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G E N E R A L      S E C R E T A R I A T

ADMINISTRATIVE MEMORANDUM NO. 86 Rev. 1
SUBJECT: OBLIGATION REVIEW GUIDELINES

 

CONSIDERING, 

That Administrative Memorandum No. 84 established the framework to decentralize among program managers the authority and responsibility to establish and record obligations. 

That the annual 1997 review by the External Auditors of unliquidated obligations revealed several cases which were not in compliance with Article 95 (then Article 94) of the General Standards, observed that "in some areas, the General Secretariat continues to refine its policy," and recommended that the Secretariat for Management provide training and further instruction on the obligation process and conduct compliance checks. 

That as part of the Secretariat for Management's program of activities to comply with the recommendations of the Board of Auditors and to complete the refinement of its policies, the Assistant Secretary for Management promulgated Administrative Memorandum No. 86 on May 28, 1998. 

That there is a need to modify Administrative Memorandum No. 86 as a result of the subsequent introduction of the Oracle system, modifications to the General Standards and Statute of the Special Multilateral Fund of the Inter-American Council for Integral Development ("FEMCIDI"), the creation of the Inter-American Agency for Cooperation and Development, and the reorganization of the Secretariat for Management under Executive Order 99-3. 

DECISION: 

Pursuant to the decision of the Secretary General, Administrative Memorandum No. 86 is hereby modified as stated below: 

I.  PURPOSES 

The purposes of this Administrative Memorandum are as follows: 

1.         To provide expanded guidelines and definitions regarding financial obligations; 

2.         To reiterate the requirement that all obligations must be based upon firm commitments when they are approved and recorded in the General Ledger accounts of the General Secretariat; 

3.         To emphasize that all obligations must observe strict adherence to the criteria established in the General Standards; 

4.         To clarify the role and responsibilities of the Department of Management Analysis, Planning and Support Services (DMAPSS) in the obligation review process; and 

5.         To review and reiterate pertinent policies and procedures with respect to the funding, authorization, and recording of obligations. 

II.  ARTICLE 95 OF THE GENERAL STANDARDS 

Article 95 of the General Standards states: 

Appropriations shall be available to meet the obligations incurred during the year for which they were approved. However, and only to the extent necessary to liquidate obligations pending at the close of the year for which they were approved, the appropriations mentioned may be extended, but not beyond December 31 of the following year, on which date they shall expire irrevocably. 

In the case of FEMCIDI, in accordance with its Statutes, resources from voluntary contributions made by the member states shall be appropriated and obligated prior to December 31 of the year in which the contributions are received, and the obligations shall be liquidated prior to December 31 of the following year. 

For the purpose of this article, obligations shall be understood as those arising from any agreement, contract, purchase order, or other document concluded with a natural or legal person under which the General Secretariat is legally obligated to disburse funds to the corresponding natural or legal person in order to execute approved activities in keeping with the provisions of the Charter, the resolutions of the General Assembly, and the General Standards. The obligations shall be recorded on the date on which the commitment becomes legally binding. 

III.  ADDITIONAL DEFINITIONS AND GUIDELINES FOR OBLIGATIONS 

1.         For purposes of applying the definition of an "obligation" under Article 95 of the General Standards 

a.         An obligation is a written purchase order, contract, or other legally binding agreement with or commitment to another person, natural or legal, to obtain goods, information, an interest in real estate, financial instruments, securities, intellectual property rights, other rights, and services in exchange for payment with financial resources of the OAS. All financial obligations require the disbursement of financial resources. 

b.         An obligation may also be contained in or arise out of a written letter of understanding, memorandum of understanding, or other legally binding agreement with or commitment to: 

i)        Another organ of the Organization of American States that is a legal person;

ii)       A Member State;

iii)      Permanent Observer State and any other State;

iv)      An agency of any State;

v)       Another public international organization.

vi)      A Non-governmental Organization ("NGO"). 

c.         An obligation is NOT an agreement, contract, or memorandum of understanding with a unit or other unincorporated dependency of the General Secretariat which does not have its own independent legal personality. 

2.         For purposes of this Administrative Memorandum: 

a.         The "Dependencies" of the General Secretariat include executive secretariats, units, departments, offices, divisions and offices with functions and responsibilities similar to those of departments, and the secretariats staffed by General Secretariat personnel and serving as secretariats to the Specialized Organizations and other entities, organs, and agencies established under the final paragraph of Article 53 of the Charter. 

b.         "Managers" include: program managers as duly assigned in accordance with their job descriptions or otherwise designated by the appropriate authority; the Secretary General and the Assistant Secretary General; the Director General of the IACD; Chiefs of Staff in the Office of the Secretary General and of the Assistant Secretary General; Assistant and Executive Secretaries, Executive Coordinators; Directors; Division Chiefs of the IACD; the Secretaries of the OAS Administrative Tribunal and of the Inter´┐ŻAmerican Juridical Committee. 

3.         The terms of Article 95 of the General Standards cited in Part II above govern the expiration of obligations for the Regular Fund and for FEMCIDI. In the case of FEMCIDI, however, the expiration date of an obligation may be modified by a change in the calendar for project execution approved by the IACD Management Board under Article 17 of the FEMCIDI Statute. Specific Fund resources are available when received and they may be obligated as permitted under the terms and conditions of the instruments that established the corresponding Specific Fund. 

4.            Obligations shall be recorded (or caused to be recorded in the case of obligations under object 1) by the responsible managers on the Oracle system or as otherwise directed by DMAPSS. They must be backed by appropriations in the approved program budget, FEMCIDI, or in the Specific Funds. Managers are responsible for the contents and accuracy as well as for the maintenance of supporting documentation for each obligation recorded or caused to be recorded by the dependency or program they administer. 

5.         The following are examples of the supporting obligation documents acceptable by object major: 

Object major                           Example 

1. Overtime - slip signed by the director of the area for work performed; 

2. Non-recurring personnel expenses (such as training, moving, repatriation and recruitment travel for staff members. 

3. Fellowships - Written offer and acceptance by the grantee, invoice from an airline, or from an educational institution;

4. Purchase order, copy of airline invoice; 

5. In-house work order issued and/or copy of a purchase order issued to an outsider; 

6 &7 Copy of purchase order issued to a third party; 

8. Copy of a signed performance contract ("CPR") with contracted party; and 

9. Purchase orders for common services procured by the General Secretariat under binding contract with an outside supplier. 

6.            Obligations are normally established to cover expenses during the fiscal year in which they are made. Obligations may be for non-discretionary, discretionary and technical cooperation expenses, as defined as follows: 

a. "Non discretionary expenses" are those that cover the costs of maintaining the basic infrastructure of the General Secretariat. They include, but are not limited to: rent, utilities, communications -long distance telephone calls, postage, network, internet, couriers- cleaning services, insurance, and photocopies. 

b. "Discretionary expenses" are those such as the purchase of office furniture and equipment, overtime, subscriptions to periodicals, travel and some services for conferences and meetings. 

c. "Technical cooperation expenses" are those for the acquisition of goods and services directly related to services to the member states, such as: training, scholarships, contracts with experts providing consulting services, travel, purchase of technical equipment. 

7.         All obligations must have a beginning and an end date. 

8.         All obligations must be backed by a corresponding appropriation and allotment from either the Regular Fund, from the Special Multilateral Fund of the Inter-American Council for Integral Development ("FEMCIDI"), or from a Specific Fund. 

9.         A fraudulent obligation is an obligation recorded or caused to be recorded by a staff member who knows or should have known, through the exercise of ordinary care, that the obligation was not supported by the corresponding appropriation or allotment. Any intentional or negligent conduct which leads to the recording of a fraudulent obligation constitutes misconduct punishable under Chapter XI of the Staff Rules. 

IV.  DMAPSS' GENERAL RESPONSIBILITIES WITH RESPECT TO THE OBLIGATION REVIEW PROCESS 

1.            DMAPSS is responsible for monitoring the obligation review process and for verifying that all obligations are executed against the corresponding appropriations in the approved Program Budget and in accordance with the other pertinent resolutions of the political bodies. 

2.            DMAPSS is ultimately responsible for the recording of obligations for personnel under Object 1 of the Program Budget and directly controls the recording process for the entire General Secretariat. 

3.            DMAPSS' staff is responsible for advising and assisting all areas of the General Secretariat on the process of recording, reviewing, and maintaining obligations in accordance with the General Standards and other applicable rules and regulations of the General Secretariat. 

4.         The other functions and responsibilities of the Department of Management Analysis, Planning and Support Services are set out in Executive Order No. 99-3. 

V.  THE OBLIGATION REVIEW PROCESS 

1.         For each quarter, every dependency of the General Secretariat shall, within two weeks of the end of that quarter, submit to DMAPPS a report indicating the status of obligations that have not been fully expended in the 180 day period since they were made, together with a justification for continuing that obligation beyond that period. DMAPSS shall cancel any obligations not appropriate justified in those reports, and the dependency shall be responsible for promptly notifying the Office of Procurement Services that the obligation has been canceled so that the purchase orders issued with respect to those canceled obligations are rescinded. 

2.         Every dependency is responsible for performing more frequent reviews of its obligations toward the end of the fiscal year. There should be at least one review on December 15th and another on or before December 31st. 

3.         In coordination with the General Secretariat's dependencies, DMAPSS shall perform random quarterly reviews of obligations recorded during the budget execution progress. The primary purpose of those reviews is to insure quality control of the obligation review process carried out by those dependencies. In conducting those reviews, DMAPSS shall: 

a.         Verify that obligations comply with established rules, regulations and procedures; and 

b.         Provide assistance in the form of budget analysis and in rescheduling or reprogramming obligations. 

4.         Within five working days following the completion of its quality review of a dependency of the General Secretariat, DMAPSS shall report its conclusions to the Assistant Secretary for Management and to the Director of that dependency. Within thirty days thereafter, DMAPSS shall convey the results of each quality review to the subject dependency, including any recommendations for improvement or remedial action required. 

VI.  ENTRY INTO FORCE 

This Revised Administrative Memorandum shall enter into force on the date of its signature and supersedes all inconsistent provisions in prior administrative memoranda on the obligations review process. 

 

James R. Harding
Assistant Secretary for Management
 

Date:  August 1, 2000
Original:  English


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