Budget monitoring of a grant: exchange rates, end-of-project forecast and funding request

Weighted average rate = total received in COP / total sent in USD = (820,000,000 + 987,500,000 + 603,000,000) / (200,000 + 250,000 + 150,000) = 2,410,500,000 / 600,000 = COP 4,017.5 per 1 USD. The simple average of the three rates (4,023.3) is wrong, because it does not take account of the weight of each transfer.

Voucher BU-0912 (COP 18,000,000) is ineligible: eligible line 5 is 112,500,000 - 18,000,000 = COP 94,500,000.

Theoretical pace: 9 months out of 12, i.e. 75%. The total is in line (74.0%). However, the kits line is almost exhausted (97.9%) while one distribution remains: risk of overspend. Transfers (71.4%) are slightly behind, which is explained by the postponement of the last cycle. Office is underspent (65.3%). Vehicles are slightly ahead of pace (78.8%): to be monitored.

Forecast indirect costs: 7% × 779,838 = USD 54,589 (budget 56,280).

Problems: (1) kits are overspent by 16.2%, above the 10% threshold: the expenditure cannot be committed without the donor's prior written approval, otherwise the excess risks being disallowed; (2) vehicles are overspent by 2.9%: allowed, but to be justified; (3) office is underspent by 11.8% and transfers by 6.1%: to be explained in the report.

Proposal: ask the donor now for a reallocation of about USD 9,700 to the kits line, funded from the staff (5,526) and office (4,264) lines, i.e. USD 9,790, rather than from the transfers line, which is direct assistance to households. The remaining transfers balance (about USD 25,000) can be used, with the donor's approval, to increase the value of the last cycle or to cover households on the waiting list. In parallel, the logistics team checks whether the kit composition can be adjusted. State that the forecast depends on the exchange rate: the next transfer will change the weighted average rate.

Project cash at 30/09: received COP 2,410,500,000 - eligible expenditure COP 2,389,500,000 = COP 21,000,000, provided the ineligible expenditure of COP 18,000,000 is reimbursed to the project from unrestricted funds (otherwise actual cash is only COP 3,000,000 and the project is pre-financing an expense that is not its own).

Requirement: 743,500,000 - 21,000,000 = COP 722,500,000, i.e. 722,500,000 / 4,000 = USD 180,625.

Budget check: budgeted direct costs USD 804,000 - transfers already received USD 600,000 = USD 204,000 available: the request of USD 180,625 is covered (indirect costs remain at headquarters).

Recommendations: request in two instalments (October for staff, vehicles and kits; early November for the transfer cycle) to limit idle cash and exchange rate risk; allow for the actual rate differing from 4,000 and adjust the second instalment.

The reception and gift baskets for the authorities are gifts and receptions, ineligible under the donor's rules. Treatment: (1) reclassify the expense from the project code to the organisation's own (unrestricted) funds, through a documented correcting entry, without altering the original voucher; (2) reimburse the project account COP 18,000,000, i.e. 18,000,000 / 4,017.5 = USD 4,480; (3) calculate indirect costs only on eligible expenditure (the 7% on this expense, about USD 314, cannot be claimed).

If the expense stayed on the project, it would be disallowed at audit, with a refund to the donor and a reputational risk. Controls: inform the finance manager and the base manager in writing; check whether there are other expenses of the same type since January; issue a memo restating the list of ineligible expenses; require finance sign-off before commitment on any "relations with authorities" expense. Relations with the authorities are managed through coordination meetings, not gifts, which also protects the organisation against any suspicion of corruption.

Example: "At 30 September 2026, eligible direct expenditure amounts to USD 594,773, i.e. 74.0% of the budget for 75% of the duration, at the weighted average rate of COP 4,017.5/USD. Cash transfers (71.4%) are slightly behind schedule: the last cycle was postponed to November to update the beneficiary lists; it will be paid in full before the end of the project. The hygiene kits line is 97.9% spent: the price of soap and sanitary pads has risen by about 20% since June. The end-of-project forecast shows an overspend of USD 9,695 (16.2%); we request your approval to reallocate USD 9,790 from the staff and office lines, without reducing the assistance paid to households. The office line is underspent (65.3%); the causes are being analysed and the balance is proposed for the reallocation. An ineligible expense of USD 4,480 was identified during our internal review and reclassified to the organisation's own funds."

I refuse the purchase as it stands, and explain why: goods bought in December but used after 31/12/2026 do not serve the project during its implementation period; they are ineligible and would be disallowed at audit, with a refund. Presenting purchased stock as project expenditure would also be misleading information to the donor. I propose legitimate solutions: (1) ask the donor for a no-cost extension to distribute the kits in 2027; (2) propose a reallocation to an activity that can be carried out before 31/12 (top-up to the last cash transfer cycle); (3) failing that, report the balance, which will be returned or deducted. I inform the finance manager so that the decision is taken at the right level.