Oversight of the Private Infrastructure Development Group
4 Jul 2014 03:15 PM
Full report: Oversight of the Private Infrastructure Development
Group
The Department for International
Development is the main funder of the Private Infrastructure Development Group
(PIDG), a multilateral organization that invests in infrastructure projects in
developing countries. DFID has worked to improve PIDG’s governance and
strategic thinking, but its oversight of PIDG has overall been insufficient to
ensure value for money from its substantially increased
funding.
Many PIDG projects look likely
to achieve good development impacts and financial returns, often in difficult
environments in Africa and south Asia. PIDG aims to operate where the private
sector would not otherwise invest, to demonstrate the commercial viability of
infrastructure projects that provide jobs or services for the poor such as
steel foundries in Nigeria or hydropower plants in Uganda. DFID has increased
its funding of PIDG and, by December 2013, its total funding of £414
million represented 70 per cent of all contributions to PIDG to
date.
According to today’s
report by the National Audit Office, DFID has been successful in encouraging
PIDG to improve its targeting of investments and performance reporting. The
Department has also increased its resources for overseeing PIDG and wields more
influence than other donors.
However, the Department has not
ensured sufficient monitoring and transparency of PIDG administrative costs,
although recent developments should strengthen PIDG’s processes. Some
PIDG board members made large expense claims: for instance, 15 flights were
booked from 2011, each costing over £5,000. PIDG revised its travel
policy in July 2014. PIDG has not regularly published or monitored its total
administrative and operational costs, which the NAO estimates were around
£23.8 million in 2012, representing 2.8 per cent of funds available to
invest.
DFID paid some money into the
PIDG Trust well before funds were paid out, because of over-optimistic
expectations. Between January 2012 and February 2014, an average of nearly
£27 million remained in the Trust, with a cost to the UK taxpayer of
between £0.2 million and £2 million. DFID kept its holdings under
review but was too optimistic about when funds could be used.
The NAO considers that
DFID’s decisions to invest in PIDG have sometimes been based on
insufficient analysis and scrutiny, and is concerned that DFID lacks
sufficiently robust information to demonstrate that investment in PIDG is the
best option.
Amongst the NAO’s
recommendations are that the Department should improve how it critically
reviews its funding of the activities of multilateral bodies such as PIDG,
releasing funds only once there is a clear need for the money and the capacity
to make good use of it.
“The Private
Infrastructure Development Group is providing important benefits to poor people
in difficult environments, but DFID does not have enough good evidence to show
that funding PIDG is the best option. Furthermore, DFID’s financial
control has been lacking, allowing the PIDG Trust to hold nearly £27
million worth of DFID funding since 2012. The Department has recently made good
progress in tackling these issues which will put it in a better position to
demonstrate value for money, but I consider that it should have taken more
action earlier given its decision in 2011 to increase funding for PIDG
five-fold.”
Amyas Morse, head of the
National Audit Office, 4 July 2014
Notes for
Editors
£700m
Maximum anticipated DFID funding
of PIDG between 2012 and 2015
70%
DFID’s share of all
donors’ funding to PIDG by the end of 2013
185m
Number of people PIDG estimates
will benefit from better services because of its agreed
projects
£6.2
billion
Reported by PIDG as the level of
total investment in 35 PIDG-supported projects which are fully constructed and
operational, including £220 million of donor funds
96 per
cent
Of DFID country teams agreed
that lack of adequate infrastructure was a major barrier to economic
development
£27
million
p>
Average amount of DFID’s
funding held unused in the PIDG Trust between January 2012 and February
2014
50
million
Number of people PIDG estimates
will benefit from new services from its investment in one project
alone
12
Deals agreed by PIDG in 2013,
compared with a target set in 2012 of agreeing 20
£6.5
million
Amount paid by DFID to PIDG in
December 2011, which was only paid out to the relevant PIDG facility in April
2014
11,500
Estimated number of jobs created
partly because of PIDG’s investment in a Ugandan hydroelectric power
plant
1. The Department for
International Development identifies a need for substantial infrastructure
investment in developing countries which cannot be met by public funding and
aid alone. It therefore aims to increase private investment from both
international and domestic investors. It describes the Private Infrastructure
Development Group (PIDG) as the most important way of supporting this aim. PIDG
is a multilateral organisation, founded by four donors including DFID in 2002,
and governed by development agencies from eight countries and the World
Bank.
2. In January 2014, DFID
published a strategic framework called ‘Economic development for shared
prosperity and poverty reduction’, which said that trade and investment
contribute to economic development. This may help countries move from aid
dependency, by raising productivity, creating jobs and boosting incomes. DFID
plans to double spending on economic development to £1.8 billion by
2015-16.
3. Press notices and reports are
available from the date of publication on the NAO website, which is at
www.nao.org.uk. Hard copies can be obtained by using the relevant links on our
website.
4. The National Audit Office
scrutinises public spending for Parliament and is independent of government.
The Comptroller and Auditor General (C&AG), Amyas Morse, is an Officer of
the House of Commons and leads the NAO, which employs some 820 staff. The
C&AG certifies the accounts of all government departments and many other
public sector bodies. He has statutory authority to examine and report to
Parliament on whether departments and the bodies they fund have used their
resources efficiently, effectively, and with economy. Our studies evaluate the
value for money of public spending, nationally and locally. Our recommendations
and reports on good practice help government improve public services, and our
work led to audited savings of £1.1 billion in 2013.