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Aid Transparency, Harmonization, Integration – the Simple Way


May 24, 2011


Doug Hadden, VP Products

After much effort, the International Aid Transparency Initiative (IATI) standard is being adopted by donors and recipient governments. Tracing aid will improve aid effectiveness. Is this standard highly complicated? Will it be too difficult to implement and expensive? I’ve made the case for using financial management systems to automate IATI compliance and for integrated donor with country systems.

The IATI Secretariat recently published a simple explanation of the IATI standard. This helps to explains that much of IATI can be automated through the proper use of financial management systems by donors and recipient governments. My premise is that financial information and project metadata is stored within the budget classifications or Charts of Accounts (COA). This metadata enables tracking transactions within the financial system with project documents and enable consolidation to the IATI standard. Donors use financial systems. Most recipient government use financial systems.

Integration Structure

The ability to automate IATI depends on the systems in use by donors and recipient governments.

  • Chart of Accounts: all financial systems include COAs. The COA is often different among organizations, although there are some similarities. Nevertheless, side tables or inferred dimensions can be created to consolidate to a shared start.
  • Core Financial: provides the commitment accounting systems used in the public sector.
  • Budget Preparation: provides multiple year budget planning and forecasts.
  • Grants Management: systems used by donors to manage grants and loans to recipients.
  • Aid Management: systems shared by donors and recipient governments to coordinate partnership activities, risk monitoring, show commitments and disbursement.
  • Project Accounting: enhancement of financial systems to provide milestone reporting.
  • Debt Management: systems used by recipient governments to manage debt and forecast payments.
  • Procurement: systems that recipient government use to buy goods and services that are part of funded aid projects.

Not all of these types of systems are used by donors or recipient governments. Nevertheless, an effective COA is an excellent starting point. And, there is often more than one financial system that could integrate with the IATI standard.

Integration Across the Budget Cycle

The posting on budget cycle provides more detail.

  1. Donor budget preparation systems where donors determine upcoming project budgets. These systems could integrate directly with recipient government budget preparation systems that include anticipated on-budget aid resulting in legally mandated budget
  2. Alternatively, and perhaps preferably, the donor budget preparation and system could integrate with aid management systems. Aid Management systems enable donors and recipient governments to collaborate in the definition, funding and management of aid projects. Also recipient government budget preparation systems could integrate with aid management systems to enable budget planning and to harmonize the government and aid budgets.
  3. The resulting budget prepared in the donor budget preparation system is formalized in the donor financial management system for disbursements during the fiscal year.
  4. Disbursement information from the donor financial system could integrate with the recipient government financial system. The recipient government receives the funds against the budget item and provides authority to spend through appropriations or warrants.
  5. Alternatively, and perhaps preferably, the donor financial management provides disbursement information to the aid management system that also integrates with the recipient government financial management system. This provides disbursement information to all stakeholders to improve aid harmonization.
  6. Outcome and project reports are generated from the Aid Management System.
  7. Outcome and project reports from the donor financial management and recipient government financial systems can also provide output, project and outcome information.
  8. Recipient government financial systems typically output statistical data using the IMF GFS standard.
  9. Output, project, outcome and statistical data can be compared to support historical analysis.

Financial Systems and IATI Integration


Financial System Alignment

Who is involved, where and how?

1. What is the name of the reporting organisation?

High Level Consolidation that can be appended to any reports coming from financial software.

2. Which organisations have given you funding? Which organisations are you funding?

Provided in donor Financial Systems.


Financial System Alignment

What are the project details?

3. What is the IATI identification code for this project?

Can be linked from COA, some systems support additional unique number (in this case IATI code) to COA element.

4. Project name

Projects are aligned typically through a program or project segment where the project code in the COA has a description with the same name as in documents.

5. Project summary or description

Project name is sufficient to provide mapping between COA and documents. Many COTS financial systems enable longer descriptions and attachments.

6. Are there documents related to this project that can be or are already published online? What is the link to them?

Could be included in COA description information

7. What is the website connected with this activity

Could be included in COA description information

8. Who are the points of contact for this project?

Could be included in COA description information

9. Are there other projects that are related to this one? How are they related

Often inferred within the structure of the COA

10. What are the geographic details of this project? (Optional)

Geocoding is not typically in the COA. However, district is often described in a separate COA segment or within the Organization segment. Donors are unlikely to have geographic details beyond country. Recipient countries likely to have geographic details following the political structure of the country, so has different levels of granularity. Geographic details often can be linked to Aid Management systems.

11. What are the start and end dates for this project?

Typically held within the Budget Preparation, Aid Management or Project Accounting systems. Medium Term Expenditure Frameworks (MTEF) with 3-year perspectives helpful to support the IATI standard.

12. What is the current status of this project

Financial status (original budget, commitments, disbursements, remaining funds) is provided in the Financial Management system. This may not show the % completion. This is often stored in Project Accounting system. Monitoring and Evaluation systems that are part of Aid Management systems include risk factors can be linked.

13 What are the expected and actual results of this project? (Optional)

Performance information provided in Aid Management sytems. The performance structure is often found in the COA. Donors should be using a structure to align project items to performance classifications. Recipient governments often have linkages to MDGs and government objectives as inferred dimension (or side tables) to the Program Segment.

14. Which sector or theme does this project contribute to

Sector information typically stored in Economic Purpose or Program segments in COA. Also provided in Aid Management systems.

15. Is procurement tied or restricted to certain countries? (Not necessarily applicable)

Procurement conditions often stored within Procurement systems. Also provided in Aid Management systems.

16. Are there any cross cutting themes to highlight in this project?

Difficult to achieve in Financial Systems but possible through creating inferred dimensions within the COA. Also provided in Aid Management systems.

17. Are there terms and conditions attached to the project?

Can be partly supported for conditionality in recipient systems. Many recipient countries have a Fund segment in the COA. Conditions by Fund source for expenditures can be automated. Specific project conditions often attached to Revenue transactions. Also provided in Aid Management systems.


Financial System Alignment

What are the financial details?

18. What are the budgets in each financial year?

Budget Preparation systems show multiple forward years. Financial Systems show previous year data and current year.

19. What are the planned disbursements in each financial year?

Budget Preparation systems show planned disbursements across multiple forward years. These planned disbursements are captured as budgets in donor and recipient systems. This does not necessarily imply ability to spend those funds.

20. What are the dates, descriptions and values of planned or committed financial transactions?

Provided in Aid Management systems. Budget Preparation systems show planned disbursements across multiple forward years. Financial systems show planned disbursements in the current fiscal year. This includes when commitments are expected. Commitments and obligations are key elements of any government This shows funds set aside by donors in the financial system ahead of disbursements including multiple year commitments. Recipient governments also commit funds that have been disbursed from donors but not yet spent. This is important because commitments can show progress (purchase orders, goods received etc.) towards disbursements.

21. What are the dates, descriptions and values of already disbursed financial transactions?

Provided in Aid Management systems. Financial Systems show full disbursement details including the type of disbursement.

22. What type of aid is this?

Provided in Aid Management systems. The donor COA should have aid types included. Recipient governments can classify the type of aid, typically within the Fund segment.

23. What are the financing mechanisms used?

Provided in Aid Management systems. Financing mechanisms are included in the Object segment in the COA. Grant Management systems can capture the entire grants and loans lifecycle including post-award administration. Recipient governments can code the mechanism in Fund or Object segments. Debt information is usually included in Debt Management systems.

Reducing Corruption

Automating financial flows from donors to recipient governments reduces corruption by dramatically reducing the fungibility of aid, as I’ve described before. Integration including with banking systems tracks funds throughout the budget life-cycle.

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Doug Hadden

Doug Hadden

Executive Vice President, Innovation at FreeBalance
Doug is responsible for identifying new global markets, new technologies and trends, and new and enhanced internal processes. Doug leads a cross-functional international team that is responsible for developing product prototypes and innovative go-to-market strategies.

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