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6.a          What are Trust Funds and why do they exist?

Resources that are provided to the Government through Trust Funds such as ARTF, LOTFA, CNTF and PITF are all considered as on-budget support. After the formation of the Interim Government in late 2001, Afghanistan was rising from the ashes of three decades of war and unrest, when the institutional capacities were very low. The existing rules and procedures, especially the Public Financial Management System, could hardly meet international standards. In order to respond to the capacity inadequacies, the international community, in consultation with GoIRA, decided to establish the Trust Funds mechanisms, managed by multilateral agencies such as the World Bank and UNDP with an aim to mobilize more on-budget resources to finance Government’s priority programs across Afghanistan.Two examples are given below.

6.b          What is AfghanistanReconstruction Trust Fund (ARTF)?

The Afghanistan Reconstruction Trust Fund (ARTF), which is a multi-donor pooled funding mechanism, was established in 2002. It is composed of two windows: recurrent window for partially supporting the Government’s operational costs and the investment window to support Government’s development budgets. Administered by the World Bank, ARTF has been successful in meeting the Government’s priorities.  Todate,donors’ contributions to ARTF (the largest trust fund) stands at USD 4.1 billion. Contributions to ARTF have increased on an annual basis from a total of USD 185 million in 2002 to USD 657 million in 2009.

The specific objectives of ARTF are to:

  • http://portal/portal/templates/ja_purity/images/bullet.gif); line-height: 19px; background-position: 18px 8px; background-repeat: no-repeat no-repeat;">Position the national budget as the key vehicle to align the reconstruction program with national development objectives.
  • http://portal/portal/templates/ja_purity/images/bullet.gif); line-height: 19px; background-position: 18px 8px; background-repeat: no-repeat no-repeat;">Promote transparency and accountability of reconstruction assistance
  • http://portal/portal/templates/ja_purity/images/bullet.gif); line-height: 19px; background-position: 18px 8px; background-repeat: no-repeat no-repeat;">Reduce the burden on limited government capacity while promoting capacity-building over time
  • http://portal/portal/templates/ja_purity/images/bullet.gif); line-height: 19px; background-position: 18px 8px; background-repeat: no-repeat no-repeat;">Enhance donor coordination for financing and policy dialogue.

The ARTF is managed by the Management Committee (MC) consisting of: the World Bank (as the administrator), the Islamic Development Bank (IDB), the Asian Development Bank (ADB) ,the UN (UNAMA and UNDP) , and MOF.The Management Committee meets regularly in Kabulto carry out the day-to-day business of the funding provided by various donors. Once everyquarter, ARTF Donors meet to discuss broader strategy with the government and ARTF  Management. There are a total of 30 donors that have contributed to the ARTF over the last six years. In general, around 15 donors contribute regularly every year. 

Contributions made to ARTF are of two natures: (i) Preferenced investment allowing donors to invest up to 50% of their contribution to ARTF for a specific program in the Trust Fund; and (ii) Non-Preferenced contribution, whereby the remaining 50% of a donor’s contribution will remain at the discretion of the ARTF Management Committee to decide where the funds should be allocated. The volume of Preferenced allocation has increased from USD 21 million in 2003 to USD 325millionin 2010, limiting the volumesof funds for the Non-Preferenced portion. This reducesthe discretionary power of the Afghan Government in investments in priorities it identifies.  ARTF is a partnership between the international community and the Afghan government for the improved effectiveness of the reconstruction effort and is the largest contributor to the Afghan budget – for both operating costs and development programs. ARTF’s support for national priority programs, for operating costs of government operations and for the policy reform agenda is contributing to the achievement of the Afghanistan National Development Strategy goals.

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6.c          What is the Law and Order Trust Fund for Afghanistan (LOTFA)?

The international community’s support to rebuild the Afghan police force started from the beginning of the establishment of the Afghan Interim Government in 2002, as envisaged by the Bonn Agreement. In May 2002, at the request of the Afghan Government, United Nations Assistance Mission for Afghanistan (UNAMA)andUNDP established LOTFA to enable the police to return to operationsthroughout the country. The Trust Fund has provided a mechanism for coordinating contributions from donors with the principle priority to cover police salaries, as well as to pursue other activities in accordance with project priorities. Since then, LOTFA has completed fivephases and is currently in phase six, until March 2013. LOTFA is nationally managed through the Ministry of Interior and is governed by UNDP’s financial rules and regulations. Ministry of Finance is the other implementing partner.

Under the current Phase-VI, LOTFA activities are clustered around three distinct pillars:

1. Police and prisons staff remuneration, as well as police infra-structure. LOTFA works with the MoI to provide timely and accountable salary payment for the Afghan National Police (ANP) and Central Prisons Department (CPD) uniformed per-sonnel, as well as police infrastructure activities, contributing to improvement in mobility, responsiveness and working con-ditions.

2. Capacity development and institutional reform of the MoI at the policy, organizational and individual level. The project works directly with the MoI to increase organizational and financial capacities.

3. Democratic policing. Through the police-e-mardumi initiative, LOTFA works with community leaders, ordinary people, police and local governance councils to engage police and the com-munity proactively on a regular basis, in an attempt to share information and common concerns. Pilot activities in 8 districts of Kabul will be expanded in Phase-VI.

4.a          What is the Development Assistance Database (DAD) and how does itwork?

With the support of UNDP, the Government of Afghanistan (GoA)createdthe Development Assistance Database (DAD) (http://dadafghanistan.gov.af/in June 2002. DADcontains information on development assistance provided to Afghanistan,including both throughthe national treasury (‘Core Budget’ or ‘On Budget’) and also external channels (‘External Budget’ or ‘Off Budget’).In 1388 (2009-2010), the process of data collection was greatly improved by the upgrading and enhancement of DAD to include measurable indicators of aid effectiveness, althoughinformation provided by donors remains incomplete in this area.DADtherefore doesnotonly contain financial information, but also covers detailsabout the location, implementing agencies and the expected outcome and outputs of donor-funded projects. The DAD relies on the provision of data by the project funders and implementers, including government organizations, development partnersand UN agencies. The database is available in English and Dari.

Moreover DAD is used as a source of the information to provided raw data for producing the Donor Cooperation Report (DCR) as well astoprovide the necessary statistical information regarding ODA to Afghanistan for the Governmental Line Ministries, statistical offices, UN agencies, embassies, donor’s community, NGOs, decision makers, mass media, education institutions, parliament and private sector companies and firms.

Aid Management Directorate and ICT Unit of the Directorate-General of  Budget, MOF, have formed a taskforce to revise and renew the DAD, since Autumn 2010. This is expected to greatly simplify the DAD and make it more user-friendly. The new DAD is expected to be launched in late Summer 2011.