Foreign Aid:

USAID Has Taken Steps to Safeguard Government-to-Government Funding but Could Further Strengthen Accountability

GAO-15-377: Published: Jun 4, 2015. Publicly Released: Jun 4, 2015.

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What GAO Found

For each key phase for government-to-government (G2G) assistance activities under its Local Solutions initiative, the U.S. Agency for International Development (USAID) has policies that generally reflect federal accountability standards to help ensure funds are used as intended. However, GAO identified several steps in implementing these policies that could further strengthen accountability.

Key Components for USAID's Government-to-Government Assistance Activities

Key Components for USAID's Government-to-Government Assistance Activities

Source: GAO synthesis of U.S. Agency for International Development (USAID) policies. | GAO-15-377

Planning: This phase entails designing projects that link to USAID missions' country development strategies, assessing and mitigating risks, and preparing planning documents. GAO found that USAID missions completed detailed fiduciary risk assessments for G2G assistance activities when required but did not always include mitigation steps in planning documents, in part, because risk assessments were often done after planning had been completed. Also, project monitoring and evaluation (M&E) plans often did not incorporate steps USAID and partner governments agreed to take to mitigate risks and build capacity.

Implementation: In this phase, USAID implements G2G activities according to the terms and conditions established in assistance agreements with partner governments. USAID missions usually selected funding mechanisms in which USAID reimburses partner governments for costs related to completion of agreed-upon activities. In addition, consistent with USAID policy, missions employed assistance agreements and corresponding implementation letters to commit funds and set objectives, among other things.

M&E. This phase includes conducting audits of partner-government entities and assessing the results of G2G assistance activities. Annual audits GAO reviewed were often submitted late, which delays audit follow-up actions required by USAID policy and limits the audits' usefulness as a monitoring tool. In addition, project M&E plans GAO reviewed rarely included indicators or evaluation questions for assessing the degree to which G2G assistance activities are building capacity, increasing ownership, or ensuring sustainability—the three interrelated goals of the Local Solutions initiative.

Why GAO Did This Study

USAID's Local Solutions initiative, launched in 2010 as part of USAID Forward, seeks to reform how the agency administers development assistance and to increase funding implemented through partner-country systems, including partner governments. In fiscal years 2012 through 2014, average annual obligations to G2G activities were about $620 million. The Local Solutions initiative aims to strengthen local capacity and enhance country ownership and sustainability of development efforts. GAO was asked to review accountability under this initiative.

GAO assessed the extent to which USAID policies and practices related to (1) planning, (2) implementing, and (3) monitoring and evaluating G2G assistance provide reasonable assurance that this assistance is used as intended. GAO analyzed key USAID policy documents; interviewed USAID officials; reviewed planning documents from 14 USAID missions; and conducted fieldwork in Nepal, Peru, and Tanzania.

What GAO Recommends

GAO recommends that USAID take steps to strengthen accountability for G2G assistance by, among other things, improving the timeliness of risk assessments; incorporating risk mitigation measures into M&E planning; improving on-time audit submission; and assessing the effects of G2G assistance on capacity, ownership, and sustainability. USAID agreed with all of GAO's recommendations and noted various actions it is taking to address them.

For more information, contact David Gootnick at (202) 512-3149 or gootnickd@gao.gov.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: USAID agreed with this recommendation and identified some steps it had already taken to address these issues. In July 2016, USAID provided an action plan that listed steps the agency was taking to address GAO's recommendation. The action plan included several action items that the agency had either completed or was in the process of implementing that focus on improving the timeliness of risk assessments. Most importantly, in June 2016, the agency completed a structured, in-depth management review of the risk assessment framework to identify the causes for current delays in the missions' completion of the risk assessments. According to agency officials, the recommendations of this review are currently under management review.

    Recommendation: To improve accountability for G2G assistance, the USAID Administrator should develop an action plan to improve the timeliness of risk assessments so that these assessments can better inform project planning.

    Agency Affected: United States Agency for International Development

  2. Status: Closed - Implemented

    Comments: USAID agreed with this recommendation. However, after reviewing its various reporting options, the agency determined that the most appropriate approach to incorporating risk mitigation measures was to build the requirements into the partner government annual work plan and reporting process rather than the monitoring and evaluation plan. Reporting requirements, including possible periodic development and joint approval of annual work plans, also should be included in the G2G agreement signed by the partner government and USAID. If the plan for mitigation of fiduciary risks developed in the Authorization of the Use of Partner Government Systems includes actions to be taken over time by the partner government, reporting on progress made should be included in the reporting requirements of the partner government under the agreement. USAID revised its Automated Directive System (ADS) chapter 201 on planning to reflect this change. We conclude that the agency?s approach to incorporating risk mitigation measures in this manner addresses our recommendation.

    Recommendation: To improve accountability for G2G assistance, the USAID Administrator should develop an action plan to ensure that M&E plans for G2G assistance activities incorporate risk mitigation measures.

    Agency Affected: United States Agency for International Development

  3. Status: Closed - Implemented

    Comments: USAID agreed with this recommendation and identified steps the agency had begun to take to coordinate with other donors. To address this recommendation, in June 2016, USAID headquarters emailed guidance it had developed to help missions improve their risk assessment coordination efforts. The email urged relevant mission officials to: (1) join financial working groups among donors working in the partner country, (2) conduct joint assessments when possible, (3) be mindful of the agency's existing and new guidance regarding joint assessments, and (4) rely on an existing assessment when relevant. The email also included a document highlighting best practices for conducting joint risk assessments, a matrix describing one mission's process for conducting a joint assessment with the World Bank, and a cross-walk comparing USAID's assessment with another widely-used financial risk assessment.

    Recommendation: To improve accountability for G2G assistance, the USAID Administrator should disseminate information to missions regarding best practices for coordinating risk assessments with other donors.

    Agency Affected: United States Agency for International Development

  4. Status: Closed - Implemented

    Comments: USAID agreed with this recommendation and identified some steps it had taken to address this issue. In December 2016, USAID provided an action plan the agency had developed to address this recommendation in three steps and documents to support that it had completed these steps. First, USAID improved the tracking and monitoring of required financial audits by making modifications to its web-based audit tracking system. The system now automatically provides updates of audit plan implementation and generates delinquency letters when audits are not on time, which can be tracked by both the USAID mission and headquarters. Second, USAID identified the pertinent issues and challenges of the capacities, capabilities, and experiences of the locally approved auditing firms and supreme audit institutions to perform timely and quality audits by conducting a survey on audit of local entities through a questionnaire sent out to a sample of 11 missions. In addition, in May 2016, USAID convened experts in the field to discuss implementation of government-to-government (G2G)activities and identify associated issues and challenges. This event included a presentation and discussion on audits of G2G activities to solicit further input. Third, USAID developed a strategy that incorporates these factors to improve on-time financial audit submission and follow-up. To implement the strategy, USAID drafted a sample Standard Operating Procedure (SOP) for financial audit of foreign (G2G and local) entities that the missions could revise and edit for their own use. According to USAID, the SOP incorporates all the inputs identified through the survey and the May 2016 event and highlights suggested timeline for on-time audit report submission, guidance on the use of the audit management system, and best practices to help missions improve their processes.

    Recommendation: To improve accountability for G2G assistance, the USAID Administrator should identify the factors contributing to late submission of required audits and develop a strategy to improve on-time audit submission and follow-up.

    Agency Affected: United States Agency for International Development

  5. Status: Closed - Implemented

    Priority recommendation

    Comments: USAID agreed with this recommendation and noted it is taking steps to address it, including a plan to develop comprehensive mission guidance recommending monitoring and evaluation approaches to assess effects of G2G assistance on partner-country capacity, ownership, and sustainability. In December 2016, USAID finalized guidance to supplement the agency?s operational policy on the program cycle, which includes core concepts about developing government-to-government activities, as well as guidance on monitoring and evaluation approaches to assess the effects of government-to-government assistance on the goals of the Local Solutions initiative. The supplemental guidance highlights the fact that monitoring and evaluation approaches for government-to-government assistance can be different from those for traditional implementing mechanisms, such as grants and contracts, and provides more detailed information on monitoring, evaluation, and learning approaches for government-to-government assistance. As a result, we conclude that the agency?s approach to tracking progress toward the goals of the Local Solutions initiative address our recommendation and we are closing it as implemented.

    Recommendation: To improve accountability for G2G assistance, the USAID Administrator should develop and disseminate guidance on assessing the effects of G2G assistance on partner-country capacity, ownership, and sustainability, including through the identification of indicators and evaluation approaches.

    Agency Affected: United States Agency for International Development

 

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