Farm Report Views From The Ground

Foreign Assistance Reform: Views From the Ground

TABLE OF CONTENTS

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Executive Summary Findings

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1. Decision-making throughout the F Process has almost entirely failed to involve consultation with in-country actors despite the valuable input those actors could provide. 2. Field-based planners and implementers fear that the F process is causing a worrisome shift away from assistance principles and areas of programming long accepted as central to the long-term success of development assistance. 3. The F process is plagued by a series of mismatches between theory and reality. a. Operational Discordance b. Failure to Address “Elephants in the Room” • US Assistance Programs Beyond Purview of F process • Longer-Term Trends in the Way the US Government Administers Foreign Assistance Recommendations APPENDIX ONE: Research Methodology APPENDIX TWO: Background on NGO In-Country Operations

NOTE: Five country case studies are published on InterAction’s website: www.interaction.org

About InterAction InterAction is the largest alliance of U.S.-based international development and humanitarian nongovernmental organizations. With more than 165 members operating in every developing country, we work to overcome poverty, exclusion and suffering by advancing social injustice and basic dignity for all.

EXECUTIVE SUMMARY

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he current effort to reform US foreign assistance grew out of an understandable desire to better align US assistance with US interests and to improve the coordination, efficiency and transparency of that aid. The process has been the subject of a great deal of writing and discussion in Washington, but views from the ground – from the in-country USAID officials and in-country implementing partners – have received less systematic attention. This report, based on some 270 in-country interviews with field-based individuals in nine countries, is an effort to bring their important observations to Washington decision-makers considering what should be the next steps.

Transformational diplomacy to date

The current round of foreign assistance reform (F process) began in January 2006 as part of the Administration’s Transformational Diplomacy initiative. The relevant goals of this initiative are: • To strengthen the strategic alignment of US foreign assistance resources with the new Strategic Framework for United States Foreign Assistance1 (Strategic Framework); • To improve coordination and efficiency in the use of foreign assistance resources across multiple agencies and accounts, by evaluating comparative strengths and tools available; • To improve transparency in the allocation and use of foreign assistance resources; and • To improve performance and accountability for results, by aligning foreign assistance more clearly with human progress, and with a uniform scale for measuring progress [embodied in the new Strategic Framework for and its progress indicators]. Source: Tobias, Randall L., “MESSAGE FROM THE ADMINISTRATOR TO THE WORKING GROUPS”, April 12, 2007

The F process mandate covers US foreign assistance funds traditionally controlled by USAID and some parts of the State Department, but not US foreign assistance programs controlled through other departments and the President’sEmergency Plan for AIDS Relief (PEPFAR) and Millennium Challenge Corporation (MCC) initiatives. The 1 Strategic Framework for United States Foreign Assistance, (Washington, DC: U.S. Department of State, July 10, 2007). Available at: http:// www.state.gov/documents/organization/88433.pdf.

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Foreign Assistance Reform: Views From the Ground

stated purpose of the F process has been to better align US foreign assistance with the new Strategic Framework. The document, created by the newly created Office of Foreign Assistance at the State Department (known informally as the “F Bureau”), identifies five programmatic priorities: peace and security; governing justly and democratically; investing in people; economic growth; and humanitarian assistance. Core country teams, based in Washington and representing the 35 countries that were identified for fasttrack implementation of the reforms, then reallocated appropriated funds and developed decision-making processes and policy guidance for the in-country USAID missions. The F Bureau subsequently launched the system in Fiscal Year 2007 through the use of Operational Plans prepared by the missions according to a complete set of instructions relating to priority objectives (including program areas, elements and scores of indicators for each objective). Missions used this framework to set annual targets for each objective.

This research study

With funding from the Gates Foundation, InterAction – the largest association of U.S.-based NGOs involved in international relief and development – undertook an effort to collect the reflections of field-based officials and individuals whose work directly involves or is influenced by the F process. For this research, InterAction chose a cross-section of countries from among the 35 nations in the fast-track category. Researchers conducted in-depth interviews in Ghana, Honduras, Kenya, Nepal and Vietnam in both June and November 2007, while InterAction staff conducted interviews in El Salvador, Nicaragua, Tanzania and Zambia. The interviews were with members of USAID country missions, and field staff of US-based NGOs that directly receive USAID funding, local NGO partners and local NGOs that directly receive USAID funding. Questions focused on knowledge of the F process, the extent of consultation, immediate and anticipated effects of the F process on programs and on partnerships between US-based and local NGOs. The result is a snapshot in time of how the F process is perceived by key actors in the best position to judge its effectiveness in improving aid delivery: the people working on the ground in its implementation in the target countries. Obviously this research was done early in F process implementation and so ongoing developments could affect the picture.

Findings

This early, field-based snapshot provides valuable insights into the program to date and helps better arm decisionmakers with the range of information they need to make early course corrections to improve the results and avoid the need for more far-reaching changes later on. The

interviews revealed three major areas that, from the field perspective, must be addressed to ensure that the F process and US foreign assistance can meet stated goals: 1.

The F process decision-making method has almost entirely failed to involve consultation with in-country actors despite the valuable input those actors could provide.

2. Field-based planners and implementers fear that the F process is, in combination with other trends in US foreign assistance, causing a worrisome shift away from assistance principles and areas of programming long accepted as central to the long-term success of development assistance. 3. The F process, as currently conducted, is plagued by a series of mismatches between theory and reality. These include: • implementation problems caused by mismatches between the F process and programmatic realities on the ground; • the fact that the F process, despite its stated goal of improving the coordination of US Foreign Assistance, really cannot make any truly significant progress in reducing the fragmentation of US foreign assistance as long as the F process has no jurisdiction over other US programs such as PEPFAR, the MCC and programs run by other Executive branch departments other than USAID and State; and • the unmet need for a serious examination of longer-term trends in how the US. government administers foreign assistance – trends that are having a growing impact on the ground, but which have received relatively little analytical scrutiny throughout the F process.

Recommendations

InterAction fully agrees that there is a need for improved coherence, accountability and transparency in US foreign assistance. However, the trends revealed by the interviews conducted as part of this research suggest that the F process, as executed to date, has demonstrated notable limitations in its ability to achieve these goals. Therefore, InterAction strongly recommends the following steps to improve the process and the overall goal of strengthening the effectiveness of US foreign assistance:

• Suspend any further implementation of the F process and initiate a more substantial review of the initiative’s implementation to date and the issues beyond its jurisdiction that affect the overall effectiveness of the F process effort. This will ensure that aspects with significant negative impacts are removed and replaced with alternatives better able to meet all stated goals. • Conduct a thorough assessment of the steps necessary to ensure the statement in the National Security Strategy that “development is one of the three legs of US national security” (along with diplomacy and defense) is reflected in policy and programmatic reality. Alternatively, consider initiating a National Development Strategy so that development will be on par with other “legs” of US National Security. In either case, this should begin with a reconsideration of the relative weight given to these three areas of interest in making foreign assistance determinations. Consideration of organizational changes necessary to achieve this goal should also begin. • Develop a systematic plan for consultation with local communities and civil society that allows decisions at the program level to be made in-country by field missions and not in Washington. • Develop a continued and more expansive consultative process between the F Bureau and US-based NGOs, including an open dialogue about the fundamental assumptions made by the new foreign assistance framework. Steps have been taken toward such an effort and we recommend that they continue. This could become an effective forum for a discussion of the impact of the general trends in the way US assistance is administered, particularly regarding the rise of independent programming (PEPFAR and MCC) and USAID’s shrinking levels of staffing and program support. • Vigilant oversight as to whether the F process will have an adverse impact on effective programs in the field that reduce poverty and meet basic needs is critical. Oversight is also needed for the provision of additional resources for such programs as necessary. Effective programs are community-based, work person-to-person and have true local ownership. Our research has shown that these are exactly the programs most at risk of becoming marginalized by the F process as it has been implemented thus far.

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FINDINGS

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he following findings represent the dominant areas of concern expressed by field-based actors during the 270 interviews InterAction conducted by InterAction. InterAction believes an important part of assessing the F process is comparing its results to the goals set for it by the Administration, namely: strategic alignment with the Strategic Framework improved coordination, efficiency and transparency in the use of US foreign assistance funds; and improved performance and accountability through the clearer alignment of foreign assistance with “human progress” and a uniform scale for measuring progress. To that end, the discussion of each finding ends with a brief review of the goals affected by that finding.

1. Decision-making throughout the F process has almost entirely failed to involve consultation with in-country actors, despite the valuable input those actors could provide. Lack of advance consultation appears to have been a consistent hallmark/problem/characteristic with all key groups of actors at the field level. The interviews suggest a strong effort by Washington to intentionally limit input from the field during the development process – even though in other areas (such as the MCC), the importance of field based input and the voices of local actors from the start have formed the core of the philosophy. USAID missions consistently reported that they were not consulted in advance. In the few cases where there was “consultation,” it was actually in the form of briefings rather than sessions in which they could provide input. Of the 25 USAID staff interviewed, 80 percent said they had not had opportunities to have input into the F process, either before or after it was announced.2 Even those who indicated they had been “consulted,” said that the meetings were really briefings, without the opportunity to make recommendations. In fact it appears that the decision-makers in Washington were actively working to limit not only field mission input, but even knowledge of the process while it was underway. For example, in one country, USAID staff was told that “Washington would do the strategy and the missions would do the tactics.” In another country, a Foreign Service Officer from the USAID mission was in Washington during the meetings of the Core Team3. Initially, he 2 Interviews were conducted with a range of USAID staff including mission directors in some countries, senior and mid-level staff, US citizens and foreign service nationals (FSNs) of the particular countries. 3 The Office of Foreign Assistance (OFA) that was created to carry out

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Foreign Assistance Reform: Views From the Ground

was told he could not attend the meeting for his country. When he complained, he was notified that he could attend but not speak or report what he heard to the Mission team. Another Foreign Service Officer was on a core team but not allowed to talk with her mission team. An additional respondent said, “The F reform has affected the mission’s ability to be predictable to the [national] government. Prior to Transformational Diplomacy, the mission had just completed our country strategy and they really burned the [national] government when they had to start adhering to the F process.” Further, another respondent stated, “There’s no dialogue and we don’t have the opportunity to defend our programs as we did in annual program reviews of the past. The F process lacks analysis and needs assessments.” Similar sentiments were expressed in other countries. NGO partners also reported a lack of transparency and inclusion. In the first round of interviews, most NGOs said USAID missions had not consulted them about the F process (in the target countries: 83 percent of US-based NGOs, 90 percent of local NGO partners and 82 percent of all NGOs with direct funding; and in the four supplemental countries 88 percent of the US-based NGOs).4 In one country, the representative of a very large, influential US-based NGO said: “Even though we’re an important partner, we wonder why they didn’t tell us of the changes.” At the October 24th panel discussion during a meeting of the Advisory Committee on Voluntary Foreign Aid in Washington, DC, three USAID mission directors – each from a different region -- said that they had deliberately not shared information about the F process with partners in their countries. By way of explanation, one said, “It was not ready for prime time.” This aligns with the way the situation was described by respondents in one of the countries. As one respondent explained, “The process was top down, closed, and driven by the F Bureau. Missions received directives, and they were not comfortable embracing them or explaining TD to stakeholders.” Other bilateral and multilateral donors also do not appear to have been consulted or even well briefed at the local level. Respondents from this group said that neither USAID the TD reforms organized core teams to develop the strategy for each country. These teams were comprised of State Department staff and sometimes USAID staff, all of whom were based in Washington, DC. 4 The term “consultation” means an effort by a donor to engage PVOs or NGOs in discussion about a proposed action or policy where recommendations by PVOs/NGOs are invited, seriously considered, and perhaps actually adopted in regard to the proposed action. “Participation” normally means a decision-making role in the particular activity.

missions nor US embassies had briefed them on the F process. Several noticed drastic changes but did not know why they were occurring. One respondent from a multilateral organization said, “No one has a clue.” In only one country, which has a MCC Compact, did a respondent indicate that there was now more cooperation with multilateral agencies on the part of the US Government. The lack of consultation calls into question the effectiveness of this part of the F process effort in meeting several of its stated goals – improving transparency and improving coordination. Not surprisingly, this lack of consultation has led to a wide range of perceptions of shifts in programmatic focus and motivation, as well as mismatches that have undermined both support for the F process on the ground and raised significant concerns about its long-term effectiveness. In fact, the lack of consultation appears to have actually worsened field level performance and attitudes on several stated goals of the F process, undermining transparency in decision-making and coordination with actors at the point of impact. [If the F process is to do a better job of achieving these goals, these shortcomings will need to be addressed through a significant reform of the consultation and decision-making process.] 2. Field-based planners and implementers fear that the F process is causing a worrisome shift away from assistance principles and areas of programming long accepted as central to the long-term success of development assistance. The most recent US National Security Statement5 specifically acknowledged development as one of the three legs on which our national security depends. Yet the interviews suggest that key actors on the ground perceive a worrisome shift away from development principles and practices that have been proven essential to effective programming. In five of the seven countries, USAID respondents expressed concern that the aid program would become more and more politicized and that the development emphasis would continue to diminish. Some commented on the reduction of funding for development sectors in favor of peace, security and democratization and the advent of the MCC. One respondent said, “We are in the dark regarding a strategy. We don’t have any strategic framework for the agency.” In two countries, staffers said that much will 5 National Security Statement of the United States of America, (Washington, DC: The White House, March 16, 2006). Avilable at: http://www. whitehouse.gov/nsc/nss/2006/nss2006.pdf.

depend on future leadership in Washington in both Congress and the White House/Administration. Representatives of other bilateral, multilateral donors and national governments in two of the four countries where such individuals were interviewed said they believed that the US Government is primarily interested in its own strategic interests rather than the development interests of the countries. One respondent said, “US policy is more important…not the needs of the country.” In the other country, one respondent noted, “The US behaves as a superpower and tends to seek its own strategic interest in the country. It should try to coordinate with other donors. The USAID program is more politically-oriented. They must admit they are not the most important donor in the country.” In the other two countries, respondents said they feared reduced funding for development areas. Of particular concern seems to be the fate of several areas considered critical to long-term development success and the ability of countries, communities and individuals to build their capabilities to eventually sustain themselves without aid. All those interviewed in seven of the countries in the second round were asked what they thought the development priorities needed to be in the countries in which they were working. Education, human development and capacity strengthening, poverty reduction through economic development (such as microenterprise), and health (particularly maternal and child health, health systems, reproductive health and nutrition) came up consistently as critical priorities. Yet, of the 13 USAID mission respondents asked if the TD reforms have been flexible enough to allow USAID missions to focus on the development priorities noted, only 23 percent of USAID staff said they were flexible enough. In one country, USAID staff said that the F process was inflexible because the agenda was determined by Washington with an intention to make all missions uniform. Therefore, countries lost their specific priorities. In another country, respondents expressed similar concerns. As one explained, “The process was top down, closed, and driven by the F Bureau. Missions received directives, and they were not comfortable embracing them or explaining TD to stakeholders.” In another country, a respondent said that budget cuts have limited USAID action because there’s not enough money put into the priorities such as democracy and economic growth. In yet another country, a respondent said that education, viewed as a high priority by all respondents, is not a priority of USAID. Project ramifications of this perceived trend appeared in several of the countries. The eight countries with

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programming in family planning and reproductive health saw funding for that work drop by an average of 24 percent. Respondents in one country noted a 100 percent cut in USAID’s pre-existing small-farmer agricultural programs when the MCC Compact was signed, along with less attention to education and health. In another country, respondents reported funding cuts in water and sanitation, environmental programs, maternal and child health and reproductive health. In a third, a respondent explained that PEPFAR money dwarfs funding for humanitarian, social development and even economic development programs. For both El Salvador and Nicaragua, the US Government’s FY 2008 presidential budget request includes significant reductions in funds for both maternal and child health and reproductive programs compared to FY 2006 levels. In the same FY 2008 request, in Zambia, maternal and child health programs have been eliminated; in Tanzania, reproductive health funding has been reduced; and in Ghana and Kenya, funding for water and sanitation has been eliminated. One respondent said, “Our proposals for Development Assistance (DA) funds are like throwing in the wind. There’s no dialogue and we don’t have the opportunity to defend our programs as we did in annual program reviews of the past. The F process lacks analysis and needs assessments.” In one country, the Mission’s five-year strategic plan has been replaced by the Mission Strategic Plan that was a product of the F process. The respondent said, “[A] lot of useful stuff [has been] discarded. [It has created] confusion for the government. US interests now are playing a greater role than local interests in determining the mission’s direction.” Similar sentiments were expressed in other countries. The perceived shift in focus calls into question the effectiveness of the F process to date, specifically in meeting two of its stated goals – improving transparency and improving coordination. It is also unclear how a shift away from principles and programmatic areas long proven to be central to effective development helps the F process achieve the objective of improving performance and accountability by aligning foreign assistance more clearly with human progress. Nor is it clear how such a shift helps ensure that the National Security Strategy’s statement, which states that development is “one of the three legs of U.S. national security” (along with diplomacy and defense), is reflected in practice. 3. The F process is plagued by a series of mismatches between theory and reality. These include: (a) implementation problems caused by mismatches between the F process and programmatic realities on the ground; (b) the fact that the F process, despite its stated goal of improving the coordination of US Foreign Assistance, really cannot make any truly significant progress in

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Foreign Assistance Reform: Views From the Ground

reducing the fragmentation of US foreign assistance as long as the F process has no jurisdiction over other US programs such as PEPFAR, the MCC and programs run by other Executive branch departments other than USAID and State; and (c) the unmet need for a serious examination of longer-term trends in how the US government views and administers foreign assistance – trends that are having a growing impact on the ground, but have received relatively little analytical scrutiny in the F process.

a. Implementation Problems Caused by Mismatches between the F process and Programmatic Realities on the Ground Projects are being shifted to one-year, performance-based funding cycles where an emphasis on numerical results is key – an approach originally introduced through the PEPFAR program. This is causing problems for NGO planning and creates considerable anxiety regarding funding for the longterm. It also has implications for program success over the long term. Uncertainties in funding make it difficult to retain the best possible program staff; this in turn undermines program success. Even when multi-year awards are made, each year’s funding must be negotiated and is not guaranteed. Respondents called the yearly funding requirement time consuming and disruptive to project implementation. The F process has also increased the emphasis on data collection, monitoring and reporting through use of the new indicators that are largely quantitative and are not impact related. USAID requests for quantitative data are increasingly frequent and, in most countries, training has not been provided as to how to utilize the new system. In most instances, respondents reported that the new indicators are neither appropriate nor focused on impact. Therefore, NGOs are continuing to use their own indicators in addition to the newly required ones from USAID. Furthermore, the fact that these new indicators are being applied to existing projects is causing confusion. As one respondent noted, “Application of a whole set of new indicators to a project not designed with those indicators in mind means analysis becomes one big hell, as one has to compare apples with oranges.” The new indicators, preparation of the yearly Operational Plan and the new reporting requirements have all caused difficulties. As one respondent explained, “The abruptness of the reforms, the short time period for implementation, unclear and oftentimes conflicting guidance with respect to mainstreaming the reforms into our day-to-day operations, and numerous glitches with migrating the data to the Operational Plan [OP] template combined to render preparation of the FY 2007 OP excruciatingly painful, time consuming and

very costly.” In another country, a respondent described how program elements have to be selected based on the new indicators that often don’t fit realities on the ground: “F had a concept and tried to fit reality into it, rather than the other way around.” Another respondent said, “A cookie cutter approach to development indicators is crazy. Even trying to create regional indicators would be a near impossibility, let alone the global indicators that F has created.” Another respondent complained of the frequency of reporting requirements: “We’ve gone from quarterly reports to a system in which our partners are writing reports and doing data collection all the time. Reporting requirements have increased 50-fold.” In another country, a respondent said that FACTS (the new data collection system) does not work: “ This new system has not led to better data collection. It is cumbersome and confusing, not user-friendly, and the Mission is often unable to even access it due to the country’s limited internet capacity. The F Bureau in Washington didn’t take into account the less developed technology the missions in developing countries have to work with.” These implementation mismatches call into question the effectiveness of the F process to date in meeting several of its stated goals – namely improving coordination and efficiency.

b. Failure to Address the “Elephants in the Room” Independent Programming (Including PEPFAR and the MCC) Although the F process was intended to improve coordination and efficiency of US foreign assistance, respondents reported that proliferation of programs and variations in their operation is greater than ever. While the F process is intended to improve coordination of US foreign assistance, it is severely hampered in its ability to do so because of the many US assistance programs that are not within its purview. This results in a “balkanization” of foreign assistance rather than the coordination hoped for through the F process. In fact, the F process controls only a minority of the total US foreign assistance funding and, in some countries, its programs are dwarfed by PEPFAR and potential MCC funding. Respondents in this assessment consistently noted the continued (and often increasing) fragmentation of US assistance in their countries – despite the efforts of the F process. One respondent said, “…the ‘reality’ of various foreign assistance initiatives from a wide range of different US government agencies has become even more proliferated, rather than more strategically integrated, orchestrated and managed through USAID…this is counter to the intent of [the foreign assistance component of] Transformational Diplomacy … as conveyed.” In another country, a respondent said, “It’s absolutely false to say that the US Government is better coordinated as a

result of the F reform. The F process has nothing to do with PEPFAR or MCC.” In yet another country, a USAID staffer asks the PVO grantees and contractors to let him know if they sign contracts with other departments of the US Government, e.g. the Department of Labor, because otherwise he has no way of knowing this information. Since a number of the countries covered in this assessment are significantly involved in the PEPFAR and MCC processes, respondents were asked about the effects of those programs on areas and staff assigned to programs covered by the F process. • The President’s Emergency Program for AIDS Relief (PEPFAR) The F process adopted many of the operational aspects of PEPFAR to such a great extent that some refer to F process as the “PEPFARization of the foreign assistance system.” Four of the countries in this assessment project have large PEPFAR programs. Respondents in these countries commented on ways in which PEPFAR is affecting other in-country aid efforts covered by the F process. The following were of particular concern. Respondents believe PEPFAR funds are overwhelming and distorting the health sector, while other important health needs are neglected. The annual US budget to fight HIV/AIDS abroad has increased from $1.5 billion in FY 2003 to $6.0 billion in 2008. Six of the countries in which interviews were conducted have FY 2008 HIV/AIDS funding requests that represent increases of between 51.52 percent (Nicaragua) and 201.06 percent (Tanzania) over FY 2006 levels. These large increases are, in a number of instances, accompanied by the reduction or elimination of programming in other health areas such as maternal and child health and reproductive health, and the related areas of water and sanitation. The amounts available for PEPFAR also dwarf those available for other important areas of development assistance. Because PEPFAR money can only be used in clearly prescribed ways to fight HIV/AIDS, other important health needs are neglected. Even though health care systems are the backbone of effective health care delivery, funding is severely lacking to strengthen these systems through efforts such as hiring and training personnel, and providing health infrastructure, equipment and supplies. Respondents in two countries reported that restrictions of PEPFAR money are so tight that money targeted for orphans and vulnerable children through PEPFAR cannot even be used to provide services to caretakers of such children. Other interview respondents noted that the PEPFAR budget is so high in some countries that the

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t Changes in funding for health programs in FARM Countries, FY 06 vs. FY 08* Country

HIV/ AIDS

Tuberculosis

Malaria

Maternal & Child Health

Family Planning/ Reproductive Health

Ghana Honduras Kenya Nepal Vietnam El Salvador Nicaragua

-28.80% -3.03% 173.37% -45.40% 180.96% 450.96% 51.52%

21.21% -100% 34.86% -

69.15% -18.65% -

-30.07% 111.79% 32.79% 51.48% -39.39% -22.73%

-5.47% -63.24% -9.53% -2.38% -39.39% -42.84%

-100% -100% -

-20.12% -13.59% 151.15% -3.37% 178.91% -26.33% -22.49%

Tanzania

201.06%

259.71%

0.00%

35.87%

-22.48%

-

165.08%

Zambia

150.00%

51.67%

-18.14%

-100%

-5.18%

-

127.85%

TOTAL

165.32%

47.21%

-5.31%

-0.52%

-24.35%

-100%

126.43%

Water Supply & Sanitation

Total

*Comparison is between FY 06 Actual figures and the FY 08 Request

money cannot be programmed effectively, given the very restrictive requirements. PEPFAR fails to capitalize on in-country expertise in developing projects and partners, but then relies on (and often over-taxes) the same USAID in-country staff to monitor the programs. The Office of Global AIDS Coordination in Washington designs the PEPFAR projects and chooses the recipients of the funding without using the field expertise of USAID missions and other in-country actors. One respondent said, “PEPFAR is more about delivering things and measuring, not cooperative implementation. The terms are much prescribed.” At the same time, PEPFAR relies on USAID mission staff to monitor its programs – this at a time when USAID mission staffs are already overstretched covering other programming. Where PEPFAR budgets have grown dramatically, staff is overworked and unable to visit field projects due to the administrative workload in the mission. In one country, a respondent said, “Our own capacity is diminishing and NGO partners on the ground are beginning to feel the effects of a weak agency. If this continues to happen, we will all go down together.” • The Millennium Challenge Corporation (MCC) The MCC was established in January 2004, two years before the F process was introduced. Seven countries in this assessment have signed either an MCC Compact or a Threshold Agreement.

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Foreign Assistance Reform: Views From the Ground

In each of those seven countries, respondents were asked how they thought the MCC Compact or Threshold Agreement was affecting the US foreign assistance program in that country. Most respondents who knew about the MCC felt that its programs have had a negative impact on their missions’ programs. In at least four of the countries, the USAID budget has been reduced. In one country, a respondent said, “[The Office of Management and Budget (OMB)] representatives said on more than one occasion that OMB is urging to cut aid in MCC compact countries.” The focus of the MCC program in the various countries is on infrastructure, commercial agriculture, energy, promotion of trade and a favorable investment climate for the private sector. Many of the respondents said they thought the MCC would affect USAID negatively by either competing with, or substituting for its programs. They also feared that the MCC would have negative effects on rural development and poverty alleviation efforts in which USAID had been involved. One respondent said, “It will generate more wealth for the wealthy.” In one country, respondents feared negative environmental impacts and displacement of inhabitants in a region where a road is to be built. They also said that MCC’s promotion of an extractive industry in the region would run counter to USAID’s effort to protect biodiversity and natural resources. In another country, respondents felt that there was insufficient recognition of the role long-term USAID programs and efforts had played in helping the country meet the preconditions necessary for MCC participation.

The F process’s failure to reach programs representing such a large portion of US foreign assistance calls into question the initiative’s effectiveness to date in meeting several of its stated goals – namely improving coordination and efficiency. General Trends in the Way US Assistance is Administered Discussion of the problems with current efforts to improve the coordination and effectiveness of US foreign assistance frequently focuses directly on internal shortcomings of the F process itself (e.g. the decision-making process and the types of indicators used) or big programs that remain outside of its purview. Both are important. However, another very important factor generally remains off the radar screen: an ongoing general shift that has been underway for some time concerning how the US Government administers US foreign assistance. While the trend is clear, it has been more the result of incremental changes rather than a clear, carefully considered policy shift. For the F process to be truly successful, these changes must be reviewed and determinations made as to whether the changes should be continued or revised. These trends were clearly on the minds of a number of the participants in this assessment who saw them as relevant to any understanding of the current state of US foreign assistance in their countries and the F process. USAID has long experienced shrinking levels of field staffing to manage programs in traditional areas of development assistance that fall outside of the big new projects such as PEPFAR. During the interviews for this assessment, it also became clear that in some countries the USAID missions are losing additional staff because of the F process. Respondents in several countries reported that long-term AID employees have retired or have left due to frustration with the F process. Moreover, in two countries Foreign Service Nationals have lost their jobs in significant numbers or have been told that they will. Where personnel has remained stable, in countries where the PEPFAR budgets have grown dramatically, staff is overworked and unable to visit field projects due to the administrative workload in the mission. In one country, a respondent said, “Our own capacity is diminishing and NGO partners on the ground are beginning to feel the effects of a weak agency. If this continues to happen, we will all go down together.” These diminishing staffing levels have played into a longerterm trend that is significantly limiting both USAID’s options for ways to disburse foreign assistance funds and the number and types of implementers who can compete for direct funding. Specifically, there is a much greater emphasis on

large contracts or grants run by consortia, with an emphasis on technical aspects of projects, and much less attention to the long-term, capacity-strengthening efforts carried out by NGOs. In several countries, a few very large US consulting firms are winning more and more USAID contracts, and only large US-based NGOs with substantial independent funding can compete. Comments from respondents in this assessment reaffirmed what InterAction had heard before – that this shift and the accordant financial and administrative requirements reduce the ability of local NGOs to compete. In at least two countries, USAID missions are also providing substantially more funding to national governments than to NGOs. This is in spite of the fact that in certain sectors, previous government programs have failed miserably while NGO programs have been evaluated by external sources as excellent. In these countries, national government officials are now participating in reviews of NGO proposals although interview respondents maintain that the officials do not have the necessary qualifications to do so. In at least one country, local NGOs that received direct USAID funds in the past must now subcontract work through US-based NGOs or contractors. This includes two large local NGO initiatives that were originally created and nurtured with USAID funds and that have been functioning effectively for over 15 years. In one country, 100 percent of US-based NGO respondents noted that USAID is calling for increased use of US professionals rather than local personnel. There are signs that the F process is making it more difficult for some local NGOs to participate in projects in which they receive only indirect USAID funding. In November, US-based NGOs were asked if the F process was making it easier or more difficult to work in partnership with local NGOs. Twenty-one percent of respondents spread across five countries said it was more difficult. Reasons included sudden funding cuts from USAID, changes in report formats and/or proposals that were hard for local NGO partners, a number of abrupt shifts from USAID in areas of emphasis that local NGOs could not implement and, in one country, the fact that most local NGOs do not share the priority objectives of the new USAID focus. Two local NGOs in different countries noted that there had been reductions in sub-grants. In one of the countries, these were in health, education and the environment. Another said that the USAID emphasis on different sectors – democratization, conflict management and strengthening of political parties – was making work for local NGOs more challenging. Lastly, local NGOs that had previously received direct USAID funding were extremely unhappy about now having to receive funds through US-based NGOs and felt this made work more administratively and bureaucratically burdensome.

www.interaction.org

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RECOMMENDATIONS

I

nterAction fully agrees that there is a need for improved coherence, accountability and transparency in US foreign assistance. However, the findings revealed by the interviews conducted as part of this research suggest that the F process, as executed to date, has demonstrated notable limitations in its ability to achieve these goals, has raised significant concerns about a fundamental shift away from critical programmatic areas and has not addressed a series of aspects of US foreign assistance that must be part of the process if the F process is to achieve its goals. Therefore, InterAction strongly recommends the following steps to improve the process and the overall goal of strengthening the effectiveness of US foreign assistance:

weight given to these three areas of interest in making foreign assistance determinations. Consideration of organizational changes necessary to achieve this goal should also begin. • Develop a systematic plan for consultation with local communities and civil society that allows decisions at the program level to be made in country by field missions and not in Washington.

• Conduct a thorough assessment of the steps necessary to ensure the statement in the National Security Strategy that “development is one of the three legs of U.S. national security” (along with diplomacy and defense) is reflected in policy and programmatic reality. Alternatively, consider initiating a National Development Strategy so that development will be on par with other legs of US National Security. In either case, this should begin with a reconsideration of the relative

• Vigilant oversight as to whether the F process will have an adverse impact on effective programs in the field that reduce poverty and meet basic needs and the provision of additional resources for such programs as necessary. Effective programs are community-based, work person-to-person and have true local ownership. Our research has shown that these are exactly the programs most at risk of becoming marginalized by the F process as it has been implemented thus far.

Photo courtesy: Neemah Esmaeilpour

• Suspend any further implementation of the F process and initiate a more substantial review of the initiative’s implementation to date and the issues beyond its jurisdiction that affect the overall effectiveness of the F process effort. This will ensure that aspects with significant negative impacts are removed and replaced with alternatives better able to meet all stated goals.

• Develop a continued and more expansive consultative process between the F Bureau and US-based NGOs, including an open dialogue about the fundamental assumptions made by the new foreign assistance framework. Steps have been taken toward such an effort and we recommend that they continue. This could become an effective forum for a discussion of the impact of the general trends in the way US assistance is administered, particularly regarding the rise of independent programming (PEPFAR and MCC) as well as USAID’s shrinking levels of staffing and program support.

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Foreign Assistance Reform: Views From the Ground

Appendix One: Research Methodology

M

ost of the data for this report was gathered through two sets of in-depth interviews with a variety of respondents in five countries (Ghana, Honduras, Kenya, Nepal and Vietnam) in June and November of 2007. InterAction staff conducted supplementary interviews in four additional countries (El Salvador, Nicaragua, Tanzania and Zambia) in August and November of 2007. In total, researchers conducted 270 interviews in the nine countries.

Timing This assessment was intentionally conducted early on in the implementation of the foreign assistance reform effort (F process). The intention was to create a snapshot of the effort on the ground while the process was still early enough in its execution to allow for any necessary adjustments to improve its effectiveness. Obviously this limited the amount of time the F process had to produce significant effects on the development work of PVOs and NGOs. As a way to maximize the value of data collected, the research was divided into two parts, with a first set of interviews carried out in late June and a second set of interviews with the same set of respondents carried out in November. This schedule was based on the hypothesis that little would be known about the reforms -- and few effects felt -- by June, whereas respondents would likely be more knowledgeable about the reforms and would have experienced more effects by November after the end-of-the fiscal-year proposal writing season had been completed.1 In addition, InterAction staff visited four other countries (El Salvador, Nicaragua, Tanzania and Zambia) to carry out supplementary research. Choice of countries The study focuses on five countries representing a geographic and situational cross section of the 35 “fast track” nations. 2 Nepal was chosen as a rebuilding country, Kenya and Vietnam as developing countries, and Ghana and Honduras as transforming countries. InterAction engaged an experienced development professional in each of these countries to carry out the research. Of the four countries in which additional interviews were conducted, Zambia is categorized as a developing country and the remaining as transforming nations.

Categories of respondents In the five primary countries, researchers interviewed five categories of respondents: • In-country staff of US-based NGOs that receive USAID funds; • Staff of local NGO3 partners of US-based NGOs on USAID-funded projects; • Staff of local NGOs receiving direct funding from USAID; • Staff of USAID missions in the particular country; • Staff of the US Embassy, other bilateral donors, multilateral donors, national government ministries or researchers knowledgeable about US foreign assistance. Interviews in the supplemental countries were limited to exchanges with USAID mission staff and with in-country staff of US-based NGOs that receive USAID funds. Focus of the research In the first round of interviews in the five primary countries, researchers asked questions in four major areas: • Background on the NGOs’ programs in the country; • Awareness of the foreign assistance reforms and extent of related consultation; • Immediate effects of the reforms on the NGOs’ programs (both USAID-funded and those funded by other donors) and on their partnerships; and • Anticipated effects of the reforms in the future. In the second round of interviews conducted in November, researchers asked follow-up questions regarding awareness of the reforms and consultation, additional effects and anticipated effects. Researchers also asked respondents for their views regarding the country’s priority development issues, emerging trends in US foreign assistance in the country, and possible steps to improve US foreign assistance in that country. In the supplemental countries, the August interviews used an adapted version of the questionnaires used in the five countries in June. Similarly, the November interviews used a slightly adapted version of the questionnaires for the five countries’ second round of interviews.

1 July -- early September is always a busy proposal-writing season for PVOs and NGOs requesting USAID funding since the US Government’s fiscal year ends in September and significant money is awarded just prior to the end of the fiscal year.

To develop a better picture of the NGO respondents themselves, they were also asked a series of questions to develop an understanding of the nature of their in-country operations. The results are covered in detail in Annex 2 of this report.

2 “Fast-Track” countries are those selected to complete an integrated, interagency Operational Plan in the US government’s 2007 fiscal year as part of the foreign assistance reform process.

3 “Local NGO” means an NGO created and staffed by citizens of the particular country with its headquarters located in that country. www.interaction.org

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Appendix Two: Background on NGO In-Country Operations

T

he NGOs interviewed for this study were asked a series of questions to develop an understanding of the nature of their in-country operations. Topics included years of in-country experience, topical programming issues, strategic planning and partnerships. Data collected from NGOs in the five primary countries and the supplemental countries was very similar. Information for NGOs in the five primary countries is provided below. In-country experience Of the 100 NGOs interviewed, the vast majority have worked in their respective countries for at least five years, and a majority have had country programs for over 10 years. Of the US-based organizations, 90 percent had worked in the five countries for at least five to 10 years, while 77 percent had worked in them for 11 years or more. Of local NGO partners, 87 percent had at least five to 10 years of experience in the countries and 53 percent had 11 years or more. And 71 percent of the local NGOs with direct funding from USAID had 11 years or more. Length of time as USAID partner Sixty percent of the US-based NGOs and 53 percent of the local NGOs with direct funding have received USAID money for over five years. Thirty-seven percent of US-based NGOs and 29 percent of the local NGOs with direct funding have received USAID money for over 10 years.

Areas of work NGO respondents work in a variety of development sectors, with health being the most common programming issue by far. Data on the top seven sectors are included below. How they operate internally: strategic planning, and monitoring and evaluation (M&E) Significant majorities of the NGOs indicated that they have both a country and sector strategy for their work. Eightytwo percent of the US-based NGOs and 70 percent of the local NGOs (both categories) had country strategies. Similarly, 75 percent of the US-based NGOs and 71 percent of the local NGOs with direct USAID funding have sector strategies. Almost 100% reported having a M&E system in use (92% of US-based NGOs, 100% of local NGO partners, and 94% of local NGOs with direct USAID funds). The percentage of organizations that have both country and sector strategies and functioning M&E systems indicates strong capacity and accountability on the part of these PVOs and NGOs. Partnerships Almost three-quarters of US-based NGOs (72%) have partnerships with local NGOs.

USBased NGOs

Local NGO Partners

Local NGOs with Direct Funds

Health

87%

70%

35%

Agriculture

52%

Education

42%

50%

Micro/Small Enterprises

40%

40%

Women’s Empowerment

33%

43%

Civil Society Strengthening

33%

Sector

Democracy/ Governance

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47% 35%

Foreign Assistance Reform: Views From the Ground

Photo courtesy: Nicole Woo

t Sectors in which PVOs and NGOs Work

InterAction Member Organizations Academy for Educational Development Action Against Hunger USA ActionAid International USA Adventist Development and Relief Agency International (ADRA) African Medical & Research Foundation African Methodist Episcopal Service and Development Agency (AME-SADA) Africare Aga Khan Foundation USA Aid to Artisans Air Serv International Alliance to End Hunger American Friends Service Committee American Jewish Joint Distribution Committee American Jewish World Service American Near East Refugee Aid American Red Cross International Services American Refugee Committee AmeriCares America’s Development Foundation (ADF) Amigos de las Américas Ananda Marga Universal Relief Team Association of Private Voluntary Organization Financial Managers Baptist World Alliance B’nai B’rith International BRAC USA Bread for the World Bread for the World Institute Brother’s Brother Foundation CARE Catholic Medical Mission Board Catholic Relief Services Center for Health and Gender Equity (CHANGE) Center for International Health and Cooperation (CIHC) Centre for Development and Population Activities (CEDPA) Children International Christian Blind Mission (CBM) Christian Children’s Fund (CCF) Christian Reformed World Relief Committee (CRWRC) Church World Service Citizens Development Corps Citizens Network for Foreign Affairs Communications Consortium Media Center Concern America CONCERN Worldwide U.S., Inc. Congressional Hunger Center Counterpart International Direct Relief International Doctors of the World Educational Concerns for Hunger Organization (ECHO) Episcopal Relief & Development Ethiopian Community Development Council Floresta The Florida Association of Volunteer Action in the Caribbean and the Americas (FAVACA) Food For The Hungry Freedom From Hunger Friends of Liberia

Friends of the World Food Program Gifts In Kind International Global Health Council Global Links Global Operations and Development Global Resource Services GOAL USA Goodwill Industries International Habitat for Humanity International Hands on Worldwide Heart to Heart International Heartland Alliance Hebrew Immigrant Aid Society Heifer International Helen Keller International Hesperian Foundation Holt International Children’s Services Humane Society International (HIS) The Hunger Project Information Management and Mine Action Programs (IMMAP) INMED Partnerships for Children Institute for Sustainable Communities Institute of Cultural Affairs International Aid, Inc. International Catholic Migration Commission (ICMC) International Center for Research on Women (ICRW) International Crisis Group (ICG) International Institute of Rural Reconstruction International Medical Corps International Orthodox Christian Charities (IOCC) International Reading Association International Relief & Development International Relief Teams International Rescue Committee (IRC) International Social Service — United States of America Branch, Inc International Youth Foundation Interplast Joint Aid Management (JAM) Jesuit Refugee Services USA Korean American Sharing Movement Latter-day Saint Charities Life for Relief and Development Lutheran World Relief Management Sciences for Health (MSH) MAP International Medical Care Development Medical Teams International Mental Disability Rights International Mercy Corps Mercy USA for Aid and Development Minnesota International Health Volunteers Mobility International USA National Association of Social Workers National Peace Corps Association National Wildlife Federation ONE Campaign Operation USA Opportunity International Oxfam America Pact

Pan American Development Foundation PATH Pathfinder International PCI-Media Impact Perkins School for the Blind Physicians for Human Rights Physicians for Peace Plan USA Population Action International Population Communication Presbyterian Disaster Assistance and Hunger Program Project HOPE ProLiteracy Worldwide Quixote Center/Quest for Peace Refugees International Relief International RESULTS Salvation Army World Service Office Save the Children Seva Foundation SHARE Foundation Society for International Development (SID) Solar Cookers International Stop Hunger Now Support Group to Democracy Trickle Up Program Unitarian Universalist Service Committee United Methodist Committee on Relief United Way International USA for UNHCR U.S. Committee for Refugees and Immigrants U.S. Committee for UNDP U.S. Fund for UNICEF VAB (Volunteers Association of Bangladesh) Winrock International Women for Women International Women’s Environment and Development Organization Women Thrive Worldwide World Cocoa Foundation World Concern World Conference of Religions for Peace World Education World Emergency Relief World Hope International World Learning World Neighbors World Rehabilitation Fund World Relief World Resources Institute (WRI) World Society for the Protection of Animals World Wildlife Fund World Vision

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