This is the accessible text file for GAO report number GAO-08-1145R entitled 'Millennium Challenge Corporation: Summary Fact Sheets for 11 Compacts Entered into Force' which was released on September 26, 2008. This text file was formatted by the U.S. Government Accountability Office (GAO) to be accessible to users with visual impairments, as part of a longer term project to improve GAO products' accessibility. Every attempt has been made to maintain the structural and data integrity of the original printed product. Accessibility features, such as text descriptions of tables, consecutively numbered footnotes placed at the end of the file, and the text of agency comment letters, are provided but may not exactly duplicate the presentation or format of the printed version. The portable document format (PDF) file is an exact electronic replica of the printed version. We welcome your feedback. Please E-mail your comments regarding the contents or accessibility features of this document to Webmaster@gao.gov. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. Because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately. GAO-08-1145R: United States Government Accountability Office: Washington, DC 20548: September 26, 2008: Congressional Committees: Subject: Millennium Challenge Corporation: Summary Fact Sheets for 11 Compacts Entered into Force: The Millennium Challenge Corporation (MCC), now in its fourth year of operations, is to provide aid to developing countries that have demonstrated a commitment to ruling justly, encouraging economic freedom, and investing in people. MCC provides assistance to eligible countries through multiyear compact agreements to fund specific programs targeted at reducing poverty and stimulating economic growth. [Footnote 1] MCC has received appropriations for fiscal years 2004 through 2008 totaling more than $7.5 billion and has set aside about $6.4 billion of this amount for compact assistance.[Footnote 2] As of August 2008, MCC had signed compacts with 18 countries totaling approximately $6.3 billion; of the 18 signed compacts, 11 compacts had entered into force, obligating a total of approximately $3 billion. [Footnote 3] The President has requested an additional $2.225 billion for MCC for fiscal year 2009, of which MCC plans to use $1.88 billion for compact assistance to countries currently eligible for compacts. Enclosed are fact sheets for the 11 MCC compacts that had entered into force as of August 2008. The fact sheets summarize each country's: * general characteristics and location, * timeline of key compact events, * per capita income relative to MCC income criteria, * performance on MCC's eligibility indicators, * compact characteristics and structure at the time of compact signature, * compact project funding distribution as of June 2008, and: * allocated and disbursed compact funds as of June 2008. To develop these fact sheets, we compiled and summarized publicly available data from a number of sources, including our previous reporting on MCC. We used information from the World Bank and from Central Intelligence Agency Fact Books to provide a general overview of each country and its economy. To develop timelines of key compact events, we analyzed MCC data from its country quarterly status reports [Footnote 4] and our previous reporting. To summarize country performance on MCC selection criteria, we (1) compared World Bank data on per capita incomes with MCC's income eligibility thresholds published in its annual candidate country reports and (2) compiled country performance on MCC policy indicators from MCC's annual candidate country scorecards and eligible country reports. To summarize the compact and its project plans, we reviewed and analyzed MCC's compacts, compact summaries, and monitoring and evaluation plans. These summaries reflect the compact structure and expectations at the time of compact signature and do not incorporate any subsequent compact restructuring. Finally, to analyze compact obligations, disbursements, and commitments, we compiled public information from MCC's quarterly reports on obligations and disbursements published in the Federal Register and from MCC's quarterly country status reports. The planned disbursements we report are based on MCC's projections at compact signature and on the assumption that compact funds are disbursed evenly throughout the compact implementation year. Descriptions of any compact restructuring, included in our discussions of compact implementation, are based on MCC and compact country documents. To clarify and confirm our understanding of this information, we submitted written questions to MCC officials. We determined that World Bank gross national income per capita data were sufficiently reliable to provide general information on compact funding and programmatic indicators. We further determined that MCC financial data were sufficiently reliable for our purposes based on our review of U.S. Agency for International Development Inspector General audits of MCC's internal controls and financial statements. We did not independently assess the reliability of MCC's projections of compact benefits and have noted this accordingly on each fact sheet. We conducted this performance audit from January to September 2008 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform our work to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Agency Comments and Our Evaluation: MCC provided written comments about drafts of these fact sheets (see enclosure I for MCC's comments and our response). Regarding the disbursement process, MCC noted that compact countries are ultimately responsible for project development and implementation, including the pace of commitments and disbursements, and that compact country entities sign contracts and therefore commit funds. We have modified the fact sheets to refer to commitments by the compact country, where appropriate, but have retained our presentation of MCC disbursements of funds for the recipient country. MCC also noted that its country counterparts revise their disbursement projections as additional information becomes available and that MCC will report updated projections to Congress in the first quarter of fiscal year 2009. We have incorporated the revised disbursement projections that MCC provided but have retained, as a baseline for the revised projections, a presentation of MCC's disbursement plan at compact signature. Finally, MCC noted that most eligible countries that did not meet selection criteria had previously been determined eligible by the Board; we modified the draft to reflect this fact. We also received and incorporated as appropriate a number of technical comments from MCC. We are sending copies of this report to interested congressional committees. We will also make copies available to others on request. In addition, the report will be available at no charge on GAO's Web site at [hyperlink, http://www.gao.gov]. If you or your staff have any questions or wish to discuss this material further, please contact me at (202) 512-3149 or gootnickd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Emil Friberg, Jr. (Assistant Director), Jordan Holt, Reid Lowe, Michael Rohrback, Michael Simon, Jena Sinkfield, and Susan Tieh made significant contributions to this report. David Dornisch, C. Etana Finkler, and Ernie Jackson provided technical assistance. Signed by: David Gootnick: Director, International Affairs and Trade: List of Committees: The Honorable Patrick J. Leahy: Chairman: The Honorable Judd Gregg: Ranking Member: Committee on Appropriations: Subcommittee on State, Foreign Operations, and Related Programs: United States Senate: The Honorable Joseph R. Biden, Jr. Chairman: The Honorable Richard G. Lugar: Ranking Minority Member: Committee on Foreign Relations: United States Senate: The Honorable Nita M. Lowey: Chair: The Honorable Frank R. Wolf: Ranking Member: Committee on Appropriations: Subcommittee on State, Foreign Operations, and Related Programs: House of Representatives: The Honorable Howard L. Berman: Chairman: The Honorable Ileana Ros-Lehtinen: Ranking Member: Committee on Foreign Affairs: House of Representatives: [End of section] Related GAO Products: Millennium Challenge Corporation: Independent Reviews and Consistent Approaches Will Strengthen Projections of Program Impact. [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-730]. Washington, D.C.: June 17, 2008. Millennium Challenge Corporation: Analysis of Compact Development and Future Obligations and Current Disbursements of Compact Assistance. [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-577R]. Washington, D.C.: April 11, 2008. Management Letter: Recommendations for Improvements to MCC's Internal Controls and Policies on Premium Class Air Travel. [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-468R]. Washington, D.C.: February 29, 2008. Millennium Challenge Corporation: Projected Impact of Vanuatu Compact Is Overstated. [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07- 1122T]. Washington, D.C.: July 26, 2007. Millennium Challenge Corporation: Vanuatu Compact Overstates Projected Program Impact. [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07- 909]. Washington, D.C.: July 11, 2007. Millennium Challenge Corporation: Progress and Challenges with Compacts in Africa. [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-1049T]. Washington, D.C.: June 28, 2007. Millennium Challenge Corporation: Compact Implementation Structures Are Being Established; Framework for Measuring Results Needs Improvement. [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-805]. Washington, D.C.: July 28, 2006. Analysis of Future Millennium Challenge Corporation Obligations. [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-466R]. Washington, D.C.: February 21, 2006. Millennium Challenge Corporation: Progress Made on Key Challenges in First Year of Operations. [hyperlink, http://www.gao.gov/cgi- bin/getrpt?GAO-05-625T]. Washington, D.C.: April 27, 2005. Millennium Challenge Corporation: Progress Made on Key Challenges in First Year of Operations. [hyperlink, http://www.gao.gov/cgi- bin/getrpt?GAO-05-455T]. Washington, D.C.: April 26, 2005. [End of section] Millennium Challenge Corporation: Armenia Compact Fact Sheet: Figure: Map of Europe with inset showing map of Armenia and indicating the capital of Yerevan. [Refer to PDF for image] Source: GAO; Millennium Challenge Corporation and Map Resources (map). [End of figure] Country Characteristics: Located in the Caucasus region of Asia, Armenia has a population of about 3 million. Armenia had a gross national income (GNI) of $1,930 per capita in 2006. Armenia’s economy is primarily based on industry and services, which together constitute about 80 percent of the country’s gross domestic product (GDP). Although agriculture comprises only 18 percent of Armenia’s GDP, it employs about 46 percent of the labor force. Since achieving independence from the Soviet Union in 1991, Armenia has made progress in implementing many economic reforms. From 2001 to 2006, Armenia sustained annual average economic growth rates of 12.4 percent. According to the World Bank, Armenia’s sustained high growth rates have led to a decrease in poverty, from over half the population in 1999 to less than 27 percent of the population in 2006. Armenia’s continued economic growth is challenged by high transportation costs: the country is landlocked and its border with Turkey has been closed since 1991. Compact Timeline: During compact development, MCC evaluates the country’s proposal and, if MCC approves it, MCC negotiates and may sign a compact with the country. After compact signature, the country must complete MCC’s entry into force requirements, such as procurement and disbursement agreements, in order for compact implementation to begin. MCC’s statute limits compact implementation to 5 years. Armenia was 1 of 16 countries that MCC selected as eligible in its first eligibility round. As of September 30, 2008, 40 percent of the compact’s 5-year period had elapsed. Figure: Key Events for Armenia Compact (timeline): Compact development: mid-2004 to late 2006; May 6, 2004: Selected as eligible for assistance. Compact implementation: late 2006 to late 2011; September 29, 2006: Compact enters into force; compact implementation begins; Compact implementation time elapsed: 40% to September 30, 2008 (current). Compact implementation time remaining: 60%; September 28, 2011: Compact implementation ends; MCC funding expires. Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] MCC Selection Criteria: MCC Candidate Criteria: Each fiscal year, MCC uses per capita incomes to identify two pools of candidate countries, low-income countries and lower-middle-income countries, based on World Bank lending thresholds. In addition, candidate countries must not be statutorily barred from receiving U.S. assistance. By law, MCC can use a maximum of 25 percent of compact assistance for any given year for new compacts with lower-middle-income countries. Armenia was a low-income candidate country from 2004, the year that MCC began operations, to 2007. In 2008, Armenia's rising GNI per capita lifted it to lower-middle-income status. MCC Eligibility Criteria: Each fiscal year, MCC’s Board uses quantitative indicators to assess a candidate country's policy performance. MCC compares the country’s performance on each indicator to that of other candidates. To pass an indicator, a country must score better than at least half of the other candidates (above the median) in its income group. To meet MCC’s eligibility criteria, a country must pass the indicator for control of corruption and at least half of the indicators in each of three categories. However, the Board may select a country as eligible even if it does not meet the criteria, and has done so in the past—mostly for countries previously selected as eligible. If the policy performance of a country implementing a compact declines, the Board can suspend or terminate the compact; however, it has not yet done so for any country. MCC selected Armenia as eligible in 2004-2007. In 2008, Armenia rose to lower-middle-income status and failed the indicator criteria for that group. However, MCC selected Armenia as eligible in 2008. Figure: Armenia GNI Per Capita: [Refer to PDF for image] This figure is a combination vertical bar and line graph depicting the following data: MCC eligibility year: 2004; Nominal GNI per capita in U.S. dollars: $800; MCC cut-off for low-income candidates: $1415. MCC eligibility year: 2005; Nominal GNI per capita in U.S. dollars: $950; MCC cut-off for low-income candidates: $1465. MCC eligibility year: 2006 (MCC implemented a program for lower-middle- income countries beginning in fiscal year 2006); Nominal GNI per capita in U.S. dollars: $1140; MCC cut-off for low-income candidates: $1575; MCC cut-off for lower-middle-income candidates: $3255. MCC eligibility year: 2007; Nominal GNI per capita in U.S. dollars: $1470; MCC cut-off for low-income candidates: $1675; MCC cut-off for lower-middle-income candidates: $3465. MCC eligibility year: 2008; Nominal GNI per capita in U.S. dollars: $1920; MCC cut-off for low-income candidates: $1735; MCC cut-off for lower-middle-income candidates: $3595. Source: GNI per capita data are from the April 2008 version of the World Bank World Development Indicators. Notes: The April 2008 data may include Bank updates that occurred after MCC candidate selection. Because of a two-year data lag, MCC used, for example, 2006 data in its 2008 eligibility round. [End of figure] Table: Armenia’s Performance on MCC Eligibility Indicators: Indicator category: Ruling Justly; Political Rights; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, lower-middle: Failed. Indicator category: Ruling Justly; Civil Liberties; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, lower-middle: Failed. Indicator category: Ruling Justly; Voice and Accountability; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Failed. Indicator category: Ruling Justly; Government Effectiveness; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Passed. Indicator category: Ruling Justly; Rule of Law; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Failed. Indicator category: Ruling Justly; Control of Corruption; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Failed. Indicator category: Investing in People: Girls' Primary Education Completion; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Failed. Indicator category: Investing in People: Primary Education Expenditures; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Passed. Indicator category: Investing in People: Health Expenditures; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, lower-middle: Failed. Indicator category: Investing in People: Immunization Rates; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Failed. Indicator category: Investing in People: Natural Resources Management (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, lower-middle: Passed. Indicator category: Encouraging Economic Freedom: Country Credit Rating (20044-2005); MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, lower-middle: NR. Indicator category: Encouraging Economic Freedom: Days to Start a Small Business (2004-2007); MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, lower-middle: NR. Indicator category: Encouraging Economic Freedom: Cost of Starting a Business (2006-2007); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, lower-middle: NR. Indicator category: Encouraging Economic Freedom: Business Start-up (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, lower-middle: Passed. Indicator category: Encouraging Economic Freedom: Inflation; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Passed. Indicator category: Encouraging Economic Freedom: Fiscal Policy; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Failed. Indicator category: Encouraging Economic Freedom: Trade Policy; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Passed. Indicator category: Encouraging Economic Freedom: Regulatory Quality; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Passed. Indicator category: Encouraging Economic Freedom: Land Rights and Access (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, lower-middle: Passed. Indicator assessment result: MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Failed. MCC eligibility determination: MCC eligibility year 2004, MCC income group, low: Eligible; MCC eligibility year 2005, MCC income group, low: Eligible; MCC eligibility year 2006, MCC income group, low: Eligible; MCC eligibility year 2007, MCC income group, low: Eligible; MCC eligibility year 2008, MCC income group, lower-middle: Eligible. Passed: scored above the median; Failed: scored at the median or below; NR: Not used to evaluate performance. Source: GAO analysis of Millennium Challenge Corporation data. Note: For the 2004 eligibility round, MCC used Primary Education Completion instead of Girls' Primary Education Completion. [End of table] Compact Summary: Compact Characteristics: At signature, Armenia’s 5-year, $235 million compact focused on reducing rural poverty through a sustainable increase in the economic performance of the agricultural sector. According to MCC, more than 1 million Armenians (35 percent of the population) live in rural areas and are dependent on semi-subsistence agriculture. The data in the graphic represent MCC’s expectations of compact benefits at compact signature. In June 2008, GAO reported that MCC had made analytic errors in its original projections of the impact of the Armenia compact. Correcting these errors reduces MCC's expected impact on income in rural areas and on poverty. (GAO-08-730). Compact Project Funding: Although the total amount of compact funding is fixed, MCC and the country may reallocate funds among projects during compact implementation as more detailed information about costs becomes available. MCC funding allocations for Armenia projects have not changed since compact signature in March 2006. Figure: Structure of Armenia Compact at Signature: Constraints to development: Poor transportation infrastructure and an underdeveloped agricultural economy constrain rural development. Planned Projects: Rural Road Rehabilitation: Rehabilitate up to 943 km of rural roads, 35 percent of the proposed lifeline road network; Irrigated Agriculture: Rehabilitate up to 21 irrigation infrastructure schemes, extending irrigation to 46,000 hectares. Build water management capacity and support transition to higher-value crops by providing technical assistance and credit assistance. MCC expected benefits: * Provide benefit to approximately 750,000 people - 75% of the rural population; * Increase beneficiaries' annual income by an estimated $36 million in 2010 and over $133 million in 2015; * Increase the real income from agriculture in rural areas by 5 percent at the end of the compact; * Reduce rural poverty rate by 6 percentage points by 2013. Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] Figure (pie-chart): Armenia Compact Funding as of June 2008: Irrigated Agriculture: 63% ($145.68 million); Rural Road Rehabilitation: 28% ($67.10 million); Program Administration and Monitoring and Evaluation: 10% ($22.87 million). Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] Compact Status: Compact Implementation: At compact signature, MCC develops a preliminary disbursement plan for the compact. MCC disburses funds as the country begins implementing projects. According to MCC, any funds not disbursed within 120 days after the compact ends would return to MCC for reprogramming. As of June 2008, 35 percent of Armenia’s 5-year compact period had elapsed and MCC had disbursed $19.16 million (8.13 percent) of compact funds, compared with the $58.45 million (24.80 percent) that it had originally planned to disburse as of that date. In the first quarter of fiscal year 2008, MCC and the country revised the projected disbursement total to $34.47 million by June 2008. As of June 2008, the country has committed $50.26 million, or 21.33 percent of compact funds.Commitments include signed contracts and the forecasted value of recurring expenses outside of a contract. In March 2008, MCC warned the government of Armenia that the compact could be suspended or terminated because the government had suspended media freedoms and imposed a state of emergency. According to MCC, parts of the compact are being restructured because of rising construction costs and currency fluctuations. In August 2008, Armenia signed contracts with six construction companies for a total of $51.5 million to rehabilitate 273 kilometers of rural roads. MCC had originally budgeted $67.1 million to rehabilitate up to 943 kilometers of roads. MCC reports that as a result of failing the indicator criteria in the 2008 eligibility round, Armenia is preparing a plan to improve its performance. Figure: (horizontal bar graph): Funds Provided for Armenia Compact: Total for compact: Total allocated at compact signature: $235.65 million; Planned disbursements as of June 2008: $58.45 million; Actual disbursements as of June 2008: $19.16 million. Irrigated Agriculture Project: Total allocated at compact signature: $145.68 million; Planned disbursements as of June 2008: $36.39 million; Actual disbursements as of June 2008: $10.19 million. Rural Road Rehabilitation Project: Total allocated at compact signature: $67.10 million; Planned disbursements as of June 2008: $14.75 million; Actual disbursements as of June 2008: $3.05 million. Program Administration and Monitoring and Evaluation: Total allocated at compact signature: $22.87 million; Planned disbursements as of June 2008: $7.31 million; Actual disbursements as of June 2008: $4.10 million. Source: GAO analysis of Millennium Challenge Corporation data. Notes: Planned disbursements are based on MCC’s projections at compact signature and assume that compact funds are disbursed evenly throughout the compact implementation year. Actual disbursements by project may not add up to the figure presented for total compact disbursements because disbursements reported as “pending subsequent report” are reflected in the compact total but not in project totals. In general, “pending subsequent report” amounts represent disbursements that will be allocated to individual projects in subsequent quarters. [End of figure] [End of Armenia Compact Fact Sheet] Benin Compact Fact Sheet: Country Characteristics: Located in coastal West Africa, Benin has a population of approximately 8.3 million. Benin had a gross national income (GNI) of $540 per capita in 2006. Benin’s economy depends on subsistence agriculture, cotton, and regional trade. The current government, which entered office in 2006, has emphasized efforts to fight corruption and accelerate Benin’s economic growth. The economy has experienced some positive growth trends in the last few years, with the real economic growth rate rising from 2.9 percent in 2005 to an estimated 5.3 percent in 2008. In 2005, Benin received debt reduction from the G8 countries, an informal group of eight major industrial countries. Compact Timeline: During compact development, MCC evaluates the country’s proposal and, if MCC approves it, MCC negotiates and may sign a compact with the country. After compact signature, the country must complete MCC’s entry into force requirements, such as procurement and disbursement agreements, in order for compact implementation to begin. MCC’s statute limits compact implementation to 5 years. Benin was 1 of 16 countries that MCC selected as eligible in its first eligibility round. As of September 30, 2008, 40 percent of the compact’s 5-year period had elapsed. Figure: Map. This figure is a map of Africa depicting the location of Benin and the capital of Porto-Novo. MCC's $307.3 million compact includes plans to improve operations and infrastructure at the Port of Cotonou. Source: GAO analysis of Millennium Challenge Corporation and Map Resources (map). [End of figure] Figure: Key Events for Benin Compact (timeline): Compact development: mid-2004 to late 2006; May 6, 2004: Selected as eligible for assistance. Compact implementation: late 2006 to late 2011; October 6, 2006: Compact enters into force; compact implementation begins; Compact implementation time elapsed: 40% to September 30, 2008 (current). Compact implementation time remaining: 60%; October 5, 2011: Compact implementation ends; MCC funding expires. Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] MCC Selection Criteria: MCC Candidate Criteria: Each fiscal year, MCC uses per capita incomes to identify two pools of candidate countries, low-income countries and lower-middle-income countries, based on World Bank lending thresholds. In addition, candidate countries must not be statutorily barred from receiving U.S. assistance. By law, MCC can use a maximum of 25 percent of compact assistance for any given year for new compacts with lower-middle-income countries. Benin has been a low-income candidate country every year since MCC began operations in 2004. MCC Eligibility Criteria: Each fiscal year, MCC’s Board uses quantitative indicators to assess a candidate country's policy performance. MCC compares the country’s performance on each indicator to that of other candidates. To pass an indicator, a country must score better than at least half of the other candidates (above the median) in its income group. To meet MCC’s eligibility criteria, a country must pass the indicator for control of corruption and at least half of the indicators in each of three categories. However, the Board may select a country as eligible even if it does not meet the criteria, and has done so in the past—mostly for countries previously selected as eligible. If the policy performance of a country implementing a compact declines, the Board can suspend or terminate the compact; however, it has not yet done so for any country. MCC has selected Benin as eligible for compact assistance every year since 2004, although the country failed MCC's indicator for control of corruption in 2007 and 2008. Figure: Benin GNI Per Capita: [Refer to PDF for image] This figure is a combination vertical bar and line graph depicting the following data: MCC eligibility year: 2004; Nominal GNI per capita in U.S. dollars: $330; MCC cut-off for low-income candidates: $1415. MCC eligibility year: 2005; Nominal GNI per capita in U.S. dollars: $370; MCC cut-off for low-income candidates: $1465. MCC eligibility year: 2006 (MCC implemented a program for lower-middle- income countries beginning in fiscal year 2006); Nominal GNI per capita in U.S. dollars: $450; MCC cut-off for low-income candidates: $1575; MCC cut-off for lower-middle-income candidates: $3255. MCC eligibility year: 2007; Nominal GNI per capita in U.S. dollars: $510; MCC cut-off for low-income candidates: $1675; MCC cut-off for lower-middle-income candidates: $3465. MCC eligibility year: 2008; Nominal GNI per capita in U.S. dollars: $530; MCC cut-off for low-income candidates: $1735; MCC cut-off for lower-middle-income candidates: $3595. Source: GNI per capita data are from the April 2008 version of the World Bank World Development Indicators. Notes: The April 2008 data may include Bank updates that occurred after MCC candidate selection. Because of a two-year data lag, MCC used, for example, 2006 data in its 2008 eligibility round. [End of figure] Table: Benin’s Performance on MCC Eligibility Indicators: Indicator category: Ruling Justly; Political Rights; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Civil Liberties; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Voice and Accountability; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Government Effectiveness; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Rule of Law; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Control of Corruption; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: Failed. Indicator category: Investing in People: Girls' Primary Education Completion; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: Failed. Indicator category: Investing in People: Primary Education Expenditures; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Investing in People: Health Expenditures; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Investing in People: Immunization Rates; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Investing in People: Natural Resources Management (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: Failed. Indicator category: Encouraging Economic Freedom: Country Credit Rating (20044-2005); MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: NR. Indicator category: Encouraging Economic Freedom: Days to Start a Small Business (2004-2007); MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: NR. Indicator category: Encouraging Economic Freedom: Cost of Starting a Business (2006-2007); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: NR. Indicator category: Encouraging Economic Freedom: Business Start-up (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: Failed. Indicator category: Encouraging Economic Freedom: Inflation; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Fiscal Policy; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Trade Policy; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: Failed. Indicator category: Encouraging Economic Freedom: Regulatory Quality; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Land Rights and Access (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: Failed. Indicator assessment result: MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: Failed. MCC eligibility determination: MCC eligibility year 2004, MCC income group, low: Eligible; MCC eligibility year 2005, MCC income group, low: Eligible; MCC eligibility year 2006, MCC income group, low: Eligible; MCC eligibility year 2007, MCC income group, low: Eligible; MCC eligibility year 2008, MCC income group, low: Eligible. Passed: scored above the median; Failed: scored at the median or below; NR: Not used to evaluate performance. Source: GAO analysis of Millennium Challenge Corporation data. Note: For the 2004 eligibility round, MCC used Primary Education Completion instead of Girls' Primary Education Completion. [End of table] Compact Summary: Compact Characteristics: At signature, Benin’s 5-year, $307 million compact aimed to improve core physical and institutional infrastructure and increase private- sector activity and investment. According to MCC, the compact planned at signature to impact up to 5 million beneficiaries—more than half of Benin’s population—in both rural and urban areas. These data are provided as context for understanding MCC’s expectations of compact benefits at the time of compact signature. Previous GAO work has identified several problems with the methodology used to determine compact projects’ expected benefits (see GAO-08-730 and GAO-07-909). GAO has not independently verified the reliability of MCC’s benefit projections for this compact. Compact Project Funding: Although the total amount of compact funding is fixed, MCC and the country may reallocate funds among projects during compact implementation as more detailed information about costs becomes available. MCC funding allocations for Benin projects have not changed since compact signature in February 2006. Figure: Structure of Benin Compact at Signature: Constraints to development: Poor physical and institutional infrastructure constrains investment and private sector activity. Planned projects: Access to Land: Secure land tenure for 115,000 households, reduce court cases related to land disputes, and increase investment in land and property. Access to Financial Services: Expand access of micro-, small-, and medium-sized enterprises to financial services by nearly $60 million. Access to Justice: Improve availability of alternative dispute resolution, provide capacity building and awareness of legal system, and construct new courthouses. Access to Markets: Improve the operations and infrastructure of the Port of Cotonou to reduce transportation costs and consumer prices. MCC expected benefits: * Benefit up to 5 million Beninese. * Increase household income by 7 percent in project areas by the end of the compact. * Increase micro-, small-, and medium-enterprise profits and wages by $5 million by the end of the compact. * Increase annual profits and wages of port users by $36 million by the end of the compact. * Lift an estimated 250,000 Beninese out of poverty by the year 2015. Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] Figure (pie-chart): Benin Compact Funding as of June 2008: Access to Markets Project: 55% ($169.45 million); Program Administration and Monitoring and Evaluation: 16% ($47.91 million); Access to Land Project: 12% ($36.02 million); Access to Justice Project: 11% ($34.27 million); Access to Financial Services Project: 6% ($19.65 million). Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] Compact Status: Compact Implementation: At compact signature, MCC develops a preliminary disbursement plan for the compact. MCC disburses funds as the country begins implementing projects. According to MCC, any funds not disbursed within 120 days after the compact ends would return to MCC for reprogramming. As of June 2008, 35 percent of the Benin compact’s 5-year period had elapsed and MCC had disbursed $24.38 million (7.93 percent) of compact funds, compared to the $78.98 million (25.70 percent) that it had originally planned to disburse as of that date. In the first quarter of fiscal year 2008, MCC and the country revised the projected disbursement total to $32.03 million by June 2008. As of June 2008, the country had committed $53.16 million, or 17.30 percent of compact funds. Commitments include signed contracts and the forecasted value of recurring expenses outside of a contract. MCC reports that as a result of failing the indicator criteria in the 2007 and 2008 eligibility rounds, Benin has developed a plan to improve its performance. Figure: (horizontal bar graph): Funds Provided for Benin Compact: Total for compact: Total allocated at compact signature: $307.30 million; Planned disbursements as of June 2008: $78.98 million; Actual disbursements as of June 2008: $24.38 million. Access to Financial Services Project: Total allocated at compact signature: $19.65 million; Planned disbursements as of June 2008: $7.15 million; Actual disbursements as of June 2008: $1.11 million. Access to Justice Project: Total allocated at compact signature: $34.27 million; Planned disbursements as of June 2008: $9.62 million; Actual disbursements as of June 2008: $0.77 million. Access to Land Project: Total allocated at compact signature: $36.02 million; Planned disbursements as of June 2008: $12.26 million; Actual disbursements as of June 2008: $5.80 million. Access to Markets Project: Total allocated at compact signature: $169.45 million; Planned disbursements as of June 2008: $31.71 million; Actual disbursements as of June 2008: $3.24 million. Program Administration and Monitoring and Evaluation: Total allocated at compact signature: $47.91 million; Planned disbursements as of June 2008: $18.24 million; Actual disbursements as of June 2008: $7.07 million. Source: GAO analysis of Millennium Challenge Corporation data. Notes: Planned disbursements are based on MCC’s projections at compact signature and assume that compact funds are disbursed evenly throughout the compact implementation year. Actual disbursements by project may not add up to the figure presented for total compact disbursements because disbursements reported as “pending subsequent report” are reflected in the compact total but not in project totals. In general, “pending subsequent report” amounts represent disbursements that will be allocated to individual projects in subsequent quarters. [End of figure] [End of Benin Compact Fact Sheet] Cape Verde Compact Fact Sheet: Country Characteristics: Located off of the coast of West Africa, Cape Verde is a chain of 10 islands with a population of about 427,000. Cape Verde had a gross national income (GNI) of $2,130 per capita in 2006, and is considered to be a lower-middle-income country by the World Bank. Its economy is service oriented, with commerce, transportation, tourism, and public services constituting about three-fourths of its gross domestic product (GDP). Cape Verde is also one of Africa’s most stable democracies, with the most recent government entering office in 2006. Since achieving independence from Portugal in 1975, Cape Verde has made strong advances in health, education and economic growth. According to the World Bank, Cape Verde is expected to have an estimated growth rate of 7 percent in 2007. The World Bank also reports that poverty in Cape Verde has declined from 37 percent in 2001 to 29 percent in 2006. Compact Timeline: During compact development, MCC evaluates the country’s proposal and, if MCC approves it, MCC negotiates and may sign a compact with the country. After compact signature, the country must complete MCC’s entry into force requirements, such as procurement and disbursement agreements, in order for compact implementation to begin. MCC’s statute limits compact implementation to 5 years. Cape Verde was 1 of 16 countries that MCC selected as eligible in its first eligibility round. It was the third country to begin implementing a compact, and as of September 30, 2008, 59 percent of the compact’s 5- year period had elapsed. Figure: Map. This figure is a map of Africa depicting the location of Cape Verde and the capital of Praia, the location of MCC's port infrastructure project. Source: GAO analysis of Millennium Challenge Corporation and Map Resources (map). [End of figure] Figure: Key Events for Cape Verde Compact (timeline): Compact development: mid-2004 to late 2005; May 6, 2004: Selected as eligible for assistance. Compact implementation: late 2005 to late 2010; October 17, 2005: Compact enters into force; compact implementation begins; Compact implementation time elapsed: 59% to September 30, 2008 (current). Compact implementation time remaining: 41%; October 16, 2010: Compact implementation ends; MCC funding expires. Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] MCC Selection Criteria: MCC Candidate Criteria: Each fiscal year, MCC uses per capita incomes to identify two pools of candidate countries, low-income countries and lower-middle-income countries, based on World Bank lending thresholds. In addition, candidate countries must not be statutorily barred from receiving U.S. assistance. By law, MCC can use a maximum of 25 percent of compact assistance for any given year for new compacts with lower-middle-income countries. Cape Verde was a low-income candidate country in 2004. It was not a candidate in 2005 because its per capita income rose above the cutoff for low-income countries. Since 2006, the first year MCC permitted lower-middle-income countries to become candidates, Cape Verde has been a lower-middle-income candidate country. MCC Eligibility Criteria: Each fiscal year, MCC’s Board uses quantitative indicators to assess a candidate country's policy performance. MCC compares the country’s performance on each indicator to that of other candidates. To pass an indicator, a country must score better than at least half of the other candidates (above the median) in its income group. To meet MCC’s eligibility criteria, a country must pass the indicator for control of corruption and at least half of the indicators in each of three categories. However, the Board may select a country as eligible even if it does not meet the criteria, and has done so in the past—mostly for countries previously selected as eligible. If the policy performance of a country implementing a compact declines, the Board can suspend or terminate the compact; however, it has not yet done so for any country. MCC selected Cape Verde as eligible in 2004, 2006, and 2007. MCC did not select Cape Verde as eligible in 2008 because the country had failed the indicator criteria 3 years in a row. Figure: Cape Verde GNI Per Capita: [Refer to PDF for image] This figure is a combination vertical bar and line graph depicting the following data: MCC eligibility year: 2004; Nominal GNI per capita in U.S. dollars: $1210; MCC cut-off for low-income candidates: $1415. MCC eligibility year: 2005; Nominal GNI per capita in U.S. dollars: $1400[A]; MCC cut-off for low-income candidates: $1465. MCC eligibility year: 2006 (MCC implemented a program for lower-middle- income countries beginning in fiscal year 2006); Nominal GNI per capita in U.S. dollars: $1630; MCC cut-off for low-income candidates: $1575; MCC cut-off for lower-middle-income candidates: $3255. MCC eligibility year: 2007; Nominal GNI per capita in U.S. dollars: $1980; MCC cut-off for low-income candidates: $1675; MCC cut-off for lower-middle-income candidates: $3465. MCC eligibility year: 2008; Nominal GNI per capita in U.S. dollars: $2130; MCC cut-off for low-income candidates: $1735; MCC cut-off for lower-middle-income candidates: $3595. Source: GNI per capita data are from the April 2008 version of the World Bank World Development Indicators. [A] In its FY 2005 Annual Report, MCC reported Cape Verde's GNI per capita to be $17,770, placing it above the low-income cut-off for the 2005 eligibility round. Notes: The April 2008 data may include Bank updates that occurred after MCC candidate selection. Because of a two-year data lag, MCC used, for example, 2006 data in its 2008 eligibility round. [End of figure] Table: Cape Verde's Performance on MCC Eligibility Indicators: Indicator category: Ruling Justly; Political Rights; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Passed; MCC eligibility year 2007, MCC income group, lower-middle: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Passed. Indicator category: Ruling Justly; Civil Liberties; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Passed; MCC eligibility year 2007, MCC income group, lower-middle: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Passed. Indicator category: Ruling Justly; Voice and Accountability; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Passed; MCC eligibility year 2007, MCC income group, lower-middle: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Passed. Indicator category: Ruling Justly; Government Effectiveness; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Passed; MCC eligibility year 2007, MCC income group, lower-middle: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Passed. Indicator category: Ruling Justly; Rule of Law; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Passed; MCC eligibility year 2007, MCC income group, lower-middle: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Passed. Indicator category: Ruling Justly; Control of Corruption; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Passed; MCC eligibility year 2007, MCC income group, lower-middle: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Passed. Indicator category: Investing in People: Girls' Primary Education Completion; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Passed; MCC eligibility year 2007, MCC income group, lower-middle: Failed; MCC eligibility year 2008, MCC income group, lower-middle: Failed. Indicator category: Investing in People: Primary Education Expenditures; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Passed; MCC eligibility year 2007, MCC income group, lower-middle: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Passed. Indicator category: Investing in People: Health Expenditures; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Passed; MCC eligibility year 2007, MCC income group, lower-middle: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Failed. Indicator category: Investing in People: Immunization Rates; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Failed; MCC eligibility year 2007, MCC income group, lower-middle: Failed; MCC eligibility year 2008, MCC income group, lower-middle: Failed. Indicator category: Investing in People: Natural Resources Management (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: NR; MCC eligibility year 2007, MCC income group, lower-middle: NR; MCC eligibility year 2008, MCC income group, lower-middle: Failed. Indicator category: Encouraging Economic Freedom: Country Credit Rating (20044-2005); MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: NR; MCC eligibility year 2007, MCC income group, lower-middle: NR; MCC eligibility year 2008, MCC income group, lower-middle: NR. Indicator category: Encouraging Economic Freedom: Days to Start a Small Business (2004-2007); MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Failed; MCC eligibility year 2007, MCC income group, lower-middle: Failed; MCC eligibility year 2008, MCC income group, lower-middle: NR. Indicator category: Encouraging Economic Freedom: Cost of Starting a Business (2006-2007); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Failed; MCC eligibility year 2007, MCC income group, lower-middle: Failed; MCC eligibility year 2008, MCC income group, lower-middle: NR. Indicator category: Encouraging Economic Freedom: Business Start-up (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: NR; MCC eligibility year 2007, MCC income group, lower-middle: NR; MCC eligibility year 2008, MCC income group, lower-middle: Failed. Indicator category: Encouraging Economic Freedom: Inflation; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Passed; MCC eligibility year 2007, MCC income group, lower-middle: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Passed. Indicator category: Encouraging Economic Freedom: Fiscal Policy; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Failed; MCC eligibility year 2007, MCC income group, lower-middle: Failed; MCC eligibility year 2008, MCC income group, lower-middle: Failed. Indicator category: Encouraging Economic Freedom: Trade Policy; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Failed; MCC eligibility year 2007, MCC income group, lower-middle: Failed; MCC eligibility year 2008, MCC income group, lower-middle: Failed. Indicator category: Encouraging Economic Freedom: Regulatory Quality; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Passed; MCC eligibility year 2007, MCC income group, lower-middle: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Failed. Indicator category: Encouraging Economic Freedom: Land Rights and Access (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: NR; MCC eligibility year 2007, MCC income group, lower-middle: NR; MCC eligibility year 2008, MCC income group, lower-middle: Failed. Indicator assessment result: MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Failed; MCC eligibility year 2007, MCC income group, lower-middle: Failed; MCC eligibility year 2008, MCC income group, lower-middle: Failed. MCC eligibility determination: MCC eligibility year 2004, MCC income group, low: Eligible; MCC eligibility year 2005, Not a candidate; Not eligible; MCC eligibility year 2006, MCC income group, lower-middle: Eligible; MCC eligibility year 2007, MCC income group, lower-middle: Eligible; MCC eligibility year 2008, MCC income group, lower-middle: Not eligible. Passed: scored above the median; Failed: scored at the median or below; NR: Not used to evaluate performance. Source: GAO analysis of Millennium Challenge Corporation data. Note: For the 2004 eligibility round, MCC used Primary Education Completion instead of Girls' Primary Education Completion. [End of table] Compact Summary: Compact Characteristics: At signature, Cape Verde’s 5-year, $110 million compact focused on water and infrastructure projects on 4 islands: Fogo, Santiago, Santo Antão, and São Nicolau. The compact funds support the upgrade and expansion of the Port of Praia, which is Cape Verde’s busiest port and handles half of the country’s cargo. These data are provided as context for understanding MCC’s expectations of compact benefits at the time of compact signature. Previous GAO work has identified several problems with the methodology used to determine compact projects’ expected benefits (see GAO-08-730 and GAO-07-909). GAO has not independently verified the reliability of MCC’s benefit projections for this compact. Compact Project Funding: Although the total amount of compact funding is fixed, MCC and the country may reallocate funds among projects during compact implementation as more detailed information about costs becomes available. MCC funding allocations for Cape Verde projects have not changed since compact signature in July 2005. Figure: Structure of Cape Verde Compact at Signature: Constraints to development: Water scarcity, lack of adequate infrastructure, weak institutional support for the private sector, and an insufficiently trained workforce constrain economic growth. Planned projects: Watershed Management and Agricultural Support: Construct water management infrastructure, including reservoirs and dikes. Support agribusiness development through research, farmer training, access to credit, and farm demonstration sites. Infrastructure Improvement: Upgrade and expand the Port of Praia. Improve transportation infrastructure on the islands of Santiago and Santo Antao, including reconstruction of 3 rural roads and construction of a series of bridges. Private Sector Development: Fund interventions to address constraints to private-sector investments. Interventions may include policy reforms, vocational training, and access to financial services. Provide technical assistance to microfinance institutions and government. MCC expected benefits: * Increase access to water and agribusiness development services for 70,000 people on the islands of Santa Antao, Fogo, and Sao Nicolau. * Reduce transportation costs for over 60,000 people on Santiago and Santa Antao islands. * Increase Cape Verde's annual income by $10 million in 5 years and by $22 million in 10 years. * Improve business climate and increase investment in priority sectors. Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] Figure (pie-chart): Cape Verde Compact Funding as of June 2008: Infrastructure Improvement Project: 71% ($78.86 million); Program Administration and Monitoring and Evaluation: 12% ($13.27 million); Watershed Management and Agricultural Support Project: 10% ($10.85 million); Private Sector Development Project: 7% ($7.20 million). Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] Compact Status: Compact Implementation: At compact signature, MCC develops a preliminary disbursement plan for the compact. MCC disburses funds as the country begins implementing projects. According to MCC, any funds not disbursed within 120 days after the compact ends would return to MCC for reprogramming. As of June 2008, 54 percent of the Cape Verde compact’s 5-year period had elapsed, and MCC had disbursed $ 17.59 million (15.98 percent) of compact funds, compared with the $67.74 million (61.54 percent) it had originally planned to disburse by June 2008. In the first quarter of fiscal year 2008, MCC and the country revised the projected disbursement total to $30.78 million by June 2008. As of June 2008, the country had committed $ 45.68 million, or 41.50 percent of compact funds. Commitments include signed contracts and the forecasted value of recurring expenses outside of a contract. In its most recent quarterly status report, MCC reported that Cape Verde’s compact was being restructured because of rising global construction costs and currency fluctuations. MCC reports that as a result of failing the indicator criteria, Cape Verde has developed a plan to improve its performance. Figure: (horizontal bar graph): Funds Provided for Cape Verde Compact: Total for compact: Total allocated at compact signature: $110.08 million; Planned disbursements as of June 2008: $67.74 million; Actual disbursements as of June 2008: $17.59 million. Watershed Management and Agricultural Support Project: Total allocated at compact signature: $10.85 million; Planned disbursements as of June 2008: $8.38 million; Actual disbursements as of June 2008: $2.54 million. Infrastructure Improvement Project: Total allocated at compact signature: $78.76 million; Planned disbursements as of June 2008: $47.29 million; Actual disbursements as of June 2008: $9.73 million. Private Sector Development Project: Total allocated at compact signature: $36.02 million; Planned disbursements as of June 2008: $12.26 million; Actual disbursements as of June 2008: $5.80 million. Program Administration and Monitoring and Evaluation: Total allocated at compact signature: $13.27 million; Planned disbursements as of June 2008: $7.53 million; Actual disbursements as of June 2008: $5.29 million. Source: GAO analysis of Millennium Challenge Corporation data. Notes: Planned disbursements are based on MCC’s projections at compact signature and assume that compact funds are disbursed evenly throughout the compact implementation year. Actual disbursements by project may not add up to the figure presented for total compact disbursements because disbursements reported as “pending subsequent report” are reflected in the compact total but not in project totals. In general, “pending subsequent report” amounts represent disbursements that will be allocated to individual projects in subsequent quarters. [End of figure] [End of Cape Verde Compact Fact Sheet] El Salvador Compact Fact Sheet: Country Characteristics: Located in Central America, El Salvador has a population of about 7.1 million. El Salvador had a gross national income (GNI) of $2,680 per capita in 2006, and is considered to be a lower-middle-income country by the World Bank. The economy is largely based on services, which constitute an estimated 63 percent of the country’s gross domestic product (GDP). Following a decade-long civil war in the 1980s, the El Salvadoran government began to institute economic reforms in the 1990s. Despite a strong record of economic reform, El Salvador has experienced relatively low economic growth rates. From 2000 to 2004, growth averaged less than 2 percent. However, the situation has improved recently, with a growth rate of 4 percent in 2006 owing to the strong performance of the agricultural, construction, and private service sectors. Compact Timeline: During compact development, MCC evaluates the country’s proposal and, if MCC approves it, MCC negotiates and may sign a compact with the country. After compact signature, the country must complete MCC’s entry into force requirements, such as procurement and disbursement agreements, in order for compact implementation to begin. MCC’s statute limits compact implementation to 5 years. El Salvador was one of three lower-middle-income countries selected in the FY 2006 eligibility round, the first year of MCC’s program for lower-middle-income countries. El Salvador was the first lower-middle- income country to begin implementing a compact and as of September 30, 2008, 21 percent of the compact’s 5-year period had elapsed. Figure: Map. This figure is a map of Central America depicting the location of El Salvador and the capital of San Salvador. MCC's $461 million compact focuses on El Salvador's Northern Zone. Source: GAO analysis of Millennium Challenge Corporation and Map Resources (map). [End of figure] Figure: Key Events for El Salvador Compact (timeline): Compact development: mid-2004 to late 2006; November 8, 2005: Selected as eligible for assistance. Compact implementation: late 2005 to late 2012; September 20, 2007: Compact enters into force; compact implementation begins; Compact implementation time elapsed: 21% to September 30, 2008 (current). Compact implementation time remaining: 79%; September 19, 2012: Compact implementation ends; MCC funding expires. Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] MCC Selection Criteria: MCC Candidate Criteria: Each fiscal year, MCC uses per capita incomes to identify two pools of candidate countries, low-income countries and lower-middle-income countries, based on World Bank lending thresholds. In addition, candidate countries must not be statutorily barred from receiving U.S. assistance. By law, MCC can use a maximum of 25 percent of compact assistance for any given year for new compacts with lower-middle-income countries. El Salvador was a candidate for MCC assistance for the first time in 2006, the first year that MCC permitted lower-middle-income countries to be candidates for assistance. MCC Eligibility Criteria: Each fiscal year, MCC’s Board uses quantitative indicators to assess a candidate country's policy performance. MCC compares the country’s performance on each indicator to that of other candidates. To pass an indicator, a country must score better than at least half of the other candidates (above the median) in its income group. To meet MCC’s eligibility criteria, a country must pass the indicator for control of corruption and at least half of the indicators in each of three categories. However, the Board may select a country as eligible even if it does not meet the criteria, and has done so in the past—mostly for countries previously selected as eligible. If the policy performance of a country implementing a compact declines, the Board can suspend or terminate the compact; however, it has not yet done so for any country. MCC selected El Salvador as eligible every year since 2006, although El Salvador did not pass the indicator criteria in 2008 because it failed 4 of 5 indicators in the Investing in People category. Figure: El Salvador GNI Per Capita: [Refer to PDF for image] This figure is a combination vertical bar and line graph depicting the following data: MCC eligibility year: 2004; Nominal GNI per capita in U.S. dollars: $2,120; MCC cut-off for low-income candidates: $1415. MCC eligibility year: 2005; Nominal GNI per capita in U.S. dollars: $2,250; MCC cut-off for low-income candidates: $1465. MCC eligibility year: 2006 (MCC implemented a program for lower-middle- income countries beginning in fiscal year 2006); Nominal GNI per capita in U.S. dollars: $2,240; MCC cut-off for low-income candidates: $1575; MCC cut-off for lower-middle-income candidates: $3255. MCC eligibility year: 2007; Nominal GNI per capita in U.S. dollars: $2,530; MCC cut-off for low-income candidates: $1675; MCC cut-off for lower-middle-income candidates: $3465. MCC eligibility year: 2008; Nominal GNI per capita in U.S. dollars: $2,680; MCC cut-off for low-income candidates: $1735; MCC cut-off for lower-middle-income candidates: $3595. Source: GNI per capita data are from the April 2008 version of the World Bank World Development Indicators. Notes: The April 2008 data may include Bank updates that occurred after MCC candidate selection. Because of a two-year data lag, MCC used, for example, 2006 data in its 2008 eligibility round. [End of figure] Table: El Salvador's Performance on MCC Eligibility Indicators: Indicator category: Ruling Justly; Political Rights; MCC eligibility year 2004, Not a candidate; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Passed; MCC eligibility year 2007, MCC income group, lower-middle: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Passed. Indicator category: Ruling Justly; Civil Liberties; MCC eligibility year 2004, Not a candidate; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Failed; MCC eligibility year 2007, MCC income group, lower-middle: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Passed. Indicator category: Ruling Justly; Voice and Accountability; MCC eligibility year 2004, Not a candidate; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Passed; MCC eligibility year 2007, MCC income group, lower-middle: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Passed. Indicator category: Ruling Justly; Government Effectiveness; MCC eligibility year 2004, Not a candidate; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Passed; MCC eligibility year 2007, MCC income group, lower-middle: Failed; MCC eligibility year 2008, MCC income group, lower-middle: Passed. Indicator category: Ruling Justly; Rule of Law; MCC eligibility year 2004, Not a candidate; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Failed; MCC eligibility year 2007, MCC income group, lower-middle: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Failed. Indicator category: Ruling Justly; Control of Corruption; MCC eligibility year 2004, Not a candidate; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Passed; MCC eligibility year 2007, MCC income group, lower-middle: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Passed. Indicator category: Investing in People: Girls' Primary Education Completion; MCC eligibility year 2004, Not a candidate; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Failed; MCC eligibility year 2007, MCC income group, lower-middle: Failed; MCC eligibility year 2008, MCC income group, lower-middle: Failed. Indicator category: Investing in People: Primary Education Expenditures; MCC eligibility year 2004, Not a candidate; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Failed; MCC eligibility year 2007, MCC income group, lower-middle: Failed; MCC eligibility year 2008, MCC income group, lower-middle: Failed; Indicator category: Investing in People: Health Expenditures; MCC eligibility year 2004, Not a candidate; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Passed; MCC eligibility year 2007, MCC income group, lower-middle: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Failed. Indicator category: Investing in People: Immunization Rates; MCC eligibility year 2004, Not a candidate; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Passed; MCC eligibility year 2007, MCC income group, lower-middle: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Passed. Indicator category: Investing in People: Natural Resources Management (2008); MCC eligibility year 2004, Not a candidate; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: NR; MCC eligibility year 2007, MCC income group, lower-middle: NR; MCC eligibility year 2008, MCC income group, lower-middle: Failed. Indicator category: Encouraging Economic Freedom: Country Credit Rating (20044-2005); MCC eligibility year 2004, Not a candidate; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: NR; MCC eligibility year 2007, MCC income group, lower-middle: NR; MCC eligibility year 2008, MCC income group, lower-middle: NR. Indicator category: Encouraging Economic Freedom: Days to Start a Small Business (2004-2007); MCC eligibility year 2004, Not a candidate; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Failed; MCC eligibility year 2007, MCC income group, lower-middle: Passed; MCC eligibility year 2008, MCC income group, lower-middle: NR. Indicator category: Encouraging Economic Freedom: Cost of Starting a Business (2006-2007); MCC eligibility year 2004, Not a candidate; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Failed; MCC eligibility year 2007, MCC income group, lower-middle: Failed; MCC eligibility year 2008, MCC income group, lower-middle: NR. Indicator category: Encouraging Economic Freedom: Business Start-up (2008); MCC eligibility year 2004, Not a candidate; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: NR; MCC eligibility year 2007, MCC income group, lower-middle: NR; MCC eligibility year 2008, MCC income group, lower-middle: Failed. Indicator category: Encouraging Economic Freedom: Inflation; MCC eligibility year 2004, Not a candidate; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Passed; MCC eligibility year 2007, MCC income group, lower-middle: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Passed. Indicator category: Encouraging Economic Freedom: Fiscal Policy; MCC eligibility year 2004, Not a candidate; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Failed; MCC eligibility year 2007, MCC income group, lower-middle: Failed; MCC eligibility year 2008, MCC income group, lower-middle: Failed. Indicator category: Encouraging Economic Freedom: Trade Policy; MCC eligibility year 2004, Not a candidate; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Passed; MCC eligibility year 2007, MCC income group, lower-middle: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Passed. Indicator category: Encouraging Economic Freedom: Regulatory Quality; MCC eligibility year 2004, Not a candidate; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Passed; MCC eligibility year 2007, MCC income group, lower-middle: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Passed. Indicator category: Encouraging Economic Freedom: Land Rights and Access (2008); MCC eligibility year 2004, Not a candidate; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: NR; MCC eligibility year 2007, MCC income group, lower-middle: NR; MCC eligibility year 2008, MCC income group, lower-middle: Failed. Indicator assessment result: MCC eligibility year 2004, Not a candidate; MCC eligibility year 2005, Not a candidate; MCC eligibility year 2006, MCC income group, lower-middle: Passed; MCC eligibility year 2007, MCC income group, lower-middle: Passed; MCC eligibility year 2008, MCC income group, lower-middle: Failed. MCC eligibility determination: MCC eligibility year 2004, Not a candidate; Not eligible; MCC eligibility year 2005, Not a candidate; Not eligible; MCC eligibility year 2006, MCC income group, lower-middle: Eligible; MCC eligibility year 2007, MCC income group, lower-middle: Eligible; MCC eligibility year 2008, MCC income group, lower-middle: Eligible. Passed: scored above the median; Failed: scored at the median or below; NR: Not used to evaluate performance. Source: GAO analysis of Millennium Challenge Corporation data. Note: For the 2004 eligibility round, MCC used Primary Education Completion instead of Girls' Primary Education Completion. [End of table] Compact Summary: Compact Characteristics: At signature, El Salvador’s 5-year, $461 million compact focused on developing the economy of the country’s Northern Zone, where, according to MCC, nearly 20 percent of El Salvador’s poor live. The data in the graphic represent MCC’s expectations of compact benefits at the time of compact signature. In June 2008, GAO reported that MCC had made errors in its original projections of the impact of El Salvador’s compact (GAO-08-730). MCC corrected these errors, reducing the expected impact on poverty and income. For example, MCC originally projected that beneficiaries’ per capita income would increase by $148 but now projects an increase of $123—a 17 percent decrease from the original projection. Compact Project Funding: Although the total amount of compact funding is fixed, MCC and the country may reallocate funds among projects during compact implementation as more detailed information about costs becomes available. MCC funding allocations for El Salvador projects have not changed since compact signature in November 2006. Figure: Structure of El Salvador Compact at Signature: Constraints to development: Poor infrastructure, limited education resources, and low agricultural production constrain regional development in the Northern Zone. Planned projects: Connectivity: Provide improved access to potable water systems for 90,000 people, sanitation services for 50,000 people, and electricity for 235,000 people. Provide formal and non-formal technical and vocational training. Productive Development: Provide technical assistance and investment capital to farmers and business development services to micro, small, and medium enterprises. Provide credit guarantees and technical assistance to lenders to promote lending activity in rural areas. Human Development: Design, construct, and rehabilitate the 289-km Northern Transnational Highway and 240 km of connecting roads. MCC expected benefits: * Directly alleviate the poverty of more than 150,000 people. * Increase incomes in the Northern Zone by 18 percent within 5 years and by 26 percent within 10 years. * Reduce poverty in the Northern Zone by 11 percentage points. Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] Figure (pie-chart): El Salvador Compact Funding as of June 2008: Connectivity Project: 50% ($233.56 million); Human Development Project: 21% ($95.07 million); Productive Development Project: 19% ($87.47 million); Program Administration and Monitoring and Evaluation: 10% ($44.84 million). Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] Compact Status: Compact Implementation: At compact signature, MCC develops a preliminary disbursement plan for the compact. MCC disburses funds as the country begins implementing projects. According to MCC, any funds not disbursed within 120 days after the compact ends would return to MCC for reprogramming. As of June 2008, 16 percent of the El Salvador compact’s 5-year period had elapsed and MCC had disbursed $5.96 million (1.29 percent) of compact funds, compared with the $35.46 million (7.69 percent) it had originally planned to disburse by June 2008. In the first quarter of fiscal year 2008, MCC and the country revised the projected disbursement total to $12.27 million by June 2008. As of June 2008, the country had committed $53.20 million, or 11.54 percent of compact funds. Commitments include signed contracts and the forecasted value of recurring expenses outside of a contract. MCC reports that as a result of failing the indicator criteria in the 2008 eligibility round, El Salvador has developed a plan to improve its performance. Figure: (horizontal bar graph): Funds Provided for El Salvador Compact: Total for compact: Total allocated at compact signature: $460.95 million; Planned disbursements as of June 2008: $35.46 million; Actual disbursements as of June 2008: $5.96 million. Human Development Project: Total allocated at compact signature: $95.07 million; Planned disbursements as of June 2008: $4.78 million; Actual disbursements as of June 2008: $0.04 million. Productive Development Project: Total allocated at compact signature: $87.47 million; Planned disbursements as of June 2008: $10.68 million; Actual disbursements as of June 2008: $0.13 million. Connectivity Project: Total allocated at compact signature: $233.56 million; Planned disbursements as of June 2008: $14.33 million; Actual disbursements as of June 2008: $0 million. Program Administration and Monitoring and Evaluation: Total allocated at compact signature: $44.85 million; Planned disbursements as of June 2008: $5.67 million; Actual disbursements as of June 2008: $1.59 million. Source: GAO analysis of Millennium Challenge Corporation data. Notes: Planned disbursements are based on MCC’s projections at compact signature and assume that compact funds are disbursed evenly throughout the compact implementation year. Actual disbursements by project may not add up to the figure presented for total compact disbursements because disbursements reported as “pending subsequent report” are reflected in the compact total but not in project totals. In general, “pending subsequent report” amounts represent disbursements that will be allocated to individual projects in subsequent quarters. [End of figure] [End of El Salvador Compact Fact Sheet] Georgia Compact Fact Sheet: Country Characteristics: Located in the Caucasus region of Asia on the southern border of Russia, Georgia has a population of about 4.6 million. Georgia had a gross national income (GNI) of $1,580 per capita in 2006. Its economy is based on agriculture, mining, and industry and grew by 9.4 percent in 2006. Following widespread protests that led to its president’s resignation, Georgia elected a new government in 2004. The new government has focused on anticorruption efforts and on economic, education, and healthcare reform. However, the conflict with Russia that erupted in August 2008 poses a challenge to the government’s reform efforts. Compact Timeline: During compact development, MCC evaluates the country’s proposal and, if MCC approves it, MCC negotiates and may sign a compact with the country. After compact signature, the country must complete MCC’s entry into force requirements, such as procurement and disbursement agreements, in order for compact implementation to begin. MCC’s statute limits compact implementation to 5 years. Georgia was 1 of 16 countries that MCC selected as eligible in its first eligibility round. As of September 30, 2008, 50 percent of the compact’s 5-year period had elapsed. Figure: Map. This figure is a map of Europe and the Middle East depicting the location of Georgia, the capital of T'bilisi, and major cities Sokhumi, Poti, Bat'umi, and Gori. At signature, the MCC's compact planned to rehabilitate 245 km of the roads in the Samtske-Javaheti region. At signature, the MCC's compact planned to rehabilitate portions of the North-South gas pipeline. Source: GAO analysis of Millennium Challenge Corporation and Map Resources (map). [End of figure] Figure: Key Events for Georgia Compact (timeline): Compact development: mid-2004 to early 2006; May 6, 2004: Selected as eligible for assistance. Compact implementation: early 2006 to early 2011; April 7, 2006: Compact enters into force; compact implementation begins; Compact implementation time elapsed: 50% to September 30, 2008 (current). Compact implementation time remaining: 50%; April 6, 2011: Compact implementation ends; MCC funding expires. Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] MCC Selection Criteria: MCC Candidate Criteria: Each fiscal year, MCC uses per capita incomes to identify two pools of candidate countries, low-income countries and lower-middle-income countries, based on World Bank lending thresholds. In addition, candidate countries must not be statutorily barred from receiving U.S. assistance. By law, MCC can use a maximum of 25 percent of compact assistance for any given year for new compacts with lower-middle-income countries. Georgia has been a low-income candidate country every year since MCC began operations in 2004. MCC Eligibility Criteria: Each fiscal year, MCC’s Board uses quantitative indicators to assess a candidate country's policy performance. MCC compares the country’s performance on each indicator to that of other candidates. To pass an indicator, a country must score better than at least half of the other candidates (above the median) in its income group. To meet MCC’s eligibility criteria, a country must pass the indicator for control of corruption and at least half of the indicators in each of three categories. However, the Board may select a country as eligible even if it does not meet the criteria, and has done so in the past—mostly for countries previously selected as eligible. If the policy performance of a country implementing a compact declines, the Board can suspend or terminate the compact; however, it has not yet done so for any country. MCC has selected Georgia as eligible every year since 2004. Although Georgia did not pass MCC’s indicator criteria from 2004-2006, improved performance led to its passing the criteria in 2007 and 2008. Figure: Georgia GNI Per Capita: [Refer to PDF for image] This figure is a combination vertical bar and line graph depicting the following data: MCC eligibility year: 2004; Nominal GNI per capita in U.S. dollars: $730; MCC cut-off for low-income candidates: $1415. MCC eligibility year: 2005; Nominal GNI per capita in U.S. dollars: $870; MCC cut-off for low-income candidates: $1465. MCC eligibility year: 2006 (MCC implemented a program for lower-middle- income countries beginning in fiscal year 2006); Nominal GNI per capita in U.S. dollars: $1,050; MCC cut-off for low-income candidates: $1575; MCC cut-off for lower-middle-income candidates: $3255. MCC eligibility year: 2007; Nominal GNI per capita in U.S. dollars: $1,300; MCC cut-off for low-income candidates: $1675; MCC cut-off for lower-middle-income candidates: $3465. MCC eligibility year: 2008; Nominal GNI per capita in U.S. dollars: $1,580; MCC cut-off for low-income candidates: $1735; MCC cut-off for lower-middle-income candidates: $3595. Source: GNI per capita data are from the April 2008 version of the World Bank World Development Indicators. Notes: The April 2008 data may include Bank updates that occurred after MCC candidate selection. Because of a two-year data lag, MCC used, for example, 2006 data in its 2008 eligibility round. [End of figure] Table: Georgia's Performance on MCC Eligibility Indicators: Indicator category: Ruling Justly; Political Rights; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Civil Liberties; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Voice and Accountability; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Government Effectiveness; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Rule of Law; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Control of Corruption; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Investing in People: Girls' Primary Education Completion; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Investing in People: Primary Education Expenditures; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: Failed; Indicator category: Investing in People: Health Expenditures; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Failed. Indicator category: Investing in People: Immunization Rates; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Investing in People: Natural Resources Management (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Country Credit Rating (20044-2005); MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: NR. Indicator category: Encouraging Economic Freedom: Days to Start a Small Business (2004-2007); MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: NR. Indicator category: Encouraging Economic Freedom: Cost of Starting a Business (2006-2007); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: NR. Indicator category: Encouraging Economic Freedom: Business Start-up (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: Failed. Indicator category: Encouraging Economic Freedom: Inflation; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Fiscal Policy; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Trade Policy; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Regulatory Quality; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Land Rights and Access (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: Passed. Indicator assessment result: MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. MCC eligibility determination: MCC eligibility year 2004, MCC income group, low: Eligible; MCC eligibility year 2005, MCC income group, low: Eligible; MCC eligibility year 2006, MCC income group, low: Eligible; MCC eligibility year 2007, MCC income group, low: Eligible; MCC eligibility year 2008, MCC income group, low: Eligible. Passed: scored above the median; Failed: scored at the median or below; NR: Not used to evaluate performance. Source: GAO analysis of Millennium Challenge Corporation data. Note: For the 2004 eligibility round, MCC used Primary Education Completion instead of Girls' Primary Education Completion. [End of table] Compact Summary: Compact Characteristics: At signature, the 5-year, $295.3 million Georgia compact aimed to stimulate growth in regions outside of the capital, T’bilisi, with an emphasis on the Samtskhe-Javakheti region in southwestern Georgia. Collectively, these regions are home to more than 40 percent of the country’s total population. The compact included plans to rehabilitate key infrastructure, creating a reliable energy and water supply and lowering transportation costs. The compact also included plans to invest in and provide technical assistance to regional enterprises, increasing agricultural productivity, jobs, and incomes. These data are provided as context for understanding MCC’s expectations of compact benefits at the time of compact signature. Previous GAO work has identified several problems with the methodology used to determine compact projects’ expected benefits (see GAO-08-730 and GAO-07-909). GAO has not independently verified the reliability of MCC’s benefit projections for this compact. Compact Project Funding: Although the total amount of compact funding is fixed, MCC and the country may reallocate funds among projects during compact implementation as more detailed information about costs becomes available. MCC compact funding for Georgia has not changed at the project level. However, MCC has approved slight changes in the allocation of funds within the Regional Infrastructure Project, adding $21.4 million to complete the rehabilitation of the Samtshke-Javakheti road. This sum was reallocated from funds originally intended for regional infrastructure development and program administration. Figure: Structure of Georgia Compact at Signature: Constraints to development: Poor infrastructure, low management capacity, and limited access to credit impede enterprise development and economic growth. Planned projects: Regional Infrastructure Rehabilitation: Rehabilitate 245 km of main roads in the Samtskhe-Javakheti region. Rehabilitate the North-South gas pipeline. Improve water supply, sanitation and irrigation systems for regions outside of capital. Regional Enterprise Development: Develop regional investment fund to provide capital and technical assistance to enterprises. Provide technical assistance and grants to help farmers and agribusinesses transition from subsistence to commercial agriculture. MCC expected benefits: * Benefit 500,000 Georgians. * Increase annual household income by $37 million. * Increase business revenues by $27 million. * Reduce poverty by 12 percent in the Samtskhe-Javakheti region. Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] Figure (pie-chart): Georgia Compact Funding as of June 2008: Regional Infrastructure Rehabilitation Project: 72% ($211.70 million); Regional Enterprise Development Project: 16% ($47.50 million); Program Administration and Monitoring and Evaluation: 12% ($36.10 million). Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] Compact Status: Compact Implementation: At compact signature, MCC develops a preliminary disbursement plan for the compact. MCC disburses funds as the country begins implementing projects. According to MCC, any funds not disbursed within 120 days after the compact ends would return to MCC for reprogramming. As of June 2008, 45 percent of the Georgia compact’s 5-year period had elapsed and MCC had disbursed $51.31 million (17.38 percent) of compact funds, compared with the $168.24 million (56.97 percent) it had originally planned to disburse by June 2008. In the first quarter of fiscal year 2008, MCC and the country revised the projected disbursement total to $70.58 million by June 2008. As of June 2008, the country had committed $192.92 million, or 65.33 percent of compact funds. Commitments include signed contracts and the forecasted value of recurring expenses outside of a contract. Owing to rising construction costs and currency fluctuations, MCC lacks sufficient funding for the full cost of rehabilitating 245 km of the Samtskhe-Javakheti road. Therefore, MCC will fund the rehabilitation of about 119 km and may reallocate funds from other activities for the rehabilitation of an additional 50 km. The Georgian government may fund the remaining road’s rehabilitation. In December 2007, MCC completed the first phase of the pipeline project, rehabilitating six sections of the North-South gas pipeline that needed emergency repairs. MCC had prioritized these repairs based on feasibility studies. The conflict between Russian and Georgia that erupted in August 2008 may affect the implementation of compact projects. Figure: (horizontal bar graph): Funds Provided for Georgia Compact: Total for compact: Total allocated at compact signature: $295.30 million; Planned disbursements as of June 2008: $168.24 million; Actual disbursements as of June 2008: $51.31 million. Regional Infrastructure Rehabilitation Project: Total allocated at compact signature: $211.70 million; Planned disbursements as of June 2008: $130.24 million; Actual disbursements as of June 2008: $33.89 million. Regional Enterprise Development Project: Total allocated at compact signature: $47.50 million; Planned disbursements as of June 2008: $20.63 million; Actual disbursements as of June 2008: $7.50 million. Program Administration and Monitoring and Evaluation: Total allocated at compact signature: $36.10 million; Planned disbursements as of June 2008: $17.36 million; Actual disbursements as of June 2008: $9.88 million. Source: GAO analysis of Millennium Challenge Corporation data. Notes: Planned disbursements are based on MCC’s projections at compact signature and assume that compact funds are disbursed evenly throughout the compact implementation year. Actual disbursements by project may not add up to the figure presented for total compact disbursements because disbursements reported as “pending subsequent report” are reflected in the compact total but not in project totals. In general, “pending subsequent report” amounts represent disbursements that will be allocated to individual projects in subsequent quarters. [End of figure] [End of Georgia Compact Fact Sheet] Ghana Compact Fact Sheet: Country Characteristics: Located in coastal West Africa, Ghana has a population of approximately 23.4 million. Ghana had a gross national income (GNI) of $510 per capita in 2006. Ghana’s economy is based on agriculture, which accounts for 40 percent of its gross domestic product (GDP). Despite its low income per capita, Ghana has experienced strong economic growth rates since 2000, with real GDP growth rising from 3.7 percent in 2000 to 6.4 percent in 2006, and expected to reach 6.7 percent in 2008. Additionally, according to World Bank statistics, poverty levels fell from 52 percent in 1992 to 28.5 percent in 2005. Ghana has received debt relief as part of the Heavily Indebted Poor Country Initiative—in which multilateral organizations and governments reduce poor countries’ debts—and the Multilateral Debt Relief Initiative, in which multilateral organizations provide full debt relief. Compact Timeline: During compact development, MCC evaluates the country’s proposal and, if MCC approves it, MCC negotiates and may sign a compact with the country. After compact signature, the country must complete MCC’s entry into force requirements, such as procurement and disbursement agreements, in order for compact implementation to begin. MCC’s statute limits compact implementation to 5 years. Ghana was 1 of 16 countries that MCC selected as eligible in its first eligibility round. As of September 30, 2008, 32 percent of the compact’s 5-year period had elapsed. Figure: Map. This figure is a map of Africa depicting the location of Ghana and the capital of Accra. Source: GAO analysis of Millennium Challenge Corporation and Map Resources (map). [End of figure] Figure: Key Events for Ghana Compact (timeline): Compact development: mid-2004 to early 2007; May 6, 2004: Selected as eligible for assistance. Compact implementation: early 2007 to early 2012; February 16, 2007: Compact enters into force; compact implementation begins; Compact implementation time elapsed: 32% to September 30, 2008 (current). Compact implementation time remaining: 68%; February 15, 2012: Compact implementation ends; MCC funding expires. Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] MCC Selection Criteria: MCC Candidate Criteria: Each fiscal year, MCC uses per capita incomes to identify two pools of candidate countries, low-income countries and lower-middle-income countries, based on World Bank lending thresholds. In addition, candidate countries must not be statutorily barred from receiving U.S. assistance. By law, MCC can use a maximum of 25 percent of compact assistance for any given year for new compacts with lower-middle-income countries. Ghana has been a low-income candidate country every year since MCC began operations in 2004. MCC Eligibility Criteria: Each fiscal year, MCC’s Board uses quantitative indicators to assess a candidate country's policy performance. MCC compares the country’s performance on each indicator to that of other candidates. To pass an indicator, a country must score better than at least half of the other candidates (above the median) in its income group. To meet MCC’s eligibility criteria, a country must pass the indicator for control of corruption and at least half of the indicators in each of three categories. However, the Board may select a country as eligible even if it does not meet the criteria, and has done so in the past—mostly for countries previously selected as eligible. If the policy performance of a country implementing a compact declines, the Board can suspend or terminate the compact; however, it has not yet done so for any country. MCC has selected Ghana as eligible for compact assistance every year since 2004, although Ghana did not pass MCC's criteria in 2007 because it failed 4 of 6 indicators in the Encouraging Economic Freedom category. Figure: Georgia GNI Per Capita: [Refer to PDF for image] This figure is a combination vertical bar and line graph depicting the following data: MCC eligibility year: 2004; Nominal GNI per capita in U.S. dollars: $260; MCC cut-off for low-income candidates: $1415. MCC eligibility year: 2005; Nominal GNI per capita in U.S. dollars: $300; MCC cut-off for low-income candidates: $1465. MCC eligibility year: 2006 (MCC implemented a program for lower-middle- income countries beginning in fiscal year 2006); Nominal GNI per capita in U.S. dollars: $370; MCC cut-off for low-income candidates: $1575; MCC cut-off for lower-middle-income candidates: $3255. MCC eligibility year: 2007; Nominal GNI per capita in U.S. dollars: $440; MCC cut-off for low-income candidates: $1675; MCC cut-off for lower-middle-income candidates: $3465. MCC eligibility year: 2008; Nominal GNI per capita in U.S. dollars: $510; MCC cut-off for low-income candidates: $1735; MCC cut-off for lower-middle-income candidates: $3595. Source: GNI per capita data are from the April 2008 version of the World Bank World Development Indicators. Notes: The April 2008 data may include Bank updates that occurred after MCC candidate selection. Because of a two-year data lag, MCC used, for example, 2006 data in its 2008 eligibility round. [End of figure] Table: Ghana's Performance on MCC Eligibility Indicators: Indicator category: Ruling Justly; Political Rights; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Civil Liberties; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Voice and Accountability; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Government Effectiveness; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Rule of Law; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Control of Corruption; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Investing in People: Girls' Primary Education Completion; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: Failed. Indicator category: Investing in People: Primary Education Expenditures; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Investing in People: Health Expenditures; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Investing in People: Immunization Rates; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Investing in People: Natural Resources Management (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Country Credit Rating (20044-2005); MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: NR. Indicator category: Encouraging Economic Freedom: Days to Start a Small Business (2004-2007); MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: NR. Indicator category: Encouraging Economic Freedom: Cost of Starting a Business (2006-2007); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: NR. Indicator category: Encouraging Economic Freedom: Business Start-up (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Inflation; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Fiscal Policy; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: Failed; Indicator category: Encouraging Economic Freedom: Trade Policy; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: Failed. Indicator category: Encouraging Economic Freedom: Regulatory Quality; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Land Rights and Access (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: Passed. Indicator assessment result: MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: Passed. MCC eligibility determination: MCC eligibility year 2004, MCC income group, low: Eligible; MCC eligibility year 2005, MCC income group, low: Eligible; MCC eligibility year 2006, MCC income group, low: Eligible; MCC eligibility year 2007, MCC income group, low: Eligible; MCC eligibility year 2008, MCC income group, low: Eligible. Passed: scored above the median; Failed: scored at the median or below; NR: Not used to evaluate performance. Source: GAO analysis of Millennium Challenge Corporation data. Note: For the 2004 eligibility round, MCC used Primary Education Completion instead of Girls' Primary Education Completion. [End of table] Compact Summary: Compact Characteristics: At signature, Ghana’s 5-year compact provided approximately $547 million for projects in 23 districts in the northern region, the Afram Basin region, and the southern agricultural area in the Southeastern region. Poverty rates in these locations are generally higher than 40 percent. These data are provided as context for understanding MCC’s expectations of compact benefits at the time of compact signature. Previous GAO work has identified several problems with the methodology used to determine compact projects’ expected benefits (see GAO-08-730 and GAO-07-909). GAO has not independently verified the reliability of MCC’s benefit projections for this compact. Compact Project Funding: Although the total amount of compact funding is fixed, MCC and the country may reallocate funds among projects during compact implementation as more detailed information about costs becomes available. MCC funding allocations for Ghana projects have not changed since compact signature in August 2006. Figure: Structure of Ghana Compact at Signature: Constraints to development: Inconsistent supply and quality of agriculture crops, high transportation costs, and insufficient access to basic services hinder growth. Planned projects: Agriculture: Provide 51,000 farm households with training in commercial skills. Rehabilitate up to 950 km of feeder roads in 8 districts. Transportation: Upgrade 14 km of N1 Highway from Tema to Accra. Rural Services Development: Construct and rehabilitate educational, water, and sanitation facilities; expand access to electricity. MCC expected benefits: * Substantially enhance livelihoods and welfare of over 1 million people. * Increase agricultural incomes for households in the targeted regions between 33 and 142 percent. * Help alleviate poverty for over 230,000 people. Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] Figure (pie-chart): Ghana Compact Funding as of June 2008: Agriculture Project: 44% ($240.98 million); Transportation Project: 26% ($143.10 million); Rural Services Development Project: 19% ($101.29 million); Program Administration and Monitoring and Evaluation: 11% ($61.63 million). Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] Compact Status: Compact Implementation: At compact signature, MCC develops a preliminary disbursement plan for the compact. MCC disburses funds as the country begins implementing projects. According to MCC, any funds not disbursed within 120 days after the compact ends would return to MCC for reprogramming. As of June 2008, 27 percent of the Ghana compact’s 5-year period had elapsed, and MCC had only disbursed $15.53 million (2.84 percent) of compact funds, compared with the $114.42 million (20.92 percent) it had originally planned to disburse as of that date. In the first quarter of fiscal year 2008, MCC and the country revised the projected disbursement total to $48.63 million by June 2008. As of June 2008, the country had committed $75.12 million, or 13.73 percent of compact funds. Commitments include signed contracts and the forecasted value of recurring expenses outside of a contract. MCC reports that as a result of failing the indicator criteria in the 2007 eligibility round, Ghana has developed a plan to improve its performance. Figure: (horizontal bar graph): Funds Provided for Ghana Compact: Total for compact: Total allocated at compact signature: $547.00 million; Planned disbursements as of June 2008: $114.42 million; Actual disbursements as of June 2008: $15.53 million. Agriculture Project: Total allocated at compact signature: $241.00 million; Planned disbursements as of June 2008: $51.49 million; Actual disbursements as of June 2008: $4.70 million. Rural Services Development Project: Total allocated at compact signature: $47.50 million; Planned disbursements as of June 2008: $20.63 million; Actual disbursements as of June 2008: $7.50 million. Transportation Project: Total allocated at compact signature: $101.30 million; Planned disbursements as of June 2008: $22.78 million; Actual disbursements as of June 2008: $0.09 million. Program Administration and Monitoring and Evaluation: Total allocated at compact signature: $61.60 million; Planned disbursements as of June 2008: $16.19 million; Actual disbursements as of June 2008: $7.45 million. Source: GAO analysis of Millennium Challenge Corporation data. Notes: Planned disbursements are based on MCC’s projections at compact signature and assume that compact funds are disbursed evenly throughout the compact implementation year. Actual disbursements by project may not add up to the figure presented for total compact disbursements because disbursements reported as “pending subsequent report” are reflected in the compact total but not in project totals. In general, “pending subsequent report” amounts represent disbursements that will be allocated to individual projects in subsequent quarters. [End of figure] [End of Ghana Compact Fact Sheet] Honduras Compact Fact Sheet: Country Characteristics: Located in Central America, Honduras has a population of about 7.4 million. Honduras had a gross national income (GNI) of $1,170 per capita in 2006, making it the second poorest country in Central America. The Honduran economy is based on trade in agricultural and manufacturing products. However, the economy’s reliance on a narrow range of exports, especially bananas and coffee, makes it vulnerable to natural disasters and commodity price changes. The current government, elected in 2005, has made poverty reduction its top priority. The World Bank reports that Honduras’s economy has grown at a faster pace recently, rising from an average of 2.4 percent growth in 2001-02 to about 6.3 percent in 2007. Compact Timeline: During compact development, MCC evaluates the country’s proposal and, if MCC approves it, MCC negotiates and may sign a compact with the country. After compact signature, the country must complete MCC’s entry into force requirements, such as procurement and disbursement agreements, in order for compact implementation to begin. MCC’s statute limits compact implementation to 5 years. Honduras was 1 of 16 countries that MCC selected as eligible in its first eligibility round. Honduras was the second country to begin implementing a compact with MCC and as of September 30, 2008, 60 percent of the compact’s 5-year period had elapsed. Figure: Map. This figure is a map of Central America depicting the location of Honduras, the capital of Tegucigaipa, the cities of Taulabe' and Comayagua, and major roads in the country. The $215 million MCC compact includes plans to upgrade approximately 109 km of the CA-5 highway. Source: GAO analysis of Millennium Challenge Corporation and Map Resources (map). [End of figure] Figure: Key Events for Honduras Compact (timeline): Compact development: mid-2004 to late 2005; May 6, 2004: Selected as eligible for assistance. Compact implementation: late 2005 to late 2010; September 29, 2005: Compact enters into force; compact implementation begins; Compact implementation time elapsed: 60% to September 30, 2008 (current). Compact implementation time remaining: 40%; September 28, 2010: Compact implementation ends; MCC funding expires. Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] MCC Selection Criteria: MCC Candidate Criteria: Each fiscal year, MCC uses per capita incomes to identify two pools of candidate countries, low-income countries and lower-middle-income countries, based on World Bank lending thresholds. In addition, candidate countries must not be statutorily barred from receiving U.S. assistance. By law, MCC can use a maximum of 25 percent of compact assistance for any given year for new compacts with lower-middle-income countries. Honduras has been a low-income candidate country every year since MCC began operations in 2004. MCC Eligibility Criteria: Each fiscal year, MCC’s Board uses quantitative indicators to assess a candidate country's policy performance. MCC compares the country’s performance on each indicator to that of other candidates. To pass an indicator, a country must score better than at least half of the other candidates (above the median) in its income group. To meet MCC’s eligibility criteria, a country must pass the indicator for control of corruption and at least half of the indicators in each of three categories. However, the Board may select a country as eligible even if it does not meet the criteria, and has done so in the past—mostly for countries previously selected as eligible. If the policy performance of a country implementing a compact declines, the Board can suspend or terminate the compact; however, it has not yet done so for any country. MCC has selected Honduras as eligible for compact assistance every year since 2004, although the country did not pass MCC’s indicator for control of corruption in 2008. Figure: Honduras GNI Per Capita: [Refer to PDF for image] This figure is a combination vertical bar and line graph depicting the following data: MCC eligibility year: 2004; Nominal GNI per capita in U.S. dollars: $950; MCC cut-off for low-income candidates: $1415. MCC eligibility year: 2005; Nominal GNI per capita in U.S. dollars: $1,010; MCC cut-off for low-income candidates: $1465. MCC eligibility year: 2006 (MCC implemented a program for lower-middle- income countries beginning in fiscal year 2006); Nominal GNI per capita in U.S. dollars: $1,090; MCC cut-off for low-income candidates: $1575; MCC cut-off for lower-middle-income candidates: $3255. MCC eligibility year: 2007; Nominal GNI per capita in U.S. dollars: $1,170; MCC cut-off for low-income candidates: $1675; MCC cut-off for lower-middle-income candidates: $3465. MCC eligibility year: 2008; Nominal GNI per capita in U.S. dollars: $1,270; MCC cut-off for low-income candidates: $1735; MCC cut-off for lower-middle-income candidates: $3595. Source: GNI per capita data are from the April 2008 version of the World Bank World Development Indicators. Notes: The April 2008 data may include Bank updates that occurred after MCC candidate selection. Because of a two-year data lag, MCC used, for example, 2006 data in its 2008 eligibility round. [End of figure] Table: Honduras' Performance on MCC Eligibility Indicators: Indicator category: Ruling Justly; Political Rights; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Civil Liberties; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Voice and Accountability; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Government Effectiveness; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Rule of Law; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Failed. Indicator category: Ruling Justly; Control of Corruption; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Failed. Indicator category: Investing in People: Girls' Primary Education Completion; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Investing in People: Primary Education Expenditures; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Investing in People: Health Expenditures; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Investing in People: Immunization Rates; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Investing in People: Natural Resources Management (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Country Credit Rating (20044-2005); MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: NR. Indicator category: Encouraging Economic Freedom: Days to Start a Small Business (2004-2007); MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: NR. Indicator category: Encouraging Economic Freedom: Cost of Starting a Business (2006-2007); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: NR. Indicator category: Encouraging Economic Freedom: Business Start-up (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Inflation; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Fiscal Policy; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: Failed; Indicator category: Encouraging Economic Freedom: Trade Policy; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Regulatory Quality; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Land Rights and Access (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: Passed. Indicator assessment result: MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: Passed. MCC eligibility determination: MCC eligibility year 2004, MCC income group, low: Eligible; MCC eligibility year 2005, MCC income group, low: Eligible; MCC eligibility year 2006, MCC income group, low: Eligible; MCC eligibility year 2007, MCC income group, low: Eligible; MCC eligibility year 2008, MCC income group, low: Eligible. Passed: scored above the median; Failed: scored at the median or below; NR: Not used to evaluate performance. Source: GAO analysis of Millennium Challenge Corporation data. Note: For the 2004 eligibility round, MCC used Primary Education Completion instead of Girls' Primary Education Completion. [End of table] Compact Summary: Compact Characteristics: At signature, the 5-year, $215 million Honduras compact aimed to generate economic growth in rural areas by enhancing agricultural development and linking the large rural population to markets. At signature, the compact’s Rural Development Project planned to increase the productivity and business skills of farmers who operate small- and mid-size farms, and the Transportation Project planned to reduce costs of transportation between targeted production centers and national, regional, and global markets. These data are provided as context for understanding MCC’s expectations of compact benefits at compact signature. Previous GAO work has identified several problems with the methodology used to determine compact projects’ expected benefits (see GAO-08-730 and GAO-07-909). GAO has not independently verified the reliability of MCC’s benefit projections for this compact. Compact Project Funding: Although the total amount of compact funding is fixed, MCC and the country may reallocate funds among projects during compact implementation as more detailed information about costs becomes available. MCC has approved slight changes to Honduras’s compact funding allocations since compact signature in June 2005. At signature, the $215 million Honduras compact included $72.2 million for the Rural Development Project and $125.7 million for the Transportation Project. Figure: Structure of Honduras Compact at Signature: Constraints to development: Low agricultural productivity and high transportation costs impede economic growth. Planned projects: Rural Development: Provide technical assistance to transition 8,255 farmers to high value crops. Provide technical assistance and loans to financial institutions, generating $28.8 million in new loans to farmers. Upgrade 1,500 km of rural roads to connect farmers to markets. Transportation: Upgrade and pave 109 km of the CA-5 highway. Pave 90 km of secondary roads. Develop a vehicle weight control system and build 8 weigh stations to help preserve upgraded roads. MCC expected benefits: * Reduce the transportation costs between targeted production centers and national, regional, and global markets, stimulating economic growth. * Increase the annual income of beneficiaries by $69 million by the end of the compact. Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] Figure (pie-chart): Honduras Compact Funding as of June 2008: Transportation Project: 59% ($127.49 million); Rural Development Project: 33% ($70.69 million); Program Administration and Monitoring and Evaluation: 8% ($16.82 million). Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] Compact Status: Compact Implementation: At compact signature, MCC develops a preliminary disbursement plan for the compact. MCC disburses funds as the country begins implementing projects. According to MCC, any funds not disbursed within 120 days after the compact ends would return to MCC for reprogramming. As of June 2008, 55 percent of the Honduras compact’s 5-year period had elapsed and MCC had disbursed $21.46 million (9.98 percent) of compact funds, compared with the $149.60 million (69.58 percent) it had originally planned to disburse as of that date. In the first quarter of fiscal year 2008, MCC and the country revised the projected disbursement total to $48.49 million by June 2008. As of June 2008, the country had committed $92.12 million, or 42.85 percent of compact funds. Commitments include signed contracts and the forecasted value of recurring expenses outside of a contract. MCC reported that the Transportation Project is being restructured owing to both escalating global construction costs and an expansion of the project’s scope that was requested by the Government of Honduras. The Central American Bank for Economic Integration has approved a $130 million loan for the government of Honduras to co-finance the additional costs of the improvements to the CA-5 Highway. According to MCC, the loan remains subject to approval by the Government of Honduras. MCC reports that as a result of failing the indicator criteria in the 2008 eligibility round, Honduras has developed a plan to improve its performance. Figure: (horizontal bar graph): Funds Provided for Honduras Compact: Total for compact: Total allocated at compact signature: $215 million; Planned disbursements as of June 2008: $149.60 million; Actual disbursements as of June 2008: $21.46 million. Rural Development Project: Total allocated at compact signature: $72.20 million; Planned disbursements as of June 2008: $50.04 million; Actual disbursements as of June 2008: $13.89 million. Transportation Project: Total allocated at compact signature: $125.70 million; Planned disbursements as of June 2008: $88.61 million; Actual disbursements as of June 2008: $2.95 million. Program Administration and Monitoring and Evaluation: Total allocated at compact signature: $17.11 million; Planned disbursements as of June 2008: $10.95 million; Actual disbursements as of June 2008: $3.80 million. Source: GAO analysis of Millennium Challenge Corporation data. Notes: Planned disbursements are based on MCC’s projections at compact signature and assume that compact funds are disbursed evenly throughout the compact implementation year. Actual disbursements by project may not add up to the figure presented for total compact disbursements because disbursements reported as “pending subsequent report” are reflected in the compact total but not in project totals. In general, “pending subsequent report” amounts represent disbursements that will be allocated to individual projects in subsequent quarters. [End of figure] [End of Honduras Compact Fact Sheet] Madagascar Compact Fact Sheet: Country Characteristics: Located in the Indian Ocean off of the coast of southeastern Africa, Madagascar is an island state with a population of approximately 18.6 million. Madagascar had a gross national income of $280 per capita in 2006, making it one of the world’s poorest countries. Agriculture is one of the largest sectors of the economy, and 73 percent of the population lives in rural areas. Since the current government took charge in 2002, it has brought about improvements in social, economic, and governance conditions. The economy has grown at an average of 5 percent per year, and poverty has declined to 69 percent from its peak of 80 percent in 2002. The International Monetary Fund and Malagasy officials predict moderate, above average real GDP growth through 2011, mostly owing to the impact of two large mining projects. Compact Timeline: During compact development, MCC evaluates the country’s proposal and, if MCC approves it, MCC negotiates and may sign a compact with the country. After compact signature, the country must complete MCC’s entry into force requirements, such as procurement and disbursement agreements, in order for compact implementation to begin. MCC’s statute limits compact implementation to 5 years. Madagascar was 1 of 16 countries that MCC selected as eligible in its first eligibility round. Madagascar was the first country to begin implementing a compact with MCC. In July 2008, MCC extended the Madagascar compact by 1 year--from 4 to 5 years--in order to allow the country more time to fully implement projects. As of September 30, 2008, 64 percent of the compact’s 5-year period had elapsed. Figure: Map. This figure is a map of Africa depicting the location of Madagascar and the capital of Antananarivo. MCC's $109.8 compact targets 5 predominantly rural zones comprising 5 million inhabitants. Source: GAO analysis of Millennium Challenge Corporation and Map Resources (map). [End of figure] Figure: Key Events for Madagascar Compact (timeline): Compact development: mid-2004 to late 2005; May 6, 2004: Selected as eligible for assistance. Compact implementation: late 2005 to late 2010; July 27, 2005: Compact enters into force; compact implementation begins; Compact implementation time elapsed: 64% to September 30, 2008 (current). Compact implementation time remaining: 36%; July 26, 2010: Compact implementation ends; MCC funding expires. Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] MCC Selection Criteria: MCC Candidate Criteria: Each fiscal year, MCC uses per capita incomes to identify two pools of candidate countries, low-income countries and lower-middle-income countries, based on World Bank lending thresholds. In addition, candidate countries must not be statutorily barred from receiving U.S. assistance. By law, MCC can use a maximum of 25 percent of compact assistance for any given year for new compacts with lower-middle-income countries. Madagascar has been a low-income candidate country every year since MCC began operations in 2004. MCC Eligibility Criteria: Each fiscal year, MCC’s Board uses quantitative indicators to assess a candidate country's policy performance. MCC compares the country’s performance on each indicator to that of other candidates. To pass an indicator, a country must score better than at least half of the other candidates (above the median) in its income group. To meet MCC’s eligibility criteria, a country must pass the indicator for control of corruption and at least half of the indicators in each of three categories. However, the Board may select a country as eligible even if it does not meet the criteria, and has done so in the past—mostly for countries previously selected as eligible. If the policy performance of a country implementing a compact declines, the Board can suspend or terminate the compact; however, it has not yet done so for any country. MCC has selected Madagascar as eligible every year since 2004, although the country did not pass the indicator test in the Investing in People category in 2007 and 2008. Figure: Madagascar GNI Per Capita: [Refer to PDF for image] This figure is a combination vertical bar and line graph depicting the following data: MCC eligibility year: 2004; Nominal GNI per capita in U.S. dollars: $220; MCC cut-off for low-income candidates: $1415. MCC eligibility year: 2005; Nominal GNI per capita in U.S. dollars: $280; MCC cut-off for low-income candidates: $1465. MCC eligibility year: 2006 (MCC implemented a program for lower-middle- income countries beginning in fiscal year 2006); Nominal GNI per capita in U.S. dollars: $290; MCC cut-off for low-income candidates: $1575; MCC cut-off for lower-middle-income candidates: $3255. MCC eligibility year: 2007; Nominal GNI per capita in U.S. dollars: $290; MCC cut-off for low-income candidates: $1675; MCC cut-off for lower-middle-income candidates: $3465. MCC eligibility year: 2008; Nominal GNI per capita in U.S. dollars: $280; MCC cut-off for low-income candidates: $1735; MCC cut-off for lower-middle-income candidates: $3595. Source: GNI per capita data are from the April 2008 version of the World Bank World Development Indicators. Notes: The April 2008 data may include Bank updates that occurred after MCC candidate selection. Because of a two-year data lag, MCC used, for example, 2006 data in its 2008 eligibility round. [End of figure] Table: Madagascar's Performance on MCC Eligibility Indicators: Indicator category: Ruling Justly; Political Rights; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Civil Liberties; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Voice and Accountability; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Government Effectiveness; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Rule of Law; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Control of Corruption; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Investing in People: Girls' Primary Education Completion; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: Failed. Indicator category: Investing in People: Primary Education Expenditures; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Failed. Indicator category: Investing in People: Health Expenditures; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: Failed. Indicator category: Investing in People: Immunization Rates; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: Failed. Indicator category: Investing in People: Natural Resources Management (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: Failed. Indicator category: Encouraging Economic Freedom: Country Credit Rating (20044-2005); MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: NR. Indicator category: Encouraging Economic Freedom: Days to Start a Small Business (2004-2007); MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: NR. Indicator category: Encouraging Economic Freedom: Cost of Starting a Business (2006-2007); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: NR. Indicator category: Encouraging Economic Freedom: Business Start-up (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Inflation; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Fiscal Policy; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Trade Policy; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Regulatory Quality; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Land Rights and Access (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: Failed. Indicator assessment result: MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: Failed. MCC eligibility determination: MCC eligibility year 2004, MCC income group, low: Eligible; MCC eligibility year 2005, MCC income group, low: Eligible; MCC eligibility year 2006, MCC income group, low: Eligible; MCC eligibility year 2007, MCC income group, low: Eligible; MCC eligibility year 2008, MCC income group, low: Eligible. Passed: scored above the median; Failed: scored at the median or below; NR: Not used to evaluate performance. Source: GAO analysis of Millennium Challenge Corporation data. Note: For the 2004 eligibility round, MCC used Primary Education Completion instead of Girls' Primary Education Completion. [End of table] Compact Summary: Compact Characteristics: At signature, the 5-year, $109.8 million Madagascar compact targeted 5 predominately rural zones with 5 million inhabitants (27 percent of the total population). Agriculture is the main source of income in these zones; 94 percent of breadwinners are farmers or farm laborers. These data are provided as context for understanding MCC’s expectations of compact benefits at compact signature. Previous GAO work has identified several problems with the methodology used to determine compact projects’ expected benefits (see GAO-08-730 and GAO-07-909). GAO has not independently verified the reliability of MCC’s benefit projections for this compact. Compact Project Funding: Although the total amount of compact funding is fixed, MCC and the country may reallocate funds among projects during compact implementation as more detailed information about costs becomes available. As of June 2008, MCC funding allocations for Madagascar projects had not changed since compact signature in April 2005. According to MCC, funding allocations have been changed since June to reflect its amendment of the compact term from 4 to 5 years. Figure: Structure of Madagascar Compact at Signature: Constraints to development: Low investment in rural areas results in low economic growth and poverty. Planned projects: Land Tenure: Formalize and decentralize Madagascar titling and surveying systems, registering 250,000 hectares with land titles or certificates. Reduce the time and cost of conducting property transactions by modernizing the national land registry and training officials. Finance: Modernize banking laws and expand the types of financial instruments available, increasing the value of savings and loans in the targeted zones. Modernize the interbank payment system to reduce risk and bring delays in settlement down from 45 days to 3 days. Agricultural Business Investment: Establish Agricultural Business Centers in the 5 zones to provide 32,000 farmers and 300 businesses with training and technical assistance on agribusiness technology, accessing credit, and management skills. MCC expected benefits: * Improve agricultural productivity by an average of 50 percent per hectare. * Increase household incomes in targeted zones by 22 percent. * Generate $20.2 million in new investment. Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] Figure (pie-chart): Madagascar Compact Funding as of June 2008: Land Tenure Project: 34% ($37.80 million); Finance Project: 33% ($35.89 million); Program Administration and Monitoring and Evaluation: 17% ($18.40 million); Agricultural Business Investment Project: 16% ($17.68 million); Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] Compact Status: Compact Implementation: At compact signature, MCC develops a preliminary disbursement plan for the compact. MCC disburses funds as the country begins implementing projects. According to MCC, any funds not disbursed within 120 days after the compact ends would return to MCC for reprogramming. As of June 2008, more than half of the Madagascar compact’s 5-year period had elapsed and MCC had disbursed $37.79 million (34.43 percent) of compact funds, compared with the $97.25 million (about 89 percent) it had originally planned to disburse as of that date. In the first quarter of fiscal year 2008, MCC and the country revised the projected disbursement total to $55.22 million by June 2008. As of June 2008, the country had committed $71.08 million, or 64.75 percent of compact funds. Commitments include signed contracts and the forecasted value of recurring expenses outside of a contract. In December 2007, the U.S. Agency for International Development’s Office of Inspector General (IG) for MCC found that MCC may have difficulty in measuring the compact’s impact owing to inconsistent data collection methods. The IG noted that MCC had set program indicators and targets too low for at least one project; the country surpassed indicators for the Finance Project before it had begun implementation. The IG also found that MCC reported some inaccurate information on compact results due to data quality weaknesses, but these inaccuracies were below the IG’s threshold for significance. MCC reports that as a result of failing the indicator criteria in the 2007 and 2008 eligibility rounds, Madagascar has developed a plan to improve its performance. Figure: (horizontal bar graph): Funds Provided for Madagascar Compact: Total for compact: Total allocated at compact signature: $109.77 million; Planned disbursements as of June 2008: $97.25 million; Actual disbursements as of June 2008: $37.79 million. Land Tenure Project: Total allocated at compact signature: $37.80 million; Planned disbursements as of June 2008: $36.09 million; Actual disbursements as of June 2008: $10.94 million. Finance Project: Total allocated at compact signature: $35.89 million; Planned disbursements as of June 2008: $33.71 million; Actual disbursements as of June 2008: $7.28 million. Agricultural Business Investment Project: Total allocated at compact signature: $17.68 million; Planned disbursements as of June 2008: $14.16 million; Actual disbursements as of June 2008: $6.30 million. Program Administration and Monitoring and Evaluation: Total allocated at compact signature: $18.40 million; Planned disbursements as of June 2008: $13.29 million; Actual disbursements as of June 2008: $10.48 million. Source: GAO analysis of Millennium Challenge Corporation data. Notes: Planned disbursements are based on MCC’s projections at compact signature and assume that compact funds are disbursed evenly throughout the compact implementation year. Actual disbursements by project may not add up to the figure presented for total compact disbursements because disbursements reported as “pending subsequent report” are reflected in the compact total but not in project totals. In general, “pending subsequent report” amounts represent disbursements that will be allocated to individual projects in subsequent quarters. [End of figure] [End of Madagascar Compact Fact Sheet] Mali Compact Fact Sheet: Country Characteristics: Located in West Africa, east of Senegal, Mali has a population of about 12.3 million. Mali had a gross national income (GNI) of $460 per capita in 2006, making it one of the poorest nations in the world. According to the World Bank, 47.4 percent of Mali’s population lives in poverty. The economy is based on agriculture, which accounts for 45 percent of Mali’s gross domestic product (GDP). Because 60 percent of its land is desert, Mali is particularly vulnerable to drought. Mali is considered to be one of the strongest democracies in Africa, and its government has pursued economic reforms to encourage growth. Despite its low income, Mali has experienced favorable economic growth in recent years. According to the World Bank, Mali’s economic growth averaged 5.3 percent from 2003 to 2006, with gold mining and transportation and communications services as main drivers of growth. Compact Timeline: During compact development, MCC evaluates the country’s proposal and, if MCC approves it, MCC negotiates and may sign a compact with the country. After compact signature, the country must complete MCC’s entry into force requirements, such as procurement and disbursement agreements, in order for compact implementation to begin. MCC’s statute limits compact implementation to 5 years. Mali was 1 of 16 countries that MCC selected as eligible in its first eligibility round. As of September 30, 2008, 21 percent of the compact’s 5-year period had elapsed. Figure: Map. This figure is a map of Africa depicting the location of Mali and the capital of Bamako. Source: GAO analysis of Millennium Challenge Corporation and Map Resources (map). [End of figure] Figure: Key Events for Mali Compact (timeline): Compact development: mid-2004 to mid-2007; May 6, 2004: Selected as eligible for assistance. Compact implementation: mid-2007 to mid-2012; September 17, 2007: Compact enters into force; compact implementation begins; Compact implementation time elapsed: 21% to September 30, 2008 (current). Compact implementation time remaining: 79%; September 16, 2012: Compact implementation ends; MCC funding expires. Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] MCC Selection Criteria: MCC Candidate Criteria: Each fiscal year, MCC uses per capita incomes to identify two pools of candidate countries, low-income countries and lower-middle-income countries, based on World Bank lending thresholds. In addition, candidate countries must not be statutorily barred from receiving U.S. assistance. By law, MCC can use a maximum of 25 percent of compact assistance for any given year for new compacts with lower-middle-income countries. Mali has been a low-income candidate country each year since MCC began operations in 2004. MCC Eligibility Criteria: Each fiscal year, MCC’s Board uses quantitative indicators to assess a candidate country's policy performance. MCC compares the country’s performance on each indicator to that of other candidates. To pass an indicator, a country must score better than at least half of the other candidates (above the median) in its income group. To meet MCC’s eligibility criteria, a country must pass the indicator for control of corruption and at least half of the indicators in each of three categories. However, the Board may select a country as eligible even if it does not meet the criteria, and has done so in the past—mostly for countries previously selected as eligible. If the policy performance of a country implementing a compact declines, the Board can suspend or terminate the compact; however, it has not yet done so for any country. MCC has selected Mali as eligible for compact assistance every year since 2004, although Mali did not pass the indicator test in 2008 because it failed 3 of 5 indicators in the Investing in People category. Figure: Mali GNI Per Capita: [Refer to PDF for image] This figure is a combination vertical bar and line graph depicting the following data: MCC eligibility year: 2004; Nominal GNI per capita in U.S. dollars: $250; MCC cut-off for low-income candidates: $1415. MCC eligibility year: 2005; Nominal GNI per capita in U.S. dollars: $320; MCC cut-off for low-income candidates: $1465. MCC eligibility year: 2006 (MCC implemented a program for lower-middle- income countries beginning in fiscal year 2006); Nominal GNI per capita in U.S. dollars: $390; MCC cut-off for low-income candidates: $1575; MCC cut-off for lower-middle-income candidates: $3255. MCC eligibility year: 2007; Nominal GNI per capita in U.S. dollars: $450; MCC cut-off for low-income candidates: $1675; MCC cut-off for lower-middle-income candidates: $3465. MCC eligibility year: 2008; Nominal GNI per capita in U.S. dollars: $460; MCC cut-off for low-income candidates: $1735; MCC cut-off for lower-middle-income candidates: $3595. Source: GNI per capita data are from the April 2008 version of the World Bank World Development Indicators. Notes: The April 2008 data may include Bank updates that occurred after MCC candidate selection. Because of a two-year data lag, MCC used, for example, 2006 data in its 2008 eligibility round. [End of figure] Table: Mali's Performance on MCC Eligibility Indicators: Indicator category: Ruling Justly; Political Rights; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Civil Liberties; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Voice and Accountability; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Government Effectiveness; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Rule of Law; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Control of Corruption; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Investing in People: Girls' Primary Education Completion; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: Failed. Indicator category: Investing in People: Primary Education Expenditures; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Failed. Indicator category: Investing in People: Health Expenditures; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed; Indicator category: Investing in People: Immunization Rates; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Investing in People: Natural Resources Management (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: Failed. Indicator category: Encouraging Economic Freedom: Country Credit Rating (20044-2005); MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: NR. Indicator category: Encouraging Economic Freedom: Days to Start a Small Business (2004-2007); MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: NR. Indicator category: Encouraging Economic Freedom: Cost of Starting a Business (2006-2007); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: NR. Indicator category: Encouraging Economic Freedom: Business Start-up (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: Failed. Indicator category: Encouraging Economic Freedom: Inflation; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Fiscal Policy; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Trade Policy; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Regulatory Quality; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Land Rights and Access (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: Failed. Indicator assessment result: MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Failed. MCC eligibility determination: MCC eligibility year 2004, MCC income group, low: Eligible; MCC eligibility year 2005, MCC income group, low: Eligible; MCC eligibility year 2006, MCC income group, low: Eligible; MCC eligibility year 2007, MCC income group, low: Eligible; MCC eligibility year 2008, MCC income group, low: Eligible. Passed: scored above the median; Failed: scored at the median or below; NR: Not used to evaluate performance. Source: GAO analysis of Millennium Challenge Corporation data. Note: For the 2004 eligibility round, MCC used Primary Education Completion instead of Girls' Primary Education Completion. [End of table] Compact Summary: Compact Characteristics: At compact signature, Mali’s 5-year, $460 million compact sought to improve agriculture in a geographic zone in one of the poorest areas of central Mali. At signature, the compact also planned to improve the Bamako-Sénou airport and create an industrial park on the airport’s land. These data are provided as context for understanding MCC’s expectations of compact benefits at compact signature. Previous GAO work has identified several problems with the methodology used to determine compact projects’ expected benefits (see GAO-08-730 and GAO-07-909). GAO has not independently verified the reliability of MCC’s benefit projections for this compact. Compact Project Funding: Although the total amount of compact funding is fixed, MCC and the country may reallocate funds among projects during compact implementation as more detailed information about costs becomes available. As of June 2008, MCC has approved slight changes to Mali’s compact funding allocations since compact signature in November 2006. At signature, the compact included $94.27 million for the Industrial Park Project; $234.61 million for the Alatona Irrigation project; and $42.31 million for program administration and monitoring and evaluation. MCC reports that it has amended the compact since June to remove funding for the Industrial Park Project. Figure: Structure of Mali Compact at Signature: Constraints to development: Lack of adequate infrastructure constrains access to markets and trade, efforts to attract businesses, and agricultural production and productivity. Planned projects: Airport Improvement: Improve airside and landside infrastructure at the Bamako-Senou Airport, including runway expansion and passenger terminal upgrade. Industrial Park: Build infrastructure, including roads and water utilities for a 100- hectare industrial park to serve 200 businesses. Alatona Irrigation: Construct canal system in Alatona zone of the Office du Niger area, resulting in an additional 16,000 hectares of irrigated land, an almost 20 percent increase in "drought-proof" land. MCC expected benefits: * Increased agricultural producers' real per capita incomes by $316. * Increased the revenues of firms servicing the airport by 13 percent. * Increase Bamako hotel and restaurant revenues by 31 percent. Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] Figure (pie-chart): Mali Compact Funding as of June 2008: Alatona Irrigation Project: 52% ($234.88 million); Industrial Park Project: 20% ($94.46 million); Bamako-Senou Airport Improvement Project: 19% ($89.63 million); Program Administration and Monitoring and Evaluation: 9% ($41.84 million). Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] Compact Status: Compact Implementation: At compact signature, MCC develops a preliminary disbursement plan for the compact. MCC disburses funds as the country begins implementing projects. According to MCC, any funds not disbursed within 120 days after the compact ends would return to MCC for reprogramming. As of June 2008, 16 percent of the Mali compact’s 5-year period had elapsed and MCC had disbursed $8.49 million (1.84 percent) of compact funds, compared with the $37.86 million (8.22 percent) it had originally planned to disburse as of that date. In the first quarter of fiscal year 2008, MCC and the country revised the projected disbursement total to $15.35 million by June 2008. As of June 2008, the country had committed $24.12 million, or 5.23 percent of compact funds. Commitments include signed contracts and the forecasted value of recurring expenses outside of a contract. MCC has reported that Mali’s compact is being restructured owing to rising construction costs and currency fluctuations. According to MCC, the compact has been amended to remove the Industrial Park Project. As of June 30, 2008, MCC had disbursed $2.08 million for this cancelled project. Figure: (horizontal bar graph): Funds Provided for Mali Compact: Total for compact: Total allocated at compact signature: $460.81 million; Planned disbursements as of June 2008: $37.86 million; Actual disbursements as of June 2008: $8.49 million. Alatona Irrigation Project: Total allocated at compact signature: $234.61 million; Planned disbursements as of June 2008: $18.57 million; Actual disbursements as of June 2008: $0 million. Industrial Park Project: Total allocated at compact signature: $94.27 million; Planned disbursements as of June 2008: $6.23 million; Actual disbursements as of June 2008: $2.08 million. Bamako-Senou Airport Improvement Project: Total allocated at compact signature: $89.63 million; Planned disbursements as of June 2008: $5.46 million; Actual disbursements as of June 2008: $1.38 million. Program Administration and Monitoring and Evaluation: Total allocated at compact signature: $42.31 million; Planned disbursements as of June 2008: $7.59 million; Actual disbursements as of June 2008: $5.03 million. Source: GAO analysis of Millennium Challenge Corporation data. Notes: Planned disbursements are based on MCC’s projections at compact signature and assume that compact funds are disbursed evenly throughout the compact implementation year. Actual disbursements by project may not add up to the figure presented for total compact disbursements because disbursements reported as “pending subsequent report” are reflected in the compact total but not in project totals. In general, “pending subsequent report” amounts represent disbursements that will be allocated to individual projects in subsequent quarters. [End of figure] [End of Mali Compact Fact Sheet] Nicaragua Compact Fact Sheet: Country Characteristics: Located in Central America, Nicaragua has a population of about 5.8 million. Nicaragua had a gross national income (GNI) of $980 per capita in 2006. Forty-six percent of Nicaragua’s population lives below the poverty line. Its economy, which is based primarily on industry and services, has grown at an average of 3.2 percent since 2001. In 2004, Nicaragua received $4.5 billion in debt reduction through the Heavily Indebted Poor Countries initiative in which multilateral organizations and governments reduce poor countries’ debts. Nicaragua has also expanded export opportunities through the U.S.-Central America Free Trade Agreement, which took effect in April 2006. Compact Timeline: During compact development, MCC evaluates the country’s proposal and, if MCC approves it, MCC negotiates and may sign a compact with the country. After compact signature, the country must complete MCC’s entry into force requirements, such as procurement and disbursement agreements, in order for compact implementation to begin. MCC’s statute limits compact implementation to 5 years. Nicaragua was 1 of 16 countries that MCC selected as eligible in its first eligibility round. As of September 30, 2008, 47 percent of the compact’s 5-year period had elapsed. Figure: Map. This figure is a map of Central America depicting the location of Nicaragua, the capital of Managua, and the major cities of Chinandega and Leon. MCC's $174 million compact targets the Leon and Chinandega regions. Source: GAO analysis of Millennium Challenge Corporation and Map Resources (map). [End of figure] Figure: Key Events for Nicaragua Compact (timeline): Compact development: mid-2004 to mid-2006; May 6, 2004: Selected as eligible for assistance. Compact implementation: mid-2006 to mid-2011; May 26, 2006: Compact enters into force; compact implementation begins; Compact implementation time elapsed: 47% to September 30, 2008 (current). Compact implementation time remaining: 53%; May 25, 2011: Compact implementation ends; MCC funding expires. Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] MCC Selection Criteria: MCC Candidate Criteria: Each fiscal year, MCC uses per capita incomes to identify two pools of candidate countries, low-income countries and lower-middle-income countries, based on World Bank lending thresholds. In addition, candidate countries must not be statutorily barred from receiving U.S. assistance. By law, MCC can use a maximum of 25 percent of compact assistance for any given year for new compacts with lower-middle-income countries. Nicaragua has been a low-income candidate country every year since MCC began operations in 2004. MCC Eligibility Criteria: Each fiscal year, MCC’s Board uses quantitative indicators to assess a candidate country's policy performance. MCC compares the country’s performance on each indicator to that of other candidates. To pass an indicator, a country must score better than at least half of the other candidates (above the median) in its income group. To meet MCC’s eligibility criteria, a country must pass the indicator for control of corruption and at least half of the indicators in each of three categories. However, the Board may select a country as eligible even if it does not meet the criteria, and has done so in the past—mostly for countries previously selected as eligible. If the policy performance of a country implementing a compact declines, the Board can suspend or terminate the compact; however, it has not yet done so for any country. Nicaragua has passed MCC’s eligibility indicators and MCC has selected the country as eligible for compact assistance every year since 2004. Figure: Nicaragua GNI Per Capita: [Refer to PDF for image] This figure is a combination vertical bar and line graph depicting the following data: MCC eligibility year: 2004; Nominal GNI per capita in U.S. dollars: $730; MCC cut-off for low-income candidates: $1415. MCC eligibility year: 2005; Nominal GNI per capita in U.S. dollars: $760; MCC cut-off for low-income candidates: $1465. MCC eligibility year: 2006 (MCC implemented a program for lower-middle- income countries beginning in fiscal year 2006); Nominal GNI per capita in U.S. dollars: $820; MCC cut-off for low-income candidates: $1575; MCC cut-off for lower-middle-income candidates: $3255. MCC eligibility year: 2007; Nominal GNI per capita in U.S. dollars: $890; MCC cut-off for low-income candidates: $1675; MCC cut-off for lower-middle-income candidates: $3465. MCC eligibility year: 2008; Nominal GNI per capita in U.S. dollars: $930; MCC cut-off for low-income candidates: $1735; MCC cut-off for lower-middle-income candidates: $3595. Source: GNI per capita data are from the April 2008 version of the World Bank World Development Indicators. Notes: The April 2008 data may include Bank updates that occurred after MCC candidate selection. Because of a two-year data lag, MCC used, for example, 2006 data in its 2008 eligibility round. [End of figure] Table: Nicaragua's Performance on MCC Eligibility Indicators: Indicator category: Ruling Justly; Political Rights; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Civil Liberties; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Voice and Accountability; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Government Effectiveness; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Failed. Indicator category: Ruling Justly; Rule of Law; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Control of Corruption; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Investing in People: Girls' Primary Education Completion; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Investing in People: Primary Education Expenditures; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: Failed. Indicator category: Investing in People: Health Expenditures; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed; Indicator category: Investing in People: Immunization Rates; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Investing in People: Natural Resources Management (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Country Credit Rating (20044-2005); MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: NR. Indicator category: Encouraging Economic Freedom: Days to Start a Small Business (2004-2007); MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: NR. Indicator category: Encouraging Economic Freedom: Cost of Starting a Business (2006-2007); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: NR. Indicator category: Encouraging Economic Freedom: Business Start-up (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: Failed. Indicator category: Encouraging Economic Freedom: Inflation; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Fiscal Policy; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Trade Policy; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Regulatory Quality; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Land Rights and Access (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: Failed. Indicator assessment result: MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. MCC eligibility determination: MCC eligibility year 2004, MCC income group, low: Eligible; MCC eligibility year 2005, MCC income group, low: Eligible; MCC eligibility year 2006, MCC income group, low: Eligible; MCC eligibility year 2007, MCC income group, low: Eligible; MCC eligibility year 2008, MCC income group, low: Eligible. Passed: scored above the median; Failed: scored at the median or below; NR: Not used to evaluate performance. Source: GAO analysis of Millennium Challenge Corporation data. Note: For the 2004 eligibility round, MCC used Primary Education Completion instead of Girls' Primary Education Completion. [End of table] Compact Summary: Compact Characteristics: At compact signature, the 5-year, $175 million Nicaragua compact aimed to build productive capacity in León and Chinandega, two regions in the northwest that lie along a major highway linking Nicaragua to Honduras and El Salvador. Approximately 800,000 people live in these two regions, where 70 percent of the rural population is poor. These data are provided as context for understanding MCC’s expectations of compact benefits at compact signature. Previous GAO work has identified several problems with the methodology used to determine compact projects’ expected benefits (see GAO-08-730 and GAO-07-909). GAO has not independently verified the reliability of MCC’s benefit projections for this compact. Compact Project Funding: Although the total amount of compact funding is fixed, MCC and the country may reallocate funds among projects during compact implementation as more detailed information about costs becomes available. In January 2008, MCC approved changes to Nicaragua’s compact funding allocations in order to fund the rehabilitation of an additional 18 km of primary roads that were not included in the original compact. At compact signature, MCC allocated $92.8 million for the Transportation Project; $33.7 million for the Rural Business and Development Project; $26.5 million for the Property Regularization Project; and $22.1 million for program administration and monitoring and evaluation. Figure: Structure of Nicaragua Compact at Signature: Constraints to development: Insecure property rights and inefficient property registration services, poor roads, and a focus on low-value crops undermine enterprise development, investment, and rural income growth. Planned projects: Property Regularization: Register 70 percent of rural and 50 percent of urban properties in Leon (a total of 43,000 properties). Reduce the time and money costs of conducting property related transactions by 50 percent, by modernizing the national land registry system. Transportation: Upgrade a 58 km stretch of the Nicaragua portion of the Pacific Corridor highway. Upgrade 100-150 km of secondary roads. Provide technical assistance to improve the ability of the Ministry of Transportation to maintain roads. Rural Business Development: Provide technical and financial assistance to transition 4,720 rural businesses, including farmers, to higher profit businesses. Provide grants to improve the water supply for irrigation. MCC expected benefits: * Increase farmer profits and wages by approximately $30 million annually, beginning 6 years after project initiation. * Increase investment in land by 32 percent over 5 years. * Generate 7,000 new jobs. * Connect Leon and Chinandega businesses to domestic, regional, and global markets. Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] Figure (pie-chart): Nicaragua Compact Funding as of June 2008: Transportation Project: 59% ($105.19 million); Rural Business Development Project: 19% ($32.90 million); Property Regularization Project: 13% ($22.00 million); Program Administration and Monitoring and Evaluation: 9% ($14.19 million). Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] Compact Status: Compact Implementation: At compact signature, MCC develops a preliminary disbursement plan for the compact. MCC disburses funds as the country begins implementing projects. According to MCC, any funds not disbursed within 120 days after the compact ends would return to MCC for reprogramming. As of June 2008, 42 percent of the Nicaragua compact’s 5-year period had elapsed and MCC had disbursed $22.56 million (12.89 percent) of compact funds, compared with the $68.86 million (39.35 percent) it had originally planned to disburse as of that date. In the first quarter of fiscal year 2008, MCC and the country revised the projected disbursement total to $28.45 million by June 2008. As of June 2008, the country had committed $29.23 million, or 16.70 percent of compact funds. Commitments include signed contracts and the forecasted value of recurring expenses outside of a contract. In commenting on this fact sheet, MCC reported that it had re-scoped the Transportation Project to upgrade 80 kilometers of secondary roads, rather than the 100-150 kilometers planned at compact signature. Figure: (horizontal bar graph): Funds Provided for Nicaragua Compact: Total for compact: Total allocated at compact signature: $175.00 million; Planned disbursements as of June 2008: $68.86 million; Actual disbursements as of June 2008: $22.56 million. Property Regularization Project: Total allocated at compact signature: $26.50 million; Planned disbursements as of June 2008: $16.63 million; Actual disbursements as of June 2008: $3.57 million. Transportation Project: Total allocated at compact signature: $92.80 million; Planned disbursements as of June 2008: $28.70 million; Actual disbursements as of June 2008: $5.22 million. Rural Business Development Project: Total allocated at compact signature: $33.70 million; Planned disbursements as of June 2008: $14.26 million; Actual disbursements as of June 2008: $7.69 million. Program Administration and Monitoring and Evaluation: Total allocated at compact signature: $22.10 million; Planned disbursements as of June 2008: $9.27 million; Actual disbursements as of June 2008: $5.79 million. Source: GAO analysis of Millennium Challenge Corporation data. Notes: Planned disbursements are based on MCC’s projections at compact signature and assume that compact funds are disbursed evenly throughout the compact implementation year. Actual disbursements by project may not add up to the figure presented for total compact disbursements because disbursements reported as “pending subsequent report” are reflected in the compact total but not in project totals. In general, “pending subsequent report” amounts represent disbursements that will be allocated to individual projects in subsequent quarters. [End of figure] [End of Nicaragua Compact Fact Sheet] Vanuatu Compact Fact Sheet: Country Characteristics: Located in the South Pacific about 1,300 miles northeast of Sydney, Australia, Vanuatu consists of 83 islands and has a population of about 215,000. Vanuatu had a gross national income (GNI) of $1,690 per capita in 2006. An estimated 40 percent of Vanuatu’s population has incomes below $1 per day. Its economy is primarily based on agriculture and tourism, which contribute about 15 percent and 19 percent, respectively, to the gross domestic product (GDP). The country’s real economic growth averaged 2 percent over the past decade, but rose to an estimated 5 percent in 2007. According to the Asian Development Bank, tourism is one of Vanuatu’s most promising sectors in terms of potential for earning foreign exchange and creating employment. Compact Timeline: During compact development, MCC evaluates the country’s proposal and, if MCC approves it, MCC negotiates and may sign a compact with the country. After compact signature, the country must complete MCC’s entry into force requirements, such as procurement and disbursement agreements, in order for compact implementation to begin. MCC’s statute limits compact implementation to 5 years. Vanuatu was 1 of 16 countries that MCC selected as eligible in its first eligibility round. As of September 30, 2008, 49 percent of the compact’s 5-year period had elapsed. Figure: Map. This figure is a map of the South Pacific depicting the location of Vanuatu, the capital of Port-vila, and the major cities of Port Olry and Luganville. Source: GAO analysis of Millennium Challenge Corporation and Map Resources (map). [End of figure] Figure: Key Events for Vanuatu Compact (timeline): Compact development: mid-2004 to mid-2006; May 6, 2004: Selected as eligible for assistance. Compact implementation: mid-2006 to mid-2011; April 28, 2006: Compact enters into force; compact implementation begins; Compact implementation time elapsed: 49% to September 30, 2008 (current). Compact implementation time remaining: 51%; April, 2011: Compact implementation ends; MCC funding expires. Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] MCC Selection Criteria: MCC Candidate Criteria: Each fiscal year, MCC uses per capita incomes to identify two pools of candidate countries, low-income countries and lower-middle-income countries, based on World Bank lending thresholds. In addition, candidate countries must not be statutorily barred from receiving U.S. assistance. By law, MCC can use a maximum of 25 percent of compact assistance for any given year for new compacts with lower-middle-income countries. Vanuatu has been a low-income candidate country every year since MCC began operations in 2004. Vanuatu’s gross national income per capita has approached lower-middle-income status in recent years. MCC Eligibility Criteria: Each fiscal year, MCC’s Board uses quantitative indicators to assess a candidate country's policy performance. MCC compares the country’s performance on each indicator to that of other candidates. To pass an indicator, a country must score better than at least half of the other candidates (above the median) in its income group. To meet MCC’s eligibility criteria, a country must pass the indicator for control of corruption and at least half of the indicators in each of three categories. However, the Board may select a country as eligible even if it does not meet the criteria, and has done so in the past—mostly for countries previously selected as eligible. If the policy performance of a country implementing a compact declines, the Board can suspend or terminate the compact; however, it has not yet done so for any country. Vanuatu has passed MCC indicator criteria and been selected as eligible for compact assistance every year since 2004. Figure: Vanuatu GNI Per Capita: [Refer to PDF for image] This figure is a combination vertical bar and line graph depicting the following data: MCC eligibility year: 2004; Nominal GNI per capita in U.S. dollars: $1,060; MCC cut-off for low-income candidates: $1415. MCC eligibility year: 2005; Nominal GNI per capita in U.S. dollars: $1,170; MCC cut-off for low-income candidates: $1465. MCC eligibility year: 2006 (MCC implemented a program for lower-middle- income countries beginning in fiscal year 2006); Nominal GNI per capita in U.S. dollars: $1,390; MCC cut-off for low-income candidates: $1575; MCC cut-off for lower-middle-income candidates: $3255. MCC eligibility year: 2007; Nominal GNI per capita in U.S. dollars: $1,580; MCC cut-off for low-income candidates: $1675; MCC cut-off for lower-middle-income candidates: $3465. MCC eligibility year: 2008; Nominal GNI per capita in U.S. dollars: $1,690; MCC cut-off for low-income candidates: $1735; MCC cut-off for lower-middle-income candidates: $3595. Source: GNI per capita data are from the April 2008 version of the World Bank World Development Indicators. Notes: The April 2008 data may include Bank updates that occurred after MCC candidate selection. Because of a two-year data lag, MCC used, for example, 2006 data in its 2008 eligibility round. [End of figure] Table: Vanuatu's Performance on MCC Eligibility Indicators: Indicator category: Ruling Justly; Political Rights; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Civil Liberties; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Voice and Accountability; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Government Effectiveness; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Rule of Law; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Ruling Justly; Control of Corruption; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Investing in People: Girls' Primary Education Completion; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Investing in People: Primary Education Expenditures; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Investing in People: Health Expenditures; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Investing in People: Immunization Rates; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Investing in People: Natural Resources Management (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: Failed. Indicator category: Encouraging Economic Freedom: Country Credit Rating (20044-2005); MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: NR. Indicator category: Encouraging Economic Freedom: Days to Start a Small Business (2004-2007); MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: NR. Indicator category: Encouraging Economic Freedom: Cost of Starting a Business (2006-2007); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: NR. Indicator category: Encouraging Economic Freedom: Business Start-up (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Inflation; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Fiscal Policy; MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Trade Policy; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Failed; MCC eligibility year 2007, MCC income group, low: Failed; MCC eligibility year 2008, MCC income group, low: Failed. Indicator category: Encouraging Economic Freedom: Regulatory Quality; MCC eligibility year 2004, MCC income group, low: Failed; MCC eligibility year 2005, MCC income group, low: Failed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. Indicator category: Encouraging Economic Freedom: Land Rights and Access (2008); MCC eligibility year 2004, MCC income group, low: NR; MCC eligibility year 2005, MCC income group, low: NR; MCC eligibility year 2006, MCC income group, low: NR; MCC eligibility year 2007, MCC income group, low: NR; MCC eligibility year 2008, MCC income group, low: Failed. Indicator assessment result: MCC eligibility year 2004, MCC income group, low: Passed; MCC eligibility year 2005, MCC income group, low: Passed; MCC eligibility year 2006, MCC income group, low: Passed; MCC eligibility year 2007, MCC income group, low: Passed; MCC eligibility year 2008, MCC income group, low: Passed. MCC eligibility determination: MCC eligibility year 2004, MCC income group, low: Eligible; MCC eligibility year 2005, MCC income group, low: Eligible; MCC eligibility year 2006, MCC income group, low: Eligible; MCC eligibility year 2007, MCC income group, low: Eligible; MCC eligibility year 2008, MCC income group, low: Eligible. Passed: scored above the median; Failed: scored at the median or below; NR: Not used to evaluate performance. Source: GAO analysis of Millennium Challenge Corporation data. Note: For the 2004 eligibility round, MCC used Primary Education Completion instead of Girls' Primary Education Completion. [End of table] Compact Summary: Compact Characteristics: At compact signature, the 5-year, $65.7 million Vanuatu compact aimed to benefit poor, rural agricultural producers and providers of tourism- related goods and services by reducing transportation costs and improving the reliability of access to transportation services. At signature, the compact focused primarily on infrastructure projects on 8 of Vanuatu’s 83 islands. In July 2007, GAO reported that MCC had overstated the expected benefits of its Vanuatu compact; GAO also identified additional risks that could affect compact results (GAO-07-909). The graphic to the right shows MCC’s expectations of compact benefits at compact signature. Compact Project Funding: Although the total amount of compact funding is fixed, MCC and the country may reallocate funds among projects during compact implementation as more detailed information about costs becomes available. MCC has approved slight changes to Vanuatu’s compact funding allocations since compact signature in March 2006. At signature, the $65.7 million Vanuatu compact included $60.7 million in project funds and $5.0 million for program administration and monitoring and evaluation activities. Figure: Structure of Vanuatu Compact at Signature: Constraints to development: Poor transportation infrastructure constrains private sector development and access to social services. Planned projects: Transport Infrastructure: Rehabilitate or construct 11 transportation infrastructure assets on 8 islands, including roads, wharves, an airstrip, and warehouses. Increase the capacity of the Vanuatu Public Works Department to maintain transportation infrastructure. MCC expected benefits: * Provide benefits to approximately 65,000 poor, rural inhabitants. * Increase average per capita income by approximately $200 — 15 percent — by 2010. * Increase total GDP by an additional 3 percent a year. Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] Figure (pie-chart): Vanuatu Compact Funding as of June 2008: Transport Infrastructure Project: 92% ($60.59 million); Program Administration and Monitoring and Evaluation: 8% ($5.10 million). Source: GAO analysis of Millennium Challenge Corporation data. [End of figure] Compact Status: Compact Implementation: At compact signature, MCC develops a preliminary disbursement plan for the compact. MCC disburses funds as the country begins implementing projects. According to MCC, any funds not disbursed within 120 days after the compact ends would return to MCC for reprogramming. As of June 2008, 43 percent of the Vanuatu compact’s 5-year period had elapsed and MCC had disbursed $14.66 million (22.32 percent) of compact funds, compared with the $40.05 million (60.97) it had originally planned to disburse as of that date. In the first quarter of fiscal year 2008, MCC and the country revised the projected disbursement total to $6.38 million by June 2008. As of June 2008, the country had committed $57.09 million, or 86.91 percent of compact funds. Commitments include signed contracts and the forecasted value of recurring expenses outside of a contract. Due to escalating global construction costs and currency fluctuations, MCC restructured the Vanuatu compact to fund up to 70 percent of the planned road rehabilitations, with a focus on the Efate and Santo islands. According to MCC, it has supported the government of Vanuatu in its efforts to secure funding from other donors for the remaining projects. Due to the restructuring, MCC reports that it has revised its estimate of compact benefits. MCC originally estimated that the compact would benefit 65,000 residents of Vanuatu; it now reports that it will benefit 51,239. MCC originally estimated that the compact would increase average per capita incomes by about $200 by 2010. MCC now expects an increase of approximately $150 by 2010. Figure: (horizontal bar graph): Funds Provided for Vanuatu Compact: Total for compact: Total allocated at compact signature: $65.69 million; Planned disbursements as of June 2008: $40.05 million; Actual disbursements as of June 2008: $14.66 million. Transport Infrastructure Project: Total allocated at compact signature: $60.69 million; Planned disbursements as of June 2008: $37.42 million; Actual disbursements as of June 2008: $11.12 million. Program Administration and Monitoring and Evaluation: Total allocated at compact signature: $5.00 million; Planned disbursements as of June 2008: $2.63 million; Actual disbursements as of June 2008: $2.00 million. Source: GAO analysis of Millennium Challenge Corporation data. Notes: Planned disbursements are based on MCC’s projections at compact signature and assume that compact funds are disbursed evenly throughout the compact implementation year. Actual disbursements by project may not add up to the figure presented for total compact disbursements because disbursements reported as “pending subsequent report” are reflected in the compact total but not in project totals. In general, “pending subsequent report” amounts represent disbursements that will be allocated to individual projects in subsequent quarters. [End of figure] [End of Vanuatu Compact Fact Sheet] Enclosure I: Comments from the Millennium Challenge Corporation: GAO comments supplementing those in the report text appear at the end of this enclosure. Millennium Challenge Corporation: Reducing Poverty Through Growth: 875 Fifteenth Street NW: Washington, DC 20005-2221: P: (202) 521-3600; F: (202) 521-3700; [hyperlink, http://www.mcc.gov] September 22, 2008: Mr. David B. Gootnick: Director, International Affairs and Trade: U.S. Government Accountability Office: 441 G Street, NW: Washington, DC 20548: Dear Mr. Gootnick: Thank you for the opportunity to provide comments on the GAO report entitled "Millennium Challenge Corporation: Summary Fact Sheets for 11 Compacts Entered into Force." MCC appreciates GAO's summaries of its compacts to reduce global poverty through the promotion of sustainable economic growth, and would like to add some key points about the structure, context, and ongoing evolution of MCC compacts. Country Ownership and Compact Disbursements: MCC works in partnership with eligible countries, which are responsible for identifying the greatest barriers to their own development; for developing their own priorities for a compact, with input from the public, as well as civil, political, and private sector actors; and for implementing compact programs once they have been approved. A compact program requires high-level engagement and leadership by the partner government, as well as civil society and other domestic stakeholders to ensure the effectiveness and sustainability of the MCC investment. MCC provides ongoing guidance and oversight, but compact countries are ultimately responsible for project development and implementation, including the pace of commitments and disbursements. In keeping with the country ownership model, compact countries' accountable entities (often referred to as MCAs), and not the MCC, sign contracts and thereby commit compact funds. [See comment 1] MCC recognizes that actual compact disbursements have been behind the original projected disbursements included in the first 11 compacts' multi-year financial plans. As GAO's recent analysis has noted, it took longer than initially projected to create accountable entities and establish the necessary capabilities to begin full implementation. These structures are essential to performing MCC's fiduciary responsibilities and ensuring results and accountability for compact funds. MCC now begins these processes earlier and invests more effort in the compact development process. These efforts will lengthen the compact development timeline as compared with the original 11 compacts, but they should yield more predictable disbursement rates for subsequent compacts and help continue to ensure U.S. taxpayer funds are well spent. A compact multi-year financial plan is a preliminary budget based upon the due diligence work done by MCC in the compact development process. As additional information becomes available regarding project cost and timelines leading up to entry into force (EIF) and beyond, MCAs revise their disbursement projections. These revisions update the compact multi-year financial plans and better reflect the on-the-ground reality in our existing countries. MCAs are currently undergoing an annual planning exercise that includes developing financial projections for FY 2009 and subsequent fiscal years. MCC's report to Congress during the first quarter of FY 2009 will include these revised projections. [See comment 2] Cost Re-estimates, Project Designs, and Expected Benefits: In December 2007 MCC first identified six countries (Armenia, Cape Verde, Georgia, Honduras, Mali, and Vanuatu) facing cost increases resulting from the global construction boom, increasing input costs, currency fluctuations, and additional information gathered through ongoing technical studies. MCC and MCAs in these six countries have successfully restructured and re-scoped projects, re-packaged procurements, signed key contracts, and sought parallel financing where appropriate. MCC has also aggressively monitored programs to address cost increases in additional countries. MCC project designs may evolve or be refined during implementation for a variety of reasons. Consequently, projections of expected benefits and beneficiaries may also change. MCC periodically reviews its compacts' benefits and beneficiaries. MCC provides updated estimates in publicly available documents such as monitoring and evaluation plans (M&E Plans) as they are available. MCC Selection Criteria and Policy Improvement Plans: MCC has previously provided GAO with text to reflect more accurately the parameters of the compact eligibility decision-making process of MCC's Board of Directors as well as clarifications on past decisions. This important process and clarifications are summarized below. Eligibility for a compact is based predominantly, but not solely, on a country meeting MCC's eligibility criteria. The Millennium Challenge Act of 2003 (the Act) outlines three factors that the Board considers in making eligibility decisions: 1. the extent to which the country meets the eligibility criteria; 2. the opportunity to reduce poverty and generate economic growth in a country; and; 3. funds available for the fiscal year. In considering performance on the eligibility criteria, the Act allows the Board discretion to take into account other quantitative and qualitative information to determine whether a country performed satisfactorily in relation to its peers in a given category. The Board may consider whether any adjustments should be made for data gaps, lags, trends, or other weaknesses in particular indicators. The fact sheets note that MCC has selected 17 countries that did not meet the selection criteria, but in 14 of these cases, the country did meet the criteria in the year it was selected. These 14 countries had already signed and begun implementing, or in some cases were developing, their compacts. While MCC is not legally required to determine a country as eligible annually after it has a compact, MCC continues to monitor performance of partner countries and has a suspension policy in place, which allows the suspension of a country that engages in a pattern of actions inconsistent with the criteria or where a significant policy reversal occurs. [See comment 3] There are only three cases in which a country was initially selected when it did not meet the performance criteria (Georgia, Mozambique, and Bolivia). In these three cases, the eligibility criteria later reflected important improvements that had occurred at the time of the initial eligibility decision but which were not reflected in the data at that time. In all three cases, the countries subsequently passed the criteria when updated data reflecting the improved policy performance became available. Regarding the other 14 countries with compacts, a country not meeting the policy performance criteria in a given year does not necessarily indicate that a significant decline in performance or policy reversal has taken place. Not meeting the policy performance criteria can reflect a variety of causes that do not rise to the level of suspension, including: * changes to the selection criteria such as the inclusion of new indicators (e.g. the addition of the Natural Resources Management Indicator for FY08); * changes in scores that are not statistically significant; * graduation of countries to a higher income category where the country is competing in a higher performing category; * minor performance declines; and; * revisions to the data by the indicator institutions. If compact partners do not meet the policy performance criteria, but a significant policy reversal has not occurred, MCC asks the country to develop and implement a "policy improvement plan" to improve performance on the criteria. This has served as both an operational tool for our partner countries and a monitoring tool for MCC. MCC has, however, suspended two countries: the compact eligibility of The Gambia and the threshold eligibility of Yemen. Sincerely, Signed by: Michael Casella: Acting Vice President: Administration and Finance: Millennium Challenge Corporation: The following are GAO's comments on the Millennium Challenge Corporation letter dated September 22, 2008. GAO Comments: 1. MCC notes that compact countries are ultimately responsible for project development and implementation, including the pace of commitments and disbursements, and that compact country entities sign contracts and therefore commit funds. In response to this and MCC's technical comments, we revised the draft fact sheets' references to MCC commitments where it was more appropriate to refer to compact country commitments. However, we retained our presentation of MCC's disbursement of funds, because the fact sheets summarize data from MCC's quarterly disbursement reports, which show disbursements provided by MCC for the recipient countries. 2. MCC states that its country counterparts revise their disbursement projections as additional information becomes available and that the countries are currently undergoing an annual planning exercise to update these projections. MCC also notes that its report to Congress in the first quarter of fiscal year 2009 will include these revised projections. We incorporated into the fact sheets the revised disbursement projections that MCC provided in its technical comments. However, we retained a presentation of MCC's disbursement plan at compact signature, as a baseline for MCC's revised projections. 3. Commenting on the draft fact sheets' statement that the MCC Board has selected 17 countries that did not meet the selection criteria, MCC notes that 14 of these countries had met the criteria in previous years. We modified the text to reflect that most eligible countries that did not meet selection criteria had previously been determined eligible by the Board. [End of enclosure] Footnotes: [1] The Millennium Challenge Act of 2003 (Public Law 108-199, Division D, Title VI) authorizes MCC to provide assistance to countries that enter into public compacts with the United States. MCC has negotiated compacts with countries that contain agreed upon assistance objectives, responsibilities, implementation schedules, expected results, and evaluation strategies. The act stipulates that a compact may not last longer than 5 years and that MCC may have only one compact with a country at a time. [2] About $1 billion has been set aside for MCC's threshold country program, administrative expenses, due diligence, monitoring and evaluation, and other costs. MCC's threshold program is designed to assist countries that have not yet qualified for compact assistance, but have demonstrated a significant commitment to improve their performance on MCC's eligibility criteria. [3] After compact signature, MCC and the country's accountable entity must complete supplemental agreements, including a disbursement agreement and a procurement agreement, before the compact enters into force and funds are disbursed. Five additional MCC compacts entered into force in September 2008. The entry-into-force of these five compacts, with Lesotho, Mongolia, Morocco, Mozambique and Tanzania, occurred too late for them to be included in these fact sheets. With these additional five compacts, MCC has obligated a total of approximately $5.5 billion as of the end of September 2008. [4] See [hyperlink, http://www.mcc.gov/about/reports/status/index.php] for MCC country quarterly status reports. [End of section] GAO's Mission: The Government Accountability Office, the audit, evaluation and investigative arm of Congress, exists to support Congress in meeting its constitutional responsibilities and to help improve the performance and accountability of the federal government for the American people. GAO examines the use of public funds; evaluates federal programs and policies; and provides analyses, recommendations, and other assistance to help Congress make informed oversight, policy, and funding decisions. GAO's commitment to good government is reflected in its core values of accountability, integrity, and reliability. Obtaining Copies of GAO Reports and Testimony: The fastest and easiest way to obtain copies of GAO documents at no cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each weekday, GAO posts newly released reports, testimony, and correspondence on its Web site. To have GAO e-mail you a list of newly posted products every afternoon, go to [hyperlink, http://www.gao.gov] and select "E-mail Updates." Order by Mail or Phone: The first copy of each printed report is free. Additional copies are $2 each. A check or money order should be made out to the Superintendent of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or more copies mailed to a single address are discounted 25 percent. Orders should be sent to: U.S. Government Accountability Office: 441 G Street NW, Room LM: Washington, D.C. 20548: To order by Phone: Voice: (202) 512-6000: TDD: (202) 512-2537: Fax: (202) 512-6061: To Report Fraud, Waste, and Abuse in Federal Programs: Contact: Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]: E-mail: fraudnet@gao.gov: Automated answering system: (800) 424-5454 or (202) 512-7470: Congressional Relations: Ralph Dawn, Managing Director, dawnr@gao.gov: (202) 512-4400: U.S. Government Accountability Office: 441 G Street NW, Room 7125: Washington, D.C. 20548: Public Affairs: Chuck Young, Managing Director, youngc1@gao.gov: (202) 512-4800: U.S. Government Accountability Office: 441 G Street NW, Room 7149: Washington, D.C. 20548: