Community-driven development decision tools for rural - IFAD

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Sustainable arrangements tofinance CDD projectsXCommon project funding mechanismsUnder IFAD loans, project funds are disbursed from a special account operated by the PCU. Thispractice is also used by most international and bilateral cooperation agencies. Under thisarrangement, project funds may or may not be included in the budget vote as Appropriations-in-Aid (AIA) 39 but, unlike other government fiscal and non-fiscal revenue, they do not transitthrough the Unified Consolidated Current Account (UCCA) and are not disbursed by thetreasury to the agents involved in project implementation. Instead, the government’s share ofproject costs is disbursed by the treasury into the special account to complement the externaldonor’s funds that are available to the PCU. In practice, the PCU becomes an ad hoc agent ofgovernment delegated to make financial transfers for the purpose of project implementation.The procedures envisaged for the handling of funds by the PCU ensure adequate accounting,financial reporting and audit in accordance with internationally accepted practices. Furthermore,in the case of CDD projects, the procedures would be expected to• maximize the effectiveness and efficiency with which funds are used at the community level;• ensure that funds are actually used to respond to community demands that comply with theproject menu and conditions;• facilitate the development of effective partnerships between the public administration, ruralcommunity organizations and locally active development agents of the private sector andcivil society.The PCU’s central role in funding project activities gives the external donor and centralgovernment a direct point of intervention in case the PCU, or some of the organizations thatreceive funding through the PCU, deviate from project objectives.Designing funding mechanisms for long-term sustainabilityPCUs are ad hoc arrangements that end when externally-funded projects close. They are nonsustainableby definition. To support CDD, a country needs permanent funding mechanismsthat, over time, can accommodate declining contributions from external public cooperationagencies and increasing contributions from government and non-government sources,including the communities and private philanthropic organizations. 40 A decision should bemade during project design as to whether the PCU arrangement can be designed to helpestablish support mechanisms for the CBOs that will be sustainable after project closure.Governments finance community-level development with their own resources in addition tousing external cooperation assistance. Technically, this requires an allocation for that purposein the budget vote. The vote may indicate the geographic distribution for the funds to betransferred, as well as other criteria that must be applied for their use. In countries that havedevolved responsibility for rural development to the district level this vote should be, inprinciple, at the disposal of the District Assemblies. The equity objective of the budget policyrequires that the transfer of funds from the central to local governments be governed by theprinciple of “reverse tax capacity”. This establishes a “fonds de péréquation”, whereby the poorestdistricts of the country receive more support from the centre than the wealthier districts.39 For more information about this and other technical expressions and acronyms used in this chapter, see Appendix 1: A Note onFiscal Decentralization.40 The reader is reminded that this is one of the specific objectives of the approach highlighted in the introduction.71
Funds are transferred to the local governments by the treasury using instruments called Inter-Governmental Financial Transfer (IGFT) which can be unconditional or conditional, dependingon the degree of freedom the central government wishes to recognize under the vote. IGFTs areassessed in terms of the qualities shown in Box 34.IGFT transactions in many countries are not typically characterized by the qualities identifiedin Box 34. Central government officers and local administratorsoften have a vested interest in non-transparency because it canBox 34facilitate elite capture of the benefits derivable from using theKey qualities of IGFTsresources transferred by the IGFT. Improving current practices• Transparency: a readily with IGFTs can be a major objective of a CDD project.understandable statementexists describing the The flow of fundsconditions upon which thetransfers are made.PCUs may support CBOs’ initiatives by• Predictability: receiving• directly funding private or public sector service providersorganizations can rely onthat implement subprojects and activities that respond tothe transfer of resourcescommunity demand;over a period of time,• channeling funds through the district budget;which permits them to• transferring funds to CSOs of public utility that formulatestrategically plan the useand implement community plans jointly with the CBOsof the resources.(see Figure 5).• Autonomy: organizationscan allocate the fundsDirectly funding service providers is often the preferred approach.to their own priorities inan independent andIt simplifies project supervision and reduces the risk of noncompliancewith subproject approval criteria andflexible manner.procurement/disbursement procedures. However, it makes littleFigure 5Flow of funds from the PCUDirect paymentsto providers of services to the CBOsDirect paymentinto the budget of devolved local governmentsThePCUTransfer through thecentral governmentbudget voteto CSOs declared to be of “public utility”Transfer through a specialized financial services organization- to rural Cbanks- for lending to the householdsThe economy at thecommunity level72
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Community-driven developmentdecisio
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The opinions expressed in this publ
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PART B. CDD PROJECT DESIGN DECISION
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ForewordThe CDD Decision Tools is t
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What is CDD?A definition of communi
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mechanisms on a list of priority ne
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Figure 1Example of decision tree on
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ICDD’s emphasis on communitiesand
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The answer to the second question i
Page 21 and 22: IICDD and local governanceDefinitio
Page 23 and 24: communities and local governance in
Page 25 and 26: IIIPoverty focus of CDDIFAD’s spe
Page 27 and 28: The way that partnership is negotia
Page 29 and 30: Risk of elite captureNon-exclusion
Page 31 and 32: Elite capture by local, professiona
Page 33 and 34: Box 17Lessons learned about targeti
Page 35: Poverty and poor resilience against
Page 38 and 39: espect. For the political setting t
Page 40 and 41: IFAD’s CDD projects do not need g
Page 42 and 43: domain of a community or a small cl
Page 44 and 45: Government procedures andprocesses
Page 46 and 47: Part B.CDD project design decisions
Page 48 and 49: To link community development and t
Page 50 and 51: CDD and production and marketing in
Page 52 and 53: Table 2Degrees of CDD in rural fina
Page 54 and 55: Partnership issues in CDD projectsV
Page 56 and 57: eduction when there is government d
Page 58 and 59: The government ideally should inclu
Page 60 and 61: the CBOs (i.e. VDCs and different t
Page 62 and 63: territory that may include several
Page 64 and 65: Implementation arrangementsfor CDD
Page 68 and 69: • conformance with conditions imp
Page 70 and 71: A larger CDD content is achieved by
Page 74 and 75: contribution to building a sustaina
Page 76 and 77: Financing projects through CSOs of
Page 78 and 79: Managing CDD projectsXIMost common
Page 80 and 81: Managing expectations about paceDur
Page 82 and 83: management. In many cases, the meth
Page 84: political or project management int
Page 87 and 88: A note on fiscal decentralization1.
Page 89 and 90: to use the money in the way it deci
Page 92 and 93: Appendix 291
Page 94 and 95: targeting around 30 per cent of the
Page 96 and 97: In both Mali and Guinea, the interv
Page 98 and 99: 25. Mansuri, G.; Vijayendra Rao. 20
Page 101 and 102: CONTACTSMohamed ManssouriCountry Pr
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Community-driven development decision tools for rural - IFAD

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