USAID overestimating localization spending, transparency group claims

The United States Agency for International Development’s approach to localization overestimates the funding that flows to local organizations, aid transparency campaigners Publish What You Fund said last week. Should it stick with its current approach, the agency could imperil its goal of spending a quarter of its funding toward local entities by 2025, the nonprofit said. The United Kingdom-based organization said in a report that USAID’s approach was too loose, and could be abused by some international aid agencies who could use it to pass themselves off as local entities. How the agency decides what makes up a local organization is at the heart of what localization will look like for USAID, which can shape the way the U.S. spends its foreign aid for years to come. Administrator Samantha Power wants 25% of the agency’s funding to go toward local organizations by 2025, and five years after that, have half of its projects be led by local communities. Publish What You Fund arrived at its conclusion after looking at USAID funding in 10 countries from 2019 to 2021. It applied its own strict definition of local, which said a local organization must be incorporated in the country of USAID’s project, be run by nationals of that country or by its beneficiaries (such as refugees), should not work outside that country, and cannot be a subsidiary or local branch of an international organization. It compared its approach to USAID’s definition, which it said allowed for local versions of international entities, companies managed by foreigners, and organizations which worked in more than one country. Using its approach, Publish What You Fund found that only about 6% of funding went to local organizations whereas a little over 11% of cash would be deemed to have gone to those organizations if it employed USAID’s broader definition. Publish What You Fund said that while USAID’s definition of what makes up a local entity is clear, USAID has another category it calls locally established partners, which it says can be an American or international organization that works “through locally-led operations and programming models.” “Whether locally established partners are counted as local implementers is controversial,” Publish What You Fund said in its report. “Many civil society advocates see this as a way for US and other international actors to perpetuate their dominant role as USAID contractors.” “This could create perverse incentives for U.S. organizations to set up local offices and pass these off as ‘local,’” it added. The analysis by Publish What You Fund presents a worrying trend for USAID, the world’s premier foreign aid agency. Even when it used USAID’s standards, the non-profit showed that the agency is way off hitting its 25% target in two years time. Under USAID’s approach, the agency needed to have directed $769 million more to local organizations to reach its goal in the three years for which Publish What You Fund analyzed the funding. Adam Phillips, who directs USAID’s work on local, community, and faith-based partnerships was at the launch of the report and he acknowledged that the agency has “ways to go” on its localization agenda. He reminded the gathering in Washington, D.C. and others who joined the conversation online that the 25% target with its current definition will present a tripling of funding going to local organizations over a four-year period. The goal of that 25% spending is to have funding go “directly to local actors,” he said. But there is a history that USAID needs to overcome. “We definitely need to grapple with inequities that have been baked into the agency for decades,” he said. Direct fundinging to local organizations was not enough, he added. The agency was working to shift power to those development is meant to help. “Money is power, but power is also power,” he said. “The power to meaningfully influence key decisions … to exercise influence over how development happens for your own organization, for your own community.” He gave examples of how the agency’s missions abroad are changing the way they do business because of the agency’s localization push. USAID Zambia has established a localization unit to work with local organizations, he said. In northern Central America, the agency is reaching out to local groups in local languages. USAID is also hiring localization advisers at its missions around the world, all in efforts to realize the ambition of transferring development to communities. In Nigeria, in what he described as a sometimes challenging security environment, the agency has 16 awards to local partners worth more than $500 million, he said. But he also acknowledged that the localization targets are agencywide and some missions may be further ahead than others depending on the specific situations of those missions. Phillips also accepted that strict standards don’t always capture all the work needed to expand access to who gets to work in development. “There are limits to indicators,” he said. “We are talking about systems and culture change … We are talking about how we come to the table as partners, how we listen to the expertise and experience of local [people].”