PAD - LGED

8. LGED has substantial experience with the Bank’s financial management, disbursement
procedures and financial reporting requirements. However, submission of Financial Monitoring
Reports (FMRs) was often delayed and accuracy was questionable and project accounts of the
RTIP have remained un-reconciled. These issues have been attributed to LGED’s heavily
decentralized structure, which has created difficulties in mobilizing adequate accounting
resources across the field offices, transmitting financial information from field offices to
headquarters, and consolidating financial information at headquarters. A financial expert
appointed under a contract completed the reconciliation of the project accounts for the period
until June 30, 2010. The task team will be reviewing the implementation of the findings. The
reconciliation work for the remaining two years (FYs 2011 and 2012) that is under process is
scheduled to be completed by July 31, 2012. While LGED submitted the annual audited
financial statements for RTIP-I on a timely basis, it has shown some difficulties in resolving
material pending issues identified by the World Bank in the audit reports.
9. While LGED’s responses to audit issues were previously slow, substantial progress was
made to address these issues in recent times. All audit objections that were material to IDA have
been satisfactorally resolved. To address the risk of slow responsiveness to audit issues in RTIP-
II, adequate resource mobilization and higher level involvement through a Project Audit
Committee have been agreed.
10. LGED developed a Unified Financial Management System (UFMS), which was
implemented in a few LGED projects but was not found adequate for being used in RTIP-I. The
system is being evaluated for rolling out to all LGED before being replaced by a full integrated
decision support system by the midterm of RTIP-II. This will include the deployment of
comprehensive and effective IT-ICT-MIS capacity in LGED to support its major technical,
administrative, governance and communication processes. The financial information systems are
intended to be in place before commencement of RTIP-II so that the experience under RTIP-I is
not repeated. A consulting firm that is currently working on assessing the UFMS has indicated
that the UFMS as it is or with minor modification will not be ready for use at RTIP-II start up.
As such, to ensure timeliness and accuracy in capturing and processing financial information, an
off the shelf internationally reputed accounting software will be procured and be made
operational for use of RTIP-II right from the start of the project.
11. To address the risk of slow responsiveness to audit issues in RTIP-II, adequate resource
mobilization and higher level involvement through a Project Audit Committee has been agreed.
Inadequate FM capacities in the project’s headquarters, even weaker capacities of the District
Offices and lack of a computerized accounting system have often resulted in delayed Financial
Monitoring Reports based on un-reconciled financial data. Slow response on material audit
objections were also the shortcomings identified in the former project and have been addressed
in the FM arrangements of the upcoming project.
12. Project Financial Management Arrangements. As in RTIP-I, LGED, will implement
RTIP-II through a PMU, under the leadership of a Project Director. The PMU will have a FM
section headed by a Financial Management Specialist (FMS). The FMS will be a qualified
Chartered Accountant (or equivalent) with adequate knowledge of project financial management
requirements of the World Bank and GoB and proven experience in working with computerized
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