The Independent Commission for Aid Impact has called on the Department for International Development (DfID) to review the way it selects and evaluates the civil society organisations it gives unrestricted funding to, in a report which made several criticisms of its £120m programme.

While identifying the current round of ‘programme partnership arrangement’ funding, by which DfID allocates unrestricted funding to charities, as generally having had a good impact on civil society organisations and beneficiaries, a report out today by the Independent Commission for Aid Impact (ICAI) has called for some critical reforms for the next round.

The current round of ‘PPA’ funding, worth £120m to 41 organisations, will not end until 2014, but the Commission’s preliminary assessment of how the funding scheme has worked criticises the monitoring and evaluation approach as “overly complex and poorly adapted to the strategic nature of PPAs”. ICAI, which was set up by the government to monitor aid impact in 2010, calls on DfID to redesign the system for monitoring and evaluation to make it “less cumbersome” for charities.

PPAs are an instrument for unrestricted funding to charities from DfID, and are designed to enable organisations to take risks and innovate in improving the lives of beneficiaries. Some 41 organisations received PPA funding in the current round. Oxfam, with a PPA worth £11.2m, is the largest recipient. DfID had invited 110 organisations to submit applications for funding in 2010 for the 2011-14 round, after having received 424 ‘concept notes’ from interested organisations.

The selection of these partner charities also came under fire in the report. “[DfID] should have identified which corporate priorities it wanted the PPAs to support,” the report argues. “It should then have used a competitive grantmaking process to maximise that contribution, with fair and transparent competition.”

ICAI recommends that in future the department improves the application process's transparency - long a watchword for DfID with relation to foundations working in international development - claiming that a lack of clarity on DfID policy meant that objectives for the PPAs were unclear. It also suggests that the arrangements should be extended beyond the current average length of three years.

ICAI was critical of a lack of true partnership in the partnership arrangements. While commending the PPAs as having improved performance within organisations, and for having prompted sharing between funded agencies, the report says that DfID could and should have played a more active role in working with the charities it funded.

“DfID could have done more to engage with CSOs [civil society organisations] on shared objectives. We are concerned that the PPAs have not, in practice, operated as partnerships,” the report reads. “DfID has failed to define what it hoped to gain from working with CSOs and, as a result, has gained less than it might have done.”

A spokeswoman for DfID said: “We very much welcome the report on Programme Partnership Arrangements and will continue to review their effectiveness to get the best possible value for the taxpayer.”

DfID will release its full response to the ICAI report by 7 June.