Reflections on the PNG Budget Forum: Can devolved funding be effectively utilised

Written by Colin Wiltshire

One of the major talking points of the recent PNG Budget Forum was the huge increase in devolved funding to provinces, districts and local level governments. Both Finance and Treasury Ministers speaking at the forum seemed cautiously optimistic and nervous in justifying these funding allocations. On paper, it seems like a large increase to subnational levels of government, up from 5% of the budget in 2012 to 15% in 2013. However, upon reviewing implementation arrangements outlined by the Finance Minister and Treasurer, it is the Members of Parliament (MPs) who have been put at the centre of decision-making power for how this funding will be spent and accounted for at all levels. They are effectively allocating much more funding to their own committees in a large expansion of the District Services Improvement Program (DSIP).

Maybe this should come as no surprise, but have the MPs bitten off more than they can chew by embedding themselves in each layer of project decision making right down to the local level? How will they demand accountability for their projects with limited implementation capacity and what will be sacrificed? This post unpacks the governance and implementation arrangements for the new devolved funding.

Previous blog posts (here) have made reference to the huge increase in devolved funding and have questioned the capacity of sub-national levels of government to spend it but have stopped short at outlining the implementation mechanisms. Fortunately at the recent budget forum, the Minister for Finance, Hon. James Marape, helped fill this gap by detailing (in this presentation available here) the rationale and arrangements behind the K1.5 billion increases in allocations to provincial, district and Local Level Government (LLG) development funds. This might have seemed like endless technical details for the audience but it is critical to understanding how this devolved funding will be spent. For me, it was fascinating, as I have spent several years working on the inside of provincial, district and local level financing systems in PNG.

In justifying these funding allocations, the Finance Minister pointed to PNG’s decentralised but underfunded system of service delivery. The Treasurer, Hon. Don Poyle, backed up these claims in his presentation stating, “It is time to empower our sub-national governments. To trust them. To allow them to serve the people.” While provinces, their districts and LLGs have responsibility for core service delivery, funding has not been sufficient to support these functions. This was a major reason behind sustained increases in ‘function grants’ for recurrent health, education, transport and law and justice services since 2007. The implementation mechanisms for spending function grants (basically through the provincial governments) are very different to the governing arrangements around devolved development funding in the 2013 budget (basically through the MPs).

Governance arrangements for devolved funding

All of the three new or increased devolved funds will be governed by existing structures. Of the devolved development funding programs in the 2013 budget, DSIP is by far the largest. Each of PNG’s 89 districts is set to receive K10m. This is a sharp increase from the K2 million provided per district since 2008, which itself is up from the just K0.5 million per district provided prior to the resources boom.

Before DSIP was first introduced, the now famous Joint District Planning / Budget Priority Committee (JDP/BPC), or ‘JDP’ as it is known in most villages, existed, but rarely met due to a lack of funding. Since the MP is the Chairman of the JDP, there is a common belief that DSIP is the “Member’s money.” The other members of the JDP are made up of the LLG Presidents, representing the Ward Councillors, with other representatives from community and church groups. There have been widespread reports that MPs used this committee as a rubber stamp, but some were known to operate with integrity. However, no matter the function or the fairness, the MP always had the final say.

Regarding lessons learnt from spending previous increases in DSIP funding, the Treasurer’s presentation conceded that “our monitoring and evaluation systems are non-existent”. Needless to say, little is known about the effectiveness of previous DSIP spending, although a lot has been said about it, ranging from positive examples of rehabilitated social infrastructure to serious allegations of misappropriations. Early findings from our PEPE survey presented at the budget forum showed that of more than 200 schools visited, 25% had received a DSIP project. Just under half of these schools that were allocated a project said they were either incomplete or significantly behind schedule and of these, 41% never expected the project to be completed.

The Provincial Support Improvement Program (PSIP) is a new funding source that will be managed through an existing committee – the Joint Provincial Planning / Budget Priority Committee (JPP/BPC) or ‘JPP’. While this committee has been dormant in many provinces, it is set to become increasingly active, as K5 million per district in each province will be allocated to the JPP. JPPs may favour projects that will benefit the whole province, like rehabilitating a major road network, provincial hospital or high school. However, Governors may also be motivated to fund projects to benefit their own local bases. Of course, whether Governors can dominate, given that other MPs from the province are also on the Committee, remains to be seen. (For readers not familiar with PNG, most MPs (89) represent districts, but one MP (the Governor) is elected for each of the country’s 22 provinces.)

Finally, under the Local Level Government Services Improvement Program (LLGSIP) K500,000 has been allocated to each of PNG’s 313 LLGs. Interestingly though, LLGSIP does not have a separate implementation and decision-making committee. Instead, it will be administered like the DSIP through the JDP. (Each district usually contains about three LLGs). This arrangement means that funding has not really been devolved to the LLG level at all. The Finance Minister stated that Ward Councillors will determine project priorities, but this remains to be seen. Again, it is the MP who will most likely be able to make funding decisions for LLGSIP as well. In any case, it will be hard to distinguish between DSIP and LLGSIP projects.

Implementation capacity to spend devolved funding

One benefit of MPs governing these committees could be improved accountability. The MPs would presumably want to see their projects implemented on time and within budget, but who will do this? The answer is the same people who already have their hands full implementing gradually increasing recurrent budgets, essential for improving basic services. They are Provincial and District Administrators who are the Executive Officers to the JPP and JDP respectively and are financially accountable for managing this devolved funding. If the political imperative is to prove this development funding can be spent effectively, it seems inevitable their focus will shift from implementing recurrent expenditure to managing development projects.

The process from receiving allocations in provincial budgets to the successful completion of a project is rarely straightforward in PNG. Identifying projects, submitting proposals for endorsement, obtaining JDP or JPP approval, and then gaining final approval from the Department of Implementation and Rural Development may be difficult and time consuming. The process of tendering and awarding contracts may be even longer, and then funds have to be released and payments made.

The government has allowed 10% of the new devolved funding to be used for administration, and some of this could be used to hire staff. But new contract staff, operating informally outside of the provincial and district administrations, will at best only take some of the administrative burden of the new devolved funding, and at worst may increase coordination problems with existing provincial and district administration.

In summary, the new changes have put MPs at the centre of decision-making, at the provincial, district and local level. Each MP will become a donor in their district or province with K10 million or more at the disposal of a Committee which they either chair or are a member of. While greater devolved funding may be well intended, it will put more pressure on an already overstretched provincial and district administrative system and risks unintended consequences, such as a diverting attention away from the effective management of recurrent expenditure.

You can view video of the Minister of Finance speaking at the budget forum here and Treasurer speaking at the budget forum here.

Colin Wiltshire is the Devpolicy Program Manager for the PNG Promoting Effective Public Expenditure Project. He is also undertaking a PhD in the State, Society and Governance in Melanesia Program at ANU.

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Colin Wiltshire

Colin Wiltshire is a Research Fellow in the politics of service delivery at the State, Society and Governance in Melanesia (SSGM) Program, Coral Bell School of Asia Pacific Affairs at The Australian National University. His research explores the political economy of budget and expenditure practices in PNG and its implications for development outcomes. He has conducted extensive fieldwork in PNG and focuses on applied, policy-relevant research. Previously, Colin managed the PNG Promoting Effective Public Expenditure (PEPE) Project, a joint research initiative with PNG’s National Research Institute and the Development Policy Centre.

7 Comments

  • No matter what the leaders say, this is a Country that is incompetent to control its finances. The implementation of projects is at the mercy of incompetent providers. There was a report by the Provincial Audit Dept relating to Wau Bulolo town council in the form of a book about 30/40mm thick. In 2002 about K600,00 was undocumented; Cheque books, deposit books, Bank statements and supporting documents were missing. No one was held accountable; not one of the co signatories was investigated, no action was taken regarding the authorities releasing money with no acquittals. The present Manager of several months does not wish to spend any of the large amount of cash in the bank until the previous management is audited. This is not happening, we are in limbo; two major culverts in Wau are creek crossings; roads are graded with no respect for the drains and most roads are eroded by drainage water.

    I believe that I can safely state that from the NCD to the smallest LLG the story of Wau can be taken as a useful analogy. I suppose that I may be being paternalistic. Maybe we should give the smaller sharks an opportunity to take a piece out of PNG and that they also should be able to enjoy a better class of rest and recreation.

    Should the Government decide to start to tighten up on local expenditures a simple start would be to audit all Provincial Governors and Council Presidents. If that were done the rest would be easy.

    Tony Flynn

    • G’day Tony,

      the essence of the problem is that corruption is like a viral disease. Either you stop it in its tracks or it spreads and destroys the whole system.

      Until and unless everyone stops beating around the bush and swallows the unpalatable medicine, nothing will change.

      Responsibility and accountability is either in place and working correctly or it doesn’t exist. Those who are being paid to operate public accounting programs must be investigated and sacked if they cannot or will not do what they are being paid to do.

      There is not easy way out. If the PNG government cannot accept that the so called ‘Melanesian Way’ is not working and change their way of operating, everyone must accept they are no better than the last lot of spivs and charlatans.

      Isn’t anyone except those like Tony here, listening? Hullo…….

  • Hi Colin,

    Thanks for raising this very important subject. I echo the concerns raised by Rabunaf Levi.
    There are a number crucial factors that impact on the effective delivery of value for money at the delivery end of the public finance continuum.

    Firstly, there must be ongoing and continuing availability of public funding so that any project, resource or staffing is funded for the life of the project. That means effective costing and ongoing maintenance programs that don’t earn much ‘political capital’.

    The delivery mechanism and public administration officers must have the training, responsibility and opportunity to undertake what programs are funded and approved without being sidelined through political opportunism.

    An accountability mechanism/s must be fully funded and effectively operating to ensure any deviations from official policy and finance legislation is identified and entirely followed up within a reasonable time frame. ‘Justice deferred is justice denied’.

    Effective accountability includes government auditing and ombudsman operations. Those performing these roles must feel able to perform their roles without fear or favour. Look at how Judge Barnett was treated and how the last Chief Ombudsman was also attacked. Were their findings and efforts ever followed up and prosecutions made? All those in the service delivery process must know and expect they will be held responsible and accountable otherwise there will always be an expectation that any breach can or may be overlooked. Criminal activity is often due to 95% opportunity and 5% intent.

    Any deviations from finance policy and legislation must be followed up and if necessary, followed through to allow effective legal action to reclaim misspent funds and convict any or all that may be culpable and liable to prosecution.

    In the past, any public funds allocated for use in the MP’s electorate have been observed to often become a publically recognised slush fund to allow MP’s to promote their our re-election or to provide implied influence and prestige at the electorate level. Government cheques for public facilities have been reportedly presented amid much media attention and then the proceeds requested to be personally returned to the giver.

    While there has been a start at identifying previous malfeasance and Mr Koim’s Task Force Sweep has started to operate, this has only just scratched the surface of what needs to be done.

    Public statements encouraging positive action to overturn many years of official inaction and myopia cannot be overturned without practical plans and effective management starting at the top. We have yet to see this ‘new start’ commence operating effectively at all levels of the PNG Public Service.
    The delivery of effective government programs is dependent of the three arms of government, legislature, executive and judiciary being able to operate independently and without any blurring of roles and accountability.

    Government is therefore like a three legged stool. No matter what surface you stand such a stool on, it will be stable and stand up.

    ‘White ant’ or weaken any one of the legs however and as soon as any weight is put on the stool it will collapse.

  • Dear Collin,

    Thank you for the post and I hope Papua New Guineans can grasp and understand the underlying facts in your post; but critically, I agree that drastic base level developments need to start in the country.

    It is the implementation aspect in terms of the financial procedures and processes of accountability within the PFMA and concurrently with the provisions of the OLPG&LLG that need to be consulted.

    Firstly, how can the provisions of Section 33A & 33B of OLPG&LLG be implemented when PFMA does not recognise JDP&BPCs as it does with PSTBs and the CSTB? This will mean that to comply with PFMA, all projects above K100,000 Certificate of Works level will be referred to PSTB (below K3 million level) and to CSTB (above K3 million and less than K10 million)…how long will that take?

    Secondly, does the JDP&BPC have financial powers to deliberate upon how much is allocated against projects? If so, do they and their MP have financial powers such as Section 32 or 29 within PFMA to execute decisions with financial implications.

    Thirdly, does the District Administrator have Section 32 financial powers of PFMA to be CEO to JDP&BPC and advise on finance above the delegatory limit of K10,000?

    Finally, given the large shift of finances to Districts and Local Level Governments and the large roles given to MPs as Chairpersons the following legislatures have to be amended to instill greater accountability and governance:
    1. 89 Electorate MPs should cease to be given Ministerial Portfolios but become ordinary MPs; and,
    2. 22 Governors be automatically made Ministers and from within them they vote a PM and DPM since they are the only ones voted in by the whole province!

    Collin, accountability and governance are not the same face of the coin…the latter smiles while the other grinds like the edge of a K1 coin.

    God Bless Brother,

    Speak loud and strong for PNG!

    • Dear Rabunaf

      Thank you for your encouraging comments. I also appreciate your questions about the implications of devolved funding for the public financial management act, particularly in regards to implementation and accountability processes. Specifically, you mention a major roadblock to effective spending might be the length of time it takes to procure projects through the Provincial Supplies and Tenders Board (PSTB) and the Central Supplies and Tenders Board (CSTB), depending on the amount. I agree this will be very challenging, especially for larger provinces like the Eastern Highlands that have 8 districts and therefore 8 JDP/BPCs receiving K10m each, not to a mention a PSIP allocation of K40m and LLGSIP funds. Added together, that is a lot of project funding to procure in one province in one financial year, which I think will mean significant delays between deciding on projects to be funded and actual implementation. Both JDP and JPP projects will also be dependent on the Provincial and District Treasuries to access funding, many of which probably do not have the capacity to manage much larger volumes of funds.

      You also raise another important point about the limited financial delegations of District Administrators even though they are CEOs to the JDP/BPC and responsible for implementing its decisions. The District Administrator will need to rely on the Provincial Administrator, who has higher financial delegations and is therefore ultimately accountable for approving spending on larger projects that were agreed by the JDP. I am not sure that all Provincial Administrators will feel comfortable approving spending on large projects when they were not part of the decision making process.

      I will continue to look into these issues more specifically as the year progresses.

      Thanks again,

      Colin

  • Hi Colin,

    Thanks for another great post which I found very thought provoking on a number of levels. One area that I have been thinking about since reading this item is that of accountability and whether the governance arrangements for devolved spending can indeed improve it. Accountability is, I feel, a bit like development – it is a process rather than a product. But the framework outlined here could add to that process I feel. It seems to me that one of the spin-offs of putting the MPs at the heart of the decision-making processes at various levels is that it would be reasonable to expect that MPs will spend more time in their constituencies than might previously have been the case (to do the decision-making, allocating, etc). This, in turn, creates an opportunity for MPs and their constituents to have ongoing dialogue about issues (sure starting out with local but possibly extending to national and even international) and thus a culture of accountability can be nurtured. Accountability is a two-way street. Constituents need information to inform their scrutiny and support to take on an assertive role in holding their elected representatives to account. MPs need information in order to address the questions raised by constituents and possibly learn to be comfortable with being asked questions. Facilitating dialogue around how these funds have been allocated and spent strikes me as a great way to develop improved political engagement more generally

    • Hi Tess

      Thanks so much for your comment and other commentary on related posts. You raise a very good point about opportunities for improved accountability with MPs likely to spend more time in their districts to make decisions, ensure their projects are on track and of course, give the keynote speech at the launch when their projects are eventually completed. While I agree there will be more dialogue about local issues that could extend to national level policy, I also think there will be a lot of frustration with the time it will take to implement projects. This could lead to a lot of finger pointing and perhaps create an incentive to work outside the system to try and get projects completed faster. Another very important accountability mechanism for devolved funding that is often overlooked is the requirement for a ‘bottom up’ Five Year Development Plan starting at the ward level. JDP/BPC decisions are supposed to be based on priority projects in these plans rather than the JDP committee or MPs themselves. If there is genuine community dialogue in the formulation of these plans, I think it could be an important tool to promote community engagement and accountability for JDP projects.

      Cheers

      Colin

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