WITHIN THE INTERNATIONAL RECONSTRUCTION FUND FACILITY FOR IRAQ

1. WITHIN THE INTERNATIONAL RECONSTRUCTION FUND FACILITY FOR IRAQ THE WORLD BANK IRAQ TRUST FUND

3. GOVERNANCE AND MANAGEMENT STRUCTURE OF THE FACILITY • Donor Committee (joint for WB and UN) • Facility Coordination Committee (joint) • Secretariat (joint) • World Bank Iraq Trust Fund • UNDG Iraq Trust Fund • Trust Fund Managers (WB and UNDG) • Monitoring Agent

4. Donor Committee • One Committee for both Trust Funds • Endorses overall priorities for Facility • Sets strategic directions • Reviews progress • Meets twice a year

5. Donor Committee Members • Minimum $10 million contribution, plus two seats for smaller donors • Iraq Strategic Review Board, UN, Bank, IMF observers (other IFIs may be invited)

6. Facility Coordination Committee • Members: UN and the Bank • Function: • Review, recommend and coordinate program of activities financed by the TFs. • Liaise with Iraqi counterparts to ensure coherence of priorities • Each TF will have full authority in allocation of funds within their agreed purpose and agreed program.

7. ITF - Secretariat • Staffed by Bank/UNDG • Based in Baghdad/Amman • Respond to inquiries • Handles administrative work • Distributes/disseminates • Reports to Facility Coordination Committee

8. ITF will be Used to Finance The Interim Program for Iraq: • Build Iraqi institutional capacity • Prepare and implement emergency operations to address urgent needs. • Lay the groundwork for Iraq’s medium-term program.

9. Activities for ITF Financing in the Interim Period 4 Projects: • Emergency Infrastructure (MNSIF) • Emergency Community Based Rural Infra (MNSRE) • Emergency Primary and Secondary Education (MNSHD) • Technical Assistance Project (MNC02)

10. Expenditure Categories under ITF Financing • Operations within the Priority Program as identified in the Needs Assessment and validated by the IRSG and the MoPDC • Expenditure categories eligible for ITF financing • Investment/Capital Expenditures, including prefeasibility studies and incremental recurrent costs directly related to I/C costs • Technical Assistance and training • ITF could cofinance Bank operations

11. Duration of ITF • ITF is established following authorization of Bank’s Board at end-January 2004 • About 20 donors participate in the Facility • Agreements for donor contributions have been signed with most donors • ITF is expected to close on December 31, 2007; or when all funds have been fully disbursed.

12. Grant Financing Steps SECTOR POLICY/ PRIORITY FINANCING IMPLEMENTATION Iraqi Administration sets budget, sector policy and the Priority Program. ISRB and the Ministry of Planning and Development Cooperation review program/project proposals from potential recipients* for consistency with budget and Priority Program, and guard against overlaps. The MOPDC submits endorsed proposals to the Facility Coordination Committee for consideration. Coordination Committee confirms eligibility of proposal to receive financing from the World Bank Iraq Trust Fund (or UNDG Trust Fund). (Generally, proposals would recommend which of UN or WB trust fund is appropriate for financing.) World Bank assigns staff with responsibility to appraise proposal under Bank’s policy and procedures. The recipient and the World Bank, as Administrator of the Trust Fund, enter into agreement that includes monitorable performance indicators and disbursement arrangements Recipient implements the project**. Recipients may be Ministry of Finance, Ministry of Planning and other central ministries of Iraq, line ministries, governorates, municipalities, UN agencies, NGOs, Iraqi private sector, IFIs, and other public sector. ** Applies only to recipient-executed operations.

13. UN Agencies NGOs Ministries Governorates Municipalities Private Sector Other Public Sector IFIs Project Proposals from Recipients • Iraq Strategic Review Board and Ministry of Planning and Development Cooperation: • Review proposal to ensure • Is within priority program • Is not being funded by another source • Endorse and forward proposals to the Facility for funding consideration • or Reject, or return for Modification. The Facility Coordiination Committee reviews proposal for eligibility for funding from the Facility Proposal is channeled to the Bank or UNDG Trust Fund

14. Procedures for ITF Financed Operations • Projects are processed under World Bank Emergency Procedures which simplify requirements and shorten preparation time • The Bank is assessing different payment mechanisms to project contractors • Bank is preparing an Implementation Manual to identify procurement procedures that will be applicable until new Iraqi procurement regulations are in place

15. The Monitoring Agent • Independent firm, selected/recruited by the Bank and reporting to the Bank • Reviewing procurement of goods, services • Screening and recommending withdrawal applications • Pre-screening financial management capacity of potential recipients • M/A does not have approval authority

16. Reporting to Donors • An aggregated WB/UN report semi annually to Donors • A website (currently being structured) that will provide up-to-date information on projects in the pipeline, under preparation, and under implementation; review of progress; and financial information

17. Bank’s Cost Recovery • Bank’s Administrative Fee—charged off the top for central units (TFO,ACTF, LEG, TCQ, etc. • For TA operations: 0.4% • For Investment and Cofinancing operations: 0.2% • Management Fee—actual costs for staff and consultants for analyzing, appraising, supervising ITF operations

18. Bank’s Cost Recovery (cont’d) 3. Management Fee—costs attributable to ITF recovered for: • Bank staff and consultants for analyzing, appraising, supervising ITF operations (salary,travel) • Monitoring Agent’s fee, expenses, • 50% cost of the Secretariat (shared with UN) • ITF administration staff • External audits requested by donors