Performance

and Accountability

Report

Fiscal Year 2008
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LIST OF ACRONYMS

 

 A&F Department of Administration and Finance 

 CIF Compact Implementation Fund 

 CISO Chief Information Security Office 

 CPS Common Payment System 

 CSRS Civil Service Retirement System 

 DCIA Debt Collection Improvement Act 

 FECA Federal Employees’ Compensation Act 

 FERS Federal Employees Retirement System 

 FFMIA Federal Financial Management Improvement Act 

 FISMA Federal Information Security management Act 

 FMFIA Federal Managers’ Financial Integrity Act 

 FY Fiscal Year 

 GAAP Generally Accepted Accounting Principles 

 GAO Government Accountability Office 

 IPIA Improper Payments Information Act 

 ITS International Treasury System 

 MCA Millennium Challenge Account 

 MCC Millennium Challenge Corporation 

 MIDAS MCC Integrated Data Analysis System 

 NBC National Business Center 

 OIG Office of Inspector General 

 OMB Office of Management and Budget 

 RRT Results Reporting Tables 

 SAS Statement of Auditing Standards 

 SBR Statement of Budgetary Resources 

 SCNP Statement of Changes in Net Position 

 SNC Statement of Net Cost 

 TSP Thrift Savings Plan 

 USAID United States Agency for International Development 
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MILLENNIUM CHALLENGE CORPORATION

Message from Millennium Challenge Corporation’s 

Chief Executive Officer 

I am pleased to submit the 2008 Performance and Accountability Report for the Millennium Challenge 

Corporation. We have made significant strides since MCC’s creation over four years ago, and our 

investments in some of the world’s poorest countries are yielding impressive results. MCC’s progress is 

due to continued emphasis on implementation and insistence that partner countries demonstrate 

accountability for results that contribute to measurable improvements for their citizens. Our efforts in 

2008 continue to reflect sound stewardship of resources that Congress provides. MCC ended fiscal year 

2008 with 18 compacts, threshold programs in 19 countries, and prospects for engagement with additional 

countries in fiscal year 2009. 

Results during fiscal year 2008, as outlined in this report, confirm that MCC is making an ongoing 

difference in the lives of the world’s poor as an on-the-ground reality that is funding antipoverty, progrowth strategies in partner countries worldwide. MCC’s insistence that countries practice sound policies 

and build capacity to help themselves has changed expectations about how successful development is 

achieved by linking good policies and country empowerment to sustainable results. 

I am also pleased to report that MCC has received an unqualified opinion on its financial statements from 

an independent auditor every year since inception, including the current year. Moreover, I can certify with 

reasonable assurance that MCC’s systems of accounting and internal controls are in compliance with the 

provisions of Section 2 (internal and administrative controls) and Section 4 (financial systems) of the 

Federal Managers’ Financial Integrity Act. I also have concluded that the systems of accounting and 

internal controls provide reasonable assurance of MCC compliance with the internal control objectives 

stipulated by the Office of Management and Budget in Circular A-123, Management’s Responsibility for 

Internal Control. Finally, I have determined that MCC is currently in substantial compliance with 

pertinent requirements of the Federal Financial Management Improvement Act. 
MILLENNIUM CHALLENGE CORPORATION

MCC is excited about its prospects for the future and looks forward to building on this year’s 

achievements, strengthening existing partnerships, and forging new partnerships. 

John J. Danilovich 

Chief Executive Officer 

 
MILLENNIUM CHALLENGE CORPORATION

Message from Millennium Challenge Corporation’s 

Chief Financial Officer 

 

The 2008 Performance and Accountability Report of the Millennium Challenge Corporation reflects our 

continued commitment to achieve the highest standards of federal management. Since its inception, MCC 

has received an unqualified or “clean” audit opinion from the Office of Inspector General (OIG) on its 

financial statements including the latest unqualified opinion for FY 2008. 

We are pleased to report that MCC’s Department of Administration and Finance has made significant 

progress on a number of key initiatives during the past fiscal year: 

3⁄4 MCC has established an electronic workflow and authorization process for all personnel actions. 

This will ensure that all personnel actions are properly authorized, documented, and retained prior 

to processing. 

3⁄4 We have continued our development of the MCC Integrated Data Analysis System (MIDAS) to 

improve financial reporting, and further integrate programmatic, performance, and financial 

information. When fully implemented, the system will improve the timeliness and use of financial 

and performance data to manage the cost of our programs and support decision-making. 

3⁄4 In August 2008, MCC completed its implementation of a “Common Payment System” (CPS). 

CPS centralizes the payment of compact expenses with MCC’s financial services provider and 

eliminates the need to “advance” large amounts of funds to partner countries. The use of CPS will 

improve MCC’s management reporting capabilities by providing real time data on compact 

disbursements and will limit the exposure of cash balances in foreign banks. 

3⁄4 MCC reorganized its information technology management structure, and implemented new 

technologies and policies to improve the stability and security of the MCC information 

technology infrastructure. Since May 2008, MCC has reduced the vulnerability level of MCC 

systems by 80 percent, and MCC has developed action plans to address all 17 findings in the OIG 
MILLENNIUM CHALLENGE CORPORATION

FY 2008 Federal Information Security Management Act (FISMA) audit before the end of the 

current fiscal year. 

MCC also resolved a large number of outstanding OIG recommendations from prior year financial, 

performance, and compliance audits. MCC closed 29 of the 32 recommendations that were open at the 

beginning of the fiscal year, and a total of 40 including those from prior years. 

We are pleased to report that the FY 2008 Independent Auditor’s Report cites only one material weakness 

in MCC’s controls over financial reporting, an improvement over the two material weaknesses indentified 

during the FY 2007 audit. The FY 2008 Report also identifies four other matters that are considered 

significant deficiencies in the areas of authorization for personnel actions, expense accruals, general 

ledger postings, and management of information systems. MCC agrees with all of the OIG 

recommendations, and is in the process of developing action plans to address and resolve these findings in 

the current fiscal year. 

MCC’s key milestone for FY 2009 is to achieve concrete results under our compacts. MCC’s 

achievements in FY 2008 and the continued progress we plan for FY 2009 will provide the financial, 

administrative, and technology support needed for successful compact development and implementation, 

and will help MCC demonstrate real results towards our goal of poverty reduction through growth. 

Michael Casella 

Acting Vice President, Administration and Finance
MILLENNIUM CHALLENGE CORPORATION

TABLE OF CONTENTS

1. Management Discussion and Analysis ......................................................................................... 5

Our Mission and Programs .............................................................................................................. 5

Millennium Challenge Corporation’s Organization ...................................................................... 10

Performance Goals, Objectives, and Results—FY 2008 Highlights ............................................. 12

Financial Performance and Analysis ............................................................................................. 22

2. Performance Report .................................................................................................................... 39

Performance Indicator Framework ................................................................................................ 41

MCC Performance in FY 2008 ...................................................................................................... 44

Strategic Goal #1 ........................................................................................................................... 44

Strategic Goal #2 ........................................................................................................................... 53

Strategic Goal #3 ........................................................................................................................... 84

Strategic Goal #4 ........................................................................................................................... 86

3. Financial Section .......................................................................................................................... 91

Balance Sheet ................................................................................................................................. 92

Statement of Budgetary Resources ................................................................................................ 93

Statement of Net Costs .................................................................................................................. 94

Statement of Changes in Net Position ........................................................................................... 95

Audit of the Millennium Challenge Corporation’s Financial Statements, Internal Controls, and 

Compliance for the Period Ending September 30, 2008 and September 30, 2007 ........................ 96

Notes to Financial Statements (As of September 30, 2008) ........................................................ 119

4. Other Accompanying Information ........................................................................................... 129

Summary of Financial Statement Audit ....................................................................................... 129

 

 

 

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MILLENNIUM CHALLENGE CORPORATION

LIST OF EXHIBITS

Exhibit 1: Compact and Threshold Countries .................................................................................... 6

Exhibit 2: Compacts in Signing Order ................................................................................................. 7

Exhibit 3: Number of Compacts, Total Value and Average Compact Size by Fiscal Year ............ 8

Exhibit 4: Threshold Programs in Signing Order .............................................................................. 9

Exhibit 5: Examples of Program Tangible Results ........................................................................... 15

Exhibit 6: Sample Selection Criteria Scorecard ................................................................................ 17

Exhibit 7: MCC Mission, Core Values, Strategic Goals, Objectives and Results .......................... 19

Exhibit 8: Division of Finance and National Business Center ......................................................... 22

Exhibit 9: Annual Funding by Fiscal Year ........................................................................................ 26

Exhibit 10: Obligations by Fund Category ........................................................................................ 27

Exhibit 11: Compact Obligations ....................................................................................................... 28

Exhibit 12: National Business Center SAS-70 Letter ....................................................................... 30

Exhibit 13: MCC's Corporate Performance Plan ............................................................................. 40

Exhibit 14: Generate Economic Growth and Reduce Poverty in Compact Countries .................. 44

Exhibit 15: Countries Improve Their Capacity to Meet Basic Human Needs ............................... 46

Exhibit 16: Improve GDP Growth ..................................................................................................... 47

Exhibit 17: Decrease Percent Living on Less Than $1 and $2 Per Day .......................................... 48

Exhibit 18: Compact Eligible and Threshold Countries Receive Higher Average Country Credit 

Ratings .......................................................................................................................................... 50

Exhibit 19: Improve Annual Percentage of Compact Targets Met on Time .................................. 51

Exhibit 20: Increase the Conditions Precedents (CPs) Met on Time .............................................. 52

Exhibit 21: Conditions Precedents Met ............................................................................................. 52

Exhibit 22: Political Rights .................................................................................................................. 57

Exhibit 23: Civil Liberties ................................................................................................................... 58

Exhibit 24: Control of Corruption ..................................................................................................... 59

Exhibit 25: Government Effectiveness ............................................................................................... 60

Exhibit 26: Rule of Law ....................................................................................................................... 61

Exhibit 27: Voice and Accountability ................................................................................................. 62

Exhibit 28: Health Expenditure .......................................................................................................... 63

Exhibit 29: Immunization Rates ......................................................................................................... 64

Exhibit 30: Girls Primary Education Completion Rate ................................................................... 65

Exhibit 31: Fiscal Policy ...................................................................................................................... 66

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MILLENNIUM CHALLENGE CORPORATION

Exhibit 32: Cost of Starting a Business .............................................................................................. 67

Exhibit 33: Time of Starting a Business ............................................................................................. 68

Exhibit 34: Regulatory Quality ........................................................................................................... 69

Exhibit 35: Strategic Goal #2 (b) Threshold Program Detailed Results ......................................... 70

Exhibit 36: Albania Threshold Program ........................................................................................... 71

Exhibit 37: Burkina Faso Threshold Program .................................................................................. 72

Exhibit 38: Guyana Threshold Program ........................................................................................... 73

Exhibit 39: Indonesia Threshold Program ........................................................................................ 74

Exhibit 40: Jordan Threshold Program ............................................................................................. 76

Exhibit 41: Kenya Threshold Program .............................................................................................. 77

Exhibit 42: Malawi Threshold Program ............................................................................................ 78

Exhibit 43: Paraguay Threshold Program ........................................................................................ 79

Exhibit 44: Philippines Threshold Program ...................................................................................... 80

Exhibit 45: Tanzania Threshold Program ......................................................................................... 81

Exhibit 46: Ukraine Threshold Program ........................................................................................... 82

Exhibit 47: Zambia Threshold Program ........................................................................................... 83

Exhibit 48: Assessment of MCC Country Partnership .................................................................... 85

Exhibit 49: Input Indicator: Efficiency and Resource Productivity 1 ............................................ 87

Exhibit 50: Input Indicator: Efficiency and Resource Productivity 2 ............................................ 87

Exhibit 51: Address and Close IG Recommendations on Time ....................................................... 88

Exhibit 52: Level of MCC Staff Engagement .................................................................................... 89

Exhibit 53: Fund Balance with Treasury ......................................................................................... 124

Exhibit 54: Status of Fund Balance with Treasury ......................................................................... 124

Exhibit 55: Operating Leases ............................................................................................................ 126

Exhibit 56: Intra-governmental Costs and Exchange Revenue ..................................................... 126

Exhibit 57: Material Differences Between the SBR and the President’s Budget ......................... 127

Exhibit 58: Undelivered Orders ........................................................................................................ 128

Exhibit 59: Reconciliation of Net Cost of Operations to Budget ................................................... 128

Exhibit 60: Summary of Financial Statement Audit Table ............................................................ 129

 

 

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1. MANAGEMENT DISCUSSION AND ANALYSIS

OUR MISSION AND PROGRAMS

The Millennium Challenge Corporation’s (MCC) mission is to reduce poverty by supporting 

sustainable, transformative economic growth in developing countries that create and maintain 

sound policy environments. 

MCC is a United States Government corporation designed to work with some of the poorest 

countries in the world. Established in January 2004, MCC is based on the principle that aid is 

most effective when it reinforces good governance, economic freedom, and investments in 

people. 

MCC selects countries that are eligible for a compact, a multi-year agreement between MCC 

and an eligible country to fund specific programs targeted at reducing poverty and stimulating 

economic growth. To become eligible to receive a compact, MCC evaluates a country’s 

performance on 17 independent and transparent policy indicators in three categories: ruling 

justly, investing in people, and economic freedom. Countries that have demonstrated 

significant improvement in policy indicators but do not yet qualify for a compact grant may be 

eligible for Threshold program assistance. Threshold programs are smaller grants designed to 

help improve a country’s performance on specific indicators. 

Since its inception, MCC’s total commitment to fighting poverty worldwide has resulted in 18 

compact agreements signed with countries in Africa, Central America, Eurasia, and the 

Pacific, totaling over $6.3 billion. Four of these compacts were signed in Fiscal Year (FY) 

2008. In addition, six threshold programs were approved during FY 2008, giving MCC a total 

of 20 threshold programs, including MCC’s first Stage II threshold program, totaling an 

additional $440 million. The countries currently receiving MCC assistance and those that are 

eligible for assistance are detailed in Exhibit 1. 
MILLENNIUM CHALLENGE CORPORATION

Exhibit 1: Compact and Threshold Countries 

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MILLENNIUM CHALLENGE CORPORATION

Compact Programs 

A compact is a multi-year grant agreement between MCC and an eligible country, based on its 

performance on 17 independent and transparent policy indicators, to fund specific programs 

aimed at reducing poverty and stimulating economic growth. It is a mutual promise between 

the U.S. Government and a partner country, each with specific responsibilities to fulfill. After 

compact signing, entry into force is the point at which funds are obligated and the 

implementation of compact programs commences. Exhibit 2 lists the dates that all MCC 

compacts were signed and entered into force. 

Exhibit 2: Compacts in Signing Order 

Compact 

Country 

Grant 

($ millions) Signed On Entry Into Force On 

1. Madagascar $109.8 April 18, 2005 July 27, 2005 

2. Honduras $215.0 June 13, 2005 September 29, 2005 

3. Cape Verde $110.1 July 4, 2005 October 17, 2005 

4. Nicaragua $175.0 July 14, 2005 May 26, 2006 

5. Georgia $295.3 September 12, 2005 April 7, 2006 

6. Benin $307.3 February 22, 2006 October 6, 2006 

7. Vanuatu $65.7 March 2, 2006 April 28, 2006 

8. Armenia $235.7 March 27, 2006 September 29, 2006 

9.Ghana $547.0 August 1, 2006 February 16, 2007 

10. Mali $460.8 November 13, 2006 September 17, 2007 

11. El Salvador $460.9 November 29, 2006 September 20, 2007 

12. Mozambique $506.9 July 13, 2007 September 22, 2008 

13. Lesotho $362.6 July 23, 2007 September 17, 2008 

14. Morocco $697.5 August 31, 2007 September 15, 2008 

15. Mongolia $284.9 October 22, 2007 September 17, 2008 

16. Tanzania $698.1 February 17, 2008 September 15, 2008 

17. Burkina Faso $480.9 July 14, 2008 Entry into Force projected for 4th

quarter of fiscal year 2009 

18. Namibia $304.5 July 28, 2008 Entry into Force projected for 4th

quarter of fiscal year 2009

Total $6,318.0 

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MILLENNIUM CHALLENGE CORPORATION

Exhibit 3 provides the number of compacts, their total value, and average size for each fiscal 

year. 

Exhibit 3: Number of Compacts, Total Value and Average Compact Size by 

Fiscal Year 

Year Compact Signed 

FY 2005 FY 2006 FY 2007 FY 2008

Number of Compacts Signed 5 4 5 4 

Total Value of Compacts ($ in millions) $905.2 $1,155.6 $2,482.8 $1,770 

Average Compact Size ($ in millions) $181.0 $288.9 $496.6 $442.0 

Threshold Programs 

A Threshold program is designed to assist countries that are on the threshold of eligibility, 

meaning they have not yet qualified for compact funding, but demonstrate significant 

commitment to improving their performance on the 17 eligibility criteria MCC uses to select 

partners for full compact funding. Threshold programs are two to three years in duration. A 

Stage II, or second, threshold program is designed for countries whose threshold programs are 

ending, but they (1) have yet to meet the compact eligibility criteria, (2) have successfully 

implemented their current threshold program, and (3) continue to pursue a policy reform 

agenda. MCC’s authorizing legislation allows using up to ten percent of MCC funding for the 

Threshold program. Exhibit 4 lists Threshold programs that are currently underway as of the 

end of FY 2008. 

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MILLENNIUM CHALLENGE CORPORATION

Exhibit 4: Threshold Programs in Signing Order 

Threshold Program Country 

Grant 

($ millions) Signed On 

1. Burkina Faso $12.9 July 22, 2005 

2. Malawi $20.9 September 23, 2005 

3. Albania $13.9 April 3, 2006 

4. Tanzania $11.2 May 3, 2006 

5. Paraguay* $34.6 May 8, 2006 

6. Zambia $22.7 May 22, 2006 

7. The Philippines $20.7 July 26, 2006 

8. Jordan $25.0 October 17, 2006 

9. Indonesia $55.0 November 17, 2006 

10. Ukraine $45.0 December 4, 2006 

11. Moldova $24.7 December 15, 2006 

12. Kenya $12.7 March 23, 2007 

13. Uganda $10.4 March 29, 2007 

14. Guyana $6.7 August 23, 2007 

15. São Tomé and Principe $8.7 November 9, 2007 

16. Kyrgyz Republic $16.0 March, 14 2008 

17. Niger $23.1 March 17, 2008 

18. Peru $35.6 June 9, 2008 

19.Rwanda $24.7 September 24, 2008 

20.Albania II: Stage II $15.7 September 29, 2008 

Total $440.2 

*On the horizon: MCC received a Stage II threshold program proposal from Paraguay on 

September 30, 2008. 

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MILLENNIUM CHALLENGE CORPORATION

MILLENNIUM CHALLENGE CORPORATION’S ORGANIZATION

Governance 

Led by a Chief Executive Officer (CEO) and overseen by a Board of Directors, MCC is 

responsible for the stewardship of the Millennium Challenge Account (MCA), which receives 

funds each year appropriated by Congress. MCC is governed by a public-private Board of 

Directors comprised of the Secretary of State, Secretary of the Treasury, U.S. Trade 

Representative, U.S. Agency for International Development (USAID) Administrator, MCC’s 

CEO, and four individuals from the private sector who are appointed by the President with the 

advice and consent of the U.S. Senate. The Secretary of State is the Chair of the Board and 

the Secretary of the Treasury is the Vice Chair. The CEO, appointed by the President and 

confirmed by the U.S. Senate, manages MCC. 

While MCC is not a Chief Financial Officers (CFO) Act agency, and is therefore not subject 

to the CFO Act of 1990,1

 it adheres to the requirements and principles applicable to such 

agencies by preparing an annual Performance and Accountability Report (PAR), in 

accordance with Office of Management and Budget (OMB) requirements and guidance. 

Organizational Structure 

Since 2004, supporting partner countries in compact development has been at the core of 

MCC’s efforts. With the success of developing viable, results-oriented compacts aimed at 

reducing poverty and stimulating growth, MCC has now entered a new phase. 

In FY 2008, MCC restructured its departments to enhance the efficiency and quality of 

compact implementation. By integrating and restructuring two existing departments, the 

Department of Operations and the Department of Accountability, into two new departments 

called the “Department of Compact Development” and the “Department of Compact 

Implementation,” MCC is now better organized to support successful compact implementation 

while fully integrating the important role of gender in development, effective monitoring and 

evaluation, and social and environmental assessments into both new departments. 

With this new structure, MCC will effectively utilize the expertise and experience of its 

professionals to focus more on program implementation, while continuing its important work 

on compact development. By streamlining compact development, MCC remains capable of 

developing a robust pipeline of sound compact proposals, which meet vigorous diligence 

reviews, and are poised for signature, entry into force, and implementation. In addition, this 

new structure provides resident country directors overseeing each compact with more 

responsibility and flexibility to respond to implementation issues in ways appropriate to 

country context. 

 

1

Pub. L. 101-576. 

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MILLENNIUM CHALLENGE CORPORATION

Staffing 

Relative to other international institutions, MCC maintains a very small staff in its 

Washington, D.C. headquarters. As of the end of fiscal year 2008, MCC employed 262 staff 

members in its Washington, D.C. offices. MCC has been successful in attracting top 

candidates from the public and private sectors and has maintained an organizational structure 

with a high percentage of senior staff and a low percentage of administrative support 

personnel, coming just under the authorized headcount level of 300 full-time employees. 

During the intense period of compact development and implementation start-up, MCC 

contracts with additional outside experts for limited engagements. MCC also uses contractors 

for oversight, supervision, monitoring, and evaluation assistance. 

Consistent with MCC’s original design and vision, MCC’s model for providing development 

assistance to partner countries puts the responsibility for program development and 

implementation on the partner country. In keeping with its model of high standards of 

accountability, but also requiring countries to take ownership of their own development, 

MCC’s practice is to have a small staff, usually consisting of two U.S. employees—a resident 

country director and a deputy resident country director—in each partner country. 

During fiscal year 2008, MCC set up new offices in four partner countries for a total of 18 

overseas offices. These offices will play a pivotal role in MCC’s increased emphasis on 

implementation oversight because of their proximity to the MCA entities responsible for 

implementation. 

New Logo 

MCC developed a new logo during fiscal year 2008 as part of its efforts to raise awareness of 

the global fight against poverty and U.S. Government efforts to provide sustainable, long-term 

solutions for the world’s poor. 

MCC’s new logo, a star formed in the classic shape of those on 

the American flag, is an emblem of the partnership and 

progress that MCC’s innovative way of delivering foreign 

assistance is bringing to some of the world’s poorest countries. 

The logo contains sweeping stripes of red and white, symbolic 

of roads or fields that are part of many MCC programs, as well 

as three stars representing the principles of aid with 

accountability, country ownership and partnership, and resultsbased assistance that define MCC’s cooperation with countries 

across the globe. 

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MILLENNIUM CHALLENGE CORPORATION

PERFORMANCE GOALS, OBJECTIVES, AND RESULTS—FY 2008

HIGHLIGHTS

This year’s Highlights section provides a summary of performance results for MCC’s strategic 

goals and objectives, an overview of how MCC measures performance, and steps MCC has 

taken to ensure the reliability of performance data. Detailed performance results are provided 

in this report in Section 2—Performance. 

Summary of Results

In fiscal year 2008, MCC continued to demonstrate its three core values, or principles, of 

recognizing good policy performance in partner countries, putting partner countries in the 

lead, and focusing on tangible results by holding partner countries accountable for the aid they 

receive. These core values underpin MCC’s mission and support its four strategic goals 

defined in MCC’s 2006—2011 Strategic Plan. Specific indicators provide the basis for 

measuring the results of target goals and objectives. 

Across the four strategic goals, MCC has generally met or exceeded many of its performance 

objectives for which data is currently available.2

 In other areas, indicators show that 

performance has not improved, or changed only slightly from prior years. As explained in 

Section 2-Performance, MCC does not establish specific performance targets for all objectives 

under Strategic Goal 2.3

 

A summary of selected results for each strategic goal is provided on the following two pages. 

For detailed performance information on each strategic goal, performance objectives, specific 

indicators, targets, and current and historical performance results, refer to Section 2-

Performance. 

 

2

In many cases, fourth quarter data was not yet available as of the publication date of this report. As such, many of 

the FY 2008 performance data are current as of the end of the third quarter, June 30, 2008. 

3

MCC does not establish targets for Strategic Goal 2 due to the policy-reform nature of the objectives under this 

goal and because progress in these areas is largely outside of MCC’s control. 

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MILLENNIUM CHALLENGE CORPORATION

Strategic Goal 1: 

Achieve sustainable, transformative 

development 

Populations affected by compacts: While four of 

the eight objectives that MCC uses to measure this 

goal have supplemental indicators, or indicators that 

may not be directly attributable to MCC, several 

objectives under Strategic Goal 1 are measured in 

the context of the populations affected by the 

compact in a given country. For 6 of the 8 objectives 

under goal 1, 2008 data was either unavailable at the 

time this report was being published, or only 

baseline data was available. 

Compact and threshold countries move from 

donor assistance toward private investment: 

Moving countries to private sector funding of 

development is one of the key goals of the MCC 

model of assistance. MCC expects performance on 

this indicator to improve more significantly for 

compact eligible and threshold countries than for 

other countries. In FY 2008, compact eligible and 

threshold countries slightly improved their collective 

country credit rating scores—one indicator of private 

investment desirability, while other candidate 

countries showed a decline in their collective 

country credit rating score. 

MCC partner countries exceeded conditions 

precedent targets: MCC countries met 93 percent 

(1,315) of their conditions precedent (CP) on time. 

CPs are actions that a compact country needs to take 

before MCC will release a disbursement of funds. 

CPs can include such actions as appointing key 

personnel, completing feasibility studies or 

environmental impact assessments, or reaching 

specific implementation milestones. 

Strategic Goal 2: 

Support development of a sound policy 

environment for economic growth and 

poverty reduction in the developing 

world 

Overall positive trend in improving partner 

country policy environments: In FY 2008, MCC 

continued to see countries improving their policy 

environments, as measured by performance 

indicators for ruling justly, investing in people, and 

economic freedom. Seventeen of the countries 

selected as eligible for assistance in FY 2008 were 

previously selected as eligible in at least one 

previous fiscal year, indicating their continued 

scorecard performance of above the median in 

relation to their peers. 

3⁄4 Partner countries improve on ruling justly: 

For the majority of indicators under this 

objective, MCC compact eligible, threshold, 

and other candidate countries improved their 

average rate of positive change in improving 

political rights, civil liberties, government 

effectiveness and voice and accountability 

3⁄4 Partner countries improve on all investing in 

people indicators: Compact eligible and 

threshold countries, in particular, increased 

their health expenditures and immunization 

rates under this objective. 

3⁄4 Some economic freedom indicators showed 

positive change, while other indicators 

showed minimal or negative change: MCC 

compact eligible, threshold and other eligible 

countries generally showed overall positive 

change with respect to the cost and time of 

starting businesses. The fiscal policy and 

regulatory quality indicators showed minimal 

or negative change overall from prior years. 

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MILLENNIUM CHALLENGE CORPORATION

Strategic Goal 3:

Advance international development 

assistance practice by improving 

MCC’s operational effectiveness 

MCC as a model in the international 

development community: The first objective, 

“Enhance MCA model recognition and support 

within the international community,” assesses 

whether there is recognition of MCC’s approach, or 

a good understanding of the MCA model and 

whether MCC is recognized for innovative and best 

practice approaches. Data for this indicator will be 

available at the end of calendar year 2008.

Partner countries highly satisfied with their 

partnership with MCC, while some indicated 

MCC maintains an insufficient level of 

ownership or responsibility over projects: 

Results of MCC’s FY 2008 Gallup poll of partner 

country representatives indicated that 73 percent are 

satisfied overall with MCC as a partner, and 81 

percent believe that MCC’s approach to country 

ownership will help them achieve their development 

goals. Fewer partner countries believe that MCC 

fits with existing development systems and 

institutions (68 percent), and maintains a sufficient 

level of ownership or responsibility over projects 

(64 percent). 

Strategic Goal 4:

Build MCC’s capabilities to achieve its 

primary strategic goals 

Administrative costs of developing and 

implementing compacts generally decreasing:

MCC significantly improved on one of its two 

efficiency indicators4 due to MCC staff continuing 

to shift their workload from the administrative 

start-up of compacts to the marginal cost of 

compact implementation. In addition, as MCC 

signed more compacts and threshold agreements, 

fiscal and procurement agents assumed more 

timely responsibility for compact administration 

upon entry into force, and the duration of time 

between compact signature and entry into force 

decreased. 

MCC works closely with OIG to implement 

audit recommendations on time: 

For FY 2008, MCC addressed 21 of 32 (66 

percent) OIG recommendations on time, failing to 

meet its target of 75 percent. The 34 percent of 

recommendations that were not closed on time 

were due to ongoing discussions with OIG about 

MCA responsibilities. In February 2008, MCC 

and OIG reached an agreement that MCAs would 

be held accountable for addressing their own audit 

recommendations, with MCC oversight. 

Staff Engagement: MCC’s level of employee 

engagement, as measured by the second annual 

staff Gallup survey, declined slightly since 2007. 

Similar to last year’s results, respondents 

consistently identified MCC’s strengths as the core 

organizational mission and the quality of work 

performed. Respondents indicated foundational 

elements as areas for continued attention, such as 

setting and discussing performance expectations. 

 

4

 The two efficiency measures include: (1) percent of administrative funds obligations per compact funds committed; 

and (2) administrative funds obligated per compact funds disbursed.

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Exhibit 5 provides just a few of many MCC success stories showing tangible performance 

results of compact implementations. The results indicate that MCC is reaching key process 

milestones on these projects in addition to the overall results captured through the 

measurement of objectives under each strategic goal. 

Exhibit 5: Examples of Program Tangible Results 

Strategic Goal 1–Farmers’ Lives are Transformed through Malagasy Lima Beans 

Cooperative 

Small Crop Produces Large Dividends for Malagasy Farmers 

Reinvigorating the economy of an entire region of a country can start with 

something as simple as taking a fresh look at a traditional crop. The Millennium 

Challenge Account (MCA) -Madagascar’s $17.7 million investment in the Agricultural 

Business Investment Project is helping farmers in rural regions like Menabe transition from 

subsistence agriculture to participating successfully in a market economy. Mr. Maharavo, a 

lima bean producer who has participated in the project, has already seen tangible results. “Our 

quality of life has already improved. Our children are better dressed. We can afford better food 

for our children to better meet their nutritional needs,” Mr. Maharavo said. Seventy-eight 

members of the cooperative who have sold their produce have earned up to $940 each. This is 

an exceptional increase in incomes considering in the average per capita income is Menabe is 

$138 a year with annual household incomes averaging $648. “We can now consider saving,” 

said Mr. Maharavo. The project not only benefits producers and other actors in the value 

chain but it also helps build the capacity of local agricultural experts at the national level. 

These are skills they will use to help other agricultural producers and businesses to thrive 

beyond the end of the MCC compact. 

Strategic Goal 2–Product-to-Market Improvements Means Poverty Reduction for the 

People of Morocco 

U.S. Revitalizes Fisheries through MCC 

The U.S. Government, through the MCC Compact with Morocco, will fund the 

construction and rehabilitation of landing sites for fishing boats in 13 ports and 20 

landing sites along Morocco’s coasts over the course of the next five years. Training that will 

teach fishers and distributors the best techniques to ensure safe, effective, and sanitary 

methods to process their goods and help get them to market will commence later this year. 

The groundbreaking project will increase incomes for approximately 25,000 of Morocco’s 

poor. 

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MILLENNIUM CHALLENGE CORPORATION

Strategic Goal 3–Identifying and Sharing Best Practices Improves Operations for All 

 MCC Partners Exchange Best Practices in 

Maximizing Poverty Reduction 

Benin, Georgia, and Mali three countries in different stages of 

implementing their MCC programs recently organized visits for key staff to exchange 

knowledge in the areas of management, procurement, financial reporting, and monitoring and 

evaluation. By sharing their experiences, these countries are hoping to enhance both the 

transparency and the efficiency with which they implement compact programs. Countries at 

the beginning of the process have found it extremely useful to establish contact with their 

counterparts who are farther along in implementation. These relationships not only help 

answer questions about the process of implementing MCC grants, but open a channel to 

exchange best practices and ideas on how to allocate resources efficiently in the fight against 

poverty. “There is no point in reinventing the wheel,” says Dominique Ekon, Procurement 

Director for MCA –Benin, when asked about the importance of regularly exchanging 

information among countries. “We’ll gladly share any knowledge or experience we have 

acquired in the implementation process with other MCAs who would benefit from it.” Ekon 

travelled to Mali in mid-April at the invitation of MCA-Mali to share procurement best 

practices with the Malian team and his counterpart. “Because of his experience in 

procurement, Dominique was able to provide us with practical, day-to-day advice on how to 

enhance productivity across sectors while ensuring ‘ownership’ of the program within the 

local partners,” says Gautam Ramnath, MCC’s’s Deputy Resident Country Director for Mali. 

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MILLENNIUM CHALLENGE CORPORATION

How MCC Measures Performance 

MCC assesses country performance in the context of its core values—good policy 

performance, country ownership and tangible results—which are particularly important 

throughout the country selection, compact development and compact implementation 

processes. MCC also measures the performance of program implementation through its four 

annual strategic goals and corresponding objectives. This section provides an overview of 

how MCC gathers and assesses country performance through its core values, performance 

goals, objectives, and annual target indicators and results. Detailed performance results can be 

found in Section 2—Performance. 

MCC’s Core Values

Good Policy Performance—Country Selection

The foundation of MCC’s engagement with partner countries is that policies matter. History 

has demonstrated that countries with strong policies in the areas of ruling justly, investing in 

people, and economic freedom have lower rates of poverty and higher rates of economic 

growth. Decades of development experience point to these attributes as necessary conditions 

for growth and poverty reduction. 

MCC assesses partner country Exhibit 6: Sample Selection Criteria Scorecard 

performance in these three areas 

by using objective, transparent, 

and third-party indicators taken 

from non-U.S. Government 

sources. MCC uses these 

indicators to create a scorecard 

that measures a country’s policy 

performance among its own 

peer group in the same per 

capita income range. MCC’s 

Board of Directors then uses 

these scorecards, in addition to 

other relevant qualitative 

information, to determine and 

select annually which countries 

are eligible to receive aid based 

on policy performance. Exhibit 

6 depicts an example of a 

scorecard that measures one of 

the seventeen selection 

criteria—civil liberties. 

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MILLENNIUM CHALLENGE CORPORATION

Country Ownership—Compact Development 

Building on the foundation of a sound policy environment, MCC is seeing real results in 

country ownership as countries become accountable for their own development and play the 

lead role in the process of developing and implementing their compacts. This ownership is 

crucial to ensuring that development results are sustainable and truly transformational. 

Once countries qualify and are selected for MCC assistance on the basis of their policy 

performance, they are invited to develop a proposal for funding, or a compact. This stage is 

referred to as the compact development process in which eligible countries must first identify 

their main constraints to poverty reduction and economic growth. Eligible countries are 

expected to design and submit their proposals for compact funding that address their own 

priorities and constraints. Countries develop their proposals in consultation with their own 

society, building country ownership that increases the likelihood of success and sustainability. 

MCC evaluates and conducts due diligence on each proposal to determine whether it will lead 

to poverty reduction and growth. If a country’s proposal is approved for funding, MCC and 

the country sign a compact. This mutual agreement outlines responsibilities for both MCC 

and the partner country and stipulates performance benchmarks to ensure accountability and 

outcomes. 

Tangible Results—Compact Implementation 

Once MCC’s Board approves a compact proposal, MCC holds its partner countries 

responsible for the aid they receive. That is why MCC’s assistance goes to those countries 

that develop programs with clear objectives, benchmarks to measure progress, procedures to 

ensure sound financial management, and a plan to monitor outcomes and evaluate impacts. 

Ultimately, MCC expects its assistance to generate tangible results in the lives of the poor 

even after compact funding ends. To ensure transparency and accountability, MCC’s 

assistance is disbursed only as performance benchmarks are achieved. 

MCC’s core values of good policy performance, country ownership and tangible results 

provide the foundation for achieving MCC’s mission, strategic goals and corresponding target 

objectives. In FY 2008, MCC continued tracking the achievement of multiple performance 

objectives aligned to each of the four strategic goals, as outlined in the FY 2006 – 2011

Strategic Plan. The performance of each objective was measured according to whether key 

indicator targets were met, not met, or improved, or not improved from the prior year(s). 

Exhibit 7 on the following page depicts the relationship among MCC’s mission, core values, 

strategic goals, objectives and results. Detailed information on MCC’s performance 

measurement framework is provided in Section 2—Performance. 

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Exhibit 7: MCC Mission, Core Values, Strategic Goals, Objectives and Results 

MCC’s Mission

Reduce poverty through economic growth

Strategic Goal

1:

Achieve

sustainable,

transformative

development

Strategic Goal 2: Strategic Strategic Goal 4:

Support

development of

sound policy

environment for

economic growth

and poverty

Goal 3:

Strategic Goals in Support of MCC’s Mission

MCC’s mission is to reduce poverty through economic growth. The FY 2006 – 2011 Strategic 

Plan outlines four strategic goals that support the achievement of this mission: 

(1) Achieve sustainable, transformative development—the expected outcome of this 

strategic goal is to significantly reduce poverty through sustainable, material 

economic growth for a significant number of people. Successful performance on this 

goal demonstrates that compact countries are taking appropriate steps to properly 

implement their compacts. 

(2) Support development of a sound policy environment for economic growth and 

poverty reduction in the developing world—the expected outcome for this goal is to 

increase the incentives for developing countries to adopt sound policies by making 

Improve

MCC’s

operational

effectiveness

Build MCC’s

capabilities to

achieve primary

strategic goals  

Target Objectives Measured by Performance Indicators  

(Inputs, Outputs, Outcomes)

MCC’s Core Values

Country

Ownership

Good Policy

Performance

Tangible Results

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MILLENNIUM CHALLENGE CORPORATION

available substantial benefits to countries that rule justly, invest in their people, and 

encourage economic freedom. MCC’s Threshold program is closely tied to this 

strategic goal, as it assists countries in becoming eligible for compact assistance by 

helping them improve their performance on the policy indicators under this goal.

(3) Advance international development assistance practice by continually improving 

MCC’s operational effectiveness—the expected outcome of this goal is for MCC to 

be a leader in the development assistance arena and to be viewed as a model of 

effectiveness by other development practitioners. MCC identifies best practices, 

internally and externally, and adopts them to improve its operations. 

(4) Build MCC’s capabilities to achieve its primary strategic goals: the expected 

outcome of this strategic goal is to operate efficiently and effectively by developing 

human resources and financial and administrative capacities, articulate clear 

processes, policies, and quality standards, and build strong support systems.

Performance Objectives, Targets and Indicators

Each strategic goal has a sub-set of specific performance objectives and corresponding 

indicators, or metrics, that are laid out in MCC’s FY 2007 – 2008 Performance Plan and 

discussed in further detail in Section 2 of this report. In setting performance targets, MCC 

considers which indicators should include targets, how numerical values should be set, and 

how frequently performance against targets should be assessed. It is MCC’s policy that the 

performance indicators selected for targeting are important, measurable, and to the extent 

possible, subject to MCC’s control. Compact-specific target values are established according 

to what would be required to achieve the economic returns or benefits envisaged at the time 

the project was presented for approval by the MCC Board of Directors. Therefore, the target 

values are closely linked to the original justification of the projects. 

MCC has also identified a number of performance indicators that may not be directly 

attributable to MCC interventions, but that do provide important information on partner 

country progress that is relevant to MCC’s programs. MCC measures such non-attributable 

performance with supplemental indicators. These indicators are tracked by MCC but not 

treated as formal indicators. 

Data Reliability 

MCC’s performance data reported in the PAR is derived from external sources, including 

other donor agencies or through independent evaluations contracted by the candidate countries 

during the compact implementation process. Where data is not available for select indicators, 

MCC often conducts surveys through an independent third party to assess its performance. 

For performance results that are based on data that MCC collects from MCAs, MCC takes 

steps to ensure that information is accurate. 

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MILLENNIUM CHALLENGE CORPORATION

Plans to Enhance Performance Measurement in FY 2009 

Going forward in FY 2009, MCC will continue measuring for results under the four strategic 

goals outlined in the FY 2006 – 2011 Strategic Plan. However, MCC has refined the 

corresponding objectives and indicators to more closely align them to each goal. For example, 

the achievement of each objective will be more directly attributable to MCC, or within MCC’s 

control to achieve. In addition, the new objectives for FY 2009 and beyond were designed to 

be achievable within one fiscal year. For example, Strategic Goal #1 objectives will measure 

the inputs and outputs across compact program sectors—roads, irrigation, agriculture, and 

rural development—for each fiscal year in which activity on those sectors occurs. This new 

approach will streamline the data collection process so that performance data can be readily 

obtained, measured, analyzed and reported. 

Use of Non-Parties 

MCC’s FY 2008 PAR has been developed by the Department of Administration and Finance 

(A&F) with MCC-wide input and the coordination assistance of a consulting company. 

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FINANCIAL PERFORMANCE AND ANALYSIS

MCC’s financial management operations are managed and controlled by the Division of 

Finance, within A&F and under the leadership of MCC’s Vice President of Administration 

and Finance. The Division is responsible for implementing financial management policies, 

controls, and systems and for providing comprehensive financial management for MCC. In 

addition, the Division is responsible for managing MCC’s internal control implementation and 

assessment efforts. 

The majority of MCC’s financial management services and all its financial management 

systems, including the core financial system and program feeder systems, are provided by the 

Department of Interior’s National Business Center (NBC), one of the Federal Government’s 

financial management “Centers of Excellence” under OMB’s financial management line of 

business. Exhibit 8 illustrates the Division of Finance and NBC’s organizational structure. 

Exhibit 8: Division of Finance and National Business Center 

Vice President for 

Administration and Finance

Chief Financial Officer

Vice President for 

Administration and Finance

Chief Financial Officer

Deputy 

Vice President

Deputy 

Vice President

Deputy CFO

GRAPHIC MCC PAR-01

10/2006

Program Analyst 

Financial 

Reports and 

Analysis

Program Analyst 

Financial 

Reports and 

Analysis

Deputy CFO

General 

Accounting

Supervisor

General 

Accounting

Supervisor

Billings and 

Collections 

Supervisor

Billings and 

Collections 

Supervisor

Lead 

Accountant

Lead 

Accountant

General Accounting 

Branch Chief

General Accounting 

Branch Chief

Policy and Procedure 

Agreements/

SLA POC

Policy and Procedure 

Agreements/

SLA POC

Vendor 

Payments

Supervisor

Vendor 

Payments

Supervisor

PCS

Supervisor

PCS

Supervisor

Travel 

Payment

Supervisor

Travel 

Payment

Supervisor

IPAC/Grant 

Payments

Supervisor 

(Accounting)

IPAC/Grant 

Payments

Supervisor 

(Accounting)

Fiscal Services

Branch Chief

Fiscal Services

Branch Chief

Accounting 

Operations

Division Chief

Accounting 

Operations

Division Chief

National Business Center

Assistant CFO

Financial Operations

Assistant CFO

Financial Operations

Senior Accountant 

Financial Analyses 

and Policy 

(Domestic)

Senior Accountant 

Financial Analyses 

and Policy 

(Domestic)

Senior Accountant 

Financial Analyses 

and Policy 

(Country Programs)

Senior Accountant 

Financial Analyses 

and Policy 

(Country Programs)

Budget Officer Budget Officer

Senior Budget 

Officer

Senior Budget 

Officer

In FY 2008, MCC continued improving its financial management and internal controls 

environment. For example, MCC undertook the following efforts last year: 

• Common Payment System (CPS): Under CPS all U.S. dollar and some local currency 

payments will be made directly to contractors and other payees through a U.S. Treasury 

payment system, which is cost-free to MCC. MCC’s transition to CPS was completed in 

August 2008. All 18 countries with signed compacts have been trained and transitioned to 

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MILLENNIUM CHALLENGE CORPORATION

the CPS. New compacts will immediately benefit from this system. Salaries and other 

smaller local currency payments will generally continue to be paid through local bank 

accounts, but funds will be transferred to the accounts when they are needed, rather than 

on a monthly basis. CPS will eliminate large balances of MCC funds in local bank 

accounts, thereby reducing the risk to the funds, and will allow MCC to provide real-time 

reporting on disbursements. For example, as a result of the implementation of CPS, MCC 

has reduced country cash balances from a high of $49.4 million on April 1, 2008 to 

approximately $6.6 million on September 20, 2008. MCC has cumulatively disbursed 

approximately $98 million since it implemented CPS. 

• Improved financial data: During FY 2008, MCC completed financial data clean-up 

efforts to standardize sector classifications and the structure of projects and activities 

across countries, leading to improved data quality and reporting. In addition, MCC’s 

Division of Finance, in conjunction with the Division of Contracts and Grants 

Management, has developed a strategy to de-obligate contracts from prior years where 

work has been completed. 

• Improved human resource procedures: MCC has established an electronic workflow and 

authorization process for all personnel actions. This will ensure that all personnel actions 

are properly authorized, documented, and retained prior to processing. 

• MCC-wide data storage and analysis system: MCC is streamlining its financial 

workflow, improving financial reporting, and further integrating programmatic, 

performance and financial information with a new comprehensive MCC Integrated Data 

Analysis System (MIDAS). Once implemented, the system will improve the timeliness 

and use of financial and performance data to manage the cost of MCC programs and 

further enhance internal and external reporting and internal controls. 

• Information Technology Infrastructure: MCC reorganized its information technology 

management structure, and implemented new technologies and policies to improve the 

stability and security of the MCC information technology infrastructure. Since May 2008, 

MCC has reduced the vulnerability level of MCC systems by 80 percent, and has 

developed action plans to address all 17 findings in the OIG FY 2008 Federal Information 

Security Management Act (FISMA) audit before the end of the current fiscal year. 

During FY 2008, MCC’s financial operations continued to intensify with the signing of four 

compacts with eligible countries.5

 MCC’s cumulative level of compact commitments 

increased significantly during the year and will continue to trend upward as MCC formally 

enters into additional compacts with eligible countries in future years. The following sections 

present the overall perspectives and highlights of MCC’s financial performance through the 

end of FY 2008. 

 

5

MCC entered into compacts with the following countries during FY 2008: Burkina Faso, Mongolia, Namibia and 

Tanzania. 

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MILLENNIUM CHALLENGE CORPORATION

Financial Statements Highlights 

For FY 2008, MCC received an unqualified or “clean” audit opinion from the Office of 

Inspector General (OIG) on its financial statements. MCC’s independent auditors, Cotton & 

Company’s FY 2008 Independent Auditor’s Report cites only one material weakness in 

MCC’s controls over financial reporting, an improvement over the two material weaknesses 

indentified during the FY 2007 audit. In addition, the auditors did not disclose any instances 

of non-compliance, as required to report under Government Auditing Standards and OMB 

Bulletin 07-04. 

While MCC is not a CFO Act agency, MCC adheres to the requirements and principles 

imposed upon such agencies by the CFO Act, the Government Management Reform Act of 

1994, and other pertinent laws and regulations. As such, MCC prepares annual financial 

statements for audit and presentation to OMB and other stakeholders. MCC’s comparative 

financial statements present MCC’s financial position and its changes during the reporting 

period, its cost of operations, and its budgetary resources and their status for the fiscal years 

ending September 30, 2008 and September 30, 2007. 

Balance Sheet 

The balance sheet presents amounts of future economic benefits owned or managed by MCC 

(assets), amounts owed by MCC (liabilities), and amounts that constitute the difference (net 

position). 

Assets and Unexpended Appropriations 

As of September 30, 2008, MCC reported total assets of almost $6.6 billion, an increase of $1 

billion from September 30, 2007. This increase is primarily the result of funds appropriated 

by Congress that had not been expended as of the end of the year. At fiscal year-end, MCC 

held $6.5 billion in unexpended appropriations, of which $5.6 billion has been obligated for 

MCC programs. 

MCC’s Fund Balance with Treasury constitutes the vast majority (99.2 percent) of total assets. 

Because MCC neither owns any of its facilities or other real property nor has any capital 

leases for office space or its information technology (IT) equipment, MCC has very few 

capital assets in relation to total assets. The capitalization thresholds are $200,000 for IT 

equipment and $50,000 for other fixed assets. As of September 30, 2008, MCC reported fixed 

assets of $8.1 million, composed solely of leasehold improvements. The leasehold 

improvements are for enhancements made to leased office space at MCC headquarters in 

Washington, D.C. 

Liabilities and Net Position 

As of September 30, 2008, MCC had approximately $42.2 million in liabilities, which were 

amounts owed to its vendors, contractors, trading partners, and employees. MCC’s ratio of 

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MILLENNIUM CHALLENGE CORPORATION

assets to liabilities as of September 30, 2008, was 156 to 1, which represented an increase 

from the 2007 ratio of 124 to 1. 

MCC’s overall net position as of September 30, 2008, was $6.6 billion. During FY 2008, 

MCC’s net position increased by $1.01 billion (18 percent) from September 30, 2007. During 

this period, MCC received $1.557 billion in appropriated funds and expended approximately 

$474 million. The available appropriations that are reflected in MCC’s positive net position 

represent the resources necessary to fund future compacts and are indicative of a lag between 

appropriation, commitment, and expenditure of compact funds. As of the end of FY 2008, 

MCC signed compacts with 18 countries and had 20 threshold programs in place. 

Statement of Net Cost 

The Statement of Net Cost (SNC) is designed to show separately the components of the net 

cost of MCC’s operations for the period. 

Program Costs 

During FY 2008, MCC incurred $461 million in net program costs. As of the end of FY 2008, 

MCC had cumulatively advanced $42.5 million to MCA (Millennium Challenge Account) 

accountable entities and other Federal Government agencies. 

Statement of Changes in Net Position 

The Statement of Changes in Net Position (SCNP) reports the change in net position during 

the reporting period. Net position is affected by changes to its two components: Cumulative 

Results of Operations and Unexpended Appropriations. Cumulative Results of Operations 

amounted to $6.8 million as of September 30, 2008, and $7.4 million as of September 30, 

2007. This balance is the cumulative difference, for all previous fiscal years through 2008, 

between funds available to MCC from all financing sources and the net costs of MCC. 

Statement of Budgetary Resources 

The Statement of Budgetary Resources (SBR) and related disclosures provide information 

about how budgetary resources were made available and their status at the end of the period. 

The Resources section of the statements present the total budgetary resources available to 

MCC. The Status of Resources section of the statements displays information about the status 

of budgetary resources at the end of the period. The total amount displayed for the status of 

budgetary resources equals the total budgetary resources available to MCC as of the reporting 

date. For 2008, MCC had total budgetary resources of $3.7 billion, including $4.4 billion 

carried forward at the beginning of FY 2008 from prior years. MCC incurred obligations of 

$2.8 billion for the year, a 27 percent increase from the $2.2 billion of obligations incurred 

during 2007. 

The following section provides additional details pertaining to MCC’s use of the funds 

appropriated to it by Congress. 

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MILLENNIUM CHALLENGE CORPORATION

Status and Use of Funds 

MCC’s programs and activities are funded by 

Congress through annual no-year appropriations. 

Since its establishment, MCC has received total 

funding of more than $7 billion, including $1.557 

billion in FY 2008 (see Exhibit 9). MCC’s funding 

was reduced by $70.6 million due to Congressional 

enacted rescissions. 

As of September 30, 2008, $781 million of MCC’s 

realized resources represented the balance of 

apportioned funds available for obligation. While 

MCC receives no-year funding, OMB apportions, per congressional limits, the amount of 

funds that MCC may obligate for administrative purposes. Administrative costs include 

personnel salaries and benefits, leases, rentals, travel, and other miscellaneous expenses. For 

FY 2008, OMB apportioned $85.8 million for MCC to use for administrative purposes. 

During FY 2008, MCC obligated approximately $85.2 million in administrative funds, or 99.3 

percent of the total amount apportioned by OMB. 

Exhibit 9: Annual Funding by 

Fiscal Year 

Fiscal 

Year 

Annual Funding 

(in thousands) 

2004 $ 994,000 

2005 1,488,100 

2006 1,752,300 

2007 1,752,300 

2008 1,557,000 

Total $7,543,700 

MCC classifies appropriations in six fund categories: 

` Administrative. Funds appropriated by Congress and apportioned by OMB for the 

purpose of operating expenses.

` Compact. Funds approved by Congress, apportioned by OMB, and obligated by MCC to 

cover compacts between MCC and partner countries. 

− Compact Implementation Fund (CIF). Funds approved by Congress and 

apportioned by OMB. CIF funds represent a portion of the funds agreed to in a 

compact and are made available at the time of compact signing for the 

purposes of speeding implementation between compact signing and entry into 

force. MCC uses authority provided in Section 609(g) of its authorizing 

legislation to provide these funds to a partner country6

. 

− Grants. Funds apportioned by OMB for grants and cooperative agreements.

` 609(g). Funds approved by Congress and apportioned by OMB to fund contracts or 

grants for the purpose of facilitating the development and/or implementation of a 

compact between the MCC and a partner country. 

` Due Diligence. Funds apportioned by OMB and used by MCC to cover costs associated 

with assessing compact proposals developed by eligible countries and providing compact 

implementation oversight. 

 

6

 Section 609(g) of the Millennium Challenge Act of 2003 provides that the MCC CEO 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. 

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MILLENNIUM CHALLENGE CORPORATION

` Threshold. Funds appropriated by Congress, apportioned by OMB, and used by MCC 

to assist countries in meeting selection criteria for MCA eligibility. Such countries are 

considered “on the threshold” of qualifying for eligibility for an MCC compact.

` Audit. Funds appropriated by Congress and apportioned by OMB for audits of MCC 

operations and programs. The USAID Office of Inspector General (OIG) is responsible 

for conducting MCC audits. 

During FY 2008, MCC incurred total obligations of approximately $2.7 billion for all program 

fund categories. Total lifetime obligations incurred by MCC since inception are 

approximately $6.49 billion. As noted in Exhibit 10, administrative funds represent a small 

proportion of the total funds provided by Congress, while in FY 2008 approximately 97 

percent of MCC’s obligations were for program operations. Should MCC not obligate the 

total amount of administrative funds apportioned by OMB during the budget year, the excess 

(unobligated) amount is no longer available for administrative purposes but “rolls over” and is 

subsequently available for program purposes. 

Exhibit 10: Obligations by Fund Category 

Funds Category 

FY 2008 Obligations 

(in thousands) 

Lifetime Obligations

(in thousands) 

Administrative $ 84,513 $ 283,361

Compacts (including CIF/Grants) 2,512,827 5,699,027

609(g) 10,514 59,674

Due Diligence 32,870 117,652

Threshold 126,095 451,696

Audit 3,102 10,127

Total $ 2,769,921 $ 6,621,537

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MILLENNIUM CHALLENGE CORPORATION

Exhibit 11 shows funds obligated for compacts by country as of the end of FY 2008. In 

addition to the program obligations in FY 2008, MCC recorded an estimated $785.4 million in 

commitments (anticipated obligations) for signed compacts with Burkina Faso ($480.9 

million) and Namibia ($304.5 million), which had not entered into force during FY 2008. 

Exhibit 11: Compact Obligations

MCA/ Country 

Total Compact 

Obligations 

(in thousands) 

Armenia $ 235,650 

Benin 307,298 

Burkina Faso 16,101 

Cape Verde 110,078 

El Salvador 460,940 

Georgia 295,300 

Ghana 547,009 

Honduras 215,000 

Kenya 100 

Lesotho 362,551 

Madagascar 109,773 

Mali 460,811 

Mongolia 284,911 

Morocco 697,500 

Mozambique 506,924 

Namibia 19,543 

Nicaragua 175,000 

Tanzania 698,136 

Vanuatu 65,690 

Total $5,568,315 

Note: Compact obligations listed are inclusive of CIF 

and grant funds per Section 609(g) of the Millennium 

Challenge Act of 2003. 

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Financial Management Systems, Internal Controls, and Compliance with Laws 

and Regulations 

The NBC is MCC’s financial management shared services provider for financial and payroll 

systems. MCC is responsible for overseeing NBC and ensuring that financial systems and 

internal controls are in place to fulfill legislated and regulatory financial management 

requirements. The following sections present information on MCC’s financial systems, 

controls, and compliance with key laws and regulations. 

Management Assurances 

Federal Financial Management Improvement Act of 1996 

The Federal Financial Management Improvement Act (FFMIA) requires federal agencies to 

implement and maintain financial management systems that are in substantial compliance with 

(1) federal financial management systems requirements, (2) federal accounting standards, and 

(3) the United States Standard General Ledger at the transaction level. Because MCC uses 

NBC for financial management and reporting services, MCC relies upon NBC’s evaluations of 

its financial management systems and its determinations of compliance with FFMIA. NBC 

issued a letter dated July 15, 2008 stating that its auditor, KPMG, found no weaknesses or 

significant deficiencies in evaluating NBC’s financial systems during the Statement of 

Auditing Standards No. 70 (SAS 70) review. Exhibit 12 below presents this letter. 

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MILLENNIUM CHALLENGE CORPORATION

 Exhibit 12: National Business Center SAS-70 Letter 

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MILLENNIUM CHALLENGE CORPORATION

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MILLENNIUM CHALLENGE CORPORATION

Federal Managers’ Financial Integrity Act of 1982 and Internal Controls over Financial 

Reporting 

The Federal Managers’ Financial Integrity Act of 1982 (FMFIA) requires agencies to issue an 

annual statement of assurance to the President and Congress on their internal controls.7

 Office 

of Management and Budget (OMB) Circular A-123, Appendix A, provides the guidance 

(including additional requirements and a methodology) for agency management to comply 

with the Act. Although OMB has determined that MCC is not required to implement the full 

requirements of A-123, MCC seeks to follow internal controls best practices by implementing 

a modified approach to its internal controls reviews. In lieu of full annual A-123 reviews, 

MCC implemented a plan to conduct reviews over the course of two years—fiscal years 2007 

and 2008—and will continue this approach going forward. 

The results of MCC’s A-123 assessments over the past two years support the CEO in 

concluding with reasonable assurance that MCC’s internal controls are in compliance with 

provisions of FMFIA, Section 2, and that MCC is in compliance with the internal control 

objectives stipulated by OMB Circular A-123. MCC’s assurance is made on the basis of its 

review of internal controls over financial reporting, in addition to assurance statements 

provided by MCC’s financial services provider, NBC, and other relevant information, 

including Government Accountability Office (GAO) and Office of Inspector General (OIG) 

audit reports. Further information on each year’s reviews is provided in the following 

paragraphs. 

Fiscal Year 2007: As reported in last year’s PAR, MCC’s FY 2007 review found that MCC 

improved its internal controls environment across the organization. Specifically, the A&F 

Department developed formal financial management policies and procedures and established 

greater oversight over controls by establishing formal mechanisms for resolving information 

technology (IT) system issues; developed a plan to meet Federal Information Security 

management Act (FISMA) compliance requirements; established an MCC-wide employee 

training program; and decentralized budgets to MCC departments. 

Also as part of the FY 2007 review, MCC reviewed documentation and key internal control 

test results for those processes that NBC performs on MCC’s behalf. NBC provided 

assurance to MCC that its auditor, KPMG, found no weaknesses or significant deficiencies in 

evaluating NBC’s financial systems during the Statement of Auditing Standards No. 70 

(SAS70) review. NBC also provided assurance that its processes and controls in place 

between October 1, 2006 and September 30, 2007 were adequate and effective to safeguard 

data from waste, fraud, abuse, and destruction and that the auditors found no material 

weaknesses or significant deficiencies in those processes or controls. The FY 2007 review 

also provided the basis for the FY 2008 review. 

 

7

 Section 2 of FMFIA specifically requires agencies to provide assurance that (i) obligations and costs are in 

compliance with applicable law; (ii) funds, property, and other assets are safeguarded against waste, loss, 

unauthorized use, or misappropriation; and (iii) revenues and expenditures applicable to agency operations are 

properly recorded and accounted for to permit the preparation of accounts and reliable financial and statistical 

reports and to maintain accountability over the assets. 

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MILLENNIUM CHALLENGE CORPORATION

Fiscal Year 2008: MCC made continued progress in improving its internal controls 

environment during FY 2008 by: 

• Establishing a working group to revise compact quarterly reporting requirements and 

related approval processes; 

• Fully implementing the International Treasury System (ITS)—or Common Payment 

System (CPS)—to disburse compact funds, thereby addressing the FY 2006 OIG audit 

report recommendation to limit cash balances in each MCA’s permitted bank account; 

• Began implementation of the MCC Integrated Data Analysis System (MIDAS) to 

improve the quarterly MCA reporting and performance tracking processes, while also 

supporting the centralized collection and storage of agency-wide financial and 

performance information in an electronic warehouse where staff are able to access it 

readily to conduct current and historical queries and develop financial and 

performance reports as needed; 

• In addition, MCC conducted (through an independent contractor) a comprehensive 

internal controls review that included the following components. MCC leadership has 

already addressed many of the findings that were documented as part of the review. 

(1) Risk assessment of MCC’s core business processes: The risk assessment 

determined that MCC’s highest risk business processes are the Compact 

Management process and the Contracts and Grants Management process. MCC 

assessed the risks of each business process on the basis of their: (1) impact on 

financial statements, (2) complexity, (3) volume of transactions, (4) degree of 

centralization, and (5) audit findings and internal control weaknesses. 

(2) Entity and process level transaction testing, findings and recommendations: In 

response to the risk assessment, MCC conducted transaction testing on the 

Compact Management and Contracts and Grants Management processes for the 

FY 2008 review. In addition, MCC selected the Personnel, Salary and Benefits 

process and the Threshold Program funds sub-process for transaction testing.8

 

Hundreds of transactions were randomly selected across fifty-nine control 

activities within each key business process and tested as part of the review. 

Testing identified some control weaknesses across the processes, primarily in the 

areas of obtaining and maintaining official documentation on written approvals 

required in the Compact Management and Contracts and Grants Management

processes. Through the aforementioned MIDAS initiative, MCC is taking steps to 

ensure that all compact approval records are appropriately documented, tracked 

 8

 The Personnel, Salary and Benefits process was chosen for testing because NBC performs this process on 

MCC’s behalf, and MCC had not yet been able to review the payroll process documentation or test results at 

NBC. A Threshold Program sub-process was chosen because USAID performs this process on MCC’s behalf 

and MCC had not yet reviewed USAID’s internal controls over these aspects of the program. 

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and maintained. In addition, MCC has significantly enhanced training provided to 

Contracting Officer’s Technical Representatives (COTR) and ensures that all 

COTRs fully understand their roles and responsibilities, particularly as they relate 

to obtaining and maintaining approval documentation on invoices and other 

contract documents. 

(3) Personnel, Salary and Benefits process: NBC’s assurance statement validated 

that no material weaknesses were found in NBC’s payroll processes. However, 

MCC was not able to review test results for key controls over NBC’s payroll 

process, particularly in the context of MCC payroll, due to testing being 

conducted by a separate department. As such, MCC intends to request to review 

NBC’s payroll process test results in subsequent A-123 reviews. In a separate 

internal review of the part of the Personnel, Salary and Benefits process that takes 

place at MCC, MCC found some control weaknesses in the timekeeping system, 

in addition to some control weaknesses in the employee timesheet certification 

process. Timekeeping policies and procedures are currently under review to 

identify areas for improvement. 

(4) Testing of improper payments: MCC evaluated NBC’s compliance with the 

Improper Payments Act to validate that NBC maintains effective internal controls. 

NBC’s parent department, the Department of the Interior (DOI), determined that 

the department is at low risk for improper payments. A DOI audit reviewed NBC 

payments from three fiscal years and found the number of improper payments 

well below the dollar amount and frequency threshold. NBC also conducts annual 

SAS 70 audits and A-123 testing on improper payments. See the “Improper 

Payments Information Act of 2002” section below for more information regarding 

NBC improper payments data. 

(5) An evaluation of NBC’s controls on business processes performed on MCC’s 

behalf: MCC’s evaluation of NBC’s controls found that overall, the processes that 

NBC tested were supported by adequate internal controls. Specifically, NBC’s 

testing concluded that its Funds Management/Cash Receipts and Disbursements 

Controls are effective, and that Controls for Financial Reporting/CFO Reporting, 

including year-end closing entries, journal entries and the quarterly accrual 

process controls, are effective. 

Compliance with Laws and Regulations 

In addition to complying with FMFIA and OMB Circular A-123 requirements, MCC’s 

management is also responsible for ensuring MCC’s compliance with other relevant financial 

management laws and regulations. Principal among these are: 

` Prompt Payment Act 

` Debt Collection Improvement Act of 1996 

` Improper Payments Information Act of 2002 

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MILLENNIUM CHALLENGE CORPORATION

` Federal Information Security Management Act 

Prompt Payment Act 

The Prompt Payment Act (Public Law 100-496), as amended, requires federal agencies to pay 

vendors transacting business with them in a timely manner. With certain exceptions, the Act 

requires agencies to make payments within 30 days of the later of (1) receipt of properly 

prepared invoices or (2) the receipt of goods or services. For amounts owed and not paid 

within the specified payment period, agencies are required to pay interest on the amount owed 

at a rate established by the Department of the Treasury. 

An agency’s performance under the Act for any given period is most often measured by the 

percentage of payments made within the specified timeframes out of all payments subject to 

the Act’s provisions. In FY 2008, MCC’s “prompt payment” performance improved to 

99.326 percent, a 1.826 percent increase over FY 2007’s 97.5 percent. During the year, MCC 

paid $4,410 in late interest to vendors, a 37 percent decrease from FY 2007’s $6,960 interest. 

Also, during the year, NBC made 98.83 percent of MCC’s vendor payments via electronic 

transfer, a 0.07 percent decrease over FY 2007’s 98.9 percent. 

Debt Collection Improvement Act (DCIA) of 1996 

In 1996, Congress passed the DCIA in response to steady increases in the amount of 

delinquent debt owed to the Government. Under the Act, all federal agencies must refer past 

due, legally enforceable, non-tax debts that are more than 180 days delinquent to the 

Department of the Treasury’s Financial Management Service (FMS) for collection through the 

Treasury Offset Program. A debt is considered delinquent if it is 180 days past due and is 

legally enforceable. A debt is legally enforceable if there has been a final agency decision that 

the debt, in the amount stated, is due and there are no legal bars to collection action. 

During FY 2008, MCC referred no debts to the FMS for collection. 

Improper Payments Information Act (IPIA) of 2002 

An improper payment is any payment that should not have been made or was made in an 

incorrect amount. The President has made the development of management controls to detect 

and prevent improper payments a major focus of his Management Agenda. Congress, 

following the President’s lead, passed the Improper Payments Information Act of 2002 (Public 

Law 107-300). The Act requires agencies to review annually all programs and activities to 

identify those that are susceptible to improper payments, estimate the annual improper 

payments in susceptible programs and activities, and report the result of their improper 

payment reduction plans and activities. OMB Memorandum 03-13 defines a program as 

susceptible to improper payments if it has improper payments that exceed 2.5 percent and $10 

million of program spending. MCC can report excellent payment performance that was 

significantly below the OMB ceiling. 

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Federal Information Security Management Act (2008) 

MCC’s FY 2008 Federal Information Security management Act (FISMA) audit, issued in 

August 2008, discussed issues regarding MCC’s information security program, many of which 

MCC has already addressed, or is proactively taking steps to address. 

For example, in accordance with the FISMA, MCC has taken several steps towards improving 

the overall technical security: 

3⁄4 In March 2008, the Chief Information Security Office (CISO) conducted a risk 

assessment that included a review of the existing security architecture, and assessment 

of the MCC network vulnerability posture, and a review of current intrusion events on 

the network. Based on the results of this assessment, in May, the CIO reorganized the 

security oversight functions and the investment in security technologies, including 

vulnerability and intrusion detection systems. 

3⁄4 Since May 2008, the newly independent MCC CIO office team has been developing 

new security policy, engineering new security architecture, and is deploying new 

monitoring technologies to help measure and manage risk to the MCC networks. To 

date, the team has helped reduce the measured vulnerability level of MCC systems by 

eighty percent. As this program continues to mature, the CISO will complete the 

development of policies and technologies that will improve the stability and security 

of the MCC information technology infrastructure. 

3⁄4 MCC continues to complete the development of additional policies and technologies 

to bring MCC’s networks into full compliance with federal security regulations. 

Summary of Material Weaknesses, Non-Compliance, and Corrective Actions 

For FY 2008, MCC received one material weakness finding related to quality control over 

financial reporting. MCC reviewed and commented on its audit finding and provided current 

status and corrective actions for the future. The section below summarizes the audit finding 

and MCC’s corrective action plan. 

Quality Control over Financial Reporting (material weakness) 

MCC concurs with the recommendations. MCC has published, in its FMPP Manual on 

Financial Reporting, Financial Audits, and Performance and Accountability Reports, FMPP 

420, procedures regarding the preparation of the financial statements and footnote disclosures 

to ensure that financial statement items are reported accurately and are properly supported. 

MCC will revise and expand its written procedures to include procedures to perform detailed 

quality control reviews to include reviewing adjustments recorded by NBC to ensure each is 

valid and has been properly recorded. Further MCC will develop documentation that provides 

an “audit trail” supporting management review and approval. It is estimated MCC will 

complete these improvements no later than March 31, 2008. 

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MILLENNIUM CHALLENGE CORPORATION

MCC has made painstaking efforts to mitigate the apparent difficulties of its relationship with 

USAID in its capacity as a service provider. During the last fiscal year, MCC met with 

USAID on four different occasions to discuss among other things, the timing of delivery of its 

deliverables. The meetings took place between September 2007 and October 23, 2008. The 

most recent meeting, held in conjunction with the OIG demonstrated that while USAID will 

make an effort to meet the requirements of OMB Circular A-136 and MCC’s Memorandum 

of Understanding, their system of controls prevents them from ensuring MCC receives final 

deliverables timely. MCC will continue its efforts to work with USAID to eliminate this 

major source of financial statement errors and misstatements. 

MCC believes it has taken full ownership and responsibility for its financial statements. MCC 

converted its statements to comply with OMB Circular A-136 in advance of the OMB 

mandated date of September 30, 2007. In conjunction with this change, MCC assumed 

responsibility for the preparation of all of its footnote disclosures and associated exhibits. As 

stated above, MCC will be implementing measures to improve quality control in accordance 

with the auditor’s recommendations. 

Limitations of Financial Statements 

The principal financial statements have been prepared to report the financial position and 

results of MCC’s operations pursuant to the requirements of 31 U.S.C. 3515(b). While the 

statements have been prepared from the books and records of MCC in accordance with 

Generally Accepted Accounting Principles (GAAP) for federal entities and the formats 

promulgated by OMB and prescribed by the Federal Accounting Standards Advisory Board, 

the statements are in addition to the financial reports used to monitor and control budgetary 

resources that are prepared from the same books and records. 

The statements should be read with the understanding that they have been prepared for a 

component of the U.S. Government, a sovereign entity. 

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MILLENNIUM CHALLENGE CORPORATION

` 39 _

2. PERFORMANCE REPORT

In accordance with the Government Performance Results Act of 1993, MCC’s Board of 

Directors approved its Strategic Plan on November 8, 2005, covering FY 2006 to FY 2011. 

The Strategic Plan defines MCC’s mission, which is to reduce poverty by supporting 

sustainable, transformative economic growth in developing countries which create and 

maintain sound policy environments. 

In addition, the Strategic Plan defines four strategic goals for MCC: 

` Strategic Goal #1. Achieve sustainable, transformative development 

` Strategic Goal #2. Support development of a sound policy environment for economic 

growth and poverty reduction in the developing world 

` Strategic Goal #3. Advance international development assistance practice by continually 

improving MCC’s operational effectiveness 

` Strategic Goal #4. Build MCC’s capabilities to achieve its primary strategic goals. 

Consistent with the approach outlined in MCC’s Corporate Performance Plan, MCC continued 

tracking the achievement of each of the four strategic goals in FY 2008 through multiple 

corresponding objectives. For each objective, MCC maintains updated data for measuring 

input, output, and outcome measures, or indicators. 

Exhibit 13 maps the annual performance goals from the Corporate Performance Plan to 

MCC’s strategic goals. The following section details MCC’s Corporate Performance Plan 

objectives, methods for verifying data, and approach to setting targets and measuring progress. 

The remaining portion of the performance section is dedicated to reporting the detailed results 

for each of MCC’s annual performance objectives for 2008, including data from previous 

years, when available. 
MILLENNIUM CHALLENGE CORPORATION

Exhibit 13: MCC's Corporate Performance Plan 

GRAPHIC Millennium (MCC) PAR Report 10/06

Reduce poverty by supporting sustainable, transformative 

Reduce poverty by supporting sustainable, transformative 

economic growth in developing countries which create and 

economic growth in developing countries which create and 

maintain sound policy environments 

maintain sound policy environments 

Strategic 

Goals Outcomes Outputs 

Economic Growth Economic Growth

Poverty Reduction Poverty Reduction

Sustainability Sustainability

Economic Growth Economic Growth

Poverty Reduction Poverty Reduction

Sustainability Sustainability

Transformative Impact Transformative Impact

Policy Performance Policy Performance

Recognition 

and Support

Recognition 

and Support

Mission

Achieve sustainable transformative development

Achieve sustainable transformative development

Support development of sound policy environment for economic growth and poverty reduction in the developing world

Support development of sound policy environment for economic growth and poverty reduction in the developing world

Advance international development assistance practice by continually improving MCC's operational effectiveness

Advance international development assistance practice by continually improving MCC's operational effectiveness

Build MCC's capabilities to achieve its primary strategic goals

Build MCC's capabilities to achieve its primary strategic goals

Quality 

Compact Programs

Quality 

Compact Programs

` 40 _
PERFORMANCE INDICATOR FRAMEWORK

MCC is designed to support innovative strategies and ensure accountability with measurable 

results. MCC integrates monitoring and evaluating into each compact so that progress can be 

measured against targets agreed to at the start of the program. However, due to the nature of 

international development work, the inherent challenge of obtaining current data, and the impact 

of external factors, performance is not always quantifiable or immediately measurable. Many of 

MCC’s partner countries also have limited capacity to measure outcome or output results. In 

addition, compacts are normally implemented over a 5-year period, making outcome data 

available only well into the implementation period. Due in part to these factors, MCC again did 

not set targets for all indicators this year, particularly for many of the objectives under Strategic 

Goal 2 (see MCC’s policy on performance targets below for details on MCC’s approach). 

Accordingly, most data comes from reliable external sources, including other donor agencies or 

independent evaluations contracted for by the candidate countries during the compact 

implementation process. Where data is not available for select indicators, MCC is developing 

and conducting surveys by independent third parties to assess its performance. 

FY 2009 Improvements to the Performance Framework 

Going forward in FY 2009, MCC will continue measuring for results under the same four 

strategic goals, but with further refinements to the objectives and indicators. The updates to the 

objectives (1) reflect a closer alignment to MCC’s four strategic goals; (2) are more directly 

attributable to MCC, or within MCC’s control to achieve; and (3) will be measureable and 

achievable within the fiscal year. For example, Strategic Goal #1 objectives will measure the 

inputs and outputs across compact program sectors—roads, irrigation, agriculture, and rural 

development. This new approach will simplify the data collection process so that performance 

data can be readily obtained, measured, analyzed and reported. 

Data Verification and Validation 

MCC has developed improved tools and increased transparency for economic analysis, including 

joint efforts with newly eligible countries to do a growth constraint analysis as a framework for 

consultation on program development, enhanced beneficiary analysis, and improved sensitivity 

analysis of expected returns. For performance results that are based on data that MCC collects, 

MCC has taken steps to ensure that information from MCA reports is accurate. MCAs are 

required to submit comprehensive quarterly reports that form the basis for annual performance 

evaluations on compact-specific indicators. MCC reviews these reports for accuracy to ensure 

that the final performance results reported in the PAR are accurate. 

Since FY 2007, all Threshold programs undergo independent program evaluations. MCC’s 

Results Reporting Tables (RRT) measure Threshold program quarterly progress on a series of 

program indicators. MCC initiated this process and coordinates its efforts closely with USAID, 

which submits the RRTs along with quarterly narrative reports. The RRT indicators typically 

 

 

 

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MILLENNIUM CHALLENGE CORPORATION

originate either from the Threshold Country Plan or from a list of performance benchmarks that 

MCC, USAID, and the Threshold country government work together to develop. 

MCC Policy on Performance Targets 

MCC’s policy on setting performance targets addresses three related issues: which indicators 

should include targets, how numerical values should be set, and how frequently performance 

against targets should be assessed. It is MCC’s policy that the performance indicators selected 

for targeting are important, measurable, and to the extent possible subject to MCC’s control. 

Compact-specific target values are established according to what would be required to achieve 

the economic returns or benefits envisaged at the time the project was presented for approval by 

the MCC Board of Directors. Therefore, the target values are closely linked to the original 

justification of the projects. 

The frequency of performance assessment against output targets is established on a case-by-case 

basis, dictated by the nature of the program. For example, infrastructure projects that do not 

start construction for a year do not have targets for the first year. Agricultural projects involving 

crops that will mature in year three will have targets on yields starting in year three. Assessment 

against compact-specific outcome targets will not normally take place until later in the life cycle 

of each compact because their targets assume the completion of most compact activities. 

Supplemental Measures 

Because MCC’s mission is to be transformative, a number of supplemental measures of 

economic growth, poverty reduction, and policy reform are included in the Corporate 

Performance Plan. MCC will measure trends in 17 supplemental indicators, but it will not set 

specific targets for these indicators or otherwise treat them as formal outcome indicators. These 

measures do not strictly meet the “A” in the SMART criteria because they are not directly 

attributable to MCC interventions. For example, while MCC can point to specific examples 

where the “MCC effect” has led to policy reform measures, MCC cannot claim credit for 

country performance on the supplemental policy indicators measures in this plan. Similarly, 

while MCC and partner countries have jointly set targeted economic growth and poverty 

reduction targets in each MCC compact, MCC will not be solely responsible for nation-wide 

improvements in per capita income growth, poverty rate reduction, the Human Development 

Index, or the Institutional Investor credit rating. 

External Factors Affecting Performance 

Various external factors affected MCC’s ability to reach its performance goals for FY 2008. 

These factors, consistent with those identified in the Corporate Performance Plan, included: 

` Economic and political environment. Stable economic and political environments in 

partner countries are necessary for these countries to pursue MCC programs. 

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MILLENNIUM CHALLENGE CORPORATION

` Policy reform. MCC compact, threshold, and candidate9

countries must undertake 

significant policy reforms that may face significant domestic opposition. Compact-eligible 

countries at a minimum must avoid backsliding on key policy issues. 

` Compact-eligible country capacity. Compact-eligible countries must adequately engage 

in all aspects of compact development and implementation with sufficient resources and 

human and political capital. Inadequacies in administrative capability, technical expertise, 

fiscal and procurement capacity, and other areas can impact a country’s performance. 

` Congress. Congress authorized MCC in 2004, and as an entirely grant-making institution 

MCC, depends on congressional appropriations to fund its compacts and Threshold 

programs. 

` Partner U.S. Government agencies. MCC must maintain the support of agencies that 

serve on the MCC Board, as well as OMB and the National Security Council, on key policy 

and operational issues. MCC also depends on assistance from a number of agencies in the 

implementation of MCC programs. 

` Non-Governmental Organizations. The support of key U.S. NGOs is essential to MCC 

because NGOs provide (a) an independent source of information about the countries with 

which MCC works, and (b) can provide independent evaluation and validation of specific 

MCC programs. 

 ` 43 _

 

9

Candidate countries are those countries that meet per capita income levels set by MCC. 
MILLENNIUM CHALLENGE CORPORATION

The following objectives constitute Strategic Goal #1: 

1.1 Generate economic growth and reduce poverty in compact countries 

1.2 Achieve sustainability of successful projects in compact countries 

1.3 Improve compact countries’ capacity to meet basic human needs 

1.4 Improve compact countries’ GDP growth 

1.5 Decrease percentage of population living on less than $1 and $2 per day 

1.6 Improve compact-eligible and threshold countries’ average country credit ratings 

1.7 Improve annual percentage of compact targets met on time 

1.8 Increase the number of Conditions Precedents (CPs) met on time 

MCC PERFORMANCE IN FY 2008 

STRATEGIC GOAL #1 

Achieve Sustainable, Transformative Development 

The MCC Strategic Plan defines the expected outcome for this strategic goal to be a significant 

reduction in poverty through sustainable, material economic growth for a significant number of 

people. MCC has defined a number of outcome, output, and input measures to assess progress 

toward this strategic goal. 

MCC’s performance against each of its eight objectives under Strategic Goal #1 is discussed in 

the following pages. Each objective is measured by a specific indicator that demonstrates 

whether progress towards accomplishing that objective is being achieved. Four of the eight 

objectives under Strategic Goal #1 are measured by supplemental indicators, and as such, do not 

have established targets, since progress in these areas is largely outside of MCC’s control. 

Performance targets and baselines from prior years are included, as applicable, to demonstrate 

progress through the years. 

Objective 1.1: Generate Economic Growth and Reduce Poverty in Compact Countries___

Outcome Indicator: Compact-Specific Economic Growth and Poverty Reduction

Creating compacts that increase economic growth and reduce poverty is MCC’s most important 

goal. Successful projects in compact countries will produce economic growth and reduce 

poverty for the populations affected by the compact. Baseline years for this measure vary by 

country and are determined by the implementation schedule of the compact. The first round of 

results for this indicator is not expected until 2009, as was stated in the fiscal year FY 2007 – 

2008 Performance Plan. Exhibit 14 below details the baselines set per country. 

Exhibit 14: Generate Economic Growth and Reduce Poverty in Compact Countries 

Compact 

Country 

Income Indicator (varies 

by country) 

Baseline 

Year 

Value* Source 

Armenia Change in real income from 

agriculture in rural areas 

(index) 

2005 100% National Statistical 

Service, Integrated 

Survey of Living 

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MILLENNIUM CHALLENGE CORPORATION

Standards 

Benin Average household income 

in land and finance areas 

2006 1457.07 INSAE (2008) 

EMICoV household 

survey 

Cape Verde Increase in annual income in 

US$ 

2005 $0 M MCA Cape Verde 

El Salvador 

 

Annual per capita income of 

program beneficiaries in the 

Northern Zone (treatment 

group) 

2004 $720 Dirección General 

de Estadistica y 

Censo, Encuesta de 

Hogares de 

Propositos Multiples 

Annual per capita income of 

program beneficiaries in the 

Northern Zone (control 

group) 

2004 $720 Direccion General 

de Estadistica y 

Censo, Encuesta de 

Hogares de 

Propositos Multiples 

Georgia Incremental increase in 

household incomes from 

compact interventions 

2007 $0 Millennium 

Challenge Georgia 

Ghana 

 

 

 

Crop income per household 

(Northern Zone) in US$ 

2006 $700 Based on data 

provided by the 

Ministry of 

Agriculture and the 

MASDAR study of a 

project in the Afram 

Plains District 

Crop income per household 

(Afram Basin Zone - East) in 

US$ 

2006 $820 

Crop income (Afram Basin 

Zone - West) in US$ 

2006 $540 

Crop income per household 

(Southern Zone) in US$ 

2006 $1,860 

Honduras Increase in annual income of 

beneficiaries in US$ 

2005 $0 M MCA-Honduras 

Madagascar Increase in household 

income in zones 

2005 $698 Estimates from the 

household survey 

Mali 

 

 

Total revenue of firms 

servicing the airport 

2008 TBD Airport survey to be 

conducted in FY09 

Total receipts of hotels and 

restaurants in Bamako 

2007 $133 M Tourism Office of 

Mali (OMATHO) 

Gross value-added of firms 

in the industrial park 

2007 $0 M Project removed 

from compact 

Real income per capita from 

irrigated agricultural 

production 

2008 TBD Household Baseline 

Survey 2008-09 

Nicaragua Total expected income gains 

(US$ millions) 

2007 Data not 

yet 

available

FIDEG household 

survey of 

beneficiary survey 

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MILLENNIUM CHALLENGE CORPORATION

Vanuatu Average cash income per 

capita of residents living 

within the catchment area of 

infrastructure sub-projects - 

disaggregated by Efate and 

Santo 

2006 $ 1291 

(Efate); 

$2122 

(Santo) 

Vanuatu Household 

Income and 

Expenditure Survey 

*The baseline value for compact specific GDP is in national currency units. The baseline value 

for the poverty headcount ration is in percent. 

Objective 1.2: Achieve Sustainable Projects in Compact Countries____________________

Outcome Indicator: Sustainability 

As reported in last year’s PAR, MCC was in the process of defining an indicator to accurately 

measure the sustainability of projects. MCC intends for this indicator to measure the extent to 

which the impact of successful programs or compact activities has continued after a compact has 

been completed and all funding has been disbursed. However, because no compact has been 

completed and no funding for compacts has been fully disbursed yet, baselines, targets and a 

reporting framework for this indicator were not precisely identified for fiscal year 2008. Thus, 

the rating is not applicable. 

Objective 1.3: Countries Improve Their Capacity to Meet Basic Human Needs__________

Supplemental Indicator: United Nations Human Development Index (HDI)

This is a supplemental indicator, and as such, it does not have an established target. The United 

Nations Human Development Index (HDI) measures a country’s achievements in three 

dimensions of human development—life expectancy at birth; adult literacy rate and the 

combined primary, secondary, and tertiary gross school enrollment ratio; and GDP per capita. 

The average HDI score of countries that are eligible for MCC assistance (either compact or 

threshold) gives a broad indication of their level of development. MCC will monitor the average 

HDI score of countries eligible for compact or threshold assistance to see whether the level of 

human development is increasing following MCC selection and delivery of assistance. Relative 

changes in average HDI scores of the three country groups (compact, threshold, and noneligible) will be monitored. 

Countries included in the HDI are classified into one of three clusters of achievement in human 

development: high human development (with an HDI of 0.800 or above); medium human 

development (HDI of 0.500–0.799); and low human development (HDI of less than 0.500). 

Exhibit 15 details HDI scores by country groups. 

Exhibit 15: Countries Improve Their Capacity to Meet Basic Human Needs 

Date Actual Comments 

2006 0.548 for non-eligible countries; 

0.536 for threshold countries; 

0.593 for compact countries 

Baseline data is from the 2006 Human 

Development Report (HDR), which uses 2004 

country data. The baseline covers countries 

that were compact-eligible or Thresholdeligible candidates in FY 2004 and FY 2005. 

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Date Actual Comments 

2007 0.737 for non-eligible countries; 

0.571 for threshold countries; 

0.608 for compact countries 

The 2007/2008 HDR uses 2005 country data. 

2008 The most current HDR covers both 2007 and 2008. The next HDR will be 

available at the end of 2009. 

Objective 1.4: Improve GDP Growth________________________________________

Supplemental Indicator: GDP Per Capita Growth Rate 

This is a supplemental indicator, and as such, it does not have an established target. The average 

GDP growth per capita of countries that are eligible for MCC assistance (either compact or 

threshold) gives a broad indication of whether their economic performance is improving and 

creating conditions for sustainable poverty reduction. MCC will monitor year-on-year changes 

in the average GDP growth per capita of countries eligible for compact or threshold assistance to 

see how their economies are performing following MCC selection and delivery of assistance. 

In 2007, MCC made the decision to use the International Monetary Fund (IMF) World 

Economic Outlook (WEO) database instead of the World Bank Development Indicators (WDI) 

database, which had been used in the prior year. This decision was based on a few key factors. 

First, the IMF produces its database through biannual data collection, resulting in the production 

of timely, accurate national income data twice a year. Conversely, the WDI produces its 

statistics once a year in April and does not always have the most recent data to publish. Further, 

national income data from the WEO database is used in other indicator analysis in this report 

(e.g., fiscal policy). 

Based on this decision, MCC recalculated 2004 - 2006 figures for the fiscal year 2008 report, 

using WEO data. This allows for more accurate comparison of per capita growth rates across 

years. Exhibit 16 below details annual GDP per capita growth rates by country groups. 

Exhibit 16: Improve GDP Growth 

Date Actual Comments 

2004 Non-eligible countries: 4.64% 

Threshold countries: 2.29% 

Compact countries: 3.68% 

These are the baseline figures (per capita growth 

rates in 2004). 

2005 Non-eligible countries: 4.44% 

Threshold countries: 2.15% 

Compact countries: 4.06% 

Non-eligible countries had a decrease of 0.20% in 

GDP per capita annual growth rate from 2004 to 

2005. 

Threshold countries had a decrease of 0.14% in GDP 

per capita annual growth rate from 2004 to 2005. 

Compact countries had an increase of 0.38% in GDP 

per capita annual growth rate from 2004 to 2005. 

2006 Non-eligible countries: 4.30% 

Threshold countries: 3.16% 

Compact countries: 4.65% 

Non-eligible countries had a decrease of 0.34% in 

GDP per capita annual growth rate from 2004 to 

2006. 

Threshold countries had an increase of 0.86% in 

GDP per capita annual growth rate from 2004 to 

2006. 

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MILLENNIUM CHALLENGE CORPORATION

Date Actual Comments 

Compact countries had an increase of 0.97% in GDP 

per capita annual growth rate from 2004 to 2006. 

2007 Non-eligible countries: 4.62% 

Threshold countries: 5.42% 

Compact countries: 4.46% 

Non-eligible countries had a decrease of 0.02% in 

GDP per capita annual growth rate from 2004 to 

2007. 

Threshold countries had an increase of 3.12% in 

GDP per capita annual growth rate from 2004 to 2007 

driven primarily by a significant increase in growth 

(from negative figures in 2004 and 2005 to 17%) in 

2007 in Timor Leste. 

Compact countries had an increase of .77% in GDP 

per capita annual growth rate from 2004 to 2007. 

2008 NA Data available in 2009 

Objective 1.5: Decrease Percent Living on Less Than $1 and $2 Per Day_______________ 

Supplemental Indicator: Percent of Population Living below $1 and $2 per Day 

This is a supplemental indicator, and as such, it does not have an established target. Data 

reported in 2007 sets the baseline for this indicator. MCC will monitor progress on this indicator 

on an annual basis. Changes in this indicator are a measure of poverty reduction. Compactspecific indicators outlined in Objective 1.1 are specific to those households directly impacted 

by MCC projects. This metric provides supplementary data for MCC to assess trends in poverty 

reduction at a national level. Because MCC programs do not have a national scope, targets are 

not set. Exhibit 17 below details, by country, the percent of population living below $1 and $2 

per day. 

Exhibit 17: Decrease Percent Living on Less Than $1 and $2 Per Day 

Date Country $1 per day (actual) $2 per day (actual) 

2007 Armenia 2% (2003) 31.07% (2003) 

Benin 30.9% (2003) 73.74% (2003) 

Bolivia 23.2% (2002) 42.18% (2002) 

Burkina Faso 27.19% (2003) 71.77% (2003) 

Cape Verde NA NA 

El Salvador 19.04% (2002) 40.55% (2002) 

Georgia 6.514% (2003) 25.29% (2003) 

Ghana 45.05% (1999) 75.01% (1999) 

Honduras 14.9% (2003) 35.71% (2003) 

Jordan 2% (2003) 6.95% (2003) 

Lesotho 36.4% (1995) 56.03% (1995) 

Madagascar 61.03% (2001) 85.1% (2001) 

Mali 36.13% (2001) 72.07% (2001) 

Moldova 2% (2003) 20.75% (2003) 

Mongolia 10.82% (2002) 44.58% (2002) 

Morocco 2% (1999) 14.33% (1999) 

Mozambique 36.18% (2002) 74.14% (2002) 

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MILLENNIUM CHALLENGE CORPORATION

Date Country $1 per day (actual) $2 per day (actual) 

Namibia 34.93% (1993) 55.78% (1993) 

Nicaragua 45.12% (2001) 79.93% (2001) 

Senegal 17.01% (2001) 56.17% (2001) 

Sri Lanka 5.55% (2002) 41.59% (2002) 

Tanzania 57.82% (2000) 89.93% (2000) 

Timor-Leste NA NA 

Ukraine 2% (2003) 4.94% (2003) 

Vanuatu NA NA 

2008 According to the World Bank’s 2007 World Development Indicators, some data 

have been slightly revised without any change to survey years. These revisions 

are very minor and therefore are not reflected here. No country data have been 

updated since the 2007 report. 

Objective 1.6: Compact Eligible and Threshold Countries Receive Higher Average______

Country Credit Ratings

Supplemental Indicator: Institutional Investor Country Credit Rating* 

This is a supplemental indicator, and as such, it does not have an established target. This 

indicator demonstrates the extent to which a country is making progress in attracting private 

investment. Moving countries toward “graduation” from donor funding to private sector funding 

of development is one of the key goals of the MCC model of assistance. It is expected that 

performance on this indicator will improve more significantly for threshold and compact eligible 

countries than for the remaining MCA candidate countries. In 2008, twenty-five countries were 

eligible for MCA Compact assistance. Exhibit 18 shows a representation of Institutional 

Investor’s country credit rating for MCC compact, threshold, and candidate countries. This 

indicator is measured in a scale of 0 to 100 points. A score of 100 indicates the most 

creditworthiness. 

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MILLENNIUM CHALLENGE CORPORATION

Exhibit 18: Compact Eligible and Threshold Countries Receive Higher Average 

Country Credit Ratings 

*Data for 2005 unavailable 

Objective 1.7: Improve Annual Percentage of Compact Targets Met on Time__________

Output Indicator: Quality of Compacts in Implementation 

As of September 2008, a total of 11 compact countries have an obligation to report on targets. 

This report does not include five countries that just achieved Entry into Force in September 2008 

-- Lesotho, Mongolia, Morocco, Mozambique, and Tanzania. These five countries do not have 

target requirements yet, as they have just begun implementation. 

The indicators in the following table provide the percentage of Outcome, Output and Process 

targets achieved in each country. Seventy-five out of 203 targets at the Outcome, Output, and 

Process levels were achieved—an overall achievement rate of 37 percent. Fifty-nine targets 

have not been reported on yet, but data is expected to be available by the end of December 2008. 

A target is determined as being met if the actual reported is within a ten percent margin of the 

target for numeric indicators, or within 30 days of a date indicator. Process indicators are 

frequently in date format. It is also worth noting that some of the targets were achieved by a 

wide margin. For example, they exceeded the target by a substantial amount. That is not 

reflected here because the PAR indicator is nominal in scale; the indicator was either met or not 

met. Exhibit 19 lists outcomes, outputs, and processes by country. 

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MILLENNIUM CHALLENGE CORPORATION

Exhibit 19: Improve Annual Percentage of Compact Targets Met on Time 

Country % Targets Achieved in FY08 Comments 

Outcome Output Process

Armenia 64 50 33 8 outcome, 3 output, and 1 process 

indicator have not been reported on 

yet, as they were due 9/30/2008 

Georgia 40 100 NA 

El Salvador 0 50 20 3 outcome and 1 process indicator 

have not been reported on yet, as they 

were due 9/30/2008 

Honduras 33 17 NA 2 outcome and 3 output indicator have 

not been reported on as they were 

due 9/30/2008 

Nicaragua 75 54 50 

Vanuatu NA 0 NA 2 of the indicators were for subprojects that were eliminated from the 

Compact; the remaining 3 indicators 

were for sub-projects that will still be 

done, but underwent major 

restructuring in FY08 

Benin 25 18 42 

Mali NA NA 8 

Ghana NA NA 51 The process indicators are not yet part 

of the formal M&E Plan, but the 

process is underway 

Cape Verde 0 25 50 32 output and 6 process indicators 

have not been reported on yet, as they 

were due 9/30/2008 

Madagascar 56 NA 67 

Total 47 35 31 

Overall 

Achieved 

38 

Objective 1.8: Increase the Conditions Precedents (CPs) Met on Time________________

Input Indicator: Compact Execution Quality 

 ` 51 _

This indicator measures the percentage of Conditions Precedents (CPs) that were met on time. 

CPs are actions that a compact country needs to take before MCC will release a disbursement of 

funds. CPs can include such actions as appointing key personnel, completing feasibility studies 

or environmental impact assessments, or reaching specific implementation milestones. The low 

percentage of CPs deferred or waived demonstrates that MCA countries are taking necessary 

actions to ensure proper implementation of their compacts. Exhibit 20 shows the percentage of 

CPs met on time for fiscal years 2006, 2007, and 2008. 
MILLENNIUM CHALLENGE CORPORATION

Exhibit 20: Increase the Conditions Precedents (CPs) Met on Time 

Date Target Actual Comments 

2006 

(Baseline) 

NA 73% met 

on time 

For 13 disbursements made during FY 2006, 250 

CPs were met on time and 92 CPs were deferred. 

None were waived. 

2007 Meet 75% 

on time 

77% met 

on time 

For FY 2007, 1,201 CPs were scheduled to be 

reported during this period and 77% (915) were met 

on time. 

2008 Meet 75% 

on time 

93% met 

on time 

For FY 2008, 1,417 CPs were scheduled to be 

reported during this period and 93% (1,315) were met 

on time. 

Rating Target met 

The percent of CPs met on time for each compact country during fiscal year 2008 are outlined in 

Exhibit 21 below. 

Exhibit 21: Conditions Precedents Met 

Compact Country CPs 

Reported for 

FY 2008 

CPs Met % of CPs Met 

Armenia 315 305 97

Benin 212 189 89

Burkina Faso 0 NA NA

Cape Verde 178 146 82

El Salvador 36 36 100

Georgia 194 194 100

Ghana 115 88 76

Honduras 111 111 100

Lesotho 8 4 50

Madagascar 40 40 100

Mali 69 69 100

Mongolia 0 NA NA

Morocco 31 24 77

Mozambique 0 NA NA

Namibia 0 NA NA

Nicaragua 108 108 100

Tanzania 0 NA NA

Vanuatu 86 86 100

Total 1,417 1,314 93

Note: This indicator counts CPs associated with compact funding, including CIF funds. 

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MILLENNIUM CHALLENGE CORPORATION

STRATEGIC GOAL #2 

Support Development of a Sound Policy Environment for Economic Growth and 

Poverty Reduction in the Developing World 

The following objectives constitute Strategic Goal #2: 

2.1 Improve policy performance in ruling justly 

2.2 Improve policy performance in investing in people 

2.3 Improve policy performance in economic freedom 

The MCC Strategic Plan defines the expected outcome for this strategic goal to be the creation 

of incentives for developing countries to adopt sound policies by making available substantial 

benefits to countries that rule justly, invest in their people, and encourage economic freedom. 

MCC looks at several elements in choosing selection indicators and uses indices of performance 

developed by independent sources. These indicators are not goals in themselves; rather they 

measure policies that are necessary conditions for a country to achieve sustainable economic 

growth. 

Due to the policy-reform nature of the objectives under this strategic goal and the fact that 

progress in these areas is largely outside of MCC’s control, all the indicators identified under 

this strategic goal are supplemental indicators, meaning they do not strictly meet the “A” in the 

SMART criteria in that they are not directly attributable to MCC interventions, as discussed in 

more detail in the previous section. Although MCC cannot claim credit for country performance 

along these indicators, they are included because they are reflective of overall progress in partner 

countries and therefore directly relevant to MCC’s programs. Therefore, while MCC will 

measure trends in these supplemental indicators, MCC will not set specific targets for these 

indicators or otherwise treat them as formal outcome measures. 

While the performance objectives for Strategic Goal #2 are considered supplemental and do not 

have formal targets or a performance rating, MCC expects the performance on these indicators 

to improve more significantly for threshold and compact eligible countries than for the 

remaining candidate countries. 

Tied closely to Strategic Goal #2 is the Threshold program, for which MCC has identified 

several formal outcome measures. The Threshold program assists countries in becoming eligible 

for compact assistance by helping countries improve their performance on the policy indicators 

under Goal #2. Therefore, results for this program are also reported in this section. USAID 

administers all of the existing Threshold programs on behalf of MCC, providing the benefit of 

USAID’s technical expertise, development experience, field presence, and administrative 

infrastructure. 

Threshold program activities include technical assistance, strategic planning, legislative 

development, and control of corruption. MCC’s threshold program strategy is to: 

` Use a short timeframe. Unlike many other policy reform programs, the Threshold 

program lasts only for a short timeframe (generally two years). This has been shown to be 

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MILLENNIUM CHALLENGE CORPORATION

a motivation for the countries to act quickly and smartly, taking advantage of MCC 

resources to accelerate their reforms. 

` Create a pipeline for compacts. The Threshold program provides a critical pipeline of 

countries for MCC’s compact program, establishing the countries’ relationship with MCC 

and enhancing MCC’s understanding of the specific countries and their challenges. Since 

MCC’s inception, seven threshold countries have already been selected for compact 

eligibility, giving MCC and the countries an opportunity to work in partnership on policy 

reforms and establishing an institutional relationship prior to engaging on much larger 

compact programs. 

As a result of the Threshold program’s focus, it has a separate set of performance measures in 

addition to the objectives set under Strategic Goal #2 in MCC’s FY 2007–2008 Performance 

Plan. Each country has a different set of objectives based on its particular program. Details of 

these performance goals and results can be found in Section 2 of this report. 

How MCC Measures Policy Reform 

MCC facilitated policy reform by two primary means: the “MCC effect” and the Threshold 

program. The “MCC effect” uses the possibility of large-scale assistance to encourage countries 

to adopt the reforms needed to become eligible for an MCC compact. The Threshold program 

assists countries in becoming eligible for compact assistance by improving their performance in 

the three policy areas. Countries are selected by the MCC Board to participate in the Threshold 

program based on their demonstrated commitment to improving policy performance on MCA 

selection criteria areas. 

In FY 2008, MCC signed six Threshold agreements, with São Tomé and Principe, Kyrgyz 

Republic, Niger, Peru, Rwanda, and Albania II. All FY 2008 programs include independent 

program evaluations that are beginning to provide MCC and the development community 

lessons learned and information on the impact of Threshold program activities. 

Calculating Rates of Change for Policy Performance Variables

To calculate rates of change for different indicators and comparison groups, MCC has made a 

number of important assumptions. MCC chose to calculate proportional changes in the median 

performance of individual peer groups for each income level classification. The Low Income 

Countries (LIC) are divided into compact-eligible countries, threshold countries, and the 

remaining candidate countries.10 

MCC first measured absolute changes in median performance on 13 indicators.11 This 

calculation uses 2002 as the base year (in most cases) and the most recent year for which data 

 

10The Remaining Candidate Countries category includes all countries that satisfy the income criteria for MCA 

candidacy, including those that are statutorily prohibited from receiving U.S. assistance. MCC includes the 

statutorily prohibited countries because they are currently included in the median calculations used to determine 

eligibility for MCA assistance. The basis for determining whether countries satisfy the income criteria comes from 

the most recently available data on Gross National Income (GNI) per capita for 2003. 

11The MCC currently uses 17 indicators in its selection process, however only 13 are discussed in this exercise. The 

indicators omitted include: “Land Rights and Access”, which was used for the first time in the FY 2008 selection 

process; “Natural Resource Management”, which was used for the first time in the FY 2008 selection process; 

“Trade Policy”, for which the underlying tariff rate data come from varying years and which may not reflect changes 

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MILLENNIUM CHALLENGE CORPORATION

are available as the end year.12 MCC then divided the absolute change in a particular peer 

group’s median performance by the “data range” in the base year. MCC defines the data range 

as the difference between the 90th percentile and the 10th percentile for all countries classified 

as LIC or Low Middle Income Countries (LMIC) in 2003. 

There are a number of important caveats regarding these calculations. MCC divides these 

caveats into five categories: sample sizes, time lags, inferences based on median changes, and 

categorical classifications. 

General Caveats 

` Sample Sizes. For some of the indicators, data are missing for a non-trivial number of 

countries. This can significantly reduce the sample of countries for which comparisons can 

be made across any specific time period.13 It is possible that these reduced sample sizes 

may introduce bias into the calculations, because rapidly improving countries may be more 

likely or less likely to have more complete data series, and therefore may be more likely or 

less likely to be included in our calculations. 

In addition, when countries are separated into different categories, e.g., threshold, compact, 

and other, the sample of countries for which the necessary data points are available is quite 

small. Across indicators, the composition of the sample for these different categories may 

vary for any given time period. While there is no reason to assume that this will introduce 

any systematic bias, it may introduce noise into the measure that will limit MCC’s ability to 

draw inferences from observed changes. 

Within the small samples for which median performance is being calculated there are also 

very large outliers present for some indicators. The median is used rather than the mean in 

order to mitigate the impact of outliers, but outliers can still tend to make the rate of change 

very noisy from year to year. For this reason, great caution should be used in drawing 

inferences about the performance of categories of countries (e.g., threshold, compact, or 

other candidate countries) from year to year. 

For the purposes of this exercise, data points are considered missing either because no data 

have been reported for a given year or because third-party providers have reported data that 

has not been updated, e.g., they have reported the same value for a given indicator in 

consecutive years without updating the information.14

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made in the time period of interest; “Primary Education Expenditures”, which relied on data from two distinct 

sources; and “Inflation”, for which many changes will be driven by exogenous factors. MCC has now combined 

Days to Start a Business and Cost of Starting a Business into a single Business Start-Up indicator, but for the 

purposes of this report, the data for the two indicators is reported separately. 

122002 is used as the base year due to the fact that the MCA selection criteria were first announced in 2002 and since 

much of the data used in the initial selection rounds (FY 2004 and FY 2005) were from 2002. 

13The sample size is further constrained by a rule that requires a country to have data for both the base year and all

end years in order to remain in the sample considered for the calculation (for this exercise, a country must have data 

for 202, 2005, 2006, and 2007 to be included in the calculation). This rule was created to eliminate the kind of bias 

that would emerge if, for example, one country that was a lower performer, had data only in the base year and 

another country that was a higher performer had data only in the end year. The change in median would therefore 

be skewed not by country performance but by the difference in composition of the base year and end year groups. 

14There are some cases in which data values from different years have been pooled to construct values for a given 

year. Where this is applicable, this has been noted in the text. 
MILLENNIUM CHALLENGE CORPORATION

` Time Lags. In most cases, there is a significant lag between changes in policy performance 

and changes in indicator performance. Reporting periods also vary by indicator, rendering 

rate-of-reform comparisons across indicators and “categorical rates of reform” highly 

problematic. The data available in a given year for a given indicator may also reflect a 

range of reporting periods. For example, some sub-indicators, which jointly constitute the 

indicators used in the selection process, report on a calendar year; others report on 12-

month periods that vary from the calendar year; and others cover 2- or 3-year periods. 

` Inferences Based on Changes in the Median. The measure of reform reflects changes in 

the medians for individual indicators. This measure necessarily gives a limited picture of 

how the full distribution of values changes over time. The median only provides 

information about where the two countries in the middle of each distribution fall. It does 

not provide any information about the mean or the rest of the distribution, which might be 

compressing, expanding, or skewing in either direction. Medians are also highly sensitive 

to the composition of the group being evaluated. The presence or absence of just one 

country can potentially have dramatic effects on the median score; this potential is greater 

in smaller sample sizes. Any inferences regarding the change in performance over time for 

any given indicator should keep the nature of MCC’s chosen summary statistic well in 

mind. 

` Categorical Classifications. For the purposes of this exercise, countries were divided into 

different categories according to their status (e.g., compact eligible, threshold, and other) as 

established by the FY 2005 selection process for LICs and the FY 2006 selection process 

for LMICs. 

Differences from the FY08 Measures 

When comparing FY 2008 performance with the reported performance in FY 2007, it is 

important to note the following critical factor: 

` Prior Year Data Revisions. Many of the indicator sources have been revised from prior 

year data, upon the release of data updates. Because of this, the median estimates and rate 

of change estimates reported for 2006 and 2007 may be slightly different than they were 

reported in the FY 2007 report. MCC believes it is preferable to reflect the revised accurate 

data whenever possible. 

MCC’s performance against its objectives for Strategic Goal #2 is outlined in the exhibits below. 

Most data is on a one year lag. For all objectives, the indicators were selected as a proxy for 

quality of policy environment. 

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MILLENNIUM CHALLENGE CORPORATION

Objective 2.1: Improve Policy Performance in Ruling Justly 

Supplemental Indicator: Political Rights__________________________________________

The Political Rights indicator rates countries on the prevalence of free and fair elections of 

officials; the ability of citizens to form political parties that may compete fairly in elections; 

freedom from domination by the military, foreign powers, totalitarian parties, religious 

hierarchies and economic oligarchies; and political rights of minority groups. This indicator 

evaluates countries on a 40-point scale, with 40 representing “most free” and 0 representing 

“least free.” Exhibit 22 details this indicator’s performance, including for prior years, as 

applicable. 

Exhibit 22: Political Rights 

Period (Year) Actual–Compact Eligible Comments 

2003 27 Actual data is from 2002. 

2006 27 Actual data is from 2005 (1-year time lag). 

The political rights indicator rate of change 

for 2003-2006 is 0%. 

2007 28 Actual data from 2006 (1-year lag). 

The political rights indicator rate of change 

for 2003–2007 is 3.39%. 

2008 28 Actual data from 2007 (1-year lag). 

The political rights indicator rate of change 

for 2003–2008 is 3.39%. 

Period (Year) Actual–Threshold Comments 

2003 21 Actual data is from 2002. 

2006 24 Actual data is from 2005. The political 

rights indicator rate of change for 2003–

2006 is 10.17%. 

2007 25 Actual data is from 2006. 

The political rights indicator rate of change 

for 2003–2007 is 13.56%. 

2008 23 Actual data is from 2007. 

The political rights indicator rate of change 

for 2003–2008 is 6.78%. 

Period (Year) Actual Value–Other 

Candidate 

Notes 

2003 9.5 Actual data is from 2002. 

2006 10.5 Actual data is from 2005. 

The political rights indicator rate of change 

for 2003–2006 is 3.39%. 

2007 11 Actual data is from 2006. 

The political rights indicator rate of change 

for 2003–2007 is 5.08%. 

2008 11 Actual data is from 2007. 

The political rights indicator rate of change 

for 2003–2008 is 5.08%. 

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MILLENNIUM CHALLENGE CORPORATION

Supplemental Indicator: Civil Liberties___________________________________________

The Civil Liberties indicator rates a country on freedom of expression, association, and 

organizational rights; rule of law and human rights; and personal autonomy and economic rights. 

This indicator evaluates countries on a 60-point scale, with a score of 60 representing “most 

free” and a score of 0 representing “least free.” Exhibit 23 details this indicator’s performance, 

including for prior years, as applicable. 

Exhibit 23: Civil Liberties 

Period (Year) Actual Value–Compact Eligible Notes 

2003 41 Actual data is from 2002. 

2006 41.5 Actual data is from 2005. 

The civil liberties indicator rate of 

change for 2003–2006 is 1.43%. 

2007 41 Actual data is from 2006. 

The civil liberties indicator rate of 

change for 2003–2007 is 0%. 

2008 39 Actual data is from 2007. 

The civil liberties indicator rate of 

change for 2003–2008 is -5.71%. 

Period (Year) Actual Value–Threshold Notes 

2003 35 Actual data is from 2002. 

2006 37 Actual data is from 2005. The civil 

liberties indicator rate of change for 

2003–2006 is 5.71%. 

2007 36 Actual data from 2006. 

The civil liberties indicator rate of 

change for 2003–2007 is 2.86%. 

2008 36 Actual data from 2007. 

The civil liberties indicator rate of 

change for 2003–2008 is 2.86%. 

Period (Year) Actual Value–Other Candidate Notes 

2003 20 Actual data is from 2002. 

2006 21 Actual data is from 2005. 

The civil liberties indicator rate of 

change for 2003–2006 is 2.86%. 

2007 22 Actual data is from 2006. 

The civil liberties indicator rate of 

change for 2003-07 is 5.71%. 

2008 22.5 Actual data is from 2007. 

The civil liberties indicator rate of 

change for 2003-08 is 7.14%. 

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MILLENNIUM CHALLENGE CORPORATION

Supplemental Indicator: Control of Corruption____________________________________

The Control of Corruption indicator rates countries on the frequency of “additional payments to 

get things done;” the effects of corruption on the business environment; “grand corruption” in 

the political arena; and the tendency of elites to engage in “state capture.” This indicator 

measures the rate of change on a scale that ranges from 3 to -3. A higher score indicates a 

higher rate of positive change in the control of corruption. Exhibit 24 details this indicator’s 

performance, including for prior years, as applicable. 

Exhibit 24: Control of Corruption 

Period (Year) Actual Value–Compact Eligible Notes 

2003 -0.442 Actual data is from 2002. 

2006 -0.403 Actual data is from 2005. 

The control of corruption indicator rate of 

change for 2003–2006 is 3.17%. 

2007 -0.435 Actual data is from 2006. 

The control of corruption indicator rate of 

change for 2003–2007 is 0.55%. 

2008 -0.458 Actual data is from 2007. 

The control of corruption indicator rate of 

change for 2003–2008 is -1.38%. 

Period (Year) Actual Value–Compact Eligible Notes 

2003 -0.822 Actual data is from 2002. 

2006 -0.771 Actual data is from 2005. 

The control of corruption indicator rate of 

change for 2003–2006 is 4.19%. 

2007 -0.714 Actual data is from 2006. 

The control of corruption indicator rate of 

change for 2003–2007 is 8.90%. 

2008 -0.690 Actual data is from 2007. 

The control of corruption indicator rate of 

change for 2003–2008 is 10.91%. 

Period (Year) Actual Value–Other Candidate Notes 

2003 -0.927 Actual data is from 2002. 

2006 -1.019 Actual data is from 2005. 

The control of corruption indicator rate of 

change for 2003–2006 is -7.65%. 

2007 -0.986 Actual data is from 2006. 

The control of corruption indicator rate of 

change for 2003–2007 is -4.96%. 

2008 -0.939 Actual data is from 2007. 

The control of corruption indicator rate of 

change for 2003–2008 is -1.01%. 

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MILLENNIUM CHALLENGE CORPORATION

Supplemental Indicators: Government Effectiveness________________________________

The Government Effectiveness indicator rates countries on the quality of public service 

provision; civil services’ competency and independence from political pressures; and the 

government’s ability to plan and implement sound policies. This indicator measures rate of 

change on a scale from 3 to -3. A higher score indicates a higher rate of positive change in 

government effectiveness. Exhibit 25 details this indicator’s performance, including for prior 

years, as applicable. 

Exhibit 25: Government Effectiveness 

Period (Year) Actual Value–Compact Eligible Notes 

2003 -0.314 Actual data is from 2002. 

2006 -0.356 Actual data is from 2005. 

The government effectiveness indicator 

rate of change for 2003–2006 is -2.98%. 

2007 -0.356 Actual data is from 2006. 

The government effectiveness indicator 

rate of change for 2003–2007 is -3.01%. 

2008 -0.378 Actual data is from 2007. 

The government effectiveness indicator 

rate of change for 2003–2008 is -4.54%. 

Period (Year) Actual Value–Threshold Notes 

2003 -0.733 Actual data is from 2002. 

2006 -0.760 Actual data is from 2005. 

The government effectiveness indicator 

rate of change for 2003–2006 is -1.91%. 

2007 -0.743 Actual data is from 2006. 

The government effectiveness indicator 

rate of change for 2003–2007 is -0.73%. 

2008 -0.594 Actual data is from 2007. 

The government effectiveness indicator 

rate of change for 2003–2008 is 9.82%. 

Period (Year) Actual Value–Other Candidate Notes 

2003 -0.906 Actual data is from 2002. 

2006 -0.987 Actual data is from 2005. 

The government effectiveness indicator 

rate of change for 2003–2006 is -5.66%. 

2007 -0.979 Actual data is from 2006. 

The government effectiveness indicator 

rate of change for 2003–2007 is -5.15%. 

2008 -0.875 Actual data is from 2007. 

The government effectiveness indicator 

rate of change for 2003–2008 is 2.23%. 

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MILLENNIUM CHALLENGE CORPORATION

Supplemental Indicators: Rule of Law____________________________________________

The Rule of Law indicator rates countries on the extent to which the public has confidence in 

and abides by rules of society; the incidence of violent and non-violent crime; the effectiveness 

and predictability of the judiciary; and the enforceability of contracts. This indicator measures 

the rate of change on a scale that ranges from 3 to -3. A higher score indicates a higher rate of 

positive change in rule of law. Exhibit 26 details this indicator’s performance, including for 

prior years, as applicable. 

Exhibit 26: Rule of Law 

Period (Year) Actual Value–Compact Eligible Notes 

2003 -0.300 Actual data is from 2002. 

2006 -0.214 Actual data is from 2005. 

The rule of law indicator rate of change for 

2003–2006 is 5.58%. 

2007 -0.386 Actual data is from 2006. 

The rule of law indicator rate of change for 

2003–2007 is -5.54%. 

2008 -0.402 Actual data is from 2007. 

The rule of law indicator rate of change for 

2003–2008 is -6.61%. 

Period (Year) Actual Value–Threshold Notes 

2003 -0.574 Actual data is from 2002. 

2006 -0.612 Actual data is from 2005. 

The rule of law indicator rate of change for 

2003–2006 is -2.45%. 

2007 -0.590 Actual data is from 2006. 

The rule of law indicator rate of change for 

2003–2007 is -1.00%. 

2008 -0.582 Actual data is from 2007. 

The rule of law indicator rate of change for 

2003–2008 is -0.53%. 

Period (Year) Actual Value–Other Candidate Notes 

2003 -1.019 Actual data is from 2002. 

2006 -1.015 Actual data is from 2005. 

The rule of law indicator rate of change for 

2003–2006 is 0.28%. 

2007 -0.977 Actual data is from 2006. 

The rule of law indicator rate of change for 

2003–2007 is 2.71%. 

2008 -0.995 Actual data is from 2007. 

The rule of law indicator rate of change for 

2003–2008 is 1.57%. 

 ` 61 _
MILLENNIUM CHALLENGE CORPORATION

Supplemental Indicator: Voice and Accountability_________________________________

The Voice and Accountability indicator rates countries on the ability of their institutions to 

protect civil liberties; the extent to which citizens of a country are able to participate in the 

selection of governments; and the independence of the media. This indicator measures the rate 

of change on a scale from 3 to -3. A higher score indicates a higher level of performance. 

Exhibit 27 details this indicator’s performance, including for prior years, as applicable. 

Exhibit 27: Voice and Accountability 

Period (Year) Actual Value–Compact Eligible Notes 

2003 -0.093 Actual data is from 2002. 

2006 -0.085 Actual data is from 2005. 

The voice and accountability indicator 

rate of change for 2003–2006 is 0.41%. 

2007 -0.004 Actual data is from 2006. 

The voice and accountability indicator 

rate of change for 2003–2007 is 4.76%. 

2008 -0.030 Actual data is from 2007. 

The voice and accountability indicator 

rate of change for 2003–2008 is 3.10%. 

Period (Year) Actual Value–Threshold Notes 

2003 -0.427 Actual data is from 2002. 

2006 -0.359 Actual data is from 2005. 

The voice and accountability indicator 

rate of change for 2003–2006 is 3.31%. 

2007 -0.281 Actual data is from 2006. 

The voice and accountability indicator 

rate of change for 2003–2007 is 7.14%. 

2008 -0.212 Actual data is from 2007. 

The voice and accountability indicator 

rate of change for 2003–2008 is 10.53%. 

Period (Year) Actual Value–Other Candidate Notes 

2003 -1.211 Actual data is from 2002. 

2006 -1.133 Actual data is from 2005. 

The voice and accountability indicator 

rate of change for 2003–2006 is 3.86%. 

2007 -1.103 Actual data is from 2006. 

The voice and accountability indicator 

rate of change for 2003–2007 is 5.35%. 

2008 -1.104 Actual data is from 2007. 

The voice and accountability indicator 

rate of change for 2003–2008 is 5.25%. 

` 62 _
MILLENNIUM CHALLENGE CORPORATION

Objective 2.2: Improve Policy Performance in Investing in People 

Supplemental Indicator: Health Expenditure______________________________________

The value reported under the Health Expenditure indicator is government health expenditure as a 

percentage of GDP. Figures are originally estimated in million national currency units (million 

NCU) and in current prices. Exhibit 28 details this indicator’s performance, including for prior 

years, as applicable. 

Exhibit 28: Health Expenditure 

Period (Year) Actual Value–Compact Eligible Notes 

2004 2.51 Actual data is from 2002. 

2006 2.64 Actual data is from 2004. 

The health expenditure indicator rate of 

change for 2004–2006 is 3.33%. 

2007 2.78 Actual data is from 2005. 

The health expenditure indicator rate of 

change for 2004–2007 is 6.94%. 

2008 2.77 Actual data is most recent of 2006 or 

2007. 

The health expenditure indicator rate of 

change for 2004–2008 is 6.72%. 

Period (Year) Actual Value–Threshold Notes 

2004 2.69 Actual data is from 2002. 

2006 2.92 Actual data is from 2004. 

The health expenditure indicator rate of 

change for 2004–2006 is 5.90%. 

2007 3.04 Actual data is from 2005. 

The health expenditure indicator rate of 

change for 2004–2007 is 9.15%. 

2008 3.08 Actual data is most recent of 2006 or 

2007. 

The health expenditure indicator rate of 

change for 2004–2008 is 10.15%. 

Period (Year) Actual Value–Other Candidate Notes 

2004 2.00 Actual data is from 2002. 

2006 1.73 Actual data is from 2004. 

The health expenditure indicator rate of 

change for 2004–2006 is -7.16%. 

2007 1.68 Actual data is from 2005. 

The health expenditure indicator rate of 

change for 2004–2007 is -8.52%. 

2008 1.77 Actual data is most recent of 2006 or 

2007. 

The health expenditure indicator rate of 

change for 2004–2008 is -6.03%. 

 ` 63 _
MILLENNIUM CHALLENGE CORPORATION

Supplemental Indicator: Immunization Rates______________________________________

The Immunization Rate indicator measures the percentage of population that has received DPT3 

and measles immunizations in a year. Exhibit 29 details this indicator’s performance, including 

for prior years, as applicable. 

Exhibit 29: Immunization Rates 

Period (Year) Actual Value–Compact Eligible Notes 

2003 80.5 Actual data is from 2002. 

2006 84 Actual data is from 2005. 

The immunization indicator rate of change 

for 2003–2006 is 7.37%. 

2007 89 Actual data is from 2006. 

The immunization indicator rate of change 

for 2003–2007 is 17.89%. 

2008 89 Actual data is from 2007. 

The immunization indicator rate of change 

for 2003–2008 is 17.89%. 

Period (Year) Actual Value–Threshold Notes 

2003 76.25 Actual data is from 2002. 

2006 85 Actual data is from 2005. 

The immunization indicator rate of change 

for 2003–2006 is 18.42%. 

2007 86.25 Actual data is from 2006. 

The immunization indicator rate of change 

for 2003–2007 is 21.05%. 

2008 83.75 Actual data is from 2007. 

The immunization indicator rate of change 

for 2003–2008 is 15.79%. 

Period (Year) Actual Value–Other Candidate Notes 

2003 71 Actual data is from 2002. 

2006 74.5 Actual data is from 2005. 

The immunization indicator rate of change 

for 2003–2006 is 7.37%. 

2007 77 Actual data is from 2006. 

The immunization indicator rate of change 

for 2003–2007 is 12.63%. 

2008 81.5 Actual data is from 2007. 

The immunization indicator rate of change 

for 2003–2008 is 22.11%. 

Supplemental Indicator: Girls Primary Education Completion Rate__________________

The Girls’ Primary Education Completion Rate indicator measures gross intake ratio of female 

students into their last year of primary school. Exhibit 30 details this indicator’s performance, 

including for prior years, as applicable. 

` 64 _
MILLENNIUM CHALLENGE CORPORATION

Exhibit 30: Girls Primary Education Completion Rate 

Period (Year) Actual Value–Compact Eligible Notes 

2003 58.98 Actual data is the most recent of 2001 or 

2002. 

2006 71.45 Actual data is the most recent of 2003 or 

2004. 

The girls’ primary education completion 

indicator rate of change for 2003–2006 is 

16.68%. 

2007 76.69 Actual data is the most recent of 2005 or 

2006. 

The girls’ primary education completion 

indicator rate of change for 2003–2007 is 

23.69%. 

2008 NA At the time of this report, the number of 

countries with updated data for 2007 

and/or 2008 was insufficient to allow for 

a large enough sample size to be 

meaningful. 

Period (Year) Actual Value–Threshold Notes 

2003 62.63 Actual data is the most recent of 2001 or 

2002. 

2006 62.43 Actual data is the most recent of 2003 or 

2004. 

The girls’ primary education completion 

indicator rate of change for 2003–2006 is 

-0.27%. 

2007 74.54 Actual data is the most recent of 2005 or 

2006. 

The girls’ primary education completion 

indicator rate of change for 2003–2007 is 

15.93%. 

2008 NA At the time of this report, the number of 

countries with updated data for 2007 

and/or 2008 was insufficient to allow for 

a large enough sample size to be 

meaningful. 

Period (Year) Actual Value–Other Candidate Notes 

2003 59.45 Actual data is the most recent of 2001 or 

2002. 

2006 65.53 Actual data is the most recent of 2003 or 

2004. 

The girls’ primary education completion 

indicator rate of change for 2003–2006 is 

8.13%. 

2007 69.60 Actual data is the most recent of 2005 or 

2006. 

The girls’ primary education completion 

indicator rate of change for 2003–2007 is 

13.59%. 

 ` 65 _
MILLENNIUM CHALLENGE CORPORATION

2008 NA At the time of this report, the number of 

countries with updated data for 2007 

and/or 2008 was insufficient to allow for 

a large enough sample size to be 

meaningful. 

Objective 2.3: Improve Policy Performance in Economic Freedom 

Supplemental Indicator: Fiscal Policy____________________________________________

The Fiscal Policy indicator measures the percent rate of change based on the percentage change 

of the budget deficit divided by GDP as a three year average. Exhibit 31 details this indicator’s 

performance, including for prior years, as applicable.

Exhibit 31: Fiscal Policy 

Period (Year) Actual Value–Compact Eligible Notes 

2003 -0.042 Actual data is the average of 2000-2002. 

2006 -0.024 Actual data is the average of 2003-2005. 

The fiscal policy indicator rate of change 

for 2003–2006 is 23.89%. 

2007 -0.019 Actual data is the average of 2004-2006. 

The fiscal policy indicator rate of change 

for 2003–2007 is 30.09%. 

2008 -0.011 Actual data is the average of 2005-2007. 

The fiscal policy indicator rate of change 

for 2003–2008 is 41.20%. 

Period (Year) Actual Value–Threshold Notes 

2003 -0.043 Actual data is the average of 2000-2002. 

2006 -0.025 Actual data is the average of 2003-2005. 

The fiscal policy indicator rate of change 

for 2003–2006 is 23.23%. 

2007 -0.008 Actual data is the average of 2004-2006. 

The fiscal policy indicator rate of change 

for 2003–2007 is 45.14%. 

2008 -0.006 Actual data is the average of 2005-2007. 

The fiscal policy indicator rate of change 

for 2003–2008 is 47.60%. 

Period (Year) Actual Value–Other Candidate Notes 

2003 -0.030 Actual data is the average of 2000-2002. 

2006 -0.024 Actual data is the average of 2003-2005. 

The fiscal policy indicator rate of change 

for 2003–2006 is 8.03%. 

2007 -0.013 Actual data is the average of 2004-2006. 

The fiscal policy indicator rate of change 

for 2003–2007 is 22.32%. 

2008 -0.014 Actual data is the average of 2005-2007. 

The fiscal policy indicator rate of change 

for 2003–2008 is 21.28%. 

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MILLENNIUM CHALLENGE CORPORATION

Supplemental Indicator: Cost of Starting a Business________________________________

The Cost of Starting a Business indicator measures the cost incurred in all stages of starting a 

new business. Cost is expressed as a percentage of the country’s Gross National Income per 

capita. Exhibit 32 details this indicator’s performance, including for prior years, as applicable. 

Exhibit 32: Cost of Starting a Business 

Period (Year) Actual Value–Compact Eligible Notes 

2003 77 Actual data is from 2003. 

2006 49.6 Actual data is from 2006. 

The cost of starting a business indicator 

rate of change for 2003–2006 is -8.10%. 

2007 37.4 Actual data is from 2007. 

The cost of starting a business indicator 

rate of change for 2003–2007 for is -

11.71%. 

2008 32.7 Actual data is from 2008. 

The cost of starting a business indicator 

rate of change for 2003–2008 for is -

13.10%. 

Period (Year) Actual Value–Threshold Notes 

2003 123.2 Actual data is from 2003. 

2006 96.0 Actual data is from 2006. 

The cost of starting a business indicator 

rate of change for 2003–2006 is -8.05%. 

2007 77.6 Actual data is from 2007. 

The cost of starting a business indicator 

rate of change for 2003–2007 is -13.49%. 

2008 62.3 Actual data is from 2008. 

The cost of starting a business indicator 

rate of change for 2003–2008 for is -

18.01%. 

Period (Year) Actual Value–Other Candidate Notes 

2003 139.5 Actual data is from 2003. 

2006 78.5 Actual data is from 2006. 

The cost of starting a business indicator 

rate of change for 2003–2006 is -18.04%. 

2007 74.6 Actual data is from 2007. 

The cost of starting a business indicator 

rate of change for 2003–2007 is -19.20%. 

2008 70.1 Actual data is from 2008. 

The cost of starting a business indicator 

rate of change for 2003–2008 for is -

20.53%. 

 ` 67 _
MILLENNIUM CHALLENGE CORPORATION

Supplemental Indicator: Time of Starting a Business_______________________________

The Time of Starting a Business indicator measures the number of days necessary to start a new 

business. Exhibit 33 details this indicator’s performance, including for prior years, as 

applicable. 

Exhibit 33: Time of Starting a Business 

Period (Year) Actual Value–Compact Eligible Notes 

2003 58 Actual data is from 2003. 

2006 42 Actual data is from 2006. 

The days to start a business indicator rate 

of change for 2003–06 is -19.98%. 

2007 29 Actual data is from 2007. 

The days to start a business indicator rate 

of change for 2003–2007 is -36.20%. 

2008 26 Actual data is from 2008. 

The days to start a business indicator rate 

of change for 2003–2008 is -39.95%. 

Period (Year) Actual Value–Threshold Notes 

2003 43 Actual data is from 2003. 

2006 37 Actual data is from 2006. 

The days to start a business indicator rate 

of change for 2003–2006 is -7.49%. 

2007 35 Actual data is from 2007. 

The days to start a business indicator rate 

of change for 2003–2007 is -9.99%. 

2008 29 Actual data is from 2008. 

The days to start a business indicator rate 

of change for 2003–2008 is -17.48%. 

Period (Year) Actual Value–Other Candidate Notes 

2003 44 Actual data is from 2003. 

2006 43 Actual data is from 2006. 

The days to start a business indicator rate 

of change for 2003–2006 is -1.25%. 

2007 37 Actual data is from 2007. 

The days to start a business indicator rate 

of change is -8.74%. 

2008 37 Actual data is from 2008. 

The days to start a business indicator rate 

of change for 2003–2008 is -8.74%. 

Supplemental Indicator: Regulatory Quality______________________________________

The Regulatory Quality indicator rates countries on the burden of regulations on business, price 

controls, the government’s involvement in the economy, and foreign investor regulation among 

other areas. This indicator measures on a scale that from 3 to -3. A higher score indicates a 

higher level of regulation. Exhibit 34 details this indicator’s performance, including for prior 

years, as applicable. 

` 68 _
MILLENNIUM CHALLENGE CORPORATION

Exhibit 34: Regulatory Quality 

Period (Year) Actual Value–Compact Eligible Notes 

2003 -0.333 Actual data is from 2002.

2006 -0.375 Actual data is from 2005. 

The regulatory quality indicator rate of 

change for 2003–2006 is -2.68%. 

2007 -0.303 Actual data is from 2006. 

The regulatory quality indicator rate of 

change for 2003–2007 is 1.92%.

2008 -0.337 Actual data is from 2007. 

The regulatory quality indicator rate of 

change for 2003–2008 is -0.29%. 

Period (Year) Actual Value–Threshold Notes 

2003 -0.512 Actual data is from 2002.

2006 -0.509 Actual data is from 2005. 

The regulatory quality indicator rate of 

change for 2003–2006 is 0.18%.

2007 -0.498 Actual data is from 2006. 

The regulatory quality indicator rate of 

change for 2003–2007 is 0.87%.

2008 -0.469 Actual data is from 2007. 

The regulatory quality indicator rate of 

change for 2003–2008 is 2.76%. 

Period (Year) Actual Value–Other Candidate Notes 

2003 -0.964 Actual data is from 2002.

2006 

-0.996 

Actual data is from 2005. 

The regulatory quality indicator rate of 

change for 2003–2006 is -2.03%.

2007 

-0.998 

Actual data is from 2006. 

The regulatory quality indicator rate of 

change for 2003–2007 is -2.15%.

2008 -0.994 Actual data is from 2007. 

The regulatory quality indicator rate of 

change for 2003–2008 is -1.92%. 

 ` 69 _
MILLENNIUM CHALLENGE CORPORATION

Threshold Program Performance Results 

The Threshold program is closely related to Strategic Goal #2 because the program assists 

countries in becoming eligible for compact assistance by helping them improve their 

performance on the policy indicators that fall under Strategic Goal #2. For this reason, Threshold 

program results are reported in this section. Each Threshold program has performance 

objectives based on the specifications of the program, so each country has unique objectives and 

targets. Some performance indicators may have changed from year to year they are no longer 

applicable, timely, or available. 

Exhibit 35 summarizes the performance results for Albania, Burkina Faso, Guyana, Indonesia, 

Jordan, Kenya, Malawi, Paraguay, Philippines, Tanzania, Ukraine, and Zambia. Tables 

summarizing performance for each country follow below. Tables for Guyana, Kenya, Jordan, 

and Zambia are new for this year, while Moldova, Uganda, São Tomé and Principe, Kyrgyz 

Republic, Niger, Peru, Rwanda, and Albania II are in the early stages of program development 

and did not report on indicator progress in fiscal year 2008. The indicators provided in each of 

the country tables were selected as proxies for quality of policy environment in each particular 

country. An improvement in the indicator is consistent with improvement in the policy 

environment in this area. 

Exhibit 35: Strategic Goal #2 (b) Threshold Program Detailed Results 

Threshold Program 

Summary Results 

Country 

Number of 

Objectives 

Performance Summary 

Targets Met Targets Not Met Data Lag / NA

Albania 14 3 3 8 

Burkina Faso 8 6 2 0 

Guyana* 8 0 0 8 

Indonesia 14 8 2 4 

Jordan* 9 6 0 3 

Kenya* 11 3 3 5 

Malawi 8 5 2 1 

Paraguay 10 7 1 2 

Philippines 9 5 2 2 

Tanzania 6 4 1 1 

Ukraine 13 6 3 4 

Zambia* 6 6 0 0 

Total 116 59 19 38 

*New for FY 2008 

` 70 _
MILLENNIUM CHALLENGE CORPORATION

Exhibit 36: Albania Threshold Program 

Albania 

Performance Indicator 

Project End 

Target Baseline 

Target Actual Target Actual 

2007 Q3 2007 Q3 2008 Q3 2008 Q3 

1 Tax revenues collected from the 

large taxpayers as a percentage 

of total tax revenues 

50% 30% 30% 50.75% 50% 49.79% 

2 Percentage of VAT returns filed 

electronically by LTO-Tirana 

taxpayers 

15% 0 - - 15% 32.6% 

3 Tax Court established 1 0 - - 1 NA15

4 Percentage of firms stating 

bribery is frequent in tax collection 

35% 42% - - 36% Not 

Available16

5 Average number of tax payments 

paid per firm per year 

25 53 - - 50% Not 

Available17

6 Percentage of procurements 

completed electronically 

2.5% 0 - - 2.5% 0.08% 

7 Percentage of PPA staff trained in 

IT integration using eprocurement software 

100% 0 40% 48% 100% 80% 

8 Reduction in the cost of 

government procurements 

-20% 0 - - -20% Not 

Available18

9 Value of gift expected to secure 

government contract as a 

percentage of contract value 

2% 6.15% - - 2% Not 

Available19

10 Total registration cost as 

percentage of income per capita 

13% 31% - - 13% NA 

11 Percentage of businesses that 

paid a bribe to register 

5% 19% - - 5% Not 

Available20

12 Number of days to register a 

business 

1 47 - - 1 NA 

13 Number of change applications 

processed by NRC 

5,000 0 - - 3,000 7,914 

14 Number of new businesses 

registered at NRC 

9,000 0 - - 8,000 16,713 

Rating: Target Met (3), Not Met (3), NA or Not Applicable (8) 

Note: All but 2 indicators under this objective were new in fiscal year 2008. For those new 

indicators an (-) means that the indicator had no targets or actual for fiscal year 2007. 

 

15 This is no longer in the work plan for this phase of the project. Ministry of Justice has drafted legislation to 

establish administrative court with tax function through another project. 

16 There is no new data available. Project is measuring this through a survey – to be updated next quarter. 17 Ibid 

18 This indicator has proven too difficult to measure as GOA is the data source and complete records are not kept. 

19 Data source is World Bank BEEPS and no new studies have come out since 2005. 

 ` 71 _

20 Data source is World Bank Doing Business Report which did not measure this indicator in their last report. 
MILLENNIUM CHALLENGE CORPORATION

Exhibit 37: Burkina Faso Threshold Program 

Burkina Faso 

Performance 

Indicator 

Project 

End 

Target 

Baseline 

as of April 

2006 

Target Actual Target Actual Target Actual 

2006 

Q4 

2006 

Q4 

2007 2007 2008 

Q3 2008 Q3

1 Total number of girls 

recruited (cumulative 

Year 1 plus Year 2) 

3,300 0 - - 3,300 6,338 9,638 9,224 

2 Temporary 

classrooms 

in operation 

132 0 120 13221

3 Girl-friendly 

educational 

complexes: 

–Completed 

–Construction in 

progress 

132 0 0 26 132 101 

21 

132 13222

4 Take-home rations 

provided for each girl 

3,300 0 3,300 NA 7,158 7,158 

5 Total number of 

social mobilization 

campaigns 

conducted on the 

benefits of girls’ 

schooling 

132 

Commun

ities 

0 33 33 33 3323

6 Literacy and training 

provided to mother 

mentors 

7,920 0 0 0 7,920 7,840 7,920 6,42624

7 Teachers and 

outreach staff trained 

in gender pedagogy 

238 0 0 0 238 24625

8 Government 

employees trained in 

monitoring and 

evaluation 

30 0 0 0 30 3026

Rating: Target Met (6), Not Met (2), NA or Not Applicable (0) 

Note: This threshold program ended on September 30, 2008. Most targets were met before Q3 

2008. 

 

21 This target was met in 2007 

22 All classrooms have been built. 

23 This target was met in 2007. 

24 Nomadic movements have reduced the number of beneficiaries. 25 This target was met in 2007. 

26 This target was met in 2007. 

` 72 _
MILLENNIUM CHALLENGE CORPORATION

Exhibit 38: Guyana Threshold Program 

Guyana 

Performance Indicator 

Project End 

Target Baseline 

Target Actual 

2008 Q3 2008 Q3 

1 Tax Revenue as a share of GDP 35.5% 35.3% Not 

Available 

Not 

Available 

2 Stock of year-end tax arrears as 

share of tax collections 

7% 2% 4% Not 

Available 

3 CTA Revenues Collected (G$B) $7.12 $8.91 $1.75 Not 

Available 

4 Stock of refunds outstanding as a 

share of VAT collections 

6.5% 2.5% 4.0% Not 

Available 

5 Number of Analysis and Forecast 

Reports produced 

NA NA 1 Not 

Available

27

28

 ` 73 _

6 Percentage of public surveyed with 

improved knowledge of eprocurement procedures 

To be determined 

based o

To be determined 

based o

NA NA

n baseline n baseline 

survey survey 

7 Percentage of public surveyed with 

improved understanding of fiduciary 

oversight role in Parliament 

0% 75% NA 29 NA

8 Number of days required to start a 46 30 NA NA 

business 

Rating: Target Met (0), Not Met (0), NA or Not Applicable (8)

 Note: Guyana’s threshold agreement was signed on August 23, 2007. 

 

27 Plan for establishing unit is being finalized. 

28 No quarterly targets have been set yet; updates will be based on follow-up survey. 

29 Ibid 
MILLENNIUM CHALLENGE CORPORATION

Exhibit 39: Indonesia Threshold Program 

Indonesia 

Performance Objective 

Project End 

Target 

Baseline 

as of May 

2007 

Target Actual Target Actual 

2007 

Q4 

2007 

Q3 

2008 

Q3 

2008 

Q3 

1 Number of judges trained on 

judicial code of conduct 

2,000 0 72 NA 1,036 901 

2 Number of court personnel 

trained on budget 

procedures 

1,600 0 0 NA 640 1,219 

3 Submission of wealth report 

data as prerequisite for 

promotion or transfer of 

high-ranking Supreme Court 

officials. 

NA NA30 - - Submission 

of wealth 

reports 

required for 

transfer or 

promotion 

Yes 

4 Establishment of Supreme 

Court Information Desk to 

receive and process 

complaints from public 

Establishment of 

public compliant 

response system 

for the Supreme 

Court 

No reponse 

system in the 

Supreme 

Court 

- - Establish 

Supreme 

Court 

Information 

Desk 

Yes 

5 Suspicious Transaction 

Reports (STRs) filed by nonbank financial institutions as 

percent of total filings 

10% 3.2% 3.2% NA 7% 22% 

(2,096) 

6 Number of PPATK cases 

transmitted for investigation 

150 per calendar 

year 

40 - - 150 78 

7 Number of trial sessions 

monitored in Jakarta 

400 per annum 0 43 NA 40031 212 

8 Number of trial sessions 

monitored outside of Jakarta 

160 in 2008 0 - - 160 Not 

Available32

9 Number of KPK 

prosecutions of high ranking 

GoI officials related to 

corruption 

4 in 2007 

6 in 2008 

2 - - NA33 8 

10 Number of successfully 

initiated electronic 

procurements 

15 

(3 per province) 

0 - - Hardware 

and software 

installed in 

five provinces 

Yes 

11 Number of children <1 year 

of age immunized with 

DTP3 and measles in seven 

presence provinces 

5,912,298 0 611,998 NA 3,210,000 Not 

Available34

12 Percent of puskesmas using 

Local Area Monitoring 

(LAM) mapping tools for 

immunization coverage 

>90% in 

presence 

districts 

49% 10% NA >90% Not 

Available35

 

30 The court has yet to agree to the definition of senior court officials for wealth report submissions for the purpose of 

determining a baseline for this indicator. 31 Old cumulative target of 350 sessions for 2007 and 2008 has been met. New target is 400 sessions for calendar 

year 2008. 32 Target has been revised to 160 trials outside Jakarta in 2008. The equipment has been procured but MOUs must be 

signed between the KPK and 5 universities before trial monitoring can begin. 33 Both the 2007 and 2008 annual targets have been exceeded. 34 There is a time lag for this Ministry of Health indicator. 

35 Ibid 

` 74 _
MILLENNIUM CHALLENGE CORPORATION

Indonesia 

Target Actual Target Actual Baseline 

 ` 75 _

Performance Objective 

Project End 

Target 

as of May 

2007 

2007 2007 2008 2008 

Q4 Q3 Q3 Q3 

13 Number of project priority 

districts' and municipalities' 

annual EPI Action Plans 

launched & monitored by 

local government 

64 0 10 NA 68 Not 

Available36

14 Number of individuals 

trained in Immunization, 

Supportive Supervision and 

Vaccine Management 

10,000 0 271 NA 8,371 6,847 

Rating: Target Met (8), Not Met (2), NA or Not Applicable (4)

Note: Six indicators under this objective were new in fiscal year 2008. For those new indicators 

an (-) means that the indicator had no targets or actual for fiscal year 2007. 

 

36 Ibid 
MILLENNIUM CHALLENGE CORPORATION

Exhibit 40: Jordan Threshold Program 

Jordan 

Performance Objective 

Project 

End Target Baseline 

Target Actual

2008 Q3 2008 Q3

1 Decisions made and Local 

Development Plans (LDP) developed 

in participation with citizen’s 

committees in each of the nine 

targeted municipalities 

9 

LDPs 

0 9 local development 

voluntary 

committees 

established 

Yes 

2 One public-private sector 

development project initiated in each 

of the nine municipalities 

9 

projects 

0 Institutional capacity 

assessed and 

institutional 

framework agreed in 

3 municipalities 

Yes 

3 Improved financial, fiscal and human 

resource management systems 

installed in at least six of the targeted 

municipalities 

6 

municipalities

0 Financial and HR 

Management 

analysis completed; 

technical assistance 

(TA) started 

Yes 

4 10% increase in voter participation in 

2007 elections 

10% increase 

from 2003 

Municipal: 

479,117 (2003) 

Parliamentary: 

2,352,496 (2003) 

NA37 NA 

5 10% increase in number of women 

voting in 2007 elections 

10% increase 

from 2003 

Municipal: 

493,856 (2003) 

Parliamentary: 

1,191,589 (2003) 

NA38 NA 

6 10% increase in number of women 

registered for 2007 elections 

10% increase 

from 2003 

Municipal: 

229,863 (2003) 

Parliamentary: 

703,565 (2003) 

NA39 NA 

7 10% increase in the level of citizen 

satisfaction with the delivery of 

services in at least 6 of the 9 

municipalities 

Baseline + 

10% 

To be measured 

using selected 

customer feedback 

measurement tools 

Quality Service 

Improvement 

training initiated 

Yes 

8 10% increase in municipal 

investments in public services 

Baseline + 

10% 

1,819,881.05 JD TA activities started 

and work plans 

developed 

Yes 

9 10% increase in tax recovery rates in 

at least six of the targeted 

municipalities 

Baseline + 

10% 

428,798.14 JD Property Tax TA 

Scope of Work 

approved 

Yes 

Rating: Target Met (6), Not Met (0), NA or Not Applicable (3)

 Note: Jordan’s threshold agreement was signed on October 17, 2006. 

 

37 Indicator is not applicable in 2008, as it was used for the 2007 elections. 38 Ibid 

39 Ibid 

` 76 _
MILLENNIUM CHALLENGE CORPORATION

Exhibit 41: Kenya Threshold Program 

Kenya 

Performance Objective 

Project 

End Target Baseline 

Target Actual 

2008 Q3 2008 Q3 

1 Improve transparency, 

accountability and corruption in the 

public sector 

3.5 3.0 

(March 2007) 

NA NA40

2 Reduction in undocumented extra 

payments or bribes connected with 

the awarding of public contracts 

4.3 3.7 

(March 2007) 

NA NA41

3 Reduction in the extent to which 

the health sector is affected by 

corruption 

2.4 2.9 

 (March 2007) 

NA NA42

4 Comprehensive procurement 

reviews on high value procuring 

entities (PE) and published on 

Public Procurement Oversight 

Authority (PPOA) website 

6 0 

 (October 2007) 

2 NA 

5 Key PEs implement proper 

procurement record keeping 

procedures 

Six PEs 

achieve a 

score of 65 

points by the 

end of the 

program 

6 baselines to be 

determined by June 

2008 survey. 

MOH: 19 pts. 

MOE: 21 pts. 

KEMSA: 34 pts. 

NA NA43

6 Use of framework contracts by 

GoK (4 milestones) 

Achieve 4 

milestones - GoK circular 

released 

No 

7 Number of PEs reporting large 

procurements to PPOA 

48 PEs report 

to the PPOA 

16 PEs reported for 

quarter end 06/2007 

32 1 (value 

$208K) 

8 Average percentage of stock 

records that correspond with 

physical counts for a set of 

indicator drugs in the central 

Kenya Medical Supplies Agency 

(KEMSA) warehouse 

100% 0% 

(April 2008) 

100% 0% 

9 Average percentage of time out of 

stock for a set of indicator drugs in 

the central KEMSA warehouse 

0% 22% 

(April 2008) 

0% 22% 

10 Percentage by value of KEMSA 

medicines purchased through 

competitive tender 

100% 100% 

(July 2007) 

100% 100% 

11 Percentage of average 

international price paid for last 

regular procurement of a set of 

indicator drugs 

<100% 60.3% 

(July 2007) 

<100% 60.3% 

Rating: Target Met (3), Not Met (3), NA or Not Applicable (5)

 Note: Kenya’s threshold agreement was signed on March 23, 2007. 

 

40 This is an annual indicator; it will be available after October 31, 2008. 41 Ibid 

42 Ibid 

 ` 77 _

43 Baseline reviews will be completed in the fourth quarter of fiscal year 2008. 
MILLENNIUM CHALLENGE CORPORATION

Exhibit 42: Malawi Threshold Program 

Malawi 

Performance 

Objective 

Project 

End Target 

Baseline 

as of 

July 

2006 

Target Actual Target Actual Target Actual

2006 2006 2007 2007 2008 

Q3 

2008 

Q3 

1 Adequate 

reports for 

ministries and 

the National 

Assembly 

(NA) 

Reports 

implemented 

Reports 

distributed 

two years 

after fiscal 

year 

Computer 

procureme

nt process 

initiated 

Yes IFMIS 

training for 

capacity to 

deliver 

quarterly 

reports 

No Monthly 

reports 

generated 

and 

distributed 

to the NA 

Yes 

2 Financial 

Intelligence 

Unit (FIU) 

established in 

accordance 

with the 

AML/CFT law 

Establish and 

operate an 

effective FIU 

No FIU AntiMoney 

Laundering 

and 

Control of 

Financing 

Terrorism 

(AML/CFT) 

law passed

Yes Procuremen

t initiated 

No FIU staffed 

and 

operational 

NA44

3 National 

Assembly has 

more control 

over own 

budget 

National 

Assembly 

oversight 

function 

strengthened 

MOF does 

not fully 

and 

regularly 

fund NA 

MOF 

allocates 

full budget 

allowance 

Yes MOF 

allocates 

full budget 

allowance 

Yes MoF 

allocates full 

budget 

allowance 

Yes 

4 Media Council 

(MC) 

established 

Media 

Council 

established 

by 2007 

No MC in 

operation 

Identify 

key 

stakeholde

rs 

Yes MC 

develops 

transparent 

by-laws 

Yes MC fully 

functioning

45

Yes 

5 Number of civil 

society groups 

testifying 

before the NA 

triples 

Civil society 

integrated 

into anticorruption 

campaign 

0 4 4 9 4 13 3 

6 AML/CFT 

passed by 

November 

2006 

Key pieces of 

reform 

legislation 

promulgated 

No 

AML/CFT 

law 

AML/CFT 

legislation 

passed by 

the NA 

Yes AML/CFT 

legislation 

passed by 

the NA 

Yes AML/CFT 

legislation 

passed by 

the NA 

Yes 

7 More than 500 

people trained 

across all 

program 

components 

GoM’s 

capacity to 

combat 

corruption 

enhanced 

0 85 47 340 718 600 2,879 

8 Sovereign 

credit rating 

moves from 

CCC+ to B- 

(+outlook) 

Sovereign 

credit rating 

improved 

2006: 

CCC+ 

Hire Fitch 

and 

prepare for 

GoM/Fitch 

meeting 

Yes Develop 

plan to 

disseminate 

Fitch report 

results 

Yes Fitch 

assessment 

positive, 

with ratings 

reaching BNo 

Rating: Target Met (5), Not Met (2), NA or Not Applicable (1)

 

44 FIU Director not appointed, but Deputy Director is in place. 45 Includes support for Ethics, Complaints and Disciplinary, and Finance committees. 

` 78 _
MILLENNIUM CHALLENGE CORPORATION

Exhibit 43: Paraguay Threshold Program 

Paraguay 

Performance Objective 

Project 

End 

Target

Baseline 

as of 

January 

2007 

Target Actual Target Actual

2007 

Q3 

2007 

Q3 

2008 

Q3 

2008 

Q3 

1 Number of cases being investigated by 

newly trained personnel using new forensic 

laboratory and new criminal investigative 

techniques 

10 0 NA NA - -

46

2 Average time required to process 

complaints related to disciplinary cases 

4 

months 

10 

months 

- - 4 

months 

2.5 

months 

3 Number of government institutions 

implementing new standards for internal 

control 

5 0 - - 5 5 

4 Number of government institutions 

exchanging public registry data on-line 

through information networks 

3 0 - - 3 3 

5 Number of public agencies subject to 

budget execution legislative oversight by 

Congress 

5 0 NA NA 5 7 

6 Reduced Value Added Tax (VAT) Breach 51% 66% 46% Not 

available 

51% -

47

7 Value of seized merchandise and liens on 

goods for alleged infringement of customs 

regulations. 

$6.5 

million 

0 $1.3 

million 

$1.07 

million 

$6.5 $5.2 

8 Corruption cases submitted correctly to the 

Public Ministry 

13 0 1 36 13 142 

9 Number of days to start a business 36 74 36 25 36 25 

10 Number of maquilas (businesses with low 

cost structures) installed 

15 38 4 0 53 62 

Rating: Target Met (7), Not Met (1), NA or Not Applicable (2) 

 

 

46 Renovation of lab facility is 98 percent complete. 

 ` 79 _

47 There was a tax gap in 2007. This indicator will be measured in September 2008 because of unavailability of 

Central Bank’s report.
MILLENNIUM CHALLENGE CORPORATION

Exhibit 44: Philippines Threshold Program 

Philippines 

Performance Objective 

Project 

End 

Target 

Baseline 

as of 

December 

2005 

Target Actual Target Actual Target Actual 

2006 2006 2007 2007 2008 

Q3 

2008 

Q3 

1 Conviction rate of Office 

of Ombudsman 

40% 33% 33 25 33 35 38 35 

2 Cases mediated 

successfully in the Office 

of Ombudsman 

450 0 0 0 25 10 325 -

48

3 Revenue integrity 

protection service (RIPS) 

cases filed 

116 18 13 27 15 16 91 106 

4 Number of officials 

charged by RIPS–

Suspended by the 

Ombudsman 

35 6 7 12 7 12 33 33 

5 Percentage increase in 

individual income tax 

returns filed 

+10% 487,594 

tax returns 

5.0 8.3 7.0 NA 10.0 10.9 

6 Percentage increase in 

corporate tax returns 

filed 

+10% 134,151 

tax returns 

5.0 6.6 7.0 NA 10.0 29.3 

7 Number of Run After Tax 

Evaders (RATE) cases 

filed 

116 44 44 77 50 87 100 NA49

8 Number Run After The 

Smugglers! (RATS) 

cases filed at the 

Department of Justice 

61 11 9 17 7 16 51 78 

9 RATS cases filed before 

the Court of Tax Appeals 

28 1 2 4 3 4 23 9 

Rating: Target Met (5), Not Met (2), NA or Not Applicable (2) 

 

48 Partial data as of end of February 2008. 

49 Unchanged due to tax amnesty law. 

` 80 _
MILLENNIUM CHALLENGE CORPORATION

Exhibit 45: Tanzania Threshold Program 

Tanzania 

Performance Objective 

Project 

End 

Target 

Baseline 

as of 

May 

2006 

Target Actual Target Actual Target Actual 

2006 2006 2007 2007 2008 

Q3 

2008 

Q3 

1 Districts using public 

expenditure tracking 

60 12 18 15 34 31 55 77 

2 Anti-corruption 

investigations brought to 

court 

28 20 21 37 24 144 28 327 

3 Media stories exposing 

corruption 

1,300 144 60 576 816 1,152 5,078 

4 Media stories of anticorruption cases brought 

to court 

300 50 -- 0 124 109 272 266 

5 Financial Intelligence 

Unit cases opened 

30 0 -- 0 -- 0 - 050

6 Procurement audits 

conducted on Media 

Development 

Associations and Local 

Government Authorities 

40 0 -- 0 12 20 36 40 

Rating: Target Met (4), Not Met (1), NA or Not Applicable (1) 

 

 ` 81 _

50 The Financial Intelligence Unit is not operational yet. 
MILLENNIUM CHALLENGE CORPORATION

Exhibit 46: Ukraine Threshold Program 

Ukraine 

Performance Objective 

Project 

End 

Target

Baseline 

as of 

January 

2007 

Target Actual Target Actual

2007 

Q3 

2007 

Q3 

2008 

Q3 

2008 

Q3 

1 Increased public knowledge of 

corruption reforms and issues 

3.73 

million 

- 1.5 million 1.4 million 3.5 4.1051

2 More transparent case assignment 100% 0 -- 0 60% Not 

Available

3 More transparent and substantive 

selection of judges 

300 0 0 0 100 26 

4 Improved transparency in 

enforcement procedures 

100% 0 42 42 60% 87% 

5 Opportunity for corrupt licensing 

practice reduced 

100% 0 NA - Identify test 

sites 

NA 

6 Improved monitoring of professional 

standards 

10% 0 NA - MoJ 

reviews 

regulations

NA 

7 Increase in sanctions and 

prosecutions for notary violations 

9.1% 0 - - 7.5% 8.0% 

8 Implementation of Ethics and 

Conflict of Interest Code 

10 lgsl 

stages***

0 - - 5-6 5 

9 Systematic monitoring of 

performance of functions in 

Ministry/Agency (SBGS) with Pilot 

IIU 

5 per 

year 

0 - - Legislation 

is in force 

NA 

10 Improved customs and 

transportation regulatory system 

35 0 - - 20 14 

11 Participation in the EU New 

Computerized Transit System 

(NCTS) 

8/35 0 - - 4/0 4/0 

12 Streamlined regulatory processes 25 247 0 0 15 0 

13 Tests securely administered 1.5 

million 

82,000 240 247 800 1,010 

Rating: Target Met (6), Not Met (3), NA or Not Applicable (4) 

Note: Five indicators under this objective were new in fiscal year 2008. For those new 

indicators an (-) means that the indicator had no targets or actual for fiscal year 2007. 

 

51 Target and baseline values were adjusted based on the new data collection methodology. 

` 82 _
MILLENNIUM CHALLENGE CORPORATION

Exhibit 47: Zambia Threshold Program 

Zambia 

Performance Objective 

Project 

End Target Baseline 

Target Actual 

2008 Q3 2008 Q3 

1 Number of days to register a 

property in Zambia 

35 70 35 35 

2 Percentage of households reporting 

payment of a bribe to the Customs 

Division of the Zambia Revenue 

Authority 

7% 14% 7% 4% 

3 Percentage of households and 

businesses reporting “high quality” 

service delivery for business 

registration 

- 41% 60% 60% 

4 Number of days to register a 

business 

10 35 10 7 

5 Number of days to export products 

 

- 60 30 19 

6 Number of days to import products - 62 30 30 

Rating: Target Met (6), Not Met (0), NA or Not Applicable (0)

 ` 83 _
MILLENNIUM CHALLENGE CORPORATION

STRATEGIC GOAL #3 

Advance International Development Assistance Practice by Continually 

Improving MCC’s Operational Effectiveness 

The following objectives constitute Strategic Goal #3: 

3.1 Enhance MCA model recognition and support within the international community 

3.2 Enhance MCC country partnership 

MCC’s Strategic Plan defines the expected outcome for Strategic Goal #3 to be that MCC will 

be at the forefront of the development assistance field and viewed as a model of effectiveness by 

other development practitioners. MCC identifies best practices, internally and externally, and 

adopts them to improve its operations. 

There are two objectives under Strategic Goal # 3. The first objective, to “Enhance MCA model 

recognition and support within the international community,” assesses whether there is 

recognition of MCC’s approach, or a good understanding of the MCA model and whether MCC 

is recognized for innovative and best practice approaches. This objective is measured by a 

“Leadership and Development” survey. Although the survey was conducted this year, data will 

be available at the end of calendar year 2008. 

The second objective, “Enhance MCC country partnership,” assesses how good a development 

partner MCC is relative to other donors and to itself over time. This objective is measured by a 

web-based survey, which was conducted in September and October 2007 of MCA country 

partners. MCA partners responded that their relationship with MCC is better as compared to 

other donor agencies. Overall, MCC provides more oversight, more help to move towards 

sustainability, and does a better job with building country capacity than other donor agencies. 

MCC’s performance against its two objectives for Strategic Goal #3 is outlined below. 

Objective 3.1: Enhance MCA Model Recognition and Support in International Community

Output Indicator: Leadership in Development Practice 

MCC conducted a survey for this measure during FY 2008 to establish a baseline. To assess 

whether MCC is receiving recognition and support for the MCA approach, this indicator 

measures the extent to which stakeholders in the international development community know 

about and understand the model and whether MCC is impacting other development actors’ 

behavior. This indicator expects that as MCC demonstrates the effectiveness of the operational 

approach and, as a result, the recognition of the MCA model increases, MCC will have an 

increasing impact on others’ behavior. 

MCC continues to communicate lessons learned through a variety of tools and techniques in its 

outreach activities, including public speaking engagements, outreach events, the MCC website, 

and working relationships in donor and recipient countries. MCC also collaborates with other 

` 84 _
MILLENNIUM CHALLENGE CORPORATION

development practitioners to share lessons learned and to determine which practices are most 

effective. MCC maintains transparency in its operations and disseminates information on its 

practices and operations in order to facilitate feedback that will strengthen its model. 

Objective 3.2: Enhance MCC Country Partnership_________________________________

Input Indicator: Assessment of MCC Country Partnership

In 2008 MCC conducted a Gallup poll of MCA country partner representatives to evaluate 

MCC’s performance relative to other donors and to MCC itself. The results of the poll will aid 

in assessing effectiveness and informing efforts to improve performance. MCC expects to 

repeat the poll every two years. Reported results are based on percentage of respondents who 

answered with a “4” or “5” on a five point scale, with 5 being highest (i.e., extremely satisfied, 

strongly agree, etc.). 

Exhibit 48: Assessment of MCC Country Partnership 

FY 2008 MCA Country Representatives Responses % 

Overall Satisfaction with MCC as partner 73 

MCC’s approach to country ownership will help achieve 

development goals 

81 

MCC’s program fits in with their country’s overall development 

strategy 

86 

MCC fits with existing development systems and institutions 68 

Sufficient level of ownership or responsibility over projects 64 

 ` 85 _
MILLENNIUM CHALLENGE CORPORATION

STRATEGIC GOAL #4 

Build MCC’s Capabilities to Achieve Its Primary Strategic Goals 

The following objectives constitute Strategic Goal #4: 

4.1 Minimize the administrative cost of developing and implementing MCC compacts 

compared to the total value of compacts 

4.2 Address and close Inspector General recommendations within agreed-upon 

timeframes 

4.3 Achieve high level of staff effectiveness and satisfaction 

MCC’s Strategic Plan defines the expected outcome for Strategic Goal #4 to be the efficient and 

effective operation of MCC. To enable MCC to achieve its mission, MCC will develop its 

human resources and financial and administrative capacities; articulate clear processes, policies, 

and quality standards; and build strong support systems. 

In FY 2008, MCC continued to improve its capacity to implement its key programs while 

simultaneously improving the internal control environment so that it fully complies with federal 

rules and regulations. Highlights of MCC’s FY 2008 efforts include: 

` Development of a highly effective and diverse workforce. Throughout the fiscal year, 

MCC continued to recruit a highly qualified and diverse workforce while implementing a 

comprehensive staff training program. 

` Pay for performance. MCC continued to enhance its pay-for-performance system. 

` Competitive sourcing of integrated support services. MCC took maximum advantage of 

the President’s initiative to competitively source administrative support services. 

` Compliance with federal requirements. MCC is committed to full compliance with all 

U.S. Government requirements and has continued efforts to achieve unqualified audits and 

meet other key financial management and internal control requirements, such as those 

contained in OMB Circular A-123, Management’s Responsibility for Internal Control. 

The indicators under Strategic Goal #4 help MCC measure its efficiency and effectiveness. 

Efficiency is defined as the ratio of an effective outcome or output to the total input resources; 

effectiveness is having an intended or expected effect and can be combined with cost 

information to show cost-effectiveness. MCC has two indicators that measure efficiency—one 

expresses efficiency as a function of compact funds committed and the other as a function of 

compact funds disbursed. 

MCC is committed to making the most effective and efficient use of its resources to achieve its 

primary goal of poverty reduction through economic growth. Now that MCC has moved out of 

its start-up phase and its programs on the ground are beginning to achieve results, MCC’s 

efficiency will improve as additional compact funds are disbursed. 

Exhibit 2-10 details MCC’s performance against its objectives for Strategic Goal #4 and 

summarizes the number of objectives MCC met in FY 2008. Exhibit 2-11 details the specific 

objective, indicator, and performance, including for prior years. 

` 86 _
MILLENNIUM CHALLENGE CORPORATION

Objective 4.1: Minimize the Administrative Cost of Developing and Implementing MCC 

Compacts Compared to the Total Value of Compacts

MCC is taking several steps to improve the compact implementation process, therefore 

increasing the amount of funds disbursed. For example, MCC has reduced the amount of time 

between compact signing, entry into force, and the first disbursement. In addition, MCC is 

putting fiscal and procurement agents in place earlier in the process to reduce delays in initial 

compact disbursement. Strategies noted under Strategic Goal #1 in the MD&A are expected to 

bolster MCC’s results on this objective in coming years. 

Exhibit 49: Input Indicator: Efficiency and Resource Productivity 1 

Period 

(Year) Target Actual Notes 

2005 

(Baseline) 

NA 3.4% The numerator is the annual total administrative 

and due diligence obligations and the denominator 

is the total amount committed under compacts and 

threshold agreements in the fiscal year. 

2006 NA 4.7% NA 

2007 2.7% 2.6% MCC outperformed its target. 

2008 NA 3.46% 

As MCC signs and begins to implement compacts, the workload for MCC staff is shifting from 

compact development to compact implementation. The Efficiency and Resource Productivity 1 

indicator measures efficiency increases as MCC’s administrative and due diligence expenses are 

focused on project implementation and results. A lower percentage indicates improvement in 

efficiency. 

Exhibit 50: Input Indicator: Efficiency and Resource Productivity 2 

Period 

(Year) 

Target Actual Notes 

2005 

(Baseline) 

NA 1,289.8% The numerator is the annual total administrative 

and due diligence disbursements and the 

denominator is the annual total amount disbursed 

for compacts, threshold agreements, and 609(g) 

activities. 

2006 NA 151.2% NA 

2007 40.0% 61.5% MCC outperformed its target. 

2008 NA 27.68% 

 ` 87 _
MILLENNIUM CHALLENGE CORPORATION

Objective 4.2: Address and Close Inspector General (IG) Recommendations Within Agreed

Upon Timeframes

Input Indicator: Compliance 

The MCC IG assesses MCC internal controls and practices through the annual financial audit 

and other audit reports and program reviews. MCC responds to the vast majority of IG 

recommendations by issuing a “management decision” to improve its compliance with U.S. 

Government laws and regulations and implementation of financial management best practices. 

MCC has a dedicated resource to track OIG recommendations and due dates. MCC did not meet 

its target for this measure for fiscal year 2008. 

Exhibit 51: Address and Close IG Recommendations on Time 

Period 

(Year) 

Target Actual Comments 

2006 

(Baseline) 

NA 44% NA 

2007 75% 67% There were a total of 36 recommendations that were 

closed, 24 of which (67%) were closed on time. MCC had 

several OIG recommendations that had been completed 

on time but MCC failed to formally notify the OIG and so 

they remained open. Had MCC provided the formal 

notification, the recommendations would have closed 

before their due dates and MCC would have achieved its 

performance target of 75%. 

2008 75% 66% There were a total of 32 recommendations in FY 2008. 

MCC closed 29 recommendations; 21 of the total 

recommendations (66%) were closed on time. During 

part of FY08 MCC and the OIG were in discussions over 

how MCC would manage certain audit recommendations 

relating to the Corporation’s accountable entities. MCC 

purposely did not formally close these recommendations 

until MCC and the OIG had reached an agreement which 

took place in February 2008. These recommendations 

accounted for the bulk of the 34% that were closed after 

the due date. 

Objective 4.3: Achieve High Level of Staff Engagement_____________________________

Input Indicator: Gallup Staffing Survey 

This is the second year that MCC engaged Gallup Consulting to conduct a staff survey 

measuring staff effectiveness. The survey was completed by 280 employees who responded to 

the same twelve questions that were asked in the 2007 survey. There was minimal change 

between 2007 and 2008 results. The survey indentified MCC’s mission and purpose as 

organizational strengths. MCC’s goal in undertaking this survey is to increase staff engagement, 

performance, and trust. FY 2007 sets the baseline for this indicator. MCC did not meet its 

target for this measure for fiscal year 2008. 

` 88 _
MILLENNIUM CHALLENGE CORPORATION

Exhibit 52: Level of MCC Staff Engagement 

Period 

(Year) 

Target Actual Comments 

2007 NA 3.64 

Grand 

Mean 

For FY 2007, 300 MCC employees were sent invitations to 

complete the 2007 Employee Engagement Survey (Gallup’s 

Q12 questions plus the Federal Human Capital Survey 

questions); 250 employees participated. 

The Gallup median response rate for their survey is 85%; 

MCC’s response rate of 83% is considered to be good. 

MCC’s Grand Mean for 2007 is 3.64, which puts the 

organization at the 31st percentile in the Gallup 2007 Overall 

Q12 database of public and private sector clients and at the 

39th percentile in the Gallup 2007 Public Sector Q12 

database and 44th percentile for first year clients. 

2008 NA 3.59 

Grand 

Mean 

For FY 2008, 280 MCC employees participated in the survey, 

yielding a response rate of 93%, surpassing Gallup’s median 

response rate of 85%. MCC’s Grand Mean for 2008 of 3.59 

puts the agency at 27th percentile in the Gallup 2008 Overall 

Q12 database, and the 29th percentile for organizations 

conducting the survey for the second time. 

 ` 89 _
MILLENNIUM CHALLENGE CORPORATION

This page is intentionally left blank. 

` 90 _
MILLENNIUM CHALLENGE CORPORATION

3. FINANCIAL SECTION

In accordance with the OMB Circular A-136, Financial Reporting Requirements, MCC is 

presenting its financial statements in the appropriate form and content for FY 2008. The tables 

below outline the following financial statements: 

` Balance Sheets 

` Statement of Budgetary Resources 

` Statement of Net Cost 

` Statement of Changes in Net Position 

` Audit of the Millennium Challenge Corporation’s Financial Statements, Internal Controls, 

and Compliance for the Period Ending September 30, 2008 and 2007 

` Notes to Financial Statements 

 ` 91 _
MILLENNIUM CHALLENGE CORPORATION

BALANCE SHEET

 

FY 2008 

(in dollars) 

 FY 2007 

(in dollars) 

Assets 

Intra-Governmental 

Fund Balance with Treasury (Note 2) $6,546,857,481 $5,549,289,597 

Total Intra-Governmental 6,546,857,481 5,549,289,597 

Accounts Receivable (Note 3) 54,672 67,798 

General Property, Plant, and Equipment (Note 4) 8,127,205 7,115,606 

Other/Advances (Note 1O, Note 5) 42,578,652 32,243,157 

Total Assets $6,597,618,010 $5,588,716,158 

 

Liabilities 

Intra-Governmental 

Other (Note 1R) $383,270 ($588,235) 

Total Intra-Governmental 383,270 (588,235)

Accounts Payable (Note 1F) 35,341,439 39,176,698 

Other/Accrued Funded Liabilities (Note 1R) 6,444,041 6,017,983 

Total Liabilities $42,168,750 $44,606,446 

 

Net Position 

Unexpended Appropriations – Other Funds $6,548,610,190 $5,536,714,361 

Cumulative Results of Operations – Other Funds 6,839,070 7,395,351 

Total Net Position $6,555,449,260 $5,544,109,712 

 

Total Liabilities and Net Position $6,597,618,010 $5,588,716,158 

The notes are an integral part of these financial statements. 

` 92 _
MILLENNIUM CHALLENGE CORPORATION

STATEMENT OF BUDGETARY RESOURCES

 

FY 2008 

(in dollars) 

FY 2007 

(in dollars) 

Budgetary Resources 

Unobligated Balance – Beginning of Period $2,256,142,503 $2,671,372,416 

Recoveries of Prior Years Obligations 504,898 15,930,609 

Budget Authority: 

Appropriations 1,557,000,000 1,752,300,000 

Nonexpenditure Transfers, Net, Anticipated and Actual (10,810,404) (9,415,980)

Permanently Not Available (Note 8) (70,611,700) 

Total Budgetary Resources $3,732,225,297 $4,430,187,045 

 

Status of Budgetary Resources 

Obligations Incurred 

Direct $2,769,921,274 $2,174,044,542 

Unobligated Balance Available 780,796,905 1,516,900,216 

Unobligated Balance Not Available 181,507,118 739,242,287 

Total Status of Budgetary Resources $3,732,225,297 $4,430,187,045 

 

Change in Obligated Balance 

Obligated Balance, Net – as of October 1, 2008 

Unpaid Obligations, Brought Forward, October 1 $3,287,907,145 $1,408,398,635 

Obligations Incurred $2,769,921,274 2,174,044,542 

Gross Outlays ($473,979,346) (278,605,423)

Recoveries of Prior Year Unpaid Obligations, Actual ($504,898) (15,930,609)

Obligated Balance, Net – End of Period 

Unpaid obligations $5,583,344,175 $3,287,907,145 

Net Outlays 

Gross Outlays $473,979,346 $278,605,423 

The notes are an integral part of these financial statements. 

 ` 93 _
MILLENNIUM CHALLENGE CORPORATION

STATEMENT OF NET COSTS

Program 2008 Total 

(in dollars) 

2007 Total 

(in dollars) 

Program Costs 

Compact 

Gross Costs (Note 7) $226,498,265 $81,079,458 

Less: Earned Revenue 

Net Program Costs 226,498,265 81,079,458 

609 (g) Programs 

Gross Costs 9,768,972 17,172,113 

Less: Earned Revenue 

Net Program Costs 9,768,972 17,172,113 

Threshold Programs 

Gross Costs 118,903,902 75,766,215 

Less: Earned Revenue 

Net Program Costs 118,903,902 75,766,215 

Due Diligence Programs 

Gross Costs 17,338,771 32,789,662 

Less: Earned Revenue 

Net Program Costs 17,338,771 32,789,662 

Audit 

Gross Costs 2,304,181 2,865,820 

Less: Earned Revenue 

Net Program Costs 2,304,181 2,865,820 

Administrative 

Gross Costs 85,782,157 77,922,458 

Less: Earned Revenue 

Net Program Costs 85,782,157 77,922,458 

Program Costs – Net of All Programs $460,596,248 $287,595,725 

Net Costs of Operations $460,596,248 $287,595,725 

The notes are an integral part of these financial statements. 

` 94 _
MILLENNIUM CHALLENGE CORPORATION

STATEMENT OF CHANGES IN NET POSITION

 

FY 2008 

(in dollars) 

FY 2007 

(in dollars) 

Cumulative Results of Operations 

Beginning Balances $7,395,351 $4,694,987 

Adjustments (Note 1I) (1,671,357) 0 

Beginning Balance, as Adjusted $5,723,994 $4,694,987 

Budgetary Financing Sources 

Appropriations Used $460,060,774 $288,359,297 

Other Financing Sources 

Donations and Forfeitures of Property 0 $123,750 

Imputed Financing 1,650,550 1,813,042 

Total Financing Sources 461,711,324 290,296,089 

Net Cost of Operations (460,596,248) (287,595,725)

Net Change 1,115,076 2,700,364 

Cumulative Results of Operations $6,839,070 $7,395,351 

 

Unexpended Appropriations 

Beginning Balance $5,536,714,361 $4,082,189,638 

Adjustments (Note 8) (3,621,292) 

Beginning Balance, as Adjusted $5,533,093,069 $4,082,189,638 

Budgetary Financing Sources 

Appropriations Received $1,557,000,000 $1,752,300,000 

Appropriations Transferred In/Out (10,810,404) (9,415,980)

Other adjustments (Note 8) (70,611,700) 0 

Appropriations Used (460,060,774) (288,359,297)

Total Budgetary Financing Sources 1,015,517,122 1,454,524,723 

Total Unexpended Appropriations $6,548,610,190 $5,536,714,361 

Net Position $6,555,449,260 $5,544,109,712 

The notes are an integral part of these financial statements. 

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MILLENNIUM CHALLENGE CORPORATION

AUDIT OF THE MILLENNIUM CHALLENGE CORPORATION’S FINANCIAL 

STATEMENTS, INTERNAL CONTROLS, AND COMPLIANCE FOR THE PERIOD 

ENDING SEPTEMBER 30, 2008 AND SEPTEMBER 30, 2007 

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MILLENNIUM CHALLENGE CORPORATION

Office of Inspector General 

 for the 

Millennium Challenge Corporation 

November 17, 2008 

Ambassador John J. Danilovich 

Chief Executive Officer 

Millennium Challenge Corporation 

875 15th Street, N.W. 

Washington, DC 20005-2203 

Subject: Audit of the Millennium Challenge Corporation’s Financial Statements, 

Internal Controls, and Compliance for the Period Ending September 30, 

2008 and 2007 

 Report No. M-000-09-001-C 

Dear Mr. Ambassador, 

Enclosed is the final report on the subject audit. The Office of Inspector General (OIG) 

contracted with the independent certified public accounting firm of Cotton & Company 

LLP to audit the financial statements of the Millennium Challenge Corporation (MCC) 

for the period ending September 30, 2008. The contract required that the audit be 

performed in accordance with United States Generally Accepted Government Auditing 

Standards, Office of Management and Budget (OMB) Bulletin 07-04, Audit 

Requirements for Federal Financial Statements, and the GAO/PCIE Financial Audit 

Manual. 

In its audit of the MCC’s financial statements for the period ending September 30, 2008 

the auditors found: 

• that the financial statements were fairly presented in conformity with U.S. 

Generally Accepted Accounting Principals. 

• four significant deficiencies in the internal controls over financial reporting and 

its operation, one of which is considered a material weakness. 

• no instances of material noncompliance with laws and regulations. 

Significant deficiencies increase the risk of improper recording, unauthorized 

transactions, omissions, potential funds control violations and noncompliance with laws, 

regulations, contracts and grant agreements. Cotton & Company LLP reported the 

following internal control significant deficiencies: 

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MILLENNIUM CHALLENGE CORPORATION

1. Absence of quality controls over financial reporting (material weakness) 

2. Authorization for personnel actions inconsistent with stated policies and 

procedures. 

3. Transactions not recorded in the period they occurred, and 

4. Lack of adequate review for accuracy and duplication prior to processing and 

recording transactions in General Ledger. 

In carrying out its oversight responsibilities, the OIG reviewed Cotton & Company, 

LLP’s report and related audit documentation. This review, as differentiated from an 

audit in accordance with U.S. Generally Accepted Government Auditing Standards, was 

not intended to enable the OIG to express, and we do not express, opinions on MCC’s 

financial statements, or internal control; or on MCC’s compliance with applicable laws 

and regulations. Cotton & Company, LLP is responsible for the attached auditor’s 

report, dated November 14, 2008, and the conclusions expressed in the report. 

However, our review disclosed no instances that Cotton & Company, LLP did not 

comply, in all material respects, with applicable standards. 

To address the internal control deficiencies reported by Cotton & Company, LLP, we 

are making the following recommendations to MCC’s management: 

Recommendation No. 1: We recommend that the Millennium Challenge 

Corporation management: 

 1.1. Perform detailed quality control reviews to ensure 

compliance with accounting standards and reporting guidance. 

1.2. Review and revise written policies and procedures 

regarding the preparation of the financial statements and related 

footnote disclosures to ensure that all financial statement line items 

are reported accurately and properly supported, and that any 

adjustments are reviewed and approved before recording in the GL 

by NBC. Document the above processes to ensure that an audit trail 

is available for all line items and amounts reported. 

 1.3. Effectively coordinate with its service providers (USAID 

and NBC) to ensure timely and accurate receipt of final trial balance 

information sufficient to prepare complete financial statements in 

accordance with OMB Circular A-136. 

Recommendation No. 2: We recommend that the Millennium Challenge 

Corporation’s management: 

 

Review and revise its process for requesting, authorizing, and 

certifying its personnel actions to ensure all actions are properly 

authorized, documented, and retained prior to the action being processed 

into the personnel database. 

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MILLENNIUM CHALLENGE CORPORATION

 ` 99 _

Recommendation No. 3: We recommend that the Millennium Challenge 

Corporation management: 

Develop and adhere to all policies and procedures related to 

quarterly and yearend reporting to ensure that all appropriate transactions 

are reviewed and a determination is made as to the amounts to accrue for 

the current period; and the accrual amount is properly prepared, clearly 

documented, and supported and that it is reviewed by both the service 

provider, NBC, and MCC for completeness and accuracy prior to and 

subsequently after posting to the GL. 

Recommendation No. 4: We recommend that the Millennium Challenge 

Corporation management: 

 4.1. Ensure that procedures for reviewing accruals and adjustments 

recorded by NBC are effectively performed to ensure each is valid and has 

been properly recorded. 

 4.2. Require documentation to support the entry of a JV to avoid 

duplication of the transactions. In addition, use of a consistent naming 

convention when entering JVs should be required to avoid duplication. 

 4.3. Ensure that PP&E reconciliations are effectively performed 

each quarter and that amortization schedules are accurate and complete. 

In finalizing the report, we received and considered MCC’s response to the draft audit 

report and the recommendations included therein. In its comments, MCC concurred 

with all of the recommendations. We acknowledge that management decisions have 

occurred for the audit recommendations. Please inform us when final action has been 

taken. 

The OIG appreciates the cooperation and courtesies extended to our staff and to the 

staff of Cotton & Company, LLP during the audit. Please contact me or Richard J. 

Taylor, Director, Financial Audits Division, at (202) 216-6963, if you have any questions 

concerning this report. 

Sincerely, 

 

Alvin A. Brown /s/ 

Assistant Inspector General 

Millennium Challenge Corporation 
MILLENNIUM CHALLENGE CORPORATION

TABLE OF CONTENTS 

 Page 

Independent Auditor’s Report 101 

 Opinion on the Financial Statements 101 

 Internal Control over Financial Reporting 103 

 Compliance with Laws and Regulations 114 

 

 Management Comments 115 

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MILLENNIUM CHALLENGE CORPORATION

Inspector General 

United States Agency for International Development 

 

Board of Directors 

Millennium Challenge Corporation 

INDEPENDENT AUDITOR’S REPORT 

We have audited the Balance Sheet of the Millennium Challenge Corporation (MCC) as of 

September 30, 2008, and the related Statements of Net Cost, Changes in Net Position, and 

Budgetary Resources for the year then ended. These financial statements are the responsibility 

of MCC management. Our responsibility is to express an opinion on the financial statements 

based on our audit. The financial statements of MCC as of September 30, 2007, were audited 

by other auditors whose report dated October 23, 2007, expressed an unqualified opinion on 

those statements. 

 

We conducted our audit in accordance with auditing standards generally accepted in the 

United States of America; standards applicable to financial audits contained in Government 

Auditing Standards, issued by the Comptroller General of the United States; and Office of 

Management and Budget (OMB) Bulletin 07-04, Audit Requirements for Federal Financial 

Statements. These standards require that we plan and perform the audit to obtain reasonable 

assurance about whether the financial statements are free of material misstatement. An audit 

includes examining, on a test basis, evidence supporting amounts and disclosures in the 

financial statements. An audit also includes assessing accounting principles used and 

significant estimates made by management, as well as evaluating overall financial statement 

presentation. We believe that our audit provides a reasonable basis for our opinion. 

In our opinion, the financial statements referred to above present fairly, in all material 

respects, the financial position of MCC as of September 30, 2008, and its net costs, changes in 

net position, and budgetary resources for the year then ended in conformity with accounting 

principles generally accepted in the United States of America. 

Management’s Discussion and Analysis (MD&A) and other accompanying information are 

not required as part of MCC’s basic financial statements. For MD&A, which is required by 

OMB Circular A-136, Financial Reporting Requirements, and the Federal Accounting 

Standards Advisory Board’s Statement of Federal Financial Accounting Standards No. 15, 

Management’s Discussion and Analysis, we made certain inquiries of management and 

compared information for consistency with MCC’s audited financial statements and against 

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MILLENNIUM CHALLENGE CORPORATION

other knowledge we obtained during our audit. For other accompanying information, we 

compared information with the financial statements. On the basis of this limited work, we 

found no material inconsistencies with the financial statements, U.S. generally accepted 

accounting principles, or OMB guidance. We did not audit the MD&A or other accompanying 

information and therefore express no opinion on them. 

In accordance with Government Auditing Standards, we have also issued separate reports 

dated November 4, 2008, on our consideration of MCC’s internal control over financial 

reporting and on our tests of its compliance with certain provisions of laws and regulations. 

The purpose of these reports is to describe the scope of our testing of internal control over 

financial reporting and compliance and results of that testing, and not to provide an opinion on 

internal control over financial reporting or on compliance. These reports are an integral part of 

an audit performed in accordance with Government Auditing Standards and should be 

considered in assessing results of our audit.

 

COTTON & COMPANY LLP 

Colette Y. Wilson, CPA 

Partner 

November 14, 2008 

Alexandria, Virginia 

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MILLENNIUM CHALLENGE CORPORATION

Inspector General 

United States Agency for International Development 

 

Board of Directors 

Millennium Challenge Corporation 

INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL

We have audited the Balance Sheet of the Millennium Challenge Corporation (MCC) as of 

September 30, 2008, and the related Statements of Net Cost, Changes in Net Position, and 

Budgetary Resources for the year then ended. We have issued our report thereon dated 

November 4, 2008. We conducted our audit in accordance with auditing standards generally 

accepted in the United States of America; standards applicable to financial audits contained in 

Government Auditing Standards, issued by the Comptroller General of the United States; and 

Office of Management and Budget (OMB) Bulletin 07-04, Audit Requirements for Federal 

Financial Statements. 

 

In planning and performing our audit, we considered MCC’s internal control over financial 

reporting as a basis for designing audit procedures for the purpose of expressing our opinion 

on the financial statements, but not for the purpose of expressing an opinion on the 

effectiveness of the MCC’s internal control over financial reporting. Accordingly, we do not 

express an opinion on the effectiveness of MCC’s internal control over financial reporting. 

A control deficiency exists when the design or operation of a control does not allow 

management or employees, in the normal course of performing their assigned functions, to 

prevent or detect misstatements in a timely manner. A significant deficiency is a control 

deficiency, or combination of control deficiencies, that adversely affects the entity’s ability to 

initiate, authorize, record, process, or report financial data reliably in accordance with 

generally accepted accounting principles such that there is more than a remote likelihood that 

a misstatement of the entity’s financial statements, that is more than inconsequential, will not 

be prevented or detected by the entity’s internal control. 

We noted four matters involving internal control and its operation that we consider to be 

significant deficiencies. These matters are listed below and are detailed in the report. 

• Quality Control over Financial Reporting 

• Authorization for Personnel Actions 

• Proper Reporting Period 

• Postings to the General Ledger 

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MILLENNIUM CHALLENGE CORPORATION

A material weakness is a significant deficiency, or combination of significant deficiencies, 

that results in more than a remote likelihood that a material misstatement of the financial 

statements will not be prevented or detected by the entity’s internal control. 

 

Our consideration of internal control over financial reporting was for the limited purpose 

described above and would not necessarily identify all deficiencies in internal control that 

might be significant deficiencies or material weaknesses. However, we consider the significant 

deficiency related to Quality Control over Financial Reporting to be a material weakness as 

defined above. 

QUALITY CONTROL OVER FINANCIAL REPORTING

MCC’s quality control over quarterly and yearend financial reporting is not sufficient to 

enable the agency to detect errors and misstatements and to make corrections in a timely 

manner. During our interim test work and review of quarterly statements and trial balances, 

we identified several control deficiencies in financial reporting that contributed to a significant 

deficiency. We brought these deficiencies to the attention of management. 

At the conclusion of yearend test work and after having received final statements and notes, 

we noted that deficiencies previously brought to management’s attention remained 

uncorrected. It is the combination and continuous nature of identified significant deficiencies 

that raised this finding to the level of a material weakness. Specifically we found that: 

• Despite frequent communications and early coordination with the United 

States Agency for International Development (USAID), MCC was unable to 

ensure timely submission of complete and accurate trial balance information 

and adjustments for reporting Threshold Program balances in its final 

financial statements, and lacked adequate cooperation from USAID. We noted 

the following: 

• MCC prepared final FY 2007 statements with preliminary trial balance 

information from USAID. USAID’s FY 2007 Federal Agencies’ 

Centralized Trial Balance System II (FACTS II) transmission was not 

completed in a timely manner sufficient for MCC reporting. Subsequent 

adjustments for FACTS II reporting were included in FY 2008 beginning 

balances, thus creating differences in beginning and ending balances. 

• MCC, in conjunction with its auditors, discussed the timing of final 

adjustments necessary for accurate and complete FY 2008 yearend 

reporting with USAID. Final trial balances were due by October 20, and 

USAID submitted the final trial balance when due. On November 6, 

however, USAID informed MCC that an additional budgetary adjustment 

of $5.2 million was being posted during the FACTS II revision period. 

MCC had submitted final statements for audit on November 5. 

• MCC did not prepare comparable FYs 2008 and 2007 quarterly statements 

and FYs 2007 and 2006 audited statements. These statements contained 

prior-year ending balances that did not tie to beginning balances for the 

current year. We noted the following discrepancies. 

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MILLENNIUM CHALLENGE CORPORATION

• FY 2006 ending balances did not agree to FY 2007 beginning balances 

for the following line items: 

− Unobligated Balance differed by $25,114,174. 

− Obligated Balance differed by $135,345,240. 

− Cumulative Results of Operations (CRO) differed by $834. 

• FY 2007 ending balances did not tie to beginning FY 2008 balances for 

the following line items: 

− Unobligated Balance differed by $4,324 in the first- and secondquarter statements and by $3,437,077 in the third-quarter statements 

due to formula errors. 

− Obligated Balances (Unpaid) differed by $1,213,646 in the first- and 

second-quarter statements and by $4,646,399 in the third-quarter 

statements due to formula errors. 

− Unexpended Appropriations differed by $3,621,292. 

• In addition, the following ending FY 2007 account balances did not tie to 

beginning FY 2008 balances. 

− FBWT differed by 3,969,761. 

− Advances differed by $72,105. 

− Accounts Payable 420,574. 

MCC restated FY 2006 ending balances, and audit adjustments were proposed 

to correct FY 2008 balances in the current year. 

• MCC does not perform detailed quality control reviews over quarterly and 

yearend MCC trial balances and financial statements submitted for review and 

audit. We noted the following: 

• The Excel file prepared by MCC’s service provider, the National 

Business Center (NBC), and used to prepare FY 2008 third-quarter 

financial statements, contained errors in formulas and cell references. 

According to MCC personnel, these errors were made when combining 

the MCC and USAID trial balances. These errors were not detected by 

NBC personnel and were not detected or corrected by MCC personnel 

prior to submission to the auditors. As a result of these errors, thirdquarter statements contained incorrect and missing line item balances, and 

the trial balance showing the beginning balances did not net to zero. 

Specifically: 

− The Appropriations Used line items on the Statement of Changes in 

Net Position (SCNP) for CRO and Unexpended appropriations did 

not agree. 

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MILLENNIUM CHALLENGE CORPORATION

− Rescissions of $12,611,700 at third quarter were recorded in the 

general ledger (GL), however it was not reported on the SCNP as a 

part of Unexpended Appropriations. 

• MCC does not conduct a thorough review or analysis of USAID-prepared 

trial balances for MCC’s Threshold Program before including these in the 

financial statements. 

• The trial balance for the financial statement package submitted for audit 

on November 10 did not balance to zero for all program funds. The 

balance of all GL accounts for Due Diligence funds totaled $156,399. The 

balance of GL accounts related to Program funds totaled $(126,214). 

Even with these differences, which net to $30,185, the total of all GL 

accounts for all funds was recorded as zero. Proposed audit adjustments 

were not fully posted. MCC did not post audit adjustments related to GL 

account 4610, Allotments – Realized Resources, and thus the trial balance 

did not balance. 

• While the statements are prepared electronically using Excel, the preparation 

lacks edit checks to ensure proper relationships exist among line items. MCC 

and NBC do not perform sufficient reconciliations, analyses, and reviews to 

ensure that appropriate and/or reasonable relationships exist within GL 

accounts and financial statement line items, and that all footnote disclosures 

are complete and accurate per the financial statement line items. For example: 

• Reporting of UDOs in MCC’s footnotes only included amounts from GL 

account 4801, UDO, Unpaid, and thus was incomplete. Balances in GL 

accounts 4802, UDO, Paid, 4871, Downward Adjustments, and 4881, 

Upward Adjustments, were omitted, thus causing the footnote amount to 

be understated by more than $42 million. 

• Testing related to the proper relationship existing between budgetary 

accounts payable and proprietary accounts payable at third quarter 

showed a difference of $5,117,519. Testing related to the proper 

relationship existing between budgetary expended authority and 

proprietary expenses at third quarter showed a difference of $149,836. 

• The Statement of Financing (SOF) footnote did not properly reconcile 

MCC’s Net Cost of Operations to its budgetary resources, because Gross 

Obligations did not agree with the amount reported on the Statement of 

Budgetary Resources. 

OMB Circular A-136, Form and Content of Performance and Accountability Report (PAR), 

states: 

Reporting entities should ensure that information in the financial statements is 

presented in accordance with GAAP for Federal entities and the requirements of this 

Circular.... 

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MILLENNIUM CHALLENGE CORPORATION

Preparation of the annual financial statement is the responsibility of agency 

management.... 

With an allocation transfer....All costs are then consolidated in the parent's financial 

statements in order to provide a complete cost of the parent’s program. Effective 

FY2007, the parent must report all budgetary and proprietary activity in its financial 

statements, whether material to the child, or not....Receiving agencies with transfer 

appropriation accounts must submit a full USSGL trial balance with attributes to the 

parent no later than 12 calendar days following the end of the reporting period or a 

date required by the parent to meet its reporting and auditing deadlines, whichever 

comes first.... 

By not reviewing components comprising the financial statement line items, MCC may 

present statements that are not comparative, accurate, or in compliance with applicable 

requirements. In addition, by not performing such reviews, MCC is not taking full ownership 

and responsibility of its financial statements.

Recommendation

We recommend that MCC management: 

• Perform detailed quality control reviews to ensure compliance with 

accounting standards and reporting guidance. 

• Review and revise written policies and procedures regarding the preparation 

of the financial statements and related footnote disclosures to ensure that all 

financial statement line items are reported accurately and properly supported, 

and that any adjustments are reviewed and approved before recording in the 

GL by NBC. Document the above processes to ensure that an audit trail is 

available for all line items and amounts reported. 

• Effectively coordinate with its service providers (USAID and NBC) to ensure 

timely and accurate receipt of final trial balance information sufficient to 

prepare complete financial statements in accordance with OMB Circular A136. 

Management Response 

MCC concurs with the recommendations. MCC has published, in its FMPP Manual on 

Financial Reporting, Financial Audits, and Performance and Accountability Reports, FMPP 

420, procedures regarding the preparation of financial statements and footnote disclosures to 

ensure that financial statement items are reported accurately and are properly supported. 

MCC will revise/expand its written procedures to include procedures to perform detailed 

quality control reviews to include reviewing adjustments recorded by NBC to ensure each is 

valid and has been properly recorded. Further, MCC will develop and implement procedures 

and documentation that provides an “audit trail” supporting management review and 

approval. Estimated completion date: No later than March 31, 2008. 

MCC has made painstaking efforts to mitigate the reporting difficulties with USAID in its 

capacity as a service provider. During the last fiscal year MCC has met with USAID on four 

different occasions to discuss, among other things, the timing of delivery of its deliverables. 

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MILLENNIUM CHALLENGE CORPORATION

Our meetings took place between September 2007 and October 23, 2008. Our most recent 

meeting, held in conjunction with the OIG, demonstrated that while USAID makes an effort to 

meet the requirements of OMB Circular A-136 and our Memorandum of Understanding, their 

system of controls prevents them from ensuring we receive final deliverables timely. MCC 

will continue its efforts to work with USAID to eliminate this major source of financial 

statement errors and misstatements. 

MCC believes it has taken full ownership and responsibility for its financial statements. MCC 

converted its statements to comply with OMB Circular A-136 in advance of the OMB 

mandated date of September 30, 2007. In conjunction with this change MCC assumed 

responsibility for the preparation of all of its footnote disclosures and associated exhibits. As 

stated above, MCC will be implementing measures to improve quality control in accordance 

with the auditors’ recommendations. 

AUTHORIZATION FOR PERSONNEL ACTIONS

MCC’s process of documenting requests and authorizations for personnel actions (SF-52s) is 

inconsistent with stated policies and procedures. In lieu of authorizing signatures on the SF52, MCC relies on emails for requests and approvals. MCC also relies on systematic 

notifications from its performance management and staffing system, Avue, for requests and 

approvals related to promotions or internal transfers of its employees. 

During our testing of a sample of 45 employees, we noted: 

• Twelve instances where SF-52s were not signed by the requesting official 

and/or the certifying official, nor was email documentation present in the 

Official Personnel File (OPF) or subsequently provided; 

• Four instances where the OPF did not have either the SF-52 or email 

documentation authorizing the personnel action; and 

• One instance where an employee was not systematically selected for hire in 

the Avue system at the time the SF-52 was created and processed. 

During our testing of a sample of 10 newly hired employees, we noted: 

• Two instances where SF-52s were not signed by the requesting, authorizing, 

and/or certifying officials, nor were email documentation or Avue 

screenprints documented in the OPF or subsequently provided; and 

• Three instances where SF-52s were not signed by the certifying official nor 

was email documentation present in the OPF or subsequently provided. 

Office of Personnel Management's (OPM), The Guide to Processing Personnel Actions, 

Chapter 4, Requesting and Documenting Personnel Actions, Section 4c, Approval of 

Personnel Actions, states: 

Personnel actions must be approved by the appointing officer on or before 

their effective dates. An appointment officer is an individual in whom the 

power of appointment is vested by law or to whom it has been legally 

delegated. Only an appointment officer may sign and date the certification in 

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MILLENNIUM CHALLENGE CORPORATION

Part C-2 of the Standard Form 52 ... the appointing officer is responsible for 

ensuring that each personnel action meets all legal and regulatory 

requirements. 

 

For personnel action requests, we noted that the requesting officials, authorizing officials, and 

approving officials did not sign in their designated area to document as validation and 

approval of for the action. In cases where SF-52s are not signed or are not drafted, MCC’s 

process is to rely on email authorizations from appropriate officials to serve as supporting 

documentation for actions to be processed. Per our interview conducted with Human 

Resources (HR) personnel, email authorizations are placed in the employees’ OPF as 

supporting documentation for processed personnel actions. However, as noted above, email 

authorizations were not located in all OPFs nor were they maintained in a centralized location 

for subsequent access and retrieval. 

By not properly completing and processing personnel action requests with appropriately 

documented authorizations, there is increased risk that personnel actions could be falsely 

created and processed, or that personnel actions could be processed with incorrect legal and 

regulatory actions. 

Recommendation

We recommend that MCC review and revise its process for requesting, authorizing, and 

certifying its personnel actions to ensure all actions are properly authorized, documented, and 

retained prior to the action being processed into the personnel database. 

Management Response

MCC concurs with this recommendation. The Human Resources Division (HRD) has 

recognized the deficiency in documentation/SF-52s in the OPF’s. Since MCC’s conversion to 

the competitive hiring process and as part of our Delegating Examining Authority, HRD’s 

staffing specialists have established an electronic work flow/approval authorization process 

within Avue to include all personnel actions. All staffing actions will be electronically signedoff on and apparent on all SF-52s within the Avue system. Once an action is complete and 

signed-off on by the Vice President, Manager, Supervisor, HRD, and Finance and Budget 

Division, the hard copy (coded) SF-52 is now printed and filed in each employees’ OPF. We 

have taken the formal approval process one step further to include the MCC Vice President, 

Administration and Finance, and the MCC Chief of Staff, to our current electronic process. 

This will be updated in the current Avue system by December 31, 2008. 

• The Recruit to Fill and Promotions/Reassignments/Retention Request Process outlines 

the Avue/Personnel Action Request (PAR) process that will record electronic 

approvals and lead to a hard coded SF-52 for filing in the employees’ OPFs. 

• Through the Avue system, HRD will be able to generate reports for the Delegated 

Examining Unit Audit requests. HRD has also established and will continue to update 

our internal standard operating procedures (SOPs) for staffing and SF-52s 

processing. 

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MILLENNIUM CHALLENGE CORPORATION

PROPER REPORTING PERIOD 

During our testing of expenses, we noted transactions that were reported in Fiscal Year (FY) 

2008, for several expenses that were actually incurred in FY 2007. Out of a sample of 61 

expense transactions, we noted the following: 

• One vendor payment to USAID did not have an accrual recorded in FY 2007 

before payment was made in November 2007 (FY 2008). This resulted in an 

understatement of FY 2007 expenses and an overstatement of FY 2008 

expenses of $1,176,360. 

• Purchase card transactions for August 2007 were not posted to the general 

ledger until March 2008, and an accrual was not posted to the General Ledger 

(GL) in FY 2007. This resulted in an understatement of FY 2007 expenses 

and an overstatement of FY 2008 expenses of $36,554. 

• Miscellaneous expenses related to refunds for expenses incurred in FY 2007, 

were posted in October 2007 (FY 2008). An accrual was not posted in FY 

2007 to match the expense resulting in an overstatement of FY 2007 and an 

understatement of FY 2008 expenses in the amount of $18,214. 

• An accrual for a compact country utilizing the Common Payment System 

(CPS) was not posted in FY 2007; instead expenses that were incurred in FY 

2007 were reported in FY 2008. We estimate that $383,332 of expenses 

recorded for Mali during the first two weeks of October 2007 (FY 2008) 

actually related to FY 2007 expenses. 

In addition, during our testing of subsequent disbursements, we found 7 out of 24 sampled 

transactions that were paid in FY 2009, related to FY 2008 and did not have accruals posted. 

Expenses were therefore understated by $1,597,587. 

Statements of Federal Financial Accounting Standards (SFFAS) No. 5, Accounting for 

Liabilities of the Federal Government, (p. 22 and 23) requires that “a liability be recognized 

when one party receives goods or services in return for a promise to provide money or other 

resources in the future... The expense is recognized in the period that the exchange occurs.” 

Office of Management and Budget (OMB) Circular A-136, Form and Content of the 

Performance and Accountability Report (PAR), Balance Sheet, Section III.4.3.4 Liabilities,

states that “liabilities shall be recognized when they are incurred regardless of whether they 

are covered by available budgetary resources.”

Although MCC does have a process in place for recording accruals on a quarterly and yearend 

basis, it did not adequately perform this review at yearend for interagency agreements and 

vendor contracts. In addition, MCC did not have a process by which it reviewed amounts due 

from vendors for services already rendered in order to accrue for the refund and reduce the 

appropriate period’s expenses. 

In FY 2007, MCC did not have a system in place to compute amounts owed, but not paid, for 

services rendered or goods accepted by MCC for countries utilizing CPS, as this was the first 

year of implementation and only one country (Mali) was using it. 

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MILLENNIUM CHALLENGE CORPORATION

FY 2008 expenses were overstated by $1,578,032 due to lack of accruals in FY 2007 and 

understated by $1,597,586 due to lack of FY 2008 accruals. 

Recommendation

We recommend MCC management develop and adhere to policies and procedures related to 

quarterly and yearend reporting to ensure: 

• All appropriate transactions are reviewed and a determination is made as to 

the amount to accrue for the current period; and 

• The accrual amount is properly prepared, clearly documented, and supported 

and that it is reviewed by both the service provider, NBC, and MCC for 

completeness and accuracy prior to and subsequently after posting to the GL. 

Management Response

MCC concurs with the recommendation. In both FY 2007 and 2008, MCC developed and 

utilized comprehensive Yearend Closing and Opening Policies and Procedures that, among 

other items, detailed MCC accrual procedures. These policies and procedures are published 

and disseminated each year. Incorporating these recommendations results in an expanded 

scope that includes updated procedures that ensure all appropriate transactions are reviewed, 

and a determination is made as to the amount to accrue for the current period. Additionally, 

accruals will be reviewed and approved by MCC prior to posting and will be reviewed for 

accuracy and completeness after posting as well. 

POSTING TO THE GENERAL LEDGER

Internal controls are not adequate to ensure that invoices, purchase orders, and journal 

vouchers (JV) are correct, accurate, and properly entered into MCC’s GL. During our testing 

we noted the following: 

• Two travel related accruals were posted twice in the GL. NBC Accounting 

Technicians posted two accruals (MCC-2008-045 and MCC-2008-046 in the 

amounts of $302,384 and $72,187, respectively) on April 7, 2008; these two 

accruals were posted again on April 12th. The first two entries were 

subsequently reversed in the next period. In addition, a JV related to accruing 

expenses for MCC’s Threshold program was posted twice in the amount of 

$739,817. NBC was unable to provide documentation or a reason as to why 

the JV accruals were posted twice. MCC surmised that NBC did not realize or 

verify that the entries had already been posted. 

• Airfare for one trip was erroneously posted twice at different amounts. 

Documentation provided for airfare posted on the centrally billed account 

showed that an initial amount of $13,640 was recorded but not reversed when 

the trip was changed to a subsequent day. New airfare in the amount of 

$14,025 was charged when the trip was rebooked. Based on inquiries with 

the Travel Coordinator regarding the airfare, it was determined that the 

duplication was not known until brought to management’s attention by the 

auditors. The erroneous amount was credited on a subsequent credit card 

statement. 

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• Property, Plant and Equipment (PP&E) transactions were incorrectly recorded 

in the GL and were not corrected in a timely manner, as follows: 

• Accountable equipment purchases in the amount of $51,862 were 

recorded in BOCs for capitalized assets. 

• A $7,875 invoice for capitalized leasehold improvements (LHI) was 

incorrectly recorded as an expense. 

• Accumulated amortization on LHI was understated by $251,992 in the 

third-quarter financial statements. The transactions to record amortization 

expense and accumulated amortization were posted as accruals instead of 

expenses; thus the amortization expense was systematically reversed, 

reducing accumulated amortization at June 30, 2008. 

• A $1,033,429 invoice was recorded in the capitalized LHI account but 

was not recorded on the amortization schedule. This resulted in 

amortization expense and accumulated amortization not being accounted 

for during the first three quarters of FY 2008. 

Government Accountability Office (GAO) Internal Control Standards for the Federal 

Government, GAO/AIMD-00-21.3.1 (11/90) states: 

Control activities occur at all levels and functions of the entity. They include a wide 

range of diverse activities such as approvals, authorizations, verifications, 

reconciliations, performance reviews, maintenance of security, and the creation and 

maintenance of related records which provide evidence of execution of these activities 

as well as appropriate documentation. Control activities may be applied in a 

computerized information system environment or through manual processes. 

Internal control and all transactions and other significant events need to be clearly 

documented, and the documentation should be readily available for examination...All 

documentation and records should be properly managed and maintained.

While some of the discrepancies in property were discovered and known by MCC 

management, corrections were not made timely. Transactions that are erroneously posted and 

not corrected in a timely manner increase the risk of financial misstatements. As a result of 

erroneous postings, expenses and equipment balances were overstated in the second and third 

quarter financial statements. All transactions were corrected by management in the 4th quarter. 

Recommendation

We recommend MCC management: 

 

• Ensure that procedures for reviewing accruals and adjustments recorded by 

NBC are effectively performed to ensure each is valid and has been properly 

recorded. 

• Require documentation to support the entry of a JV to avoid duplication of the 

transaction. In addition, use of a consistent naming convention when entering 

JVs should be required to avoid duplication. 

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• Ensure that PP&E reconciliations are effectively performed each quarter and 

that amortization schedules are accurate and complete. 

Management Response

MCC concurs with the recommendation. MCC has a section published in its Financial 

Management Policies and Procedures (FMPP) Manual on Expense Accruals, FMPP 220. 

Closer scrutiny of the existing policy and procedures indicated a need to “tighten” the 

controls surrounding these processes. MCC will adopt procedures to review accruals and 

adjustments recorded by NBC to ensure each is valid and has been properly recorded. 

Additionally, MCC and NBC will jointly develop procedures to eliminate the possibility of 

recording duplicate transactions. Lastly, MCC’s FMPP 350, Policies and Procedures on 

Property, Plant and Equipment (PP&E), clearly defines MCC’s policies on PP&E but is silent 

on specific control procedures. MCC will develop and implement detailed procedures by no 

later than March 31, 2009. 

We noted certain matters involving internal control and its operation that we will report to 

MCC management in a separate letter. 

This report is intended solely for the information and use of USAID, MCC management, 

others within MCC, OMB, and Congress. It is not intended to be and should not be used by 

anyone other than these specified parties. 

COTTON & COMPANY LLP 

Colette Y. Wilson, CPA 

Partner 

November 14, 2008 

Alexandria, Virginia

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Inspector General 

United States Agency for International Development 

 

Board of Directors 

Millennium Challenge Corporation 

INDEPENDENT AUDITOR’S REPORT ON 

COMPLIANCE WITH LAWS AND REGULATIONS

We have audited the Balance Sheet of the Millennium Challenge Corporation (MCC) as of 

September 30, 2008, and the related Statements of Net Cost, Changes in Net Position, and 

Budgetary Resources for the year then ended. We have issued our report thereon dated 

November 4, 2008. We conducted our audit in accordance with auditing standards generally 

accepted in the United States of America; standards applicable to financial audits contained in 

Government Auditing Standards, issued by the Comptroller General of the United States; and 

Office of Management and Budget (OMB) Bulletin 07-04, Audit Requirements for Federal 

Financial Statements. 

 

MCC management is responsible for complying with laws and regulations applicable to the 

agency. As part of obtaining reasonable assurance about whether MCC’s financial statements 

are free of material misstatement, we performed tests of its compliance with certain provisions 

of laws and regulations, noncompliance with which could have a direct and material effect on 

the determination of financial statement amounts, and certain other laws and regulations 

specified in OMB Bulletin 07-04. Providing an opinion on compliance with those provisions 

was not, however, an objective of our audit, and accordingly, we do not express such an 

opinion. 

The results of our tests of compliance disclosed no instances of noncompliance that we are 

required to report under Government Auditing Standards and OMB Bulletin 07-04. 

This report is intended solely for the information and use of USAID, MCC management, 

others within MCC and USAID, OMB, and Congress. It is not intended to be and should not 

be used by anyone other than these specified parties. 

 

COTTON & COMPANY LLP 

Colette Y. Wilson, CPA 

Partner 

November 14, 2008 

Alexandria, Virginia 

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MILLENNIUM CHALLENGE CORPORATION

 

 

 

TO: Alvin A. Brown 

 Assistant Inspector General 

FROM: Michael Casella /s/ 

 Acting Vice President, Administration and Finance 

DATE: November 17, 2008 

SUBJECT: Management Response to Draft Independent Auditor’s 

 Report on MCC’s Financial Statements for Fiscal Years 

 Ended September 30, 2008 and 2007, Respectively 

We have received the subject draft report and are pleased to note that the independent auditors, Cotton & 

Company, LLP, are issuing an unqualified opinion on our principal financial statements, namely the 

Statements of: 

 Financial Position; 

 Net Costs; 

 Changes in Financial Position; and 

 Budgetary Resources. 

The Millennium Challenge Corporation’s (MCC) management recognizes the importance of 

accountability, effective stewardship and public disclosures related to the resources entrusted to it. Our 

goal is to achieve and maintain excellence in our financial management, financial reporting and internal 

control systems. Accordingly, we will implement the recommendations as soon as possible to strengthen 

our systems of internal control and lend further credibility to our financial statements and overall financial 

operations. 

We wish to recognize and thank you, your team, and Cotton & Company for working closely with us 

during the audit process. Any questions may be addressed to Mr. Dennis Nolan, Deputy Chief Financial 

Officer, or to me. 

Following are our management decisions and responses to Cotton & Company’s audit recommendations. 

Material Weakness 

Quality Control over Financial Reporting 

MCC’s quality control over quarterly and yearend financial reporting is not sufficient to enable the agency 

to detect errors and misstatements and to make corrections in a timely manner. 

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Recommendation No. 1 

We recommend that MCC management: 

1.1 Perform detailed quality control reviews to ensure compliance with accounting standards and reporting 

guidance. 

1.2 Review and revise written policies and procedures regarding the preparation of the financial 

statements and related footnote disclosures to ensure that all financial statement line items are reported 

accurately and properly supported, and that any adjustments are reviewed and approved before recording 

in the GL by NBC. Document the above processes to ensure that an audit trail is available for all line items 

and amounts reported. 

1.3 Effectively coordinate with its service providers (USAID and NBC) to ensure timely and accurate 

receipt of final trial balance information sufficient to prepare complete financial statements in accordance 

with OMB Circular A-136. 

Management Response 

MCC concurs with the recommendations. MCC has published, in its FMPP Manual on Financial 

Reporting, Financial Audits, and Performance and Accountability Reports, FMPP 420, procedures 

regarding the preparation of financial statements and footnote disclosures to ensure that financial 

statement items are reported accurately and are properly supported. MCC will revise/expand its written 

procedures to include procedures to perform detailed quality control reviews to include reviewing 

adjustments recorded by NBC to ensure each is valid and has been properly recorded. Further, MCC will 

develop and implement procedures and documentation that provides an “audit trail” supporting 

management review and approval. Estimated completion date: No later than March 31, 2008. 

MCC has made painstaking efforts to mitigate the reporting difficulties with USAID in its capacity as a 

service provider. During the last fiscal year MCC has met with USAID on four different occasions to 

discuss, among other things, the timing of delivery of its deliverables. Our meetings took place between 

September 2007 and October 23, 2008. Our most recent meeting, held in conjunction with the OIG, 

demonstrated that while USAID makes an effort to meet the requirements of OMB Circular A-136 and our 

Memorandum of Understanding, their system of controls prevents them from ensuring we receive final 

deliverables timely. MCC will continue its efforts to work with USAID to eliminate this major source of 

financial statement errors and misstatements. 

MCC believes it has taken full ownership and responsibility for its financial statements. MCC converted 

its statements to comply with OMB Circular A-136 in advance of the OMB mandated date of September 

30, 2007. In conjunction with this change MCC assumed responsibility for the preparation of all of its 

footnote disclosures and associated exhibits. As stated above, MCC will be implementing measures to 

improve quality control in accordance with the auditors’ recommendations. 

Significant Deficiency 1: Authorization for Personnel Actions 

MCC’s process of documenting requests and authorizations for personnel actions (SF-52s) is inconsistent 

with stated policies and procedures. 

Recommendation No. 2

We recommend that MCC review and revise its process for requesting, authorizing, and certifying its 

personnel actions to ensure all actions are properly authorized, documented, and retained prior to the 

action being processed into the personnel database. 

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Management Response

MCC concurs with this recommendation. The Human Resources Division (HRD) has recognized the 

deficiency in documentation/SF-52s in the OPF’s. Since MCC’s conversion to the competitive hiring 

process and as part of our Delegating Examining Authority, HRD’s staffing specialists have established 

an electronic work flow/approval authorization process within Avue to include all personnel actions. All 

staffing actions will be electronically signed-off on and apparent on all SF-52s within the Avue system. 

Once an action is complete and signed-off on by the Vice President, Manager, Supervisor, HRD, and 

Finance and Budget Division, the hard copy (coded) SF-52 is now printed and filed in each employees’ 

OPF. We have taken the formal approval process one step further to include the MCC Vice President, 

Administration and Finance, and the MCC Chief of Staff, to our current electronic process. This will be 

updated in the current Avue system by December 31, 2008. 

• The Recruit to Fill and Promotions/Reassignments/Retention Request Process outlines 

the Avue/Personnel Action Request (PAR) process that will record electronic 

approvals and lead to a hard coded SF-52 for filing in the employees’ OPFs. 

• Through the Avue system, HRD will be able to generate reports for the Delegated 

Examining Unit Audit requests. HRD has also established and will continue to update 

our internal standard operating procedures (SOPs) for staffing and SF-52s 

processing. 

Significant Deficiency 2: Proper Reporting Period 

During our testing of expenses, we noted transactions that were reported in Fiscal Year (FY) 2008, for 

several expenses that were actually incurred in FY 2007. 

Recommendation No. 3

We recommend MCC management develop and adhere to policies and procedures related to quarterly and 

yearend reporting to ensure: 

3.1 All appropriate transactions are reviewed and a determination is made as to the 

amount to accrue for the current period; and 

3.2 The accrual amount is properly prepared, clearly documented, and supported and 

that it is reviewed by both the service provider, NBC, and MCC for completeness 

and accuracy prior to and subsequently after posting to the GL. 

Management Response

MCC concurs with the recommendation. In both FY 2007 and 2008, MCC developed and utilized 

comprehensive Yearend Closing and Opening Policies and Procedures that, among other items, detailed 

MCC accrual procedures. These policies and procedures are published and disseminated each year. 

Incorporating these recommendations results in an expanded scope that includes updated procedures that 

ensure all appropriate transactions are reviewed, and a determination is made as to the amount to accrue 

for the current period. Additionally, accruals will be reviewed and approved by MCC prior to posting and 

will be reviewed for accuracy and completeness after posting as well. 

Significant Deficiency 3: Posting to the General Ledger 

MCC’s internal controls are not adequate to ensure that invoices, purchase orders, and journal vouchers 

(JV) are correct, accurate, and properly entered into MCC’s GL. 

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Recommendation No. 4

We recommend MCC management: 

 

4.1 Ensure that procedures for reviewing accruals and adjustments recorded by NBC 

are effectively performed to ensure each is valid and has been properly recorded. 

4.2 Require documentation to support the entry of a JV to avoid duplication of the 

transaction. In addition, use of a consistent naming convention when entering JVs 

should be required to avoid duplication. 

4.3 Ensure that PP&E reconciliations are effectively performed each quarter and that 

amortization schedules are accurate and complete. 

Management Response

MCC concurs with the recommendation. MCC has a section published in its Financial Management 

Policies and Procedures (FMPP) Manual on Expense Accruals, FMPP 220. Closer scrutiny of the 

existing policy and procedures indicated a need to “tighten” the controls surrounding these processes. 

MCC will adopt procedures to review accruals and adjustments recorded by NBC to ensure each is valid 

and has been properly recorded. Additionally, MCC and NBC will jointly develop procedures to eliminate 

the possibility of recording duplicate transactions. Lastly, MCC’s FMPP 350, Policies and Procedures on 

Property, Plant and Equipment (PP&E), clearly defines MCC’s policies on PP&E but is silent on specific 

control procedures. MCC will develop and implement detailed procedures by no later than March 31, 

2009. 

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NOTES TO FINANCIAL STATEMENTS (AS OF SEPTEMBER 30, 2008) 

Note 1—Summary of Significant Accounting Policies 

A. Basis of Presentation 

The accompanying financial statements have been prepared to report the financial 

position, results of operations and budgetary resources for MCC, as required by OMB 

Circular A-136, Financial Reporting Requirements for form and content and in 

accordance with Section 613 of the Millennium Challenge Act of 2003 and the 

Government Corporation Control Act (31 U.S.C. §9106). These financial statements 

have been prepared from MCC’s books and records and are presented in accordance 

with the applicable requirements of OMB, the Secretary of the Treasury, and the 

Government Management and Reform Act of 1994. 

MCC’s accounting policies conform to and are consistent with generally accepted 

accounting principles for the Federal Government, as promulgated by OMB and 

prescribed by the Federal Accounting Standards Advisory Board (FASAB). 

MCC’s principle financial statements are: 

` Balance Sheet 

` Statement of Net Cost 

` Statement of Budgetary Resources 

` Statement of Changes in Net Position 

Financial statement footnotes are also included and are considered an integral part of 

the financial statements. 

B. Reporting Entity 

MCC was formed in January 2004 pursuant to the Millennium Challenge Act of 2003 

(Public Law 108-199). MCC’s mission is to reduce poverty by supporting 

sustainable, transformative economic growth in developing countries which create and 

maintain sound policy environments. The assistance is intended to provide economic 

growth and the alleviation of extreme poverty, strengthen good governance, 

encourage economic freedom, and promote investments in people. 

C. Budgets and Budgetary Accounting 

MCC’s programs and activities are funded through no-year appropriations. Such 

funds are available for obligation without fiscal year limitation and remain available 

until expended. MCC was provided total appropriations of $1.557 billion and $1.752 

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billion in FY 2008 and FY 2007, respectively. OMB apportions MCC administrative 

funds on an annual basis pursuant to statutory limitations in the appropriations bill. In 

addition, MCC receives from OMB a separate apportionment of funds for 

administrative (SAE) and audit oversight, compact programs, due diligence programs, 

609(g) programs and threshold programs. Because of the no-year status of MCC 

appropriations, unobligated administrative, audit, and due diligence funds 

(apportioned on annual bases) are not returned to the Treasury; however, unobligated 

balances as of September 30 for these three categories of funds are transferred to the 

compact fund category at the beginning of the subsequent fiscal year. 

D. Basis of Accounting 

Financial transactions are recorded on accrual and budgetary bases in accordance with 

pertinent federal accounting and financial reporting requirements. Under the accrual 

method of accounting, financing sources are recognized when used and expenses are 

recognized when incurred, without regard to receipt or payment of cash. Budgetary 

accounting facilitates MCC’s compliance with legal constraints and controls over the 

use of federal funds. 

The accompanying Balance Sheet, Statement of Net Cost and Statement of Changes in 

Net Position are prepared on the accrual basis. The Statement of Budgetary 

Resources is prepared in accordance with budgetary accounting rules. 

E. Fund Balance with Treasury 

MCC does not maintain cash in commercial bank accounts. Rather, MCC’s funds are 

maintained in Treasury accounts. The Department of the Treasury processes all cash 

receipts and disbursements for MCC. The Fund Balances with Treasury represent noyear funds, which are maintained in appropriated funds that are available to pay 

current and future commitments. 

F. Accounts Payable 

MCC records as liabilities all amounts due to others as a direct result of transactions 

or events that have occurred. Accounts payable represent amounts due to federal and 

non-federal entities for goods and services received by MCC, but not paid at the end 

of the accounting period. Accounts payable reported at the end of FY 2008 and FY 

2007 were $35.3 million and $39.2 million, respectively. A significant portion of 

accounts payable reported ($24.4 million) for FY 2008 was from the USAID reported 

balances for Threshold programs. 

G. Actuarial FECA Liability 

The Federal Employees’ Compensation Act (FECA) provides income and medical 

cost protection to covered federal civilian employees injured on the job, employees 

who have incurred a work-related occupational disease, and beneficiaries of 

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employees whose deaths are attributable to a job-related injury or occupational 

disease. 

Claims incurred for benefits for Corporation employees under FECA are administered 

by the Department of Labor (DOL) and later billed to MCC. MCC’s actuarial liability 

for workers’ compensation includes any costs incurred but unbilled as of year-end, as 

calculated by DOL, and is not funded by current appropriations. 

MCC incurred no FECA liabilities during FY 2008 and FY 2007. 

H. Accrued Annual Leave 

The value of employees’ unused annual leave at the end of each fiscal quarter is 

accrued as a liability. At the end of each fiscal quarter, the balance in the accrued 

annual leave account is adjusted to reflect current pay rates and leave balances. 

Annual leave is funded from current appropriations. Sick leave and other types of 

non-vested leave are expensed when used and, in accordance with federal 

requirements, no accruals are recorded for unused leave. 

I. Net Position 

Net position is composed of unexpended appropriations and cumulative results of 

operations. Unexpended appropriations are funds appropriated by Congress to MCC 

that are still available for expenditure at the end of the fiscal year. Cumulative results 

of operations represent the net differences between financing sources and expenses 

since MCC’s inception. 

MCC made an adjustment to the FY 2008 beginning balance for cumulative results of 

operations to account for FY 2007 prior period adjustments. These adjustments were 

identified as expense accruals for payments that were not properly accrued in FY 

2007. 

J. Financing Sources 

Per note 1.C, MCC funds its program and operating expenses through no-year 

appropriations. Appropriations are recognized as an accrual-based financing source at 

the time they are used to pay program or administrative expenses, except for expenses 

to be funded by future appropriations. 

K. Retirement Benefits 

MCC’s employees participate in either the Civil Service Retirement System (CSRS) 

or the Federal Employees Retirement System (FERS). FERS was established by 

Public Law 99-335. Pursuant to this law, most U.S. Government employees hired 

after December 31, 1983, are covered by FERS and Social Security. Federal 

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employees hired prior to January 1, 1984, were allowed to elect whether they desired 

to participate in FERS (with Social Security coverage) or remain in CSRS. For 

employees covered by CSRS, MCC contributes 7 percent of their gross pay toward 

their retirement benefits. For those employees covered by FERS, MCC contributes 11 

percent of their gross pay toward retirement. Employees are also allowed to 

participate in the federal Thrift Savings Plan (TSP). For employees under FERS, 

MCC contributes an automatic 1 percent of basic pay to TSP and matches employee 

contributions up to an additional 4 percent of pay, for a maximum Corporation 

contribution amounting to 5 percent of pay. Employees under CSRS may participate 

in the TSP, but will not receive either MCC’s automatic or matching contributions. 

At the end of FY 2008, MCC made retirement contributions of $142,000 to CSRS, 

$2.66 million to FERS, and $998,130 to TSP. 

L. Use of Estimates 

The preparation of financial statements requires management to make estimates and 

assumptions that affect the reported amounts of assets and liabilities, the disclosure of 

contingent assets and liabilities at the date of the financial statements, and the reported 

amounts of financing sources and expenses during the reporting period. Actual results 

could differ from such estimates. 

M. Contingencies 

MCC can be a party to various routine administrative proceedings, legal actions, and 

claims brought by or against it, including threatened or pending litigation involving 

labor relations claims, some of which may ultimately result in settlements or decisions 

against MCC. In the opinion of MCC’s management and legal counsel, there are no 

proceedings, actions, or claims outstanding or threatened that would materially impact 

MCC’s financial statements. 

N. Judgment Fund 

Certain legal matters to which MCC can be named as a party may be administered 

and, in some instances, litigated and paid by other federal agencies. In general, 

amounts paid in excess of $2,500 for Federal Tort Claims Act settlements or awards 

pertaining to these litigations are funded from a special appropriation administered by 

the Department of the Treasury, called the Judgment Fund. Although the ultimate 

disposition of any potential Judgment Fund proceedings cannot be determined, 

management expects that any liability or expense that might ensue would not be 

material to MCC’s financial statements. 

O. Custodial Receivables and Liabilities 

Under current policy and procedures, MCC funds all compacts with other countries by 

advancing funds on a monthly basis to cover projected needs. Such funds provided to 

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the countries are required to be deposited in interest-bearing accounts, if legally 

feasible, until disbursed. The interest earned on these accounts is remitted to MCC 

and deposited into an account at the U.S. Treasury. Such interest may not be retained 

or used by MCC, but periodically, is returned to the Treasury’s general funds. MCC 

had outstanding advances related to compact financing (Compact, Due Diligence and 

609(g) funding) of approximately $32.6 million and $30.8 million on September 30, 

2008 and 2007, respectively. MCC received and deposited $1.61 million and $1.93 

million in interest remittances on September 30, 2008 and 2007, respectively. 

P. Donated Services 

MCC may on occasion utilize donated services from other Federal agencies and 

private firms in the course of business operations. MCC did not utilize donated 

services for FY 2008. The approximate fair market value of donated services for 

September 30, 2007 was $123,750. 

Q. Transfers with Other Federal Agencies 

MCC is a party to allocation transfers with another federal agency as a transferring 

entity. Allocation transfers are legal delegations by one department of its authority to 

obligate budget authority and outlay funds to another department. A separate fund 

account (allocation account) is created in the U.S. Treasury as a subset of the parent 

fund account for tracking and reporting purposes. All allocation transfers of balances 

are credited to this account, and subsequent obligations and outlays that are incurred 

by the child entity are charged to this allocation account, as they execute the delegated 

activity on behalf of the parent entity. 

Generally, all financial activity related to these allocation transfers (e.g., budget 

authority, obligations, outlays) is reported in the financial statements of the parent 

entity, from which the underlying legislative authority, appropriations, budget 

appointments are derived. MCC allocates funds, as the parent, to the United States 

Agency for International Development (USAID). In FY 2008 and 2007, MCC 

transferred budgetary authority of $110 million and $201 million, respectively to 

USAID for Threshold programs. 

R. Liabilities 

MCC reclassified FY 2007 balances ($2.046 million) from Intragovernmental 

Liabilities to non-Intragovernmental liabilities in the column titled “Other/Accrued 

Funded Liabilities” for proper reporting with FY 2008 balances. MCC noted that 

expense accruals reported in FY 2007 should not have been displayed as 

“Intragovernmental” and should have been denoted as liabilities from the “Public.” In 

order to ensure the FY 2007 expense accruals were properly reported in comparison 

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with FY 2008 expense accruals, MCC reclassified this portion of the FY 2007 

balance. 

Note 2—Fund Balance with Treasury 

The U.S. Treasury accounts for all U.S. Government cash on an overall consolidated 

basis. MCC is appropriated “general” funds only and maintains theses balances in the 

Fund Balance with Treasury. The general fund line items on the Balance Sheet for 

September 30, 2008 and 2007 consisted of the amounts presented in Exhibit 53. The 

status of the general fund balances is summarized by obligated and unobligated 

balances in Exhibit 54. 

Exhibit 53: Fund Balance with Treasury

September 30, 2008 

(in thousands) 

September 30, 2007 

(in thousands) 

Fund Balances 

General Funds $6,546,857 $5,549,290 

Total $6,546,857 $5,549,290 

Exhibit 54: Status of Fund Balance with Treasury 

September 30, 2008 

(in thousands) 

September 30, 2007 

(in thousands) 

Status of Fund Balances with Treasury 

Unobligated Balance 

 Available 

 Unavailable 

$782,006 

181,507 

$1,520,927 

739,242 

Obligated Balance $5,583,344 $3,289,121 

Total $6,546,857 $5,549,290 

Note 3—Accounts Receivable, Net 

Accounts receivable reflects overpayments of payroll, travel and other MCC current 

and former employee expenses. MCC does not record an allowance for doubtful 

accounts as these expenses are deemed wholly collectible. Total receivables at the 

end of FY 2008 and 2007 were approximately $55,000 and $68,000, respectively. 

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MCC reclassified its FY 2007 balances for Accounts Receivable from 

Intragovernmental Assets to non-Intragovernmental Assets for proper reporting with 

the FY 2008 balances. MCC, in its previous A-136 financial statement reporting, has 

incorrectly classified its Accounts Receivable balances as “Intragovermental.” These 

balances were reviewed during FY 2008 and determined to be Accounts Receivable 

due from the “Public.” 

Note 4—General Property, Plant and Equipment (PP&E), Net 

MCC’s PP&E costs are the associated leasehold improvements made to its leased 

office space. MCC has made significant leasehold improvements to its office space 

and amortizes the improvements based on the in-service (invoice) date of the 

improvement. Amortization on that in-service improvement is calculated on a 

quarterly basis. The cost of these improvements at September 30, 2008 and 2007 was 

$10.9 million and $8.7 million, respectively. Accumulated depreciation was $2.8 

million and $1.5 million, respectively. The current book value is valued at $8.1 

million and $7.1 million for the periods ending September 30, 2008 and 2007, 

respectively. The useful life of the improvements is based on the lease terms; 10 

years for the Bowen building lease and 8 years for the City Center building lease. 

MCC’s capitalization threshold for all other general property, plant and equipment 

must have an original cost of $50,000 or more and an estimated useful life of 5 or 

more years. MCC’s software capitalization threshold defines a capitalized asset that 

has an original cost of $200,000 or more and an estimated useful life of 5 years or 

more and the information technology infrastructure capitalization threshold defines a 

capitalized asset as having an original cost of $200,000 or more and an estimated 

useful life of 3 years or more. These thresholds reduce MCC’s administrative costs 

associated with accounting for PP&E, and result in increased operational efficiency. 

Note 5—Other Assets 

Advances reflect amounts provided to MCA compact countries and other federal 

agencies in accordance with formal compacts or inter-agency agreements. MCC 

reported $42.6 million and $32.2 million in advances as of September 30, 2008 and 

2007, respectively. 

Note 6—Leases 

MCC leases office space in two adjacent locations in Washington, D.C. These leases 

are on 10 year (Bowen) and 8 year (City Center) lease terms that terminate on May 25 

and May 26, 2015, respectively. The Bowen building lease increases approximately 1 

percent each year of the lease term. The City Center building lease increases every 

` 125 _
MILLENNIUM CHALLENGE CORPORATION

three years through the lease term. The increases for both buildings are depicted in 

Exhibit 55 below. 

Exhibit 55: Operating Leases 

Future Lease Payments Due 

Fiscal Year Bowen City Center Total 

FY 2009 5,502,517 1,889,524 7,392,041 

FY 2010 5,557,542 1,889,524 7,447,006 

FY 2011 5,613,117 1,942,376 7,555,493 

FY 2012 5,669,249 1,942,376 7,611,625 

FY 2013 5,725,941 1,942,376 7,668,317 

After 5 Years 11,624,232 3,990,458 15,614,690 

Total Future Lease Payments (in dollars) $39,692,598 $13,596,634 $53,289,232 

Note 7—Intragovernmental Costs and Exchange Revenue 

The Statement of Net Cost reports the MCC’s gross cost less earned revenues to arrive 

at net cost of operations. Costs have been illustrated by MCC specific programs. 

Exhibit 56 shows the value of exchange transactions between the Corporation and 

other Federal entities, as well as non-Federal entities. Intra-governmental costs relate 

to transactions between the MCC and other Federal entities. Public costs, on the other 

hand, relate to transactions between the MCC and non-Federal entities. MCC does 

not have any exchange revenues. 

Exhibit 56: Intra-governmental Costs and Exchange Revenue Compact 609(g) Threshold Due Diligence Audit Administrative 

FY 2008 

Total 

(in 

thousands)

FY 2007 

Total 

(in 

thousands)

IntraGovernmental - - 3,006 2,680 2,118 11,285 19,089 14,156 

Public 226,498 9,769 115,898 14,659 186 74,497 441,507 273,439 

Total - 

Program $226,498 $9,769 $118,904 $17,339 $2,304 $85,782 $460,596 $287,595 

` 126 _
MILLENNIUM CHALLENGE CORPORATION

Note 8—Adjustments to Beginning Balance of Budgetary Resources 

At the beginning of FY 2008, $12.6 million of amounts appropriated under the 

Foreign Operations, Export Financing and Related Programs Appropriations Act were 

rescinded. The rescission was part of the Across-the-Board rescission enacted for FY 

2008. MCC was also subject to a mid fiscal year 2008 rescission of $58 million. 

MCC also made adjustments to its Unexpended Appropriations beginning balance to 

reflect the ending balance from FY 2007. This adjustment was due to untimely 

reporting of final FY 2007 ending balances from USAID for the Threshold program. 

At the end of FY 2007, USAID made an additional adjustment to its account balances 

that was never reported and incorporated into MCC’s consolidated financial 

statements. This oversight was identified in FY 2008 and recorded as an adjustment 

to ensure that FY 2007 ending balances for Unexpended Appropriations equaled FY 

2008 beginning balances for Unexpended Appropriations. 

Note 9—Explanation of Differences between the Statement of 

Budgetary Resources (SBR) and the Budget of the U.S. Government 

MCC ensures that the information reported in its books is reflected within the Budget 

of the U.S. Government. Since MCC’s financial statements are published before the 

President’s Budget, this reconciliation is based on the Statement of Budgetary 

Resources (SBR) for FY 2007 and the 2007 actual data reported in the President’s 

2009 budget submission. Fiscal year 2008 actual data will be published in February 

2009 within the 2010 Budget of the United States. Material differences reported in 

the budgetary resources column ($2,679) represent unobligated balances reported on 

MCC’s SBR and SF133, but not in the Budget of the U.S. Government. See Exhibit 

57. 

Exhibit 57: Material Differences Between the SBR and the President’s Budget 

Budgetary 

Resources 

(in millions)

Obligations 

Incurred 

(in millions) 

Distributed 

Offsetting 

Receipts 

(in millions) 

Total 

Outlays 

(in millions)

Statement of Budgetary 

Resources 

4,430 2,174 277 

Unobligated Balance Carry 

forward from FY 2006 

(2,679) 

Budget of the U.S. 

Government 

1,751 (3) 277 

` 127 _
MILLENNIUM CHALLENGE CORPORATION

Note 10—Undelivered Orders at the End of the Period 

The reported net position consists of unexpended appropriations and cumulative 

results of operations, which reflects the difference between financing sources and 

expenses since MCC’s inception. Exhibit 58 presents Undelivered Orders as of 

September 30, 2008 and 2007. 

Exhibit 58: Undelivered Orders 

Undelivered 

Orders 2008 2007 

Administrative 27,302,437 27,939,653 

Audit 2,180,340 1,466,325 

609(g) 25,349,832 25,781,640 

Due Diligence 49,203,177 33,829,978 

Compact/CIF 5,242,750,204 2,956,809,299 

Threshold 238,174,754 234,952,661 

Total $5,584,960,744 $3,280,779,556 

Note 11—Reconciliation of Net Cost of Operations to Budget 

Exhibit 59 reconciles the resources available to MCC to finance operations with the 

net cost of operating MCC’s programs. Some operating costs, such as depreciation, 

do not require direct financing sources. This exhibit illustrates the reconciliation of 

Net Cost of Operations to Budget. 

Exhibit 59: Reconciliation of Net Cost of Operations to Budget 

Resources Used to Finance 

Activities Program Costs

Budgetary Resources Obligated 

Gross obligations 2,769,921,274 Gross Costs 460,596,248

Recoveries of prior year unpaid 

obligations 

(504,898) 

Other financing resources 1,650,550 

Total resources used to finance 

activities 

2,771,066,926 

Total resources used to finance 

items not part of the net cost of 

operations 

(2,306,454,323) Less: Earned Revenue - 

Total components of net cost of 

operations that will not require or 

generate resources 

1,147,968 

Other expenses not requiring 

budgetary resources 

(5,164,323) 

Net Cost of Operations 460,596,248 Net Cost of Operations 460,596,248 

` 128 _
MILLENNIUM CHALLENGE CORPORATION

4. OTHER ACCOMPANYING I NFORMATION

SUMMARY OF FINANCIAL STATEMENT AUDIT

In accordance with the requirements of OMB Circular A-136, MCC is required to prepare a 

summary of its financial statement audit. The FY 2008 Independent Auditor’s Report cited 

only one material weakness in MCC’s controls over financial reporting. See Exhibit 60 

below. 

Exhibit 60: Summary of Financial Statement Audit Table 

 

Audit Opinion Unqualified 

Restatement No 

Material 

Weaknesses 

Beginning 

Balance 

New Resolved Consolidated Ending 

Balance 

Quality Control 

Over Financial 

Reporting 

0 1 - - 1 

Total Material 

Weaknesses 

0 1 - - 1 

` 129 _
MILLENNIUM CHALLENGE CORPORATION

` 130 _

 

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875 Fifteenth Street NW

Washington, DC 20005-2221

www.mcc.gov

Reducing Poverty Through Growth