The United States Agency for International Development (USAID) has just provided a detailed update on its goal to direct 25% of its funding to local actors by 2025. Earlier this year, Publish What You Fund investigated the measurement of this 25% target and concluded that the choice of methodology could determine whether more than US$1.4 billion of additional funding is channelled to local actors each year. So we have been looking closely at USAID’s FY 2022 Localization progress report, which charts progress towards the 25% goal  and provides insights as to how the 50% goal[1] will be measured.

Firstly, we want to acknowledge and commend USAID for taking these first steps towards greater localization, demonstrating real leadership by setting firm goals and reporting against them. Once again we’ve been reminded of the scale of the challenge with the 2023 Global Humanitarian Assistance Report finding that there was no increase in the proportion of total international humanitarian assistance provided directly to local and national actors in 2022, which stood at just 1.2% (US$485 million). Secondly, we commend USAID publication the underlying data associated with the 25% goal, which is invaluable to help stakeholders understand the approach being taken and the implications.

While we acknowledge that both of USAID’s goals are important and complementary, given our analysis of the 25% goal in our recent Metrics Matter report we’re going to unpick what USAID’s progress report has to say about where their funds are going. Here’s where we land:

An imperfect definition of local

While the USAID definition of “local” incorporates some features that local partners advocate for, several of these are missing from the current measurement approach – including local staffing and governance which are critical to shifting power. An important consideration is whether Locally Established Partners can be counted, since their inclusion could create dynamic incentives for US organizations to set up local subsidiaries to apply for “local” funding. We understand that USAID has been (with the help of some missions) manually checking for such instances. However, the criteria used to identify these are not clear, nor is the extent of the spot checking. A number of institutions, which appear not to be autonomous and self-determining due to their affiliations with global brands, appear in the data set marked as local. Examples include PwC, KPMG, Ernst and Young, Deloitte, World Vision, and Bollore Logistics.

25% of what?

When originally announced, the 25% goal was articulated as “a quarter of USAID’s funding”. This could be defined in different ways ranging from USAID’s total budget (which feels unworkable given the need for a DC headquarters and country missions), or total agency award obligations which totalled US$35.9 billion in FY 2022[2]. However, USAID has chosen to use a much smaller proportion of its funding as the basis for the 25% goal. Specifically, USAID explains that its denominator “is the total development and humanitarian Acquisition & Assistance funds obligated in GLAAS (the Global Acquisition and Assistance System) in that given fiscal year”. However, as a proportion of total agency award obligations in FY 2022 this means USAID is only considering 43% (US$15.6 billion) of its funding as being eligible for distribution to local partners. On the face of it this feels problematic and could have implications for stakeholders’ trust in the process – as well as missing a good opportunity to open up additional funding to local partners.

From a transparency perspective it is frustrating that there seems to be little justification given as to why so much of USAID’s spending is excluded for consideration, especially when some of this funding is for UN agencies, including projectized funds. It’s worth remembering that UN funding is a perennial thorn in the side of localisation advocates working to ensure more equity in countries where the UN plays an outsized role in humanitarian response and where local organisations struggle for funding.

So what’s next?

As we made clear in Metrics Matter, how USAID decides to measure this goal will have major implications for the success and acceptance of its wider localization efforts. Its measurement approach should be transparent and accountable to local actors. We have called on USAID to reconsider its measurement approach and create a credible and replicable method (using publicly available data) which more closely aligns with USAID’s own definition[3] of local funding (locally registered, operating, owned, and governed). For now, it very much feels like the limitations of systems and internal processes are defining the approach and constraining its potential. The tail appears to be wagging the dog.

While USAID has pointed to changes that will facilitate more direct funding to local partners, much of the progress to date appears to be related to PEPFAR’s push for greater localization. Using a more appropriate measure will provide USAID with greater incentive to undertake the reforms needed to significantly expand its work with truly local organizations. It will also provide the information on where the shift to local is happening, so that USAID can learn from its successes.

USAID’s first year measuring funding to local actors is critical: it will establish the baseline and methodology that will drive the agency’s strategy and accountability for years, and will likely influence other funders, so it’s worth getting it right.

[1] by 2030, at least half of USAID programs will create space for local actors to exercise

leadership over priority setting, activity design, implementation, and defining and measuring results

[2] https://www.usaspending.gov/agency/agency-for-international-development?fy=2022

[3] https://www.usaid.gov/sites/default/files/2023-01/303.pdf