Issue Source: Workshops, Atlas Helpdesk, BOM Units
Affected Parties: Country Offices, Headquarters
Categorization: Policy – Process Prescription / Procedure, Efficiency – Office Organization/User Capacity
UNDP expenditure policy requires that expenditure is not recorded for services that will be delivered and/or paid in a subsequent year. Services, unlike goods, do not carry over and are not encumbered from year to year. The encumbrance accounting process, which records expenditure for purchase orders that have not been processed (paid) in vouchers, cannot differentiate services performed in one year and services performed in a subsequent year on a single purchase order. As a result, we have instructed country offices that they must divide purchase order for service contracts and other services procurement based on the year in which the work will be performed. This leads to substantial additional work for country offices as they must create separate POs for multiple year contracts for services. Further, it is often difficult to determine up front the amount of services that will be provided in one year versus the next. And it results in contracts signed with the vendor not matching POs in the system which must be separated by year.
Longer-term this solution will likely be resolved by the move of UNDP and its partner agencies to following international accounting standards (IPSAS). Under IPSAS, expenditure for goods and services will be recorded only once goods or services are received. The actual receipt or payment will result in the recording of expenditure, not the existence of a dispatched PO. Therefore, it will likely no longer be required to split purchase orders based on year in which services are performed.