Since announcing the USAID Forward initiative in 2010, USAID has updated policies and procedures to guide the initiative, notably the following: In 2011, USAID established procedures for determining the suitability of using partner-country government systems to implement USAID- funded programs. In 2011 and 2012, USAID also updated its guidance and procedures for program planning and design, monitoring and evaluation plans, and evaluation standards for all new programs, including those implemented through local organizations. In March 2013, USAID issued a progress report on USAID Forward that provided information on the status of the Local Solutions initiative, among other things. The report included agency-wide percentages of funding obligated to local organizations for fiscal years 2010 through 2012, as well as disaggregated 2012 figures by region, with a break-out for Afghanistan and Pakistan together, and by sector—for example, health, agriculture, and democracy and governance. Subsequently, in October 2013, USAID released fiscal year 2012 funding data used to report on the principal indicator for tracking and reporting on implementation of the Local Solutions initiative. Just prior to publication of this report, USAID published fiscal year 2013 data for this indicator on its website. USAID also provides updated information on the status of the Local Solutions initiative through its annual performance plans and reports issued jointly with the Department of State, as well as through quarterly and annual reporting to the Office of Management and Budget on agency priority goals. In 2013, USAID filled the newly created position of Local Solutions Coordinator in the agency’s Counselors office. According to USAID, the Local Solutions Coordinator is responsible for coordinating the activities— such as policy, program, legal, financial, and procurement—of the various headquarters offices and missions involved in carrying out the Local Solutions initiative. USAID has reported the funds tracked toward its 30 percent target in different ways, and this inconsistent reporting complicates the assessment of the degree to which USAID is making progress. On the basis of information provided in its 2013 progress report and other data provided by USAID, agency funds obligated to local organizations increased from about 10 to 14 percent of mission program funds in fiscal years 2010 through 2012—a $465 million increase. However, depending on which funds are counted toward the principal Local Solutions indicator, USAID’s progress toward its 30 percent target ranged from the 14 percent reported in its 2013 progress report to as high as 24 percent of mission program funds obligated to local organizations, as noted in data published on the agency’s website. In addition, in fiscal year 2012, including all cash transfers and trust funds, 5 missions, including those in Afghanistan and Pakistan, obligated about 79 percent of all USAID funding to local organizations, while 72 missions obligated the remaining 21 percent. USAID has reported on its principal Local Solutions indicator with and without cash transfers and before and after the addition of qualifying trust funds in two missions. According to USAID, funds included in the calculation of this indicator include all mission program funds to local organizations that directly implement programs and include loan guarantees to local banks, cash transfers, and contributions to trust funds that are managed by a government department or ministry. USAID’s reporting of the indicator, however, varied in the inclusion of some of these funds. In its 2013 progress report, USAID reported an increase in obligations to local organizations during fiscal years 2010 through 2012— from about 10 to 14 percent of mission program funds. According to data provided by USAID, this represents a $465 million increase, excluding cash transfers and additional qualifying trust funds to two missions that USAID later determined qualify as investments in local organizations. Including cash transfers, the percentage of mission program funds obligated to local organizations increased from about 14 percent to 17 percent from fiscal year 2010 to 2012. Subsequently, in October 2013, USAID published on its website updates showing fiscal year 2012 dollar amounts and percentages of mission program funds obligated to local organizations both including and excluding cash transfers. In this update, USAID noted contributions to certain trust funds that USAID had determined met the agency’s definition of local funding after the release of the 2013 progress report. As shown in figure 1, depending on whether cash transfers and these qualifying trust funds are counted toward the indicator, USAID achieved fiscal year 2012 levels of funds obligated to local organizations that are between 14 percent and 24 percent. However, USAID has not determined which indicator definition it intends to use. Differences in USAID’s reporting on cash transfers and qualifying trust funds make it difficult to compare the indicator from year to year and quantify the progress needed to achieve its 30 percent target. Cash transfers. In its March 2013 progress report and data released in October 2013, USAID reported fiscal year 2012 dollar amounts and percentages of mission program funds obligated to local organizations, both including and excluding cash transfers. For all 3 fiscal years for which data are available, if cash transfers are included in the indicator definition, the overall percentage of funds obligated to local organizations increases. As of fiscal year 2012, according to USAID data, the agency obligated about 14 percent of mission program funds, or about $1.4 billion, to local organizations, excluding cash transfers. With cash transfers included, the agency obligated more than 17 percent, or about $1.7 billion in fiscal year 2012. Qualifying trust funds. According to USAID officials, after publication of the March 2013 progress report, USAID determined that contributions to certain trust funds made by two missions met the The addition of these qualifying agency’s definition of local funding. trust funds increases the agency-wide percentage of local funding for fiscal year 2012 from about 14 percent to about 21 percent. According to USAID officials, the agency plans to include these qualifying trust fund contributions in its future tracking and reporting of local mission program funding because they meet the agency’s definition of local funding. Cash transfers and qualifying trust funds. When both cash transfers and all qualifying trust funds are included in the indicator definition, the agency-wide percentage of local funding rises to about 24 percent in fiscal year 2012. The October 2013 data published by USAID on its website reflect the agency’s determination that about $29 million and $671 million in trust fund contributions made by USAID missions in Bangladesh and Afghanistan, respectively, met the definition of local funding. meet the Local Solutions definition of local funding and determine whether to include it. USAID also uses this indicator to report on the agency’s priority goals related to procurement reform that it established in response to requirements under the Government Performance and Results Act Modernization Act of 2010. USAID’s report on its priority goals related to procurement reform defines the indicator as the percentage of program funds implemented through local systems. See http://www.performance.gov for additional information. Afghanistan and Pakistan because these missions represent key efforts to implement programs through local organizations. If Afghanistan and Pakistan are excluded from the agency-wide indicator, the percentage of mission program funds obligated to local organizations in fiscal year 2012, including qualifying trust funds and cash transfers, drops from about 24 percent to about 14 percent. On the basis of our analysis of the fiscal year 2012 data provided by USAID, we found that funds obligated to local organizations are heavily concentrated in a small number of countries—including Afghanistan and Pakistan. With cash transfers and all qualifying trust funds, five USAID missions—Afghanistan, Pakistan, Jordan, South Africa, and Uganda— accounted for 79 percent of all funding obligated to local organizations in fiscal year 2012. The remaining 21 percent of all fiscal year 2012 funding obligated to local organizations was attributed to USAID’s other 72 missions (see fig. 2). USAID’s principal Local Solutions indicator does not fully reflect activities the agency carries out to achieve the initiative’s goals of strengthening partner-country capacity, enhancing and promoting country ownership, and increasing program sustainability. Moreover, USAID does not have a means for determining the extent to which missions are carrying out evaluations that can provide evidence about the long-term effectiveness of the initiative. USAID’s principal indicator of progress under the Local Solutions initiative—the percentage of mission program funds obligated to local organizations—does not fully capture the activities the agency undertakes to achieve the goals of the initiative. For example, to achieve USAID’s stated goals under the initiative, according to USAID, the agency has put in place frameworks for all of the following activities, among others: assessing partner-country government and nongovernmental organizations’ strengths and weaknesses, developing implementing mechanisms to mitigate risks and ensure providing technical assistance, and carrying out monitoring and evaluation plans. In its 2013 progress report, the agency provides information related to the status of some of these various activities, such as numbers of assessments completed and awards made to partner-country government and nongovernmental organizations.report and other reports, the agency emphasizes increases in its Local Solutions funding indicator to demonstrate progress. According to USAID officials, that indicator is likely to remain the primary indicator used for reporting progress on the Local Solutions initiative. However, in the 2013 progress By tracking obligated funds, the indicator indirectly measures—but to a limited degree—the success with which USAID missions have proceeded through required risk assessment and project design steps. First, in the case of funding to partner-country governments, obligation of funds occurs at the time of agreement—stage 4 under USAID’s five-stage process for using country systems to implement programs. However, according to USAID, because missions move carefully through the project design phase, some missions have not yet obligated funds to partner governments. As a result, the Local Solutions indicator does not capture these missions’ efforts to assess and mitigate risk, including through selection of implementing mechanism, as well as build capacity prior to obligation of funds. Second, the indicator does not reflect the status of reassessment activities in countries where USAID obligated funding to local organizations prior to 2011, particularly in Afghanistan and Pakistan.of mission activities occurring after the obligation of funds, including monitoring and evaluation of program implementation. According to USAID officials, agency headquarters does not require missions to report this information.