lac ipresentation

Loan Administration Change Initiative (LACI)

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Loan Administration Change Initiative (LACI):

Improving Development Effectivenessthrough

Better Financial Management

Presentation to Agencies Implementing World Bank Financed Projects


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PurposeTo describe:

– The Loan Administration Change Initiative (LACI)

– LACI Implementation Procedures– LACI Disbursement Procedures


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Agenda

1. Presentation2. Questions and answers


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What is LACI?What is LACI?

Procurement& Contract

Management

•Improved project management & monitoring •Improved development effectiveness. •Simplified Disbursement procedures.

Project Financial Management

Physical Progress

Disbursement


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Background

Fundamentally re-examining whether the Disbursement/Repayment Process makes sense in today’s changing environment

Responding to client needs (Borrowers, Task Managers)

Recognition that the Disbursement Function can add value throughout the Lending Process rather than only at the back end

Recognition that project financial accountability needs strengthening

Why was this initiative started?


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LACI Project Overview

Phase I

Phase II

Phase III

StakeholderAnalysisStakeholderAnalysis

Current StateAnalysisCurrent StateAnalysis

VisionCreationVisionCreation

ProcessDesignProcessDesign

Phase IV

Pilot Testing& EvaluationPilot Testing& Evaluation

APR ‘96 MAY JUN JUL AUG SEP OCT NOV DEC JAN..……...…….. DEC ‘97

Phase V

Transition and ImplementationTransition and Implementation


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Ensure that projects have proper financial management systems, improve project implementation, ensure best use of resources

Eliminate detailed disbursement document preparation and review to reduce processing time

Link project progress and physical performance to quarterly disbursements to ensure effective project monitoring and funding

LACI Guiding Principles


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LACI Process Overview

Assess Borrower/Project Financial Management System

as required:• agree on technical assistance• hire financial management staff

Review Borrower Financial Management

System (FMS) and Reporting/Monitoring

Mechanisms

Assess Borrower’s

Project FMSA

Determine strength of

FMS

Understand Project

Develop plan to ensure Borrower creates FMS for

the project

projects with strong financial management systems

projects with weaker financial management systems

Project Design


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LACI Process Overview

Monitor Project Financial & Physical Implementation

Disburse to Special Account

A

Quarterly Borrower submission and Bank

review of Project Management Report

Determine Reporting/Monitoring

Requirements are met

Borrower and Bank coordinate to

resolve impediment

projects with strong financial management systems

Yes

Project Implementation

no


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Quarterly Project Management Report

(to support withdrawal application)

The Bank will provide example reporting modules and create an enabling environment for receipt of electronic transactions

minimum requirements: -sources and uses of funds statement -expenditures by category and project activity statements - special account reconciliation -expenditure forecast

-contract commitment/expenditure report, including source of supply data for contracts above the prior review threshold, as well as post-review contracts above $100,000.

Project Progress Report

FinancialStatements

ProcurementManagement

Report

comparison of actual physical and financial progress vs. forecasts

-procurement status report


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LACI Implementation Procedures

Implementation Approach Sound financial accounting and reporting requirements are

absolutely necessary before project implementation.

LACI will be implemented in a flexible manner, taking into

account the borrower’s accounting, financial management

and reporting capability.

The Bank will seek agreement of the country when applying

the new disbursement methodology.

Strong partnership between Borrowers and the Bank


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Selection of LACI Projects

All new projects appraised from July 1, 1998

All existing projects under three years old as of July 1, 1998, and any other projects requested by the borrower


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Role of the Borrower Maintain appropriate level of staffing and project organizational

structure

Maintain appropriate financial management and reporting

– to generate timely Project Management Reports (PMRs)

– to produce acceptable annual audited financial statements Ensure timely disbursement of counterpart funding to

implementing agencies

Arrange timely appointment of an independent auditor under

appropriate TOR.


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Role of Bank

Role of Bank Departments Project Certification Process for Board

Presentations Conversion of Existing Projects PMR Disbursement Procedures Special Account Procedures under LACI Payment Approval Process under LACI


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Role of the Bank Departments

The fiduciary responsibilities for LACI implementation in the Bank are shared as follows:

Regional Operations will ensure that projects have the required financial management systems and staff in place before Board approval and throughout implementation.

Loan Department will ensure consistent project financial management and required LACI documentation exist across the regions.

The Legal Department will ensure the inclusion of necessary provisions in the legal agreements regarding financial management.


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Project Certification Process for Board Presentation

FMS-OPR assesses and certifies the adequacy of the project financial management system.

Procurement Specialist assesses and certifies the adequacy of procurement management capacity

TTL endorses the assessment of FMS and PS and certifies project for LACI compliance.

PMR format is agreed upon during appraisal and recorded in the minutes of negotiation.

LACI requirements are reflected in the Legal Document. Loan Department staff review and sign off.


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Conversion of Existing Projects

In consultation with the borrower, each Country Department will have the primary responsibility for the portfolio review to determine projects that will be convertedThe certification procedure for new projects will be followedThe Task Team Leader will initiate an amendment


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PMR Disbursement Procedures

PMR-based disbursement procedures will be adopted for

implementation of LACI compliant projects

Submission of Quarterly PMRs of the quarter within 45 days after the

end of the quarter

Disbursement will be made exclusively via the project Special Account

Direct payment and special commitment procedures may be used in

certain cases

For non-LACI projects, existing disbursement procedures will continue

to apply


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Special Account Procedures under LACI

A ceiling of 20 percent of the loan amount will normally be

specified in the Special Account Schedule to the loan

agreement

The first advance will reflect the physical work program

and cash flow forecast of actual project needs normally for

the first six months

Application for subsequent payment to the Special Account

will be supported by PMRs, reflecting actual project progress

and cash forecast


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Payment Approval Process under LACI

The Withdrawal Application and the supporting PMRs will be reviewed by the Task Team FMS-OPR will recommend the amount to be paid to the Special Account; Procurement Specialist and Task Team Leader will endorse the recommendation Final approval and release of payment will be made by FMS-LOA/ DOLOA will advise the borrower reasons for not approving or reducing the amount applied for and request remedial actionOn an exceptional basis, the Bank will consider releasing payment monthly or bi-monthly

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lac ipresentation

Documents

project implementation

project projects

laci project overview

borrowers project fms

effective project monitoring

specific project independent

financial accountability

new projects