September 22nd - Procurement and bookkeeping

At last, I am back in the field and loving it! Not that I don’t enjoy staying in the main office in Banda Aceh, on the contrary, but it is easy to get out of touch with what is happening in the field. And that can lead to unnecessary frustrations, as was made apparent in my last log!

In the meantime, we have landed in the implementation phase of the different Integrated Community Projects (ICPs). A handful of projects are still being revised but there are not many left. The cow husbandry project and computer projects in Seungko Mulat, for instance, which I wrote about a couple of weeks ago, were approved this week. So we are busy monitoring.

The first step in implementing the projects is the procurement of materials and labour. There are clear guidelines for this; the basic rules are as follows:

- For amounts under 500 USD, all receipts must be kept;

- For amounts between 500 and 5,000 USD, we require a minimum of three quotations;

- For amounts between 5,000 and 20,000 USD, a closed tender process should be held on a local level;

- For amounts upwards of 20,000 USD, an open tender process should be held on provincial level (and because of it is a sizeable sum, the International Rescue Committee [IRC] must be directly involved)

It is really important that procurement rules are followed and that a sound financial system is put in place. After all, the Community Development Boards (CDBs) are accountable for spending the community grants; they must be able to justify every penny they spend, to the IRC and above all to the beneficiaries, the community members. The IRC in turn is accountable to Stichting Vluchteling (SV), The Netherlands Refugee Foundation, which is accountable to its own donors. The procurement process and the bookkeeping must therefore adhere to strict demands. Transparency and visibility are key words here; particularly in the Indonesian context, where corruption is rampant (obviously we want to avoid corruption in the ICPs; as a precautionary measure, the communities have selected the CDB members on the basis of their integrity).

The CDB members have received the necessary trainings pertaining to procurement, bookkeeping and monitoring. Furthermore, they have received a number of books in which to keep track of all this. These books are public and in principle accessible by anyone.

We are now keeping a sharp eye on the procurement process; especially in the beginning because that is when most mistakes are made. Things are still not clear or we find that there is resistance to conform to certain rules. In addition, a number of unanticipated incidents will always occur. Receipts for small purchases, for instance, may be missing, documents may be kept but the books not updated or there may be mistakes in the calculations. Sometimes the CDR teams go on monitoring visits but fail to write monitoring reports. Another problem that has occurred is that there is but one local supplier, making it difficult to obtain three quotations. And even when there are enough suppliers, they sometimes refuse to provide quotations because they do not want to be played out against each other. Or they request payment for it; that too has happened! Finally, an incident has taken place which shows that too much transparency and visibility can backfire. The CDBs post ICP information in a public place, usually close to the mosque or in a local coffee shop. In some communities, they have also published the available budgets for the various projects. In one community where a closed tender process was running, three contractors have made bids for exactly the same amount, namely the entire available budget! There are obvious flaws with this; among other things, the risk is high that the contractors have either rounded up or rounded down their price. In the first case, the contractor would be paid too much whereas in the second case, the contractor may not be able to finish the job for that amount, or might do a really bad job at it (from hereon out, only the total budgets will be publicly announced, the total for all projects in a given community – the project costs will only be posted on a board next to the construction site, as is the custom in Indonesia, once the tender process is over).

At this point it is still easy to intervene; problems can be addressed and mistakes rectified. The consequences of dubious procurement processes and bad financial management are great. The funds for the various projects are paid in a number of installments; should the procurement process and/or the bookkeeping not comply with our demands, the payments will stop, for all projects in a given community.

So it is in everyone’s best interest to insure that the procurement process and the bookkeeping are not only sound but also transparent and visible.

That is all folks. See you next week!

Take care,

Alex.