International research has shown that the practice of inflating aid figures has become a serious problem amongst the international donor community.

Many aid donor countries are not as generous as they first appear, inflating their official aid figures by including funding that does not provide material support to impoverished communities and instead funds the domestic institutions of the donor country.

In light of this tendency, Aid/Watch observed that there was an urgent need to understand the full picture of the on-the-ground contribution that Australia’s aid provides.

In analysing the effectiveness of Australia’s development contribution, this report finds widespread structural flaws in Australia’s aid program, revealing serious problems in terms of both the quantity and, more importantly, the quality of the aid Australia provides.

In terms of quantity, this financial year our aid program will exceed $3 billion dollars for the first time. However in spending only 0.3% of our Gross National Income, Australia is far off making the internationally agreed target of 0.7% by 2015.

Furthermore, nearly a billion dollars in aid is spent funding Iraqi debt cancellation, the Australia Federal Police, the Department of Immigration and other Australian agencies, as well the expensive full fee costs of foreign scholarships to study in Australia. This is a billion dollars that’s absorbed by spending that does not explicitly target the poverty alleviation objectives set out in the Millennium Development Goals.

Instead it reflects Australia’s broader national security and commercial interests, rather than the relief of poverty in the majority world. Furthermore, once these extra items are deducted from the Australian aid program, other clear questions about aid expenditure emerge that suggest that the rest of the aid program is not as effective as it could be.

For instance, the extent to which Australian aid privileges Australian commercial interests continues to severely diminish the value of our aid.

Private companies, consultants and advisors manage the bulk of the aid activities in recipient countries. They dominate to such an extent that it is more useful to describe an ‘aid industry’ rather than an aid program as aid pays top private sector premiums when it could be more effectively supporting local organisations.

Even within AusAID, top positions have been contracted out to private consultants who demand a much higher price than a public servant’s wage.

Furthermore, the move to formally untie Australian aid has not broken the monopoly of key Australian companies. More and more conflict of interest questions emerge as the big companies who receive aid, sit within large corporate structures which often have other mining, engineering, agriculture, media and gambling interests in the same countries where they deliver aid.

Moreover, in the face of direct criticism, Australia continues to excessively rely on Technical Assistance (TA) within the aid program, recruiting greater numbers of Australian public servants, private consultants and companies to work within recipient governments on ‘capacity building’ initiatives.

Various international reports including the OECDDAC’s peer review of Australia have criticised the levels of TA in Australia’s aid, however Australia continues to sidestep this criticism.

Finally, Australia continues to pursue a heavyhanded, carrot and stick approach to aid by instituting a performance incentives program that will tie additional aid to certain reform criteria.

International evidence is forthright in stating this is an outdated and ineffective model that can infringe upon the sovereign decision-making processes in aid recipient countries.

The key findings of this report reveal donor interests, donor control of aid funds and donor leverage are still manifest in Australian aid. This is a call to action to government to stop this insular approach to international aid, and to ‘get real’ with our aid program.

Equally as importantly, it is also a call to action to the Australian public to bring the much needed debate about aid to the fore and ask the questions: Where is my aid money going? And how can it be better spent?

Read the full Aid/Watch report here.