Budget support is aid provided directly to a partner government's central exchequer, and aims to reduce poverty through helping to fund the poverty reduction strategy of the beneficiary country. DFID's use of budget support has risen to £461 million, representing nearly twenty per cent of bilateral expenditure. Budget support has been designed to improve aid effectiveness by reinforcing developing country policies and systems, and reducing transaction costs. Despite having provided budget support in some countries for many years, however, the Department has not established whether it is in practice cost-effective. DFID's main criterion for providing budget support is that benefits must outweigh the risks, a judgement which is assessed subjectively by country teams. DFID assesses weaknesses in financial systems but rarely estimates the associated risks of corruption or waste of UK funds. DFID's monitoring has basic weaknesses in specifying suitable indicators and tracking progress against objectives. Bodies such as Parliaments, State Audit Offices and civil society organisations can provide effective challenge to governments and ensure that the poor benefit from budget support funding. DFID has not historically paid sufficient attention to strengthening domestic accountability. DFID also has a responsibility to UK stakeholders to demonstrate that funds have been spent effectively.

Many of the poorest countries in the world are affected by insecurity and violence. Insecurity has human and economic impacts, both for affected countries and their neighbours. Many insecure countries also receive lower levels of aid per capita than stable countries. These are good reasons to provide assistance to insecure countries, but there are also difficulties and risks. This report examines how the Department for International Development (DFID) works in insecure environments, ranging from some of the world's most insecure countries where armed conflict is still present and stabilisation is required, to less insecure contexts where donors may have more scope to engage in long term development projects. It examines what DFID is achieving and how it designs and manages its programmes, including dealing with risks to its staff. Insecurity is defined by reference to the incidence of political violence and the level of threat to aid workers. The NAO's work included four country case studies, literature and documentation review, data analysis and surveys. Their findings covered DFID's increasing interest in insecure environments, on what its expenditure has achieved in insecure environments, the design and management of country programmes, managing staff resources and costs and value for money. There are seven recommendations.

The Committee's report reviews the Department for International Development's 2007 annual report (HCP 514, session 2006-07, ISBN 9780102945195), focusing on issues of efficiency and effectiveness. The Committee welcomes the increase in the DFID's budget under the Comprehensive Spending Review Settlement for 2008-11, in line with the target of 0.7 per cent of Gross National Income to be allocated to Official Development Assistance by 2013. However, it notes the significant challenge for DFID in using this funding effectively when it is also required to reduce its administrative costs, and therefore staff numbers, at a time when its focus is shifting increasingly towards fragile states where providing assistance is resource-intensive. Concerns are raised that DFID continues to emphasise inputs rather than outcomes, although DFID's new Public Service Agreement Delivery Agreement and the plans to establish the Independent Advisory Committee on Development Impact should make it easier to identify whether DFID's expenditure is effective in reducing poverty in developing countries. Four areas for improvement in DFID's work are highlighted relating to gender equality, climate change, governance and agricultural development.

This report is the International Development Committee's annual review of UK aid programmes and the administration of the Department for International Development (DFID). The Committee finds that field work overseas should be given greater priority and Ministers must explain UK spending on humanitarian projects more clearly. DFID should not provide funds to support disasters in middle income countries by raiding bilateral development programmes in low income countries. Other wealthy OECD countries must play their part in providing humanitarian assistance. DFID should set out annually its provisional budget for humanitarian relief, what is held as contingencies for unpredictable events and how it will be deployed if not called upon. There has also been a decline in DFID's spending on budget support, the consequences of which should be assessed. £1,075 million of DFID's bilateral expenditure is spent through multilaterals and private contractors. DFID has put in place a number of changes to improve the value for money provided by spending through and should report on their effectiveness. The Committee is also worried that the Department actually spends 40% of its budget in the last two months of the year, which raises questions about the smooth running of management and planning processes. DFID staff should have longer postings overseas (normally a minimum of four years) so that they can develop a deeper understanding of the culture and politics of the country they are working in and engage more effectively with the country's politicians.

A compilation of reports previously issued by the OECD.