Redesign Reaction: It’s Time to Simplify and Rationalize Aid

This blog is part of a series responding to the MFAN Co-Chairs’ and other aid architecture proposals. Join the conversation! #RedesignReaction

The recent discussion draft “A New Foreign Aid Architecture Fit for Purpose” by MFAN Co-Chairs George Ingram, Tessie San Martin, and Connie Veillette provides a comprehensive and thought provoking blueprint for elevating development as a leg of the national security triad (defense, diplomacy, and development).  It is not clear whether the current administration is interested in moving in the direction of elevating development.  However, even absent a willingness to implement the proposal as a whole, there are a number of components that could be considered separately, and that might find bipartisan support.  Whether implemented in part or whole, the recommendations of the discussion draft offer significant opportunity to improve the efficiency and effectiveness of U.S. development and humanitarian programs.

Implementation of “Goldwater-Nichols” Reforms:  Implementation of personnel exchanges and rotations, as the discussion draft recommends, is in my view one of the most important reforms in the paper.  Having personnel who focus on development and diplomacy experience first hand the challenges and benefits of working across these disciplines would not just ensure integration of policy and knowledge, but would also increase understanding of agency cultures, which is often the most difficult difference to bridge.  In the absence of a full-scale consolidation of aid agencies, these exchanges could be extended to the Millennium Challenge Corporation (MCC), the Office of the Global AIDS Coordinator (OGAC), and other relevant agencies.  In addition, the U.S. Agency for International Development (USAID) should take a page from the State Department and the military and ensure that Foreign Service Officers (FSOs) serve periodically in Washington offices, so that they are fully exposed to the way decisions are made at headquarters, as opposed to current practice that often allows FSOs to serve four or five overseas tours in a row.  Absent exceptional circumstances, USAID FSOs should be expected to serve one tour in Washington for every two tours overseas.

Consolidation and Simplification of USAID Bureaus:  Regardless of whether a Global Development Agency (GDA) is created, the paper makes sensible recommendations regarding consolidation of offices and bureaus that can be applied to USAID.  The past two administrations have taken the approach of creating new bureaucratic structures to implement new initiatives, both outside of USAID (MCC and OGAC) and within (the Bureau of Food Security and the Global Development Lab). There are some advantages in creating an independent unit to implement a new assistance approach, particularly in a case such as MCC, where the entire concept of assistance is different.  However, this also makes it more difficult for the benefits of the new approach to integrate into the larger organization, and in many cases the new initiative is implemented “around” the rest of the development institution rather than through it.

The integration proposed in the paper of the Bureau of Food Security and the Global Development Lab into a Stability and Economic Growth Center and a Strategy and Technical Center, respectively, would help ensure that the innovations developed in these centers spread throughout the agency.  At the same time, USAID or the GDA must ensure that the expertise of these new centers is fully integrated into the work of the agency, particularly programs implemented by overseas missions, otherwise the new centers risk the same issues that plague the current USAID central bureaus.  One approach could be to encourage staff of the new central bureaus, including civil service staff, to periodically serve in overseas missions, so that their expertise and knowledge is fully disseminated across the agency.

The one recommendation in this part of the paper that is troubling is the consolidation of Global Development Agency, or USAID, regional bureaus into a “country unit” in the Strategy and Technical Center.  The increased impact that USAID had in National Security Council (NSC) and other inter-agency deliberations during the Obama Administration occurred in part because of strong regional Assistant Administrators, and it is difficult to imagine an NSC structure going forward where a country unit office director could have such an impact.  Retaining Assistant Administrator level regional leadership is critical for development to have and take full advantage of the largely-regional foreign policy process, whether they represent USAID or a GDA.

Rationalization of State and USAID programs:  Many of the recommendations regarding the respective roles of State and USAID could be implemented absent a full-scale consolidation of development programs.  For example, the Secretary of State could recommend moving refugee programs into a new Relief and Resilience Center, where they would be more effectively coordinated with other relief efforts.  State and USAID could also shift shorter-term democracy efforts, such as election support, to State, as the paper recommends.  Both of these recommendations would more closely align the programs in question to the central missions of their agencies.  However, the proposal in the paper for State to “retain responsibility for strategic economic assistance to countries of critical foreign policy importance” while shifting budget full budget responsibility for development and humanitarian assistance programs to the GDA, or back to USAID, requires a significant change in the way economic assistance accounts are currently used.

The Office of Foreign Assistance Resources at State (F) currently takes an “account blind” approach to budget formulation, looking at the budget for each country as a whole and then determining which economic assistance account, Development Assistance (DA) or Economic Support Fund (ESF), should be used to fund the non-health and non-humanitarian aspects of that program.  This was a departure, beginning in 2006, from the traditional way DA and ESF were allocated, with DA used to fund longer-term development efforts driven primarily by development outcomes and ESF used to address economic assistance aimed at achieving foreign policy goals.  Under the previous approach, DA levels to most countries were relatively stable, while ESF would often be provided to the same countries in order to address shorter-term foreign policy requirements, and each account was used primarily to support the purpose for which it was authorized.

Despite their different purposes and authorities, the current F budget approach treats DA and ESF as interchangeable, and uses ESF to fund long-term development programs in some countries and DA to fund shorter-term foreign policy-driven programs in others.  While this may seem to be a relatively technical budget policy issue, the shift to “account blind” budgeting in 2006 has been a significant impediment to restoring program budget accountability and responsibility to USAID, since State now argues that it needs to control both ESF and DA allocations at a detailed level to ensure that foreign policy priorities are met.  Returning to the previous approach would allow USAID, or the GDA, to regain detailed budget responsibility over DA, while State could retain authority over ESF and use it in any country to fund foreign policy priorities.

Management and Shared Services:  The discussion draft refers to a “management center” for the GDA, but does not go into significant detail regarding the structure of this center.  While the GDA, or a freestanding USAID, will continue to need a management center or bureau, this is an area where the use of shared services could increase efficiencies absent of a consolidation.  The White House Office of Management and Budget (OMB), under the Bush and Obama Administrations, has moved towards consolidation of “back room” functions such as human resources (HR) and financial management into a small number of shared service providers.  For example, most agencies use one of four main payroll providers (the Departments of Defense, Agriculture and Interior, and the General Services Administration), and OMB has pressed agencies to move to similar centralized service providers for HR and financial management services.

State has expressed interest in serving such a roll for international agencies, and for certain functions, such as financial management and foreign service HR, it might make sense for the GDA, or component agencies in the absence of a merger, to shift a portion of such functions to State.  This would not require USAID, or the GDA, to give up control of financial management or human resources.  In fact, USAID is currently required by statue to have a Chief Financial Officer and a Chief Human Capital Officer, who report to the USAID Administrator and have ultimate responsibility for these services.  However, USAID or GDA could share the technical platforms for these services with State (USAID and State already share the same financial management platform), and could have State perform certain basic financial management and HR actions, without giving up any policy decision-making (for example, USAID would still be responsible for all hiring, performance, promotion, and other decisions in human resources).

Whether this would work in practice, however, is dependent on receiving high quality and responsive services from State, and USAID and other agencies continue to express concerns the lack of a customer service culture at State.  A shared service approach for U.S. embassies, the International Cooperative Administrative Support Services (ICASS) system, has one agency in an embassy responsible for most administrative services for all agencies that operate out of that post.  In most, but not all, cases, the agency providing the services is State, and other agencies, including USAID and MCC, have raised numerous concerns that State, as the largest agency at most embassies, focuses first on its own administrative needs, rather than prioritizing its other agency customers.  This concern will need to be addressed before shared services will be fully embraced by USAID or other development agencies.

In the absence of a development agency consolidation, other functions could be improved through a shared service approach.  For example, USAID is by far the largest international grant-making agency, and could undertake grant administration for all foreign assistance agencies, including State and MCC.  In fact, a proposal during the Bush Administration to move most State and USAID contract actions to State and most grant actions to USAID failed in part because of resistance from State grant-making bureaus.  Other, non-back end functions could also be considered for a shared service approach.  For example, many of the functions of the proposed GDA Strategy and Technical Center, such as impact evaluation and strategic planning, could be consolidated for development programs as shared services under the agency that has the greatest expertise in each area, such as MCC for impact evaluation or USAID for strategic planning.

Michael Casella is the Former Director of USAID’s Office of Budget and Resource Management. 

You Might Also Like