Organizing Payment & Accountability by Patricia Mc Kenzie The World Bank

Review of Good Practice Note on HPAI Compensation

Organizing Payment

& Accountabilityby Patricia Mc Kenzie

The World Bank


Why Compensate

• To encourage early reporting of disease outbreaks and compliance with culling orders

• Reimbursement for loss of private property destroyed by the State for public good.


Stakeholder Issues and Concerns

Government’s Concerns:• Emergency Preparedness• Crisis Management• Sourcing Funds for Compensation• Minimizing administrative costs including

the costs of transferring money• Minimizing funding costs• Minimizing leakages• Improvement of image and credibility• Program efficiency and results



Farmer’s Concerns:• Fair treatment and access • Fair price that approximates market value• Fast Compensation• Minimizing bureaucracy• Physical Security



Societal Concerns:-• Similar to farmer’s• Accountability of Government• Transparency of compensation fund

management



Donors and Funds Providers:-• Appropriate institutional arrangements• Mitigation of fiduciary risks• Proper payments: No over payments,

ghosts, rent-seeking• Results and achievement of program

objectives • Efficiency, accountability and

transparency


Context

• Differences in Animal Production systems are fundamental to the approach to compensation and impact the payment mechanisms.

• Two major types:- – Large commercial systems– Small holder and back yard systems


Essential Elements of Compensation Payment Systems

• Legal basis for establishing responsibilities for compensation fund administration

• Cross- provincial and cross-ministry coordination e.g MOF, MOA, Central- Local Gov’t.

• Financial needs assessment- how much will compensation cost? (Payment rates, number of farmers, type of farmers, no. of birds)

• Funding Sources- how will the government raise the money? (sources and mobilizing needed financing

• Payment agencies- how will the funds flow to the beneficiaries?


Essential Elements of Compensation Payment Systems

• Payment mechanisms- how will the payments be made?

• Payment Instruments:- Cash, Bank Transfers, Vouchers

• Certification- on what basis will payment be made?

• Communication of Time frame for payment- how soon?

• How will disbursements be monitored?

• Financial and Social Accountability Mechanisms:- financial audits, operational audits, local government reviews, social audits.


Insights from country cases

• There is a negative correlation between HPAI risks and the capacity to respond

• Satisfaction levels for farmers interviewed regarding central government compensation strategies are very low. In the case of Vietnam for example, percentages unsatisfied ranged from 75% to 100

• Farmer’s behavior (i.e incentives or disincentives for culling) strongly depends on the way the flow of funds is organized



• It is difficult to estimate compensation requirements at the district level and to provide funds in advance

• Districts are reluctant to pre-finance compensation, since they may experience problems being reimbursed

• Fiduciary ex-ante controls cause delays and physical evidence suitable for ex-post audits is destroyed when the birds are disposed



• In most cases there is no transition strategy to facilitate the integration of local disease control centers and emergency response team into the routine activities of the local/ provincial agricultural service

• The “emergency” phase is therefore prolonged unnecessarily


Results

• Compensate the appropriate beneficiaries ( and only them) and appropriate amount

• With the shortest possible interval between reporting culling, culling and payment

• Requires considerable advance preparation• Requires financial, institutional and human

resources• Much harder to do AFTER disease

outbreaks.


Good Practice

Use of Existing Institutions • Minimize administrative costs to

governments• Create synergies and opportunities for

success transfer• Build sustainable capacity


Good Practice

Multidisciplinary teams for culling

• Fosters ownership and participation of ministries

• Reduces risk of collusion and conspiracy• Efficiency


Good Practice

• Use of local payment channels with reimbursement from central compensation funds, for Rapid cash disbursement

• Complaints mechanisms including hotlines to handle complaints about misuse

• Enhance government image• Build trust• Handle grievances• Promote fair treatment


Good Practice

Use Community Based Organizations• Fair treatment especially when involved with culling procedures• Social accountability and transparency

Publication of Program progress reports and financial statements

• Enhanced disclosure• Monitoring and Evaluation of Results• Credibility• Transparency• Accountability• After culling a paying list of farmers per village, including the

amounts to be compensated should be posted or announced in a public space.


Good Practice

Operational and Financial Audits• Efficiency• Credibility• Fiduciary Assurance• The terms of reference for operational audits should focus

on confirming the legitimacy of a compensation payments made from a randomly selected sample of villages


Main Conclusions and Recommendations

• Instruments used to organize payments will vary dependent on the chronology of the disease i.e. disaster preparedness, crisis management, transition

• Main challenge is to achieve balance between front loaded ex-ante controls, simplicity, especially under difficult field conditions and weak institutional capacity and governance.



• Eligibility databases should be built as part of the emergency preparedness plans

• In crisis situation however, building of eligibility databases and emergency payment procedures are likely to go on in parallel



• Make greater use of local banking entities, producer’s organizations, veterinary services, non-governmental organizations and aid agencies ( e,g UN)


Trade Offs

• Governance- the major concern of governments and donor partners- can delay the response

• The problem is worst where preparation is least, since prior agreements and stake holder buy-in may be absent

• Where outbreaks occur in an unprepared institutional environment, there must be a shift in approach from ex-ante institutions and procedures to ex-post assurance.


District-level Livestock Agency (Dinas)

Poultry Farmers

Local Government pre-finances compensation payment

DG Livestock Production Support (DGLS)

Request for payment of the compensation to the Budget Holder (KPA), cc to Provincial Dinas

Provincial-level Livestock Agency

(Dinas)

Endorsement to the district request

If necessary, administrative and field verification

Cash Office (KPPN)

Payment Request (SPP-LS)

Local Bank (Head of Dinas account)

Payment Order (SP2D-LS)

Reimbursement

Indonesia -Compensation Funds Flow

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Documents

Organizing Payment & Accountability by Patricia Mc Kenzie The World Bank