Jocelyn Fraser, PhD student in Mining Engineering // March 2, 2015
Over the past few weeks, we have looked at efforts to implement – or plan for – sub-national reporting (SNR) in a number of EITI countries. [1] While there are many country-specific differences to consider, some common questions illustrate the challenges member countries will face as they endeavour to comply with new EITI disclosure requirements.
- The costs of sub-national reporting. Who will pay to implement sub-national reporting? How will local capacity constraints be addressed? Who will cover the cost of third-party verification? Will there be funds to incorporate extractive activities – such as artisanal and small scale mining – not currently included in some countries’ national reports?
- Definition of materiality/thresholds for reporting. What types of payments will need to be tracked at the sub-national level? Should donations and social investment be included? Should there be a common threshold for reporting or will each member country make their own determination? Some countries account for non-material transfers as a demonstration of transparency: should this be a requirement for SNR? In cases where SNGs have direct access to resource revenue, how will material amounts be included in the country report?
- The process for sub-national reporting. How are local governments to account for resource revenue payments? In the absence of proper accounting protocols, a common nomenclature and reporting templates, how will readers be able to compare results from various reporting regions within a country? What guidance and quality assurance will be provided by the EITI? Are central governments prepared to communicate how they determine the percentage of resource-revenue to distribute, as well as the timeline for how often, and when, money is distributed?
Existing EITI requirements do not require disclosure on how resource revenues are used and sub-national reporting does not mandate this as a part of the new EITI standards. Yet, in terms of transparency, this is a critical issue. For sub-national reporting to be relevant for local residents, it will be important to demonstrate that money from the extractive sector is invested to address environmental, social and governance (ESG) issues and legitimate community needs. Without an explanation of how resource revenues build healthy communities, there can be little expectation that residents will trust government and for-profit companies to act in a manner that benefits communities hosting extractive operations.
[1] For a more fulsome discussion of sub-national reporting issues and case studies on a number of EITI countries see Aguilar, Caspary & Seilar (2011) http://siteresources. worldbank.org/INTOGMC/ Resources/EITI- WBMiningSectorWEB.pdf