I.    Introduction

1.    At its Spring 2000 Meeting, the International Monetary and Financial Committee (IMFC) endorsed the Executive Board's decision to establish an independent evaluation office (EVO) at the Fund as a means to enhance the learning culture within the Fund, help build the Fund's external credibility, promote a greater understanding of the work of the Fund, and support the Executive Board's institutional governance and oversight responsibilities. The Committee requested that the Board agree on the terms of reference, structure, staffing, and operating procedures for EVO and report back to the Committee at its next meeting. This report responds to that request.

2.    The idea of establishing an independent evaluation office at the IMF goes back at least to January 1993 when the Executive Board considered a management proposal for a separate evaluation office. However, despite extensive discussions, a consensus was not reached to proceed with the proposal at that time.

3.    The issue of independent evaluation was again brought to the attention of the Executive Board in 1995-96, in light of the experience with an evaluation by an outside expert of Fund surveillance in the context of the Mexican crisis. In an effort to forge a consensus on this issue, management proposed an alternative approach, which the Executive Board endorsed in June 1996 for a trial period. Rather than establishing an independent evaluation office at the Fund, an understanding was reached to continue with existing practices of self-evaluation by the operational departments; to conduct internal evaluations by the Office of Internal Audit and Inspection (OIA) in response to specific needs; and at the same time, to undertake two to three independent evaluations per year by outside experts.

4.    In the subsequent period, the Fund sponsored a number of external evaluations, including of such fundamental aspects of its work as the Enhanced Structural Adjustment Facility (ESAF), internal research, and surveillance activities. This was in addition to a number of substantive self-evaluations on issues such as Fund-Supported Programs in the Asian Crisis, ESAF, and surveillance. There were also reviews by the Office of Internal Audit and Inspection (OIA) of the resident representative program and Fund technical assistance.

5.    Experience under this approach was reviewed by the Executive Board in March 2000, drawing on views from both within and outside of the official sector. Key input from the non-governmental sector included the Report of the Special Study Group convened by the Center of Concern¹ and a joint paper produced by Rethinking Bretton Woods Project and Friends of the Earth US². In the context of this review, Directors sought to identify lessons with the intention of recommending ways in which the Fund's capacity to undertake independent evaluations could be enhanced and its ability to more effectively integrate the lessons drawn from those evaluations into the work of the Fund improved.

6.    Among the general concerns raised with the exclusive use of external experts for independent evaluations was that-despite the generally high quality of the evaluations to date -a lack of familiarity with the particularities of the Fund's operations and mandate could limit the practical value of their advice. Also, because the external experts were only employed by the Fund for the duration of the evaluation in which they were involved, they were not available to assist Directors in monitoring the implementation of the recommendations from their work which had been adopted by the Board and it would be difficult to maintain the institutional memory of experience obtained in the conduct of particular evaluations.

7.    The outcome of this review was a decision by the Executive Board on April 10, 2000 to establish an independent evaluation office in the IMF. This decision was welcomed by the International Monetary and Financial Committee (IMFC) in its Communiqué of April 16, 2000, in which it urged "the Executive Board to agree on the terms of reference, structure, staffing, and operating procedures [for EVO] and to report back to the Committee at its next meeting." The IMFC also indicated that it would look forward to receiving regular reports on the activities of the office at future IMFC meetings.

8.    The Executive Board met in early August 2000 to discuss a background paper that elaborated on the operational modalities of EVO³. While providing clarity on fundamental issues such as institutional accountabilities, the scope of activities, organizational structure, the responsibilities of EVO's Director, EVO's budget and some operational considerations, Directors were cognizant of the need not to be overly prescriptive on a number of other issues, including how the unit would be managed. They realized that-for EVO to be able to function independently-the precise manner in which it was managed, including the specifics of its recruitment policy, would need to be left in the hands of its Director.

9.    At the conclusion of the discussion, it was agreed that the background paper on which the discussion was based and the Chairman's concluding remarks would be posted on the IMF's website (this was done on August 18, 2000) to provide an opportunity for public comment. Directors also supported the preparation of terms of reference for EVO that would be presented as part of the report to the IMFC in Prague. Finally, they endorsed the recommendation that the process of engaging an executive search firm to assist the Board in appointing the Director of EVO should begin.

10.    On the basis of the August discussion and input received from the public in the period immediately following the posting of the background paper, the Evaluation Group of Executive Directors drafted terms of reference for EVO, which were discussed and approved by the Executive Board on September 14, 2000. They are attached to this report and presented to the IMFC for its endorsement.

11.    It is the hope of the Executive Board that a Director for EVO, meeting the qualifications described in the August 2000 Background Paper, could be selected and in place by early next year. This would permit EVO to be operational before the Spring 2001 meeting of IMFC in Washington, at which time the Executive Board will provide the Committee with a further report on EVO's status.

The Independent Evaluation Office (EVO) has been established to systematically conduct objective and independent evaluations on issues, and on the basis of criteria, of relevance to the mandate of the Fund. It is intended to serve as a means to enhance the learning culture within the Fund, strengthen the Fund's external credibility, promote greater understanding of the work of the Fund throughout the membership, and support the Executive Board's institutional governance and oversight responsibilities. EVO has been designed to complement the review and evaluation work within the Fund and should, therefore, improve the institution's ability to draw lessons from its experience and more quickly integrate improvements into its future work.

EVO will be independent of Fund management and staff and will operate at arm's-length from the Fund's Executive Board. Its structure and modalities of operation must protect its operational independence-both actual and perceived.

A Director, to be appointed by the Executive Board, will head EVO. The Director's term of appointment will be for a period of four years renewable for a second term of up to three years. The Director's appointment may be terminated at any time with the approval of the Executive Board. At the end of the term of service, the Director will not be eligible for appointment or reappointment to the regular staff of the Fund. The Director will be responsible for the selection of EVO personnel (including external consultants) on terms and conditions to be determined by the Board with a view to ensuring that the office is staffed with independent and highly-qualified personnel. The majority of full-time EVO personnel will come from outside the Fund.

The Director of EVO will be responsible for the preparation of the Work Program. The content of the Work Program should focus on issues of importance to the Fund's membership and of relevance to the mandate of the Fund. It should take into account current institutional priorities, and be prepared in light of consultations with Executive Directors and management, as well as with informed and interested parties outside the Fund. The Director will present EVO's Work Program to the Executive Board for its review.

EVO, through its Director, will report regularly to the Executive Board, including through the preparation of an Annual Report. It is also expected that the IMFC will receive regular reports on the activities and findings of EVO.

With respect to individual evaluations, staff, management and-when appropriate-the relevant country authorities, will be given an opportunity to comment on the assessments being presented to the Executive Board.

The Director of EVO, in consultation with Executive Directors, will prepare a budget proposal for EVO for consideration and approval by the Executive Board. Its preparation will be independent of the budgetary process over which management and the Office of Budget and Planning have authority, but its implementation will be subject to the Fund's budgeting and expenditure control procedures. EVO's budget will be appended to that of the Executive Board within the Fund's Administrative Budget.

If requested by the Executive Board, EVO will provide technical and administrative support for any external evaluations launched directly by the Executive Board.

In carrying out its mandate, including in the preparation of its Work Program, EVO will be free to consult with whomever and whichever groups it deemed necessary, both within and outside the Fund.

EVO will have sole responsibility for drafting EVO evaluations, Annual Reports, press releases and other EVO documents or public statements.

EVO's Work Program will be made public and there will be a strong presumption that EVO reports will be published promptly (within the constraints imposed by the need to respect the confidentiality of information provided to the Fund by its members), unless, in exceptional circumstances, the Executive Board were to decide otherwise.

Publication of evaluations will be accompanied by comments from management, staff, and others, including relevant country authorities, where appropriate, along with the conclusions reached by the Board in considering the evaluation report.

In conducting its work, EVO should avoid interfering with operational activities, including programs, or attempting to micro-manage the institution.

Within three years of the launch of EVO operations, the Executive Board should initiate an external evaluation of EVO to assess its effectiveness and to consider possible improvements to its structure, mandate, operational modalities, or terms of reference. Without prejudging how that review would be conducted, it should be understood that the review would include the solicitation of broad-based input from outside the official community.