Management of aid funds: working through the process with LGUs

best out Donors and I/NGOs are apprehensive of coursing funds directly to LGUs. The higher the amount the greater is the anxiety. Given the institution’s notoriety in fund management, this is understandable. Where I was employed last, the house is divided into those who are for and against LGUs as direct fund managers. I was among the ‘for’. At first, the case against the LGUs was a blanket NO based on lists of documented evidence but later – this was welcomed by the ‘for’ – a more quantifiable tool was developed one that assesses risks (something like doing a credit risk evaluation). But while the tool can give the agency a clear and quantifiable worthiness of the fund recipient, challenges remain. One, the LGU may have passed a certain category with flying colors but failed in another. What to do? In any case, the agency would still have to take risks. Calculated risks.

Regardless, I am a stickler for LGUs participating in fund management. In cases where the rating of an LGU is low, mitigating measures could be drawn up like arranging for LGUs to manage the fund with others, preferably a civic organization-partner, in a clearly-drawn up partnership. But above all – this spells the failure or success of the arrangement – for the aid or development agency to be with its LGU partner every critical step of the project, as a facilitator of learning.

My logic in LGUs managing aid funds is that they need to be shown and learn that there is another way – a better, more systematic, and uncorrupt way – of handling money especially large amounts of it. And who to show it and be with them in the process than the aid agency which clearly has everything spelled out. When aid or development agencies say ‘LGUs ought to be honest’ then show the LGUs how because apparently the agency making the statement has a clear picture of what ‘honest’ is or ought to be.

The LGUs, because this is new to them, are like children being taught the values. Ask any parent of children who’ve grown up to be good and loving individuals — the growing up years were far from easy. A parent doesn’t just feed and clothe the child and expect the child to grow up having good values. Parenting is also process-oriented. And mistakes are inherently part of the process. The important thing is to have learned, preferably sooner rather than later.

I think that if I dig deeper it’s the inherent difficulties in this process (more than corruption per se) that put off aid or development agencies – who are already limited by time constraints in project implementation – from engaging with LGUs in the aspect of fund management. But then good fund management is the product of a process. One that is marked by faith, patience, and trust. And as Robert Frost maintains the best way out (i.e. to get to the product) is always through. The question then is, are aid or development agencies willing to spend some time – maybe hurt their shins a bit – working with the LGUs through the process of change? Because it is the only way out.


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