PRESS RELEASE

Setting the Record Straight: Forbes Distorts Facts*

June 28, 2012

Claim: Anonymous sources in article claim computer glitches have caused $2 billion to appear and disappear from accounts.
Fact: This is not true. Our accounts are regularly and independently audited. If the errors mentioned in this article had occurred, our independent auditors would be required to report on these amounts as internal control weaknesses. The article provides no evidence.

Claim: Anonymous sources say staff ignoring flat budget at the Bank.
Fact: During President Zoellick's 5-year tenure, the approved budget was kept flat in real terms, even as we tripled lending between 2008 and 2010. In addition, during this period there were no budget overruns, and on two occasions actual underruns of 2 to 3% occurred. Our budget consists of dollars earned through revenues on our own operations, and the revenue above this is contributed to IDA or to build capital.

Claim: Article sources anonymous “bank insiders” claiming trust funds are generally not supposed to go toward administrative overhead, which many countries are unaware of.

Fact: We are totally open on our use of Trust Funds, which are doing important work in fragile and conflict-affected countries such as Haiti and South Sudan. Trust funds are fully disclosed to the Board, are in our budget and expense reporting, our publicly disclosed budget document, and the Bank's public Financial Statements. They are explicitly intended to contribute to the administrative costs of work programs agreed with the donors. In fact, the use of the funds is agreed up front in an agreement signed by the Bank and donors. Countries turn to the World Bank to manage Trust Funds because of our fiduciary controls and accountability. This is the ultimate market test.

Claim: Article asserts without evidence, “As the number of projects and amounts of money have escalated, so has the mischief, corruption and cover-ups, since no agency has the power to audit them.”
Fact: If this reporter, or any other sources, have evidence, please provide it. We have an anonymous hotline so that anyone around the world can provide evidence in a fully protected and confidential manner. World Bank projects are among the most scrutinized in the world. In addition to financial statement audits on its own accounts, individual World Bank projects are separately audited and subject to examination by our internal audit department. Finally, a corruption unit as well as an inspection panel and independent evaluation group, each with independent reporting lines to the board, continuously monitor Bank projects.

Claim: The article wrongly claims an evaluation of the Bank saw a major drop in project quality which we tried to suppress.
Fact: Wrong. The evaluation states that the share of Bank supported operations exiting the portfolio in FY08-10 whose outcomes were moderately satisfactory or better was 74 percent, compared to 79 percent in FY05-07. Most of these projects were approved by our executive Board long before 2007. The report went on to say “This suggests that the Bank’s quality assurance system deserves a closer look.” Rather than suppress the report we have cited it in our blueprint for Modernization which was shared with our Executive Board. We take quality seriously and are in the process of establishing a new oversight mechanism.

Claim: The article claims former auditor Carman Lapointe confronted the President before she left the institution.
Fact: This is untrue.

Claim: Article falsely suggests the World Bank is not open or transparent.
Fact: We are best practice in openness amongst multilateral organizations.

  • Recently, Publish What You Fund rated the Bank #1 in terms of aid transparency out of 58 donors for the second year running. And the Center for Global Development (CGD) and Brookings ranked IDA as top donor in transparency and learning.
  • Access to Information – First multilateral with a “Freedom of Information Act” policy to allow the public to access World Bank’s trove of documents. We also set up an independent panel for appeals of decisions. In FY11, 14,000 documents and reports posted on our site — +4 million page views since the policy went into effect in July 2010.
  • Open Access policy adopted for knowledge and research – under the most liberal Creative Commons copyright license
  • Disclosure policies are fully in line with the Volcker recommendations.
  • The Bank is at the forefront of the International Aid Transparency Initiative (IATI).
  • World Bank Finances initiative – all financial commitments and disbursements disclosed on the web, country by country.
  • Sanctions: Bank is now releasing sanctions/debarment decisions.
  • Multilateral Aid Reviews in the UK and Australia gave the Bank high marks on transparency and accountability.

Claim: Article suggests developing countries don’t need our money.
Fact: The $300 billion plus committed since 2007 to help stop contagion from the worst financial crisis since the Great Depression doesn't support that. Nor do the 310 million children immunized – equivalent to four times the number of children in the United States.…the more than 3 million teachers recruited and/or trained – more than 4 times the number of primary and secondary school teachers in France….the almost 500,000 improved community water points and more than 1.5 million piped household water connections constructed or rehabilitated.

Claim: Article claims no articulated vision for the World Bank.
Fact: We would recommend you read these speeches: Beyond Aid, Modernizing Multilateralism and Markets, Seizing Opportunity from Crisis: Making Multilateralism Work, The End of the Third World? Modernizing Multilateralism for a Multipolar World, Democratizing Development Economics, The Middle East and North Africa: A New Social Contract for Development.

Claim: The article criticizes the World Bank’s relationship with China.
Fact: China remains a valued client. True. China contributed directly to our two most recent replenishments of our Fund for the Poorest (IDA 15 and 16), and prepaid over $1 billion of IDA credits. Calls for reform in the China 2030 report, which we developed in partnership with China, have been controversial in China, but this reflects the debate going on within China between the reformers and others. At the same time, we have debarred Chinese firms for collusion. Over 70% of our projects in China now deal with the environment, which is good for China and good for the world. Also, contrary to the article, China borrows at market-based rates from the World Bank.

Claim: The piece suggests the President has a hands-off management style.
Fact: On the contrary, the President met every morning with his Management team —some 30-plus VPs and MDs. He was the first President in Bank history to do this.

Claim: The article suggests that a recent evaluation of the Bank criticized our “corruption-fighting efforts.”
Fact: This is misleading. The review in question did not look at our recently beefed-up investigative office for corruption (INT). This was in fact a report covering broader changes in governance across country systems – the Bank’s borrowers. The Bank has put its first priority on protecting its own money and that of donors. We will continue to work to strengthen government systems, but we are not going to do it at the expense of our own money or the money entrusted to us by our shareholders.

Claim: The article calls the Bank “dysfunctional”
Fact: Please talk to our clients. Talk to Indonesia where the Bank in 2009 approved a unique $2 billion loan with a deferred drawdown option (DDO) as part of a $5.5 billion contingent financing facility that helped Indonesia mobilize funding from the capital markets. Talk to Central and Eastern Europe about 2009 partnership with EBRD, EIB and the EC to put together the Vienna Initiative, to work with large European banks prevent a large-scale and uncoordinated withdrawal of cross-border bank groups from Eastern Europe. Talk to Afghanistan, where the World Bank is the largest funder of the National Solidarity Program, which is providing jobs and improving infrastructure throughout the country. The program has financed more than 61,000 community projects in more than 29,000 villages in all 34 provinces. The reporter’s statement is hyperbole not backed by reality.

Claim: The reporter cites a staff disciplinary case as a “whistleblower witch-hunt.”
Fact: Wrong. The case the reporter cites was reviewed by an independent panel of judges (Administrative Tribunal), which held that the staffer’s actions did amount to misconduct, and his actions did not meet the standard for a claim to be a whistleblower.

The ruling states:

  • “The Tribunal notes that the Applicant leaked extracts of draft minutes of a meeting of the Board of Executive Directors…..The Tribunal finds that by leaking this information the Applicant violated Staff Rule 3.01, paragraph 5.01, and Principle 3.1 of the Principles of Employment and thereby committed misconduct.”
  • “The Applicant’s claims that he was a whistleblower therefore fail.”


Claim: The World Bank has no oversight or accountability.
Fact: The World Bank Group has more oversight agencies than any other multilateral agency covering Internal Audit, Independent Evaluation, Integrity, Inspection Panel, IFC’s Compliance Advisor/Ombudsman. Plus we’re accountable to 188 shareholder countries, our 25-member resident Board, consultations with Civil Society on all policies, and strong congressional/parliamentary oversight.


What the piece doesn’t talk about
Over the past five years, the World Bank Group has greatly ramped up assistance to developing country partners, received unprecedented support from donors, and created innovative new instruments to respond effectively to global challenges.

Responding to Crises – helping the poor

  • Record Crisis Lending/Support -- over $300 billion in financing for developing countries.
  • Two record donor replenishments for the World Bank’ Fund for the Poorest, IDA, in a time of global fiscal austerity.
  • First Capital Increase in 20 years— over half the contributions to the capital increase from developing countries.

Action to prevent Eurozone contagion: Led 2009 partnership put together the Vienna Initiative, to work with large European banks to prevent a large-scale and uncoordinated withdrawal of cross-border bank groups from Eastern Europe.

Greater priority on corruption investigations. Over the past five years, the Bank’s corruption investigation arm, INT, has grown both in staff (92 in FY11, up from 52 staff in FY07) and in budget ($20.4 million in FY11, up from $14.04 in FY07), while chalking up significant accomplishments. INT’s work during this past fiscal year included:

  • 62 debarments of firms and individuals for wrongdoing, while jointly debarring 14 entities with other Multilateral development Banks (this compares with two (2) debarments in FY06, one (1) debarment in FY07, and 13 in FY08).
  • Based on an INT referral, UK authorities ordered Macmillan Publishers Limited to pay over £11 million. WBG debarred Macmillan for 6 years (2010), for bribery on an education project in Sudan.
  • Norway also took prosecutorial action against three former employees of “Norconsult,” based on an INT referral.
  • An International Corruption Hunters Alliance brought together 286 senior enforcement and anticorruption officials from 134 countries, to inject momentum into global anti-corruption efforts.
  • A cross-debarment agreement among the Multilateral Development Banks— companies debarred by the Bank can no longer seek business from other multilateral development banks (MDBs), closing a loophole in multilateral programs
  • Cooperation agreements in support of parallel investigations, asset recovery and information sharing with the UK Serious Fraud Office, the European Anti-Fraud Office, Interpol, the International Criminal Court, USAID, and others.
  • Enhanced preventive training and forensic audits designed to identify and address “red flags”in Bank projects.
  • Climate Investment Funds (CIFs) – real progress in the fight against climate change. CIF funding of $7.2 billion supports energy efficiency projects, clean transport projects, renewable energy, adaptation, reforestation. That $7.2 billion is expected to mobilize over $80 billion from private sector and other development partners with projects in 48 countries.
  • Natural Capital Accounting/Green Accounting – ground-breaking new approach to measuring the wealth of nations: The World Bank is supporting countries to factor their natural capital into systems of national accounts through a global partnership. Over 50 countries, 86 companies, and 17 CSOs joined forces behind the move to factor the value of natural assets like clean air, clean water, forests and other ecosystems into business decision-making.
  • Asset Management Company (AMC), a new IFC subsidiary for developing country investments: —AMC mobilizes and manages third-party funds for investment in emerging markets. It manages funds on behalf of a wide variety of institutional investors, including sovereign funds, pension funds, and development finance institutions, and mobilizes additional capital resources for investment in productive private enterprise in developing countries. Leveraging IFC’s global network, AMC introduces some of the world’s largest investors to emerging markets in general and emerging markets private equity in particular. As of March 31, 2012, AMC had approximately $4.2 billion in assets under management. IFCs internal rate of return for its equity investments is 20%, and higher in Africa.
  • Program for Results -- third lending instrument in Bank’s history (others are investment lending and budget support): In January, 2012, the World Bank Board of Executive Directors approved the Program-for-Results (PforR), an innovative new financing instrument that links the disbursement of funds directly to the delivery of defined results. Money will flow once the results have been delivered and verified. PforR will also help improve the transparency and accountability of developing country programs and strengthen systems to fight fraud and corruption.
  • More accountability for stakeholders – the new Global Partnership for Social Accountability: The World Bank's Board of Executive Directors has just approved the creation of a Global Partnership for Social Accountability (GPSA). The GPSA is a new mechanism to scale up and support social accountability by beneficiary groups and civil society organizations (CSOs) in developing countries.

*Forbes posted a story online on June 27. This “Setting the Record Straight” document rebuts some of the article’s false assertions.




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