DfID Financial Management : Fifty-Second Report of Session 2010-12, Report, Together with Formal Minutes, Oral and Written Evidence

This report examines the Department for International Development's financial management capability, its increasing focus on value for money, and the challenges it faces in managing its increasing programme budget while reducing its overall running costs.

DFID is protected from overall expenditure reductions as the Government has committed to increasing the UK's aid spending to 0.7% of gross national income by 2013.

The Department faces a substantial challenge to improve its financial management while reducing its administration costs by a third over the next four years.

The Committee welcomes the planned introduction, in 2011, of a finance improvement plan.

DFID must now keep up the focus on better financial management.

There is concern that the Department does not quantify the likely level of leakage through fraud and corruption. And DFID is only considering fraud risk at the level of delivery method rather than at a country level.

Management of fraud risk will require a stronger framework for ensuring money is properly spent on the ground, with effective monitoring and pro-active anti-fraud work. The likely increase in funding via multilateral organisations (which then determine how to distribute the aid worldwide) might not ensure value for money as DFID does not have the same visibility over the cost and performance of multilaterals' programmes as it does over its own bilateral programmes.

Finally, the Committee is concerned that the Department still has insufficient data to make informed investment decisions based on value for money.