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Options for Sector Wide Approaches (SWAps)

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  1. Options for Sector Wide Approaches (SWAps) 2nd Africa Region Education Capacity Development Workshop“Country Leadership and Implementation for Results in the EFA FTI Partnership” Tunis, Tunisia December 4, 2007 DANIEL TOMMASI

  2. Objective of this session • FTI can mobilize additional funds for education plans • What will be the mechanisms for procurement, payment, and reporting? • A broad direction: The Paris declaration principles. • But, their implementation must take into account the strengths and weaknesses of the country’s public financial management (PFM) systems • This session will review the different aid modalities, with the view of giving elements to make the more appropriate choice taking into account both the Paris declaration principles and the country context

  3. Paris Declaration (March 2005) • Set international guidelines and targets for raising the quality of aid. • Ownership. 75% of countries should have developed operational development strategies by 2010 • Alignment. Partner countries commit to strengthen public financial management systems and donors commit to use increasingly partner countries system. • Harmonisation. Donors commit to strengthen their coordination. 66% of aid flows should be provided in the context of program based approaches (PBA). • Managing for results. Develop results-oriented reporting and assessment frameworks. • Mutual Accountability. Mutual assessment of progress in implementing agreed commitments will be carried out.

  4. "Traditional" project aid • Weaknesses • Does not address local capacity, may lead to fragmentation: • In most cases, managed through parallel or partly parallel systems public financial management (PFM) systems. • Parallel administration for recurrent expenditures in the social sectors. • Lack of coherent policy and prioritization. • narrow focus on projects; • short-term focus on disbursement and success of projects. • Donor-driven agenda and resource allocation. • Aid transaction costs (supervision, PIU, etc.).

  5. "Traditional" project aidcontinued • Advantages • To limit fiduciary risks, according to the donors. • To bypass inefficient PFM systems. • To give support to local government. • To be the only possible form of aid delivery in post-conflict countries. • To engage a donor-government dialogue, even without an agreement on the sector policy

  6. Direct budget support • General or sector budget support • Not earmarked to specific projects/activities • With policy conditionalities • Advantages • Avoid parallel PFM systems. • Encourage strengthening existing PFM systems • Focus on policy issues. • Lower administrative costs than projects. • Inconveniences • Fiduciary risks (for the donors). • The policies are not implemented, in countries where there is a significant budget deviance. • Risks of slower program implementation. • Focus on macro-fiscal issues, sector policies. insufficiently taken into account.

  7. SWAps • SWAps and PBAs are ways of engaging in development co-operation based on the principle of co-ordinated support for a locally owned sector policy/programme • PBAs and SWAps share the following features: • Leadership by the host country or organisation. • A single comprehensive programme and budget framework. • A formalised process for donor co-ordination and harmonisation of donor procedures for reporting, budgeting, financial management and procurement. • Efforts to increase the use of local systems for programme design and implementation, financial management, monitoring and evaluation. DAC guidelines. Harmonizing donor practices for effective aid delivery. Volume 2. OECD, 2006.

  8. Gradual and phased process To varying degree as a SWAp evolves & matures in each case Key Elements of SWAps:Intent and Directions, not “Pre-requisites”www1.worldbank.org/harmonization/paris/AfricaWorkshop/SWApsAfrNov2004Final-Tony%20Hl.ppt Harmonized Implementation Mechanisms & Increased Use of Country Systems Coordination/alignment of (all) resources Common Sector Program/Expenditure Framework with Pooling of Funds Agreed Sector Policy Framework/Strategies based on Shared Vision & Priorities Partnership with Development Partners Government Ownership & Leadership

  9. SWAp: Financing modalities • The SWAp is not a financing arrangement, several financing modalities may be considered: • Sector budget support • Pooled or basket funding. • Pooled with earmarking. • Parallel but coordinated funding for activities or projects in the SWAp program: • Mixed, some donors doing different form of financing

  10. SWAp: Advantages • Advantages • Government as sector leader. • Strengthening the country PFM systems encouraged. • United financing from all sources. • Resource allocation based on policy priorities. • Increased transparency and accountability • A uniform “code of conduct” for all donors • Reduced duplicative reporting • Performance monitoring with a common framework

  11. SWAp: concerns • Concerns • Intensive upfront work to assess and agree on implementation mechanism • Then, managing a SWAp, coordinating the donors may be demanding. • E.g. risk of micro-management • Parallel financing may be badly coordinated with the other programs included in the SWAp.

  12. Budget support as more effective aid? Recent experiences and emerging lessons. World Bank. 2006

  13. SWAp: some design issues • A sector strategy and a sector budget/ expenditure program are required. • See session on strategy, budget and MTEF. • Other design issues: • Choice between financing modalities • Organizational arrangements • Reporting requirement • Procurement • Disbursement • Memorandum of Understanding

  14. SWAp: Comparison of financing modalities

  15. Managing a SWAP • Organizational arrangements. No blue-print), but often: • High level steering group • Task force/Secretariat • Working groups: by subsector and/or policy issues • Reporting requirements • Financial reports, at least quarterly to transfer the pooled funds. • Performance monitoring reports • Independent audit

  16. Managing a SWAP continued • Procurement • Assess the national system • If needed set up interim special procedures • E.g. World Bank procedures above a certain amount; agreed procedure manual for other procurement • Implement required improvements to use the national systems increasingly • Prepare an annual procurement plan • Train procurement units

  17. Managing a SWAP continued • Disbursements • Some principles: • The budget must be comprehensive • All expenditures must be classified, reported, and accounted for under an unified system • All government bank accounts should be Treasury's accounts • Pooled funds should be preferably channeled through the consolidated fund (and treasury single account, if any) • This does not impede using imprest, when needed (e.g. for remote regions). • Key requirement: reporting.

  18. Managing a SWAp: disbursements continued

  19. Memorandum of Understanding • A Memorandum of Understanding will specify: • Institutional arrangements. • Procurement arrangements, and post review of procurement actions plus technical and procurement audit. • Financial Management • Interim and annual reporting arrangements. • Annual audit, joint evaluation reviews. • Manuals on financial management and procurement procedures should be annexed to the Memorandum of Understanding.

  20. SWAp transaction costs • In principle, high at the beginning of the process, then lower than for stand alone projects. • In practice, • Difficult to measure. • Risk to absorb scarce human resources in SWAp management activities. • Their level will depend on several factors: quality of the coordination between government and donors, possibility of using the government reporting system, etc.

  21. SWAPs: Conclusion and conditions of success • The SWAp is an approach not a rigidly defined model –there is no blueprint. • Conditions of success • Government has a sector policy in place. • Donors support that policy. Government is open to discuss with them the strategy and resource allocation for the sector. • There is political commitment by government to the SWAp. • The sector falls mainly under the remit of one line ministry. • There is a sound overall macro-economic and budget management environment. • Government is open to independent scrutiny. • Donors are prepared to make a medium/long term financial commitment to the program. • The arrangements for managing the SWAp are carefully designed with the view to diminishing transaction costs.