2018 Organisation and Management of Aid Review

In Pursuit of Per Diem – Donor and Recipient Practices of Per Diem Payment

Arne Tostensen

Increasing emphasis on capacity-building and training activities as a proportion of donors’ country programmes has drawn attention to per diem practices. This report discusses the uses and abuses of per diem payments, predominantly by aid agencies and their counterparts in developing countries.

The purpose of this report is threefold: (a) to summarise the understanding of the uses and abuses of daily subsistence allowances (per diems) in connection with seminars, trainings sessions, etc.; (b) to assess the effects of per diem systems on development programmes, budgets and incentives; and (c) to recommend remedies to identified challenges.

The methodology comprised a review of published literature and other secondary material. Empirical information was obtained from fieldwork in Ethiopia, Malawi and Tanzania, including interviews with key informants such as civil servants, civil society representatives, and donors

The report was presented during the seminar Carpe Per Diem – Bruk och missbruk av per diem och reseersättningar i internationellt bistånd (och vad givare kan göra åt saken).

Main findings

  • Practices emerged in four categories: (a) compensation covering travel expenses efficiently; (b) performance reward perceived as bonus; (c) unintended distortion of incentives; and (d) outright fraud.
  • Manipulation is attributable to: (I inadequate control; (ii) asymmetry of information between principal and agent; (iii) a collective action failure, and (iv) contexts that condone irregularities.
  • In Tanzania exaggerated payments are provided as bonus, seminars and workshops are organised opportunistically and corruption is condoned.
  • In Malawi the discretionary nature of authorisation and control encourages informal behaviour that violate formal rules, despite internal and external auditing.
  • In Ethiopia an informal practice has emerged whereby the reported number of days are inflated in order to compensate for real expenses. The systems create distortions, manipulation of budgets, higher rates and forging of receipts.

Arne Tostensen, Senior Researcher, Chr. Michelsen Institute