Are you obtaining value for money on your development projects?

Development projects are crucial to a country’s development. Sub Saharan Africa receives a large percentage of global development assistance but there has been much debate on the effectiveness of this development assistance and the best measure of this effectiveness. For development aid to have a real impact, the funds must be properly planned and focused to priority areas that will have a real impact and thereafter disbursed and utilised transparently to meet the objectives of the assistance.

Development projects are crucial to a country’s development. Sub Saharan Africa receives a large percentage of global development assistance but there has been much debate on the effectiveness of this development assistance and the best measure of this effectiveness.

For development aid to have a real impact, the funds must be properly planned and focused to priority areas that will have a real impact and thereafter disbursed and utilised transparently to meet the objectives of the assistance.

The traditional method of measuring value was focused on the assessment of economy. This was done by way of financial audits that mainly focused on how funds have been utilised and whether expenditure was eligible.

With increasing challenges in maintaining transparency in the procurement process and the development of comprehensive public procurement rules and regulations, the focus of financial audits was expanded to cover the procurement cycle.

When measuring economy, the main question a development project would be seeking to address is whether funds were properly accounted for and utilised for the intended purposes.

The other equally important question is whether the procurement process was conducted in line with laid down procedures through a transparent and competitive process resulting in the project obtaining high quality goods and services at the lowest cost.

However, at this level of measuring economy, there is very little linkage of inputs to outputs or moving to the next level of reviewing whether the inputs were in the expected number and quality and whether they were provided in a cost effective manner.

This review would normally be conducted at the second level of measuring value, that is, efficiency.

Efficiency measures whether the project obtained the maximum output for a given input. One of the major factors to consider is timeliness in implementation of activities and this is closely tied to putting in place efficient processes.

Efficient processes should ensure that there is no room for idle resources, wastage, duplications, technical errors and delays. In summary, efficiency is all about “doing things right”.

As much as efficiency and economy are both important, they are not sufficient measures of value. It is no use doing the wrong things well or for a project to be efficiently run, but in the end, the project does not achieve the expected outcomes.

Hence, we move to the third measure, which is effectiveness. Unlike efficiency which focuses on doing things right, effectiveness is about “doing the right thing”. Overall, effectiveness measures whether the project received the right results.

Effectiveness is therefore the most important of the 3”E`s” (Economy, Efficiency and Effectiveness) and also the most difficult to assess. Effectiveness seeks to assess whether the objectives of the project have been achieved.

While the assessment of whether objectives have been met may seem relatively simple, in practice it may be very difficult. Indeed sometimes objectives do not exist or are unclear and poorly linked to project inputs, activities and outputs.

Value for money audits focus on the three “Es” i.e. economy, efficiency and effectiveness in the use of resources and are more comprehensive than financial audits. This explains the recent shift towards value for money audits.

At the end of the day, each project should seek to answer three key questions, whether the project acquired the appropriate resources at the least cost, whether the maximum output was obtained for the level of input and whether the project achieved the right results.

Are you obtaining value for money for your development projects in this regard?

Florence Gatome is a senior manager with PwC Rwanda.

florence.w.gatome@rw.pwc.com

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