FY18 World Bank Budget

Transcription

1 FY18 World Bank Budget September 25, 2017 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION

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3 CONTENTS 1. OVERVIEW AND RECOMMENDATIONS OVERVIEW FY18 BUDGET RECOMMENDATIONS FY18-20 BUDGET FRAMEWORK STRATEGIC ALIGNMENT BUDGET SUSTAINABILITY CONTINUED FOCUS ON EFFICIENCIES FY18 BUDGET ADMINISTRATIVE BUDGET PROPOSAL SOURCES AND USES OF FLEXIBILITY OPERATIONS IG&A UNITS NON-UNIT SPECIFIC ALLOCATIONS EXPENSE FUNCTIONAL VIEW CAPITAL BUDGET OVERVIEW FACILITIES TECHNOLOGY AND SYSTEMS ANNEXES ANNEX I. PROGRAM COST SUMMARY ANNEX II. INDICATORS OF BUDGET SUSTAINABILITY, STRATEGIC ALIGNMENT AND BUDGET EFFICIENCY ANNEX III. FULL COST RECOVERY OF STAFF BENEFITS TABLES Table 2.1: FY18 Emerging Budget Trajectories (US$ million)... 9 Table 2.2: Expenditure Review Total Savings Estimates, May 2017 (US$ million) Table 2.3: Expenditure Review Reconciliation Against FY18 Target Baseline (US$ million) Table 3.1: FY17 WB Budget and Proposed FY18WB Budget Trajectory (US$ million) Table 3.2: FY18 Sources and Uses of Flexibility (US$ million) Table 3.3: FY17-18 Budget by Work Program and Funding Source (US$ million) i

4 Table 3.4: FY17-18 Budget Share by Work Program and Funding Source (%) Table 3.5: Lending Commitments (US$ billion) Table 3.6: FY17-18 Operational Budget Envelopes (US$ million) Table 3.7: Grant-making Facilities Budgets (US$ million) Table 3.8: FY18 IG&A Budget Envelopes (US$ million) Table 3.9: FY17 and FY18 Board-Related Budgets (US$ million) Table 3.10: Centrally-Managed Accounts (US$ million) Table 3.11: FY17 and FY18 Functional Expense View of Administrative Expenses (US$ million) Table I.1: FY18 Funding for WB Work Program and Unit (US$ million) Table I.2: Overview of External Funds Projected Revenues FY18 by Unit (US$ million) FIGURES Figure 2.1: Operational Share of Unit Budgets (excluding GMF)... 5 Figure 2.2: Client Engagement Share of Operational Unit Budgets... 6 Figure 2.3: FCV and FCV at Risk CE Budgets as a Share of Total CE Budget... 6 Figure 2.4: IBRD and IDA Budget Anchors with Proposed Increased Budget Trajectory... 8 Figure 2.5: External Funds as a Share of Total Administrative Spending Plans... 9 Figure 2.6: Total Administrative Budget per US$ Billion Loan Approved (in US$ million) Figure 2.7: Total Administrative Budget per Lending Project Approved (in FY17 US$ million) Figure 2.8: Total Administrative Budget per US$ Billion Portfolio under Supervision (in US$ million). 12 Figure 2.9: Total Administrative Budget per Project under Supervision (in FY17 US$ million) Figure 3.1: Evolution of the Country Engagement Bank Budget from FY17 to FY18 (US$ million) Figure 3.2: Country Engagement Bank Budget Allocations by Business Process for FY16-18 (US$ million) Figure 3.3: Country Engagement Bank Budget Allocation Shares by Business Process for FY Figure 3.4: FY18 Country Engagement Allocation Shares by Practice Groups Figure 3.5: Country Engagement Bank Budget Allocations for FCV & FCV at Risk Countries for FY16-18 (US$ million) Figure 3.6: Country Engagement Bank Budget Allocations to Small States for FY16-18 (US$ million) 25 Figure 3.7: Full-time Bank Staff on Payroll BOXES Box 3.1: Embedding the Cascade Across the Client Engagement Cycle ii

5 ACRONYMS ASA AFR BB BETF BPC BPS CCSA CE CGIAR CMA CO CODE CPF CRO DEC DFI DGF DPF EAP EBC ECR ECA EFO ER ESF FCV GE GMF GSD GGEVP GGHVP GGSVP GPSA HRD IBRD ICSID IDA IDF IEG IFC IG&A IJS INT Advisory Services and Analytics Africa Region Bank Budget Bank-Executed Trust Fund Budget Planning and Consolidation Budget, Performance Review, and Strategic Planning Vice-Presidency Cross-cutting Solution Areas Country Engagement Consultative Group for International Agricultural Research Centrally-Managed Account Country Offices Committee on Development Effectiveness Country Partnership Framework Chief Risk Officer Development Economics Vice-Presidency Development Finance Vice-Presidency Development Grant Facility Development Policy Financing East Asia and Pacific Region Ethics and Business Conduct Vice-Presidency External and Corporate Relations Vice-Presidency Europe and Central Asia Region Externally Financed Output Expenditure Review Environmental and Social Framework Fragility, Conflict and Violence Global Engagement Grant-Making Facility General Services Department Equitable Growth, Finance and Institutions Practice Group Human Development Practice Group Sustainable Development Practice Group Global Partnership for Social Accountability Human Resources Development Vice-Presidency International Bank for Reconstruction and Development International Centre for Settlement of Investment Disputes International Development Association Institutional Development Fund Independent Evaluation Group International Finance Corporation Institutional, Governance, and Administrative Internal Justice System Integrity Vice-Presidency iii

6 ITS LCR LEG LLI MEF MIGA MNA OPCS PAD PCRF PCS PFC RAMP PPM PSW RAS RETF RM SAR SBO SCD SDG SPF STC TA TRE VPU WBG WBT WFA WPA Information & Technology Solutions Vice-Presidency Latin America and Caribbean Region Legal Vice-Presidency Learning, Leadership, and Innovation Mediation Facility Multilateral Investment Guarantee Agency Middle East and North Africa Region Operations Policy and Country Services Vice-Presidency Project Appraisal Document Post-retirement Contribution Reserve Fund Program Cost Summary Pension Finance Committee Reserves Advisory and Management Program Program and Practice Management Private Sector Window Reimbursable Advisory Services Recipient-Executed Trust Fund Resource Management South Asia Region Strategy and Business Outlook Systematic Country Diagnostic Sustainable Development Goals State and Peace-building Fund Short Term Consultant Technical Assistance Treasury Vice-Presidency Vice Presidential Unit World Bank Group World Bank Tribunal World Bank Group Finance and Accounting Vice-Presidency Work Program Agreement iv

7 1. OVERVIEW AND RECOMMENDATIONS This document, which supports the key engagement with Executive Directors in this year s strategic planning and budget discussions, presents the FY18 World Bank Budget for Board approval. This budget proposal reflects close consultations between Executive Directors and Management throughout the strategic planning, budgeting and performance management process for the World Bank Group. 1.1 OVERVIEW 1. The World Bank Group has embarked on a number of reforms to meet emerging development challenges. 2. The World Bank has strengthened its financial position and is on track to meet all of its FY18 budget sustainability goals. In recent years, the World Bank Group (WBG) has stepped forward to meet the emerging development challenges articulated in the Sustainable Development Goals. The WBG Twin Goals and the Forward Look paper chart a course to building a better and stronger World Bank Group that can meet these challenges. Implementation of the Forward Look will enable the Bank to pursue a 2x3 strategy, i.e., achieving the twin goals with investments in three priority areas, namely Sustainable and Inclusive Growth, Human Capital, and Resilience. The strategic planning and budgeting process enables management across the WBG to convert strategy to action on the ground, with a focus on five key areas to ensure the WBG remains fit for purpose: (i) serve all client segments, (ii) lead on global issues, (iii) mobilize financing, (iv) improve the business model, and (v) ensure adequate financial capacity. The World Bank (WB) has placed itself on a stronger financial footing and is better equipped to meet the growing demands of its clients. The IDA replenishment discussions concluded in December 2016 with a groundbreaking US$75 billion replenishment, around 50 percent higher than IDA-17. This will enable IDA to scale up interventions over the next three years, including a doubling of lending to Fragility, Conflict and Violence (FCV) affected countries, and to support critical governance and institution building, jobs and economic transformation, climate change, and gender equality. Through the financial reforms and the Expenditure Review (ER), the Bank has successfully implemented measures to increase revenues and contain expenditures through savings and efficiencies. The Bank is on track to meet its target of US$300 million in Expenditure Review savings by FY18, as part of broader savings of US$400 million for WBG institutions and Trust Funds. In addition, in a landmark achievement, IBRD and IDA will each fully cover administrative expenses with revenues generated from their operations and meet their budget sustainability principles in FY18. In the case of IBRD, this will be the first time that this has been achieved on a sustainable basis in at least 20 years, as IBRD administrative 1

8 expenses have for many years been funded in part from earnings from capital. 3. Management is proposing an administrative budget of US$2,550 million, and a capital budget of US$198 million for FY The FY18 budget has been framed taking into account the need to align spending plans with strategic priorities, meet the Bank s budget sustainability goals, and promote greater efficiency in the use of resources. Recognizing the need to maintain budget discipline and adhere to the ER target on the one hand, and additional work program pressures (in both volume and scope) on the other, Management is proposing a US$2,550 million administrative budget for FY18. This represents an increase to the FY18 administrative spending trajectory, as presented in last year s Budget Paper, of US$19 million, and an increase in the funding trajectory for Grant-making Facilities (GMFs) of US$5 million for the Consultative Group for International Agricultural Research (CGIAR). The FY18 administrative budget represents a 1.0 percent increase over the FY17 budget in nominal terms and a 1.3 percent decrease in real terms. Management is also proposing a capital budget of US$198 million for FY18, comprising US$113 million for Facilities investments and US$85 million for IT investments. Chapter 3 provides details underlying the budget administrative proposal and further details on the capital budget proposal are set out in Chapter 4. Management has built its budget plans around the following three key principles: a) Direct resources toward strategic priorities agreed during the W process including (i) the preparation and delivery of the pipeline for IDA and FCV scale-up built around IDA-18 s five themes and the Private Sector Window (PSW); (ii) maintaining engagement in IBRD countries and optimizing lending delivery while capital options are considered; (iii) developing and implementing WBG approaches to creating markets, catalyzing private sector investments, to address the infrastructure gap; (iv) speeding up support and innovation on key global public goods and corporate commitments, such as climate change, fragility, displacement, pandemics, domestic resource mobilization, and resilience to shocks; (v) implementing the WBG Gender Strategy, mainstreaming it into operational work; and (vi) investments in internal reforms to ensure the Bank remains fit for purpose, e.g., agile and administrative simplification initiatives, safeguards and procurement reform, strengthening knowledge management, increasing field presence, especially in FCV countries, continuing adjustment of span of control in operations, improving resource management, and continued Trust Fund reform and further integration of external funds into strategy and budget. To better meet these challenges, Management is improving the incentive system and management of its staff through the implementation of the FY17-19 People Strategy. 2

9 b) Ensuring budget sustainability with a budget that allows the Bank to meet the budget anchor targets in FY18 and onwards for both IBRD and IDA. c) Promoting efficiency by pursuing savings that will ensure the Bank meets its Expenditure Review target in FY18, implementing Business Reviews of SEC, TRE, CRO and OPCS in FY18, and enhancing efforts to achieve further efficiencies and savings beyond FY FY18 BUDGET RECOMMENDATIONS 5. Management seeks Board approval of the FY18 Budget. Management seeks Board approval of the following FY18 Budget recommendations: That the total administrative budget (Bank Budget) be set at US$2,550 million, managed within a range of +/- 2 percent. This includes: o o o o An indicative budget of US$87.7 million for Executive Directors; US$13.0 million for Board of Governors, Development Committee Secretariat, and Inspection Panel; US$17.1 million for the Corporate Secretariat; and US$29.2 million for the Independent Evaluation Group. This is subject to a separate approval process by CODE. That the capital budget be set at US$198 million. 3

10 2. FY18-20 BUDGET FRAMEWORK This section discusses the key strategic priorities in light of the emerging development agenda and the principles used in determining the size of the expenditure envelope for FY18-20 based on the institution s financial outlook in the context of the financial sustainability framework, and the implementation of the Expenditure Review and other efficiency initiatives. 6. The budgetary implications of priorities that have emerged from the W process have been assessed against three principles, namely Strategic Alignment, Budget Sustainability and Efficiency. Resource allocation decisions for the planning period FY18-20 were based on the following three broad principles: Strategic alignment of resources to priorities, particularly in view of the Forward Look and IDA-18 commitments; Budget sustainability - ensuring that the IBRD and IDA Budgets are affordable; and Efficiency - achieving the Expenditure Review targets in FY18 and driving further efficiencies. 2.1 STRATEGIC ALIGNMENT 7. Implementation of the Forward Look enables the Bank to pursue its 2x3 strategy: achieving the twin goals with investments in three priority areas, namely Sustainable and Inclusive Growth, Human Capital, and Resilience. Endorsed by shareholders at the 2016 Annual Meetings, the Forward Look Paper provides a roadmap for a better and stronger Bank. It positions the WB to serve its members with reforms to (i) assist all client segments, (ii) lead on global issues, (iii) mobilize financing, (iv) improve the business model, and (v) ensure adequate financial capacity. Leading on Global Issues Ensuring Adequate Financial Capacity Twin Goals (i) Eliminating Extreme Poverty (ii) Boosting Shared Prosperity Mobilization Improving the Business Model Assisting All Client Segments 4

11 8. The FY18-20 W process has addressed the substantive elements of the 2x3 strategy. 9. As a result, the FY18 budget further aligns resources with key strategic priorities. The FY18-20 planning process has paid attention to the need to resource Forward Look paper priorities, directing funding to critical aspects such as scaling up IDA, especially in FCV countries, increasing decentralization, enhancing security, implementing the new Procurement Framework and Environmental and Social Framework (ESF), expanding Agile Bank reforms, and knowledge management. Regional and GP strategies are built on the 2x3 strategy, as well as key Forward Look paper priorities such as creating markets, climate action, gender, and crisis response. Management has continued to shift resources towards operations and client facing services. As shown in Figure 2.1, the relative share of Bank Budget (BB) allocated to operational units and programs (i.e., excluding the Grant-making Facilities and central accounts) increases from 56.2 percent to 57.2 percent between FY17 and FY18. Figure 2.1: Operational Share of Unit Budgets (excluding GMF) Within operational units, resources have been shifted towards Client Engagement (Country Engagement and Global Engagement) and away from operational overheads (Program and Practice Management). See Figure

12 Figure 2.2: Client Engagement Share of Operational Unit Budgets 60.0% 58.0% 56.0% 54.0% 53.7% % 54.9% 52.0% 50.0% FY16 FY17 FY18 1 Reflects the transfer of International Offices Budget from ECA to ECR in FY17 W process decisions also included shifting Country Engagement resources from IBRD countries to IDA countries, reflecting the increased IDA-18 scale up (see further details in section 3.3). In addition, the share of Country Engagement resources for FCV (both IDA and IBRD) and FCV at Risk countries 1 has increased from 17.9 percent in the FY17 budget to 19.5 percent in the FY18 budget, illustrating a greater commitment to FCV activities (see Figure 2.3). Figure 2.3: FCV and FCV at Risk CE Budgets as a Share of Total CE Budget 30.0% 25.0% 20.0% $115m $121m 18.3% 17.9% $143m 19.5% 15.0% 10.0% FY16 FY17 FY18 For Institutional, Governance, and Administrative (IG&A) units, within an overall context of tight budgetary constraints, Management has targeted the key priority areas of staff security, implementation of the complex IDA-18 Financing Framework, and implementation of the new Procurement Framework and Environmental and Social Framework for incremental funding. Details on the allocation of resources for FY18 across operational and IG&A units and across functions are provided in Chapter 3. 1 Comprises Guinea, Nepal, Niger, and Tajikistan as per IDA methodology. 6

13 2.2 BUDGET SUSTAINABILITY 10. A combination of Margins for Maneuver and budget sustainability measures have placed the Bank on firmer financial footing to meet the budget anchors in FY18. Through a combination of measures designed to increase revenues (loan volumes and charges) and contain spending (Expenditure Review) the Bank is expected to achieve the budget anchor targets in FY18. The budget anchor principle requires that the Bank s own administrative resources (or Bank budget) should be covered by the revenues generated from its lending operations. As referred in Figure 2.4, the IDA budget anchor has always been close to 100 percent and is projected to be at or below 100 percent in FY18. Unlike IDA, IBRD expenses have not been covered by revenues from lending for many years. However, as a result of successful efforts to grow revenues and contain spending, the IBRD anchor is projected to fall from a historical high of 189 percent in FY10, and 148 percent even as late as FY15, to below 100 percent in FY18. Consequently, the FY18 IDA anchor is estimated at 98 percent and the projected FY18 IBRD anchor is estimated at 91 percent. Nevertheless, because of the volatility of the IBRD/IDA cost sharing ratio, and of potential shortfalls of loan revenues for IBRD/IDA and external funds, the budget anchor space is still susceptible to unexpected changes 2. 2 In particular, the incremental costs for the preparation of the IDA-18 scale-up in FY18 ahead of the related but later materialization of incremental IDA revenues gives rise to a small possibility that IDA expenses may slightly exceed revenues in FY18. 7

14 Figure 2.4: IBRD and IDA Budget Anchors with Proposed Increased Budget Trajectory IBRD Anchor 1, % 200% Expenses/Revenues US$ million 1,200 1, % 160% 155% 147% 148% 135% 109% 91% 160% 120% 80% 40% Budget Anchor % 0 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 0% IBRD loan spread revenue IBRD-funded expenses IBRD budget anchor IDA Anchor Expenses/Revenue US$ million 1,600 1,400 1,200 1, % 102% 93% 96% 98% 100% 100% 98% 94% FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 120% 100% 80% 60% 40% 20% 0% Budget Anchor % IDA revenue IDA-funded expenses IDA budget anchor 11. Management is proposing a budget of US$2,550 million in FY18 which balances the need to fund a growing program and maintain financial discipline. Recognizing the need to maintain budget discipline and adhere to the ER target on the one hand, and additional work program pressures (volume and scope) on the other, Management is proposing a FY18 budget of US$2,550 million (Table 2.1). This represents an increase on the FY18 administrative spending trajectory, as presented in last year s Budget Paper, amounting to US$19 million and an increase in the GMF funding trajectory of US$5 million for CGIAR. The FY18 administrative budget represents a 1.0 percent increase over the FY17 budget in nominal terms and a 1.3 percent decrease in real terms. 8

15 Table 2.1: FY18 Emerging Budget Trajectories (US$ million) FY17 FY18 Current Trajectory (FY17-FY19 as per FY17 WB Budget Document) 2,524 2,526 Revision to Trajectory 24 Of which - Work Program increase 19 Of which - CGIAR increase 5 Revised Trajectory 2,524 2,550 IBRD Anchor 109% 91% Available for IBRD net income retention/transfer 120 IDA Anchor 1 100% 98% Available for other uses of IDA income FY18 based on IDA-18 revenue definition. 12. External funds represent a significant share of total administrative spending. 13. Progress continues in aligning external funds with strategic priorities, improving cost recovery and integrating Trust Funds into budget plans. The base case scenario for FY18 envisages growth in Bank Executed Trust Funds (BETF) of 6 percent. External funds have grown significantly as a source of funds in recent years, but this share is expected to stabilize. In the case of Trust Funds, the Bank maintains a stock of funds amounting to almost two years of requirements, leaving the Bank time to adjust to any significant drop in contributions. Strategic fundraising plans are being developed for business units to further align external funds and priorities. Forecasting of external funds usage and their alignment with strategic priorities are being improved through their earlier integration into work program agreements and the introduction of new budget planning and reporting systems. Due to the size and importance of external funds, further efforts are being made to accelerate Trust Fund reform and deepen Trust Fund integration. Figure 2.5: External Funds as a Share of Total Administrative Spending Plans 40% 35% 30% 27% 29% 30% 31% 33% 34% 35% 36% 37% 25% 20% FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 9

16 2.3 CONTINUED FOCUS ON EFFICIENCIES 14. Expenditure Review measures and ongoing Business Reviews support more efficient use of resources. The Expenditure Review (ER) program will be fully implemented in FY18, with the Bank meeting its target. Together with other efforts, the ER has helped the Bank meet its budget anchors and redirect resources toward strategic priorities and corporate commitments. The Internal Audit Department (IAD) review, completed in June 2016, confirmed that the ER program was delivering as expected, that savings had been firmly embedded in budget trajectories and that Management had instituted an effective governance framework to oversee program implementation. On completion of the ER program in FY18, IAD is planning to perform an ex-post review and will report to the Board on its findings. Table 2.2 provides a summary of the evolution of ER savings since initial May 2015 estimates. These confirm that the Bank is on its way to achieve the savings originally targeted. Table 2.2: Expenditure Review Total Savings Estimates, May 2017 (US$ million) ` Previous WBG Estimates May 2015 Latest WBG Estimates May 2017 IBRD/IDA Total o/w BB o/w BETF Immediate Measures Group-Wide Measures Finance, Tech & Corporate Operations Additional Measures Total Board Related Savings Total IFC MIGA 15. Building on the ER, the Bank is implementing a program of Business Reviews across IG&A units to monitor efficiency and assist in sizing of budgets. This program will be extended to operational units from FY20. Business Reviews in FY16 and FY17 covered about half of the IG&A units, and further reviews are planned in FY18 and FY19. This practice follows from Management s commitment to budget discipline through benchmarking and ensuring continued efficiency focus. The next wave of business reviews will build on lessons learned in the first two years. Management will put in place an enhanced peer review and governance mechanism and will make greater use of outside expertise where appropriate. Starting from FY20, and as requested by the Board, Management will conduct business reviews for all operational units. 10

17 16. Comparing the FY18 budget envelope with expected commitments and with the size of the portfolio demonstrates the Bank s ongoing aggregate efficiency despite the growing volume and scope of our work. US$ million While program costs will increase modestly as demand for Bank services grows, this growth will be managed within the budget anchors, demonstrating the Bank s commitment to a financially sustainable budget trajectory. As illustrated in Figures below, comparing the FY18 budget envelope with expected commitments and with the size of the portfolio demonstrates the Bank s ongoing aggregate efficiency despite the growing volume and scope of our work (see Annex II for a breakdown of these indicators for IBRD and IDA). Figure 2.6: Total Administrative Budget per US$ Billion Loan Approved (in US$ million) US$ million IBRD+IDA Figure 2.7: Total Administrative Budget per Lending Project Approved (in FY17 US$ million) IBRD+IDA 11

18 Figure 2.8: Total Administrative Budget per US$ Billion Portfolio under Supervision (in US$ million) 30 US$ million IBRD+IDA Figure 2.9: Total Administrative Budget per Project under Supervision (in FY17 US$ million) US$ million IBRD+IDA 17. Proposed changes to the budget trajectory in FY18 fall within the ER target. As set out in the FY17 Budget Paper, and reproduced below, the agreed FY18 trajectory that would meet the ER was US$2,545 million, and the originally planned FY18 budget trajectory was US$2,526 million, leaving a buffer of US$19 million. Two adjustments were made in framing the FY18 Budget proposal. These include (i) an increase in the budget trajectory of US$19 million, and (ii) an increase in the ER trajectory to accommodate a US$5 million increase in the GMF trajectory for CGIAR. Further details on these two increases totaling US$24 million are provided in Chapter 3. 12

19 Table 2.3: Expenditure Review Reconciliation Against FY18 Target Baseline (US$ million) Baseline As Presented in FY17 WB Budget Everything Else Being Equal Trajectory 2,793 Less: GMF Phase Out (85) Everything Else Being Equal Trajectory (BB Only) 2,708 ER Savings Less: ER Target, Gross Savings (300) Add: 25% reinvestment 75 Net ER Savings (225) Adjustments Add: IDA-18 Scale up 62 BB Target Trajectory, after Net ER savings and adjustments 2,545 FY18 Budget Trajectory in FY17 Budget Paper 2,526 FY18 Existing Budget and Target Trajectories in FY17 Budget Paper 19 FY18 Budget Adjustment to GMF Trajectory for CGIAR Building on the ER efficiency gains, Management is working on initiatives to further promote efficiency and budget discipline across the Bank. 19. Management is strengthening governance over investments in facilities and IT projects to ensure value-for-money. As noted earlier, achievement of the ER targets required a number of expenditure policy reforms as well as changes to the Bank s operating model, the benefits of which will continue to accrue to the Bank beyond FY18. In addition, the program of Business Reviews of VPUs will also continue with the enhanced framework detailed above. As we approach the end of the ER implementation period, Management intends to pursue further efficiencies. While at this time it would not be appropriate to revise the FY19-20 indicative target trajectory to reflect all possible efficiencies, given the uncertainties surrounding the future level of IBRD lending and related resource implications, Management is working to identify additional measures that will further promote efficiency across the Bank. Further analysis is being conducted to define these measures, related savings and implications for future budgets. The next paragraphs provide an indication of the planned directions. Management plans to further brief the Board in the Fall on them. A WBG Real Estate Council is being established to refine and implement the WBG real estate strategy, as well as set and approve real estate and facilities standards and principles, and prioritize and approve specific large facilities investments in accordance with the strategy. This will support Management in its efforts to review the Bank s global footprint and global space standards, both in Washington and around the world, with a view to prioritizing and rationalizing spending on facilities overall. 13

20 ITS continues to implement new efficiency measures over and above those of the Expenditure Review. As part of the FY16 Business Review of ITS, it was agreed to seek opportunities to rationalize spending on ITS Operations and Maintenance (O&M). 20. As the largest spending item, comprising around 56 percent of total spending, Management will continue to ensure prudent management of staffing costs. 21. The Bank is working to identify innovations in working more flexibly, through the Agile initiatives, and will continue to expand those efforts. 22. The Bank will also pursue reforms aimed at streamlining procedures and processes to generate greater efficiencies in IG&A units. The Bank will continue affordability assessments of annual workforce plans and limit hiring by VPUs where it is not affordable within their budget trajectory. Furthermore, analysis is ongoing on the structure of staffing in both operational units and IG&As with a view to fine-tune it to reduce unnecessary layers. In addition, HRD will follow Board guidance related to staff compensation issues. Overall, the Bank continues to pilot and rapidly scale up ideas that make our business model more agile. In selected operational units, pilots are identifying opportunities to streamline internal processes where lessons learned can be scaled up to create a more agile Bank. Incorporating cross functional teams, pilots are underway on programs delivered in regions. In the pilots, over a hundred interventions were identified through bottom-up team workshops, and a quarter of these are being pursued. Almost 1,800 staff have been involved thus far, with plans to reach 50 percent of all staff in the coming year. Lessons learned are being used to enable the Bank to offer services with greater speed and more flexibility, while ensuring that staff remain engaged and empowered throughout the process. Examples of interventions that are improving the speed and quality of our work, while ensuring staff empowerment, include (i) riskbased flight paths for project preparation that allow for faster project concept approval and tailored review meetings according to specific project risks, and (ii) streamlined, agile Project Appraisal Documents (PADs) that eliminate redundancies and focuses on the added-value substance. To build a strong institution in the long term, Management plans to pursue administrative simplification more aggressively and capture the cost savings that accrue from these efforts. These include (i) standardizing, automating and simplifying processes using lean methodologies (e.g., Lean Six Sigma pilots on loan origination and Trust Fund activation) and robotics, and (ii) enhancing the Bank s shared services model for more effective and efficient service delivery for staff. Going forward, all new initiatives and strategies must be properly costed and budgeted before being rolled out and implemented. 14

21 23. The Bank will continue to upgrade Resource Management systems and tools, and make enhancements as necessary based on user feedback. 24. Reforms to improve the way the Bank manages external funds will continue to be implemented. 25. Further efforts will also be made to strengthen the link between planning, budgeting and the Corporate Scorecard. As part of an effort to strengthen transparency, predictability, and accountability over expenditures across the Bank, Resource Management (RM) systems and tools have been upgraded in the past year with the development of the Budget Planning and Consolidation system (BPC) to strengthen and align budget and staff planning, among others. Implementation is at an advanced stage. A Resource Management reporting portal has also been developed this year and widely welcomed by managers and staff across the Bank, giving them real time access to reports. Further upgrades are planned for FY18. A number of reforms to external funds are underway including (i) alignment of external funds with strategic priorities and budgets, (ii) improved cost recovery, (iii) simplification and standardization of Trust Fund requirements, and (iv) improving transparency for donors through the Development Partner Center (DPC) portal. Priority will be given to advancing these reforms in FY18. As the current planning and budgeting model evolves, efforts will continue to be made to strengthen the linkages between the Corporate Scorecard and planning and budgeting papers across the World Bank Group. The use of consistent metrics throughout will enhance transparency and accountability. 15

22 3. FY18 BUDGET This section presents the specifics of the FY18 administrative budget proposal, and provides details on its impact on Operational Programs, IG&A units, other non-unit specific budgets, as well as an expense line view. 3.1 ADMINISTRATIVE BUDGET PROPOSAL 26. Management is proposing a budget of US$2,550 million for FY18, as part of a broader total funds envelope of US$4,046 million. The proposed Budget for FY18 is US$2,550 million, which is an overall increase of US$24 million compared with the FY18 trajectory presented in the FY17 Budget Paper comprising a US$19 million increase to cover higher expected administrative costs associated with the IDA-18 scale up and other resource needs, and US$5 million for CGIAR (see Table 3.1). Compared with the FY17 budget, this is an increase of 1.0 percent in nominal terms and a decline of 1.3 percent in real terms. The All Funds FY18 envelope is expected to be around US$4,046 million (see Table 3.3). Table 3.1: FY17 WB Budget and Proposed FY18WB Budget Trajectory (US$ million) FY17 FY18 Proposed FY18 Budget Trajectory (Nominal) 2,524 2,550 % Change YOY 1.0% Proposed FY18 Budget Trajectory (in FY17$) 2,524 2,490 % Change YOY -1.3% 3.2 SOURCES AND USES OF FLEXIBILITY 27. The proposed budget increase (i) reflects an expansion in the Bank s program not foreseen a year ago, (ii) takes into account redeployments at the Bank and VPU level, and (iii) can be accommodated within the Bank s ER and budget anchor targets. At the time of the FY17 Budget Paper, it was not possible to anticipate the extent of certain IDA-18 commitments, including the FCV scale up, the new and more complex IDA financing framework (blending donor and market resources), the new IDA windows (PSW and refugees) and other cost pressures. The developments of the past year have required the Bank to adjust and recalibrate the budget trajectory. The total FY8 budget flexibility amounts to US$67 million. Some US$43 million was identified through internal deployments, US$19 million by utilizing space within the existing ER target trajectory, and US$5 million by increasing the trajectory for GMFs. 16

23 Table 3.2: FY18 Sources and Uses of Flexibility (US$ million) Sources Sources of Internal Flexibility 43 Uses Allocations to Operations Units (75%) 39 Benefits Recovery from Reimbursables 5 Lending & Supervision Coefficient Increase 7 Unallocated Flexibility Identified in FY17 WB Budget 1 Increase in Capacity of FCV CCSAs 2 Centrally-Managed Accounts (including LLI efficiency gains) 9 Global Public Goods 5 PCRF Advance Payment in FY17 16 Safeguards/Procurement Reforms 4 Corporate Contingency 12 Staff Decentralization/Country Office Facilities 12 Managerial Span of Control 8 Knowledge/Learning 4 Simplification/Agile Bank 4 Total 45 Already in the FY18 Trajectory (6) Trajectory Increase 24 Allocations to IG&A Units (25%) 13 Administrative Spending 19 Security 5 CGIAR 5 Safeguards/Procurement Reforms 4 Support to IDA-18 Scale Up 6 Total 15 Already in the FY18 Trajectory (2) Corporate Contingency 10 CGIAR 5 Total Sources of Flexibility 67 Total Uses of Flexibility Allocations by Unit reflect adjustments to trajectories arising from additional flexibility, staff benefit rate adjustments, ER changes, and unit reorganizations. The resulting allocations across programs are set out in Tables 3.3 and 3.4 and discussed in further detail in Sections 3.3, 3.4, and 3.5 of this chapter. These highlight a shift in resources toward Operational Units, and toward Client Engagement within these Operational Units. In addition, they reflect changes to VPU trajectories arising from benefit rate adjustments, remapping of units arising from reorganizations (e.g., ECA and ECR), implementation of the ER, and inflation adjustments. Management plans to ensure that all Bank products and activities, however funded, reflect the full cost of staff. The Bank currently assesses a 50 percent charge on Washington-appointed staff salaries to the costs of its products but this charge only partially covers the institutional benefits of such staff, the balance being borne by the Bank s Centrally- Managed Accounts. Effective July 1, 2017, the benefit recovery rate will revert to the originally set rate of 70 percent for Washington appointed staff, enabling unit-level decision making to be based on the full cost of staff, and to end the subsidy that IBRD and IDA currently provide to external funds. A 45 percent benefit rate will also be introduced for Country Office appointed staff. The Country Office rate will be discounted for external funds cost recovery purposes until FY19. To reflect this policy change, Bank Budget unit trajectories have been adjusted upwards from FY18 in a cost neutral manner, with corresponding reductions in the Bank s Centrally-Managed Accounts. 17

24 Table 3.3: FY17-18 Budget by Work Program and Funding Source (US$ million) BB All Funds INDICATIVE BUDGET TRAJECTORIES 1 FY17 Restated FY17 Restated FY18 WB Budget FY17 WB Budget FY17 CLIENT ENGAGEMENT ,465 1,543 1,745 Country Engagement ,218 1,289 1,460 Global Engagement Program & Practice Management Total Operational Units 1,276 1,400 1,494 2,164 2,288 2,509 Grant Making Facilities Total Operations 1,320 1,444 1,529 2,208 2,332 2,544 IG&A PROGRAMS 981 1,076 1,116 1,245 1,340 1,401 Institutional Services Governance Services Administrative Services TOTAL: ALL UNITS 2,301 2,520 2,644 3,454 3,672 3,944 TOTAL: ALL UNITS (excl. GMFs) 2,257 2,476 2,609 3,410 3,628 3,909 CENTRALLY MANAGED ACCOUNTS o/w Corporate Contingency TOTAL TRAJECTORY 2,708 2,708 2,746 3,871 3,871 4,046 o/w Funded by External Funds (184) (184) (196) (1,347) (1,347) (1,496) Net Trajectory Funded by IBRD/IDA 2,524 2,524 2,550 2,524 2,524 2,550 1 "Restated FY17" reflects FY17 WB Budget based on the new staff benefits recovery rates effective July 1, FY18 trajectory is similarly stated on the new basis. FY18 Table 3.4: FY17-18 Budget Share by Work Program and Funding Source (%) BB All Funds Share of Budget Trajectory 1 FY17 Restated FY17 Restated FY18 WB Budget FY17 WB Budget FY17 CLIENT ENGAGEMENT 29.9% 30.4% 31.4% 43.0% 42.5% 44.6% Country Engagement 26.6% 27.2% 28.1% 35.7% 35.5% 37.4% Global Engagement 3.2% 3.2% 3.4% 7.2% 7.0% 7.3% Program & Practice Management 26.7% 26.2% 25.8% 20.5% 20.5% 19.5% Total Operational Units 56.5% 56.6% 57.2% 63.5% 63.1% 64.2% IG&A PROGRAMS 43.5% 43.4% 42.8% 36.5% 36.9% 35.8% Institutional Services 16.0% 16.4% 16.6% 14.8% 15.2% 15.2% Governance Services 8.8% 8.7% 8.4% 6.4% 6.4% 6.0% Administrative Services 18.6% 18.3% 17.7% 15.4% 15.3% 14.6% TOTAL: ALL UNITS (excl. GMFs) 100% 100% 100% 100% 100% 100% 1 "Restated FY17" reflects FY17 WB Budget based on the new staff benefits recovery rates effective July 1, FY18 trajectory is similarly stated on the new basis. The International Offices budget of US$8.5 million was transferred from ECA s PPM to ECR in FY17. This transfer is reflected in the above tables in FY18. If this transfer had been reflected in FY17, the Operational share of unit budgets (excl. GMF) in "Restated FY17" would be 56.2% for BB and 62.8% for All Funds. FY18 18

25 3.3 OPERATIONS BY WORK PROGRAM AND VPU 29. Growing demand for Bank services will be met by higher lending volumes overall. In addition, the Cascade approach will allow the Bank to make greater leverage of these resources than in the past. Current projections for IBRD and IDA lending commitments suggest higher levels of lending overall. IBRD delivery in FY16 was US$30 billion. In the context of a more constrained capital environment, it is projected that IBRD s existing capital will support lending of up to US$24 billion in FY17 and FY18 (see Table 3.5). IBRD s capital position is the subject of ongoing discussions between Management and Shareholders. The IDA-18 envelope includes a doubling of resources to countries facing fragility, conflict and violence (FCV). Increased financing will also boost core IDA resources and dramatically expand IDA s support for crisis response and pandemic preparedness, small states, and regional integration. The FY18 IDA pipeline is developing rapidly and is on track for a strong launch. The Bank has developed a Cascade approach to facilitate greater leveraging of existing resources and development solutions to mitigate risks for private sector investors in developing countries, thereby crowding in private capital (see Paragraph 41). A new IDA Private Sector Window (PSW), introduced together with IFC and MIGA, will help mobilize private capital and scale up private sector development, particularly in fragile situations. Table 3.5: Lending Commitments (US$ billion) FY16 FY17 FY18 Actual Projection Projection IBRD IDA Total

26 30. As Bank Operational Programs expand, budget trajectories are also being increased to fund key priorities. As identified in the current budget and strategic planning process, the major operational priorities for FY18 include (i) ensuring delivery of IDA-18 and scaling up engagement in FCV countries and small states, (ii) maintaining engagement in IBRD countries, (iii) accelerating work on global public goods and corporate commitments, including climate change, fragility, displacement, pandemics, domestic resource mobilization, and resilience to shocks, (iv) developing and implementing WBG approaches to creating markets, and (v) implementing the WBG Gender Strategy. These priorities are reflected in the budget trajectories for Operations. The proposed FY18 budget for Operations is US$1,529 million, an increase of US$86 million or 6 percent from FY17 (see Table 3.6). Of this increase, resources for Client Engagement have increased by US$69 million, including for Country Engagement (US$60 million) and Global Engagement (US$9 million) work to meet these priorities. PPM allocations have increased by US$26 million, while for GMFs have fallen by US$9 million. External funds complement Bank resources for Client Engagement work. Annex I presents an all funds view for these by VPUs and budget categories. 31. Allocations to Regions reflect underlying business shifts. IDA-18 scale-up was a key driver in the CE realignments between regions, and to the Africa and South Asia regions in particular, with these incremental resources supporting CMUs covering IDA countries, including FCV countries. IBRD budgets have also been tightened to reflect lending projections for FY18. 20

27 Table 3.6: FY17-18 Operational Budget Envelopes (US$ million) INDICATIVE BUDGET TRAJECTORIES 1 FY17 WB Budget Restated FY17 FY18 FY17 WB Budget Restated FY17 AFR CE PPM Total EAP CE PPM Total ECA CE PPM Total LCR CE PPM Total MNA CE PPM Total SAR CE PPM Total All Regions CE ,218 1,289 1,460 PPM Total for Regions 950 1,051 1,111 1,581 1,682 1,853 GP/CCSAs GE GE Total GP/CCSAs PPM Equitable Growth, Finance and Institutions Human Development Sustainable Development EAB and Other CCSAs Total GP PPM Total GP/CCSAs Operational Grant Making Facilities Total Operations 1,320 1,444 1,529 2,208 2,332 2,544 4 FY17 CCSAs include Climate Change (CC), Public Private Partnerships (PPP) and Jobs. These units are consolidated under Sustainable Development (CC, PPP) and Human Development (Jobs) Practice Groups in FY18, reflecting the revised organizational structure. BB All Funds 1 "Restated FY17" reflects FY17 WB Budget based on the new staff benefits recovery rates effective July 1, FY18 trajectory is similarly stated on the new basis. 2 The International Offices budget of US$8.5 million was transferred from ECA s PPM to ECR in FY17. This transfer is reflected in the above tables in FY18. 3 Includes Extended Assignment Benefits (EAB) for all GP/CCSA staff and funding to support Agile Bank initiative. FY18 21

28 32. The outcome of the WPA process shows a substantial increase in allocations to IDA countries in FY18. Allocations to IBRD and IDA countries from the CE envelope are set out in Figure 3.1. Overall allocations to IDA countries have increased from US$359 million to US$415 million an increase of US$56 million (16 percent), bringing the IDA funded share of the Country Engagement Work Program from 53 percent to 57 percent. The allocations to IBRD countries increased by US$4 million (1 percent), reflecting the Bank s commitment to remain engaged in IBRD countries, albeit in an environment of constrained IBRD capital. Figure 3.1: Evolution of the Country Engagement Bank Budget from FY17 to FY18 (US$ million) 33. Country Engagement allocations across business processes are reflective of strategic priorities emerging from country dialogue. The distribution of the additional CE allocation has been spread across Business Processes (Figure 3.2) for (i) increased lending volumes for a growing program, (ii) higher lending and supervision coefficients reflecting increased scope, and (iii) increased effort to support safeguard and fiduciary reforms. As a result, the share of CE allocations to lending has been growing over FY16-18 (Figure 3.3). 34. Country Engagement allocations for fiduciary spending amount to US$67 million in FY18. The resources for fiduciary work respond to the need to support the implementation of the new procurement framework, and the IDA-18 scale up. Resources for fiduciary work represent 9 percent of total CE allocations in FY18. 22

29 35. Country Engagement allocations for environment and social safeguards work amount to US$52 million in FY18. The resources for safeguards work respond to the need to support the implementation of the new Environmental and Social Framework, and the IDA-18 scale up. Resources for safeguards work represent 7 percent of total CE allocations in FY Allocations for Advisory Services and Analytics (ASA) have broadly maintained their share of CE allocations since FY17. Additional CE resources were injected as part of the WPA process to ensure that growth in lending and supervision volumes and coefficients would not continue to be at the expense of critical Advisory Services and Analytics (ASA). The outcome of the WPA process suggests that this strategy was broadly successful, with ASA allocations held constant overall at about 21 percent of total CE spending (after the ER-related ASA rationalization between FY16 and FY17) (see Figure 3.3). Figure 3.2: Country Engagement Bank Budget Allocations by Business Process for FY16-18 (US$ million) Lending Supervision ASA Others Includes Fiduciary and Safeguards FY16 FY17 FY18 2 Includes Country Monitoring, CPFs, Portfolio Management, Quality Assurance, Contingency, Collaboration, Country Operations Support, and Internal Knowledge Management Figure 3.3: Country Engagement Bank Budget Allocation Shares by Business Process for FY

30 37. Country Engagement allocations across Practice Groups reflect strategic priorities emerging from country dialogue. The FY18 CE allocations show Sustainable Development, including Safeguards, holding the largest share at 44 percent; Equitable Growth, Finance and Institutions, including Fiduciary, with 32 percent; and Human Development with 14 percent. Regional, Cross-Cutting Solutions Areas and Others, which includes regional contingencies, currently hold a 10 percent share, but this amount will be reduced during the year as regional contingency funds are directed to the Practice Groups, whose allocations will increase. Figure 3.4: FY18 Country Engagement Allocation Shares by Practice Groups Equitable Growth, Finance & Institutions 32% (of which 9% Fiduciary) Fiduciary Human Development 14% Regional, Cross-Cutting Solutions Areas & Others 10% Safeguards Sustainable Development 44% (of which 7% Safeguards) 38. Country Engagement allocations for fragility, conflict, and violence (FCV) affected countries have increased significantly. As illustrated in Figure 3.5, the CE allocation to FCV and FCV at risk countries (IDA and IBRD) increased by US$22 million (18 percent) from US$121 million in FY17 to US$143 million in FY18. This is on top of a US$6 million (5 percent) increase from FY16 to FY17. The FCV and FCV at Risk country CE share of total CE spending for FY18 is projected to be 19.5 percent which compares with 17.9 percent in FY17. A portion of these additional resources will fund staff to work on these countries. As part of the IDA-18 replenishment deliberations, Management committed to deploy 50 more professional staff for FCV IDA by End-September 2017 and another 100 by end IDA-18. This is in addition to an increase of 50 staff that has already taken place in FCV countries since FY15. 24

31 Figure 3.5: Country Engagement Bank Budget Allocations for FCV & FCV at Risk Countries for FY16-18 (US$ million) 39. Country Engagement allocations to Small States have also increased by 29 percent, on top of a 9 percent increase in FY17. As illustrated in Figure 3.6, the CE allocation for small states (IDA and IBRD) increased by US$10 million (a 29 percent increase) from US$35 million in FY17 to US$45 million in FY18. This is on top of a US$3 million (9 percent) increase from FY16 to FY17. Since FY16, CE allocations to small states have increased by a total of US$13 million, a 41 percent increase. Figure 3.6: Country Engagement Bank Budget Allocations to Small States for FY16-18 (US$ million) +41% % % FY16 FY17 FY18 AFR EAP ECA LCR MNA SAR 25

32 40. Focus on implementation is key to successfully deliver on the IDA-18 scale-up and commitments agreed with partners. 41. The Bank has developed a Cascade approach to facilitate greater leveraging of resources. To operationalize IDA-18 policy commitments and allocations, sustained efforts and close coordination between Regions and GPs/CCSAs are underway to: (i) build a strong and robust pipeline for IDA-18, strengthen project preparation, and support country capacity; (ii) launch new facilities like the Private-Sector Window; (iii) implement the IDA-18 policy commitments; and (iv) ensure solid monitoring of IDA-18 implementation. In addition, the Bank has increased lending and supervision coefficients to reflect the more complex scope of work and challenging geographies the Bank faces, and coefficients for multi sector tasks have also been increased to reflect the increased need of closer collaboration. As the Bank is also committed to increasing its presence on the ground, additional resources have been made available for Extended Assignment Benefits (EAB). The Bank will redouble efforts to mitigate risks for private sector investors in developing countries, thereby helping to crowd in private capital. In this regard, the new IDA Private Sector Window (PSW), introduced together with IFC and MIGA, will help mobilize private capital and scale up private sector development, particularly in fragile situations. The Cascade approach is being embedded across the CE work program. As a start, nine pilot countries have been identified, and work is underway to explore and pursue opportunities through diagnostics and technical support in priority sectors. Technical assistance and policy work will also be done to address binding constraints. Finally, investment projects with potential for commercial finance will follow an adapted Cascade approach with commercial financing options explored and WBG support adapted accordingly. The Cascade is further illustrated in Box 3.1 below. Box 3.1: Embedding the Cascade Across the Client Engagement Cycle 26

33 42. To support global climate goals, the WBG developed and is implementing its Climate Change Action Plan. 43. Gender gaps and their impact on development feature prominently in regional and practice group Country Engagement work. 44. Global Engagement funding from all sources is expected to increase in FY18 to US$285 million from US$253 million in FY17. Driven by client demand, the Climate Change Action Plan focuses on activities that support the WBG s core mission and build on its comparative advantage. It reconfirms the WBG s commitment to increase the climate-related share of its portfolio from 21 to 28 percent by Issues including women s employment, inclusion and gender-based violence will be addressed through the WBG Gender Strategy, integration of gender components in lending operations and ASA, and Gender Innovation Labs (GILs). The WBG also partners closely with agencies such as UN Women, Global Banking Alliance for Women, and the Chartered Insurance Institute. The Bank will continue to track projects to ensure that they include components addressing gender gaps. The Bank s Global Engagement work program supports non-countryspecific priorities including (i) fulfilling corporate commitments, (ii) supporting innovation and product development to support evidencebased policy making by developing global databases, tools and evaluations, and maintain WBG leadership in global public goods, (iii) sustaining partnerships and global engagements, and (iv) providing operational support to facilitate knowledge services and enable rapid and flexible operational response. This includes US$88 million of Bank funding representing an increase of US$9 million from FY17. Bank funding has been allocated based on the following categories: Corporate Commitments: Priorities include work on climate change, including the operationalization of the 28 percent lending target, implementation of the WBG Gender Strategy, support to the G20, implementation of the Cascade approach, fragility, pandemics, refugees, debt, jobs, citizen engagement, domestic resource mobilization and support for the SDGs. Innovation/Product Development: A number of activities will be undertaken including support to the operationalization of the Twin Goals, design of country job strategies, accelerating progress on Universal Healthcare implementation strategies, analyzing the potential use of guarantees in FCV countries, as well as assessment of the impacts of climate on migration. 27

34 Partnerships: Initiatives are underway including the development of a database on public-private partnerships, support to COP23 and G20 agendas on climate, as well as support to UN agencies and donor funded initiatives across a range of issues. Operational Support: This includes allocations to Global Practices in support of strategy development and implementation, knowledge work, as well as issues requiring a rapid response. It also includes an increase of US$3 million in the allocations of the Gender and FCV CCSAs. 45. The Program and Practice Management (PPM) budget will increase by US$26 million in FY18. The budget for Program and Practice Management will increase from US$648 million in FY17 to US$674 million in FY18, which is an increase of US$26 million (see Table 3.3). The PPM budget for operational units funds the support and overhead costs, including management, support staff, Country Office Facilities. Additional resources provided to PPM in FY18 will address a number of priorities, including: reducing the front-line managerial span of control; supporting additional decentralization of staff to FCV countries which will increase spending on Country Office facilities, security, and Extended Assignment Benefits; GP contributions to the new Procurement Framework and Environmental and Social Framework implementation, including for training; and implementation of the Knowledge Management Action Plan GRANT-MAKING FACILITIES 46. Management has made progress in phasing out, mainstreaming or reducing Bank funding for Grant-making Facilities. In the case of Grant-making Facilities (GMFs) a decision was made to phase out Bank funding (e.g., Institutional Development Fund (IDF), Development Grant Facility (DGF)); mainstream the activity into a Bank program and subject it to contestability (e.g., Global Partnership for Social Accountability (GPSA)); or reduce funding (e.g., State and Peace-Building Fund (SPF), Consultative Group for International Agricultural Research (CGIAR)). 28

35 Table 3.7: Grant-making Facilities Budgets (US$ million) FY13 FY14 FY15 FY16 FY17 FY18 State and Peace-Building Fund (SPF) Institutional Development Fund (IDF) Development Grant Facility (DGF) Global Partnership for Social Accountability (GPSA) PD Total Operational Activities Related to Grants The activities of the GPSA have now been mainstreamed into the GE work program. 3.4 IG&A UNITS 47. IG&A unit allocation increases have been constrained with additional funding targeted very selectively on key strategic priorities. Additional funding has been allocated to IG&A units in FY18 to focus on three strategic priorities, namely: Support to finance units for the IDA-18 scale up: A number of VPUs face additional responsibilities to address the IDA-18 expansion, in particular arising from the leveraging of the IDA balance sheet. Support the implementation of the new Procurement Framework and Environmental and Social Framework 3. Support to enhance institutional security measures. Management will continue to seek greater efficiencies through strengthened management of Facilities and IT investments (including greater use of cloud computing and reviewing the Bank s global footprint), and control of staffing levels to ensure alignment with budget trajectories. 3 For funding of safeguards and fiduciary work in operational units, see paragraphs 34 and

36 Table 3.8: FY18 IG&A Budget Envelopes (US$ million) 30