Revenue Distribution and Local Impact

6. Transparency, control and audit

A key issue in any scheme of revenue distribution is that the process should be transparent, and that mechanisms for control and audit should be in place to make sure that intended flows of revenue reach their destination. Successful governance of natural resources requires governments to be held to account for their actions. Accountability forces governments to face difficult decisions and implement them effectively, but requires that the public is also well informed.

It also allows for feedback processes to learn from mistakes and improve policy; it can reduce the temptation to wrongly appropriate the (often substantial) revenue flows. This facilitates a democratic debate on trade-offs and may improve access to finance from multilateral donors and other foreign investors.

Achieving this is not easy and faces risks from entrenched interest groups, from ambiguity over the responsibilities of both government and extraction firms, the mandates and jurisdictions of multiple layers of government, and bottlenecks in, for example, the judicial system.

For example, a government should strive to join the Extractive Industries Transparency Initiative (EITI) in which both governments report how much revenue they receive from extraction companies and extraction companies report how much they transfer to national governments. These reported flows should be equal.