By politics.co.uk staff
The Department for International Development cannot yet asses the "value for money" of many of the aid projects it funds, a report has said.
The report by the National Audit Office (NAO) found the department faced "significant financial and operational challenges" in the years ahead, as its aid budget is refocused.
"The department has improved its core financial management and has an ambitious programme underway to improve its focus on value for money," it said.
"It has put important building blocks in place; however its financial management is not yet mature.
"The department cannot yet assess important aspects of the value for money of the aid it has delivered, at an aggregated level."
The government recently announced a re-targeting of the UK overseas aid budget, which will see more money spent in conflict areas.
DfID's budget is accordingly set to increase by £3.3 billion over the next four years - but its administration budget will be cut by a third.
The NAO report said the re-targeting meant the department had to do more to combat corruption and fraud and use financial professionals to a greater extent, especially to provide better forecasting.
Amyas Morse, head of the National Audit Office, said the department's new aid targets would be "higher risk".
"The department knows its increase in funding, and new approach to aiding developing countries, brings challenges", he said.
"This report shows considerable progress is being made, but a better information environment is needed to deal with the heightened levels of assurance required in targeting future aid at higher risk locations."