UK’s failure to tackle aid budget fraud blamed on cuts and merger

The United Kingdom’s steep aid cuts and the disruptive scrapping of its development department have been blamed for a failure to tackle fraud, according to a watchdog’s scathing report. Just £2.2 million ($2.8 million) of fraud was found in 2020-2021 from an aid budget of £9.9 billion — a 0.02% detection rate way below the estimate that between 0.5% and 5% is the true loss in any government spending. The Public Sector Fraud Authority “considers reporting of ‘near zero’ levels of fraud to be an indicator of poor value for the taxpayer because it shows that either fraud is not being found or that controls are so tight that the quality of delivery is compromised,” according to a report published Tuesday. The report’s author, the Independent Commission for Aid Impact — a group that scrutinizes U.K. aid spending — pins much of the blame on cuts to monitoring and training, revealing that fraud liaison officers, or FLOs, in countries receiving aid, spend only 10% of their time in the role. Meanwhile, a new accounting system called HERA, introduced by the recently merged Foreign, Commonwealth & Development Office “caused payment delays and staff having to use offline workarounds, heightening fraud risk.” In Kenya, one of the countries the ICAI inquiry team visited, FCDO local staff reported that “few effective controls were in place for a period of around six to eight weeks, during which the office relied on trusted staff to invent and apply controls manually using spreadsheets and offline record-keeping.” “Programme staff expressed concern about how easy it would have been to defraud the system during this time. HERA continues to confuse and frustrate, consuming disproportionate amounts of staff time that could otherwise be spent on managing programmes,” the report stated. In Mozambique, a second case study, “when the fraud liaison officer (FLO) left the team in January 2023, a new FLO was appointed, however, they did not receive a proper handover, training or support.” Similarly, in India, which ICAI also visited, the FLO “did not receive any formal training after being appointed, and was not aware of the FLO job description until recently”. The report also found that COVID-19 travel restrictions and “a more cautious attitude to security risks” meant fewer FCDO staff visited projects, “something widely seen as crucial in tackling fraud.” “Missed opportunities to share learning across teams and an under-resourced central and in-country support function meant FCDO was still finding virtually no fraud despite the significant risks it faces,” it concluded. The criticism comes just a day after an auditor’s report revealed the U.K. government has admitted to a “severe” risk that international development skills and expertise are being lost, three years after the axing of the Department for International Development, which triggered the loss of almost 100 advisers in little more than a year. Tarek Rouchdy, the commissioner who led the ICAI review, said FCDO has “strong fraud risk management processes”, but added: “The department is still largely just reacting to these risks, rather than proactively seeking out fraud and corruption in an effort to root it out wherever it is hidden. “Our review suggests that proper investment in anti-fraud capability and support at the centre, and ensuring there is enough senior oversight of aid programmes in countries, would help the UK to better safeguard taxpayers’ money and ensure our aid is not being diverted away from the people who need it.”