New report warns on ‘creative accounting’ diverting aid to housing refugees within EU

Temporary refugee accommodation at Berlin's former Templehof airport. Germany's aid spending on refugees within Germany has gone up 16% due to the crisis. [UNHCR]

A major new report has warned that there are no strict guidelines on how EU member states divert parts of their development aid budgets to helping and housing refugees within their own countries, rather than spending it abroad.

At stake is the so-called Official Development Aid (ODA), of which all EU member states are committed to spending 0.7% of GDP, and how much of that can be used on accommodating refugees, mostly from Syria, who have arrived in Europe – rather than spending it in developing nations.

This form of aid is officially called ‘in-donor’, but a detailed analysis from the European Centre for Development Policy Management (ECDPM) has found there is little statistical conformity over what member states can count from their ODA budgets towards ‘in-donor’ aid.

The 263-page report, published on Friday (3 February), warns that “OECD guidelines for reporting in-donor refugee costs are ambiguous.”

In carefully-guarded language, it goes on to say: “There are a number of incentives for making full use of this ambiguity.

“Reporting these costs can, for example, bring donors closer to their ODA/GNI [0.7% of GDP] share target.

“Interviews conducted for this study further revealed that donors [ie member states] may be inclined to report these costs extensively to point up their actual efforts to protect refugees.”

In fact, it points to Germany – which took in over 1 million refugees in 2015 – as having recently changed its reporting methodology “to include more cost items.”

This also aligns Germany with the practice of other member states.

However, the ECDPM report points to Denmark, which quickly closed its borders to migrants in 2015 as they headed to Sweden by land, as “making maximum use of the room for manoeuvre in the OECD guidelines, or maybe even go beyond them”.

Cast doubt on credibility of the statistics

In fact, the report finds, current “divergent practices across donors concerning types of asylum seekers covered and cost items included cast doubt on the credibility of these ODA statistics.”

It adds that “the underlying rationale for what costs should qualify as ODA is not clear in all cases”, and calls for harmonisation of such standards.

NGOs criticise accounting ‘loopholes’ behind apparent rise in foreign aid

Campaigning groups have blamed ‘accounting loopholes’ behind an apparent increase in global development aid, saying much of the extra money ended up being spent at home by rich countries.

At stake is a fear among many NGOs that if the overall pot of money from the Commission and EU member states remains static, the amount being diverted to be spent at home amongst EU countries will come at the expense of that sent abroad to be used in Africa, and the Pacific and Caribbean countries.

That is not yet the case.

In fact, despite the influx of migrants and refugees into Europe since the outset of the Syrian civil war – and especially in 2015 and 2016 – overall ODA has continued to rise.

Collectively EU ODA rose from €55bn in 2012 to €59bn in 2014, and €68bn in 2015.

That show that – so far – the overall ODA budget is increasing. However, in 2016 the individual aid budgets of both Denmark and the Netherlands were reduced, whilst Sweden and Germany – the two major recipients of the influx of refugees – increased.

So, in total in 2015, Sweden spent 33.8% of its ODA on refugees housed within Sweden. In the Netherlands it was 22% and in Denmark 15.5%.

If the cost of in-donor aid is subtracted from the Dutch total, it means the Netherlands aid spend actually drops below it ‘achieved’ target of 0.7% of GDP.

The largest hike came in Germany, which went from spending around 1% of ODA on in-donor aid in 2014, to 17% in 2015.

For the EU collectively, the in-country costs of housing refugees and migrants leapt by €5.3bn from 2014 to 2015.

‘Creativity in sourcing additional finances’

Whilst overall ODA has kept pace, and kept increasing to pay for this, the report ultimately warns that it is based on “creativity in ‘sourcing’ additional finances’.

This will eventually “put a strain on future budgets”, and could affect long-term strategic objectives in aid spending – at least by “testing the flexibility and responsiveness” of so-called multi-year funding.

The report was written by ECDPM’s  Anna Knoll and Andrew Sherriff, and commissioned the Swedish Expert Group for Aid Studies.

Further Reading

Mimica: Europe's new plan for Africa 'could reach €88 billion'

EXCLUSIVE / One of the keynote announcements of Jean-Claude Juncker's State of the Union address last week was the European External Investment Plan. EU development aid chief Neven Mimica gives the details in an interview with EURACTIV.com