Introduction and Summary of Conclusions
and Recommendations
1. The Department for International Development (the
Department) made a major contribution to the international response
to the humanitarian crisis arising from the problems in Kosovo.
The speed of the refugee outflow from Kosovo into Macedonia and
Albania was unprecedented; it was the largest and most sudden
population movement witnessed in Europe since the Second World
War. The Department allocated £110 million for humanitarian
aid to Kosovo and the surrounding countries in 1999-2000—more
than they allocated to any single country.[1]
2. In responding to the crisis the Department provided
some services directly, but they also worked extensively with
the British military and a range of other public and private organisations
to deliver their aid effort. The Department had contracted the
Crown Agents to provide an emergency response team. This team,
the Emergency Logistics Management Team (ELMT), ran and staffed
the Department's field offices and operations in the region.[2]
3. On the basis of a report by the Comptroller and
Auditor General,[3]
the Committee took evidence from the Department and Crown Agents
on the management of the Department's response to the crisis.
Our key conclusions are:
The Department are to be commended for their major
contribution to the effort to provide relief to the many thousands
of people who suffered from the crisis in Kosovo. They were key
players in the international response. They not only delivered
direct aid, but also helped to co-ordinate the international effort.
The need for greater co-ordination is one of the lessons from
the Kosovo experience, and the Department recognise the role they
have to play in achieving that.
The very unpredictability of the Department's work
in responding to emergencies is what underlines the need for well
thought out and established contractual relationships and management
procedures. But for two years the Department did not have a written
contract with an air chartering broker and they were operating
with the Crown Agents on the basis of a series of contract extensions.
In future, the Department must ensure that their emergency response
capability is not put at risk by failures to keep key contractual
and operating arrangements up to date.
The Department need to plan their funding requirements
for future emergencies more carefully in order to avoid holding
large balances in excess of need in their bank accounts at the
Crown Agents, as had occurred in this case.
4. Our detailed conclusions and recommendations are
as follows:
On the Department's contribution to the international
response
(i) The Department were at the forefront
of the international response to the humanitarian crisis in Kosovo
and neighbouring countries. Through the Crown Agents they were
on the ground quickly, and made an immediate impact. They were
active in providing support to the refugees in Macedonia and Albania;
they were instrumental in co-ordinating the international response;
and they provided practical support to the UN as it sought to
establish itself in Kosovo. They also provided funds and practical
support for a wide range of humanitarian relief projects in the
region, including those run by the British Military. We commend
all those involved for their efforts (paragraph 12).
(ii) The international response to the crisis
was fragmented and co-ordination depended on who had the capacity
on the ground. There was a lack of clarity about the relative
roles and responsibilities of the international organisations
involved and their response was slow. The Department will need
to press the United Nations to set up the required information
exchange systems and to strengthen the UN Office for the Co-ordination
of Humanitarian Affairs (paragraph 13).
On managing the supply chain
(iii) The Department have now let a
new contract for arranging air charters. They now use one broker,
whereas previously they had two. This arrangement will only achieve
better value if it succeeds in generating sufficient competition
between prospective suppliers. In the past the Department have
had insufficient documentation to demonstrate that the broker
is getting the best deal on their behalf. They assured us that
they would now keep appropriate documentation to be able to show
that they were getting value for money (paragraph 22).
(iv) The Crown Agents had been working in
the region during the crisis for six months by the time the Department
signed a new contract with them. These were less than ideal circumstances
in which to be conducting post-tender negotiations and agreeing
a contract. We note that over this period the cost of the core
elements of the contract rose from some £900,000 (the basis
on which Crown Agents won the competition) to more than £2
million. Without re-tendering the Department could not demonstrate
that they got the best price. By allowing post-tender negotiations
to run on for so long and by initiating a major change to the
basis of the contract, they ran the risk of unfairness to other
bidders (paragraph 23).
(v) By agreeing the new core element when
they were under pressure during the crisis, the Department may
have become locked into a contract at too high a rate. The Department
should review whether the level of support agreed at the height
of the Kosovo crisis is what they require, and re-tender the contract
at the earliest opportunity (paragraph 24).
(vi) Although staff recruited to run the
field offices in the region were experienced people, they received
little in the way of written guidance on how to run the operation.
The absence of such guidance may increase the time staff have
to devote to administration and divert attention from the emergency.
It also increases the risk of inappropriate systems being put
in place. We note that the Crown Agents have now established standard
operating procedures, and we look to the Department to ensure
that they draw on these for future operations (paragraph 25).
(vii) Crown Agents staff working in the
Department's field offices made the decisions about whether or
not to arrange procurement of items through the Crown Agents in
London which incurred a separate management fee for the Department
to pay. This represents a potential conflict of interest. The
Department will need to act on the assurance they gave us that
they would carry out regular checks on the procurement decisions
made by local staff on their behalf (paragraph 26).
On managing the Department's assets
(viii) Over a 13-month period the average
balance in the Department's accounts at the Crown Agents was some
£2.86 million compared with a minimum balance of around £1
million that Crown Agents estimate would have been required to
service the projects funded by these accounts. These balances
were held in non-interest bearing accounts on which bank charges
were not levied. The interest cost to the Exchequer of holding
funds in excess of need was considerably greater than the likely
level of bank charges that would otherwise have been levied. A
better planned approach to cash management will be needed if the
Department are to fulfil the assurances they gave us that in future
balances in these accounts will be monitored more closely and
will reduce as a result (paragraph 32).
(ix) The Department had called for monthly
financial statements to satisfy themselves that money disbursed
by the Crown Agents on their behalf through field offices has
been spent properly. But there was a delay, ranging between four
and seven months, between the establishment of the field offices
and the production of project management accounts to show what
was happening to the money on the ground. The Department should
take steps to ensure that field offices are prepared and equipped
to produce accounts and other management information on a timely
basis (paragraph 33).
(x) The National Audit Office could not
confirm that humanitarian supplies sent to the region during the
refugee crisis had been received by the intended recipient. The
Department should obtain documentary evidence of delivery of the
supplies they send to relieve emergencies and have assured us
that they propose to do so (paragraph 34).
On managing the Department's grant-giving
(xi) A major component of the Department's
contribution to the relief effort has been to provide funds to
support specific projects run by other organisations. It is important
that they deal quickly with requests for funding, while being
able to demonstrate that decisions are properly made. The Department
assured us that decisions were made on the basis of detailed proposals,
and within delegated limits of authority, but did acknowledge
that applications had not gone through a structured vetting process.
In future they will provide an audit trail by completing a checklist
to support grant decisions (paragraph 39).
(xii) The Department require completion
reports to record what projects have achieved and to account for
the grant. These reports are the Department's principal means
of identifying and recovering any unspent grants and it is essential
that they follow-up any that are outstanding. We note that the
Department have now received 93 per cent of final project reports
from grant recipients. They need to pursue those that remain outstanding
(paragraph 40).
(xiii) The Department's monitoring of progress
on some local projects against agreed timescales and budgets had
prompted them to terminate grants where they had been dissatisfied
with the results. In view of its size and complexity, we recommend
that the Department review their experience of grant-giving during
this operation, to see what lessons can be learned (paragraph
41).
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