How to build budget transparency, accountability and participation in fragile states?

Aug 06, 2012

According to recent research by the Overseas Development Institute (ODI) most of the world’s poor will be living in fragile and conflict-affected states (FRACAS, pinching Duncan Green’s acronym) by 2015. It is, therefore, becoming even more urgent to figure out the puzzle of how to build budget transparency, accountability and participation in such states.

Another study by the World Bank (WB) and ODI (don’t they ever sleep?)  presents lessons from public finance management (PFM) reforms in eight such FRACAS. The good news is that they find that some reform is indeed possible. Anecdotal evidence from International Budget Partnership’s own work in places like Cambodia, Mali and Chad, support this finding. The bad news of  the WB and ODI research is that most of the successful reforms were technical in nature (such as the introduction of treasury single accounts or an improved chart of accounts). Further bad news is that these reforms did not improve government service delivery. Even worse news is that PFM reforms designed to support budget planning and budget accountability were generally not successful.

Where do we go from here?

To find out, I did a quick tour of recent research on government accountability in FRACAS (mostly accessed through the Governance and Social Development Resource Centre’s excellent document library). This post summarizes what I found, tries to figure out what it means for budget transparency, accountability and participation and then outlines how the IBP is testing these ideas in Tunis and Egypt.

What do we know about building accountability in FRACAS?

I was relieved that the research shows that it is possible to build accountability in FRACAS. Unsurprisingly, this is done through social and political, rather than through purely technical, measures. In summary, here is what the research says:

  • An accountability relationship between government and citizens requires a minimum of social capital that doesn’t exist in most FRACAS. The first steps, therefore, should be to rebuild trust between government and the people.
  • Such trust is best built through constructing inclusive pacts between governments and civil society institutions to identify shared priorities and oversee key programs.
  • Even these initial steps require entry points where some basic trust still exists. A few authors suggest that such entry points are more often found at local rather than national level.
  • Faith in these transitional arrangements is itself fragile and needs to be supported by early results in the form of government service delivery – something like the famous ‘democratic dividend’.

Can one build budget transparency, participation, and accountability in FRACAS?

Translating this general accountability research into the public finance sphere suggest  the following:

  • Right from the start, top-down PFM reforms should be supported by bottom-up, citizen-inclusive efforts to build transparency and accountability. Some of these processes may need to be exploratory and done in preparation for tougher accountability work, but without it, PFM reforms may fail.
  • Top-down technical reforms may be essential to basic state building in FRACAS, but the accountability processes that are needed to support them, are best be built from the bottom up.
  • In many FRACAS resource allocation lies at the root of the conflict. Until questions of who gets what are addressed in an acceptable way, trust may remain an illusive prize. In order to  build trust and move ahead, these questions should be addressed early in the reform process.
  • Without some service delivery benefit, stakeholders are likely to lose faith in more technical reform processes. Centralized technical reforms (which sometimes do not impact on service delivery), should therefore be coupled with line ministry and local level reforms that are more likely to result in service delivery improvements.

An opportunity amidst the crisis?

Rather than just posing a challenge, post-conflict situations also present a major opportunity to build trust and open public finance management systems. The crisis in FRACAS can present unique opportunities for reform that fast-track through years of red tape and bureaucratic process. For example, the constitution-making process in Egypt and Tunisia presents  historic opportunity to insert budget transparency and participation rules into the fundamental law.

The IBP is piloting some of these ideas in Egypt and Tunisia. We are working with government, civil society, academia, and media to build connections and capacity within and between these groups. In this way we hope to increase attention to PFM and accountability early on in the transition before bad habits re-assert themselves.  More detail in future posts.

APPENDIX: The rest of this post is a summary of research about FRACAS and accountability that I found on the web

Trust precedes accountability

Duncan Green of Oxfam argues that in FRACAS it may be premature to support citizen demand for accountability. He argues that “the state may simply lack the capacity to deliver, rather than the will, while citizens may have had such a negative previous experience of the state that all they want is to be left alone.” For this reason, he counsels that initial efforts to establish accountability should focus on building legitimacy, trust, and the social contract between citizens and state as a prerequisite to building accountability. His argument is supported by Henriette von Kaltenborn-Stachau’s research that argues that the lack of public trust, societal fragmentation, and exclusion in post-conflict situations contribute to  “particular public sphere challenges that are related to the prevalence of fear, rumours and uncertainty caused by disempowerment and loss of livelihoods.“

This is a bit of a chicken-and-egg situation, though. As the GSDRC page on accountability in fragile states points out, “problematic citizen-state relations are considered to be both a cause and consequence of violent conflict.” If the problem in FRACAS is a lack of trust between citizens and the state, it may be trite and even circular reasoning to suggest that the solution lies with building trust between citizens and the state. Exactly how are FRACAS supposed to pull themselves up by their own bootstraps?

Start at local level?

Research by Rosalind Eyben and Sarah Ladbury for IDS argues that civic participation often grows up around local, rather than national,  issues. While citizens may have withdrawn from national political life because of conflict, they may still be engaged at the local level around more immediate bread and butter issues (what some call “partial citizenship”). They argue that efforts to build participation and accountability, therefore, should start with local associations and focus on issues of local service delivery. In a recent post on the Fragile State Resource Center Blog, Seth Kaplan supports these claims when he argues that what he calls “social cohesion” can best be restored from the local level up.

While this may be a slight idealization of “the local,” their point that efforts to rebuild trust should start where there is still some trace of a relationship between citizens and government (what McLean-Hilker et al call “entry points”) is fair — whether that is at the local or national level. When even local politics are riven by conflict and mistrust, argues Pearce, civil society organizations, such as churches and NGOs, can “keep alive the participatory space” by distributing basic information about violence and resources.

Involve citizens from the start, deliver benefit from the start

The 2011 World Development Report argues that two characteristics mark successful transitions in FRACAS. First, the creation of coalitions of government, churches, and civil society that are “inclusive-enough.” The role of churches and CSOs in these coalitions is not just to signal inclusiveness but also to push for deeper institutional reform. The second is that the government needs to deliver early results so that a skeptical population can gain faith in the democratic process. Galtung and Tisné discuss examples from eight post-conflict states to show that CSOs can and should be involved in this process from the earliest stages. While some of this process can be driven by donors and the international community, such top-down efforts need to be supported by social accountability mechanisms that are better suited to the exigencies of a post-war context.

UNDESA’s note on service delivery in post-conflict situations has a few things to say about what such service delivery should look like, but doesn’t say much about how to do it. While some have been critical of  Paul Collier’s idea of  Independent Service Authorities, it does provide some answer to the riddle of how to build confidence in reform efforts through service delivery in low-capacity contexts.

Careful of the media

A potentially important buttress to reform efforts is the media. In a  World Bank policy brief, Kalathil, Langlois and Kaplan argue that the media can enable citizens to engage in dialogue and serve as platforms for debate and oversight.  As some of the IBP’s own impact case studies show, the media can however also be deeply divisive and may be perceived as a threat by  governments of FRACAS that are dependent on donors and the international community for funding, security etc.

16 comments:

  1. I think that you are being overly harsh on the World Bank report. The report analyzed 8 cases. It found a strong linkage between PFM reform and government effectiveness, but not with service delivery. I’m not sure measurements for reform like PEFA can be connected to service delivery. (You’ve built an argument that requires 4 bullet points ending with ‘democratic dividend’ – could the study have measured that with the tools being used?) But surely, government effectiveness is a better measurement for improved budget management.

    As another point, ‘technical’ improvements like the TSA, improved chart of accounts and budget execution are enablers for budget transparency. The last two are demonstrated in Timor-Leste (not analyzed in the study) through the transparency portal at http://www.transparency.gov.tl. Timor is a much better example because civil society outreach was a critical factor. Also, there has been transparency initiatives on procurement, revenue, aid and outcomes. Perhaps these additional domains are necessary for building trust.

    1. Thanks for the comment Doug. The connection or lack of connection to service delivery is raised by the WB/CAPE report itself – that’s not my point. But leaving that aside, the real is that there is not likely to be much support for these PFM reforms if they are not coupled with accountability reforms. That is what most of the research seems to suggests.

      Some work that I did on MTEFs for ODI a few years ago suggests the same thing – all reforms, even technical PFM reforms, should start with the facilitation of political buy in – and not just of the government. The seems to be even truer in fragile and post-conflict environments. The bulk of the post wrestles with how to do that. Any thoughts?

      1. Thoughts, yes. Post-conflict countries have social cohesion, digital divide & capacity constrains. Reform needs to be sequenced. My sense is that it may be more effective to create a platform for accountability as the first step. This is technical in nature and often driven by donors and civil society (including foreign NGOs) rather than truly bottom-up. We’d all like citizen engagement as the first step but I think that post-conflict governments need to show good faith and earn a sense of trust before citizen efficacy can steer accountability.

        1. Now I’m wondering whether the reforms covered in the WB/ODI report were coordinated with the kind of platform for accountability that you describe. And if they did, why did the budget accountability reforms still fail?

          1. I think that the sample size is somewhat too small and there wasn’t a benchmark against other types of countries. The analysis seemed to show that budget planning initiatives were not as successful as budget execution. Budget preparation requirements in PEFA assessments are quite strong. Budget preparation is far more complex than execution. My view is that lack of budget prep success (based on PEFA) does not necessary mean a failure in budget accountability and transparency. That’s because the chart of accounts needs to meet certain standards, program budgeting should be used and the budget result should be close to the original budget (budget credibility). A country can receive a reasonable assessment in the open budget index if they prepare budget prep and execution documents in a timely manner. But, they can have a poor PEFA assessment for budget preparation.

  2. Albert – this is a very interesting and thoughtful post, and I think it represents the WB/ODI piece quite well.

    I actually don’t think this is a sequencing issue at all. It seems to me that there isn’t much to be said in favor of building PFM reform plans based on platforms that treat accountability, transparency, budget credibility, budget-policy links etc as functionally similar dimensions of PFM systems. They are not.

    You can do quite sophisticated executive internal budget reforms without much buy-in from outside the central bureaucracy. think macroeconomic forecasting, or debt management.

    Strengthening external accountability in fragile states (or any states, for that matter) is a totally different process. It relies on pretty substantial and deeply political change. Executives are understandably reluctant to push for this if nobody powerful enough asks for it. And just having an “accountability component” in your PFM reform plan just won’t do it.

    I have to admit I’m pretty biased against technical PFM sequencing, just wrote something about that here: http://www.beyondbudgets.org/blog/2012/7/19/why-most-publications-about-pfm-sequencing-are-missing-the-p.html

    1. Thanks Philip. And thanks for the reference to the Beyond Budgets Blog – I hadn’t see before.

      You make some good points. But I find it hard to agree with your strong separation of technical budget reforms and accountability reforms. There is just so much of the seemingly technical budget reform process that touches on the interests of political interest groups for one to separate the two.

      I would argue that there are a minimum set of PFM reforms that are necessary in FRACAS as a pre-requisite for any other reforms.(I asked Paul Collier about this years ago and his answer was to focus on expenditure control.) These could be driven and supported by donors and the international community and implemented as a set of emergency PFM measures.

      Without some of the accountability reforms described in my post, these emergency measures would have a limited shelf life. So a second wave of reform should start building trust and accountability as well as starting more systematic reform of the resource allocation process. But that would be another post. Anyone keen to post on this? Doug? Philip?

      1. 1. Premise that PFM Reform and Accountability are Different Things

        I also find this argument against sequencing and the separation of PFM reform and accountability to be less than convincing. The premise that MTEF or accrual accounting has failed to take hold in many developing countries isn’t indicative of general reform or accountability success or failure. [Yes, it’s taken hundreds of years for reform in developed countries – and some do not yet have multiple year budgeting (US), accrual accounting (almost all) or even double-entry bookkeeping (Germany).] It might be more instructive to align PEFA assessment criteria with accountability assessments (Open Budget Index, Revenue Watch Index, World Governance Indicators) to see if there is a linkage between PFM reform and accountability success.

        2. Not Enough Analysis on How to Encourage Accountability

        Yes, can’t agree more.

        3. Need to start Accountability Bottom-Up with Citizens

        My sense is that both top-down and bottom-up is needed. Social cohesion and trust issues may mean that accountability starts top-down as a mechanism to build trust in some circumstances.

        1. Just to be clear, the reasons for MTEF and other advanced reforms often failing are, to my mind, completely different from the challenges faced by accountability-type reforms.

          We often talk about PFM reforms, and “the PFM system” as if all its component parts are pretty serve the same intermediate purpose, follow the same internal logic and succeed or fail for similar reasons. I don’t think that’s the case at all.

          Of course the core elements of the budget process have a technical and a politial dimension, and they are related.

          But there are some internal PFM stuff that is relatively non-political, and some other stuff that’s extremely political. And accountability reforms, which are undoubtedly very important in the long run, are extremely political and rely on factors entirely outside the executive to succeed.

          In other words, there are lots of necessary conditions that have to be combined to see sustainable success.

          So yes, probably something for a longer treatment, perhaps even a paper rather than a blog post…

          1. I’ve been scratching my head on this for a few days. Internal Ministry of Finance driven PFM reform is not, in my experience, purely internal and technical. This can be highly political especially in countries where the civil service is politicized – in most developing countries. Also, these ‘technical’ PFM reforms have significant accountability ramifications: segregation of duties, expenditure controls that ensure following fiscal discipline and audit trail that identifies fraud.

          2. Doug, no question at all – there are many MoF internal things that are extremely political for exactly the reasons you mentioned and more. MTEFs often fail because they don’t account for ministers unwilling to surrender power over outyear ceilings; cash automation because it hurts corrupt office-holders etc.

            But none of that compares in magnitude to, say, proper parliamentary accountability – which involves party systems, electoral systems, media freedom.

            There’s a difference between accountants tinkering with the chart of accounts and societal transformation. It’s not that the former doesn’t matter. But there is a pretty big difference…

          3. Here’s where our views fundamentally diverge. So-called PFM “technical” reforms are absolutely linked with political reforms. Lock step. Even this “tinkering” with the Chart of Accounts that you speak of is affected with these very same motivations/incentives/power struggles related to legislative and civil society accountability. It identifies accountability mechanisms through controls and segregation of duties (power), external reporting and comparability through IPSAS/GFS (transparency) and the accounting methods where the move to accrual accounting prevents hiding. Of course, the COA is but one little element of the PFM system. This so-called “technical” system eliminates points of corruption (audit trail, use of EFT), and creates the underlying mechanisms that make party system, media freedom and electoral system reform meaningful. And, the power systems within countries know it. They know that even “technical” PFM reforms can affect “clients” who benefit from corruption. That it is the mechanism that exposes corruption, mismanagement and poor governance. It upsets the status quo. Important “technical reforms” require legal reform – use of EFT rather than cheques, move from civil service payment by vouchers to bank cards, use of accrual methods, imposition of procurement process rules etc. (Many political parties are funded in developing countries via procurement corruption.) The power elite in any country recognizes that this is the slippery slope towards additional reform – especially if there are breadcrumbs for the manipulation of government contracts, hiring and the national treasury. (So do donors who make technical and legal reform conditions for continued support.)

            I’m not suggesting that these back-office and organizational reforms are equivalent to fundamental societal change. I’m saying the there are significant political implications to every technical reform and that the political implications become progressively meaningful. That’s why we see countries adopt audit, procurement and civil service laws. It’s not to enable tinkering or minor process improvements.These require legislation.

            Therefore, I find this notion that there is a distinction between technical and political reforms to be artificial. Technical reforms represent a sub-set of political reforms.

  3. Although Tanzania is not a FRACAS, public expenditure tracking work by Tearfund partner the Christian Council of Tanzania has shown that there is indeed a lack of trust at local level that needs to be overcome, and that a mixture of a courageous local population with support from a wider national level civil society is needed both to build this trust, but also to create a critical mass that will be strong and secure enough to challenge vested interests. See http://justpolicy.wordpress.com/2012/08/06/a-tale-of-two-villages-where-transparency-is-doing-its-job/

    1. Thanks Graham. That is very interesting. Could you say more about what you have done to support this process?

      1. Thanks Albert. The main support has been though the Christian Council of Tanzania through 1) training communities in their rights such as access to information and right to participation, 2) training them in the technicalities of the budget process, 3) supporting tracking techniques and wider social accountability work so that the budget tracking produces the desired results in a local context. We are currently undertaking some research into the impacts of this work and how it can be linked more strongly to wider participation in fiscal policy. Results expected early 2013!

  4. I don’t think there is a fundamental disagreement here over political versus technical reforms. Of course all PFM reforms are always both political and technical. But the same way technical challenges differ from area to area, so do the political ones. I’m all for emphasizing that bureaucracy-internal change has its own power relations, principal-agent problems, collective action problems, cultural issues and whatnot. In fact, that’s one of the most important – and interesting – areas of public administration as a subject of research and practice.

    That said, the political challenges differ between PFM areas. And just to come back to Albert’s original post, accountability reforms involve a lot of capital-P politics. That’s why there is all this research out there about fostering demand for more information and transparency – which of course is the business of IBP. Without such demand executives have less of an incentive to be accountable.

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