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Outcome of the SR Capacity Assessment

The UNDP Country Office (CO) needs to take different steps, depending on the outcome of the capacity assessment:

  • Positive assessment without reservations or significant assessed risks: UNDP CO can proceed with the preparation of the Sub-recipient (SR) agreement documentations and contact the Legal Office (LO) if there are any deviations from the appropriate model SR agreement. Please refer to figure 2 here for next steps. The cash transfer modality may be used for the SR that has a positive assessment and is rated low risk. Depending on the programme needs, the other modalities can also be used or a combination of the three modalities. The cash transfer modalities are:

    1. Direct cash transfers – Funds are transferred by UNDP to the SR before the SR incurs expenditures to support activities agreed in the work plan;
    2. Direct payments –  SR is accountable for the expense, does the sourcing but requests UNDP to effect payment to the vendor  and other third parties  to support activities agreed in the work plan; and
    3. Reimbursements – SR pre-finances grant activities with prior approval of UNDP and is reimbursed on submission of a request for reimbursements with supporting.
  • Positive assessment (with reservations): UNDP CO determines that the SR does not possess all the required capacity to carry out the activities envisioned under the programme. UNDP and the SR need to address the identified capacity issues prior to signing the SR agreement – for example, through a Condition Precedent/Special Condition or a capacity development plan, as part of the agreement, or through specific  cash transfer modalities, as risk mitigation measures. For an SR rated as moderate risk, direct cash transfers may be applied for specific areas found to be strong, while direct payments or reimbursements would apply in weaker areas.

    For an SR rated as significant risk, direct cash transfers or reimbursements should not be used. Direct payments may be used only in selected areas where the SR internal control framework is assessed as adequate. UNDP CO retains and implements certain activities under direct implementation, through which UNDP incurs expenses directly on behalf of the programme and in the context of Global Fund grants, this includes procurement of health products and capital assets, procurement of high value professional services, all procurement for countries under the “Zero Cash Policy” and all other SR activities that cannot be financed through the three cash transfer modalities based on the risk rating. The UNDP CO can also consult with the Global Fund/Health Implementation Support Team about how to address the situation most appropriately.

  • Negative assessment and UNDP determines that capacity cannot be developed, even with appropriate measures: UNDP should reject the entity as an SR and initiate a new selection process.

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