This blog post is co-published with the Open Government Partnership here.
A societal imperative
The magnitudes are staggering. To tackle the unprecedented healthcare emergency and lockdowns necessitated by COVID-19, governments are mobilizing the biggest stimulus and safety net packages we have seen since World War II. Governments and international institutions have announced at least $20 trillion in spending thus far in response to COVID-19. In the G20 countries, $6.3 trillion has been provided in fiscal support so far, representing 9.3 percent of G20 GDP. Germany’s fiscal and monetary stimulus is in excess of 40 percent of GDP! South Africa’s first round fiscal stimulus package is 10 percent of GDP. In Africa, over $114 billion in aid is needed to finance governments’ COVID-19 stimulus packages, of which half has been mobilized. These efforts dwarf the response to the 2008 global financial crisis.
Millions of lives and livelihoods are at stake. Rescue packages in each country have a different mix of fiscal, monetary and regulatory measures. Across countries they include massive procurements of life-saving medical supplies and medicines that touch the lives of all citizens; safety nets for millions of vulnerable people; subsidies and credits to protect jobs for thousands of micro, small and medium enterprises (MSME); and major infrastructure investments, tax and regulatory incentives to provide employment for millions. For instance, Nigeria’s $6 billion package aims to provide a safety net for 30-60 million vulnerable households, job protection for half a million in 50,000 MSMEs, and employment for over a million through rural roads projects. Effectiveness of these surpluses is not just of profound economic and social significance – it is a moral imperative. It is also a vital opportunity for governments to build back and sustain citizen trust, which had plummeted to historic lows prior to the pandemic.
But history also tells us that when money moves as fast as in the COVID-19 response there is a risk of corruption, capture, and failure to reach those who need help the most. And we have already seen early signs of these with COVID-19 funds in developed and developing countries alike. In Brazil, federal prosecutors have launched more than 400 investigations into suspected cases involving COVID-19 funds. In Colombia, 14 of the country’s 32 governors are suspected of corruption involving emergency COVID-19 funds. In the U.S., the incredibly wealthy L.A. Lakers franchise valued at $4.4 billion received $4.6 million from the payroll protection program targeted to small businesses.
Even prior to the pandemic, the track record of many countries is that public spending does not reach many of the intended beneficiaries; the funds “leak”. For instance, 70 percent of the recipients of Sri Lanka’s Samurdhi program for the poor were in fact not poor. Simply scaling up existing safety net programs may not ensure that vulnerable groups receive vital COVID-19 assistance.
The open government approach
To mitigate these risks and achieve their vital goals, an open governance of these massive stimulus and safety nets is essential. Openness, which enables citizens, civil society, businesses to shape programs and “follow the money.” This offers a unique approach by combining government transparency with the active participation of citizens, civil society and oversight institutions to ensure that funds achieve their intended purposes.
This is a central thrust of what government reformers and civil society activists have sought to accomplish through the Open Government Partnership (OGP) over the past decade. The reforms they have co-created and implemented provide excellent innovations and learning which can be applied to COVID-19 stimulus and safety net packages. For instance:
Through Italy’s Open Coesione Platform, the government disclosed details of one million projects supported by 100 billion euro of EU financing and then launched a massive public information campaign to empower citizens, including high-school students, to be on-the-ground monitors of projects.
Through the Philippines’ Open Roads Initiative in 2014, the government disclosed details of road expenditures, often geo-coded. Citizens and civil society carried out social audits on the existence and condition of roads, and the formal audit institution used the citizens’ social audits to mandate a government response, saving $300,000 per ghost road identified.
Through the Citizen Eyes and Ears mobile app in Kaduna, Nigeria, the government discloses the geo-location of publicly funded projects and citizens upload photos and feedback on these projects which go directly to the Governor’s office and State Legislature for corrective action.
Stages of design and implementation of stimulus & safety nets
These open government approaches can be applied to different stages of design and implementation of COVID-19 stimulus and safety nets packages. They offer an unprecedented opportunity to start to rectify societal inequities that have been laid bare by the pandemic and build a more just recovery. This can’t happen without a transparent and inclusive process.
Open decision-making. To begin with there must be total transparency in the decision-making process. Government needs to be open about who gets the money (including tax and regulatory exemptions), how that was decided and where the funds are coming from. It is vital to ensure that the stimulus policy-making process is evidence-based and inclusive, particularly to amplify the voice of historically marginalized groups and others facing added vulnerabilities due to COVID-19. Any interested member of the public should be able to inform those decisions directly, and the lobbying that accompanies policy and budgetary processes should be made open for all to see through transparent registers like those Chile and Ireland have instituted. Transparency in company ownership can provide oversight over whether bailouts, public contracts or regulatory exemptions are getting captured by the politically connected. Any company registered offshore, not paying their taxes, or undermining other social obligations should not receive support, as Denmark and Canada have instituted.
Open aid. The terms of the billions of dollars in grants and loans to finance COVID-19 response and recovery from International Financial Institutions such as the World Bank and IMF, and other incurred debt, should be made open. All financial flows should be disclosed according to aid transparency best practices, along with specific targets of what they are intended to accomplish and who they seek to reach. This will start to balance the necessary focus thus far on mobilizing international aid with now an equally concerted attention on how well the money raised is being used to achieve its intended purposes.
Open budgets. Following an open decision-making process on who the target for support is and where the money is coming from, ministries of finance need to disclose their expenditures, including emergency COVID-19 spending, in regularly updated open data, as the U.S. did for the $800 billion Recovery and Reinvestment Act of 2009. This already poses a challenge because the Open Budget Survey (OBS) for 2020 highlights that three-quarters of the 117 surveyed countries do not have sufficient levels of budget transparency according to the basic minimum standards set in accordance with international norms.
Transparency and oversight of safety nets and MSME support. Beyond overall budget transparency, transparency in safety nets and engagement and oversight by groups representing the least resilient and those hardest hit by the pandemic can ensure that these funds actually reach the intended beneficiaries. For instance, the Philippines government has released a $4 billion “social amelioration package” for COVID-19. But ensuring these precious resources are not siphoned by corruption and actually reach the targeted 18 million vulnerable — senior citizens, people with disabilities, pregnant women, indigent indigenous people, and the unemployed — will require transparency, participation and oversight on who is eligible and a citizens’ grievance redressal mechanism, mediated by the vigilant Filipino civil society and overseen by formal accountability institutions. Similarly, transparency and monitoring by business associations is needed to ensure that support in stimulus packages reach targeted MSMEs. This is a key emerging focus in the design and monitoring of South Africa’s package where smaller MSMEs in distress could not access the initial credit guarantee scheme.
Open contracts. Governments also need to ensure that all procurement processes are open and competitive – from the tender to execution. Yet less than one-third of countries have taken steps to publish contracting data. This poses a particular risk of price gouging and corruption in times of COVID-19, even jeopardizing lives. As New York desperately struggled to acquire ventilators, it paid – through an opaque contract – a whopping $69 million for 1,500 ventilators at triple the retail price; tragically, none were even delivered. Open contracting and open spending empowers citizens, journalists and civil society to follow the money and become the government’s eyes and ears on the ground. For instance, in Paraguay and Colombia, the government publishes emergency contracts as open data that civil society monitors, including by tracking price differences for COVID-19 supplies. For public contracts in stimulus packages more broadly (e.g., for infrastructure projects), open contracting can save money, fight corruption and spur economic activity. Through Ukraine’s open contracting platform over two years, citizens flagged 14,000 violations, the government saved $1 billion, 82% of entrepreneurs reported reduced corruption, and there was a 50% increase in contract bids, including from MSMEs.
Formal oversight institutions. At the heart of an open government approach is a partnership of government with citizens, civil society and accountability institutions. Formal oversight, audit functions and whistleblower protections are essential. All stimulus spending should be audited by independent institutions, and regular reports made to parliament. In this regard, there are important opportunities for audit institutions to collaborate with civil society in value-for-money audits or following the money, such as the Philippines’ Commission of Audit using citizens’ social audits under the Open Roads Initiative. Where corruption is uncovered, prosecutions should be made. Where nefarious political influence is suspected, the media should be free to report.
Participation & monitoring by citizens, civil society & businesses. Beyond formal oversight mechanisms, government, civil society and business associations need to shape and monitor packages to ensure that they have the desired impact. This means grassroots groups monitoring infrastructure projects, checking that those vulnerable households eligible for safety nets and cash transfers get their support (while respecting right to privacy), and informal sector businesses who may not be on the government’s radar receive targeted MSME support. A particularly important imperative is to empower civil society groups representing the marginalized and vulnerable groups to amplify their voice in shaping and monitoring COVID-19 safety net programs. In Africa, the Follow the Money network of civil society organizations is tracking COVID-19 related spending, including aid flows, to ensure it is reaching those it is intended to help. These youth civil society organizations are also leveraging social media and digital technology to solicit beneficiary feedback.
Where civil society uncovers corruption, waste or poor implementation government must commit to address those deficiencies quickly to close the feedback loop. Only then will governments be able to earn or sustain citizens’ trust.
Civic space & media freedoms. For corruption and waste to be uncovered, the protection of civil liberties, basic freedoms of the press, and access to information must be sacrosanct. Unfortunately, many countries have gone in the opposite direction by shutting down civic space, and restricting freedom of information. It is imperative to roll these back for effective design, implementation and monitoring of COVID-19 programs.
A call to action: the essential steps
For all of these measures to happen, we need a campaign in every country to monitor trillions or billions of dollars for millions of people, to ensure stimulus and safety net packages achieve their tremendous promise and imperative of saving lives and livelihoods. This requires complementary and mutually reinforcing actions by governments, civil society, business associations, accountability institutions, and international donors. Our call to action for each stakeholder group is summarized in this graphic. As citizens all over the world have been mobilized around curbing COVID-19 contagion, there is an unprecedented opportunity to now channel that attention and mobilize citizens and citizen groups to shape and oversee packages that will directly impact their lives. Indeed, with so many lives and livelihoods and such massive resources at stake, we need collective, collaborative leadership – a coalition of stakeholder groups to join forces and ensure that stimulus and safety nets flow through open governments, open budgets and open contracts through to the “last mile” of service delivery. If we do this, we won’t just ensure an effective COVID-19 response – we will build back a better governance system that will institutionalize openness and citizen oversight, sustain citizen trust by putting citizens at the heart of governance, and produce a more fair and just society for better times to come.
Crises such as the COVID-19 pandemic often put civil society organizations on the front lines of response, filling the gaps governments cannot or will not fill. In this post, we highlight two IBP partners in Latin America that stepped up and are acting as leaders in their communities.
Brazil: Campaign wins guaranteed basic income for informal workers
As the country’s COVID-19 cases increased past 11,000, including more than 500 deaths, the Brazilian parliament approved a three-month basic-income guarantee for informal workers. And now, President Jair Bolsonaro has signed the bill—thanks to effective civil society mobilization.
This vital benefit was the result of a mobilization of more than 150 civil society organizations and social movements, along with a few politicians and political parties in the legislature. A coalition was formed and a campaign launched. In four days, boosted by popular YouTubers and heavy social media engagement, the campaign petition attracted more than 500,000 signatures. The petition was used to press parliamentarians to prioritize and vote for the bill. After some small modifications, the law was quickly passed by the two houses of the parliament.
The Institute of Socioeconomic Studies (INESC) is one of the five organizations leading this campaign. Given the social isolation necessary due to the coronavirus pandemic and the resulting decrease in economic activities, the organizations were worried about how low-income families, especially those without a formal job, would survive. As city after city goes into lockdown to stop the spread of the virus, they are highly likely to lose their income.
Informal workers who earn a net family income below three times the minimum wage and do not receive any other social security benefit (with the exception of Bolsa Familia) will receive the temporary aid—an estimated 30 million people, costing around US$12 billion. Each worker will receive around US$120 a month; however, that doubles to US$240 if a household is led by a single mother. Up to two people in one family can receive the benefit. The federal government has already compiled a register of informal workers, which will streamline distribution.
José Antônio Moroni, co-executive director of INESC, says this is an emergency in which the interests of civil society organizations align with those of the majority of parliamentarians. “When the parliament opens itself up to the demands of civil society, when there is an openness to building solutions and projects together with civil society, good things happen,” he says.
INESC and its four partner organizations have an extensive track record in working with the Brazilian Parliament. Their advocacy and networking in the parliament paved the way for them to negotiate with a broad set of stakeholders. The organizations also participate in a variety of civil society networks and movements for democracy and human rights in Brazil, creating substantial on-the-ground connections that were quickly mobilized to put pressure on the parliament.
The income-support program is a dramatic contrast to the federal government’s earlier proposal, which suggested that employers withhold wages for four months. The government withdrew the idea, however, following a strong, negative reaction. This created an empty political space for civil society to fill.
Bolsonaro himself constantly minimizes the crisis, denying the impact of the virus on peoples’ health and calling for the suspension of social isolation—thus undermining state governors’ efforts to control the pandemic. This, despite fact that at least 23 members of his entourage have been infected. Bolsonaro not only refused to remain in isolation but made a point of shaking hands with his supporters and taking selfies with their mobile phones. The president later claimed he tested negative but refused to make the results public.
Now, the pressure is on for the president to quickly implement the measure by distributing the payments. More than 26,000 emails were sent in one week to Bolsonaro and his minister of finance, saying #PayItSoonBolsonaro #PagaLogoBolsonaro
Argentina: Homelessness is vulnerable hole in safety net
COVID-19 isn’t yet at the scale seen in the United States, Italy and Spain in Argentina, but infections have crept past 1,000 and government officials have moved quickly to get out ahead of it. President Alberto Fernández announced a total quarantine of the population of 44 million, putting in place stringent measures to limit mobility and enforce social isolation. Despite an already battered economy, Fernández was convinced the country must learn from others’ mistakes.
However, one very vulnerable group was left out: the homeless people living on the streets of Buenos Aires and other big cities. When a census was conducted in April 2019, there were 7,251 people without stable homes in the capital city. Of these, 5,412 also did not have access to shelters and thus slept on the street, making their health precarious. More than a third (38%) reported suffering one or more health conditions; in fact, the most common are respiratory in nature. In addition, 10% of people living on the street are over 60 years old, the age group with the highest risk of death from COVID-19. Yet preventive measures such as regular handwashing, disinfecting frequently touched items and surfaces, etc. are measures that can hardly be done by someone living on the streets.
IBP partner ACIJ (Asociación Civil por la Igualdad y la Justicia) has long focused on this vulnerable population as one of its main areas of work. Last year, it joined a team that conducted an unofficial census of homeless people, as well collaborated on a lawsuit demanding that the city government design and implement a comprehensive public policy to protect their rights.
When COVID-19 hit and homeless people were neglected, ACIJ joined CELS (Centro de Estudios Legales y Sociales), other civil society organizations and public defenders to call for urgent measures to ensure that homeless people can practice adequate hygiene and have free access to health care by:
Suspending evictions to avoid an increase in people living on the streets.
Guaranteeing alternative housing solutions when public shelters are full.
Requiring shelter staff to regularly clean their facilities, offer the supplies needed to maintain personal hygiene and organize access to health care.
Educating homeless people on preventive steps they can take and how/when to access health care when sleeping on the streets.
Providing economic support for public and social organizations that assist people living on the streets.
Assuring sufficient resources (budget, facilities and logistical support) are available to implement these actions. To allow civil society to monitor the use of these resources, ACIJ also is asking for transparency in the government’s procurement system.
Pressure was brought to bear on the government through social media, and a letter with demands was presented to the Ministry of Territorial Development and Habitat, as well as the city government in Buenos Aires.
Hopefully, these activities will pave the way to longer-term improvements in services to help secure housing for those without permanent shelter. ACIJ and its partners will continue their campaign to raise awareness of the fragile conditions of vulnerable communities, both during the COVID-19 pandemic and after.
This effort is part of a long-standing commitment of ACIJ to promote respect for human rights and defend society’s most vulnerable groups. Its goals include greater transparency and better performance of public institutions, awareness among citizens of their basic rights and the channels available for receiving protection, and training professionals from diverse disciplines who are committed to public-interest issues.
Tune in April 30 at 9 a.m. EDT (UTC-4) to hear experts from around the world announce and discuss the latest Open Budget Survey results.
As I write, the COVID-19 pandemic is wreaking havoc around the world. The threat to public health, the damage to national economies, and the disruption to daily life is jarring and frightening as countries struggle to contain the virus and blunt its impact. At this troubled time, we are thinking about our many colleagues around the world, wishing them good health and safety.
In this environment, open and accountable public budgets are not a luxury; they are more crucial than ever.
Budgets will play a central role in government responses to this virus and its fallout. We strongly support aggressive government action and, like others, we believe leaders should pay special attention to the needs of those living in poverty, who are particularly vulnerable to COVID-19’s devastating health and economic impacts. To meet these unparalleled challenges, governments must rapidly shift priorities and realign tax and spending policies. The rush to act may tempt some leaders to forego informing and engaging the public on the steps they take. However, while the crisis demands swift and decisive action, it nevertheless requires honesty, transparency, engagement and, in the end, public trust.
IBP’s latest Open Budget Survey (OBS), the results of which will be released April 29, shows there is reason for concern. Drawing on independent research in 117 countries, we find that most governments lack the accountability systems and policies to make their budgets fully open to the public. Gaps in budget transparency exist throughout the budget cycle, especially in how governments publicize changes to budgets during implementation. These shortcomings are compounded by the weak oversight of legislatures and auditors and scarce opportunities for public input. In addition, sector budgets do not typically include the detail necessary to show public spending improves the delivery of critical services, including health care services central to resolve this pandemic.
These deficiencies concern us because to raise living standards, public spending must deliver results. Our previous research has found that many governments do not fully spend their budgets or publicly explain variations. For example, underspending of vaccine budgets is especially high, even in countries with recurring stockouts. Corruption and inefficiencies will likely worsen in this crisis at just the time when governments should be most under the microscope for misuse of funds.
The consequences of today’s budget decisions will be felt for years to come. This crisis unfolded at a time of simmering public frustration over stark public inequities and governments’ failure to address them. Public trust could be further undermined if governments respond to the pandemic with actions that seem arbitrary or that favor certain interests over others.
Fortunately, a different outcome is possible. Our work of the last two decades clearly shows that open budget practices are linked to greater equity and efficiency. Our latest OBS also demonstrates that many governments have been able to take immediate steps to open their budgets to public scrutiny. Their actions point the way for others. However, all governments have a long way to go to provide meaningful opportunities for public input into budgeting processes and thus secure better outcomes. Civic organizations are vital sources of insight, information and networks that can boost the effectiveness of government services and build public accountability and trust. Now, more than ever, governments must think creatively about how to invite and facilitate public participation and harness its benefits.
Civil society will prove an innovative partner. IBP in South Africa, for instance, is providing data to residents of informal settlements in the major metropolitan centers so they can provide real-time feedback about government services during the pandemic, such as whether public toilets were cleaned. This information allows government officials to understand community needs and the quality of services, and, when necessary, help communities hold government accountable.
Elsewhere, IBP’s partner in Argentina, ACIJ (Asociación Civil por la Igualdad y la Justicia), is working with allies to assure that homeless people in Buenos Aires are protected during the pandemic. More than a third of these “invisible people” suffer from one or more health conditions; in fact, the most common are respiratory in nature. In addition, 10% of those who live on the street are over 60 years old, the age group with the highest risk of death from COVID-19. Yet preventive measures such as regular handwashing and social distancing are luxuries without reliable shelter and public services.
In our latest OBS report, we launch a global Call to Action for governments to work with civic organizations, the private sector and donors to make sustained advances in budget transparency, inclusion and oversight. We call on governments to urgently adopt budget policies that mitigate the harmful effects of COVID-19 and, in doing so, embrace budgeting processes that restore public trust and shape a more inclusive future. (For more information on the global call to action, email Claire Schouten at IBP: [email protected].)
No one knows precisely how this pandemic will play out. To be sure, open budget systems alone cannot prevent its negative effects. But they can strengthen the bonds between citizens and government, so needed right now, and in the process improve the delivery of essential public services.
More than 5 million South Africans live in informal settlements—sprawling, crowded communities that frequently lack even the most basic of public services, such as safe, clean toilets and water. An estimated 43% of the total population does not have access to clean water, for example. In informal settlements communal toilets are often neglected and not regularly cleaned. It is the mission of IBP South Africa to improve service delivery to poor communities via oversight of government budgeting and spending, and long has focused much of its work on mobilizing settlement residents.
In mid-March, that all came to a sudden halt when we heard that someone in our small office block,where we share bathrooms and kitchen facilities, tested positive for COVID-19. We closed our office and organized to work remotely: a flurry of finding dongles and nervous trips to and from the now-infected office ensued.
The next day, President Ramaphosa prohibited public meetings of over 100 people, suspended international travel, closed the borders to most foreign visitors and urged the now-routine steps of washing hands and social distancing. Lockdown soon followed as infections multiplied.
The president’s announcement was welcome. But the IBP South Africa team and our informal settlement partners felt that the conditions in which these residents live—very close quarters, with shared water and toilets—was not being sufficiently addressed. We started working with a team of health professionals to identify hygiene practices that would help informal-settlement residents avoid contracting the novel coronavirus while using communal facilities. We produced and posted/distributed a poster and pamphlet in both English and eight local languages.
The response was overwhelming, with national, provincial and city government agencies endorsing and reprinting it—often requesting to add their logos. We initially translated the pamphlet into four languages, but on demand, we translated it into six more, including Portuguese and Chichewa (spoken in Malawi).
The next few days were a blur, but while working on the pamphlet, IBP South Africa and its partners—SASDI Alliance, Planact and Afesis-corplan—began working on an initiative called Asivikelane, “Let us protect each other” in Zulu. Its goal: to mobilize settlement residents to monitor failures in delivery of critical hygiene services and report the problems.
To date, partner organizations have enlisted the help of 331 residents from 80 informal settlements in six municipalities. If the internet and cellphone networks hold up (this is all done remotely), we estimate that in the weeks to come we will be able to ramp up the initiative include to at least 100 settlements.
Each week, participants ask the same residents three questions:
Is there clean water available in your settlement?
Were the toilets cleaned in the last seven days?
Was waste collected in your settlement in the last seven days?
The first week of monitoring found that metros were not cleaning communal toilets or collecting trash regularly, and clean water was in short supply, particularly in certain areas. However, good news included new water taps and tanks in some settlements and a promise of more chemical toilets in one community. The responses from government were again very positive with the national minister of human settlements requesting a briefing and one of the city governments fixing all of the problems that were identified and asking that we bring them these problems on a weekly basis.
Meanwhile, IBP South Africa is researching how reporting lines and budget processes/procedures have changed during the state of disaster declared by the president. The goal of this research is to inform the work of IBP South Africa and our partners as we engage with various levels of government. We are still in the early stages, but in many cases, we are finding, for example, that elected local councils have ceded all power to the mayor thus changing the advocacy landscape significantly. One of our partner organizations, the Dullah Omar Institute at the University of the Western Cape, is building its expertise on the legal changes in governance and budget regulations of this situation. We will also open a conversation with the national treasury and auditor general.
The future is very uncertain and there is so much about our working environment that is utterly unpredictable. For how long will this go on? Will government restrictions become stricter as the crisis worsens? How many of the informal settlement residents in our network will get sick? Despite these unknowns, we think our work will emerge stronger from the crisis.
Because of the more regular interaction between informal settlement residents and our partner organizations (weekly phone calls), we think their positive footprint in informal settlements will deepen. Partners are also using the outreach process to engage more informal settlement residents.
As a result, the relationship between IBP South Africa, its partners and various layers of the government will strengthen, because we are all working on the same initiative at the same time and interacting more intensively and regularly than before. In fact, after the launch of Asivikelane, three city governments reached out to find ways of collaborating. Stay tuned!
In 2013, Kenya began an ambitious experiment in devolution, decentralizing considerable power to 47 newly created counties which would take over responsibility for key services like health care. As is often the case, this devolution was premised on the notion that it would bring services closer to the people, and lead to improved access and a fairer distribution of services. Accordingly, counties were given the authority to formulate their own budgets, independent of national government.
While it is too early to assess the success of these reforms, for the theory of devolution to hold, counties must clearly access and spend funds on services. This is not a sufficient condition for improvements in access or quality, but it is a necessary one.
As part of the International Budget Partnership’s (IBP) Addressing Budget Credibility (ABC) initiative, we undertook the first systematic assessment of sub-national budget credibility in Kenya, looking at the degree to which counties collect revenue and spend as budgeted. Our analysis is based on data from all 47 counties over a four-year period (2014-2018), drawn primarily from reports produced by Kenya’s Controller of Budget. We complemented this data with county budget implementation reports and audit information from the Office of the Auditor General.
Rates of recurrent versus development spending were quite different. While overall counties spent 80 percent of their approved budgets during the four-year period, they were able to spend, on average, 96 percent of their approved recurrent budgets, but only 61 percent of their approved development budgets. In 2017/18, development expenditure against budget fell to only 42 percent. On the other hand, recurrent budget execution has continuously improved, growing from 92 percent in 2014 to 99 percent in 2017.
Trends are very similar to those at the national level. In the same four-year period, the national government’s line ministries (MDAs) spent 82 percent of the approved budget. While recurrent expenditure absorption was reasonably high, just as at county level, development absorption was much lower (an average of 67 percent over the period). From this, we can conclude that there is nothing particularly remarkable about low credibility at county level, but also that decentralization has not (yet) led to any improvement in budget execution.
Challenges at the county level are especially notable in sectors with high development spending –roads, water, and agriculture – although health budgets are also consistently underspent, achieving only an average of 86 percent budget execution over the four-year period we investigate. This is driven mainly by low execution of the health sector development budget, which averaged less than 60 percent for the period.
Re-prioritization of spending occurs during budget execution and may undermine service delivery over time. The shares of expenditure on executive and legislative administration (i.e., operational costs) tends to rise relative to their share of the original budget, while the share for agriculture and water tends to fall. In other words, as the budget is implemented, those costs needed to run the executive but not linked to specific services take a larger share of spending than budgeted, while the share of the budget going to some key services like agriculture and water is less than what was originally budgeted.
Counties rely heavily on national transfers and receive them too late in the year to spend down before the books are closed. Less than half of the intergovernmental transfers are received by the middle of the year, and 65 percent or less by the end of the third quarter. This pattern was particularly severe in 2017. Receiving roughly 29 percent of total revenue in the last quarter is likely to undermine counties’ ability to spend.
Counties also exhibit poor budget formulation and management practices. Kenya’s counties over-budget for expenditure and are too optimistic about revenues. Furthermore, counties exhibit inappropriate usage of supplementary budgets. While these budgets should be used to make corrective adjustments that facilitate budget execution, we find that county-level supplementary budgets sometimes worsen budget credibility, rather than improve it.
Hope for improvement?
While the overall data do not show strong signs of improvement in budget credibility over time, roughly one in five counties did improve their budget performance over the period. These improving counties come from across Kenya and suggest that there is wide potential for addressing low credibility over time.
A starting point for measuring budget credibility is the Public Expenditure and Financial Accountability (PEFA) framework. In looking for signs of change in county performance, we started by using the PEFA scoring approach to measuring budget credibility. In this approach, a county that executes anything less than 85 percent of its budget earns the lowest grade of “D”.
Given generally low execution rates in Kenya, this scoring approach obscures the wide variation among poor performers and we therefore introduced a complementary approach. Our alternative ranks counties by quartiles across the full range of budget execution rates. Using this method, we identified nine counties that improved their performance by two quartiles over the period, more than double what we found looking at counties that improved by two PEFA grades (from say a D to a B). In other low credibility environments, such as Nigeria or Philippines, it is important to complement the PEFA approach with other measures.
Table 1: Kenyan counties that showed improved budget performance from 2014-2018 under differing scoring approaches: PEFA vs IBP
Toward greater transparency and credibility
Counties are not transparent about budget implementation. In addition to our overall review of all 47 counties, we looked at eight in more detail. We tried to collect data on credibility from county budget documents and to seek out explanations for low credibility directly from county officers. This was challenging. Only one of the eight counties (Baringo) regularly produces a quarterly budget implementation report, and just over half publish the County Budget Review and Outlook Paper, which reviews annual performance. Both these documents are legally mandated and should provide insight into the reasons for poor credibility.
We found that counties had trouble explaining their performance, although we did learn more about the causes of poor credibility: challenges with contractor capacity, at least partly related to the requirement to fill demographic quotas (for women, youth, local contractors, etc.); poorly designed public participation processes that yield infeasible projects due to lack of technical guidance to inform public views; and lack of or delay in approving policies to guide the use of special public funds (such as bursary or business development funds) where such funds cannot be spent without local legislation.
The low rate of overall budget execution is almost certainly driven in part by delayed release of funds to counties from their share of intergovernmental transfers. Nevertheless, this cannot be the whole story. In general, there is also a fairly high degree of volatility within counties over time, meaning that fixed characteristics of counties, such as their size or level of development, cannot explain the variation.
Are there factors which might vary from year to year and which could have more explanatory value? One possibility is that there are variations in legislative amendments over time, and that sectors where legislators amend the budget to add more projects tend to have lower credibility. This would be consistent with research from other contexts, such as Nigeria or Philippines.
A related hypothesis is that poorly constructed participatory processes could be the culprit. Where the public is not properly guided with technical support, they may insert unrealistic projects into the budget that then cannot be implemented, and these proposals might also vary from year to year.
Our data also hint at the fact that executives and legislatures tend to claw back some budgetary funds for their administrative budgets, or at least budgets controlled by them directly, and understanding what exactly happens to these funds and how and why they are moved is also an area for further investigation