World Bank

The World Bank lends billions of dollars each year to help countries overcome poverty and promote economic and social progress. The Bank, however, operates in an environment in which countries often lack openness and accountability and corruption sometimes flourishes. The Bank faces the challenge of both providing development assistance under such conditions while also exercising its fiduciary responsibility, including minimizing corruption in the projects it finances. To combat corruption, the Bank has undertaken an ambitious and systematic effort to identify and correct key weaknesses in its management controls. The Bank has made significant strides in meeting each of the five standards of an effective management control system, including (1) strengthening internal oversight mechanisms, project management, and public institutions in borrowing countries; (2) focusing more attention on assessing the risks associated with the corruption and the weak managerial capacity of its borrowers; (3) supervising its projects more closely to ensure that management directives are carried out; (4) monitoring and evaluating the implementation of the Banks' projects; and (5) better disseminating and communicating information on its anticorruption efforts, both within the Bank and in borrowing countries. However, challenges remain and additional action will be required before the Bank can provide reasonable assurances that project money is being spent according to the Bank's guidelines. Overcoming some of these challenge, particularly in building borrower managerial capacity for implementing the Banks' projects, will be onerous and will require a long-term effort because corruption and weak management are often endemic to the economic development environment in which the Bank operates.

GAO noted that: (1) in its efforts to address corruption concerns, the Bank has undertaken an ambitious and systematic effort to identify and correct key weaknesses in its system of management controls; (2) the Bank has made significant progress in meeting each of the five standards of an effective management control system; (3) however, challenges remain and further action will be required before the Bank can provide reasonable assurance that project funds are spent according to the Bank's guidelines; (4) GAO focused on Bank efforts to improve internal oversight mechanisms, project management, and public institutions in borrowing countries; (5) the Bank has added new oversight committees and staff to better monitor Bank operations and borrower procurement and financial management practices; (6) however, many of the public agencies in borrowing countries charged with implementing Bank-financed projects are managerially weak and lack skilled and experienced staff; (7) the Bank has focused more attention on better assessing the risks associated with corruption and weak managerial capacity of its borrowers; (8) however, the risks identified are not always raised to the attention of senior decisionmakers and fully addressed in risk mitigation plans; (9) the Bank has strengthened controls by devoting more attention and resources to supervising its projects more closely; (10) this has included hiring or training local Bank staff or contracting with consultants to review borrower procurement actions more closely; (11) however, the Bank and some borrowers do not always comply with Bank procedures on project auditing and Bank supervision of borrowers' procurement and financial management practices; (12) the Bank has introduced some new tools for monitoring and evaluating the implementation of Bank projects; (13) however, these tools do not provide enough information for Bank management to measure the extent to which some key management control problems are being resolved; (14) the Bank has significantly improved its dissemination and communication of information on its anticorruption efforts, both within the Bank and in borrowing countries; and (15) however, some borrower governments and nongovernmental organizations are still not aware of the Bank's hotline and other mechanisms for reporting fraud and corruption.

Recommendations

Our 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.

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