Mr. Seamus McCarthy:

The key areas of responsibility of the Department of Foreign Affairs and Trade are foreign policy advice and coordination, promotion of Ireland's economic interests abroad, management of the country's development aid programme and provision of passport and consular services for Irish citizens.

The activities and running costs of the Department are funded under two Votes. Gross expenditure under Vote 28 amounted to €209 million in 2011, the largest element of which was salary costs of 1,250 staff, which came to €92 million. Office premises expenses including costs associated with Ireland's network of embassies and missions abroad amounted to €22 million. The account shows that €48 million was paid in contributions to international organisations while €12 million was spent on support services for Irish immigrants. Vote 29 for international co-operation is administered by the Department's Irish Aid unit. Spending under Vote 29 accounted for 79% of the official development assistance provided by the State in 2011.

Chapter 19 is compiled each year to provide an overview of Ireland's official development assistance programme and its delivery. Having grown over several years to a peak of €921 million in 2008, expenditure on official development assistance declined in each of the past three years. The total programme spend was €657 million in 2011. As the committee is aware, the UN has a long-standing target for developed countries to contribute development aid equivalent to 0.7% of GNP each year. Ireland's programme expenditure reached a peak of 0.59% of GNP in 2008, which had fallen back to 0.52% in 2011. Development aid is channelled through a variety of partner organisations, including Government bodies, NGOs, civil society organisations and multilateral aid agencies. The delivery channel used in each target country depends on the type of assistance required and the conditions which exist there. Risks of fraud, corruption and misappropriation are significant factors to be taken into account in devising an aid delivery strategy. Robust systems are required to provide assurance to taxpayers that funds reach their intended destination, are used for their intended purposes and that projects have the desired impact. The chapter therefore examines the Department's systems for audit and evaluation of its spending.

The Department has put in place a specialist evaluation and audit unit which aims to provide assurance that funds are used for their intended purpose and that value for money is achieved. The primary focus of the unit's audit work is the assessment of the appropriateness and reliability of the accounting and financial management systems of the partner organisations through which aid is delivered. The work of the unit is overseen by the Department's audit committee. In early 2011, the unit adopted a new policy of carrying out formal assessments of public financial management systems in countries where aid is channelled through governmental systems. These assessments encompass all elements of systems including budgeting and planning, accounting, auditing, reporting and local parliamentary oversight. There is a particular emphasis on assessing the status, independence and capacity of national audit offices. The policy is to carry out two assessments during each five-year strategic plan for a programme country. The first assessment is carried out at the planning stage and concentrates on the risks associated with channelling funds through governmental systems. The second assessment is at the mid-point of the five-year term and focuses on any changes to the public management financial environment.

The Department has reported that audit coverage of approximately 90% of expenditure in programme countries has been achieved in recent years through a combination of activities carried out by the Department's internal auditors, audits commissioned by Irish Aid or partner organisations and reports from national audit offices in recipient countries. Qualified opinions were expressed in relation to 7% of the programme country expenditure in 2009 for which audits have been completed indicating that material concerns had been identified in the course of audit. For a further 38% of Irish Aid expenditure in programme countries, the implication of the audit reports received was unclear. This included scenarios in which either the report received expressed no clear opinion or the national audit office expressed a qualified opinion on one department or ministry but it was not possible to identify the precise amount of Irish Aid expenditure to which the opinion related. We recommended that the Department establish a central system to record all audit reports received and to record and track over time the proportion of expenditure in each programme country receiving qualified or adverse audit opinions. Clearer audit assurance must be sought where it has not been obtained in the past.

Irish Aid also provides funding on a multi-annual basis to support the strategic plans of five large Irish NGOs. The evaluation and audit unit audits the control structures and governance arrangements in these organisations on a cyclical basis and completed audits in 2011 of grants awarded to GOAL and Concern. At an overall level, the audits found that both organisations had complied with the requirements of the schemes and that expenditure had been properly accounted for, however the audits raised certain issues on corporate governance in GOAL. The accounting officer will be able to outline the extent to which these have been addressed.

The unit also carries out an extensive programme of evaluation of aid on a cyclical basis co-ordinated with its strategic planning and formal procedures to track and follow up on recommendations. Evaluations completed in 2011 of the country strategies for Zambia and Mozambique found that both were having a positive impact while highlighting a number of issues to be considered in the context of development of the next country strategy papers. Following the recent field trip, members of the committee have first-hand knowledge of the work being done in Mozambique, the impact being achieved and the control issues which arise and how they are dealt with. To facilitate meaningful evaluation across the entire programme of development aid, the chapter recommends that the Department should ensure that funding provided to partner organisations is linked to appropriate and measurable targets.

The committee is aware that since chapter 19 was completed, the Ugandan auditor general has reported on the misappropriation of €11.6 million of donor funding, including €4 million contributed by Irish Aid towards reconstruction in the north of Uganda. It was not only a serious crime against the Irish taxpayer but also against severely disadvantaged communities in northern Uganda who were expected to benefit from infrastructural developments in health, education, water, sanitation and roads. The accounting officer will be able to brief the committee on the outcome of the Department's investigations to date into that matter. I intend to review the circumstances surrounding the misappropriation during the audit of the 2012 appropriation account.