Practical approaches to the aid effectiveness agenda: evidence in aligning aid information with recipient country budgets

Working and discussion papers
July 2010
Samuel Moon with Zachary Mills

The Paris Declaration and the Accra Agenda for Action emphasise the importance of aligning aid with recipient government priorities and delivering aid through government systems. However, since a significant amount of aid is not delivered through national budgets, the issue of aligning these resources to government systems remains a major challenge. A fundamental concern is the ability to relate aid resources to the expenditure patterns of recipient governments. Too often, that link is not made. Generic donor ‘sector’ categorisations of aid are applied at country level, even though these do not relate meaningfully to recipient governments’ sectoral or administrative budget classifications.

At the core of this problem is the need to produce aid information in a way that can be aligned with the administrative/organisational classification and the functional/purpose classification of a recipient government’s budget. Making aid information available to the recipient country government at the relevant point in their budget calendar is also important. An explicit linkage between the purpose of aid and the government development strategy and budget is fundamental to more effective strategic planning and budgeting. It will also facilitate the implementation of government policies and programmes in the context of a more comprehensive and accurate estimate of the total government and donor resources available for national priorities.

This paper explores the linkages between aid and budgets in two ways. First, it documents similarities among 14 aid-recipient country budgets, comparing them with the Creditor Reporting System of the Development Assistance Committee (DAC/CRS) and the UN Classification of the Functions of Government (COFOG) system. It assesses the fit of the latter for practical use by donor agencies. The main aim is to contribute to the development of more comprehensive sub-sector classifications, which may also be movable among top-level sectors, so as to fit around decisions made at country level on sector definitions.

Second, the paper constructs a generic functional classification, designed specifically for the purpose of examining budget administrative classifications. This set of functions is grouped at sector level for ease of analysis and use, but is anchored on the lowest level of the classification. The aim was to review the commonalities between budget administrative classifications and develop a draft set of generic functional definitions that best align with the administrative structures of the countries in the sample. Those definitions may then be tested at donor headquarters level. The paper also makes recommendations on how to facilitate the transfer of aid information, particularly aid that is not spent through recipient country budget systems.