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p. 4 of 6 BACK | NEXT Introduction New Approach for Cost Sharing and Expenditure Eligibility Proposed Cost Sharing and Expenditure Eligibility Rules Fiduciary Oversight Implementation Arrangements and Resource Implications Recommendations

Cost Sharing and Eligibility of Expenditures for Asian Development Bank Financing: A New Approach

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Fiduciary Oversight

43. The cost sharing and expenditure eligibility changes call for more flexible disbursement arrangements. However, ADB and its development partners should not decrease their normal type and level of internal and external controls. On the contrary, greater attention to fiduciary oversight is an important feature of the new policy framework.

44. The process would start with upfront assessments of country systems. At the project level, the DMC and the executing agencies also would be required to provide assurances to ADB that financed expenditures are strictly for the purposes of the project. ADB country teams would evaluate the DMCs’ financial management systems (including audit capacity) generally at the CSP stage.

45. ADB staff still would be required to assess in detail the financial management and procurement capacities of project implementing agencies. This work would be part of the due diligence process during project preparation. In particular, auditing arrangements, and agreement that audited financial statements and project accounts are provided in a timely fashion, will be reviewed. Staff also would be required to monitor on a regular basis the financial management and procurement capacities of the agencies during project implementation or execution. Further, reviews by external auditors and ADB staff would remain a key feature of the monitoring process. These reviews would focus on the appropriateness of the expenditures, as opposed to the current practice of reviewing in detail expenditure eligibility.

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