Written evidence submitted by Adam Smith International
Introduction
1.1 ICAI is doing a good job in helping hold UK aid spending to account. It is clearly fully independent of the departments it investigates and this provides credibility to its analysis and recommendations. The greater emphasis on results and impact in DFID’s programmes is partially attributable to ICAI, but also of course to DFID’s own efforts. The ICAI Commissioners are clearly dedicated to their work and leading from the front. The considerable amount of time they spend overseas on investigations is notable.
1.2 Accountability in development aid is often hard to achieve. After all one is spending other people’s money on other people. ICAI has added significantly to accountability in the UK. We now have one of the most accountable aid programmes in the world, if not the most accountable.
Specific comments
2.1 Follow-up reports are a good idea and are having an impact. Otherwise there might be a tendency for the agreed ICAI recommendations to receive less attention once the initial report has been put to bed.
2.2 ICAI could be more effective at investigating whether individual failings are in fact representative of systemic problems. For example, in section 3.3 of the Annual Report, concern is raised about £67m lying unused in a trust fund account. Putting money in trust fund accounts is a common means of “spending” one’s annual budget, even though the money may not actually be spent for years. To what extent does it happen? This is the sort of thing that would benefit from thorough investigation.
2.3 To take another example, ICAI’s report on education in Nigeria revealed that UNICEF’s performance was pretty useless. Section 4.5 of the Annual Report reveals that UNICEF continues to be pretty useless in Nigeria. We and others have experience of UNICEF performing poorly elsewhere. It’s quite probably the case that UNICEF performs poorly more or less everywhere. That’s something that ICAI should try and establish quickly. If that is the case then ICAI should not shrink from recommending that discretionary funding to this body should cease.
2.4 In relation to section 4.6 on use of contractors we can state that the ICAI intervention has had a very positive impact. There is now a much healthier and more collaborative relation between DFID and the key firms that work for it. However it must be said that significant problems do remain. For example we and others are deeply concerned at the relative lack of guidance provided to DFID personnel on issues such as post contract clarifications which open the space for considerable interpretation on how contracts should be negotiated subsequent to a supplier being confirmed as the preferred bidder. This often results in disputes and lengthy delays to the mobilisation of projects, a problem which ICAI has highlighted. There is also considerable confusion as to the most appropriate contracting model to utilise, and this causing further delays and disputes. We recognise, however, that the leadership of DFID is alive to these challenges and is taking steps to manage them, but progress is patchy and slow. There is good hope, however, that the programme management and rule simplification initiatives currently underway will address some of the underlying systemic issues.
2.5 DFID Nepal: Adam Smith International is a significant delivery partner for DFID Nepal. In response to section 4.4 on follow up we have noted a constructive and encouraging approach by DFID Nepal to improving collaboration with its suppliers with the broad aim of improving lesson learning and improving how suppliers and DFID work together on programme delivery and problem solving.
2.6 Section 3.10 refers to ICAI’s review of DFID’s Livelihoods portfolio in Afghanistan which concluded that it was the simpler interventions such as building roads that were more effective.
DFID’s Growth and Livelihoods portfolio in Afghanistan has been running for almost 10 years and has registered a number of success that, until recently included the increase in tax revenues (Tax reform moved from Growth and Livelihoods to DFID’s Governance Reform Team in 2013), creation of a credible and transparent budget process (again DFID’s Budget Strengthening project moved from Growth and Livelihoods to the Governance Reform Team in 2013) and reform of the mining sector that could well be the foundation of considerable economic growth over the years to come. While there is some truth to the criticism that DFID Afghanistan’s Growth and Livelihoods portfolio is overly ambitious at times, there remain ambitious development outcomes beyond ‘building roads’ that remain important to focus upon. While we appreciate that our projects were not reviewed by ICAI on this occasion, their success does suggest that complex interventions do indeed work in Afghanistan. This points to the need for ICAI to take care in making very broad brush conclusions, such as the one noted above. This will be particularly important when the large thematic investigations are undertaken.
2.6 Synthesis of findings – Section 5.2 – reflects upon DFID’s strategies and theories of change noting that they are usually strong at the individual programme level but weaker in respect of more complex interventions with multiple components. We are of the view that DFID and its key suppliers need to together concentrate on better explaining – in layman’s terms -how DFID’s programmes in general and for technical assistance programmes in particular deliver lasting and transformative change. For example honing the narrative of how strengthening revenue administration is a country can increase tax take and reduce over time donor dependency or how increasing power generation both generates economic growth and leads to a range of other social benefits – such as the improved educational and health outcomes from electric light and refrigeration. DFID’s public discourse on explaining and at times defending its programme need to move away from a focus on numbers such as inoculations given or bed nets distribution and seek to better explain the complex causal linkages that lead to lasting change. The upcoming ICAI investigation on impact will be a useful opportunity to address this issue.
2.7 A major issue with ICAI’s work overall is the relative lack of focus on DFID’s multilateral spending. Some 47% DFID’s budget is spent through multilateral organisations. It is difficult to evaluate this spending effectively without getting deep into the detail of what actually happens. Evidence suggests that there are very considerable problems with many multilateral aid organisations. This is not surprising as they are not particularly accountable. ICAI should investigate them in sufficient depth to gain an accurate understanding of their actual performance. There is some doubt as to whether the Multilateral Aid Review provides a reliable guide. For examples it awarded positive points to an organisation merely for being present in a DFID priority country. Being present is not a good indicator of quality.
2.9 The World Bank should be a particular focus. It was rated favourably in DFID’s Multilateral Aid Review and receives considerable funds from DFID. But there are very substantial problems with its modus operandi. There are often huge delays in its programmes, such that one has usually no real idea when they will start. Programmes are often cut up into tiny little bits, and contractual and administrative problems are very extensive. A thorough analysis of the World Bank that really delved deeply into how it conducts its work might well conclude that it is not suited to perform some of its functions, and that it should concentrate on others. This would have important implications for DFID’s own work.
2.10 Similarly it would be useful to examine much more deeply the major UN organisations to which DFID provides funds. Some of these, like UNDP and UNICEF, are direct implementers of projects. In an earlier report on Nigeria ICAI raised the question of whether DFID should contract UN organisations as implementers on a non-competitive basis. Is the performance of these organisations sufficiently strong that they should be given major tasks on a non-competitive basis? A thorough, in-depth examination of these organisations would yield valuable recommendations regarding if and how DFID should utilise them. We welcome the comments in section 5.5 of the ICAI Annual Report on the problem of relative lack of scrutiny of such organisations. ICAI is quite correct to say that they are treated differently because they are viewed as ‘development partners’ rather than contractors. ICAI needs to help rectify this problem by conducting more of that detailed scrutiny itself. This will not be welcomed by those organisations, but it needs to be done.