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;
economic growth; and humanitarian assistance. Core coun-
try teams, based in Washington and representing the 35
countries that were identified for fast-track implementation
of the reforms, then reallocated appropriated funds and de-
veloped decision-making processes and policy guidance for
the in-country USAID missions. The F Bureau subsequently
launched the system in Fiscal Year 2007 through the use of
Operational Plans prepared by the missions according to a
complete set of instructions relating to priority objectives
(including program areas, elements and scores of indicators
for each objective). Missions used this framework to set an-
nual targets for each objective.
This research study
With funding from the Gates Foundation, InterAction –
the largest association of U.S.-based NGOs involved in in-
ternational relief and development – undertook an effort to
collect the reflections of field-based officials and individuals
whose work directly involves or is influenced by the F pro-
cess. For this research, InterAction chose a cross-section
of countries from among the 35 nations in the fast-track
category. Researchers conducted in-depth interviews in
Ghana, Honduras, Kenya, Nepal and Vietnam in both June
and November 2007, while InterAction staff conducted in-
terviews in El Salvador, Nicaragua, Tanzania and Zambia. The
interviews were with members of USAID country missions,
and field staff of US-based NGOs that directly receive USAID
funding, local NGO partners and local NGOs that directly
receive USAID funding. Questions focused on knowledge of
the F process, the extent of consultation, immediate and an-
ticipated effects of the F process on programs and on part-
nerships between US-based and local NGOs.
The result is a snapshot in time of how the F process is
perceived by key actors in the best position to judge its ef-
fectiveness in improving aid delivery: the people working on
the ground in its implementation in the target countries. Ob-
viously this research was done early in F process implementa-
tion and so ongoing developments could affect the picture.
Findings
This early, field-based snapshot provides valuable in-
sights into the program to date and helps better arm de-
cision-makers with the range of information they need to
make early course corrections to improve the results and
avoid the need for more far-reaching changes later on. The
interviews revealed three major areas that, from the field
perspective, must be addressed to ensure that the F process
and US foreign assistance can meet stated goals:
1. The F process decision-making method has almost en-
tirely failed to involve consultation with in-country actors
despite the valuable input those actors could provide.
2. Field-based planners and implementers fear that the F
process is, in combination with other trends in US for-
eign assistance, causing a worrisome shift away from
assistance principles and areas of programming long
accepted as central to the long-term success of devel-
opment assistance.
3. The F process, as currently conducted, is plagued by a
series of mismatches between theory and reality. These
include:
• implementation problems caused by mismatches
between the F process and programmatic realities on
the ground;
• the fact that the F process, despite its stated goal of
improving the coordination of US Foreign Assistance,
really cannot make any truly significant progress in
reducing the fragmentation of US foreign assistance
as long as the F process has no jurisdiction over other
US programs such as PEPFAR, the MCC and programs
run by other Executive branch departments other
than USAID and State; and
• the unmet need for a serious examination of longer-
term trends in how the US. government administers
foreign assistance – trends that are having a grow-
ing impact on the ground, but which have received
relatively little analytical scrutiny throughout the F
process.
Recommendations
InterAction fully agrees that there is a need for improved
coherence, accountability and transparency in US foreign as-
sistance. However, the trends revealed by the interviews con-
ducted as part of this research suggest that the F process, as
executed to date, has demonstrated notable limitations in its
ability to achieve these goals. Therefore, InterAction strongly
recommends the following steps to improve the process
and the overall goal of strengthening the effectiveness of US
foreign assistance:
• Suspend any further implementation of the F process and
initiate a more substantial review of the initiative’s imple-
mentation to date and the issues beyond its jurisdiction
that affect the overall effectiveness of the F process effort.
This will ensure that aspects with significant negative im-
pacts are removed and replaced with alternatives better
able to meet all stated goals.
• Conduct a thorough assessment of the steps necessary
to ensure the statement in the National Security Strategy
that “development is one of the three legs of US national
security” (along with diplomacy and defense) is reflected
in policy and programmatic reality. Alternatively, con-
sider initiating a National Development Strategy so that
development will be on par with other “legs” of US Na-
tional Security. In either case, this should begin with a
 reconsideration of the relative weight given to these three
areas of interest in making foreign assistance determina-
tions. Consideration of organizational changes necessary
to achieve this goal should also begin.
• Develop a systematic plan for consultation with local
communities and civil society that allows decisions at the
program level to be made in-country by field missions and
not in Washington.
• Develop a continued and more expansive consultative
process between the F Bureau and US-based NGOs, in-
cluding an open dialogue about the fundamental as-
sumptions made by the new foreign assistance frame-
work. Steps have been taken toward such an effort and
we recommend that they continue. This could become
an effective forum for a discussion of the impact of the
general trends in the way US assistance is administered,
particularly regarding the rise of independent program-
ming (PEPFAR and MCC) and USAID’s shrinking levels of
staffing and program support.
• Vigilant oversight as to whether the F process will have
an adverse impact on effective programs in the field that
reduce poverty and meet basic needs is critical. Oversight
is also needed for the provision of additional resources for
such programs as necessary. Effective programs are com-
munity-based, work person-to-person and have true local
ownership. Our research has shown that these are exactly
the programs most at risk of becoming marginalized by
the F process as it has been implemented thus far.
FINDINGS
The following findings represent the dominant areas of
concern expressed by field-based actors during the 270 in-
terviews InterAction conducted by InterAction. InterAction
believes an important part of assessing the F process is com-
paring its results to the goals set for it by the Administration,
namely: strategic alignment with the Strategic Framework
improved coordination, efficiency and transparency in the
use of US foreign assistance funds; and improved perfor-
mance and accountability through the clearer alignment
of foreign assistance with “human progress” and a uniform
scale for measuring progress. To that end, the discussion of
each finding ends with a brief review of the goals affected
by that finding.
1. Decision-making throughout the F
process has almost entirely failed to involve
consultation with in-country actors, despite
the valuable input those actors could provide.
Lack of advance consultation appears to have been a con-
sistent hallmark/problem/characteristic with all key groups
of actors at the field level.
The interviews suggest a strong effort by Washington to in-
tentionally limit input from the field during the development
process – even though in other areas (such as the MCC), the
importance of field based input and the voices of local actors
from the start have formed the core of the philosophy.
USAID missions consistently reported that they were not
consulted in advance. In the few cases where there was “con-
sultation,” it was actually in the form of briefings rather than
sessions in which they could provide input. Of the 25 USAID
staff interviewed, 80 percent said they had not had oppor-
tunities to have input into the F process, either before or
after it was announced.2 Even those who indicated they had
been “consulted,” said that the meetings were really brief-
ings, without the opportunity to make recommendations.
In fact it appears that the decision-makers in Washington
were actively working to limit not only field mission input,
but even knowledge of the process while it was underway.
For example, in one country, USAID staff was told that “Wash-
ington would do the strategy and the missions would do the
tactics.” In another country, a Foreign Service Officer from
the USAID mission was in Washington during the meetings
of the Core Team3. Initially, he was told he could not attend
the meeting for his country. When he complained, he was
notified that he could attend but not speak or report what
he heard to the Mission team. Another Foreign Service Of-
ficer was on a core team but not allowed to talk with her
mission team. An additional respondent said, “The F reform
has affected the mission’s ability to be predictable to the [na-
tional] government. Prior to Transformational Diplomacy, the
mission had just completed our country strategy and they re-
ally burned the [national] government when they had to start
adhering to the F process.”
Further, another respondent stated, “There’s no dialogue
and we don’t have the opportunity to defend our programs as
we did in annual program reviews of the past. The F process
lacks analysis and needs assessments.” Similar sentiments
were expressed in other countries.
NGO partners also reported a lack of transparency and
inclusion. In the first round of interviews, most NGOs said
USAID missions had not consulted them about the F pro-
cess (in the target countries: 83 percent of US-based NGOs,
90 percent of local NGO partners and 82 percent of all NGOs
with direct funding; and in the four supplemental countries
88 percent of the US-based NGOs).4 In one country, the rep-
2 Interviews were conducted with a range of USAID staff including mission
directors in some countries, senior and mid-level staff, US citizens and for-
eign service nationals (FSNs) of the particular countries.
3 The Office of Foreign Assistance (OFA) that was created to carry out the
TD reforms organized core teams to develop the strategy for each coun-
try. These teams were comprised of State Department staff and some-
times USAID staff, all of whom were based in Washington, DC.
4 The term “consultation” means an effort by a donor to engage PVOs or
NGOs in discussion about a proposed action or policy where recommen-
dations by PVOs/NGOs are invited, seriously considered, and perhaps ac-
tually adopted in regard to the proposed action. “Participation” normally
means a decision-making role in the particular activity.
resentative of a very large, influential US-based NGO said:
“Even though we’re an important partner, we wonder why
they didn’t tell us of the changes.” At the October 24th panel
discussion during a meeting of the Advisory Committee on
Voluntary Foreign Aid in Washington, DC, three USAID mis-
sion directors – each from a different region – said that they
had deliberately not shared information about the F pro-
cess with partners in their countries. By way of explanation,
one said, “It was not ready for prime time.” This aligns with
the way the situation was described by respondents in one
of the countries. As one respondent explained, “The process
was top down, closed, and driven by the F Bureau. Missions
received directives, and they were not comfortable embracing
them or explaining TD to stakeholders.”
Other bilateral and multilateral donors also do not appear
to have been consulted or even well briefed at the local level.
Respondents from this group said that neither USAID mis-
sions nor US embassies had briefed them on the F process.
Several noticed drastic changes but did not know why they
were occurring. One respondent from a multilateral organi-
zation said, “No one has a clue.” In only one country, which
has a MCC Compact, did a respondent indicate that there
was now more cooperation with multilateral agencies on
the part of the US Government.
The lack of consultation calls into question the effective-
ness of this part of the F process effort in meeting several
of its stated goals – improving transparency and improving
coordination.
Not surprisingly, this lack of consultation has led to a wide
range of perceptions of shifts in programmatic focus and
motivation, as well as mismatches that have undermined
both support for the F process on the ground and raised
significant concerns about its long-term effectiveness.
In fact, the lack of consultation appears to have actually
worsened field level performance and attitudes on several
stated goals of the F process, undermining transparency in
decision-making and coordination with actors at the point
of impact. [If the F process is to do a better job of achieving
these goals, these shortcomings will need to be addressed
through a significant reform of the consultation and deci-
sion-making process.]
2. Field-based planners and implementers fear
that the F process is causing a worrisome shift
away from assistance principles and areas of
programming long accepted as central to the
long-term success of development assistance.
The most recent US National Security Statement5 specifi-
cally acknowledged development as one of the three legs
5 National Security Statement of the United States of America, (Washing-
ton, DC: The White House, March 16, 2006). Avilable at: http://www.white-
house.gov/nsc/nss/2006/nss2006.pdf.
on which our national security depends. Yet the interviews
suggest that key actors on the ground perceive a worrisome
shift away from development principles and practices that
have been proven essential to effective programming.
In five of the seven countries, USAID respondents ex-
pressed concern that the aid program would become more
and more politicized and that the development emphasis
would continue to diminish. Some commented on the
reduction of funding for development sectors in favor of
peace, security and democratization and the advent of the
MCC. One respondent said, “We are in the dark regarding a
strategy. We don’t have any strategic framework for the agen-
cy.” In two countries, staffers said that much will depend on
future leadership in Washington in both Congress and the
White House/Administration.
Representatives of other bilateral, multilateral donors and
national governments in two of the four countries where such
individuals were interviewed said they believed that the US
Government is primarily interested in its own strategic inter-
ests rather than the development interests of the countries.
One respondent said, “US policy is more important…not the
needs of the country.” In the other country, one respondent
noted, “The US behaves as a superpower and tends to seek its
own strategic interest in the country. It should try to coordinate
with other donors. The USAID program is more politically-ori-
ented. They must admit they are not the most important donor
in the country.” In the other two countries, respondents said
they feared reduced funding for development areas.
Of particular concern seems to be the fate of several ar-
eas considered critical to long-term development success
and the ability of countries, communities and individuals
to build their capabilities to eventually sustain themselves
without aid. All those interviewed in seven of the countries
in the second round were asked what they thought the de-
velopment priorities needed to be in the countries in which
they were working. Education, human development and ca-
pacity strengthening, poverty reduction through economic
development (such as microenterprise), and health (partic-
ularly maternal and child health, health systems, reproduc-
tive health and nutrition) came up consistently as critical
priorities. Yet, of the 13 USAID mission respondents asked
if the TD reforms have been flexible enough to allow USAID
missions to focus on the development priorities noted, only
23 percent of USAID staff said they were flexible enough.
In one country, USAID staff said that the F process was in-
flexible because the agenda was determined by Washington
with an intention to make all missions uniform. Therefore,
countries lost their specific priorities. In another country,
respondents expressed similar concerns. As one explained,
“The process was top down, closed, and driven by the F Bureau.
Missions received directives, and they were not comfortable
embracing them or explaining TD to stakeholders.” In another
country, a respondent said that budget cuts have limited
USAID action because there’s not enough money put into
the priorities such as democracy and economic growth.
In yet another country, a respondent said that education,
viewed as a high priority by all respondents, is not a priority
of USAID.
Project ramifications of this perceived trend appeared in
several of the countries. The eight countries with program-
ming in family planning and reproductive health saw funding
for that work drop by an average of 24 percent. Respondents
in one country noted a 100 percent cut in USAID’s pre-
existing small-farmer agricultural programs when the MCC
Compact was signed, along with less attention to education
and health. In another country, respondents reported fund-
ing cuts in water and sanitation, environmental programs,
maternal and child health and reproductive health. In a third,
a respondent explained that PEPFAR money dwarfs funding
for humanitarian, social development and even economic
development programs. For both El Salvador and Nicaragua,
the US Government’s FY 2008 presidential budget request
includes significant reductions in funds for both maternal
and child health and reproductive programs compared
to FY 2006 levels. In the same FY 2008 request, in Zambia,
maternal and child health programs have been eliminated;
in Tanzania, reproductive health funding has been reduced;
and in Ghana and Kenya, funding for water and sanitation
has been eliminated.
One respondent said, “Our proposals for Development As-
sistance (DA) funds are like throwing in the wind. There’s no
dialogue and we don’t have the opportunity to defend our pro-
grams as we did in annual program reviews of the past. The F
process lacks analysis and needs assessments.” In one country,
the Mission’s five-year strategic plan has been replaced by
the Mission Strategic Plan that was a product of the F pro-
cess. The respondent said, “[A] lot of useful stuff [has been]
discarded. [It has created] confusion for the government. US
interests now are playing a greater role than local interests in
determining the mission’s direction.” Similar sentiments were
expressed in other countries.
The perceived shift in focus calls into question the effec-
tiveness of the F process to date, specifically in meeting two
of its stated goals – improving transparency and improving
coordination. It is also unclear how a shift away from prin-
ciples and programmatic areas long proven to be central
to effective development helps the F process achieve the
objective of improving performance and accountability by
aligning foreign assistance more clearly with human prog-
ress. Nor is it clear how such a shift helps ensure that the
National Security Strategy’s statement, which states that de-
velopment is “one of the three legs of U.S. national security”
(along with diplomacy and defense), is reflected in practice.
3. The F process is plagued by a series of
mismatches between theory and reality.
These include: (a) implementation problems
caused by mismatches between the F process
and programmatic realities on the ground;
(b) the fact that the F process, despite its
stated goal of improving the coordination of
US Foreign Assistance, really cannot make
any truly significant progress in reducing
the fragmentation of US foreign assistance
as long as the F process has no jurisdiction
over other US programs such as PEPFAR, the
MCC and programs run by other Executive
branch departments other than USAID and
State; and (c) the unmet need for a serious
examination of longer-term trends in how the
US government views and administers foreign
assistance – trends that are having a growing
impact on the ground, but have received
relatively little analytical scrutiny in the F
process.
a. Implementation Problems Caused by Mismatches
between the F process and Programmatic
Realities on the Ground
Projects are being shifted to one-year, performance-based
funding cycles where an emphasis on numerical results is
key – an approach originally introduced through the PEPFAR
program. This is causing problems for NGO planning and
creates considerable anxiety regarding funding for the long-
term. It also has implications for program success over the
long term. Uncertainties in funding make it difficult to retain
the best possible program staff; this in turn undermines pro-
gram success. Even when multi-year awards are made, each
year’s funding must be negotiated and is not guaranteed.
Respondents called the yearly funding requirement time
consuming and disruptive to project implementation.
The F process has also increased the emphasis on data
collection, monitoring and reporting through use of the
new indicators that are largely quantitative and are not
impact related. USAID requests for quantitative data are in-
creasingly frequent and, in most countries, training has not
been provided as to how to utilize the new system. In most
instances, respondents reported that the new indicators are
neither appropriate nor focused on impact. Therefore, NGOs
are continuing to use their own indicators in addition to the
newly required ones from USAID. Furthermore, the fact that
these new indicators are being applied to existing projects
is causing confusion. As one respondent noted, “Application
of a whole set of new indicators to a project not designed with
those indicators in mind means analysis becomes one big hell,
as one has to compare apples with oranges.”
The new indicators, preparation of the yearly Operational
Plan and the new reporting requirements have all caused
difficulties. As one respondent explained, “The abruptness
of the reforms, the short time period for implementation,
unclear and oftentimes conflicting guidance with respect to
mainstreaming the reforms into our day-to-day operations,
and numerous glitches with migrating the data to the Opera-
tional Plan [OP] template combined to render preparation of
the FY 2007 OP excruciatingly painful, time consuming and
very costly.” In another country, a respondent described
how program elements have to be selected based on the
new indicators that often don’t fit realities on the ground:
“F had a concept and tried to fit reality into it, rather than the
other way around.” Another respondent said, “A cookie cut-
ter approach to development indicators is crazy. Even trying
to create regional indicators would be a near impossibility,
let alone the global indicators that F has created.” Another
respondent complained of the frequency of reporting re-
quirements: “We’ve gone from quarterly reports to a system
in which our partners are writing reports and doing data col-
lection all the time. Reporting requirements have increased
50-fold.” In another country, a respondent said that FACTS
(the new data collection system) does not work: “ This new
system has not led to better data collection. It is cumbersome
and confusing, not user-friendly, and the Mission is often un-
able to even access it due to the country’s limited internet ca-
pacity. The F Bureau in Washington didn’t take into account
the less developed technology the missions in developing
countries have to work with.”
These implementation mismatches call into question the
effectiveness of the F process to date in meeting several
of its stated goals – namely improving coordination and
efficiency.
b. Failure to Address the “Elephants in the Room”
Independent Programming
(Including PEPFAR and the MCC)
Although the F process was intended to improve coordi-
nation and efficiency of US foreign assistance, respondents
reported that proliferation of programs and variations in
their operation is greater than ever.
While the F process is intended to improve coordination
of US foreign assistance, it is severely hampered in its ability
to do so because of the many US assistance programs that
are not within its purview. This results in a “balkanization” of
foreign assistance rather than the coordination hoped for
through the F process. In fact, the F process controls only
a minority of the total US foreign assistance funding and,
in some countries, its programs are dwarfed by PEPFAR and
potential MCC funding. Respondents in this assessment
consistently noted the continued (and often increasing)
fragmentation of US assistance in their countries – despite
the efforts of the F process. One respondent said, “…the ‘re-
ality’ of various foreign assistance initiatives from a wide range
of different US government agencies has become even more
proliferated, rather than more strategically integrated, orches-
trated and managed through USAID…this is counter to the in-
tent of [the foreign assistance component of] Transformational
Diplomacy … as conveyed.” In another country, a respondent
said, “It’s absolutely false to say that the US Government is bet-
ter coordinated as a result of the F reform. The F process has
nothing to do with PEPFAR or MCC.” In yet another country, a
USAID staffer asks the PVO grantees and contractors to let
him know if they sign contracts with other departments of
the US Government, e.g. the Department of Labor, because
otherwise he has no way of knowing this information.
Since a number of the countries covered in this assess-
ment are significantly involved in the PEPFAR and MCC pro-
cesses, respondents were asked about the effects of those
programs on areas and staff assigned to programs covered
by the F process.
• The President’s Emergency Program for AIDS Relief (PEPFAR)
The F process adopted many of the operational aspects
of PEPFAR to such a great extent that some refer to F pro-
cess as the “PEPFARization of the foreign assistance sys-
tem.” Four of the countries in this assessment project have
large PEPFAR programs. Respondents in these countries
commented on ways in which PEPFAR is affecting other
in-country aid efforts covered by the F process. The fol-
lowing were of particular concern.
Respondents believe PEPFAR funds are overwhelming
and distorting the health sector, while other important
health needs are neglected. The annual US budget to
fight HIV/AIDS abroad has increased from $1.5 billion in FY
2003 to $6.0 billion in 2008. Six of the countries in which
interviews were conducted have FY 2008 HIV/AIDS fund-
ing requests that represent increases of between 51.52
percent (Nicaragua) and 201.06 percent (Tanzania) over
FY 2006 levels. These large increases are, in a number of
instances, accompanied by the reduction or elimination
of programming in other health areas such as maternal
and child health and reproductive health, and the related
areas of water and sanitation. The amounts available for
PEPFAR also dwarf those available for other important ar-
eas of development assistance.
Because PEPFAR money can only be used in clearly
prescribed ways to fight HIV/AIDS, other important
health needs are neglected. Even though health care sys-
tems are the backbone of effective health care delivery,
funding is severely lacking to strengthen these systems
through efforts such as hiring and training personnel,
and providing health infrastructure, equipment and sup-
plies. Respondents in two countries reported that restric-
tions of PEPFAR money are so tight that money targeted
for orphans and vulnerable children through PEPFAR
cannot even be used to provide services to caretakers of
such children. Other interview respondents noted that
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
money cannot be programmed effectively, given the
very restrictive requirements.
PEPFAR fails to capitalize on in-country expertise in
developing projects and partners, but then relies on
(and often over-taxes) the same USAID in-country staff
to monitor the programs. The Office of Global AIDS Coor-
dination in Washington designs the PEPFAR projects and
chooses the recipients of the funding without using the
field expertise of USAID missions and other in-country ac-
tors. One respondent said, “PEPFAR is more about delivering
things and measuring, not cooperative implementation. The
terms are much prescribed.” At the same time, PEPFAR relies
on USAID mission staff to monitor its programs – this at a
time when USAID mission staffs are already overstretched
covering other programming.
Where PEPFAR budgets have grown dramatically,
staff is overworked and unable to visit field projects due
to the administrative workload in the mission. In one
country, a respondent said, “Our own capacity is diminish-
ing and NGO partners on the ground are beginning to feel
the effects of a weak agency. If this continues to happen, we
will all go down together.”
• The Millennium Challenge Corporation (MCC)
The MCC was established in January 2004, two years
before the F process was introduced. Seven countries in
this assessment have signed either an MCC Compact or a
Threshold Agreement.
In each of those seven countries, respondents were
asked how they thought the MCC Compact or Thresh-
old Agreement was affecting the US foreign assistance
program in that country. Most respondents who knew
about the MCC felt that its programs have had a nega-
tive impact on their missions’ programs. In at least four
of the countries, the USAID budget has been reduced. In
one country, a respondent said, “[The Office of Manage-
ment and Budget (OMB)] representatives said on more than
one occasion that OMB is urging to cut aid in MCC compact
countries.”
The focus of the MCC program in the various countries
is on infrastructure, commercial agriculture, energy, pro-
motion of trade and a favorable investment climate for
the private sector. Many of the respondents said they
thought the MCC would affect USAID negatively by ei-
ther competing with, or substituting for its programs.
They also feared that the MCC would have negative ef-
fects on rural development and poverty alleviation ef-
forts in which USAID had been involved. One respondent
said, “It will generate more wealth for the wealthy.” In one
country, respondents feared negative environmental im-
pacts and displacement of inhabitants in a region where
a road is to be built. They also said that MCC’s promotion
of an extractive industry in the region would run counter
to USAID’s effort to protect biodiversity and natural re-
sources. In another country, respondents felt that there
was insufficient recognition of the role long-term USAID
programs and efforts had played in helping the country
meet the preconditions necessary for MCC participation.
The F process’s failure to reach programs representing
such a large portion of US foreign assistance calls into
question the initiative’s effectiveness to date in meeting
several of its stated goals – namely improving coordina-
tion and efficiency.
General Trends in the Way US Assistance is Administered
Discussion of the problems with current efforts to improve
the coordination and effectiveness of US foreign assistance
frequently focuses directly on internal shortcomings of the F
process itself (e.g. the decision-making process and the types
of indicators used) or big programs that remain outside of
its purview. Both are important. However, another very im-
portant factor generally remains off the radar screen: an on-
going general shift that has been underway for some time
concerning how the US Government administers US foreign
assistance. While the trend is clear, it has been more the result
of incremental changes rather than a clear, carefully consid-
ered policy shift. For the F process to be truly successful, these
changes must be reviewed and determinations made as to
whether the changes should be continued or revised.
These trends were clearly on the minds of a number of the
participants in this assessment who saw them as relevant to
any understanding of the current state of US foreign assis-
tance in their countries and the F process.
USAID has long experienced shrinking levels of field staff-
ing to manage programs in traditional areas of development
assistance that fall outside of the big new projects such as
PEPFAR. During the interviews for this assessment, it also
became clear that in some countries the USAID missions are
losing additional staff because of the F process. Respondents
in several countries reported that long-term AID employees
have retired or have left due to frustration with the F process.
Moreover, in two countries Foreign Service Nationals have
lost their jobs in significant numbers or have been told that
they will. Where personnel has remained stable, in countries
where the PEPFAR budgets have grown dramatically, staff is
overworked and unable to visit field projects due to the ad-
ministrative workload in the mission. In one country, a respon-
dent said, “Our own capacity is diminishing and NGO partners
on the ground are beginning to feel the effects of a weak agency.
If this continues to happen, we will all go down together.”
These diminishing staffing levels have played into a longer-
term trend that is significantly limiting both USAID’s options
for ways to disburse foreign assistance funds and the num-
ber and types of implementers who can compete for direct
funding. Specifically, there is a much greater emphasis on
large contracts or grants run by consortia, with an emphasis
on technical aspects of projects, and much less attention to
the long-term, capacity-strengthening efforts carried out
by NGOs. In several countries, a few very large US consult-
ing firms are winning more and more USAID contracts, and
only large US-based NGOs with substantial independent
funding can compete. Comments from respondents in this
assessment reaffirmed what InterAction had heard before –
that this shift and the accordant financial and administrative
requirements reduce the ability of local NGOs to compete.
In at least two countries, USAID missions are also providing
substantially more funding to national governments than to
NGOs. This is in spite of the fact that in certain sectors, previ-
ous government programs have failed miserably while NGO
programs have been evaluated by external sources as excel-
lent. In these countries, national government officials are
now participating in reviews of NGO proposals although in-
terview respondents maintain that the officials do not have
the necessary qualifications to do so. In at least one country,
local NGOs that received direct USAID funds in the past must
now subcontract work through US-based NGOs or contrac-
tors. This includes two large local NGO initiatives that were
originally created and nurtured with USAID funds and that
have been functioning effectively for over 15 years. In one
country, 100 percent of US-based NGO respondents noted
that USAID is calling for increased use of US professionals
rather than local personnel.
There are signs that the F process is making it more diffi-
cult for some local NGOs to participate in projects in which
they receive only indirect USAID funding. In November,
US-based NGOs were asked if the F process was making
it easier or more difficult to work in partnership with local
NGOs. Twenty-one percent of respondents spread across
five countries said it was more difficult. Reasons included
sudden funding cuts from USAID, changes in report formats
and/or proposals that were hard for local NGO partners, a
number of abrupt shifts from USAID in areas of emphasis
that local NGOs could not implement and, in one country,
the fact that most local NGOs do not share the priority
objectives of the new USAID focus. Two local NGOs in dif-
ferent countries noted that there had been reductions in
sub-grants. In one of the countries, these were in health,
education and the environment. Another said that the
USAID emphasis on different sectors – democratization,
conflict management and strengthening of political parties
– was making work for local NGOs more challenging. Lastly,
local NGOs that had previously received direct USAID fund-
ing were extremely unhappy about now having to receive
funds through US-based NGOs and felt this made work
more administratively and bureaucratically burdensome.
RECOMMENDATIONS
InterAction fully agrees that there is a need for improved
coherence, accountability and transparency in US foreign
assistance. However, the findings revealed by the interviews
conducted as part of this research suggest that the F process,
as executed to date, has demonstrated notable limitations in
its ability to achieve these goals, has raised significant con-
cerns about a fundamental shift away from critical program-
matic areas and has not addressed a series of aspects of US
foreign assistance that must be part of the process if the F
process is to achieve its goals. Therefore, InterAction strongly
recommends the following steps to improve the process
and the overall goal of strengthening the effectiveness of US
foreign assistance:
• Suspend any further implementation of the F process and
initiate a more substantial review of the initiative’s imple-
mentation to date and the issues beyond its jurisdiction
that affect the overall effectiveness of the F process effort.
This will ensure that aspects with significant negative im-
pacts are removed and replaced with alternatives better
able to meet all stated goals.
• Conduct a thorough assessment of the steps necessary
to ensure the statement in the National Security Strategy
that “development is one of the three legs of U.S. national
security” (along with diplomacy and defense) is reflected
in policy and programmatic reality. Alternatively, consider
initiating a National Development Strategy so that devel-
opment will be on par with other legs of US National Secu-
rity. In either case, this should begin with a reconsideration
of the relative weight given to these three areas of interest
in making foreign assistance determinations. Consider-
ation of organizational changes necessary to achieve this
goal should also begin.
• Develop a systematic plan for consultation with local com-
munities and civil society that allows decisions at the pro-
gram level to be made in country by field missions and not
in Washington.
• Develop a continued and more expansive consultative
process between the F Bureau and US-based NGOs, includ-
ing an open dialogue about the fundamental assumptions
made by the new foreign assistance framework. Steps have
been taken toward such an effort and we recommend that
they continue. This could become an effective forum for a
discussion of the impact of the general trends in the way
US assistance is administered, particularly regarding the
rise of independent programming (PEPFAR and MCC) as
well as USAID’s shrinking levels of staffing and program
support.
• Vigilant oversight as to whether the F process will have
an adverse impact on effective programs in the field that
reduce poverty and meet basic needs and the provision
of additional resources for such programs as necessary.
Effective programs are community-based, work person-
to-person and have true local ownership. Our research has
shown that these are exactly the programs most at risk of
becoming marginalized by the F process as it has been
implemented thus far.
Appendix One: Research Methodology
Most of the data for this report was gathered through two
sets of in-depth interviews with a variety of respondents in
five countries (Ghana, Honduras, Kenya, Nepal and Vietnam)
in June and November of 2007. InterAction staff conducted
supplementary interviews in four additional countries (El
Salvador, Nicaragua, Tanzania and Zambia) in August and
November of 2007. In total, researchers conducted 270 in-
terviews in the nine countries.
Timing
This assessment was intentionally conducted early on in the
implementation of the foreign assistance reform effort (F pro-
cess). The intention was to create a snapshot of the effort on
the ground while the process was still early enough in its ex-
ecution to allow for any necessary adjustments to improve its
effectiveness. Obviously this limited the amount of time the F
process had to produce significant effects on the development
work of PVOs and NGOs. As a way to maximize the value of
data collected, the research was divided into two parts, with a
first set of interviews carried out in late June and a second set of
interviews with the same set of respondents carried out in No-
vember. This schedule was based on the hypothesis that little
would be known about the reforms – and few effects felt – by
June, whereas respondents would likely be more knowledge-
able about the reforms and would have experienced more
effects by November after the end-of-the fiscal-year proposal
writing season had been completed.6 In addition, InterAction
staff visited four other countries (El Salvador, Nicaragua, Tanza-
nia and Zambia) to carry out supplementary research.
Choice of countries
The study focuses on five countries representing a geo-
graphic and situational cross section of the 35 “fast track” na-
tions.7 Nepal was chosen as a rebuilding country, Kenya and
Vietnam as developing countries, and Ghana and Honduras as
transforming countries. InterAction engaged an experienced
development professional in each of these countries to carry
out the research. Of the four countries in which additional in-
terviews were conducted, Zambia is categorized as a develop-
ing country and the remaining as transforming nations.
Categories of respondents
In the five primary countries, researchers interviewed five
categories of respondents:
• In-country staff of US-based NGOs that receive USAID funds;
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-
tries, researchers asked questions in four major areas:
• Background on the NGOs’ programs in the country;
• Awareness of the foreign assistance reforms and extent of
related consultation;
• Immediate effects of the reforms on the NGOs’ programs
(both USAID-funded and those funded by other donors)
and on their partnerships; and
• Anticipated effects of the reforms in the future.
Of the 100 NGOs interviewed, the vast majority have worked
in their respective countries for at least five years, and a major-
ity have had country programs for over 10 years. Of the US-
based organizations, 90 percent had worked in the five coun-
tries for at least five to 10 years, while 77 percent had worked
in them for 11 years or more. Of local NGO partners, 87 percent
had at least five to 10 years of experience in the countries and
53 percent had 11 years or more. And 71 percent of the local
NGOs with direct funding from USAID had 11 years or more.

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