Hundreds of millions of pounds in overseas aid is lost to fraud every year undetected by the Department for International Development, an auditors’ report suggests.
Only 0.03 per cent of the £10 billion a year spent on aid is recorded as fraudulent by the department run by Priti Patel, even though it sends money to many of the world’s most corrupt countries. The implausibility of such low levels of fraud is spelt out by the National Audit Office in a report on waste in the aid budget.
Although the auditors do not attempt to quantify the scale of unreported fraud, they highlight that other agencies and departments admit to significantly higher levels of misused money. HMRC admits that 3 per cent of its budget is lost through fraud and the Department for Work and Pensions puts its fraud losses at 0.7 per cent. Both operate in Britain, considered one of the world’s least corrupt societies.
The NAO notes that “only small numbers of serious fraud cases” are reported by Dfid in countries such as Iraq, Zimbabwe and South Sudan despite their reputation for financial crookedness. “There is no clear correlation between perceptions of corruption and numbers of fraud cases reported” by Dfid, the auditors say.
Britain’s aid spending has risen by more than a quarter in four years thanks to David Cameron’s pledge to meet a United Nations target of devoting 0.7 per cent of national income to overseas development. Critics fear that the budget is out of control, with cash rushed out in an annual dash to meet spending requirements.
Most of the aid is delivered through international agencies such as the World Bank and UN. “Detection is particularly challenging where Dfid does not have direct control over all the funds it provides,” auditors warn. Coincidentally, the NAO points out that the UN has the same low level of reported fraud as Dfid at just 0.03 per cent.
The auditors point to studies by the centre for counter-fraud studies at Portsmouth University, which has estimated that the amount of expenditure lost to fraud and error across a number of organisations is likely to be between 3 per cent and 10 per cent of the total. Although the NAO does not quantify a 3 per cent fraud loss to the Dfid budget, which would be consistent with HMRC’s findings and the minimum figure in the academic survey, that would be equivalent to nearly £300 million.
Priti Patel said the Department for International Development had “overhauled its approach to fraud”
While Dfid actively seeks out fraud, the NAO discovered that the British Council, which has a £1 billion-a-year turnover and 11,000 employees operating in 114 countries, created a counter-fraud team only in 2015 and until recently it consisted of one person. The council, a charity promoting culture that receives £162 million a year in public funds, two thirds of it from the overseas aid budget, estimated that it lost £35,000 to fraud last year, the first year it collected data.
A Whitehall source said: “Everyone alleges there’s loads of fraud. Dfid is alive to the issue.”
Ms Patel said: “The UK operates in the most fragile countries because these are the places where the poorest are dying from starvation, drought and disease; these are the places where conflict and economic failure drive mass migration; and these are the countries where it is in the UK’s direct national interest to keep them stable and secure.
“In the last three years Dfid has overhauled its approach to fraud, meaning our robust systems are better at preventing and detecting fraud, and better at getting taxpayers’ money back.”