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Funding for the Future? Lessons from the Past: A Review of USAID Dollar-Appropriated Endowments

The Commercial Market Strategies project prepared Funding for the Future? Lessons From the Past: A Review of USAID Dollar-Appropriated Endowments in response to a request by USAID's Bureau of Policy and Program Coordination (PPC) and Bureau of Global Health, Office of Population and Reproductive Health (G/PRH), for a comprehensive review of dollar-appropriated endowments and the guidelines used to manage them. An endowment is a sum of money that is gifted by a donor to a recipient, set aside for a specific purpose, and invested to generate a stream of income. Endowments may be set up for a specific term or designed to exist in perpetuity. Many donors, including USAID, have used endowments as a tool for sustainable development. Through the early 1990s, USAID could only fund endowments with local currency, which did not provide reliable earnings because of local currency devaluations. In 1994, new legislation and the development of Policy Directive 21, Guidelines: Endowments Financed With Appropriated Funds (PD-21), opened the door for USAID Bureaus and Missions to establish and fund endowments with dollar appropriations. This publication reviews more than 25 USAID endowments funded since PD-21, across diverse sectors and geographic regions. The endowments reviewed ranged in size from less than $1 million to close to $200 million and were designed for different purposes, among them, to initiate or sustain a specific development project, to sustain an organization, to develop a sector through a grant program, and to leverage funds from new donors. The report documents the experiences, lessons learned, and best practices gleaned from these endowments. It also analyzes PD-21 in light of these experiences and outlines recommendations for future endowments.