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p. 11 of 11 BACK | NEXT 2002 in Review: Board of Directors' Report Reconstructing nations Supporting regional cooperation Reorganizing internally Adopting new policies and procedures Reviewing existing policies Broadening development partnerships Undertaking its Work Board committees

Annual Report 2002

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Board committees

The Board of Directors had four standing committees and one working committee in 2002. For membership, see Appendix 5.

Audit Committee

The Committee continued to examine the adequacy of ADB’s internal controls and its internal and external audits. Pursuing its main focus of the previous year, the Committee monitored in 2002 the implementation of the newly adopted international accounting standards (Financial Accounting Standards [FAS] 133) and their potential impact on ADB’s financial management. In particular, the Committee examined ADB’s practice of parallel reporting—with one report following the FAS 133 and another, prepared simultaneously, following the presentation of ADB’s financial statements with reference both to
pre-FAS 133 reporting practices and to the new current-value reporting practice (see the Management’s Discussion and Analysis chapter). Given the difficulties experienced in 2002 in accounting and reporting globally, the Committee emphasized the importance of monitoring the reporting practices used. The Committee also noted the need for the multilateral development banks (MDBs) to cooperate closely among themselves, and the importance of engaging the professional partnership of the independent auditors in this complex issue.

A second major focus in 2002 was the further development of an integrated and independent institutional risk management capability in ADB, made possible by an initiative of Management, the independent auditors, and the Audit Committee. The Committee continued to monitor the implementation of new initiatives to improve internal and external controls, specifically but not exclusively through the Integrated Financial Management and Human Resource Management Information System (INTEGRA), the integrated computerized control system that became operational in 2002. The Committee also reviewed and endorsed the 2002 work program of the Office of the General Auditor (OGA), noting the successful completion of a peer review by the European Bank for Reconstruction and Development; reviewed and endorsed the annual report of the Anticorruption Unit of the OGA, citing the close coordination with other MDBs; and reviewed the Audit Recommendations Implementation Report, noting the high percentage of audits directly or indirectly related to the issue of risk management either in operations or in financial management.

Budget Review Committee

The Committee met in May to review the implementation of INTEGRA and future directions of the Information Systems and Technology Strategy for ADB. In November, it reviewed Management’s 2002 work accomplishments, and 2003 budget proposal and work plans of departments and offices.

At the May meeting, the Committee was informed of the removal of the “operations” module from the original scope of INTEGRA and urged careful consideration of the lessons learned from this. The Committee also provided its views on the future directions of ICT in ADB.

During budget deliberations in November, the Committee requested information on the reorganization and its effectiveness. Concerned about the transitional impact on operations and on the budget, it suggested that a progress review clarify and refine the roles of regional departments and the Regional and Sustainable Development Department. The Committee was advised that new business processes had streamlined processing of new projects and project administration.

On ADB strategies and policies, the Committee expressed the view that all new policies should include an assessment of cost implications to allow for better measurement of resource requirements and ensure that new policy mandates are adequately funded and staffed.

The Committee noted a need for prioritizing the knowledge networks and thematic/sector committees (see the Operational Priorities and Performance chapter), for being selective in forming new committees, and for minimizing disruption of the operational departments. The Committee noted the importance of knowledge management for development effectiveness. It suggested that coordination with bilateral and multilateral development partners be improved to avoid duplication of work and to ensure more effective use of ADB’s limited technical assistance resources.

On the regional departments, the Committee recommended a review of the loan classification system to ensure that it accurately reflects poverty reduction impact, including that of infrastructure projects; increased cooperation with other MDBs; and the need to address the issue of work distribution between and within the regional departments. The Committee supported an expansion of ADB’s regional cooperation activities.

On the Resident Mission Policy, the Committee emphasized the need for a clearer relationship between the resident and regional missions and the operations coordination division, and fuller integration of the missions into their respective regional departments; more vigorous deployment of staff and budgetary resources to the missions; more interaction among missions in the same region; increased use of national officers/local experts; and strengthened external relations and outreach programs.

The Committee expressed reservation about the expansion of the Private Sector Operations Department (PSOD) into new areas, and suggested that PSOD’s 2003 work program be trimmed, considering resource constraints. It recommended that PSOD should concentrate on helping smaller DMCs, strengthening collaboration with the regional departments and DMC governments, and developing appropriate instruments for niche markets and sectors.

On portfolio management, the Committee noted that the regional departments, Central Operations Services Office (COSO), and Operations Evaluation Department (OED) have distinct functional responsibilities for managing ADB’s portfolio. It noted COSO’s continued efforts to build DMC capacity in portfolio management by supporting procurement legislation and project accounting and financial management.

With more poverty and purpose-specific grant funds being managed by ADB, the Committee noted the need for a structured marketing strategy to attract funding agencies.

The Committee noted the increase in cofinancing in 2002 over the previous year (see the Operations chapter).
It noted the accumulation of in-house expertise on guarantees through recent credit enhancement operations and staff training. It encouraged cooperation among the Office of Cofinancing Operations (OCO), PSOD, and other departments/offices and expected better results and performance in this area.

On budget management, the Committee noted that in 2003 the Budget, Personnel and Management Systems Department (BPMSD) aims to further the link between work program and resource allocation by updating the staff time coefficient for some products and services. It recommended exercising more selectivity in work programs, eliminating low-priority work, and optimizing the use of budgetary resources in meeting urgent and unplanned requirements.

The Committee recommended approval of the budget for 2003 (see Appendix 10).

Development Effectiveness Committee

The Committee, established in December 2000, is mandated to help the Board ensure that ADB’s country strategies and programs, through its lending and knowledge products and services, achieve their desired development objectives and use ADB resources efficiently and effectively.

The Committee continued its focus on ADB’s operations evaluation program and results, as it reviewed a balanced selection of OED reports (see Box at right); examined the annual programs for project and technical assistance completion reports coordinated by COSO; and discussed OED’s Annual Review of Evaluation Activities in 2001 and Annual Report on Loan and Technical Assistance Portfolio Performance for the Period Ending 31 December 2001.

In its report on loan and technical assistance portfolio performance in 2001, the Committee noted that the proportion of projects rated unsatisfactory had decreased; a more robust project performance monitoring system had been introduced; disbursement under project loans was proceeding well; and the use of technical assistance resources was being prioritized. However, it concluded that further efforts should address delays in loan effectiveness, contract awarding under project loans, submission of audited project accounts, and technical assistance implementation.

In its report on ADB’s evaluation activities in 2001, the Committee highlighted the importance of measurable objectives for assessing development effectiveness. It noted that, although evaluation improves development effectiveness, operations can be improved only if the evaluation findings and recommendations are translated into staff guidelines. The Committee thus agreed that evaluation should become a core business process of ADB.

Inspection Committee

In 2002, the Committee held 13 formal and several informal meetings. It considered six requests for inspection during the year.

At the beginning of 2002, two requests for inspection were pending—the Samut Prakarn Wastewater Management Project in Thailand and the Southern Transport Development Project in Sri Lanka. In February, the Committee received Management’s response to the Inspection Panel’s report on its inspection of the Samut Prakarn Project. As required under the Inspection Function, the Committee submitted its recommendation on the Panel’s report and Management’s response to the Board within 14 days. The Board of Directors considered the Committee’s recommendations in March.

The Committee received four requests for inspection of the Southern Transport Development Project in Sri Lanka. The first was received in December 2001, and the other three in 2002. Each was submitted by a different group of requesters who would be affected by the project. The Committee decided that, prima facie, two of the requests were neither clearly frivolous nor clearly ineligible, and requested Management to respond to them. After consulting with a member of the Roster of Experts, the Committee determined with respect to both requests that there was insufficient basis to warrant an inspection. The Board approved the Committee’s recommendation. The Committee determined that the other two requests were ineligible under the Inspection Function and that a response from Management was not required.

In November, the Committee received a request for inspection of the Chashma Right Bank Irrigation Project in Pakistan. The Committee reviewed the request in December and decided that, prima facie, the request was neither clearly frivolous nor clearly ineligible, and requested Management to respond to it. For more on the Inspection Function, see http://www.adb.org/inspection/review.asp.

Working Group on the Annual Report

ADB’s annual reports, including its special theme chapters, reflect broad consultations between the Working Group and staff members. The Annual Report Readers’ Survey responses are also considered. The Working Group guides the structure and process. To facilitate the work of future Board working groups, the Working Group on Annual Report 2002 recommended several changes in the process and timing of inputs for future annual reports and theme chapters.

In addition, they effected structural changes in Annual Report 2002:

• An expanded Operational and Financial Overview includes more data and provides a more complete summary of the year.
• The Operational Priorities and Performance chapter, organized according to ADB’s operational themes and sectors, provides discussion of their role in meeting ADB’s overall objective of reducing poverty.
• Presentation of DMCs by regional department in the Country Reports chapter highlights DMC partnerships.
• The Knowledge and Support Activities (which replaces the Strategic Planning and Support Activities) and the Institutional Matters chapters show how the reorganization has been institutionalized.
• The Glossary attempts to harmonize terminology across ADB.
• Cross references and links to specific pages on ADB’s web site (see http://www.adb.org) are included throughout the report.
• Partnership Points, included in most chapters, reflect the many ways ADB and its development partners—governments and civil society including nongovernment organizations, multilateral and bilateral organizations, and the private sector—worked in 2002 to reduce poverty in the Asia and Pacific region.

Back Undertaking its Work	Annual Report 2002