OECD Development Co‑operation Peer Reviews: Italy 2019

4. Italy’s structure and systems

Abstract

This chapter reviews Italy’s organisational structures and management systems for its development co-operation, examining the extent to which they are fit for purpose and have the capacity to deliver Italy’s development objectives.

Law 125/2014 clearly spells out the role and mandates of official development actors, and establishes new structures, notably the Italian Agency for Development Co-operation (AICS). Partnership approaches, transparency, accountability and the operationalisation of development policy are key characteristics of the law. In practice, the full implementation of this important reform is still in progress. Overall, Italy has clear processes and quality assurance checks in place; however, accountability will have to be managed as AICS implements a greater share of EU delegated co‑operation in its overall portfolio. Italy can also do more to encourage and scale up its innovation efforts. The human resources available to AICS and the Ministry of Foreign Affairs and International Co-operation (MFAIC) are not adequate. A human resources plan is urgently needed to attract and retain skilled staff and ensure the satisfactory delivery of Italy’s development co-operation programme.

Authority, mandate and co-ordination

Peer review indicator:

Responsibility for development co-operation is clearly defined, with the capacity to make a positive contribution to sustainable development outcomes

Law 125/2014 clearly spells out the role and mandates of all official development actors, including the Ministry of Foreign Affairs and International Co-operation (MFAIC) and the Agency for Development Co-operation (AICS). Multi-stakeholder approaches, transparency, accountability and operationalising development policy are key characteristics of the law. In practice, the reform has not been fully implemented and there are few incentives for greater co-ordination.

The new law sets out long-awaited reforms

Italy’s development co-operation system is clearly spelled out in the law. In August 2014, the Italian Parliament approved Law 125/2014, the primary legislation that reforms the Italian development co‑operation system. The passing of Law 125/2014 coincided with strong political will to “relaunch development co-operation” (MFAIC, 2016[1]) after less successful attempts to fully reform Law 49/1987, which had defined Italy’s co-operation with developing countries over the previous 27 years.

The law set out to broaden partnerships, operationalise Italian development policy, and create more accountability and transparency. Put into action, these are all plausible and concrete ways to address the recommendations from the 2014 Peer Review (Annex A).

Law 125/2014 introduces important organisational changes (see the organisation charts in Annex D):

• A governance system that elevates development co-operation by establishing the position of a Deputy Minister for Co-operation.

• A new Italian Agency for Development Co-operation (Agenzia italiana per la cooperazione allo sviluppo – AICS) that builds on the previous Central Technical Unit of the Directorate General for Development Co-operation (DGCS) in the Foreign Ministry, and takes over legal and administrative responsibilities previously assigned to the Foreign Ministry and embassies in the field.

• New financial tools assigned to Cassa depositi e prestiti S.p.A. (CDP), Italy’s development finance institute, which is also responsible by law for managing the Revolving Fund (fondo rotativo); co-financing with private, public or international entities; and financing private actors (Chapter 5).

• An inter-ministerial development co-operation committee (Comitato interministeriale per la Cooperazione allo sviluppo – CICS) to co-ordinate all public development activities and align them with the three-year programming plan.

• A National Development Co-operation Council (Consiglio Nazionale per la Cooperazione allo Sviluppo – CNCS) with broad multi-stakeholder involvement to ensure policy coherence for sustainable development (Chapter 1).

• A Joint Development Co-operation Committee (Comitato congiunto) to approve all bilateral and multilateral initiatives above EUR 2 million and concessional loans. The Foreign Minister approves humanitarian aid programmes, which are not submitted to the joint committee for approval.

Intra- and inter-ministerial co-ordination could be stronger

Law 125/2014 clearly states the rationale for the creation of the AICS, which “is established as a legal entity…subjected to the power of orientation and supervision of the Minister of Foreign Affairs and International Co-operation (MFAIC), for the purpose of implementing development co-operation policies…” (Republic of Italy, 2014[2]). AICS has the mandate to perform technical and operational activities related to formulation, appraisal, financing, implementation, monitoring and evaluation of programmes and projects and operates at the country-level through its field offices.

The Directorate General for Development Co-operation (DGCS) of the MFAIC maintains oversight of multilateral official development assistance (ODA), humanitarian assistance, concessional loans and credit, and monitoring and evaluation, the latter through a reallocation of AICS’s resources back to DGCS. The clear division of labour under the law requires good collaboration between MFAIC and AICS. This does occur, given that most development experts dealing with these issues left the MFAIC to join AICS, leaving only diplomats responsible for these portfolios in the MFAIC (Chapter 4).

Within the ministry, the management of the ODA budget extends beyond the DGCS to the Directorate General for Italian Citizens Abroad and Migration Policies (DGIT), which manages the Africa Fund (Fondo Africa) established in 2017 with the objective to combat irregular immigration and stem human trafficking. The fund is the primary vehicle for Italy’s contributions to the EU Emergency Trust Fund for Africa to address the root causes of irregular migration. The direct involvement of DGCS of MFAIC is limited to Fondo Africa’s activities that are implemented by AICS (EUR 26.8 million in 2017-18, or 14.9% of the Fund’s total resources) and to a lesser extent via contributions to the EU Trust Fund (EUR 93 million, or 51.7%), where DGCS represents Italy on the board and for which AICS implements activities through delegated co-operation (Chapter 6). The remainder of Fondo Africa activities implemented through the ministries of defence and interior or multilateral organisations are overseen by DGIT alone, despite the development nature and impact of these activities.

Aside from the MFAIC and AICS, who manage the bulk of Italy’s ODA, the Ministry of Economy and Finance is responsible for 36% of ODA (according to 2017 OECD statistics), including public debt operations and contributions to international financial institutions and multilateral development banks, global funds and debt relief operations. While the PPPD reflects this cross-ministerial collaboration, the joint committee does not discuss or make decisions about debt operations, for example. The Ministry of Environment and the Ministry of Interior manage smaller shares for bilateral and multilateral1 ODA and in‑donor refugee costs, respectively. AICS-Ministry Conventions, or tripartite conventions between ministries and the agency, define roles and mandates, are renewed every three years.

In Rome, inter-ministerial co-ordination at the technical level (with the Ministries of Foreign Affairs, Environment, Interior, Economy and Finance, and ISTAT) appears to work well. On issues related to policy co-ordination, however, interministerial co‑ordination can be more challenging. All ministries that have a stake in Italy’s ODA budget would benefit from closer co-ordination – both in Rome, at permanent representations, and at the country level (Chapter 1). In Senegal, for example, where there is no overarching country strategy, it was clear that neither AICS nor the Italian Embassy had a comprehensive overview of the whole-of-Italian-government footprint in the country, including the multilateral channels (Annex C.3). In the few partner countries where Italy has developed country strategies, partners are identified, such as the Italian Institutes for Statistics and Health and decentralised authorities (Chapter 2).

Systems

Peer review indicator:

The member has clear and relevant processes and mechanisms in place

Given the long-term change management process involved in setting up new systems, the short-term focus has been on delivering Italy’s development co-operation rather than consolidating the reform. Overall, Italy has clear processes and checks in place and the agency has been “pillar assessed” by the EU. It can continue to strengthen the quality of some of its aid management and audit systems, which will also be necessary as it becomes a more important implementer of EU delegated co-operation. In the future, Italy could do more to encourage and scale up its innovation efforts.

Adapting to the reform has taken time

Formally established in January 2016, AICS embarked on a change management process, and invested in finding a fit-for-purpose organisational model best adapted to the multiple functions bestowed upon it by the law. In the meantime, it has adopted a pragmatic approach to delivering its programmes despite the administrative, human resources, and financial constraints defined by legislation and accompanying rules. This is confirmed by the recent EU pillar assessment, which determined that the EU could entrust budget implementation tasks to AICS (Moore Stephens LLP, 2018[3]) in the context of EU delegated co-operation.

On the whole, it has taken some time for the Italian development co-operation system to carry out these challenging reforms, not helped by some uncertainty around the political will to uphold the reform (Openpolis and Oxfam Italia, 2019[4]). The naming of a new director of AICS in April 2019 after a one-year vacancy offers an opportunity to consolidate the significant reform measures outlined in Law 125/2014.

Managing EU delegated co-operation is a fine balancing act

Italy aims to increase the delegated co-operation it implements on behalf of the EU from around 10% today to about 50% of AICS’s operations. Italy is currently the third largest member state implementing activities for the EU Emergency Trust Fund for Africa through delegated co-operation. At present, EU delegated co‑operation affords the agency the flexibility to operate outside Italian law and financial rules. For example, it can directly contract non-Italian CSOs and hire staff on more flexible contracts, and it is not bound by the strict ratio of programme and administrative costs. While this flexibility and the additional resources present an opportunity for AICS, its systems will likely need to be reinforced. AICS will have to work to ensure coherence, complementarity and alignment (or explain discrepancies) with its own bilateral investments, and develop robust administrative and backstopping functions to effectively and efficiently manage this dual‑tracked accountability.

Table 4.1 outlines and assesses the relevant systems in place to implement Italian development co‑operation, make it more innovative and adapt to change.

Table 4.1. Assessment of Italy’s development co-operation systems

	Yes	No	Comments
Clear and transparent processes and procedures in place to make decisions on:
programming	●		▲DGCS (strategic) and AICS programming instructions go hand-in-hand ▼Aid management IT system is not yet in place
policies (Chapter 2)	●
partnerships (Chapters 2 and 5)		●	▲Law 125/2014 recognises multiple stakeholders for development co-operation ▼ No clear strategy or process to determine partnership decisions
Systems are in place to assure the quality of development co-operation, including:
audit	●		▲External audit, anti-terrorism, anti-mafia checks in place ▼No internal audit function
mainstreaming cross-cutting issues (Chapter 3)	●		▲Programming instructions and country strategies provide clear instructions and criteria to mainstream gender and disability. ▼No clear instructions on mainstreaming environment / climate change, although old guidance on environment exists.
Fair systems for:
procurement	●		▲Procurement rules and thresholds annexed to each programme document
contracting	●		▲ Strengthened ex ante controls before a contract is awarded to verify compliance with public procurement and fair competition.
Systems in place to assess and adapt to risks, including:
strategic reputational programming security	● ● ●	●	▲Project documents identify ecological, social, institutional, economic, and security risks ▲Robust risk management procedures are in place with Rome having final say. ▲Conditions associated with the identified risks are agreed by the project steering committees..
sexual exploitation and abuse (SEA)		●	▲MFAIC and AICS code of conduct refers to discrimination and sexual harassment ▼MFAIC and AICS code of conduct does not refer to SEA
corruption (see text)	●
Innovation and adaptation introduced, incentivised, measured, and potentially scaled.		●	▲Last call for proposals for private sector prioritises new ideas and start-up firms, bringing innovative partnerships to the forefront ▼Leadership and internal system does not provide incentives to innovate and adapt to changes in the development landscape

Note: Green triangles refer to good practice and red triangles refer to areas where progress is needed.

Source: OECD secretariat following the structure of the DAC Peer Review Reference Guide, based on documentation provided by the Ministry of Foreign Affairs and International Co-operation (MFAIC) and Italian Agency for Development Co-operation (AICS).

Italy’s anti-corruption plan is not well-known outside Rome

The AICS’s 2017-19 anti-corruption plan identifies four types of risk: compliance, financial, operational and strategic (AICS, 2017[5]).2 Allocating sufficient resources to implement the plan and to manage corruption risks will be crucial to its success. Italy has past experience in managing corruption domestically, which it is has been able to transfer to its international programming. In high-risk corruption settings, Italy works jointly with other development partners to identify risks, verify risk-control mechanisms, put in place mitigation measures, and – if necessary – redirect or repackage programming together with partners. This co-operation is good practice and in line with the OECD Council Recommendation for Development Co‑operation Actors on Managing the Risk of Corruption (OECD, 2016[6]).

Italy can use its experience in these contexts to increase its use of pooled mechanisms and link audit and evaluation recommendations to programme design. As it revises its anti‑corruption plan and ethics code, it should accelerate training for its entire workforce and implementing partners in the field3 including on protecting whistle-blowers. The revised plan and practices could assist Italy to strengthen corruption risk prevention, internal control and audit procedures, and assessment tools.

Capabilities throughout the system

Peer review indicator:

The member has appropriate skills and knowledge to manage and deliver its development co-operation, and ensures these are located in the right places

Backstopping from headquarters is not adequate considering the centralised procedures that require headquarters to sign off at multiple points of the programming cycle. A human resources plan is urgently required for Italy to deliver a quality programme.

Highly centralised procedures require more support in headquarters

The “backstopping” function provided by headquarters is essential to Italy’s ability to deliver a high-quality development co-operation programme. Italy’s highly centralised modus operandi is a way to manage risk and ensure quality programming, but depends on back-up from a reactive and skilled workforce in Rome.

To illustrate, thematic desks at AICS headquarters in Rome must approve any project modifications; the legal desk advises on tendering processes; and geographic desks advise on technical assistance (Annex D). Currently, AICS headquarters do not have the technical and administrative capacity to react to these requests for approval or advice in a timely manner, which frustrates partners, and in turn delays and compromises the effective delivery and responsiveness of Italy’s development co-operation programme (Chapter 5, Annex C).

MEF oversees the utilisation of the Revolving Fund (fondo rotativo) that extends concessional loans. Italy’s development finance institution, CDP, is responsible for the administrative management of the Revolving Fund, while AICS is responsible for the day-to-day management at the country level. CDP has only recently started to provide blended finance by combining its own resources either with those of the Revolving Fund or with those of other international financial institutions, primarily due to a lack of country presence and insufficient expertise in both CDP and AICS. However, this is improving (Chapter 3).

Delivery of Italy’s development programme requires a strong and skilled workforce in Rome

The successful delivery of Italy’s development co-operation programme hinges on a skilled and adequately resourced workforce. Staff in Rome and partner countries in AICS and DGCS are very committed to their work and its purpose, but suboptimal staffing levels mean that the system is overstretched.

Law 125/2014 states the maximum staffing level of AICS to be 200 (18 managers and 182 employees). To date, 158 agency staff are employed in Rome and Florence, and 80 out of the 100 allocated positions for locally-engaged staff in Italy’s 20 field offices are filled. A December 2018 amendment to the law allows for an increase of 40 staff in Italy, of which 20 could be upgrades from temporary to permanent contracts, and 20 could be new hires. This leaves 80 vacancies to fill, meaning that, at best AICS has had 25% fewer staff than the maximum capacity defined by law. Furthermore, in the year leading up to early April 2018 the agency was operating without a director and only one of two deputy directors. These human resource gaps have had a negative impact on staff morale.

In the Directorate General for Development Co-operation (DGCS), 33 diplomats including the Director‑General and two Deputy Directors General oversee humanitarian and emergency aid, multilateral allocations, and the evaluation desk. Although this leaves little development expertise within DGCS, the situation is helped through good collaboration between the Ministry and AICS on these issues.

Italy faces an important challenge in attracting and retaining experienced officials familiar with development co-operation to help drive the cultural shift required to fully implement the law. This is all the more urgent due to the fact that 39 of the 50 experts hired under the previous law4 will soon retire. The current law no longer allows for this “expert”, better-paid job category. Given the requirement to select among existing civil servants first, AICS has largely depended on the secondment of civil servants from outside the field of development co-operation to fill these executive positions. In addition, hiring people with development co-operation expertise could help instil a culture of experimentation and staff initiative, injecting best practice from across the field of international development (Chapter 6).

Partners and government actors speak highly of the technical expertise and commitment of AICS colleagues in the field. Here, staff operate under a variety of short or fixed-term contracts, with the exception of the country director, who has a permanent contract (Annex C.4). The reform law shifted administrative responsibility in the field from the embassy to AICS field offices, which has added considerably to the country director’s administrative burden, leaving less time for more strategic engagement. The requirement to have working knowledge of the Italian language in addition to the official language of the host country means that in some contexts it can be challenging to find qualified staff among a small pool of candidates.

Aside from the country director, there is virtually no possibility for career progression or rotation for any staff to other posts within the Italian development co-operation system. In addition, there is little access to professional development or training, and the team heard that there was no way to register anonymous grievances about problems in the workplace, whether personal or programme-related. In spite of staff members’ personal commitment, these issues, compounded with mostly short-term contracts, impact staff morale. Recently, the implementation of EU delegated co-operation has given AICS more flexibility to employ non-Italian speaking experts and issue longer-term employment contracts.

The 2014 Peer Review had already called for Italy to create a human resources plan for its development co-operation (OECD, 2014[7]), and this was reiterated by the recent EU pillar assessment (Moore Stephens LLP, 2018[3]). Developing a medium-term human resources strategy should be a priority for Italy, and it would need to outline how it will strengthen staff retention, well-being, engagement, professional development and training for staff in Italy and in field offices.

References

[5] AICS (2017), Piano Triennale di Prevenzione della Corruzione e della Trasparenza Agenzia Italiana per la Cooperazione allo Sviluppo, https://www.aics.gov.it/wp-content/uploads/2017/09/AICS_Piano_Anticorruzione_ADOTTATO_22-set-2017.pdf (accessed on 16 April 2019).

[1] MFAIC (2016), International Development Co-operation: Three year Programming and Policy Planning Document, 2016-18, Ministry of Foreign Affairs and International Co-operation, Rome, https://www.esteri.it/mae/resource/doc/2018/03/doc_triennale_2016-2018_eng.pdf.

[3] Moore Stephens LLP (2018), Pillar Assessment of the Agenzia italiana per la cooperazione allo sviluppo (AICS).

[6] OECD (2016), Recommendation of the Council for Development Co-operation Actors on Managing the Risk of Corruption, OECD, Paris, https://www.oecd.org/corruption/anti-bribery/Recommendation-Development-Cooperation-Corruption.pdf.

[7] OECD (2014), OECD Development Co-operation Peer Reviews: Italy 2014, OECD Development Co-operation Peer Reviews, OECD Publishing, Paris, https://doi.org/10.1787/9789264213241-en.

[4] Openpolis and Oxfam Italia (2019), Italy’s official development assistance: back to the past, Openpolis, https://www.openpolis.it/wp-content/uploads/2019/02/Cooperazione-Italia_EN.pdf.

[2] Republic of Italy (2014), Law no. 125 of 11 August 2014 - Unofficial translation, https://www.aics.gov.it/wp-content/uploads/2018/04/LEGGE_11_agosto_2014_n_125_ENGLISH.pdf (accessed on 12 April 2019).

Notes

← 1.  The Ministry of Environment (MTTE) manages ODA to multilateral entities as well as a significant share of bilateral ODA dedicated to combating climate change. In particular, MTTE has the mandate to engage with global climate funds, public-private partnerships, and innovative financing, to name a few. In early 2018, the UNDP Africa Centre for Climate and Sustainable Development was inaugurated in Rome, based on a Memorandum of Understanding signed between MTTE and UNDP.

← 2.  In 2018, Italy started reporting against its observance of the anticorruption plan.

← 3.  The current corporate performance plan (2019-2021) aims for 65% of employees to have attended training on anti-corruption and the ethics code by 2021. This would leave 35% untrained, which is a significant development risk. It would be important to secure resources to reach 100% as soon as possible.

← 4.  Under Article 12 of Law 49/1987, up to 120 experts could be hired under a more competitive salary scheme outside of the public sector structure for a period of four years (renewable). Article 32 of Law 125/2014 says the agency can avail itself of 50 such experts from DGCS. These experts can compete for the so-called “executive” positions in the agency through competitive tests, although in practice these positions have been filled by civil servants seconded from other departments (commandati).