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