Consultation on Funding Review
This consultation is concluded.
EITI international funding review consultation
Comments and submissions welcome by end of April 2016.
The International EITI Secretariat has estimated that the cost of EITI implementation exceeds USD 50 million per year. Of this, the international management costs less than USD 6 million. In recent years, the international management has faced three challenges with its existing funding model in which broadly, supporting governments and companies pay 50% each on a voluntary contribution basis:
- Overall: given the limit to expected revenue from companies in 2016, the current funding formula effectively places a ceiling on the overall budget. In other words, the funding formula has become financially unsustainable with the Secretariat's mandate.
- Equity: in these constrained times, an increasing number of supporters – governments and companies are not paying the advised contribution and some are not paying at all.
- Managing uncertainty: given the voluntary nature of the contributions to the Secretariat, there is uncertainty of both short-term and multi-year funding, making budget planning more challenging.
In summary, the current arrangements are no longer sustainable. The Board has therefore decided to review its funding mechanisms with the aim to ensure that the EITI has funding arrangements that ensure reliable income. In order to do so, it is undertaking a consultation.
Should implementing and supporting countries and supporting companies have to pay a minimum fee?
The Board is exploring the current practice of governance representation without taxation. The key emphasis is on whether implementing countries and whether supporting companies should pay a membership fee, and whether supporting countries should be required to provide support at a minimum level.
The current dependence on voluntary contributions from supporting countries and companies has some considerable advantages and disadvantages. It offers supporters extensive flexibility, not only in how much they may pay but when and how they make financial contributions and whether they for example wishes to earmark financial support to certain aspects of the EITI’s activities. In the early years of the development of the EITI, it offered a flexibility that allowed countries and companies to engage and express political support while their financial support varied. Some supporters have preferred voluntary contributions as they claim it brings significantly less bureaucracy. Amongst the disadvantages with voluntary contributions is that it makes it difficult to plan for the EITI and it puts the Secretariat in a difficult position sometimes having to negotiate with countries and companies about the size of their support. This has been brought into stark light during the present fall in commodity prices and strains on aid budgets.
Voluntary contributions from both countries and companies are increasingly also resulting in lack of fairness. Some countries and companies pay and are asked to increasingly do so, while other supporters are not providing any funding. The number of contributors to the EITI fell from 66 in 2014 to just 50 in 2015.
The consultation paper explores these issues in more detail.
You are invited to provide input into this consultation. Comments and submissions should be sent to Kjerstin Andreasen (firstname.lastname@example.org) by end of April.
Issues to consider
The following ten questions might guide your thinking, though feel free to comment wider:
- How can the long term funding of validation be assured? Whilst the Board has agreed a more cost-effective method for validation, it will still be a significant additional cost to the Secretariat which is not assured in the long term.
- Implementing countries used to pay for validation until 2013. At present they do not pay anything for the international management of the EITI. Should the EITI follow a similar flexible membership fee policy for its implementing countries as for example the Open Government Partnership?
- Should implementing country support be earmarked, perhaps for technical assistance, validation, or some core support?
- Should contributions become mandatory for supporting countries? Should contributions to the EGPS or bilateral support to in-country activities be taken into account?
- Should a supporting country not be required to pay a fee separate from that of whether they also implement?
- Should contributions become mandatory for supporting companies?
- What considerations should be considered for establishing supporting companies’ contributions e.g. market capitalisation, turnover, the number of countries in which they operate, whether or not they are or wish to be eligible for Board representation, sales, profits, number of employees, etc.
- Should there be conditions for grouped contributions, such as those provided by ICMM (eg. discount on a per company basis, in exchange for a commitment of x years of funding)?
- For supporting countries and supporting companies, should some kind of graduated membership system be considered with more rights for something called perhaps ‘supporting partners’ vis-à-vis ‘supporters’? Should greater contributions be related to greater influence within their own constituencies? If so, how might this be reflected – Board seats, shareholding, etc.?
- Should the EITI seek funding from other organisations – non-extractive companies, foundations, etc., even if this has previously not been successful? And if so, how would they be represented in the governance of the process?
Since 2015, the Open Government Partnership has expected all its participating governments to contribute towards OGP's budget. These contributions are based on each participating country's income level (according to the World Bank data). The Steering Committee set both minimum and recommended contribution levels. For low income countries, the minimum is $10,000 and the recommended is $25,000. For lower middle income countries, the minimum is $25,000 and the recommended is $50,000. For upper middle income countries the minimum is $50,000 and the recommended is $100,000. For high income countries the minimum is $100,000 and the recommended is $200,000. All contribution levels are in US dollars.See more at: http://www.opengovpartnership.org/finances-and-budget#sthash.T8AWNNEL.dpuf.