From the Daily Telegraph 

• Millions lost from AusAID program
• 175 cases of fraud under investigation
• PNG is corruption central with 71 identified cases of fraud

AUSTRALIA'S $4.5 billion foreign aid program is plagued by record levels of fraud, with millions of dollars being stolen by corrupt officials and overseas agencies.

AusAID has 175 cases of fraud under investigation - stretching across 27 countries and totalling millions of dollars.

Documents released under Freedom of Information expose a criminal trail in some of the world's poorest countries, with widespread theft of money and forging of receipts.

They also show how food and other supplies are being diverted from dirt-poor communities and sold on the black market at inflated prices.

While AusAID insists it is improving fraud control, the documents also reveal police are often reluctant to intervene and charge local criminals - frustrating the agency's attempts to recover missing aid money.

In one extraordinary case, the Eritrean Government in 2006 seized food and other supplies from the UN's World Food Program, saddling Australian taxpayers with a probable loss of $1.25 million.

The revelations will do little to boost public confidence in a foreign aid program that is forecast to nearly double to $8 billion a year by 2015.

PNG emerged as corruption central with 71 cases of identified fraud - 40 per cent of the AusAID total - involving millions in missing funds.

Indonesia, which will receive $458 million in Australian assistance in 2010/11, recorded 31 fraud cases, followed by the Philippines at 20 and Solomon Islands with 19.

AusAID director-general Peter Baxter said fraud levels in foreign aid compared "very favourably" with domestic agencies like Centrelink.

"The level of fraud in our program from 2004/05 until December 2010 was 0.017 of 1 per cent of the $20 billion that had been appropriated to AusAID during that period," Mr Baxter said. And he denied fraud was on the increase, despite 16 cases being reported last November alone.

But FOI documents reveal how taxpayers' money is being squandered, with corrupt local officials and agencies profiting at the expense of the poor. Australia is one of the biggest aid donors in the world, focusing on the Asia-Pacific although the Government wants to expand its aid funding into Africa over the coming years.

The FOI documents reveal the difficulties of trying to manage a $4.5 billion budget while dealing with some of the most corrupt nations in the world. One investigation in Fiji, involving fraud of $37,670, has been closed with AusAID declining to report the matter to police "due to the highly sensitive political environment" in the Pacific island nation.

Other times, AusAID has struggled to establish fraud "because of the lack of a paper trail" while on other occasions businesses were paid money but then closed their offices.

An unknown amount of AusAID funds were caught up in a major scandal involving the African country of Mali with health workers allegedly embezzling hundreds of thousands of dollars.

The fraud involved "managing contractors" paid hundreds of millions to manage aid projects - including Cardno Limited, involved in 40-odd cases of fraud.