MPs fear corruption risk from poorly monitored aid

from the Guardian, UK

by Larry Elliott,

Parliament's spending watchdog will warn the government today that lax monitoring of aid spending meant hundreds of millions of pounds of taxpayers' money was at risk of corruption or being wasted.

In a report critical of the Department for International Development (DFID), the Commons public accounts committee said monitoring of the £461m sent to governments in 2006-07 had been inadequate.

"Despite spending around one fifth of its bilateral aid in the form of direct payments to the governments of developing countries, DFID does not know how good an instrument this is in reducing poverty," says Edward Leigh MP, chairman of the committee. "Nor does the department know whether such support provides better value for money in reducing poverty than other forms of aid.

"Parliament must be able to come to an informed view on the balance of risk and reward. The countries who receive this financial support often do not have the monitoring systems to check that the funds have gone where they should. And when UK funds are paid directly to developing countries' national systems, the risks of leakage and corruption are often particularly high.

"DFID must give more attention to building accountability within developing countries and to supporting the parliamentary and audit bodies in those countries who can challenge the use of public resources by the ruling party."

Douglas Alexander, the international development secretary, said that budget support was used only if the conditions were right. "It helps developing countries manage their economies and public finances and can deliver significant benefits for poor people, including health, education and water."

The PAC report said that the financial risks of putting funds through weak national systems were often high. "Estimates of leakage and corruption in the use of developing nations' budgets are many times higher than would be acceptable in UK domestic expenditure."

The PAC said there was "insufficient evidence" to come to a balanced judgment on whether budget support was the right approach in the 13 recipient countries. It added that DFID should give its best estimate of the level of corruption, waste and inefficiency, and set out its plans for ensuring the money was well spent.

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