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THE WORLD BANK - INTERNATIONAL FINANCE CORPORATION - MULTILATERAL INVESTMENT GUARANTEE AGENCY. Strengthening Trust Fund Management. 1.Update on Portfolio Developments 2.Progress in Implementing the new Trust Fund Management Framework 3.Fiduciary Principles Accord with the UN - PowerPoint PPT Presentation
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THE WORLD BANK - INTERNATIONAL FINANCE CORPORATION - MULTILATERAL INVESTMENT GUARANTEE AGENCY
THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
Strengthening Trust Fund Management
1. Update on Portfolio Developments
2. Progress in Implementing the new Trust Fund Management Framework
3. Fiduciary Principles Accord with the UN
4. Compliance and Financial Reporting
3THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
Update on Portfolio Developments
1. Update on Portfolio Developments
2. Progress in Implementing the new Trust Fund Management Framework
3. Fiduciary Principles Accord with the UN
4. Compliance and Financial Reporting
4THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
Cash contributions were 41% higher in FY07
Largest amounts went to: GFATM (28%) GEF (11%) GAVI (10%) Afghanistan Reconstr. (6%)
339 donor agencies: Sovereign Gov’ts 79% (value) Intergovernmental Orgs. 11% World Bank Group 6% Private Non-Profit Entities 3% Private For-Profit Orgs. 1%
Donor Category FY03 FY04 FY05 FY06 FY07
Sovereign
Number of Countries 63 73 67 73 78
Number of Agencies 123 149 149 165 157
Non-Sovereign
Multilaterals 8 8 5 6 5
Funds, Foundations, Agencies, etc. 70 93 125 119 177
78 101 130 125 182
Total Number of Different Agencies 201 250 279 290 339
Cash Contributions to WBG-Administered TFs FY03-07
4,940
4,750
5,214
7,334
3,899
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
FY2003
FY2004
FY2005
FY2006
FY2007
$ million
5THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
Disbursements increased 33% in FY07
TF spending was 23% of IDA+IBRD+TF disbursements in FY07 (12% in FY03):
60% TF resources went to regional/global activities
29% to IDA countries
6% to IBRD countries
5% to blend countries
WBG TF Disbursements FY2003-07
2,561
3,277
4,128
4,374
5,808
0 1,000 2,000 3,000 4,000 5,000 6,000
FY2003
FY2004
FY2005
FY2006
FY2007
US$ million
12,150
6,700
2,561
10,391
6,461
3,276
10,094
8,488
4,128
12,223
8,444
4,374
11,055
8,579
5,808
0
5,000
10,000
15,000
20,000
25,000
30,000
FY03 FY04 FY05 FY06 FY07
Total IBRD, IDA and TF Disbursements (US$ Millions)
TFs
IDA
IBRD
6THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
Biggest spending growth in Health, Post-Conflict/Disaster Recovery, & Environment
Sector/Theme FY03 FY04 FY05 FY06 FY07 FY03-07
Health 95 442 950 1,145 2,368 5,000Debt Service 801 1,005 878 771 267 3,722Post Conflict/Disaster Recovery 343 432 657 679 776 2,887Environment 483 490 529 642 684 2,830Other Bank-Executed 409 421 383 304 271 1,786Other Recipient-Executed 131 171 263 261 370 1,195Others 60 66 153 234 632 1,145Infrastructure and Finance 164 150 187 177 189 867IFC, MIGA and ICSID 73 99 128 160 240 700Education 0 0 0 2 11 13TOTAL 2,561 3,276 4,128 4,374 5,808 20,147
7THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
Largest growth continued to be in FIFs
FY03-07: BETF disbursements
increased from $186m to $330m
RETF disbursements grew from $984m to $2.1b (e.g., post-crisis)
FIF disbursements grew from $1.31b to $3.1b (mainly for sectoral initiatives)
1,015 TFs in FY07: 85% <$20m 61% <$5m 24% <$1m
MDTFs increased from 118 to 285 in FY03-07: 71% of total disbursements 59
196
709
966
73184
984
1,318
99236
1,151
1,791
128274
1,488
2,238
160283
1,456
2,476
240330
2,111
3,127
0
1,000
2,000
3,000
4,000
5,000
6,000
2002 2003 2004 2005 2006 2007
Disbursements by the Type of Trust FundsUSD millions
FinancialIntermediary
Recipient-executed
Bank-executed
Other BankGroup
Trust Fund Category
FY07 Disbursements Number of Active TFs
US$m % FY07-end %
IBRD/IDA-Administered TFs 5,568 96% 822 81%
Bank Executed 330 6% 419 41%
Recipient Executed 2,111 36% 304 30%
Financial Intermediary 3,127 54% 97 10%
Other Bank Group-Administered TFs 240 4% 195 19%
TOTAL 5,808 100% 1,015 100%
8THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
Progress in Implementing the new Trust Fund Management Framework
1. Update on Portfolio Developments
2. Progress in Implementing the new Trust Fund Management Framework
3. Fiduciary Principles Accord with the UN
4. Compliance and Financial Reporting
9THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
TF Management Framework:Consultation/Approval Process
Extensive consultation with donors during and after May 2007 Donor Forum, and internally with World Bank management and staff
Presentations to Audit Committee (July 2007) and Budget Committee (September 2007) of the World Bank’s Executive Board
Approval by Executive Directors – October 30, 2007
Three Pillars:
1. Enhanced Strategic Focus and Selectivity
2. Strengthened Risk and Results Management
3. Enhanced Operational Efficiency and Sustainability
+ Policy Principles for accepting and managing trust funds at the World Bank
10THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
TF Management Framework:Key Implementation Actions
Formal launch by Managing Directors and CFO – November 2007
Detailed TFMF Implementation Plan prepared – November 2007
Donors informed of new policy principles and fee structure – December 5
Each Vice Presidency designated a senior TFMF focal point – December
High-level Steering Committee to oversee implementation – January 2008
IFC harmonized TF policies with IBRD/IDA -- informed donors January 7
New policy framework for TF management (OP/BP 14.40) being finalized for Board -- expected to become effective July 1, 2008
11THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
TFMF Pillar 1:Enhanced Strategic Focus & Selectivity
1. Country level:
Reflect TFs more systematically in operational programs Integrate TFs in Country Assistance Strategy (CAS)
2. Region/Sector level:
Put TFs in broader context of regional/sector business needs Integrate into strategic discussions at VPU level through TF
Management Plans
3. Corporate level:
Institutional review of strategic issues and risks Systematic monitoring of major partnership and TF initiatives Senior Management Review of especially large/complex TF
and partnership proposals and financial engineering initiatives
12THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
TFMF Pillar 2:Strengthened Risk & Results Management
1. Strengthening Standard Controls: Continued investment in automation to improve compliance and reporting
User Survey of e-Trust Fund project tools completed in December; results incorporated in design of follow-on TFast systems project
Bank-wide communication on new TF typology -- December 19, 2007 Data quality initiative to standardize definitions and reports Mandatory learning & accreditation program being updated Reviewing internal processes to rationalize roles and enhance efficiency
2. Tailoring Specialized Controls to Type-specific Risks: Integrated BETFs into FY09-11 planning/budget exercise Aligning RETFs with IBRD/IDA lending processes/systems (risk-adjusted)
Inclusion of "RE" projects over $5 million in reporting to Board
FIF oversight/review at institutional level
3. Strengthened Results Focus: Greater rigor and consistency of monitoring and evaluation
13THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
TFMF Pillar 3:Enhanced Operational Efficiency & Sustainability
1. Revised TF fee structure effective January 1, 2008: Minimum threshold for establishing a new TF is now US$1 million Continued cost-sharing by the Bank for BETFs and TFs for project preparation Set-up charge of $35,000 for each new TF that carries a standard fee For all other TFs, full cost recovery through customized fee arrangements
2. New Externally-Financed Output (EFO) instrument: Specified deliverables/timeframe in support of Bank work program; no minimum
or maximum size, no fees; reporting focused on outputs Detailed guidelines and standard legal templates prepared Accounting procedures designed System design finalized 13 EFOs signed for total of $6.9m ($540,000 average size)
3. Other Work in Progress: Improved cost estimation process/guidelines for customized fee arrangements Introducing more rigorous procedures for capturing TF administration costs Revising methodology for fee income allocation to different Bank units
14THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
Fiduciary Principles Accord with the UN
1. Update on Portfolio Developments
2. Progress in Implementing the new Trust Fund Management Framework
3. Fiduciary Principles Accord with the UN
4. Compliance and Financial Reporting
15THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
Multi-Donor Trust Funds:Key Vehicle For Channeling Aid to Crisis and Post-Crisis Situations
New World Bank policy on Rapid Response to Crises and Emergencies: specifically highlighted importance of MDTFs in supporting
coordinated, timely and effective response of donor community to crises and emergencies
Since 1994, US$5.4 billion in crisis response assistance channeled through MDTFs: US$4.3 billion administered by WB US$1.1 billion administered by UN
Reflecting lessons learned, new policy emphasized: close coordination and collaboration of all development
partners for effective response to crises and emergencies more effective collaboration and partnership between WB & UN
16THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
Strengthening WB/UN Collaboration & Partnership in Crises & Emergencies
Respond to a commitment made to WB’s Board during discussion of Rapid Response policy
address systemic issues that undermined effectiveness of WB/UN cooperation in crisis & emergency situations
Reflect findings and recommendations of 2007 Review of Post-Crisis MDTFs
commissioned by Norway, Canada, Netherlands, U.K. in collaboration with the WB (“MDTF Review”), with UN consultations
17THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
Strengthening WB/UN Partnership:Instruments under Development
Partnership Statement on WB/UN Cooperation principles, linkage of planning processes, communications
protocol, and troubleshooting mechanisms
Fiduciary Principles Accord (FPA) designed to address problems and delays associated with
lack of interoperability between legal and fiduciary frameworks of WB & UN
18THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
FPA: Specific Issues being Addressed
For WB-administered TFs, Bank policies & fiduciary requirements normally apply to all TF recipients, including UN
This requirement has resulted in significant delays in: concluding legal agreements between WB & UN
start-up of urgent implementation activities by UN due to lack of interoperability between WB & UN internal rules and policies, particularly in fiduciary areas
In some situations (e.g., Sudan), donors had to agree specifically to permit UN to rely on its own fiduciary rules & procedures on an exceptional basis
Only other model -- fiscal agency (pure “pass-through” from WB to UN) -- undermines Trustee’s/Administrator’s ability to report on overall program progress or address serious issues (including fraud & corruption)
19THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
FPA: A New Model For WB/UN Partnership & Cooperation under Crisis MDTFs
FPA Premises: 1. Fiduciary requirements/rules & procedures of World Bank & UN are
designed to meet same due diligence goals & principles
2. Allow each organization to implement activities using own internal rules & procedures, based on an assurance that its rules & procedures are adequate to meet agreed fiduciary principles & goals
3. Reciprocity -- application of FPA to TFs administered by either WB or UN
FPA Elements:1. Agreement on shared fiduciary principles and goals in financial
management, procurement, project monitoring & reporting arrangements, addressing fraud & corruption, etc.
2. An assurance from each organization (to be renewed at agreed intervals) that its internal requirements, rules & regulations permit it to meet these principles & goals
3. An additional process for addressing allegations of fraud & corruption or other serious issues
20THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
FPA: Expected Outcomes
Quick, effective disbursement of MDTF funds in crisis & post-crisis situations when UN (or WB) implementation or direct support is needed
Timely conclusion of legal agreements based on an agreed template that allows each organization to implement such activities using own fiduciary rules & procedures
Consistent reporting on use of funds and implementation progress against expected outcomes & results
Enhanced role for donors as part of governing body to oversee progress and make decisions on proper recourse to address any issues
21THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
FPA: Topics for Discussion
Choice of Model Use of own fiduciary rules based on assurance against shared
fiduciary principles vs. compliance with Administrator’s fiduciary requirements
Roles Governing Body vs. Trustee/Administrator vs. Implementing
Agency
Information Needs of Donors Financial Reporting
Progress Reporting/Results Monitoring
Special Issues/Concerns
22THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
Compliance and Financial Reporting
1. Update on Portfolio Developments
2. Progress in Implementing the new Trust Fund Management Framework
3. Fiduciary Principles Accord with the UN
4. Compliance and Financial Reporting
23THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
Compliance & Quality Assurance:Overview
BETFs
Reimbursed US$87,000 in FY07 (cf US$10 million in FY02)
RETFs (more anecdotal)
Bank reimbursed US$20 million in FY02
Reimbursements in FY07 probably less than US$5 million in total, by countries
CSR/TQC/LOA review of process compliance “OK”
QAG findings (FY08) are encouraging and confirm that quality depends on management attention
FIFs often support global programs, evaluated by IEG or externally, or have only a trustee role for the Bank
24THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
Compliance & Quality Assurance:Looking Ahead
Learning and Accreditation Program will be updated by end-2009
New TF Management Framework links TF usage more tightly to Bank business units’ strategy and success indicators
Risk-based fiduciary framework on RETFs will further enhance compliance and results
Greater emphasis on GAC, country systems and donor harmonization, as well as new system-based tools & reports will improve oversight, consistency and standards
25THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
Financial Reporting:Agenda
Overview of Financial Reporting Arrangements
Trust Funds Portfolio
Trust Funds vary by type and size
Types of trust funds and growth (FY03-FY08)
Overview of the Single Audit
Single Audit FY08
Single Audit FY09 and Beyond
Questions for Consideration
1
26THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
Financial Reporting Arrangements:Overview
1. Statements of Receipts, Disbursements and Fund Balance (unaudited)• Required by administration agreements• Readily available to donors on the web
2. Trust funds subject to separate financial statement audit• When required by administration agreement• 80% of the portfolio by value at June 30, 2007; 13% by number of TFs
(circa 130 TFs) • Special request from donors• IFRS; US GAAP; special purpose financial statements; cash-based
3. Single Audit• 20% of the portfolio by value at June 30, 2007; 87% by number of TFs
(circa 850 TFs)• Required by administration agreements
2
Audit Arrangements
27THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
Rapid growth in volume, diversity, and complexity of portfolio since FY03
There are 3 types of TFs: Bank Executed Recipient Executed Financial Intermediary Arrangements
85% of the trust funds by number are less than $20m
Donor balance accounts currently total ~$180m
184
977
1,326
236
1,149
1,793
274
1,487
2,238
292
1,456
2,466
331
2,110
3,127
-
1,000
2,000
3,000
4,000
5,000
6,000
FY03 FY04 FY05 FY06 FY07
Disbursements by the Type of Trust Fund US$ millions
FinancialIntermediary
RecipientExecuted
BankExecuted
IFC andMIGA TFs
Funds Held in Trust (Cash Only)
-
5,000
10,000
15,000
FY
03
FY
04
FY
05
FY
06
FY
07
US
$ m
illio
ns
TOTAL
Donor Pledges
36
5258
714 16
0
10
20
30
40
50
60
70
FY06 FY07 FY08 (YTD Dec 2007)
Am
ou
nt
in U
SD
bil
lio
ns
Cumulative Pledge Net Receivable from Donors
0%
20%
40%
60%
80%
100%
Trust Funds by Size
62%
15%
3
> 20 million
5 million - $20 million
23%
< $5 million
Trust Fund Portfolio: Trust funds vary by type and size
28THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
Th
e W
orl
d B
an
k’s
O
pera
tion
al In
pu
t
Types of Trust Fund Arrangements
Trust Funds by TypeFY06-end Balance, USD
millions
ExternallyManaged
Stand Alone
Linked to WB Operations
Recipient Executed$2,110m
113% increase since FY03
Single Donor Multiple Donors
Financial Intermediary
$3,127m138% increase
since FY03
Bank Executed$571m
122% increase since FY03
Trust Funds by TypeFY07 Disbursements, US$
millionsBank Managed
4
Trust Fund Portfolio: Types of funds and growth (FY03-FY07)
29THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
Overview of the Single Audit
Annual assertion by management over internal controls surrounding cash–based financial reports
Management assertion on internal controls Contributions from Donors are recorded in the appropriate trust fund on a
timely basis
Assets from underlying funds held in trust are segregated from funds of the Bank
Transactions are recorded in the underlying financial records and the financial reporting of each trust fund are valid and complete
Investment income is earned and credited to the appropriate trust fund in accordance with the terms and provisions of the agreements
Disbursements follow established Bank policies and procedures
Fees for administering each trust fund are charged in accordance with the terms and provisions of the trust fund agreements
Financial reporting is in compliance with the requirements set forth in the legal agreements entered into with the donors
External auditor’s attestation
Applicable audit standard (AT 501 issued by the US AICPA)
5
30THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
Single Audit FY08
AT 501 is being revised which necessitates a change in single audit approach for FY09 and beyond
No longer able to combine different entities with different financial reporting dates and different bases of accounting (cash vs accrual)
What Donors will receive for FY08:
Management assertion on internal control over financial reporting (ICFR) - same as previous years
External auditor attestation will be under International Standards on Assurance Engagements (ISAE 3000) instead of US AICPA AT 501 audit standard
Trust funds for which accrual-based financial statements are prepared are excluded from the single audit
6
31THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
Single Audit FY09 and Beyond
Management assertion and auditor attestation likely to be similar to FY08 (change in auditors)
Bank proposes to prepare a combined financial statement for all cash based trust funds and provide a management assertion thereon
Audited under International Standards on Auditing
Provide additional information in the form of notes and disclosures
Considering strengthening the single audit in future years (e.g. using “agreed upon procedures”)
7
Pro Forma Stmt
32THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
Is the current level of audited TF financial information provided by the World Bank satisfactory?
Is the TF financial and other information that is currently available on the web satisfactory?
Will the future arrangements for the single audit
satisfy the needs of Donors?
Questions for Consideration
33THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
Current Audit Arrangements
34THE WORLD BANK - MULTILATERAL INVESTMENT GUARANTEE AGENCY - INTERNATIONAL FINANCE CORPORATION
Single Audit FY09 and Beyond
Note:
Figures above are for illustrative purposes only
Figures are unaudited and subject to change