Aid Thoughts

Sidney J. Mussberger did not want to talk about the Audit.

We’ve said before that some of the most important issues in development are the least romantic and photogenic. One of the issues missing a glass slipper is audit. Let’s be frank for a moment: audits are boring. They are boring to do, boring to read about (except in the rare occasion that they bring to light spectacular mismanagement of funds) and they are boring to talk about, except in their most condensed forms. I have never been the most patient meeting attendee, but two things are guaranteed to have me pining for the release of defenestration: macroeconomic data reconciliation meetings and audit meetings.

Yet, I actively seek out both. Beneath the stolid veneer of number crunching, these are the areas where the Government’s intentions for economic management and the use of public funds are best revealed in their most unforgiving light. After the complaints, arguments and counterarguments that the Lancet article about resource management brought up, this is a timely point to make. The only really legitimate argument that can be made against Governments substituting aid money for their own spending in a sector is if the allocation of funds by Government is grossly inappropriate – otherwise the complaints make a mockery of good budget management and the concept of local ownership of development processes. Yet for all the cry and hue, it’s interesting that no-one has actually looked and examined how many of the countries ‘guilty’ of reallocation have been audited.

If a Government is audited, it should be relatively clear where money has gone. Once this is the case, the whole fungibility argument becomes obsolete: it doesn’t matter what money facilitates bad spending. Bad spending should be minimized regardless. If this is done and reveals no horrorshows, then fungibility of aid is not an issue: all spending is at least justifiable, with no money spent on a new Range Rover for the Minister of Finance’s nephew or a shopping expedition to Paris for the First Lady. The role of donors here is crucial, because it must be played very carefully. A donor that bullies the Government into submitting to an audit by auditors appointed by the donors will face a serious backlash: it is not their Government or money to audit (they can of course audit their own programmes) and they are infringing upon the sovereignty of the state in question. Any canny politician can easily spin this as a case of ‘modern imperialism’ and reject the audit findings, however well-intentioned they were.

Rather, a donor can only advocate for an audit to be initiated by a third party, following legal procedures put into law by the Government. The donor’s role here is to remove all excuses for not holding the audit: to train the supreme audit body, to make sure they have the equipment they need, to provide the legal experts to make sure that the laws governing audit are drafted adequately. This is all fairly obvious and very common. But this is of course only half the story. If the audit is released without any explicatory documents and very little press, its impact outside a small coterie of finance geeks and development agencies will be minimal. The power of audit is to stimulate accountability, and a Government should be accountable to its electorate, those who pay tax to fund it and expect services in return.

This is the insight that lies behind the recent increase in interest in demand-side accountability. Essentially, the idea here is to give civil society groups the ability to scrutinise the myriad information that a Government can produce and to articulate the demands of the electorate better. Again, this is a tricky role for donors to play, because it leaves them open to charges of political partiality. What they must do, therefore, is focus on providing skills to all parties that desire them – and not advice. In Tanzania and Malawi, I have noticed an upswing in this kind of work, and initial signs that NGOs and CSOs are engaging more with budget processes, audit and the like are encouraging. This is probably the one area where I think donors tend not to spend enough time working with non-Government actors.

Naturally, audit will not remove debates about how money should be spent: the question of whether an extra road should be built in the Northern region or money should be spent on the development of a trade marketing board, or on training new teachers remains. This is an argument about rates of return, political imperatives and more nebulous concepts like rights, entitlements and so on. The donors have a role to play here, too: advocating, arguing and so on. But once it’s been established that spending is legitimate (i.e. developmental in intention, as opposed to personal consumption using state funds) then the decisions should be out of donor hands. They advocate, but must be prepared that the final decision goes against their advice. This is meaning of Ownership, one of the central pillars of the Paris Declaration and Accra Agenda for Action. Ultimately, the final decisions should be taken between a Government and the civil society groups that advocate on behalf of the population. Donors should remain on the sidelines.

None of this actually works this way. Audits tend to be produced with a great delay – often one or two years after the financial year in question, and sometimes even after the Government audited has passed out of power. Donors frequently fail to strike the balance between empowering civil society and remaining impartial, either doing too little or too much. And once policy decisions on aid are made, even on legitimate expenditures, donors throw their weight around and use their money to undermine the Government’s own vision of how development should be pursued.

Yet these problems are simply an argument for a redoubling of efforts. If audits are late or non-existent, aid can legitimately be withheld. If donors are finding it difficult to engage directly with civil society, a new framework can be developed, in which CSO skills requirements are addressed through demand-driven interventions and donors fund external skills development processes without getting involved in their content or management. The hardest issue to address is when donors bully Governments into making choices. The Paris and Accra agreements have targets and resolutions that aim to limit these, but ultimately aid recipients have no power of sanction over donor agencies. Owen Barder suggests marketizing aid can resolve this, but I don’t know if this will stop donors from engaging in brinkmanship or carrot-and-stick inducement to distort Government spending plans. Some kind of Ombudsman for donors may be helpful, but this will be dismissed as more bureaucracy in the aid community. The answer isn’t obvious, but we need to keep looking.