Budget Alignment

IATI Tag Meeting

Session 4

4 October 2010

Introduction & Session Agenda Key issue is integration of aid in and

reflection on budget Session Agenda

Introductions Agreement on meeting outcome Presentation

• Identify key discussion questions Discussion Conclusion

• Decisions• Action points

Partner country needs Timely, up-to-date and reliable information on current

and future aid flows. Detailed (where, when, by whom, how, on what and in

which sectors) Results Better coverage Conditions and terms With relevant documentation

Necessary for allocative and operational efficiency, mutual accountability, local accountability

Need to match information produced in the aid management cycle to the information requirements of the budget cycle and vice versa

High cost of manipulating information manually between formats: can IATI streamline reporting both ways?

Different information needs within government

Key differences between aid flows Different delivery channels

Delivery channel 1: treasury, in cash Delivery channel 2: recipient partner country

agency, in cash Delivery channel 3: through third party or

managed by donor itself, in kind Different channels have different

information needs for budget integration throughout the budget cycle

4 prioritisation assumptions

First ‘must have’ information to prepare and manage budgets at the centre

Accounting for financial flows necessary to account for results

Budget preparation information more important than budget execution

Functional classification critical because it can map to administrative / functional and programmatic (if in use) classifications at country level Economic classification also important,

particularly at spending agency level and for macro planning

Information needs

GENERAL INFORMATION REQUIRED FOR ALL AID FLOWS

+Critical - Critical

All information is required by PC financial year

All information needs to be accurate and timely

Information is critical for country programmable aid

The finance type of each flow

Currency and value in local currency

Degree of earmarking (BS, SBS, other)

Disbursement channel

Information on conditions

Accountable government institution

Expected outcomes and outputs

Actual results

Covered

COMMITMENT INFORMATION REQUIRED

+Critical - Critical

Forward commitments by donor at aggregate and sector level for the budget year and medium term (all aid)

Forward information on planned disbursements for budget year and medium term

For all: in-year updates on planned disbursements

For GBS: planned disbursements by donor

For SBS: planned disbursements by donor by sector

Covered

DISBURSEMENT INFORMATION REQUIRED

Information needs

Information needs

Planned disbursements

Actual disbursements

All disbursements, by donor, by project, by implementing institutions

All, disaggregated by intended purpose (functional)

DISBURSEMENT INFORMATION REQUIRED

+Critical - Critical Covered

For earmarked projects and programmes all channels

All, disaggregated by intended purpose (programmatic)

All, disaggregated by economic (high level)

All, disaggregated by economic (lower levels)

All, by geographical location

Beneficiaries of Channel 3 disbursements

Supply chain disbursements (service providers)

+Critical Covered

Information needs

By donor by project

By beneficiary institution

By implementing agency

By functional classification

ACTUAL EXPENDITURE OF AID

- Critical

For Channel 3 projects and programmes

By programmatic classification

By economic classification (high level)

By lower level economic classification

Key concerns remaining Channel of disbursement (nature of flow) Disaggregated information on allocation of flows in terms of

country budget structures Information on the actual use of fund

Selected key issues

Important to add identification of channel Information on actual use of funds for Channel 3 flows

will be important transparency gain Role of AIMS

Interface between aid and project management cycles and budget management

Comprehensive, up to date AIMS requires continuous cooperation

Recording, verifying and reconciling information Only 6 out of 29 cases uses country budget

classifications Country level choice

Key issue is coding of aid

IATI coding for country budget alignment Countries have different classification schemas, but at

lower levels of disaggregation significant commonality Donor systems use CRS classifications, at lower levels

of disaggregation significant commonality with country systems Some areas less developed

Countries require disaggregated information, whatever coding system is used Lowest unit of information is sub-programme

component level (see table) Where should standards apply, at donor HQ level (on

set of codes for all countries) or at country level (unique set of codes for each country)

4 Options Option 1

Use CRS codes for common sector identifier (3.12) across all donors and countries

Use unique country codes agreed at country level for each country (3.11)

Main benefit: high country budget alignment Option 2

Develop a common coding system using CRS disaggregated codes that can map to country budgets and to CRS

Same codes apply to all countries for budget alignment Main benefit: once off coding that roll up to CRS and map to country

budgets, simpler donor systems, higher likelihood of compliance/easier monitoring.

Option 3 Develop common coding system and encourage additional country

coding Option 4

Do nothing for now, commit to resolve issue and publish raw information in the meantime.

ONCE-OFF CODING

OUTPUTS TO

BUT MORE DETAILED CODING THAN CURRENTLY USED IN PRACTICE

Analysis of options: BENEFITS

Country-specific coding Common Coding

Degree of Alignment Complete or near complete

Imperfect alignment – further work to align

Level of detail Country choice, so some can negotiate high disaggregation plus more dimensions

One size fits all – common denominator likely to be sub-vote level & functional and high level econ

Comprehensiveness Can include non-IATI donors, if country negotiates and peer pressure works

Non-IATI donors could follow, but unlikely to

Timeliness and (accuracy)

As it depends on many donors in many countries, timeliness could be problematic

Centralised control of

publication of data, more

timely

Country reporting Partner country reporting in partner country classifications

Partner country reporting can be aligned to donor-centric formats (trans cost)

Analysis of Options: RISKCountry-specific coding Common Coding

Compliance Enforcement at country level – unless HQs set up central quarterly checking system

Issue not multi-donor projects, nor Channel 1, but Channel 2 and 3. Will projects be known?

Peer pressure will operate at country level

Enforcement at HQ / international level

Peer pressure at international level

Higher likelihood of more complete datasets for IATI donors

Sustainability Can it be programmed into donor systems?

Updating and who can use

data?

Common coding more easily programmed into donor systems

Updating and who can use data?

Which system more likely to create conditions for compliance of (i) donors that have information, and don’t publish or (ii) donors who don’t have information

Analysis of options: SET-UP COSTS

Country-specific coding Common Coding

DONORS Agree coding for each country

Set-up and maintain coding system for each country

Adjust when country classification changes

Add more detail to some CRS codes in current systems

PARTNERS Agree coding framework

Set up systems to incorporate IATI info into country systems (AIMS or PFM)

Set up system (AIMS or

directly to PFM) to

translate IATI coding into

country coding.

Should recognise that donors are set up differently

Country-specific coding Common Coding

Donors Code programmes 1x for CRS and 1x for IATI

Country coding likely to be to be programme component – cannot roll up to CRS

Code programmes 1x output to CRS and to country budgets

Level of detail at which coding occurs will be programme component

Partner Countries Chase up donors and line ministries for info on programme commitments, disbursements and use of funds for IATI and non-IATI donors, unless full compliance in terms of timeliness, comprehensiveness and accuracy

Chase up non-IATI donors and line ministries for info on programme commitments, disbursements and use of funds

Check detail when necessary with IATI donors / line ministries

Analysis of Options: Continuous Costs

Analysis of options: Other

Country-specific coding Common Coding

Who will code Desk officers at country

level using country

specific coding (3.11)

Donor specific, but desk officers at country level using central system and 1 coding for all countries

Channel 1 Funds 80% of aid at country level may differ from 80% of aid at international level. If country can get information on 80% of aid, greater benefit than 80% compliance at international level

Better data across countries for comparison with country own spending

PRACTICE

SIDE BENEFITS

Discussion questions

What level of disaggregation are we aiming at? How will it work in practice – at which point will

coding occur? Analysis of country-specific vs common coding

Is cost benefit analysis right? What has been missed? What is risk of non-compliance, sustainability for both

types of coding? What are the key trade-offs?

• More info for more countries, less detail for some• Higher likelihood of compliance, less detail• IATI donors / non-IATI donors

What is way forward to December? Other?