Matthew Elliott: Where exactly does the EU's development money go?

the european Union oversees a substantial aid and development budget. In 2007 it distributed over €8.5bn in foreign assistance, with rises planned over the coming years.

It is vital that this budget is administered efficiently, so that it helps as many people as it can. It must also be done in an open and honest manner that reassures European taxpayers that their trust is not being abused. Critically, it must be administered effectively, with systems in place to prevent money financing the corruption, hate-filled propaganda and violence it is supposed to prevent. If politicians and officials cannot deliver on these simple standards, then they will be failing not only their constituents, but also the millions in need across the world.

Unfortunately the evidence suggests the EU is indeed failing to deliver on these standards. Investigations by the EU's fraud investigator – the European Anti-Fraud Office (OLAF) – have uncovered numerous examples of development assistance lost to corruption. For instance 90 per cent of the money assigned to a water supply project in Paraguay was located in a bank account belonging to a foundation unconnected with the project. Declared sub-contractors did not exist and the director controlling the project owned a company contracted to carry out work. Closer to home, an Italian non-profit organisation (not yet been publicly identified) received €11m from the EU, and even more from the Italian government, to finance twenty-eight projects in the third world. OLAF found that the organisation had sent fake or duplicate invoices and that only part of the money had gone to the specified projects.

The EU also provides budget support – direct financial transfers – to foreign governments with lamentable records on human rights and democratic government. Under the European Neighbourhood and Partnership Instrument the Algerian government receives millions in EU support.

Yet in 2008 EU member states were strongly urged by Amnesty International to cease deportations to Algeria on the grounds of its record on torture. In Syria, the EU is pledged to provide €130m between 2007 and 2010 to support the Government's budget, despite democracy campaigners being sent to prison for "weakening national sentiment" (i.e. opposing the regime) and the suspected involvement of Syria in the assassination of Lebanon's Prime Minister Rafiq Hariri. EU budget support helps Egypt fund a television station that was described, by one of the stations own officials, as seeking to help "people on the way to committing what you in the West call a suicide mission". Apart from the occasionally investigated case of abuse though, it is extremely difficult to get a clear picture of how European taxpayers' money has been spent under the EU aid budget. And if MEPs feel they can't get the information needed to properly scrutinise EU spending, the ordinary citizen has no chance. This needs to change.

The first step is publication. In the United States, bipartisan legislation required the details of entities and organisations receiving federal funding to be published. That led to the creation of the USAspending.gov website which gives citizens clear access to how their money is spent.

Beyond that, those receiving major grants should have to account for their efforts to the key European Parliament committees. That would make it impossible for the EU institutions to sign blank cheques and then fail to check up on how that money has been spent. It would mean genuine accountability for how funds are used and allow money to be focussed on those projects that can show results.

Finally, and perhaps most importantly, the EU needs to insist that the organisations it supports do not engage in or glorify terrorism. When the US Rockefeller and Ford Foundations were alerted to the fact that their donations were supporting extremist organisations they quickly terminated funding and moved to alter their grant letters, inserting conditions to make such behaviour clear cause for ending donation in the future.

The EU is working with one of the largest aid budgets in the world. It needs to show that it understands the responsibility that comes with such impressive resources. European taxpayers will rightly be outraged if their money continues to find its way into the pockets of the corrupt or, worse still, ends up supporting the hatred and violence it is meant to resolve.

Matthew Elliott is Chief Executive of the Taxpayers' Alliance which publishes 'Reforming EU development Assistance' this week