HARMONIZED APPROACH TO CASH TRANSFERS (HACT)

RESPONSES TO KEY IMPLEMENTATION CHALLENGES

Background
Adoption of the new harmonized approach by UNDP, UNICEF, UNFPA and WFP was a further step in
implementing the Rome Declaration on Harmonization and Paris Declaration on Aid Effectiveness, which
call for a closer alignment of development aid with national priorities and needs. The approach allows
efforts to focus more on strengthening national capacities for management and accountability, with a view
to gradually shift to utilizing national systems. It is envisaged that HACT will help Agencies shape their
capacity development interventions and provide support to new aid modalities.
Following the experiences of the first two years of implementation of HACT, the end of 2007 and end of
September 2008 status updates indicated a number of challenges that seem to have been faced by
countries. This note summarizes some of the key challenges based on the implementation update plus
other feedback received from countries, Regional Directors Teams and HACT regional and country focal
points. The note provides responses to these key challenges from the HACT Advisory Committee and
other colleagues in HQs who led the development of HACT framework and are overseeing its
implementation. The range of concerns has narrowed significantly; however, there are several concerns
which require additional clarifications. One of the key responses is that there seems to be a need for
improved communication on the rationale for adopting HACT both within the agencies and to national
partners.
Agreement of the Government
1.

National partners are reluctant to accept HACT as an overall approach.

In some countries this issue is primarily a communications problem. It is essential that all agencies that
have adopted HACT, promote it collectively starting with senior level national partners. It should be
emphasized that HACT has been developed in response to the Paris Declaration on Aid Effectiveness with
a focus on promoting the use of national systems. In order to assist the UN Country Teams a note Talking
to country partners about HACT has been developed, included in the workbook and available on the
UNDG web-site (http://www.undg.org/index.cfm?P=255)
It needs to be stressed that:
o
HACT is intended in the medium term to lead to: (i) reduction in costs for the national partners
and UN agencies; (ii) increasing use of national systems; and (iii) contribute to building the financial
management capacity of national partners.
o
In the event that national governments are reluctant to accept HACT, it should be made clear to
national partners that it is mandatory for UNDP, UNICEF, UNFPA and WFP to use the HACT approach
in cash transfers to national partners.
o
Regional Directors Teams can be requested to provide support, if required, in convincing highlevel government officials.

2.

In some cases governments have requested legal documents approving HACT.

HACT was approved on 10 December 2004 by the United Nations Development Group. Thereafter,
UNDP, UNFPA, UNICEF and WFP reported to their respective Executive Boards as well as at the Joint
Meeting of the Boards. HACT was launched by the Executive Directors of UNDP, UNFPA, UNICEF and
WFP in April 2005 and is mandatory for these agencies. HACT did not require specific approval of the
Executive Boards because it represented a change to policies and procedures only and not to any
legislative authority.
The common operational framework for transferring cash to government and non-government
Implementing Partners was adopted by UNDP, UNICEF, UNFPA and WFP pursuant to the UN General
Assembly Resolution 56/201 on the Triennial policy review of operational activities for development of
the United Nations system. Its implementation will significantly reduce transaction costs and lessen the
burden that the multiplicity of UN procedures and rules creates for its partners.
The adoption of the new Harmonized Approach to Cash Transfers was a further step in implementing the
Rome Declaration on Harmonization and Paris Declaration on Aid Effectiveness, which call for a closer
alignment of development aid with national priorities and needs.
The UN General Assembly Resolution 62/208 on the Triennial comprehensive policy review of
operational activities for development of the United Nations system (TCPR 2007) encouraged the
organizations of the United Nations development system to further promote and expand the harmonized
approach to cash transfers initiative.
3.

Use of HACT by Specialized Agencies

Specialized agencies that are members of UNDG and to whom HACT may apply have also agreed to
adopt HACT at the UNDG meeting on 24 April 2008 1. So far, FAO, HABITAT, UNESCO, UNOPS and
UNIDO confirmed that they will use HACT where applicable to their operations in Delivering as One
pilots. ILO agreed in principle but needs to conduct more detailed internal assessments before proceeding;
UNCDF and GAVI Secretariat are currently exploring the possibilities of using HACT.
4.

Assessments are sometimes viewed as invasive and too costly. Where government partners
are the principal contributors of the funds, it is also seen as being problematic to carry out
micro assessment.

HACT was intended to simplify and harmonize using a risk-based approach. If government agreement
cannot be ensured the option is to assume high risk and continue with procedures of expenditure
verification and auditing that come at higher transaction cost for the partner and usually lack the crucial
capacity development element.
The assessments allow to learn about the partners practices, systems, policies and procedures with a view
of increasingly using these. Capacity development interventions cannot be targeted where there is no
assessment.
1

The minutes of the UNDG meeting that took the decision on adoption of HACT by Specialized Agencies are available at
http://www.undg.org/docs/9060/24April_UNDG_minutes_FinalDraft.doc

HACT does not reduce the need for the UN agencies to ensure their fiduciary responsibility for the funds
transferred by them to implementing partners. Each agency will determine the cash transfer modalities
and plan assurance activities based on assumption of high risk, the amount of cash transferred and the
history of previous cooperation. In the event that assessments cannot be carried out, the assurance and
audit activities would need to be planned as for high risk partners.
In the event that an assessment of a national partner has been carried out by a donor agency or multilateral
institution and this is deemed to be acceptable for the purposes of HACT, then it is not necessary for the
UN agencies to conduct a micro assessment of that partner.
If the Supreme Audit Institution was confirmed through a macro assessment to have adequate capacity,
the findings of their audit could substitute in part or in full for a micro assessment. Any major issues not
covered by the audit would then have to be covered in a shortened or truncated micro assessment. At the
same time long-term arrangements with the auditors will also enable the UN agencies to reduce the costs.
In the event that there are no cash transfers being made to national partners then the agencies do not have
to conduct the steps under HACT such as a macro and micro assessment and use of the FACE form.
HACT would not be applicable and should be reported as such.
5.

There is also resistance of the central government counterparts to be subject to audit and
assurance in cases when they delegate/subcontract to lower level entities (in this case the
either the lower level should be assessed or the oversight capacity at central level should be
assessed)

The HACT framework specifies that micro assessments are conducted for the Implementing Partners that
receive or are expected to receive cash transfers above US$ 100,000 combined from all Agencies, or as
locally agreed among the Agencies. The entity of the implementing partner that signs the AWP is the one
that will be micro-assessed. It will be receiving cash transfers from the UN agencies and will be
responsible for submitting FACE form will be subject to audit and assurance activities and should ensure
proper reporting from the lower level entities in case of delegation/subcontracting.
6.

UNDP sometimes manages its projects through Project Implementation Units (PIU). In
many instances the government indicated that the micro assessment should be limited to the
PIU, not the rest of the units of the relevant ministry.

To address this matter a functional review should be carried out of the functions what and which unit
carries out the work and undertakes specific actions. If all the functions are carried out by the PIU, then
there should only be a dedicated assessment of the PIU. On the other hand, if the functional review
indicates that functions are partially carried out by the PIU and the relevant department of the ministries,
then the PIU and the relevant departments should be subject to an assessment.
Since the issue is specifically related to UNDP further guidance on it should be sought through UNDP
HQ and Regional Focal Points. The lists are available at:
http://www.undg.org/docs/9101/HACT-HQs-Agency-Focal-Points-(05.28.2008).doc
and
http://www.undg.org/docs/8946/REGIONAL-RESOURCE-TEAMS-on-HACT-(05.07.2008).xls
7.

Development of manual/ local guide on HACT for implementing partners

Since HACT is all about harmonization, development of individual local guides can become confusing
and difficult to monitor. Guidance on HACT implementation should be sought through 2005 September

UNDG HACT framework to avoid multiple interpretations and parallel reference guides. Thus far, it has
been felt by that the HACT framework should provide the requisite guidance.
Commitment of the UN staff and Heads of Agencies and HACT compliance
8.

There is inadequate commitment of the UN staff and Heads of Agencies.

HACT is not optional. The primary responsibility and accountability for the implementation of HACT as
a part of Common Country Programming Process lies with the Resident Coordinators and respective
agency heads at the country level, reporting to the respective Regional Directors and the Regional
Directors Team.
Through country by country follow up the reasons for inadequate commitment of the UN Staff and Heads
of Agencies in HACT implementation will be identified and addressed by the RDT mechanisms.
9.

Some countries have noted uneven and inconsistent implementation across the agencies.

Uneven implementation is an issue that needs to be addressed by (i) Agencies at the country level; (ii)
Regional Directors Teams; and (iii) Agencies at the HQs level.
The global update of HACT implementation is available on the UNDG web-site. The update provides
information per country per agency. Country specific inputs have been made available to the agencies and
the Regional Directors Teams who will be following up on implementation on a country-by-country basis
to identify and address the reasons for inconsistent implementation.
10.

Postponement/ deferral of HACT deadline

So far postponement/deferrals have been approved in crisis countries as well as in cases where the
programme cycles have been extended or negotiations with government have been delayed due to internal
political changes. The decision on each case is taken by the Regional Directors Teams based on the
justification provided in the joint request from the UNCTs on HACT postponement. UNCTs are also
requested to provide revised workplans indicating the new expected date for full HACT implementation.
It is noted that there have been a number of deferrals. Since most deferrals are only for one year and
noting that this is a new tool under implementation, it is expected that future deferrals will be on a highly
exceptional basis.
11.

Conducting micro-assessments in countries with a significant number of implementing

partners receiving cash transfers of US$ 100,000 a year and more is an extremely timeconsuming and expensive exercise. This causes reluctance by the country teams to do it.

HACT framework allows changing the threshold for micro-assessments if locally agreed by the agencies .
If the agency(s) decides to apply a higher threshold for individual partner or the agencies agree to do so
for the shared partners they should seek the approval of the Comptroller(s) of the agency(s) concerned.
Capacity building
12.

At this stage there is little evidence that the potential of HACT as a capacity development
approach is being exploited. Capacity development aspects of HACT have consistently
received less attention by country teams, which may be due to time constraints, perceived
lack of mandate and priority for an agency as well as lack of relevant capacities in Agencies.

Capacity development is a central part of HACT and of the work any UN agency. Without identifying
capacity gaps and planning to address them either through budgeting for assistance by the UNCT or by
facilitating support through other development partners risk management cannot truly go beyond risk
assessment.
It is acknowledged that all agencies have to focus their resources on their key thematic areas of
development, but financial management capacity should be seen as a cross-cutting underlying capacity
necessary for any implementing partner to effectively work in the areas that matter most to the agencies.
More detailed guidance on how to support financial management capacity should be sought from the
agencies directly, based on the commitment to undertake or facilitate such capacity development in the
HACT Framework.
HACT implementation requires strengthening capacity both of the implementing partners and UN staff in
budgeting, programming etc.
Training and learning
13.

Lack of trained staff at the country level

HACT training has been conducted at the country and regional level. Over 430 country focal points in
130 countries have been oriented. Additional training of trainers was provided for Eastern and Southern
Africa. As a major outcome of these training of staff possessing the full range of competencies necessary
to facilitate HACT trainings and support successful implementation of HACT across the region has been
created. The first recourse should be the trained staff at country and regional level.
The materials of the HACT ToT are available for using in HACT trainings by other UNCTs at
http://www.undg.org/index.cfm?P=256
At the same time Regional Focal Points are available to provide support.
14.

Programme staff have not been trained and have not taken on their responsibilities under
HACT at the country level

The approach requires involvement of both programme and operations staff. Staff trained should brief
their programme colleagues and Representatives have to ensure, the programme staff incorporate HACT
in their regular programming processes. The revised E-learning Kit on the programming process
(UNSSC) contains a HACT module as part of the programming process.
Criteria for HACT compliance
15.

UNCTs2 can be considered HACT compliant when:

Macro assessment has been completed or high risk has been assumed
All partners receiving 100 000 USD (or limit set by the agencies at the country level) collectively
from UNDP, UNFPA, UNICEF and WFP (and any other agencies that have agreed to adopt
HACT in the country) have been micro assessed or high risk has been assumed for implementing
partners where micro assessment couldnt be completed

UNCT for the purposes of this document only refers to agencies that have agreed to adopt HACT in the country,
currently these are UNDP, UNICEF, UNFPA and WFP but other agencies or organizations that have agreed to adopt
HACT would be included.

There is agreement on HACT implementation with the government either in the CPAPs or
through exchange of letters
Assurance and audit plan of implementing partners has been developed and implementation
mechanisms agreed upon

Since HACT is a harmonized approach amongst all agencies in the country, if any of them does not meet
the above criteria, the country cannot be considered HACT compliant.
The Resident Coordinator along with the Representatives of the individual agencies certifies that the
above steps are complete and that the UNCT is HACT compliant. The Resident Coordinator should also
inform the relevant Regional Directors Team (with a copy to Development Operations Coordination
Office) once the UNCT becomes HACT compliant.
Audit and Assurance
16.

There are ongoing concerns that systems of different agencies are not yet aligned with the
HACT procedures. In particular, there appears to be conflicting guidance around agency
audit requirements that contradicts the established thresholds under HACT.

Once the UNCT becomes HACT compliant (meets all criteria listed under section 15 above) HACT
guidelines on audit apply. Until UNCT becomes HACT compliant agency specific guidelines apply.
***

HACT Advisory Committee

December 2008