Cash and Vouchers - Risks and Mitigation Measures John Lamm, Food Security and Markets Advisor, Office of Food for Peace SENSITIVE BUT UNCLASSIFIED
Context of FFP Programming SENSITIVE BUT UNCLASSIFIED
Changes in USAID’s Approach to Risk • In 2016, the Office of Management and Budget (OMB) updated Circular A-123 to introduce a new requirement that federal agencies integrate Enterprise Risk Management (ERM) with their internal control systems. • “ Governance Charter for Enterprise Risk Management and Internal Control at USAID: A Mandatory Reference for ADS Chapter 596 ” updated 8/24/2017
ERM GOVERNANCE STRUCTURE AGENCY RISK PROFILE that provides insight into all areas of enterprise risk (+ FMFIA Internal Control Certification) Administrator Executive Management Council for Risk & Internal Control (EMCRIC) Agency- ERM/Internal Control level Risk Management Council (RMC) Senior Assessment Team (SAT) ERM Internal Control Bureau- Management Councils on Risk & Internal Control (MCRCs) level ERM/Internal Control (+ FMFIA Internal Control Assessments) AU- Management Councils on Risk & Internal Control (MCRCs) level ERM/Internal Control Assessable Unit (AU) Risk Profiles
2 Major Premises Behind Concept of Risk Appetite PREMISE #1: Risk refers to “uncertainty” and is not necessarily positive or negative. PREMISE #2: We accept a certain level of risk every time we intervene or engage. Per OMB Circular A- 123, risk is defined as “the effect of uncertainty on [an Agency’s] objectives.” 5
USAID RISK APPETITE STATEMENT RISK CATEGORY OVERALL RISK APPETITE Programmatic HIGH Fiduciary LOW Reputational MEDIUM Legal LOW Security LOW Human Capital MEDIUM Information Technology MEDIUM
USAID RISK APPETITE STATEMENT We have a HIGH risk appetite with regard to: Harnessing new technologies and Exploring, testing, or using innovations. new security methods or technologies. Promoting sustainability through SECURITY Supporting partners’ local ownership and resource- mobilization. development of their security PROGRAMMATIC plans. Partnering with the private sector. CAPITAL Adopting innovative best HUMAN Embracing flexible, iterative design practices. and implementation. Innovative modalities for acquisition Adoption of new technologies and assistance. or platforms. Empowering our employees to REPUTATIONAL TECHNOLOLGY represent the Agency. INFORMATON Sharing and increasing the transparency of technical and programmatic information. Promoting a culture of learning.
FFP Points of Emphasis on CTP • FFP remains committed to working in conflict and hard-to- reach areas to go wherever the vulnerability is greatest. We program CTP in Nigeria, Somalia, Syria, Yemen, etc. • FFP has no explicit preference between vouchers and cash at a global level (but may in specific country contexts). • Risk doesn’t end the moment the transfer changes hands.
FFP Points of Emphasis on Vouchers For voucher programs, vendor conduct must be monitored: – Especially if program participants have few options in their geographic area. – Especially if participants share PIN numbers with vendors, leave their card at the store, or otherwise trade control over their transfer for convenience.
FFP Points of Emphasis on Digital Cash Transfers • Where possible, FFP encourages partners to adopt electronic systems for CTP to mitigate risk. • For systems that minimize the handling of physical cash (e.g., vouchers, e- payments), strong internal controls are critical, especially around segregation of duties and systems access.
FFP Points of Emphasis on Direct Cash Distribution • Records on chain of custody are critical; – The closer to delivery an implementer can take possession (physically and chronologically), the better • Risk is elevated when using a sub-grantee for one-off transfers. • Advanced financing for FSPs should be implemented only with strong accountability controls.
Risks and Vulnerabilities • Key Question: – Are the right people receiving the right resources? • Key Points of Vulnerability: 1 2 3 4
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