Budget Alignment

1. Budget Alignment IATI Tag Meeting Session 4 4 October 2010

2. 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

3. 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

4. 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

5. 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

6. Information needs GENERAL INFORMATION REQUIRED FOR ALL AID FLOWS +Critical - Critical Covered 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 

7. Information needs COMMITMENT INFORMATION REQUIRED +Critical - Critical Covered Forward commitments by donor at aggregate and sector level for the budget year and medium term (all aid)  DISBURSEMENT INFORMATION REQUIRED 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 

8. Information needs DISBURSEMENT INFORMATION REQUIRED +Critical - Critical Covered For earmarked projects and programmes all channels  Planned disbursements Actual disbursements   All disbursements, by donor, by project, by implementing institutions All, disaggregated by intended purpose (functional)   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)

9. Information needs ACTUAL EXPENDITURE OF AID Covered +Critical - Critical • 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 For Channel 3 projects and programmes  By donor by project By beneficiary institution   By implementing agency By functional classification   By programmatic classification  By economic classification (high level)  By lower level economic classification

10. 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

11. 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)

12. 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.

13. ONCE-OFF CODING OUTPUTS TO BUT MORE DETAILED CODING THAN CURRENTLY USED IN PRACTICE

14. 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 Can include non-IATI donors, if country negotiates and peer pressure works Non-IATI donors could follow, but unlikely to Comprehensiveness Timeliness and (accuracy) Centralised control of publication of data, more timely As it depends on many donors in many countries, timeliness could be problematic Partner country reporting in partner country classifications Partner country reporting can be aligned to donor-centric formats (trans cost) Country reporting

15. Analysis of Options: RISK Country-specific coding Common Coding Enforcement at HQ / international level Peer pressure at international level Higher likelihood of more complete datasets for IATI donors 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 Compliance 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 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?

16. Analysis of options: SET-UP COSTS Common Coding Country-specific coding Agree coding for each country Set-up and maintain coding system for each country Adjust when country classification changes DONORS Add more detail to some CRS codes in current systems Should recognise that donors are set up differently Set up system (AIMS or directly to PFM) to translate IATI coding into country coding. PARTNERS Agree coding framework Set up systems to incorporate IATI info into country systems (AIMS or PFM)

17. Analysis of Options: Continuous Costs 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

18. Analysis of options: Other PRACTICE Country-specific coding Common Coding Who will code Donor specific, but desk officers at country level using central system and 1 coding for all countries Desk officers at country level using country specific coding (3.11) SIDE BENEFITS 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

19. 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?