Prepared in consultation with the Government Accountability Office By Tara Baumgarten Michaela Meckel Jélan Passley Maria Toniolo Outline Background Information International Trends and Overview of Use of Local Systems ID: 736285
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Slide1
Effective Engagement of Accountable Local Governments in Development Assistance Projects
Prepared in consultation with the Government Accountability Office
By:
Tara
Baumgarten
Michaela
Meckel
Jélan
Passley
Maria
Toniolo
Slide2
Outline
Background Information
International Trends and Overview of Use of Local Systems
Policy Goals
Alternative Donor Approaches
Evaluation of Alternatives
RecommendationsSlide3
Background
International commitments to increase aid effectiveness:
Paris Declaration (2005)
Accra Agenda (2008)
Busan
Partnership (2011)
Aid
delivered via recipient country public financial management (PFM) and local procurement systemsDirect budget support
U.S. has not yet met targets for use of local systemsSlide4
Percentage of Aid Using Country PFM and Procurement Systems, 2010
Source: OECD 2010 Slide5
Use of Local Systems
Increase institutional capacity and sustainable development
Risk Assessment
Tools may be donor-
s
pecific, harmonized or borrowed from other institutions
Risk Mitigation
Variety of approaches to respond to risks such as corruption, poor accounting practices, and instability Slide6
Policy Goals
Increase
the percentage of effectively managed aid delivered via local
systems
Increase local institutional
capacity
Efficiently deliver aid
Effectively identify and assess potential risks throughout the projectEffectively manage risks throughout the project
Compatibility
with the U.S. context Slide7
United States
11%
of aid through recipient country PFM
systems and 12% through
local procurement systems in 2010
Average partner PFM score of
2.17
(1 low – 6 high)Lack of harmonization in aid strategyUSAID ForwardUse of capacity assessments to strengthen institutions and responsibly administer aid via local
systems
Public Expenditure and Financial Accountability (PEFA) FrameworkSlide8
United Kingdom-DFID
66
% of aid through recipient country PFM systems and 68% through local procurement systems in 2010
Average partner PFM score of 3.52
Of
aid
delivered via local PFM
systems in 2010, 64% was in the form of direct budget support, which increases the efficacy of aidSlide9
DFID Risk Assessment Overview
DFID uses three main tools to conduct assessments:
PEFA Framework
E
valuates six dimensions
Fiduciary Risk Assessments
E
valuate quality of PFM systemsCountry Governance Analyses
Assess quality of governance and instabilitySlide10
DFID Risk Management Overview
Risk Management
Program
Anti-Corruption Policy
Team
Fraud Risk-Management
Group
Managing the Risk of Financial Loss programEmpowerment and Accountability Resource network
Pilot Strategic Intelligence Threat Assessments Slide11
Sweden
64
% of aid through recipient country PFM systems and 70% through local procurement systems in 2010
Average
partner PFM score of
3.65
Of aid delivered via local PFM
systems in 2010, 73% was in the form of direct budget supportTwo main agencies: Ministry of Foreign Affairs and Swedish International Development Cooperation Agency (SIDA)Slide12
Sweden Risk Assessment Overview
Transparency International
Corruption Perception
Index
World
Bank’s Country Policy and Institutional Assessment
index
Sweden’s assessments of previous involvement with a partner country, development strategy and human rights complianceEconomic Intelligence Unit’s Democracy IndexUNDP
Human Development
IndexSlide13
Sweden Risk Management Overview
SIDA Unit for Monitoring and Evaluation
P
erforms regular audits
SIDA Anticorruption code of
conduct
S
uspends further aid disbursement until receiving repayment of mismanaged fundsSwedish National Audit Office and
Swedish
Agency for Development
Evaluation
Monitor SIDA operationsSlide14
Asian Development Bank
90
% of aid through recipient country PFM systems and 29% through local procurement systems in 2010
Average partner PFM score of 3.36
Of
aid delivered via local PFM
systems
in 2010 35% was in the form of direct budget supportAsian Development Fund provides grants and low-interest loans to developing economiesSlide15
ADB Risk Assessment Overview
Country
Partnership Strategy reflects the development and poverty reduction goals of
partner governments
Performance
based allocation is based on each country’s performance and policies in place to effectively implement ADB
projects
ADB tailors Country Partnership Strategy when planning projects in countries with weak governanceSlide16
ADB Risk Management Overview
The Office of Anticorruption and Integrity monitors projects and receives complaints of possible corruption or misuse of funds
Investigates
allegations of
corruption
Power
to sanction businesses and
individualsIndependent Evaluation Department determines whether or not ADB policies and ADB programs are successfulSlide17
World Bank
71
% of aid through local PFM systems
and
55
% through local procurement systems in 2010
Average partner PFM score of 2.27 Of aid delivered via local PFM systems in 2010, 58% was direct budget supportLargest local systems donor in 2010 in absolute terms ($11 billion)Slide18
World Bank Risk Assessment Overview
Country
Financial Management Strategy
based on:
Country
Financial Accountability Assessment (CFAA
)
Public Expenditure Review (PER)Country Procurement Assessment Report (CPAR)Institutional & Governance Review (IGR)
PEFA Framework (optional
)
Use
of assessments by other
donorsSlide19
World Bank Risk Management Overview
Accounting
risk
management
Monitoring
by financial management
staff
Corruption risk managementBorrowers are required to report fraud and corruptionBorrowers can be audited at any
time
Early
termination if fraud or corruption
occursSlide20
Goal 1: Percentage of Aid Via Local Systems
Other donors lead the way in use of local systems
Larger donors, such as the U.S. and World Bank, tend
to work
with
lower quality local
PFM and procurement systems on average
GoalImpact Category
Status Quo: U.S.
Country
Approach
1: DFID
Country
Approach
2: Sweden
Multilateral Approach 1:
ADB
Multilateral Approach 2:
World Bank
Increase Percentage of Effectively Managed Aid Delivered via Local Systems
Amount of funds managed and quality of recipient PFM systems
Low
High
Moderate
Moderate
Moderate
Amount of funds managed and quality of recipient procurement systems
Low
Moderate
Moderate
Low
ModerateSlide21
Goal 2: Increase Local Institutional Capacity
Risk assessments may improve local systems
C
apacity building may be necessary component
L
ocal involvement in institutional reform important
Goal
Impact Category
Status Quo: U.S.
Country
Approach
1: DFID
Country
Approach
2: Sweden
Multilateral Approach 1
:
ADB
Multilateral Approach 2:
World Bank
Increase local institutional
capacity
Increase PFM system quality
*
High
Moderate
Moderate - Low
Moderate
Increase
procurement system quality
*
Moderate
Moderate
-
Low
Low
Moderate
Institutional reform is sustainable and locally driven
Low
High
High
Moderate
Moderate - HighSlide22
Goal 3: Efficiently Deliver Aid
D
onors harmonize efforts in a variety of ways, including assessments
and
l
arge project co-financing
Multiple large bureaucracies that handle different types of aid may present efficiency challenges GoalImpact Category
Status Quo: U.S.
Country
Approach
1: DFID
Country Approach
2: Sweden
Multilateral Approach 1:
ADB
Multilateral Approach 2:
World Bank
Efficiently deliver aid
Harmonization of aid stakeholder activities
Low
High
Moderate-
High
Moderate - High
Moderate
Aid is delivered efficiently (in terms of time and money)
Moderate
High
Moderate
Moderate
LowSlide23
Goal 4: Effectively Assess Potential Risks
A
ssessing corruption and financial risk directly is more effective than as part of larger country assessments
Evidenced by control of corruption scores
Goal
Impact Category
Status Quo: U.S.
Country
Approach
1: DFID
Country
Approach
2: Sweden
Multilateral Approach 1:
ADB
Multilateral Approach 2:
World Bank
Effectively
identify and assess potential risks
Effectively identify and assess threat of corruption
Moderate
High
Moderate
Moderate
Low
Effectively identify and assess weaknesses in accounting practices
Moderate
High
Moderate
Moderate
Low
Effectively identify and assess risks of instability
Moderate
Moderate
Moderate-
High
Low
LowSlide24
Goal 5: Effectively Manage Risks
Active control mechanisms, quick responses, and long-term plans to mitigate risk appear most successful
Goal
Impact Category
Status Quo: U.S.
Country
Approach
1: DFID
Country
Approach
2: Sweden
Multilateral Approach 1:
ADB
Multilateral Approach 2:
World Bank
Effectively manage risks throughout the
project
Effectively detect and respond to instances of corruption throughout the
project
High
Moderate
Moderate - High
Moderate
Low
Effectively detect and respond to weaknesses in accounting practices throughout the project
Low
Moderate
Moderate
Moderate - Low
Moderate
Effectively detect and respond to instability throughout the project
Moderate
Moderate
Low
Low
*Slide25
Goal 6: Compatibility with U.S. Context
The World Bank aid scope is most similar to the U.S.
DFID also shares similar foreign policy objectives
Sweden is a smaller donor and may have scaling issues
ADB has a limited regional focus but shares major recipients - Pakistan and Afghanistan
Goal
Impact Category
Status Quo: U.S.
Country
Approach
1: DFID
Country
Approach
2: Sweden
Multilateral Approach 1:
ADB
Multilateral Approach 2:
World
Bank
Compatibility with U.S. Context
Similarities of aid profiles and approach
N/A
Moderate
Moderate
Moderate
High
Economic feasibility
N/A
Moderate
Low
Moderate - Low
ModerateSlide26
Recommendations
Ensure
consistent and coordinated risk assessments across
countries
Expand use
of the PEFA
Framework
evaluation tool Increase cooperation with other donorsIncreased use of PEFA could helpConsider incremental approach to use of local systems
Start with
smaller projects
or components
of a partner country’s PFM system that operate well
Slide27
Questions?