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609(g) and Due Diligence
Office of the Inspector General
The Millennium Challenge Corporation (MCC) is requesting $800 million for fiscal year (FY) 2019, to support compacts in Tunisia, Burkina Faso, and Sri Lanka and the development of compacts in Timor-Leste and Lesotho, both of which were selected in December 2017 as eligible to develop compacts. This request will advance U.S. values and interests overseas through partnerships that fight poverty, spur economic growth, and support stability in regions of significant strategic importance. MCC selects partner countries based on hard data and rigorous analysis, and results are evaluated, monitored and publicly shared. Our business-like approach is aligned with the Administration’s priority of ensuring that the Federal Government maintains responsible and transparent stewardship of U.S. taxpayer dollars.
MCC’s operations are guided by the same core principles the agency was founded on 14 years ago and are in line with the Administration’s focus on evidence-based decision-making, evaluation, and partnership with the private sector. With a goal of advancing developing countries from aid partners to trade partners, MCC’s singular mission of spurring economic growth has been demonstrated to be one of the most effective ways to achieve widespread and lasting reductions in poverty in the developing world. By holding itself and its partner countries accountable for results and continued good governance, MCC advances U.S. security, values, and prosperity. MCC’s competitive selection system, which rewards political and economic policy advances, directly supports the President’s priority of incentivizing reforms, as stated in the National Security Strategy. And with cost-effective projects, a lean staff, and an evidence-based approach, MCC is a good investment for the American people.
The agency’s focus on transparency and accountability for results continues to be recognized. MCC was ranked #1 among U.S. Government agencies and #2 overall in Publish What You Fund’s most recent 2016 Aid Transparency Index, released in April 2016. In addition, for the second consecutive year MCC received the highest score of all federal agencies measured in Results for America’s 2017 “Federal Invest in What Works Index”. The index highlights the extent to which federal agencies build the infrastructure necessary to use data, evidence, and evaluation in budget, policy, and management decisions.
FY 2019 will be a critical year for MCC and its partners, with transformative programs in several countries on target to be presented to MCC’s Board of Directors and signed in FY 2019. Specifically, the FY 2019 request will support compact development in Tunisia, Burkina Faso, and Sri Lanka. These partnerships will advance economic growth and help people lift themselves out of poverty.
Tunisia’s compact provides a unique opportunity to collaborate with a high-capacity partner and fledging democratic state in an important region of the world, and is expected to address excessive market controls of goods and services, water scarcity, particularly in the agricultural sector of the country’s interior regions, and constraints in these sectors caused by restrictive labor market regulations.
Burkina Faso’s second compact with MCC will focus on access to energy and human development. MCC is currently working with the compact development team in Burkina Faso to identify specific problems within these sectors. Investments will potentially focus on improving the production, transmission and distribution of electricity, as well as using targeted investments to improve access to and the quality of secondary and vocational education. Initiatives will also focus on strengthening the institutional, legal, and operational frameworks of each sector.
Sri Lanka’s compact will focus on modernizing the country’s transportation and land management sectors. These interventions are aimed at reducing transport bottlenecks and congestion in the Western Province and between the Western Province and other regions; and optimizing the use of state lands for commercial purposes.
MCC’s FY 2019 request also represents an opportunity to expand on the success of MCC’s model and to continue efforts to maximize agency efficiency and effectiveness, as laid out in MCC’s Agency Reform Plan. Key elements include:
Maintaining MCC’s rigorous oversight model and commitment to learning, which includes continuous review of compact and threshold programs, eliminating activities when appropriate via regular monitoring mechanisms, and oversight by MCC’s Board of Directors. In FY 2019, MCC anticipates the development of programs in up to 10 countries with another 16 programs in implementation. Continuous monitoring and regular portfolio reviews are an important step in ensuring the agency is maximizing the impact of investments.
Managing the annual country eligibility process for compact and threshold programs. MCC’s competitive selection process is a data-driven, transparent method for determining which countries meet MCC’s stringent governance standards. To be considered for MCC funding, countries must first pass MCC’s scorecard—a collection of 20 independent, third-party indicators that measure a country’s policy performance in the areas of economic freedom, investing in its people and ruling justly. The tool represents one of the many ways MCC is distinctive in how it works to combat poverty through economic growth around the world.
Strengthening the environment for private enterprise in MCC partner countries through critical public policy reforms and institutional capacity building to create an enabling environment for investment. MCC will continue to collaborate with the private sector in the design, implementation and sustainability of compact and threshold programs and to seek co-investment opportunities and/or follow-on investments that leverage host country and MCC resources for potential public-private partnerships. An “Opening Markets” section has been included at the end of this Executive Summary section outlining some examples of potential opportunities that may exist within MCC’s current portfolio of programs.
Establishing a strong and dynamic knowledge management system, business practices, and tools to systematically share and deploy learning and results internally, externally and with MCC’s partner countries, with the goal of improving efficiency in the development and implementation of country programs and increasing MCC’s impact.
Implementing a new business process that streamlines burdensome reporting requirements by MCC’s country teams and consolidates existing programmatic information into a single comprehensive document for each country program—the Star Report. The Star Report collects critical information throughout a program’s lifecycle in areas like performance, sustainability and lessons learned, serving as a core document of record for the agency, and a go-to resource for Congress and external stakeholders after a program is completed.
Continuing to identify efficiencies throughout the compact development process with the goal of reducing development time while maintaining—or even improving—the quality of MCC’s programs. MCC’s refined investment criteria and new compact development guidance and an agency-wide “efficiency challenge” will contribute to this effort.
Taking advantage of advances in cloud computing and enterprise software management to reduce operating expenses while improving service quality, staff productivity, and information security. Cost savings will allow for additional capital investments in software solutions that support and automate core business processes, further improving staff and agency productivity.
Developing and implementing new Integrated Program Management (IPM) guidelines to help country partners establish easy-to-use cost, schedule, risk, communications, and change management systems that will provide managers the input necessary to understand compact priorities, potential risks, and upcoming decision points. This in turn will improve cost and schedule efficiency as well as project quality, allowing MCC’s funds to go further and have a greater impact.
Enhancing MCC’s workforce through an organizational and training needs assessment, and applying a new workforce demand model to enable proactive workforce management based on future business needs.
In addition to the above, in FY 2017, MCC began implementing a new internal budget framework called the Integrated Planning, Budgeting, and Execution (IPBE) system. The main objective of IPBE is to improve internal oversight of MCC’s limited resources, while improving transparency and accountability throughout the agency. The implementation of this framework will position MCC to better integrate budget formulation with execution exercises. This will provide MCC senior leadership with the necessary financial information to make strategic decisions and provide further support and accuracy in MCC’s external budget requests.
The efforts described above build upon goals identified in MCC’s current strategic plan, NEXT, as well as MCC’s corporate priorities for FY 2018, which include:
Advancing and delivering high-quality compact and threshold programs;
Strengthening organizational health and effectiveness;
Enhancing and enabling operational and technical agility and innovation; and
Advancing MCC policy initiatives.
Going forward, MCC’s incoming leadership team may choose to update the agency’s strategic plan to further enhance MCC’s singular mission, reinforce and deepen the model, and expand the agency’s impact and reach.
The following sections will discuss how MCC’s funding will support compacts in Burkina Faso, Tunisia, and Sri Lanka, future threshold programs, 609(g) assistance, due diligence, administrative expenses, and the Office of the Inspector General.