Just prior to publication of this report, USAID  published fiscal year 2013 data for this indicator on its website. However, depending  on which funds are counted toward the principal Local Solutions indicator,  USAID’s progress toward its 30 percent target ranged from the 14 percent  reported in its 2013 progress report to as high as 24 percent of mission  program funds obligated to local organizations, as noted in data published  on the agency’s website. USAID Funding to Local Organizations Increased in Fiscal Years 2010 through 2012, but Indicator Reporting Lacks Clarity

USAID has reported on its principal Local Solutions indicator with and  without cash transfers and before and after the addition of qualifying trust  funds in two missions. Differences in USAID’s reporting on cash transfers and qualifying  trust funds make it difficult to compare the indicator from year to year and  quantify the progress needed to achieve its 30 percent target. If  Afghanistan and Pakistan are excluded from the agency-wide  indicator, the percentage of mission program funds obligated to local  organizations in fiscal year 2012, including qualifying trust funds and  cash transfers, drops from about 24 percent to about 14 percent. 2). USAID Cannot Demonstrate Progress toward Local Solutions Goals Based on Its Principal Indicator Alone and Without Tracking Relevant Evaluations

USAID’s principal Local Solutions indicator does not fully reflect activities  the agency carries out to achieve the initiative’s goals of strengthening  partner-country capacity, enhancing and promoting country ownership,  and increasing program sustainability. Principal Indicator Does Not Fully Capture Efforts to Implement the Local Solutions Initiative

USAID’s principal indicator of progress under the Local Solutions  initiative—the percentage of mission program funds obligated to local  organizations—does not fully capture the activities the agency undertakes  to achieve the goals of the initiative. Steps Taken by USAID to Evaluate the Local Solutions Initiative Do Not Include the Means to Track Relevant Evaluations

USAID has laid some groundwork for evaluating the Local Solutions  initiative but cannot currently determine the extent to which missions are  planning or conducting evaluations the agency deems appropriate for  understanding the long-term effectiveness of the initiative. Without a means to track evaluations of programs or  projects that use a Local Solutions approach, USAID headquarters  officials and stakeholders are not able to easily obtain evidence needed  to demonstrate Local Solutions’ progress in achieving USAID’s Local  Solutions goals related to country capacity, country ownership, and  program sustainability. Recommendations for Executive Action

We recommend that the USAID Administrator take the following three  actions to improve the agency’s tracking and reporting on progress of its  Local Solutions initiative:
Clarify in future reporting the types of funding included in the  percentage of USAID funds obligated to partner-country local  organizations. Identify additional indicators to better capture Local Solutions  progress toward the initiative’s goals. Provide a means to identify evaluations of programs that are  implemented by partner-country local organizations. With regard to our third recommendation that USAID provide a means to  identify evaluations of programs implemented by partner-country local  organizations, USAID stated that it is introducing a tag in its evaluation  registry to track the evaluation of projects that are directly implemented  through local partners. The objectives of this report were to assess the  extent to which USAID (1) has demonstrated progress toward achieving  its 30 percent target, and (2) is tracking progress in achieving the Local  Solutions goals of strengthening partner-country capacity to implement  programs, enhancing and promoting country ownership, and increasing  sustainability. To address these objectives, we reviewed USAID Local Solutions  initiative documents, including the March 2013 USAID Forward progress  report and agency documents published at the launch of the initiative that  explain the rationale, baseline figures, and targets for the initiative. See figure 3 for the complete distribution of the funding amounts USAID  missions obligated to local organizations in fiscal year 2012. In fiscal year 2010, USAID missions obligated 71 percent of local mission  program funds to partner-country governments and 29 percent to local  nonprofit and for-profit organizations and educational institutions.
Why GAO Did This Study

Since 2010, USAID has undertaken a series of reforms, collectively called USAID Forward. One key reform, the Local Solutions initiative, aims to shift program implementation from U.S.- based and international organizations to partner-country organizations, including governments and for-profit and nonprofit organizations. The three overarching goals of the initiative are to strengthen the capacity of partner countries, to enhance and promote country ownership, and to increase the sustainability of development efforts. GAO was asked to review the implementation of this initiative. GAO assessed the extent to which USAID (1) has demonstrated progress toward achieving its fiscal year 2015 target for the principal Local Solutions indicator, and (2) is tracking progress in achieving the initiative's goals related to local partners' capacity, country ownership, and program sustainability. To address these objectives, GAO reviewed funding data and documents and interviewed USAID officials.

What GAO Found

The U.S. Agency for International Development's (USAID) reporting on its principal Local Solutions indicator—the percentage of mission program funds obligated to local organizations in partner countries—lacks clarity, complicating the assessment of the agency's progress toward its fiscal year 2015 target of 30 percent. The March 2013 USAID Forward progress report states that these obligations increased from about 10 percent of mission program funds in fiscal year 2010 to about 14 percent in fiscal year 2012—a $465 million increase. However, the agency also has reported progress on the principal Local Solutions indicator in three other ways, depending on whether two key types of funding—cash transfers and certain qualifying trust funds—are included (see figure). These reporting differences make it difficult to compare the indicator from year to year and to quantify the progress needed to achieve the 30 percent target by fiscal year 2015. Moreover, USAID's approach to tracking the Local Solutions indicator has evolved since the launch of the initiative. For example, USAID included funds in Afghanistan and Pakistan, missions the agency previously had planned to exclude. If these missions are excluded, the percentage of mission program funds obligated to local organizations in fiscal year 2012, including qualifying trust funds and cash transfers, decreases by 10 percentage points.
USAID's principal Local Solutions indicator does not fully reflect activities the agency has undertaken to implement the initiative, and USAID does not have a means to track relevant mission-led evaluations of programs implemented by partner-country organizations. USAID relied primarily on its principal Local Solutions indicator to demonstrate progress. While this principal indicator reflects, to some degree, the steps missions are required to take before obligating funds to local organizations, it provides no information about the status of activities both prior to and following obligation of funds, such as assessing risk and monitoring programs. Furthermore, although USAID has laid some groundwork for evaluating the Local Solutions initiative, the agency does not currently have the means to determine the extent to which missions are conducting performance evaluations to assess the effectiveness of programs implemented through local organizations. Such evaluations can provide evidence needed to demonstrate progress toward the initiative's goals related to local partners' capacity, country ownership, and program sustainability.

What GAO Recommends

USAID should (1) clarify in future reporting the types of funding included in the percentage of USAID funds obligated to partner-country local organizations, (2) identify additional indicators to better capture progress toward the initiative's goals, and (3) provide a means to identify evaluations of programs that used the initiative's approach. USAID neither agreed nor disagreed with the recommendations but identified actions it has ongoing to address these issues, and just prior to publication of this report released fiscal year 2013 data on its website that includes some clarifying information.