PBS NewsHour broadcast a three-part story on the effectiveness of U.S. foreign aid, claiming that it falls short of intended goals due primarily to its over reliance on the so-called “aid industrial complex.” While acknowledging that the U.S. has long been one of the world’s largest donors of foreign aid, representing less than 1% of the federal budget, only a small portion of the $33 billion aid dollars actually reach the communities they are intended to help.
The reporter, Fred de Sam Lazaro, interviews reform advocates that provide numbers and stories to highlight the high cost of implementing development projects that comply with regulations and account for all taxpayer money spent. The report also highlights successful entrepreneurs in Ghana who have not been able to obtain USAID financing but are providing cost effective means of assuring distribution of authentic pharmaceuticals, expanding health care and supporting farmers.
In the interview of Walter Kerr, Co-Executive Director of Unlock Aid, he states that less than 10% of U.S. foreign assistance reach the targeted communities. In the third part of the series, a USAID statement is shared that took issue with the 10% figure, but did not offer a more accurate number. Kerr goes on to add that 98% of USAID grants pay for activities rather than results, with 43% failing to achieve at least half of the intended grant results. His point is that the implementing partners are being paid in full, even though they failed to achieve about half of the intended results.
Kerr also references a study that found that working with local partners results in at least a 32% cost savings over the use of international firms or organizations. The reason cited for reliance on international “implementing partners” is the importance of compliance tied to taxpayer funds, rather than delivering results.
The story describes USAID’s recent localization efforts in providing at least 25% of its funding directly to local partners, noting that it has fallen well short at about 10%. Former USAID Administrator, Brain Atwood, offered that USAID has had to outsource its work to larger organizations as staffing was cut and budgets were increased. Atwood believes it will take time and additional staffing to move beyond reliance on the large implementing partners in reaching more local entities.
In an interview at the end of the three parts, de Sam Lazaro summarizes the issue – “The criticism, I think, is of a system that’s process-bound, that is inflexible, and that distorts and detracts from getting much better results than would be possible given the amount of money that’s being spent.” In response to a concluding question about alternatives to the status quo, he notes Brian Atwood’s suggestion for the need for more program flexibility to test different approaches to solving a problem. The reporter also suggests incentivizing the private sector to come up with innovation, such as Operation Warp Speed that produced the COVID vaccine in record time.
In many ways, the PBS report is the usual USAID-bashing story of wasteful spending and ineffective projects. It is old news that the cost of compliance and managing large projects in challenging contexts is high, analogous to the Defense Department’s infamous purchase of $300 hammers that complied with government specs and regulations when a typical hammer from the hardware store was suitable and only cost $25. Why rely on large, expensive contractors and grantees when entrepreneurs are addressing problems in their own countries in a cost-effective way? Fund raising brochures often describe how much of each contributed dollar reaches the villages. The “dirty little secret” offered by a former aid industrial complex executive was that, after overhead, fund-raising (“development education”), corporate expenses, and program oversight, about 35 cents of each dollar they received reached the communities being served. It may be difficult for USAID to come-up with a sector-wide benchmark on dollars per beneficiary, unless they start competing contracts and grants on that basis.
These are long-standing issues. In 2010, former USAID Administrator Andrew Natsios provided a broader perspective on the in-balance between compliance (the “counter-bureaucracy”) and technical programs and its impact on development in his Center for Global Development essay entitled The Clash of the Counter-bureaucracy and Development. He makes the case that the high cost of compliance, impatience for measurable development impact, and reliance on a short list of large implementers has distorted development programs. Among Natsios’ recommendations is to recognize that some programs, such as health and humanitarian assistance, lend themselves to measurable, more hard science-based results while others, such as institution building and policy reform are more difficult to measure and take more time. USAID should program accordingly, using different tools for service delivery, institution-building and policy reform. The aid equivalent of a $300 hammer should not be used for all programs.
Read the transcript or watch the report in the following links:
Part 1 Where does U.S. foreign aid go and does it make an impact?
https://www.pbs.org/newshour/show/where-does-u-s-foreign-aid-go-and-does-it-make-an-impact-2
Part 2 – Is U.S. foreign aid for health care being used effectively?
https://www.pbs.org/newshour/show/is-u-s-foreign-aid-for-health-care-being-used-effectively
Part 3 – How U.S. aid is being used to address food security in sub-Saharan Africa
https://www.pbs.org/newshour/show/how-u-s-aid-is-being-used-to-address-food-security-in-sub-saharan-africa
