DEVELOPMENT POLICY AND THE IMPLEMENTATION
OF EXTERNAL ASSISTANCE 2005
Letter from Gareth Thomas MP, Parliamentary
Under-Secretary of State, Department for International Development
to the Chairman
Your Committee met on 11 October 2006 and discussed
the Annual Report 2006 on the European Community's Development
Policy and the Implementation of External Assistance in 2005.
Your Committee did not clear the document from scrutiny and asked
for further information.
The Committee raised concerns about the management
of financial risks, both for the Commission's budget support and
for the whole of Community expenditure on development assistance.
You asked me to comment on the Commission's ability to evaluate
the quality of public finance management before and during a budget
support operation. As you will know, the Commission's budget support
has it own set of regulations designed to minimize risk of fraud
and mismanagement. Safeguards are further strengthened by the
European Court of Auditors, which audits the use of Community
external aid (and audited the Commission's budget support to Africa,
Caribbean and Pacific countries in 2005). The Commission itself
also performs ex-ante "audits" to check the robustness
of recipients of Community budget support.
In addition, the Commission is now adopting
the Public Expenditure and Financial Accountability (PEFA) framework
to assess the quality of public finance management systems in
partner countries. The Commission is actively involved in the
development and implementation of the PEFA framework in partner
countries, taking a lead role with the World Bank. I very much
support this initiative; the UK will also be integrating PEFA
in our own approach to fiduciary risk management.
You also asked for comments on the Commission's
capacity to identify, minimise and manage the risk of poor or
fraudulent management of the disbursements of aid. I am satisfied
in this regard. Much progress has been made since the reform programme
began in 2000 to increase the effectiveness and reduce the risks
associated with aid.
In 2001, EuropeAid was created in order to ensure
sound and accountable financial, technical and contractual management
of Community aid. At the same time, the Commission has "deconcentrated"
(decentralised) much of its programme management to their country
offices. This has helped to bring management much closer to the
projects, with the commensurate increase in project quality and
outcomes. The 2004 Court of Auditors' Report on deconcentration
concluded that robust financial management procedures are generally
ensured under devolved management.
In order to improve the design of individual
operations, quality support groups now review projects and programmes
in preparatory stages and at completion of preparatory activities.
These quality support groups use checklists based on evaluation
criteria recommended by the Development Assistance Committee of
the Organisation for Economic Co-operation and Development. These
indicators include institutional capacity issues, monitoring and
evaluation systems and risk management. The Commission's Annual
Report describes further measures taken in 2005 to help delegations
carry out quality checks at the design phase of projects and programmes.
As much as any other development agency. the
Commission is seeking to strike a balance between ensuring that
risks are controlled, and working to provide aid at the right
time and in the most useful ways. We will continue to work with
the Commission to ensure that emerging lessons in this regard
are fully understood and acted upon.
For your information, I attach the Council Conclusions
that were adopted at the October GAERC. While these Conclusions
welcome the Report, they emphasise the need for continuing improvements
in many of the areas which I have highlighted to you in the past
(including in my Explanatory Memorandum on the Report).
The Conclusions encourage the Commission to
adopt a forward look when drafting the Report, rather than only
commenting on issues in the calendar year under consideration.
The Commission is encouraged to set out annual objectives explicitly,
and to provide an assessment on achievement of these objectives.
In particular they invite the Commission to make a clear link
from the description of activities to the achievement of the Millennium
Development Goals. The Council also invites the Commission to
provide a more explicit description of the implementation and
effects of the Paris Declaration on Aid Effectiveness.
25 November 2006
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