The Progressive


A project of Common Dreams

For Immediate Release

Bea Edwards, International Prog. Director
202.408.0034 ext. 155, cell 202.841.1391

Dylan Blaylock, Communications Director
202.408.0034 ext. 137, cell 202.236.3733

Internal World Bank Report Finds Staff Fear Reprisal; Corruption Inadequately Addressed

Lending to Poor Countries Fails to Counter Wrongdoing;


The Independent Evaluation Group (IEG) of the World Bank has
released its Review of IDA Internal
which reveals that the Bank's lending to poor
countries does not effectively address fraud and corruption
("F&C"). The Government Accountability Project (GAP) notes that
the IEG review of the IDA (International Development Association) also states
that: "Staff fear reprisal for reporting
infringements," and "reported improprieties are not followed up on
and resolved in a timely manner."

In addition, the IEG makes the
claim that these deficiencies will be "addressed by the new whistleblower
mechanism," which was approved in June 2008 by Bank officials. GAP,
however, was consulted about the provisions of this whistleblower protection
policy prior to its adoption, and immediately denounced the measure. The policy
is palpably deficient and inadequate, as it contains coverage loopholes, inadequate
compensation limits, and unjustifiable reporting restrictions - all of
which render it virtually useless. Nearly eleven months after its approval,
there are virtually no whistleblower cases under investigation at the Bank
despite reports of both widespread corruption and retaliation.

in the IEG review (Annex D to Volume II), the real problems appear:

of risk assessments, the treatment of F&C considerations has often been sparse,
although it has now begun to be addressed better in several important documents
and processes:

Sector Strategy: The CAS [Country Assistance Strategy] and Sector Strategy
processes have not systematically and
seriously addressed fraud and corruption risk at the country level
Management is now trying to change this, and under the CGAC (Country Governance
and Anti-Corruption Program) being undertaken as part of the GAC (Governance
And Anti-Corruption Program) initiative it should become routine for a CAS to contain
a section on country governance, which would often include F&C issues. (emphasis added)

"Former Bank president James Wolfensohn placed
accountability and governance prominently on the Bank's agenda in 1996,"
said Bea Edwards, International Program Director at GAP. "Thirteen years
later the report shows that World Bank staff have not yet been given the tools
necessary to assess and address the risk of fraud and corruption. Nor have they
been given the protections necessary to come forward and report misconduct
inside the Bank itself or at counterpart agencies and vendors."

A lack of whistleblower protection leaves an
institution such as the World Bank vulnerable to fraud and corruption, despite the
presence of other internal controls, described in the review. A survey by PriceWaterhouseCoopers
of more than 5,400 companies in 40 countries, shows that whistleblowers identify
more fraud in private corporations than internal auditors, corporate compliance
officers and law enforcement agencies.

The IEG report reveals that most of the Bank's
efforts on F&C have been confined to "high-level speeches,"
"major reports" and "analytical programs." To
date, according to the review, (Vol. II, Annex D, p. 41), project design
documents do not directly address the issue; nor do guidelines for project
supervision, financial management or procurement. "Country Systems"
lending, through which the World Bank provides budget support to borrowing
governments requires accountability assessments, but lacks real safeguards
against fraud and corruption (Vol. II, Annex D, p. 47). In brief, there is an
anti-corruption program on paper but very little in practice. Staff who
consider implementing anti-corruption measures are reporting that they fear
they are risking their careers at the Bank if they do so.

The Department of
Institutional Integrity

More worrisome still is the
fact that staff members in the Department of Institutional Integrity (INT), the
unit specifically responsible for investigating corruption, reported fear of
reprisal more than the staff of any other

out F&C issues in projects and reporting on observed improprieties may lead
to reprisals from their managers, and managerial signals and behavior are not always
consistent with these messages. Overall, mixed messages and ambivalence are
still considered prevalent.

"These facts paint a
dismal picture of INT," said Edwards. She noted that the department has
been controversial in its approach to dealing with international whistleblower
concerns for years - highlighted during the Paul Wolfowitz scandal. Over
the last few months, INT Director Leonard McCarthy has operated under a cloud
of suspicion that he intervened politically in a high-level investigation for
which he was responsible in South

Inadequately Addressing Issues
from the Volcker Report

In preparing for the IEG
report, Bank management claimed to have addressed F&C issues by adopting
the recommendations made by a panel headed by Paul Volcker that examined
complaints about INT nearly two years ago. The Volcker Panel insisted that
corruption would only be addressed effectively through a "fully coordinated approach
across the entire World Bank Group, ending past ambivalence about the
importance of combating corruption."

The findings of the IEG review show, however, that
this is precisely what management has not done:

  • Investigators
    of corruption are themselves afraid of reprisal;
  • The director of INT
    stands accused of politicizing an investigation in his previous post;
  • Basic
    project and lending documents do not include a requirement to assess risk
    of F&C or address it;
  • Safeguards
    against F&C do not exist for budget support loans, perhaps the most
    vulnerable of IDA funds;
  • Staff
    members have not been adequately trained to recognize signs of corruption
    in projects, nor do performance appraisals include incentives to report
  • Improprieties
    reported by staff are not addressed and resolved in a timely manner;
  • Management
    also routinely fails to take timely actions to follow up on audit,
    investigatory, and evaluation findings of impropriety.

IEG and an Advisory Panel, which completed this final
review of internal controls at IDA after Bank management and the Internal Audit
Department provided their assessments of controls, disagreed with both sets of
internal conclusions about the seriousness of the lapses. Management
acknowledged a deficiency in addressing F&C but did not assign it
significance sufficient to require reporting beyond IDA
itself. Independent evaluators and the Advisory Panel, however, who
prevailed over management's objections after months of internal battling,
assessed the cumulative effect of the lack of safeguards and staff fear of
reprisal as sufficiently serious as to place Bank funds and objectives for IDA
at significant risk. The problem, according to IEG "rises to the level of
material weakness," the most deficient of four possible ratings.

The Government Accountability Project (GAP) is a 30-year-old nonprofit public interest group that promotes government and corporate accountability by advancing occupational free speech, defending whistleblowers, and empowering citizen activists. We pursue this mission through our Nuclear Safety, International Reform, Corporate Accountability, Food & Drug Safety, and Federal Employee/National Security programs. GAP is the nation's leading whistleblower protection organization.