Conclusions and recommendations
Increased spending at the end of 2011
1. From 2013 the UK will be increasing ODA to 0.7%. It is vital that this money is spent cost-effectively. At the end of 2011 the Department took action to boost calendar year spending by £580 million and thus hit the UK's ODA target. The Permanent Secretary told us that the Department would not take decisions which did not represent good Value For Money. DFID should miss ODA calendar year spending targets where there are delays or cancellations to its planned projects and it does not have alternatives which provide good value for money.
(Paragraph 14)
2. The establishment of a Development Bank would not only mean that DFID was not so constrained by the need to ensure that cash was spent by the end of the year, but also, more importantly, would provide DFID with a mechanism to offer concessional loans and put it in a better position to meet future challenges, including its engagement with middle income countries.
(Paragraph 15)
Increase in spending on multilaterals and reduction
in aid to recipient governments
3. About two-thirds of DFID's expenditure in 2011-12, including nearly 40% of the Department's bilateral expenditure (spending through country offices), went through multilateral organisations. This represents a major change in recent years and has been accompanied by a decline in general budget support to recipient Governments. DFID should carefully examine its growing multilateral expenditure and ensure that it has thoroughly examined other options such as greater use of local NGOs and sector budget support, especially as multilaterals have high costs and too often limited effectiveness. We recommend that DFID provide an annual report on the progress it is making on reducing the administration costs of multi-lateral agencies through cross-donor consensus. We commend DFID for demonstrating leadership in analysing multilateral costs and seeking to reduce them. We also welcome the Permanent Secretary's willingness to look at making more use of 'sector' budget support.
(Paragraph 28)
4. We also recommend that DFID develop specific strategies for engaging with NGOs and civil society organisations (CSOs) which ensure thatthe Department's bureaucratic procedures and funding mechanisms facilitate partnerships with effective, smaller NGOs and CSOs;
- ensure that there is an effective 'access point' for smaller NGOs and CSOs to make it easier for them to engage with DFID; and provide clear guidance to country staff regarding its expectations for working withsmaller NGOs and CSOs.
(Paragraph ?29)
The switch of non-humanitarian bilateral aid from
low income to middle income countries
5. DFID has switched expenditure from low to middle income countries. This has occurred in part because several countries with a large number of poor people have recently graduated to middle-income status. The Department's policy towards middle income countries is contradictory: it is ending grant aid to India in 2015, but programmes in Nigeria and Pakistan are due to grow rapidly. The Department explains that this is because both countries have a massive share of the remaining MDG burden, yet the same logic applies to India where a different approach is being taken. As expenditure on middle income countries increases, it is even more important that decision-making is rational and consistent; we recommend that the Department establish and make public the criteria it will use to inform decisions of when and how it should cease to provide aid.
(Paragraph 33)
6. We note that while DFID has increased expenditure in several middle income countries, its bilateral programme in one of the world's poorest countries, Burundi, has ended. We urge the new Secretary of State to re-instate a bilateral programme in Burundi.
(Paragraph 34)
The Department's spending by its development policy
priorities - 'pillars'
7. In its Annual Report and Accounts, the Department reported some huge discrepancies between actual and planned spend by pillar. DFID admitted that it got its initial estimates wrong, but said that whilst data on spending was useful it was giving more attention to results. The calculation of pillar spending appears to have little relevance to the Department's spending decisions. The Department should either explain its relevance or delete the mechanism altogether.
(Paragraph 39)
Research
8. DFID's spending on research is increasing significantly. We are surprised that 27% of research expenditure goes in core funding to major international research institutes and is not subject to market testing, but monitored by DFID representation on the Boards of institutes. DFID's large research expenditure has the potential to benefit UK universities as well as providing the evidence needed to improve the delivery of aid. The Department has limited information on how much of the research it commissions is conducted in the UK. We recommend that the Department review its research portfolio to identify any sectors where UK universities look under represented. It should use this information to inform its on-going engagement with universities.
(Paragraph 46)
9. We are concerned that DFID staff are not yet making consistently good use of the research it commissions. The Department should improve its staff training and put increased resources into its Research and Evidence Division.
(Paragraph 49)
Front-line delivery costs: front-line staff
10. In the past we had expressed concerns that DFID did not have adequate numbers of staff to spend cost-effectively its budget. DFID has addressed this and is rapidly increasing the number of professional advisers and increasing the proportion of its staff working overseas. However, we have some concerns about the mix and skills of staff, including whether it has the staff to oversee the huge expenditure of UK taxpayers' money undertaken by multilaterals. In its reply to this report the Government should explain the reasons for increasing the number of professional advisers to a greater extent than any other group of staff and for the variations in numbers of advisers in each category.
(Paragraph 55)
11. The typical posting of a home civil servant to a DFID country office is for three years, and is usually shorter in fragile countries. Short postings bring risks to continuity and institutional memory. We recommend that the Department consider the merits of extending the standard length of posting so that staff have more time to ground themselves in the local culture and environment and then utilise that knowledge. For more fragile environments, we repeat our recommendation that the Department develop a cadre of staff who would have several postings to the same location over a period of years, and who could providing on-going support to country based staff once they had completed individual postings.
(Paragraph 68)
12. The effectiveness with which DFID country based staff engage with local people will in part depend on their language and knowledge of local cultures. We recommend that the Department spend a small part of its rapidly growing budget on improving the language skills of its staff. We recommend that the Department put in place a strategy for addressing any gaps or shortfalls and take greater account of language skills in making appointments and promotions.
(Paragraph 69)
13. SAIC have a key role to play in DFID country programmes. DFID is bound by HMG rules on pay and conditions and thus if it is to retain good performing staff it must ensure they are well managed and motivated. While generally positive, the results of the Civil Service People Survey show that a significant minority of staff-appointed in country have reported experience of discrimination, harassment or bullying. We welcome DFID's determination to address discrimination, harassment and bullying. DFID must also ensure that SAICs' behaviour is in accordance with the values of the UK public service.
(Paragraph 75)
14. Security expenditure in high risk countries is significant. We understand the Permanent Secretary's concerns about the Department's duty of care to its staff but there appears to be less attention paid to how this impinges on the ability to deliver departmental objectives on the ground. We recommend that the UK Government consider changing working and/or delivery methods to take this fully into account.
(Paragraph 92)
Costs associated with the location of staff
15. The Department has made clear its intention to reduce administration costs despite an increasing budget; however, the evidence relied upon to support these reductions is either historical, in relation to changing from paper based systems to computerised systems, or lack detail, described as simplifying processes. There is a lack of substance in the explanation provided by the department. We recommend that DFID provide a detailed breakdown of the changes of processes that have allowed savings to be made.
(Paragraph 97)
16. Employee costs have borne the largest reduction in administrative costs. It is important that as a result too many administrative tasks are not farmed out to front-line staff, thereby reducing the overall efficiency of the Department. The level of administrative costs should not be an arbitrary target, but should be determined by what is best for delivering the Department's results.
(Paragraph 98)
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