Tag Archives: aid transparency

Is the Donor Transparency Train About the Derail?

Doug Hadden, VP Products

International donors have been making great strides in aid transparency. This improvement, according to the Aid Transparency Index, has been mixed. The trend has been towards improvement…however…. 

Why care about donor transparency?

There is significant debate about aid effectiveness with many observers claiming that "official development assistance" does not work. Foreign aid, they say, leads to increased corruption. Others point to apparent successes. The debate has become a discussion over narratives, because the facts are not readibly available, comparible, or complete. The data will tell us the whether/where/why/when and who of aid effectiveness. Donor transparency provides traceability and gets us away from inaccurate narratives. For example, a recent report by Independent Commission for Aid Impact (ICAI) on the UK Department For International Development (DFID) generated headlines like "Our foreign aid fuels corruption – Official watchdog's verdict on aid spending that Cameron has defiantly ring-fenced." Charles Kenny form the Center for Global Development pointed out that "ICAI can’t attack DFID for inadequate evidence on the one hand and then turn around and use similarly inadequate evidence to suggest failure and success on the other."  

Without donor transparency and transparency across the aid supply chain, we'll be cursed with endless arguments over anecdotes.

And one step backwards?

Meanwhile, the measures for the Public Expenditure and Financial Accountability (PEFA) are changes. PEFA has standardized donor evaluation of country Public Financial Management (PFM) systems. Recipient countries had to endure different PFM assessments from different donors. There are currently 28 high level measures for countries and 3 for donors. It was an administrative nightmare. Although not perfect, PEFA has been an excellent step forward. The PEFA Secretariat is funded by donors. In the latest reform, the PEFA Secretariat is proposing the elimination of the donor measures:

"D 1, 2, and 3: donor funding is not relevant in some countries, and in those where it represents a significant proportion of revenues, aid funds should be analyzed together with other funding sources. In addition, other processes have been established to monitor mutual accountability between donors and recipient governments following the Paris Declaration on Aid Effectiveness. For these reasons, the management of donor funding will now be incorporated more generally into the indicators."

Publish What You Fund suggests that "donors are being let off the hook" and that "there is an inherent hypocrisy in donors using a framework to assess country performance (and sometimes to make allocation decisions), without being held accountable for their own role in it." 

What does D1, D2 and D3 tell us?

PEFA measures are ordinals, so measures are not all equal and the differences between D and C in one measure can be much wider than in another measure. This is the description of D1, D2 and D3 along with how the donors in a recipient country can achieve a "C" ranking from the range of A to D:

D-1. Predictability of Direct Budget Support
(i) In no more than one out of the last three years has direct budget support outturn fallen short of the forecast by more than 15%.
(ii) Quarterly disbursement estimates have been agreed with donors at or before the beginning of the fiscal year and actual disbursements delays (weighted) have not exceeded 50% in two of the last three years.
 
D-2. Financial information provided by donors for budgeting and reporting on project and program aid
(i) At least half of donors (including the five largest) provide complete budget estimates for disbursement of project aid for the government‟s coming fiscal year, at least three months prior its start. Estimates may use donor classification and not be consistent with the government‟s budget classification.
(ii) Donors provide quarterly reports within two months of end-of-quarter on the all disbursements made for at least 50% of the externally financed project estimates in the budget. The information does not necessarily provide a break-down consistent with the government budget classification.
 
D-3. Proportion of aid that is managed by use of national procedures
(i) 50% or more of aid funds to central government are managed through national procedures.

 

This is not a good Report Card for Donors

I've observed that donor scores have been particularly low in the past. Here's an example from 4 post-conflict countries (with the year of assessment) for which you would think there are high donor priorities to improve aid effectiveness. I can see why donors would prefer to not have this information public. I don't think that we can blame recipient governments for these scores. And, it seems to me that providing forward-looking data (D-1) is critical to the recipient governments, as is driving aid priorities (D-3).  You would think that the donors who are touting improvements made in transparency would exert peer pressure for D-1 and D-2. 

 

Afghanistan 2008

Liberia 2012

Sierra Leone 2010

Timor-Leste 2010

D-1

B+

N/A

D

D

D-2

D

D+

D

D+

D-3

D

D

D

D

Transparency Isn’t about Gaming the System.

Doug Hadden

Many international donors do not provide transparent information about forward budgets making it difficult for recipient countries to properly plan budgets or coordinate development. A study by Publish What You Fund, “the information on forward budgets is still patchy, limited in scope and published in hard-to-access formats.”

As noted on twitter, some donors believe that publishing forward budgets encourages corruption. The thinking is that officials in recipient countries will notify “friends” about upcoming aid projects. These “friends”, it is thought, will be inappropriately positioned to capture these projects. In other words, gaming the system.

I object strongly to the notion that transparent processes introduces more corruption risks than opaque processes. Opaque processes ensures that there is a much smaller set of players that are “in the know.” Publishing forward budgets increases competition because organizations have time to investigate country needs, find local partners, and determine risks.

I can’t tell you how many times that FreeBalance has encountered procurement cycles that are so short that we can’t evaluate risks like capacity, corruption and political will. My sense is that many credible vendors find risks too high and elect not to bid. Other credible vendors are likely to take the risk of preparing a proposal, under the assumption that competitors are unlikely to take the risk. And, these vendors add a buffer to the quoted price for protection.

In short: transparency increases competition, reduces prices, ensures higher value proposals AND limits the perverse effects of small groups of elites who have early warning.

Donors wield aid transparency power

Doug Hadden, VP Products

Original post at Publish What You Fund.

Is transparency a threat to the development status quo or an opportunity to break through the “dead aid” narrative?

FreeBalanceRocksThe problem with transparency is that it usually refers to the other guy. Politicians want governments to be transparent. Donors want beneficiaries to be transparent.

Transparency is a threatening concept. It opens up the organizational kimono to scrutiny. And, sometimes unfair levels of scrutiny, where a single gaff can become the defining narrative in the minds of the public.

This means that aid transparency can seem dangerous to International Financial Institutions (IFIs) who are expected to support the International Aid Transparency Initiative (IATI). We need to understand this context before we condemn donors for not fully supporting transparency standards. We should not be surprised that there is a wide divergence in aid transparency commitments according to Publish What You Fund analysis. Aid transparency is fundamentally political – for larger donors, including major NGOs, it’s not about technology.

From a Culture of Expertise to Multidisciplinary Insight

IFI staff is made up of subject matter experts, many of whom have deep on-site knowledge in their chosen domain. Development is a complex undertaking. Aid transparency can enable those without sufficient understanding to opine. These opinions can be politicized and result in unfortunate changes in IFI policy, particularly in bilateral donor institutions.

Yet, one aspect of complex domains like development, is an overly narrow focus. The key to achieving optimal development results may come from analysis from another domain, or an amateur or a domain expert from a different region. This is perhaps why the World Bank, on the forefront of aid transparency, is reorganizing to achieve global insight from regional lessons learned. Aid data can tap the wisdom of crowds – or the wisdom of big data – to improve development effectiveness.

From Broadcast to Social Engagement

Institutions traditionally operate “out of network” by broadcasting messages through traditional and social media. These messages undergo significant scrutiny, particularly in the public sector. The Canadian federal government, for example, requires a 12 step approval process for official tweets. Social media and open aid data plunges IFIs into operating within existing social networks.

Organizations lose the ability to control the message in social networks. Authenticity becomes critical. Message sanitization often has the opposite effect. What is the incentive for donors to lose the control of the message?

For one thing, donors have lost control of the message. The public in many developed countries seem to believe that foreign aid spending is rampant. Aid transparency could dis-intermediate the media that is intent on sensationalizing foreign aid failures.

Aid Transparency Arms Race?

Aid transparency has become politicized (in a good way). Thanks to the Publish What You Fund Aid Transparency Index and the efforts of civil society, many donors have realized the political benefits of publishing to IATI standards. Aid transparency equates to aid credibility.

There are many observers who believe that donor aid, as currently provided, reduces development and growth. Economist Dambisa Moyo, for example, calls this “Dead Aid”. The important point about aid skepticism, in my opinion, is that foreign aid doesn’t always work as expected. And, the triumphs broadcast by some donors are resplendent in hyperbole.

It’s high time for a change. To a more advanced understanding of aid. To leverage data and analysis to determine what works in what context. This is becoming a matter of survival for aid organizations whether international IFIs, government bilateral donors or NGOs – proof of aid effectiveness.

Aid Transparency will Favour the Agile

Doug Hadden VP Products

A recent analysis by Publish What You Fund found that larger donors tend to have better aid transparency than smaller donors. This analysis was based on the aid commitment and the quality of transparency information published to the International Aid Transparency Iniatiave (IATI) standard. This generated a discussion (below) about the information technology capacity advantages of large organizations and the increased incentives for transparency for these larger donors.

My sense is tht the technology advantage will be soon negligible because smaller organizations have new technology choices and are less bound to highly rigid financial and records management software. Agility gives smaller organizations an advantage in the long run: it overcomes economies of scales enjoyed by larger entities thanks to developments like cloud computing and social collaboration. Of course, larger organizations can adopt more agile information systems, but tend to be reluctant because of sunk costs.

Transparency Incentives Also Favour the Agile?

Larger donors and NGOs are under more scrutiny, especially by the press. Social media and crowdfunding will, in the coming years, increase the pressure on all aid and development organizations to be transparent and show results. Unacceptable administration and transactions costs will be exposed through aid transparency. Smaller aid organizations are finding that crowdfunding eliminates expensive intermediaries – and, it will create a direct connection with individuals funding projects. Grant management – where aid organizations cater to the dogma of large funding organizations – will become less important than this direct connection. 

This new reality is disrupting the non-profit sector. 

Therefore, agility in information systems for transparency and for crowdfunding will favour the agile.

Transparency will drive funding and the funding will demand transparency. A virtual circle that will improve aid effectiveness.

Corruption and Aid Outrage

Doug Hadden, VP Products

Aid Outrage

According to the 'bastion' of British journalism, the Daily StarCorrupt dictators funded by £11.2bn of UK taxpayers' cash from Helene Perkins This seems to be part of the aid outrage: "why is so much going to corrupt foreigners and so little spent at home?" It gives the tantalizingly misleading impression that aid spending is orders of magnitude larger than reality.

via PBS.ORG

Corruption Narrative

The fuel for this outrage is corruption. And, providing a tenuous link between aggregate aid and dictators. For example:

"War-ravaged Afghanistan, Libya and Syria have also been given millions. The shock findings came as David Cameron hit his aid spending target."

How exactly is this a shock? Does Ms. Perkins think that one should have a war in Afghanistan and not attempt rebuilding? Should the UK not provide any humanitarian assistance in Libya or Syria? Is Ms. Perkins completely ignorant of UK aid policy? (i.e. more focus on humanitarian aid and post-conflict countries).

Ms. Perkins asserts that "a study from Transparency International (TI) said the cash was being siphoned off by some brutal regimes."

What study is this? We all know that there is aid money that goes into the pockets of elites in developing countries. There is a far cry from "some" to "all" aid money. There is a difference in corruption related to the type of aid and how the aid is disbursed. That, apparently doesn't matter to the corruption narrative.

Ms. Perkins goes on to talk about Somalia as "one of the worst governed" countries in the world. Exactly how does she propose that governance in Somalia is to be improved? Magic? Or, perhaps governance assistance. Yet, the African Development Bank has found that Somalia has made significant governance progress in 2013.

The blatant editorialing continues with about the  "whopping…£107m  to South Sudan whose president is the fearsome General Salva Kiir Mayardit." Is Ms. Perkins afraid of a man wearing black hats? 

As Aid Effectiveness Improves despite Narrative

Aid effectiveness is improving thanks to increased aid transparency and the use of big data analysis. It's exciting times for aid effectiveness where analytical tools are debunking myths like those espoused by Ms. Perkins. It's creating action such as in the World Bank reorganization to better share good aid practices around the world.

What’s new at FreeBalance?

This weekly news update provides the Government Resource Planning (GRP) community with a brief overview of recent FreeBalance developments and relevant industry news.

Reducing Risk in Government Financial Management Software Implementations in Latin America

FreeBalance attended the XVIII International Congress of CLAD. The International Congress of Latin American Centre for Development Administration (CLAD) conference took place in Montevideo, Uruguay from October 29 to November 1 and it focused on state reform. FreeBalance introduced a tool to help public servants better determine risk factors of implementing custom-developed, Commercial-Off-The-Shelf (COTS) or hybrid approached to government Integrated Financial Management Information Systems (IFMIS) at the event.

Read more >>

Alliance with EXICTOS Extends FreeBalance Government Treasury Portfolio to Central Banks

FreeBalance has announced a new alliance with EXICTOS focused on government treasury and Central Bank solutions. EXCITOS PROMOSOFT FINANCIAL SUITE solutions for the international financial sector will augment the FreeBalance GRP software portfolio. EXICTOS, based in Lisbon Portugal, has significant international experience in the financial sector.

Read more about the alliance >>

Aid Data & Aid Transparency have Come a Long Way

There is a persistent debate in the “development” community about whether aid works, whether it is counter-productive and whether some of it works. There is precious little data to support any of these positions. More specifically, there has been enough sparse data at different levels of aggregation to the point where correlation becomes dubious and causation is a forlorn hope. The development community has been innovating rather than pontificating.

Read the full story >>

Can Technology Enable Global Governance?

Lectures and discussions at think tanks range from bafflegab to insight. One of the interesting themes that was tantalizingly discussed in Pascal Lamy’s “Does Globalization need Global Governance” lecture at the Brookings Institution was the impact of technology. Technology is responsible for globalization: first transportation and now digital communications. Are digital communications disrupting the role of the nation state by introducing governance efficiencies?

Find out on the FreeBalance blog >>

Aid Data & Aid Transparency have Come a Long Way

Data-Driven Pivot for Development Effectiveness

Doug Hadden, VP Products

There is a persistent debate in the "development" community about whether aid works, whether it is counter-productive and whether some of it works. There is precious little data to support any of these positions. More specifically, there has been enough sparse data at different levels of aggregation to the point where correlation becomes dubious and causation is a forlorn hope. The deep geek recesses of the development community and academia have not been inactive in this "confirmation bias" world. They've been innovating rather than pontificating.

This is the age of big data. Of data driven decisions.

The work accomplished through the partnership that is "aiddata.org" is remarkable. I attended a 2010 conference showing preliminary results from researchers where it was clear that there wasn't enough information to answer critical questions. Data quality was also suspect. Data was too high level to make good conclusions. It was a tantalizing look at what could be.

That conference was preceded by an International Aid Transparency Imitative (IATI) "technical advisory group" meeting. I was not optimistic that donors were motivated to provide development information in a transparent, standard, machine-readable and timely manner.

Donors seem to be competing for transparency, which is a good thing. There is still a way to go. My view on what I saw today with the launch of Aid Data 3.0 is that development practitioners everyway can see the value of transparency and accessible tools.

Donor Transparency Accelerates

IATI: the little transparency index that could

Doug Hadden, VP Products

Publish What You Fund launched the 2013 Aid Transparency Index at the Brookings Institution last week. The index was based on the extent to which donors supported practice elements of the International Aid Transparency Initiative (IATI). This might seem like one of those glass half full/half empty stories. My sense, having taken part is some IATI technical sessions, is that donor transparency is on the rise. There were many donors over the past few years who claimed that IATI support was expensive, could not be supported by current information systems and would not provide sufficient benefit.

The good thing about the Aid Transparency Index is that it creates disincentives for those donors that are not transparent. It creates motivation for donors to join IATI and implement more functions – for example, move from static PDF documents to machine-readable XML. Here are my notes from the event:

Transparency, Big Data and Aid Effectiveness

Doug Hadden, VP Products

Michael Clemens, a Senior Fellow at the Center for Global Development has an interesting article: The New Transparency in Aid Evaluation: The Millennium Villages Debacle Is a Good Sign of What We’re Learning. I made a few comments on the blog that I'm expanding here. Clemens describes recent advances in development economics that are helping to answer some questions about aid effectiveness.This "new transparency" involves new media like blogs and social media. The promise of transparency is better evidence about what works while eliminating "confirmation bias."

Confirmation Bias and Dogma

The razor's edge on aid transparency is the challenge to dogma. We're at this exciting inflection point thanks to the  International Aid Transparency Initiative (IATI), AidInfo and others that increase accessible data. There is a real promise that this information will generate insights. Aid interventions will become comparable. Contextual factors will be better understood. Yet, the aid debate within politics seems to have become even more dogmatic and polarized where the notion that 'aid doesn't work' has become a troubling meme. Where confirmation bias plays a dominant role.

Could this "information overload" enhance confirmation bias? Generate even more 'facts' to support dogma? Much like the health care / climate change / gun control debates in the United States. 

There is a world of difference between the politics of aid and the reality of aid. Transparency will inform decision-makers and be leveraged by implementers.

The difficulty with the aid / health care  / climate change / gun control debates in the U.S. is about narrative, not facts. (For example, blaming aid recipients as if they deserve to be poor and sick.) It's emotional. It's based on views of what motivates people to act in different ways and what ought to be priorities. And, fear. 

Micro and Macro Problem

Much of the evidence that aid works is at a micro level where smaller interventions are easy to manage and measure. There are few expected outcomes and few unexpected outcomes. Much of the evidence that aid doesn't work or does work is at a very high macro level. Economies that receive aid improve or do not improve. Theories abound. It is virtually impossible to prove that aid was materially responsible for every country meeting MDG objectives (or, that those objectives represent effective outcomes.) And, it is similarly almost impossible to prove that aid created perverse incentives so that MDG objectives were not met. 

The data at the micro level can not be extrapolated, today, to broad conclusions. That's where big data comes in.

Big Data and the End of Narrative?

There is a "big data" backlash. (From experts of the pre-big data world. Much like the horse industry objecting the the automobile industry.) The primary criticism of big data is that it is no different than typically business intelligence and size of the data doesn't change effects. And, many argue that there is simply no way for big data to find unexpected insight because only experts can ask the right question. (The notion of "data scientist" is rejected because you can't get insight without specialist knowledge.)

My sense is that the big data will generate insight because specialists often filter out relevant information from other specializations.

The key behind big data is not that the data is big. It's that the data comes from multiple sources including reports, social media, and electronic monitoring devices. It is possible to understand the context coming from these sources. This will slowly cut through false and misleading narratives. Slowly because media remains dominated by narrative – especially cable news in the United States.

And, there seems to be a mad rush to lower aid or privatize aid or pontificate about aid during this window before we gain the next generation of insight. It's almost as if the dogmatic are trying to fill us with noise to drown out the potential problem when transparency demonstrates that they were wrong.