International Environmental Oversight
U.S. Agencies Follow Certain Procedures Required by Law, but Have Limited Impact Gao ID: GAO-09-99 November 20, 2008The World Bank Group lends about $40 billion annually to developing countries. Critics have claimed that some projects have harmed the environment and the local population. Title XIII of the International Financial Institutions Act of 1977 outlines in part the U.S. government's requirements for reviewing potential environmental and social impacts of proposed multilateral development bank projects. GAO was asked to assess the U.S. government's international environmental oversight efforts by examining (1) how U.S. agencies implement legislative requirements to review the potential environmental concerns associated with proposed World Bank Group projects, and (2) agencies' ability to identify and address these concerns. GAO reviewed Title XIII, World Bank Group reports, and U.S. agency documents and met with representatives from U.S. government agencies, the World Bank Group, and nongovernmental organizations.
U.S. agencies take various approaches to meet legal requirements for reviewing World Bank Group proposals likely to have significant adverse environmental impacts. The Treasury Department (Treasury), which leads these efforts, generally focuses on fulfilling the law's largely procedural requirements, such as ensuring that the project's environmental assessment is made publicly available by the project sponsor 120 days before it is voted on by the Group's board. The reviews usually occur from 1 to 3 weeks prior to such a vote. Treasury also engages in required consultations by leading a weekly interagency working group. Some participants stated that, because of limited time and the volume of proposals, they rely on Treasury to identify proposals of concern to facilitate the discussions. However, Treasury has not routinely done so. For a selected few projects, Treasury and the U.S. Agency for International Development analyze in more depth a proposal's potential environmental and social impacts. Both agencies learn about many such projects through regular interaction with nongovernmental organizations. Time constraints limit the U.S. government's ability to identify environmental and social concerns associated with World Bank Group projects before a vote on the proposal, and projects with potentially significant adverse impacts proceed with or without U.S. government support. The compressed review time frame makes it difficult for U.S. officials to examine proposal documentation and solicit information from knowledgeable parties. In addition, by the time of the vote, a project is often already in its final design stage or even under construction, which limits U.S. agencies' ability to identify ways to mitigate the concerns. Furthermore, proposals with potentially significant adverse impacts proceed with or without U.S. government support. The board consistently approves proposals that lack U.S. support; between January 2004 and May 2008, all 34 of the proposals the United States did not support because they did not meet legislative requirements were still approved by the board. Finally, the U.S. government occasionally supports proposals with significant environmental impacts, due to competing priorities, including economic and other considerations.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-09-99, International Environmental Oversight: U.S. Agencies Follow Certain Procedures Required by Law, but Have Limited Impact
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Report to the Chairman, Committee on Foreign Relations, U.S. Senate:
United States Government Accountability Office:
GAO:
November 2008:
International Environmental Oversight:
U.S. Agencies Follow Certain Procedures Required by Law, but Have
Limited Impact:
GAO-09-99:
GAO Highlights:
Highlights of GAO-09-99, a report to the Chairman, Committee on Foreign
Relations, U.S. Senate.
Why GAO Did This Study:
The World Bank Group lends about $40 billion annually to developing
countries. Critics have claimed that some projects have harmed the
environment and the local population. Title XIII of the International
Financial Institutions Act of 1977 outlines in part the U.S.
government‘s requirements for reviewing potential environmental and
social impacts of proposed multilateral development bank projects. GAO
was asked to assess the U.S. government‘s international environmental
oversight efforts by examining (1) how U.S. agencies implement
legislative requirements to review the potential environmental concerns
associated with proposed World Bank Group projects, and (2) agencies‘
ability to identify and address these concerns. GAO reviewed Title
XIII, World Bank Group reports, and U.S. agency documents and met with
representatives from U.S. government agencies, the World Bank Group,
and nongovernmental organizations.
What GAO Found:
U.S. agencies take various approaches to meet legal requirements for
reviewing World Bank Group proposals likely to have significant adverse
environmental impacts. The Treasury Department (Treasury), which leads
these efforts, generally focuses on fulfilling the law‘s largely
procedural requirements, such as ensuring that the project‘s
environmental assessment is made publicly available by the project
sponsor 120 days before it is voted on by the Group‘s board. The
reviews usually occur from 1 to 3 weeks prior to such a vote. Treasury
also engages in required consultations by leading a weekly interagency
working group. Some participants stated that, because of limited time
and the volume of proposals, they rely on Treasury to identify
proposals of concern to facilitate the discussions. However, Treasury
has not routinely done so. For a selected few projects, Treasury and
the U.S. Agency for International Development analyze in more depth a
proposal‘s potential environmental and social impacts. Both agencies
learn about many such projects through regular interaction with
nongovernmental organizations.
Figure: Timeline of Events Related to U.S. Government Review of
Proposed World Bank Group Projects:
[Refer to PDF for image]
This figure contains a timeline depicting the following information:
* 120 days before board vote: U.S. government cannot support project
unless environmental assessment is disclosed 120 days before the World
Bank Group board vote;
* 1-3 weeks before board vote: Project notification and Treasury
review;
* ~1 week before interagency meeting: Interagency meeting agenda sent
out by Treasury;
* ~1 week before board vote: Interagency meeting/consultation;
* World Bank Group board vote.
Source: GAO analysis of Department of Treasury data.
[End of figure]
Time constraints limit the U.S. government‘s ability to identify
environmental and social concerns associated with World Bank Group
projects before a vote on the proposal, and projects with potentially
significant adverse impacts proceed with or without U.S. government
support. The compressed review time frame makes it difficult for U.S.
officials to examine proposal documentation and solicit information
from knowledgeable parties (see fig.) In addition, by the time of the
vote, a project is often already in its final design stage or even
under construction, which limits U.S. agencies‘ ability to identify
ways to mitigate the concerns. Furthermore, proposals with potentially
significant adverse impacts proceed with or without U.S. government
support. The board consistently approves proposals that lack U.S.
support; between January 2004 and May 2008, all 34 of the proposals the
United States did not support because they did not meet legislative
requirements were still approved by the board. Finally, the U.S.
government occasionally supports proposals with significant
environmental impacts, due to competing priorities, including economic
and other considerations.
What GAO Recommends:
To maximize interagency contributions to evaluating World Bank Group
proposals, GAO recommends that the Secretary of the Treasury routinely
identify all proposals of concern in advance of interagency working
group meetings. Treasury agreed with the recommendation, whereas USAID
suggested that it may warrant further guidance to more clearly address
short lead times.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-09-99]. For more
information, contact Thomas Melito, 202-512-9601, melitot@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
U.S. Agencies Take Various Approaches to Meet Legal Requirements for
Reviewing World Bank Group Proposals Likely to Impact the Environment:
U.S. Government Ability to Identify Environmental Concerns Is Limited,
and World Bank Group Projects with Potentially Significant Adverse
Impacts Proceed with or without U.S. Government Support:
Conclusion:
Recommendation for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Comments from the Department of the Treasury and GAO's
Evaluation:
Appendix III: Comments from the United States Agency for International
Development and GAO's Evaluation:
Appendix IV: GAO Contact and Staff Acknowledgments:
Table:
Table 1: World Bank Group Project Categories Based on Potential
Environmental Impact:
Figures:
Figure 1: Timeline of Events Related to U.S. Government Review of
Proposed World Bank Group Projects:
Figure 2: Number of World Bank Group Proposals That Treasury Has not
Supported due to Lack of Compliance with the Pelosi Amendment, January
2004 through May 2008:
Abbreviations:
CEQ: Council on Environmental Quality:
EIA: Environmental Impact Assessment:
EPA: Environmental Protection Agency:
IBRD: International Bank for Reconstruction and Development:
IDA: International Development Association:
IFC: International Finance Corporation:
MIGA: Multilateral Investment Guarantee Agency:
NEPA: National Environmental Policy Act of 1969, as amended:
Title XIII: Title XIII of the International Financial Institutions Act
of 1977, as amended:
USAID: U.S. Agency for International Development:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
November 20, 2008:
The Honorable Joseph R. Biden, Jr.
Chairman:
Committee on Foreign Relations United States Senate:
Dear Mr. Chairman:
The World Bank Group[Footnote 1] lends about $40 billion annually to
developing countries, and while its projects can provide significant
benefits, some, particularly those involving natural resource
management, rural development, energy, and other infrastructure
projects, can adversely impact the physical environment and the lives
of indigenous people in the project area. Critics of the World Bank
Group, as well as oversight entities within the World Bank Group, have
claimed that many of these projects have harmed the environment and the
local population. For example, some road projects have led to
deforestation caused by clear-cutting, and artificial lakes created by
large dam projects have forced thousands of local inhabitants to leave
their homes and communities and resettle elsewhere. In 1989, the World
Bank established policies that require project sponsors to prepare
assessments that would identify environmental and social impacts
associated with the projects it finances. The World Bank Group also
established policies guiding the disclosure of this information to the
public. However, concerns persist about the implementation of these
policies as well as the quality of the environmental assessments
associated with the projects. For example, according to a 2008 World
Bank Group Internal Evaluations Group report, World Bank Group staff
have not consistently applied its environmental assessment standards
across regions and countries, partly due to unclear guidance.
Title XIII of the International Financial Institutions Act of 1977, as
amended (Title XIII) outlines the U.S. government's basic requirements
for reviewing the potential environmental and social impacts of
proposed multilateral development bank projects, including those of the
World Bank Group. This legislation was enacted to strengthen the
environmental performance of multilateral development banks, which
includes promoting the use of environmental assessments to identify and
address harmful environmental and social impacts of multilateral
development bank projects. It requires, in part, that the U.S.
government review proposed World Bank Group and other multilateral
development bank-funded projects with the potential for such impacts.
To do so, U.S. government agencies examine project-specific
environmental assessments prior to project approval and ensure that
these assessments were made available to the public by the project
sponsors at least 120 days before the project is voted on by the World
Bank Group Board of Directors. The Department of the Treasury
(Treasury) instructs the U.S. Executive Director on the U.S. position
for each proposed project based on its review; the legislation
specifically precludes the U.S. Executive Director from supporting
projects that do not meet the 120-day public disclosure requirement.
For this report, you asked us to assess (1) how U.S. agencies implement
their legislative requirements to review the potential environmental
and social concerns associated with proposed World Bank Group projects,
and (2) agencies' ability to identify and address these concerns.
Although this legislation applies to all multilateral development
banks, we have limited the scope of our review to the World Bank Group
organizations because their environmental policies are generally
considered to be international good practice among multilateral
organizations and private-sector entities. Also, this report is the
first in a two-part review: it focuses on U.S. government oversight of
the World Bank Group's environmental assessment processes; the second
report will focus on World Bank Group environmental assessment policies
and their implementation.
To address these objectives, we reviewed portions of Title XIII and its
relevant amendments, as well as agency documents such as periodic
reports to Congress and position papers. We also interviewed U.S.
government officials from the Council on Environmental Quality, the
Environmental Protection Agency (EPA), the U.S. Agency for
International Development (USAID), and the Departments of Commerce,
State, and the Treasury. In addition, we reviewed World Bank Group
reports and studies and interviewed relevant World Bank Group officials
from 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), as well as environmental experts from nongovernmental
organizations, and the private sector.
We conducted this performance audit from October 2007 to November 2008,
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives. Appendix I provides detailed
information on our methodology.
Results in Brief:
U.S. agencies take various approaches to meet legal requirements for
reviewing World Bank Group proposals likely to have significant adverse
environmental and social impacts. Treasury, which leads these efforts,
reviews proposals that it determines are likely to have significant
adverse environmental and social impacts. These reviews are generally
focused on fulfilling requirements in the law, which are largely
procedural, such as ensuring that sponsors of World Bank Group projects
make environmental assessments publicly available 120 days before a
vote by the World Bank Group's Board of Directors. The reviews
generally occur anywhere from 1 to 3 weeks prior to board vote.
Treasury also engages in required interagency consultations by leading
a weekly interagency working group. Officials from some of the
participating agencies stated that because of the volume of proposals
to review and the short time span in which to discuss them, they rely
on Treasury to identify proposals of concern to facilitate the
discussions. However, Treasury has not routinely done so. For example,
of over 95 project proposals in 2007 categorized by the World Bank
Group as being likely to have significant adverse environmental
impacts, Treasury identified only 14 in advance of the interagency
meeting. For a selected few controversial projects, USAID and Treasury
analyzed in more depth the potential environmental and social impacts.
Because they have different statutory responsibilities and flexibility
within their statutory requirements, the agencies conduct the reviews
and apply criteria differently. Both agencies learn about many such
projects through regular interaction with nongovernmental
organizations.
Time constraints limit the U.S. government's ability to identify
environmental and social concerns associated with World Bank Group
projects before the Group's board votes on them, and projects with
significant adverse impacts proceed with or without U.S. government
support. The compressed time frame between World Bank Group
notification of projects, interagency meetings to discuss the projects,
and the board vote date makes it difficult for U.S. agency officials to
review project documentation and solicit information from knowledgeable
parties. In addition, by the time a project is ready for a board vote,
it is often already in its final design stage or, in some cases, under
construction, which limits U.S. agencies' ability to identify ways to
mitigate environmental and social issues associated with these
projects. For example, construction on a mine project in Guatemala
began a month before it received approval for IFC financing.
Furthermore, the World Bank Group consistently approves projects with
potentially significant adverse impacts without U.S. government
support; between January 2004 and May 2008, all 34 of the projects the
U.S. Executive Director did not support because they did not meet the
law's public disclosure requirements were still approved by the board
of directors and moved forward.[Footnote 2] In addition, the U.S.
government occasionally supports projects with significant adverse
environmental impacts, due to competing priorities. For example, when
reviewing an environmental assessment and associated documentation for
a hydroelectric project in Uganda, USAID and EPA raised environmental
concerns and recommended that Treasury instruct the U.S. Executive
Director not to support the project, but Treasury ultimately supported
the project with State's concurrence due to a balance of economic and
other considerations and a belief that potential impacts can be
mitigated.
To improve U.S. agencies' ability to effectively contribute to the
interagency effort to evaluate World Bank Group proposals that are
likely to have significant adverse environmental and social impacts, we
are recommending that the Secretary of the Treasury, in his capacity as
the chair of the Working Group on Multilateral Assistance, routinely
identify all proposals of concern in advance of working group meetings
with other agencies in order to maximize the ability of all
participants to contribute to the evaluation of World Bank Group
proposals.
In commenting on a draft of this report, Treasury agreed with the
recommendation and noted in technical comments submitted separately
that it is already taking a number of measures to comply with the
recommendation. We also incorporated Treasury's technical comments as
appropriate in the report. Treasury disputed our finding that their
efforts have had little impact, because they believed we did not
adequately note Treasury's behind the scenes efforts to influence
project design. While we have added language to the report to reflect
some of these efforts, Treasury did not provide us with information to
gauge the impact of these communications. Treasury also believed that
we characterized the interagency process as limited to weekly meetings.
While we disagree with Treasury's interpretation, we added language to
clarify the extent of interagency communication. In its comments on the
draft report, USAID suggested that the recommendation may warrant
further guidance to more clearly address very short lead times. It also
noted that sections of Title XIII, such as those calling for a system
for information exchange with other interested member countries, were
not addressed in the report. These sections were not addressed because
we focused the scope of our review on those sections of Title XIII that
directly addressed U.S. government oversight of the potential
environmental and social concerns associated with proposed World Bank
Group projects. USAID made additional comments on more specific topics,
which we address more fully in the agency comments section of this
report.
Background:
The World Bank Group's member countries collectively determine policy
and make investment decisions. Its board of directors is made up of 24
executive directors who represent all 185 member countries.[Footnote 3]
The U.S. Executive Director is the main liaison between the United
States and the World Bank Group. Treasury has the lead role in working
with the U.S. Executive Director to determine the U.S. position on
proposed World Bank Group projects. As a member country of the World
Bank Group, the United States may support, abstain from voting, or vote
against a proposed project. However, no single member country can veto
a proposed project.
In 1989, the World Bank established social and environmental
guidelines, or Safeguard Policies, to identify and address potentially
significant negative environmental and social impacts. In 2006, IFC
developed its own distinct performance standards for assessing the
environmental and social impact of its projects, and MIGA introduced
its own standards, which were largely based on IFC's, in 2007. The
World Bank, IFC, and MIGA have also established policies guiding the
disclosure of project information to the public. IFC and MIGA
guidelines state that proposed project documents, including
environmental assessments, should be released 60 days prior to a board
vote on projects with potential, significant adverse impacts. The World
Bank disclosure guidelines do not specify a number of days.
World Bank Group entities screen project proposals for potential
environmental impacts and assign one of four categories to determine
the type of environmental assessment needed. See table 1.
Table 1: World Bank Group Project Categories Based on Potential
Environmental Impact:
Category: A;
Definition: Projects with potential, significant adverse impacts that
are diverse, irreversible, or unprecedented;
Examples: Large dams, mining activities, new roads;
Environmental Assessment (EA) requirements: Requires full EA.
Category: B;
Definition: Projects with potential, limited adverse impacts that are
few in number, site-specific, largely reversible, and readily addressed
through mitigation measures;
Examples: Rural electrification, smaller scale irrigation,
rehabilitation, and maintenance projects;
Environmental Assessment (EA) requirements: Requires less comprehensive
EA.
Category: C;
Definition: Projects that are expected to have minimal or no adverse
impacts;
Examples: Health, education, and family planning projects;
Environmental Assessment (EA) requirements: No EA required.
Category: FI;
Definition: Projects in which funds are channeled through a financial
intermediary;
Examples: Support to a local development investment fund to finance
municipal infrastructure;
Environmental Assessment (EA) requirements: No EA required.
Source: GAO analysis of World Bank Group documents.
[End of table]
Title XIII outlines the U.S. government's basic requirements for
reviewing the potential environmental and social impacts of proposed
multilateral development bank projects, including those of the World
Bank Group. The overall purpose of the legislation is to ensure that
U.S. assistance to multilateral development banks promotes sustainable
use of natural resources and the protection of the environment, public
health, and the status of indigenous people in developing countries. In
1989, Congress amended Title XIII to include Section 1307, commonly
referred to as the Pelosi Amendment. The Pelosi Amendment directly
affects whether the U.S. government will support a proposed project. It
directs the U.S. government to ensure that a proposed project with
potentially significant negative impacts meets certain requirements,
such as making publicly available an assessment of the project's
environmental impact 120 days before the World Bank Group's Board of
Directors votes on the project. If the World Bank Group's project
sponsor does not make the assessment or a summary of the assessment
publicly available within this time frame, the law instructs the U.S.
government not to vote in favor of the proposal. The law also requires
that the assessment include an analysis of the project's cumulative and
associated impacts, as well as alternatives to the proposed project. As
a result of the Pelosi Amendment, the World Bank Group and other major
multilateral development banks began requiring project sponsors to
prepare environmental impact assessments and make them available to
affected groups, according to representatives from U.S. government
agencies and nongovernmental organizations, as well as a 1998 U.S.
Congressional Research Service report determining the impact of the
Pelosi Amendment.[Footnote 4]
Both the Pelosi Amendment and other sections of Title XIII specify the
responsibilities of several U.S. agencies in monitoring proposed
multilateral development bank projects with the potential for
significant environmental and social impacts. As the lead U.S. agency
interacting with the multilateral development banks, Treasury is to
take the following actions:
* ensure that an environmental impact assessment or a comprehensive
summary accompanies project proposals,
* consult with and consider recommendations from other federal agencies
and interested members of the public regarding this assessment,
* determine whether an environmental assessment has been made publicly
available at least 120 days prior to the board vote on the proposal,
* instruct the U.S. Executive Director on the U.S. position for each
proposed project,
* consult with other U.S. agencies to develop environmental impact
review procedures for proposed multilateral development bank projects
and assist in implementing these procedures,[Footnote 5] and:
* provide an annual report to Congress on the environmental
sustainability of multilateral development banks' operations and the
efficacy of U.S. efforts in this process.
Title XIII also requires USAID to work with Treasury and the Department
of State (State) to analyze, where feasible, the environmental, social,
and other[Footnote 6] impacts of proposed multilateral development bank
projects "well in advance" of the projects' board vote date, and to
ensure that investigations are undertaken for proposals that are likely
to have substantial adverse impacts. USAID is also required to provide
its own report to Congress that identifies proposals likely to have
adverse impacts on the environment, natural resources, public health,
or indigenous peoples. State and Treasury are to work with USAID to
vigorously promote mechanisms to strengthen the environmental
performance of multilateral development banks.
U.S. Agencies Take Various Approaches to Meet Legal Requirements for
Reviewing World Bank Group Proposals Likely to Impact the Environment:
Treasury addresses Pelosi Amendment requirements for assessing World
Bank Group projects by conducting reviews that focus on procedural
requirements such as whether the project's environmental assessment is
made publicly available by the project sponsor 120 days before the
World Bank Group's board vote date. Treasury also engages in required
interagency consultations by leading a weekly interagency working
group. However, Treasury does not always identify projects with
potentially significant environmental and social impacts in advance of
the interagency meetings, making it difficult for participants to
provide effective input. Because they have different responsibilities
and flexibility within their statutory requirements, USAID and Treasury
take different approaches to analyzing in more depth the environmental
and social impacts of a few controversial projects. The agencies learn
about many such projects through regular interaction with
nongovernmental organizations.
Treasury Addresses Pelosi Amendment Requirements by Conducting
Procedural Reviews and Engaging in Interagency Consultations:
Treasury Reviews of World Bank Group Projects Generally Focus on
Procedural Requirements:
As required by the Pelosi Amendment, Treasury conducts reviews of
environmental documentation for World Bank Group proposals that could
have significant environmental or social impacts. Treasury's efforts
generally focus on fulfilling the requirements of the legislation,
which are largely procedural; specifically, Treasury staff review
documentation on World Bank Group projects to ensure that procedural
requirements specified in the legislation are met. These requirements
include ensuring that an environmental impact assessment or a
comprehensive summary of the assessment is made publicly available 120
days prior to the World Bank Group's Board of Executive Directors vote
date[Footnote 7] and that the summary contains items such as
discussions of alternatives to the proposed project and the project's
direct and indirect environmental impacts. A Treasury Department
official who reviews project documentation stated that the review
process involves attempting to ascertain the actual disclosure date,
which is not necessarily the date or dates listed on the documents.
[Footnote 8] The Treasury reviews generally take place once the World
Bank Group's Board of Executive Directors schedules a vote for the
proposed project. In practice, this can be anywhere from 1 to 3 weeks
prior to the scheduled vote date. In calendar year 2007, Treasury
officials estimated that they reviewed over 95 projects that they
determined could have significant environmental or social impacts.
[Footnote 9]
The Pelosi Amendment requires that Treasury consider, among other
things, associated and cumulative environmental impacts in its review
of World Bank Group project documentation but does not specify what
criteria should be used to determine these considerations. As a result,
one Treasury economist said she uses professional judgment to determine
if the evidence "seems reasonable" when reviewing environmental
assessments for compliance with the Pelosi Amendment's requirement
regarding associated and cumulative environmental impacts. Since the
amendment does not require Treasury to review proposals to determine if
they meet the World Bank Group's environmental and social safeguard
policies, Treasury generally does not evaluate proposals for compliance
with these policies. Treasury officials stated that they do not do this
because the multilateral development banks have their own procedures,
staff, and accountability mechanisms for ensuring compliance with bank
policies. Treasury officials noted that they occasionally may closely
review the analysis contained in the environmental assessment or other
project documentation if they have concerns about the environmental and
social impact of the project. However, these officials told us that
they rarely instruct the U.S. Executive Director not to support a
proposal because of deficiencies with the assessment's technical
analysis.[Footnote 10]
Because Treasury is only required by law to review proposals on which
the World Bank Group board votes, a subset of proposals, specifically,
umbrella proposals, are not always reviewed by Treasury for compliance
with the Pelosi Amendment. These proposals, which are presented to the
World Bank Group's board for approval, contain an environmental
assessment that represents a framework for multiple sub-projects.
Although the board must approve the proposal as a whole, future sub-
projects--some of which could have significant adverse impacts--are not
subject to board approval. Since the board does not vote on
subprojects, the Pelosi Amendment does not require Treasury to review
them. Instead, Treasury reviews these types of proposals on a case-by-
case basis. According to Treasury officials, they use professional
judgment to determine if the intended sub-projects are likely to have
significant adverse environmental and social impacts and, therefore,
whether they review environmental documents associated with the sub-
projects.
Treasury reports its findings to Congress, as required by law,[Footnote
11] but does not provide these reports in a timely manner. Federal law
requires Treasury to provide an annual report to Congress summarizing
the environmental performance of the multilateral development banks,
including the World Bank Group. Treasury's most recent report is for
fiscal year 2005. Treasury officials told us in October 2007 and again
in August 2008 that they were still preparing the report for fiscal
year 2006.
Treasury Engages in Interagency Consultations to Address Pelosi
Amendment Requirements:
Treasury addresses the Pelosi Amendment's requirement that it consult
with other agencies[Footnote 12] by leading an interagency working
group on multilateral assistance that meets once a week for about an
hour to discuss U.S. agencies' concerns regarding proposed World Bank
Group projects. This group discusses political, economic,
environmental, social, and other concerns related to proposed
multilateral development bank projects, including those of the World
Bank Group.[Footnote 13] The purpose of these discussions is to solicit
agency input as to whether Treasury should instruct the U.S. Executive
Director to support the projects. In addition to Treasury, State,
USAID, and the Commerce Department are regular participants at the
meeting. Other agencies such as EPA have attended in the past.
According to participants, the volume of proposals and brief discussion
time at the working group meetings has limited the quality of
discussion on proposals with potentially significant environmental and
social impacts. Approximately 1 week prior to each working group
meeting, Treasury distributes an agenda containing a list of all
multilateral development bank proposals that are scheduled for a vote
over the next several weeks. The number of proposals to be discussed in
the hour-long meeting each week varies, averaging about 60, but in some
weeks, such as near the end of the World Bank Group's fiscal year, it
has been about 150. Treasury officials told us they assume the agencies
will review the proposals in advance and inform Treasury of any
concerns they may have. They said that if an agency does have an issue
with a proposal, Treasury staff will informally discuss the concern
with the agency and attempt to resolve it prior to the meeting.
Officials from participating agencies we met with stated that because
of the volume of proposals to review and the short time span in which
to discuss them, they rely on Treasury to identify in the meeting
agenda proposals that it believes to be of concern, to facilitate the
discussion. However, Treasury has not routinely done so. For example,
of over 95 World Bank Group proposals in 2007 considered by Treasury as
being likely to have significant adverse environmental impacts, the
agency identified only 14 in the agendas it sent out in advance of the
working group meetings. Treasury officials stated that, given all their
other responsibilities and limited resources, they had not been focused
on identifying proposals likely to have significant adverse
environmental impact for the weekly working group meeting agendas.
USAID and Treasury Analyze a Selected Few Controversial Projects in
More Depth, and Learn about Many Such Projects through Regular
Interaction with Nongovernmental Organizations:
USAID and Treasury Are Governed by Different Statutory Responsibilities
for Analyzing the Impacts of Controversial Projects:
Title XIII does not specify a particular process that USAID and
Treasury should use when considering environmental assessments, and the
agencies use different standards when assessing the sufficiency of
environmental impact assessments. Though USAID and Treasury are charged
with different statutory responsibilities, each agency may evaluate
environmental impact assessments on proposed projects during its review
process. Neither federal law nor agency regulations specify one
standard to be used across the federal government when considering
proposals or environmental impact assessments.
Section 1303 of Title XIII requires USAID to ensure that other U.S.
agencies and overseas USAID missions analyze, where feasible, the
environmental impacts of multilateral development loans well in advance
of the loans' approval to determine whether the proposals will
contribute to the sustainable development of the borrowing country.
USAID is also required to ensure that investigations of proposed
projects with "substantial adverse impacts" are conducted. Because the
law contains no prescriptive requirements for how to ensure that
investigations of projects with likely substantial adverse impacts are
conducted, USAID has taken various approaches to fulfilling this
requirement. In previous years, the agency conducted a brief annual
review of a large number of proposed projects; in contrast, its current
approach is to conduct a thorough analysis of a much smaller number of
proposed projects. For example, USAID's 1999 report to Congress briefly
highlighted environmental concerns in 29 projects. In contrast, the
latest report, from April 2008, provides an in-depth analysis of nine
projects.
According to the official responsible for conducting the
investigations, USAID reviews the project's environmental assessment,
as well as related studies, such as the environmental management plan.
To perform its analyses, USAID employs a technical expert, who
evaluates proposals' environmental and social impacts against USAID
standards as well as other guidance, such as that developed by the
Council on Environmental Quality (CEQ).[Footnote 14] This technical
expert told us she uses certain criteria when determining whether a
proposed project should be investigated and applies them at her
discretion. These criteria include, among others, the significance and
potential of adverse cumulative impacts, the ability of the proposal to
serve as a model for similar proposals within a particular sector, and
the potential for the proposal to undermine USAID's sustainable
development activities. USAID may also perform site visits to the
proposed project location. During these visits, USAID and other U.S.
government officials, including those from Treasury and State, may meet
with stakeholders such as the project sponsor, World Bank Group staff,
host-country government officials, and local communities affected by
the proposal. In addition, USAID may continue to monitor and report on
the project if the World Bank Group board approves it once financing
and construction begin.
Treasury, in determining the U.S. position on proposed actions to be
taken by the World Bank Group, is required to develop and prescribe
procedures that consider environmental impact assessments, the
interagency and public review of these assessments, and other
environmental reviews and consultations required by law. Treasury
issued regulations in 1992 to fulfill this requirement; however, the
regulations do not specify criteria to be used in the interagency
process that measure the sufficiency of the environmental assessments.
While these regulations address how Treasury will instruct the U.S.
Executive Director to proceed at the World Bank Group when an
environmental analysis is determined to be insufficient, the
regulations do not identify a set of criteria or standard against which
to measure sufficiency. While USAID uses guidance and regulations
issued by the Council for Environmental Quality when reviewing
different aspects of environmental assessments, Treasury often uses
internal requirements issued by the World Bank.
Although not required to do so by law, Treasury occasionally conducts
additional, more in-depth investigations of a few World Bank Group
proposals that it determines to be controversial, such as mining or oil
and gas projects, or that present opportunities for reducing adverse
impacts.[Footnote 15] Unlike its more procedural reviews of proposals
for compliance with the Pelosi Amendment, Treasury officials said they
may evaluate these proposals' documentation for compliance with the
multilateral development banks' internal requirements for assessing
environmental and social impacts.[Footnote 16] However, they do not
necessarily determine, for example, whether the World Bank's "good
practices" have been followed. The World Bank's good practices,
compiled in its Environmental Assessment Sourcebook, give examples of
practices that the World Bank considers models for project managers to
emulate, such as establishing project supervision and monitoring
programs.[Footnote 17]
U.S. Government Agencies Focus Attention Predominantly on Projects
Identified by Nongovernmental Organizations:
According to officials from U.S. agencies, of the few proposed projects
that Treasury and USAID select for in-depth analysis, many come to
their attention through regular interaction with nongovernmental
organizations. To foster dialogue with interested non-governmental
organizations and to fulfill legislative requirements, Treasury and
USAID meet with nongovernmental organizations in a forum commonly
referred to as the Tuesday Group, since it generally meets on the first
Tuesday of each month.[Footnote 18] At this forum, the agencies often
obtain leads on potentially controversial projects through discussions
of planned and ongoing multilateral development bank projects that may
have significant adverse environmental and social impacts.
In mid-2008, Treasury informally proposed changing the structure of
these meetings. Specifically, Treasury's proposal establishes a
steering committee consisting of a representative from Treasury, USAID,
and two nongovernmental organizations[Footnote 19] for the purpose of
reviewing and selecting submitted discussion topics for subsequent
meetings, which would then focus the discussion on those issues that
the steering committee identifies. Treasury officials said that this
proposal is meant to make the meetings more efficient, since the
officials have many responsibilities and can devote only a small share
of their time to assessing the environmental impacts of multilateral
development bank projects. We discussed this proposal with the Bank
Information Center in September 2008; the Center and Treasury are
considering a compromise proposal that would have an agreed-upon agenda
while setting aside some time for open-ended discussion.[Footnote 20]
U.S. Government Ability to Identify Environmental Concerns Is Limited,
and World Bank Group Projects with Potentially Significant Adverse
Impacts Proceed with or without U.S. Government Support:
Time constraints limit the U.S. government's ability to identify the
environmental and social concerns associated with World Bank Group
projects before the World Bank Group board votes on them, and projects
with potentially significant adverse impacts proceed with or without
U.S. government support. By the time a project is ready for board vote,
it is often in its final design stage or, in some cases, already under
construction, which limits U.S. agencies' ability to identify ways to
mitigate environmental and social issues associated with the project.
Furthermore, the World Bank Group consistently approves projects with
potentially significant adverse impacts without U.S. government
support; between January 2004 and April 2008, all 34 of the projects
the U.S. Executive Director did not support because they did not meet
the Pelosi Amendment requirements were still approved by the World Bank
Group's Board of Directors and moved forward. In addition, the U.S.
government occasionally supports projects with significant
environmental impacts, due to competing priorities and a belief that
potential impacts can be mitigated.
The U.S. Government's Ability to Identify Environmental and Social
Issues Associated with Most World Bank Group Projects Is Limited by
Review Time Frames:
Officials from agencies that participate in the interagency working
group told us that they usually do not have sufficient time to identify
environmental and social issues associated with projects in the few
weeks encompassing the World Bank Group's notification of a proposed
project scheduled for a vote, the working group meeting at which the
project could be discussed, and the date the board votes on the
project. Figure 1 shows the timeline of events related to the U.S.
government's review of proposed World Bank Group projects.
Figure 1: Timeline of Events Related to U.S. Government Review of
Proposed World Bank Group Projects:
[Refer to PDF for image]
This figure contains a timeline depicting the following information:
* 120 days before board vote: U.S. government cannot support project
unless environmental assessment is disclosed 120 days before the World
Bank Group board vote;
* 1-3 weeks before board vote: Project notification and Treasury
review;
* ~1 week before interagency meeting: Interagency meeting agenda sent
out by Treasury;
* ~1 week before board vote: Interagency meeting/consultation;
* World Bank Group board vote.
Source: GAO analysis of Department of Treasury data.
[End of figure]
Treasury officials said that they are notified about projects when they
receive a project appraisal document, which describes the project and
is what the board reviews when it votes on a project. They said they
generally receive this document about 1 to 3 weeks before the board is
scheduled to vote on the project.[Footnote 21] They then put these
projects on the working group meeting agenda. The working group
meetings generally take place approximately 1 or 2 weeks before the
board votes on projects, and Treasury e-mails a list of projects and
estimated board vote dates to relevant U.S. agencies about 1 week
before each meeting. State and USAID officials noted that this
compressed time frame makes it difficult to review project
documentation and solicit input from relevant officials from other
offices within their agencies. Furthermore, USAID staff in countries
where projects are being proposed have limited time to review project
documentation because they do not have access to the necessary project
documents and depend on staff in Washington to make this information
available to them, according to USAID officials. Even when U.S.
agencies are able to identify project-related issues, the U.S.
government has little time to discuss these issues with the World Bank
Group. USAID officials stated that project stakeholders are unlikely to
alter the project without sufficient time for discussion before a vote.
[Footnote 22]
Even when agencies can identify issues before the board vote, the
project is often in its final design stage or, in some cases, already
under construction, so the extent to which the World Bank Group can
mitigate the issues is limited. Treasury officials stated that there is
little opportunity to influence project design once the World Bank
Group has released the project appraisal document shortly before the
board votes on the project. In addition, an April 2008 USAID report to
Congress stated that there are inadequate opportunities to identify,
avert, or mitigate adverse environmental and social impacts associated
with the projects even when the multilateral development banks release
the environmental documents 120 days before the board votes, as the
Pelosi Amendment requires. In some instances, projects may already be
under construction. For example, construction began on an IFC-financed
gold mine in Guatemala a month before the project went to the board for
a vote,[Footnote 23] despite problems associated with the project,
including inadequate consultations with the affected community and
potential water contamination, according to a USAID report. In its 2005
annual report to Congress, Treasury noted that, while the timeliness
and quality of environmental impact assessments of World Bank Group
projects had improved, the agency remained concerned about the need to
determine appropriate interventions if projects had already begun
construction or suffered from a legacy of unaddressed environmental
damage.
The World Bank Group Consistently Approves Projects That Lack U.S.
Government Support:
Since 2004, the World Bank Group has always approved proposals that
lack U.S. support, even if they have potentially significant adverse
environmental and social impacts. A lack of U.S. government support for
proposals that do not comply with the Pelosi Amendment does not prevent
the board from approving such proposals because one member country's
vote cannot prevent approval. Between January 2004 and May 2008,
[Footnote 24] all 34 of the proposed projects the U.S. Executive
Director did not support because they did not meet the Pelosi Amendment
requirements were still approved by the World Bank Group Board of
Directors and moved forward. (See fig. 2 for the number of proposals
Treasury has not supported due to lack of compliance with the Pelosi
Amendment.)
Figure 2: Number of World Bank Group Proposals That Treasury Has not
Supported due to Lack of Compliance with the Pelosi Amendment, January
2004 through May 2008:
[Refer to PDF for image]
This figure illustrates the following information, using interlocking
circles:
About 180 World Bank Group Category A proposed projects;
23 Category A proposed projects:
Treasury may review for compliance with the Pelosi Amendment proposed
projects that are classified by the World Bank Group as Category A”that
is, likely to have significant adverse environmental and social
impacts. Of the approximately 180 proposed projects categorized as such
from January 2004 through May 2008, Treasury identified 23 that did not
meet the requirements of the Pelosi Amendment and recommended that the
U.S. Executive Director abstain from voting for them.
11 non-Category A proposed projects:
Treasury may also review for compliance with the Pelosi Amendment
proposed projects that are not classified by the World Bank Group as
Category A, if it determines these proposed projects are still likely
to have significant adverse environmental and social impacts. Because
the agency does not maintain an ongoing database of its reviews, we
could not obtain the exact number of these proposed projects. From
January 2004 through May 2008, Treasury determined that 11 of these
proposed projects did not meet the requirements of the Pelosi Amendment
and recommended that the U.S. Executive Director abstain from voting
for them.
Source: GAO analysis of Department of Treasury and World Bank Group
data.
[End of figure]
Treasury officials told us that overall U.S. interests are sometimes
served when the board approves projects that the Pelosi Amendment
prevents the United States from supporting. For example, in one case,
the board approved a proposal for a development project in Iraq that
the U.S. government would have otherwise wanted to support, but could
not because it did not meet the amendment's 120-day disclosure
deadline.
Furthermore, once proposed projects are approved by the board, they are
unlikely to be modified to address U.S. concerns about adverse
environmental and social impacts. U.S. government officials informed us
that changes are seldom made to a project as a result of the U.S.
Executive Director not supporting it.[Footnote 25] According to
Treasury officials, once the board has approved the proposal and the
World Bank Group has funded the project, Treasury has little leverage
in influencing any changes to mitigate adverse environmental or social
impacts.
The United States Occasionally Supports Projects with Significant
Environmental Impacts, Due to Competing Priorities:
In some cases, Treasury recommends that the U.S. Executive Director
support projects with significant adverse impacts. Some U.S. agencies
may want to oppose these projects because of environmental concerns,
but Treasury sometimes recommends that the U.S. Executive Director vote
in favor of the project if it determines that it is in compliance with
the Pelosi Amendment and that potential impacts can be mitigated. As
the lead U.S. agency in formulating the U.S. government's position on
proposed multilateral development bank projects, Treasury's
determination takes into account competing priorities--such as economic
development--as well as environmental concerns and, therefore, does not
always reflect consensus either among agencies or among units of the
same agencies. For example, when reviewing an environmental assessment
and associated documentation for a hydroelectric dam project in Uganda,
USAID and EPA raised environmental concerns and recommended that
Treasury instruct the U.S. Executive Director not to support the
project. USAID and EPA officials opposed the project because, among
other things, they believed the environmental analysis was incomplete
and the analysis of the impact of the dam on endangered species was
inadequate. However, Treasury ultimately supported the project due to
economic considerations, having determined that the measures the
project sponsor would take to mitigate the adverse impacts were
sufficient. In its memo to instruct the U.S. Executive Director to
support the project, Treasury stated that the project would help reduce
Uganda's electricity shortage and, thereby, lower an obstacle to
economic growth and development. State also ultimately supported the
project because it brought an acceptable balance across multiple
issues, including clean energy, economic development, and political
support for the Ugandan government, according to State officials.
We could not determine the extent to which the U.S. government balances
competing priorities for projects with potentially significant adverse
environmental and social impacts that are compliant with the Pelosi
Amendment. Between January 2004 and July 2008, Treasury supported 17
World Bank Group proposals for which it determined that significant
environmental impacts would occur, but be mitigated. However, because
Treasury does not generally write memos to the U.S. Executive Director
for projects it supports, it does not maintain documentation to show to
what extent other issues may have outweighed environmental and social
concerns in these cases.[Footnote 26] Treasury officials responsible
for conducting environmental reviews stated that for controversial
projects, decisions are made by senior-level administration officials.
Conclusion:
Given the potential consequences of World Bank Group projects with
significant environmental and social impacts, the overriding
constraints posed by the World Bank Group's project development and
approval process, and the restrictions the Pelosi Amendment imposes on
the U.S. government's decision-making, U.S. agencies must coordinate
efficiently to maximize their resources within the very limited time
they have available to review upcoming projects. However, Treasury is
not maximizing the effectiveness of a major mechanism for gathering
interagency views on projects--the weekly interagency working group it
leads. The working group meetings, which Treasury uses to meet its
legal requirement to consult with other agencies on the possible
impacts of World Bank Group proposals, are meant to provide an
opportunity for all participants to utilize their expertise and discuss
their perspectives and concerns as part of the vetting process to
determine a U.S. position on the proposals. Prior to the meetings,
Treasury's staff flag those projects that they believe have potentially
significant environmental and social impacts. Treasury has not,
however, been routinely passing this information on to the other
participants of the working group in advance of group meetings. For
example, Treasury only identified about 15 percent of such projects in
working group agendas in 2007. Without this identification, working
group agencies have been limited in their ability to effectively
contribute to the interagency effort to evaluate proposed World Bank
Group projects.
Recommendation for Executive Action:
In order to improve U.S. agencies' ability to effectively contribute to
the interagency effort to evaluate World Bank Group proposals that are
likely to have significant adverse environmental and social impacts, we
recommend that the Secretary of the Treasury, in his capacity as the
chair of the Working Group on Multilateral Assistance, routinely
identify all proposals of concern in advance of working group meetings
with other agencies in order to maximize the ability of all
participants to contribute to the evaluation of World Bank Group
proposals.
Agency Comments and Our Evaluation:
We provided a draft of this report to Treasury and USAID for their
review and comment. Treasury and USAID provided written comments, which
are reprinted in appendix II and III respectively. Treasury also
provided technical comments, which are incorporated as appropriate
throughout the report.
Treasury agreed with our recommendation and noted in its technical
comments that it welcomes this recommendation and is already taking a
number of measures to comply with it. Treasury also disagreed with two
of our findings. First, Treasury disputed our finding that its efforts
had little impact, because it believed we did not adequately note
Treasury's behind the scenes efforts to influence project design. In
response, we have added language to the report to reflect some of these
efforts. However, Treasury did not provide us with information to gauge
the impact of these communications and Treasury officials also told us
they could not determine what impact these communications have on
project design. Second, Treasury also believed that we characterized
the interagency process as limited to weekly meetings. While we
disagree with Treasury's interpretation, we added language to clarify
the extent of interagency communication.
In its comments, USAID suggested that the recommendation may warrant
further guidance to more clearly address very short lead times for
notice to other agencies. We did not, however, revise this
recommendation because we believe it is up to Treasury to determine how
best to implement the recommendation. USAID's comments also raised
several issues, including that our report title was overly expansive.
In response, we modified the title to clarify that the report addresses
certain procedures required by U.S. law. USAID was also concerned that
our report did not address all provisions in Title XIII, such as
creating a system for information exchange with other interested member
countries. These were not within the scope of this report because we
focused our review on those sections of Title XIII that directly
address U.S. government oversight of the potential environmental and
social concerns associated with proposed World Bank Group projects.
USAID was also concerned that we did not address whether Treasury has
sufficient expertise to evaluate measures to mitigate environmental
damage. However, it is beyond the scope of this report to determine
whether mitigation measures have been effective; we anticipate
addressing this issue in our next report, which will focus on project
implementation. More detail on USAID's comments and our evaluation can
be found in appendix III.
We are sending copies of this report to interested congressional
committees, the Secretary of the Treasury, and the Administrator of
USAID. The report is available at no charge on the GAO Web site at
[hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me at (202) 512-9601. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff who made major contributions to this
report are listed in appendix IV.
Sincerely,
Signed by:
Thomas Melito:
Director, International Affairs and Trade:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
Our objectives were to assess (1) how U.S. agencies implement their
legislative requirements to review the potential environmental and
social concerns associated with proposed World Bank Group projects, and
(2) agencies' ability to identify and address these concerns.
To assess how U.S. agencies implement their legislative requirements,
we reviewed environmental legislation, including: Title XIII of the
International Financial Institutions Act of 1977, as amended; the
procedures for the environmental review of proposed projects of
multilateral development banks in 31 C.F.R. Part 26; as well as the
U.S. Agency for International Development's (USAID) Environmental
Procedures contained in 22 C.F.R. Part 216. We also reviewed
legislation governing U.S. environmental assessments, such as the
National Environmental Policy Act of 1969 (NEPA) and Council on
Environmental Quality Regulations for Implementing the Procedural
Provisions of NEPA, 40 C.F.R. Parts 1500-1508; and, Council on
Environmental Quality guidance on implementing 40 C.F.R. Part 1500-
1508. To determine how agencies implement their legislative
requirements, we interviewed U.S. government officials from the
Environmental Protection Agency (EPA), USAID, and the Departments of
State and the Treasury (Treasury), as well as expert staff from
environmental non-governmental organizations. Because not every agency
keeps complete records of its environmental oversight activities or has
internal policies governing such actions, certain procedural
documentation could not be provided. In such cases, we relied on agency
officials' testimonial evidence.
To examine agencies' ability to identify and address environmental
concerns of proposed World Bank Group projects, we reviewed agency
documents such as periodic reports to Congress, agency decision memos,
and the U.S. government's voting record on World Bank Group proposals.
We also interviewed U.S. government officials from EPA, USAID, and the
Departments of Commerce, State, and Treasury. In addition, we
interviewed relevant World Bank Group officials from the International
Bank for Reconstruction and Development, the International Development
Association, the International Finance Corporation, and the
Multilateral Investment Guarantee Agency, as well as environmental
experts from nongovernmental organizations, and the private sector.
To determine the number of World Bank Group projects that the U.S.
Executive Director abstained from voting on due to the requirements of
the Pelosi Amendment, we collected data from Treasury on the U.S.
Executive Director's voting record from January 2004 through May 2008.
We also used these data to identify projects supported by the U.S.
Executive Director that Treasury determined may have significant
environmental impacts, but that the U.S. Executive Director supported
based on Treasury's determination that such impacts have been addressed
and mitigated in the design of the project.
To assess the reliability of Treasury's data on the U.S. Executive
Director's voting record, we (1) interviewed the Treasury official
responsible for managing the team of analysts who record data on the
status of multilateral development bank projects; and (2) reviewed the
voting record data. During the course of our review, we identified
incomplete data fields and manual data entry errors, such as duplicate
entries of the same project. However, based on our intended use of the
data--to identify how the U.S. Executive Director voted on particular
World Bank Group projects--and the results of our assessment, we
determined that the data provided were sufficiently reliable for the
this purpose.
Because Treasury does not maintain a database of the projects it
reviews for compliance with the Pelosi Amendment, we requested that the
agency create a list of projects receiving such a review for calendar
years 2006 through 2008. The Treasury analyst conducting these reviews
compiled for us an estimate of the projects she reviewed during this
time frame. She stated that she compiled the list from a manual log she
keeps along with archived emails. Although the analyst stated that the
list was generally accurate it is possible that a few projects may not
have been captured. We determined, however, that the data provided were
sufficiently reliable for the purposes of this report.
To determine the total number of projects the World Bank Group
identified as (1) having the potential for significant adverse impacts;
(2) having the potential for limited adverse impacts; or (3) having
funds channeled through a financial intermediary, we extracted data
from the World Bank's and IFC's project Web sites from January 2004
through May 2008. Since the World Bank Group has not completed vetting
its response to our request to conduct a review of World Bank Group
environmental assessment policies and their implementation, it
therefore did not allow us to assess the reliability of World Bank and
IFC data. Although we used this data to identify an approximate number
of projects that were categorized by the World Bank and IFC as likely
to have significant adverse environmental impacts, the reliability of
those data are undetermined.
Due to the nature of the Multilateral Investment Guarantee Agency's
(MIGA) business model (providing political risk insurance and project
guarantees), it was not feasible for us to collect project-related
data, since MIGA's tracking and monitoring activities are different
than those of the IFC or the World Bank. For example, MIGA does not
categorize its support in terms of individual projects, but rather in
terms of individual guarantees from distinct investors. Therefore,
there may be more than one investor who has applied for and obtained
MIGA insurance and, thus, more than one guarantee for a given project.
We conducted this performance audit from October 2007 to November 2008,
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
[End of section]
Appendix II: Comments from the Department of the Treasury and GAO's
Evaluation:
Note: GAO comments supplementing those in the report text appear at the
end of this appendix.
Department Of The Treasury:
Washington, D.C. 20220:
November 7, 2008:
Mr. Thomas Melito:
Director, International Affairs and Trade:
Government Accountability Office:
441 G St., NW:
Washington, D.C. 20548:
Dear Mr. Melito:
I welcome the opportunity to comment, on behalf of the Treasury
Department, on the Government Accountability Office's report on
International Environmental Oversight. We found it to be a useful
presentation, and we appreciate the effort your staff put into this
report.
We fully agree with the report's assessment that Treasury has followed
the procedures required by Title XIII of the International Financial
Institutions Act of 1977 through the establishment of a rigorous loan
review process. However, we dispute your claim that our efforts have
little impact. This finding is based on the fact that U.S. opposition
at the World Bank Board is insufficient to block projects from going
forward. However, the report does not take into account Treasury's
efforts behind the scenes to influence project design, which we believe
have yielded benefits. In this regard, we look forward to your second
report on this topic, and anticipate that you will find that U.S.-led
efforts have had a significant impact on the World Bank's environmental
due diligence over the past twenty years. [See comment 1]
We also disagree with your characterization of the interagency process
as one that is limited to weekly meetings, an assertion which does not
reflect the dynamic nature of the process. In fact, the process of
consultations and coordination with other agencies can be quite
intensive, and includes regular engagement among staff. [See comment 2]
That said, your point that the sheer volume of projects and limited
review time review strains USG analytical resources is a valid one. To
manage these strains, Treasury is committed to increased efforts to
provide agencies with earlier warning on environmentally significant
projects. We already provide a 6-12-month pipeline of upcoming MDB
projects to all agencies, but going forward we will incorporate the
pipeline into the weekly discussions. We also now include in the agenda
for the weekly meetings the environment category for each project, in
conformity with your recommendation.
Thank you for the opportunity to review and comment on the draft
report.
Sincerely,
Signed by:
Illegible, for:
Karen Mathiasen:
Acting Deputy Assistant Secretary:
International Finance Development and Debt:
The following are GAO's comments on the U.S. Department of Treasury's
letter dated November 7, 2008.
GAO Comments:
1. Treasury disputed our finding that their efforts have little impact.
While Treasury officials did note that they communicate with World Bank
Group officials informally about projects, Treasury did not provide us
with information to gauge the impact of these communications.
Furthermore, Treasury officials also told us they could not determine
what impact these communications have on project design.
2. Treasury asserted that we characterized the interagency process as
limited to weekly meetings. While we did not specifically state that
the interagency process is limited to the weekly interagency working
group meetings, we have added language to clarify the extent of
interagency communication.
[End of section]
Appendix III: Comments from the United States Agency for International
Development and GAO's Evaluation:
Note: GAO comments supplementing those in the report text appear at the
end of this appendix.
USAID:
From The American People:
U.S. Agency for International Development:
1300 Pennsylvania Avenue, NW:
Washington, DC 20523:
[hyperlink, http://www.usaidgov]:
November 13, 2008:
Mr. Thomas Melito:
Director:
International Affairs and Trade:
U.S. Government Accountability Office:
441 G Street, N.W.
Washington, D.C. 20548:
Dear Mr. Melito:
I am pleased to provide the U.S. Agency for International Development's
(USAID) formal response on the draft GAO report entitled "International
Environmental Oversight: U.S. Agencies Follow Procedures Required By
Law, But Have Limited Impact" (Nov 2008) (09-99).
USAID appreciates the opportunity to comment on the GAO's draft report.
In general, while it is clear a great deal of work went into this
report and GAO has identified some important issues, several key
sections of Title XIII do not appear to have been evaluated or, if they
were, they were not discussed in the report. For example, Section 1304
requires Treasury, in consultation with State and USAID to create a
system for cooperative exchange of information with other interested
member countries on assistance proposals. The overarching objective of
the International Financial Institutions Act (Title XIII) and relevant
sections is "to vigorously promote mechanisms to strengthen the
environmental performance of these banks". The creation or
effectiveness of this system was not discussed, including
recommendations or corrective measures to improve the process to
increase potential impact. [See comment 1]
Detailed commentary on the draft report with proposed recommendations
covering the following areas is enclosed:
* Report Title;
* Timing Constraints;
* Mitigation Measures;
* Section 1307;
* Reviews and Standards of Reviews;
* Tuesday Group;
* GAO draft report recommendation.
Thank you for the opportunity to respond to the GAO draft report and
for the courtesies extended by your staff in the conduct of this
review.
Sincerely,
Signed by:
Sean R. Mulvaney:
Assistant Administrator:
Bureau for Management:
Enclosure: a/s:
Detailed Commentary:
Report Title: The report title is overly expansive since the report
only covers USG oversight of Multilateral Development Banks (MDBs) and
not "international environmental oversight," which is a far broader
issue. In addition, this report focuses only on the World Bank group,
while Title XIII of the International Financial Institutions Act (Title
XIII) applies to all eleven MDBs. [See comment 2]
Timing constraints: The timeline on which GAO bases a number of its
findings starts when the Project Appraisal document is released, which
is usually 1-3 weeks before the Board vote. USAID agrees that this
short timeline is a serious problem for engaging effectively with the
MDBs, especially for loans where a project is already underway and
construction has begun long before the loan comes to a vote. In such
"after the fact" loans, there is limited ability to affect the
environmental impacts of a project.
However, the single focus and reference to this timeline is misleading.
It does not take into consideration the time period leading up to
release of the Project Appraisal document when the project
Environmental Impact Assessment (EIA) has been released to the public
120 days prior to Board vote for World Bank (Bank) projects. Although
it is ideal to engage with the Bank and project sponsors prior to the
finalization of the EIA, USAID believes it is possible to conduct a
worthwhile investigation of the project during the time immediately
following the initial EIA release. This would include review and
analysis of environmental documentation, as well as conducting site
visits and meetings with stakeholders to develop recommendations for
USG engagement with Bank management on project improvements. Obviously
the final USG position would have to wait until the Project Appraisal
document is released, but by engaging earlier, the USG could have a
greater opportunity to discuss recommendations with the Bank. The
Project Appraisal document would then form the basis to determine the
extent to which the recommendations have been considered and integrated
into the project. This early upstream approach has been recommended by
USAID since 2002 with the initial restructuring of Tuesday Group (the
monthly meeting of non-governmental organizations (NGOs) and U.S.
Government agencies, co-chaired by USAID and Bank Information Center to
address MDB project loans and policies). [See comment 3]
Mitigation measures: In several places, the report states that Treasury
supports projects with significant adverse environmental impacts due to
competing priorities and based on the belief that potential impacts can
be mitigated (pages 5, 17, 21). The report implies that Treasury has
the expertise to review the EIAs and determine if the mitigation
measures are appropriate. For example, the report states that "...
USAID and Treasury analyzed in more depth the potential environmental
and social impacts. Because they have different statutory
responsibilities and flexibility within their statutory requirements,
the agencies conduct the reviews and apply criteria differently" (page
4). Without a substantive assessment of the EIA and clear standards of
review it is difficult to determine whether credible analysis was
established against which to determine the scope and scale of
environmental and social impacts and what measures might be needed to
avoid or mitigate impacts. In many cases, information on funding and
third party responsibilities and/or commitments to implement the
mitigation plan are not available as part of the Board's project review
process. Therefore, there is no way to determine if the mitigation plan
will be viable.
These concerns could be addressed on projects that rely on mitigative
measures to reduce environmental impacts to an acceptable level by
requiring that the full funding and commitments for the EIA monitoring
and mitigation plan be made an integral part of the loan amount and the
Bank's internal management plan for the loan. This would also be a
required part of the standard Board review process. [See comment 4]
Section 1307: USAID strongly believes that the intent of the Section
1307 (Pelosi Amendment) is more than just a procedural process. The 120-
day public disclosure period prior to Board vote should be the
opportunity where a fully developed environmental impact assessment,
including adequate alternatives analyses and cumulative and associated
effects analyses, is available to both the public and the member
countries of the MDB to engage in an informed discussion that results
in concrete improvements to the final design. The broader objective of
Title XIII is to improve the environmental performance of the MDBs and
to have EIAs account for cumulative and associated impacts. The EIA is
the foundation for improving environmental performance of bank projects
and by not "vigorously promoting mechanisms to strengthen the
environmental performance of these banks," the intent of Title XIII is
not being achieved. [See comment 5]
The report cited the Uganda (Bujagali) Hydropower project as a project
Treasury supported contrary to USAID's recommendation. Among USAID's
concerns was that the environmental analysis included an inadequate
cumulative impact analysis required under Section 1307 (Pelosi
Amendment) (page 21). It should be noted that the USAID finding that
the environmental analysis was incomplete has since been supported by
the African Development Bank's own Compliance Review and Mediation
Unit.
An example was provided to demonstrate that the Pelosi Amendment can
prevent the US from supporting projects it would otherwise want to
support (page 21). This example was a development project in Iraq which
the USG wanted to support but could not because it did not meet the 120
day disclosure period. This example also illustrates the intent of the
Pelosi amendment to require public disclosure of EIAs in sufficient
time to ensure that affected groups and local nongovernmental
organizations have access to available information.
Reviews and Standards of Review: The report states that Treasury is to
consult with other US agencies to develop environmental impact review
procedures for proposed MDB projects (Section 1307(d)) (page 8). To
USAID's knowledge this has not occurred, as evidenced in the report's
statement that US agencies take various approaches (page 3) and have
different environmental standards when assessing the sufficiency of
environmental impact assessments (page 13).
USAID has found that some EIAs issued by the Banks do not meet any
international standards for EIAs, or domestic ones applied by the
Executive Branch to its own projects, nor even the Banks' own
standards. Omissions of such basic EIA elements as cumulative impacts,
associated facilities impacts, baseline studies, no-action
alternatives, consultation with the affected public including
indigenous peoples, and adaptive management are highly significant and
not merely matters of EIA style.
The report states that USAID may evaluate the environmental impact
assessments of a project during its review (page 13). The majority of
reviews that USAID undertakes are considered under Section 1303 (a),
and as such USAID would like to clarify that it always evaluates the
EIA.
The report states that USAID may meet with stakeholders when performing
site visits (page 14). When USAID undertakes an affirmative
investigation it always meets with as many stakeholders as possible in
order to gain a more complete understanding of the project to be able
to make informed recommendations.
USAID notes that in practice, Title XIII analysis is applied to a
limited number of proposed MDB loans - essentially ones with the
greatest potential for significant adverse environmental and social
impacts. The purpose is to focus finite resources to achieve in-depth
analysis of projects that can serve as examples for the rest of the MDB
projects to follow. Consequently, no conclusions should be drawn from
the numbers in this report on the overall percentage of MDB projects
having significant environmental problems.
We also believe that the report should include recommendations on ways
to harmonize the seemingly disparate review standards being used. [See
comment 6]
Tuesday Group: There are factual errors in the report with respect to
the Tuesday Group (TG). First, Treasury is not a co-chair of Tuesday
Group. USAID and the Bank Information Center (a non-governmental
organization) are the co-chairs. Second, the proposal attributed to
Treasury is inaccurate. The proposal described in the draft report was
agreed upon in 2004 based on consultations with NGOs and U.S.
Government agencies, and was first reported in USAID's MDB Report to
Congress 2002-2004. Please see attachment. Treasury did submit a
different proposal recently, and USAID has provided comments to
Treasury on it. [See comment 7]
GAO draft report recommendation: The recommendation that "the Secretary
of the Treasury, in his capacity as the chair of the Working Group on
Multilateral Assistance, routinely identify all proposals of concern in
advance of working group meetings" may warrant further guidance to more
clearly address the very short lead times for notice to other agencies.
[See comment 8]
Section 5: Annex A:
Reorganization Of Tuesday Group:
Complementing the U.S. government interagency review process is the
Tuesday Group (TG) which is comprised of concerned NGOs and U.S.
Federal agencies. Meeting monthly for more than a decade, it addresses
policies, macroeconomic and project loans of the MDBs. Meetings are
held in Washington and attended by representatives of several agencies
and about 25 NGOs as well as guests from around the world. USAID and
the Bank Information Center (BIC), an NGO serving citizens groups
concerned about MDBs, co chair the meetings. Minutes from the meetings
are shared with about 165 NGOs worldwide.
Proposal for Restructuring Tuesday Group (adopted June 2004):
The objective for restructuring is to ensure TG is a vehicle for
substantive input on the policies and projects of the MDBs. The
restructuring proposal seeks to address several issues raised by TG
participants: informed discussion at TG requires advance circulation of
information; many important MDB issues that deserve TG attention
require more proactive identification and preparation; agenda items
often require more structure to ensure full discussion. The new TG
format will be reviewed after several meetings and is open for further
refinement.
A Steering Committee comprised of USAID, Bank Information Group, the
Department of the Treasury and an NGO to be determined, will confer
monthly to plan the ensuing TG meeting:
* Set agenda for following TG via submitted proposals (NGOs or U.S.
Federal agencies) and by proactively identifying issues and relevant
presenters/responders;
* Use Chatham House Rule;
* Operate via meetings, calls and emails Any differences will be
resolved by the co-chairs (USAID and BIC).
Criteria used by the Steering Committee for determining which submitted
issues are prioritized for in-depth discussion or only as an
announcement:
* Identifiable environmental and social impacts;
* Sustained engagement by project proposer to help achieve objectives;
* Importance of potential implications of the project/policy;
* Leverage TG can bring towards contributing to positive changes with
respect to project/policy.
NGOs and U.S. Federal agencies are to submit a one-page outline of
proposed project/policy issue for initial discussion to TG co-chairs at
least three weeks prior to TG meeting (see timeline below). Format for
one-page submission should identify:
* Project/policy/issue;
* Potential environmental and social impacts;
* Importance of potential implications of the project/policy (e.g. why
discuss this project versus the 1004-category A projects per year that
need to be reviewed?);
* Decision points/timeline for proposed intervention(s);
* Objectives of proposed intervention(s):
- Note: Proposed interventions are directed towards U.S. government or
NGOs and may be different depending on U.S. government entity.
* Groups working on issue.
Presenters of accepted agenda items are to prepare a 2-3 page (maximum)
presentation and submit to TG co-chairs no later than one full week
prior to TG meeting. This will enable TG co-chairs to distribute agenda
and submissions to TG participants at least one full week prior to next
TG meeting. Suggested format for Tuesday Group presentation:
* Background;
* Key Issues;
* Proposed intervention(s)/timeline, including objectives of proposed
intervention(s);
* Proposer's contribution and sustained engagement to help achieve
objectives (i.e. project specific analyses, field outreach, time
commitment).
Supporting documents can also be submitted for distribution.
TG meeting format and discussion:
* Last minute agenda items for emerging issues (for flagging important
developments, not for in-depth discussion);
* Follow up items from previous meetings;
* Discussion moderated by TG co-chairs (BIC or USAID). Purpose of
discussion is to clarify points made in presentation, to offer
additional information, and to facilitate follow-up;
* Minutes will be taken and circulated of meeting.
Follow-up after TG presentation:
* Relevant organizations will communicate among themselves to determine
response to presentation.
* Appropriate organization will inform TG of decision at the next
meeting.
* As required, relevant organization will host separate project
specific meetings.
* As required, project updates will be provided during future TG
meetings.
- Note; TG co-chairs will provide an example of follow-up submission (1
page maximum). Supporting documents can also be submitted for
distribution.
One project will be selected for discussion under Chatham House Rule as
a test case for determining practicality and receptivity for a blanket
adoption of Chatham House Rule at TG. This will require an explicit
agreement by all participants.
Timeline for setting agenda:
* Week 1 -TG meeting;
* Week 2 - Proposed agenda items submitted and Steering Committee makes
decisions;
* Week 3 - Notify presenters so they can prepare document and submit to
TG co-chairs;
* Week 4 - Send out agenda and documents - at least one full week prior
to next TG meeting.
The following are GAO's comments on the U.S. Agency for International
Development letter dated November 13, 2008.
GAO Comments:
1. USAID commented that several sections of Title XIII are not
discussed in the report, such as creating a system for information
exchange with other interested member countries. This is outside the
scope of our report, which focuses on U.S. government efforts to review
the World Bank Group's process for assessing the environmental impact
of projects. We have added language to the report to clarify this
point.
2. USAID commented that our draft report title was overly expansive. In
response, we have changed the title to clarify that our report
addresses certain procedures required by U.S. law.
3. USAID commented that the focus on a short timeline is misleading
because it does not take into consideration the time period leading up
to the release of the project appraisal document. However, Title XIII
does not provide a timeline for when U.S. government agencies should
begin reviewing World Bank Group or other multilateral development bank
proposals. By not specifying a timeline, the legislation leaves it up
to the agencies to determine when they should begin reviewing
proposals. We do note that an April 2008 USAID report to Congress
stated that there are inadequate opportunities to identify, avert, or
mitigate adverse environmental and social impacts associated with
projects even when the banks release the environmental documents 120
days before the board votes. USAID has acknowledged that it can only
use the early, upstream approach to provide a more intensive look at a
limited number of projects.
4. USAID commented that our report implies that Treasury has the
expertise to review environmental impact assessments and determine if
mitigation measures are appropriate. However, we do not comment on
Treasury expertise. Rather, we acknowledge that USAID and Treasury
review documentation for different purposes. We also state that
Treasury is the lead agency in formulating the U.S. government's
position on proposed multilateral development projects, and that its
decisions do not always reflect consensus among agencies or even among
units of the same agencies. While the Pelosi Amendment (Section 1307)
requires that environmental impact assessments contain associated and
cumulative impacts and alternatives to the proposal in order for
Treasury to support a project in a board vote, Treasury is not required
to consider specific mitigating measures in determining how to instruct
the U.S. executive director to vote. Section 1306, a separate law in
Title XIII, requires Treasury to instruct the U.S. Executive Director
to vigorously urge the multilateral development banks to consider other
environmental factors and to circulate to the bank board documents that
include these factors, including mitigating measures. It is beyond the
scope of this report to determine whether mitigation measures have been
effective; we anticipate addressing this issue in our next report,
which will focus on project implementation.
5. USAID strongly believes that the intent of Section 1307 of Title
XIII is to be more than just a procedural process. However, the
specific provisions of Section 1307 that require U.S. government
oversight of the potential environmental and social concerns associated
with proposed World Bank Group projects are primarily procedural in
nature. We revised the report as appropriate in response to this
comment.
6. USAID states that Treasury has not consulted with other U.S.
agencies to develop environmental impact review procedures for
multilateral development bank projects. USAID believes that our report
should include recommendations to harmonize disparate review standards.
However, the law does not require agencies to harmonize review
standards. Therefore, we did not address this issue in this report.
7. USAID commented on several factual errors in the report with respect
to the Tuesday Group. We have revised the report to incorporate the
first point regarding Tuesday Group co-chairs. Regarding the second
point, we characterized the proposal, dating from mid-2008, as it was
described to us by Treasury and the Bank Information Center. Moreover,
in a technical comment regarding this proposal, Treasury did not
dispute its timing. We have added a sentence to an existing footnote
stating that this proposal is very similar to one described in section
5, annex A of USAID's 2002-2004 report to Congress.
8. USAID commented that our recommendation may warrant further guidance
to more clearly address the very short lead times for notice to other
agencies. However, we did not change our recommendation, which was made
to the Secretary of the Treasury. We believe it is up to Treasury to
determine how best to implement the recommendation.
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
Thomas Melito (202) 512-9601 or melitot@gao.gov:
Staff Acknowledgments:
Anthony Moran, Assistant Director; Kay Halpern; Chris Kunitz; RG
Steinman; Christina Werth; and Linda Wong made key contributions to
this report. In addition, Ashley Alley, Debbie Chung, Etana Finkler,
and Joel Grossman provided technical or legal assistance.
[End of section]
Footnotes:
[1] The World Bank Group is comprised of several affiliated but
distinct institutions: (1) the World Bank, which consists of the
International Bank for Reconstruction and Development and the
International Development Association and provides funding primarily to
governments to aid public-sector development; (2) the International
Finance Corporation, which provides financing to the private sector for
projects in developing and transitioning countries; and (3) the
Multilateral Investment Guarantee Agency, which provides political risk
and other insurance to foreign investors in developing countries.
[2] Each member country's vote is weighted according to the country's
contribution to the Bank. While the United States has 16.41 percent of
the vote at IBRD, a majority of all votes is required for a proposal to
pass (IBRD Article V, Section 3).
[3] The executive directors of IBRD serve ex-officio as directors of
IDA and IFC, provided that the country that appoints them or any one of
the countries that elects them is also a member of IDA and IFC. It is
customary for the directors of MIGA also to serve as executive
directors of the World Bank. IFC and MIGA each have slightly fewer
member countries than the World Bank; IFC has 179; MIGA 172.
[4] U.S. Congressional Research Service, Multilateral Development
Banks' Environmental Assessment and Information Policies: Impact of the
Pelosi Amendment (98-180F) (February 1998).
[5] The other U.S. agencies Treasury consults with include the
Department of State, USAID, the Environmental Protection Agency, the
Council on Environmental Quality, the Department of the Interior, and
the National Oceanic and Atmospheric Administration.
[6] These include the extent to which the proposal will contribute to
the sustainable development of the borrowing country, the economic
viability of the proposal, and its impact on public health.
[7] According to Treasury officials, for World Bank projects, once
board documents have been distributed, board procedures provide for a
delay of up to one board meeting, which could be useful in meeting
Pelosi Amendment requirements only if the public disclosure period
falls short by a day or two. For IFC projects, where the IFC-required
disclosure period is 60 days, Treasury officials told us the client's
financing needs typically prohibit shifting from 60 to 120 days to meet
the Pelosi Amendment requirements.
[8] According to this official, the disclosure date is the date the
documentation is posted on the World Bank's Web site. Treasury
officials obtain this date from the Web site, the board document, the
World Bank's Integrated Safeguards Data Sheet, or World Bank Group
staff. They will also look at the local disclosure date, if there is
one. However, since Treasury generally conducts the review shortly
before the board vote, Treasury officials told us they do not have a
way to verify whether the date on the documentation is the date the
documents were actually posted on the Web site.
[9] Treasury officials could not provide the exact number of proposals
they review for the Pelosi Amendment because they do not keep an
ongoing database of Pelosi Amendment reviews.
[10] Treasury officials said they rarely do this because such
deficiencies are seldom identified.
[11] Section 539(e) of Title V of Public Law 99-591 and Section
1303(b)(3) of Title XIII require Treasury to provide an annual report
to Congress on the environmental sustainability of multilateral
development bank operations and the efficacy of U.S. efforts in this
process.
[12] The law requires Treasury to consult with U.S. agencies such as
State, EPA, and USAID in determining whether multilateral development
banks or the borrower provide an environmental assessment or summary
thereof for a proposed project that is likely to have significant and
adverse environmental impacts (22 U.S.C. § 262m-7). In addition,
Treasury regulations specify the actions Treasury and the working group
should take if U.S. government agencies or members of the public have
specific comments on proposed multilateral development projects (31
C.F.R. § 26.4). Such actions include considering whether the
multilateral development bank has assigned the proposed project the
appropriate environmental category, and considering the U.S.
government's position on the project.
[13] These meetings are for U.S. government agencies to address all
mandates and concerns associated with multilateral development bank
projects, not just those associated with the environment.
[14] See USAID's Environmental Procedures, 22 C.F.R. Part 216; The
National Environmental Policy Act of 1969 (NEPA), as amended; CEQ
Regulations for Implementing the Procedural Provisions of NEPA, 40
C.F.R. parts 1500-1508; and CEQ guidance on implementing 40 C.F.R. Part
1500-1508: [hyperlink, http://www.nepa.gov/nepa/regs/guidance.html].
[15] The Treasury official responsible for performing these analyses
stated she may initiate the analyses many months to years before the
proposed project is scheduled for a board vote. She provided
information indicating that Treasury performed four such analyses in
2006 and 2007.
[16] The World Bank, IFC and MIGA each has its own requirements, which
project sponsors must follow when preparing environmental assessments.
For example, the World Bank lays out its requirements for environmental
assessments in its Operational Directive 4.01. The World Bank also has
an environmental assessment guidebook, the Environmental Assessment
Sourcebook, which contains advisable practices that could be employed
when preparing an environmental assessment. The World Bank recommends,
but does not require, that environmental assessments conform to these
advisable practices.
[17] World Bank Environmental Assessment Sourcebook, rev. 1999.
[18] The Tuesday Group is chaired by USAID and the Bank Information
Center, a nongovernmental organization. Treasury regulations require
Treasury to consider all comments made from any member of the public
during the periodic meetings convened by the Bank Information Center
and present summaries to other U.S. government agencies participating
in an interagency working group led by Treasury (31 C.F.R. §
26.4(a)(2)).
[19] In its proposal, Treasury has named only one nongovernmental
organization, the Bank Information Center. A Treasury official said the
agency has yet to identify a second organization to participate in the
proposed steering committee. This proposal is very similar to one
described in section 5, annex A of USAID's 2002-2004 report to
Congress.
[20] In commenting on this report, Treasury officials noted that, as of
October 2008, an open discussion period has been part of the Tuesday
Group meeting format.
[21] Treasury officials noted that, while they do not have the fully
appraised project proposal until about 3 weeks before the board vote
date, they do receive some project information much earlier, through a
6-month "pipeline" notification system that they have asked each
multilateral development bank to prepare. They also stated that they
share this information with other agencies in an ongoing consultation
process prior to the interagency meeting.
[22] According to some agency officials, the board vote date might be
postponed to allow more time for discussion, although this is rare. For
example, according to Treasury officials, IFC management delayed voting
on a paper mill project in Uruguay to allow for an analysis of
cumulative impacts of the two mills that were planned in the project.
However, this was a highly unusual case that was brought to the U.S.
government's attention by a high-level delegation from Argentina, which
would have been affected by the project. According to Treasury
officials, if they need clarification about a project while conducting
a review before a board vote, they will contact World Bank Group
officials to discuss the project. However, if they do not obtain a
response from World Bank Group officials before the board vote date,
Treasury must make a decision based on the information it already has.
[23] According to an expert on the environmental impacts of World Bank
Group projects who worked for several decades as an Environmental
Advisor to the World Bank Group, IFC projects often have additional
financing from the private sector, which allows construction to begin
before the project sponsor applies for or is approved to receive IFC
financing.
[24] This was the most complete data at the time of our analysis.
[25] In commenting on this report, Treasury officials stated that,
while this situation is rare, there have been two multilateral
development bank projects over the past year that were changed
following the circulation of a U.S. statement to the board the night
before the vote indicating that the United States would vote no. These
projects were a World Bank road project in the Philippines and an Asian
Development Bank technical assistance proposal for a feasibility study
of roads through Indonesian national parks.
[26] Treasury officials noted that their agency generally prepares
decision memos for support for highly controversial projects, very
large projects, and all China projects.
[End of section]
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