Podcast Summary

The CGD Podcast

Episode: Corruption and Pay-for-Performance Aid – William Savedoff and Charles Kenny
Date: January 13, 2014
Host: Lawrence MacDonald
Guests: Charles Kenny (CK) and William Savedoff (WS), Senior Fellows at the Center for Global Development

Episode Overview

This episode delves into a critical debate in the international development community: Is results-based “cash on delivery” (COD) or pay-for-performance aid more or less vulnerable to corruption than traditional input-tracking models? Host Lawrence MacDonald speaks with Charles Kenny and William Savedoff about their research challenging conventional assumptions about corruption and aid modalities. Through real-world examples, relevant research, and memorable metaphors, the discussion advocates for a shift in focus—from accounting for every input to measuring and rewarding actual development outcomes.

Key Discussion Points & Insights

1. Framing the Corruption Question in Aid

• Many donors are wary of COD/pay-for-performance aid, worrying that “the money might get stolen” because outputs (not inputs) are being paid for.
• The assumption: input-tracking (every receipt, robust audits) is the best guard against corruption.

Notable Quote:

"Making corruption...the reason why poor countries are poor is a bit like in the United States saying, oh well, you know why these people can't get a job? It's because they're lazy...I think it's blaming the victim and I think that's bad."
— Charles Kenny [01:21]

2. Problems with Existing Anti-Corruption Controls

• WS and CK contend that standard accountability practices (audits, procurement, documentation) are costly and often ineffective.
  • Example: The World Bank spends at least $30 million/year directly on audits, with additional hidden costs as staff focus on compliance [03:03].
  • Recipient countries often assign their most capable people to compliance rather than development.

Notable Quotes:

"It's really a massive burden on the aid agencies. But more importantly, it's a massive burden on recipient countries who put some of their best people on making sure they comply...rather than, I don't know, actually trying to get more kids through school and tested at the end of them as it might."
— Charles Kenny [03:27]

3. Are Input-Tracking Controls Effective?

• “Red flag” detection systems (few bidders, incomplete documentation, etc.) don’t reliably indicate real corruption.
  • Research finds that projects with more “red flags” aren’t reliably the problematic ones [05:00].
• Cross-country data: World Bank’s identical oversight mechanisms failed to equalize costs in road projects—costs were still higher in high-bribery countries [06:03].

Notable Quotes:

"If the control mechanisms were working, you'd hope, you'd assume the prices would be the same...In countries that are more corrupt...the World Bank pays more to build that road."
— Charles Kenny [06:36]

4. Incentive Structure: Status Quo vs. Results-Based Aid

• Status Quo: Honest implementers are overburdened with compliance, while corrupt actors just need to fabricate documentation.
  • The metaphor: Counting beans planted vs. counting beans harvested.
  • Dishonest actors evade detection by producing correct paperwork even with no meaningful outputs [08:05].

Notable Exchange:

"All they had to do was show the records that said they bought the thing or they planted it or whatever and they get the money. So it's much easier for the dishonest person to divert money and not do any work than for the honest person..."
— William Savedoff [09:08]

5. Does Outcome-Based Payment Reduce Corruption?

• Paying for deliverables (e.g., students tested or “beans harvested”) aligns incentives better.
  • Honest actors focus on results.
  • Dishonest actors must still deliver results to get paid, raising the bar for effective theft and reducing opportunities for corruption [10:01].
  • Even if some money is diverted, the loss is proportional to lost outcomes—making the scope of corruption more visible and relevant.

6. Case Study: Afghanistan’s Health Program [12:37]

• The Special Inspector General for Afghanistan Reconstruction (SIGAR) recommended shutting down a highly effective, low-cost health program due to inadequate record-keeping, despite strong evidence of positive impact on health outcomes (reduced child, maternal, and adult mortality).
  • Example of the perverse effects of prioritizing documentation over real-world results.

Notable Quotes:

"I can tell you one thing that program has done. It has saved thousands upon thousands of Afghan lives...But because we don't have all the receipts in a nice little book, SIGAR is suggesting shutting it down."
— Charles Kenny [13:13]

7. Rethinking Aid Accountability Systems

• Agencies (like the World Bank, Global Fund, or USAID) often add outcome measurements on top of legacy input-tracking, increasing, rather than decreasing, the reporting burden.
  • Real gains come from shifting more focus to outcomes and away from onerous input-tracking, not layering both [18:36].

Notable Quotes:

"We're going to do everything we did before and require everything we required before, but now we're going to add on top...what results you had. There's some gain to that. But as long as you continue to have very detailed requirements about where the money went...that tends to overwhelm any attention to...outcomes."
— William Savedoff [18:36]

Notable Quotes & Memorable Moments

• "We still need bean counters. We just need them counting, you know, the beans that we want delivered, not the beans we put into the process in the first place."
  — Charles Kenny [21:56]

• "It's a mindset change...There's a proposal here to align the incentives in a way that's going to maximize good outcomes and minimize corruption. But there's still going to be some."
  — Lawrence MacDonald [20:13]

Timestamps for Key Segments

• 01:21 – Charles Kenny critiques the narrative that corruption is the cause of poverty.
• 03:03 – Costs of audits and procurement compliance in traditional aid.
• 05:00 – Why “red flag” tracking doesn’t identify corruption reliably.
• 06:36 – Road project costs and input controls' failure to equalize outcomes.
• 08:05 – How traditional compliance makes life harder for the honest, easier for the unscrupulous.
• 10:01 – Results-based aid: honest actors benefit, dishonest face higher hurdles.
• 12:37 – Afghanistan health program case study: perverse outcomes of input-focus.
• 18:36 – Adding result tracking to inputs increases, not decreases, reporting burden.
• 21:56 – “We still need bean counters…just different beans.”

Language & Tone

Throughout the episode, the tone is clear, wonky but accessible, and sometimes gently irreverent. The guests use memorable analogies (“bean counting”) to demystify complex issues, and the style encourages curiosity and critical reflection.

Conclusion

This episode presents a persuasive argument, grounded in research and practical examples, that traditional input-tracking does not reliably prevent corruption and may come at a significant opportunity cost. Instead, a shift toward results-based aid—measuring and rewarding true outcomes—can better align incentives, improve development impact, and make the cost of corruption more visible and relevant. The hosts leave the listener with food for thought and pointers to further reading.

For more details, see Charles Kenny and William Savedoff’s CGD working paper and policy brief on this topic at www.cgdev.org.