Establishing trust funds is one effective way for donors to channel finances and partner with local governments and other development institutions to deliver targeted assistance to the world’s poorest and most vulnerable.
But building a robust and stable trust fund can be an arduous and slow task for development professionals caught up in the tussle of bureaucracy.
At the World Bank, staffers are familiar with long clearance processes involving coffee with potential donors, writing and rewriting proposals to account for changes in country-level fees or policies, seeking approval from several World Bank departments and officials, and then struggling to recover the costs associated with a new fund.
All of this might soon change.
The World Bank is reforming the way it approaches trust funds by condensing its approval process, establishing one singular department to conduct clearances, developing new mechanisms to recover costs and taking steps to harmonize negotiations with donors.
Speaking Wednesday at the bank’s headquarters in Washington, D.C., as part of the institution’s Fragility, Conflict and Violence Forum, World Bank manager for policy, design and risk management for partnerships and trust funds Caroline Harper highlighted the “simplification initiatives” that her team is putting together to speed up trust fund development.
Condensed approval process
The first thing her team is working on is to get rid of the clearance mechanism known as the trust fund proposal.
Under this mechanism, World Bank staff members meet with potential donors in country, develop a concept note for a new trust fund, seek out management for approval, and then turn the concept note into a separate proposal for review by numerous World Bank units. Harper said this process is problematic since it fosters unnecessary duplication of work and eats up time.
Without the TFP, one concept note would be all that’s required to achieve approval and move forward.
A time frame for the new mechanism is still unclear, but Harper said she hopes it will be up and running by the next fiscal year. In the meantime, her team is focusing on building up the importance of the concept note so that the transition to a new mechanism is a smooth one.
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Another initiative Harper and her team are taking to simplify the development of trust funds is to designate a single World Bank unit to provide clearances for concept notes, or what are currently TFPs.
As it stands, staff members developing trust funds need to seek clearances from several World Bank units, including from controllers and a structure team. Under the new model, the newly established Development Finance Institution will be what Harper calls a “one-stop shop” for clearances.
A third way the World Bank is planning to improve trust funds is by taking steps to improve cost recovery. According to Harper, the World Bank was “underrecovering $268 million of cost associated with trust funds” in fiscal year 2014.
“In this really tight budget environment and with a policy of full cost recovery, we just simply can’t continue to absorb these costs,” Harper said.
One solution is to establish an indirect cost and a flat percentage fee for any personnel working on a trust fund. This would apply to both fixed and open-term staff.
Harper said work is still being done to define what the cost and the percentage fee are, and that trust fund donors would have to be on board.
Board discussions surrounding this initiative are taking place Feb. 24, and the technical briefing paper went to the board over the weekend, according to Harper.
The initiative will apply to trust funds starting July 1.
Harmonizing negotiations with donors
Harper also described an initiative already put in place to harmonize negotiations between trust fund managers at the bank and donors.
The consultative group on operational principles for partnerships and trust funds was established to “harmonize the needs of donors with what [the World Bank] can do within our policy framework so that every single engagement doesn’t have to be negotiated,” Harper said.
Trust fund managers often have to delve into different negotiations with different donors such as the U.K. Department for International Development and the European Union in order to demonstrate results and accountability of a trust fund. Now, the new consultative group will focus on reporting, results and risk assurances, and World Bank officials hope donors will harmonize their demands to fit what the group will aim to provide.
Harper also encouraged World Bank staff not to “overpromise” donors what can be accomplished through a particular trust fund. Overpromising and not following through “hurts our donor relations,” Harper said, adding “we need to be true to the cost of doing business with trust funds.”
What do you think of the World Bank’s trust fund reform? Will it make the institution more efficient and financially honest, or will it hamper the flow of finances to much needed development projects?
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