Budget

The total budget for the program was US$8.34m in cash, with US$7.0m from Norway and US$1.34m from Belgium. In addition there was a US$420,000 non-cash in-kind contribution from UNEP for staff time. However, the Government of Norway decreased its actual contribution by US$2.0m, so that the available cash funds were actually US$6.34m. This decrease in the contribution was not reflected in the signed project document logframe or budget. Officially, it was not stated why this reduction occurred, but informally Norway conveyed that concerns about UNEP’s management of the funds led to the reduction (Norwegian Official, pers comm., 2005). No core UNEP Environment Fund cash was contributed.

The budget was broken down by the standard UNEP budget categories, which do not correspond to the actual results, outputs or activities in the logframe. This is because the UNEP budget categories are based on inputs, such as consultancy fees, workshop costs and travel. The budget shows that US$600,000 was allocated directly to the each of the seven countries, a total of US$4.2m, with an additional US$1.9m allocated to international institutes. Other funds were provided to support staff, travel, workshops and meetings.

5.6.2 Comment and Assessment

Budget categories were not aligned to the outputs or activities in the logframe is because UNEP’s project design methodology was not yet adequately results based, although it has since been restructured. It was not possible to change the UNEP budget categories as they were integral to the UNEP financial management system. (UNEP uses the same financial management system as UN Headquarters. UNDP has a more results-based but incompatible system.) The difficulties posed by using incompatible software and project design modalities were such that the UNEP Poverty and Environment team was authorized to adopt UNDP project format and budgetary categories for PEI country projects, though with a reconciliation system built in the align the UNDP budget categories with UNEP’s for financial disbursement and reporting purposes. This agreement took more than a year to

finalize through discussion within UNEP; prior to that two ProDocs for each country PEI programme had to be prepared and approved, with different formats for the respective agencies.

Experience with early implementation showed that the overall budget was inadequate and flawed in its distribution across different budget categories. More specifically, higher funding per country was needed (UNEP P&EP, 2005). While the initial budget per country was US$600,000, following restructuring the minimum cash budget per country increased to US$2.0m, with expenditure in some countries exceeding US$3.0m. (While US$2.0m is ‘peanuts’ (DFID official, pers comm., 2007) in the context of the bilateral aid, it is a substantial amount of money for a policy project.) For UNEP, which is accustomed to having US$50,000 – US$100,000 country projects, and has an annual core budget of about US$90.0m, it is a substantive amount of money. The issue of inadequate funding for country projects was identified in the Belgian evaluation, which stated that “to sustain the benefits of these sub-projects, it will be necessary to mobilise substantive resources from donors” (p24, UNEP, 2006).

The rationale for providing US$1.9m to international institutes was that they would provide support to country projects. But this did not prove to be cost effective, for a variety of reasons, including that they were based outside Africa. It would have been more cost effective and consistent with good development aid practice to allocate most of the funds directly to the seven pilot countries in this project from the beginning and let the countries indicate what kind of support they needed and from whom.

Other issues in the budget included the following:

x Experience demonstrated that the provision of the funds for travel to the countries was between one-third and one-half of that what was actually needed. x The allocation of $955,000 for meetings and workshops was excessive.

x The $2.0m cut in Norway’s contribution in the budget was not reflected in the budget for several months.

x Insufficient funds were allocated for translation of documents or the conduct of workshops in French.

The US$2.0m cut in the Norwegian budget had potentially fatal consequences to the project. No explanation could be found as to why the project was not immediately revised when UNEP was informed that US$5.0m would be provided rather than US$7.0m. The potential consequences were particularly grave for the PEI country projects, since funding had been committed to the four international institutes through legally binding MOUs, requiring that the burden of cuts would be borne by yet to be developed country projects. The situation

was saved by funds being transferred into the P&EP by Belgium from another Belgian project that was under-spending,

While the amount and structure of the budget was the major design issue, during project implementation poor management of the budget became a dominant issue. More specifically, budget expenditures inconsistent with the project objectives and cost effectiveness led to the main donor threatening to freeze funding. This followed a whistleblower transmitting information to the Norwegians, who complained about inappropriate expenditure by UNEP (Government of Norway official pers comm., 2005). In the end Norway and UNEP replaced, respectively, the Oslo-based Norwegian government staff member responsible for monitoring UNEP implementation of the project and the UNEP line manager (the whistleblower) for the project, but left the UNEP director responsible for the allegedly inappropriate budget allocations in place. Donor oversight was then transferred to the Nairobi donor embassy from the home capital, which proved to be much more effective.

Very senior management at UNEP became aware of the donor’s concerns about how funds were being spent as, apart from donor expressions of concern, the ‘corridor’ talk at UNEP was rife with discussion about the inappropriate use of funds. However, no evidence could be found that suggested that action was taken to address these issues by very senior UNEP management. These and other management issues are discussed under the management section.

In summary, with respect to budget issues, the budget total was inadequate and a higher proportion needed to be allocated to PEI country projects to align the budget with the desired outcome and country-level realities. In addition, the budget was poorly managed, with allegations of inappropriate expenditures and strong concerns expressed by the donor. These budgetary issues suggest that a mix of development aid design and organisational culture factors were relevant.