Detailed Information on the
Millennium Challenge Corporation Assessment

Continuing efforts to apply lessons learned from MCC's start-up, especially improvements on the compact implementation process.

Implementing a comprehensive performance data collection, storage, and reporting system to improve data collection and facilitate the comparison of performance measures across compacts.

Strengthening the integration of performance information in the budget submission and other related documentation.

Measure: Madagascar: As MCC's mission is to reduce poverty through economic growth, the Corporation measures each Compact's ability to increase the income of its beneficiaries. In Madagascar, MCC seeks to increase household income in its Compact zones from a baseline of $698 to $852, which is approximately a 22% increase.

Explanation:Economic growth will be measured by the most appropriate data available for each Compact but will always measure either incomes or value-added since these are the constituent elements of GDP. For Madagascar, the results of the 2005 Household survey and the Agricultural Productivity survey in MCA zones were used to understand the significant factors which determine the level of poverty in each region, and also to assess the income effect of each factor depending on the regional poverty level and economic environment. Income targets were then set for each zone to take into consideration the characteristics of each region. Other studies of rural income growth were used to complement the hypotheses on the income effects from agricultural productivity and access to credit.

Measure: Honduras: As MCC's mission is to reduce poverty through economic growth, the Corporation measures each Compact's ability to increase the income of its beneficiaries. In Honduras, MCC seeks to increase income of beneficiaries by $69 million.

Explanation:Economic growth will be measured by the most appropriate data available for each Compact but will always measure either incomes or value-added since these are the constituent elements of GDP. For Honduras, MCC will use the sum of the benefit streams from each of the activities to determine its increase of beneficiaries income. These will be derived from the Economic Rate of Return (ERR), which was calculated for each Project to determine if the Project would have a significant impact on Economic Growth and Poverty Reduction. All Activities were required to have an ERR greater than 12%, which is higher than two times the annual GDP growth rate of 4.6% for both 2004 and 2005.

Measure: Cape Verde: As MCC's mission is to reduce poverty through economic growth, the Corporation measures each Compact's ability to increase the income of its beneficiaries. In Cape Verde, MCC seeks to increase income of beneficiaries by $10 million..

Explanation:Economic growth will be measured by the most appropriate data available for each Compact but will always measure either incomes or value-added since these are the constituent elements of GDP. For Cape Verde, MCC will use the summation of the income benefits from the program's four projects to determine its increase of beneficiaries' income. Cape Verde's projects include Watershed Management and Agriculture Support Project (Increase in farm profits, farm wagers, retained earnings of agribusinesses, and returns to micro-finance institutions), Port of Praia Project (Estimated increase of value-added tourism industry and in government revenue as a result of increasing the efficiency of the Port), Roads Project (Savings on vehicle operating costs from the road upgrade with asphalt plus the increase in income from the construction of bridges), and Private Sector Development Project (Estimated contribution to economic growth calculated from the expected elasticity of growth with respect to the ration of liquid liabilities to GDP).

Measure: Corporate-Wide Efficiency Measure: Minimize the administrative costs of developing and implementing MCC Compacts compared to the total value of Compacts. MCC will use this measure to determine whether MCC administrative and contract resources are being used to more efficiently develop and oversee implementation of Compacts as lessons learned from early Compact development and implementation are applied.

Explanation:The measure is expressed as a percentage - the numerator is the annual total administrative and due diligence obligations for the fiscal year and the denominator is the total amount committed under Compacts and Threshold Agreements that were signed or undergoing implementation in the fiscal year. Data is from MCC's Oracle financial system, which is hosted by the National Business Center. Note: 2007 estimates assume 6 Compacts and 8 Thresholds signed. 2008 estimates assume a $3 billion appropriation.

Measure: Corporate-Wide Efficiency Measure: Minimize the funds disbursed for administrative activities compared to the funds disbursed to implement Compact and threshold programs. MCC will use this measure to determine whether MCC administrative and contracted resources are being used to more efficiently develop and oversee implementation of Compacts as lessons learned from early Compact develop and implementation are applied.

Explanation:The measures is expressed as a percentage - the numerator is the annual total administrative and due diligence disbursements for the fiscal year and the denominator is the annual total amount disbursed for compacts, threshold agreements and section 609(g) activities. Data is from MCC's Oracle financial system, which is hosted by the National Business Center. Note: 2007 assumes 6 Compacts and 8 Thresholds signed. 2008 assumes a $3 billion appropriation.

Measure: Madagascar Land Tenure Project: Adoption of a new land law consolidating the legal basis for proposed land tenure reform procedures.

Explanation:Legislative proposal reflecting the Programme National Foncier (PNF) submitted to Parliament and passed. Source: Official Records.

Measure: Madagascar Land Tenure Project: Protect existing property rights records; Improve ability to identify competing property claims and prioritization of property rights.

Explanation:Percentage of land documents (A) inventoried and (B) restored/digitized. Land document comprise livres fonciers, land dossiers, plans individuels, cadastre plan, and plan de reperage. Source: National Land Program through the Land Observatory Note: (A) Inventoried and (B) Land Documents Restored/Land Documents Digitized

Measure: Madagascar Land Tenure Project: Elimination of bottlenecks and delays in the present land registration system.

Explanation:Reduction in average cost and time required to issue a new title or certificate at the local and/or national land services offices in three zones: (A) Antananarivo, (B) Vakinankaratra/Amoron'i Mania, and (C) Menabe (USD / days). Source: National Land Program through the Land Observatory

Measure: Madagascar Finance Project: Increase competition in the financial sector.

Explanation:Increase (A) number of savings accounts and (B) outstanding value of accounts (in USD) from National Savings Bank, Caisse d'Epargne de Madagascar (CEM). Source: National Savings Bank (CEM)

Measure: Madagascar Finance Project: Increase competition in the financial sector.

Explanation:Increase (A) the number and (B) outstanding value of accounts (in USD) from the MicroFinance Institutions (MFIs). Source: Comission Nationale de la Micro-Finance through the Association Professionnelle des Institutions Financieres Mutualistes and Association des Institutions Non-Mutualistes.

Measure: Madagascar Agricultural Business Investment Project: Create a National Coordinating Center (NCC) and coordinate activites with Government Ministries and Agricultural Business Centers (ABCs) through identifying investment zones.

Explanation:Identify zones and description of benefits within each Zone submitted.

Measure: Madagascar Agricultural Business Investment Project: Improve production technologies and market capacity in the rural areas.

Explanation:Increase (A) number of farmers receiving technical assistance and (B) number of farmers that adopt new technologies or engage in higher value production. Source: Independent evaluations of targeted clients as compared to a control group.

Measure: Honduras Agricultural Project: Increase productivity and business skills of farmers who operate small- and medium-size farms and their employees through number of program farmers harvesting high-value horticulture crops.

Explanation:Number of active Program Farmers plus number of Program Farmers that have graduated from the program that are still producing high-value horticulture. Source: Implementing Entity for Farmer Training and Development Activity.

Measure: Honduras Transportation Project: Reduce transportation costs between targeted production centers and national, regional, and global markets through improving highways and secondary roads as well as building weight stations.

Explanation:Reduce transportation costs in three ways: (A) Kilometers of highway upgraded, (B) Kilometers of secondary roads upgraded, and (C) Number of weight stations built.

Measure: Cape Verde Watershed Management and Agriculture Support Project: Increase agricultural productivity in the intervention areas.

Explanation:Average yield per production cycle for hoticulture products (tons/ha). Horticulture includes the following products: tomato, cabbage, carrot, pepper, potato, sweet potato, yucca, and onion. Source: MCA Watershed Baseline Survey, Agriculture Campaign 2005/2006, MCA Cool Season Agricultual Survey: October/April, MCA Warm Season Agricultural Survey: May/September.

Measure: Cape Verde Watershed Management and Agriculture Support Project: Area treated with soil conservation and water capturing infrastructure.

Explanation:Total number of hectares with rural infrastructure for soil conservation and water catchment like terraces, contour walls, vegetation, dikes, check dames, etc. Source: Annual Monitoring Report

Measure: Cape Verde Watershed Management and Agriculture Support Project: Area irrigated with drip irrigation.

Explanation:Total number of hectares irrigated with drip irrigation in the intervention areas. Source: Agriculture Census 2004, MCA Watershed Baseline Survey, Agriculture Campaign 2005/2008, Quarterly Monitoring Report.

Measure: Cape Verde Port of Praia Project: Increase efficiency of the Port of Praia in tons of general cargo handled per hour.

Explanation:Tons of general cargo handled per working hour (effective rate). Source: Empresa Nacional de Administracao dos Portos (ENAPOR)/National Port Authority Report.

Measure: Cape Verde Port of Praia Project: Increase efficiency of the Port of Praia in containers handled per hour.

Explanation:Containers handled per working hour (effective rate). Source: Empresa Nacional de Administracao dos Portos (ENAPOR)/National Port Authority Report

Measure: Cape Verde Roads Project: Improve rural transportation network through kilometers of roads rehabilitated.

Explanation:Total number of kilometers of road rehabilitated (Cumulative). Source: Supervisory Firm's Final Report.

Measure: Cape Verde Private Sector Development Project: Increase in financial intermediation, volume of deposits in micro-finance institutions as percentage of total deposits.

Explanation:Volume of deposits in mico-finance institutions (MFI) supported by MCC as percentage of total deposits in the formal banking system. Source: Annual Central Bank Report and MFI's Annual Report.

Measure: Madagascar Economic Rate of Return: The economic impact of the Compact was estimated by forecasting the benefits of each Project relative to the costs. The horizon for Madagascar's ERR is 2014 with an increase of 31%. MCC will use this measure to determine if the benefits of the project exceed the costs. This measure can be compared across Compacts.

Explanation:ERR's methodology is best described as micro-economic growth analysis. In brief, it seeks to measure the economic growth impact of Compacts at the micro-economic level by measuring the expected increase in either value-added or incomes of individual firms, individuals, or sectors of economic activity. At a high-level, the ERR is calculated through a four-step process: (1) define the intended beneficiaries and the set of actions that are necessary and sufficient to achieve the desired impact (such as a rise in incomes or value-added of this group), (2) gather data on total value-added or incomes of the intended beneficiaries today and estimate value-added without the program over time, (3) estimate the value-added with the program over time, and (4) organize a cash-flow analysis with program costs being negative entries and differences in value-added being positive entries. This analysis determines an internal rate of return, or Economic Rate of Return.

Measure: Honduras Economic Rate of Return: The economic impact of the Compact was estimated by forecasting the benefits of each Project relative to the costs. The ERR for each Project was calculated based on the internal rate of return of all costs and benefits. For the Rural Development Project, MCC has an ERR with a 15-year time horizon achieving an increase of 21%. For the Transportation Project, MCC has an ERR with a 20-year time horizon achieving an increase of 25%. This measure can be compared across Compacts.

Explanation:ERR's methodology is best described as micro-economic growth analysis. In brief, it seeks to measure the economic growth impact of Compacts at the micro-economic level by measuring the expected increase in either value-added or incomes of individual firms, individuals, or sectors of economic activity. At a high-level, the ERR is calculated through a four-step process: (1) define the intended beneficiaries and the set of actions that are necessary and sufficient to achieve the desired impact (such as a rise in incomes or value-added of this group), (2) gather data on total value-added or incomes of the intended beneficiaries today and estimate value-added without the program over time, (3) estimate the value-added with the program over time, and (4) organize a cash-flow analysis with program costs being negative entries and differences in value-added being positive entries. This analysis determines an internal rate of return, or Economic Rate of Return.

Measure: Cape Verde Economic Rate of Return: The economic impact of the Compact was estimated by forecasting the benefits of each Project relative to the costs. For Cape Verde, this measure includes: (A) the Watershed Management and Agriculture Support Project ERR (10%) examines the increase in value added that results from the horticulture and fruit production, (B) the Roads Project ERR (14%) measures the reduction in vehicle operating costs through road improvements and bridge construction, (C) the Port of Praia ERR (23%) measures improvements to the port assumed to prevent a slowdown in growth in the tourism, and (D) the Financial Sector Project ERR (11%) is based on published econometric estimates of the impact of the depth of the financial sector of GDP growth. This measure can be compared across Compacts.

Explanation:ERR's methodology is best described as micro-economic growth analysis. In brief, it seeks to measure the economic growth impact of Compacts at the micro-economic level by measuring the expected increase in either value-added or incomes of individual firms, individuals, or sectors of economic activity. At a high-level, the ERR is calculated through a four-step process: (1) define the intended beneficiaries and the set of actions that are necessary and sufficient to achieve the desired impact (such as a rise in incomes or value-added of this group), (2) gather data on total value-added or incomes of the intended beneficiaries today and estimate value-added without the program over time, (3) estimate the value-added with the program over time, and (4) organize a cash-flow analysis with program costs being negative entries and differences in value-added being positive entries. This analysis determines an internal rate of return, or Economic Rate of Return.

Measure: Cape Verde Financial Sector Reform: Increase competition in the government securities as percentage of government security stock held outside of financial institutions and government agencies.

Explanation:Total value of T-bills held outside of financial institutions and government agencies as a percentage of total value of T-bills outstanding. Source: Annual Central Bank Report and Annual Government's Accounts

Measure: Cape Verde Infrastructure Project: Improve rural transport network.

Explanation:Percentage of rehabilitation work phases completed on roads. (Cumulative Percentage) Source: Fiscal Agent Financial Report

Measure: Cape Verde Infrastructure Project: Improve rural transport network.

Explanation:Percentage of rehabilitation work phases completed on bridges (Cumulative percentage). Source: Fiscal Agent Financial Report. Note: Work in this area is not expected until Year 2 Quarter 2 due to start-up delays.

Measure: Quality of Compacts in Implementation: Achieve sustainable transformative development through improving the annual percentage of Compact targets met on time.

Explanation:This indicator is a composite measure of quality of MCA implementation of all MCC Compacts. As such it is an appropriate measure of MCC performance in implementing its Compacts. It treats all Compacts of equal importance and all targets of equal weight. The scaling of the scorecard is arbitrary but consistent across all Compacts. The level of indicator achievement should increase from one year to the next as shown in the targets below. Source: Monitoring and Evaluation Plans, Indicator Tracking Tables

Measure: Madagascar Finance Project: Increase competition in the financial sector.

Explanation:Increase the number of (A) savings accounts and (B) outstanding value of accounts (in USD) from the primary banks in MCA zones. Source: Central Bank and Commission de Supervision Bancaire et Financiere.

Measure: Madagascar Agricultural Business Investment Project: Increased formalization of enterprises.

Explanation:Increase (A) number of Agricultural Business Center (ABC) clients that register as formal enterprises, cooperatives, or associations and (B) number of ABC clients with marketing contracts.

Measure: Madagascar Agricultural Business Investment Project: Identify investment opportunities through identifying agribusiness opportunities.

Explanation:Increase (A) number of visitors receiving information from National Coordinating Center (NCC) with respect to business opportunities and (B) number of visitors from ABC with respect to business opportunities.

Measure: Madagascar Agricultural Business Investment Project: Improve production technology and market capacity in the rural areas.

Explanation:Increase (A) number of businesses receiving technical assistance and (B) increase number of businesses employing technical assistance. Source: Agricultural Business Center.

Measure: Madagascar Agricultural Business Investment Project: Improve production technology and market capacity in the rural areas.

Explanation:Increase number of business plans prepared for individual farmers, farmer associations/cooperatives, and enterprises. Source: Agricultural Business Center, National Coordinating Center.

Measure: Madagascar Agricultural Business Investment Project: Increase competition in the financial sector.

Explanation:Increase (A) number of loans and (B) value of outstanding loans (in USD) from Micro-Finance Institutions in MCA Zones. Source: Comission Nationale de la Micro-Finance through the Association Professionnelle des Institutions Financieres Mutualistes and Association des Institutions Non-Mutualistes.

Measure: Madagascar Finance Project: Increase competition in the financial sector.

Explanation:Increase (A) the number of loans and (B) value of outstanding loans (in USD) from the primary banks in MCA Zones. Source: Central Bank and Commission de Supervision Bancaire et Financiere.

Is the program purpose clear?

Explanation: The purpose of the Millennium Challenge Corporation (MCC or Corporation) is clear. MCC's mission is to reduce poverty by supporting sustainable, transformative economic growth in developing countries which create and maintain sound policy environments. MCC provides assistance through Compacts for development projects that remove constraints to poverty reduction and economic growth.

Evidence: Millennium Challenge Act of 2003, PL 108-199, Division D, Title VI; Annual Report 2005, p. 10; Performance and Accountability Report 2006, p.1.

Does the program address a specific and existing problem, interest, or need?

Explanation: According to the World Bank, "about one billion people [one fifth of the world's population] live on less than $1 a day; 2.6 billion live on less than $2 a day." The need for poverty reduction and economic growth is an existing problem worldwide. Poverty within Compact countries can be illustrated in two unique ways, based on income level and human welfare indicators. First, all compact countries have a considerable percentage of their population living below $2 dollars a day, ranging from 25.3 percent in Georgia to 90.6 percent in Mali. Second, in looking at the Human Development Index (HDI), a rating based on three factors, healthy life, knowledge, and standard of living, MCC Compact countries were ranked as either Medium Human Development (8 total) or Low Human Development (3 total). Of the 177 countries that were ranked, MCC Compact countries ranged from Armenia at a ranking of 80 to Mali, the third lowest, at a ranking of 175. These indicators show that MCC's Compact countries have significant poverty in both the amount of income earned and quality of life lived.

Evidence: World Bank Poverty; MCC Developed Matrix of Percent Living Below $1 a day, $2 a day, and HDI; Human Development Indicator; GNI per Capita.

Is the program designed so that it is not redundant or duplicative of any other Federal, state, local or private effort?

Explanation: With its establishment, MCC incorporated lessons learned from decades of United States government and other bilateral and multilateral donor agencies' development experience. The Corporation provides a unique mechanism for United State's foreign assistance. Through its established selection criteria, MCC concentrates its work on a select number of countries that have already demonstrated their commitment to their own development. MCC believes that it will be most effective if its assistance is invested in countries where strong institutions and sound policies are in place to support poverty reduction through economic growth. MCC, therefore, only partners with governments that have shown their commitment in three major categories: ruling justly, investing in people, and encouraging economic freedom. Craig Burnside and David Dollar's work "Aid, Policies, and Growth" supports MCC's focus on countries with sound policy environments as it is only within these countries that foreign assistance has been successful in spurring economic growth. They state, "There is robust evidence that aid has a positive effect on growth in an environment of good fiscal, monetary, and trade policies." (30) Additionally, in contrast to other donors that determine development projects for countries, MCC has sought greater country ownership through enabling country's to identify and design their own development projects. MCC's Office of the Inspector General (OIG) from USAID defines its approach as innovative. In the "OIG for MCC Annual Plan for 2007," OIG states that "this strategy of relying on host country for design and implementation of the program is very different from traditional foreign assistance model of donor designing and implementing the program." (1) In looking at the United States Agency for International Development (USAID), it is clear that MCC's mandate is distinct. USAID's mission is to "provide economic and humanitarian assistance in more than 100 countries to provide a better future for all." Through this mission, it is clear that USAID provides a broad range of assistance in numerous countries. MCC has alternatively decided to narrow its work, spending the majority of its resources on countries where its assistance would be most effective. A Brookings Institution report by James W. Fox and Lex Rieffel entitled "The Millennium Challenge Account: Moving Toward Smarter Aid" states that "MCC appears to be a more promising vehicle [than USAID] for transferring resources flexibly in response to the key needs of recipient countries." (34)

Evidence: Selection Criteria; Selection Indicators; Country Scorecards; Dollar and Burnside, "Aid, Policies, and Growth," The World Bank, p. 31; USAID OIG for MCC, "Annual Plan 2007," p. 1; Fox and Reiffel, "The Millennium Challenge Account, Moving Toward Smarter Aid," Brookings Institution, July 2005, p. 34; Steven Radelet, "The Millennium Challenge Account: Transforming US Foreign Assistance Policy," Center for Global Development, Agenda, Vol. 11, No. 1, November 2004, p. 53-54.

Is the program design free of major flaws that would limit the program's effectiveness or efficiency?

Explanation: MCC's design is free of major flaws that would limit the program's effectiveness or efficiency. MCC benefits from over 50 years of lessons learned from other donors' experiences and has worked to incorporate these lessons into its design. The Corporation was designed as a lean structure with a low-cost approach and better allocation of resources. MCC monitors its design, structure, and effectiveness on an ongoing basis. As issues arise, MCC develops creative solutions to address any potential limitations. For example, MCC has improved its efficiencies on Compact development and implementation in several ways, including restructuring several parts of the organization to streamline proposal evaluation and Compact development, developing a comprehensive training program for teams working on Compacts, offering "MCC-University" to representative from newly-selected and currently Compact eligible countries to address any questions on Compact development, and reducing the timeline for Compact implementation through "bridge" or "609(g)" funding. Additionally, performance and efficiency measures are built into each Compact to ensure effectiveness at the implementation level. USAID's OIG has positively reviewed MCC's work in its "Review of the Millennium Challenge Corporation's Progress in Achieving its Planned Organizational Structure and Beginning its Assistance Programs," stating that "MCC is steadily transforming itself from a start-up organization to a fully-fledged operating organization and structuring itself to be among the countries' largest donor." Currently, there is no strong evidence that another approach would be more effective.

Evidence: FY2007/2008 Performance Plan; Compacts; USAID OIG for MCC, "Review of the Millennium Challenge Corporation's Progress in Achieving its Planned Organizational Structure and Beginning its Assistance Programs," p. 1; Fox and Reiffel, "The Millennium Challenge Account, Moving Toward Smarter Aid," p. 25.

Is the program design effectively targeted so that resources will address the program's purpose directly and will reach intended beneficiaries?

Explanation: MCC is designed to ensure that resources will address the program's purpose directly and reach the intended beneficiaries. The Corporation targets its intended beneficiaries in three ways. First, through its selection process, MCC focuses its work on countries that meet an income requirement and perform above the median on 16 policy indicators. Through these criteria, MCC focuses on the poorest countries with the greatest ability to succeed. Second, beneficiary analyses are built into each compact that enables each activity to address MCC's mission to reduce poverty by targeting a specific group. Third, MCC has a low ratio of program to administrative expenses, enabling the majority of the resources to be expended on development activities. Fox and Reiffel state that "Overhead, monitoring and evaluation costs represent... a range that appears to be far below the comparable percentages for USAID and other bilateral donor agencies" (15). Through these mechanisms, MCC limits the amount of unintended beneficiaries.

Evidence: Selection Criteria; Country Scorecards; Guidelines for Economic and Beneficiary Analysis of a Compact Proposal; Compacts; Beneficiary Analyses; FY2007/2008 Performance Plan; Fox and Reiffel, "The Millennium Challenge Account, Moving Toward Smarter Aid," p. 15.

Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: MCC's mission is to reduce poverty by supporting sustainable, transformative economic growth in developing countries which create and maintain sound policy environments. The Corporation's first strategic goal is to achieve sustainable transformative development. MCC carries out this work through the implementation of Compacts that meet MCC's selection criteria. Each MCC Compact contains a limited number (usually 2-3 per Compact) of specific long-term (5 year or more) performance measures that focus on outcomes and meaningfully reflect the purpose of the program, which is the reduction of poverty through economic growth. All Compacts to date have five-year terms with the exception of Madagascar with its four-year term. The long-term performance measures can be found in an abbreviated form in Annex III of each Compact and in their full form in the Monitoring and Evaluation (M&E) Plans of each Compact. In line with the mission and strategic goals of MCC, the measures focus on two outcomes: (1) how much poverty has been reduced and (2) how much economic growth has been achieved. The first measure on poverty reduction is calculated through household surveys taken at the beginning of the Compact, at intermediate intervals, and after the Compact completion. In many countries, baselines are still being determined through MCC procured household surveys as most countries have outdated census figures. The second outcome on economic growth is measured by the most appropriate data available, but will always measure either incomes or value-added since these are the constituent element of GDP. MCC is also in the process of establishing beneficiary-weighted indexes to allow comparison of measures across Compacts. These indexes will allow MCC to compare progress between countries. MCC plans to have an initial version of these indexes in MCC's next performance plan. Additionally, as Economic Rates of Return (ERR) are developed for each Compact, they represent an additional long-term measure that will be able to be compared across Compacts.

Evidence: Compact Annex III; M&E Plans; FY2007/2008 Performance Plan; Guidelines for Economic and Beneficiary Analysis of a Compact Proposal; MCC Developed Performance Measure Matrix.

Does the program have ambitious targets and timeframes for its long-term measures?

Explanation: The long-term performance measures in each MCC Compact have both ambitious targets and timeframes. For poverty reduction, baseline data is used to determine the level of poverty in areas where Compact projects are targeted. From these baselines, MCC then develops ambitious targets on the reduction in the number of people living in poverty based on Compact activity. For economic growth, ERRs are developed based on rigorous economic principles. In order for an investment to have a high ERR, the economic benefit to the beneficiary must be achieved within a certain period of time; otherwise, it will result in a negative or drastically diminished ERR. These timeframes are specific in each Compact but vary between Compacts due to variations in design, sector, and scale of projects. It is also worth noting that the field of international economic development has traditionally emphasized inputs (dollars spent) or outputs (units built) and not on outcomes. This emphasis was in part due to the level of difficulty in achieving and demonstrating impact. Therefore, MCC's outcome-oriented measures are in their very nature ambitious.

Evidence: Compact Annex III; M&E Plans; FY2007/2008 Performance Plan; MCC Developed Performance Measure Matrix.

Does the program have a limited number of specific annual performance measures that can demonstrate progress toward achieving the program's long-term goals?

Explanation: In order for MCC to accomplish its mission and long-term performance measures of reducing poverty through economic growth, MCC has established a limited number of specific annual performance measures for each Compact, which are stated in each country's M&E Plan. Each Compact has four to seven discrete, quantifiable annual performance measures. These annual performance measures measure the program's progress and are aligned with the long-term goals of the Compact. The annual performance measures measure both outcomes and outputs. The annual performance measures are often based on each Compact activity and measure the most critical indicator of the activity's success. For example, in Madagascar, one of the Compact's main components is a Land Tenure Project. A critical element of this project is the elimination of bottlenecks and delays in the present land registration system. MCC is therefore measuring the reduction in average cost and time required to issue a new title at the local and/or national land services offices in three zones. MCC has established corresponding annual measures in all Compacts. The Corporation has also established an output measure in its FY2007/2008 Performance Plan that cuts across all Compacts that have entered into force and measures improvement in the annual percentage of Compact targets met on time. This measure is designed to assess MCC's ability to successfully implement Compacts. MCC is also in the process of developing an additional measure to measure MCC's Country Partnership with Compact countries.

Evidence: Compact Annex III; M&E Plans; MCC Developed Matrix for Objectives, Outcomes, and Outputs; FY2007/2008 Performance Plan; MCC Developed Performance Measure Matrix.

Does the program have baselines and ambitious targets for its annual measures?

Explanation: Each Compact's annual performance measures include baselines and ambitious targets. These measures are laid out in the M&E Plans for each Compact. The annual targets begin with an initial baseline for the beginning of the first project year in line with Compact implementation. Annual targets are then set for each year over a four or five-year period, corresponding with the term of the compact. The targets are ambitious and set at levels that reflect improvements and efficiencies gained as the Compact moves further into implementation. In addition to the annual performance measures, MCC has an annual output measure as part of its annual performance plan that cuts across all compacts. It measures MCC's success at completing its annual targets across all Compacts, and it measures the results of these targets on an annual basis. MCC began tracking this measure in FY2006, during which time Madagascar was the only compact country that was 12 months past the date of Entry into Force and therefore the only country that had performance data for annual targets.

Evidence: Compact Annex III; M&E Plans; FY2007/2008 Performance Plan; MCC Developed Performance Measure Matrix.

Do all partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) commit to and work toward the annual and/or long-term goals of the program?

Explanation: As part of the Compact Process, the recipient country government enters into Compact with the United States' government, representing their commitment to the program. Accountable Entities are then established within each country to manage MCA programs and implement the Compact on the behalf of the country government. MCC believes that through integrating monitoring and evaluation in the design of the Compact greatly enhances the probability of a successful outcome. The Corporation therefore integrates concrete, quantified results and methods for monitoring and evaluation into each Compact so that progress can be measured from the start of the program. Within each Compact, specific, measurable goals and indicators are identified and agreed upon in Annex III. The M&E Plan is then developed with strategies for proper monitoring and measurement of long-term and annual goals. The government is committed through the Accountable Entity to achieve both its long-term and annual goals. Compact countries demonstrate their work toward the annual and long-term goals through established reporting mechanisms. All quarterly reporting is required before the Disbursement Requests are approved. If adequate progress is not reported, the Disbursement Request will be modified appropriately. Furthermore, within the Compact development process, MCC establishes both a Procurement Agreement and Procurement Agent Agreement, which outlines the terms of contracts and the responsibilities of the Procurement Agent to ensure compliance.

Evidence: Compacts; M&E Plans; Procurement Agreement; Procurement Agent Agreement; Disbursement Requests; Quarterly Financial Reports; Quarterly Progress Reports; Indicator Tracking Table; Procurement Progress Reports.

Are independent evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need?

Explanation: Independent evaluations of sufficient scope and quality are conducted on a regular basis to support necessary program improvements and evaluate the Corporation's effectiveness. MCC has both evaluations that are: (1) solicited through our OIG or third party organizations and (2) unsolicited through a variety of organizations. MCC's OIG based at USAID develops an Annual Plan on the audits and reviews that they will conduct each year. MCC also contracts out third party organizations to provide information on Compact activity. Evaluations of MCC country-specific programs are formally embedded as requirements within Compacts. Furthermore, MCC finances independent evaluations that measure impact and its attribution to MCC program interventions on selected country programs. Numerous outside organizations have conducted reviews of MCC's work, including the Center for Global Development, the Government Accountability Office, Interaction, Bread for the World, The World Bank, The Brookings Institution, The Heritage Foundation, as well as a number of scholarly articles from such institutions as Harvard University and Princeton University. Additionally, Center for Global Development monitors MCC regularly and has a website dedicated to the monitoring and evaluation of the program. These independent evaluations have been a range of topics, including the overall model of MCC, the role of country ownership, and country selection. MCC has reviewed these evaluations and, where possible, implemented their recommendations.

Evidence: USAID OIG for MCC, "Annual Plan 2007;" Compacts; MCC Developed Audit Schedule; Fox and Reiffel, "The Millennium Challenge Account: Moving Toward Smarter Aid;" Center for Global Development, "MCA Monitor," www.cgdev.org; Radelet, "The Millennium Challenge Account: Transforming US Foreign Assistance Policy?;" Interaction, "NGO Issue Brief: The Millennium Challenge Account and U.S. Foreign Assistance," Interaction.org, March 2003, Bread for the World, "Millennium Challenge Account," www.bread.org, 2007; Daniel Kaufmann and Aart Kraay, "Governance Indicators, Aid Allocation, and the Millennium Challenge Account," The World Bank, December 2002; Brett D. Schaefer, "Promoting Economic Prosperity Through the Millennium Challenge Account," Heritage Lectures, January 2006; Doug Johnson and Tristan Zajonc, "Can Foreign Aid Create an Incentive for Good Governance?: Evidence from the Millennium Challenge Corporation," Harvard University, April 2006; Woodrow Wilson School Graduate Workshop, "Effectiveness Matters: Enhancing Aid Effectiveness in the Face of Administrative Capacity Constraints," Princeton, 2007; Elizabeth Spiro Clark, "The Millennium Challenge Account: Spur to Democracy," Foreign Service Journal, April 2005.

Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program's budget?

Explanation: As MCC has only been in existence for less than four years, MCC has not had sufficient annual or long-term performance data to explicitly tie resource requests to accomplishment of annual and long-term performance goals. Without performance data, MCC has been unable to: (1) define the relationship between performance targets and resources, (2) demonstrate the impact of funding, policy or legislative decisions on expected performance nor provide any evidence that requested resources will enable the programs to achieve performance goals, and (3) report all direct and indirect costs needed to meet performance targets. The first rounds of annual performance data on Compacts that have been in force for more than one year are beginning to be collected. Significantly more annual performance data will be available in FY2008, which will be used in the FY2009 budget request. In addition, MCC will not have results for long-term performance goals for Compacts until Compacts reach their terminus, the first of which is scheduled to conclude in FY2009. MCC fully intends to explicitly and transparently tie future budget requests to performance goals. As one example, MCC will look at a country's success in meeting its long-term measures of its first Compact to inform whether or not resources should be requested for a subsequent Compact.

Evidence: Compacts; M&E Plans; FY2008 Budget Submission.

Has the program taken meaningful steps to correct its strategic planning deficiencies?

Explanation: MCC created its first 5 year Strategic Plan in 2006. The Corporation plans to revise its Strategic Plan on at least a three year cycle. MCC further intends to evaluate the results of its operations annually. On that basis, MCC will additionally review and revise this plan, as needed. MCC also developed its initial Performance Plan in 2006. Through MCC's latest update of its Performance Plan, it has sought to strengthen its strategic goals and performance measures.

Evidence: Strategic Plan FY2006-2011; FY2006 Performance Plan; FY2007/2008 Performance Plan.

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: On a quarterly basis, MCC collects timely and credible performance and financial information from all of its program partners, which are the managing entities or "MCAs" in all Compact countries. On an annual basis, MCC collects data for each Compact activity's performance measures and looks at its progress against the established baselines. This information is used to manage the program and improve performance. MCC uses this information as a basis to determine how much funding to disburse to the partner country as well as when this disbursement should take place. A program that is underperforming or have not met benchmarks according to schedule will not be given additional disbursements until issues that are affecting the performance or schedule are resolved MCC has been working to improve the timeliness of receiving these reports. Marked improvement has been made for the Quarterly Financial Report, where all but one were received in a timely manner. Furthermore, to ensure credibility, MCC's OIG will be conducting audits on each Compact country to verify that performance and financial data is being reported accurately. In addition to the regular collection of performance information on Compacts, MCC also receives quarterly status reports from USAID on countries that have Threshold Programs. USAID provides quarterly reports to MCC on the status of each country's program. Each report indicates progress made against the baselines toward the targets for the defined measures. This information empowers MCC and those responsible for implementing the Threshold Program to better manage and make any performance improvements that may be necessary.

Evidence: Disbursement Request; Quarterly Financial Report; Quarterly Progress Report; Procurement Progress Report; Indicator Tracking Table; Annual Supplement to Quarterly Progress Plan; Memorandum of Understanding with USAID on Threshold Program; USAID Quarterly Reports.

Are Federal managers and program partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) held accountable for cost, schedule and performance results?

Explanation: MCC holds Managers, partner countries, contractors, and other government partners accountable. MCC holds managers and employees accountable through a pay-for-performance compensation system. Each year, employees develop individual performance plans based on MCC's Corporate goals as well as departmental and division level objectives. MCC employees are then evaluated on their individual performance against their performance plans and against set performance criteria at the end of each fiscal year. Pay Adjustments include a possible merit based increase for individuals that meet and/or exceed performance goals. MCC holds partner countries accountable by a project activity schedule and corresponding budget, which are closely monitored by MCC. If a Compact country reports an issue with cost, schedule, or performance; MCC works to identify the source of the problem and develop corrective actions to resolve the issue. For example, Cape Verde began building a section of road for their Infrastructure Project that was not yet approved. MCC halted all related activity and funding until the problem was addressed. In conclusion, Cape Verde agreed to bear the cost for that section of the road as it was in conflict with their agreement and resumed work based on Compact terms. MCC also closely manages projects through the Disbursement Request process. Each quarter Compact countries submit their Disbursement Request with a number of reports, including their Quarterly Progress Report and Quarterly Financial Report. Based on their ability to stay within cost, on schedule, and demonstrate performance results, MCC will adjust their Disbursement Request. MCC has both reduced and cancelled Disbursement Requests based on this performance information. Contractors are held accountable due to the structure of the contract, which are fixed-price, performance based. Government partners such as USAID are held accountable through quarterly reporting and the established venues for coordination such as the Board of Directors.

Evidence: 2006 Performance Evaluation Process and 2007 Performance Plan Process Guidelines; Compacts, Disbursement Requests; Quarterly Financial Reports; Quarterly Progress Reports; Cape Verde Guidance; Procurement Agreement; Memorandum of Understanding with USAID; USAID Quarterly Reports.

Are funds (Federal and partners') obligated in a timely manner, spent for the intended purpose and accurately reported?

Explanation: MCC obligates funds in a timely manner and ensures that funds are spent for their intended purpose and reported accurately. The full amount of a Compact is obligated up front at the point that a Compact Enters into Force (EIF). This is the point after the Compact has been signed, all necessary requirements and subsequent agreements have been signed, and Compact implementation formally begins. MCC is in the process of reviewing this practice to ensure that funds are being obligated at the correct stage of the implementation process. Each quarter, a Compact country submits a Quarterly Financial Report along with the submission of the Disbursement Request for the forthcoming quarter. This Quarterly Financial Report empowers MCC to monitor the Compact's progress and ensure that the funds have been spent for their intended purpose. Additional reporting is provided to MCC from the Fiscal Agent that is a part of each partner country's implementing Entity. Each fiscal agent must have an approved financial and reporting system and is responsible for maintaining proper accounting, records, and documentation as well as developing and submitting re-disbursement requests. MCC allocates and transfers funds to USAID for the Threshold Program that are obligated in USAID's financial system. USAID provides quarterly reports to MCC on obligations and disbursements that are used in ensuring that MCC's financial statements are accurate and to ensure that Threshold funds are obligated in a timely manner and spent for the intended purpose.

Evidence: Policies and Procedures on Compact Financial Management of the Financial Management Policies and Procedures Manual (Serial Number 700); Compacts; Cite Fund; Disbursement Agreements; Disbursement Requests; Quarterly Financial Requests; Memorandum of Understanding with USAID; USAID Quarterly Reports; Entry Into Force Matrix.

Does the program have procedures (e.g. competitive sourcing/cost comparisons, IT improvements, appropriate incentives) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: MCC has procedures that measure and achieve efficiencies and cost effectiveness in program execution. MCC has efficiency measures in the Annual Performance Plan. They address Compact execution quality, efficiency and resource productivity, compliance, and staff effectiveness and satisfaction. In the Performance Plan, MCC has also outlined specific activities that it will be undertaking to increase efficiency. At the Compact level, MCC uses the Economic Rate of Return (ERR) of a Compact to measure the likely efficiency and cost effectiveness of a Compact project component. The ERR measures the economic benefit that will beneficiaries will receive compared with to the input costs associated with implementing the compact over a defined time horizon. The ERR for each Compact is in the M&E Plan. Additional efficiency and cost effectiveness is achieved through the procurements that are awarded under the Compact. All contracts are awarded through a competitive process and are typically fixed-priced, performance-based contracts, which increases cost effectiveness and improves efficiency.

Evidence: Strategic Plan; FY2007/2008 Performance Plan; Compacts; M&E Plans; Economic Rate of Returns; Procurement Agreement; Procurement Agent Agreement.

Does the program collaborate and coordinate effectively with related programs?

Explanation: MCC collaborates and coordinates effectively with related programs. Coordination with U.S. foreign assistance agencies and other bilateral and multilateral donors has been a priority for MCC from inception. MCC's authorizing legislation established the Corporation's Board of Director, which facilitates interagency cooperation because of (1) its interagency composition and (2) required coordination with USAID. MCC has also worked extensively to coordinate with other multilateral and bilateral donors in Compact development and implementation. Consultations with other donors within partner countries provides important feedback on country proposals, reduces the cost of programs by avoiding duplication and approaches that have been unsuccessful in the past, creates synergy, facilitates co-financing, common or supportive programs, and informs other donors of MCC approaches and methods of operation. MCC has demonstrated successful donor coordination in projects including: road construction projects in Honduras and Nicaragua, collaboration with the World Bank on a land project in Madagascar, and by encouraging European Commission and French investments on a justice project in Benin. MCC is in the process of compiling more comprehensive data on Donor Coordination by MCC in partner countries in order to analyze and improve the current process. An output indicator of the Performance Plan measures whether MCC is having an impact on other donors and foundations in the development community by evaluating whether others have adopted approaches similar to MCC. This measure will help MCC determine whether or not other programs perceive MCC as collaborating and coordinating effectively. MCC's efforts at donor coordination have been positively reviewed in independent studies. For example, a Brookings Institution report stated, "The four Compacts all reflect a significant degree of interaction with other donors. Three of them are directly complementary to World Bank projects. In all four cases, there appears to have been coordination with USAID in the design and implementation process" (Fox and Reiffel,14).

Evidence: Authorizing Legislation; Policy and Procedures on Donor Coordination; Importance of Donor Coordination; FY 2007/2008 Performance Plan (Output Indicator on MCC's Impact on Donors); Strategic Plan; FY 2007/2008 Performance Plan; Data on Georgia and Mozambique; Fox and Reiffel, "The Millennium Challenge Account: Moving Toward Smarter Aid," p. 14.

Does the program use strong financial management practices?

Explanation: MCC has strong financial management practices. MCC has received a clean audit opinion for each of the three annual audits that have been conducted. MCC has successfully completed a review of its internal controls through the A-123 process. As of March 30, 2007, MCC had closed all FY2004 audit recommendations and all but one FY2005 audit recommendation (with final action expected April 2007). For the FY2006 audit, one recommendation has been closed and a significant number of management decisions will take place upon report issuance. Additionally, MCC has developed a Financial Management Policies and Procedures Manual to standardize all relevant financial processes. MCC is implementing strong financial management practices within each Compact, a process that is undergoing continual improvement.

Evidence: Annual Reports of 2004 and 2005; Performance and Accountability Report of 2006; Corrective Action Plan; Compacts; Fiscal Agent Agreement; Quarterly Financial Reports; Disbursement Requests.

Has the program taken meaningful steps to address its management deficiencies?

Explanation: MCC has taken steps to address management deficiencies. To streamline processes and improve efficiency in the compact development process, MCC restructured its organization. MCC introduced new procedures for the Quarterly Financial Report in order to standardize one reporting format across all Compact countries and enable better financial practices and better decisions on disbursement amounts and timing. MCC has also sought to improve management practices of the Millennium Challenge Accountable Entity within each Compact country. Early experience demonstrated that the pre-proposal process is crucial to success in implementation of future Compacts and the recipient countries' capacity. Therefore, MCC has taken steps to increase partner country capacity during all stages of compact development and implementation including the pre-proposal process. In March of 2006, MCC conducted its second annual MCC University that provides detailed guidance to countries at various stages of the process and facilitates sharing of best practices between eligible countries. Furthermore, MCC has created a routine forum for identifying and addressing management deficiencies through routine Senior Management Off-Site meetings. MCC has implemented many recommendations from the Government Accountability Office (GAO), Inspector General and other outside groups, including developing a strategic plan and performance plan and strengthening internal controls.

Evidence: USAID OIG for MCC, "Review of the Millennium Challenge Corporation's Progress in Achieving its Planned Organizational Structure and Beginning its Assistance Programs;" GAO, "Millennium Challenge Corporation: Progress made on Key Challenges in First Year of Operations;" GAO, "Millennium Challenge Corporation: Compact Implementation Structures are Being Established; Framework for Measuring Needs Improvement;" MCC Documentation: Quarterly Reporting Formats, Lessons Learned Document on Donor Coordination, and Results of the Senior Management Implementation Off-Site.

Are grants awarded based on a clear competitive process that includes a qualified assessment of merit?

Explanation: MCC grants are awarded based on a clear competitive and merit based process. On an annual basis, MCC's Board of Directors selects countries as eligible for Compact funding according to a clear, competitive transparent process. The process is as follows: First, the pool of candidate countries that compete for MCC assistance is defined based on per capita income requirements. This list is sent to Congress. Second, MCC publishes Selection Criteria and Methodology and allows 30-days for formal public comment. Third, after the 30 day period expires, MCC gathers and publishes the performance data of each candidate country according to the published selection criteria. This information is all available publicly on MCC's website. Finally, using the performance data that quantifies the merit of each country in the defined indicators, MCC's Board of Directors selects countries that will be eligible for MCC funding. These four steps ensure that MCC grants are awarded in a process that is clear, is competitive and includes an assessment of merit.

Evidence: Selection Process for MCA Eligible Countries; Candidate Country Reports; Criteria and Methodology Reports; Public Comment Summaries; Eligible Country Reports; Indicator Descriptions; Country Scorecards.

Does the program have oversight practices that provide sufficient knowledge of grantee activities?

Explanation: MCC has established oversight practices that provide sufficient knowledge of grantee activities. MCC builds oversight practices into the structure of the Compacts and the supplementary agreements including the Fiscal and Procurement Agreements. The Corporation has established financial oversight of grantee activities by requiring Quarterly Financial Reports from all MCC Compact countries. MCC has established oversight of performance on Compact projects and activities through Quarterly Progress Reports that are submitted to MCC by each Compact country and include information on results achieved and progress made towards annual performance targets and long-term targets. These are laid out in the M&E Plans for each Compact. Based on Compact country's ability to stay within cost, on schedule, and demonstrate performance results, MCC will adjust a Compact's Disbursement Request. MCC has both reduced and cancelled Disbursement Requests based on this performance information.

Evidence: Compacts; M&E Plans; Fiscal Agent and Procurement Agent Agreements; Quarterly Financial Reports, Disbursement Requests; Quarterly Progress Reports.

Does the program collect grantee performance data on an annual basis and make it available to the public in a transparent and meaningful manner?

Explanation: MCC collects grantee performance data through several established report mechanisms on a quarterly and annual basis. For each Compact country, a website has been established by the Compact country to publicize MCC's work within the country. Through these venues, MCC has been able to make much of this information available in a transparent and meaningful way.

Evidence: Disbursement Requests; Quarterly Progress Reports; Quarterly Financial Reports; Procurement Progress Report; Indicator Tracking Tables; Annual Supplement to Quarterly Report; Country Websites: http://www.mcc.gov/countries/index.php.

Has the program demonstrated adequate progress in achieving its long-term performance goals?

Explanation: MCC has not yet demonstrated adequate progress in achieving its long-term performance goals. While some small progress has made against shorter term goals, it is too early in MCC's life as an organization and there is too little evidence to date to conclude that progress toward long term achievements have be demonstrated. Subsequent PARTs will reevaluate this finding.

Evidence: Quarterly Progress Reports; Indicator Tracking Table; FY2007/2008 Performance Plan.

Does the program (including program partners) achieve its annual performance goals?

Explanation: As articulated in Question 2.4, MCC has a limited number of specific annual performance measures for each Compact, which are defined in each country's M&E Plan. These annual performance measures indicate the program's progress and are aligned with the long-term goals of the Compact. To a small extent, MCC is achieving its annual performance goals in the countries that have entered into force prior to March 2006 and therefore have one full year of performance data. "Entry into Force" is the event that triggers the start of Compact timelines and is therefore time period zero for all annual and long-term performance goals. Madagascar, Honduras, and Cape Verde are the three Compacts that entered into force prior to March 2006. For Madagascar, MCC met two of the three annual measures for its first Compact year. MCA-Madagascar was successful in submitting and passing a new land law to consolidate the legal basis for the proposed land tenure reform as well as establishing the five investment zones for the Agricultural Business Investment Project. The third measure was waived to the next Compact year. As of the last reporting period (Compact Quarter Six), Madagascar is well on its way to achieving its annual measures for its second Compact year. For this period, Madagascar has achieved: (1) for the Land Tenure Project, 1 out of 1 goal was met, (2) for the Finance Project, 6 out of 9 were met with 2 needing more data and 1 meeting the goal at 92% level, and (3) for the Agricultural Business Improvement project, 6 out of 11 were met with 2 additional at the 75% level. Therefore, as of Quarter Six, 13 of the 21 measures were achieved (62%). Of the 8 that were not met, two had incomplete data and three were at greater than 74% actual compared to target. It is also important to note of the 13 measures that were met, 9 significantly exceeded their targets. For Honduras, MCC had established one target in its M&E Plan for its first Compact year for the increase in income of beneficiaries, but this measure was waived to the next year as less preparatory work had been completed then assumed in the Compact's Implementation Plan. MCA-Honduras has two indicators with targets for May 1, 2007. For Cape Verde, the majority of the annual measures' targets are the same as the baseline, indicating that no change was expected for the first Compact year. For those with measurable targets, MCA-Cape Verde achieved: (1) For the Roads Project, 1 out of 2 goals were met and (2) for Private Sector Development Project, 1 out of 1 goals wasmet. In looking at the most currently available information, MCC has achieved 17 of its 28 annual measures (60%). MCC plans to update this information as more information becomes available. Additionally, subsequent PART submissions will have larger data sets of annual Compact performance indicators.

Evidence: Quarterly Progress Report: Annex A, Indicator Tracking Table; M&E Plans.

Does the program demonstrate improved efficiencies or cost effectiveness in achieving program goals each year?

Explanation: At the Corporate-level, MCC has established two efficiency measures in its FY2007/2008 Performance Plan. The first Efficiency/Resource Productivity measure focuses on minimizing the administrative cost of developing and implementing MCC Compacts compared to the total value of Compacts. In 2005, MCC set a baseline of 3.4%. During 2006, administrative costs rose slightly to 4.7% of the total value of Compacts. This raise was expected due to the increased staffing levels and administrative costs in building MCC's capacity. MCC has set aggressive targets for 2007 (2.6%) and 2008 (2.0%). The second Efficiency/Resource Productivity measure's objective is to minimize the funds disbursed for administrative activities compared to the funds disbursed to implement compact and threshold programs. In 2005, MCC set a baseline of 1,289.8%, based on the fact that in the first full year of its existence, most of MCC's disbursements were focused on building the capacity of the Corporation. The Corporation quickly reduced the percentage of administrative activities to disbursed Compact and Threshold Funds to 151.2%. MCC has set aggressive targets for 2007 (40%) and 2008 (25%). MCC has also set aggressive efficiencies measures at the Compact-level, known as the Economic Rate of Return (ERR). The ERR measures the rate of poverty reduced to the resources utilized over a 20-year time horizon. MCC is a new organization; therefore, the results of these measures will not be available until activity for a given Compact has been completed. For example in Honduras, MCC has established two ERRs based on their two main projects. The Rural Development Project has an ERR of 21%, and the Transportation Project has an ERR of 25%.

Evidence: MCC's FY2007-2008 Performance Plan; M&E Plans.

Does the performance of this program compare favorably to other programs, including government, private, etc., with similar purpose and goals?

Explanation: As MCC is in its third year of existence, limited comparative performance data currently exists. This discussion will then focus on evaluations that have been conducted that compare MCC with similar programs, within the context of MCC's three years of existence. First, as MCC's ability to successfully perform is based on its design, several evaluations have critiqued the Corporation's model in comparison to previously established foreign assistance models. Second, MCC's second Strategic Goal is to "Support Development of Sound Policy Environment for Economic Growth and Poverty Reduction in the Developing World." Due to its selection criteria, MCC has been able to create an incentive effect (also called the MCC Effect) for developing countries to improve their policy environments. Third, a critical objective of meeting MCC's first Strategic Goal is to achieve sustainability of successful projects in Compact countries. An important element of sustainability is attaining country ownership for Compact activities. MCC has been viewed as more successful at achieving a high degree of country ownership than other donor programs. Fourth, MCC ranks equivalent or more efficient than many donors in overhead costs. Foreign assistance programs are often seen as inefficient and bureaucratic, imposing high administrative costs.

Evidence: FY2007/2007 Performance Plan; Compacts; Fox and Reiffel, "The Millennium Challenge Account: Moving Toward Smarter Aid;" Center for Global Development, "MCA Monitor," www.cgdev.org; Radelet, "The Millennium Challenge Account: Transforming US Foreign Assistance Policy?;" Interaction, "NGO Issue Brief: The Millennium Challenge Account and U.S. Foreign Assistance," Interaction.org, March 2003, Bread for the World, "Millennium Challenge Account," www.bread.org, 2007; Daniel Kaufmann and Aart Kraay, "Governance Indicators, Aid Allocation, and the Millennium Challenge Account," The World Bank, December 2002; Brett D. Schaefer, "Promoting Economic Prosperity Through the Millennium Challenge Account," Heritage Lectures, January 2006; Doug Johnson and Tristan Zajonc, "Can Foreign Aid Create an Incentive for Good Governance?: Evidence from the Millennium Challenge Corporation," Harvard University, April 2006; Woodrow Wilson School Graduate Workshop, "Effectiveness Matters: Enhancing Aid Effectiveness in the Face of Administrative Capacity Constraints," Princeton, 2007; Elizabeth Spiro Clark, "The Millennium Challenge Account: Spur to Democracy," Foreign Service Journal, April 2005.

Do independent evaluations of sufficient scope and quality indicate that the program is effective and achieving results?

Explanation: Several positive outside assessments of MCC's concept and design are encouraging indicators of future results, both on intermediate performance indicators and on the long term goals of economic growth and elimination of extreme poverty, but since these findings do not directly address MCC's measures of effectiveness and outcomes, the agency earns a "small extent" on this question. Two studies have concluded that MCC has effected positive changes in the economic growth policy environment in its candidate countries in order to increase their chances of becoming eligible for MCC funding. In addition, several evaluations have indicated that MCC's design is a unique and innovative approach to international development. Studies have cited MCC's untied funding, no-year money, local ownership of programs, and performance based approaches as constructive changes to more traditional international development and aid programs.

Evidence: FY2007/2007 Performance Plan; Compacts; USAID OIG for MCC, "Review of the Millennium Challenge Corporation's Progress in Achieving its Planned Organizational Structure and Beginning its Assistance Programs," 2006; GAO, "Millennium Challenge Corporation: Progress made on Key Challenges in First Year of Operations," 2005; OECD, DAC Peer Review, 2007; Fox and Reiffel, "The Millennium Challenge Account: Moving Toward Smarter Aid;" Center for Global Development, "MCA Monitor," www.cgdev.org; Radelet, "The Millennium Challenge Account: Transforming US Foreign Assistance Policy?;" Interaction, "NGO Issue Brief: The Millennium Challenge Account and U.S. Foreign Assistance," Interaction.org, March 2003, Bread for the World, "Millennium Challenge Account," www.bread.org, 2007; Daniel Kaufmann and Aart Kraay, "Governance Indicators, Aid Allocation, and the Millennium Challenge Account," The World Bank, December 2002; Brett D. Schaefer, "Promoting Economic Prosperity Through the Millennium Challenge Account," Heritage Lectures, January 2006; Doug Johnson and Tristan Zajonc, "Can Foreign Aid Create an Incentive for Good Governance?: Evidence from the Millennium Challenge Corporation," Harvard University, April 2006; Woodrow Wilson School Graduate Workshop, "Effectiveness Matters: Enhancing Aid Effectiveness in the Face of Administrative Capacity Constraints," Princeton, 2007; Elizabeth Spiro Clark, "The Millennium Challenge Account: Spur to Democracy," Foreign Service Journal, April 2005.