UK aid 'brand' at risk from cross-government funds, says IDC report

Personnel from UK Aid looks on as a forklift vehicle takes aid shipment on board HMS Ocean. Photo by: Ministry of Defence / CC BY

LONDON — Official development assistance spent outside the Department for International Development — which is set to rise to 30 percent within the next two years — is less transparent, less coherent, and less poverty-focused than aid spent by DFID, a new report from the parliamentary International Development Committee has found.

The U.K.’s controversial cross-government aid strategy has seen a rising proportion of aid spent through departments other than DFID. But the report from IDC, the group of legislators who monitor the country’s aid spending, concluded that not only is cross-government aid falling short of international standards for transparency, but also that poor coordination, competing department priorities, and a lack of focus on poverty reduction could damage the U.K. aid brand.

Almost £2.5 billion ($2.92 billion) of the U.K.’s approximately £13 billion aid budget was spent through departments other than DFID in 2016, including the Department for Business, Energy and Industrial Strategy (£696 million) and the Foreign & Commonwealth Office (£504 million); as well as through cross-government funds such as the CSSF (£601 million) and the Prosperity Fund (£38 million).

In all, this accounted for roughly 19 percent of ODA in 2016, with an additional 7.9 percent spent through nondepartmental sources such as the International Monetary Fund’s Poverty Reduction and Growth Trust, and non-DFID EU attribution. The proportion of cross-government aid spending is due to rise to 30 percent by 2020.

The IDC report revealed that the third largest non-DFID aid spender, the Foreign Office, spent more than 52 percent of its allocated ODA budget on “administrative costs,” such as costs related to the administering of aid and “diplomatic administration connected to development.” The Home Office spent more than 93 percent of its aid budget on what are described as administrative costs, although this figure includes domestic spending on resettling refugees within the U.K.’s borders.

By comparison, in 2015, DFID spent less than 5 percent of its £10 billion aid budget on administrative and delivery costs.

The IDC report expressed concern that the high use of ODA for administrative purposes in non-DFID departments “is misdirected and that in some cases existing diplomatic activities are being badged as ODA without any additional targeting to lead to a reduction in poverty.”

Chair of IDC and Member of Parliament Stephen Twigg expressed specific concern about the potential misuse of ODA through cross-government funds, saying that “current arrangements for oversight leave gaps and the opportunity for a lack of coherence.”

“While spreading the administration of ODA across Whitehall creates the potential to establish new and innovative partnerships in aid delivery, it also risks undermining the quality of the U.K.’s ODA,” Twigg said. “We are concerned at the risks this poses to policy coherence, effective oversight, and transparency. We are also concerned about the uneven focus on poverty reduction in programs administered outside DFID.”

The committee recommends that the U.K. government makes systematic improvements to the coherence, transparency, and poverty focus of cross-government funds before increasing their share of U.K. ODA any further.

Cross-government funds missing the mark

Aid watchdog calls for 'urgent steps' to fix CSSF

"Too many programs showed signs of basic design errors, with poor delivery and a lack of quality control," according to an Independent Commission for Aid Impact review of the £ 1.2 billion Conflict, Stability and Security Fund.

IDC focused much of its criticism on dual-purpose, cross-government funds — namely the Prosperity Fund and CSSF, which blend ODA and non-ODA funds, and which continue to draw fire from watchdogs over a lack of transparency.

The IDC reports that aid officials gave “contradictory” testimony regarding CSSF — the second-biggest non-DFID aid spender in 2016 — and its obligation to meet aid reporting standards. One witness from the Joint Fund Unit claimed CSSF is obliged to publish all its funding and programming data, while other witnesses said much of the data provided by CSSF is redacted for “national security” reasons. This lack of clarity risks “undermining faith in the U.K. aid brand,” the IDC said.

It also highlights inconsistency in the way CSSF chooses the countries where it works. Many providing evidence testified that the decision “is being governed primarily by national security interests rather than the potential to reduce poverty,” it said. The recent National Security Capability Review committed to increasing the U.K. development agenda’s focus on security and justice, a priority which the report says risks sidelining the aid strategy’s primary aim of poverty reduction.

The increase in the use of dual-purpose, cross-government aid funds also presents a threat to the U.K.’s commitment to untied aid, the report says. While the Prosperity Fund’s chief aim is poverty reduction, according to its website, a secondary benefit is cited as the “creation of opportunities for business, including UK business.” A witness from Bond, the network of aid NGOs, said an increasing focus on British businesses in the Prosperity Fund’s activities is “worrying.”

“Once you open that up as an acceptable way [to approach aid spending], that counts as a priority equally with poverty reduction ... The choice of countries very much looks at countries that would be important in a post-Brexit scenario,” Tamsyn Barton, former CEO of Bond, told IDC.

Analysis of Prosperity Fund spending by Oxfam Great Britain, which was submitted to the committee, suggested that around 20 percent in value terms of the Prosperity Fund’s projects in 2016-2017 explicitly sought to showcase the capabilities of U.K. entities alone, while half of all projects in China involved showcasing the capabilities of U.K. entities and promoting U.K.-China collaborations.

IDC concluded that the Prosperity Fund’s emphasis on “promoting U.K. trade risks losing the rightful emphasis of the fund upon the primacy of poverty reduction, and is a step towards the return of tied aid.”

Empowering DFID to oversee spending

The report praises the U.K. government’s decision to create three teams across Whitehall to oversee ODA spending: The Cross-Ministerial Group, the Senior Officials Group, and the new Ministerial Committee for the Cross-Government Funds, established in April.

At the same time, IDC found it “extraordinary” that the current system for bidding on cross-government ODA — the “challenge panel” created by Treasury to assess more than £18 billion worth of bids from non-DFID departments to spend ODA — failed to ask “for details of their capacity or capability to implement their proposed projects or their plans for monitoring and evaluation of the projects’ outcomes, nor to consider how the bid contributed to the objectives of the UK Aid Strategy.”

“We are concerned that the current bidding process enables departments to bid for ODA without due regard being made of their capability to administer these programmes effectively,” the report states.

“Consequently, we recommend that the bidding process is amended to include an evaluation of a department’s staffing, systems and knowledge capacity to administer ODA. We also recommend that departments detail their plans for monitoring and evaluation of projects, including how the Independent Commission for Aid Impact [the UK aid watchdog] will have access to this information.”

While DFID is “willing and able” to provide this support, including “programme management and reporting, and highlighting when required administration standards are not being met,” the report stated, “our key concern is whether other government departments are willing or able to absorb it.”

The report repeatedly returns to the theme of DFID’s willingness and ability to manage the cross-government’s aid administration being impeded by the lack of a centralized effort across government to empower DFID to follow through with its guidance — both through resources and by creating a mandate that aid-spending departments heed its recommendations.

However, responding to the report, some in the aid community disagreed with IDC’s view that DFID should be put in charge of all aid spending.

“The report recognizes there are gaps in coordination and oversight, and that a clear statement on individual departmental responsibilities is required. But making DFID responsible for all U.K. ODA risks DFID being held responsible when there are problems or failures,” Nilima Gulrajani, a senior research fellow in the Development Strategy and Finance department at the Overseas Development Institute, told Devex.

“This is problematic because DFID may have had little control and oversight of other government department spending. In parliamentary democracies, central agencies like the treasury or the prime minister’s office tend to be responsible for overseeing line ministries as they have the ‘bird’s eye view’ of government and the administrative responsibility for ensuring effectiveness.”

Gulrajani said that having a “line ministry” such as DFID take on a coordination and oversight role is “both difficult practically as well as a serious reputational risk.”

But Romilly Greenhill, U.K. director of the ONE Campaign, welcomed IDC’s stance.

“The IDC is right to call out aid that doesn’t meet its core purpose of fighting poverty. Their recommendation that DFID — with its world-leading expertise in using aid effectively — be given final sign-off of U.K aid spent anywhere in Whitehall is spot on,” she told Devex.

Greenhill also supported the recommendation that the government make systematic improvements to cross-government funds before increasing their share of U.K. ODA.

“The IDC’s recommendation that funds which fall short of meeting these standards should not see any increase in their share of U.K. aid is smart. The British taxpayer rightly expects any part of government responsible for delivering U.K. aid to ensure it is transparent, effective, and focused on the job it’s intended for: Reducing poverty.”

Responding to the report, a U.K. government spokesperson told Devex, “We have been clear: We must ensure that the aid budget is not just spent well but could not be spent better and [that] standards are raised across government to achieve value for taxpayers’ money.”

“U.K. aid spending is best done using expertise across government, with departments working together in a joined up way,” the spokesperson said.

About the author

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    Molly Anders

    Molly Anders is a U.K. Correspondent for Devex. Based in London, she reports on development finance trends with a focus on British and European institutions. She is especially interested in evidence-based development and women’s economic empowerment, as well as innovative financing for the protection of migrants and refugees. Molly is a former Fulbright Scholar and studied Arabic in Syria, Jordan, Egypt and Morocco.