Cash Consortium for South/Central Somalia

Transcription

1 Cash Consortium for South/Central Somalia Combined Risk Analysis (updated September 2012) Table of Contents: Introduction Recent improvements in risk mitigation strategy Diversion in South Central Somalia Compliance with Donor regulations and Consortium wide Minimum operating standards Cash Consortium approaches to risk mitigation Overall Needs Assessment (targeting, coverage) Acceptability of Cash Transfer Programming Market Assessment: Commodities Market Assessment: Sustainability Delivery Mechanisms and payment methods Protection risks for beneficiaries Security risks for NGO staff... 9

2 Introduction Since mid- 2011, the Cash Consortium has been providing access to food and other non- food items through unconditional cash grants for the most vulnerable populations in South Central Somalia. The context is highly challenging, due to continuing conflict, lack of governance, high criminality and low levels of humanitarian access to affected populations. In response to difficulties encountered in the field and the findings of the external evaluation 1, this paper has been written to articulate the Consortium s position on mitigating risk in general, including the risks of diversion and fraud. It updates and complements the risk mitigation strategy which was developed in 2011, and is based on a number of sources: interviews with each agency s field teams, a format/tool developed by Save the Children that draws on standard operating procedures for cash programming, as well as research and guidelines consolidated through the Cash Learning Partnership (CaLP). 1. Recent improvements in risk mitigation strategy This is an overview of recent improvements made to the SCC s strategy to reduce risks in implementing cash transfer programming: Direct/Self- implementation: all fours organisations now use direct implementation for Cash Consortium programmes, rather than through remote local partnerships. This means the SCC will only work in areas where its staff can be present on the ground to monitor program activities. Though this can reduce access to some areas, it gives the SCC greater control. We will continue to monitor the situation, with the aim of returning to working through local partnerships if and when conditions permit. Community participation: the SCC will continue to work with the Village Relief Committees (VRC) and women s groups, throughout the project cycle, from targeting through to monitoring. This engagement is to be done at both HQ and field levels. Staff will conduct regular field site visits during project implementation. Many risks are closely linked to the issue of quality programming and can be decreased through good project cycle management and transparent community based targeting. Complaints mechanisms: All consortium agencies have complaints feedback mechanisms in place. One consortium member is working with an online platform in which all complaints and follow- up are made publicly available. Another organisation is piloting an approach to strengthen the existing complaints response mechanisms to make it a two way process. This approach allows not only beneficiaries to make complaints, but also enables the agency to be proactively involved in contacting beneficiaries (see below). Remote monitoring via telephone: Monitoring through random telephone interviews of key informants is being piloted by one consortium member, enabling feedback on project 1 The external evaluation conducted in April 2012 by Humanitarian Outcomes made the recommendation that CTP monitoring will have to improve its ability to capture sensitive issues such as diversion and intentional targeting errors (inclusion/exclusion) largely through the better implementation and use of complaints mechanisms and qualitative data, not least through reflecting on how to make the latter more independent. (Humanitarian Outcomes 2012:8)

3 processes and payment related issues (this entails recording beneficiary contact telephone numbers as part of registration processes from the start and will be part of the beneficiary database). Qualitative data can be collected and triangulated through other sources of data collection in the organization. Regular communication between field and Nairobi offices: SCC project teams in the field will continue to liaise actively with Nairobi counterparts to report on programme delivery. This will cover aspects of targeting and beneficiary selection criteria, representation of Village Relief Committees, beneficiary complaints and feedback, quality checklists and monitoring data. Timely response: it is essential not only to monitor programme processes and impact, but also to adjust and respond in a timely manner. We are working to systematically integrate this monitoring feedback into continued programming. Risk management reporting framework: The SCC will develop a substantive risk management reporting framework; whereby actions taken to mitigate risks at different stages will be documented. In addition protocols for investigation of cases of misuse of funds will be strengthened. Mitigating against risk of diversion to excluded parties : all transfer agents have been verified against US OFAC Office of Foreign Asset Control list, UK Treasury lists, EU proscribed lists and UN sanctions lists. Tight control of payments to hawalas: As laid out in the Minimum Operating Standards (MOS) and the Consortium proposal, the hawala companies are required to pre- finance the cash distributions. The Consortium member only re- imburses the hawala subject to provision of the appropriate documentation, which demonstrates that the distributions have been carried out. Hawala s risk management: hawala companies will also be required to develop risk management procedures for implementation in their particular contract. Furthermore, the legal counsel of the Hawala companies will be required to meet with SCC staff prior to signature of the contract, in order to clarify the implications of the contract and their risk management procedures. Where applicable, Hawala should also sign agreements with third parties involved (agents) cascading all the terms and conditions agreed with the contracting SCC member. Hawala should require their agents to provide performance bond or bank guarantee to cover against any risks of non- compliance.

4 2. Diversion in South Central Somalia We are using the definitions of diversion that ODI has been working with in the Cash and Voucher Monitoring Group (CVMG). Diversion is wide term, used to mean any resources (cash or in- kind assistance) that do not reach the intended recipient, because of 'an abuse of entrusted power for private gain.' It should be highlighted that diversion is not just an issue for CTP, it can also occur with in- kind assistance. There are different parties who might benefit from diversion of aid: Diversion to excluded parties Diversion to powerful individuals, families or communities Diversion to NGOs and NGO staff Diversion to criminal groups Once the grant is received by the beneficiary, any form of extortion is considered a protection issue rather than one of diversion. The diagramme below illustrates the potential risks of diversion at different programming phases.

5 3. Compliance with Donor regulations and Consortium wide Minimum operating standards The Consortium has established minimum operating standards (MOSs) to serve as a guideline for the distribution of the cash grants (annexed). The standards ensure that adequate controls are present pre- distribution, during distribution and after distribution. The MOSs also ensure that there are some cross cutting controls that are ongoing throughout the process of distribution. Part of the cross cutting controls include a financial review by an external auditor (KPMG) to assess the relevance of the controls put in place by the Consortium and recommend improvements where there are gaps. The external review also ensures compliance with Donor regulations. Ongoing review of the MOSs to ensure that they remain relevant and take into account any changes in the context of operation. 4. Cash Consortium approaches to risk mitigation This section is based on the experience of the SCC since 2011, examining the risks and problems that have been encountered and outlining the mitigation measures and checks in place to address these issues. Risk Mitigation 1 Overall Needs Assessment (targeting, coverage) Risk of low impact and low humanitarian coverage The project is considered by some stakeholders as too small to make an impact on affected populations. Beneficiaries expectations are high and more people than the ones that are currently reached are interested in receiving the cash grant. - Vulnerability mapping carried out as a basis for retargeting to cater for the most vulnerable caseload. - Sensitisation and community mobilization to clearly explain project rationale and manage beneficiary expectations. - Effective complaints mechanisms are established and there has been increased communication with beneficiaries to better identify the most vulnerable and any targeting errors. - The 2 nd phase of the external evaluation (Humanitarian Outcomes) is assessing the relevance of targeting critieria, i.e. whether the most vulnerable people have been reached. Risk of diversion at targeting phase Influence of clan on the selection of beneficiaries, risk of minority clans being excluded (this represents an abuse of power and can be considered as a form of diversion,. for example, militias have fired overhead and threatened registration staff so that their families are registered or provide ID cards to them) - Strong vulnerability- based targeting with community input has been put in place. - Information dissemination sessions have been carried out so that the targeting criteria are clearly understood (everyone should know who is receiving funds and why). - Regular monitoring at cash delivery points is in place. - For SC, OTPs are an effective focal point for implementation so that communities can appreciate the vulnerability levels of

6 recipients. - There is a zero tolerance policy to diversion of funds, for example, when one local partner was found to be involved in diversion the CC ceased to work with them. Risk of exclusion errors at targeting phase Community based targeting could lead to criteria that effectively exclude women or other vulnerable groups, such as minority clans. Risk that beneficiary lists no longer valid as some people have become vulnerable since targeting, while others are no longer vulnerable - Staff have been trained on all aspects of targeting and registration and encourage communities to include women when CBT is used. - Beneficiary list are regularly updated and re- targeting is currently underway. (re- targeting, scale- up in existing areas or respond in nearby areas if the humanitarian situation worsens) Risk of inclusion errors at targeting Inclusion of non- eligible people during the registration process, e.g. non- targeted people sneaking into the registration line. - Receipts are being collected in triplicate (one for agency, one for beneficiary, one for Hawala) to reduce fraud. Furthermore, a security questions on some aspects of the family will be used as a means to assure that registered beneficiaries are the ones receiving the assistance. - Cases of double registration of beneficiaries have been found through registrar checking and then deregistered. - Complaints mechanisms are used to help capture inclusion errors, for example DRC also investigated a few complaints where husbands took the card and claimed their wives had died, but upon investigation it turned out that this was not true so the card returned to her and the local committee informed 2 Acceptability of Cash Transfer Programming Risk that cash becomes inacceptable, either to local authorities, to traders, or to recipients themselves - The acceptability and appropriateness of CTP was assessed in the initial risk assessment and is being regularly monitored by SATG through the qualitative data monitoring. Analysis is done by ODI and SCC responds accordingly. This includes questions to beneficiaries, community leaders and traders, on whether they prefer vouchers, in- kind assistance, or cash grants. - Field staff also feed back to the SCC members if there is evidence that CTP has become inacceptable. Acceptability of CTP is also closely linked to protection of beneficiaries (see below) 3 Market Assessment: Commodities Markets: risk of commodities being unavailable or inaccessible Risk that basic food and non- food items are no longer available on the market - The availability of commodities is monitored on a weekly basis through market price monitoring by SCC organisations, but due to the nature and integration of markets in South Central key commodities (or appropriate substitutes) have so far been available.

7 - Access to markets is monitored after each cash distribution (i.e. usually on a monthly basis) when beneficiaries are asked how long they travelled to markets and any constraints they had in accessing markets. 4 Market Assessment: Sustainability Markets: risk of inflation The CTP will cause inflation and therefore the price of minimum expenditure basket (MEB) will continue to fluctuate. For ex, other actors (such as OIC) are procuring a lot of food on the local Mogadishu market, thus pushing up prices. - Market price data is collected on a weekly basis by SCC agencies and analysed by ODI. Market price data is compared with other sources (Fewsnet, WFP). So far no inflation has been linked to CTP. - Amount of money injected into the local economy through CTP is not significant when compared to other influxes (such as remittances). Reduced humanitarian access Reduced humanitarian access due to conflict/ insecurity External military incursions - Enhance local implementation structures through local staffing to steer project in case of access problems. - For some difficult to access areas, beneficiaries travel to local towns to collect their grants. - If the situation of security and access doesn t allow project implementation, the project will be put on hold till further notice. - Assess risk of injury and/or damages to staff and beneficiaries and make a decision to either stop the project or schedule intervention during safer periods. 5 - Delivery Mechanisms and payment methods Cash delivery: risk of diversion by hawala Diversion of funds to excluded parties by money transfer company itself. Diversion of funds by money transfer company itself (using ghost beneficiaries, for example.) - All transfer agents have been verified against US OFAC Office of Foreign Asset Control list, UK Treasury lists, EU proscribed lists and UN sanctions lists. - Hawalas will agree in signature to SCC member organisations codes of conduct and anti fraud policies. Therefore the hawala will be held accountable for not reporting any diversion to excluded parties. - Hawalas should pre- finance the cash distributions with the Consortium member re- imbursing them subject to provision of the appropriate documentation demonstrating that the distributions have been carried out. - Clear financial procedures and documentation are in place to ensure the funding can be traced throughout the project (for example, verification of vouchers against payment lists to establish correctness in payment). - Project staff will be present (as much as possible) for the payment of beneficiaries to ensure that monies are provided correctly. - Proactive complaints response to capture diversion. Includes feedback solicitation from the beneficiaries.

8 Cash Delivery risk of delays Delay of cash payment by Hawala agents due to poor compliance of agreements signed Delay of payment by Hawala agents due to access problems (delays in payments could cause loss of support and commitment from communities.) Misuse of cash by beneficiaries to buy items that are not beneficial to them (e.g. khat). - Ensure timely and effective action can be taken to: Prevent losses of funds or other assets where fraud has occurred and to maximize recovery of losses. Minimize fraud by taking rapid action at the first signs of a problem; Identify the fraudsters among its sub- agents and maximize the success of any disciplinary /legal action taken. - Constant dialogue with Hawalas has helped to ensure that terms and conditions of agreements are respected - Project staff liaises closely with communities and hawalas in order to promptly communicate potential delays in case of any problems - Approval by local authorities has been a very important factor - If there is a risk that payment may be delayed (due to rain, or conflict) two payments may be made at once to avoid beneficiaries missing out on any cycle. Good targeting, based on vulnerability, reduces the risk of beneficiaries using grants for anti- social purposes. 6 Protection risks for beneficiaries Regular monitoring at the household level tracks the use of the cash by beneficiaries. Risk to beneficiaries theft, intimidation, protection related issues leading to fund diversion to militia groups or local administration - Ensure grants are paid out to registered beneficiaries and not through proxies. Consortium members require that their representatives be present as observers during payment, but no cash will be handled by NGO staff. Community representatives will also help to verify the beneficiaries during payments. - Create sufficient awareness with all stakeholders and all local authorities that these grants cannot be subjected to any taxation. - One of the Hawala selection criteria is security of the beneficiaries, while waiting for money and departing from the distribution site. The level of protection afforded at collecting points is normally high as any interference with recipients will reflect on the reliability of the Hawala system which has strong clan/ business protection. - Actively monitor any possible diversion and report matter to the donor and take immediate actions - If diversion indeed occurs the project should be stopped until situation improves to a level where diversion cannot happen. - Beneficiaries provided with protection related information on risks anticipated as a result of receiving cash and possible mitigation strategies. - Existing complaints system strengthened to be more proactive including raised awareness levels, collection of issues at community level and proactive sourcing of feedback from communities - According to the team there has so far been very few instances of inter- clan robbery and criminality is low.

9 Lack of correct dollar denomination could cause beneficiaries to accept grants as pairs (or more) wasting their time to resolve, and opening channels for diversion. - Contractual guarantees (with hawalas) for correct payment amounts are in place. If not possible, grant size should be rounded at application stage. Specific risks for female beneficiaries Women excluded from receiving payments because of difficulties in identifying beneficiaries due to the Islamic dress mode Women are excluded from a level of control over grant spending A combination of methods to identify female beneficiaries has been put in place: Photo ID in all areas where this is possible Use of security pass key questions where photo is not possible and where feasible in combination with the photo ID. Ensure that there is at least one female staff member so that beneficiaries can show their faces. VRC members also include women who can verify female beneficiaries. - This has occurred in the past but on a negligible scale, however through VRCs, pressure has been put on households to encourage women s control over grant spending. SCC continues to monitor and negotiate these incidents often with successful solutions. Possible alternative cash delivery mechanisms? Risk that hawalas money transfer companies are no longer appropriate / efficient / effective - Investigate possibility of other transfer mechanisms, for example electronic transfer through SMS with two suppliers Zaad and EVC+. (Apparently amounts able to be transferred are limited, and Al Shabab has banned the system in many areas.) - Oxfam GB and Concern WW are currently piloting the use of mobile phones for money transfers in Somalia, this experience should be followed closely. If appropriate, the SCC can change cash delivery mechanism. 7 Security risks for NGO staff Security risk to staff due to criminality: insecurity occasioned by large amounts of cash being handled by different people involved. Security risk due to generalized conflict: fighting between armed forces and armed opposition groups - Implementing agencies do not handle large amounts of cash, instead, money vendors (hawalas) do this and are contracted to assume full liability of any loss of monies, up until the point of delivery. - Use of local staff that knows the security issues/risks have very close relationships with the local communities. - Close monitoring of staff between office and field, daily security updates with staff and partner organizations and flexibility in the approach and continues change of the payment plans.