Diversifying Financing for Integrity Building

joy Oct 30, 2014
Blog

By Siobhan O'Shea, August 2014

Most funding for the accountability, anti-corruption, transparency and integrity building sector comes from traditional sources; a small number of bilateral, multilateral aid agencies and foundations. The amount of available funding from these sources has grown over the past ten years or so and the sector has expanded to include hundreds of organisations throughout the world. However, there are few donors who were not already active in this sector ten years ago.

Integrity Action’s Fix Rate paper published in 2013 highlighted examples of measuring the impact and effectiveness of the work being done by organisations in this sector. The paper also suggested that effective integrity building could be achieved for less than 1-2% of total project costs. This sector is not expensive and the returns through reduced fraud, waste and corruption can be very significant. But for the sector to grow to the next level, be truly sustainable and have scalable impact, innovative ways must be found to increase the levels of available funding.

During the 2014 Integrity Leadership Course held at the Central European University we discussed some alternative prospects for funding. I will review different approaches in this paper.

i)    1% Fund for integrity

One potential channel for funding is to establish an integrity fund for the sector at the national, sub-national or even municipal level. It could, for example, allocate 1% of public resources to fund community monitoring and feedback mechanisms.

· In Chong Alai, Kyrgyzstan, there was no body for collecting waste; therefore problems with waste being dumped everywhere. Local monitors got together and formed a group, a public union to collect the waste. This work was funded by local government through taxes, as well as local businesses such as shops and restaurants. Read more here. The Chong Alai case does not represent the case of a formal fund, but it can be a valuable test case.
· In Kenya numerous powers that were previously administered by central government have been devolved to the county level. In Kwale County local politicians have been seeking to create an Integrity Fund that would fund community monitoring. They are drawing on their positive experiences with community monitoring in the county and their conviction that this approach can produce cost-effective results.

· In Timor Leste, citizens in the capital city Dili, often approach NGO Luta Hamutuk to help them with integrity challenges they have. Luta Hamutuk bring together citizens and service providers or other relevant stakeholders to address the problems. Timor Leste has a functioning ombudsman and anti-corruption commission to deal with these types of issues. These bodies have funds available that could be used to develop a help desk function to address the needs of the people. This could institutionalise integrity building at scale.

· Citizens Connect is a SeeClickFix type app that was piloted in Boston, USA, in 2010.  At that time, the Mayor’s Office of New Urban Mechanics was established to serve as part of the city’s municipal government.  The Office focuses on encouraging civic participation and helping to address problems in services such as roads and education.  It uses Citizens Connect for this purpose. Use of the tool has resulted in over 35,000 improvements to services. What makes this an innovative financing project is how it is funded. The tool was funded through the Community Innovation Challenge grant programme, which is managed by the Massachusetts Executive Office for Administration and Finance.  

ii)  Revenue Generating Models of Social Accountability

Whereas the social accountability sector is overwhelmingly reliant on grant funding, SeeClickFix from the USA and MySociety from the UK are, respectively, a for-profit and a non-profit that have developed revenue-generating models to finance social accountability.

iii) Social investment by companies

Many multinational companies have corporate social responsibility programmes requiring them to invest funds into projects in the communities where they work. These funds are often used ineffectively but if they were managed as part of a national fund they could potentially be more effective.

For example, Siemens created an integrity initiative as part of a settlement between the company and the World Bank. This USD $100 million fund has been used to support NGOs working on integrity initiatives, including Integrity Action.

In Nigeria, an oil rich country, the majority of people do not see the benefits of the country’s natural resources. The activities of oil companies have negatively affected the environment, which in turn affects agriculture and fishing, and the livelihoods of people who depend on these for income or food. Local communities responded by kidnapping employees of Chevron, one of the largest oil companies in Nigeria. Eventually Chevron met with local people to address the issues. Committees were set up to address the needs of the communities. Chevron established a foundation through their Corporate Social Responsibility (CSR) programme. This foundation addressed funded development projects that were prioritised by the communities. Chevron is also working towards addressing the environmental damage.

iv) Funds from fines and taxes

In many infrastructure or development projects contracts specify that contractors are fined for delays in delivery. These fines are often not enforced but could provide a good opportunity for funding integrity building. If for example we are able to demonstrate the fix rate in countries, we can show the potential for addressing problems at scale.  Fines could be imposed not only for delays in project implementation but also for non-compliance with the contract or misuse of funds.

If, for example, 5% to 10% of the value of these fines were disbursed through an Integrity fund, it would have a transformative effect on this sector. These fines could contribute to a fund for community integrity building to monitor and fix problems in projects and services.

Conclusion

For any of these options to be effective there needs to be a strong evidence base. Beneficiaries, government, service providers all need to see how integrity building can fix problems and improve projects and services, and save them money in the long run. Demonstrating this may give the incentives needed for diversifying funds for integrity building.

As well as this, long term partnerships need to be established between government, civil society and businesses. This is necessary to institutionalise the funding mechanisms and ensure the funding is long term and not just available on a project by project basis.