Are USAID localization results even worse than reported?

Today, USAID reported it had slid backward on its localization target — directing 9.6% of eligible funding toward local organizations in 2023. But the true figure may be closer to 5.2%, according to a new report by the nonprofit group Publish What You Fund. “Regardless of which approach one considers, USAID is a long way from channeling 25% of its funding directly to local organizations,” Publish What You Fund wrote in its report, which was released the same day as the USAID report. “Just as importantly, how USAID defines and measures its 25% goal is working against its own progress.” The difference between USAID’s estimate and the lower PWYF figure is mainly down to two things, according to Gary Forster, chief executive of PWYF. First, there’s the definition of local: The way USAID counts a local organization is looser than some would like, often including local affiliates of multinational organizations. Second, USAID doesn’t count all its spending when setting a target for local funding. It includes only “eligible funding” — money that could reasonably be expected to go to local organizations, which excludes cash that goes to the United Nations, staff and embassy costs, among other things. In 2022, USAID considered only around 43% of all funding to be eligible, with data from USASpending clocking in at $35.9 billion, and a breakdown in USAID’s last localization report counting a total eligible funding envelope of around $15.5 billion. Publish What You Fund thinks far more should be considered. “Setting a target and making the data publicly available is great, and sets an example,” Forster said. “But the devil’s in the details, and things like the definition [of local] and the denominator really matter if you want to drive change and be credible.” Publish What You Fund doesn’t look at localization targets the same way USAID does. It doesn’t have the capacity to analyze every grant, so its researchers sampled 10 priority countries out of a portfolio of over 100. That may explain part of the difference — but a larger part, they say, comes down to definitions. Different definitions, different results USAID’s figures and the PWYF analysis come three years after USAID’s administrator, Samantha Power, set an ambitious localization target. By 2025, USAID aims to have shifted a quarter of all eligible funding to local organizations — and five years after that, it hopes, half of USAID’s programs will be led by those they aimed to serve. With two years left until that first deadline, the differences between USAID and Publish What You Fund’s figures are stark. While USAID defines local entities as those headquartered in a target country, the agency doesn’t necessarily exclude those affiliated with an international organization or private sector group such as Population Services Kenya or Right to Care Zambia. Publish What You Fund does the opposite, removing international organizations from their analysis. And according to Forster, that’s part of the problem. “There’s a whole bunch of money in [USAID’s count] that we don’t think meet most people’s ideas of local,” he said. “If you’re looking to diversify the portfolio of service providers, this definition isn’t going to encourage that. In fact, this definition could allow local offices of international organizations to spin off and start hoovering up those local contracts.” It’s something that, for decades, organizations have warned against. Those tied to international agencies can often ride the name of a trusted brand, Forster explained, eating up competition against less-resourced organizations. There’s also the issue of capacity, he added: Organizations with years of experience competing and winning USAID awards are more likely to continue doing so unless they are restricted from applying in the first place. “Unless there’s some kind of affirmative, proactive action taken to change the landscape, it’s hard to see how the current incentives will play out in anything other than the usual suspects winning the same work,” Forster said. By counting such organizations, Publish What You Fund found an extra $26 million was being counted toward entities that the organization did not define as local, a figure the report stated led to a 12% inflation of total funding to local organizations. “We will always keep coming back to this issue of how you define and measure local because it’s absolutely critical,” said Tod Preston, the executive director of the Modernizing Foreign Assistance Network, an advocacy organization that supported Publish What You Fund’s report. “That’s really where the rubber meets the road, as it has huge implications.” USAID and Publish What You Fund also differ when it comes to the denominator of the localization equation. USAID draws that figure from a smaller pot of funding, one that excludes funds being channeled to projects run by United Nations agencies and other multinationals. But Publish What You Fund looks at the entire flow of project-type interventions in the 10 countries they analyzed, raising the denominator of the localization equation in those nations from $2.4 billion to $4.2 billion, the organization stated. “A significant part of this envelope — 35.6% — is funding to UN agencies for project payments,” the report found, with the bulk of that funding going toward United Nations agencies in Kenya, Jordan, Haiti, Guatemala, Ethiopia, and Bangladesh. The key difference is that USAID considers money currently going to the United Nations as cash local organizations could never compete for. But Publish What You Fund disagrees; the United Nations is delivering programs, it says, and there is no reason, in theory, that a large local organization couldn’t do the same work. The exclusion of U.N. funds from the total pot can mean huge ripple effects for localization in certain countries, Forster explained. It might explain why in Bangladesh, direct funding toward local organizations made up just 5.7% of USAID’s in-country total, according to Publish What You Fund statistics. While Bangladesh hosts a surplus of large, well-connected local organizations, the United Nations runs much of the country’s response to the ongoing Rohingya refugee crisis — a funding stream that’s excluded from the localization pot, Forster said. “When you talk to local organizations [in Bangladesh], their whole concept of localization is less money to the UN, and more money to local organizations,” Forster said. “But when UN money is getting ring-fenced, local organizations are pulling their hair out saying, what game is this that we’re playing?” Localization by country The local funding landscape changes from country to country — but for every nation Publish What You Fund analyzed, the numbers were startlingly lower than USAID’s figures. Kenya — a nation with a robust development ecosystem, and one of the largest economies on the African continent — held the highest portion of locally funded organizations among the nations Publish What You Fund selected. The organization found that 15% of USAID funds went toward local Kenyan groups in 2023, but in USAID’s progress report, the agency reported a figure more than three times higher: 51.3%. The gaps between the other nine nations shared a similar pattern, though not quite as steep. USAID measured Bangladesh’s local funding level at 9.5%; Publish What You Fund tracked the same figure at 5.7%. USAID found 19.4% of dollars in Guatemala were channeled to local organizations; Publish What You Fund’s figures came out at 6%. That all comes down to the numerator and the denominator of the equation, explained Sally Paxton, Publish What You Fund’s U.S. representative. “We understand that this is a really ambitious job. And USAID, more than any bilateral that we know of, has set a very ambitious target,” said Paxton. “But it really needs the voice of local people to come in and change the way that this assistance is delivered — and that’s a big shift to turn around.” Still, whether it takes two years or 20, the world will be watching. USAID is virtually the only federal aid agency that’s been trying to localize its funding so publicly, Forster said, noting that several governments have rejected Publish What You Fund’s offers to run their own numbers. “They’re glad that they haven’t set their own targets because genuinely, it’s really hard,” said Forster. “If [the other governments] know their number, they’ll need to act on it. So they’re just going to watch what USAID does for now.”