Date: 2024-04-28 Page is: DBtxt003.php L0913-TVM-MMW-000036
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TrueValueMetrics ... Peter Burgess Manuscript
Making Management Work for Relief and Development |
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Chapter 36
Organizational View, Part 2 |
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Official Organizations
Introduction – Official Organizations What are the official organizations? The official organizations are the various multilateral organizations established by international treaties to provide some modest level of global governance and international relief and development assistance. The public probably thinks of the official organizations as being the single biggest factor in international relief and development, mainly because of media attention that the official organizations command and their public relations activities. The official organizations include: (1) the multilateral organizations; (2) the “south” government entities; and (3) the “north” government entities. Multilateral organizations include the entities of the United Nations system, the Breton Woods Institutions, and a number of other intergovernmental organizations. The Inter-Governmental Agency for Development (IGAD) is an example of an intergovernmental organization. Government entities include the ministries of government, government agencies and parastatal organizations . For example, the Ministry of Health, Ministry of Education, US Agency for International Development (USAID), Liberia Produce Marketing Corporation (LPMC). Multilateral Organizations Need for reform There has been a groundswell of criticism about the performance of the multilateral institutions for many years ... it started with a vengeance in the early 1980s. But even though multilateral organizations like the United Nations, the Breton Woods Institutions and others have been in need of reform for a very long time, very little has been accomplished. In fact it is worse ... because the management dimension of the official relief and development sector is so weak, reform initiatives usually end up adding costs and deteriorating performance. Power of PR These organizations will get the message when the public sees more and more how ineffective their work is, and starts to demand performance in exchange for ongoing funding. It is only when the organizations are forced to have substantive performance to feed into their public relations because the public is calling for performance information that there will be reform to improve performance. Until there is a way to “see” performance, nothing is going to happen. The organizations will be able to say what they want through their public relations spokespeople and press releases and go on their merry way for ever. But if the public is totally outraged ... and the money gets stopped, then there will be performance reform. The way to accelerate performance reform in these organizations is to accelerate the deployment of a management information framework and public accounting for the relief and development sector. The United Nations System The United Nations System is made up of literally hundreds of organizations, each with some special mandate. The core of the system is the UN Secretariat located in New York. The General Assembly of the UN is also in New York as well as the Security Council. The United Nations Development Programme (UNDP) has its headquarters in New York, as does the UN Children's Fund (UNICEF). Many of the UN systems specialized agencies are based in Geneva, Switzerland. Among them are the High Commission for Refugees (UNHCR) and the World Health Organization (WHO). The UN Industrial Development Organization (UNIDO) is based in Vienna, the UN Food and Agriculture Organization (FAO) and the World Food Programme (WFP) are based in Rome. The UN Education, Science and Culture Organization (UNESCO) is based in Paris. The UN Economic Commission for Africa (ECA) is based in Addis Ababa. These organizations all have big headquarters staff ... and create huge paper and information flows. In terms of value adding, the work needs evaluation. United Nations Development Programme (UNDP) Over the years I have done a considerable amount of work with UNDP. Impressions of UNDP I have tried on several occasions to get historical information about project performance within UNDP ... and was struck by the almost total absence of institutional memory. The system did not facilitate feedback about lessons learned, and in the end, failure was repeated over and over again. The biggest strength of UNDP is its network of offices around the world. The UNDP Resident Representative (RR) in each country is the coordinator of UN activities in the country, but the systems to do this effectively have been unusually weak. Some of the RRs have been people of great courage and capability, but by no means all. The role of procedure in the UNDP (and the UN) is distressing. I was in Juba, South Sudan when the UN mandated a security evacuation for its staff. Several UNV's (United Nation's Volunteers) had their wives with them at the UNV's expense. The UN required the UNVs to leave and put up at an hotel in Nairobi, but had no provision for the wives to leave as well. Not surprisingly the UNVs were unhappy ... and they refused to leave. A senior human resources office traveled from New York to Juba to intervene, but offered nothing but a detailed knowledge of every HR rule in the UN manuals. The UNVs did not evacuate ... fortunately the security crisis resolved. I was disgusted by the whole performance. Nor is the UN very culturally sensitive. The UN Resident Representative of Namibia died during his tenure in the position. He was of Nigerian nationality, and a number of the UNDP staff in Namibia were also African. Death is an important event in most cultures, but especially in African cultures. The UN system seemed to have no protocol to handle this persons situation. One of the African staff took it upon himself to handle the repatriation and funeral arrangements in an appropriate way with the reasonable expectation that the expenses would be covered by the UN ... sorry ... mistake. While the UN failed this culture test ... Namibia did the right thing without a second thought. I have always hoped that UNDP could really become a driver of a value adding relief and development agenda ... it has much of the structure that would make it a formidable force for good, but this has never happened. Specifically, UNDP has offices in almost every country in the “south” and could be a valuable link between the “north” and the “south”. For some reason, this has never happened ... probably because the information links have been dysfunctional. My hopes for performance improvement driven by the work if UNDP were diminished when they discontinued the Development Cooperation Reports (DCRs) and the Development Cooperation Analysis System (DCAS). The DCR and the DCAS information was detailed enough to be of tremendous analytical value ... but it also drew attention to the irrelevance of official development assistance in truly helping the “south” to become successful. Instead, UNDP supported the development of the Human Development Report, another collection of economic statistics about the failure of relief and development, without enough information to be the basis for solution oriented interventions. The Breton Woods Institutions The World Bank, that is the International Bank for Reconstruction and Development (IBRD) is the central organization of the Breton Woods Group. Created originally to help with European reconstruction after the Second World War, it has evolved into the main funding agency for “south” development. The International Monetary Fund (IMF) is another organization in the Breton Woods Group with a mandate to help countries through periodic financial hard times. The World Bank Group The World Bank Group has been responsible for major fund flows into relief and development. They have also been responsible for projects that have added to debt without adding much to socio-economic progress. The World Bank Group includes the World Bank (also known as the International Bank for Reconstruction and Development), the International Development Agency (IDA), the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Association (MIGA) These organizations ought to be a power for progress, but they are unlikely to achieve much progress until they put a lot more emphasis on project performance and especially the control of financial resources. Once upon a time, a long time ago, I thought that the World Bank was a high performance organization able to drive development forward and solve the problems of the post-colonial world's underdevelopment. Later, rather than sooner, I learned better. World Bank Cannot Change I have tried to be pro-active in the World Bank context about project performance and how it could be improved. I did not make much of an impression. Way back I worked on checking a costing for a World Bank hydro-electric project. My conclusion was that the cost estimate was understated by some 50% ... a pretty serious problem. I did not think about this experience until almost 20 years later when I was more closely involved with the World Bank, and realized that the World Bank is dominated by economists, and very few accountants are engaged in the management process. I later developed the impression that there were some 10,000 well educated staff striving mightily to give the impression that the World Bank's one idea was right. If the facts do not support this ... then we need to get facts changed. Of course, this is easier to do in economics than in accounting, which perhaps explains why accountants are not particularly welcome. The preoccupation with simplistic measures of World Bank performance, like value of loans approved, or amount of funds disbursed, is a formula for disaster ... subsequently realized on a grand scale. The World Bank cannot change ... it has several different sets of stakeholders that ensure that nothing of substance changes very much. These are (1) the staff; (2) the Executive Directors; and, (3) the biggest funder ... the US Congress. Only when these three groups are in agreement can there be significant change, and that is not going to happen any time soon. The World Bank should be one of the key relief and development intermediaries. The World Bank has huge potential as a builder of financial stability for the “south” rather than being a huge and amorphous programming monster that does thousands of things in every single sector, and hardly any of them well. World Bank for Public Finance The World Bank was meant to be a relief and development sector financial intermediary. Over the years it has become the dominant supplier of funds to the poor “south”, as well as being the controller of the financing agenda for each of its client countries and a determinant of the policy options. The World Bank can be, once again, an important and effective part of a high performance relief and development sector, if it takes a bigger role in financing and a reduced role in policy determination. Wall Street is already comfortable financing the World Bank, but the World Bank has disbursed the monies raised in ways that have resulted in value destruction in the beneficiary countries, and too much debt that is highly onerous for the beneficiary societies. The reasons for this have been already discussed at some length in earlier chapters. But the World Bank is an ideal intermediary for the rebuilding of the “Public Finance” sector of the “south”. This is one of the areas where World Bank scale is appropriate. In some ways this is what Structural Adjustment should have been able to do, but never did. But a World Bank program that funds the “Public Finance” sector and insists on just three basic things: (1) excellence in accounting and financial reporting; (2) management information about socio-economic progress; and, (3) a high standard of fiscal responsibility. International Monetary Fund (IMF) The International Monetary Fund (IMF) has a lot of power and influence. But its role in support of success in relief and development is not at all clear. I have participated a number of times in work being done by IMF teams in various places including Kazakhstan, Afghanistan, Liberia and Burundi ... and in all these cases I was totally in disagreement with the conclusions reached by the IMF experts. I can understand to some extent why the IMF gets things wrong ... they seem to be ignoring the level of development of the economy in the “south” and using thinking that has been developed assuming economic models and the productivity of the “north”. Like almost everything done by experts in the relief and development sector, the thinking is “economics” rather than the more basic fundamentals of accounting and production ... or costs, revenues and value. Governments in the “South” Difficult, if not impossible, goals Governments in the poor “south” have a very difficult job. In combination with political leadership, the job becomes almost impossible. Adding in the influence of guidance and conditionality from the international donors and funding agencies and the job becomes absolutely impossible. Some of the things that government does in the “south” with almost no money are quite amazing. Some of the people on the government payroll do an enormous amount of good work with little pay, and little recognition. In the course of my work, the efforts of nurses in hospitals and clinics to be helpful has earned my admiration ... especially when their pay would be delayed for many, many months. Nurses, Teachers ... Soldiers I have worked on various aspects of government finance over the years, and seen a lot of government operations on the ground. The situation with nurses and teachers is really sad ... they do very valuable work as the foundation for socio-economic progress, but their pay is small, and very often comes late ... not by an hour or two, nor a day or two ... but sometimes months late. But it really doesn't matter to the top leadership of government ... after all, what are nurses and teachers going to do about it. I had an audience with a Head of State in Africa some years back to discuss the catastrophic state of his country's economy. After the meeting I summed up the crisis with the phrase “When the nurses and teachers are not being paid, there is an economic problem ... but when the soldiers are not being paid, it is over.” Within three months there was a coup and the President was assassinated. The catastrophic state of public finance in the poor “south” has created a terrible instability, that will only get worse over time unless there is a public finance strategy that makes sense. The governments in the “south” need a lot of help. Some of the political leadership has attempted to change the direction of development and move to more sustainable practices, but it is difficult, and essentially impossible without meaningful help. Some things in government work ... but are merely constrained with limited money. Other things do not work for a variety of reasons, and no amount of incremental money will make a difference. There needs to be careful distinguishing between the two. Where there is corruption and money is being stolen from the system, more money does not help at all. Where the money is simply too little to do the work needed, more money will help. This ought to be easy to find out from a working government accounting system and active management information system. Every country should have these ... in most cases the foundation is in place, but it does not work because there is little professional supervision and oversight. Central Banks Central banks have a significant role in the success of an economy, but in most countries in the “south” the central bank has become very weak, and has little role in anything. This has to change, and central banks have to be assisted in taking on the role of facilitator of the monetization of the economy. In much of the “south” the exchange rate for the local currency against the “hard” currencies has been a disaster, with the central banks unable or unwilling to take control, and the international banking sector not much involved. Ministry of Finance / Treasury Department The Ministry of Finance and the Treasury Department (under whatever exact name they operate) have a key role to play in the improved management of government resources, and especially those associated with international funding and relief and development funding. I did some work in the Treasury Department of the Government of Barbados some years ago. Almost the first thing I learned is that the Treasury Department balanced the accounting books of the government every day, and they produced reports to Parliament of month and year to date revenues and expenditures compared to budget every month. I was not expecting this level of rigor in the accounting system, and did a little test of the system to prove to myself that it was as good as it seemed to be. I was able to track my own $10 license fee paid into a remote police station all the way through the system until it got into the treasury bank account. There is some excellent accounting going on in government in the “south” but it has not been the subject of ongoing international attention, even though it is a critical area of concern. While some excellent accounting is going on, this excellence does not translate into excellence in the area of budget allocation and the use of funds. Though there is some good accounting, the government reporting of fund use and the control of fund use is generally poor. One of the most powerful areas of assistance for “south” government would be for the government accounting to be absolutely 100% reliable. As we see in Barbados, it can be done ... and as I know from working with clerical staff in dozens of places around the world, it can be done. The only problem is that the leadership in the relief and development sector ... “north” and “south” does not have it as a priority, and without that it will not get done. Government accounting and budget control Government accounting ought to be a very important component of relief and development sector information. Serious mistakes have been made in setting up accounting and accountability in the relief and development sector, with government accounting relegated to a very inferior position. As a result, far too often, the accounting and accountability for fund flow control in government is compromised ... much to the benefit of the corrupt. Government accounting can be very well done. Accounting is not difficult and many people in the “south” have been trained to do accounting. Numbers that are used in budgets are not accounting, but are plans or projections, sometimes based on prior year actual accounting results, or based on a combination of actual and estimate for prior period. Budget control where expenditures are required to be less than the budget amount are common in government. In the corporate world the budget for expenditures may be more flexible, with the budget for profit performance being much more important. Spending to increase profit performance is normal in the corporate world, but rare in the relief and development sector. The government budget would be a more meaningful document if it got more public and professional exposure, both in the planning phases and in the execution phase. It would be very powerful to be able for donors to fund modest parts of the budget, rather than trying to come up with projects that are not included in the budget. Some donors seem to have the misconception that items in the budget are already funded, when in fact, in the “south”, the revenue side of the budget often cannot support even the most critical of the budgeted expenditures. Accordingly, a line item ability to get donor funding would be very advantageous. Planning development at the national level The planning of development at the national level is a balancing act between a variety of pressures including: political priorities, economic and social priorities, available resources and donor priorities. Priorities at one level of funding are different from those that apply at another level of funding. The quality of projects determines a lot what results are achieved. Project quality can be improved a lot when needs of the beneficiaries are truly taken into account rather than merely the desires of the donors, which may or may not be relevant to the situation in the host area (See Box). Aid Coordination ... The Quality of Projects I helped to prepare the first development plan after Namibia's independence. Based on this, some $700 million was pledged at the UN Secretary General's donor conference for Namibia in New York. Donors were very slow in honoring their pledges and I was asked to help with aid coordination and the mobilization of the pledges. As I helped develop an aid coordination process it became very clear that the donors were honoring their commitment by sector, but were not doing so in a way that reflected the country's plan, but in ways that only suited the donors. For example, even though three very comprehensive and expensive (and good) plans for the health sector had been prepared 16 donors made proposals that included doing health sector studies. The sector needed funding or gifts in kind of medicine and medical supplies, of transport equipment (ambulances), of X-Ray equipment and money that could be used to recruit and pay for more nurses, doctors and other staff. The last thing needed was more studies. Another priority sector was agriculture and fisheries. The big challenge was to modernize these sectors and in the case of fisheries to improve the income from the fishery. The UK's Overseas Development Agency proposed a project to study the fishery that had 3 expatriate man-months of time being spent in Namibia to collect data and 24 man-months of time in the UK's fisheries lab at Lowestoft in the UK. Almost all the proposals were donor driven designs not at all responsive to the needs of the country, and not very much in conformity with the plans presented at the donor conference. I wrote many “memo to file” documents describing the inappropriateness of the proposals, and, to their credit, a good number of donors responded favorable to the critiques ... but I don't think many people in my position would have been as outspoken as I chose to be. Projections Projections are only as good as the people making them. Since most people are not very good at “numbers”, it is unreasonable to expect that projections are going to be very good. Too many projections are purely arithmetic with little basis in reality. Using a spreadsheet it is easy to calculate the results of exponential growth, and results can look phenomenal. But if an organization has never done exponential growth in the past, why would they be able to do it in the future? Budget execution and control There are many different names associated with the processes used to control expenditure, but the results are similar. The goal is for the elected government to control the government's money, and to do this nothing can be disbursed without the approval of the legislature. This is usually the budget and appropriations legislation. Expenditures can be incurred within the budget limits sets by the law. Many ways of controlling this exist, some giving very detailed control, and some almost no control at all. In government, budget control can be very effective. The systems have evolved over a very long time, and work very well when they are respected by political leadership. Project accounting One of the problems with budget control in the “south” has been the practice of donors and financing organizations, including the World Bank, of insisting on a separate accounting procedure for their “projects”. This has had the effect of weakening the basic controls of the Ministry of Finance over all the public sector fund flows. There are many examples of donors doing “accounting” that makes it appear that their contribution to development is much bigger than it is in fact. One example of this is the valuation of gifts of grain using pricing that was more than three times the world market prices. Another example is the pricing of “used” equipment at highly inflated prices ... and the valuing of “north” nationals at their “north” salary scales when they are doing work that locals could do for one hundredths the cost ... there are lots of others. Project Accounting Outside the Government System I have discussed the financial control of donor funded projects many times around the world, and in every case the local Treasury Ministry officials have always brought up the problem of doing project accounting outside the central government control system. For many years the World Bank staff ... usually with limited financial accounting expertise ... have seen independent as better. An absolute mistake that has enabled corrupt project staff to operate with almost no local oversight and get away with millions. There has been widespread adoption of a system referred to as the single treasury account. The idea of a single treasury account goes back hundreds of years. The aim is for the representatives of the people to decide on how the money is spent, that is the elected legislative body, and not the Monarch or Head of State. It is a standard control practice in almost all governments around the world ... though not now applied very well in a large number of countries in the “south” where a dominant political executive controls everything. Single Treasury Account The structure of government, and the management and control of government's resources has evolved over many centuries. One of the key control concepts that has been used for a very long time is the idea that the spending of government should be authorized by an elected body, and not be simply in the hands of an absolute monarch. To this end all the financing of government flows into a “Single Treasury Account” and all disbursements are made from this account under the authority of legislature, primarily through the budget. This has been an evolving control mechanism that has worked relatively well in both the “north” and the “south”, except that most relief and development sector funding flows outside this control framework through a variety of ad-hoc project financing mechanisms almost totally lacking in any sort of formal internal control. Audit Audit in the government context can be useful, but it is normally too little and too late. It seems that people in senior positions often think that audit is going to solve problems of accounting, and provide cover for administrative and control failure. In fact, audit only confirms that an accounting system is working, or is not, and whether reports being prepared are in conformity with the underlying records. Audit is an important tool to confirm that the accounting system is working, but only that. Of course, accountants can do more work, and investigate problems. This is not standard audit work, but much more, and the work depends on the mandate given in the terms of reference. Governments in the “North” What does the public know? In most countries in the “north” the public thinks that the government budget provides a lot of funding for relief and development sector support. Surveys suggest that people often think that in the US the relief and development budget is about the same as the military budget, or the agriculture budget. It is not. Relief and development support from the budget is small, and in relation to the size of the economy almost infinitesimal ... less than one half of 1%. The size relative to the economy as a whole tends to be a little bigger in Europe, but in most countries is still less than 1%. The public does not know much about international trade in military equipment and supplies. This trade has a big impact on the “south” and on the balance of power in different parts of the world. Worse, the reasons for doing it are often not clear, and the idea that it is “good” when “we” do it and “bad” when “they” do it is a formula for continuing global instability and a catalyst for the ongoing growth of terrorism. Meanwhile, not very much is known about the impact of “north” government support for relief and development in the beneficiary communities round the world. How much is disbursed in known. What incremental value is created by these resources is almost always not known. Government organizations comprising bilateral aid agencies and embassies are widely distributed all over the world. They know a lot, but not much of this knowledge is designed for public use, and rather little of it has benefit for the “south”. The work of bilateral aid agencies ought to be of significant benefit for the “south” but it easily is diverted to geopolitical ends that are counterproductive for “south” progress. What the public deserves to know The public deserves an accounting of the fund flows that originate with the government and what these fund flows accomplish. The accounting has to go a lot further than a description of the contracting process, or the relationship between money that is going to be disbursed and the benefits that are going to be realized ... but needs to get down to what actually happens with money disbursed. What is needed is information about: (1) How much money and when; (2) Who got the money, and what they did with the money; (3) Who got some benefits and what value can be ascribed to these benefits. None of this is rocket science, but the power of this information is considerable. Government does too much of “management by procedure” which does not work very well and instead there needs to be more accountability that is determined by the relationship between money used and benefits realized. While this is sometimes complicated ... most of the time it is not. If an individual buys something and does not get value for the money, there is an immediate complaint. What makes it so different when the government buys something? Bilateral aid agencies Bilateral aid agencies are a major source of funding for countries in the “south”. The most important stakeholder for these agencies is, however, the funding source, rather than any of the beneficiaries. These agencies do what the political leadership wants them to do, rather than what would be best for needy beneficiaries ... the bilateral aid agencies are driven by a domestic political agenda more than they are by development optimization. This can change to some degree if there were to be publicly available management information about the relief and development sector. Trade issues Most “north” countries have a dependency on trade, and all do everything that they can to ensure that the terms of trade are favorable. Between “north” and “north” the negotiations are more or less among equals in terms of economic power and the outcomes are reasonably fair. But in the case of trade between “north” to “south”, the negotiations are anything but between equals and the end result is usually something that has benefit to the most powerful. Subsidies Subsidies are a big source of economic distortion. There are big agricultural subsidies in many “north” countries because of the powerful agriculture lobby which has profited enormously without alienating customers with high prices. North America has big subsidies and so do many of the European countries. Policies and relief and development Government in the “north” defines what it is going to do in support of relief and development. A lot of the allocation of resources results from aggressive lobbying efforts and international political priorities ... with the result that a very large proportion of the USAID funding has been allocated to Israel and Egypt for almost 30 years. Government in the “north” define the programs they want to support. To a considerable extent projects are planned around capabilities that are friendly to government with rather little regard to the effectiveness in delivery to beneficiaries. International treaties International treaties have an important role in defining the way the global economy works, the responsibilities of countries with respect to international issues and the relationship between countries. But most treaties give benefit to countries in the “north” without giving a lot of thought to the impact of the agreements to people in the “south”. It would be interesting to evaluate all treaties to understand the impact on the “south” ... rather than assuming that what happens in the “south” does not matter. |
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