FY17 World Bank Budget September 22, 2016 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION BUDGET, PERFORMANCE REVIEW AND STRATEGIC PLANNING This document contains forward-looking statements that are based on management’s expectations, estimates, projections, and assumptions. Words such as “proposes,” “plans,” “estimates,” “anticipates,” “intends,” and variations of these words and similar expressions are intended to identify forward-looking statements. Such statements are not guarantees of future performance. As with any projection or forecast, they are inherently susceptible to uncertainty and changes in circumstances, and the Bank is under no obligation to update or alter its forward looking statements, whether as a result of such changes, new information, subsequent events or otherwise. FY17 WORLD BANK BUDGET CONTENTS 1. OVERVIEW AND RECOMMENDATIONS...................................................................................... 1 1.1 OVERVIEW ....................................................................................................................................... 1 1.2 FY17 BUDGET RECOMMENDATIONS ......................................................................................... 2 2. BUDGET SUSTAINABILITY............................................................................................................... 3 2.1 INCREASING BUDGET FLEXIBILITY .......................................................................................... 3 2.2 EXPENDITURE REVIEW ................................................................................................................. 4 3. FY17-19 BUDGET FRAMEWORK ..................................................................................................... 6 3.1 ADMINISTRATIVE BUDGET PROPOSAL .................................................................................... 6 3.2 SOURCES AND USES OF FLEXBILITY ........................................................................................ 6 3.3 BUDGET ALLOCATIONS BY UNITS ............................................................................................ 8 3.4 NON-UNIT SPECIFIC ALLOCATIONS ........................................................................................ 12 3.5 EXPENSE FUNCTIONAL VIEW ................................................................................................... 15 3.6 CAPITAL BUDGET ........................................................................................................................ 17 4. BUDGET ALLOCATIONS TO WORK PROGRAMS .................................................................... 19 4.1 COUNTRY ENGAGEMENT WORK PROGRAM ......................................................................... 19 4.2 GLOBAL ENGAGEMENT WORK PROGRAM ............................................................................ 21 5. ENHANCING THE BUDGET FRAMEWORK ................................................................................ 23 ANNEXES ANNEX I: PROGRAM COST SUMMARY.............................................................................................. 25 ANNEX II: CAPITAL BUDGET ............................................................................................................... 28 TABLES Table 2.1: Expenditure Review Total Savings Estimates, May 2016 (FY18 US$ million)......................... 4 Table 3.1: FY17 Sources of Flexibility (US$ million) ................................................................................ 6 Table 3.2: FY17 Uses of Flexibility (US$ million) ..................................................................................... 8 Table 3.3: FY17-19 Budget by Work Program and Funding Source (US$ million) ................................... 9 Table 3.4: FY17-19 Budget Share by Work Program and Funding Source ................................................ 9 Table 3.5: FY17-19 Operational Budget Envelopes (US$ million) ........................................................... 10 i FY17 WORLD BANK BUDGET Table 3.6: FY17-19 IG&A Budget Envelopes (US$ million) ................................................................... 11 Table 3.7: Centrally-Managed Accounts (US$ million) ............................................................................ 12 Table 3.8: Projected Contributions to Staff Retirement and Related Plans (US$ million) ........................ 13 Table 3.9: FY16 and FY17 Board-Related Budgets (US$ million) ........................................................... 14 Table 3.10: Grant-making Facilities Budgets (US$ million) ..................................................................... 14 Table 3.11: FY17 Functional Expense View of Administrative Expenses (All Sources - US$ million) .. 16 Table 3.12: Capital Program Summary - Investment Schedule FY17-19 (US$ million) .......................... 17 Table I.1: FY17-19 Funding for WB Work Program and Unit (US$ million) .......................................... 25 Table I.1 (Continued) ................................................................................................................................. 26 Table I.2: Overview of External Funds Projected Revenues FY16-FY19 by Unit (US$ million) ............ 27 Table II.1: Capital Program Summary - Investment Schedule FY17-19 (US$ million)............................ 28 Table II.2: Technology & Systems –Total IT Depreciation FY17-19 (US$ million) ................................ 31 Note: Totals in the tables may not add up due to rounding. FIGURES Figure 3.1: Full-time Bank Staff on Payroll .............................................................................................. 17 Figure 4.1: Evolution of the Country Engagement Budget from FY16 to FY17 (US$ million) ............... 19 Figure 4.2: FY15 to FY17 Changes in WPA Plans (US$ million) ............................................................ 20 Figure 4.3: Allocations to FCS (US$ million) ........................................................................................... 21 ii FY17 WORLD BANK BUDGET ACRONYMS ASA Advisory Services and Analytics AFR Africa Region BETF Bank-Executed Trust Fund BPS Budget, Performance Review, and Strategic Planning CCSAs Cross-Cutting Solution Areas CE Country Engagement CGIAR Consultative Group for International Agricultural Research CMA Centrally-Managed Account CPF Country Partnership Framework EAP East Asia and Pacific Region ECR External and Corporate Relations ECA Europe and Central Asia Region EFO Externally Financed Output FCS Fragile and Conflict-Affected Situations GE Global Engagement GSD General Services Department HRD Human Resources Department IBRD International Bank for Reconstruction and Development IDA International Development Association IEG Independent Evaluation Group IFC International Finance Corporation IG&A Institutional, Governance, and Administrative ITS Information & Technology Solutions LCR Latin America and Caribbean Region MD Managing Director MIGA Multilateral Investment Guarantee Agency MNA Middle East and North Africa Region OPCS Operations Policy and Country Services PCRF Post-Retirement Contribution Reserve Fund PCS Program Cost Summary PPM Program and Practice Management RAS Reimbursable Advisory Services SAR South Asia Region SBO Strategy and Business Outlook SCD Systematic Country Diagnostic SPF State and Peace-Building Fund TRE Treasury VPU Vice Presidential Unit WBG World Bank Group WPA Work Program Agreement iii FY17 WORLD BANK BUDGET 1. OVERVIEW AND RECOMMENDATIONS This document, which supports the final engagement with Executive Directors in this year’s planning discussions, presents the FY17 World Bank Budget for Board approval. This budget proposal reflects close consultations between Executive Directors and Management throughout the strategic planning, budgeting and performance management process for the World Bank Group. 1.1 OVERVIEW 1. Business growth together with the combination of revenue increase and expenditure reduction measures implemented in the past few years have strengthened the Bank’s long-term financial position, but short-term constraints remain. The Bank has been able to deliver on higher lending commitments and supervise a growing portfolio without a commensurate growth in budget as a result of leverage, pricing, and Expenditure Review (ER) measures approved by the Board. Nevertheless, FY17 remains financially constrained with revenue growth and budget cuts only partially offsetting the adverse impact of low interest rates. 2. Implementation of Expenditure Review measures is on track to achieve its goals by FY18. World Bank Group savings could reach slightly above US$400 million, of which the Bank will yield about US$340 million. Business reviews of Institutional, Governance, and Administrative units (IG&A) are also being conducted to reinforce and embed value for money and continuous improvement practices. The emerging financial flexibility is timely as demand for Bank’s financing is expected to remain robust. 3. Management is proposing a budget for FY17 of US$2,524 million. While the proposed aggregate amount remains constrained and is US$6 million (0.2 percent) lower than the Board-approved FY16 WB Budget, Management believes that through reallocations it will also be able to fund the growing demand for services both in scale and scope from our clients. 4. Management plans to implement the following key budget priorities:  Channel the majority of budget flexibility to operations, in particular to increased country engagement envelopes to address, among other things, expanding activities in IDA countries, gender, climate change, Fragile and Conflict-Affected Situations (FCS), social and environmental safeguards, fiduciary standards, and refugees;  Further streamline the Advisory Services and Analytics (ASA) portfolio to optimize knowledge services and unlock additional resources for lending and supervision activities;  Strengthen the new categorization and governance process for Global Engagement funding;  Conduct business reviews of the Human Resources Department, External and Corporate Relations, and Internal Audit Department in FY17;  Continue implementing external funds management enhancements to increase cost recovery, improve governance, and lower transaction costs; and 1 FY17 WORLD BANK BUDGET  Develop and engage with the Board on key principles on allocating resources arising from Budget Anchor space anticipated in FY18 and onward. 1.2 FY17 BUDGET RECOMMENDATIONS 5. Management seeks Board approval of the following FY17 Budget recommendations:  That the total administrative budget (Bank Budget) be set at US$2,524 million, managed within a range of +/- 2 percent. This includes:  Board-related FY17 funding: o An indicative budget of US$79.0 million for Executive Directors; o US$12.7 million for Board of Governors, Development Committee, and Inspection Panel; and o US$15.5 million for the Corporate Secretariat.  That the capital budget be set at US$210 million.  That the catch-up contribution of US$16 million to the Post-retirement Contribution Reserve Fund (PCRF), deferred from FY15 to FY17, be further deferred to FY18. The PCRF is distinct from Staff Retirement Plans (SRP), and is established for the purpose of managing budget volatility arising from Bank’s contributions to SRP. Therefore, the deferment has no impact on the Bank’s contributions to SRP, which are based on actuarial recommendations.  That the revised IBRD/IDA cost attribution methodology (as set out in Section 3.4), which more fairly distributes costs between both institutions, be implemented for IBRD and IDA for FY17 and beyond. 2 FY17 WORLD BANK BUDGET 2. BUDGET SUSTAINABILITY This section discusses the main determinants of the size of the overall expenditure envelope as a result of the institution’s financial outlook in the context of the financial sustainability framework and the implementation of the Expenditure Review. 2.1 INCREASING BUDGET FLEXIBILITY 6. Budget sustainability measures as monitored through Budget Anchors1 have placed the Bank on firmer financial footing. New loan pricing and Expenditure Review (ER) measures would potentially help the Bank meet its administrative budget needs without recourse to equity related earnings by FY18. 7. A strong and financially sustainable Bank is critical to maintaining relevance and achieving the aspirations of shareholders articulated as part of the ongoing “Forward Look” exercise.2 The goal of leveraging more external resources can only be achieved if the Bank is able to fully use its capital and income to respond to client demand for high and sustainable financing volumes. Secondly, the goal of remaining “fit for purpose” requires sufficient budget space to enable prudent reinvestment in priorities; delivery of uninterrupted high-quality services to clients; fulfillment of additional demand for IDA financing; and flexibility in responding to the emerging development challenges. In line with demand, both IDA and IBRD financing pipelines would need to be properly funded in preparation for FY18. 8. Despite expected improving revenue conditions, the Budget Anchor space is still susceptible to potential shortfalls in loan spread income and external funds. Therefore, Management will continuously identify further flexibilities within the budget framework, ensure ER measures are on track and business reviews performed as scheduled, and monitor the availability and use of external funds. 9. Notwithstanding business growth and expanded scope of activities, Management has carefully calibrated proposed trajectory adjustments to maintain budget discipline. The FY17 WB Budget proposal preserves past efficiency gains, and better aligns the budget with work program requirements and demand trends. In addition, the proposal, together with indicative outer year planned trajectories (as detailed in the next section), were formulated taking into account the following key principles: 1 The Bank has two Budget Anchors that define its budget sustainability rules. For IBRD, budget sustainability means, in the medium-term, IBRD expenses do not exceed loan spread income (after waivers); and for IDA, budget sustainability means that IDA expenses do not exceed IDA revenue from service charges, while minimizing recourse to the commitment charge. 2 The Forward Look exercise is an initiative undertaken by Board and Management to discuss and develop action plans on how the World Bank Group would remain “fit for purpose” in addressing ambitious sustainable development goals by 2030. 3 FY17 WORLD BANK BUDGET  Identify flexibility (additional resources) within the existing budget framework as a first resort to fund new needs. Total resources identified in FY17 was US$108 million.3  Channel resources to Country Engagement allocations with emphasis on strengthening IDA delivery and FCS engagements; reinforcing practice management; adequately funding fiduciary and safeguards; and encouraging selectivity in the ASA portfolio while optimizing global engagement allocations; maintaining CGIAR support pending alternative funding options; containing IG&A budgets. As a result of the additional flexibility mentioned above, their deployment in favor of operations, and tight restraint of IG&A budgets, the amount channeled to operations (including from proposed trajectory addition) was US$119 million. 2.2 EXPENDITURE REVIEW 10. Expenditure Review measures and ongoing business reviews support implementation of Budget Anchors. The program is on track and broadly delivering as planned, as shown in Table 2.1 below. To further enhance resource management, the Bank has conducted reviews of five Institutional, Governance, and Administrative (IG&A) units with more planned in FY17 and beyond to eventually cover all IG&A units. Other efforts to identify more efficient and effective ways of managing the business will continue as Management seeks to preserve the gains, and to create more internal budget flexibilities that can be redeployed to emerging priorities or allowed to flow through net income to reserves under prudent management of expected Budget Anchor space. Table 2.1: Expenditure Review Total Savings Estimates, May 2016 (FY18 US$ million) LATEST WBG IBRD/IDA Ref: June ESTIMATES IFC MIGA 2015 TOTAL o/w BB o/w BETF MAY 2016 Immedi a te Mea s ures 110 126 96 71 25 29 1 Group-Wi de Mea s ures 54 40 29 24 5 11 1 Fi na nce, Tech & Corpora te 84 81 72 71 1 9 0 Opera tions 100 100 96 96 - 4 - Addi tiona l Mea s ures 48 54 42 33 9 12 0 Total 397 402 335 295 40 66 1 Boa rd Rel a ted Sa vi ngs 8 8 6 6 - 2 0 TOTAL 404 409 340 300 40 68 1 Note: Numbers ha ve moved a cros s pa cka ges from the WB FY17-19 SBO due to re-cl a s s i fi ca tion, but total s rema i n the s a me. 11. The Expenditure Review is projected to deliver slightly above US$400 million in savings across the World Bank Group. These savings constitute targeted reductions against an "Everything–Else– 3 “Flexibility” in this context is defined as the difference between the resources available (Bank Budget trajectory as agreed in the FY16 Budget Document plus forecasted increase in revenues) and the resources already programmed (i.e., already factored in units’ budget trajectories). 4 FY17 WORLD BANK BUDGET Being–Equal” baseline budget projection4 beginning in FY15. A recent Internal Audit (IAD) review confirmed that Management has instituted an effective governance framework to oversee the ER implementation, and to realize the program’s goals by FY18. 4 The “Everything–Else–Being–Equal” baseline budget is inflation adjusted, and its trajectory reflects prevailing budget assumptions prior to the implementation of the ER program. The ER savings represent the total difference between this baseline, and the current proposed budget trajectories that fully incorporate the ER measures. 5 FY17 WORLD BANK BUDGET 3. FY17-19 BUDGET FRAMEWORK This section presents the specifics of the FY17 administrative budget proposal, including use of budget flexibility, allocations by work program, unit type, and operational unit, as well as an expense line view. It also includes a discussion of non-unit specific accounts and budgets, and the capital budget. 3.1 ADMINISTRATIVE BUDGET PROPOSAL 12. After careful consideration of the impact of the proposed budget trajectory adjustment on financial sustainability, Management seeks approval of a FY17 WB Budget of US$2,524 million. The total FY17 envelope including external funds is expected to be around US$3,871 million. The proposed Budget is US$6 million lower than last year’s Board approved budget of US$2,530 million (although it represents a US$75 million addition to the indicative FY17 budget trajectory in the FY16 WB Budget). 3.2 SOURCES AND USES OF FLEXBILITY 13. The total FY17 budget flexibility amounts to US$183 million. This amount includes US$108 million of internal flexibilities (as explained in paragraph 9) and US$75 million from the proposed trajectory increase over the indicative FY17 trajectory presented in the FY16 WB Budget. Table 3.1: FY17 Sources of Flexibility (US$ million) WB Flexibility Available for FY17 (US$ million) - BB Only Budget A = Budget Tra jectory per FY16 WB Budget 2,449 B = Progra mmed res ources 2,419 C = A-B = Ini tia l Budget Fl exi bi l i ty 30 D = Addi tiona l cos t recovery 17 E = Addi tiona l ER Sa vi ngs 11 F = Del a y i n PCRF ca tch-up contri bution 16 G = Other s a vi ngs i dentifi ed 34  Regi ons PPM reba l a nci ng 12  Re-orga ni za tion Cha nges 1 20  ICSID Cl a wba ck 2 H = (C+D+E+F+G) Total Internal Flexibility identified 108 I = Proposed increase in trajectories 75  IBRD 26  IDA 49 K = Total Flexibility (H+I) 183 1 Of this, US$6 million is earmarked in FY17 (to CE) for Equitable Growth, Finance and Institutions. 6 FY17 WORLD BANK BUDGET 14. The total flexibility of US$183 million for FY17 was distributed based on the proposed budget actions described below. Overall, for unit allocations, US$119 million (65 percent of the total) will go toward supporting operations and only US$39 million (21 percent of the total) to support IG&A units (refer to Table 3.2 below). Operations  Country engagement (CE): US$58 million increase in country engagement trajectory in FY17 with resources allocated to address the growing demand for IBRD and IDA activities. Implicit in the allocations to IBRD and IDA are the effect of the increase in lending preparation and supervision average cost coefficients in order to fund expanding work scope and encourage more selectivity.  Program and practice management (PPM): US$41 million increase in program and practice management trajectory in FY17 with resources allocated to fund operational effectiveness, including greater decentralization of Global Practices staff to the field.  Grant-making Facilities (GMF): In line with last year’s decision, US$20 million has been added to the FY17 trajectory to ensure minimum transfers of US$ 30 million to the Consultative Group for International Agricultural Research (CGIAR) while alternative options are being explored. IG&A Units  Security costs: US$5 million to further bolster security and safety measures at headquarters and country offices.  External funds policy changes: US$5 million to compensate IG&A units that are no longer able to directly charge certain costs to external funds, but instead receive a regular budget allocation. There are still a few units that continue to charge staff costs to trust funds (e.g. to Financial Intermediary Fund Secretariats & Trustees).  ITS operations and maintenance costs: US$15 million largely to support capital projects that have already been approved and are being implemented.  Support to senior corporate staff: US$6 million to fund executive and senior management offices.  IDA+ and operational support: US$6 million allocated for IDA+ (US$3 million), and to units that provide support to operational units (US$3 million), including operational procurement and safeguard reforms.  Other allocations: US$2 million to various governance units to handle increased initiatives under HR programs. Centrally Managed Accounts  In addition to the US$4 million allocated to depreciation, another US$1 million was deemed necessary following technical revisions to asset classes and project completion dates.  Furthermore, another US$8 million released from internal efficiency efforts has been set aside for possible additional costs. Corporate Contingency  Additional US$2 million has been has been set aside to address unforeseen contingencies. 7 FY17 WORLD BANK BUDGET Table 3.2: FY17 Uses of Flexibility (US$ million) WB Proposed Uses of Flexibility for FY17 (US$ million) - BB Only Budget A = Country Enga gement 58 B = PPM 41  Global Practices July 2015 Adjustment 25  Span of Control 8  Decentralization of GP staff 8 C = Gra nt Ma ki ng Fa ci l i ties 20 D = Total Operations (A+B+C) 119 E = Corpora te Contingency 12 F = IG&As 39  Security 5  Compensation for TF Policy Change 5  ITS O&M 15  EXC/MD/SVP Group 6  IDA+ 3  Support to Operations 3  Governance units increased case loads 1  Staff support (health & safety/visa program/gender) 1 G = Centra l l y Ma na ged Accounts 13  Depreciation 5  Other Costs 8 H = Una l l oca ted Fl exi bi l i ty - I = Corporate Contingency, total IG&A and Central Accounts (E+F+G+H) 64 J = Total Uses of Flexibility (D+I) 183 Operations as Share of Total Uses of Flexibility 65% 3.3 BUDGET ALLOCATIONS BY UNITS 15. The total administrative budget by work program and units reflect management’s decisions and guidance received from the Board during the FY17-19 strategic planning process. Table 3.3 below presents the budget breakdown as a result of these interactions and the key budget actions on the use of the flexibility mentioned above: 8 FY17 WORLD BANK BUDGET Table 3.3: FY17-19 Budget by Work Program and Funding Source (US$ million) BB All Funds FY16 FY16 FY17 FY18 FY19 FY17 FY18 FY19 WB Budget WB Budget CLIENT ENGAGEMENT 639 674 721 766 1,376 1,465 1,516 1,568 Country Enga gement 562 601 648 692 1,132 1,218 1,272 1,321 Gl oba l Enga gement 78 73 73 74 244 247 244 247 Program & Practice Management 572 602 610 630 657 699 708 728 Total Operational Units 1,211 1,276 1,331 1,395 2,033 2,164 2,224 2,296 Grant Making Facilities 68 44 30 25 68 44 30 25 Total Operations 1,279 1,320 1,361 1,420 2,101 2,208 2,254 2,321 IG&A PROGRAMS 1,023 981 997 1,024 1,313 1,246 1,261 1,291 Ins titutiona l Servi ces 423 362 369 374 593 505 513 520 Governa nce Servi ces 188 199 204 209 204 217 221 226 Admi ni s tra tive Servi ces 412 420 423 441 515 524 527 546 TOTAL: ALL UNITS 2,302 2,301 2,357 2,444 3,414 3,454 3,515 3,612 TOTAL: ALL UNITS (excl. GMFs) 2,234 2,257 2,327 2,419 3,346 3,410 3,485 3,587 CENTRALLY MANAGED ACCOUNTS 392 407 364 385 455 418 376 397 o/w Una l l oca ted Fl exi bi l i ty - - 1 19 - - 1 19 Corpora te Conti ngency 10 12 12 15 10 12 12 15 TOTAL TRAJECTORY 2,694 2,708 2,722 2,829 3,868 3,871 3,891 4,010 o/w Funded by Externa l Funds 164 184 196 207 1,338 1,347 1,365 1,387 Net Trajectory Funded by IBRD/IDA 2,530 2,524 2,526 2,622 2,530 2,524 2,526 2,622 16. The relative share of the Bank Budget (BB) allocated to operational units and programs (excluding GMF) increases from 54 percent to 57 percent between FY16 and 17, and is projected to rise to 58 percent in FY19 (refer to Table 3.4 below). The same increasing trend applies when all funds are considered. In the same way, the relative share of the CE envelope would rise from 25 percent to 27 percent in FY17 and continue upward to 29 percent in FY19. On the other hand, the IG&A units’ share is planned to fall from 46 percent to 43 percent and eventually to 42 percent. Table 3.4: FY17-19 Budget Share by Work Program and Funding Source BB All Funds FY16 FY16 FY17 FY18 FY19 FY17 FY18 FY19 WB Budget WB Budget CLIENT ENGAGEMENT 29% 30% 31% 32% 41% 43% 43% 44% Country Enga gement 25% 27% 28% 29% 34% 36% 36% 37% Gl oba l Enga gement 3% 3% 3% 3% 7% 7% 7% 7% Program & Practice Management 26% 27% 26% 26% 20% 20% 20% 20% Total Operational Units 54% 57% 57% 58% 61% 63% 64% 64% IG&A PROGRAMS 46% 43% 43% 42% 39% 37% 36% 36% Ins titutiona l Servi ces 19% 16% 16% 15% 18% 15% 15% 14% Governa nce Servi ces 8% 9% 9% 9% 6% 6% 6% 6% Admi ni s tra tive Servi ces 18% 19% 18% 18% 15% 15% 15% 15% TOTAL: ALL UNITS (excl. GMFs) 100% 100% 100% 100% 100% 100% 100% 100% 9 FY17 WORLD BANK BUDGET 17. The Country Engagement (CE) allocation to all regional units will increase over the next three years (refer to Table 3.5). Allocations to Africa and the South Asian regions reflect management’s commitment to IDA countries and operations. As a result of some adjustments made to PPM budgets, management staffing and decentralization of staff to the field, Global Practices (GPs) and Cross-Cutting Solution Areas (CCSAs) units would have better calibrated PPM budgets. Table 3.5: FY17-19 Operational Budget Envelopes (US$ million) BB All Funds FY16 FY17 FY18 FY19 FY16 FY17 FY18 FY19 WB Budget WB Budget AFR CE 189 207 221 241 366 403 419 441 PPM 113 107 110 113 115 111 113 116 Tota l 302 315 331 354 481 513 532 557 EAP CE 80 84 96 102 186 180 193 201 PPM 55 54 55 56 57 55 57 58 Tota l 135 138 151 159 243 236 250 259 ECA CE 75 78 82 85 144 154 159 163 PPM 55 58 58 60 57 59 60 61 Tota l 130 135 141 145 201 213 219 225 LCR CE 86 89 93 96 144 143 148 151 PPM 51 49 50 52 52 50 51 52 Tota l 136 138 143 147 196 193 199 204 MNA CE 50 51 55 57 121 149 154 157 PPM 34 33 32 33 35 38 38 39 Tota l 84 84 87 90 155 187 192 195 SAR CE 83 93 102 110 171 189 199 208 PPM 51 48 48 49 51 49 50 51 Tota l 133 141 149 159 222 239 248 259 All Regions CE 562 601 648 692 1,132 1,218 1,272 1,321 PPM 358 349 354 362 367 363 369 377 Total for Regions and All CE 920 950 1,003 1,054 1,499 1,581 1,641 1,698 GP/CCSA GE GE 78 73 73 74 244 247 244 247 Tota l 78 73 73 74 244 247 244 247 GP/CCSA PPM Equitable Growth, Finance and Institutions 59 72 72 76 59 84 85 89 Human Development 31 37 37 39 31 45 45 47 Sustainable Development 75 84 85 88 75 105 106 110 GP Front Offices and CCSA 1,2 50 61 61 64 126 101 102 106 Total GP PPM 214 253 256 267 290 336 339 352 Total GP/CCSA 291 326 328 342 534 583 583 599 Operational Grant Making Facilities 3 68 44 30 25 68 44 30 25 Total Operations 1,279 1,320 1,361 1,420 2,101 2,208 2,254 2,321 1 Includes externally assigned benefits for all GPs/CCSA staff. 2 External Funds were not classified by GP VPUs for FY16 and therefore show against GP front offices. 3 Consists of US$14 million State and Peace-Building Fund (SPF) and US$30 million CGIAR BB funding in FY17. In FY16, Global Partnership for Social Accountability (GPSA) and Development Grant Facility (DGF) were also funded. 10 FY17 WORLD BANK BUDGET 18. External Funds (EFs) continue to be an important source of funding in operational units. Close to 85 percent of the total EFs expected in FY17 (US$617 million for CE) was also integrated in work program agreement conversations between Regions and Global Practices. EFs are managed and monitored in conjunction with Bank Budget so as to provide full costs of delivering products and services. 19. The IG&A units allocation would fall by 4 percent from US$1,023 million to US$981 million between FY16 and 17 with a slight increase of 2 percent per annum in the next two years (refer to Table 3.6 below). The declining FY16-17 trajectory factors in Expenditure Review related reductions, and the integration of certain functions into other operational and IG&A units. Table 3.6: FY17-19 IG&A Budget Envelopes (US$ million) BB All Funds FY16 FY16 FY17 FY18 FY19 FY17 FY18 FY19 WB Budget WB Budget 1.0 Institutional Services 1.1 Budget, Performance & Strategy 75 69 72 73 78 69 72 73 1.2 Chief Risk Office 12 13 14 13 13 14 15 13 1.3 Development Economics 49 47 48 48 87 94 96 96 1.4 Development Finance 20 22 22 23 58 60 59 60 1.5 External & Corporate Relations 44 35 36 36 57 37 38 39 1.6 Global Environment Fund - - - - 35 32 32 33 1.7 ICSID 2 - - - 2 - - - 1 1.8 Leadership, Learning & Innovation 48 - - - 65 - - - 1.9 Legal Services 31 32 33 33 32 34 34 35 1.10 Operational Policy & Country Services 43 45 45 46 44 46 46 47 1.11 Treasury 62 59 60 61 77 75 76 78 1.12 WBG Finance & Accounting 38 38 39 40 45 44 45 46 Sub-Total 423 362 369 374 593 505 513 520 2.0 Governance Services 2.1 Administrative Tribunal 2 2 2 2 2 2 2 2 2.2 Boards 90 92 94 96 90 92 94 96 2.3 Conflict Resolution System 4 4 4 5 5 7 6 6 2.4 Corporate Secretariat 15 15 16 16 16 17 17 17 2.5 Independent Evaluation Group 26 26 28 28 35 35 37 38 2.6 Integrity Vice Presidency 18 18 19 19 19 19 19 19 2.7 Internal Audit 8 8 8 8 10 10 10 11 2.8 Office of Ethics and Business Conduct 5 7 7 7 6 9 9 9 2.9 Office of the President 8 7 7 7 8 7 7 7 2.10 Office of Suspension & Debarment 1 2 2 2 1 2 2 2 2 2.11 Managing Directors 10 16 17 17 10 16 17 17 2.12 Sanctions Board 2 2 2 2 2 2 2 2 Sub-Total 188 199 204 209 204 217 221 226 3.0 Administrative Services 3.1 General Services and Facilities 131 138 143 147 176 176 181 185 3.2 Human Resources 48 57 58 60 61 70 71 72 3.3 Information & Technology Solutions 233 225 222 235 279 277 276 289 Sub-Total 412 420 423 441 515 524 527 546 TOTAL INSTITUTIONAL, GOVERNANCE & ADMIN. 1,023 981 997 1,024 1,313 1,246 1,261 1,291 1 LLI has been integrated into other operational and IG&A units. 2 Also includes the transfer of the New York and Geneva offices. 11 FY17 WORLD BANK BUDGET 3.4 NON-UNIT SPECIFIC ALLOCATIONS Centrally-Managed Accounts 20. In addition to unit specific budgets, the administrative budget includes a number of Centrally- Managed Accounts (CMA) that consolidate expenses not easily attributable to specific units, as well as Institutional Programs, typically managed by units but for which Management maintains discretion over the budget (refer to Table 3.7 for details).  Recoveries due to internal transfer pricing are expected to increase by US$17 million (3 percent) over FY16 primarily due to Staff Benefits recoveries from units and increases in external funds indirect rate recoveries.  Centrally-Managed Depreciation is expected to increase by US$21 million (28 percent) over FY16 primarily due to an increase in Centrally-Managed Depreciation.  Funding for Institutional Programs is increasing by US$3 million (3 percent) mainly due to increases in HQ Real Estate Strategy expenses and corporate liability insurance costs.  Earmarked funding will increase by US$7 million (39 percent) over FY16 due to new allocations for the HQ Office utilization project and evacuation costs.  Centrally-Managed Staff Benefits expenses are expected to stay flat with Staff Retirement Accounts expected to increase by US$13 million while Centrally-Managed Benefits are expected to decrease by a similar amount.  Corporate Contingency is set at US$12 million in FY17. Table 3.7: Centrally-Managed Accounts (US$ million) FY16 FY17 $ Change % Change WB Budget Budget Recoveries (596) (613) (17) 2.9% Centrally-Managed Depreciation 75 96 21 27.7% Institutional Programs 105 108 3 3.0% Earmarked Funding 18 25 7 38.6% Centrally-Managed Staff Benefits 780 779 (1) -0.1% HRD-Ma na ged Staff Benefi ts 246 233 (13) -5.1% Ta x Al l owa nces 123 122 (1) -0.8% 1 Staff Retirement Accounts a nd PCRF 411 424 13 3.1% Corporate Contingency 10 12 2 20.0% Total 392 407 15 3.8% 1 Post-Retirement Contribution Reserve Fund 12 FY17 WORLD BANK BUDGET Staff Retirement and Related Plans 21. The Bank’s contributions to the staff post-retirement plans are based on actuarial recommendations approved by the Pension Finance Committee (PFC). FY17 contributions are expected to increase to US$363 million from US$349 million in FY16. This change is driven by a slight increase in the contribution rate to 29.99 percent from FY16’s rate of 29.87 percent, as well as by the projected impact of changes in salaries. Total Staff Retirement Plan costs, comprising contributions to the plans and contributions to the Post-Retirement Contribution Reserve Fund (PCRF) will increase from US$409 million projected in FY16 to US$424 million in FY17 (refer to Table 3.8 below). 22. The PCRF was established in FY13 as a budget stabilization tool to reduce budget volatility in the event of large extraordinary contributions to the staff post-retirement plans in any given year. It is important to note that the PCRF is distinct from staff retirement plans that the Bank contributes to separately based on actuarial recommendations. The Reserve Fund is built by taking the excess between the actual contribution rate recommended by the actuaries and a 35 percent of net salaries rate set by the Bank itself. The balance of the Fund is expected to be US$181 million at the end of FY17. 23. In FY15, a recommendation was approved by the Board to reduce the contribution to the Fund by US$16 million in light of constrained budget flexibility and to defer the payment to FY17. The constrained financial situation anticipated in FY17 will make it a challenge to absorb the FY15 deferral amount of US$16 million. Therefore, a recommendation is being made to the Board to delay the US$16 million reserve contribution from FY17 to FY18 when increased budget flexibility is expected. With the exception of FY15, the full 35 percent contribution rate has been maintained every year including FY17 to build up the Reserve Fund. Table 3.8: Projected Contributions to Staff Retirement and Related Plans (US$ million) FY16 FY17 FY18 FY19 (Proj.)3 Staff Retirement Accounts Contribution 1 349 363 354 365 2 Post-Retirement Contribution Reserve Fund Contribution 60 61 101 89 Total Contribution 409 424 455 454 Post-Retirement Contribution Reserve Fund Balance 120 181 282 371 1 Contribution Rate Projections are based on 2016 Actuarial Valuations – Approved May 9, 2016. 2 Consistent with the actuarial review process for the pension plan, PCRF review should occur every 5 years, subsequent to each SRP experience review. The review process would involve the following areas: (a) target contribution rate, (b) size and outlook of the PCRF, and (c) investment policy and governance arrangements. Please refer to “Smoothing Budgetary Contributions to the Post-Retirement Benefits Plans: Establishment of a Post- Retirement Contribution Reserve Fund” (June 8, 2012) for further details. 3 Note FY16 figures are projected actuals (not Budget). 13 FY17 WORLD BANK BUDGET Board-related Budgets 24. The FY17 WBG Budget for the Boards, SEC, and IEG is expected to grow by 1 percent in FY17. The FY17 budget for Executive Directors is subject to the decisions of the Joint Committee on Remuneration and approval by the Board of Governors (refer to Table 3.9 for details). Table 3.9: FY16 and FY17 Board-Related Budgets (US$ million) FY16 FY17 $ Change % Change WB Budget Executive Di rectors (EDs ) 77.1 79.0 2.0 3% Boa rd of Governors (BDG) 7.5 7.3 (0.2) -3% DC Secreta ri a t (DCS) 1.8 1.7 (0.0) -2% Ins pection Pa nel (IPN) 3.8 3.6 (0.1) -3% 1 Total Boards 90.1 91.7 1.6 2% SEC 15.5 15.5 0.0 0% IEG 33.9 34.2 0.2 1% IEG Reimbursables (7.5) (7.9) (0.4) 5% Total 132.0 133.4 1.4 1% 1 The Boards and SEC work programs are fully funded by the Bank Budget independent of any cost sharing revenues received from IFC/MIGA. Therefore, funding from Reimbursables is shown only for IEG. Grant-making Facilities 25. Management remains committed to previously discussed transition plans for Grant-making facilities. The Board approved trajectories for Grant-making facilities are shown in Table 3.10 below. Table 3.10: Grant-making Facilities Budgets (US$ million) FY15 FY16 FY17 FY18 FY19 State and Peace-Building Fund (SPF) 25 21 14 TBD TBD Development Grant Facility (DGF) 33 12 - - - Global Partnership for Social Accountability (GPSA) 5 5 - - - Consultative Group for International Agricultural Research (CGIAR) 47 30 30 TBD TBD Total Operational Activities Related to Grants 110 68 44 30 25 26. The Bank remains committed to the success of the Consultative Group for International Agricultural Research (CGIAR), recognizing that the agricultural research and development of the kind CGIAR provides is essential to the achievement of the twin goals of eliminating extreme poverty and boosting shared prosperity. Consequently, the Bank will continue to maintain leadership and trustee roles in the CGIAR system and work is ongoing to find an alternative financing mechanism. 14 FY17 WORLD BANK BUDGET 27. The State and Peace-Building Fund (SPF) provides the Bank unique access to supporting Fragile and Conflict-Affected Situations (FCS) clients, which is a corporate priority. It allows the Bank to remain engaged with countries in arrears (e.g. Libya and Somalia) or non-members (e.g. West Bank and Gaza), and be at the forefront of undertaking research studies in novel situations such as the mass refugee and migration crisis. There is recognition that while activities funded by the SPF are critical in support of the FCS priority, its business, and operating model will require upgrading from a Bank-funded recipient-executed grants mechanism to a co-financed technical-assistance facility. Fragility, Conflict and Violence CCSA management has already started discussions with current and potential development partners for this re-purposing of the SPF. This facility may ultimately be integrated under a larger umbrella platform for crisis response financing that is currently under discussion. Management is committed to strengthening delivery across the WBG in FCS countries. IBRD/IDA Cost Attribution Methodology 28. Management is seeking Board approval to change the IBRD/IDA cost attribution methodology for Grant-making Facilities activities, from being fully attributable to IBRD (the current approach) to the weighted average ratio of the operational costs for IBRD and IDA. The Bank’s administrative budget is a single resource envelope that funds the combined work programs of IBRD and IDA. Budgeted resources are managed, and costs are recorded as a single organization recognizing the institution-wide approach to setting work program priorities. Management uses an allocation methodology to attribute fiscal year administrative expenses to IBRD and IDA. BPS conducts periodic reviews to ensure a fair allocation of expenses between the two organizations and as a result management is seeking Board approval for the above change. This is consistent with the treatment of GMFs as part of the operational work program in the administrative budget hierarchy since FY16, and results in a more equitable sharing of the expenses of these programs between the two entities. 29. As part of this review, Management is also seeking Board approval to allocate recently centralized security costs using the relevant IBRD/IDA country classifications, rather than using weighted average ratios. There are also minor technical adjustments being proposed to better reflect the operationalization of the new budget model and to avoid reliance on allocation drivers that are low in value and so susceptible to sharp movements from year to year. All proposed changes are set to be made effective from FY17. 3.5 EXPENSE FUNCTIONAL VIEW 30. The Bank follows an approach which allows budget holders flexibility to vary inputs as long as they stay within prudent parameters (e.g. fixed cost ratios). As a result, the Bank does not set specific budgets by expense category of total administrative budget such as for staff salaries and benefits. 15 FY17 WORLD BANK BUDGET 31. The functional expense line view presented in Table 3.11 is an illustrative decomposition of the administrative budget by expense line item. Nevertheless, as the relative share of the expense items have remained relatively stable over the years, the estimates below represents the current view of the most likely outcome. The actual outcome may differ because work programs may vary during the year, and decisions are made to respond to changing business needs that may entail trade-offs between different expense categories. Table 3.11: FY17 Functional Expense View of Administrative Expenses (All Sources - US$ million)1 FY15 FY16 FY17 Expenses by Type of Expense Actuals Projections Projections Fixed Expenses 2,458 67% 2,479 66% 2,496 65% Of which: Staff Sa l a ri es a nd Benefi ts (i ncl udi ng 2,062 56% 2,079 55% 2,086 55% contri butions to SRP, SSRP, RSBP) 2 3 Other Fi xed 396 11% 400 11% 410 11% Variable Expenses 1,235 33% 1,302 34% 1,332 35% Of which: ST Cons ul tants & Tempora ri es 578 16% 637 17% 657 17% Tra vel Cos ts 331 9% 335 9% 345 9% Contra ctua l Servi ces 280 8% 280 7% 280 7% 4 Other Va ri a bl e 48 1% 50 1% 50 1% Total Unit Gross Expenses 3,693 100% 3,781 100% 3,827 100% Grant Making Facilities (GMFs) 110 68 44 5 Total Admin. Expenses (incl. GMFs) 3,803 3,849 3,871 1 A ctual figures may differ fro m external financial repo rting due to certain year-end financial acco unting adjustments made to co mply with acco unting principles generally accepted in the U.S. (US GA A P ). In additio n, FY1 6-17 expenses are pro jectio ns presented in the B o ard-appro ved FY1 7 WB B udget o f June 23, 201 6 and will differ fro m actuals repo rted in the external financial statements. 2 Includes staff salaries and benefits and ETC/ETT co sts fo r all units as well as co sts o f co ntributio n to staff retirement plans (i.e. co ntributio ns to SRP , SSRP , RSB P ). 3 Other fixed expenses include Co mmunicatio ns & IT, Equipment & B uilding, Depreciatio n, and TF Indirects. 4 Other variable expenses also include Representatio n and Ho spitality as well as chargeback revenues fo r Fo o d Services. 5 FY15 actuals exclude US$ 10 millio n in year-end financial acco unting adjustments. 32. Staffing represents about 56 percent of total unit gross expenses in FY15. The average level of full-time Bank staffing in FY16 has been about 2.7 percent below the average of FY15 (refer to Figure 3.1). Separation of full-time staff, including those related to the phasing out of the Extended Term Consultants/Temporaries and Junior Professional Associates, continued to exceed the number of hires. Management will continue to implement staffing plans, strengthen technical skills, and align demand with the business needs and corporate priorities, while remaining within the proposed budget envelope. 16 FY17 WORLD BANK BUDGET Figure 3.1: Full-time Bank Staff on Payroll 3.6 CAPITAL BUDGET 33. The proposed capital budget for FY17 is US$210 million within a total US$534 million program proposed for the FY17-19 period. Technology and Systems accounts for US$275 million (51 percent) and the remaining US$259 million (49 percent) is for Facilities. The FY17-19 capital program is marginally lower by US$4 million than the one proposed in the FY16-18 planning cycle, with increased investments in facilities offset by decreased IT investments. The decrease in IT investments is driven by Management’s decision to cap the Bank’s Technology and Systems capital budget, based on affordability constraints and the need to shift resources to front line operations. Management has concluded that the IT annual investment plan would be maintained at US$105 million in FY17 but is expected to decline to US$85 million from FY18 onward (refer to Table 3.12 for a summary). Additional details are provided in Annex II. Table 3.12: Capital Program Summary - Investment Schedule FY17-19 (US$ million) FY16 FY16-18 FY17 FY18 FY19 FY17-19 Budget 1 Budget Plan Plan Total AIP Total AIP Technology and Systems 103 309 105 85 85 275 of whi ch: IBRD Onl y 80 240 70 50 50 170 2 WBG Projects 20 60 35 35 35 105 Small Investments < $200,000 3 3 9 - - - - Facilities 82 229 105 113 41 259 of which: Washington 16 72 31 29 24 84 Country Office 67 156 74 84 17 175 Total Capital Budget (All Parts): 185 538 210 198 126 534 1 Annual Investment Plan (AIP) as per FY16 WB Budget. 2 IFC and MIGA will pay their share of the administrative costs associated with WBG projects through Shared Service Agreements with IBRD. 3 Small capital investments under US$0.2 million, driven by FY15 policy change and lowering the capitalization threshold to US$0.1 million. 17 FY17 WORLD BANK BUDGET 34. The proposed FY17-19 Technology and Systems capital envelope is estimated at US$275 million. The FY17 IT capital budget request of US$105 million is spread across three segments, as follows:  Business Programs solutions (US$78 million or 74 percent) that directly support modernizing operations; information, knowledge and learning; HR; risk management; core financial and strategic budget systems; and end user work experience.  IT Capabilities Enhancements (US$10 million or 10 percent) in areas such as data management, analytics, information management, collaboration, connectedness, mobility, and security.  IT Foundations (US$17 million or 16 percent) representing IT replenishment investments. 18 FY17 WORLD BANK BUDGET 4. BUDGET ALLOCATIONS TO WORK PROGRAMS This section provides an overview of the operational work program to be funded by the proposed FY17 net administrative budget, in support of strategic directions and institutional priority areas. 4.1 COUNTRY ENGAGEMENT WORK PROGRAM 35. As noted before, robust demand for Bank services was one of the key drivers that shaped the Country Engagement (CE) budget allocation. IBRD lending is expected to remain firm, while the goals for IDA are to utilize the full IDA17 allocation, build the pipeline for IDA 18, and focus on FCS countries. 36. To properly manage the demand for financing, leverage WBG synergies, and optimize the use of scarce resources, the Bank will continue to systematically follow a country engagement framework that entails the use of Strategic Country Diagnostics (SCDs) and Country Partnership Frameworks (CPFs). These tools constitute key building blocks for the Bank’s strategic engagement with clients and guide operational work programs and strengthen engagement in priority thematic areas of focus. 37. Given the demand outlook and other priorities, additional budget needs were factored in to arrive at a proposed FY17 Country Engagement (CE) envelope of US$601 million with all sources funding for CE estimated to reach US$1,218 million in FY17. To maintain Management’s commitment to Expenditure Review measures, the FY17 Bank funding base trajectory was reduced by US$18 million from US$562 million to a new US$544 million base. Subject to Board approval of the overall budget, additional resources for Regional CE envelopes would comprise US$18 million for IBRD programs and US$40 million for IDA programs (including IDA+), a net increase of US$58 million from the FY17 base to meet growing demand and increased operational requirements (refer to Figure 4.1 below). Figure 4.1: Evolution of the Country Engagement Budget from FY16 to FY17 (US$ million) 40 601 562 18 544 FY16 FY17 IBRD IDA FY17 Base 19 FY17 WORLD BANK BUDGET 38. In alignment with business growth and an ongoing policy to channel resources to operations, the CE envelope will continue its steady growth into FY17 (refer to Figure 4.2). Outcomes of the work program agreement process reflect the effect of streamlining the ASA portfolio, partly as a result of increased allocations to lending and supervision activities facilitated by increases in coefficients that constrain the remaining CE budget for ASA activities, as well as the ongoing effort to tie knowledge generation to project design, adopt a more programmatic approach, and to be demand led. Figure 4.2: FY15 to FY17 Changes in WPA Plans (US$ million) 39. CE allocations to lending preparation are increasing by US$31 million (24 percent) and lending supervision by US$12 million (5 percent). Beyond the increase in fiduciary and safeguards, together with lending and supervision coefficients (by 6 and 2 percent respectively), the significant increase in lending preparation supports increased operational quality and compliance requirements, and pipeline development in anticipation of IDA+. Additionally, the higher coefficients and resulting allocations encourage further selectivity, improve quality and effectiveness, decrease fragmentation, and help reduce the significant strain on task teams to meet new priorities for operations (greenhouse gas accounting, climate risk assessments, gender, etc.). 40. Attention to fiduciary issues and environmental and social standards remain a priority and these areas are adequately funded. FY17 allocations for fiduciary, including procurement, increased 28 percent over last year to US$51 million. Safeguard allocations also increased 15 percent to US$39 million. Together, these important allocations represent 15 percent of the CE envelope. 41. Work program focus on Fragile and conflict-affected situations (FCS) continues to receive attention with US$92 million (15 percent of total CE) allocated in the original work program agreement for FY17, up US$4 million from FY16 and US$6 million from FY15. Regional units are committed to further increasing allocations to FCS in FY17 from their contingencies, in particular when further progress is made on determining the new and increased IDA allocation rules to FCS in IDA18 and pipeline needs become firmer. 20 FY17 WORLD BANK BUDGET Figure 4.3: Allocations to FCS (US$ million)5 88 92 Region FY15 FY16 FY17 86 AFR 44 45 49 EAP 8 8 9 ECA 4 3 4 LCR 4 3 4 MNA 13 15 14 SAR 12 12 12 Total 86 88 92 FY15 FY16 FY17 42. Continued management oversight of the Advisory Services and Analytics (ASA) portfolio has helped to streamline the number and refocus the use of ASA as intended, i.e. for strategic development of knowledge, building capacity, informing project and program design, and for the delivery of technical assistance. Allocations were directed to foster completion of existing ASA tasks and reduce supply-driven ASA with better key performance indicators covering cost, timeliness, and quality. Other process tasks such as policy dialogue, and economic monitoring were addressed to reduce the proliferation of miscoded ASA tasks and avoid ASA over-programming. 4.2 GLOBAL ENGAGEMENT WORK PROGRAM 43. Management continues to seek selectivity and transparency in the choice of Global Engagement activities. While all sources of funding are expected to increase slightly, Bank funding is planned to remain relatively flat in the next two years. All funding sources for Global Engagements are estimated to reach US$247 million in FY17 with Bank funding set at US$73 million (a US$5 million decrease of Bank funding allocated in FY16). 44. The FY17 funding decisions reflect a broader assessment of Global Engagement activities across the Bank. In order to optimize alignment and efficiency, related activities in IG&A units were assessed as part of the decision-making process. As a result, such activities were integrated and funds transferred to the GPs as part of institutional realignment. This process of strengthening governance arrangements over the Global Engagement funding allocation process across VPUs is expected to be strengthened further in FY18. 45. Priorities will include public goods such as climate change, fragility, pandemics, refugees, and gender. Bank funding has been allocated between four categories, as follows:  Corporate commitments (US$31 million): This category includes corporate priorities, such as IDA18 replenishment, that are proposed by Practice Group Vice Presidents and endorsed by Senior Management. 5 The amounts shown exclude PPM related costs such as security, assignment benefits, etc. 21 FY17 WORLD BANK BUDGET  Cross-cutting strategic engagements (US$10 million): These activities are multi-sectorial and constitute priorities raised to the Board by the operational units.  Innovation, product development, and partnerships (US$8 million): Knowledge products that address emerging demands, and maintain the WBG’s leadership in global public goods fall under this category.  Global operational support (US$23 million): This is comprised of knowledge services and activities requiring rapid and flexible operational response (includes US$18 million for CCSAs). 22 FY17 WORLD BANK BUDGET 5. ENHANCING THE BUDGET FRAMEWORK 46. The strategic planning, budget and performance review exercise is now firmly established as part of the performance management process. At the Group level, it has fostered closer collaboration between the Bank, IFC, and MIGA, and has enhanced the monitoring of progress by integrating with related processes throughout the fiscal year. Through various efforts under the strategy-driven business planning approach, the Board and Management had extensive discussions that linked the short and medium terms as well as spanned the entire WBG. Collectively, these interactions were not only instrumental in formulating the FY17 Budget proposals, but also guided further Management actions identified below. 47. From a performance management perspective, Management has a comprehensive agenda of key issues to work on, that includes:  Strengthening the link between the corporate scorecard and planning/budgeting. This constitutes ongoing efforts to deepen and broaden performance ownership and accountability in the Bank as well as to ensure issues and actions arising from the dialogue created are subsequently reflected in the strategic planning and budgeting process.  Consolidating and locking-in Expenditure Review savings. In addition to the Internal Audit (IAD) review that was previously mentioned in Section 2.2, an ex-post review will be conducted in the first half of FY18. Beyond the savings that have already been embedded into the budget, several other initiatives were identified, continue to be developed, and will deliver efficiencies beyond the three-year ER window. Additionally, ongoing business reviews will yield further efficiency opportunities.  Developing key principles to inform decisions on the use of the “Budget Anchor space” and to set budget envelopes. These principles could include: alignment with the Forward Look, and existing and other emerging priorities; meeting growing demand in the volume and scope of business; using available of internal flexibilities first, with systematic use of business reviews to maintain efficiency and effectiveness and find new flexibilities; maintaining a buffer under the Budget Anchor to absorb revenue and external funds shortfalls (in particular, in critical areas); and accounting for cost pressures and institutional mandates.  Continuing to implement ongoing external fund reforms. These reforms are aimed at raising cost recovery; reducing transaction costs of processing, negotiating, managing, and reporting on trust funds; and improving governance. The Bank is also preparing guidance notes on donor reporting and on managing for results in trust funds in order to improve quality and standardization in these two important areas. Additionally, Management will continue to work on improvements around annualizing multi-year BETFs for better planning and monitoring, and planning for allocations of programmatic EFs across projects, Regions, and Global Practices.  Phasing out Bank-financing of Grant-making Facilities. Management will continue the transition of these programs as was the case for the Development Grant Facility, and Global Partnerships for Social Accountability in FY16. Alternative funding for CGIAR continues to be a priority. 23 FY17 WORLD BANK BUDGET  Continuing to strengthen selectivity and governance of the ASA portfolio. The effect of prioritizing lending and supervision activities by raising the coefficients along with emphasis on fiduciary and safeguards have already facilitated this process. However, this process had already begun earlier, and will continue with renewed focus on knowledge creation that supports project design, capacity building, and a programmatic or demand-led approach through Reimbursable Advisory Services (RAS).  Prioritizing Global Engagement activities by using the new categorization and governance process to optimize global engagement funding. The aim going forward is to drive further selectivity and transparency, avoid overlaps with country-led activities, and crowd-in external funding. Funding would be prioritized for activities that position the Bank as a leader in setting global priorities, and the development of global tools and databases in support of evidence-based policy making.  Optimizing IT operations and maintenance expenditures. As a follow-up to last year’s business review, Information and Technology Solutions (ITS) is currently reviewing how it organizes and manages operations and maintenance (O&M) activities in the Bank. This review aims at (i) delivering a new O&M operating framework to better plan, operate, manage and budget its O&M activities; (ii) providing increased visibility into O&M activities, particularly what, where and how IT resources are aligned to drive operating costs and efficiencies; and (iii) identifying further optimization opportunities with recommendations to increase IT asset management efficiency and effectiveness, using comparative benchmarking where appropriate. The outcomes of this review are expected by the end of FY16 with implementation commencing in FY17. 24 FY17 WORLD BANK BUDGET ANNEX I: PROGRAM COST SUMMARY Table I.1: FY17-19 Funding for WB Work Program and Unit (US$ million)1 BB External Funds All Funds FY16 FY16 FY16 WB Budget FY17 FY18 FY19 WB Budget FY17 FY18 FY19 WB Budget FY17 FY18 FY19 1.0 Country Engagement2 1.1 AFRVP 188.5 207.0 221.0 241.5 177.6 195.6 197.8 199.6 366.1 402.6 418.9 441.0 1.2 EAPVP 80.3 83.9 95.9 102.4 105.9 96.5 97.5 98.4 186.3 180.4 193.3 200.8 1.3 ECAVP 74.6 77.6 82.2 85.5 69.7 76.4 77.2 77.9 144.2 154.0 159.4 163.4 1.4 LCRVP 85.6 88.7 92.8 95.9 58.4 54.1 54.7 55.2 144.0 142.9 147.5 151.1 1.5 MNAVP 49.8 50.9 54.7 56.6 70.7 98.2 99.2 100.1 120.5 149.1 153.9 156.7 1.6 SARVP 82.6 93.2 101.5 109.7 88.3 96.1 97.1 98.1 170.9 189.4 198.7 207.8 Sub-Total 561.5 601.4 648.2 691.5 570.5 617.0 623.6 629.4 1,132.0 1,218.3 1,271.8 1,320.9 2.0 Global Engagement 2.1 GPs /CCSAs 77.7 72.9 72.5 74.1 166.3 174.0 171.2 172.9 244.0 246.8 243.7 247.0 Sub-Total 77.7 72.9 72.5 74.1 166.3 174.0 171.2 172.9 244.0 246.8 243.7 247.0 3.0 Operational Grant Making Facilities 3.1 CGIAR 30.0 30.0 TBD TBD - - - - 30.0 30.0 TBD TBD 3.2 State a nd Pea ce Bui l di ng Fund 21.0 14.0 TBD TBD - - - - 21.0 14.0 TBD TBD 3.3 Devel opment Gra nt Fa ci l i ty 12.0 - - - - - - 12.0 - - - 3.4 Gl oba l Pa rtners hi p for Soci a l Accountabi l i ty 5.0 - - - - - - - 5.0 - - - Sub-Total 68.0 44.0 30.0 25.0 - - - - 68.0 44.0 30.0 25.0 A TOTAL CLIENT ENGAGEMENT 707.2 718.2 750.7 790.7 736.9 790.9 794.8 802.2 1,444.1 1,509.1 1,545.5 1,592.9 4.0 Region PPM 4.1 AFRVP 113.4 107.5 110.2 112.7 1.9 3.0 3.1 3.1 115.3 110.5 113.3 115.7 4.2 EAPVP 54.6 53.7 55.1 56.3 2.3 1.7 1.7 1.7 56.9 55.4 56.8 58.0 4.3 ECAVP 55.0 57.8 58.4 59.7 2.3 1.5 1.5 1.5 57.3 59.3 59.9 61.2 4.4 LCRVP 50.8 49.4 50.5 51.6 0.9 0.9 0.9 0.9 51.6 50.3 51.4 52.5 4.5 MNAVP 34.1 32.8 32.4 33.1 0.9 5.5 5.5 5.5 35.0 38.2 37.9 38.6 4.6 SARVP 50.6 47.5 47.9 48.9 0.7 1.8 1.8 1.8 51.3 49.3 49.7 50.7 Sub-Total 358.2 348.7 354.5 362.3 9.0 14.4 14.5 14.5 367.2 363.1 369.0 376.8 5.0 GP/CCSA PPM 5.1 Equi tabl e Growth, Fi na nce a nd Ins titutions 58.6 71.5 72.4 75.6 - 12.8 12.9 13.1 58.6 84.3 85.3 88.6 5.2 Huma n Devel opment 30.5 37.1 37.4 39.0 - 7.8 7.8 7.9 30.5 44.8 45.2 46.9 5.3 Sus tai na bl e Devel opment 74.9 83.8 84.7 88.4 - 21.6 21.8 22.0 74.9 105.3 106.4 110.4 5.4 Front Offi ces a nd CCSAs 3 49.9 60.9 61.4 64.5 76.3 40.4 40.8 41.2 126.2 101.3 102.2 105.7 Sub-Total 213.8 253.2 255.8 267.4 76.3 82.6 83.4 84.2 290.1 335.8 339.1 351.6 B TOTAL PROGRAM & PRACTICE MGMT. 572.1 601.9 610.2 629.7 85.3 97.0 97.8 98.7 657.3 698.9 708.1 728.4 C TOTAL OPERATIONS 1,279.2 1,320.1 1,361.0 1,420.3 822.1 887.9 892.6 900.9 2,101.4 2,208.0 2,253.6 2,321.3 25 FY17 WORLD BANK BUDGET Table I.1 (Continued) BB External Funds All Funds FY16 FY16 FY16 FY17 FY18 FY19 FY17 FY18 FY19 FY17 FY18 FY19 WB Budget WB Budget WB Budget 6.0 Institutional Services 6.1 Budget, Performa nce & Stra tegy 74.5 68.8 71.9 73.4 3.3 - - - 77.8 68.8 71.9 73.4 6.2 Chi ef Ri s k Offi ce 12.4 13.4 14.2 12.6 0.9 0.7 0.7 0.7 13.2 14.1 14.9 13.3 6.3 Devel opment Economi cs 48.9 47.3 48.2 48.2 38.2 47.0 47.6 48.0 87.1 94.3 95.8 96.2 6.4 Devel opment Fi na nce 20.0 22.5 22.1 22.5 38.0 37.0 37.3 37.2 58.1 59.5 59.3 59.7 6.5 Externa l & Corpora te Rel a ti ons 44.4 34.8 35.5 36.3 12.9 2.2 2.2 2.3 57.2 37.0 37.7 38.5 6.6 Gl oba l Envi ronment Fund - - - - 35.0 32.0 32.3 32.6 35.0 32.0 32.3 32.6 6.7 ICSID 2.2 - - - - - - - 2.2 - - - 4 6.8 Lea ders hi p, Lea rni ng & Innova ti on 47.7 - - - 17.1 - - - 64.8 - - - 6.9 Lega l Servi ces 30.5 32.0 32.7 33.4 1.9 1.9 1.7 1.7 32.4 33.9 34.5 35.1 6.10 Opera ti ona l Pol i cy & Country Servi ces 43.1 45.4 45.3 46.3 1.0 0.7 0.6 0.5 44.1 46.1 45.9 46.8 6.11 Trea s ury 61.8 59.4 59.8 61.1 15.0 16.0 16.6 17.3 76.8 75.4 76.4 78.4 6.12 WBG Fi na nce & Accounti ng 37.6 38.5 39.3 40.1 7.0 5.7 5.5 5.5 44.6 44.2 44.7 45.6 Sub-Total 423.0 362.1 368.9 374.1 170.4 143.3 144.5 145.7 593.4 505.3 513.4 519.9 7.0 Governance Services 7.1 Admi ni s tra ti ve Tri buna l 1.6 1.7 1.7 1.8 0.6 0.5 0.5 0.5 2.1 2.2 2.2 2.2 7.2 Boa rds 90.1 91.7 93.7 95.8 - - - - 90.1 91.7 93.7 95.8 7.3 Confl i ct Res ol uti on Sys tem 3.7 4.3 4.4 4.5 1.3 2.5 1.3 1.3 5.0 6.9 5.7 5.8 7.4 Corpora te Secreta ri a t 15.5 15.5 15.8 16.2 1.0 1.2 1.2 1.2 16.5 16.7 17.0 17.4 7.5 Independent Eva l ua ti on Group 26.4 26.3 27.7 28.4 8.6 8.7 8.9 9.2 35.0 34.9 36.7 37.5 7.6 Integri ty Vi ce Pres i dency 18.4 18.5 18.9 19.3 0.3 0.1 0.1 0.1 18.6 18.6 19.0 19.4 7.7 Interna l Audi t 7.6 7.7 7.9 8.1 2.7 2.5 2.5 2.5 10.2 10.2 10.4 10.5 7.8 Offi ce of Ethi cs a nd Bus i nes s Conduct 4.5 6.6 6.7 6.9 1.5 2.3 2.3 2.3 6.1 8.9 9.0 9.1 7.9 Offi ce of the Pres i dent 7.7 7.0 7.1 7.3 - - - - 7.7 7.0 7.1 7.3 7.10 Offi ce of Sus pens i on & Deba rment 1.5 1.6 1.7 1.7 - - - - 1.5 1.6 1.7 1.7 7.11 Ma na gi ng Di rectors 5 9.7 16.4 16.7 17.1 - - - - 9.7 16.4 16.7 17.1 7.12 Sa ncti ons Boa rd 1.6 1.7 1.7 1.7 - - - - 1.6 1.7 1.7 1.7 Sub-Total 188.1 198.9 204.2 208.7 15.9 17.7 16.7 17.0 204.0 216.6 220.9 225.7 8.0 Administrative Services 8.1 Genera l Servi ces a nd Fa ci l i ti es 130.9 138.4 142.7 146.7 44.8 38.0 37.9 37.9 175.7 176.4 180.6 184.6 8.2 Huma n Res ources 47.9 57.3 58.3 59.6 13.0 12.8 12.2 12.2 60.9 70.1 70.5 71.8 8.3 Informa ti on & Technol ogy Sol uti ons 232.8 224.6 222.4 234.6 45.8 52.4 53.5 54.6 278.6 277.1 275.9 289.2 Sub-Total 411.7 420.3 423.4 441.0 103.5 103.3 103.6 104.7 515.2 523.6 527.0 545.7 D TOTAL INSTITUTIONAL, GOVERNANCE & ADMIN. 1,022.7 981.3 996.5 1,023.8 289.8 264.2 264.9 267.4 1,312.6 1,245.5 1,261.4 1,291.2 E TOTAL: ALL UNITS 2,302.0 2,301.4 2,357.5 2,444.1 1,112.0 1,152.1 1,157.5 1,168.4 3,414.0 3,453.6 3,515.0 3,612.5 9.0 Centrally Managed Accounts & Programs 9.1 6 Budget recovery (595.9) (613.0) (665.9) (684.2) 63.0 11.3 11.8 11.8 (532.9) (601.7) (654.1) (672.3) 9.2 Corpora te Conti ngency 10.0 12.0 12.0 15.0 - - - - 10.0 12.0 12.0 15.0 9.3 Depreci a ti on 75.2 95.9 109.6 115.2 - - - - 75.2 95.9 109.6 115.2 9.4 Ea rma rked Fundi ng 17.7 24.6 27.2 27.9 - - - - 17.7 24.6 27.2 27.9 9.5 Ins ti tuti ona l Progra ms 105.1 108.2 58.8 55.9 - - - - 105.1 108.2 58.8 55.9 9.6 Sta ff Benefi ts & Reti rement 779.7 778.9 821.4 836.5 - - - - 779.7 778.9 821.4 836.5 9.7 Una l l oca ted Fl exi bi l i ty - - 1.0 18.9 - - - - - - 1.0 18.9 Total Centrally-Managed Accounts & Programs 391.8 406.6 364.2 385.3 63.0 11.3 11.8 11.8 454.8 417.9 376.1 397.1 F TOTAL ALL FUNDS EXPENDITURE ENVELOPE 2,693.7 2,708.0 2,721.7 2,829.4 1,175.0 1,163.4 1,169.3 1,180.2 3,868.7 3,871.5 3,891.1 4,009.6 G o/w Funded by External Funds DRR 7 (163.8) (184.0) (195.7) (206.9) - - - (163.8) (184.0) (195.7) (206.9) 7 H o/w Funded by External Funds CRR - - - - (356.4) (322.3) (319.8) (322.2) (356.4) (322.3) (319.8) (322.2) I o/w Funded by External Funds BETF - - - - (818.6) (841.1) (849.5) (857.9) (818.6) (841.1) (849.5) (857.9) J o/w Admin Budget Funded by IBRD/IDA 2,529.9 2,524.0 ###### ###### 2,526.0 2,622.5 2,622.5 - - 0.0 -- -- 2,529.9 2,529.9 2,524.0 ###### ###### 2,622.5 2,526.0 ###### 1 All budget figures are reported in nominal terms. 2 Country Engagement BB includes US$5.7 million in FY17 earmarked for Equitable Growth, Finance and Institutions. 3 In FY16 all External Funds were distributed to the GP VP. 4 LLI has been integrated into other operational and IG&A units. 5 Also includes the transfer of the New York and Geneva offices. 6 Includes staff benefits recoveries from internal transfer pricing, rebates, TF recoveries, and Corporate Services. 7 Reimbursable revenues have been classified as either: • Coupled Reimbursable Revenues (CRR) are earned by the Bank for services that are directly related to the underlying expense incurred by a unit; revenue is not earned unless there is a corresponding expense, similar • Decoupled Reimbursable to BETF, Revenues or on the other hand, are earned by the Bank for services that are not directly driven by the underlying expenses incurred by the managing unit. (DRR), Examples of these revenues include: Trust Funds fee income, health services, and revenues from sub-letting office space to third parties. Since the FY16 Budget Framework, expenditure 26 FY17 WORLD BANK BUDGET Table I.2: Overview of External Funds Projected Revenues FY16-FY19 by Unit (US$ million) Coupled Reimbursable Funds (CRR) Bank Executed Trust Funds (BETF) External Funds FY16 WB FY16 WB FY16 WB Budget FY17 FY18 FY19 Budget FY17 FY18 FY19 Budget FY17 FY18 FY19 1.0 Country Engagement 1.1 AFRVP 17.8 30.4 31.0 31.1 159.8 165.2 166.8 168.5 177.6 195.6 197.8 199.6 1.2 EAPVP 5.3 6.2 6.3 6.3 100.7 90.3 91.2 92.1 105.9 96.5 97.5 98.4 1.3 ECAVP 24.1 24.2 24.4 24.6 45.6 52.2 52.8 53.3 69.7 76.4 77.2 77.9 1.4 LCRVP 10.4 11.3 11.4 11.5 48.0 42.9 43.3 43.7 58.4 54.1 54.7 55.2 1.5 MNAVP 40.5 61.0 61.7 62.3 30.2 37.2 37.5 37.9 70.7 98.2 99.2 100.1 1.6 SARVP 1.9 6.6 6.8 6.8 86.4 89.5 90.4 91.3 88.3 96.1 97.1 98.1 Sub-Total 99.9 139.7 141.6 142.6 470.7 477.3 482.0 486.8 570.5 617.0 623.6 629.4 2.0 Global Engagement 2.1 GPs /CCSAs 10.6 4.5 - - 155.7 169.5 171.2 172.9 166.3 174.0 171.2 172.9 Sub-Total 10.6 4.5 - - 155.7 169.5 171.2 172.9 166.3 174.0 171.2 172.9 A TOTAL CLIENT ENGAGEMENT 110.5 144.2 141.6 142.6 626.4 646.8 653.2 659.7 736.9 790.9 794.8 802.2 3.0 Region PPM 3.1 AFRVP 1.5 1.4 1.4 1.4 0.4 1.7 1.7 1.7 1.9 3.0 3.1 3.1 3.2 EAPVP 2.0 0.3 0.3 0.3 0.3 1.4 1.5 1.5 2.3 1.7 1.7 1.7 3.3 ECAVP 2.3 1.5 1.5 1.5 - - - - 2.3 1.5 1.5 1.5 3.4 LCRVP 0.4 0.2 0.2 0.2 0.5 0.7 0.7 0.8 0.9 0.9 0.9 0.9 3.5 MNAVP 0.5 4.6 4.6 4.6 0.4 0.9 0.9 0.9 0.9 5.5 5.5 5.5 3.6 SARVP 0.3 0.3 0.3 0.3 0.4 1.5 1.5 1.6 0.7 1.8 1.8 1.8 Sub-Total 7.0 8.1 8.1 8.1 2.0 6.3 6.3 6.4 9.0 14.4 14.5 14.5 4.0 GP/CCSA PPM 4.1 Equi ta bl e Growth, Fi na nce a nd Ins ti tuti ons - 1.3 1.3 1.3 - 11.5 11.6 11.8 - 12.8 12.9 13.1 4.2 Huma n Devel opment - 1.1 1.1 1.1 - 6.7 6.7 6.8 - 7.8 7.8 7.9 4.3 Sus ta i na bl e Devel opment - 0.6 0.6 0.6 - 21.0 21.2 21.4 - 21.6 21.8 22.0 1 5.6 0.3 0.3 0.3 70.7 40.2 40.6 41.0 76.3 40.4 40.8 41.2 4.4 Front Offi ces a nd CCSAs Sub-Total 5.6 3.3 3.3 3.3 70.7 79.3 80.1 80.9 76.3 82.6 83.4 84.2 B TOTAL PROGRAM & PRACTICE MGMT. 12.5 11.4 11.4 11.4 72.7 85.6 86.4 87.3 85.3 97.0 97.8 98.7 C TOTAL OPERATIONS 123.0 155.5 152.9 153.9 699.1 732.4 739.7 747.0 822.1 887.9 892.6 900.9 5.0 Institutional Services 5.1 Budget, Performa nce & Stra tegy 3.3 - - - - - - - 3.3 - - - 5.2 Chi ef Ri s k Offi ce 0.9 0.7 0.7 0.7 - - - - 0.9 0.7 0.7 0.7 5.3 Devel opment Economi cs 6.4 5.8 5.9 5.9 31.8 41.3 41.7 42.1 38.2 47.0 47.6 48.0 5.4 Devel opment Fi na nce 5.4 6.0 6.0 5.6 32.6 31.0 31.3 31.6 38.0 37.0 37.3 37.2 5.5 Externa l & Corpora te Rel a ti ons 11.3 0.4 0.4 0.4 1.6 1.8 1.8 1.8 12.9 2.2 2.2 2.3 5.6 Gl oba l Envi ronment Fund - - - - 35.0 32.0 32.3 32.6 35.0 32.0 32.3 32.6 5.7 Lea ders hi p, Lea rni ng & Innova ti on 1.6 - - - 15.5 - - - 17.1 - - - 5.8 Lega l Servi ces 1.9 1.9 1.7 1.7 - - - - 1.9 1.9 1.7 1.7 5.9 Opera ti ona l Pol i cy & Country Servi ces - 0.3 0.3 0.1 1.0 0.4 0.4 0.4 1.0 0.7 0.6 0.5 5.10 Trea s ury 15.0 15.6 16.3 16.9 - 0.3 0.3 0.4 15.0 16.0 16.6 17.3 5.11 WBG Fi na nce & Accounti ng 7.0 5.7 5.5 5.5 - - - - 7.0 5.7 5.5 5.5 Sub-Total 52.9 36.5 36.7 36.8 117.5 106.8 107.9 108.9 170.4 143.3 144.5 145.7 6.0 Governance Services 6.1 Admi ni s tra ti ve Tri buna l 0.6 0.5 0.5 0.5 - - - - 0.6 0.5 0.5 0.5 6.2 Confl i ct Res ol uti on Sys tem 1.3 2.5 1.3 1.3 - - - - 1.3 2.5 1.3 1.3 6.3 Corpora te Secreta ri a t - - - - 1.0 1.2 1.2 1.2 1.0 1.2 1.2 1.2 6.4 Independent Eva l ua ti on Group 7.6 7.9 8.2 8.4 1.0 0.7 0.8 0.8 8.6 8.7 8.9 9.2 6.5 Integri ty Vi ce Pres i dency 0.3 0.1 0.1 0.1 - - - - 0.3 0.1 0.1 0.1 6.6 Interna l Audi t 2.7 2.5 2.5 2.5 - - - - 2.7 2.5 2.5 2.5 6.7 Offi ce of Ethi cs a nd Bus i nes s Conduct 1.5 2.3 2.3 2.3 - - - - 1.5 2.3 2.3 2.3 Sub-Total 13.9 15.8 14.8 15.0 2.0 1.9 2.0 2.0 15.9 17.7 16.7 17.0 7.0 Administrative Services 7.1 Genera l Servi ces a nd Fa ci l i ti es 44.8 38.0 37.9 37.9 - - - - 44.8 38.0 37.9 37.9 7.2 Huma n Res ources 13.0 12.8 12.2 12.2 - - - - 13.0 12.8 12.2 12.2 7.3 Informa ti on & Technol ogy Sol uti ons 45.8 52.4 53.5 54.6 - - - - 45.8 52.4 53.5 54.6 Sub-Total 103.5 103.3 103.6 104.7 - - - - 103.5 103.3 103.6 104.7 D TOTAL INSTITUTIONAL, GOVERNANCE & ADMIN. 170.3 155.5 155.0 156.5 119.5 108.8 109.8 110.9 289.8 264.2 264.9 267.4 E TOTAL: ALL UNITS 293.4 311.0 308.0 310.4 818.6 841.1 849.5 857.9 1,112.0 1,152.1 1,157.5 1,168.4 8.0 Centrally Managed Accounts & Programs 8.1 Other Centra l l y Ma na ged Accounts 63.0 11.3 11.8 11.8 - - - - 63.0 11.3 11.8 11.8 Total Centrally-Managed Accounts & Programs 63.0 11.3 11.8 11.8 - - - - 63.0 11.3 11.8 11.8 F TOTAL EXTERNAL FUNDS 356.4 322.3 319.8 322.2 818.6 841.1 849.5 857.9 1,175.0 1,163.4 1,169.3 1,180.2 1 In FY16 all External Funds were distributed to the GP VP. 27 FY17 WORLD BANK BUDGET ANNEX II: CAPITAL BUDGET 1. The proposed US$210 million capital budget for FY17 is part of the US$534 million three-year capital investment program proposed over the FY17-19 period. Technology and Systems accounts for US$275 million (51 percent of the total envelope) and Facilities accounts for US$259 million (49 percent). The FY17-19 capital program is marginally lower than the one envisioned in the FY16-18 planning cycle, with increased investments in facilities (US$30 million, mostly in country offices) offset by decreased IT investments (US$34 million). The decrease in IT investments is driven by Management’s intention to cap the Bank’s Technology and Systems capital budget at US$85 million annually, based on affordability constraints and the need to shift resources to front line operations. Management has reached the view that the IT annual investment plan will be maintained at US$105 million in FY17 to fund – among other priorities – critical investments in Treasury systems before reducing to US$85 million from FY18 onwards. Refer to Table III.1 below for a summary. Table II.1: Capital Program Summary - Investment Schedule FY17-19 (US$ million) FY16 FY16-18 FY17 FY18 FY19 FY17-19 Budget 1 Budget Plan Plan Total AIP Total AIP Technology and Systems 103 309 105 85 85 275 of whi ch: IBRD Onl y 80 240 70 50 50 170 2 WBG Projects 20 60 35 35 35 105 Small Investments < $200,000 3 3 9 - - - - Facilities 82 229 105 113 41 259 of which: Washington 16 72 31 29 24 84 Country Office 67 156 74 84 17 175 Total Capital Budget (All Parts): 185 538 210 198 126 534 1 Annual Investment Plan (AIP) as per FY16 WB Budget. 2 IFC and MIGA will pay their share of the administrative costs associated with WBG projects through Shared Service Agreements with IBRD. 3 Small capital investments under US$0.2 million, driven by FY15 policy change and lowering the capitalization threshold to US$0.1 million. TECHNOLOGY CAPITAL PROGRAM 2. The indicative FY17-19 Technology and Systems capital program envelope of US$275 million represents an 11 percent decrease from the FY16-18 capital program of US$309 million presented in last year’s Budget document. It includes investments linked to IT-related Expenditure Review measures, estimated to generate savings of about US$8 million in FY17 and US$3 million in FY18. 3. The capital program for Technology continues to support the WBG strategy through investment in transformative Information Technology (IT). The Information Technology Solutions Group (ITS), a WBG provider, is following its IT Implementation Roadmap which specifies outcomes to be achieved over a three to five year period. Each outcome is delivered as part of three waves: (i) narrowing information and process gaps, (ii) improving WBG operations and performance, and (iii) bringing transformative capabilities. 28 FY17 WORLD BANK BUDGET 4. The FY17 IT capital budget request of US$105 million has three segments: a. Business Programs Solutions (US$78 million or 74 percent) that directly support business facing requirements include six programs:  Modern Operations to enhance the client solutions design and delivery platform in line with new delivery model through business alignment, simplification, integration, and productivity.  Information, Knowledge & Learning to strengthen WBG services by supporting open information (transparency and accountability), information matters (support evidence-based solution design), and global knowledge and learning (facilitate knowledge flow).  Modern HR to support Career Development, Talent Management, Total Rewards, and Global Mobility Benefits, replacing aged and outdated applications with new tools to support WBG staff and managers (focus on ease of use, cloud-based solutions, mobile etc.).  Risk Management to modernize systems to identify, measure, and respond to risks, volatility and uncertainty in the financial markets; improve credit risk and operational risk management tools; eliminate inefficient manual processes, enhanced analysis, monitoring, and reporting.  Core Financial & Strategic Budget Systems to replace aging financial systems with solutions that: align with core business requirements; leverage enterprise platforms and enhance the capabilities of existing financial systems; reduce operational risk; increase transactional efficiency; and provide a unified platform for strategic and business planning.  End User/Work Experience to develop a seamless experience across devices, driven by end- user requirements with minimal customization; and provide self-service, social-enabled, and context-aware support framework. b. IT Capabilities Enhancements (US$10 million or 10 percent) to enable new and existing applications to be delivered with speed and flexibility with focus in the following critical areas:  Data Management & Analytics to enhance the Business Intelligence (BI) program (Reporting, Dashboards, etc.) and support new applications on the WBG Data Integration platform.  Information Management to improve access and provide tools to improve productivity by providing a robust platform.  Business Enablement to enable Client Relationship Management platforms that establish scalable tools across WBG and support rapid development of applications.  Collaboration to provide tools to facilitate communications, collaboration, and transactions.  Communication to standardize and enable communication channels.  Connectedness Technology to increase network availability with improved access control.  Mobility to implement mobile apps supporting operations, HR, and financial approvals. 29 FY17 WORLD BANK BUDGET  Security to enhanced access control across WBG with proactive defense against system threats. c. The IT Foundation (US$17 million or 16 percent) to build a modern, robust and flexible IT infrastructure. FACILITIES CAPITAL PROGRAM 5. The indicative FY17-19 Facilities capital program envelope of US$259 million represents a US$30 million (13 percent) increase over the FY16-18 capital program of US$229 million. The FY17 Facilities capital budget request of US$105 million includes US$31 million for Washington facilities, US$51 million for Country Office (CO) facilities, and US$23 million for investments to replace some large CO leasehold properties with owned buildings. ADMINISTRATIVE BUDGET IMPACT OF THE CAPITAL BUDGET 6. The Bank’s administrative budget will be affected by depreciation in subsequent fiscal years based upon the level of capital budget approved by the Board. Budget expenses such as operations and maintenance have a claim on a unit’s budget resources. Once a specific capital project is completed and becomes an asset, depreciation commences and if not centrally funded, may be the responsibility of the business unit. VPUs must demonstrate the ability to fund carrying costs of a capital investment within their allocated budget, over the asset’s life cycle, before any release of funds. 7. Technology and Systems. Over the three-year planning period, Technology and Systems capital investments have an incremental depreciation impact of approximately US$62 million over the three- year estimates presented in the FY16-18 planning cycle. Moreover, IT depreciation is expected to continue to rise in line with new investments and peak at approximately US$96 million in FY21 (up from US$55 million and US$74 million, respectively in FY16 and FY17) by when all proposed investments will be depreciating.6 The three-year trajectory for IT depreciation is shown in Table V.3. The administrative budget impact associated with the IT capital investment plan also includes one-time project administrative and incremental operations and maintenance (O&M) costs which are estimated to be approximately US$15 million in FY17. 6 The assumptions used to project depreciation costs have been updated to take into account a recent acceleration of IT project delivery times and the shift of WB project mix towards a short asset life. In addition, for clearer presentation, the total depreciation expense irrespective of source of funding has been reported both in Table III.2 and in this paragraph, whereas in previous years, only the centrally-managed depreciation was reported. 30 FY17 WORLD BANK BUDGET Table II.2: Technology & Systems –Total IT Depreciation FY17-19 (US$ million) FY16 FY16-18 FY17 FY18 FY19 FY17-19 Budget Total AIP1 Budget Plan Plan Total AIP Total Depreciation - Technology and Systems 55.4 189.6 73.5 88.3 89.9 251.7 of which: Centrally-managed Depreciation 2 41 148 58 69 71 198 ITSVP's Own-managed Depreciation 3 13 34 11 14 14 39 Depreciation Charged to non-IBRD Units (IFC, MIGA, TFs) 4 2 8 4 5 5 15 1 Annual Investment Plan (AIP) as per FY16 WB Budget. 2 Centrally-Managed depreciation expenses are funded by the Institution. In FY12, Management endorsed a centralization of IT depreciation expenses with the main objective of better aligning IT capital investment decisions with the administrative budget planning while also ensuring that the existing IT asset base is adequately funded. 3 ITSVP's own-managed depreciation for the Business Continuity Center and the PC Program is funded mainly through chargeback. 4 IFC and MIGA will pay their share of the depreciation costs associated with WBG projects through Shared Service Agreements with IBRD. 8. Washington Facilities. Over the three-year planning period, Washington capital projects will increase administrative budget expenses by approximately US$4 million. 9. Country Office Facilities. Over the three-year planning period, Country Office capital projects will increase administrative budget expenses by about US$3 million. The administrative budget impact from the CO Facilities Phase II Global projects requirement of US$23 million (to replace some large CO leasehold properties with Bank-owned buildings) is not very significant over this three-year planning period given the lengthier implementation timeline of these projects. In addition, the long asset depreciation life cycle7 of Facilities projects tends to create minimal increases across fiscal years. 7 Land is not depreciated per accounting rules, acquisitions are depreciated over 50 years, and construction/repair projects are typically depreciated over 10 years. 31