Addressing corruption risks in multi-partner funds

(Short version)

The donor community is focusing more and more on fragile situations and complex global issues such as health pandemics. Multi-partner funds, MPFs, are becoming a vehicle of choice for delivering results on challenging development and humanitarian issues and in difficult situations because they can provide innovative approaches and partnerships for delivering results. This, however, may also lead to more complex delivery chains, and hence also new risks that donors may not be fully cognisant of. 

This U4 Brief examines six major MPFs and their approaches to risk analysis and risk management:

1. ARTF – Afghanistan Reconstruction Trust Fund
2. LOTFA – Law and Order Trust Fund for Afghanistan
3. CERF – Central Emergency Response Fund
4. GPE – Global Partnership for Education
5. Gavi – The Vaccine Alliance
6. GFATM – Global Fund to fight AIDS, Tuberculosis and Malaria.

Looking at these six funds allows us to address important dimensions of the MPF universe: diversity of funds structure (roles of trustee versus administrator versus decision-making bodies); diversity of administrators (World Bank, UN, independent funds); country specific versus global funds; general versus thematic funds; emergency versus development focus; and vulnerable versus stable working environments.

While the risk picture facing the funds varies, the big difference is how the funds administrators understand and address risks. Traditional MPFs under UN or World Bank administration (ARTF, LOTFA) focus on fiduciary responsibilities, which is largely in line with most donors’ concerns of financial probity and ‘zero tolerance for corruption.’

More recent funds with sector focus (Gavi, GFATM, GPE) provide a more holistic analysis of risk related to attainment of actual objectives, where the concept of ‘risk appetite’ for various risks along their various delivery chains is key. This discussion involves all parties to the funds, including the donors, since the core idea is that all partners to the MPF need to share in the risks inherent in delivering real results to intended beneficiaries. This implies that donors should themselves consider modifying their approaches to managing and accepting risk in order to improve the likelihood of MPFs reaching their agreed-upon objectives. This might include:

• Donors should clarify with MPFs what the actual end-states are that the funding aims to accomplish, so as to hold all actors involved accountable for performance. 
• In light of this, donors should challenge MPF administrators with regards to how participatory and inclusive the MPF in fact is when it comes to needs identification, policy and priority setting, quality assurance of financial and performance results and reporting, and implementation
• Donors should encourage a risk analysis of the funds’ actual delivery chains, followed by a discussion on stakeholders’ risk appetites, in order to agree an action plan for addressing priority risks and to ensure a joint commitment to sharing those risks.
• Donors should review resource levels dedicated to corruption prevention versus investigation and prosecution of possible fraud, among other things to avoid a disproportionate share to prosecutorial activities.
• Donors should review their responses to cases of fraud, to ensure that the response is proportionate to the problem identified and preferably addressed to the actor or actors actually responsible for the problem. 
• Donors should review their own organisation and management of relations to MPFs, including perhaps a strategy for engaging in more quality assurance activities in order to gain better understanding of the risk trade-offs fund managers must address.