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Financial Management and Analysis of Projects : 4. Financial Management of Executing Agencies : 4.2. Institutions and Systems
4.2.3. Governance
4.2.3.1.
ADB's governance policies are
operationalized through OM C4. This OM was developed from ADB's
Governance: Sound Development Management. It is recommended
that this paper also be studied to appreciate the thrust of ADB's
policy on Governance as set out in OM C4.
4.2.3.2.
ADB regards questions of governance
from the standpoint of their relation to the effectiveness with
which development assistance is used, the impact of development
programs and projects, and the absorptive capacity of borrowing
DMCs. However, ADB's analytical framework for addressing governance
issues draws a distinction between elements of good governance and
the specific areas of action (e.g., public sector management), in
which they could be promoted or their existence enhanced. Accordingly,
ADB has identified the four basic elements of good governance: accountability,
participation, predictability, and transparency.
4.2.3.3.
A financial analyst, or any staff
member or consultant engaged by ADB to define the financial management
and analysis requirements of a project, the project's EA and
any associated organizations must take into account ADB's
policy on good governance. This would also include ADB's definitions
and the approach to supporting its DMCs in achieving that goal through
its operations. By defining the above key elements of good governance,
and drawing attention to the linkages between these four elements,
ADB makes clear that sound development management is critical for
ensuring adequate returns and efficacy of the programs and projects
it financed and that these should be used to underpin its good governance
policy.
- OM
C4 proposes that ADB will enhance accountability by focusing
on public sector management, public enterprise management, public
financial management, and civil service reform.
- Under
participation, ADB will support involvement
of beneficiaries and affected groups in development programs and
projects, the development of closer interfaces between public
and private sectors, decentralization of economic functions (particularly
to local government units), and cooperation with NGOs.
- As
regards predictability, ADB emphasizes
enhancement of effective legal and regulatory regimes for economic
development and capacity building of institutions responsible
for the administration and enforcement of such laws and regulations
including training of legal personnel.
- Disclosure
of information, as stressed in OMC4, is the principal focus of
ADB's support for transparency,
ranging from national-level data (statistics, etc) to annual financial
reporting by EAs.
4.2.3.4.
While ADB intends to provide specialist
support to advise on, and to assist in, project preparation and
implementation for financial management-related components, it will
remain the responsibility of each financial analyst to prepare,
appraise, and supervise each element of the project. This should
be done in a manner that is fully responsive to ADB's governance
policy. While it is recognized that accurate information on transparency,
in particular, may be limited or not available with respect to a
proposed project in the early stages of design and development,
the financial analyst should still encourage the EA and any PPTA
consultants to ensure full disclosure of all institutional, systems,
and financial management aspects by the time final documentation
of the project is available for appraisal.
4.2.3.5.
OM C4 and the policy paper are extensive
in their scope, their proposed assistance and definitions, together
with a forecast of ADB's commitments, to not only assist the
DMCs, but also to ensure that ADB itself can be held equally responsible
for upholding its governance tenets.
4.2.3.6.
ADB's Policy Paper on Good Governance
also stresses the need to be vigilant with respect to corruption
and fraud. To further assist financial analysts and others concerned
with corruption avoidance, the Knowledge Management section of the
web-based Guidelines contains useful reference materials on anti-corruption.
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4.2.2. Major Institutional Assessments | Next
4.2.4. Financial Management and Governance Arrangement |
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