GAO Audits MCC Performance in First 3 Countries

GAO's audit (pdf) of MCC operations in Madagascar, Cape Verde and Honduras--the first three compacts--is out. The report is LONG, so let me break out some of the notables in the report. Also, bear in mind that many of the findings and recommendations included in this audit have in fact been applied by the MCC in subsequent compacts:

• Due diligence activities, both ex-ante diagnostic (economic rate of return and poverty/social impact assessment) and overall program monitoring and evaluation strategies are weak. Due to problems of data quality, the initial analysis of certain projects' economic impact may not have reflected actual country conditions. Unreliable benchmarks may make progress toward a goal less meaningful;
• in Madagascar and Cape Verde, participation in the compact design process was fairly limited;
• use of a Project Implementation Unit (PIU) approach to managing MCA programs trades off efficiency/implementation speed for capacity and fiduciary institution building;
• local understaffing at the beginning of compacts makes it harder to achieve all goals within the compact period.

GAO's monitoring and evaluation recommendations for MCC bear particular mention, not only because M&E is a critical tool for enabling MCC to adhere to its unique mission of enforcing accountability, but also because timely, methodologically sound impact analyses can be the best way to inform the design of future development initiatives undertaken by other donors, NGOs, and developing country governments. As discussed in CGD's Evaluation Gap Working Group report, there is a dearth of good impact evaluations. For MCC to become a leader in accountable and effective development programming, it should pay particular attention to GAO's recommendations to improve its M&E by: ensuring the reliability of baseline data collection, clearly linking outcome targets to the economic justification of a project, instituting clear policies for establishing and adjusting targets, and developing early on a design for randomized controlled trials for use throughout the projects' lifecycles. Importantly, the MCC and recipient countries need to exert greater energy and resources to these activities at the outset, not well into the program's implementation.It will be worth keeping an eye on these issues raised by GAO to see if they are, as the State Department claims, merely transitory, due to the infancy of MCC's compact implementation processes and still evolving policies and procedures.