Select Committee on Public Accounts First Report

2  Funding the Humanitarian Assistance

10. Of the £76.8 million of assistance pledged by the Department, by May 2006 £13 million had been spent directly by the Department, and £52.6 million provided in grants to third parties. Due to the enormous sums contributed to the relief effort by the public and by other nations, the Department considered that it would have been a waste of public expenditure to spend the remaining £11.2 million directly on the emergency. The Department therefore allocated £3.4 million to the United Nations-led Central Emergency Response Fund and earmarked a further £7.5 million to disaster risk reduction projects. One such project relates to the development of a tsunami early warning system for the Indian Ocean. While other countries and aid agencies are developing the science relating to the system, the Department are developing the capacity for the alerts generated by the system to be communicated to local people.

11. In May 2006 - some 16 months after the disaster - 82 % of the £52.6 million paid to third parties had been spent and some £9.3 million had not yet been fully accounted for. Figure 2 summarises the position.
Figure 2. Grants awarded by the Department, and amounts spent
Grants paid by the Department

Amount spent by recipients

Balances to be accounted for by recipients

United Nations agencies
DFID Indonesia Aid Programme
Source: Department's Memorandum [3]

12. The Department attributed the slow pace with which the grants were being spent partly to the time it had taken to get some of the projects underway, and partly to the generosity of funding provided by other sources. Included in the unspent balance was £300,000 in respect of two grants made to the United Nations Children's Fund (UNICEF). A review by the Department had suggested that in this case funding by DFID had continued even though UNICEF had been unable to spend all the resources they already had at their disposal. The Department were following up all unspent grants as in some cases, including UNICEF, there may be balances to be repaid. Final accounts would be received over the next few months and the Department would obtain independent audit certificates for all grants that they had made.

13. The Department described the steps they had taken to ensure that humanitarian aid was used cost-effectively. They explained that there was a range of actions and measures, as shown in Figure 3 below.

Source: DFID Evidence[4]

14. There are risks of unjustified cost-inflation and overcharging in the provision of goods and services in an emergency situation, and unsubstantiated allegations had been made that Oxfam, for example, had suffered losses due to corruption in Indonesia. The Department had guarded against cost-inflation and overcharging by detailed monitoring on the ground which provided assurance that they had not been overcharged or held to ransom. So far as they were aware, no UK taxpayers' money had been involved in any corruption in tsunami aid projects. There had been allegations of corruption involving money from other sources in Sri Lanka and Indonesia. In Sri Lanka the Auditor General was investigating some of the allegations, and in Indonesia some 550 complaints of corruption were being followed up.

15. The audit process also has an important role to play in maintaining public confidence in the provision of public services and acting as a deterrent to fraud or corruption. The Department place reliance upon their own internal audit arrangements and also upon the audits of individual grants (conducted by NGOs' auditors). The work that the UK National Audit Office undertake at a national and international level provides additional assurance. In the case of the tsunami, there was a large number of organisations and countries involved in the relief effort and each looked for its own audit assurance as to how its money was spent. One of the lessons learnt from the response to the tsunami was that rather than having many auditors to follow the expenditure, there should be a more joined up audit approach which should deliver savings by reducing the administrative burden on recipient countries and organisations. The Department were aware that the National Audit Office were involved in developing such a harmonised and co-ordinated audit approach.

3   Ev 15 Back

4   Qq 4, 5, 7, 13, 14, 34-38, 43, 67, 69, 70, 79 Back

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Prepared 23 November 2006