Select Committee on International Development Ninth Report


Delays/Underspends

43. The problem of underspends within EC development assistance programmes is not new. In the Committee's Report on the Future of the EC Development Budget we observed that "the excessive underspends in so many of the Community's external programmes reveal a Commission unable to manage and disburse its resources ... it is not enough, however, simply to blame underspends on the inefficient management of the Commission. The fundamental mistake has been to allocate excessive funds in the first place for predominantly political reasons".[66] The Communication on the Reform of the Management of External Assistance was frank in its admission of the extent of the problem, "The average length of project/programme implementation has continuously increased over the last few years with a corresponding trend in the backlog of outstanding commitments that reached over 20 billion by the end of 1999. In the last five years the average delay in disbursement of committed funds has increased from 3 years to 4.5 years. For certain programmes, the backlog of outstanding commitments is equivalent to more than 8.5 years' payments".[67]

44. On the subject of backlogs, Clare Short told the Committee, "You know that on the replenishment of the European Development Fund, what is it, 14 billion euros unspent, and they asked for a new replenishment. It is like a political game. It is just sums of money flying around, not that the money is there to be spent on good development. I think we have to get serious about what we want to do to have an effect on the ground, spend the kind of budgets well, get rid of backlogs and have all the staffing being effective in the future".[68]

45. The Committee has heard of a number of examples of delays and inefficiencies in disbursement. Population Concern gave the Committee two examples of such delays: the first was a delay of thirteen months in the disbursement of funds for four mini-projects in Bolivia and Peru; in the second instance — a Community-based Distribution Programme in Karachi — the funding situation became so dire that the Director of a local NGO in Pakistan took out a personal loan to pay staff salaries, using her residence as collateral. As a result, partner NGOs have requested that Population Concern should not seek financing from the European Community in future. The Committee was also concerned to discover, in the course of its visit to Brussels, that not a single penny of the 250 million allocated for reconstruction in Nicaragua in the wake of Hurricane Mitch had been spent.[69]

46. Poul Nielson explained the different elements of the underspend, "I think it is important ... to note that there are at least three different components of that backlog. We do not have problems in the order of 20 billion as such. One part of it is what I would call the normal time lag between committing money for a programme that is going to be implemented in some years. This is perfectly normal ... The second part of it is a backlog based on very good reasons. The Nigeria/Sudan/Somalia/Congo problems of this world, where it is highly meaningful that we have kept back money and not spent because the conditions were not there, is also part of the backlog we are talking about. The third part of it, to keep it simple, is the real problem. The money that we should have been able to spend within a normal time but where we are simply slower, that is what I would call the real backlog. The size of that is not easy to determine and it varies a lot from programme to programme and region to region in the world".[70]

47. The Commission has already begun to think innovatively on how to reduce the backlogs. One example is the use of 1 billion of unspent EDF funds to support the HIPC Initiative, a move described by Poul Nielson as "the biggest show of South-South solidarity we have seen in a long time".[71] We congratulate the Commission on the imaginative use of underspends to support the HIPC Initiative.

48. The Commission, in the Statement on Development Policy, has developed a clear analysis of the major problems it faces in implementing commitments.[72] These include: a complex and fragmented aid system; policies guided by instruments rather than by policy objectives; lack of human resources; burdensome ex-ante financial controls; substandard monitoring and evaluation procedures.

49. The Communication on the Reform of the Management of External Assistance has recommended that the Commission "launch a major programme to clear the accumulated backlog: examination of commitments prior to 1995 with a view to closing them and review of 1995/96/97 dormant commitments. A substantial programme to clear the accumulated backlog has been launched thanks to the allocation of 20 'auxiliary' posts to the SCR on the 2000/2001 budget".[73] It is important to note, however, that reductions in backlogs through the speedier disbursement of funds should not be achieved at the cost of quality. Clare Short told the Committee, "I do have a fear here that we could get a speed-up of spending and no improvement of quality. That is a real danger. At the moment we get about 100 million back a year that they cannot spend because of their inefficiency. If they speeded up and spent it all but spent it badly, would we have improved things? That is a danger".[74]

50. The level of existing backlogs is untenable. It cannot make for good practice to have an average of four and a half years between commitments and disbursement. It damages the reputation of the Community and will have severe implications for implementing partners. We support the proposal by the Commission to examine dormant commitments with a view to rescinding them. We recommend that the Commission propose a clear timetable for the realisation of this objective. It is better to close dormant commitments and not draw down funds from Member States than simply to have the money spent by the EC quickly and badly.

51. We further note the problems that NGOs are having with the EC in getting paid on time. We recommend a payment code of conduct for the EC, introducing penalty payments if the original amount contracted is not paid within the period agreed.

ECHO

52. ECHO, the European Community Humanitarian Office, is the body responsible for the disbursement of humanitarian relief in the wake of natural disasters and complex emergencies. ECHO's website states that "whether the need is for short term relief, rehabilitation after a disaster, or a spur to self-sufficient development in the long term, human and material resources have to be mobilised rapidly to end the victims' suffering and prevent future crises".[75] It goes on to state that ECHO's task is to ensure goods and services get to crisis zones fast — ideally within four days from the date a disaster strikes.

53. It has become very clear — both during Committee inquiries and from evaluations of ECHO[76] — that ECHO suffers from exactly the same problems of poor administration, delayed disbursement and staffing as other parts of the Commission. During our recent visit to Brussels and when examining ECHO's own website we have been unable to discern any clear and transparent information on how and where ECHO is spending its money. This is clearly unacceptable. We recommend that DFID request details of amounts committed and disbursed by ECHO, with all relevant dates, in: Mozambique after the recent floods; Central America in the wake of Hurricane Mitch; Kosovo; and Ethiopia during the recent emergency, and then report to the Committee. We also recommend that ECHO, as a matter of urgency, reform its procedures so as to provide prompt, clear and comprehensive information on its activities.

54. The Commission has committed itself to producing a framework for the policy direction and management of EC humanitarian activities and to produce a more coherent and effective strategy to link rehabilitation and development work. By June 2001, the Commission has said that it will produce a longer-term strategy review of its overall approach to interventions in crisis situations. The Committee looks forward to the production of a strategy review of ECHO's approach to crisis situations. We trust that proposals contained therein will contribute to the speedy delivery of goods and services to crisis zones.

The Reform of the Project Cycle and the SCR

55. A key proposal of the Communication on the Management of the Reform of External Assistance is the reform of the project cycle management. At present, DGs External Relations and Development under Commissioners Patten and Nielson are responsible for the first four stages of the project cycle — programming, identification of projects and actions, appraisal and the financing decision — while the SCR is responsible for the last two: implementation and evaluation. Under the proposals outlined in the Communication, the project cycle is to be reunified from identification through to full implementation. This system will apply to over 80 per cent of the annual 9.6 billion external assistance from the budget and the EDF. ECHO, pre-accession aid and certain other activities (including Human Rights, CFSP and the Rapid-Reaction Facility) are to be excluded and will continue to be managed by DG RELEX. Measures to give effect to these new provisions are expected by the end of July 2000 but, at the time this Report was written, details were unavailable.


The EC Project Cycle

The six stages of the "full project cycle" are:

1)  programming: the starting point is an overall political strategy (strategic framework) which also specifies the amount allocated. Within this, programming gives concrete expression to the guidelines for each country and/or region in terms of objectives, priorities, focal sectors and the general thrust of global and sectoral conditionality. Programming is multi-annual, indicative, and is negotiated with the recipient country

2)  identification of projects and actions, i.e. deciding on the relevance of a project in terms of the programming objectives and an initial assessment. This sets terms of reference for subsequent studies;

3)  appraisal: determining the feasibility of a project, carrying out an economic and financial analysis, and stipulating conditions for its execution;

4)  the financing decision defined as the financial commitment leading to a legally binding document, the financing agreement;

5)  implementation, i.e. undertaking the agreed activities, including procurement, conclusion of contracts, technical and financial supervision, monitoring of project/programme conditions, payments, audit;

6)  evaluation: assessing the results and the degree to which objectives have been attained.

Currently project cycle management is generally split between DG RELEX / DG DEV, which are responsible for the first four of these stages, and the SCR, which handles the last two.

56. The aims of these proposals, as outlined in the Communication on the Reform of the Management of External Assistance are to:

57. In the Committee's previous Report on the Future of the EC Development Budget, we expressed concern that the establishment of the SCR and the resulting separation of policy and implementation might further erode the link between evaluation and future programme design. The Communication on the Reform of the Management of External Assistance has proposed the establishment of a Quality Support Group whose functions are to be:

  • to ensure programming documents respect minimum quality standards and compliance with evaluation results and the objectives set by the Group of RELEX Commissioners;
  • to identify best practice inside and outside (benchmarking) so as to promote excellence and innovation;
  • to disseminate results; and
  • to inform the Group of RELEX Directors-General of the course of the programming exercises and to propose any necessary improvements.[78]

58. The Communication states that the creation of a Common Service for External Relations (SCR) has helped to introduce greater coherence in the way different programmes are managed and that it has now started to deliver concrete results. For example, invoices are now generally paid within the normal 60-day deadline, the rate of growth in outstanding commitments declined in 1999 for the first time since 1990 and transparency has been greatly improved. However, we have been told that much remains to be done. For example, consideration should be given to proper flexibility in NGO contracts.

59. We congratulate the SCR on its achievements to date in rationalising procedures. We welcome the proposals by the Commission to expand the role of the SCR, and in so doing to reunify the bulk of the project cycle. We also welcome the establishment of a Quality Support Group which we see as acting as a bridge between programming and evaluation.

60. The Communication also proposes greater delegation of responsibility to in-country delegations and, where possible, decentralisation of project management to partner countries. The Communication states that "the option proposed is that of extensive delegation. The successor to the SCR should not act ... exclusively from Brussels. It should also be represented in delegations".[79] Jürgen Schüler, Acting Director of the SCR, explained, "the intention is that the SCR within a year's time would basically be a monitoring, advisory, evaluation and audit authority. The identification down to implementation process will be done in the delegations".[80] However he was unable to provide the Committee with further details on how these proposals would operate in practice, "The head of delegation will always be administered by DG Foreign Relations [Relex] ... There are no details [on SCR staff] so far. This is something which is under examination, apart from the major orientations".[81] Clare Short supported proposals for greater delegation, "I think greater delegation of authority behind good policy with a good action plan is a key component of the reform. At the moment we have delegations of the EC right across the world in country after country, wonderful reach, and they have so little discretion. They can do very little and all decisions are referred back to Brussels. It is frustrating for the individuals concerned and it is very, very inefficient because there is a lot of delay ... You need the improvement in the quality and the action plan to be able to delegate intelligently but we are very in favour of moving in that direction".[82]

61. We recommend that the SCR should explicitly endorse, and be committed to, the principles enshrined in the Statement on Development Policy. Details of how the new, expanded, SCR would operate in practice were sketchy at the time of the Committee's visit to Brussels. We look forward to being provided with further details as soon as they are available. We wish to know the DG to which SCR officials in the field will report — DG Development or DG External Relations. For example, would an SCR official in Morocco be seeking to identify projects on the basis of the framework set out in the Statement on Development Policy or according to political priorities such as the stabilisation of the near abroad?

Staffing

62. In examining the efficiency and effectiveness of EC development assistance, the issue of staffing has become hotly contested between Member States and the Commission. The Commission, in its Communication on the Reform of the Management of External Assistance, states that "Human resources have failed to keep pace with the growth in the volume of funds to be managed: EC aid volumes have increased by a factor of 2.8 over the last ten years whereas staff levels have increased by only 1.8 times. Extrapolating numbers of management staff to match the growth in the corresponding budgets from 1989 to 1999 suggest a current shortfall in excess of 1,300 posts. Comparison with other international aid donors underlines the scale of the challenge: the Commission has a half to a third as many staff per managed by comparison with other donors. Where Member States or the World Bank have between four and nine officials to manage 10 millions, the Commission has 2.9 officials".[83] Glenys Kinnock MEP illustrated the point graphically "The Commission as a whole has fewer staff than Clwyd County Borough or Leeds City Council"[84]. The UK Platform, EC NGO Network / BOND, speaking on behalf of British Overseas NGOs stated that "NGOs welcome the emphasis placed on the critical problem of understaffing in the Commission's External Relations operations. Without significant investment in improving the quality and quantity of appropriate staffing, no amount of reorganisation will be sufficient to resolve the existing problems".[85]

63. Shortly before the publication of this Report, the Commission produced a Communication on "Matching the Commission's Activities with its Human Resources — the Means to Achieve our Objective".[86] At the same time, it published proposals to amend the financial regulations of the EC. Whilst the Committee has not had an opportunity to consider these proposals, we recommend that the Government provide us with details of the likely impact of the Commission's proposals for changes in human resources and for amending the financial regulation on the management of external assistance.

TECHNICAL ASSISTANCE OFFICES (TAOS)

64. This understaffing has forced the Commission to resort to the system of Technical Assistance Offices (TAOs).[87] Chris Patten explained to the Committee, "We have not got any staff to deal with it, so what do you do? You establish a bureau d'assistance technique, a TAO ... There are 80 of those employing about 800 people at a cost of about 170 million. The system has been rightly criticised for being largely outside proper budgetary and political control".[88] The Communication on the Reform of the Management of External Assistance notes that "unfettered sub-contracting has shown its drawbacks: the annual cost of TAOs in the RELEX field is estimated at around 170 million out of 190 for the whole Commission. To give an indication of the order of magnitude, this figure is equivalent to around 80 per cent of the total administrative budget of the Commission's delegations worldwide".[89] A group of Commissioners, chaired by Commissioner Prodi, is currently in the process of conducting a Peer Review of the resource implications of the reforms set out in the Commission White Paper.[90] The purpose of the review is to examine redeployment within and across DGs and assess overall staff needs, look at externalising non-core activities and, if necessary, propose additional resources. Whilst the Committee has no objection in principle to the use of contractors to implement EC programmes, we support the Commission's conclusion that a workable, more cost-effective alternative to the TAOs is urgently required.

65. Clare Short told us that she was adamantly opposed to allowing the Commission to recruit more staff, "I think staffing is a trap. They are inclined to say, 'We can't improve without more staff'. Then you are supposed to throw good money after bad, and I do not think Member States will agree to just increase their staffing. What they need to do is use the staff they have well, and then co-finance with Member States in other areas rather than duplicate on Member States' staffing strengths in all areas".[91] She went on to state "I personally will fight to the death to not give them any more staff until they improve the quality of what they are doing, otherwise we are just throwing more and more resources away".[92]

66. Chris Patten noted that Member States were unlikely to endorse any proposals for more staff, "I am sufficiently politically experienced to know that if I simply go to Member States and say, 'We want another n hundred people permanently on our staff', they are going to tell us to get lost. So what we are proposing is that we should use the operational credits which are available in the budget to take on contracted staff to work for Europe Aid. Does that just mean transferring people from the technical assistance offices to the Europe Aid? No, because we think that we can actually deliver what the TAOs are doing already with fewer people than they are doing it ... It does not involve any breach in budgetary principle or concept since we already use operational credits for employing people out in our delegations for managing projects and we already use operational credits for some people who are contracted to work for us".[93]

67. DFID has broadly welcomed these proposals. Clare Short told the Committee, "the reorganisation of the management structure has been done in such a way that the Commission will be able to use programme funds to employ people to help deliver its programmes. That will be part of the answer to its staff shortage problem. We think it is sensible — we do it too — but it needs watching to make sure it is done well, rather than a proliferation of people who do not deliver specifically. So they are going to get new staff through this mechanism".[94]

68. There can be no doubt that parts of the Commission, in particular those DGs responsible for external assistance, are severely understaffed. Constanza Adinolfi told the Committee, "just to give you an indication we have at the moment between 200 and 300 partners we work with. We have an average per year of some 1,000 contracts to manage ... We have a huge administrative burden to support in managing the aid ... each desk which is managing funds and contracts manages between 10 and 12 million euros and something like between 50 and 70 contracts per person, which is completely crazy. I do not know how they do it. I admire my desk officers for the professionalism they put into this, but this is done by enterprise, by being in the office sometimes 12 hours, by coming to work on Saturday and Sunday, by having very long periods of leave which are not taken and so on".[95] Such incidences are not isolated examples.

69. The Committee has repeatedly heard — from NGOs and Commission officials — that the Commission simply does not have enough staff to cope with the vastly increased sums that it is required to spend and the increased financial controls that have been imposed on it as a result of fraud allegations. Any reassessment of staffing in DGs Development and External Relations, however, must first take account of the proposals to rescind dormant commitments and of changes in staffing requirements as a result of Commission proposals to concentrate on six core areas. Only then should the issue of staffing be addressed. We look forward to the conclusions of the Peer Review on staffing in the Commission, subject to the conditions set out above.

Micromanagement

70. The Communication on the Reform of the Management of External Assistance explains that, because of the weakness of EC programming, Member States are encouraged, through a range of approximately 50 management committees to give disproportionate attention to the Commission's decisions on individual projects, rather than to concentrate on more strategic issues. This inevitably leads to considerable delays. Chris Patten told the Committeee during its visit to Brussels that "at present we have to run an aid programme with Member States wanting to micro-manage every national programme rather than agreeing a strategy and then letting us manage, with all sorts of procedures regarding procurement and contracts which were frankly I think often devised in order to try to enable Member States to get a bigger share of the action for their own companies. All those problems make it a wonder that we manage anything at all".[96] Clare Short, however, appeared reluctant to relinquish control over the detail of EC policies, "If you have a completely malfunctioning bureaucracy I suppose you try to intervene at every point in which decisions are made to try and both get better quality decisions and more effectiveness. I imagine we are involved right down the line in all the different programmes. You might call it micro management, we are trying to get increased effectiveness and better quality".[97] She went on to state that "I am not saying we would not give it up until we see better effectiveness on the ground, we would give it up as part of the reform package".[98]

71. The Member States and the Commission appear to have reached an impasse on the issue of micromanagement with the Commission keen to change the emphasis from detailed management before project implementation to evaluation during and after completion of the project. Member States are reluctant to relinquish control until there has been some discernable improvement in the Commission's own evaluation of development assistance. Member States and the Commission should seek to agree, at the earliest opportunity, an overall policy framework for EC development assistance and an action plan for its implementation. Once such a policy has been agreed and as soon as suitable accounting mechanisms have been put in place Member States should seek to reduce their day-to-day involvement in the management of Commission-run development projects.

  

Conclusion

72. A great deal has changed in the European Commission since the last time the Committee examined this issue. The financial perspectives for the period 2000-2006 have been agreed, the resignation of the Santer Commission has led to Commission reform. The new Commission is in the process of re-examining its management procedures, and a number of proposals have been made for the reform of external assistance. Further changes are afoot. However, if the EC is to realise the its own objectives of improving the management of its external assistance a number of additional reforms will be required both on the part of the Commission and on the part of Member States. The momentum of recent change must be maintained. This will require nothing less than a comprehensive action plan for the reform of EC development assistance, endorsed by the Commission and Member States, with clear commitments and a timetable for their implementation. To this end, we recommend an extraordinary meeting of the Development Council focussed entirely on the reform of the EC's development budget and programme.

73. Clare Short has stated that "the Commission is the worst development agency in the world. The poor quality and reputation of its aid brings Europe into disrepute".[99] The Commission has itself recognised its poor performance in the past. The Communication on the Reform of the Management of External Assistance noted that "the EC's management performance has deteriorated over time to the point of undermining the credibility of its external policies and the international reputation of the European Union".[100]

74. None of the issues raised in this Report are new. We are exasperated with the failure of the Commission to reform its development activity effectively. We have no doubt that were the development reforms we outline implemented, the EC could make a real difference to the elimination of poverty. The EC is living on borrowed time — the Commission should give up its addiction to half-measures and have the courage to reform for the benefit of the world's poor.


66   First Report from the International Development Committee, Session 1998-99, The Future of the EC Development Budget, HC 44, para.52 Back

67   Communication on the Reform of the Management of External Assistance, 8889/00, May 16, 2000, p.6 Back

68   Q.52 Back

69   Q.191 Back

70   Q.162 Back

71   Q.162 Back

72   Statement on Development Policy, p.14 Back

73   Communication on the Reform of the Management of External Assistance, 8889/00, May 16, 2000, p.20 Back

74   Q.1 Back

75   http://www.europa.eu.int/comm/echo/en/operatio/index_en.html Back

76   For example, the independent evaluation of Community Humanitarian Activities carried out under Article 20 of Regulation 1257/96 Back

77   Communication on the Reform of the Management of External Assistance, 8889/00, May 16, 2000, p.7 Back

78   Ibid, p.12 Back

79   Ibid, p.19 Back

80   Q.145 Back

81   Qq.146-7 Back

82   Q.44 Back

83   Communication on the Reform of the Management of External Assistance, 8889/00, May 16, 2000, p.5 Back

84   Evidence p.75 Back

85   Evidence p. 62 Back

86   SEC(2000)2000 Back

87   A list of TAOs, in French, has been received by the Committee and placed in the Library of the House Back

88   Qq.95-6 Back

89   Communication on the Reform of the Management of External Assistance, 8889/00, May 16, 2000, p.5 Back

90   COM(2000)200 Back

91   Q.18 Back

92   Q.23 Back

93   Q.96 Back

94   Q.20 Back

95   Q.81 Back

96   Q.96 Back

97   Q.45 Back

98   Q.46 Back

99   "Aid that Doesn't Help", Financial Times, 23 June 2000 Back

100   Communication on the Reform of the Management of External Assistance, 8889/00, May 16, 2000, p.5 Back


 
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