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GAO critical of foreign aid process

Auditor says Millennium corporation should provide more information on how it chooses countries eligible for aid.

The Millennium Challenge Corporation should seek to provide more transparent information about how it selects which foreign countries are eligible for development aid, according to a recent Government Accountability Office report.

The MCC, established by Congress in 2004, is a federal agency that distributes foreign aid to poor countries that demonstrate a commitment to ruling justly, investing in people and economic freedom.

In April, Madagascar--an island nation off the coast of Africa--signed the first compact to receive MCC assistance. It will receive $110 million over four years to advance land titling, financial sector reforms and agricultural production. Four other countries are in the middle of compact negotiations with the agency.

Countries are evaluated using criteria set by nongovernmental organizations. For example, in the "investing in people" category, countries' immunization rates are assessed by the World Health Organization. For "ruling justly," the World Bank Institute evaluates anti-corruption efforts. For "economic freedom," the Heritage Foundation rates trade policies. In each of these categories, MCC monitors at least four indicators and sets quantitative criteria to judge countries. Countries must have scores higher than the median on at least half the indicators, as well as a score above the median in fighting corruption to be eligible for aid.

Still, the MCC's authorizing legislation does not require strict adherence to the criteria and allows it to use judgment in determining country eligibility. In 2004 and 2005, the agency determined that 17 countries are eligible: Armenia, Benin, Bolivia, Cape Verde, Georgia, Ghana, Honduras, Lesotho, Madagascar, Mali, Mongolia, Morocco, Mozambique, Nicaragua, Senegal, Sri Lanka and Vanuatu. However, three of those countries, Bolivia, Georgia and Mozambique, did not meet the quantitative criteria.

At the same time, 13 other countries met the criteria but were ruled ineligible. They were Bhutan, Burkina Faso, China, Djibouti, Egypt, Guyana, Kiribati, Mauritania, Nepal, Philippines, Swaziland, Tonga and Vietnam.

The MCC did not provide Congress with justifications for why the countries were not selected for aid. It appeared from the GAO analysis that agency officials had placed extra weight on criteria examining whether applicant countries were working to further civil liberties and political freedom.

In addition, the watchdog agency found that some of the data used to determine whether countries met the quantitative criteria was not readily accessible to the public. In other cases, problems with data meant that the scores of 17 countries "may have been misclassified as above or below the median."