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Financial Management and Analysis of Projects : 5. Reporting and Auditing
5.3 Financial Reporting5.3.1. Introduction5.3.1.1. This section describes the required form and timing of reports on the financial position and performance of projects and, where applicable, of EAs and IAs. ADB seeks to agree with borrowers, EAs and/or IAs at loan negotiations to receive, for each project, interim and annual audited financial statements acceptable to ADB in respect of each fiscal year (OM J7 and GP 43).5.3.1.2. In cases where an ADB TA grant is provided in parallel with, and linked to, an ADB loan to a borrower for the same project operation, the provisions for financial reporting and auditing set out in this part of the Guidelines will apply. Depending on the obligations agreed upon by ADB and the borrower and its EAs and IAs on the progress of a project, ADB typically requires the submission of periodic progress reports, including financial reports, covering: (i) the progressive interim, annual, and final costs of a project; (ii) where appropriate, the financial performance and financial position of an EA or PIU; (iii) accountability for the funds, including ADB loans, provided for project implementation; (iv) the bases for disbursements of proceeds of ADB loans; (v) the extent of compliance with financial and related covenants, and (vi) the effectiveness of project-related financial management and accounting systems as specified by ADB and agreed to by the borrower. 5.3.1.3. Early in the project processing cycle, preferably at project identification, the financial analyst should inform borrowers, EAs, and IAs of the project accounting and auditing requirements. Commitments are to be sought, as confirmed in a subsequent Aide Memoire and in the loan agreement as to the nature, form and manner of compliance, and the timing of the appointment of the auditor. Where necessary, commitments are to be detailed in the minutes of loan negotiations. The appointment of auditor should be made either before the date of ADB loan approval or the start-up date of the project. 5.3.1.4. Borrowers and EAs should be reminded of the need to inform other concerned entities or persons on ADB's reporting requirements including: (i) a government ministry responsible for the performance of an EA, and for assigning or appointing the auditor; (ii) a government auditor mandated by law to audit the accounts of the EAs or IAs; (iii) private or commercial auditors acting on behalf of, or in substitution for, a government auditor; and (iv) a principal or holding company having financial responsibility for the EAs or IAs. Early notification of ADB requirements to the above responsible authorities is essential to enable the Project Officer to assess the likely prospects for compliance prior to, and during, appraisal. This will also allow the Project Officer to comment on the expected performance and quality of financial reporting and auditing in the RRP and, if necessary, in the project identification and preparation BTORs. 5.3.1.5. Reports on project identification, preparation, appraisal (RRP), and supervision should include a reference to the accounting standards and policies adopted by the borrower's EA and PIU, and their acceptability to ADB. Any modifications that will be, or have been, made to financial reporting requirements should be communicated to ADB.
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