With shift to local aid, corruption a rising challenge

Local government officials and civil society leaders observe the construction of a USAID-funded construction project that will protect village farmlands from flash floods. Photo by: Ahmad Salarzai / SIKA-East / USAID / CC BY-NC-ND

The U.S. Agency for International Development is taking a harder look at how its programs can avoid perpetuating corrupt regimes.

Aid is disproportionately going to conflict-affected and resource-cursed countries, and with the agency’s increased emphasis on directly supporting local governments and institutions, the risks of corruption are higher, agency officials said at a panel on the issue last week.

“We recognize working on the local push, but aid is going to poorly governed places, and this is going to bring difficult trade-offs and complicated issues,” Neil Levine, director of USAID’s Center of Excellence for Democracy, Human Rights and Governance, said at the panel.

The panel followed the release of Freedom House’s annual report revealing global political rights and civil liberties declining in every region of the world, with democratic ideals under greater threat than at any point in the past quarter century.

The U.S. government is exacerbating those risk factors of dealing with corrupt regimes by not being more careful of how inputs are used, and should more closely examine the type of regimes it supports and how, Sarah Chayes, senior associate in rule of law at the Carnegie Endowment for International Peace argued at the panel.

U.S. aid to Nigeria, Afghanistan and Egypt, she said, was “dealt with as badly as it could,” with donors creating long-term harm by propping up corrupt regimes instead of changing incentive structures.

But USAID officials said the organization is taking steps to avoid this type of harm. Most recently, it completed its first pilot of a new political economy analysis tool in Colombia, and is “building a cadre” of people in Washington to send on field missions to conduct more pilots in the upcoming months, Levine said.

Staff members are being trained to better understand the political and economic systems of countries to then better guide project design — choosing good partners and making a program flexible to adaptations on the ground, said Laura Pavlovic, cross-sectoral programs division chief at USAID’s Center of Excellence on Democracy, Human Rights and Governance.

The agency has also increasingly used its public financial management rapid assessment framework to analyze whether governments have the capacity to use funds with procurement integrity before passing them money.

“There is a push to look at the public accountability aspects of direct engagement with partner country governments, more attention to issues of democratic accountability for the use of funding,” Pavlovic said.

“Where are the opportunities across the development portfolio to promote accountable governance? We’re getting at that and understanding the systems and how to directly partner, not run money through systems,” she said.

PFMRAF was created as result of the USAID Forward program facing pressure to partner locally, but now the agency is indeed struggling with the tension of the local shift versus money lost to corruption — or what agency insiders call “evaporated milk”— according to a USAID employee who wished to remain anonymous.

“But consider the alternative. Do you shut down a project because of corruption? Projects help and employ people, and a shutdown is a major statement. The question is what can we put up with. You can’t get everyone,” the source said.

USAID is practicing stronger due diligence in auditing of local institutions, arbitrary “spot checks” of various programs, writing more sophisticated auditing stipulations into contracts, paying attention to declining business with corrupt leaders and assessing whether local contractors can receive grants based on their integrity, the source said.

“The major issue is whose legitimacy is advanced through what we do,” Larry Cooley, president of Management Systems International, said at the panel.

“There’s two games — the game we think we’re playing and the one [partners] are playing,” Levine added.

Carnegie is now in the process of creating a color-coded world corruption map showing revenue streams, kleptocratic structures and trade-offs in assisting various countries, Chayes told Devex after the panel.

How else could USAID and other donor agencies ensure aid to conflict-affected and resource-cursed countries does not get lost to corruption? Have a say by leaving a comment below.

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About the author

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    Claire Luke

    Claire is a journalist passionate about all things development, with a particular interest in labor, having worked previously for the Indonesia-based International Labor Organization. She has experience reporting in Cambodia, Nicaragua and Burma, and is happy to be immersed in the action of D.C. Claire is a master's candidate in development economics at the George Washington Elliott School of International Affairs and received her bachelor's degree in political philosophy from the College of the Holy Cross.