Scrutiny of Natural Resource Fund must not be left up to political appointees alone

Sep 05, 2018 News

– World Bank says Independent actors critical to transparency process

By Kiana Wilburg

Scrutiny of a nation’s Natural Resource Fund (NRF) cannot rest with the government alone. Oversight bodies which are independent of political influence must also have a role in ensuring transparency of the Fund.
For some time, this has been the message of the World Bank to nations like Guyana which are embarking on a NRF. This Fund will hold moneys earned from the petroleum sector.
The institution’s advice is predicated on the well documented cases of resource funds which are not properly managed due to lack of oversight by independent actors. The Bank said that too often, Natural Resource Funds are only accountable to only a few persons, who are political appointments.
It said that in most countries, constraint and accountability are ideally spelled out in legislation. And most governments know that independent and regular audits are also essential. It stressed however that these are often times not practiced.
For nations interested in ensuring accountability of their NRFs, the World Bank advised that good governance practices must have several layers of transparency mechanisms. It said that these would include both vertical and horizontal accountability.
The World Bank explained that vertical accountability comes with management reporting that leads, ultimately, to a minister. Horizontal accountability however, is provided by regular reporting on the Fund’s performance to elected officials who are independent of government. The Bank said that this type of accountability also includes widely available and readily accessible public information on the Fund.
The Bank said, “Transparency with respect to all aspects of fund operation and performance is generally regarded as indispensable to achieving good governance. This can be achieved through press releases, publications and audits which are available on the internet.” Further to this, the Bank said that the presence of watchdog non-governmental organizations (NGOs) strengthens horizontal accountability.
As with most Funds, the World Bank said that the management process will often involve the use of asset managers as well as internal and external managers. It stressed however that the recruitment of any asset manager should be made as independent as possible. It stressed too that regular, independent audits are essential if confidence in the Fund is to be established and maintained.
The World Bank said that Norway is a prime example of the independent process that is needed to manage a Fund. In the case of Norway, an external performance audit is carried out and published. This is in addition to the internal audit on the country’s NRF. The Bank said that these systems of control are essential to making any NRF a success. (See link for more details http://www.eisourcebook.org/uploads/files/146340875221568.3ResourceFunds and their PopularityEISB.pdf)