Written evidence submitted by ActionAid
DFID'S APPROACH
TO ASSESSING
THE EFFECTIVENESS
OF AID
AND THE
ROLE OF
DFID'S NEW
AID WATCHDOG
1. ActionAid welcomes this inquiry into DFID's
approach to assessing the effectiveness of UK aid. ActionAid believes
that aid is effective only when it is truly available for poverty
reduction and when it supports countries to develop and implement
aid exit strategies, which reduce aid dependency over the long
term.
2. With only five years to press towards achievement
of the Millennium Development Goals (MGDs), now is a critical
time to examine DFID's approach to assessing its aid effectiveness,
and identify priorities for the future. We welcome the Coalition
Government's focus on this area. Through MDG8, donor countries
committed to increase aid volumes, improve aid effectiveness,
and provide debt relief. These targets recognised that without
more and better aid delivered for the primary purpose of poverty
reduction, poor countries will not make the progress necessary
to achieve the MDGs.
3. The 2010 OECD DAC peer review of UK development
assistance praised as DFID a model for other donors in its efforts
to reduce poverty and delivering high quality aid.[1]
The UK must continue to provide international leadership towards
the South Korea High Level Forum (HLF) on Aid Effectiveness planned
for late 2011. This HLF will be a key opportunity for the UK and
other donors to establish a renewed focus on results, transparency
and ensuring aid represents value for money for poor women and
men.
4. ActionAid's experience is that efforts to
improve the impact of UK aid have become business as usual in
some contexts which is very welcome, but that a commitment to
aid effectiveness must remain an organisational priority if concrete
poverty reduction objectives are to be realised which allow southern
governments to reduce their aid dependency in the future, and
if the UK is to retain its international leadership status in
this area.
TRANSPARENCY CRITICAL
TO IMPROVED
AID EFFECTIVENESS
5. ActionAid has long campaigned for citizens
in poor countries to have information about aid provided in their
name. We welcomed the Government's announcement of an Aid Transparency
Guarantee and that an independent aid watchdog will be established.
We also recognise the UK's continued leadership in the International
Aid Transparency Initiative. These announcements must build on
and complement both each other and the existing mechanisms designed
to support improved aid effectiveness and impact through improving
transparency. This will hopefully establish a new standard of
openness and encourage scrutiny by citizens in countries receiving
UK aid, as well as assuring UK taxpayers that aid is reaching
the poorest.
6. For example, ActionAid Cambodia and the Cambodian
NGO Forum on aid bought local NGOs, INGOs, trades unions, community
members and Buddhist organisations face to face with international
donors to scrutinise donor behaviour and to engage with the Cambodian
government on its own use of aid. The NGO Forum remains active
in discussions with government and donors on the quality and use
of aid, which has supported progress in improving aid quality.
7. Leading donors - including DFID - signed the
Paris Declaration on Aid Effectiveness in 2005, committing to
improve the quality of their aid in line with five principles:
country ownership, mutual accountability, donor harmonisation,
alignment with national priorities, and managing for results.
They agreed, amongst other things, targets for the amount of aid
reported in recipient government budgets and to improve the timeliness
of disbursements against budgeted expenditure. The UK is the top
performing G8 donor in terms of levels of aid reported on budget,
and has made real strides in improving the predictability of its
aid against forward budgets. Subsequently, at the Third High Level
Forum on Aid Effectiveness in Accra, Ghana, in 2008, the UK committed
to provide rolling three-to-five-year forward expenditure and/or
implementation plans for all UK aid. DFID has yet to publish this
information on forward plans.
AID TRANSPARENCY
IN THE
INTERNATIONAL DEVELOPMENT
ACT (2006)
8. DFID support to the International Aid Transparency
Initiative has been central to a greater donor commitment to transparency,
and DFID's project information database has started to demonstrate
ways in which donors can make information about their aid more
accessible, particularly to their own citizens.
9. The International Development (Reporting and
Transparency) Act (2006) requires DFID's Minister to report annually
on specific aid effectiveness practices. This annual report is
another important contribution to improving transparency and allowing
public and parliamentary scrutiny of DFID progress, however there
are opportunities to press for improvements in the quality of
information DFID provides in line with this obligation, and through
the proposed Aid Watchdog.
10. The 2006 Act requires DFID to report on progress
in specifying future allocations of aid and promoting better management
of aid. In its 2009-10 report DFID provided information on the
predictability of its poverty reduction budget support (see below
for further discussion of DFID budget support) allocations to
14 countries. While ActionAid welcomes this information, DFID's
accounts show that PRBS accounts for only 11% of DFID's total
spending which means that information on the predictability the
vast majority of DFID spending has not been provided.
11. ActionAid's experience is also that DFID
has not consistently provided accurate and timely forward spending
plans in southern countries. Lack of information about future
aid volumes makes DFID aid unpredictable which reduces its value
to southern governments by undermining long term planning and
creating financial uncertainty.[2]
It also prevents citizens from tracking budgeted against actual
spending. ActionAid's local partners repeatedly tell us that a
lack of information remains a major challenge to holding governments
- and donors - to account for aid spending and results.
Questions
- · When
will DFID begin publishing forward spending plans for all UK aid,
in line with its Paris and Accra commitments to report spending
on-budget and provide rolling three- to five-year forward expenditure
and/or implementation plans?
- · What
requirements are there for DFID to consult with national governments
and citizens in southern countries for the development of national
forward spending plans?
- · How
will the Aid Transparency Guarantee ensure that all planned and
actual UK Aid spending information is publicly available to citizens
in an accessible, comprehensive and timely format?
AN AID
WATCHDOG FOR
ALL ODA AND
WITH SOUTHERN
REPRESENTATION
12. ActionAid welcomes the new independent Aid
Watchdog proposed by the government. It will be important that
the Watchdog is mandated to scrutinise all of the Government's
official development assistance, not just ODA administered by
DFID. It is crucially important that all ODA spending government
departments are held to the same standards as DFID. For this reason,
ActionAid also believes that the findings and recommendations
of the planned Watchdog must be acted on across government departments.
13. The composition and workplan of the Watchdog
will also be critical in ensuring that the Watchdog is properly
focussed on ensuring that ODA is delivering results and value
for money in recipient countries Ensuring that the Watchdog's
commissioners and workplan are informed by, and include representatives
from, southern countries will ensure that the views and experiences
of poor people and recipient country governments are being accounted
for.
Questions
- ·Will
the new Aid Watchdog be mandated to scrutinise all ODA spending;
not just aid managed by DFID?
- · Will
the Watchdog membership include southern representation so that
the views and experiences of poor people and aid recipient governments
are taken into account?
- · What
measures will be put in place requiring government departments
responsible for ODA budgets to act in response to the Watchdog's
findings and recommendations?
MORE PROGRESS
NEEDED ON
TECHNICAL ASSISTANCE
14. The International Development Act also requires
that DFID's aid remain untied and ActionAid welcomes the Coalition
Programme undertaking that UK Aid will continue to be untied.
A 2009 OECD DAC report shows clearly that only the UK, Luxembourg
and Norway have formally fully untied their aid, while highlighting
that tying aid reduces value for money by unnecessarily increasing
the cost of goods, services and works by an average of 15-30%.[3]
15. ActionAid continues to call for UK progress
on the de facto untying of all UK official development
assistance, including technical assistance. The same OECD DAC
report showed meant that over 80% of consultancy contracts awarded
still go to UK firms.[4]
A planned 2007 review of DFID's use of technical assistance has
never been implemented, meaning that DFID has never investigated
whether its use of technical assistance represents value for money
spending or is effective in southern countries.
Question
- · Will
DFID review its use of technical assistance to ensure that it
represents value for money, and that its technical assistance
is demand driven and country-led?
EFFECTIVE AID
SUPPORTS NATIONAL
DEVELOPMENT PRIORITIES
16. In preparation for the next South Korea HLF,
DFID will need to look again at the effectiveness of various aid
modalities, including budget support. Budget support is another
area where the UK has been a global leader, recognising that aid
provided directly to governments committed to poverty reduction
is the most effective - and efficient - way of supporting national
development strategies at scale over the long term. ActionAid
favours forms of development finance which enable countries to
drive their own development strategies and priorities, and therefore
favours budget support where countries have a commitment to poverty
reduction and to transparent public financial management. This
can support long term development albeit in a way which may require
more effort around transparency and attribution in the short term.
17. Donors published their first independent
evaluation of budget support in 2006. This found that budget support
can be an effective way of supporting national poverty reduction
strategies and building developing country government capacity
- in Burkina Faso, Rwanda, Mozambique, Uganda and Vietnam budget
support was associated with more resources being made available
for service delivery, a reorientation of public expenditure in
line with government's policy priorities and better predictability
of funding. It was also found to have positive impacts on public
financial management. In addition, it found that budget support
had a positive impact in terms of the overall quality of donor
aid provided and on the efficiency of resource use by developing
governments - this is in part because recipient governments can
follow their own standard procedures rather than a large number
of differing donor ones.
18. At the same time the authors cautioned that
donors shouldn't rush to adopt budget support in all contexts,
identifying political risks associated with it.[5]
Critics have focused on these political risks, despite budget
support remaining less than five percent of global ODA. On the
basis of our own experience in countries receiving DFID budget
support ActionAid shares some of these concerns. The criteria,
for example, upon which budget support (and other aid) will be
disbursed or withdrawn from particular countries, should be clear
and transparent to recipient governments, parliaments and civil
society.
19. It will also be important for DFID to put
in place mechanisms which provide for information from these accountability
and monitoring activities to influence DFID budget support allocations,
and clarify when aid will be changed from budget support to other
modalities. Some of the strongest criticisms of DFID's use of
budget support have concentrated on its continued use despite
violations of agreements governing budget support arrangements
(Memorandum of Understanding) signed with recipient governments,
for example in cases of human rights violations or misuse of funds.
20. ActionAid's own research (2006) has shown
that budget support has supported national poverty reduction strategy
dialogue between governments and civil society, but that DFID
contact with civil society has decreased in favour of increased
policy negotiation with national governments. While in part designed
to reinforce domestic accountability relationships, these changes
were particularly challenging for local NGOs who were not able
to fund their valuable service delivery activities and often lacked
the skills to engage in policy dialogue and monitoring at local
and national level. Five years on, nascent budget tracking and
accountability forums are emerging at local and national levels
in southern countries but weak accountability mechanisms and capacity
mean that these efforts still need support.
21. ActionAid therefore welcomes the government
commitment that an amount equal to five per cent of the value
of budget support will support civil society, media and non-executive
budget accountability and monitoring in recipient countries. Our
own experience is that supporting poor and vulnerable communities
with increased economic literacy and budget tracking skills is
a powerful way of enabling them to hold their governments and
donors to account for the use of aid money.[6]
It will be important for the intended recipients of these funds
to have a say in how they are designed and administered.
Questions
- · What
steps will DFID take to establish feedback loops so that information
that may affect budget support payments can be gathered and acted
upon?
- · What
plans has to DFID publically consult on planned guidance for budget
support accountability funding so that organisations for which
the funds are intended can provide their views on design and administration?
1 http://www.oecd.org/document/52/0,3343,en_2649_34603_45620020_1_1_1_37413,00.html
Back
2
See ActionAid's Real Aid report, Page 27 for further research Back
3
Untying Aid: is it working, Synthesis Report, 2009, OECD DAC Back
4
IBID page 17 Back
5
http://www.oecd.org/dataoecd/42/38/36685401.pdf Back
6
ActionAid's Economic Literacy and Budget Accountability in Governance
programme supports communities around the world to scrutinise
and hold local and national government to account for budgets
and spending. When women in Jahadi village, Nepal, came to know
of an allocation for women's empowerment in their village development
council (VDC) budget they approached the Council secretary to
ask how the budget had been spent. They forced the secretary to
admit that the budget had already been spent on other development
works and demanded that the budget allocated for women's empowerment
be properly spent The women of Jahadi are now keeping a watchful
eye on the VDC to ensure that women benefit from the budget.
Back
| 
