Legal Framework

Management of Financial Resources and UNDP Cost Recovery

Management of UNDP Financial Resources is performed in compliance with UNDP Financial Rules and Regulations (attached) as well as in compliance with UNDP Cost Recovery Policy (attached). UNDP Cost Recovery Policy ensures that Other Resources mobilized by the UNDP Serbia Country Office create an environment for adequate and sustainable support to the Government in the Republic of Serbia. All costs associated with the delivery of Other Resources funded programmes at the country and headquarters levels are to be fully covered through cost recovery mechanisms.

UNDP facilitates cost recovery for the services provided to the projects by charging GMS and ISS as follows:

General Management Support (GMS) is used to cover the cost of following services:

  • Project identification, formulation, and appraisal
  • Determination of execution modality and local capacity assessment
  • Briefing and de-briefing of project staff and consultants
  • General oversight and monitoring, including participation in project reviews
  • Receipt, allocation and reporting to the donor of financial resources
  • Thematic and technical backstopping through Bureaus
  • Systems, IT infrastructure, branding, knowledge transfer

Cost Recovery minimum GMS fee is 8% for Third Party Cost Sharing and Trust Funds.

Cost Recovery minimum GMS fee is 5% for Government Cost Sharing (depending on the portfolio threshold).

UNDP Country Offices are mandated to strictly adhere to the implementation of UNDP Cost Recovery Policy.

Implementation Support Services (ISS) include the cost of following services:

Service charges based on the actual services rendered to projects, based on an Actual Price List (endorsed by UNDP Headquarters in 2011).

UNDP facilitates cost recovery by charging for the services provided to its UN sister agencies through:

  • The use of standardized services based on the Universal Price List, and
  • Ad-hoc services which are individually negotiated.

International Public Sector Accounting Standards (IPSAS)

In 2012 UNDP rolled-out International Public Sector Accounting Standards (IPSAS) which are independently-developed financial reporting standards widely considered as best practice for public sector organizations, as they impose the most stringent requirements for clarity and transparency.

Over fifty governments have adopted IPSAS, or are in the process of doing so. IPSAS standards are based on full accrual accounting, in contrast to the previously applied United Nations System Accounting Standards (UNSAS) which were phased-out in 2011.

IPSAS compliance has been ensuring that UNDP’s financial reports give a complete and accurate picture of its financial situation. Adopting IPSAS has contributed to:

  • Improved accountability
  • Greater transparency
  • Greater credibility
  • Improved overall management and planning
  • Improved programme management
  • Harmonization of reports and statements across the UN system

Harmonized Approach to Cash Transfers (HACT)

Harmonized Approach to Cash Transfers (HACT) introduces a new way of managing the process of transferring cash to UNDP implementing partners.

United Nations Agencies are changing the way they perform their activities in both, programme and operations, to keep pace with the changes in the world of development cooperation.

The management of cash transfers to Implementing Partners is shifted by the HACT from a system of rigid controls to an approach based on risk management, which aims at:

  • Reducing transaction costs pertaining to country programmes of the UNDG ExCom agencies, by simplifying and harmonizing rules and procedures as well as facilitating the requesting of information and reporting on funds.
  • Strengthening the capacity of Implementing Partners to manage resources effectively ;
  • Helping to control the risks related to the management of funds, thereby increasing overall effectiveness.

Before implementing HACT, macro- and micro-assessments are conducted in order to determine the levels of risk in transferring large amounts of funds and to identify knowledge gaps so that a programme can be developed to tackle these gaps.

Micro-assessments are conducted by the UN agencies together with selected Implementing Partners.  On the basis of the results of an assessment, assurance activities are planned with each of the Implementing Partners. UN in Serbia has been implementing HACT since 2011.