Forum for Trade and Development

Devex’s Molly Anders continues the discussion on the changing landscape of UK aid strategy.

Operations are shifting at the U.K. Department for International Development in the wake of the new aid strategy, released in late 2015. Following closely on its heels, the Independent Commission for Aid Impact is revamping the way it monitors DfID, paying special attention to past shortcomings and potential pitfalls in the new cross-government approach.

“We’ll look beyond DfID, given the shift in responsibility for [official development assistance] spending signaled in the aid strategy,” Alison Evans, chief commissioner of the aid watchdog told Devex.

In 2015, government departments for the first time took part in a competitive bidding process to access funds for official development assistance. As a result, aid disbursed by DfID will drop from 85 to 72 percent going forward, according to the new aid strategy, with the remainder spent by other government departments, including the Foreign Commonwealth Office, the Ministry of Defense, the Department of Health, the Ministry of Innovation and Business, the National Security Council and others.

While some non-DfID departments, like the FCO, have handled aid for years, others, like the Department of Health, will need both technical expertise and additional oversight to manage the new aid flows.

“There are some details to be worked out on the precise governance of some of the programs,” Mark Lowcock, permanent secretary for DfID, told members of parliament during an International Development Committee evidence session in December. “What we’re observing is quite a high appetite from other parts of government for staff, capability and advice from DfID.”

Pete Vowles, head of program delivery at DfID, named a few other challenges for oversight, even under the current model.

“How we design and deliver iterative and adaptive programs that are more responsive to change and remain accountable” can be difficult for scrutinizers like ICAI to follow, he told Devex, compared with “traditional views of projects where everything is approved and then delivered and can be easily tracked,” especially, he said, in fragile or difficult environments.

And for organizations counting on U.K. aid for project funding, or looking to partner across the new spectrum of aid-equipped government bodies, the process is likely to require a little more homework for everyone involved, for example new resources to follow procurement procedures for lesser-known parts of government, like the Department of Health.

“The new methodology gives us the flexibility to tailor our scrutiny to the new context and to put more emphasis on evidence and learning, while meeting accountability requirements,” Evans said.

The result, from ICAI’s perspective, will be more delivery channels in need of aid oversight, and notably no new funding, staff or resources for the watchdog, according to the new aid strategy allocations.

In order to cope with DfID’s new reach, ICAI has introduced a wider variety of reporting methodologies based on integrating previous learning, with involvement from ICAI earlier in the results chain.

“We plan to focus on areas where UK aid is making significant results claims, areas where risks are rising or changing and areas of new and innovative programming,” Evans said.

One example of how future accountability mechanisms will work is ICAI’s report on DfID’s efforts to eliminate violence against women and girls, which features one of ICAI’s new learning reviews. The new reviews are designed to offer a “real-time view” of DfID programs.

Areas of concern

Evans said ICAI is increasingly working “beyond financial aid alone,” namely DfID’s use of alternative forms of development finance, like concessional loans.

And DfID, like the rest of U.K. government, is under pressure to meet the treasury’s “nonfiscal capital” targets, meaning nongrant financial instruments and contributions. According to a memo from ICAI to the IDC, “In the short term, DfID’s options are constrained and it may need to consider options such as increasing its contribution to the multilateral development banks,” namely the World Bank’s International Development Association, to which the U.K. is already the largest contributor.

While the emphasis on concessional loans in lieu of traditional grants aligns with the ongoing tilt in DfID’s aid priorities toward economic development, DfID is limited here both by the rules set by the Organization for Economic Cooperation and Development on ODA, which limit how much nonfiscal financing counts as ODA, and by their parallel focus on fragile states, which prove riskier environments for investment.

“We need to strengthen further the core finance complex in the department, because as the balance sheet grows, we need more capability to manage those ongoing investments effectively, especially given the slightly complex budgeting, provisioning, accounting reevaluation system that government has for managing assets on its own balance sheets,” Lowcock said.

In terms of new financial flows, the ICAI memo points out that DfID is working on a range of new financial instruments, including investment funds for agri-business, renewable energy and financial services for the poor.

The new emphasis on fragile states poses another risk, both in terms of transparency and financing. How DfID manages operations in fragile states, the ICAI alluded, will likely be one of the largest areas of focus for their work.

Given that DfID’s engagement in the past in fragile states has consisted of smaller, more focused program delivery, a new model will require a rebalance of financing. Among about 1,600 active projects, only about 50 projects comprise half of all U.K. aid. The new focus is likely to require a shift toward smaller projects in countries in which DfID does not historically have a presence. Lowcock pointed out, however, that its cross-government collaboration with FCO could ease efforts, allowing DfID to use embassies and consulates in-country for operations.

ICAI singles out the U.K.’s new cross-government funds, like the Ross Fund, the Prosperity Fund and the National Security and Stability Fund, as particular areas of concern.

“Interdepartmental funds are intended to promote a more whole-of-government approach to addressing public threats,” the memo states. “However, past experience suggests that this is not an automatic outcome.”

Finally, ICAI called for DfID to clarify the division between bilateral and multilateral funding channels; an issue Lowcock acknowledged in recent hearings, and said has been taken into consideration in the department’s ongoing bilateral and multilateral aid reviews.