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Financial Management and Analysis of Projects : 7. Knowledge Management
7.7. Appraisal Checklist: Nonrevenue-Earning Project
7.7.1.1.Preparation at Headquarters
7.7.1.1.1. Meet with Division Manager and Project Officer to receive briefing
on ADB's approach to defining a nonrevenue-earning project with
respect to the country, borrower, cofinanciers, project, and appraisal
mission.
7.7.1.1.2. Study and note all positive
and negative attributes ascribed to country, sector, and similar
projects in: (i) the Country Strategy Paper to understand the role
that the project is to be designed to fulfill; (ii) relevant reports
on the country profile, institutions to be involved in, and responsible
for, the project and, where available, the proposed EA; (iii) all
reports on project identification and preparation, including forecasts
of local and foreign inflation for the country concerned; (iv) relevant
reports on country project performance; and (v) all recent reports
on ongoing projects in the sector in the country.
7.7.1.2. Initial Steps
7.7.1.2.1. Participate in or, where necessary, arrange initial meetings with
counterparts in organizations in the government concerned with the
project, including the EA.
7.7.1.2.2. Ensure that all managers
and staff to be involved in project planning and implementation
have copies of ADB's Handbook for Borrowers on Financial Management
and Financial Analysis of Investment Projects, ADB's Loan
Disbursement Handbook, and ADB's Procurement Handbook.
7.7.1.2.3. Advise on the availability
of the web-based Financial Management Guidelines.
7.7.1.3. Institutional Environment
7.7.1.3.1. Confirm/modify information obtained through readings (see paragraph 7.7.1.1.2 above).
7.7.1.3.2. Determine current organizational and management linkages of central government, state government (where applicable), and sector institutions to be involved in financial aspects of project design, development, implementation, and operation.
7.7.1.3.3. Determine current and/or proposed organizational and financial aspects of the management structure of the existing or proposed EA to be involved in project design, development, implementation, and operation.
7.7.1.3.4. Understand the country's financial sector, the role of the central bank and the banking system, and their potential application to/impact on the project.
7.7.1.3.5. Determine the capability, capacity, and current performance of the accounting and auditing profession in the country, particularly as they will impact on the project.
7.7.1.3.6. Determine the capability, capacity, and current performance of the government audit service, particularly as they will impact on the project.
7.7.1.3.7. Determine the quality of accounting and bookkeeping capability, and training in the existing or proposed EA.
7.7.1.3.8. Determine the capability of the financial manager(s) designated to be responsible for the project.
7.7.1.3.9. Make recommendations for modifications to organizational structures, managements, staffs and training necessary to support the project-share with Project Officer-and, where necessary, prepare an institutional appraisal of the EA to support upgrading of institutional performance.
7.7.1.4. Financial Management Systems
7.7.1.4.1. Taking into account, sections 7.7.1.3.3-7.7.1.3.9,
where there exists an ongoing financial management system, accounting
and bookkeeping systems, computer/data processing systems, and an
internal control environment and internal control systems to support
the project, form a judgment on the acceptability, or otherwise,
of these systems. Examine the following systems to the extent that
they are likely to be necessary to support the project:
Planning
and budgeting records
Payroll including HR records
Accounts payable
Accounts receivable
Taxes and duties
Inventories
Project accounting records
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Ledgers
and journal systems
Bank accounts and reconciliations
Equity records
Subsidies received
Grants/donations records
Loans received and repayments
Loans advanced |
Cash
management
Asset records
Internal controls and internal audit
Periodic and annual financial statements
External auditors' reports and opinions
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7.7.1.4.2. On the basis of examination
in 7.7.1.4.1, determine the nature and
form of the accounting standards in use and their likely acceptability
to ADB. In the event that they would not be acceptable, define ADB's
requirements to counterparts of the EA and the borrower.
7.7.1.4.3. On the basis of examination
in 7.7.1.4.1, determine the nature and
form of the auditing standards in use and their likely acceptability
to ADB. In the event that they would not be acceptable, define ADB's
requirements to counterparts of the EA and the borrower.
7.7.1.4.4. In the absence of any of
the system elements set out in 7.7.1.4.1,
define new or additional system requirements necessary to support
the project and advise a timetable to counterparts for their introduction
and full operation, including necessary staff additions and training.
7.7.1.4.5.
Review and, where necessary, complete the FM Assessment Questionnaire
(FMAQ). Discuss and agree project steps and process with counterparts.
Prepare a preliminary Financial Management Internal Control and
Risk Assessment (FMICRA). Prepare a draft Financial Management Assessment
Report or update the existing Financial Management Assessment Report,
if required.
7.7.1.5. Definition of Project Cost Requirements
7.7.1.5.1. Review with counterparts and consultants responsible for project
design/preparation, the project description and specifications documents
to understand the likely project components and their related cost
elements.
7.7.1.5.2. Although this project is
proposed as nonrevenue-earning, review with the Project Officer
the possibility of introducing a tariff and charges as part of project
design, for meeting all or any critical part of the costs of producing
products/outputs/sales, etc., ensuring that such a tariff and charges
would encourage cost savings that could be proposed as part of the
project and meet forecast inflationary factors.
7.7.1.5.3. Where available, use COSTAB
software to compile all project costs and procurement documentation.
7.7.1.5.4. Review with counterparts
and consultants responsible for project design/preparation the project
cost table for comprehensiveness, adequacy of structure/descriptions
of base cost line items, including annual foreign and local costs,
and annual/periodic expenditures including financial charges during
development, where applicable. Ensure that taxes and duties are
clearly defined and capable of being measured for exclusion from
ADB financing.
7.7.1.5.5. Prepare or obtain a country/sector
disbursement profile to judge the likely accuracy of the forecasts
of proposed expenditures and ADB disbursements.
7.7.1.5.6. Examine the price contingencies
for accuracy with respect to local and foreign costs, including
application of appropriate rates of local and foreign inflation.
7.7.1.5.7. Examine the physical contingencies
for accuracy with respect to appropriate allowances as prescribed.
7.7.1.5.8. Discuss with Project Officer
and, where appropriate, with counterparts, the Financing Plan and
disbursement profile to determine the total financing requirements,
the amount and timing of receipt of each input of funds requirements,
the proposed amount of ADB's proposed total loan/credit proceeds,
of receipts from cofinanciers, and from counterpart funds.
7.7.1.6. Preparation of Financial Projections and Draft RRP
7.7.1.6.1.
Determine forecast annual operating
costs of the EA that is to implement the project only, and incorporate
forecast inflation.
7.7.1.6.2. Using the information from
7.7.1.5.3-7.7.1.5.8,
prepare projected combined annual income statementfor the project
period.
7.7.1.6.3. Using the information from
7.7.1.5.3-7.7.1.5.8,
compile the FIRR, with appropriate financial performance indicators
for the project and, where appropriate, the EA. Discuss proposed
indicators with Project Officer and counterparts, explaining logic
of selection and methods of calculation.
7.7.1.6.4. With Project Officer, explain
in detail to counterparts the method of compilation and the forecast
results of all financial statements at all appropriate levels of
concerned institutions and managements with the objective of reaching
agreement on the Project Cost Table, the financing plan, the financial
projections and any tariffs and charges proposed.
7.7.1.6.5. With the Project Officer,
meet with cofinanciers at mutually agreed locations (whenever possible,
in the presence of counterparts) to explain the method of compilation
and the forecast results of all financial statements at all appropriate
levels of concerned institutions and managements with the objective
of reaching agreement on the, Project Cost Table, the financing
plan, the financial projections, performance indicators, and any
tariffs and charges proposed.
7.7.1.6.6. Draft the section of the
Aide Memoire relating to all financial aspects of the project and
discuss with Project Officer. Make any agreed amendments for presentation
of complete Aide Memoire to counterparts at appropriate levels.
7.7.1.6.7. Draft paragraphs for inclusion
in the financial section of the RRP, and prepare financial appendixes
to attach to the RRP. Review with the Project Officer.
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7.6.11. Assurances | Next
7.8. Appraisal Checklist: Revenue-Earning Project |
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