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Overseas Aid

Volume 485: debated on Tuesday 16 December 2008

To ask the Secretary of State for International Development (1) what criteria his Department uses to ensure that multilateral donors have at least as good financial and physical safeguards in place as a bilateral aid project undertaken by his Department; (241908)

(2) what auditing function his Department carries out with multilateral donors.

When the Department for International Development (DFID) funds multilateral partners for specific projects we subject them to regular mandatory project cycle management design and approval procedures to establish accounting and audit, in-year and end of project reporting standards and processes. To safeguard UK taxpayers' investment, these include detailed narrative and financial reports on project expenditure, progress achieved with resources used, and assurance that any problems identified are being addressed.

For grants to international organisations, we insist on evidence about the use of funds from the organisation's own audited accounts, or special audited statements. Our requirements are set out in standard (MOU) texts and are built into the funding agreement. It is mandatory for projects with an approved commitment of £1 million and above and which are at least one year old to be reviewed and scored annually.

For core funding, which is general support to the multilateral institution's overall budget, DFID uses institutional strategies (ISs) to set the framework for the funding relationship. ISs include a performance framework that contains measurable indicators and targets, with baselines and data sources that are clearly specified. IS objectives are scored annually. DFID uses the agency's own monitoring systems as far as possible supplemented by independent reviews as required on an annual basis. We insist on evidence about the use of funds from the organisation's own audited accounts, or special audited statements, as well as additional internal controls. For example, the World Bank provides us with an annual set of accounts that has been audited by an external, private sector audit firm, as well as an annual external audit of their financial risk controls. The World Bank also has a strong internal audit department and an independent evaluation arm that regularly tests the quality of the project portfolio and reports publicly. Similarly, the European Union's administrative structures include anti-fraud and internal audit units and the European Court of Auditors, as well as an Evaluation Department.

It is rare for us to provide physical assets to an international organisation. Where we do, these typically remain the property of the UK Government. If the organisation wishes to dispose of the assets or use them for a different purpose to that originally intended, DFID must approve the decision.