The United States Agency for International Development (USAID) is the United States Government agency primarily responsible for administering civilian foreign aid. Responding to President Barack Obama‘s pledge in his 2013 State of the Union Address to “join with our allies to eradicate extreme poverty in the next two decades,” USAID has adopted as its mission statement “to partner to end extreme poverty and to promote resilient, democratic societies while advancing the security and prosperity of the United States.” USAID operates in Africa, Asia, Latin America, theMiddle East, and Eastern Europe.

President John F. Kennedy created USAID from its predecessor agencies in 1961 by executive order. USAID’s programs are authorized by the Congress in the Foreign Assistance Act, which the Congress supplements through directions in annual funding appropriation acts and other legislation. Although technically an independent federal agency, USAID operates subject to the foreign policy guidance of the President, Secretary of State, and the National Security Council.


USAID’s decentralized network of resident field missions is drawn on to manage US government (USG) programs in low-income countries for a range of purposes.

  • Disaster relief
  • Poverty relief
  • Technical cooperation on global issues, including the environment
  • U.S. bilateral interests
  • Socioeconomic development

Disaster relief

USAID Packages are delivered by United States Coast Guard personnel

Some of the U.S. Government’s earliest foreign aid programs provided relief in crises created by war. In 1915, USG assistance through the Commission for Relief of Belgium headed by Herbert Hoover prevented starvation in Belgium after the German invasion. After 1945, the European Recovery Program championed by Secretary of State George Marshall (the “Marshall Plan“) helped rebuild war-torn Western Europe.

USAID manages relief efforts after wars and natural disasters through its Office of U.S Foreign Disaster Assistance in Washington D.C. Privately funded U.S. NGOs and the U.S. military also play major roles in disaster relief overseas.

Poverty relief

Early reading and literacy programs contribute to long-term development, USAID Nigeria

After 1945, many newly independent countries needed assistance to relieve the chronic deprivation afflicting their low-income populations. USAID and its predecessor agencies have continuously provided poverty relief in many forms, including assistance to public health and education services targeted at the poorest. USAID has also helped manage food aid provided by the U.S. Department of Agriculture. In addition, USAID provides funding to NGOs to supplement private donations in relieving chronic poverty.

Global issues

Technical cooperation between nations is essential for addressing a range of cross-border concerns like communicable diseases, environmental issues, trade and investment cooperation, safety standards for traded products, money laundering, and so forth. The USG has specialized agencies dealing with such areas, such as the Centers for Disease Control and the Environmental Protection Agency. USAID’s special ability to administer programs in low-income countries supports these and other USG agencies’ international work on global concerns.


Among these global interests, environmental issues attract high attention. USAID assists projects that conserve and protect threatened land, water, forests, and wildlife. USAID also assists projects to reduce greenhouse-gas emissions and to build resilience to the risks associated with global climate change. U.S. environmental regulation laws require that programs sponsored by USAID should be both economically and environmentally sustainable.

U.S. bilateral interests

To support U.S. geopolitical interests, USAID is often called upon to administer exceptional financial grants to allies. Also, when U.S. troops are in the field, USAID can supplement the “Civil Affairs” programs that the U.S. military conducts to win the friendship of local populations. In these circumstances, USAID may be directed by specially appointed diplomatic officials of the State Department, as has been done in Afghanistan and Pakistan during operations against al-Qaeda.

U.S. commercial interests are served by U.S. law’s requirement that most goods and services financed by USAID must be sourced from U.S. vendors.

USAID is also sometimes called upon to support projects of U.S. constituents that have exceptional interest.

Socioeconomic development

To help low-income nations achieve self-sustaining socioeconomic development, USAID assists them in improving management of their own resources. USAID’s assistance for socioeconomic development mainly provides technical advice, training, scholarships, commodities, and financial assistance. Through grants and contracts, USAID mobilizes the technical resources of the private sector, other USG agencies, universities, and NGOs to participate in this assistance.

Programs of the various types above frequently reinforce one another. For example, the Foreign Assistance Act requires USAID to use funds appropriated for geopolitical purposes (“Economic Support Funds”) to support socioeconomic development to the maximum extent possible.

Modes of assistance

USAID delivers both technical assistance and financial assistance.

Technical assistance

Technical assistance includes technical advice, training, scholarships, construction, and commodities. Technical assistance is contracted or procured by USAID and provided in-kind to recipients. For technical advisory services, USAID draws on experts from the private sector, mainly from the assisted country’s own pool of expertise, as well as from specialized USG agencies. Many host-government leaders have drawn on USAID’s technical assistance for development of IT systems and computer hardware procurement to strengthen their institutions.

To build indigenous expertise and leadership, USAID finances scholarships to U.S. universities and assists the strengthening of developing countries’ own universities. Local universities’ programs in developmentally important sectors are assisted directly and through USAID support for forming partnerships with U.S. universities.

The various forms of technical assistance are frequently coordinated as capacity building packages for development of local institutions.

Financial assistance

Financial assistance supplies cash to developing country organizations to supplement their budgets. USAID also provides financial assistance to local and international NGOs who in turn give technical assistance in developing countries. Although USAID formerly provided loans, all financial assistance is now provided in the form of nonreimbursable grants.

In recent years, the USG has increased its emphasis on financial rather than technical assistance. In 2004, the Bush Administration created the Millennium Challenge Corporation as a new foreign aid agency that is mainly restricted to providing financial assistance. In 2009, the Obama Administration initiated a major realignment of USAID’s own programs to emphasize financial assistance, referring to it as “government-to-government” or “G2G” assistance.


USAID is organized around country development programs managed by resident USAID offices in developing countries (“USAID missions”), supported by USAID’s global headquarters in Washington, DC.

Country development programs

USAID plans its work in each country around an individual country development program managed by a resident mission. Missions work in over fifty countries, consulting with their governments and non-governmental organizations to identify programs that will receive USAID’s assistance. As part of this process, USAID missions conduct socioeconomic analysis, design assistance, award contracts and grants, administer assistance (including evaluation and reporting), and manage flows of funds.

As countries develop and need less assistance, USAID shrinks and ultimately closes its resident missions. USAID has closed missions in a number of countries that had achieved a substantial level of prosperity, including South Korea, Turkey, Tunisia, and Costa Rica.

USAID also closes missions when requested by host countries for political reasons. In September 2012, the U.S. closed USAID/Russia at that country’s request. Its mission in Moscow had been in operation for two decades. On May 1, 2013, the President of Bolivia, Evo Morales, asked USAID to close its mission, which had worked in the country for 49 years. The closure was completed on September 20, 2013.

USAID missions are led by Mission Directors and are staffed both by USAID Foreign Service Officers and by development professionals from the country itself, with the host-country professionals forming the majority of the staff. The length of a Foreign Service Officer’s “tour” in most countries is four years, to provide enough time to develop in-depth knowledge about the country. (Shorter tours of one or two years are usual in countries of exceptional hardship or danger.)

The Mission Director is a member of the U.S. Embassy’s “Country Team” under the direction of the U.S. Ambassador. As a USAID mission works in an unclassified environment with relative frequent public interaction, most missions were initially located in independent offices in the business districts of capital cities. However, since the passage of the Foreign Affairs Agencies Consolidation Act in 1998 and the bombings of U.S. Embassy chanceries in east Africa in the same year, missions have gradually been moved into U.S. Embassy chancery compounds.


USAID Administrator Gayle E. Smith

The country programs are supported by USAID’s headquarters in Washington, D.C., “USAID/Washington,” where about half of USAID’s Foreign Service Officers work on rotation from foreign assignments, alongside USAID’s Civil Service staff and top leadership. USAID is headed by an Administrator appointed by the President and confirmed by the Senate. The current USAID Administrator isGayle E. Smith, who was sworn in on December 2, 2015.

USAID/Washington helps define overall USG civilian foreign assistance policy and budgets, working with the State Department, the Congress, and other U.S. government agencies. It is organized into “Bureaus” covering geographical areas, development subject areas, and administrative functions. Each Bureau is headed by an Assistant Administrator appointed by the President.

  • Geographic bureaus
    • AFR—Sub-Saharan Africa
    • ASIA—Asia
    • LAC—Latin America & the Caribbean
    • E&E—Europe and Eurasia
    • ME—the Middle East
    • OAPA—Afghanistan and Pakistan
  • Subject-area bureaus
    • GH—Global Health
    • E3—Economic Growth, Education, and the Environment
    • DCHA—Democracy, Conflict, and Humanitarian Assistance
    • BFS—Food Security
  • Headquarters bureaus
    • M—Management
    • LPA—Legislative and Public Affairs
    • PPL—Policy, Planning, and Learning.

Independent oversight of USAID activities is provided by its Office of Inspector General, U.S. Agency for International Development, which conducts criminal and civil investigations, financial and performance audits, reviews, and inspections of USAID activities around the world.


USAID’s global U.S. “direct-hire” staff—those with career contracts—include Civil Service staff in Washington as well as USAID Foreign Service Officers. The size of this staff was about 3,900 in 2012. An additional 400 U.S. staff work under contracts for shorter periods, typically two to three years. (By comparison, the State Department’s U.S. workforce currently numbers about 19,000.)

USAID’s host-country staff, who normally receive one-year contracts that are renewed annually, make up the majority of the Agency’s global workforce (57% in 2009).

USAID Foreign Service Officers are selected competitively for specific job openings on the basis of academic qualifications and experience in development programs. (This recruitment system differs from the State Department’s use of the “Foreign Service Officer Test” to identify potential U.S. diplomats. Individuals who pass the Foreign Service test become candidates for the State Department’s selection process, which emphasizes personal qualities in thirteen dimensions such as “Composure” and “Resourcefulness.” No specific education level is required for appointment as a diplomatic Foreign Service Officer).

In 2008, USAID launched the “Development Leadership Initiative” to reverse the decline in USAID’s Foreign Service Officer staffing, which had fallen to fewer than 1,000 worldwide. USAID’s goal was to double the number of Foreign Service Officers by 2012. USAID currently has about 1,700 Foreign Service Officers (compared to 13,000 in the State Department).

USAID’s internal staffing is a small part of the overall development assistance picture, however. Developing-country communities, firms, and government agencies may have thousands of individuals working on a development project. USAID-financed technical assistance to such a project might be provided by a team of five to twenty short-term and long-term specialists, with USAID’s oversight being performed by one or two project officers with the help of the Mission’s support offices for contracting and financial management.

Inside a USAID field mission

Pakistani and U.S. Staff of USAID/Pakistan in 2009

While USAID can have as little presence in a country as a single person assigned to the U.S. Embassy, a full USAID mission in a larger country may have twenty or more USAID Foreign Service Officers and a hundred or more professional and administrative employees from the country itself.

The USAID mission’s staff is divided into specialized offices in three groups: (1) assistance management offices; (2) the Mission Director’s and the Program office; and (3) the contracting, financial management, and facilities offices.

Assistance management offices

Called “technical” offices by USAID staff, these offices design and manage the technical and financial assistance that USAID provides to their local counterparts’ projects. The technical offices that are frequently found in USAID missions include Health and Family Planning, Education, Environment, Democracy, and Economic Growth.

Health and Family Planning

Examples of projects assisted by Health and Family Planning offices are projects for eradication of communicable diseases, strengthening of public health systems focusing on maternal-child health including family planning services, HIV-AIDS monitoring, delivery of medical supplies including contraceptives and HIV vaccines, and coordination of Demographic and Health Surveys. This assistance is primarily targeted to the poor majority of the population and corresponds to USAID’s poverty relief objective, as well as strengthening the basis for socioeconomic development.


USAID’s Education offices mainly assist the national school system, emphasizing broadening coverage of quality basic education to reach the entire population. Examples of projects often assisted by Education offices are projects for curriculum development, teacher training, and provision of improved textbooks and materials. Larger programs have included school construction. Education offices often manage scholarship programs for training in the U.S., while assistance to the country’s universities and professional education institutions may be provided by Economic Growth and Health offices. The Education office’s emphasis on school access for the poor majority of the population corresponds to USAID’s poverty relief objective, as well as to the socioeconomic development objective in the long term.


Examples of projects assisted by Environment offices are projects for tropical forest conservation, protection of indigenous people’s lands, regulation of marine fishing industries, pollution control, reduction of greenhouse gas emissions, and helping communities adapt to climate change. Environment assistance corresponds to USAID’s objective of technical cooperation on global issues, as well as laying a sustainable basis for USAID’s socioeconomic development objective in the long term.


Examples of projects assisted by Democracy offices are projects for the country’s political institutions, including elections, political parties, legislatures, and human rights organizations. Counterparts include the judicial sector and civil-society organizations that monitor government performance. Democracy assistance received its greatest impetus at the time of the creation of the successor states to the USSR starting in about 1990, corresponding both to USAID’s objective of supporting U.S. bilateral interests and to USAID’s socioeconomic development objective.

Economic Growth

Examples of projects often assisted by Economic Growth offices are projects for improvements in agricultural techniques and marketing (the mission may have a specialized “Agriculture” office), development of microfinance industries, streamlining of Customs administrations (to accelerate growth of exporting industries), and modernization of government regulatory frameworks for industry in various sectors (telecommunications, agriculture, and so forth). In USAID’s early years and in some larger programs, Economic Growth offices have financed economic infrastructure like roads and electrical power plants. Economic Growth assistance is thus quite diverse in terms of the range of sectors where it may work. It corresponds to USAID’s socioeconomic development objective and is the source of sustainable poverty reduction. Economic Growth offices also occasionally manage assistance to poverty relief projects, such as to government programs that provide “cash transfer” payments to low-income families.

Special assistance offices

Some USAID missions have specialized technical offices for areas like counter-narcotics assistance or assistance in conflict zones.

Disaster assistance on a large scale is provided through USAID’s Office of U.S. Foreign Disaster Assistance. Rather than having a permanent presence in country missions, this office has supplies pre-positioned in strategic locations to respond quickly to disasters when and where they occur.

The Office of the Mission Director and the Program Office

The Mission Director’s signature authorizes technical offices to provide assistance according to the designs and budgets they propose. With the help of the Program Office, the Mission Director ensures that designs are consistent with USAID policy for the country, including budgetary earmarks by which Washington directs that funds be used for certain general purposes such as public health or environmental conservation. The Program Office compiles combined reports to Washington to support budget requests to Congress and to verify that budgets were used as planned.

Contracting, financial management, and facilities offices

While the Mission Director is the public face and key decision-maker for an impressive array of USAID technical capabilities, arguably the offices that make USAID preeminent among U.S. government agencies in the ability to follow through on assistance agreements in low-income countries are the “support” offices.

Contracting offices

Commitments of U.S. government funds to NGOs and firms that implement USAID’s assistance programs can only be made in compliance with carefully designed contracts and grant agreements executed by warranted Contracting and Agreement Officers. The Mission Director is authorized to commit financial assistance directly to the country’s government agencies.

Financial management offices

Funds can be committed only when the Mission’s Controller certifies their availability for the stated purpose. “FM” offices assist technical offices in financial analysis and in developing detailed budgets for inputs needed by projects assisted. They evaluate potential recipients’ management abilities before financial assistance can be authorized and then review implementers’ expenditure reports with great care. This office often has the largest number of staff of any office in the mission.

Facilities offices

Called the “Executive Office” in USAID (sometimes leading to confusion with the Embassy’s Executive Office, which is the office of the Ambassador), “EXO” provides logistical support for mission offices, including personnel recruitment and management, computers, transportation, and office space. Increasing integration into Embassies’ chancery complexes, and the State Department’s recently increased role in managing USAID, is expanding the importance of coordination between USAID’s EXO and the overall Embassy’s General Services Office in dividing up responsibilities for support to the USAID mission.

Assistance projects

While the terms “assistance project” and “development project” might sometimes be used indiscriminately, it helps in understanding USAID’s work to distinguish between (1) the development projects of local government agencies and NGOs, such as their projects to improve public health services or schools for a particular beneficiary group, and (2) USAID’s assistance projects, which support local development projects. The key to successful assistance is how well it fits the needs of local development projects.

When a local development project’s assistance needs have been identified, USAID arranges the agreed assistance through funding agreements with implementing organizations, often referred to by USAID staff as “implementing partners.” A variety of different kinds of funding agreements can be used by USAID to support implementing partners. Also, USAID sometimes finances several different implementers to provide a number of different inputs to a single development project.

To illustrate, a multi-faceted assistance effort supporting a single development project could include the following types of funding agreements:

  1. A budget-support grant to a government agency.
  2. A contract with a firm for support to the agency.
  3. A grant to a local NGO serving the beneficiary group.
  4. A grant to an international NGO to strengthen the operations of the local NGO.

Each of these types of USAID funding agreements is profiled below.

Budget support to a government agency

This funding agreement would take the form of a letter from USAID’s Mission Director, countersigned by the recipient agency, explaining the agency’s objectives, the amount of USAID’s financial commitment, the specific expenditures to be financed by USAID’s grant, and other operational aspects of the agreement.

USAID’s technical office would assign a staff member (U.S. or local) to oversee progress in the agency’s implementation. USAID’s financial management office would transfer funds to the agency, in tranches as needed. Audit under this kind of government-to-government (G2G) financial assistance is usually performed by the host government’s own audit agency.

Contract for TA to a government agency

As a government agency is usually specialized in services to the beneficiary population (medical services, for example), its staff may not be equipped to undertake investments called for in the agency’s program, such as construction, acquisition of equipment, or management of training and study tours. The government agency might therefore request USAID’s assistance in these areas, and USAID could respond by contracting with a firm to supply the services or technical assistance requested.

USAID’s technical office would collaborate with the government agency and stakeholders in drafting the specifications for what is needed (generally referred to as a “Statement of Work” for the contract) and in conducting market research for available sources and potential bidders. USAID’s Contracting Officer would then advertise for bids, manage the selection of a contractor from among the competing bidders, sign the contract, and assign a technical-office staff member as the Contracting Officer’s Representative to oversee the performance under the contract. (If the work load permits, this staff member might be the same person who oversees USAID’s financial assistance to the government agency.)

The contractor supplies technical assistance directly to the government agency, so that in monitoring contractor performance USAID relies substantially on the agency’s evaluation of the contractor’s work.

Grant to finance NGO services to a beneficiary group

Non-governmental organizations are, like their government counterparts, usually already engaged in service provision in areas where USAID wants to assist, and they often have unique abilities that complement public programs. Therefore, USAID technical-office staff might set aside a budget and, with the help of the mission’s contracting office, publish a solicitation for applications from NGOs for financial assistance to their programs. One or several grants could be made to selected NGOs by the contracting office’s “Agreement Officer.” Similar to the case of a contract, a USAID technical-office staff member would be assigned as the Agreement Officer’s Representative to monitor progress in the NGOs’ implementation and to arrange for external evaluations. USAID grants require recipient NGOs to contract for external audits.

As some local NGOs may be small and young organizations with no prior experience in receiving awards from USAID, the USAID mission’s financial management office conducts a careful review of grant applicants’ administrative systems to ensure that they are capable of managing USG funds. Where necessary, USAID can devote part of the grant to the NGO’s internal organizational strengthening to help the NGO qualify for USAID’s financing and build the capacity of the organization in the process. Disbursement of the portion of USAID’s grant financing the NGO’s project would follow completion of the NGO’s internal organizational development.

Grant to an international NGO for technical assistance

International NGOs have their own development projects and capabilities. If USAID and its counterparts determine that development objectives can best be met by supporting an NGO project, the relevant USAID technical office will draft a program description and the contracting office will issue as a request for applications to solicit responses from the international NGO community. The process is used if grants to local NGOs would not be able to achieve the USAID Mission’s objectives or if local NGO capacity is not yet sufficient.

International NGOs also frequently make unsolicited proposals to USAID, requesting funding for their own planned assistance activities. Where NGOs or business enterprises are dedicating a substantial amount of non-USG resources to their projects, they can receive USAID funding through “Global Development Alliance” grants, provided that the non-USG resources are at least equal in value to USAID’s grant.

In general, USAID provides financial assistance (grants) to support other organizations’ programs when those programs correspond to the areas that USAID wants to support, while USAID uses contracts to procure products or services requested by the leaders of local development projects.

A Diversity of Possible Assistance Mechanisms

In addition to the types of projects described above, USAID uses various other assistance mechanisms for different U.S. objectives. Budget agreements with other USG agencies, which differ from contracts and NGO grants, are common in supporting collaboration between the U.S. and other countries on global issues. Large budget-support grants, referred to as “non-project” assistance, may be made to recipient governments to pursue U.S. foreign policy interests.

For more details about how USAID manages funding agreements, USAID’s procedures manuals—the “Automated Directives System” (ADS)—are available to anyone who is interested. In particular, ADS Series 300 on “Acquisition and Assistance” covers many details about agreements with implementing partners.


Before World War II

The realization that early industrializers like the United States could provide technical assistance to other countries’ development efforts spread gradually in the late 1800s, leading to a substantial number of visits to other countries by U.S. technical experts, generally with official support by the U.S. Government even when the missions were unofficial. Japan, China, Turkey, and several Latin American countries requested missions, while the U.S. Government also initiated missions, particularly to Central America and the Caribbean countries when the U.S. felt that crises related to failed elections, excessive debt, and infectious diseases could directly affect U.S. interests. Fiscal management, monetary institutions, election management, mining, schooling, roads, flood control, and urban sanitation were among the missions’ subjects.

U.S. technical missions in this era were not, however, part of a systematic, USG-supported program. Possibly the closest approximation to what USG development assistance would become was the China Foundation for the Promotion of Education and Culture, established by the USG in 1924 using “reparation” funds provided by China itself. The Foundation’s technical development activities ranged widely and included support for development of a leading Chinese university, Tsinghua University.

A notable early example of U.S. Government foreign assistance for disaster relief was its contribution to the 1915 Committee for Relief in Belgium headed byHerbert Hoover, to prevent starvation in Belgium after the German invasion. After World War I in 1919, the USG created the American Relief Administration, also headed by Hoover, which provided food primarily in Eastern Europe.

Between the two world wars, however, U.S. assistance in low-income countries was often the product of private initiative, including prominently the work of private foundations—Carnegie, Ford, Rockefeller, and others. The Rockefeller Foundation, for example, assisted the breeding of improved maize and wheat varieties in Latin America and supported public health initiatives in Asia.

Institutionalization of U.S. Foreign Aid

World War II stimulated a sustained U.S. Government foreign aid effort. Germany’s occupation of France and military advance into North Africa in 1940 prompted the USG to create an agency that was ultimately named the Office of Inter-American Affairs, or OIAA, to counter the potential for increasing German influence in the Western Hemisphere. Working directly under the Office of the President and headed by the young Nelson Rockefeller (the future Vice President of the United States, from the family whose fortune financed the Rockefeller Foundation), OIAA’s 1,400 employees provided technical assistance across Central and South America for economic stabilization, food supply, health, and sanitation.

After the war, OIAA as an emergency agency was abolished and its operating agencies were transferred to the State Department. On the basis of positive evaluations from the U.S. Ambassadors in Latin America, the State Department succeeded in getting Congressional authorization to extend the programs through 1950.

In January 1949, President Truman, responding to advice from staff who had worked with OIAA, proposed a globalized version of the program as the fourth element of his overall foreign policy—”Point Four.” The initiative’s purpose was to provide technical knowledge to aid the growth of underdeveloped countries around the world. After a lengthy debate, the Congress approved Point Four in 1950 and the Technical Cooperation Administration (TCA) was established within the Department of State to run the program.

Point Four’s technical development program for underdeveloped areas complemented the Marshall Plan, which the U.S. had created in 1948 to help rebuild war-torn Western Europe, primarily through financial assistance. Implemented by the Economic Cooperation Administration (ECA), the Marshall Plan also expanded its reconstruction finance to strategic parts of the Middle East and Asia.

In addition to Point Four and the Marshall Plan, the Fulbright Program of academic exchanges was established in 1946, globalizing the wartime program of exchange visits between professionals from Latin America and the United States. The U.S. also provided technical assistance for development in China through a Joint Commission on Rural Reconstruction established in 1948.

In light of the Korean War, Congress passed in October 1951 the Mutual Security Act and created the Mutual Security Agency (MSA) to better coordinate civilian assistance with military assistance. The MSA absorbed both the Marshall Plan (replacing ECA) and Point Four (with the Technical Cooperation Administration becoming an agency within MSA).

In 1953 at the end of the Korean War, the incoming Eisenhower Administration established the Foreign Operations Administration (FOA) as an independent government agency outside the Department of State to consolidate economic and technical assistance, replacing both the MSA and the TCA, which were abolished. The new majority in Congress also required a 25 per cent reduction in staff, which fell mainly on TCA staff, as in general the Foreign Operations Administration adopted the organization and procedures inherited from the Marshall Plan.

In 1955, foreign aid was brought back under the administrative control of the Department of State and FOA was renamed the International Cooperation Administration (ICA).

In 1956, the Senate conducted a study of foreign aid with the help of a number of independent experts, receiving a notable report from the MIT professors Max Millikan and Walt Rostow. The resulting 1959 amendment to the Mutual Security Act declared that development in low-income regions was a U.S. objective along with and additional to other foreign-policy interests, attempting thus to clarify development assistance’s relationship with the effort to contain Communism.

In 1957, the Development Loan Fund was established within ICA to manage ICA’s portfolio of loans for development projects. In 1959, the Fund became an independent agency.

Creation of USAID

In 1961, the Congress approved the Foreign Assistance Act of 1961 with President Kennedy’s support, which retained the 1959 policy of international development as an independent U.S. objective and added an emphasis on the need for long-term efforts. Organizationally, the Act called for merging the ICA, the Development Loan Fund, and other foreign aid entities into a new agency.

To implement the Act, the Agency for International Development, or A.I.D. (subsequently re-branded as USAID), was created within the State Department. Its internal organization was adjusted to emphasize country-by-country programming. As in the previous change in Administration in 1953, a major reduction in staff took place.

The Peace Corps was also established at this time. In addition, the Fulbright educational and cultural exchange program was strengthened by the Fulbright-Hays Act of 1961.

“New Directions” in the 1970s

In the late 1960s, foreign aid became one of the focal points in Legislative-Executive differences over the Vietnam War. In September 1970, President Nixon proposed abolishing USAID and replacing it with three new institutions: one for development loans, one for technical assistance and research, and one for trade, investment and financial policy. Consistent with this approach, in early 1971 President Nixon transferred the administration of private investment programs from USAID to the Overseas Private Investment Corporation (OPIC), which had been established by foreign aid legislation at the end of 1969.

The Congress did not act on the President’s proposal for replacing USAID, but rather adopted in 1973 a proposal supported by USAID management for “New Directions” in foreign aid. By amending the Foreign Assistance Act, the Congress provided that U.S. aid should emphasize “Basic Human Needs”: food and nutrition; population planning and health; and education and human resources development. President Nixon signed the New Directions act into law (PL 93-189) in December 1973.

Also in 1973, the “Percy Amendment” of the Foreign Assistance Act required U.S. development assistance to integrate women into its programs, leading to USAID’s creation of its Women in Development (WID) office the following year. In the same year, however, the Helms Amendment banned use of U.S. Government funds for abortion as a method of family planning, which effectively required USAID to eliminate all support for abortion.

A further amendment of the Foreign Assistance Act in 1974 prohibited assistance for police, thus ending USAID’s involvement in Public Safety programs in Latin America, which in the 1960s were, along with the Vietnam War, part of the U.S. Government’s anti-Communist strategy.

The reforms also ended the practice of the 1960s and 1970s in which many USAID officers in Latin America and Southeast Asia had worked in joint offices led by State Department diplomats or in units with U.S. military personnel.

Evolving organizational linkages with the State Department

Foreign aid has always operated within the framework of U.S. foreign policy and the organizational linkages between the Department of State and USAID have been reviewed on many occasions.

In 1978, legislation drafted at the request of Senator Hubert Humphrey was introduced to create a Cabinet-level International Development Cooperation Agency (IDCA), whose intended role was to supervise USAID in place of the State Department. However, although IDCA was established by Executive Order in September 1979, it did not in practice make USAID independent.

In 1995, legislation to abolish USAID was introduced by Senator Jesse Helms, the Chairman of the Senate Foreign Relations Committee, who aimed to replace USAID with a grant-making foundation. Although the House of Representatives passed a bill abolishing USAID, the measure did not become law. In order to gain Congressional cooperation for his foreign affairs agenda, however, President Clinton adopted in 1997 a State Department proposal to integrate more foreign affairs agencies into the Department. The “Foreign Affairs Agencies Consolidation Act of 1998” (Division G of PL 105-277) abolished IDCA, the Arms Control and Disarmament Agency, and the United States Information Agency, which formerly maintained American libraries overseas. Although the law authorized the President to abolish USAID, President Clinton did not exercise this option.

In 2003, President Bush established PEPFAR, the President’s Emergency Plan for AIDS Relief, putting USAID’s HIV/AIDS programs under the direction of the State Department’s new Office of the Global AIDS Coordinator.

In 2004, the Bush Administration created the Millennium Challenge Corporation (MCC) as a new foreign aid agency to provide financial assistance to a limited number of countries selected for good performance in socioeconomic development. The MCC also finances some USAID-administered development assistance projects.

In January 2006, Secretary of State Condoleezza Rice created the Office of the Director of U.S. Foreign Assistance (‘F’) within the State Department. Under a Director with the rank of Deputy Secretary, F’s purpose was to ensure that foreign assistance would be used as much as possible to meet foreign policy objectives. F integrated foreign assistance planning and resource management across State and USAID, directing all USAID offices’ budgets according to a detailed “Standardized Program Structure” comprising hundreds of “Program Sub-Elements.” USAID accordingly closed its Washington office that had been responsible for development policy and budgeting.

On September 22, 2010, President Barack Obama signed a Presidential Policy Determination (PPD) on Global Development. (Although the Administration considered the PPD too sensitive for release to the public, it was finally released in February 2014 as required by a U.S. court order. The Administration had initially provided a fact sheet to describe the policy.) The PPD promised to elevate the role of development assistance within U.S. policy and rebuild “USAID as the U.S. Government’s lead development agency.” It also established an Interagency Policy Committee on Global Development led by the National Security Staff and added to U.S. development efforts an emphasis on innovation. To implement the PPD’s instruction that “USAID will develop robust policy, planning, and evaluation capabilities,” USAID re-created in mid-2010 a development planning office, the Bureau of Policy, Planning, and Learning. Also, on November 23, 2010, USAID announced the creation of a new Bureau for Food Security to lead the implementation of President Obama’s Feed the Future Initiative, which had formerly been managed by the State Department.

On December 21, 2010, Secretary of State Clinton released the Quadrennial Diplomacy and Development Review (QDDR). Modeled after the military’s Quadrennial Defense Review, the QDDR of 2010 reaffirmed the plan to re-build USAID’s Foreign Service staffing while also emphasizing the increased role that staff from the State Department and domestic agencies would play in implementing U.S. assistance. In addition, it laid out a program for a future transfer of health sector assistance back from the State Department to USAID. The follow-on QDDR released in April 2015 reaffirmed the Administration’s policies.

“USAID Forward”

Project Implementation (“Implementation and procurement reform”)Since 2009, USAID has been implementing a group of measures under the name “USAID Forward” to strengthen its performance in a number of areas.

    • Increase the contracts and grants awarded to local organizations in USAID’s host countries.
    • Increase the use of small businesses.
    • Include metrics in implementation agreements to increase focus on institutional capacity building.
    • Use host country project implementation systems where appropriate.
  • Talent management
    • Expand professional roles for USAID’s professional staff recruited from host countries (“Foreign Service Nationals”).
    • Improve hiring and training practices, as well as providing better incentives.
  • Policy capacity
    • Create the Bureau of Policy, Planning and Learning (PPL) and expand research on evidence-based development policies.
    • Re-emphasize science and technology and reintroduce a culture of research, knowledge-sharing and evaluation.
  • Monitoring and Evaluation
    • Expand use of independent and scientific project evaluations.
  • Budget management
    • Re-create an Office of Budget and Resource Management to ensure that budget procedures align resources with country strategies and toward programs that are demonstrating meaningful results.
  • Science and technology:
    • Upgrade USAID’s internal S&T capabilities, expand technical expertise, and improve staff access to analytical tools like Geospatial Information Systems.
    • Drawing from the examples of major S&T initiatives of the past, like oral rehydration therapies and the Green Revolution, develop a set of Grand Challenges for Development to focus the Agency and its development partners on scientific and technical barriers that limit development progress.
    • Build S&T capacity in developing countries through cooperative research grants, improved access to scientific knowledge, and higher education and training opportunities.
  • Innovation
    • Foster innovative development solutions by connecting USAID staff to leading innovators in the private sector and academia.
    • Create “Development Innovation Ventures” to fund and pilot innovations.

Budgetary resources

The 20 Countries with the Largest Budgets for U.S. Economic Assistance in Fiscal Year 2012
Nation Billions of Dollars
Afghanistan 2.24
Pakistan 0.97
Jordan 0.48
Ethiopia 0.45
Haiti 0.31
Kenya 0.31
Iraq 0.28
Democratic Republic of Congo 0.24
Uganda 0.22
Tanzania 0.21
Somalia 0.20
West Bank and Gaza 0.20
Ghana 0.19
Bangladesh 0.18
Colombia 0.18
Indonesia 0.17
Liberia 0.16
Yemen 0.16
Mozambique 0.16
India 0.15

The cost of supplying USAID’s assistance includes the agency’s “Operating Expenses,” $1.35 billion in fiscal year 2012, and “Bilateral Economic Assistance” program costs, $20.83 billion in fiscal year 2012 (the vast bulk of which was administered by USAID).

Up-to-date details of the budget for USAID’s assistance and other aspects of the USG’s foreign assistance are available from USAID’s budget webpage, This page contains a link to the Congressional Budget Justification, which shows the U.S. Government’s Foreign Operations budget (the “150 Account”) for all International Affairs programs and operations for civilian agencies, including USAID. This page also has a link to a “Where Does the Money Go?” table, which shows the recipients of USAID’s financial assistance (foreign governments as well as NGOs), the totals that were spent for various countries, and the sources (U.S. government agencies, universities, and private companies) from which USAID procured the goods and services that it provided as technical assistance.

U.S. assistance budget totals are shown along with other countries’ total assistance budgets in tables in a webpage of the Organization for Economic Cooperation and Development.

At the Earth Summit in Rio de Janeiro in 1992, most of the world’s governments adopted a program for action under the auspices of the United Nations Agenda 21, which included an Official Development Assistance (ODA) aid target of 0.7% of gross national product (GNP) for rich nations, specified as roughly 22 members of the OECD and known as the Development Assistance Committee (DAC). However, most countries do not adhere to this target, as the OECD’s table indicates that the DAC average ODA in 2011 was 0.31% of GNP. The U.S. figure for 2011 was 0.20% of GNP, which still left the U.S. as the largest single source of ODA among individual countries.

Source: Wikipedia

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