MPs have voiced concerns about the accountability of foreign governments whose central budgets are being partly funded by British taxpayers.
The Department for International Development (DfID) spent £461 million on budget support for 13 countries in 2006/07, hoping to strengthen government capacity, increase donor harmonisation and help cut poverty.
Members of the Commons' public accounts committee are frustrated by the poor accountability systems of some of the related governments - and the subsequent difficulty in working out how effective UK funds are in the fight against poverty.
"Despite spending around one-fifth of its bilateral aid in the form of direct payments to the governments of developing countries, DfID does not know how good an instrument this is in reducing poverty," committee chairman Edward Leigh said.
"Nor does the department know whether such support provides better value for money in reducing poverty than other forms of aid.
"Parliament must be able to come to an informed view on the balance of risk and reward. The countries who receive this financial support often do not have the monitoring systems to check that the funds have gone where they should. And, when UK funds are paid directly to developing countries' national systems, the risks of leakage and corruption are often particularly high."
DfID said it was preparing a response to the report.