A White Paper launched by FreeBalance in June emphasises that greater integration between donor and recipient budget systems is crucial to the success of aid transparency. The paper argues that the rationalisation needed to integrate different operational systems is not as complex and expensive as previously thought, and could be achieved relatively quickly and inexpensively through the adoption of good practices in financial management.
The paper highlights that a central goal of the Paris Declaration on Aid Effectiveness and the Accra Agenda for Action is to use strengthened country financial systems rather than separate donor systems. FreeBalance calls for donor funds to always be on the budget to ensure transparency, citing greater budgetary integration as “critical” to the success of the International Aid Transparency Initiative (IATI) as it would allow government resource planning systems to be seamlessly integrated and support the emerging international standard.
With greater budgetary integration between government systems, transaction costs and corruption are reduced through automation. This data harmonisation then also supports efficiency and effectiveness. Manual methods of integration compromise data quality and timeliness, with the result that aid is harder to coordinate and therefore is less effective.
Read the full paper here for details on how to better integrate budget systems.