ADB Procedures

ADB DISBURSEMENT PROCEDURES

Reference: ADB’s Loan Disbursement Handbook dated January 2007

1. Procedures for withdrawal of loan proceeds are standardized to facilitate disbursements under most loans. Disbursement procedures consist of four major types, described briefly below:

A. DIRECT PAYMENT PROCEDURE (page 24 of the Handbook)
2. This procedure is where ADB, at the borrower’s request, pays a designated beneficiary directly.
1. Requirements
(i) A signed withdrawal application (form ADB-DRP/RMP in Appendix 5) must be submitted to ADB together with a summary sheet (form DRPSS in Appendix 8) and the required supporting documents.
(ii) A separate withdrawal application is required for each different currency.
2. Supporting Documents
3. The following supporting documents must be submitted to ADB with the withdrawal application:
(i) All cases require a contract or confirmed purchase order (PO), if not submitted earlier to ADB, indicating the amount and date due;
(ii) payment of goods requires the supplier’s invoice, bill of lading, other similar documents;
(iii) payment of services requires the consultant’s claim or invoice;
(iv) payment of civil works requires the claim or invoice and a summary of work progress certified by the project engineer approved by the borrower’s authorized representative.

B. COMMITMENT PROCEDURE (page 26 of the Handbook)
4. This procedure is where ADB, at the borrower’s request, provides an irrevocable undertaking to reimburse a commercial bank for payments made or to be made to a supplier against a letter of credit (LC) financed from the loan account.
1. Requirements
(i) A signed application for issuance of commitment letter in the form ADBCL (see Appendix 6) is submitted to ADB together with a summary sheet for the commitment letter (see Appendix 9) and the required supporting documents. A separate application is required for each currency in which a commitment letter is requested.
2. Supporting Documents
5. Supporting documents to be submitted to ADB with the application for commitment letter include:
(i) a contract or confirmed PO, if not yet submitted earlier to ADB; and
(ii) two signed copies of the LC against which ADB’s commitment letter is requested.
a. Amendments to the LC
6. The borrower requests ADB’s approval of amendments to the LC as soon as the LC amendment is obtained from the LC issuing bank (see Appendix 17). Copy of the signed amendment must be attached to the request.
7. ADB communicates its approval to the nominated commercial bank and the borrower by the form shown in Appendix 18 or by authenticated SWIFT, tested telex, or a formal letter of approval.
8. ADB can allow the borrower, in urgent cases, to send its application for approval to amend the LC by fax. The message is to include loan number, commitment letter number, LC number, and nature and reason for the amendment. Copy of the LC amendment should be attached to the application.
9. The message must state that the amendment has been made by the LC issuing bank and that the application for approval of amendment of LC and a copy of the LC amendment are being airmailed to ADB.
10. Amendments to the LC for:
(i) extending the expiry date and shipping dates up to the loan closing date; and
(ii) other amendments except those mentioned in para. 8.18 need not be submitted to ADB for approval. The borrower merely informs ADB using the standard form (see Appendix 19) and submits a signed copy of the amendment. This will ensure ADB’s prompt payment of claims received from the nominated commercial bank.
b. Amendments requiring ADB’s prior approval
11. ADB’s prior approval is required for amendments to the LC involving changes such as:
(i) extension of the LC expiry date beyond the loan closing date of the loan account, as specified in the loan agreement, or otherwise extended by ADB;
(ii) change in the LC’s value or currency;
(iii) description or quantity of goods;
(iv) country of origin;
(v) beneficiary; and
(vi) terms of payment.
12. The nominated commercial bank(s) are to copy all proposed amendments to ADB for its information or approval.

C. REIMBURSEMENT PROCEDURE (page 30 of the Handbook)
13. This procedure is one where ADB pays from the loan account to the borrower’s account or, in some cases, to the project account for eligible expenditures, which have been incurred and paid for by the project out of its budget allocation or its own resources.
14. Under this procedure, ADB’s payments are made only to the borrower or EA and not to a third party, and this procedure normally requires submission of full supporting documentation.
1. Requirements
(i) A signed withdrawal application (see form ADB-DRP/RMP in Appendix 5) must be submitted to ADB together with a summary sheet (see form ADB-RMP-SSin Appendix 8) and the required supporting documents.
(ii) A separate withdrawal application must be submitted for each currency.
(iii) A separate summary sheet must also be submitted for each loan category or subcategory grouping items claimed by contract number.
(iv) The expenditures should have been incurred and paid for by the borrower out of its own fund sources.
2. Supporting Documents
(i) ADB is to receive the withdrawal application with the contract or confirmed PO, if not yet submitted to ADB;
(ii) a copy of the invoice/bill/claim and delivery receipt; and
(iii) the evidence or receipt of payment showing the amount paid, the date of receipt, and the payee.

D. IMPREST FUND PROCEDURE (page 37 of the Handbook)
15. This is a procedure where ADB makes an advance disbursement from the loan account for deposit to an imprest account to be used exclusively for ADB’s share of eligible expenditures. The following conditions must exist before the borrower is allowed to use the procedure: (i) need for the procedure, (ii) borrower’s capability, and (iii) audit arrangements.
1. Requirements
(i) A signed withdrawal application for imprest account (see Appendix 7) must be submitted to ADB together with a statement of the estimated ADB share of project expenditures on form ADB-IFP-EES (see Appendix 29).
16. The borrower is required to open, for the exclusive use of the project, a separate bank account for depositing advances. The imprest account shall be maintained in current account only and opened in the borrower’s name. The Account may be opened at the Central Bank of the borrower’s country or in a commercial bank the borrower designates, provided that the institution chosen is capable of executing foreign exchange and local currency transactions, opening letters of credit and handling a large volume of transactions, and issuing detailed monthly bank statements promptly.
17. The ceiling and initial amount of the imprest account will be $5 million.
2. Liquidation/Replenishment
18. As eligible expenditures are incurred and paid from the Account, the borrower requests liquidation/replenishment of the Account by submitting a withdrawal application and the applicable summary sheet using the form in Appendix 8 if full documentation is required or Appendix 22 to 25 if SOE procedure is approved. The corresponding bank statement and reconciliation statement (see Appendix 30) should also be submitted with the application. Withdrawal application must be prepared in the currency of the Account
.
E. INSTRUCTIONS FOR WITHDRAWALS
19. Before the first withdrawal application (W/A) is submitted to ADB, the name of the authorized representative(s) must be provided to ADB, including the authenticated specimen signatures of the representative(s).
20. The W/A should be signed by the authorized representative(s), sequentially numbered and should not exceed five digits (00001, 00002, etc). The cover letter of the W/A should indicate that taxes and duties are not included in the amount for disbursement being requested and are paid by the Borrower.
21. For all withdrawals, ADB must receive a withdrawal application in the prescribed form. A withdrawal application is a written request from the borrower to ADB to pay funds against the borrower’s loan account. The application must reach ADB before the loan closing date. The W/A forms and summary sheets to be used vary for the different procedures. A separate W/A for each currency requested should be submitted. A withdrawal application consists of:
(i) the application itself in letter form (see Appendixes 5, 6, and 7 for sample formats);
(ii) summary sheet(s) for each category claimed (see Appendixes 8 and 9 for sample formats); and
(iii) supporting documents, if required (see Appendix 10).
22. Before a disbursement is made for any contract issued by the Borrower, ADB has to prepare a Procurement Contract Summary Sheet (PCSS). Copies of all signed contracts and supporting documents should be sent to ADB as soon as they are available. This is a basis for ADB to monitor performance against the projected annual activities made at the start of the year. A PCSS number will be assigned by ADB for each contract received and these data will be relayed to the EA. The PCSS serves as an acknowledgement by ADB that the award of a contract has been checked and has been found to comply with ADB’s procurement guidelines. It also serves as a basis for disbursement. The PCSS is also
numbered sequentially, not exceeding four digits, i.e. 0001, 0002, etc. The PCSS consists of the following basic information:
(i) ADB Contract No. or the PCSS No.
(ii) Date of ADB approval of the Award of Contract
(iii) Date of Contract Approval by the EA
(iv) Mode of Procurement
(v) Name of contractor or supplier
(vi) Terms of payment and currency of contract
(vii) Component to which the expenditures will be charged
23. Without the PCSS, ADB’s Controller’s Department could not proceed with the processing of payment for the W/A. When an amendment or a variation of a contract is made, a copy of the variation order should also be sent to ADB, for updating of the PCSS.
24. To avoid delay in the processing of payment, the PCSS No. should be indicated in the W/A to be submitted by the EA. The PCSS No. should be shown in the summary sheet.
25. The W/A to be submitted to ADB must be the signed original copy to the attention of Mr. Gail Oliver Dumagas, CTLA-4 and copied to Director, SEID.

ADB FINANCIAL REPORTING AND AUDITING REQUIREMENTS

1. ADB's Handbook for Borrowers on the Financial Governance and Management of Investment Projects Financed by the ADB (the Booklet) provides guidelines to ensure timely compliance with the Loan covenants and the quality of financial information as required by ADB.
2. ADB, by its Charter, is required to ensure that the proceeds of any loan made, guaranteed, or participated in by ADB are used for the purposes for which the loan was approved. ADB requires accurate and timely financial information from its borrowers/recipients to be assured that expenditure was for the purposes stated in the loan agreement.
3. The following are the main requirements:
(i) ADB requires the EA to maintain separate project accounts and records exclusively for the Project to ensure that the Loan funds were used only for the objectives set out in the Loan Agreements.
The first set of project accounts to be submitted to ADB covers the fiscal year ending 31 December 2008. As stipulated in the Loan or Project Agreements, they are to be submitted up to six months after the end of the fiscal year. For this Loan, the deadline is by 30 June 2009.
(ii) The accounts and records for the project are to be consistently maintained by using sound accounting principles. The external auditor is to express an opinion on whether the financial report has been prepared using international or local generally accepted accounting standards and whether they have been applied consistently. ADB prefers project accounts to use international accounting standards prescribed by the International Accounting Standards Committee. The name of external auditor is to comment on the impact of any deviations, by the Executing Agency from international accounting standards.
(iii) The external auditor specifies in the Auditor's Report the appropriate auditing standards they used, and direct them to expand the scope of the paragraph in the Auditor's Report by disclosing the key audit procedures followed. The external auditor is also to state whether the same audit procedures were followed for all supplementary financial statements submitted.
ADB wishes that auditors conform to the international auditing standards issued by the International Federation of Accountants. In cases where other auditing standards are used, the external auditor is requested to indicate in the Auditor's Report the extent of any differences and their impact on the audit.
(iv) The external auditor's opinion is also required on whether
    • the proceeds of the ADB's Loan have been utilized only for the project as stated in the Loan Agreement;
    • the financial information contains data specifically agreed upon between the Recipient or EA and ADB to be included in the financial statements;
    • the financial information complies with relevant regulations and statutory
    • requirements; and
    • compliance has been met with all the financial covenants contained in the Loan or Project Agreements.
(v) The Auditor's Report is to clearly state the reasons for any opinions that are qualified, adverse, or disclaimers.
(vi) Actions on deficiencies disclosed by the external auditor in its report are to be resolved by the Recipient or Executing Agency within a reasonable time. The external auditor is to comment in the subsequent Auditor’s Report on the adequacy of the corrective measures taken by the Recipient or EA.
4. Compliance with these ADB requirements will be monitored by review missions and during normal project supervision, and followed up regularly with all concerned, including the external auditor.

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