FIDUCIARY FORUMFIDUCIARY FORUM20082008

Disbursement

What’s NewWhat’s New iLAP – new systems (February 2008) E signature pilot (November 2007) Reorganization of LOA (July 2007) New Disbursement forms (2007) Updated Disbursement Policy OP/BP 12.00

(March 2007) Disbursement Guidelines (2006) New Legal Agreements (July 2005) Eligibility OP/BP 6.00 (April 2004) Decentralization (2003)

Session outlineSession outline

LOA organization - who does whatEligibility - Disbursement

categories Advances – flexibilitySupporting documentation - SOEElectronic WA – electronic

signatures

The Loan divisions

Part of CSR VPDisburses USD 20 to 22 billion

each year28,000 disbursement transactions123 staff7 regional centers

Controllers, Strategy, Resource Management (CSR)

CSRVP

CSRSI CTRDR CSRRM

CTRDRDeputy

Controller

LOADMDisbursement Management

LOAFCFiduciary

and Controls

ACTCFLoan Services

Group

Fiduciary and Controls Fiduciary and Controls Division Division (LOAFC)(LOAFC)

Clearance function during project identification through Board

Monitor ongoing adequacy of fiduciary arrangements during implementation

Participate in joint CSR/FM quality reviews

Disbursement Disbursement Management Management (LOADM)(LOADM)

Processing withdrawal applicationsPortfolio management Records management

Eligibility Reforms (2004)

Removes old definitions of eligible and ineligible expenditures from OP 12.00 (now covered in OP 6.00)

Shifts determination of eligibility to what is needed for the project, in accordance with country financing parameters and the loan agreement

New flexibility in setting up withdrawal categories in loan agreement (no longer tied to procurement methods)

Guiding Principles

Bank loan proceeds finance the expenditures necessary to meet the development objectives of operations supported by the loan. 

Guiding Principles

acceptable oversight arrangements, including fiduciary oversight arrangements, are in place to ensure that such loan proceeds are used only for the purposes for which the loan is granted, with due attention to considerations of economy and efficiency.

Eligibility

What are the Eligible Expenditures ?

When are they incurred ?

How are they valued ?

When are they recorded by the Bank ?

Guidance“….Bank staff typically ….” !!!Review the cost estimate that the

borrower prepares for the each project.

This estimate is normally broken down by expenditure line items that facilitate management of the project and oversight of its implementation, and by time profile (at least annually).

Guidance

On the basis of this review, Bank staff form a judgment as to whether all costs are necessary to meet the objectives of the operation.

All necessary costs for which Bank staff are satisfied that acceptable arrangements are in place to manage associated risks are eligible for Bank financing

DISBURSEMENT DISBURSEMENT CATEGORIESCATEGORIES

It used to be so easy

Schedule IGoods WorksServices

Schedule II – Project description

Disbursement Categories

Can match the needs of the projectType of expenditureProject componentSingle categoryFlexible

Disbursement Disbursement PercentagesPercentages

Country Financing Parameters for most countries

Mainly “up to” 100%

EligibleEligible

Taxes and dutiesRecurrent costsLocal costsSpecial authorization (land etc)

What to expectWhat to expect

More emphasis on making sure that Disbursement Categories match project needs

AdvancesAdvances

The BasicsWhat we used to do What are the changes

DESIGNATED ACOUNTS DESIGNATED ACOUNTS DECEMBER 31, 2007DECEMBER 31, 2007

Funds in Designated Accounts $ 6.2 billion (2003 $4.1 billion)

DA inactive 6 months $ 807 million (2003 - $52 million)

DA inactive 12 months $128 million (2003 - $ 8 million)

DAs INACTIVE 6 MONTHS

0

100

200

300

400

500

600

700

800

900

98 99 00 01 02 03 04 05 06 07

It used to be so easyIt used to be so easy

Special Accounts up to 10%

Initial Allocation up to 5%

OP 12.00 pp 5OP 12.00 pp 5

The Bank determines the amount that may be advanced into the designated account in accordance with the operation’s periodic financing requirements.

BP 12.00 pp 7BP 12.00 pp 7

When disbursement arrangements include the use of advances, the task team leader reviews the reasonableness of the borrower’s forecasts from time to time to ensure that these amounts are in line with the operation’s periodic financing requirements. The task team leader alerts the finance officer when forecasts are considered to be unreasonable, and recommends appropriate action

OP 12.00 pp 5OP 12.00 pp 5

The designated account is an account that is maintained exclusively for the project. It may be an account which is segregated for Bank proceeds, or an account which pools Bank proceeds with funds of the borrower, development partners, or both.

The Bank may advance loan The Bank may advance loan proceeds into..OP12.00 pp5proceeds into..OP12.00 pp5

an account of the borrower that is .. held in a financial institution acceptable

to the Bank and operated on terms and conditions acceptable to the Bank (the “designated account”)

to finance eligible expenditures as they are incurred and for which supporting documentation will be provided at a later date

MARCH 2007 CHANGESMARCH 2007 CHANGES

NO MORESecond Generation Special

Accounts90 day advances30 day advancesSub accounts

Transfers from DA to Other Transfers from DA to Other Accounts of the BorrowerAccounts of the Borrower

Loan proceeds on deposit in designated accounts may be transferred to another account of the borrower or the project if the need exists and if appropriate arrangements are in place to ensure that loan proceeds so advanced will only be used for the purposes intended.

Disbursement Handbook para 119

WITHHOLDING ADVANCESWITHHOLDING ADVANCES

The Bank is not satisfied that the borrower’s planned project expenditures justify the deposit. The Bank may, by notice to the borrower, adjust the amount it deposits or withhold further deposits into the Designated Account until it is satisfied that the financial needs of the project warrant further deposits;

What to expectWhat to expect

No new advances where previous advances have not been accounted for by the disbursement deadline date (plus two months)

Greater focus on the making sure that advances match project needs

Documentation thresholdsDocumentation thresholds

The BasicsWhat we used to do What are the changesWhat we are doing now

The BasicsThe Basics

Supporting documentation – records

Procurement prior review thresholds

Not the same thing

The BasicsThe Basics

Op 12.00 pp 6 Supporting Documentation“The Bank may require records (e.g., receipts, invoices) for certain specific expenditures, and/or accept summary reports of expenditure (i.e., interim financial reports or statements of expenditure) from the borrower to support the application for withdrawal.”

What we used to doWhat we used to do

OP/BP 12.30 Statements of ExpenditureODP 5.02 Statements of Expenditure

Up to, but not exceeding, procurement prior review thresholds

Normally should not be less than $50,000

Normally should not exceed $250,000

What are the changesWhat are the changes

LACI - PMR/FMR/IFRNew Procurement Guidelines 2004

• Procurement Plans• Prior review first two contracts

Updated Disbursement Policies OP/BP 12.00 March 2007

What to expectWhat to expect

Having “normal” documentation/SOE thresholds for each country

Moving to higher documentation/SOE thresholds in lower risk MICs

eDisbursementeDisbursement Phase I: electronic withdrawal applications

– eForms

Previously, “PDF” form that could be filled out online, printed, signed and sent to Bank

Now, eForm allows preparation online (in Client Connection) and provides “smart help” according to application type (e.g., advance, documentation of advance, direct payment)

““Smart help”?Smart help”? eForms pre-fills borrower information,

designated account details, etc.

Provides look-up tables for commercial banks, currencies, etc.

Runs edits and checks to ensure form is complete, sufficient funds available

Still requires printing, signing, sending

Phase II: eSignaturePhase II: eSignature Phase II: eSignature (pilot) under way

Client prepares application online, attaches supporting documents, “signs” electronically (RSA SecurID), and eForm is automatically emailed to LOA service account

No printing, no physical signing, no mailing

Rollout to all eligible clients post-pilot

Phase III: Full eDisbursementPhase III: Full eDisbursement Phase III: eDisbursement means straight-

through processing

Client enters application request online and automatically updates loan disbursement records in iLAP

Eliminates duplicative data entry by LOA, but builds in additional checks and balances to flag unusual / risky payments

Manual/paper forms continue for clients without access to good IT infrastructure