Donor oversight 'unacceptably poor'
The Department for International Development has been strongly criticised by MPs for channelling hundreds of millions of pounds of taxpayers' money into an overseas investment agency despite fears that the funds were going to projects linked to known fraudsters.
The UK is the biggest donor to the Private Infrastructure Development Group (PIDG) - which was set up to invest in infrastructure projects in developing countries - with total support expected to reach £860 million by 2017.
However the Commons Public Accounts Committee said that PIDG was beset by "poor financial management", lavish travel spending, and doubts about the integrity of its investments.
In its report, the committee raised concerns that funds had gone to companies with links to "known criminal fraudsters" and the "looting" of Nigerian oil revenues.
Dfid insisted the alleged links with a criminally fraudster had been thoroughly investigated and that "absolutely no evidence" had been found to support them.
However, the committee said that neither Dfid nor PIDG had provided the documentary evidence to support their assertions.
The committee also complained that PIDG board members had been allowed to run up tens of thousands of pounds in air fares for fully flexible business class tickets. Between January 2011 and July 2014, more than £75,000 was paid out on just 15 flights.
Committee chairman Margaret Hodge: "It is essential for public confidence in spending on overseas aid that the Department for International Development is able to demonstrate that UK taxpayers' money is being used for its intended purpose - of helping the world's poorest people - and not ending up in the wrong hands.
"Every pound that is lost to fraud and corruption is a pound that could have been spent on educating a child, improving health systems or supporting economic development.
"We recognise that PIDG operates in countries where standards of governance can be challenging. However the Department's oversight of PIDG has been unacceptably poor and has left it open to questions about the integrity of PIDG's investments and some of the companies with which it works."
A Dfid spokesman said: "Britain's investment in PIDG has helped to create 200,000 jobs and driven £6.8 billion of private investment into some of the world's poorest countries, developing their economies and making them less dependent on aid.
"We already have strong oversight of PIDG's activities and have recently clamped down on excessive travel rates. An independent review of their operations, backed by Britain, will ensure they continue to kick start growth in the developing world."
The Dfid spokesman said: "This PAC report suggests that UK funds are at risk of ending up in the wrong hands, citing alleged links between a convicted fraudster and a PIDG-backed company.
"These have been investigated thoroughly by the National Audit Office, as well as DFID and PIDG, and absolutely no evidence has been found to substantiate them."