EURASIA REGIONAL TRAINING HUB

EITI Advanced CourseKHAZAR UNIVERSITY ▫REVENUE WATCH INSTITUTE

15-17 June 2012, Baku

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▪آمدید

Introductions:name, organization and…

What is something nice about your

country that most people do not know ?

What is something about the extractive

sector that most people in your country

do not know?

DAY 3DAY 3DAY 2DAY 2

Training OverviewTraining Overview

DAY 1DAY 1

Report AnalysisReport

AnalysisInnovationsInnovations

Theory of

Change

Theory of

Change

Action PlanningAction

PlanningExams/ Evaluati

ons

Exams/ Evaluati

ons

Value ChainValue Chain

Report QualityReport Quality

Country Presenta

tions

Country Presenta

tions

EITI as a “stepping stone”

to other reforms

EXTRACTIVE SECTOR VALUE CHAIN

EITI a Step TowardSustainable Development

Ensuring revenue

transparency

EITI in the value chain

Getting a good deal

Ensuring revenue

transparency

Managing Volatile resources

Deciding to extract

Investing in sustainable developme

nt

Step I: Theory of Change and

The Problem Tree

Problems

Causes(ref. value chain)

Roots ( hard to see causes)

Hint: be specific!

NOT ‘Lack of Transparency‘TRY ‘State owned oil Co. does not publish a budget or sales figures’

NOT ‘Lack of Accountability’ TRY ‘ Parliament does not have the tools and knowledge to understand payments from the extractive sector and hold ministries accountable’

The Metaphor of a Tree

Step 1: Start with 3 problems with the extractive sector in

your country

Step 2: Identify the underlying causes based on the value chain – where do

decisions go wrong?

Hint: Choose problems that are specifically related to the extractive sector.

Question: what is special about the extractive sector and it’s impact on development?

Causes (refer to Value Chain)

Roots ( hard to see causes)

Step 3: Roots explain why poor decisions on the value chain–these are sometimes hidden and many!

Roots ( hard to see causes)

Hint: ‘supply side’ capacity gaps :

• Technical expertise• Lack of international standards• Lack of clarity/ definitions • Adequate staff• Adequate financing• Necessary mandate/Authority• Monitoring and Enforcement• Information• Motivation/Political Will

… but don’t forget the problem includes lack of demand for change too!

• No mobilization/organization of stakeholders

• No international support• Lack of public awareness /pressure• Lack of political will• Lack of interest by media• Lack of awareness of oversight actors

Capacity Gaps

Roots ( hard to see causes)

Hint: think about barriers such as•Structural (lack of strong legislative /judiciary/accountability mechanisms, No access to information)

•Interests (status quo) e.g.• Elites (individuals, families)• Political (parties or politicians also branches e.g., executive) • Networks (factions)• Inter-ministerial rivalry

•Norms (lack of demand for change, no culture of political participation, fatalism, competition rather than coalition networks)

•Beliefs/ attitudes (short term: ‘oil will last my lifetime’; ‘gov. will take care of me’; lack of knowledge of rights; fear; perceptions of fairness; no faith in the state; no faith in the public; need to control the public)

Structural Barriers- Deep Roots

Don’t Get Stuck!

CAPACITY GAP/ STRUCTURAL BARRIER

ROOT CAUSES

POLICYCAUSES

Instructions

Step II:Building a Theory of Change

based on Transparency

Who is a stakeholder in your Problem Tree analysis ?

Hint: definition of a Stakeholder:•who is responsible for the action (implementation)?•who is responsible for decision-making ?•who is affected by the decision?•Others: who have a oversight or monitoring role on the quality of decision-making or who have an enforcement role.

A CB

Stakeholder labeling

Decision- maker

Affected Stakeholder

A CB Decision-

maker

Affected Stakeholder

How can we transform the problem with more transparency and EITI?

Instructions

Present your Tree! (5 min each)

Characteristics of a Quality EITI report

PurposeTo present 10 indicators of a high quality EITI

report and their application to <country>

http://data.revenuewatch.org/eiti/

EITI: a Model for Change

ACTIONDATA (Reports) INFORMATION

Is it good data?:

quality and accessibility

HOW do we use it better?Better report

analysis

WHO should act? WHAT should be

done?Advocacy: building support

Why do we care about report quality?

Report quality depends on local decisions and processes

Global Standards

EITI Rules

Independent Validation

Local Standards

TORsWorkplan

MOU

10 Indicators of Report Quality

Regularity1Timeliness2Materiality3Reliability of Data4Coverage5

Discrepancy6SOEs7Disaggregation8Comprehensibility9Accessibility10

Comparable, objective - NOT exhaustive Focused on reports - NOT process Based on requirements + Best practice (#s 8,9)

1. Regularity

Does the country produce reports every year?

Measured as: #of reports / # of implementing years

The closer the score gets to a 1, the closer the country is to producing reports every year E.g.: country X joined EITI in 2008 and has produced two reportsCountry X Score =2/4, or 0.5

1. Regularity

http://data.revenuewatch.org/eiti/indicators/regularity.php

1. Regularity

http://data.revenuewatch.org/eiti/indicators/regularity.php

1. Regularity and the EITI Rules

First EITI Report within 18 months. –Thereafter, annually.

REQUIREMENT 5E

2. Timeliness

2. Timeliness

http://data.revenuewatch.org/eiti/indicators/timeliness.php

2. Timeliness

http://data.revenuewatch.org/eiti/indicators/timeliness.php

2. Timeliness and EITI rules

–Data no older than the second to last complete accounting period –e.g., an EITI Report published in 2010

based on data no later than year 2008

–Note: after 1st validation…

REQUIREMENT 5E

3. Materiality (Requirement 9 +11)

Is it clearly defined?

Measured as:Is materiality defined in the report? (Y/N)

Materiality thresholds should cover important revenue flows without overburdening the compilation of an EITI report

3. Materiality –Country Thresholds

3. Materiality – is it clearly defined?

3. Materiality and EITI rules

•agreed by MSG in templates•must be disclosed in EITI report!

REQUIREMENTS 9 and 18

4. Data reliability

Is the data provided by company and government audited?

Measured as:Are EITI documents required to be based on audited financial statements? Y/N

If only some companies or agencies did so, RWI provides details in the notes.

4. Data reliability

3. Country Practice on Data Reliability

4. Data Reliability and EITI rules

–If data are already audited, EITI only requires their reconciliation

–If not, EITI requires that the MSG is content with the agreed method of ensuring all data is audited in the future (e.g., a time-bound action plan).

REQUIREMENTS 12 and 13

5. Coverage

Does the report include all main revenue streams and all additional information necessary to assess the value of in-kind receipts and to calculate royalties?

Main revenue streams measured by: Inclusion of all royalties, taxes, fees, bonuses and state-owned enterprise revenues (Y/N/NA)

Additional info measured by: Payment data from all significant companies, commodity prices, production data (Y/N/NA)

5. Coverage

5. Coverage and EITI rules

–Guidance on materiality• List of revenue streams that should be disclosed (R9d);

other payments may be material (R9 e to g)

–No mention of volumes and prices!–Ultimately, materiality defined nationally (9c)

REQUIREMENTS 9, 11, 14 and 15

6. Discrepancies

6. Discrepancies

6. Discrepancies and EITI rules

–Discrepancies must be identified

–Where possible, explained or addressed

–Recommendations for remedial actions

REQUIREMENTS 17 and 18 b5

7. State-Owned Enterprises (SOE)

Does the Report cover SOE payments and receipts?

Measured as: Are SOE revenue data clearly explained? (Y/N)SOEs, e.g. national oil companies- receive large revenues on behalf of government.

NOCs receive ~90% of oil revenues in Yemen, ~70% in Cameroon and ~60% in Nigeria

7. SOE Revenue Flows

7. SOES and EITI rules

–SOEs are often responsible for collecting certain revenue streams and selling physical products. They then transfer some or all of the proceeds to the treasury, either directly or as company dividends. These transactions should be explained clearly in the report.

REQUIREMENTS 9 and 11

8. Disaggregation

Is revenue data broken down and meaningful?

Best determinant of whether an EITI report is useable and significant

Measured by:

Disaggregation at company, revenue stream, project, commodity levels

8. Disaggregation (Best practice)

8. Disaggregation and EITI rules

–EITI policy is neutral

–Must be agreed at the national level!

REQUIREMENTS 9c

9. Comprehensibility (Best practice)

Can readers understand the report?

Measures whether reports have:

a) a summary with key findings and reconciled revenue totals;

b) a clear indication of what currencies and units of measurement are used; c) a written explanation of key findings and recommendations;

d) a definition of terms.

These indicators are not enough to capture readability. Many reports score well but are still hard to understand.

9. Comprehensibility

9. Comprehensibility cont’d

9. Comprehensibility and EITI rules

Rules mention “comprehensibility” • explanation of discrepancies• recommendations where necessary • Encourages summary and comparison of

revenue streams to total revenues etc

REQUIREMENTS 17 and 18

10. Accessibility

Can a citizen find and read the report?

Measured by: •Availability in the official languages of the country (Y/N)

•Accessibility on a government website (Y/N)These indicators may not enough to capture accessibility, e.g. does government make report data known through media?

10. Accessibility

10. Accessibility and EITI rules

–Paper copies distributed–Online dissemination–Written clearly in all appropriate languages–Outreach events

REQUIREMENT 18d

Instructions

1. REGULARITY (# OF REPORTS/#OF YEARS)

2. TIMELINESS(DATE OF REPORTS - DATE OF DATA)

3. MATERIALITY(IS IT DEFINED?)

Company Audit

No Company Audit

Government Audit

No Government Audit

4. DATA RELIABILITY(Are companies and government to provide

data from audited financial statements?)

5. COVERAGE AZB KAZ KYR MON AFG

a) royalties

b) taxes

c) surface, rental or license fees

d) bonusese) state-owned enterprise (SOE) paymentsf) Report covers all extractive sector companies.g) Report states the price of any product received or sold by government.h) Report states the quantity of resources produced.

CAUSES EXPLAINED

CAUSES NOT EXPLAINED

RECONCILED DATA FOLLOWING CORRECTIONS

RECONCILED DATA NOT PROVIDED

6.DISCREPANCY

7. SOE(ARE REVENUE FLOWS EXPLAINED?)

AZB KAZ KYR MON AFG

a) Companies

b) Projects

c) Commodities

8.Disaggregation

AZB KAZ KYR MON AFG

a) SUMMARYb) CURRENCIES AND UNITS EXPLAINEDc) KEY FINDINGS AND RECSd) DEFINITION OF TERMS

9.COMPREHENSIBILITY

IN OFFICIAL LANGUAGE

NOT IN OFFICIAL LANGUAGE

ON GOV WEBSITE

NOT ON GOV WEBSITE

10. ACCESSIBILITY

data.revenuewatch.org/eiti

Basic data

Report Quality Indicators

Compare indicators across countries

Instructions