Sam Moon, Overseas Development Institute Evidence in aligning aid Information with recipient country budgets

1. Practical Approaches to Aid Effectiveness: Evidence in aligning aid Information with recipient country budgets Sam Moon Overseas Development Institute ~ ICGFM Winter Conference 6 December 2010

2. Motivation for the study Why did we undertake this study? “IATI’s role is to develop consistent and coherent international standards for the way donors report information about aid spending” We felt that there was a need, and much work required, to make the standard as valuable as possible for recipient country governments. Premise of the research – “is enough common ground between government classifications to support a recommendation for a common standard for aid flows to reduce transaction costs for recipient countries; and do existing international classifications adequately describe country level standards.”

3. Problem Definition Accountability in planning, budgeting, execution and service delivery The cycle is delicate in most developing countries: Parliaments, budgeting process, accounting procedures, transparency of implementation can be weak. The domestic cycle of accountability is likely to be undermined if it is not carefully observed and supported with the delivery of aid: Common planning and execution standards, integration of systems, etc.

4. Aligning aid with recipient country systems requires funds to be: CABRI (2008) Aid On Budget Synthesis Report

5. Overcoming the problem: two levels Donor Headquarters/ International system: Publicly available information on aid in a format that best facilitates country level demands for aid information Country level: Tool or mechanism that can capture all aid information and fully reclassify it to country specific standards to improve planning and accountability for the entire set of resources.

6. Methodology of the study Focus on the organisational and functional classification of the Chart of Accounts. Choose a sample of developing countries (14) from different regions and different colonial legacies. Compare the sample of government sector/organisational classifications with the OECD/DAC CRS purpose codes (designed to describe aid flows) and COFOG (designed to describe government expenditure) Examine recipient budgets by sector using COFOG as a base. Use the evidence to identify similarities and differences and, if possible, generate a classification that is able to output to CRS and to the country classifications Ensure the analysis includes low level sector classification

8. budget calendar?

9. Broader chart of accounts?

10. Organisation or function?

12. Findings of the Study There are significant similarities at lower level but the composition of these functions within ministries and sectors varies widely. The international classifications both have strong and weak points, but neither adequately describes the country sector/organisational structures. The availability of national budget classifications/CoAs was more limited than expected.

13. Key sector level findings General Public Service: Public administration, Defence Justice Law and Order These have a number of fairly discrete functions – core PFM, internal and external security, judiciary, policing, electionsetc. But are organised very differently in countries due to legacy or political influences. Eg: Police

14. Police function

15. Economic Affairs Planning and administrative functions may be centralised or disaggregated to specific functions such as agriculture, roads, energy. Countries will have greater disaggregation on the economic sectors most active in the economy, but the broad set tends to be common across countries.

16. The structure of education is fairly common across countries and international standards are also similar. The approach to health varies so widely that a consistent set of common functions could not be found. The emphasis on and organisation of social protection and welfare can vary, but lower level functions are fairly comparable across countries Social Affairs

17. The ‘Spine’ To demonstrate the findings, we constructed a best fit low level classification from the evidence that outputs to the country classifications as well as the OECD DAC/CRS. Grouped broadly by COFOG function as a widely recognised standard for government functions. Why the DAC/CRS? Donors generally already report to this so it is important to ensure there is integration.

18. Implications and recommendations Interfacing information on aid with the national planning/budgeting process MUST be undertaken at country level – there is no substitute. A common standard in describing aid, and a clear protocol for publication of this information is important for facilitating this process.

19. There are significant similarities in the standards used at country level for planning and budgeting... But existing international standards and protocols are weak, creating high transaction cost at country level.

20. While a great deal of political emphasis is put on transparency and integration of aid and budget systems... The effort required to create and operationalise mechanisms to do this appears to out-weigh political will to drive the process at donor level. Furthermore, weakened accountability structures at country level often cause perverse incentives for actors at country level – leading to additional pressures for maintaining status quo.

21. This paper and others such as CABRIs Aid on Budget study and studies for the IATI process begin to outline the requirements and the constraints of a system of standards for aligning aid to country systems. But some recipient governments are implementing their own tools to capture and align aid information. Malawi and Rwanda are making great steps in building database tools and government policies for the management of aid.