{"id":987526336,"date":"2022-09-27T11:06:17","date_gmt":"2022-09-27T10:06:17","guid":{"rendered":"https:\/\/p4h.world\/extra-budgetary-funds-for-covid-19-evidence-from-two-years-of-implementation\/"},"modified":"2023-06-01T15:05:14","modified_gmt":"2023-06-01T14:05:14","slug":"extra-budgetary-funds-for-covid-19-evidence-from-two-years-of-implementation","status":"publish","type":"post","link":"https:\/\/p4h.world\/en\/extra-budgetary-funds-for-covid-19-evidence-from-two-years-of-implementation\/","title":{"rendered":"Extra-Budgetary Funds for COVID-19: Evidence from two years of implementation"},"content":{"rendered":"<p>By:\u00a0<strong>Justine Hsu<\/strong>\u00a0(World Health Organization); <strong>H\u00e9l\u00e8ne Barroy<\/strong>\u00a0(World Health Organization); <strong>Richard Allen\u00a0<\/strong>(Global Consultant on Public Finance); <strong>Fazeer Sheik Rahim<\/strong>, (International Monetary Fund); <strong>Tsolmon Tsilaajav<\/strong>\u00a0(World Health Organization Regional Office for South-East Asia); <strong>Juliet Nabyonga<\/strong>\u00a0(World Health Organization Regional Office for Africa)<\/p>\n<p>&nbsp;<\/p>\n<p><img decoding=\"async\" src=\"https:\/\/p4h.world\/app\/uploads\/2023\/03\/ebf_covid_0-scaled.jpg\" width=\"100%\" \/><\/p>\n<p>Funding the response to the COVID-19 pandemic has posed a considerable challenge to public financial management (PFM) systems, many of which were already constrained and suffering from rigid budget structures, cumbersome approval procedures\u00a0delaying\u00a0the release of funds, and poor budget execution.\u00a0In the wake of COVID-19 being declared a pandemic, many countries created extra-budgetary funds (EBFs)\u00a0to respond to the virus more effectively.<\/p>\n<p>Historically, <a href=\"https:\/\/www.imf.org\/external\/pubs\/ft\/tnm\/2010\/tnm1009.pdf\"><u>EBFs<\/u><\/a> have often been established in times of crisis to respond to emergencies. EBFs\u00a0are accounts created for general government transactions for a specific dedicated purpose; typically they are not included in the annual budget, and operate through separate banking and institutional arrangements. Governments opt for these accounts to help streamline funding, allowing for more rapid and flexible transactions. However, because EBFs bypass government\u2019s regular control functions,\u00a0these accounts carry financial management and accountability risks.<\/p>\n<p>In 2020, during the initial stages of the pandemic, the World Health Organization (WHO) and International Monetary Fund (IMF) carried out a review of more than 40 EBFs that had been created by governments to respond to COVID-19. The team compiled information on the purpose of these funds, their general characteristics, and their legal mandates. The review, published in August 2020 as a\u00a0<a href=\"https:\/\/blog-pfm.imf.org\/pfmblog\/2020\/08\/-covid-19-funds-in-response-to-the-pandemic-.html\"><u>Note for the IMF\u2019s Special Series<\/u><\/a> on COVID-19, found that the main aims in establishing these EBFs were (i) to simplify procedures and accelerate spending, (ii) to pool public and private resources, and (iii) to incentivize coordination of interventions across different sectors and levels of government.<\/p>\n<p>Two years on, in 2021-22, a review of the same 40-plus EBFs was conducted to assess the extent to which the funds met their objectives and how they were operationalized. The review included an in-depth analysis of a subset of these EBFs, representing diverse institutional setups and operating modalities. Stakeholders were interviewed in Bhutan, C\u00f4te d\u2019Ivoire, Kenya, and South Africa to better understand how the funds have been implemented at each step in the PFM chain, covering topics such as funding arrangements, spending modalities, and reporting and tracking mechanisms. In addition, publicly available auditor reports and related documentation were also reviewed to further understand any issues in the efficiency and\/or effectiveness of funds in Bhutan, Cameroon, C\u00f4te d\u2019Ivoire, Kenya, Mauritius, Sierra Leone, and South Africa<sup>1<\/sup>.<\/p>\n<p>Overall, this follow-up analysis revealed that operationalizing such funds was not as easy or as quick as initially thought and thus served as a \u2018reality check\u2019. Our analysis found that EBFs not only varied in their implementation across country contexts studied but have also generally not worked as well with some funds later reintegrated into regular budgetary processes in order to reinvigorate oversight and accountability. The review identified a set of eight key lessons on good practices and on risks posed by EBFs, to help guide countries in their response to future health emergencies.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>1. <\/strong><strong>COVID<\/strong><strong>-19<\/strong><strong>\u00a0<\/strong><strong>EBFs<\/strong><strong> varied <\/strong><strong>widely <\/strong><strong>in their<\/strong><strong>\u00a0<\/strong><strong>structure<\/strong><strong> and operating modalities<\/strong><strong>, in spite of a shared objective to make funding more streamlined, timely, and flexible<\/strong><strong>.<\/strong><\/p>\n<ul>\n<li>A first type of arrangement was in keeping with \u2018traditional\u2019 EBFs, where a state-owned enterprise or other public entity manages resources using banking arrangements and financial procedures that are outside the regular budgeting process and PFM rules<sup>2<\/sup>. In Sierra Leone, for example, an EBF was established under the President\u2019s National Coronavirus Emergency Response Centre, but exempted from the country\u2019s PFM Act of 2016 and Public Procurement Act of 2016, such that accounts were opened in commercial banks and transactions were managed outside of the regular procedures.<\/li>\n<li>In a second type of arrangement, governments created a separate fund to finance its COVID-19 response but expenditure followed regular PFM procedures. In C\u00f4te d\u2019Ivoire, this involved some adaptations to facilitate a more flexible and timely release of spending where emergency procedures, for example for spending authorizations, were called upon.<\/li>\n<li>A third type of arrangement is the privately managed fund, for example in Kenya and South Africa where a private entity mobilized and managed resources outside regular budgetary and PFM rules. In Kenya, the private fund is managed by a board consisting of leaders from private banks and companies from other sectors. The South African fund is <a href=\"https:\/\/solidarityfund.co.za\/about\"><u>managed by an independent board<\/u><\/a> of 12 directors with experience in private-sector banking and investment. This fund also established specific committees for fundraising, disbursements, audit, and risk management.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><strong>2. Certain countries modified their EBF\u2019s design or organization over the course of implementation, generally to address unclear arrangements that had proved to be problematic. <\/strong>C\u00f4te d\u2019Ivoire\u2019s government initially proposed its EBF as a separate pooled fund to streamline the flow of resources through a single account; to improve transparency and accountability, it later integrated this fund into the regular budget process. A common reason for making changes was that the legal framework was loosely defined<sup>3<\/sup> and lacked specific provisions on the EBFs\u2019 exact mandate and organizational arrangements. In Sierra Leone, for example, the authorities inherited a fund that had been set up to fight Ebola and was not legally codified to address COVID-19. The government subsequently clarified the EBF\u2019s scope, institutional set-up, and operating procedures and rules, making adjustments such as hiring a private accounting firm to undertake fiduciary management and setting up district-level entities to fast-track the response.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>3.\u00a0 <\/strong><strong>Most <\/strong><strong>COVID-19 <\/strong><strong>EBFs <\/strong><strong>complemented regular <\/strong><strong>PFM processes; <\/strong><strong>only a minority of funds <\/strong><strong>substituted for those processes<\/strong><strong>. <\/strong>In South Africa,\u00a0for example, the Solidarity Fund complemented regular flows of budgetary resources by supporting \u201chigh impact procurement\u201d in situations where the government was \u201cnot able to act with sufficient agility\u201d \u2013 for example, the rapid expansion of contact tracing and the acceleration of COVID-19 testing. The fund also provided resources for R&amp;D and other \u201ccatalytic interventions\u201d that supported the country\u2019s innovation and industrial capabilities, such as the local manufacture of ventilators. By contrast, Mauritius\u2019s COVID-19 Solidarity Fund and Sierra Leone\u2019s National Coronavirus Emergency Response Centre were the sole COVID-19 funding response mechanisms in each country. In contexts where an EBF\u2019s mandate was less well-defined, overlaps were reported between operations financed by the funds and by regular budgets allocations (e.g., in Kenya).<\/p>\n<p>&nbsp;<\/p>\n<p><strong>4<\/strong><strong>.\u00a0 <\/strong><strong>Particularly in <\/strong><strong>countries<\/strong><strong> that adopted a <\/strong><strong>COVID-19 natio<\/strong><strong>n<\/strong><strong>al response plan<\/strong><strong>, <\/strong><strong>EBFs hel<\/strong><strong>p<\/strong><strong>ed<\/strong><strong> to foster coordination and ensure alignment <\/strong><strong>of <\/strong><strong>domestic<\/strong><strong> and external <\/strong><strong>funding<\/strong><strong> and public and private sources<\/strong><strong>.<\/strong> For example, C\u00f4te d\u2019Ivoire developed a strategic COVID-19 health response plan with cost projections for a wide range of COVID-19-related needs; the government used these estimates to request financing and to negotiate with development partners on budget lines within the EBFs that were over or under-funded. Bhutan\u2019s EBF helped to coordinate public and private contributions in support of the National Preparedness and Response Plan for COVID-19. The funds in Kenya and South Africa were particularly successful in mobilizing and bringing together resources from private companies and private individuals to serve the response\u2019s objectives. As of September 2020, government financing of South Africa\u2019s Solidarity Fund represented less than 4% of the <a href=\"https:\/\/solidarityfund.co.za\/media\/2020\/12\/Solidarity-Fund-%E2%80%93-Interim-Impact-Report_Final.pdf\"><u>total ZAR 3<\/u><u>.1<\/u><u> billion <\/u><u>received<\/u><\/a>\u00a0(~USD 181 million),\u00a0with ZAR 2.9 billion coming from corporations and foundations and ZAR 83 million from individual donations.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>5<\/strong><strong>. <\/strong><strong>Most <\/strong><strong>EBFs <\/strong><strong>facilitated the flexible <\/strong><strong>reallocati<\/strong><strong>on<\/strong><strong>\u00a0<\/strong><strong>of <\/strong><strong>resources <\/strong><strong>across national budgets<\/strong><strong> to <\/strong><strong>respond to <\/strong><strong>COVID-<\/strong><strong>19-<\/strong><strong>related <\/strong><strong>needs<\/strong><strong>, but often <\/strong><strong>the <\/strong><strong>releases of <\/strong><strong>domestic <\/strong><strong>fund<\/strong><strong>ing<\/strong><strong>\u00a0<\/strong><strong>were <\/strong><strong>delayed or <\/strong><strong>did <\/strong><strong>not materialize.<\/strong><strong>\u00a0<\/strong>Bhutan\u2019s\u00a0government deferred all new construction,\u00a0and reallocated funds from the construction sector to health\u00a0in order to help ensure budget for responding to COVID-19. However, in several countries, funds were not released as planned due to insufficient revenue, or weaknesses in expenditure procedures. In Cameroon, there were reported shortfalls in\u00a0budget disbursements to the EBF,\u00a0adversely impacting the fund\u2019s operations.\u00a0In Mauritius, the Ministry of Health disbursed only around a third of the MUR 1.7 billion (~USD 36 million)\u00a0that had been budgeted for medical products. Such delays and revenue shortfalls not only hinder service delivery but also raise questions about transparency and accountability. Several countries noted issues with disbursements to the government\u2019s subnational levels. Sierra Leone, for example,\u00a0grappled with challenges in decentralizing its COVID-19 response. While the government appointed response centers and district coordinators in all of the country\u2019s 16 districts\u00a0to coordinate local planning and oversee implementation of response operations, insufficient funds were made available through the EBF, and there were substantial delays before a uniform financial management system and standard operating procedures\u00a0were put in place.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>6<\/strong><strong>. <\/strong><strong>Although some <\/strong><strong>EBFs facilitated <\/strong><strong>a <\/strong><strong>more streamlined and timely approval process<\/strong><strong>\u00a0<\/strong><strong>for<\/strong><strong> s<\/strong><strong>pending<\/strong><strong>, the use of <\/strong><strong>emergency <\/strong><strong>funds <\/strong><strong>was <\/strong><strong>also<\/strong><strong> associated with inefficiencies and misuse<\/strong><strong>. <\/strong>This was especially the case in countries that lack robust financial management capabilities, and clear and effective standard operating procedures for managing and accounting for the funds.\u00a0For example, in the early phase of the pandemic in Sierra Leone, there were many reports of unauthorized payments and misuse of funds to purchase items not related to the COVID-19 response. In\u00a0Mauritius, auditors noted the inadequacy\u00a0of documentation at the different stages of the spending process; some ministries did not keep a record of key decisions,\u00a0such as justifications for selection of suppliers, consideration of risks, and\/or\u00a0procedures for managing potential conflicts of interest.\u00a0More favorably, Bhutan adopted Simplified Procurement Rules and Regulations for goods, works, and services related to\u00a0the COVID-19 response, and adoption of this regulation mitigated inefficiencies and the misuse of funds.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>7<\/strong><strong>.\u00a0 <\/strong><strong>While <\/strong><strong>o<\/strong><strong>versight of EBFs <\/strong><strong>was <\/strong><strong>challenging<\/strong><strong> in all study context<\/strong><strong>s<\/strong><strong>, <\/strong><strong>their implementation prompted <\/strong><strong>the development of<\/strong><strong> \u2018real-time auditing\u2019<\/strong><strong> in the face of accountability concerns<\/strong>.\u00a0Real-time audits can provide useful\u00a0evidence of irregular spending, fraud\/corruption, and the misuse of funds, thus demonstrating a commitment to transparency.\u00a0Mauritius, Sierra Leone, and South Africa published timely audit reports for their COVID-19 funds\u00a0before the end of 2020. To better track data\u00a0and support fiscal transparency, some EBFs created reporting platforms with financial data (as in C\u00f4te d\u2019Ivoire), reported on performance (as in South Africa),\u00a0and contracted private firms to conduct audits (as in Kenya, Sierra Leone, and South Africa).\u00a0Accountability\u00a0concerns were less of an issue for privately managed COVID-19 funds, which typically have\u00a0established processes to ensure checks and balances. The Solidarity Fund in South Africa, for example, has a strong reporting framework and contracted an independent audit by PWC\u00a0which reviewed not only financial data but also the Fund\u2019s impact on the health sector.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>8<\/strong><strong>. <\/strong><strong>Legislation d<\/strong><strong>id<\/strong><strong> not systematically specify a<\/strong><strong>rrangements for the c<\/strong><strong>losure of EBFs <\/strong><strong>once <\/strong><strong>the COV<\/strong><strong>I<\/strong><strong>D-19 crisis <\/strong><strong>end<\/strong><strong>s<\/strong><strong>, leaving some uncertainty <\/strong><strong>about <\/strong><strong>future operations and retrocession of funds.<\/strong>\u00a0As of July 2022, only Mauritius and South Africa among the seven countries surveyed had specified end-dates for their COVID-19 funds. Mauritius\u2019 EBF was reintegrated into regular budgetary processes in 2021.\u00a0South Africa\u2019s Solidarity Fund <a href=\"https:\/\/www.news24.com\/fin24\/economy\/south-africa\/solidarity-fund-to-close-by-september-20220317\"><u>announced <\/u><u>its<\/u><u> \u2018sunset\u2019<\/u><\/a> for September 2022 with remaining funds to be transferred to various regular budgetary programmes. Bhutan\u2019s government\u00a0indicated that its COVID-19 fund will \u2018sunset\u2019 when the situation \u2018rebounds,\u2019 but without details on the fund\u2019s retrocession.<\/p>\n<p>&nbsp;<\/p>\n<p>In conclusion,\u00a0this review provided a deeper understanding of how EBFs in specific country contexts have performed\u00a0in terms of meeting their objectives,\u00a0specific processes and operations adopted for budgeting and spending, and\u00a0regulations to ensure accountability.<strong>\u00a0<\/strong>The experience of the past two years demonstrates that while EBFs could facilitate the response to help emergency situations, they are not a \u2018magic bullet.\u2019<strong>\u00a0<\/strong>A key lesson from EBF implementation is the need to ensure a balance between potential benefits (gains in flexibility) and risks (weak oversight, misuse of funds, potential for corruption).\u00a0Governments and development partners\u00a0should be cautious about the use of\u00a0EBFs as a\u00a0tool for crisis response, unless they are able to manage the funds robustly within a sound legal framework,\u00a0with appropriate checks and balances to mitigate\u00a0financial management and accountability risks.\u00a0There is still much to learn about how EBFs \u2013 with their wide variation in design and standard operating procedures (or lack thereof) \u2013 compare with regular budget allocations, both in terms of the speed and volume of budget execution and of accountability measures. More broadly, the focus should be on <a href=\"https:\/\/apps.who.int\/iris\/bitstream\/handle\/10665\/359143\/9789240052574-eng.pdf\"><u>strengthening the regular PFM system<\/u><\/a> \u2013 at all stages of the cycle from budget formulation to the auditing of expenditures\u00a0\u2013\u00a0to\u00a0improve the government\u2019s capability to respond flexibly and in a timely manner to national\u00a0health emergencies.<\/p>\n<p>&nbsp;<\/p>\n<p><em>The authors <\/em><em>wish<\/em><em> to acknowledge the invaluable insight<\/em><em>s<\/em><em> provided by COVID-19 fund representatives from <\/em><em>Bhutan, C<\/em><em>\u00f4<\/em><em>te d\u2019Ivoire, Kenya, and South <\/em><em>Afr<\/em><em>i<\/em><em>ca<\/em><em>.<\/em><em> Without their willingness to share information, this review would not have been possible. We thank Peter Cowley for reviewing and providing insights on an earlier version of the blog.\u00a0We also thank Joe Kutzin and Peter Cowley for reviewing and providing insights on an earlier version of the blog.<\/em><\/p>\n<p>&nbsp;<\/p>\n<p>1.\u00a0Bhutan: <a href=\"https:\/\/www.cabinet.gov.bt\/press-release-3\/2\/\">cabinet.gov.bt\/press-release-3\/2\/<\/a>, <a href=\"https:\/\/www.bhtf.bt\/resources\/3\">bhtf.bt\/resources\/3<\/a>; Cameroon: <a href=\"https:\/\/minfi.gov.cm\/en\/audits-report-on-the-use-of-covid-19-fund\/\">minfi.gov.cm\/en\/audits-report-on-the-use-of-covid-19-fund\/<\/a>; C\u00f4te d\u2019Ivoire: <a href=\"https:\/\/finances.gouv.ci\/actualites\/65-contenu-dynamique\/actualite\/724-covid-19-fonds-de-soutien-du-gouvernement-les-premiers-cheques-remis-aux-beneficiaires\">finances.gouv.ci\/actualites\/65-contenu-dynamique\/actualite\/724-covid-19-fonds-de-soutien-du-gouvernement-les-premiers-cheques-remis-aux-beneficiaires<\/a>; Kenya: <a href=\"https:\/\/www.oagkenya.go.ke\/special-audit-report\/\">oagkenya.go.ke\/special-audit-report\/<\/a>; Mauritius: <a href=\"https:\/\/nao.govmu.org\/Pages\/ValueForMoney_n.aspx\">nao.govmu.org\/Pages\/ValueForMoney_n.aspx<\/a>; Sierra Leone: <a href=\"https:\/\/www.auditservice.gov.sl\/other-reports\/\">auditservice.gov.sl\/other-reports\/<\/a>; South Africa: <a href=\"https:\/\/solidarityfund.co.za\/reports\/\">solidarityfund.co.za\/reports\/<\/a>,\u00a0 <a href=\"https:\/\/www.agsa.co.za\/Reporting\/SpecialAuditReports.aspx\">agsa.co.za\/Reporting\/SpecialAuditReports.aspx<\/a><\/p>\n<p>2. \u00a0These private funds should not\u00a0be strictly identified as EBFs because they operate largely or completely outside the control of the government.<\/p>\n<p>3.\u00a0 For example, in <a href=\"https:\/\/www.cabinet.gov.bt\/press-release-3\/2\/\"><u>Bhutan<\/u><\/a> the legislation refers to \u201cthe response and containment of COVID-19\u201d; in <a href=\"https:\/\/finances.gouv.ci\/actualites\/65-contenu-dynamique\/actualite\/724-covid-19-fonds-de-soutien-du-gouvernement-les-premiers-cheques-remis-aux-beneficiaires\"><u>C<\/u><u>\u00f4<\/u><u>te d\u2019Ivoire<\/u><\/a> to \u201csupport the human emergency response\u201d; and in <a href=\"https:\/\/mof.govmu.org\/Pages\/Covid-19-Solidarity-Fund.aspx\"><u>Mauritius<\/u><\/a> to \u201cstrengthening the preparedness and response to face COVID-19\u201d.<\/p>\n<p>&nbsp;<\/p>\n<p><em>The responsibility for opinions expressed in this blog lies solely with its author(s). This disclaimer applies to any means of dissemination, distribution or publication of said blog\u00a0at any time.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>By:\u00a0Justine Hsu\u00a0(World Health Organization); H\u00e9l\u00e8ne Barroy\u00a0(World Health Organization); Richard Allen\u00a0(Global Consultant on Public Finance); Fazeer Sheik Rahim, (International Monetary Fund); Tsolmon Tsilaajav\u00a0(World Health Organization Regional Office for South-East Asia); Juliet Nabyonga\u00a0(World Health Organization Regional Office for Africa) &nbsp; Funding the response to the COVID-19 pandemic has posed a considerable challenge to public financial management (PFM)&#8230;<\/p>\n","protected":false},"author":873,"featured_media":987526337,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"By:\u00a0<strong>Justine Hsu<\/strong>\u00a0(World Health Organization); <strong>H\u00e9l\u00e8ne Barroy<\/strong>\u00a0(World Health Organization); <strong>Richard Allen\u00a0<\/strong>(Global Consultant on Public Finance); <strong>Fazeer Sheik Rahim<\/strong>, (International Monetary Fund); <strong>Tsolmon Tsilaajav<\/strong>\u00a0(World Health Organization Regional Office for South-East Asia); <strong>Juliet Nabyonga<\/strong>\u00a0(World Health Organization Regional Office for Africa)\r\n\r\n&nbsp;\r\n\r\n<img src=\"https:\/\/p4h.world\/app\/uploads\/2023\/03\/ebf_covid_0-scaled.jpg\" width=\"100%\" \/>\r\n\r\nFunding the response to the COVID-19 pandemic has posed a considerable challenge to public financial management (PFM) systems, many of which were already constrained and suffering from rigid budget structures, cumbersome approval procedures\u00a0delaying\u00a0the release of funds, and poor budget execution.\u00a0In the wake of COVID-19 being declared a pandemic, many countries created extra-budgetary funds (EBFs)\u00a0to respond to the virus more effectively.\r\n\r\nHistorically, <a href=\"https:\/\/www.imf.org\/external\/pubs\/ft\/tnm\/2010\/tnm1009.pdf\"><u>EBFs<\/u><\/a> have often been established in times of crisis to respond to emergencies. EBFs\u00a0are accounts created for general government transactions for a specific dedicated purpose; typically they are not included in the annual budget, and operate through separate banking and institutional arrangements. Governments opt for these accounts to help streamline funding, allowing for more rapid and flexible transactions. However, because EBFs bypass government\u2019s regular control functions,\u00a0these accounts carry financial management and accountability risks.\r\n\r\nIn 2020, during the initial stages of the pandemic, the World Health Organization (WHO) and International Monetary Fund (IMF) carried out a review of more than 40 EBFs that had been created by governments to respond to COVID-19. The team compiled information on the purpose of these funds, their general characteristics, and their legal mandates. The review, published in August 2020 as a\u00a0<a href=\"https:\/\/blog-pfm.imf.org\/pfmblog\/2020\/08\/-covid-19-funds-in-response-to-the-pandemic-.html\"><u>Note for the IMF\u2019s Special Series<\/u><\/a> on COVID-19, found that the main aims in establishing these EBFs were (i) to simplify procedures and accelerate spending, (ii) to pool public and private resources, and (iii) to incentivize coordination of interventions across different sectors and levels of government.\r\n\r\nTwo years on, in 2021-22, a review of the same 40-plus EBFs was conducted to assess the extent to which the funds met their objectives and how they were operationalized. The review included an in-depth analysis of a subset of these EBFs, representing diverse institutional setups and operating modalities. Stakeholders were interviewed in Bhutan, C\u00f4te d\u2019Ivoire, Kenya, and South Africa to better understand how the funds have been implemented at each step in the PFM chain, covering topics such as funding arrangements, spending modalities, and reporting and tracking mechanisms. In addition, publicly available auditor reports and related documentation were also reviewed to further understand any issues in the efficiency and\/or effectiveness of funds in Bhutan, Cameroon, C\u00f4te d\u2019Ivoire, Kenya, Mauritius, Sierra Leone, and South Africa<sup>1<\/sup>.\r\n\r\nOverall, this follow-up analysis revealed that operationalizing such funds was not as easy or as quick as initially thought and thus served as a \u2018reality check\u2019. Our analysis found that EBFs not only varied in their implementation across country contexts studied but have also generally not worked as well with some funds later reintegrated into regular budgetary processes in order to reinvigorate oversight and accountability. The review identified a set of eight key lessons on good practices and on risks posed by EBFs, to help guide countries in their response to future health emergencies.\r\n\r\n&nbsp;\r\n\r\n<strong>1. <\/strong><strong>COVID<\/strong><strong>-19<\/strong><strong>\u00a0<\/strong><strong>EBFs<\/strong><strong> varied <\/strong><strong>widely <\/strong><strong>in their<\/strong><strong>\u00a0<\/strong><strong>structure<\/strong><strong> and operating modalities<\/strong><strong>, in spite of a shared objective to make funding more streamlined, timely, and flexible<\/strong><strong>.<\/strong>\r\n<ul>\r\n \t<li>A first type of arrangement was in keeping with \u2018traditional\u2019 EBFs, where a state-owned enterprise or other public entity manages resources using banking arrangements and financial procedures that are outside the regular budgeting process and PFM rules<sup>2<\/sup>. In Sierra Leone, for example, an EBF was established under the President\u2019s National Coronavirus Emergency Response Centre, but exempted from the country\u2019s PFM Act of 2016 and Public Procurement Act of 2016, such that accounts were opened in commercial banks and transactions were managed outside of the regular procedures.<\/li>\r\n \t<li>In a second type of arrangement, governments created a separate fund to finance its COVID-19 response but expenditure followed regular PFM procedures. In C\u00f4te d\u2019Ivoire, this involved some adaptations to facilitate a more flexible and timely release of spending where emergency procedures, for example for spending authorizations, were called upon.<\/li>\r\n \t<li>A third type of arrangement is the privately managed fund, for example in Kenya and South Africa where a private entity mobilized and managed resources outside regular budgetary and PFM rules. In Kenya, the private fund is managed by a board consisting of leaders from private banks and companies from other sectors. The South African fund is <a href=\"https:\/\/solidarityfund.co.za\/about\"><u>managed by an independent board<\/u><\/a> of 12 directors with experience in private-sector banking and investment. This fund also established specific committees for fundraising, disbursements, audit, and risk management.<\/li>\r\n<\/ul>\r\n&nbsp;\r\n\r\n<strong>2. Certain countries modified their EBF\u2019s design or organization over the course of implementation, generally to address unclear arrangements that had proved to be problematic. <\/strong>C\u00f4te d\u2019Ivoire\u2019s government initially proposed its EBF as a separate pooled fund to streamline the flow of resources through a single account; to improve transparency and accountability, it later integrated this fund into the regular budget process. A common reason for making changes was that the legal framework was loosely defined<sup>3<\/sup> and lacked specific provisions on the EBFs\u2019 exact mandate and organizational arrangements. In Sierra Leone, for example, the authorities inherited a fund that had been set up to fight Ebola and was not legally codified to address COVID-19. The government subsequently clarified the EBF\u2019s scope, institutional set-up, and operating procedures and rules, making adjustments such as hiring a private accounting firm to undertake fiduciary management and setting up district-level entities to fast-track the response.\r\n\r\n&nbsp;\r\n\r\n<strong>3.\u00a0 <\/strong><strong>Most <\/strong><strong>COVID-19 <\/strong><strong>EBFs <\/strong><strong>complemented regular <\/strong><strong>PFM processes; <\/strong><strong>only a minority of funds <\/strong><strong>substituted for those processes<\/strong><strong>. <\/strong>In South Africa,\u00a0for example, the Solidarity Fund complemented regular flows of budgetary resources by supporting \u201chigh impact procurement\u201d in situations where the government was \u201cnot able to act with sufficient agility\u201d \u2013 for example, the rapid expansion of contact tracing and the acceleration of COVID-19 testing. The fund also provided resources for R&amp;D and other \u201ccatalytic interventions\u201d that supported the country\u2019s innovation and industrial capabilities, such as the local manufacture of ventilators. By contrast, Mauritius\u2019s COVID-19 Solidarity Fund and Sierra Leone\u2019s National Coronavirus Emergency Response Centre were the sole COVID-19 funding response mechanisms in each country. In contexts where an EBF\u2019s mandate was less well-defined, overlaps were reported between operations financed by the funds and by regular budgets allocations (e.g., in Kenya).\r\n\r\n&nbsp;\r\n\r\n<strong>4<\/strong><strong>.\u00a0 <\/strong><strong>Particularly in <\/strong><strong>countries<\/strong><strong> that adopted a <\/strong><strong>COVID-19 natio<\/strong><strong>n<\/strong><strong>al response plan<\/strong><strong>, <\/strong><strong>EBFs hel<\/strong><strong>p<\/strong><strong>ed<\/strong><strong> to foster coordination and ensure alignment <\/strong><strong>of <\/strong><strong>domestic<\/strong><strong> and external <\/strong><strong>funding<\/strong><strong> and public and private sources<\/strong><strong>.<\/strong> For example, C\u00f4te d\u2019Ivoire developed a strategic COVID-19 health response plan with cost projections for a wide range of COVID-19-related needs; the government used these estimates to request financing and to negotiate with development partners on budget lines within the EBFs that were over or under-funded. Bhutan\u2019s EBF helped to coordinate public and private contributions in support of the National Preparedness and Response Plan for COVID-19. The funds in Kenya and South Africa were particularly successful in mobilizing and bringing together resources from private companies and private individuals to serve the response\u2019s objectives. As of September 2020, government financing of South Africa\u2019s Solidarity Fund represented less than 4% of the <a href=\"https:\/\/solidarityfund.co.za\/media\/2020\/12\/Solidarity-Fund-%E2%80%93-Interim-Impact-Report_Final.pdf\"><u>total ZAR 3<\/u><u>.1<\/u><u> billion <\/u><u>received<\/u><\/a>\u00a0(~USD 181 million),\u00a0with ZAR 2.9 billion coming from corporations and foundations and ZAR 83 million from individual donations.\r\n\r\n&nbsp;\r\n\r\n<strong>5<\/strong><strong>. <\/strong><strong>Most <\/strong><strong>EBFs <\/strong><strong>facilitated the flexible <\/strong><strong>reallocati<\/strong><strong>on<\/strong><strong>\u00a0<\/strong><strong>of <\/strong><strong>resources <\/strong><strong>across national budgets<\/strong><strong> to <\/strong><strong>respond to <\/strong><strong>COVID-<\/strong><strong>19-<\/strong><strong>related <\/strong><strong>needs<\/strong><strong>, but often <\/strong><strong>the <\/strong><strong>releases of <\/strong><strong>domestic <\/strong><strong>fund<\/strong><strong>ing<\/strong><strong>\u00a0<\/strong><strong>were <\/strong><strong>delayed or <\/strong><strong>did <\/strong><strong>not materialize.<\/strong><strong>\u00a0<\/strong>Bhutan\u2019s\u00a0government deferred all new construction,\u00a0and reallocated funds from the construction sector to health\u00a0in order to help ensure budget for responding to COVID-19. However, in several countries, funds were not released as planned due to insufficient revenue, or weaknesses in expenditure procedures. In Cameroon, there were reported shortfalls in\u00a0budget disbursements to the EBF,\u00a0adversely impacting the fund\u2019s operations.\u00a0In Mauritius, the Ministry of Health disbursed only around a third of the MUR 1.7 billion (~USD 36 million)\u00a0that had been budgeted for medical products. Such delays and revenue shortfalls not only hinder service delivery but also raise questions about transparency and accountability. Several countries noted issues with disbursements to the government\u2019s subnational levels. Sierra Leone, for example,\u00a0grappled with challenges in decentralizing its COVID-19 response. While the government appointed response centers and district coordinators in all of the country\u2019s 16 districts\u00a0to coordinate local planning and oversee implementation of response operations, insufficient funds were made available through the EBF, and there were substantial delays before a uniform financial management system and standard operating procedures\u00a0were put in place.\r\n\r\n&nbsp;\r\n\r\n<strong>6<\/strong><strong>. <\/strong><strong>Although some <\/strong><strong>EBFs facilitated <\/strong><strong>a <\/strong><strong>more streamlined and timely approval process<\/strong><strong>\u00a0<\/strong><strong>for<\/strong><strong> s<\/strong><strong>pending<\/strong><strong>, the use of <\/strong><strong>emergency <\/strong><strong>funds <\/strong><strong>was <\/strong><strong>also<\/strong><strong> associated with inefficiencies and misuse<\/strong><strong>. <\/strong>This was especially the case in countries that lack robust financial management capabilities, and clear and effective standard operating procedures for managing and accounting for the funds.\u00a0For example, in the early phase of the pandemic in Sierra Leone, there were many reports of unauthorized payments and misuse of funds to purchase items not related to the COVID-19 response. In\u00a0Mauritius, auditors noted the inadequacy\u00a0of documentation at the different stages of the spending process; some ministries did not keep a record of key decisions,\u00a0such as justifications for selection of suppliers, consideration of risks, and\/or\u00a0procedures for managing potential conflicts of interest.\u00a0More favorably, Bhutan adopted Simplified Procurement Rules and Regulations for goods, works, and services related to\u00a0the COVID-19 response, and adoption of this regulation mitigated inefficiencies and the misuse of funds.\r\n\r\n&nbsp;\r\n\r\n<strong>7<\/strong><strong>.\u00a0 <\/strong><strong>While <\/strong><strong>o<\/strong><strong>versight of EBFs <\/strong><strong>was <\/strong><strong>challenging<\/strong><strong> in all study context<\/strong><strong>s<\/strong><strong>, <\/strong><strong>their implementation prompted <\/strong><strong>the development of<\/strong><strong> \u2018real-time auditing\u2019<\/strong><strong> in the face of accountability concerns<\/strong>.\u00a0Real-time audits can provide useful\u00a0evidence of irregular spending, fraud\/corruption, and the misuse of funds, thus demonstrating a commitment to transparency.\u00a0Mauritius, Sierra Leone, and South Africa published timely audit reports for their COVID-19 funds\u00a0before the end of 2020. To better track data\u00a0and support fiscal transparency, some EBFs created reporting platforms with financial data (as in C\u00f4te d\u2019Ivoire), reported on performance (as in South Africa),\u00a0and contracted private firms to conduct audits (as in Kenya, Sierra Leone, and South Africa).\u00a0Accountability\u00a0concerns were less of an issue for privately managed COVID-19 funds, which typically have\u00a0established processes to ensure checks and balances. The Solidarity Fund in South Africa, for example, has a strong reporting framework and contracted an independent audit by PWC\u00a0which reviewed not only financial data but also the Fund\u2019s impact on the health sector.\r\n\r\n&nbsp;\r\n\r\n<strong>8<\/strong><strong>. <\/strong><strong>Legislation d<\/strong><strong>id<\/strong><strong> not systematically specify a<\/strong><strong>rrangements for the c<\/strong><strong>losure of EBFs <\/strong><strong>once <\/strong><strong>the COV<\/strong><strong>I<\/strong><strong>D-19 crisis <\/strong><strong>end<\/strong><strong>s<\/strong><strong>, leaving some uncertainty <\/strong><strong>about <\/strong><strong>future operations and retrocession of funds.<\/strong>\u00a0As of July 2022, only Mauritius and South Africa among the seven countries surveyed had specified end-dates for their COVID-19 funds. Mauritius\u2019 EBF was reintegrated into regular budgetary processes in 2021.\u00a0South Africa\u2019s Solidarity Fund <a href=\"https:\/\/www.news24.com\/fin24\/economy\/south-africa\/solidarity-fund-to-close-by-september-20220317\"><u>announced <\/u><u>its<\/u><u> \u2018sunset\u2019<\/u><\/a> for September 2022 with remaining funds to be transferred to various regular budgetary programmes. Bhutan\u2019s government\u00a0indicated that its COVID-19 fund will \u2018sunset\u2019 when the situation \u2018rebounds,\u2019 but without details on the fund\u2019s retrocession.\r\n\r\n&nbsp;\r\n\r\nIn conclusion,\u00a0this review provided a deeper understanding of how EBFs in specific country contexts have performed\u00a0in terms of meeting their objectives,\u00a0specific processes and operations adopted for budgeting and spending, and\u00a0regulations to ensure accountability.<strong>\u00a0<\/strong>The experience of the past two years demonstrates that while EBFs could facilitate the response to help emergency situations, they are not a \u2018magic bullet.\u2019<strong>\u00a0<\/strong>A key lesson from EBF implementation is the need to ensure a balance between potential benefits (gains in flexibility) and risks (weak oversight, misuse of funds, potential for corruption).\u00a0Governments and development partners\u00a0should be cautious about the use of\u00a0EBFs as a\u00a0tool for crisis response, unless they are able to manage the funds robustly within a sound legal framework,\u00a0with appropriate checks and balances to mitigate\u00a0financial management and accountability risks.\u00a0There is still much to learn about how EBFs \u2013 with their wide variation in design and standard operating procedures (or lack thereof) \u2013 compare with regular budget allocations, both in terms of the speed and volume of budget execution and of accountability measures. More broadly, the focus should be on <a href=\"https:\/\/apps.who.int\/iris\/bitstream\/handle\/10665\/359143\/9789240052574-eng.pdf\"><u>strengthening the regular PFM system<\/u><\/a> \u2013 at all stages of the cycle from budget formulation to the auditing of expenditures\u00a0\u2013\u00a0to\u00a0improve the government\u2019s capability to respond flexibly and in a timely manner to national\u00a0health emergencies.\r\n\r\n&nbsp;\r\n\r\n<em>The authors <\/em><em>wish<\/em><em> to acknowledge the invaluable insight<\/em><em>s<\/em><em> provided by COVID-19 fund representatives from <\/em><em>Bhutan, C<\/em><em>\u00f4<\/em><em>te d\u2019Ivoire, Kenya, and South <\/em><em>Afr<\/em><em>i<\/em><em>ca<\/em><em>.<\/em><em> Without their willingness to share information, this review would not have been possible. We thank Peter Cowley for reviewing and providing insights on an earlier version of the blog.\u00a0We also thank Joe Kutzin and Peter Cowley for reviewing and providing insights on an earlier version of the blog.<\/em>\r\n\r\n&nbsp;\r\n\r\n1.\u00a0Bhutan: <a href=\"https:\/\/www.cabinet.gov.bt\/press-release-3\/2\/\">cabinet.gov.bt\/press-release-3\/2\/<\/a>, <a href=\"https:\/\/www.bhtf.bt\/resources\/3\">bhtf.bt\/resources\/3<\/a>; Cameroon: <a href=\"https:\/\/minfi.gov.cm\/en\/audits-report-on-the-use-of-covid-19-fund\/\">minfi.gov.cm\/en\/audits-report-on-the-use-of-covid-19-fund\/<\/a>; C\u00f4te d\u2019Ivoire: <a href=\"https:\/\/finances.gouv.ci\/actualites\/65-contenu-dynamique\/actualite\/724-covid-19-fonds-de-soutien-du-gouvernement-les-premiers-cheques-remis-aux-beneficiaires\">finances.gouv.ci\/actualites\/65-contenu-dynamique\/actualite\/724-covid-19-fonds-de-soutien-du-gouvernement-les-premiers-cheques-remis-aux-beneficiaires<\/a>; Kenya: <a href=\"https:\/\/www.oagkenya.go.ke\/special-audit-report\/\">oagkenya.go.ke\/special-audit-report\/<\/a>; Mauritius: <a href=\"https:\/\/nao.govmu.org\/Pages\/ValueForMoney_n.aspx\">nao.govmu.org\/Pages\/ValueForMoney_n.aspx<\/a>; Sierra Leone: <a href=\"https:\/\/www.auditservice.gov.sl\/other-reports\/\">auditservice.gov.sl\/other-reports\/<\/a>; South Africa: <a href=\"https:\/\/solidarityfund.co.za\/reports\/\">solidarityfund.co.za\/reports\/<\/a>,\u00a0 <a href=\"https:\/\/www.agsa.co.za\/Reporting\/SpecialAuditReports.aspx\">agsa.co.za\/Reporting\/SpecialAuditReports.aspx<\/a>\r\n\r\n2. \u00a0These private funds should not\u00a0be strictly identified as EBFs because they operate largely or completely outside the control of the government.\r\n\r\n3.\u00a0 For example, in <a href=\"https:\/\/www.cabinet.gov.bt\/press-release-3\/2\/\"><u>Bhutan<\/u><\/a> the legislation refers to \u201cthe response and containment of COVID-19\u201d; in <a href=\"https:\/\/finances.gouv.ci\/actualites\/65-contenu-dynamique\/actualite\/724-covid-19-fonds-de-soutien-du-gouvernement-les-premiers-cheques-remis-aux-beneficiaires\"><u>C<\/u><u>\u00f4<\/u><u>te d\u2019Ivoire<\/u><\/a> to \u201csupport the human emergency response\u201d; and in <a href=\"https:\/\/mof.govmu.org\/Pages\/Covid-19-Solidarity-Fund.aspx\"><u>Mauritius<\/u><\/a> to \u201cstrengthening the preparedness and response to face COVID-19\u201d.\r\n\r\n&nbsp;\r\n\r\n<em>The responsibility for opinions expressed in this blog lies solely with its author(s). This disclaimer applies to any means of dissemination, distribution or publication of said blog\u00a0at any time.<\/em>","_et_gb_content_width":""},"categories":[170],"tags":[124,133],"acf":[],"_links":{"self":[{"href":"https:\/\/p4h.world\/en\/wp-json\/wp\/v2\/posts\/987526336"}],"collection":[{"href":"https:\/\/p4h.world\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/p4h.world\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/p4h.world\/en\/wp-json\/wp\/v2\/users\/873"}],"replies":[{"embeddable":true,"href":"https:\/\/p4h.world\/en\/wp-json\/wp\/v2\/comments?post=987526336"}],"version-history":[{"count":0,"href":"https:\/\/p4h.world\/en\/wp-json\/wp\/v2\/posts\/987526336\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/p4h.world\/en\/wp-json\/wp\/v2\/media\/987526337"}],"wp:attachment":[{"href":"https:\/\/p4h.world\/en\/wp-json\/wp\/v2\/media?parent=987526336"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/p4h.world\/en\/wp-json\/wp\/v2\/categories?post=987526336"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/p4h.world\/en\/wp-json\/wp\/v2\/tags?post=987526336"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}