OFFICE OF INSPECTOR GENERAL

FOR THE

MILLENNIUM CHALLENGE CORPORATION

Annual Plan

2006

MCC OIG Fiscal Year 2006 Annual Plan 

Statement of the Acting Deputy Inspector 

General 

I am pleased to present the Offi ce of Inspector 

General’s (OIG) annual plan for fiscal year (FY) 

2006. This plan consolidates our audit, investigative 

and other activities into a single document that 

articulates our planned work in 2006 at the 

Millennium Challenge Corporation and it highlights 

accomplishments vis-à-vis our FY 2005 plan. 

The annual plan details the audit, investigative, 

and other activities the OIG plans to undertake in 

order to provide the best service possible in helping 

the Millennium Challenge Corporation achieve its 

development assistance objectives. 

This plan recognizes that the Millennium Challenge 

Corporation has been in existence for less than 

two years and allows for changes resulting from 

developing policy and program implementation. 

Our overriding goal is to support management in 

the delivery of its programs by ensuring that the 

Corporation operates effi ciently, effectively and 

with integrity. We do this through our audit and 

investigative activities and by advising management 

on program risks and the need for associated internal 

controls that promote effective and effi cient program 

delivery. In performing our duties, we work with 

the Corporation’s Board of Directors, management 

and staff as well as with members of Congress and 

their staffs to understand their particular interests 

and to provide them with information they can use 

in developing and administering the Millennium 

Challenge Corporation’s programs and activities. 

We can do this because we have a professional 

and well-trained staff operating under professional 

standards mandated by law and promulgated by 

the Comptroller General of the United States and 

the President’s Council on Integrity and Effi ciency. 

Under these standards, our operations are subject 

to an external peer review performed by another 

independent inspector general’s offi ce. The most 

recent review, completed in 2004, reported that we 

met applicable professional standards. 

In addition, and most important, we can serve 

the Corporation and Congress by providing 

management with timely recommendations, 

suggestions, and advice that they can rely on 

because of the independence that the Inspector 

General Act of 1978 provides. The Act created an 

independent Inspector General by requiring the 

Inspector General to report both to the head of the 

organization and to Congress, keeping both fully 

informed on problems identified during the course 

of our work. We accomplish this task through our 

regular reporting processes, including our audit and 

investigation reports and our semiannual reports 

to Congress, and through frequent briefings to the 

Corporation’s Directors, its managers and members 

of Congress and their staffs. Our goal through this 

cooperative approach is to assist the Corporation’s 

management by providing solid information and 

recommendations for solutions to problems as they 

carry out their day-to-day business. 

Paula F. Hayes 

Acting Deputy Inspector General 

MCC OIG Fiscal Year 2006 Annual Plan 

Millennium Challenge Corporation

Office of Inspector General

Annual Plan

Fiscal Year 2006 

MCC OIG Fiscal Year 2006 Annual Plan 

CONTENTS

Authority and Responsibility ............................................................................................... 1

Keep the Head of the Corporation and Congress Fully Informed on the Status

Promote Sound Accounting and Reporting on Financial Activities and

Preserve and Protect the Millennium Challenge Corporation’s Program and

Mission ................................................................................................................................. 1

Values ................................................................................................................................... 1

OIG General Goals and Objectives ..................................................................................... 2

Organization of the Millennium Challenge Corporation ................................................... 3

OIG Strategic Goals ............................................................................................................. 4

Planned Activities for Fiscal Year 2006 .............................................................................. 4

of MCC’s Administration and Operations and the Need for Corrective Action ................ 4

Information Security ........................................................................................................... 5

Promote Economy, Efficiency, and Effectiveness and Assess Program Results ................. 7

Employee Integrity .............................................................................................................. 9

Factors Affecting OIG Audit and Investigative Activities .................................................. 10

MCC OIG Fiscal Year 2006 Annual Plan 

Authority and Responsibility 

The United States Agency for International Development (USAID) Office of Inspector General (OIG) 

was established on December 16, 1980, by Public 

Law 96-533, which amended the Foreign Assistance 

Act of 1961. On December 29, 1981, the President 

signed the International Security and Development 

Cooperation Act of 1981, bringing the USAID 

Inspector General under the purview of the Inspector 

General Act of 1978. The OIG assumed audit and 

investigative oversight of the African Development Foundation (ADF) and the Inter-American 

Foundation (IAF) in 1999 in accordance with Public 

Law 106-113. Finally, on January 23, 2004, the 

USAID Inspector General was appointed to serve as 

the Inspector General for the Millennium Challenge 

Corporation through Public Law 108-199 (The 

Consolidated Appropriations Act of 2004). 

The Inspector General Act of 1978, as amended, 

authorizes the Inspector General to conduct and 

supervise audits and investigations. In doing this 

work, the OIG (1) promotes economy, effi ciency, 

and effectiveness and (2) detects and prevents fraud, 

waste, and abuse in programs and operations. The 

Inspector General is responsible for keeping the head 

of the respective organization and Congress fully 

informed of the results of audits and investigations 

related to the organization’s programs and operations, 

as well as the necessity for, and progress of, corrective 

actions. 

The Consolidated Appropriations Act, having 

designated the USAID Inspector General to serve as 

the Inspector General for the Millennium Challenge 

Corporation (MCC or Corporation), states that the 

Inspector General may conduct reviews, investigations and inspections of all aspects of the operations 

and activities of the Corporation. The legislation 

states further that, in fulfilling this responsibility, the 

Inspector General shall report to and be under the 

general supervision of the Corporation’s Board of 

Directors. To carry out this authority and responsibility the Office of Inspector General established an 

Assistant Inspector General (AIG/MCC) to coordinate 

audit and investigative activities at the MCC. The 

AIG/MCC has and, for the near term, will continue 

to coordinate with and accomplish much of its work 

through the staffs of the USAID Assistant Inspectors 

General for Audit, Management and Investigations, as well as through the OIG’s seven Regional 

Inspectors General located in Baghdad, Iraq; Cairo, 

Egypt; Dakar, Senegal; Frankfurt, Germany; Manila, 

Philippines; Pretoria, South Africa; and San Salvador, 

El Salvador. We will also make use of contractors 

whenever deemed appropriate and effi cient. 

Mission 

The mission of the OIG is to contribute to and support 

integrity, efficiency, and effectiveness in all activities 

of the organizations for which it has oversight 

responsibilities. 

Values 

In accomplishing our mission, we are committed to 

the following: 

Integrity. Strive to display character, decency, and 

honor in everything we do; work openly and fairly 

with our colleagues and partners; show respect 

for one another; maintain independence to ensure 

objectivity and impartiality; and accept responsibility 

for our actions. 

Excellence. Strive to produce work that has distinction, merit, quality, and a positive effect; work 

efficiently with highly trained people who enjoy 

equal opportunities to excel; deliver products that are 

accurate, timely, complete, concise, and meaningful; and present work in a way that is most useful 

to those who are responsible for implementing the 

organization’s goals and objectives. 

Teamwork. Work with the organization’s 

management to understand its program objectives; 

collaborate with the organization, demonstrating 

and encouraging integrity and achieving excellence; 

understand the entire OIG program and its effect on 

the organization’s programs; help management fi nd 

solutions to problems; and remember that our success 

is measured in part by the success of our colleagues 

and partners. 

1
MCC OIG Fiscal Year 2006 Annual Plan 

OIG General Goals and Objectives 

The goal of the OIG with respect to the Millennium 

Challenge Corporation is to ensure that the MCC 

operates efficiently, effectively, and with integrity. 

To achieve this goal, the OIG will assist the Corporation as it continues to develop organizationally and 

expand its assistance programs. The OIG will continue its policy of involvement with the Corporation’s 

Board and the Corporation’s managers to help ensure 

good oversight. The OIG will support key MCC programs and management functions through audit and 

investigative activities designed to ensure that the 

Corporation operates efficiently, effectively, and with 

integrity. 

Activities Accomplished this Past Year to Help 

Ensure that MCC Operates Effi ciently, Effectively and with Integrity 

• In fiscal year 2005, the Corporation entered into 

interagency agreements with the U. S. Department 

of Agriculture, the Department of the Treasury and 

the Army Corp of Engineers for technical expertise on developing assistance Compacts. We have 

notified the Inspectors General of these organizations of the existence of the agreements and we 

will work with the Inspectors General to insure 

effective audit oversight of all MCC-funded activities. 

• We completed six audits and reviews scheduled 

for fiscal year 2005 and four were in process as of 

September 30, 2005. 

• We have developed audit guidelines for non-U.S. 

auditors that will be contracted to audit MCC 

Compact activities. 

• We provided two fraud awareness briefi ngs to 

MCC staff to alert them to fraudulent practices and 

schemes and advise them on how to report fraud if 

it is encountered. 

• We continued our meetings and consultations with 

GAO, OMB and Congressional staff members 

to ensure awareness of ongoing MCC activities, 

and in the case of GAO to also coordinate audit 

and oversight work. Also we have expanded our 

involvement with the Corporation Board by briefing the Secretary of State (Chair) on our ongoing 

work at MCC. 

Collaboration with other organizations is a significant element in performing our audit and investigative work and providing oversight for MCC’s program activities. We will continue to consult with 

other organizations to consider work they have performed, seek opportunities for joint work, and obtain 

additional information that will have an effect on our 

planning. For example, we will collaborate with the 

Government Accountability Office and keep abreast 

of the U.S. Agency for International Development’s 

(USAID) activities in support of MCC’s mission. 

Government Accountability Offi ce 

The IG Act requires coor- “... each Inspector General 

shall give particular regard dination with the Government to the activities of the 

Accountability Offi ce (GAO) Comptroller General of the 

United States with a view to avoid duplication and to toward avoiding duplication and insuring effective ensure effective coordination coordination and cooperation.” and cooperation. The OIG 

has assigned a liaison to serve 

as the principal contact with GAO. The liaison is 

responsible for keeping the OIG advised of GAO’s 

relevant audit work and reports, which are used for 

OIG planning. Consultation and coordination are 

undertaken in developing the OIG’s annual audit 

plan. 

In addition to the general OIG policy, AIG/MCC has 

established a consultative process with GAO staff 

involved in reviewing MCC activities. As we plan 

and initiate our audit work at MCC, we coordinate 

with GAO on an ongoing basis to ensure there is 

no duplication of effort while making sure that 

all relevant areas relating to MCC are covered. For 

example, we discuss such areas as access to MCC 

information, work plans to ensure that there is no 

duplication of effort and that all relevant areas are 

covered, MCC management issues, and the progress 

and results of our ongoing oversight work. As a 

result of these activities we are able to establish a 

reasonable degree of assurance that the Corporation’s 

2
MCC OIG Fiscal Year 2006 Annual Plan 

risks and vulnerabilities are being addressed and 

reported to the Corporation and to the Congress. 

United States Agency for International 

Development 

Compact development

USAID has an important “During any discussion with 

a country for the purpose of role in assisting the entering into a Compact with 

the country, officials of the Corporation with its country Corporation participating in 

such discussions shall, at a 

minimum, consult with approprocess. The Millennium priate officials of the United 

States Agency for International Challenge Act requires that Development...” 

the Corporation’s Chief 

Executive Officer consult with the Administrator 

of USAID to coordinate activities of the Corporation with those of USAID. For example, USAID is 

required to seek to ensure that appropriate USAID 

programs play a primary role in preparing MCC’s 

candidate countries to become eligible for MCC 

Compacts. MCC’s Board of Directors has approved 

$185 million for that activity, of which $80 million 

has been allocated to USAID as of September 30, 

2005. In this context the AIG/MCC is in ongoing 

consultation with appropriate USAID staff in order 

to keep fully informed of the coordination efforts of 

USAID and the Corporation. 

Organization of the Millennium 

Challenge Corporation 

The Millennium Challenge Corporation is headquartered in Washington, D. C., having moved from 

Arlington, Virginia in May 2005. 

During fiscal year 2005, the Corporation continued 

to develop its organizational structure and get its 

Compact assistance program underway. In April 

2005 the Corporation signed its first Compact, a 

$110 million rural development project, with the 

Government of Madagascar. Since then it has 

signed four more Compacts with the governments 

of Honduras, Nicaragua, Cape Verde and Georgia. 

As of September 30, 2005 it had about 140 U.S. 

staff on board (including contractors) and planned 

to complete its full staffing level of about 200 

U.S. positions by December 2005. The Corporation 

was still developing and defining the specifi c laws 

and federal regulations that it will follow. Pending 

the completion of that process it plans to continue 

following government-wide rules and regulations. 

Further, given its limited staff both short term and 

long term, the Corporation has contracted with the 

Department of Interior’s National Business Center 

(NBC)* in Denver, Colorado for most of its support 

needs such as accounting and fi nancial statement 

preparation, payroll management, and its human 

resources management. 

For fiscal years 2004 and 2005 the Corporation 

obligated about $428.5 million and disbursed about 

$43.5 million of its $2.494 billion combined fi scal 

year 2004-2005 appropriations. This was primarily 

for salary, administrative and start-up related 

expenses. 

As the Corporation expands its Compact award 

program the largest portion of its expenditures long 

term will be for programs implemented overseas. 

For example, as of September 30, 2005, the value 

of the five Compacts that MCC has signed is $905 

million. Twelve additional countries are currently 

approved to submit proposals for assistance to be 

funded from MCC’s fiscal year 2004-2005 funds. 

* NBC is an administrative and computer information service 

provider for the Department of Interior and other federal agencies. 

3
MCC OIG Fiscal Year 2006 Annual Plan 

OIG Strategic Goals 

The OIG’s strategic goals with respect to the Corporation are to: 

• Keep the Head of the Corporation and Congress 

Fully Informed on the Status of the MCC’s 

Administration and Operations and the Need for 

Corrective Action 

• Promote Sound Accounting and Reporting On 

Financial Activities and Information Security 

• Promote Economy, Efficiency, and Effectiveness, 

and Assess Program Results 

• Preserve and Protect the Millennium Challenge 

Corporation’s Program and Employee Integrity 

The following planned audit and investigative 

activities for fiscal year 2006 are designed to address 

these strategic goals. 

Planned Activities for Fiscal Year 2006 

Keep the Head of the Corporation and Congress 

Fully Informed on the Status of the MCC’s 

Administration and Operations and the Need 

for Corrective Action 

The OIG will accomplish this goal by doing the 

following: 

• Prepare and submit semiannual reports to 

Congress as required. The IG Act requires that the 

OIG provide Congress with written reports of its 

activities and accomplishments every six months. 

The reports include our audit and investigative 

highlights as well as summaries of signifi cant 

audits conducted during the reporting period. 

We have issued our third Semiannual Report to 

Congress which covered the six-month period 

ending September 30, 2005. 

• Present timely briefings to the Board, Chief 

Executive Officer and key MCC offi cials on 

critical problem areas identified by OIG audits 

and investigations. We plan to brief the Board on 

significant audits and investigations and to discuss 

the status of the Corporation’s management 

controls and Compact program oversight and 

monitoring efforts. We also plan to brief the CEO 

and senior MCC managers to bring matters of 

importance to there attention within a time frame 

enabling those managers to take effective remedial 

action. 

• Present timely briefings to key congressional staff 

on the status of significant OIG audit and investigative activities, problems and issues identifi ed, 

and the necessity for and progress of corrective 

actions being taken by MCC. 

• Conduct audits and distribute audit 

reports to MCC management and 

congressional staff in a timely 

manner. The OIG continually assesses its planning 

information to help identify issues and areas 

of potential audit and investigative concern as 

expeditiously as possible. The OIG also reviews 

report distribution and dissemination procedures 

to bring its message more efficiently to its congressional, MCC, and public clients. Audit reports are 

placed on the Internet in a format complying with 

federal requirements. In addition, the OIG has 

instituted procedures for electronically distributing 

audit reports directly to congressional members 

and staffs. 

Issued six 

audit reports 

in FY 2005 

4
MCC OIG Fiscal Year 2006 Annual Plan 

Promote Sound Accounting and 

Reporting on Financial Activities and 

Information Security 

The OIG will address this strategic goal through the 

following planned audits. 

Limited Scope Survey/Risk Assessments of the 

Financial Accountability Arrangements for 

Compact Implementation (in new Compact 

countries as they reach the point of fi rst redisbursement) 

By September of 2005 the Millennium Challenge 

Corporation had entered into its fi rst fi ve country 

Compact agreements and expected to enter into 

several more agreements by the end of the calendar 

year. Under its FY 2005 audit plan the OIG 

performed on-the-ground surveys/risk assessments of 

the financial implementation arrangements of the two 

initial country Compacts - Madagascar and Honduras 

- as part of its FY 2006 audit plan, the OIG plans 

to continue reviews of the fi nancial implementation 

arrangements for new Compacts. 

The risk assessment objectives are to determine 

whether the recipients are complying with the 

financial requirements of the Compact and whether 

the financial policies and procedures are adequate 

to provide sound management and accounting 

practices for the funds provided by the MCC. The 

anticipated benefit of these surveys is that we will 

provide MCC with a greater level of assurance that 

the funds provided to the recipients are effectively 

controlled and managed. We may also be able to 

provide recommendations for enhancing the fi nancial 

management practices in place at the selected 

recipients. 

Audit of the Millennium Challenge Corporation’s Management of Its Travel Activities 

Due to the nature of the Millennium Challenge 

Corporation’s business, expenses relating to travel 

are going to make up a material portion of its 

operational expenses. The Millennium Challenge 

Corporation has been given wide discretion in 

determining how certain laws and regulation 

apply to the Corporation. We will examine the 

MCC travel policies and procedures and select a 

sample of the travel activities that have occurred to 

determine whether MCC has established policies 

and procedures related to travel; trips are made in 

accordance with the policies and procedures, and 

the travel activity is in compliance with government 

travel regulations. 

By reviewing the policies and procedures and a 

sample of the travel activity we expect to be able to 

provide MCC reasonable assurance that its policies 

and procedures and travel activity are consistent with 

the Government Travel Regulations. We will also 

be able to inform MCC’s management whether its 

policies and procedures are being followed. 

Audit of Millennium Challenge Corporation’s 

Controls Over Its Contract for Information 

Technology Services 

The Millennium Challenge Corporation (MCC) outsources its information technology (IT) operations 

and related services. It requires technologies that 

continuously update systems and improve mission 

performance and business solutions in the most 

economical and efficient manner. To accomplish 

this, in November 2004, MCC awarded a contract to 

a privately held IT and management consulting fi rm. 

Federal Acquisition Regulation Part 39, “Acquisition of Information Technology;” National Institute 

of Standards and Technology Special Publication 

800-53, “Information Security;” and Offi ce of 

Management and Budget Circular A-130 provide 

requirements for acquiring information technology 

services. 

This audit will determine whether MCC implemented 

controls necessary to monitor its contractor’s 

performance against the required service and security 

levels, and engineering upgrades. The audit will also 

determine whether (1) performance measures were 

incorporated into the statement of work for each 

type of service to be provided; (2) the service level 

was completely and clearly defined in the statement 

of work; (3) performance-based incentives were 

5
2006 

MCC OIG Fiscal Year 2006 Annual Plan 

included in the terms of the agreement, and (4) the 

statement of work required the contractor to provide 

engineering upgrades and whether corresponding 

incentives were included in the contract. The results 

of the audit will be used to complete our annual 

audit pursuant to the Federal Information Security 

Management Act of 2002. 

Audit of Millennium Challenge Corporation’s 

FY 2006 Financial Statements 

One of the OIG’s responsibilities is to conduct or 

oversee an annual audit of the Millennium Challenge 

Corporation’s financial statements. In accordance 

with the Government Corporation Control Act (USC 

Title 31, chapter 91) MCC is required to have its 

consolidated financial statements audited by the MCC 

Inspector General or an independent external auditor 

as determined by the Inspector General. Conforming 

to section 9105 of Title 31, the OIG will contract an 

independent external auditor to audit MCC’s fi scal 

year 2006 fi nancial statements. 

The audit objectives will be to determine whether 

MCC’s principal financial statements: (1) Statement 

of Financial Position, (2) Statement of Operations, 

(3) Statement of Cash Flows, and (4) Statement 

of Budgetary Resources are presented fairly in all 

material respects and conform to generally accepted 

accounting principles. The auditors will also obtain 

an understanding of MCC’s internal control structure 

and will perform tests of compliance with laws and 

regulations that could have a direct and material 

effect on the principal fi nancial statements. 

Review of Millennium Challenge Corporation 

Compliance with the Provisions of the Federal 

Information Security Management Act for FY 

The Federal Information Security Management Act 

of 2002 (FISMA), Public Law 107 347, requires 

each agency to develop, document, and implement 

an agency-wide information security program to 

provide information security for the information 

and information systems that support the operations 

and assets of the agency, including those provided 

or managed by another agency, contractor, or other 

source. The Act also addresses program management 

and the evaluation of information security controls. 

This annually mandated audit will determine whether 

the Millennium Challenge Corporation’s information system security program meets the requirements 

of the Federal Information Security Management Act 

of 2002. It will also contribute to the protection of 

data files, computer equipment, and resources from 

unauthorized access, modification, or destruction. 

Assess Capabilities and Approve Local Accounting Firms for Auditing Millennium Challenge 

Corporation Compacts 

MCC assistance Compacts will be signed for 

amounts of over $100 million to nearly $300. 

While the Office of Inspector General maintains 

a list of in-country audit firms capable of auditing 

USAID projects (grants), it is not certain that these 

firms have the capacity to audit grants as large as 

MCC’s Compacts are likely to be. 

By assessing the capabilities of local accounting firms we can identify those firms capable of 

performing financial audits of large (over $100 

million) Compact programs and determine early 

on if alternative auditing mechanisms are needed, 

such as U. S. based accounting firms or the Defense 

Contract Audit Agency (DCAA). 

Oversight of Contracted Financial Audits of the 

Millennium Challenge Corporation’s Program 

Implementing Entities 

Under the terms of MCC’s Compact agreements, 

annual audits will be required of MCC Compact 

implementing entities. These audits will be required 

to be conducted in accordance with generally 

accepted government auditing standards in the 

U.S. or other internationally recognized auditing 

standards. MCC will rely on nonfederal auditors to 

do these audits. 

The OIG’s oversight of these audit activities will 

ensure that: (1) nonfederal auditors have adequately 

6
MCC OIG Fiscal Year 2006 Annual Plan 

assessed the allowability of MCC award expenditures; (2) nonfederal auditors are familiar with the 

compliance auditing requirements of MCC Compact 

agreements; (3) the independence of the nonfederal 

auditors has not been compromised in appearance 

or in fact, and (4) nonfederal auditors assess the 

adequacy of the audited entity’s internal controls in 

relation to the audited awards. 

Promote Economy, Effi ciency, and 

Effectiveness and Assess Program 

Results 

The OIG will address this strategic goal through the 

following planned audits. 

Review of the Millennium Challenge Corporation’s Due Diligence Process Leading to 

Compact Awards 

The Millennium Challenge Act of 2003, under 

Section 605(d)—Application—states that the Chief 

Executive Officer, in consultation with the Board 

and working with eligible countries selected by the 

Board for negotiation of Compacts, should develop 

and recommend procedures for considering solicited 

and unsolicited proposals in Compacts prior to an 

approval of the Compacts by the Board. 

MCC has developed and posted to its website 

“Guidance for Developing Proposals for MCA 

Assistance” intended to help eligible countries 

develop their proposals. MCC’s guidance provides, 

among other things, that a country’s proposal identify 

its specific development goals as well as plans for 

continued policy reform and the strengthening of 

institutions critical to economic growth and poverty 

reduction. A proposed request for MCC funding 

must delineate measurable goals, accountability for 

results and effective financial oversight. Prior to 

negotiation with the eligible country, MCC performs 

a detailed due diligence exercise on those elements 

of the country’s proposed programs to ensure that 

the proposed activities are feasible and are a good 

investment for MCC. 

By reviewing MCC’s due diligence process we 

may be able to provide an objective evaluation of 

the thoroughness and completeness of the process, 

identify important areas not covered, if any, and 

recommend corrective actions. This will lead to 

ensuring that MCC is funding the best projects and 

improving the prospects for a successful Compact 

project. 

Review of the Millennium Challenge Corporation’s Coordination with USAID in Assisting 

Threshold Countries to Become Eligible To Apply 

for Millennium Challenge Assistance 

Section 616 of the Millennium Challenge Act -

Assistance to Certain Candidate Countries, authorizes 

MCC’s Board of Directors to provide assistance to 

candidate countries in order to assist them to become 

eligible for Compact assistance. The Act identifi es 

these countries as countries that have not yet qualifi ed 

for MCA assistance but have demonstrated a significant commitment to improve their performance 

on the MCA eligibility criteria. As a result, the 

MCC established the Threshold Program. USAID, 

in partnership with MCC, will take the lead in 

implementing and managing the Threshold Program. 

MCC’s Board of Directors authorized MCC to enter 

into an interagency agreement with USAID for up to 

$185 million to assist the threshold countries. Other 

U.S. agencies and departments may also be involved 

in providing threshold assistance. 

OIG will conduct a review of the Threshold Program 

to determine how MCC is coordinating the activities 

with USAID to administer the program. Primarily, 

the review will examine and evaluate evidence MCC 

has for assuring itself that the program has reasonable 

expectation of making the assisted countries eligible 

for future MCC assistance through Compacts. The 

review will assess how MCC is coordinating the 

activities, the responsibilities each organization has 

in carrying out the program, and the adequacy of 

MCC’s coordination activities. 

7
MCC OIG Fiscal Year 2006 Annual Plan 

Audit of the Millennium Challenge Corporation’s Plans for Monitoring Country Programs 

A program’s potential for success can only be assessed 

by effective oversight and monitoring. Millennium 

Challenge Corporation Compacts contain Monitoring and Evaluation Plans and MCC has published 

the following monitoring statement on its web-site 

regarding its Compact projects: 

• MCC Compacts will be monitored by the MCC 

staff, the administrators within the countries and 

by independent experts employed by the MCC. 

These monitoring activities will occur contemporaneously to provide checks against each other. 

MCC will seek to design Compacts so that they 

are amenable to effective monitoring. The 

monitoring activities will include the following: 

an initial assessment of the priority and impact of 

the program on maximizing growth and poverty 

reduction; ongoing assessments of whether the 

intermediate objectives of the programs are being 

accomplished on schedule and within the budget; 

ongoing assessments of whether value added 

will indeed be increased by the Compact, and 

a retrospective assessment of the impact of the 

project on economic growth after completion. 

We plan to audit this activity to determine if MCC 

has an effective monitoring system in place to ensure 

proper management oversight of MCC-funded 

activities. The audit will evaluate the monitoring system MCC plans to implement to monitor 

the results of its program assistance activities and 

identify any apparent weaknesses and recommend 

actions to keep or get the programs on track. 

Audit of the Millennium Challenge Corporation’s Management of Section 609(g) Funds 

Section 609(g) – Assistance for Development of 

Compact - of the Millennium Challenge Act of 2003 

provides for using MCC funds to assist eligible 

countries in developing Compacts. Specifi cally the 

legislation states that “... the Chief Executive Offi cer 

(of the Corporation) may enter into contracts or 

make grants for any eligible country for the purpose 

of facilitating the development and implementation 

of the Compact between the United States and the 

country”. 

Assistance under this section could address such 

things as the economic reasoning of the proposal, 

statistical issues or baseline surveys, engineering 

feasibility and design, and environmental impact 

assessments. MCC will consider 609(g) funding for 

Compact development and implementation activities 

only in the event of a demonstrated and justifi ed need 

for such funding. In addition, MCC must be satisfi ed 

that adequate fi nancial controls, in terms of fi nancial 

management and procurement processes, have been 

identified and that the country has developed an 

acceptable work plan (with timeline and estimated 

budget) for use of the 609(g) funding. 

We will audit this activity to determine if MCC 

followed its guidelines in deciding to fund an eligible 

country using 609(g) funds and if MCC monitored 

the use of the funds to ensure compliance with the 

intent of the MCC Act. The audit is timely because 

by reviewing MCC’s evaluation and monitoring 

early on we can make recommendations while the 

Compact development and implementation process 

is in its early stages. 

Survey/Risk Assessment of Compact Program 

Implementation in Georgia 

Georgia is one of the original 16 countries that The 

Millennium Challenge Corporation considered 

eligible to submit a proposal for a Compact project. 

As of September 2005, MCC had selected 17 

countries as eligible to apply for MCC Compact 

assistance and had signed Compacts with fi ve of 

the countries – Madagascar, Cape Verde, Honduras, 

Nicaragua and Georgia. MCC is currently evaluating proposals from the other 12 countries and plans 

to sign Compacts with Ghana, Armenia, Benin and 

Vanuatu by the end of December 2005. 

We plan to perform this risk assessment to fi nd 

out what major programs and/or project activities 

Georgia is planning for MCC funding and how they 

are being implemented; what the signifi cant areas 

of administrative and operational risk and vulnerability are and the action the Millennium Challenge 

8
MCC OIG Fiscal Year 2006 Annual Plan 

Corporation is taking to mitigate the risks. The 

anticipated benefit of this risk assessment is that 

we will provide the MCC with a greater level of 

assurance that the funds provided to the recipients 

are effectively managed and the MCC is receiving 

the maximum benefits for the funds provided. We 

may also be able to provide recommendations for 

enhancing the financial management practices in 

place at the selected recipients. 

Review of the Millennium Challenge Corporation’s Progress in Meeting the Requirements of 

the Government Performance and Results Act 

As a government corporation, the MCC is considered 

a federal agency under Section 105, Title 5 of the 

USC, and is therefore subject to the requirements 

of the Government Performance and Results Act of 

1993 (GPRA). 

GPRA creates a framework for more effective 

planning, budgeting, program evaluation and fi scal 

accountability for federally funded programs. The 

intent of the Act is to improve public confi dence in 

federal agencies’ performance by holding agencies 

accountable for achieving program results and to 

improve congressional decision making by clarifying 

and stating program performance goals, measures, 

and costs. 

As provided for in the Act, MCC is required to 

prepare: 

Strategic Plans – MCC will be required to submit 

five-year Strategic Plans that include a comprehensive mission statement, a set of outcome-related 

strategic goals, and a description of how the MCC 

intends to achieve those goals. The Strategic Plan 

has to be updated every three years. 

Annual Performance Plans – MCC is required to 

submit to the Office of Management and Budget 

(OMB) Annual Performance Plans covering each 

program activity set forth in its budget. MCC’s 

annual plans must be consistent with its Strategic 

Plan; establish quantifiable performance goals; 

define the level of performance to be achieved 

during the fiscal year; and describe the operational 

processes and resources required to meet the 

performance goals. 

Annual Performance Reports – By March 31 of 

each year, MCC will be required to issue to the 

President and the Congress a performance report 

for the previous fiscal year. This report will assess 

MCC’s performance vis-a-vis the strategic goals 

established for that year, analyze progress towards 

those goals, and explain deviations from the goals 

and how impediments will be overcome in the 

future. 

The audit will determine whether the MCC has 

complied with the requirements of GPRA. 

Preserve and Protect the Millennium 

Challenge Corporation’s Program and 

Employee Integrity 

The OIG plans to combine both investigative and 

audit activities to meet this strategic goal. Below 

are the strategic objectives under this goal and the 

OIG investigative and audit activities planned to 

accomplish our oversight responsibilities during 

fiscal year 2006. 

Investigate allegations of fraud, waste and 

abuse in the programs and operations of the 

Millennium Challenge Corporation 

The OIG will investigate all allegations of fraud, 

waste, and abuse received from MCC personnel, 

OIG staff, contractors, grantees, the Hotline, or other 

sources. When appropriate, the OIG will refer cases to 

MCC for administrative action and to the Department 

of Justice for criminal and/or civil action(s). 

The OIG will prioritize program integrity cases 

involving any major fraud in the programs and 

operations of MCC. Major fraud investigations are 

the investigations involving large dollar losses by the 

MCC. 

9
MCC OIG Fiscal Year 2006 Annual Plan 

The OIG will also report the number of investigations 

conducted, and the number of criminal, civil, and 

administrative actions taken. 

Prevent fraud, waste and abuse in the 

programs and operations of the Millennium 

Challenge Corporation 

Conduct Fraud Awareness Briefi ngs 

The OIG will promote awareness of fraud by 

providing training to MCC employees, contractors, grantees, and others to alert them to fraudulent 

schemes and practices. The OIG will develop and 

distribute fraud awareness literature, audiovisual 

aids and other material to MCC and its partners. 

In furtherance of OIG fraud-prevention efforts, the 

OIG will offer advice and support to MCC and its 

partners on antifraud strategies through briefi ngs, 

meetings, conferences and other forums. 

Recommend Systemic Improvements 

The OIG will design audits to provide reasonable 

assurance of detecting material misstatements 

resulting from violations of provisions of contracts 

or grant agreements that have a direct and material 

effect on the determination of fi nancial statement 

amounts or other financial data significant to the 

audit objectives. The OIG will make recommendations for systemic improvements if weaknesses are 

uncovered in MCC programs or operations and will 

work with MCC to correct the problems. 

Promote the Hotline 

The OIG will continue to promote the Hotline as a 

tool for reporting fraud, waste, and abuse in fraud 

awareness presentations and other forums. 

The OIG believes that the Hotline is both an effective 

medium for receiving allegations and an active 

deterrent against fraud. 

Preserve and protect MCC employee integrity 

by conducting and concluding investigations of 

employee integrity efficiently and expeditiously. 

The OIG will investigate all allegations of personnel 

misconduct received from MCC personnel, contractors, grantees, the Hotline, and other sources. 

Evidence of wrongdoing by any employee will be 

reported to the Department of Justice for criminal/ 

civil prosecution and/or to MCC for administrative 

action. 

The OIG recognizes the effect that employee investigations have on the Corporation’s programs and 

operations. Accordingly, the OIG will complete 

employee integrity investigations within 120 days of 

receipt of an allegation. 

Factors Affecting OIG Audit and Investigative Activities 

The OIG faces several factors, some of which are 

beyond its control, that could affect its ability to 

achieve its goals and objectives with respect to the 

MCC. For example, the OIG has no implementation 

authority and can only make recommendations to 

MCC on the basis of audit and investigative fi ndings. 

MCC is not obligated to accept any of the OIG’s 

recommendations. OIG recommendations, along 

with MCC’s responses, will be included in OIG audit 

reports and summarized in the OIG’s semiannual 

report to Congress. 

Other factors both internal and external to MCC 

affect the OIG’s ability to accomplish its work. 

Since MCC is a new organization, its operating 

policies, procedures and program activities are 

still undergoing development. And the number of 

Compacts that will be operational in the 16 countries 

originally eligible for MCC assistance is not certain. 

Furthermore, over time MCC will be executing 

Compacts in many more countries as its development 

program expands. For example, in July of 2004, 

MCC identified 57 new candidate countries that the 

Corporation’s Board of Directors will consider for 

eligibility to apply for assistance in 2006, plus 13 of 

the original 16 deemed eligible in 2004. 

10
MCC OIG Fiscal Year 2006 Annual Plan 

The working environment overseas is complex, 

given the differences in language, laws, and 

standards of accountability and corruption in many 

countries is a significant consideration. According 

to the World Bank, corruption—the abuse of public 

office for private gain—is a global problem that 

exists in varying degrees. Transparency International (TI) publishes a corruption-perception index, 

rating countries surveyed on a scale from 10 (least 

corrupt) to 0 (highly corrupt). Of 133 countries 

rated by TI for 2003, 96 received a rating below 5. 

Eleven of the 16 countries selected as eligible to 

submit proposals for MCC assistance under MCC’s 

fiscal year 2004 and 2005 funding were ranked at 

3.4 or below, indicating a high level of corruption. 

The other five countries were not rated by Transparency International in 2003. 

In carrying out its audits and investigations, OIG 

staff must be aware of these vulnerabilities and 

factor the high-risk environments into designing 

audit and investigative strategies. 

11

Millennium Challenge Corporation

Office of Inspector General 

1300 Pennsylvania Avenue, NW 

Room 6.06D 

Washington, DC 20523 

The MCC Annual Plan is available on the Internet at 

www.usaid.gov/oig/public/mcc_report/mcc_ann_report.htm