Note: These OP/BP 10.02 and BP 10.02 Annex A together replace OP/BP 10.02, Financial Management, and BP 10.02 Annexes A, B, and C, dated August 1997; and the Operational Memoranda OP/BP 10.02, Financial Management, dated August 6, 1997, and Policy on Auditing of Bank-financed Projects, dated April 4, 2002. OP and BP 10.02 have been revised to reflect changes approved by the Executive Directors on February 20, 2003 and set out in Audit Policies and Practices for World Bank-financed Activities (R2003-007 and IDA/R2003-0013). Questions on financial management may be addressed to the Chief Financial Management Officer, OPCS. |
1. Throughout the preparation and implementation of a Bank-supported operation,1 each project team includes appropriately qualified and experienced financial management staff.2 Where feasible, financial management staff ensure that the financial management requirements for individual projects are adapted to the country’s circumstances, make use of the country’s normal systems where capacity permits, and involve common arrangements with other donors. Project Preparation2. During the preparation3 of each operation proposed for Bank financing, financial management staff assess the proposed financial management arrangements4 to identify any weaknesses and assess the risks these pose. 3. Financial management staff agree with the borrower on the format and content of interim and annual audited financial statements to be provided throughout the implementation of the operation. They also agree on the scope of audit work to be carried out for each operation, and the identity of the auditor or the process for selecting the auditor. 4. The results of the financial management assessment, together with actions agreed with the borrower to mitigate any risks identified, are recorded in a financial management assessment report and documented in summary form in the Project Appraisal Document. As appropriate, relevant information may be recorded in the minutes of negotiations or in the legal agreements. Project Implementation 5 During project implementation,5 financial management staff review the continuing adequacy of the financial management arrangements. The Regional Manager, Financial Management, determines the extent, manner, and timing of these reviews on the basis of considerations of risk6 and actual implementation performance.7 In reviewing the financial management arrangements, financial management staff undertake, as necessary, visits to project locations to meet with financial management and other project staff, observe the performance of the financial management system, and test-check the application of controls or individual transactions. Financial management staff also monitor the timeliness of receipt of, acknowledge receipt of, and review the interim and annual audited financial statements8 that the borrower is required to provide. They pay particular attention to indications of the quality of the auditor’s performance and to the substance of the audit report findings. 6. When financial management staff note deficiencies in the financial management arrangements, including failure to send audited financial statements to the Bank in a timely manner, poor auditor performance or audit findings indicative of internal control weaknesses, they discuss these matters with the borrower. In consultation with the task team leader the Regional Manager, Financial Management and the Loan Department, they make appropriate recommendations9 to the country director. The borrower is notified of any actions taken by the country director. 7. Financial management staff record the basis for, and results of, ongoing reviews in a format determined by the Regional Manager, Financial Management. The Regional Manager, Financial Management monitors reports of financial management performance to ensure timely and appropriate follow-up.10 The task team leader, with input from financial management staff, provides a financial management rating in the Implementation Status and Results Report. Project Completion 8. Significant issues that affected financial management performance during the course of implementation are recorded in Implementation Completion Reports.11
“Bank” includes IBRD and IDA; “loans” includes credits and grants; and “borrower” includes grant recipients. This BP applies to all loans, credits, advances under the Project Preparation Facility (PPF), and grants financed from World Bank resources, including IDA grants, and IDF (Institutional Development Fund) and other Development Grant Facility (DGF) grants, with the exception of Development Policy (previously known as adjustment) loans and Guarantees. The BP also applies to recipient-executed grants financed from trust funds, unless, exceptionally, the terms of the agreement with the donor make provision for different requirements. The policies for Development Policy lending and Guarantees are set out in OP 8.60, Development Policy Lending, and OP 14.25, Guarantees, respectively. The financial management team member is designated by the Regional Manager, Financial Management, following consultation with the sector manager and/or country director, as appropriate. Project preparation covers the period from project concept stage through Board approval. The assessment may be based on work carried out by Bank staff or work acceptable to the Bank done by other donors or client country institutions. Project implementation covers the period from Board approval through the loan closing date. Financial management staff update their assessment of financial management risks as appropriate during project implementation. FM staff monitor the status of compliance with the Bank’s financial reporting requirements through the Audit Report Compliance System. BP 10.02, Annex A,sets out actions that the Bank takes. These performance reports are produced on a regular basis and report on, inter alia, the number of audit exemptions granted, the number of (aged) overdue audit reports, and progress on actions agreed on in the previous reporting period.
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