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Hunting for per diems

The need to improve quality and efficiency in most developing countries’ basic service delivery explains why a significant proportion of aid is spent on seminars, workshops and travel arrangements for civil servants and staff of non-governmental organizations (NGO).

Various forms of per diem (non-salary daily subsistence allowance) are intended to compensate employees of public and private organisations for extra expenses incurred when on work-related assignments away from their normal duty station or home base. The compensation offered is normally set at standardised rates, payable according to stipulated rules and regulations. Per diems may function well and cost-effectively in most settings. However, there is often a discrepancy between the standardised rates and the actual costs. This makes per diems susceptible to abuse. The large amounts spent on per diems every year, signals that the system needs to be revised.

In the research project Hunting for Per Diems. The Uses and Abuses of Travel Compensation in Three Developing Countries”, Tina Søreide and Arne Tostensen, senior researchers at the Chr. Michelsen Institute, and Ingvild Aagedal Skage, PhD student at the Faculty of Comparative Politics, UiB, have enquired into the laissez-faire culture of per diems in Tanzania, Malawi and Ethiopia.

An added value?
Civil servants are generally poorly paid. To some extent, this explains the potential for misuse of per diems. For many, allowances contribute significantly to their total income. By participating in a three day seminar hosted by donors or others, civil servants can increase their monthly income significantly. However, the researchers found that risks of abuse and misuse are higher at higher levels.

The findings demonstrate that the added value of seminar participation needs to be considered. In the end, it is a management decision to send employees to seminars.

-This confirms the impression that abuse is mainly a management related problem. The added value of seminar participation needs to be evaluated. What is there to learn, who needs to go, why go for a seminar if in house-training can be more efficient? More thorough evaluation of seminars will raise consciousness on abuse of per diems, says Søreide.

The report urges donor agencies to be more aware of the potential for misuse. By offering high per diem allowances for their own events, they inflate the rates.

How to get rid of the brown envelopes
The line between misuse of per diems and fraud is sometimes thin. Many forms of misuse are not illegal, for example to organize more meetings than needed. Donor organisations have tried to harmonise their practices through the Paris-declaration, an international agreement defining harmonisation and alignment principles for allowances, but cultures of misuse have turned out to be difficult to change.

The report recommends that development partners alter existing practices. Instead of cash per diem payment, they could reduce the problem by offering benefits in-kind (food and accommodation). It is also necessary to emphasize that misuse is unacceptable and that abuse is a criminal offense.

Securing value for money
The formal systems for dealing with per diem allowances are fairly good and quite similar between the countries included in the study. It seems the actual implementation and institutional context matter more than the legal framework.

Control routines are to a large extent performed internally in all three countries. There is a strong need for more external control. This is recognized by the auditor general authorities in the countries in question, according to Søreide.

-The signals from the auditor general authorities are positive. More cooperation, transparency and external control will reduce the risk of fraud, she says.

Transparency and access to information is not only important for the authorities performing the actual control functions, but also a necessity in order to enable civil society and the media to act as a watch dog.

-Reliable control systems are also a question of securing value for money, says Søreide.

Published April 23, 2012

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