MCC's policy for terminated programs requires no specific actions

The Millennium Challenge Corporation's current closure policy requires accountable entities to complete specific steps before a compact program formally ends.▸ For suspended or terminated programs specifically, it applies those steps only "to the greatest extent possible," with no required actions and no documentation when they're skipped. A December 2025 USAID Inspector General advisory⧉ warns this matters more than ever now: following a 2025 review of foreign assistance, MCC may terminate multiple programs worth over $1 billion, of which more than $60 million was already spent. The advisory cites its own office's history with this exact risk -- a March 2010 review⧉ found MCC's first-ever compact termination, in Madagascar, left $490,000 uncollected, $102,058 in assets unaccounted for, and $3.8 million in taxes never pursued, even though a wind-up plan with specific requirements existed at the time.

Madagascar was the first country to sign an MCC compact, a $110 million, four-year agreement in 2005.▸ When a March 2009 military coup triggered a legal bar on funding the new government, MCC terminated the compact effective August 31, 2009, with wind-up activities to finish by December. By then MCC had already disbursed $80.8 million of the $110 million -- $13.8 million for an agricultural business project, $26.4 million for a land-titling project, the rest for finance and administration. The termination followed MCC's Draft Wind-up Plan, which the agency had in fact developed. The inspector general's finding wasn't that MCC had no plan. It was that the plan didn't specify what had to happen, and nobody was required to document what didn't.

MCC's own closeout guidelines said cash left in a compact's bank account had to hit zero within 90 days of the end date, and should not exceed $100,000 even on the end date itself.▸ An independent financial audit found $490,000 still sitting in the Madagascar account a month after that date, with no plan from MCC for collecting it or explaining why it hadn't been collected. A further $75,527 in advances, accrued interest, and security deposits went unclaimed because the wind-up plan never addressed those categories of funds at all. Separately, Madagascar's government owed MCC more than $3.8 million in value-added tax assessments -- taxes MCC never pursued collecting, on the stated grounds that it lacked diplomatic standing with the post-coup government and doubted it would get paid anyway.

The same absence of required steps showed up in how physical assets were handled.▸ MCC chose not to take formal U.S. government title to the compact's property, so instead of selling it at a public auction through the U.S. Embassy -- the standard method -- it had the local accountable entity sell items directly to its own employees and the public, and told the entity to spend the proceeds locally rather than return them to the Treasury. Of $6.66 million in tracked compact assets, $102,058 ended up simply lost or with no disposition information at all; separately, an NGO taking over the land-titling project's assets received motorcycles from 235 field offices that were never inventoried before the handoff, worth an estimated $144,000. The wind-up plan also included no requirement to wipe sensitive data from IT equipment before it changed hands, and no requirement that recipient NGOs -- except for one project's -- prove they were even legally incorporated in Madagascar before receiving compact property.

The 2010 review made eight recommendations.▸ MCC agreed to five. It rejected three outright, including the recommendation that it actually go collect the $3.8 million in Madagascar's unpaid taxes -- the agency's position was that collection was unlikely and not worth pursuing. That closeout ran under a wind-up plan that specified real requirements -- an account-balance cap, asset-disposition procedures -- which MCC and its local partner still didn't fully meet or enforce. Fifteen years later, the inspector general is flagging a version of that same risk with even less structure underneath it: MCC's current policy doesn't specify required actions for suspended or terminated programs at all.

In January 2025, a presidential order to review all U.S. foreign assistance froze MCC's funding across the board.▸ At that moment, MCC had 13 compact and threshold programs already in the implementation phase, together worth more than $1 billion, of which the agency had spent over $60 million. In late July 2025, MCC announced the review had concluded and directed the agency to terminate several of those programs, pending its Board's approval -- the same $1 billion-plus pool, the same $60 million already spent. MCC's fiscal year 2026 budget request separately proposes canceling $1.2 billion in unspent funds from the agency's prior-year funding -- a figure the inspector general's advisory does not specify as limited to only these 13 programs. The agency also went through government-wide workforce reductions during this same period.

The inspector general's December 2025 advisory found MCC's current closure policy still doesn't require specific closeout steps for suspended or terminated programs -- it applies them only "to the greatest extent possible," with no mandatory actions and no requirement to document what's skipped.▸ That's a thinner framework than the one that still failed to prevent gaps in Madagascar, where at least an account-balance cap and asset-disposition procedures existed on paper. What's different this time is the scale and the staffing: MCC has never had to close out several programs simultaneously before, and it now has fewer people to do it with, and less institutional memory among the people who remain. A program closeout normally takes over a year and is supposed to start 15 months before a scheduled end date -- termination compresses that timeline into something closer to a scramble.

The inspector general made one recommendation this time: require the closeout steps in MCC's existing policy to actually apply to suspended and terminated programs, and require documentation whenever the agency deviates from them.▸ MCC agreed only in part -- it committed to updating its policy by September 30, 2026, to require documentation of how the policy is being applied "to the greatest extent possible," not to requiring the underlying steps themselves. The inspector general marked the recommendation resolved but still open, pending MCC actually following through.