OECD peer review of US foreign assistance commends progress but notes areas for improvement

Charlotte Petri Gornitzka, former head of the Swedish aid agency and now chair of the Development Assistance Committee (DAC) of the Organization for Economic Cooperation and Development, was in Washington this week unveiling the DAC peer review of U.S. assistance.

The DAC, the club of major bilateral donor countries, undertakes an exhaustive review of each member’s development program once every five years. This new review of U.S. assistance is generally commendatory, identifies advancements since the last review in 2011, and points to areas for further improvement.

Here’s the cliff notes.

Asserting U.S. Leadership

The report tees off with a nod to U.S. global leadership, specifically its enhancement through key initiatives (health, food security climate, energy, illicit financial flows), the elevation of development as a pillar of U.S. foreign policy, a strengthened U.S. Agency for International Development (USAID), and the establishment of development policy guidelines and initiatives across the government. Further, it highlights the constructive role of the President Obama’s  reinforcement of development as a core pillar of American power through the Presidential Policy Directive on Global Development (PPD-6), and the comprehensive assessment of how the Department of State and the USAID can become more  effective and accountable through the Quadrennial Diplomacy and Development Reviews (QDDR).

More Strategic

The review commends the U.S. for a more strategic approach to development, as by setting government-wide priorities through PPD-6 and USAID’s return to writing strategies for its development activities in each of its partner county. Additional examples are the PPD-6 call for greater selectivity and focus, reflected in a 42 percent reduction in the number of country programs, and in the QDDR’s identification of areas of U.S. comparative advantage. But it also states, with more than 21 government agencies implementing foreign assistance, there is need for a government-wide, all-inclusive global development strategy as recommended by PPD-6.

It observes that the U.S. has pursued a more strategic use of multilateral organization but lacks a common multilateral engagement strategy. Further, the unmet financial commitments to the multilateral development banks of $1.6 billion erodes U.S. leadership and influence in those institutions.

Coherence

The report commends the U.S. for bringing greater coherence to its development policies but states that progress has not been made, in contrast to other DAC members, in greater coherence between development and domestic policies. The interagency dialogue that produced the U.S. position on the United Nation’s Sustainable Development Goals was a rare occasion of joining considerations of domestic, development, and foreign policies.

The report recognizes U.S. outreach and support for civil society. It also notes its engagement in fragile states, with 44 percent of U.S. official development assistance going to countries that are fragile, conflict-affected, or post-crisis.

Stronger USAID

As to the assessment that “USAID’s expanded capabilities are making a positive difference,” the report credits this to the restoration of the agency’s policy, budget, evaluation, and strategy functions; increased staffing numbers and expertise; a more strategic focus on results and innovation; and the agency’s increased presence at meetings of the National Security Council and designation as a leader on important development initiatives and disaster response.

The report identifies business model improvements of an emphasis on using local systems, integrated approaches to programming, use of partnerships, greater transparency, innovative models by USAID’s new Global Development Lab, more and higher quality evaluations, use of adaptive management, and efforts to transform evaluations into learning

At the same time, it points to the continued constraints of a complex, burdensome, and often-delayed budgeting system that limits the flexibility of U.S. foreign aid to adjust to local priorities and an ever changing development environment. It also reports that the USAID’s personnel system, currently at the beginning of a five-year transformation plan, is not “fit for purpose.”

Engaging the Private Sector

The report views the U.S. as successful in mobilizing the private sector. USAID has created tools to engage the private sector, including extensive use of public-private partnerships and a new Office of Private Capital and Microenterprise. Between 2012 and 2014 the U.S. mobilized $10 billion in private finance through guarantees. Since 2010 the portfolio of the Overseas Private Investment Corporation has grown 47 percent, but it is hamstrung from doing more by insufficient staff, lack of equity authority, and the requirement that a U.S. entity must be involved in a project.

Humanitarian Assistance

On humanitarian assistance, the report highlights that the U.S. is the largest donor, its staff is respected for its expertise and experience, and its increased accountability to affected populations. The short-comings are, despite modest improvements, in the areas of antiterrorism measures that hinder the ability of nongovernmental organizations to respond to crisis situations and tied procurement and transportation of food aid.  In addition, the improved collaboration and coherence between the Department of State and USAID has not overcome the division of labor between the two agencies that complicates “access to development funding for durable solutions for refugees.”

Visits to Malawi and South Africa

The two countries that the DAC team visited to get a ground-level view of U.S. assistance were Malawi and South Africa. In both countries the U.S. is seen as a strong development partner. However, USAID missions lack the flexibility to respond to local needs due to funding predetermined by presidential initiatives and congressional directives.  The review does find that the program of the Millennium Challenge Corporation in Malawi “bears all the hallmarks of effective development cooperation.”

Overall Improvements and the Path Forward

The report presents a brief tally of how the U.S. has responded to the recommendations of the 2011 DAC peer report. The U.S. acted fully or partially on 80 percent of the recommendations and took no action on four.

The DAC report adds a respected international voice to comparable assessments of the substantial progress that has been made in the management of U.S. assistance and where further steps are in order.

With a new administration taking office in a month, the report could not be more timely. It is a useful guide to the strengths and shortcomings of U.S. assistance policies and programs and where improvements can be made.