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Practical Approaches to the Aid Effectiveness Agenda published


July 14, 2010

Doug Hadden, VP Products

The Overseas Development Institute,  International Budget Partnership and Publish What You Fund has published a study that shows how aid information can be aligned and integrated with recipient country budgets.
The report authored by Samuel Mooon (pictured on the left at the recent IATI Technical Advisory Group meeting)  with the assistance of Zachary Mills takes a practical approach.

Why Use Country Systems?

The Accra Agenda for Action mandates the use of country systems by development partners.  According to the authors, “the Paris Declaration and the Accra Agenda for Action emphasise and formalise the importance of aligning aid with recipient government priorities and delivering aid through government systems. Yet, a significant amount of aid, in some countries the vast majority, is not delivered through the national budget. Indeed, many recipient governments are not even aware of large amounts of the aid directed to their countries. Generic donor ‘sector’ categorisations of aid are often applied at country level, even though these do not relate meaningfully to recipient governments’ sectoral or administrative budget classifications.” The use of country Integrated Financial Management Information Systems (IFMIS) can reduce transaction costs, improve transparency and harmonize aid to improve results.

The authors also point out that “the ability of citizens to hold their government to account for the services it delivers may be weakened by the provision of aid.”  Governments become more accountable to development partners rather than citizens.  The use of country systems to integrate development partner and government budgets changes the transparency dynamic to focus on citizens. And, citizens participate when taxes are linked to policy and outcomes.

It is difficult to argue with the statement that “a solution at the country level is imperative to effectively align aid with government planning and implementing cycles and to address country-specific concerns.” Integrating the aid lifecycle from donor through to outcome is the focus of the International Aid Transparency Initiative. IATI also promises to make donors accountable.

Can Aid and Government Information Integrate?

 Many stakeholders seem to view the notion of aid and country integration as a theoretic exercise fraught with technical difficulties. The authors point out that “no AIMS has successfully and reliably brought aid information together in a way that interfaces with the national budget.”  The study examined whether current international classification standards can be leveraged including:

  • International Monetary Fund Government Financial Statistics (GFS)
  • United Nations Classification of the Functions of Government (COFOG)
  • Organisation for Economic Co-operation and Development Assistance Committee (DAC) and  Creditor Reporting System (CRS)

There has been much effort in countries to leverage good practices in budget and accounting classifications. The study found that there is complexity associated with linking sectoral requirements and  international classifications against multi-dimension Charts of Accounts (CoA). Yet, the study shows remarkable similarities in budget classifications across 14 governments. And, the study recommends how international standards can be extended to meet integration and harmonization needs. Government CoAs can accommodate standards support through inferred or side concepts that require little or no change to budget operations. Budget preparation and budget execution can operate independent of these classifications so as not to add any complexity. This is currently supported by many governments who are able to support GFS, COFOG and MDG classifications without affecting daily data entry.

The study recommends that donors should provide budget and funding information to facilitate usage by country system rather than the other way around.  “Those countries most dependent on foreign aid and countries with lower capacity will lose out if donors do not publish aid information that is easy to link with recipient government budget systems,” the study asserts.  The study points out that donors have adjusted to national currencies and fiscal years. So the technical exercise can extend to supporting government budget and auditing calendars.

There remains some semantic issues in classifications that need to be overcome. There is no technical reason why development partner, aid information and country systems cannot integrate.

How is FreeBalance Helping with Aid Transparency?

There is interesting observation that I don’t fully agree with: “the ease of mapping aid onto budgets may have an inverse relationship with institutional capacity levels, and lower capacity countries are likely to start at a disadvantage in the attempt to use aid information and build functioning integral AIMS.” Our anecdotal experience is that countries with lower institutional capacity level may be more receptive to supporting the standards that enables aid management integration. They are more willing to use these standards to accelerate capacity building. We see that some of these countries will often roll-out full compliance with standards in a second phase.

As a For Profit Social Enterprise (FOPSE) with numerous country Government Resource Planning (GRP) systems in emerging nations, FreeBalance has been assisting in improving aid transparency. We are active in IATI and have provided technical advice on country systems. We have integrated the FreeBalance Accountability Suite with the Development Gateway Aid Management Program (AMP). We are producing a Transparency Portal product for our customers.  And, we are working with our for-profit and non-profit partners to develop an integrated aid and budget Ministerial Decision Support System.

We see multiple integration points between aid and country systems. In particular, aid management systems should be integrated with the budget preparation process. This provides full transparency on how the government and development partners expect to achieve joint goals. It should also be integrated to track expenditures throughout the lifecycle. And, it should integrate commitments so that development partners are aware of in-progress activities.

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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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