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GAO-06-466R 1 (2006-02-21)

handle is hein.gao/gaocrptatec0001 and id is 1 raw text is: Sai Accountability * Integrity * Reliability United States Government Accountability Office Washington, DC 20548 February 21, 2006 The Honorable Richard G. Lugar Chairman, Committee on Foreign Relations United States Senate Subject: Analysis of Future Millennium Challenge Corporation Obligations Dear Chairman Lugar: The Millennium Challenge Corporation (MCC)-intended to provide aid to developing countries that have demonstrated a commitment to ruling justly, encouraging economic freedom, and investing in people-has received appropriations for fiscal years (FY) 2004-06 totaling more than $4.2 billion. About $3.8 billion of this amount has been set aside for compact assistance.' As of January 2006, MCC had signed or approved eight compacts2 obligating about $1.5 billion,3 leaving an unobligated balance of about $2.3 billion. To assist in this year's budget deliberations, this letter provides a range of estimates under two scenarios of how quickly MCC could obligate this balance and three possible levels of FY 2007 appropriations at the current pace of compact award. The President has requested an additional $3 billion for MCC for FY 2007. To address this objective, we analyzed MCC's FY 2005 and 2006 budget presentations and other corporation records. We selected two illustrative scenarios for future MCC obligations: (1) a higher cost scenario in which the average size of future compacts is consistent with MCC projections and (2) a lower cost scenario in which future compacts are consistent with the average compact size to date. For both of these scenarios, we assumed that MCC would sign an average of two compacts per quarter-the actual rate observed since April 2005. We discussed our estimates with MCC officials and have incorporated their comments as appropriate. We conducted our work in December 2005 through February 2006 in accordance with generally accepted government auditing standards. Summary Under the higher-cost scenario, MCC would obligate the balance of its FY 2004-06 appropriations in the second quarter of FY 2007. Assuming that subsequent compact size remains consistent with MCC projections, an FY 2007 appropriation of $1, $2 or $3 billion will support the funding of compacts through, respectively, the third quarter of FY 2007, the fourth quarter of FY 2007, or the second quarter of FY 2008. The cumulative number of compacts under this scenario ranges from 18 to 23. 1About $400 million has been set aside for MCC's threshold country program, administrative expenses, due diligence, monitoring and evaluation, and other costs. 'The Millennium Challenge Act of 2003 (Public Law 108-199, Division D, Section 605) 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 assistance objectives, responsibilities, implementation schedules, expected results, and evaluation strategies. 3Through January 2006, MCC had expended about $12 million of the $1.5 billion obligated for compact assistance. GAO-06-466R MCC Obligations

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