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MPs on a parliamentary select committee are urging the Government to temporarily suspend funding increases planned for the New Zealand Agency for International Development (NZAid), saying its systems are too weak to cope.
The foreign affairs and defence select committee is going to monitor the agency quarterly because of concerns over weaknesses in its controls in its Wellington office and overseas posts, it said yesterday in its financial review of the Ministry of Foreign Affairs and Trade.
Concerns about the agency are so acute that the Office of the Auditor General is receiving monthly reports on it.
The aid agency is a semi-autonomous body within the Ministry of Foreign Affairs and Trade.
Foreign Minister Winston Peters announced a record increase, of 21 per cent in funding in last year's budget with the promise of a 69 per cent increase over four years.
Its programme budget rises from $359 million in the last financial year to $429 million this year. By 2010-11 the aid budget would reach $601 million, Mr Peters promised, which would be 0.35 of GNI (gross national income).
The MPs on the committee said they did not question the Government's commitment to increasing aid.
Given the ministry's admission to its problems and the lack of capacity to allocate the extra funding "some suggest that a review of the timeframe is needed for such increased expenditure in light of these clear signs of continual inadequate financial management".
"We take the most serious view of the concerns expressed in the annual audit report, which go to the heart of NZAid's capacity to deliver the significant financial assistance provided by the New Zealand public to its intended beneficiaries."
Problems highlighted in the audit included inadequately trained staff, weak filing systems, weak understanding of financial delegations, and a lack of understanding of responsibilities and accountabilities between the overseas posts and Wellington.
Weakness in the Wellington office included lack of funding and contract management policies, lack of data showing value-for-money assessments had been done, and the discretion given to management to follow different contract practices.
The audit said the problems were caused by a lack of policies and controls, and resulted from the increase in the programme in recent years.
Government MPs do not hold a majority on the committee, but in their cross-examination last week of the sector manager at the Office of the Auditor General, Gareth Ellis, they showed they were as concerned as National MPs about NZAid.
