A new deal for development assistance? The US Foreign Aid Transparency and Accountability Act

On July 15, President Obama signed the Foreign Aid Transparency and Accountability Act of 2016. The law requires federal agencies involved in development assistance to monitor and evaluate the “outcomes and impacts” of their projects and programs and use the results as a source for learning. Moreover, every agency must evaluate all activities whose financial volume is higher than or equal to the median program volume in its portfolio. The president has 18 months to establish guidelines for monitoring and evaluation practices and the application of results. This will likely take place under the next US president. In two years from now, agencies have to publicly share their data on foreingassistance.gov website on a quarterly basis.

More data more learning

US aid agencies, and donors across the world, have been monitoring and evaluating their work since many years. So, what does the law change other than institutionalizing existing administrative practice? Assessing aid effectiveness is now legally binding and makes it a policy priority, also for future administrations. This is unprecedented. Moreover, a wide range of data will soon be publicly available, which increases transparency and enables researchers and the broad public to engage more in the debate about aid effectiveness. Furthermore, the media platform Devex argues that the law will make it easier for individual organizations to admit failure publicly since everyone will have to do it. But there is more to the bill. First, it indicates a shift in focus from measuring so called outputs (e.g. the number of people with access to safe drinking water) to outcomes and impact (e.g the reduction of waterborne diseases). Second, it calls for quality evaluations. Notably, it demands the collection of baseline data against which progress can be measured, and the use of sound evaluation methods – like randomized controlled trials and difference-and-difference analysis – that show objectively how a project or program has improved peoples’ lives. Third, the bill emphasizes the need for learning. It demands that evaluation findings guide current and future programs in order to improve their effectiveness. It also requires impact evaluations on all pilot programs before they are replicated, wherever possible. This means that agencies will have to put more thinking into program design, which can in turn lead to more successful programs. Where agencies lack the expertise to conduct high quality evaluations themselves, they are asked to partner up with institutions that have the necessary skills.

More development assistance, not less

That all sounds great, but what’s the catch? While the new law opens the door to more evidence-based policy making, we don’t know at this point how good the quality of the published data will be. Verifiable and reliable information is key to improving foreign assistance and reduce poverty more effectively. It will certainly take some time until federal agencies and their implementing partners, such as NGO and development consultancies, will have the infrastructure in place to conduct high quality evaluations.

Turning the spotlight on aid effectiveness might have some adverse effects. First, agencies might start to spend more money on sure-shots where success is more likely and shy away from riskier, innovative activities. Second, programs whose outcomes are difficult to measure might become less attractive, although they constitute an important investment in the international community and policy dialogue (e.g. supporting democratization processes at the macro level). Third, too strong a focus on the “bang for the dollar” that each intervention is getting might give way to arguments to cut aid spending, which is already comparatively low: the US is the world’s largest donor, but spends less than 1 percent of the federal budget on development assistance.

While these concerns need to be kept in mind they do by no means question the need for using more and better evidence to fight poverty.

Switzerland should follow suit

The new US law demonstrates a strong national commitment to increase aid effectiveness through more and, above all, better data. Moreover, it sends an inspiring signal to the international community that aid measurement should become a policy priority, and it backs the International Aid Transparency Initiative (IATI). Switzerland already subscribed to the IATI and has national evaluation practices in place. However, like many other donors it can do better in increasing the effectiveness of its development assistance by putting a stronger emphasis on high quality evaluations. These are essential to identify where resources are and aren’t put to a good use and inform policy makers in which area to make adjustments. Simply put: good evaluations make good policies. But we also need good policies to lay the groundwork for good evaluations. The US approach is an example that Switzerland should consider following to achieve this goal.