days of arrival)
  • A list of goods and services ordered and not yet received is available
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