By Albert van Zyl–
THE Constituency Development Funds (CDFs) are funding arrangements that channel money from central government directly to electoral constituencies for local infrastructure projects.
Decisions about how these funds are allocated and spent are heavily influenced by elected members of parliament (MPs).
The degree to which these funds are controlled by parliamentarians, and the degree to which local citizens participate in them, vary from country to country.
But the defining feature of CDFs is that MPs have substantial control over the distribution and application of centrally allocated funds, a significant break from their primary lawmaking and oversight roles.
This brief will argue that CDFs have a negative impact on accountability and service delivery that most poor countries can ill afford. The risks associated with CDFs should be taken more seriously by governments, donors, CSOs, and other actors involved in the development process.
They should actively discourage their adoption in countries where CDFs are being considered and promote other options for strengthening legislatures and improving local project delivery that could be more effective.
In countries where CDFs are more entrenched and less likely to be repealed, the issues discussed in this paper should be addressed through a variety of reforms that we outline below.
In addition, MPs should resist the temptation of jumping into the task of managing and spending the budget and rather focus on the more sustainable processes of holding the executive to account for service delivery.
Spread of CDFs Not Supported by Evidence Comparatively little is known about CDFs. In fact it is surprising that policymakers have been prepared to adopt them, given the absence of research on their long-term impact in countries like Pakistan, the Philippines, and
India, which have well-established CDF schemes.
Despite the dearth of research supporting these funding mechanisms, CDF are spreading rapidly.
To date at least 23 countries have adopted or are considering adopting CDFs: Bhutan, Ghana, Honduras, India, Jamaica, Kenya, Liberia, Malawi, Malaysia, Mongolia, Namibia, Nepal, Nigeria, Pakistan, Papua New Guinea, Philippines, Rwanda, Solomon Islands, Southern Sudan, Tanzania, Uganda, Zambia, and Zimbabwe.
CDFs also grow very rapidly in size once they are introduced. In the Philippines allocations to members of congress have increased almost six fold since its CDF was introduced in 1990. In Zambia the size of the CDF has grown from K60, 000 when it was introduced in 2006 to 666 million Kwacha in 2010. In Kenya the CDF was introduced at 2.5 percent of the national government’s ordinary revenue and has grown along with the overall sise of the government budget.
It has been argued that CDFs can address a number of development and governance challenges that many countries face. They purportedly:
*  ensure project delivery in the face of ineffective and corrupt local government structures,
* bypass central bureaucracies and channel funding directly to community level, enable the participation of the local population in the choice of which local infrastructure is delivered,
* empower the legislature by allowing them to allocate and spend money independently of the executive, and
* allow MPs to respond directly to concrete demands from their constituents, something that they may not be powerful enough to make the executive do.
These arguments in favour of CDF are appealing, yet there are many critics of CDFs, as well. Though CDFs have made the headlines largely because of corruption and political manipulation associated with them, we believe that there are three more fundamental deficiencies built
into the design of these schemes.
CDFs may breach the key democratic principle of the separation of power by conferring the executive function of budget execution on the legislature.
As a result of this breach, CDFs may compromise the ability of legislatures to represent the electorate and to oversee the work of the executive.
By skewing resource allocation and project selection and oversight, CDFs also may have a negative impact on governments’ capacity to contribute to service delivery and development, especially at the local government level.
Below we discuss the three basic concerns with CDF more extensively. The conclusion outlines some ways of addressing these problems, as well as some research hypotheses that the International Budget Partnership (IBP) intends to investigate in order to build a stronger evidence base for these arguments.
Deficiency #1: Breaching the separation of powers The separation of powers is a system for the governance of democratic states that divides the state into a number of branches, each with separate and independent powers and areas of responsibility. A common division is one in which there is an executive, a legislature, and a Judiciary.
The “separation” can result from each of the branches being elected independently (as in the case of presidential systems) or by a set of constitutional, civil, or common law provisions that prevent each of the branches from usurping the functions of another.
The separation of powers is meant to reduce the risk of poor governance by limiting the authority of each branch of government.
This division also allows citizens to seek redress if one of the branches should act against their interests.
In most recent examples, the separation of powers has helped the judiciary and the legislature to limit the power of the executive, as is the case when legislatures use audit reports to hold the executive to account for the implementation of the budget.
In the budget system of democratic states, the most important manifestation of the separation of powers is that the legislature enacts the budget and evaluates, but is not directly involved in, its implementation.
It determines the rules of the game and pronounces on whether these have been followed but does not “play the game” itself — it is the executive that manages and spends the budget.
CDF schemes appear to breach the separation of powers by conferring the executive powers of budget implementation on MPs.
As a Kenyan court put it, “any outfit that is composed of Members of Parliament and is charged with expenditure of public funds is commingling of roles of the different organs of state in a manner that is unacceptable… it would be against the constitutional principle of the separation of powers for Members of Parliament to take part in actual spending, then submit their annual estimates to themselves in Parliament through the Public Accounts Committee” (quoted in Ongonya et al 2005).
In federal countries with federal governing structures, CDFs even run the risk of violating a “vertical” separation of power by allowing elements of national government (the legislature) to implement programs at the local level.
According to Ongonya et al (2005), “Involving the Members of Parliament who are at the national level, in the control and management of the CDF, which targets and is for the benefit at the local level is a violation of the… ideal of devolution.”
The institutional design and legislative framework of individual CDFs vary in the degrees of control over the implementation they give MPs.
Thus they do not all breach the separation of powers in the same way and to the same degree. Still, the majority of CDF problems are ultimately related to the fact that it confers executive functions on MPs, and comprehensive solutions to these problems may remain elusive until this basic problem is addressed.
Efforts to deal with the unintended consequences of this breach will not resolve this core flaw of CDF schemes.
Aspects of this research will continue in next week’s edition of your column.
(Van Zyl is a researcher for the International Budget Project at the Centre on Budget and Policy Priorities. The Project works to enhance the effective participation of civil society organisations in public budgeting in developing and transition countries. Van Zyl joined the IBP in August 2005 to work on a wide range of training and research activities).
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