HACT is a framework adopted in 2005 for UN agencies like UNDP, UNFPA, UNICEF and WFP to manage cash transfers to implementing partners. It aims to lower transaction costs, improve partners' management capacities, and minimize risks. Key aspects of HACT include assessing partners' financial management risks and adjusting assurance activities accordingly, relying more on partners' own systems, and standardizing reporting across agencies. UN agencies use a risk management approach, with more oversight for new or higher risk partners. HACT is intended to strengthen national ownership while helping build partners' financial management abilities.

2.  Adopted in 2005, HACT is a new way of
managing the process of transferring cash to
our implementing partners.
 The Approach is outlined in a framework that
applies to UNDP, UNFPA, UNICEF and WFP–
the United Nations Development Group
Executive Committee agencies (or UNDG
ExCom) – at this stage.

3.  Lower complexity of procedures and
reduce transaction costs of
development cooperation;
 Improve capacity of national partners
to effectively manage aid;
 Minimize risks related to the
utilization of funds and increase
overall effectiveness

4.  National ownership - Governments are in
the driver’s seat
 Strengthening capacity – reliance on
Government systems
 Risk Management
 Assessments and assurance activities

5.  UN Agencies rely on system of controls for managing cash
transfers.
 Partners often have to produce multiple reports in
different formats at different times for the various
agencies.
 The new system relies on what is called a risk
management approach.
◦ With trusted long-term partners that have stable management and
strong internal management systems, risk is likely to be low
◦ New partner about whom there is little prior information or
experience, risk will be higher.
 Agencies adjust their cash transfer method and assurance
activities according to the level of risk

6.  Macro and Micro assessments are used to
determine risk and assurance activities such
as audits and spot checks.
 4 cash transfer modalities can be used:
◦ Direct cash transfers (advance)
◦ Direct payments
◦ Reimbursement
◦ Direct agency implementation.

7.  The aim of the assessments is to help
government and other partners to identify
strengths and weaknesses in their financial
management systems.
 The assessments are not a form of
conditionality – instead they inform how best
to work together

8.  HACT as a risk-based management approach is reconfirmed,
whether or not several agencies share an implementing
partner;
 HACT is to be the sole framework for transferring cash to IPs.
Emphasis is on standardizing the way UN agencies work with
IPs to reduce transaction costs while ensuring joint
operationalization with respect to country macro assessments
as well as assessments and audits of shared partners.
 The agreed principles and processes will be mainstreamed
into the adopting agencies’ guidelines, which are aligned with
the revised HACT framework with due consideration for the
specificity of each agency’s business model and business
processes;

9.  Accountability and responsibility for applying these
procedures and monitoring application lies with each agency.
They are promoted and coordinated by the Resident
Coordinator with oversight at HQ level.
 Further clarification is provided on assurance planning.
Financial audit will be added to the menu of assurance
activities for higher-risk IPs, while internal control audit will
apply to lower-risk IPs and spot checks and programmatic
monitoring will apply to all IPs, as per agency procedures.

10. Implementation of HACT Processes
Implementation area Implementation Status
Assessments Micro assessments, deemed necessary through micro
assessment planning, have been completed or high risk
has been assumed.
Assurance Agency assurance plan has been completed and
implementation is on track. Adjustments to the plan have
been documented as necessary and at least annually.
For shared IPs, planned assurance activities have been
detailed in the agency assurance plan and implementation
is on track. Adjustments to the plan have been
documented as necessary.
Capacity development Capacity development has been completed as required
and communicated by agency HQ.

11. Agency HACT focal point
 Each agency will identify a HACT focal point, who will serve as
the key point of contact for HACT implementation in the
agency. This person is responsible for managing or
supporting HACT activities and arising issues, according to
agency office structure. This role may be suitable for an
existing position and may not necessarily require a full-time
commitment; this is decided by each agency.
 The HACT focal point will also responsible for working with
the HACT inter-agency coordinator to share information as
necessary for effective coordination and to develop best
practices at country level.

12. Agency Programme Staff
 Effective implementation of the HACT framework requires
consideration of HACT as part of regular programme planning
and monitoring activities. It is important to embed HACT
activities in agency programmatic activities, such as by
combining financial monitoring procedures with
programmatic monitoring activities. This will minimize the
burden on IPs and achieve the most efficient use of resources.
 Agency programme staff are an important part of the capacity
assessment process. Programme staff observations about the
IP’s activities should be considered throughout the
programme cycle and should inform assurance activities,
leading to adjustments if necessary.

13. Risk rating Spot checks* Programmatic
monitoring
Audit frequency Audit type
Low 1 per year,
excluding
year of audit
Third or fourth year
of the programme
cycle
Internal controls audits
May switch to financial audit if
significant issues or concerns are
identified in spot checks
Medium 1-2 per year,
excluding
year of audit
Second and fourth
year of the
programme cycle
Significant Per agency
guideline
Per agency
guidelines
Annual For shared IPs: Financial audits
If IPs receive two sequential audits with
unqualified opinion, an internal
controls audit should be performed for
remaining period
Other partners: As per agency
guidance
High Per agency
guidelines
Annual
*Each spot check reviews a significant amount of total expenditures reported on the selected FACE form
for testing (i.e. one FACE form per year for low-risk IPs). The specific amount of expenditures to be
selected for testing is based on agency guidance. This assurance activity is not intended to provide 100%
coverage of expenditures during the entire programme year or cycle.
Guidance for Assurance Activities

14.  Certifies expenditures and provides a basis
for the disbursement of funds for the next
period;
 Permits disbursement on quarterly, not
transaction basis;
 Cash disbursed, but not utilized –
reprogrammed/refunded;
 No accompanying back-up documentation

15.  Reduces the most burdensome transaction
costs for government counterparts;
 True harmonization in the area of assurance
 Simplification of both programme and
financial operations
 Help National capacity building for
programme implementation