Supplementary memorandum by the Department
for International Development (DFID)
DEPARTMENT FOR INTERNATIONAL DEVELOPMENT:
SPRING SUPPLEMENTARY ESTIMATE 2006-07
1. SUMMARY OF
CHANGES SOUGHT
IN THE
ESTIMATE
1.1 The DFID Spring Supplementary Estimate
increases voted provision by £93.5 million within DFID's
Departmental Expenditure Limit (DEL) and by £105.3 million
of Annually Managed Expenditure (AME).
Departmental Expenditure Limits (DEL)
1.2 Voted DEL has been increased by:
— £47 million for draw down
of end-year flexibility (EYF) provision and £343,000 from
the Treasury's Reserve; and
1.3 These resources add to voted resource
for DFID's PSA objectives. The increase in voted programme resource
has been allocated to sections of the vote to reflect as far as
possible latest outturn forecasts for 2006-07.
1.4 Voted DEL for administration has also
been increased by £30 million draw down of non-cash EYF and
£12,000 of budget provision transferred from other departments.
The £30 million will be available for a possible accounting
expense for property disposals and does not add to cash provision
for normal administration budgets (see section 6 below).
Annually Managed Expenditure (AME)
1.5 Voted AME has been increased because
of changes in the forecast of requirements for two particular
non-cash expenses:
— £94 million in RfR1, section
K for the accounting provision against future payments to the
International Finance Facility for Immunisation (see section 7);
and
— £11 million in RfR1 section
J for the cost of capital charge on DFID's investment in CDC.
1.6 The Estimate reinstates a section (RfR1,
section L) with a token provision of £1,000 for EU research
funding. DFID is acting as the lead institution for a programme
to co-ordinate EU member states' research programmes in water
science and technology for the developing world sector research
programme involving institutions in a number of EU countries;
the token Estimate authorises DFID to receive and pass on funds
for this from the EU Commission.
2. DETAILED EXPLANATION
OF THE
CHANGES
RfR 1: Poverty Elimination
2.1 Programme resources for poverty elimination
in the vote have increased by £62.4 million. This increase
is made up of:
— £47,077,000 of EYF drawdown
(see section 5).
— £343,000 from the central
Reserve; this is an adjustment to increase the £2.16 million
added to DFID's DEL in 2005-06 relating to VAT receipts on the
Live 8 DVD.
— £8,470,000 from payments
previously assumed to be made from non-voted provision to the
International Facility for Immunisation which will be made in
2007-08 rather than 2006-07 (see paragraph 2.9 below).
— £6,544,000 formerly in
Departmental Unallocated Provision (DUP) and now included in to
voted provision.
2.2 In this Estimate the bulk of the additional
voted provision is allocated to International programmes (section
D) which are increased by £90,000,000 to £1,811,364,000.
This increase takes account of the additional allocation made
during the year from the contingency reserve for the Fast Track
Initiative (FTI) for improving education provision in developing
countries.
2.3 The Committee may wish to note that
there is not a direct correspondence between the increase in DEL
resource and the changes in Estimates provision. This is because
DFID sets budgets for programme managers at the start of the financial
year which already take account of possible draw down from EYF
stock. We also set aside a contingency Reserve from which allocations
are made during the year.
2.4 During the year we reviewed budgets
to take account of agreed EYF draw down and allocations from the
contingency reserve. Outturn on some budgets changes because of
slippage in project and programmes which extend over more than
one year. This Estimate revises provision for the most significant
changes in forecast spend. Provisional outturns for 2006-07 by
programme on a comparable basis to those in Annex 1 Table 4 in
the 2006 Departmental Report will be published in the 2007 Departmental
Report.
RfR2: Conflict Prevention
2.5 Voted resources for RfR2 have been increased
by £1,085,000. This represents the transfer to vote of the
balance of resources in the Africa Conflict Pool. The additional
resources will be used for projects in Burundi.
AME
2.6 The voted provision in RfR1 section
K has been increased by £94,000,000 This section provides
for a non-cash accounting charge which will be included in the
resource account for 2006-07 to recognise our obligation to make
future payments to the International Finance Facility for Immunisation
(IFFIm). The UK has committed £1.4 billion to IFFIM. We will
make cash payments between 2007 and 2026; these, with payments
from other donors, will be used to repay interest and principal
on bonds issued by IFFIm. The resources raised from bond issues
are being used by IFFIm to front loan support to immunisation
programmes.
2.7 Under UK Generally Accepted Accounting
Principles, DFID has to make an accounting provision to recognise
the commitment it has accepted to repay IFFIm borrowings. This
accounting provision is in Annually Managed Expenditure budgets;
the cash payments are part of DFID's non-voted DEL.
2.8 At the time of Main Estimates it was
not known how much IFFIm would borrow in 2006-07. In the event
a first bond issue of $1,000 million was made in October 2006.
The accounting provision for this will be up to £300 million
rather than the £200 million provided for in the Main Estimate.
2.9 Our first cash payment to IFFIm will
now be made in 2007-08 rather than 2006-07 as assumed at the time
of the Main Estimate. £8,470,000 previously held within non-voted
DEL for this payment has been transferred to voted provision.
2.9 The provision in RfR1 section J is for
the cost of capital charge on DFID's investment in CDC Group plc.
This expense is calculated on CDC's average net assets during
the year. We now expect these to be up to £220 million more
than assumed at the time of Main Estimates with a consequent increase
in the AME expense.
3. IMPACT ON
DFID'S PUBLIC
SERVICE AGREEMENT
3.1 The 2006 Autumn Performance Report
(CM 6978) reports on progress against PSA targets. Of the
25 programme sub-targets in the 2005-08 PSA, five are ahead of
course, eight on course, four on course with some slippage and
eight show slippage.
3.2 The sections of the Estimate are aligned
with DFID's main Public Service Agreement objectives and targets.
In particular RfR 1 section A and RfR1 section B include the largest
part of the resources we allocate to targets 1 and 2 (progress
towards the MDGs in key countries in Africa and Asia. Target 3
(improved effectiveness of the multilateral system) relates to
resources in section D of the Estimate but also to non-voted amounts
attributed to the DEL for spending through the EU budget; target
4 (reductions to EU and world trade barriers) does not have a
specific resource allocation though resource provision for Aid
for Trade is included in country and multilateral budgets.
3.3 The Autumn Performance Report describes
DFID's action to address underperformance of those PSA targets
which are off-track. These actions often involve the redirection
and better use of resources within regional budgets as well as
improvements in the way in which donors work with partner governments
and with each other. Changes in resources between sectors in Africa
in response to our assessment of progress against the PSAs will
not therefore be reflected in changes to the Estimate. The small
reduction in provision for Africa in this Estimate reflects anticipated
slippage on programmes rather than any change in priorities and
there is no change in our plans to spend £1.25 billion in
Africa in 2007-08.
4. DEPARTMENTAL
EXPENDITURE LIMITS
4.1 As announced in a written Ministerial
Statement, DFID's DEL has increased by £57,216,000. Changes
in the Resource DEL during the year are shown below:
| DFID RDEL (£ million)
| Voted | Non-Voted
| Total |
| In Main Estimates | 4,260 |
701 | 4,961 |
| Additions from EYF and Reserve | 77
| | 77 |
| Transfers from non-voted to voted | 16
| (16) | 0
|
| Transfers to OGDs | | (20)
| (20) |
| Total changes | 93 | (36)
| 57 |
| Total in this Estimate | 4,352
| 665 | 5,018 |
| | |
|
4.2 Outturn against RDEL in previous years and the RDEL
budget for 2007-08 is shown below:
| RDEL (£ million) | Voted
| Non-Voted | Total
| Outturn | Variance
|
| 2003-04* | 3,034 | 872
| 3,906 | 3,705 | 191
|
| 2004-05 | 3,294 | 608
| 3,901 | 3,802 | 99
|
| 2005-06 | 3,871 | 627
| 4,498 | 4,486 | 12
|
| 2006-07 | 4,353 | 665
| 5,018 | | |
| 2007-08 | 4,548 | 711
| 5,258 | | |
| | |
| | |
* The underspend on provision in 2003-04 includes an
exceptional accounting credit of £85 million; budgets and
outturn restated for re-classification of CDC capital charge from
DEL to AME.
5. END YEAR
FLEXIBILITY
5.1 DFID's stock of EYF represents the balance of underspends
on voted provision in previous years. The available stock is adjusted
for under and overspends on the non-voted DEL provision for spending
on development from the EU budget (these are calculated in arrears
when EU accounts are available). This adjustment reduced the EYF
stock available at the start of 2006-07. Of the resulting available
stock (as published in the Public Expenditure Outturn White Paper)
the amounts drawn down into this Estimate and balance remaining
are as follows:
| Administration |
Programme | Total
| of which near cash |
| At 1 April 2006 | 30.000 |
91,804 | 121,804 | 49,333
|
| Drawn down | (30,000) | (47,077)
| (77,077) | (47,077) |
| Balance | 0 | 44,727
| 44,727 | 2,256 |
| | |
| |
| | |
| |
This represents underspend on DFID votes from the Global Conflict Pool. This is available only for draw down on Global Pool spending managed by FCO.
| | | |
|
6. ADMINISTRATION COSTS
LIMIT
6.1 The table below shows outturn against the Administration
Costs Limit (ACL) in previous years and the ACL for 2006-07 and
2007-08:
| £'000 | Administration Budget
| Outturn |
| 2003-04 | 214,816 | 195,955
|
| 2004-05 | 232,024 | 212,638
|
| 2005-06 | 238,981 | 221,952
|
| 2006-07 | 265,012 |
|
| 2007-08 | 232,000 |
|
| | |
6.2 The ACL for 2006-07 was originally set at £235
million. In this Estimate this has been increased by £30
million of non-cash EYF drawdown and by £12,000 near cash
by transfer from the Cabinet Office for purchase of legal services.
The total amount of the addition has been added to central programmes
(RfR1 section G).
6.3 The non-cash increase in administration costs is
to allow for an accounting provision which may be needed for a
property formerly occupied by DFID's scientific agency. We are
negotiating the disposal of this property; we may need to make
an accounting provision for the difference between our book cost
and the disposal value. The non-cash increase in the DEL will
allow us to make this charge in this year's account if this proves
necessary.
Richard Calvert
Director Finance and Corporate Performance Division
20 February 2007
| 
