2 The Department's strategic direction
and focus on value for money |
13. The Department told us it was due to close a
third of its overseas offices and focus on a smaller number of
countries where the challenge was greatest.
The Department was also focussing on sectors in which it has relatively
less experience, including private sector finance and climate
change. The Department intends to focus more on fragile and conflict-affected
states which pose higher risks in terms of poor security, delivery
capacity, measurement of costs and outcomes, and leakage of funds
through fraud and corruption.
14. At the time of
the hearing, the Department was identifying and designing many
of the projects and programmes needed to reach the 0.7% target.
Given the challenge of developing a large "pipeline"
of new projects, we were concerned that, in order to hit its target,
the Department would simply increase its funding to multilateral
organisations (who determine how and where to spend funds) and
to overseas governments through budget support. These mechanisms
are both ways to provide large amounts of money for comparatively
small amounts of administrative cost and time, when compared with
the resources required to manage the Department's bilateral programme.
15. The Department lacked certainty about the future
split between bilateral funding and the funding it gives to multilateral
organisations. But on its current plans, the proportion of its
funding spent via multilaterals is due to increase from 37% of
its budget in 2009-10 to approximately 45% by 2014-15.
When the Committee took evidence from Suma Chakrabarti in 2002,
two Permanent Secretaries ago, he agreed that the Department could
not ensure that the aid it provided through multilateral organisations
was best applied to reduce poverty, as it had little direct control
over how multilateral development organisations use funds.
The Department still has limited input into the financial management
of multilaterals at an operational level.
As such, we were concerned that the increased funding going to
multilaterals could increase the level of the Department's spending
which is lost to fraud and corruption.
16. The Department admitted that it had previously
had concerns over a number of multilateral organisations which
did not have a strong enough record in fiduciary risk management.
The Department said it was putting money where it could maximise
value for money and had stopped funding a number of multilateral
organisations that it thought were poor value for money.
17. The Department channels funding through complex
delivery chains, and most of it is spent two or three steps removed
from the Department's control.
The Department has a corporate target to reduce its running costs
to 2.09% by 2014-15, but partner organisations and multilaterals
add further layers of running costs, which are often much higher.
The Department cited the example of UN organisations which have
running costs of 13%, although this was not strictly comparable
to the Department's own definition of running costs. Total running
costs for the delivery chain as a whole were not known.
18. Despite previous recommendations from this Committee,
the Department still has insufficient data to make informed investment
decisions based on value for money. The Department's Bilateral
Aid Review was supported by only limited data, and relied on people's
experiences of what they could deliver with the resources available.
The Department also had insufficient data on its projects and
programmes, including a lack of timely data and information on
unit costs. We reminded
the witnesses of our November 2010 hearing on primary education
where we found a lack of measurement on whether the Department's
programmes were actually keeping children in school and leading
to an improvement in standards and outcomes. The Department told
us that it has made progress in collecting data on primary education
in developing countries and would provide a progress report in
autumn 2011. The
Department gave examples of how it was improving its evidence
base more generally, including through external research, sharing
lessons internally, through its new business case approach and
by working with countries to access and generate better data.
19. The Department's financial and management information
system, ARIES, does not provide integrated performance and financial
data to support well-founded decisions.
The Department told us that its priority was to collect the data
it needed; integrating all of the results and unit cost data into
a single IT system was not, in its view, an urgent priority.
The Department was not clear about whether it needed to generate
more data, or whether the data existed but needed to be better
20. We questioned whether the culture within the
Department was sufficiently focussed on value for money. On entering
office, the Secretary of State said "The flipside of having
the privilege of a protected budget is you have to strain every
sinew to get every possible pound to work as hard as it can",
and the Department told us that there was a clearer understanding
of top level corporate priorities.
While the Department had increased its focus on value for money,
it acknowledged that it had not yet maximised value for money
in everything it was doing and could do more.
21. We were unconvinced that value for money was
at the heart of all the Department's decisions, as staff did not
have the information or incentives to demonstrate unequivocally
that they allocate resources on the basis of value for money.
Departmental staff told the National Audit Office in 2010 that
forecasts had been compromised by a reluctance to forecast underspends,
because of concerns that unspent funds would be withdrawn.
The Department admitted that country offices had been protective
over their own budgets, as they wanted to hold on to all the resource
they could in order to deal with the problems within their own
countries. The Department agreed that where projects in one country
were not delivering value for money, it should reallocate funding
to other projects or to other countries.
30 Q 17, C&AG's Report, paragraph 1.9, page 15 Back
Q 17 Back
Q 127; C&AG's Report, paragraph 3.16, page 30 Back
Qq 18, 127 Back
Qq 19-21, 108; Based on the Department's current plans, bilateral
aid is also expected to be 45%.Around 10% of the budget is as
yet unallocated. Back
Q 31; The Committee of Public Accounts, Department for international
Development: Performance Management - Helping to Reduce World
Poverty, Forty-Eighth Report of Session 2001-02, HC 793, paragraph
3, bullet 1 Back
C&AG's Report, para 5, page 4 Back
Qq 39-40, 60 Back
Q 40 Back
Q 18 Back
Q 35 Back
Qq 102-106 Back
Qq 14, 17 Back
Qq 130, 132 Back
Q 4 Back
Q 16, 17, 132 Back
C&AG's Report, paragraph 10, page 6 Back
Q 132 Back
Qq 17, 132-135 Back
Qq 71-74 Back
Q 17 Back
Q 75; C&AG's Report para 2.32, page 26 Back
Q 75 Back