The aid department approved a £735 million investment into its private finance arm without consulting independent experts in an "echo" of failings it made in funding an airport on a remote island that cannot currently be used, MPs have said.
The Public Accounts Committee (PAC) questioned the Department for International Development's (DFID) decision to approve the business case for the recapitalisation of the CDC Group, its private investment arm, in 2015, without seeking external advice.
The committee expressed concerns that DFID was able to sign off on the investment without independent advice, given that it has not appointed a representative to CDC's board because it "apparently" has no staff "with the requisite knowledge of investment decisions".
The MPs said it echoed their findings on the "fiasco" of the publicly-funded £285.5 million airport on the South Atlantic territory of St Helena, which commercial aircraft have been unable to use due to dangerous wind conditions.
In its report on CDC, the committee said: "The Department approved the business case for the £735 million recapitalisation of CDC in 2015 without seeking investment advice from external experts.
"The Department considers that it does not have the relevant expertise in-house to involve itself in individual investment decisions made by CDC.
"However, it maintains that it did have sufficient expertise to approve the business case for the £735 million recapitalisation of CDC without obtaining external assurance from investment experts.
"This echoes our findings on the St Helena airport fiasco where we found that the Department had not commissioned an independent adviser with the necessary technical expertise to corroborate or challenge advice received."
The committee called on DFID to employ external investment experts to provide quality assurance and independently challenge future business cases recommending more investment into CDC.
"The Department told us that it would need to look 'very hard' at whether it had the right skills to build a business case to justify its next investment in CDC," the MPs said.
"We are concerned that the Department may come under pressure from ministers to provide further funding to CDC without sufficient evidence of a strong investment pipeline needed to determine whether the funding would provide value for money."
The report also raised concerns about the way CDC, which supports businesses in Africa and South Asia, measures the impact it makes with its investments, because it is based on expected rather than actual performance.
Echoing similar findings from the National Audit Office in November, the committee said: "It is difficult to determine what wider economic development impact CDC has achieved.
"CDC's assessment of its development impact assesses expected rather than actual development performance.
"The Department and CDC supplements the two existing performance targets covering the financial return from investments and development performance with other indicators seeking to capture broader aspects of CDC's performance, such as the number of jobs created and improvements in environmental, social and governance standards.
"However, these indicators lack a target against which progress can be assessed, and there is variability across the indicators as to what is required to be reported and on what basis.
"The Department approved an evaluation of the development impact of CDC's investments almost two years ago but has not managed to recruit a person with the right skills to supervise this work and has yet to let the contract for the evaluation, undermining its ability to understand CDC's performance."