Organizing Payment

1

• Organizing Payment
• Accountability
• by Patricia Mc Kenzie
• The World Bank

2
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.

3
Stakeholder Issues and Concerns

• Governments 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

4
Stakeholder Issues and Concerns

• Farmers Concerns
• Fair treatment and access
• Fair price that approximates market value
• Fast Compensation
• Minimizing bureaucracy
• Physical Security

5
Stakeholder Issues and Concerns

• Societal Concerns-
• Similar to farmers
• Accountability of Government
• Transparency of compensation fund management

6
Stakeholder Issues and Concerns

• 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

7
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

8
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 Govt.
• 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?

9
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.

10
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
• Farmers behavior (i.e incentives or
  disincentives for culling) strongly depends on
  the way the flow of funds is organized

11
Insights from country cases

• 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

12
Insights from country cases

• 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

13
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.

14
Good Practice

• Use of Existing Institutions
• Minimize administrative costs to governments
• Create synergies and opportunities for success
  transfer
• Build sustainable capacity

15
Good Practice

• Multidisciplinary teams for culling
• Fosters ownership and participation of ministries
• Reduces risk of collusion and conspiracy
• Efficiency

16
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

17
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.

18
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

19
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.

20
Main Conclusions and Recommendations

• 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

21
Main Conclusions and Recommendations

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

22
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.

23
Indonesia -Compensation Funds Flow
DG Livestock Production Support (DGLS)
3
5
Payment Request (SPP-LS)
Endorsement to the district request
4
If necessary, administrative and field
verification
Provincial-level Livestock Agency (Dinas)
Cash Office (KPPN)
2
Request for payment of the compensation to the
Budget Holder (KPA), cc to Provincial Dinas
Payment Order (SP2D-LS)
6
Local Bank (Head of Dinas account)
District-level Livestock Agency (Dinas)
7
Reimbursement
Local Government pre-finances compensation
payment
1
Poultry Farmers