As a general rule, DFID should not make advance payments. Advances increase transaction costs, place a demand on the management of cash and may well complicate the accounting process. There is a risk the advance will not be accounted for, or that the quality of accounting will not be as good as for payment in arrears. DFID is not in the business of advancing or lending money, this is the job of the banking sector; but the cost of borrowing can be factored into proposals and may be met by DFID. Managing Public Money tells us not to pay in advance of need - the need for an advance should be proved and not presumed.
Given the nature of our business, DFID has accepted that, in a limited range of circumstances, there may be a case for considering an advance payment. This includes advances to civil society, advances through imprest accounts, small advances through contracts usually limited to mobilization costs and staff advances for travel and subsistence. An advance payment might also be considered where the purpose is developmental. Where we enter into arrangements with a private sector organisation a bank guarantee may be required. Before agreeing to any advance full justification, on a case-by-case basis, must be provided.
1. Staff must not, under any circumstances, make the offer of an advance.
2. The recipient must set out in writing the purpose(s) for which the advance will be used, when submitting the request.
3. An advance payment must not include any element for fee expenses.
4. An advance payment must not be paid until there is the need to use the funds.
5. An advance to contractors must be recovered over as short a period as is practicable.
6. Advances paid from a (Debtor) Account must be monitored regularly.
7. Subsequent advances must not be paid until the previous but one advance payment has been accounted for (see civil society advance guidance).
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