Financial management and reporting

The cost categories required to be reported in the audited program financial statements (APFS) need to align with the categorization at appraisal so as not to cause problems in reporting. PLN faced difficulty in estimating the financing charges during implementation at appraisal stage. In addition, PLN raised a concern on the disclosure provision regarding APFS due to confidentiality requirements. The cost categories reported in the APFS were not aligned with the categorization used at appraisal, due to which changes to reporting formats were needed.

Handholding of the executing agency on financial management facilitates consistent compliance and timely submission of project financial reports.Multiple issues observed in project audit reports in early to mid-project implementation were eventually successfully addressed through close collaboration between JMRC and an ADB consultant. Having a financial management specialist during review missions and a dedicated financial management staff would further enhance financial management capacities in future projects.

Insufficient financial staffing and difficulties in information collection could hinder compliance to ADB financial requirements. During implementation, the IA faced challenges in complying with ADB’s financial management requirements. Submissions of audited project and entity financial statements were delayed because of (i) difficult information collection process, (ii) reports not complying with ADB guidelines, and (iii) insufficient accounting staff because of Uzbekenergo’s unbundling and restructuring.

Including ADB financial management staff in project implementation teams will facilitate compliance to ADB financial reporting requirements. the first two annual audited project financial statements was delayed in the absence of complete information. ADB’s financial management staff should have been part of the project implementation team from the inception stage to review and monitor project financial performance and provide timely advice.

Closer communication and coordination between ADB and the implementing agencies (IAs) are necessary to ensure timely loan closing. The loan closing took about 21 months. One of the major reasons was that some of the withdrawal application papers submitted by the IAs were incomplete or inconsistent and clarifications or corrections of these took a long time. ADB’s review and clearance on these clarifications was also slow in several cases.

Trainings and in-person support are needed to strengthen financial management performance and full compliance, especially in cases where the government agencies are handling ADB projects for the first-time. As the first ADB project the Secretariat of State for Vocational Training and Employment (SEFOPE) oversaw, more thorough trainings and in-person support could have strengthened financial management performance and full compliance with the grant covenants.

Regular scrutiny of the financial statements by ADB, coupled with periodic training of finance and project accounts staff, will help expedite financial closure. The financial management arrangements of the recipient and executing agency were robust. Even then,
financial closure of the grant account took 1.15 years from the grant closing date because of delays in the liquidation of advances and additional time needed to resolve the statement of expenditures review findings. Financial closing was further exacerbated by COVID-19 in-country lockdown measures.

Diligent project financial monitoring enables savings to be identified at an early stage, making it possible for additional components to be undertaken thereby improving project results and benefits. The project's executing and implementing agencies identified some savings after the award of two original works packages. This enabled an additional works package to be prepared, procured, and executed within the extended implementation period.

The participation of a financial management specialist in review missions and site visits will help improve capacity and ensure timely financial reporting. The project generally met ADB’s financial monitoring and reporting requirements. However, submission of the audited project financial statements was at times delayed. The delays could have been avoided by having a financial management specialist participate in project review missions and site visits. The measure could have also enhanced the capacity and awareness of ADB financial management procedures.

The participation of a financial management specialist in review missions and site visits will help improve capacity and compliance with statutory and financial covenants. The project generally met ADB’s financial monitoring and reporting requirements. But it encountered delays in the submission of the audited project financial statement for fiscal years 2016 and 2017. These delays could have been avoided by having a financial management specialist participate in project review missions and site visits.