Almost £900m of UK foreign aid has been handed to an organisation with links to fraudsters and oil looters.
A damning report from the Public Accounts Committee says the Department for International Development has not done enough to safeguard British aid.
Nearly £900m has been handed to Private Infrastructure Development Group, a multilateral agency which invests in infrastructure projects in developing countries.
The agency approved a €25m investment in a power plant in the Ivory Coast in partnership with a firm which is allegedly linked to a known fraudster.
And PIDG also, the Committee heard, sat back as up to $30m was handed to an energy firm “linked to allegations of looting Nigerian oil revenues.”
Committee chair Margaret Hodge said: “Every pound that is lost to fraud and corruption is a pound that could have been spent on educating a child, improving health systems or supporting economic development.”
Shipley Conservative Philip Davies said the report showed “why it so ludicrous to be massively increasing our overseas aid budget when we can’t even ensure the existing budgets are spent appropriately.”
The MP added: “No wonder people say overseas aid is the taking of money from poor people in rich countries and giving it to rich people in poor countries”
Wakefield MP Mary Creagh, Labour’s shadow international development minister, said the report showed David Cameron’s promise of value for money on aid was a failure.
“The National Audit Office and now the Public Accounts Committee have exposed that the Tory-led Government has been pouring hundreds of millions of pounds of taxpayers’ money into the Private Infrastructure Development Group without checking where it went.
“Ministers have sat on their hands while Britain’s aid efforts have been undermined. If the Tories and Lib Dems don’t know where aid money is going then how can they measure if it is working?”
The Government has insisted the mishandling claims are false.
A DFID spokesman said: “Britain’s investment in the Private Infrastructure Development Group has helped to create 200,000 jobs and driven £6.8bn of private investment into some of the world’s poorest countries, developing their economies and making them less dependent on aid.
“This PAC report suggests that UK funds are at risk of ending up in the wrong hands, citing alleged links between a convicted fraudster and a PIDG-backed company. These have been investigated thoroughly by the National Audit Office, and absolutely no evidence has been found to substantiate them.”