John McCullagh
Irish Aid

22/12/2003

A key issue for Irish Aid is to ensure that public funds for which we are responsible reach their intended destination and are spent effectively.  Effective systems of financial control and audit are vital to enable tracking of funds, to ensure that they are spent for the purposes for which they were intended and to eliminate unnecessary costs and waste.  We also need to ensure that funds are spent efficiently and effectively and that Ireland’s development cooperation programme has a real and positive impact on the lives of the poorest of the poor.  Orthodox financial controls alone will not provide this information and rigorous programme appraisal, monitoring and evaluation are crucial.

Development cooperation is not a risk-free business.  While the programme has grown every year since 1992, expansion accelerated dramatically in 2002 with an increase in the budget of €100 million (30%), the largest single increase in the history of the programme.  This increase was equivalent to the entire programme in 1996.  Absorbing increases of this magnitude and at the same time ensuring maximum value for the additional monies poses a significant challenge.

Development cooperation is also an increasingly complex business.  Assistance is delivered through a range of mechanisms: stand-alone projects, Area Based Programmes (ABPs), Sector Wide Approaches (SWAps) and General Budget Support.  Funds are channelled through various routes: direct to partner Governments; via multilateral organisations (UN, EU etc.); through Irish, international and domestic non-governmental organisations (NGOs) and through basket funds, where Ireland co-funds programmes along with other donors.  By definition, a larger number of actors and mechanisms adds greater complexity to accountability processes.  In many cases we do not retain direct control over the use of the funds and we therefore must build in appropriate checks and balances so that we can be sure that contributions reach their destination and have the maximum impact.

Irish Aid has taken a pro-active approach to the management of risk.  In association with independent consultants, a risk management system is being developed and implemented across all our programme countries.  The system identifies potential risks to the programme; the probability of those risks occurring; the assessment of potential impact; and the measures which should be taken to avoid or manage the risks.  Each Embassy monitors and reports regularly on risks.

Governance
Corruption can pose problems anywhere, including in developing countries where the risk of corruption is often perceived to be greater.  In addition to implementing a range of financial controls and other safeguards, Irish Aid, in line with international best practice, funds a range of programmes to promote good governance in developing countries.  Governance relates to the way in which power is exercised in the management of a country’s economic and social resources for development.  In particular, programmes promote respect for human rights and for the rule of law; political openness and participation; accountability and transparency, and administrative capacity and efficiency.  A number of programmes specifically aim to strengthen Parliamentary oversight and to support audit functions in partner countries.  More generally, good governance is one of four cross-cutting issues which must be addressed in all Irish Aid programmes.

Financial Control
The quality of financial control depends crucially on the calibre of staff and the quality of the systems in place.  In relation to staffing, we employ three professional accountants, two in the role of Internal Auditor and one as Financial Controller.  These officers provide technical and professional expertise to enable us to manage the budget effectively.  In addition, an experienced accountant is employed in each of the six programmes countries in Sub-Saharan Africa and in South Africa.  Programme country offices, together with all of the accounts under their control, are subject to annual external audit by reputable international accounting firms.  Specific components of the programme such as ABPs and/or SWAps are also subject to audit on a regular basis.

A new financial management system, installed three years ago, operates not only to the best Irish standards but also meets OECD reporting and expenditure itemising requirements.  The system facilitates tracking and analysis of all accounts and has greatly increased the speed of financial information retrieval, oversight and accountability across the programme. An equivalent system is being introduced by the Department in respect of non-development programmes and costs funded under Vote 38.  Financial procedures and guidelines are kept under ongoing review and preparation of a consolidated manual of procedures is underway.

As with other Departments, the Office of Comptroller and Auditor-General plays an oversight role and the entire programme is subject to the scrutiny of the Public Accounts Committee.  The proposed allocation for each year is scrutinised by the Oireachtas Committee on Foreign Affairs while the programme is also scrutinised by the Sub-Committee on Development and (in respect of EU aspects of development) by the Committee on European Affairs.

In line with best practice it is intended to establish an independent Audit Committee for the Department of Foreign Affairs before the end of 2003. This committee will provide an independent appraisal of the audit arrangements for the development programme with a view to strengthening internal controls and enhancing the quality of the service provided by the Evaluation and Audit Unit.

Effectiveness and Value for Money
While it is critical that funds reach intended beneficiaries and are spent in accordance with programme priorities, it is equally critical that we can deliver an effective programme of assistance which makes a real difference to the lives of those most in need.  Financial controls will not, of themselves, guarantee a quality programme.  The key to effectiveness lies in proper appraisal and planning, partnership, effective monitoring and thorough evaluation.

Development is a very complex, technical business.  Access to expertise across a range of sectors as diverse as health, education, macro-economics, agriculture and governance, is a key requirement for an effective programme.  Irish Aid has assembled an in-house team of sector specialists, whose role, in association with locally-recruited specialists in programme countries, is to provide expert analysis of programme proposals and to monitor the effectiveness of programme implementation.  Because many programmes are co-funded with other donors, we contribute to joint assessment of initiatives and at the same time can learn from the experience of others.  In cases where we have insufficient expertise in-house or where an independent assessment is required, we can draw on additional support from external consultants.

A key oversight role is assigned to the Programme Appraisal and Evaluation Group (PAEG), an inter-departmental group comprising senior officers from the Department, representatives of interested Government Departments and a team of independent experts.  PAEG assesses draft proposals for a wide range of programme activities.  In carrying out appraisals, the independent experts consider whether proposals:

• are locally driven, locally owned and fit with local priorities;
• are consistent with Irish Aid policy, our strategy for the particular country and can be implemented within available resources;
• have been designed to the highest standards of development practice and appropriate technical standards;
• address poverty reduction and other crosscutting issues such as HIV/AIDS, governance, gender and environment, and assess the degree to which there is flexibility to take account of unforeseen problems or changing circumstances.

Complementing its active role in the area of audit, the Evaluation and Audit Unit is responsible for conducting a schedule of evaluations.  The purpose of evaluations is to determine the effectiveness and efficiency of programmes, to identify areas for improvement and to enable us to learn lessons which can be applied elsewhere in the programme.  More than 50 assignments have been carried out by the Unit over the last four years including an extensive thematic evaluation of ABPs and a number of evaluations of support for NGO activities.  The Unit has also participated in joint donor/government exercises.

Influencing Others
The levels of assistance which we channel through the UN and other multilateral organisations have increased significantly in recent years.  Ireland has sought membership of boards of several multilateral bodies.  This gives us a greater say in strengthening the systems of these organisations and to take part in joint evaluations.  We have also been to the fore among donors in pushing for reform of the EU’s development programmes and these efforts are now paying off in terms of greater efficiency and effectiveness of assistance.

External Influences
A key external factor in ensuring effectiveness is the OECD’s Peer Review process.  Peer review, as the name implies, is undertaken by other donors and a team of experts from the OECD Secretariat.  The process involves a field visit to one of the programme countries: in-depth interviews with personnel from the Department; discussions with members of the Foreign Affairs Committee and with stakeholders in the development cooperation field (e.g. NGOs), other Government Departments which have an involvement in development and independent experts.  An oral hearing is held, with participation from OECD member states and the findings of the review are published and disseminated widely.  The last review, published in 1999, gave a very positive endorsement of the programme while identifying some priorities for further work.  The next review, to be undertaken in 2003, will assess the extent to which we have addressed the recommendations of the 1999 review and will provide an up-to-date analysis of the strengths and weaknesses of the programme.

An important recommendation of the Ireland Aid Review, which was published and approved by Government in spring 2002, concerned the establishment of a broadly-based advisory board to oversee the programme and provide strategic direction.  The Advisory Board whose current chairman is Chris Flood is working closely with Irish Aid to maximise the quality, effectiveness and accountability of the programme.  Its main areas of responsibility are to:

• provide general oversight and advice on the strategic direction of the programme;
• enhance the independence of the evaluation and audit arrangements;
• commission research of the highest international standards;
• keep overall staffing needs of the programme under review;
• organise the Development Forum to facilitate strategic dialogue with NGOs and missionaries.

The role of stakeholders and the general public in promoting value for money cannot be under-valued.  Irish Aid facilitates this role by engaging in regular dialogue with NGOs and other organisations.  A newly launched website is raising awareness of the development programme as part of a wider communications strategy: what we do and how public funds are spent.  Greater awareness and in time, making results of programme evaluations available publicly on the website should promote accountability and ultimately enhance the effectiveness of Irish Aid’s activities.  This will be crucial if public confidence in and support for a growing programme is to be maintained and increased.