USAID Leaks Report 001: MCC Management Challenges Fiscal Year 2009

Executive Summary: The Hits Keep Coming

Welcome to the bureaucratic circus that is the Millennium Challenge Corporation (MCC) circa 2009. If you thought USAID was an impenetrable maze of inefficiency and corruption, you haven’t seen anything yet. This Inspector General report is a brutal takedown of MCC’s inability to manage $340 million in suspended, terminated, or outright canceled projects across five different countries, all while throwing another $440 million into a Threshold Program that wasn’t even working.

Key Findings:

$340 Million in Planned Projects? Poof! MCC yanked funding in Madagascar, Honduras, Nicaragua, Armenia, and Mongolia due to political instability and a general failure to maintain democratic governance. The biggest loser? Mongolia ($188M gone) because a Russian-owned railway company refused to allow an audit.
The Threshold Program: A $440 Million Guessing Game. MCC dumped this cash into a program designed to make countries “compact-eligible.” The problem? The IG found no clear evidence that this program actually worked. Some countries got MCC compacts without even participating, while others received multiple threshold grants after already failing once.
Financial Management: A Masterclass in Bad Oversight. Despite receiving unqualified audits for six straight years, MCC’s ability to track its own money was laughable. Audits were late, oversight was weak, and some financial transactions lacked supporting documentation altogether. Imagine running a $6 billion program and not keeping receipts.
IT Security? What IT Security? The IG found MCC was still not fully compliant with federal cybersecurity laws—seven years after its creation. In other words, a $6 billion development agency was operating with security gaps wide enough to drive a truck through.

The Blame Game

So, Who’s Responsible for This Disaster?

Political Instability vs. Poor Planning: MCC keeps getting burned by partnering with shaky governments, then acting surprised when their projects collapse. It’s not corruption-proofing—it’s corruption-reacting.
Throwing Money at the Wall to See What Sticks: The Threshold Program was a half-billion-dollar social experiment that lacked accountability or measurable success. Some countries magically became eligible before the program ended. Others just…didn’t.
Financial Controls So Weak They Might as Well Not Exist: MCC outsourced its accounting to the Department of the Interior’s National Business Center, but neither agency actually reviewed the invoices behind the transactions.
A System Built on Hope, Not Oversight: The IG notes that MCC simply trusts that its country partners will provide receipts for expenses. Spoiler alert: They don’t. Audits went unmonitored, documentation was missing, and MCC’s accountants were asleep at the wheel.

Fraud vs. Waste vs. Reductions

Category	Amount ($M)	What Happened?
Waste	$440M	Threshold Program had no clear impact on country eligibility.
Reductions	$340M	Projects canceled due to coups, bad governance, or Russian interference.
Poor Oversight	N/A	Financial audits incomplete or delayed, missing documentation.

Key Contractors Involved

Millennium Challenge Account (MCA) entities – The local bodies running MCC-funded programs in each country. These groups failed to provide proper documentation.
U.S. Department of the Interior’s National Business Center – Managed MCC’s financial accounts but apparently never asked for receipts.
Russian-controlled UBTZ Railway (Mongolia) – Refused an audit, resulting in the cancellation of a $188 million project.

Specific Forms of Grift or Waste

“Pay First, Ask Questions Later” Accounting: MCC handed out millions to overseas projects without ensuring the funds were tracked properly.
The “Eligibility Illusion”: The Threshold Program burned $440 million to make countries eligible for MCC compacts—yet most of them either qualified before finishing the program or never qualified at all.
Mongolia’s Railway Scam: Russian partners refused to open the books, and instead of pushing back, MCC just canceled the entire $188M project.
Honduras, Nicaragua, Armenia: The Selective Ethics Game: MCC cut some projects due to “undemocratic elections” while continuing others in the same countries.

Policy or Political Issues Affecting the Projects

Bad Infrastructure Bets: Cost overruns and delays were common, yet MCC focused on throwing more money at problems instead of reforming its approach.every U.S. government agency to publicly disclose its biggest management failures. The OIG conducted audits, investigations, and evaluations into MCC’s financial and operational performance for Fiscal Year 2009—and it’s not a pretty picture.

MCC’s Self-Inflicted Political Risk: The agency partners with unstable governments, then panics and cancels projects when those governments collapse.

No Clear Strategy for Risk Mitigation: The IG warns that MCC’s method of responding to political crises on a case-by-case basis is unsustainable.

001-MCC_Management_Challenges_2009

Report 001 originally sourced from the USAID OIG here.

The Deep Dive

How the Money Was Allocated, Lost, or Stolen

At its core, this report is a damning exposé on MCC’s financial mismanagement and misguided development strategies. Let’s dissect exactly how the $340 million in lost projects and $440 million in pointless Threshold Programs went down.

1. The $340 Million That Disappeared: Political Chaos Meets Bureaucratic Incompetence

MCC was created with the lofty goal of funding long-term infrastructure and development projects in “democratic” developing nations. The problem? Political chaos doesn’t wait for five-year funding cycles.

Here’s where the cash evaporated:

Madagascar: $23M Gone – Coup Casualty. When Madagascar’s democratically elected president was booted in March 2009, MCC yanked its funding just four days later. The IG found that this quick termination meant that millions were left in limbo, with no clear accountability for how much had already been spent.
Honduras: $11M Trimmed – Selective Sanctions. A June 2009 coup put MCC in a tough spot. Instead of pulling out completely, they kept funding an agricultural irrigation project but canceled a rural roads rehabilitation project. Why? Because the irrigation project was already too far along, and MCC couldn’t afford to lose face.
Nicaragua: $61M Reduced – Election Interference, but Not Too Much. The 2008 elections were filled with fraud, leading MCC to pull funding for a property regularization program and an unstarted road project. However, they continued funding already existing projects—showing that MCC was willing to look the other way when convenient.
Armenia: $59M Cut – A Case of Too Little, Too Late. Undemocratic elections in early 2008 led to MCC pulling the plug on a rural roads project. The problem? This was already near the end of the compact, meaning the money sat unspent for months before MCC formally admitted failure.
Mongolia: $188M Canceled – Russian Rail Sabotage. MCC had a $285M compact with Mongolia, but nearly two-thirds of that was tied up in a railway project controlled by a joint Mongolian-Russian company. When the Russian side refused to allow an audit, MCC pulled the plug—but with no plan to reallocate those funds effectively.

2. The $440 Million “Threshold Program” That Did…Nothing

The Threshold Program was meant to help countries qualify for MCC compacts by funding governance improvements, anti-corruption programs, and economic reforms. Sounds great, right? Except for one problem:

🔴 The IG found NO clear evidence that the program worked.

Here’s how bad it got:

8 of 12 countries in the program became MCC-eligible BEFORE the program ended. That means MCC spent money on reforms that didn’t even contribute to their eligibility.
3 countries NEVER became eligible even after MCC pumped millions into their reforms.
1 country actually got compact funding before its Threshold Program even ended!

MCC was basically throwing hundreds of millions at countries and hoping for the best. It didn’t track effectiveness, didn’t have clear accountability, and essentially ran an expensive international lottery.

3. Financial Oversight: A Case Study in Neglect

MCC’s financial controls were so weak that the IG found:

MCA entities (local partners) often failed to provide proper documentation for expenses.
USAID-managed Threshold Programs didn’t respond to audit requests for supporting financial documents.
Quarterly and year-end financial statements had errors and misstatements because MCC wasn’t performing proper quality-control checks.
Audit reports from MCA entities weren’t submitted on time—leaving MCC blind to how funds were actually spent.

In short: MCC’s financial oversight was a joke. Money was being thrown around, receipts were optional, and by the time auditors started asking questions, the funds had already disappeared.

How MCC Burned Through Billions with No Accountability

At this point, it’s clear that MCC wasn’t just fumbling the ball—it wasn’t even playing the same sport. The Inspector General’s 2009 report paints a picture of an agency that was:

Cancelling hundreds of millions in projects mid-stream due to political turmoil.
Dumping $440 million into a program with no measurable results.
Completely ignoring financial oversight to the point where it couldn’t even track expenses.
Running IT security like it was still 1999, failing to comply with basic cybersecurity laws.

Let’s break it all down.

Political, Operational, and Financial Challenges

1. MCC’s “Surprise” at Political Instability: A Foreseeable Disaster

MCC prides itself on choosing developing countries with “good governance” for funding. Yet, by 2009, it had already been burned in multiple nations where coups, election fraud, and general instability torched $340 million in funding.

The biggest joke? MCC acted like these events were unpredictable.

Madagascar had long-standing political tensions before the 2009 coup—MCC still threw in millions.
Honduras’ political instability was well known, but MCC funded projects anyway, then had to awkwardly cut only some funding when the government collapsed.
Nicaragua’s 2008 elections were widely condemned, yet MCC only partially pulled out, allowing some projects to continue despite the fraud.
Mongolia’s railway deal was a train wreck from the start. MCC should have known Russia wouldn’t allow transparency in a strategic asset. Instead, it wasted $188 million before realizing it had no leverage.

MCC wasn’t just bad at picking stable partners—it was bad at reacting when things fell apart. The agency had no clear policy on how to handle governments that backslid into authoritarianism. It just made panicked, case-by-case decisions.

2. The $440 Million Threshold Program Was a Scam

By now, we’ve established that MCC blew nearly half a billion dollars on a program that had:

✅ No clear impact on country eligibility.
✅ No accountability for spending.
✅ No evidence it worked at all.

The IG’s findings were brutal:

Some countries qualified before the program ended—meaning the money had no impact.
Some never qualified at all—meaning the money was completely wasted.
Some got MCC funding before finishing the program—proving the process was meaningless.

The Threshold Program was supposed to be about “helping nations become MCC-eligible.” Instead, it was a glorified slush fund for consultants and bureaucrats.

3. Financial Oversight? MCC Didn’t Even Try.

The IG was crystal clear: MCC’s financial controls were a mess.

🔴 MCA entities (local project managers) weren’t responding to audit requests.
🔴 USAID, which ran the Threshold Program, wasn’t keeping records properly.
🔴 Quarterly and year-end financial statements had serious errors.
🔴 Transactions lacked proper documentation, but MCC paid anyway.

Even worse, MCC didn’t even keep its own invoices.

The agency outsourced its accounting to the U.S. Department of the Interior, but neither MCC nor the Interior Department bothered to check whether the transactions were legitimate.

This isn’t just incompetence—it’s negligence on a massive scale.

4. MCC’s IT Security: A Hacker’s Paradise

For six years straight, MCC failed to meet basic federal cybersecurity requirements.

Key security policies weren’t in place.
Weak oversight of IT systems.
Failure to comply with basic data protection laws.

This means that even if MCC had tracked its money correctly (which it didn’t), the agency’s data security was so weak that a hacker could have walked in and stolen everything.

For an agency managing billions in taxpayer money, this was inexcusable.

Final Summary: The Damage Report

The Final Bill of MCC’s Failures (2009 Edition)

Category	Amount ($M)	What Went Wrong?
Suspended, Terminated, or Canceled Projects	$340M	Political instability led to MCC pulling out—often without a clear backup plan.
Threshold Program Waste	$440M	No clear evidence that this program actually helped countries become compact-eligible.
Financial Mismanagement	???	MCC had no proper documentation for many transactions and weak auditing.
IT Security Failures	???	MCC’s cybersecurity was so bad it violated federal law.

Total wasted? At least $780 million. And that’s just what the IG could track.

What Should Have Been Done Differently?

Tighter Political Risk Assessments – MCC should have seen the writing on the wall in Madagascar, Honduras, and Nicaragua. Instead, it waited until AFTER coups and rigged elections to take action.
Kill the Threshold Program (or Make It Accountable) – Half a billion dollars was spent on a program with no clear impact. That’s not aid—it’s just burning money.
Require Actual Receipts for Spending – How does a multi-billion-dollar agency not require invoices for its payments? This is financial malpractice.
Fix IT Security Before Hackers Do It for You – MCC’s cybersecurity failures were a huge liability. If sensitive financial data was breached, who knows what could have happened?

Final Verdict: A Billion-Dollar Blunder

The MCC was supposed to be a smarter, results-driven alternative to traditional foreign aid. Instead, it fell into the same traps:

Poor risk assessment.
No accountability.
A financial oversight system so weak it was practically nonexistent.

The $780 million in wasted funds revealed in this report could have built roads, schools, and hospitals. Instead, it vanished into the bureaucratic abyss.

MCC had one job: fund high-impact projects in well-governed countries.

By 2009, it had failed at both.

USAID Leaks by Prime Rogue Inc