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POLICY November 2008

BRIEF

Transformational Diplomacy:
The “F Process”
Recommendations
Problem
Under the process of creating a national strategy for global development, under-
The 2006 take a broader, more fundamental set of reforms that replaces and builds on the
Transformational lessons of the “F process.” Create a new, independent and elevated U.S. foreign
Diplomacy reforms
assistance agency that brings coherence and coordination to the U.S. Government’s
(the “F process”)
undertaken by the development and humanitarian assistance efforts and elevates development to its
Department of rightful place alongside defense and diplomacy, as articulated in the 2002 and 2006
State’s Director of National Security Strategies. These positions are aligned with the recommendations
Foreign Assistance of the Modernizing Foreign Assistance Network, a bipartisan coalition of experts on
accelerated the U.S. foreign assistance.
alignment and
coordination of the
U.S. Government’s Actions
humanitarian
and development • Suspend any further implementation of the “F process” pending a substantive
assistance with the review to determine which aspects of its implementation and associated reforms
priorities of the should be retained or discarded;
Department of State, • Name a strong USAID Administrator who is given budget authority over an inde-
weakening USAID pendent development agency including authority over funding currently under
and subordinating it
the mandate of the Director of Foreign Assistance at the Department of State;
to the Department
of State. The “F • Disband the F Bureau in the Department of State and return its staff to USAID;
process” did not • Continue and expand consultation between Washington and the field, U.S.-based
focus on the foreign NGOs, and Congress to achieve a more accountable and effective foreign assis-
assistance handled tance framework and structure;
by over 20 other • Develop a systematic plan for consulting with local communities and civil soci-
departments and
ety that allows field missions (rather than Washington) to make decisions at the
agencies. This
epitomizes the program level; and
lack of strategic • Revitalize and reinvigorate USAID, significantly increasing the number of full-time
coherence to U.S. USAID foreign service officers and civil service employees and enhancing its staff
development policy. training capability.

1400 16th Street, NW
Results
Suite 210
Washington, DC 20036 These reforms will produce a more effective U.S. foreign assistance framework and
202-667-8227 delivery structure by elevating humanitarian and development assistance alongside
reform@interaction.org defense and diplomacy, and will empower and adequately resource the technical
expertise needed for effective implementation.
www.interaction.org
Background
For more than ten years, InterAction has main- relief and development at their center. They have further
tained that the programs, strategies and institutional struc- weakened an already demoralized and embattled USAID,
tures of U.S. foreign assistance lack a coherent framework, exacerbated a trend toward the militarization of U.S foreign
and are therefore under-resourced, increasingly fragment- assistance (see separate briefing paper in this binder), and
ed and uncoordinated. These factors have driven two inter- eroded the U.S. government’s capacity to deliver effective
related trends in recent years: the dangerous weakening of relief and development assistance at a time when these
the civilian capabilities of U.S. foreign policy, especially at tools are needed more than ever.
USAID and the Department of State; and the increasing role
of the Department of Defense in delivering humanitarian
and development assistance.
One of the chief justifications for the Bush Administration’s
Transformational Diplomacy reforms (the “F process”) was to
realign U.S. foreign assistance programs with U.S. foreign
policies in the post 9/11 world and index these investments
to measurable outcomes. To this end, the Administration has,
through executive action, established a new office at the U.S.
Department of State called the Office of U.S. Foreign Assis-
tance (or “F Bureau” in State department nomenclature). The
Director of Foreign Assistance (DFA) serves as the Senate-
confirmed USAID Administrator, and holds the rank equiva-
lent to Deputy Secretary of State though is not Congressional
confirmed as a Department of State senior official. The DFA
was originally charged with running both USAID and the “F
process.”The staff of the F Bureau is comprised of some 60-80
USAID-funded positions that were moved from the agency’s
Bureau of Policy and Program Coordination (PPC) into the
State Department also by executive order, thereby leaving
USAID without budget and planning capacity.
The creation the F Bureau’s framework and indicators re-
flects a lack of fundamental focus on sustainable poverty
reducing development work and substitutes inputs and
outputs for meaningful measures of outcomes. The “F pro-
cess” instituted a new foreign assistance framework that bor-
rowed from the President’s Emergency Plan for AIDS Relief
(PEPFAR) and the Millennium Challenge Corporation (MCC)
criteria (two major Administration initiatives outside the “F
process”) to rationalize USAID’s programs to five country and
six objective categories. An elaborate set of indicators and a
new database to track them was developed to measure and
report on progress within each category. The thinking was
that this would achieve more accountable and more eas-
ily understood relief and development programs, thereby
furthering U.S. foreign policy goals and increasing political
support for aid in Congress. InterAction supports reforms
designed to achieve greater transparency, accountability
and efficiency if more effective humanitarian and develop-
ment assistance is the result. InterAction also supports the
premise that foreign assistance, including relief and devel-
opment programs, serves the U.S. national interest in a va-
riety of ways. However, the “F process” reforms do not place
POLICY November 2008

PAPER

Foreign Assistance
Reform: Views From
the Ground

T
Previously published by he current effort to reform US foreign assistance grew out of an understandable desire to
InterAction, June 2008. 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 ini-
tiative 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 mul-
tiple 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
1400 16th Street, NW
Millennium Challenge Corporation (MCC) initiatives. The stated purpose of the F process has
Suite 210
Washington, DC 20036
been to better align US foreign assistance with the new Strategic Framework. The document,
202-667-8227
created by the newly created Office of Foreign Assistance at the State Department (known
reform@interaction.org informally as the “F Bureau”), identifies five programmatic priorities: peace and security;

1 Strategic Framework for United States Foreign Assistance, (Washington, DC: U.S. Department of State, July 10, 2007).
www.interaction.org Available at: http://www.state.gov/documents/organization/88433.pdf.
governing justly and democratically; investing in people; 2. Field-based planners and implementers fear that the F
economic growth; and humanitarian assistance. Core coun- process is, in combination with other trends in US for-
try teams, based in Washington and representing the 35 eign assistance, causing a worrisome shift away from
countries that were identified for fast-track implementation assistance principles and areas of programming long
of the reforms, then reallocated appropriated funds and de- accepted as central to the long-term success of devel-
veloped decision-making processes and policy guidance for opment assistance.
the in-country USAID missions. The F Bureau subsequently
launched the system in Fiscal Year 2007 through the use of 3. The F process, as currently conducted, is plagued by a
Operational Plans prepared by the missions according to a series of mismatches between theory and reality. These
complete set of instructions relating to priority objectives include:
(including program areas, elements and scores of indicators • implementation problems caused by mismatches
for each objective). Missions used this framework to set an- between the F process and programmatic realities on
nual targets for each objective. the ground;
• the fact that the F process, despite its stated goal of
This research study improving the coordination of US Foreign Assistance,
With funding from the Gates Foundation, InterAction – really cannot make any truly significant progress in
the largest association of U.S.-based NGOs involved in in- reducing the fragmentation of US foreign assistance
ternational relief and development – undertook an effort to as long as the F process has no jurisdiction over other
collect the reflections of field-based officials and individuals US programs such as PEPFAR, the MCC and programs
whose work directly involves or is influenced by the F pro- run by other Executive branch departments other
cess. For this research, InterAction chose a cross-section than USAID and State; and
of countries from among the 35 nations in the fast-track • the unmet need for a serious examination of longer-
category. Researchers conducted in-depth interviews in term trends in how the US. government administers
Ghana, Honduras, Kenya, Nepal and Vietnam in both June foreign assistance – trends that are having a grow-
and November 2007, while InterAction staff conducted in- ing impact on the ground, but which have received
terviews in El Salvador, Nicaragua, Tanzania and Zambia. The relatively little analytical scrutiny throughout the F
interviews were with members of USAID country missions, process.
and field staff of US-based NGOs that directly receive USAID
funding, local NGO partners and local NGOs that directly Recommendations
receive USAID funding. Questions focused on knowledge of InterAction fully agrees that there is a need for improved
the F process, the extent of consultation, immediate and an- coherence, accountability and transparency in US foreign as-
ticipated effects of the F process on programs and on part- sistance. However, the trends revealed by the interviews con-
nerships between US-based and local NGOs. ducted as part of this research suggest that the F process, as
The result is a snapshot in time of how the F process is executed to date, has demonstrated notable limitations in its
perceived by key actors in the best position to judge its ef- ability to achieve these goals. Therefore, InterAction strongly
fectiveness in improving aid delivery: the people working on recommends the following steps to improve the process
the ground in its implementation in the target countries. Ob- and the overall goal of strengthening the effectiveness of US
viously this research was done early in F process implementa- foreign assistance:
tion and so ongoing developments could affect the picture. • Suspend any further implementation of the F process and
initiate a more substantial review of the initiative’s imple-
Findings mentation to date and the issues beyond its jurisdiction
This early, field-based snapshot provides valuable in- that affect the overall effectiveness of the F process effort.
sights into the program to date and helps better arm de- This will ensure that aspects with significant negative im-
cision-makers with the range of information they need to pacts are removed and replaced with alternatives better
make early course corrections to improve the results and able to meet all stated goals.
avoid the need for more far-reaching changes later on. The • Conduct a thorough assessment of the steps necessary
interviews revealed three major areas that, from the field to ensure the statement in the National Security Strategy
perspective, must be addressed to ensure that the F process that “development is one of the three legs of US national
and US foreign assistance can meet stated goals: security” (along with diplomacy and defense) is reflected
in policy and programmatic reality. Alternatively, con-
1. The F process decision-making method has almost en- sider initiating a National Development Strategy so that
tirely failed to involve consultation with in-country actors development will be on par with other “legs” of US Na-
despite the valuable input those actors could provide. tional Security. In either case, this should begin with a
reconsideration of the relative weight given to these three process – even though in other areas (such as the MCC), the
areas of interest in making foreign assistance determina- importance of field based input and the voices of local actors
tions. Consideration of organizational changes necessary from the start have formed the core of the philosophy.
to achieve this goal should also begin. USAID missions consistently reported that they were not
• Develop a systematic plan for consultation with local consulted in advance. In the few cases where there was “con-
communities and civil society that allows decisions at the sultation,” it was actually in the form of briefings rather than
program level to be made in-country by field missions and sessions in which they could provide input. Of the 25 USAID
not in Washington. staff interviewed, 80 percent said they had not had oppor-
• Develop a continued and more expansive consultative tunities to have input into the F process, either before or
process between the F Bureau and US-based NGOs, in- after it was announced.2 Even those who indicated they had
cluding an open dialogue about the fundamental as- been “consulted,” said that the meetings were really brief-
sumptions made by the new foreign assistance frame- ings, without the opportunity to make recommendations.
work. Steps have been taken toward such an effort and In fact it appears that the decision-makers in Washington
we recommend that they continue. This could become were actively working to limit not only field mission input,
an effective forum for a discussion of the impact of the but even knowledge of the process while it was underway.
general trends in the way US assistance is administered, For example, in one country, USAID staff was told that “Wash-
particularly regarding the rise of independent program- ington would do the strategy and the missions would do the
ming (PEPFAR and MCC) and USAID’s shrinking levels of tactics.” In another country, a Foreign Service Officer from
staffing and program support. the USAID mission was in Washington during the meetings
• Vigilant oversight as to whether the F process will have of the Core Team3. Initially, he was told he could not attend
an adverse impact on effective programs in the field that the meeting for his country. When he complained, he was
reduce poverty and meet basic needs is critical. Oversight notified that he could attend but not speak or report what
is also needed for the provision of additional resources for he heard to the Mission team. Another Foreign Service Of-
such programs as necessary. Effective programs are com- ficer was on a core team but not allowed to talk with her
munity-based, work person-to-person and have true local mission team. An additional respondent said, “The F reform
ownership. Our research has shown that these are exactly has affected the mission’s ability to be predictable to the [na-
the programs most at risk of becoming marginalized by tional] government. Prior to Transformational Diplomacy, the
the F process as it has been implemented thus far. mission had just completed our country strategy and they re-
ally burned the [national] government when they had to start
FINDINGS adhering to the F process.”
The following findings represent the dominant areas of Further, another respondent stated, “There’s no dialogue
concern expressed by field-based actors during the 270 in- and we don’t have the opportunity to defend our programs as
terviews InterAction conducted by InterAction. InterAction we did in annual program reviews of the past. The F process
believes an important part of assessing the F process is com- lacks analysis and needs assessments.” Similar sentiments
paring its results to the goals set for it by the Administration, were expressed in other countries.
namely: strategic alignment with the Strategic Framework NGO partners also reported a lack of transparency and
improved coordination, efficiency and transparency in the inclusion. In the first round of interviews, most NGOs said
use of US foreign assistance funds; and improved perfor- USAID missions had not consulted them about the F pro-
mance and accountability through the clearer alignment cess (in the target countries: 83 percent of US-based NGOs,
of foreign assistance with “human progress” and a uniform 90 percent of local NGO partners and 82 percent of all NGOs
scale for measuring progress. To that end, the discussion of with direct funding; and in the four supplemental countries
each finding ends with a brief review of the goals affected 88 percent of the US-based NGOs).4 In one country, the rep-
by that finding.
2 Interviews were conducted with a range of USAID staff including mission
1. Decision-making throughout the F directors in some countries, senior and mid-level staff, US citizens and for-
process has almost entirely failed to involve eign service nationals (FSNs) of the particular countries.
3 The Office of Foreign Assistance (OFA) that was created to carry out the
consultation with in-country actors, despite TD reforms organized core teams to develop the strategy for each coun-
the valuable input those actors could provide. try. These teams were comprised of State Department staff and some-
Lack of advance consultation appears to have been a con- times USAID staff, all of whom were based in Washington, DC.
sistent hallmark/problem/characteristic with all key groups 4 The term “consultation” means an effort by a donor to engage PVOs or
of actors at the field level. NGOs in discussion about a proposed action or policy where recommen-
dations by PVOs/NGOs are invited, seriously considered, and perhaps ac-
The interviews suggest a strong effort by Washington to in- tually adopted in regard to the proposed action. “Participation” normally
tentionally limit input from the field during the development means a decision-making role in the particular activity.
resentative of a very large, influential US-based NGO said: on which our national security depends. Yet the interviews
“Even though we’re an important partner, we wonder why suggest that key actors on the ground perceive a worrisome
they didn’t tell us of the changes.” At the October 24th panel shift away from development principles and practices that
discussion during a meeting of the Advisory Committee on have been proven essential to effective programming.
Voluntary Foreign Aid in Washington, DC, three USAID mis- In five of the seven countries, USAID respondents ex-
sion directors – each from a different region – said that they pressed concern that the aid program would become more
had deliberately not shared information about the F pro- and more politicized and that the development emphasis
cess with partners in their countries. By way of explanation, would continue to diminish. Some commented on the
one said, “It was not ready for prime time.” This aligns with reduction of funding for development sectors in favor of
the way the situation was described by respondents in one peace, security and democratization and the advent of the
of the countries. As one respondent explained, “The process MCC. One respondent said, “We are in the dark regarding a
was top down, closed, and driven by the F Bureau. Missions strategy. We don’t have any strategic framework for the agen-
received directives, and they were not comfortable embracing cy.” In two countries, staffers said that much will depend on
them or explaining TD to stakeholders.” future leadership in Washington in both Congress and the
Other bilateral and multilateral donors also do not appear White House/Administration.
to have been consulted or even well briefed at the local level. Representatives of other bilateral, multilateral donors and
Respondents from this group said that neither USAID mis- national governments in two of the four countries where such
sions nor US embassies had briefed them on the F process. individuals were interviewed said they believed that the US
Several noticed drastic changes but did not know why they Government is primarily interested in its own strategic inter-
were occurring. One respondent from a multilateral organi- ests rather than the development interests of the countries.
zation said, “No one has a clue.” In only one country, which One respondent said, “US policy is more important…not the
has a MCC Compact, did a respondent indicate that there needs of the country.” In the other country, one respondent
was now more cooperation with multilateral agencies on noted, “The US behaves as a superpower and tends to seek its
the part of the US Government. own strategic interest in the country. It should try to coordinate
The lack of consultation calls into question the effective- with other donors. The USAID program is more politically-ori-
ness of this part of the F process effort in meeting several ented. They must admit they are not the most important donor
of its stated goals – improving transparency and improving in the country.” In the other two countries, respondents said
coordination. they feared reduced funding for development areas.
Not surprisingly, this lack of consultation has led to a wide Of particular concern seems to be the fate of several ar-
range of perceptions of shifts in programmatic focus and eas considered critical to long-term development success
motivation, as well as mismatches that have undermined and the ability of countries, communities and individuals
both support for the F process on the ground and raised to build their capabilities to eventually sustain themselves
significant concerns about its long-term effectiveness. without aid. All those interviewed in seven of the countries
In fact, the lack of consultation appears to have actually in the second round were asked what they thought the de-
worsened field level performance and attitudes on several velopment priorities needed to be in the countries in which
stated goals of the F process, undermining transparency in they were working. Education, human development and ca-
decision-making and coordination with actors at the point pacity strengthening, poverty reduction through economic
of impact. [If the F process is to do a better job of achieving development (such as microenterprise), and health (partic-
these goals, these shortcomings will need to be addressed ularly maternal and child health, health systems, reproduc-
through a significant reform of the consultation and deci- tive health and nutrition) came up consistently as critical
sion-making process.] priorities. Yet, of the 13 USAID mission respondents asked
if the TD reforms have been flexible enough to allow USAID
2. Field-based planners and implementers fear missions to focus on the development priorities noted, only
that the F process is causing a worrisome shift 23 percent of USAID staff said they were flexible enough.
away from assistance principles and areas of In one country, USAID staff said that the F process was in-
programming long accepted as central to the flexible because the agenda was determined by Washington
long-term success of development assistance. with an intention to make all missions uniform. Therefore,
The most recent US National Security Statement5 specifi- countries lost their specific priorities. In another country,
cally acknowledged development as one of the three legs 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
5 National Security Statement of the United States of America, (Washing-
embracing them or explaining TD to stakeholders.” In another
ton, DC: The White House, March 16, 2006). Avilable at: http://www.white-
house.gov/nsc/nss/2006/nss2006.pdf. country, a respondent said that budget cuts have limited
USAID action because there’s not enough money put into These include: (a) implementation problems
the priorities such as democracy and economic growth. caused by mismatches between the F process
In yet another country, a respondent said that education, and programmatic realities on the ground;
viewed as a high priority by all respondents, is not a priority (b) the fact that the F process, despite its
of USAID. stated goal of improving the coordination of
Project ramifications of this perceived trend appeared in US Foreign Assistance, really cannot make
several of the countries. The eight countries with program- any truly significant progress in reducing
ming in family planning and reproductive health saw funding the fragmentation of US foreign assistance
for that work drop by an average of 24 percent. Respondents as long as the F process has no jurisdiction
in one country noted a 100 percent cut in USAID’s pre- over other US programs such as PEPFAR, the
existing small-farmer agricultural programs when the MCC MCC and programs run by other Executive
Compact was signed, along with less attention to education branch departments other than USAID and
and health. In another country, respondents reported fund- State; and (c) the unmet need for a serious
ing cuts in water and sanitation, environmental programs, examination of longer-term trends in how the
maternal and child health and reproductive health. In a third, US government views and administers foreign
a respondent explained that PEPFAR money dwarfs funding assistance – trends that are having a growing
for humanitarian, social development and even economic impact on the ground, but have received
development programs. For both El Salvador and Nicaragua, relatively little analytical scrutiny in the F
the US Government’s FY 2008 presidential budget request process.
includes significant reductions in funds for both maternal
and child health and reproductive programs compared a. Implementation Problems Caused by Mismatches
to FY 2006 levels. In the same FY 2008 request, in Zambia, between the F process and Programmatic
maternal and child health programs have been eliminated; Realities on the Ground
in Tanzania, reproductive health funding has been reduced; Projects are being shifted to one-year, performance-based
and in Ghana and Kenya, funding for water and sanitation funding cycles where an emphasis on numerical results is
has been eliminated. key – an approach originally introduced through the PEPFAR
One respondent said, “Our proposals for Development As- program. This is causing problems for NGO planning and
sistance (DA) funds are like throwing in the wind. There’s no creates considerable anxiety regarding funding for the long-
dialogue and we don’t have the opportunity to defend our pro- term. It also has implications for program success over the
grams as we did in annual program reviews of the past. The F long term. Uncertainties in funding make it difficult to retain
process lacks analysis and needs assessments.” In one country, the best possible program staff; this in turn undermines pro-
the Mission’s five-year strategic plan has been replaced by gram success. Even when multi-year awards are made, each
the Mission Strategic Plan that was a product of the F pro- year’s funding must be negotiated and is not guaranteed.
cess. The respondent said, “[A] lot of useful stuff [has been] Respondents called the yearly funding requirement time
discarded. [It has created] confusion for the government. US consuming and disruptive to project implementation.
interests now are playing a greater role than local interests in The F process has also increased the emphasis on data
determining the mission’s direction.” Similar sentiments were collection, monitoring and reporting through use of the
expressed in other countries. new indicators that are largely quantitative and are not
The perceived shift in focus calls into question the effec- impact related. USAID requests for quantitative data are in-
tiveness of the F process to date, specifically in meeting two creasingly frequent and, in most countries, training has not
of its stated goals – improving transparency and improving been provided as to how to utilize the new system. In most
coordination. It is also unclear how a shift away from prin- instances, respondents reported that the new indicators are
ciples and programmatic areas long proven to be central neither appropriate nor focused on impact. Therefore, NGOs
to effective development helps the F process achieve the are continuing to use their own indicators in addition to the
objective of improving performance and accountability by newly required ones from USAID. Furthermore, the fact that
aligning foreign assistance more clearly with human prog- these new indicators are being applied to existing projects
ress. Nor is it clear how such a shift helps ensure that the is causing confusion. As one respondent noted, “Application
National Security Strategy’s statement, which states that de- of a whole set of new indicators to a project not designed with
velopment is “one of the three legs of U.S. national security” those indicators in mind means analysis becomes one big hell,
(along with diplomacy and defense), is reflected in practice. as one has to compare apples with oranges.”
The new indicators, preparation of the yearly Operational
3. The F process is plagued by a series of Plan and the new reporting requirements have all caused
mismatches between theory and reality. difficulties. As one respondent explained, “The abruptness
of the reforms, the short time period for implementation, proliferated, rather than more strategically integrated, orches-
unclear and oftentimes conflicting guidance with respect to trated and managed through USAID…this is counter to the in-
mainstreaming the reforms into our day-to-day operations, tent of [the foreign assistance component of] Transformational
and numerous glitches with migrating the data to the Opera- Diplomacy … as conveyed.” In another country, a respondent
tional Plan [OP] template combined to render preparation of said, “It’s absolutely false to say that the US Government is bet-
the FY 2007 OP excruciatingly painful, time consuming and ter coordinated as a result of the F reform. The F process has
very costly.” In another country, a respondent described nothing to do with PEPFAR or MCC.” In yet another country, a
how program elements have to be selected based on the USAID staffer asks the PVO grantees and contractors to let
new indicators that often don’t fit realities on the ground: him know if they sign contracts with other departments of
“F had a concept and tried to fit reality into it, rather than the the US Government, e.g. the Department of Labor, because
other way around.” Another respondent said, “A cookie cut- otherwise he has no way of knowing this information.
ter approach to development indicators is crazy. Even trying Since a number of the countries covered in this assess-
to create regional indicators would be a near impossibility, ment are significantly involved in the PEPFAR and MCC pro-
let alone the global indicators that F has created.” Another cesses, respondents were asked about the effects of those
respondent complained of the frequency of reporting re- programs on areas and staff assigned to programs covered
quirements: “We’ve gone from quarterly reports to a system by the F process.
in which our partners are writing reports and doing data col-
lection all the time. Reporting requirements have increased • The President’s Emergency Program for AIDS Relief (PEPFAR)
50-fold.” In another country, a respondent said that FACTS The F process adopted many of the operational aspects
(the new data collection system) does not work: “ This new of PEPFAR to such a great extent that some refer to F pro-
system has not led to better data collection. It is cumbersome cess as the “PEPFARization of the foreign assistance sys-
and confusing, not user-friendly, and the Mission is often un- tem.” Four of the countries in this assessment project have
able to even access it due to the country’s limited internet ca- large PEPFAR programs. Respondents in these countries
pacity. The F Bureau in Washington didn’t take into account commented on ways in which PEPFAR is affecting other
the less developed technology the missions in developing in-country aid efforts covered by the F process. The fol-
countries have to work with.” lowing were of particular concern.
These implementation mismatches call into question the Respondents believe PEPFAR funds are overwhelming
effectiveness of the F process to date in meeting several and distorting the health sector, while other important
of its stated goals – namely improving coordination and health needs are neglected. The annual US budget to
efficiency. 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
b. Failure to Address the “Elephants in the Room” interviews were conducted have FY 2008 HIV/AIDS fund-
ing requests that represent increases of between 51.52
Independent Programming percent (Nicaragua) and 201.06 percent (Tanzania) over
(Including PEPFAR and the MCC) FY 2006 levels. These large increases are, in a number of
Although the F process was intended to improve coordi- instances, accompanied by the reduction or elimination
nation and efficiency of US foreign assistance, respondents of programming in other health areas such as maternal
reported that proliferation of programs and variations in and child health and reproductive health, and the related
their operation is greater than ever. areas of water and sanitation. The amounts available for
While the F process is intended to improve coordination PEPFAR also dwarf those available for other important ar-
of US foreign assistance, it is severely hampered in its ability eas of development assistance.
to do so because of the many US assistance programs that Because PEPFAR money can only be used in clearly
are not within its purview. This results in a “balkanization” of prescribed ways to fight HIV/AIDS, other important
foreign assistance rather than the coordination hoped for health needs are neglected. Even though health care sys-
through the F process. In fact, the F process controls only tems are the backbone of effective health care delivery,
a minority of the total US foreign assistance funding and, funding is severely lacking to strengthen these systems
in some countries, its programs are dwarfed by PEPFAR and through efforts such as hiring and training personnel,
potential MCC funding. Respondents in this assessment and providing health infrastructure, equipment and sup-
consistently noted the continued (and often increasing) plies. Respondents in two countries reported that restric-
fragmentation of US assistance in their countries – despite tions of PEPFAR money are so tight that money targeted
the efforts of the F process. One respondent said, “…the ‘re- for orphans and vulnerable children through PEPFAR
ality’ of various foreign assistance initiatives from a wide range cannot even be used to provide services to caretakers of
of different US government agencies has become even more such children. Other interview respondents noted that
t Changes in funding for health programs in FARM Countries, FY 06 vs. FY 08*

Family
Water
Tuber- Maternal & Planning/
Country HIV/AIDS
culosis
Malaria
Child Health Reproduc-
Supply & Total
Sanitation
tive Health

Ghana -28.80% 21.21% 69.15% -30.07% -5.47% -100% -20.12%
Honduras -3.03% -100% - 111.79% -63.24% - -13.59%
Kenya 173.37% 34.86% -18.65% 32.79% -9.53% -100% 151.15%
Nepal -45.40% - - 51.48% -2.38% - -3.37%
Vietnam 180.96% - - - - - 178.91%
El Salvador 450.96% - - -39.39% -39.39% - -26.33%
Nicaragua 51.52% - - -22.73% -42.84% - -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%
*Comparison is between FY 06 Actual figures and the FY 08 Request

the PEPFAR budget is so high in some countries that the program in that country. Most respondents who knew
money cannot be programmed effectively, given the about the MCC felt that its programs have had a nega-
very restrictive requirements. tive impact on their missions’ programs. In at least four
PEPFAR fails to capitalize on in-country expertise in of the countries, the USAID budget has been reduced. In
developing projects and partners, but then relies on one country, a respondent said, “[The Office of Manage-
(and often over-taxes) the same USAID in-country staff ment and Budget (OMB)] representatives said on more than
to monitor the programs. The Office of Global AIDS Coor- one occasion that OMB is urging to cut aid in MCC compact
dination in Washington designs the PEPFAR projects and countries.”
chooses the recipients of the funding without using the The focus of the MCC program in the various countries
field expertise of USAID missions and other in-country ac- is on infrastructure, commercial agriculture, energy, pro-
tors. One respondent said, “PEPFAR is more about delivering motion of trade and a favorable investment climate for
things and measuring, not cooperative implementation. The the private sector. Many of the respondents said they
terms are much prescribed.” At the same time, PEPFAR relies thought the MCC would affect USAID negatively by ei-
on USAID mission staff to monitor its programs – this at a ther competing with, or substituting for its programs.
time when USAID mission staffs are already overstretched They also feared that the MCC would have negative ef-
covering other programming. fects on rural development and poverty alleviation ef-
Where PEPFAR budgets have grown dramatically, forts in which USAID had been involved. One respondent
staff is overworked and unable to visit field projects due said, “It will generate more wealth for the wealthy.” In one
to the administrative workload in the mission. In one country, respondents feared negative environmental im-
country, a respondent said, “Our own capacity is diminish- pacts and displacement of inhabitants in a region where
ing and NGO partners on the ground are beginning to feel a road is to be built. They also said that MCC’s promotion
the effects of a weak agency. If this continues to happen, we of an extractive industry in the region would run counter
will all go down together.” to USAID’s effort to protect biodiversity and natural re-
sources. In another country, respondents felt that there
• The Millennium Challenge Corporation (MCC) was insufficient recognition of the role long-term USAID
The MCC was established in January 2004, two years programs and efforts had played in helping the country
before the F process was introduced. Seven countries in meet the preconditions necessary for MCC participation.
this assessment have signed either an MCC Compact or a The F process’s failure to reach programs representing
Threshold Agreement. such a large portion of US foreign assistance calls into
In each of those seven countries, respondents were question the initiative’s effectiveness to date in meeting
asked how they thought the MCC Compact or Thresh- several of its stated goals – namely improving coordina-
old Agreement was affecting the US foreign assistance tion and efficiency.
General Trends in the Way US Assistance is Administered NGOs. This is in spite of the fact that in certain sectors, previ-
Discussion of the problems with current efforts to improve ous government programs have failed miserably while NGO
the coordination and effectiveness of US foreign assistance programs have been evaluated by external sources as excel-
frequently focuses directly on internal shortcomings of the F lent. In these countries, national government officials are
process itself (e.g. the decision-making process and the types now participating in reviews of NGO proposals although in-
of indicators used) or big programs that remain outside of terview respondents maintain that the officials do not have
its purview. Both are important. However, another very im- the necessary qualifications to do so. In at least one country,
portant factor generally remains off the radar screen: an on- local NGOs that received direct USAID funds in the past must
going general shift that has been underway for some time now subcontract work through US-based NGOs or contrac-
concerning how the US Government administers US foreign tors. This includes two large local NGO initiatives that were
assistance. While the trend is clear, it has been more the result originally created and nurtured with USAID funds and that
of incremental changes rather than a clear, carefully consid- have been functioning effectively for over 15 years. In one
ered policy shift. For the F process to be truly successful, these country, 100 percent of US-based NGO respondents noted
changes must be reviewed and determinations made as to that USAID is calling for increased use of US professionals
whether the changes should be continued or revised. rather than local personnel.
These trends were clearly on the minds of a number of the There are signs that the F process is making it more diffi-
participants in this assessment who saw them as relevant to cult for some local NGOs to participate in projects in which
any understanding of the current state of US foreign assis- they receive only indirect USAID funding. In November,
tance in their countries and the F process. US-based NGOs were asked if the F process was making
USAID has long experienced shrinking levels of field staff- it easier or more difficult to work in partnership with local
ing to manage programs in traditional areas of development NGOs. Twenty-one percent of respondents spread across
assistance that fall outside of the big new projects such as five countries said it was more difficult. Reasons included
PEPFAR. During the interviews for this assessment, it also sudden funding cuts from USAID, changes in report formats
became clear that in some countries the USAID missions are and/or proposals that were hard for local NGO partners, a
losing additional staff because of the F process. Respondents number of abrupt shifts from USAID in areas of emphasis
in several countries reported that long-term AID employees that local NGOs could not implement and, in one country,
have retired or have left due to frustration with the F process. the fact that most local NGOs do not share the priority
Moreover, in two countries Foreign Service Nationals have objectives of the new USAID focus. Two local NGOs in dif-
lost their jobs in significant numbers or have been told that ferent countries noted that there had been reductions in
they will. Where personnel has remained stable, in countries sub-grants. In one of the countries, these were in health,
where the PEPFAR budgets have grown dramatically, staff is education and the environment. Another said that the
overworked and unable to visit field projects due to the ad- USAID emphasis on different sectors – democratization,
ministrative workload in the mission. In one country, a respon- conflict management and strengthening of political parties
dent said, “Our own capacity is diminishing and NGO partners – was making work for local NGOs more challenging. Lastly,
on the ground are beginning to feel the effects of a weak agency. local NGOs that had previously received direct USAID fund-
If this continues to happen, we will all go down together.” ing were extremely unhappy about now having to receive
These diminishing staffing levels have played into a longer- funds through US-based NGOs and felt this made work
term trend that is significantly limiting both USAID’s options more administratively and bureaucratically burdensome.
for ways to disburse foreign assistance funds and the num-
ber and types of implementers who can compete for direct RECOMMENDATIONS
funding. Specifically, there is a much greater emphasis on InterAction fully agrees that there is a need for improved
large contracts or grants run by consortia, with an emphasis coherence, accountability and transparency in US foreign
on technical aspects of projects, and much less attention to assistance. However, the findings revealed by the interviews
the long-term, capacity-strengthening efforts carried out conducted as part of this research suggest that the F process,
by NGOs. In several countries, a few very large US consult- as executed to date, has demonstrated notable limitations in
ing firms are winning more and more USAID contracts, and its ability to achieve these goals, has raised significant con-
only large US-based NGOs with substantial independent cerns about a fundamental shift away from critical program-
funding can compete. Comments from respondents in this matic areas and has not addressed a series of aspects of US
assessment reaffirmed what InterAction had heard before – foreign assistance that must be part of the process if the F
that this shift and the accordant financial and administrative process is to achieve its goals. Therefore, InterAction strongly
requirements reduce the ability of local NGOs to compete. recommends the following steps to improve the process
In at least two countries, USAID missions are also providing and the overall goal of strengthening the effectiveness of US
substantially more funding to national governments than to foreign assistance:
• Suspend any further implementation of the F process and Appendix One: Research Methodology
initiate a more substantial review of the initiative’s imple- Most of the data for this report was gathered through two
mentation to date and the issues beyond its jurisdiction sets of in-depth interviews with a variety of respondents in
that affect the overall effectiveness of the F process effort. five countries (Ghana, Honduras, Kenya, Nepal and Vietnam)
This will ensure that aspects with significant negative im- in June and November of 2007. InterAction staff conducted
pacts are removed and replaced with alternatives better supplementary interviews in four additional countries (El
able to meet all stated goals. Salvador, Nicaragua, Tanzania and Zambia) in August and
• Conduct a thorough assessment of the steps necessary November of 2007. In total, researchers conducted 270 in-
to ensure the statement in the National Security Strategy terviews in the nine countries.
that “development is one of the three legs of U.S. national
security” (along with diplomacy and defense) is reflected Timing
in policy and programmatic reality. Alternatively, consider This assessment was intentionally conducted early on in the
initiating a National Development Strategy so that devel- implementation of the foreign assistance reform effort (F pro-
opment will be on par with other legs of US National Secu- cess). The intention was to create a snapshot of the effort on
rity. In either case, this should begin with a reconsideration the ground while the process was still early enough in its ex-
of the relative weight given to these three areas of interest ecution to allow for any necessary adjustments to improve its
in making foreign assistance determinations. Consider- effectiveness. Obviously this limited the amount of time the F
ation of organizational changes necessary to achieve this process had to produce significant effects on the development
goal should also begin. work of PVOs and NGOs. As a way to maximize the value of
• Develop a systematic plan for consultation with local com- data collected, the research was divided into two parts, with a
munities and civil society that allows decisions at the pro- first set of interviews carried out in late June and a second set of
gram level to be made in country by field missions and not interviews with the same set of respondents carried out in No-
in Washington. vember. This schedule was based on the hypothesis that little
• Develop a continued and more expansive consultative would be known about the reforms – and few effects felt – by
process between the F Bureau and US-based NGOs, includ- June, whereas respondents would likely be more knowledge-
ing an open dialogue about the fundamental assumptions able about the reforms and would have experienced more
made by the new foreign assistance framework. Steps have effects by November after the end-of-the fiscal-year proposal
been taken toward such an effort and we recommend that writing season had been completed.6 In addition, InterAction
they continue. This could become an effective forum for a staff visited four other countries (El Salvador, Nicaragua, Tanza-
discussion of the impact of the general trends in the way nia and Zambia) to carry out supplementary research.
US assistance is administered, particularly regarding the
rise of independent programming (PEPFAR and MCC) as Choice of countries
well as USAID’s shrinking levels of staffing and program The study focuses on five countries representing a geo-
support. graphic and situational cross section of the 35 “fast track” na-
• Vigilant oversight as to whether the F process will have tions.7 Nepal was chosen as a rebuilding country, Kenya and
an adverse impact on effective programs in the field that Vietnam as developing countries, and Ghana and Honduras as
reduce poverty and meet basic needs and the provision transforming countries. InterAction engaged an experienced
of additional resources for such programs as necessary. development professional in each of these countries to carry
Effective programs are community-based, work person- out the research. Of the four countries in which additional in-
to-person and have true local ownership. Our research has terviews were conducted, Zambia is categorized as a develop-
shown that these are exactly the programs most at risk of ing country and the remaining as transforming nations.
becoming marginalized by the F process as it has been
implemented thus far. 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;

6 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.
7 “Fast-Track” countries are those selected to complete an integrated, inter-
agency Operational Plan in the US government’s 2007 fiscal year as part
of the foreign assistance reform process.
• Staff of local NGO8 partners of US-based NGOs on USAID- t Sectors in which PVOs and NGOs Work
funded projects; US-
Local NGO
Local NGOs
Sector Based with Direct
• Staff of local NGOs receiving direct funding from USAID; NGOs
Partners
Funds
• Staff of USAID missions in the particular country; Health 87% 70% 35%
• Staff of the US Embassy, other bilateral donors, multilat- Agriculture
Education
52%
42% 50%
eral donors, national government ministries or researchers Micro/Small Enterprises 40% 40%
knowledgeable about US foreign assistance. Women’s Empowerment
Civil Society Strengthening
33%
33%
43%
47%
Democracy/Governance 35%
Interviews in the supplemental countries were limited to
exchanges with USAID mission staff and with in-country similar. Information for NGOs in the five primary countries is
staff of US-based NGOs that receive USAID funds. provided below.

Focus of the research In-country experience
In the first round of interviews in the five primary coun- Of the 100 NGOs interviewed, the vast majority have worked
tries, researchers asked questions in four major areas: in their respective countries for at least five years, and a major-
• Background on the NGOs’ programs in the country; ity have had country programs for over 10 years. Of the US-
• Awareness of the foreign assistance reforms and extent of based organizations, 90 percent had worked in the five coun-
related consultation; tries for at least five to 10 years, while 77 percent had worked
• Immediate effects of the reforms on the NGOs’ programs in them for 11 years or more. Of local NGO partners, 87 percent
(both USAID-funded and those funded by other donors) had at least five to 10 years of experience in the countries and
and on their partnerships; and 53 percent had 11 years or more. And 71 percent of the local
• Anticipated effects of the reforms in the future. NGOs with direct funding from USAID had 11 years or more.

In the second round of interviews conducted in Novem- Length of time as USAID partner
ber, researchers asked follow-up questions regarding aware- Sixty percent of the US-based NGOs and 53 percent of the
ness of the reforms and consultation, additional effects and local NGOs with direct funding have received USAID money
anticipated effects. Researchers also asked respondents for for over five years. Thirty-seven percent of US-based NGOs
their views regarding the country’s priority development is- and 29 percent of the local NGOs with direct funding have
sues, emerging trends in US foreign assistance in the coun- received USAID money for over 10 years.
try, and possible steps to improve US foreign assistance in
that country. Areas of work
In the supplemental countries, the August interviews used NGO respondents work in a variety of development sec-
an adapted version of the questionnaires used in the five tors, with health being the most common programming is-
countries in June. Similarly, the November interviews used sue by far. Data on the top seven sectors are included below.
a slightly adapted version of the questionnaires for the five
countries’ second round of interviews. How they operate internally: strategic planning,
To develop a better picture of the NGO respondents them- and monitori ng and evaluation (M&E)
selves, they were also asked a series of questions to develop Significant majorities of the NGOs indicated that they have
an understanding of the nature of their in-country operations. both a country and sector strategy for their work. Eighty-two
The results are covered in detail in Annex 2 of this report. percent of the US-based NGOs and 70 percent of the local
NGOs (both categories) had country strategies. Similarly, 75
Appendix Two: percent of the US-based NGOs and 71 percent of the local
Background on NGO In-Country NGOs with direct USAID funding have sector strategies.
Operations Almost 100% reported having a M&E system in use (92%
The NGOs interviewed for this study were asked a series of of US-based NGOs, 100% of local NGO partners, and 94%
questions to develop an understanding of the nature of their of local NGOs with direct USAID funds). The percentage of
in-country operations. Topics included years of in-country organizations that have both country and sector strategies
experience, topical programming issues, strategic planning and functioning M&E systems indicates strong capacity and
and partnerships. Data collected from NGOs in the five pri- accountability on the part of these PVOs and NGOs.
mary countries and the supplemental countries was very
Partnerships
Almost three-quarters of US-based NGOs (72%) have part-
8 “Local NGO” means an NGO created and staffed by citizens of the particu-
lar country with its headquarters located in that country. nerships with local NGOs.
POLICY November 2008

BRIEF

InterAction Foreign Assistance Reform Advisory Group
Organization URL
Academy for Educational Development www.aed.org
Adventist Development and Relief Agency www.adra.org
International
CARE www.care.org
Catholic Relief Services www.crs.org
Church World Services www.churchworldservice.org
Heifer International www.heifer.org
Pact www.pactworld.org
Plan USA www.planusa.org
Save the Children www.savechildren.org
Winrock International www.winrock.org
World Education www.worlded.org
World Vision www.worldvision.org

InterAction Public Policy Working Group
Organization URL
Academy for Educational Development www.aed.org
Action Against Hunger www.actionagainsthunger.org
Action Aid www.actionaid.org
Adventist Development and Relief Agency www.adra.org
International
Africare www.africare.org
Aga Khan Foundation U.S.A. www.akdn.org
Air Serv International www.airserv.org
American Friends Service Committee www.afsc.org
American Jewish World Service www.ajws.org
American Red Cross www.redcross.org
American Refugee Committee www.archq.org
AmeriCares www.americares.org
Bread for the World www.bread.org
CARE www.care.org
Catholic Medical Mission Board www.cmmb.org
1400 16th Street, NW Catholic Relief Services www.crs.org
Suite 210 Center for Health and Gender Equity, Inc www.genderhealth.org
Washington, DC 20036 Centre for Development & Population Activities www.cedpa.org
202-667-8227 (CEDPA)
reform@interaction.org CHF International www.chfinternational.org
Child Health Foundation (CHF) www.childhealthfoundation.org
Christian Children’s Fund www.christianchildrensfund.org
www.interaction.org Church World Service www.churchworldservice.org
InterAction Public Policy Working Group (cont)
Organization URL

Concern Worldwide www.concernusa.org
Congressional Hunger Center www.hungercenter.org
Counterpart International www.counterpart.org
Ethiopian Community Development Council, Inc www.ecdcinternational.org
Florida Association for Volunteer Action in the www.favaca.org/
Caribbean and the Americas (FAVACA)
Food for the Hungry www.fh.org
Friends of the World Food Program www.friendsofwfp.org
Global Health Council www.globalhealth.org
Habitat for Humanity International www.habitat.org
Heartland Alliance www.heartlandalliance.org
Hebrew Immigrant Aid Society www.hias.org
Heifer International www.heifer.org
InsideNGO www.InsideNGO.org
Institute for Sustainable Communities www.iscvt.org
Interplast www.interplast.org
Int’l Catholic Migration Commission www.icmc.net
Int’l Center for Research on Women www.icrw.org
Int’l Crisis Group www.crisisweb.org
International Medical Corps www.imcworldwide.org
Int’l Orthodox Christian Charities www.iocc.org
Int’l Reading Association www.reading.org
International Relief & Development www.ird.org
International Rescue Committee www.theirc.org
Jesuit Refugee Services USA www.jrsusa.org
Joint Aid Management www.jamusa.org
Life for Relief and Development www.lifeusa.org
Lutheran World Relief www.lwr.org
Management Sciences for Health www.msh.org
MAP International www.map.org
Medical Teams International www.medicalteams.org
Mental Disability Rights International www.mdri.org
Mercy Corps www.mercycorps.org
Minnesota International Health Volunteers www.mihv.org
National Peace Corps Association www.rpcv.org
ONE Campaign www.one.org/
Opportunity International www.opportunity.org
Oxfam America www.oxfamamerica.org
Pact www.pactworld.org
Pan American Development Foundation www.padf.org
PATH www.path.org
Pathfinder International www.pathfind.org
Physicians for Human Rights www.phrusa.org
Plan USA www.planusa.org
Population Action International www.populationaction.org
Project HOPE www.projecthope.org
ProLiteracy Worldwide www.proliteracy.org
Refugees International www.refugeesinternational.org
InterAction Public Policy Working Group (cont)
Organization URL

Relief International www.ri.org
RESULTS, Inc. www.results.org
Save the Children www.savethechildren.org
The Hunger Project www.thp.org
U.S. Committee for Refugees and Immigrants (USCRI) www.refugees.org
U.S. Committee for UNDP www.undp-usa.org
U.S. Fund for UNICEF www.unicefusa.org
Winrock International www.winrock.org
Women for Women International www.womenforwomen.org
Women Thrive Worldwide www.womenthrive.org
World Vision www.worldvision.org
World Wildlife Fund www.worldwildlife.org