Appendix Two: Central Challenges Faced by CDFs
Accountability and transparency deficiencies generally result from the lack of a clear, effective mechanism for oversight or separation of powers delineated in CDF policy, which can lead to:
Unaccounted for or wasted money because balance sheets are improperly, dishonestly or rarely reported.
Corruption when MPs use funds to buy political favors or votes; when decentralized levels of government, administration and CSOs fail to maintain and submit to central CDF administration detailed records of money used; and/or project designers or implementers are selected on the basis of clientelism or nepotism.
Disillusioned constituencies because they were not consulted at any or all stages of project identification, proposal, selection, approval and implementation.
Efficiency issues arise when there is a misallocation, misuse or underutilization of CDF disbursements as a consequence of:
Fiscal illusion, or the inability for local populations to grasp the aggregate cost of all CDF projects for the central government and its impact on the national budget. In this case, because CDF money does not come directly from a constituency’s revenue or tax base, it is treated as “free money”, diminishing the degree of efficient utilization of and effort to monitor such disbursements. Also, the central government incurs long-term cost of these projects, which is a hidden cost.
Project duplication with development efforts of national and local government or development efforts funded by the donor community.
Poorly designed projects due to the lack of a coherent policy framework within which to propose, devise and implement projects, which ultimately promotes waste.
Incompetent administration in local government that may be technically ill- equipped to administer project funds due to the technical complexity of management practice.
Equity dilemmas surface partly because of different approaches to defining three core elements of what is meant by “fair CDF distribution”. To address these three elements, one must define who the deserving recipients are, what the limits are of the project or item for which money is allocated and how you gauge the fairness of the process of distribution? Given an agreed upon definition of equity, issues of fairness include:
The differences in population and need (economic, social, healthcare, etc.) across constituencies if CDF money is allocated evenly per constituency.
Motivating factors leading MPs to prioritize certain geographic areas of their constituency for development as opposed to others. Sometimes, when one area of a constituency is a political party stronghold, MPs will spend more heavily on other areas because there is minimal incentive to spend in an area already backing that legislator.