C. Budgeting Financing

 

The financing of statistical activities is a constant endeavour for the leadership of the National Statistical System. It is as a core undertaking at the time of design and implementation of National Strategies for the Development of Statistics (NSDS). A fundraising strategy should ensure that the sources of funding -with their specific requirements- contribute to achieving national strategic goals.

During the assessment phase, an evaluation of past funding mechanisms should be carried out, taking into account the following dimensions: source, continuity of support, amount, activities, type of funding instrument and specific conditions for fund management. The assessment will shed light on identify those partnerships more adequate for  attaining the NSS objectives.

In light of the assessment conclusions, new objectives and expected results are determined, and an action plan, covering all activities to be completed during the validity of the NSDS, is prepared. The action plan is accompanied by a timetable and a budget, on the basis of a costing. A new evaluation of the landscape of potential funders should be completed and each of the activities should include a funding source (whether domestic, external or mixed). 

 
NATURE OF THE EXPENDITURE TO BE FINANCED, SOURCES OF FINANCING AND COSTING

Nature of the expenses involved in the NSDS

In a National Statistical System, several areas need to be considered for producing relevant, timely, reliable and accessible statistics on a long-term basis to facilitate good decision-making. The following areas are considered: resources (physical, human, monetary, legal), skills and knowledge (such as statistical production processes, quality assurance frameworks, data literacy), management (e.g. coordination between national statistical agencies, strategic planning), governance (such as the relationship with political authorities) and incentives (for example, the legitimacy of official statistics).

Improvement in any of these areas requires the preparation of action plans, composed of strategic activities and therefore incurring on additional expenditure. The budget of the NSDS should include operational costs, those that the NSS would incur with the current set of activities, and the additional investment required to implement the strategic activities.

Costing

Once the NSDS is designed and objectives are set, both operational costs and the additional investment should be costed for the period of the action plan. In this way, an ‘all-in’ scenario is depicted. An initial costing of current activities should be done at the level of each agency in the National Statistical System, indicating what is already funded for the period (African Union, 2012). With this estimation, individual budgets should be assembled to produce a baseline scenario for an NSDS budget, including funding priorities (“core”, “strategic” and “aspirational” activities). Great attention must be paid to harmonisation of methods used to cost action plans for NSDS, especially in countries where statistical systems are decentralised.

Prioritising activities between ‘core’, ‘strategic’ and ‘aspirational’ allows to depict gradual scenarios between the baseline and the ‘all-in’. This facilitates searching for extra funds while achieving the objectives outlined in the strategy (for example, if expanding the use of administrative records in official statistics is ‘strategic’ for the NSS, and improving data literacy is ‘aspirational’, funds for the former should be sought after first). The additional costs of undertaking the NSDS should be costed at “the levels of coordination activities and systems of statistical production in organs of state” (African Union, 2012: 26).

A final review of the costs indicated in the budget should include assessing the cost-effectiveness of past activities and taking provisions to improve it (e.g. selecting other vendors). A special consideration before submitting the final budget is the likelihood that all costed activities will be completed in the current period, considering available human resources and other constraining factors.

Failure to prioritise between activities and project the time necessary to complete them may result in the failure of the action plan in itself; therefore it is crucial to consult and dedicate time and resources to this task.

 
FINANCING STRATEGIES AND SEARCH FOR FINANCING 
 
The activities of the NSDS action plans can be financed from national (or internal) resources or from external sources. Usually, a combination of both is used. A common practice is to finance operational costs with national resources. Recourse to external funding can be justified in the case of additional investments (e.g. development of new tools, training and improvement of human resources, infrastructure development.).

To mobilise the substantial financing required for the successful implementation of the NSDS, a balance between national and external resources should be guaranteed by the government, taking account the priorities of the NSS, the public sector’s financing capacity and the alternatives offered by bilateral and multilateral cooperation. It must thus define a financing strategy, with an “optimal” combination of funding sources that responds to the NSS needs. It also implies balancing the mix of non-conditional funds over ear-marked ones (those aimed at a specific project or activity).

The proportion of national resources for statistical purposes varies widely between countries, and from one period to another. In most LDCs, the proportion of financing derived from external resources exceeds that obtained from internal sources. Nevertheless, external dependency should be assessed with a critical eye, since those funds are generally ear-marked and involve high reporting costs.  Results-based frameworks, often accompanying external funding sources, can also have a short time span, therefore privileging short-term, more immediate-rewarding projects.

A financing strategy must be based on decisions taken at the highest level of government. For these decisions to favour the financing of the NSDS, they must be aligned with the National Development Plan (NDP) to improve co-ordination between the NSO and the Ministry of Planning. The development of a national statistical system is, above all, a political matter. Governments must decide the proportion of national resources devoted to statistical activities, and whether or not the system will be developed by having recourse to loans in the medium and long-term.

The NSDS financing strategy must be defined early, if possible at the end of the national statistical system assessment. The results of the assessment should be shared with technical and financial partners to establish a sound basis for discussion before and during the preparation of the NSDS action plan. This discussion will be more likely to succeed if the government has clearly determined the proportion of national resources that it anticipates allocating to the financing of the country’s NSDS. At this point, thorough knowledge of external financing sources is also required.

A financing strategy should be designed to achieve the sustainability funds over time, at least during the validity of the NSDS. To promote longer-term planning, smooth disbursements should be prioritised over lump-sum ones. Looking for the right partners, especially external ones, is crucial to leverage not only financial resources but also the support for achieving NSDS objectives. The financing strategy should also include a communications plan with funding authorities, since a “good flow of information is at the core of success” (Statistics Norway, 2013: 5).

“Communication is crucial for a well-functioning project. All parties should do what they can to contribute to a flow of information, both within and between the two institutions. Communication is one of the most important tools to increase the transparency in the project and thereby reduce both general and cultural misunderstandings.” (Statistics Norway, 2013: 47).

 

1. Stakeholders and donor management

There are several mechanisms for improving the communication between the funding authorities and those responsible for implementing and coordinating the NSDS. For international donors, results-based frameworks are commonly used to monitor the progress of a development project. In the case of national governments, the World Bank recommends using Medium Term Expenditure Frameworks.

An MTEF “comprises a global financial budget set at the highest level by central departments, basic discussions to estimate the current and medium-term costs of public policy options, and finally, a process of adjustment of costs and available resources” (World Bank, 2013b). An MTEF allows to reconcile objectives, budgetary allocations and performance measurement. It is therefore possible at all times to balance resources and expenditure to achieve a fixed objective. Usually, a distinction is made between global and sector-based MTEF, the latter being drawn up at the level of ministerial departments, which are given responsibility for their management. In the context of implementation of NSDS, a “sector-based” MTEF can be prepared for statistical purposes for the implementation of an action plan, including the activities that must be carried out by all public statistical departments, regardless of their supervisory ministry. Few examples of such MTEF are really prepared in developing countries, with some exceptions (e.g. Philippines). The high technical and political status conferred to the MTEF by the Bretton Woods institutions and the Ministries of Finance suggests that the explicit inclusion of the NSDS and its costs in a MTEF should be pursued.

Results-based frameworks represent “the underlying logic that explains how the development objective of a project is to be achieved. This is achieved by translating the results chain of an intervention into indicators that measure the degree to which inputs are being transformed into specific activities and outputs, and the degree to which a relevant target population is using those outputs as the anticipated outcomes of the project.” (World Bank, 2013a: 1).

While results-based frameworks can provide a detailed monitoring of a statistical project, their use “the ultimate output of any statistical activity is the production of data and information. And the expectation is that these data will generate positive outcomes, which relate explicitly to the uses to which the data are put, such as informing, formulating and monitoring policy and policy outcomes, research (academic, government, NGO and commercial), etc. Outcomes will then have impacts, on growth, poverty, well-being, the environment, etc.” (Round, 2012: 12).

In the future, a good strategy would be tracking and communicating the intermediary outputs and outcomes that the NSS achieved in the funding period. Such an approach could help shifting support from specific outputs (e.g. a specific survey) to larger outputs (e.g. developing environmental statistics) and eventually outcomes (e.g. increasing statistical literacy among the population or use of statistics for decision-making).

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2. Assessing the financing landscape National sources

National resources destined for the financing of statistical activities are derived from the National budget. While national statistical institutes generally have their own budget, sector-based statistical services are often mixed up with those of the units from which they depend. For this reason, it is difficult, if not impossible, to estimate the public budget for sector-based statistical services. To respond to this challenge, the preparation of a consolidated budget integrating the needs of the whole NSS (NSO and other official data producers) on a yearly basis would help.

In the case of NSOs, the units handling administrative and financial affairs are responsible for the preparation of a draft budget every year under the authority of the institute’s director. This must observe the various stages of the timetable of preparation of the national budget and take account of the recruitment of personnel.

Generally speaking, the resources allocated to the official statistical system from government budgets will experience great difficulty in increasing more rapidly than the country’s Gross Domestic Product over a very long period, regardless of the priority the government places on the development of its statistical system. One way to increase the availability of funds targeting statistical activities would be to reform the structure of those statistical units in-line ministries that support the central statistical body so as to increase their profile and attract a suitable and dedicated budget.


National Statistical Offices (NSOs) that enjoy a level of independence — a trend that seems to grow, in particular in Africa — should consider signing performance contracts with their government to gu
arantee a pre-defined volume of financial resources over a period of several years. Such an arrangement would require that the NSO deliver well defined statistical outputs. These NSOs should take full advantage of their independent status by offering paid services to third parties, while not losing sight of their public service mission.

In the case of a sector-based statistical department that does not have its own budget, its manager is responsible for requesting the necessary funding at the time of preparation of the draft budget.

The national budget is voted on by Parliament each year. In the case of investment expenditure, public investment programmes are also drawn up over two or more years. Increasingly, programme budgets are also prepared to meet the needs of results-based management. Finally, other tools such as MTEF are also deployed.

In developing countries, and particularly African ones, preference has been given to the preparation of medium-term expenditure frameworks, on the one hand, at the beginning of the millennium, by management focusing on the results of development, which boosted planning activities and which was behind the Poverty Reduction Strategy Documents (PRSD), and on the other hand, by budgetary aid, which has developed since then and which is strongly encouraged by the Paris Declaration on Aid Effectiveness.

External sources 

Before recurring to international funding, it is important to assess the landscape of potential funders, the modalities they offer, their interests and priorities and their reporting mechanisms. A good fundraising strategy would imply conducting a background research and understanding commonalities between national priorities and those of the funders before submitting a proposal, with the purpose of ensuring the least number of concessions are made at the time of negotiating.

 

i.    Types of funders

Very few countries have recourse to loans to finance their NSDS, even on very easy terms. For instance, Burkina Faso’s implemented its 2004-2009 NSDS through a combination of resources derived from the national budget, grants in the form of project and programme aid, and an STACAP loan from the World Bank at a concessional rate.

For their part, technical and financial partners have gradually felt the need to refine their financing strategy to respond better to the growing needs of developing countries. The majority of bilateral and multilateral donors have programmed frameworks for their development aid (e.g. European Development Fund, UNDAF, African Development Bank). Support for statistical development through the financing of NSDS can be mentioned in the context of these programming frameworks.

Advocacy in favour of financing NSDS, which takes place during discussions and in consultative groups, is of course important, but it is not enough on its own. The commitments given by donors of funds before and during these events must be followed up, and must materialise, for the purpose of the relevant projects presented by governments over time. There must be constant advocacy, using all available channels, such as groups of technical and financial partners involved in national statistical development (see the example of Mali) (see D. ADVOCACY).

Increasingly, southern cooperation has become more relevant for developing countries to implement their statistical strategies. Results of the latest survey on capacity development (PARIS21, 2018) indicate that for ‘southern’ countries, south-south cooperation is a relevant source of funds for improving the capacity of their NSS in aspects related the integration of new data sources, the incorporation of new technologies and the improvement of data disaggregation.

Besides traditional sources of external funding, the expansion of the data ecosystem allows considering other partners, given that data collection options have expanded for several countries to include new domains, including gender statistics and geospatial mapping. This is especially the case with foundations that have started playing a relevant role in financing data-related initiatives. The Bill and Melinda Gates Foundation and the William and Flora Hewlett Foundation are leading these efforts with commitments of, respectively, USD 13.2 and 3 million in 2016 (PARIS21, 2017).

Several countries are considering public-private partnerships (PPP) in statistics as a source of funding (PARIS21, 2018). The private sector includes not only private companies, but also academia and non-governmental organisations. In general, PPPs in statistics are not sources of funds per-se, but they do aid in saving costs while increasing the frequency and granularity of data collection. “Although cases of successful PPPs are sparse, the examples studied have shown that the private sector is willing to co-operate with third parties, provided that their confidentiality requirements are respected”. (Robin, Klein & Jütting, 2016: 25).

ii.     Financing modalities  

Having regard to the limited resources that developing countries devote to statistical activities, the deployment of NSDS remains largely dependent on external resources. The financing of statistical activities by technical and financial partners can take various forms: project aid, programme aid, general budgetary aid, and sector-based budgetary aid.

Project aid 

 

Programme aid

Project aid is when a donor makes resources available that are intended exclusively to finance the whole or part of a statistical operation (survey or census) or an activity aiming to increase capacity (for example, training or the reinforcement of human resources).

Programme aid can target the development of an area of activity other than statistics (for example, health, education, agriculture) while reserving part of the funds for statistics

Budgetary aid 

Implies making financial resources available for the national budget to aid in achieving certain development objectives that can be general, such as the improvement of governance (general budgetary aid) or sector-based (sector-based budgetary aid). 

Basket funds 

A basket fund is a pooled structure where donors pool their resources for a large project (e.g. completion of national surveys and censuses) to facilitate its management. These can also be put in place to implement NSDS (e.g. the case of Rwanda). The setting up of a basket fund usually involves the signature of an agreement or memorandum between the government side and the donors concerned. These documents contain the rules of engagement: the objectives to be achieved and the results expected, the respective contributions, the mechanisms for managing and disbursing funds, the system of monitoring, assessment, reporting and audit, etc. The management of basket funds may be entrusted to one of the donors, or to the country’s central statistical organisation, under the supervision of a steering committee.

Statistical development funds

Specific financing instruments have been set up multilaterally. This is the case of the World Bank Trust Fund for Statistical Capacity Building, which finances the preparation of NSDS and other activities to build statistical capacity in the form of donations. The World Bank’s STATCAP programme is intended to finance the implementation of NSDS with loans at very low interest rates. More recently, the Statistics for Results Facility has been created to help countries that have a suitable and partially-financed NSDS, to receive donations to implement it. A first group of pilot countries has thus had the benefit of substantial financing.  Finally, since the African Charter on Statistics was adopted in 2009, some African countries have decided to set up statistical development funds (not operational yet). These funds could be in a number of forms: the setting up of an appropriations account at the State Treasury that is managed in accordance with the rules of public accounting; the creation of a public administrative institution of modest size to manage funds made available by the State in the form of grants, or even allocated revenues, as well as contributions of funds from donors that agree to participate in the provision of such funds.

 

The preference of a specific funding modality over another depends on the country’s capacity to leverage funds, the type of project that is being financed and the mechanisms that are more effective for monitoring performance and sustainability. 

iii.  Matching priorities

Since the early 2000s, many developing countries have drawn up and implemented Poverty Reduction Strategy Papers (PRSP) with the support of the international community. Several countries have moved forward to produce National Development Plans (NDP). In LDCs, PRSPs and NDPs documents now constitute the reference framework for development strategies and policies and for the intervention of technical and financial partners. These documents define priorities, operational objectives and expected results as well as the activities to be carried out, and indicators, in accordance with management principles focusing on results. These strategies include indicators of success that need to be periodically monitored and evaluated by policy-makers in order to  Statistics should be given a priority status in the development strategy and the NSDS recognized as part of the strategy.

Unless statistics are regarded as a sector to be developed in its own right, PRSD should, in their lists of priority actions, include the main activities of the action plans of NSDS with their costs and timetable; this will facilitate the search for financing for statistical development when the discussions or consultative groups organised to mobilise the financing of the PRSD are prepared and take place. There ought to be a close articulation between the global development strategy and the NSDS. This linkage is unfortunately often missing.

iv.  Benchmarking

Before deciding on a financing strategy, a country must conduct an exhaustive benchmark about the funding practices in other countries. This is especially true regarding government contribution to funding the NSS. When the NSDS is designed for meeting the needs of the national government as outlined in the NDPs (for example in Rwanda, Philippines and Ethiopia, see below), donors have a clearer panorama of what national priorities are, thus it results easier for them to align to them. At the same time, higher use results in higher domestic funding.

Palestine has increased the share of national funding from “from 40% in 1994 to 75% in 2017” (PARIS21, 2017). In Rwanda, “for the first NSDS, the NISR mobilised 96% of the resources required from both the government and development partners (NISR 2014). The Basket Fund (comprised of support from DFID, EU and WB) contributed 44% of the total, while the government funded 29%, which was directed to core recurrent operational costs (NISR  2009)” (Sarwar, Samman and Greenhill, 2017: 11)

 

In the case of Philippines, the NSS is mainly funded though domestic resources (budgetary allocations) mobilised by means of successive NSDSs and MTEFs. This was possible because of the strong ties between the executive office and the development of NSDSs: “Executive Order 121 mandates that the PSDP [Philippine Statistical Development Programme] requires endorsement by the President of the Philippines through a presidential proclamation to make it a legal and enforceable document” (Sarwar, Samman and Greenhill, 2017: 14). Similarly, in Ethiopia “the government provided a majority of the funding for the first NSDS - $32.6 million – while development partners and non-governmental organisations contributed $10.27 million USD (CSA 2009).” (Sarwar, Samman and Greenhill, 2017: 17)

 

In practice

The way in which resources are managed and the expenditure that they should cover vary according to the sources of financing and the financing mechanisms. The case of national resources, and that of external resources, will be dealt with in turn below.

 

How

The management of financing from a national source and of the expenditure relating thereto is governed by the rules of public accounting. Disbursements of funds are managed by departments of the State Treasury, while expenditure is managed in accordance with the procedures applicable to public finances, and in particular the public procurement code.

In the case of external sources of finance, management procedures vary according to who the donors are and what financing mechanisms are put in place. In the case of project aid and programme aid, the management of resources can be entrusted wholly or partly to an external autonomous management unit, or to one that is set up inside the beneficiary institution. The management rules and procedures are laid down by the donor. According to their complexity and the extent to which they are under the control of national managers, observance of applicable time limits will be more or less assured.

As its name indicates, budgetary aid is paid to the national budget beneficiary. The Paris Declaration on Aid Effectiveness adopted in 2005 recommends that donors should define their aid in accordance with the priorities laid down by the beneficiaries themselves, and that they should use the latter’ internal procedures. They should therefore harmonise their interventions. Disbursements of budgetary aid are often subject to conditions, non-compliance with which can have negative consequences for the statistical activities that would be financed in this context.

As for basket funds, they can be managed like a Trust Fund or as a component of global budgetary aid.

Regardless of the methods used to manage financing from external sources, it is necessary for the managers of public statistical offices and/or of NSDS to have a thorough knowledge of the aid programming cycles of the various donors of funds, in order to benefit from this type of financing on time and to the maximum extent.

 

Difficulties encountered and solutions 

In many developing countries, the results obtained in the area of financing and the implementation of NSDS are disappointing. This partially explains the delays and low completion rates of activities included in the NSDS action plans. Two main factors can explain this: a) the unrealistic nature of the action plans, which plan too many activities having regard to the human resources available, ii) the absence of an advocacy strategy and genuine financing strategy. 

Ideally, the financing strategy for NSDS should be discussed immediately after the adoption of the survey report and while the strategies are drawn up, well before the preparation of action plans. Once the action plans are approved by the government, statisticians get down to organising a conference of donors of funds. These conferences have seldom occurred and the few that have been organised show mixed results, with donors being more interested in Poverty Reduction Strategy documents. A strong linkage between PRSPs/National Development Plans and NSDSs would increase the visibility of the NSDSs and ease the mobilization of resources from the donors.

Another difficulty encountered in the financing of statistical activities arises from the weaknesses in the system of monitoring and evaluating the NSDS. The period covered by NSDS (three to five years, or even longer) is too long to enable the administration to enter into specific financial commitments. It is therefore important to draw up annual national statistical programmes that will regularly be the subject of implementation reports (see IMPLEMENTATION). Although derived from the action plans of NSDS, such programmes must only include activities that have already obtained financing or that are capable of securing financing in the course of the year under review. In this respect, a group of technical and financial partners supporting statistics is the appropriate framework within which to combine or supplement the financing already available from national or external resources, and at the same time enables a continued dialogue with national decision-makers on statistical development. The relatively successful experience of Mali is an example of this. (see examples of good practices below).

 

Conclusion

Along with inadequate human resources, difficulties encountered in the financing and budgeting of statistical activities are among the main causes hindering NSDS implementation. Particular emphasis must be placed on the following points:

i) The need for a realistic financing strategy

ii) A proper connection between NSDS and National Development Plans

iii) Sound control of financing strategies, programming frameworks and donor disbursement procedures

iv) The importance of constantly arguing in favour of the mobilisation of funds

v) Monitoring, assessment and reporting of the financial performance of the action plan, regarded as an integral part of the global system of monitoring, assessment and reporting of NSDS.

vi) The possibilities offered by the new donor aid procedures such as budgetary aid should be explored in detail, while remaining conscious of their constraints and limitations.

Admittedly, the synchronization of NSDS plans with each donor programming cycle is quite difficult. It might take one or two years before approval is given to a formal request and several months before the funds are released. 

A strong political commitment in favour of the NSDS and a more performing NSS should lead to an increasing portion of the budget financed by the country and to more independence vis-à-vis the donors. The preparation of a new NSDS should target a rise of the fraction of the NSS financed by the country.



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To this effect, an number of initiatives have emerged in recent years:  Tracking citations of official statistics in the media, conducting user satisfaction surveys, counting visits to official statistics agencies websites (UNECE, 2017); developing a statistical literacy index and a use of statistics index in National Development Plans and official documents (PARIS21).