2.3.3 Financial management

Managers of a process in a conflicted or postconflict state—in particular, one where institutions have collapsed and are being reestablished—may have few or no financial procedures to follow and no government revenues to fund the process. The potential challenges include:

  • developing an internal financial management system from scratch;
  • the requirement by international donors to have an external actor (for example, the United Nations Development Programme) handle the financial management of the process, which can slow the process down if the financial systems are cumbersome (e.g., UNDP’s bureaucratic procedures for financially administering the process in Zimbabwe [ongoing process]) or the financial managers of the external organization are not competent and the constitution-makers do not have control over who is hired or fired;
  • securing funding from international donors who may then require some kind of management, oversight or advisory role while attempting to retain national ownership of the process;
  • handling complex and multiple financial reporting or auditing requirements required by international donors; and
  • needing to administer corruption-prone activities such as procurement, per diems, salaries, and the like entirely in cash because there are no functioning banks.

In states with functioning governmental institutions, financial management may be carried out according to preexisting systems and procedures, and at least some of the funds for the process come from contributions made by the government. When financial systems are in place, the existing governmental procedures can create other problems. They may involve reliance on a slow, corrupt, or incompetent bureaucracy. If the government has no legal obligation to fund the process, government actors may stop the funding if the proposed changes threaten those who have power over the money.

Some processes have received funds from governments and also from international donors, and their managers have had to deal with a combination of all of these problems. In this section, we discuss the challenges in a range of contexts. (Issues in relation to dealing with donors are discussed in part 2.3.12.)

Budgeting and costing for the process

Before costs for the process are determined, ideally a strategic plan has been created that has considered the level of funding available and has identified the realistic objectives, tasks, institutions, and resources needed. (See part 2.3.2 on strategic planning.) The next step is to develop a detailed budget that identifies the items and costs for each aspect of the process—for example, the costs of establishing and running each of the needed institutions and procedures, such as a constitutional commission, a constituent assembly, and a referendum. This can become complicated, because the establishment of institutions or procedures may depend on a precondition. For example, in Kenya the law provided that if a divisive issue could not be decided by the constitutional conference it would be decided by referendum. In a country where state institutions have broken down, there may be no electoral management body and no government funds for elections, yet managers must budget for the possibility of holding a referendum.

If the funding comes exclusively from international donors, one overall budget may be required and the approval process may be established by the donors. The process then resembles that of a civil society organization making a project budget and receiving funds from a donor. Additional budgets may need to be prepared if and when new components of the process are added, such as a decision at a later stage of the process to consult on the draft constitution. Establishing good relationships based on trust with the donors or government officials will help with the dilemmas that may emerge in planning for the process and getting funds released on time.

This handbook, in part, has been developed to serve as a planning tool and can assist with identifying budgetary items related to the potential tasks, institutions, procedures, and personnel required. Simply reviewing the table of contents will help in the creation of a budget.

Practical tips

  • The task of developing the budget should be led by experienced local financial managers (to the extent possible) and personnel who will understand the unique challenges and needs of the context. International actors with relevant experience in budgeting for a constitution- making process can assist but should not take over the process even if international donors are required to approve the budget.
  • Budgetary items that tend to be overlooked include audit fees; fuel for vehicles; maintenance and repair expenses; running costs such as rent, electricity, and gas bills; catering; cleaning services; security services; cell phones and usage costs; accommodations; the establishment of regional or district offices; the refurbishing of buildings; the extensive amount of paper as well as printing and photocopying expenses; interpretation and translation costs (especially if the constitution-making body is working in several different languages), graphic design work; salaries or per diems if necessary for future members of the constitution-making bodies; transportation costs (for personnel, members of the constitution-making body, and possibly for members of the public to get to public consultation meetings), the technical equipment and personnel required to record, secure and analyze public views for a widespread public consultation process; and capacity development or workshop costs so that staff members are adequately prepared to undertake their responsibilities.
  • A decision will need to be made about how much or whether to pay constitution-makers for their time and whether to provide them with transportation and living allowances. It is reasonable to compensate people for lost income from time spent away from their job. However, when the compensation is more than what they might expect to earn otherwise, this can lead to members purposely delaying the process. Remuneration should be modest, and it should be noted that for larger constitution-making bodies—ones that are convened only to adopt the constitution—members may expect no remuneration (though payment of daily allowances and travel expenses may still be required). Corrupt politicians or others may try to pad the budget so that large per diems are made available as a way for political parties to influence key actors to serve their interests.
  • To be cost-effective and promote national ownership of the process, requests for funds and in-kind contributions should be made not only to donors (from the international community) but also to local civil society organizations, the business community, the media (perhaps space in a newspaper for the draft constitution), and so on. Past processes have benefited from such offerings as secondment of staff and free radio time.
  • Many constitution-making processes are funded only until the adoption of the constitution, but this is not the end of the process. Many costs remain, including those for keeping some personnel on staff to ensure that all official documents and media materials (such as pictures and video) are properly archived, that civic education and outreach continues so people are aware of the contents of the constitution, and that key government officials understand the implementation requirements of the constitution. (See part 2.7.2 on implementation.) Any official website established as part of the process should be continued for a while at least (as it may play an important role in making the new constitution accessible and better understood). When it is no longer needed for such purposes, the website should be archived, so that the material is later available to researchers. Or the website could remain active and used as a tool to continue to engage the public on constitutional issues. These items should also be put in the budget.

Box 24. Benefits of a diverse staff

In Afghanistan [2004], the secretariat made it a priority to include women in leadership positions and to have a staff that was balanced in terms of gender and ethnicity. If the secretariat had not hired women it would have been difficult to speak with women leaders or organize elections in areas where women often are allowed to speak only to men from their families. Similarly, the secretariat communicated with marginalized groups more effectively because members from those groups were hired to perform outreach tasks. In contrast, in Iraq [2005], the committee secretariat had formed an outreach unit to handle the public consultation process. The Iraqi staff members recruited were predominantly Shia Arabs and they used predominantly Shia networks to gather input on the constitution. Far fewer Sunni Arabs or Kurds were consulted or had the opportunity to participate.

Financial accountability

Preventing corruption is a key challenge. In states emerging from conflict, there may be no financial systems in place. Policies for procurement may not be well established or understood, and where no bank exists, creating a system of cash disbursements that carefully tracks all financial transactions is tricky. If funds have been spent but there are no supporting documents in the form of receipts or vouchers, there may be accusations of corruption even if the problem is simply poor financial management. Accurate records of financial transactions are critical and must be reviewed regularly. All supporting documents should be gathered and filed in the order received, and cross-referenced to the books of account.

In contexts where the funds are controlled by a corrupt bureaucracy, managers may need to develop special methods of oversight to avoid problems. Even a slight misuse of government or donor funds can have serious consequences. In Uganda in 1992 a donor withheld critically important funding because of corruption in the ministry of constitutional affairs. The funding, however, was for the constitutional commission, and the corruption was identified by the financial managers at the commission. The withholding of funds delayed the drafting process and reduced the credibility of the process.

To ensure fiscal accountability, the expenditures should be audited. In Kenya, the chair of the Constitution of Kenya Review Commission (2001–3) invited the national auditor general to carry out an early audit, which enabled the return of funds that had been siphoned off through corruption. A code of conduct (see appendix C.1) should provide clear guidance about what practices are considered corrupt.