ADS Chapter 220

Use and Strengthening of Reliable Partner

Government
Systems for Implementation of Direct
Assistance

Full Revision Date: 07/28/2014

Responsible Office: M/CFO and PPL
File Name: 220_072814

07/28/2014 Full Revision

Functional Series 200 Programming Policy
ADS 220 Use and Strengthening of Reliable Partner Government Systems for
Implementation of Direct Assistance
POCs for ADS 220: Jerry Florkowski, (202) 567-5363, [email protected]; and
Jeremiah Carew, (202) 712-5534, [email protected]
This chapter has been revised in its entirety.
Table of Contents

220.1

OVERVIEW .............................................................................. 4

220.2

PRIMARY RESPONSIBILITIES ............................................... 4

220.3

POLICY DIRECTIVES AND REQUIRED PROCEDURES........ 6

220.3.1

Relation of This Chapter to Other Agency Guidance ......................... 13

220.3.2

Expanded Democracy, Human Rights and Governance Review ....... 14

220.3.3

220.3.3.6

Public Financial Management Risk Assessment Framework

(PFMRAF) ............................................................................................... 18
Government to Government (G2G) Assistance Exceptions, Deviations and Waivers
PFMRAF Administrative Requirements ................................................... 21
Overview of the Public Financial Management Risk Management
Framework (PFMRAF) ............................................................................. 30
Stage 1 PFMRAF - Rapid Appraisal ........................................................ 32
PFMRAF Stage 2 Risk Assessment, Identification, Analysis, Mitigation,
and Recommendations ............................................................................ 33
Fiduciary Risk Mitigation Plans ................................................................ 37

220.3.4
220.3.4.1
220.3.4.2
220.3.4.3
220.3.4.4
220.3.4.5

Project Design for Use of Partner Government Systems ................... 38

The Approval for Use of Partner Government Systems (AUPGS) ........... 42
Types of G2G Assistance andDesign Overview ...................................... 43
Design Considerations for G2G Projects and Activities ........................... 45
Bilateral Assistance Agreements (BAA) ................................................... 51
Implementation Letters for Sub-obligations.............................................. 55

220.3.5
220.3.5.1
220.3.5.2
220.3.5.3

Project Implementation When Using Partner Government Systems 55

The Project Manager and the National Counterpart(s) ............................ 55
Project and Program Implementing Mechanisms .................................... 56
Managing Bilateral Implementation and Communications- The Role of the
Implementation Letter (IL) ........................................................................ 64

220.4

MANDATORY REFERENCES ............................................... 70

220.3.3.1
220.3.3.2
220.3.3.3
220.3.3.4
220.3.3.5

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220.4.1

External Mandatory References ........................................................... 70

220.4.2

Internal Mandatory References ............................................................ 71

220.5

ADDITIONAL HELP ............................................................... 72

220.6

DEFINITIONS ......................................................................... 73

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ADS 220 - Use and Strengething of Reliable Partner Government Systems for
Implementation of Direct Assistance
220.1

OVERVIEW
Effective Date: 07/28/2014

This chapter specifies the policies and procedures to be followed when designing,
negotiating, and implementing direct funding agreements to partner governments
(Government to Government (G2G) assistance). A Missions decision to use G2G
agreements will result from both strategic planning and project design processes that
consider the best means to invest USAID resources and achieve a clearly stated
development purpose, taking into consideration a rigorous risk assessment and risk
mitigation process. Use of G2G agreements is encouraged as a necessary element of
sustaining development results beyond USAID funding. This chapter is meant to
complement ADS 201, Planning by expanding the description of Agency risk
management practices that apply to G2G assistance and the mechanisms that are
available for financing G2G assistance.
220.2

PRIMARY RESPONSIBILITIES
Effective Date: 07/28/2014

The following primary responsibilities for the design and implementation of projects that
include G2G implementing mechanisms are based on function, not skill category (i.e.,
they are not backstop-specific).
Mission Directors/Principal Officers are encouraged to issue Mission Orders, as
needed, to assign the functional responsibilities below.
a.
Mission Directors/Principal Officers, with their partner government
counterparts, promote collaboration and mutual accountability between USAID, the
partner government, other donors, civil society, and other key stakeholders. The
Agency encourages Mission Directors/Principal Officers, in coordination with the
cognizant Embassy Chief of Mission, to serve as the designated U.S. Government
representative.
b.
Partner Government Systems Teams (PGS Teams) assist the Mission
Director/Principal Officer in arranging, with partner government counterparts, an
assessment of the partner governments Public Financial Management (PFM) systems,
as well as organizing the Enhanced Democracy, Human Rights and Governance
Review (Enhanced DRG Review) in 220.3.3.1, if necessary. Following completion of
Public Financial Management Risk Assessment Framework (PFMRAF) Stage 2, the
PGS Team will be integrated into the Project Design Teams (PD Teams) referenced in
ADS 201. This will establish a unified, collaborative and coordinated structure
responsible for integrating the PFMRAF process into the design process.

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c. The following offices in USAID/W have primary responsibility for providing support
for the PGS Teams:
(1)

The Bureau for Management, Office of the Chief Financial Officer

(M/CFO), supports Missions and Controllers in the application of the
PFMRAF and related G2G activities. The CFO or designee also
establishes, staffs, and administers the Government to Government Risk
Management Team (G2GRMT). As requested, the CFO may also consult
with the Mission Director/Principal Officer concerning the Approval for the
Use of Partner Government Systems (AUPGS).

(2)

Government to Government Risk Management Team (G2GRMT),

within M/CFO, is delegated the following responsibilities:
a.

Assures quality control and consistency for:

(i)

The use of the PFMRAF, including development and

maintenance of the PFMRAF manual and related
Agency training;

(ii)

Analyzing data supporting PFMRAF conclusions and

recommendations;

(iii)

Stage 1 Rapid Appraisals, Stage 2 Risk Assessment

Statements of Work and reports, and risk mitigation
plans required under the PFMRAF; and

(iv)

Development of a list of PFM risk assessment

evaluation criteria (Stage 2 Questionnaire) for
customization and use by Missions.

b.

Clears the PFMRAF Stage1 Rapid Appraisal scope and final

report package and Stage 2 Risk Assessment Statements of
Work, strategies, and final report package (see 220.3.2.4 and
220.3.2.5);

c.

Provides continuing policy analysis and advice to the CFO,

Agency leadership and Missions on assessment of PFM
systems, as appropriate and necessary;

d.

Coordinates with other USAID offices, Missions, and

stakeholders for the maintenance of a repository of information
related to PFMRAF, PFM, and the related subject matter;

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220.3

e.

Facilitates communication and activities between Missions,

Bureaus, USAID leadership, external stakeholders, and the
donor community regarding PFMRAF and related activities; and

f.

Acts as subject matter experts on PFMRAF guidance, training,

and related matters.

(3)

The Bureau of Policy, Planning and Learning (PPL), is responsible for

the policies and guidance related to the Program Cycle as defined in ADS
Chapters 200-203. PPL has a key role in ensuring integration of G2G
programs with other Agency programming systems.

(4)

The Bureau for Democracy, Conflict and Humanitarian

Assistance/Center of Excellence on Democracy, Human Rights and
Governance (DCHA/DRG), is responsible for developing the democratic
accountability components of the PFMRAF, as well as the methodology of
the Enhanced DRG Review. DCHA/DRG may also provide assistance to
the Mission in developing the DRG recommendations resulting from the
PFMRAF Stage 1 Rapid Appraisal and/or Enhanced DRG Review.
DCHA/DRG may also support PGS Teams and/or Mission DG Officers on
DRG issues.

(5)

Regional, Technical, and Pillar Bureaus and Offices assist Missions

and PGS Teams in designing and reporting on G2G projects and
activities, as well as coordinating G2G best practices and technical
approaches between and among Missions.

(6)

Assistant Administrators of Regional Bureaus consult, as necessary,

with respective Mission Directors/Principal Officers concerning difficult or
politically sensitive AUPGSs, determining whether an Enhanced DRG
Review is required under 220.3.1.1, and approving moving forward with
G2G activities pursuant to any DRG-related waivers. They also direct and
mobilize Bureau resources to assist Missions as necessary.

(7)

The Bureau for Economic Growth, Education and

Environment/Economic Policy (E3/EP) assist Missions and PGS
Teams, upon request, in PFM risk mitigation, and PFM and public
accountability strengthening and capacity development.
POLICY DIRECTIVES AND REQUIRED PROCEDURES
Effective Date: 07/28/2014

a.

Approach

Global best practice on supporting sustained development outcomes is embedded in

principles of aid effectiveness first ratified in the Paris Declaration (2005) and reaffirmed
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in global compacts adopted in Accra (2008) and Busan (2011). The central idea is that
external aid investments are most likely to catalyze sustained development processes
when they reinforce a countrys internally-determined development priorities (country
ownership) and arrangements (country systems).
However, the Busan agreement added an important nuance that effective and
sustainable development requires inclusive development. Inclusive country ownership
means that development priorities are established in ways that ensure they are broadly
responsive to citizen needs and aspirations. Inclusive country systems recognizes that
all parts of societycertainly the government, but also civil society, the private sector,
universities, and individual citizenshave important resources, ideas, and energy that
are essential to sustaining development.
To operationalize the pledge USAID made at Busan to promote inclusive country
ownership and inclusive country systems, and to further USAIDs long-standing
commitment to sustained development, the Agency developed ADS 220maq, Local
Systems: A Framework for Supporting Sustained Development, which articulates
the Agencys approach to supporting sustained development and identifying good
practices.
The Framework is grounded in the recognition that achieving and sustaining any
development outcome depends on the contributions of multiple and interconnected
actors. Building the capacity of a single actor or strengthening a single relationship is
insufficient. Rather, the focus needs to be on the system as a whole: the actors, their
interrelationships, and the incentives that guide them. Realizing improvements in
development outcomes is a product of increasing the performance of multiple actors
and the effectiveness of their interactions. Sustaining development outcomes depends
on the sustainability of the local system.
From a local systems perspective:

Strengthening means building up the capacities of local actorsgovernments,

civil society, and private sectorand the system as a whole. Strengthening can
be accomplished through a variety of means, including direct assistance to
partner governments.

Use means relying on that local system to produce desired outcomes. Direct
assistance to partner governments and to other local actors is an essential
feature of using local systems.

Where sustainability is our objective, USAID is committed to employing all of our

development resources to strengthen and use local systems.

Governmental agencies in partner countries generally play important roles within local
systems. Depending on the setting, governments may:

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Set goals and targets,

Manage resources,

Deliver services directly,

Procure goods and services,

Establish standards,

Settle disputes,

Monitor performance,

Disseminate information, or

Provide quality control and oversight.

Given their prominent role in most local systems, the ability of partner government
agencies to perform their defined roles is an essential contribution to strengthening local
systems and sustaining development gains.
This ADS chapter provides guidance on how to assess partner government procedures
and practices, generally referred to in this chapter as PGS, especially a partner
governments PFM practices. This ADS chapter also provides guidance on the ways
assistance can be provided to partner governments either to strengthen internal PGS or
to use them to facilitate effective government participation in local systems.
This ADS chapter should be used in conjunction with ADS 201. Determining which and
how best USAID engages local systems should be addressed as part of the countrylevel strategic planning and project design processes outlined in ADS 201. Similarly,
designing projects that strengthen and/or use local systems, which are likely to include
a number of interventions including interventions directed at government actors, should
follow the project design guidance provided in ADS 201.
At the same time, there are special strategic and design concerns that are particular to
providing direct assistance to partner governments. These include fiduciary risks
associated with providing funds to sovereign states, reputational risks associated with
governments that have democratic accountability weaknesses, and selection of funding
mechanisms that achieve programmatic results through support of governmental
responsibilities. This ADS chapter specifies policies and procedures for addressing
these special concerns.
b.

Policies and Procedures

This ADS chapter outlines the policies and procedures that govern when USAID
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disburses funds directly to a partner government or relies upon partner government
systems to implement direct assistance projects or project activities.
(1)

To the extent that foreign policy considerations, existing bilateral relations, and
resources allow, Missions should offer partner governments an assessment of
partner government PFM systems to determine if USAID may use those
systems for the implementation of USAID-financed projects. Mission
Directors/Principal Officers are responsible for leading discussions with partner
government officials that may result in an assessment of PGS, if appropriate.
This assessment must be conducted in close coordination with relevant partner
government institutions and officials. Consideration should be given to inviting
other donors to participate, where appropriate.

(2)

Missions must assess PGS using the PFMRAF, when required by this chapter,
along with other factors in the design process, prior to authorizing obligations or
sub-obligations that will involve the disbursement of funds directly to a partner
government.

(3)

If the partner government agrees to an assessment, Mission Directors/Principal

Officers are responsible for designating Mission staff to coordinate and conduct
the PFMRAF, defined as the PGS Team. The designated Mission staff should
represent all Mission Offices or Teams who will have a role in the assessment,
design, or implementation of the proposed project or project activity. Members
of the PGS Team will be integrated into the PD Team following Stage 2, as
described in ADS 201, and the Project Implementation or Development
Objective Team. Mission Directors/Principal Officers must establish a PGS
Team prior to initiating the PFMRAF process. For Missions contemplating a
new Country Development Cooperation Strategy (CDCS), a PGS Team will
support the integration of the PFMRAF initial appraisal with the CDCS. Prior to
initiating PFMRAF, the PGS Team must notify and consult with the G2GRMT
concerning application of the PFMRAF, due diligence responsibilities, and
identification and management of any potential risks associated with the use of
assessed government systems and implementing institutions.

(4)

Subsequent to PFMRAF Stage 2, PD Teams are responsible for:

Drafting the AUPGS;

Incorporating the results of the PFMRAF and AUPGS into project

designs that include the use of PGS;

Assisting the Mission Director/Principal Officer, as needed and

designated, in the negotiation of a G2G project activity with the
partner government; and

Managing the implementation of G2G project activities.

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(5)

The PD Team will be responsible for:

Coordination, oversight, monitoring, and evaluation of any risk

mitigation measures established by the Mission; and

Ensuring that a monitoring and evaluation plan is in place for the

project taking into consideration the use of PGS (see ADS 203,
Assessing and Learning).

The above will be specifically addressed in the Project Appraisal Document

(PAD) for each project including G2G implementing mechanisms.
(6)

Though the full designation of the PGS Team is at the discretion of the Mission
Director/Principal Officer, Missions should assign the following functional
responsibilities:
(a) Controllers must be designated as members of the PGS Team. They
should provide primary leadership for conducting the PFMRAF and
addressing all technical issues concerning assessment of the PFM
systems of partner governments. They should undertake a primary and
substantive role in:

Designing mitigation strategies for identified fiduciary risks, and

Monitoring and oversight of partner government implementation of

any such fiduciary risk mitigation measures in the AUPGS included
in the PAD and negotiated with the partner government.

Controllers should also be members of PD Teams and participate in the

design, implementation, monitoring, and evaluation of USAID-funded
projects, as applicable, to build institutional capacity for PFM. Controllers
are also responsible for the design of the fiduciary risk mitigation and
monitoring plan appropriate to the level of risk for G2G activities when a
Stage 2 Risk Assessment is not required by this ADS chapter.
(b) Resident Legal Advisors (RLAs) must be designated as members of the
PGS Team and subsequent PD Teams. RLAs assist in application of the
PFMRAF, project design, and preparation of the AUPGS, and provide
advice to the Mission on the:

Negotiation of the bilateral assistance agreement (BAA),

Selection of implementing mechanisms, and

Negotiation and preparation of Implementation Letters (ILs).

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Involving the RLA early in the process is essential to ensure identification

of legal and negotiation issues prior to development of risk mitigation
plans, project design, and negotiations strategy.
(c) Program Officers/Project Development Officers (PDOs) must work
with the PGS Team to design the plans for the PFMRAF. Because of the
leadership role Program Officers/Project Development Officers play in the
PD Teams and the Program Cycle, they are primary actors in the overall
process.
(d) Democracy, Human Rights and Governance Officers should assist in:

Assessing key issues related to the partner countrys democracy,

human rights and governance environment; and

Identifying any democratic accountability issues that may need to

be addressed as part of a project that includes direct G2G funding
agreements.

DRG Officers should participate directly in the PFMRAF Stage 1 Rapid

Appraisal. They should also assume other tasks, as assigned, in the
project assessment and design of projects that include G2G activities,
assistance projects, and related PFM and Public Accountability (PA)
capacity development activities. In cases where an Expanded DRG
Review is conducted in conjunction with the PFMRAF (see 220.3.2), DRG
Officers must be included on the PGS Team. Where democratic or public
accountability risks are identified by an Expanded DRG Review, DRG
Officers must be included in designing, monitoring, and evaluating
accountability of any democratic or public accountability risk mitigation
measures set forth in the PAD (including the AUPGS annex) and
negotiated with the partner government.
(e) Technical Officers must be included on the PGS Team when relevant
partner government entities are identified for possible development
assistance. Technical Officers help design the plans for the PFMRAF,
and should be primary and active members in the PGS Team given their
knowledge and experience with the partner government entities under
assessment. As key members of the Project Design Teams, Technical
Officers also lead the separate assessment of technical capacity of
proposed partner government implementing entities during the
development of the PAD (see 220.3.3.3f). While Technical Officers
provide leadership on the PGS Team for functions overlapping with those
of the Development Objective Team (see ADS 201), they are not
expected to lead the PFMRAF process.

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(f) Contracting and Agreement Officers (COs/AOs) must be included as
members of the PGS Team to:

Provide input into the AUPGS and choice of implementing

mechanism;

Assist with negotiating prices and establishing payment bases (e.g.,

outputs or cost reimbursement budgets) for partner government
agreements;

Assist in reviewing estimated costs of partner government

implementation;

Provide advice and assistance regarding the partner governments

engagement, administration, and management of local organization
and contractor implementers; and

Serve as the Mission subject matter expert on public sector

procurement, including, if appropriate resources levels are available
to the Mission, leading technical assistance, or procurement system
strengthening activities.

(7)

The PGS Team is responsible for retaining PFMRAF records in accordance

with ADS 502, The USAID Records Management Program.

(8)

In conducting assessments and using the PFMRAF pursuant to this ADS

chapter, Missions must:
(a) Communicate initial PFMRAF planning and ongoing progress to the
G2GRMT, including the designation of the PGS Team;
(b) Consult with the Regional Bureau regarding the applicability of an
Enhanced DRG review, along with other aspects of G2G/PFMRAF
planning;
(c) Document the weaknesses and/or needed improvements in the PGS and,
if political and other considerations allow, share the weaknesses and
needed improvements with the partner government, stakeholders, and
other donors;
(d) Identify and manage fiduciary, political, project implementation, and other
risks that might be incurred from use of partner government PFM systems
as ascertained through the PFMRAF and project design and
implementation processes; and

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(e) Document the approval for, and the use of, PGS in accordance with the
policies and procedures in this ADS chapter.
(9)

Missions should design projects that deliver development assistance through

PGS if:
(a) The results of the PMFRAF and other assessments of risks support such
use, including partner government agreement to any necessary risk
mitigation measures; and
(b) Strong partner government institutions are required to achieve the project
purpose and sustain project impacts into the future.

(10)

Missions should select, negotiate, and use implementation and funding

mechanisms with the partner government that meet the requirements of this
ADS chapter and are appropriate to achieve the purpose of the project (see
220.3.3).

(11)

Missions should consider capacity building assistance to partner governments

(training, technical assistance, etc.) if appropriate and as necessary to mitigate
risks identified in the project design process and to help ensure sustainability
of project results.

(12)

Missions must use adequate and appropriate risk mitigation measures to

address any identified fiduciary risks associated with the use of PGS for
project implementation.

(13)

Missions should monitor, evaluate, and provide oversight of project

implementation and effectiveness, including the implementation of partner
government PFM procurement systems, technical capacity used, as well as
implementation of risk mitigation plans.

(14)

Missions must close out funding mechanisms and related bilateral

implementation arrangements after project completion.

220.3.1

Relation of This Chapter to Other Agency Guidance

Effective Date: 07/28/2014

This ADS chapter relates to other Agency policy and guidance based on the following
guidelines.
a.

This guidance supplements, but does not replace, existing Agency policy and
guidance on Programming Policy (ADS 200 series), ADS 624, Host CountryOwned Local Currency and ADS 350, Grants to Foreign Governments. In
addition to following the procedures for the AUPGS, Mission Directors/Principal
Officers remain responsible for partner government procurement system
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assessment and certification requirements under ADS 301, Responsibility for
Procurement when Host Country Contracting under ADS 305, Host Country
Contracts is used. This ADS chapter incorporates and supersedes policy and
guidance formerly contained in ADS 317 for Fixed Amount Reimbursement
activities.
b.

When the policy, procedures, and guidance in this ADS chapter are applicable,
they must be used in lieu of the policy, procedures, and guidance in ADS 305.
By utilizing the policies and procedures outlined in this ADS chapter, it is
intended that Missions will gradually move away from the project
implementation processes and procedures outlined in ADS 305 to those in
accordance with this ADS chapter.

c.

As described in ADS 201 and 220.3, the use of PGS is one approach for
delivering USAID assistance. To fully strengthen PGS, use of PGS may often
be combined with direct USAID support to and capacity development of local
organizations and private entities. The use of PGS can be combined with
USAID support for the activities of:

Local non-governmental and private organizations,

Non-local USAID contractors and grantees, and

Other methods to achieve development objectives.

Capacity building and risk mitigation activities that strengthen the capacity of a
government implementing entity to deliver services should also be combined
with direct use of partner government PFM systems to ensure the soundness
of the system, as appropriate.
d. The PFMRAF assessment processes fulfill the pre-financing due diligence
requirements (pre-award audits) described in ADS 591, Financial Audits of
USAID Contractors, Grantees, and Host Government Entities for G2G
projects and activities. No separate pre-financing, audit-like, or due diligence
assessments, other than described in this ADS chapter, are required for USAID
financing of G2G projects and activities.
220.3.2

Expanded Democracy, Human Rights and Governance Review

Effective Date: 07/28/2014

In order to ensure that all USAID assistance reflects broad U.S. Government (USG)
commitments to promote democracy, human rights and good governance, Missions
may be asked to undertake an Expanded Democracy, Human Rights and Governance
Review (Expanded DRG Review) as part of the development of their CDCS. The
purpose of the Expanded DRG Review is to determine if planned G2G assistance is
likely to strengthen the relationship between the government and the people, or if such
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assistance will only serve to empower the government at the expense of its people.
This analysis, when applicable, is intended to assist Missions in thinking through the
reputational risk to the United States Government of direct engagement with a
government that is perceived as restricting political freedoms and human rights, as well
as the risk that USG resources or programming could be misused in a way that
damages political freedoms or human rights. When applicable, the Expanded DRG
Review is added to the PFMRAF Stage 1 Rapid Appraisal.
a.

Notification. All Missions must notify their intent to consider the use of PGS to
deliver assistance as part of the CDCS process or in conjunction with the
initiation of a PFMRAF Stage 1 Rapid Appraisal, whichever comes first. Missions
must give this notification to the Regional Bureau and G2GRMT. This notification
will allow the cognizant Mission Director -- in consultation with the Regional
Bureau Assistant Administrator, M/CFO, DCHA/DRG, and other cognizant USG
officials -- to determine, given the specific country context and current
circumstances, whether the country meets the required standard for democratic
accountability, which may include the following elements:
(i) The country publicly discloses, on an annual basis, its government budget
and enforces access to information laws;
(ii) The countrys legislature, civil society, and media possess the rights and
freedoms necessary to enable the monitoring of the proposed G2Gfunded activities;
(iii) The legislature, supreme audit institution, and judiciary possess the
independence to hold the executive accountable for enforcing the above
rights and monitor the expenditure of funds for G2G activities; and
(iv) The country is taking steps to protect the rights of civil society, including
freedom of association and assembly (imposed by section 7031, FY2014
Appropriations Act).
In the event that a country is not taking steps to protect the rights of civil society
and a Mission cannot address this issue through mitigation measures, such as
conditions precedent or pre-obligation project interventions that increase
protections for civil society, the use of PGS for project implementation may not
be considered (see ADS 220.3.3.1).
Based on this consultation, the Mission Director will make a determination as
follows:
(1)

The country meets basic standards for democratic accountability (DA).

The Mission may move forward with project design and PFMRAF
assessments that will further determine the use of G2G in the target
country.
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(2)

The country does not meet basic standards for DA, and the PFMRAF
Stage 1 or CDCS analysis should be expanded to include additional
DRG questions that analyze the risk that use of G2G mechanisms will
empower the government at the expense of the people (Expanded DRG
Review).

(3)

No further consideration of G2G should be made at the current time.

The Mission will communicate this determination, in writing, to the Regional

Bureau Assistant Administrator.
b. Analysis. Missions required to conduct an Expanded DRG Review as part of a
PFMRAF Stage 1 Rapid Appraisal or CDCS must include analysis that considers
the current DA environment in the country. This analysis should draw upon a
desk review of relevant reference materials, which could include:

Recent DRG Assessments,

Open Budget Index reports,

Article 19 reports,

State Department Human Rights reports, and

Other Mission reporting as well as third party source material.

The Expanded DRG Review should involve interviewing cognizant partner

government and non-governmental entities, other donors, USAID partners, and
others.
The analysis should consider how risks associated with gaps in DA may be
mitigated through the design, implementation, and monitoring of projects that
include G2G mechanisms, and whether the proposed activities are able to
effectively mitigate the reputational risk of direct assistance to the partner
government. Mitigation activities could include:

Support for citizen engagement in the development, implementation, and

monitoring of project interventions to ensure the inclusion of all groups in
project activities, specifically integrating civil society, media, or vulnerable
populations into project interventions, or

The incorporation of conditions precedent in bilateral agreements requiring

that the government is taking steps to address gaps in democratic
accountability. Missions may also consider whether the geographic
targeting of project activities provide opportunities to address democratic
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accountability gaps; in some contexts there may be opportunities at the
regional or local level to more openly address democratic accountability
issues.
c.

Determination. All Stage 1 Rapid Appraisals, whether or not they include an

Expanded DRG Review, will be reviewed by the G2GRMT pursuant to
220.3.3.4.d. This review may include a video teleconference convened by the
Mission, at the request of the Mission, Regional Bureau, PPL, DCHA/DRG, or
M/CFO. In the case of an Expanded DRG Review, those involved in this video
teleconference will consider the findings of the draft PFMRAF Stage 1 Rapid
Appraisal to determine whether the proposed G2G activities are likely to mitigate
the risks of direct engagement with the partner government empowering the
government at the expense of its people. As a result of the review, the Mission
Director will make a determination to be documented in the Stage 1 or CDCS, as
follows:
(1)

The proposed G2G investments mitigate the risks associated with direct
engagement. As the Mission further develops its G2G projects, it will
seek to address these issues in additional analyses and the project
design process. This determination may also be employed in situations
where use of PGS may be approved for use in certain sectors, but not
others; or

(2)

The proposed G2G investments fail to mitigate the risks associated with
direct engagement, and use of PGS for project implementation may not
be considered. However, in the event that the democratic accountability
environment improves, a Mission may undertake a new analysis of the
Expanded Review questions as stated in 220.3.2b and submit this
analysis for review by the Mission Director, Regional Bureau, PPL,
DCHA/DRG, and M/CFO.

In the event of a disagreement regarding whether DRG conditions preclude the

use of G2G mechanisms, the Deputy Administrator will make the final
determination in consultation with interagency partners. The substance of the
discussion will be documented in writing and may inform the finalization of the
Stage 1 report.
d. Democratic Accountability Strengthening and Project Design. The PFMRAF
Stage 1 and 2 analyses and other analyses may identify additional DA issues
that the Mission will need to address as part of the project design (see ADS
201.3.15.1). Any such DA weaknesses must be identified and addressed in the
PAD. This may require the incorporation of DA risk mitigation measures into the
project, which could include:

The development and funding of additional capacity building activities for

governmental or non-governmental accountability institutions,
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Support for community monitoring of G2G projects, or

Other interventions tailored to the country context.

The Mission must also include follow-up monitoring on any DA risk mitigation
measures and capacity building activities built into the Project Implementation
Plan and indicate the frequency with which these activities are measured for
progress and assessed as to their effectiveness.
220.3.3

Public Financial Management Risk Assessment Framework

(PFMRAF)
Effective Date: 07/28/2014

Except as otherwise provided in this ADS chapter, Missions must complete the
PFMRAF process as part of an overall project design and authorization process before
obligating or sub-obligating funds to a partner government for implementation of G2G
project activities.
220.3.3.1

Government to Government (G2G) Assistance Exceptions,

Deviations and Waivers
Effective Date: 07/28/2014

a.

Except as provided in 220.3.3.1.c.(3) (statutory notwithstanding authority

exception), before authorizing a project and subsequently obligating or subobligating funds to be disbursed directly to a partner government, Missions must
do each of the following:
(1)

Assess the implementing entity and all PGS to be used in connection with
the assistance for:
(a)

Technical, financial, and management capabilities;

(b) Competitive procurement policies and systems;

(c)

Monitoring and evaluation systems;

(d) What steps the partner government is taking to publicly disclose the
national budget, including income and expenditures, on an annual
basis;
(e)

Whether U.S. foreign assistance is taxed (through value added

taxes or customs duties) or, if so, whether the partner government
reimburses such taxes;

(f)

Whether the recipient agency or ministry is headed or

controlled by an organization designated as a foreign terrorist
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organization under section 219 of the Immigration and
Nationality Act; and
(g) What steps the partner is taking to protect the
rights of civil society, including freedom of association and
assembly.
(2)

Determine and document that the implementing agency or ministry has

the systems required to manage the proposed assistance, including:
(a)

The necessary technical, financial, and management capabilities;

(b) Competitive procurement policies and systems;

(c)

Effective monitoring and evaluation systems are in place to ensure

that such assistance is used for its intended purposes;

(d) The government of the recipient country is taking

steps to publicly disclose, on an annual basis, its national
budget, to include income and expenditures;
(e)

Whether U.S. foreign assistance is taxed (through value added

taxes or customs duties) or, if so, whether the partner government
reimburses such taxes;

(f)

The recipient agency or ministry is not headed or controlled by an

organization designated as a foreign terrorist organization under
section 219 of the Immigration and Nationality Act; and

(g) The recipient government is taking steps to protect the

rights of civil society, including freedom of association and
assembly (see ADS 220.3.2).
(3)

Address, through a risk mitigation plan and the bilateral implementing

agreement, any identified vulnerabilities or weaknesses, including
ensuring that:
(a)

Effective monitoring and evaluation systems are in place, and

(b) Mitigating all risks identified such that no acceptable level of fraud
is assumed.
b.

Policy waivers and deviations: The criteria outlined in 220.3.3.1a are the
minimum legal G2G assessment requirements for USAID assistance that
Missions may not deviate from except as provided in 220.3.3.1.c.(3). See ADS
220mac, Legal Requirements for G2G Assistance for requirements. For
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deviations or waivers of any policies in this ADS chapter not legally required, the
following apply:
(1)

Pilot projects: The PFMRAF policies and processes in this ADS chapter
other than those in 220.3.3.1.a, are not required for small scale or pilot
projects or activities implemented through PGS with a total estimated
USAID funding life of project budget less than the Single Audit Act
threshold (currently $750,000). Missions must undertake and document
the requirements in 220.3.3.1.a in the PAD for activities relying on this
exception.

(2)

Fixed Amount Reimbursement: No Stage 2 Risk Assessment is

required for Fixed Amount Reimbursement (FAR) life of project obligations
of less than $10 million made before FY17. When using this exception, the
Mission must identify, mitigate, manage, and monitor mitigation of risk in
accordance with 220.3.3.1a.

(3)

Waiver or deviation from the PFMRAF process based on Impairment

of Foreign Assistance Objectives: The PFMRAF, together with other
requirements of the project design process, fulfills statutory and other
requirements such as the General Assessment outlined in ADS 624 and
imposed by statute, such as the requirements contained in 220.3.3.1.a.
Deviations and waivers from this ADS chapter may only be requested
pursuant to this paragraph.
(a)

Many aspects of the PFMRAF policies and procedures are flexible

and customizable for country-specific and project-specific contexts.
Therefore, before requesting a policy deviation or waiver under this
paragraph, Missions must consult with the G2GRMT regarding the
scope of work for the PFMRAF Stage 1 or Stage 2 and the
proposed deviation or waiver.

(b) Missions/Operating Units (OUs) may not deviate or waive legal

requirements except as permitted by law.
(c)

When circumstances warrant deviation or waiver from policy

requirements of this ADS chapter that are not legally mandated,
Regional Bureau Assistant Administrators (AAs) may approve a
waiver of or deviation from the policy-based PFMRAF policies and
procedures of this ADS chapter in order to avoid impairment of
foreign assistance objectives in an action memorandum. In this
case, the Mission must submit this action memorandum, with
M/CFO clearance, documenting:
(i)

The justification for the waiver or deviation;

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(ii)

The results of the consultations with the G2GRMT pursuant

to 220.3.3.1.b.(2)(a);

(iii) Relevant circumstances concerning USAIDs relationship

and experience with the partner government generally and
the partner government implementing entity specifically;
(iv) The value of the G2G activities being contemplated (the
financial risk exposure); and
(v)

Country development performance.

(d) If a waiver or deviation is approved pursuant to this paragraph, the

Mission must still undertake and document the requirements in
220.3.3.1.a in the PAD for activities otherwise relying on such
waiver or deviation.
c.

For G2G assistance financed with funds that include notwithstanding authority,
the legal requirements of this ADS chapter (see ADS 220mac, Legal
Requirements for G2G Assistance), including those in 220.3.3.1.a, may be
waived after formal consultation with the cognizant Regional Bureau AA,
G2GRMT, and the Resident Legal Advisor/Office of General Counsel (RLA/GC)
attorney and upon documentation of the following in the PAD:
(1)

Such consultations,

(2)

The specific statutory requirement being waived, and

(3)

The notwithstanding authority upon which the Mission is relying.

220.3.3.2

PFMRAF Administrative Requirements

Effective Date: 07/28/2014

The PFMRAF consists of two stages:

Stage 1: a country level examination of the partner government PFM

environment and associated fiduciary and related risks, as well as elements of
governance and public accountability.

Stage 2: an institutional-level examination to identify, evaluate, and propose

measures to mitigate transactional-level fiduciary risks of target partner
government institutions PFM systems at the country, sector, or sub-national
government.

a.

PFMRAF Administration

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(1)

Documentation: Undertaking and producing both the Stage 1 Rapid

Appraisal and the Stage 2 Risk Assessment of proposed implementing
partners must be recommended and/or agreed upon by USAID and the
partner government. Documentation must demonstrate that the USAID
Mission conducting and establishing risk mitigation measures exercised
due diligence in its assessments. Documentation must be maintained in
any resulting project files, and pertinent documents must be attached to
the PAD. Missions must maintain and dispose of PFMRAF documentation
in accordance with ADS 502 policies and procedures.

(2)

Disclosure: The PFMRAF is an Agency management tool and resulting

documents must be treated as internal management documents and are
subject to USAID record disclosure and other legal and policy
requirements and procedures. Documents and records in USAIDs
possession may be subject to disclosure outside of USAID:

Under the Freedom of Information Act,

In response to an official audit or investigation, or

In response to a request from the U.S. Congress.

Regardless of how the applicable phases of the PFMRAF process are

conducted, Missions must take due care in appropriately communicating
the results of the respective Stage 1 and Stage 2 reports. Overall results
of the assessments should be communicated to the partner government
prior to progressing in the assessment process or sharing with donors or
other third parties. Consideration should also be given to redacting and
otherwise controlling release of information that may be considered
politically or procurement sensitive.
(3)

Inherently Governmental Function: Because assessment and use of

PGS involve the conduct of diplomacy, negotiations with the partner
government, and decisions about the design and conduct of the USAID
assistance projects in a partner country, the assessment process and
related determinations constitute "inherently governmental" functions of
the U.S. Government, and must be carried out by the cognizant USAID
personnel (including USG direct hires and personal service contractors
(PSCs)), as follows:
(a)

As a matter of policy, USAID personnel (direct hires or PSCs)

must perform all aspects of Stage 1 Rapid Appraisal, other
than administrative tasks (scheduling meetings, copying
documents, etc.);

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(b) USAID personnel may conduct Stage 2 Risk Assessment, or
contract or other private sector support can be utilized so long
as USAID personnel:
(i)

Design and lead the development of and approve the

Scope of Work (SOW);

(ii)

Adequately manage and supervise the activities of the

contractor or private sector personnel;

(iii) Review and independently determine the adequacy of

the contractor analysis, deliverables, products, and
conclusions; and
(iv) Independently design, determine, and implement the
risk mitigation plan with due consideration to contractor
or private sector input, recommendations, products,
deliverables, or conclusions.
(c)

b.

Potential conflicts of interest must be avoided or mitigated

when a contractor or private sector support the Stage 2 Risk
Assessment function. For example, the same firm providing
such assessment services may not implement or assist in the
implementation of any PFM mitigation or capacity
development activities. Likewise, if contractor support is
utilized to draft the Stage 2 Scope of Work, the contractor is
precluded from conducting the Stage 2 Risk Assessment.

Other Assessments
(1)

Relying Upon Assessments by Others:

(a)

When other donors or Public International Organizations

(PIOs) manage multi-donor trust funds (MDTFs) or when
USAID finances trilateral assistance (development assistance
from a recipient country to another recipient country), USAID,
in contributing to the fund, relies on the trustees assessment,
oversight, and management of the partner governments
implementation. In such situations, instead of using the
PFMRAF process and requirements of this ADS chapter, the
policies and procedures of ADS 308, Awards to Public
International Organizations or ADS 351, Agreements with
Bilateral Donors apply (see 220.3.3.2d).

(b) When USAID finances another donor or PIO through a costtype grant (see ADS 308 and ADS 351) that uses the partner
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governments PFM and procurement systems, USAID relies
on the PIOs or other donors assessment, oversight, and
management of the partner governments implementation. In
such situations, instead of using the PFMRAF process and
requirements of this ADS chapter, the policies and procedures
of ADS 308 or ADS 351 apply. Alternatively, USAID may
perform the PFMRAF processes pursuant to this ADS chapter
or conduct a joint assessment (see 220.3.3.2b(2) or
policy/guidance on joint assessments).
(c)

When a USAID direct contractor or grantee makes an award

(i.e. sub-contract under prime acquisition instrument; subgrant or contract under prime assistance instrument) to a
foreign governmental organization, USAID relies on the prime
entitys assessment and management systems to assure
adequate accountability for USAID funds except for Grants
Under Contracts that provide funds to partner government
entities (see ADS 302.3.4.12 and 220.3.4.3 for additional
policy requirements).

(d) Where the partner government acts as the trustee or manager

for a MDTF (basket fund), Missions must conduct a PFMRAF
on the systems to which USAID disburses appropriated funds
in accordance with this ADS chapter. See ADS 624 for
MDTFs that involve expenditures of Host Country-Owned
Local Currency (HCOLC) contributed to the basket fund to
implement development activities.
(2)

Joint Assessments and Other Assessments Equivalence:

Where the PFMRAF requirements are applicable, the policy and
guidance regarding conducting joint assessments or relying upon other
donors assessments in ADS 220mae, Public Financial Management
Risk Assessment Framework Manual apply.

c.

PFMRAF Timing Requirements

(1)

General Requirements: The PFMRAF requires up-to-date risk

assessment and risk mitigation, as follows:
(a)

Missions must arrange a PFMRAF Stage 1 Rapid Appraisal in

every country where:

USAID appropriated funds or resources with an

estimated value of $500,000 or more will be provided
directly to a partner government; or
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A quasi-governmental entity is being contemplated.

Planning for a Stage 1 Rapid Appraisal should commence

once a Mission Director/Principal Officer determines that
G2G assistance over $500,000 may be contemplated with
the partner government (see 220.3.3.1 for exceptions,
waivers, and/or deviations to the Stage 1 Rapid Appraisal
requirement).
(b)

PFMRAF Stage 2 Risk Assessments are required of all new

or potential partner government implementing entities
(including quasi-governmental entities, project
implementation units, and sub-national entities, including
regional, local, or other units of government) except as
otherwise provided in this ADS chapter. A Stage 2 Risk
Assessment should not be implemented unless it is part of a
broader project design process, documented by an approved
Concept Paper (see ADS 201.3.15.2).
This requirement includes central level partner government
entities such as Ministries of Finance (or equivalent) through
which donor assistance funds would flow, implementing line
ministries or other government agencies, institutes, boards,
etc. that are responsible for direct implementation of USAIDfunded assistance activities, subject to the PFMRAF
exceptions provided in 220.3.3.1. Because respective
partner government PFM systems are most often centered
and managed by the Ministry of Finance or equivalent
institution, Missions should map and understand the flow of
funds in the proposed activity to identify all financial actors
and assess the Ministry of Finance or Central Bank, as
appropriate for their roles during the initial Stage 2,
whenever possible, in order to maximize economies of scale
in the collection of data and analysis of information.

(c)

PFMRAF Stage 2 Risk Assessments should rely upon prior

Stage 2 Risk Assessments, if applicable. They should be
tailored according to need in terms of reducing the burden
on central ministries (e.g., Ministry of Finance, Central Bank,
etc.) for which prior Stage 2 Risk Assessments have already
examined the relevant and material aspects of the systems
contemplated for use. In such cases, only the new or unique
aspects of the central ministry or system and its functional
relationship with the implementing government entity may
need to be assessed further.
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(2)

Updates of the Stage 1 Rapid Appraisal: In addition to the initial

Rapid Appraisal, as described above, Missions should consider
undertaking a Stage 1 Rapid Appraisal whenever:
(a)

USAID is beginning the development of a new CDCS in a

country. Once an initial Stage 1 Rapid Appraisal is completed
and the Mission has some experience with G2G programming,
Missions should make every effort to align the schedule for
conducting subsequent Stage 1 Rapid Appraisals to the CDCS
cycle and calendar. This approach has the advantage of:
(i)

Providing Missions the greatest economies of scale in

the collection of data and analysis of information;

(ii)

Ensuring that Rapid Appraisal conclusions on the

overall country development PFM risk environment are
considered as the Mission determines the approach
and content of the Missions future strategy; and

(iii) Establishing and ensuring that the Rapid Appraisal is

updated approximately every five years in accordance
with the CDCS cycle.
(b) Over six years have elapsed from the previous Stage 1 Rapid
Appraisal. As outlined above, the preference is that
subsequent Stage 1 Rapid Appraisals be planned and
completed to coincide with the five-year CDCS planning.
However, Missions should initiate a new Stage 1 Rapid
Appraisal independent of the CDCS cycle if the previous
appraisal is over six years old and if the Mission plans to
continue its use of partner government implementing
institutions.
(3)

Updates of the Stage 2 Risk Assessments: In addition to the

condition outlined in (1)(b) above, Missions should consider
undertaking a new, or revising an existing, Stage 2 Risk Assessment
and documenting it in a PAD amendment under the following
conditions:
(a)

Significant Increase in Funding

(i)

If a Mission is planning to increase the amount of total

estimated funding for existing projects or activities
implemented by a previously approved government
entity by more than 50 percent of the initially authorized
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amount, or authorizes an additional amount of more
than $20 million, whichever is greater, an updated
assessment must be conducted and documented, to
ensure the entitys PFM systems are sufficient to bear
the increased risk associated with the increased
funding levels.
(ii)

Such an updated assessment does not require a full

reassessment; rather, it must include a sample review
of the conclusions of the Stage 2 Risk Assessment for
the government entity receiving the increase (including
Ministries of Finance or other central ministry through
which funds might flow). It must also include a review
and revalidation of the risk management plan for every
approved partner government entity receiving the
funding increase. The Mission Controller must conduct
or contract out the updated assessment.

(b) Updated risk assessment aligned with project life: In

addition to the requirements above, USAID Missions financing
project implementation through the use of PGS must update
Stage 2 Risk Assessments on a schedule that coincides with
the life of the project(s) being implemented, typically a five
year period. This includes government entities (including
Ministries of Finance, Central Bank, or other central ministry
through which USAID funds might flow) that are implementing
USAID-funded projects or project activities successfully.

(c)

(i)

For enduring projects that may extend beyond a five

year period without additional funding being provided
to/through government implementing entities, a new
Stage 2 Risk Assessment is not required within the
(extended) life of the project or project activity for such
implementing entities. Through ongoing monitoring, the
Mission should continue to document and update risk
and risk mitigation.

(ii)

For each new project or project activity to be

implemented by a previously assessed government
entity, the conditions described in 220.3.3.2c(3)(a)(ii)
will apply, subject to 220.3.3.2 c(4).

Previously terminated activities: In cases where the Mission

suspends or terminates a project or project activity
implemented by a partner government entity and where
termination is a result of a negative PFM determination, a new,
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full Stage 2 Risk Assessment will generally be required if the
Mission wishes to reconsider its use of the partner
governments systems of that entity for the implementation of
USAID activities.
(d) Change in implementing mechanism: A new or updated
Stage 2 Risk Assessment may need to be performed prior to
obligating or sub-obligating funds for the new implementing
mechanism when:

(4)

(i)

A prior Stage 2 Risk Assessment has been performed

on a partner government entity tailored to a specific
implementing mechanism (e.g., Sector Program
Assistance); and

(ii)

A new implementing mechanism will be used for which

the prior Stage 2 Risk Assessment did not adequately
assess risks associated with the new implementing
mechanism (e.g., cost reimbursement project
assistance).

Reassessment updates based upon material and significant

changes to partner government environment in democratic
governance, budget processes and transparency, legal
requirements affecting G2G assistance, and changes in
macroeconomic conditions:
(a)

Mission Directors/Principal Officers, at their discretion and in

consultation with the Regional Bureau Assistant
Administrators, as appropriate, are encouraged to require a
Stage 1 and/or Stage 2 reassessment, or DRG Enhanced
Review, in the event of significant changes in:
(i)

The partner governments democratic governance

systems and institutions;

(ii)

Government budget processes, accountability, and

transparency that materially increase risks of PFM
practices;

(iii) Legal requirements, including public disclosure laws,

concerning G2G assistance that significantly damage
public transparency; or
(iv) Macroeconomic changes of condition that may affect
risk.
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(b) No reassessment is required if the Mission Director/Principal

Officer determines, in writing, that changes in the above
categories, while significant, do not materially affect or alter
the conditions of the implementation of USAID assistance
using approved PGS.
d.

The Partner Government Implementing Entity

The assessment requirements in 220.3.3.1a are applicable to Grants Under
Contracts (GUCs) that provide funds to partner government entities (see ADS
201.3.15.4, 302.3.4.12, and 220.3.4.3). These requirements are not applicable
to contracts or subcontracts with partner government entities awarded pursuant
to ADS 302, USAID Direct Contracting, or to assistance subawards to partner
government entities made by recipients pursuant to ADS 303, Grants and
Cooperative Agreements to Non-Governmental Organizations, and in
accordance with the following policies and procedures:
(1)

Use of the PFMRAF may be undertaken with counterpart partner

governmental, quasi-governmental, or other public entities on the
national and subnational (regional, local, other unit of government)
levels.

(2)

Universities and other governmental entities providing technical

assistance: Use of the PFMRAF is not required if USAID provides
funds directly or through a contract, sub-contract, GUC, assistance
award, or assistance sub-award to universities or other educational
units of the partner government whose primary purpose is to provide
education, research, or training services. These funds cannot flow
through central government PFM systems otherwise used to execute
central government budgetary authority. All direct contracts,
subcontracts, GUCs, awards, or sub-awards to universities and other
educational, research, or training government entities must comply
with:

(3)

The exceptions to those requirements for educational and

related institutions under 22 C.F.R 228.13; and

ADS 302 and ADS 303, as applicable to agreement type,

including USAIDs normal responsibility determination/preaward survey requirements.

Parastatals and Quasi-Governmental Entities

(a)

Parastatals and quasi-governmental entities may be formed

primarily for commercial or non-commercial purposes. Those
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that are formed primarily for commercial purposes are not
generally subject to this ADS chapter and instead must follow
22 CFR 228 and either ADS 302 or ADS 303, as applicable.
(b) Non-commercial government parastatals and quasigovernmental organizations should be treated as a partner
government agency, requiring compliance by the financing
Mission or OU with this ADS chapter, when the organization
meets the following five criteria:

(c)

220.3.3.3

(1)

A majority of the members of the supreme governing

body is comprised of government officials,

(2)

The entity delivers public goods or services,

(3)

The entity is subject to audit by the partner

governments Supreme Audit Institution,

(4)

The entity uses the partner governments PFM and

procurement systems, and

(5)

Implementation will involve the use of the partner

governments PFM or other systems.

Missions or Washington OUs may decide, at their discretion,

to carry out a PFMRAF assessment even when parastatals or
quasi-governmental organizations do not meet all of the five
criteria listed above, when the Mission Director/Principal
Officer determines that application of the PFMRAF to a
parastatal or quasi-governmental organization is in the best
interest of the U.S. Government or USAID. The Mission must
document such a determination in the AUPGS. Parastatals
under consideration for funding by USAID without PFMRAF
review are subject to ADS 302 or ADS 303, including USAIDs
normal responsibility determination/pre-award survey
requirements.

Overview of the Public Financial Management Risk Management

Framework (PFMRAF)
Effective Date: 07/28/2014

The Stage 1 Rapid Appraisal and Stage 2 Risk Assessment are sequential. Missions
considering the use of partner government institutions for implementation should strive
to complete Stage 1 Rapid Appraisal (or revisions thereto) in conjunction with the
development or revision of the CDCS. Stage 2 Risk Assessments may commence any
time a partner government entity has been identified in an approved Concept Paper as
being actively considered as an implementing entity, so long as a Stage 1 Rapid
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Appraisal has been completed in accordance with the timing requirements in
220.3.3.2.c. Timing is otherwise at the Missions discretion.
a.

b.

The Stages of the Public Financial Management Risk Assessment

Framework
(1)

Stage 1 Rapid Appraisal. This initial stage provides Missions/OUs

with a high-level, country-wide snapshot of PFM, governance, and
public accountability systems of the partner country government. The
appraisal helps inform the decision of whether the Mission/OU should
move forward to undertake a more rigorous, focused assessment of
each potential implementing entity. It identifies and documents the
existence and quality of policies, legal, and institutional framework and
systems reflecting government commitment to development,
transparency, and accountability. It also identifies political or security
factors that may affect fiduciary risk.

(2)

Stage 2 Risk Assessment. The second phase focuses on respective

partner government implementing institutions and involves the
identification, analysis, and mitigation of risks. The assessment
identifies and, where appropriate, proposes measures to mitigate
fiduciary risks in the proposed implementing entity or entities and may
include mitigation actions to be taken by the entity, the Mission, or by
third parties as determined by the final project design. The Stage 2
Risk Assessment entails a professional, institution-level examination of
the PFM system(s) of targeted partner government implementing
institutions proposed to be used to implement USAID-financed projects
or project activities. Stage 2 Assessments should be completed as
part of a project design process, as described in ADS 201.

Scope of the PFMRAF Stages

Within the flexibilities permitted by this ADS chapter and its references, the
scope of both Stage 1 and Stage 2 should be informed by the project design
process, including the technical capacity analysis under ADS 201 (see
220.3.3.3f). While the PFMRAF may be used to determine the best
implementing mechanism in conjunction with planning and design guidance in
ADS 201, Stage 2 should be customized to the degree this ADS chapter
permits based on considerations such as funds flow and whether advances will
be used, so as to minimize appraisal and assessment impacts and burdens on
partner government entities. PFMRAF Stage 2 should focus on the systems
relevant to and inherent in the actual use of USAID funds (see 220.3.3.2c for
additional scope and timing requirements for reassessments).

c.

Negotiations with the Partner Government

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Prior to and during the assessment and project design processes, the Mission
Director/Principal Officer and other designated PD Team members will be
actively engaged in consultations and negotiations about the direction of the
project with representatives of the partner government. Consistent with the
Local Systems Framework the participation of partner government counterparts
in the design of projects should be solicited and such participation is critical
when PGS are likely to be used. The partner government may have its own
requirements for project design and approval when PGS are used. The
Mission should be sensitive to partner government needs and planning systems
in this area and support partner government efforts to employ and strengthen
its own design and approval systems for projects.
Missions must realize that communications with the partner government
concerning potential G2G assistance funded by USAID may create
expectations. Consequently, Missions are encouraged to develop both a
negotiation and public communication strategy toward the partner government
before initiating the PFMRAF process. Missions are also encouraged to
develop an open approach to working with the partner government so that
governments are aware of what decisions affecting project approval and
funding have been made and which have not. It is imperative that partner
governments understand that USAID funding commitments are only secured
once obligating agreements and sub-obligating documents have been jointly
signed and delivered.
220.3.3.4

Stage 1 PFMRAF - Rapid Appraisal

Effective Date: 07/28/2014

The Rapid Appraisal provides USAID with a high-level, country-wide snapshot of the
PFM, governance, and public accountability systems of the partner country government
and helps inform the decision of whether USAID should move forward to undertake a
more rigorous, institution-level Stage 2 Risk Assessment.
a.

Stage 1 identifies and documents the existence and quality of policies, the legal
and institutional framework, and the systems reflecting government
commitment to development, transparency, and accountability. Stage 1 also
identifies political or security factors that may affect fiduciary and other risks
affecting USAID assistance.

b.

The conduct of a Stage 1 Rapid Appraisal is a Mission responsibility and does

not require formal G2GRMT approval to initiate. However, Missions should
carefully consider/analyze their capacity to undertake a Rapid Appraisal without
G2GRMT support.

c.

G2GRMT is available to support the design, planning, and implementation of

the Rapid Appraisal upon request and subject to the availability of resources.

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d.

Regardless of how Stage 1 Rapid Appraisal is initiated and managed, Missions

are required to communicate and coordinate Stage 1 planning and progress to
G2GRMT. The G2GRMT must clear the scope and reports of the Stage 1
Rapid Appraisal.

e.

During Stage 1, the USAID Mission will identify the following:

(1)

USAID-partner government joint development objectives that may lend

themselves to implementation through partner government PFM
systems;

(2)

Sectors in which the USAID Mission and partner government may want
to cooperate on projects implemented through PGS; and

(3)

Any areas of PFM system weakness, relationship challenges, or other

factors that could pose significant implementation risks, such as
potential failure to adequately account for resources or to perform.
Note should also be made of PFM reforms or strengthening initiatives
that should also be taken into account.

f.

To identify systemic partner government PFM practices that are potentially

weak, the Mission should use current available information about the partner
governments national-level PFM systems (e.g., recent Public Expenditure and
Financial Accountability (PEFA) reports, Country Procurement Assessment
Reports (CPAR), Organization of Economic Cooperation and DevelopmentDevelopment Assistance Committee (OECD-DAC) government procurement
system assessments, partner government-generated and self-assessments
and reports, and other donors assessments). Lack of previous countrywide
PEFA or other relevant OECD-DAC assessments or analysis may make risk
identification more difficult than instances where such information is readily
available. However, such should not ordinarily be a reason to turn down a
request for a Stage 1 Rapid Appraisal. Countries lacking PEFA, OECD-DAC,
or other relevant assessments or analyses should be encouraged to complete
such an assessment, with USAID assistance, if appropriate and available.

g.

Missions/OUs must also consider the technical capacity of the proposed

counterpart partner government ministry, agency, or other unit of government to
implement directly the assistance in its technical capacity analysis done for the
PAD (see 220.3.3.3f).

h.

Additional guidance regarding Stage 1 Rapid Appraisals is contained in ADS

220mae, Public Financial Management Risk Assessment Framework
Manual.

220.3.3.5

PFMRAF Stage 2 Risk Assessment, Identification, Analysis,

Mitigation, and Recommendations
Effective Date: 07/28/2014
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The Stage 2 Risk Assessment includes testing PFM and other systems as necessary to
validate applicable and relevant systems operations and internal controls; identify
performance risks; and develop associated risk mitigation options associated with a
proposed USAID project that included G2G activities.
a.

Unless the Stage1 Rapid Appraisal results in a determination by the Mission

that there is an unacceptable level of government-wide fiduciary risk, political
constraints, or other insurmountable barriers to the use of PGS, the Mission
PGS Team may initiate an in-depth Stage 2 fiduciary risk assessment of
potential implementing entities to inform the project design.

b.

The Stage 2 Risk Assessment is a fiduciary risk tool, not one designed for
programmatic and other types of risk; however, some programmatic and other
types of risk may be identified as part of this process. Missions should plan to
conduct separate, ideally concurrent with Stage 2, programmatic and technical
risk analyses as outlined in ADS 201.

c.

The Stage 2 Risk Assessment process consists of the following steps:

(1)

At the Concept Paper stage of project design, the Mission, Project

Design Team, and PGS team members will identify a clear statement
of the Project Purpose (typically aligned with an Intermediate Result
(IR) in the CDCS Results Framework and identify the partner
government entity counterparts. The Concept Paper normally will be
accompanied by a Statement of Work outlining the scope and
objectives of the Stage 2 Assessment. This is prepared by the PGS
and Project Design Teams, in consultation with G2GRMT. Missions
will outline their approach to the Stage 2 Risk Assessment as part of
the Project Concept Paper (see ADS 201).

(2)

The Mission/OU must then develop a list of PFM risk assessment

evaluation criteria (Stage 2 questionnaire) as outlined in ADS 220mae,
Public Financial Management Risk Assessment Framework
Manual.

(3)

Risk assessment evaluation criteria (the questionnaire) guide the

identification of fiduciary risks associated with the proposed
project/activity to be implemented by the respective institution(s) or
sector of the partner government.

(4)

The Mission/OU may customize, as appropriate, the list of evaluation

criteria (Stage 2 questionnaire) used to conduct the proposed Stage 2
Risk Assessment.

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(5)

The Stage 2 Risk Assessment and project design are iterative

processes that must be repeated for each implementing entity included
within a project or activity.

d.

The Mission may perform the Stage 2 Risk Assessments or contract out or hire
expert consultants, including auditors and accountants with local knowledge
and PFM technical experience. When doing so, the Mission must closely
monitor the PFMRAF Stage 2 Risk Assessment. The G2GRMT, DCHA/DRG,
and GC are available to provide support to the design, planning, and
implementation of Stage 2 Risk Assessments, subject to the availability of
resources.

e.

The G2GRMT must clear the Stage 2 Risk Assessment SOW and
subsequently, the final report package (see ADS 220mae, Public Financial
Management Risk Assessment Framework Manual).

f.

During the Stage 2 Risk Assessment, the Mission-designated PGS Team must
examine the current capacity, control systems, and day-to-day practices used
in the PFM, including the procurement system in the ministries, departments,
agencies or other partner government implementing entities (e.g., subnational)
that may be responsible for managing USAID funding. This examination must
include appropriate testing of PFM systems in order to validate operations,
internal controls, and day-to-day practices as well as identify vulnerabilities and
recommend appropriate risk mitigation measures and a risk mitigation plan to
be finalized during project design.

g.

If it is in the professional judgment of the PGS Team, in consultation with the

G2GRMT that reliable and material analysis from relevant government-wide
assessments by the partner government and/or the countrys Supreme Audit
Institution, other donors, other USG agencies, or international auditing
authorities have assessed certain government PFM functions, the USAIDimplemented Stage 2 Risk Assessment does not need to re-examine the
practices covered by such assessment(s). Pre-existing/recent assessments
should be compared with the factors being assessed by the Stage 2 Risk
Assessment. The PGS Team may need to conduct a validation analysis,
including limited on-site or other results testing, to identify areas or customized
factors presenting particular risk to the proposed project or activity that were
unaddressed by the prior assessment. G2GRMT is available for consultations
on validation of pre-existing assessments, and the identification of additional
factors, if any, that require further assessment by the Stage 2 PFMRAF. For
joint assessments and reliance entirely on assessments conducted by other
entities, see 220.3.3.2a(3).

h.

The Stage 2 questionnaire in ADS 220mae, Public Financial Management

Risk Assessment Framework Manual presents a comprehensive list of
illustrative questions by function, criterion, and sub-criteria as a starting point to
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be evaluated as part of the Stage 2 Assessment. The questionnaire need not
be used in its entirety, but rather focused on the areas and questions
considered relevant and within the scope of the respective Stage 2 Risk
Assessment. It is important to note that the risk assessment team may draw
not only from the questionnaire, but also from other professional guidelines or
checklists as applicable (i.e., AICPA or IIA).
i.

Where possible, USAID Missions should consider including appropriate partner

government representatives or those of other donors in the Stage 2 Risk
Assessment process, as appropriate.

j.

Missions/OUs should engage in PFMRAF processes in parallel with the project

design process (i.e., preparing the programmatic/technical risk assessment,
other analyses, working with the partner government to define the purpose,
outputs and an overall funding level, identifying and costing out inputs, etc.).
Prior to undertaking the Stage 2 assessment, the Mission must identify a set of
government partners and implementing institutions in the finalized Project
Concept Paper. As the Mission reviews preliminary results of the Stage 2
assessment(s), it should consider:

Alternative implementation mechanisms (project vs. program);

Alternative financing mechanisms (cost reimbursement, FAR, Sector

Program Assistance, etc.); and

Associated risk mitigation or capacity building requirements.

In the end, the Stage 2 Risk Assessment and project design will

Establish the baseline level of risk corresponding to proposed project

funding levels, flow of funds, and implementing mechanisms; and

Identify PFM vulnerabilities of the partner government institutions that

the USAID Mission is considering using to implement the project or
specific project activities that will be established and approved in the
PAD.

k.

All design, planning, and pre-obligation legal requirements must be satisfied

before obligating or sub-obligating funds for G2G assistance.

l.

The PFMRAF identifies fiduciary risks associated with a particular project

implementation proposal. A fiduciary risk mitigation plan is required for all G2G
activities within projects and must be part of the AUPGS and reflected in the
PAD.

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m.

After considering these factors, the PGS Team, in conjunction with any
consultant or team that assisted in the Stage 2 Assessment, prepares the
Stage 2 Risk Assessment Report.

n.

All risk management decisions (whether defined in the AUPGS or other

components of the project design process) must be made on the basis of
identified, assessed, and evaluated risk after consideration of the information
available at the time of the decision. Risk management decisions may require
the partner government to undertake appropriate risk mitigating actions.
Identification of risk management measures is intertwined with, and may
overlap with, project design. Through the design process, risks will be
analyzed for probability and impact, given a specific project design. Any
identified risk must be treated through capacity building, imposition of additional
controls, or other measures. Fiduciary risk mitigation measures identified in the
Stage 2 report will be further analyzed and refined through the project design
process with the final fiduciary risk mitigation plan being incorporated into the
AUPGS (see 220.3.1.6).

o.

Additional guidance on Stage 2 Risk Assessments is contained in ADS

220mae, Public Financial Management Risk Assessment Framework
Manual.

p.

Testing. In conducting Stage 2 assessments, the limited use of testing should

be used to ascertain information and develop conclusions about the viability of
PFM systems. The application of testing is important to validate overall
systems operations and internal controls, and identify fiduciary and
performance risks and associated risk mitigation options. The type and extent
of testing performed must be documented. Additional guidance on testing is
contained in ADS 220mae, Public Financial Management Risk Assessment
Framework Manual.
Corruption. If USAIDs Stage 1 Rapid Appraisal and Stage 2 Risk
Assessment produces clear evidence of specific institutional vulnerabilities to
corruption, but the partner government fails to respond with appropriate policies
and actions, the Mission should refrain from using those institutions and
systems. If, however, the partner government acknowledges a vulnerability to
corruption and demonstrates, by agreement in the BAA or Implementation
Letter, a commitment to combat it with energetic enforcement or corrective
actions, USAID should support such efforts and weigh them favorably when
considering use of PGS.

220.3.3.6

Fiduciary Risk Mitigation Plans

Effective Date: 07/28/2014

Missions must include every project activity involving G2G in a project-specific risk
mitigation plan describing the manner in which all identified fiduciary risks will be
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adequately mitigated during the entire implementation such that no acceptable level of
risk/fraud is assumed. The plan must be included in the AUPGS which then becomes a
mandatory annex to the PAD. Non-fiduciary risk and associated risk mitigation plans
must be addressed elsewhere in the PAD.
a.

The fiduciary risk mitigation plan must treat all risks identified in the final project
design by:
(1)

The selection of the most appropriate implementing mechanism;

(2)

If appropriate, establish specific mitigation measures which may be

expressed as time limits (such as quarterly or annual limits on
commitments to the partner government) or amount limits (such as "not
to exceed $5 million") or both;

(3)

If appropriate, establish risk mitigation measures, which may take the

form of short-, medium- or long-term technical assistance to build
partner government capacity, supplemental control measures
to mitigate identified risk areas during project implementation, or both;
and

(4)

Such other risk mitigation measures deemed appropriate during the

project design process.

b.

While the PGS/PS Teams should share and negotiate the mitigation measures
identified in the risk mitigation plan with the partner government implementing
entity, the contents and sufficiency of the risk mitigation plan must represent the
independent judgment of the PGS Team and the Mission Director.

c.

All risk mitigation measures in the fiduciary risk mitigation plan must be
expressly incorporated into the BAA or IL. The specific actions that USAID and
the partner government agree to undertake to mitigate each risk identified in the
Stage 2 report and applicable to the G2G project activity must be incorporated
into the agreement or IL.

220.3.4

Project Design for Use of Partner Government Systems

Effective Date: 07/28/2014

Missions must follow the strategy development and project design policies and
guidance contained in ADS 201 (see ADS 201.3.11) and this ADS chapter for all
projects and project activities implemented through reliable PGS. Additionally, there are
certain policies and procedures unique to projects proposed for implementation by
partner government institutions. These include:

The Approval of the AUPGS focused on fiduciary risk (discussed in 220.3.4.1);

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The risk mitigation plan, (including all aspects of risk including but not limited to
fiduciary risk) incorporated into project design, including how that plan will be
monitored during project implementation;

Measures (technical assistance, training, etc.) intended to strengthen the

capacity of the partner government to sustain the project results following
completion of USAID funding;

The selection of funding mechanisms, consideration of project vs. program

assistance; and

Special requirements for the PAD and obligating documents for G2G activities.

a.

G2G Project Design Overview

Successful project implementation is driven by project design. For example,
after executing a Development Objective Agreement (see 220.3.2.4) with the
partner government, thereby obligating funds, one or more projects that support
the development objective are further defined and designed by USAID in
conjunction with the partner government, including any potential government
implementing entities. When the PFMRAF Stage 2 assessment is completed
as part of the project design process, the project-specific AUPGS will be
incorporated as a mandatory annex in the PAD. Once the Mission Director
signs the Project Authorization, the PD Team may initiate negotiations with the
involved partner government entities. Funds for G2G activities included in the
project are typically sub-obligated through an IL. The IL confirms financing and
permits initiation of the G2G activities.
See ADS 220sab, G2G Programming Lifecycle: Development Objective
Agreement for a diagram describing the process. For funds obligated in a
Bilateral Project Agreement (BPA), see ADS 220saa, G2G Programming
Lifecycle: Bilateral Project Agreement for a diagram describing the process.
For program/non-project assistance, see ADS 220sad, G2G Programming
Lifecycle: Project Assistance Agreement for a diagram describing the
process. These different types of G2G agreements are described in more
detail in section 220.3.5.2.

b.

AUPGS and Project Design

The PFMRAF process leading to the AUPGS must be integrated into the project
design process, beginning with the Concept Paper.
(1)

The project design process concludes with completion of the PAD

(including the AUPGS) and the Mission Director signing the Project
Authorization.

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c.

(2)

The results of the Stage 1 Rapid Appraisal and Stage 2 Risk

Assessment will be refined and adjusted by final project design
decisions and documented in the AUPGS, and such risk mitigation
measures as, capacity building, technical assistance, concurrent
audits, and disbursements in tranches, etc. must be incorporated into
project implementation plans, as appropriate. The results may
facilitate transfer of greater responsibility for implementation to the
partner government once capacity is built.

(3)

Every project involving the implementation of a G2G activity must

include a project-specific fiduciary risk mitigation plan in an AUPGS.

(4)

While analysis contributing to an AUPGS may cover more than one

project implemented by a single partner government entity or more
than one partner government entity implementing the same project,
the AUPGS should be project-specific because of distinct project
purposes; and therefore, distinct risk analyses and mitigation plans.

(5)

USAID is legally required to address or mitigate all partner government

risks identified by the PFMRAF/project design process. However,
Missions must be aware that the more extensive the risk mitigation
measures become (particularly those of a verification or approval
nature that are externally imposed), the less the PFM, procurement,
and other government systems may be considered to be the partner
governments own systems. In cases where weaknesses or level of
risk need to be mitigated, Missions should identify PFM and public
accountability strengthening, capacity development opportunities, and
a strategy by which USAID assistance can move from employing
special oversight to full use of PGS without the need for extensive,
externally imposed risk mitigation measures. In such cases,
associated technical assistance and its estimated cost must be
included in the PAD.

(6)

Missions may consider a phased approach to project design and

implementation. It may be reasonable to authorize a PAD and begin
activities that strengthen PFM systems and later amend the PAD to
provide for direct G2G financing when the PHF or other PGS/capacity
can successfully implement direct agreements.

Preparation of the Project Appraisal Document (PAD)

(1)

As the design of a project progresses from concept paper through the

analytical process, the Mission Project Design Team will prepare the
PAD and, ultimately, the Project Authorization (PA) as part of the
planning process outlined in ADS 201.3.11 and in accordance with
applicable Mission order(s) concerning project approval. Selection of
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implementation mechanisms, financing methods, and procurement
planning are essential parts of this planning process.
(2)

The separate, comprehensive PAD and the PA memorializes

compliance with all project planning requirements including USAID
planning, strategy, financial planning, the analytical basis for the
project, the results of the PFMRAF, and all other policy and legal
requirements.

(3)

The PAD will contain the detailed budgets for the whole project,
including all project activities (G2G and non-G2G) that finance inputs
or outputs, or a justification for the level of financing for Program
Assistance (see Program Assistance Policy). For both project
assistance and program assistance, a full discussion of implementing
arrangements and methods of financing is required in the PAD (see
220.3.3.2 for further discussion of G2G implementing mechanisms).

(4)

The PAD will contain plans for project monitoring and evaluation,
indicating how the project is complying with ADS 203. The plan should
clearly describe how the project will collect needed data from project
inception (baseline data), and periodically over the life of the project for
both monitoring and evaluation purposes. Performance indicators and
evaluation questions may be jointly identified with the host
government, as appropriate. Missions should pay careful attention
during the project design stage to clarify monitoring roles and
responsibilities of the partner government entity, including indicator
definitions, data collection methodologies, and reporting. In developing
the project monitoring and evaluation plan, Missions should consider
approaches for measuring the projects specific capacity building
objectives. Missions should consider evaluation questions that include
the effectiveness and sustainability of the use of PGS in meeting
assistance objectives and the effectiveness of related capacity building
support to partner government entities. The PAD may also include a
Learning Approach (see ADS 201.3.3.5 and 201.3.15.4f) which will
outline processes to ensure the Mission and partner government entity
collaborate for synergies, and combine critical analyses and periodic
reflection with adaptive management to maintain relevance of project
activities.

(5)

The PAD must also include a sustainability analysis that, at a

minimum, must include a technical capacity analysis of the partner
government implementing entity to implement the project and a
recurrent cost analysis pursuant to ADS 201.3.12.1 and 220.3.4.3f.

(6)

The Mission can amend the PAD and PA, if the Mission has an
ongoing project that it wishes to amend to add a G2G activity. The
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amendment must include the Stage 2 assessment and AUPGS, as
well as other programmatic analyses related to the use of a partner
government entity (institutional, technical, sustainability, etc.) and a
revised budget. The Mission must also complete an amendment to the
project authorization for the signature of the Mission Director.
(7)
220.3.4.1

See ADS 201 and ADS 203 for further specific guidance on the PAD.

The Approval for Use of Partner Government Systems (AUPGS)

Effective Date: 07/28/2014

The AUPGS is an addendum to the PAD which documents the due diligence
requirements and associated fiduciary risk mitigation plan for using PGS. The AUPGS
establishes USAIDs and the partner governments fiduciary risk management strategy
and guidelines for the life of the respective project. The AUPGS must:
a.

Result from a Stage 1 Rapid Appraisal and Stage 2 Risk Assessment;

b.

Be incorporated into the PAD for projects that include G2G activities and
must be completed prior to PAD finalization and Project Authorization;

c.

Describe a project-specific fiduciary risk mitigation plan (see 220.3.1.6)

which accounts for all identified fiduciary risks as informed by the project
design process;

d.

Outline management, monitoring, and reporting roles and responsibilities

over G2G activities included within the project, including adherence to the
risk mitigation plan;

e.

Document that the PFM systems that will be used for the implementation of
USAID development assistance will be subject to:
(1)

Periodic financial audit as provided in the BAA and ADS 591;

(2)

Periodic re-assessment of the Stage 1 Rapid Appraisal and the

Stage 2 Risk Assessment, as described in this ADS chapter;

(3)

Periodic reporting and oversight, including compliance with any

risk mitigation measures established in the risk mitigation plan;

(4)

Evaluation, in accordance with ADS 203, of the outcomes and

effectiveness of the project and its G2G activities and of related
capacity building support to implementing partner government
entities; and

(5)

Be reviewed for concurrence by the PGS Team.

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The Project Authorization, to be signed by the Mission Director, will clearly state that the
AUPGS is approved.
220.3.4.2

Types of G2G Assistance andDesign Overview

Effective Date: 07/28/2014

a.

USAID generally finances implementation of development assistance through four

general types of implementers:
(1)

Partner government entities;

(2)

Private sector contractors or recipients (see ADS 302 and ADS 303,
respectively), including local civil society organizations and other nongovernmental organizations (see 220.3.4.3);

(3)

Other U.S. Government agencies (see ADS 306, Interagency

Agreements); and

(4)

Public International Organizations or bilateral donors (see ADS 308

and ADS 351, respectively).

b.

For implementation by partner government entities, G2G project activities may

employ a variety of funding mechanisms (outlined below), but an initial choice
between two basic categories of assistance is required: program assistance or
project assistance (see Program Assistance Policy). Their most salient features
are described in more detail in the implementation section, 220.3.5.2. Note: the
term program in the context of program assistance as used in this ADS chapter
is not meant to coincide with the term program as used in ADS 201 (see ADS
201.3.11). Both project assistance and program assistance may be involved in
projects as defined in ADS 201.

c.

Project Assistance: Under project assistance, the purpose of USAID assistance

is to substantively and sustainably improve the lives of USAIDs target population
through:

Improved services (e.g., health, education);

Increased incomes;

Food security;

Stronger democracies, and

Better governance, etc.

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To achieve the purpose, USAID provides financing for specific project inputs, such
as technical assistance, training, equipment, vehicles, capital, construction, etc. All
inputs are identified during the design of the project activity and budgeted in the
PAD. Budget tables are included in the PAD, and the obligating or sub-obligating
documents, to facilitate implementation and ensure transparency. These should
be sufficiently detailed to meet U.S. Government requirements for estimating the
costs of the activity. There are two methods of financing G2G project activities:

d.

e.

(1)

Cost reimbursement (inputs), and

(2)

Fixed amount reimbursement (outputs or associated milestones).

Program Assistance (See ADS 201.3.11): Under program assistance, USAID

provides a generalized resource transfer, in the form of foreign exchange or
commodities, to the partner government to alleviate constraints that are policy
(DA/ESF) or resource (Economic Support Funds (ESF)) based. Under program
assistance, individual transfers of funds are dependent on the completion of
performance actions by the partner government and funds are only disbursed after
program actions have been completed. There are two types of program assistance
implementing mechanisms; both involve resource transfers, but are used to
achieve different results and are implemented differently:
(1)

Sector program assistance, and

(2)

Balance of payments (BoP) or general budget support (GBS).

Choice of Funding Mechanism: The choice of the appropriate funding

mechanism for all project activities must be based on a clear statement of the
overall project purpose. Projects may finance different activities with very different
funding and implementing mechanisms. G2G project activities may employ a
variety of funding mechanisms to finance approved activities and inputs. The
selection of G2G funding mechanisms should be determined by, among other
things:
(1)

Whether the project purpose lends itself to project assistance or

program (non-project) assistance (see 220.3.4.3c);

(2)

The applicability, availability, and accuracy of input cost data;

(3)

The nature of the project or activity and how its results will be
sustained into the future;

(4)

The technical capacity and institutional strength of the implementing

entity;

(5)

The results of the PFMRAF Stage 2 Risk Assessment; and

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(6)

Management burdens on available resources in the Mission and

partner government.

Before selecting and negotiating a particular implementing mechanism with a

partner government entity, Missions should identify all of the mechanisms available
for the project activities and fully understand the positive and negative aspects of
each mechanism.
220.3.4.3

Design Considerations for G2G Projects and Activities

Effective Date: 07/28/2014

The design of projects that include activities implemented by partner government

entities involve several important considerations.
a.

Incorporation of PFMRAF and AUPGS

(1)

Risk mitigation measures, such as capacity building, training and

technical assistance, concurrent audits, and tranched disbursements
should be incorporated into project design, where appropriate. If
employed, these may facilitate increasing direct implementation
responsibility on partner government entities once capacity is
strengthened.

(2)

Depending on the results of the PFMRAF Stages 1 and 2, inclusion of

an incremental approach may be useful, under which the partner
government would be expected to demonstrate measured progress in
addressing identified PFM weaknesses. Quantitative limits on funds
advanced or simply dividing the project into phases may be used to
limit USAIDs fiduciary exposure at any one point and should be
incorporated into the risk mitigation plan. See ADS 220maj,
Advances for G2G Assistance and ADS 636, Program Funded
Advances for guidance on advances of project funds.

(3)

USAID and its partner government counterparts must agree on a

reporting plan that includes periodic progress reports from the
responsible government counterpart. These will include:

Reporting on the performance indicators identified in the

Monitoring and Evaluation Plan and Learning Approach that
measure progress towards goals and objectives of the USAIDfunded project;

Periodic implementation progress meetings; and

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Subsequent, jointly-agree plans of action to address

implementation problems.

Monitoring of all project activities will be reflected in the broader project

monitoring and evaluation plan presented in the PAD. Such monitoring
plans should include provisions to ensure partner government follow-up on
any risk mitigation measures established in the AUPGS, the PAD, and/or
the Project Authorization.
(4)

Consideration must be given to incorporating the results of the

PFMRAF Stages 1 and 2 and any technical assistance provided to
address diagnosed weaknesses, into the monitoring and evaluation
plan, if appropriate. In the case of program assistance, disbursement
of USAID funds may be linked programmatically to the success of
mitigation measures agreed upon in the Program Agreement. These
mitigation measures may also be defined as project activities in the
PAD or spelled out as covenants or conditions precedent to
disbursement in the PA and the subsequent sub-obligating document
(the IL).

(5)

As appropriate, Missions should use the following financial oversight

provisions for projects being implemented by government partners:
(a)

Use of existing partner government indicators and reporting

mechanisms for financial reporting, to the greatest degree
possible;

(b) Fixed and appropriately timed periodic reporting by the partner

government on the receipt and use of funds, including (where
applicable) policy or performance benchmarks; and
(c)

(6)

Adjustment of risk mitigation features as implementation

progresses; i.e., adding, deleting, or changing risk mitigation
approaches by joint agreement, as necessary.

Procurement. The use of PGS generally includes use of partner

government procurement systems. It is USAID policy to rely on the
partner governments own procurement laws and regulations, policies,
and procedures to the greatest extent permitted by USAID regulations
and policy, subject to the results of the risk assessment process.
However, in deciding how to rely on partner government procurement
systems, USAID Missions should take into consideration the following:
(a)

The way in which USG legal and policy requirements apply

vary with the G2G implementing modality. Below are some

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examples, but Missions should consult their cognizant RLA or
GC attorney for additional information.
(b) Procurement under a Fixed Amount Reimbursement
mechanism must follow the requirements of ADS 220mah,
G2G Implementing and Funding Mechanisms Fixed
Amount Reimbursement;
(c)

Requiring USAID pre-approval of partner government

procurements, if imposed by a Mission as a financial risk
mitigation measure, may potentially trigger certain
requirements (e.g., Defense Base Act insurance, third party
liability, etc.). To adequately balance burdens and benefits
involved in risk management, the Mission will need to consult
with the relevant RLA, GC attorney, or M/OAA on the legal
implications of USAID approvals of partner government
actions.

(d) Payment directly by USAID to a partner government contractor

or grant recipient for project assistance requires the use of
ADS 305 procedures;

(7)

(e)

Except as described in ADS 310, Source and Nationality

Requirements for Procurement of Commodities and
Services Financed by USAID, ADS 312,Eligibility of
Commodities, and this ADS chapter, USAIDs
source/nationality regulation at 22 CFR 228 applies to partner
government procurements for project assistance unless such
procurements are limited to local costs (available for purchase
in the partner country); and

(f)

While the partner government implementing entity is not

legally required to follow the competition requirements legally
applicable to USAIDs own direct contracting such as provided
in the Federal Acquisition Regulation, USAID should
encourage the maximum use of competition by the partner
government implementing entity, subject to:
(i)

The partner governments own legal and policy

requirements, and

(ii)

Sound public procurement principles and practices.

Additional Project Design guidance and materials are available in ADS

201, from PPL/SPP, and on ProgramNet to assist with project design.

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b.

Use of Different Modalities for Project Implementation

(1)

It is typical for a USAID-financed development project to employ

various complementary project activities and funding mechanisms to
achieve the project purpose.

(2)

From the Logical Framework, a required component of USAIDs project

design approach (see ADS 201), project activities produce a set of
project outputs that, when completed, achieve the project purpose.
How the project achieves each distinct project output should be
considered individually. For example, building a series of standard
elementary school classrooms may be most efficiently achieved
through a FAR activity. Increasing the pedagogical capacity of the
teacher training facility may be most efficiently achieved through a
combination of training and technical assistance. Textbooks may be
procured most efficiently via contract from a local book publisher or
printer. Some of these activities may be completed most efficiently by
the partner government; others may be completed most efficiently
through USAID-direct contracts.
During the project design process, the partner government and USAID
should first determine the outputs necessary to reach the project
purpose. Then, USAID and the partner government entity will
determine how these outputs will be achieved; e.g., what kinds of
activities are required and what methods of implementation and
financing are most appropriate to successfully complete these
activities. The flexibility of the design approach allows the Mission and
the partner government to choose the most appropriate, effective, and
efficient means of achieving the project outputs.
Throughout the design process, Missions will strive to ensure that the
partner government is charged with responsibility for the success of
activities most important to the sustainability of project results.

(3)

c.

Budgets, cost estimates, and implementation of all G2G assistance

(project assistance and NPA) must follow Recurrent Cost Policy and
Salary Supplement Policy (see ADS 220mac, Legal Requirements
for G2G Assistance).

Consideration of Program (or Non-Project) Assistance Modalities

(1)

Program Assistance includes two sub-types: sector program

assistance (SPA), and BoP/GBP (see Program Assistance Policy).
Whereas these sub-types share some common elements (e.g.,
resource transfer mechanisms and, often, host country owned local
currency operations), they differ in focus and objectives.
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d.

(2)

In certain countries with particularly well-developed national

development strategies, technical capacity, and strong PFM systems,
SPA should be considered as a means to achieving broad-based,
sector development results. SPA promotes medium- to long-term
increases in production or efficiency in a defined economic or social
sector or sub-sector. Such assistance is directly linked to specific
policy, institutional or other partner government actions necessary to
further or achieve agreed-upon development objectives at the sectorial
level. Disbursement in foreign exchange (or internationally procured
commodities) occurs after the agreed-upon actions are taken. As
resources are provided, they are deposited or transferred to the
partner government for its use, governed largely by its own PFM and
other systems. These programs are generally appropriate when the
purpose is to transform a particular sector (e.g., agriculture, health)
and the main constraints to achieving significant sector development
results require a mixture of institutional improvements, systems
strengthening, policy changes, and budget expansion. SPA
approaches are often combined with project assistance activities that
provide technical assistance, or complementary sector project
investments in infrastructure, training, etc.

(3)

BoP/GBS is a modality that may be primarily concerned with promoting

economic and political stability by bridging short-term public sector
budget and/or BoP short-falls. In appropriate cases, this assistance
may be accompanied by, or conditioned upon, institutional or policy
reforms. Typically this assistance is provided to fragile states and
strategic partners. The time horizon for this type of resource transfer
program may be short-, medium-, or long-term, depending on the
structural nature of the resource short-falls. Such programs are
normally financed with ESF and have a generally high level of USG,
international, or foreign policy support.

Multi-Donor Approaches
(1)

Missions planning projects using PGS may consider coordinating with

other bilateral and multilateral donors (also referred to as public
international organizations) on project approaches, joint funding
arrangements, and other coordination measures such as those in ADS
308 and ADS 351 as part of the project design process

(2)

When working with another donor serving as the Trustee of a MDTF or

lead donor of a pooled funding arrangement where USAID and the
other donors funds will flow through a partner governments systems,
the PGS Team must review and confirm the MDTF trustees or lead
donors administrative arrangements for the pertinent multi-donor (or
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other) trust fund under consideration for USAID financing. The review
must include fiduciary risk management and other accountability
arrangements, to be established by the MDTF trustee/lead donor to
assess and monitor partner government PFM systems. This is
assuming that those systems will be used for project
implementation. PGS Teams should refrain, to the maximum extent
possible, from duplicating the work of the administrative agent (the
MDTF trustee or its agent) of such funds by directly examining the
partner government PFM systems. Effectively, it is the MDTF trustees
oversight, not the PGS themselves, which must be examined. The
documentation establishing USAIDs participation in such MDTFs must
include provisions that clearly establish the trustees responsibility as
the administrative agent for risk management and treatment.
(3)

e.

Trust funds managed by the partner government (multi-donor trust

funds or baskets) may involve issues similar to those involved when a
multi-lateral or other bilateral donor acts as a trustee/lead donor.
When a fund is managed by the partner government itself and the
funds will use the partner governments PFM or other systems to
implement development activities, the policies and procedures of this
ADS chapter apply to the fund. PGS Teams should attempt to
coordinate with and rely upon, other contributing donors assessment
of the trustees financial and other oversight capacity and risks.
Missions must ensure that such other donors efforts are compatible
with and sufficiently meet the processes and requirements of this ADS
chapter.

USAID direct contracts and grants

(1)

Pursuant to ADS 201, ADS 302, and ADS 303, as applicable, USAID
may:
(a)

Award a contract to or consent to a sub-contract with a partner

government pursuant to ADS 302.3.3;

(b) Approve a Grant under Contract to a partner government

pursuant to ADS 201.3.15.4 and ADS 302.3.4.12; and
(c)

(2)

Approve a sub-award to a partner government by a direct

assistance recipient pursuant to ADS 303.3.21.

It is USAID policy to increase its direct assistance to partner

governments to achieve sustainable development results. After
xx/xx/xxxx no prime award to a contractor or recipient may contain
sub-awards that provide funds to partner governmental entities unless
a PAD or Determination & Finding, as specified in ADS 302.3.4.12 or
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ADS 303.3.21, is approved by the cognizant Bureau AA (in
consultation with relevant Pillar or Regional AAs, as applicable) and
the AA for Management and is provided to the Contracting Officer.
Pursuant to ADS 201.3.15.4, progress toward this deadline will be
evaluated approx. three years after the date of implementation and
may be extended or cancelled by the Administrator upon a finding that
implementation of the policy will unnecessarily interfere with the
Agency's work.
220.3.4.4

Bilateral Assistance Agreements (BAA)

Effective Date: 07/28/2014

The project design process must result in a determination to use appropriate obligating
and sub-obligating instruments for each project. Missions must document this
determination in the PAD and PA.
a.

The PAD and the PA approve a set of project or program activities. Funds for
activities approved in the PAD/PA may be obligated and sub-obligated in
different ways through different types of implementing mechanisms and
documents.

b.

A BAA may be
(1)

A Development Objective Grant Agreement (DOAG) (or Assistance

Agreement or Strategic Objective Grant Agreement (SOAG)) (see ADS
350);

(2)

A BPA;

(3)

A Program Assistance Agreement (PAA); or

(4)

A Limited Scope Grant Agreement (LSGA) (for small project

obligations of less than $500,000 (see ADS 350)).

BAAs are different in form and function from non-obligating documents such as
Memoranda of Understanding, sometimes used for bilateral program
coordination or political relationship purposes and non-obligating Framework
Bilateral Agreements (see ADS 349, International Agreements), which
establish the general terms and conditions of the U.S. Government bilateral
assistance relationship with the partner government, including diplomatic
privileges and immunities for USAID staff.
c.

Often, USAID foreign assistance funds are initially obligated bilaterally through
mechanisms such as DOAGs or SOAGs. In other cases, USAID-funded
bilateral projects are obligated for specific projects through a BPA or a LSGA,
which can then be sub-obligated to the government, a direct USAID contractor
or grantee, or a Public International Organization. Program assistance (Sector
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Program Assistance or BoP/GBS) must be obligated separately from project
assistance in a Program Assistance Agreement (see ADS 220sai, Sector
Program Assistance Agreement Template or ADS 220saj, Balance of
Payments/General Budget Support Assistance Agreement Template).
d.

In all cases, adequate technical and financial planning requirements must be

fulfilled prior to obligation in a DOAG or SOAG as required by FAA Section
611(a) (see ADS 201). In some instances, the BAA (e.g., DOAG) is executed
prior to the completion of a PAD. Multiple project activities identified in the PAD
are subsequently sub-obligated with a portion of the funding obligated in a
DOAG. See ADS 201 and ADS 350 and consult the Mission Program Officer
or RLA for additional information.

e.

A project funded through a DOAG or BPA may include multiple project activities
and these may utilize one or more implementation or funding mechanisms
(e.g., USAID direct contract, cost reimbursement, FAR). Activities may also be
managed directly by institutions of the partner government as well as
contractors and recipients funded directly through USAID sub-obligations (see
220.3.2.2). See ADS 220sab, G2G Programming Lifecycle: Development
Objective Agreement for a diagram describing the G2G design and project
delivery process.

f.

Where funds are obligated in a DOAG or BPA, subobligation of funds for

specific activities to a partner government implementing entity must be made by
IL. An IL is used to approve the activity, approve a budget for the activity, and
confirm an initial amount of financing for all or a portion of the activity being
funded.

g.

When G2G activities are sub-obligated with funds obligated in a DOAG,

Missions must follow these guidelines:
(1)

When a DOAG is the obligating document, it must describe the actual

or illustrative activities that are intended to achieve the defined
development objective as described in ADS 201.

(2)

G2G activities contemplated for financing under a DOAG must be

described in the DOAG at the same level as other DOAG implementing
activities. Final approval of G2G implementing activities and funding
instruments will then be made by IL upon completion of the project
design process, a PAD, and a Project Authorization. No funds made
available under a SOAG/DOAG may be sub-obligated until the
corresponding PAD has been completed and the Mission Director has
approved the Project Authorization.

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h.

(3)

When G2G activities or projects are revised or refined after the DOAG
is signed, the DOAG may need to be amended, particularly when the
DOAG describes actual activities rather than illustrative activities.

(4)

The DOAG must include an illustrative budget and the files must
document adequate financial planning (see ADS 201). The illustrative
budget may be further modified as needed (most easily in conjunction
with incremental obligations) to reflect actual funding decisions,
negotiations, unanticipated requirements, and other changes that the
partner government and USAID agree upon.

(5)

Missions/Operating Units must follow the guidance in ADS 350 for

SOAGs and DOAGs and must use the Development Objective
Agreement and Bilateral Project Agreement Template (non-health)
or the Development Objective Agreement and Bilateral Project
Agreement Template (health).

Direct obligation of funds for G2G activities into BPAs or PAAs must be done
according to the following:
(1)

Program assistance must be obligated directly into a PAA, and not

obligated initially into a broader SOAG or DOAG that combines both
program and project assistance (see 220.3.3). See ADS 220sad, G2G
Programming Lifecycle: Program Assistance Agreement for a
diagram describing the Program Assistance G2G design,
authorization, and implementation process.

(2)

Direct obligation of appropriated and allowed funds into a BPA may be

considered for projects with substantial G2G activity. See ADS
220saa, G2G Programming Lifecycle: Bilateral Project Agreement
for a diagram describing the BPA G2G design, authorization, and
implementation process.

(3)

Missions may consider funding BPAs when funds have not been
obligated in a DOAG (e.g., when there is no DOAG); when the PAD
has been approved and the project has been authorized; and when
other circumstances exist, such as:
(a)

When a development objective (DO) contains one or two,

narrowly defined Intermediate Results; or

(b) When management wishes to complete the design of the full

project (PAD/PA) and project technical and implementation
analyses prior to obligation of funding for activities.

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i.

(4)

Sub-obligation of G2G project funds obligated in a BPA is

accomplished via IL, as for DOAG-obligated funds.

(5)

The documentary form and legal content of a BPA closely resembles

that for a DOAG, although its approach, scope, and degree of
specificity largely differ (see ADS 350mac, Development Objective
Agreement and Bilateral Project Agreement Template (non-health)
or ADS 350mad, Development Objective Agreement and Bilateral
Project Agreement Template (health)).

(6)

See ADS 220sai, Sector Program Assistance Agreement Template

or ADS 220saj, Balance of Payments/General Budget Support
Assistance Agreement Template for more information on Program
Assistance Agreements.

Because both G2G and non-G2G funds are obligated in DOAGs, BPAs, or
LSGAs, no document modeled after an approved obligating document (see
ADS 621, Obligations) may be used to sub-obligate funds for a G2G activity.
(1)

A BPA/PAA may not be used to sub-obligate funds for a G2G activity

obligated in a DOAG.

(2)

The following may not be used to sub-obligate funds directly to a

partner government for a G2G activity for which funds are obligated in
either a DOAG or BPA:
(a)

Limited Scope Grant Agreements;

(b) ADS 303: Grants;

(c)

ADS 302: Contracts;

(d) ADS 308: PIO grants;

(e)

ADS 351: Agreements with Bilateral Donors;

(f)

ADS 349: Framework Agreements;

(g) Fixed Amount Reimbursement Agreements (note: FAR

activities authorized in a PAD and financed with funds
obligated via DOAG are treated as G2G activities in
accordance with this guidance and therefore are sub-obligated
via FAR ILs); or
(h) Memoranda of Agreement or Understanding (MOAs/MOUs).

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j.

All Foreign Assistance Act requirements, USAID policy requirements, and

standard operating requirements applicable to foreign assistance provided
under the BAA (DOAG or BPA) are normally included in the agreement (and
further referenced or amplified in an IL) to the extent they will be applicable to
the partner governments implementation (see ADS 350 and 220.3.2.5).

220.3.4.5

(1)

All compliance issues must be identified in a compliance plan outlined

in the PAD.

(2)

Partner government contributions, unless waived or inapplicable, must

be included in the DOAG or BPA, and in the project level budgets
presented in the PAD.

(3)

Additional explanation of legal requirements is contained in ADS

220mac, Legal Requirements for G2G Assistance (Also, see ADS
350mac, Development Objective Agreement and Bilateral Project
Agreement Template (non-health) or ADS 350mad, Development
Objective Agreement and Bilateral Project Agreement Template
(health)).

Implementation Letters for Sub-obligations

Effective Date: 07/28/2014

An Implementation Letter is the document for approving and managing G2G assistance
project activities and sub-obligating funds obligated in a DOAG or BPA. An IL confirms
financing for all or a portion of the total anticipated cost of the activity (see 220.3.4.3).
Project assistance ILs may describe, approve, and sub-obligate funds for one or more
G2G project assistance activities using different methods of financing (see 220.3.5.2 b).
220.3.5

Project Implementation When Using Partner Government Systems

Effective Date: 07/28/2014

It is important for the PGS Team to monitor progress and periodically evaluate the
effectiveness of the fiduciary and other risk mitigation measures put in place throughout
implementation via the selected partner government system. This is crucial for the
effective and efficient use of appropriated funds.
220.3.5.1

The Project Manager and the National Counterpart(s)

Effective Date: 07/28/2014

The Nature of the Bilateral Relationship. The success of and inherent nature of
bilateral development assistance is premised on a relationship of equal partnership
between two sovereign entities. USAID personnel must engage with partner
government personnel with the highest degree of professionalism, collegiality,
diplomacy, and collaborative intentions.

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a.

b.

Designated Representative. The Mission Director/Principal Officer serves as

the designated U.S. Government representative for the BAA. After approval of
G2G activities in the respective PAD, Mission Directors/Principal Officers are
responsible for negotiating, signing, administering, and, if needed at the
implementation stage, amending, suspending, or terminating an approved G2G
project activity with the partner government. Only the Mission Director/Principal
Officer, or other delegated officer pursuant to ADS 103, Delegations of
Authority has the authority to:
(1)

Execute the BAA, and

(2)

Approve and execute amendments to the BAA.

Delegations of Authority. Mission Directors/Principal Officers may designate

additional representatives from the Mission and the PGS Team to manage the
project and establish long-term, professional relationships with partner
government counterparts. These delegations may include the authority to:
(1)

Sign Implementation Letters, and

(2)

Take formal implementation actions under a BAA.

c.

Due to the inherently governmental functions involved, individuals designated

as delegated representatives of USAID for the BAA and/or implementation and
management of the project activities must be USAID personnel (direct hires or
PSCs (US or Foreign Service Nationals). PSCs must not be delegated the
authority to sub-obligate funds. See other restrictions on delegations to U.S.
PSCs and non-U.S. citizen employees in ADS 103.3.1.1.

d.

Additional Authorized Representatives. The Mission must notify the partner

government, in writing, of the USAID personnel and their delegated authorities
as Additional Authorized Representatives under the agreement.

220.3.5.2

Project and Program Implementing Mechanisms

Effective Date: 07/28/2014

Because the Mission Director/Principal Officer or other delegated officer is responsible

for negotiating and signing the BAA under which funds will flow through PGS for
implementation (see ADS 103.5.1), ultimately, he or she is responsible for selecting the
funding mechanism(s) to be used to finance G2G activities. The Project Design team
and other designated staff will assist and advise the Mission Director/Principal Officer.
a.

Selection of an Implementation/Funding Mechanism

Selection of G2G implementing mechanisms takes into account several

considerations.

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(1)

Competition is not required prior to entering into a BAA or issuing ILs

for implementation through PGS.

(2)

Missions should consider and select implementation/funding

mechanisms that can best achieve the purpose of the project or
activity, foster and deepen PFM capacity, and efficiently implement the
project or activity while guaranteeing accountability and promoting
sustainability. A brief description of the key bilateral implementing
mechanisms can be found in ADS 220maa, Key Bilateral Funding
Mechanisms. Often, more than one implementing mechanism may be
able to achieve the project/activity purpose.

(3)

Financial and programmatic risks will vary depending on the type of

implementing mechanism under consideration, as well as the capacity
of the implementing institution. Risk mitigation measures should be
established in bilateral agreements and other implementation
documents with due care, not to undermine the integrity of partner
government PFM and procurement systems. The goals are to
increase partner government capacity and sustain the benefits of
USAID investments.

(4)

A project assistance BAA (DOAG), LSGA, or BPA may incorporate:

One or more USAID bilateral funding mechanisms, and

Activities implemented by contractors and recipients.

See ADS 220sab, G2G Programming Lifecycle: Development

Objective Agreement for a diagram describing the DOAG G2G
design and project delivery process or ADS 220saa, G2G
Programming Lifecycle: Bilateral Project Agreement for a diagram
describing the BPA G2G design and project delivery process.
(5)

Program/non-project assistance and resource transfer mechanism(s)

must be obligated using a separate instrument than projectized
assistance approaches/mechanisms (see USAIDs Program
Assistance Policy). Also, see ADS 220sad, G2G Programming
Lifecycle: Project Assistance Agreement for a diagram describing
the Program Assistance G2G design, authorization, and
implementation process.

(6)

To the extent possible, Missions and Operating Units must avoid

negotiating or funding the establishment of separate, donor-funded
project implementation/management units (PIUs/PMUs) that operate
outside the existing systems and structure of the partner government.
It is USAID policy to use existing PGS entities and institutions in order
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to strengthen those already established by the partner government
rather than create or maintain unsustainable, separately operated
project management or implementation units.
(7)

b.

As part of the selection of the implementing mechanism, Missions must

determine that the proposed implementing ministry/agency/other unit
of government has staff with sufficient technical capacities to
implement the assistance being offered. This is accomplished through
a technical capacity analysis completed as part of the project design
process, as described in 220.3.2.3 f.

G2G Project Assistance Methods of Finance

(1)

Cost Reimbursement. Under this mechanism, USAID reimburses the

partner government entity for its actual costs and expenditures
incurred in carrying out the project or project activities.
(a)

Missions must identify the inputs and the estimated costs of

inputs to be financed by USAID and the partner government in
the DOAG or a BPA and budgeted in the PAD (see ADS
201.3.8.2).

(b) Budgets must provide sufficient detail to justify the level of

financing approved by the Mission.
(c)

For projects that are jointly approved by USAID and the

partner government outside of the governments budget cycle,
or when funding from the partner government is not available,
advance funding from USAID may be provided. Advances:
(i)

Can be provided in conjunction with cost

reimbursement projects on a revolving (advanceliquidation) basis;

(ii)

Should be subject to:

1.

Mission determination that adequate funding will

become available within the partner
governments budget to implement the project on
a reimbursement basis; and

2.

Periodic review and a renewal process subject to

USAID approval of continued funding.

(iii) Must follow ADS 220maj, Advances for G2G

Assistance.

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(d) USAID agrees to pay reasonable, allowable, and allocable
actual costs up to the amount sub-obligated for the activity,
and subject to periodic progress reviews of satisfactory activity
progress.

(2)

(e)

Additional policy and guidance on the use of Direct Cost

Reimbursement for G2G project assistance is contained in
ADS 220mag, G2G Implementing and Funding
Mechanisms Cost Reimbursement Projects.

(f)

Missions are encouraged to use the Cost Reimbursement

Implementation Letter Template (non-health) or Cost
Reimbursement Implementation Letter Template (health).

Fixed Amount Reimbursement (FAR). Under fixed amount

reimbursement, USAID reimburses a fixed amount per output or
associated milestone as the partner government completes each
identified output or associated milestone. The payment amount for
each output or associated milestone is the amount agreed to and fixed
in advance in the IL as a reasonable estimate of the cost to produce
the output or associated milestone and is not altered based on the
partner government entitys actual cost experience. The IL must also
establish quality standards for each output or associated milestone that
must be met and verified by USAID or its representative prior to
reimbursement.
(a)

The requirements for using FAR are:

(i)

Outputs or associated milestones must:

1.

Be objectively verifiable regarding completion

and quality;

2.

Be or contribute directly to sustainable and

independently useful outputs, regardless of
whether other outputs or activities are
completed;

3.

Be paid for in amounts based on reasonably

accurate, documented cost estimates. Outputs
or associated milestones may not be flexibly
priced to provide liquidity; and the payment
amount for each output or associated milestone
must be based on a reasonable and documented
estimate of the outputs or associated
milestones cost; and
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4.

(ii)

Be within the partner governments span of

management control to successfully complete as
designed.

Each output or associated milestone should be likely to

be completed in less than 12 months from the initiation
of work, although some variation in timing may result
from the nature of outputs or associated milestones
contemplated and actual implementation experience;

(iii) The payment amount for each output or associated

milestone must be based on:
1.

A detailed and reasonable estimate of its cost (or

a percentage thereof); and

2.

Documented verification by USAID of output or

associated milestone completion.

(iv) Programmatic risk increases for the partner government

entity assuming a significant portion of the financial risk
for actual costs under a FAR. Therefore, USAID must
assess and determine that the partner government
entitys management and budgetary capacity is
sufficient to produce the financed outputs or associated
milestones under a FAR before obligating or subobligating funds for a FAR. This assessment may be
conducted as part of the technical capacity analysis
required by ADS 201 (see ADS 201.3.15.3c) or
combined with the PFMRAF. When the technical
analysis is combined with the PFMRAF, the SOW and
report should provide separate sections covering
fiduciary and technical matters.
(b) Additional policy and guidance on the use of FAR is contained
in ADS 220mah, G2G Implementing and Funding
Mechanisms Fixed Amount Reimbursement.
(c)

On an exceptional basis, as justified, USAID may provide

advances under FAR, where necessary, so long as advances
are liquidated based on successful completion of outputs or
associated milestones rather than actual costs incurred.
Associated milestone payments must be refundable if the final
output is not completed.

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(d) FAR may include periodic adjustment of subsequent output or
associated milestone payment amounts based on changed
conditions, such as price escalation or unforeseeable inflation.
However, such adjustment must not be retroactive to works in
progress or previously completed. Missions must document
such adjustments and modify ILs in writing.
(e)

c.

Missions are encouraged to use the Fixed Amount

Reimbursement Implementation Letter Template (nonhealth) or Fixed Amount Reimbursement Implementation
Letter Template (health).

Program Assistance Implementing Mechanisms

(1)

Sector Program Assistance

(a)

Missions may undertake Sector Program Assistance

operations where such use promotes medium-to long-term
increases in production or efficiency in a specific economic
sector or sub-sector.

(b) The provision of SPA resources must be directly linked to

(based on and disbursed after execution of) specific policies,
institutional reforms, or other partner government actions
necessary to achieve agreed development objectives in the
identified sector or subsector.
(c)

A SPA may be funded with any category of appropriated

funding in any definable, approved USAID sector.

(d) Under SPA, USAID provides financial support for sector

performance actions, which accomplish all or part of the
programs purpose when completed.
(i)

SPA performance actions must be verifiable,

comprehensive, meaningful, and achievable.

(ii)

SPA performance actions must be included directly or

by reference as conditions precedent to the
disbursement of USAID funds under the Program
Assistance Agreement.

(iii) Prior to each disbursement of funds, the USAID Mission

will prepare documentation which explains how each
performance action was met (or not) and how the
Mission made its decision to disburse (or withhold
disbursement).
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(e)

Once performance actions or conditions are met, USAID

disburses U.S. dollars to the partner government.
(i)

Disbursement of appropriated funds to the partner

government is generally made into a partner
government-owned bank account held in an acceptable
correspondent bank in the U.S., preferably the Federal
Reserve Bank.

(ii)

A Congressional Notification (CN) is required for NonProject Assistance (NPA), including SPA, that is
separate and additional to those required for G2G
assessments and USAID programming.

(iii) SPA disbursements may be exempt from the separate

dollar account requirement if an exemption is justified
and notified in the Congressional Notification.
(iv) Advances of appropriated funds are not authorized
under a SPA.
(f)

If the U.S. dollar disbursements under the program assistance

agreement do not generate local currency (e.g., through the
sale of foreign exchange or purchase of commodities), a
separate deposit of Host Country Owned Local Currency
(HCOLC) may be stipulated in the agreement. However, a
separate HCOLC deposit is not legally required. Generated or
deposited HCOLC will be deposited into a separate Special
Local Currency bank account. The use of the HCOLC will be
jointly programmed in accordance with USAID policy and local
currency programming guidance. Generation (or deposit) of
HCOLC is typically used when USAID wishes to be more
closely involved in ensuring the allocation of funding to specific
sector budgets or budget line items. This increases USAIDs
management responsibility for the program, but also allows
USAID to influence the partner governments budget for the
target sector in a meaningful way.

(g) A SPA is subject to the design parameters of the project

design guidance in ADS 201. The Mission Director/Principal
Officer must authorize a PAD covering the SPA. However,
those sections of the design guidance covering detailed, line
item budgeting would not be appropriate given the nature of
SPA financing. Also, the SPA PAD must meet the analytical
requirements established in Program Assistance Policy.
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(h) SPAs must include a monitoring and evaluation plan.

(2)

(i)

Additional policy and guidance on the use of SPA is contained

in Program Assistance Policy.

(j)

Missions are encouraged to use the Sector Program

Assistance Agreement Template.

Balance of Payments/Budget Support (BoP/GBS) (also commonly

referred to as cash transfer assistance)
(a)

These types of resource transfers may be provided where

exceptional political or economic circumstances are present
and there is a need to promote economic and political stability.

(b) This support is usually provided from ESF appropriations, and

normally involves specific Congressional approval, either
through special appropriation or through the Congressional
Notification process.
This assistance addresses a short- to long-term resource constraint
and may also include partner government actions (conditionality) that
help alleviate constraints to future growth and/or establish a stable
political environment. Typically these programs finance foreign
exchange and/or budgetary shortfalls.

(c)

(i)

Actions to be taken by the partner government are

included in an obligating bilateral program assistance
agreement as conditions precedent to disbursement.

(ii)

Dollar resources are provided via a cash transfer after

the conditions precedent are met. The dollar resources
are provided on a generalized basis, (i.e., their end
use is not tied to specific project inputs or costs), and
they generally support a program purpose that relates
to a foreign exchange or budgetary shortfall. However,
the end use of the dollar resources must be identified in
the Program Assistance Agreement and they are
tracked and auditable to their end uses.

Commodity Import Programs (CIPs)

(i)

CIPs are a form of program assistance that provides

BoP/GBS in countries where the economy is unstable

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and basic economic institutions, especially foreign
exchange management, are functioning poorly.
(ii)

Under this form of assistance, USAID enters into a PAA

with the partner government which allows for the private
or public sector purchase of international commodities.
1.

The importers deposit the cost of the

commodities in local currency (HCOLC), which is
subsequently jointly programmed by the partner
government and USAID;

2.

The importer enters into the import contract and

imports the commodities; and

3.

USAID arranges for direct payment to the seller.

(iii) Under a CIP, both the dollar resources are auditable to

their end use and the HCOLC is auditable to the point
to which it is jointly programmed.
(iv) See ADS 307, Commodity Import Programs for
additional guidance on the use of CIPs.
(d) See ADS 220saj, Balance of Payments/General Budget
Support Assistance Agreement Template for BoP/GBS
agreement content.
220.3.5.3

Managing Bilateral Implementation and Communications- The Role

of the Implementation Letter (IL)
Effective Date: 07/28/2014

a.

General Guidance for the Content of ILs. An IL is an implementing

document that approves actions for activities for which funds have been
obligated via DOAG/BPA. An IL may not amend the DOAG/BPAs purpose or
the total amount of funding obligated by the DOAG/BPA, nor may it otherwise
amend its provisions except as noted below.
(1)

An IL may:
(a)

Amend Annex 1 of the DOAG/BPA;

(b) Amplify or explain DOAG/BPA provisions;

(c)

Provide details on how DOAG provisions apply to a particular

financing mechanism (e.g., a cost reimbursement);
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(d) Approve exceptions or changes to DOAG/BPA requirements

where permitted in the DOAG/BPA (e.g., requirements that
state except as USAID or the parties may otherwise agree in
writing);
(e)

Amplify terms, conditions, and working arrangements

established in the DOAG/BPA or initial IL;

(f)

Describe and provide detailed information about a project,

provide project level implementation guidance, and jointly
approve a project, as described in a PAD; and

(g) Subobligate funds for G2G project activities.

(2)

b.

Prior to approving or issuing any IL for G2G implementation or subobligation of funds, the Mission must ensure that the following
documents have been completed, approved, and/or authorized:

PFMRAF,

AUPGS,

Overarching PAD, and

Project Authorization.

Establishing Bilateral Implementation Arrangements for G2G Activities

(1)

G2G Activity Approval and Initial Funding. For G2G activities, an IL

is used to describe and approve a specific activity for which funds have
been obligated in a SOAG/DOAG. The activity approved is an
implementing activity which implements provisions of the
SOAG/DOAG.
(a)

Funding for specific G2G activities is sub-obligated in an IL for

activities obligated in a SOAG/DOAG or in a BPA. Every IL
that sub-obligates funds must be approved and signed by the
Mission Director/Principal Officer or as delegated.

(b) Depending on the nature and scope of the activity and the
funding available in the SOAG/DOAG/BPA, an IL may subobligate funds for an entire activity or it may sub-obligate funds
for an identified period or a lesser amount of funding.
Additional, incremental funding for an activity would be

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subobligated in a subsequent IL (see 220.3.5.2b for a subobligating IL template).
(c)

The Project Manager, Program Officer/Project Development

Officer, and RLA are responsible for ensuring that the initial IL,
and the BAA under which it is issued, is properly drafted and
prepared. The Mission Director/Principal Officer is ultimately
responsible for the content of the IL.

(d) Once the initial IL is drafted, USAID may submit it to the

partner government in draft form for review. The IL may be
subject to clarifications and negotiations at the request of the
partner government. After any negotiations, the IL will be
revised to incorporate any changes, and the negotiations and
changes may be recorded in a separate memorandum
prepared by the designated Mission Officer.
(e)

(2)

The Mission should then internally clear the IL and present it

to the partner government for its signature.

Basic Implementation Letter or Letters. Missions/Operating Units

may find it useful to negotiate and approve one or more bilateral
implementing ILs with the partner government that provide guidance
and specific implementation details for the specific project and/or the
specific G2G activity or activities approved in the BAA.
(a)

While all terms and conditions, as well as standard provisions,

applicable to the partner governments implementation of
project assistance under the BAA are normally in the relevant
SOAG/DOAG or BPA (e.g., audit, evaluation, government
counterpart financing, delegations of authority,
source/nationality, etc.), some terms may require amplification,
reference, or modification, if the latter is expressly provided in
the BAA. Such amplification, reference, or modification would
be accomplished via IL (modification is permitted via IL if the
BAA expressly permits this through language such as except
as USAID or the parties may otherwise agree in writing).

(b) A Basic Implementation Letter (or a series of ILs) might cover

the following topics, among other things:
(i)

Designations and Delegations of Authorities. For

G2G assistance projects in which the implementing
partner government entity (e.g., technical or line
ministry, sub-ministry service, district or municipality)
will be different from the BAA signatory entity (e.g.,
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Ministry of Planning, Finance or Central Bank), an IL
may designate an Additional Authorized Representative
for specified purposes. The Mission Director will also
inform the partner government implementing entity of
the name of the person serving as Project Manager for
the G2G project or activity.
(ii)

Disbursement Procedures and Documentation.

Within the scope of flexibility expressly allowed in the
BAA, ILs must include provisions explaining how BAA
requirements apply to the specific financing mechanism
(e.g. cost reimbursement, FAR, etc.) and how the
project financing mechanism operates.
(1)

See 220.3.5.2 for templates with common

IL terms by implementing mechanism and
funding type.

(2)

Where advances are authorized, see ADS

220maj, Advances for G2G Assistance.

(iii) Procurement Guidance and Principles. Any

weaknesses identified by the PFMRAF Stage 2 Risk
Assessment and retained in the final project design
related to the relevant procurement system(s) must be:

Addressed by the Mission in the mitigation plan

in the AUPGS, and

Incorporated into the terms of the agreement or

by IL.

Missions might find it useful to reiterate some of the

expected and basic principles that apply to
implementation of the activity, including the points at
which, and the means in which, SOAG/DOAG
provisions and requirements apply to the particular
project activity. This articulation may also include
identification of the documentation or certifications
required for review and/or approval by USAID. When
designing G2G projects and their procurement system
risk mitigation measures, Missions must mitigate all
identified risks while preserving to the maximum degree
possible the use of partner government procurement
procedures.

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(iv) Records, Inspections, and Audits and Terms of the
Assistance. ILs may be used to explain and amplify
SOAG/DOAG provisions regarding USAIDs rights, as
applied to the specific activity, to:

(v)

(1)

Audit the use of USAID funds by the partner

government on behalf of the USAID
Inspector General, the Government
Accountability Office, and other oversight
bodies (see ADS 591).

(2)

Inspect and review books, records, and

documentation associated with partner
government implementation of USAIDfunded activities.

Reports to be Submitted to USAID. A basic

implementing IL may be used to describe the nature,
content, and frequency of reporting during the
implementation of a project activity.
(1)

Reports may include financial reports,

activity implementation reports, or progress
reports on achieving important activity
benchmarks or project level indicators, as
determined by the Mission in conjunction
with the partner government implementing
entity.

(2)

This IL should establish the partner

government entity responsible for the
reporting, the details to be reported
(providing a report template), the frequency
of reporting, and the USAID individual or
office to where the report must be sent.

(vi) Project Committees or Joint Working Groups.

Establishing a partnership relationship for G2G project
management goes beyond formal communications
transmitted by IL. Such a relationship involves meeting
with partner government officials and implementing
institutions.
(1)

At a higher level, there are implications of

managing USAID funds through partner
governments that may involve several

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government entities, such as the Ministries
of Finance, Central Bank, Planning and the
implementing Ministry or organization; e.g.,
the Central Bank, local governments, etc.
Within USAID, issues related to project or
activity implementation may often involve
Mission staff in addition to the designated
DO team.
(2)

(3)

In order to firmly establish a partnership

approach to G2G implementation, it is often
appropriate to establish one or more
bilateral project working groups that meet
regularly over the life of the project or
activity. Such working groups could include
representatives from a variety of
government entities with an interest in the
project. Depending on the nature and level
of management cooperation involved, such
committees or groups may be formally
established by the Basic Implementation
Letter. USAID participants may include
PGS Team members, as designated by the
Mission Director, as well as nongovernmental and other stakeholders, as
appropriate.

Managing Implementation Actions and Approvals. ILs are used to

approve or concur in the full display of project actions, including the
following:
(a)

Activity approval and sub-obligations;

(b) DOAG conditions precedent;

(c)

Compliance with DOAG covenants;

(d) Changes to the Description of the Activity;

(e)

Establishment and Monitoring of Risk Mitigation Measures, if

any;

(f)

Approve work plans, as required;

(g) Establish an evaluation plan;

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(h) Establish an audit plan;

c.

(i)

Provide detailed descriptions of project activities; and

(j)

There may be exchanges of letters that do not rise to the level

of an IL.

IL Management
(1)

Drafting of ILs: It is the responsibility of Mission management to

outline how it will use ILs for project management, including
responsibilities, content, delegations of authority, etc. The project
manager, assisted by the DO Team, will initiate an IL when necessary
to effect or approve a project action. The DO Team Leader will assign
primary responsibility for drafting the IL and the Mission clearances
required, except as otherwise provided in Mission Orders or other
written policy.

(2)

Mission Clearances: Since ILs form the written record of G2G project
activity or project implementation, there must be a record of formal
clearances for each IL. Missions should direct how the clearance
process is managed and what offices must clear specified actions via a
Mission Order or other protocol.

(3)

Partner Government Concurrence: Partner government signature of

ILs is required where specified by the agreement, for instance to
amend Annex 1 or where the agreement states except as the parties
otherwise agree in writing. However, obtaining partner government
signature on ILs, even where not required, is helpful to facilitate partner
government officials understanding and acceptance of the projects,
USAID requirements, and partner government commitments. There
may be other ILs where partner government signature is not
necessary, such as ILs communicating a waiver or time extension,
unless required by the agreement.

(4)

Maintaining a Record of ILs. Each IL must be titled, describe the

action it takes, and reference the BAA and the activity.

220.4

MANDATORY REFERENCES

220.4.1

External Mandatory References

Effective Date: 07/28/2014

a.

22 CFR 216

b.

Foreign Assistance Act of 1961, as amended (FAA)

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c.

Section 529 (a) of the FY 2002 Appropriations Bill for Foreign Operations,
Export Financing, and Related Programs

d.

SFOAA FY 12 Section 703

e.

State Department Cable # 119780 (April 15, 1988; Unclassified)

220.4.2

Internal Mandatory References

Effective Date: 07/28/2014

a.

ADS 103, Delegations of Authority

b.

ADS 201, Planning

c.

ADS 203, Assessing and Learning

d.

ADS 204, Environmental Procedures

e.

ADS 220maa, Key Bilateral Funding Mechanisms

f.

ADS 220mac, Legal Requirements for G2G Assistance

g.

ADS 220mae, Public Financial Management Risk Assessment Framework

Manual

h.

ADS 220mag, G2G Implementing and Funding Mechanisms Cost

Reimbursement Projects

i.

ADS 220mah, G2G Implementing and Funding Mechanisms Fixed Amount

Reimbursement

j.

ADS 220maj, Advances for G2G Assistance

k.

ADS 220maq, Local Systems: A Framework for Supporting Sustained

Development

l.

ADS 301, Responsibility for Procurement

m.

ADS 302, USAID Direct Contracting

n.

ADS 303, Grants and Cooperative Agreements to Non-Governmental

Organizations

o.

ADS 305, Host Country Contracts

p.

ADS 306, Interagency Agreements

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q.

ADS 307, Commodity Import Programs

r.

ADS 308, Awards to Public International Organizations

s.

ADS 310, Source and Nationality Requirements for Procurement of

Commodities and Services Financed by USAID

t.

ADS 312, Eligibility of Commodities

u.

ADS 320, Branding and Marking

v.

ADS 349, International Agreements

w.

ADS 350, Grants to Foreign Governments

x.

ADS 350mac, Development Objective Agreement and Bilateral Project

Agreement Template (non-health)

y.

ADS 350mad, Development Objective Agreement and Bilateral Project

Agreement Template (health)

z.

ADS 351, Agreements with Bilateral Donors

aa. ADS 502, The USAID Records Management Program

ab. ADS 591, Financial Audits of USAID Contractors, Grantees, and Host
Government Entities
ac. ADS 621, Obligations
ad. ADS 624, Host Country-Owned Local Currency
ae. ADS 627, Local Currency Trust Fund Management
af.

ADS 636, Program Funded Advances

ag. Policy Directive 18

ah. Program Assistance Policy
ai.

Salary Supplement Policy

220.5

ADDITIONAL HELP
Effective Date: 07/28/2014

a.

ADS 220saa, G2G Programming Lifecycle: Bilateral Project Agreement

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b.

ADS 220sab, G2G Programming Lifecycle: Development Objective

Agreement

c.

ADS 220sad, G2G Programming Lifecycle: Project Assistance Agreement

d.

ADS 220sae, Cost Reimbursement Implementation Letter Template (nonhealth)

e.

ADS 220saf, Cost Reimbursement Implementation Letter Template (health)

f.

ADS 220sag, Fixed Amount Reimbursement Implementation Letter (nonhealth)

g.

ADS 220sah, Fixed Amount Reimbursement Implementation Letter Template

(health)

h.

ADS 220sai, Sector Program Assistance Agreement Template

i.

ADS 220saj, Balance of Payments/General Budget Support Assistance

Agreement Template

j.

ProgramNet

220.6

DEFINITIONS
Effective Date: 07/28/2014

This section defines terms including acronyms used in this document. For additional
definitions, please see the ADS Glossary.
Approval for the Use of Partner Government Systems (AUPGS)
An addendum to the PAD which documents the due diligence requirements and
associated fiduciary risk mitigation plan for using PGS. The AUPGS establishes
USAIDs and the partner governments fiduciary risk management strategy and
guidelines for the life of the respective project. The AUPGS is incorporated into the
Project Appraisal Document for projects that include G2G activities and must be
completed prior to PAD finalization and Project Authorization. (Chapter 220)
Bilateral Assistance Agreement (BAA)
A bilateral obligating agreement entered into for achievement of development or
strategic objectives, program assistance or to accomplish project activities, including a
Development Objective Grant Agreement (DOAG) (or Assistance Agreement or
Strategic Objective Grant Agreement (SOAG)) (see ADS 350), Bilateral Project
Agreement (BPA), Program Assistance Agreement (PAA), or Limited Scope Grant
Agreement (LSGA) (see ADS 350).When funds obligated in a Strategic or Development
Objective Agreement (S/DOAG) are used to finance USAIDs contribution to a
Government to Government (G2G) assistance project, the mechanism for approving
and managing project activities and sub-obligating funds for G2G activities is an
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Implementation Letter (IL). When funds financing USAIDs contribution to a G2G
assistance project are not obligated in a SOAG/DOAG, a BPA may be used to obligate
project funds. ILs are also used to sub-obligate G2G assistance project funds directly to
the partner government under a BPA or S/DOAG. Both S/DOAGs and BPAs may
contain a combination of activities carried out using implementing mechanisms that do
and do not use PGS (e.g., a combination of G2G assistance activities, grants to NGOs,
direct USAID contracts, delegated cooperation agreements with other donors, etc.) An
LSGA may be used for small project obligations to a partner government of less than
$500,000.When implementing program assistance (sector program assistance or
BoP/GBS), a Program Assistance Agreement must be used to separately obligate
program (non-project) assistance funds. (Chapter 220)
Democratic Accountability
A standard based upon the degree to which a country publicly discloses on an annual
basis its government budget and enforces access to information laws, the countrys
legislature, civil society, and media possess the rights and freedoms necessary to
enable the monitoring of the proposed G2G-funded activities, and the legislature,
supreme audit institution, and judiciary possess the independence to hold the executive
accountable for enforcing the above rights and monitor the expenditure of funds for
G2G activities. (Chapter 220)
Government to Government (G2G) Assistance
When USAID disburses funds directly to a partner government entity, including all
instances in which USAID finances a partner government entity of a bilateral foreign
assistance recipient country to implement a project or project activity, including nonproject assistance, using the partner governments own financial management,
procurement or other systems. (Chapter 220)
Implementation Letter (IL)
A letter issued by USAID under an agreement with a partner government that amplifies
and memorializes implementing details under the agreement. An IL may or may not
sub-obligate funds under the agreement. (Chapter 220 and 350)
Intermediate Result (IR)
A component of a results framework in a mission CDCS. An important result that is
seen as an essential step to achieving a Development Objective. IRs are measurable
results that may capture a number of discrete and more specific lower level results and
typically define the purpose of projects. (Chapters 200-203, 220)
Multi-donor trust funds
Pooled funding arrangement where USAID is one of multiple donors contributing to a
trust (or trust fund, or fund in trust) in which an entity (Public International
Organization or other donor) serves as a trustee, and title in the funds remains in
USAID and the other contributors as opposed to a grant in which title to the funds
passes to a PIO or other donor as a recipient. (Chapters 220 and 308)
Parastatal
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Government-funded or-owned organizations that are often otherwise independent of
government and whose debt obligations are generally not backed by the full faith and
credit of the sovereign government. (Chapters 220 and 249)
Partner Government Implementing Entity
An office, organization or body at any level of a public administration system (ministry,
department, agency, service, district or municipality) of a bilateral foreign assistance
recipient country that implements activities financed by or jointly programmed as a
result of funds disbursed by USAID directly to the partner government public financial
management system. (Chapter 220)
Partner Government Systems (PGS)
All government systems involved in the management of government operations
regardless of function, including financial, procurement, human resources, performance
monitoring, audit, disclosure, adjudication, regulation, enforcement and others. In the
context of Public Financial Management Risk Assessment Framework (PFMRAF),
Public Financial Management (PFM) systems are a subset of PGS. (Chapter 220)
Partner Government Systems Teams (PGS Teams)
Assist the Mission Director/Principal Officer in arranging, with partner government
counterparts, an assessment of the partner governments Public Financial Management
systems, as well as organizing Democracy Rights and Governance reviews, as
necessary. The PGS Team will be integrated into specific Project Design Teams
referenced in ADS 201. (Chapter 220)
Project Appraisal Document (PAD)
Documents the complete project design and serves as the reference document for
Project Authorization and subsequent implementation. The PAD should: define the
development problem to be addressed by the project; provide a description of the
technical approach to be followed during implementation; define the expected results at
the input, output, purpose, and goal level (as presented in the final logical framework);
present the financial plan and detailed budget; present an overall project
implementation and procurement plan; and present the Monitoring and Evaluation plan
and Learning Approach. (Chapters 200-203, 220)
Public Financial Management (PFM)
A class of systems and elements involved in the management of public resources. It
primarily refers to the processes, procedures and activities associated with spending
public resources to include budgeting, treasury, cash management, disbursement,
accounting and reporting, audit and control, and may include the financial management
features of various government systems such as procurement and human resources, as
well as the financial management aspects of transparency, governance and public
accountability. In the context of financial management and fiduciary risk identification,
procurement may be referred to as a separate system from other systems involved in
PFM for clarity and precision. (Chapter 220)

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Public Financial Management Risk Assessment Framework (PFMRAF) is USAIDs
risk management process to identify, mitigate and manage the fiduciary risks
encountered when considering Government to Government (G2G) assistance. It
focuses on fiduciary risks to which USG funds may be exposed to when administered
directly by the Public Financial Management (PFM) systems of the individual entities
intended to implement G2G funded activities. PFM assessments of individual entities
must include all systems that may be used in implementing an individual project.
(Chapter 220)
Public International Organization (PIO)
An international organization composed principally of countries or such other
organization as designated pursuant to section 308.2. (Chapters 220 and 308)
Trilateral assistance
Where USAID finances development activities implemented or financed by a
development assistance recipient country for the benefit of another development
recipient country. (Chapter 220)

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