2006 Review of Post-Crisis Multi-Donor Trust Funds: Key Findings

1. 2006 Review of Post-Crisis Multi-Donor Trust Funds: Key Findings Joint Donor and World Bank Review Norway, Canada, United Kingdom, and The Netherlands World Bank Conflict Prevention and Reconstruction Unit, Trust Funds Operations Unit, Fragile States Unit

2. Background • Increasingly, multi-donor trust funds (MDTFs) used to mobilize resources and provide flexible financing in post-crisis situations. • Decision to examine experiences with use of MDTFs in post-crisis situations, and offer guidance to Bank and stakeholders. • MDTF Review = year-long collaboration between the World Bank and Norway (through Ministry of Foreign Affairs, MFA, and Agency for Development Cooperation, Norad) • Subsequently joined by Canadian International Development Agency (CIDA), Netherlands Ministry of Foreign Affairs and Department for International Development (DFID) of UK • Close cooperation with United Nations (UNDGO and UNDP) – coordinated TORs, UN participation in workshops, and UN review of draft reports and country case studies.

3. Process • May 2006: inception report presented at workshop in Oslo to discuss preliminary findings from Phase I desk study. • December 2006: draft final report incorporating information and analyses from field visits presented at The Hague Conference on Post-Crisis MDTFs, co-chaired by: • Aart Jacobi - Director, Human Rights and Peace-building Department, MFA, The Netherlands • Jon Lomoy - Deputy Director General, Department for Regional Affairs and Development, MFA, Norway • Kyle Peters - Director, Operations Policy & Country Services, World Bank • February 2007: Final report issued, incorporating comments from the December 2006 Conference.

4. Objectives and Scope • Purpose: identify MDTF arrangements that can better address post-crisis situations, with a focus on cross-cutting issues such as governing structures, harmonization and coordination, timeframe for establishment, relationship between UN system and World Bank, impact of donor policies, role of implementing agencies. • Scope: Review considered 18 MDTF examples; 16 in post-conflict situations, two in post-disaster settings • 1 proposed post-tsunami MDTF, not created (Sri Lanka) • 12 administered by Bank, of which detailed data and information were available for all 12 • 5 administered by UN (four by UNDP, one by UNICEF), of which detailed data and information were available for 2 • eight MDTFs were covered in-depth during field visits to Afghanistan, Iraq, Sudan, Timor-Leste, Indonesia, and several Great Lakes countries

5. MDTFs Considered • Afghanistan Reconstruction Trust Fund (ARTF - Bank) • Afghan Interim Authority Fund (AIAF–UNDP) • Law and Order Trust Fund of Afghanistan (LOTFA–UNDP) • Great Lakes Multi-Donor Demobilization and Reintegration Program (MDRP – Bank) • Indonesia Multi-Donor Fund (MDF – Bank) • UNDG Iraq Trust Fund (UN ITF – UNDP) • World Bank Iraq Trust Fund (WB ITF – Bank) • Multi-Donor Trust Fund for Sierra Leone (MDTF-SL - Bank) • Sri Lanka: Proposed post-tsunami trust fund (not created) • Sudan Multi-Donor Trust Fund – National (MDTF-N – Bank) • Multi-Donor Trust Fund –South Sudan (MDTF-SS–Bank) • Sudan Capacity Building Trust Fund (CBTF–UNICEF) • Trust Fund for East Timor (TFET–Bank) • Consolidated Fund for East Timor (CFET – UNDP) • Timor-Leste Transitional Support Program / Consolidated Support Program (TSP/CSP–Bank) • West Bank & Gaza Holst Fund (Bank) • West Bank & Gaza Reform Fund (Bank) • Technical Assistance Trust Fund for West Bank & Gaza (Bank)

6. Sources and Outputs • Sources: • document reviews and informant conversations • no cross-fund analysis of performance, speed, or results data • informants included: • staff in administrator agencies (World Bank and UNDP, at head office and in field), • representatives of national recipient governments, • donor officials (head office and in field), • national civil society organizations and international NGOs • Outputs: inform recipient countries, World Bank, donors, UN system, other implementing agencies, and civil society on challenges and opportunities in using MDTFs, discussing policy implications and trade-offs of different approaches.

7. Key Findings:Big Picture • MDTFs in post-crisis situations: • have been important instruments for resource mobilization, policy dialogue, risk and information management; • are appreciated by host governments; • are largely in line with Paris Declaration on Aid Effectiveness and DAC Pilot Principles for Engagement in Fragile States; • generate “positive externalities” that other instruments do not. • MDTF performance has been uneven across country examples, seen both in objective measures (speed and delivery of outputs, quality of processes) and in subjective measures (stakeholder perceptions of success). • MDTFs operate in high-risk, high-cost environments and require flexible and adequate funding. • Growing consensus identifies external factors that affect MDTF performance and design elements that should be adjusted for specific characteristics of post-crisis contexts. • Without exaggerating the importance of MDTFs, donors should strengthen this largely successful instrument for joint action.

8. Key Findings: Conceptualization • Authorizing Environment:preferences of national authorities and donor governments, availability and interest of potential Administrator(s) • Considering an MDTF • Base MDTF in an agreed results matrix (such as TRM from post-conflict needs assessment) • Clarify the “why” • roles: what functions will the MDTF perform? • “bank account” - mechanism for pooled funding, lowers transactions costs for donors and lightens burden on national governments • forum for discussions on strategic priorities and recovery policies • venue for aid and/or donor coordination • objectives and priorities: what will the MDTF deliver? • basic services • recovery/reconstruction • capacity-building

9. Key Findings:Stakeholders (1) Stakeholder views on positive aspects of MDTFs • National Authorities: • national voice in coordinated/harmonized programming • draws political attention, platform for resource mobilization • resources usually untied, amenable to national programming • mitigates individual donor domination or influence • Donors: • consistent with Paris Declaration commitments • administrative costs of managing funds is reduced • permits resources tracking and reporting back to capitals • allows small donors to engage when separate bilateral program not feasible • complementary vehicle to activities funded bilaterally by larger donors • information sharing mechanism, forum for inter-donor discussion and coordination, forum for dialogue with national authorities • larger facilitating mechanism for dialogue with representatives of local civil society, provincial and local level authorities • secretariat provides services/documents donors cannot generate on own, collects/analyzes data donors would not otherwise get

10. Key Findings: Stakeholders (2) Stakeholder views on negative aspects of MDTFs • National Authorities: • prefer national mechanism and fear donors may attempt to dominate discussion and decisions • risk of donors extracting concessions in return for financing • absence of a strong peace process to support MDTF • MDTF unnecessary given existing government capacity • Donors: • political importance of supporting own actors on the ground • general skepticism about efficiency and effectiveness of MDTFs • no comparative data on own-performance provided • major home-country commercial and political interests involved, tied to large investments • larger donors don't need an MDTF for voice and access; consensus-approach of MDTFs do not cater for concerns donors want addressed • new or non-traditional donors have other channels for collaboration, not comfortable with MDTF instrument (seen as DAC donor dominated) • some donors provide funding from specific budget lines or sources, difficult to pool funds

11. Key Findings: Context and Design • Consider external factors: • scope and nature of needs • commitment by national actors • capacities of national authorities, non-state actors • security constraints • international context of support for an MDTF • MDTF design considerations • Objectives (specific needs and roles) • Governance structure, including roles of stakeholders • Choice of Administrator, including fiduciary rules and mechanisms for collaboration • Structure – one fund with one or more windows, two funds with overarching governance structure to link them • Channels for implementation and disbursement • Potential implementing partners for MDTF-funded activities

12. Key Findings: Performance • MDTF Structure and Functions • Structure of Bank-administered MDTFs includes up to three levels: • policy council; funding committee; project committee • last two sometimes combined • Technical Secretariat services these bodies • Choice of Administrator: Bank and UN have different comparative advantages in specific country contexts, alignment is critical to MDTF performance. • Performance of Bank-administered post-crisis MDTFs • Conclusions drawn from wide range of country examples • On-budget government-implemented projects, generally good • Off-budget and small-scale projects often experience delays, severe problems in Sudan in speed of delivery and in using UN agencies • Staffing issues: deploying quickly with right skills mix, access to lessons learned and HQ support/facilitation/troubleshooting • Performance of UN-administered post-crisis MDTFs • Few country cases; most conclusions drawn from UN Iraq Trust Fund • Rapid disbursement in highly challenging circumstances, able to use multiple channels including non-government and UN direct execution • Concerns about government ownership and capacity building; allowing donor earmarking violates principles of harmonization

13. Recommendations for Designing MDTFs • Choice of Administrator must take into account the relevance of the organization's mandate, procedures, capacities and resources to the context, and discussions about these factors must be country-specific, not global. • Decisions on Administrator explicitly involves the preferences of both national actors and lead donor countries. • Governance structures of MDTFs should explicitly take into account the range of roles that stakeholders expect them to play: pooled channel for funding, donor/aid coordination venue, stakeholder consultation and information-sharing • Membership (both voting and non-voting advisory) in different levels of the tiered governance structure (oversight, policy and resource allocation, project approval) should be aligned with roles and should build in mechanisms for avoiding appearance of conflicts of interest • Once overall design parameters are ‘roughed in’, and choice of Administrator(s) is determined, core group (with support from central MDTF ‘one-stop-shop’ or operations team) should begin framing the draft Operations Manual so that refinement, approval, and publication can happen as soon after the MDTF is established as feasible

14. Recommendations for Launching MDTFs • MDTF secretariats should be staffed up early with critical skills that include trust funds management, legal, procedural, procurement and financial management. • Administrator should ensure rules and regulations in key areas (procurement, recruitment, disbursement) are appropriate to post-conflict or post-disaster situations. • Administrator should have a "one-stop-shop" or clearing-house mechanism where MDTF staff can turn for institutional memory, senior skills, standardized instruments, and other forms of operational support. • As two key international partners whose different comparative advantages are both required in post-crisis recovery, UN and Bank should endeavor to improve mechanisms for collaboration and reduce barriers to “inter-operability” through framework agreements.

15. Challenges • Managing expectations • Make objectives explicit and shared • Monitor perceptions • Focus on communication • Working with partners • Instruments and frameworks not yet available for Bank to work smoothly with all UN entities • Managing time pressure • Streamline processing allows precious time to be used on critical interventions and reduce “churning” • Prioritizing and sequencing required to deliver visible results while setting processes in play to also deliver “invisible” policy and institutional / capacity building results

16. Recommendations from February 2007: update the relevant Operational Policies and Bank Procedures that will improve its ability to act efficiently and effectively in post-crisis situations. improve internal capacities to support MDTFs: ensure intensified senior management support to MDTFs provide s sufficient resources from Regions to allow MDTFs to staff up quickly with necessary skills in critical fields establish a "one-stop-shop" that provides access to its "best practice" and "lessons learned", and an inventory of key personnel for advice and guidance revise human resources policies on hiring/ secondment, promotion and incentive schemes so qualified and committed staff are identified and supported for MDTF postings further develop standardized instruments for operating MDTFs: standardized donor funding agreements; staffing profiles and job description templates; staff training program standard operational documents simplified criteria for acceptable administrative and accounting systems and capacities for non-Government implementing agencies on smaller off-budget projects Bank and UN should establish senior-level working group to review issues with MDTFs Actions as of May 15, 2007: New Rapid Response Policy Framework (8.0) replaced OP/BP 8.50 on March 1, 2007; Trust Funds OP/BP 14.40 to be revised in CY 2007 Range of new and strengthened institutional response mechanisms approved on Feb 27 2007; together with OP/BP 8.0, these provide streamlined processes with much shorter turnaround times new incentives and support for staff serving in fragile and conflict –affected states automatic waiver of some budget and HR restrictions and streamlining of key HR processes corporate and regional Rapid Response Committees with authority to move human and financial resources and waive restrictions designated emergency specialists in key fiduciary and support units – financial management, procurement, legal, disbursement, HR Standardized instruments and templates donor agreements exist; development of staff training programs both through TFLAP and OPCS are underway; template operational documents, staffing profiles, and job descriptions/TORs not yet completed new checklists developed with simplified criteria for assessing systems and capacity of NGOs and non-Government agencies Working Group established March 2007 on Global UN-Bank Fiduciary Framework to cover Procurement, FM, Audit, Sanctions and Remedies; target completion of first draft for legal clearance July 2007 World Bank Response to MDTF Review Recommendations

17. Active Follow-Up to MDTF Review • Reconfiguring HQ support based on experience: • a post-conflict MDTF is never “just a bank account” – critical aid coordination & policy dialogue instrument • TFO and OPCS provide upstream support to country teams on pre-MDTF design discussions • Rapid Response Committee is forum for country-specific engagement and MDTF guidance • TFO will add a MDTF sub-module into the Trust Funds Learning and Accreditation Program; • new OPCS Core Learning Course will include module on MDTFs • New guidance will be added into revised OP/BP 14.40 and Trust Funds Handbook

18. Conflict Sensitivity in MDTFs (1) • Finding from the MDTF report: • MDTFs operate in high-risk, high-cost environments; • Lack of conflict analysis (i.e. as part of MDTF risk management) in past MDTF design is of concern. • Conflict sensitivity* − capacity of an organization to: • Understand the conflict context in which it operates; • Understand the interaction between its operations and the conflict context; and • Act upon the understanding of this interaction in order to avoid negative impacts and maximize positive impacts on the conflict context of the interventions. * Conflict sensitive approaches to development, humanitarian assistance and peace-building, Safer World/International Alert, Center for Conflict Resolution, Africa Peace Forum, and Consortium of Humanitarian Agencies, 2004.

19. Conflict Sensitivity in MDTFs (2) • Both the UN and the World Bank have well-developed frameworks for conflict analysis, but neither capacity has been consistently tapped when serving as MDTF Administrator • World Bank’s Conflict Analysis Framework (CAF) • Seeks to enhance conflict sensitivity and conflict prevention potential of Bank assistance by • Examining sources & consequences of violent conflict; and • Examining a country’s resilience to violence and ability to manage it. • Doing this will help • Increase sensitivity to conflict in strategies for poverty reduction and development; • Identify and analyze sources and problem issues related to conflict; • Highlight linkages between conflict and poverty; and • Strengthen resiliency to conflict via appropriate development interventions and poverty reduction measures.

20. Linking Conflict Analysis to MDTFs • Conflict in Somalia: Drivers and Dynamics (2005) • informed the Somalia Joint Needs Assessment (JNA), the Somali Reconstruction and Development Framework (2006), and the “Financing Options for Reconstruction and Development in Somalia (2007) • Aid, Conflict and Peace-building in Sri Lanka: 2001-2005 • useful to the development community in general programming • considered in upstream planning for a Tsunami Reconstruction Fund, planned but not implemented due to peace process difficulties