NAO tells a positive story on DFID's approach to fraud

Posted On: 
10th February 2017

Save the Children looks beyond the headlines to see a good review for DFID's approach to tackling fraud.

Accusations that DFID loses hundreds of millions of pounds to fraud is not fair argues Save the Children.
PA Images

Given the recent press attacks on UK aid spending, the prospect of a report by the National Audit Office (NAO) on DFID’s approach to tackling fraud must have been an enticing one for headline writers. However, it’s worth going beyond the headlines to get a full picture of the issue.

The report points out that fraud cases have increased at DFID, but this is more positive than it seems, as it highlights that this “as a result of their work to increase awareness of fraud and reporting requirements among its staff and suppliers.” Indeed DFID is to be commended on its efforts to increase transparency and scrutiny, which as the report makes clear, are baring results. 

Many reports claim that the report reveals ‘hundreds of millions’ are lost to fraud by DFID every year, but this is not entirely fair. This angle conflates DFID’s reported fraud figures – 0.03% (around £3m) – with academic research that estimates likely total losses to fraud by any organisation. 

The NAO cites University of Portsmouth research, saying that “providing an accurate calculation of the amount any organisation or sector is losing to fraud is difficult, as data are only readily available for detected fraud… [the research finds that] the amount of expenditure lost to fraud and error across a number of organisations is likely to be between 3% and 10% of total expenditure”. The NAO does not suggest that DFID’s reported fraud figures are inaccurate. In fact it compares them to similar figures at comparable organisations: “In 2015, USAID reported that 0.0055% of its annual budget was lost to fraud and corruption, and AUSAID reported that it lost 0.026%”. So nothing in the report suggests that DFID loses hundreds of millions to fraud, indeed, as it notes that the department recovers around two thirds of reported fraud losses, a more accurate net figure is around £1 million per year, or roughly 0.01% of DFID’s total budget.

The report notes that “fragile states are more likely to be vulnerable to fraudulent activity”, and it found that the highest number of serious fraud cases occurred in countries designated as fragile states. DFID’s ambition to focus half of its budget on fragile states is very welcome, but in meeting this ambition, value for money considerations are not straightforward. A pound spent in South Sudan is riskier than a pound spent in Ghana. Delivery costs and the chances of failure or fraud are both likely to be higher in the former, as the report makes clear. Fragile states, however, are home to some of the world’s most desperate people, and higher risks are not a reason not to act for them. In Yemen, for example, where a combination of war and poverty have created near-famine conditions, Save the Children staff and partners have screened over 90,000 children for malnutrition at a cost of $20 per child. That would have been more straightforward in a country in which it was easier to operate, but it shouldn’t stop us from doing what we can for Yemen’s children, and certainly still counts as value for money.

In the Secretary of State’s response to the NAO she said “it is time for the global aid community to be honest about the challenges it faces”, and she is right – the debate around the aid budget must be more frank, and more nuanced. The NAO’s report today points out that, in working to relieve poverty and respond to humanitarian crises, DFID comes up against fraud all over the world, and lost around 0.03% of its budget to it. It notes too that the Department for Work & Pensions lost around 0.7% to fraud during the same period, and HM Revenue & Customs around 3%. In the light of this, commentary on Britain’s aid budget should pay it the courtesy that domestic spending is more readily afforded – the acceptance that not every pound of government money makes the impact intended for it, but this doesn’t mean it’s not worth it.

British aid saves and changes lives around the world; there’s an easy chance for a positive headline about British aid every single day.