LONDON (AlertNet) - More UK aid could be lost to fraud and corruption because of Britain's plans to channel more aid money to fragile and conflict-ridden states such as Somalia and Pakistan, a parliamentary watchdog said on Thursday.
The Department for International Development (DFID), one of only two ministries being spared deep budget cuts, plans to increase its aid spending to 0.7 percent of gross national income by 2013 while reducing its overall running costs by a third.
Many of the "fragile states" DFID is refocusing its aid on are developing countries which are mired in conflict, politically unstable, or unwilling to tackle poverty – conditions that usually translate into weak governance.
"The Department is going to be spending more in fragile and conflict-affected countries and the danger to the taxpayer is that there could be an increase in fraud and corruption," said chairwoman of the public accounts committee, Margaret Hodge.
"However, the Department could not even give us information as to the expected levels of fraud and corruption and the action they were taking to mitigate it," the opposition Labour member of parliament said.
The committee complained that not enough progress had been made in terms of DFID's financial management. It said that the investigation of fraud was reactive and reported levels of fraud "unbelievably low".
For the 2009-2010 financial year, DFID uncovered losses due to fraud of 459,000 pounds ($750,000) – around 0.01 percent of overall spending – of which 199,000 pounds have been recovered so far.
The watchdog also raised concerns about DFID's plans to spend more money through multilateral organisations such as the European Commission and World Bank and less through bilateral programmes.
"This poses a risk to value for money because the Department will have less oversight than it does over country-to-country programmes," Hodge said.
"Indeed, we are concerned that the strategy has more to do with the fact that it is easier to spend through multilaterals than go through the process of assessing value for money of bilateral programmes."
'BRITISH AID SAVES LIVES'
International Development Secretary Andrew Mitchell said the government took a "zero tolerance" approach to corruption.
"British aid saves lives and we clamp down ruthlessly on any misuse of funds," he said.
The coalition government, which came to power in May 2010, had made huge changes to the way DFID runs its finances, Mitchell said, adding that aid was linked to "tangible results on the ground".
Aid workers and many experts argue it is impossible to eliminate corruption entirely and that risks often have to be taken to help people in need.
In a separate statement published on the same day as the public accounts committee report, Mitchell said British aid had helped to feed 2.4 million people facing severe hunger in the Horn of Africa.
"We are providing vaccinations and medicines to those left desperately weak and vulnerable to disease," he said.
"But the scale of the crisis remains huge. In Somalia alone, more than 400,000 children are at risk of death and the coming of the rains increases the risk of disease sweeping through overcrowded refugee camps."
(Editing by Rebekah Curtis)