The Newton Fund review: report of the Sub-Committee on the work of ICAI Contents

Conclusions and recommendations

ICAI’s overall findings

1.Based on the evidence we reviewed, we find that the Amber/Red score awarded by ICAI to the Fund is an accurate assessment of its performance and we endorse ICAI’s six recommendations to BEIS. ICAI’s review should be treated as providing the imperative for BEIS to do much needed improvements to the Fund as conditions for any extension of the Fund within the next Spending Review process. The Department should update us on progress towards implementing ICAI’s recommendations in its response to our Report. (Paragraph 16)

2.We concur with ICAI’s view that the Department’s response to ICAI’s review did not engage sufficiently with the core substance of ICAI’s key recommendations but instead presented a list of actions, previously announced, that did not meet the need identified by the Commission. Almost a year since ICAI’s findings were published, we also note the slow progress made towards completing even these actions to which the Department did commit itself. The Department should update us on progress towards completing these five on-going actions in its response to our Report. (Paragraph 20)

Newton Fund design

3.With respect to UK aid funds, whether within a dual-purpose fund or not, we believe that Departments should not be able to bid for ODA without due regard being given to their capacity and capability to administer these programmes effectively. Extensions to ODA-funded programmes should only be agreed where there is robust and up-to-date supporting evidence from an evaluation of impact conducted to a standard endorsed by ICAI or the National Audit Office. (Paragraph 27)

4.For this reason, we recommend that the Newton Fund not be extended at the next Spending Review if BEIS is not able to demonstrate by then that it can measure value-for-money and impact. In addition, from inception, such a fund should have both a strategy and a theory of change. Renewal of the Fund should also be conditional on the Department improving the way it collates data to measure impact, starting with meeting its own deadline of October 2020 for the rollout of its ‘Research ODA’ information management system. The Department should update us on progress towards implementing these measures in its response to our Report. (Paragraph 28)

5.Overall the Fund is not designed in a way that guarantees that its primary purpose — delivering development impact — is as prioritised as its secondary purpose — fostering UK national interests. Large amounts of ODA should not be devolved to Departments other than DFID without establishing guarantees, or an oversight mechanism, in relation to their ability to deliver outcomes to consistently high standards of technical compliance and developmental impact. (Paragraph 29)

6.In line with our predecessor committees, we recommend that HM Treasury and DFID take the lead in promoting and monitoring excellence in ODA administration across Whitehall. In addition, the Fund should only continue to be financed with ODA if the Department uses DFID’s expertise to substantially reshape it towards a model that prioritises its primary purpose and delivers development impact to a high standard. BEIS should update us on progress towards implementing these measures in its response to our Report, outlining DFID’s input into the process. DFID should also write to us to outline the steps it is taking to promote better ODA administration across Whitehall. (Paragraph 30)

7.It appears that the Department may have misinterpreted ICAI’s findings on whether Newton Fund grants amounted to inappropriately ‘tied aid’. We recommend that the Government undertake a formal review of the extent to which the matched funding model which is used for the Newton Fund (and other funds like the GCRF) is compatible with the spirit of the Government’s commitment to untie all UK aid and the letter of the rules on ODA as articulated by the Development Assistance Committee (DAC) of the OECD. This review should also specifically outline how the Government intends to de facto as well as de jure untie UK standalone technical assistance and proposals to strengthen the OECD-DAC rules to this effect. The outcome of this review should be reported to our parent committee (the International Development Committee) by the time BEIS’s response to our Report is due. (Paragraph 39)

Measuring performance

8.The current arrangements for ODA compliance which are left at the delivery partners’ appreciation and with no explicit link to an overall strategy create risks of gaps in coherence and elements of ambiguity to arise. The training and support available to delivery partners so far has not seemed to have had the desired impact; instead it has left them and BEIS under the erroneous impression that their projects were already delivering substantial development impact. BEIS needs to take a bigger role in coordinating and monitoring delivery partners’ ODA eligibility processes and go much further in implementing ICAI’s Recommendation 1, starting by publishing as soon as possible its much-delayed revised ODA compliance guidance for delivery partners and country reviews. (Paragraph 44)

9.We feel that without also publishing an overall strategy for the Fund that is in line with the UK Aid Strategy and clearly states the responsibility and accountability mechanisms for delivery partners in delivering it, BEIS will continue to fail at enforcing ODA compliance and development impact to the required standard. We recommend that the Department publish a strategy with clear performance metrics for the Fund as soon as possible. BEIS should update us on progress towards publishing its revised ODA compliance guidance and a strategy in its response to our Report. (Paragraph 45)

10.DFID’s approach to performance evaluation should be replicated by other departments like BEIS which are administering increasingly large amounts of ODA and must therefore demonstrate, prior to being given this responsibility, their ability to measure impact. (Paragraph 52)

11.If it is to be renewed at the next Spending Review and continues to be entirely ODA-funded, the Fund’s grant allocation system should be radically redesigned to ensure that developmental impact becomes its genuine driving force (and not just a constraint around its secondary purpose). BEIS needs to impose stronger ODA-eligibility criteria and encourage delivery partners to switch from allocation processes designed solely for research excellence projects to ones that prioritise development impact. Fellowship awards should not be used to support research on any topic, but related to development if they are to be funded using ODA. BEIS should update us on steps taken towards completing these measures in its response to our Report. (Paragraph 53)

12.The reporting and transparency requirements should be increased for both BEIS and delivery partners to allow public scrutiny of the Fund’s spending, impact and of delivery partners’ performance on ODA compliance. BEIS should follow DFID’s example and publish on a single platform all relevant information on a) delivery partners’ ODA-compliance processes, b) the ODA compliance guidance it is currently developing for delivery partners and how it will enforce it, c) details and statistics of Newton Fund grant applications that are accepted or rejected depending on ODA eligibility, d) business cases, performance and transaction data and reports (e.g. programme completion and annual reports) for all ODA projects it is responsible for. In its response to our Report, BEIS should outline progress towards achieving these recommendations. (Paragraph 55)

Published: 15 June 2020