2010 trust fund annual report - The World Bank€¦ · Figure 7. Top 10 Donors to IBRD/IDA Trust Funds in FY10 14 Figure 8. Annual RETF Disbursements in Fragile States, FY06-FY10

Concessional Finance and Global Partnerships Vice Presidency

2010 trust fund annual report

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International Bank for Reconstruction and Development (IBRD)

International Development Association (IDA)

International Finance Corporation (IFC)

Multilateral Investment Guarantee Agency (MIGA)

International Center for Settlement of Investment Disputes (ICSID)

the world bank group

Fiscal Year Ended June 30, 2010

Concessional Finance and Global Partnerships Vice Presidency

The World Bank1818 H Street, NW

Washington, DC 20433


ii

Acknowledgments

This report was prepared by Magdalena Manzo (team leader), Valery Ciancio, Rajesh Gopal, Kazuki Itaya, Juan

Fernando Machado, Galina Menchikova, Kjell Nordlander, Deborah Schermerhorn, and Luzviminda Tatlonghari.

Buenaflor Cabanela provided data support and analysis with assistance from Natalia Antsilevich, Praveen

Desabatla, Jiangwei Cui, and Zhimei Xu. The report benefited from guidance and inputs from Priya Basu, Juan

Carlos Mendoza, and Roberto Tarallo. Invaluable comments were received from Carol Bonney, Rocio Castro,

Lalit Kishore Chirimar, Lynette Kieti, David Potten, Sajjad Shah, and Lydia Kruse Tietz. The authors express

their sincere gratitude to Patricia Rogers for her review and editorial assistance.

ABBREVIATIONS AND ACRONYMS 1

FOREWORD 2

SECTION 1. FY10 TRUST FUND PORTFOLIO: HIGHLIGHTS AND TRENDS 5

Overall Portfolio Trends 5 Trust Funds in the International Aid Architecture 6 Cash Contributions 7 Disbursements 10 Trust Fund Assets 11

SECTION 2. IBRD/IDA TRUST FUNDS 13

Overall Trends 13 Use of Funds 16

SECTION 3. FINANCIAL INTERMEDIARY FUNDS 23


SECTION 4. IFC TRUST FUNDS 33


SECTION 5. TRUST FUNDS IN ACTION: ACHIEVEMENTS AND RESULTS 39

Alignment with Corporate Priorities 39 Achievements on the Ground 40

SECTION 6. MANAGEMENT OF TRUST FUNDS 47

Trust Fund Management Framework 47 Financial Management of Trust Funds 48 Risk Monitoring and Control Frameworks 50

ANNEX 1. EXCERPTS OF THE WORLD BANK GROUP’S MODIFIED CASH BASIS TRUST FUNDS

SINGLE AUDIT REPORT, WITH A FULL VERSION ON CD-ROM 55

ANNEX 2. TRUST FUND GLOSSARY 75

BOXES

Box 1. Examples of RETF Initiatives 18Box 2. Examples of BETF Initiatives 21Box 3. Management of Trust Funds: Bank Services at a Glance 48

Table of Contents

iv

FIGURES

Figure 1. Annual Cash Contributions by Trust Fund Type, FY06-FY10 7Figure 2. Ten Largest Donors to WBG-administered Trust Funds: Cumulative Contributions during FY06-FY10 9Figure 3. WBG-administered Trust Funds: Annual Disbursements, FY06-FY10 10Figure 4. WBG-administered Trust Funds: FY10 Disbursements by Region 10Figure 5. WBG-administered Trust Funds: Assets at end-FY10 11Figure 6. IBRD/IDA Trust Funds: Annual Cash Contributions, Disbursements, and Grant Commitments 13Figure 7. Top 10 Donors to IBRD/IDA Trust Funds in FY10 14Figure 8. Annual RETF Disbursements in Fragile States, FY06-FY10 16Figure 9. Annual Disbursements from IBRD, IDA, and RETFs, FY06-FY10 17Figure 10. Regional Share of RETF Disbursements for FY10 18Figure 11. Sector Allocation of RETF Disbursements for FY10 18Figure 12. Total Bank Expenditures Funded by Bank Budget and BETFs, FY06-FY10 19Figure 13. Selected Business Activities Funded from Bank Budget and BETFs in FY10 20Figure 14. FIF Share of Bank’s Total Trust Fund Portfolio—Funds Held in Trust 23Figure 15. FIF Portfolio: Cumulative Contributions, Commitments, and Cash Transfers 24Figure 16. Largest FY06–FY10 Cumulative Cash Contributions to FIFs 26Figure 17. FIF Transfers by Focal Area 26Figure 18. GFATM Financial Status 27Figure 19. Ten Largest GFATM Beneficiary Countries, FY10 28Figure 20. GEF Financial Status 28Figure 21. CIFs’ Financial Status 29Figure 22. IFFIm Financial Status 30Figure 23. AMC Financial Status 31Figure 24. IFC TFs: Cash Contributions by Activity Type 33Figure 25. IFC TFs: Cash Contributions, Funds Held in Trust, and Disbursements 34Figure 26. FY10 IFC Signed Donor Commitments for Advisory Services by Donor Group 34Figure 27. FY10 IFC Signed Donor Commitments for Advisory Services 34Figure 28. Regional Distribution of Donor Contributions to Advisory Services 35Figure 29. Trust Fund Investment Portfolio Asset Composition, FY09 and FY10 50

TABLE

Table 1. Cash Contributions to Trust Funds, by Donor Type, FY06-FY10 8

ATTACHMENT: CD-ROM

SINGLE AUDIT OF TRUST FUNDS:

n Management’s Assertion Regarding Effectiveness of Internal Controls over Financial Reporting of the Modified Cash Basis Trust Funds;

n Independent Auditor’s Report on Management’s Assertion Regarding Effectiveness of Internal Controls over Financial Reporting of the Modified Cash Basis Trust Funds;

n Independent Auditors’ Report on the Combined Statement of Receipts, Disbursements, and Fund Balance;

n Combined Statement of Receipts, Disbursements, and Fund Balance; and n Notes to the Combined Statement of Receipts, Disbursements, and Fund Balance.

Dollar figures throughout this report are U.S. dollars. The source of all tables and figures, unless otherwise noted, is the Concessional Finance and Global Partnership Vice Presidency of the World Bank. Questions and comments regarding this report may be e-mailed to [email protected].

12010 Trust Fund Annual Report

AHIF Avian and Human Influenza Facility AMC Advance Market CommitmentsARTF Afghanistan Reconstruction Trust FundAS Advisory servicesBETF Bank-executed trust fundBNPP Bank-Netherlands Partnership ProgramCCRIF Caribbean Catastrophe Risk Insurance

Facility CERs Carbon emission reductions CFP Concessional and Global PartnershipCIF Climate Investment Funds COSO Committee of Sponsoring Organizations of

the Treadway CommissionCTF Clean Technology FundDAC Development Assistance Committee

of the OECDEEF EcoEnterprises Fund EFA-FTI Education for All Fast-Track InitiativeFIF Financial intermediary fundGAC Governance and anticorruption GEF Global Environment Facility GFA IFFIm/GAVI Fund Affiliate GFATM Global Fund to Fight AIDS, Tuberculosis

and MalariaGFRP Global Food Crisis Response ProgramGPF Governance Partnership Facility GTLP Global Trade Liquidity Program

IBRD International Bank for Reconstruction and Development

ICSID International Centre for Settlement of Investment Disputes

IDA International Development Association IFC International Finance Corporation IFFIm International Finance Facility for

Immunization ITF Iraq Trust Fund JSDF Japan Social Development FundKCP Knowledge for Change Program MDB Multilateral development bank MDTF Multidonor trust fund MDTF-N The Sudan National Multi-Donor Trust FundMDTF-SS Multi-Donor Trust Fund for Southern SudanMIGA Multilateral Investment Guarantee Agency OECD Organisation for Economic Co-operation

and DevelopmentRETF Recipient-executed trust fundSCF Strategic Climate FundSEETF South-South Experience Exchange FacilityTFMF Trust Fund Management Framework TF Trust fundVPU Vice-Presidential Unit (of the World Bank)WBG World Bank GroupWSP Water and Sanitation Program

Abbreviations and Acronyms

2

The World Bank Group (WBG) trust fund portfolio continues to grow reflecting the increased importance of trust funds as a vehicle for channeling concessional development finance. FY10 was marked by an overall increase in terms of trust fund contributions and disbursements, following a relative slow down in FY09. Specifically, cash contributions reached US$11.5 billion, a 33 percent increase from FY09. Similarly, annual disbursements registered an all-time high of US$9.5 billion in FY10, 37 percent higher than in FY09.

As the global aid architecture evolves, so does the nature of trust funds. Three types of trust funds are held by the WBG:

n The IBRD/IDA Trust Funds support activities directly implemented or supervised by IBRD or IDA. Cash contributions and disbursement levels for these trust funds have almost doubled over

the past five years, with total cash contributions reaching US$4.3 billion in FY10. Two categories of IBRD/IDA Trust Funds exist:

n Recipient Executed Trust Funds (RETF) disbursements in FY10 remained relatively stable at about US$3.1 billion. RETF grants are often extended to Bank borrowers for the purpose of co-financing IBRD/IDA projects, investments, and institutional capacity-build-ing initiatives. As the main financing instru-ments available to finance investment and technical assistance projects in fragile and conflict-affected areas, RETFs have provided significant support to the World Bank’s work in fragile states, including in Afghanistan, Iraq, Kosovo, Southern Sudan, Timor Leste, and West Bank and Gaza. RETF flows to fragile states have increased from just over US$630 million in FY06 to US$1.2 billion each in FY09 and FY10, accounting for 39 percent of total RETF annual disbursements.

Foreword

Axel van TrotsenburgVice PresidentConcessional Finance and Global PartnershipsThe World Bank


n Bank Executed Trust Funds (BETF) disburse-ments in FY10 increased by 22 percent to US$560 million from US$460 million in FY09. BETFs contribute funding for the World Bank’s advisory work and knowledge agenda, with emphasis on human development, social services, finance and private sector, governance, and environment.

n In Financial Intermediary Funds (FIFs) the Bank acts as financial intermediary, facilitating the flow of funds from one or more donors to various recipients using multiple implementing agencies. This arrangement is particularly helpful in addressing development priorities requiring collective action among multiple development partners. Cash contributions to FIFs increased from US$4.74 billion in FY09 to US$6 billion in FY10 and they represent the bulk of the increase

in contributions to WBG trust funds during FY10. Most of this new funding fulfills prior donor commitments to the Global Fund to Fight Aids, Tuberculosis and Malaria (GFTAM) and the Climate Investment Funds (CIFs) which became operational in FY10.

n The role that IFC has played in providing financial support to firms in developing countries at a time of global banking liquidity crises is behind the exceptional growth in IFC trust funds during the last two fiscal years. Through FY08, most of the IFC trust funds supported capacity development through technical assistance. Since then, donors have supported the funding of several facilities to support trade, microfinance, and other business areas affected by the global crisis. Cash contri-

butions to the IFC trust funds in FY10 reached over US$1.1 billion, four times the average

amount of the previous three fiscal years.

In view of the distinct nature of these three types of instruments and to facilitate the understanding of their respective roles, this FY10 Trust Fund Annual Report is divided into separate sections for each one of them.

Significant progress has been made in implementing the Trust Fund Management Framework, approved in 2007 to better integrate trust funds into the Bank’s strategies and business processes and improve their management. Internal processes have been revamped to ensure that trust funds are better aligned with the Bank’s overall strategy and that their management is achieved in a cost-effective way. However, challenges remain, and further work is needed to address fragmentation of the trust fund portfolio. Some consolidation has already been achieved over recent years, notably through the expanded use of multi-donor trust funds. Going forward, efforts will aim at establishing a more structured approach to donor relations and fundraising within the World Bank Group, improving the integration of trust funds into the Bank’s multiyear budget planning framework, and achieving greater alignment around country assistance strategies and improving the integration of trust funds in the Bank’s results agenda.

4


As of June 30, 2010, the World Bank Group (WBG)—comprising the International Bank for Reconstruction and Development (IBRD), the International Develop-ment Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID)—holds US$26 billion in trust for a range of donors. These trust funds support country-level operations, emergency responses, knowledge initiatives, advisory services, and collective action across countries on global priorities such as climate change, public health, and food security. Thus they have become important vehicles for the WBG to engage in a wide range of partnerships and leverage development assistance to client countries.

The WBG’s role and responsibilities in managing the trust funds vary depending on the type of fund. To better reflect these differences, a new reporting framework was introduced in June 2010 that distin-guishes among the following three types of funds:1

n IBRD/IDA trust funds (IBRD/IDA TFs). The Bank2 manages the funds and implements or super-vises the activities financed. The use of IBRD/IDA TFs is split between Bank-executed trust funds (BETFs), which are used in support of the Bank’s work program, and recipient-executed trust funds (RETFs), under which funds are provided to

1 This departs from the trust fund typology used in previous Trust Fund Annual Reports. Whereas the aggregate number and overall value of trust fund accounts are consistent with previous treatment, the breakdown by trust fund type differs. The distinction of what constitutes a FIF has been sharpened and circumscribed by specified roles assumed by the WBG as trustee; these are elaborated in Section 3 of this report. Accordingly, a number of trust funds—e.g., carbon funds and debt service trust funds—that used to be classified as FIFs are now classified as IBRD/IDA TFs. Additionally, MIGA’s portfolio is now combined with IBRD/IDA TFs.

2 Throughout this report, “the Bank” refers to IBRD/IDA.

a third party, normally in the form of project financing, and supervised by the Bank.

n Financial intermediary funds (FIFs). The Bank, as trustee, administrator, or treasury manager, provides an agreed set of financial and adminis-trative services, managing donor contributions and transferring them to partner entities.

n IFC trust funds (IFC TFs). IFC manages the funds in support of IFC advisory services and donor-funded investments.

For IBRD/IDA and IFC TFs, the World Bank Group is normally responsible for all financial and program-matic functions, including oversight of the operation-al use of the funding. For FIFs, the partner imple-menting entity or the governing board or secretariat acting on behalf of the donors exercises oversight over the ultimate use of funds.

This Annual Report presents the trends in the trust fund portfolio, describes the portfolio’s growing share in the WBG’s business, and reports on results achieved on the ground. It also provides an update on progress made in enhancing the management of trust funds, describes the associated financial management and reporting systems, and presents the Single Audit for FY10.3

OVERALL PORTFOLIO TRENDS

The WBG’s trust fund portfolio has grown substan-tially in recent years. The cash contribution level, disbursement level, and total amount of funds held in

3 The Single Audit refers to Management’s Assertion regarding Effectiveness of Internal Controls over Financial Reporting of Modified Cash Basis Trust Funds, and the Combined Statements of Receipts, Disbursements and Fund Balance, together with the Independent Auditors’ Reports on those statements.

FY10 Trust Fund Portfolio:Highlights and Trends

1

6

trust have all more than doubled between FY06 and FY10. Particularly in the last two years, portfolio growth has largely been driven by FIFs: in FY10, cash contributions to FIFs were 134 percent more than in FY06, while contributions to IBRD/IDA TFs were 81 percent more than in FY06. Contributions to IFC TFs increased by nearly 500 percent since FY06, albeit from a small base.

After a relative slowdown in FY09, FY10 was marked by a strong overall recovery in both contributions and disbursements. Cash contributions from donors reached an unprecedented level of US$11.5 billion, a 33 percent increase from FY09. Similarly, annual disbursements registered an all-time high of US$9.5 billion, 37 percent higher than in FY09.

The total number of active trust funds grew from 927 in FY06 to 1075 by the end of FY10; of these, 55 are FIFs, 773 are IBRD/IDA TFs, and 247 are IFC TFs.4 In addition, a non-trust- funded FIF, the pilot Pneumo-coccal Advance Market Commitment (AMC) was created in FY09.5 Among the major new trust funds activated in FY10 were the Global Agriculture and Food Security Program, a FIF with contribution commitments from donors of US$932 million, and IFC TFs for the Global Trade Liquidity Program (GTLP), which attracted US$882 million of contribu-tion commitments from donors.

Despite the dramatic growth in the value of the trust fund portfolio, the numbers of trust funds have remained relatively stable. This is largely because the WBG has encouraged donors to pool their contribu-tions in larger multidonor trust funds (MDTFs), rather than establishing numerous small single-donor trust funds. MDTFs facilitate donors’ building consensus around shared objectives, help harmonize program

4 At the end of FY09, there were 761 active IBRD/IDA TFs. During FY10, 117 of these trust funds closed and 129 new trust funds were activated, resulting in 773 active IBRD/IDA TFs at end-FY10. There were 50 FIF accounts as of end-FY09; 4 of these closed in FY10, while 9 new accounts were activated, bringing the total number of active FIF accounts to 55 at end-FY10. Similarly, at the end of FY09 there were 233 IFC TFs. During FY10, 38 of these were closed and 52 new trust funds were activated, resulting in 247 active IFC TFs at end-FY10.

5 AMC transactions are recorded in IBRD books and disclosed in IBRD financial statements.

implementation arrangements, and reduce fragmen-tation in the delivery of development assistance. Although MDTFs number only 427, or 40 percent of total active trust funds in FY10, their share of the portfolio has continued to increase, now accounting for 79 percent of all funds held in trust and 80 percent of FY10 disbursements, up from 73 percent and 74 percent, respectively, in FY06.

TRUST FUNDS IN THE INTERNATIONAL AID ARCHITECTURE

The growing WBG trust fund portfolio reflects the importance of trust funds as a vehicle for channeling concessional development assistance. A significant proportion of bilateral aid from OECD-DAC6 members is channeled through the multilateral system through non-core contributions that are earmarked for specific use—known as multi-bi aid. According to the 2010 DAC Report on Multilateral Aid,7 multi-bi aid amounted to US$14 billion in 2008 and represented about one-third of total DAC contributions to multi-laterals. In 2008, the WBG—the second-largest channel for DAC trust funds—received US$2.4 billion in contributions to IBRD/IDA and IFC TFs.8 As the DAC report noted, the use of multi-bi aid gives donors increased visibility and influence, reduces transaction costs, and allows them to target contributions to countries where they have no bilateral presence. For the World Bank, multi-bi aid helps it scale up and engage in a wider range of activities, such as expand-ing its engagement in fragile and crisis-affected countries. Providing multi-bi aid through existing institutions rather than establishing new institutions or parallel bilateral initiatives may also reduce the fragmentation of aid; however, the creation of numer-ous funds with potentially overlapping objectives and mandates indicates a need for coordination both within and across multilateral institutions or programs.

6 OECD-DAC: Development Assistance Committee of the Organi-sation for Economic Co-operation and Development.

7 Refer to OECD website; this is the second DAC report on this topic after the 2008 DAC Report on Multilateral Aid, issued in 2009. The 2010 report covers 2008 data.

8 The World Food Program was the largest recipient of non-core contributions from DAC members, receiving US$2.9 billion, and UNDP received US$1.8 billion.


Trust funds in the WBG facilitate development work in multiple dimensions, including promoting cutting-edge research, extending just-in-time financial assistance in response to crises, and piloting innova-tive solutions to intractable development problems. At the same time, they serve as platforms to actively engage various stakeholders—donors, recipients, private sector, and civil society—allowing them to articulate their ideas and priorities, but more importantly, drawing them in to be part of the solution.

CASH CONTRIBUTIONS

Between FY06 and FY10, annual cash contributions grew at an average annual rate of 22 percent, from US$5.2 billion to US$11.5 billion. The FY10 cash contributions were almost equally divided between FIFs and other trust funds: US$6.0 billion (52 percent) was directed towards FIFs, US$4.3 billion (38 percent) to IBRD/IDA TFs, and US$1.1 billion (10 percent) to IFC TFs (see Figure 1).

US

$ b

illi

on

s

Financial intermediary funds 6.034.744.493.272.57

IBRD/IDAtrust funds 4.343.654.013.742.40

IFC trust funds 1.140.300.240.300.23

FY10FY09FY08FY07FY06

0

1

2

3

4

5

6

7(includes AMC)

Figure 1. Annual Cash Contributions by Trust Fund Type, FY06–FY10(US$ billions)

Annual cash contributions from donors

reached an unprecedented level of US$11.5 billion.

8

Over the five-year period FY06-FY10, 58 sovereign governments contributed to WBG trust funds, accounting for 83 percent of total contributions during the period (see Table 1). Of these, 10 donor countries provided a total of US$30 billion, or 73 percent of total cash contributions during the period. The United States has primarily contributed to FIFs and is the single largest FIF contributor, accounting for 22 percent of total cash contributions to FIFs since FY06. The

United Kingdom has focused its contributions on IBRD/IDA TFs and is the single largest contributor to them, accounting for 19 percent of total contributions to IBRD/IDA TFs during the past five years. After the WBG, the United Kingdom is the largest contributor to IFC TFs, accounting for 20 percent of total cash contributions to them since FY06. (Figure 2 shows the cumulative contributions of the 10 largest donors over the period.)

In FY10, governments and their agencies accounted for 86 percent of total cash contributions to WBG trust funds. The two leading donors were the United States, which contributed US$1.8 billion, and the United Kingdom, which contributed the equivalent of US$1.7 billion. Intergovernmental entities, including the European Commission, accounted for 9 percent of FY10 contributions, and the WBG accounted for 2 percent. The balance came from other international organiza-tions, foundations and not-for-profit organizations, and corporations and other for-profit organizations, each accounting for 1 percent.

Contributions from non-OECD-DAC member coun-tries—“emerging donors”—increased significantly over the last five years; their share of total contribu-tions rose from 1 percent in FY06 to 5 percent in FY10. Cash contributions from these donors more than doubled from US$230 million in FY09 to US$610 million in FY10.

Contributions from the private sector increased nearly sixfold between FY06 and FY10, as the number of private foundations, corporations, and other nonprofit and for-profit entity donors doubled from 59 to 103. The increase in number is partly due to

Donor Type FY06 FY07 FY08 FY09 FY10

Sovereign governments 4,148 5,778 7,301 7,384 9,869

Intergovernmental institutions 579 790 797 492 1,032

World Bank 421 408 284 343 208

Private nonprofit entities 22 250 147 268 173

Private for-profit organizations 21 77 162 140 114

Other organizations 10 12 52 59 120

Total 5,200 7,314 8,743 8,686 11,516

Table 1. Cash Contribution to Trust Funds, by Donor Type FY06–FY10(US$ millions)


Figure 2. Ten Largest Donors to WBG-administered Trust Funds: Cumulative Contributions during FY06–FY10(US$ billions)

US

$ b

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2

4

6

IFC trust fundsIBRD/IDA trust fundsFinancial intermediary funds

NorwaySpainFranceJapanGermanyCanadaNetherlandsEuropeanCommission

UnitedStates

UnitedKingdom

(includes AMC)

the participation of private firms in various IBRD/IDA-administered carbon funds. The largest private sector contributor was the Bill and Melinda Gates Foundation, which over the last five years donated US$530 million to FIFs, US$187 million to IBRD/IDA TFs, and US$8 million to IFC TFs.

Finally, in FY10 donors committed to US$10.1 billion in new contributions through signed legal agree-ments, slightly less than the US$10.6 billion signed in the previous year.

Contributions from emerging donors

increased significantly over the last five years.

10

Trust funds are used to finance a wide range of projects and activities, and they can be country-spe-cific, regional, or global in scope. Figure 4 presents a geographical breakdown of fund deployment during FY10 based on disbursement flows from IBRD/IDA and IFC TFs, and on information provided by FIF partners. The Sub-Saharan Africa Region continues to be the largest beneficiary of trust funds; indeed, its share increased from previous years. The shares of funds going to the South Asia and Middle East and North Africa Regions declined, while the shares for Latin America and East Asia remained relatively stable.

DISBURSEMENTS

Disbursements grew from US$4.4 billion in FY06 to US$9.5 billion in FY10, an average annual growth rate

of 21 percent. Of the total disbursed in FY10, FIFs accounted for US$4.8 billion (more than 50 percent), IBRD/IDA TFs for US$3.7 billion, and IFC TFs for the remaining US$1.0 billion (see Figure 3).

Figure 3. WBG-administered Trust Funds: Annual Disbursements, FY06-FY10(US$ billions)

Financial intermediary funds

IBRD/IDAtrust funds

IFC trust funds


US

$ b

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4.793.033.213.012.36

3.693.623.282.591.87

1.000.270.240.190.13

0

1

2

3

4

5(includes AMC)

Africa

East Asia and Pacific

Europe and Central Asia

Latin America andthe Caribbean

Middle East andNorth Africa

South Asia

Global

(includes AMC)

36%

12%6%

4%

5%

9%

28%

Figure 4. WBG-administered Trust Funds: FY10 Disbursements by Region


TRUST FUND ASSETS

At end-FY10, funds held in trust by the WBG amount-ed to US$26 billion,9 or 8 percent more than the US$24 billion posted at the end of FY09. These assets consisted of US$22.3 billion in cash and investments and US$3.7 billion in promissory notes.10 Nearly 60 percent of the funds held in trust was attributable to FIFs, 38 percent to IBRD/IDA TFs, and the balance to IFC TFs (see Figure 5). Four FIF programs—Global Fund to Fight AIDS, Tuberculosis and Malaria (GFATM), Global Environmental Facility (GEF), Climate Invest-ment Fund (CIF), and International Finance Facility for Immunization (IFFIm) and its disbursing arm GAVI Fund Affiliate (GFA)—collectively accounted for 52 percent of the total fund assets held.

In addition, at the end of FY10, contributions receiv-able11 from donors based on signed contribution agreements stood at US$12.4 billion, 10 percent less than the US$13.8 billion at end-FY09. Three FIF programs—IFFIm/GFA, GFATM, and CIF—together accounted for nearly 60 percent of the total contribu-tions receivable.

9 Including AMC funds.10 “Cash and investments” refers to the investment portfolio

composed of amounts paid into trust funds administered by the WBG, but not yet disbursed. This investment portfolio is maintained separately from the assets of the WBG; however, all trust fund assets are managed on a commingled basis, considering investment horizons and the cash flow profiles of different programs. “Promissory notes” refers to non-negotiable, non-interest-bearing demand notes, which are generally encashed according to schedules agreed with the donors and are recorded as cash contributions upon encashment.

11 “Contributions receivable” refers to funds provided to a trust fund administered by the Bank on the basis of a signed agreement between the WBG and donor(s) but not yet paid in.

Figure 5. WBG-administered Trust Funds: Assets at end-FY10

(US$ billions)

US

$ b

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Cash and investments on hand

Promissory notes on hand

Contributions receivable

0

5

10

15

20

25

IFC trust fundsIBRD/IDAtrust funds

Financialintermediary

funds

(includes AMC)

12


OVERALL TRENDS

For IBRD/IDA trust funds (IBRD/IDA TFs), the Bank is normally responsible for financial management as well as programmatic functions, including exercising oversight over the operational use of the funds. The larger part of the IBRD/IDA TF portfolio consists of recipient-executed trust funds (RETFs), under which funds are provided to the recipient under a Grant Agreement with the Bank.12 Most RETFs provide financing to projects carried out by recipient country agencies, including nongovernment entities, and normally supervised by the Bank. In addition, IBRD/IDA also administers a relatively small share of trust funds that help client countries service their debt repayments and other obligations. Trust funds used in

12 Under the new reporting framework, carbon funds are classified as RETFs. Instead of Grant Agreements, Emission Reduction Purchases Agreements are used for carbon fund grants.

support of the Bank’s work program—Bank-executed trust funds (BETFs)—typically finance the expenses incurred by the Bank to deliver such things as techni-cal assistance to client countries, policy and research studies, implementation support, and global knowl-edge products. Many IBRD/IDA TFs support both Bank and recipient-executed activities.13 Whether a grant is a BETF or RETF is determined when funds are allocated to particular projects and activities, rather than when the donor contributions are received. Cash contributions and disbursement levels for IBRD/IDA TFs have doubled over the past five years (see Figure 6). Contributions grew at an average annual rate of 16 percent and disbursements at an average annual rate of 18 percent.

13 Such a trust fund was referred to as a “hybrid trust fund” in the 2009 Trust Fund Annual Report.

IBRD/IDA Trust Funds2

US

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DisbursementsCommitmentsCash contribution

0

1

2

3

4

5


Figure 6. IBRD/IDA Trust Funds: Annual Cash Contributions, Disbursements, and Grant Commitments(US$ billions)

Note: Commitment refers to the amount of financing approved for projects at the disbursing grant level.

14

The US$4.3 billion in cash contributions directed to IBRD/IDA TFs in FY10 represented a 19 percent increase over the FY09 level.14 In FY10, the United Kingdom was the largest contributor to IBRD/IDA TFs, followed by Spain (see Figure 7). Between FY06

14 Carbon funds, IBRD/IDA debt service trust funds, and secretariat expenses and administration costs associated with FIFs, which were all previously reported as FIFs, are now classified as IBRD/IDA TFs in the new typology structure. In addition, Bank trust fund transfers to IFC and MIGA’s trust funds are also now classified as IBRD/IDA TFs. Accordingly, the level of cash contributions for IBRD/IDA TFs in FY09 using the new typology amounted to US$3.6 billion, instead of the US$3.2 billion previously reported for FY09.

and FY10, the five largest donors—the United King-dom, European Commission, the Netherlands, Canada, and Spain—together accounted for 56 percent of total cash contributions.

US

$ m

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0

100

200

300

400

500

600

700

800

GermanySwedenAustraliaNorwayNetherlandsCanadaEuropeanCommission

United StatesSpainUnitedKingdom

Figure 7. Top 10 Donors to IBRD/IDA Trust Funds in FY10(US$ millions)

RETFs have provided significant support

to the World Bank’s work in fragile states.


In FY10, 129 new IBRD/IDA TFs were established. The top five in terms of signed donor commitments were the EU Food Crisis Rapid Response Facility (US$144 million), Bank-Netherlands Partnership Program–Renewal (US$121 million), Multidonor Trust Fund for Climate Change Program in the People’s Republic of Bangladesh (US$97 million), Regional Power Infrastructure Projects in Southern Africa (US$87 million), and Rapid Social Response Multidonor Trust Fund (US$59 million).

FY10 disbursements of US$3.7 billion from IBRD/IDA TFs represented a 2 percent increase from FY09.15 Of total disbursements, 74 percent were from multidonor trust funds (MDTFs). RETF disbursements in FY10 remained relatively stable at about US$3.1 billion, while those from BETFs increased by 22 percent to US$560 million from US$460 million in FY09.

In FY10, as in previous years, the majority of IBRD/IDA TFs disbursement (nearly 70 percent in FY10) was deployed through a programmatic approach. Unlike non-programmatic or free-standing trust funds, which typically finance a predetermined project or set of activities, programmatic trust funds are disbursed in two stages. In the first stage, donors commit funds on the basis of an agreed broad strategic develop-ment objective to be pursued through a program of activities over multiple years; and in the second stage, funding is assigned to specific activities (i.e., projects) in accordance with the agreed criteria and governance arrangements. The programmatic approach provides longer-term financing while allow-ing for flexibility in the selection of projects and creating opportunities for donors and stakeholders to participate in setting strategic priorities.

Between FY06 and FY10, nearly 60 percent of total disbursements from IBRD/IDA TFs were attributable to 20 programs. The Afghanistan Reconstruction Trust Fund (ARTF) accounted for the largest share of disbursements, disbursing US$2.4 billion, or 16 percent of total disbursements during the period. Other programs that accounted for large disbursements during the last five years were the Global Environ-

15 Using the new typology, disbursements from IBRD/IDA TFs in FY09 amounted to US$3.62 billion, compared to the US$3.2 billion previously reported.

16

Figure 8. Annual RETF Disbursements in Fragile States, FY06-FY10(in US$ millions and as percent of total RETF disbursements)

Note: The annual disbursement level is based on the set of countries designated as fragile states for the reporting year.

0

300

600

900

1200

1500


10%

20%

30%

40%

50%

Percentage of RETFsOther Fragile StatesAfghanistan

US

$ m

illi

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s

ment Facility (with IBRD as implementing agency), Education for All-Fast Track Initiative (EFA-FTI), carbon funds, and the MDTFs for Sudan, Aceh, and West Bank and Gaza. The trust fund programs that disbursed the most during FY10 were the ARTF (US$435 million), EFA-FTI (US$262 million), and the MDTFs for North and South Sudan (US$222 million).

USE OF FUNDS

Recipient-executed Trust Funds

As part of the Bank’s trust fund management framework, the Bank has promoted mainstreaming IBRD/IDA trust-funded projects and activities into the Bank’s normal business practices. Accordingly, RETF grants are increasingly being processed according to IBRD/IDA operational procedures—from their inclusion in Country Assistance Strategies to the application of Bank fiduciary and safeguard policies, risk assessment, and performance monitoring and reporting systems, among others.

RETF grants are often extended to Bank borrowers for the purpose of co-financing IBRD/IDA-funded projects, investments, and institutional capacity-building initiatives. Project-related financing is also provided through carbon funds through the purchase of carbon credits. RETFs are an attractive source of financing for low-income countries, and an increas-ing share has flowed into IDA countries, especially in Africa. In FY10, about 60 percent of RETF project grants were extended to IDA countries, 23 percent to IBRD countries, and the balance to regional or global institutions.

RETFs are often the main financing instrument available to finance investment and technical assis-tance projects in fragile and conflict-affected areas (see Figure 8). They have provided significant support to the World Bank’s work in such fragile states as Afghanistan, Iraq, Kosovo, Southern Sudan, Timor Leste, and West Bank and Gaza. RETF flows to fragile states have increased from just over US$630 million in FY05 to US$1.2 billion in FY10, and they accounted


for 39 percent of total RETF disbursements during FY10. RETFs have also reinforced the World Bank’s ability to respond to natural disasters, in circum-stances ranging from earthquakes (Pakistan and Indonesia) through tsunamis (Aceh in Indonesia, and Samoa) to hurricanes, flood, and drought.

Between FY06 and FY08, RETF disbursements nearly doubled, and their share of the Bank’s total project financing grew from less than 7 percent to 12 percent. However, as the Bank responded to the food and financial crises in FY09 and FY10, disbursements from IBRD loans and IDA credits/grants surged; as a result, the relative share of RETFs fell back to less than 7 percent by FY10 (see Figure 9).

Figure 9. Annual Disbursements from IBRD, IDA, and RETFs, FY06–FY10(US$ billions)

RETFsIDAIBRD

0

10

20

30

40

50


RETF disbursements as percentage of total IBRD, IDA, and RETF disbursements

US

$ b

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BETFs play an important role in moving

the World Bank’s expanding knowledge agenda.

18

Among the Bank’s Regions, the Sub-Saharan Africa Region continued to be the largest beneficiary of RETFs in FY10, followed by East Asia and Pacific, South Asia, and Middle East and North Africa (see Figure 10).

In FY10, as in FY09, three sectors dominated the use of RETFs: public administration and law, education, and health and social services (see Figure 11).

Box 1. Examples of RETF Initiatives

Caribbean Catastrophe Risk Insurance Facility. At the request of a group of Caribbean governments, in 2007 the World Bank and other partners established the Caribbean Catastrophe Risk Insurance Facility (CCRIF), the world’s first regional insurance fund. The CCRIF offers index-based insurance—insurance under which payouts are based on an objective, local index (such as one tracking earthquake data or hurricane wind speeds) that serves as a proxy for actual loss. Donors provided start-up funds, and the Bank later arranged a US$20 million reinsurance “cat swap” that transferred a portion of risk to capital markets. By pooling risks, the 16 member countries have saved about 40 percent compared to the premium costs they would have incurred if they had negotiated individually on commercial markets. Because the insurer does not need to tally the damage after a catastrophe, payouts are immediate: for example, after the January 2010 earthquake, CCRIF made a US$7.75 million payment to Haiti.

Japan Social Development Fund. Since 2000, the Government of Japan has provided close to US$500 million that has resulted in the allocation of US$422 million worth of grants in support of community-driven development and poverty reduction projects aimed at empowering the poorest and most vulnerable people. The Japan Social Development Fund (JSDF) supports exceptionally disadvantaged groups, providing grants that give direct benefits to members of these groups, using innovative approaches, and aiming ultimately at enhancing the welfare and empowerment of group members. Unlike most Bank-financed projects, many JSDF grants are executed by nongovernmental organizations/civil society organizations and local governments, and are implemented at the community level using highly participatory approaches. Projects supported by the JSDF often complement other Bank projects and provide a test bed for innovations that are subsequently scaled up.

Figure 10. Regional Share of RETF Disbursements for FY10

Figure 11. Sector Allocation of RETF Disbursements for FY10

Africa

East Asiaand Pacific

Europe andCentral Asia

Latin America andthe CaribbeanMiddle East and North Africa

South Asia

Global

32%

20%

9%

5%14%

17%

3%

Agriculture

Public adminand law

EducationFinance

Health andsocial services

Energy andmining

Transportation

Water andsanitation

Industry and tradeOthers

10%

32%

17%2%

13%

4%

6%

7%

7%2%


Bank-executed Trust Funds

FY10 BETF disbursements of US$560 million were 55 percent higher than the FY06 level of US$306 million, representing an average annual growth rate of 16 percent. BETFs now account for about 18 percent of

total expenditures by the Bank, up from 12 percent five years ago (see Figure 12). To enhance strategic alignment, quality assurance, and effective manage-ment of BETF-funded activities, the planning and use of BETFs are increasingly being integrated with the Bank’s resource management and budget process.

BETFBB

US

$ m

illi

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s

0

500

1000

1500

2000

2500

3000

3500


Figure 12. Total Bank Expenditures Funded by Bank Budget and BETFs, FY06–FY10(US$ millions)

Note: Gross BB expenditure includes payments from external sources for services provided by the Bank.

20

BETFs contribute funding for the Bank’s advisory work and knowledge agenda. They also finance global and regional partnership programs and associated program secretariats (e.g., the Water and Sanitation Program, the Energy Sector Management Assistance Program, and the Public-Private Infrastructure Facility). In FY10, major business areas that received BETF support were external partnerships and outreach (31 percent of BETF disbursements), techni-cal assistance (17 percent), project supervision (10 percent), and country and economic sector work and knowledge management (8 percent each).

BETFs play a significant role in moving the Bank’s expanding knowledge agenda by underwriting the preparation of important research studies, policy papers, and technical reports as well as the dissemi-nation of global knowledge and best practices. BETF

grants continue to be a major source of funding for the Bank’s technical assistance activities, accounting for 53 percent of total expenditures in FY06 and FY10.BETFs now fund over 40 percent of knowledge management work and 28 percent of economic and sector work, compared to 25 percent and 18 percent in FY06 (see Figure 13).

BETF funding for external partnership activities doubled, accounting for 56 percent of total Bank expenditures in this area in FY10, compared to 47 percent in FY06. BETFs also contribute to the costs of preparing and supervising RETF grants supporting co-financing and stand-alone projects. During FY10, BETF support for project supervision activities accounted for 16 percent of total expendi-tures for these activities, double the 8 percent share posted in FY06.

0

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350

BETFBB

Knowledgemanagement

Country economicand sector work

LendingTechnicalassistance

Externalpartnership and

outreach

Supervision

16% 56%

53% 10%28%

41%US

$ m

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Figure 13. Selected Business Activities Funded from Bank Budget and BETFs in FY10(in US$ millions and percentage share of BETFs)


Box 2. Examples of BETF Initiatives

Water and Sanitation Program. In Tanzania, the Water and Sanitation Program (WSP) is supporting govern-ment efforts to improve the implementation and monitoring of rural sanitation programs. The Government of Tanzania cannot reliably report on the number of people that have gained access to improved sanitation facilities; it currently tracks only access to basic sanitation. WSP is supporting the government in redrafting definitions and performance indicators in line with the UNICEF/WHO Joint Monitoring definitions. This is a significant milestone, laying a foundation on which to build capacity at the village, ward, and district levels in monitoring and data collection. WSP also supported the government in rolling out a village registration system to collect data on nine key indicators, including access to improved sanitation. Joint government and donor missions and reviews on WSP’s Scaling up Rural Sanitation Project experience in Tanzania have resulted in a budget of US$13 million for a national sanitation campaign led by the Ministry of Health and Social Welfare, which is planned to start in 2011. (Source: WSP FY10 End of Year Report).

The South-South Experience Exchange Facility. Launched in October 2008, the South-South Experience Exchange Facility (SEETF) provides accessible, just-in-time funding to help developing countries share their knowledge and expertise and aims to further the World Bank’s knowledge-sharing agenda by drawing directly upon the accumulated expertise of partner countries. As an example, India shared its IT experience with eight African countries via the New Economy Skills for Africa Program for Information and Communication Technologies grant. The Governments of Nigeria, Tanzania, Kenya, and Ghana are incorporating what they learned from India in implementing IT strategies in their countries. Kenya and Nigeria are moving ahead with skills development and certification programs, while Ghana and Tanzania are building critical IT infrastructure and information centers. India also benefited from the experience, as Indian firms that hosted the exchange are pursuing new investment opportunities in Africa’s ICT sector through their new-found counterparts.

22


OVERALL TRENDS

Financial intermediary funds (FIFs) represent a fast-growing business area for the Bank, accounting

for the lion’s share of the Bank’s total trust fund portfolio (see Figure 14). Many FIFs have been launched in the context of G7/G8 and G20 meetings.

Financial Intermediary Funds3

Non-FIF portfolio FIF share in %FIF portfolio

US

$ b

illi

on

s

(includes AMC)

0

6

12

18

24

30

FY10FY09FY08FY07FY060%

20%

40%

60%

80%

100%

Figure 14. FIF Share of Bank’s Total Trust Fund Portfolio—Funds Held in Trust(US$ billions)

FIFs focus mainly on the provision of global public goods,

particularly health and climate change.

24

As of the end of FY10, the Bank managed 16 FIFs.16 The largest FIF is the Global Fund to Fight AIDS, Tuberculosis and Malaria (GFATM). The combined

16 These 16 FIFs are Adaptation Fund (AF); pilot Advance Market Commitment (AMC); Consultative Group on International Agricultural Research (CGIAR); Clean Technology Fund (CTF); Debt Relief Trust Fund (DRTF); Global Agriculture and Food Security Facility (GAFSP); Global Alliance for Vaccines and Immunization Fund (GAVI Fund); GAVI Affiliate Trust Fund (GFA); Global Environment Facility (GEF); Global Fund to Fight AIDS, Tuberculosis and Malaria (GFATM); Haiti Reconstruction Fund (HRF); International Finance Facility for Immunization (IFFIm); Least Developed Countries Fund (LDCF); Onchocerciasis (Riverblindness) Fund; Special Climate .Change Fund (SCCF); and Strategic Climate Fund (SCF). The establishment of the new Guyana Rainforest Investment Fund in FY11 has increased the total number of FIFs to 17. Except for the Onchocerciasis Fund, all these FIFs are managed by the Multilateral Trusteeship and Innovative Finance department in the Concessional Finance and Global Partnerships Vice Presidency (CFP).

volume of donor contributions17 to FIFs, funds chan-neled through them, and overall funds (including cash and promissory notes) held by FIFs has grown significantly in recent years (see Figure 15).

17 Payments received by the Bank in the form of cash and promissory notes are counted as contributions, in line with the basis of commitments (for use of funds) approved by respective governing bodies of FIFs.

Figure 15. FIF Portfolio: Cumulative Contributions, Commitments, and Cash Transfers(US$ billions)

Commitments TransfersCash contributions andnet promissory notes Funds held in trust

US

$ b

illi

on

s

0

5

10

15

20

25

30

35

40


Note: Figures are cumulative since the inception of the FIF portfolio. Funds held in trust include cash, investments, and promissory notes.


In FIFs, the Bank has the role of financial intermedi-ary between the governance entity or entities and the recipients of the partnership/program. Broadly, there are two types of governance arrangements for FIFs.

n For FIFs that have a governing entity with legal capacity and responsibility for the use of funds, the Bank (as trustee) transfers funds (received from donors and managed in a trust fund) directly to multiple third-party entities according to instructions from and on behalf of the govern-ing entity (e.g., GFATM). Adequate legal capacity is a must for the FIF’s governing body.

n In the second type of arrangement (e.g., under the Global Environment Facility, or GEF), the Bank (as trustee) transfers funds to partner entities, which then manage the funds and transfer them to the final recipients. Each partner entity applies its own policies and procedures in preparing, implementing, and supervising projects, and each is accountable to the FIF governing body for the use of funds. In this case, partner entities are required to have credible (internationally recognized) fiduciary, safeguards, and other relevant policies and capacity.

FIFs have their own governance structures and detailed legal agreements that specify the services provided by the Bank. These services come with customized business processes and control environments.

During the design of FIFs, the Bank may provide advice and support to partners on governance structures, operational arrangements, financial structuring, fiduciary controls, and risk management. Once a FIF is established, the Bank provides a set of agreed financial services to a third party—usually management of donor pledges, commitments, and promissory notes; investment management of trust fund liquidity; resource transfers18 to designated recipients; and financial reporting. In rare cases, the Bank provides resource mobilization support, for example, organizing and managing replenishment negotiations (e.g., for the GEF). Under some FIFs, the Bank also provides customized treasury manage-

18 Include cash transfers and payments made from a FIF trust fund to eligible recipients — both internal and external.

26

USE OF FUNDS

FIFs focus mainly on the provision of global public goods, particularly health and climate change (see Figure 17). Recently established FIFs have helped address food security challenges (e.g., the Global Agriculture and Food Security Facility) and natural disasters (e.g., the Haiti Reconstruction Fund).

ment or other treasury services, hedging intermedia-tion (International Finance Facility for Immunization, or IFFIm, and Pilot Pneumococcal Advance Market Commitments, or AMC), and monetization of certified emission reductions (Adaptation Fund). Development partners and clients rely on the Bank’s technical, financial, and legal expertise in designing and estab-lishing FIFs, as well as its highly professional Trea-sury services and leading-practice donor contribution management, accounting, and reporting capabilities.

Over the past five years, the United States has been the largest contributor to FIFs, accounting for a cumulative cash contribution of US$4.5 billion, followed by Germany (US$2.0 billion) and France (US$1.9 billion) (see Figure 16). In FY10, the largest cash contributions came from Japan, the United States, Germany, and the United Kingdom. The largest recipients of FIF funds (for onward transfer) were the United Nations Development Programme, IBRD, and the United Nations Environment Programme.

Figure 17. FIF Transfers by Focal Area(percentage of total funds transferred)

Health

Environment/Climate Change

Others

16%

7%

77%

0

1

2

3

4

5

SpainNetherlandsEuropeanCommission

CanadaItalyUnitedKingdom

JapanFranceGermanyUnitedStates

US

$ b

illi

on

s

(includes AMC)

Figure 16. Largest FY06–FY10 Cumulative Cash Contributions to FIFs (US$ billions)


Cumulatively, about 30 percent of country-level funding from the environment and climate-related FIFs19 was allocated to projects in IDA countries20 and 70 percent to projects in IBRD countries. In contrast, about 78 percent of country-level funding from the three main health-related FIFs—GFATM, IFFIm, and AMC—was allocated to projects in IDA countries and the rest to projects in IBRD countries.

MAJOR AND INNOVATIVE FIFS

Global Fund to Fight AIDS, Tuberculosis and Malaria

GFATM was created in 2002 to mobilize resources from the public and private sectors to fight three of the world’s most devastating diseases and to channel the money to areas of greatest need. GFATM is the largest FIF and indeed the largest trust fund (by

19 The six climate-related FIFs are GEF and its two related funds, Special Climate Change Fund and Least Developed Countries Fund, the two Climate Investment Funds (Clean Technology and Strategic Clinate Fund), and the Adaptation Fund.

20 Includes IDA and IDA Blend countries.

outstanding balance) managed by the Bank. The Bank’s responsibilities are those of a limited fiscal agent; as the GFATM trustee, the Bank manages donor contributions, liquidity, and disbursements for GFATM at the direction of the GFATM secretariat. Over the last five years, annual paid-in contributions to GFATM almost doubled, annual transfers (dis-bursements) increased by about 200 percent, and the amount of funds held in trust more than doubled (see Figure 18). GFATM recently concluded a replenishment of its resources, obtaining pledges of US$11.7 billion in new funding for the next three calendar years (2011–2013). As GFATM has expanded, the Bank’s role as trustee has involved a steadily increasing flow of funds and rise in the number of transactions managed—during 2010, a 40 percent increase in the number of transactions processed.

Figure 18. GFATM Financial Status (US$ millions)

Commitments Transfers Funds held in trustCash contributions andnet promissory notes

US

$ m

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0

1000

2000

3000

4000

5000

6000

7000

8000


28

GFATM has played a key role in reducing infections, illness, and death caused by the three biggest communicable diseases in some of the world’s poorest countries. In FY10 Ethiopia was the largest beneficiary of GFATM resources (see Figure 19).

Global Environment Facility

The GEF was established in October 1991 as a pilot program in the Bank to assist in the protection of the

global environment and to promote environmentally sustainable development. The Bank plays three roles in the GEF: it is the GEF trustee, it is one of the GEF implementing agencies (for GEF-funded project implementation), and it hosts the GEF secretariat (which is nonetheless functionally independent from the Bank). To prevent any real or perceived conflicts of interest, these three roles are handled by three separate parts of the Bank.

As the GEF trustee, the Bank provides a range of services: management of donor pledges, commit-ments, and promissory notes; investment manage-ment of trust fund liquidity; resource transfers to designated recipients; and financial reporting. The Bank also provides resource mobilization support to the GEF, organizing and managing replenishment negotiations. At the GEF-5 Replenishment negotia-tions, completed on May 12, 2010, the contributors agreed to a financing framework of US$4.34 billion—an increase of about 39 percent over the GEF-4 Replenishment. New resources provided by donors amounted to US$3.54 billion, a 54 percent increase over the GEF-4 donor contributions. Figure 20 provides a snapshot of GEF’s financial status.

Figure 20. GEF Financial Status (US$ millions)


US

$ m

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s

0

500

1000

1500

2000

2500

3000

3500

4000

4500


Figure 19. Ten Largest GFATM Beneficiary Countries, FY10

(percent of total funds transferred)

Others

Ethiopia

Nigeria

India

Tanzania

DRC

ZimbabweRwanda

UgandaIndonesiaChina

8.6%

8.5%

5.6%

5.2%

4.8%3.3%

3.0%2.9%2.8%

2.6%

52.5%


Climate Investment Funds

The Climate Investment Funds (CIFs), interim instruments that became operational in 2010, comprise two funds: the Clean Technology Fund (CTF), and the Strategic Climate Fund (SCF). The CTF is designed to scale up investments in low-carbon technologies, and the SCF supports various pro-grams to test innovative approaches to climate action. Donor countries have pledged over US$6 billion to the CIFs. The CIFs include sunset clauses linked to agreement on the future of the climate change regime. The Bank serves the CIFs in three capacities: as trustee to administer the CTF and SCF; as one of six implementing agencies to implement programs and projects financed by the CIFs; and as the administrative unit to support the work of the CIFs. As trustee for the CIFs, the Bank provides such services as management of donor pledges, commit-ments, and promissory notes; investment manage-ment of trust fund liquidity; resource transfers to designated recipients; and financial reporting.

One of the unique features of the CIFs is that con-tributors can provide funding to them in the form of grant or capital contributions, and for CTF, conces-sional loan contributions. Both funds are able to provide concessional loans, grants, and guarantees to recipients through the multilateral development banks (MDBs), which return reflows (principal repayment, interest, fees or any other reflow of funds) received from recipients to the trust funds. Figure 21 presents a snapshot of the CIFs’ financial status.

Transfers

Commitments

Cash contributions andnet promissory notes

0

500

1,000

1,500

2,000

2,500

FY10FY09

Funds held in trust

US

$ m

illi

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s

Figure 21. CIFs’ Financial Status (US$ millions)

Recently established FIFs help address

food security challenges and natural disasters.

30

International Finance Facility for Immunization

The IFFIm, established in 2006, has successfully raised US$2.8 billion from the capital markets (of which US$0.2 billion was for refinancing of maturing bonds) for financing the immunization programs of the GAVI Alliance.21 By issuing bonds backed by future donor commitments (IFFIm’s assets are long-term, legally binding grant agreements from sovereign donors), IFFIm makes more money available now for vaccine purchase and delivery in the poorest coun-tries.22 IFFIm’s funding costs are closely comparable to those of MDBs. Figure 22 presents a snapshot of IFFIm’s financial status and demonstrates IFFIm’s

21 Formerly the Global Alliance for Vaccines and Immunization.22 Includes purchase and delivery of the pentavalent vaccine

against diphtheria, tetanus, pertussis, hepatitis B, and Hib. IFFIm also supports immunization initiatives to combat measles, yellow fever, poliomyelitis, and maternal and neonatal tetanus.

“frontloading” of financing, which enabled significant commitments and disbursements in the early years, using proceeds from the bond issuances backed up by future donor payments. It is estimated that IFFIm funding will help prevent the deaths of about five million children between 2006 and 2015 and of another five million adults thereafter. As IFFIm’s treasury manager, the Bank provides the following services: development and execution of market-based financ-ing strategies and funding operations; multidonor grant and payment tracking; liquidity and investment management; risk monitoring and asset-liability management; and accounting and reporting.


US

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FY10FY09FY08FY07

Figure 22. IFFIm Financial Status (US$ millions)


Pilot Pneumococcal Advance Market Commitment

The AMC was launched in 2009 with donor commit-ments of US$1.5 billion backed by the IBRD. Its aim is to accelerate the creation of a viable market for pneumococcal vaccines. The Bank, which helped design the AMC and took on AMC donor risk on its own balance sheet,23 provides a range of financial services to AMC donors: management of donor pledges, commitments, and promissory notes; investment management; resource transfers to designated recipients; and financial reporting. Donor financing is used to cover the incremental costs of vaccine production for developing countries. The AMC is implemented through the GAVI Alliance, and vaccine procurement is carried out through UNICEF. Because the AMC’s structure involves donor contri-butions that are backed by the IBRD, AMC commit-ments (i.e., the allocation of the AMC subsidy to the Supply Agreements for vaccines) are made against the total amount of US$1.5 billion pledged by donors to the AMC. Figure 23 presents a snapshot of the AMC’s financial status.

Initial indications from the pilot AMC’s early imple-mentation stages are that this innovative partnership is well on its way toward meeting its main planned outcomes. It is estimated that AMC funds will help immunize nearly 700 million infants, directly prevent-ing about 2.8 million deaths through 2020 during the AMC itself. In addition, the accelerated introduction of pneumococcal vaccines is likely to prevent another 4.9 million deaths. The AMC is results-driven in that payments are made only for vaccines that work well in the poorest countries. It is also demand-led in that it is designed to respond to specific requests from developing countries.

23 AMC transactions are recorded in IBRD books and disclosed in IBRD financial statements.

Figure 23. AMC Financial Status (US$ millions)

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FY10FY09

Transfers

Commitments

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32


OVERALL TRENDS

The resources needed to alleviate poverty and ad-vance development are too vast for governments to provide on their own, so a major part of the domes-tic and international financing needs of developing countries is expected to come from private investors. Indeed, most developing countries recognize that the private sector plays a critical role in driving innova-tion, creating jobs, and providing the goods and ser-vices needed to sustain and improve living standards. IFC fosters the development of the private sector in client countries through partnerships with donor and host country governments, other development insti-tutions, philanthropies, and clients themselves, seek-ing to achieve maximum development impact with the solutions it offers through its firm-level interven-

tions, its standard-setting, and its work to promote a business-enabling environment. IFC TFs are the main instrument for financing advisory services (AS), and are used for managing donors’, clients’, and IFC’s contributions to AS. Trust-funded activities are fully aligned with IFC’s Regional Strate-gies and are an integral part of IFC’s overall business strategy. Until recently, IFC TFs primarily funded AS activities. However, in FY09, as a response to the global financial crisis, donor trust-funded invest-ments received an impetus with the launch of the Global Trade Liquidity Program (GTLP) (see Figure 24). Since then, donors have indicated increased interest in donor-funded investment programs and such similar programs as the Climate Change Fund.

IFC Trust Funds4

Figure 24. IFC Trust Funds: Cash Contributions by Activity Type(US$ millions)

Non-advisory services (donor-funded investments and other)Advisory services

0

200

400

600

800

1000

1200


US

$ m

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34

During FY10 contributions to and disbursements from IFC TFs increased sharply, primarily because of the GTLP initiative (see Figure 25).

IFC’s partnerships with donors proved to be especially important in FY10, given the resource-constrained environment faced by countries grappling with the fallout from an unprecedented financial and econom-ic crisis. After average annual growth of 10 percent from FY06 to FY09, in FY10, for the first time, cash contributions to IFC TFs exceeded US$1 billion, a 275 percent increase from the previous year’s level. In addition, IFC received US$181 million in new signed commitments from 19 donor governments and several institutional investors and private part-ners for AS (see Figures 26 and 27).

USE OF FUNDS

Advisory Services

To help the private sector in emerging markets, IFC AS provide advice, problem solving, and training to companies, industries, and governments. IFC’s experience shows that companies need more than financial investment to thrive—they also need a legislative environment that enables entrepreneur-ship, and advice on business best practices. Around half of IFC’s AS projects involve advising national and local governments on how to improve the investment climate and strengthen basic infrastructure, and the other half involve helping investment clients improve corporate governance and become more sustainable. IFC AS are divided into four business lines: Access to Finance, Investment Climate, Public-Private Partner-ships, and Sustainable Business.

IFC offers advice through various regional and global programs delivered through its more than 84 offices in 66 countries (see Figure 28). In FY10, IFC AS port-folio comprised 736 active projects valued at more than US$850 million.24 IFC TFs funded AS expendi-tures of US$268 million, of which 61 percent went to IDA-eligible countries.

24 The value of AS projects represents the total budgeted value for the projects over their life funded by trust funds.

Figure 25. IFC Trust Funds: Cash Contributions, Funds Held in Trust, and Disbursements

(US$ millions)

Figure 26. FY10 IFC Signed Donor Commitmentsfor Advisory Services by Donor Group

Figure 27. FY10 IFC Signed Donor Commitmentsfor Advisory Services

(US$ millions)


US

$ m

illi

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s

TF Disbursements

Cash contribution

Funds held in trust

0

200

400

600

800

1,000

1,200

1,400

Governments

Institutional/multilateralPrivate partners/

foundations

84%

11%5%

United Kingdom

Netherlands

GEF and CTFSwitzerlandCanada

Norway

Austria

Japan

Australia

Gates Foundation

Others

$43

$26

$17$15$13

$11

$10

$9

$9$8

$21


Figure 28. Regional Distribution for Advisory Services


Middle East andNorth Africa

Latin America andthe Caribbean

Europe andCentral Asia

South Asia

East Asia and Pacific

Africa

Global

5% 2% 5% 4% 5%

1% 1% 4% 6% 5%

10% 4% 4% 8% 9%

4% 1% 3% 1% 3%

8% 10% 6% 9% 4%

3% 15% 9% 8% 5%

70% 67% 68% 64% 69%

For the first time, cash contributions to IFC TFs

exceeded US$1 billion.

36

Access to Finance

IFC helps increase the availability and affordability of financial services, particularly to micro, small, and medium-sized enterprise clients. IFC’s priorities are to build bank and nonbank financial institutions, de-velop financial infrastructure, and improve the legal and regulatory framework. At the end of FY10, IFC had an active Access to Finance portfolio of 238 projects in 68 countries, valued at almost US$290 million. FY10 project expenditures totaled about US$50 million, of which 50 percent was in IDA-eligible countries and 14 percent in fragile and conflict-affected countries.

Investment Climate

IFC helps governments implement reforms to im-prove their business environment and encourage and retain investment, thus fostering competitive mar-kets, growth, and job creation. At the end of FY10, IFC had an active Investment Climate portfolio of 144 projects in 67 countries, valued at more than US$185 million. FY10 project expenditures totaled US$53 million, of which 75 percent was in IDA-eligi-ble countries and 32 percent in fragile and conflict-affected countries.

IFC provides investment climate advice to client governments in close collaboration with such donor partners as the Foreign Investment Advisory Service, the multidonor investment climate advisory platform. Most of IFC’s programs are implemented from the field, where IFC works closely with its investment colleagues and WBG partners, including MIGA in particular.

Public-Private Partnerships

IFC advises governments on structuring public-private partnership transactions in infrastructure and other public services—advice that helps gov-ernments achieve long-term economic growth and better living standards by harnessing the potential of the private sector to increase people’s access to, and enhance the quality and efficiency of, such public services as electricity, water, health, and education.

This advice, based on global best practices, balances the needs of investors with public-policy consider-ations and the needs of the community. IFC provides integrated solutions for small-scale infrastructure projects by combining advisory services to govern-ments with capacity building for private sponsors; and it makes basic public services more affordable by advising small-scale providers on projects involv-ing performance-based grants. IFC also builds the capacity of providers who might otherwise not have access to financial resources. IFC’s record of success and reputation for objectivity and transparency make it the leading multilateral adviser in the field.

At the end of FY10, IFC had an active Public-Private Partnership portfolio of 91 projects in 53 countries, valued at more than US$130 million. FY10 project expenditures totaled about US$26 million, of which 40 percent was in IDA-eligible countries and 14 percent in fragile and conflict-affected countries.

Sustainable Business

IFC supports the sustainable development of markets that work for all members of society, building on its environmental and social performance standards to promote sustainable business practices among firms in sectors such as infrastructure, extractive indus-tries, manufacturing, agribusiness, and services. IFC programs promote good corporate governance practices, build the capacity of small firms, advance women entrepreneurs, and encourage inclusive man-agement and investment decisions. IFC works with companies to encourage improved practices toward decent employment and growth, address climate change, and promote sustainable agribusiness and forestry.

IFC’s Sustainable Business line of activity was created in July 2010 from the merger of the Corporate Advice and Sustainability business lines. At the end of FY10, the two business lines together had an active port-folio of 263 projects in about 70 countries, valued at US$255 million. Combined FY10 project expenditures totaled about US$51 million, of which an average of 49 percent was in IDA-eligible countries and 9 percent in fragile and conflict-affected countries.


Donor-funded Investments

IFC receives funds from member governments or their governmental agencies for investment purposes and invests these funds, along with its own resources, through trust funds. Donor funds to be used for investment purposes are provided to IFC on a grant basis or on a reimbursable grant basis, with interest, dividend, principal, and any other investment reflows to the donors (to the extent money flows back from the investments). IFC’s portfolio of investment-mak-ing trust funds has recently grown in volume because of donor contributions to IFC’s crisis response initia-tives such as the GTLP, which account for 77 percent of IFC TF portfolio.

Global Trade Liquidity Program

The GTLP is a unique, coordinated global initiative that raises funds from governments, development finance institutions, and private sector banks to sup-port trade in developing markets and address the

shortage of trade finance resulting from the global financial crisis. It works through global and regional banks to extend trade finance to importers and exporters in developing countries. GTLP began its op-erations in May 2009 with targeted commitments of US$4 billion from public sector sources. Within three years, the program should be able to support up to US$45 billion in trade.

As the global financial crisis evolves, the proven GTLP platform (operational processes, IT/MIS, human resources, standardized documentation, accounting, agency role, mobilization framework) is providing so-lutions to meet market demands as well as IFC’s and program participants’ development priorities. GTLP maintains good geographical diversity. Latin America and the Caribbean and East Asia and Pacific repre-sent 62 percent of the trade supported by the GTLP, Sub-Saharan Africa 19 percent, and South Asia 14 percent. A new disbursement of US$100 million to an existing Africa-dedicated facility will play an important role in further increasing IFC’s reach in Africa.

The GTLP is a unique global initiative to support trade

in developing markets and address the shortage of

trade finance resulting from the global financial crisis.

38


WBG-supported development operations have long included results frameworks. All Bank Country Assistance Strategies contain key measurable assessments, allowing governments, donors, and stakeholders to collaborate more effectively in iden-tifying and achieving common goals for development. New sector strategies must include measurable results indicators. All Bank-funded projects rely on monitoring and results frameworks to guide imple-mentation, prompt midcourse corrections as needed, measure impact, and cull lessons learned. Finally, IDA uses its Results Measurement System to identify and track development results in countries where policies and operations are being supported and to evaluate IDA’s performance in the process.

This focus on development results also includes the Bank’s trust-funded programs and activities: trust funds are and continue to be integrated into the Bank’s results agenda. In FY09 a review of results related to trust-funded activities, undertaken by the Bank’s Concessional Finance and Global Partnerships Vice-Presidency, found varying quality in the results frameworks for trust-funded activities. While this variation was partly due to the difficulty of articulating the results of trust-funded activities, which are often intermediate outcomes in a longer results chain, clearly the issue required more attention from the Bank. During FY10 the Bank made significant progress in strengthening and reporting on the results frame-works linked to trust-funded activities and programs.

ALIGNMENT WITH CORPORATE PRIORITIES

Trust funds, whether country-specific, regional, or global, have an important role in supporting the WBG’s post-crisis strategic development priorities set by the Development Committee of the Boards of Governors of the World Bank and International Monetary Fund (IMF) in April 2010.

n Several of the largest trust-funded programs—such as the Afghanistan, Iraq, and Sudan Trust Funds, and such global programs as the Japan Social Development Fund—are supporting the poorest or most vulnerable groups in fragile states and areas.

n Programs such as the Climate Investment Funds support developing countries in creating oppor-

tunities for growth, aiming to achieve sustain-able growth by helping them transform into more efficient economies that use less carbon. The South-South Experience Exchange Facility (SEETF) promotes growing economies’ knowl-edge sharing on development and social protec-tion; and the IFC-managed programs for Public-Private Partnerships, Sustainable Business, and Investment Climate support the creation of opportunities for economic growth.

n By initiating and managing global and regional partnerships through such trust funds as the Global Environment Facility (GEF) and Interna-tional Finance Facility for Immunization (IFFIm), the Bank promotes global collective action and supports important global issues and global public goods in areas such as climate change, education, food security, and health.

n Some programs are explicitly designed to strengthen governance by addressing gover-nance and anticorruption (GAC) issues. The Governance Partnership Facility (GPF), for

Trust Funds in Action: Achievements and Results

5

WBG’s Post-Crisis Strategic Development Priorities

n Targeting the poor and vulnerable;n Creating opportunities for growth;n Promoting global collective action;n Strengthening governance; andn Managing risk and responding to crisis.

40

example, supports the Bank in implementing its GAC strategy through program activities that rigorously and systematically address country-level governance impediments to development. Other trust funds, while they are not designed to tackle such issues directly, often promote linking resources to results on the ground, thus contrib-uting to strengthening governance by improving the modality of service delivery, which is critically important to strengthening the credibility and legitimacy of governments.

n The increasing speed with which problems that develop in one part of the world can spread to others has been evident in the recent financial crisis, the spread of communicable diseases, and the pace of global climate change. Trust funds are the instrument of choice in managing risk

and responding to crisis because of the versatil-ity, flexibility, and speed with which they can be deployed. Notable examples are the Global Trade Liquidity Program (GTLP) and the Avian and Human Influenza Facility (AHIF), as well as trust funds established in response to such events as the food price crisis, food security issues, and Haiti reconstruction.

As noted earlier, trust funds have become important vehicles for the WBG to engage in a wide range of partnerships and leverage development assistance at the country, regional, and global levels. The fol-lowing section showcases examples of the impor-tance of such collaboration between the WBG and its partners through the support provided by IBRD/IDA TFs, FIFs, and IFC TFs for country-level opera-tions, engagement in fragile states and conflict- affected countries, and global public goods initia-tives. Other examples illustrate the support provided to the collective global response to crises such as food security and trade, as well as the growth, governance, and knowledge agendas.

ACHIEVEMENTS ON THE GROUND

Fragile States and Conflict-Affected Countries

Iraq Trust Fund

Under the umbrella of the International Recon-struction Fund Facility for Iraq, the Iraq Trust Fund (ITF) has financed successful reconstruction and capacity-building programs since its establishment in 2003. Despite very difficult security conditions, ITF-financed projects have been contributing signifi-cantly to Iraq’s reconstruction efforts by financing investments, strengthening government capacity, and financing advisory services and economic and sector work that are critical to backstopping Iraq’s medium- and longer-term development efforts.

Outcomes of the ITF program include construction of 78 schools and rehabilitation of 133 more, benefit-ting about 52,000 students; financing of the printing and distribution of more than 82 million textbooks; rehabilitation of two water treatment plants serving about 300,000 people; rehabilitation of nine hospital emergency units and supply of essential equipment and drugs to 12 emergency units; construction of six rehabilitation centers and training of 82 medical personnel in physical therapy; and organization of more than 65 workshops for over 1,450 Iraqi officials in economic management, public sector management, and social safety nets. The ITF has also supported recently completed analytic technical assistance—the Iraq Household Socio-Economic Survey Tabulation Report, and Iraq’s Public Financial Management (PFM) Action Plan—and capacity-building technical assistance: Iraq Kurdistan Civil Service Reform Capacity Building, and a workshop on Designing and Building a Results-based Monitoring and Evaluation System.

Sudan National MDTF and the MDTF for Southern Sudan

Sudan’s Comprehensive Peace Agreement, signed in January 2005, called for the creation of two multi-donor trust funds (MDTFs)—one for the national gov-ernment, and one for Southern Sudan—as part of the wealth-sharing protocol. The Sudan National Multi-donor Trust Fund (MDTF-N) and the Multidonor Trust Fund for Southern Sudan (MDTF-SS) were officially


established following the Oslo donor conference in April 2005. The trust funds support the two govern-ments as they implement various aspects of the peace agreement and rebuild conflict-affected areas. Investments aim to help the poorest and bring about lasting peace, while ensuring government ownership, transparency, and accountability in spending.

Key results from MDTF-N: (a) successful comple-tion of two key milestone provisions of the peace agreement—a new currency and a general popula-tion census; (b) rehabilitation of 446 kilometers of rail line between Babanusa and Wau, reestablishing a vital rail link between Northern and Southern Sudan that was disrupted for more than 25 years; (c) a 27 percent increase in enrollment in basic education in targeted communities following the construction or rehabilitation of 246 schools and the training of more than 2,300 teachers; (d) a 30 percent increase in births attended by skilled health staff thanks to the construction of nearly 180 health facilities and the training of more than 1,900 health professionals; and (e) rehabilitation of 332 water points, providing better access to safe water for nearly 500,000 people across war-affected states.

Key results from MDTF-SS: (a) increased access to medical supplies for more than 2.5 million people; (b) financial assistance provided to entrepreneurs to establish their own businesses; (c) a new currency and a nationwide census, the first all-inclusive cen-sus for Southern Sudan since 1956; (d) rehabilitated and rebuilt roads, including the completion of a criti-cal transportation route between Juba and Mundri in the North; and (e) significantly increased capacity in government ministries that were nonexistent when the MDTF-SS began.

Afghanistan Reconstruction Trust Fund

The Afghanistan Reconstruction Trust Fund (ARTF) was designed to provide coordinated funding for reconstruction activities in line with agreed priorities of the government while promoting transparency and accountability. From its inception, the ARTF has gen-erated over US$3.6 billion in aggregate contributions, and approximately US$750 million in new pledges from 14 donors.

Key results: (a) school enrollment is now the high-est in Afghan history: enrollment in grades 1-12 increased from 3.9 million in 2004 to 6.3 million in 2008, the number of girls enrolled went from 839,000 in 2004 to more than 2.3 million in 2008, and girls now make up a little over one-third of all school- children. (b) Farmers are being trained to adopt improved horticultural practices and are provided grants for up to 80 percent of the total cost of good-quality fruit saplings and essential equipment (prun-ing shears, pesticides, protective clothing, etc.). In the spring and autumn of 2009, new orchards were plant-ed on more than 1,130 hectares of land; and in the spring of 2010, another 1,275 hectares were brought under cultivation. (c) The High Office of Oversight and Anti-Corruption is implementing an asset declara-tion program which has resulted in 72 percent of the cabinet declaring their assets, setting an important precedent for other senior officials.

Opportunities for Growth

IFC Advisory Services

Through its four business lines, IFC supports clients in a wide range of sectors, promoting sustainable business practices and helping small and medium-sized enterprises (SMEs), especially those in low-income areas. The following are illustrations of some of the results emerging from IFC products through its advisory services (AS) business lines.

n Business taxation. In Sudan, an estimated 100,000 firms now have a Tax Identification Number. The country has substantially improved its information technology infrastructure and systems, making it easier for business own-ers to file taxes. The system is now Web-based, accessible outside Khartoum, and linked to the Customs Chamber; and there are plans to link it to the Business Registration system.

n Advisory mandates. Projects producing success-ful public tenders in which private operators were selected are expected to provide 15.9 million people with improved access to services, help produce US$2 billion in fiscal benefits for govern-ments, and enable US$3.4 billion in investment.

42

n Eco-standards and sustainable supply chains. IFC and other investors provided support to EcoEnterprises Fund (EEF), a venture capital fund that invests in businesses that protect the environment and conserve biodiversity, thus cre-ating economic incentives for conservation. This support enabled EEF to finance 23 SMEs, which brought over 535,000 hectares of land under sustainable management or direct protection and created over 3,700 jobs.

n Corporate governance. Some 5,986 entities benefitted from corporate governance AS that facilitated US$128 million in financing, with an additional US$10 million in IFC investment. This included training for 17,991 individuals, of whom 3,620 were women.

n SME management solutions. IFC enabled 47,634 individuals (in 3,957 unique SMEs) to receive Business Edge and SME Toolkit classroom-based management training; an additional 10.9 million worldwide accessed SME Toolkits, online business management resources.

n Sustainable energy. Lighting Africa has contrib-uted to a 50 percent reduction in retail prices of off-grid lighting products. Program-supported companies have sold over 112,000 of these products, providing over 500,000 people with improved services.

Knowledge

The Trade Development Facility MDTF

The Trade Development Facility MDTF was created to support the Lao People’s Democratic Republic (Lao PDR) in its efforts to sustain poverty reduction and economic growth, by facilitating trade and the cross-border movement of goods, and by increasing the government’s capacity to undertake specific tasks related to regional and global economic integration. The MDTF assists Lao PDR in implementing the Action Matrix for Trade-Related Assistance, approved by the government and donors in September 2006, and to achieve the goals set out in the Lao PDR Poverty Reduction Strategy and National Socio-Economic Development Plan.

The Strategy and Action Plan, which envisages the establishment of a National Trade Facilitation Secre-tariat and formation of a National Trade Facilitation Executive Board, is due for cabinet approval in December 2010. The Garments Service Centre project, implemented in partnership with the Association of Lao Garment Industries, has, as a key initial result, identified an off-the-shelf modular training curricu-lum for customization in the Lao context. The Lao Trade Research Digest was launched at a workshop in June 2010. The Economic Research Institute for Trade is also launching a monthly research forum where trade-related research papers can be present-ed for discussion in support of policy formulation and research capacity building. This is an important part of efforts to establish the Institute as a strong think-tank and clearinghouse of trade research in Laos.

Knowledge for Change Program

The overall aim of the KCP is to act as an effective, transparent, and efficient vehicle for pooling intel-lectual and financial resources for data collection, analysis, and research supporting poverty reduction and sustainable development. The KCP’s strategy is based on three pillars: Empowering Poor People, Improving the Investment Climate, and Global Public Goods (promoting research in areas such as climate change and global pandemics). The KCP can be mobilized very quickly to respond to unforeseen challenges; for example, for the global financial crises, the KCP has funded new projects that will assess the causes of the crises, the likely impacts on poverty and human development, and the appropriate policy responses.

Several KCP projects addressed investment climate and its relationship to the growth agenda. For exam-ple, Barriers to Banking found that barriers are higher in countries where there are more stringent restric-tions on bank activities and entry, less disclosure and media freedom, and poorly developed physical infra-structure. A key study result is that, contrary to the findings of recent and widely disseminated reports, global warming appears to be accelerating. The research project Improving Malaria Outcomes through Evidence-based Program Design: A Multi-country Initiative to Support the World Bank’s Booster Program for Malaria Control generated evidence on effective approaches to increase demand for and utilization of antimalarial


services, such as long-lasting insecticide-treated nets and effective antimalarial medication using the first-line treatment regime, Artemisinin-based com-bination therapies.

The Bank Netherlands Partnership Program

BNPP was established in 1998 with the objective of strengthening the development and institutional effectiveness of the World Bank by integrating the results of BNPP projects into overall World Bank programs. The current sector/thematic priorities of BNPP are education, sexual and reproductive health, gender equality, growth and equity, fragility and conflict, and sustainable development and climate change. Capacity building, gender, and good governance have been effectively mainstreamed in the program.

Noteworthy results from recent projects include the following: (a) the study on Making Schools Account-able produced crucial new evidence on how reforms aimed at making schools more accountable are working on the ground; (b) evaluations of girls’ sti-pend programs in Cambodia and Pakistan led to the expansion of pilot programs and Bank lending; (c) the study “Justice for the Poor: Breaking Legal Inequality Traps at the Local Level” was instrumental in providing advice to the Sierra Leone Government and development partners on the formulation of a national access to justice strategy and also influenced dialogue around the preparation of a national policy to adopt Peace Committees and National Human Rights Commission in Kenya; (d) analytic work on scaling up HIV/AIDs prevention and treatment in Africa was instrumental in restructuring the Treatment Acceleration Project and influenced the national policy in Rwanda on pediatric care regarding treat-ment for children up to five years of age; (e) country and strategic environmental assessments influenced country dialogue and informed the lending program

in many low income countries; and (f) the study on improving the investment climate in Africa through corporate governance strengthening contributed to the preparation of a Bank operation in Nigeria for the restructuring of the Agricultural Cooperative and Rural Development Bank.

Global Crisis Response

Global Food Price Crisis Response Program

Established in May 2008, the Bank’s Global Food Crisis Response Program (GFRP) aims to reduce the negative impact of high food prices on the lives of the poor in a timely manner, support developing-country governments in designing sustainable policies to mitigate the poverty impacts of volatile food prices, and contribute to broad-based growth in agricultural productivity and market participation to ensure an adequate food supply. Besides IDA credits, IBRD loans, and grants to the poorest and most vulner-able from the Food Price Crisis Response Trust Fund funded from Bank surplus, grant funding has been made available through three externally-funded trust funds in support of the full range of interventions available under the GFRP.

By the end of FY10, total GFRP projects amounted to US$1.4 billion. GFRP support is estimated to reach almost 38 million people with short-term support to maintain or increase food production, and for social protection. Of these, the GFRP trust funds have reached or are expected to soon reach almost 9 million people. The majority of GFRP funding (about 60 percent) has focused on Africa, where higher food prices have been a special concern. Besides Africa, GFRP has provided support to affected countries in South Asia and East Asia and Pacific, Latin America and the Caribbean, East and Central Asia, and Middle East and North Africa.

The focus on development results also includes

the Bank’s trust-funded programs and activities.

44

Global Trade Liquidity Program

The IFC-managed Global Trade Liquidity Program (GTLP) initiative, established in May 2009, supports trade in developing markets and addresses the shortage of trade finance resulting from the global financial crisis. GTLP has been acknowledged in the financial industry as an innovative structure to help infuse much-needed liquidity into the trade finance market, thereby catalyzing global trade growth. It represents a win-win proposition: for banks it provides an opportunity to continue supporting clients through these difficult times; and for IFC and its partners, it affords the ability to channel liquidity and credit into markets to help revitalize trade flows by leveraging the banks’ vast networks across emerging markets in Asia, Africa, the Middle East, Europe, and Latin America. The program is already benefitting thou-sands of importers and exporters and SMEs.

By the end of June 2010, GTLP-supported trade had reached over US$6.5 billion, through approximately 4,600 transactions. About 82 percent of these trans-actions were for SMEs. Of the trade volume, 19 percent reached Sub-Saharan African countries and about 35 percent reached IDA-eligible countries.

Avian and Human Influenza Facility The AHIF, part of the international community’s coordinated global action, is a flexible multidonor financing framework to assist countries, territories, and regional international organizations in responding to the threat posed by highly pathogenic avian influenza. The overall objective of the AHIF is to minimize the risk and socioeconomic impact of avian influenza and of a possible human pandemic influenza in developing countries that lack adequate domestic resources and capacity to control the diseases.

AHIF supported rapid assessments of the national avian influenza plans in five countries in the Africa Region. In the East Asia and Pacific region, five of the six countries that received grants updated their pandemic preparedness action plans; the effective-ness of these plans was recently demonstrated by the competent handling of H1N1 outbreaks in Cambodia and Myanmar and H5N1 in Bhutan. AHIF funding supported the Middle East Consortium on Infectious

Disease Surveillance—a network of public health ex-perts and Ministry of Health officials from Israel, the Palestinian Authority, and Jordan—in responding to the outbreak, which crossed the borders of all three countries in 10 days. AHIF also supported the MERCOSUR regional program (Argentina, Brazil, Chile, Paraguay, and Uruguay), contributing to con-siderable enhancement of the regional capacity to address animal disease issues, in terms of communi-cation and exchange of knowledge and information.

Strengthening Governance

Governance Partnership Facility

Launched in December 2008, the GPF is a partner-ship of the World Bank with the United Kingdom, the Netherlands, and Norway that aims to increase awareness and acceptance of the development im-portance of GAC work across the Bank’s programs. Its strategy is twofold: to make knowledge resources on GAC more available and to give a wide spectrum of Bank programs hands-on experience in implement-ing GAC measures.

In Zambia, GPF-funded political economy analysis provided a new vision and a basis for agreement, ending a decade’s impasse over raising energy tariffs; also, the upcoming irrigation projects in Zambia will apply a pilot approach to improve the mechanism for feedback from the project beneficiaries. In Mongolia, GPF resources helped the government pass a much improved Fiscal Stability Law by refocusing policy attention on Mongolia’s natural resource challenges—that is, getting policymakers and other stakeholders to think about the crisis impact as a symptom of a broader challenge of natural resource dependence. In the Dominican Republic, demand-side actors have launched the 2010 budget monitoring campaign, and the government has committed to opening up its budget to the public by providing real-time access to its financial management information system in a user-friendly manner. The GPF is also support-ing the Bank’s GAC Knowledge and Learning Portal (http://gacknowledge), which is already making a dif-ference within the Bank and is expected to be opened to the global public before the end of 2010.


Global Public Goods

International Facility for Immunization

Established in 2006, the IFFIm, as a source of predict-able, stable, and significant funding, is a counter-weight to the unpredictable, uncommitted short-term flows that have constrained immunization efforts in the past.

More than US$1.6 billion raised through the IFFIm has been disbursed for vaccines in developing countries: the pentavalent vaccine (which protects children against diphtheria, tetanus, pertussis, Hepatitis B, and Hib), and vaccines against measles, polio, maternal and neonatal tetanus, and yellow fever. The effects are already dramatic. For instance, the IFFIm helped avert a potentially devastating setback to polio-eradication efforts by reassigning US$105 million from establishing a post-eradication vaccine stockpile to immediate vaccine activities, facilitating the immunization of more than 100 million children in 11 polio-affected countries.

Global Fund to Fight AIDS, Tuberculosis, and Malaria

Established in 2002, GFATM aims to make a sustain-able contribution to reducing infection, illness, and death caused by HIV/AIDS, tuberculosis (TB), and malaria. GFATM is structured as a partnership of developed countries, developing countries, the private sector, civil society, and affected communities.

At the end of December 2009, programs financed by GFATM were providing antiretroviral therapy to 2.5 million people; the provision of this therapy, when scaled up rapidly, appears to be linked to reductions in AIDS mortality. GFATM provides over 60 percent of the external financing for TB and multidrug-resistant TB control efforts in low- and middle-income coun-tries. Programs funded by GFATM have provided treatment to 6 million people who had active TB, and approved TB proposals have totaled close to US$3.2 billion and covered 112 countries. It is clear that in many of the countries where GFATM supports programs, TB prevalence and mortality rates are declining. GFATM has supported programs that dis-tributed 104 million insecticide-treated nets, provided insecticide spraying in more than 19 million dwell-ings, and supplied treatment for 108 million cases of malaria. Funding in this area is having a substantial impact on malaria morbidity and mortality worldwide, with an increasing number of countries reporting a reduction in malaria deaths of more than 50 percent.

Trust funds have an important role

in supporting the World Bank Group’s post-crisis

strategic development priorities.

46


TRUST FUND MANAGEMENT FRAMEWORK

In 2007, the WBG introduced the Trust Fund Manage-ment Framework (TFMF) with the main goal of mainstreaming trust funds into the Bank’s strategies and business processes. The TFMF has sought to enhance the strategic relevance, risk management and controls, and efficiency of Bank-administered trust funds. Implementation of the TFMF is largely on track and is delivering results in each of the three pillars of the framework:25

n Pillar 1: Alignment with Bank strategies. All Vice-Presidential Units (VPUs) managing trust funds now prepare annual trust fund manage-ment plans, which review the role of their trust fund portfolio in the broader context of overall VPU strategy and activities. At the country level, recipient-executed trust funds (RETFs) are increasingly discussed in Country Assistance Strategies and Country Portfolio Performance Reviews. As a result, trust funds are now more explicitly considered by both the Bank and recipients as an integral part of overall Bank country programs. A Senior Management review process is now in place with regard to the Bank’s engagement in complex partnerships. The process was used for FIFs such as the Adaptation Fund, the Climate Investment Funds, and the Pilot Advanced Market Commitment, and the recently launched Global Agriculture and Food Security Program.

n Pillar 2: Risk management and controls. RETFs greater than US$5 million are now subject to the same review and appraisal processes as equiva-lent Bank lending activities, both for investment and development policy operations. Meanwhile

25 See Managing Trust Funds: An Update and the Way Forward (SecM2010-0299), May 14, 2010.

most Bank-executed trust funds are subject to the same controls as Bank budget expenditures. Measures have also been taken to strengthen controls, through updated guidelines for staff, enhanced risk reporting, new reviews of TF commitment authority and foreign exchange risks, and the establishment of a new financial management department in the Concessional Finance and Global Partnerships Vice-Presidency. The review processes for FIFs have been expanded and now incorporate systematic assessment— at the working level and by Senior Management—of risks and their appropriate management and mitigation.

n Pillar 3: Cost efficiency and sustainability. Introduction of a revised fee structure has led to significant improvements in recovering the costs the WBG incurs in administering trust funds. Information systems that support trust fund management have been strengthened, and an increasing proportion of administrative support work is being off-shored. Feedback indicates that the institutional and system enhancements are resulting in more efficient services.

Significant progress has been made in implement-ing the TFMF: most of the measures have been taken. However, challenges remain. In the coming months and years, the WBG will need to continue and deepen the work carried out under the three TFMF pillars. Further work is needed to address fragmentation of the trust fund portfolio at the country level, ensure that trust funds complement Bank operations and strategic priorities, and enhance corporate accountability and predictability and the sustainability of Bank-administered trust funds. Three major areas of focus will be strategic alignment, integration of operational and manage-ment systems, and portfolio sustainability.

Management of Trust Funds 6

48

Over recent years, some consolidation has already been achieved, notably through the expanded use of MDTFs. The next phase of consolidation will cut across all three focus areas, aiming for example to establish a more structured approach to donor relations and fundraising within the World Bank, improve the integration of trust funds into the Bank’s multiyear budget planning framework, and achieve greater alignment at the country level by consolidating trust funds around Country Assistance Strategy objectives.

Alignment of IBRD/IDA trust funds with new opera-tional practices is a priority and will follow the Bank’s reforms on investment lending and analytic and advisory services. Trust funds will continue to be integrated into the Bank’s results agenda. The ongoing strengthening of management information systems and data reporting will continue to ensure that all stakeholders have access to accurate and user-friendly data on trust funds and other sources of concessional finance. Cost-recovery arrangements for trust funds will be regularly reviewed and adjust-ed as appropriate.

FINANCIAL MANAGEMENT OF TRUST FUNDS

When donors provide funding to the WBG to finance development projects and programs, they expect these funds to be well managed. WBG financial management covers the process of sourcing funding from donors, investing the financial assets received, and disbursing funds to recipients. Within this value chain, the WBG performs a variety of financial and risk management activities and services (see Box 3). The WBG adheres to high fiduciary standards and has in place sound financial management techniques to ensure that the funds provided by donor partners are prudently managed.

For all the funds the WBG holds in trust, it provides a core set of financial and administrative services set out in legal agreements: donor contribution manage-ment, encashment of promissory notes, investment management of trust fund assets, commitment and disbursement of funds, resource transfers to desig-nated recipients (for FIFs), and accounting and reporting. Trust fund assets are kept separately and are not commingled with the WBG’s assets.

The financial management of trust funds starts by guiding donors through the process of making a contribution to a trust fund. Required legal documents include Framework Agreements and individual donor Administration Agreements. The Bank collects and manages the funds from donors, sending invoices to donors for their installment payments, and process-ing the cash and promissory note payments received. The Bank may also provide resource mobilization support, such as managing replenishment negotia-tions for the Global Environment Facility.

For IBRD/IDA TFs, the Bank enters into Grant and Project Agreements with the developing countries that receive the donor-provided resources. The fund balance is tracked to ensure that grant commitments for projects match available funding and donor receivables. Forecasts ensure the ability to commit grant amounts for future project disbursements. Cash flows and liquidity are managed to provide for available funds when required; disbursements to recipients are ultimately dependent on the receipt of funds from donors.

Box 3. Management of Trust Funds: Bank Services at a Glance

n Financial management of TFs;n Fees for administrative and financial

services;n Investment management;n Intermediation services in the capital

markets;n Risk monitoring and control frameworks;n Financial risk management;n Information technology systems;n Financial reporting and independent

audits;n Quality assurance and compliance

monitoring;n Independent evaluation of projects and

programs;n Governance and anticorruption

agenda; andn Access to information.


The program manager of each trust fund records and tracks allocations of funds for specific grants. Alloca-tions can encompass grant or loan commitments, administrative budgets, fees for project supervision, and other commitments. For IBRD/IDA TFs, commit-ments translate into subsequent disbursements for eligible expenditures, and for FIFs, into transfers of funds to recipients.

Fee for Administrative and Financial Services Provided

The WBG charges a fee to recover the cost of the administrative and financial services it provides; this fee is reflected in the Administration Agreement signed with the donors. A standard or a customized fee is charged to the trust fund principal, depending on the type of trust fund, the program administration services provided, and the transaction costs involved. Fees and charges are established in accordance with

the WBG policy and guidelines for recovering the full direct and indirect costs associated with administer-ing trust funds, including the managing unit costs and central overhead costs. For FIFs, the fees for trustee, administrator, or treasury manager services are usually negotiated up front with the FIF governing bodies/donors as part of the governance document and/or Administration Agreements.

IFC charges a standard administrative fee of 5 percent of donor contributions for trust funds set up for Advisory Services, and up to 2 percent for donor investment trust funds.

Investment Management

Between receiving funds from donors and disbursing them to projects, the WBG prudently invests the trust fund and FIF assets in the capital markets, with the

50

primary objective of preserving the capital of the assets. To achieve the investment objectives, a strategic asset allocation is developed and suitable portfolio benchmarks are selected. On the basis of the WBG’s investment guidelines, investment positions are established with approved market counterparties for which credit exposure limits are established and monitored.

The assets of trust funds are invested in three tranches with different risk and return profiles. All trust funds are reviewed annually with respect to their allocation into the different investment tranches, taking into account multiyear cash flow projections for each fund and risk/return considerations. Investment returns for trust funds are analyzed monthly, and quarterly reviews assess investment policy and asset allocations.

As of end-FY10, the total liquid assets invested for trust funds, excluding AMC, stood at US$22.1 billion (US$19.9 billion at end-FY09). The average rate of return on trust fund cash and investments for FY10 was 2.19 percent (compared with 4.64 percent for FY09), reflecting the lower market yield environ-ment.26 The average annual return for trust funds over three years was 4.46 percent, and over five years, 4.24 percent. Figure 29 shows the asset composition of the trust fund investment portfolio. Intermediation Services in the Capital Markets

The Bank provides customized financial services for some FIFs. For example, for the International Finance Facility for Immunization (IFFIm), the Bank’s Treasury designed a borrowing strategy and provides execution services for IFFIm bond issues in the global capital markets. The Bank also monetizes carbon emission reductions (CERs) received on behalf of a fund; the monetization program converts CERs into cash to support commitments and disbursements to the funds’ projects. On behalf of carbon fund participants, the Bank enters into Emission Reduction Purchase Agreements. The Bank also provides foreign currency hedging intermediation services for IFFIm and the Advance

26 The rate of return for individual trust funds would vary according to their participation in the different asset classes, depending on the trust funds’ risk and reward needs.

Market Commitments initiative. The Bank could provide other customized financial intermediation services as required by donors.

RISK MONITORING AND CONTROL FRAMEWORKS

The WBG monitors and reports on risk at the institu-tional and fund level. It uses an integrated risk management framework, providing a continuous, proactive, and systematic process to analyze, man-age, and communicate risks from an institutional perspective to its Board and Management.

At the fund level, the assigned task managers perform risk assessments throughout the life of the fund, providing input into the oversight and monitor-ing of funds. The WBG mitigates financial and operational risks through internal controls and processes to safeguard donor assets. Controls are evaluated using the internationally recognized and

Figure 29. Trust Fund Investment Portfolio Asset Composition, FY09 and FY10

0%

20%

40%

60%

80%

100%

FY2009FY2010

Money marketand cash

Domesticgovernment

bonds

Mortgagebacked

securities (MBS)

Asset backedsecurities (ABS)

Agency,corporate and

sovereign/governmentguarantees

3,323 3,077

1,132 1,862

2,679 2,607

4,515 6,016

10,445 6,303


widely accepted internal control framework of the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The WBG regularly assesses all of its business units and works to strengthen and streamline its controls and business processes. It periodically conducts reviews to ensure that financial transaction processing ad-heres to high operational standards and is suffi-ciently segregated, with effective controls and independent oversight.

Financial Risk Management

Trust funds may expose recipients to credit risk if the donor contributes less than the amounts agreed in the contribution agreement and if the Bank enters into commitments on the basis of those future donor contributions receivable. To manage grant recipi-ents’ exposure to donor credit risk, the standard practice for IBRD/IDA TFs is to enter into grant com-mitments based on cash proceeds received from donors. At the same time, the Bank recognizes that some donors pay in their contributions over time as the grant-financed development projects are being implemented. If grant commitments are entered into against such donor contribution receivables, system controls ensure that commitments remain within the amount of donor-signed contribution agreements, and that disbursements are subject to cash available in the trust fund. For FIFs, commit-ments are entered into only after cash and promis-sory notes have been received from the donors.

Trust funds are subject to foreign exchange risk if the currency of the donor contributions differs from the currency of grant commitment, exposing grant recipients to currency volatility with respect to the volume of development projects that a given trust fund will finance. Such market risks are identified, and measures to mitigate these risks are reviewed and approved by appropriate departments and finance committees. If a trust fund commits grants on the basis of future donor contribution receiv-ables, Bank controls limit commitments to 85 percent of donor receivables to manage the underly-ing currency risk.

For FIFs, the Bank consults and advises external governing bodies on any currency risks. If requested by the governing body, the Bank may agree to hedge foreign exchange risks by arranging for intermedia-tion of suitable market transactions.

Information Technology Systems

The WBG uses integrated IT systems that provide end-to-end financial transaction processing. Trans-actions include the recording of replenishment and contribution agreements, calls of resources from donors, foreign exchange, allocation of investment income, disbursement of funds, and associated reporting to donors in accordance with underlying agreements. The IT systems provide data and customized reporting to donors, implementing agencies, and secretariats, as part of the WBG’s fiduciary responsibilities. The WBG is making significant investments in information security, continuously strengthening the governance and security of its IT systems.

Donors have access to several system applications offering financial information on their contributions to trust funds. Two web-based applications are the Donor Center in the Bank’s Client Connection website and the Aidflows application. The Donor Center is a secure website managed by the Bank that provides each donor with detailed information about its trust fund portfolio (except for contributions to FIFs). Monthly unaudited financial reports can be generated for each donor agency. It may be accessed by going to http://clientconnection.worldbank.org and clicking on “Login.” Those who wish to register as a new user should contact their agency’s Donor Center Administrator.

Aidflows is a tool to visualize how much development aid is provided and received around the world. Users can select individual donor countries (providing the aid) and beneficiary countries (receiving the aid) to track the sources and uses of aid funding. The WBG and the OECD have partnered to make global data on aid funding easily accessible and to raise the transparency of aid. Aidflows may be accessed at www.aidflows.org.

52

Quality Assurance and Compliance Monitoring

The WBG dedicates teams and units to provide results measurement and quality assurance for trust fund operations. Monitoring of compliance with applicable WBG policies and procedures includes periodic compliance testing of financial transactions for trust funds—part of the overall control framework through which the WBG provides donors the assurance that its policies and proce-dures are being followed.

Independent Evaluation of Projects and Programs

The World Bank’s Independent Evaluation Group—which reports directly to the Bank’s Executive Directors and is not part of Bank Management— carries out regular evaluations of World Bank- financed development projects and RETF projects and programs. These evaluations are designed to derive lessons from experience and to offer an objective basis for assessing outcomes and results of development projects and programs. The lessons drawn from evaluations are disseminated publicly.

Governance and Anticorruption Agenda

The World Bank is continuously working to strength-en governance and financial oversight in its partner countries where development projects are being implemented. The World Bank’s governance and anti-corruption agenda, a core pillar in these efforts, features capacity-building measures to help member countries combat corruption as well as measures to protect and enhance the integrity of the World Bank’s operations.

The World Bank’s Integrity Vice Presidency plays a central role in the fight against corruption, investigat-ing allegations of fraud and corruption and of possible staff misconduct. It provides guidance to World Bank staff and clients for building preventive measures within development projects, including customized advice and training.


Access to Information

The World Bank’s Policy on Access to Information for IBRD and IDA became effective on July 1, 2010. The new policy moves the Bank from an approach that spelled out what information would be publicly available, to one that enables public availability of all information in the Bank’s possession that is not on a clear list of exceptions, including information about trust funds and partnerships.

Types of documents that are now routinely disclosed include Administration Agreements between the Bank and trust fund donors as well as Grant Agree-ments between the Bank and recipients of trust fund grants. Donor contributions made to each trust fund and aggregate commitments and disbursements made from each trust fund to specific activities or countries are types of financial information that are routinely disclosed.

54


This section provides excerpts of the World Bank Group Modified Cash Basis Trust Funds Report on Internal Controls over Financial Reporting and Combined Statements of Receipts, Disbursements, and Fund Balance (which Management refers to and defines as the Single Audit Report). The complete Single Audit Report is published on the CD-ROM enclosed with this document.

The Independent Auditors’ Reports issued by KPMG LLP and included with the excerpts are based on the complete Single Audit Report, and should be read only in conjunction with the Single Audit Report in its entirety.

The Single Audit excludes the large FIFs, as the Bank provides separate audited financial statements each year for these programs.

In accordance with the respective agreements, the Bank provides annual audited financial statements

for the major FIFs, such as The Clean Technology Fund, Strategic Climate Fund, Global Environment Facility Trust Fund, Special Climate Change Fund, Global Fund to Fight Aids, Tuberculosis and Malaria, International Finance Facility for Immunizations, GAVI Fund Affiliate, and Debt Relief Trust Fund. To date, unqualified auditor’s opinions have been issued on each of these financial statements. The Advance Market Commitment (AMC) is an innovative financing initiative established in 2009. AMC is accounted for in IBRD’s financial statements and is therefore audited as part of IBRD’s institutional audit. Other FIFs, including the Special Climate Change Fund, the Consultative Group on International Agricultural Research, the Least Developed Countries Fund, the GAVI Fund Trust Fund, Carbon Funds, the Adaptation Fund, the Voice Trust Fund, Global Agriculture and Food Security Program, and Haiti Reconstruction Fund are covered by the Single Audit. Additional information regarding individual Trust Funds and programs can be obtained at http://CFP.

Excerpts of the World Bank Group’s Modified Cash Basis Trust Funds Single Audit Report, with a

Full Version on CD-ROM

1AN

NEX

56

The World Bank Group Modified Cash Basis Trust Funds Report on Internal Controls over Financial Reporting & Combined Statements of Receipts, Disbursements and Fund Balance June 30, 2010

TABLE OF CONTENTS

Management’s Assertion Regarding Effectiveness of Internal Controls over Financial Reporting of the Modified Cash Basis Trust Funds 57

Independent Auditors’ Report on Management’s Assertion Regarding Effectiveness of Internal Controls over Financial Reporting of the Modified Cash Basis Trust Funds 59

Independent Auditors’ Report on the Combined Statements of Receipts, Disbursements and Fund Balance 61

Combined Statements of Receipts, Disbursements and Fund Balance 62

Notes to the Combined Statements of Receipts Disbursements and Fund Balance 63


MANAGEMENT’S ASSERTION REGARDING EFFECTIVENESS OF INTERNAL CONTROLS OVER FINANCIAL REPORTING OF THE MODIFIED CASH BASIS TRUST FUNDS

_____________________________________ MODIFIED CASH BASIS TRUST FUNDS

COMBINED FINANCIAL STATEMENTS

58

MANAGEMENT’S ASSERTION REGARDING EFFECTIVENESS OF INTERNAL CONTROLS OVER FINANCIAL REPORTING OF THE MODIFIED CASH BASIS TRUST FUNDS (Cont’d)




INDEPENDENT AUDITORS’ REPORT ON MANAGEMENT’S ASSERTION REGARDING EFFECTIVENESS OF INTERNAL CONTROLS OVER FINANCIAL REPORTING OF THE MODIFIED CASH BASIS TRUST FUNDS



60

INDEPENDENT AUDITORS’ REPORT ON MANAGEMENT’S ASSERTION REGARDING EFFECTIVENESS OF INTERNAL CONTROLS OVER FINANCIAL REPORTING OF THE MODIFIED CASH BASIS TRUST FUNDS (Cont’d)




INDEPENDENT AUDITORS’ REPORT ON THE COMBINED STATEMENTS OF RECEIPTS, DISBURSEMENTS AND FUND BALANCE



62

Expressed in thousands of U.S. dollars

For the year ended

For the year ended

June 30, 2010 June 30, 2009

Contributions 3 $ 6,052,645 $ 4,068,426 Investment income, net 2 123,785 306,263 Other receipts 4 39,524 41,238 Advances received from the Bank 8 7,505 5,574 Transfers from other trust funds 9 199,931 276,166

Total receipts 6,423,390 4,697,667

Project-related disbursements 5 4,946,360 4,147,807 Administrative fees 6 84,905 63,313 Refunds to donors 7 71,273 89,808 Advances repaid to the Bank 8 6,020 8,950 Transfers to other trust funds 9 14,731 2,131

Total disbursements 5,123,289 4,312,009

1,300,101 385,658 Foreign currency adjustments 2 (159,482) (112,771)

1,140,619 272,887

Fund Balance:Beginning of year 8,214,556 7,941,669 End of year $ 9,355,175 $ 8,214,556

Fund balance consists of:

10 $ 9,355,175 $ 8,214,556

The accompanying notes are an integral part of these financial statements.

MODIFIED CASH BASIS TRUST FUNDSCOMBINED STATEMENTS OF RECEIPTS, DISBURSEMENTS AND FUND BALANCE

Notes

Excess of receipts over disbursements before foreign currency adjustments

Excess of receipts over disbursements after foreign currency adjustments

Trust Funds' share of the cash and investments in the Pool




NOTES TO THE COMBINED STATEMENTS OF RECEIPTS, DISBURSEMENTS AND FUND BALANCE June 30, 2010 Note 1 - Organization and operations

The International Bank for Reconstruction and Development (IBRD), the International Development

Association (IDA), the International Finance Corporation (IFC), and the Multilateral Investment

Guarantee Agency (MIGA), in these financial statements collectively referred to as “the Bank”, enter

into administration agreements, individually or jointly, with various external donors for funding trust

funds. The Bank is the Administrator of such trust funds.

Trust funds provide funds to meet diverse development needs, including project preparation, technical

assistance, advisory services, debt relief, post conflict transition, climate change and co-financing of

lending projects.

Basis of combination

Individual trust funds which are accounted for and reported using the modified cash basis of

accounting, as described in note 2, are included in the combined statements of receipts, disbursements

and fund balance (Combined Financial Statements). The list of trust funds that are combined in the

financial statements is provided in note 13. These trust funds are referred to in these financial

statements as “modified cash basis trust funds”. Transactions between trust funds included in these

statements are eliminated.

IBRD performs certain administrative, accounting, financial reporting and treasury services related to

trust fund activities on behalf of the Bank. IBRD, IDA, IFC, and MIGA are members of the World

Bank Group, which also includes the International Centre for Settlement of Investment Disputes.

Activities of the modified cash basis trust funds are carried out in the following ways:

Recipient-executed activities

Recipient-executed trust funds involve activities carried out by a recipient third-party executing

agency (Recipients). The Bank enters into agreements with and disburses funds to those recipients,

who then exercise spending authority to meet the objectives and comply with terms stipulated in the

agreements, including the submission of progress and financial reports for these activities to the

Bank.



64

NOTES TO THE COMBINED STATEMENTS OF RECEIPTS, DISBURSEMENTS AND FUND BALANCE June 30, 2010 Note 1 - Organization and operations (continued)

Bank-executed activities

Bank-executed trust funds involve the execution by the Bank of activities as described in the relevant

administration arrangement with donors which define the terms and conditions for use of the funds.

Spending authority is exercised by the Bank, under the terms of the administration agreements. The

Bank prepares the terms of reference, procures goods and services from suppliers, makes payment,

and submits progress and audited financial reports for these activities to donors.

Financial intermediary funds

Financial intermediary funds comprise a heterogeneous mix of trust funds not covered by either

Bank-executed or Recipient-executed trust funds. They include funds with complex financial

schemes, or arrangements in which the Bank provides specific administrative or financial services

with a limited fiduciary or operational role. Arrangements include the administration of a variety of

debt service trust funds, fiscal agency services funds and other more-specialized limited fund

management roles. Financial intermediary funds are held and disbursed in accordance with

instructions from donors, or in some cases governance bodies operating on behalf of donors.

Note 2 - Significant accounting policies

Basis of Presentation

The accompanying Combined Financial Statements have been prepared on the cash receipts and

disbursements basis of accounting, modified to record the share in pooled cash and investments at fair

value (modified cash basis of accounting). Accordingly, net investment income includes realized and

unrealized investment income (loss).

The modified cash basis of accounting is a comprehensive basis of accounting other than accounting

principles generally accepted in the United States of America (U.S. GAAP) or International Financial

Reporting Standards (together, generally accepted accounting principles). Receipts, with the

exception of net investment income as described above, are recorded when collected (i.e., when

credited to the modified cash basis trust funds) rather than when pledged/earned, and disbursements

are recorded when paid (i.e., when debited from the modified cash basis trust funds).

In accordance with the modified cash basis of accounting, as described above and with the policies

adopted for the administration of the modified cash basis trust funds, certain transactions are reported

in the Combined Financial Statements in the period in which the transaction is credited/debited to the

modified cash basis trust funds, rather than in the period to which they relate. These may include




NOTES TO THE COMBINED STATEMENTS OF RECEIPTS, DISBURSEMENTS AND FUND BALANCE June 30, 2010 Note 2 - Significant accounting policies (continued)

donor contributions not credited to a modified cash basis trust fund at the financial statement dates

due to timing or other reasons, reposting of disbursements in the ordinary course of business as

deemed necessary, and any refunds of previous disbursements deemed by the Bank not to be eligible

in accordance with the relevant administration agreements.

The Combined Financial Statements are not intended to be a presentation in conformity with

generally accepted accounting principles; however, certain information pertaining to the fair value of

financial instruments is presented in accordance with the pertinent U.S. GAAP pronouncements as

described below.

U.S. GAAP defines fair value, establishes a consistent measurement framework and establishes a fair

value hierarchy, which is based on the quality of inputs used to measure fair value and requires fair

value measurement disclosures. It also requires that the valuation techniques used to measure fair

value maximize the use of observable inputs and minimize the use of unobservable inputs. Note 10

on fair value of financial instruments provides further details on the fair value measurement of the

pooled cash and investments.

The Combined Financial Statements are expressed in U.S. dollars, the reporting currency. Fund

balances, consisting of the modified cash basis trust funds’ share in pooled cash and investments,

denominated in currencies other than U.S. dollar are translated into the reporting currency at market

exchange rates in effect at the financial statement dates.

Further, for reporting purposes, contributions received and disbursements made in currencies other

than U.S. dollar are translated at market exchange rates in effect on the transaction date.

Translation adjustments as well as any transaction gains or losses are reported in the Combined

Financial Statements as foreign currency adjustments. However, transaction gains or losses arising

on disbursements, if any, are borne by IBRD.

In addition to the modified cash basis trust funds, the Bank administers a number of other trust funds

which are accounted for and reported under generally accepted accounting principles, a special

purpose basis of reporting, or another basis. These trust funds administered by the Bank are excluded

from the Combined Financial Statements. Transfers between trust funds included in the Combined



66

NOTES TO THE COMBINED STATEMENTS OF RECEIPTS, DISBURSEMENTS AND FUND BALANCE June 30, 2010 Note 2 - Significant accounting policies (continued)

Financial Statements are eliminated; however, transfers to/from trust funds that are not included in the

Combined Financial Statements are reported as transfers.

The preparation of the Combined Financial Statements in conformity with the modified cash basis of

accounting requires management to make estimates and assumptions that affect the reported amounts

of fund balances and related disclosure at the financial statement dates and the reported amounts of

receipts and disbursements during the reporting period. Actual results could differ from these

estimates. Significant judgments have been used in the valuation of certain financial instruments.

Share in pooled cash and investments and net investment income

Amounts paid into the modified cash basis trust funds, but not yet disbursed, are managed by IBRD

which maintains an investment portfolio (the Pool) for all of the trust funds administered by the

entities of the World Bank Group. IBRD maintains all trust fund assets separate and apart from the

funds of the World Bank Group. The Pool is divided into sub-portfolios to which allocations are

made based on fund specific investment horizons, risk tolerances and/or other eligibility requirements

for trust funds with common characteristics as determined by IBRD. Generally, the Pool is invested

in cash and liquid financial instruments such as money market instruments, government and agency

obligations, mortgage-backed securities and other high-grade bonds. The Pool may include securities

pledged as collateral under repurchase agreements with counterparties and receivables from resale

agreements for which it has accepted collateral. Additionally, the Pool may also include derivative

contracts such as currency forward contracts, currency swaps and interest rate swaps.

The Pool is a trading portfolio and is reported at fair value with all gains/losses included in net

investment income. The share in pooled cash and investments represents the modified cash basis

trust funds’ allocated share of the Pool’s fair value at the end of the reporting period.

Net investment income consists of the modified cash basis trust funds’ allocated share of the

following: interest income earned by the Pool, realized gains/losses from the sales of securities and

unrealized gains/losses resulting from recording the securities held by the Pool at fair value.




NOTES TO THE COMBINED STATEMENTS OF RECEIPTS, DISBURSEMENTS AND FUND BALANCE June 30, 2010 Note 3 - Contributions

Contributions represent funds provided by donors, including the Bank, in support of various trust

fund activities. Donors provide cash contributions either directly or against unconditional promissory

notes made payable to the Administrator upon demand. Contributions are recognized in the modified

cash basis trust funds upon receipt of funds and receipt of the signed and countersigned

administration agreements. Contributions for the year ended June 30, 2010 include amounts

contributed by the Bank to the modified cash basis trust funds amounting to $208.1 million (June 30,

2009: $343.4 million).

Note 4 - Other receipts

Other receipts consist primarily of receipts by the trust funds for advisory services, service fees and

repayments of credits disbursed by the Trust Fund for Gaza and West Bank, refunds from closed

projects, reimbursement of administrative fees, and reimbursements of expenses not deemed to be

eligible disbursements.

Note 5 - Project-related disbursements

Project-related disbursements represent amounts incurred for trust fund activities consistent with the

terms of the administration agreements. These include:

a. Disbursements from Bank-executed trust funds to support: (i) the Bank’s own work

program, including analytical and advisory activities, (ii) trust fund administration

activities, and (iii) other project-related activities. The disbursements for these activities

include amounts reimbursed to the Bank for estimated direct staff costs, related benefits

and overhead costs totaling $262.9 million for the year ended June 30, 2010 (June 30,

2009: $230.0 million).

b. Disbursements from Recipient-executed trust funds to third-party recipients for carrying

out development activities and financing the investment and recurrent needs of service

delivery, capacity building and technical assistance. These disbursements also include

payments to IBRD and IDA from debt service trust funds amounting to $224.5 million for

the year ended June 30, 2010 (June 30, 2009: $131.7 million).

c. Disbursements from Financial intermediary funds in accordance with instructions from

donors or governance bodies operating on behalf of donors.



68

NOTES TO THE COMBINED STATEMENTS OF RECEIPTS, DISBURSEMENTS AND FUND BALANCE June 30, 2010 Note 5 - Project-related disbursements (continued)

As part of its regular control framework, the Bank performs various compliance reviews of trust fund

activities, which may result in the identification of certain matters which could result in ineligible

expenditures related to the modified cash basis trust funds. In the event that disbursements are

identified which are deemed not to be eligible in accordance with the relevant agreements for the

modified cash basis trust funds, the Bank will consult with the donors to determine the appropriate

remedy and account for them pursuant to the established policy.

Note 6 - Administrative fees

To assist in the defrayment of the costs incurred for the administration, supervision and oversight of

modified cash basis trust funds, the Bank deducts fees pursuant to the legal agreements with donors.

In exceptional arrangements, the Bank is not compensated for the services provided to administer the

funds.

Note 7 - Refunds to donors

Refunds to donors primarily represent the return of undisbursed fund balances upon completion of

individual trust fund activities. Refunds to donors also include remittances to IDA in the amount of

$4.9 million for the year ended June 30, 2010 (June 30, 2009: $5.5 million) for the repayment of

funds previously disbursed to recipients of the Trust Fund for Gaza and West Bank as credits. These

repayments are first credited to the Trust Fund for Gaza and West Bank and then remitted to IDA -

see also note 4.

Note 8 - Advances received from and repaid to the Bank

Advances received from the Bank represent amounts temporarily granted by the Bank to the modified

cash basis trust funds in anticipation of receipt of contributions committed by donors. Advances

repaid to the Bank represent repayment of such advances by the modified cash basis trust funds to the

Bank.

Note 9 - Transfers from/to other trust funds

Transfers from/to other trust funds represents transfer of funds between the modified cash basis trust

funds included in the Combined Financial Statements and other trust funds excluded from the

Combined Financial Statements.




NOTES TO THE COMBINED STATEMENTS OF RECEIPTS, DISBURSEMENTS AND FUND BALANCE June 30, 2010 Note 10 - Fair value of financial instruments

As discussed in note 2, cash and investments of all trust funds administered by the World Bank Group

are managed in a pooled investment portfolio. The Trust Funds’ share in the pool is not traded in any

market; however, the underlying assets within the Pool are traded and reported at fair value. All

investment decisions are made and performance monitored at the Pool level. The disclosure on fair

value measurement and fair value hierarchy is therefore at the Pool level. The fair value amount of

the modified cash basis trust funds’ share in the pooled cash and investments at the end of the

reporting period also is disclosed.

Fair value measurements

IBRD has an established and documented process for determining fair values. Fair value is based

upon quoted market prices for same or similar securities, where available. Financial instruments for

which quoted market prices are not readily available are valued based on discounted cash flow

models. These models primarily use market-based or independently-sourced market parameters such

as yield curves, interest rates, volatilities, foreign exchange rates and credit curves, and may

incorporate unobservable inputs. Selection of these inputs may involve some judgment. To ensure

the valuations are appropriate where internally-developed models are used, IBRD has various controls

in place, which include both internal and periodical external verification and review.

The techniques applied in determining the fair values of financial instruments are summarized below.

Investment securities

Where available, quoted market prices are used to determine the fair value of investment securities.

The Pool may include investment securities such as government and agency obligations, money

market securities, and corporate and asset-backed securities. For instruments for which quoted

market prices are not readily available, fair values are determined using model-based valuation

techniques, either internally-generated or vendor-supplied, that includes the standard discounted cash

flow method using market observable inputs such as yield curves, credit spreads, and prepayment

speeds. Unless quoted prices are available, money market instruments are reported at face value,

which approximates fair value.



70

NOTES TO THE COMBINED STATEMENTS OF RECEIPTS, DISBURSEMENTS AND FUND BALANCE June 30, 2010 Note 10 - Fair value of financial instruments (continued)

Securities purchased under resale agreements and securities sold under agreements to repurchase

Securities purchased under resale agreements and securities sold under agreements to repurchase are

reported at face value which approximates fair value.

Discount notes and plain vanilla bonds

Discount notes and plain vanilla bonds are valued using the standard discounted cash flow method,

which relies on market observable inputs such as yield curves, foreign exchange rates, basis spreads

and funding spreads.

Derivative contracts

Derivative contracts include currency forward contracts, currency swaps and interest rate swaps.

Derivatives are valued using the standard discounted cash flow methods using market observable

inputs such as yield curves, foreign exchange rates, basis spreads and funding spreads.

Fair value hierarchy

Financial instruments are categorized based on the priority of the inputs to the valuation technique.

The fair value hierarchy gives the highest priority to quoted prices in active markets for identical

assets or liabilities (Level 1), the next highest priority to observable market-based inputs or inputs that

are corroborated by market data (Level 2) and the lowest priority to unobservable inputs that are not

corroborated by market data (Level 3). When the inputs used to measure fair value fall within

different levels of the hierarchy, the level within which the fair value measurements is categorized is

based on the lowest level input that is significant to the fair value measurement of the instrument in

its entirety. Thus, a Level 3 fair value measurement of the instrument may include inputs that are

observable (Level 2) and unobservable (Level 3).





The following tables present the Pool’s fair value hierarchy for financial instruments measured at fair

value on a recurring basis as of June 30, 2010 and June 30, 2009. The modified cash basis trust

funds’ allocated share of the Pool’s financial instruments may hold varying proportions among the

three levels.

Level 1 Level 2 Level 3 Total

Investment securities Government and agency obligations $ 4,766 $ 7,233 $ - $ 11,999

Money market securities 801 6,426 - 7,227

Asset-backed securities - 3,764 2 3,766

Total investment securities $ 5,567 $ 17,423 $ 2 $ 22,992

Securities purchased under resale agreements and securities sold under repurchase agreements (303) (13) (316)

Derivatives, net - (59) - (59)

Total of financial instruments in the Pool at fair value $ 5,264 $ 17,351 $ 2 $ 22,617

Fair Value Measurement on a Recurring Basis

as of June 30, 2010

In millions of U.S. dollars

Level 1 Level 2 Level 3 Total

Investment securities Government and agency obligations $ 5,457 $ 4,981 $ 49 $ 10,487 Money market securities 558 5,787 - 6,345 Asset-backed securities - 4,114 96 4,210 Total Investment securities $ 6,015 $ 14,882 $ 145 $ 21,042

Securities purchased under resale agreements and securities sold under repurchase agreements (477) (206) - (683)

Derivatives, net - (5) - (5)

Total of financial instruments in the Pool at fair value $ 5,538 $ 14,671 $ 145 $ 20,354

In millions of U.S. dollars Fair Value Measurement on a Recurring Basis

as of June 30, 2009



72


In the Pool, the carrying value of securities pledged as collateral under repurchase agreements as of

June 30, 2010 and June 30, 2009 were $316 million and $685 million, respectively. During the years

ended June 30, 2010 and June 30, 2009, neither transfers between levels nor securities in level 3 were

significant. Therefore, no further disclosures on them are included.

As of June 30, 2010 and June 30, 2009, the Pool does not have any financial instruments measured at

fair value on a non-recurring basis.

Modified cash basis trust funds’ share of the cash and investments in the Pool

The modified cash basis trust funds’ share of the cash and investments in the Pool, which was

allocated based on the specific investment horizons, risk tolerances and other eligibility requirements

pursuant to the agreements, has a fair value of $9,355 million as of June 30, 2010 (June 30, 2009:

$8,215 million). Net investment income in the amount of $124 million was credited to the modified

cash basis trust funds for the year ended June 30, 2010 (June 30, 2009: $306 million) based on their

allocated share of the cash and investments in the Pool.

Financial risks related to the Pool

IBRD, on behalf of the Bank, invests the Pool’s assets generally in liquid instruments such as money

market securities, government and agency obligations, mortgage-backed securities and derivative

contracts. IBRD’s policy limits investments in the Pool to financial instruments with minimum credit

ratings as follows:

Money market securities: issued or guaranteed by financial institutions with senior debt

securities rated at least A-.

Government and agency obligations: issued or unconditionally guaranteed by government

agencies rated at least AA- if denominated in a currency other than the home currency of the

issuer, otherwise no rating is required. Obligations issued by an agency or instrumentality of

a government, a multilateral or any other official entity require a minimum credit rating of

AA-.

Mortgage-backed securities and Asset-backed securities: minimum rating must be AAA.

Derivatives: counterparties must have a minimum rating of A+.





Modified cash basis trust funds’ financial risks

The modified cash basis trust funds are exposed to credit risk on its share in the cash and investment

in the Pool. As of June 30, 2010, the Trust Funds’ share in the Pool is invested in a sub-portfolio of

which approximately 64% (June 30, 2009: 67%) of the securities are rated at least AA and 100%

(June 30, 2009: 98%) of the securities are rated at least A+. As of June 30, 2010, this Pool sub-

portfolio is invested in the following types of instruments: 41% (June 30, 2009: 33%) in money

market securities, 57% (June 30, 2009: 65%) in government and agency obligations and the

remaining 2% (June 30, 2009: 2%) in mortgage-backed securities and asset-backed securities.

Note 11 - Guarantees

There are four investment guarantee trust funds, which are administered by MIGA, included in the

combined statements of receipts, disbursements and fund balance. MIGA, on behalf of these trust

funds, issues guarantees against loss caused by non-commercial risks to eligible investors on qualified

investments in the countries specified in the trust fund administration agreements. These guarantees

expire between June 2012 and March 2015. At June 30, 2010, the maximum potential amount of

future payments of the guarantees is $2.5 million (June 30, 2009: $2.7 million).

Note 12 – Subsequent Events

Management has evaluated subsequent events through September 21, 2010, the date the financial

statements were available to be issued.

Note 13 - List of trust funds included in the Combined Financial Statements

This note provides the listing of individual trust funds which are accounted for and reported using the

modified cash basis of accounting, as described in note 2, and therefore are included in the Combined

Financial Statements. Certain trust funds are included in 2009, but not in 2010 primarily because

they were closed during the year ended June 30, 2009. Similarly, certain trust funds are included in

2010 but not in 2009 primarily because they were created and activated during the year ended June

30, 2010.



74


Term Definition

Administration

Agreement

Agreement between the WBG institution and a donor specifying a trust fund’s purposes and scope of activities. An Administration Agreement also defines the nature of the Bank’s relationship with the donor and spells out, among other things, the arrangements governing the use of funds, progress and financial reporting, cost recovery fee, auditing, and disclosure of information.

Bank-executed

trust funds

Trust funds for which the Bank has spending authority and which support the Bank’s work program.

Cash

contributions

Contributions received by the Bank in the form of cash and encashment of promissory notes.

Co-financing Any arrangement under which funds provided by third parties are associated with IBRD/IDA funds or guarantees provided for a particular project or program.

Commitment Amount of financing approved for project(s) or activity(ies) at the grant level.

Contribution

receivable

Funds provided to a trust fund administered by the Bank on the basis of a signed agreement between the WBG institution and donor(s) but not yet paid in.

Disbursements Payments made from a trust fund account to eligible recipients; also referred to as transfers in the case of FIFs, and as expenditures in the case of IFC TFs.

Donor Any entity that makes funds available to be held in trust by the WBG, including sovereign governments, intergovernmental institutions, private nonprofit entities, and private for-profit organizations. The WBG itself is considered a donor when contributing to trust funds from its own net income.

Financial

intermediary

funds

Financial instruments, usually (but not always) trust funds, for which the Bank as trustee, administrator, or treasury manager provides an agreed set of financial and administrative services. The Bank manages donor contributions and transfers them to partner implementing entities. The partner entity or the governing board or secretariat acting on behalf of the donors oversees the ultimate use of funds.

Free-standing

trust fund

A fund that supports specified project(s) or activity(ies) as defined at the time of contribution.

Trust Fund Glossary2

ANNE

X

76

Term Definition

Grant The funds provided from a trust fund to an external recipient or to the Bank to implement the trust fund activities. A grant normally carries no repayment obligation when used for the agreed activities. When a grant is provided to an external recipient, the recipient agrees to implement the grant activities by signing a Grant Agreement.

Grant

Agreement

Agreement between the Bank and an external recipient of a trust fund that governs the use of the donor’s grant. The agreement spells out the respective responsibilities of the Bank and the recipient.

IBRD/IDA trust

fund

A trust fund for which the Bank manages the funds and implements or supervises the activities financed. The use of IBRD/IDA TFs is split between Bank-executed trust funds (BETFs), which are used in support of the Bank’s work program, and recipient-executed trust funds (RETFs), under which funds are provided to a third party, normally in the form of project financing and supervised by the Bank.

IFC trust fund A trust fund for which IFC manages the funds in support of IFC advisory services and donor-funded investments.

Multidonor

trust fund

A trust fund with pooled contributions from more than one donor, generally for a program of activities over a number of years. This arrangement includes essentially standard legal agreements with all donors, which specify governance procedures covering management, operational and financial reporting, and uses of the funds.

Programmatic

trust fund

A trust fund that supports multiple grants under a two-stage funding mechanism. Initially (at the time of contribution), one or more donors agree to a thematic framework with criteria for supporting a program of activities, and the donor(s) commit their funds to the trust fund on this basis. In the second stage, grants are approved for specific activities on the basis of the agreed criteria.

Promissory

note

Non-negotiable, non-interest-bearing demand note, generally encashed according to schedules agreed with the donors and recorded as cash contributions upon encashment.

Recipient Any entity that receives trust fund monies, including governmental, quasi-governmental, nongovernmental, or private institutions. The Bank may itself be the recipient of a trust fund in support of Bank activities.

Recipient-

executed trust

fund

A trust fund that the Bank passes on to a third party and for which the Bank plays an operational role: the Bank normally appraises and supervises activities financed by these funds.

Trust fund A financing arrangement set up with contributions from one or more donor(s), and in some cases from the WBG. A trust fund can be country-specific, regional, or global in its geographic scope, and it can be free-standing or programmatic.


Single Audit withCombined Financial Statements

For enquires contact

Global Partnership and Trust Fund Operations, CFPTO

The World Bank

1818 H St. NW, Washington, D.C. 20433, U.S.A.

[email protected]

www.worldbank.org/cfp

Photography Credits:

Tran Thi Hoa/The World Bank, page 4Thomas Sennett/The World Bank, page 13Curt Carnemark/The World Bank, pages 15, 46, and 74Michael Morris/The World Bank, page 19Dominic Sansoni/The World Bank, pages 22 and 25Flickr—IFC, page 32Eric Miller/The World Bank, page 38Shehzad Noorani/The World Bank, page 49Anatoliy Rakhimbayev/The World Bank, page 52Edwin Huffman/The World Bank, page 54

Concessional Finance and Global Partnerships

The World Bank1818 H Street, NWWashington, DC 20433U.S.A.

www.worldbank.org/cfp

Documents

2010 trust fund annual report - The World Bank€¦ · Figure 7. Top 10 Donors to IBRD/IDA Trust Funds in FY10 14 Figure 8. Annual RETF Disbursements in Fragile States, FY06-FY10