Corporate report

FCDO response to the Independent Commission for Aid Impact recommendations on tackling fraud in UK aid, April 2021

Published 20 May 2021

This was published under the 2019 to 2022 Johnson Conservative government

The Government welcomes the Independent Commission for Aid Impact’s (ICAI) cross-government review on Tackling fraud in UK aid where it looked across the 5 departments allocated more than £100 million Official Development Assistance (ODA) in 2019 to 2020.

Each government department spending ODA is responsible and accountable for ensuring they manage fraud risks. This is treated seriously, with departments doing everything possible to prevent, detect and respond to any cases robustly. Where fraud does occur, ODA Spending Departments have effective processes to recover any funds lost and we recover more than 90% of losses each year from fraud.

This report has recognised that:

• systems, processes and structures are relevant to tackle fraud
• fraud risks are well-considered at both the country and programme level
• staff and delivery partners understand the need to report suspected fraud

The UK Government, led by the Cabinet Office, has invested significantly in recent years to improve departments’ ability to identify and manage fraud risk. The focus has been on designing the right structures, investing in training and awareness, and strengthening the language on fraud in grants and financial agreements.

Commercial reforms introduced over several years have increased scrutiny of supply partners’ costs and overheads, reduced the fees paid to consultants and set the highest standards for ethical behaviour by our own staff and our supply partners. Procurement is carried out in accordance with Public Contracts Regulations and scrutinised by senior officials, Ministers, Internal Audit Department and the Cabinet Office.

Recommendation 1

Consideration should be given to establishing a centralised ODA counter-fraud function to ensure good practice and consistency of the ODA counter-fraud response and share intelligence across all ODA spend.

Response: Partially accept

The Government recognises the need for a centralised counter fraud function and has invested in a Counter Fraud Centre of Expertise hosted in the Cabinet Office. The centre brings the function together, oversees the development of capability through the Government Counter Fraud Profession and supports public bodies to enhance their fraud response by working with experts to develop tools and services to help find and fight fraud, including through the use of data and analytics. The centre also leads the International Public Sector Fraud forum, engaging public sector agencies globally to understand, find and stop fraud. To create a separate ODA counter fraud function would not represent value for money and would create a duplication of effort.

ODA fraud governance will be strengthened to facilitate the sharing of good practice and to increase consistency of approach for counter fraud activity across ODA spending departments. The merger between DFID and FCO provides the opportunity to combine counter fraud knowledge and capability and FCDO will lead on creating an ODA counter-fraud forum. This will be achieved through existing infrastructure including the ODA Senior Officials Group, ODA learning days and formalising current informal communications channels.

Recommendation 2

ODA spending departments should review and streamline external whistleblowing and complaints reporting systems and procedures and provide more training to delivery partners down the delivery chain on how to report safely.

Response: Accept

The Government has invested considerable efforts in raising awareness among our own staff and our implementing partners making it clear that all credible suspicions must be reported. In our programmes, reporting processes are often adapted to consider contextual, language and cultural differences relating to the operating environment. While the scope of our whistleblowing policies covers internal staff, we take robust measures to protect the identity and safeguard the safety of all complainants.

Supply Partners with a contractual requirement to comply with the FCDO Supply Partner Code of Conduct are required to maintain and cascade an up to date whistleblowing policy for their own staff and for all their delivery partners. They must also circulate the FCDO whistleblowing hotline within their own and their delivery chain partners’ organisations over the life of their contracts.

The findings of the review have highlighted that more can be done. The FCDO will lead on:

• a review of external whistleblowing and complaints reporting systems
• a review and update of the range of communication channels to partners on expectations in terms of how, what and who to report concerns to
• a review and update of public statements to ensure we are sufficiently clear on our commitment to confidentiality
• strengthening the scrutiny of partners’ whistleblowing procedures
• a review of our tendering documentation to ensure clear and independent reporting process for delivery partners

Recommendation 3

Counter-fraud specialists should increase independent oversight of ODA outsourcing, including systematically reviewing failed or altered procurements, and advising on changes to strengthen the actual and perceived integrity of ODA procurement.

Response: Accept

The review found no evidence of fraud in ex-DFID’s procurement systems and successive reviews by ICAI have found that ex-DFID ensures good value for money from its procurement of the UK’s world-leading aid programmes. Commercial reforms introduced over several years have increased transparency and scrutiny of supply partners’ costs and overheads, reduced the fees paid to consultants and set the highest standards for ethical behaviour by our own staff and our supply partners throughout our supply chains. The FCDO Supply Partner Code of Conduct requires supply partners to demonstrate value for money through financial transparency through annual declarations and enhanced check-ins through the life of the contract. This requires supply partners to strive for continuous improvement of financial management and governance processes, which the FCDO can monitor.

The report highlights that the Internal Audit Department (IAD) conducts independent reviews of ex-DFID’s procurement systems. The scope of these audits will include consideration of fraud risks associated with procurement. Where irregularities are identified they are reported to the investigations team for further examination.

Programme procurement evaluation procedures are carried out in line with central government guidance. Procurement specialists undergo regular mandatory ethics training and specific procurement fraud training. Commercial will consider strengthening the process for systematically reviewing failed or altered procurements.

Recommendation 4

To aid understanding and learning, ODA counter-fraud specialists should invest in collecting and analysing more data, including on who bears the cost of fraud, and trends in whistleblowing and procurement.

Response: Accept

We acknowledge the ICAI recommendation on the need for further investment in the collation and analysis of more data. Our data capture, analysis and reporting are consistently evolving. We will seek out opportunities to build on this including by analysing data to target future investigations, capacity building and awareness raising based on risk factors and emerging threats. As part of this work, we will explore how to better understand who bears the cost of fraud.