Millennium Challenge Corporation

Document Title 00

Difference

2008 Annual Report

Making a
s in Honduras. Port expansion in Cape Verde. Business de

development services in Nicaragua. Assistance to farmers

armers in Georgia. Upgrading wharfs in Vanuatu. Improve

credit services in Ghana. Providing legal aid in Benin. Wa

ion in Cape Verde. Gas pipeline rehabilitation in Georgia.

mprove access to agriculture services in Mali. Enable dev

velopment of water point system in Mozambique. Provide

crop insurance in El Salvador. Teacher training in Mongol

Water supply improvements in Nicaragua. Formalize prop

operty rights in Benin. Improve ferry service in Ghana. Str

Rehabilitate health centers in Lesotho. Port upgrades in M

ncrease financial services in Morocco. Repair rural roads i

vocational education in El Salvador. Standardizes propert

rights in Mozambique. Promotes irrigation development i

in Ghana. Rural credit assistance to farmers in Armenia. 

Bridge construction in Cape Verde. Standardize land tenu

ure policies in Nicaragua. Water supply and sanitation im

mprovements in Georgia. Improve solid waste disposal in

n Mali. Construct fish landing sites in Morocco. Execute a

pilot wetlands restoration in Lesotho. Improve coconut p

producers’ products in Mozambique. Introduce a long-ter

rangeland leasing system in Mongolia. Expand the capac

a water treatment plant in Tanzania. Strategic road maint

ntenance planning in Armenia. Modernize national interba

bank payment system in Madagascar. Road improvement

farmer access to credit in Honduras. Improve credit infor

ormation bureau in Benin. Services to efficiently perform

contracts in Vanuatu. Construct a blood transfusion cente

Millennium Challenge Corporation. Reducing poverty thro
Making

a Difference

2008 Annual Report

evelopment services in Nicaragua.

s

e

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perty

re

Morocco.

in Tanzania.

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in Ghana. 

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mprovements

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This document is produced in accordance with Section 613 of the Millennium Challenge Act of 2003, codified at 22 U.S.C. §§7701, 7707 (a).

Every effort has been made to produce this document in a cost-efficient, user- and environmentally-friendly manner based on industry best practices and 

government printing protocols.

The paper used to print this document includes a minimum of between 10 percent (cover paper) and 30 percent (interior paper) postconsumer fiber as 

mandated by the U.S. Congress Joint Committee on Printing.

To reduce costs, waste and environmental impact, this document is made available on MCC’s website at http://www.mcc.gov/annualreport.
Contents

Executive Summary............................................................................................................................................. 3

Message from Secretary of State Condoleezza Rice Chair of the Board .................................................4

Message from Ambassador John J. Danilovich Chief Executive Officer .................................................. 5

Section 1: Expectations That Make a Difference............................................................................................ 7

The MCC difference defined by our mission......................................................................................... 7

The MCC difference defined by our programs... ................................................................................... 8

The MCC difference defined by our leadership.... ..............................................................................20

Section 2:A Different Model............................................................................................................................ 21

Spotlighting Selection .............................................................................................................................. 21

Spotlighting Compact Development ..................................................................................................... 23

Spotlighting Implementation................................................................................................................... 25

Section 3:Results That Make a Difference.....................................................................................................29

Results: Policy Reforms That Make a Difference ................................................................................30

Results: Compact and Threshold Program Progress that Makes a Difference ..............................36

Management’s Financial Comments..............................................................................................................47

A Message from the Acting Vice President of 

the Department of Administration and Finance..................................................................................47

Appendices..........................................................................................................................................................49

Appendix A: Individual Compact Country Highlights ......................................................................50

Appendix B: Financial Statements..........................................................................................................66

Making a Difference i
ii Making a Difference
Executive Summary

school—from business owners and residents in 

Georgia tapping into a reliable energy source 

thanks to an upgraded gas pipeline, to women 

in Madagascar using microloans to grow their 

small businesses—MCC is stimulating growth 

and reducing poverty 

by partnering with 

poor countries committed to change. 

The 2008 Annual 

Report—covering 

the period from 

October 1, 2007 

to September 30, 

2 0 0 8 — e x p l a i n s 

what makes MCC’s 

partnerships so different and outlines 

our early successes. 

MCC’s commitment 

to making a difference in the lives of 

the poor resulted 

in MCC compacts 

with 18 countries 

in Africa, Central 

America, Eurasia, and the Pacific totaling over 

$6.3 billion and MCC threshold programs in 

19 countries worldwide, including MCC’s first 

Stage II, or second, threshold program, totaling 

an additional $440 million. The aggressive implementation of these compacts and threshold 

programs is bringing new economic opportunities, raising standards of living, and creating a 

more prosperous future for the world’s poorest 

citizens.

Cristiane Ratsia Anne Marie, a mother of 

three, is growing her business, increasing her 

income, and standing on her own with access 

to new microcredit loans provided with the 

help of Madagascar’s Millennium Challenge 

Corporation (MCC) compact. With her first loan 

already repaid, she moved to her second and is 

planning to open a clothing store. Onion grower 

Jorge Anibal Flores is achieving higher yields, 

lower unit costs, and increased income because 

of the direct technical assistance he is receiving through Honduras’s compact with MCC. 

Nearby, fellow Honduran and single mother 

Modesta Rodriguez struggles to support her 

family by washing and ironing in a makeshift 

home along the CA-5 North Highway. Under 

the country’s comprehensive resettlement plan 

associated with the expansion of this major 

thoroughfare, drawn up with assistance and financing from MCC, Modesta accepted in-kind 

compensation so she can move from the side of 

the highway to safer housing with significantly 

improved living conditions. 

Cristiane, Jorge, and Modesta are just three 

of the millions of people who will experience 

a meaningful, tangible difference in their lives 

because MCC is delivering U.S. Government 

development assistance in an innovative, demanding, and unprecedented way. By incorporating the innovation and patience necessary 

for long-term sustainable development, MCC’s 

approach has taken root and is bearing results. 

From farmers in Nicaragua investing in their 

farms’ productivity because they now have secure land titles, to children and young adults in 

Burkina Faso, Ghana, and El Salvador attending 

Making a Difference 3
Message from 

Secretary of State Condoleezza Rice

Chair of the Board 

At the signing ceremony of Burkina Faso’s $481 

million Millennium Challenge compact on July 

14, 2008, I concluded my remarks by recognizing that the future of the Millennium Challenge 

Corporation is bright. 

MCC’s future is bright because of the real 

results emerging from MCC compacts and 

threshold programs. MCC has worked with 

partner countries that span the globe to design 

programs which tackle barriers to sustainable 

development specifically identified by partners. 

As of the end of fiscal year 2008, MCC will have 

committed over $6.7 billion to these programs 

to fulfill MCC’s mission of poverty reduction 

through sustainable economic growth. Also, 

MCC’s future is bright because of its innovative vision for foreign assistance, a vision that 

sees that aid can be more effective when it is 

provided to countries that govern justly, invest 

in their people, and foster economic freedom. 

Finally, MCC’s future is bright because of the 

excellence of MCC’s leadership and staff, who 

work in close partnership with countries worldwide to replace poverty with prosperity. 

MCC’s innovative approach to foreign assistance 

has revolutionized the way we promote development. This approach grew out of the United 

States’ commitment at the 2002 Monterrey 

Summit on Financing for Development, where 

President Bush called for a “new compact for 

global development,” linking greater contributions from developed nations to greater 

responsibility from developing nations. By encouraging partner countries to shoulder deeper 

responsibility for their own development, MCC 

helps these countries secure their futures, and 

ensures their ongoing commitment to political, 

economic, and social reform. 

With continued support from Congress, the 

next administration, and the development community, I am confident of MCC’s bright future 

and the transformational difference MCC will 

continue to make in the lives of the world’s 

poorest. MCC is one of the best examples of 

America’s positive international engagement, 

forging partnerships for progress that make a 

difference in the fight against global poverty. 

Condoleezza Rice 

Chair

4 Making a Difference
Message from 

Ambassador John J. Danilovich 

Chief Executive Officer 

Over four short years, the Millennium Challenge 

Corporation’s investments in some of the 

world’s poorest countries are yielding impressive results. In addition to documenting these 

early outcomes, our 2008 Annual Report offers 

some perspective on the scope of MCC’s contributions to the effective and innovative delivery 

of U.S. development assistance. 

In 2008, through MCC investments, upgrades 

were completed on Georgia’s gas pipeline to 

provide a reliable energy source for businesses 

and homes, roads were constructed in Cape 

Verde that integrate markets and reduce transportation costs, and women received assistance 

to grow small businesses in Madagascar. MCC 

compacts supported programs to distribute land 

titles in Nicaragua, to train farmers in Armenia 

on improving agricultural productivity, to rehabilitate elementary schools in Ghana, and to 

fund scholarships in El Salvador so students can 

attend college.

These are just a few of the unfolding results 

that we have seen in the past year. Proving that 

MCC is no longer a mere concept, these results 

on the ground demonstrate constructive and 

tangible effects on the lives of the world’s poor. 

Alongside our growing portfolio of country partnerships, they confirm that MCC is successfully 

delivering development assistance and making 

a positive difference worldwide. Indeed, MCC’s 

expectation that country partners commit to 

sound development policies and build country 

capacity to support their own sustainable results has not only motivated good governance 

and reforms, but also opened the door to new 

expectations in country empowerment. 

MCC looks forward to continued cooperation 

with Congress, fellow U.S. Government agencies, nongovernmental organizations, the private sector, and friends and experts throughout 

the international development community to 

contribute even more constructively to helping partner countries lift themselves out of 

poverty and onto the path of opportunity and 

prosperity.

John J. Danilovich

Chief Executive Officer

Making a Difference 5
6 Making a Difference
Section 1: 

Expectations That Make a Difference

The MCC difference 

defined by our mission...

Reducing poverty through growth

The Millennium Challenge Corporation is an 

effective resource in America’s toolbox of development assistance, charged with the singular 

mission of reducing poverty through sustainable economic growth. To do this, MCC expects more from ourselves, our partners, and 

the assistance we deliver. 

Different expectations for ourselves

 MCC delivers development assistance in a 

unique and demanding way that is changing 

not only the conversation about U.S. foreign 

assistance but also the practice of how to 

make aid most effective.

 MCC’s model demands the new realization 

that development occurs not just from the 

completion of a program but from a partner 

country’s leadership of it. 

 MCC incorporates over half a century of best 

practices in development, challenging countries to practice sound policies and build 

their capacity to lead their development.

Different expectations for our partners

 MCC raises expectations by partnering with 

those poor countries committed to good 

governance, to stamping out corruption, to 

investing in the health and education of their 

citizens, and to economic freedom. 

 MCC changes the expectations, supporting countries that are championing their

development efforts with MCC funds, based 

on their homegrown solutions in extensive 

consultation with their citizens.

 MCC expects countries to deliver tangible 

results that will make a difference in the lives 

of the poor.

Different expectations 

for our assistance

 MCC boosts conditions for trade, investment, and entrepreneurship that fuel the private sector’s ingenuity as the ultimate engine 

of growth. 

 MCC supports America’s security and foreign policy objectives by working toward 

a safer and more prosperous world, where 

pockets of poverty do not become breeding 

grounds for extremism. 

 MCC’s “smart aid” approach is one of the 

best examples of America’s “smart power” 

strategy for global engagement. 

Making a Difference 7
The MCC difference defined by our programs...

Compacts in Signing Order (as of the end of fiscal year 2008)

Compact with

Grant Amount 

(in millions) Entry Into Force on

1. Madagascar $109.8 July 27, 2005

2. Honduras $215.0 September 29, 2005

3. Cape Verde $110.0 October 17, 2005

4. Nicaragua $175.1 May 26, 2006

5. Georgia $295.3 April 7, 2006

6. Benin $307.3 October 6, 2006

7. Vanuatu $65.7 April 28, 2006

8. Armenia $235.7 September 29, 2006

9. Ghana $547.0 February 16, 2007

10. Mali $460.8 September 17, 2007

11. El Salvador $461.0 September 20, 2007

12. Mozambique $506.9 September 22, 2008

13. Lesotho $362.6 September 17, 2008

14. Morocco $697.5 September 15, 2008

15. Mongolia $284.9 September 17, 2008

16. Tanzania $698.0 September 15, 2008

17. Burkina Faso $480.9 Entry into Force projected for 

4th quarter of fiscal year 2009

18. Namibia $304.5 Entry into Force projected for 

4th quarter of fiscal year 2009

Compact

A compact is 

a multi-year 

grant agreement 

between MCC and 

an eligible country 

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.

Entry

Into 

Force

After compact 

signing, entry into 

force is the point 

at which funds are 

obligated and the 

implementation of 

compact programs 

commences.

8 Making a Difference
Threshold Programs in Signing Order

Threshold Program with

Grant Amount 

(in 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. 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 Príncipe $8.7 November 9, 2007

16. Kyrgyz Republic $16.0 March 14, 2008

17. Niger $23.0 March 17, 2008

18. Peru $35.6 June 10, 2008

19. Rwanda $24.7 September 24, 2008

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

Threshold 

Program 

A threshold 

program is 

designed to assist 

countries that are 

on the “threshold,” 

meaning they have 

not yet qualified for 

compact funding, 

but demonstrate 

significant 

commitment to 

improving their 

performance on the 

eligibility criteria 

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.

* On the 

horizon

MCC received a 

Stage II threshold 

program proposal 

from Paraguay on 

September 30, 

2008. 

Making a Difference 9
MOLDOVA

ALBANIA

NICARAGUA

HONDURAS

MOROCCO

BURKINA FASO

BENIN

SÃO TOMÉ

& PRINCIPE

CAPE VERDE

GHANA

MALI 

PARAGUAY

BOLIVIA

PERU

GUYANA

SENEGAL

EL SALVADOR

NAMIBIA

ZAMBIA

Compact-Eligible Countries

Suspended Compact-Eligible Countries

Compacts Signed

Compact-Eligible and 

Compact-Eligible with 

Compact Signed and 

Map of Compact and Threshold Program Countries

10 Making a Difference
A

JORDAN

MALAWI

RWANDA

TANZANIA

KENYA

UGANDA

UKRAINE

GEORGIA

MONGOLIA

KYRGYZ REPUBLIC

MOZAMBIQUE

INDONESIA

PHILIPPINES

TIMOR-LESTE

ARMENIA

MADAGASCAR

YEMEN

NIGER

LESOTHO

VANUATU

A

A

reshold Eligible

h reshold Agreement Signed

reshold Agreement Signed

reshold-Eligible Countries

reshold Agreements Signed

reshold Countries Suspended

Making a Difference 11
Cumulative

Total Number of compacts approved 

through fiscal year 2008:.....................................................................................18

Total approximate value of compacts approved 

through fiscal year 2008:................................................................$6.32 billion

Compacts

FY 2008

Total Number of compacts approved 

during fiscal year 2008:.........................................................................................4

Total approximate value of compacts approved 

during fiscal year 2008:.....................................................................$1.77 billion

Honduras

$215.0

Benin

$307.3

Georgia

$295.3

Cape Verde

$110.0

Madagascar

$109.8

Namibia

$304.5

Burkina Faso

$480.9

Tanzania

Mongolia $698.1 $284.9

Morocco

$697.5

Lesotho

$362.6

Mozambique

$506.9

El Salvador

$460.8

Mali

$460.8

Ghana

$547.0

Armenia

$235.7

Vanuatu

$65.7

Nicaragua

$175.1

Values of MCC Signed Compacts

Over $6.3 billion, in millions of USD (as of September 30, 2008)

12 Making a Difference
MCC Compact Program Results

Commitments by sector, in millions of USD (as of September 30, 2008), total $6.3 billion

Property Rights 

and Land Policy

•	 13,852 personnel trained in land 

registration, surveying, conflict 

resolution, land use planning, land 

legislation, land management and/or 

new technologies

•	 25,180 hectares formalized

•	 86,122 landholders reached

•	 5 legal and regulatory reforms 

adopted

MCC investments in property rights 

and land policy aim to facilitate 

secure, efficient access to land and 

other real property. They support 

reforms to reduce transaction costs 

and improve tenure security and land 

access, thereby creating an effective 

property rights system. This, in turn, 

will catalyze the capitalization of land 

and immovable property, increasing 

investment, advancing land use and 

land productivity, and removing 

obstacles to land markets.

Agriculture

•	 55,730 farmers trained

•	 750 agribusinesses assisted 

•	 5,447 hectares under production 

with MCC support

•	 $5.85 million in agricultural and rural 

loans

MCC investments in agriculture aim 

to increase incomes by creating jobs 

in the agriculture sector; increasing 

farmers’ capacity, productivity and 

access to markets; improving access to 

credit; and strengthening agribusiness. 

Data as of September 30, 2008

Irrigation

•	 $12.1 million, contracts for feasibility 

and/or design studies

•	 78% disbursed, contracted feasibility 

and/or design studies for canals, 

pipes, and other water conveyance 

systems

•	 $5.5 million, contracts for irrigation 

system construction

•	 41% disbursed, irrigation system 

works contracts

MCC investments in irrigation include 

construction and rehabilitation of 

irrigation systems and watershed 

management systems. They aim to 

increase the income and productivity 

of agricultural producers.

Data as of September 30, 2008

Roads 

•	 $17.5 million, contracts for feasibility 

and/or design studies

•	 69% disbursed, contracted feasibility 

and/or design studies

•	 3,362 kilometers of roads under 

design

•	 $371 million, contracts for roads 

design and/or works

•	 805 kilometers of road under works 

contracts

•	 14% disbursed, road works contracts

In transportation projects, roads 

rehabilitation and construction aim 

to reduce transport costs, improve 

access to public transportation and 

basic services, and facilitate trade. In 

agriculture projects, roads aim to link 

producers to markets for their goods, 

and to inputs for their production. 

Roads in irrigation projects provide 

access to, from, and within irrigated 

areas. 

Data as of September 30, 2008

Monitoring and Evaluation

$135

2%

Program Administration

and Oversight

$573

9%

Energy

$292

5%

Governance

$291

5%

Health, Education,

and Community Services

$462

7%

Water Supply

and Sanitation

$505

8%

Finance

and Enterprise

Development

$587

9%

Agriculture

$1,344

21%

Transportation

$2,129

34%

Making a Difference 13
The Compact Portfolio

MCC funds a portfolio of compacts in various 

stages of implementation by partner countries 

worldwide. These compacts are reducing poverty, stimulating growth, and making a difference in the lives of the poor by: 

 providing small farmers with land titles in 

Benin, Madagascar, and Nicaragua, protecting their property rights and giving them 

collateral for credit to expand their farming 

activities or build their small businesses,

 delivering a more dependable energy supply 

to people and businesses in Georgia,

 awarding scholarships to students in El 

Salvador to prepare them to participate in the 

productive economy,

 rehabilitating rural schools for young students 

in Ghana,

 improving roads in Armenia and Vanuatu, 

giving farmers access to markets for their 

crops,

 creating opportunities through training for 

farmers in Mali and Honduras, and

Scholarship 

Opportunities 

Maria Magdalena Flores 

Miranda, 19, is the recipient of a pilot program scholarship and is 

enrolled at the Escuela 

Nacional de Agricultura 

Roberto Quinones. Maria 

is one of the first 110 students from El Salvador’s 

Northern Zone to benefit 

from a scholarship as part of the MCC compact. 

In all, up to 3,600 deserving youth from low income families will benefit from the competitive 

scholarship program. Investing in scholarships 

for these students enhances their earnings and 

employment opportunities, while contributing 

to overall economic growth and poverty reduction. In addition to El Salvador, MCC supports 

educational programs in Burkina Faso, Ghana, 

Mongolia, Morocco, Niger, and Namibia.

Land Tenure 

Reforms

Representatives from two 

villages in Benin show the 

cards selecting their villages to participate in the 

rural land tenure program, 

a component of the country’s $307.3 million MCC 

compact. With secure land 

tenure rights, the rural poor 

are more willing to invest in 

higher yielding crops or use higher-value farming inputs, such as fertilizers. They are able to 

use their property as collateral to access capital 

to grow their operations. In these ways, secure 

tenure helps to increase rural incomes. In addition to Benin, MCC compacts with Madagascar, 

Nicaragua, Mongolia, Mozambique, Burkina 

Faso, and Namibia are among those that have 

components aimed at securing land tenure and 

strengthening property rights. 

14 Making a Difference
Transportation 

Links 

Through MCC grant 

funding, roads have 

already been paved 

in Cape Verde, which 

identified a lack of 

transportation infrastructure as a major 

barrier to developing 

a common national 

market, decreasing production costs, and facilitating the movement of people and goods 

between islands. Cape Verde is making strategic 

investments in roads and small bridges to ensure 

improved transportation links to social services, 

employment opportunities, local markets, ports, 

and airports. For these same reasons, many MCC 

partner countries include infrastructure upgrades 

as part of their compacts.

Artisan 

Training

With average monthly 

earnings of about $118, 

artisan workers in Morocco 

will invest MCC funds in 

their skills. These artisans 

will train in production 

techniques and business 

management and will have 

access to bank or microcredit loans to invest in modern kilns and pottery workshops. They also will take advantage 

of improvements to Morocco’s national training 

system for literacy and vocational education to 

benefit artisans and the general population, particularly women and girls.

 expanding transparency and efficiency for 

those working in government ministries 

through an e-procurement system and improving transportation networks in Cape 

Verde.

These compact programs are working to create 

opportunities that will:

 expand the rail network in Mongolia to create 

jobs and a more efficient way for businesses to 

export,

 invest in artisan training and productivity in 

Morocco,

 improve health clinics to benefit those living 

with HIV/AIDS in Lesotho,

 bring reliable electricity service to businesses 

and to the residents of rural communities in 

Tanzania,

 improve water systems in Mozambique, so 

girls and women can attend school and work 

rather than spend their day fetching water, 

 strengthen agricultural productivity in 

Burkina Faso to help avert future food price 

crises, and 

 improve the management and infrastructure 

of Etosha National Park in Namibia to enhance the vitality of Namibian tourism and 

attract investments in ecotourism.

Making a Difference 15
MCC Threshold Programs 

For countries that demonstrate a significant 

commitment to meeting the eligibility criteria 

but fall short on some indicators, MCC turns to 

a threshold program. This program provides 

further incentive for policy reform, assisting 

countries become compact eligible by helping 

them address specific areas of policy weakness 

identified in the 17 selection indicators. Up to 

ten percent of MCC’s appropriation may be 

spent on the threshold program.

 Four countries—Albania, Burkina Faso, 

Malawi, and Tanzania—are scheduled to 

complete their threshold programs in 2008, 

resulting in significant improvements to increase government transparency, efficiency, 

and investments in people.

 To date, eight threshold-eligible countries—

including Burkina Faso, Jordan, Malawi, 

Moldova, Philippines, and Tanzania—have 

been selected subsequently as compacteligible due to improvements in their policy 

performance track records.

USAID’S Role in MCC’s Threshold Program 

The United States 

Agency for International 

Development serves as 

the lead administrator 

in 19 of MCC’s 20 current threshold programs 

and contributes significantly to the success of 

MCC’s threshold program. 

Threshold Program Successes 

 Albania has made significant reforms to improve government administration. Through 

its MCC-supported electronic tax filing 

system, approximately 3,100 e-filed declarations were submitted between April and June 

2008, compared with 90 between November 

and December 2007. Nearly 50,000 tax 

forms were downloaded by the end of June 

2008 via the Internet, compared with 1,400 

in January. 

 Indonesia’s national immunization coverage 

has increased from 71 to 78 percent according 

to 2007-2008 survey data. MCC’s support 

has helped nearly three million children under the age of one receive measles and DPT3 

vaccines in threshold program-supported 

provinces. 

 Paraguay’s Supreme Court has increased 

efficiencies with the support of the MCC 

threshold program. Cases now require an average of two and a half months for processing 

compared to an average of ten months before 

the threshold program began. 

 Tanzania’s threshold program has audited 

procurement practices in 20 key ministries 

and departments. By uncovering non-compliance with procurement laws, the threshold 

program-funded Prevention and Combating 

of Corruption Bureau opened 36 new cases 

and obtained nine convictions on previous 

cases between April and June 2008.

 In Zambia, programmatic targets have been 

reached or surpassed in the number of days 

required to register a business (decrease 

from 10 days to one day), 

to register a property 

sale (decrease from 70 

days to 35 days), to start a 

business (decrease from 

35 days to 18 days), to 

export goods (decrease 

from 60 days to 30 days), and to import goods 

(decrease from 62 days to 31 days). 

 In Burkina Faso, nearly 16,700 Burkinabe 

students—55 percent of whom are girls—are 

enjoying well-ventilated classrooms, access 

to potable water and new latrines, desks, 

school manuals, canteens, and take-home 

rations. 

 Through Jordan’s threshold program, upgrades to the automated customs clearance 

system at King Hussein Bridge and Cyber City 

16 Making a Difference
in Irbid are complete. Through September 2008, this program has supported the upgrade at 10 of 

the 14 target customs centers.

For more information: Appendix B

Visit Appendix B for more information on the uses of all funds appropriated to MCC for fiscal year 

2008.

Cumulative

Total Number of threshold programs (including Stage II) 

approved through fiscal year 2008: ................................................................19

Total approximate value of threshold programs 

approved through fiscal year 2008: .......................................... $440 million

Threshold Programs (including Stage II)

FY 2008

Total Number of threshold programs (including Stage II)

 approved during fiscal year 2008:...................................................................6

Total approximate value of threshold programs

 approved during fiscal year 2008:..............................................$124 million

MCC Threshold Programs—All Countries

The following chart captures the indicators central to MCC’s threshold programs during fiscal year 

2008 as a percentage of total threshold funding. As of September 30, 2008

Voice and Accountability

0.96%

Trade Policy

1.94%

Rule of Law

12.41%

Political Rights

4.05%

Land Rights and Access

0.08%

Immunization Rate

7.17%

Government Effectiveness

1.89%

Girls' Primary

Education Completion

7.07%

Fiscal Policy

5.43%

Control 

of Corruption

52.55%

Civil Liberties

4.38%

Business

Startup

2.07%

Making a Difference 17
0

300

600

900

1200

1500 Threshold

Due Diligence

Compacts

609(g)

Projected 

through

FY2009

FY2005 FY2006 FY2007 FY2008

Millions

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000 Threshold

Due Diligence

Compacts

609(g)

FY2005 FY2006 FY2007 FY2008

Millions

0

100

200

300

400

500

600

700

800 Threshold

Due Diligence

Compacts

609(g)

Quarter 1 Quarter 2 Quarter 3 Quarter 4

Millions

Financial Highlights

Total Cumulative Commitments by Program 

As of September 30, 2008

Cumulative Quarterly Program Disbursements, Fiscal Year 2008

Total MCC Cumulative Program Disbursements

As of September 30, 2008

18 Making a Difference
MCC Cumulative Commitments (in $millions) MCC Cumulative Obligations (in $millions)

Cumulative Number of Compacts Signed Cumulative Number of resholds Signed

MCC Cumulative Appropriations (in $millions) Total Number of MCC Staff



















,

,

,

,

 

,

,

,



,

,

,

,







 

Making a Difference 19
The MCC difference defined by our leadership....

MCC’s Board of Directors

MCC is managed by a Chief Executive Officer and is overseen by a public-private Board of Directors 

comprised of the Secretary of State (Chair), the Secretary of the Treasury (Vice Chair), the U.S. 

Trade Representative, the U.S. Agency for International Development Administrator, the CEO, and 

four individuals from the private sector appointed by the President with the advice and consent of 

the U.S. Senate. One of MCC’s hallmark differences is the private sector component of our Board 

and the valuable insights and expertise these members contribute to fulfilling our mission. The private sector members are:

Lorne W. Craner

President, International 

Republican Institute 

Senator

William H. Frist, M.D.

Schultz Class of 1951 Visiting 

Professor of International 

Economic Policy Woodrow 

Wilson School of Public and 

International Affairs 

Princeton University

Kenneth Hackett

President, 

Catholic Relief Services 

Alan J. Patricof

Founder and Managing 

Director, Greycroft, LLC

MCC’s Senior Management

With less than 300 employees at headquarters and an extremely limited global imprint of just two 

U.S. employees (a resident country director and a deputy resident country director) in each partner 

country, MCC is designed to be a nimble organization that can respond with speed, creativity, and 

ingenuity.

Department of

Administration

and

Finance

Department of

Compact

Development

Department of

Compact

Implementation

Department of

Congressional

and

Public Affairs

Office of the

Chief

Executive

Officer

Department of

Policy and

International

Relations

Office of the

General

Counsel

20 Making a Difference
Development

Once countries are selected 

to participate in the full MCC 

program, they are invited to 

engage in a consultative 

process with their civil 

societies to determine how 

best to overcome their 

constraints to poverty 

reduction and economic 

growth. Furthering country 

ownership, countries are 

responsible for developing a 

proposal for funding—a 

compact—to address their 

development priorities. 

Implementation

Once a partner country’s 

compact proposal is fully 

vetted for quality and 

viability, the country also is 

responsible for 

implementing its compact 

programs, maintaining policy 

performance, and achieving 

program results. 

Selection

What makes MCC different 

is our use of a policy 

performance-based 

selection process to 

determine our partner 

countries. 



Section 2:

A Different Model

The Millennium Challenge Corporation awards 

grants—not loans—to partner countries 

through an innovative process built upon four 

fundamental principles that are essential for 

the effective and efficient use of development 

assistance—good policy performance, country 

ownership, country responsibility, and tangible results. These principles drive the process 

of country selection as well as compact development and implementation.

Spotlighting Selection 

Performance-based selection

Core to the MCC model is the use of 17 independent policy indicators to evaluate a country’s 

performance in three categories—ruling justly, 

investing in people, and encouraging economic 

freedom. MCC’s Board of Directors considers 

the policy performance scorecard, produced 

annually to assess a country’s performance in 

these three areas, together with other information that compensates for data lags, to determine whether a country is eligible to apply for 

MCC assistance. 

For more information about MCC’s selection 

process, visit www.mcc.gov.

Making a Difference 21
Sample MCC Country Scorecard

Ghana FY08

LIC GNI/Cap: $520

Population: 22,112,800

Investing In People

Ruling Justly

Economic Freedom

How to Read this Scorecard: Each MCC Candidate Country receives an annual scorecard assessing its performance in 3 policy categories: Ruling Justly, Investing in People, 

and Economic Freedom. Under the name of each indicator is the country’s score and percentile ranking in its income peer group (0% is worst; 50% is the median; 100% is 

best). Under each country’s percentile ranking is the peer group median. Country performance is evaluated relative to the peer group median and passing scores, or scores 

above the median, are represented with green. Failing scores, or scores at or below the median, are represented with red. The black line that runs along the horizontal axis 

represents the peer group median. Each World Bank Institute indicator is accompanied by a margin of error, which is represented by the vertical blue bar.

Sources: Freedom House

Sources: World Health Org.

Sources: World Bank Institute

Freedom House World Bank Institute World Bank Institute World Bank Institute World Bank Institute

World Health Org. UNESCO/National Sources UNESCO CIESIN/YCELP

IFAD/IFC IFC Heritage Foundation IMF WEO National Sources

For more information regarding the Millennium Challenge Account Selection Process and these indicators, please consult MCC’s website: www.mcc.gov

0

10

2 0

3 0

4 0

'02 '04 '06

Median 20

Political Rights

Data 37 (100%) 

0

2 0

4 0

6 0

'02 '04 '06

Median 30

Civil Liberties

47 (93%) 

Median 0.00

Control of 

Corruption

0.65 (93%) 

-2.0

- 1.0

0.0

1.0

2.0

'02 '04 '06

Median 0.00

Government 

Effectiveness

0.92 (99%) 

-2.0

- 1.0

0.0

1.0

2.0

'02 '04 '06

Median 0.00

Rule of Law

0.74 (92%) 

-2.0

- 1.0

0.0

1.0

2.0

'02 '04 '06

Median 0.00

Voice and 

Accountability

1.07 (97%) 

-2.0

- 1.0

0.0

1.0

2.0

'02 '04 '06

Median 0.00

Regulatory Quality

0.60 (99%) 

-2.0

- 1.0

0.0

1.0

2.0

'02 '04 '06

Data

-8.00

-5.50

-3.00

-0.50

2.00

4.50

'02 '04 '06

Median -1.34

Fiscal Policy

-3.94 (19%) 

2 0

4 0

6 0

8 0

10 0

'02 '04 '06

Median 84

Immunization Rates

Data 84.5 (51%) 

0

0.2

0.4

0.6

0.8

1

'03 '05 '07

Median 0.610

Land Rights and 

Access

0.768 (86%) 

0

0.25

0.5

0.75

1

'03 '05 '07

Median 0.930

Business Start-Up

0.952 (74%) 

2 0

4 0

6 0

8 0

10 0

'03 '05 '07

Median 58.2

Trade Policy

58.0 (49%) 

0

10

2 0

3 0

'02 '04 '06

Max. 15

Inflation

10.91 (20%) 

10

4 0

70

10 0

13 0

'02 '04 '06

Median 67.8

Girls' Primary 

Education Completion 

67.8 (49%) 

0

3

6

9

12

15

'01 '03 '05

Median 2.07

Health Expenditures

2.59 (56%) 

0

2 5

50

75

10 0

'03 '05 '07

Median 66.53

Natural Resource 

Management

67.69 (56%) 

0

2

4

6

8

10

'02 '04 '06

Median 1.67

Primary Education 

Expenditures

1.70 (52%) 

10/10/2007

22 Making a Difference
Spotlighting Compact Development 

Compact Development Process

The proposals developed by countries are their 

priorities for development. By engaging in a participatory, timely, and meaningful consultative 

process with the rural and urban poor, women, 

private and voluntary organizations, the business community, and other donors, countries 

themselves—not MCC—determine how they 

would use an MCC grant. Overwhelmingly, 

countries are applying their MCC funds toward 

rural development—to increase agricultural 

productivity and to transport their goods to 

market through investments in roads, ports, 

and bridges. 

MCC awards grants that promote systemic 

change and that are based in results-driven 

partnerships. Building upon our early years of 

experience, MCC added critical elements to 

the compact development process during fiscal 

year 2008, both to strengthen the quality of a 

country’s proposal and to enhance readiness for 

implementation. These changes include:

 Constraints Analysis: At the beginning of the 

process, MCC works with the country team 

to undertake a constraints analysis to identify 

major barriers to economic growth. 

 Results-focused project design tools: MCC 

equips the country team to use resultsfocused project design tools to strengthen its 

project conceptualization and planning and 

to facilitate substantive stakeholder engagement and participatory project design in 

country.

 Project concept paper guidance: To assist 

countries in submitting focused, wellprepared proposals, MCC provides them 

with specific project concept paper guidance, 

which also helps improve the dialogue between MCC and our partner countries on 

the potential benefits, costs, and risks of a 

proposed investment.

 Peer reviews: MCC conducts internal and 

external peer reviews of these countrydeveloped concept papers to bring to bear 

best practices and lessons learned in order to 

strengthen the final compact design.

 Two-staged economic analyses: MCC works 

with the country team to conduct two-staged 

economic analyses—a preliminary and then 

a more detailed analysis—to enhance decision-making through an earlier assessment 

of potential program impact.

 Detailed planning and analytical work 

up-front: MCC and the country team undertake more detailed planning and analytical 

work up-front during this enhanced compact 

development process, completing much of 

the environmental and social assessments, 

technical feasibility studies, and detailed 

engineering design studies so as to ensure 

better cost certainty and reduce implementation risk.

These refinements are giving a significant boost 

to the compact development process. Investing 

more time and resources in upstream project 

definition and design will lead to quicker and 

more predictable disbursements, and enhance 

the likelihood of successfully completing a compact on time and within budget. 

Economic Rates of Return

As any other investor would, MCC analyzes 

each program to determine its sustainability 

and its likely economic impact, as reflected in 

its economic rate of return (ERR), defined as a 

comparison of the costs and benefits of a public 

investment. Estimating the ERR of a proposed 

project before the investment is made gives 

MCC a forecast of the project’s likely economic 

impact. In a groundbreaking move for any government agency or donor, MCC made its ERR 

spreadsheets used in our funding decisions 

available to the public through our website during fiscal year 2008. 

Making a Difference 23
Entry into Force 

occurs

Compact 

provisions in full 

force and effect 

in the country

Accountable 

Entity is 

responsible for 

overseeing 

implementation 

of projects

Submission of 

quarterly 

progress 

reports

Disbursements 

occur

Ongoing public 

awareness 

campaigns 

about Compact 

progress

Monitoring and 

evaluation of 

project impacts

5.

Pre-Entry

Into Force

Activities

Implementation

Compact 

ratification, if 

necessary

Completion of 

stand-up of 

MCA 

Accountable 

Entity

Completion of 

Implementing 

Entity 

agreements

Completion of 

annual budgets 

and 

implementation 

plans

Completion of 

Terms of 

Reference and 

work plans for 

implementation 

and 

procurement

Pre-qualification 

of consultants 

and contractors 

for early 

procurements

4.

Compact

Negotiation

and Signing

MCC and 

country 

conduct 

Compact 

negotiations 

(technical 

content)

MCC prepares 

and submits 

Investment 

Memo to MCC 

Investment 

Committee

MCC and 

country 

negotiate 

Compact 

documents 

(legal)

MCC Board 

approves 

Compact

Compact signing

3.

Project

Development

and Appraisal

Implementation Preparations

Country further 

develops 

projects

MCC disburses 

609(g) funding 

and assists with 

feasibility 

studies, 

environmental 

impact 

assessments, 

framework 

resettlement 

plans, 

preliminary 

designs, etc. 

At an 

appropriate 

time, MCC 

prepares and 

submits 

Congressional 

Notification to 

commence 

negotiations

MCC conducts 

formal appraisal 

of developed 

projects, 

including 

second peer 

review

MCC begins to 

develop 

Investment 

Memo

2.

Project

Definition

Initial 

consultative 

process 

completed 

Country 

develops and 

provides 

Concept Paper 

for each 

potential 

project

MCC reviews 

Concept Papers

MCC sends 

mission to 

country, if 

necessary, to 

determine 

studies needed 

to develop 

project(s)

MCC provides 

formal response 

to Concept 

Paper(s)

MCC makes 

609(g) funding 

available if 

appropriate

1.

Startup and

Preliminary

Analysis

Country names 

Point of 

Contact (POC)

Country 

establishes 

Core Team 

Country 

commences 

Consultative 

Process

Country 

completes 

Constraints and 

Sector Analyses

MCC provides 

feedback on 

Constraints and 

Sector Analyses

MCC provides 

guidance and 

training on 

Concept Paper 

development

Accountable Entity, Fiscal Agent, Procurement Agent, and

Implementing Entities are established and trained.

The Making of a Compact

24 Making a Difference
Spotlighting Implementation

MCA Accountable Entities

While MCC provides technical support and oversight, partner countries principally drive compact 

implementation, setting up accountable entities, which are responsible for the daily management, 

operation, coordination, implementation, and monitoring and evaluation of the compact. The accountable entity becomes the central point of contact for MCC, other donors, contractors, consultants, and the country’s citizens. The accountable entity develops and is responsible for the implementation of compact activities, including financial plans, procurement plans, the monitoring and 

evaluation plan, the fiscal accountability plan, work plans, and any audit plan. Existing accountable 

entities (often referred to as MCAs) in partner countries include: 

Country MCA Name Website

Armenia

MCA-Armenia http://www.mca.am/new/enversion/index.

php

Benin

MCA-Benin http://www.mcabenin.bj/

Burkina Faso

MCA-Burkina Faso

Cape Verde

MCA-Cape Verde http://www.mca.cv/

El Salvador

FOMILENIO http://www.mca.gob.sv/fomilenio/index.php

Georgia

Millennium 

Georgia Fund

http://www.mcg.ge/

Ghana

MiDA http://www.mida.gov.gh/

Honduras

MCA-Honduras http://www.mcahonduras.hn/

Lesotho

MCA-Lesotho

Madagascar

MCA-Madagascar http://www.mcamadagascar.org/

Mali

MCA-Mali http://www.mcamali.org/

Mongolia

MCA-Mongolia

Making a Difference 25
Country MCA Name Website

Morocco

Agence du Partenariat 

pour le Progrès

Mozambique

MCA-Mozambique

Namibia

MCA-Namibia

Nicaragua

MCA-Nicaragua http://www.cuentadelmilenio.org.ni/

Tanzania

MCA-Tanzania http://www.mca-t.go.tz/

Vanuatu

MCA-Vanuatu http://www.governmentofvanuatu.gov.vu/

mca-vanuatu/Home/tabid/54/Default.aspx

Coordinating with other donors, U.S. 

agencies, and development partners

Coordinating with other donors and development actors in partner countries is critical for 

successful compact development and implementation. Such coordination avoids costly 

duplications, saves time and money, and better 

leverages MCC investments to maximize impact. MCC identifies mutually beneficial partnerships with other donors and development 

actors, and MCC compact activities build upon, 

complement, and benefit from their work.

 As part of MCC’s compact development 

process in Malawi, the government conducted a joint economic growth diagnostic 

with the United Kingdom’s Department 

for International Development, the World 

Bank, and the African Development Bank. 

 In Burkina Faso, MCC consulted with major 

road sector donors—the World Bank, the 

European Union, the African Development 

Bank, the Arab Bank for Economic 

Development in Africa, the Saudi Fund for 

Development, the Kuwait Fund for Arab 

Economic Development, and the Islamic 

Development Bank—to connect MCC’s 

road activities with those of other donors. 

 MCC coordinates with the U.S. Trade and 

Development Agency (USTDA) in multiple 

countries. In Ghana, MCC/USTDA assistance is being coordinated in transportation 

infrastructure, where USTDA is funding 

a master plan to modernize the port of 

Tema, where MCC’s upgrade of the National 

Highway connects. In Morocco, USTDA 

awarded a $531,810 grant to the Ministry of 

Agriculture and Maritime Fishing to support MCC’s Fruit Tree Productivity project, 

which includes cold storage infrastructure 

and facilities to reduce losses in palm date 

production. 

 In Tanzania, MCC is working within the 

government’s five-year Transport Sector 

Investment Program alongside the World 

Bank, the African Development Bank, the 

European Union, Norway, Denmark, and 

the Netherlands to help Dar es Salaam develop a newly enacted Roads Act that nearly 

doubles funding for road maintenance on the 

mainland through an increased fuel levy. 

26 Making a Difference
Forging alliances to maximize results 

MCC has signed various memoranda of understanding (MOUs) during fiscal year 2008 to 

leverage the resources of those in the private 

sector. These MOUs demonstrate MCC’s work 

to augment U.S. taxpayer money, prevent duplication of effort, improve the impact of each 

project activity, and help our partners attract 

long-term growth opportunities. 

 October 22, 2007: MCC signs a memorandum of understanding with Microsoft 

Corporation, the U.S. Agency for 

International Development, and the 

President’s Emergency Plan for AIDS Relief 

to pursue common development goals.

 February 19, 2008: MCC and the United 

Kingdom’s Department for International 

Development sign a memorandum of 

understanding to increase on-the-ground 

cooperation in partner countries—including 

Ghana, Malawi, Mozambique, Tanzania, and 

Zambia—in the priority sectors of education, 

water and sanitation, transportation, and 

governance. 

 April 2, 2008: MCC and General Electric 

Company sign a memorandum of understanding to pursue development goals in 

partner countries.

 May 15, 2008: MCC and the Phelps Stokes 

Fund sign a memorandum of understanding to promote diversity by expanding and 

deepening minority involvement in the international arena.

 June 11, 2008: MCC and the Alliance for a 

Green Revolution in Africa (AGRA), under the leadership of former UN Secretary 

General Kofi Annan, sign a memorandum of 

understanding to help African countries improve the productivity and incomes of smallscale farmers and poor rural households. 

MCC CEO 

Ambassador 

John Danilovich 

and former U.N. 

Secretary General 

Kofi Annan shake 

hands after the 

Alliance for a Green 

Revolution in Africa 

(AGRA) MOU 

signing at MCC on 

June 11, 2008.

Making a Difference 27
For the development community, 2008 marked an 

important year for aid effectiveness. Major events 

like the United Nations Economic and Social Council’s 

Development Cooperation Forum and the Third HighLevel Forum on Aid Effectiveness in Accra, Ghana 

provided opportunities to assess progress made 

toward greater aid effectiveness. MCC participated 

actively in these events, together with other donors 

and partner countries from around the world. In line 

with the Paris Declaration on Aid Effectiveness and 

aid effectiveness more broadly, MCC’s model actually builds upon a number of key aid effectiveness 

principles. First, country ownership is at the heart 

of aid effectiveness and MCC’s approach: we ask 

partner countries to identify their own constraints to 

poverty reduction, design their own programs, and 

implement their own compacts. Second, in line with 

aid predictability, MCC commits all funding up-front 

at the time of compact signing, so partner countries 

know exactly how much they can expect to receive 

over the life of an MCC grant. Third, MCC compact 

assistance is untied, which means procurements are 

open to international competitive bidding. Finally, 

through the use of rigorous tools, including economic rate of return analysis and impact evaluation, 

MCC ensures that both we and our partner countries 

are focused on delivering results.

The Los Angeles Times: “Millennium Challenge is a 

bold approach to foreign aid, targeted at creating 

important economy-building infrastructure in poor 

countries.”

Indianapolis Star: “The Millennium Challenge 

Account...is the kind of smart and strategic foreign 

aid that can earn back the U.S. public’s confidence in 

our ability to make a meaningful and compassionate 

response to the world poverty crisis.”

Oxfam America: “If the US wants to become a smart 

development leader, US policy makers should... [r]

ecommit to supporting the MCC.”

Sheila Herrling, from the Center for Global 

Development: “...We are a big supporter...always in 

support of the success of the MCA. It continues to 

be...the greatest experiment we’ve had in U.S. foreign 

assistance since the Marshall Plan. It brings together 

a lot of the lessons that we’ve learned over the past 

50 years in development effectiveness that countries 

should be owning and driving and designing and 

implementing their programs...”

Foreign Policy Advisor to the President of Mongolia: 

“If I could give a piece of advice to the next U.S. president, it would be to continue with the Millennium 

Challenge Account...The novelty of the mechanism 

of assistance is that it is supposed to be based on recipient country ownership so it is the recipient countries who are identifying their primary problems...” 

MCC and Aid Effectiveness

What others are saying about 

MCC’s different model for development

28 Making a Difference
Section 3:

Results That Make a Difference

The MCC Effect captures the powerful incentive MCC 

provides for poor countries to make reforms on their 

own to qualify for MCC assistance. To date, the most 

significant impact has been the incentive created 

for countries to adopt legal, policy, regulatory, and 

institutional reforms related to the MCC eligibility 

criteria. In addition to a significant amount of grant 

funding, MCC eligibility can lead to international 

recognition and increased private sector investment, 

which also has encouraged many countries to implement economic, social, and political reforms. MCC 

has catalogued a long list of examples of the MCC 

Effect in action, including: 

 A December 2007 New York Times front-page 

article reported that “Burkina Faso has gone to 

great lengths to meet the agency’s good governance standards. ... [The government] has 

also halved the number of days it takes to start 

a business, and reduced by a third the cost of 

registering property.” The World Bank similarly 

notes in its Doing Business 2008 report that 

it has observed a significant “MCC Effect” in 

Burkina Faso. 

 The World Bank’s 2007 Celebrating Reform report hails MCC as a catalyst for reform in Georgia. 

In the last three years, Georgia has catapulted 

from 112th place to 18th place on the International 

Finance Corporation’s Ease of Doing Business 

Index. They have overhauled tax and customs 

administration, business and property registration, the courts, and the civil service. 

 In response to a late 2006 discussion between 

MCC and Niger about indicator performance, 

Niger’s government took swift action to reduce 

the cost of starting a business by almost 60 percent and the time and cost of property registration by a third. 

 Nathaniel Heller, the Managing Director of Global 

Integrity, an independent, nonprofit organization 

that tracks governance and corruption trends 

around the world, stated in February 2008 that 

“[w]hether people like it or not, countries are, in 

practice, responding to what has been coined the 

MCC Effect...and they are undertaking reforms, 

sometimes some of the tough ones.”

For more information on the MCC Effect, visit www.

mcc.gov/mcceffect to download a complete report.

The MCC Effect

International development must measure results in many ways. The impact of compacts and threshold programs being implemented in partner countries is evidence of MCC’s success. Incentives 

provided through the MCC model also leverage significant changes in policies and procedures that 

countries institutionalize to ensure the sustainability of this programmatic progress. The marriage 

of policies and programs creates a strong foundation for poverty reduction and economic growth 

that can make a difference in the lives of the poor in meaningful ways. 

Making a Difference 29
Results: Policy Reforms 

That Make a Difference 

By awarding development assistance in a different and demanding way, MCC is a strong 

catalyst for reform. During fiscal year 2008, 

partner countries made progress in their policy 

reforms to fight corruption, deepen democracy, 

empower women, engage the private sector, and 

build trade capacity.

Fighting corruption 

Because transparency and good governance are 

essential ingredients for sustainable economic 

growth, MCC only selects those countries 

for compact eligibility that pass our control 

of corruption indicator. As a result, countries 

seeking MCC eligibility—and even those that 

have already been selected as eligible—are 

adopting tough anticorruption laws, opening 

up the public policymaking process to greater 

scrutiny, and stepping up corruption-related 

investigations and prosecutions. Specifically, 

MCC threshold programs are helping reformminded governments implement aggressive 

anticorruption programs by cleaning up tax 

administration, customs administration, public 

financial management, and business licensing; 

training investigative journalists, investigators, 

public prosecutors, and magistrates; providing 

assistance in the drafting and implementation 

of anticorruption legislation; strengthening civil 

society watchdog units and government auditing agencies; and establishing mechanisms for 

income and asset disclosure.

...it’s simply too early to measure the end-of-compact results of income 

growth and beneficiary impact. But there are certainly sufficient outcome 

results to demonstrate the effect that the MCC model is having on changing 

the way U.S. development assistance is viewed by partner countries and 

on reforming local policies that pave the way for sustained development. 

Repairing a gas pipeline in Georgia to prevent environmental and safety 

hazards and prevent the disruption of gas delivery, enhancing transparency 

of government operations and budgeting in Cape Verde, increasing access 

to credit by women in Madagascar, raising crop productivity and farmer 

incomes in Honduras are but a few of the very real results from MCC 

investments. These kinds of outcomes are the building blocks of long-term, 

country-owned development that can build a better safer world and 

ultimately transition countries away from foreign assistance.”

—Center for Global Development MCA Monitor 

July 28, 2008

30 Making a Difference
 Albania is implementing electronic tax filing to reduce opportunities for corruption. 

These and other reform efforts are having 

an impact: the percentage of Albanians who 

paid a bribe to the tax authorities declined 

from 46 to 27 percent between 2006 and 

2007.

 With threshold program support, Malawi 

put into operation an Integrated Financial 

Management System. Malawi’s sovereign 

credit rating was upgraded from CCC+ to 

B-. A higher rating indicates improved financial transparency and practices, increasing the country’s prospects for foreign direct 

investment

 Indonesia is using its MCC threshold program to reduce corruption in the judiciary. 

The number of Indonesians reporting that 

they had to pay a bribe to receive legal or 

judicial services declined from 36 percent in 

2006 to 16 percent in 2007.

 Lesotho’s Parliament passed the Money 

Laundering and Proceeds of Crime Act 2008

in April 2008 that will establish an AntiMoney Laundering Authority and a Financial 

Intelligence Unit, enabling the confiscation 

of unlawful proceeds from all serious crimes 

and requiring accountable institutions to take 

prudent measures to help combat money 

laundering.

Deepening democracy 

MCC deepens democracy by linking aid to 

policy performance on such indicators of democratic standing as political rights, civil liberties, 

and voice and accountability. We encourage 

a consultative process that works through domestic institutions, and that continues through 

democratic institutions during the implementation of their compacts. 

 El Salvador, Jordan, Indonesia, Guatemala, 

Dominican Republic, Philippines, Moldova, 

and Ukraine have established ministerial 

commissions or committees to coordinate 

democratic reforms that are related to MCC 

eligibility. 

 To ensure transparency and accountability, 

MCC grant resources appear as a line item 

in the budgets of our partner countries. In 

Vanuatu, this triggered new debates about 

funds for road maintenance and tax procedures. In Georgia, the inclusion of MCA 

budget data prompted civic actors to examine the MCA budget more closely. 

 In Mali, advisory councils representing direct beneficiaries and comprised of members 

of the private sector, civil society, and local 

government met in August 2008 to discuss 

airport improvements and Alatona irrigation projects. Councils meet periodically 

to provide their feedback and recommendations to MCA-Mali as part of a collaborative 

decision-making process and to promote 

transparency and accountability. 

Empowering women 

As captured in MCC’s groundbreaking Gender 

Policy, we are committed to ensuring that gender is considered in all stages of our work with 

partner countries—from the selection of eligible 

countries, the development and design of compacts, the assess¬ment and implementation of 

projects, the monitoring of program results, 

and the evaluation of program impacts. 

 During Nicaragua’s consultative process and 

throughout implementation, the Northwest 

Women’s Council has helped shape the rural business development and land titling 

projects. The work of MCA-Nicaragua 

in developing and implementing a gender 

policy has been recognized by Women 

Thrive Worldwide, a U.S. nongovernmental 

organization. 

MCC’s commitment 

to strengthening 

good governance 

was captured in a 

November 2007 

research paper, 

“MCC and the 

Long Term Goal 

of Deepening 

Democracy,”

unveiled during 

an event at 

the Carnegie 

Endowment for 

International Peace.

To download 

the paper, visit 

www.mcc.gov.

Making a Difference 31
Honduras is using MCC funding to encourage 

women’s participation in agricultural activities 

with customized technical assistance and training 

for improving yields, incomes, and market access. 

Assistance is targeted to women in the agriculture 

sector because they are traditionally underrepresented and undertrained. 

The Progress

•	 3,580 women so far have participated in training events, covering subjects from horticulture 

production, business skills, postharvest handling, 

and market information.

•	 Diversifying their crops to include a range of 

high value fruits and vegetables, women farmers 

of the program have planted 152 hectares and 

have generated local and export sales of more 

than $206,700 as of June 2008.

•	 The program’s women clients have generated 

132 full-time equivalent positions for women jobs 

in their communities, generating an estimated 

income of $100,000.

The Women Farmers 

Iris Sagrario Acosta

Plantain grower, Colón

Iris Sagrario Acosta’s husband went to the United 

States and left her in charge of their farm. Despite 

having no experience in agriculture, she used the 

technical assistance she received in basic production 

practices to turn her farm into a profitable business. 

She increased her planting area from 3.5 hectares 

of plantains in 2006 to 8.9 hectares in 2007. Iris’s 

net sales increased in that period from $7,300 to 

$12,100.

“This has been a great experience, and I enjoy farm 

activities. I have learned how to select plants, clean 

filters, and manage a drip irrigation system. I envision 

a good future, when [the program] is no longer here. 

I know that it will go well now that I have the skills to 

carry on.”

Norma Dalila Castillo

Flower grower, Santa Cruz de Yojoa, Cortes

Norma Dalila Castillo started with the program in 

September 2007. She has one hectare of tropical 

flowers where she implemented the program’s recommended production practices. Her net income 

earned as of March 2008 increased to $2,760.

“...We have implemented new production practices 

and the results are great. We have improved yields, 

quality, and shelf-life of our flowers, which we are 

currently selling in Tegucigalpa, and [are] looking 

into export markets.”

Women in Honduras Benefit from MCC Compact

32 Making a Difference
 Compact projects in Benin, Madagascar, 

Mali, and Mongolia are securing land titles 

and furthering property rights for women. 

 Lesotho ensured that gender equality in economic rights was legally guaranteed before 

sign¬ing its MCC compact. 

 In Ghana, agricultural training for women 

participants from 600 farmer-based organizations has been tailored to increase the 

likelihood that they will feel comfortable 

with adopting new technology. 

Engaging the private sector

MCC knows that the true engine of sustainable 

growth is private sector investment. Our partner 

countries are reforming in ways that attract not 

only MCC’s attention but also that of the private 

sector. Private enterprise strengthens supply 

chain linkages, encourages local entrepreneurs 

to meet global standards, generates incentives 

to open markets, and ultimately creates higherpaying jobs. Private sector engagement—from 

development through implementation—

contributes to successful compacts by ensuring 

that private sector trade and investment follow 

MCC investments.

 In September, Chiquita Brands began discussions with major pineapple producers in 

Ghana benefitting from MCC’s investment in 

agriculture productivity regarding potential 

long-term (12–15 year) fixed price contracts 

to source pineapple for the European market. 

Chiquita will build upon MCC’s investment 

in post-harvest infrastructure and cold 

storage, collaborate on training initiatives, 

strengthen the existing supply chain, and 

lower input costs for growers. 

 All compact countries are learning about new 

models of public-private partnership through 

MCC’s private sector toolkit. This toolkit 

illustrates four global best practices to leverage and sustain compacts: private financing 

of infrastructure, outsourced management, 

output-based aid, and social franchise. 

 MCC’s compact programs in Benin, 

Cape Verde, El Salvador, Georgia, Ghana, 

Madagascar, Mali, Morocco, and Namibia 

contain finance and enterprise development 

components. Other compact programs focus 

on farmer training and technical assistance 

that enhance agriculture’s role in increasing 

incomes and economic growth.

 The Georgia Regional Development Fund, 

created through Georgia’s MCC compact to 

support small businesses outside of Tbilisi, 

invested $2 million in Bazi, a food cannery, 

to expand its tomato and apple juice concentrate production. By sourcing the raw 

materials from farmers in the Gori region, 

Bazi will drive private sector-led economic 

activity among enterprising local producers 

of tomatoes and apples. 

Building trade capacity 

 For the five MCC compacts that entered into 

force in fiscal year 2008, over half of their 

grant funding supports aid-for-trade activities. This builds on efforts in fiscal year 2007, 

when MCC obligated more aid-for-trade 

than any other U.S. Government agency. 

 Ghana provided an MCC-funded grant to the 

Sea-Freight Pineapple Exporters of Ghana 

for their member farmers to purchase prefabricated walk-in coolers. This increases 

the competiveness of Ghana’s horticulture 

by keeping produce fresh longer and allows exporters to attract a better price from 

European buyers.

 Mongolia’s compact will modernize and increase the capacity of the rail sector, which 

moves 97 percent of the ton-kilometers of 

freight transport in this landlocked counReuters News 

Service reported 

that “MCC’s list of 

eligible countries 

is closely watched 

by development 

groups and 

investment firms 

which see it as a 

confidence vote in 

governments in the 

developing world.” 

Major Wall Street 

banks often cite a 

country’s eligibility 

for MCC assistance 

as a signal that it 

has a good policy 

framework in 

place to support 

economic growth.

Making a Difference 33
try. Increasing transport efficiencies is vital for moving domestic shipments as well as imports 

and exports. 

 More than 2,300 producers and entrepreneurs in Nicaragua are leveraging the MCC compact 

to implement business plans to export products such as sesame seeds, cashews, honey, beans, 

cheese, cassava, and plantains to the United States, Japan, Germany, Honduras, and El Salvador.

 Benin is using its MCC compact to expand the Port of Cotonou and streamline customs procedures to attract importers and facilitate exporters in the highly competitive West African shipping 

trade. This will translate into lower priced goods in the Beninese marketplace—helping Benin 

with preferential trade agreements like the African Growth and Opportunity Act—and will position the country as a service provider of choice for inland African countries like Burkina Faso and 

Niger. 

MCC Investments in Agriculture

34 Making a Difference
MCC Investments in Roads

MCC Investments in Irrigation

Making a Difference 35
MCC Investments in Property and Land Rights

Results: Compact and Threshold Program Progress that Makes a Difference

Results Overall 

In 2008, MCC made a major transition in emphasis from signing compacts to implementing them. 

MCC partner countries are now awash in implementation activity to fight poverty. Farmers are 

being trained, roads are being paved, bridges are being constructed, and land titles are being issued. 

Projects in some locations are already completed, where vehicles now travel on roads that link rural 

areas to new markets and community services; water runs through new irrigation systems to increase 

agricultural productivity; and gas flows through pipelines to provide energy to homes and businesses. 

And, with project starts around the world ramping up each week, the pace of implementation will 

accelerate further in 2009 and beyond to deliver on the promise of MCC. This section illustrates 

the progress being made in four major sectors of MCC activity: agriculture, roads, irrigation, and 

property rights and land policy. We see results unfolding worldwide in MCC partner countries in 

Africa, Eurasia and the Pacific, and Latin America. 

36 Making a Difference
Compacts and

threshold programs in

amount

to over

of MCC’s total Africa 70 percent grants worldwide.

Results: Africa

Compact with

Grant Amount 

(in millions)

Madagascar $109.8 

Cape Verde $110.0

Benin $307.3

Ghana $547.0

Mali $460.8

Mozambique $506.9

Lesotho $362.6

Morocco $697.5

Tanzania $698.0

Burkina Faso $480.9

Namibia $304.5

TOTAL 

compacts in Africa

$4.6 billion

11 compacts

Threshold 

Program with

Grant Amount 

(in millions)

Burkina Faso $12.9

Malawi $20.9

Tanzania $11.2

Zambia $22.7

Kenya $12.7

Uganda $10.4

São Tomé 

and Príncipe $8.7

Niger $23.0

Rwanda $24.7

TOTAL threshold 

programs in Africa

$147.2 million

9 threshold 

programs 

Making a Difference 37
Chart: MCC Commitments by Sector—Africa Compacts

Millions USD, Total: $4.6 billion (as of September 30, 2008)

Chart: MCC Commitments by Indicator—Africa Threshold Programs

(as of September 30, 2008)

Business Startup

0.38%

Voice and Accountability

3.01%

Rule of Law

1.49%

Political Rights

6.76%

Land Rights and Access

0.26%

Government Effectiveness

5.89%

Girls' Primary Education

20.38%

Fiscal Policy

4.90%

Control of Corruption

49.14% Civil Liberties

7.79%

Monitoring 

and Evaluation

2%

Program Administration

and Oversight

10%

Energy

5% Governance

5%

Health, Education

and Community Services

9%

Water Supply

and Sanitation

9%

Finance and

Enterprise Development

10%

Agriculture

24%

Transportation

26%

38 Making a Difference
Wray) in realizing their basic right to an education is the lack of adequate school infrastructure. Ghana’s MCC compact offers the students 

of four schools in this rural district something 

they have never had: functioning classrooms. 

In April 2008, Ghana’s accountable entity for 

implementing its MCC compact—MiDA—

began renovating the first four of a total of 35 

schools in seven different rural districts scheduled for rehabilitation under the initial phase of 

the school project. The project is a joint effort 

among MiDA, the beneficiary 

communities themselves, the 

district-level government, and 

the Ministry of Education. 

MiDA hired local builders to 

rehabilitate the schools and 

provide furnishings. The project’s second phase will focus 

on the construction of new 

schools designed specifically 

to meet community needs. 

This $2.8 million school rehabilitation project 

is part of Ghana’s $547 million MCC compact. 

Over time, the construction and rehabilitation of hundreds of schools in the Agricultural 

Intervention Zones will not only supplement 

other MCC projects and Ghana’s agricultural 

development, but also buttress long-term sustainability by decentralizing and expanding the 

provision of basic community services throughout Ghana. 

Making a difference in Cape Verde: 

E-Procurement system a model 

of transparency and efficiency

Imagine the difficulty of governing a nation 

of ten islands scattered over 4,033 square kilometers of the Atlantic Ocean. No wonder 

the government of Cape Verde developed an 

e-government system to facilitate public administration of its territory through a computer 

network. This system includes, among other 

features, real access to government expenditures 

and a consolidated public registry database. As 

Making a difference in Madagascar:

A creative solution helps 

women gain access to credit 

Sylvie Faramihaja (pictured) moves around 

her native town of 

Toamasina and its 

surrounding villages 

in eastern Madagascar 

with ease on her moped. Equipped with 

this vehicle, and with 

training on how to help 

women access microcredit, she is helping 

to reduce poverty as 

part of Madagascar’s $110 million MCC compact. Sylvie is one of 20 credit counselors who 

have been trained to help women in their quest 

to access credit. She spends her days coaching 

women in microcredit support groups that were 

established in partnership with the region’s 

largest microfinance institution. Through these 

groups, women acquire small loans without collateral and are responsible for repaying them on 

a weekly basis. Loans vary from under $100 to 

up to $2,000 and help women buy supplies and 

goods for their shops or small cottage industries 

that include artisan crafts and food production. 

Sylvie is aware of the cultural, economic, and 

practical issues that are part of these women’s 

daily lives—and of just how important microcredit can be to their future. “More and more 

women are taking advantage of credit...and 

they are paying back their loans while improving their businesses,” she proclaims with pride. 

This group-based credit approach has proven to 

be very effective, with almost a 100 percent loan 

repayment rate.

Making a difference in Ghana: 

Rural schools help children 

reach their potential

One of the biggest challenges for the children of 

Ghana’s Awutu-Effutu-Senya district (pictured 

with MCC Associate Country Director Troy 

Making a Difference 39
part of its $110 million MCC compact, Cape Verde will expand upon its e-government system to 

elevate efficiency and transparency of its procurement system to world class standards. Roughly 

$1 million in compact funds will provide equipment, software, and technical expertise to strengthen 

Cape Verde’s e-government system, which will serve as the backbone of compact procurements in 

the areas of infrastructure, agriculture support, and private sector development. For the average 

citizen, this translates into a more efficient use of government resources. Eventually, the system will 

be applied to enhance transparency across all government ministries, and Cape Verde will take over 

its costs and maintenance to ensure sustainability over the long run.

For more information: Appendix A

Visit Appendix A for compact country results.

Compact with

Grant Amount 

(in millions)

Georgia $295.3

Vanuatu $65.7

Armenia $235.7

Mongolia $284.9

TOTAL compacts 

in Eurasia 

and the Pacific

$881.6 million

4 compacts

Threshold 

Program with

Grant Amount 

(in millions)

Albania $13.9

Albania: 

Stage II $15.7

Philippines $20.7

Jordan $25.0

Indonesia $55.0

Ukraine $45.0

Moldova $24.7

K y r g y z 

Republic $16.0

TOTAL threshold programs in Eurasia and 

the Pacific

$216.0 million

8 threshold 

programs 

Compacts and

threshold programs in

amount

to over

of MCC’s total 16 percent grants worldwide.

Results: Eurasia and the Pacific

Eurasia     Pacific and

the

40 Making a Difference
Monitoring and Evaluation

2%

Program Administration

and Oversight

9%

Energy

6%

Governance

3%

Health, Education and Community Services

5%

Water Supply

and Sanitation

7%

Finance and Enterprise Development

4%

Agriculture

18%

Transportation

46%

Business Startup

0.60%

Trade Policy

3.95%

Rule of Law

13.62%

Political Rights

3.84%

Immunization Rate

9.30%

Fiscal Policy

4.60%

Control of Corruption

60.24%

Civil Liberties

3.84%

Chart: MCC Commitments by Sector—Eurasia and the Pacific Compacts

Millions USD, Total: $882 million (as of September 30, 2008)

Chart: MCC Commitments by Indicator—Eurasia and the Pacific Threshold Programs

(as of September 30, 2008)

Making a Difference 41
Making a difference in Armenia: 

Higher incomes for farmers

Armenian farmer Sevan Jamalyan 

(pictured with CEO Ambassador 

Danilovich) has become a celebrity in his village of Griboyedov. 

Not only is he among the first 

farmers in the Armavir region to 

complete the water management 

training offered through MCC’s 

$235.7 million compact with 

Armenia, but also his farm has 

been selected as a demonstration site for future 

water-to-market program trainings, an overall 

$33 million initiative that will improve farmers’ 

skills and capabilities in this critical area. With 

new technologies, training, and equipment—

ranging from irrigation pipes to sensors and 

water meters—farmers like Sevan are improving 

farm production and management, increasing 

their productivity, and transitioning into higher 

value agricultural activities. “Many 

farmers have no idea about such 

elementary things like fertilizing or 

irrigating; they do it intuitively or just 

follow what their senior or elder peers 

do,” Sevan explains. There will be 220 

demonstration sites all over the country by the end of the compact; 120 of 

them will illustrate water management 

techniques and the remaining 100 will 

be devoted to high value agriculture.

Making a difference 

in the Philippines:

Mediation program utilizes 

resources more efficiently

In late 2007, a private lending company filed a 

complaint before the Office of the Ombudsman 

of the Philippines against 50 government employees, including school teachers and police 

and fire department personnel, to collect outstanding amounts on their delinquent personal 

loans. The Office of the Ombudsman decided 

to recommend the case for mediation, a new 

alternative dispute resolution program made 

possible through the Philippines $20.7 million 

MCC threshold program. After both parties 

presented their points of view during mediation, 

the lending company agreed to restructure the 

employees’ payment schedules. This outcome 

benefited all parties involved; the employees and 

the company were able to reach an agreement, 

and the Office of the Ombudsman had 50 fewer 

complaints, reducing the number of pending 

cases and shifting more resources from administrative work to the fight against corruption. 

This is one example of the threshold program’s 

effectiveness in the Philippines, and contributed 

to the March 2008 decision by MCC’s board of 

directors to select the country as eligible to apply for an MCC compact.

Making a difference in Georgia:

Equipping Georgian farmers 

to increase productivity

Local entrepreneur 

Tamaz Niparishvili 

(pictured) is the 

director of Kaspi’s 

Farm Service Center, 

a one-stop agricultural shop created 

through a grant 

provided through 

the Millennium 

Challenge Georgia Agribusiness Development 

project, a key component of Georgia’s $295.3 

million MCC compact. Tamaz used the grant 

from Millennium Challenge Georgia to buy a 

tractor, a delivery van, and an initial inventory 

of farm supplies to expand his small shop. He 

also devoted personal funds to equip it with a 

warehouse and training facilities. Farmers in 

Kaspi now have access to this state-of-the-art 

Farm Service Center that sells fertilizers, seeds, 

tools, veterinary preparations, disinfectants, and 

pest management solutions. Tamaz’s shop not 

only will rent machinery and tractors to farmers, but also will provide consultants who can 

42 Making a Difference
offer training on how to use them. These basic services create previously unavailable opportunities 

for farmers in this promising agricultural region in central Georgia. Tamaz states, “There is a lot 

to do. We want to increase the competitiveness of Georgian agribusiness. The development of the 

agricultural sector in the region will bring stable incomes and improve farmers’ standard of living.” 

Kaspi’s Farm Service Center is among the first of a network of 30 planned by Millennium Challenge 

Georgia. 

For more information: Appendix A

Visit Appendix A for compact country results.

Compact with

Grant Amount

(in millions)

Honduras $215.0 

Nicaragua $175.1

El Salvador $461.0

TOTAL compacts in 

Latin America

$851.1 million 

3 compacts

Threshold 

Program with

Grant Amount

(in millions)

Paraguay $34.6

Guyana $6.7

Peru $35.6

TOTAL threshold 

programs in 

Latin America

$76.9 million

3 threshold 

programs

Compacts and

threshold programs in

amount

to over

of MCC’s total Latin America 14 percent grants worldwide.

Results: Latin America

Making a Difference 43
Monitoring and Evaluation

2%

Program Administration and Oversight

7%

Energy

4%

Governance

Health, Education and 3%

Community Services

3%

Water Supply and Sanitation

1%

Finance and Enterprise Development

10%

Agriculture

12%

Transportation

58%

Business Startup

9.4%

Rule of Law

30.0%

Immunization Rate

14.9%

Fiscal Policy

7.5%

Control of Corruption

38.2%

Chart: MCC Commitments by Sector—Latin America Compacts

Millions USD, Total: $851 million (as of September 30, 2008)

Chart: MCC Commitments by Indicator—Latin America Threshold Programs

(as of September 30, 2008)

44 Making a Difference
Making a difference in Honduras: 

Assistance to onion growers increase 

production yields

The Farmer Training and Development program 

under Honduras’s $215 million MCC compact is providing technical assistance to help 

Honduran farmers transition to the production 

and marketing of high value horticultural crops. 

In Guinope, a municipality in the department 

of El Paraíso, 300 small farmers have been using traditional production practices to produce 

onions on 80-100 hectares of land. Average 

yield has been only 40,000 pounds per hectare, 

and weather, pests, and diseases often result in 

lower yields or entire crop failures. Now, direct 

technical assistance covering the entire production system is being offered to 29 growers by 

expert agronomists who have already facilitated 

major changes and improvements, including 

higher density plantings. These practices have 

improved all stages of agricultural production. 

In the planting process, for instance, this assistance has provided improved soil management 

techniques, improved plantlet production practices, demonstrated higher density planting, 

and introduced the use of “starter solution” and 

biological controls during transplant. These 

onion farmers are reaping the benefits of higher 

yields, lower unit costs, and increased incomes. 

Additional farmers have seen these results and 

are now being trained by those farmers who 

have already successfully diversified their crop 

base.

Making a difference in Paraguay:

Strengthening institutions by 

increasing ethical awareness among 

public servants

Public servants in Paraguay’s Ministry of 

Education and Culture have been energized 

by a comprehensive ethics campaign resulting 

in the creation of a Code of Ethics and Good 

Governance. Five other government ministries 

and institutions responsible for administering 

a considerable amount of Paraguay’s public 

budget have also benefited from this program, 

conducted through MCC’s $34.6 million threshold program in Paraguay. Wide employee participation and consultation as well as leadership 

from the ministries themselves have been at the 

core of the ethics program, which was launched 

with a survey among public employees about 

perceptions on ethical and unethical behavior 

within their ministries. Designated individuals 

were then invited to volunteer for an Ethics and 

Good Governance training, featuring a series of 

workshops that guided them in developing the 

Code of Ethics to incorporate ethics at an institutional level. A total of 131 individuals from 

different ministries participated in the training, 

including 26 from the Ministry of Education and 

Culture. The program also included a train-thetrainer module, which trained 74 government 

employees to pass on their knowledge and continue raising awareness about ethics in public 

service. Paraguay’s new government administration is committed to sustaining these efforts 

by assigning a qualified staff and allocating a 

budget to the ethics programs established. 

Making a Difference 45
Making a difference in Nicaragua: Women’s incomes and trees sprout up 

Until recently, the ten members of the Cooperativa Forestal de Múltiples 

Servicios de Chinandega Norte (CO-FOCHINORTE), a tree nursery cooperative in Chinandega, were struggling to make ends meet. The women, 

mostly single mothers, split their time between the tree nursery and other 

jobs. The co-op in which they had set their hopes for a better future made 

barely enough money to cover the tree nursery’s overhead expenses but 

not enough to pay its members’ salaries. All that changed in 2007 when 

CO-FOCHINORTE, together with five other local microenterprises, won 

a public bid to supply trees for an innovative forestry development project 

funded through Nicaragua’s $175.1 million MCC compact. The project 

stimulates the rural economy by expanding tree plantations for commercial use and developing all components of the value chain—nurseries, 

timber companies, carpenters, and export activities. According to Danelia Rivera (pictured), COFOCHINORTE’s vice-chairwoman, the contract with MCA-Nicaragua allowed them to produce 

trees on a large scale and to pay their members a decent salary—salaries the members used to buy 

food and clothing for their children, among other things. CO-FOCHINORTE produced 100,000 

trees in 2007, and the group performed so well that it secured a second, larger contract in 2008. 

“We have increased our business’ capital with the support of MCA-Nicaragua. As a result, our tree 

nursery will yield increased profits and we will bring home higher salaries,” confirms Danelia. 

For more information: Appendix A

Visit Appendix A for compact country results.

The Millennium Challenge Corporation is a groundbreaking way of delivering development assistance 

that is changing the global conversation not only 

about aid effectiveness, but also about its practice. 

MCC bundles the best lessons learned in development assistance. The MCC model relies on sound 

policy performance and country ownership to reduce poverty through sustainable economic growth 

in meaningful, tangible ways that will benefit and 

transform the lives of those living in poverty. MCC 

already has incorporated and put into action the 

most fundamental reforms discussed in connection 

with the future direction of foreign assistance. 

The principles that define MCC will inform the future 

architecture of a new and improved foreign aid approach. The development community agrees that 

the types of approaches and reforms that MCC has 

instituted merit attention and should be adopted as 

appropriate by donors; many donors are now looking 

at ways to emphasize performance-based development assistance. 

MCC will move into the next chapters of its history by 

continuing to improve operations and encouraging 

countries to shoulder deeper responsibility for their 

own development. MCC will lead sound compact development and support aggressive implementation 

of large-scale poverty reduction programs with tangible results. With ongoing support and resources, 

MCC will remain a strong and effective model for 

delivering results-focused development assistance 

that makes a positive and sustainable difference in 

the global fight against poverty.

Moving Forward: Making a Difference Beyond 2008

46 Making a Difference
Management’s Financial Comments

A Message from the Acting Vice 

President of the Department of 

Administration and Finance

The 2008 Annual 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:

 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. 

 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.

 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.

 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 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 identified 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 

Making a Difference 47
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. The achievements highlighted in this Annual Report for 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 toward our goal 

of poverty reduction through growth. 

Michael Casella

Acting Vice President, 

Administration and Finance

For more information: Appendix B

Visit Appendix B for MCC’s operational and programmatic financial statements. 

48 Making a Difference
Appendices

Making a Difference 49
Compact Implementation Timeline Year 1 Year 2 Year 3 Year 4 Year 5

Roads Package 1 

rehabilitation kicks 

off in 9 regions

August 2008: 

6.5 km of tertiary 

canal repairs 

conclude

$1.5 million credit 

to farmers issued 

We Are Here

* For more information on country proposals, due diligence, program set-up, 

implementation and monitoring, and ongoing impact, please see the diagram 

entitled Typical MCC Program Cycle at www.mcc.gov.

As of September 30, 2008

Disbursements to Date................. $24,193,593

Total Contract Commitments...... $86,422,882

Compact Implementation Status Report Timeline, Armenia

3

2

1 09/06 - 08/07 09/07 - 08/08 09/08 - 08/09 09/09 - 08/10 09/10 - 08/11

Rural Roads Project

 Design / Environmental Assessment

 Rural Roads 1

 Other Rural Roads

Irrigation Infrastructure Activity

 Pumping Stations

 Resevoirs

 Main Canals

 Gravity Schemes

 Tertiary Canals

 Ararat Valley Drainage Scheme

Water-to-Market Activity

 Strengthening Water User Associations

 On-Farm Water Management Technologies

 Post-Harvest, Processing, and Marketing

 Credit for Farmers

 Project Preparation

 Construction - Infrastructure

 Project Activities - Other Sectors

3

2

1



	


Compact Implementation

Armenia Compact Progress  Rural Road Rehabilitation: Rehabilitation works continue on a  

kilometer segment of rural road linking northern farmers to major 

agricultural markets in the region. By the end of , nine villages 

will benefit from access to the new road.

 In September , MCA-Armenia began the re-habilitation of 

 kilometers of rural road segments impacting all regions of 

Armenia. e Government of Armenia is contributing  million 

(excluding VAT) toward this . million project.

 Irrigation Infrastructure Activity: Repairs to , meters of irrigation canal that service , acres of farmland were completed in 

August . e  farmers who will benefit from the improved 

irrigation resulting from these repairs provided  of the funds 

required for the repairs project.

 Water-to-Market Activity: An additional , farmers have been 

trained in the use of new and improved farming technologies, 

bringing the total to ,. In , over  farmers received a 

total of . million in credit to develop their agribusinesses.

 Note: Compact funding allocations for Armenia have not changed since 

compact signature, although irrigated infrastructure and road construction works have been adjusted in scope/size due to escalating global 

construction costs and currency fluctuations.

Compact At-A-Glance

Signed............................................ //

Entry Into Force...........................//

e five year, . million compact 

aims to reduce rural poverty by increasing the agricultural sector’s economic 

performance. is goal will be achieved 

through strategic investments in rural 

roads and irrigation systems.

Country At-A-Glance

Population......................................,,*

GNI per Capita ................................. ,*

Program Administration &

Monitoring and Evaluation

Water-to-Market Activity

Irrigation Infrastructure Activity

Rural Road Rehabilitation $32.42 $67.10

$113.26

$22.87

in millions

$86,422,882 total contract commitments

$24,193,593 disbursed to date

Obligations by Project

World Development Indicators, World Bank, 2007

On the Web: 

www.mcc.gov

MCA-Armenia: 

www.mca.am

September 30, 2008 | www.mcc.gov

Appendix A: Individual Compact Country Highlights

 . ) ! * % 

50 Making a Difference


	


Compact Implementation

Benin Compact Progress  Access to Justice Project: In October , the Parliament of Benin 

enacted new legal procedural codes, thereby replacing codes that 

had been out of date for  years. Having now achieved that mile-

stone, MCA-Benin may proceed with the construction of  court-

houses in various sites throughout the country. e Arbitration, 

Mediation and Conciliation Center (CAMeC) has now been fully 

staffed and is starting operations in new office space in Cotonou.

 Access to Land Project: MCA-Benin completed construction on 

five of seven global positioning stations that will collect data for 

land mapping and titling activities. MCA-Benin also trained more 

than a dozen trainers on surveying and mapping with the most 

sophisticated GPS equipment in the region. MCA-Benin has also 

completed an in-depth assessment of the national urban land 

permit commission.

 Access to Financial Services Project: MCA-Benin established the 

Management Unit for the Financial Innovation and Expansion 

Challenge Facility, which launched its first request for grant ap-

plications in September . e team trained  delegates 

throughout Benin to ensure that institutions in remote areas 

would have access to information and application materials re-

garding the Challenge Facility.

Compact At-A-Glance

Signed............................................ //

Entry Into Force...........................//

e five-year, . million compact 

will increase access to land through more 

secure tenure, expand access to financial 

services through grants to enterprises, 

provide access to justice by bringing 

courts closer to rural populations and 

improve access to markets through im-

provements to the Port of Cotonou.

Country At-A-Glance

Population......................................,,*

GNI per Capita .....................................*

Program Administration

Monitoring and Evaluation

Access to Markets

Access to Justice

Access to Financial Services

Access to Land

$34.27

$8.78

$39.13 $36.02

$169.45

$19.65

in millions

$52,255,019 total contract commitments

$24,396,415 disbursed to date

Obligations by Project

World Development Indicators, World Bank, 2007

On the Web: 

www.mcc.gov

MCA-Benin: 

www.mcabenin.bj

September 30, 2008 | www.mcc.gov

Compact Implementation Timeline Year 1 Year 2 Year 3 Year 4 Year 5

September 25: 

MCA receives 

Certificate of 

Appreciation for 

transparency from 

US Ambassador at 

2 year anniversary 

recognition event

Sept. 2008: 

Environmental 

Validation 

workshop in 

Cotonou to explore 

local concerns 

about Port 

construction

October 2008: 

Challenge Facility 

opens its first 

batch of proposals 

for micro-finance 

projects

We Are Here October 17:

National Assembly 

passes reformed 

Legal Procedural 

Codes for the first 

time in 10 years

4

* For more information on country proposals, due diligence, program set-up, 

implementation and monitoring, and ongoing impact, please see the diagram 

entitled Typical MCC Program Cycle at www.mcc.gov.

As of September 30, 2008 

Disbursements to Date................. $24,396,415

Total Contract Commitments..... $52,255,019

Compact Implementation Status Report Timeline, Benin

 10/06 - 09/07 10/07 - 09/08 10/08 - 09/09 10/09 - 09/10 10/10- 09/11

Access to Markets

 Port Institutional Activity: Customs Improvement, Audit 

 Port Security and Landside Improvements

 Waterside Improvements

 Studies: Port Project and Design, Dry Port, Master Plan

Access to Land

 Policy and Legal Framework

 Property Rights and Registration

 Land Registration Services and Info Management

 Information, Education and Communication

Access to Financial Services

 Financial Institution Capacity Building 

 Financial Enabling Environment Activity

Access to Justice

 Arbitration Center

 Business Registration Station

Improved Courts Services: Legal Information 

Center,Judges' Training, Legal Aid, New Courthouses

 Project Preparation

 Construction - Infrastructure 

 Project Activities - Other Sectors

43

3

2

21

1

! * % *

Making a Difference 51
	



	

Burkina Faso Program 

Summary

e five-year, . million compact seeks to reduce poverty and 

accelerate economic growth throughout Burkina Faso. e compact aims 

to increase investments in land and rural productivity through improved 

land tenure security and land management, expand the productive use of 

land in order to increase the volume and value of agricultural production 

in project zones, enhance access to markets through investments in the 

road network and increase primary school completion rates for girls.

Program Highlights

 e MCC Resident Mission was established in July . 

Recruitment of locally employed staff is underway.

 MCA-Burkina Faso’s Board of Directors held their first official 

meeting on September , . During this meeting, the Board 

reviewed the decree establishing the Accountable Entity (MCABurkina Faso), and approved its bylaws, the recruitment of key officers, and the process for the selection of the National Coordinator. 

 In September, following a competitive selection process, Mr. Bissiri 

Sirima, who had served as the National Coordinator for the “MCC 

Program’s Coordination Unit” during the Compact Development 

phase, was formally chosen as MCA-Burkina’s National 

Coordinator. MCA-BF has hired all its key officers and is in the 

process of hiring the second tier staff. 

 In September, the (b) interagency agreement between MCC 

and USAID was signed for the implementation of the BRIGHT  

Schools Project.

September 30, 2008 | www.mcc.gov

Compact Status

Status................Compact Signed

Country Information

Population .................,,*

GNI Per Capita .................. *

Compact Process

Stage

 Eligibility 

Notification

--

 Proposal Receipt --

 Opportunity 

Memo

--

 Congressional 

Notification 

on Compact 

Negotiations

--

 Investment Memo --

 Board Approval --

 Compact Signing --

Entry 

Into Force

Initial 

Disbursement

52 Making a Difference


	


Compact Implementation

Cape Verde Compact Progress  Infrastructure Project: e Pedra Badejo-Orgãos (km), Cruz 

Grande -Calhetona (km) and Assomada - Rincão ( km) roads, 

as well as two bridges and a km connecting road in Paul are pres-

ently under construction. 

 On October , , in a ceremony witnessed by citizens, mem-

bers of the Cabinet, diplomats and donors, the Prime Minister of 

Cape Verde, José Maria Neves, launched the Phase I works for the 

upgrade and modernization of the Port of Praia. is . million 

project is funded by MCC.

 Watershed Management and Agricultural Support: Sig-

nificant progress has been made with  dikes and  reservoirs 

built. Twenty additional reservoirs and sixty more dikes are under 

construction on three islands. All three Rural Extension Centers 

in each of the watersheds have been rehabilitated and equipped for 

operation. ese centers will provide training of and outreach to 

farmers including courses in drip irrigation and environmentally 

sustainable agriculture practices.

 Access to Credit Activity: e first contract and funds disburse-

ment to microfinance institutions under the Access to Credit 

Activity was signed on October th, . is activity will benefit 

urban and rural poor through increased access to micro-credit 

funds building on capacities developed in the last decade through 

support from the US P.L  food program.

Compact At-A-Glance

Signed...............................................//

Entry Into Force..........................//

e five-year . million compact 

seeks to improve investment climate, 

reform the financial sector, develop infra-

structure to support increased economic 

activity and provide access to markets, 

employment, and social services. Other 

goals include increasing agricultural 

productivity and rural incomes.

Country At-A-Glance

Population.........................................,*

GNI per Capita ................................. ,*

Program Administration

Monitoring and Evaluation

Private Sector

Infrastructure Rehabilitation

Watershed and Agriculture Management

$78.76

$37.8

$4.89 $8.38

$7.20

$10.85

in millions

$89,451,435 total contract commitments

$27,039,198 disbursed to date

Obligations by Project

World Development Indicators, World Bank, 2007

On the Web: 

www.mcc.gov

MCA-Cape Verde: 

www.mca.cv

September 30, 2008 | www.mcc.gov

  , ! ! . ! Compact Implementation Timeline Year 1 Year 2 Year 3 Year 4 Year 5

First loans have 

been made to 

borrowers through 

local microfinance 

institutions 

October 11 2008: 

Groundbreaking 

for Works on Port 

of Praia Phase I 

(MCC-funded part 

of port)

October 2008: 

7 kms of the 

Assomada-Rincao 

Road 7 km have 

been paved and 

two bridges in 

Santo Antao are 

under construction

E-Procurement 

initiative in support 

of e-Government 

launched 

4

* For more information on country proposals, due diligence, program set-up, 

implementation and monitoring, and ongoing impact, please see the diagram 

entitled Typical MCC Program Cycle at www.mcc.gov.

Compact Implementation Status Report Timeline, Cape Verde

321

We Are Here

As of September 30, 2008 

Disbursements to Date................. $27,039,198

Total Contract Commitments..... $89,451,435

10/05 - 09/06 10/06 - 09/07 10/07 - 09/08 10/08 - 09/09 10/09 - 09/10

Watershed Management and Agricultural Support

 Water Management Activity 

 Agribusiness Development Services Activity

 Credit Activity

Infrastructure

 Port

 Roads and Bridges

Private Sector Development

 Partnership to Mobilize Investment

 Financial Sector Reform

Program Administration

 Enhanced Transparency Initiative

 Project Preparation

 Construction - Infrastructure

 Project Activities - Other Sectors

1234

Making a Difference 53


	


Compact Implementation

El Salvador Compact Progress  Productive Development Project: To date, FOMILENIO, the Sal

-

vadoran entity responsible for implementing the MCC compact, 

has signed  grant programs valued at . million benefitting 

over , farmers and small business owners. FOMILENIO also 

signed a . million contract to implement the technical assis-

tance activity, including reaching approximately , beneficiaries, 

creating approximately  new jobs and guaranteeing funds to 

incentivize local lending in the underserved northern zone. 

 Human Development Project: Installation of the first  photovol-

taic systems and community training in the most remote regions 

of the northern zone has begun. In addition, FOMILENIO has 

contracted for the feasibility studies and final designs of  mu-

nicipal water & sanitation systems. FOMILENIO and the Ministry 

of Education have approved the  middle-technical institutes 

which will benefit from MCA investments in infrastructure and 

modern equipment.

 Connectivity Project: As implementation gathers momentum 

entering compact year , FOMILENIO has opened the first two 

of its regional offices in Metapan and Nueva Concepcion. ese 

regional offices will provide closer relationships with the commu-

nity of beneficiaries in the northern zone and will provide strategic 

outposts for work on implementing the Resettlement Action Plan, 

a prerequisite for all future construction activities related to the 

Connectivity Project.

Compact At-A-Glance

Signed.............................................1⁄2/

Entry Into Force...........................//

e five-year, . million compact 

seeks to improve the lives of Salvadorans 

through strategic investments in educa-

tion, public services, agricultural produc-

tion, rural business development and 

transportation infrastructure.

Country At-A-Glance

Population......................................,,*

GNI per Capita ..................................,*

Accountability

Program Administration

Productive Development

Human Development 

Connectivity

$95.07

$233.56

$24.26

$20.59

$87.47

in millions

$53,762,988 total contract commitments

$12,484,214 disbursed to date

Obligations by Project

World Development Indicators, World Bank, 2007

On the Web: 

www.mcc.gov

FOMILENIO: 

www.fomilenio.gov.sv

September 30, 2008 | www.mcc.gov

We Are Here

As of September 30, 2008

Disbursements to Date................. $12,484,214

Total Contract Commitments..... $53,762,988

Compact Implementation Timeline Year 1 Year 2 Year 3 Year 4 Year 5

The installation of 

the first 250 photo-

voltaic systems has 

commenced. Con-

racts for feasibility 

studies and designs 

have been signed 

for the first 24 

municipal water and 

sanitation systems. 

FOMILENIO has 

a) signed 13 

grant programs 

(valued at $6.8M) 

benefitting 3,074 

farmers and small 

business owners; 

b) signed a $25M 

contract with 

Chemonics to reach 

1,815 beneficiaries 

and create 781 

new jobs in year 2; 

and C) capitalized 

key insurance and 

guarantee funds 

to incentivize 

local lending in 

the underserved 

nothern zone.

FOMILENIO hired Wilbur and 

Associates as its Connectivity Project 

Manager (CPM). In preparation for 

initial construction of the Northern 

Highway, FOMILENIO has begun 

the process of acquiring rights of 

way with the first 48 cases to be 

completed in October. 

* For more information on country proposals, due diligence, program set-up, 

implementation and monitoring, and ongoing impact, please see the diagram 

entitled Typical MCC Program Cycle at www.mcc.gov.

Compact Implementation Status Report Timeline, El Salvador

321

10/07-9/0810/08-09/0910/09-09/1010/10-09/1110/11-09/12

Human Development Project

 Education and Training

 Water and Sanitation

 Rural Electrification

 Community Infrastructure

Productive Development Project

 Production and Business

 Investment Support

 Financial Services

Connectivity Project

 Northern Transnational Highway

 Connecting Roads

 Project Preparation

 Construction - Infrastructure 

 Project Activities - Other Sectors

3

12

((2 +.

54 Making a Difference
!+.#% 

	


Compact Implementation

Georgia Compact Progress  Regional Infrastructure Development: e first of three con

-

struction seasons is nearing completion in the rehabilitation of the 

roads system in the Samtskhe-Javakheti region. Two companies 

are working in parallel to complete  km of road that will con-

nect the region to Tbilisi, improve travel time, reduce vehicle oper-

ating costs, and provide an important trade link with Armenia. 

 Energy Sector Rehabilitation: Phase II of natural gas pipeline 

repairs are now underway. e repairs include the replacement 

of  kilometers of pipeline and major earthworks to protect the 

pipeline from landslides. e works are being conducted by a con-

sortium of three Georgian engineering firms led by New Energy 

Ltd. 

 Regional Infrastructure Development Project: Six contracts, to-

taling . million, have been approved to rehabilitate municipal 

water supply systems in three cities. e projects will assure that 

the populations of Poti, Kutaisi and Bakuriani have a -hour sup-

ply of potable water. 

 Georgia Regional Development Fund: e Georgia Regional 

Development Fund invested . million in Bazi, a Georgian food 

processing and cannery operation. e investment will be used 

to expand the company’s facilities that produce apple and tomato 

concentrate. is was GRDF’s third investment.

Compact At-A-Glance

Signed.............................................//

Entry Into Force............................. //

e five-year, . million compact will 

rehabilitate key regional infrastructure, 

stimulate regional trade by improving 

transportation, ensure a reliable energy 

supply, improve the delivery of regional 

and municipal services and develop 

regional enterprises by investing in farms 

and other enterprises.

Country At-A-Glance

Population.....................................,,*

GNI per Capita ...................................*

Monitoring and Evaluation

$8.45 Program Administration

$22.90

Regional Infrastructure Development Activity

$43.49

Enterprise Development Project

$47.35

Energy Rehabilitation Activity

$49.50

Road Rehabilitation Activity

$123.62

in millions

$213,694,749 total contract commitments

$73,162,510 disbursed to date

Obligations by Project

*World Development Indicators, World Bank, 2007

On the Web: 

www.mcc.gov

Millennium Challenge Georgia Fund: 

www.mcg.ge

September 30, 2008 | www.mcc.gov

Compact Implementation Timeline Year 1 Year 2 Year 3 Year 4 Year 5

September 2008: 

Construction con-

tinues on road con-

necting Georgia to 

Armenia and Turkey

September 2008: 

$15.5 million in 

contracts approved 

for works in 3 cities

September 2008: 

Phase II, consisting 

of nine repairs is 

under way.

We Are Here

September 2008:

GRDF makes 

a $2 million 

investment in Bazi, 

a food processing 

company

4

* For more information on country proposals, due diligence, program set-up, 

implementation and monitoring, and ongoing impact, please see the diagram 

entitled Typical MCC Program Cycle at www.mcc.gov.

As of September 30, 2008

Disbursements to Date................. $73,162,510

Total Contract Commitments..... $213,694,749

Compact Implementation Status Report Timeline, Georgia

321

4/06-3/074/07-3/084/08-3/094/09-3/104/10-3/11

Road Rehabilitation

Regional Infrastructure Development

 Poti Municipal Water Project

 Borjomi Municipal Water Project

 Bakuriani Municipal Water Project

 Kutaisi Municipal Water Project

 Kobuleti Municipal Water Project

Energy Sector Rehabilitation

 Phase I - Emergency Repairs - 6 Sites

 Phase II - 9 Sites

 Phase III - 8 Sites

Georgia Regional Development Fund

 Investments

Agribusiness Development Activity

 Grant-Making

 Project Preparation

 Construction - Infrastructure

 Project Activities - Other Sectors

4321

September 2008:

Over 85 grants 

awarded with a 

value of over $3 

million

5

5

Making a Difference 55


	


Compact Implementation

Ghana Compact Progress  Agriculture Project: Training in commercial agriculture has begun 

for  farmers in the MiDA zones. By December , it is 

expected that , farmers will have been trained.

 Cold Chain Activity: Seven pineapple farms procured walk-in cool-

ers in order to keep their produce fresh longer. MiDA and MCC, 

in partnership with Association for a Green Revolution in Africa, 

have supported the drafting of a new seed law and a new law on 

plant protection, which is pending approval from Parliament.

 Agricultural Credit Activity: e Bank of Ghana has provided . 

million to  local Participating Financial Institutions to lend to 

credit recipients, including commercial banks, savings and loan 

banks and rural banks.

 Land Activity: MiDA co-sponsored the first National Land Policy 

Forum in Ghana March . MiDA installed a Continuously 

Operating Reference Station and trained local staff. MiDA consul-

tants have educated participating communities about the benefits 

of land registration.

 Transportation Project: In November, MiDA expects to sign its 

largest contract to date worth  million to upgrade the first part 

of a -kilometer stretch of highway around the capital of Accra, 

known as National Highway . Consultants have also completed a 

key feasibility study on  kilometers of trunk roads in the Afram 

Plains Basin.

Compact At-A-Glance

Signed............................................../ /

Entry Into Force............................//

e five-year, . million compact 

seeks to increase farmer incomes through 

private sector-led agribusiness develop-

ment. e compact aims to spur the pro-

duction and productivity of both staple 

and high-value crops to make Ghana’s 

agricultural products more competitive in 

regional and global markets.

Country At-A-Glance

Population....................................,,*

GNI per Capita .....................................*

Monitoring and Evaluation

Program Management and Oversight

Rural Development 

(education, water/sanitation, electricity)

Transportation Development

Agriculture Development

$143.10

$240.98

$15.00

$46.63

$101.29

in millions

$100,467,187 total contract commitments

$25,957,953 disbursed to date

Obligations by Project

World Development Indicators, World Bank, 2007

On the Web: 

www.mcc.gov

MiDA: 

www.mida.gov.gh

September 30, 2008 | www.mcc.gov

Compact Implementation Timeline Year 1 Year 2 Year 3 Year 4 Year 5

September 2008: 

Farmer Based 

Organization 

training begins with 

600 farmers

October 2008: 

First members 

of the Seafreight 

Pineapple 

Exporters of Ghana 

(SPEG) association 

procure pre-coolers 

for crop storage

December 2008: 

100% of Phase 

1A schools 

rehabilitiation 

complete

We Are Here

* For more information on country proposals, due diligence, program set-up, 

implementation and monitoring, and ongoing impact, please see the diagram 

entitled Typical MCC Program Cycle at www.mcc.gov.

As of September 30, 2008

Disbursements to Date................. $25,957,953

Total Contract Commitments..... $100,467,187

Compact Implementation Status Report Timeline, Ghana

321

2/07-1/082/08-1/092/09-1/102/10-1/112/11-1/12

Agriculture Project

 Training of Farmer Based Organizations (FBOs)

 Irrigation Development

 Land Tenure Facilitation

 Improve Post Harvest & Value Chain Services

 Improve Credit Services & Value Chain Investments

 Rehabilitation of Feeder Roads

Transportation Project

 Upgrading of National Highway (N1)

 Construction/Rehab of Afram Basin Trunk Roads

 Improvements to Volta Lake Ferry Service

Rural Development Project

 Strengthen Public Sector Procurement Capacity

 Construction/Rehab of Educational Facilities (rolling)

 Construction of Water Sanitation Facilities

 Electrification of Rural Areas

 Improvements/Networking of Rural Banks

 Improvements of National Payment System

 Project Preparation

 Construction 

 Project Activities

3

2

1

$*

56 Making a Difference


	


Compact Implementation

Honduras Compact Progress  Rural Development Project: As of September , nearly , 

Program farmers cultivating over ,  hectares of high value 

horticulture crops are receiving technical assistance and training 

in best agriculture practices, integrated pest management, appropriate technology for increased productivity, and sanitary and 

phytosanitary measures.

 Over the last quarter, the response of financial intermediaries to 

the revised trust fund guidelines has been impressive. As of September ,  applications for lines of credit have been received, 

eight of which have been approved for a total value of . million. 

e approved lines of credit are being provided to a wide variety 

of financial institutions which will help strengthen the farmers’ 

access to a diverse pool of financial products.

 Transportation Project: Construction is underway and  kilometers of the CA- highway project are under contracts totaling 

close to  million. Resettlement works for . kilometers of the 

CA- highway are in progress and procurement continues for the 

remaining resettlement works contracts

 Contracts for two of the three planned secondary roads have been 

signed for a combined value of  million and construction is 

underway.

Compact At-A-Glance

Signed.............................................//

Entry Into Force........................... //

e five-year, . million compact’s 

two main objectives are to increase the 

productivity and business skills of farmers and to reduce transportation costs 

between targeted production centers and 

national, regional and global markets.

Country At-A-Glance

Population......................................,,*

GNI per Capita ................................. ,*

Program Administration

Monitoring and Evaluation

Rural Development Project

Transportation Project

$70.7 $127.2

$9.3

$7.8

in millions

$180,385,494 total contract commitments

$34,944,531 disbursed to date

Obligations by Project

World Development Indicators, World Bank, 2007

On the Web: 

www.mcc.gov

MCA-Honduras: 

www.mcahonduras.hn

September 30, 2008 | www.mcc.gov

Compact Implementation Timeline Year 1 Year 2 Year 3 Year 4 Year 5

September 2008: 

Construction is 

underway for the 

North Segment of 

the CA-5 Highway.

September 2008: 

Farmers have 

begun to access 

credit from financial 

intermediaries 

that have signed 

contracts for a total 

value of $4.5M.

September 2008: 

Traffic count and 

the origin/destination survey began. 

It will provide baseline and ongoing 

data to monitor the 

effects of Transportation projects.

We Are Here

* For more information on country proposals, due diligence, program set-up, 

implementation and monitoring, and ongoing impact, please see the diagram 

entitled Typical MCC Program Cycle at www.mcc.gov.

As of September 30, 2008

Disbursements to Date................. $34,944,531

Total Contract Commitments..... $180,385,494

Compact Implementation Status Report Timeline, Honduras

3

2

1 10/05 - 09/06 10/06 - 09/07 10/07 - 09/08 10/08 - 09/09 10/09 - 09/10

Transportation Project

 CA-5 Highway

 Secondary Roads

 Weight Control System

Rural Development Project

 Farmer Training and Development

 Farmer Access to Credit

 Farm to Market Roads

 Agricultural Public Goods Grant Facility 

Program Administration and Control

 Program Administration

 Audit

Monitoring and Evaluation

 Data Quality Review

 Data Collection

 Project Preparation

 Construction - Infrastructure

 Project Activities - Other Sectors

3

2

1

+* 1./

Making a Difference 57
!/+0$+ 

	


Compact Implementation

Lesotho Compact Progress  Program Set-Up: e compact program is being administered by 

MCA-Lesotho, an independent entity established under the laws 

of Lesotho, with oversight from a mixed public-private Board of 

Directors. All key staff of MCA-Lesotho are now in place. In ad-

dition,  implementing entities that will support MCA-Lesotho in 

executing the compact program are now staffed and operational. 

 Water Sector Project: e Metolong Program Management Unit 

(MPMU) and the Water and Sewage Authority Project Implemen-

tation Unit contracts, both extremely critical to the compact, have 

been approved and signed. Mobilization of the MPMU is a condi-

tion precedent to the initial disbursement of compact funds.

 Health Sector Project: e Health Project Implementation Unit has 

been established within the Ministry of Health and Social Welfare. 

All core Health PIU staff members are on board. Mobilization of 

the Health PIU is a condition precedent to the initial disbursement 

of compact funds. 

 Private Sector Development Project: An important condition prec-

edent to the initial disbursement of compact funds relates to the 

harmonization of other laws with Lesotho’s Legal Capacity of Mar-

ried Persons Act and was satisfied in August . Additionally, 

Lesotho-based banks have signed on to the Common Monetary 

Area Cross Border Payment Committee Oversight Agreement. 

Compact At-A-Glance

Signed.............................................//

Entry Into Force............................//

e . million compact with Lesotho 

seeks to improve health outcomes and 

productivity through strengthening the 

health system, removing barriers to for-

eign and local private sector investment 

and providing water supply for industrial 

and domestic use.

Country At-A-Glance

Population...................................... ,,*

GNI per Capita ................................. ,*

Program Administration

Health Sector 

Water Sector 

$164.03 Private Sector Development

$36.11

$122.40

$87

$40.02 in millions

$7,275,016 total contract commitments

$4,009,994 disbursed to date

Obligations by Project

World Development Indicators, World Bank, 2007

On the Web: 

www.mcc.gov

MCA-Lesotho: 

September 30, 2008 | www.mcc.gov

58 Making a Difference


	


Compact Implementation

Madagascar Compact Progress  Land Tenure Project: e project has restored and digitized 

, disintegrating land rights documents in  of the country’s 

 regional land service offices. A total of  local land management offices are operational and have issued , land certificates, securing land rights for , families.

 Finance Project: e project is on track in establishing the national 

inter-bank payment system at the Central Bank. e project’s assistance to the National Savings Bank in modernizing its information management system has helped increase the bank’s capacity 

to provide services to its clientele. A fund set up to increase available capital at microfinance institutions has resulted in additional 

loans worth ,, benefitting  farmers.

 Agricultural Business Investment Project: MCA-Madagascar has 

provided technical assistance to over , farmers and  

small businesses, and has facilitated farmer groups in mobilizing 

microfinance loans.

 Other Highlights: In mid-, the government of Madagascar 

created a separate ministry to oversee the implementation of the 

land tenure reform program in Madagascar. To date, MCC is financing roughly  of this program through the compact. In late 

September, the new Ministry of Land Reform, Estate and Country 

Planning organized a donor conference to increase understanding 

of the land tenure reform program, highlight its successes to date, 

and solicit support and financing to expand the program to all 

regions of Madagascar. 

Compact At-A-Glance

Signed.............................................//

Entry Into Force............................//

e four-year, approximately . million compact seeks to increase land security, expand competition in the financial 

sector and spur investment in farms and 

other rural businesses.

Country At-A-Glance

Population....................................,,*

GNI per Capita .....................................*

Program Administration

Monitoring and Evaluation

Agricultural Business Investment Project

Finance Project

Land Tenure Project

$35.89

$17.68

$15.02

$37.80

$3.38

in millions

$78,055,109 total contract commitments

$50,044,288 disbursed to date

Obligations by Project

World Development Indicators, World Bank, 2007

On the Web: 

www.mcc.gov

MCA-Madagascar: 

www.mcamadagascar.org

September 30, 2008 | www.mcc.gov

Compact Implementation Timeline Year 1 Year 2 Year 3 Year 4

August 2008: 

Launched invitations for bid for the 

construction of 191 

land management 

offices

October 2008: 

Launched second 

round of support 

fund for microfinance institutions 

worth $1 million

September 2008: 

Construction began 

on six ABC’s in 

three of the target 

zones

We Are Here

* For more information on country proposals, due diligence, program set-up, 

implementation and monitoring, and ongoing impact, please see the diagram 

entitled Typical MCC Program Cycle at www.mcc.gov.

As of September 30, 2008

Disbursements to Date................. $50,044,288

Total Contract Commitments..... $78,055,109

Compact Implementation Status Report Timeline, Madagascar

3

2

1 08/05 - 07/06 08/06 - 07/07 08/07 - 07/08 08/08 - 07/09 08/09 - 07/10

Land Tenure Project

 Support Development of National Land Policy Framework

 Improve Ability of the National Land Service Administration

 Decentralization of Land Services

 Land Tenure Regularization

 Information Gathering Analysis and Dissemination

Finance Project

 Promote Legal and Regulatory Reform

 Reform Sovereign Debt Management and Issuance

 Strengthen the National Savings Bank

 Provide New Instruments for Agribusiness Credit

 Modernize National Interbank Payment System

 Improve Credit Skills Training, Increase Credit Information

Agricultural Business Investment Project

 Create and Operate Six Agricultural Business Centers

 Create National Coordinating Center for ABC's

 Identify Investment Opportunities

 Build Management Capacity Zones

 Project Preparation

 Construction - Infrastructure

 Project Activities - Other Sectors

3

2

1

Year 5


 #/.

Making a Difference 59

(% 

	


Compact Implementation

Mali Compact Progress  Alatona Irrigation Project: Procurement actions were launched 

for the agricultural systems development services, upgrades to 

the main water conveyance system and construction of irrigation 

canals, as well as the supervision of irrigation construction and 

design of social infrastructure such as health clinics and schools.

 A local NGO is providing communication and coordination as-

sistance to  families in preparation for their relocation to new 

villages which are adjacent to the irrigated land parcels they will 

receive as part of their resettlement compensation package.

 e Niono-Goma Coura road construction and supervision 

contracts are expected to be signed in late October or early 

November; road resettlement compensation will be complete by 

December  when construction is scheduled to begin.

 Bamako-Sénou Airport Improvement Project: Selection of 

design and supervision consultants for airside and landside activi-

ties is underway with mobilization projected for December . 

Airside construction activities are scheduled to start in 

 Note: e Mali Compact was formally restructured due to escalating 

global construction costs, currency fluctuations, and feasibility and 

operational efficiencies. Funds formerly designated for the Industrial 

Park Project have been dedicated towards the completion of the Airport 

Project, as requested by the Government of Mali.

Compact At-A-Glance

Signed........................................... //

Entry Into Force............................//

e five-year, . million compact will 

increase the productivity of agriculture. 

e compact will expand Mali’s access 

to markets and trade through key infra-

structure investments that capitalize on 

the Bamako-Sénou Airport and the Niger 

River for irrigated agriculture.

Country At-A-Glance

Population....................................,,*

GNI per Capita .................................... *

Industrial Park Project

$2.08

Monitoring and Evaluation

$4.66

Program Administration

$37.18

Alatona Irrigation Project

$234.88 

Bamako Senou Airport 

Improvement Project

$182.01 

in millions

$59,614,246 total contract commitments

$10,300,831 disbursed to date

Obligations by Project

*World Development Indicators, World Bank, 2007

On the Web: 

www.mcc.gov

MCA-Mali: 

www.mcamali.org

September 30, 2008 | www.mcc.gov

Compact Implementation Timeline Year 1 Year 2 Year 3 Year 4 Year 5

August 2008: 

First meeting of 

Airport and Alatona 

Project Advisory 

Committees

October 2008: 

Pre-bid conference 

held for the three 

main irrigation 

contracts

October 2008: 

Significant advancement on 

the design of social infra-

structure for Alatona villages 

(housing, schools, health 

centers, etc.)

We Are Here

September 2008:

Land selection criteria 

finalized for 5-10 ha parcels

4

* For more information on country proposals, due diligence, program set-up, 

implementation and monitoring, and ongoing impact, please see the diagram 

entitled Typical MCC Program Cycle at www.mcc.gov.

As of September 2008 

Disbursements to Date................. $10,300,831

Total Contract Commitments..... $59,614,246

Compact Implementation Status Report Timeline, Mali

31

5

October 2008: 

NGC Road 

construction 

and supervision 

contracts signed

2

September 2008: 

Key procurement for agricul-

tural services launched

September 2008:

Local NGO signs contract for 

preparation of resettlement 

implementation in the 

Alatona zone

6

September 2008: 

Bids from firms shortlisted for 

the Airport design and super-

vision contracts are evaluated 78

August 2008: 

MCA requests institutional 

strengthening proposals from 

key aviation agencies

9

9/07-9/089/08-9/099/09-9/109/10-9/119/11-9/12

Alatona Irrigation Project

 Niono - Goma Coura Road

 Irrigation Planning and Infrastructure

 Social Infrastructure

 Land Allocation

 Resettlement

 Social Services (Education and Health)

 Agricultural Services and Financial Services 

Bamako-Senou Airport Improvement Project

 Airside Infrastructure

 Landside Infrstructure 

Institutional Strengthening 

 Project Preparation

 Construction - Infrastructure

 Project Activities - Other Sectors

32

1

1

4

5678

9

60 Making a Difference

+*#+(% 

	


Compact Implementation

Mongolia Compact Progress  Program Set-Up: e Mongolia Compact entered into force on 

September , , completing the obligation of . million 

and officially begining the five-year term for implementation of the 

Compact. 

 MCA-Mongolia (MCA-M), the accountable entity implementing 

the program, completed the process of hiring its project implementation unit experts and support staff.

 MCA-M has received proposals for key consulting services including: the Rail Project Manager, Rail Audit, Rail Environmental 

Impact Assessment, and the Technical and Vocational Education 

Training Evaluations are currently underway.

 MCA-M has conducted comprehensive orientation training for 

local media representatives about the MCC Compact project. 

 A Memorandum of Understanding was signed between MCAMongolia and the Ministry of Health, establishing key areas for 

cooperation and coordination in the Health Program. 

Compact At-A-Glance

Signed.......................................... //

Entry Into Force............................//

e five-year, . million compact 

seeks to better enable the country’s 

burgeoning urbanized market based 

economy and help Mongolians to increase 

their incomes by becoming healthier and 

better trained, by using their land assets 

more productively and by increasing their 

capacity to trade with the world.

Country At-A-Glance

Population.....................................,,*

GNI per Capita ..................................,*

Administrative Cost

Property Rights

Transportation

Health

Education $188.30

$23.06

$30.93 $25.51

$17.03

in millions

$2,290,213 total contract commitments

$1,656,805 disbursed to date

Obligations by Project

World Development Indicators, World Bank, 2007

On the Web: 

www.mcc.gov

MCA-Mongolia: 

www.mca.mn

September 30, 2008 | www.mcc.gov

Making a Difference 61


	


Compact Implementation

Morocco Compact Progress  Program Set-Up: After a competitive recruitment process, the 

steering committee for the Agency of Partnership for Progress 

(APP) named an APP Director General and six other key directors. 

APP is the organization responsible for the implementation of the 

MCA Compact on behalf of the Moroccan government. 

 Major procurements related to all five project activities have been 

released and contracts are being finalized.

 e Morocco Compact entered into force on September ,  

completing the obligating of  million and officially beginning 

the five-year term for implementation of the compact program.

 Other Highlights: e U.S. Trade and Development Agency signed 

a grant agreement with the Moroccan Ministry of Agriculture and 

Maritime Fishing totaling , to support development of cold 

chain storage in sectors targeted by the MCA-funded Fruit Tree 

Productivity project. 

Compact At-A-Glance

Signed............................................... /1⁄2

Entry Into Force............................//

e five-year, . million compact 

seeks to increase productivity in high 

potential sectors, including investments 

in fruit tree productivity, small-scale 

fisheries and artisan crafts. Small busi-

ness creation and growth will also be 

supported by investments in financial 

services and trainings for entrepreneurs.

Country At-A-Glance

Population...................................,,*

GNI per Capita ..................................,*

Monitoring & Evaluation

Program Management

Financial Services

Enterprise Support

Artisan Sector Development

Small-Scale Fisheries

Agricultural

in millions

Productivity

$300.90

$116.17

$111.87

$33.85

$46.20

$67.77

$20.74

$7,971,796 total contract commitments

$775,894 disbursed to date

Obligations by Project

World Development Indicators, World Bank, 2007

On the Web: 

www.mcc.gov

September 30, 2008 | www.mcc.gov



	


Compact Implementation

Mozambique Compact Progress  Program Set-up: e Mozambique Compact entered into force on 

September , , completing the obligation of . million 

and officially beginning the five-year term for implementation of 

the Compact program.

 MCA continues to launch international competitions for the 

provision of services required to implement the compact projects. 

Several outreach events and conferences were held in Mozam-

bique, as well as South Africa, Brazil and United States, countries 

with strategic alliance with Mozambique, in order to promote the 

business opportunities financed under the Compact.

 Road Rehabilitation Project: e Government of Mozambique has 

issued a letter of sector policy that outlines substantial and sig-

nificant changes to the delivery and management of urban water 

and sanitation services. is fulfills a condition precedent for the 

Compact program and is supported by the other donors in the 

water sector, including the World Bank and other bilateral donors.

 MCA-Mozambique and MCC hosted a water sector outreach 

event in Johannesburg, South Africa with the US Foreign Com-

mercial Service to give an overview of MCC and its water sector 

investments in Southern Africa to potential bidders.

Compact At-A-Glance

Signed.............................................//

Entry Into Force........................... //

e five-year, . million compact 

seeks to improve rural and urban water 

and sanitation, roads, land administra-

tion, and agriculture. It will also address 

policy reforms and capacity building ini-

tiatives. Work will focus on the economi-

cally lagging northern provinces, home to 

half of the country’s population.

Country At-A-Glance

Population................................... ,,*

GNI per Capita .....................................*

Administration, Oversight, 

Monitoring and Evaluation

Land Tenure

Agribusiness

Roads

Water/Sanitation

$132 $176.31 $205.59

$70.53

in millions

$17.43

$39.07

$5,260,796 total contract commitments

$2,842,952 disbursed to date

Obligations by Project

World Development Indicators, World Bank, 2007

On the Web: 

www.mcc.gov

September 30, 2008 | www.mcc.gov


+.++Ē
+6)%-1!

62 Making a Difference
	



	

Namibia Program 

Summary

e Millennium Challenge Corporation’s . million compact with 

Namibia seeks to reduce poverty and accelerate economic growth 

throughout the country. e compact focuses on improving the quality 

of education and providing training for underserved populations, and 

attempts to capitalize on Namibia’s comparative advantages (e.g., large 

areas of semi-arid communal land suitable for livestock and diverse 

wildlife and unique landscapes ideal for ecotourism) to increase the 

incomes of poor Namibians

Program Highlights

 e MCC resident mission is now fully staffed. MCA-Namibia is 

currently hiring permanent staff to manage and implement the different compact projects. 

 Upcoming key milestones include compact ratification by the 

Namibian parliament, the mobilization of the standby Fiscal and 

Procurement Agents, the signing of the Program Implementation 

Agreement and Tax Agreement and MCA-Namibia’s first request 

for Compact Implementation Funding.

 On September th the strategic environmental assessment was 

presented to MCC. e document summarized potential environmental and social impacts of compact activities and presented 

mitigation strategies to minimize or avoid these issues. is information will be used to expedite environmental assessments and 

inform compact implementation moving forward.

 In September, MCC staff travelled to Namibia and led a workshop 

for MCA-Namibia’s Supervisory Board. e event addressed issues 

relevant to the compact, MCC’s structure, the roles and responsibilities of the board and best practices for compact implementation.

September 30, 2008 | www.mcc.gov

Compact Status

Status................Compact Signed

Country Information

Population .................. ,,*

GNI Per Capita ................ ,*

Compact Process

Stage

 Eligibility 

Notification

--

 Proposal Receipt --

 Opportunity 

Memo

-

 Congressional 

Notification 

on Compact 

Negotiations

--

 Investment Memo --

 Board Approval --

 Compact Signing --

Entry 

Into Force

Initial 

Disbursement

Making a Difference 63


	


Compact Implementation

Nicaragua Compact Progress  Transportation Project: Nicaragua has made major advancements 

with the signing of three road construction contracts worth . 

million: Villanueva-Guasaule, León-Poneloya and Somotillo-Cinco 

Pinos. ese three contracts will provide for the rehabilitation of 

approximately  kilometers of important economic corridors and 

access-to-market feeder roads.

 Rural Development Project: e program continues to improve 

rural income with , agricultural and livestock business plans 

under implementation producing higher yields and increasing 

exports. Of these,  livestock and dairy business plans are under 

implementation supplying quality milk to local and regional industries and leveraging US  , in productive loans from local 

banks.

 Land Tenure Regularization Activity: After successfully completing 

the aerial photography and mapping of the Department of León, 

the program has completed its pilot phase in the Department of 

Nagarote, issuing , cumulative land titles and property certifications.

 Note: Compact funding allocations for Nicaragua were adjusted in October  to accommodate the construction of the Villanueva-Guasaule 

primary road, a critical segment of the Pan-American Highway linking 

Nicaragua and Honduras.

Compact At-A-Glance

Signed.............................................//

Entry Into Force........................... //

e five-year, . million compact 

seeks to reduce transportation costs, 

improve rural communities’ access to 

markets, and increase wages and profits 

from farming and related enterprises in 

the region. Additionally, the compact 

aims to increase investments by strengthening property rights.

Country At-A-Glance

Population..................................... ,,*

GNI per Capita .................................... *

Fiscal/Procurement Agent

Program Administration & 

Monitoring and Evaluation

Rural Development

Property Regularization

Transportation

$26.5

$33.7 $92.8

$10.6 $11.5

in millions

$80,585,674 total contract commitments

$33,982,460 disbursed to date

Obligations by Project

World Development Indicators, World Bank, 2007

On the Web: 

www.mcc.gov

MCA-Nicaragua: 

www.cuentamilenio.org.ni

September 30, 2008 | www.mcc.gov

Compact Implementation Timeline Year 1 Year 2 Year 3 Year 4 Year 5

September 2008: 

Construction 

contracts 

were signed to 

rehabilitate 50 

kilometers of key 

secondary roads

August 2008: 

Construction began 

on the Villanueva to 

Guasuale Road

September 2008: 

The Nagarote 

Pilot Project was 

completed, granting 2256 cumulative land titles and 

solvencies

We Are Here

July 2008:

A 2.7 million dollar 

contract was signed 

to implement the 

MCA Forestry 

cluster. The 

contract will help 

small farmers and 

business people 

improve fruit, fuel, 

and hardwood 

investments

4

* For more information on country proposals, due diligence, program set-up, 

implementation and monitoring, and ongoing impact, please see the diagram 

entitled Typical MCC Program Cycle at www.mcc.gov.

As of September 30, 2008

Disbursements to Date................. $33,982,460

Total Contract Commitments..... $80,585,674

Compact Implementation Status Report Timeline, Nicaragua

3

2

1 6/06 - 5/07 6/07 - 5/08 6/08 - 5/09 6/09 - 5/10 6/10 - 5/11

Transportation Project

 Rehabilitation of the N-1 (Segment of Pacific Corridor)

 Upgrading of Key Secondary Routes

 Technical Assistance to FOMAV

 Technical Assistance to MTI

 Villanueva to Guasaule

Property Regularization Project

 Institutional Capacity Building

 Cadastral Mapping

 Database Installation

 Land Tenure Regularization 

 Protected Area Demarcation

 Analysis and Communication

Rural Development Project

 Rural Business Development Services

 Technical Assistance

Grants to Improve Water Supply for Farming and Forest 

Production

 Project Preparation

 Construction - Infrastructure

 Project Activities - Other Sectors

4

3

2

1

%.#1

64 Making a Difference
*101 

	


Compact Implementation

Vanuatu Compact Progress  Transportation Infrastructure Project: MCA-Vanuatu has signed 

a  million design and build contract for the construction of the 

Efate Ring Road and segments of the Santo East Coast Road. De-

sign work for the Efate Ring Road is well underway and construc-

tion began in September . 

 Environmental and social assessments for the island of Efate have 

been finalized and mitigation measures are in progress. Resettle-

ment agreements are being signed ahead of schedule.

 Institutional Strengthening: MCA is in the final stages of the 

procurement process for maintenance equipment for the Public 

Works Department. is equipment will help increase the depart-

ment’s maintenance capacity and ensure the sustainability of the 

projects. A new Engineering Support Unit has been established 

within PWD with a current staffing of four dedicated to the com-

pact programs.

 Note: Compact funding allocations for Vanuatu have been adjusted to 

reflect higher than expected infrastructure project costs. MCC will fund up 

to  of the road rehabilitation planned in the compact which now will be 

on the two main islands of Vanuatu rather than the eight islands originally 

planned. MCC has actively supported the Government of Vanuatu in ne-

gotiations with other donors to finance as much as possible of the remaining 

original project components. 

Compact At-A-Glance

Signed............................................ //

Entry Into Force...........................//

e five-year, . million compact 

focuses on improvements to the country’s 

transportation infrastructure. e pro-

gram will benefit rural agricultural pro-

ducers and the tourism sector by reducing 

transportation costs and improving 

transportation services.

Country At-A-Glance

Population.........................................,*

GNI per Capita ..................................,*

Monitoring and Evaluation

Program Management 

and Administration

Institutional Strengthening

Transportation

Infrastructure Upgrading

$1.34

$54.59

$6.22

in millions

$3.64

$61,275,541 total contract commitments

$24,160,429 disbursed to date

Obligations by Project

*World Development Indicators, World Bank, 2007

On the Web: 

www.mcc.gov

MCA-Vanuatu: 

www.governmentofvanuatu.gov.vu/

mca-vanuatu

September 30, 2008 | www.mcc.gov

Compact Implementation Timeline Year 1 Year 2 Year 3 Year 4 Year 5

May 2008: 

Contract signed 

for $54 Million 

Civil Works project 

and contractor 

mobilized. 

September 2008: 

Construction for 

Efate Ring Road 

began.

We Are Here

* For more information on country proposals, due diligence, program set-up, 

implementation and monitoring, and ongoing impact, please see the diagram 

entitled Typical MCC Program Cycle at www.mcc.gov.

As of September 2008 

Disbursements to Date................. $24,160,429

Total Contract Commitments..... $61,275,541

Compact Implementation Status Report Timeline, Vanuatu

21

4/06-03/074/07-3/084/08-3/094/09-3/104/10-3/11

Transportation Infrastructure Project

 Design and Build Civil Works Project

 Technical Assistance for Supervisory and Public Works Dept.

Institutional Strengthening 

 Institutional Capacity Building within the Public Works Dept.

 Project Preparation

 Construction - Infrastructure

 Project Activities - Other Sectors

1

2

Making a Difference 65
*6*% 

	


Compact Implementation

Tanzania Compact Progress  Program Set Up: e Tanzania Compact entered into force on 

September , , officially obligating the full  million and 

beginning the five-year term for implementation of the Compact 

program.

 MCA-Tanzania, the accountable entity responsible for implementing the Compact, is fully staffed and working to complete the 

preparatory work necessary for successful implementation of 

Compact activities.

 MCA-Tanzania signed implementing entity agreements with the 

Tanzania Electric Supply Company and the Tanzania National 

Roads Agency. e former will facilitate the implementation of 

the Energy Sector Project and the latter a significant portion of 

the Transport Sector Project. Additional implementing entity 

agreements are expected to be signed with other Government of 

Tanzania agencies later this year. 

 Other Highlights: In October  MCA-Tanzania signed the first 

consulting and supervising engineer contract for the energy sector 

work, for a total of nearly  million over five years. is is the 

first of several such contracts that will assist MCA-Tanzania in 

preparing for, procuring and then supervising the various works 

contracts under the Compact.

Compact At-A-Glance

Signed.............................................//

Entry Into Force............................//

e five-year, . million compact 

seeks to stimulate economic growth, 

increase household incomes, and raise the 

quality of life in program areas through 

targeted infrastructure investments in 

transportation, energy and water.

Country At-A-Glance

Population...................................,,*

GNI per Capita .................................... *

Program Administration

Energy

Water

Transportation

$206.47

$52.55

$372.78

$66.34

in millions

$1,032,644 total contract commitments

$315,187 disbursed to date

Obligations by Project

World Development Indicators, World Bank, 2007

On the Web: 

www.mcc.gov

MCA-Tanzania: 

www.mca-t.go.tz

September 30, 2008 | www.mcc.gov

66 Making a Difference
Appendix B: Financial Statements FUND Grouping FY 2008 Quarter 4 Obligations FY 2008 Obligations* Cumulative Obligations FY 2004-2008 FY 2008 Quarter 4 Disbursements† FY 2008 Disbursements Cumulative Program Disbursements* FY 2004-2008 Projected Cumulative Program Disbursements* FY 2004-2009 Cumulative MCC Disbursements FY 2004-2008 Projected Cumulative Disbursements FY 2004-2009 609(g)** 0 10,513,525 59,673,783 2,734,824 9,823,797 36,499,170 56,499,170 36,499,170 56,499,170 ADMINISTRATIVE*** EXPENSES 25,821,273 84,513,336 283,361,246 24,104,879 85,154,483 256,058,809 341,058,809 AUDIT EXPENSES 2,500,000 3,101,934 10,127,487 747,847 2,387,919 7,947,146 11,447,146 COMPACTS  2,495,044,663 2,512,696,287 5,568,027,238 111,604,236 228,896,745 353,602,831 853,602,831 353,602,831 853,602,831 DUE DILIGENCE† 12,881,415 32,870,260 117,652,067 -2,238,704 17,258,480 69,501,216 94,501,216 69,501,216 94,501,216 THRESHOLD†† 41,769,059 125,746,893 451,696,147 36,672,853 131,236,090 199,108,794 381,608,794 199,108,794 381,608,794

Total 2,578,016,410 2,769,442,236 6,490,537,969 173,625,935 474,757,513 658,712,012 1,386,212,012 922,717,967 1,738,717,967

** The fund grouping "609(g)" includes funds under section 609(g) of the Millennium Challenge Act of 2003, as amended, other than Compact Implementation Funding.***Administrative Funds for FY 2008 "Obligations" are the net of obligations and deobligations occurring within the fiscal year.†The negative Quarterly Disbursement amount is due to the reversal of an accrual from a prior period that exceeded the amount of the actual.

††All data for the threshold program are provided by USAID, except for the Sao Tome and Principe threshold program, which is administered by U.S. Department of Treasury. USAID’s data for this report are from its General 

Ledger by country rather than its Threshold Country Programs report. USAID is working to rectify discrepancies between these two data sources.

Millennium Challenge Corporation

Fund Summary

As of September 30, 2008 (in $)

*Program Disbursements include all fund groupings, except administrative and audit expenses. ****The fund grouping "Compacts" includes Compact Implementation Funding, Compacts, and other grants except those made using threshold program and 609(g) fund groupings. "Obligations" and "Disbursements" (FY 2008 and Cumulative) for "Compacts" are understated by $289,110. This discrepancy is being researched and will be corrected in a future update.

Total MCC Cumulative Program Disbursements

As of September 30, 2008

0

800600400200

1600140012001000

FY2005 FY2006 FY2007 FY2008 Projected through FY 2009

Millions

ThresholdDue DiligenceCompacts609(g)

Making a Difference 67
Status Signing Date Entry Into Force

FY2005 FY2006 FY2007** FY2008 FY2009 FY2010 FY2005 FY2006 FY2007** FY2008*** FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

Country FUND Grouping***Armenia 609g 0.5 (0.5) 0.0 (0.0)

COMPACTS EIF 3/27/2006 9/29/2006 235.2 0.5 7.9 16.3 31.1 89.0 92.7 

DDILIGENCE 0.4 0.7 1.1 1.3 0.1 0.2 0.9 0.6 

Benin 609g 1.5 (1.5) 0.5 (0.5)

COMPACTS EIF 2/22/2006 10/6/2006 307.3 13.4 11.0 42.5 99.3 141.1 

DDILIGENCE 0.7 1.3 1.3 0.9 0.0 1.2 0.6 0.4 

Burkina Faso 609g 9.4 2.2 

COMPACTS Signed 7/14/2008 16.1 464.8 3.3 1.7 74.1 96.5 163.4 108.0 34.1 

DDILIGENCE 0.0 0.3 4.4 1.8 0.0 0.0 1.0 4.0 

Cape Verde 609g 0.2 0.2 0.0 0.1 

COMPACTS EIF 7/7/2005 10/17/2005 110.1 7.5 6.4 13.1 24.2 55.8 

DDILIGENCE 1.7 0.2 0.2 1.8 0.5 0.3 0.6 0.4 

Georgia 609g 4.2 1.1 (0.5) (0.6) 0.0 2.4 1.1 0.3 

COMPACTS EIF 9/12/2005 4/7/2006 294.7 0.6 10.1 19.9 43.1 36.2 121.3 64.6 DDILIGENCE 0.8 4.0 2.3 1.6 0.2 1.9 2.5 1.2 

Ghana 609g 0.1 13.5 (10.4) 0.1 2.8 0.4 

COMPACTS EIF 8/1/2006 2/16/2007 547.0 9.3 16.6 94.4 248.3 128.5 50.5 

DDILIGENCE 0.2 4.6 0.2 2.2 0.0 1.8 2.0 0.4 

Honduras COMPACTS EIF 6/13/2005 9/29/2005 215.0 3.0 8.0 24.0 48.8 124.1 

DDILIGENCE 0.7 1.0 0.5 0.7 0.3 0.6 0.5 0.5 

Jordan COMPACTS Draft Concept 

Papers

TBD TBD 350.0

DDILIGENCE 0.0

Lesotho 609g 0.6 0.6 0.1 0.3 0.6 0.1 

COMPACTS EIF 7/23/2007 9/17/2008 15.7 346.9 4.0 12.3 67.8 114.1 98.4 66.8 

DDILIGENCE 0.1 3.4 2.8 0.0 2.8 0.9 

Morocco COMPACTS EIF 8/31/2007 9/15/2008 32.4 665.1 - 0.8 21.2 194.1 221.1 157.2 103.7 

DDILIGENCE 0.2 4.7 2.3 0.0 3.3 0.8 

Madagascar 609g 1.3 (1.3)

COMPACTS EIF 4/18/2005 7/27/2005 109.8 2.5 7.1 13.1 27.3 25.8 30.3 

DDILIGENCE 0.3 0.5 2.3 0.3 1.3 0.4 0.1 0.5 

Mali 609g 5.1 4.6 0.7 6.2 2.7 

COMPACTS EIF 11/13/2006 9/17/2007 460.7 0.1 2.1 8.2 41.6 129.7 161.8 117.5 

DDILIGENCE 0.2 1.5 0.9 1.6 0.0 0.7 1.1 0.9 

Moldova COMPACTS Program

Development

TBD TBD 25.0 475.0 

DDILIGENCE 0.1 0.0 

Mongolia COMPACTS EIF 10/22/2007 9/17/2008 284.9 1.7 16.3 97.1 73.0 78.2 18.6 

DDILIGENCE 1.4 2.1 1.7 0.3 1.8 1.1 

Mozambique 609g 13.9 (0.4) 0.9 6.6 1.8 

COMPACTS EIF 7/13/2007 9/22/2008 25.3 481.6 2.8 12.8 173.8 168.8 74.0 74.7 

DDILIGENCE 0.0 1.0 2.8 1.6 0.1 1.8 1.0 

Namibia 609g 3.2 0.9 

COMPACTS Signed 7/28/2008 19.5 284.9 3.2 41.0 71.8 95.2 65.8 27.5 DDILIGENCE 0.0 2.4 0.9 0.0 0.9 1.9 

Nicaragua† 609g 0.1 (0.1) 0.0 (0.0)

COMPACTS EIF 7/14/2005 5/26/2006 174.9 0.1 (0.3) 2.2 7.8 24.3 32.5 62.1 46.3 

DDILIGENCE 0.5 0.9 0.8 0.8 0.2 0.7 0.3 0.4 

Senegal 609g (1.6) 1.6 3.0 0.1 

COMPACTS Program

Development

TBD TBD 21.3 403.8 

DDILIGENCE (0.2) 0.0 0.1 0.1 0.0 

El Salvador COMPACTS EIF 11/29/2006 9/20/2007 460.9 0.0 2.2 10.0 32.9 145.8 91.2 169.4 

DDILIGENCE 2.0 1.7 1.5 1.2 0.9 1.2 

Tanzania 609g 9.8 1.3

COMPACTS EIF 2/17/2008 9/15/2008 698.1 0.3 11.1 149.3 249.4 196.8 91.2 

DDILIGENCE 0.2 5.4 3.8 0.0 3.7 1.6 

Timor-Leste COMPACTS Concept Paper 

Submitted

TBD TBD 10.0 190.0 

Vanuatu COMPACTS EIF 3/2/2006 4/28/2006 65.7 1.6 0.4 22.2 11.5 22.4 9.9 

DDILIGENCE 2.1 1.1 0.6 0.6 0.9 0.2 

Non-Compact/ 609g 6.5Cross-Cutting COMPACTSInitatives DDILIGENCE 6.3 7.5 5.7 4.7 2.8 4.2 6.5 (0.7)

Total 343.0 953.0 1,893.1 2,556.1 806.0 1,418.8 8.3 52.3 142.9 256.0 500.0 1,925.4 1,730.6 1,200.5 528.8 61.6 

Footnotes:

†FY 2008 Obligations and Disbursements for Nicaragua are understated by $289,110. This issue is being researched and will be corrected in a future update.

Obligations Projected Obligations Disbursements Projected Disbursements*

***Disbursements before FY 2008 were adjusted to be in line with a new accounting policy

Administration and Finance

Quarterly Report to Congress - Compact and Compact Related

As of September 30, 2008

($; in millions)

*MCC anticipates FY 2009 disbursements to be within 10 percent of the projections. MCC’s assessment of risks across the whole portfolio of compacts and is, therefore, lower than the sum of all compact countries' MCA work plan projections. FY 2009 Projections are based on 

detailed project planning and represent the full year's projection. Projections for FY 2010 and beyond are based on general program plans and are subject to revision as more detailed planning occurs. Program implementation involves uncertainty associated with factors such as procurement process, construction schedules, and capacity of Accountable Entities and Implementing Entities. Projected disbursements will be contingent on contract deliverables meeting expected timelines and quality standards. The projected obligations for Jordan, Moldova, Senegal and Timor-Leste are notional and are likely to increase or decrease based on negotiations with the countries and Board Approval.

**During FY 2007, the Compact Implementation Funding (CIF) was created as a new fund type. CIF, originally classified as 609(g), was then reclassified to CIF (COMPACT). This change caused several of the obligations and disbursements to become negative for 609(g) due tthe timing of this accounting event.

Estimated Quarter 4, FY2009Estimated Quarter 4, FY2009

68 Making a Difference
Country Expected Signing Current Status

Estimated

Grant Amount

(in $ millions)

Burkina Faso FY 2008 - Quarter 4 Signed, moved to Compact Implementation $481Namibia FY 2008 - Quarter 4 Signed, moved to Compact Implementation $304Bolivia TBD Proposal N/A

Jordan TBD Draft Concept Papers in development $300-350

Malawi TBD Constraints and Sector Analyses $400-450

Moldova TBD Program Development $450-550

Philippines TBD Draft Concept Papers submitted $500-700

Senegal TBD Program Development $400-500

Timor-Leste TBD Concept Papers submitted $150-200

Ukraine TBD Core Team Established N/A

Major stages in compact development process:

1. Selected2. Core Team Established3. Public Consultations Commenced4. Constraints and Sector Analyses5. Concept Paper(s) or Proposal (in development or submitted)6. Program Development & Appraisal7. Investment Memo8. Negotiations9. Board Approval10. Signed

Compacts in Development

Estimates as of September 30, 2008

TBD--The date for expected compact signing depends on a country's progress in the compact development process and on the availability of funds.

Making a Difference 69
Disbursements

FY 2005 2006 2007 2008 2009 2010 2005 F2006 2007 2008 2009 2010 2011 2012

Country Status Signing Date

Albania 1 Signed 4/3/2006 13.9 4.9 7.7 1.2 

Burkina Faso Signed 7/22/2005 12.9 0.3 10.9 1.5 0.1 

Guyana Signed 8/23/2007 0.1 6.7 0.1 1.2 2.8 2.8 

Indonesia Signed 11/17/2006 55.0 1.8 19.6 21.0 12.7 Jordan Signed 10/17/2006 25.0 3.2 9.6 7.3 4.9 Kenya Signed 3/23/2007 12.7 0.9 11.8 Kyrgyz Republic Signed 3/14/2008 16.0 0.4 9.3 6.2Malawi Signed 9/23/2005 20.9 6.2 6.9 6.3 1.5 

Moldova Signed 12/15/2006 24.7 0.5 9.7 14.6 

Niger Signed 3/17/2008 23.1 6.9 13.8 2.3 

Paraguay 1 Signed 5/8/2006 34.6 0.0 0.6 7.8 15.2 11.1 Peru Signed 6/9/2008 35.6 17.8 17.8

Philippines Signed 7/26/2006 20.7 2.1 9.4 9.2 Rwanda Signed 9/24/2008 24.7 0.0 7.4 14.8 2.5

Sao Tome & Principe

Signed 11/9/2007

0.2 8.7 0.0 0.2 0.7 7.8 0.2 

Tanzania Signed 5/3/2006 11.2 0.1 2.8 6.4 1.8 

Uganda Signed 3/29/2007 10.4 0.0 3.3 7.1 

Ukraine Signed 12/4/2006 45.0 1.3 14.4 29.3 Zambia Signed 5/22/2006 22.7 0.2 12.4 9.5 0.6 

Albania 2 Signed 9/29/2008 15.7 4.7 9.4 1.6

Timor-Leste** Compact 

Development

0.1

0.1

Yemen† Board Approved 0.1 0.0 0.0 0.1 

Paraguay 2†† Proposal in Development 30.0 9.0 18.0 3.0 

Sum 13.2 124.1 179.7 123.8 30.0 0.0 7.7 54.7 115.9 182.5 100.6 9.4 USAID Administrative Fee*** 0.9 8.7 12.6 8.1 2.1 

*"Obligations" and "Disbursements" amounts include funding for technical assistance to develop threshold country plans and for independent monitoring and evaluation.** Technical assistance was provided to develop Timor-Leste's threshold country plan in 2005, but funds were not obligated until FY 2007.*** The USAID Administrative Fee is equal to 7 percent of the program cost for each threshold country except for Sao Tome and Principe, whose threshold program is being administered by the U.S. Department of Treasury.****The projected obligations are notional and are likely to change after negotiations of the threshold program agreements. Projected disbursements are based on USAID and U.S. Department of Treasury estimates. †Further action on the Yemen threshold program is on hold until further notice.

Obligations* Projected 

Obligations****

†† Paraguay 2 will use FY 2008 appropriations.

Millennium Challenge Corporation

MCC Quarterly Report to Congress - Threshold Country Programs

As of September 30, 2008

(in millions)

Projected Disbursements

70 Making a Difference
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: 

x that the financial statements were fairly presented in conformity with U.S. 

Generally Accepted Accounting Principals. 

x four significant deficiencies in the internal controls over financial 

reporting and its operation, one of which is considered a material weakness. 

x 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: 

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. 

2 

Making a Difference 71
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. 

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. 

3 4 

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 

72 Making a Difference
TABLE OF CONTENTS 

Page 

Independent Auditor’s Report 2 

 Opinion on the Financial Statements 2  Internal Control over Financial Reporting 4 

 Compliance with Laws and Regulations 14  Management Comments 15 

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 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. 

2 

Making a Difference 73
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 

3 

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. 

x Quality Control over Financial Reporting x Authorization for Personnel Actions x Proper Reporting Period x Postings to the General Ledger 

4 

74 Making a Difference
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: 

x 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: x 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. 

x 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. 

x 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. x FY 2006 ending balances did not agree to FY 2007 beginning balances for 

the following line items: 

5 

 Unobligated Balance differed by $25,114,174.  Obligated Balance differed by $135,345,240.  Cumulative Results of Operations (CRO) differed by $834. 

x 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. 

x 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. 

x 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: x 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, third-quarter 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. 

 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. 

x 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. 

6 

Making a Difference 75
x 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. 

x 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: x 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. 

x 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. 

x 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.... 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.... 

7 

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: 

x Perform detailed quality control reviews to ensure compliance with accounting 

standards and reporting guidance. 

x 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. 

x 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. 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

8 

76 Making a Difference
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 SF-52, 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: 

x 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; 

x Four instances where the OPF did not have either the SF-52 or email 

documentation authorizing the personnel action; and 

x 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: 

x 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 

x 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 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

9 

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. 

x 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. 

x 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. 

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: 

x 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. 

x 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. 

x 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. 

x 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. 

10 

Making a Difference 77
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. 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: 

x All appropriate transactions are reviewed and a determination is made as to the 

amount to accrue for the current period; and 

x 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: 

11 

x 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. 

x 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. 

x Property, Plant and Equipment (PP&E) transactions were incorrectly recorded 

in the GL and were not corrected in a timely manner, as follows: x Accountable equipment purchases in the amount of $51,862 were recorded 

in BOCs for capitalized assets. 

x A $7,875 invoice for capitalized leasehold improvements (LHI) was 

incorrectly recorded as an expense. 

x 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. 

x 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.

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78 Making a Difference
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: 

x Ensure that procedures for reviewing accruals and adjustments recorded by 

NBC are effectively performed to ensure each is valid and has been properly recorded. 

x 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. 

x 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

13 

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 

14 

Making a Difference 79
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 

15 

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. 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 

16 

80 Making a Difference
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. 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 SF52s 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. 

x 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. 

x 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 

17 18 

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. 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. 

Making a Difference 81
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. 

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. 

82 Making a Difference
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. 

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. 

Making a Difference 83
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 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 no-year 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 workrelated occupational disease, and beneficiaries of 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. 

84 Making a Difference
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 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 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 

Making a Difference 85
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 nonIntragovernmental 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 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 as of September 30 

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 as of September 30 

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. 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. 

86 Making a Difference
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 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 nonFederal 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 

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. 

Making a Difference 87
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 

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 2,769,921,274 460,596,248Recoveries of prior year unpaid obligations 

(504,898) 

Other financing resources 1,650,550 Total resources used to finance activities 

2,771,066,926 

Gross Costs 

Total resources used to finance items not part of the net cost of operations 

(2,306,454,323) - 

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) 

Less: Earned Revenue 

Net Cost of Operations 460,596,248 Net Cost of Operations 460,596,248 

88 Making a Difference

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ter in Lesotho. Improves potable water access in El Salva

Create agricultural business centers in Madagascar. Assis

ncrease drip irrigation usage in Cape Verde. Expand finan

ancial services in Benin. Strengthen public sector procure

ement capacity in Ghana. Construct a new airport passen

nger terminal in Mali. Farmer and enterprise training for

commercial agriculture in Ghana. Construct small and me

edium irrigation infrastructure in Morocco. Rehabilitate w

water treatment plants in Tanzania. Install animal shelters

in Mongolia. Provide technical assistance to farmers in El 

l Salvador. Modernize the commercial legal system in Les

Promote legal and regulatory reform in Madagascar. Rep

Decentralize land registration in Benin. Improve access to

o financial and market information in Mali. Designs, const

tructs, and rehabilitates secondary roads in El Salvador. 

Provide support and training to promote gender equality 

 in Lesotho. Provides technical assistance to fish vendors 

n Morocco. Increase rail traffic in Mongolia. Lay a subma

rine electric transmission cable in Tanzania. Construct wa

ater reservoirs in Cape Verde. Rehabilitate a primary road

in Nicaragua. Improve rural land tenure security in Madag

Construct a weight control system in Mongolia. Expand t

a water treatment plant in Honduras. Strengthens superv

vision of microfinance institutions in Benin. Expand irriga

tion infrastructure in Mali. Increase electricity coverage in

in El Salvador. Provide technical skills to youth and unem

mployed persons in Mongolia. Help financial institutions m

loans in Benin. Expand total area under irrigation produc

erty through growth. Millennium Challenge Corporation. 
2008-08-001-013-01-BAB

875 Fifteenth Street NW

Washington, DC 20005-2221

www.mcc.gov

Reducing Poverty Through Growth