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Financial Management and Analysis of Projects
4. Financial Management of Executing Agencies
4.1. Financial Management Overview
4.1.1.The primary objective of the
financial management process is to optimize financial and economic
benefits from an investment. Financial management comprises multiple
processes, including financial accounting, management (and cost)
accounting, assets accounting, cash and money markets accounting,
financial reporting, internal controls, and internal audit, with
external audit providing a report and opinion on the reported financial
status and performance. Each of these processes, including financial
management itself, should incorporate subprocesses and techniques,
including management, forecasting, strategic planning, planning
and budgeting, procurement, disbursements, control, and communications.
4.1.2. The objective of this part
of the Guidelines is to assist a financial analyst to examine institutional
and systems requirements and to prepare appropriate financial analyses.
These are needed to support an investment from its inception through
completion, and where necessary, through the life of the loan or
credit. In addition, this part will also help the analyst define
efficient forms of performance measurement for use in monitoring
project implementation and obligations undertaken by a borrower.
4.1.3. The general objective of ADB
appraisals of EAs and IAs is to ensure that they are technically,
managerially, and financially capable of efficiently and effectively
implementing proposed projects or programs. The specific appraisal
objectives are to: (i) develop criteria on which to decide whether
institutional capacity (in terms of financial management) is sufficient
to justify loan approval, (ii) identify the institution's
development needs (in terms of financial management)-both
project related and long term-that should be addressed either
as a project component or by Technical Assistance, and (iii) confirm
that the financial management system is sustainable.
4.1.4. Together with the parts on
Investment Projects, Reporting and Auditing, and Financial Institutions,
this part is aimed at providing the financial analyst with a comprehensive
view of financial management of projects, based on ADB's Operations
Manual and related guidance documents. In addition to this introduction,
Financial Management has three parts:
| 4.2 |
Institutions
and Systems |
This part describes techniques for examining
the various institutions and agencies of borrowers, particularly
as they impact on the financial management of projects. |
| 4.3 |
Financial
Analysis |
This
part describes forecasting and financial analysis in relation
to executing agencies. |
| 4.4 |
Measuring
Performance |
This part is mainly applicable to the executing
agencies of revenue-earning projects. It describes the financial
performance measurements that can be used to assess the performance
of the EA in achieving the financial objectives of the project. |
4.1.5.
Each of the financial management processes and techniques that these
Guidelines describe must be tied directly to the physical components
and operational elements of the investment project.
4.1.6. ADB appraisal of borrowers,
EAs, and/or PIUs is not usually necessary where the World Bank has
already appraised these clients. In these cases, ADB accepts the
World Bank certification unless there is fundamental disagreement,
which must be justified with full reasons.
4.1.7.OM
Section 32 (1997), ADB's Operational Missions, describes ADB
mission types, procedures, and requirements. These missions all
involve aspects of financial management, in particular: (i) Loan
Inception Missions (para. 22), (ii) Loan Disbursement Missions (para.
24), (iii) Loan Review Missions (paras. 25-27), and (iv) Audit
Review Missions (para. 10).
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3.7.4. Miscellaneous ADB Reports | Next
4.1. Financial Management Overview |
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