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Euro Reporting
1. The Financial and Administrative Framework Agreement (FAFA) governs our partnership with the
European Commission (EC), for the implementation of the European Union (EU) budget. Each EU
contribution comes with a contribution-specific agreement signed between UNDP and the EU
representatives (in the Country or in Brussels). The agreement sets out the specific reporting
requirements.
2. Up to 2013, there was one type of contract used for EU contributions channeled through the UN,
called the Standard Contribution Agreement (SCA] with international organizations. Since 2013, in
addition to this, the use of the EU Grant Contract was introduced.
3. Since 2015, the EU Pillar-Assessed Grant or Delegation Agreement (PAGoDA) templates was
introduced. There are some specific reporting requirements for contracts funded through DG ECHO
(EU Humanitarian Assistance) linked to their obligatory on-line platform used for submission of
reports.
4. Unless otherwise defined, PAGoDA contract templates allow for financial reports in UNDP's
accounting currency i.e. US dollars. There is no need to present reports in Euro in such cases.1
5. UNDP offices implementing EU-funded activities are required to thoroughly review the contributionspecific agreements in order to comply with the prescribed reporting requirements. Questions
relating to contractual aspects can be brought to the Brussels-based Helpdesk at:
[email protected]
6. For the Standard Contribution Agreement, two reports have been developed in Atlas with the
following objectives:
a. Provide offices receiving EC funding with a management tool for regularly monitoring budget,
fund availability and expenditures in both US dollars and Euro in order to manage their currency
exposure;
b. Provide an early warning measure for any necessary budget revision or consultation with EC and
stakeholders;
c. Provide a standard solution for Euro reporting that attempts to harmonize the different
approaches that offices are taking when reporting to the EC;
d. Facilitate timely reporting and improve our overall reporting performance;
e. Implement a standard approach for converting non-Euro expenditures into Euro, consistent with
the UN Accounting Rules and the UN-EC FAFA signed in 2003, and amended in 2014;
f. Automate the preparation of the report and reduce the current extensive manual effort
required for reporting to the EC.
7. For the Standard Contribution Agreement, the following two reports are developed in Atlas are:
a. The EC Donor Report
b. The Budget Comparison Report, which provides a comparison of the budget and fund availability
in US dollars and in Euro in order to determine the effects of currency fluctuation and initiate
appropriate budget revision or negotiation with the EC to eliminate or minimize any losses
resulting from currency fluctuation.
1
As of May 2016, the PAGoDA template is currently under revision and it will shortly be replaced by "PAGoDA-2"
version where reporting requirements might be further.
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EC Donor Report
8. The EC Donor Report is designed for submission to the EC and consistent with the budget categories
agreed under the FAFA. It can be used for both fund-level co-financing (EC trust funds), as well as for
project-level co-financing (cost sharing agreements signed with the EC). If ‘trust fund' is selected, the
report will be generated for all projects funded from the selected fund.
9. The budget figures represent the budget for the fiscal year(s) of the reporting period shown at the
top of the report and mirror the latest budget revision for each fiscal year, converted into Euro,
using the exchange rate at the date that the budget revision was sent to commitment control.
10. Expenditure includes encumbrances and disbursements processed during the reporting period. The
Euro values are determined by converting the USD expenditure figures using the UN exchange rate
at the transaction accounting date. Encumbrances are converted to Euro based on the accounting
period of the Purchase Order. Further, expenditures are summarized by EU categories, through a
mapping process that links existing UN Charts of Accounts to these categories. The disbursement
and encumbrance figures for a fiscal year are extracted from the General Ledger. These figures
during the course of the year come from the Project Resources table.
11. The Euro and US dollars values of contributions are derived based on the exchange rate for the
accounting date the contribution is recorded in the Bank Account. The funding analysis summary
enables UNDP to initiate a request for the next installment of the pending contribution.
Budget Comparison Report
12. The Budget Comparison Report provides a comparison of budget and fund availability in both USD and
EURO. Its primary purpose is to determine the gain/loss of the outstanding contributions in USD terms
due to changes in the Euro exchange rate. Since the purpose is to determine the gain/loss resulting from
exchange fluctuation of EC's funding, it does not include other or third party financial data.
13. The Funding Analysis shows the outstanding contributions by deducting the total contributions received
from the total budget entered in Atlas. The pending contributions, computed both in Euro and USD, are
“revalued” by applying the latest exchange rate of Euro to USD. The difference between the revalued
pending contributions and the original pending contributions based on the USD budget represent the
Gain/(Loss) that the office would incur if the pending contributions were to be received as of the
reporting date.
14. The FAFA guides the reporting policies between UNDP and the EC. The FAFA clearly states that
“…reports to be submitted to the Commission will be in Euro, except in PAGODA contract templates.
These reports may be drawn from financial statements denominated in US Dollars as per UN legislative
requirements. Where necessary, actual expenditure will be converted into Euro using the rate of
exchange at which the EC's contribution was recorded into the United Nation's accounts”. This clause
allows the use of the UN exchange rate for converting non-Euro disbursements into Euro as long as
there is an auditable system for recording expenditures. Please note that the financial reporting under
PAGODA contracts can use USD.
15. Standard UNDP project documents are signed in all cases.
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16. The Budget Comparison Report shows the computed “Gain/(Loss)” that would impact the budgetary
spending limit of the project. If this occurs the budget should be revised to reflect the gain/(loss) to
avoid any overspending which could happen if the office would monitor the project budget using
only the USD budget status. When revising the project budget, a loss should be entered as a
negative amount and a gain as a positive amount to the EU Budget Category EUX12 and account
76100 The budget total is thus decreased or increased, reflecting a possible change in future
contributions. It is important to note that the gain/(loss) only generates a budget revision but no
accounting entry in the Atlas results.
17. Templates and forms can be found in the documentation under the following links:
a. EU page
b. EU Budget Categories
c. Euro Donor Query
d. Revenue Management Better Practice Guide
18. There are certain exchange rate scenarios to consider when dealing with EC-funded projects:
a. When UNDP does pre-financing at the start of the project;
b. When the EC pays on time, but, given exchange rate fluctuations, UNDP incurs exchange
gain/losses. This can be minimized by running the budget comparison report on a regular basis
and making the appropriate adjustments to the dollar budget so that the spending limit shown
reflects what is available to spend;
c. When UNDP does the pre-financing before the payment of the last installment - this can be
addressed by negotiating from the outset a smaller percentage to be disbursed as the last
installment. By running the report often enough (see above) any losses may be minimized as far
as possible
d. Budgeting
19. The FAFA with the EC calls for both budgetary control and financial reporting in Euro. However, since
UNDP's base currency is USD, all of its budgetary controls have only been applied in USD.
20. Those offices managing their EC-funded budget only using the USD budget/funding balance have, as
a result, incurred significant exchange losses. The new Atlas reports have been developed to
facilitate budget monitoring in multi-currency to meet both the EC's and UNDP's own financial
reporting requirements.
21. With the use of these new Atlas reports, all EC funding recipients are strongly urged to review and
make necessary adjustments to their budgets in order to better reflect the exchange rate fluctuation.
An additional EU Budget Category EUX12 (Adjustment of Budgetary Spending) has been introduced
in order to allow for the adjustment of budgetary spending limits resulting from currency fluctuation
without this showing on the budget (see Procedures above).
EU Budget Categories
22. EU Budget Categories have been made available for project budgets and the reports fully use these
categories to generate themselves in the format required by the EC. This reporting will only be
optimized if all offices use the EU categories properly when creating or revising budgets.
23. Expenditure is reported based on the account chartfield used when processing financial transactions.
The expenditure accounts are mapped to the EU budget categories to generate the reports in EC
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format. Thus, to take full advantage of the automated process, it is highly critical that the EU budget
categories be used consistently when creating new budgets or revising existing budgets.
24. When signing a project with the EC there might be more sub-categories than the ones present in
Atlas. As UNDP only has to report what it signs with the EC, it is preferable that the budget is not
agreed upon at the detailed level but rather at the broader lever reflected in the categories currently
available in Atlas. For those offices that need to provide detailed information to the EC, a Euro
Donor Query (available in Atlas) is available with all the detailed required information, grouped by
EC detailed category.
Exchange Rates
25. The approach taken for the Atlas Euro reporting is to convert expenditure using the UN official
exchange rate at the transaction accounting date - an approach consistent with the UN accounting
standards.
Final EC Disbursement
26. The EC does not fully release its final contributions before it approves the final report. This
arrangement requires UNDP to pre-finance a maximum of 20%, or the final agreed percentage, from
other funding sources. It is important to note that according to the FAFA, the EC could advance from
80% to 100% of their 'proportional share' of each year's budget. The decision to grant a higher
disbursement percentage is made taking into account the past record of the office in submitting
timely final reports.
Managing Procurement
27. A funding mismatch associated with Euro reporting arises because UNDP receives Euros for projects,
but makes disbursements in other currencies. To align currency inflows and outflows, the following
changes should be made to procurement and payment processes for projects financed in Euros or
Euro-pegged currencies:
a. Procurement of goods and services should include a requirement for pricing in
Euros;
b. Contracts related to the projects should be issued in Euros;
c. To the extent possible, all disbursements should be in Euros.
28. Electronic Funds Transfer (EFT) is the preferred method of disbursement. To use EFT effectively:
a. Obtain vendor banking information, including IBAN;
b. Enter vendor banking information in the vendor profile;
c. Send the vendor profile to Treasury ([email protected]) for validation before creating a
voucher;
d. If an office does not have a local or zero-balance account (ZBA) in Euro, the Headquarters Euro
account should be used for disbursement (when preparing the voucher, select HQ Euro account
for disbursement: bank code 00007, account code 1002).
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