Select Committee on Public Accounts Third Report


The Committee of Public Accounts has agreed to the following Report:—


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).

1  C&AG's Report, HC 495 Session 1999-2000 Emergency Aid: The Kosovo Crisis, paras 2, 23 and 1.2 Back

2  ibid, para 1.19 Back

3  ibid  Back

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