Harmonized Approach to Cash Transfer (HACT)

The Harmonized Approach to Cash Transfer (HACT) dictates policies and procedures for capacity assessment, cash transfer modality, audit, assurance and monitoring. HACT applies to government and civil society organization/non-governmental organization (CSO/NGO) participation in UNDP projects. At this time, UNDP-managed Global Fund projects are exempt from HACT, and capacity assessments are performed instead.

Before an entity can be engaged as Responsible Party (RP) on a UNDP project, a capacity assessment of that entity is performed. The following are key considerations for capacity assessment:

Technical capacity- ability to monitor the technical aspects of the project;
Managerial capacity– ability to plan, monitor and coordinate activities;
Administrative capacity– ability to:
- Procure goods, services and works on a transparent and competitive basis
- Recruit and manage the best qualified personnel on a transparent and competitive basis
- Prepare and sign contracts
- Manage and maintain equipment; and
Financial capacity– ability to:
- Produce project budgets
- Ensure physical security of advances, cash and records,
- Disburse funds in a timely, proper and effective manner
- Ensure financial recording and reporting
- Prepare, authorize and adjust commitments and expenses

The partner’s technical, managerial, administrative and financial capacities should be reassessed throughout the life of the project (preferably on an annual basis).

The HACT macro- and micro-assessments are the basis for selection of the cash transfer modality used for each IP or RP and the level of assurance activities used. The level of risk can differ from institution to institution, and the UNDP office should effectively and efficiently manage this risk for each national institution by:

Assessing the institution’s financial management capacity throughout the life of the project;
Applying appropriate procedures for the provision of cash transfers to the institution; and
Maintaining adequate awareness of the institution’s internal controls for cash transfers through assurance activities.

For each institution the level of risk may change over time, and this may require appropriate changes in options for cash transfer modality, and audit and monitoring procedures. Sub-recipient (SR) capacity assessment is addressed in detail in the SR management section of the Manual.

HACT offers three cash transfer modalities:

Direct cash transfer – UNDP advances cash funds on a quarterly basis (based on agreed work plan) to the RP, who in turn reports back expense through Funding Authorization and Certification of Expenditures (FACE) forms. Note that the recording of expenses, from requisition through to disbursement, occurs in the books of the RP. UNDP is pre-funding the activities with advances of cash. Please refer to UNDP Programme and Operations Policies and Procedures (POPP) on Direct Cash Transfers and Reimbursements).
Direct payment – The RP carries out the procurement activity but requests UNDP to make the disbursement directly to vendors through FACE. In this arrangement, UNDP is undertaking only the fiduciary function (accounting and banking services, and the disbursement function) on behalf of the RP. Please Refer to POPP on Direct Payments.
Reimbursement – Unlike direct cash transfer, a reimbursement arrangement is where UNDP pays the RP after it has made a disbursement based on the annual work plan. The RP needs prior consultation with UNDP before embarking on the pre-financing arrangement. Please refer to POPP on Direct Cash Transfers and Reimbursements.

Depending on SRs’ capacity, it is possible to use all modalities in the same project, for different activities and/or inputs. However, this is not recommended due to this approach’s inherent complexity.

Please refer to POPP on Harmonized Approach to Cash Transfers (HACT)

Resources

UNSDG FACE Form

Functional Area: Financial Management Project Stage: Grant Making and Signing; Grant Implementation; Reporting Author: Other Language: English Type: Policies, Procedures and guidance Topic: Financial rules and regulations, Financial Reporting Resource File Format: Link Resource Accessibility: Publicly accessible

UNDP POPP Direct Cash Transfers and Reimbursements

Functional Area: Financial Management Project Stage: Grant Making and Signing; Grant Implementation; Reporting Author: UNDP Language: English Type: Policies, Procedures and guidance Topic: Financial rules and regulations, Financial Reporting Resource File Format: Link Resource Accessibility: Publicly accessible

Functional Areas

Project Lifecycle