It's not possible to "follow the money" via IATI transactions. Discuss!

Community Zone Traceability
#1

I’m hoping people can join in - and even call me out as wrong - on this thread. I’ve purposely written it this way…!

Traceability: what we think happens:

  • Donor A publishes a Disbursement of £100, on the 1st Feb 2017.
  • This transaction has a reference: 12345
  • They use receiver-org to clearly identify that Organisation B is destination of the funds
  • They also use receiver-activity-id to point to a specific IATI activity, published by Organisation B, that receives the fund

and

  • Organisation B also publishes IATI data, which includes an Incoming Fund for £100 on 1st Feb 2017
  • This transaction has a reference: 12345
  • They indicate that the provider-org is Donor A, and also include the provider-activity-id to signal that the source of the funds is an activity published by Donor A

Together, this looks like great traceability. We can connect two organisations together, alongside their activities, via a couple of transaction.

But! The transactions are not actually linked together. Each publisher can provide their internal reference for the transaction, but it’s not possible to cite other transaction references, in the same way we can for organisations and activities.

This might seem like nitpicking. After all, the above two transactions look like they link together. All available parts of the standard are in place, so good enough, right?

At a human level - eyeballing the data - we can probably make the assumption that this D is connected to the IF. But (and this is a reason for our standard) how can a machine read and connect them?

This becomes tricky when - for example - the values of the transactions don’t match, for various reasons. I have been discussing with one organisation how they receive a single IF from a donor, and then make several D to partners, from that. It’s possible to see this in their accounting system, but when expressed via IATI, it’s difficult to then match things up - particularly when there are multiple transactions flowing in and out.

More fundamentally, we might want to ask: is this important for the IATI community? Are we concerned about tracing and linking specific transactions together? Or - can we accept that traceability in IATI will not be so precise?

And - do post an alternative take on this, if you have one.

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AidHedge links service to IATI data (beta version)
Add related-transaction element (excluded 2.03)
#2

I agree with you 100%. It does seem like nitpicking.

  1. The standard hasn’t been designed as a banking system.
  2. Nor as an auditor’s ledger.
  3. It can trace resource flows between activities, not transaction-by-transaction.
  4. There are many reasons why transactions won’t match: currency exchanges and periodic aggregations to name two.
  5. The internal reference was never intended to manage traceability. It merely points you back to the publishers own system.

imho …

No

No

Yes

I don’t. Getting activity-to-activity traceability established as standard practice is a big enough challenge - particularly harnessing the large volumes of funds flowing through multilaterals.

#3

Hi @stevieflow,
Some comments:
1 - your assumption is that donor A knows the activity identifier of the recipient organization at the moment of disbursement. That is often not the case, since that activity might not yet exist in B’s administration.
2 - When organization B refers to the correct provider-org-activity-id of donor A, there can be no misunderstanding which activity is being funded where the funding is coming from.
3 - when this happens at the same date and the amounts are the same that is more than good enough for traceability purposes.
4 - when dates or amount differ slightly, you can still get a reasonable picture of what happens.
5 - if they differ greatly, this is a good reason to further look into the data quality of each publisher.

So I fully agree with @bill_anderson: we shouldn’t try to make IATI financial auditor proof banking system. That would divert our focus from far more interesting subjects like results reporting, etc.

#4

I agree that it is not possible to follow the money, and that traceability is massively important but also with the others that its not a big deal to not be perfectly linked in the way you describe. What is really important about traceability is what happened with that money and where (sub-nationally) so that in country actors can confirm that yes that money was actually spent and now we have great new services that are sustainable. Or this project under performed, it was supposed to deliver 10,000 services, but only delivered 4,000. Is there an explanation why the project under-performed, that allows for lessons to be learned, or calls for further investigation of perhaps improper financial management. Then all this becomes a real accountability exercise that can result in improvements, not just checking a box that says yes the money was spent and received.

#5

Thanks @bill_anderson @Herman and @ariag for your contributions

To clarify, I am not advocating for IATI to change/switch/adopt to an “banking system”. I just wanted to highlight how it can very nearly be perceived as that. Having spoken to numerous donors, publishers, data users and interested bystanders - not often fortunate enough to spend hours with the standard and those around it - it has become clear that this perception is widespread.

And - this isn’t a surprise imho. We use the terms:

  • Transaction
  • Provider
  • Receiver

For the person in a finance team asked to implement IATI, they can quite easily believe it is about specific transactions, that relate to each other. As we talk more about traceability, and use these terms, then others may look for the specifics I outline above, rather than the gist or “general picture”.

Understood. Can other people find that clarity too?

I don’t think this is about my nitpicking, or what’s the right or wrong implementation of the standard. If we are serious about widespread adoption, then we’re going to have to spell things like this out for data producers and users means. Repeatedly.

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#6

Point taken.

(Plus some padding 'cos Discuss says my reply has to be at least 20 characters - that’s a bit silly)

#7

I think there is likely consensus in this thread that IATI is not trying to provide traceability between transactions.

The question then is how we make sure we don’t give that impression to the outside world when talking traceability.

In the work we have been doing with DFID, the framing was in terms of “Delivery chains” and I wonder if this would be a better framing for any future discussions?

#8

Fully agree with all above.

It’s unfortunate that we may have created an erroneous perception regarding traceability. In fact, I was uncomfortable myself from the very beginning with the concept of (very precise) traceability that was pitched by some IATI promoters. It didn’t seem to matter too much (ie didn’t want to nitpick), but Steven shows that it does matter - I have heard similar feedback/complaints myself, and do believe it puts off potential publishers.

Tim has summed it up nicely. We need to adjust how we describe what IATI is about, what it enables, what purpose each data element has. Perhaps indeed “Delivery chains” would be more appropriate. We may have a challenge though explaining why we must publish specific transactions (rather than eg quarterly aggregates).

#9

Agree with all above.

Depending on the structuring by the publisher this could also have impact on use cases that use aggregations of funds. While creating transparency portals I had the request twice to show ‘spend’ (disbursements + expenditure) funds by donor. When the publisher has activities funded by multiple donors this is not possible, and the response I get back when I tell that is that they can in their financial systems.

One of those publishers is thinking about structuring a multi-donor funded program in one parent activity and multiple child activities (one per donor) so they can show geographic / sector / receiver-org spread per donor on spend funds. To me that sounds like a precision vs complexity trade-off that every publisher should decide upon theirselves (or do I miss anything and is this undesirable?).

Just as the impossibility of financial traceability I would think it is good to create awareness of the (im)possibilities when using certain publishing strategies. To make sure publishers report this in their desired structure from the start.

#10

Hi,

I agree with Vincent. For me the answer to this is strongly linked to another question which is “Is it possible to eliminate double reporting/counting without being able to solve traceability?” I would be keen to hear whether people think this is possible?

The difficulty of eliminating double counting (e.g. how much did country X receive in year Y) is why I keep on having to return to using OECD data instead of IATI data. Therefore, if the answer is “eliminating double counting requires better traceability than currently exists in the standard”, then I think IATI does need to think about adapting some of the features of an accounting system (or find another solution).

As for tracking results - these are not as separate discussions as is suggested here - knowing how much money was spent on a project (thus being able to eliminate double reporting) is a fairly key component of results based management etc.

Matt

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#11

I’m responded to my original post to illustrate something here

This activity - from a UK Fund Manager - is a great example:

http://d-portal.org/q.html?aid=GB-COH-04105827-AIDDIRECT

If you look at the transactions, in most cases the provider/receiver org is provided, along with the relevant activity-id. So - when viewed in d-portal it looks like these transactions are linked to other transactions, potentially

trace.png914×238 31.1 KB

(the yellow text are links to other pages on d-portal)

But - these links take you to the activity level, not to any specific transaction

As per original post, I just want to highlight a potential mismatch between what people might think the standard implies (or even uses of the data may lead users to expect) vs what it actually does.

With this illustration I will rephrase the original question: it’s not possible to “follow the money” by linking together specific transactions. Discuss (if you really want!)!

#12

Hi Stevie,

We currently have this discussion in the federations of Belgian NGOs because from next year on we’ll be obliged to publish IATI files on all the programmes that are funded by the Belgian government. A big concern that’s going around here is that ‘the numbers don’t add up’. In our case, we get some 80% of the total budget of a programme from the donor, which we can register as a transaction (incoming fund). The rest of the funding comes primarily from private gifts, but these aren’t registered as transactions, so it’s felt that this leaves a gap in the financial accountability. The current idea is to register this remaining 20% as a virtual transaction from the NGO to itself so that the total budget is correct. Personally I think that this is a very bad idea, as you’re creating transactions that didn’t actually occur (not in this form at least).

Another issue is that from the total amount that you receive, you only send a certain percentage to your partner organisations: the total budget minus administration costs. So NGOs are worried that the general public or critical journalists will think they are stealing money, because IATI doesn’t offer enough possibilities to explain what they are doing with the money that doesn’t flow to developing countries. The same may happen in the recipient countries, where local offices of the NGOs or their partner organisations again need a certain percentage of the money they receive for their own work while the rest goes to the final beneficiaries. So again the ‘solution’ that is proposed is to work with virtual transactions to indicate that this money is used for working costs so that the total amount spent adds up.

I totally agree with the previous remarks that this is not what IATI is about. The problem is that in a growing number of countries, IATI is used by donor agencies to manage the programmes they fund. And these donor agencies have very stringent financial reporting frameworks, so things have to ‘add up’. One aspect of this is that we’re forced to report on a level of detail that IATI was never designed for (in my view). But what it amounts to is that we’re pushed to make it possible to ‘follow the money’ and that we need to force the standard to make this possible. For me, this is a threat to both the standard and the way we are reporting to the donors.

To finish, I think that part of the problem is that a very big part of the standard is the financial aspect. The organisation file is nothing but financial data, and the core of the activity file is the transactions. Sure there is some reporting of results (using only numeric indicators), but for me it is not a surprise that people would expect that you could follow the aid streams and that the numbers would add up.

#13

@Bart_Stevens Yes, IATI is used by some donors for managing programmes they fund. It can not replace financial accounting though and I believe we shouldn’t try. So things do NOT need to add up. IATI should give a reasonable view of the larger picture though.

And that is exactly why the Netherlands MFA still asks for a separate financial accounting statement each year for its activities. IATI is used to asses the non-financial aspects of an activity. The financial figures are only used to provide a rough estimate.

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#14

OK - I understand your sentiment (and of the MFA @Herman) - and thanks for thinking on this further @Bart_Stevens

What troubles me slightly is that I understand (given the info in this thread) that MFA are asking organisations to publish financial data in the IATI format, but it doesn’t really matter if it is accurate as there is another (closed?) system for that.

How inaccurate is tolerable, therefore? What’s a reasonable view? We should careful - imho - when using such language around IATI. It kind of implies that all the effort people may go to with (for example) transaction data (outputting data from financial systems, aggregating it, adding organisation references, including external activity identifiers) isn’t a valued. If it’s not valued, then why do it?

However, I think we might be getting mixed between what the standard can do, and how various organisations implement it?

So, for one organisation, it may be really valuable that they can link their transactions in such a detailed way. As per my original post, I was simply highlighting that - at a technical level - the standard does not allow this function. This seems a minor oversight

For other organisations, the granularity, linking and interplay between different transactions may be of no interest at all. That’s their choice.

I’m now at risk of taking this discussion off into a tangent about how the standard can (and should imho) support various implementations. But, I’ll leave that for other times :slight_smile:

#15

Hi @stevieflow.
You are right. I should have been more careful describing what I mean with a rough estimate.

It is important that the IATI publication is as accurate as possible, given de inherent limitations of IATI. But it will not be as accurate as an audited financial accounting statement. With an rough estimate I mean an estimate compared to the accuracy of an audited financial accounting statement in which topics as exchange rate gains/losses, overhead costs, interest, liquidity, assets, etc. are addressed.