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Cost effectiveness is the relationship between the level of resources used (costs) and progress towards a predetermined outcome (effect). While costs are relatively easy to quantify, outcomes are less so. The Ministry’s work of providing foreign policy advice and representation does not lend itself easily to direct cost effectiveness analysis. Few of the Ministry’s outcomes have readily quantifiable measures of impact, and many are realised gradually over many years. While work continues to develop appropriate impact measures there is anecdotal evidence that the Ministry is getting more efficient. In 2011/12, the total output expenses for the Ministry was $361 million – a decrease of around $9 million or 2% compared to 2010/11. This reduction in expenditure is beginning to represent the results of the Ministry’s 20/20 Change Programme and the drive to reduce costs while maintaining output quality and quantity.
In 2011/12, there has been continued focus on improving value for money and effectiveness of ODA. Initiatives developing stronger ‘value for money’ checks have been incorporated into business processes and procurement processes have been strengthened. Improvements include a new three year strategic plan 2012-2015, with results frameworks and indicators that are to be used across relevant programmes, sectors, thematic areas and activities. The indicators will collect results to address both medium/long term ‘development results’ and short term ‘New Zealand results’ that are more directly attributable to the New Zealand Aid Programme.
Approaches that support more strategic interventions are considered ‘higher order aid modalities’. During 2011/12, the use of higher order aid modalities decreased from 59 percent in 2009/10 to 51 percent. A contributing factor to the lower use of higher order aid modalities was that the International Agencies appropriation spend was down by $9 million compared to 2010/11. The number of activities reduced from 718 in 2010/11 to 597 in 2011/12, and the median annual expenditure on activities increased from $200,000 in 2010/11 to $255,519 in 2011/12 demonstrating progress in scaling up activities.
The Ministry’s performance against these key measures is set out in the table below:
Measure |
Target |
Result |
Comment or Explanation |
|---|---|---|---|
Increasing amount and proportion of ODA spent directly on sustainable economic development |
Increasing from 33% of ODA directly spent on sustainable economic development and |
Met - 37% |
There has been a significant increase in dollar terms but not to the percentage of ODA spent directly on sustainable economic development. This is due to a $56 million increase in total aid that can be directly allocated to particular sectors.1 This percentage figure is however expected to increase significantly in 2011/12. |
Increasing percentage of aid going to the Pacific 2 |
Increasing from 52% |
Met - 56% |
The amount of aid going to the Pacific has increased from $257.3 million to $287 million for 2011/12. |
Number of activities |
650 or less |
Met - 597 |
The baseline number of activities is currently being reviewed; activity numbers have been significantly reduced during 2011/12. |
Median annual expenditure on an activity |
$200,000 or more |
Met - $255,514 |
|
Use of higher order aid modalities |
58% |
Not met – 51% |
A contributing factor for not meeting this target was the decreased spend on multilateral aid in 2011/12. |
The Ministry’s ratings in assessments of international good practice in development assistance also provide a measure of cost effectiveness.
There has been a significant review of international aid effectiveness commitments. A survey of progress towards attaining the Paris Declaration indicators formed the basis of discussions at the Fourth High Level Forum on Aid Effectiveness held in Busan at the end of 2011. The survey gave misleading results for the New Zealand Aid Programme as funding to only four partner countries (representing just 7 percent of total aid), was used for the 2005 baseline upon which progress in 2010 was judged.
When looking at total funding New Zealand has made good progress towards achieving the Paris indicators, especially in the area of alignment with partner countries’ own systems and priorities. In 2011/12, 69 percent of aid for the government sector used partner countries’ own public financial management systems and 73 percent used national procurement systems; a significant increase from 40 percent in 2010/11i. New Zealand used just 26 ‘parallel project implementation units’ (delivery mechanisms outside the national implementation agencies) to deliver funding to the government sector. This number has continued to reduce since 2005 as partner governments have taken increased ownership of development programmes.
The proportion of New Zealand funding that is untied has increased each year from approximately 85 percent in 2007/08 to over 95 percent in 2011/12.
The use of Programme Based Approaches (PBAs) is an area where New Zealand has not met the global target of 66 percent and increasingly this statistic will be a focus for the futureii. In 2011/12, 56 percent of funding was delivered through PBAs: this is trending upwards from 55 percent in 2010/11 and 52 percent in 2009/10.
In 2011, the Centre for Global Development published the second edition of its Quality of Official Development Assistance (QuODA) Assessment. Out of 31 bilateral donors New Zealand achieved the following rankings across four dimensions: 11th Maximising Efficiency, 24th Fostering Institutions, 4th Reducing Administration Burden on Recipients (increase from 13th in 2010), and 11th Transparency and Learningiii.
The Commitment to Development Index measures a range of indicators to provide an overall measure of countries’ commitment to development. In 2011 New Zealand ranked 7th out of 22 countries for Commitment to Development, compared to 5th in 2010iv.
New Zealand was not included in the Humanitarian Response Index (HRI), measured annually by DARA International in 2011, as insufficient survey responses were obtained to calculate the qualitative indicators that make up the indexv.
[1] This excludes aid to multilateral organisations where we are unable to attribute spend to a particular sector.
[2] This figure represents Pacific expenditure as a percentage of bilateral, regional assistance and international agencies.
[i] As a guardian of New Zealand tax payers’ money, the New Zealand Aid Programme will use local systems after a rigorous assessment where they are proven to be robust
[ii] Programme-based approaches involved coordinated support for locally owned development programmes. They help reduce fragmentation and administrative costs while promoting increased local ownership and a greater focus on development outcomes
[iii] Nancy Birdsall, Homi Kharas and Rita Perakis 2011, Center for Global Development, Measuring the Quality of Aid: QuODA Second Edition www.cgdev.org/content/publications/detail/1425642
[iv] David Roodman, Julie Walz and Tejaswi Velayudhan 2011, Center for Global Development, Commitment to Development Index 2011, New Zealand
[v] Humanitarian Response Index 2011, DARA, Donor Assessments New Zealand