Our Issues

Budgeting for Effective Foreign Assistance

U.S. global development and humanitarian assistance professionals constantly confront shifting challenges and emerging opportunities in their work to fight poverty, enhance food security, improve health care capacity, respond to international emergencies, among many other formidable tasks.

A critical component for success in these activities – achieving the maximum impact for sustainable results – is the availability of adequate funding that is flexible in its use, predictable in its accessibility, sufficient for maintaining human and operational capacity, and unfettered from restrictions that increase costs and undermine results.

Read more below- and find additional resources here:

Flexible funding 

For many years, Congress has maintained the practice of including funding directives in the State- Foreign Operations Appropriations bills that reflect congressional priorities on how these resources should be spent. While it is the prerogative of Congress to direct, oversee, and demand accountability of taxpayer’s money, the number of directives and the mandatory nature of them has grown considerably in the past two decades, as a 2021 CSIS report documents. American global development professionals and diplomats express concern that these congressional directives, as well as Presidential Initiatives, limit their ability to allocate funds for local priorities, support efforts to enhance country ownership and self-reliance, respond to rapidly changing circumstances, and pivot to opportunities that advance American national interests. Moreover, as support grows for having local stakeholders play a greater role in U.S.-supported development decisions and implementation, greater flexibility in how U.S. assistance is allocated will become even more crucial.

More flexible foreign aid funding mechanisms from Congress, paired with appropriate and timely accountability on the part of the executive branch, would significantly enhance the effectiveness and impact of U.S foreign assistance.  Such flexibility could take multiple forms, including the reduction of mandatory country and sector directives, an increase in the current 10% “deviation” from directives allowed by Congress, and a set-aside of 10% or 15% within the major development and health appropriation accounts that would not be subject to directives.  

At the heart of increasing funding flexibility is the restoration of trust between the executive and legislative branches: in exchange for a relaxation of restrictions, USAID and other executive officials engage in meaningful consultation with their congressional counterparts and gather the data and evidence demonstrating the success of their programs.  Where success is not achieved, they need to clearly explain why and how they plan to take course corrective action.


Timely & Stable Funding 

Foreign affairs budget instability is not new.  Delays in congressional enactment of annual appropriations, extensive post-appropriation negotiations between lawmakers and executive branch officials, changes in budget priorities of a new Congress or administration, cumbersome internal processes at USAID and the State Department, and other erratic budget practices seriously impede the allocation of funds to the field and raise uncertainties among aid managers whether their funding envelope will allow them to continue their work as planned.  Some of these obstacles appear to have grown both in frequency and magnitude in recent years.

Significant evidence shows that development assistance is most effective when funded at relatively stable levels and for multiple years. Sharp and unexpected reductions —or even the threat of such cuts — can harm effectiveness and undermine development gains. A chaotic budget environment beleaguered with cuts, delays, and rescissions does not enable effective aid nor efficient use of American taxpayer dollars. MFAN and its members have highlighted case studies that document this problem. 

When Congress delays enactment of appropriation bills, it should consider extending the time for which development and health funds are available for obligation. In addition, the post-appropriation process, (known as the Sec. 653(a) process), needs to be fixed so that funds do not languish in Washington for six months or more while lawmakers and executive branch officials negotiate country and sector allocations. And above all, development and humanitarian resources must not be used in a politicized or transactional fashion that erode stable funding streams.

Robust Funding for Development Agencies Operating Expenses  

A strong level of resources for U.S. development agencies’ operating expenses is essential for aid effectiveness.  USAID’s Operating Expenses (OE) account supports the agency’s efforts to drive innovation, attract and retain skilled development talent, oversee program implementation, including efforts to utilize increasing numbers of local partners, improve transparency and accountability, evaluate results, and apply a strong learning agenda for future activities. Not only must OE levels keep pace with growing development and humanitarian program operations, they also must include mandatory cost-of-living-increases for salary and benefits, amounts that increased an estimated 13% since 2020. In addition, increasing the number of contract officers is essential to the success of the agency’s localization work. OE resources are needed to support local capacity building efforts at USAID missions and sustain and grow the corps of Foreign Service Nationals, who are the backbone of the agency’s operations around the world. 

As a foreign assistance agency that is laser-focused on evidenced-based decision-making and that has pioneered new and innovative means of evaluating the results of its investments, the Millennium Challenge Corporation (MCC) administrative funding is critical in its efforts of program oversight, performance management and economic analysis, monitoring of country eligibility and selection, monitoring, evaluation, and evidence reporting, among other important activities.  With a modest staff of about 300 that oversees a cumulative operational budget of roughly $7 billion, the MCC must also adjust for increasing COLAs.  Likewise, the U.S. International Development Finance Corporation (DFC), as it expands to meet its significantly increased $60 billion portfolio authorized under the BUILD Act, requires sufficient administrative resources that keep pace with its growing investment activities. Of particular interest to MFAN is for the DFC to sustain strong capacity for monitoring and evaluation and reporting those findings transparently, focusing squarely on its global development mandate, and to maintain strong voices in the offices of the Chief Development Officer and Chief Risk Officer.

Cargo Preference

Under the Cargo Preference Act of 1954, 50% of all non-military U.S. government cargo -- including food for U.S. international food aid programs -- must be shipped on privately owned, U.S.-flagged commercial vessels. Numerous studies have shown that this requirement results in higher shipping costs and longer transportation times, meaning less food assistance reaches those in need. USAID estimates that in 2021 alone it would have saved $31 million in transportation costs if cargo preference requirements had been waived; those funds instead could have been used to provide food aid to approximately 16 million additional people. A 2015 report by the Government Accountability Office (GAO) found that cargo preference laws increased the cost of food aid shipping by 23 percent between 2011 and 2014.

MFAN supports waiving or permanently eliminating cargo preference requirements in order to strengthen the effectiveness and reach of U.S. international food assistance programs. Exempting food aid from U.S. cargo preference requirements is a common sense reform that would expand America’s ability to respond to emergencies and reduce famine and hunger.

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