Sections:
Department for International Development Expenditure Statistics 2007/08
Section 3
Understanding DFID Expenditure Statistics
Classification of Bilateral and Multilateral Aid
1. The classification of aid as bilateral or multilateral is based on definitions laid down by the DAC. On the whole bilateral assistance is provided to partner countries while multilateral assistance is provided as core contributions to international organisations. While much of DFID’s expenditure is clearly identifiable as bilateral or multilateral in nature, there are some anomalies.
2. Funds can only be classified as multilateral if they are channelled through an organisation on Annex 2 in the DAC Statistical Reporting Directives which identifies all multilateral organisations. The DAC list of multilaterals is updated annually based on members nominations; organisations must be engaged in development work to be classified as multilateral aid channels.
3. Aid may be classed as bilateral while a case is being made for the recipient institution to be recognised by the DAC as a multilateral organisation. Once the DAC has recognised the multilateral organisation the aid may be retrospectively re-classified as multilateral.
4. While core funding to multilateral organisations is always classified as multilateral expenditure, additional funding channelled through multilaterals where the recipient country/region, sector, theme or individual project is known is classified as bilateral expenditure. This would be the case in circumstances where DFID has control over what the money is being spent on/or where it is being spent. (For example, where a DFID country office transfers money to a multilateral organisation for a particular piece of work in that country.) Where DFID is supporting the internal capacity building of a multilateral organisation or is funding a secondee to, or administration costs of, a multilateral organisation this is classified as multilateral expenditure.
Classification of DFID Bilateral Aid Types
5. Financial Aid – Poverty Reduction Budget Support (PRBS) – Funds provided to developing countries for them to spend in support of a government policy and their expenditure programmes whose long-term objective is to reduce poverty; funds are spent using the overseas governments’ own financial management, procurement and accountability systems to increase ownership and long term sustainability. PRBS can take the form of a general contribution to the overall budget - general budget support - or support with a more restricted focus which is earmarked for a specific sector - sector budget support.
6. Other Financial Aid – Funding of projects and programmes such as Sector Wide Programmes not classified as PRBS. Financial aid in its broader sense covers all bilateral aid expenditure other than technical cooperation and administrative costs but in SID we separately categorise Humanitarian Assistance, DFID Debt Relief and ‘other bilateral aid’. Aid and Trade Provision which was previously identified in SID has now been merged into ‘other financial aid’ as it is a rapidly declining flow.
7. Technical Cooperation - Activities designed to enhance the knowledge, intellectual skills, technical expertise or the productive capability of people in recipient countries. It also covers funding of services which contribute to the design or implementation of development projects and programmes. This assistance is mainly delivered through research and development, the use of consultants, training (generally overseas partners visiting the UK or elsewhere for a training programme) and employment of ‘other Personnel’ (non-DFID experts on fixed term contracts). This latter category is becoming less significant over time as existing contracted staff reach the end of their assignments.
8. Humanitarian Assistance - Provides food aid and other humanitarian assistance including shelter, medical care and advice in emergency situations and their aftermath. Work of the conflict pools is also included.
9. DFID Debt Relief - This includes sums for debt relief on old DFID aid loans and cancellation of debt under the Commonwealth Debt Initiative (CDI). The non-CDI DFID debt relief is reported on the basis of the ‘benefit to the recipient country’. This means that figures shown represent the money available to the country in the year in question that would otherwise have been spent on debt servicing. The CDI debt cancellation is reported on a ‘lump sum’ basis where all outstanding amounts on a loan are shown at the time the agreement to cancel is made.
10. Other Bilateral Aid – This category covers support to the developmental work of UK and international Civil Society Organisations, (increasingly through partnership agreements with CSOs). It includes bilateral aid delivered through multilateral organisations including aid delivered through multi donor funds such as such as the Education Fast Track Initiative. ‘Other bilateral aid’ also includes any aid not elsewhere classified such as DFID’s Development Awareness Fund.
11. DFID has introduced a new reporting system, ARIES, which integrates all of DFID’s current financial and project management systems. To coincide with the introduction of this new system, DFID has produced a revised aid classification. The new classification will be the basis for reporting next year and is consistent with current DAC proposals for a new aid typology reporting standard.
DFID Imputed Share of Multilateral ODA
12. When DFID provides core contributions in support of multilateral organisations development work, DFID is unable to track directly its contributions to country or sector level. However, to provide a further indication of the destination and sector of DFID aid, DFID uses the overall proportions of ODA reported by the relevant agencies to impute a DFID contribution.
13. DFID uses the breakdown of ODA reported by each multilateral organisation to the DAC to estimate what proportion of its core contributions are spent in each country and sector. Where a multilateral organisation does not report its development assistance to the DAC but the multilateral is only mandated to work in a particular country, region or sector, DFID allocates 100% of its core contributions to the relevant country, region or sector. If a multilateral organisation does not report to the DAC but works in multiple sectors and/or countries then 100% of DFID’s core contributions are allocated to the category ‘non-sector allocable’.
Sector Expenditure Estimates
14. Every bilateral DFID project is marked with up to eight ‘input sector codes’ that identify where funding will be spent. There are around 200 input sector codes, each of which comes under one of ten broad sectors:
- Education (including primary education and teacher training)
- Health (including communicable disease control, health personnel and maternal health)
- Social Services and Infrastructure (including social protection, shelter and housing and food security)
- Water Supply and Sanitation (including water resource policy and waste management)
- Government and Civil Society (including public administration, financial management, human rights, elections, statistics, culture, strengthening civil society, civilian peace building and de-mining)
- Economic (including transport, communications, energy, banking, financial services, agriculture, forestry and fishing, manufacturing, construction, trade, tourism, urban and rural development)
- Environment Protection (including bio-diversity, climate change and flood prevention)
- Research (including all topics of research)
- Humanitarian Assistance (including emergency relief, emergency food aid and reconstruction)
- Non-Sector Allocable (including debt relief, support to refugees in developing countries and development awareness)
15. For each sector code selected, budget holders indicate what proportion of the total commitment is expected to be spent in or on behalf of that sector. Prior to October 2002 just one dominant sector was identified which limits comparison between the data in this report and older data.
16. DFID is increasingly moving towards larger and longer term programmes including a greater use of Poverty Reduction Budget Support (PRBS) both General Budget Support (GBS) and Sector Budget Support (SBS). In PRBS, funds are provided directly to recipient governments and pooled with their own funds. Partner governments then use their own allocation, execution, accounting and reporting systems in spending the aid to support their development programmes. Understanding how the UK's money is used therefore means understanding the way in which the recipient government allocates and uses all its funds. In managing PRBS, DFID country offices monitor this process closely.
17. PRBS cannot be separately identified from partner government funds and while Sector Budget Support, by its very nature, is easily allocable to sectors, General Budget Support cannot be easily broken down. For statistical purposes, DFID has developed a standardised methodology to notionally allocate General Budget Support to sectors in the same proportions as the recipient government allocates total resources to ODA eligible activity. This means, for example, if a government intends to spend 25 % of its budget on education, 25 % of GBS provided would be attributed to education. This method allows GBS to be allocated to eight broad sectors.
18. It is important to note that this methodology does not attempt to say where DFID funding actually goes, but where it would go if partner governments allocated it in proportion to their own budget. The methodology also does not attempt to measure, or claim to measure, marginal changes in governments’ expenditure resulting from aid flows.
19. Projects classified as having the humanitarian aid type can be identified in five sectors. These are:
- Social Services and Infrastructure (emergency social protection and non-emergency food aid)
- Government and State Building (civilian peace building and de-mining)
- Research (humanitarian research)
- Humanitarian Assistance (including emergency relief, emergency food aid and reconstruction)
- Non-Sector Allocable (support to refugees in developing)
20. This means a higher amount of expenditure is classified under the humanitarian aid type (£430m in 2007/08) then is included in the humanitarian assistance sector (£314m).