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Conditions for Approval to Use the Statement of Expenditures Procedure

9.15 For approval to use the SOE procedure, the following conditions should be considered and met:

• Impracticability of full documentation: The SOE procedure is used where it is impractical to require full documentation. This may apply to, e.g., EA operating costs or expenditures related to contracts scattered over a wide area.

• Borrower's capability: The EA and/or IA must have sufficient administrative and accounting capabilities to prepare and maintain proper SOE records and make them readily available for examination.

• Audit arrangements: The EA and/or IA must be capable of arranging for periodic or annual audits of SOE transactions as part of the project's audit.

Approval of the Statement of Expenditures Procedure

9.16 During project preparation, ADB staff identifies the need for the SOE procedure. If the procedure is approved, it is provided for in the PAM.

9.17 If during project implementation the borrower needs to use simplified documentation, it may request ADB's approval (Sections 4.13-4.14).

Statement of Expenditures Ceiling

9.18 For project loans, normally the ceiling is not exceeding $100,000 per individual payment (the ceiling refers to the amount paid by the EA and/or IA, without taking into account ADB's share of the expenditure). Any other ceiling may be approved by ADB on a case-by-case basis. The ceiling should be indicated in the PAM.

9.19 For financial intermediation loans, the ceiling is, in principle, the "free limit" (Chapter 11).

9.20 The upward change in the SOE ceiling should be approved by ADB (Sections 4.13-4.14).

Ineligible Payments

9.21 Where ADB subsequently finds any payment made under the SOE procedure to be insufficiently supported or ineligible for ADB financing, ADB may offset the amount of the unjustified or ineligible payment against subsequent withdrawals for reimbursement, or request the borrower or EA to refund the same amount to the loan account.

Audit Arrangements

9.22 SOE records must be audited regularly by independent and qualified auditors acceptable to ADB. The audit is carried out as part of the regular annual audit of project financial statements. A separate audit opinion is included in the auditor's report.

Review by ADB Staff

9.23 ADB reserves the right to conduct spot or random checks of expenditures covered by SOEs through disbursement missions or review missions. Documents are to be kept in the office of the EA or IA as appropriate (see Section 4.29 for retention period of supporting documents) and must be made readily available for checking by ADB's disbursement and review missions or upon ADB's request for submission of supporting documents on a sampling basis.

Suspending Use of the Statement of Expenditures Procedure

9.24 ADB may suspend the use of SOE procedure when

• the borrower continuously claims ineligible expenditures;

• the borrower fails to submit the audit report before the deadline;

• the audit report and/or the management letter indicates significant irregularities in financial management, accounting, internal control, or the use of the ADB funds in project implementation; or

• the disbursement or review mission finds significant irregularities in the use of ADB funds.

Force Account Works Procedure

9.25 The force account works (FAW) procedure is a procedure for reimbursing the borrower for expenditures in carrying out certain approved civil works required for the project. The FAW procedure may also be used under the imprest fund procedure. Two certificates are used instead of the usual supporting documents: the first on the project's physical progress (Part 1) and the second on its financial progress (Part 2) (Appendix 9D).

9.26 To support the cumulative progress stated on the first certificate (Part 1 of Appendix 9D), information on the physical progress of civil works being undertaken under FAW is included in a periodic project progress report,[1] which is provided to ADB separately from the WA and the certificates for FAW.

Conditions for Approval to Use the Force Account Works Procedure

9.27 This procedure is applicable to projects in which the borrower uses its own work force, equipment, and other resources. It is also applicable when the size, nature, and location of the works make competitive bidding unsuitable. ADB must also be satisfied that the borrower's construction facilities are adequate and efficient and the borrower is capable of doing the work expeditiously at reasonable cost. The use of FAW procedure should be provided for in the PAM.

Details on the Certificates for Force Account Works

9.28 Details on the certificates are as shown in the following table.

Item

First Certificate

Second Certificate

Indicates

Cumulative percentage of completion of physical progress of work

Cumulative amount in US dollars which can be withdrawn

Current amount of claim based on the percentage of work completed

Certified and signed by

Project engineer or representative of executing agency or project consultant

Representative of executing or implementing agency

Mutually Exclusive Use of Simplified Documentation

9.29 The SOE and FAW procedures are separate simplified documentation

procedures and, therefore, should not be used in combination. For instance, expenditures under FAW should not be listed in the SOE form for liquidation.

  • [1] See Project Administration Instructions (PAI) No. 5.01.
 
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