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This Bank Procedures statement was updated in April 2007 consequent to the issuance of OP/BP 12.00, Disbursement. (Archived July, 2008) Note: OP and BP 14.40 replace OD 14.40, Trust Funds and Reimbursable Programs, and the following Operational Memoranda: OMS 4.40, "Trust Funds," 5/5/89, and OD 14.40: Trust Funds and Reimbursable Programs, 6/26/91; they also draw on the Operational Memoranda Technical Assistance Grant Programs for the Environment, 5/26/89, and Management of Externally Funded Programs, 1/7/92. These statements do not cover reimbursable arrangements, arrangements under which the Bank provides administrative services but does not receive funds in trust, trust funds funded by IBRD from its budget or net income, or the IDA-11 Interim Trust Fund and IDA Debt Reduction Facility. Questions should be addressed to the Manager, Official Cofinancing and Trust Funds Division, CAP. |
1. The Bank1seeks to enter into framework (or umbrella) agreements with trust fund (TF) donors. Such agreements regulate the provision of donor resources for a variety of partnership activities--including technical assistance (TA) and cofinancing--and set out TF use conditions. The Bank's Cofinancing and Project Finance Department (CAP) is responsible for facilitating and coordinating the mobilization of TF resources.2 CAP is also responsible for managing the Consultant Trust Fund Program (CTFP) and certain TF programs under which funds are provided for further allocation by the Bank, for example, Japan's Policy and Human Resources Development Fund (PHRD). Planning Use of Trust Funds
2. The Country Assistance Strategy document indicates the role of TFs in supporting the strategy, drawing attention to any special features, risk, or cost. Each vice presidential unit (VPU) indicates in its annual business plan3the level of work program activities to be supported by TFs and the activities considered suitable for donor funding. CAP assists the VPUs by identifying sources of TF support through its regular contacts with donors, including formal donorBank consultations. In addition, VPUs identify donor interests through informal discussions with donor agency staff.
Proposals for TF Funding
Existing TF Programs
3. For the CTFP and TA funds managed by CAP (e.g., PHRD), the VPU submits a request for funding allocations for specific activities directly to CAP.
New TFs
4. To request external funding of an activity through a TF, the VPU concerned4prepares an Initiating Brief for a Trust Fund (IBTF).5 The IBTF demonstrates that the proposal is consistent with the acceptance requirements set out in OP 14.40, paras. 4-6; describes the nature of the activity and the objectives to be achieved; states the funding source, terms and conditions, and execution responsibility; sets out the arrangements for monitoring progress and evaluating results, including performance indicators; and, for a country-specific TF supporting TA activities (see OP 14.40, para. 2 (c)), justifies any proposal that the Bank execute the TF.6
5. The VPU submits the IBTF for clearance by CAP, which obtains necessary clearances from other Bank units concerned.7
6. An IBTF for a new global or regional TF program is subject to approval by the concerned Managing Director, Operations; all other IBTFs may be approved by the vice president of the VPU concerned.
7. If the Bank and a donor have a framework agreement in place, the VPU and CAP ensure that the proposed TF activities are consistent with the agreement, and the VPU seeks funds in accordance with the terms of that agreement. If there is no framework agreement between the Bank and a donor, or if the provisions of such an agreement do not address the mobilization of TF resources for a specific activity, VPU and CAP staff determine how best to obtain the funds needed.
TF Administration and Grant Agreements
TF Administration Agreement
8. LEG drafts, and ensures that donor staff review and concerned Bank staff clear,8a TF Administration Agreement that includes the following standard provisions:
(a) The Bank exercises the same care in the discharge of its functions under the Agreement as it exercises in its own affairs and assumes no further liability to the donor.
(b) Accounts for TFs are kept separate from those of the Bank.
(c) The financial statements of each TF are presented in the currency specified in the Agreement.
(d) To facilitate disbursements, the Bank may convert TF assets into other currencies.
(e) The Bank is authorized to invest the assets of a TF and may commingle those assets with other TF assets administered by the Bank. The Agreement specifies whether the investment income is retained by the Bank to defray its administrative costs, refunded to donors, added to the TF account, or used for some other purpose.
In addition, the Agreement sets out arrangements for calling the funds from the donor and provisions for cost recovery.
Grant Agreement
9. LEG drafts, and ensures that recipient staff review and concerned Bank staff clear,9a TF Grant Agreement.
Negotiation, Signing, and Distribution
10. The VPU, LEG, and other concerned departments10negotiate TF Administration and TF Grant Agreements. LEG ensures that any significant changes to these Agreements agreed during negotiations are cleared by CAP and other concerned departments. The VPU signs them on behalf of the Bank, and arranges for signing by other parties.
11. The VPU sends the original signed TF Administration and TF Grant Agreements to LEG and provides copies of these documents and the approved IBTF to CAP for appropriate internal distribution.
Implementation
12. The recipient of the grant executes all country-specific TF-financed activities,11except as allowed under OP 14.40, para. 11. When in exceptional cases the Bank agrees to execute such TF activities, the VPU is responsible for hiring consultants,12preparing terms of reference or specifications, negotiating contracts, reviewing consultants' studies and reports, authorizing payments, administering project budgets, and preparing progress reports to donors. VPU staff facilitate recipient ownership of the activities supported by the TF by keeping recipient authorities informed about key steps and consulting them as necessary.
Financial Arrangements
13. Upon receiving a copy of the signed TF Administration Agreement (and any Grant Agreement), ACT activates a TF account for each TF (or TF activity) negotiated with the donor. ACT may authorize an interim budget for a Bank-executed activity if it receives evidence that donor funds will be made available and that the requesting VPU will cover the expenses incurred if the proposed TF is not established and funds received within six months.13
14. When activities under a TF are executed by the recipient, regular disbursement procedures14for Bank loans apply. For Bank-executed TF activities, the VPU authorizes commitments and payments using the Bank's Budget and Accounting System, subject to the provisions of the relevant TF Administration Agreement and the applicable Bank administrative and operational policies and procedures.
15. Financial statements for each TF are prepared on a cash basis. Contributions are recorded when received, and disbursements are recognized when paid rather than when obligations are incurred.
Supervision, Completion, and Evaluation
16. The VPU supervises TF activities to ensure that the funds are used in a timely manner for the agreed purposes. Each VPU is accountable for TFs it administers; therefore, it establishes internal control and monitoring procedures to ensure that the Bank fulfills its obligations in accordance with the terms and conditions of each TF Administration Agreement. Financial administration of a TF is the responsibility of the VPU.
17. ACT prepares TF financial reports and statements and furnishes them to the donor, the recipient (where required), and internal Bank users.
18. Each recipient-executed TF Administration or Grant Agreement (or the activity funded under such Agreements) stipulates a closing date,15set so as to allow a reasonable period for disbursements after completion of the activity. By the closing date, the Bank closes the TF account for an activity or, exceptionally, extends the closing date.16
19. VPU staff initiate action for closure when the TF activities are completed. For recipient-executed activities, VPU staff inform the recipient of the final disbursement figures. The VPU (or CAP, for CTFs) cancels any unused funds and ensures that the unused funds are disposed of in accordance with the TF Administration Agreement. As required, within six months of completion of the activity, the VPU prepares an Implementation Completion Memorandum (ICM).17 ACT prepares the final financial statement and arranges for any final audit required.
20. CAP reviews ICMs for completeness and internal coherence. It prepares an annual report summarizing the major findings and lessons learned recorded in ICMs, and disseminates this information to Bank staff. In addition, OED may carry out evaluations of TF activities.
Portfolio Review and Financial Audits
21. Each year, normally within 60 days after the end of the fiscal year, the VPU provides to CAP an evaluation report of its entire TF portfolio, focusing in particular on TF activities exceeding a specified amount to be determined from time to time.18 CAP reviews these reports and prepares a report to management on the status of the overall TF program.
Financial Audits
22. The Internal Audit Department (IAD) selectively audits TFs and may respond to special requests by VPUs. IAD also carries out periodic reviews of TF operations.
23. Each year ACT provides each donor a management assertion, together with an attestation from the Bank's external auditors, on the satisfactory performance of the procedures and controls used by the Bank in administering trust funds.
24. If a donor wishes to have a separate external audit of a TF financial statement, ACT arranges for such an audit, provided that the donor agrees to cover the audit costs.
Policy Formulation and Review
25. CAP and the Operations Policy Department, in consultation with ACT, LEG, LOA, OED, PBD, and the VPUs concerned, periodically review the Bank's TF policies to ensure their continued effectiveness in contributing to the Bank's development objectives. CAP reports to management and, from time to time, prepares reports for submission to the executive directors.
Cost Recovery and Waiver
26. CAP and PBD periodically review the Bank's policy on cost recovery and establish a uniform structure19for recovering the costs of managing and administering TFs.
27. Cost recovery may take place through the levy of a fee (which may be paid by the donor, the recipient, or both), the reimbursement of actual costs to the Bank, a charge on TF principal, retained investment income, or a combination of any of these modes. The selected mode of cost recovery is stipulated in the TF Administration Agreement.
28. In exceptional circumstances, PBD, in consultation with CAP, may agree that the Bank should absorb part or all of its costs because of the benefits accruing from a specific TF to realizing the policy agenda and program objectives of the Bank20or the resulting cost savings to the Bank, or for special reasons. ____________ "Bank" includes IBRD and IDA, and "loans" includes IDA credits and IDA grants. The Resource Mobilization Department is responsible for facilitating and coordinating the processing of multidonor, multirecipient TFs of $100 million or more. Such TFs are normally signed on behalf of the Bank by the Managing Director, Finance and Resource Mobilization. The Planning and Budgeting Department (PBD), in consultation with CAP, provides annual guidelines to assist VPUs in preparing a budget that includes TFs. A global or regional TF may be initiated by one or more VPUs. IBTFs are normally three to five pages long, depending on the nature and scope of the TF activity. The IBTF is cleared with the Legal Department (LEG) and Accounting Department (ACT); in addition, if cost recovery is waived in whole or in part, it is cleared with the Planning and Budgeting Department (PBD); and the IBTF for a recipient-executed TF is cleared with the Loan Department (LOA). Staff from the following Bank departments clear a TF Administration Agreement: the VPU managing the trust fund, CAP, ACT, LOA (for a recipient-executed TF), and PBD (if cost recovery is waived in whole or in part). Staff from the following Bank departments clear a TF Grant Agreement: the VPU managing the trust fund, CAP, ACT, and (for a recipient-executed TF) LOA. The departments listed in footnote 8 may participate in negotiating TF Administration and Grant Agreements if provisions differing from those in the cleared IBTF are to be discussed. Including country-specific TA activities funded under a global or regional TF. Internal procedures for engaging consultants for Bank work apply. See PBD's Budget Management Manual, para. 9.19. For additional information, see OP/BP 12.00, Disbursement. The provisions of paras. 18 and 19 apply to suballocations for TA activities under TFs (including CTFs) funded by framework agreements. See OP/BP 13.30, Closing Dates. For a trial period (FY97-98), ICMs are required for any TF activity (including suballocations) exceeding $1 million. ICMs are furnished to CAP and the Operations Evaluation Department by the responsible VPU. For cofinancing TFs, the Implementation Completion Report for the project may cover all the activities under the project, so that separate ICMs are not needed for the TF activities. For a trial period (FY97-98), this amount is $1 million. The structure is published in the Budget Management Manual. For example, CTFs and debt or debt service reduction TFs are exempt from cost recovery on these grounds.
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