ROAD MANAGEMENT AND SAFTY PROJECT Project Launch Workshop

1. ROAD MANAGEMENT AND SAFTY PROJECTProject Launch Workshop Financial Management Implementation

2. Key Objectives • What in financial management and why? • Financial Management in Road Management and Safety Project (RMSP) • Financial Monitoring Reports (FMR) • New audit arrangements

3. Financial Management System • The Road Directorates to maintain adequate financial management systems • To provide accurate and timely reports on project resources and expenditures

4. Why Financial Management? • Part of overall management • Renewed emphasis in the bank • Increasing focus on corruption and transparency • The Bank’s new initiative on Loan Administration (disbursement mechanism) • Strengthening institutional development • Helps in performing and improving the Bank’s fiduciary responsibility

5. What is Financial Management System? Characteristics of financial management include: • Internal Control • Accounting • Reporting • Planning and Budgeting • Staffing, and • Audit

6. ORGANISATION & STAFFING PLANNING & BUDGETING FINANCIAL MANAGEMENT INTERNAL CONTROL ACOUNTING AUDITING REPORTING

7. How do we ensure that the project have adequate FMS? • Conducting an assessment of project financial management system during project design - pre-appraisal, appraisal, or negotiation • Develop an time-bound action plan to strengthen financial management • Verification of the adequacy of Project Financial Management arrangements

8. RMSP - Key Steps in FMS • Appointment of qualified accountants • Appointment of global auditors • Implementation of a computerised accounting software • Design of FMR • Implementation & training of accounting software • Completion of financial manual

9. FEATURES OF THE FMR • INCLUDES INFORMATION ON FINANCIAL PERFORMANCE, PROCUREMENT ANDPROJECT OUTPUTS • COVERS ALL SOURCES AND APPLICATION OF FUNDS • FACILITATES COMPARISON OF FINANCIAL AND PHYSICAL PROGRESS • NORMALLY PREPARED ON THE BORROWER’S CHART OF ACCOUNTS AND UNDERLYING SYSTEMS • FREQUENCY NORMALLY QUARTERLY BUT THE PERIOD MAY BE VARIED TO FOUR OR SIX MONTHS TO MEET PROJECT NEEDS • CONTENTS SHOULD BE AGREED DURING PROJECT PREPARATION

10. Contents of FMR • Introductory narrative discussion of developments and progress • Financial Reports (FMS primary responsibility) • Sources and Uses of funds (period and cumulative) • Uses of funds by project components (budgeted and actual – period and cumulative) • Balance Sheet • Special Account Statement

11. Contents of FMR • Physical Progress Reports (TL primary responsibility) • Output indicators or contract status for key activities • Outcome indicators not required in FMR • Narrative information may be the most appropriate in some projects

12. Contents of FMR • Procurement Reports (PS primary responsibility) • Generally for contracts not subject to prior review but above a certain threshold

13. Scope and Frequency • Ability to produce FMR should be in place by Before Board • Scope – encompasses total project and not just Bank financed portion • Currency of FMR – normally in the currency used for maintaining books of accounts • Frequency – flexible, normally quarterly • At least semi-annually (BiH Quarterly) • Submission – within 45 days

14. RMSP - Main Outputs • Computerized accounting system • Completion of financial manual • Acceptable FMR template • Sound financial capacity with Road Directorates

15. Where to for RMSP? • Finalise project plan & budget • Reliable and regular FMR • Updating Financial Manual • Improve financial capacity • Counterpart funding – compliance with legal agreement (ie advance to project account before effectiveness) • Compliance with FARAH Handbook and disbursement procedures