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 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

7. 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

8. Planned disbursements Actual disbursements All disbursements, by donor, by project, by implementing institutions All, disaggregated by intended purpose (functional) DISBURSEMENT INFORMATION REQUIRED +Critical- CriticalCovered 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)

9. +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

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 codingCommon Coding Degree of AlignmentComplete or near complete Imperfect alignment – further work to align Level of detailCountry 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)

15. Analysis of Options: RISK Country-specific codingCommon 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

16. 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 PARTNERSAgree 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

17. Country-specific codingCommon Coding DonorsCode 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 CountriesChase 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

18. Analysis of options: Other Country-specific codingCommon 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 Funds80% 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

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?