Lac Ipresentation


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  • Lac Ipresentation

    1. 1. Loan Administration Change Initiative (LACI): Improving Development Effectiveness through Better Financial Management Presentation to Agencies Implementing World Bank Financed Projects
    2. 2. Purpose <ul><li>To describe: </li></ul><ul><ul><li>The Loan Administration Change Initiative (LACI) </li></ul></ul><ul><ul><li>LACI Implementation Procedures </li></ul></ul><ul><ul><li>LACI Disbursement Procedures </li></ul></ul>
    3. 3. Agenda <ul><li>1. Presentation </li></ul><ul><li>2. Questions and answers </li></ul>
    4. 4. What is LACI? Procurement & Contract Management <ul><li>Improved project </li></ul><ul><li>management & </li></ul><ul><li>monitoring </li></ul><ul><li>Improved development </li></ul><ul><li>effectiveness. </li></ul><ul><li>Simplified Disbursement </li></ul><ul><li>procedures. </li></ul>Project Financial Management Physical Progress Disbursement
    5. 5. Background <ul><li>Fundamentally re-examining whether the Disbursement/Repayment Process makes sense in today’s changing environment </li></ul><ul><li>Responding to client needs (Borrowers, Task Managers) </li></ul><ul><li>Recognition that the Disbursement Function can add value throughout the Lending Process rather than only at the back end </li></ul><ul><li>Recognition that project financial accountability needs strengthening </li></ul>Why was this initiative started?
    6. 6. LACI Project Overview Phase I Phase II Phase III Stakeholder Analysis Current State Analysis Vision Creation Process Design Phase IV Pilot Testing & Evaluation APR ‘96 MAY JUN JUL AUG SEP OCT NOV DEC JAN..……...…….. DEC ‘97 Phase V Transition and Implementation
    7. 7. <ul><li>Ensure that projects have proper financial management systems, improve project implementation, ensure best use of resources </li></ul><ul><li>Eliminate detailed disbursement document preparation and review to reduce processing time </li></ul><ul><li>Link project progress and physical performance to quarterly disbursements to ensure effective project monitoring and funding </li></ul>LACI Guiding Principles
    8. 8. LACI Process Overview Project Design Assess Borrower/Project Financial Management System <ul><li>as required: </li></ul><ul><li>agree on technical assistance </li></ul><ul><li>hire financial management staff </li></ul>Review Borrower Financial Management System (FMS) and Reporting/Monitoring Mechanisms Assess Borrower’s Project FMS A Determine strength of FMS Understand Project Develop plan to ensure Borrower creates FMS for the project projects with strong financial management systems projects with weaker financial management systems
    9. 9. LACI Process Overview Yes Project Implementation no Monitor Project Financial & Physical Implementation Disburse to Special Account A Quarterly Borrower submission and Bank review of Project Management Report Determine Reporting/Monitoring Requirements are met Borrower and Bank coordinate to resolve impediment projects with strong financial management systems
    10. 10. Attributes of a Strong Financial Management System Loan Administration Change Initiative (LACI) Internal Control Project Financial Management Indicators Audit Arrangements Reports that Link Financial and Physical Progress -corresponds to agreed format/applicable standards financial information: -is relevant to decision makers -is timely -- submission dates set and adhered to -is accurate and reliable -is independently audited in a timely manner -includes explanation of significant variances there is appropriate segregation of duties and responsibilities there are clear, written procedures and responsibilities that are adhered to there is a critical mass of sufficient qualified/trained staff and supervisors there is adequate: -asset control -control over bank and cash accounts - maintenance and easily available access to supporting documents  auditors are: -capable and experienced with respect to specific project -independent of the entity/project audited -competent and follow acceptable auditing standards/practices      Project Accounting Project Financial Management and Other Related Staffing
    11. 11. Quarterly Project Management Report (to support withdrawal application) The Bank will provide example reporting modules and create an enabling environment for receipt of electronic transactions  minimum requirements: -sources and uses of funds statement -expenditures by category and project activity statements - special account reconciliation -expenditure forecast  Project Progress Report Financial Statements Procurement Management Report -procurement status report -contract commitment/expenditure report, including source of supply data for contracts above the prior review threshold, as well as post-review contracts above $100,000. comparison of actual physical and financial progress vs. forecasts 
    12. 12. LACI Implementation Procedures <ul><li>Implementation Approach </li></ul><ul><li>Sound financial accounting and reporting requirements are absolutely necessary before project implementation. </li></ul><ul><li>LACI will be implemented in a flexible manner, taking into account the borrower’s accounting, financial management and reporting capability. </li></ul><ul><li>The Bank will seek agreement of the country when applying the new disbursement methodology. </li></ul><ul><li>Strong partnership between Borrowers and the Bank </li></ul>
    13. 13. LACI Implementation Procedures <ul><li>Selection of LACI Projects </li></ul><ul><ul><li>All new projects appraised from July 1, 1998 </li></ul></ul><ul><ul><li>All existing projects under three years old as of July 1, 1998, and any other projects requested by the borrower </li></ul></ul>
    14. 14. LACI Implementation Procedures <ul><li>Role of the Borrower </li></ul><ul><li>Maintain appropriate level of staffing and project organizational structure </li></ul><ul><li>Maintain appropriate financial management and reporting </li></ul><ul><ul><li>to generate timely Project Management Reports (PMRs) </li></ul></ul><ul><ul><li>to produce acceptable annual audited financial statements </li></ul></ul><ul><li>Ensure timely disbursement of counterpart funding to implementing agencies </li></ul><ul><li>Arrange timely appointment of an independent auditor under appropriate TOR. </li></ul>
    15. 15. LACI Implementation Procedures Role of Bank <ul><li>Role of Bank Departments </li></ul><ul><li>Project Certification Process for Board Presentations </li></ul><ul><li>Conversion of Existing Projects </li></ul><ul><li>PMR Disbursement Procedures </li></ul><ul><li>Special Account Procedures under LACI </li></ul><ul><li>Payment Approval Process under LACI </li></ul>
    16. 16. Role of the Bank Departments <ul><li>The fiduciary responsibilities for LACI implementation in the Bank are shared as follows: </li></ul><ul><li>Regional Operations will ensure that projects have the required financial management systems and staff in place before Board approval and throughout implementation. </li></ul><ul><li>Loan Department will ensure consistent project financial management and required LACI documentation exist across the regions. </li></ul><ul><li>The Legal Department will ensure the inclusion of necessary provisions in the legal agreements regarding financial management. </li></ul>
    17. 17. Project Certification Process for Board Presentation <ul><li>FMS-OPR assesses and certifies the adequacy of the project financial management system. </li></ul><ul><li>Procurement Specialist assesses and certifies the adequacy of procurement management capacity </li></ul><ul><li>TTL endorses the assessment of FMS and PS and certifies project for LACI compliance. </li></ul><ul><li>PMR format is agreed upon during appraisal and recorded in the minutes of negotiation. </li></ul><ul><li>LACI requirements are reflected in the Legal Document. </li></ul><ul><li>Loan Department staff review and sign off. </li></ul>
    18. 18. Conversion of Existing Projects <ul><li>In consultation with the borrower, each Country Department will have the primary responsibility for the portfolio review to determine projects that will be converted </li></ul><ul><li>The certification procedure for new projects will be followed </li></ul><ul><li>The Task Team Leader will initiate an amendment </li></ul>
    19. 19. PMR Disbursement Procedures <ul><li>PMR-based disbursement procedures will be adopted for implementation of LACI compliant projects </li></ul><ul><li>Submission of Quarterly PMRs of the quarter within 45 days after the end of the quarter </li></ul><ul><li>Disbursement will be made exclusively via the project Special Account </li></ul><ul><li>Direct payment and special commitment procedures may be used in certain cases </li></ul><ul><li>For non-LACI projects, existing disbursement procedures will continue to apply </li></ul>
    20. 20. Special Account Procedures under LACI <ul><li>A ceiling of 20 percent of the loan amount will normally be specified in the Special Account Schedule to the loan agreement </li></ul><ul><li>The first advance will reflect the physical work program and cash flow forecast of actual project needs normally for the first six months </li></ul><ul><li>Application for subsequent payment to the Special Account will be supported by PMRs, reflecting actual project progress and cash forecast </li></ul>
    21. 21. Payment Approval Process under LACI <ul><li>The Withdrawal Application and the supporting PMRs will be reviewed by </li></ul><ul><li>the Task Team </li></ul><ul><li>FMS-OPR will recommend the amount to be paid to the Special Account; Procurement Specialist and Task Team Leader will endorse the recommendation </li></ul><ul><li>Final approval and release of payment will be made by FMS-LOA/ DO </li></ul><ul><li>LOA will advise the borrower reasons for not approving or reducing the amount applied for and request remedial action </li></ul><ul><li>On an exceptional basis, the Bank will consider releasing payment monthly or bi-monthly </li></ul>-