Organizing Payment & Accountability by Patricia Mc Kenzie The World Bank

1. Organizing Payment & Accountability by Patricia Mc Kenzie The World Bank

2. Why Compensate • To encourage early reporting of disease outbreaks and compliance with culling orders • Reimbursement for loss of private property destroyed by the State for public good.

3. Stakeholder Issues and Concerns Government’s Concerns: • Emergency Preparedness • Crisis Management • Sourcing Funds for Compensation • Minimizing administrative costs including the costs of transferring money • Minimizing funding costs • Minimizing leakages • Improvement of image and credibility • Program efficiency and results

4. Stakeholder Issues and Concerns Farmer’s Concerns: • Fair treatment and access • Fair price that approximates market value • Fast Compensation • Minimizing bureaucracy • Physical Security

5. Stakeholder Issues and Concerns Societal Concerns:- • Similar to farmer’s • Accountability of Government • Transparency of compensation fund management

6. Stakeholder Issues and Concerns Donors and Funds Providers:- • Appropriate institutional arrangements • Mitigation of fiduciary risks • Proper payments: No over payments, ghosts, rent-seeking • Results and achievement of program objectives • Efficiency, accountability and transparency

7. Context • Differences in Animal Production systems are fundamental to the approach to compensation and impact the payment mechanisms. • Two major types:- • Large commercial systems • Small holder and back yard systems

8. Essential Elements of Compensation Payment Systems • Legal basis for establishing responsibilities for compensation fund administration • Cross- provincial and cross-ministry coordination e.g MOF, MOA, Central- Local Gov’t. • Financial needs assessment- how much will compensation cost? (Payment rates, number of farmers, type of farmers, no. of birds) • Funding Sources- how will the government raise the money? (sources and mobilizing needed financing • Payment agencies- how will the funds flow to the beneficiaries?

9. Essential Elements of Compensation Payment Systems • Payment mechanisms- how will the payments be made? • Payment Instruments:- Cash, Bank Transfers, Vouchers • Certification- on what basis will payment be made? • Communication of Time frame for payment- how soon? • How will disbursements be monitored? • Financial and Social Accountability Mechanisms:- financial audits, operational audits, local government reviews, social audits.

10. Insights from country cases • There is a negative correlation between HPAI risks and the capacity to respond • Satisfaction levels for farmers interviewed regarding central government compensation strategies are very low. In the case of Vietnam for example, percentages unsatisfied ranged from 75% to 100 • Farmer’s behavior (i.e incentives or disincentives for culling) strongly depends on the way the flow of funds is organized

11. Insights from country cases • It is difficult to estimate compensation requirements at the district level and to provide funds in advance • Districts are reluctant to pre-finance compensation, since they may experience problems being reimbursed • Fiduciary ex-ante controls cause delays and physical evidence suitable for ex-post audits is destroyed when the birds are disposed

12. Insights from country cases • In most cases there is no transition strategy to facilitate the integration of local disease control centers and emergency response team into the routine activities of the local/ provincial agricultural service • The “emergency” phase is therefore prolonged unnecessarily

13. Results • Compensate the appropriate beneficiaries ( and only them) and appropriate amount • With the shortest possible interval between reporting culling, culling and payment • Requires considerable advance preparation • Requires financial, institutional and human resources • Much harder to do AFTER disease outbreaks.

14. Good Practice Use of Existing Institutions • Minimize administrative costs to governments • Create synergies and opportunities for success transfer • Build sustainable capacity

15. Good Practice Multidisciplinary teams for culling • Fosters ownership and participation of ministries • Reduces risk of collusion and conspiracy • Efficiency

16. Good Practice • Use of local payment channels with reimbursement from central compensation funds, for Rapid cash disbursement • Complaints mechanisms including hotlines to handle complaints about misuse • Enhance government image • Build trust • Handle grievances • Promote fair treatment

17. Good Practice Use Community Based Organizations • Fair treatment especially when involved with culling procedures • Social accountability and transparency Publication of Program progress reports and financial statements • Enhanced disclosure • Monitoring and Evaluation of Results • Credibility • Transparency • Accountability • After culling a paying list of farmers per village, including the amounts to be compensated should be posted or announced in a public space.

18. Good Practice Operational and Financial Audits • Efficiency • Credibility • Fiduciary Assurance • The terms of reference for operational audits should focus on confirming the legitimacy of a compensation payments made from a randomly selected sample of villages

19. Main Conclusions and Recommendations • Instruments used to organize payments will vary dependent on the chronology of the disease i.e. disaster preparedness, crisis management, transition • Main challenge is to achieve balance between front loaded ex-ante controls, simplicity, especially under difficult field conditions and weak institutional capacity and governance.

20. Main Conclusions and Recommendations • Eligibility databases should be built as part of the emergency preparedness plans • In crisis situation however, building of eligibility databases and emergency payment procedures are likely to go on in parallel

21. Main Conclusions and Recommendations • Make greater use of local banking entities, producer’s organizations, veterinary services, non-governmental organizations and aid agencies ( e,g UN)

22. Trade Offs • Governance- the major concern of governments and donor partners- can delay the response • The problem is worst where preparation is least, since prior agreements and stake holder buy-in may be absent • Where outbreaks occur in an unprepared institutional environment, there must be a shift in approach from ex-ante institutions and procedures to ex-post assurance.

23. Indonesia -Compensation Funds Flow DG Livestock Production Support (DGLS) 3 5 Payment Request (SPP-LS) Endorsement to the district request 4 If necessary, administrative and field verification Cash Office (KPPN) Provincial-level Livestock Agency (Dinas) 2 Request for payment of the compensation to the Budget Holder (KPA), cc to Provincial Dinas Payment Order (SP2D-LS) 6 Local Bank (Head of Dinas account) District-level Livestock Agency (Dinas) 7 Reimbursement Local Government pre-finances compensation payment 1 Poultry Farmers