U.S. Agency for International Development (USAID): Background, Operations, and Issues Curt Tarnoff Specialist in Foreign Affairs July 21, 2015 Congressional Research Service 7-5700 www.crs.gov R44117 U.S. Agency for International Development: Background, Operations, and Issues Summary This report provides background information on the institutional makeup and operations of the U.S. Agency for International Development (USAID), the leading international humanitarian and development arm of the U.S. government. The report then discusses in greater depth several aspects of the agency that might be of particular congressional interest. In FY2015, USAID is responsible for more than $20 billion in appropriations, representing more than one-third of the International Affairs 150 budget function and more than half of total foreign assistance encompassed by the State, Foreign Operations appropriations and international food aid appropriated under the Agriculture appropriations. USAID provides assistance to a range of countries—125 in FY2013; however, of those, 23 received under $1 million, mostly small island nations or countries receiving one-time funds for humanitarian purposes. In FY2013, nearly 40% of funds attributable to countries and regions went to sub-Saharan Africa and more than 19% went to Afghanistan and Pakistan. Of funds attributable to a specific sector, 36% were for health programs and 19% for humanitarian efforts. USAID maintains more than 60 country and regional missions that design and manage a wide range of development projects, most intended to meet specific development objectives as formulated in a Country Development Cooperation Strategy. Most projects are implemented through some form of grant, cooperative agreement, or contract by one of thousands of potential development partners—nonprofit private voluntary organizations and other non-governmental organizations, for-profit contractors, universities, international organizations, and foreign governments and civil society. Since 2010, under its USAID Forward agenda, the agency has undertaken numerous reforms to address challenges in budgeting, evaluation, human resources, use of the private sector, and the application of science and technology to development issues, among other concerns. Congress maintains broad interest in and authority over the budget, operations, and policies of the U.S. government’s leading development agency, and over U.S. foreign policies generally. Issues of possible interest to Congress include the following, each of which is addressed more fully in the report: • Accountability. Is the agency able to provide adequate accountability for taxpayers dollars and could efforts to increase accountability have negative implications for the agency? • Local Solutions. What are the benefits and challenges of moving agency resources through local governments and organizations? • Aid Implementers. What are some of the concerns regarding the largest cohort of aid implementers, U.S. contractors and grantees? • Relationship to Department of State. What has been the historic relationship of USAID, technically an independent agency, and the Department of State, and what impact has this relationship had on USAID operations? What is the outlook for the USAID-State relationship? Congressional Research Service U.S. Agency for International Development: Background, Operations, and Issues • Role of Congress. In what ways can and does Congress affect the programs and operations of USAID? • Sustainability. How can USAID ensure that project efforts are maintained by local governments and organizations after its financial and technical support ends? USAID faces multiple challenges in the course of fulfilling its mission, including: Local Solutions. Providing assistance to local entities incurs the risk of loss of taxpayer dollars. Efforts to mitigate risk generally require more personnel and consequent funding to monitor local entities and build their capacities. Sustainability. “Country ownership” and domestic resource mobilization efforts are two ways the agency has sought to address sustainability, but a clear path to sustainability remains a work in progress. Human Resources. The agency faces shortages of specific skill sets to meet the needs generated by efforts to work more closely with local government and private sector partners and to meet the needs of the Food Security Initiative. Program Flexibility. Congressional funding mandates and a host of presidential initiatives are viewed by many observers as restricting the ability of USAID mission personnel to program project activities in accordance with development professional and partner country priorities. Scaling-Up. Seeing successful ideas from pilot through to maturity and making them work at the country, region, and international level likely requires a long-term funding horizon, programming flexibility, and mechanisms to spread ideas throughout the agency—each a challenge in itself. Security. Security concerns in non-permissive environments, such as South Sudan and Afghanistan, raise numerous obstacles to successful project implementation. Congressional Research Service U.S. Agency for International Development: Background, Operations, and Issues Contents USAID Background ......................................................................................................................... 1 Key Features of USAID ............................................................................................................ 1 Agency Roles, Strategy, and Programs ...................................................................................... 3 Drivers of Agency Strategy and Programs .................................................................... 5 USAID Budget .......................................................................................................................... 9 Budget Accounts ......................................................................................................... 10 Budget Trends ............................................................................................................. 14 Aid Recipients ......................................................................................................................... 16 Aid Program Sectors ................................................................................................................ 18 How USAID Delivers Assistance ............................................................................................ 20 Mission and Headquarters Roles ................................................................................. 20 Program and Project Development ............................................................................. 24 Project Design ............................................................................................................. 26 Types of Aid and Aid Delivery Instruments ................................................................ 27 Project Implementation and Oversight........................................................................ 29 USAID Forward and Other Reform Efforts ............................................................................ 31 Human Resources ....................................................................................................... 32 Procurement and Local Solutions ............................................................................... 33 Policy and Budget Management Capacity .................................................................. 34 Evaluation ................................................................................................................... 35 Science, Technology, and Innovation .......................................................................... 36 Private Sector Funding ................................................................................................ 37 Selected USAID Issues .................................................................................................................. 38 Financial and Performance Accountability .............................................................................. 38 Too Little Accountability? .......................................................................................... 38 Too Much Accountability? .......................................................................................... 40 “Local Solutions” and Procurement Reform ........................................................................... 41 U.S. Contractors and Grantees .................................................................................... 41 Country Ownership ..................................................................................................... 43 Localization and Accountability ................................................................................. 45 U.S. Aid Implementers ............................................................................................................ 47 Large Implementers vs. Small .................................................................................... 48 Contracts vs Grants/Cooperative Agreements ............................................................ 49 Role of USAID Vis-à-Vis the State Department ..................................................................... 51 Background: USAID’s Role in the U.S. Government ................................................. 52 Current Status .............................................................................................................