Local Solutions and G2G Assistance

USAID’s Local Solutions initiative aims to increase funding for partner- country systems, including partner governments, private sector, and  nongovernmental organizations, that have sufficient capacity—and to  help strengthen their capacity when needed—in order to achieve  sustainable development outcomes. Implementation: This phase entails selecting appropriate funding  mechanisms and implementing G2G assistance activities according to  the terms and conditions established in bilateral assistance  agreements and other legal documents. Monitoring and evaluation (M&E): This phase entails conducting  audits of partner-government entities and assessing the progress and  results of G2G assistance activities. Planning: USAID Missions Completed Detailed Fiduciary Risk Assessments but Did Not Always Address Risks and Mitigation Steps in Project Design and Missed Opportunities to Coordinate with Other Donors

USAID policy addresses accountability standards calling for identification,  analysis, and mitigation of risks, and we found that USAID missions  completed detailed risk assessments. However, missions did not always  integrate risk mitigation measures into project and M&E planning when  required by USAID policy. In addition,  M&E plans we reviewed often did not incorporate steps USAID and  partner governments agreed upon to address risks and build capacity. In addition, consistent with USAID policy addressing  accountability standards related to the establishment of control activities,  missions employed G2G assistance agreements and corresponding  implementation letters with partner governments to commit funds and set  objectives and conditions for funding, among other things. However, the audits were often submitted late, limiting their usefulness as  a monitoring tool. In addition, we found that project-level plans for M&E  rarely included indicators or evaluation questions for assessing the  degree to which G2G assistance activities would build local systems  capacity, increase country ownership, or enhance sustainability—the  three interrelated goals of the Local Solutions initiative. Recommendations for Executive Action

We recommend that the USAID Administrator take the following five  actions to improve accountability for G2G assistance:  1.  develop an action plan to improve the timeliness of risk assessments  so that these assessments can better inform project planning;   2.  develop an action plan to ensure that M&E plans for G2G assistance  activities incorporate risk mitigation measures;  3.  disseminate information to missions regarding best practices for  coordinating risk assessments with other donors;  4.  identify the factors contributing to late submission of required audits  and develop a strategy to improve on-time audit submission and  follow-up; and  5.  develop and disseminate guidance on assessing the effects of G2G  assistance on partner-country capacity, ownership, and sustainability,  including through the identification of indicators and evaluation  approaches. GAO staff who made key contributions to this  report are listed in appendix V.

Appendix I: Objectives, Scope, and Methodology

Our objectives in this report were to assess the extent to which U.S.  Agency for International Development (USAID) policies and practices  related to (1) planning, (2) implementing, and (3) monitoring and  evaluating government-to-government (G2G) assistance provide  reasonable assurance that this assistance is used as intended. Second, mission officials in Indonesia and Georgia determined that all of  each mission’s respective fiscal year 2012 obligations had not, in fact,  been implemented through partner government entities and, as such,  were incorrectly characterized as G2G assistance. We also selected 3 USAID missions—Nepal, Peru, and Tanzania—for in- depth case studies. USAID agreed with these  recommendation and noted steps it was taking to address them.
Why GAO Did This Study

USAID's Local Solutions initiative, launched in 2010 as part of USAID Forward, seeks to reform how the agency administers development assistance and to increase funding implemented through partner-country systems, including partner governments. In fiscal years 2012 through 2014, average annual obligations to G2G activities were about $620 million. The Local Solutions initiative aims to strengthen local capacity and enhance country ownership and sustainability of development efforts. GAO was asked to review accountability under this initiative.
GAO assessed the extent to which USAID policies and practices related to (1) planning, (2) implementing, and (3) monitoring and evaluating G2G assistance provide reasonable assurance that this assistance is used as intended. GAO analyzed key USAID policy documents; interviewed USAID officials; reviewed planning documents from 14 USAID missions; and conducted fieldwork in Nepal, Peru, and Tanzania.

What GAO Found

For each key phase for government-to-government (G2G) assistance activities under its Local Solutions initiative, the U.S. Agency for International Development (USAID) has policies that generally reflect federal accountability standards to help ensure funds are used as intended. However, GAO identified several steps in implementing these policies that could further strengthen accountability.
Planning: This phase entails designing projects that link to USAID missions' country development strategies, assessing and mitigating risks, and preparing planning documents. GAO found that USAID missions completed detailed fiduciary risk assessments for G2G assistance activities when required but did not always include mitigation steps in planning documents, in part, because risk assessments were often done after planning had been completed. Also, project monitoring and evaluation (M&E) plans often did not incorporate steps USAID and partner governments agreed to take to mitigate risks and build capacity.
Implementation: In this phase, USAID implements G2G activities according to the terms and conditions established in assistance agreements with partner governments. USAID missions usually selected funding mechanisms in which USAID reimburses partner governments for costs related to completion of agreed-upon activities. In addition, consistent with USAID policy, missions employed assistance agreements and corresponding implementation letters to commit funds and set objectives, among other things.
M&E. This phase includes conducting audits of partner-government entities and assessing the results of G2G assistance activities. Annual audits GAO reviewed were often submitted late, which delays audit follow-up actions required by USAID policy and limits the audits' usefulness as a monitoring tool. In addition, project M&E plans GAO reviewed rarely included indicators or evaluation questions for assessing the degree to which G2G assistance activities are building capacity, increasing ownership, or ensuring sustainability—the three interrelated goals of the Local Solutions initiative.

What GAO Recommends

GAO recommends that USAID take steps to strengthen accountability for G2G assistance by, among other things, improving the timeliness of risk assessments; incorporating risk mitigation measures into M&E planning; improving on-time audit submission; and assessing the effects of G2G assistance on capacity, ownership, and sustainability. USAID agreed with all of GAO's recommendations and noted various actions it is taking to address them.