United States Government Accountability Office

GAO Testimony 

Before the Subcommittee on Africa and 

Global Health, Committee on Foreign 

Affairs, House of Representatives

MILLENNIUM 

CHALLENGE 

CORPORATION 

Progress and Challenges 

with Compacts in Africa 

Statement of David B. Gootnick, Director 

International Affairs and Trade 

For Release on Delivery

Expected at 2:30 p.m. EDT

Thursday, June 28, 2007

 

GAO-07-1049T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

June 28, 2007

MILLENNIUM CHALLENGE 

CORPORATION 

Progress and Challenges with Compacts 

in Africa 

Highlights of GAO-07-1049T, a testimony 

to the Subcommittee on Africa and Global 

Health, Committee on Foreign Affairs, 

House of Representatives

In January 2004, Congress 

established the Millennium 

Challenge Corporation (MCC) to 

administer the Millennium 

Challenge Account for foreign 

assistance. MCC’s mission is to 

reduce poverty by supporting 

sustainable, transformative

economic growth in partnership 

with developing countries that 

create and maintain sound policy 

environments. MCC signs compacts 

obligating funds for such projects 

with countries it selects as eligible

for this assistance, according to

criteria outlined in MCC’s 

authorizing legislation. Each

compact has a maximum duration 

of 5 years. After signed compacts

enter into force, MCC begins to 

disburse funds. For fiscal years 

2004 to 2007, MCC received 

appropriations of almost $6 billion. 

MCC has obligated almost $3 

billion for 11 compacts; $1.5 billion 

of this amount is for 5 compacts in 

sub-Saharan Africa (Africa). 

This testimony examines (1) the

pace of MCC’s initiation of 

compacts in Africa, (2) MCC 

projects and management 

structures in African countries with 

signed compacts, and (3) MCC’s 

progress in disbursing compact 

funds. In preparing this testimony, 

GAO drew from, and updated,

previous reports on MCC’s 

compact development, obligations, 

implementation, management, and 

disbursements. 

For MCC’s five signed African compacts—with Madagascar, Cape Verde,

Benin, Ghana, and Mali—progressing from eligibility selection to compact 

signature took between 12 and 31 months. All except the compact with Mali

have entered into force—on average, about 5 months after compact 

signature. Of six other African countries that MCC identified as eligible for 

compact assistance, none have reached compact signature, although three 

have been eligible for more than 3 years. Overall, MCC has established, and 

obligated funds for, fewer compacts than projected. 

MCC has budgeted about three-quarters of compact funding in Africa for 

transportation and other infrastructure projects (37 percent) and agriculture 

and rural development projects (39 percent). To provide oversight and 

accountability and facilitate stakeholder involvement, the countries have 

established management structures with several common components. GAO 

reported in July 2006 that Madagascar and Cape Verde did not fill key 

positions until months after entry into force and that this may limit 

achievement of compact objectives. According to MCC, key officials for 

subsequent compacts with Benin and Ghana were in place around the time 

of entry into force; key positions for Mali have not yet been filled.

MCC has disbursed compact funds in Africa more slowly than planned and, 

unless it can increase its rate of disbursements, may have large unexpended

balances and uncompleted projects when the compacts expire. As of March 

31, 2007, MCC had disbursed about $26 million (23 percent) of $113.9 million 

it planned to disburse by that date. The low rate of disbursement is most 

critical for Madagascar and Cape Verde, both in their second year of 

compact implementation. According to MCC, the unexpectedly slow 

disbursement reflects both its high standards for accountability and its initial 

overestimation of the countries’ capacities to meet those standards. 

Planned vs. Actual MCC Disbursements to African Countries as of March 31, 2007 

www.gao.gov/cgi-bin/getrpt?GAO-07-1049T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact David Gootnick 

at 202-512-3149 or gootnickd@gao.gov. 
Mr. Chairman and Members of the Committee: 

Thank you for the opportunity to discuss GAO’s findings and observations

regarding the Millennium Challenge Corporation’s (MCC) activities and 

progress in sub-Saharan Africa.1

In January 2004, Congress established MCC to administer the Millennium 

Challenge Account (MCA) for foreign assistance.2

 MCC’s mission is to 

reduce poverty by supporting sustainable, transformative economic 

growth in partnership with developing countries that create and maintain 

sound policy environments. In countries where it funds projects or 

activities, MCC expects to raise incomes and lift thousands out of poverty. 

For fiscal years 2004 to 2007, MCC received appropriations of almost $6 

billion, about $5.1 billion of which has been set aside for compact 

assistance.3 MCC is currently working with 40 countries worldwide—

either providing compact assistance or helping them become eligible for

compact assistance4

—and had obligated almost $3 billion for compacts 

with 11 of these countries as of May 2007. 

In 2006, we reported on MCC’s implementation of its first compacts—

including compacts with Madagascar and Cape Verde—examining MCC’s 

process for initiating the compacts and its management structures for 

 1

Sub-Saharan Africa does not include the additional MCC-eligible country of Morocco. 

2

Millennium Challenge Act of 2003, Public Law 108-199, Division D, Title VI of the

Consolidated Appropriations Act, 2004. Title II, Division D of this act established the MCA

for MCC appropriations. 

3

An MCC compact is an agreement between the U.S. government, acting through MCC, and 

the government of a country eligible for MCC assistance. Other funds are used for MCC’s

threshold country program, administrative expenses, due diligence, monitoring and 

evaluation, and other costs. 

4

MCC uses criteria outlined in the Millennium Challenge Act to select countries as eligible 

for compact assistance. In general, MCC selects as eligible countries that are not barred

from receiving U.S. assistance; that meet income criteria; and that also meet criteria for 

ruling justly, encouraging economic freedom, investing in people, and combating 

corruption.

Page 1 GAO-07-1049T 
implementing them.5

 Today I will discuss MCC’s activities in sub-Saharan 

Africa (Africa), where MCC has signed compacts with five countries and 

identified another six countries as eligible for assistance. Specifically, I

will discuss (1) the pace of MCC’s initiation of compacts in Africa, (2) 

MCC projects and management structures in African countries with signed 

compacts, and (3) MCC’s progress in disbursing compact funds. 

To address these objectives, we updated our previous reports as needed. 

We updated and summarized MCC’s progress in initiating and

implementing programs in Africa, using public documents available from 

the MCC Web site and the results of our previous reporting. Our analysis 

of MCC’s obligations for compact assistance to African countries is based 

on a budget analysis that we conducted in February 2007. Our analysis of 

MCC’s disbursements is based on a budget analysis that we conducted in 

May 2007, comparing MCC data about actual and planned disbursements 

from July 2005 through March 2007. We conducted our work for this 

testimony in June 2007 in accordance with generally accepted government 

auditing standards. (See app. I for further details of our scope and 

methodology.) 

The pace at which MCC has initiated compacts with African countries has 

varied. For the five signed compacts—with Madagascar, Cape Verde, 

Benin, Ghana, and Mali—progressing from eligibility selection to compact 

signature took between 12 and 31 months. Four of the compacts have

entered into force—on average, about 5 months after compact signature. 

Of the six additional eligible African countries, none has reached compact 

signature, although three have been compact eligible for more than 3 

years. In general, MCC’s rate of establishing and obligating funds for new 

compacts has been slower than projected, with the result that MCC 

currently has more than $2 billion in unobligated funds set aside for 

compacts. 

Summary 

 5

GAO, Millennium Challenge Corporation: Compact Implementation Structures Are

Being Established; Framework for Measuring Results Needs Improvement, GAO-06-805 

(Washington, D.C.: July 28, 2006). Previous GAO work summarized MCC’s progress in its 

first year of operations and in making awards for compact assistance. See GAO, 

Millennium Challenge Corporation: Progress Made on Key Challenges in First Year of

Operations, GAO-05-455T (Washington, D.C.: Apr. 26, 2005) and GAO-05-625T (Washington, 

D.C.: Apr. 27, 2005); Analysis of Future Millennium Challenge Corporation Obligations, 

GAO-06-466R (Washington, D.C.: Feb. 21, 2006). 

Page 2 GAO-07-1049T 
MCC’s compact projects in Africa have emphasized transportation and 

agriculture and are to be implemented through country-run management 

structures. Approximately three-quarters of the compact funding in Africa

has been budgeted for (1) transportation and other infrastructure projects 

(37 percent) and (2) agriculture and rural development projects (39 

percent). To provide oversight and accountability and facilitate 

stakeholder involvement, the countries have established management 

structures with common components. The countries’ management 

structures generally include a steering committee, responsible for compact 

oversight and results; a stakeholder committee, to advise the steering 

committee on compact implementation; and a management unit, 

principally responsible for compact management and implementation. As 

we reported in July 2006, Madagascar and Cape Verde—the first two 

African countries to sign compacts—did not fill key positions in their 

management structures until several months after entry into force, and 

this delay may limit their achievement of compact objectives. According to

MCC, key management officials for subsequent compacts with Benin and

Ghana were in place around the time of entry into force. Key positions for 

Mali, whose compact has not entered into force, have not yet been filled.

MCC has disbursed compact funds in Africa more slowly than planned 

and, unless it can make future disbursements more quickly, may have 

large unexpended balances and uncompleted projects when the compacts 

expire. According to MCC, its unexpectedly slow rates of disbursement 

have primarily reflected its high standards for program accountability and

sustainability as well as its initial overestimation of partner country 

capacity to meet these standards. As of March 31, 2007, MCC had 

disbursed $26 million (23 percent) of the $113.9 million it had planned to 

disburse by that date. The slower-than-expected disbursement is most 

critical for Madagascar and Cape Verde, both in their second year of 

compact implementation. 

The Millennium Challenge Act of 2003 requires MCC to select countries as 

eligible for MCA assistance each fiscal year.6

 Countries with per capita Background 

 6

The Millennium Challenge Act also authorizes a limited amount of assistance to certain 

candidate countries to help them become eligible for MCA assistance; this assistance is 

referred to as MCC’s threshold program. Threshold candidate countries must (1) meet the 

requirements for MCA candidacy and (2) demonstrate a significant commitment to meeting 

the act’s eligibility criteria but fail to meet those criteria. We have not analyzed MCC’s work 

with threshold countries. 

Page 3 GAO-07-1049T 
income at or below a set threshold may be selected as eligible if they meet

MCC indicator criteria and are not statutorily barred from receiving U.S.

assistance.7 MCC has signed compacts with five countries in Africa and 

identified six other African countries as eligible for compact assistance 

(see fig. 1). 

 7

MCC uses 16 indicators divided into three categories: Ruling Justly, Encouraging 

Economic Freedom, and Investing in People. To be eligible for MCA assistance, countries

must score above the median relative to their peers on at least half of the indicators in each 

category and above the median on the indicator for combating corruption. 

Page 4 GAO-07-1049T 
Figure 1: African Countries Receiving or Eligible for MCC Compact Assistance, as of June 2007 

Sources: GAO, based on MCC information; map (Map Resources); photos: GAO.

Cape 

Verde

Gambia

Senegal

Madagascar

Namibia

Lesotho

Madagascar land records digitization project

Cape Verde road infrastructure project

Mozambique

Tanzania

Mali

Burkina Faso

Ghana

Benin

Compact eligible

Compact signed

Suspended (Gambia only)

Note: On June 16, 2006, MCC suspended Gambia from eligibility for assistance, citing a pattern of 

actions inconsistent with MCC’s selection criteria, including documented evidence of human rights

abuses and increased restrictions on political rights, civil liberties, and press freedom by the 

government, as well as worsening economic policies and anticorruption efforts. 

Page 5 GAO-07-1049T 
After MCC selects a country as compact eligible, the country may begin a 

four-phase process that can lead to a compact’s entry into force (see fig.

2). 

Figure 2: Summary of MCC Compact Development and Implementation Process as of June 2007 

Eligibility 

determination

Compact 

development

Compact 

implementation

Finalize supplemental 

agreements

Opportunity 

memo

Investment 

memo

Compact 

signinga Entry into 

force

Country proposal 

development

MCC’s due 

diligence review

Source: GAO analysis of MCC data.

Compact negotiationb

and MCC board 

approval

MCC and country 

complete 

entry into force 

requirements

MCC authorizes fund 

disbursement and oversees

country implementation of 

compact

• Burkina Faso

• Namibia

• Senegal

• Tanzania

• Lesotho

• Mozambique

• Mali • Benin

• Cape Verde

• Ghana

• Madagascar

• Gambiac

a

MCC must notify congressional appropriations committees 15 days prior to obligating funds. 

b

Compact negotiations begin after the MCC investment committee approves a consultation 

memorandum prepared by the MCC transaction team. The memorandum is based on the transaction 

team’s determination that the country proposal has sufficient information to justify entering into 

negotiations with the country. MCC must consult with and report to the appropriate congressional 

committees 15 days prior to the start of compact negotiations. 

c

The MCC Board suspended Gambia’s eligibility on June 16, 2006, citing a pattern of actions 

inconsistent with MCC’s selection criteria. 

• Country proposal development. The eligible country is invited to submit a 

compact proposal, to be developed in consultation with members of civil 

society, including the private sector and nongovernmental organizations. 

• MCC due diligence review. In conducting due diligence, MCC evaluates 

the eligible country’s proposal against MCC criteria to ensure that 

proposed programs will be effective and funds will be well used. 

• Compact negotiation and MCC approval. Following due diligence, MCC 

enters into compact negotiations with the eligible country. If compact 

Page 6 GAO-07-1049T 
negotiations are successful, the MCC Board of Directors8

 may approve the

compact, and MCC and the eligible country may sign it. Each signed 

compact includes a multiyear Financial Plan Summary that documents 

MCC’s planned projects and disbursements by project in each compact 

year. 

• MCC and compact country complete entry-into-force requirements. 

MCC’s compact with each country identifies supplemental agreements that 

MCC and the country’s accountable entity must complete before the 

compact can enter into force. 

After a compact enters into force, MCC may begin disbursements and the

country may begin implementing projects. The Millennium Challenge Act 

stipulates that a compact may last no longer than 5 years and that MCC 

may have only one compact with a country at a time. The compacts 

stipulate that, with limited exceptions, all funds must be spent during the 

term of the compact period.9

MCC has obligated a total of about $1.5 billion as of May 2007 through its 

five compacts with African countries. The average size of these compacts 

is about $307 million, providing per capita assistance ranging from $6 to 

$222, or an average of $25 (see table 1).10 Four of MCC’s compacts—with 

Benin, Cape Verde, Ghana, and Madagascar—have entered into force. 

According to MCC, two additional compacts, with Lesotho and 

Mozambique, are being brought before the MCC board at its meeting on

 8

MCC is a government corporation, managed by a Chief Executive Officer (CEO) whom the

President appoints with the advice and consent of the Senate, and is overseen by a Board

of Directors. The Secretary of State serves as board chair, and the Secretary of the 

Treasury serves as vice-chair. Other board members are the U.S. Trade Representative, the

Administrator of the U.S. Agency for International Development (USAID), the CEO of MCC, 

and up to four Senate-confirmed public members who are appointed by the President from

lists of individuals submitted by congressional leadership. 

9

MCC compacts signed as of May 2007 contain language stipulating that all disbursements 

and redisbursements shall cease upon expiration, suspension, or termination of a compact 

provided that reasonable expenditures for goods, services, and works properly incurred

under or in furtherance of these compacts before the compact term expires or is 

terminated may be paid from MCC funding. In addition, signed compacts contain language

providing that when a compact expires or is terminated, any funding not disbursed by MCC 

is automatically released from any obligation in connection with that compact. 

10Overall, MCC’s 11 compacts as of May 2007 provide an average of $34 per capita. 

Page 7 GAO-07-1049T 
June 27, 2007.11 The proposed amounts of these compacts are $362 million 

and $507 million, respectively. 

Table 1: MCC Compacts with African Countries, as of June 25, 2007 

Country Compact amount

Compact amount per 

capita (2004 population)

Madagascar $109.8 million $6

Cape Verde $110.1 million $222

Benin $307.3 million $38

Ghana $547.0 million $25

Mali $460.8 million $35

Total $1,535.0 million

Average $307.0 million $25

Source: GAO analysis of MCC data. 

The time involved in MCC’s initiation of compacts with African countries 

has varied, with three countries remaining in the compact development 

process for more than 3 years without reaching compact signature. For the 

five African countries with signed compacts, progressing from eligibility 

selection to compact signature took from 347 to 921 days, or about 12 to 

31 months—an average of 633 days, or about 21 months. For the four 

compacts that have entered into force, achieving entry into force took an 

average of 158 days, or about 5 months, from compact signature. For all 

MCC compacts, the process from eligibility to compact signature has 

taken an average of 567 days, or approximately 19 months, with an 

additional 167 days on average to entry into force. (See fig. 3.) MCC has 

not yet signed compacts with six additional African countries eligible for 

compact assistance—Burkina Faso, Lesotho, Mozambique, Namibia, 

Senegal, and Tanzania. MCC completed due diligence for Lesotho and 

Mozambique on May 24 and June 6, 2007, respectively. As of June 6, 2007, 

MCC’s Pace of 

Compact Initiation in 

Africa Has Varied 

 11In February 2007, we estimated the rate of MCC’s future obligations, including those in

Africa, under two scenarios. In the first scenario, using MCC’s projected amount and rate of 

compact awards as stated in its 2008 congressional budget justification ($485 million at 1.5 

compacts per quarter), we estimated that MCC would obligate the balance of its 2004-2007 

appropriations set aside for compact assistance ($2.1 billion) by the fourth quarter of 2007

and the $3 billion requested for 2008 by the fourth quarter of that year. In the second 

scenario, using MCC’s historical amount and rate of compact awards ($271 million at about 

1.2 compacts per quarter), we estimated that the corporation would obligate the balance of 

its 2004-2007 appropriations by the fourth quarter of 2008 and the $3 billion requested for 

2008 by the fourth quarter of 2010. 

Page 8 GAO-07-1049T 
MCC was performing due diligence for the remaining four. Three of these 

six countries—Lesotho, Mozambique, and Senegal—have been eligible 

since MCC’s initial determination of eligible countries in May 2004. 

Page 9 GAO-07-1049T 
Figure 3: Duration of Compact Development Process for Eligible African Countries with and without Signed Compacts, as of

June 6, 2007 

0 100 200 300 400 500 600 700 800 900 1,000 1,100 1,200

0 100 200 300 400 500 600 700 800 900 1,000 1,100 1,200

Source: GAO analysis of MCC data.

447

Total days

Countries With Signed Compacts

Countries Without Signed Compacts

529

883

1,016

1,126

704

759

Proposal development

Due diligence

Compact negotiation, board approval, and signature

Entry into force

Opportunity memo

Investment memo

Compact signature

Entry into force

Madagascar

Cape Verde

Benin

Countries with

signed compactsb,c

African countries with

signed compactsb

Malia

Ghana

1

1

2

3

2 3 4

1 2 3

1 2 3 4

1 2 3 4

1 2 3 4

1 2 3 4

1 2 3 4

4

575

Total days

1,126

575

1,126

1,126

575

Averages

Number of days

Tanzania

Senegal

Namibia

Burkina Faso

Lesotho

Mozambiqued

1

1

1

1 2

1 2

1

a

As of June 6, 2007, the Mali compact had been signed for 205 days without entering into force. 

b

Average time to enter into force does not include countries that have not yet entered into force. 

Page 10 GAO-07-1049T 
c

Ten of the 11 countries with signed compacts became eligible during the first round of MCC country 

eligibility announcements in May 2004. 

d

According to MCC, it approved the Mozambique investment memo on June 6, 2007.

Compact development does not operate on a fixed timetable or schedule.

However, during 2005-2007, MCC’s actual rate of establishing new 

compacts was slower than the rate projected by the corporation’s annual 

budget requests. As a result, MCC’s obligations for compact assistance 

have been substantially less than projected. MCC currently has more than 

$2 billion in unobligated funds set aside for compacts. 

About three-quarters of MCC’s compact funding in Africa supports 

transportation and agriculture projects. To implement and oversee the 

projects, the countries with compacts in force have established 

management structures with similar components. For MCC’s first two 

African compacts, key management officials were not in place until 

months after entry into force, but such positions were filled before, or 

shortly after, the two subsequent African compacts entered into force. 

Approximately 76 percent of MCC compact funding has been budgeted for 

(1) transportation and other infrastructure projects and (2) agricultural 

and rural development projects. (See fig. 4.) Specifically, about 37 percent 

($575.2 million) of compact funding in Africa is allocated to transportation 

and other infrastructure, and about 39 percent ($605.4 million) is allocated 

to agriculture and rural development. MCC’s six non-African compacts 

likewise obligate about 76 percent for these two project categories, with 

55 percent ($791.6 million) for transportation and other infrastructure and

21 percent ($299.1 million) for agriculture and rural development. 

MCC Projects in 

Africa Emphasize 

Transportation and 

Agriculture, and 

Management 

Structures Have Been 

Established 

Page 11 GAO-07-1049T 
Figure 4: Types of MCC Compact Projects in African and Non-African Countries (dollars in millions) 

Transportation 

and

other 

infrastructure

Agriculture 

and

rural

development

Land 

tenure

Finance

and private 

sector 

development

Other 

programs

Program

administration, 

monitoring, 

and evaluation

37%

2% 12%

4%

5%

10%

55%

39% 21%

Transportation and other infrastructurea

Agriculture and rural developmentb

Land tenure

Finance and private sector development

Other programsc

Program administration,

monitoring, and evaluation

0

78.8

169.4

143.1

183.9

575.2

791.6

Madagascar

Cape Verde

Benina

Ghana

Malia,b

Sub-total

Non-African countries

African

countries

African

countries

Non-African 

countries

17.7

10.8

0

342.3

234.6

605.4

299.1

37.8

0

36

0

0

73.8

26.5

35.9

7.2

19.7

0

0

62.8

87.5

0

0

34.3

0

0

34.3

95.1

18.4

13.3

47.9

61.6

42.3

183.5

148.1

Total $1,366.8 $904.5 $100.3 $150.3 $129.4 $331.6

Total 

compact 

value

109.8

110.1

307.3

547.0

460.8

1,535.0

1,447.8

$2,982.8

Source: GAO analysis of MCC data.

7%

6%

2%

a

The Access to Markets Project in Benin is a major construction project at the Port of Cotonou and 

includes associated studies and institutional strengthening. The Mali compact includes the BamakoSénou Airport Improvement Project and an Industrial Park Project. 

b

The Irrigated Agriculture Project in Armenia includes the repair of irrigation infrastructure. The 

Alatona Irrigation Project in Mali includes planning and infrastructure, land allocation, and 

resettlement activities, among other items. 

c

Other programs include the Justice Program in Benin and the Human Development Project in El 

Salvador. The Benin program includes institutional strengthening and infrastructure components 

(construction of new courthouses). The El Salvador program includes Education and Training, and 

Community Development activities. 

Page 12 GAO-07-1049T 
Examples of MCC infrastructure and agriculture projects in Africa include

the following: 

• Infrastructure projects. Reconstruction of roads and the Port of Praia in 

Cape Verde, a major construction project at the Port of Cotonou in Benin,

and the Bamako-Sénou Airport Improvement Project and an Industrial 

Park Project in Mali. 

• Agriculture projects. Agricultural business centers and technical 

assistance in Madagascar and training and institutional strengthening 

programs in Mali and Ghana. 

To implement compact projects, MCC directly hires a resident country 

director and a small staff for each country to serve as MCC’s public face 

and to manage its relationship with the compact country. However, MCC 

gives the compact countries authority to manage and oversee their 

compact programs using MCC funds.12 Figure 5 shows the general 

structure that MCC’s first three compact countries, including two in Africa, 

have established to provide oversight and management of their compact 

programs and to facilitate stakeholder input (see fig. 5).13

 12According to MCC, three of MCC’s five Resident Country Director positions in Africa are 

currently filled. The Benin position was filled from March 2006 to May 2007 and MCC is 

currently seeking to hire a replacement. The Ghana position has not yet been filled, but

MCC expects the selected candidate to arrive in country in August 2007. 

13The countries’ oversight structures have most elements in common, but countries have

the flexibility to design the structures to fit their needs. 

Page 13 GAO-07-1049T 
Figure 5: MCC Compact Country Oversight and Management Structure in the First 

Three Compact Countries 

Note: This figure represents a composite of the Madagascar, Cape Verde, and Honduras oversight 

and management structures. However, in Honduras, stakeholder input is obtained through 

representatives on the steering committee, rather than through a stakeholder committee. 

The three countries have generally included the following oversight and 

management entities in their structures: 

Source: GAO, based on MCC data.

Steering committee 

MCC (Washington D.C.) 

Stakeholder committee

MCA management unit

Implementing

entity

Implementing

entity

Implementing

entity

Vendor Vendor 

Government 

Vendor 

MCC Resident Country 

Director

Oversight

Accountable entity 

Feedback/advice

Composed of representatives

from the relevant ministries, 

municipalities, the private 

sector and nongovernmental 

organizations

• Managing Director

• Administration and Finance Director

• Monitoring and Evaluating Director

• Procurement Director

• Implementing entities

Such as:

• Key ministers

• MCC Resident Country Director

 (as a non-voting member)

• Civil society representative(s)

• The steering committee represents the country government and interfaces 

directly with MCC. The committee is ultimately responsible for the 

Page 14 GAO-07-1049T 
oversight and results of the MCC compact, oversees management unit 

employees, and approves and signs off on key decisions and reporting to

MCC. 

• In Madagascar and Cape Verde, a stakeholder committee meets 

periodically to advise and inform the steering committee regarding 

compact implementation and to serve as the official liaison between 

interested parties and the steering committee. 

• The management unit is directed by the steering committee and has 

principal responsibility for overall compact management and 

implementation, including financial management and procurement. The 

financial management and procurement functions may also be handled by 

an external fiscal agent or procurement agent. Together, the steering 

committee and the management unit form the “accountable entity.”14

We reported in July 2006 that key compact management positions 

remained unfilled after the Madagascar and Cape Verde compacts entered 

into force; the two countries did not hire key officials until several months 

after their compacts’ entry into force in July and October 2005, 

respectively. This incomplete staffing at entry into force may limit the 

countries’ ability to achieve their compact objectives within the fixed time 

period of the compacts.15 According to MCC, key positions at MCC’s 

subsequent compacts with Benin and Ghana were filled prior to, or shortly 

after, entry into force. Key positions for the Mali compact, which has not

entered into force, are not yet filled, but MCC expects to fill these 

positions in August 2007.

 14MCC refers to the accountable entity by combining “MCA” and the country’s name—for 

example, “MCA-Madagascar.” 

15In October 2005, after the signature of its first six compacts, MCC adopted a policy 

implementing the authority given it by section 609(g) of the Millennium Challenge Act of

2003 to make grants to facilitate the development and implementation of compacts. MCC’s 

policy includes a provision where, if certain conditions are met, it may fund an eligible 

country’s request for “management support payments” for salaries, rent, and equipment for

the country’s MCA technical team prior to compact signature. 

Page 15 GAO-07-1049T 
MCC has disbursed compact funds in Africa more slowly than planned 

and, unless the rate of disbursements increases, may have large 

unexpended balances and uncompleted projects when the compacts 

expire.16 To address this challenge, MCC officials report taking several 

steps to expedite program implementation and better match 

disbursements with projections. 

As of March 31, 2007, MCC had disbursed $26 million in compact funds to 

four African countries—23 percent of the $113.9 million that it intended to 

disburse by that date.17 (See table 2.) 

MCC Has Not 

Achieved Its Planned 

Rate of 

Disbursements

Table 2: MCC Disbursements to African Countries through March 31, 2007 

(Dollars in millions) 

Country

Date compact 

entered into force 

Prorated planned 

disbursements

Cumulative 

actual 

disbursements

Percentage of planned

disbursements actually 

disbursed

Percentage of

compact elapsed

Madagascar Jul. 27, 2005 $59.40 $14.47 24 42

Cape Verde Oct. 17, 2005 $30.07 $7.53 25 28

Benin Oct. 6, 2006 $15.62 $3.45 22 8

Ghana Feb. 16, 2007 $8.81 $0.74 8 2

Total $113.90 $26.19 23

Source: GAO analysis of MCC data. 

Note: Planned disbursements are prorated on an annual basis. 

As table 2 shows, MCC’s actual disbursement of compact funds has fallen 

substantially behind its planned disbursement, most critically for its 

compacts with Madagascar and Cape Verde, both in the second year of 

implementation. MCC’s disbursement for Madagascar by month 20 of the 

4-year implementation accounted for 24 percent of the planned 

disbursement, and its disbursement for Cape Verde by month 17 of the 5-

year implementation accounted for 25 percent of the planned 

disbursement. Our analysis of MCC’s overall compact disbursements 

suggests that unless it increases the rate of compact assistance

disbursements in Africa and elsewhere, MCC could have significant 

 16MCC disbursements provide funds to the accountable entity of a compact country. The 

accountable entity then redisburses funds for program activities. 

17Overall, through March 2007, MCC had disbursed 26 percent of the $257.6 million that it 

had planned to disburse for the nine compacts that had entered into force by that date. 

Page 16 GAO-07-1049T 
obligated but undisbursed balances when the compacts expire. This 

implies that some Africa projects may not be completed by the end of the 

current compacts. If this occurs, MCC will miss opportunities to achieve 

its mission of poverty reduction through economic growth in compact 

countries. 

According to MCC, its unexpectedly slow rates of disbursement have 

primarily reflected two factors: the need to maintain high standards for 

program accountability and sustainability, and its initial overestimation of 

partner country capacity to meet these standards. The countries’ 

management structures are intended to ensure fiscal accountability; 

however, at the time of our 2006 report, some required elements of these 

procurement and fiscal accountability structures in Cape Verde and 

Madagascar were not yet in place. As of May 2007, MCC did not have 

mechanisms in place to address significant delays in its planned 

disbursements. However, MCC reports taking a number of steps to 

expedite program implementation and better match disbursements with 

projections, such as providing better guidance on compact development 

and implementation and improving its initial analysis of country capacity. 

MCC noted that disbursement rates do not fully capture its progress to 

date, in part because these rates do not reflect MCC activities such as 

policy reform and capacity building.

Mr. Chairman, this concludes my statement. I will be happy to answer any 

questions you or members of the subcommittee may have. 

For questions regarding this testimony, please contact David B. Gootnick 

at (202) 512-3149. Other key contributors to this statement were Emil 

Friberg (Assistant Director), Tracy Guerrero, Reid Lowe, Mike Rohrback, 

Mona Sehgal, and Michael Simon. David Dornisch, C. Etana Finkler, Ernie 

Jackson, Marc Molino, and Jena Sinkfield provided technical assistance. 

GAO Contacts and 

Staff 

Acknowledgments 

Page 17 GAO-07-1049T 
Page 18 GAO-07-1049T 

Appendix I: Objectives, Scope, and 

Methodology 

This testimony discusses (1) the pace of the Millennium Challenge 

Corporation’s (MCC) initiation of compacts in sub-Saharan Africa (Africa), 

(2) MCC’s projects and management structures in African countries with 

signed compacts, and (3) MCC’s progress in disbursing compact funds. 

To determine the status of MCC’s initiation of compacts in Africa, we 

determined the length of the compact development process based on our 

previous reporting and MCC’s status reports on eligible countries, which 

include the dates these countries completed key milestones in the process. 

We quantified the duration of the development process for MCC’s 

individual compacts as well as the average length of the process for its 

compacts in African and non-African countries. 

To describe MCC’s compact projects, we relied primarily on our previous 

reporting on MCC,1

 updating it to include more recent compacts. We 

identified compact project types across broad categories and calculated 

total funding for each category to determine the general focus of MCC 

compact assistance in African and non-African countries. In describing 

MCC’s management structures, we summarized our previous reporting on

MCC’s first three compacts, including those for two countries in Africa. 

We also summarized an MCC report on the status of its management 

staffing in Africa. 

To analyze the pace of MCC’s disbursements for the countries with 

compacts in force, we compared MCC data for actual and planned 

disbursements from July 2005 through March 2007. For this analysis, we 

used MCC’s assumption that compact funds are disbursed evenly 

throughout the compact implementation year. Because MCC’s compacts 

are at varying stages of implementation, we prorated planned 

disbursements on an annual basis for each country based on the number 

of months the compact was in force.2

MCC provided technical comments on a draft of this testimony and we 

have incorporated their comments as appropriate. 

We conducted our work for this testimony during June 2007 in accordance 

with generally accepted government auditing standards. We also followed 

 1

GAO-06-805 

2

In practice, MCC approves disbursements on a quarterly basis and disburses compact

funds in monthly payments according to the terms of the quarterly approval.
generally accepted government auditing standards for the published GAO 

reports on which this testimony is partly based. 

Page 19 GAO-07-1049T (320515) 
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