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Aid Transparency is a Smoking Gun


November 15, 2011

Doug Hadden, VP Products

Publish What You Fund has completed a 2011 Aid Transparency Index. Their conclusion? “Some donors do well, all donors can do better.” Perhaps that’s a euphemism for meager improvements.

As a participant in the International Aid Transparency Initiative (IATI) Technical Advisory Group, I have heard that fully supporting IATI is technically difficult. My sense is that the problem isn’t transparency: it’s traceability.

[Technically, the majority of IATI can be supported through any decent financial management system, assuming that donors follow good practices that are imposed on developing nation governments. See: Public Expenditure and Financial Accountability (PEFA) requirements around program budgeting and budget classifications.]

The Smoking Gun

As Richard Allen pointed out in the IMF PFM blog, using “country systems” is a “courageous policy.” The same goes with full aid transparency.

  • Aid transparency could reduce inefficiencies by an order of magnitude by revealing administrative costs and reducing the transaction costs for donor reporting
  • Aid transparency could reduce corruption by an order of magnitude by revealing transaction and by reducing the use of cash
  • Aid transparency could improve effectiveness by an order of magnitude by analyzing “apples to apples” across aid programs and through improved coordination

We know that foreign aid programs are less efficient and effective that could be. We also know that there is a lot of corruption opportunities. Therefore, IATI seems to be a no-brainer.

Here’s the deal: today we know the problems. We just can’t easily trace it to the donor. There is deniability. So, we could be almost certain that 20%, 40% or 60% of a program budget is wasted. With IATI, we know for sure. And, it traces back to the donor.

Let’s not shoot the Messenger

Please, let’s all agree that we won’t criticize donors for corruption, inefficiencies and ineffectiveness if there is a commitment to improve. “Accountability” should not mean front-page stories about money gone astray – it should mean analyzing what donors are doing about it.

My sense is that some of the backtracking on transparency at the Busan High Level Forum is about getting shot in the press. (And blogs.)

Some Odd Moments

In the course of discussions around IATI, I have had some odd points made:

  • IATI is pointless because aid if fungible [that’s what IATI plans to solve]
  • Bi-lateral donors proud of transparency leadership [that score under 30%]
  • Program budgeting is a bad practice [no, it’s a good practice]
  • IATI support is technically difficult [yet small organizations are able to support it]
  • Certain financial software applications are difficult to adapt to support new standards [tell you software vendor to smarten up]
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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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