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  • Congressional Budget Justification (CBJ):  Congressional Budget Justification, FY 2020
  • March 2019

Administrative Expenses

Administrative Expenses

Administrative Expenses
(in millions of $) FY 2018 Enacted FY 2019 Enacted FY 2020 President's Budget
Total Appropriation/Request 905.0 905.0 800.0
  Total Administrative Expenses 105.0 105.0 109.0
    Human Capital 56.0 56.0 57.5
    Training 1.0 1.0 1.0
    Overseas Operations 10.0 10.0 10.5
    Contracted Services 10.0 8.9 10.0
    Information Technology 14.0 15.0 15.0
    Rent, Leasehold & Improvements 6.0 6.3 6.4
    Travel 7.3 7.4 7.9
    Other Administrative Expenses 0.7 0.4 0.7
MCC’s FY 2020 funding request for administrative expenses is $109 million. With this noted increase to administrative expenses as compared to prior years, MCC anticipates staffing the regional compact initiative with up to nine new full-time equivalents (FTE), plus contracted support, travel, and overseas operations costs. In addition, MCC will be standing up the new Accountable Entity Audit Program and requires an additional FTE and contracted services in support of the augmented function.

Accountable Entity Audit Program

After MCC establishes a partnership with a country, the partner country sets up a local accountable entity that is responsible for compact, threshold program, or grant implementation overseen by MCC. Due to MCC’s heavy reliance on financial reporting from accountable entities to produce its annual financial statements and Agency Financial Report (AFR), MCC must have reasonable assurance that accountable entity financial reporting is reliable and accurate. Sufficiently robust audits of that financial reporting by qualified Independent Public Accounting firms (IPA) are a central component of building that assurance.

In July 2017, the USAID Office of the Inspector General (OIG) notified MCC that, as a result of the findings of a peer review, it would no longer be performing certain functions related to accountable entity financial audits. Previously, the USAID OIG provided oversight that contributed to the assurance that IPAs selected to perform financial audits for the accountable entities had the appropriate skills and capabilities to undertake those audits, and that their audit reporting was adequate to support that reasonable assurance. With the notification by USAID OIG to MCC that these functions would no longer be performed, MCC assumed the USAID OIG responsibilities to perform the audit oversight functions. Beginning in the third quarter of FY 2018, MCC began establishing the new Accountable Entity Audit Program to assume the responsibilities central to the successful performance of audits of the accountable entities within its partner countries, and the associated costs have been included in this budget request. MCC is now responsible for the following:

  • Assuring compliance with MCC’s audit guidelines, as well as:
    • Review and approve Independent Public Accounting (IPA) firms audit planning documents.
    • Review and approve the draft and final accountable entity external financial audit reports.
    • Provide technical guidance to IPAs.
    • Transmit final accountable entity external financial audit reports to USAID OIG.
  • Ensuring appropriate vetting of independent audit firms to be contracted by accountable entities to perform their external financial audits to include addressing auditor qualifications within the procurement process, and potentially issuing an approved auditors list based on that vetting.
  • Issuing guidance to accountable entities regarding the scope of external financial audits performed by local IPA.
MCC created an approach to address the new responsibilities and expects the new oversight program to be implemented in two phases to ensure continued high-quality accountable entity financial audits.  During the first stage, MCC assigned responsibilities to the accountable entities through modifying current audit contracts. The modifications include revising payment approval language and deliverable approval timelines. Additionally, MCC will review audit planning documents and reporting deliverables for compliance with MCC Audit Guidelines.

In phase two, MCC will implement a risk-based external financial audit oversight program, designed and overseen by a new MCC unit specifically tasked with these responsibilities. The MCC unit would provide consultant support that closely resemble the functions previously conducted by the USAID OIG, including:

  • Developing and issuing audit guidelines for accountable entities that detail the scope of external financial audits performed by local IPA (to replace the prior guidance from the USAID OIG).
  • Vetting potential IPAs to be contracted by accountable entities to perform their external financial audits, and issuing an approved auditors list based on that vetting.
  • Reviewing and approving IPA audit planning documents and accountable entity financial audit reports.
  • Providing technical guidance to IPAs.
MCC believes this approach will lead to significant opportunities for improvement in the quality of audit oversight along with more timely and predictable oversight of the accountable entity auditors. Costs related to the new Accountable Entity Audit Program of roughly $1.8 million are included in the request for Administrative Expenses in FY 2020.

Human Capital

The chart below illustrates the actual and planned FTEs from FY 2018 to FY 2020.
Actual and Planned FTEs from FY 2018 to FY 2020
Budgeted Full-Time Equivalents (FTE) FY 2018 FY 2019 FY 2020
Total FTE 343 354 362
Washington D.C. Headquarters 317 325 330
Overseas 26 29 32
MCC continues to make strategic investments to better motivate and develop these human capital resources. In FY 2018, MCC expanded the functionality of the corporate performance management system to include real-time feedback, rewards, and recognition. In addition, MCC implemented a new learning management system, MCCLearn, to support the training and development of FTEs. As a complement to these efforts, in FY 2019 MCC plans to automate the rewards and recognition process and deploy a talent management dashboard, which will allow the agency to reduce repetitive administrative tasks per OMB Memo M-18-23 and facilitate data-driven human capital decisions.

Overseas Operations

MCC is planning $10.5 million in FY 2020 to continue supporting overseas administrative operations, including local-engaged staff salaries and benefits, rent, residential allowance, relocation expenses, travel, shipping, office and residential furniture, IT equipment, official vehicles, and International Cooperative Administrative Support Services (ICASS). Although MCC maintains a small footprint overseas, it continually faces the pressure associated with ICASS and Capital Security Cost-Sharing (CSCS) burden sharing and cost arrangements established by the Department of State to maintain and operate embassy compounds. Likewise, MCC anticipates growing overseas costs in FY 2020 related to the addition of FTEs related to regional compacts and the new Resident Threshold Country Director positions. As part of MCC’s Integrated Planning, Budgeting, and Execution framework (IPBE), MCC continuously reviews the costs related to overseas operations in order to maximize the use of funding while providing adequate support towards our relatively small overseas presence.

Information Technology (IT)

MCC is planning $15 million for information technology (IT) support in FY 2020. As part of IPBE, MCC was able to include less funding for IT support in the President’s FY 2018 budget request by capitalizing on the use of available funding from prior years to maintain the level of ongoing IT capabilities. While IT support in the President’s previous budget reflected a concerted effort to minimize the request level based on available funding from prior years, this budget request reflects the actual need for IT support in FY 2020. MCC continues to explore ways to keep IT costs lower, including consolidation of IT service contracts in FY 2019, which will reduce the duplication of overhead costs from contracting with multiple service providers. MCC also continues to leverage umbrella agreements to staff its initiatives and upgrades rather than administering multiple contracts or using employees for special limited projects. As noted in the executive summary, IT plays an integral role in supporting agency-wide initiatives including a knowledge management system, learning and performance management systems, and ongoing improvements towards management information systems in support of MCC’s country partners. Rising IT costs continue to be offset through reinvestment of any savings, allowing MCC to maintain quality IT service without large increases in baseline resources.

Rent

Beginning with FY 2018, MCC began full-year payments for rent for the headquarters space. The FY 2020 budget request reflects the nominal percentage increase within the occupancy agreement. As in the prior fiscal years, MCC continues to maximize the use of its headquarters space, proactively using space planning technology for seat management as well as conference and meeting space requirements. As such, MCC maintains a small space footprint.