2022

BREFONS ETHIOPIA-
Launching Workshop-
Disbursement policy,
rules and procedures
29,Nov-2,Dec 2022

Presented by; Berhanu Berihun

 Session Objectives

 Disbursement Effectiveness for project implementation by:

 Common Understanding of:-
 Disbursement Principles
 Disbursement processing
 Disbursement rules and procedures
 Methods of disbursements
 Causes of disbursement delays etc.

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 Reference Documents

 Disbursement Handbook
 Disbursement Letter
 Project Appraisal Report
 Loan/ Protocol of Agreement/Bipartite Funding and
Implementation Agreement
 General Conditions

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 Specific Requirement -

Entry into Force

Condition precedent to first Disbursement
Approved Work plan
Authorized signatories
Opening of Special Account
AfDB Client Connection: https://clientconnection.afdb.org
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General Information-

The Society for Worldwide Interbank Financial

Telecommunications
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 General information’s

The Bank  Unit of Account 

Grant amounts and the amounts for each category of expenditure are
denominated in the Bank Unit of Account (UA)

Why does the

What is the Bank Unit of Bank use the
Account? Unit of
Account?

The Bank  UA is a Basket of

Five Currencies
 To minimise exchange
USD
rate risk of its portfolio.
Pound Sterling  To minimise exchange
Japonaise Yen rate risk of Borrowers
Euro 13
South Africain Rand
 USD/ XXX XXX/ USDNov USD/ XXX XXX/ USD
Currency Nov30,2021 30,2021 Nov 30,2022 Nov 30,2022
USD 1 1 1 1
Pound Sterling 0.72548 1.3784 0.86674 1.15375
Japanies Yen 113.65004 0.0088 148.24085 0.00675
EURO 0.85874 1.1645 0.99139 1.00868
South African Rand 15.21132 0.06574 18.37901 0.05441
ETB 47.59354 0.02101 53.7024 0.01862
1 UAC/ USD 1.41538 1.28329
1 USD/ UAC 0.70652 0.77925

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Assignment of Resources
Disbursements/
commitments are not
permitted against the
unallocated category.
Funds must be transferred
to an approved category for
Project Cost
use
Project

Amount Financed
Loan Grant
Denominated in Commitment Currency

Goods
Expenditure Categories
Services Works
Unallocate Operating
Services
Allocated/Denominated in Loan/Grant Commitment Currency d Expenses

Contracts denominated in Services

Goods Goods Services Works
Contract 1 Currency
Contract 2 of Procurement
Contract 1L Contract 1
Contract
1G
Goods, Service and Works

Contracts approved At commitment, contract Actual disbursements

against loans & grants up value is converted into converted into
to the limit allocated to the commitment currency commitment currency
each expenditure using exchanges rate as at using exchange rate at
category the Bid approval date the time of disbursement
approval 15
General Information- Grant Number:2100155041055
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Financing Sources and Currencies
Financing Source Commitment Currency Disbursement Currency Payment/Contract Currency

2000 - ADB Loan USD, EUR, JPY, GBP, ZAR Commitment Currency No Restrictions

2100 - ADF Loan UAC USD, EUR, JPY, GBP No Restrictions

2100 - ADF Grant UAC Bank’s Choice No Restrictions

2200 - NTF UAC USD No Restrictions

5500 - Middle Income Country

UAC USD, EUR USD, EUR
Fund (MIC)

5600 - Africa Water Facility (AWF) EUR EUR EUR

5650 - Congo Basin Forest Fund

EUR EUR EUR
(CBBF)
5700 - Fund for African Private
USD USD USD
Sector Assistance (FAPA)
5800 - Rural Water Supply &
Sanitation EUR EUR EUR
Initiative (RWSSI)

5900 - Fragile States Facility (FSF) UAC USD, EUR USD, EUR
 General Principles-
Eligible Expenditures

 Expenditure eligibility (timing) Grant Singed: 12/07/2022

To be closed: 30/12/2027
 Authorized signatories
 Disb. Ceilings (total, category, contract)
 Currencies & restrictions
 Numbering of applications

Disbursement is the effective

transfer of funds to finance
eligible expenditures Eligible expenditures are
items of expenditure agreed
upon and outlined in the
loan/Grant agreement for Bank21
Group financing.
POLICY OF EXPENDITURE ELIGIBLE FOR BANK GROUP
FINANCING.
For the Bank, the principle is that all justified expenditures in a project, program or
study are eligible, with the exception of taxes and customs duties, expenditures on
items on the negative list
 Taxes and Duties
 Eligibility determined on a case-by-case basis and included in individual appraisal reports
 Bank Charges for Special Accounts
 All bank charges (reasonable) related to operating the special account (transfer charges, commission etc.) are
eligible.
 LC charges & fees are eligible
 All bank charges in the payment chain shall be borne by the beneficiary. On the other hand, bank charges for
special account are eligible.
 Counterpart Funds
 Covered in the appraisal report and approved by the Board
To be eligible, expenditures must fall under one of the categories specified in the Project Appraisal Report and
Legal Agreement. The expenses incurred should be in line with the Legal Agreement and for the sole purpose
of meeting the objectives of the project. Only expenses incurred from the signature date and, at the latest, the
closing date of the related financing agreement, would be considered eligible. 22
POLICY OF EXPENDITURE ELIGIBLE FOR
BANK GROUP FINANCING
Ineligible expenditures include but are not limited to the following:
 Items not included in the expenditure categories in the Legal Agreements.
 Items not procured in accordance with the Bank’s procurement rules and
procedures.
 Expenditures made before the date of the Legal Agreements or, for
projects with retroactive financing, before the date specified in the Legal
Agreement
 Expenditures incurred after the closing date, except for audit-related
expenses incurred up to 6 months after the closing date.
 Expenditures for which the Bank has not received satisfactory evidence or
justification
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 General Principles-
Ineligible Expenditures
 Expenditure Eligibility – timing, Category, Contract
 Project unrelated activities
 Mis-procured expenditures
 Absence of Bank’s approval
 Unsupported expenditures
 Interest charges and penalties
Taxes with exception of payroll taxes and bank
charges
POLICY OF EXPENDITURE ELIGIBLE FOR BANK GROUP
FINANCING.
Provisional sums are
 Covered in Appraisal & Board Approved generally an allowance or
 Provisional expenditures of infrastructure projects estimate (often described as
a “best guess”) included
 Recurrent costs within the contract price of a
construction contract for works
 Remuneration of PIU staff (including severance pay)
that are: not sufficiently
 Project vehicles defined, designed or detailed
to allow an accurate
 Leased assets
determination of its cost at
 Food the time the contract is
entered
 Land acquisition
 under list of ineligible expenses: exception made for audit related expenses. Under
certain circumstance could go beyond audit fees only. Final audit expenses will be
payable after closing date, not fees only. This may include some expenses as the Bank
and borrower may determine.

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 Disbursement Methods Overview

Direct Payment Reimbursement

Method

Special Account Reimbursement Guarantee

Disbursement Method Descriptions
Nature of Expenditure
Local currency costs, Small purchases,
Small civil works.
Small and numerous expenditures;
Training expenses; Operating expenses
and small works and goods
Works progress payments; Consultant’s
progress claims; Purchasing
goods/equipment
Financing import of goods
FOCUS WILL BE ON SPECIAL ACCOUNT AND DIRECT METHODS
Recommended Disbursement
Method
1. Reimbursement (RP)
2. Special Account/Revolving Fund
(RF)
3. Direct payment (DP)
4. Reimbursement Guarantee (RG)
Description
For eligible expenses already incurred
and paid for by the Borrower of project
from its own resources
The Bank makes an advance
disbursement from the loan account to a
special account to be used exclusively
for the Bank’s share of eligible
expenses
The Bank, at the Borrowers request,
pays a designated beneficiary directly.
The Bank provides an irrevocable
undertaking to reimburse a commercial
bank for payments made or to be made
to a beneficiary against a letter of
credit. Referred to as “special
commitment” in the general conditions
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Disbursement Methods
Special Account
Special Account – Conditions of use
Effective administrative, financial and accounting procedures

Satisfactory internal control system

Annual budget/work program approved by the Bank

Annual independent audit of project accounts (including special account) submitted to and
accepted by the Bank within 6 months of the project financial year end.

Account Open and held with a financial institution acceptable to the Bank
Special Account – General Principles
Replenishment threshold of SA (use 50% of previous advance and 100% of older advances)
1St Tranches 50%, 2nd Tranches 40% and the last Tranches 10%

Last advance no later than 6 months before closing date

All the funds advanced must be justified or reimbursed to the Bank within four months from
the closing date

Provide exchange rates applicable to expenditures in currency different from the Special
Account currency

Separate Form A2 for each Category of Expenditure

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Special Account – General Principles

Advances are provided based on project needs and planned expenditures for up to 6 months.

Payments from the special account must follow all Bank procedures and policies

Borrower bears all risks associated with foreign exchange fluctuations between the currency of
the grant, the Special Account and project expenditures

Justifications can be submitted on periodic basis - it does not have to be accompanied with a
request for replenishment/Interim Unaudited Financial Statement.
Special Account Method-Documentation Requirements
Procedure for Borrower Documentation Requirements for Borrower
A. AFDB’s INITIAL ADVANCE TO THE SPECIAL ACCOUNT
1. Completes and signs withdrawal request for funds Form A1
2. Completes an estimate of expenditure sheet Form A3
Annual Work Programmed
Letter from the Bank opening the Account
a letter from the institution opening the account with full bank’s details.
B. LIQUIDATION OR REPLENISHMENT OF THE SPECIAL ACCOUNT
Form A1
Form A2
Form A3
Supporting Documentation
Mandatory:
Interim Unaudited Financial Statement approved by the bank
Sources and uses of Fund
Reconciliation Statement-Fund Movement
Bank Statements for the Special Account
Bank Statements for sub-accounts
Annual Work Programmed
The Bank reserves the right to
request any additional documents as
and when required

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Special Account Method - Documentation Requirements
C. FINAL LIQUIDATION OR RECOVERY OF ADVANCES
1. Completes and signs withdrawal request for funds Form A1
2. Completes and signs the Statement of Expenditures (SOE) Form A2
3. Prepares the necessary Special Account reconciliation Supporting Documentation
statement and attaches the bank statement(s) Mandatory:
4. Attaches supporting documents, as agreed to with the Interim Unaudited Financial Statement approved by the
Bank bank
5. Refunds promptly to the loan account any amount that Reconciliation Statement
remains outstanding in the Special Account after the loan Bank Statements for the Special Account
closing date, as specified in the Loan Agreement. Bank Statements for sub-accounts

The Bank reserves the right to

request any additional documents as
and when required

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Disbursement Methods
Direct Payment Method
Contracts
Require “no objection” by the Bank

Payment in the currency in which the cost of goods and services are payable and within the limit of the
amounts approved
Advance payment guarantees and performance bonds denominated in the payment currency of the
contract and worded in accordance with the contract
The Bank recommends project to request a local bank to confirm authenticity of a guarantee issued by a foreign bank.

Retention money paid at the end of warranty/defects liability period or commissioning, or against an
acceptance certificate or against unconditional guarantee

Guarantees must be issued by a bank or financial institution licensed to do so in the country of the
Guarantee issuer

Borrower to monitor the validity of advance payment guarantees and performance bonds, and ensure
amendment/extension as necessary
 Direct Payment Method - Documentation Requirements
Procedure for Borrower
1. Completes and signs withdrawal request Form
A1using a separate application form for each
currency.
2. Completes and signs the appropriate
Statement of Expenditures (SOE) Form A2
3. Attaches supporting documents
The Bank reserves the right to
request any additional documents as
and when required
Documentation Requirements for Borrower
Form A1
Form A2
Supporting Documentation
Mandatory:
Contract (with the first request for payment)
Letter from Beneficiary’s Bank confirming the account
details (with first request for payment)
Purchase Order
Advance payment bank guarantee
Retention Money bank guarantee
Invoice/Bill/Claim
Interim payment certificate
Bill of Lading
Delivery Receipt
Acceptance Certificate
Completion Certificate
Certification of fulfilment of Defects Liability Period
Acceptance of report/study
Reports obtainable in Client Connection Link: https://clientconnection.afdb.org
Details of disbursement applications paid between two
Statement of Confirmed Disbursement
specified dates

Lists contracts approved by the Bank for financing from

List of Contracts/Sub Projects
loan/grant resources

Disbursements/commitments against a contract and

Contract ledger
remaining balance

Shows disbursements against each expenditure category and

Category Ledger
remaining balance

Shows details of disbursements against the loan/grant and

Summary Ledger
remaining balance

Shows advances made to the special account and

Revolving Fund Report
justification submitted and approved by the Bank

Summary of disbursement applications received but not paid

Pending Disbursement Report
and often includes reason application is pending
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Guidance on the Filling of Disbursement Request Forms
A1 Disbursement Request
1. Application Type
Reimbursement

Special A ccount Initial Advance

Special Account Replenishment

Justification Only
Direct Payment

2. Loan/Grant Number
3. Project Title
4. Request Number
5. Please pay

For request for replenishment of a Special Account

6. We hereby send the attached statement of expenditures for a total amount of: The expenditures have
been made under the advance granted within the framework of the above mentioned agreement. We apply for this disbursement under the above Agreement, and
hereby certify or agree as follows:
(a) The undersigned has not previously withdrawn any amount to meet these expenses. The undersigned has not and does not intend to obtain funds for this purpose from the
proceeds of any other loan, credit or grant.
(b) The goods and services covered by this application have been or are being purchased in accordance with the conditions of the agreement.
(c) The expenditures have been made or are being made solely on goods and services from approved origin.
(d) The expenditures are for eligible items to be financed under the loans and do not include taxes, duties and other ineligible items
(e) The supporting documentation for expenditures from the special account has been retained for review by the bank and/or external auditors
7. Beneficiary Details
Name
Contact Person
Address
City/Country /
Email

8. Beneficiary Bank Details

Account holder Name (if different from beneficiary)
Bank Name
Bank Address
City/Country /
Account Number / IBAN
SWIFT Code

9. Correspondant Bank (where applicable)

Bank Name
Bank Address /country
Account Number / IBAN
SWIFT Code

10. Excecuting Agency Details

Name
Contact Person
Address
City/Country /
E-mail
Tel./Fax. /

11. Authorized Signatories

Name/Title Signature

Name/Title Signature

12. Date
A2 Statement of Expenditure
1. Application Type
Date Reimbursement
Special Account
Page of Justification Only
Direct Payment

2. Loan/Grant Number 3. Request Number

4. Project Title
5. Category/Sub-Project 6. Currency

Goods/Services/Works Contract/Purchase Order Invoice Payment details

Item 10. Borrower 11. AfDB 13. Banks 14. Amount
o 7. Contractor/Supplier 8. Description of 12. Contract 15. Invoice 16. Amount 18. Evidence of
N 9. Country of Origin Contract Contract Share of Previously 17. Date of Payment
Goods/Services Value Ref./Date Requested Payment
Reference Reference Contract Paid by Bank

19. Payments on this Page

20. Balance from Previous Page
21. Running Total

Project Manager

Name Signature

Authorized Signatories

Name Signature Name Signature

A3 Estimated Budgeted Activities

Date 1. Application Type

Initial A dvance
Page of
Replenishment

2. Loan/Grant Number 3. Request Number

4. Project Title
5. Category/Sub-Project 6. Currency

7. Period for Utilization of Advance to

14. Date of
Item 10. Country of Origin of 11. Annual 12. Banks 13. Advance
o 8. Detailed Description of Goods/Services 9. Quantity approval by
N Goods/Services Budget Share Requested
Bank

15. Total on this Page - -

16. Balance from Previous Page -
17. Running Total - -

Project Manager

Name Signature

Authorized Signatories

Name Signature Name Signature

Special Account Reconciliation Statement

Project Name

Special Account Statement as at ----- Loan/Grant Num ber

Currency of Speci al Account (SA) /i

1 Advances disbursed to the special account /ii
Initial advance Request No. 1
Replenishment 1 - Request No.
Replenishment 2 - Request No.
Replenishment 3 - Request No.
2 Total advance s disbursed to the special account -

3 SA closing balance as at ….... /iii -

4 Justification submitted with the attached application - Request No. -

5 Expenses previ ously justi fi ed to the Bank /iv

Expenses justified to the Bank under Request No. -
Expenses justified to the Bank under Request No. -
Expenses justified to the Bank under Request No. -
Expenses justified to the Bank under Request No. ... -
Total e x pense s justified to the Bank - -

6 Total advance accounte d for (3+4+5) -

-
7 Discrepancy (2) - (6) to be explained /v

NOTES
/i: Assuming SA currency is US dollars.

/ii: List the advances disbursed to the special account and actual amounts received.

/iii: Enter the closing balance on the SA Bank Statement as at 31 August 2019.

/iv: List of justification previously submitted to the Bank with request No, and amount.
T he discrepancy should be explained in a separate note, e.g., expenses rejected by the Bank, non-eligible expenses to be
/v:
reimbursed to SA, expenses not yet justified to the Bank, interest earned, etc.
 Observed Weaknesses - Both SA and DP - Form A2
Observed Weaknesses
More than one expenditure category included on a
single page
Form not properly signed (Project manager and
Authorized Signatories)
Incomplete or unclear details of expenditure
Errors in calculations
Inclusion of ineligible expenses
Relevant exchange rate not provided
Advances presented as expenditure
Recommended Action
Separate Expenditure categories (Services, Goods,
Operating Costs e.t.c…)
Ensure verification of authorized signatories and
changes if applicable
Provide detailed explanation
Be vigilante in calculating especially if not done on an
automated calculating application
Refer to project appraisal report
Provide relevant exchange rates for expenses in
currency different from special account currency
Transfers to sub-accounts are not considered as
expenses
Observed Weaknesses – SA - Form A3

Observed Weaknesses Recommended Action

Advance requested for period exceeding 6 months  Follow the prescribed period

Budgeted expenses exceeds project absorptive Be realistic. Projects can request replenishment any
capacity time provided minimum replenishment criteria is met

Incomplete/unclear expense descriptions Put explicit description such as quantity, days, e.t.c.

Request includes expenses not eligible for payment Consult your PAR before submitting the request
through the special account

Time to closing is less than 6 months Track closing date and request extension early
Causes of Delays
Causes of delays Causes of delays
Documentation not appropriate for the
Agreement not effective and/or first
disbursement type being requested
disbursement conditions have not been met

Authorized Signatories not designated by Erroneous application numbering

the appropriate authority

Application not signed by an authorized

signatory or signatories
Incorrect Loan/Grant Number indicated on
forms
Signed contracts/subsequent variations not
submitted to the Bank or not entered in SAP
Incomplete/unclear/inconsistent payment
instructions
Causes of Delays
Causes of Delays Causes of Delays
Supporting documents or claims not Budget not made readily available from
consistent with contract terms Government side to pay for claims

Claiming expenditures incurred before the Insufficient justification of previous advances

signature date or after the closing date to the special account

Replenishment request submitted less than 6

Insufficient funds in a category or contract
months before the closing date

Expenditures are not consistent with the Audited financial statements not submitted to
legal agreement or rejected by the Bank

Inconsistencies between currencies of

payment in the withdrawal application and Delays in review of expenditure and budget
the other supporting documents
PROJECT CLOSURE PROCEDURE
The tasks to be completed for the closure of a Bank
financed project include :
 Review the implementation status of all contracts, and ensure the settlement of
pending certificates for work executed on or before the closing date;
 Request cancellation of undisbursed contract balances

 Reconcile all the disbursements made (advances to the special account, direct
payments, reimbursement) with the bank records;
 Contract for final audit should be approved by Bank before closing date

 Return all expired guarantees to service providers

 Request bank details from Bank and liquidate the special account

 PCR and payment of the final audit, retention monies.

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 IO N S? &
? AD D I T
T IO N S
QUES S?
E N T
COMM
End of Session

GOOD LUCK and STAY SAFE

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 2022

PAU Supervision
Mission-
6-10 ,June 2022
Disbursement status
Update

Prepared by; Berhanu Berihun

 Status of Resource
Allocation

Total resource UA 30,000,000.00

Undisbursed Balance UA Dec-2021 June-2022
1,725,111.23 1UA=1.4008 54 !UA=1.39726
Disbursement Ratio 94.25 USD USD
Contract Ledger

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 Status of the S/Account

PAULESI PAUGHSS PAUSTI

AUC
UA UA UA
UA4,441,981.61
5,703,435.97 6,974,870.79 7,085,550.91

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 Project closing: -Due
diligence to be followed

•Payment of all disbursement requests covering goods, works and services

delivered or completed before or on the closing date. The related applications
should be received by the Bank within 4 months following the closing date of the
project.

•Reconciliation of loan accounts with those of the project, especially of payments

made under contracts and revolving fund statements to establish amounts to be
justified;

•Cancellation by the Task Manager of all balances on contracts following payment

of the final requests. The necessary resources for the final audit will be set aside for
payment within 6 months.

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 Project closing: -Due
diligence to be followed
•Steps have been put in place for the conduct of the final audit.

•For unjustified advances in the SA, the PMU shall submit to the Bank, no later
than four months after the closing date, the relevant justifications (summary
expenditure statements accompanied by the bank and reconciliation
statements).

•When the Bank and PMU have agreed on the total amount to be returned from
the SA, the PMU is required to repatriate the said funds to the account obtained
from FTRY within four months after the closing date of the project.

•When all the above have been achieved, the special account is considered
liquidated and may be closed by the PMU.

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End of Session

GOOD LUCK and STAY SAFE

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