FY18 World Bank Budget September 25, 2017 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION FY18 WORLD BANK BUDGET CONTENTS 1. OVERVIEW AND RECOMMENDATIONS ...................................................................................... 1 1.1 OVERVIEW ....................................................................................................................................... 1 1.2 FY18 BUDGET RECOMMENDATIONS ......................................................................................... 3 2. FY18-20 BUDGET FRAMEWORK ..................................................................................................... 4 2.1 STRATEGIC ALIGNMENT .............................................................................................................. 4 2.2 BUDGET SUSTAINABILITY........................................................................................................... 7 2.3 CONTINUED FOCUS ON EFFICIENCIES ................................................................................... 10 3. FY18 BUDGET ..................................................................................................................................... 16 3.1 ADMINISTRATIVE BUDGET PROPOSAL .................................................................................. 16 3.2 SOURCES AND USES OF FLEXIBILITY ..................................................................................... 16 3.3 OPERATIONS .................................................................................................................................. 19 3.4 IG&A UNITS.................................................................................................................................... 29 3.5 NON-UNIT SPECIFIC ALLOCATIONS ........................................................................................ 31 3.6 EXPENSE FUNCTIONAL VIEW ................................................................................................... 33 4. CAPITAL BUDGET ............................................................................................................................. 36 4.1 OVERVIEW ..................................................................................................................................... 36 4.2 FACILITIES ..................................................................................................................................... 36 4.3 TECHNOLOGY AND SYSTEMS................................................................................................... 36 ANNEXES ANNEX I. PROGRAM COST SUMMARY .............................................................................................. 37 ANNEX II. INDICATORS OF BUDGET SUSTAINABILITY, STRATEGIC ALIGNMENT AND BUDGET EFFICIENCY ......................................................................................................................... 42 ANNEX III. FULL COST RECOVERY OF STAFF BENEFITS ............................................................. 46 TABLES Table 2.1: FY18 Emerging Budget Trajectories (US$ million) .................................................................... 9 Table 2.2: Expenditure Review Total Savings Estimates, May 2017 (US$ million).................................. 10 Table 2.3: Expenditure Review Reconciliation Against FY18 Target Baseline (US$ million).................. 13 Table 3.1: FY17 WB Budget and Proposed FY18WB Budget Trajectory (US$ million) ......................... 16 Table 3.2: FY18 Sources and Uses of Flexibility (US$ million) ................................................................ 17 Table 3.3: FY17-18 Budget by Work Program and Funding Source (US$ million) .................................. 18 i FY18 WORLD BANK BUDGET Table 3.4: FY17-18 Budget Share by Work Program and Funding Source (%) ........................................ 18 Table 3.5: Lending Commitments (US$ billion) ........................................................................................ 19 Table 3.6: FY17-18 Operational Budget Envelopes (US$ million) ............................................................ 21 Table 3.7: Grant-making Facilities Budgets (US$ million) ........................................................................ 29 Table 3.8: FY18 IG&A Budget Envelopes (US$ million) .......................................................................... 30 Table 3.9: FY17 and FY18 Board-Related Budgets (US$ million) ............................................................ 31 Table 3.10: Centrally-Managed Accounts (US$ million) ........................................................................... 32 Table 3.11: FY17 and FY18 Functional Expense View of Administrative Expenses (US$ million) ......... 34 Table I.1: FY18 Funding for WB Work Program and Unit (US$ million) ................................................. 38 Table I.2: Overview of External Funds Projected Revenues FY18 by Unit (US$ million) ........................ 41 FIGURES Figure 2.1: Operational Share of Unit Budgets (excluding GMF) ................................................................ 5 Figure 2.2: Client Engagement Share of Operational Unit Budgets ............................................................. 6 Figure 2.3: FCV and FCV at Risk CE Budgets as a Share of Total CE Budget ........................................... 6 Figure 2.4: IBRD and IDA Budget Anchors with Proposed Increased Budget Trajectory .......................... 8 Figure 2.5: External Funds as a Share of Total Administrative Spending Plans .......................................... 9 Figure 2.6: Total Administrative Budget per US$ Billion Loan Approved (in US$ million) .................... 11 Figure 2.7: Total Administrative Budget per Lending Project Approved (in FY17 US$ million) ............. 11 Figure 2.8: Total Administrative Budget per US$ Billion Portfolio under Supervision (in US$ million) . 12 Figure 2.9: Total Administrative Budget per Project under Supervision (in FY17 US$ million) .............. 12 Figure 3.1: Evolution of the Country Engagement Bank Budget from FY17 to FY18 (US$ million) ....... 22 Figure 3.2: Country Engagement Bank Budget Allocations by Business Process for FY16-18 (US$ million)........................................................................................................................................................ 23 Figure 3.3: Country Engagement Bank Budget Allocation Shares by Business Process for FY16-18 ...... 23 Figure 3.4: FY18 Country Engagement Allocation Shares by Practice Groups ......................................... 24 Figure 3.5: Country Engagement Bank Budget Allocations for FCV & FCV at Risk Countries for FY16- 18 (US$ million) ......................................................................................................................................... 25 Figure 3.6: Country Engagement Bank Budget Allocations to Small States for FY16-18 (US$ million) 25 Figure 3.7: Full-time Bank Staff on Payroll .............................................................................................. 35 BOXES Box 3.1: Embedding the Cascade Across the Client Engagement Cycle ................................................... 26 ii FY18 WORLD BANK BUDGET ACRONYMS ASA Advisory Services and Analytics AFR Africa Region BB Bank Budget BETF Bank-Executed Trust Fund BPC Budget Planning and Consolidation BPS Budget, Performance Review, and Strategic Planning Vice-Presidency CCSA Cross-cutting Solution Areas CE Country Engagement CGIAR Consultative Group for International Agricultural Research CMA Centrally-Managed Account CO Country Offices CODE Committee on Development Effectiveness CPF Country Partnership Framework CRO Chief Risk Officer DEC Development Economics Vice-Presidency DFI Development Finance Vice-Presidency DGF Development Grant Facility DPF Development Policy Financing EAP East Asia and Pacific Region EBC Ethics and Business Conduct Vice-Presidency ECR External and Corporate Relations Vice-Presidency ECA Europe and Central Asia Region EFO Externally Financed Output ER Expenditure Review ESF Environmental and Social Framework FCV Fragility, Conflict and Violence GE Global Engagement GMF Grant-Making Facility GSD General Services Department GGEVP Equitable Growth, Finance and Institutions Practice Group GGHVP Human Development Practice Group GGSVP Sustainable Development Practice Group GPSA Global Partnership for Social Accountability HRD Human Resources Development Vice-Presidency IBRD International Bank for Reconstruction and Development ICSID International Centre for Settlement of Investment Disputes IDA International Development Association IDF Institutional Development Fund IEG Independent Evaluation Group IFC International Finance Corporation IG&A Institutional, Governance, and Administrative IJS Internal Justice System INT Integrity Vice-Presidency iii FY18 WORLD BANK BUDGET ITS Information & Technology Solutions Vice-Presidency LCR Latin America and Caribbean Region LEG Legal Vice-Presidency LLI Learning, Leadership, and Innovation MEF Mediation Facility MIGA Multilateral Investment Guarantee Agency MNA Middle East and North Africa Region OPCS Operations Policy and Country Services Vice-Presidency PAD Project Appraisal Document PCRF Post-retirement Contribution Reserve Fund PCS Program Cost Summary PFC Pension Finance Committee RAMP Reserves Advisory and Management Program PPM Program and Practice Management PSW Private Sector Window RAS Reimbursable Advisory Services RETF Recipient-Executed Trust Fund RM Resource Management SAR South Asia Region SBO Strategy and Business Outlook SCD Systematic Country Diagnostic SDG Sustainable Development Goals SPF State and Peace-building Fund STC Short Term Consultant TA Technical Assistance TRE Treasury Vice-Presidency VPU Vice Presidential Unit WBG World Bank Group WBT World Bank Tribunal WFA World Bank Group Finance and Accounting Vice-Presidency WPA Work Program Agreement iv FY18 WORLD BANK BUDGET 1. OVERVIEW AND RECOMMENDATIONS This document, which supports the key engagement with Executive Directors in this year’s strategic planning and budget discussions, presents the FY18 World Bank Budget for Board approval. This budget proposal reflects close consultations between Executive Directors and Management throughout the strategic planning, budgeting and performance management process for the World Bank Group. 1.1 OVERVIEW 1. The World Bank Group In recent years, the World Bank Group (WBG) has stepped forward to has embarked on a meet the emerging development challenges articulated in the Sustainable number of reforms to Development Goals. The WBG Twin Goals and the Forward Look paper meet emerging chart a course to building a better and stronger World Bank Group that can development challenges. meet these challenges. Implementation of the Forward Look will enable the Bank to pursue a “2x3” strategy, i.e., achieving the twin goals with investments in three priority areas, namely Sustainable and Inclusive Growth, Human Capital, and Resilience. The strategic planning and budgeting process enables management across the WBG to convert strategy to action on the ground, with a focus on five key areas to ensure the WBG remains “fit for purpose:” (i) serve all client segments, (ii) lead on global issues, (iii) mobilize financing, (iv) improve the business model, and (v) ensure adequate financial capacity. 2. The World Bank has The World Bank (WB) has placed itself on a stronger financial footing and strengthened its is better equipped to meet the growing demands of its clients. The IDA financial position and replenishment discussions concluded in December 2016 with a is on track to meet all groundbreaking US$75 billion replenishment, around 50 percent higher of its FY18 budget than IDA-17. This will enable IDA to scale up interventions over the next sustainability goals. three years, including a doubling of lending to Fragility, Conflict and Violence (FCV) affected countries, and to support critical governance and institution building, jobs and economic transformation, climate change, and gender equality. Through the financial reforms and the Expenditure Review (ER), the Bank has successfully implemented measures to increase revenues and contain expenditures through savings and efficiencies. The Bank is on track to meet its target of US$300 million in Expenditure Review savings by FY18, as part of broader savings of US$400 million for WBG institutions and Trust Funds. In addition, in a landmark achievement, IBRD and IDA will each fully cover administrative expenses with revenues generated from their operations and meet their budget sustainability principles in FY18. In the case of IBRD, this will be the first time that this has been achieved on a sustainable basis in at least 20 years, as IBRD administrative 1 FY18 WORLD BANK BUDGET expenses have for many years been funded in part from earnings from capital. 3. Management is Recognizing the need to maintain budget discipline and adhere to the ER proposing an target on the one hand, and additional work program pressures (in both administrative budget volume and scope) on the other, Management is proposing a US$2,550 of US$2,550 million, million administrative budget for FY18. This represents an increase to the and a capital budget of FY18 administrative spending trajectory, as presented in last year’s US$198 million for Budget Paper, of US$19 million, and an increase in the funding trajectory FY18. for Grant-making Facilities (GMFs) of US$5 million for the Consultative Group for International Agricultural Research (CGIAR). The FY18 administrative budget represents a 1.0 percent increase over the FY17 budget in nominal terms and a 1.3 percent decrease in real terms. Management is also proposing a capital budget of US$198 million for FY18, comprising US$113 million for Facilities investments and US$85 million for IT investments. Chapter 3 provides details underlying the budget administrative proposal and further details on the capital budget proposal are set out in Chapter 4. 4. The FY18 budget has Management has built its budget plans around the following three key been framed taking into principles: account the need to align spending plans a) Direct resources toward strategic priorities agreed during the W with strategic priorities, process including (i) the preparation and delivery of the pipeline for meet the Bank’s budget IDA and FCV scale-up built around IDA-18’s five themes and the sustainability goals, Private Sector Window (PSW); (ii) maintaining engagement in IBRD and promote greater countries and optimizing lending delivery while capital options are efficiency in the use of considered; (iii) developing and implementing WBG approaches to resources. “creating markets”, catalyzing private sector investments, to address the infrastructure gap; (iv) speeding up support and innovation on key global public goods and corporate commitments, such as climate change, fragility, displacement, pandemics, domestic resource mobilization, and resilience to shocks; (v) implementing the WBG Gender Strategy, mainstreaming it into operational work; and (vi) investments in internal reforms to ensure the Bank remains “fit for purpose”, e.g., agile and administrative simplification initiatives, safeguards and procurement reform, strengthening knowledge management, increasing field presence, especially in FCV countries, continuing adjustment of span of control in operations, improving resource management, and continued Trust Fund reform and further integration of external funds into strategy and budget. To better meet these challenges, Management is improving the incentive system and management of its staff through the implementation of the FY17-19 People Strategy. 2 FY18 WORLD BANK BUDGET b) Ensuring budget sustainability with a budget that allows the Bank to meet the budget anchor targets in FY18 and onwards for both IBRD and IDA. c) Promoting efficiency by pursuing savings that will ensure the Bank meets its Expenditure Review target in FY18, implementing Business Reviews of SEC, TRE, CRO and OPCS in FY18, and enhancing efforts to achieve further efficiencies and savings beyond FY18. 1.2 FY18 BUDGET RECOMMENDATIONS 5. Management seeks Management seeks Board approval of the following FY18 Budget Board approval of the recommendations: FY18 Budget. • That the total administrative budget (Bank Budget) be set at US$2,550 million, managed within a range of +/- 2 percent. This includes: o An indicative budget of US$87.7 million for Executive Directors; o US$13.0 million for Board of Governors, Development Committee Secretariat, and Inspection Panel; o US$17.1 million for the Corporate Secretariat; and o US$29.2 million for the Independent Evaluation Group. This is subject to a separate approval process by CODE. • That the capital budget be set at US$198 million. 3 FY18 WORLD BANK BUDGET 2. FY18-20 BUDGET FRAMEWORK This section discusses the key strategic priorities in light of the emerging development agenda and the principles used in determining the size of the expenditure envelope for FY18-20 based on the institution’s financial outlook in the context of the financial sustainability framework, and the implementation of the Expenditure Review and other efficiency initiatives. 6. The budgetary Resource allocation decisions for the planning period FY18-20 were implications of priorities based on the following three broad principles: that have emerged from the W process have been • Strategic alignment of resources to priorities, particularly in view of assessed against three the Forward Look and IDA-18 commitments; principles, namely • Budget sustainability - ensuring that the IBRD and IDA Budgets are Strategic Alignment, affordable; and Budget Sustainability • Efficiency - achieving the Expenditure Review targets in FY18 and and Efficiency. driving further efficiencies. 2.1 STRATEGIC ALIGNMENT 7. Implementation of the Endorsed by shareholders at the 2016 Annual Meetings, the Forward Forward Look enables Look Paper provides a roadmap for a better and stronger Bank. It the Bank to pursue its positions the WB to serve its members with reforms to (i) assist all client “2x3” strategy: segments, (ii) lead on global issues, (iii) mobilize financing, (iv) improve achieving the twin goals the business model, and (v) ensure adequate financial capacity. with investments in three priority areas, namely Sustainable and Inclusive Growth, Leading on Human Capital, and Global Issues Resilience. Ensuring Adequate Mobilization Financial Capacity Twin Goals (i) Eliminating Extreme Poverty (ii) Boosting Shared Prosperity Improving the Assisting All Business Model Client Segments 4 FY18 WORLD BANK BUDGET 8. The FY18-20 W process The FY18-20 planning process has paid attention to the need to resource has addressed the Forward Look paper priorities, directing funding to critical aspects such substantive elements of as scaling up IDA, especially in FCV countries, increasing the “2x3” strategy. decentralization, enhancing security, implementing the new Procurement Framework and Environmental and Social Framework (ESF), expanding Agile Bank reforms, and knowledge management. Regional and GP strategies are built on the “2x3” strategy, as well as key Forward Look paper priorities such as creating markets, climate action, gender, and crisis response. 9. As a result, the FY18 Management has continued to shift resources towards operations and budget further aligns client facing services. As shown in Figure 2.1, the relative share of Bank resources with key Budget (BB) allocated to operational units and programs (i.e., excluding strategic priorities. the Grant-making Facilities and central accounts) increases from 56.2 percent to 57.2 percent between FY17 and FY18. Figure 2.1: Operational Share of Unit Budgets (excluding GMF) Within operational units, resources have been shifted towards Client Engagement (Country Engagement and Global Engagement) and away from operational overheads (Program and Practice Management). See Figure 2.2. 5 FY18 WORLD BANK BUDGET Figure 2.2: Client Engagement Share of Operational Unit Budgets 60.0% 58.0% 56.0% 54.9% 1 53.7% 54.1% 54.0% 52.0% 50.0% FY16 FY17 FY18 1 Reflects the transfer of International Offices Budget from ECA to ECR in FY17 W process decisions also included shifting Country Engagement resources from IBRD countries to IDA countries, reflecting the increased IDA-18 scale up (see further details in section 3.3). In addition, the share of Country Engagement resources for FCV (both IDA and IBRD) and FCV at Risk countries1 has increased from 17.9 percent in the FY17 budget to 19.5 percent in the FY18 budget, illustrating a greater commitment to FCV activities (see Figure 2.3). Figure 2.3: FCV and FCV at Risk CE Budgets as a Share of Total CE Budget 30.0% 25.0% $143m $115m $121m 19.5% 20.0% 18.3% 17.9% 15.0% 10.0% FY16 FY17 FY18 For Institutional, Governance, and Administrative (IG&A) units, within an overall context of tight budgetary constraints, Management has targeted the key priority areas of staff security, implementation of the complex IDA-18 Financing Framework, and implementation of the new Procurement Framework and Environmental and Social Framework for incremental funding. Details on the allocation of resources for FY18 across operational and IG&A units and across functions are provided in Chapter 3. 1 Comprises Guinea, Nepal, Niger, and Tajikistan as per IDA methodology. 6 FY18 WORLD BANK BUDGET 2.2 BUDGET SUSTAINABILITY 10. A combination of Through a combination of measures designed to increase revenues (loan Margins for Maneuver volumes and charges) and contain spending (Expenditure Review) the and budget sustainability Bank is expected to achieve the budget anchor targets in FY18. The measures have placed budget anchor principle requires that the Bank’s own administrative the Bank on firmer resources (or Bank budget) should be covered by the revenues generated financial footing to meet from its lending operations. the budget anchors in FY18. As referred in Figure 2.4, the IDA budget anchor has always been close to 100 percent and is projected to be at or below 100 percent in FY18. Unlike IDA, IBRD expenses have not been covered by revenues from lending for many years. However, as a result of successful efforts to grow revenues and contain spending, the IBRD anchor is projected to fall from a historical high of 189 percent in FY10, and 148 percent even as late as FY15, to below 100 percent in FY18. Consequently, the FY18 IDA anchor is estimated at 98 percent and the projected FY18 IBRD anchor is estimated at 91 percent. Nevertheless, because of the volatility of the IBRD/IDA cost sharing ratio, and of potential shortfalls of loan revenues for IBRD/IDA and external funds, the budget anchor space is still susceptible to unexpected changes2. 2 In particular, the incremental costs for the preparation of the IDA-18 scale-up in FY18 ahead of the related but later materialization of incremental IDA revenues gives rise to a small possibility that IDA expenses may slightly exceed revenues in FY18. 7 FY18 WORLD BANK BUDGET Figure 2.4: IBRD and IDA Budget Anchors with Proposed Increased Budget Trajectory IBRD Anchor 1,400 189% 200% Expenses/Revenues US$ million 1,200 160% 158% 155% 147% 148% 160% 135% 1,000 Budget Anchor % 109% 120% 800 91% 600 80% 400 40% 200 0 0% FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 IBRD loan spread revenue IBRD-funded expenses IBRD budget anchor IDA Anchor 1,600 120% 98% 102% 100% 100% 98% Expenses/Revenue US$ million 1,400 93% 96% 98% 94% 100% 1,200 Budget Anchor % 80% 1,000 800 60% 600 40% 400 20% 200 0 0% FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 IDA revenue IDA-funded expenses IDA budget anchor 11. Management is Recognizing the need to maintain budget discipline and adhere to the proposing a budget of ER target on the one hand, and additional work program pressures US$2,550 million in (volume and scope) on the other, Management is proposing a FY18 FY18 which balances the budget of US$2,550 million (Table 2.1). This represents an increase on need to fund a growing the FY18 administrative spending trajectory, as presented in last year’s program and maintain Budget Paper, amounting to US$19 million and an increase in the GMF financial discipline. funding trajectory of US$5 million for CGIAR. The FY18 administrative budget represents a 1.0 percent increase over the FY17 budget in nominal terms and a 1.3 percent decrease in real terms. 8 FY18 WORLD BANK BUDGET Table 2.1: FY18 Emerging Budget Trajectories (US$ million) FY17 FY18 Current Trajectory (FY17-FY19 as per FY17 WB Budget Document) 2,524 2,526 Revision to Trajectory 24 Of which - Work Program increase 19 Of which - CGIAR increase 5 Revised Trajectory 2,524 2,550 IBRD Anchor 109% 91% Available for IBRD net income retention/transfer 120 1 IDA Anchor 100% 98% Available for other uses of IDA income 5 24 1 FY18 based on IDA-18 revenue definition. 12. External funds represent The base case scenario for FY18 envisages growth in Bank Executed a significant share of Trust Funds (BETF) of 6 percent. External funds have grown total administrative significantly as a source of funds in recent years, but this share is spending. expected to stabilize. In the case of Trust Funds, the Bank maintains a stock of funds amounting to almost two years of requirements, leaving the Bank time to adjust to any significant drop in contributions. 13. Progress continues in Strategic fundraising plans are being developed for business units to aligning external funds further align external funds and priorities. Forecasting of external funds with strategic priorities, usage and their alignment with strategic priorities are being improved improving cost recovery through their earlier integration into work program agreements and the and integrating Trust introduction of new budget planning and reporting systems. Due to the Funds into budget size and importance of external funds, further efforts are being made to plans. accelerate Trust Fund reform and deepen Trust Fund integration. Figure 2.5: External Funds as a Share of Total Administrative Spending Plans 40% 37% 35% 36% 35% 34% 33% 30% 31% 29% 30% 27% 25% 20% FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 9 FY18 WORLD BANK BUDGET 2.3 CONTINUED FOCUS ON EFFICIENCIES 14. Expenditure Review The Expenditure Review (ER) program will be fully implemented in measures and ongoing FY18, with the Bank meeting its target. Together with other efforts, the Business Reviews ER has helped the Bank meet its budget anchors and redirect resources support more efficient toward strategic priorities and corporate commitments. use of resources. The Internal Audit Department (IAD) review, completed in June 2016, confirmed that the ER program was delivering as expected, that savings had been firmly embedded in budget trajectories and that Management had instituted an effective governance framework to oversee program implementation. On completion of the ER program in FY18, IAD is planning to perform an ex-post review and will report to the Board on its findings. Table 2.2 provides a summary of the evolution of ER savings since initial May 2015 estimates. These confirm that the Bank is on its way to achieve the savings originally targeted. Table 2.2: Expenditure Review Total Savings Estimates, May 2017 (US$ million) Previous WBG Latest WBG IBRD/IDA Estimates Estimates IFC MIGA ` May 2015 May 2017 Total o/w BB o/w BETF Immediate Measures 110 133 96 71 25 36 1 Group-Wide Measures 54 42 29 24 5 13 1 Finance, Tech & Corporate 84 99 92 91 1 7 - Operations 100 84 78 78 - 6 - Additional Measures 48 52 42 33 9 10 - Total 396 410 336 296 40 72 1 Board Related Savings 8 7 6 6 - 1 - Total 404 417 342 302 40 73 1 15. Building on the ER, the Business Reviews in FY16 and FY17 covered about half of the IG&A Bank is implementing a units, and further reviews are planned in FY18 and FY19. This practice program of Business follows from Management’s commitment to budget discipline through Reviews across IG&A benchmarking and ensuring continued efficiency focus. The next wave units to monitor of business reviews will build on lessons learned in the first two years. efficiency and assist in Management will put in place an enhanced peer review and governance sizing of budgets. This mechanism and will make greater use of outside expertise where program will be appropriate. Starting from FY20, and as requested by the Board, extended to operational Management will conduct business reviews for all operational units. units from FY20. 10 FY18 WORLD BANK BUDGET 16. Comparing the FY18 While program costs will increase modestly as demand for Bank services budget envelope with grows, this growth will be managed within the budget anchors, expected commitments demonstrating the Bank’s commitment to a financially sustainable budget and with the size of the trajectory. As illustrated in Figures 2.6-2.9 below, comparing the FY18 portfolio demonstrates budget envelope with expected commitments and with the size of the the Bank’s ongoing portfolio demonstrates the Bank’s ongoing aggregate efficiency despite aggregate efficiency the growing volume and scope of our work (see Annex II for a breakdown despite the growing of these indicators for IBRD and IDA). volume and scope of our work. Figure 2.6: Total Administrative Budget per US$ Billion Loan Approved (in US$ million) 120 88 92 90 88 85 100 83 79 US$ million 80 67 62 61 53 59 54 53 60 46 39 40 20 - IBRD+IDA Figure 2.7: Total Administrative Budget per Lending Project Approved (in FY17 US$ million) 16 14 12 10 11 10 10 10 US$ million 9 9 10 9 9 8 8 9 8 7 7 8 6 6 4 2 - IBRD+IDA 11 FY18 WORLD BANK BUDGET Figure 2.8: Total Administrative Budget per US$ Billion Portfolio under Supervision (in US$ million) 30 25 22 22 20 21 20 20 17 US$ million 17 15 14 14 15 14 15 13 12 11 11 10 5 - IBRD+IDA Figure 2.9: Total Administrative Budget per Project under Supervision (in FY17 US$ million) 3.0 2.5 2.0 1.7 1.7 1.7 US$ million 1.6 1.6 1.6 1.6 1.5 1.6 1.6 1.6 1.6 1.4 1.5 1.5 1.4 1.5 1.0 0.5 - IBRD+IDA 17. Proposed changes to the As set out in the FY17 Budget Paper, and reproduced below, the agreed budget trajectory in FY18 trajectory that would meet the ER was US$2,545 million, and the FY18 fall within the ER originally planned FY18 budget trajectory was US$2,526 million, target. leaving a buffer of US$19 million. Two adjustments were made in framing the FY18 Budget proposal. These include (i) an increase in the budget trajectory of US$19 million, and (ii) an increase in the ER trajectory to accommodate a US$5 million increase in the GMF trajectory for CGIAR. Further details on these two increases totaling US$24 million are provided in Chapter 3. 12 FY18 WORLD BANK BUDGET Table 2.3: Expenditure Review Reconciliation Against FY18 Target Baseline (US$ million) As Presented in FY17 WB Budget Baseline Everything Else Being Equal Trajectory 2,793 Less: GMF Phase Out (85) Everything Else Being Equal Trajectory (BB Only) 2,708 ER Savings Less: ER Target, Gross Savings (300) Add: 25% reinvestment 75 Net ER Savings (225) Adjustments Add: IDA-18 Scale up 62 BB Target Trajectory, after Net ER savings and adjustments 2,545 FY18 Budget Trajectory in FY17 Budget Paper 2,526 ∆ FY18 Existing Budget and Target Trajectories in FY17 Budget Paper 19 FY18 Budget Adjustment to GMF Trajectory for CGIAR 5 18. Building on the ER As noted earlier, achievement of the ER targets required a number of efficiency gains, expenditure policy reforms as well as changes to the Bank’s operating Management is working model, the benefits of which will continue to accrue to the Bank beyond on initiatives to further FY18. In addition, the program of Business Reviews of VPUs will also promote efficiency and continue with the enhanced framework detailed above. budget discipline across the Bank. As we approach the end of the ER implementation period, Management intends to pursue further efficiencies. While at this time it would not be appropriate to revise the FY19-20 indicative target trajectory to reflect all possible efficiencies, given the uncertainties surrounding the future level of IBRD lending and related resource implications, Management is working to identify additional measures that will further promote efficiency across the Bank. Further analysis is being conducted to define these measures, related savings and implications for future budgets. The next paragraphs provide an indication of the planned directions. Management plans to further brief the Board in the Fall on them. 19. Management is A WBG Real Estate Council is being established to refine and implement strengthening the WBG real estate strategy, as well as set and approve real estate and governance over facilities standards and principles, and prioritize and approve specific investments in facilities large facilities investments in accordance with the strategy. This will and IT projects to ensure support Management in its efforts to review the Bank’s global footprint value-for-money. and global space standards, both in Washington and around the world, with a view to prioritizing and rationalizing spending on facilities overall. 13 FY18 WORLD BANK BUDGET ITS continues to implement new efficiency measures over and above those of the Expenditure Review. As part of the FY16 Business Review of ITS, it was agreed to seek opportunities to rationalize spending on ITS Operations and Maintenance (O&M). 20. As the largest spending The Bank will continue affordability assessments of annual workforce item, comprising around plans and limit hiring by VPUs where it is not affordable within their 56 percent of total budget trajectory. Furthermore, analysis is ongoing on the structure of spending, Management staffing in both operational units and IG&As with a view to fine-tune it will continue to ensure to reduce unnecessary layers. In addition, HRD will follow Board prudent management of guidance related to staff compensation issues. staffing costs. 21. The Bank is working to Overall, the Bank continues to pilot and rapidly scale up ideas that make identify innovations in our business model more agile. In selected operational units, pilots are working more flexibly, identifying opportunities to streamline internal processes where lessons through the Agile learned can be scaled up to create a more agile Bank. Incorporating cross initiatives, and will functional teams, pilots are underway on programs delivered in regions. continue to expand In the pilots, over a hundred interventions were identified through those efforts. bottom-up team workshops, and a quarter of these are being pursued. Almost 1,800 staff have been involved thus far, with plans to reach 50 percent of all staff in the coming year. Lessons learned are being used to enable the Bank to offer services with greater speed and more flexibility, while ensuring that staff remain engaged and empowered throughout the process. Examples of interventions that are improving the speed and quality of our work, while ensuring staff empowerment, include (i) risk- based flight paths for project preparation that allow for faster project concept approval and tailored review meetings according to specific project risks, and (ii) streamlined, agile Project Appraisal Documents (PADs) that eliminate redundancies and focuses on the added-value substance. 22. The Bank will also To build a strong institution in the long term, Management plans to pursue reforms aimed pursue administrative simplification more aggressively and capture the at streamlining cost savings that accrue from these efforts. These include (i) procedures and standardizing, automating and simplifying processes using lean processes to generate methodologies (e.g., Lean Six Sigma pilots on loan origination and Trust greater efficiencies in Fund activation) and robotics, and (ii) enhancing the Bank’s shared IG&A units. services model for more effective and efficient service delivery for staff. Going forward, all new initiatives and strategies must be properly costed and budgeted before being rolled out and implemented. 14 FY18 WORLD BANK BUDGET 23. The Bank will continue As part of an effort to strengthen transparency, predictability, and to upgrade Resource accountability over expenditures across the Bank, Resource Management Management systems (RM) systems and tools have been upgraded in the past year with the and tools, and make development of the Budget Planning and Consolidation system (BPC) to enhancements as strengthen and align budget and staff planning, among others. necessary based on user Implementation is at an advanced stage. A Resource Management feedback. reporting portal has also been developed this year and widely welcomed by managers and staff across the Bank, giving them real time access to reports. Further upgrades are planned for FY18. 24. Reforms to improve the A number of reforms to external funds are underway including (i) way the Bank manages alignment of external funds with strategic priorities and budgets, (ii) external funds will improved cost recovery, (iii) simplification and standardization of Trust continue to be Fund requirements, and (iv) improving transparency for donors through implemented. the Development Partner Center (DPC) portal. Priority will be given to advancing these reforms in FY18. 25. Further efforts will also As the current planning and budgeting model evolves, efforts will be made to strengthen continue to be made to strengthen the linkages between the Corporate the link between Scorecard and planning and budgeting papers across the World Bank planning, budgeting Group. The use of consistent metrics throughout will enhance and the Corporate transparency and accountability. Scorecard. 15 FY18 WORLD BANK BUDGET 3. FY18 BUDGET This section presents the specifics of the FY18 administrative budget proposal, and provides details on its impact on Operational Programs, IG&A units, other non-unit specific budgets, as well as an expense line view. 3.1 ADMINISTRATIVE BUDGET PROPOSAL 26. Management is The proposed Budget for FY18 is US$2,550 million, which is an overall proposing a budget of increase of US$24 million compared with the FY18 trajectory presented US$2,550 million for in the FY17 Budget Paper – comprising a US$19 million increase to FY18, as part of a cover higher expected administrative costs associated with the IDA-18 broader total funds scale up and other resource needs, and US$5 million for CGIAR (see envelope of US$4,046 Table 3.1). Compared with the FY17 budget, this is an increase of 1.0 million. percent in nominal terms and a decline of 1.3 percent in real terms. The “All Funds” FY18 envelope is expected to be around US$4,046 million (see Table 3.3). Table 3.1: FY17 WB Budget and Proposed FY18WB Budget Trajectory (US$ million) FY17 FY18 Proposed FY18 Budget Trajectory (Nominal) 2,524 2,550 % Change YOY 1.0% Proposed FY18 Budget Trajectory (in FY17$) 2,524 2,490 % Change YOY -1.3% 3.2 SOURCES AND USES OF FLEXIBILITY 27. The proposed budget At the time of the FY17 Budget Paper, it was not possible to anticipate increase (i) reflects an the extent of certain IDA-18 commitments, including the FCV scale up, expansion in the Bank’s the new and more complex IDA financing framework (blending donor program not foreseen a and market resources), the new IDA windows (PSW and refugees) and year ago, (ii) takes into other cost pressures. The developments of the past year have required the account redeployments Bank to adjust and recalibrate the budget trajectory. at the Bank and VPU level, and (iii) can be The total FY8 budget flexibility amounts to US$67 million. Some US$43 accommodated within million was identified through internal deployments, US$19 million by the Bank’s ER and utilizing space within the existing ER target trajectory, and US$5 million budget anchor targets. by increasing the trajectory for GMFs. 16 FY18 WORLD BANK BUDGET Table 3.2: FY18 Sources and Uses of Flexibility (US$ million) Sources Uses Sources of Internal Flexibility 43 Allocations to Operations Units (75%) 39 Benefits Recovery from Reimbursables 5 Lending & Supervision Coefficient Increase 7 Unallocated Flexibility Identified in FY17 WB Budget 1 Increase in Capacity of FCV CCSAs 2 Centrally-Managed Accounts (including LLI efficiency gains) 9 Global Public Goods 5 PCRF Advance Payment in FY17 16 Safeguards/Procurement Reforms 4 Corporate Contingency 12 Staff Decentralization/Country Office Facilities 12 Managerial Span of Control 8 Knowledge/Learning 4 Simplification/Agile Bank 4 Total 45 Already in the FY18 Trajectory (6) Trajectory Increase 24 Allocations to IG&A Units (25%) 13 Administrative Spending 19 Security 5 CGIAR 5 Safeguards/Procurement Reforms 4 Support to IDA-18 Scale Up 6 Total 15 Already in the FY18 Trajectory (2) Corporate Contingency 10 CGIAR 5 Total Sources of Flexibility 67 Total Uses of Flexibility 67 28. Allocations by Unit The resulting allocations across programs are set out in Tables 3.3 and reflect adjustments to 3.4 and discussed in further detail in Sections 3.3, 3.4, and 3.5 of this trajectories arising chapter. These highlight a shift in resources toward Operational Units, from additional and toward Client Engagement within these Operational Units. In flexibility, staff benefit addition, they reflect changes to VPU trajectories arising from benefit rate adjustments, ER rate adjustments, remapping of units arising from reorganizations (e.g., changes, and unit ECA and ECR), implementation of the ER, and inflation adjustments. reorganizations. Management plans to ensure that all Bank products and activities, however funded, reflect the full cost of staff. The Bank currently assesses a 50 percent charge on Washington-appointed staff salaries to the costs of its products but this charge only partially covers the institutional benefits of such staff, the balance being borne by the Bank’s Centrally- Managed Accounts. Effective July 1, 2017, the benefit recovery rate will revert to the originally set rate of 70 percent for Washington appointed staff, enabling unit-level decision making to be based on the full cost of staff, and to end the subsidy that IBRD and IDA currently provide to external funds. A 45 percent benefit rate will also be introduced for Country Office appointed staff. The Country Office rate will be discounted for external funds cost recovery purposes until FY19. To reflect this policy change, Bank Budget unit trajectories have been adjusted upwards from FY18 in a cost neutral manner, with corresponding reductions in the Bank’s Centrally-Managed Accounts. 17 FY18 WORLD BANK BUDGET Table 3.3: FY17-18 Budget by Work Program and Funding Source (US$ million) BB All Funds INDICATIVE BUDGET TRAJECTORIES 1 FY17 Restated FY17 Restated FY18 FY18 WB Budget FY17 WB Budget FY17 CLIENT ENGAGEMENT 674 752 820 1,465 1,543 1,745 Country Engagement 601 672 732 1,218 1,289 1,460 Global Engagement 73 79 88 247 253 285 Program & Practice Management 602 648 674 699 745 764 Total Operational Units 1,276 1,400 1,494 2,164 2,288 2,509 Grant Making Facilities 44 44 35 44 44 35 Total Operations 1,320 1,444 1,529 2,208 2,332 2,544 IG&A PROGRAMS 981 1,076 1,116 1,245 1,340 1,401 Institutional Services 362 407 434 505 550 593 Governance Services 199 216 219 217 234 236 Administrative Services 420 453 463 524 556 571 TOTAL: ALL UNITS 2,301 2,520 2,644 3,454 3,672 3,944 TOTAL: ALL UNITS (excl. GMFs) 2,257 2,476 2,609 3,410 3,628 3,909 CENTRALLY MANAGED ACCOUNTS 407 188 101 418 200 102 o/w Corporate Contingency 12 12 10 12 12 10 TOTAL TRAJECTORY 2,708 2,708 2,746 3,871 3,871 4,046 o/w Funded by External Funds (184) (184) (196) (1,347) (1,347) (1,496) Net Trajectory Funded by IBRD/IDA 2,524 2,524 2,550 2,524 2,524 2,550 1 "Restated FY17" reflects FY17 WB Budget based on the new staff benefits recovery rates effective July 1, 2017. FY18 trajectory is similarly stated on the new basis. Table 3.4: FY17-18 Budget Share by Work Program and Funding Source (%) BB All Funds Share of Budget Trajectory 1 FY17 Restated FY17 Restated FY18 FY18 FY20 WB Budget FY17 WB Budget FY17 CLIENT ENGAGEMENT 29.9% 30.4% 31.4% 43.0% 42.5% 44.6% Country Engagement 26.6% 27.2% 28.1% 35.7% 35.5% 37.4% Global Engagement 3.2% 3.2% 3.4% 7.2% 7.0% 7.3% Program & Practice Management 26.7% 26.2% 25.8% 20.5% 20.5% 19.5% Total Operational Units 56.5% 56.6% 57.2% 63.5% 63.1% 64.2% IG&A PROGRAMS 43.5% 43.4% 42.8% 36.5% 36.9% 35.8% Institutional Services 16.0% 16.4% 16.6% 14.8% 15.2% 15.2% Governance Services 8.8% 8.7% 8.4% 6.4% 6.4% 6.0% Administrative Services 18.6% 18.3% 17.7% 15.4% 15.3% 14.6% TOTAL: ALL UNITS (excl. GMFs) 100% 100% 100% 100% 100% 100% 1 "Restated FY17" reflects FY17 WB Budget based on the new staff benefits recovery rates effective July 1, 2017. FY18 trajectory is similarly stated on the new basis. The International Offices budget of US$8.5 million was transferred from ECA’s PPM to ECR in FY17. This transfer is reflected in the above tables in FY18. If this transfer had been reflected in FY17, the Operational share of unit budgets (excl. GMF) in "Restated FY17" would be 56.2% for BB and 62.8% for All Funds. 18 FY18 WORLD BANK BUDGET 3.3 OPERATIONS 3.3.1 BY WORK PROGRAM AND VPU 29. Growing demand for Current projections for IBRD and IDA lending commitments suggest Bank services will be higher levels of lending overall. met by higher lending • IBRD delivery in FY16 was US$30 billion. In the context of a more volumes overall. In constrained capital environment, it is projected that IBRD’s existing addition, the “Cascade” capital will support lending of up to US$24 billion in FY17 and FY18 approach will allow the (see Table 3.5). IBRD’s capital position is the subject of ongoing Bank to make greater discussions between Management and Shareholders. leverage of these resources than in the • The IDA-18 envelope includes a doubling of resources to countries past. facing fragility, conflict and violence (FCV). Increased financing will also boost core IDA resources and dramatically expand IDA’s support for crisis response and pandemic preparedness, small states, and regional integration. The FY18 IDA pipeline is developing rapidly and is on track for a strong launch. • The Bank has developed a “Cascade” approach to facilitate greater leveraging of existing resources and development solutions to mitigate risks for private sector investors in developing countries, thereby crowding in private capital (see Paragraph 41). A new IDA Private Sector Window (PSW), introduced together with IFC and MIGA, will help mobilize private capital and scale up private sector development, particularly in fragile situations. Table 3.5: Lending Commitments (US$ billion) FY16 FY17 FY18 Actual Projection Projection IBRD 30 24 24 IDA 16 16 25 Total 46 40 49 19 FY18 WORLD BANK BUDGET 30. As Bank Operational As identified in the current budget and strategic planning process, the Programs expand, major operational priorities for FY18 include (i) ensuring delivery of budget trajectories are IDA-18 and scaling up engagement in FCV countries and small states, also being increased to (ii) maintaining engagement in IBRD countries, (iii) accelerating work fund key priorities. on global public goods and corporate commitments, including climate change, fragility, displacement, pandemics, domestic resource mobilization, and resilience to shocks, (iv) developing and implementing WBG approaches to “creating markets”, and (v) implementing the WBG Gender Strategy. These priorities are reflected in the budget trajectories for Operations. The proposed FY18 budget for Operations is US$1,529 million, an increase of US$86 million or 6 percent from FY17 (see Table 3.6). Of this increase, resources for Client Engagement have increased by US$69 million, including for Country Engagement (US$60 million) and Global Engagement (US$9 million) work to meet these priorities. PPM allocations have increased by US$26 million, while for GMFs have fallen by US$9 million. External funds complement Bank resources for Client Engagement work. Annex I presents an all funds view for these by VPUs and budget categories. 31. Allocations to Regions IDA-18 scale-up was a key driver in the CE realignments between reflect underlying regions, and to the Africa and South Asia regions in particular, with these business shifts. incremental resources supporting CMUs covering IDA countries, including FCV countries. IBRD budgets have also been tightened to reflect lending projections for FY18. 20 FY18 WORLD BANK BUDGET Table 3.6: FY17-18 Operational Budget Envelopes (US$ million) BB All Funds INDICATIVE BUDGET TRAJECTORIES 1 FY17 Restated FY17 Restated FY18 FY18 WB Budget FY17 WB Budget FY17 AFR CE 207 229 266 403 425 489 PPM 108 116 119 111 119 123 Total 315 345 385 513 543 612 EAP CE 84 96 105 180 193 232 PPM 54 59 61 55 61 66 Total 138 155 167 236 253 298 ECA CE 78 87 86 154 163 188 PPM2 58 62 54 59 64 55 Total 135 149 140 213 227 243 LCR CE 89 99 96 143 153 151 PPM 49 55 56 50 55 57 Total 138 153 152 193 208 207 MNA CE 51 57 60 149 155 166 PPM 33 36 36 38 42 37 Total 84 93 95 187 197 203 SAR CE 93 105 120 189 201 235 PPM 48 51 52 49 53 54 Total 141 156 172 239 254 289 All Regions CE 601 672 732 1,218 1,289 1,460 PPM 349 379 378 363 393 393 Total for Regions 950 1,051 1,111 1,581 1,682 1,853 GP/CCSAs GE GE 73 79 88 247 253 285 Total 73 79 88 247 253 285 GP/CCSAs PPM Equitable Growth, Finance and Institutions 72 76 77 84 89 89 Human Development 37 40 37 45 47 43 Sustainable Development 84 90 106 105 112 164 EAB and Other3 46 46 62 46 46 62 CCSAs 4 15 17 13 55 57 13 Total GP PPM 253 269 295 336 352 371 Total GP/CCSAs 326 349 383 583 606 656 Operational Grant Making Facilities 44 44 35 44 44 35 Total Operations 1,320 1,444 1,529 2,208 2,332 2,544 1 "Restated FY17" reflects FY17 WB Budget based on the new staff benefits recovery rates effective July 1, 2017. FY18 trajectory is similarly stated on the new basis. 2 The International Offices budget of US$8.5 million was transferred from ECA’s PPM to ECR in FY17. This transfer is reflected in the above tables in FY18. 3 Includes Extended Assignment Benefits (EAB) for all GP/CCSA staff and funding to support Agile Bank initiative. 4 FY17 CCSAs include Climate Change (CC), Public Private Partnerships (PPP) and Jobs. These units are consolidated under Sustainable Development (CC, PPP) and Human Development (Jobs) Practice Groups in FY18, reflecting the revised organizational structure. 21 FY18 WORLD BANK BUDGET 32. The outcome of the WPA Allocations to IBRD and IDA countries from the CE envelope are set out process shows a in Figure 3.1. Overall allocations to IDA countries have increased from substantial increase in US$359 million to US$415 million – an increase of US$56 million (16 allocations to IDA percent), bringing the IDA funded share of the Country Engagement countries in FY18. Work Program from 53 percent to 57 percent. The allocations to IBRD countries increased by US$4 million (1 percent), reflecting the Bank’s commitment to remain engaged in IBRD countries, albeit in an environment of constrained IBRD capital. Figure 3.1: Evolution of the Country Engagement Bank Budget from FY17 to FY18 (US$ million) 33. Country Engagement The distribution of the additional CE allocation has been spread across allocations across Business Processes (Figure 3.2) for (i) increased lending volumes for a business processes are growing program, (ii) higher lending and supervision coefficients reflective of strategic reflecting increased scope, and (iii) increased effort to support safeguard priorities emerging from and fiduciary reforms. As a result, the share of CE allocations to lending country dialogue. has been growing over FY16-18 (Figure 3.3). 34. Country Engagement The resources for fiduciary work respond to the need to support the allocations for fiduciary implementation of the new procurement framework, and the IDA-18 spending amount to scale up. Resources for fiduciary work represent 9 percent of total CE US$67 million in FY18. allocations in FY18. 22 FY18 WORLD BANK BUDGET 35. Country Engagement The resources for safeguards work respond to the need to support the allocations for implementation of the new Environmental and Social Framework, and environment and social the IDA-18 scale up. Resources for safeguards work represent 7 percent safeguards work of total CE allocations in FY18. amount to US$52 million in FY18. 36. Allocations for Advisory Additional CE resources were injected as part of the WPA process to Services and Analytics ensure that growth in lending and supervision volumes and coefficients (ASA) have broadly would not continue to be at the expense of critical Advisory Services and maintained their share Analytics (ASA). The outcome of the WPA process suggests that this of CE allocations since strategy was broadly successful, with ASA allocations held constant FY17. overall at about 21 percent of total CE spending (after the ER-related ASA rationalization between FY16 and FY17) (see Figure 3.3). Figure 3.2: Country Engagement Bank Budget Allocations by Business Process for FY16-18 (US$ million) +60 +44 732 672 628 195 175 +20 Lending1 144 297 Supervision1 260 272 +25 ASA 148 138 +12 150 Others2 75 88 +2 90 FY16 FY17 FY18 1 Incl udes Fiduciary a nd Safeguards 2 Incl udes Country Monitoring, CPFs, Portfolio Management, Quality As surance, Contingency, Col l aboration, Country Operations Support, and Internal Knowledge Ma nagement Figure 3.3: Country Engagement Bank Budget Allocation Shares by Business Process for FY16-18 23 FY18 WORLD BANK BUDGET 37. Country Engagement The FY18 CE allocations show Sustainable Development, including allocations across Safeguards, holding the largest share at 44 percent; Equitable Growth, Practice Groups reflect Finance and Institutions, including Fiduciary, with 32 percent; and strategic priorities Human Development with 14 percent. Regional, Cross-Cutting Solutions emerging from country Areas and Others, which includes regional contingencies, currently hold dialogue. a 10 percent share, but this amount will be reduced during the year as regional contingency funds are directed to the Practice Groups, whose allocations will increase. Figure 3.4: FY18 Country Engagement Allocation Shares by Practice Groups Fiduciary Human Equitable Growth, Development Finance & Institutions 14% 32% (of which 9% Fiduciary) Regional, Cross-Cutting Solutions Areas & Others 10% Safeguards Sustainable Development 44% (of which 7% Safeguards) 38. Country Engagement As illustrated in Figure 3.5, the CE allocation to FCV and FCV at risk allocations for fragility, countries (IDA and IBRD) increased by US$22 million (18 percent) conflict, and violence from US$121 million in FY17 to US$143 million in FY18. This is on (FCV) affected countries top of a US$6 million (5 percent) increase from FY16 to FY17. have increased significantly. The FCV and FCV at Risk country CE share of total CE spending for FY18 is projected to be 19.5 percent which compares with 17.9 percent in FY17. A portion of these additional resources will fund staff to work on these countries. As part of the IDA-18 replenishment deliberations, Management committed to deploy 50 more professional staff for FCV IDA by End-September 2017 and another 100 by end IDA-18. This is in addition to an increase of 50 staff that has already taken place in FCV countries since FY15. 24 FY18 WORLD BANK BUDGET Figure 3.5: Country Engagement Bank Budget Allocations for FCV & FCV at Risk Countries for FY16-18 (US$ million) 39. Country Engagement As illustrated in Figure 3.6, the CE allocation for small states (IDA and allocations to Small States IBRD) increased by US$10 million (a 29 percent increase) from US$35 have also increased by 29 million in FY17 to US$45 million in FY18. This is on top of a US$3 percent, on top of a 9 million (9 percent) increase from FY16 to FY17. Since FY16, CE percent increase in FY17. allocations to small states have increased by a total of US$13 million, a 41 percent increase. Figure 3.6: Country Engagement Bank Budget Allocations to Small States for FY16-18 (US$ million) +41% 45 35 18 32 +29% 15 13 +9% 10 7 1 7 1 8 1 6 7 4 2 2 3 3 5 FY16 FY17 FY18 AFR EAP ECA LCR MNA SAR 25 FY18 WORLD BANK BUDGET 40. Focus on implementation To operationalize IDA-18 policy commitments and allocations, is key to successfully sustained efforts and close coordination between Regions and deliver on the IDA-18 GPs/CCSAs are underway to: (i) build a strong and robust pipeline for scale-up and commitments IDA-18, strengthen project preparation, and support country capacity; agreed with partners. (ii) launch new facilities like the Private-Sector Window; (iii) implement the IDA-18 policy commitments; and (iv) ensure solid monitoring of IDA-18 implementation. In addition, the Bank has increased lending and supervision coefficients to reflect the more complex scope of work and challenging geographies the Bank faces, and coefficients for multi sector tasks have also been increased to reflect the increased need of closer collaboration. As the Bank is also committed to increasing its presence on the ground, additional resources have been made available for Extended Assignment Benefits (EAB). 41. The Bank has developed The Bank will redouble efforts to mitigate risks for private sector a “Cascade” approach to investors in developing countries, thereby helping to crowd in private facilitate greater capital. In this regard, the new IDA Private Sector Window (PSW), leveraging of resources. introduced together with IFC and MIGA, will help mobilize private capital and scale up private sector development, particularly in fragile situations. The “Cascade” approach is being embedded across the CE work program. As a start, nine pilot countries have been identified, and work is underway to explore and pursue opportunities through diagnostics and technical support in priority sectors. Technical assistance and policy work will also be done to address binding constraints. Finally, investment projects with potential for commercial finance will follow an adapted Cascade approach with commercial financing options explored and WBG support adapted accordingly. The Cascade is further illustrated in Box 3.1 below. Box 3.1: Embedding the Cascade Across the Client Engagement Cycle 26 FY18 WORLD BANK BUDGET 42. To support global Driven by client demand, the Climate Change Action Plan focuses on climate goals, the WBG activities that support the WBG’s core mission and build on its developed and is comparative advantage. It reconfirms the WBG’s commitment to implementing its increase the climate-related share of its portfolio from 21 to 28 percent Climate Change Action by 2020. Plan. 43. Gender gaps and their Issues including women’s employment, inclusion and gender-based impact on development violence will be addressed through the WBG Gender Strategy, feature prominently in integration of gender components in lending operations and ASA, and regional and practice Gender Innovation Labs (GILs). The WBG also partners closely with group Country agencies such as UN Women, Global Banking Alliance for Women, and Engagement work. the Chartered Insurance Institute. The Bank will continue to track projects to ensure that they include components addressing gender gaps. 44. Global Engagement The Bank’s Global Engagement work program supports non-country- funding from all sources specific priorities including (i) fulfilling corporate commitments, (ii) is expected to increase in supporting innovation and product development to support evidence- FY18 to US$285 million based policy making by developing global databases, tools and from US$253 million in evaluations, and maintain WBG leadership in global public goods, (iii) FY17. sustaining partnerships and global engagements, and (iv) providing operational support to facilitate knowledge services and enable rapid and flexible operational response. This includes US$88 million of Bank funding representing an increase of US$9 million from FY17. Bank funding has been allocated based on the following categories: • Corporate Commitments: Priorities include work on climate change, including the operationalization of the 28 percent lending target, implementation of the WBG Gender Strategy, support to the G20, implementation of the Cascade approach, fragility, pandemics, refugees, debt, jobs, citizen engagement, domestic resource mobilization and support for the SDGs. • Innovation/Product Development: A number of activities will be undertaken including support to the operationalization of the Twin Goals, design of country job strategies, accelerating progress on Universal Healthcare implementation strategies, analyzing the potential use of guarantees in FCV countries, as well as assessment of the impacts of climate on migration. 27 FY18 WORLD BANK BUDGET • Partnerships: Initiatives are underway including the development of a database on public-private partnerships, support to COP23 and G20 agendas on climate, as well as support to UN agencies and donor funded initiatives across a range of issues. • Operational Support: This includes allocations to Global Practices in support of strategy development and implementation, knowledge work, as well as issues requiring a rapid response. It also includes an increase of US$3 million in the allocations of the Gender and FCV CCSAs. 45. The Program and The budget for Program and Practice Management will increase from Practice Management US$648 million in FY17 to US$674 million in FY18, which is an (PPM) budget will increase of US$26 million (see Table 3.3). The PPM budget for increase by US$26 operational units funds the support and overhead costs, including million in FY18. management, support staff, Country Office Facilities. Additional resources provided to PPM in FY18 will address a number of priorities, including: reducing the front-line managerial span of control; supporting additional decentralization of staff to FCV countries which will increase spending on Country Office facilities, security, and Extended Assignment Benefits; GP contributions to the new Procurement Framework and Environmental and Social Framework implementation, including for training; and implementation of the Knowledge Management Action Plan. 3.3.2 GRANT-MAKING FACILITIES 46. Management has made In the case of Grant-making Facilities (GMFs) a decision was made to progress in phasing out, phase out Bank funding (e.g., Institutional Development Fund (IDF), mainstreaming or Development Grant Facility (DGF)); mainstream the activity into a reducing Bank funding Bank program and subject it to contestability (e.g., Global Partnership for Grant-making for Social Accountability (GPSA)); or reduce funding (e.g., State and Facilities. Peace-Building Fund (SPF), Consultative Group for International Agricultural Research (CGIAR)). 28 FY18 WORLD BANK BUDGET Table 3.7: Grant-making Facilities Budgets (US$ million) FY13 FY14 FY15 FY16 FY17 FY18 State and Peace-Building Fund (SPF) 33 - 25 21 14 5 Institutional Development Fund (IDF) 17 9 - - - - Development Grant Facility (DGF) 56 51 33 12 - - Global Partnership for Social Accountability (GPSA) 1 5 5 5 5 - - PD 50 50 47 30 30 30 Total Operational Activities Related to Grants 161 115 110 68 44 35 1 The activities of the GPSA have now been mainstreamed into the GE work program. 3.4 IG&A UNITS 47. IG&A unit allocation Additional funding has been allocated to IG&A units in FY18 to focus increases have been on three strategic priorities, namely: constrained with • Support to finance units for the IDA-18 scale up: A number of VPUs additional funding face additional responsibilities to address the IDA-18 expansion, in targeted very particular arising from the leveraging of the IDA balance sheet. selectively on key strategic priorities. • Support the implementation of the new Procurement Framework and Environmental and Social Framework3. • Support to enhance institutional security measures. Management will continue to seek greater efficiencies through strengthened management of Facilities and IT investments (including greater use of cloud computing and reviewing the Bank’s global footprint), and control of staffing levels to ensure alignment with budget trajectories. 3 For funding of safeguards and fiduciary work in operational units, see paragraphs 34 and 35. 29 FY18 WORLD BANK BUDGET Table 3.8: FY18 IG&A Budget Envelopes (US$ million) 30 FY18 WORLD BANK BUDGET 48. The FY18 WBG budget The FY18 budget for the Boards, which includes the Executive Directors for the Boards, SEC, Offices (EDs), the Board of Governors (BDG), the Development and IEG amounts to Committee Secretariat (DCS), and the Inspection Panel (IPN), amounts US$147 million. to US$100.7 million. The FY18 budget for SEC amounts to US$17.1 million, and that for IEG amounts to US$29.2 million. Although the Bank’s share of these budgets is authorized as part of this document, the sizing of these budgets is not determined by Management. Table 3.9: FY17 and FY18 Board-Related Budgets (US$ million) FY17 Restated FY18 WB Budget FY17 WB Budget Executive Directors (EDs) 79.0 85.7 87.7 Board of Governors (BDG) 7.3 7.3 7.3 DC Secretariat (DCS) 1.7 1.7 1.7 Inspection Panel (IPN) 3.6 3.9 4.0 Total Boards 91.7 98.6 100.7 SEC 15.5 16.8 17.1 IEG 26.3 28.8 29.2 Total 133.4 144.1 147.0 3.5 NON-UNIT SPECIFIC ALLOCATIONS 49. The changes in budget The principal movement in the Centrally-Managed Accounts (CMAs) in for the Centrally- FY18 is due to the change in the staff benefit recovery rates as explained Managed Accounts are previously. The FY17 restated information in Table 3.10 shows a principally due to the decline in budget for the CMAs by US$219 million as budgets are changes to the staff correspondingly transferred to VPUs to compensate them for the benefit recovery rate adjusted benefit recovery rates. After adjusting for the benefit rate and the scaling down of increase, the net change in the budget for the CMAs between Restated funds set aside for staff FY17 and FY18 is US$87 million, as explained below: separations. • Budget Recoveries in FY18 comprise principally the recovery of the staff benefit charge from both units and external funds as well as other recoveries for indirect costs. The increase from FY17 is due to a combination of the elimination of the Washington-appointed staff cost subsidy to external funds and salary increases. • Corporate Contingency is set at US$10 million in FY18 (reduced from US$12 million in FY17). 31 FY18 WORLD BANK BUDGET • Depreciation is expected to increase by US$11 million (12 percent) over FY17 primarily due to an increase in Centrally-Managed ITS depreciation. This reflects the downstream impact of the significant ramp up of ITS investment over recent years. • Funding for Institutional Programs is decreasing by US$53 million (38 percent). This decline is mainly due to the completion of the Expenditure Review and accompanying scaling down of funding for the Staff Separation program (US$45 million). Unallocated LLI savings are fully utilized in FY18 (US$8 million) and are a source of flexibility as presented in Table 3.10. Other Institutional Programs are expected to stay relatively flat. • Centrally-Managed Staff Benefits expenses are expected to increase by US$52 million (7 percent) due to a combination of salary and staff growth from original FY17 budget estimates. Table 3.10: Centrally-Managed Accounts (US$ million) FY17 Restated FY18 $ Change % Change WB Budget FY17 A B C=(B-A) (C/A) Budget Recoveries (613) (842) (937) (95) 11% Corporate Contingency 12 12 10 (2) -17% Depreciation 91 91 102 11 12% Institutional Programs 138 138 85 (53) -38% Staff Separations 59 59 14 (45) -76% Washington real estate costs 31 31 32 1 3% Business Continuity 18 18 18 - 0% HRD-managed awards programs 4 4 4 - 0% Corporate insurances 4 4 4 - 0% Community Connections 3 3 3 - 0% Evacuation costs 2 2 2 - 0% Unallocated LLI efficiency gains 8 8 - (8) -100% Other programs 9 9 8 (1) -11% Staff Benefits & Allowances 779 789 841 52 7% HRD-managed Staff Benefits 233 243 251 8 3% Tax Allowances 122 122 129 7 6% Staff Retirement and PCRF 424 424 462 38 9% Total 407 188 101 (87) -46% 32 FY18 WORLD BANK BUDGET 50. The Bank’s required Using the PFC’s approved FY18 rates, required contributions to the contributions to the staff Staff Retirement and related plans are expected to increase to an post-retirement plans are estimated total of US$398 million in FY18 compared to US$380 million based on actuarial in FY17. This change is a combination of a slight increase in the recommendations actuarially determined contribution rate to 30.15 percent from FY17’s approved by the Pension rate of 29.99 percent, and projected salary increases. Total Staff Finance Committee Retirement Plan costs, comprising contributions to the plans and (PFC). contributions to the Post-Retirement Contribution Reserve Fund (PCRF) will increase from US$459 million projected in FY17 to US$462 million in FY18. 51. The PCRF was The Bank’s contributions to the staff post-retirement benefit plans has established in FY13 been set at 35 percent of net salaries, above the actual annual contribution with the objective of rate currently recommended by the actuaries, so that the excess reducing budget (difference between the actual rate determined by PFC and the 35 percent volatility resulting from fixed contribution rate) can be added to the PCRF in order to build up the the Bank’s Reserve Fund. The balance of the Fund is projected to be US$263 contributions to the million at the end of FY18. staff post-retirement plans. 52. In FY17, Management The Board had agreed that an FY15 obligation to contribute US$16 settled a US$16 million to the PCRF could be deferred to FY18. Based on anticipated million deferred savings in the current year, Management decided to settle this obligation contribution to the in FY17, resulting in creating flexibility of US$16 million in FY18. PCRF, reducing pressures on the FY18 budget. 3.6 EXPENSE FUNCTIONAL VIEW 53. The functional expense The Bank follows a dollar budget approach which allows budget holders view shows staff costs to flexibility to vary inputs as long as they stay within staffing affordability be the main expense parameters and their authorized budgets. As a result, the Bank does not category. set specific budgets by expense category for staff salaries, short term consultants, or travel. Accordingly, the functional expense line view presented in Table 3.11 below is an illustrative decomposition of the administrative budget by expense line item. Nevertheless, as the relative shares of the expense items have remained relatively stable over the years, the estimates below represent the current view of the most likely outcome. The actual outcome may differ because work programs vary during the year, and decisions are made to respond to changing business needs that may entail trade-offs between different expense categories. 33 FY18 WORLD BANK BUDGET Table 3.11: FY17 and FY18 Functional Expense View of Administrative Expenses (US$ million) FY17 FY18 Projections Projections Type of Expense BB+Reimb. All Funds BB+Reimb. All Funds Percent of Percent Percent Percent US$m Total US$m of Total US$m of Total US$m of Total Fixed Expenses 2,268 76% 2,607 67% 2,312 76% 2,701 67% Of which: Staff Salaries and Benefits 1,890 63% 2,178 56% 1,922 63% 2,255 56% 1 Other Fixed Expenses 378 13% 429 11% 390 13% 446 11% Variable Expenses 700 24% 1,268 33% 724 24% 1,310 33% Of which: ST Consultants & Temporaries 214 7% 610 16% 221 7% 631 16% Travel Costs 224 8% 336 9% 235 8% 350 9% Contractual Services 218 7% 266 7% 224 7% 273 7% Other Variable Expenses 2 44 1% 57 1% 45 1% 57 1% Total Unit Gross Expenses 2,968 100% 3,875 100% 3,036 100% 4,011 100% Grant Making Facilities (GMFs) 44 57 35 35 Total Gross Admin Expenses (incl. GMFs) 3,012 3,932 3,071 4,046 Reimbursable Revenues and Fee income (488) (521) Total Net Admin Expenses (incl. GMFs) - BB Only 2,524 2,550 1 Other fixed expenses include Communications & IT, Equipment & Building, Depreciation, and TF Indirect costs. 2 Other variable expenses include Supplies, Printing, and other indirects costs. FY18 projected administrative expenses on an All Funds view are expected to grow by 2.9 percent (US$114 million), compared to FY17 projections of expenditures4, mainly driven by an increase in external funds of 6.3 percent (US$88 million) with Bank Budget increasing by 1.0 percent (US$26 million). Staffing is the main expense category, representing about 56 percent of total unit gross expenses on an All Funds view (63 percent of Bank Budget). 4The difference between the FY17 projection of US$3,932 million and the US$3,871 million presented in Table 3.3 is due to revised estimates of External Funds from the FY17 Budget. 34 FY18 WORLD BANK BUDGET 54. The average number of In terms of staff count, the average level of full-time Bank staffing in full- time Bank staff has FY17 has been about one percent above the average of FY16 (refer to increased by about 1 Figure 3.7 below). Terminations of full-time staff, including those percent in FY17. related to the phasing out of the Extended Term Consultants/Temporaries and Junior Professional Associates, were offset by new hires mainly in operational units. Figure 3.7: Full-time Bank Staff on Payroll 55. The People Strategy for The People Strategy for FY17-19 prioritizes areas that will have the most FY17-19 prioritizes impact on the WBG’s ability to achieve strong business outcomes, while areas that will have the strengthening the Employment Value Proposition (“EVP”). The strategic most impact on the staffing reviews by HRD is one element of the new People Strategy for WBG’s ability to FY17-19 which is anchored on five areas of focus: (i) leveraging the achieve strong business WBG’s global and diverse talent; (ii) building and developing leadership outcomes. and managerial capacity; (iii) strengthening performance and rewards; (iv) promoting the health, safety, and well-being of staff; and (v) improving the WBG’s organizational effectiveness. Three cross cutting themes of diversity and inclusion, FCV and focus on HR fundamentals are embedded throughout the action items in the strategy. To this end, efforts will be made to strengthen technical skills, and align demand with business needs and corporate priorities, while remaining within the proposed budget envelope. 56. All other expenses are In terms of other expense categories, FY18 projections reflect the growth estimated to grow in in total administrative expenses from projected FY17 levels and a stable FY18 by 2.1 percent share of major line items to total costs. These costs are driven by the needs across all funds. of Operational units and increased depreciation. 35 FY18 WORLD BANK BUDGET 4. CAPITAL BUDGET This chapter includes an outline of the Bank’s FY18 Capital Budget request. 4.1 OVERVIEW 57. The proposed capital The proposed capital budget for FY18 is US$198 million, comprising budget for FY18 is US$113 million for Facilities investments and US$85 million for US$198 million. Technology and Systems investments. 4.2 FACILITIES 58. The proposed Facilities The proposed FY18 Facilities investment of US$113 million comprises: Capital Budget for FY18 is US$113 million. • Country office construction, purchases, relocations, and upgrades (US$74 million or 65 percent) in select country offices. • HQ facilities repairs, renovations and upgrades (US$30 million or 27 percent) that include higher-density office space set-up, pilots to modernize efficient space concepts, relocations and construction of facilities, replacement of equipment, and security systems. 4.3 TECHNOLOGY AND SYSTEMS 59. The proposed Capital The FY18 Technology and Systems investment plan of US$85 million is Budget for Technology spread across three segments, as follows: and Systems in FY18 is • Business Programs Solutions (US$62 million or 73 percent) that US$85 million. address the day to day business needs of Bank VPUs, including modernizing operations and HR; information, knowledge and learning; core financial and strategic budget systems; and digital workspace programs. • Technology and Systems Capabilities Enhancements (US$12 million or 14 percent) with focus on enhanced capabilities in: data management, analytics, information management, collaboration, cloud, connectivity, mobility, and security. • Cyclical Replenishment Investments (US$11 million or 13 percent) to build a modern, robust and flexible IT infrastructure. 36 FY18 WORLD BANK BUDGET ANNEX I. PROGRAM COST SUMMARY 1. Table I.1 Program Cost Summary (PCS) shows the FY17-18 budget by: work program and unit, Bank Budget, and external funds. Table I.2 further classifies external funds into coupled reimbursable revenues (refer to definition below) and BETFs. All budget figures are reported in nominal terms. 2. As described in Annex III, changes are to be made effective July 1, 2017 to the staff benefit recovery rates. To reflect these policy changes, Bank Budget unit trajectories have been adjusted upwards from FY18 in a cost neutral manner, with corresponding reductions in the Bank’s Centrally -Managed Accounts. To enable the reader to see trajectories on a consistent basis, the Restated FY17 column of the PCS displays FY17 WB Budget for units as if the recovery rate changes had always been in place. 3. The PCS reflects framework adjustments since FY15 and takes another step towards a unified approach to planning for revenues and expenditures. As was done in FY16 and FY17, the FY18 budget is constructed using holistic revenue and expense budgeting with respect to reimbursable revenues and IBRD/IDA funding. Reimbursable revenues have been classified as either: • Coupled Reimbursable Revenues (CRR) which 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 to BETF, or • Decoupled Reimbursable Revenues (DRR), on the other hand, which are earned by the Bank for services that are not directly driven by the underlying expenses incurred by the managing unit. Examples of these revenues include: Trust Funds fee income, and revenues from sub-letting office space to third parties. 4. Since the FY16 Budget Framework, expenditure authorization previously given as reimbursables expense budget associated with DRR is now allocated to units or programs as regular Bank Budget (i.e., it is “budgetized” and is now no different from a unit’s other BB allocations). This facilitates better medium-term planning for the units, while allowing flexibility at the corporate level. All changes in BB allocation are now subject to the annual planning (W) process as they are no longer linked to the revenue earned. 37 FY18 WORLD BANK BUDGET Table I.1: FY18 Funding for WB Work Program and Unit (US$ million) BB External Funds All Funds INDICATIVE BUDGET TRAJECTORIES 1 FY17 Restated FY17 FY17 Restated WB Budget FY18 WB Budget FY18 WB Budget FY18 FY17 FY17 1.0 Country Engagement 1.1 AFRVP 207.0 229.2 265.7 195.6 223.6 402.7 424.8 489.2 1.2 EAPVP 83.9 96.2 105.5 96.5 126.6 180.4 192.7 232.0 1.3 ECAVP 77.6 87.0 85.6 76.4 102.0 153.9 163.3 187.7 1.4 LCRVP 88.7 98.5 95.9 54.2 54.6 142.9 152.7 150.5 1.5 MNAVP 50.9 56.7 59.6 98.2 106.4 149.1 154.9 166.0 1.6 SARVP 93.2 104.8 120.0 96.1 114.9 189.4 200.9 234.9 Sub-Total 601.4 672.3 732.3 617.0 728.1 1,218.4 1,289.4 1,460.4 2.0 Global Engagement 2.1 GP/CCSA 72.9 79.5 87.7 174.0 196.9 246.8 253.5 284.7 Sub-Total 72.9 79.5 87.7 174.0 196.9 246.8 253.5 284.7 A TOTAL CLIENT ENGAGEMENT 674.2 751.8 820.0 791.0 925.0 1,465.2 1,542.8 1,745.0 3.0 Region PPM 3.1 AFRVP 107.5 115.6 119.4 3.1 3.4 110.6 118.6 122.8 3.2 EAPVP 53.7 58.9 61.1 1.7 5.2 55.4 60.6 66.3 2 3.3 ECAVP 57.8 62.3 54.1 1.5 1.3 59.3 63.8 55.4 3.4 LCRVP 49.4 54.6 55.7 0.9 0.9 50.3 55.4 56.6 3.5 MNAVP 32.8 36.2 35.8 5.5 1.4 38.3 41.7 37.1 3.6 SARVP 47.5 51.2 52.2 1.8 2.2 49.3 52.9 54.4 Sub-Total 348.7 378.8 378.3 14.3 14.3 363.0 393.1 392.6 4.0 GP/CCSA PPM 4.1 Equitable Growth, Finance and Institutions 71.5 76.4 76.9 12.8 12.2 84.3 89.2 89.1 4.2 Human Development 37.1 39.6 37.3 7.8 5.4 44.9 47.4 42.7 4.3 Sustainable Development 83.8 90.4 105.9 21.6 57.8 105.4 112.0 163.7 4.4 EAB and Other3 46.2 46.3 62.2 - - 46.2 46.3 62.2 4 4.5 CCSAs 14.7 16.8 12.9 40.5 0.4 55.2 57.3 13.3 Sub-Total 253.2 269.5 295.3 82.7 75.8 335.9 352.1 371.1 B TOTAL PROGRAM & PRACTICE MGMT. 601.9 648.2 673.6 97.0 90.1 698.9 745.2 763.7 5.0 Operational Grant Making Facilities 5.1 CGIAR 30.0 30.0 30.0 - - 30.0 30.0 30.0 5.2 State and Peace Building Fund 14.0 14.0 5.0 - - 14.0 14.0 5.0 5.3 Development Grant Facility - - - - - - - - 5.4 Global Partnership for Social Accountability - - - - - - - - Sub-Total 44.0 44.0 35.0 - - 44.0 44.0 35.0 C TOTAL OPERATIONS 1,320.1 1,444.1 1,528.6 888.0 1,015.1 2,208.1 2,332.0 2,543.7 38 FY18 WORLD BANK BUDGET Table I.1: FY18 Funding for WB Work Program and Unit (US$ million) (Cont’d.) / 2 of 3 BB External Funds All Funds INDICATIVE BUDGET TRAJECTORIES 1 FY17 Restated FY17 FY17 Restated WB Budget FY18 WB Budget FY18 WB Budget FY18 FY17 FY17 6.0 Institutional Services 6.1 Budget, Performance & Strategy 68.8 79.0 74.0 - - 68.8 79.0 74.0 6.2 Chief Risk Office 13.4 15.0 17.2 0.7 0.9 14.1 15.7 18.0 6.3 Development Economics 47.3 52.4 52.4 47.1 54.7 94.3 99.4 107.1 6.4 Development Finance 22.5 25.8 27.8 37.0 37.3 59.5 62.9 65.1 6.5 2 34.8 39.1 50.0 2.2 3.1 37.0 41.3 53.0 External & Corporate Relations 6.6 Global Environment Fund - - - 32.0 33.0 32.0 32.0 33.0 6.7 ICSID - - - - - - - - 6.8 Leadership, Learning & Innovation - - - - - - - - 6.8 Legal Services 32.0 36.7 38.8 1.9 2.4 33.9 38.5 41.2 6.9 Operational Policy & Country Services 45.4 49.4 51.4 0.7 0.5 46.1 50.1 51.9 6.10 Treasury 59.4 65.7 67.8 15.9 16.7 75.4 81.6 84.6 6.11 WBG Finance & Accounting 38.5 44.0 46.0 5.7 7.4 44.2 49.7 53.4 6.12 Strategy, Performance, and Admin. 5 - - 8.9 - 3.2 - - 12.1 Sub-Total 362.1 407.0 434.2 143.3 159.3 505.3 550.2 593.4 7.0 Governance Services 7.1 Administrative Tribunal 1.7 1.8 1.9 0.5 0.5 2.2 2.3 2.4 7.2 Boards 91.7 98.6 100.7 - - 91.7 98.6 100.7 7.3 Conflict Resolution System 4.3 4.9 5.0 2.5 1.5 6.9 7.4 6.4 7.4 Corporate Secretariat 15.5 16.8 17.1 1.2 1.2 16.7 18.0 18.4 7.5 Independent Evaluation Group 26.3 28.8 29.2 8.6 9.0 34.9 37.4 38.2 7.6 Integrity Vice Presidency 18.5 20.5 21.0 0.1 0.4 18.6 20.6 21.4 7.7 Internal Audit 7.7 8.4 8.6 2.5 2.7 10.2 10.9 11.3 7.8 Office of Ethics and Business Conduct 6.6 7.4 7.2 2.3 2.1 8.9 9.7 9.3 7.9 Office of the President 7.0 7.5 7.4 - - 7.0 7.5 7.4 7.10 Office of Suspension & Debarment 1.6 1.8 1.8 - - 1.6 1.8 1.8 7.11 Office of the CEO 5.4 5.9 5.3 - - 5.4 5.9 5.3 7.12 Office of the MD and CAO 2.4 2.7 2.7 - - 2.4 2.7 2.7 7.13 Office of the MD and CFO 2.9 3.1 3.2 - - 2.9 3.1 3.2 7.14 Office of the SVPMM6 5.6 6.2 6.3 - - 5.6 6.2 6.3 7.15 Sanctions Board 1.7 1.8 1.9 - - 1.7 1.8 1.9 Sub-Total 198.9 216.0 219.1 17.7 17.4 216.5 233.7 236.5 8.0 Administrative Services 8.1 General Services and Facilities 138.4 143.7 152.7 38.0 40.3 176.4 181.7 193.0 8.2 Human Resources 57.3 67.0 68.4 12.8 15.9 70.1 79.8 84.4 8.3 Information & Technology Solutions 224.6 241.9 241.4 52.4 51.8 277.1 294.4 293.2 Sub-Total 420.3 452.6 462.5 103.3 108.1 523.6 555.9 570.6 D TOTAL INSTITUTIONAL, GOVERNANCE & ADMIN. 981.3 1,075.6 1,115.8 264.2 284.7 1,245.5 1,339.7 1,400.5 E TOTAL: ALL UNITS 2,301.4 2,519.6 2,644.4 1,152.2 1,299.9 3,453.6 3,671.8 3,944.3 39 FY18 WORLD BANK BUDGET Table I.1: FY18 Funding for WB Work Program and Unit (US$ million) (Cont’d.) / 3 of 3 BB External Funds All Funds INDICATIVE BUDGET TRAJECTORIES 1 FY17 Restated FY17 FY17 Restated WB Budget FY18 WB Budget FY18 WB Budget FY18 FY17 FY17 9.0 Centrally Managed Accounts & Programs 9.1 Budget recovery7 (613.0) (842.0) (936.9) - - (613.0) (842.0) (936.9) 9.2 Corporate Contingency 12.0 12.0 10.0 - - 12.0 12.0 10.0 9.3 Depreciation 91.0 91.3 102.4 - - 91.0 91.3 102.4 9.4 Institutional Programs 138.0 138.2 85.1 11.3 0.4 149.3 149.5 85.5 9.5 Staff Benefits & Retirement 778.6 788.9 840.8 - - 778.6 788.9 840.8 Total Centrally-Managed Accounts & Programs 406.6 188.4 101.4 11.3 0.4 417.9 199.7 101.8 F TOTAL ALL FUNDS EXPENDITURE ENVELOPE 2,708.0 2,708.0 2,745.7 1,163.5 1,300.3 3,871.5 3,871.5 4,046.0 G o/w Funded by External Funds DRR (184.0) (184.0) (195.7) - - (184.0) (184.0) (195.7) H o/w Funded by External Funds CRR - - - (322.3) (325.1) (322.3) (322.3) (325.1) I o/w Funded by External Funds BETF - - - (841.1) (975.2) (841.1) (841.1) (975.2) J o/w Admin Budget Funded by IBRD/IDA 2,524.0 2,524.0 2,550.0 - - 2,524.0 2,524.0 2,550.0 1 "Restated FY17" for BB reflects FY17 WB Budget based on the new staff benefits recovery rates effective July 1, 2017. FY18 trajectory is similarly stated on the new basis. 2 The International Offices budget of $8.5 million was transferred from ECA’s PPM to ECR in FY17. This transfer is reflected in the above table beginning in FY18. 3 Includes Extended Assignment Benefits (EAB) for all GP/CCSA staff and funding to support Agile Bank initiative. 4 FY17 CCSAs include Climate Change (CC), Public Private Partnerships (PPP) and Jobs. These units are consolidated under Sustainable Development (CC, PPP) and Human Development (Jobs) Practice Groups from FY18, reflecting the revised organizational structure. 5 Reflects the move of the Corporate Procurement unit from BPS. 6 Office of the SVPMM includes New York and Geneva Offices. 7 Includes staff benefits recoveries from internal transfer pricing, rebates, TF recoveries, and Corporate Services. 40 FY18 WORLD BANK BUDGET Table I.2: Overview of External Funds Projected Revenues FY18 by Unit (US$ million) Coupled Bank Executed External Funds Reimbursable Funds (CRR) Trust Funds (BETF) FY17 FY17 FY17 WB Budget FY18 WB Budget FY18 WB Budget FY18 1.0 Country Engagement 1.1 AFRVP 30.4 22.2 165.2 201.4 195.6 223.6 1.2 EAPVP 6.2 6.7 90.3 119.9 96.5 126.6 1.3 ECAVP 24.2 32.6 52.2 69.5 76.4 102.0 1.4 LCRVP 11.3 9.4 42.9 45.2 54.2 54.6 1.5 MNAVP 61.0 53.0 37.2 53.4 98.2 106.4 1.6 SARVP 6.6 7.3 89.5 107.6 96.1 114.9 Sub-Total 139.7 131.1 477.3 597.0 617.0 728.1 2.0 Global Engagement 2.1 GP/CCSA 4.5 10.1 169.5 186.8 174.0 196.9 Sub-Total 4.5 10.1 169.5 186.8 174.0 196.9 A TOTAL CLIENT ENGAGEMENT 144.2 141.2 646.8 783.8 791.0 925.0 3.0 Region PPM 3.1 AFRVP 1.4 1.5 1.7 1.9 3.1 3.4 3.2 EAPVP 0.3 3.6 1.4 1.6 1.7 5.2 3.3 ECAVP 1.5 1.3 - 0.0 1.5 1.3 3.4 LCRVP 0.2 0.2 0.7 0.7 0.9 0.9 3.5 MNAVP 4.6 0.5 0.9 0.9 5.5 1.4 3.6 SARVP 0.3 0.7 1.5 1.5 1.8 2.2 Sub-Total 8.1 7.6 6.2 6.6 14.3 14.3 4.0 GP/CCSA PPM 4.1 Equitable Growth, Finance and Institutions 1.3 2.8 11.5 9.4 12.8 12.2 4.2 Human Development 1.1 0.9 6.7 4.5 7.8 5.4 4.3 Sustainable Development 0.6 5.3 21.0 52.5 21.6 57.8 4.4 CCSAs 0.3 0.1 40.2 0.3 40.5 0.4 Sub-Total 3.3 9.1 79.4 66.7 82.7 75.8 B TOTAL PROGRAM & PRACTICE MGMT. 11.4 16.8 85.6 73.3 97.0 90.1 C TOTAL OPERATIONS 155.5 158.0 732.4 857.1 888.0 1,015.1 5.0 Institutional Services 5.1 Chief Risk Office 0.7 0.9 - - 0.7 0.9 5.2 Development Economics 5.8 7.1 41.3 47.6 47.1 54.7 5.3 Development Finance 6.0 6.1 31.0 31.2 37.0 37.3 5.4 External & Corporate Relations 0.4 0.7 1.8 2.3 2.2 3.1 5.5 Global Environment Fund - - 32.0 33.0 32.0 33.0 5.6 Legal Services 1.9 1.8 - 0.6 1.9 2.4 5.7 Operational Policy & Country Services 0.3 - 0.4 0.5 0.7 0.5 5.8 Treasury 15.6 16.1 0.3 0.7 15.9 16.7 5.9 WBG Finance & Accounting 5.7 7.4 - - 5.7 7.4 5.10 Strategy, Performance, and Admin. - 3.2 - - - 3.2 Sub-Total 36.5 43.4 106.8 115.9 143.3 159.3 6.0 Governance Services 6.1 Administrative Tribunal 0.5 0.5 - - 0.5 0.5 6.2 Conflict Resolution System 2.5 1.5 - - 2.5 1.5 6.3 Corporate Secretariat - - 1.2 1.2 1.2 1.2 6.4 Independent Evaluation Group 7.9 8.3 0.7 0.7 8.6 9.0 6.5 Integrity Vice Presidency 0.1 0.4 - - 0.1 0.4 6.6 Internal Audit 2.5 2.7 - - 2.5 2.7 6.7 Office of Ethics and Business Conduct 2.3 2.1 - - 2.3 2.1 Sub-Total 15.8 15.5 1.9 1.9 17.7 17.4 7.0 Administrative Services 7.1 General Services and Facilities 38.0 40.3 - - 38.0 40.3 7.2 Human Resources 12.8 15.7 - 0.2 12.8 15.9 7.3 Information & Technology Solutions 52.4 51.8 - - 52.4 51.8 Sub-Total 103.3 107.8 - 0.2 103.3 108.1 D TOTAL INSTITUTIONAL, GOVERNANCE & ADMIN. 155.5 166.7 108.7 118.1 264.2 284.7 E TOTAL: ALL UNITS 311.0 324.7 841.1 975.2 1,152.2 1,299.9 8.0 Centrally Managed Accounts & Programs 8.1 Other Centrally Managed Accounts 11.3 0.4 - - 11.3 0.4 Total Centrally-Managed Accounts & Programs 11.3 0.4 - - 11.3 0.4 F TOTAL EXTERNAL FUNDS 322.3 325.1 841.1 975.2 1,163.5 1,300.3 41 FY18 WORLD BANK BUDGET ANNEX II. INDICATORS OF BUDGET SUSTAINABILITY, STRATEGIC ALIGNMENT AND BUDGET EFFICIENCY Focus Indicator Definition Trend IBRD Anchor Administrative expenses as a share of operational revenues 1,400 189% 200% (loan spread revenue) (percent) 1,200 160% Expenses/Revenues US$ million 158% 155% 147% 148% 160% 135% 1,000 Budget Anchor % 109% 120% 800 91% 600 80% 400 40% 200 0 0% FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 IBRD loan spread revenue IBRD-funded expenses IBRD budget anchor Budget Sustainability IDA Anchor Administrative expenses as a share of operational revenues 1,600 120% (IDA net loan revenues) Expenses/Revenue US$ million 102% 100% 100% 1,400 98% 96% 98% 98% 93% 94% 100% (percent) 1,200 Budget Anchor % 80% 1,000 800 60% 600 40% 400 20% 200 0 0% FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 IDA revenue IDA-funded expenses IDA budget anchor External Funds External funds as a share of Ratio total administrative spending 40% 37% plans (percent) 35% 36% 35% 34% 33% 30% 31% 29% 30% 27% 25% 20% FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 42 FY18 WORLD BANK BUDGET Focus Indicator Definition Trend Operational Share of Unit Total share of unit Budgets Administrative Budget (BB) allocated to Operational Units excluding GMFs (percent) 1 Client Engagement Share of Operational Unit Share of Operational Unit Budget (BB) excluding Strategic Alignment Budgets GMFs Allocated to Country 60.0% Engagement (CE) and Global 58.0% Engagement (GE) (percent) 56.0% 1 54.9% 54.1% 53.7% 54.0% 52.0% 50.0% FY16 FY17 FY18 1Reflects the transfer of International Offices Budget from ECA to ECR in FY17 FCV Share of Country CE (BB) budget share for Engagement Budgets FCV and FCV at Risk countries over total CE (BB) 30.0% envelope (percent) 25.0% $143m $115m $121m 19.5% 20.0% 18.3% 17.9% 15.0% 10.0% FY16 FY17 FY18 43 FY18 WORLD BANK BUDGET Focus Indicator Definition Trend Bank Budget to Total Administrative Lending Volume Budget (BB) per US$ 120 88 92 90 88 Ratio billion loan approved 100 83 85 79 US$ million 80 67 62 61 53 59 54 53 (US$ million) 60 46 39 40 20 - IBRD+IDA 120 120 111 115 108 101 100 85 100 87 91 80 81 80 77 74 74 74 72 75 70 78 73 75 US$ million 80 US$ million 80 68 65 59 54 58 58 60 43 44 50 48 60 35 40 27 40 20 20 - - Budget Efficiency IBRD IDA Bank Budget per Total Administrative Project Approved Budget (BB) per lending 16 14 Ratio project approved 12 10 10 11 10 US$ million 10 9 9 10 9 9 8 8 9 8 7 7 (FY17 US$ million) 8 6 6 4 2 - IBRD+IDA 15 15 15 14 16 13 14 12 12 12 12 12 12 12 11 10 10 US$ million 10 9 8 8 6 4 2 - IBRD 44 FY18 WORLD BANK BUDGET Focus Indicator Definition Trend Bank Budget to Total Administrative Portfolio Volume Budget (BB) per US$ 30 Ratio billion portfolio under 25 22 22 21 20 20 supervision 20 17 17 US$ million 15 14 15 (US$ million) 15 14 14 13 12 11 11 10 5 - IBRD+IDA 30 30 26 26 23 24 25 25 22 21 19 20 19 19 18 18 US$ million 20 20 18 US$ million 16 16 17 17 14 15 Budget Efficiency (Cont'd.) 15 13 12 12 13 13 13 12 13 13 10 15 12 12 10 10 10 5 5 - - IBRD IDA Bank Budget per Total Administrative Project under Budget (BB) per project 3.0 Supervision under supervision 2.5 2.0 1.7 1.7 US$ million 1.6 1.6 1.7 1.6 1.6 1.5 1.6 1.6 1.6 1.6 Ratio (FY17 US$ million) 1.5 1.4 1.5 1.5 1.4 1.0 0.5 - IBRD+IDA 3.0 3.0 2.5 2.5 2.1 2.2 2.2 2.1 2.1 2.0 2.0 2.1 2.0 2.1 1.9 US$ million 1.9 1.8 2.0 1.8 1.8 US$ million 2.0 1.4 1.4 1.4 1.4 1.5 1.3 1.4 1.3 1.3 1.2 1.4 1.3 1.3 1.5 1.2 1.2 1.2 1.2 1.5 1.0 1.0 0.5 0.5 - - IBRD IDA 45 FY18 WORLD BANK BUDGET ANNEX III. FULL COST RECOVERY OF STAFF BENEFITS 1. Management plans to ensure that all Bank products and activities, however funded, reflect the full cost of staff. 2. The Bank currently assesses a 50 percent charge on Washington-appointed staff salaries to the costs of its products which partially covers the institutional benefits of such staff. The balance between these charges and the total staff benefit cost (equivalent to 20 percent of salary costs for at least the past five years) is borne by the Bank’s Centrally-Managed Accounts. Effective July 1, 2017, the benefit recovery rate will revert to the originally set rate of 70 percent, enabling unit-level decision making to be based on the full cost of staff. 3. The benefit costs of Country Office (CO)-appointed staff had not to date been assessed to products and activities in the same manner as for Washington-appointed staff. With a third of the Bank's staff now Country Office (CO)-appointed, Management plans to introduce a benefits recovery rate, set at 45 percent, to be applied to CO salaries to fully cover their benefit costs. This is effective July 1, 2017 except for external funds which will be charged the new rate from FY19. 4. These policy changes are budget neutral from a Bank Budget perspective. Bank Budget unit trajectories have been adjusted upwards in a cost neutral manner to reflect these changes with corresponding reductions in the Bank’s Centrally-Managed Accounts. To enable the Board to see trajectories on a consistent basis, the VPU trajectories for FY17 have been restated as if the changes had always been in place. 5. Charging the actual benefit rate on all sources of funds is an integral step to fully implement the US$100 million incremental annual cost recovery targeted from BETFs as part of the trust fund cost recovery framework approved by the Board in FY15. The recovery from BETFs of the subsidy of around US$30 million for Washington-appointed staff benefits was already assumed in the FY18-19 trajectory set out in the FY17 Budget. The incremental cost of these policy changes on Trust Funds is estimated to amount to around 1 percent of total annual Bank Trust Fund disbursements. This cost increase though is expected to be offset by the savings already being applied to trust funds under the Expenditure Review measures at the aggregate trust fund portfolio level. 6. These policy changes also apply to other external funds (i.e., RAS and EFO instruments) and US$5 million annually is expected to be recovered from the elimination of the benefit cost subsidy on these funds. 46