Far cry from service improvement

THE amount of funding pumped into the Government’s service improvement programme (SIP) has increased dramatically, yet service delivery has been a matter of great concern. University of Papua New Guinea School of Business and Public Policy economics lecturer MAHOLOPA LAVEIL spoke to reporter JESHER TILTO about SIP funds in the country.

Q: What are SIP funds?
Laveil: Service Improvement Programmes (SIP) are made up of the Provincial Services Improvement Programmes (PSIP), District Services Improvement Programmes (DSIP) and the phased out Local Level Government Service Improvement Programmes (LLGSIP).
They are an example of a broader global phenomenon often referred to as constituency development funds: Funds that individual Members of Parliament (MPs) control to greater or lesser extents.
In PNG, DSIP funds are allocated to each open MP, and have been volatile since first introduced in 1984.
Although similar funds exist in many countries globally, on a per capita basis, PNG’s funds are some of the highest in the world.
Note that SIP funding is strictly for projects only and is not used for MPs salaries.

Q: What is the history of these funds?
Laveil: PNG’s SIP funds began in 1984, as the National Development Fund.
Under this fund, DSIPs were budgeted at K10,000 for each open MP. It was increased to K2.5 million in 2002. It went up to about K4 million in 2012.
Since 2013, that was a huge increase in funding, so the DSIP funds increased to K10 million per MP.
By 2020, a total of K890 million (K10 million per open MP) was allocated to DSIPs, comprising 15 per cent of PNG’s capital expenditure.
Today, it is at K10 million per district per year for DSIP and K5 million per district under PSIP.
Because DSIP funds comprise such a large share of capital expenditure, DSIP funds tend to fall when revenue falls, and the waxing and waning fiscal fortunes of the Government explain much of the fluctuation in DSIP volumes.
There have been four spikes in real DSIP funds, in the periods: 1993–1995, 1999, 2006–2008 and 2013.
In the early 1990s PNG was heavily reliant on agriculture exports, and this was evident in 1993–1995, when Government revenue rose as log and coffee prices increased.
By the 2000s, Government revenue in PNG had become primarily dependent on extractive industries.
The spike from 2006-2008 was caused by a surge in government revenue driven by increases in log and mineral prices.
In 2013, DSIP funds increased again, as a boost in tax revenue from the construction phase of the PNG Liquified Natural Gas project allowed higher budget allocations.
A fall in DSIP funds occurred in 2018, caused by a diversion of expenditure in response to a large earthquake.
In 2020, depressed global trade and a three-month internal lockdown as a result of the Coronavirus pandemic led to lower revenue and a diversion of expenditure to health, security and economic recovery, reducing DSIP funding.

Q: How are DSIP funds used?
Laveil: At the open electorate level, the district government, known as the District Development Authority (DDA), resembles a corporate structure.
The district administrator serves as chief executive officer of the DDA, which is overseen by a board consisting of local level government presidents, who are elected officials, and chaired by the MP.
Although the board is responsible for determining DSIP expenditure, the MP, as chair, wields considerable influence over DSIP decisions.
DSIP fund allocations are held within the Finance Department.
Once budget submissions are made by the respective MP for specific projects, the funds are released.
In theory, these funds may only be approved if acquittals of the previous year’s expenditure have been made to the Department of Implementation and Rural Development (DIRD).
DSIP funds are paid directly to the respective DDA’s bank account, from which the DDA then pays contractors selected to undertake proposed projects.
DSIP funds for school projects (usually to build new classrooms or teachers’ houses) are typically paid to the schools themselves.
DSIP funds for health and other special purpose projects are typically undertaken by external contractors.

Q: What are some issues with these funds?
Laveil: Key issues found with these funds include:
lINEQAULITIES can be found in the disbursement of these funds to the provinces in the country. If a province was given K5 million for each of its districts, Morobe, which had nine districts, would get K45 million for its PSIP. On the other hand, Manus with one district, would get K5 million for its PSIP. There is a lot of inequality with these funds across the provinces, which came in around 2013-2016.
lPOOR governance. District and provincial administrations do not provide acquittals. Acquittals are just ticking the box. All you have to do is show the receipts on what you actually used the SIP funds for and the business entities hired to run the projects. The district treasury is supposed to provide oversight. However, many districts do not provide acquittals which are supposed to be submitted to DIRD. DIRD is tasked with monitoring and reviewing DSIP projects. However, acquittals for projects are rarely made and the department rarely reviews or monitors projects. Once DIRD doesn’t receive those acquittals, it can’t provide the project site visits and cannot provide those acquittals to the Auditor General’s Office (AGO). That last audit for all the districts and provinces was done in 2016, but released in 2019. From 2016 to 2023 there is a six-year gap that we just have no idea of where the money was.
lPOLITICAL interference. In theory, these funds can be used as tools of electoral patronage, to the advantage of incumbents. We have seen different governments use it as a political tool. A common complaint about DSIP funds is that they are often used to reward and expand an MP’s voter support base. They can use that funding for projects in their voter support base and increase their popularity and win at the next election. In Parliament, it is used to win popularity in the governing coalition and win Opposition members and bring them over and consolidate power within the Government. DSIP funds are provided by law to each open MP. However, the timing of the release of the funds is determined by the Department of Finance. The Government’s influence over the Finance Department responsible for DSIP disbursement has enabled MPs greater control over the use of the funds.

Q: What are your comments on these funds?
Laveil: SIP funds have risen in the long run.
In the short run, SIP funds have tended to rise and fall with fluctuations in government revenue. SIP funds have increased a lot but service delivery has been very poor.
Although a lot of funding that has gone into the health and education sector, many rural clinics and schools have not been upgraded. DSIP and PSIP funds should be Constitutional Grants instead.
The funding is not going where it needs to be and that needs to be looked at.
The volatility of these funds coupled with poor governance surrounding its spending continually limits PNG’s ability to meet its development goals.