Development assistance and transparency

6.3.3 SWAps and Budget Support

In countries where donors have agreed to pool their resources for a specific sector this process is often guided by a so-called Sector-Wide Approach (SWAp). SWAps are expected to address problems of

“project” modality, increase aid effectiveness, and establish greater coherence between policies, programs and budgets. SWAp is first and foremost a policy co-ordinating mechanism and not a financial mechanism. SWAp thus, in principle, applies to budget as well as project funding arrangements even if they many times are seen as primarily a management tool for disbursement and accounting of funds. SWAp covers public funding for the sector including project type aid, technical assistance, earmarked funds and pooled funds.

According to studies by WHO, SWAPs provide an improved diagnosis of barriers to service utilisation and improvement, including better understanding of corruption and incentives problems. SWAPs also help to create common procedures for planning, disbursement, accounting, audit, and review, all of which can help reduce the costs of dealing with donors, and increase coherence of programmes.

Also studies by UNFPA indicate that SWAps place government squarely in charge, increase predictability of funding, increase transparency of resource use, improve accountability, and achieve more value for money.

See also “Experience of Sector Wide Approaches in Health - A Simple Guide for the Confused”, European Community Paper No 25, 2000.

Corruption and The Global Fund

The Global Fund to Fight AIDS, Tuberculosis, and Malaria (known as GFATM or The Global Fund) temporarily suspended five grants to Uganda due to concerns about corruption. The suspension was imposed in August 2005 because of “serious mismanagement of the grants” that was first reported by a Ugandan whistleblower. The suspension was a dominant story in the Ugandan media when it first happened, pushing the government to set up a formal commission of inquiry led by the country’s chief judge. The Ugandan government said that if necessary it would recover lost money by selling the property of those found guilty of misappropriating it.

Uganda has already received $USD 79 million of the $USD 213.6 million in grant funds approved by the Global Fund since June 2003 for scaling up national response to HIV/AIDS, tuberculosis, and malaria; expanding access to treatment; and for care and support of orphans and other vulnerable children.

The Global Fund lifted the suspension in December 2005 after it reached agreement with the Principal Recipient (PR) of the grant (the Ministry of Finance, Planning, and Economic Development), and the Country Coordinating Mechanism (CCM) on new oversight structures, steps towards CCM restructuring, and measures to evaluate the quality and efficacy of all sub-recipients of grant funds. The Global Fund Country Coordinating Mechanism is a key governance structure whose role is to facilitate public-private collaboration in the development of grant proposals and monitoring of implementation.

Source: Global Fund Observer, Issue 53, 11 December 2005, and Issue 50, 7 September 2005 (A newsletter produced by Aidspan, an independent watchdog of the Global Fund), and the Global Fund’s website, accessed 30 Dec. 2005

LINKS:

http://www.aidspan.org/

http://www.theglobalfund.org/

The usual concern with SWAps is that they increase the chance of corruption. When donor funds go through a SWAp, the idea is that government assume responsibility for resource allocation decisions in pursuit of agreed objectives. This reduces the scope for donor external control and audit of government’s use of funds. If it leads to improved control by the public sector of its own spending, then it is all the good. But if it allows public officials to divert donor funds the same way they may be diverting taxpayer money, then it is not much of an advance at all. Great care thus must be placed on arrangements for financial management, external and independent audits, and other checks and balances such as Basket funding committees, etc.

6.3.4 Tied aid

Some bilateral aid is tied. It must be used for procurement of goods and /or services from the donor country. Studies used by the World Bank show that tied aid reduces the value of that assistance by about 25%. It is not clear whether tied aid is more or less prone to corruption; however, there is evidence that tied aid projects may pay higher prices for supplies due to price discrimination. For example, Mozambique is reported to have been charged up to 50% more for drugs procured from multinational companies using tied aid, compared to a state purchaser using public budget financing who purchased drugs from the same multinationals.

6.3.5 Funding through NGOs

A substantial share of external funding today is channelled through international and/or local non-governmental organisations. In these cases donors need to apply accountability and transparency rules similar to those that have been recommended for countering corruption in the budget process.

Health Sector Support to Zambia/Risk Analysis and Alternative Strategy

“Corruption could be regarded from both a technical and political perspective. From a technical perspective, corruption is adequately dealt with within the health sector.

Working within the framework of a SWAp, means that Sweden and other collaborating partners (CP´s) have an overview of all resources, including Government of the Republic of Zambia (GRZ), to the health sector. This implies that Sweden may be more aware of mismanagement of funds and corruption than would otherwise have been the case. Within a SWAp environment corruption can be better dealt than in a traditional project/project environment and it is getting increasingly difficult for politicians or public servants to misuse funds, regardless of whether it is GRZ funds or CP funds. The political perspective, meaning the willingness from the political elite to seriously deal with corruption, is much more complicated. This perspective is closely interlinked with democracy, human rights and good governance. As outlined above, the good governance situation is far from satisfactory.”

Assessment memorandum, Sector Programme Support to the Zambian Health Sector 2002 - 2005, Sida 2001-05-28

- Administrative systems and routines (transparency, fairness, and documentation) - Personnel administration (transparency, fairness, and documentation)

- Financial control (promotion of good administration, transparency in the financing picture and handling of means, and anti-corruption measures).