Debating the rules: What in-house refugee costs count as aid?

Civil society groups in Europe are increasingly concerned about the way their governments are funding the resettlement of refugees by redirecting official development assistance budgets toward domestic programming.

The proportion of ODA spent on hosting refugees inside donor countries has risen steeply, to 10.8 percent of total ODA in 2016, up from 9.2 percent in 2015 and 4.7 percent in 2014. The latest figures on ODA spending by the Development Assistance Committee, released by the Organisation for Economic Co-operation and Development, also show that, while donors have increased aid budgets, much of this new spending is being directed toward in-donor refugee costs.

The DAC set up a temporary working group to reassess the rules for what in-house costs can be counted as aid. Over the past year, they have worked to “improve the consistency, comparability, and transparency of reporting of ODA-eligible, in-donor refugee costs.” The group will meet for the last time on July 10, before new rules, likely to come into effect in 2018, are announced in October.

While some countries are pushing for a broader definition of what counts as ODA, a number of aid organizations are now campaigning for tighter limits. They also want greater transparency around the reporting process — OECD data currently just has one headline for “in-donor refugee costs,” with no further details of what exactly is spent and how.

By reporting money that is spent on asylum seekers under ODA, a false picture is created of what is being spent on aid, these groups argue.

“It highly inflates aid levels,” says Sara Harcourt, director for development finance at the ONE campaign. “It looks like some countries are increasing their aid levels significantly, when if fact that increase is just going to in-donor refugee costs and is not actually leaving their own country.”

Shifts in spending

Some $15.4 billion in DAC countries’ ODA was spent domestically in 2016 — an amount that has nearly quintupled since 2010, when it was just 3.25 billion. For the first time, DAC donors spent more on domestic costs — about $1 billion — than on humanitarian assistance.

Ten European countries spent over 15 percent of their ODA on domestic refugee costs in 2016, with Austria (37.7 percent) spending the most, followed by Italy (34.3 percent) and Germany (25.2 percent). Four DAC-donors — Australia, Japan, Korea and Luxembourg — did not count any refugee costs as ODA.

The rules on what can be classed as ODA are currently vague and unclear, and some donor countries have used this to their advantage, Julie Seghers, OECD policy and advocacy adviser at Oxfam, says.

The current rules state that “sustenance of refugees” in donor countries can be counted as ODA during “the first twelve months of their stay.” This includes payments for refugees’ transport to the host country and “temporary sustenance, including food, shelter and training.”

However, it’s “a very fine line to draw between what is temporary sustenance and what is integration,” which has left room to interpretation, says Seghers. Denmark, for example, reports vocational training as aid when it will benefit people who will become residents.

Seghers says Oxfam is concerned that problematic costs may be included as aid and taken from ODA budgets. For example, costs relating to patrolling and security measures, or to age testing of refugees in Norway — a measure that Irene Dotterud-Flaa, senior advocacy adviser for Save the Children Norway, describes as “a tool to reduce immigration, not to protect refugees.”

Diversion of aid 

The influx of refugees into Europe and a lack of clarity around what can be spent under ODA budgets has meant that aid has been diverted away from programs set up to eradicate poverty in developing countries most in need.         

For example, the recent OECD report shows that Norway’s aid spending increased by 7.8 percent between 2015 and 2016, but deducting domestic costs means that the total volume of aid actually decreased by 1.4 percent.

“They’re basically reducing aid in developing countries,” says Seghers. “It’s really about depriving countries most in need, to pay for domestic expenditures in our countries.”

Germany also nominally raised its ODA spending in 2016, reaching its 0.7 percent ODA goal for the first time, but 25 percent of spending in that year went to domestic costs.

“[I]nflating the ODA volumes with money that is not actually being spent,” says Luca De Fraia, member of Concord Steering Group on financing for development, and deputy secretary general at ActionAid Italia, “is a major malpractice.”

Call for tighter rules and more transparency                

Members of Concord and the ONE campaign say that, while welcoming refugees is an important humanitarian issue, the cost of reception shouldn’t come from ODA budgets. They hope the DAC committee will tighten the scope of eligible local costs and place more detailed reporting requirements on donors.

“We’re hoping that clarification will lead to streamlining donor reporting practices, because at the moment the way donors report varies a lot,” says Seghers. “So it’s very inconsistent and very hard to compare. Basically it’s making sure the data is more transparent and the rules are very clear, tight and strict. Also it’s a concern for a lot of NGOs that we’re kept in the dark and it’s very difficult for us to scrutinise.”

The working group is currently unpacking the meaning of the term “refugees” — and whether it should cover, for example, asylum seekers, refugees distributed under the European Union’s agreed quota system, migrants or some combination. It is considering the period within which sustenance costs are eligible and whether the timeframe should be changed from the current 12 months.

The DAC is also examining the methodology used for assessing costs and whether it can be based on estimates per refugee — as is currently done by some donors, Harcourt says — or whether it must be based on real individual costs attached to individual people.

Significantly, the DAC is reassessing which specific cost items should be included, for example food, shelter, training, education, administrative costs such as processing asylum applications, voluntary repatriation, policing and border patrol, security screening, rescue at sea and detention centres.

“It is particularly important to clarify the distinction between costs related to ‘temporary sustenance,’ which are reportable, and costs related to ‘integration,’ which are not reportable, given that they aim at enabling the permanent integration of refugees in donors’ economies,” Seghers says.

Impact of rule changes

So far, Harcourt says she sees the DAC committee “focusing on clarifying the rules and not broadening them.”

More specific rules could clarify what can and cannot be counted as ODA. This would streamline the reporting process across countries and lead to greater transparency about what is being spent.

However, it is unclear what impact the new rules will have on spending across the DAC. Donors spending a significant amount of ODA on domestic refugee reception, such as Germany and Italy, may have to spend less at home. Aid groups see a risk, however, that donors that don’t currently direct ODA domestically, such as Luxembourg, could take advantage of the newly specified rules to spend more aid locally.  

“There’ll be a balancing — some countries having to tighten up, while others may take the opportunity to report things they weren’t previously,” says Harcourt. “It’s really difficult to estimate what effect that will have.”

Also unclear is what level of granularity will be made public in the new data. Advocates hope for more detail that would “enable external stakeholders, such as civil society or parliaments, to scrutinise these costs and make sure donors are not abusing the rules,” Seghers says.

For now, Seghers worries that civil society organizations are being cut out of the process. Groups like hers “are not sitting at the negotiation table, and are not being officially consulted, so it’s challenging to anticipate what the outcome of this process will look like.”

Regardless of the outcome, aid groups see much of the debate itself as problematic because it legitimizes spending ODA money within donors’ own borders. The worry is that new rules will not solve that underlying problem, Morten Emil Hansen, senior policy adviser on aid and development at Oxfam, says.

“It might even make it worse,” he says. “It’s really been frustrating to see them undermining the ODA concept in the way they have.”

Update, July 5: This article was updated to clarify that age testing of refugees may be included in ODA costs in Norway

Read more international development news online, and subscribe to The Development Newswire to receive the latest from the world’s leading donors and decision-makers — emailed to you free every business day.