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Financial Management and Analysis of Projects : 5. Reporting and Auditing : 5.3. Financial Reporting
5.3.3. Accounting Statements and Financial Reports5.3.3.1. The following table summarizes the financial reporting requirements for projects and EAs/PIUs. While the reporting requirements for revenue-earning projects and EAs/PIUs are uniform, those for Nonrevenue-earning projects and EAs/PIUs are not.5.3.3.2. The most significant difference among the financial reports of nonrevenue-earning projects and EAs/PIUs depends on whether entities use the accrual or the cash basis of accounting. Under the cash basis of accounting, nonfinancial assets (for instance, fixed assets, receivables, inventories) will not be systematically recorded. Consequently, the information that is necessary to prepare Income Statements and Balance Sheets will not be available; instead, Statements of Cash Receipts and Payments will be prepared. Where accrual accounting is used, Statements of Income and Expenses will be prepared along with Balance Sheets. Accrual statements should always be supplemented with a Cash Flow Statement. While many ADB DMCs have signaled their intention to adopt the accrual basis of accounting, this will take many years. However, nonrevenue-earning entities in some countries that have historically used the Soviet Accounting System (e.g., Uzbekistan), may prepare accrual-based financial statements. 5.3.3.3. The purpose and format of each accounting statement, which is listed in the following table, is described in the following subsections. Accounting Statements and Financial Reports
Statement of Accounting or Financial Policies5.3.3.4. As discussed in section 5.2.3, and irrespective of whether the cash or accrual basis of accounting is used, a clear statement of the accounting or financial policies that underlie the accounting statements must be provided.Statement of Income (or Cash Receipts)5.3.3.5. Shows the year's complete financial information, and cumulative data from project start-up to date. Where the cash basis of accounting is followed, the opening and closing cash balances should be shown. ADB financing should be subdivided as follows when ADB disburses via SOE procedures: (i) by expenses category in the loan agreement, RRP or revisions thereto; (ii) disbursements via SOE; and (iii) other methods.Statement of Expenses (or Cash Payments)5.3.3.6. Shows the year's financial information, and cumulative totals from project start-up to the current date. Where the accrual basis of accounting is used, this statement will include noncash items, such as depreciation.Cash Flow Statement5.3.3.7. The Cash Flow (or project funds) Statement should include:
Imprest Account Statement5.3.3.8. This statement summarizes ADB's advances and replenishments, less amounts withdrawn by the project entity, showing the remaining cash balance in the Imprest Account.5.3.3.9. Bank statements should be provided by each local bank that is selected to operate each imprest account, where these are in use for the project. Each bank statement should summarize the current year's advances and replenishments, interest earned on balances; less withdrawals for project expenditures. The first account is used to receive money from ADB for the credit of the "Project Imprest Account", and the second may be used by the project for local operating purposes ("Second Generation Imprest Account"). The Project Imprest Account is to be used to replenish the SGIA, when this is in use. It will be necessary to attach "Reconciliation Statements" to reflect in-transit items between ADB and the Imprest Account and between Imprest Account and the SGIA. (Replenishment made by ADB not yet received; and reimbursements to the SGIA from the Imprest Account not yet received by it). The third financial statement is a detailed statement of transactions of the Imprest Account's operating account(s). This is to be generated by the EA, where the Imprest Account is used to make direct payments in local and foreign currency. Statement of Expenditures5.3.3.10. The Statement of Expenditures (SOE) procedure is an ADB reimbursement procedure that does not require submission of supporting documentation. The SOE form should include certification, confirming existence of registration for mobilization and secured advances/deposits. The ADB Loan Disbursement Handbook describes the use of this method and associated reporting and auditing procedures.Income Statement and Balance Sheet5.3.3.11. These statements may not be necessary where cash accounting is used. These statements are described in section 4.3.4 (Preparing Financial Tables).Notes to Financial Statements5.3.3.12. The EA should provide Notes to the financial statements. These should be explanatory notes and/or supplementary financial statements that analyze or qualify important heads of account, or that present the information in conformity with generally accepted accounting practices of the country.5.3.3.13. For example, if Statements are prepared on a "cash basis", information may be required from the EA to convert key items to an "obligation" or "accrual" basis and ADB, therefore, may seek details relating to obligations (unpaid commitments and accounts receivable) in supplementary statements. Similarly, details may also be required to distinguish between transactions relating to capital (development) investments and operating expenditures. Other Information5.3.3.14. ADB wishes to receive financial reports on a project that illustrate both performance in the fiscal year under review and accumulated transactions from project commencement particularly with regard to sources of funds and expenditures for assets and inventories.5.3.3.15. Reporting practices in some government entities require only disclosure of annual financial transactions against annual budget authorizations. Therefore, to monitor performance from start-up throughout the project's implementation period, the reported results of project transactions and financial performance data for previous fiscal years should be included as memorandum entries in a current fiscal year's Statement of Income (or Cash Receipts) and Statement of Expenses (or Cash Payments). 5.3.3.16. Alternatively, the reported results of prior years may be included in the annual financial statements as of the last day of the reporting fiscal year, that summarizes and classifies all receipts and expenditures relating to the project from its commencement. In addition, the accumulated sources or provision of funds for the project in the ratio agreed upon between the borrower and ADB should be disclosed in the Notes to the financial statements.
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