Millennium Challenge Corporation
Progress Made on Key Challenges in First Year of Operations Gao ID: GAO-05-625T April 27, 2005In January 2004, Congress established the Millennium Challenge Corporation (MCC) to administer the Millennium Challenge Account. MCC's mission is to promote economic growth and reduce extreme poverty in developing countries. The act requires MCC to rely to the maximum extent possible on quantitative criteria in determining countries' eligibility for assistance. MCC will provide assistance primarily through compacts--agreements with country governments. MCC aims to be one of the top donors in countries with which it signs compacts. For fiscal years 2004 and 2005, Congress appropriated nearly $2.5 billion for the Millennium Challenge Corporation; for fiscal year 2006, the President is requesting $3 billion. GAO was asked to monitor MCC's (1) process for determining country eligibility, (2) progress in developing compacts, (3) coordination with key stakeholders, and (4) establishment of management structures and accountability mechanisms.
For fiscal years 2004 and 2005, the MCC board used the quantitative criteria as well as judgment in determining 17 countries to be eligible for MCA compacts. Although MCC chose the indicators based in part on their public availability, our analysis showed that not all of the source data for the indicators were readily accessible. In addition, we found that reliance on the indicators carried certain inherent limitations, such as measurement uncertainty. Between August 2004 and March 2005, MCC received compact proposals, concept papers, or both, from 16 eligible countries. It signed a compact with Madagascar in April 2005 and is negotiating compacts with four countries. MCC's 4-year compact with Madagascar for $110 million would make it the country's fifth largest donor. MCC is continuing to refine its compact development process. In addition, MCC has identified elements of program implementation and fiscal accountability that can be adapted to eligible countries' compact objectives and institutional capacities. MCC is taking steps to coordinate with key stakeholders to use existing expertise and conduct outreach. The U.S. agencies on the MCC Board of Directors--USAID, the Departments of State and Treasury, and the Office of the U.S. Trade Representative--have provided resources and other assistance to MCC, and five U.S. agencies have agreed to provide technical assistance. Bilateral and multilateral donors are providing information and expertise. MCC is also consulting with nongovernmental organizations in the United States and abroad as part of its outreach activities. MCC has made progress in developing key administrative infrastructures that support its mission and operations. MCC has also made progress in establishing corporatewide structures for accountability, governance, internal control, and human capital management, including establishing an audit capability through its Inspector General, adopting bylaws, providing ethics training to employees, and expanding its permanent full-time staff. However, MCC has not yet completed comprehensive plans, strategies, and related time frames for establishing these essential management structures and accountability mechanisms on a corporatewide basis.
GAO-05-625T, Millennium Challenge Corporation: Progress Made on Key Challenges in First Year of Operations
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Testimony:
Before the Committee on International Relations, House of
Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery Expected at 10:30 a.m. EDT:
Wednesday, April 27, 2005:
Millennium Challenge Corporation:
Progress Made on Key Challenges in First Year of Operations:
Statement of David B. Gootnick, Director, International Affairs and
Trade:
Jeanette M. Franzel, Director, Financial Management and Assurance:
GAO-05-625T:
GAO Highlights:
Highlights of GAO-05-625T, testimony before the House International
Relations Committee.
Why GAO Did This Study:
In January 2004, Congress established the Millennium Challenge
Corporation (MCC) to administer the Millennium Challenge Account. MCC‘s
mission is to promote economic growth and reduce extreme poverty in
developing countries. The act requires MCC to rely to the maximum
extent possible on quantitative criteria in determining countries‘
eligibility for assistance. MCC will provide assistance primarily
through compacts”agreements with country governments. MCC aims to be
one of the top donors in countries with which it signs compacts.
For fiscal years 2004 and 2005, Congress appropriated nearly $2.5
billion for the Millennium Challenge Corporation; for fiscal year 2006,
the President is requesting $3 billion. GAO was asked to monitor MCC‘s
(1) process for determining country eligibility, (2) progress in
developing compacts, (3) coordination with key stakeholders, and (4)
establishment of management structures and accountability mechanisms.
What GAO Found:
For fiscal years 2004 and 2005, the MCC board used the quantitative
criteria as well as judgment in determining 17 countries to be eligible
for MCA compacts. Although MCC chose the indicators based in part on
their public availability, our analysis showed that not all of the
source data for the indicators were readily accessible. In addition, we
found that reliance on the indicators carried certain inherent
limitations, such as measurement uncertainty.
Between August 2004 and March 2005, MCC received compact proposals,
concept papers, or both, from 16 eligible countries. It signed a
compact with Madagascar in April 2005 and is negotiating compacts with
four countries. MCC‘s 4-year compact with Madagascar for $110 million
would make it the country‘s fifth largest donor. MCC is continuing to
refine its compact development process. In addition, MCC has identified
elements of program implementation and fiscal accountability that can
be adapted to eligible countries‘ compact objectives and institutional
capacities.
MCC is taking steps to coordinate with key stakeholders to use existing
expertise and conduct outreach. The U.S. agencies on the MCC Board of
Directors”USAID, the Departments of State and Treasury, and the Office
of the U.S. Trade Representative”have provided resources and other
assistance to MCC, and five U.S. agencies have agreed to provide
technical assistance. Bilateral and multilateral donors are providing
information and expertise. MCC is also consulting with nongovernmental
organizations in the United States and abroad as part of its outreach
activities.
MCC has made progress in developing key administrative infrastructures
that support its mission and operations. MCC has also made progress in
establishing corporatewide structures for accountability, governance,
internal control, and human capital management, including establishing
an audit capability through its Inspector General, adopting bylaws,
providing ethics training to employees, and expanding its permanent
full-time staff. However, MCC has not yet completed comprehensive
plans, strategies, and related time frames for establishing these
essential management structures and accountability mechanisms on a
corporatewide basis.
Figure: Selected Elements of MCC Progress as of April 2005
[See PDF for Image]
[End of Figure]
What GAO Recommends:
GAO recommends that MCC‘s Chief Executive Officer continue to develop
and implement overall plans and related time frames to establish
corporatewide accountability, internal control, and human capital
management. In addition, GAO recommends that MCC‘s Board of Directors
consider, in addition to its statutory responsibilities, other
responsibilities associated with sound and effective governance.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-625T].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact David B. Gootnick at
(202) 512-4128 or gootnickd@gao.gov.
[End of Section]
Mr. Chairman and Members of the Committee:
Thank you for the opportunity to discuss GAO's findings and
observations regarding the Millennium Challenge Corporation's (MCC)
first year of operations.
In January 2004, Congress established MCC,[Footnote 1] a government
corporation, to administer the Millennium Challenge Account (MCA).
MCC's mission is to provide development assistance that reduces extreme
poverty through economic growth and strengthens good governance,
economic freedom, and investments in people. MCC is to carry out its
mission by funding projects or activities in developing countries that
demonstrate a commitment to MCA objectives. MCC assistance is intended
to supplement existing development assistance provided by the United
States or other donors; to provide incentive, MCC aims to be among
countries' largest donors. The Millennium Challenge Act of 2003
authorizes assistance in the form of grants, cooperative agreements,
and contracts, which MCC will administer through compacts--agreements
between the U.S. government and recipient countries' governments.
Candidate countries are expected to develop compact proposals to secure
MCA funding and manage MCC-funded projects.
The act requires the MCC Board of Directors to determine a country's
eligibility for assistance, based, to the maximum extent possible, on
objective and quantifiable indicators of the country's commitment to
specific criteria set out in the act.[Footnote 2] MCC is also required
to provide to Congress justifications for the board's eligibility
determinations and to coordinate its activities with those of the U.S.
Agency for International Development (USAID). The act also authorizes
MCC to help certain candidate countries achieve eligibility, which MCC
does through its Threshold Program.[Footnote 3] For fiscal years 2004
and 2005, Congress appropriated nearly $1 billion and $1.5 billion,
respectively, for MCC; for fiscal year 2006, the President is
requesting $3 billion.
Today I will discuss MCC's activities during its first 15 months,
specifically, its (1) process for determining country eligibility for
fiscal years 2004-2005, (2) progress in developing compacts, (3)
coordination with key stakeholders, and (4) establishment of management
structures and accountability mechanisms.
To address these objectives, GAO analyzed MCC's process for determining
country eligibility, including countries' scores for the quantitative
indicators and the scores' source data for fiscal years 2004 and 2005;
we also examined the selection criteria for the Threshold Program. We
determined that these and other data that we used were sufficiently
reliable for our analysis. In addition, we reviewed MCC documents,
countries' compact proposals and an MCC compact, and reports by USAID
and GAO. We conducted interviews with, among others, officials from
MCC, U.S. government agencies, and nongovernmental organizations
(NGOs), and we attended MCC public outreach meetings in Washington,
D.C. In January 2005, we visited Honduras, one of four countries with
which MCC was negotiating at that time, where we met with officials
from the Department of State, USAID, MCC, and the Honduran government,
as well as donor representatives and local NGOs. We performed our work
between April 2004 and April 2005 in accordance with generally accepted
government auditing standards. (See app. I for further details of our
scope and methodology.)
Summary:
The MCC Board of Directors based its determinations of countries'
eligibility for MCA assistance on a quantitative indicator methodology,
as required by the Millennium Challenge Act; at the same time, the
process involved certain challenges. Applying its 16 quantitative
indicators and exercising the discretion implicit in the act, the board
selected a total of 17 countries as eligible for compact assistance for
fiscal years 2004 and 2005. MCC did not provide Congress its
justifications for the 13 countries that met the indicator criteria but
were not deemed eligible; the Millennium Challenge Act does not require
MCC to provide justifications for not selecting countries. In addition,
although MCC published country scores for the 16 indicators at its Web
site, some of the source data used to generate these scores were not
readily available to the public. Our analysis of the results of MCC's
eligibility determinations also revealed some inherent limitations of
MCC's indicator methodology. For instance, measurement uncertainty may
have affected the eligibility determination for 17 countries, and
missing data for two indicators may have reduced the number of
countries that passed the Economic Freedom category.
MCC is refining the compact development process and has taken steps to
identify country-level program implementation and fiscal accountability
elements. Between August 2004 and March 2005, MCC received compact
proposals, concept papers, or both, from 16 eligible countries. It
signed a 4-year compact with Madagascar for $110 million in April 2005
and is negotiating compacts with 4 other countries. MCC's compact with
Madagascar would make it the country's fifth largest donor. MCC's
compact development process currently involves the following steps: (1)
proposal development, (2) proposal submission and initial assessment,
(3) detailed proposal assessment and negotiation, and (4) board review
and compact signing. In addition, MCC has identified elements of a
program implementation and fiscal accountability framework that can be
adapted to eligible countries' compact objectives and institutional
capacities.
MCC has initiated coordination of program activities with U.S.
agencies, other donors, and U.S.-based NGOs. U.S. agencies represented
on the MCC Board of Directors--USAID, the Departments of State and
Treasury, and the Office of the U.S. Trade Representative (USTR)--have
provided advice, resources, and assistance to MCC. In addition, MCC has
signed agreements with five U.S. agencies for programmatic and
technical assistance. Key bilateral and multilateral donors are
providing information and expertise, such as country briefings and
assessments, to MCC. In addition, MCC is consulting with some U.S.-
based NGOs and has met with country-based NGOs. However, several U.S.-
based NGOs have raised questions about the involvement of U.S.-based
NGOs and country-based civil society groups.
MCC has made progress in establishing key management structures and
elements of accountability mechanisms, but it has not yet developed
essential corporatewide plans, strategies, and time frames. MCC's
accomplishments in its first 15 months included setting up key
administrative infrastructures to support its initial and ongoing
program implementation, establishing an audit and review capability
through its Inspector General (IG), adopting bylaws for its Board of
Directors, providing ethics training to employees, and expanding its
permanent full-time staff. However, MCC has not yet completed the
plans, strategies, and time frames needed to establish corporatewide
structures for accountability, governance, internal control, and human
capital management. For example, the MCC board has not fully defined
its responsibilities for overseeing corporate management, and MCC
management has not yet completed its institutional infrastructure that
aligns human capital planning and performance management with the
corporation's goals and mission.
We recommend that MCC's Chief Executive Officer continue to develop and
complete overall plans and related time frames to address corporatewide
accountability, establish comprehensive internal control over program
and administrative operations, and institute an effective human capital
infrastructure. In addition, we recommend that the Secretary of State,
in her capacity as Chair of the MCC Board of Directors, ensure that the
board considers and defines the scope of its responsibilities with
respect to corporate governance and oversight and develops an overall
plan or strategy, with related time frames, for carrying out these
responsibilities. In doing so, the board should consider, in addition
to its statutory responsibilities, other corporate governance and
oversight responsibilities commonly associated with sound and effective
corporate governance practices. MCC provided technical comments on a
draft of this report and agreed to take our recommendations under
consideration.
Background:
Each fiscal year, the Millennium Challenge Act requires MCC to select
countries as eligible for MCA assistance by identifying candidate
countries, establishing an eligibility methodology, and making
eligibility determinations. MCC evaluates eligible countries' proposals
and negotiates compacts, which must be approved by the MCC board. The
Threshold Program assists countries that are not deemed eligible but
show a commitment to MCA objectives. MCC is governed by a board of
directors consisting of U.S. government and other representatives.
Candidate Countries:
For fiscal year 2004, the Millennium Challenge Act limited candidates
to low-income countries--those with per capita incomes less than or
equal to the International Development Association (IDA) cutoff for
that year ($1,415)--that also were eligible for IDA
assistance.[Footnote 4] This provision limited candidacy in the MCA's
first year to the poorest low-income countries. For fiscal year 2005,
candidates were required only to have incomes less than or equal to the
IDA ceiling for that year ($1,465).[Footnote 5] Additionally, for
fiscal years 2004 and 2005, candidates could not be ineligible for U.S.
economic assistance under the Foreign Assistance Act of 1961. (See app.
II for a list of candidate countries for fiscal years 2004 and 2005.)
Eligibility Determinations:
The Millennium Challenge Act requires that the MCC board base its
eligibility decisions, "to the maximum extent possible," on objective
and quantifiable indicators of a country's demonstrated commitment to
the criteria enumerated in the act. MCC selected its indicators based
on their relationship to growth and poverty reduction, the number of
countries they cover, their transparency and public availability, and
their relative soundness and objectivity.[Footnote 6]
For fiscal years 2004 and 2005, MCC's process for determining country
eligibility for MCA assistance had both a quantitative and a
discretionary component (see fig. 1). MCC first identified candidate
countries that performed above the median in relation to their peers on
at least half of the quantitative indicators in each of the three
policy categories--Ruling Justly, Investing in People, and Encouraging
Economic Freedom--and above the median on the indicator for control of
corruption. (See app. III for a table describing the indicators,
listing their sources, and summarizing the methodologies on which they
are based.) In addition, MCC considered other relevant information--in
particular, whether countries that scored substantially below the
median (at the 25th percentile or lower) on an indicator were
addressing any shortcomings related to that indicator. MCC also
considered supplemental information to address gaps, lags, or other
data weaknesses as well as additional material information.[Footnote 7]
Figure 1: MCC's Process for Determining Country Eligibility:
[See PDF for image]
[A] The fiscal year 2004 and 2005 medians for the 16 indicators were
based on the scores of all countries meeting the income criteria,
including those countries that are ineligible to receive U.S. economic
assistance under the Foreign Assistance Act.
[B] For fiscal year 2004, MCC used the Primary Education Completion
Rate.
[C] Average of immunization rates for DPT3--diphtheria, pertussis and
tetanus--and measles.
[D] For the consumer price inflation indicator, countries are not
required to score higher than the median; instead, inflation rates must
not exceed 20 percent for fiscal year 2004 or 15 percent for fiscal
year 2005.
[End of figure]
The Millennium Challenge Act requires that, within 5 days of the
board's eligibility determinations, the MCC Chief Executive Officer
submit a report to congressional committees containing a list of the
eligible countries and "a justification for such eligibility
determination" and publish the report in the Federal Register.
MCA Compacts:
Eligible countries are invited to submit compact proposals, which are
to be developed in consultation with members of civil society,
including the private sector and NGOs. However, a country's eligibility
does not guarantee that MCC will sign and then fund a compact with that
country. MCC is to sign compacts only with national
governments.[Footnote 8] Under the act, the duration of compacts is
limited to a maximum of 5 years; MCC expects to approve compacts with
durations of 3 to 5 years. MCA funds are not earmarked for specific
projects or countries, and money not obligated in the fiscal year for
which it was appropriated can be used in subsequent fiscal years. For
fiscal years 2004 and 2005, Congress has directed that MCC use its
existing appropriations to fully fund a compact--that is, obligate the
entire amount anticipated for the compact's duration.[Footnote 9]
Funding for compacts and the Threshold Program must be drawn from the
appropriation for the fiscal year in which the country was eligible.
MCC aims to be among the largest donors in recipient countries, which,
according to MCC officials, creates incentive for eligible countries to
"buy into" MCC's principles of policy reform, sustainable economic
growth, country partnership, and results.
Threshold Program:
The Millennium Challenge Act authorizes a limited amount of assistance
to certain candidate countries to help them become eligible for MCA
assistance. These candidate countries must (1) meet the fiscal year
2004 or 2005 requirements for MCA candidacy and (2) demonstrate a
significant commitment to meeting the act's eligibility criteria but
fail to meet those requirements.[Footnote 10] MCC has implemented these
legislative provisions as its Threshold Program. Figure 2 compares
features of MCC compact and Threshold Program assistance; appendix IV
describes the Threshold Program.
Figure 2: Comparison of MCC Compact Assistance and Threshold Program:
[See PDF for image]
[A] According to MCC, participation in the Threshold Program does not
guarantee future eligibility for compact assistance.
[B] Includes funds for administrative expenses but excludes $40 million
set aside for fiscal year 2004 and $150 million (up to 10 percent of
total MCC appropriations) in fiscal year 2005 for the Threshold
Program. As of April 2005, MCC had not determined the amount of funding
set aside for the fiscal year 2005 Threshold Program.
[C] The MCC board could authorize additional Threshold Program funding
of up to 10 percent ($99.4 million) of fiscal year 2004 MCC
appropriations.
[End of figure]
MCC Governance:
MCC has broad authority under the Millennium Challenge Act to enter
into contracts and business relationships. The act establishes the MCC
Board of Directors and assigns it a key decision-making role in the
corporation's activities, including those related to implementing the
compact program. The act also makes provisions for the board to consult
with Congress and provide general supervision of MCC's IG.[Footnote 11]
The board consists of the Secretary of State (Board Chair), the
Secretary of the Treasury (Vice Chair), the USAID Administrator, and
the U.S. Trade Representative, in addition to MCC's Chief Executive
Officer. The board has four other positions filled by Presidential
appointment with the approval of the Senate. Two of these positions
have been filled. (For a timeline of key events and milestones since
MCC's launch, see app. V.)
MCC Used Quantitative Indicators and Judgment to Determine Country
Eligibility; Process Involves Ongoing Challenges:
For fiscal years 2004 and 2005, the MCC board based its determinations
of countries' eligibility on its quantitative indicator methodology as
well on discretion. Although MCC published the countries' indicator
scores at its Web site, some of the indicator source data used to
generate the scores were not readily available. Finally, we found that
reliance on the indicators carried certain inherent limitations.
MCC Used Quantitative Indicators and Judgment to Determine Eligibility:
MCC used the 16 quantitative indicators, as well as the discretion
implicit in the Millennium Challenge Act, to select 17 countries as
eligible for MCA compact assistance for fiscal years 2004 and 2005 (see
fig. 3).
Figure 3: MCA Eligibility Determinations for Fiscal Years 2004 and 2005:
[See PDF for image]
[End of figure]
* Fiscal year 2004: In May 2004, the MCC board selected 16 countries as
eligible for fiscal year 2004 funding. The countries deemed eligible
include 13 that met the quantitative indicator criteria and 3 that did
not (Bolivia, Georgia, and Mozambique). Another 6 countries met the
criteria but were not deemed eligible.
* Fiscal year 2005: In October 2004, the MCC board selected 16
countries as eligible for fiscal year 2005 funding. The countries
deemed eligible included 14 countries that met the indicator criteria
and 2 countries that did not (Georgia and Mozambique). Ten countries
met the criteria but were not deemed eligible. Fifteen of the 16
countries also had been deemed eligible for fiscal year 2004;[Footnote
12] the only new country was Morocco.
MCC did not provide Congress its justifications for the 13 countries
that met the indicator criteria but were not deemed eligible for fiscal
years 2004 and 2005 (one of these countries, Tonga, did not score
substantially below the median on any indicator).[Footnote 13] The act
does not explicitly require MCC to include a justification to Congress
for why these countries were not deemed eligible.
In addition, our analysis of countries that met the indicator criteria
but were not deemed eligible suggests that, besides requiring that a
country score above the median on the indicator for control of
corruption, MCC placed particular emphasis on three Ruling Justly
indicators (political rights, civil liberties, and voice and
accountability) in making its eligibility determinations. In fiscal
years 2004 and 2005, 6 of the 13 countries that met the indicator
criteria but were not deemed eligible had scores equal to or below the
median on these three indicators.[Footnote 14] On the other hand, the
13 countries that were not deemed eligible performed similarly to the
eligible countries on the other three Ruling Justly indicators--
government effectiveness, rule of law, and control of corruption--as
well as on the indicators for Investing in People and Encouraging
Economic Freedom.
Not All Source Data for Quantitative Indicators Were Publicly
Accessible:
Although MCC published its country scores for all of the indicators at
its Web site,[Footnote 15] some of the indicator source data used to
generate the scores were not readily available to the public. We found
that source data for nine of the indicators[Footnote 16] were
accessible via hyperlinks from MCC's Web site, making it possible to
compare those data with MCC's published country scores. However, for
the remaining seven indicators, we encountered obstacles to locating
the source data, without which candidate countries and other interested
parties would be unable to reproduce and verify MCC's results.
* Primary education completion rates: The published indicators were
created with data from several sources and years, and not all of these
data were available on line.
* Primary education and health spending (percentage of gross domestic
product): When national government data were unavailable, MCC used
either country historical data or data from the World Bank to estimate
current expenditures.
* Diphtheria and measles immunization rate: The general hyperlink at
the MCC Web site did not link to the data files used to create the
published indicators.[Footnote 17]
* One-year consumer price inflation: The published indicators were
created with a mix of data from several data sources and different
years.
* Fiscal policy: The published indicators were created with
International Monetary Fund (IMF) data that are not publicly available.
* Days to start a business: Updated indicators were not published until
after the board had made its fiscal year 2004 eligibility decisions.
Use of Quantitative Indicators Had Some Inherent Limitations:
MCC's use of the quantitative indicator criteria in the country
selection process for fiscal years 2004 and 2005 involved the following
inherent difficulties:
* Owing to measurement uncertainty, the scores of 17 countries may have
been misclassified as above or below the median.[Footnote 18] In fiscal
years 2004 and 2005, 7 countries did not meet the quantitative
indicator criteria because of corruption scores below the median, but
given measurement uncertainty their true scores may have been above the
median. Likewise, 10 countries met the indicator criteria with
corruption scores above the median, but their true scores may have been
below the median.[Footnote 19]
* Missing data for the days to start a business and trade policy
indicators reduced the number of countries that could achieve above-
median scores for those indicators. For fiscal years 2004 and 2005, 20
and 22 countries, respectively, lacked data for the indicator for days
to start a business, and 18 and 13 countries, respectively, lacked data
for the trade policy indicator. Our analysis suggests that missing data
for these two indicators may have reduced the number of countries that
passed the Encouraging Economic Freedom category.
* The narrow and undifferentiated range of possible scores for the
political rights, civil liberties, and trade policy indicators led to
clustering--"bunching"--of scores around the median, making the scores
less useful in distinguishing among countries' performances. In fiscal
year 2005, for example, 46 countries, or two-thirds of the countries
with trade policy data, received a score of 4 (the median) or 5 (the
lowest score possible) for trade policy. Our analysis suggests that
bunching potentially reduced the number of countries that passed the
Ruling Justly and Economic Freedom categories and limited MCC's ability
to determine whether countries performed substantially below their
peers in affected indicators.
With respect to the indicator for control of corruption, countries
deemed eligible for MCA compact assistance represent the best
performers among their peers; at the same time, studies have found
that, in general, countries with low per capita income also score low
on corruption indexes. Of the 17 MCA compact eligible countries, 11
ranked below the 50th percentile among the 195 countries rated by the
World Bank Institute for control of corruption; none scored in the top
third.
MCC Is Refining Its Compact Development Process:
MCC has received compact proposals, concept papers, or both, from 16
countries; of these, it has approved a compact with one country and is
negotiating with four others. At the same time, MCC continues to refine
its process for reviewing and assessing compact proposals. As part of
this process, MCC has identified elements of country program
implementation and fiscal accountability that can be adapted to
eligible countries' compact objectives and institutional capacities.
MCC Has Received a Number of Proposals and Is Negotiating Several
Compacts:
Between August 2004 and March 2005, MCC received compact proposals,
concept papers, or both, from 16 MCA compact-eligible countries, more
than half of which submitted revised proposal drafts in response to
MCC's assessments.[Footnote 20] In March 2005, MCC approved a 4-year
compact with Madagascar for $110 million to fund rural projects aimed
at enhancing land titling and security, increasing financial sector
competition, and improving agricultural production technologies and
market capacity; MCC and Madagascar signed the compact on April 18,
2005. MCC is negotiating compacts with Cape Verde, Georgia, Honduras,
and Nicaragua[Footnote 21] and is conducting in-depth assessments of
proposals from two additional countries. Figure 4 summarizes the types
of projects that eligible countries have proposed and that MCC is
currently reviewing.
Figure 4: Types of Proposed Projects under MCC Review:
[See PDF for image]
Note: Dots indicate that one or more projects may be categorized as
shown and are not intended to quantify the number of projects a country
has proposed or the number of projects in a category.
[A] "Agribusiness" includes agricultural production, processing,
marketing, and other projects.
[B] "Business" includes projects related to nonagricultural business
development (e.g., tourism and industrial parks).
[C] "Policy reform" also includes assistance for public sector capacity-
building. According to MCC officials, all compacts will contain project-
related policy reform elements, some of which may receive funding.
[D] "Transportation infrastructure" includes road, port, and airport
planning, construction, and upgrading.
[E] "Water management" includes construction and upgrading of dams,
irrigation systems, and water reservoirs, among other things.
[F] MCC approved Madagascar's compact in March 2005; MCC and Madagascar
signed the compact on April 18, 2005.
[End of figure]
The countries' initial proposals and concept papers requested about
$4.8 billion; those that MCC is currently reviewing (see fig. 4) and
negotiating request approximately $3 billion over 3 to 5 years. Our
analysis--based on MCC's goal of being a top donor as well as
Congress's requirement that the corporation fund compacts in full--
shows that the $2.4 billion available from fiscal year 2004 and 2005
appropriations will allow MCC to fund between 4 and 14 compacts,
including Madagascar's compact, for those years.[Footnote 22] MCC's
$110 million compact with Madagascar, averaging $27.5 million per year,
would make it the country's fifth largest donor (see app. VI for a list
of the largest donors to MCA compact-eligible countries in fiscal years
2002-2003).[Footnote 23]
MCC Continues to Refine Its Compact Development Process:
As of April 2005, MCC is continuing to refine its process for
developing compacts. According to MCC officials, the compact
development process is open ended and characterized by ongoing
discussions with eligible countries. According to a recent IG report,
MCC's negotiating a compact with Madagascar has served as a prototype
for completing compacts with other countries.[Footnote 24] At present,
the compact proposal development and assessment process follows four
steps (see fig. 5).
Figure 5: MCC's Compact Development Process:
[See PDF for image]
[End of figure]
Step 1: Proposal development. MCC expects eligible countries to propose
projects and program implementation structures, building on existing
national economic development strategies. For instance, the Honduran
government's proposal is based on its Poverty Reduction Strategy Paper
(PRSP)[Footnote 25] and a subsequent June 2004 implementation
plan.[Footnote 26] MCC also requires that eligible countries use a
broad-based consultative process to develop their proposals.[Footnote
27] MCC staff discuss the proposal with country officials during this
phase of compact development. Although MCC does not intend to provide
funding to countries for proposal development,[Footnote 28] some
countries have received grants from regional organizations for proposal
development.[Footnote 29]
Step 2: Proposal submission and initial assessment. Eligible countries
submit compact proposals or concept papers. MCC has not specified
deadlines for proposal submission or publicly declared the limits or
range of available funding for individual compacts. According to MCC
officials, the absence of deadlines and funding parameters permits
countries to take initiative in developing proposals. However,
according to U.S.-based NGOs, the lack of deadlines has caused some
uncertainty and confusion among eligible country officials. Honduran
officials told us that knowing a range of potential funding would have
enhanced their ability to develop a more focused proposal.
During this stage, MCC conducts a preliminary assessment of the
proposal, drawing on its staff, contractors, and employees of other
U.S. government agencies. This assessment examines the potential impact
of the proposal's strategy for economic growth and poverty reduction,
the consultative process used to develop the proposal, and the
indicators for measuring progress toward the proposed goals. According
to MCC, some eligible countries have moved quickly to develop their MCC
programs. Others initially were unfamiliar with MCC's approach and some
faced institutional constraints. MCC works with these countries to
develop programs that it can support. In addition, MCC is exploring
ways--such as providing grants--to facilitate compact development and
implementation. Once MCC staff determine that they have collected
sufficient preliminary information, they seek the approval of MCC's
Investment Committee[Footnote 30] to conduct a more detailed analysis,
known as due diligence.
Step 3: Detailed proposal assessment and negotiation. MCC's due
diligence review includes an analysis of the proposed program's
objectives and its costs relative to potential economic
benefits.[Footnote 31] Among other things, the review also examines the
proposal's plans for program implementation, including monitoring and
evaluation; for fiscal accountability; and for coordination with USAID
and other donors. In addition, the review considers the country's
commitment to MCC eligibility criteria and legal considerations
pertaining to the program's implementation.[Footnote 32] During their
review, MCC staff seek the approval of the Investment Committee to
notify Congress that the corporation intends to initiate compact
negotiations; following completion of the review, MCC staff request the
committee's approval to enter compact negotiations. When the
negotiations have been concluded, the Investment Committee decides
whether to approve submission of the compact text to the MCC board.
Step 4: Board review and compact signing. The MCC board reviews the
compact draft. Before the compact can be signed and funds obligated,
the board must approve the draft and MCC must notify appropriate
congressional committees of its intention to obligate funds.
MCC Has Identified Elements of Program Implementation and Fiscal
Accountability Framework:
MCC has identified several broadly defined elements of program
implementation and fiscal accountability that it considers essential to
ensuring achievement of compact goals and proper use of MCC funds. As
signatories to the compact, MCC and the country government will be
fundamental elements of this framework. However, MCC and eligible
countries can adapt other elements (see fig. 6) by assigning roles and
responsibilities to governmental and other entities according to the
countries' compact objectives and institutional capacities.[Footnote
33] Madagascar's compact incorporates these elements in addition to an
advisory council composed of private sector and civil society
representatives, as well as local and regional government officials.
The compact also requires that MCA-Madagascar, the oversight entity,
adopt additional plans and agreements before funds can be disbursed,
including plans for fiscal accountability and procurement. In addition,
the compact requires the adoption of a monitoring and evaluation plan;
provides a description of the plan's required elements; and establishes
performance indicators for each of Madagascar's three program
objectives, which are linked to measures of the program's expected
overall impact on economic growth and poverty reduction. MCC expects to
disburse funds in tranches as it approves Madagascar's completed plans
and agreements. According to the IG, MCC officials expect to make the
initial disbursements within 2 months after signing the
compact.[Footnote 34]
Figure 6: Adaptable Elements of MCC's Framework for Program
Implementation and Fiscal Accountability:
[See PDF for image]
[End of figure]
MCC Is Taking Steps to Coordinate with Key Stakeholders:
MCC has received advice and support from USAID, State, Treasury, and
USTR and has signed agreements with five U.S. agencies for program
implementation and technical assistance. In addition, MCC is consulting
with other donors in Washington, D.C., and in the field to use existing
donor expertise. MCC is also consulting with U.S.-based NGOs as part of
its domestic outreach effort; however, some NGOs raised questions about
the involvement of civil society groups. (See app. VII for more details
of MCC's coordination efforts.)
U.S. Agencies Are Contributing Resources and Technical Assistance:
MCC initially coordinated primarily with U.S. agencies on its board and
is expanding its coordination efforts to leverage the expertise of
other agencies. USAID and the Department of State in Washington, D.C.,
and in compact-eligible countries, have facilitated meetings between
MCC officials and donors and representatives of the private sector and
NGOs in eligible countries. In addition, several of the six USAID
missions contacted by GAO reported that their staff had provided
country-specific information, had observed MCC-related meetings between
civil society organizations and governments, or had informed other
donors about MCC. MCC has also coordinated with the Department of the
Treasury and USTR. For example, according to MCC officials, MCC has
regularly briefed these agencies on specific elements of compact
proposals and established an interagency working group to discuss
compact-related legal issues.
Since October 2004, MCC has expanded its coordination through formal
agreements with five U.S. agencies, including the Census Bureau, Army
Corps of Engineers, and Department of Agriculture, that are not on the
MCC board. MCC has obligated more than $6 million for programmatic and
technical assistance through these agreements, as shown in figure 7.
Figure 7: Agreements between MCC and U.S. Agencies:
[See PDF for image]
[A]For fiscal year 2004 Threshold Program. All funds under this
agreement must be obligated by September 30, 2005, unless MCC notifies
USAID otherwise.
[B] Funding is for a 1-year period.
[End of figure]
MCC Is Consulting with Other Donors and Using Donor Expertise:
MCC has received information and expertise from key multilateral and
bilateral donors in the United States and eligible countries. For
example, World Bank staff have briefed MCC regarding eligible
countries, and officials from the Inter-American Development Bank said
that they have provided MCC with infrastructure assessments in
Honduras. According to MCC, most donor coordination is expected to
occur in eligible countries rather than at the headquarters level. In
some cases, MCC is directly coordinating its efforts with other donors
through existing mechanisms, such as a G-17 donor group in Honduras.
In addition to soliciting donor input, MCC officials have encouraged
donors not to displace assistance to countries that receive MCA
funding.[Footnote 35] Donors in Honduras told us that MCA funding to
that country is unlikely to reduce their investment, because sectors
included in the country's proposal have additional needs that would not
be met by MCA.
MCC Has Met with NGOs:
According to MCC officials, MCC is holding monthly meetings with a U.S.-
based NGO working group[Footnote 36] and hosted five public meetings in
2004 in Washington, D.C, as part of its domestic outreach efforts. The
NGOs have shared expertise in monitoring and evaluation and have
offered suggestions that contributed to the modification of 1 of MCC's
16 quantitative indicators. In addition, MCC has met with local NGOs
during country visits.
Some U.S-based NGOs have raised questions about the involvement of NGOs
in this country and of civil society groups in compact-eligible
countries. Environmental NGOs told us in January 2005 that MCC had not
engaged with them since initial outreach meetings; however, MCC
subsequently invited NGOs and other interested entities to submit
proposals for a quantitative indicator of a country's natural resources
management. Representatives of several NGOs commented that MCC lacks in-
house expertise and staff to monitor and assess civil society
participation in compact development. In addition, U.S.-based NGOs
expressed concern that their peers in MCA countries have not received
complete information about the proposal development process.
MCC Has Made Progress in Developing Management Structures but Has Not
Completed Corporatewide Plans, Strategies, and Time Frames:
Since starting up operations, MCC has made progress in developing key
administrative infrastructures that support its program implementation.
MCC has also made progress in establishing corporatewide structures for
accountability, governance, internal control, and human capital
management, including establishing an audit and review capability
through its IG, adopting bylaws, providing ethics training to
employees, and expanding its permanent full-time staff. However, MCC
has not yet completed plans, strategies, and time frames needed to
establish these essential management structures on a corporatewide
basis. (See fig. 8 for a detailed summary of MCC's progress.)
Figure 8: MCC's Progress on Key Management Structures:
[See PDF for image]
[A]Schedule A refers to positions specifically excepted from federal
competitive service requirements.
[B] According to MCC officials, MCC and OMB have agreed that MCC may
submit a modified report to satisfy the Government Performance and
Results Act requirement of a performance plan and report by March 31,
2005. MCC expects to submit the report by the end of fiscal year 2005.
[End of figure]
Administrative Infrastructure:
During its first 15 months, MCC management focused its efforts on
establishing essential administrative infrastructures--the basic
systems and resources needed to set up and support its operations--
which also contribute to developing a culture of accountability and
control. In February 2004, MCC acquired temporary offices in Arlington,
Virginia, and began working to acquire a permanent location. In
addition, consistent with its goal of a lean corporate structure with a
limited number of full-time employees, MCC outsourced administrative
aspects of its accounting, information technology, travel, and human
resource functions. Further, MCC implemented various other
administrative policies and procedures to provide operating guidance to
staff and enhance MCC's internal control. MCC management continues to
develop other corporate policies and procedures, including policies
that will supplement federal travel and acquisition regulations.
Accountability:
Accountability requires that a government organization effectively
demonstrate, internally and externally, that its resources are managed
properly and used in compliance with laws and regulations and that its
programs are achieving their intended goals and outcomes and are being
provided efficiently and effectively. Important for organizational
accountability are effective strategic and performance planning and
reporting processes that establish, measure, and report an
organization's progress in fulfilling its mission and meeting its
goals. External oversight and audit processes provide another key
element of accountability.
During its initial 15 months, MCC developed and communicated to the
public its mission, the basic tenets of its corporate vision, and key
program-related decisions by the MCC board. MCC began its strategic
planning process when key staff met in January 2005 to begin setting
strategic objectives and it expects to issue the completed plan in the
coming months. In addition, MCC arranged with its IG for the audit of
its initial year financial statements (completed by an independent
public accounting firm) and for two program-related IG reviews.
However, to date, MCC has not completed a strategic plan or established
specific implementation time frames. In addition, MCC has not yet
established annual performance plans, which would facilitate its
monitoring of progress toward strategic and annual performance goals
and outcomes and its reporting on such progress internally and
externally. According to MCC officials, MCC intends to complete its
comprehensive strategic and performance plans by the end of fiscal year
2005.
Corporate Governance:
Corporate governance can be viewed as the formation and execution of
collective policies and oversight mechanisms to establish and maintain
a sustainable and accountable organization while achieving its mission
and demonstrating stewardship over its resources. Generally, an
organization's board of directors has a key role in corporate
governance through its oversight of executive management, corporate
strategies, risk management and audit and assurance processes, and
communications with corporate stakeholders.
During its initial 15 months, the MCC board adopted bylaws regarding
board composition and powers, meetings, voting, fiscal oversight, and
the duties and responsibilities of corporate officers and oversaw
management's efforts to design and implement the compact program.
According to MCC, during a recent meeting of the board to discuss
corporate governance, the Chief Executive Officer solicited feedback
from the board regarding defining and improving the governance process.
MCC's board established a compensation committee in March 2005, and a
charter for the committee is being drafted. In addition, MCC is
preparing, for board consideration, a policy on the board's corporate
governance. As drafted, the policy identifies the board's statutory and
other responsibilities, elements of board governance, rules and
procedures for board decision-making, and guidelines for MCC's
communications with the board. With regard to MCC board membership,
seven of the nine board members have been appointed and installed.
Through board agency staff, MCC staff have regularly informed board
members--four of whom are heads of other agencies or departments--about
pending MCC matters.
The board has not completed a comprehensive strategy or plan for
carrying out its responsibility--specifically, it has not defined the
board's and management's respective roles in formulating and executing
of corporate strategies, developing risk management and audit and
assurance processes, and communicating and coordinating with corporate
stakeholders. Moreover, although the bylaws permit the board to
establish an audit committee--to support the board in accounting and
financial reporting matters; determine the adequacy of MCC's
administrative and financial controls; and direct the corporation's
audit function, which is provided by the IG and its external auditor--
the board has not yet done so. Finally, two of the MCC board's four
other positions have not yet been filled.
Internal Control:
Internal control provides reasonable assurance that key management
objectives--efficiency and effectiveness of operations, reliability of
financial reporting, and compliance with applicable laws and
regulations--are being achieved. Generally, a corporatewide internal
control strategy is designed to:
* create and maintain an environment that sets a positive and
supportive attitude toward internal control and conscientious
management;
* assess, on an ongoing basis, the risks facing the corporation and its
programs from both external and internal sources;
* implement efficient control activities and procedures intended to
effectively manage and mitigate areas of significant risk;
* monitor and test control activities and procedures on an ongoing
basis; and:
* assess the operating effectiveness of internal control and report and
address any weaknesses.
During its first 15 months, MCC took several actions that contributed
to establishing effective internal control. Although it did not conduct
its own assessment of internal control, MCC management relied on the
results of the IG reviews and external financial audit to support its
conclusion that key internal controls were valid and reliable. Further,
MCC implemented processes for identifying eligible countries and
internal controls through its due diligence reviews of proposed
compacts, establishment of the Investment Committee to assist MCC staff
in negotiating and reviewing compact proposals, and the board's
involvement in approving negotiated compacts. In addition, MCC
instituted an Ethics Program, covering employees as well as outside
board members, to provide initial ethics orientation training for new
hires and regularly scheduled briefings for employees on standards of
conduct and statutory rules. In April 2005, MCC officials informed us
that they had recently established an internal controls strategy group
to identify internal control activities to be implemented over the next
year, reflecting their awareness of the need to focus MCC's efforts on
the highest-risk areas.
However, MCC has not completed a comprehensive strategy and related
time frames for ensuring the proper design and incorporation of
internal control into MCC's corporatewide program and administrative
operations. For example, MCC intends to rely on contractors for a
number of operational and administrative services; however, this
strategy will require special consideration in its design and
implementation of specific internal controls.
Human Capital Management:
Cornerstones of human capital management include leadership; strategic
human capital planning; acquiring, developing, and retaining talent;
and building a results-oriented culture. In its initial year, MCC human
capital efforts focused primarily on establishing an organizational
structure and recruiting employees necessary to support program design
and implementation and corporate administrative operations (see app.
VIII for a diagram of MCC's organizational structure). MCC set short-
and longer-term hiring targets, including assigning about 20 employees-
-depending on the number and types of compacts that have been signed--
to work in MCA compact-eligible countries; it also identified needed
positions and future staffing levels through December 2005 based on its
initial operations. With the help of an international recruiting firm,
MCC expanded its permanent full-time staff from 7 staff employees in
April 2004 to 107 employees in April 2005; it intends to employ no more
than 200 permanent full-time employees by December 2005 (see fig.
9).[Footnote 37] In addition, MCC hired 15 individuals on detail, under
personal services contracts, or as temporary hires, as well as a number
of consultants. Finally, in January 2005, MCC hired a consultant to
design a compensation program to provide employees with pay and
performance incentives and competitive benefits, including performance
awards and bonuses, retention incentives, and student loan repayments.
MCC officials told us that they intend the program to be comparable
with those of federal financial agencies, international financial
institutions, and multilateral and private sector organizations.
Figure 9: Actual and Planned Staffing Levels as of April 1, 2005:
[See PDF for image]
[End of figure]
MCC has not completed an institutional infrastructure that includes (1)
a thorough and systematic assessment of the staffing requirements and
critical skills needed to carry out its mission; (2) a human capital
planning process that integrates MCC's human capital policies and
strategies with its program goals and mission; and (3) a performance
management system that links employees' pay and incentive programs to
individual knowledge, skills, performance, and contributions. MCC
officials acknowledged the need to refine and systematize MCC's
workforce planning to ensure that the corporation has the human capital
capability needed for a broad range of programs in a number of
developing nations.
Conclusions:
In its first 15 months, MCC took important actions to design and
implement the compact program--making eligibility determinations,
defining its compact development process, and coordinating and
establishing working agreements with key stakeholders. MCC also acted
to establish important elements of a corporatewide management structure
needed to support its mission and operations, including some key
internal controls. However, MCC has not yet fully developed plans that
define the comprehensive actions needed to establish key components of
an effective management structure.
We believe that, to continue to grow into a viable and sustainable
entity, MCC needs to approve plans with related time frames that
identify the actions required to build a corporatewide foundation for
accountability, internal control, and human capital management and
begin implementing these plans. In addition, MCC's board needs to
define its responsibilities for corporate governance and oversight of
MCC and develop plans or strategies for carrying them out. As MCC moves
into its second year of operations, it recognizes the need to develop
comprehensive plans and strategies in each of these areas.
Implementation of such plans and strategies should enable MCC's
management and board to measure progress in achieving corporate goals
and objectives and demonstrate its accountability and control to
Congress and the public. As part of our ongoing work for your
committee, we will continue to monitor MCC's efforts in these areas.
Recommendations for Executive Action:
We recommend that the Chief Executive Officer of the Millennium
Challenge Corporation complete the development and implementation of
overall plans and related time frames for actions needed to establish:
1. Corporatewide accountability, including:
* implementing a strategic plan,
* establishing annual performance plans and goals,
* using performance measures to monitor progress in meeting both
strategic and annual performance goals, and:
* reporting internally and externally on its progress in meeting its
strategic and annual performance goals.
2. Effective internal control over MCC's program and administrative
operations, including establishing:
* a positive and supportive internal control environment;
* a process for ongoing risk assessment;
* control activities and procedures for reducing risk, such as measures
to mitigate risk associated with contracted operational and
administrative services;
* ongoing monitoring and periodic testing of control activities; and:
* a process for assessing and reporting on the effectiveness of
internal controls and addressing any weaknesses identified.
An effective human capital infrastructure, including:
* a thorough and systematic assessment of the staffing requirements and
critical skills needed to carry out MCC's mission;
* a plan to acquire, develop, and retain talent that is aligned with
the corporation's strategic goals; and:
* a performance management system linking compensation to employee
contributions toward the achievement of MCC's mission and goals.
We recommend that the Secretary of State, in her capacity as Chair of
the MCC Board of Directors, ensure that the board considers and defines
the scope of its responsibilities with respect to corporate governance
and oversight of MCC and develop an overall plan or strategy, with
related time frames, for carrying out these responsibilities. In doing
so, the board should consider, in addition to its statutory
responsibilities, other corporate governance and oversight
responsibilities commonly associated with sound and effective corporate
governance practices, including oversight of:
* executive management,
* the formulation and execution of corporate strategies,
* risk management and audit and assurance processes, and:
* communication and coordination with corporate stakeholders.
Agency Comments and Our Evaluation:
MCC provided technical comments on a draft of this statement and agreed
to take our recommendations under consideration; we addressed MCC's
comments in the text as appropriate. We also provided the Departments
of State and Treasury, the U.S. Agency for International Development,
and the Office of the U.S. Trade Representative an opportunity to
review a draft of this statement for technical accuracy. State and
USAID suggested no changes, and Treasury and USTR provided a few
technical comments, which we incorporated as appropriate.
Mr. Chairman and Members of the Committee, this concludes my prepared
statement. I will be happy to answer any questions you may have.
Contacts and Acknowledgments:
For questions regarding this testimony, please call David Gootnick at
(202) 512-4128 or Phillip Herr at (202) 512-8509.
Other key contributors to this statement were Todd M. Anderson, Beverly
Bendekgey, David Dornisch, Etana Finkler, Ernie Jackson, Debra Johnson,
Joy Labez, Reid Lowe, David Merrill, John Reilly, Michael Rohrback,
Mona Sehgal, and R.G. Steinman.
[End of section]
Appendix I: Scope and Methodology:
We reviewed MCC's activities in its first 15 months of operations,
specifically its (1) process for determining country eligibility for
fiscal years 2004 and 2005, (2) progress in developing compacts, (3)
coordination with key stakeholders, and (4) establishment of management
structures and accountability mechanisms.
To examine MCC's country selection process, we analyzed candidate
countries' scores for the 16 quantitative indicators for fiscal years
2004 and 2005, as well as the selection criteria for the fiscal year
2004 Threshold Program. We used these data to determine the
characteristics of countries that met and did not meet the indicator
criteria and to assess the extent to which MCC relied on country scores
for eligibility determination. We also reviewed the source data for the
indicator scores posted on MCC's Web site to identify issues related to
public access and to determine whether we could reproduce the country
scores from the source data. Our review of the source data methodology,
as well as the documents of other experts, allowed us to identify some
limitations of the indicator criteria used in the country selection
process. For these and other data we used in our analyses, we examined,
as appropriate, the reliability of the data through interviews with MCC
officials responsible for the data, document reviews, and reviews of
data collection and methodology made available by the authors. We
determined the data to be reliable for the purposes of this study.
To describe MCC's process for developing compacts, including plans for
monitoring and evaluation, we reviewed MCC's draft or finalized
documents outlining compact proposal guidance, compact proposal
assessment, and fiscal accountability elements. We reviewed eligible
countries' compact proposals and concept papers to identify proposed
projects, funding, and institutional frameworks, among other things. To
summarize the projects that countries have proposed and that MCC is
currently assessing, we developed categories and conducted an analysis
of countries' proposal documents and MCC's internal summaries. We also
reviewed Madagascar's draft compact to identify projects, funding, and
framework for program implementation and fiscal accountability. We met
with MCC officials to obtain updates on the compact development
process. In addition, we interviewed representatives of nongovernmental
organizations (NGOs) in Washington, D.C., and Honduras, as well as
country officials in Honduras, to obtain their perspectives on MCC's
compact development process.
To assess MCC's coordination with key stakeholders, we reviewed
interagency agreements to identify the types of formal assistance that
MCC is seeking from U.S. agencies and the funding that MCC has set
aside for this purpose. We also reviewed MCC documents to identify the
organizations, including other donors, with which MCC has consulted. In
addition, we interviewed MCC officials regarding their coordination
with various stakeholders. We met with officials from the U.S. agencies
on the MCC board (Departments of State and Treasury, USAID, and USTR)
to assess the types of assistance that these agencies have provided to
MCC. We also contacted six USAID missions in compact-eligible countries
to obtain information on MCC coordination with U.S. agencies in the
field. To assess MCC's coordination with NGOs and other donors, we met
with several NGOs, including InterAction, the World Wildlife Fund, and
the Women's Edge Coalition in Washington, D.C., and local NGOs in
Honduras; we also met with officials from the Inter-American
Development Bank in Washington, D.C., and Honduras, as well as
officials from the World Bank, Central American Bank for Economic
Integration, and several bilateral donors in Honduras. Finally, we
attended several MCC public outreach meetings in Washington, D.C.
To analyze MCC's progress in establishing management structures and
accountability mechanisms, we interviewed MCC senior management and
reviewed available documents to identify the management and
accountability plans that MCC had developed or was planning to develop.
We reviewed audit reports by the USAID Office of the Inspector General
to avoid duplication of efforts. We used relevant GAO reports and
widely used standards and best practices, as applicable, to determine
criteria for assessing MCC's progress on management issues as well as
to suggest best practices to MCC in relevant areas. Although our
analysis included gaining an understanding of MCC's actions related to
establishing internal control, we did not evaluate the design and
operating effectiveness of internal control at MCC.
In January 2005, we conducted fieldwork in Honduras, one of four
countries with which MCC had entered into negotiations at that time, to
assess MCC's procedures for conducting compact proposal due diligence
and its coordination with U.S. agencies, local NGOs, Honduran
government officials, and other donors. In conducting our field work,
we met with U.S. mission officials, Honduran government officials,
donor representatives, and local NGOs. We also visited some existing
USAID projects in the agricultural sector that were similar to projects
that Honduras proposed.
We provided a draft of this statement to MCC, and we have incorporated
technical comments where appropriate. We also provided a draft of this
statement to the Departments of State and Treasury, USAID, and USTR;
State and USAID suggested no changes, and Treasury and USTR provided
technical comments, which we addressed as appropriate. We conducted our
work between April 2004 and April 2005, in accordance with generally
accepted government auditing standards.
[End of section]
Appendix II: Candidate and Eligible Countries for MCA and Threshold
Programs, Fiscal Years 2004-2005:
[See PDF for Image]
Note: The countries listed do not include the 12 and 14 countries that
were not candidates because of legal prohibitions in fiscal years 2004
and 2005, respectively.
[End of Figure]
[End of section]
Appendix III: Indicators Used in the Selection Process:
Table 1 lists each of the indicators used in the MCA compact and
threshold country selection process, along with its source and a brief
description of the indicator and the methodology on which it is based.
Table 1: Quantitative Indicators Used to Determine MCA Country
Eligibility:
Ruling Justly.
Indicator/Source: Political rights: Freedom House, Freedom in the World
2003;
Ruling Justly: Description: Measures the ability of citizens to
participate freely in the political process. This includes the right to
vote, elect representatives who have real power, and compete for public
office;
Ruling Justly: Methodology: A survey providing an annual evaluation of
the state of global freedom. A panel of experts uses a broad range of
sources of information, including foreign and domestic news reports,
nongovernmental organization publications, think tank and academic
analyses, individual professional contacts, and visits to the region.
The panel rates countries on the prevalence of free and fair elections
of officials with real power; the ability of citizens to form political
parties that may compete fairly in elections; freedom from domination
by the military, foreign powers, totalitarian parties, religious
hierarchies, and economic oligarchies; and the political rights of
minority groups. Countries receive numerical ratings from 1 to 7, with
1 being the most free.
Indicator/Source: Civil liberties: Freedom House, Freedom in the World
2003;
Ruling Justly: Description: Measures citizen's freedom to develop
opinions, institutions, and personal autonomy without interference from
the state.
Indicator/Source: Voice and accountability: Governance Matters III:
Governance Indicators for 1996-2002, D. Kaufmann, A. Kraay, and M.
Mastruzzi, The World Bank, 2003;
Ruling Justly: Description: Measures the ability of institutions to
protect civil liberties, the extent to which citizens of a country are
able to participate in the selection of governments, and the
independence of the media;
Ruling Justly: Methodology: An index of surveys based on several
hundred individual variables measuring perceptions of governance, drawn
from 25 separate data sources constructed by 18 different
organizations. The governance indicators are measured in units ranging
from-2.5 to 2.5, with higher values corresponding to better governance
outcomes.
Indicator/Source: Government effectiveness: Governance Matters III:
Governance Indicators for 1996-2002, D. Kaufmann, A. Kraay, and M.
Mastruzzi, The World Bank, 2003;
Ruling Justly: Description: Measures the ability of the government to
formulate and implement sound policies, including quality of public
service provision, quality of bureaucracy, competency of civil
servants, independence of civil service from political pressures,
credibility of the government's commitment to policies.
Indicator/Source: Rule of law: Governance Matters III: Governance
Indicators for 1996-2002, D. Kaufmann, A. Kraay, and M. Mastruzzi ,
The World Bank, 2003;
Ruling Justly: Description: Measures the extent to which the public has
confidence in, and abides by, rules of society. Includes perception of
the incidence of crime, the effectiveness and predictability of the
judiciary, and the enforceability of contracts.
Indicator/Source: Control of corruption: Governance Matters III:
Governance Indicators for 1996-2002, D. Kaufmann, A. Kraay, and M.
Mastruzzi , The World Bank, 2003;
Ruling Justly: Description: Rates countries on the frequency of
"additional payments to get things done," the effects of corruption on
the business environment, "grand corruption" in the political arena,
and the tendency of elites to engage in "state capture.".
Investing In People.
Indicator/Source: Primary (girls') education completion rate: World
Bank (EdStats and Education for All, World Development Indicators) and
UNESCO Institute for Statistics, various years;
Investing In People: Description: The number of students (girls)
completing primary education, divided by the population in the relevant
age cohort;
Investing in People: Methodology: EdStats compiles data from a variety
of sources. The primary sources are the UNESCO Institute for Statistics
(UIS), the Organization for Economic Co-operation and Development
(OECD), the International Monetary Fund (IMF), and the World Bank and
its client countries.
Indicator/Source: Primary education spending (% OF GDP): National
Governments and World Bank (Education For All), various years;
Investing In People: Description: Total expenditures on primary
education by government at all levels, divided by GDP;
Investing in People: Methodology: Data from national sources was
gathered directly from the governments of both the candidate countries
and the legally prohibited countries in March and April 2004 with the
assistance of U.S. embassies.
Indicator/Source: Public health spending (% OF GDP): National
Governments, supplemented by World Bank (World Development Indicators),
various years;
Investing In People: Description: Total expenditures on health by
government at all levels, divided by GDP;
Investing in People: Methodology: Same methodology as Primary education
spending (% of GDP).
Indicator/Source: Diphtheria and measles immunization rate: World
Health Organization and UNICEF estimates of National Immunization
Coverage, 2002;
Investing In People: Description: The average of DPT3 and measles
immunization rates for the most recent year available;
Investing in People: Methodology: Data officially reported to WHO and
UNICEF by Member States in addition to data reported in the published
and grey literature. WHO and UNICEF also consult with local experts-
primarily national EPI managers and WHO regional office staff-for
additional information regarding the performance of specific local
immunization services. The true level of immunization is based on
estimates of national immunization for various vaccines.
Economic Freedom.
Indicator/Source: Country credit rating: Institutional Investor, March
2004;
Economic Freedom: Description: A semi-annual survey of bankers' and
fund managers' perceptions of a country's risk of default;
Economic Freedom: Methodology: Institutional Investor reports regularly
and provides credit ratings, based on the perceived risk of government
default, every 6 months for 145 countries, including 85 MCA countries.
Countries are ranked on a scale from 1 to 100 based on information
provided by economists and sovereign risk analysts from banks and money
management and securities firms.
Indicator/Source: Fiscal policy: IMF World Economic Outlook, 2003 or
more recent data, if available; RULING JUSTLY: Description: Overall
budget deficit (after receipt of grants but not concessional loans;
includes interest on debt) divided by GDP, averaged over a 3-year
period;
Economic Freedom: Methodology: The IMF provided the MCC with the budget
deficit data, which is otherwise not publicly available. We do not know
what methodology the IMF used to obtain this data for all countries.
However, WEO short-term fiscal policy assumptions for advanced
economies are based on officially announced budgets adjusted for
differences between the national authorities and the IMF staff
regarding macroeconomic assumptions and projected fiscal outcomes.
Indicator/Source: Trade policy: Heritage Foundation/Wall Street Journal
2004 Index of Economic Freedom;
Economic Freedom: Description: A country's openness to international
trade based on average tariff rates and nontariff barriers to trade, on
a scale of 1 to 5, with 1 being the most open;
Economic Freedom: Methodology: This is a subjective indicator. The
countries are rated from 1 to 5, based primarily on tariff and quota
rates, where available.
Indicator/Source: Regulatory quality: Governance Matters III:
Governance Indicators for 1996-2002, D. Kaufmann, A. Kraay, and M.
Mastruzzi, The World Bank, 2003;
Economic Freedom: Description: Measures of the incidence of market-
unfriendly policies such as price controls or inadequate bank
supervision, as well as perception of the burdens imposed by excessive
regulation in areas such as foreign trade and business development;
Economic Freedom: Methodology: Same methodology as voice and
accountability, above.
Indicator/Source: Days to start a business; May 2004, World Bank Doing
Business;
Economic Freedom: Description: The number of days required for
companies to complete all procedures necessary to legally start a
business;
Economic Freedom: Methodology: Doing Business compiles a comprehensive
list of entry regulations by recording all the procedures that are
officially required for an entrepreneur to obtain all necessary
permits, and to notify and file with all requisite authorities, in
order to legally operate a business. The data are from January 2003.
Indicator/Source: One-year consumer price inflation: IMF International
Financial Statistics (2002, 2003), supplemented by national government
data, and IMF's World Economic Outlook, various years;
Economic Freedom: Description: The most recent 12-month change in
consumer prices as reported in the IMF's International Financial
Statistics or in another public forum by the relevant national monetary
authorities;
Economic Freedom: Methodology: Consumer price indexes (CPI) are used
most frequently as an indicator of inflation. The CPI reflect changes
in the cost of acquiring a fixed basket of goods and services by the
average consumer. Weights are derived from household expenditure
surveys, which may be conducted infrequently.
[End of table]
Since announcing the 16 quantitative indicators that it used to
determine country eligibility for fiscal year 2004, MCC made two
changes for fiscal year 2005 and is exploring further changes for
fiscal year 2006. To better capture the gender concerns specified in
the Millennium Challenge Act, MCC substituted "girls' primary education
completion rate" for "primary education completion rate." It also
lowered the ceiling for the inflation rate indicator from 20 to 15
percent. In addition, to satisfy the act's stipulation that MCC use
objective and quantifiable indicators to evaluate a country's
commitment to economic policies that promote sustainable natural
resource management, MCC held a public session on February 28, 2005, to
launch the process of identifying such an indicator. MCC expects to
complete the process by May 2005.
[End of section]
Appendix IV: Threshold Program Selection Process:
The MCC board used objective criteria (a rules-based methodology) and
exercised discretion to select the threshold countries (see fig. 10).
For fiscal year 2004, the MCC board relied on objective criteria in
selecting as Threshold Program candidates countries that needed to
improve in 2 or fewer of the 16 quantitative indicators used to
determine MCA eligibility. (That is, by improving in two or fewer
indicators, the country would score above the median on half of the
indicators in each policy category, would score above the median on the
corruption indicator, and would not score substantially below the
median on any indicator.) MCC identified 15 countries that met its
stated criteria and selected 7 countries to apply for Threshold Program
assistance. Our analysis suggests that one of these seven countries did
not meet MCC's stated Threshold Program criteria.[Footnote 38] The MCC
board also exercised discretion in assessing whether countries that
passed this screen also demonstrated a commitment to undertake policy
reforms to improve in deficient indicators.
For fiscal year 2005, the MCC did not employ a rules-based methodology
for selecting Threshold Program candidates. Instead, the board selected
Threshold Program and MCA compact-eligible countries simultaneously.
The board selected 12 countries to apply for Threshold Program
assistance, including reconfirming the selection of 6
countries[Footnote 39] that also had qualified for the fiscal year 2004
Threshold Program.
Figure 10: MCC's Threshold Program:
[See PDF for image]
[End of figure]
[End of section]
Appendix V: Timeline of Key Events:
Figure 11 illustrates key events and defining actions relating to MCC
since the passage of the Millennium Challenge Act in January 2004.
Figure 11: Timeline of Key MCC-related Events and Actions, Fiscal Years
2004-2005:
[See PDF for image]
[End of figure]
[End of section]
Appendix VI: Donors in MCA Compact-eligible Countries:
MCC plans to be among the top donors in MCA compact-eligible countries.
Figure 12 shows the total official development assistance net (average
for 2002 and 2003) provided by the top three donors as well as the
amount of total official development assistance net (average for 2002
and 2003) provided by all donors in each of the MCA compact-eligible
countries. As the figure indicates, based on the average for the years
2002-2003, the United States was the top donor in Armenia, Bolivia,
Georgia, and Honduras and was among the top five donors in nine
additional countries.
Figure 12: Top Donors in MCA Compact-eligible Countries, Total Annual
ODA Net, Average for 2002-2003:
[See PDF for image]
[End of figure]
[End of section]
Appendix VII: MCC Coordination with Key Stakeholders:
MCC is coordinating its program and funding activities with various
stakeholders to keep them informed and to utilize their expertise or
resources at headquarters and in the field (see fig. 13). In addition,
several U.S. agencies have taken steps to coordinate their activities
with MCC.
Figure 13: MCC Coordination with Key Stakeholders:
[See PDF for image]
[End of figure]
AAlthough MCC was formally established in February 2004, an interagency
team that included representatives from the National Security Council,
State, USAID, Treasury, and the Office of Management and Budget began
designing and implementing the MCA initiative in the spring of 2002.
[End of section]
Appendix VIII: MCC Organizational Structure:
Within each of the eight functional areas shown in figure 14, the
actual staffing level as of April 2005 appears in the pie chart in each
box and the planned staffing level by December 2005 appears in the
right corner of each box.
Figure 14: MCC Organizational Structure As of April 1, 2005:
[See PDF for image]
[End of figure]
[End of Section]
FOOTNOTES
[1] Millennium Challenge Act of 2003, Public Law 108-199, Division D,
Title VI of the Consolidated Appropriations Act, 2004. Also, Title II,
Division D of this act established the Millennium Challenge Account for
MCC appropriations.
[2] For fiscal years 2004 and 2005, MCC established an eligibility
methodology that rates countries on 16 indicators, which are selected
in part based on their objectivity and public availability. The
indicators are arranged under the three policy categories--Ruling
Justly, Investing in People, and Encouraging Economic Freedom. To be
eligible, countries must score above the median on at least half of the
indicators in each category and above the median on an indicator for
combating corruption.
[3] The Threshold Program provides assistance to improve scores on the
16 indicators for candidate countries that are not deemed eligible but
demonstrate a significant commitment to meeting MCC eligibility
requirements.
[4] The IDA, an arm of the World Bank Group, provides long-term
interest-free loans and grants to the poorest developing countries with
limited access to private sources of capital.
[5] For fiscal year 2006 and beyond, the Millennium Challenge Act
requires that candidates for MCA assistance (1) be either low-income or
lower-middle-income countries and (2) not be ineligible for U.S.
economic assistance under the Foreign Assistance Act of 1961. The act
defines lower-middle-income countries as those classified as such by
the World Bank with incomes above the IDA ceiling. MCA assistance to
the lower-middle-income countries may not exceed 25 percent of the
total amount of assistance to all countries for that year.
[6] See Millennium Challenge Corporation, "Report on the Criteria and
Methodology for Determining the Eligibility of Candidate Countries for
Millennium Challenge Account Assistance in FY 2004, Annex A: Indicator
Definitions" (available at: http://www.mca.gov/about_us/
congressional_reports/index.shtml).
[7] MCC's fiscal year 2004 and 2005 methodology reports state that,
where the act stipulates criteria for which there is limited
quantitative information (e.g., rights of people with disabilities) or
no well-developed performance indicator (e.g., sustainable management
of natural resources), the MCC board relies on supplemental data and
qualitative information such as State Department Human Rights reports,
access to sanitation, deforestation, and trade in endangered species.
[8] The Millennium Challenge Act authorizes assistance to the national
government of an eligible country, regional or local governmental units
of the country, or a nongovernmental organization or private entity.
[9] The Consolidated Appropriations Act, 2005, provides that funds
appropriated for MCC for fiscal years 2004 and 2005 are available for
compacts only if the compacts obligate, or commit to obligate (subject
to availability of funds and agreement of the parties), the entire
amount anticipated for the compact's duration. See Public Law 108-447,
Division D, Title II, 118 Stat. 2809, 2980.
[10] The act limited this type of assistance to 10 percent of MCA's
fiscal year 2004 appropriations. The Foreign Operations, Export
Financing, and Related Programs Appropriations Act, 2005, limited this
type of assistance to 10 percent of fiscal year 2005 appropriations.
Future funding for this type of assistance will be determined by
legislation in subsequent years.
[11] Public Law 108-199 designated the USAID Office of the Inspector
General as MCC's IG.
[12] Cape Verde, eligible in fiscal year 2004, was not a candidate in
fiscal year 2005.
[13] According to GAO analysis, 12 of the countries deemed eligible in
fiscal years 2004 and 2005 met the indicator criteria but scored
substantially below the median (25th percentile or lower) on one or two
indicators. MCC's reports to Congress listed 4 countries that scored
substantially below the median (Cape Verde, Lesotho, Morocco, and Sri
Lanka). MCC provided justification for selecting as eligible these 4
countries, but it did not provide justification for selecting the
remaining 8 countries.
[14] The 6 countries that scored low on the three governance indicators
are Bhutan, China, Djibouti, Egypt, Swaziland, and Vietnam. The 13
countries that passed the indicators but were not selected are Bhutan
(2004 and 2005), Burkina Faso (2005), China (2005), Djibouti (2005),
Egypt (2005), Guyana (2004 and 2005), Kiribati (2004), Mauritania
(2004), Nepal (2005), Philippines (2005), Swaziland (2005), Tonga
(2004), and Vietnam (2004 and 2005). Six of these countries--China,
Djibouti, Egypt, Nepal, Swaziland, and Vietnam--also scored low on
trade policy relative to the MCA-eligible countries.
[15] MCC officials told us that, owing to staffing constraints, MCC did
not post updated indicator data before the board's fiscal year 2004
eligibility decisions. Having added more staff, MCC posted the updated
data prior to the board's fiscal year 2005 decisions.
[16] Source data for voice and accountability, government
effectiveness, rule of law, control of corruption, and regulatory
quality were from the World Bank Institute; for trade policy, from the
Heritage Foundation; for civil liberties and for political rights, from
Freedom House; and for country credit rating, from Institutional
Investor.
[17] MCC officials told us that they use general hyperlinks to prevent
users from linking to outdated Web addresses.
[18] Measurement uncertainty, or margin of error, makes it difficult in
many cases to say with accuracy where a country's true score lies.
Measurement uncertainty applies to virtually all indicators, including
the World Bank Institute's governance indicators. The World Bank team
that created the corruption and other governance indicators cautioned
that special scrutiny should be given to borderline cases, saying that
"for one-third of the potentially MCA-eligible countries, there is at
least a 25 percent chance they will be mistakenly classified as below
the median when they should be above, and vice versa." See Daniel
Kaufmann and Aart Kraay, Governance Indicators, Aid Allocation, and the
Millennium Challenge Account: A Summary (Washington, D.C.: The World
Bank, December 2002).
[19] According to MCC officials, the board also used Transparency
International's (TI) Corruption Perceptions Index as a secondary
corruption source. However, TI scores were not available for all the
fiscal years 2004 and 2005 candidate countries.
[20] MCC encourages countries to submit concept papers, outlines, or
other documentation for guidance and feedback before submitting initial
proposals.
[21] MCC has notified appropriate congressional committees of its
intent to enter into negotiations with these countries.
[22] The lower estimated number of compacts assumes that MCC funds 5-
year compacts at a level equal to the average annual assistance
provided by the largest donor in the 17 countries that were eligible in
fiscal years 2004 and 2005 (about $109 million). The higher estimate
assumes that MCC funds 3-year compacts at a level equal to the average
annual assistance provided by the third largest donor in these
countries (about $60 million).
[23] Based on OECD net official development assistance (ODA) data. OECD
defines ODA as grants or loans to developing countries undertaken by
the official sector (a) with the promotion of economic development and
welfare as the main objective and (b) if a loan, having a grant element
of at least 25 percent.
[24] Office of Inspector General, Review of Millennium Challenge
Corporation's Progress in Achieving Its Planned Organizational
Structure and Beginning Its Assistance Programs As of February 28, 2005
(Washington, D.C.: March 2005).
[25] The World Bank and IMF require countries to develop participatory
poverty reduction strategies as a condition for receiving assistance.
These strategies, which are outlined in countries' PRSPs, provide the
basis for World Bank and IMF concessional lending and debt relief.
[26] Republic of Honduras, Attaining the Goals of the Poverty Reduction
Strategy: Implementation Plan for 2004-2006, Consultative Group Meeting
for Honduras, Tegucigalpa M.D.C., June 10-11, 2004 (Tegucigalpa: 2004).
[27] The Millennium Challenge Act, Sec. 609(d), requires the United
States, in entering into a compact, to ensure that eligible countries
consider the perspectives of rural and urban poor, including women, and
consult with private and voluntary organizations, the business
community, and other donors.
[28] The Millennium Challenge Act, Sec. 609(g), authorizes MCC to enter
into contracts with, or make grants to, eligible countries to
facilitate compact development and implementation.
[29] For example, Mongolia has received assistance from The Asia
Foundation to develop its proposal. In addition, Honduras and Nicaragua
have received separate grants from the Central American Bank for
Economic Integration (CABEI) and Inter-American Development Bank (IDB).
[30] The Investment Committee comprises MCC's CEO and vice presidents.
[31] MCC's cost-benefit analysis identifies, among other things,
potential economic benefits and intended beneficiaries, as well as
financial and nonfinancial (e.g., environmental impact) project costs.
Previous GAO work on the Global Fund to Fight AIDS, TB and Malaria
identified technical review of grant proposals as a challenging aspect
of its operations. See U.S. Government Accountability Office, Global
Health: Global Fund to Fight AIDS, TB and Malaria Has Advanced in Key
Areas, but Difficult Challenges Remain, GAO-03-601 (Washington, D.C.:
May 7, 2003).
[32] According to MCC documents, the legal considerations include the
country's statutory requirements for compact approval and enforcement;
Millennium Challenge Act section 605 prohibitions (i.e., military
assistance and training; assistance relating to U.S. job loss or
production displacement; assistance relating to environmental, health,
or safety hazards; and use of funds for abortions and involuntary
sterilizations); and exemption MCA assistance from taxation or
reimbursement of such taxation.
[33] Many poor countries have weak, inefficient, and sometimes corrupt
institutions that resist reform. See, for example, U.S. Government
Accountability Office, Developing Countries: Debt Relief Initiative for
Poor Countries Faces Challenges, GAO/NSIAD-00-161 (Washington, D.C.:
June 2000). Also see C.I.C.E./Deloitte, Senegal "MCA Jumpstart"
Strengthening Planning and Management Systems to Support Accelerated
Development in Senegal, "MCA Jumpstart" Summary Report, Phase 1 (Dakar,
Senegal: USAID, January 2004) and C.I.C.E./Deloitte, Senegal MCA
Jumpstart Phase 2: Overcoming Absorptive Capacity Constraints (Dakar,
Senegal: USAID, November 2004).
[34] Previous GAO work suggests that countries' effective use of
development assistance may depend on their abilities to establish the
necessary institutions for identifying projects and distributing funds.
See, for example, our 2003 report on the Global Fund to Fight AIDS, TB
and Malaria (GAO-03-601).
[35] Previous GAO work on the Global Fund to fight AIDS, TB and Malaria
indicates that it can be difficult to monitor donor spending on
specific programs and to ensure that new grants augment spending at the
country level (see GAO-03-601).
[36] The NGO Implementation Working Group on the Millennium Challenge
Account includes InterAction, an alliance of more than 160 U.S.-based
international development and humanitarian organizations.
[37] Fifteen of these positions are administratively determined;
Congress authorized 30 such positions for MCC in the Millennium
Challenge Act.
[38] Yemen would have had to improve on at least three indicators to
meet the fiscal year 2004 Threshold Program criteria.
[39] Albania was not a candidate for fiscal year 2005 due to per capita
income above the IDA ceiling.
