GAO faults Bank on internal controls and performance measurement

21 July 2003

In a recent report the General Accounting Office (GAO, an audit and investigative arm of the US Congress) said that it is currently difficult to know whether internal controls at the World Bank are sufficient to ensure that funds disbursed are used for their intended purposes. The report acknowledges progress at the Bank on its ability to assess and report on its internal controls on financial reporting but argues that despite earlier commitments the Bank is currently not in a position to guarantee that adequate controls over its operations (including performance goals) and compliance with its own charter and policies are in place. In other words, there is no way to know whether World Bank money is spent as it is supposed to be. The GAO recommends a comprehensive review of the Bank’s internal controls on operations and compliance.

The shortcomings of the Bank highlighted by the GAO include its inability to measure whether its assistance makes a positive difference. In recent years the Bank has come under increasing pressure – especially from the US – to provide tangible, measurable results for its operations in return for an increase in financial contributions from rich countries. The Bank depends on these to finance its concessional lending channelled through the International Development Association (IDA). This has led the Bank to emphasise a ‘results agenda’ (see At Issue on results). In a recent interview World Bank President James Wolfensohn boasted: “measured by the results we had hoped for, we are close to 80 percent”. But the findings of the GAO tend to reinforce arguments of critics such as Professor Robert Wade that the Bank’s performance measurement is not reliable and cannot be trusted as figures have been too often ‘massaged’ in the past.

Excerpt from the GAO report

In 1995, the World Bank established a 5-year timeline to ensure that, by the end of fiscal year 2000, management would be able to express assurance that adequate controls were in place, not only for financial reporting purposes, but also for efficiency and effectiveness of operations. The World Bank has not yet met that goal. During our review, we were told that the Bank Group does not yet have plans to have a comprehensive assessment of these controls.

In a response to the GAO report the Banks points to its “various units which form an extensive network of management controls and oversight that are responsible for operations evaluation, internal control, oversight and compliance” and says it is planning or implementing a number of changes to procurement and project documentation and a new policy on external project audits.