Diamond Area Community Development Fund

1
Diamond Area Community Development Fund

• Stakeholder Consultation Meeting
• July 16, 2008 Ministry of Mineral Resources,
  Sierra Leone

2
Objectives

• To check if information received and assumptions
  drawn on that information is correct
• To obtain the regional perspective from
  stakeholders who are users of the Fund
• To broaden the stakeholder consultation to
  include civil society and other government
  ministries
• To test some potential solutions and options for
  re-structuring the project selection and
  monitoring process, particularly in the Chiefdoms
• To raise other issues that are related such as
  collaboration with other funds, donor
  contributions, etc.

3
Outline

• Brief Introduction and Context setting
• DACDF current status
• Problems/concerns with DACDF
• Administration
• Allocation
• Suggested Solutions
• Options for re-structuring to address fund
  management problems
• Related Issues (collaboration with other funds,
  donors, etc.)

4
Part 1

• Brief Introduction
• Description of Current Status regarding the DACDF
• Problems and Concerns

5
Focus of Discussion

• The discussion will focus on the Chiefdom
  allocations as this is where 80 of the funding
  is spent and where stakeholder interviews
  conducted thus far have focused
• The use, management and accountability of the
  funds within local government structures should
  also be reviewed, but the focus of the following
  discussion is on the Chiefdoms

6
Introduction Brief History of DACDF

• The DACDF was initiated in 2001 0.75 of 3
  diamond export tax
• By the end of 2005, 2.8 had been allocated to
  more than 60 Chiefdoms
• About 13 District and City Councils have received
  20 of the Chiefdom allocation

7
Current Process for regional funding allocations
through DACDF
GGDO calculates the DACDF allocation Currently 0
.75 of 3 diamond export tax
The MMR collects artisanal mining licenses from
regional offices on bi- annual basis and
calculates DACDF amount per Chiefdom
15 of the total amount goes to the District
council 5 goes to the City council 80 goes to
the Chieffdom Dev Cmmttee
The CDC selects projects, contracts suppliers,
monitors progress
No formal reporting mechanism from DACDF funding
recipients to the MMR, but the MMOs and GMEs do
include status reports of DACDF spending
8
DACDF Distribution Process

• The cheques for the District Council, the City
  Council and the Chiefdom are prepared at MMR and
  the Minister (and other invited Ministers, such
  as Minister of Local Government, etc) travels to
  the districts twice yearly and distributes the
  funds during a ceremony/media event where the
  amounts are publicized
• The money goes directly to the Chiefdom
  Development Committee, the local council and the
  city council

9
Brief History

• The Fund was intended to return some portion of
  diamond revenue to communities where diamond
  mining was taking place
• Part of post-conflict efforts to reclaim diamond
  areas from the legacy of the war and to help
  communities rebuild damaged infrastructure, etc.
• Intended to enable local communities, led by the
  Paramount Chief, to create their own development
  agenda
• Through linking number of ASM licenses to amount
  of DACDF funding allocation, the Fund acted as
  incentive for the community to reduce illegal ASM

10
Has it been successful?

• According to the audit performed by the Network
  Movement for Justice and Democracy in 2006, there
  has been an improvement in road networks and
  social infrastructure in some communities and
  there appears to have been a reduction in illegal
  mining in most DACDF Chiefdoms
• However, a number of concerns and problems are
  being raised by stakeholders at a time when the
  Fund disbursement has been temporarily suspended
  (no funds were disbursed during 2007 due to
  elections, etc.)

11
Problems and Concerns

• There is little disclosure in how the decisions
  are made, how the suppliers are hired, and in the
  accounting of payments to the supplier there is
  poor communication between the CDC and the
  community
• CDCs do not appear to be representative of all
  demographic groups in the community, particularly
  the youth and women
• There is one committee, the CDC, that makes
  decisions on projects, implements them and
  monitors them good governance would indicate
  that the responsibilities of selection and
  implementation of projects should be separate
  from the monitoring and oversight functions

12
Problems and Concerns with DACDF Fund Management

• The Chiefdom Allocation
• The Minister of MMR and the Minister of Local
  Government have expressed concerns that the
  impact of the funds spent since 2001 should be
  more significant that the funds should have
  resulted in improved conditions in communities
• Other stakeholders complain that there are not
  enough financial controls on the money that goes
  directly to the Chiefdom Development Committee
  lack of accountability
• The lack of financial controls means that project
  funding is often not spent wisely and fails to go
  to the intended beneficiary the community

13
Problems and Concerns

• The District Council and the City Council
• The 15 (DC) and 5 allocation (CC) do not appear
  to have terms and conditions attached to them
  further, they appear to be arbitrary amounts that
  seem to be supporting the decentralization thrust
  of government
• Some stakeholders have complained that the DACDF
  allocation to local government is not being spent
  on development projects, but are subsumed into
  the operating budgets

14
Problems and Concerns

• There appears to be little formal monitoring of
  projects along the way
• This results in poorly executed or incomplete
  projects that fail to meet the original project
  specifications
• There are sometimes poor quality suppliers used
  to construct infrastructure projects
• There appear to be instances where a supplier
  charges one amount for the work to be done but
  does not spend that amount on the actual project
  execution

15
End of Part 1Group Feedback

• Are the descriptions of the current DACDF funding
  allocation and distribution process correct?
• Are the problems identified correct? Are there
  new ones that we dont know about?

16
Part 2

• Suggested solutions to problems and concerns
  regarding
• Project Selection
• Procurement
• Structures to improve DACDF use, management and
  oversight

17
Suggestions to Address Problems and Concerns

• PROJECT SELECTION
• Demographic representation ensure that all
  demographic groups living in communities are
  represented on the Chiefdom Development Committee
  or any committees struck to develop projects.
  NaCSA and relevant NGOs should be involved in
  both project selection and oversight functions
• Community Involvement There should be a call for
  proposals from community members and an open and
  transparent process used to select projects
• Project Proposal Format Use a standard format
  for project proposals that include objectives,
  analysis of the problem, resources required, etc.
  (one has been developed)
• Proposals should be linked to national poverty
  reduction strategy and be drawn from categories
  related to poverty reduction, infrastructure
  development (social and transport), etc.

18
Suggested solutions

• PROCUREMENT
• A database of suppliers should be developed and
  vetted through technical staff (at MMR, Works,
  LG)
• The National Procurement Agency may contribute
  advice and technical assistance in complying
  these lists
• Only approved suppliers are eligible to receive
  contracts for infrastructure projects
• Payment for invoices should only be released upon
  progress reports according to an agreed work
  schedule. Payment up-front will not be accepted

19
Solution Options To Address Fund Management
Problems

• Current DACDF Distribution Process

MMR and MLG
GDDO
Chiefdom
City Council
District Council
20
Current Process for regional funding allocations
through DACDF
GGDO calculates the DACDF allocation Currently
0.75 of 3 diamond export tax
The MMR collects artisanal mining licenses from
regional offices on bi- annual basis and
calculates DACDF amount per Chiefdom
15 of the total amount goes to the District
council 5 goes to the City council 80 goes to
the Chieffdom Dev Cmmttee
The CDC selects projects, contracts suppliers,
monitors progress
No formal reporting mechanism from DACDF funding
recipients to the MMR, but the MMOs and GMEs do
include status reports of DACDF spending
21
Current Status with improved governance changes

• MP, MMR and LC sit on CDC
• There is a call for proposals from the
  community
• Budgets remain in DACDF or MMR local bank account
  until projects are approved
• Signatories for bank withdrawals to pay supplier
  include MP, LC and MMR as well as CDC
• There is a formal reporting system put in place
  from the CDC to MMR and MLG (HQ)
• Annual audits would occur (MMR Internal Audit or
  AG) and the following years allocation would
  depend on performance

22
Alternatives to the Current Structures

• The next series of slides will introduce some
  options regarding possible new DACDF project
  management and oversight structures
• They are simply ideas and are being presented to
  stimulate discussion
• There have been no decisions on any one option
  we ask that you keep an open mind and consider
  possibilities that may not have been suggested
  before

23
Option 1 Create external technical committee
based in Freetown
CDC
MMR/MLG
External Oversight Committee (HQ) Holds
funds Evaluates proposals Oversees
implementation Approves payments
Communities
CDC
CDC
District Council
City Council
CDC
24
Option 1 External Technical Committee

• The Director of Mines-Chairman
• Professional Head, Min. of Works Tech.
  Maintenance-Member
• The Director of Rural Development-Min. of Local
  Government-Member
• Director of Planning, Min. of Dev. Economic
  Planning-Member
• An Ex-Officio member to be co-opted as and when
  necessary

25
Option 1 The External Technical Committee

• Communities forward proposals to the CDC the
  CDC recommends selection and forwards to the
  External Technical Committee
• The duties of the Committee would include
• Evaluating community pilot projects and making
  recommendations, overseeing the implementation of
  projects, disbursing funds for supplier invoices
  and reporting periodically to MMR/MLG

26
Option 1 Pros and Cons

• Pros
• A high-level committee would be an impartial
  mechanism to oversee project and supplier
  selection free from local influence (CDC, etc.)
• It would have the required technical and
  administrative expertise
• Cons
• There are more than 60 Chiefdoms and only one
  committee located at HQ. The capacity of the
  committee to manage all these CDC allocations
  would be strained and would undoubtedly result in
  payment delays and problems with project
  implementation and completion
• The technical committee is located in Freetown
  and may be too far from the Districts where the
  projects are being implemented to monitor
  effectively
• This structure goes against the governments
  policy regarding decentralization

27
Group Feedback

• What are thoughts regarding the two options
  presented so far, the Current Status with changes
  and Option 1 (external HQ committee)?
• What about the proposed solutions regarding
  project selection and procurement?

28
Option 2 District Technical Committees
(Comprised mostly of National Government reps)
CDC
District Technical Committee
Communities
CDC
MMR/MLG (HQ)
District Technical Committee
CDC
District Technical Committees are made up of
national government technical staff present in
the regions and possibly some locally elected
staff. They would take on an oversight
responsibility. CDCs would select projects based
on community input
CDC
District Technical Committee
CDC
District Technical Committee
CDC
District Council
City Council
CDC
29
Option 2 District Technical Committees

• Funds remain in local bank account under the
  DTCs authority
• CDCs are responsible for project selection from
  community-based call for proposals
• District Technical Committees are made up of
  national Ministry technical staff located in the
  regions and possibly some locally elected staff
  from the local government structures (MMR, LG,
  Works, etc)
• CDCs submit projects for consideration by the DTC
• The DTC takes on an oversight function it
  approves projects, selects supplier, oversees
  progress, approves payments and monitors results

30
Option 2 Pros and Cons

• Pros
• There is an oversight function performed by a
  body of national government representatives that
  is not connected to the CDC
• There is technical advice and capacity through
  appropriate government reps
• Because there are technical committees struck for
  each District, the capacity constraints are not
  as great as they would be with only one technical
  committee located at Freetown
• Cons
• Although technical committee staff are located in
  the regions, they would mostly be representing
  national Ministries (Works, Procurement Agency,
  MMR, MLG, etc.) -- this takes the accountability
  away from the community, and is contrary to the
  decentralization thrust of government

31
Group Feedback

• What does the group think of Option 2? Is it
  workable? Is it better or worse than the previous
  options? Are there modifications to this option
  that people can suggest to make it better? Are
  people worried that this option goes against the
  decentralization objective of government?

32
Option 3 Regional Chiefdom Organization
Communities
CDC
Paramount Chiefs responsible for chiefdoms in a
District would come together under one
organization for the purpose of disbursing DACDF
funds. They would provide a coordinated
oversight function. The CDCs would submit
proposals to them based on community input
MMR/MLG (HQ)
Regional Chief Organization
CDC
CDC
CDC
CDC
District Council
City Council
33
Option 3 Regional Chiefdom Organization

• In this option, there would be a new organization
  made up of all Chiefdoms in a particular district
• This regional body would provide an oversight
  function it would approve projects submitted by
  the individual CDCs, choose supplier and approve
  payments, monitor progress of project
  implementation
• The CDCs would select and implement the projects
  based on community input
• Funds would remain in a local bank account until
  the projects and suppliers were selected
• Several signatories would be required for
  withdrawal of funds -- the Chair of the RCO, the
  MMR and LGs

34
Option 3 Pros and Cons

• Pros
• The smaller Chiefdoms would benefit from being
  amalgamated into one regional Chiefdom body
• There would be greater regional economic impact
  from consolidation of funds from all Chiefdoms
  into development projects
• Cons
• The wealthier Chiefdoms may not wish to put their
  funds into a consolidated pot for development
  projects in other area in the District
• There may be conflict between the Chiefs in terms
  of decision-making and funding priorities

35
Group Feedback

• Would Option 3 work? Would it be possible or
  desirable to have all Chiefs in a District form a
  governing body to manage the DACDF funds more
  effectively? Would there be greater developmental
  impact? What are the disadvantages?

36
Option 4 Strengthening Local Government
Communities
CDC
The District Council would provide an
oversight function and would ensure that the
Chiefdoms all contribute to local development
needs on a regional basis. The CDCs would select
projects based on community input but they would
be considered In the context of a
regional development plan
MMR/MLG (HQ)
District Council
CDC
CDC
CDC
CDC
City Council
37
Option 4 Strengthening Local Government Option

• In this option, all DACDF funds would be
  transferred to a bank account in the city where
  the relevant District Councils are located
• The CDCs would solicit proposals from community
  members and submit them to the DC for review
• The DC would perform an oversight function on the
  CDCs in its area
• When projects are selected, funds can be released
  from the bank account with the appropriate
  signatories the LC, the local MP, the MMR, etc.

38
Option 4 Pros and Cons

• Pros
• Strengthened local government from having
  management and accountability for DACDF funds
• In keeping with decentralization policy
• The individual Chiefdom projects would be
  evaluated and assessed based on district-wide
  needs
• Therefore, there would be more regional
  development impact from consolidating the fund
  and disbursing it on a District-wide basis
• Cons
• The Chiefdoms may resent losing their control
  over the DACDF funds. There may be an increase in
  illegal mining if the Chiefs do not see such a
  direct benefit from funds accrued in the DACDF
  for their use
• Local government may lack the absorptive capacity
  to handle the consolidated funds from a number of
  Chiefdoms in the largest diamond producing areas

39
Group Feedback

• Would Option 4 work? Is it desirable to place
  management of all DACDF funds in the hands of
  local government? Is there sufficient capacity in
  local government offices to manage these funds?
  How would the Chiefdoms react to this proposal?

40
Option 5 Decentralization to Community
City Council
MMR/MLG (HQ)
District Council
Selection and Implementation Committee Selects
Projects Selects Suppliers Approves supplier
payments Reports to CDC
Chiefdom
Receives recommendations from SI Committee Makes
final project decisions Administrative oversight
function
Communities
41
Option 5 Community Decentralization Option

• Funds are held in a local bank account
• They are drawn based on project selection by the
  SI Committee and project approval from the CDC
  then, the local MP, the CDC and the LG are
  signatories
• The CDC performs oversight function
• A Selection and Implementation Committee that is
  made up of community members submits projects
• The SI then reviews and recommends selected
  projects to the CDC if the CDC does not accept
  the recommendation, there must be a written
  explanation as to the rationale
• All minutes, reports, etc. from the two
  committees are published and available to the
  community

42
Option 5 Pros and Cons

• Pros
• The community has the accountability for the
  DACDF funds in keeping with principles of
  decentralization
• The community is in close proximity to what is
  going on regarding project progress and can
  monitor effectively
• Cons
• There may not be sufficient expertise in the
  committee but this could be supplemented by
  external assistance as needed
• There may be influence exerted on the Committee
  by the CDC but if minutes of meetings are taken
  and published it is less likely that the
  community itself will allow this to occur

43
End of Part 2

• Which option is best?
• What will it take to implement that option?

44
Part 3

• Related Issues
• DC and CC use, monitoring and oversight of DACDF
  funds
• Consolidation of Funds (ASM rehabilitation fund?
  Agriculture fund?)
• Donor funding to match DACDF Projects

45
Allocations to the DC and CC

• Currently the DACDF funds appear to contribute to
  the operating budget of these Councils should
  there be terms and conditions attached to the
  DACDF funds that require them to be spent on
  development projects?
• Who should oversee this process?

46
Collaboration

• There are a number of government sponsored funds
  related to mining in addition to the DACDF,
  there is the ASM Rehabilitation Fund and the
  Agriculture Fund. Should these funds all be
  consolidated into one fund? If so, how would they
  be managed? Who would implement and who would
  oversee?
• There are possibilities for collaboration with
  donors in project selection and delivery. Is this
  desirable and if so how would the projects be
  managed?