Traceability - definitions of disbursement and expenditure (included 2.03)

Standard Management 2.03 Decimal Upgrade Proposals
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#1

This proposal is part of the 2.03 upgrade process, please comment by replying below.

Standard
Activity

**Schema Object** Codelist

**Type of Change** Change code descriptions

**Issue** Clarify the distinction between disbursements and expenditures

**Proposal** Make the following changes to the [TransactionType](http://iatistandard.org/202/codelists/TransactionType/) codelist descriptions:

  • Disbursement
    • From: “Outgoing funds that are placed at the disposal of a recipient government or organisation, or funds transferred between two separately reported activities.Under IATI traceability standards the recipient of a disbursement should also be required to report their activities to IATI.”
    • To: “Outgoing funds that are transferred to a recipient organisation that reports, or is expected to report, their activities to IATI; or funds transferred within an organisation between two separately reported activities.”
  • Expenditure
    • From: “Outgoing funds that are spent on goods and services for the activity. The recipients of expenditures fall outside of IATI traceability standards.”
    • To: “Outgoing funds that are spent on goods and services for the activity, or are transferred to a recipient that doesn’t and is is not expected to report their activities to IATI.”
**Standards Day** A recommendation to improve these definitions was made during general discussion of traceability rules.

**Links** N/A

#2

This seems like a good idea. It might also help with intra-organisation traceability and to avoid double counting, particularly if used with the “incoming funds” transaction type.

#3

I wonder whether the definition is trying to do too much, by defining definition/expenditure AND saying what is subject to IATI traceability standards. Should the latter not be included in guidance instead of the definition of these codes?

I also wonder whether there are existing definitions of disbursement and expenditure in accounting standards that we should defer to, in order to ensure interoperability of IATI data with other data. Perhaps IMF GFS would be a good place to start?

#4

This topic has been included for consideration in the formal 2.03 proposal

#6

I’m not sure about the new wording:

  • “Reporting to IATI” makes it sound like IATI is a controlling body rather than an open data standard. I’d propose to stick with “publish IATI data” or something along those lines.

  • “Expected to…” leaves a lot of room for interpretation. Expected by whom?
    With the proposed explanation of expenditures I foresee many disbursements to local development partners will be excluded “because nobody would expect them to publish IATI data”. Personally I find @rolfkleef’s schema (below) clearly explains the different types of transactions.

The definitions of disbursements and expenditures should i.m.o clearly explain the difference between transfers meant for development related activities and other expenses. Mixing these definitions with ‘traceability guidelines’ doesn’t make them clearer.

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1 Like
#7

@pelleaardema Totally agree with this. Rolf’s example is also helpful.

Though again I think IATI should be adopting some generally-accepted definition of disbursement and expenditure. I would look first at the IMF’s Government Financial Statistics or the definitions published by another accounting body.

Ultimately I think you should see 100% of a disbursement eventually expended lower down the chain (though many reasons why the numbers might not totally add up).

#9

Notes from consultation calls w/c 3rd July

Discussion:
The group wanted to better understand the motivation behind this proposal. The main motivation for amending the definitions is the need to clarify and streamline the definitions as a lot of people were unclear on what “under IATI traceability standards” means
The group also wanted clarification about what ‘expected to report’ means and it was agreed that additional guidance should be developed for different stakeholder groups
Discussion over language used e.g. ‘reporting’ or ‘publishing’. There was generally an agreement that the word “reporting” shouldn’t be used.

Outcome:
The proposal was reviewed by those on the call and there was no objection from the group. Suggestion was made to change the word “report” to “publish” in the definition
The group expressed the need for more use cases and more guidance from the IATI technical team on the ‘expected to report’ under IATI traceability standards.

#10

Kind of want to re-iterate the points made by @pelleaardema and myself above - would be great if the proposers of this change would engage with those arguments.

My strong preference would be to:

  • consult with accounting organisations and use a widely-recognised definition from international accounting standards;
  • do not mix up IATI’s (evolving) traceability standards with the definitions of different types of financial flows. How to implement traceability should be included in guidance, rather than trying to crowbar it into these definitions.

Examples of problems with the proposed definition:

  • budget support would be classified as expenditure (because recipient governments are not expected to report to IATI), when it clearly is not under a logical/intuitive understanding of “disbursement” and “expenditure”.
  • funds transferred to a private company may be classed as disbursement or expenditure depending on whether the provider org had traceability requirements that covered private companies, rather than depending on the nature of the flows.

As currently proposed, these changes would have quite negative effects on the usefulness of this data at country level, where the understanding of disbursements and expenditures is generally much closer to the existing definition than the proposed definition. Given the wide concern about increasing data use, we should be trying to move closer to those country-level definitions, not further away.

1 Like
#11

Fully agree with @markbrough and @pelleaardema.

#12

This proposal currently stands as not having consensus.

Reading the whole thread again, it strikes me that the problem to be addressed was NOT confusion between expenditure and disbursement, but rather around the traceability language

Pelle, Mark and myself have signaled support for removing the traceability/publishing part from the definitions. This would seem to solve the problem. Nobody has opposed this idea.

While I agree in principle with Mark’s point about using generally-accepted definitions, I’m also inclined to limit changes as much as possible.

The new definitions could therefore be:

Disbursement: Outgoing funds that are placed at the disposal of a recipient government or organisation, or funds transferred between two separately reported activities.

Expenditure: Outgoing funds that are spent on goods and services for the activity.

#13

I could live with that.

#14

Any objections to @YohannaLoucheur’s definitions?

#15

They look very clear.

#16

Definitions look good - much clearer. Thanks @YohannaLoucheur

1 Like
#17

I agree with @YohannaLoucheur’s definitions. It makes sense to have simple definitions of concepts like this. How we use them, for example in setting up traceability “rules”, can be independent of the definition.

#18

This proposal has been been included in the 2.03 upgrade. It can be viewed in the following two Discuss posts:

#19