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Serious risks in delivery of £1.3 billion aid project, watchdog warns

An aid watchdog has warned of "serious risks" in the delivery of a £1.3 billion project to help developing countries.

Proposals asking for cash from the Prosperity Fund have been vague and concerns have been raised over potential conflicts of interest, according to the Independent Commission for Aid Impact (ICAI).

Few details of where the money will go have been publicly released and there has been limited scrutiny of the scheme, it said.

In a report, it raised concerns over the speed at which Whitehall was being expected to increase aid spending - from £55 million this year to £350 million annually by 2019.

The fund was set up to reduce poverty and create business opportunities, particularly in countries like China, India, Mexico, Indonesia and Brazil, but faces challenges in meeting the aims, it found.

Outline bids for money, known as concept notes, "contained limited detail as to how either objective will be achieved", it said.

The report adds: "Given the speed at which participating departments are expected to move from concept notes through to full business cases and implementation at scale, the lack of delivery capacity in key departments and diplomatic posts presents some serious risks.

"The Prosperity Fund is supporting departments with training, guidance, advice and, in some cases, with additional contractors, to improve delivery capacity. For departments that have not managed large aid programmes before, there is very little time to put in place the required systems and capacities."

The fund, which has a budget of £1.3bn over five years and is part of the Government's overall commitment to spending 0.7% of national income on aid, is in its early days and has yet to implement any major programmes.

The ICAI said it recognised that "significant progress" had been made in a short time and pointed out that systems were still being refined.

But it said it was "particularly concerned" that although guidance states poverty reduction is a condition of funding, no targets are set.

It added: "We are also concerned that some of the potential suppliers of services to the fund have been providing advice (often informally at embassy/ high commission level) on programme design in ways that are not sufficiently transparent and could give rise to conflicts of interest."

The watchdog, which scrutinises taxpayer-funded UK aid, called on the Government to review the time scale for awarding funding.

Systems must also be "fully transparent" and the fund should be " more open" about its involvement with business so it avoids potential conflict of interests and secures value for money, the ICAI said.

It should also introduce "explicit and challenging" processes to make sure it meets international rules on aid, the watchdog added.

Alison Evans, ICAI's chief commissioner, said: "The Prosperity Fund is a complex and ambitious initiative, and marks a new direction for UK aid.

"It has made significant progress in a short space of time, but to deliver on its aims it must continue to improve its systems and processes, particularly given the risks associated with its current speed of delivery.

"We therefore recommend the Government reviews the current spending plans to ensure the amount of UK aid spent matches the Prosperity Fund's capacity to deliver the results for people in developing countries, and for business."

Oxfam's head of UK policy Tim Livesey said: "We are very concerned that the Prosperity Fund is failing to put poverty reduction front and centre of its work.

"The British public expects the UK's aid budget to be spent reducing poverty, and the fund should work harder to achieve this goal."

A Government spokesman said: "Sustained economic growth is the only long term solution to poverty and the Prosperity Fund supports the vital economic development needed to help middle-income countries, where more than 60% of the world's poorest live, to stand on their own two feet and become our trading partners of the future.

"Overseas Development Assistance spend under the Fund is and will continue to be fully consistent with UK law under the International Development Act and OECD DAC criteria.

"As ICAI acknowledge, the Fund has made significant progress in a short time frame and we are already implementing the vast majority of ICAI's early recommendations, including on transparency."

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