Financial Management Assessment Questionnaire1

(Note: This questionnaire should be used as a tool only to gather information relevant for
assessing financial management capacity of executing and implementing agencies. It
may be used selectively for second subsequent projects, or periodic financing reports.
Additional questions may be required as deemed fit).
Topic Response Potential
Risk Event

1. Executing / Implementing Agency

1.1 What is the entitys legal status / registration?
1.2 How much equity (shareholding) is owned by the
Government?

1.3 Obtain the list of beneficial owners of major

blocks of shares (non-governmental portion), if
any.2
1.4 Has the entity implemented an externally-
financed project in the past? If yes, please
provide details.
1.5 Briefly describe the statutory reporting
requirements for the entity.
1.6 Describe the regulatory or supervisory agency of
the entity.
1.7 What is the governing body for the project? Is
the governing body for the project independent?
1.8 Obtain current organizational structure and
describe key management personnel. Is the
organizational structure and governance
appropriate for the needs of the project?
1.9 Does the entity have a Code of Ethics in place?

1.10 Describe (if any) any historical issues reports of

ethics violations involving the entity and
management. How were they addressed?

2. Funds Flow Arrangements

2.1 Describe the (proposed) project funds flow
arrangements in detail, including a funds flow
diagram and explanation of the flow of funds
from ADB, government and other financiers, to
the government, EA, IA, suppliers, contractors,
ultimate beneficiaries, etc. as applicable.
2.2 Are the (proposed) arrangements to transfer the
proceeds of the loan (from the government /
Finance Ministry) to the entity and to the end-
recipients satisfactory?

1 This questionnaire should be administered by ADB staff or consultant (the Reviewer), and
utilized only to obtain information, and to identify and describe potential risk events. Rating of
risks should be carried out separately by assessing their likelihood and impact.
2 In such cases, consult OAI on the need for integrity due diligence on non-governmental
beneficial owners.
 Topic Response Potential
Risk Event
2.3 Are the disbursement methods appropriate?
2.4 What have been the major problems in the past
involving the receipt, accounting and/or
administration of funds by the entity?

2.5 In which bank will the Imprest Account (if

applicable) be established?
2.6 Is the bank in which the imprest account is
established capable of
Executing foreign and local currency
transactions?
Issuing and administering letters of credit
(LC)?
Handling a large volume of transaction?
Issuing detailed monthly bank statements
promptly?

2.7 Is the ceiling for disbursements from the imprest

account and SOE appropriate/required?

2.8 Does the (proposed) project implementing unit

(PIU) have experience in the management of
disbursements from ADB?
2.9 Does the PIU have adequate administrative and
accounting capacity to manage the imprest fund
and statement of expenditure (SOE) procedures
in accordance with ADBs Loan Disbursement
Handbook (LDH)? Identify any concern or
uncertainty about the PIUs administrative and
accounting capability which would support the
establishment of a ceiling on the use of the SOE
procedure.
2.10 Is the entity exposed to foreign exchange risk? If
yes, describe the entitys policy and
arrangements for managing foreign exchange
risk.
2.11 How are the counterpart funds accessed?

2.12 How are payments made from the counterpart

funds?

2.13 If project funds will flow to communities or

NGOs, does the PIU have the necessary
reporting and monitoring arrangements and
features built into its systems to track the use of
project proceeds by such entities?
 Topic Response Potential
Risk Event
2.14 Are the beneficiaries required to contribute to
project costs? If beneficiaries have an option to
contribute in kind (in the form of labor or
material), are proper guidelines and
arrangements formulated to record and value
the labor or material contributions at appraisal
and during implementation?

3. Staffing
3.1 What is the current and/or proposed
organizational structure of the accounting
department? Attach an organization chart.

3.2 Will existing staff be assigned to the project, or

will new staff be recruited?
3.3 Describe the existing or proposed project
accounting staff, including job title,
responsibilities, educational background and
professional experience. Attach job descriptions
and CVs of key existing accounting staff.
3.4 Is the project finance and accounting function
staffed adequately?
3.5 Are the project finance and accounting staff
adequately qualified and experienced?
3.6 Are the project finance and accounting staff
trained in ADB procedures, including the
disbursement guidelines (i.e., LDH)?
3.7 What is the duration of the contract with the
project finance and accounting staff?
3.8 Identify any key positions of project finance and
accounting staff not contracted or filled yet, and
the estimated date of appointment.
3.9 For new staff, describe the proposed project
finance and accounting staff, including job title,
responsibilities, educational background and
professional experience. Attach job descriptions.

3.10 Does the project have written position

descriptions that clearly define duties,
responsibilities, lines of supervision, and limits of
authority for all of the officers, managers, and
staff?
3.11 What is the turnover rate for finance and
accounting personnel (including terminations,
resignations, transfers, etc.)?
3.12 What is training policy for the finance and
accounting staff?
3.13 Describe the list of training programs attended
by finance and accounting staff in the last 3
years.
 Topic Response Potential
Risk Event

4. Accounting Policies and Procedures

4.1 Does the entity have an accounting system that
allows for the proper recording of project
financial transactions, including the allocation of
expenditures in accordance with the respective
components, disbursement categories, and
sources of funds (in particular, the legal
agreements with ADB)? Will the project use the
entity accounting system? If not, what
accounting system will be used for the project?
4.2 Are controls in place concerning the preparation
and approval of transactions, ensuring that all
transactions are correctly made and adequately
explained?
4.3 Is the chart of accounts adequate to properly
account for and report on project activities and
disbursement categories? Obtain a copy of the
chart of accounts.
4.4 Are cost allocations to the various funding
sources made accurately and in accordance
with established agreements?
4.5 Are the General Ledger and subsidiary ledgers
reconciled monthly? Are actions taken to resolve
reconciliation differences?
4.6 Describe the EAs policy for retention of
accounting records including supporting
documents (e.g, ADBs policy requires that all
documents should be retained for at least 1 year
after ADB receives the audited project financial
statements for the final accounting period of
implementation, or 2 years after the loan closing
date, whichever is later). Are all accounting and
supporting documents retained in a defined
system that allows authorized users easy
access?
4.7 Describe any previous audit findings that have
not been addressed.
Segregation of Duties
4.8 Are the following functional responsibilities
performed by different units or persons: (i)
authorization to execute a transaction; (ii)
recording of the transaction; (iii) custody of
assets involved in the transaction; (iv)
reconciliation of bank accounts and subsidiary
ledgers?

4.9 Are the functions of ordering, receiving,

accounting for, and paying for goods and
services appropriately segregated?

Budgeting System
 Topic Response Potential
Risk Event
4.10 Do budgets include physical and financial
targets?
4.11 Are budgets prepared for all significant activities
in sufficient detail to allow meaningful monitoring
of subsequent performance?

4.12 Are actual expenditures compared to the budget

with reasonable frequency? Are explanations
required for significant variations against the
budget?
4.13 Are approvals for variations from the budget
required (i) in advance, or (ii) after the fact?

4.14 Is there a ceiling, up to which variations from the

budget may be incurred without obtaining prior
approval?

4.15 Who is responsible for preparation, approval and

oversight/monitoring of budgets?

4.16 Describe the budget process. Are procedures in

place to plan project activities, collect
information from the units in charge of the
different components, and prepare the budgets?
4.17 Are the project plans and budgets of project
activities realistic, based on valid assumptions,
and developed by knowledgeable individuals?

Is there evidence of significant mid-year

revisions, inadequate fund releases against
allocations, or inability of the EA to absorb/spend
released funds?

Is there evidence that government counterpart

funding is not made available adequately or on a
timely basis in prior projects?

What is the extent of over- or under-budgeting of

major heads over the last 3 years? Is there a
consistent trend either way?

Payments
4.18 Do invoice-processing procedures require: (i)
Copies of purchase orders and receiving reports
to be obtained directly from issuing
departments? (ii) Comparison of invoice
quantities, prices and terms, with those indicated
on the purchase order and with records of goods
actually received? (iii) Comparison of invoice
quantities with those indicated on the receiving
reports? (iv) Checking the accuracy of
calculations? (v) Checking authenticity of
 Topic Response Potential
Risk Event
invoices and supporting documents?

4.19 Are all invoices stamped PAID, dated, reviewed

and approved, recorded/entered into the system
correctly, and clearly marked for account code
assignment?

4.20 Do controls exist for the preparation of the

payroll? Are changes
(additions/deductions/modifications) to the
payroll properly authorized?

Policies And Procedures

4.21 What is the basis of accounting (e.g., cash,
accrual) followed (i) by the entity? (ii) By the
project?
4.22 What accounting standards are followed
(International Financial Reporting Standards,
International Public Sector Accounting
Standards cash or accrual, or National
Accounting Standards (specify) or other?
4.23 Does the project have adequate policies and
procedures manual(s) to guide activities and
ensure staff accountability?
4.24 Is the accounting policy and procedure manual
updated regularly and for the project activities?
4.25 Do procedures exist to ensure that only
authorized persons can alter or establish a new
accounting policy or procedure to be used by the
entity?
4.26 Are there written policies and procedures
covering all routine financial management and
related administrative activities?
4.27 Do policies and procedures clearly define
conflict of interest and related party transactions
(real and apparent) and provide safeguards to
protect the organization from them?
4.28 Are manuals distributed to appropriate
personnel?
4.29 Describe how compliance with policies and
procedures are verified and monitored.
Cash and Bank
4.30 Indicate names and positions of authorized
signatories for bank accounts. Include those
persons who have custody over bank
passwords, USB keys, or equivalent for online
transactions.
4.31 Does the organization maintain an adequate and
up-to-date cashbook recording receipts and
payments?
 Topic Response Potential
Risk Event
4.32 Describe the collection process and cash
handling procedures. Do controls exist for the
collection, timely deposit and recording of
receipts at each collection location?
4.33 Are bank accounts reconciled on a monthly
basis? Or more often?
Is cash on hand physically verified, and
reconciled with the cash books? With what
frequency is this done?
4.34 Are all reconciling items approved and
recorded?
4.35 Are all unusual items on the bank reconciliation
reviewed and approved by a responsible official?
4.36 Are there any persistent/non-moving reconciling
items?
4.37 Are there appropriate controls in safekeeping of
unused cheques, USB keys and passwords,
official receipts and invoices?
4.38 Are any large cash balances maintained at the
head office or field offices? If so, for what
purpose?
4.39 For online transactions, how many persons
possess USB keys (or equivalent), and
passwords? Describe the security rules on
password and access controls.
Safeguard over Assets
4.40 What policies and procedures are in place to
adequately safeguard or protect assets from
fraud, waste and abuse?
4.41 Does the entity maintain a Fixed Assets
Register? Is the register updated monthly?
Does the register record ownership of assets,
any assets under lien or encumbered, or have
been pledged?
4.42 Are subsidiary records of fixed assets,
inventories and stocks kept up to date and
reconciled with control accounts?
4.43 Are there periodic physical inventories of fixed
assets, inventories and stocks? Are fixed assets,
inventories and stocks appropriately labeled?
4.44 Are the physical inventory of fixed assets and
stocks reconciled with the respective fixed
assets and stock registers, and discrepancies
analyzed and resolved?
4.45 Describe the policies and procedures in disposal
of assets. Is the disposal of each asset
appropriately approved and recorded? Are steps
immediately taken to locate lost, or repair broken
assets?
4.46 Are assets sufficiently covered by insurance
policies?
 Topic Response Potential
Risk Event
4.47 Describe the policies and procedures in
identifying and maintaining fully depreciated
assets from active assets.

Other Offices and Implementing Entities

4.48 Describe any other regional offices or executing
entities participating in implementation.
4.49 Describe the staff, their roles and responsibilities
in performing accounting and financial
management functions of such offices as they
relate to the project.
4.50 Has the project established segregation of
duties, controls and procedures for flow of funds
and financial information, accountability, and
reporting and audits in relation to the other
offices or entities?
4.51 Does information among the different offices/
implementing agencies flow in an accurate and
timely fashion? In particular, do the offices other
than the head office use the same accounting
and reporting system?
4.52 Are periodic reconciliations performed among
the different offices/implementing agencies?
Describe the project reporting and auditing
arrangements between these offices and the
main executing/implementing agencies.
4.53 If any sub-accounts (under the Imprest Account)
will be maintained, describe the results of the
assessment of the financial management
capacity of the administrator of such sub-
accounts.
Contract Management and Accounting
4.54 Does the agency maintain contract-wise
accounting records to indicate gross value of
contract, and any amendments, variations and
escalations, payments made, and undisbursed
balances? Are the records consistent with
physical outputs/deliverables of the contract?
4.55 If contract records are maintained, does the
agency reconcile them regularly with the
contractor?
Other
4.56 Describe project arrangements for reporting
fraud, corruption, waste and misuse of project
resources. Has the project advised employees,
beneficiaries and other recipients to whom to
report if they suspect fraud, waste or misuse of
project resources or property?
5. Internal Audit
5.1 Is there an internal audit (IA) department in the
entity?
 Topic Response Potential
Risk Event
5.2 What are the qualifications and experience of
the IA staff?
5.3 To whom does the head of the internal audit
report?
5.4 Will the internal audit department include the
project in its annual work program?
5.5 Are actions taken on the internal audit findings?
5.6 What is the scope of the internal audit program?
How was it developed?
5.7 Is the IA department independent?
5.8 Do they perform pre-audit of transactions?
5.9 Who approves the internal audit program?
5.10 What standards guide the internal audit
program?
5.11 How are audit deficiencies tracked?
5.12 How long have the internal audit staff members
been with the organization?
5.13 Does any of the internal audit staff have an IT
background?
5.14 How frequently does the internal auditor meet
with the audit committee without the presence of
management?
5.15 Has the internal auditor identified / reported any
issue with reference to availability and
completeness of records?
5.16 Does the internal auditor have sufficient
knowledge and understanding of ADBs
guidelines and procedures, including the
disbursement guidelines and procedures (i.e.,
LDH)?
6. External Audit entity level
6.1 Is the entity financial statement audited regularly
by an independent auditor? Who is the auditor?

6.2 Are there any delays in audit of the entity? When

are the audit reports issued?

6.3 Is the audit of the entity conducted in

accordance with the International Standards on
Auditing, or the International Standards for
Supreme Audit Institutions, or national auditing
standards?

6.4 Were there any major accountability issues

noted in the audit report for the past three
years?
6.5 Does the external auditor meet with the audit
committee without the presence of
management?
 Topic Response Potential
Risk Event
6.6 Has the entity engaged the external audit firm
for any non-audit engagements (e.g.,
consulting)? If yes, what is the total value of
non-audit engagements, relative to the value of
audit services?
6.7 Has the external auditor expressed any issues
on the availability of complete records and
supporting documents?
6.8 Does the external auditor have sufficient
knowledge and understanding of ADBs
guidelines and procedures, including the
disbursement guidelines and procedures (i.e.,
LDH)?
6.9 Are there any material issues noted during the
review of the audited entity financial statements
that were not reported in the external audit
report?
External Audit project level
6.10 Will the entity auditor audit the project accounts
or will another auditor be appointed to audit the
project financial statements?
6.11 Are there any recommendations made by the
auditors in prior project audit reports or
management letters that have not yet been
implemented?
6.12 Is the project subject to any kind of audit from an
independent governmental entity (e.g. the
supreme audit institution) in addition to the
external audit?
6.13 Has the project prepared acceptable terms of
reference for an annual project audit? Have
these been agreed and discussed with the EA
and the auditor?
6.14 Has the project auditor identified any issues with
the availability and completeness of records and
supporting documents?
6.15 Does the external auditor have sufficient
knowledge and understanding of ADBs
guidelines and procedures, including the
disbursement guidelines and procedures (i.e.,
LDH)?
6.16 Are there any recommendations made by the
auditors in prior audit reports or management
letters that have not yet been implemented?
[For second or subsequent projects]
6.17 Were past audit reports complete, and did they
fully address the obligations under the loan
agreements? Were there any material issues
noted during the review of the audited project
financial statements and related audit report that
have remained unaddressed?
7. Reporting and Monitoring
 Topic Response Potential
Risk Event
7.1 Are financial statements and reports prepared
for the entity?
7.2 Are financial statements and reports prepared
for the implementing unit(s)?
7.3 What is the frequency of preparation of financial
statements and reports? Are the reports
prepared in a timely fashion so as to be useful to
management for decision making?
7.4 Does the entity reporting system need to be
adapted for project reporting?
7.5 Has the project established financial
management reporting responsibilities that
specify the types of reports to be prepared, the
report content, and purpose of the reports?
7.6 Are financial management reports used by
management?
7.7 Do the financial reports compare actual
expenditures with budgeted and programmed
allocations?
7.8 How are financial reports prepared? Are
financial reports prepared directly by the
automated accounting system or are they
prepared by spreadsheets or some other
means?
7.9 Does the financial system have the capacity to
link the financial information with the project's
physical progress? If separate systems are used
to gather and compile physical data, what
controls are in place to reduce the risk that the
physical data may not synchronize with the
financial data?
7.10 Does the entity have experience in implementing
projects of any other donors, co-financiers, or
development partners?
8. Information Systems
8.1 Is the financial accounting and reporting system
computerized?
8.2 If computerized, is the software off-the-shelf, or
customized?
8.3 Is the computerized software standalone, or
integrated and used by all departments in the
headquarters and field units using modules?
8.4 How are the project financial data integrated
with the entity financial data? Is it done through
a module in the enterprise financial system with
automatic data transfer, or does it entail manual
entry?
8.5 Is the computerized software used for directly
generating periodic financial statements, or does
it require manual intervention and use of Excel
 Topic Response Potential
Risk Event
or similar spreadsheet software?

8.6 Can the system automatically produce the

necessary project financial reports?
8.7 Is the staff adequately trained to maintain the
computerized system?
8.8 Do the management, organization and
processes and systems safeguard the
confidentiality, integrity and availability of the
data?
8.9 Are there back-up procedures in place?

8.10 Describe the backup procedures online

storage, offsite storage, offshore storage, fire,
earthquake and calamity protection for backups.