Detailed Information on the
Asian Development Fund Assessment

Work with Congress to secure $115 million annually for the period 2006 to 2009 to fund the U.S. commitment to the latest Asian Development Fund replenishment (AsDF-9).

Work with the Fund and other donors to improve the ability of developing countries to handle their debt, including increasing the amount of grants for the most debt-vulnerable Asian countries.

Monitor the Fund's improvements and implementation of measures to show its effectiveness in achieving development goals, including its progress in meeting development objectives across-the-board.

Measure: Halt and reverse the spread of major diseases including AIDs and malaria

Explanation:Measures attainment of basic health in AsDB recipient countries, a critical factor in sustainable development and income growth

Measure: Millennium Development Goal: Percent reduction in percent of population with income below $1 per day

Explanation:Measures reduction in poverty in Asian users of the AsDB.

Measure: Increase percent of children completing primary education

Explanation:Measures attainment of basic education in AsDB recipient countries, a critical factor in sustainable development and income growth

Is the program purpose clear?

Explanation: Articles I and II of the Articles of Agreement of the Asian Development Bank clearly state the purpose of the institution. "The purpose of the Bank shall be to foster economic growth and cooperation in the region of East Asia??and to contribute to the acceleration of the process of economic development of the developing member countries in the region." Article II provides specifics on the modality of the Bank's operations. In early 1999, with the Asian financial crisis as a catalyst, the AsDB further refined its mission statement by adopting poverty reduction in Asia as its overarching goal.

Evidence: See AsDB website -- www.adb.org -- for Articles of Agreement. (Note: except as noted, documents referenced in this PART can be found at this website.)

Does the program address a specific and existing problem, interest, or need?

Explanation: The Asian Development Bank mobilizes resources from regional and non-regional members to provide concessional financing and grants for the development objectives of the poorest Asian countries.

Evidence: Over one billion people in the world live on less than $1 per day; over 3 billion live on less than $2 per day. Almost two-thirds of the world's poor live in Asia and the Pacific.

Is the program designed so that it is not redundant or duplicative of any other Federal, state, local or private effort?

Explanation: The AsDB has entered into Memoranda of Understanding (MOUs) with other Multilateral Development Banks (MDBs) and works closely with other aid agencies to coordinate activities and to avoid overlap.

Evidence: The AsDB has concluded MOUs with the World Bank and EBRD (internal documents) to ensure that efforts are complimentary, that resources and knowledge gained are shared and that efforts are effective without unnecessary overlap. AsDB also has a partnership agreement with the IaDB (internal document). Coordination with other aid agencies is achieved through the donor coordination process when designing the individual country strategies.

Is the program design free of major flaws that would limit the program's effectiveness or efficiency?

Explanation: Despite improvements in the internal governance, development focus and efficiency of the AsDB, there is still room for improvement. As part of the AsDF-9 agreement, the AsDB agreed to implement results-based management in all aspects of the Bank's operations and to inaugurate a 30% grants program in AsDF for the poorest countries in Asia. While results-based management has been incorporated into a large number of project documents, it is not yet a consistent part of all country and regional documents. We also believe AsDB effectiveness can be further enhanced by an expansion of the AsDB's grants program.

Evidence: On July 17, 2001, President Bush proposed "that up to 50 percent of the funds provided by the development banks to the poorest countries be provided as grants for education, health, nutrition, water supply, sanitation and other human needs, which will be a major step forward." The promotion of results-based management in the MDBs has been long-standing U.S. Treasury policy.

Is the program design effectively targeted so that resources will address the program's purpose directly and will reach intended beneficiaries?

Explanation: Resources are distributed according to a performance-based allocation system (PBA) that calculates scores based on a country's poverty level, an assessment of its policies and institutions, and portfolio performance. As a product of the recent AsDF-9 negotiations, the AsDF agreed to significantly increase the weights given to economic performance and good governance in a country's overall rating and consequently, to direct more concessional resources to such countries. These and other goals must be fully implemented by the end of 2008.

Evidence: Further elaboration is provided in the AsDB Board of Director's paper on the new PBA policy.

Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: The AsDB has adopted the eight development goals of the Millennium Declaration (MDGs), which serve as ambitious, long-term performance goals. Countries that adhere to the MDGs are supposed to achieve these goals by 2015. In addition, the AsDB also sets long-term country specific goals in its Country Strategy and Program papers. The AsDB is developing long-term performance measures at the institutional level. At the recently concluded AsDF-9 replenishment, donors agreed to implement a comprehensive results measurement and result-based management system in all Bank operations. This effort is already well underway and will be fully completed by 2008.

Evidence: The Millennium Development Goals include: (1) eradicate extreme poverty and hunger; (2) achieve universal education; (3) promote gender equality and empower women; (4) reduce child mortality; (5) improve maternal health; (6) combat HIV/AIDS, malaria and other diseases; (7) ensure environmental sustainability; and (8) develop a global partnership for development. Long-term results-based performance measures are under development. The AsDF-9 Donors' Report, attached, provides additional details on AsDB's results-based management agenda.

Does the program have ambitious targets and timeframes for its long-term measures?

Explanation: In the AsDF-9 replenishment negotiations, the AsDB agreed to plan and implement a comprehensive results-based management and measurement system. This system is now in the process of being implemented and will be completed by 2008.

Evidence: Targets and timeframes have been incorporated in a majority of project documents and have been piloted in a number of Country Strategy and Programs. Results-based targets and timeframes should be integrated in all project and country documents before the end of 2006. As part of this effort, the AsDB will also implement results measurement at the institutional level. See attached Progress Report on the AsDB's Reform Agenda.

Does the program have a limited number of specific annual performance measures that can demonstrate progress toward achieving the program's long-term goals?

Explanation: The annual measures are under development. AsDF-9 replenishment negotiations included agreement that the Bank would develop a mechanism for defining and measuring annual outcomes and outputs at the project, sector, country and institution-level. The AsDF-9 Donors' Report itself includes a range of long-term institutional goals. In addition, the AsDB measures attainment of institutional goals through its annual report to the Board of Governors and the annual budget review process. Progress made against specific AsDF-9 goals will be assessed by donors at the AsDF-9 Mid-Term Review in fall 2006; the individual components of the AsDF-9 agreement will be fully implemented by the end of 2008. AsDF Mid-Term Reviews are conducted every two years.

Evidence: AsDF-9 Donors' Report, Progress Report on the AsDB's Reform Agenda, 2005 Administrative Budget, and 2005 Annual Report.

Does the program have baselines and ambitious targets for its annual measures?

Explanation: Establishing baseline data and development targets are an integral part of the outcome-based measurement system noted above. Most project documents now have annual targets to measure development impact.

Evidence: AsDF-9 Donors' Report and Progress Report on the AsDB's Reform Agenda.

Do all partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) commit to and work toward the annual and/or long-term goals of the program?

Explanation: All partners have committed to the Millennium Development Goals. In addition, all AsDF member countries have explicitly committed to the objectives of the AsDF-9 replenishment agreement, which sets out strategic goals for the period 2005-8 to make the AsDB more results-oriented including implementation of baselines, targets, interim and final results for all programs, achieving a 21 percent grants window, and meeting several institutional goals including increased transparency. Finally, AsDB management and borrowing countries jointly agree on long-term development goals as part of their formulation of Country Strategy and Programs (which are 3-year strategies) that are consistent with the MDGs and have interim targets.

Evidence: The AsDB Board of Governors, which represents both donors and borrowers, formally ratified the goals of AsDF-9 in August 2004 (discussed in Donors' Report). The Country Strategy and Program for Nepal provides an example of the sort of long-term goal-setting typical to Country Strategies and Programs.

Are independent evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need?

Explanation: The independent Operations Evaluation Unit (OED), which reports directly to the Board of Directors, conducts regular assessments of AsDB projects, policies and procedures. The results of these evaluations are incorporated into the design of follow-on lending to ensure best practices. In addition, the Office of Auditor General conducts periodic, independent, and objective appraisals of ADB activities to ensure adequacy and effectiveness of controls, and to identify the means for improving economy, efficiency, and effectiveness in the use of resources. Perhaps most important is the oversight of effectiveness conducted by the Board of Directors and their host governments as part of their regular assessment of AsDB projects and policies.

Evidence: The Operations Evaluation Department issues an annual report summarizing its activities from the previous year and outlining priorities for the coming year. All evaluations for the coming year are reviewed by the Development Effectiveness Committee as well as the full Board of Directors. The Audit Committee of the Board of Directors has a similar supervisory role over the activities of the Office of Audit General. These functions are supplemented by the individual evaluations conducted during the year on an ad hoc basis by the Board of Directors. See OED annual report and TORs for the Development Effectiveness Committee and Audit Committee

Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program's budget?

Explanation: AsDF requests for donor resources are subject to close scrutiny during replenishment negotiations that occur every four years and through the annual budget, which is submitted to the Board of Directors for approval. Annual appropriation requests to Congress are based on commitments outlined by the ADB in the replenishment negotiations and in the annual budget document.

Evidence: As results management is rolled out at the ADB, resource requests will increasingly be measured against achievement of quantified output targets. These targets will be specified in the annual budget and in replenishment agreements. 2005 Budget document and AsDF-9 Donors' Report.

Has the program taken meaningful steps to correct its strategic planning deficiencies?

Explanation: The AsDF-9 agreement mandates a number of important strategic reforms including adoption of results-based management at all levels of the institution and greater weight given to economic performance and governance in country allocations. These reforms will be fully implemented by 2008. In addition, in 2001, the Bank initiated a reorganization process to ensure a better match between internal structures and strategic objectives. An independent assessment of the effectiveness of the AsDB's reorganization is ongoing.

Evidence: Reorganization strategy, initial independent evaluator's report, and AsDF-9 Donors' Report.

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: The AsDB regularly collects financial and performance data at the project level in the form of portfolio reviews in order to make adjustments as needed both for the individual project and at the country level. Portfolio reviews help assess country capacity and performance. Ex-post evaluations are carried out in the form of project performance audits. The performance-based allocation (PBA) system also ensures that better performers receive more financing over time.

Evidence: The Performance-Based Allocation (PBA) system is intended to direct more resources to better-performing countries as measured against a set of indicators including governance, macroeconomic performance and structural reforms. Countries which perform better over time are eligible to receive increased allocations; poor performers receive reduced allocations. The Bank's new PBA policy, adopted in 2004, significantly increases the weight given to performance and governance in the country rating formula. The PBA policy document provides additional details.

Are Federal managers and program partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) held accountable for cost, schedule and performance results?

Explanation: Any significant deviation from original schedule or cost must be approved by the Board of Directors as a waiver. At the project level, project managers hold contractors to predetermined standards of performance on quality, timing and cost. At the institutional level, donors assess the AsDF's development effectiveness every four years during replenishment negotiations to determine whether to make a contribution to the Fund and at what level. Further, AsDB management has initiated a new human resources strategy that rewards staff for achievement of development outcomes, rather than the quantity of loans approved.

Evidence: The AsDB signs management contracts with all project contractors. AsDF-9 Donors' Agreement outlines institutional reforms for the period 2005-9.

Are funds (Federal and partners') obligated in a timely manner and spent for the intended purpose?

Explanation: The AsDB maintains a system for ensuring that its funding provided only for activities that promote the objectives which have been agreed by donors to the AsDF replenishment. The Bank has also streamlined internal processes in recent years, which have shortened the lag between project completion and implementation. The AsDB has taken a series of steps to address a backlog of undisbursed loans.

Evidence: The AsDB has a system of internal controls (policies on procurement, financial management, disbursement, and financial statement audits), an internal auditor, a fraud and corruption investigative mechanism (the Integrity Division), and an independent Operations Evaluation Department. General oversight is provided by the Audit Committee of the Board of Directors.

Does the program have procedures (e.g. competitive sourcing/cost comparisons, IT improvements, appropriate incentives) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: International competitive bidding for major works is the norm, and guidelines are published by the Procurement Unit and repeated in the project documents that are submitted for Board approval. However, AsDF does not track a specific, institution-wide efficiency measure.

Evidence: See www.adb.org for further details.

Does the program collaborate and coordinate effectively with related programs?

Explanation: MOUs with other MDBs, the donor coordination process, the Country Strategy and Program process, and the Poverty Reduction Strategy Paper program all reinforce effective cooperation and collaboration. Numerous informal exchanges also occur between the AsDB and other MDBs on a range of subjects including anti-money laundering, remittances, HIV/AIDS, and regional integration. In the aftermath of the tsunami disaster, the AsDB worked closely and effectively with the World Bank, UNDP and other donors to coordinate provision of aid to affected countries. We hope AsDB will build on this cooperation in other areas.

Evidence: MOUs with the World Bank, EBRD and IaDB (internal documents).

Does the program use strong financial management practices?

Explanation: Financial management at the AsDB is fully integrated, incorporating international best practices. Financial statements are audited by independent external auditor annually. Internal audits are performed by the Office of Auditor General and reviewed by the Audit Committee of the Board of Directors. The risk management unit of the AsDB Treasury Department, procurement unit and AsDB Board of Directors provide an added layer of oversight. The Integrity Division of the Office Auditor General investigates allegations of corruption and fraud among ADB staff and in ADB-sponsored projects.

Evidence: The AsDB has a AAA credit rating. Annual independent auditor's reports.

Has the program taken meaningful steps to address its management deficiencies?

Explanation: During AsDF-9 negotiations, the Bank agreed to a number of significant reforms. The AsDF-9 Agreement delegates more authority to the Bank's Vice Presidents and provides for a more transparent and participatory disclosure and communications policy. Donors and Bank management also agreed to establish a dedicated Results Management Unit to oversee integration of results measurement in all project and grant documents and in country strategies. Internal oversight has been strengthened through the establishment of independent offices to assess the effectiveness of AsDB-funded projects and address the concerns of people adversely affected by Bank programs. In 2002, the Bank adopted a reorganization plan to streamline management and realign management processes with strategic priorities. An independent assessment of this reorganization process has been completed.

Evidence: The AsDF-9 Donors' Report and Independent Assessment of the Effectiveness of AsDB's Reorganizationl.

Does the program have oversight practices that provide sufficient knowledge of grantee activities?

Explanation: The AsDB has an internal portfolio monitoring and supervision system that tracks all ongoing projects and identifies programs at risk.

Evidence: 2003 report on loan and technical assistance portfolio performance.

Does the program collect grantee performance data on an annual basis and make it available to the public in a transparent and meaningful manner?

Explanation: The AsDB reports a wide variety of data on its member countries. This data is published in the AsDB annual report and in the annual Asian Development Outlook. This data is timely and credible and provides a basis upon which the public can evaluate performance data. In addition, as noted above, the Bank has an internal portfolio monitoring and supervision system that tracks all ongoing projects and identifies programs at risk.

Evidence: The 2004 AsDB Annual Report can accessed at www.adb.org. The Asian Development Outlook 2005 document can be found at www.adb.org/documents/books/ado/2005/default.asp. Also 2003 report on loan and technical assistance portfolio performance.

Has the program demonstrated adequate progress in achieving its long-term performance goals?

Explanation: The AsDF-9 replenishment negotiations were a significant step forward in tying Fund financing and activities to results-based management objectives. For example, the replenishment agreement establishes a dedicated Results Management Unit to oversee integration of results measurement in all project and grant documents and in country strategies. To this end, the Bank has made significant strides in improving the quantity and quality of hard, timebound data in its loan and country documents. Further, AsDB management has initiated a new human resources strategy that rewards staff for achievement of development outcomes, rather than the quantity of loans approved. All of the provisions of the AsDF-9 agreement must be fully implemented by the end of 2008.

Evidence: It is still too early to determine whether implementation of AsDF-9 has led to achievement of better development results. Progress Report on the AsDB's Reform Agenda (internal).

Does the program (including program partners) achieve its annual performance goals?

Explanation: Annual measures are under development. The long-term, strategic institutional targets established in the AsDB-9 Donors' Report will be implemented by the end of 2008 to promote the achievement of the long-term development goals. Progress against this agenda will be assessed by donors at the AsDF-9 Mid-Term Review in fall 2006. AsDF Mid-Term Reviews are conducted every two years. New annual institutional performance goals are under development. In the interim, AsDB budget documents are increasingly focused on a limited number of measurable, strategic outputs. Bank management also measures progress against current institutional goals through its annual budget review exercise and annual report to the Board of Directors.

Evidence: AsDF-9 Donors' Report, 2005 Administrative Budget, and 2005 Annual Report.

Does the program demonstrate improved efficiencies or cost effectiveness in achieving program goals each year?

Explanation: The AsDB's performance-based allocation (PBA) system allocates resources to AsDF recipients on the basis of country performance across a range of economic and social indicators, including governance and macroeconomic performance. In addition, the AsDB will invest $55 million in information technology and other capital expenditures for the period 2004-2009. Improvements in the Bank's information systems and technology infrastructure will support implementation of the results-based agenda approved in AsDF-9 and ensure that internal resources are deployed in a more efficient and cost-effective manner.

Evidence: PBA policy paper, Information Technology paper and AsDF-9 Donors' Report.

Does the performance of this program compare favorably to other programs, including government, private, etc., with similar purpose and goals?

Explanation: Comparisons to other regional development banks and other bilateral programs are difficult since common measurements of effectiveness do not exist upon which to rank the multilateral and bilateral donors.

Evidence: No common measurements of effectiveness across multilateral and bilateral donors currently exist. However, Treasury experience suggests that AsDB performance is on par with or better than that of the African Development Bank and Inter-American Development Bank.

Do independent evaluations of sufficient scope and quality indicate that the program is effective and achieving results?

Explanation: Accountability is reinforced through the independent Operations Evaluation Department, which assesses the effectiveness of the Bank's operations at the project, sector, and country level, and by the oversight provided by the Board of Directors. AsDF replenishment negotiations also provide an opportunity for donors to take stock of accomplishments and hold Bank management accountable for results.

Evidence: OED evaluations; AsDF-9 Donors' Report and Progress Report on the AsDB's Reform Agenda (internal).