Board of Directors

The Board has standing committees for audit, budget review, compliance review, and development effectiveness. In 2006, the Ethics Committee was created. Membership of the committees is shown in Appendix 6.

Audit Committee. The committee helps the Board oversee ADB’s financial reporting and audits, including internal controls. The committee operated under terms of reference that had been expanded in the previous year to include procurement policies and procedures in its review of risk management.

The committee was satisfied that all audits were appropriate and in accordance with ADB’s approved policies and applicable auditing standards. The committee reviewed quarterly financial statements and the annual management discussion and analysis, and considered applying key financial and accounting systems using information technology.

The committee made several recommendations, including to establish an integrated risk management framework; monitor prepayments and any associated possible impact on operating income; review progress in implementing cost accounting systems and cost information systems in ADB; and continue to periodically monitor the implementation of accounting standards, including Financial Accounting Standard 133 covering derivative instruments.

The committee met 10 times.

Budget Review Committee. The committee discussed the President’s planning directions in preparation for the work program and budget framework (2007–2009) and exchanged views with the vice presidents on its key thrusts.

The committee noted that the work program and budget framework is conceived as a business plan to allow implementation of the second medium-term strategy, ADB’s commitments to the Paris Declaration on Aid Effectiveness, and managing for development results. The committee further noted ADB’s efforts to scale up development effectiveness and improve institutional efficiency. It reviewed the implementation status of the enhanced separation program, discussed the sequestration and redeployment of professional staff positions, and noted the realignment of regional departments as an attempt to balance resources among departments.

At midyear, the committee reviewed the operations program and budget utilization status, including ADB-wide efficiency measures supporting the second medium-term strategy. The committee was also briefed about the price and volume aspects of the 2007 budget; cost implications of new policies, strategies, and initiatives; and the budget carryover concept for implementation, beginning from the 2007 budget.

The committee discussed the draft 2007 budget and noted the need to provide an appropriate level of staff and budgetary resources to support ADB’s priorities. The committee made recommendations to ensure the effective use of budgetary resources through strengthened linkage between performance and budgetary allocations. The committee recommended approval of ADB’s 2007 budgets for internal administrative expenses and annual capital expenditures as well as the 2007 budget of the ADB Institute.

The committee met seven times.

Compliance Review Committee. The committee, set up under the ADB 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.

The committee discussed the panel’s draft monitoring reports on the implementation of the Board-approved remedial actions in the Southern Transport Development Project in Sri Lanka and the Chasma Right Bank Irrigation Project (Stage III) in Pakistan. The committee met informally with Management to be briefed on the progress in implementing the remedial actions. The committee checked on the status of implementation as reported by the panel in its monitoring reports and discussed whether Management’s actions had brought the project into compliance.

The committee met three times.

Development Effectiveness Committee. The committee continued to shift the focus of its review work from individual operation evaluations to broader evaluations at the country, sector, thematic, and policy levels. The committee reviewed nine independent evaluation reports by the Operations Evaluation Department, including three country program evaluations. The committee is encouraged by increasing referrals to country assistance program evaluation findings in the design of new country strategies.

The committee reviewed Management’s annual reports on the implementation of the poverty reduction strategy and progress in managing for development results.

The committee ensured that Management adequately considered key recommendations in the evaluation reports of the Operations Evaluation Department and that these resulted in operational actions when Management accepted them. Special attention was paid to monitoring implementation of the action plan to improve loan and technical assistance portfolio performance that Management had initiated at the end of 2005 in response to the committee’s recommendation. The committee encouraged the Operations Evaluation Department to make findings more accessible and to disseminate them more widely. The committee continued to search for additional ways of strengthening Board–Management dialogue on portfolio performance and quality assurance.

The committee met 11 times.

Ethics Committee. The Board established the committee to address matters of ethics that may arise under the Code of Conduct adopted by the Board in September 2006. The code provisions apply to all Board members (directors, alternate directors, and temporary alternate directors) and to the President.

The committee is responsible for advising directors, alternate directors, or the President when they request guidance on actual or potential conflicts of interest or other ethical issues concerning themselves. The committee also considers any allegations of misconduct against directors, alternate directors, or the President that relate to the performance of their duties. It recommends appropriate action to the Board.

The committee did not meet in 2006.

The committee noted that the work program and budget framework is conceived as a business plan to allow implementation of the second medium-term strategy

The Development Effectiveness Committee continued to shift the focus of its review work from individual operation evaluations to broader evaluations at the country, sector, thematic, and policy levels