Australian aid projects in limbo after Trump administration scrapped USAID, FOI reveals
Freedom of Information (FOI) documents obtained by the ABC show Department of Foreign Affairs and Trade (DFAT) officials sought details on what projects would be affected by Donald Trump's decision to close USAID.
The documents show USAID was "holding funds" paid by Australia for two separate aid projects.
A total of $1.5 million given to USAID to help deliver a clean drinking water project in Indonesia was returned to DFAT on June 12 this year.
Details of the other project were redacted from the documents obtained by the ABC due to including "material in the nature of opinions and recommendations in relation to the department's deliberative processes", DFAT said.
Former World Vision Australia CEO Reverend Tim Costello said he was "so glad that Australian taxpayers' money came back" but said the situation had been a close call for DFAT.
"[Donald] Trump and [Elon] Musk destroyed USAID and it is going to cost 15 million lives by 2030. Having Australian taxpayers' dollars lost in that would have been an insult to injury," he said.
The ABC's FOI request to DFAT specifically asked for: "All documents relating to the transfer of DFAT funds to the United States Agency for International Development (USAID)."
The Indonesia water project was set up as a Delegated Cooperation Arrangement, DFAT said.
These arrangements allow governments "to delegate support to another donor partner", while "the lead donor holds the contractual relationship with the implementing partner for the program, and funds them directly", DFAT added.
In this Indonesia project, Australia contributed more money but USAID took the lead on the ground, the FOI documents show.
DFAT told the ABC that such arrangements were "common practice".
But Rev Costello said he wasn't aware that direct funding being made to USAID was common practice.
"I was surprised by that," he said, but added "there is a lot of cooperation between them [DFAT and USAID]".
"I didn't know that we directly funded USAID but I assume it's joint projects and I know that the humanitarian sector see many donor governments working in cooperation," he added.
Rev Costello said it would have been a "sobering lesson" for DFAT to have to ask for the money to be returned.
Research Associate at the Lowy Institute's Indo-Pacific Development Centre, Grace Stanhope, said financial cooperation with other bilateral government agencies was "really quite rare".
"I suspect we do cooperate fairly often with the US but it just happens through a third-party," she added.
Ms Stanhope said $1.5m was a small amount of money in the context of Australia's total aid spending.
But she said it was important it was returned.
DFAT acted as co-donor for the Indonesia Urban Resilient Water, Sanitation and Hygiene Activity, which was also known as IUWASH Tangguh.
The project aimed to increase access to "poor-inclusive, climate-resilient, safely managed drinking water and sanitation services" in Indonesia.
USAID was the lead donor, which meant it took the lead in implementing the project and agreed to "administer and manage the contribution of DFAT", according to the signed arrangement document.
As seen in the plans in the FOI documents, Australia agreed to commit a total of $2.9 million ($US1.9 million) while USAID agreed to pay $US408,861.96.
Only $1.5 million was ever actually sent to USAID from DFAT.
The second payment of $1.4 million was cancelled following USAID's shutdown.
USAID made the privately held development company Development Alternatives Incorporated (DAI) the implementing partner for the project.
A spokesperson from DAI confirmed to the ABC that the "IUWASH Tangguh was among those DAI projects terminated".
The spokesperson added the project was scheduled to run until March 2027, but was unable to comment on the amount of funds unspent.
This program was one of "many programs in the region that have been impacted by USAID cuts", chief of policy and advocacy at Australian Council for International Development (ACFID), Jessica Mackenzie, said.
ACFID is an Australian non-government organisation involved in international development and aid.
"Water, sanitation and hygiene programs are core to development programming and help change lives," Ms Mackenzie added.
Ms Mackenzie added that Australia often worked with like-minded partners on development programs and "Australia has jointly funded numerous development projects with USAID, especially in the Pacific".
She added that there has been a shift away from joint funding in recent years as countries are "driven by a desire for more direct control over aid delivery".
"Though with decreasing humanitarian funding in 2025, after significant donor cuts, we may see more pooled funds emerging soon," Ms Mackenzie added.
Ms Stanhope said that while this incident would likely make DFAT "pause before doing joint projects bilaterally" going forward, she "wouldn't want this to become a reason for DFAT to do less co-financing".
"I think the bigger picture is that especially in Asia and the Pacific, lots of donors doing lots of small projects leads to aid fragmentation and inefficiencies and duplication of projects," she said.
"Something that we should be doing more of is co-financing with other implementing agencies and only when it's sensible."
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