Two aid initiatives supported by Australia were thrown into uncertainty after the U.S. government under Donald Trump significantly reduced USAID’s funding, cutting billions of dollars from global aid programs.
Documents obtained by the ABC through Freedom of Information (FOI) requests reveal that the Department of Foreign Affairs and Trade (DFAT) sought clarification on which projects would be affected by Trump’s directive to shut down USAID operations.
The FOI documents show that USAID had been “holding funds” allocated by Australia for two separate aid efforts. On June 12 of this year, $1.5 million earmarked for a clean drinking water project in Indonesia was returned to DFAT.
Details about the second project were redacted due to the inclusion of opinions and recommendations tied to DFAT’s internal deliberations, the department stated.
Reverend Tim Costello, former CEO of World Vision Australia, expressed relief that the Australian taxpayer money was recovered, noting the situation had been precarious.
“Trump and Musk dismantled USAID, and that could cost 15 million lives by 2030,” he said. “Losing taxpayer money in that process would’ve added insult to injury.”
DFAT said the Indonesia water initiative was carried out under a Delegated Cooperation Arrangement—an agreement that allows one donor country to delegate project leadership to another, which then manages funds and partnerships. In this case, Australia was the primary financial contributor, while USAID led on-the-ground implementation.
These types of arrangements are “common practice,” according to DFAT. However, Rev. Costello was unaware that direct funding to USAID was a standard approach. While surprised, he acknowledged frequent collaboration between DFAT and USAID, explaining that humanitarian agencies often work in partnership with multiple donor governments.
Rev. Costello suggested that being forced to recover funds may have served as a “sobering lesson” for DFAT.
Grace Stanhope, a research associate at the Lowy Institute’s Indo-Pacific Development Centre, said direct financial collaborations with bilateral partners are relatively uncommon. She noted that while Australia and the U.S. do often work together, it’s usually via third-party entities.
Though $1.5 million is modest relative to Australia’s total foreign aid budget, Ms. Stanhope emphasized the importance of accountability. “Even small sums are still taxpayer money,” she said.
About the Indonesia Project
Australia partnered on the Indonesia Urban Resilient Water, Sanitation and Hygiene Activity (IUWASH Tangguh) to enhance access to inclusive, climate-resilient water and sanitation services. According to the FOI documents, USAID agreed to manage Australia’s financial contribution and act as the lead donor.
Australia committed a total of $2.9 million (USD $1.9 million), while USAID pledged USD $408,861.96. However, only $1.5 million was ever disbursed, as the second installment of $1.4 million was cancelled after USAID was defunded.
USAID had contracted Development Alternatives Incorporated (DAI) to implement the project. A DAI spokesperson confirmed to the ABC that IUWASH Tangguh was among the projects terminated. Originally, the program was scheduled to run through March 2027, but the status of unused funds remains unclear.
Jessica Mackenzie, head of policy and advocacy at the Australian Council for International Development (ACFID), noted that USAID’s funding cuts have impacted many similar programs across the region.
She emphasized the vital role that water, sanitation, and hygiene initiatives play in transforming lives.
Should DFAT Reconsider Co-Funding Projects?
Ms. Mackenzie said that Australia has a history of working alongside like-minded donors, including multiple joint projects with USAID, particularly in the Pacific. However, she acknowledged a trend toward more direct control over aid delivery, which may reverse slightly due to declining humanitarian budgets in 2025—potentially leading to increased pooled funding.
Ms. Stanhope remarked that while this episode may make DFAT more cautious with bilateral co-financing, she hoped it would not deter future collaborations.
“In the Asia-Pacific, too many donors running separate projects causes duplication and inefficiencies,” she said.
“Co-financing—when done strategically—can help reduce fragmentation and improve outcomes.”
Understanding the FOI Process
The Freedom of Information (FOI) system, also known as Right to Information (RTI) in some states, allows public access to government-held information.
Most FOI requests are submitted by individuals seeking personal records or interactions with agencies. At the federal level, the Department of Home Affairs (which oversees visas) and Services Australia (which runs Centrelink) receive the most requests.
In state jurisdictions, agencies like police and hospitals are the most frequent recipients. Journalists, academics, think tanks, and politicians also use FOI laws to scrutinize government actions.
To make a request, visit the FOI section of the relevant government department’s website. Note that some fees may apply.
