Multilateral Foreign Aid:

U.S. Participation in the International Fund for Agricultural Development

NSIAD-93-176: Published: Sep 24, 1993. Publicly Released: Sep 24, 1993.

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Pursuant to a congressional request, GAO reviewed U.S. participation in the International Fund for Agricultural Development (IFAD) to: (1) evaluate how IFAD has conducted its operations; (2) evaluate the agency's funding outlook; (3) determine whether projects are experiencing any problems; and (4) review the relationship between IFAD and the U.S. Agency for International Development (AID).

GAO found that: (1) the U.S. government initially agreed to participate in IFAD with the understanding that IFAD would have limited involvement in project design and implementation and would maintain a small staff and limited administrative overhead expenses; (2) IFAD has become more involved in the development and implementation of its own projects to ensure that projects have an impact on targeted beneficiaries; (3) IFAD projects have had mixed results and face difficulties after assistance ends; (4) IFAD faces uncertainty over its funding in the future due to a decrease in donations; (5) IFAD administrative and operating expenses have increased by 60 percent and IFAD staff has increased significantly; (6) AID has had minimal involvement with IFAD projects at the field level due to other project priorities; and (7) IFAD would benefit from coordinating more projects with AID.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: If after the assessment is made, the United States continues to participate in IFAD, the Administrator, AID, should work with IFAD to help assure that projects financed by the organization are sustainable after external support ceases.

    Agency Affected: United States Agency for International Development

    Status: Closed - Implemented

    Comments: According to AID, the issue of sustainability of IFAD projects remains an ongoing priority concern for U.S. agencies involved in developing positions for meetings of the IFAD Executive Board and Governing Council. The U.S. Executive Director makes questions of sustainability the focus of much of his scrutiny of proposed IFAD projects.

    Recommendation: If AID determines that IFAD should return to its original operating structure and that the original donor funding ratio is still appropriate, but is unsuccessful in getting IFAD to return to that operating structure or in restoring the funding ratio, the Administrator, AID, working with other appropriate U.S. departments and agencies, should initiate action to suspend any further U.S. contribution to IFAD.

    Agency Affected: United States Agency for International Development

    Status: Closed - Implemented

    Comments: Based on the results of the rapid external assessment of IFAD and other factors, including IFAD's reform efforts, U.S. agencies decided that the United States should remain in IFAD, albeit with a reduced level of financial support. The U.S. contributed $30 million to IFAD's fourth replenishment, a 64-percent reduction from the U.S. contribution to the third replenishment. Further, U.S. agencies agreed that if IFAD had replenishments beyond the fourth replenishment, the U.S. would not participate in them. Any future voluntary contributions from the U.S. would depend on whether U.S. agencies thought that a contribution would be a good use of U.S. development assistance funds.

    Recommendation: If the assessment shows that the IFAD original operating structure and donor funding ratio are still appropriate, the Administrator, AID, as the head of the lead agency for U.S. participation in IFAD, should seek to restore the originally envisioned funding ratio between Organization of Petroleum Exporting Countries and Organization for Economic and Cooperation Development countries.

    Agency Affected: United States Agency for International Development

    Status: Closed - Implemented

    Comments: Due to Saudi Arabia's decision to significantly reduce its contribution to IFAD, the original U.S. goal of restoring OPEC funding was reassessed. It was determined OPEC countries would no longer contribute 40 percent of the replenishment share. Since the funding ratio between OPEC and OECD countries could not be continued, U.S. agencies decided that a revision to IFAD's governance structure would be appropriate. Specifically, OPEC countries relinquished two seats on IFAD's Executive Board and OECD countries gained two seats. Also, voting rights were reallocated according to amounts that countries actually paid to support IFAD.

    Recommendation: If the assessment shows that the IFAD original operating structure and donor funding ratio are still appropriate, the Administrator, AID, as the head of the lead agency for U.S. participation in IFAD, should work with IFAD to conform its activities to its original operating structure and to reduce its overhead costs.

    Agency Affected: Working Group on Multilateral Assistance

    Status: Closed - Implemented

    Comments: U.S. agencies agreed that IFAD's program structure had evolved appropriately. At the time the Rapid External Assessment was made, IFAD management was taking steps to make IFAD more efficient and to reduce overhead costs. Further, IFAD pays administrative costs entirely out of earnings on its own investments and not out of donor contributions--a practice AID will continue to support.

    Recommendation: When considering IFAD fourth replenishment, the Administrator, AID, along with members of the Working Group on Multilateral Assistance, should determine whether IFAD mission and capitalization (both the amount and the contribution ratio) needs to be reexamined. Such a determination should include an assessment of whether the U.S. contribution to IFAD is an efficient use of these funds.

    Agency Affected: United States Agency for International Development

    Status: Closed - Implemented

    Comments: Changes in the contribution ratio between OPEC/OECD countries prompted the U.S. and other donor nations to call for an examination of IFAD's performance, mission, and its value as an investment of development assistance resources. IFAD's Governing Council commissioned an external assessment of IFAD in January 1994. This assessment included an examination of IFAD's cost-effectiveness, including the ratio between administrative costs and lending levels. In addition, a Special Governing Council Committee reviewed the modalities of financing IFAD's operations, the standards for allocation of voting rights among member states, and the criteria for allocation of Executive Board seats among member states. Based on the results of the rapid assessment, the U.S. decided that IFAD's mission was appropriate and that contributions to IFAD are an efficient use of U.S. resources.

    Recommendation: When considering IFAD fourth replenishment, the Administrator, AID, along with members of the Working Group on Multilateral Assistance, should determine whether IFAD mission and capitalization (both the amount and the contribution ratio) needs to be reexamined. Such a determination should include an assessment of whether the U.S. contribution to IFAD is an efficient use of these funds.

    Agency Affected: United States Agency for International Development

    Status: Closed - Implemented

    Comments: Changes in the contribution ratio prompted the U.S. and other nations to call for an examination of IFAD's performance, mission, and value as an investment of resources. IFAD commissioned an external assessment that included an examination of its cost-effectiveness, including the ratio between administrative costs and lending levels. A Special Governing Council Committee reviewed the modalities of financing IFAD's operations, standards for allocation of voting rights, and criteria for allocation of Executive Board seats. The U.S. decided that IFAD's mission was appropriate and that contributions to IFAD are an efficient use of U.S. resources. However, due to changes in the funding provided by OPEC countries, IFAD developed a series of changes to the governance structure that make it more consistent with an institution mainly funded by developed countries. The Committee decided that the OPEC group would relinquish two seats on the Executive Board and voting rights were reallocated.

    Recommendation: If after the assessment is made, the United States continues to participate in IFAD, the Administrator, AID, should direct AID mission directors in countries with IFAD programs to become knowledgeable of IFAD activities, and advise AID headquarters and the U.S. mission in Rome whether the IFAD projects complement or conflict with AID activities and whether the projects will be sustainable without further assistance.

    Agency Affected: United States Agency for International Development

    Status: Closed - Implemented

    Comments: According to AID, reengineering efforts within AID have forced AID missions to focus their resources and staff on a set of strategic objectives. Staff are held accountable for producing results in areas related to the strategic objectives. Only AID missions having an agriculture/food security objective have the appropriate staff and resources to comment on the utility and sustainability of IFAD projects. The U.S. Executive Director to IFAD, a technical expert in agriculture development, is the principal U.S. agent for quality control over planned IFAD projects. It is the Executive Director's responsibility to alert missions to new IFAD projects and obtain their input on sustainability. The Executive Director is seeking ways to bring IFAD project ideas to the attention of missions at an earlier point in the project development process, in an attempt to leverage IFAD projects in a way that enhances the impact of AID activities in the agriculture and food security sectors.

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