Mr. Seamus McCarthy:

I thank the Chairman. Key areas of responsibility of the Department of Foreign Affairs and Trade include foreign policy advice and co-ordination, 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 - Foreign Affairs and Trade amounted to €215 million in 2016. Administration subheads accounted for 71% of that expenditure. The largest element of this was the salary costs of some 1,280 staff, which came to just under €79 million. Office premises expenses of €23 million included costs associated with Ireland’s network of embassies and missions abroad. The bulk of the non-administrative expenditure related to contributions to international organisations and grants for support services for Irish emigrants. Receipts into the Vote comprised mainly fees related to the issue of passports and visas, and other consular services. These receipts were approximately €12.3 million, or 30%, ahead of the level projected for the year, probably reflecting the first impacts of the UK Brexit vote in mid-2016. A net surplus of just over €8.7 million was liable for surrender to the Exchequer at the end of the year.

Vote 27 - International Co-operation is administered by the Department’s development co-operation division and funds approximately two thirds of Ireland’s official development assistance, with a particular focus on sub-Saharan Africa. The 2016 appropriation account for the Vote records gross expenditure of nearly €485 million. A surplus of nearly €2 million was liable for surrender to the Exchequer.

Chapter 14 of my report was compiled to provide an overview of the control systems in place in respect of bilateral assistance provided under Vote 27 and to review changes in the Department’s administrative procedures for bilateral assistance following a significant fraud in Uganda in 2012. Some €386 million, or just over half of Ireland’s development assistance, was applied as bilateral assistance. Bilateral assistance is the provision of direct assistance to a developing country through a variety of channels, including the country’s government agencies, non-governmental organisations, international agencies and missionary societies. The remainder of the development assistance budget was applied as multilateral assistance, where contributions to international agencies or organisations are pooled and applied for development purposes.

Figure 1, which is now on screen, shows the breakdown of bilateral assistance in 2016. As can be seen in figure 1, a key element of Ireland’s programme is the targeted delivery of assistance to eight selected key partner countries under long-term strategic partnerships. Assistance provided under these partnerships is managed primarily by the Irish embassy in the partner country. A five-year country strategy plan is drawn up for each of the key partner countries, outlining a framework of how the embassy will accomplish certain target outcomes. A review of the country strategy plans for each of the eight key partner countries conducted as part of the examination identified that only five of the strategies were current. The Department’s objective is to have new strategies completed and approved in time to coincide with expiring strategies. However, where there are significant changes in the key partner country, either regionally or nationally, or where a mid-term review suggests that a strategy is worth continuing, the strategy may be extended.

Given the nature of development assistance and the context in which it is delivered, the risk of fraud, corruption and misappropriation are significant factors to be taken into account by all donor countries. Following the discovery in 2012 of a significant fraud involving Irish funds in Uganda, the Department has revised its assurance process for the development assistance programme. More emphasis is now being placed on pre-funding assessment, monitoring and evaluation of projects and systematic review of external audit findings. Members of the committee who travelled to Tanzania last month will have had the opportunity to examine the practical application of that framework.

At the time we were completing the report, the Department had not reported publicly on suspected frauds in funded organisations or on the percentage of assistance funds that is lost to fraud. In 2016, 12 instances of fraud were reported in funded partner organisations amounting to potential losses of €312,000 or 0.043% of Irish development assistance funding provided in 2016. When recovered amounts of €126,000 were accounted for, the potential net loss was 0.026%. This is broadly in line with the levels reported by a number of government aid agencies in other jurisdictions. The Department has agreed a recommendation to develop a methodology to publish information in respect of frauds and alleged frauds affecting Irish Aid funds awarded to partner organisations, most likely through its departmental annual report.