Foreign

Assistance
Reform:
Views
From the
Ground
 TABLE OF CONTENTS

4 Executive Summary

Findings

6 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.

7 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.

8 3. The F process is plagued by a series of mismatches between theory

and reality.
a. Operational Discordance
b. Failure to Address “Elephants in the Room”
• US Assistance Programs Beyond Purview of F process
• Longer-Term Trends in the Way the US Government
Administers Foreign Assistance

12 Recommendations


13 APPENDIX ONE: Research Methodology

14 APPENDIX TWO: Background on NGO In-Country Operations

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

About InterAction
InterAction is the largest alliance of U.S.-based international
development and humanitarian nongovernmental organizations.
With more than 165 members operating in every developing
country, we work to overcome poverty, exclusion and suffering
by advancing social injustice and basic dignity for all.
EXECUTIVE SUMMARY
T
he current effort to reform US foreign assistance
grew out of an understandable desire to bet-
ter align US assistance with US interests and to
improve the coordination, efficiency and trans-
parency 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 offi-
cials 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 Trans-
formational Diplomacy initiative. The relevant goals of this
initiative are:
• To strengthen the strategic alignment of US foreign
assistance resources with the new Strategic Frame-
work for United States Foreign Assistance1 (Strategic
Framework);
• To improve coordination and efficiency in the use of
foreign assistance resources across multiple agencies
and accounts, by evaluating comparative strengths
and tools available;
• To improve transparency in the allocation and use of
foreign assistance resources; and
• To improve performance and accountability for results,
by aligning foreign assistance more clearly with human
progress, and with a uniform scale for measuring prog-
ress [embodied in the new Strategic Framework for
and its progress indicators].
Source: Tobias, Randall L., “MESSAGE FROM THE ADMINISTRATOR TO
THE WORKING GROUPS”, April 12, 2007
The F process mandate covers US foreign assistance
funds traditionally controlled by USAID and some parts
of the State Department, but not US foreign assistance
programs controlled through other departments and the
President’sEmergency Plan for AIDS Relief (PEPFAR) and
Millennium Challenge Corporation (MCC) initiatives. The
1 Strategic Framework for United States Foreign Assistance, (Washing-
ton, DC: U.S. Department of State, July 10, 2007). Available at: http://
www.state.gov/documents/organization/88433.pdf.
4 Foreign Assistance Reform: Views From the Ground
stated purpose of the F process has been to better align US
foreign assistance with the new Strategic Framework. The
document, created by the newly created Office of Foreign
Assistance at the State Department (known informally as
the “F Bureau”), identifies five programmatic priorities:
peace and security; governing justly and democratically;
investing in people; economic growth; and humanitarian
assistance. Core country teams, based in Washington and
representing the 35 countries that were identified for fast-
track implementation of the reforms, then reallocated ap-
propriated funds and developed decision-making processes
and policy guidance for the in-country USAID missions. The
F Bureau subsequently launched the system in Fiscal Year
2007 through the use of Operational Plans prepared by the
missions according to a complete set of instructions relating
to priority objectives (including program areas, elements
and scores of indicators for each objective). Missions used
this framework to set annual targets for each objective.
This research study
With funding from the Gates Foundation, InterAction – the
largest association of U.S.-based NGOs involved in inter-
national 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 cate-
gory. Researchers conducted in-depth interviews in Ghana,
Honduras, Kenya, Nepal and Vietnam in both June and No-
vember 2007, while InterAction staff conducted interviews
in El Salvador, Nicaragua, Tanzania and Zambia. The inter-
views were with members of USAID country missions, and
field staff of US-based NGOs that directly receive USAID
funding, local NGO partners and local NGOs that directly
receive USAID funding. Questions focused on knowledge
of the F process, the extent of consultation, immediate and
anticipated effects of the F process on programs and on
partnerships between US-based and local NGOs.
The result is a snapshot in time of how the F process is per-
ceived by key actors in the best position to judge its effec-
tiveness in improving aid delivery: the people working on the
ground in its implementation in the target countries. Obvi-
ously 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 insights
into the program to date and helps better arm decision-
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 pro-
cess 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 Assis-
tance, really cannot make any truly significant prog-
ress in reducing the fragmentation of US foreign
assistance as long as the F process has no jurisdic-
tion over other US programs such as PEPFAR, the
MCC and programs run by other Executive branch
departments other than USAID and State; and
• the unmet need for a serious examination of
longer-term trends in how the US. government
administers foreign assistance – trends that are
having a growing impact on the ground, but which
have received relatively little analytical scrutiny
throughout the F process.
Recommendations
InterAction fully agrees that there is a need for improved
coherence, accountability and transparency in US foreign
assistance. However, the trends revealed by the inter-
views conducted as part of this research suggest that the
F process, as executed to date, has demonstrated notable
limitations in its ability to achieve these goals. Therefore,
InterAction strongly recommends the following steps to
improve the process and the overall goal of strengthening
the effectiveness of US foreign assistance:
• Suspend any further implementation of the F process
and initiate a more substantial review of the initiative’s
implementation to date and the issues beyond its ju-
risdiction that affect the overall effectiveness of the F
process effort. This will ensure that aspects with signifi-
cant negative impacts are removed and replaced with
alternatives better able to meet all stated goals.
• Conduct a thorough assessment of the steps neces-
sary 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 de-
fense) is reflected in policy and programmatic reality.
Alternatively, consider initiating a National Develop-
ment Strategy so that development will be on par with
other “legs” of US National Security. In either case,
this should begin with a reconsideration of the relative
weight given to these three areas of interest in making
foreign assistance determinations. Consideration of
organizational changes necessary to achieve this goal
should also begin.
• Develop a systematic plan for consultation with local
communities and civil society that allows decisions at
the program level to be made in-country by field mis-
sions and not in Washington.
• Develop a continued and more expansive consultative
process between the F Bureau and US-based NGOs,
including an open dialogue about the fundamental 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 admin-
istered, particularly regarding the rise of independent
programming (PEPFAR and MCC) and USAID’s shrink-
ing levels of staffing and program support.
• Vigilant oversight as to whether the F process will have
an adverse impact on effective programs in the field
that reduce poverty and meet basic needs is critical.
Oversight is also needed for the provision of additional
resources for such programs as necessary. Effective
programs are community-based, work person-to-per-
son 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.
www.interaction.org 5
FINDINGS
T
he following findings represent the dominant ar-
eas of concern expressed by field-based actors
during the 270 interviews InterAction conducted
by InterAction. InterAction believes an important
part of assessing the F process is comparing its results to
the goals set for it by the Administration, namely: strategic
alignment with the Strategic Framework improved coordi-
nation, efficiency and transparency in the use of US foreign
assistance funds; and improved performance and account-
ability 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 ac-
tors from the start have formed the core of the philosophy.
USAID missions consistently reported that they were not
consulted in advance. In the few cases where there was
“consultation,” it was actually in the form of briefings rath-
er than sessions in which they could provide input. Of the
25 USAID staff interviewed, 80 percent said they had not
had opportunities to have input into the F process, either
before or after it was announced.2 Even those who indi-
cated they had been “consulted,” said that the meetings
were really briefings, without the opportunity to make rec-
ommendations. In fact it appears that the decision-makers
in Washington were actively working to limit not only field
mission input, but even knowledge of the process while it
was underway. For example, in one country, USAID staff
was told that “Washington would do the strategy and the
missions would do the tactics.” In another country, a For-
eign Service Officer from the USAID mission was in Wash-
ington during the meetings of the Core Team3. Initially, he
2 Interviews were conducted with a range of USAID staff including mis-
sion directors in some countries, senior and mid-level staff, US citizens
and foreign service nationals (FSNs) of the particular countries.
3 The Office of Foreign Assistance (OFA) that was created to carry out
6 Foreign Assistance Reform: Views From the Ground
was told he could not attend the meeting for his country.
When he complained, he was notified that he could attend
but not speak or report what he heard to the Mission team.
Another Foreign Service Officer was on a core team but not
allowed to talk with her mission team. An additional respon-
dent said, “The F reform has affected the mission’s ability to
be predictable to the [national] government. Prior to Trans-
formational Diplomacy, the mission had just completed our
country strategy and they really burned the [national] gov-
ernment 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 pro-
cess lacks analysis and needs assessments.” Similar senti-
ments 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-
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
mission directors – each from a different region -- said that
they had deliberately not shared information about the F
process with partners in their countries. By way of explana-
tion, one said, “It was not ready for prime time.” This aligns
with the way the situation was described by respondents
in one of the countries. As one respondent explained, “The
process was top down, closed, and driven by the F Bureau.
Missions received directives, and they were not comfortable
embracing them or explaining TD to stakeholders.”
Other bilateral and multilateral donors also do not appear
to have been consulted or even well briefed at the local
level. Respondents from this group said that neither USAID
the TD reforms organized core teams to develop the strategy for each
country. These teams were comprised of State Department staff and
sometimes USAID staff, all of whom were based in Washington, DC.
4 The term “consultation” means an effort by a donor to engage PVOs or
NGOs in discussion about a proposed action or policy where recom-
mendations by PVOs/NGOs are invited, seriously considered, and
perhaps actually adopted in regard to the proposed action. “Participa-
tion” normally means a decision-making role in the particular activity.
missions nor US embassies had briefed them on the F pro-
cess. Several noticed drastic changes but did not know why
they were occurring. One respondent from a multilateral
organization said, “No one has a clue.” In only one country,
which has a MCC Compact, did a respondent indicate that
there was now more cooperation with multilateral agen-
cies 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
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 em-
phasis 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 regard-
ing a strategy. We don’t have any strategic framework for
the agency.” In two countries, staffers said that much will
5 National Security Statement of the United States of America, (Wash-
ington, DC: The White House, March 16, 2006). Avilable at: http://www.
whitehouse.gov/nsc/nss/2006/nss2006.pdf.
depend on future leadership in Washington in both Con-
gress 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 strate-
gic interests rather than the development interests of the
countries. One respondent said, “US policy is more impor-
tant…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 pro-
gram is more politically-oriented. They must admit they are
not the most important donor in the country.” In the other
two countries, respondents said they feared reduced fund-
ing for development areas.
Of particular concern seems to be the fate of several areas
considered critical to long-term development success and
the ability of countries, communities and individuals to build
their capabilities to eventually sustain themselves without
aid. All those interviewed in seven of the countries in the
second round were asked what they thought the develop-
ment priorities needed to be in the countries in which they
were working. Education, human development and capacity
strengthening, poverty reduction through economic devel-
opment (such as microenterprise), and health (particularly
maternal and child health, health systems, reproductive
health and nutrition) came up consistently as critical priori-
ties. Yet, of the 13 USAID mission respondents asked if the
TD reforms have been flexible enough to allow USAID mis-
sions to focus on the development priorities noted, only 23
percent of USAID staff said they were flexible enough.
In one country, USAID staff said that the F process was
inflexible because the agenda was determined by Wash-
ington 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 stakehold-
ers.” 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 eco-
nomic 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
www.interaction.org 7
programming in family planning and reproductive health
saw funding for that work drop by an average of 24 per-
cent. 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 at-
tention to education and health. In another country, re-
spondents reported funding cuts in water and sanitation,
environmental programs, maternal and child health and
reproductive health. In a third, a respondent explained that
PEPFAR money dwarfs funding for humanitarian, social
development and even economic development programs.
For both El Salvador and Nicaragua, the US Government’s
FY 2008 presidential budget request includes significant
reductions in funds for both maternal and child health and
reproductive programs compared to FY 2006 levels. In the
same FY 2008 request, in Zambia, maternal and child health
programs have been eliminated; in Tanzania, reproductive
health funding has been reduced; and in Ghana and Kenya,
funding for water and sanitation has been eliminated.
One respondent said, “Our proposals for Development As-
sistance (DA) funds are like throwing in the wind. There’s no
dialogue and we don’t have the opportunity to defend our
programs as we did in annual program reviews of the past.
The F process lacks analysis and needs assessments.” In one
country, the Mission’s five-year strategic plan has been re-
placed by the Mission Strategic Plan that was a product of
the F process. The respondent said, “[A] lot of useful stuff
[has been] discarded. [It has created] confusion for the gov-
ernment. US interests now are playing a greater role than lo-
cal interests in determining the mission’s direction.” Similar
sentiments were expressed in other countries.
The perceived shift in focus calls into question the effective-
ness of the F process to date, specifically in meeting two of
its stated goals – improving transparency and improving co-
ordination. It is also unclear how a shift away from principles
and programmatic areas long proven to be central to effec-
tive development helps the F process achieve the objective
of improving performance and accountability by aligning
foreign assistance more clearly with human progress. Nor is
it clear how such a shift helps ensure that the National Secu-
rity Strategy’s statement, which states that development is
“one of the three legs of U.S. national security” (along with
diplomacy and defense), is reflected in practice.
3. The F process is plagued by a series of mismatches between
theory and reality. These include: (a) implementation problems
caused by mismatches between the F process and programmatic
realities on the ground; (b) the fact that the F process, despite
its stated goal of improving the coordination of US Foreign As-
sistance, really cannot make any truly significant progress in
8 Foreign Assistance Reform: Views From the Ground
reducing the fragmentation of US foreign assistance as long as
the F process has no jurisdiction over other US programs such as
PEPFAR, the MCC and programs run by other Executive branch
departments other than USAID and State; and (c) the unmet
need for a serious examination of longer-term trends in how
the US government views and administers foreign assistance –
trends that are having a growing impact on the ground, but have
received relatively little analytical scrutiny in the F process.
a. Implementation Problems Caused by Mismatches
between the F process and Programmatic
Realities on the Ground
Projects are being shifted to one-year, performance-based
funding cycles where an emphasis on numerical results is
key – an approach originally introduced through the PEPFAR
program. This is causing problems for NGO planning and
creates considerable anxiety regarding funding for the 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 col-
lection, monitoring and reporting through use of the new
indicators that are largely quantitative and are not impact
related. USAID requests for quantitative data are increas-
ingly frequent and, in most countries, training has not been
provided as to how to utilize the new system. In most in-
stances, 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 cum-
bersome and confusing, not user-friendly, and the Mission is
often unable to even access it due to the country’s limited
internet capacity. The F Bureau in Washington didn’t take
into account the less developed technology the missions in
developing countries have to work with.”
These implementation mismatches call into question the ef-
fectiveness 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 coordina-
tion 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 coun-
tries, 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 pro-
cess. One respondent said, “…the ‘reality’ of various foreign
assistance initiatives from a wide range of different US gov-
ernment agencies has become even more proliferated, rather
than more strategically integrated, orchestrated and managed
through USAID…this is counter to the intent of [the foreign as-
sistance component of] Transformational Diplomacy … as con-
veyed.” In another country, a respondent said, “It’s absolutely
false to say that the US Government is better coordinated as a
result of the F reform. The F process has nothing to do with
PEPFAR or MCC.” In yet another country, a USAID staffer asks
the PVO grantees and contractors to let him know if they sign
contracts with other departments of the US Government,
e.g. the Department of Labor, because otherwise he has no
way of knowing this information.
Since a number of the countries covered in this assessment
are significantly involved in the PEPFAR and MCC process-
es, respondents were asked about the effects of those pro-
grams on areas and staff assigned to programs covered by
the F process.
• The President’s Emergency Program for AIDS Relief (PEPFAR)
The F process adopted many of the operational aspects
of PEPFAR to such a great extent that some refer to F
process as the “PEPFARization of the foreign assistance
system.” Four of the countries in this assessment proj-
ect have large PEPFAR programs. Respondents in these
countries commented on ways in which PEPFAR is affect-
ing other in-country aid efforts covered by the F process.
The following were of particular concern.
Respondents believe PEPFAR funds are overwhelming
and distorting the health sector, while other important
health needs are neglected. The annual US budget to
fight HIV/AIDS abroad has increased from $1.5 billion in FY
2003 to $6.0 billion in 2008. Six of the countries in which
interviews were conducted have FY 2008 HIV/AIDS 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
areas of development assistance.
Because PEPFAR money can only be used in clearly pre-
scribed ways to fight HIV/AIDS, other important health
needs are neglected. Even though health care systems
are the backbone of effective health care delivery, fund-
ing is severely lacking to strengthen these systems
through efforts such as hiring and training personnel, and
providing health infrastructure, equipment and supplies.
Respondents in two countries reported that restrictions
of PEPFAR money are so tight that money targeted for
orphans and vulnerable children through PEPFAR can-
not even be used to provide services to caretakers of
such children. Other interview respondents noted that
the PEPFAR budget is so high in some countries that the
www.interaction.org 9
 t Changes in funding for health programs in FARM Countries, FY 06 vs. FY 08*
Family
Planning/ Water
Tuber- Maternal &
Country HIV/ AIDS Malaria Repro- Supply & Total
culosis Child Health
ductive Sanitation
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

money cannot be programmed effectively, given the
very restrictive requirements.
PEPFAR fails to capitalize on in-country expertise in devel-
oping projects and partners, but then relies on (and often
over-taxes) the same USAID in-country staff to monitor
the programs. The Office of Global AIDS Coordination in
Washington designs the PEPFAR projects and chooses
the recipients of the funding without using the field ex-
pertise of USAID missions and other in-country actors.
One respondent said, “PEPFAR is more about delivering
things and measuring, not cooperative implementation.
The terms are much prescribed.” At the same time, PEP-
FAR relies on USAID mission staff to monitor its programs
– this at a time when USAID mission staffs are already
overstretched covering other programming.
Where PEPFAR budgets have grown dramatically, staff is
overworked and unable to visit field projects due to the
administrative workload in the mission. In one country,
a respondent said, “Our own capacity is diminishing and
NGO partners on the ground are beginning to feel the ef-
fects 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 Threshold Agree-
ment was affecting the US foreign assistance program
in that country. Most respondents who knew about the
MCC felt that its programs have had a negative impact on
their missions’ programs. In at least four of the countries,
the USAID budget has been reduced. In one country, a
respondent said, “[The Office of Management and Budget
(OMB)] representatives said on more than one occasion
that OMB is urging to cut aid in MCC compact countries.”
The focus of the MCC program in the various countries
is on infrastructure, commercial agriculture, energy, 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 either
competing with, or substituting for its programs. They
also feared that the MCC would have negative effects
on rural development and poverty alleviation efforts in
which USAID had been involved. One respondent said,
“It will generate more wealth for the wealthy.” In one
country, respondents feared negative environmental 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.

10 Foreign Assistance Reform: Views From the Ground

 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 re-
sult of incremental changes rather than a clear, carefully con-
sidered 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 as-
sistance in their countries and the F process.
USAID has long experienced shrinking levels of field staff-
ing to manage programs in traditional areas of develop-
ment 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 mis-
sions 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 num-
bers or have been told that they will. Where personnel has
remained stable, in countries where the PEPFAR budgets
have grown dramatically, staff is overworked and unable
to visit field projects due to the administrative workload in
the mission. In one country, a respondent said, “Our own
capacity is diminishing and NGO partners on the ground are
beginning to feel the effects of a weak agency. If this contin-
ues 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 consulting
firms are winning more and more USAID contracts, and only
large US-based NGOs with substantial independent funding
can compete. Comments from respondents in this assess-
ment reaffirmed what InterAction had heard before – that
this shift and the accordant financial and administrative
requirements reduce the ability of local NGOs to compete.
In at least two countries, USAID missions are also providing
substantially more funding to national governments than
to NGOs. This is in spite of the fact that in certain sectors,
previous government programs have failed miserably while
NGO programs have been evaluated by external sources as
excellent. In these countries, national government officials
are now participating in reviews of NGO proposals although
interview respondents maintain that the officials do not
have the necessary qualifications to do so. In at least one
country, local NGOs that received direct USAID funds in the
past must now subcontract work through US-based NGOs
or contractors. This includes two large local NGO initiatives
that were originally created and nurtured with USAID funds
and that have been functioning effectively for over 15 years.
In one country, 100 percent of US-based NGO respondents
noted that USAID is calling for increased use of US profes-
sionals 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.
www.interaction.org 11
RECOMMENDATIONS
I
nterAction fully agrees that there is a need for improved
coherence, accountability and transparency in US for-
eign assistance. However, the findings revealed by the
interviews conducted as part of this research suggest
that the F process, as executed to date, has demonstrated
notable limitations in its ability to achieve these goals, has
raised significant concerns about a fundamental shift away
from critical programmatic areas and has not addressed a
series of aspects of US foreign assistance that must be part
of the process if the F process is to achieve its goals. There-
fore, InterAction strongly recommends the following steps
to improve the process and the overall goal of strengthen-
ing the effectiveness of US foreign assistance:
• Suspend any further implementation of the F process
and initiate a more substantial review of the initiative’s
implementation to date and the issues beyond its ju-
risdiction that affect the overall effectiveness of the F
process effort. This will ensure that aspects with signifi-
cant negative impacts are removed and replaced with
alternatives better able to meet all stated goals.
• Conduct a thorough assessment of the steps neces-
sary 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 real-
ity. Alternatively, consider initiating a National Devel-
opment Strategy so that development will be on par
with other legs of US National Security. In either case,
this should begin with a reconsideration of the relative
12 Foreign Assistance Reform: Views From the Ground
weight given to these three areas of interest in making
foreign assistance determinations. Consideration of
organizational changes necessary to achieve this goal
should also begin.
• Develop a systematic plan for consultation with local
communities and civil society that allows decisions at
the program level to be made in country by field mis-
sions and not in Washington.
• Develop a continued and more expansive consultative
process between the F Bureau and US-based NGOs,
including an open dialogue about the fundamental 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 admin-
istered, 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 pro-
grams most at risk of becoming marginalized by the F
process as it has been implemented thus far.
Photo courtesy: Neemah Esmaeilpour
 Appendix One: Research Methodology
M
ost of the data for this report was gathered
through two sets of in-depth interviews with a va-
riety of respondents in five countries (Ghana, Hon-
duras, Kenya, Nepal and Vietnam) in June and November
of 2007. InterAction staff conducted supplementary inter-
views in four additional countries (El Salvador, Nicaragua,
Tanzania and Zambia) in August and November of 2007.
In total, researchers conducted 270 interviews in the nine
countries.
Timing
This assessment was intentionally conducted early on in the
implementation of the foreign assistance reform effort (F
process). The intention was to create a snapshot of the ef-
fort on the ground while the process was still early enough
in its execution to allow for any necessary adjustments to
improve its effectiveness. Obviously this limited the amount
of time the F process had to produce significant effects on
the development work of PVOs and NGOs. As a way to maxi-
mize the value of data collected, the research was divided
into two parts, with a first set of interviews carried out in
late June and a second set of interviews with the same set
of respondents carried out in November. This schedule was
based on the hypothesis that little would be known about
the reforms -- and few effects felt -- by June, whereas re-
spondents would likely be more knowledgeable about the
reforms and would have experienced more effects by No-
vember after the end-of-the fiscal-year proposal writing sea-
son had been completed.1 In addition, InterAction staff vis-
ited four other countries (El Salvador, Nicaragua, Tanzania
and Zambia) to carry out supplementary research.
Choice of countries
The study focuses on five countries representing a geo-
graphic and situational cross section of the 35 “fast track”
nations. 2 Nepal was chosen as a rebuilding country, Kenya
and Vietnam as developing countries, and Ghana and Hon-
duras as transforming countries. InterAction engaged an
experienced development professional in each of these
countries to carry out the research. Of the four countries
in which additional interviews were conducted, Zambia is
categorized as a developing country and the remaining as
transforming nations.
1 July -- early September is always a busy proposal-writing season for
PVOs and NGOs requesting USAID funding since the US Govern-
ment’s fiscal year ends in September and significant money is
awarded just prior to the end of the fiscal year.
2 “Fast-Track” countries are those selected to complete an integrated,
interagency Operational Plan in the US government’s 2007 fiscal year
as part of the foreign assistance reform process.
Categories of respondents
In the five primary countries, researchers interviewed five
categories of respondents:
• In-country staff of US-based NGOs that receive USAID
funds;
• Staff of local NGO3 partners of US-based NGOs on
USAID-funded projects;
• Staff of local NGOs receiving direct funding from USAID;
• Staff of USAID missions in the particular country;
• Staff of the US Embassy, other bilateral donors, multilat-
eral donors, national government ministries or research-
ers knowledgeable about US foreign assistance.
Interviews in the supplemental countries were limited to
exchanges with USAID mission staff and with in-country
staff of US-based NGOs that receive USAID funds.
Focus of the research
In the first round of interviews in the five primary countries,
researchers asked questions in four major areas:
• Background on the NGOs’ programs in the country;
• Awareness of the foreign assistance reforms and ex-
tent of related consultation;
• Immediate effects of the reforms on the NGOs’ pro-
grams (both USAID-funded and those funded by other
donors) and on their partnerships; and
• Anticipated effects of the reforms in the future.
In the second round of interviews conducted in November,
researchers asked follow-up questions regarding 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.
3 “Local NGO” means an NGO created and staffed by citizens of the
particular country with its headquarters located in that country.
www.interaction.org 13
 Appendix Two:
Background on NGO In-Country
Operations

T
he NGOs interviewed for this study were asked a
series of questions to develop an understanding of the
nature of their in-country operations. Topics included
years of in-country experience, topical programming issues,
strategic planning and partnerships. Data collected from
NGOs in the five primary countries and the supplemental
countries was very similar. Information for NGOs in the five
primary countries is provided below.
In-country experience
Of the 100 NGOs interviewed, the vast majority have worked in
their respective countries for at least five years, and a majority
have had country programs for over 10 years. Of the US-based
organizations, 90 percent had worked in the five countries for
at least five to 10 years, while 77 percent had worked in them
for 11 years or more. Of local NGO partners, 87 percent had
at least five to 10 years of experience in the countries and 53
percent had 11 years or more. And 71 percent of the local NGOs
with direct funding from USAID had 11 years or more.
Length of time as USAID partner
Sixty percent of the US-based NGOs and 53 percent of the
local NGOs with direct funding have received USAID money
for over five years. Thirty-seven percent of US-based NGOs
and 29 percent of the local NGOs with direct funding have
received USAID money for over 10 years.
Areas of work
NGO respondents work in a variety of development sectors,
with health being the most common programming issue by
far. Data on the top seven sectors are included below.
How they operate internally: strategic planning, and
monitoring and evaluation (M&E)
Significant majorities of the NGOs indicated that they have
both a country and sector strategy for their work. 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
partnerships with local NGOs.

t Sectors in which PVOs and NGOs Work

US- Local Local NGOs

Sector Based NGO with Direct
NGOs Partners Funds

Health 87% 70% 35%

Agriculture 52%
Education 42% 50%
Micro/Small 40% 40%
Enterprises
Women’s 33% 43%
Photo courtesy: Nicole Woo

Empowerment
Civil Society 33% 47%
Strengthening
Democracy/ 35%
Governance

14 Foreign Assistance Reform: Views From the Ground

InterAction Member Organizations
Academy for Educational Development Friends of the World Food Program Pan American Development Foundation
Action Against Hunger USA Gifts In Kind International PATH
ActionAid International USA Global Health Council Pathfinder International
Adventist Development and Relief Global Links PCI-Media Impact
Agency International (ADRA) Global Operations and Development Perkins School for the Blind
African Medical & Research Foundation Global Resource Services Physicians for Human Rights
African Methodist Episcopal Service and GOAL USA Physicians for Peace
Development Agency (AME-SADA) Goodwill Industries International Plan USA
Africare Habitat for Humanity International Population Action International
Aga Khan Foundation USA Hands on Worldwide Population Communication
Aid to Artisans Heart to Heart International Presbyterian Disaster Assistance and
Air Serv International Heartland Alliance Hunger Program
Alliance to End Hunger Hebrew Immigrant Aid Society Project HOPE
American Friends Service Committee Heifer International ProLiteracy Worldwide
American Jewish Joint Distribution Committee Helen Keller International Quixote Center/Quest for Peace
American Jewish World Service Hesperian Foundation Refugees International
American Near East Refugee Aid Holt International Children’s Services Relief International
American Red Cross International Services Humane Society International (HIS) RESULTS
American Refugee Committee The Hunger Project Salvation Army World Service Office
AmeriCares Information Management and Mine Action Save the Children
America’s Development Foundation (ADF) Programs (IMMAP) Seva Foundation
Amigos de las Américas INMED Partnerships for Children SHARE Foundation
Ananda Marga Universal Relief Team Institute for Sustainable Communities Society for International Development (SID)
Association of Private Voluntary Organization Institute of Cultural Affairs Solar Cookers International
Financial Managers International Aid, Inc. Stop Hunger Now
Baptist World Alliance International Catholic Migration Support Group to Democracy
B’nai B’rith International Commission (ICMC) Trickle Up Program
BRAC USA International Center for Research Unitarian Universalist Service Committee
Bread for the World on Women (ICRW) United Methodist Committee on Relief
Bread for the World Institute International Crisis Group (ICG) United Way International
Brother’s Brother Foundation International Institute of Rural Reconstruction USA for UNHCR
CARE International Medical Corps U.S. Committee for Refugees and Immigrants
Catholic Medical Mission Board International Orthodox Christian Charities (IOCC) U.S. Committee for UNDP
Catholic Relief Services International Reading Association U.S. Fund for UNICEF
Center for Health and Gender Equity (CHANGE) International Relief & Development VAB (Volunteers Association of Bangladesh)
Center for International Health and International Relief Teams Winrock International
Cooperation (CIHC) International Rescue Committee (IRC) Women for Women International
Centre for Development and Population Activities International Social Service — United States of Women’s Environment and Development
(CEDPA) America Branch, Inc Organization
Children International International Youth Foundation Women Thrive Worldwide
Christian Blind Mission (CBM) Interplast World Cocoa Foundation
Christian Children’s Fund (CCF) Joint Aid Management (JAM) World Concern
Christian Reformed World Relief Jesuit Refugee Services USA World Conference of Religions for Peace
Committee (CRWRC) Korean American Sharing Movement World Education
Church World Service Latter-day Saint Charities World Emergency Relief
Citizens Development Corps Life for Relief and Development World Hope International
Citizens Network for Foreign Affairs Lutheran World Relief World Learning
Communications Consortium Media Center Management Sciences for Health (MSH) World Neighbors
Concern America MAP International World Rehabilitation Fund
CONCERN Worldwide U.S., Inc. Medical Care Development World Relief
Congressional Hunger Center Medical Teams International World Resources Institute (WRI)
Counterpart International Mental Disability Rights International World Society for the Protection of Animals
Direct Relief International Mercy Corps World Wildlife Fund
Doctors of the World Mercy USA for Aid and Development World Vision
Educational Concerns for Hunger Organization Minnesota International Health Volunteers
(ECHO) Mobility International USA
Episcopal Relief & Development National Association of Social Workers
Ethiopian Community Development Council National Peace Corps Association
Floresta National Wildlife Federation
The Florida Association of Volunteer Action in the ONE Campaign 1400 16th Street, NW, Suite 210
Caribbean and the Americas (FAVACA) Operation USA Washington, DC 20036
Food For The Hungry Opportunity International Phone: (202) 667-8227
Freedom From Hunger Oxfam America Fax: (202) 667-8236
Friends of Liberia Pact www.interaction.org