Inside the Haiti Reconstruction Fund Annual Report

July 26, 2011

Last Friday, as the board of the Interim Haiti Recovery Commission (IHRC) was meeting, the Haiti Reconstruction Fund (HRF) released their first annual report. (Note: we obtained a copy by asking one of the report’s media contacts for one; the report itself unfortunately has still not been made publicly available.) The report, which received cursory but positive media coverage, touted the high level of aid disbursement and the flexibility with which the HRF can operate, while rightly noting that the wider international community was failing to keep up. As AFP reported:

At an international donors conference held in New York in March 2010, 55 donors pledged $4.58 billion in grants in 2010 and 2011 for rebuilding the country. But as of June, donors had disbursed $1.74 billion, just 38 percent of the pledges, the World Bank said.

In releasing the report, the HRF also pointed to major reconstruction projects, such as the Neighborhood Housing Reconstruction Project as “highlights of the work done so far”.

A more thorough look at the annual report, however, shows that although the HRF has disbursed a significant portion of the funds raised, much of that money remains unspent in the hands of partner agencies. In fact, the World Bank, which is the administrator of the Neighborhood Housing Reconstruction Project, has yet to disburse a single dollar for the project, while the Inter-American Development Bank (IDB) has yet to disburse any aid that has been transferred from the HRF.

The HRF was established in March of 2010 by the World Bank, and validated by the Haitian government in May of 2010. With contributions of $351 million from 19 donors, the HRF describes itself as “[t]he largest source of unprogrammed funding for the reconstruction of Haiti”. A significant share (20 percent) of donor contributions has gone to the HRF. The steering committee is headed by representatives from the government of Haiti, as well as major donors who have donated more than $30 million. Although the steering committee approves funding decisions, the projects the HRF funds are all projects that have been approved by the IHRC, which has not always properly incorporated Haitians into the decision making process.

Disbursement Rate

The HRF annual report, and subsequent media coverage has focused on the 71 percent of funds that has been disbursed to various entities, but fails to acknowledge that much of this money remains unspent. The HRF report notes that “The Trustee has transferred funds totaling US$197 million in respect of those approved projects and associated fees to the Partner Entities”, and an additional $40 million is set to be transferred. Together the $237 million is equal to 71 percent of the total funds raised. However, as the HRF notes, this money has not actually been spent on the ground, but simply transferred to their Partner Entities (the World Bank, UN and IDB). The disbursement of funds from those organizations is just $35 million, or about 10 percent of the total contributions received. The IDB, which has received $37 million in HRF funds has yet to actually disburse any of this total.

Despite this, the HRF press release on Friday listed a number of projects as “highlights of the work done so far”. HRF manager Josef Leitmann commented to the Financial Times:

“That’s no mean feat in an environment like Haiti where there are so many obstacles and challenges to getting things done on the ground,”

Yet these projects – even though funding has been made available by the HRF — have not actually been undertaken. As is clear from the HRF’s own report, nowhere near $240 million has been spent “on the ground”.

Aid as “Accompaniment”

Last month the UN Special Envoy for Haiti released a report, “Has Aid Changed? Channelling assistance to Haiti before and after the earthquake” [PDF], which suggested aid should be evaluated based on the principle of accompaniment, and concluded that “aid is most effective at strengthening public institutions when it is channelled through them.”

The HRF, in their communications strategy notes that, “The HRF should be perceived as an efficient, responsive and flexible source of financing for reconstruction priorities as determined by the Government of Haiti”. The report adds that “In line with the principle of “accompaniment” as advocated by the Office of the Special Envoy for Haiti, the Government of Haiti and the IHRC which it has established are very much in the driver’s seat when it comes to operating the HRF and allocating its resources.” Indeed, the HRF does appear to work much more in coordination with the Haitian government than many other organizations. 23 percent of the total budget support received by the Haitian government was channeled through the HRF. As opposed to direct budget support however, the HRF takes a more indirect route, as explained by the Special Envoy:

Budget support that is provided through the HRF is first transferred to the World Bank, which acts as trustee of the HRF; then, on approval from the HRF steering committee, to the relevant partner entity (the World Bank or the IDB); and finally, to the Haitian treasury. The partner entities do not charge fees if the contribution can be combined with their existing budget support operations.

Projects from the HRF, although carried out under the administration of one of their partner entities are then carried out on the ground by “a variety of different entities.” According to the annual report, the Haitian government is the implementing partner for 88.4 percent of HRF funds, an impressive total. The report points out that it is a “reflection of the strong ownership of the government in the implementation of HRF projects.” Yet the report also points out that “HRF’s most important partner is the Interim Haiti Recovery Commission [IHRC] which sets priorities for how HRF resources are used and is responsible for endorsing and forwarding all requests for financial support to the Fund”. Although the government of Haiti is a significant partner in the IHRC, the commission has previously come under scrutiny for the lack of Haitian input. As Penelope Chester at UN Dispatch noted:

On the same day that the Haiti Reconstruction Fund Annual Report was released, President Martelly announced plans to reform the Interim Haiti Reconstruction Commission, which oversees the disbursement of donor funds from the Fund. Martelly is struggling to strike a balance between Haitian ownership of reconstruction and proper administration and management of funds. A Martelly advisor said: “The IHRC itself has become this extra entity outside of the government, and that is what we need to fix.”

The advisor, Michele Oriole, went on to say, “We have to say, ‘OK, this is an important forum to keep the momentum and focus on Haiti, but here is how we want it to function.'”

Donors Preferencing Contributions

In April, Jacqueline Charles of the Miami Herald reported on how small organizations have largely been left out of rebuilding projects. In the article, Charles noted that, “the U.S. and other donors even specify preferences when donating to the trust fund. As a result, the fund, which was initially envisioned as a place to pool resources to fill funding gaps, has little extra money for priorities like debris removal and schools.” This criticism is echoed in the HRF annual report, as one of the goals for next year is to “To dissuade existing and future donors from preferencing their contributions so that the GoH has maximum flexibility to use HRF resources to finance strategic priorities.” The US, which is the largest contributor to the HRF, attached preferences to the entire $120 million that was given. Although the sectors the US for which it earmarked its donations are all important, it takes away the flexibility that is supposed to be the hallmark of the HRF and limits the ability of the government of Haiti to lead the reconstruction process. According to the Special Envoy, only about half of the $100 million that has yet to be allocated is not preferenced.

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