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Is the Donor Transparency Train About the Derail?


November 3, 2014

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
















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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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