Financial Management Financial Management in projects involving in projects involving

Output-based AidOutput-based Aid

Xavier Chauvot de BeauchêneGPOBA

SDN WeekWashington, DCFebruary 27, 2008

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What differs in projects What differs in projects involving OBA?involving OBA?

Same requirements on Financial management (OP10.02):

• Assessment of Financial Management Arrangements

• Interim Financial Reporting

• Audited Financial Statements

Same objective: Borrowers maintains acceptable financial arrangements that provide assurance that the proceeds of the Loan are used for the purpose for which the Loan was granted.

So…where are the differences?

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Projects involving OBA are Projects involving OBA are differentdifferent

Implementing entity differ: OBA linked to Service provider (SP), directly of through a fiduciary agent;Service Provider can be private, public or NGO/CBO (working under private principles), or governments.

• Risk allocation differ:– OBA gives comfort on use of funds:

Subsidy accounts for a portion of the cost of a pre-financed output.– Economy and efficiency reviewed ex-ante, procurement, unit

costs reviews.

• Linkage to expenditures differ: Ouputs usually not tied to one contract, but the result of a number of goods and/or works and/or CS contracts. Unit costs monitoring onerous.Monitoring in FM system linked to output or beneficiary.

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Audited Financial Audited Financial StatementsStatements

Annual audit, report provided within 6 months:

• Accounting standards…• Auditing standards…• Scope of audit and auditor…

…Have to be acceptable to the Bank

Exemption possible if borrower has more cost effective mechanisms providing the Bank with equivalent assurance on the appropriate use of loan proceeds, on exceptional basis.

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Interim Financial Reporting Interim Financial Reporting (IFR)(IFR)

• OP10.02: Format, content, periodicity and due date acceptable to the Bank.

• IFRs tailor-made to the project: depend on number of service providers; involvement of a fiduciary agent.

• Sources and uses of funds organized around outputs• Statement of Expenses (SOEs) indicate number of

outputs and subsidy per output• Basis for output verification and disbursement.

• Used as a management tool: verified quantity of outputs, unit costs monitoring (subsidy scheme), total expenditures, and amounts eligible for Bank financing.

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Current Quarter Year to Date

Cumulative to Date

Sources of FundsWorld BankTOTAL

Less:Uses of Fund

Installation of Water Service ConnectionTOTAL

Surplus/ Deficit

Next 6 months

Actual

IFR1- Report on Sources and Uses of FundsFor the quarter ending/ period

in USD

Forecast

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IFR2- STATEMENT OF EXPENSES

To: World Bank Loan Department

Executing Agency: East Meets West Foundation

Trimester from: [date] Disbursement category: **

Number of connections

during the period

Service start date

Financial cost per connection

*

Subsidy amount per connection

(USD) **

Percentage of subsidy:

80% / 20% **

1. 1 DanangHoa Vang

GGGG 20.00 XXXXX 125.00 100.00 80% 1,600.00

2 100.00 0.00

3 100.00 0.00

4 100.00 0.00

20.00 1,600.00

** As defined in the Grant Agreement

Confirmation by the Operator:

- - - - - - - - - -- - - - - - - - - - - - - - -- - -- Date: - - - - - - - -- - - - - - - - - - - -

NAME (authorized representative):

TITLE:

TOTAL:

I hereby certify that, in accordance with the provisions of the Grant Agreement dated [insert date], this quarterly request for disbursement has to be sent for review and clearance to the Task Team Leader at The World Bank, which is acting as Administrator of the Global Partnership on Output-based Aid. I also certify that the information provided on this invoice is accurately presenting the number of eligible water connections made during the aforementioned period and the number of eligible connections which have been in service for at least six months. I also understand that the Word Bank Task Team Leader might request that the conclusion of an independant verification agent be received prior to disbursing the funds, in accordance with the provisions of the Operations Manual. This request will be officially submitted to the Loan Department of the World Bank in Manilla only after official clearance of the World Bank Task Team Leader has been received, and will reflect the amounts that have been found acceptable to the World Bank for the given quarter.

No. CommuneSubsidy Amount requested for the

periodDistrictProvince

* Cumulating Investment Costs (EMWF Line Item Cost of Construction + Implementation Cost + Financial Cost) and Financial Contribution from the Beneficiary (i.e. excluding Estimated Value of In-Kind Contribution and Estimated Value of Land Provided).

Project ID

Number of eligible GPOBA connections submitted for payment during the period

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Assessment of FM Assessment of FM arrangementsarrangements

• Assess adequacy of Borrower’s system of accounting, reporting, auditing and internal controls

• Assess Borrower’s capacity• Identify risks propose mitigation measures…

…to ensure that funds are used economically and efficiency for the purpose intended.

• Financial Management Questionnaire, adapted to OBA.

• Financial Management Guidance Note being prepared.