Memorandum submitted by Development Initiatives
AID EFFECTIVNESS—THE IMPORTANCE OF
BETTER REPORTING TO IMPROVE TIMELINESS AND TRANSPARENCY OF FINANCIAL
FLOWS FOR POVERTY REDUCTION
1. A key but currently neglected issue within
the Aid Effectiveness agenda is the need to improve the timeliness
and transparency of resource flows for poverty reduction and sustainable
development.
2. Lack of timely and transparent data:
(a) impedes development planning and coordination—and
therefore the efficient use of resources
(b) is a major obstacle to developing country
ownership
(c) reduces accountability—to donor
country taxpayers and more importantly to people in poverty in
whose name resources are being allocated
3. At present, most recipient country governments
only have partial knowledge of the resources they are meant to
be receiving. This represents a substantial obstacle to effective
financial management and planning—and undermines country
ownership. Few businesses would survive without full and timely
financial data.
4. In principle, improving the quality of
information on $100 billion in global aid flows should not be
an insurmountable challenge. The trillions of dollars traded on
global markets daily can be effectively tracked. Advances in IT
offer major opportunities for better dovetailing of existing systems
used by OECD donors. And whilst the potential benefits in terms
of efficiency in the use of aid resources are as yet unquantified,
intuitively they will be substantial.
5. Currently the OECD's DAC Statistics and
Creditor Reporting System (CRS) databases provide a central authoritative
source of data on ODA flows for poverty and development. A wide
range of bilateral, multilateral, non-governmental, academic and
private sector organisations rely heavily on OECD data.
6. But donor reporting to the DAC systems
is far from being current—a disbursement made to a particular
country in January 2008 will not appear in finalised DAC Statistics
until December 2009—almost 2 years later. Reporting to DAC
Statistics is mandatory—but reporting to the important CRS
remains voluntary and CRS data is therefore incomplete.
7. Whilst substantial efforts have been
made, especially in recent years, to provide data which is disaggregated
and/or flagged, so that it is possible to see how policy intentions
are being matched by changes in spending, NGOs and civil society
groups (particularly in developing countries) find it difficult
to access data which is as recent and disaggregated as they require.
8. Whilst the OECD is the single most important
source of information on aid flows (especially since the OECD
DAC defines what can be counted as ODA), there are several other
databases which track aspects of aid, including databases designed
for use by developing country governments. Unfortunately not all
such databases are designed to be compatible with each other—or
with the DAC and CRS systems—which reduces their usefulness
for international comparability purposes.
9. Although audit processes play a vital
role in scrutinising the proper use of resources, there is a case
for increased access to transaction level data on aid, in order
that a range of stakeholders can see how aid is transmitted through
different organisations from source to ultimate beneficiary. A
much clearer picture is needed on who has access to what resource
information at each stage of the process.
10. Reporting on disbursements and commitments
discussed above is important and can be greatly improved. In addition,
there is also scope for some additional transparency at an earlier
stage—when donors are putting together indicative spending
frameworks. Often it is left to field staff in country to find
out on an ad hoc basis what donor partners are planning to spend.
There is clearly potential for some basic sharing of information
on allocations significantly earlier, with clear benefits to country
level coordination.
SOME INDICATIVE
AREAS FOR
PROGRESS
11. There is a strong case for all OECD
donors giving greater priority to several aspects of financial
and statistical reporting.
12. Investment is needed at all levels to
ensure that donors collect and can report a more disaggregated
picture to the OECD. This means, inter alia, more capacity
(both personnel and IT investment) in DAC members' statistical
departments so that adequate priority is be given to the joint
effort to produce internationally comparable data. Increased capacity
is needed in the Development Cooperation Directorate of the OECD
so that donors can be supported in efforts to improve the timeliness
and granularity of data.
13. Concrete steps that could be taken at
an early stage include:
(a) A shared effort to bring forward deadlines
for reporting to the OECD—not all donors meet the current
July 15 deadline.
(b) Reporting to the CRS to be made mandatory—in
line with DAC statistics
(c) Urging all actors, including multilateral
agencies, to ensure that their resource data related work is compatible
with DAC protocols and definitions.
(d) An effort to investigate the potential
for greater application of innovative IT solutions to donor reporting—drawing
on the expertise of the IT and finance sectors.
(e) The vital importance of increased public
access to information (project level and financial data in standardised
format) needs to be explicitly recognised as a discrete and important
area for specific timetabled progress following the Accra meeting.
(f) Whilst improving transparency of bilateral
donors is a priority since they provide most global ODA, the same
principle of timely, comparable and properly broken-down data
being made publicly available should also be applied to other
aid providers and funding channels —including non-OECD bilateral
donors, multilateral agencies, NGOs and Foundations —and
government departments in developing countries.
WHAT DFID CAN
DO:
14. DFID is already ahead of the curve on
many aspects of reporting and is well positioned to set an example
to the donor community and to continually strive to improve its
own performance, drawing on best financial and IT practice in
other sectors.
15. DFID should continue to work with a
range of partners to promote the issue of transparent and timely
data. It should set itself challenging goals to further improve
performance and should work with other donors to ensure increased
resourcing of the OECD on statistics and reporting.
16. DFID should (continue to) champion the
development of standards such as IDML (International Development
Markup Language) which can ensure the efficient electronic sharing
of data.
17. It should prioritise the development
of statistical capacity in developing countries, including through
sustained support for the Paris21 Initiative and through increasing
opportunities for building southern statistical capacity. In line
with its efforts to explain and increase public engagement in
development, DFID should provide specific support to processes
and organisations which seek to increase access and understanding
of development related statistical information—recognising
that there is a real gap between data being available online—and
people (whether ordinary members of the public, MPs, NGOs or officials
in southern government departments) actually having the bandwidth,
computer access, confidence and economic literacy to make practical
use of the data.
CONCLUSION
18. Whilst 20/20 realtime information on
resource flows for poverty reduction is probably unattainable—there
are very many modest but worthwhile steps that every organisation
involved in the aid process can take to improve the current situation.
Some of these steps are known, a few have been mentioned in this
memorandum, others are being identified. The IDC could play an
important role in taking its own view on the importance of this
issue as part of the wider aid effectiveness agenda.
ABOUT DI AND
THE RESOURCE
TRACKING INITIATIVE
1. Development Initiatives is an independent
UK-based organisation that undertakes research and advocacy work
on aid and poverty reduction. We have considerable experience
in the area of aid effectiveness, having co-founded the Reality
of Aid programme and managed the report process over its first
decade. DI provides statistical and policy analysis to a range
of bilateral and non-governmental agencies and manages an ongoing
research programme on Global Humanitarian Assistance.
2. Development Initiatives has recently
embarked on a major new initiative to track resources for poverty
reduction, seeking to increase access to information on aid resources
from the point of their initial allocation through to commitment,
disbursement and ultimate impact.
3. The overall aim is to ensure that governments
and citizens are in a stronger position to plan, manage and account
for aid resources, thus maximising the impact of these resources
on poverty reduction and sustainable development. The programme
will seek to do this by improving the quality, timeliness, transparency
and availability of data on resource flows.
4. The expected outcome of the project is
more and better data on aid flows, accessible at all levels, resulting
in better planning, more transparent resource allocation, improved
aid management and increased accountability. This in turn will
contribute to the achievement of the MDGs through faster, more
effective poverty reduction, in line with the objectives of the
Paris Declaration on Aid Effectiveness.
5. We do not underestimate the challenges,
political, administrative and attitudinal, to increased resource
transparency. But limited analysis and dialogue to date shows
that there is real demand from a range of stakeholders and genuine
potential for substantial progress.
6. Whilst our work is in its early stages,
we are grateful for the opportunity to highlight this issue to
the International Development Committee as part of their inquiry
on Co-ordination for Aid Effectiveness.
7. We ask the International Development
Committee to consider this issue as part of its current inquiry,
and would welcome the opportunity of sharing our analysis on this
issue as our new programme of work progresses.
February 2008
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