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Document 3:4 (2024−2025) / Published The risk of financial irregularities in the administration of development aid

There are significant shortcomings in the manner in which the Norwegian Ministry of Foreign Affairs and the Norwegian Agency for Development Cooperation (Norad) prevent, detect and respond to financial irregularities.

Brief background

  • There is generally a high risk of irregularities in development aid.
  • Disbursements of development aid under the Ministry of Foreign Affairs’ budget have increased from NOK 31.6 billion in 2013 to NOK 50.8 billion in 2023.
  • Anti-corruption and the principle of zero tolerance for financial irregularities form the basis for the allocation and administration of funds under the Ministry of Foreign Affairs’ budget.
  • This investigation has adopted a system perspective. Thus, we have not sought to uncover financial irregularities.

Overall assessment

It is objectionable that the Ministry of Foreign Affairs’ and Norad’s efforts to prevent, detect and follow up financial irregularities do not align with what is warranted by the distinct characteristics, risks, and significance of development aid administration.

Overall, the public administration’s management of the risk of financial irregularities in development aid is not as efficient as it could and should be.

These weaknesses increase the risk of financial irregularities being committed in connection with Norwegian development aid funds, as well as the failure to detect and halt such irregularities at an early stage.

Conclusions

  • The overall management in the Ministry of Foreign Affairs and Norad has failed to adequately manage the risk of financial irregularities.
  • Significant weaknesses in the assessment of the risk of financial irregularities in grant administration undermine the possibilities for effective prevention and detection.
  • Weaknesses in the design and implementation of prevention and detection measures undermine the management of the risk of financial irregularities.
  • The follow-up of suspected financial irregularities is inadequate.

Recommendations

We recommend that the Ministry of Foreign Affairs and Norad strengthen the management of the risk of financial irregularities in the Ministry’s and Norad’s administration of development aid by

  • clarifying the content of the guidelines on zero tolerance and anti-corruption as a cross-cutting consideration;
  • developing policy and procedure documents that jointly provide a comprehensive overview of the system for managing the risk of financial irregularities;
  • conducting overall assessments of the risk of financial irregularities in the development aid portfolio as a whole, as a basis for the prioritisation of prevention and detection measures;
  • establishing systems and routines that provide the management in the Ministry of Foreign Affairs and Norad with controlling information on how the overall management—from prevention and detection to follow-up of suspicions—works;
  • strengthening the training of staff members to ensure that they are capable of safeguarding prioritised prevention and detection measures within their areas of responsibility;
  • setting requirements for grant recipients in the application-based grant schemes regarding documentation of how the risk of financial irregularities applies to the projects in question;
  • ensuring that funds are not disbursed until relevant requirements have been met to the extent possible.
Kategorier: Foreign affairs