To be published as HC 1681-i

House of COMMONS



International Development Committee

The Work of ICAI – December 2011

Tuesday 13 December 2011

Graham Ward

Mark Lowcock

Evidence heard in Public Questions 1 - 84


1. This is a corrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.

2. The transcript is an approved formal record of these proceedings. It will be printed in due course.

Oral Evidence

Taken before the International Development Committee

on Tuesday 13 December 2011

Members present:

Malcolm Bruce (Chair)

Hugh Bayley

Mr Sam Gyimah

Richard Harrington

Pauline Latham

Jeremy Lefroy

Mr Michael McCann

Chris White


Examination of Witnesses

Witness: Graham Ward, Chief Commissioner, ICAI, gave evidence.

Q1 Chair: Obviously we know who you are, but could you just introduce yourself formally for the record?

Graham Ward: Thank you, Chairman. I am Graham Ward, the Chief Commissioner of the Independent Commission for Aid Impact.

Q2 Chair: Thank you for coming in again. Effectively we are now on the next phase of reality in terms of reporting. You have concluded and published four reports, and obviously we will be questioning you about them. Perhaps just as a general overview, what do you think you have learnt in the process of producing those reports, and has it given you any inclination on the basis of what you have learnt to do anything different as you approach the next round?

Graham Ward: Thank you, Chairman. As you might expect, we have learnt several lessons from the first six months of our full activity-as, of course, we are doing this for the first time. One of the main lessons is that the commissioners feel it would be more useful to do fewer studies but in more depth.

You will recall we originally envisaged producing up to 20 reports a year, but, having produced this first set of reports, we have now revised that estimate. We now expect to produce about 12 reports in the first year. That is because we have a better understanding of the time it takes to complete a review in the depth that the commissioners require to ensure that questions of effectiveness and value for money can be answered properly.

We may wish to publish more than 12 reports in subsequent years, but we will want to monitor the balance between the time, the cost and the quality before making those sorts of decisions.

Chair: Okay.

Graham Ward: Sorry, there are some other lessons as well, if you would like.

Q3 Chair: Yes, but if I give you this supplementary you can take the two together. For those of us who have to process them on top of everything else, they have the virtue of being short and snappy reports, if they do the job. But on the other hand, people can say they are, in the quote I have here, "quick and dirty"; in other words they are too short, too concise. It does not tell you how much went into the report. You have a policy of having a short report, but you do not know how many person days were involved. I do not know whether you can take that supplementary with what you were about to say about the lessons that have been learnt.

Graham Ward: I can certainly tell you how many person days were involved in terms of the different reports. I hope that they are not dirty; we were certainly not quick in putting them together. ICAI’s Approach to Effectiveness and Value for Money was 99.25 days; DFID’s Approach to AntiCorruption was 287.25 days; DFID’s Climate Change Programme in Bangladesh was 144 days; and DFID’s Support to the Health Sector in Zimbabwe was 161.5 days. Those are the numbers of days that were taken by the contractor to do the fieldwork. There was then, of course, a considerable amount of input that came from ICAI’s own secretariat and from the commissioners personally.

Q4 Chair: You published the terms of reference for the reviews after the publication of the reports themselves, and you are reporting to us. Will you give us the terms of reference in advance in future, at least in draft form?

Graham Ward: I think we would be very happy to look at ways in which the Committee could be more involved in what we are doing, and we could look at a number of options. For example, you could review the work plan and, based on the experience and expertise of you and your fellow members of the Committee, input through discussions with the Committee clerks and our staff-or face to face with me if you would prefer to do that-in relation to what should be done on particular reports. We would be very happy to have regular meetings together to discuss what reports are coming up, what elements we think we will be focusing on and what elements you would like to see a focus on as well.

It would be possible, of course, to send draft terms of reference for formal comment, but it would be appropriate for us to consider together whether that would make the process longer or cause difficulties in terms of the publication schedule. It also occurs to me that that’s quite a late stage at which to put together our plans. You may prefer to be more involved at an earlier stage than that. The earlier one gets meaningful input into the planning process, generally the better it is.

Chair: All we are really looking for is compatibility, as well as shared experience. It would be unfortunate, for example, for us to say, "Why did you not do this?" after the event, as opposed to being able to say, "Look, it would be really helpful if you did this or that." But you have indicated a number of mechanisms; we will have to work those out to find the most effective way of doing it. We have quite a lot of questions, so I am going to bring my colleagues in now so we can get through them.

Q5 Richard Harrington: Good morning, Mr Ward. When you first met this Committee we discussed at some length the system you have taken on of basically subcontracting the work out to KPMG, I think, who were a conduit to other contractors. I would like to ask you, please, how satisfied are you with the contractors’ work to date, and are you pleased with the way it has gone? Do you feel that particular system of subcontracting is working?

Graham Ward: Yes, overall we believe the relationship is working well: the contractor consortium has been responsive to the requests we have made of them and the instructions we have given to them. Their people have been enthusiastic and hard-working. It has taken a little bit of time for the contractor to understand exactly what we as a board of commissioners are looking for, our thought processes, but I think that is normal in any new working relationship. Things are now working together very well.

Just to make sure we got the right tone and the right quality into our reports, we have invested a considerable amount of time as commissioners individually in drafting the first four reports. Again, that was necessary to set the right tone for the future. At the beginning there were some challenges around the right mixture of skills in the review teams: did they necessarily have the right experience? We have addressed that with the contractor, and we are now confident we have the right balance of development and audit skills in the team for each report.

I should also mention an administrative matter: at the beginning some three months-worth of monthly contractual payments for the management fee, which is part of the consortium contract, was suspended because the contractor had failed to deliver the first quarterly report, as was required by the contract. That report would include work that had been undertaken and costs that had been incurred in the previous quarter, and work to be undertaken in the forthcoming quarter, and the description of outputs, costs and time frames that are expected. We did not suspend the payments because of a lack of confidence or because of quality issues, but the contractor was contracted to deliver those; they had not delivered them, so we withheld payment until such time as they had.

Q6 Richard Harrington: That is interesting, but I know that you cannot win, because if you have a whole load of civil servants and everything, the press cry "bureaucracy" and all this kind of thing. My instinct is it is a good system, but from your point of view-and I have been in the same position commercially with contractors-how do you know whether they are doing a good job or not?

Graham Ward: First of all, we approve the terms of reference; they provide an inception report, which gives us their understanding of what the task in hand is; we discuss that inception report as commissioners; and we then discuss it with the contractor. There is then quite a lot of interaction between the members of the consortium who are carrying out the work and our staff, just getting progress reports as to what is going on and any issues that are arising.

Then they come to us when they have completed the fieldwork and share the findings of the fieldwork with the commissioners. We look at what the possible conclusions, recommendations and rating, or series of ratings, within the report might be. We debate that together and take the opportunity in that meeting to drill down and quiz them on the quality of the evidence they have for the conclusions that have been drawn and the recommendations that are being made. That gives us a pretty good feel.

In respect of one of the reports, the Zimbabwe report, one of the commissioners, Mark Foster, was in Zimbabwe at the same time as the field team, so he was able to observe what the field team was doing in person at the time.

Q7 Chair: He happened to be there on other business, or was there in his capacity as commissioner?

Graham Ward: He happened to be there-close by, anyway-on other business, and went there in his capacity as commissioner, but did it pro bono.

Chair: That is fine; it is just for context.

Q8 Richard Harrington: On that subject, are the contractors on a fixed price for the job, or is it billing on a time basis?

Graham Ward: What happens is that, after we have given them the terms of reference and they have come back with the inception report, part of the inception report we receive is their estimate of the staff mix, the time to be taken and the out-of-pocket expenses that are to be incurred. We then go through that; we challenge the numbers put up to us and negotiate what they are. Once we have reached agreement with the contractor at that stage, they are then held to that as a maximum fee, but they have undertaken to us that, if they do it in less time, we will get the benefit of any reduction that comes through to that. We hold them hard to these things; I think we press them pretty hard.

Q9 Richard Harrington: Finally on that theme, how much has the contractor been paid to date-the top contractor or the individual ones underneath, if you prefer?

Graham Ward: I have some numbers here. The cost, excluding VAT, for the first four reports together is about £645,000. The management fee is about £26,000 per month, excluding VAT.

Q10 Richard Harrington: Per month?

Graham Ward: Per month, the £26,000.

Q11 Richard Harrington: A year has gone by, so-

Graham Ward: They were appointed in May after our official launch, so it is not quite a year that has gone by yet.

Q12 Richard Harrington: The whole thing-I suppose the VAT goes to the Government anyway, so let us take that off-would be about £750,000.

Graham Ward: Of that order, yes.

Q13 Hugh Bayley: Did drafts of the reports get shown to officials at DFID before they were published?

Graham Ward: As part of the framework, we will pass drafts of the report to DFID officials for fact checking. We are very clear to them that it is only fact-checking and not a negotiation of opinions or any of the evidence.

The process is that they get it, and they come back to us if they believe there is a doubt in terms of any of the facts or if they believe we have breached the Government’s security requirements. What they have to do is fill in a template-I have here a copy of the template we use-that says what they believe is wrong; where in the draft report it is; what they believe should be amended and why; and the evidence for what they are putting forward. That then comes back to the commissioners. The commissioners themselves will have seen the report that goes off to officials. The commissioners then form a view and take a judgment as to whether to accept any of the amendments that are proposed. That then becomes the final report, which is what was sent to the Committee.

Q14 Hugh Bayley: Thank you, I understand the process; what I do not understand is how much change results from the process. Are you talking about a couple of tables and half a dozen words? How many amendments were made? Use one of your reports as an example, if it is a typical example.

Graham Ward: I would guess maybe around 10, but we are looking at things that are, in most cases, points of detail-the date of a paper referred to in a reference or something like that.

Q15 Hugh Bayley: One of the things I found useful about the report-or three of them-is your traffic light system.

Graham Ward: Thank you.

Q16 Hugh Bayley: Was there a proposal from officials to change the traffic lights?

Chair: Would the traffic lights be in the report that was shown to them? Those are not facts; those are your judgments.

Graham Ward: They were in the report. The framework agreement says that we should pass the whole report across, and so we have stuck to the terms of that. But we were not under any pressure; there were no requests to change any of the traffic lights.

Q17 Hugh Bayley: Did you have meetings with officials to discuss their points of fact, or was it a paper-based process or an electronic process?

Graham Ward: I certainly had no meetings in respect of that. It was a paper-based process.

Q18 Hugh Bayley: Finally on the extent of DFID’s input, were these reports referred in draft to Ministers? Perhaps you do not know that; it is a question for the Permanent Secretary.

Graham Ward: I do not know whether, once we have given it to DFID officials, it went to Ministers as well.

Q19 Hugh Bayley: You told us when you came to see us in October last year that you would publish work plans and ICAI’s reports directly to its website without getting them cleared, in any sense, by the Department, so there would be a particular strand of transparency that comes from that. Do you think this process of factual checking is consistent with that view you held a year ago? In other words, do you think that you, ICAI, are perceived as being too close to DFID, or do you think there is a danger that you will be perceived as being too close to them?

Graham Ward: I do feel that it is consistent. We have not in any way negotiated or even discussed conclusions prior to what you have received. The process of doublechecking facts is something-as far as I understand it-that is universal in any reports issued in the public sector; it is certainly pretty well universal practice in the private sector in issuing reports.

We do publish direct to the website; we do not negotiate. We are independent: constitutionally we are independent, and personally. The commissioners are a very independent-minded group of people.

Q20 Chair: The test might come, of course: if you send them an "all red" report, you might get a different response.

Graham Ward: I might, but they will not change our resolve, Chairman.

Q21 Jeremy Lefroy: Good morning, Mr Ward. In the memorandum of understanding, DFID said that they would respond to your reports within three weeks. They were published exactly three weeks ago. Have they responded?

Graham Ward: They have: I received a response from the Permanent Secretary yesterday morning.

Q22 Jeremy Lefroy: First of all, have they accepted the recommendations on all of them, and if not, which ones have they not accepted, and have they given a timetable?

Graham Ward: They have accepted the recommendations. You may have seen the Secretary of State’s response to the publication of the reports, where he undertook that all of our recommendations would be implemented. That has been followed through by officials and the Permanent Secretary. There is a time line in respect of the detailed way in which the Department will implement the recommendations.

The response from the Department is not so much about whether they are accepted or not, because the Secretary of State’s statement has dealt with that issue; it is how the recommendations will be implemented, and does include time lines. The amount of time to implement particular recommendations does vary from recommendation to recommendation, as the amount of work involved varies from recommendation to recommendation.

Q23 Jeremy Lefroy: Thank you. How radical do you consider the recommendations to be? Do you think they were things the Department was working on anyway, or were they a mixture of the two?

Graham Ward: It was a mixture of the two. There are some things where the Department had perhaps already moved part way towards the sort of thing we were recommending. There were others where we have taken them to a new plane.

Q24 Jeremy Lefroy: Could you give an example of that, of where you have taken them to a new plane?

Graham Ward: Probably the AntiCorruption report would be one example where we have said there really is a need to have a full co-ordination in respect of risk assessment, risk management, anticorruption programming and fraud response. That is a new level of engagement. There are also recommendations within the Bangladesh report on the way in which those carrying out work on the Department’s behalf should be monitored and the way in which the arrangements with them should be established in the first instance. That would be a couple of examples of new things.

Q25 Pauline Latham: Your report recognises that DFID already have several measures in place to mitigate the likelihood of corruption in the countries considered to be at risk. How precisely would your proposal for an explicit anticorruption strategy for each high-risk country differ from existing arrangements, and what added value would it bring?

Graham Ward: What we found was that there was an awareness of the risks of fraud and corruption, but there was a lot of scope for much greater emphasis on the way in which anticorruption measures are taken and implemented. There is a need for more assertiveness on the part of the Department in respect of these things, especially given the increase in funding to fragile states, which we have started to see already and is planned for the future.

The current organisation is fragmented, as I mentioned in response to the question from Mr Lefroy. If we got a response that is much more coherent and comprehensive, it would be much more effective in managing the corruption risks. In one of the points, for example, at the time we did the report there was no single senior person with responsibility for doing this. That is something we believe should be put in place, and the Department has in fact accepted that and indicated that they have already nominated somebody to take that responsibility.

We expected to see a more detailed assessment of specific corruption risks, country by country, because at the end of the day these things are happening on the ground. You cannot manage and fight corruption in the general case: it has to be in the specific case. That assessment would describe the specific risks in particular sectors in particular countries, with a detailed analysis of the types of corruption expected in that country and the patterns of corruption being experienced in that country. Then we would expect to see those things being brought in to meaningful plans and actions for detailed anticorruption measures.

Q26 Pauline Latham: The Secretary of State recently said that there was going to be zero tolerance of corruption. Knowing that many countries that we deal with do have corrupt practices, do you think that was a sensible approach, or do you think it is not dealing with reality? If it is not dealing with reality, how are we going to get a zero-tolerance approach when it is happening all the time?

Graham Ward: It is the right aim. I mentioned at my preappointment hearing that I have been to work in more than 60 different countries, and I am not aware of any where there is, in fact, no corruption at all. Even the UK is numbered in the thirties in Transparency International’s Corruption Perceptions Index. Every country has more to do, but the approach has to be to have zero tolerance; it has to be to plan to control the funds DFID is providing in a way that will prevent them being used for corrupt purposes, to establish what the possible sources of corrupt use would be, and to put in safeguards to try to minimise the incidence of corruption.

Q27 Pauline Latham: When we give multilateral or bilateral aid, how can we be sure that the organisations we give money to have standards as high as we would like?

Graham Ward: Again, that is an area where our recommendations were indicating that there is more to be done. There are rights in many of the contracts DFID has with these people to enable them either to receive information in respect of what we loosely call audit activities, or indeed possibly to send in their own. On the observations we have made, the number of occasions on which those rights are exercised is rather small. We believe those things should be followed up much harder. We believe that all the contracts like this should include rights of access to reports that are produced either by people considered suitably independent and competent, and appointed by the agency doing the work, or directly by somebody appointed by DFID, perhaps in conjunction with other people providing funding for a particular programme.

Q28 Pauline Latham: Finally, should DFID publish its fiduciary risk assessments, or at least make them available to this Committee?

Graham Ward: The danger of publishing a fiduciary risk assessment is that it is a good set of signposts of what you have and have not spotted for the people who might seek to defraud you, and could be seen by criminals as a route map of how better to do their role as perpetrators of crime. I would expect that they should not generally be published. In terms of making them available to the Committee, you know your rights to information better than I do.

Q29 Chris White: Good morning, Mr Ward. Just taking Mrs Latham’s question a little bit further, with regard to our external delivery partners, and making sure we have a focus on levels of corruption, what extra measures would you put in place to ensure that due diligence was done as effectively as possible, what estimate would you make of the cost that might be associated with that due diligence, and how proportionate do you think it would be?

Graham Ward: When an intervention is being considered and planned, there should be a proper comparison with the people who could be used as part of the implementation. That should take into account their capabilities, the costs associated with it, the systems of control that they will be exercising, and the way in which they will report on whether or not those systems of control have been implemented. That is all part of the comparison process.

At the time the projects we were looking at were carried out, that was rather weak in terms of the way DFID was operating. Over recent months, new processes have been introduced as part of the investment committee processes within DFID which do now start to incorporate those sorts of processes. I do not have any feel as to how much it might cost them to do that process; but if we look at what would be the cost of management time in the centre here, and at the scale of the money being made available to different countries, I would be amazed if it were not a cost-effective measure.

Q30 Chris White: Do you see that the issue of corruption or anticorruption would feature as a high priority in each of your reports?

Graham Ward: What we are planning to do every time we go out to a country is to have a very keen eye open to looking first at the system DFID has within that country in terms of managing its corruption risk. We will keep a very keen eye out to see if we can identify any corruption taking place. What we will not be doing is carrying out full forensic audits in every country we visit. The scale required by that would be huge, both in time and money. That would take us beyond the scope of the budgets that have been made available to us. Looking for these things, in my experience, should be a management function, and what we should be doing is assessing how well the management of the Department is addressing the issue.

Q31 Chris White: Just a last one-and it might not be something you can answer-do you know how many people are employed by DFID specifically in the field of corruption and its eradication?

Graham Ward: Not off the top of my head, Mr White. Perhaps the Permanent Secretary can help later on.

Chris White: That is probably not a fair question to ask you.

Q32 Chair: We are going to go through some of the reports specifically now, starting with the Zimbabwe report. The Committee visited Zimbabwe shortly before the election, in fact. Therefore what you discover is of some interest to us. You are generally positive, as we were, about what DFID is doing in the health sector, but you raised concerns, as we did, that the cost of implementing the programme and the bureaucracy associated with it meant that you would indicate 13% of charges as administrative costs. In the table in your report, you have the overhead proportion of costs for different implementing partners: specifically UN agencies, 11% to 12%-that is general-and specialised, 13%; PSI 12%; Elizabeth Glaser Foundation, 12%; Crown Agencies, interestingly, 4.25%. Did you make any assessment of how those differences arose and how those charges arose, and what implications it has for the cost-effectiveness of its programme?

Graham Ward: Thank you, Chairman. The facts are as you have just read out. We were not able to identify either a consistency of definition of those sorts of costs, or why it was that they should differ from each other. You will have seen that our recommendations include trying to agree a consistent definition of what administrative costs are; looking to see what should be included within them and what should not; and then making sure that, as part of the management process of the contracts, efforts are made to keep those costs as low as is compatible with the quality of service delivery required.

Q33 Chair: We would certainly expect your commission to pursue this quite consistently over time, because DFID is under the constraint of keeping its admin costs to 2%, yet provides very substantial amounts of its budget to other agencies that, as you see, have overheads of 12% or 13%. But your point about definition, of course, is crucial as to how the costs are allocated. I do not want to suggest that the 2% costs in DFID are a fudge, but there is room for manoeuvre in terms of how costs are allocated and what you regard as core overhead or programme budgets and so forth. It is very difficult to compare like with like sometimes. Given that the Department is taking a lead on evaluation of multilateral agencies and so forth, is there a scope for DFID internationally to take a lead in trying to get a definition and a common standard that will enable you, the commission, and we, the Committee, and hopefully the Department as well to determine what is the most cost-effective way of delivering aid and development assistance?

Graham Ward: Yes, I think there is scope for them to take a lead in respect of that. They have responded positively in implementing the recommendation we have made, and on the back of the work they do as part of implementing that response, that does put them in a position to take-

Chair: Pauline.

Pauline Latham: When he has finished.

Graham Ward: No, that is fine.

Q34 Pauline Latham: I was going to say, we talk about value for money and cost-effectiveness, but there has to be a recognition, doesn’t there, that for some countries it will not be the same price that delivers the same thing? We have just come back from South Sudan, for instance, which has nothing. It is going to be much more expensive to operate in that sort of environment than it would be in, say, Kenya, which is a much more structured country. Is there recognition within your organisation that you cannot just say, "Delivering a hospital costs that much; delivering the staff costs that much. That is value for money, but, oh my gosh, it costs twice as much in another country. That cannot be value for money"?

Graham Ward: Mrs Latham, there is a very clear recognition within ICAI that costs are necessarily different in different environments. Yes, that point is very much part of our thinking.

Chair: I think we will come back to these issues as they are quite central to the whole costeffectiveness issue.

Q35 Hugh Bayley: In your conclusions on the Zimbabwe report you say that, "DFID has succeeded in safeguarding aid flows, ensuring that no funds passed through the Government of Zimbabwe." How confident are you that no DFID money is funding the Government or its Ministries?

Graham Ward: As part of the work that was carried out on our behalf, we followed through the flow of funds. On the basis of what we examined, we are confident that the funds were being used for the purpose for which they were intended.

Q36 Hugh Bayley: On page 8 of the report you have a flowchart. Do you have it in front of you?

Graham Ward: I do, yes.

Q37 Hugh Bayley: It seems to indicate that DFID and other donors in the consortium are providing money to UNDP, which in turn channels it through the World Health Organisation/Crown Agents, which then goes in its entirety on to the Ministry of Health and Child Welfare. Am I reading the table right, and what proportion of the overall £52 million is channelled to the Ministry of Health and Child Welfare?

Graham Ward: I do not have that number immediately in front of me. May we provide you with a written response on that?

Q38 Hugh Bayley: Please do, but I would regard the Ministry of Health as a Government Ministry, and unless I misunderstand this chart, it seems to conflict with the conclusion that you have reached about funding not going to the Government.

Graham Ward: Let me come back to you with the individual numbers later on, as soon as we can.

Q39 Hugh Bayley: Could I ask a further policy point? Turning back to the recommendations on page 21, at paragraph 3.2 you make the point that funding, as far as you are aware, is not going through the Government of Zimbabwe. Then in the recommendation at 3.3 you comment on one of our conclusions from our report of a year or so before, and then express your own view that "DFID should support the Zimbabwe Ministry of Health to strengthen its capability to manage the health system." Again, there appears to be a contradiction between not funding Government agencies, as a rule, in Zimbabwe and a particular proposal. Are you drawing a distinction between capacity-building within the Department as opposed to funding the programmes that it manages?

Graham Ward: The recommendation at paragraph 3.3 needs to be looked at in the context of when the time is right. Everyone in the room is familiar with the political situation in the country, and the way in which it has been changing and people are proposing that it be changed-or hope it can be changed. When the time is right in the local political context and the UK can have trust in the local political context, then this sort of work becomes relatively urgent, given that, at the end of the day, development aid is looking at a country being able to be selfsustaining in the context of health provision, rather than taking handouts in perpetuity. This must be part of the longer-term plan.

Q40 Hugh Bayley: This is a personal view, but my view as a UK politician is that it is important for Government agencies to operate efficiently, even though the majority of our funding-or perhaps all our funding-goes through NGOs and others who are working in the sector. The fundamental concern of British politicians and the British public is that, if money is spent-British taxpayers’ money-within the Ministry of Health in Zimbabwe, it should be spent wholly and completely for the purposes that we are intending, and that none should be siphoned off for other priorities of the Government, either within the Government or within the party machine. I am sure that would be your approach too, would it?

Graham Ward: It would, and indeed higher up in paragraph 3.3 we do contextualise our recommendation in terms of the political situation stabilising, and that the ability of the Department of Health in Zimbabwe to manage its own affairs is going to be a medium to long-term thing. Yes, we agree with you that this is part of the successful development aid, but we do have to be confident that the money is going to be used properly before it is provided to a department for that purpose.

Q41 Chair: The Committee certainly recognised that the Zimbabwe Ministry of Health was a functionally competent Ministry with, I think I remember them saying, an MDC minister and a ZANUPF Permanent Secretary who had the advantage of having gone to medical school together. We accept that it is functional, but Mr Bayley is making the point we still have to be sure that the money is not siphoned off to other places. Clearly there is no guarantee of that in the present circumstances.

Graham Ward: Absolutely; it is a timing issue, perhaps.

Q42 Jeremy Lefroy: We were concerned to note in your report that only £13 million of the £75 million allocated to the Climate Change Programme in Bangladesh has been spent because of delays in implementation by the World Bank. Having just come back from South Sudan, where there was a multidonor trust fund administered by the World Bank that was seriously flawed in its delivery, we were a little bit concerned about that and wondered whether you could comment on it: why you think it happened, and whether DFID should reconsider its funding through the World Bank in this type of programme.

Graham Ward: You are absolutely right in terms of the delays and the quantification that we identified. We think that part of this is to do with what were changing political circumstances in Bangladesh; part of it was to do with appointment of the right people; and part of it was to do with the way in which authority had not been fully delegated from the World Bank in Washington to the World Bank people in Bangladesh. We also believe that there is a need for DFID to up its game in the context of the way in which it manages people who are implementing projects on its behalf. We note in the report that there is not a single document that sufficiently sets out the objectives, the expected achievements and the time targets in terms of the use of the UK’s money. We recommend that such a document should be put in place.

Although that recommendation appears in the Bangladesh report, it is a recommendation we would expect to have general application to make sure there is a proper contract-in the sense that you and I would understand it as a commercial contract-with all the consequences and the monitoring that comes from that. If implementing partners are unwilling to accept that sort of contract, it does ask questions about whether they should be used or not. We are looking at the Department’s relationship with the World Bank in one of our forthcoming reports. We will be in a better place to provide fuller and better information at that stage.

Q43 Jeremy Lefroy: Thank you. Secondly on that, you will be aware that the recently concluded Durban Conferences set up the Green Climate Fund, which is going to be an enormous amount of money, to which DFID is going to be a very major contributor. Would you therefore consider, based on your experience here, that DFID should be looking to do more in climate change resilience and adaptation bilaterally, rather than through these organisations such as the World Bank?

Graham Ward: As you will know, Mr Lefroy, it is not within our terms of reference to be judging policy issues. I wonder whether that falls into the category of policy issues, rather than the sorts of things we were established to comment on. Maybe it is not proper for me to offer a personal opinion. Certainly as a board we have not considered that issue.

Jeremy Lefroy: You are probably right, so we will ask the Permanent Secretary.

Q44 Mr Gyimah: One of the recommendations you made is that "DFID should support monitoring by local and international civil society organisations of the activities and the achievements of the Bangladesh Climate Change Strategy and Action Plan". Why do you think it is necessary to fund a separate monitoring programme by NGOs of the Bangladesh Climate Change Strategy, and was one of your reasons to establish a general principle or not?

Graham Ward: The reason behind it is that what we are looking for is a system of monitoring in which the people of Bangladesh, as the intended beneficiaries of the programme, and the taxpayers and voters in the UK, as the providers of the fund, can have confidence. We believe that establishing an arrangement of this sort would provide the confidence that is required. You will have noticed, Mr Gyimah, that within our report Effectiveness and Value for Money we put a great deal of emphasis on the involvement of the intended beneficiaries in the evaluation of the effectiveness of programmes. Nobody has a greater interest in the programme being effective than the individual poor person in the country that is the subject of the programme. They are going to be very keen to make sure things are happening properly.

In respect of the second part of your question, we do believe that that is a good system. It is a system that should be considered in respect of all interventions, perhaps alongside other possible systems; but that must always be a good contender as a way of establishing the effectiveness of the programme.

Q45 Mr Gyimah: Thank you for that. There have also been rumours that DFID Bangladesh has a considerable amount of its budget left for this financial year and is searching for ways to spend it. What information do you have on this?

Graham Ward: I have no personal information in respect of those rumours.

Q46 Mr Gyimah: Moving on to Effectiveness and Value for Money, which Mrs Latham touched on earlier in this discussion, you have set out how you define effectiveness and value for money as part of your evaluation studies. Has this exercise brought to the fore any areas of DFID’s work where ICAI would find it difficult to conduct a meaningful evaluation?

Graham Ward: I do not think the study has identified areas where it would be particularly difficult for us to do it. The way in which one carries out an evaluation, and choosing, if you like, from the menus we have provided in that report, depends on the level of maturity of the intervention that is being examined. If one is looking at the early stages of something, it is always going to be more judgmental in terms of the progress that has been made, and it is perhaps more challenging for us to evaluate. If we are looking at a programme that is very innovative in its approach, that will be more challenging for us to evaluate, but we are well prepared to take on these challenges. There is nothing within the ambit of the work DFID is doing that we would consider beyond our making a very good attempt to carry out an evaluation worthy of the name.

Q47 Mr Gyimah: One of the things that struck me is how you define the terms "effectiveness", and "value for money"; they are absolutely critical to the work you are doing. How do your definitions differ from existing ones and why?

Graham Ward: In doing what we are doing, we are not trying to create new incentives for DFID and a conflict of different people setting different types of targets. It is important to set that out at the beginning. But I would say that in common with others, what we do want to see is benefit for individual poor people. We want to see good use of UK taxpayers’ money, and we are looking to take more of an emphasis than many others have taken in terms of an endtoend view. The major emphasis we put on input from individual intended beneficiaries is different for us in terms of the way in which we are looking at things.

In the research we were doing behind this report, we also saw that very often in the past, effectiveness has been in one box and value for money in another. But when we looked at it, we thought of effectiveness as part of the numerator in the value for money fraction. A big part of value must be the effectiveness of the programme. We are looking to integrate the two things in our approach. For example, one of the reasons why we are perhaps spending more time on individual reports than we had thought before we got into this level of analysis is that we see it as being hugely important to integrate the two things.

Where we are different is we have comprehensive criteria with emphasis on intended beneficiaries, and we are trying to report on a relatively short time scale, with the intention of providing information that would be useful, Chairman, to you and your Committee within a sensible time scale, and reports that are brief, easily assimilated and, we hope, clear in our conclusions and recommendations.

Q48 Mr Gyimah: Thank you for that. Moving on from definitions to a process question, what is your relationship with DFID’s internal evaluation department? How would you say you add value to the work they do?

Graham Ward: With respect to DFID’s internal evaluation department, the objective of ICAI is not to add value to them; rather it is to report independently as to what we think about areas that we are examining, and indeed report to you on those issues. When we are looking at a particular programme, our team will liaise with DFID’s internal evaluation people to look at what evidence they have in respect of that area: have they carried out work on that? When was it carried out? How was it carried out? What were the conclusions? That will help to inform the scope of the work we are doing, and may be able to identify for us particular areas of interest that we should be pursuing in more depth.

Q49 Pauline Latham: In your Approach to Effectiveness and Value For Money, you note that you will not have the time to carry out extensive reviews or evaluations, which generally take a significant period of time to reach a conclusion. Now, that is due to lack of resources, but surely you are going to go in and do the quick wins, the easier reports, and not go in and take some really indepth reports because you are committed to doing so many reports a year. Does that mean we will not really know what is happening in depth, and do you think this will hinder the work that you need to do?

Graham Ward: There are a number of points in that question. If we look at the question of depth, I mentioned earlier that we are now planning to publish fewer reports in a year than was thought at the time when I met you just over a year ago and knew less about it, because we want to have the depth in our reports that we believe would be useful. That is one aspect of our approach to that.

The section of the report to which you were referring is essentially techniques of establishing the effectiveness of work. We were looking, for example, at whether we should be getting involved in doing randomised control trials. That is very difficult for us to do in the time scales. One reason, of course, is it is necessary to establish those at the beginning-it is really before a programme has started, and it would be very rare for us to be in that position. Also, it tends to take many years to follow through and find out the results, which is beyond the time scale that would be sensible from your point of view and ours. Maybe you would consider it unhelpful if I said I am just starting looking at this one, and I expect to report on how effective it is, assuming our organisation carries on that long, in 2020 or 2021.

The nature and context of our work dictates that we are looking for things that could be completed in a shorter time scale, but I would not say that depth of analysis and thought is directly proportional to the amount of time it takes to prepare a report. What we are intending to do, and I hope we have achieved it in these, is to have a good, strong depth of analysis and thought in formulating conclusions and recommendations.

Chair: As you said, it is a year since we first met and you started this process. As I said at the beginning, there is virtue in having this kind of report, but that was particularly my view when I saw that, thinking we are going to get 20-plus of them. Clearly what we are likely to get in the future, I guess, is reports like this but occasionally a more substantive report on a particular aspect, if you deem that is justified. Clearly, again, as a Committee we need to determine how, when and if there are things we should follow up or refer back to you. That is still an ongoing process, but following Pauline Latham’s question, clearly there are indications of resources, but you have a lot more resources than we have, and in a sense, to complement the two is the most effective outcome. Maybe we should ask the Permanent Secretary, when he is in front of us in a minute, about the role of the evaluation department in this situation, and how that interacts. Clearly it is not your concern.

Q50 Hugh Bayley: Just a very brief point: you have made a very good start, but what will you be doing to follow up six or 12 months after you receive a response to your reports from DFID, in order to look at how far and how well you think they have complied with the undertakings they gave to change that policy or approach in various respects in response to your report?

Graham Ward: Thank you for that question, Mr Bayley. This, to us, is one of the core aspects of our work. Frankly, we do not believe there is any point in making recommendations unless we follow through and see whether or not they have been implemented. I have here the response from the Permanent Secretary, and the headings in his detailed response are: our recommendation, action to be taken and a target date. At staff level, our staff and DFID’s staff will have contact monthly to see whether progress is being made on track to specific deadlines. We are planning that there will be a meeting between our commissioners and the DFID board a couple of times a year that will focus very much on what has happened in respect of the reports that have been issued and the undertakings given in response to our reports. Also, probably a couple of times a year I will have a meeting with the Secretary of State, which will focus on similar issues. Then we will, as part of our programme, have specific investigations and reports issued to you, looking at what was said would be done and what has actually been done, and what we think about it.

Q51 Chair: Will you be publishing an annual report of your work?

Graham Ward: Yes, Chairman, we are.

Q52 Chair: Clearly, if you publish 10 or 12 reports, what would be interesting is to know what common themes there are, rather than them all standing alone, and whether there are interactive effects that you might want to look into again. But you are going to publish an annual report?

Graham Ward: Absolutely Chairman, yes, and that is good advice as to some of its content, absolutely.

Q53 Chair: Thank you very much indeed. I concur with what Mr Bayley said: it is a good and interesting start, and no doubt it will become more authoritative, perhaps, as there is more experience and more reports are produced. But I would also make the point that the interesting relationship between you and the Department will happen when you come with a report that has red all over it. That will be an interesting test. Thank you very much anyway.

Graham Ward: Thank you very much.

Chair: We will obviously continue to work with you on your programmes.

Examination of Witnesses

Witness: Mark Lowcock, Permanent Secretary, DFID, gave evidence.

Q54 Chair: Thank you very much, Mr Lowcock, and obviously you sat through the first evidence session, so you will understand the flavour of the questions. Again, if I can ask you formally, welcome of course, but could you introduce yourself for the record?

Mark Lowcock: Good morning, thank you very much. I am Mark Lowcock; I am the Permanent Secretary of the Department for International Development.

Q55 Chair: As I said, we have seen this process evolve over the last 12 months, and we have had the first reports, and we have had an opportunity to evaluate them. From your point of view, how has that process worked out? Are you happy with the way the Commission works relative to the Department, or do you think there is any way they could change? What is your view of the quality of what they have done and how valuable it has been to you?

Mark Lowcock: The Government established the Independent Commission for Aid Impact because we believe very profoundly and strongly in the power of independent scrutiny as a means of improving impact and performance. As the Secretary of State made clear in welcoming the first set of ICAI’s reports, we think that view has been vindicated: we have accepted all of the key recommendations, and the Department is motoring away-and we will no doubt come on to this when we get into the detail-in implementing the recommendations.

The arrangements that have been set up are essentially for Mr Ward and his team to mark my work, not really for me to mark Mr Ward’s work. I am a little bit reluctant to be drawn into a debate about quality.

Q56 Chair: I was not going to ask you to mark it; I was just asking if you are comfortable with the way it has worked, in a practical way.

Mark Lowcock: We set in place a detailed set of arrangements on how ICAI would work. I do not have any concerns about whether those arrangements are being followed or not. I would like to make one comment about the content of the set of reports, which is that, from my point of view, it is quite helpful that ICAI have established a very clear methodology for what they mean by value for money. It means there is a predictable environment against which I and the senior management of the Department can task the Department to understand where ICAI will be coming from. That value for money methodology is a helpful bit of the rubric.

Q57 Chair: Has the experience of the last year changed anything you do or the way you do it-you and/or the Department?

Mark Lowcock: There are a lot of things that have changed, some of which arise directly from the interaction with ICAI. A lot arose from the broader set of changes the Government has put in place since it took office. As you know, the establishment of ICAI is just one of the things we have done to try to drive a much stronger focus on results, evidence, analysis, value for money and cost-effectiveness through the Department. Clearly the most direct way in which ICAI are having an impact is in the way in which we respond to the set of recommendations that we now have from the first set of reports. There is a very big culture change going on across the whole of the Department on value for money, evidence, impact. It is accelerated and reinforced by ICAI, but it is part of a broader effort.

Q58 Chair: You have had the first four reports; you have said you are implementing the recommendations. Does that imply that you are happy that the approach has been fair, or does it perhaps imply that ICAI has not been radical enough? In other words, there was nothing very surprising there that you had any difficulty responding to?

Mark Lowcock: That is a difficult question, Mr Chairman. We have accepted all of these recommendations because we are persuaded that they are sensible recommendations that will improve our impact and effectiveness. If over the life of ICAI’s existence over the next several years there is never a recommendation that we decline to accept, that might be grounds for asking whether they are being sufficiently radical and testing enough. We need to find our way through this a little bit. Implementing these recommendations-we will come on to this-is expensive. I am not in the business of allocating staff, time and money to doing things that I judge are not going to improve impact and value for money. These recommendations are ones we welcome and will implement.

Q59 Chair: Informally, Mr Bayley just pointed out to me in your response that you have set a target date for the implementation of recommendations, which is quite an interesting approach. I have two things to say. One is that we might ask you to do the same when you are replying to the Committee’s reports. That might be helpful. But obviously they are variable, so presumably that is a reflection of how organisationally challenging it is, or at least that time is required to adjust to them, which is reflected in the timetables.

Mark Lowcock: That is exactly right. It is a very good management discipline to have a timetable against which we will implement the recommendations. Some of the recommendations are completely within our control to achieve; others are less so. Some require us to work with others, persuade others, and some require a bigger organisational effort than others. The time frames we have given reflect those things. We have a management process inside the Department, and we will also be reporting to ICAI to detail whether we are on track with the timetable, which we have set out to you and them, that we will implement these recommendations on. Staff across the Department know-because I tested this before I signed off the recommendations and the timetable that I sent you yesterday-that I attach a high importance to us delivering these things at the time we have said we will.

Chair: Richard Harrington has to leave, and I am bringing him in out of order.

Q60 Richard Harrington: Thank you very much. I believe that you were here when Graham Ward gave his evidence before. In answer to my question, to remind you, he said it cost £750,000 to produce four reports over eight months, which to me seems a lot of money, given the amount of reports. You may not be able to answer this question now, but you could work out the cost of producing the same reports using DFID’s own evaluation department. I am not sure the taxpayer is getting value for money at all from these reports that we have seen. As I say, you probably just do not have that figure to hand-who would?-but I would be very interested; I think the Committee would be as well.

Mark Lowcock: I am very happy, Mr Harrington, to write to you with examples of products we have produced and the cost of them. The thing I would say is there is obviously a core cost of creating and maintaining ICAI, which is about £400,000 a year. That is intrinsic in having something outside of the Department. We set it up in the way we did because we thought that was the best value for money approach to do it.

I would also observe that there has been a competitive process through which ICAI have hired their consultants and contractors. You heard from Mr Ward about the rigour with which he is managing the contractors-his unwillingness to pay the first set of bills until the products were delivered. That is the kind of approach I am keen to see; it is the kind of approach I take inside the Department as well.

ICAI sought our advice and assistance in the contracting process. We know some of these organisations and have some experience in driving value for money through there in the contracting and implementation of what we do. As of now, I do not have concerns about whether ICAI are paying a lot more to generate these reports than we would pay if we were doing something similar ourselves. I will give you some examples and pursue the question a little bit more, just to satisfy myself that my initial judgment is a reasonable one.

Chair: The Secretary of State may argue, may he not, that you have to pay some small price to guarantee independence? That is clearly a point at issue.

Q61 Hugh Bayley: Mr Ward described to us the process for checking facts with officials in your Department. When drafts of the report were sent across, were any of them shown to Ministers?

Mark Lowcock: Yes; officials briefed the Secretary of State on the broad content of the drafts, and the Secretary of State made it clear to us that he did not want to discuss the detailed content, partly because he wanted himself to be clear about the importance of maintaining ICAI’s independence. I can also tell you that, for example, when the Bangladesh report was issued, I happened to be in Bangladesh on that day. It was sent down to my team in Dhaka; the office was buzzing with the receipt of this important document. Naturally they wanted to have a discussion with me about it. I did not play a role myself, either, in the fact-checking process; nor did anybody in the Department, as Mr Ward said to you-and nor will anyone in the Department-offer a commentary on whether we think the traffic lights are a fair judgment or not. Those are ICAI’s judgments.

I will, if I may, offer one additional point on that on the Zimbabwe Health Programme. I put this on the record as much as anything else to manage the expectations of the 2,500 people who work for me in the Department. In my opinion, that Programme delivered remarkable results for remarkably small costs. If you look at the tens of thousands of people on antiretrovirals, the access to family planning-essentially for a lot of the period, we were the only reason why people in Zimbabwe had access to family planning, whether it was contraceptive pills, condoms or injectables. If you look at availability of drugs in the health system, if you look at the top 1,500 facilities in the health system and ask yourself how many of those had 80% of the basic drugs in the period when Zimbabwe was at its most riven, at the start of that period 9% of those facilities-less than one in 10-had basic drugs to a sufficient level. We got that up to 65%, and that was in very difficult circumstances. I personally think there is a high degree of value for money in those programmes.

The point I made to my team is that the bar ICAI is setting for a green, a straight green, is a very high bar. That is fine, that is their job, but there is a bit of expectation-management. Those programmes are impressive programmes, I must say, given all the other things I have looked at across my experience in the Department.

Q62 Chair: You mean you think they should have got a green?

Mark Lowcock: No, I am not saying that, Mr Chairman; I am being very careful not to say that. I am managing the expectations of the 2,500 people who work for me and who are very passionate about what they do.

Chair: I just want to say we saw it in action, and we did see the results. We would concur with your version of it.

Q63 Hugh Bayley: I was going to say something very similar, and Mr Ward has said that he will send a further note to clarify the situation, which we look forward to receiving. On the question of this process, you said that you were not personally involved in the fact-checking process, and I think that is probably a wise decision as the Permanent Secretary of the Department. Although I understand why Ministers would be extremely interested in how the new process is going, having set up ICAI-and it is no criticism of them wanting a brief this time round-I would have thought in the future it might be sensible for them to delegate the fact-checking process to officials, who, after all, are the people who will advise on facts to Ministers. If that were to happen, it would help to reassure our Committee and the public that ICAI is genuinely independent.

Chair: I have been asked whether I, as Chairman of the Committee, see it as the same time as the Secretary of State. When I point out that, as I understand it, the answer is no, eyebrows are raised.

Mark Lowcock: The final report comes to all of us at the same time. The rationale for fact-checking, as Mr Ward set it out, is a powerful rationale. I know the same applies across the private sector, as well as on reports that the NAO does on us. It is not in anyone’s interest for us to issue reports that have material inaccuracies in them. Candidly, there were one or two things in these reports. Just to give you a very small example, in the description in the AntiCorruption report of how many kilos of grain a family in the Zambia Programme got, the initial draft of the report said 15 and the correct answer is 50 or something. There are some very straightforward things. There are also some things that relate to the personal security of staff whom I have a duty of care in law for, which I am keen to avoid getting into the wrong place on.

It seems to me that the central issue is whether any of the judgments are being swayed by the interaction in the fact-checking process between the Department and ICAI. From what I have seen in the instructions given to the Department, I am satisfied that that is not the purpose of it. Ultimately, that is Mr Ward’s responsibility, and he will give you his assurance on that. But the concept of fact-checking is a sensible one.

Q64 Hugh Bayley: Factchecking does make sense. I agree with you; it is in nobody’s interest to have people picking at factual inaccuracies in the report after it is published. The reassurance I am looking for is that there will be no political overlay to the fact-checking. I appreciate that you cannot give an undertaking here for your Secretary of State, but I hope as a result of this conversation you will have a conversation with the Secretary of State and ask him to get back to the Chairman to express a view about whether routinely in the future he will receive a submission in his box about draft reports when they come, or whether it is something he could be more relaxed about and say he would not, unless there were very special circumstances. Could I just ask one final thing? Mr Ward said to us that typically something like 10 bids for fact changes would be made per report through the chart process that he described to us. Were any of your bids for factual amendments to these four reports rejected by ICAI?

Mark Lowcock: A very fair question, Mr Bayley, and I guess it is consistent with the fact that I did not play a role in the fact-checking that I do not know the answer to that. I am very happy to ask Mr Ward, whose responsibility this is rather than mine, to consider whether he would like to reply to you on that.

If I may, Mr Chairman, I have some supplementary information on the question Mr Harrington asked me earlier: the cost of evaluations of the sort that are maybe broadly comparable with ICAI’s reports varies between something like £100,000 and £150,000 if we do them inside the Department. That is not way out of line with the ICAI numbers. If we are doing much more complex evaluations, for example of the sort involving randomised control trials, as Mrs Latham was asking about earlier, the cost can be significantly higher there. If you are running a randomised control trial over several years, affecting tens of thousands of people, that is obviously very expensive, but as a kind of core starting point for those complex evaluations, they might cost around £250,000.

Chair: Thank you for that.

Q65 Mr McCann: Good to see you again, Mr Lowcock; the last time when we were together was when we both celebrated 30 years of DFID in my constituency, East Kilbride. It is good to see you again; I thought I would get that plug in very early.

Mark Lowcock: It was a terrific event, Mr McCann. It is still reverberating, in the constituency as well as in the building.

Q66 Mr McCann: Absolutely, and we celebrated over a sarsaparilla, just in case anyone gets any wrong ideas. Can I ask you a question about the five recommendations, because we received the paperwork yesterday that sets out the recommendation, action already taken, action to be taken and the target date. One thing that is missing, just from my perspective, is "agreed" or "not agreed"; I am making the assumption that it is implicit within the documentation that everything has been agreed, but I would be grateful if you perhaps summarised DFID’s view on those, and whether or not there was any subtlety or slight difference of opinion in terms of how the recommendations would be achieved.

Mark Lowcock: This is on the AntiCorruption report, Mr McCann, is that right?

Mr McCann: Yes, correct.

Mark Lowcock: We fully agree with the set of recommendations that are at the front of this report. What we have set out, in quite a lot of detail, is precisely how across the Department we will implement them. Maybe I should just say two or three things in more detail about that. Would that be helpful?

Mr McCann: Absolutely.

Mark Lowcock: The first thing to say is, I know I only sent this to you yesterday; actually, that was still a day before the formal deadline. In future we will get them to you as fast as we can, particularly if it is ahead of a hearing, because I recognise that would be helpful to the Committee. On the set of recommendations on the AntiCorruption report, the first key recommendation is that, in the high-risk corruption environments, we should have a country-level strategy both on how we are going to safeguard our own resources and-personally I think this is one of the most exciting bits of this report-how we are going to try to change the overall environment to make it less corrupt. We are now road testing the guidance for those anticorruption strategies, finalising the list of countries; we want to make sure we do those strategies to a consistent level and quality, so we need a bit of central quality control. The first batch will be published around the middle of next year.

As Mr Ward alluded to earlier, all of this work-following up the AntiCorruption study in the first instance-I am supervising myself right at the top of the organisation with a group of very senior officials. Early next year I will transfer that supervision to one of my deputies, Mark Bowman, whom we just hired from the Treasury. Hundreds and hundreds of people across the organisation will have their jobs changed by the way in which we respond to these recommendations in the AntiCorruption study. That bears on the question Mr White asked Mr Ward earlier about how many people were involved in this. This is a major, organisation-wide effort.

I am sorry to give a long answer, but could I make one broader point about this as well? Clare Short gave a lecture on corruption last week-a very interesting, enjoyable lecture; I hope it is widely read-and in it she noted these recommendations and the Government’s acceptance of them. One of the points she made is that dealing with and even recognising corruption is a relatively new phenomenon. It was only in 1993 that TI was created; it was only in 1997 that the World Bank started talking about corruption; and it was only about four months ago, in July, that the 2010 Bribery Act came into effect in this country, which for the first time makes it illegal to pay a bribe in a foreign country.

One of the things that is happening is a big global change in the acceptability of things that used to be a common occurrence. I note that China has recently passed legislation to make bribery overseas illegal, and India has just joined the UN Convention against Corruption. The power of the recommendations in here on changing the corrupt environment in many of the countries in which we work is quite transformational. This is an exciting agenda for the Department. The report identifies a number of areas where we play a global leading role at the moment. We can do a lot more, because the global environment has changed.

Q67 Mr McCann: First of all, sorry to my colleagues, I may have dived in there, but I have the next question as well. But can I ask a supplementary broad question? The Secretary of State often repeats the mantra that the UK has a zero-tolerance approach to corruption. That is a bit of a deceptive statement, because in actual fact what he is talking about is zero tolerance for UK funds being corrupted, because it is impossible, as we know, to affect the way that corruption takes place, for example, as we saw last week and heard about, in South Sudan. Is there a danger in that statement, in that it creates a broader impression of the zero tolerance of any UK funds being corrupted and the impossibility of controlling the wider issue of corruption, which is still prevalent across a lot of the developing world? Secondly, how does that tally with the Department’s risk-management approach, which is clearly about managing the risk as opposed to deluding ourselves that we can completely eliminate it?

Mark Lowcock: My own view is that it has been very helpful, not just in the Department but globally, to have this focus on zero tolerance. What does it mean in practice? The Public Accounts Committee were asking me a set of questions about this last week. Firstly it means that, as far as the Department’s own funds are concerned, if we have a worry expressed to us, we take very prompt and wide-scale action. For example, in our programme that provides tiny amounts of cash-40p or 50p a week per person-to orphans and vulnerable children in Kenya, we had an allegation made to us earlier this year about fraud. We suspended payments to that programme. Some people thought that was a significant reaction; we thought that was the right thing to do. We conducted an audit, an inquiry; we found that there were management problems but no fraud and we restarted. That was the approach we took because we have zero tolerance for loss of our own funds.

Secondly we have a massive internal and wider effort whenever we suffer a loss. That is one reason why we now have a 92% recovery rate on our losses. That is important both to get back the taxpayers’ money where it is lost, but also, maybe even more important, for the salutary message it sends to the people through whom we channel our resources and the countries in which we work.

On your wider question, this concept of zero tolerance in the environment, that is a helpful thing to get into the discourse and dialogue, partly because this is such a new issue in the development space-it is good to have ways in which to draw attention to it-and partly because corruption is such a big brake on development. It often robs the poorest people of the world of a better opportunity for a decent life. It dramatically constrains the ability of countries to deal with their problems. I am rather in favour of some temperature raising on this issue. The mood of the global community is very consistent with that at the moment.

Q68 Mr McCann: But would you not accept there are two elements to it: there is an element that we can control directly and there is an element where we are preaching? Hopefully a lot of people are listening, but as we know that is not necessarily the case.

Mark Lowcock: I do accept there are different elements, Mr McCann; you are right on that. I hope we are not perceived by other people as preaching, but it is very useful and valuable for the UK to be playing a prominent role in these international discussions as well.

Q69 Chris White: Thank you, Mr McCann. We have talked about corruption on a number of occasions through this session. You said that hundreds of people are going to have changes in their jobs. You say that the Department is going through a transformational process. Would you credit ICAI for creating a sense of urgency and raising the awareness of corruption, or do you think it was a coincident timing process that you were both going through?

Mark Lowcock: This is something the Government has been putting more attention on since it came into office. When I was appointed, part of my pitch for the job was that we need to do better on value for money and safeguarding our resources. As you know, I am an accountant amongst other things; I care about these issues. I also had the useful experience of exchanging views with the Public Accounts Committee on this set of issues in July. They have delivered a set of recommendations to us. A whole series of things have come together.

If I did not agree with the core recommendations from ICAI, I would not have accepted them and I would not be putting such a big organisational effort into following them up. The things ICAI have said to us are not the only things we need to do on anticorruption. There are other things as well. For example, I would put a heavy weight on us continuing the big investment we have made on building up public financial management systems; strengthening auditors-general; strengthening public accounts committees in the countries in which we work; promoting public sector reform; and trying to deal with some of the reasons why a policeman who has not been paid for months on end finds themselves tempted. We need to deal with all those sets of things as well. However, there are some distinctive things in the ICAI recommendations that reinforce and add value to the broader approach we want to take.

Q70 Chris White: That is clearly quite a wide-ranging strategy. Will you be producing a report at some time to say where you have got to with the range of issues you are going to be looking at?

Mark Lowcock: Yes, we will do that. We will report on a quarterly basis to ICAI on how we are doing on implementing their recommendations. This is going to have longlasting effects on the work of the Department, a lot of which will play out over a period of time. For example, getting to the point where we have finalised a strategy in every country where we need one on anticorruption is going to take us a period of time. We have set out that timetable. My expectation is we will learn from the first and that will inform the second phase of anticorruption strategies. We will learn from implementation. As I said earlier, this is a big set of changes; I do not anticipate a moment arising at which we will have solved the problem. This is a permanent shift in our work that will be with us for a long time. But we will certainly report regularly on how we are getting on.

Q71 Mr Gyimah: In response to your comment about appreciating the need to raise the temperature on the corruption issue, I noticed that one of the things ICAI did was strongly criticise your ability to monitor the corruption risk of aid given to delivery partners. What measures are you taking to address this?

Mark Lowcock: One of the recommendations ICAI have made to us is that we first need a different set of internal processes and products to supervise our delivery partners. Secondly, we need more people with different skills across the organisation to do that supervision. We have streams of work on both of those. On the second, we have a hiring strategy: within the 2.2% of the Department’s budget that is available to pay for the work and staff of the Department, we need more people with skills in public financial management and programme management to supervise the delivery partners at the country level to check that they are delivering what they are supposed to be delivering with good value for money, that their procurement is clean and that they are managing their own risks. We need a lot of extra people in that space.

In terms of the products, we have quite a lot of work streams going on there. For example, we are in a dialogue with the National Fraud Authority about whether we can learn things from their approach to dealing with fraud in the UK for our programmes. We have commissioned some work from the Centre for Counter Fraud Studies at the University of Portsmouth to help us look at particular ways in which we channel aid to have better processes for managing the risk to each of those. We are also in a dialogue with a number of other major development organisations to see what more we can learn from them. There is quite a lot going on there, and it is in those two broad streams I referred to.

Q72 Mr Gyimah: Thank you. Am I right in thinking you produce fiduciary risk reports, and can the Committee see the reports that you produce?

Mark Lowcock: I am sure we would be very happy to let the Committee see all those documents on a private basis. Mr Ward gave you a good explanation for why I am not in favour of publishing them. I am not in the business of tipping off people who would like to defraud us with additional information that would help them, for obvious reasons. But I am very happy to explore exactly what set of information we can give to the Committee.

There is just one caveat I would like to put on the record that might limit exactly what we do. We finance the City of London Police and Metropolitan Police units that try to deal with bribery cases overseas in developing countries, and corruption, in which British citizens-or people for whom the British legal system has recourse-are involved. There are sometimes particular cases or issues in some of that work that it would not be appropriate for us to give a broad circulation to, even possibly to the Committee, for reasons to do with the legal process. That is the only caveat I can think of that would constrain what we would be happy to give the Committee privately.

Mr Gyimah: It would be great to see those reports privately if we could, Mr Chairman.

Q73 Chair: Yes, thank you very much. We mentioned with Mr Ward, and you mentioned, the Health Programme in Zimbabwe, so I think there is agreement that this was very important and effective. Although you have said you believe it was value for money in the sense it reached a lot of people and delivered a lot of measurable results, the Commission in their report say that DFID is paying over the odds for its implementing partners’ overheads and administrative costs in Zimbabwe. I recall that, when the Committee were looking into this, the NGOs were complaining that the bureaucracy was quite expensive for them-the compliance costs of avoiding diversion of funds to the Government. That being the case, what action will you take to deal with this?

Mark Lowcock: First, let me say I do welcome the analysis and the set of recommendations on how we can drive down delivery costs. I basically agree with the set of things said in paragraphs 2.35 to 2.38 of the report. We have set out in our response to the report what we are going to do: we will produce a detailed value-for-money strategy. That will take into account the corruption risks. We will pursue the administration cost issues with our delivery partners. As you appreciate, we, sometimes jointly with others, commission those delivery partners. This is something the full implementation of which will need to be agreed between us and others. It is not just a matter for us on our own. There is a big agenda here that, consistent with the value-for-money drive we have on our costs, we need to roll out.

Two more points on this, if I may. First, we need to recognise that agencies delivering programmes do need some core capacity. Some of these programmes-especially when you cannot work through the Government-are not cheap to deliver. I am not in favour of so paring the costs that we run greater risks on losses or reduced quality. There is a balance to be struck there. The second point is-and this is something about which I am writing later in the week to all the heads of the multilateral agencies we finance-I am observing that we are struggling to win a substantial level of support for our value-for-money agenda at the level of the governing boards of a lot of agencies, especially UN agencies. As a member of a lot of these organisations, we are a bit too much of a lone voice at the moment in pushing this, and it is on my agenda to try to generate a bigger club, if you like, of the major financiers of these institutions.

Q74 Chair: You are quite a loud lone voice, given that you are quite a big funder.

Mark Lowcock: I am told we are loud in a number of ways, Mr Chairman, including that we are a significant funder, but we are only one of more than 100 members in a lot of these organisations. A lot of the value-for-money drive that we need has to be organisation-wide in UNDP or UNICEF, or whoever it is. I am forecasting quite a long-run effort on this. I am in the business of enlisting help and support from the other important members of these organisations. I make this point just because it is going to be a little while before we achieve our own objectives or satisfy you and ICAI about where we are getting to.

Q75 Chair: The clerk is pointing out to me the June 2012 date, which is related to what I was going to ask you. On the basis of what you just said, and your very fair point that partners may need core funding, and that is not just admin costs, it all raises the question of what is a common definition. You set the date of June 2012 for achieving a common definition. I suppose two questions arise from that. That is DFID’s common definition, presumably, not the world’s common definition-or do you want to put that into the pot?-and something that is going to be understood by the partners as to precisely what overheads and admin costs are legitimate core funding, and so forth. In other words, we will have a much better understanding when you are trying to compare like with like.

Mark Lowcock: First, what we are aiming for is to agree a definition that others buy into as well. That is the goal: that is what we are trying to do. Of course, we cannot force others to agree the definition with us, but I do not think it is very helpful if we on our own propose a definition; we have to bring other people in with us. There is a persuasion job to be done there that we are exerting our resources on.

You are right to say that there is a lot of complexity in what you mean by admin costs. Some people think the internal audit function is as much operational as it is admin. I have some sympathy for that, because it drives a lot of value for money. But there are significant definitional issues. It is also the case that the process of administration itself adds value, in my opinion. That is where a lot of the value for money comes from. If you do the procurement well and call that admin, you are saving a lot of money. Some people tend to associate admin with something undesirable, unnecessary and bad in the world. My perspective on this is the way you run the programmes is to drive the value for money. That is where you get a lot of the value for money.

Q76 Chair: In the conversation we had in South Sudan last week we were told by a UN representative that UNDP, which is a partner of DFID in South Sudan, was, in terms of value for money and delivery costs, a bargain. When I put that to the country head of DFID, that was not quite his take on it. Do you think after June 2012 that would not just be an exchange of conversation? Could there be objective criterion that he could put back, for example, to UNDP and say, "On our basis, you are too expensive by that amount and for those reasons"?

Mark Lowcock: What we have with this recommendation in Zimbabwe on the health sector is a Trojan horse. What we are trying to do is use that as a model to drive a better definition, to encourage greater focus on what is good value administrative expenditure and what is not, and then we will need to spread that far and wide. This is a big problem across the whole set of development institutions. There has not historically been enough focus on the cost of getting things done. We are making it a bigger focus.

Q77 Jeremy Lefroy: If we could move on to the report on Bangladesh, I know you were in the room when I was asking Mr Ward about the delays in the World Bank programme. Could you perhaps give us some reasons, or some indication from your perspective, as to why there has been such a significant delay? I would also like to understand, given the problems I also referred to that we have seen in the multidonor trust fund in Sudan, whether there are beginning to be concerns about the ability of the World Bank to deliver programmes.

Mark Lowcock: Just to take the Sudan case first, we were extremely unhappy with the performance of the multidonor trust fund over a period of years. That led us to curtail significant parts of our funding and to have, right at the top level, a series of quite pointed exchanges with Bank management. The main thing they needed to do was to put more senior staff, decision makers, into the field. To their credit, they have made some progress on that-partly by headhunting one of my senior staff, which I have mixed feelings about.

Chair: Be careful what you wish for.

Mark Lowcock: I know, I know. I am not satisfied they have got to the place they need to get to yet, but I do want to acknowledge there has been some progress.

On Bangladesh, the report is a fair assessment of the areas for improvement in the Bank’s management and other multilateral agencies’ engagement in programme delivery. One core problem has been the Bank has not had enough professional staff and decision-making roles based in Dhaka. As part of the IDA negotiation, we said with the other financiers of IDA that we wanted a much higher proportion of the Bank’s staff in decision-making roles based in the country so they could be much more responsive and solve problems as they arise. That is vindicated by the experience here.

We are looking again at the memorandum of understanding we have with the Bank on this programme. We have quite a big programme of work to try to deal with the specific problems that the report identifies, and we have listed our actions, if you like, in the response. There is a wider issue across the Bank group: this is not just a Bangladesh problem, but we would like the solution to the Bangladesh problem to be rolled out more widely. We do need to recognise that sometimes the Bank is the best institution to fulfil certain functions. They do a good job as the trust fund manager in a lot of cases. They have high fiduciary standards and they supervise procurement very effectively. There are reasons why we collaborate with them, but in the same way that we have a big internal agenda in DFID to improve the value for money of implementation, so we have the same aspiration for the Bank to do that where we are financing them.

Q78 Jeremy Lefroy: Just to come on to the other question that Mr Ward quite rightly did not rise to answer, there is the Green Climate Fund. It is going to be quite substantial. Obviously it has only just been set up; it is not functional yet, but it will be. Are you intending to develop much more inhouse capacity within DFID to deliver such programmes, because there will be a lot of UK taxpayers’ money there, and clearly we do not necessarily have confidence in other people to deliver those programmes in places like Bangladesh?

Mark Lowcock: Yes, Mr Lefroy, I am sure we need more capacity inside the Department. We have done quite a bit of hiring in 2011 to build up that capacity, especially in our overseas offices. We have some more to do. I would like, if I may, to write to you with more details of that. But my answer to your core question is yes, we absolutely have to do that.

May I, Mr Chairman, reply to a question Mr Gyimah asked Mr Ward? He was expressing some worry about whether it is the case that DFID Bangladesh is not going to spend its budget this year. As of yesterday, DFID Bangladesh had spent £117 million out of the country programme budget for the current financial year of £175 million: about 66%. That is roughly what I would expect to see two thirds of the way through the financial year.

There are two sins the country programmes can commit in this regard. The major sin is to throw money at something that is not of the quality we want simply to spend the budget. The minor sin-which is still a sin-is to mis-forecast what you are going to spend. Everyone across the country network knows the hierarchy of sinning. If they underspend, it will be because they are not satisfied on the value for money that year. We will deal with that centrally across the Department as a whole.

Chair: I was in Bangladesh three or four weeks ago and had an hour’s briefing with DFID. I certainly did not get the impression that they were seriously adrift or that they felt they were. These are rumours that might have come from a not well-motivated source, but it is important to test it out.

Q79 Hugh Bayley: A quick follow up: if a country office underspends by, shall we say, £10 million for the sort of reason you are proposing, is there any scope for carrying money forward, and does it mean that the subsequent year’s budget might be reduced as a result of an underspend in one year?

Mark Lowcock: For the Department as a whole, there is a very small provision for carry-over from one financial year to the next, but access to the underspend is granted on a case-by-case basis by the Treasury. In recent years they, for understandable reasons, have not been keen to grant that access. Essentially we run the finances of the Department as a whole where we can in such a way as to avoid significant underspends. We have a variety of means for doing that, which we are practised in.

Within each country team, the issues are a little bit more complicated. Whether we adjust the budget for the following year in light of an underspend in the current year will depend on the reasons for the underspend. Sometimes one of the things that happens is, for reasons beyond our control, payments are just delayed or projects come on train more slowly, and sometimes you catch up. Sometimes there is a more systemic problem. We try to have a mature approach to running the finances in a way to maximise the delivery of results, rather than the financial flows themselves being a driver of future budgets.

Chair: Pauline Latham.

Pauline Latham: Sorry, I thought we had finished.

Q80 Hugh Bayley: While Pauline is looking at the papers, may I ask the Permanent Secretary this: is he satisfied that the current approach avoids creating a perverse incentive for people to spend in the last quarter to safeguard future-year budgets?

Mark Lowcock: It is a fair question, Mr Bayley, because it has been an historical problem on which we have made progress in the last two or three years. We have made good progress on that this year. The bunching problem-the percentage of the total budget spent in the last quarter will be significantly lower this year than in a lot of previous years.

What we are trying to get to is a position where there is so much competition for resources to deliver results across the Department that people are consistently a little bit disappointed that they cannot get quite enough money to deliver the results they would be able to deliver if they had a bit more money. That is the psychology we want in the Department: to have a high degree of competition for the available resources. It is hardest to do that, as I know you understand, in periods when the budget is growing and the staffing is struggling to catch up a little bit. Last year, for example, and in parts of this year, I have been a little bit worried about that; I am confident we are moving to the place I just described where we would like to get to, but maybe you will test me again on that when I come and report on the annual report next year, because I would certainly like to be in a good position on that by then.

Q81 Pauline Latham: Sorry about the little glitch there. Mr Ward talked about the definitions of effectiveness and value for money, and how they were inextricably linked in that, if you have poor value for money, the programme is not as effective, etc. Do you have any concerns that the definitions may prejudice ICAI’s approach to your work in any way? Mr Ward also said that you have your internal evaluation department and ICAI is nothing to do with that; it is completely separate. Do you feel that you really need as large a department for internal evaluation now that ICAI is in existence?

Mark Lowcock: On your first question on the methodology, as I said earlier, from my point of view it is helpful that ICAI have set out a clear methodology, because that means there is a predictable framework for the Department. I do not have any commentary on the precise methodology they have chosen. I agree with Mr Ward that you have to look at the value end of the equation as well as the money end of the equation. That is common ground. On 30 September we published the Department’s overall plan to improve our approach to value for money, the finance improvement plan, which deals a lot with the value-for-money issues on both the value and the finance sides. There are no major areas of concern for us there.

On the evaluation department, that used to be the bit of DFID from which we ran our programme of independent evaluation studies. At the time ICAI was established, we closed that business down. We do not ourselves, from the central department, produce those internal independent evaluations any more. We have recycled the money from that operation into other things. We still have a small team at the centre that deals with evaluation, but the main thing they do is provide advisory services to the several dozen evaluation specialists who are dotted around the wider Department, who commission, for example, randomised control trials and a lot of the longer running research and evaluation programmes of the sort that Mr Ward explained are not really within the resource environment or the mandate of ICAI. We have closed down the bit of the organisation that used to do what Mr Ward’s team now does, but we are still inside DFID financing more, especially longer-term evidence generation and evaluation material, than we have ever done in the past.

Q82 Chair: It has been an interesting morning, because this process was obviously set off a year ago, and what I would take as being interesting is that there is a dynamic emerging. It is becoming more interesting than just an accounting exchange. I guess that is testimony the fact that Mr Ward, who is one of the country’s top accountants, is more than an accountant-or at least his team are-which is adding value and making things more interesting too, rather than dry. We are in part of a process that will continue for as long as this relationship continues. What we will be looking forward to over the next year is the extent to which the ICAI operation feeds into the Department and back again, and also the interaction between the Committee in all of this, because there is more than enough work to be done to ensure that the overseas development budget delivers all the objectives, and all the players have value to add. It is an added dimension, and all of us want to see what difference it will make. So far, it seems to be adding genuine value. The interaction and the way the Department is reacting is very positive. I still repeat my proviso: at some point or other there will be a "red", and that may be the more interesting test-although I am sure you will argue that the Department is so well run that you will avoid that situation.

Mark Lowcock: Time will tell what the set of ratings are. All I want to say is: where a problem is exposed, we are going to stand up and recognise it if there is a problem, and we are going to fix the problem. That is the whole point of this arrangement, and that is the sense in which I think it should add quite a lot of value.

Q83 Chair: While you are here to confirm, I think it has now been approved that the Committee has agreed that we will do reports on taxation and transparency, and on the situation in Malawi. We will be commenting on your briefs on that, and there will be dates in March when we are going to visit Zambia and Malawi. You were probably aware of that, but I think it is now reasonably firmed up.

Mark Lowcock: Thank you very much. You always add value through the processes you run. The taxation issue is really interesting. I know several of you were in South Sudan last week. I would like to put on the record that I saw Mark Mallalieu yesterday; you saw for yourselves that it is a very tough environment, and they really enjoyed their interaction with you and I hope you had as good a week as they had in hosting you. We are looking forward to seeing your findings on that.

Q84 Chair: If you put a word in to the Foreign Office, we think our ambassador needs a little bit more comfort than he is being given at the moment.

Mark Lowcock: I will talk to Simon Fraser.

Chair: Thank you very much.

Mark Lowcock: Thank you very much.

Prepared 22nd December 2011