US Treasury to Appropriations: World Bank, IFC Accountability Must Be Strengthened

Last week, the US Treasury Department submitted a report to the appropriations committees of the House and Senate on strengthening the accountability mechanisms of the World Bank and International Finance Corporation, fulfilling a requirement included in the spending package signed into law earlier this year. The report acknowledges recent increases in caseloads and recommends that both the Inspection Panel and the IFC’s Compliance Advisor Ombudsman (CAO) be allocated larger budgets to carry out their responsibilities.

Treasury’s report also has specific recommendations for upcoming review of the CAO: 

• CAO reporting lines. The review should consider the question of whether the CAO (in its entirety) should report to the Board. The CAO now reports to the President of the World Bank Group. While this reporting line gives the CAO independence from the IFC and MIGA CEOs, if the CAO reported to the Board, the Board could take a stronger role in overseeing Management’s responses and supporting the CAO budget. While there are benefits to the current reporting lines, on balance, we believe that the CAO should report to the Board. However, to maintain the functional integrity of the CAO, we believe it important that the CAO’s reporting lines should not be split between the Board and the President.
• Redress. The review should consider whether the IFC should do more to promote redress for harms done, and potentially look at whether a funding mechanism should be established for this purpose. The IFC could consider options for the establishment of contingency resources, whether on a project, client or portfolio basis.
• Strengthening project-affected people’s engagement. The review should consider measures to strengthen project-affected people’s engagement in the CAO process. For example, IFC should consult with complainants in developing its Management Action Plan, and conduct better outreach to project-affected communities to be sure they are aware of the CAO and its services.  In addition, the IFC should take a stronger position against retaliation for questioning or speaking out against a project; this is a broader issue than submission of complaints to the CAO.
• Management responses to CAO findings. The Management should agree to respond systematically and thoroughly to all CAO findings so that the Management Action Plan reflects Management’s best effort to improve all areas of the project where CAO found weaknesses.

These recommendations are consistent with the views of several NGOs that have been calling for greater accountability of the World Bank and IFC. The emphasis on redress for victims and on consultation with complainants and others who are affected by IFC’s projects is particularly welcome. As is the need for a proper response from management; this has been lacking in past cases brought to the CAO. 

Strong accountability mechanisms that are adequately staffed and funded are essential to the World Bank and IFC as they increase their activities in low-income countries and fragile and conflict-affected states. I hope that the United States Congress will give careful consideration to these recommendations as it moves forward with the process of considering the IFC and International Bank for Reconstruction and Development capital increases.