## Executive Summary

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### Overview
- Proposals for Executive Board approval:
  - An $868.3 million net administrative budget for FY 09 set in the context of the FY 09–11 MTB, and the corresponding $966.9 million limit on gross administrative expenditures.
  - A $48.3 million capital budget for capital projects beginning in FY 09 in the context of the FY 09–11 medium-term capital plan.
  - A separate $155 million multi-year appropriation to meet restructuring costs.
  - A proposal to carry forward and transfer up to $30 million of unused resources from the FY 08 administrative budget to the restructuring budget.
- Central goal: reshape the institution to deliver more focused outputs cost-effectively; refocusing driven by membership needs and global challenges and enabled by the proposed MTB.

### Strategic directions underpinning the MTB
- Medium-term policy goal:
  - Put in place a sustainable budgetary framework for FY 09–11 to eliminate the income-expenditure gap in FY 12.
  - Strategy requires simultaneous enactment of income and expenditure measures; a new income model and expenditure restraint are both necessary for balance.
- Income/expenditure framing and targets:
  - Managing Director proposed that about $100 million of the FY 12 income-expenditure gap be met through expenditure reductions and the rest through enhanced income measures.
  - The FY 08–10 MTB envisaged a real reduction of $27 million dollars (a cumulative 3 percent, measured against the external deflator).
  - The FY 09–11 MTB incorporates a further $100 million in real expenditure reductions (over 10½ percent in FY 08 prices).
  - Measured from the starting point of the FY 08 budget, total savings amount to $127 million (over 13½ percent).
- Five building blocks of the strategic plan:
  - Strengthening multilateral surveillance (macro-financial linkages, exchange rates, spillovers).
  - Sharpening bilateral surveillance using cross-country perspectives.
  - Refocusing LIC work on macro-stability, growth, and integration.
  - Streamlining capacity building to macro-critical, demand-driven, externally funded TA.
  - Modernizing the Fund by updating business practices and seeking efficiency gains.
- Implementation: thirteen working groups assessed feasibility of attaining $100 million in real savings over the medium term.

### Composition and allocation of savings (FY 09–11, in millions of FY 08 dollars)
- Personnel savings (total $67):
  - Efficiency gains: 27
  - Fewer programs, less review, fewer layers: 16
  - Fewer resident representative/overseas staff: 7
  - Streamline systems and administrative processes: 7
  - Refocus capacity building: 5
  - Refocus LIC work: 2
  - Refocus surveillance: 2
  - Eliminate policy overlaps: 1
- Non-personnel savings (total $33):
  - Travel related expenses: 10
  - Less resident representative/overseas office costs: 9
  - Increased leasing of HQ: 25
  - Funding investment office through SRP: 2
  - Annual meetings’ savings: 2
  - IT services: 2
  - Elimination of subsidies: 2
  - More revenues (Concordia): 1
- Total FY 09–11 savings targeted: 100 (real, FY 08 dollars).

### Budgetary reallocation across outputs (real gross dollar inputs; Millions of FY 08 Dollars)
- Surveillance increases (real):
  - Multilateral: 28319
  - Bilateral surveillance: 158137-13 (of which: Systemic countries 445320)
  - Regional: 182218
- Country programs and Fund-financed capacity building reduced in absolute and relative terms.
- Note: reallocations reflect real increases for (i) multilateral surveillance; (ii) surveillance of systemically important countries; and (iii) regional surveillance, achieved by smaller resource allocations to Fund-financed TA, country programs, and support.

### Design and key features of the proposed MTB
- The proposed MTB delivers an unprecedented 13½ percent real reduction by FY 11 (measured using the external deflator), relative to FY 08.
- Despite the reduction, MTB allows real increases in resources allocated to multilateral surveillance, surveillance of systemically important countries, and regional surveillance.
- MTB designed to bridge the medium-term income gap in conjunction with a proposed new income model; neither income measures nor expenditure restraint alone would achieve FY 12 balance.

### Restructuring Budget and operational adjustments
- Proposed Restructuring Budget:
  - A $155 million multi-year appropriation to meet institutional restructuring costs.
  - Proposal to carry forward and transfer up to $30 million of unused FY 08 administrative resources to the Restructuring Budget.
- Departmental and staffing adjustments:
  - Departments to prepare individual business plans after the first phase of restructuring.
  - Staffing reductions distributed per working group proposals to realize personnel-related savings.

### Capital budget and planning
- Proposed FY 09 capital budget:
  - $48.3 million for capital projects beginning in FY 09 within the FY 09–11 medium-term capital plan.
- FY 09–11 capital plan total: $138 million (direct appropriation for FY 09 provides expenditures over next three years).
- Caps and benchmarks:
  - Building facility annual appropriations capped at 3 percent (moving average) of HQ1 replacement value.
  - Total IT expenditures cap set at 11 percent of aggregate net administrative and capital budgets.

### Departmental budgetary allocations and output-area shifts
- Departmental allocations designed to match Fund-wide priorities; Table 3 shows percent contributions to real change by department type.
- Key percent changes from Table 3 (selected entries preserved exactly):
  - Global monitoring: -5.4 total; -1.1 Area; -1.8 Capacity Building; -41.1 Non-TA; 41.3 Units 2/; -11.5 Other 3/
  - Multilateral surveillance (Of which): 2.4 total; -0.3 Area; 0.8 Capacity Building; -17.2 Non-TA; 36.7 Units 2/; 1.9 Other 3/
  - Country-specific and regional monitoring: -17.7 total; -33.5 Area; -13.3 Capacity Building; -6.4 Non-TA; 7.1 Units 2/; -3.5 Other 3/
  - Bilateral surveillance: -19.6 total; -40.2 Area; -9.7 Capacity Building; -4.8 Non-TA; 5.7 Units 2/; -6.5 Other 3/
  - Regional surveillance: 3.1 total; 8.5 Area; 0.4 Capacity Building; -0.8 Non-TA; 0.7 Units 2/; -0.3 Other 3/
  - Country programs and financial support 4/: -17.7 total; -38.8 Area; -6.6 Capacity Building; -55.4 Non-TA; 29.5 Units 2/; 14.7 Other 3/
  - Capacity building: -10.1 total; -10.5 Area; -66.5 Capacity Building; -1.6 Non-TA; 5.8 Units 2/; 65.8 Other 3/
  - Support: -38.6 total; -16.2 Area; -11.8 Capacity Building; -1.0 Non-TA; 16.0 Units 2/; -120.3 Other 3/
  - Governance: -10.5 total; 0.0 Area; 0.0 Capacity Building; 5.4 Non-TA; 0.4 Units 2/; -45.2 Other 3/
  - Total 1/: -100.0 total; -100.0 Area; -100.0 Capacity Building; -100.0 Non-TA; 100.0 Units 2/; -100.0 Other 3/

### Reallocating staff positions (Box 1) and FTE reductions
- Multistep reallocation process:
  - Step 1: establish number of economists and professionals by activity intensity (program, intensive surveillance, surveillance).
  - Step 2: division sizes increased to 15–20 staff; immediate offices reduced to 10–12 percent of department staff.
  - Step 3: interdepartmental reallocations to reflect strategic priorities; AFR and MCD least affected.
- Impacts by category:
  - Positions for economists and other professionals: least affected (a 10 percent reduction).
  - Manager positions and some support positions: reduced by over 20 percent each.
- FTEs and budget (FY 08 baseline):
  - Total: 2,901 FTEs; 922 (in $ millions) budget FY08.
  - Memorandum items:
    - Gross departmental reductions: 418
    - Units/margin: -38
    - Net Fund FTE reductions: 380

### Phasing of adjustments, MTB design, and savings (Tables 5–7)
- Nonpersonnel measures timing:
  - Some measures implemented in FY 09 with full realization into FY 10; sizeable nonpersonnel measures (e.g., leasing HQ2 space to the World Bank) in FY 10; global IT sourcing takes longer.
- Staffing phasing:
  - Nearly 60 percent of FTE reductions planned for FY 09; remainder staggered over FY 10–11.
  - Voluntary separations can occur as late as May 13, 2009; separations could shift into FY 10.
- Savings under FY 09–11 MTB (in millions of FY 08 dollars), relative to FY 08 budget:
  - FY 09: Total savings 87; Personnel 54; Non-personnel 33
  - FY 10: Total savings 109; Personnel 73; Non-personnel 36
  - FY 11: Total savings 127; Personnel 84; Non-personnel 43
- Phasing of staffing adjustment (as presented):
  - Separations as budgeted:
    - FY 09: Number of staff separating 220; Phasing (in percent) 58 27 15
    - FY 10: Number of staff separating 103; Phasing (in percent) 58 27 15
    - FY 11: Number of staff separating 57; Phasing (in percent) 58 27 15
  - All volunteers depart in FY 10 scenario: Number of staff separating 70 25 35 7; Phasing 18 67 15 (as presented)
- Structure and phasing of adjustment (Real percent change relative to FY 08 budget):
  - Budgetary reductions (Real percent): FY 09 9.5; FY 10 11.8; FY 11 13.7
  - Budgeted FTE reductions totals: FY 09 220; FY 10 323; FY 11 380
    - Area: FY 09 93; FY 10 108; FY 11 115
    - Functional: FY 09 89; FY 10 126; FY 11 141
    - Support and other 1/: FY 09 38; FY 10 89; FY 11 124
  - 1/ Includes OED and IEO.

### Proposed net administrative budget and real reductions (Section IV and Table 8)
- Proposed net administrative budget (nominal):
  - FY 09: $868 million
  - FY 10: $880 million
  - FY 11: $895 million
- Using an external deflator of 4 percent, implied real reduction for FY 09 is 9½ percent, relative to the FY 08 net administrative budget.
- Real budget in FY 08 dollars (Proposed net budget, FY 09–11 MTB):
  - FY 09: 835
  - FY 10: 813
  - FY 11: 796
  - Real percent change: -9.5 -2.6 -2.2
- Memorandum items:
  - FY 09–11 MTB relative to FY 08-10 MTB (In millions of FY 08 dollars): -79 -96 -100
  - Real percent change: -8.6 -10.6 -11.2
  - FY 09–11 MTB relative to FY 08 budget (In millions of FY 08 dollars): -87 -109 -127
  - Real percent change: -9.5 -11.8 -13.7

### External deflator (Box 2 and Table 9)
- External deflator applied:
  - FY 08–10 envelope deflator: 2.7 percent
  - Proposed FY 09–11 envelope deflator: 4.0 percent
- Table (annual percent change) extracts:
  - External deflator: FY 04 4.1; FY 05 5.0; FY 06 3.5; FY 07 3.4; FY 08 2.7; FY 09 4.0
  - Washington-Baltimore CPI: FY 04 3.3; FY 05 2.2; FY 06 3.6; FY 07 4.1; FY 08 2.9; FY 09 4.5
  - Compensation index: FY 04 4.4; FY 05 6.1; FY 06 3.4; FY 07 3.1; FY 08 2.7; FY 09 3.7
- External deflator calculation: 0.7 x compensation index percent change + 0.3 x Washington-Baltimore CPI percent change.

### Contingency reserves, personnel drivers, and expenditure drivers
- Contingency and planning reserves:
  - FY 09: 1 percent of the net administrative budget
  - FY 10: 1½ percent
  - FY 11: 2 percent
- Personnel is the main driver: personnel outlays account for nearly three-quarters of the budget.
- Table 10 highlights (in millions of U.S. dollars; FY 08 baseline):
  - Personnel (nominal): FY 09 723; FY 10 697; FY 11 702; FY 11 less FY 08 (Nominal) -6
  - Travel (nominal): FY 09 100; FY 10 98; FY 11 99; FY 11 less FY 08 -1
  - Building and other expenditures (nominal): FY 09 161; FY 10 163; FY 11 165; FY 11 less FY 08 10
  - Reserves (nominal): FY 09 10; FY 10 13; FY 11 18
  - Gross Expenditures (nominal): FY 09 994; FY 10 967; FY 11 985; FY 11 less FY 08 100
  - Receipts (nominal): FY 09 -71; FY 10 -99; FY 11 -105; FY 11 less FY 08 -38
  - Net Administrative Budget (nominal): FY 08 922; FY 09 868; FY 10 880; FY 11 895; FY 11 less FY 08 -27
- In FY 08 dollars (real terms):
  - Personnel: FY 09 723; FY 10 670; FY 11 649; FY 11 less FY 08 -86
  - Travel: FY 09 100; FY 10 94; FY 11 88; FY 11 less FY 08 -12
  - Building and other expenditures: FY 09 161; FY 10 157; FY 11 153; FY 11 less FY 08 -9
  - Net Administrative Budget (FY 08 dollars): FY 08 922; FY 09 835; FY 10 813; FY 11 796; FY 11 less FY 08 -127
- Other drivers:
  - Travel: 6 percent real reduction in FY 09; 12 percent lower in real terms by FY 11 (both vs FY 08).
  - Building and other expenditures: fall 6 percent in real terms by FY 11.
  - IT systems spending required to facilitate day-to-day efficiency gains.
  - Receipts expected to rise as Fund moves toward more external financing of TA and increased leasing, but expectations are uncertain.

### Measuring savings and personnel expenditure implications
- FY 08-10 MTB (rolled forward) vs FY 09-11 MTB (Table 11) highlights:
  - Panel A (FY 08-10 MTB): Total FY 08 922; FY 11 896; Change FY 08 - FY 11 -27 (Percent -2.9)
    - Personnel FY 08 652; FY 11 635; Change -17 (-2.6)
    - Non-Personnel FY 08 270; FY 11 260; Change -10 (-3.7)
  - Panel B (FY 09-11 MTB): Total FY 08 922; FY 11 796; Change FY 08 - FY 11 -127 (Percent -13.7)
    - Personnel FY 08 652; FY 11 568; Change -84 (-12.8)
    - Non-Personnel FY 08 270; FY 11 227; Change -43 (-15.9)
  - Panel C. Difference (B minus A): Total 0 -79 -96 -100
    - Personnel 0 -50 -63 -67
    - Non-Personnel 0 -29 -34 -33
- MTB targets an additional $100 million in annual savings by FY 11 compared with last year’s MTB:
  - Of that, $67 million in personnel expenditures and $33 million in nonpersonnel expenditures.
  - Reduction of 380 funded staff positions and similar cutbacks in contractuals to save $84 million in annual personnel costs by FY 11, relative to FY 08 (of which $17 million was already in baseline FY 08–10 MTB and $67 million added in FY 09–11 MTB).
- Personnel cost treatment (Table 12):
  - FY 08 personnel expenditures nominal 652; FY 11 nominal 639; Percent change nominal -2.0
  - Real using external deflator: FY 08 652; FY 11 568; Change -12.8
  - Real using implicit deflator: FY 08 652; FY 11 567; Change -13.1
  - Personnel costs in the new MTB are assumed to increase by an (unweighted) average of 4.7 percent a year over FY 09–11, compared with the 4 percent annual increase in the external deflator.

### Restructuring budget details (Section V)
- One-time costs associated with restructuring estimated at up to $185 million in the most conservative scenario.
- Proposal: fund these costs through a supplementary three-year appropriation.
- Part of the cost defrayed by carrying forward unused FY 08 administrative budget resources (up to $30 million); supplementary appropriation sought: $155 million.
- Conservative formulation assumptions:
  - Assumes 300 staff (rather than 400) will separate.
  - Voluntary departure decision period extended to 12 months.
  - Budget includes all standard benefits and allowances that will accrue while delaying/deferring separation, and the Fund’s share of contributions to the MBP and SRP for separating staff on salaries and separation leave.
- Assumptions for each separating staff member:
  - Leave under voluntary option; delay separation until May 13, 2009; choose separation leave under SBF.
  - Fund average salary charged to restructuring budget for 34.5 months (12 months delay + 22.5 months SBF maximum).
  - Fund contributions to SRP recognized when separations known; actual contributions for staff on separation leave made based on 14 percent of gross pensionable remuneration.
- Ancillary separation benefits estimated total: $11.5 million:
  - Outplacement Services: $8.1 million.
  - Education Allowance: $3.4 million.
  - Waived payback obligations: $7 million foregone reimbursements.
- Separation cost scenarios (based on 300 separations with one-year delay; figures in millions of U.S. dollars):
  - Scenario 1 (Separation leave; 22.5 months): Total 185; New multi-year appropriation: 155; FY2008 under spend: 30
  - Scenario 2 (Lump sum; 22.5 months): Total 167; New multi-year appropriation: 137; FY2008 under spend: 30 (Scenario 2 costs about $18 million less than Scenario 1)
  - Scenario 3 (Separation leave; 15 months): Total 148; New multi-year appropriation: 118; FY2008 under spend: 30 (Scenario 3 costs some $37 million lower than Scenario 1)
- Memorandum items (millions of U.S. dollars):
  - Nonrecoverable costs: 7
  - Retired Staff Benefits Investment Account (RSBIA): 62
    - Separation grant: 41
    - 60 days of annual leave: 10
    - Separation travel: 8
    - Resettlement allowance: 3
- Funding modalities and timing:
  - Mandatory separations identified in first round funded retroactive to May 1, 2008.
  - Voluntary separations: employee delays up to May 13, 2009.
  - Departments may defer and employees delay separation up to 12 months after deferral ends.
  - Budgeted funds not used would lapse at end of period (April 30, 2012).

### Capital budget composition, projects, and procedures
- Capital budget categories: building facilities, IT, and major building works.
- Building facilities project types: regulatory/security, replacement, revenue generating, new facility projects.
- IT project portfolios:
  - Enterprise Information Portfolio
  - Financial and Administrative Information Portfolio
  - Infrastructure and Connectivity Portfolio
  - IT Planning and Management Portfolio
- Major building works: none planned in medium term.
- Table 25 selected capital expenditures (in millions of U.S. dollars):
  - Building Facilities (FY 09): 25.8
  - IT (FY 09): 33.3
  - Total Capital Expenditures (FY 09): 59.1
  - Total Capital Expenditures (FY 11): 44.0
- Capital budget procedures:
  - Multi-year funding (approved funds available for three consecutive years; unused funds lapse).
  - IT projects reviewed by steering committees; building projects evaluated by TGS with CBA.
  - Approved projects financed in tranches tied to milestones; sponsors must provide status and revised CBA for releases.
- Formulation benchmarks:
  - Building facilities: recent investment ~3 percent of HQ1 replacement value (moving average benchmark).
  - IT: total IT expenditures capped at 11 percent of total net administrative and capital budgets.

### Capital projects supporting refocusing (selected)
- Projects cited to support restructuring and refocusing:
  - Financial Stability Portal
  - Economic Data Facilities Warehouse
  - Financial Risk Analysis
  - TA Regional Prioritization
  - TA Costing
  - TA Donor Portal
  - Collaboration with Trusted Partners
  - Desktop@IMF
  - Human Capital Management (HCM) Reengineering
  - integrated Budgeting and Business Intelligence System (iBBIS)

### Medium-Term Budget rolling forward and headline figures (Table 16 highlights)
- A. Approved FY 08-FY 10 MTB (net budget sequence in source): 922.39 938.09 959.4
- B. Rolling forward FY 08-10 MTB to FY 09-11 revised starting point for net expenditures: 950.0 984.0 1,007.8
- C. Policy changes: restructuring: -81.8 -104.3 -113.0
- D. FY 09-11 MTB (net budget): 868.2 879.7 894.9
  - Revised central receipts estimate: 98.6 105.0 109.3
  - Gross expenditures: 966.8 984.7 1,004.2
  - Upper limit on gross expenditures: 966.8 990.7 1,013.9
- Memo: FY 09-11 Deflator (percentage change): 4.0 4.0 4.0

### Real net and gross expenditures (FY 08 dollars) and changes
- Real net expenditures (FY 08 dollars), FY 09–11 MTB: 834.8 813.3 795.6
  - Change vs revised starting point: -78.6 -96.5 -100.0
  - Percentage change: -8.6 -10.6 -11.2
- Real gross expenditures (FY 08 dollars), FY 09–11 MTB: 929.6 910.4 892.7
  - Change: -53.6 -67.4 -69.5
  - Percentage change: -5.5 -6.9 -7.2

### Output-area allocation and key figures (Tables 17–20 highlights, in millions)
- Selected gross administrative budgeted expenditures:
  - Global Monitoring: 171.6 169.5 173.8 179.3
  - Country specific and regional monitoring: 346.2 350.3 355.0 361.8
  - Capacity Building: 237.8 235.9 239.7 243.7
  - Total, excluding reserves: 984.1 958.2 971.6 986.2
  - Reserves: 9.6 8.6 13.1 18.0
  - Total gross expenditures: 993.7 966.8 984.7 1,004.2
  - Support (memorandum): 313.1 292.1 297.9 305.6
  - Governance (memorandum): 91.5 89.0 91.1 90.2
- Real FY 11 less FY 08 deltas (selected):
  - Global Monitoring: -12.2
  - Country specific and regional monitoring: -24.5
  - Country programs and financial support: -49.5
  - Total, excluding reserves: -107.4
  - Total gross expenditures (real): -96.8
  - Support (memorandum): -41.4
  - Governance (memorandum): -11.3
- Shares of total gross expenditures (excluding reserves) FY 08 to FY 11:
  - Global Monitoring: 17.4 17.7 17.9 18.2
  - Country specific and regional monitoring: 35.2 36.6 36.5 36.7
  - Capacity Building: 24.2 24.6 24.7 24.7
  - Country programs and financial support: 23.2 21.1 20.9 20.4

### Administrative budget by major expenditure category (Tables 21–22)
- Nominal (Table 21, in millions of U.S. dollars):
  - I. Personnel: 723.1 696.8 702.2 716.8
    - Salaries: 424.6 417.2 422.4 433.4
    - Benefits: 298.5 279.6 279.8 283.3
  - II. Travel: 100.5 98.0 98.8 99.1
  - III. Building and other expenditures: 160.6 163.4 165.2 170.3
  - V. Reserves: 9.6 8.6 13.1 18.0
  - Gross Expenditures: 993.7 966.8 984.7 1,004.2
  - Receipts: -71.4 -98.6 -105.0 -109.3
  - Net Administrative Budget: 922.3 868.2 879.7 894.9
- Real (FY 08 dollars) — FY 11 less FY 08 deltas:
  - I. Personnel: 723.1 670.0 649.2 637.2 — FY 11 less FY 08: -85.9
    - Salaries: 424.6 401.1 390.5 385.3 — FY 11 less FY 08: -39.3
    - Benefits: 298.5 268.9 258.7 251.9 — FY 11 less FY 08: -46.6
  - II. Travel: 100.5 94.2 91.4 88.1 — FY 11 less FY 08: -12.3
  - III. Building and other expenditures: 160.6 157.1 152.7 151.4 — FY 11 less FY 08: -9.2
  - Gross Expenditures (real): 993.7 929.6 910.4 892.7 — FY 11 less FY 08: -101.0
  - Receipts (real): -71.4 -94.8 -97.1 -97.2 — FY 11 less FY 08: -25.7
  - Net Administrative Budget (real): 922.3 834.8 813.3 795.6 — FY 11 less FY 08: -126.8

### Financing administrative expenses — reconciliation and headline income position (Appendix I, Box 5)
- Capital-related adjustments (examples and FY 08 figures):
  - FY 08 capital budget expenditures: $46 million (of which $25 million capitalized; $21 million expensed directly).
  - Depreciation charge related to capitalized assets: $35 million.
  - Capital items included in administrative expenses in FY 08 total $56 million compared with capital budget expenditure figure of $46 million.
- FY 08 projected income and shortfall:
  - Projected outturn for the net administrative budget in FY 08: $886 million
  - Administrative expenses (including capital–related adjustments) estimated to be: $942 million
  - Operational income for FY 08: $845 million
  - Estimated income shortfall in FY 2008: $97 million
- Table 23 (selected rows, in millions of U.S. dollars):
  - Net administrative budget: 886 868 880 895 931 (FY 08FY 09FY 10FY 11FY 12)
  - Add: Capital budget items not capitalized: 21 21 19 18 18
  - Depreciation expense: 35 38 42 46 46
  - A. Administrative expenses after capital-related adjustments: 942 928 941 959 994
  - B. Operational income: 845 832 858 934 1,023
    - Lending income: 307 238 140 101 99
    - Investment income: 432 393 508 576 644
    - Interest free resources: 100 125 133 181 203
  - C. Net operational income (B-A): -97 -96 -84 -25 28
  - Assumed U.S. dollar/SDR exchange rate: 1.57 1.65 1.65 1.65 1.65

### Receipts, donor-financed capacity building, and revenue initiatives
- Receipts split into general receipts and external donor funding (principally for TA and training).
- Selected receipts lines and trends (Table 24, in millions of U.S. dollars; FY 08–FY 11 patterns preserved as presented):
  - Externally financed technical assistance and scholarships: levels and percent changes shown in source tables.
  - Concordia apartment: 23 44 ... 53
  - Other miscellaneous reimbursements include HQ2 leasing, reimbursement of investment office costs, travel commissions and rebates, parking; totals and percent-change reporting provided in source.
- Strategy:
  - Increasing Fund receipts is central to the new budget strategy.
  - Initiatives to increase receipts: leasing freed office space (e.g., to the World Bank), higher Concordia rates, reimbursement of pension investment office administrative expenses by SRP, aligning parking charges with market levels, increased travel rebates.
  - Additional donor support for capacity building via topical trust funds expected to offset cuts in TA and training.
  - Potential for increased TA output in real terms if demand for RTAC-delivered TA is strong.

*Executive Summary, IMF FY 09–11 Medium-Term Budget (excerpt).*

### Executive Summary ......................................................................................................

### Executive Summary

### Overview
- Proposals for Executive Board approval:
  - An $868.3 million net administrative budget for FY 09 set in the context of the FY 09–11 MTB, and the corresponding $966.9 million limit on gross administrative expenditures.
  - A $48.3 million capital budget for capital projects beginning in FY 09 in the context of the FY 09–11 medium-term capital plan.
  - A separate $155 million multi-year appropriation to meet restructuring costs.
  - A proposal to carry forward and transfer up to $30 million of unused resources from the FY 08 administrative budget to the restructuring budget.
- The central goal: reshape the institution to deliver more focused outputs cost-effectively using its comparative advantage; refocusing is driven by membership needs and global challenges and is enabled by the proposed MTB.

### Strategic directions underpinning the MTB
- Medium-term policy goal:
  - Put in place a sustainable budgetary framework for FY 09–11 to eliminate the income-expenditure gap in FY 12.
  - Strategy requires simultaneous enactment of income and expenditure measures; a new income model and expenditure restraint are both necessary for balance.
- Income/expenditure framing:
  - The Managing Director proposed that about $100 million of the FY 12 income-expenditure gap be met through expenditure reductions and the rest through enhanced income measures.
  - The FY 08–10 MTB envisaged a real reduction of $27 million dollars (a cumulative 3 percent, measured against the external deflator).
  - The FY 09–11 MTB incorporates a further $100 million in real expenditure reductions (over 10½ percent in FY 08 prices).
  - Measured from the starting point of the FY 08 budget, total savings amount to $127 million (over 13½ percent as shown in Figure 2).
- Five building blocks of the strategic plan:
  - Strengthening multilateral surveillance through stronger analyses of macro-financial linkages, exchange rates, and spillovers originating from systemically important countries.
  - Sharpening bilateral surveillance by applying cross-country perspectives to policy issues facing individual countries.
  - Refocusing LIC work to emphasize macro-stability, growth, and integration with the global economy.
  - Streamlining capacity building by focusing on macro-critical activities and making technical assistance (TA) more demand driven, and externally funded.
  - Modernizing the Fund by updating business practices and seeking efficiency gains.
- Implementation process:
  - Thirteen working groups studied facets of the five building blocks; recommendations were assessed top-down and bottom-up to ascertain feasibility of attaining $100 million in real savings over the medium term.
- Four central budgetary considerations:
  - Providing a framework to help refocus the institution.
  - Putting in place a budget framework that will help close the income-expenditure gap in FY 12.
  - Maximizing nonpersonnel expenditure reductions to better exploit technological advances and enhance organizational efficiency.
  - Implementing personnel-related expenditure reductions fairly, while preserving business continuity.

### Composition and allocation of savings
- Composition of FY 09–11 savings (in millions of FY 08 dollars) — as presented:
  - Personnel Savings67
  - Efficiency gains 27
  - Fewer programs, less review, fewer layers16
  - Fewer resident representative/overseas staff7
  - Streamline systems and administrative processes7
  - Refocus capacity building5
  - Refocus LIC work2
  - Refocus surveillance2
  - Eliminate policy overlaps1
  - Non-personnel Savings
  - 33
  - Travel related expenses10
  - Less resident representative/overseas office costs9
  - Increased leasing of HQ25
  - Funding investment office through SRP2
  - Annual meetings’ savings2
  - IT services2
  - Elimination of subsidies2
  - More revenues (Concordia)1
  - Total
  - 100
- Budgetary reallocation across outputs:
  - The MTB moves resources from non-core to core activities and reallocates within core activities toward priorities. The proposed MTB provides both a larger share and greater absolute levels of expenditure for certain key areas.
  - Real budgetary allocations (Gross dollar inputs spent on each output area; columns do not sum to the Fund total because of omitted categories; units: Millions of FY 08 Dollars) — as presented:
    - Surveillance
      - Multilateral 
        - 28319
      - Bilateral surveillance
        - 158137-13
        - Of which: Systemic countries
          - 445320
      - Regional
        - 182218
    - Country programs
      - 122103-15
    - Fund-financed capacity building
      - 10686-19
    - Support
      - 313272-13
  - Note: These allocations reflect a real increase for (i) multilateral surveillance; (ii) surveillance of systemically important countries; and (iii) regional surveillance, achieved by smaller resource allocations to Fund-financed TA, country programs, and support.

### Design and key features of the proposed MTB
- The proposed MTB delivers an unprecedented 13½ percent real reduction by FY 11 (measured using the external deflator), relative to FY 08.
- Despite the sharp reduction, MTB allows real increases in resources allocated to:
  - Multilateral surveillance.
  - Surveillance of systemically important countries.
  - Regional surveillance.
- The FY 09–11 MTB is designed to bridge the medium-term income gap in conjunction with a proposed new income model; neither income measures nor expenditure restraint alone would achieve FY 12 balance.

### Restructuring Budget and operational adjustments
- Proposed Restructuring Budget:
  - A $155 million multi-year appropriation to meet institutional restructuring costs.
  - Proposal to carry forward and transfer up to $30 million of unused FY 08 administrative resources to the Restructuring Budget to help defray restructuring costs.
- Departmental and staffing adjustments:
  - Departments were asked to prepare individual business plans after the first phase of the restructuring exercise is underway.
  - Staffing reductions were distributed in line with working group proposals approved by management to realize personnel-related savings.

### Capital budget and planning
- Proposed FY 09 capital budget:
  - $48.3 million for capital projects beginning in FY 09 within the FY 09–11 medium-term capital plan.

### Organizational process and consultations
- Strategic plan and budget parameters were articulated by the Managing Director following vetting by staff and the Board and discussions with shareholders.
- The Managing Director presented the strategic vision and budget outlines to Executive Directors on multiple occasions, most recently on March 12, 2008.
- The plan was discussed in the Committee on the Budget (COB) on January 10, 2008 and February 5, 2008, and in the Board meeting on March 12, 2008.

_Executive Summary, IMF FY 09–11 Medium-Term Budget (excerpt)._

### 13.      How are departments accommodating these budgetary shifts? The departmental

### _032008 - 13.      How are departments accommodating these budgetary shifts? The departmental

### Departmental budgetary allocations and output-area shifts
- Departmental budgetary allocations are designed to match Fund-wide priorities.
- Table 3 (Key Output Areas, FY 11 Relative to FY 08) shows percent contribution to real change by type of department.
- About 40 percent of the total output reduction for area departments will come from resources formerly allocated to country program-related activities.
- Area and TA functional departments are planning a real increase in resources for regional surveillance and for surveillance of systemically important countries.
- The budget provides positions for new units to ensure coordination across departments in two areas: (i) multilateral surveillance and (ii) refocusing of LIC work.
- The methodology for constructing departmental budgets and departmental FTE and dollar budget reductions are described in Box 1.

Key percent changes from Table 3 (selected entries preserved exactly as in source):
- Global monitoring: -5.4 total; -1.1 Area; -1.8 Capacity Building; -41.1 Non-TA; 41.3 Units 2/; -11.5 Other 3/
- Multilateral surveillance (Of which): 2.4 total; -0.3 Area; 0.8 Capacity Building; -17.2 Non-TA; 36.7 Units 2/; 1.9 Other 3/
- Country-specific and regional monitoring: -17.7 total; -33.5 Area; -13.3 Capacity Building; -6.4 Non-TA; 7.1 Units 2/; -3.5 Other 3/
- Bilateral surveillance: -19.6 total; -40.2 Area; -9.7 Capacity Building; -4.8 Non-TA; 5.7 Units 2/; -6.5 Other 3/
- Regional surveillance: 3.1 total; 8.5 Area; 0.4 Capacity Building; -0.8 Non-TA; 0.7 Units 2/; -0.3 Other 3/
- Country programs and financial support 4/: -17.7 total; -38.8 Area; -6.6 Capacity Building; -55.4 Non-TA; 29.5 Units 2/; 14.7 Other 3/
- Capacity building: -10.1 total; -10.5 Area; -66.5 Capacity Building; -1.6 Non-TA; 5.8 Units 2/; 65.8 Other 3/
- Support: -38.6 total; -16.2 Area; -11.8 Capacity Building; -1.0 Non-TA; 16.0 Units 2/; -120.3 Other 3/
- Governance: -10.5 total; 0.0 Area; 0.0 Capacity Building; 5.4 Non-TA; 0.4 Units 2/; -45.2 Other 3/
- Total 1/: -100.0 total; -100.0 Area; -100.0 Capacity Building; -100.0 Non-TA; 100.0 Units 2/; -100.0 Other 3/
- Notes: 1/ Excludes reserves. 2/ Includes work on low-income countries. 3/ Includes offices, and support and governance departments.

### Reallocating staff positions (Box 1)
- Staff positions were reallocated within and across departments through a multistep process.
- First step: establish number of economists and other professionals.
  - In area departments, the number of economists was determined by each country’s relationship with the Fund—program, or surveillance. Surveillance countries were further divided by anticipated level of intensity. More economists were notionally assigned to program and intensive surveillance cases.
  - In capacity building and functional departments (PDR, RES, and others), economist allocations were linked to outputs such as surveillance, research, and capacity building in accordance with their centrality to the refocusing.
  - Staffing levels in support and governance departments were reallocated in line with strategic priorities, incorporating efficiency gains, for example through outsourcing.
- Second step: division sizes were increased to 15–20 staff to reflect industry standards for span of control; immediate offices were reduced to a target of 10–12 percent of total department staff. Results were reviewed and adjusted for inconsistencies.
- Final step: management made interdepartmental reallocations to reflect strategic priorities. AFR and MCD are least affected because they have more program countries.
- Impacts by category:
  - Positions for economists and other professionals: least affected (a 10 percent reduction).
  - Manager positions and some support positions: reduced by over 20 percent each.

### FTEs and budget by department (Table 4) — selected preservation of numeric values
- Total Fund FTEs and budget figures reported (FY 08 baseline):
  - Total: 2,901 FTEs; 922 (in $ millions) budget FY08; FY08-11 percent reduction reference in table.
- Memorandum items (in levels):
  - Gross departmental reductions: 418
  - Units/margin: -38
  - Net Fund FTE reductions: 380
- Note: Table 4 lists department-level FTE and budget figures (area, TA functional, functional, support, governance and other) with FY 08 levels and percent reductions FY 08 - FY 11. (Full department-level rows present in source table.)

### Phasing of adjustments, MTB design, and savings (Tables 5–7, Figure 3)
- Phasing considerations:
  - Nonpersonnel measures such as new travel policy, new airline agreements, smaller publications budget, elimination of selected subsidies can be implemented in FY 09; full realization spills into FY 10. Some sizeable nonpersonnel measures (e.g., leasing HQ2 space to the World Bank) will be implemented in FY 10; further global sourcing of IT will take longer.
  - Nearly 60 percent of the reductions in FTEs are planned for FY 09, remainder staggered over FY 10–11. Voluntary separations can occur as late as May 13, 2009; separations could shift into FY 10.
- Table 5. Savings Under the FY 09-11 MTB (in millions of FY 08 dollars), relative to FY 08 budget:
  - FY 09: Total savings 87; Personnel 54; Non-personnel 33
  - FY 10: Total savings 109; Personnel 73; Non-personnel 36
  - FY 11: Total savings 127; Personnel 84; Non-personnel 43
- Table 6. Phasing of Staffing Adjustment
  - Separations as budgeted:
    - FY 09: Number of staff separating 220; Phasing (in percent) 58 27 15 (presumed FY09/FY10/FY11 percentages)
    - FY 10: Number of staff separating 103; Phasing (in percent) 58 27 15
    - FY 11: Number of staff separating 57; Phasing (in percent) 58 27 15
  - All volunteers depart in FY 10 scenario:
    - Number of staff separating 70 25 35 7 (table shows “Number of staff separating 70 25 35 7” and phasing “18 67 15” as presented)
- Table 7. Structure and Phasing of Adjustment (Real percent change relative to FY 08 budget)
  - Budgetary reductions (Real percent): FY 09 9.5; FY 10 11.8; FY 11 13.7
  - Area: FY 09 10.4; FY 10 13.7; FY 11 15.8
  - Functional: FY 09 9.3; FY 10 11.8; FY 11 13.0
  - Support and other 1/: FY 09 9.3; FY 10 10.6; FY 11 13.1
  - Budgeted FTE reductions totals: FY 09 220; FY 10 323; FY 11 380
    - Area: FY 09 93; FY 10 108; FY 11 115
    - Functional: FY 09 89; FY 10 126; FY 11 141
    - Support and other 1/: FY 09 38; FY 10 89; FY 11 124
  - 1/ Includes OED and IEO.

- Figure 3 summary:
  - Proposed Real Net Administrative Budget FY 09-11 (in millions of FY 08 dollars) shows a trajectory declining from FY 08 baseline toward FY 11 with annotations:
    - $100 million (label)
    - $127 million (label)
  - Note: FY 08-10 MTB FY 11 figure is calculated assuming a policy stance of a one percent real reduction is continued.

### Proposed net administrative budget and real reductions (Section IV and Table 8)
- Proposed net administrative budget:
  - FY 09: $868 million
  - FY 10: $880 million
  - FY 11: $895 million
- Using an external deflator of 4 percent, implied real reduction for FY 09 is 9½ percent, relative to the FY 08 net administrative budget.
- Real reduction over the three-year period is more than 13½ percent (with respect to FY 08).
- Table 8 highlights (In millions of FY 08 dollars; Real annual percent change):
  - FY 08-10 MTB rolled forward one year…950 984 1,008 (nominal sequence in source)
  - Proposed net budget, FY 09-11 MTB…868 880 895 (nominal)
  - Proposed net budget, FY 09-11 MTB (in FY 08 dollars)…835 813 796
  - Proposed net budget, FY 09-11 MTB (Real percent change)…-9.5 -2.6 -2.2 (relative rows preserved as presented)
- Memorandum items:
  - FY 09-11 MTB relative to FY 08-10 MTB (In millions of FY 08 dollars)…-79 -96 -100
  - Real percent change…-8.6 -10.6 -11.2
  - FY 09-11 MTB relative to FY 08 budget (In millions of FY 08 dollars)…-87 -109 -127
  - Real percent change…-9.5 -11.8 -13.7

### External deflator (Box 2 and Table 9)
- The Executive Board agreed an external deflator is used in setting the Fund’s nominal administrative budget. The deflator is applied to all three years in setting the MTB envelope, updated each January on a rolling basis.
- External deflator applied:
  - FY 08–10 envelope deflator: 2.7 percent
  - Proposed FY 09–11 envelope deflator: 4.0 percent
- Table of external deflator and components (annual percent change) as provided:
  - FY 04 external deflator 4.1; FY 05 5.0; FY 06 3.5; FY 07 3.4; FY 08 2.7; FY 09 4.0
  - Washington-Baltimore CPI: FY 04 3.3; FY 05 2.2; FY 06 3.6; FY 07 4.1; FY 08 2.9; FY 09 4.5
  - Compensation index: FY 04 4.4; FY 05 6.1; FY 06 3.4; FY 07 3.1; FY 08 2.7; FY 09 3.7
  - Public sector compensation: FY 04 4.3; FY 05 4.4; FY 06 3.7; FY 07 3.4; FY 08 2.6; FY 09 4.5
  - Private financial sector compensation: FY 04 4.8; FY 05 8.8; FY 06 2.8; FY 07 2.2; FY 08 2.9; FY 09 3.1
  - Private industrial sector compensation: FY 04 3.0; FY 05 4.1; FY 06 4.3; FY 07 4.6; FY 08 2.0; FY 09 2.4
- Table 9 notes: External deflator calculation: 1/ Calculated as: 0.7 x compensation index percent change + 0.3 x Washington-Baltimore CPI percent change.

### Contingency reserves, personnel drivers, and expenditure drivers (Sections 17–18, Table 10)
- Contingency and planning reserves programmed as:
  - FY 09: 1 percent of the net administrative budget
  - FY 10: 1½ percent
  - FY 11: 2 percent
- Rationale: buffer for uncertainties in institutional restructuring implementation and need for planning reserves in outer years.
- Personnel is the main driver: personnel outlays account for nearly three-quarters of the budget.
- Table 10 highlights (in millions of U.S. dollars; FY 08 baseline):
  - Personnel (nominal): FY 09 723; FY 10 697; FY 11 702; FY 11 less FY 08 (Nominal) -6
  - Travel (nominal): FY 09 100; FY 10 98; FY 11 99; FY 11 less FY 08 -1
  - Building and other expenditures (nominal): FY 09 161; FY 10 163; FY 11 165; FY 11 less FY 08 10
  - Reserves (nominal): FY 09 10; FY 10 13; FY 11 18
  - Gross Expenditures (nominal): FY 09 994; FY 10 967; FY 11 985; FY 11 less FY 08 100
  - Receipts (nominal): FY 09 -71; FY 10 -99; FY 11 -105; FY 11 less FY 08 -38
  - Net Administrative Budget (nominal): FY 08 922; FY 09 868; FY 10 880; FY 11 895; FY 11 less FY 08 -27
- In FY 08 dollars (real terms):
  - Personnel: FY 09 723; FY 10 670; FY 11 649; FY 11 less FY 08 -86
  - Travel: FY 09 100; FY 10 94; FY 11 88; FY 11 less FY 08 -12
  - Building and other expenditures: FY 09 161; FY 10 157; FY 11 153; FY 11 less FY 08 -9
  - Gross Expenditures: FY 09 994; FY 10 930; FY 11 910; FY 11 less FY 08 -101
  - Receipts: FY 09 -71; FY 10 -95; FY 11 -97; FY 11 less FY 08 26
  - Net Administrative Budget (FY 08 dollars): FY 08 922; FY 09 835; FY 10 813; FY 11 796; FY 11 less FY 08 -127
- Other expenditure drivers noted:
  - Travel: 6 percent real reduction in FY 09; 12 percent lower in real terms by FY 11 (both vs FY 08).
  - Building and other expenditures: fall 6 percent in real terms by FY 11, despite slight nominal rise, due to IT replacements and refurbishments.
  - IT systems spending necessary to facilitate day-to-day efficiency gains.
  - Receipts expected to rise as Fund moves toward more external financing of TA and increased leasing, but expectations are uncertain.

### Measuring savings and personnel expenditure implications (Box 3, Tables 11–12)
- FY 08-10 MTB (rolled forward) vs FY 09-11 MTB comparison (Table 11):
  - Panel A (FY 08-10 MTB): Total FY 08 922; FY 11 896; Change FY 08 - FY 11 -27 (Percent -2.9)
    - Personnel FY 08 652; FY 11 635; Change -17 (-2.6)
    - Non-Personnel FY 08 270; FY 11 260; Change -10 (-3.7)
  - Panel B (FY 09-11 MTB): Total FY 08 922; FY 11 796; Change FY 08 - FY 11 -127 (Percent -13.7)
    - Personnel FY 08 652; FY 11 568; Change -84 (-12.8)
    - Non-Personnel FY 08 270; FY 11 227; Change -43 (-15.9)
  - Panel C. Difference (B minus A): Total 0 -79 -96 -100
    - Personnel 0 -50 -63 -67
    - Non-Personnel 0 -29 -34 -33
  - Memorandum item: Funded staff positions FY 08 2,901; FY 11 -380; percent -13.1 (presented as “Funded staff positions2901268125792521-380-13.1” in source)
- FY 09–11 MTB targets an additional $100 million in annual savings by FY 11 compared with last year’s MTB:
  - Of that, $67 million in personnel expenditures and $33 million in nonpersonnel expenditures.
  - Combined annual net administrative spending would fall by $127 million in real terms over FY 08–11.
  - The MTB incorporates a reduction of 380 funded staff positions and similar cutbacks in contractuals to save $84 million in annual personnel costs by FY 11, relative to FY 08. Of this $84 million, $17 million was already in baseline FY 08–10 MTB and $67 million added in FY 09–11 MTB.
- Personnel cost treatment (Table 12):
  - FY 08 personnel expenditures nominal 652; FY 11 nominal 639; Percent change nominal -2.0
  - Real using external deflator: FY 08 652; FY 11 568; Change -12.8
  - Real using implicit deflator: FY 08 652; FY 11 567; Change -13.1
  - Note: personnel costs in the new MTB are assumed to increase by an (unweighted) average of 4.7 percent a year over FY 09–11, compared with the 4 percent annual increase in the external deflator.

### Restructuring budget (Section V)
- The restructuring budget is a one-time appropriation over a multiyear period to meet the costs of refocusing the Fund.
- One-time costs associated with the restructuring estimated at up to $185 million in the most conservative scenario.
- Proposal: fund these costs through a supplementary three-year appropriation.
- Part of the cost would be defrayed by carrying forward unused FY 08 administrative budget resources (up to $30 million), so the supplementary appropriation being sought would amount to $155 million.
- Such an appropriation is subject to a separate Board decision authorizing management to incur expenses during FY 08–11 up to the maximum of the appropriation. Execution of the restructuring budget will be reported to the Board periodically.

*Italicized source attribution: Excerpt from the IMF document titled “How are departments accommodating these budgetary shifts? The departmental” (content unit _032008 - 13.)*

### 20.      The restructuring budget makes provisions for severance payments, allowances,

### _032008 - 20.      The restructuring budget makes provisions for severance payments, allowances,

### Restructuring budget purpose and composition
- The restructuring budget makes provisions for severance payments, allowances, and certain ancillary benefits.
- Approximately two-thirds of the restructuring budget is expected to be used for severance payments to separating staff under the modified Separation Benefits Fund (SBF) approved by the Board in January 2008.
- The remainder will be spent on certain benefits, allowances, and other costs associated with separation, as well as a number of ancillary benefits.
- The remainder of the budget consists of costs associated with separating staff, most notably outplacement services, certain ancillary benefits, and initiatives to facilitate staff retooling via external mobility under the existing Short-Term External Assignment Program, and Leave Without Pay in the Interest of the Fund.

### Key formulation assumptions and conservative choices
- The restructuring budget has been formulated using fairly conservative assumptions and differs from the framework discussed in the February COB meeting in three respects:
  - (i) The restructuring budget assumes 300 staff (rather than 400 staff) will separate from the Fund, reflecting lower overall reduction targets, and staff vacancies accumulated by end-FY 08.
  - (ii) The voluntary departure decision period is extended from the initially envisaged 8 months to 12 months.
  - (iii) The budget includes all standard benefits and allowances (e.g., expatriate benefits) that will accrue to staff while delaying/deferring their separation, as well as the Fund’s share of contributions to the Medical Benefits Plan (MBP) and the Staff Retirement Plan (SRP), for all separating staff on both their salaries and separation leave.
- All separating staff are assumed to:
  - leave under the voluntary option;
  - delay their separation until May 13, 2009; and
  - choose separation leave (under the SBF) instead of the newly introduced “Rule of Age 50” under the SRP.
- For each separating staff member, it is assumed that the Fund average salary is charged to the restructuring budget for 34.5 months, consisting of the maximum delay period (12 months) and the maximum eligibility period (22.5 months) under the modified SBF.
- Consistent with IAS 19 and IFRS, Fund contributions to the SRP will be recognized when separations—whether mandatory or voluntary—are known. Actual contributions into the SRP for staff placed on separation leave (up to 22.5 months) will be made based on 14 percent of gross pensionable remuneration. Similar accounting treatment applies to the Fund’s contributions to the MBP, Group Life Insurance (GLI), and tax allowances.

### Ancillary separation benefits (Box 4) — estimated total $11.5 million
- Management decided to extend applicability of and eligibility for certain existing benefits and allowances. Ancillary separation benefits are estimated at $11.5 million and include:
  - Outplacement Services ($8.1 million) to facilitate transition to the external job market, available for both mandatory and voluntary separations and in some cases to all staff:
    - Access to IMF in-house career counselor.
    - Access to services of an outplacement firm, including one-on-one job search assistance (interviewing, resume writing), career transition counseling program, and access to databases of private and public employers, international agencies, diplomatic missions, U.S. government departments, etc.
    - Access to short-term training sessions to enhance separating staff’s skills.
    - Access to vacancies in IFIs, central banks, and private sector institutions.
    - Job search interview travel: one low fare economy class ticket for job search and interview outside the metropolitan area (for mandatory separations only).
  - Education Allowance ($3.4 million) for additional education allowances for the 2008/2009 academic year for both voluntary and mandatory separations, and for deferred separations for the 2009/2010 academic year.
- Management has also decided to waive certain payback obligations, amounting to $7 million in foregone reimbursements for all eligible staff:
  - Appointment benefits: staff obligation to repay the Fund for payments received in connection with appointment if the staff member does not serve the first two years of a fixed-term appointment.
  - Service requirement: staff obligation to repay costs associated with HR programs, such as short-term external assignments, study leave, sabbaticals, etc.

### Separation cost scenarios and headline numbers (Table 13; based on 300 separations with one-year delay)
- Common assumptions across scenarios:
  - All scenarios assume staff will delay their separation date until May 13, 2009.
  - Scenarios 1 and 2 assume the maximum number of SBF eligible months (22.5).
- Scenario summaries (in millions of U.S. dollars):
  - Scenario 1 (Separation leave; 22.5 months):
    - SBF salary payments: 767
    - One-year delay salary payments: 39
    - Contribution to the SRP: 27
    - Tax allowance (U.S. nationals): 14
    - MBP: 10
    - Home leave: 3
    - Spouse and Child Allowances and Group Life Insurance: 1
    - Ancillary benefits: 12
    - Outplacement and other services: 8
    - Education allowance: 3
    - Retooling and retraining: 4
    - Of which: Short-Term External Assignment Program: 2
    - Total: 185
    - New multi-year appropriation: 155
    - FY2008 under spend: 30
  - Scenario 2 (Lump sum; 22.5 months):
    - SBF salary payments: 651
    - One-year delay salary payments: 39
    - Contribution to the SRP: 9
    - Tax allowance (U.S. nationals): 14
    - MBP: 10
    - Home leave: 3
    - Spouse and Child Allowances and Group Life Insurance: 1
    - Ancillary benefits: 12
    - Outplacement and other services: 8
    - Education allowance: 3
    - Retooling and retraining: 4
    - Of which: Short-Term External Assignment Program: 2
    - Total: 167
    - New multi-year appropriation: 137
    - FY2008 under spend: 30
    - Scenario 2 would cost about $18 million less than Scenario 1.
  - Scenario 3 (Separation leave; 15 months):
    - SBF salary payments: 51
    - One-year delay salary payments: 39
    - Contribution to the SRP: 21
    - Tax allowance (U.S. nationals): 14
    - MBP: 10
    - Home leave: 3
    - Spouse and Child Allowances and Group Life Insurance: 1
    - Ancillary benefits: 12
    - Outplacement and other services: 8
    - Education allowance: 3
    - Retooling and retraining: 4
    - Of which: Short-Term External Assignment Program: 2
    - Total: 148
    - New multi-year appropriation: 118
    - FY2008 under spend: 30
    - Scenario 3 costs are some $37 million lower than Scenario 1.
- Memorandum items (in millions of U.S. dollars):
  - Nonrecoverable costs: 7 (each scenario: 7, 7, 7)
  - Retired Staff Benefits Investment Account (RSBIA): 62 (each scenario: 62, 62, 62)
    - Separation grant: 41 (each scenario: 41, 41, 41)
    - 60 days of annual leave: 10 (each scenario: 10, 10, 10)
    - Separation travel: 8 (each scenario: 8, 8, 8)
    - Resettlement allowance: 3 (each scenario: 3, 3, 3)
- Notes from Table 13 retained exactly as in source:
  - All scenarios assume staff will delay their separation by 12 months, until May 13, 2009.
  - Assumes that 25 percent of those separating are U.S. nationals.
  - Under Scenario 2, it is assumed that all separating staff are eligible for retiree medical coverage.
  - Based on the sample of staff used to illustrate the cost of reforming the SBF, that sample assumed that 15 percent of staff members would separate at the Rule of 85 thus receiving reduced benefits, while about 6 percent of the staff would qualify for the minimum SBF payment.
  - Scenarios 1 and 3 provide for the SRP contingent liabilities arising from staff choosing the separation leave option under the SBF, thus remaining on the Fund's payroll for the entire period, whereas Scenario 2 reflects only the Fund's 14 percent of gross pensionable remuneration for FY 09 since staff choosing the lump sum option under the SBF cease accruing rights under the SRP (included in Scenarios 1 and 3).
  - Scenario 3 average separation leave of 15 months is based on the sample of staff used to illustrate the cost of reforming the SBF.

### Funding modalities and timing
- The restructuring budget will cover all costs related to separating staff.
- Figure 4 (text description) illustrates three modalities whereby staff costs will be charged to the restructuring budget:
  - Mandatory Separations identified in the first round are funded from the Restructuring Budget retroactive to May 1, 2008.
  - Voluntary Separations: "Employee Delays"—employee delays separation date up to May 13, 2009.
  - Voluntary Separations: "Department Defers / Employee Delays"—department defers for up to 12 months; employee delays separation date anytime up to 12 months after the department deferral ends.
- Considering uncertainty regarding separation choices (voluntary versus mandatory), vehicle of separation (SRP Rule of Age 50 versus SBF), and timing, staff recommend formulating the restructuring budget on the basis of the most conservative assumptions. Budgeted funds not used would lapse at the end of the period (i.e., April 30, 2012).

### Capital budget overview (FY 09–11)
- Executive Board approval is sought for an appropriation of $48.3 million for capital projects beginning in FY 09.
- Directors are asked to take note of the capital budget envelope proposed for the following two years, resulting in the FY 09–11 capital plan of $138 million.
- The appropriation for FY 09 provides for expenditures over the next three years; over one-third of it is for building facility projects and the remainder for information technology projects.
- Table 14 summary (in millions of U.S. dollars; figures indicate appropriations approved or requested for capital projects beginning in each financial year):
  - FY 07 FY 08 FY 09 FY 10 FY 11 Total
  - Total 48 47 46 141 (FY 09–11 Plan total: 138)
  - Building Facilities and Information Technology components are detailed in the source.
- The capital budget reflects a significant downward adjustment in real terms; security initiatives are now complete and no new funding is being sought for them.
- Caps and benchmarks:
  - Building facility capital projects annual appropriations capped at 3 percent (on a moving average basis) of the asset replacement value of the main HQ1 building.
  - Total IT expenditures cap set at 11 percent of the Fund’s aggregate net administrative and capital budgets.
- Capital budget benchmark outcomes (in percent; Table 15):
  - Building Facilities (three-year moving average as a percentage of replacement value of HQ1 in FY 02 dollars): FY 06 2.4, FY 07 2.1, FY 08 1.5, FY 09 1.6, FY 10 1.7, FY 11 2.2.
  - IT (Total IT expenditures as a percent of total net administrative and capital budgets): FY 06 9.6, FY 07 9.7, FY 08 10.1, FY 09 11.0, FY 10 10.5, FY 11 9.7.
- About one-half of the FY 09 requested budget is for projects that preserve the integrity of the Fund’s asset base (office and building renovations; replacement of building and technology infrastructure components).
- The remainder of the capital budget is aligned with business needs and the institution’s refocusing strategy, supporting surveillance and LIC work, enabling a new framework for technical assistance, strengthening collaboration, and facilitating more efficient work practices.

*Source: Office of Budget and Planning (excerpted content).*

### 30.      The capital budget also includes new and revised projects that will help facilitate

### 032008 - 30.      The capital budget also includes new and revised projects that will help facilitate

### Capital projects and institutional restructuring
- Projects cited to support institutional restructuring and refocusing:
  - Financial Stability Portal
  - Economic Data Facilities Warehouse
  - Financial Risk Analysis
  - TA Regional Prioritization
  - TA Costing
  - TA Donor Portal
  - Collaboration with Trusted Partners
  - Desktop@IMF
  - Human Capital Management (HCM) Reengineering
  - integrated Budgeting and Business Intelligence System (iBBIS)
- Intended effects:
  - support deeper analysis of macro-financial linkages and spillovers
  - streamline the WEO production process
  - strengthen forecasting for surveillance
  - support capacity building activities
  - modernize the Fund

### Medium-Term Budget (MTB) rolling forward and headline figures (Table 16)
- A. Approved FY 08-FY 10 MTB
  - Net budget: 922.39 938.09 959.4 (FY 08FY 09FY 10FY 11 layout from table header)
  - Central receipts estimate: 71.47 71.7 71.7
  - Gross expenditures: 993.8 1,009.7 1,031.1
  - Overseas Annual Meetings: 0.0 0.0 5.4
- B. Rolling forward the FY 08-10 MTB to FY 09-11
  - Starting point top-down constraint on net expenditures 1/: 938.0 959.4 970.2
  - Changes in assumptions: inflation: 12.0 24.7 37.7
  - Revised starting point for net expenditures: 950.0 984.0 1,007.8
- C. Policy changes: restructuring
  - Policy changes: -81.8 -104.3 -113.0
- D. FY 09-11 MTB
  - Net budget: 868.2 879.7 894.9
  - Revised central receipts estimate: 98.6 105.0 109.3
  - Gross expenditures: 966.8 984.7 1,004.2
  - Upper receipts estimate: 98.6 111.0 119.0
  - Upper limit on gross expenditures: 966.8 990.7 1,013.9
- Memorandum items:
  - FY 08-10 Deflator (percentage change): 2.7 2.7 2.7
  - FY 09-11 Deflator (percentage change): 4.0 4.0 4.0

### Real net and gross expenditures (FY 08 dollars) and changes
- Real net expenditures (FY 08 dollars)
  - FY 08-FY 10 MTB: 922.39 913.3 909.6
  - Revised starting point from FY 08-10 MTB: 913.4 909.8 895.6
  - FY 09-FY 11 MTB: 834.8 813.3 795.6
  - Change: -78.6 -96.5 -100.0
  - Percentage change: -8.6 -10.6 -11.2
- Real gross expenditures (FY 08 dollars)
  - FY 08-10 MTB: 993.8 983.1 977.6
  - Revised starting point from FY 08-10 MTB 2/: 983.2 977.8 962.2
  - FY 09-11 MTB: 929.6 910.4 892.7
  - Change: -53.6 -67.4 -69.5
  - Percentage change: -5.5 -6.9 -7.2

### Output-area allocation and key output-area figures (Tables 17–20 highlights)
- Table 17 (Estimated Gross Administrative Budgeted Expenditures by Key Output Area, FY 08 - FY 11) — selected lines (In millions of U.S. Dollars)
  - Global Monitoring: 171.6 169.5 173.8 179.3
  - Country specific and regional monitoring: 346.2 350.3 355.0 361.8
  - Capacity Building: 237.8 235.9 239.7 243.7
  - Total, excluding reserves: 984.1 958.2 971.6 986.2
  - Reserves: 9.6 8.6 13.1 18.0
  - Total gross expenditures: 993.7 966.8 984.7 1,004.2
  - Support (memorandum): 313.1 292.1 297.9 305.6
  - Governance (memorandum): 91.5 89.0 91.1 90.2
- Table 18 (Real FY 08 dollars) — selected FY 11 less FY 08 changes
  - Global Monitoring: -12.2
  - Country specific and regional monitoring: -24.5
  - Country programs and financial support: -49.5
  - Total, excluding reserves: -107.4
  - Total gross expenditures (real): -96.8
  - Support (memorandum): -41.4
  - Governance (memorandum): -11.3
- Table 19 (Shares of total gross expenditures, excluding reserves) — percent shares
  - Global Monitoring: 17.4 17.7 17.9 18.2
  - Country specific and regional monitoring: 35.2 36.6 36.5 36.7
  - Capacity Building: 24.2 24.6 24.7 24.7
  - Country programs and financial support: 23.2 21.1 20.9 20.4
  - Generally available facilities: 10.0 8.1 8.0 7.8
  - Facilities specific to low-income countries: 13.2 13.1 12.9 12.6
- Table 20 (Expenditure allocation, FY 08 - FY 11, in millions of FY 08 dollars) — totals and notable deltas
  - Total (excluding reserves): 984.1 (FY08) to 876.7 (FY11) — Diff: -107.4
  - AREA DEPTS: 236.4 to 197.8 — Diff: -38.6
  - CAPACITY BUILDING: 246.2 to 208.3 — Diff: -37.8
  - NON-TA FUNCTIONAL SUPPORT & OFFICES: 116.7 to 100.0 — Diff: -16.8
  - SUPPORT & OFFICES and OTHER categories detailed across outputs (see table for granular line items)

### Administrative budget by major expenditure category (Tables 21–22)
- Nominal (Table 21, in millions of U.S. dollars)
  - I. Personnel: 723.1 696.8 702.2 716.8
    - Salaries: 424.6 417.2 422.4 433.4
    - Benefits: 298.5 279.6 279.8 283.3
  - II. Travel: 100.5 98.0 98.8 99.1
  - III. Building and other expenditures: 160.6 163.4 165.2 170.3
  - IV. Annual Meetings: 0.0 0.0 5.4 0.0
  - V. Reserves: 9.6 8.6 13.1 18.0
  - Gross Expenditures: 993.7 966.8 984.7 1,004.2
  - Receipts: -71.4 -98.6 -105.0 -109.3
  - Net Administrative Budget: 922.3 868.2 879.7 894.9
- Percentage shares of total net expenditures
  - I. Personnel: 78.4 80.3 79.8 80.1
  - II. Travel: 10.9 11.3 11.2 11.1
  - III. Building and other expenditures: 17.4 18.8 18.8 19.0
  - V. Reserves: 1.0 1.0 1.5 2.0
- Real (Table 22, FY 08 dollars) — FY 11 less FY 08 deltas (in millions of FY 08 dollars)
  - I. Personnel: 723.1 670.0 649.2 637.2 — FY 11 less FY 08: -85.9
    - Salaries: 424.6 401.1 390.5 385.3 — FY 11 less FY 08: -39.3
    - Benefits: 298.5 268.9 258.7 251.9 — FY 11 less FY 08: -46.6
  - II. Travel: 100.5 94.2 91.4 88.1 — FY 11 less FY 08: -12.3
  - III. Building and other expenditures: 160.6 157.1 152.7 151.4 — FY 11 less FY 08: -9.2
  - Gross Expenditures (real): 993.7 929.6 910.4 892.7 — FY 11 less FY 08: -101.0
  - Receipts (real): -71.4 -94.8 -97.1 -97.2 — FY 11 less FY 08: -25.7
  - Net Administrative Budget (real): 922.3 834.8 813.3 795.6 — FY 11 less FY 08: -126.8

### Financing administrative expenses — reconciliation and headline income position (Appendix I, Box 5, Table 23)
- Two capital-related adjustments required to translate administrative budget to administrative expenses under IFRS:
  - Depreciation expenses for capitalized assets (examples: HQ2 depreciated over 30 years; IT equipment over 3–5 years)
  - Certain capital budget items not capitalized under accounting treatment that are expensed directly in the year disbursements are made (examples include some repair work and those below a threshold of $100,000)
- FY 08 capital and expense details:
  - FY 08 estimated outturn for capital budget expenditures: $46 million
    - Of this, $25 million is capitalized on the Fund’s balance sheet
    - Remaining $21 million is expensed directly (includes renovations and repairs, security enhancements, and some IT development work)
  - Depreciation charge related to assets capitalized in previous years: $35 million
  - Thus, capital items included in overall administrative expenses in FY 08 total $56 million compared with capital budget expenditure figure of $46 million
- FY 08 projected income and shortfall (Box 5)
  - Projected outturn for the net administrative budget in FY 08: $886 million
  - Administrative expenses (including capital–related adjustments) estimated to be: $942 million
  - Operational income for FY 08: $845 million
  - Estimated income shortfall in FY 2008: $97 million

- Table 23. Projected Net Income and Administrative Expenses, FY 08 – FY 12 (in millions of U.S. dollars) — selected rows
  - Net administrative budget: 886 868 880 895 931 (FY 08FY 09FY 10FY 11FY 12)
  - Add: Capital budget items not capitalized: 21 21 19 18 18
  - Depreciation expense: 35 38 42 46 46
  - A. Administrative expenses after capital-related adjustments: 942 928 941 959 994
    - Percent change over previous year: 0.8 -1.5 1.4 1.9 3.7
  - B. Operational income: 845 832 858 934 1,023
    - Lending income: 307 238 140 101 99
    - Investment income: 432 393 508 576 644
    - Interest free resources: 100 125 133 181 203
    - Reimbursements: 6 7 6 7 6
  - C. Net operational income (B-A): -97 -96 -84 -25 28
  - Memorandum items:
    - Administrative expenses after capital-related adjustments (FY 08 dollars): 942 892 870 852 850
    - Operational income (FY 08 dollars): 845 800 793 830 874
    - Capital expenditures (budget definition): 46 59 52 44 44
    - Capital-related expenses (accounting definition): 56 60 62 64 64
    - Assumed U.S. dollar/SDR exchange rate: 1.57 1.65 1.65 1.65 1.65

### Receipts (Appendix II, Table 24) — selected items and trends
- Receipts are split into general receipts and external donor funding (principally for TA and training)
- Selected receipt lines (Table 24, in millions of U.S. dollars; percent change FY11 - FY08 noted in table)
  - Externally financed technical assistance: 44 61 60 -69 63 -76 32 (table formatting shows figures across FY 08FY 09FY 10FY 11 with percent change FY11 - FY08)
  - Scholarships (including administrative fees): 56 55 ... -19 (table shows changes)
  - Fund-sponsored sharing agreements: 65 56 ... -22
  - Publications income: 44 44 ... -9
  - Concordia apartment: 23 44 ... 53
  - Other miscellaneous reimbursements: 71 72 02 11 53 (table shows components including HQ2 leasing: 0 2 55..., Reimbursement of investment office costs: ... 33 3..., Travel commissions and rebates: 5 10 10 10 71, Parking: 23 44 ... 57)
  - Total (central estimates and percent-change reporting): 71 99 102-111 106-119 36 (table formatting indicates totals and percent change FY11 - FY08)
- Strategy notes:
  - Increasing Fund receipts is central to the new budget strategy
  - Efforts to increase general receipts where possible without compromising attractiveness as an employer
  - Additional donor support for capacity building via topical trust funds expected to offset cuts in TA and training
  - Potential for increased TA output in real terms if there is strong demand for TA delivered through RTACs

*Source: Office of Budget and Planning; Finance Department (text and tables as provided in the content unit).*

### 1.      The capital budget comprises projects under three categories: building facilities,

### _032008 - 1.      The capital budget comprises projects under three categories: building facilities,

### Capital budget composition
- The capital budget comprises projects under three categories: building facilities, IT, and major building works (Table 25).
- Building facilities projects:
  - Regulatory or security projects: mandated by changes to building codes or industry regulations, or essential for protection of Fund staff and property.
  - Replacement projects: replacement of building structures or equipment for life–cycle reasons, business requirements, or to increase reliability to avoid high cost and risk of system failure towards the end of their life-cycle.
  - Revenue generating projects: enable the Fund to develop with partners new business opportunities to earn income on a sustainable basis on existing capacity.
  - New facility projects: provide new functions or capacity within the existing headquarters buildings (example: reconfiguration of office and cafeteria space to accommodate the childcare center).
- IT projects grouped into four portfolios:
  - Enterprise Information Portfolio: supports enhanced economic analysis and data management, knowledge and information asset management, and transforms staff work and interaction.
  - Financial and Administrative Information Portfolio: supports modernization and automation of the Fund’s financial, human resource and other administrative processes.
  - Infrastructure and Connectivity Portfolio: finances life cycle replacement of computing, printing, and communications assets.
  - IT Planning and Management Portfolio: covers projects that affect the entire IT function and/or the way IT is delivered.
- Major building works: construction of HQ2 has been the only major building works project in recent years; no major building projects are planned in the medium term.

### Table 25 — Outturn and Projected Capital Expenditures, FY 02 – FY 11 (in millions of U.S. dollars)
- Estimated Major Program Area — Outturn/Planned figures by fiscal year:
  - Building Facilities: FY 02 22.9, FY 03 14.0, FY 04 14.3, FY 05 30.6, FY 06 21.0, FY 07 16.1, FY 08 17.5, FY 09 25.8, FY 10 22.3, FY 11 18.5
    - Budgets approved prior to FY 09: 22.9, 14.0, 14.3, 30.6, 21.0, 16.1, 17.5, 18.4, 9.9, n/a
    - FY 09 Budget: 7.4, 7.0, 2.3
    - Medium-term FY2010-FY2011 Plan: n/a, 5.4, 16.2
  - Information Technology (IT): FY 02 30.7, FY 03 24.8, FY 04 21.5, FY 05 34.2, FY 06 26.9, FY 07 24.1, FY 08 28.4, FY 09 33.3, FY 10 29.4, FY 11 25.5
    - Budgets approved prior to FY 09: 30.7, 24.8, 21.5, 34.2, 26.9, 24.1, 28.4, 17.2, 4.2, n/a
    - FY 09 Budget: 16.1, 9.7, 5.7
    - Medium-term FY 10-11 Plan: n/a, 15.5, 20.2
  - Total Building Facilities and IT: FY 02 53.6, FY 03 38.8, FY 04 35.8, FY 05 64.8, FY 06 47.9, FY 07 40.2, FY 08 45.9, FY 09 51.5, FY 10 51.7, FY 11 44.0
  - Major Building 2/: FY 02 7.9, FY 03 13.5, FY 04 52.4, FY 05 61.2, FY 06 7.0, FY 07 5.3, FY 08 0.1, FY 09 0.0, FY 10 0.0, FY 11 0.0
    - Budgets approved prior to FY 09: 7.9, 13.5, 52.4, 61.2, 7.0, 5.3, 0.1, 0.0, 0.0, 0.0
  - Total Capital Expenditures: FY 02 61.5, FY 03 52.3, FY 04 88.2, FY 05 126.0, FY 06 54.9, FY 07 45.5, FY 08 46.0, FY 09 59.1, FY 10 51.7, FY 11 44.0
- Source: Office of Budget and Planning.
- Note: Figures may not add to totals due to rounding.
- Footnotes:
  - 1/ Expenditures reflect disbursements against budget approvals, which for capital items have a life of three years. Thus, expenditures in any given financial year may correspond to projects budgeted for under any of the last three capital plans.
  - 2/ Includes HQ Phase III and HQ2.

### Receipts and revenues
- General receipts are expected to increase by some 50 percent in nominal terms, largely reflecting initiatives identified by several of the working groups commissioned by the Managing Director.
- Salient contributors to increased receipts:
  - Reduction in staff freeing up office space that will be leased to the World Bank, and higher rates at the Concordia.
  - On the recommendation of the pension committee, administrative expenses of the pension investment office will be reimbursed by the staff retirement plan.
  - Parking charges will be aligned with market levels.
  - An increase in travel rebates have been negotiated by TGS.

### Donor-financed capacity building
- Donor financed capacity building activities are expected to rise sharply by FY 11.
- Medium-term partnership strengthening with donors:
  - Bundling TA through a menu of topical trust funds focused on trust funds that fit donors’ development strategies and institutional priorities.
  - Expanding delivery through the RTAC’s model which complements headquarters–based TA. RTACs structure (recipient countries, donors, and Fund staff together prioritize TA) builds stakeholder ownership and their physical proximity allows prompt response to urgent or frequent TA requests.
- The Fund will also maintain existing partnerships with donors through the current subaccount structure for donors that have delegated budgets to field offices for TA interventions.

### IT capital projects and history
- IT microcomputers, servers and other infrastructure equipment and similar IT projects have been part of the capital budget since FY 88.
- In FY 00, the Executive Board approved inclusion of major software development projects in the capital budget.
- IT projects are grouped into the four portfolios listed under "Capital budget composition."
- The overall FY 09 IT capital budget proposal is unchanged in dollar terms relative to last year’s capital plan, but portfolio composition and distribution of funds among portfolios have changed to support refocusing and planned PC and server refreshes in FY 09 and FY 10.

### Capital budget procedures
- Multi–year funding approach adopted in FY 03: approved funds are available to projects for a period of three consecutive years; unused funds lapse at end of three–year period; projects longer than three years require Executive Board approval of new funding appropriations.
- All capital projects undergo careful scrutiny before funding approval:
  - All IT capital projects reviewed by a steering committee assessing project alignment with business needs, return on investment, and cost–benefit analysis (CBA).
  - Building facility capital projects evaluated based on need, urgency, contribution to life of the building, and subject to CBA.

### Formulation of the capital budget — benchmarks and approach
- Resource envelopes for IT and building facilities components are derived using benchmarks; benchmarks establish upper limits, not precise budget size.
- Bottom–up exercise required to assess business case, assign priorities, and build capital plans project–by–project within envelopes (see Box 6).
- Benchmark for building facilities:
  - Recent investment in facilities replacement/modernization was about three percent of the replacement value of HQ1—consistent with external benchmarks.
  - Post-September 2001 security appropriations crowded out life–cycle replacement/modernization projects; share of security expenditures decreased from 41 percent of total facilities expenditures to 15 percent in FY 08.
  - New method: regular condition assessments of all building components on a 3 to 5 year cycle. In FY 08, TGS engaged outside consultants; by early FY 09 all major building assets will have been analyzed with a thorough assessment completed. New approach to be fully implemented for FY 10 capital budget submission.
- Benchmark for IT:
  - Fund generally contained total IT expenditures (capital plus administrative) to no more than 11 percent of the total net administrative and capital budgets.
- Benchmark for major building works:
  - Each project treated as one-off; budgets approved by the Executive Board with regular progress reports. No further projects in this category planned for the medium–term.

### Governance, oversight, and project management
- New governance arrangements and processes to oversee IT capital budget and monitor project status (see Box 7).
- Business-led IT governance committees oversee and are responsible for effective management of Fund’s IT investment and bottom-up IT capital budget formulation.
- Projects have strong business ownership and sponsorship and continual performance monitoring.

### Box 6 — Formulation of the Capital Budget: The Bottom Up Approach (key points)
- Vetting projects for inclusion:
  - Project sponsors must provide a business case; most take the form of a formal cost–benefit analysis including: (i) estimate of all costs over useful life less terminal value; (ii) estimate of all quantifiable benefits and descriptions of non–quantifiable benefits; (iii) key assumptions and calculations; (iv) net present value calculation for projects of $1 million or more and a payback analysis for projects under $1 million; (v) sensitivity analyses.
  - Priorities for building facilities established by TGS in consultation with OBP, based on scale and nature of proposed project.
- IT project process elements:
  - Strategic planning: CIO-led exercise to understand medium–term business objectives and IT enabling roles; findings endorsed by Committee on Business and Information Technology (CBIT).
  - Alignment with “refocusing and modernization”: proposals reviewed for fit with Managing Director’s strategic directions.
  - Reformulation “from the ground up”: re-evaluation of projects already under way together with new proposals.
  - IT governance involvement: IT Steering Committees evaluate proposals, seek clarifications on promised business value, and recommend funding allocations; recommendations endorsed by BITAG and CBIT.
- Vetting when funds are released:
  - Approved projects receive financing in tranches tied to milestones; sponsors must provide OBP with up–to–date project status and revised cost–benefit analysis for funding releases.

### Box 7 — IT Governance (key points)
- CIO position established in FY 07 with overall responsibility for IT and information management.
- Revamped IT governance arrangements to strengthen accountability, business involvement, alignment, and project management:
  - CBIT: executive–level committee chaired by management, ensures IT strategy alignment, oversees IT investments, and sets Fund–wide information management and IT policy and standards.
  - Steering Committees: oversee each of the three main capital project portfolios; chaired at department–head level; responsibilities include reviewing IT projects and making funding recommendations to CBIT, monitoring and reporting on project progress and outcomes, and advising CBIT on business practices and technology standards.
  - BITAG: representatives from all departments serving as a sounding board for the CIO on IT priorities, service delivery, and approaches.
- Strengthened project management practices:
  - All IT capital projects must prepare, register, and maintain project plans in a portfolio management tool used to monitor project progress and spending against milestones and budgets.
  - Steering Committee chairs receive monthly reports on projects within their purviews.

*Source: Office of Budget and Planning.*

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