Disbursement By Results

[atseacliff]

I've attached a series of documents and links related to Results Based Disbursements - aka Cash On Delivery, P4R, Payments For Progress;  which will have increasingly important implications for the way donor deliver aid in years to come.  The goals of these schemes are laudible  - greater country ownership and the promotion of results based programs thereby giving recipients full responsibility and authority over resources paid. A Results Based Aid program can be designed to attain any goals for which measureable progress can be defined e.g. expanding secondary education, increasing immunization programs, expanding access to running water or slowing deforestation. 

Government and donor agencies have shown a strong interest in developing these programs.  From an PFM perspective there are a number of interesting challenges:
1. Defining the program and underlying expenditure framework - requires a COA which has sufficient detail to report on the underlying program to be financed.
2. Assessment and capacity building work - PFM systems will often be weak and capacity will be low.  According to the principles of disbursement based on results measures of progress in developing systems will be important and, on occasions may be linked to disbursements.  Benchmarking and measuring progress using PEFA like performance measures are important but challenging in a sector/program context.
3. Accountability and independent verification - an important element of these programs is to identify appropriate measures of performance and establish a way of reporting and verifying progress.  Independent verification of results is critical to the credibiity of the agreement between the recipient and provider. Finding cost effective credible institutions to conduct this audit and verification work may prove challenging where local agencies (e.g. SAIs, internal audit) lack the skills and capacity.
4. Fiduciary concerns - there are bound to be question marks over the less stingent safeguards which are likely to be applied under these modalities. This, in part is why the traditional investment project is likely to continue as an option for IFIs for the foreseeable future.

Attached Link to World Bank P4R background and consultative papers.
http://web.worldbank.org/WBSITE/EXTERNAL/PROJECTS/EXTRESLENDING/0,,contentMDK:22748955~pagePK:7321740~piPK:7514729~theSitePK:7514726,00.html
 
Attachments

[harnett]

Very valuable - thank you.  I'd like to add another major concern for PFM.

The definition of results matters - is disbursement on the basis of outputs or outcomes?  Outcomes would be the obvious choice, but PFM usually can only control outputs and hope the outcomes follow.  Would a country which had achieved (internal) output targets, but the outcomes (as yet) had not materialised or hit targets, be penalised?

Nevertheless, an interesting approach but again the devil is likely to be in the detail.

[atseacliff]

You are right - the devil will be in the detail.  It would be worth reading some of the attachments to my original posts - the OECD Brief is a pretty good starting point to get a better understanding of the thinking behind the approach.  It is particularly interesting in discussing how the risk burden might shift between donors and recipients if this aid modality went global.

Some of the obvious candidates for Cash On Delivery projects are in the social sectors where measureable outcomes, or at least well-defined outputs associated with outcomes, like immunisation rates or completion of primary education can be linked to disbursements.  In principal the approach could be used in any sector however, in part for the reasons you have identified it would be hard to apply to a PFM program where outcomes are uncertain and there may be a substantial amount of TA required. 

[Martin Johnson]

Hmm ... interesting stuff. Lots of issues. Clean and clear results based financing (paying for vaccinations achieved) is one thing. Measuring some results based aid without creating moral hazards, being overly expensive to evaluate or introducing distortions to resource allocations is another. I am aware of some donor thinking in countries where I have been working where budget support may be delivered on the basis of school exam performance. Now, call me old fashioned, but I remember a time when students in the UK achieving three 'A' grades at 'A' level were as rare as a trophy heading to the Riverside (née Ayresome Park). These days they come along as frequently as goals went into the bulging nets of middlesbrough during Uncle Gordon's reign (I actually wanted to say as often as new managers arrive at Chelsea but feared the pedant's response). Now either me and my contemporaries were completely fick all those years ago (no responses required please!) or there has been massive grade inflation in Britain (the employers and the universities are sure of it - the universities reckon new students have to go through 'A' level training after they arrive). And that has happened just through internal pressures and without an external donor government providing compelling incentives to inflate examination performance. Seems to me this constitutes a serious risk of undermining the fundamental component of the system that demands and regulates quality - exactly the opposite of what the laudable intention of the RBA seeks. Ho hum ....

[petagny]

Even without the moral hazard issue there is a lot of 'white noise' in developing country statistics that risks turning aid into a lottery. There probably also needs to be solid support to statistical services as well. Defining results also needs to be carefully considered - outputs, intermediate outcomes or outcomes? By definition, government officials do not control outcomes, they can merely influence them (hopefully!) and there is usually a whole array of external factors that can change outcomes. Attributing the impact of government actions on outcomes is not easy and linking aid to outcomes could lead to arbitrary flows. Is it better to have a jointly agreed understanding of the intervention logic and then link aid to delivery of outputs, and efficiency and service quality measures?

[harnett]

So many issues to consider in moving towards RBD.  A favourite of mine is that a major reason for the lack of impact of aid has been the weakness of institutions, often, but not always correlated to poverty indicators (ourselves in PFM being at the coalface of institutional strengthening).  So RBD could easily end up penalising the very countries that aid is supposed to prioritise - the underlying reason being that those countries have weak institutions.

I'd also like  to add a bit of devilment myself, in that if RBD were to be rolled out, maybe for consistency it should also be applied to aid institutions themselves - we've all heard the stories of wildly differing costs for school building by different agencies etc.  Indeed, maybe this reasoning was behind the recent contributions of governments (most notably the UK) to the GAVI fund - a fund which interestingly bypasses many of the institutional barriers faced by traditional donors.