Conditions for Approval to Use the Statement of Expenditures Procedure

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:
ȕ 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.
ȕ Borrower’s capacity:The EA and/or IA must have adequate administrative and
accounting capacity to prepare and maintain proper SOE records and make them
readily available for examination.
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If the capacity of the EA/IAs is determined to
be inadequate, the SOE procedure should not be used.
ȕ 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 the SOE procedure, it may
request ADB’s approval (Sections 4.13–4.14).
Statement of Expenditures Ceiling
9.18  For loans where the EA/IA’s capacity is determined to be adequate, there is no ceiling
on the use of the SOE procedure.
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A ceiling on the use of the SOE procedure may be
established (either during project preparation or during implementation) when there
is concern or uncertainty about the capacity of the EA/IA to administer the procedure.
9.19  The ceiling refers to the amount paid by the EA/IA, without taking into account ADB’s
share of the expenditure. Such ceiling (e.g., USD equivalent $10,000, $50,000, $100,000,
etc.) is determined by ADB on a case-by-case basis, depending on the specifics of the
project and nature of expenditures to be financed, and should be indicated in the PAM.
Required supporting documents should be submitted to ADB in accordance with
applicable procedures, for any individual payment that exceeds such ceiling.
9.20 For financial intermediation loans, the ceiling, if any, may be established at the
“free limit” (Chapter 11).
9.21 Any upward change, establishment, or removal of the SOE ceiling during project
implementation should be approved by ADB (Sections 4.13–4.14).
3
An assessment of the borrower’s capacity should be based on the results of the Financial Management
Assessment (FMA) performed on the relevant entity, review of current and prior audit reports for projects
administered/implemented by the relevant EA/IA, internal audit reports, issues noted during project
implementation (e.g., issues noted during the processing of WAs by ADB) for projects administered/
implemented by the relevant EA/IA, and other relevant information, as deemed necessary.
4
In such case, “no ceiling” is considered to be the approved ceiling for the purposes of OM J6/OP.

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Certificates on the percentage of completed work and amount that can be withdrawn

Simplified Documentation
9.7   Where full documentation is impractical, burdensome, voluminous, or costly, and if the
conditions (Sections 9.15 or 9.28) are met, ADB may accept simplified documentation
using the following procedures:
Procedure
Simplified Documentation to
Replace Full Documentation
Statement of expenditures procedure
Force account works procedure
Statement of expenditures
Certificates on the percentage of completed work and
amount that can be withdrawn
Narrative Procedures
9.8  The narrative procedures and the check list for reimbursement procedures are shown
in Appendix 9A.
Statement of Expenditures Procedure
9.9  The statement of expenditures (SOE) procedure is a simplified procedure requiring no
submission of supporting documentation of expenditures.
9.10  The procedure derives its name from the SOE form which is submitted with the WA.
The SOE replaces the usual supporting documents and the summary sheet.
9.11  The SOE form provides data on contracts and disbursements of individual payments
(up to any applicable SOE ceiling).
9.12  In the SOE, the representative of the executing agency (EA) or implementing agency
(IA) which prepared the SOE certifies the following:
ȕ expenditures have been incurred and paid for proper execution of project activities
under the terms and conditions of the loan agreement;
ȕ all documentation authenticating these expenditures has been retained and will
be made available for examination by auditors and ADB representatives upon
request; and
ȕ for projects with an SOE ceiling, payments have not been split to enable them to
pass through such ceiling.
9.13  For the borrower’s convenience, this handbook provides the following SOE forms
(a project-specific form approved by ADB [free format] is also acceptable):
ȕ Statement of Expenditures for Project Loans (Appendix 9B); and
ȕ Statement of Expenditures for Financial Intermediation Loans (Appendix 9C and
Section 11.8).
9.14  SOE procedure may also be used when liquidating or replenishing advances under the
imprest account, if provided in the project administration manual (PAM).
ISSUED: FEBRUARY 2015

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The reimbursement procedure is a disbursement procedure

Description
9.1  The reimbursement procedure is a disbursement procedure where the Asian
Development Bank (ADB) pays from the loan account to the borrower’s1
account for
eligible expenditures which have been incurred and paid for by the borrower out of its
budget allocation or its own resources.
9.2  Under this procedure, ADB’s payments are made only to the borrower and not to a
third party (e.g., supplier or contractor).
9.3  This procedure requires submission of full supporting documentation, unless
simplified documentation (Sections 9.7–9.30) is approved.
Basic Requirements
9.4  A signed withdrawal application (WA) (Appendix 7A) must be submitted to ADB
together with a summary sheet (Appendix 7B) and the required supporting documents.
9.5  The expenditures should have been incurred and paid for by the borrower out of its
own fund sources.
Supporting Documents
9.6  The evidence or receipt of payment (showing the amount paid, the date of receipt,
and the payee) is required to be submitted together with the WA, in addition to the
same supporting documents as required under direct payment (Section 7.4), unless
simplified documentation (Sections 9.7–9.30) is approved.
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ADB will return WAs
that do not meet the requirements. In addition, the borrower should retain the same
supporting documents as required under the direct payment procedure (Sections 7.5
and 4.29).

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The nominated commercial bank(s) is (are) to copy all proposed amendments to ADB for its information or approval

The nominated commercial bank(s) is (are) to copy all proposed amendments to ADB
for its information or approval.
Amendments to the Letter of Credit
8.16  The borrower requests ADB’s approval of amendments to the LC as soon as the LC
amendment is obtained from the LC issuing bank (Appendix 8E). A copy of the signed
amendment must be attached to the request.
8.17  ADB communicates its approval to the nominated commercial bank and the borrower
by the form shown in Appendix 8F or by authenticated SWIFT, tested telex, or a
formal letter of approval.
8.18  ADB can allow the borrower, in urgent cases, to send its application for approval to
amend the LC by fax. The message is to include loan number, commitment letter
number, LC number, and nature and reason for the amendment. A copy of the LC
amendment should be attached to the application.
8.19  The message must state that the amendment has been made by the LC issuing bank
and that the application for approval of amendment of the LC and a copy of the LC
amendment are being airmailed to ADB.
8.20  Amendments to the LC for the following need not be submitted to ADB for approval:
(i) extending the expiry date and shipping dates up to the loan closing date, and
(ii) other amendments except those mentioned in Section 8.14. The borrower merely
needs to inform ADB using the standard form (Appendix 8G) and submit a signed copy
of the amendment. This will ensure ADB’s prompt payment of claims received from
the nominated commercial bank.
Limitation of ADB’s Commitment
8.21  A borrower, when requesting a commitment letter, agrees in the application form
that if the US dollar or special drawing right (SDR)
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equivalent as specified in ADB’s
commitment is exceeded at the time of ADB’s payments due to currency fluctuations,
ADB may use the uncommitted portion of the loan to cover the deficiency. If the
uncommitted portion of the loan is insufficient, the borrower agrees to pay the
remaining obligation promptly under the LC after receiving ADB’s notice.
4
The special drawing right (SDR) is an international reserve asset created by the International Monetary
Fund in 1969 to supplement the official reserves of its member countries. Its value is based on a basket of
four key international currencies—US dollar, yen, pound sterling, and euro. Source: http://www.imf.org/
external/np/exr/facts/sdr.htm

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