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Governing Structures

Board Committees

Audit Committee

The Audit Committee identified and reviewed a comprehensive range of audit issues within its mandate, representing a broad cross-section of ADB operations and activities, including the quarterly financial statements, which are analyzed closely to review the financial soundness of ADB, and to keep track of the net income position. It continued to monitor implementation of the Financial Accounting Standard, FAS 133, covering accounting principles and practices in relation to derivative instruments; the effectiveness and efficiency of control procedures, including backup procedures as part of the Business Continuity Plan; and measures being taken to prevent fraud and corruption.

The committee, together with relevant ADB departments, finalized a review of its terms of reference, bringing them in line with those of other multilateral development banks. The role of the committee was made more specific with the inclusion of risk management, and procurement policies and procedures as part of the review of internal controls. The committee supported the initiative of the President at the Istanbul Annual Meeting of establishing an independent Risk Management Unit.

Budget Review Committee

The Budget Review Committee discussed the Enhanced Separation Program, later approved by the Board. It clarified how the program will provide flexibility to adjust human resources in line with the Human Resources Strategy.

The committee also discussed and amended its terms of reference to reflect the participation of Vice Presidents in committee meetings as necessary, allowing the discussion of strategic directions before the finalization of the work program and budget framework. The committee also looked at efforts and progress to improve cost information. It noted that the work program and budget framework should be viewed as an ADB business plan to enhance effectiveness, with inclusion of a stronger results framework.

The committee reviewed the special capital expenditure proposal on a business continuity facility, later approved by the Board, to serve as a backup work facility during business interruptions at headquarters. It also recommended approval of ADB’s 2006 budgets for internal administrative expenses and annual capital expenditures. The guiding principle of the budget formulation was zero real growth.

During the deliberations on the 2006 budgets, the committee requested a review of the overall lending program projections in the draft budget document, and these were subsequently revised upward. In response, the committee was provided with an update of the projected programs on regular operations, ADF grants, multitranche financing facility, and emergency assistance. The committee expressed concern about the impact of a zero real growth budget on the scaling up of operations, implementation of new initiatives, and the medium-term strategy. The committee was informed that this would not restrict work program objectives and targets, which are fully resourced.

The committee reviewed the work program of the ADB Institute, proposed a 2006 budget of $14.2 million, and recommended its approval.

Compliance Review Committee

The Compliance Review Committee, set up under the Accountability Mechanism, clears the Compliance Review Panel’s proposed terms of reference and time frame for conducting compliance reviews, and reviews the panel’s draft monitoring reports on implementation of remedial actions approved by the Board before the panel finalizes them. In 2005, the committee discussed the panel’s proposed terms of reference for conducting a compliance review of the request under the Southern Transport Development Project in Sri Lanka and three draft monitoring reports on the implementation of remedial actions on the inspection request on the Chashma Right Bank Irrigation Project (Stage III). The terms of reference and monitoring reports are posted on the panel’s website (www.compliance.adb.org).

Development Effectiveness Committee

To ensure the independence of ADB’s operations evaluation process and reports, on 1 January 2004, the Operations Evaluation Department began reporting directly to the Board of Directors through its Development Effectiveness Committee.

Evolving areas of concern to the committee include how evaluation recommendations that Management accepts are turned into action, with an eye to making improvements. They also include how impact is monitored, and how the department could play a more strategic role.

All evaluation reports are posted on ADB’s website upon circulation to the Board and Management, in accordance with the Public Communications Policy. Management’s responses to the reports and recommendations, and the chair’s summaries of committee discussions of the department’s major reports are also posted when available.

The committee has changed the focus of its reviews and discussions from individual project evaluations to broader evaluations at the country, sector, thematic, and policy levels. Accordingly, in 2005, the committee meeting agenda included only such broader studies, none at the project level. For the first time, the committee recommended that Management formulate a comprehensive action plan to address key strategic issues identified in the annual report on portfolio performance. Management responded positively to the recommendation and committed to monitoring and reporting to the Board on such an action plan.

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