As Congress calls for more effective and transparent U.S. foreign assistance, the State Department has an opportunity to modernize how it measures results, learns from evidence, and directs scarce resources to where they generate the greatest return for American taxpayers.
Although overall U.S. foreign assistance funding has declined compared with previous years, Congress recently passed a spending bill that delivers more support than anticipated. It allocates $51.3 billion for international affairs, 66 percent more than the administration’s request.
At the same time, it is asking the State Department to do more with less and ensure these limited dollars achieve meaningful impact. The bill directs the Secretary of State to develop a multi-year strategy to improve the effectiveness and transparency of U.S. foreign assistance – with an emphasis on outcomes, impact evaluations, and partnerships with local organizations (Sec.7011).
This congressional mandate creates an important opportunity. But it also raises a critical question: Does the State Department currently have the tools, systems, and staff to deliver on this vision?
Meeting this expectation will require the State Department to rethink its approach to Monitoring, Evaluation, and Learning (MEL), and to integrate cost-effectiveness evidence into decision making. To do so, the State Department will need additional staff capacity and technical expertise, as highlighted in a recent report by the Modernizing Foreign Assistance Network (MFAN).
When done well, MEL can strengthen accountability to Congress, taxpayers, and local stakeholders while helping to ensure that limited resources flow to the most effective programs. When done poorly, MEL risks becoming a box-checking exercise that generates data but little insight.
A cost-effectiveness approach can complement and strengthen MEL. It has two main components: (1) comparing findings from global evidence and using that evidence to design and fund cost-effective programs, and (2) producing new evidence for State to fill in knowledge gaps as needed. It goes beyond tracking program activities to help ensure that funding goes towards programs that deliver the greatest impact per-dollar-spent for a given objective.
As the State Department builds its capacity to implement foreign assistance programs, the choices it makes now can shape the value-for-money of U.S. foreign assistance for years to come.
Any effective MEL system must get the basics right, and monitoring is the first step in the process. Programs should clearly articulate what they are delivering, how much it costs, and what they aim to achieve – and then report transparently on progress toward those goals.
A high-quality monitoring and reporting practice provides accountability for resources spent as well as a critical element for measuring cost effectiveness. This requires data and reporting systems that track what services are delivered, who receives them, who is eligible, and what it costs to deliver those services.
For example, a program designed to help farming communities recover after a natural disaster should clearly report the eligibility criteria used to select communities and farming households, the services delivered and their duration, and the cost of providing that support.
Strong monitoring and transparent reporting are necessary, but they are not sufficient. To truly improve aid effectiveness, the State Department should start upstream by integrating a cost-effectiveness approach into decision-making from the very start of program design.
Traditional MEL systems often focus on whether activities were implemented as planned and whether outputs were delivered. This focus is closely tied to cost-efficiency: the amount it costs to deliver a particular component of a program.
Cost-effectiveness asks a related but distinct question: how much impact can be achieved per dollar spent? “Impact” is carefully measured – ideally using a counterfactual – and is defined in relation to the specific outcomes the Administration seeks to achieve.
Start by applying cost-effectiveness evidence.
Answering this question begins with identifying and prioritizing “Smart Buys” in foreign assistance – programs proven to consistently deliver higher impact than alternatives for every dollar of taxpayer funding toward a given objective.
Examples of these Smart Buys include:
● For improving global health: Immunization campaigns – vaccines plus things like SMS texts, ambassadors, and other ways of increasing attention to and demand for vaccines – are one example at a highly cost-effective lifesaving intervention.
● Improving food security and self-reliance: Providing households with large, one-time direct transfers has proven to be a low-cost, high impact way to increase food consumption, income, and other indicators of well-being. Pairing direct transfers with a more holistic set of services, such as livelihood trainings, savings services, and life skills coaching (an approach often called the “graduation approach”) can be an especially cost-effective intervention for increasing long-term self-reliance.
● Strengthening markets for local and U.S. businesses: Several cost-effective programs can help connect firms and entrepreneurs to markets and spur business and job growth – including investments in digital infrastructure that facilitate trade. Direct transfers can also strengthen local markets by increasing household purchasing power. Studies show that every $1 in direct transfers can generate around $2.50 in local economic activity, benefiting recipients and local businesses alike. These market benefits are often greater than those generated by vouchers or in-kind assistance.
As the State Department develops a strategy to improve aid effectiveness and clarify how evidence will inform future programming, it starts with an important advantage: a large and growing body of evidence on what works. There is also considerable practical knowledge on how to scale effective programs and monitor their efficient delivery. Thousands of impact evaluations already exist across sectors; meaning the State Department does not need to start from scratch, nor limit itself only to impact evaluations from the last year.
Produce new cost-effectiveness evidence as needed.
Where evidence is limited, or where programs represent a novel or substantially modified approach, the State Department can produce new evidence. For example, it can commission impact evaluations (when appropriate) to identify the causal effect of new programs. The recently passed spending bill allocates $15M for such impact evaluations.
When causal cost-effectiveness evidence can't be neatly applied or generated, leverage cost-effectiveness thinking.
For some programs, it might be hard to apply or produce causal evidence via impact evaluations. For example, programs related to economic growth, state craft, or other objectives are not always amenable to impact evaluations. Even in these cases, decision makers can still make better decisions by applying cost-effectiveness thinking: drawing on the best available evidence where it exists and, where it doesn’t, using transparent and well-reasoned assumptions to compare options and identify those most likely to deliver the greatest value.
Applying a cost-effectiveness approach consistently across State-managed assistance would represent a significant step forward. It would also align closely with U.S. foreign policy and strategic interests. Whatever outcomes the State Department seeks to achieve, it can apply cost-effectiveness evidence to identify the interventions most likely to deliver those results at the lowest cost.
As the State Department takes on greater leadership over U.S. foreign assistance programs, it will also face staffing and capacity constraints.
Strengthening MEL and building the capacity to integrate, cost-effectiveness evidence and thinking is not free. But it is a small fraction of program budgets and can prevent much larger inefficiencies. Without staff who can interpret evidence, assess cost-effectiveness, and translate findings into program decisions, even the best MEL frameworks will fall short.
Determining when and how to produce new evidence also requires deep expertise. Staff need to understand what evidence already exists, how to assess its quality, and where the new research would be most valuable. Otherwise, agencies risk commissioning impact evaluations that are unnecessary or not informative.
The State Department should consider:
● Establishing a small, central MEL and cost-effectiveness team with clear authority and mandate to set standards and provide guidance in partnership with technical or regional experts.
● Developing a department-wide policy that outlines expectations for transparency, data quality, and the use of evidence – potentially as part of State’s formal response to Congress’s FY26 directive.
● Embedding MEL and cost-effectiveness points of contact across bureaus or within large programs.
Such a policy could include requirements that large programs be grounded in rigorous evidence, expectations for public reporting, and minimum data quality standards. The Millennium Challenge Corporation (MCC) offers one example of how this can be done consistently: their analyses and reports include thinking through counterfactual scenarios to estimate impact behind each investment decision. Ultimately, the goal should be to embed rigorous M&E and cost-effectiveness into the State Department's institutional culture and day-to-day decision-making.
A key window to get this right.
The State Department faces growing expectations to demonstrate effectiveness at a time when resources are constrained and expectations of foreign assistance are increasing. That makes it especially important that MEL systems are right-sized, high-quality, and focused on learning – not just ensuring compliance.
There is also a clear timing imperative. While many leaders are advancing ideas on evidence-driven foreign assistance for future administrations, the decisions the State Department makes now – under current leadership and in response to congressional direction – will shape how U.S. foreign assistance is managed for years to come.
Making foreign assistance effective and transparent is not an academic exercise. It is central to ensuring that taxpayer dollars are used wisely to advance U.S. foreign policy goals as effectively as possible – with real results on the ground.
