On Monday, The Australian published an exposé on Australian aid that would lead the layperson to believe fraud was endemic and chronic within the now defunct AusAID. That was followed on Tuesday by an editorial justifying the merger of AusAID into DFAT on grounds of rampant fraud.
This line of criticism is nothing new for the aid program, which has been subjected to years of criticism from the media on the issue. It also completely misses the mark for the public discussion we need in order to improve the delivery of Australian aid.
Clearly, fraud should never be tolerated, and the government should strive to take all reasonable attempts to minimise fraud. But is fraud as rampant in the aid program as The Australian implies? The answer is a resounding 'no'. In 2012-13 the Australian aid program (then AusAID) reported net losses of $865,730 to fraud, equating to about 0.017% of annual aid expenditure. The Independent Review of Aid Effectiveness found that fraud in AusAID over the 2004-10 period averaged 0.017%. So not only are levels of fraud extremely low, they are also consistently low.
The fact that fraud accounts for one tenth of a percent of our aid expenditure should be grounds enough to argue that it garners too much public attention, but let's dig a little deeper.
First, how does Australia compare to other donors? Comparable data across countries is limited; it seems Australia is unique in its fixation on this issue. This 2012 University of Portsmouth study identifies rates of fraud in the US aid program in 2008 at 0.85% of total expenditure, and 1.13% of the EU's aid program in 2009. By international comparison, then, 0.017% looks like it should earn Australia a gold star. [fold]
The singling out of Australia's aid program from all government spending might be justified if it is an outlier or poor performer when it comes to fraud. But this is hardly the case. Take Centrelink, for example. Of the $86.6 billion spent on welfare in 2008-09, over 0.13% was reclaimed through fraud investigations, 13 times higher than the rate of all identified fraud in the Australian aid program. In another recent case, the Defence Department was scandalised when a single case of fraud was only discovered after $585,000 was racked up on a fuel card.
So it's remarkable that The Australian justifies the merging of AusAID into DFAT based on a tiny amount of fraud in the aid program. By all accounts AusAID was managing fraud exceptionally and consistently well, and there has been no proof that DFAT can or will do any better. In fact, with the aid program suffering its largest ever single-year budget cut, a major cultural shift occurring after the merger of departments, the loss of experienced aid program managers, and development spending decisions now being made by an agency with foreign, security and consular policy priorities, it's hard to see how DFAT will improve the already excellent rate of fraud minimisation.* It will be interesting to see if DFAT is as transparent about the rate of fraud in the aid program in the future.
With all of this in mind, it's worth asking why the media keeps pursuing the issue of fraud in the aid program.
A simple answer is that it's easy. Because AusAID had sound fraud policies, the documents are easy to access through an FOI request and are bound to lead to a headline (I have to admit, it would be hard to walk away from a story on fraud that includes contracts paid to 'Joke Shipping Services'). Another reason is that stories like this appeal to those that don't support aid. Without mentioning how isolated and infinitesimal these individual cases are, it would be easy for a reader to infer that all aid is wasted (a quick look at the comments section of the exposé illustrates this point).
But if we really want to talk about improving Australia's aid program, this conversation is a distraction. Fraud will never be completely removed from any aid program; aid is delivered in some of the harshest environments in the world and some degree of (and indeed appetite for) risk must be accepted. This is particularly the case if the focus on innovation Foreign Minister Julie Bishop has been encouraging in the aid program is to be realised. There are instead a myriad of topics that investigative journalists could address, such as what impact the merger has had on the effectiveness of Australia's aid projects, how transparency of the aid program has changed under DFAT, and how the 20% cut to the aid program has affected relations with our aid partners.
It's time for The Australian to start asking the right questions.
UPDATE: DFAT Secretary Peter Varghese sent a letter to The Australian in response to its story; the letter has now been published on the DFAT website.
Photo by Flickr user Department of Foreign Affairs and Trade.
*The DFAT website published this report in June claiming fraud in the aid program had jumped to 0.029% in 2013-14, almost double the rate of fraud in AusAID’s final year of operation.