A Parliamentary Review of Belgian Aid

In July 1997 the ‘Special Parliamentary Commission for the Follow Up of the Problems of the (Belgian) Directorate for Development Cooperation’ (ABOS/AGCD), created in late 1995, published its report. [1] The audit examined several ‘dossiers’, and exposed serious structural weaknesses in the Belgian development cooperation. The reports findings are summarised below:

• The goals of Belgium’s development cooperation are insufficiently clear (p. 19-20) and there is no coherent and strategic long-term vision. This leaves Belgium’s aid open to the interests and priorities of successive Secretaries of State for Aid and to the influence of lobbies. Aggravated by the absence of a geographical and sectoral concentration, the result is a highly fragmented portfolio of aid. There is also a lack of coordination and dialogue between the different actors in Belgium (ABOS/AGCD accounts for 63% of total ODA, with the Ministries of Finance and the External Trade department allocating most of the remainder), and a paternalistic relationship with recipient country governments. A lack of transparency leaves the Belgian aid programme with a poor public image.
• Over the years the development agenda has grown substantially, both in quantity of projects and programmes and in themes. Yet contrary to the DAC recommendations the staffing of the aid administration has not only been increased but effectively reduced (p. 20-25). At 5%, the low overheads of the aid administration represent understaffing rather than efficiency. Moreover, there is a high turnover of staff, poor job security, with staff on short term contracts and arbitrary personnel policies, and insufficient personnel with serious field experience. There is no proper IT system, the legal department is understaffed and the Monitoring and Evaluation unit is down to two people (p. 22). The aid administration has field delegations, but communications and relationships between Brussels and the field are poor, and there has not been an effective devolution of authority to the field. It is not uncommon for Brussels to override the advice of the field delegation (p. 48).
• The procedures and decision-making processes (p. 25-26) are complex, unclear and hierarchical. As a result dossiers spent a long time in an administrative carousel that is not necessarily effective because there is no clear notion of ‘development relevance’.
• The aid administration operates with an accountancy mentality, paying exclusive attention to financial and administrative controls, ignoring the appraisal and evaluation of the substance of a project or programme. The aid department is therefore not in a position to be accountable or to develop organisational learning (p. 26-27). Even in terms of financial-administrative audits, the process is weak as verification visits to the field are seldom undertaken.

The review thus advocates fundamental reform (p. 192-208) with recommendations, among others, for a long term policy, the development of a strategic framework with geographical, sectoral and thematic priorities, more and better human resources, and a strengthening of an independent monitoring and evaluation function. In the medium term the different aid instruments should be concentrated in a new Department of International Cooperation (p. 199).

This news section does not report on the direct bilateral aid dossiers examined, the indirect ones via multilaterals, but will concentrate on indirect aid channelled through NGOs.

NGOs and Belgian development cooperation

The relationships and cooperation between the aid department and the NGOs could be improved from both sides (p. 213-216). The NGO right of initiative is recognised i.e. they cannot be seen as pure contractors. But the NGO scene is very diverse, and the high number of NGO projects and programmes creates a heavy burden for the aid department. Typically, its staff concentrates on new, not on ongoing projects (p. 117). There is a need for improved communications, an ongoing dialogue especially around expanded programme funding (p. 119), and more transparency from both sides. The NGOs, for their part, need improve coordination amongst themselves. Structural problems concern the ABOS/AGCD regulations, which are complex, sometimes inconsistent or open to different interpretation, and always changing. The staff changes in the ABOS/AGCD aggravate the absence of policy and continuity. The regulations need to be simplified and clarified and both the aid department and the NGOs need to strictly respect them, which is not now always the case. NGOs also need to develop their project documentation which was found to be often so rudimentary that no detailed analysis let alone evaluation was possible (p. 47). NGOs were often found to be slow in submitting their financial reports, but when they did, the aid department in turn proved slow in checking it and following up where needed (p. 152). The regulatory and legal framework with regard to partnerships of Belgian intermediary NGOs and local counterparts, and with regard to innovative ways of financing NGO development projects, need to be developed, and it needs to be made clear what legislation applies where. Finally, the ABOS/AGCD cannot continue to exercise only an administrative and financial control. It needs to pay attention to the substance and impact of projects and programmes (p. 35-37). NGOs themselves however need to develop their internal audit and evaluation capacity (p. 120-121).

The Parliamentary Commission examined a sample of 3 NGO dossiers. Only MSF Belgium was deliberately chosen upon request of the Secretary of State for Aid, Mr. Moreels, former MSF President (1986-1994). The audit of the dossier of COOPIBO (p. 101-122) highlighted NGO practices in the face of general cash flow problems. Delayed accounting of expenses and/or delayed disbursement of agreed funding creates cash flow problems for an NGO with limited general fundraising capacity and limited reserves. The cash flow vulnerabilities of NGOs that work with substantial official funds need to be studied more systematically as a matter of policy (p. 122). The audit of MSF-Belgium, first by the High Commission of Supervision (Hoog Committee van Toezicht) and subsequently also by the Court of Auditors, included all emergency operations funded by ABOS/AGCD since 1991. This amounted to 248,305,000 Bfr (approx. $6.95m). The debate essentially turned around ‘Transfer’. MSF created Transfer in 1989 as its procurement agency. It is housed in the same building as MSF. Upon recommendation of the Arthur Andersen firm, Transfer was given the legal status of a ‘cooperative association’. The first argument focused on a conflict of interest. As a cooperative association, Transfer is a commercial organisation. Belgian legislation forbids an NGO to have any structural links with commercial organisations, hence MSF Belgium, which owns over 99% of Transfer’s shares, would no longer legally qualify as an NGO. MSF denied that the intention or reality behind Transfer was that of a commercial organisation and that the small profits made were reinvested. The Court of Auditors however upheld the commercial nature of Transfer. The second argument concerned the shared cost structure of MSF and Transfer.

The Court of Supervision alleged that Transfer absorbed MSF costs, thereby artificially reducing its profit margin and its tax liability. The recommendations of the Parliamentary Commission demand a clear, contractual and accounting separation of the common costs between MSF and Transfer. The third argument concerned good practice in procurement. Non-legally binding guidelines from ABOS/AGCD articulated in 1988-9 stated that procurement had to be informed by offers from at least three EU suppliers. MSF and other NGOs were unable to provide sufficient documentation to that effect. MSF argued that the market for emergency goods is subject to cartel formation, and that at a time of crisis prices tend to rise rapidly. Therefore it felt the need to rely on Transfer’s professionally constituted ‘stocks-on-standby’. The Court of Auditors granted that three different offers may not always be possible (eg. for patented medicines), and that delivery time is as much a consideration in emergencies as price/quality. Yet it held that the guideline to consider three suppliers then had to be followed at the time of constituting the stock. In that regard it was remarked how few emergency stocks were procured in the country affected by an emergency or its region. The mainly Belgian procurement leads to very high transportation costs: for the Kurdish emergency operation in 1991, for example, 60% of the expense incurred was for transport (p. 155-156).

The fourth argument concerned accountability. Whereas government funds were given to MSF, they effectively went to Transfer. The auditors could thus not always find adequate documentation with MSF, which might effectively exist with Transfer. As a result, MSF either has to incorporate Transfer within its normal structure, which would have significant overall organisational costs, or effect a clearer dissociation and open it up to other NGOs.

From a legal point of view, the situation is problematic in that the 1988-9 guidelines were not legally binding. The specific legal regulation of emergency aid did not take place in Belgium until 1995. Until then, the aid department and NGOs were effectively operating in a legal vacuum. A framework law needs to be developed, indicating the criteria for geographical choice, sectoral priority and thematic emphasis, to provide Belgian aid with a legal basis. As a consequence, the audit and resulting controversies are unlikely to lead to legal actions. On the contrary, the result will be more regulation. It remains to be seen whether this will also be simpler and better regulation. 

[1] Chambre des Représentants de Belgique: Suivi des problèmes de l’Administration Générale de la Coopération au Développement. Rapport fait au nom de la Commission Spéciale. 1123/1 – 96/97, Brussels, (July 1997).