II. Examination of expenditure
26. DFID's Annual Report 2003 formed the basis for
the evidence session with the Permanent Secretary.[20]
The 2002 Spending Review announced an increase in DFID's budget
to £4.6 billion by 2005-06 on the basis that there should
be demonstrable improvements to the lives of the poorest people.
We were concerned at the lack of a linkage between the additional
funding provided and any assessment of an increase in what is
delivered. We recommended therefore that DFID demonstrate the
links between the funds secured and commitments made in the spending
review and the performance which the Department records in its
annual report.[21]
27. Financial flexibility is essential in an environment
where risks as well as opportunities arise which DFID has to respond
to but is not in a position to control or even influence—when
dealing with financial crises for instance. We used the report
to explore the department's risk management and its commitment
to making use of financial flexibility in order to link funds
with performance. So, for example, in Bangladesh the country team
were able to move swiftly to support the government's reform programme
in jute production, whilst in Tanzania, budget support was cut
after the government decided to purchase a $40m air traffic control
system.
28. We continued, as in previous years, to question
DFID's use of direct budget support. Aid-receiving countries should
not be overburdened with a range of different reporting requirements
for donors. We were pleased, therefore, this year to note the
work DFID is doing in conjunction with the NAO on building up
the financial management and tracking systems in its partner countries.
Recipient governments' performance management and accountability
is the key to measuring the impact of budgetary support. We stressed
to DFID that the assumed benefits of direct budgetary support
may be worth the associated risks but careful monitoring and evaluation
is needed to minimise the risks and maximise the benefits.
20 Op cit. HC 825 Back
21
Ibid Back
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