DFID country offices monitor how basket funding and budget support is spent to ensure that there is evidence it has been used for the purposes agreed with partner governments. An important aspect of country monitoring arrangements is ensuring adequate audit arrangements are in place.
Given the diverse nature of the countries in which DFID works and the different partners (both government and international) involved, the design of monitoring and audit arrangements varies considerably for both basket funds and budget support. The best figures we can provide are for funds disbursed in the 2005 budget year of the countries concerned.
DFID contributed to some 45 basket funds in 18 different countries in 2005 and delivered aid through poverty reduction budget support in 16 countries. In all these cases, DFID staff reviewed relevant financial information on how funds were used and participated in meetings with government and donor partners to discuss progress.
Around half of the basket funds were audited by the national audit institution and half by a specially appointed auditor. Poverty reduction budget support in 11 countries was audited by the national audit institution and in five, by a specially appointed auditor.
The nature of basket funding and budget support means that common agreements usually exist between government and donors on how funds will be used and the monitoring and auditing arrangements. Therefore there is no distinction between UK and lead donor arrangements.
There is no standardised definition of a basket fund. In order to respond to the question, we have defined it as having a common bank account into which at least two donors pool resources to support a government to implement an agreed sector programme or set of activities; and procedures relating to the operation of the bank account are additional to government’s own procedures and are governed by an agreement between government and donors.
Nearly all national audit institutions are statutorily independent of the executive branch of government and in this sense are non-governmental auditors, although they are the auditors of government’s expenditure. In many cases and particularly in regard to budget support, this is the form of independent audit carried out. This reply distinguishes between audit by the national audit institution and an audit carried out by a private sector auditor appointed outside normal national procedures to meet donor requirements.