World Bank report sees risks of fraud in IDA lending programme

20 April 2009

A World Bank Group study has warned of significant risks of fraud and corruption in the International Development Association's (IDA) lending programme under which it provides loans and grants to 78 countries, including India.

The report, prepared by the World Bank's Independent Evaluation Group (IEG), said a "material weakness" exists in controls over fraud and corruption related to IDA.

The risk of fraud and corruption by stakeholders, including local beneficiaries and contractors, could result in diversion of IDA funds, the report further pointed out.

"Evidence emerged during the review that suggested that there are significant risks of fraud and corruption impinging on IDA's lending operations,not fully matched by appropriate controls," the report said.

The key purpose of the IDA's internal control system is to assure its stakeholders that IDA complies with its articles and policies, and that the funds it provides for development purposes are used as intended and show measurable results.

The evaluation, the first of its kind to be carried out by any international development finance institution, was carried out over several stages through a detailed management self-assessment, a review by the Bank's internal auditing department, and a comprehensive independent evaluation by IEG.