When You Say US Foreign Assistance is Corrupt, Where Are You Pointing the Finger?

From former Senator Jesse Helms’ view that US foreign assistance was “pouring money down foreign rat holes” to current Senator Rand Paul’s view that when America gives aid to developing countries “70 percent of it is stolen off the top,” there’s a widespread view that fraud and corruption are simply endemic in US foreign assistance because they are endemic in developing countries. At least when it comes to the development assistance portion of foreign aid, these claims are belied by the available evidence. And America’s aid programs have delivered some incredible results.  But to the extent the overall foreign assistance system is poorly managed to deliver, it is worth looking at who bears responsibility for those failures. The answer, surely, is the institutions implementing the programs—the ones who buy the goods and services ultimately purchased with US funding. It must be failures in their controls, the malfeasance of their staff, the grift and self-dealing of their management.

Helpfully, foreignassistance.gov, which tracks US foreign assistance spending, provides data on who is implementing programs—from weapons transfers through family planning services—so that we can see which failing institutions are the ones aid critics should hold responsible for wasting American tax dollars. And it is true that the biggest single institution implementing US foreign assistance programs worldwide is challenged by weak governance: overpaying for products, using opaque, non-competitive procurement practices to purchase useless goods and services, losing track of what it is meant to be delivering, failing to pass an audit year after year. It’s the US Department of Defense.

In 2020, the Pentagon was responsible for implementing assistance programs worth $11.8 billion. That’s 23 percent of all foreign assistance recorded for the year.  Of course, that’s mostly arms transfers, but even looking at civilian assistance, USAID, the Millennium Challenge Corporation, and the Department of State collectively implemented $4.4 billion, an additional nine percent of the total. The US government all together was responsible for implementing 39 percent of assistance.  Add in US-based nonprofits and firms, and the proportion of US foreign assistance implemented by institutions based in the US climbs to 60 percent.

Another 31 percent of funding goes to projects implemented by international organizations and multilateral bodies like the United Nations. That leaves just nine percent of all US foreign assistance implemented by the governments, firms, and nonprofits of recipient countries—less than half of the total implemented by the Pentagon alone. The Washington Metropolitan Area Transit Authority was responsible for implementing more US foreign assistance than the government of Uganda in 2020—and Uganda is near the top of the list of recipient government implementors. (WMATA is implementing the program to subsidize USAID employees for riding subways and buses in DC—that counts as foreign aid.) The US Department of Health and Human Services was responsible for implementing more US assistance than the governments of every single recipient country worldwide combined.

And when it comes to crony deals, aid critics might want to examine US assistance contracted to firms and non-profits worldwide for delivery. A full 79 percent of those implementing contracts go to US bidders, leaving a fifth for firms and non-profits from the rest of the world combined. When the World Bank provides finance to developing countries who then manage the resulting contracting processes, only about 64 percent of the total contract value goes to firms in the recipient country. Between recipient-executed World Bank assistance and donor-executed US bilateral funding it looks like the second might be more subject to elite capture.

So, when Jesse Helms was talking about pouring money down rat holes, he surely meant Dupont Down Under. Or when Senator Paul says 70 percent of foreign assistance is stolen, he must be implying it is stolen by the Joint Chiefs of Staff. And for all they misidentify and exaggerate the scale of the problem, unintentionally America-bashing aid critics in the Senate and beyond illuminate a serious issue: US assistance could have considerably more impact if it were implemented by institutions that can get value for money out of funding, and—at least with civilian assistance—that means giving recipient countries considerably more control. While you might think greater recipient control is politically impossible, in 2022, the numbers on recipient government-executed support will actually look a lot better. Along with arms shipments, the US Congress has backed billions of dollars of budget support to Ukraine, despite the fact that it scores poorly on international corruption measures. If only it didn’t take a geopolitical crisis for America to spend aid money more effectively.