Foreign Aid

UK lawmakers unclear on how aid money is spent

(July 30, 2013) Lawmakers in the UK say the country is handing out billions of dollars in foreign aid without knowing how it is spent.

By Brady Yauch for Probe International

Lawmakers in the UK admit the country is handing out billions of dollars in foreign aid money to a host of multilateral institutions without having a clear idea on how the money is being spent.

That’s the conclusion of a report by the International Development Committee, which is currently reviewing how the UK’s aid money is being spent by the World Bank and other multilateral organizations.

The UK currently doles out $7.5 billion (US) in foreign aid to such organizations, accounting for about 60 percent of its total official aid budget.

But how the money is spent is largely a mystery, as aid officials admit that the last major review on the performance of aid programs completed in 2011 included just two visits to countries where the UK had no current aid operations –putting the UK in the compromised position of having to rely on the self-assessments of the multilateral institutions themselves.

“In countries where the UK has no bilateral aid programmes of its own, monitoring multilateral organisations is a key challenge for the Government,” Sir Malcolm Bruce, Chair of the International Development Committee, said in a statement earlier this week. He called on the government to “undertake more visits to countries in which the UK has no bilateral programmes.”

The UK currently gives more of its aid money – as a percentage of its total official aid budget – to largely unaccountable multilateral organizations than most other developed countries. The United States, for example, gives just 26 percent of its foreign aid money to multilateral agencies, preferring instead to use bilateral agreements where it has more control over how the money is spent.

Worse still, the UK currently has no way to determine whether they are getting “value for money” from the cash they are handing over to multilateral organizations. In their report, British lawmakers admit that aid officials failed to compare 35 of 39 international organizations – accounting for 42% of the entire UK aid budget last year – on a value for money basis to the UK’s own aid operations.

Failing to do so, lawmakers admit, makes its “difficult to know whether bilateral aid or multilateral aid represented better value for money.”

“When the UK provides funding to an international organisation, we need to have some assurance that this is better value for money than the alternative,” Bruce admits. “Comparing international organisations’ work with our own, bilateral aid programmes is imperative.”

In written evidence to lawmakers, the advisory firm Adam Smith International added that the UK currently gives too many resources to “slow and inefficient” multilateral organizations whose work is either “poor or not capable of being properly judged.” The firm added that there is a “problem of accountability” and that it is “is not really possible to judge the performance of these organisations.”

The report is the latest example of foreign aid funds being funneled through multilateral organizations with little to no accountability on how that money is being spent. While the UK is right to investigate the merits of the current multilateral aid programmes, they should also consider the longstanding advice of critics that the multilateral institutions are constitutionally unaccountable and un-reformable and should be shutdown altogether.

Brady Yauch is an economist and Executive Director at Consumer Policy Institute.

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