Foreign Assistance: USAID Relies Heavily on Nongovernmental	 
Organizations, but Better Data Needed to Evaluate Approaches	 
(25-APR-02, GAO-02-471).					 
                                                                 
U.S. officials are interested in transferring some government	 
social welfare functions to nongovernmental organizations (NGOs).
One area is in the delivery of foreign assistance to developing  
countries and countries transitioning from communism to 	 
market-oriented democracy. Many NGOs active in international	 
development have years of experience working overseas and have	 
received millions of dollars in funds from private sources as	 
well as the U.S. government. USAID directed $4 billion of its	 
$7.2 billion assistance funding to NGOs in fiscal year 2000.	 
However, the amount of funding provided by specific types of	 
assistance is unknown, because USAID lacks comprehensive and	 
reliable data. USAID uses varuous types of contracts, grants, and
cooperative agreements to provide assistance through NGOs. This  
range of funding mechanisms allows USAID flexibility to draw on  
the strengths and expertise of a large community of experienced  
NGOs. The different mechanisms have advantages and disadvantages 
in terms of cost, time, selection of potential implementers, and 
USAID's authority to oversee assistance activities. Compared with
USAID, official donors provide more of their funding to foreign  
governments and private donors and spend more of their funding on
unsolicited proposals. USAID emphasizes the use of funding	 
mechanisms that involve greater programmatic and financial	 
controls and competition for funding among NGOs.		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-471 					        
    ACCNO:   A03137						        
  TITLE:     Foreign Assistance: USAID Relies Heavily on	      
Nongovernmental Organizations, but Better Data Needed to Evaluate
Approaches							 
     DATE:   04/25/2002 
  SUBJECT:   Charitable organizations				 
	     Economic development				 
	     Federal aid to foreign countries			 
	     Foreign economic assistance			 
	     Program evaluation 				 
	     Developing countries				 
	     International economic relations			 
	     AID Child Survival and Diseases Program		 
	     Fund						 
                                                                 
	     AID Development Assistance Program 		 
	     AID International Disaster Assistance		 
	     Fund						 
                                                                 
	     Food for Peace Program				 


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GAO-02-471
     
Report to the Chairman, Subcommittee on National Security, Veterans Affairs,
and International Relations, Committee on Government Reform, House of
Representatives

United States General Accounting Office

GAO

April 2002 FOREIGN ASSISTANCE

USAID Relies Heavily on Nongovernmental Organizations, but Better Data
Needed to Evaluate Approaches

GAO- 02- 471

Why GAO Did This Study

Some members of Congress have expressed concern that the U. S. Agency for
International Development?s (USAID) management of the foreign aid program
may not take full advantage of nongovernmental organizations and use the
most effective approaches. To help address this issue, GAO (1) prepared a
profile of USAID?s use of nongovernmental organizations to provide foreign
aid, (2) analyzed the funding mechanisms for employing these organizations,
and (3) compared USAID?s approaches to using nongovernmental organizations
with other donors? approaches.

April 2002 FOREIGN ASSISTANCE

This is a test for developing highlights for a GAO report. The full report,
including GAO's objectives, scope, methodology, and analysis is available at
www. gao. gov/ cgi- bin/ getrpt? GAO- 02- 471. For additional information
about the report, contact Jess Ford (202) 512- 4268. To provide comments on
this test highlights, contact Keith Fultz (202- 512- 3200) or email
HighlightsTest@ gao. gov.

USAID Relies Heavily on Nongovernmental Organizations, but Better Data
Needed to Evaluate Approaches

What GAO Recommends

Due to the limitations GAO identified in USAID data, GAO recommends that
USAID compile more reliable data on the extent to which the agency uses
specific types of organizations and funding mechanisms to enable further
analysis of USAID?s assistance approaches and their effectiveness.

USAID agreed with our findings and recommendation and indicated that it has
taken the agency?s data shortfalls into account in its ongoing efforts to
review and replace its business systems.

Highlights of GAO- 02- 471, a report to the Subcommittee on National
Security, Veterans Affairs, and International Relations, Committee on
Government Reform, House of Representatives United States General Accounting
Office

What GAO Found

USAID relies heavily on nongovernmental organizations to deliver foreign
assistance. GAO found that in fiscal year 2000, USAID directed about $4
billion of its $7.2 billion assistance funding to nongovernmental
organizations, including at least $1 billion to private voluntary
organizations (charities) working overseas. However, the amount of funding
USAID provides to specific types of organizations for different kinds of
assistance activities is unknown because USAID lacks comprehensive and
reliable information in this area.

USAID uses a range of funding mechanisms to provide assistance through
nongovernmental organizations, such as endowments and global grants and
contracts. The mechanisms have both potential advantages and disadvantages
in terms of cost, time, selection of implementers, and USAID?s authority to
oversee assistance activities. USAID generally favors mechanisms that
delegate a large amount of control over programs to implementing
organizations. However, the agency has not compiled detailed data on its use
of specific types of funding mechanisms or evaluated their effectiveness.

USAID employs many of the same approaches to using nongovernmental
organizations as other donors do. The agency and other donors may emphasize
different funding mechanisms, however, with USAID tending to choose those
offering greater programmatic and financial controls and competition. GAO
found a few donors who use nongovernmental organizations in ways that are
significantly different from USAID?s usual approaches.

USAID Assistance Funds Obligated During Fiscal Year 2000

Source: GAO analysis of USAID data.

G A O Accountability Integrity Reliability

Highlights

Page i GAO- 02- 471 Foreign Assistance Letter 1

Results in Brief 2 Background 3 USAID Relies Heavily on Nongovernmental
Organizations to Carry

Out Assistance Activities 5 USAID Has a Flexible Array of NGO Funding
Mechanisms, Each

with Potential Advantages and Disadvantages 11 Similarities and Differences
in Approaches of USAID and Some

Other Donors 20 Conclusions 22 Recommendations for Executive Action 23
Agency Comments 23

Appendix I Scope and Methodology 25

Appendix II Major NGO Recipients of USAID Fiscal Year 2000 Procurement Funds
27

Appendix III Faith- Based Private Voluntary Organizations 29

Appendix IV Comments from the U. S. Agency for International Development 32

GAO Contacts 34 Acknowledgments 34

Appendix V GAO Contacts and Staff Acknowledgments 34

Tables

Table 1: Selected NGO Funding Mechanisms Used by USAID 12 Table 2: Top 10
NGO Recipients of USAID Procurement Funding

Obligations in Fiscal Year 2000 27 Table 3: Top 10 For- Profit Recipients of
USAID Procurement

Funding Obligations in Fiscal Year 2000 27 Contents

Page ii GAO- 02- 471 Foreign Assistance

Table 4: Top 10 PVO Recipients of USAID Procurement Funding Obligations in
Fiscal Year 2000 28 Table 5: Top 10 University Recipients of USAID
Procurement

Funding Obligations in Fiscal Year 2000 28

Figures

Figure 1: USAID Obligations During Fiscal Year 2000 6 Figure 2: Distribution
of Fiscal Year 2000 Funding Devoted to PVOImplemented Programs by Major
Program Area 9 Figure 3: Distribution of Fiscal Year 2000 Funding Devoted to
PVOImplemented Programs by USAID Bureaus 10 Figure 4: Obligations to
Nongovernmental Organizations During

Fiscal Year 2000, by Type of Agreement 19 Figure 5: Faith- Based Versus
Secular PVOs 30 Figure 6: Breakdown of Faith- Based PVO?s by Denomination 31

Abbreviations

USAID U. S. Agency for International Development NGO Nongovernmental
organization PVO Private voluntary organization

Page 1 GAO- 02- 471 Foreign Assistance

April 25, 2002 The Honorable Christopher Shays Chairman, Subcommittee on
National Security,

Veterans Affairs, and International Relations Committee on Government Reform
House of Representatives

Dear Mr. Chairman: In recent years, U. S. officials have shown increased
interest in transferring certain social welfare functions of the U. S.
government to nongovernmental organizations, both commercial and not for
profit. Such organizations have expressed interest in and, according to U.
S. officials, have demonstrated the ability to use federal funds to serve a
wider pool of beneficiaries and help meet the U. S. government?s objectives
in a variety of areas. One of these areas is the delivery of U. S. foreign
assistance to developing countries and countries transitioning from
communism to market- oriented democracy. Many nongovernmental organizations
active in international development have years of experience working
overseas and have received millions of dollars in funds from private sources
as well as the U. S. government for this work.

Some members of Congress have expressed concern that the U. S. Agency for
International Development?s (USAID) management of the U. S. foreign aid
program may not take full advantage of the potential of nongovernmental
organizations and use the most effective approaches for delivering aid. To
help address this issue, at your request, we have (1) prepared a profile of
USAID?s use of private voluntary organizations and other nongovernmental
organizations to provide U. S. foreign aid; (2) analyzed the funding
mechanisms USAID uses to employ these organizations, including the potential
advantages and disadvantages of each mechanism and the degree of control
USAID exercises over program implementation; and (3) compared USAID?s
approaches to using nongovernmental organizations with other private and
official donors? approaches. To meet these objectives, we conducted
interviews with and collected and analyzed documentation from U. S.
government agencies, nongovernmental organizations, and other international
donors in the United States and in three developing countries overseas. We
also visited a number of aid activities in these countries run by private
charities and other nongovernmental organizations and analyzed financial
information

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 02- 471 Foreign Assistance

in several USAID databases. A detailed description of the scope and
methodology for our review is included in appendix I of this report.

USAID relies heavily on nongovernmental organizations to deliver foreign
assistance. Nongovernmental organizations, including private voluntary
organizations (charities); consulting firms; and universities, are active
throughout all of USAID?s program areas. We found that in fiscal year 2000,
USAID directed about $4 billion of its $7.2 billion assistance funding to
nongovernmental organizations, including at least $1 billion to U. S.
private charitable organizations working overseas. However, the amount of
funding that USAID provides to specific types of nongovernmental
organizations for various types of assistance activities is unknown, because
USAID lacks comprehensive and reliable information in this area.
Furthermore, according to USAID, definitions of the different types of
organizations are not universally accepted and mutually exclusive, making it
difficult to categorize them consistently across the agency.

USAID has adopted many different types of contracts, grants, and cooperative
agreements to provide assistance through nongovernmental organizations. This
range of funding mechanisms allows USAID staff significant flexibility in
drawing upon the strengths and expertise of a large community of experienced
nongovernmental organizations worldwide. The different mechanisms have both
potential advantages and disadvantages in terms of cost, time, selection of
potential implementers, and USAID?s authority to oversee assistance
activities, among other factors. Nearly all mechanisms have minimum
financial accountability requirements, and only a few mechanisms entail
increased financial risk for USAID funds. USAID collects data on its use of
major funding agreements- contracts, grants, and cooperative agreements-
which indicate that the agency delegates a significant amount of day- to-
day control over aid delivery to the implementing organizations. However,
the agency has not compiled detailed data on its use of specific types of
funding mechanisms or systematically evaluated their relative effectiveness
at an agencywide level. Without better data it would be difficult for USAID
managers to begin the process of determining which types of organizations
and funding mechanisms are likely to be most effective at achieving a
desired development impact.

USAID uses many of the same funding mechanisms that other donor
organizations use. We found that, compared with USAID, official donors
provide more of their funding directly to foreign governments and private
donors and spend more of their funding on unsolicited proposals. USAID
Results in Brief

Page 3 GAO- 02- 471 Foreign Assistance

emphasizes the use of funding mechanisms that involve greater programmatic
and financial controls and competition for funding among nongovernmental
organizations. We also identified two approaches to using nongovernmental
organizations that USAID has not adopted on a significant scale, including
routine funding by the Canadian International Development Agency of project
proposals conceived and submitted independently by nongovernmental
organizations.

To help ensure that USAID makes effective use of nongovernmental
organizations in carrying out its international development activities, we
are recommending that USAID compile more reliable data on the extent to
which the agency uses specific types of organizations and funding
mechanisms, so that further analysis of the effectiveness of USAID?s
assistance approaches may be conducted. USAID generally agreed with our
findings and recommendation and indicated that the agency has taken its data
shortfalls into account in its ongoing efforts to review and replace its
business systems.

USAID is an independent agency that provides economic, development, and
humanitarian assistance around the world in support of U. S. foreign policy
goals. USAID?s program budget covers four program accounts: (1) Development
Assistance, (2) the Child Survival and Diseases Program Fund, (3)
International Disaster Assistance, and (4) Transition Initiatives.
Additionally, USAID manages program funds under other accounts jointly
administered with the State Department: Economic Support Funds, Assistance
for Eastern Europe and the Baltic States, and Assistance for the Independent
States of the Former Soviet Union. Another assistance program, the P. L. 480
Title II Food for Peace Program, is administered by USAID but falls under
the Department of Agriculture?s budget. USAID is organized into geographic
bureaus responsible for overall activities in countries where USAID has
programs and functional bureaus that conduct agency regional or worldwide
programs. USAID has field missions in four regions of the world (Sub-
Saharan Africa, Asia and the Near East, Latin America and the Caribbean, and
Europe and Eurasia).

USAID provides assistance through partnerships with other organizations and
individuals. Organizations carrying out USAID- funded programs typically
fall into one of three major categories: nongovernmental organizations
(NGO); government entities (host country and U. S. government agencies); and
public international organizations, such as U. N. agencies. The agency makes
direct cash payments to some foreign governments and finances the provision
of U. S. commodities, such as Background

Page 4 GAO- 02- 471 Foreign Assistance

equipment and machinery, intermediate goods, and raw materials, to many
foreign countries. In addition, USAID funds other U. S. government agencies
through interagency agreements to provide assistance overseas. USAID also
obtains goods and services for delivery to beneficiaries overseas. It hires
individuals and organizations to implement various development assistance
programs, such as providing technical assistance, conducting research,
providing policy advice, implementing communitybased assistance activities,
and constructing infrastructure assistance activities. The term NGO includes
for- profit firms, educational institutions, cooperative development
organizations, and private voluntary organizations (PVO). PVOs are tax-
exempt, nonprofit organizations that receive voluntary contributions of
money, staff time, or in- kind support from the general public and are
engaged in voluntary, charitable, or development assistance activities. PVOs
and NGOs can be U. S. based, international, or locally based in the host
country.

USAID provides development- related goods and services from nongovernmental
organizations, primarily through three types of legal agreements: grants,
cooperative agreements, and contracts. Under a grant agreement, the
recipient is free to implement an agreed- upon development program without
substantial involvement by USAID. Under a cooperative agreement the
implementing organization has a significant amount of independence in
carrying out its program, but USAID is involved in selected areas deemed
essential to meeting program requirements and ensuring achievement of
program objectives. 1 Under a contract, USAID determines the requirements
and standards for the assistance activities and frequently provides
technical direction during contract implementation. Contracts also provide
greater control over costs and allow USAID to terminate the agreement
unilaterally if circumstances warrant.

USAID guidance contains criteria for selecting the appropriate assistance or
acquisition agreement. 2 This guidance spells out the level of USAID control
allowed under each type of legal agreement but places no

1 These areas include (1) approval of work plans, (2) designation of key
positions and approval of key personnel, and (3) approval of monitoring and
evaluation plans. 2 Chapter 304 of USAID?s automated directive system, based
on the authority provided by the Foreign Assistance Act of 1961, sections
621 and 634( b); the Federal Grant and Cooperative Agreement Act of 1977;
and OMB guidance.

Page 5 GAO- 02- 471 Foreign Assistance

restrictions on the type of organizations that are eligible to receive
funding under grants, cooperative agreements, and contracts.

In accordance with U. S. law, 3 USAID policy requires full and open
competition for grants, cooperative agreements, and contracts in most
circumstances. USAID also requires recipients of its funding to demonstrate
that they have adequate financial resources; a satisfactory record of
performance; and accounting, recordkeeping, and overall management systems
that meet applicable standards. Furthermore, they must undergo an
independent annual audit by a USAID- approved auditing firm if they receive
more than $300, 000 in U. S. government funds in a fiscal year.

USAID depends on nongovernmental organizations to provide assistance in all
areas of its work, and a steady flow of USAID funds goes directly to private
voluntary organizations. The agency provides even more funding indirectly to
private voluntary organizations through other organizations, but USAID does
not compile specific information on this funding. USAID data are not
comprehensive and reliable enough to permit a detailed analysis of the
agency?s use of different types of nongovernmental organizations.

USAID relies on NGOs to deliver a majority of its foreign assistance funds.
USAID funding obligations during fiscal year 2000 4 included about $4
billion to nongovernmental organizations to implement assistance programs.
In addition, USAID?s fiscal year 2000 program budget for foreign assistance
included about $3.2 billion for transfers to host countries, 5 interagency
transfers, funding of public international organizations, and

3 The Competition in Contracting Act of 1984, P. L. 98- 369 as amended, and
the Federal Agreements and Cooperative Agreements Act of 1977, 31 U. S. C.
6301 et seq.

4 These are funds obligated between October 1, 1999, and September 30, 2000,
from fiscal year 2000 and prior years? obligating authority. 5 In fiscal
year 2000, USAID obligated cash transfers to the governments of Albania,
BosniaHerzegovina, Bulgaria, Egypt, Israel, Jordan, Macedonia, Montenegro,
Romania, and West Bank/ Gaza. USAID Relies Heavily

on Nongovernmental Organizations to Carry Out Assistance Activities

NGOs Deliver a Large Amount of Foreign Assistance

Page 6 GAO- 02- 471 Foreign Assistance

commodity imports. 6 Figure 1 shows USAID obligations during fiscal year
2000.

Figure 1: USAID Obligations During Fiscal Year 2000

a Includes obligations from prior years? obligating authorities made from
October 1, 1999, to September 30, 2000. b Includes funding for commodities
procurement and shipping.

Source: GAO analysis of USAID budget and procurement data.

Many types of NGOs implement USAID- funded assistance activities throughout
the world, as illustrated by some of the assistance activities we reviewed
during our fieldwork. With USAID funding, major U. S. and local charities,
such as Save the Children, provided food to victims of Hurricane Mitch in
Nicaragua and Honduras. Educational institutions, including Johns Hopkins
University and the Pan- American Agricultural School implemented USAID-
funded water and sanitation- related activities in the region in response to
the disaster. In South Africa, USAID contracted with Deloitte Touche
Tohmatsu to help historically disadvantaged groups in South Africa
participate in the privatization of government enterprises. USAID has also
funded many small nongovernmental organizations, such

6 The commodity import program is the method by which USAID finances the
foreign exchange costs of procuring and shipping eligible commodities to
recipient countries.

Page 7 GAO- 02- 471 Foreign Assistance

as an association of mothers in Cape Town, South Africa, to create a
babysitting cooperative to care for poor, orphaned, and neglected children.
(See app. II for a listing of nongovernmental organizations receiving the
most USAID funding in fiscal year 2000.)

USAID does not collect financial data that would allow a detailed funding
analysis for any specific type of nongovernmental organizations except
private voluntary organizations. USAID maintains various databases,
primarily from the budget and procurement offices and the Office of Private
and Voluntary Cooperation, which provide some information on the types of
organizations receiving funding. In two of these databases USAID
specifically tracked funding for PVOs. However, USAID?s databases did not
contain similar information for other types of organizations, such as
commercial firms, universities, or other nonprofits. Data for these
organizations were maintained only in USAID?s procurement database; but,
according to USAID procurement officials, this system is plagued by data-
entry flaws, and organizations are frequently categorized incorrectly.
According to USAID, definitions of the different types of organizations are
not universally accepted and mutually exclusive, making it difficult to
categorize them consistently across the agency. In May 2001, the USAID
Administrator acknowledged that the agency?s data on its use of PVOs and
NGOs were not complete due to the disparate accounting systems and
limitations in its data- coding procedures, which the agency intended to
correct with the adoption of a new accounting system in a few years.

According to USAID data, the portion of USAID funding devoted to
PVOimplemented programs totaled about $1 billion in fiscal year 2000. 7
Historically, the percentage of the program budget obligated for PVOs
between 1995 and 2000 has ranged from 14.2 percent in 1997 to 19.1 percent
in 1998. According to data from USAID?s budget office, about twothirds of
the funding USAID obligated for PVO programs in fiscal year 2000 was for U.
S.- based, voluntary organizations involved in international development-
while the remaining one- third was for international, thirdparty, and local
organizations as well as cooperative development organizations. (See app. IV
for information on religious affiliation of U. S. PVOs.)

7 Beginning in October 2000, legislation has required that funding to PVOs
be at least equivalent to the level of funding provided in fiscal year 1995,
which was about 15 percent of USAID?s program budget. USAID Databases Permit

Detailed Analysis Only for Direct Funding to PVOs

Page 8 GAO- 02- 471 Foreign Assistance

However, these figures likely understate the total amount of all USAID funds
provided to PVOs because they do not capture funds provided indirectly
through other organizations. Other U. S. government agencies and foreign
governments may use USAID funds for PVO- implemented programs, but USAID
does not track this information. Furthermore, according to USAID officials
and records we reviewed, PVOs get additional funding under separate
subcontract or subgrant arrangements with other implementers of USAID
programs. We were unable to calculate the amount of this indirect funding
because USAID does not compile comprehensive information on the use of
subgrants and subcontracts. For example, for one grants- management contract
we reviewed in South Africa, subgrants to other nongovernmental
organizations accounted for a large majority of contract expenditures; but
the mission was not required to report information on these subgrants to
USAID headquarters.

PVO- implemented programs extended throughout all of USAID?s five major
program areas in fiscal year 2000, as shown in figure 2. For example, as we
observed during our fieldwork, U. S. PVOs worked to rebuild the
infrastructure and economy of Nicaragua and Honduras after Hurricane Mitch
by constructing roads and bridges and training farmers in more efficient
agricultural methods. In South Africa, local PVOs helped establish health
clinics and trained community health workers to provide counseling and
medical care for persons with HIV/ AIDS, tuberculosis, and other diseases.

Page 9 GAO- 02- 471 Foreign Assistance

Figure 2: Distribution of Fiscal Year 2000 Funding Devoted to PVO-
Implemented Programs by Major Program Area

Source: GAO analysis of USAID budget data.

Figure 3 further shows that USAID used PVOs throughout all four of its
geographic regions, in its Global Bureau, and in its Bureau of Humanitarian
Response. 8

8 As of November 2001, the Global Bureau and the Bureau of Humanitarian
Response have been reorganized into the Bureau for Democracy, Conflict and
Humanitarian Assistance, the Bureau for Economic Growth, Agriculture and
Trade, and the Bureau for Global Health.

Page 10 GAO- 02- 471 Foreign Assistance

Figure 3: Distribution of Fiscal Year 2000 Funding Devoted to PVO-
Implemented Programs by USAID Bureaus

Source: GAO analysis of USAID budget data.

Since USAID does not routinely collect comprehensive and reliable data on
its use of other specific types of nongovernmental implementing
organizations, such as for- profit firms and universities, it would have
difficulty evaluating the relative effectiveness of the different types of
organizations. For example, without basic information about where and when
USAID has used universities to strengthen educational institutions in
Africa, it cannot compare that overall experience with its experience using
private voluntary organizations or other type of organization in similar
circumstances. Hence it would be difficult for USAID managers to begin the
process of determining which approach would be more likely to achieve the
desired development impact.

Page 11 GAO- 02- 471 Foreign Assistance

Within the broad categories of contracts, grants, and cooperative
agreements, USAID has developed a highly flexible system of working with
nongovernmental organizations to provide foreign assistance, using a wide
variety of funding mechanisms. These mechanisms give USAID missions and
bureaus many options for meeting their objectives, depending on the specific
circumstances. All have potential advantages and disadvantages, and a few
entail more financial risk than the others. While USAID data indicate that,
overall, the agency generally favors agreements that delegate a significant
amount of control over program implementation to nongovernmental
organizations, we could not determine the extent to which USAID uses each of
the specific types of funding mechanisms. Nor could we determine the
comparative effectiveness of these mechanisms because USAID has not compiled
relevant evaluative data for this.

In addition to standard contracts, grants, and cooperative agreements, USAID
uses several different variations of these funding mechanisms to deliver
foreign assistance using nongovernmental organizations, including grants
management contracts, umbrella grants, and endowments. Potential advantages
of these funding mechanisms include increasing the number and diversity of
organizations involved in USAID programs, while limiting the procurement and
management burdens on the missions; drawing more on nongovernmental
organizations to design programs; fostering a community of sustainable
nongovernmental organizations; and involving other private sector partners
in the development process. Potential disadvantages associated with some of
these mechanisms include increased risk that programs will not meet USAID?s
objectives since several mechanisms reduce USAID missions? involvement in
program design, selection of implementers, and management of program
activities; and some limit or preclude competition among implementing
organizations. Also, a few mechanisms involve increased financial risks.
Table 1 shows potential trade- offs associated with various funding
mechanisms. Determining the appropriate funding mechanism depends heavily on
the specific circumstances in the country and sector involved. USAID Has a
Flexible

Array of NGO Funding Mechanisms, Each with Potential Advantages and
Disadvantages

Choice of Funding Mechanism Entails TradeOffs

Page 12 GAO- 02- 471 Foreign Assistance

Table 1: Selected NGO Funding Mechanisms Used by USAID Funding mechanism
Description Potential advantages Potential disadvantages Contracts

Standard contract Agreement with a contractor, usually awarded
competitively, to provide goods and services meeting USAID specifications,
with substantial USAID involvement and technical direction. USAID uses
several types of contracts with different pricing arrangements (cost plus
fixed fee, cost- plus- incentive fee, cost contract, cost- sharing,
costplus- award fee).

 Wide selection of potential contractors

 High level of accountability - substantial USAID involvement permitted in
design and implementation

 Time- consuming award process

 Resource intensive to manage and monitor contract implementation

Funding of unsolicited proposal Contract issued noncompetitively,

based on proposal designed and submitted independently by applying
organization.

 Abbreviated award process

 Identifies needs USAID may be unaware of

 Encourages NGO creativity in designing solutions

 Limited selection of implementing organizations

 Increased cost due to lack of competition

 Other advantages of competition lost

 Limited input into design of program

 Difficulty ensuring that no informal solicitation has occurred Mission use
of global indefinite quantities contract

Contract issued to an organization to implement an assistance program on a
global or regional basis; missions issue task orders to contractor to
implement associated, country- specific assistance activities. Main contract
awarded competitively and associated awards with limited competition only
among other relevant global/ regional contract holders.

 Quicker a access to expert resources by missions after headquarters has
awarded contract

 Lower level of administrative burden for missions

 Missions have more limited selection of contractors

 May not precisely meet missions? needs

 More expensive than using local contractor

 Tension between mission and headquarters over control of program Grants
management contract Contract with an organization to award

and manage grants to other nongovernmental organizations.

 Easier award process for missions

 Additional administrative capacity

 Additional technical expertise

 Multiple implementing organizations with single contract to award and
administer

 Additional layer of program administration

 Additional program costs

Page 13 GAO- 02- 471 Foreign Assistance

Funding mechanism Description Potential advantages Potential disadvantages
Grants and cooperative agreements

Standard cooperative agreement Award usually issued competitively to

an organization or individual to implement an assistance program with
limited USAID involvement.

 Wide selection of potential awardees

 Time- consuming award process

 Less accountability than with contract- lower level of involvement in
implementation permitted Standard grant Award usually issued competitively
to

an organization or individual to implement an assistance program
independently of USAID involvement.

 Wide selection of potential awardees

 Time- consuming award process

 Less accountability than with contract and cooperative agreement- no
substantial involvement in implementation permitted Funding of unsolicited
proposal Award issued noncompetitively, based

on proposal designed and submitted independently by applying organization.

 Abbreviated award process

 Identifies needs USAID may be unaware of

 Encourages NGO creativity in designing solutions

 Limited selection of implementing organizations

 Increased cost due to lack of competition

 Other advantages of competition lost

 Limited input into design of program

 Difficulty ensuring that no informal solicitation has occurred Funding of
proposals solicited through annual program statement

Award issued semicompetitively based on general solicitation for bids, with
very few specifications, for new assistance activities compatible with the
mission?s overall program.

 Abbreviated award process

 Identifies needs USAID may be unaware of

 Encourages NGO creativity in designing solutions

 Increased cost due to limited competition.

 Other advantages of competition lost

 Limited input into design of program Leader with associates Award issued
competitively to an

organization to implement a program on a global or regional basis; mission
can award grants or cooperative agreements to the organization to implement
associated country- specific assistance activities.

 Quick and easy award process for missions

 Missions have more limited selection of implementing organizations

Umbrella grant/ cooperative agreement

Award to a lead organization to award and manage subgrants to other
organizations.

 Additional administrative capacity

 Additional technical expertise

 Multiple implementing organizations with single contract to award and
administer

 Additional layer of program administration

 Additional overhead costs

 Limited control over grantee selection

Page 14 GAO- 02- 471 Foreign Assistance

Funding mechanism Description Potential advantages Potential disadvantages

Endowment/ Trust Award to an organization for it to invest to generate a
stream of income to fund its operations and/ or programs over the long term.

 Enhanced long- term sustainability of organization

 Leverages other donor funding

 Limited long- term administrative burden

 Encourages NGO creativity in designing solutions

 Risk of financial loss from lower than anticipated investment yield

 Very limited input into program design and implementation

 Limited direct programmatic impact

 Expensive

 Significant initial administrative burden Matching grant Grant intended to
build the capacity of

U. S. PVOs and strengthen their partnerships with foreign NGOs.

 Enhances NGO capacity and sustainability

 Matching requirement helps ensure NGO commitment

 Encourages NGO creativity in designing solutions

 Limited direct programmatic impact

 Match requirement limits number of eligible organizations

Support for network/ consortium Award to support development and

operation of a network or consortium of NGOs, sometimes cofinanced by other
donors.

 Leverages resources of other donors

 Synergy of multiple organizations

 Multiple implementing organizations with single contract to award and
administer

 Enhances NGO capacity and sustainability

 More limits on input into program

 Compromise with other donors

Support for intersectoral partnerships

Various programs to foster cooperation and collaboration among NGOs,
government, and private sector organizations, including foundations and
businesses.

 Leverages private resources

 Helps focus private sector philanthropy

 Objectives may not be compatible

Other mechanisms Credit programs Loans and loan guaranties for private

financing of microenterprises, housing and urban infrastructure, and other
development- related assistance activities.

 Leverages investment capital from private sources

 Time consuming to arrange credit deals

 Risk of financial loss from higher than anticipated loan default rate a
Unless otherwise noted, relational terms such as ?additional? or ?less? in
this table refer to the

mechanism?s relationship to the standard type of each mechanism under which
it is listed here. Source: GAO analysis of USAID information.

Some of these funding mechanisms enable USAID to draw on a large number of
diverse nongovernmental organizations while limiting the procurement and
management workload for the missions. Use of USAID global contracts and
leader- with- associate grants allow missions with limited staff resources
to use a pool of nongovernmental organizations preselected at USAID
headquarters to respond quickly to countries? developmental needs. For
instance, the USAID mission in South Africa used several global agreements
preawarded by USAID?s Bureau of Potential Advantages

Page 15 GAO- 02- 471 Foreign Assistance

Population, Nutrition, and Health to acquire NGO resources to establish
several local health assistance activities. Also, umbrella grants and grants
management contracts enable USAID to ?outsource? the grants award and
management process, thus maximizing the number of partner organizations
involved in a program without creating an undue management burden for the
missions. Intermediary organizations can fulfill the necessary competition
and financial accountability requirements on USAID?s behalf. Agreements with
consortia or networks of development- related organizations also give USAID
access to the resources of a number of affiliated organizations using a
single funding mechanism. For example, in the NGO Networks for Health
program, USAID entered into a single 5- year cooperative agreement with a
coalition of four U. S. PVOs and one technical agency working to improve
family planning, reproductive health, child survival, and HIV/ AIDS services
worldwide.

Some mechanisms allow NGOs more discretion in designing assistance
activities to respond to countries? development needs than a standard grant,
cooperative agreement, or contract. By funding unsolicited proposals as well
as proposals submitted to USAID missions in response to their Annual Program
Statements, 9 USAID allows organizations to design assistance programs
relatively independently within wide parameters. According to USAID
officials in Nicaragua, after Hurricane Mitch, the USAID mission issued an
Annual Program Statement and relied heavily on the proposals it received
from NGOs to establish a portfolio of assistance activities it could
implement quickly; NGOs operating in Nicaragua were considered the most
knowledgeable about the hurricane victims? needs, and USAID funded many of
the proposals they submitted.

Several of these mechanisms are aimed at fostering a community of
nongovernmental organizations that can function effectively and
cooperatively over the long term. USAID?s matching grants program helps U.
S.- based PVOs build their operational and technical capacity while
encouraging them to raise funds from other sources for the same purpose.
Endowments provide funding for an extended period of time, often 10 years or
more, during which the recipient organizations may be expected

9 USAID units issue Annual Program Statements to disseminate information to
prospective program implementers about the agency?s strategy in a particular
field and geographic area so that they may develop and submit applications
for USAID funding. An Annual Program Statement describes the types of
activities for which applications will be considered and the process and
criteria for evaluating applications.

Page 16 GAO- 02- 471 Foreign Assistance

to become sustainable without USAID funds. For example, a USAID endowment
for a charitable foundation in South Africa to assist and educate
disadvantaged youths covers long- term administrative costs, which
foundation representatives expect to replace with funding from other
sources, such as other donations and small commercial enterprises, within a
few years. USAID also awards grants and cooperative agreements to NGO
networks to strengthen the long- term working relationships among
organizations with similar or complementary expertise and objectives. For
example, USAID has helped fund the International HIV/ AIDS Alliance, which
USAID conceived as a mechanism to link and support nongovernmental and
community- based organizations throughout the developing world that are
fighting the HIV/ AIDS pandemic.

Finally, some mechanisms involve private- sector entities, including
foundations and corporations, in the development process. According to
USAID, many of these organizations can bring significant resources to bear,
but they could benefit from the expertise and field presence of USAID and
its traditional nongovernmental partners. Through intersectoral
partnerships- joint assistance activities among organizations in the
governmental, NGO, and private sectors- USAID has worked at leveraging the
contribution of private sector entities for greater development impact. For
example, according to USAID officials, under the Millennium Alliance for
Social Investment, USAID funds a cooperative agreement with a U. S. private
voluntary organization to match businesses and nonprofits for strategic
community investments and to provide training and technical assistance to
make the partnerships work. Such efforts serve as models for USAID?s new
Global Development Alliance, a major element of its current development
strategy. 10

Some of these funding mechanisms require USAID missions to delegate more
authority over program design and implementation to others than under a
standard grant, contract, or cooperative agreement. This may increase the
risk that the programs implemented will not meet the missions? objectives.

10 USAID describes the Global Development Alliance as it?s ?new business
model,? and the ?First Pillar of USAID?s reorganization and reform
strategy.? Through the formation of strategic partnerships with private
sector actors involved in international development, including NGOs, PVOs,
cooperatives, foundations, corporations, the higher education community, and
individuals, USAID seeks to leverage significant resources, expertise,
creative approaches, and new technologies to address development issues.
Potential Disadvantages

Page 17 GAO- 02- 471 Foreign Assistance

Using some mechanisms limits USAID?s authority to influence the design of
programs. For example, in funding unsolicited proposals, USAID procurement
rules do not permit USAID officials? involvement in the conception phase of
a program. Also, in endowments, USAID might fund an organization?s
administrative function and overall program instead of particular program
activities; in such cases, USAID would not directly influence these
activities as they are being designed and implemented. Lack of involvement
in program design can limit USAID?s ability to ensure that its programs are
responsive to the needs of host countries and are designed with their
collaboration.

With some mechanisms, USAID missions may have more limited involvement in
the choice of assistance activity implementers. In the case of global
contracts, preapproved implementers are selected by headquarters bureaus and
may not be as qualified or able to perform as cost effectively as other
organizations available locally; thus, they may not be the best resource for
achieving program objectives in a particular country. In South Africa,
according to USAID mission officials, USAID has not used global agreements
with U. S. PVOs to implement programs in some cases, because providing
grants to capable local organizations is more compatible with the mission?s
development strategy. Furthermore, with umbrella grants and cooperative
agreements, USAID officials are generally not permitted, under USAID policy,
to be directly involved in selecting subgrantees. This limits USAID?s
ability to ensure that all recipients of USAID funds are the most qualified
to meet program objectives.

Management of some funding mechanisms may be potentially more cumbersome and
expensive than awarding standard grants, cooperative agreements, and
contracts. Several of these mechanisms entail multiple layers of program
administration, which can increase program costs and have programmatic
implications. For example, programs implemented through headquarters-
awarded indefinite quantity contracts may be administered by officials both
in headquarters and the missions. According to a senior official in USAID?s
Bureau for Global Health, this can introduce tension and inefficiency in the
management of some programs. Also, umbrella mechanisms and grants management
contracts may increase the overhead costs for a program, since the program
implementer may charge USAID a fee for administering subgrants and
subcontracts. For example, the grants management contractor we visited in
South Africa charged USAID a 3 percent management fee for all the funds it
awarded through subgrants or subcontracts. If fees charged by intermediaries
are greater than USAID?s potential costs of implementing the assistance
activities

Page 18 GAO- 02- 471 Foreign Assistance

more directly, the cost of the program would increase with use of these
funding mechanisms; and less USAID funds would reach their intended
beneficiaries.

Finally, while it is USAID?s policy to award funding competitively in most
cases, use of some of these mechanisms may limit or eliminate competition.
According to USAID policy, competition helps ensure that assistance
activities will (1) have predefined objectives to maximize impact, (2) be
consistent and mutually reinforcing, and (3) draw support from the best
available sources. Furthermore, limiting the number of potential
implementers bidding on a program may cause USAID?s cost to be higher than
with full competition.

Only two of USAID?s funding mechanisms listed in this report, endowments and
credit programs, involve significantly more financial risk for USAID than
standard grants, contracts, and cooperative agreements. Endowments are
subject to a possible loss of value due to market fluctuations, depending on
how they are invested. With credit programs, loan default rates may be
higher than anticipated. Use of these mechanisms can be particularly
complex, and they require special approval at USAID headquarters.

We found that all of the other mechanisms entail the same financial
accountability requirements and therefore none poses an increased financial
risk for USAID. Since USAID?s financial management prequalification and
auditing requirements apply to all fund recipients, regardless of whether
they receive funds directly from USAID or through an intermediary
organization, USAID?s lower direct involvement in the implementation of
assistance activities does not necessarily imply looser financial controls.
Data available from USAID in two countries we visited indicated that the
risk of USAID contractors and grantees misusing funds was relatively low.
For example, audits of about $18 million in funds received by 13
nongovernmental organizations in Nicaragua for Hurricane Mitch disaster
relief revealed only about $23, 000 (about 0.1 percent) in ?questioned? or
potentially unallowable expenditures. In Southern Africa (Botswana, Uganda,
South Africa, Zimbabwe, Uganda, Malawi, Kenya, Tanzania, and Rwanda), audits
found that $235,232 of about $43 million (0.5 percent) provided to
nongovernmental organizations in fiscal year 2000 was ineligible for USAID
funding or unsupported by documentation. Elevated Financial Risk

Associated with Two Funding Mechanisms

Page 19 GAO- 02- 471 Foreign Assistance

While USAID maintains data on the use of the three general categories of
funding agreements- grants, cooperative agreements, and contracts- no data
were available on the extent to which USAID used specific types of funding
mechanisms within each of these categories, such as grants management
contracts, umbrella grants, and funding of unsolicited proposals. However,
data on USAID?s use of funding agreements indicate that the agency favors
mechanisms that delegate day- to- day management control to the
nongovernmental organizations implementing them. As shown in figure 4, in
fiscal year 2000 USAID obligated $2.6 billion to fund grants and cooperative
agreements- which inherently limit the agency?s decision- making authority.
This is about two- thirds of USAID?s $4 billion in total obligations to
nongovernmental organizations for that year and nearly twice as much as the
$1.4 billion obligated for contracts, which USAID may have more substantial
involvement in implementing.

Figure 4: Obligations to Nongovernmental Organizations During Fiscal Year
2000, by Type of Agreement

Note: Includes obligations from prior years? obligating authorities made
during the period October 1, 1999, to September 30, 2000.

Source: GAO analysis of USAID procurement data.

Limited Data Available on USAID?s Use of Various Funding Mechanisms

Page 20 GAO- 02- 471 Foreign Assistance

Furthermore, we could find little evaluative information at USAID to judge
the effectiveness of the different NGO funding mechanisms. We were unable to
identify any USAID studies of the effectiveness of various categories of
funding mechanisms. USAID recently completed a study of lessons learned from
its experience establishing and managing endowments. However, this study did
not analyze the developmental objectives of USAID?s endowments or evaluate
their impact. USAID confirmed that it does not systematically evaluate the
relative effectiveness of their programs and approaches at the agency- wide
level. However, USAID indicated that it conducts evaluations at the country
level.

Since USAID does not routinely collect data on the specific types of funding
mechanisms it uses, it would have difficulty evaluating the relative
effectiveness of the different mechanisms. For example, without basic
information about where and when it has funded unsolicited grant proposals
to strengthen democratic institutions in Eastern Europe, it would be
difficult to compare that overall experience with its experience using
standard contracts, or other types of funding mechanisms, in similar
circumstances. Hence, it would be difficult for USAID managers to begin the
process of determining which approach would be more likely to achieve the
desired development impact.

USAID routinely uses many of the same approaches to providing international
development assistance as the official and private donor organizations we
visited. Like USAID, these donors use various types of grants and contracts
with governmental and nongovernmental organizations, but they may emphasize
certain funding mechanisms more than USAID does. Compared with most other
donors, USAID?s choice of funding mechanisms tends to be guided by a desire
for programmatic and financial controls and competition. We identified a few
donors that use NGOs in ways USAID has not yet tried on a significant scale.

Official donors we visited generally followed a standard grant and contract
approach, similar to USAID?s, providing assistance to both governmental and
nongovernmental organizations. For example, the Canadian International
Development Agency had an overall approach quite similar to USAID?s,
providing funding both for assistance activities that the agency identified
and/ or designed itself as well as for activities generated by
nongovernmental organizations or foreign governments. In addition, like
USAID?s Office of Private and Voluntary Organizations, the Canadian
Similarities and

Differences in Approaches of USAID and Some Other Donors

Official Donors

Page 21 GAO- 02- 471 Foreign Assistance

International Development Agency has taken a special interest in developing
the capacity of nongovernmental organizations and has created a specific
unit to oversee programs run by NGOs. In South Africa, the United Kingdom
used grants almost exclusively to fund programs implemented by
nongovernmental organizations.

Although USAID, like other official donors, provides grants to governments,
some official donors we visited tended to favor this approach more than
funding nongovernmental organizations directly. For example, two major
official donors we visited in Nicaragua- Japan and Sweden- provided nearly
all of their assistance for Hurricane Mitch relief to the government of
Nicaragua, while USAID?s assistance was channeled overwhelmingly through
nongovernmental organizations. In this situation, where USAID had concerns
about the integrity of the government?s financial controls and competitive
contracting systems, it preferred to provide goods and services directly
through nongovernmental organizations. USAID also preferred to retain more
substantial control over the types of programs that would be funded with its
assistance.

Private foundations we visited used a range of approaches for providing
assistance, most of which were similar in nature to USAID?s. Most
foundations awarded grants to governmental and nongovernmental organizations
that submitted proposals aligned with the foundations? strategic priorities.
Some foundations also offered subsidized loans for development- related
projects, ?umbrella grant? funding to be subgranted to other organizations,
and contributions to endowments and global funds. Like USAID, these
organizations funded grants both for programs that they conceived themselves
and for programs that were submitted independently by organizations seeking
assistance funding.

USAID, abiding by federal procurement regulations and its policy on
competition, does not rely as heavily on unsolicited proposals as many of
the private donors we visited. None of the private donor organizations we
visited followed as formal a competitive process in grant making as USAID
employs. In general, they relied on the professional judgment of their staff
and preexisting relationships with other organizations to guide their choice
of programs and aid recipients. In some cases, such practices would not be
allowed under federal guidelines. Some donors sponsored competitions for
grants among preselected applicants, but this was relatively rare.
Furthermore, these organizations did not have as strict financial management
oversight over their recipients as USAID does. Though most of the private
foundations we visited performed some basic Private Donors

Page 22 GAO- 02- 471 Foreign Assistance

review of the managerial capacity of the organizations they funded and
retained the right to audit them, the process was more informal than
USAID?s. Also, USAID makes frequent use of contracts and cooperative
agreements, which these donors did not usually use, so as to maintain some
degree of formal programmatic control even after funds have been awarded to
implementing organizations.

Although USAID?s operations encompassed most funding mechanisms used by
other donors we visited, we identified a few approaches aimed at maximizing
NGO involvement that were different from those generally taken by USAID.

 The Open Society Institute, a charitable foundation based in New York and
Budapest, Hungary, provides nearly all of its assistance to indigenous
national foundations that it has chartered throughout the world. These
foundations, whose staff and board of directors usually consist of local
professionals, develop country assistance priorities and select programs and
recipient organizations independently from the Open Society Institute. The
Open Society Institute selects the board of directors for the foundations,
approves the annual budget, and provides technical support.  The Canadian
International Development Agency operates a special

program with funding set aside each year solely for proposals conceived and
submitted independently by nongovernmental organizations. This supplements
funding the organizations may be awarded for other specific assistance
activities conceived by geographic offices within the agency. Funds are
allocated to Canadian commercial enterprises seeking to work on local
infrastructure projects, faith- based organizations, volunteer groups, and
other nongovernmental organizations.

USAID marshals and coordinates the activities of a wide variety of
organizations, mostly nongovernmental, to deliver foreign assistance
throughout the world. In response to the diverse conditions in the countries
and geographic regions where USAID provides assistance, the agency has a
flexible array of funding mechanisms available, which allows it to
participate as a development activity implementer to varying degrees, as it
deems appropriate, while maintaining an emphasis on accountability and
competition.

Although we identified some of the potential advantages and disadvantages of
USAID?s different funding mechanisms, there is little information on the
relative effectiveness of USAID?s many approaches to Alternative Donor

Approaches Aim to Maximize NGO Involvement

Conclusions

Page 23 GAO- 02- 471 Foreign Assistance

providing assistance. USAID has conducted little evaluation of its
experience using the various funding mechanisms and types of organizations
to achieve its objectives around the world. Indeed some of the essential
information USAID would need to conduct such evaluations- data on the types
of implementing organizations, funding mechanisms used, and objectives in
its various program areas and bureaus- are not complete and sufficiently
detailed. With better data on these aspects of USAID?s operations, USAID
managers and congressional overseers would be better equipped to analyze
whether USAID?s mix of approaches takes full advantage of nongovernmental
organizations to achieve the agency?s objectives. As USAID takes steps to
modernize its accounting system in the next few years, it has an opportunity
to include the collection of this data into the design of this system.

To help ensure that USAID makes effective use of nongovernmental
organizations and funding mechanisms in carrying out its international
development activities, we are recommending that USAID compile more reliable
data on the extent to which the agency uses specific types of organizations
and funding mechanisms so that further analysis of the effectiveness of
USAID?s assistance approaches may be conducted.

We received written comments from USAID. These comments are reprinted in
appendix IV. In addition to their overall comments, USAID provided technical
and editorial comments, which we have incorporated in the report as
appropriate.

USAID agreed with the findings and recommendation of our report and
indicated that it has taken the agency?s data shortfalls into account in its
ongoing efforts to review and replace its business systems, so that funding
and assistance approaches can be transparently tracked and reported in the
future. According to USAID, the new systems will allow for the collection of
data globally that will be more complete with a greater degree of accuracy,
will give a clearer picture into the its various programs, and will allow
managers to better measure program effectiveness.

As arranged with your office, we plan no further distribution of this report
for 30 days from the date of the report unless you publicly announce its
contents earlier. At that time, we will send copies to appropriate
Recommendations for

Executive Action Agency Comments

Page 24 GAO- 02- 471 Foreign Assistance

congressional committees and to the administrator of USAID. We will also
make copies available to other interested parties upon request.

If you or your staff have any questions concerning this report, please call
me at (202) 512- 4128. Other GAO contacts and staff acknowledgments are
listed in appendix V.

Sincerely yours, Jess T. Ford Director, International Affairs and Trade

Appendix I: Scope and Methodology Page 25 GAO- 02- 471 Foreign Assistance

To prepare a profile of USAID?s use of nongovernmental organizations to
provide U. S. foreign aid, we conducted an extensive review of USAID
financial databases and interviewed officials throughout USAID. We obtained
and analyzed financial data from USAID?s offices of procurement, budget, and
private and voluntary organizations, as well as the office of the USAID
inspector general and three overseas missions- Honduras, Nicaragua, and
South Africa. We interviewed USAID officials responsible for compiling and
maintaining these data in order to assess their reliability and limitations.
We also interviewed USAID headquarters officials in all geographic bureaus,
two functional bureaus, and the Management Bureau, and USAID officials in
the three missions that we visited to obtain additional data, details, and
examples pertaining to their particular experiences using nongovernmental
organizations and other program implementers.

To analyze the funding mechanisms USAID uses to employ nongovernmental
organizations, we reviewed USAID program and procurement guidance and other
relevant documents and interviewed USAID officials who were routinely
involved in choosing funding mechanisms at headquarters and the three field
missions we visited. In the course of our overseas fieldwork, we visited a
variety of assistance activities and spoke to numerous program implementers,
including representatives of nongovernmental organizations, private
voluntary organizations, foreign governments, and for- profit organizations,
about their relationship with USAID and their experiences with the various
funding mechanisms. In Honduras and Nicaragua we focused our review on the
Hurricane Mitch Reconstruction Program. We interviewed representatives of
several nongovernmental organizations in Washington, D. C., as well,
including an association of international developmentrelated nongovernmental
voluntary organizations. Due to the large number, variety, and dispersion of
nongovernmental organizations, we did not visit an adequate number of
organizations to generalize observations we made during these visits.
However, these organizations provided useful detail, examples, and
illustrations of information we obtained from USAID and other sources. To
determine the extent to which USAID has evaluative information on its use of
various funding mechanisms to assess the tradeoffs among them, we obtained
and analyzed documents and data and interviewed relevant officials from
USAID offices in headquarters and overseas missions we visited. We also
conducted several literature searches using USAID?s databases to identify
studies and evaluations conducted by USAID or its contractors or partners
relating to various funding mechanisms or types of partners. We met with
officials from USAID?s Center for Development Information and Evaluation to
identify Appendix I: Scope and Methodology

Appendix I: Scope and Methodology Page 26 GAO- 02- 471 Foreign Assistance

any other reports that we may not have found in our USAID literature
searches.

To compare USAID funding mechanisms with the approaches of other donor
organization, we visited a sample of donors selected subjectively, primarily
based on the size of the donors as well as geographic location and other
criteria. We selected four of the largest private foundations involved in
international development located in New York City, which included the Ford
Foundation, the Rockefeller Foundation, the Carnegie Corporation, and the
Open Society Institute. To obtain the perspective of other donor
organizations operating with U. S. government funds, we visited the Asia
Foundation and the National Science Foundation. Due to logistical
constraints, we limited our review of official donors to bilateral donors
that were operating in the countries that we visited. They included Canada,
the United Kingdom, Japan, and Sweden. We were unable to schedule meetings
with representatives of the European Union during our field visits, but we
reviewed relevant information available through its Web sites and
interviewed third- party sources regarding its foreign assistance
operations. Our selection of donors was not intended to be exhaustive, but
rather illustrative of the main trends in international donor operations as
we were able to discern them based on our interviews with knowledgeable
international development officials and other sources of information. We
excluded multilateral donors in the scope of our review due to significant
differences in the way they are organized and operate.

We conducted our work between April 2001 and February 2002 in accordance
with generally accepted government auditing standards.

Appendix II: Major NGO Recipients of USAID Fiscal Year 2000 Procurement
Funds

Page 27 GAO- 02- 471 Foreign Assistance

Table 2: Top 10 NGO Recipients of USAID Procurement Funding Obligations in
Fiscal Year 2000

Name Organization type Total amount

obligated (in millions of

dollars)

Development Alternatives, Inc. For- profit 160

Catholic Relief Services Private voluntary organization 138

CARE Private voluntary organization 137

Barents Group, LLC For- profit 133

Chemonics International, Inc. For- profit 105

Save the Children Private voluntary organization 63

World Vision Private voluntary organization 57

Hagler Bailly Services, Inc. For- profit 51

Johns Hopkins University University 47

Mercy Corps International Private voluntary organization 43

Source: USAID procurement data.

Table 3: Top 10 For- Profit Recipients of USAID Procurement Funding
Obligations in Fiscal Year 2000

Name Total obligations (in millions of dollars)

Development Alternatives, Inc. 160

Barents Group, LLC 133

Chemonics International, Inc. 105

Hagler, Bailey Services, Inc. 51

Deloitte Touche Tohmatsu 38

John Snow, Inc. 37

ABT Associates, Inc. 36

International Resource Group 28

Louis Berger International 22

PriceWaterhouseCoopers 22

Source: USAID procurement data.

Appendix II: Major NGO Recipients of USAID Fiscal Year 2000 Procurement
Funds

Appendix II: Major NGO Recipients of USAID Fiscal Year 2000 Procurement
Funds

Page 28 GAO- 02- 471 Foreign Assistance

Table 4: Top 10 PVO Recipients of USAID Procurement Funding Obligations in
Fiscal Year 2000

Name Total obligations (in millions of dollars)

Catholic Relief Services 138

CARE 137

Save the Children 63

World Vision 57

Mercy Corps International 43

Cooperative Housing Foundation 35

Population Council 29

Winrock International 25

Population Services International 25

AVSC International 22

Source: USAID procurement data.

Table 5: Top 10 University Recipients of USAID Procurement Funding
Obligations in Fiscal Year 2000

Organization Total obligations (in millions of dollars)

Johns Hopkins University 47

University of North Carolina, Chapel Hill 25

Georgetown University 16

University of Delaware 6

State University of New York 6

Harvard University 5

Georgia State University 5

American University in Beirut 5

Michigan State University 5

University of Wisconsin, Madison 5

Source: USAID procurement data.

Appendix III: Faith- Based Private Voluntary Organizations

Page 29 GAO- 02- 471 Foreign Assistance

As shown in figure 5, a significant number of faith- based organizations are
eligible to implement USAID?s development programs. Based on our review of
self- reported information from 439 U. S. private voluntary organizations
registered with USAID 1 in fiscal year 2001, 26 percent, appeared to be
faith- based. 2

1 It is USAID?s policy that none of the funds appropriated under the U. S.
Foreign Assistance Act may be made available to any PVO that is not
registered with USAID. Disaster assistance funding and funding through
subgrants or contracts are not subject to this requirement.

2 We defined a PVO as ?faith- based? if its websites, mission statements,
objectives, or priorities directly mentioned an affiliation with a religious
organization or referenced God, Allah, another deity, prayer, faith, or
other overtly religious terms. We concluded that having been founded by a
religious person (priest, rabbi, nun, etc.) did not necessarily determine
whether an organization was currently faith based. Where possible, the
religious denomination was identified from the same information. Where it
was unclear whether an organization was secular or faith- based and to which
denomination it belonged, we contacted the organization for clarification,
if possible. If no clarification was received, the organized was classified
as ?unclear.? Appendix III: Faith- Based Private Voluntary

Organizations

Appendix III: Faith- Based Private Voluntary Organizations

Page 30 GAO- 02- 471 Foreign Assistance

Figure 5: Faith- Based Versus Secular PVOs

Note: Includes only those registered with USAID. Source: Our analysis of
USAID and PVO data.

As shown in figure 6, these PVOs span a range of denominations, but are
comprised primarily of Christian organizations.

Appendix III: Faith- Based Private Voluntary Organizations

Page 31 GAO- 02- 471 Foreign Assistance

Figure 6: Breakdown of Faith- Based PVO?s by Denomination

Note: Includes only those registered with USAID. Source: Our analysis of
USAID and PVO data.

Appendix IV: Comments from the U. S. Agency for International Development
Page 32 GAO- 02- 471 Foreign Assistance

Appendix IV: Comments from the U. S. Agency for International Development

Appendix IV: Comments from the U. S. Agency for International Development
Page 33 GAO- 02- 471 Foreign Assistance

Appendix V: GAO Contacts and Staff Acknowledgments Page 34 GAO- 02- 471
Foreign Assistance

Thomas Melito (202) 512- 9601 James Michels (202) 512- 5756

In addition to those named above, Katherine Brentzel, Janey Cohen, Martin De
Alteriis, Kathryn Hartsburg, Lawrence Suda, and La Verne Tharpes made key
contributions to this report. GAO Contacts

Acknowledgments

(320032)

Appendix V: GAO Contacts and Staff Acknowledgments

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