Millennium 

Challenge 

Corporation 

Offi ce of 

Inspector 

General 

Annual Plan

2005

MCC OIG Fiscal Year 2005 Annual Plan 

 Statement of the Acting Inspector General 

I am pleased to present the Offi ce of Inspector 

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

2005. This document articulates our planned 

work in 2005 at the Millennium Challenge 

Corporation. 

This annual plan provides details on the audit, 

investigative, and other activities that 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 annual plan recognizes that the Millennium 

Challenge Corporation is a new organization and 

allows for changes resulting from developing 

policy and program implementation. 

Our overriding goal is to support management 

in the delivery of its programs. We do this 

through our audit and investigative activities 

and by advising management on program risks 

and the need for associated internal controls 

for promoting effective and effi cient program 

delivery. In performing our duties, we work 

with the Corporation’s management and staff as 

well as with members of Congress and their staffs 

to understand their particular interests and to 

provide them with information that 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 

applicable professional standards were met. 

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 both 

the Corporation’s management 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.

 James R. Ebbitt 

Acting Inspector General 

MCC OIG Fiscal Year 2005 Annual Plan 

Millennium Challenge Corporation

Office of Inspector General

Annual Plan

Fiscal Year 2005 

MCC OIG Fiscal Year 2005 Annual Plan 

CONTENTS

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

Keep the Head of the Corporation and Congress Fully Informed on the Status of MCC’s

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 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . 4

Administration and Operations and the Need for Corrective Action. . . . . . . . . . . . . . . . . . . . . . . 4

Promote Sound Accounting and Reporting on Financial Activities and Information Security. . 5

Promote Economy, Efficiency, and Effectiveness and Assess Program Results . . . . . . . . . . . . . . 6

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

Factors Affecting OIG Audit and Investigative Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

MCC OIG Fiscal Year 2005 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 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 

further states that, in carrying out this responsibility, 

the Inspector General shall report to and be under 

the general supervision of the Corporation’s Board 

of Directors. 

Given the Corporation’s unique structure and the 

substantial level of development assistance it 

will administer, the Office of Inspector General 

established a separate Assistant Inspector General 

(AIG/MCC) to coordinate all audit and 

investigative activities at the MCC. The AIG/MCC 

will 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; Budapest, Hungary; 

Cairo, Egypt; Dakar, Senegal; 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 it has oversight 

responsibilities for. 

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, demon1
MCC OIG Fiscal Year 2005 Annual Plan 

strating and encouraging integrity and achieving 

excellence; understand the entire OIG program 

and its effect on the organization’s programs; 

help management find solutions to problems; 

and remember that our success is measured 

in part by the success of our colleagues and 

partners. 

OIG General Goals and Objectives 

The goal of the OIG with respect to the 

Millennium Challenge Corporation is to ensure 

that the MCC operates effi ciently, effectively, 

and with integrity. To meet this goal, the OIG 

will assist the MCC as the Corporation 

establishes its organizational structure and begins 

its assistance programs. The OIG will continue 

its policy of early involvement in the 

Corporation’s activities to help ensure good 

oversight and will support key MCC programs 

and management functions through audit and 

investigative activities designed to ensure that 

the Corporation operates effi ciently, effectively, 

and with integrity. 

A signifi cant element in performing our audit and 

investigative work is our collaboration with other 

organizations in providing oversight for MCC’s 

program activities. We will consult with other 

organizations to consider the work they have 

performed, seek opportunities for joint work, 

and obtain additional information that will 

have an effect on our planning. Specifi cally, we 

will collaborate with the Government 

Accountability Office and we will keep abreast 

of the U.S. Agency for International 

Development’s activities in support of MCC’s 

mission. We have provided more specifi c detail 

regarding our plans to accomplish these efforts 

as follows. 

Government Accountability Offi ce 

The IG Act requires coordination with the 

Government Accountability Office (GAO) to 

prevent duplication and to ensure effective 

coordination 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 planning our annual audits. 

In addition to the general OIG policy, AIG/MCC 

has established a consultative process with GAO 

staff involved in reviewing MCC activities. 

AIG/MCC maintains a continuing dialog with 

GAO which will be a major factor in planning 

our audit and investigative activities at the 

Corporation. 

United States Agency for International 

Development 

USAID has an important role in assisting the 

Corporation with its country compact development process. The Millennium Challenge Act 

requires that the Corporation’s Chief Executive 

Officer consult with the Administrator of 

USAID to coordinate activities of the Corporation with those of USAID. USAID is 

also required to seek to ensure that appropriate programs of USAID play a primary 

role in preparing MCC’s candidate countries 

to become eligible countries. 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. 

2
MCC OIG Fiscal Year 2005 Annual Plan 

Organization of the Millennium Challenge 

Corporation 

The Millennium Challenge Corporation is 

headquartered in Arlington, Virginia. During fi scal 

year 2004, the Corporation was in a start-up mode. 

As of September 30, 2004, it had about 63 U.S. 

staff on board (including contractors) and planned 

to build to a full staffing level of about 200 U.S. 

positions by December 2005. Several of its key 

administrative staff had only recently been hired 

and it had not yet developed MCC-specifi c 

operating procedures. Pending the development of 

MCC-specific procedures, it planned to follow 

government-wide rules and regulations. Further, 

given its limited staff both short term and long 

term, the Corporation intends to contract out most 

of its support needs. 

In late March 2004, MCC entered into 

Interagency Agreements with the Department 

of Interior’s National Business Center (NBC)* 

in Denver, Colorado for human resource 

management, payroll, and accounting services. 

MCC’s plans are that its accounting 

records will primarily be located at the NBC 

and that the Corporation will interface with the 

NBC’s systems electronically for disbursing 

authentication, as well as financial reports and 

statements. 

For fiscal year 2004 the Corporation obligated 

about $15 million and spent about $4 million of its 

$994 million fiscal year 2004 appropriation. 

This was primarily for salary, administrative 

and start-up related expenses. 

The largest portion of the Corporation’s expenditures long term will be for programs implemented 

overseas. In 2004, 16 countries were approved to 

submit proposals for assistance to be funded from 

MCC’s fiscal year 2004 funds. Given the time 

* NBC is an administrative and computer information service 

provider for the Department of Interior and other federal agencies. 

involved for countries to develop high quality 

proposals and the negotiations that will take place 

after the receipt of the initial proposals, MCC 

expects money to begin flowing under these 

potential agreements (called country compacts) 

in fiscal year 2005. Longer term, as its budget 

increases, the number of country agreements is 

expected to grow substantially. 

As noted earlier, the MCC was essentially in an 

organizational and start-up mode at the time of 

preparing this annual plan. Therefore, we have 

made assumptions and projections based on the 

state of the Corporation’s development. These 

assumptions and projections include: 

• MCC will continue to contract its human 

resources management, payroll, and accounting services through Interagency Agreements 

with the NBC. 

• MCC will have developed written operating 

and accounting policies and procedures by 

mid-fiscal year 2005. 

• Accounting documentation will be electronically approved by MCC, and maintained and 

stored at NBC. 

• MCC will have auditable fi nancial statements 

for fiscal year 2004 and forward. 

• Country compact funding will be given 

directly to recipient government fi scal agents 

and disbursements to project implementing 

entities will be done by the government fi scal 

agent. 

• Country compacts will contain “audit rights” 

clauses permitting AIG/MCC to audit country 

projects. 

• Country compacts will have been executed 

and be operational by mid-fiscal year 2005. 

3
MCC OIG Fiscal Year 2005 Annual Plan 

OIG Strategic Goals 

The OIG’s strategic goals with respect to the MCC 

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, Effi ciency, and Effectiveness, 

and Assess Program Results 

• Preserve and Protect the Millennium Challenge 

Corporation’s Program and Employee Integrity 

Below we provide our planned audit and investigative activities for fiscal year 2005 to address these 

strategic goals. 

Planned Activities for Fiscal Year 2005 

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 significant audits conducted during the 

reporting period. We will issue our first Semiannual Report to Congress for the period ending 

September 30, 2004. 

• 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 program oversight 

and monitoring efforts. We also plan to 

brief the CEO and senior MCC staff to 

bring matters of importance to the attention of 

MCC management in a time frame enabling 

those managers to take effective remedial 

action. In addition, the OIG will endeavor 

to identify issue areas of priority importance 

and establish a schedule of formal 

presentations to brief MCC managers on the 

status of internal controls and OIG activity 

in those areas. 

• Present timely briefings to key congressional 

staff on the status of significant OIG audit and 

investigative activities, problems and issues 

identified by these efforts, and the necessity 

for and progress of corrective actions 

being taken by MCC. The OIG continually 

tries to identify issue areas of priority 

importance, and it also establishes a 

schedule of formal presentations to brief 

congressional members and staff on the status of 

internal controls and OIG activity in those 

areas. 

• 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 continually 

reviews report distribution and dissemination 

procedures to bring its message more effi ciently 

to its congressional, MCC, and public clients. 

Audit reports are placed on the Internet in a 

format complying with all federal requirements. 

In addition, the OIG has instituted procedures 

for electronically distributing audit reports 

directly to congressional members and staffs. 

4
MCC OIG Fiscal Year 2005 Annual Plan 

Promote Sound Accounting and Reporting on 

Financial Activities and Information Security

OIG activities to accomplish this strategic goal 

during fiscal year 2005 are the following. 

Audit of Millennium Challenge Corporation’s 

FY 2005 Financial Statements 

One of the OIG’s newly assigned responsibilities is to conduct or oversee an annual audit of 

the MCC’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 conduct the audit of MCC’s fiscal year 2005 

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. 

Oversight of Contracted Financial Audits of 

MCC’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 oversight activities will ensure the 

following: 

Nonfederal auditors have adequately assessed 

allow ability of MCC award expenditures. 

Nonfederal auditors are familiar with the 

compliance auditing requirements of MCC 

compact agreements. 

The independence of the nonfederal auditors 

has not been compromised in appearance or in 

fact. 

The objective of the OIG oversight is to ensure 

that nonfederal auditors are independent, familiar with the compliance auditing requirements for 

MCC’s programs, adequately assess the 

allowability of MCC award expenditures, and 

assess the adequacy of the audited entity’s 

internal controls in relation to the audited awards. 

The OIG will conduct quality control reviews 

to ensure that the work of nonfederal auditors 

meets applicable standards. 

Risk Assessments of the Financial Aspects of 

Country Compact Implementation 

The Millennium Challenge Corporation expects to 

enter into its first country compact agreements 

around mid fiscal year 2005. As part of the 

OIG FY 2005 audit plan, the OIG plans to 

do on-the-ground assessments of the fi nancial 

implementation arrangements of the initial 

country compacts. 

Our 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. 

5
MCC OIG Fiscal Year 2005 Annual Plan 

The anticipated benefit of these risk assessments 

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 fi nancial 

management practices in place at the selected 

recipients. 

Review of Millennium Challenge Corporation’s 

Compliance with Federal Information Security 

Management Act 

The Federal Information Security Management Act 

of 2002 (FISMA), Public Law 107-347 states that: 

Each agency shall 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.... 

MCC, as a Government corporation, is subject 

to FISMA. This audit will contribute to the protection 

of data files, computer equipment, and resources 

from unauthorized access, modifi ca tion, and 

destruction. Specifically, it will determine whether 

MCC’s information system security program meets 

the requirements of the FISMA. 

Audit of MCC’s Plans for Using E-Commerce 

Solutions to Implement the Paperwork Reduction 

Act 

The head of each agency is responsible for carrying 

out the agency’s information resources management 

activities to improve agency productivity, effi ciency, 

and effectiveness; and complying with the 

requirements of this Act. 

The Millennium Challenge Corporation has 

indicated that, as much as practicable, it intends to 

establish a paperless offi ce. The implementation of 

e-commerce software solutions could eventually 

reduce or eliminate additional paperwork, reduce 

purchasing cycle times, and lower the costs of goods 

and services to the Corporation. 

The objective of this audit is to determine whether 

the MCC’s plans for integrating e-commerce 

software solutions adequately address the 

requirements of the Paperwork Reduction Act. 

Promote Economy, Efficiency, and Effectiveness and Assess Program Results 

The OIG will address this strategic goal through 

the following planned audits. 

Audit of the Millennium Challenge Corporation’s Efforts to Establish Its Internal Control 

Structure 

MCC was established in January 2004 as a 

Government corporation and is subject to the 

Government Corporation Control Act, Chapter 91 of 

Title 31 of the US Code. 

Section 9106 of Chapter 91 requires that a 

Government corporation shall submit an 

annual management report to the Congress 

not later than 180 days after the end of the 

corporation’s fiscal year. The report shall include, 

among other things, a statement on internal 

accounting and administrative control systems by 

the head of the corporation consistent with 

the requirements for agency statements on internal 

accounting and administrative control systems 

under the amendments made by the Federal 

Managers’ Financial Integrity Act of 1982 

(Public Law 97–255). 

The importance of internal controls is addressed, 

both explicitly and implicitly, in many statutes 

and executive documents. The Federal Managers’ 

Financial Integrity Act (FMFIA) establishes 

specific requirements with regard to management 

controls. The agency head must establish controls 

6
MCC OIG Fiscal Year 2005 Annual Plan 

that reasonably ensure that: (i) obligations and 

costs comply with applicable law; (ii) assets are 

safeguarded against waste, loss, unauthorized 

use or misappropriation; and (iii) revenues and 

expenditures are properly recorded and accounted 

for. In addition, FMFIA requires agency heads 

to conduct an annual evaluation and report 

on the control and financial systems that protect the integrity of Federal programs. The Act 

encompasses program, operational, and administrative 

areas as well as accounting and fi nancial management. 

The audit will determine whether the Millennium 

Challenge Corporation implemented a system of 

internal controls consistent with the requirements of 

the Federal Managers’ Financial Integrity Act. 

Review of the Millennium Challenge Corporation’s 

Progress in Achieving its Planned Organizational 

Structure and Beginning its Assistance Programs 

(As of February 28, 2005) 

The review will be a follow up of the August 2004 

review which we reported on in Report No. 

M-000-04-001-S dated September 30, 2004. We 

will continue assessing MCC’s developmental and 

organizational progress as it moves toward full 

operational status. As in the previous review, the 

objectives will be to determine the progress the 

Millennium Challenge Corporation has made in 

achieving its planned organization structure and the 

status of its program development process. 

Review of Millennium Challenge Corporation’s 

Progress in Meeting the Requirements of the 

Government Performance and Results Act 

As a Government corporation, the MCC is considered 

to be a federal agency under Section 105, Title 5 of 

the U.S.C., and is therefore required to meet the 

requirements of the Government Performance and 

Results Act of 1993 (GPRA). 

GPRA places new expectations and requirements on 

federal agencies by creating a framework for more 

effective planning, budgeting, program evaluation and 

fiscal accountability for federally funded programs. 

The intent of GPRA 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. 

Basic GPRA requirements include: 

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; defi ne 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 objective will determine whether the 

MCC has complied with the requirements of 

GPRA. 

7
MCC OIG Fiscal Year 2005 Annual Plan 

Audit of the Millennium Challenge Corporation’s Monitoring System for Its Assistance 

Activities 

Monitoring is very important in project planning 

and implementation. Monitoring provides 

information useful to analyzing the project; 

determining whether the inputs to the project 

are well defined and utilized; identifying problems 

facing the project and finding solutions, and ensuring 

all activities are carried out as intended and in a 

timely manner. 

MCC’s Monitoring and Evaluation offi ce is 

responsible for overseeing the assessment of 

economic logic and growth impact of country 

proposals, the establishment of monitoring and 

evaluation plans, and the collection and analysis of 

performance measurement data. 

The audit objective will be to describe the 

monitoring system MCC plans to implement to 

monitor the results of its program assistance 

activities and assess any apparent weaknesses. 

Audit of the Millennium Challenge 

Corporation’s Coordination with Other 

Donors to Implement Its Assistance Program 

Section 609(f) of the Millennium Challenge Act 

requires that “to the maximum extent feasible, 

activities undertaken to achieve the objectives of 

the Compact shall be undertaken in coordination with 

the assistance activities of other donors.” 

Section 615(a) requires that “The Chief 

Executive Officer [of MCC] shall consult with 

the Administrator of the United States Agency for 

International Development in order to coordinate 

the activities of the Corporation with the activities 

of the Agency.” 

MCC’s Guidance for Developing Proposals for MCC 

Assistance in FY 2004 asks that country proposals 

contain a description of other donor activity in the 

proposed activity areas and mechanisms for 

coordination with MCC activities. It is one of the 

elements intended to be included in country 

proposals and should include contributions of 

other donors who have provided development 

assistance to the country in recent years, how 

existing and past projects related to the priorities 

and goals presented in the country’s proposal 

fared, and how the activities undertaken to 

achieve the program goals would be coordinated 

with the assistance activities of other donors 

during the duration of the program. 

The audit will determine whether MCC 

implemented a system to track and coordinate 

other donors’ assistance in implementing MCC’s 

assistance program. 

Audit of the Millennium Challenge Corporation’s Contract Management Process 

According to the Federal Acquisition Regulations, 

contracting officers are responsible for ensuring 

performance of all necessary actions for effective 

contracting, ensuring compliance with the 

terms of the contract, and safeguarding the 

interests of the United States in its contractual 

relationships. Due to MCC’s plans for limiting 

its direct hire staff and increasing the use 

of contractors to implement MCC’s programs, 

there is significant risk that required monitoring 

by MCC of its contractors will not be suffi cient 

to ensure program objectives are achieved 

and funds are used in accordance with 

laws, regulations and agreement terms. 

Additionally, there is high congressional 

interest in how MCC plans to monitor 

its activities. 

The audit will assess whether the MCC has 

managed its contracting process, including 

monitoring of contract activities, in accordance 

with applicable laws and regulations. 

8
MCC OIG Fiscal Year 2005 Annual Plan 

Review of the Millennium Challenge 

Corporation’s Progress in Achieving its 

Planned Organizationl Structure and Beginning 

its Assistance Programs (As of August 31, 2005) 

As of August 31, 2005, the review will be the 

second follow up of the August 2004 review 

which we reported on in Report No. 

M-000-04-001-S dated September 30, 2004. 

We will continue assessing MCC’s developmental 

and organizational progress as it moves 

toward full operational status. As in previous 

reviews, the objectives will determine the 

progress the MCC has made in achieving its 

planned organization structure and the status of MCC’s 

program development process. 

Review of MCC’s Coordination with USAID in 

Managing Threshold Country Programs 

Section 616, Assistance to Certain Candidate 

Countries, of the Millennium Challenge Act authorizes 

the MCC’s Board of Directors to provide assistance 

to a candidate country in order to assist it to become 

an eligible country. The Act identifies these countries 

as countries that have not yet qualified for MCA 

assistance but have demonstrated a signifi cant 

commitment to improve their performance on the 

MCA eligibility criteria. As a result, the MCC 

established the “Threshold Program.” Threshold 

Program assistance will be used to help such 

countries address the specifi c policy weaknesses 

indicated by the country’s scores on the sixteen 

policy indicators that are central to the MCA eligibility 

criteria and methodology. 

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 

$40 million to assist the threshold countries. 

Other U.S. agencies and departments may also 

be involved in providing threshold country assistance. 

On September 30, 2004, the MCC’s Board of 

Directors invited seven countries to apply for 

FY 2004 MCC Threshold Program assistance: 

Albania, East Timor, Kenya, Sao Tome and 

Principe, Tanzania, Uganda, and Yemen. These 

countries will be invited to submit assistance 

proposals to help them achieve policy and other 

reforms necessary to improve their performance on 

the indicators. MCC and USAID will then evaluate 

the proposals and determine which of the proposals 

merit MCC funding. 

The objective of the audit will be to determine 

whether the MCC is adequately coordinating 

the Threshold Program activities with USAID 

and complying with applicable laws and 

regulations. 

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 2005. 

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 2005 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 

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 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. 

Audit of Millennium Challenge Corporation’s 

Controls to Assess its Employees’ Compliance 

with the Office of Government Ethics 

Standards 

Chapter XVI—Office of Government Ethics, 

Subchapter B—Government Ethics, under 

Title 5—Administrative Personnel, of the Code 

of Federal Regulations (CFR) delineates the 

responsibilities of employees and agencies 

for ensuring the integrity of federal employees. 

Part 2635—Standards of Ethical Conduct 

for Employees of the Executive Branch under 

Subchapter B defines Agency (SS 2635.102) to 

mean an executive agency as defi ned in 

5 U.S.C. 105. Subsection 105 of Title 5 U.S.C. 

defines executive agency to mean an executive 

department, a Government corporation, and an 

independent establishment. Therefore, the 

Millennium Challenge Corporation is covered by 

the standards and provisions of the Offi ce of 

Government Ethics. 

Subsection 2635.101 of Title 5, Subchapter B sets 

forth the basic obligations of public service. Public 

service is a public trust, and therefore, each 

employee has a responsibility to the United States 

Government and its citizens to place loyalty to 

the Constitution, laws and ethical principles above 

private gain. To ensure that every citizen can 

have complete confidence in the integrity of the 

Federal Government, each employee shall respect 

and adhere to the principles of ethical conduct 

set forth in Subchapter B, as well as its 

implementing standards and supplemental agency 

regulations. 

Subpart B—Designated Agency Ethics Offi cial–sets 

forth the responsibilities of the agency head. In 

general, the head of each agency is 

responsible for and shall exercise personal 

leadership in establishing, maintaining, and carrying 

out the agency’s ethics program. He or she 

shall make available to the ethics program 

sufficient resources (including investigative, audit, 

legal, and administrative staff as necessary) to 

enable the agency to administer its program in a 

positive and effective manner. 

The head of each agency shall appoint an 

individual to serve as the designated agency 

ethics official and an individual to serve 

in an acting capacity in the absence of the 

primary designated agency ethics offi cial 

(alternate agency ethics official). In selecting 

these two individuals, the head of an agency 

10
MCC OIG Fiscal Year 2005 Annual Plan 

should ensure that the individuals have appropriate 

skills in the administrative, legal, managerial, and analytical areas. 

The audit will determine whether the MCC 

established an ethics program that meets 

government ethics requirements under CFR 

Title 5. 

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; the OIG will complete employee integrity 

investigations within 120 days of receipt of an 

allegation. 

The OIG will also report the number of investigations conducted, and the number of criminal, civil, 

and administrative actions taken. 

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 findings. MCC is not obligated to 

accept any of the OIG’s recommendations. 

The OIG’s recommendations, along with MCC’s 

responses, will be included in OIG audit reports and 

summarized in the OIG’s semiannual report 

to Congress. In addition, 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 initial 16 

eligible countries is still unknown. 

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 2005, plus 13 of the original 16 deemed 

eligible in 2004. 

The working environment overseas is complex, 

given the differences in language, laws, and 

standards of accountability. Also, 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 to MCC assistance 

under MCC’s fiscal year 2004 funding were 

ranked at 3.4 or below, indicating a high 

level of corruption. The other fi ve 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