Hundreds of millions given to foreign aid fund that lacked scrutiny, say MPs

Hundreds of millions of pounds of British public funds have been handed over without proper scrutiny to an aid agency accused of funding international criminals, according to a report published on Thursday by parliament’s spending watchdog.

The Department for International Development (DfID) faces damning criticism for failing to examine the financial management of the Private Infrastructure Development Group (PIDG), the agency which is meant to fund large projects in developing countries.

MPs on the public accounts committee heard allegations that £19m of PIDG money may have ended up with a firm associated with the convicted money launderer James Ibori, because of a failure of control. Ibori, a petty thief who rose to be one of Nigeria’s richest men, received a 13-year jail sentence in London in 2012 after admitting fraud of nearly £50m. The Metropolitan police estimate he had embezzled £157m of Nigerian public funds.

Separately, the agency gave nearly £20m to another company named as a suspect in a Nigerian financial inquiry into allegations of looting of the country’s oil revenues, the report said.

MPs 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 last year, more than £75,000 was paid out on just 15 flights.

Some of the report’s claims have been hotly disputed by the government. A DfID spokesman claimed the alleged links with Ibori had been thoroughly investigated and “absolutely no evidence” had been found to support them, or the claims related to the looting of oil revenues.

However, the committee said that neither DfID nor PIDG had provided documentary evidence to allay MPs’ concerns.

The report comes amid a debate on the Conservative right over whether to support David Cameron’s commitment for the UK to spend 0.7% of its annual income on aid. Ukip has argued against the ring-fencing of aid.

Margaret Hodge, the committee’s chair, said that DfID’s performance had been unacceptably poor. Civil servants had been unable to demonstrate that UK taxpayers’ money was being used for its intended purpose of helping the world’s poorest people, she said.

“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.”

PIDG, funded by seven nations including Britain and Switzerland, encourages private companies to carry out infrastructure projects in developing countries.

The report said there was a lack of oversight and a hands-off approach to the fund from ministers and officials. It also said that Britain did not exercise its voting rights well to control the funds and had allowed other countries equal voting rights, even though the UK provides 88% of PIDG’s money.

Poor oversight by officials allowed money to sit idle in a bank account rather than funding projects, the committee concluded. Between January 2012 and February last year, an average of £27m of DfID’s money was left sitting in PIDG bank accounts managed by SG Hambros.

Mary Creagh, Labour’s international development spokeswoman, said that Cameron had promised value for money on aid but the report showed he had failed to deliver.

“The national audit office and now the public accounts committee have exposed that the Tory-led Government has been pouring hundreds of millions of pounds of taxpayers’ money into the Private Infrastructure Development Group without checking where it went,” Creagh said.

“Ministers have sat on their hands while Britain’s aid efforts have been undermined. If the Tories and Lib Dems don’t know where aid money is going then how can they measure if it is working?”

A DfID spokesman claimed there was no proof that Ibori had been linked to a PIDG-backed firm.

“Britain’s investment in PIDG has helped to create 200,000 jobs and driven £6.8bn of private investment into some of the world’s poorest countries, developing their economies and making them less dependent on aid,” he said.

“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 kickstart growth in the developing world.”

ActionAid’s head of advocacy Barry Johnston said public confidence in aid spending rested on effective scrutiny and showing the positive impact it was having on the lives of the poorest.

“The Department for International Development has led globally on ensuring ever greater transparency from aid recipients – and NGOs and governments have risen to this challenge.

“This report demonstrates that it’s time we applied the same relentless focus on transparency and results to funding to the private sector,” he said.