Public Disclosure Authorized Public Disclosure Authorized Photos.com Public Disclosure Authorized Public Disclosure Authorized EAP DRM KnowledgeNotes Disaster Risk Management in East Asia and the Pacific Establishing a Tracking System to Monitor Reconstruction Expenditures By A. Zaki Fahmi & Jock McKeon 1 In the aftermath of major humanitarian crises, whether caused by natural disasters or conflicts, the international community is increasingly pledging larger amounts of aid to help rebuild devastated regions. At the same time, recipient agencies are called upon to increase the level of accountability and transparency to ensure that the resources they manage are well spent. Large amounts of funding to handle, the need for greater accountability, and the increased pressure to improve aid effectiveness intensifies the necessity for reliable information; ii) timely analysis of reconstructionprogress ; and iii) the consequent level of funding. Hence, establishing a system that tracks the total expenditures from all actors involved in a reconstruction program is becoming an indispensible component of sound management practice in post-crisis reconstruction programs. A tracking system to monitor reconstruction expenditures should monitor all stages of post-crisis reconstruction financial flows, from the initial stage when donors pledge money to actual budget appropriations, and finally to the tracking of disbursements on actual projects. The advantages of such a tracking system are multiple. It enables actors to allocate appropriate funds where it is most needed and to avoid duplications, in terms of both, sector needs and geographic location. Such a system also allows agencies to detect problems early on and to take corrective action as needed, i.e., when there are low levels of spending on projects, or high volatility in the delivery of funds from donors. 1 The authors are based in the World Bank Office in Jakarta, Indonesia. Working Paper Series No. 18 This working paper series is produced by the East Asia and Pacific Disaster Risk Management Team of the World Bank, with support from the Global Facility for Disaster Reduction and Recovery (GFDRR). The series is meant to provide just-in-time good practice examples and lessons learned from projects and programs related to aspects of disaster risk management.
2 Disaster Risk Management in East Asia and the Pacific Post-disaster responses are normally conceptualized into three different stages: (i) emergency response; (ii) rehabilitation and early recovery (also called transition); and (iii) reconstruction. However, the boundaries among these consecutive stages often overlap and are sometimes difficult to distinguish. 1. The emergency stage refers to the period immediately after the disaster, when the focus is on humanitarian assistance aimed at saving lives and providing essential supplies to those most affected. 2. Second is the rehabilitation or early recovery stage. In this phase, the intervention is focused on restoring normality to the affected areas and communities. It includes activities such as providing temporary housing and buildings, repairing damaged structures, and restoring basic services, such as transport and public utility infrastructure. 3. Finally, the reconstruction stage includes activities designed to rearrange the affected physical space and environment and enable the allocation of resources in accordance with the new social priorities arising from the effects of the disaster (ECLAC, 2003). This guidance note illustrates eight simple steps required to monitor and communicate the flow of funds in the reconstruction stage. These steps are based on the experience of the World Bank in various reconstruction programs throughout Asia and the Pacific. Step 1. Conduct a damage and losses assessment Planning for the reconstruction stage requires an initial comprehensive assessment to identify the physical damage and economic losses caused by a disaster. In recent years, this assessment has been increasingly undertaken using a methodology developed by the United Nations Economic Commission for Latin America and the Caribbean (ECLAC). It provides affected countries or regions with the means to determine the value of lost assets and to define a baseline for reconstruction requirements. The assessment should enable the identification of the most affected geographical areas and sectors, together with corresponding reconstruction priorities. Eight steps required to establish an expenditure tracking system 1 2 3 4 5 6 7 8 Conduct a damage and loss assessment Establish the minimum core needs Construct the Master Table Set up the data collection system Process the data Define the data classifications Analyze the data Communicate the findings Step 2. Establish the minimum core needs The damage and loss assessment should ideally include estimates of the total physical damage, future losses, and any additional expenses related to the clean-up. The term Minimum core needs assumes that a portion of household and private sector damage and losses will be covered directly by those affected, possibly through insurance or savings. Therefore, an adjustment is made to the value of the damage and loss assessment to reflect this private coverage. The estimates of the value of the damage and losses may also be supplemented by adding estimates of the broader financial needs of the reconstruction program based on the criteria of the reconstruction strategy. For example, the core minimum needs may be adjusted upwards to include an estimation
Establishing a Tracking System to Monitor Reconstruction Expenditures 3 of the cost to rebuild to higher standards, and additional costs should be included to cover for an expected increase in inflation. Figure 1 illustrates the comparison between the minimum core needs and the total allocation of funds to projects. It highlights the amount of money going into building back better approaches, as well as the extent to which some funds are yet to be allocated to specific projects. Step 3. Construct the master table The master table is a core element of any reconstruction expenditure tracking analysis. It summarizes the damage and loss assessment, minimum core needs, commitments, allocations and disbursements of funds from all actors of the overall reconstruction program. It is organized by sectors that match the categories of the damage and loss assessment and by types of funding institutions, including national governments, donors and NGOs. Step 4. Set up the data collection system The financing part of the master table is populated by collecting information on financial commitments, allocations and disbursements for reconstruction programs. Commitments refer to the creation of a legal, contractual obligation between the donor and recipient entity, specifying the amount to be contributed. Allocations refer to the actual allocation of the committed funds for a particular purpose, program, or project. Disbursements refer to the actual payment of funds or transfer of in-kind goods from the donor to the recipient entity. The collection of data on donors commitments should start early in order to avoid losing any important information. In the first few weeks after a disaster, informal information on donor and country pledges normally begins to be reported. A formal donor conference is typically held shortly after a disaster to gather information on the types of donor commitments and their level of Figure 1: Comparison of Minimum Core Needs to Actual Allocations (as of December 2008) 10 US$ billion 9 8 7 6 5 Upgrading facilities in tsunami- and earthquakeaffected & post-conflict reintegration and development programs, 0.8 Inflation, 1.3 Nias, 0.4 Build Back Better US$ 0.8 bn Donors - grants, 0.1 Donors - soft loans, 0.4 Donors, 2.3 Build Back Better US$ 0.8 bn 4 3 2 Aceh damage and loss assessment, 4.5 Minimum Required to Rebuild to Pre-tsunami Levels US$ 6.2 bn NGOs, 2.0 Already Allocated to Specific Projects - $6.5 bn 1 GOI, 2.2 0
4 Disaster Risk Management in East Asia and the Pacific support. Further data collection from institutions other than donor countries (i.e., NGOs) can be carried out within a timeframe of one to two months. Data collection on actual allocations and disbursements to projects and programs may depend on the local institutional set up. In some cases this information can be obtained from the relevant reconstruction agency (if one exists) because donors and NGOs are usually required to submit their project details to such an agency. This information often includes the project name, key activities, funding source, implementing agency, targeted regions, project duration, and budget allocation. In cases where no data center exists, the information is collected by directly contacting the institutions. Table 2 identifies the strategies for consideration when targeting the different actors involved. In recent years, several aid management databases, such as the Development Assistance Database (DAD) and the Aid Management Platform (AMP), have been developed to monitor financial information and improve the management of the recovery process. However, in many instances the data coverage has been limited, often focusing on the UN and other core donor activities, and excluding government-supported projects that may Table 1: Example Master Table (US$ million) Summary of Needs, Projects, and Gaps (US$ million) Damage and Loss assessment (Including Nias) NEEDS PROJECTS BALANCE (Projects - Needs) Damage and Loss with Inflation Adjusted Minimum to build back 1 Total Projects and Programs Allocations Total Projects and Programs Disbursements Balance of Damage and Loss Balance of Core Needs Disbursements Gap (to Core) A B C D E D-B D-C E-C Social Sector 359 460 482 1,741 1,248 1,281 1,258 765 Education 151 193 204 523 375 330 320 171 Health 115 147 152 681 488 533 529 336 Community, culture and religion 94 120 127 537 385 417 410 258 Infrastructure and Housing 2,620 3,352 2,672 3,244 2,359-107 572-313 Housing 1,597 2,043 1,460 1,672 1,388-371 212-72 Transport 606 776 612 745 454-30 133-158 Communications 43 55 56 112 34 57 56-22 Energy 88 113 118 45 40-68 -73-78 Water & Sanitation 64 82 82 335 270 253 252 188 Flood control, irrigation works 221 283 284 250 122-33 -35-162 Other Infrastructure 0 0 59 85 51 85 26-8 Productive Sectors 1,183 1,514 223 738 616-776 514 392 Agriculture & Livestock 225 288 73 160 153-127 87 80 Fisheries 511 654 130 163 137-491 33 7 Enterprise 448 573 20 415 325-158 394 305 Cross Sectoral 681 871 349 794 569-77 445 220 Environment 554 709 201 115 124-594 -85-76 Governance & Admin (incl. Land) 113 144 129 660 430 516 531 301 Bank & Finance 14 18 19 19 14 1 0-5 Total 4,843 6,196 3,727 6,517 4,792 321 2,790 1,064 1 : Including Nias and inflation adjusted. Ratio 1.279295745
Establishing a Tracking System to Monitor Reconstruction Expenditures 5 Table 2: Reconstruction Data Collection Strategy Key players Data Collection Strategy National government Official government reporting; if a reconstruction agency is managing a large share of the reconstruction then data collection is more easily facilitated. Donors Data collection efforts through consultative mechanisms. Alternatively, collection from the top 10 donors. NGOs Comprehensive datasets are only feasible if government establishes a system to approve projects, including from NGOs; alternatively focus on the top 10 NGOs.* * Top 20 players (including government) managed more than 85 percent of the total reconstruction program in Aceh and Nias. nonetheless constitute a significant share of the overall reconstruction financing. Although the DAD includes sophisticated technical specifications, including visual breakdowns to the village level, it has faced many data quality issues, such as: (a) the inability to separate the data between emergency and reconstruction programs; (b) the problem of double-counting when donors transfer funds to their implementing partners; and (c) the inability to produce funding-gap assessments. Therefore, while such databases may help in storing and collecting data, they also need to be complemented by a team of analysts to clean, sort, and analyze the data. Experience from Indonesia s reconstruction programs shows that low-tech, labor-intensive data collection and analysis can produce more meaningful data than the high-tech, self-entry-based information systems. Datasets invariably contain errors that can only be detected by analysts. Hence, real people need to track real money. Step 5. Process the data Several pitfalls and challenges must be taken into consideration once the data have been collected: 1. Emergency funding needs to be separated from reconstruction and development projects. 2. Emergency spending plays a significant role in the wake of a disaster, including in-kind support such as medicine, temporary shelter, food, and cash for the clean-up work. 3. Reconstruction finance tracking should exclude emergency-type spending and focus on investments required to replace assets that have been damaged or lost, such as housing, schools, bridges, and roads. 4. This separation should be made manually by reading the project description in the project documents. Figure 2 (page 6) can be used as a guide in processing data. Second, double-counting can be avoided by focusing on either the executing agencies or the funding agencies. Often, donors transfer funds to UN agencies, NGOs or other donors to implement recovery projects. In order to eliminate the risk of double-counting, it is important to differentiate between execution and contribution. In Aceh and Nias, the tracking was done through individual projects at the level of the executing agencies to avoid double-counting. When fewer players manage reconstruction programs, such as after the 2006 Yogyakarta earthquake, focusing on the funding agencies may prove a better option. Table 3 details some of the pitfalls and challenges involved in analyzing data. Step 6. Define the data classifications Projects should be classified by sector and should follow the categories used in the damage and loss assessment. This subsequently makes it possible to identify gaps between funding allocations and where the most damage has occurred. This process is especially critical as there are frequently unclear project definitions, multi-sectoral projects, and sector mapping. The quality of the master
6 Disaster Risk Management in East Asia and the Pacific Figure 2: Framework for Processing the Data Damage and Losses Assessment core needs Government project data Approved projects data (if available) Donor project data RECONSTRUCTION DATA Cleanse Data Remove Duplicates Allocate to sectors Verify Data Conduct Analysis Reports Presentation NGO project data data processing Table 3: Data Analysis: Pitfalls and Challenges Key players National government Donors NGOs Key pitfalls and challenges Separation between emergency and reconstruction programs and sub-national data Separation between emergency and reconstruction programs, double-counting, and geographical data Separation between emergency and reconstruction programs and double-counting table depends on the classification of each individual project; therefore it is very important to have clear sectoral (and geographic) definitions. Defining sectors without ambiguity in their definition can be problematic. In order to resolve this problem, detailed descriptions of each project should be requested from the data providers. Based on the project descriptions, projects (or parts thereof ) can then be assigned to the appropriate sectors. This task needs to be performed during each data collection, and records on sectoral assignments should be maintained for future reference. This will help to ensure consistency across data reporting periods and consistency in sectoral assignments across agencies. The final step in populating the master table is to link all data with the original data source to update, crosscheck and avoid losing any data. Step 7. Analyze the data Once the master table has been populated, the existing expenditures can be compared to the actual needs and used to conduct gap assessments. Below are a few examples of the types of gap analyses that can be calculated: Needs compared to the reconstruction program: compares all projects being implemented and in the pipeline against estimated needs to help budget planning and forward estimates. Needs compared to disbursements: compares actual project disbursements to needs and the actual amount of funds spent to help estimate progress on the ground. Sectoral gaps represent the difference between total budget allocations (or disbursements) and the minimum rebuilding needs. In situations where core minimum needs are unavailable, the financing gap can be obtained by subtracting from the total budget allocated
Establishing a Tracking System to Monitor Reconstruction Expenditures 7 either the total damage and losses, or the government plan for reconstruction in each sector. Where data are available, it is also possible to compare needs, allocation, and disbursement geographically. Damage and losses, government plans, and minimum core needs should be adjusted to account for inflation. Table 4 shows how data should be aggregated once they have been collected. This table shows the breakdown of allocations, while similar tables also need to be produced for commitments and disbursements. Step 8. Communicate the findings Data collection and analysis should be performed periodically and communicated widely to all stakeholders. A quarterly production of results is often useful in the early stages of reconstruction to assist in the appropriate allocation of funds. In addition to formal publications, updates should be published containing key tables and graphs in Microsoft Word, Excel and PowerPoint formats, which are useful to stakeholders for their own report-writing purposes. Publications generally contain a broad picture of the status of the reconstruction process and include detailed analyses of the updated financing situation to supply reliable information. Figure 3 (page 8) shows examples of key information produced during expenditure tracking in Aceh and Nias, which are used widely by stakeholders. These graphs and the associated data have been reproduced in reports, briefing notes, and other presentations since 2005. Links to these resources are available online at http://go.worldbank.org/ HQMC6331P0. n Table 4: Example of a Breakdown of Funds Allocated Allocated funds (% total) BRR Donors NGOs TOTAL Social Sector 5% 12% 10% 27% Education 2% 3% 4% 8% Health 2% 4% 5% 10% Community, culture and religion 2% 5% 2% 8% Infrastructure 19% 16% 14% 50% Housing 10% 5% 11% 26% Transport 4% 7% 0% 11% Communications 1% 1% 0% 2% Energy 0% 0% 0% 1% Water & Sanitation 1% 1% 2% 5% Flood control, irrigation works 3% 1% 0% 4% Other Infrastructure 0% 1% 0% 1% Productive Sectors 3% 4% 4% 11% Agriculture & Livestock 1% 1% 1% 2% Fisheries 1% 1% 1% 2% Enterprise 2% 2% 3% 6% Cross Sectoral 7% 4% 1% 12% Environment 0% 1% 1% 2% Governance & Administration (incl. land) 7% 3% 1% 10% Bank & Finance 0% 0% 0% 0% Total 34% 35% 30% 100%
8 Disaster Risk Management in East Asia and the Pacific Figure 3: Examples of Key Outputs US$ millions 500 400 300 200 100 0-100 Sectoral gaps This graph shows the gap between funding allocations, and the amount of money needed to meet core minimum needs. Blue bars show that sectors have enough funds to rebuild to pre-tsunami levels, while red bars show a deficit in funding. -200 Health Governance & Admin (Incl. Land) Education Enterprise Community, culture and religion Water & Sanitation Transport Agriculture & Livestock Fisheries Communications Other Infrastructure Bank & Finance US$ millions Housing Energy Flood Control, Irrigation Works Environment 9,000 Funding flows Demonstrated in the diagram is the funding flow of commitments from contributors, to allocations to projects, to funds disbursed. This particular graph reveals that about 50 percent of allocated funds have been disbursed. 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Donor loans, 372 Donor grants, 2,828 NGO, 2,100 COI, 2,400 Committment 2103 1,641 1,948 Allocated 688 1,014 1,112 Disbursment Housing Trnasport Health Education Governance & Administration (incl. Land) Community, culture and religion Enterprise Water & Sanitation Flood control, irrigation works Agriculture & Livestock Fisheries Other Infrastructure Environment Communications Energy Bank & Finance n GOI n Donors n NGOs 0 200 400 600 800 1000 1200 1400 1600 US$ millions Allocations by sector Highlighted here is the difference in allocation choices made by different contributors across sectors. For example, the 2 nd and 5 th bars down show NGOs allocated fewer funds (than the government or donors) to the transportation and governance sectors. Source: World Bank, March 2007.
Establishing a Tracking System to Monitor Reconstruction Expenditures 9 References Agustina, C.D. 2007 Tracking the Money: International Experience with Financial Information Systems and Databases for Reconstruction, The World Bank-Global Facility for Disaster Reduction and Recovery, Washington, DC. Fengler, Wolfgang. 2007. Tracking Financial Flows after Disasters: Reconstruction Expenditure Tracking Methodologies (RETAM). The World Bank Economic Policy, PREM Notes Number 114. World Bank, Washington, DC. Fengler, Wolfgang, Ahya Ihsan, and Kai Kaiser. 2007. Managing Reconstruction Finance: International Experiences with Public Financial Management and Accountability. Policy working paper no. 4475. World Bank, Washington, DC. McKeon, Jock. 2008, World Bank: Tracking Reconstruction Funds in Indonesia after the 2004 Earthquake and Tsunami in Amin, S., and Goldstein, M. (2008) Data Against Natural Disaster: Establishing Effective Systems for Relief, Recovery, and Reconstruction. World Bank: Washington, DC. McKeon, Jock, and Masyrafah, Harry. Post Tsunami Aid Effectiveness in Aceh: Proliferation and Coordination in Reconstruction Wolfensohn Center for Development Working Paper No 6. Wolfensohn Center for Development at the Brookings Institution: Washington, DC.
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