The Department of Foreign Affairs and Trade (DFAT) submitted that ‘development effectiveness is a high priority for the Australian Government’.
This chapter considers evidence received in the inquiry on the overall effectiveness of Australia’s aid program. The chapter begins with a brief review of the performance framework for Australia’s aid program. The chapter then considers recent reviews carried out by the DFAT and the Organisation for Economic Co-operation and Development (OECD) Development Assistance Committee (DAC). The chapter concludes with a brief summary of other views.
Evidence on effectiveness in relation to specific areas of the aid program is discussed in subsequent chapters where relevant.
In 2014, the then Minister for Foreign Affairs, the Hon. Julie Bishop MP, outlined a new performance framework for Australia’s aid program, Making Performance Count: enhancing the accountability and effectiveness of Australian aid, which accompanies Australia’s aid policy.
The framework aims to link performance with funding and to strengthen the focus on results and value-for-money.
The performance framework sets out ten high-level strategic targets to ensure that the aid program is effective and delivers on government priorities. The targets, which apply across the aid program, include:
increasing Australia’s aid-for-trade investments to 20 per cent of the aid budget by 2020;
ensuring that more than 80 per cent of investments, regardless of their objectives, effectively address gender issues in their implementation;
increasing the proportion of country program aid that is spent in the Indo-Pacific region to at least 90 per cent from 2014-15; and
reducing the number of individual investments by 20 per cent by 2016‑17 to focus efforts and reduce transaction costs.
The performance of the aid program is judged on its progress in meeting these targets. Progress is reviewed each year and reported publicly in a Performance of Australian Aid report (see next section).
DFAT explained that the performance framework also includes assessment and reporting at the country and regional program level, at the partner level, and at the individual investment level.
DFAT stated that the performance framework provides ‘a rigorous approach to ensuring that the department is achieving results and demonstrating value for money at all levels of the aid program’.
Office of Development Effectiveness
The Office of Development Effectiveness (ODE) is an independent unit within in DFAT that ‘monitors the quality and assesses the impact’ of Australia’s aid program.
The ODE conducts evaluations with a policy, sectoral, program, and thematic focus, supports program areas in DFAT to conduct their own evaluations of individual investments, reviews the quality of evaluations in DFAT and the uptake of recommendations, and oversees the evaluation policy for the aid program.
The Independent Evaluation Committee (IEC) acts as an external advisory body for the ODE. The IEC comprises three independent members, including the Chair, along with a DFAT Deputy Secretary. External members are appointed by the Minister for Foreign Affairs. The IEC reviews and endorses all ODE products.
DFAT published 41 evaluations in 2017 and planned to publish 56 in 2018.
In its submission, DFAT highlighted an ODE evaluation of progress made in strengthening disability inclusion in Australian aid. The evaluation was published in December 2018.
The Committee received some evidence from stakeholders on the performance framework and the ODE.
In its peer review of Australia’s aid program (see below), the OECD DAC concluded that ‘Australia has set out a clear and comprehensive performance framework to accompany its new aid policy and strategic targets’.
The OECD DAC went on:
... The new framework places a heavy emphasis on ensuring that taxpayer dollars are well spent and demonstrate results. Overall, Australia’s aggregated performance reporting system is well oriented to ensure that performance information is used for overall direction, communications and accountability.
However, the OECD DAC also found there was less emphasis on the use of performance information to guide decision making at a strategic level.
World Vision submitted that while the framework has driven a more rigorous performance assessment process, aid funding remains only partly aligned to performance. World Vision suggested that performance metrics could be refined ‘to capture a more holistic picture of aid performance’.
Some stakeholders, including the OECD DAC, suggested clearer alignment between the performance framework and the Sustainable Development Goals (SDGs).
Other stakeholders recommended additional targets. For example, the Australian Disability and Development Consortium recommended that the performance framework include a strategic target ‘that an ambitious percentage of investments, regardless of their objectives, will effectively address disability inclusion in their implementation’, analogous to the existing strategic target for the empowerment of women and girls.
In relation to the ODE, Oxfam Australia submitted that the ODE is ‘absolutely critical to the effectiveness, transparency and accountability of Australian aid’.
The Lowy Institute submitted that the ODE ‘continues to provide good assessments of individual projects’. However, the Institute also noted DFAT’s reliance on the private sector and consultants for independent reviews and assistance on project design. The Institute recommended that the ODE ‘have its mandate and resourcing expanded to include independent oversight of project design and implementation, as well as project evaluation‘.
World Vision recommended that the ODE should have a role in monitoring Australia’s advancement of the Sustainable Development Goals through the aid program.
The OECD DAC reported that Australia ‘has a strong evaluation system and has continued support and funding for high-quality evaluation work’. Suggestions for improvement included ensuring that evaluations are published online in a timely manner and are accompanied by management responses, and enhancing stakeholders’ involvement in evaluations.
Recent reviews of aid performance
This section briefly summarises the findings relating to performance from two 2018 reports on Australia’s aid program:
the Performance of Australian Aid 2016-17 report, published in May; and
the OECD DAC peer review for Australia, published in March.
Performance of Australian Aid 2016-17
In May 2018, in line with its commitment to publish an annual performance report, DFAT published the Performance of Australian Aid 2016‑17 report.
The report provides an update on the ten strategic targets for Australia’s aid program, summarises the performance of global, country, and regional programs, and summarises performance data for the six priority areas for investment under the aid policy.
The report stated that, by the end of 2016-17, nine of the Australian Government’s ten strategic targets for the aid program had been achieved. The target on increasing aid-for-trade investments was achieved ahead of schedule, but the target on gender equality had not yet been achieved.
The report noted that, as most of the targets had been achieved, and in light of the release of the Foreign Policy White Paper, a review of the targets is currently underway.
Across the aid program, 90 per cent of investments were rated as satisfactory for effectiveness and 85 per cent of investments were rated as satisfactory for efficiency.
However, aid investments in the Pacific were rated lower on quality assessment criteria than the aid program as a whole. The report stated:
Gender equality continues to be a particular challenge, requiring the gradual and systematic questioning of well-established and closely held social norms. ...The Pacific continues to be a challenging environment for monitoring and evaluating aid investments, given host government capacity constraints and underdeveloped systems.
Ten of the 29 program objectives in the Pacific were assessed as ‘at risk’, meaning that progress was less than expected, and one program objective in Nauru was assessed as ‘off track’.
Progress against performance benchmarks by Pacific programs was described as ‘mixed’, with 59 per cent of benchmarks achieved, 32 per cent partly achieved, and 8 per cent not achieved (data was not available for some benchmarks).
On sector and thematic performance, the report found that the largest change in aid investments in priority areas from 2015-16 to 2016-17 was in health, where expenditure decreased as a proportion of the overall aid program from 14 per cent to 11 per cent. The report attributed this difference to ‘the changing priorities and nature of Australia’s engagement in several country programs in South-East and East Asia’.
OECD DAC peer review
As noted in the previous section, in March 2018 the OECD DAC published its peer review of Australia’s aid program (DAC review).
In a submission to the inquiry, the OECD explained that the objectives of DAC reviews are to:
... hold members accountable for the commitments they have made; review their performance against key dimensions of development cooperation and other domestic policies with an impact on developing countries; and, learn from and share good practice.
DFAT provided background on the conduct of the DAC review:
The peer review was conducted by DAC experts and peer reviewers from Belgium and Japan over the course of 2017. The peer review team visited Australia and Solomon Islands as part of the review process. In February 2018, Australia appeared before the DAC to respond to the draft peer review report.
The OECD’s submission to the inquiry summarised the main findings and recommendations of the DAC review, focusing on five key topics in the terms of reference of the present inquiry.
In relation to the strategic and development goals of Australia’s aid program, the DAC review found:
Australia actively seeks to shape the regional and international environments and to strengthen global co-operation in ways that advance Australia’s interests.
The DAC review noted Australia’s advocacy for responses to the unique challenges of small island developing states, its role in disaster risk reduction, resilience, and response, and its ‘strong commitment to mainstreaming gender’.
However, the DAC review expressed concern that reductions in the aid budget since 2013 had ‘affected the scope of both the development and humanitarian programmes’. The DAC review recommended Australia ‘re‑introduce an ambitious target for increasing [overseas development assistance] against gross national income and set out a path to meet the target’.
The DAC review also noted that while Australia influenced the 2030 Agenda, it had yet to explicitly align its aid policy and performance frameworks to the SDGs.
The DAC review recommended that, as Australia refocuses its aid program on its national interests, it should take care to maintain sufficient focus on poverty reduction and increase focus on environment and climate.
The DAC review noted that DFAT lost a significant number of experienced aid management staff in the course of its integration with AusAID, and recommended DFAT ensure it has the capability ‘to match the ambition of its development policy’:
The effective use of aid and the effective use of policy levers beyond aid rely on development expertise. ...DFAT has a limited number of specialists working on the aid programme, preferring to invest in the skills of generalists and to outsource implementation to contractors. This approach exposes DFAT to risks related to development effectiveness, programme efficiency and reputation.
DFAT stated that it was considering the recommendations of the DAC review:
DFAT is considering all of the recommendations of the peer review, including in light of work already underway, such as establishing new aid governance arrangements, the recent launch of the Workforce Plan, and continuation of policy work to better integrate environment and climate change considerations into the aid program.
Other views on effectiveness
While much of the evidence received by the Committee related to particular aspects of Australia’s aid program, the Committee received some more general evidence about the effectiveness of the aid program, which is summarised in this section.
ChildFund Australia submitted that there is ‘strong, independent evidence’ of the effectiveness of the Australia’s aid program.
The Australian Council for International Development (ACFID) highlighted the effectiveness of Australian aid and development non-government organisations (NGOs) working in partnership with the government through the Australian NGO Cooperation Program (ANCP).
The ANCP, which was established in 1974, provides annual funding to accredited Australian NGOs to support projects in sectors including education, health, water and sanitation, food security, and economic development.
ACFID referred to an ODE evaluation of the ANCP conducted in 2015, which found:
... in 2013–14 ANCP represented around 2.7 per cent of the aid budget and delivered 18.2 per cent of the department’s output-level aggregate development results. In comparative terms the ANCP reported the largest number of aggregate development results of any program in DFAT while being the eighth largest program by value.
By contrast, a number of stakeholders suggested that it is difficult to evaluate the effectiveness of activities implemented by the United Nations (UN) and other multilateral organisations, as well as projects managed by private contractors.
For example, Marie Stopes International Australia (MSIA) submitted:
... since the rapid scale up of contracts to commercial entities in the Australian aid program, there have been no performance reports or evaluation. As a result, it is currently difficult to comment on aid effectiveness as a whole under the managing contractor and facility model.
Similarly, Save the Children submitted:
... in practice, it is difficult to properly assess whether Australia’s aid is being spent in the most efficient and effective manner given the lack of transparency and project-level reporting by the largest recipients of Australian aid, being private contractors and multilateral organisations.
Save the Children noted that in 2015-16 more than 41 per cent of Australia’s aid funding was allocated to multilateral organisations and 20 per cent was allocated to private contractors.
Oxfam Australia also referred to the relative increase in aid funding expensed through private contractors, which it attributed to the policy decision to consolidate the number of individual aid investments:
This policy decision was made on the basis that ‘fewer, larger investments will increase the impact and effectiveness of our aid, as well as reduce the administrative overheads required to manage the program’.
However, the International Development Contractors Community (IDCC) cautioned against an over-reliance on the UN and other multilateral organisations, suggesting that contributions to these organisations were less effective than direct bilateral engagement:
DFAT has much less direct control or oversight of activities implemented by UN and multilateral agencies, and is less able to ensure that their reporting focuses on the results the government wants to achieve. By DFAT’s own measures, multilateral aid rates as significantly less effective, with partner performance assessments of multilateral aid programs rating at 4.5, compared to 4.9 for commercial implementing partners or 4.8 for Australian non-government organisations.
Similarly, Save the Children submitted:
... considerable evidence suggests that channelling funding through UN agencies can also lead to increased costs, delays, and less flexibility in the delivery of aid.
The IDCC recommended a ‘relative reduction in the share of multilateral mechanisms in the aid mix’.
Save the Children suggested Australia increase accountability for the UN and other multilateral organisations in relation to cost efficiency, transparency and accountability, timeliness, and public engagement. Save the Children also recommended that private contractors be held to the same standards as NGOs.
The University of Queensland highlighted a need for greater research into ‘the effectiveness of the private sector in building successful development opportunities and positively impacting Australia’s partnerships with Indo‑Pacific neighbours’.
MSIA suggested an independent evaluation comparing the effectiveness of aid managed by commercial entities with other forms of aid.
Oxfam noted that DFAT has ‘flagged plans to evaluate the effectiveness of large-scale commercial development facilities’.
Lastly, Save the Children submitted that there is scope for Australia to improve the geographic targeting of its aid program at both the national and sub-national levels.
In relation to aid allocations at the national level, Save the Children recommended that priority be given to countries in highest need according to the UN Committee for Development Policy’s Least Developed Country methodology.
In relation to aid allocations at the sub-national level, Save the Children explained:
Just as poverty reduction occurs at vastly different rates across countries and global regions, poverty reduction within countries is normally a spatially uneven process. Deep pockets of poverty can persist even in countries that, at the aggregate level, are experiencing rapid poverty reduction.
Country-level poverty assessments regularly identify specific areas or groups of people with particular characteristics experiencing higher-than-average probabilities of being poor. They may be locked in poverty traps or other low-level equilibriums in which aggregate economic growth does not translate into employment income or transfers for them.
Save the Children therefore recommended that Australian aid be focused on geographic areas and population groups with the highest concentration of poverty and barriers to sustainable development.
Australian aid stakeholder surveys
In a submission to the inquiry, the Development Policy Centre at the Australian National University (DPC) summarised the findings of its 2013 and 2015 Australian aid stakeholder surveys, which sought the views of ‘aid experts who have worked with the aid program regularly and who have first-hand experience of its performance’. The surveys had 356 and 461 respondents respectively.
The DPC noted that stakeholder views included that the performance of the aid program had worsened between 2013 and 2015, that there had been a loss of expertise in the aid program, and that transparency and community engagement had gone from strengths of the aid program to weaknesses.
The DPC also explained that stakeholders perceived a ‘loss of strategic clarity’ and saw the aid program as being ‘less about poverty reduction and more about the national interest’.
The DPC stated that the survey results highlighted the importance to aid effectiveness of ‘attributes such as staff expertise and continuity, results orientation, and avoidance of micromanagement’, suggesting that these benchmarks were absent from those used by the government.
The DPC also suggested that DFAT should be encouraged to gather feedback from stakeholders such as contractors and NGOs:
These are, of course, not the ultimate beneficiaries of Australian aid, and they have their own interests. But they are well-informed, they are trusted by the Australian government with billions of dollars, and their views should be taken account of.
Contraction of Australia’s aid budget
Finally, a strong theme in evidence was that the contraction of Australia’s aid budget had undermined the ambition and effectiveness of the aid program.
In its peer review of Australia’s aid program, the OECD DAC found:
Since 2013, in cumulative terms, the Australian aid budget has been cut by over 30%. Overall budget cuts have affected the scope of both the development and humanitarian programmes. Furthermore, Australian budget projections suggest that the ratio of ODA to gross national income will continue to decline, reaching a historic low of 0.22% in 2017/18.
The OECD DAC suggested Australia was ‘falling behind’ other DAC members—while Australia’s gross domestic product (GDP) per capita is above the OECD average, its allocation to aid is below the average of DAC members. The OECD DAC also noted that reductions to the aid budget have been made in the context of increasing overall government expenditure.
The Lowy Institute also noted the ‘dramatic contraction’ in the aid budget, suggesting that the aid program is ‘the least generous it has been in Australia’s history’.
World Vision Australia described the impact of reductions to the aid budget:
Despite the vital role that Australian aid plays in building a safer and more prosperous region, successive aid cuts totalling more than $11 billion since 2014 have undermined Australia’s role as a trusted donor and hampered Australian Government's ability to deliver on the outcomes and intent of its 2014 aid Policy. ...Since the 2014 aid policy was introduced, Australian aid investments to vulnerable countries have significantly decreased – and unfortunately this has not been as a result of a decreased need for such investment. Reducing the aid budget reduces Australia's impact on poverty reduction and its contribution toward the SDGs, meaning that more people will be left behind.
Not only do cuts to the aid program impact vital poverty reduction and peacebuilding initiatives, they can also damage Australia’s credibility as a donor and regional partner.
... For Australia's aid program to be most effective, in both reducing poverty and building Australia’s influence across the Indo-Pacific, setting a long term trajectory towards meeting our global commitments on aid allocation will be a crucial step in demonstrating solidarity and support for our regional neighbours.
ACFID also addressed the impact of reductions to the aid budget:
Punishing cuts on Australian aid over a sustained period have been both a reason for and consequence of a lack of strategic clarity around Australia’s ODA.
...The Australian aid cuts did harm communities and developing countries.
Cuts have also meant an overall diminution of Australia’s influence overseas – not only is Australia less able to help people affected by conflict and natural disasters, but its ability to tackle emerging threats such as disease pandemics and rising extremism is severely restricted. Australia’s capacity to help build more peaceful and prosperous societies is also impeded, as is its capacity and willingness to innovate and take the sort of risks in programming which could potentially pay enormous dividends. Furthermore, geopolitically, Australia’s international reputation has not escaped unharmed as a result of the cuts.
ACFID emphasised the importance of any increase in the aid budget being ‘planned, stepped, and predictable’:
It is well established that aid is most effective when it is predictable. Delivering aid dividends takes time through building relationships with local partners and adapting to local contexts. A lack of predictability is hard for recipients to plan around and has been shown to make aid less effective.
Similarly, Oxfam Australia submitted:
In the absence of commitment and political leadership to maintain aid investment in the long-term, the aid budget remains highly vulnerable to future cuts. Further budget uncertainty and contraction would significantly undermine Australia’s aid program ambition, effectiveness and impact, with flow on impacts for Australia’s standing in the international community.
While many stakeholders supported in increase in Australia’s aid budget, the Committee is aware of a range of views in relation to an appropriate target. For example:
World Vision recommended a target of 0.33 per cent of GNI by 2023-24, with a long-term target of 0.7 per cent of GNI;
ACFID recommended an increase of 10 per cent each year for six years, corresponding to a target of 0.33 per cent of GNI by 2024-25, with a further target of 0.7 per cent of GNI by 2030; and
Oxfam recommended a target of 0.7 per cent of GNI by 2030.
Oxfam Australia explained:
DAC donors agreed as far back as 1969 that 0.7 percent of GNI represents a fair benchmark allocation of international aid. The 0.7 commitment was reinforced in 2015 and is a part of the Sustainable Development Goals. Currently Denmark, Germany, Luxembourg, Norway, Sweden and the United Kingdom all have aid budgets at this target or above.
Australia, with one of the highest incomes per capita in the world, should make 0.7 GNI its target.
As noted earlier in this chapter, the OECD DAC recommended that Australia ‘re-introduce an ambitious target for increasing ODA against [GNI] and set out a path to meet the target’.
Drawing on the evidence set out in this chapter, the Committee encourages DFAT to increase its efforts to monitor the effectiveness of aid activities implemented through private sector and multilateral organisations, commensurate with the increasing role these organisations have in Australia’s aid program.
The Committee expects that greater transparency and more rigorous evaluation of these activities will not only assist in identifying inefficiencies and areas for improvement, but will also strengthen stakeholders’ confidence in the aid program.
The Committee also encourages the Australian Government to consider approaches to integrate the SGDs in the policy and performance frameworks that underpin the aid program.
In relation to effectiveness more broadly, while not wishing to diminish the considerable achievements of the aid program, the Committee also acknowledges that the declining aid budget has, to some extent, undermined the impact of Australia’s aid program.
The Committee considers that there is a clear case for Australia’s aid program and supports an increase in Australia’s aid budget from current levels.
The Committee is also concerned to see greater stability and certainty in the aid budget going forward. For this reason, the Committee affirms the importance of bipartisan agreement on Australia’s aid budget.
The Committee is aware that there has previously been bipartisan agreement for a target of 0.5 per cent of GNI. While noting that some comparable countries have committed to—and, in some cases, achieved—more ambitious targets, the Committee considers that this target is an appropriate starting point for restoring Australia’s aid funding, with a view to sustaining further increases in the future.
Beyond this initial target, the Committee considers 0.7 per cent of GNI is an appropriate long-term target for Australia’s aid funding, consistent with the SDGs.
The Committee considers that articulation of a clear timeframe for achieving these targets would assist in building broad-based political and community support.
The Committee recommends that the Australian Government, within a year, commit to a set timeframe of no more than five years for increasing Australia’s funding for Development Partnerships (aid) to at least 0.5 per cent of gross national income, and to a second set timeframe of no more than 10 years for increasing Australia’s funding for Development Partnerships (aid) to at least 0.7 per cent of gross national income.
As noted above, the Committee is concerned to see greater stability and certainty in the aid budget. In particular, the Committee supports the establishment of a legislated minimum level of aid funding, consistent with the targets set out above.
The Committee recommends that the Australian Parliament, within a year, introduce a legislated floor of 0.5 per cent of gross national income funding for Development Partnerships (aid), to come into effect immediately upon conclusion of the set timeframe of no more than five years, as recommended in Recommendation 3 when 0.5 per cent is reached. In addition, the Committee recommends that the Australian Parliament subsequently introduce a legislated floor of 0.7 per cent of gross national income at the time Development Partnerships (aid) funding reaches this target under the proposed second set timeframe of no more than 10 years. 0.7 per cent should then remain the legislated floor after this period of time.
In working to increase the overall level of aid funding, the Committee suggests that traditional aid funding could be supplemented with funding allocated from other portfolios, where this is appropriate. This approach would acknowledge the reality that the aid program is a whole-of-government commitment, and that effective aid delivers benefits to Australia—as well as to recipient countries—across a wide range of areas. This supplementation through other portfolios would also, in the Committee’s view, reduce the risk of future reductions in funding for Development Partnerships, particularly for example through the sourcing of Development Partnerships funding through the Defence budget, where funding reductions are largely opposed by the Australian public.
The Committee recommends that the Australian Government, in working to reach 0.5 per cent, and then 0.7 per cent, of gross national income for Development Partnerships (aid), supplement the core Development Partnerships funding managed by the Department of Foreign Affairs and Trade portfolio with funding set aside from other portfolios such as Defence, Health, Education and Agriculture (for example, funding for conflict resolution and governance Development Partnerships programs under the Defence budget, which in turn may prevent future Defence expenditure). In doing so, consideration should be given to setting up Development Partnerships units within (or from) each contributing Department, which would then be managed under the core Development Partnerships structure headquartered under the Department of Foreign Affairs and Trade.
Lastly, in addition to increasing the overall level of aid funding, the Committee is of the view that there is scope to improve the effectiveness of aid expenditure through an increased focus on those who are most in need. In particular, the Committee notes the evidence received by Save the Children and others in relation to improving the geographic targeting of aid at the national and sub-national level.
The Committee recommends that the Australian Government implement further measures to improve geographic targeting of aid at the national and sub-national level of recipient countries.