MCC, a government corporation, is managed by a chief executive officer (CEO), whom the President appoints with the advice and consent of the Senate, and is overseen by a Board of Directors. The Secretary of State serves as board chair, and the Secretary of the Treasury serves as vice- chair. MCC’s model is based on a set of core principles deemed essential for effective development assistance, including good governance, country ownership, focus on results, and transparency. According to MCC, country ownership of an MCC compact occurs when a country’s national government controls the prioritization process during compact development, is responsible for implementation, and is accountable to its domestic stakeholders for both decision making and results. In keeping with the MCC principle of country ownership, MCC enters into a legal relationship with partner country governments. During the 5-year compact implementation period the partner government vests responsibility for day-to-day management, including monitoring and evaluation of the progress of compact projects, to accountable entities in recipient countries (the entities’ name is usually formed from “MCA” plus the country’s name—for example, MCA-Cape Verde). MCC provides the frameworks and guidance for compact implementation, monitoring, and evaluation that MCAs are to use in implementing compact projects. To promote transparency, MCC makes information available on its Web site throughout the life of a compact, such as project budgets and descriptions, projected outcomes, and quarterly updates on financial and program progress. This transparency enables stakeholders to review the information that contributed to MCC investment decisions, track program progress against targets, and, once programs reach completion, see clearly which programs did or did not achieve their goals. The Cape Verde and Honduras compacts were among the first countries that MCC selected as eligible for assistance and the first to reach the end of the 5-year implementation period. The two compacts varied in the type and size of projects funded, but each devoted more than half of compact funds to infrastructure projects such as roads and ports. Each compact also included a smaller agricultural development project such as farmer training or construction of agricultural infrastructure. MCC and the government of Cape Verde signed a 5-year compact in July 2005, which entered into force in October 2005 and ended in October 2010. The compact, for which MCC committed $110.1 million in funding at compact signature, consisted of three projects. Figure 1 shows Cape Verde compact funding by project at signature and compact end. Table 1 shows the Cape Verde projects’ planned activities and funding allocations at compact signature. MCC and the government of Honduras signed a 5-year compact in June 2005, which entered into force in September 2005 and ended in September 2010. The compact, for which MCC committed $215 million in funding at compact signature, consisted of two projects. Figure 2 shows Honduras compact funding by project at signature and compact end. Table 2 shows the Honduras projects’ planned activities and funding allocations at compact signature. Each fiscal year, MCC identifies countries that are candidates for assistance. MCC uses per capita income data to identify two pools of candidate countries: low-income and lower-middle-income countries. MCC’s Board of Directors then uses quantitative indicators to assess a candidate country’s policy performance to determine eligibility. If the policy performance of a country declines during implementation of a compact, the board can suspend or terminate the compact. After MCC selects a country as eligible, the country begins a four-phase process that can lead to a compact’s entry into force: (1) the eligible country develops and submits a compact proposal; (2) MCC conducts a due diligence review of the proposed projects; (3) MCC and the country negotiate and sign the compact after MCC board approval; (4) MCC and the country complete preparations, including developing disbursement plans, for the compact to enter into force. After the compact enters into force, compact implementation begins, and funds are obligated and disbursed. Following MCC’s internal reorganization in October 2007, MCC revamped its compact development process to include greater initial engagement with eligible countries and assistance to countries in conducting needed studies and establishing management structures. MCC compacts are to be designed so that projects are sustainable over 20 years. During the compact development process, MCC is to assess the mechanisms in place to enhance sustainability, including the policies and practices that will enable MCC investments to continue to provide benefits. For instance, as part of compact proposals submitted to MCC, partner countries are required to identify risks to project sustainability and describe measures needed to ensure that project benefits can be sustained beyond the period of MCC financing. Partner countries are to consider a number of issues affecting sustainability, including environmental sustainability; institutional capacity for operations and maintenance; and for proposed infrastructure projects, recent funding, performance, and expected expenses for operations and maintenance. Furthermore, during compact implementation, MCC tracks progress against key policy reforms and institutional improvements that were included in the compact to enhance project impact and sustainability. For each compact, countries are required to create a monitoring and evaluation plan, which is one aspect of MCC’s efforts to assess a compact’s results. MCC developed guidelines in 2006 to assist eligible countries in the preparation of the monitoring and evaluation plan and issued an updated policy in 2009. According to MCC’s 2009 monitoring and evaluation policy, the policy applies to new or revised monitoring and evaluation plans developed after issuance of the policy in May 2009. According to MCC’s 2006 guidelines for monitoring and evaluation plans, performance monitoring helps track progress toward compact goals and objectives, as well as serves as a management tool. In addition, according to MCC’s 2009 monitoring and evaluation policy, the plan’s monitoring component outlines the performance indicators by which compact results will be measured. The plan’s monitoring component also establishes a performance target for each indicator and the expected time the target will be achieved. For example, the number of kilometers completed may be an indicator for road construction projects and a numeric target is set to be completed by compact end. In response to MCC’s experiences with early compacts, MCC has learned that plans may change during compact implementation and that it may be necessary to modify programs after the execution of a compact agreement. Recognizing that MCC has a responsibility to ensure that program modifications are promptly and transparently assessed based on adequate due diligence and consultation, in August 2010, MCC adopted a policy to establish a single process for evaluating and approving such modifications. The agency updated this policy in March 2011. A rescoped compact project or activity refers to any change in the scope or substance of a compact program, including the modification, addition or elimination of a project, activity or subactivity that may entail potential alterations to the intended beneficiary group. In response to such changes, MCC allows for modifications to associated indicators and targets. According to MCC policy issued in 2009, indicators in the monitoring and evaluation plan can be modified by (1) adding a new indicator, (2) removing an existing indicator, or (3) changing a descriptive quality of an existing indicator. The policy also outlines several reasons for adding or changing indicators. For instance, an indicator may be removed because a change to the project renders the indicator irrelevant or the cost of collecting data for an indicator outweighs its usefulness. End-of-compact targets associated with these indicators can also be changed, including increasing or decreasing targets. MCC’s 2009 policy also outlines specific circumstances under which targets may be changed, including changes in scope of the activity or exogenous factors such as natural disasters or political turmoil. Ultimately, the justification for deleting or modifying an indicator or target must be adequately documented in revised monitoring and evaluation plans. Figure 3 shows a timeline of the MCC monitoring and evaluation plans for the Cape Verde and Honduras compacts. For both countries, only final monitoring and evaluation plans, issued in October and December 2010 for Cape Verde and Honduras, respectively, were subject to MCC’s 2009 monitoring and evaluation policy. MCC hires independent researchers to evaluate the impact of compact projects, and the monitoring and evaluation plan outlines aspects of planned impact evaluations, including questions, methodologies, and data collection. These analyses compare projects’ final results with an estimate of what would have happened without the project, measuring changes in individual, household, or community income and well-being that result from a particular project. During its due diligence review of each compact proposal, MCC analyzes proposed projects’ estimated impact on the country’s economic growth and poverty reduction. Specifically, MCC calculates a projected economic rate of return (ERR)—that is, the expected annual average return to the country’s firms, individuals, or sectors for each dollar that MCC spends on the project. In calculating project ERRs, MCC uses information such as MCC’s expected annual expenditures for the project and the projected annual benefits to the country. In calculating expected project benefits, MCC projects the sustainability of investments over a relatively long term, typically 20 years, and includes assumptions about the probability that necessary maintenance will be completed. MCC establishes a minimum acceptable ERR, referred to as a hurdle rate, that compact projects should achieve to be eligible for funding. It uses this, as well as other information gathered during the due diligence process, to inform its internal decisions to fund proposed projects and compacts. According to MCC’s 2006 guidelines for monitoring and evaluation plans, the economic analysis links to the development of indicators and targets for monitoring compact results. Furthermore, according to MCC’s 2009 policy on monitoring and evaluation of compacts, monitoring and evaluation plans should be directly linked to economic analyses. The variables from the ERR analysis of benefit streams should be used as performance indicators and targets in the monitoring and evaluation plan.