Foreign Aid Reform [1 ed.] 9781617610349, 9781617289262

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FOREIGN POLICY OF THE UNITED STATES

Copyright © 2010. Nova Science Publishers, Incorporated. All rights reserved.

FOREIGN AID REFORM

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FOREIGN POLICY OF THE UNITED STATES

FOREIGN AID REFORM

FINN C. HUDSON

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EDITOR

Nova Science Publishers, Inc. New York

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Independent verification should be sought for any data, advice or recommendations contained in this book. In addition, no responsibility is assumed by the publisher for any injury and/or damage to persons or property arising from any methods, products, instructions, ideas or otherwise contained in this publication. This publication is designed to provide accurate and authoritative information with regard to the subject matter covered herein. It is sold with the clear understanding that the Publisher is not engaged in rendering legal or any other professional services. If legal or any other expert assistance is required, the services of a competent person should be sought. FROM A DECLARATION OF PARTICIPANTS JOINTLY ADOPTED BY A COMMITTEE OF THE AMERICAN BAR ASSOCIATION AND A COMMITTEE OF PUBLISHERS. Additional color graphics may be available in the e-book version of this book. LIBRARY OF CONGRESS CATALOGING-IN-PUBLICATION DATA Foreign aid reform / editor, Finn C. Hudson. p. cm. Includes index. ISBN978-1-61761-034-9 (e-book) 1. Economic assistance, American. 2. Interagency coordination--United States. 3. United States--Foreign relations. I. Hudson, Finn C. HC60.F59157 2010 338.91'73--dc22 2010022891

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CONTENTS

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Preface

vii

Chapter 1

Foreign Aid Reform: Issues for Congress and Policy Options Susan B. Epstein and Connie Veillette

Chapter 2

Foreign Aid Reform, National Strategy, and the Quadrennial Review Susan B. Epstein

1

37

Chapter 3

Foreign Aid Reform: Studies and Recommendations Susan B. Epstein and Matthew C. Weed

51

Chapter 4

Foreign Aid Reform: Agency Coordination Marian Leonardo Lawson and Susan B. Epstein

83

Chapter 5

Foreign Aid Reform: Comprehensive Strategy, Interagency Coordination, and Operational Improvements Would Bolster Current Efforts United States Government Accountability Office

Chapter 6

Chapter 7

Chapter 8

Chapter 9

Restructuring U.S. Foreign Aid: The Role of the Director of Foreign Assistance in Transformational Development Connie Veillette

109

153

Opening Statement of Chairman John F. Kerry, U.S. Senate Committee on Foreign Relations, Hearing on "Reforming U.S. Foreign Aid Policies"

167

Opening Statement of Senator Richard G. Lugar, U.S. Senate Committee on Foreign Relations, Hearing on ―Th e Case for Reform: Foreign Aid and Development in a New Era‖

169

Testimony of Peter McPherson, President, Association of Public and Land-Grant Universities (APLU) and Former Administrator, U.S. Agency for International Development (USAID), before the U.S. Senate Committee on Foreign Relations, Hearing on ―The Case for Reform: Foreign Aid and Development in a New Era‖

173

vi Chapter 10

Chapter 11

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Index

Contents Statement of Professor Jeffrey D. Sachs, Director of the Earth Institute at Columbia University and Special Advisor to UN Secretary General Ban Ki-Moon on the Millenium Development Goals, before the Senate Foreign Relations Committee, Hearing on ― The Case for Reform: Foreign Aid and Development in a New Era‖

177

Statement of Rev. David Beckmann, President, Bread for the World and Co-Chair, Modernizing Foreign Assistance Network, before the U.S. Senate Committee on Foreign Relations, Hearing on ―The Case for Reform: Foreign Aid and Development in a New Era‖

183 187

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PREFACE U.S. foreign aid programs began in earnest with the Marshall Plan to rebuild Europe following World War II. Arguably, the underlying rationale for aid during most of the postwar period was to counter Communist influence in the world. Since the fall of the Berlin Wall and the collapse of the Soviet Union, and particularly since the terrorist attacks of September 11, 2001, aid programs have increasingly been justified within the context of anti-terrorism. Despite changing global conditions and challenges, U.S. foreign aid programs, their organizational structure, and their statutory underpinnings, reflect the Cold War environment in which they originated. This book focuses on the role that foreign assistance can play as a foreign policy tool within the current international environment. Chapter 1 - Since the terrorist attacks of September 11, 2001, the role of foreign assistance as a tool of foreign policy has come into sharper focus. The President elevated global development as a third pillar of national security, with defense and diplomacy, as articulated in the U.S. National Security Strategy of 2002, and reiterated in 2006. At the same time that foreign aid is being recognized as playing an important role in U.S. foreign policy, it has also come under closer scrutiny by Congress, largely in response to a number of presidential initiatives, and by critics who argue that the U.S. foreign aid infrastructure is cumbersome and fragmented, and that aid policy is unfocused. In recent years, several initiatives have heightened congressional interest in, and caused a reexamination of, U.S. foreign assistance policy and programs, including organizational structure. In January 2006, Secretary of State Rice announced an initiative to bring coordination and coherence to U.S. aid programs. The Secretary created a new State Department position—Director of Foreign Assistance (DFA)—the occupant of which serves concurrently as Administrator of the U.S. Agency for International Development (USAID). A new Bureau of Foreign Assistance (F) was created to coordinate assistance programs, led by the DFA, who in 2006, developed a Strategic Framework for Foreign Assistance to align U.S. aid programs with strategic objectives. The Framework guided the writing of the FY2008 and FY2009 budgets, and is expected to be reflected in the FY2010 budget request. U.S. foreign aid programs began in earnest with the Marshall Plan to rebuild Europe following World War II. Arguably, the underlying rationale for aid during most of the postwar period was to counter Communist influence in the world. Since the fall of the Berlin Wall and the collapse of the Soviet Union, and particularly since the terrorist attacks of September 11, 2001, aid programs have increasingly been justified within the context of anti-terrorism. Despite changing global conditions and challenges, U.S. foreign aid programs, their

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viii

Finn C. Hudson

organizational structure, and their statutory underpinnings, reflect the Cold War environment in which they originated. These factors are, arguably, motivating the heightened interest in re-evaluating how U.S. aid programs function, and in revamping how they are administered. There is also a growing recognition of the role that foreign assistance can play as a foreign policy tool that is equal to the role of diplomacy and defense within the current international environment characterized by regional conflicts, terrorist threats, weapons proliferation, concerns with disease pandemics, and the difficulty in overcoming poverty. As a result, a number of recent highprofile studies have made recommendations for specific reforms. Chapter 2 - Several development proponents, nongovernmental organizations (NGOs), and policymakers are pressing the 111th Congress to reform U.S. foreign aid capabilities to better address 21st Century development needs and national security challenges. Over the past nearly 50 years, the legislative foundation for U.S. foreign aid has evolved largely by amending the Foreign Assistance Act of 1961 (P.L. 87-195), the primary statutory basis for U.S. foreign aid programs, or enacting separate freestanding laws to reflect specific U.S. foreign policy interests. Many describe U.S. aid programs as fragmented, cumbersome, and not finely tuned to address the existing needs and U.S. national security interests. Lack of a comprehensive congressional reauthorization of foreign aid for about half of those fifty years further compounds the perceived weakness of U.S. aid programs and statutes. The current structure of U.S. foreign aid entities, as well as implementation and followup monitoring of the effectiveness of aid programs, have come under increasing scrutiny in recent years. Criticisms include a lack of focus and coherence overall, too many agencies involved in delivering aid with inadequate coordination or leadership, lack of flexibility, responsiveness and transparency of aid programs, and a perceived lack of progress in some countries that have been aid recipients for decades. Over the last decade, a number of observers have expressed a growing concern about the increasing involvement of the Department of Defense in foreign aid activities. At issue, too, is whether USAID or the Department of State should be designated as the lead agency in delivering, monitoring, and assessing aid, and what should the relationship between the two. Representative Berman, Chairman of the House Foreign Affairs Committee (HFAC), states on the committee Website that foreign assistance reform is a top priority.In 2009, he introduced H.R. 2139, Initiating Foreign Assistance Reform Act of 2009.Similarly, Senator Kerry, Chairman of the Senate Foreign Relations Committee (SFRC), Senator Lugar, Ranking Minority Member, and others introduced a reform bill, S. 1524, the Foreign Assistance Revitalization and Accountability Act of 2009. Other foreign aid reform legislation is expected to be introduced in 2010. The Senate is likely to consider H.R. 2410, the House-passed Foreign Relations Authorization Act of 2010 and 2011, that includes language requiring a national strategy for development, as well as a quadrennial review of diplomacy and development. The Obama Administration, with support from Secretary of State Hillary Clinton, Secretary of Defense Robert M. Gates, and USAID Administrator Rajiv Shah, announced action to seek solutions to the problems associated with foreign aid and begin the process of reform. Secretary Clinton announced in July 2009 that the Department of State would conduct a Quadrennial Diplomacy and Development Review(QDDR) to address issues involving State Department and USAID capabilities and resources to meet 21st Century demands. In August 2009, the President signed a Presidential Study Directive (PSD) on U.S. Global Development

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Preface

ix

Policy to address overarching government department and agency issues regarding foreign aid activities and coordination. Both are scheduled to be concluded in 2010. Chapter 3 - Both the 111th Congress and the Obama Administration have expressed interest in foreign aid reform and are looking at ways to improve and strengthen the U.S. Agency for International Development (USAID), coordination among implementing agencies, and monitoring effectiveness of aid activities. Since the terrorist attacks of September 11, 2001, the role of foreign assistance as a tool of U.S. foreign policy has come into sharper focus. President George W. Bush elevated global development as a third pillar of national security, with defense and diplomacy, as articulated in the U.S. National Security Strategy of 2002, and reiterated in 2006. In January 2006, Secretary of State Rice announced the ― transformational development‖ initiative to bring coordination and coherence to U.S. aid programs. She created a new Bureau of Foreign Assistance (F Bureau), led by the Director of Foreign Assistance (DFA), who also serves as Administrator of the U.S. Agency for International Development. F Bureau developed a Strategic Framework for Foreign Assistance (Framework, or F process) to align aid programs with strategic objectives. The Framework became a guiding force in the FY2008 and FY2009 budgets, as well as the FY2010 budget request. In recent years, numerous studies have addressed various concerns and provided recommendations regarding U.S. foreign aid policy, funding, and structure. Views range from general approval of the F process as a first step toward better coordination of aid programs and the need to build on it, to strong criticism of the creation of the F Bureau, its inadequacy in coordinating or reforming much of what is wrong with foreign aid, and the need to replace it with a cabinet-level department of foreign aid. While the 14 studies surveyed by the Congressional Research Service (CRS) emphasize different aspects of the importance of U.S. foreign assistance, all agree that foreign assistance must be reformed to improve its effectiveness. Of the 16 recommendation categories CRS identifies, only enhancing civilian agency resources has the support of all of the studies covered in this chapter. The next two most-often cited recommendations are raising development to equal status with diplomacy and defense, and increasing needs-based foreign aid, while encouraging recipient-government ownership of aid effectiveness. Half of the studies urge a greater congressional role in foreign aid budgeting and policy formulation. Because these studies were written for the purpose of reforming U.S. foreign aid, it is not surprising that none of them recommends maintaining the status quo. Given the current economic crisis and budget constraints along with other major concerns, such as health care, energy policy, and global warming, however, some Members of Congress may prefer a continuation of the existing foreign aid structure. This chapter is a review of selected studies written between 2001 and 2008 and will not be updated. For related information on foreign aid and foreign affairs budgets, see CRS Report RL34552, State, Foreign Operations, and Related Programs: FY2009 Appropriations, by Susan B. Epstein and Kennon H. Nakamura. Chapter 4 - In the decades since the Foreign Assistance Act of 1961 became law, Congress, various Administrations, and a number of Commissions, have reviewed U.S. foreign aid programs and proposed ways to improve the coordination and effectiveness of U.S. foreign assistance by consolidating or otherwise restructuring various agencies. Two recent trends in foreign assistance have renewed interest in this issue. First, foreign assistance funding has expanded considerably since the terrorist attacks of September 11, 2001, from just over $15 billion in FY2001 to more than $45 billion in FY2007, including supplemental

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x

Finn C. Hudson

appropriations. Second, there has been an increase during this same time period in the number of agencies implementing foreign assistance. U.S. foreign assistance has long been carried out by multiple U.S. government agencies, including the State Department (State), the U.S. Agency for International Development (USAID), the Department of Defense (DOD) and many others, to a lesser extent. In 2007, 24 U.S. government agencies reported disbursing foreign assistance resources. With so many entities administering foreign aid, often with different objectives, many aid experts have questioned whether these agencies are working at cross-purposes. Where agencies have similar objectives, there is concern that they may be duplicating each others‘ efforts. There is no overarching mechanism in place for coordinating or evaluating this broad range of activities. There are, however, several less-comprehensive systems of coordination in place among various departments and agencies, using means as varied as National Security Council policy coordination committees, new information-sharing technology systems, and interagency staff exchanges. There is little consensus among policy makers and aid experts about how best to improve coordination, or even the need for more formal coordination. Some argue that the multiple funding accounts and implementing agencies appropriately reflect the wide range of competencies that development programs require, as well as diverse U.S. foreign assistance objectives. Others say the lack of centralized coordination authority impedes U.S. foreign aid transparency, efficiency, and effectiveness. Still others argue that there has been insufficient evaluation of foreign assistance programs to know whether coordination is needed to improve program efficiency and effectiveness. Proposals aimed largely or in part at addressing these concerns include developing a national foreign assistance strategy, authorizing a new or existing agency to coordinate all foreign assistance programs, coordinating through the National Security Council, enhancing the ability of U.S. missions abroad to coordinate aid activities at the country level, separating strategic aid programs from development assistance programs, and enhancing monitoring and reporting activities. In the 111th Congress, foreign assistance reform proposals incorporating aid coordination provisions have been introduced by leaders of both the House Foreign Affairs and Senate Foreign Relations Committees. On the House side, H.R. 2410, the Foreign Relations Authorization Act for Fiscal Years 2010 and 2011, and H.R. 2139, the Initiating Foreign Assistance Reform Act of 2009, both include provisions to improve inter-agency coordination of foreign assistance. On the Senate side, coordination provisions are included in S. 1524, the Foreign Assistance Revitalization and Accountability Act of 2009. Chapter 5 - In January 2006, to better align foreign assistance programs with U.S. foreign policy goals, the Secretary of State appointed the Administrator of the U.S. Agency for International Development (USAID) to serve concurrently as Director of Foreign Assistance (DFA) and gave the DFA authority over all Department of State and USAID foreign assistance funding and programs. The Office of the Director of Foreign Assistance (State/F) was given responsibility for reforming foreign assistance by, among other things, consolidating State and USAID foreign assistance processes. GAO was asked to (1) examine State/F‘s key efforts to consolidate State and USAID foreign assistance processes and (2) identify any key challenges that affect State/F‘s reform of foreign assistance. GAO evaluated budget, planning, and other documents and interviewed agency officials in Washington, D.C.; Ethiopia; Haiti; Jordan; Kenya; Peru; and Ukraine.

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Preface

xi

Chapter 6 - The creation of a new State Department position — Director of Foreign Assistance — has sparked congressional interest regarding the management, budgeting, and proposals for reform of U.S. foreign aid programs. Charged with coordinating U.S. assistance programs, the Director of Foreign Assistance (DFA) will have authority over most State Department and U.S. Agency for International Development (USAID) programs, although major foreign aid programs, such as the Millennium Challenge Account and the Office of the Global AIDS Coordinator will remain outside of his scope. The DFA is also tasked with providing ― guidance‖ to other agencies that manage foreign aid activities. Some assistance programs are scattered throughout numerous domestic policy agencies and the Department of Defense. The restructuring is part of Secretary Rice‘s ― transformational development‖ initiative, that seeks to use foreign assistance to transform recipient countries‘ economic development paths, and to graduate countries from a dependence on aid. Details of the restructuring have been unveiled with the release of a new Strategic Framework for Foreign Assistance. The Framework links strategic objectives with categories of countries that have shared characteristics or development challenges. Operational plans would design country-specific aid programs to meet those challenges. The FY2008 budget request has been developed by joint State Department and USAID teams to provide better coordination and coherence. While the current restructuring requires no legislative action, it raises a number of questions with regard to the management of foreign aid programs, funding levels, and reform options that will confront the 110th Congress. Supporters argue that it is a long overdue reform of fragmented and uncoordinated assistance programs that will focus aid on strategic objectives and make programs more accountable. Some critics contend that its piecemeal approach will not result in comprehensive reform. Others fear that it will politicize aid programs, and put the focus on short-term objectives rather than long-term development. Administration officials have said that the current effort is the first step in a more thorough overhaul of U.S. foreign assistance. Chapters 7 through 11 feature testimony before the U. S. Senate.

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In: Foreign Aid Reform Editor: Finn C. Hudson

ISBN: 978-1-61728-926-2 © 2010 Nova Science Publishers, Inc.

Chapter 1

FOREIGN AID REFORM: ISSUES FOR CONGRESS AND POLICY OPTIONS Susan B. Epstein and Connie Veillette

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SUMMARY Since the terrorist attacks of September 11, 2001, the role of foreign assistance as a tool of foreign policy has come into sharper focus. The President elevated global development as a third pillar of national security, with defense and diplomacy, as articulated in the U.S. National Security Strategy of 2002, and reiterated in 2006. At the same time that foreign aid is being recognized as playing an important role in U.S. foreign policy, it has also come under closer scrutiny by Congress, largely in response to a number of presidential initiatives, and by critics who argue that the U.S. foreign aid infrastructure is cumbersome and fragmented, and that aid policy is unfocused. In recent years, several initiatives have heightened congressional interest in, and caused a reexamination of, U.S. foreign assistance policy and programs, including organizational structure. In January 2006, Secretary of State Rice announced an initiative to bring coordination and coherence to U.S. aid programs. The Secretary created a new State Department position—Director of Foreign Assistance (DFA)—the occupant of which serves concurrently as Administrator of the U.S. Agency for International Development (USAID). A new Bureau of Foreign Assistance (F) was created to coordinate assistance programs, led by the DFA, who in 2006, developed a Strategic Framework for Foreign Assistance to align U.S. aid programs with strategic objectives. The Framework guided the writing of the FY2008 and FY2009 budgets, and is expected to be reflected in the FY2010 budget request. U.S. foreign aid programs began in earnest with the Marshall Plan to rebuild Europe following World War II. Arguably, the underlying rationale for aid during most of the postwar period was to counter Communist influence in the world. Since the fall of the Berlin Wall 

This is an edited, reformatted and augmented version of a CRS Report for Congress publication, Report#RL34243, dated January 27, 2009.

2

Susan B. Epstein and Connie Veillette

and the collapse of the Soviet Union, and particularly since the terrorist attacks of September 11, 2001, aid programs have increasingly been justified within the context of anti-terrorism. Despite changing global conditions and challenges, U.S. foreign aid programs, their organizational structure, and their statutory underpinnings, reflect the Cold War environment in which they originated. These factors are, arguably, motivating the heightened interest in re-evaluating how U.S. aid programs function, and in revamping how they are administered. There is also a growing recognition of the role that foreign assistance can play as a foreign policy tool that is equal to the role of diplomacy and defense within the current international environment characterized by regional conflicts, terrorist threats, weapons proliferation, concerns with disease pandemics, and the difficulty in overcoming poverty. As a result, a number of recent highprofile studies have made recommendations for specific reforms. This chapter, written by Connie Veillette, a former CRS Specialist, will be updated by Susan Epstein to reflect continuing developments.

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OVERVIEW Congress and the Administration have increased their interest in foreign assistance programs in the post-9/11 environment, prompting a re-examination of the purposes of assistance, and how best to achieve those objectives. The renewed interest occurs as the Administration has initiated many new programs that introduced performance-based assistance in the form of the Millennium Challenge Account, and sector-specific assistance, largely directed at health programs in Africa. The Administration also unveiled in early 2006 a restructuring of foreign aid programs administered by the Department of State and the U.S. Agency for International Development (USAID). The restructuring is meant to link aid programs with strategic objectives and to provide more coordination and coherence. In addition, a number of recent studies have made specific recommendations for both policy and organizational reforms. Congress has been considering these reforms as part of the annual appropriations process. The 111th Congress may consider some far-reaching reforms in authorizing legislation in 2009 at a time when the Obama Administration has expressed interest in aid reform.

Criticisms of Current Foreign Aid Structures and Programs The current structure of U.S. foreign aid entities and the conduct and effectiveness of aid programs have come under increasing scrutiny on a number of fronts. Programs have been described as fragmented and cumbersome, and lacking in flexibility, responsiveness, and transparency. Aid policy is considered lacking in focus and coherence. There is ambiguity with regard to who develops aid policy, not just between the State Department and USAID, but among the 26 other government departments, agencies, and offices that provide some type of foreign aid. In general, some disillusionment with foreign aid results from a perceived lack of progress in some countries that have been aid recipients for decades. Other criticism results

Foreign Aid Reform: Issues for Congress and Policy Options

3

from an outdated aid apparatus developed during the Cold War that has been reformed in a piecemeal fashion, often adding conflicting and competing priorities, and that has not been updated to reflect current world conditions and challenges.

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DEFINITIONS AND DATA SOURCES Definitions. There is no precise definition of what the term foreign assistance encompasses. At its broadest level, it can refer to any and all expenditures that provide assistance to foreign countries in the areas of economic development, humanitarian assistance, disaster response, security and military assistance, governance and rule of law, health, and trade development. The broad definition covers programs managed by many government agencies in addition to those of the State Department and USAID. Often, when talking about appropriations, the term is considered to refer to those programs funded in annual State Department and Foreign Operations appropriations bills. This would include programs managed by the State Department, USAID, and several independent agencies, but would exclude some major funding streams, such as from the Department of Defense and the Department of Health and Human Services. A narrower conceptualization of the term refers to programs that promote long-term economic development, poverty alleviation, health, and humanitarian assistance, largely but not entirely, managed by USAID. (Humanitarian assistance is understood to encompass food aid and disaster assistance.) When used as such, the term excludes large sums of assistance administered by the State Department, but would include grants from the Millennium Challenge Corporation. Another term, official development assistance (ODA), is also used. ODA is defined by the Organization for Economic Cooperation and Development (OECD) as grant assistance of a mainly development nature. As such, it excludes some security and military assistance. For the most part, this chapter adopts the broadest definition. This approach is used because possible reforms that Congress may consider could address aid programs government-wide. In some parts of this chapter, the foreign operations budget is considered separately, and is noted as such in the narrative. Data Sources. This chapter relies on two main data sources, both of which have limitations. The first data source is budget documents submitted to Congress, and enacted foreign operations appropriations. While this source provides detailed information on a large portion of U.S. aid programs, it does not cover aid programs of domestic agencies. Those agencies often do not systematically report these types of expenditures in their congressional budget justifications, and their appropriations bills do not always provide the details of the funding approved. The second source is a data base maintained by the Development Assistance Committee (DAC) of the OECD. Donor nations report their calendar year disbursements of official development assistance to the DAC, and the DAC report is the internationally accepted measure of ODA contributions of the international community of donors. Its limitations, as noted above, is that it is not inclusive of all the assistance that the United States provides. On the other hand, it is a reliable source of data on what types of assistance are being provided by all government agencies.

4

Susan B. Epstein and Connie Veillette Specific points of contention include: 





    

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

the level of U.S. assistance, usually in relation to other international donors, and the composition of aid, generally the ratio of humanitarian and development aid to security assistance, by region; the coordination of aid among programs in USAID, the State Department, and independent agencies, such as the Millennium Challenge Corporation, the Trade and Development Agency, the Overseas Private Investment Corporation, and several regionally focused funds, such as the Inter-American Foundation, and the African Development Foundation; the coordination of aid among numerous domestic agencies, such as the Department of Health and Human Services (HHS) and the Center for Disease Control (CDC), that administer some type of foreign assistance program; the coordination of bilateral and multilateral assistance; the coordination of aid with other international donors; the involvement of the Department of Defense in aid programs that some observers believe should be carried out by civilian agencies; the perceived ambiguity with regard to who sets foreign aid policy among the State Department and USAID; the effectiveness of aid programs, especially in light of a steady diminution of technical expertise at USAID, and the increasing reliance on contractors both in Washington and in the field to carry out aid programs; and the lack of a foreign assistance strategy to guide and justify the provision of aid generally, and one that deals with programs, specifically, that responds simultaneously to recipient country needs and U.S. priorities.

Some of these issues are longstanding; others are responses to more recent changes, such as new aid initiatives, new offices administering assistance, and a general increase in the foreign aid budget.

Current Aid Platforms and Funding Aid Platforms The State Department and USAID are the lead agencies that provide foreign assistance. Both are funded in the annual State Department and Foreign Operations appropriations bills. In FY2007, the State Department controlled about 64% of bilateral and multilateral assistance, while USAID accounted for approximately 20%. The remainder is managed by other independent agencies such as the Millennium Challenge Corporation, the Trade and Development Agency, and the Peace Corps. Some funds are co-managed by the State Department and USAID, such as the Economic Support Fund, although major policy decisions are often retained by State. Some observers maintain that restructuring initiatives beginning in 2006 have further removed USAID from policy decisions. The accounts managed by USAID largely pertain to long-term development, health programs, and disaster relief, although the Office of the Global AIDS Coordinator, which

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Foreign Aid Reform: Issues for Congress and Policy Options

5

administers the largest U.S. initiative on human immunodeficiency virus and acquired immunodeficiency syndrome (HIV/AIDS), is located in the State Department. The State Department aid portfolio, in addition to HIV/AIDS funds, comprises accounts related to military assistance (implemented by the Department of Defense), narcotics and law enforcement, migration and refugees, antiterrorism, peacekeeping operations, and accounts focusing on democratic transitions in states of the former Soviet Union, and eastern Europe and the Baltics. Prior to 2006 reforms (see section below on recent reforms), there was little coordination at the budget and policy development level between State and USAID. There are, however, a number of independent agencies administering foreign assistance that remain outside of State and USAID, and that are also funded in the annual foreign operations appropriations bills. These include the Millennium Challenge Corporation, the Trade and Development Agency, the Peace Corps, the Overseas Private Investment Corporation, and the Export-Import Bank. These agencies develop their own budgets, and critics argue that their activities are not well coordinated with those of State and USAID. In addition to these entities, there are aid programs administered by approximately 14 different departments and agencies. The largest portfolio belongs to the Department of Defense, which manages programs providing humanitarian assistance, civic action activities, training and equipping of foreign militaries, and even some health-related assistance. (See page 27 for a complete list of agencies reporting assistance in calendar year 2006.) These organizations have provided as much as 40% in official development assistance in recent years. Each of these agencies develops its own budget and those funds are appropriated in domestic funding bills. These programs remain outside of the jurisdiction of foreign operations appropriations subcommittees and foreign affairs authorizing committees that have oversight of foreign assistance. In addition, there is no central reporting mechanism for these programs, making it difficult to ascertain the full amount that the United States is providing in foreign assistance in any given year. Proponents of aid reform point to this situation as one of the main symptoms of a fragmented aid structure that impedes coherent, government-wide foreign assistance policy and implementation.

Current Funding Since the events of 9/11, amounts requested and approved by Congress for foreign assistance generally have trended upward. The foreign operations FY2009 budget request is $26.1 billion, or an increase of 8.8% over the $24 billion estimate (including supplements only within P.L. 110- 161) in foreign assistance programs for FY2008. The actual FY2007 funding level for FY2007, including supplemental funds, totals $26.4 billion. The estimated level for FY2008, approved in the FY2008 Consolidated Appropriations Act, Division J (H.R. 2764, P.L. 110-161), represents 1.2% of the total U.S. budget. Part of the trend in increases is due to the greater use of supplemental appropriations measures to fund international affairs spending, including foreign assistance. Table 1 provides funding levels for foreign operations since FY1999 in both current and constant dollars, and includes both regular and supplemental funds. (It is difficult to ascertain with much precision the appropriated levels for programs located in domestic agencies‘ budgets. See Figure 6 for an indication of these funding channels.)

6

Susan B. Epstein and Connie Veillette Table 1. Foreign Operations Appropriations, FY1999-FY2009 (discretionary budget authority in billions of current and constant dollars)

Current$ Constant

FY9 9 15.44 20.08

FY00

FY01

16.41 20.80

16.31 20.20

FY0 2 16.54 20.11

FY03

FY04

FY05

23.67 28.03

39.05 44.93

23.45 26.03

FY0 6 23.13 24.83

FY07

FY08

FY09

26.38 27.71

est. 27.22

req. 28.78

Notes: Amounts do not include mandatory Foreign Service retirement accounts that total $34.6 million in FY2009. FY1999 excludes $17.61 billion for the IMF. All figures include regular and supplemental appropriations. Figures for FY2009 are requested amounts. Figures for FY2008 are State Department estimates. Both FY2008 and FY2009 figures include supplementals passed by Congress June 30, 2008, P.L. 110-252.

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Statutory Basis of Foreign Assistance The main statutory basis of foreign aid programs is the Foreign Assistance Authorization Act of 1961 (FAA), as amended (P.L. 87-195; 22 U.S.C. 2151). The FAA has been amended numerous times since its initial enactment, but it has not been comprehensively reauthorized since 1985. Instead, Congress has enacted a series of statutes to authorize specific aid programs. These include the FREEDOM Support Act (P.L. 102-511); the Support for East European Democracy (SEED) Act (P.L. 109-102); the Afghanistan Freedom Support Act of 2002 P.L. 107-327; the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003 (P.L. 108-25); the Millennium Challenge Act of 2003 (P.L. 108-199), and various Security Assistance Acts since 1999.1 Over the years, most aid reform studies have recommended that the FAA and related statutes be replaced with new legislation that would update the statutory basis to eliminate the emphasis on the Cold War and communism and reflect current international conditions, thereby bringing coherence to numerous aid programs.

Historical Rationales for Foreign Assistance2 Since the start of U.S. foreign aid programs, the rationale for such assistance has been posited in terms of national security, humanitarianism, and commercial interest. From a beginning in rebuilding Europe after World War II and assisting newly independent states in Africa, aid programs reflected Cold War tensions that continued through the 1980s. U.S. assistance programs were viewed in a national security context, as a way to prevent the incursion of Soviet influence in Latin America, Southeast Asia, and Africa. In the immediate aftermath of the dissolution of the Soviet Union, aid programs lost their Cold War underpinnings. With the end of the Cold War, foreign aid programs reflected less of a strategic focus on a global scale, and instead responded to regional issues such as Middle East peace initiatives, supporting the transition to democracy of eastern Europe and republics of the former Soviet Union, addressing international drug production and trafficking in the Andes, and stemming illegal immigration. Foreign aid lost its anti-Communism rationale, and decreasing foreign aid budgets in the 1990s reflected the lack of an overarching theme. Even during periods when aid programs were justified in the context of the Cold War, and more recently in the context of anti-terrorism, foreign aid programs also were justified for

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commercial and humanitarian reasons. Foreign assistance has long been defended as a way to either promote U.S. exports by creating new customers for U.S. products, or by improving the global economic environment in which U.S. companies compete. At the same time, a strong current has existed that explained U.S. assistance as a moral imperative to help povertystricken countries and those trying to overcome disasters or conflict. Providing assistance for humanitarian reasons or in response to natural disasters has generally been the least contested within the American public and policymakers alike. The purposes of aid are thought to fit within these rationales. By promoting economic growth and reducing poverty, improving governance, addressing population growth, expanding access to basic education and health care, protecting the environment, promoting stability in conflictive regions, protecting human rights, curbing weapons proliferation, and addressing drug productionand trafficking, the United States would achieve its goals of promoting national security, ensuring a global economic environment for American products, and demonstrating the humanitarian nature of the U.S. people. Some observers have returned to the view that poverty and lack of opportunity are the underlying causes of political instability and the rise of terrorist organizations, much as poverty was viewed as encouraging a breeding ground for communist insurgencies in the 1960s, 1970s, and 1980s. At the same time, the rise of disease pandemics that have the ability to spread with increasing speed has also brought focus to U.S. aid programs. The present national security rationale for foreign affairs programs has transitioned from a largely anti-communist orientation for some 40 years following World War II to a more recent focus on anti-terrorism in the post September 11, 2001, environment. In 2002, President Bush released his National Security Strategy that for the first time established global development as the third pillar of U.S. national security, along with defense and diplomacy. Development was again underscored in the Administration‘s re-statement of the National Security Strategy released on March 16, 2006.3 The Bush Administration has also announced significant initiatives relating to diplomacy and foreign aid. A new transformational diplomacy initiative, announced in 2006, would reposition diplomats to global trouble spots, create regional public diplomacy centers, localize small posts outside of foreign capitals, and better train diplomats in language, public diplomacy, and democracy-promotion skills. Also announced in 2006 was the creation of a new position at the State Department, the Director of Foreign Assistance (DFA), who serves concurrently as USAID Administrator. Heading up the new ― F bureau‖ at State, the DFA has created a new Strategic Framework for Foreign Assistance with the objectives of providing more coordination, coherence, transparency, and accountability for aid programs. New presidential initiatives, including the Millennium Challenge Account (MCA), the President‘s Emergency Plan for AIDS Relief (PEPFAR), and the President‘s Malaria Initiative (PMI) have resulted in large increases in the foreign aid budget. Pledges for increased aid, to Africa, for example, as well as reconstruction costs in Afghanistan and Iraq, are also driving the recent increases.

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Trends in Foreign Assistance Funding Historic Trends Spending for U.S. foreign assistance programs, that began in earnest in the 1940s with a four-year $13 billion (current dollar)4 investment in rebuilding Europe under the Marshall Plan, has fluctuated in response to world events. After the Marshall Plan ended in the early 1950s, U.S. assistance focused on Southeast Asia to counter Soviet and Chinese influence. Under President Kennedy, aid levels rose to their highest historic levels (as measured as a percentage of national income) since the Marshall Plan, with the Alliance for Progress in Latin America, and assistance to newly independent states in Africa. Aid spending leveled off in the 1970s, even with spending for Middle East peace initiatives, and then rose again in the 1980s to address famine in Africa, continuing peace efforts in the Middle East, and the U.S. response to insurgencies in Central America. The 1990s saw aid levels fall to their lowest levels, averaging approximately 0.14% of national income.

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New Presidential Initiatives U.S. aid programs have recently focused on a number of initiatives relating to health funding and assistance to Africa. Proponents of these new initiatives believe that aid programs need to be responsive to current global conditions, such as disease outbreaks and regional instability, while critics argue that these new focuses are diverting resources from some regions, are neglecting other needs, such as infrastructure, or long-term development and poverty alleviation, and are further contributing to the fragmentation and stovepiping of aid programs.

Source: Data provided by the U.S. Agency for International Development as reported to the OECD Development Assistance Committee (DAC). Notes: Official Development Assistance (ODA) is reported as calendar year disbursements and covers government-wide aid programs. It does not include some military assistance accounts, such as FMF and IMET. Figure 1. U.S. Official Development Assistance as a Percentage of National Income

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Beginning in 2003, the Administration launched new initiatives with sector or region specific focus. 

HIV/AIDS. Under a new five-year initiative in 2003, the President‘s Emergency Plan for AIDS Relief (PEPFAR), President Bush pledged a total of $15 billion by FY2008 for HIV/AIDS prevention and treatment. Africa, with 12 of the 15 PEPFAR focus countries, is the primary beneficiary. With the FY2008 budget request, this pledge would be exceeded. On May 30, 2007, the President announced a follow-on plan to provide a total of $30 billion through FY2013.



Malaria. The Administration announced a President‘s Malaria Initiative (PMI) in 2006, pledging that the United States would spend an additional $1.2 billion over a five-year period (FY2006-FY2010) on malaria prevention and treatment. Congress appropriated $122 million in FY2006 and $248 million in FY2007. The request for FY2008 is $388 million, keeping the pledge on track.



Africa. Prior to the 2005 G-8 Summit, the Administration announced that it would double U.S. assistance to Africa by 2010. The FY2008 request keeps the doubling pledge on track. Excluding Millennium Challenge Corporation (MCC) assistance, bilateral aid to the region would increase by 53%, largely driven by HIV/AIDS funds.



MCC. In announcing the creation of the independent Millennium Challenge Corporation, the President initiated a new aid platform to reward recipient countries for sound economic and governance policies, and pledged $5 billion in annual funding by FY2006. In fact, requests have never topped $3 billion a year, which is also the amount of the FY2008 request. Congress has consistently cut the MCC request, with some Members expressing concern that the program was slow to get started, and has not disbursed much of its existing funding. Funds are appropriated for three- or five-year compacts, although grants are obligated on an annual basis.



Education in Africa. Announced in 2002, the Africa Education Initiative pledged to spend more than $600 million on basic education over five years. Funding is to train new and existing teachers, provide textbooks and other teaching materials, and offer tuition scholarships.

Regional Distribution of Aid The distribution of foreign assistance by region has varied depending on world events. Since the Administration announced the President‘s Emergency Plan for AIDS Relief (PEPFAR), the regional distribution has been skewed in favor of Africa, where 12 of the plan‘s 15 focus countries are located. Since 2001, aid to Africa has more than quadrupled, from $1.3 billion to $5.5 billion in FY2008.5 In the same period, aid to South and Central Asia has increased ten-fold, from $205 million in FY2001 to nearly $2.2 billion proposed for FY2008. Assistance to Europe and Eurasia has fallen by 60% as a result of some countries

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graduating from SEED and FSA programs. Decreases in the Near East reflect reductions in aid to Israel. Figure 2 shows the percentage share of bilateral aid in three selected years. A major focus of the FY2008 budget is a continuation of funding to address the HIV/AIDS pandemic in many countries with high prevalence rates. The 15 PEPFAR focus countries are the main beneficiaries, although Child Survival and Health (CSH) funds are used in non-focus countries as well.6 A concern of some aid analysts is the effect that this focus has on other types of development assistance and in other regions. The largest effect can be seen in Africa. If Global HIV/AIDS Initiative (GHAI) funds are excluded, then Africa would see a 27% increase in funding since FY2001, rather than a quadrupling.

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Sector Distribution of Aid From a historical view, U.S. aid programs have emphasized different approaches. With the Marshall plan, aid planners sought to rebuild infrastructure in European societies that had previously attained healthy development levels. With a growing number of communist insurgencies and political instability in Asia, Latin America, and Africa, the focus turned in the 1960s to rapidly improving economic growth by addressing urban poverty. This approach segued in the 1970s to issues of rural poverty with programs that attempted to provide integrated assistance in such sectors as agriculture, education, and health. At the same time, under President Carter, human rights considerations entered into foreign aid policy. In the Clinton Administration, sustainable development became popular, and aid programs also encompassed issues of human rights and democracy, as the United States helped eastern and central European nations transitionto democracy.

Source: U.S. Department of State and CRS calculations. Notes: Data is drawn from aid accounts funded in annual foreign operations appropriations bills. Figures exclude food aid. Includes GHAI funds. AFR = Africa; EAP = East Asia and Pacific; EUR = Europe and Eurasia; NE = Near East; SCA = South and Central Asia; WH = Western Hemisphere. Figure 2. Regional Distribution of Foreign Aid, FY1995, FY2001, and FY2008

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Many observers describe current U.S. programs as giving priority to health and security assistance. This perception is largely driven by the large increase of funding for HIV/AIDS prevention and treatment, and the costs of reconstruction in Afghanistan and Iraq. Health funding, including all USAID and State Department programs, comprised approximately 6% of the foreign aid budget in FY1995, but has risen to nearly 30% in FY2008. Security assistance,7 on the other hand, has increased slightly from 36% in FY1995 to 44% in FY2008.8

Use of Supplementals Supplemental appropriations for Foreign Operations programs, which in FY2004 exceeded regular Foreign Operations funding, have become a significant channel of funds for U.S. international activities, especially those related to reconstruction efforts in Iraq and Afghanistan. Supplemental appropriations bills have often also been used as vehicles to provide additional funding to respond to unanticipated emergencies or natural disasters. There has been some criticism that the Administration has relied too heavily on supplementals and that some items, particularly relating to Iraq, should be incorporated into the regular appropriations cycle. The Administration counters that given the nature of rapidly changing overseas events and unforeseen emergencies, it is necessary to make supplemental requests for unexpected and non-recurring expenses. Funds in supplemental appropriations bills are generally declared emergency, and do not fall under discretionary budget caps. Figure 3 shows the growing reliance on Foreign Operations supplemental appropriations. Congress approved a FY2007 supplemental bill (H.R. 2206/P.L. 110-28) providing $6.146 billion in international affairs spending, of which $4.42 billion is foreign aid. For FY2008, the Administration submitted an emergency request with the regular budget that totaled $3.3 billion for international affairs spending, of which $1.37 billion is proposed for foreign aid programs. A second request was sent to Congress on October 22, 2007 for an additional $1.96 billion in foreign assistance, for a total of $3 .328 billion in supplemental FY2008 funding. In June 2008, Congress passed FY2008 and FY2009 supplemental funding in H.R. 2642/P.L. 110-252, which provides an additional $4.16 billion in foreign operations funding for FY2008 and $2.87 billion for FY2009.

Source: CRS calculations based on enacted appropriations measures. Notes: All figures include regular and supplemental appropriations. Figures are in current U.S. dollars. Figure 3. Supplemental Funding for Foreign Operations

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ISSUES FOR CONGRESS Congress will likely play an integral role in any type of foreign aid reform, by authorizing a new aid infrastructure, appropriating funds for refocused aid programs, or both. The challenges facing Congress include weighing the justifications for foreign aid programs in relation to benefits to the United States that may be provided by such assistance, and to a variety of domestic needs that often put budgetary pressure on foreign aid. This entails scrutiny of the current level of assistance and proposals to increase aid. A foreign aid reform effort likely necessitates a review of the current organization of the numerous departments and agencies that provide international assistance programs with an eye toward providing coordination. This may involve a re-evaluation of the existing statutory framework provided by the Foreign Assistance Act of 1961, as amended (P.L. 87-195; 22 U.S.C. 2151, et seq.), and other authorizing legislation, depending on the extent of the reform. There are a variety of organizational reforms that can be undertaken. Those chosen would depend on what Congress perceives to be the major problems besetting U.S. foreign assistance policy, whether those problems are related to goals and strategy; implementation and effectiveness; or coordination and coherence. The following section outlines the criticisms of current aid programs and issues that Congress faces in reforming them. The next section provides a review of proposals for policy options and organizational reform in how foreign aid policy is formulated and how aid programs are administered and managed.

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Revisiting the “Why” of Foreign Aid Many analysts contend that the rationale of foreign aid has centered on security concerns for most of its existence, with security most often defined in an anti-communism or antiterrorism context. Another rationale—to reflect the humanitarian nature of the American people—has also been prominent. A third rationale—to promote U.S. exports—has been prominent at some points. Further, some aid proponents have justified aid as a means to reduce illegal immigration to the United States by addressing the economic motivations for migration, or to reduce the illegal flow of narcotics. Others have cited the need for the United States to exercise leadership in the aid field commensurate with its economic, political, and military standing in the world. It is likely that U.S. foreign aid policy will continue to be predicated on all of these rationales. There are a number of other considerations, however, that policy makers may address in any redesign of U.S. foreign aid. 

Should U.S. assistance be based on the political and economic performance of recipients (i.e., tied aid)? There is a strong belief in the development communitythat countries with democratic institutions have greater capacity to absorb and benefit from foreign aid. Critics argue that a focus on performance-based criteria neglects countries in dire need of assistance, but that are not able, for one reasonor another, to achieve U.S.-determined benchmarks.

Foreign Aid Reform: Issues for Congress and Policy Options 





13

Should U.S. assistance emphasize poverty alleviation without regard for the nature of the recipient country government? Critics of aid point out that U.S. aid has been given to countries with repressive regimes, and may signal tacit support for such regimes. The poverty of its citizens cannot be overcome by foreign assistance, if repressive and corrupt regimes exploit the provision of aid. On the other hand, some observers believe that there is a moral obligation to find the means to help people in need, most of whom are the victims of repressive regimes. Should U.S. assistance be focused on countries that have the best chance of graduating from aid? Such a focus would reduce the number of countries in which the United States conducts development activities, as ― best cases‖ are identified, and as countries graduate from assistance. On the other hand, it would omit countries that have not reached a level of development that approaches sustainability. Should development serve as its own distinct purpose, or should it be seen as a tool of diplomacy? Those who favor a strong development policy based on a humanitarian rationale believe that development is distinct from diplomacy and should not be subsumed by it. Others believe that the American public will not support foreign aid budgets unless it can be demonstrated that aid serves strategic U.S. foreign policy objectives.

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Recent Foreign Aid Reform The latest reform effort, begun in January 2006, is the Secretary of State‘s reorganization creating a new position and new bureau to coordinate aid. The changes were made in the context of achieving the Administration‘s development initiatives. To that end, she created a new State Department position, Director of Foreign Assistance (DFA), and a new Bureau of Foreign Assistance (F). The DFA serves concurrently as Administrator of USAID. When established, it was argued that the dual-hatted nature of the position, along with a rank equivalent to Deputy Secretary, would allow for the better coordination of aid programs. The DFA has authority over assistance programs managed by the State Department and USAID, and provides guidance for foreign assistance delivered through other government agencies. While the FY2008 foreign operations budget request was written under his direction, the DFA has had very little input, except informally, over the aid provided by other agencies and departments, that according to one USAID document now totals more than 50 government entities.9 This situation was, arguably, not unexpected since the DFA has no statutory authority, except that delegated to the office from the Secretary of State. In 2006, the DFA presented a new Strategic Framework for Foreign Assistance10 that links aid programs to U.S. strategic objectives. Countries are grouped into five categories representing common development challenges. Rebuilding countries are those in, or emerging from, internal or external conflicts. Transforming countries include low and lower-middle income countries that meet certain performance criteria based on good governance and sound economic policies. Developing countries are those low and lower-middle income countries that are not yet meeting performance criteria. Sustaining Partnership countries include uppermiddle income countries with which the United States maintains economic, trade, and security relationships beyond foreign aid. Restrictive countries include authoritarian regimes

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Susan B. Epstein and Connie Veillette

with significant freedom and human rights issues, most of which are ineligible to receive U.S. assistance except for humanitarian purposes. Programs in these countries operate through non-governmental organizations or through entities outside the country. A sixth category was created to encompass global or regional programs that transcend any one country‘s borders. Countries are expected to graduate from one category to another, and then eventually from aid entirely. Each category represents common development challenges around which aid programs are to be designed, and linked to strategic objectives. Those objectives include peace and security; governing justly and democratically; investing in people; economic growth; and humanitarian assistance. Countries in each category may receive assistance under several or all objectives. The initial reception to the Framework and the DFA position within the development community is mixed. Some observers hail the effort as a timely and necessary attempt to provide some coherence to a growing number of assistance programs. These analysts see the effort as a good first step to address a fragmented assistance structure. They also argue, however, that the reform does not go far enough in addressing the weakened state of technical expertise at USAID in the context of decreasing operating budgets. USAID staff numbers have been cut in half since the early 1980s as most development activities are carried out by private contractors and the nongovernmental organization community, with many observers remarking that instead of development experts, the agency now has contract managers. Others criticize the new Framework for being inadequate. They contend that unless the DFA has authority over all U.S. assistance programs, the serious problem of lack of coordination and coherence will not be solved. If one examines the sources of official development assistance, as reported to the Organization for Economic Cooperation and Development (OECD), programs under the jurisdiction of the DFA—that is all State Department and USAID programs—accounted for 58% of U.S. aid in calendar year 2006. The actual amount may be much less as it appears that the Office of the Global HIV/AIDS Coordinator, which administers the PEPFAR program, is not a part of the F bureau.

Proposed Levels of Foreign Assistance A number of international forums have highlighted the needs of the developing world and the role of rich countries. Annual events, such as the G-8 summits and international meetings on the subject of development, have produced pledges to increase aid in overall terms, for specific regions, and for particular purposes.11 The proliferation of pledges raises the question of what is an appropriate level of assistance that will bring about sustainable development while being cognizant of the capabilities, both political and financial, of donor countries. Some international aid goals are wide-ranging and ambitious, such as the U.N.‘s Millennium Development Goals (MDG), while others are more focused, such as doubling aid to Africa by 2010. The U.N. Millennium Project established eight development goals to be achieved, some partially, by 2015.12 The U.N. Development Program (UNDP) estimates that global aid levels from all donors would need to climb to $195 billion by 2015 in order to reach these goals. With aid levels in 2004 at $79 billion, this would mean more than doubling assistance in roughly a 10- year period. While this goal would necessitate an increase from

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the current level of 0.25% of donor countries‘ income to about 0.54% by 2015,13 the United Nations has had a longstanding goal of donor countries providing 0.7% of national income. As of 2006, only five countries had reached that goal (Denmark, Luxembourg, the Netherlands, Norway, and Sweden). The number of pledges made by the United States and other donor countries is cause for a consideration of the burden that each should shoulder. There are two ways to measure levels of foreign aid—as a percentage of a country‘s Gross National Income (GNI), or as a percentage of a country‘s budget.14 Advocates of increasing foreign aid have called for the United States to reach specific goals with regard to both. Critics believe that neither quantifiable measurement is appropriate and that large increases in assistance are not necessary. Figure 4 represents the current level of foreign aid spending proposed for FY2008 compared to a one percent increase, and an increase to 0.7% of national income.

0.7% of GNI A popular target for donor country assistance is 0.7% of GNI. This target has developed over time as a lobbying tool for increasing foreign assistance, and some countries have committed to working toward the goal by 2015. The United States has never committed to the 0.7% target. U.S. aid levels were 0.17% in 2006, or approximately $23.5 billion.15 In 2005, U.S. aid reached $27.9 billion, or 0.22% of GNI, reflecting high levels of debt relief and aid disbursements in Iraq and Afghanistan. The European Union vowed to reach a collective level of 0.5 6% of national income by 2010, and to hit the 0.7% target by 2015. Historically, U.S. foreign aid as a percentage of national income has been higher than present levels. During the 1960s, the annual average was 0.5 1%, falling to 0.26% in the 1970s, 0.22 % in the 1980s, and 0.14% in the 1990s. The value of the 0.7% target, or any percentage target, as the correct level of aid that will produce measurable development results has never been firmly established.16 Based on GNI of roughly $14 trillion projected for 2008, a U.S. foreign aid budget that is 0.7% of GNI would total $98 billion, representing more than a tripling of aid levels from the $27.6 billion disbursed in 2005. Increase by 1% of Budget Another measurement is the ratio of assistance to the overall annual budget. At $24.3 billion proposed in FY2008, current U.S. foreign aid comprises 1.2% of the budget.17 This level is a decrease from previous levels that averaged 1.4% during the 1990s and 1.8% during the 1980s.18Some advocates of higher levels of aid have proposed increasing foreign aid spending by an additional one percent of total budget authority, or to approximately 2.2%. Since 1980, U.S. aid levels have reached 2.2% in just five years: 1980, 1981, 1984, 1985, and 1993. In terms of the FY2008 budget, a one percent increase would amount to an additional $29 billion for a total foreign aid budget of $53 billion. This would represent a near doubling of assistance. Critics of both proposals counter that foreign aid is measured in such a way that it excludes some U.S. government and private sector activities. Official development assistance (ODA)19 consists of aid activities of a development nature. While this includes some Department of Defense assistance, such as DOD‘s HIV/AIDS assistance to some foreign militaries, humanitarian assistance, and counter-narcotics programs, it excludes the

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StateDepartment‘s Foreign Military Financing (FMF) and International Military Education and Training (IMET), as well as costs of U.S. military activities that proponents argue promote stability around the world. Funding for FMF and IMET programs alone has totaled roughly $4.6 billion in each of the last three fiscal years. Other critics point out that ODA data also exclude private giving. The State Department estimates that these charitable contributions from organizations totaled $8.6 billion in calendar year 2005, and that if one includes private capital flows totaling $69.2 billion, the ratio of total revenue flows to GNI would come to 0.84%. The Hudson Institute‘s Index of Global Philanthropy 2007 estimates that contributions from individuals and organizations amounted to $33.5 billion in 2005, not including another $61.7 billion in remittances (cash transfers by immigrants to individuals in their countries of origin). If both are included, they say, U.S. aid levels would reach 0.98% of GNI. Some observers do not believe private assistance, whether from charitable contributions or corporations should be counted since both can fluctuate from year to year, and in the case of corporate investments, occur in more advanced economies, such as China and India. Further, there is disagreement within the development community on the effects of remittances in recipient communities.

Maintain Current Aid Levels Regardless of the debate on what should be included in ODA figures, some observers do not believe that U.S. aid should be measured in terms of GNI or annual budgets. They point out that the United States is the largest provider of foreign assistance in monetary terms among all donors, often providing a quarter of all ODA disbursements tracked by the DAC. Critics of large increases in foreign aid believe that many developing countries lack the capacity to absorb large inputs of assistance, and that such levels could overwhelm weak government institutions, including health care and education systems. For example, some USAID missions have expressed concern that the health care systems in some PEPFAR countries are not capable of sustaining the large amount of HIV/AIDS funds that have increased precipitously in recent years, and are proposed to climb further under the President‘s pledge to double funding in the FY2009-FY2013 time frame.20

Source: CRS calculations based on the FY2008 budget request. Figure 4. Proposals for Increased Aid

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Observers also contend that large increases in aid run the risk of creating recipient country dependency from ill-designed projects created in the immediate aftermath of large infusions of funds to aid programs. Such a situation does not square with the underlying notion that nations should eventually graduate from assistance. They believe, instead, that U.S. aid agencies should focus on quality programs that reward countries taking the necessary steps to promote their own development. In other words, aid policy should be concerned with outcome rather than input, a criticism also shared by those advocating aid increases. Others believe that the budget should be based on need and demand, rather than on any arbitrary formula. This would entail a demand- driven approach with greater field involvement.

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POLICY OPTIONS The topic of foreign aid reform and reorganization has existed nearly as long as foreign aid programs themselves. In fact, the creation of USAID in the Kennedy Administration was partly an effort to bring coordination to aid programs that had developed across government agencies. Since then, there have been numerous studies of how best to organize foreign aid in order to increase its effectiveness and to support U.S. interests.21 There are at least three paths Congress can consider with regard to policy options. One is to maintain the status quo, with all the attributes described herein. A second is to maintain the Foreign Assistance Act of 1961, as amended, but further amend it to reflect the challenges of the 21st Century, and possibly to support a different mix of assistance by refocusing goals, strategies, and programs. As outlined below, those include refocus assistance; change or better define the role of the Department of Defense; change the use of multilateral instruments and organizations; and create a unified budget. Another path, and arguably a more ambitious one, is to reorganize the current aid infrastructure to achieve congressional objectives. This could entail a re-write of the Foreign Assistance Act of 1961. As outlined below, structural reform options include elevate USAID to a cabinet-level department; merge USAID into the State Department; create a new aid agency with increased jurisdiction; and improve interagency coordination.

REFORM OPTIONS Refocus Assistance With the growth in objectives, priorities, and programs, some reform proponents have suggested that donor countries should refocus their programs on more defined goals. They suggest that a country‘s aid programs should focus on particular sectors, regions, or objectives, preferably based on the strengths a donor has to offer recipient countries.22 Other donor countries have undertaken reforms to refocus their foreign assistance, or have initiated reviews of their programs. Sweden recently announced that it would reduce the number of recipient countries from 70 to 33 while maintaining the same level of funding.23 Programs will focus on three categories of countries: those in need of long-term development, largely povertyreduction projects in Africa; those in conflict or post-conflict situations, such

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as Afghanistan, Colombia, Iraq, Liberia, and Sudan; and eastern European countries in order to deepen cooperation and European integration. France‘s new government has proposed linking its aid to the good governance practices of recipient nations. Government officials have said that France‘s aid programs should be streamlined with clear priorities and limited scope, and should focus on ― one or two strategic aims.‖24 A refocused U.S. aid program could be one that identifies a limited number of objectives or priorities, and then directs funding for those objectives. The objectives chosen would have implications for the regional distribution of aid, as for example, an objective to alleviate poverty would benefit Africa at the expense of other regions. At its most extreme, this approach would entail a dramatic scaling back of U.S. aid activities that do not support the chosen focus, and could also mean a reduction in the number of countries receiving U.S. assistance. A less drastic refocusing could be similar to the process undertaken in 2006 that produced the Strategic Framework for Foreign Assistance that linked assistance to five strategic objectives. This approach, as currently managed, does not overcome problems of coherence and coordination among U.S. government agencies.

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Change/Define Role of Defense Department The role of the Department of Defense in foreign aid activities has increased in recent years, largely in response to stabilization and reconstruction activities in Iraq and Afghanistan. The proportion of DOD foreign assistance has increased from 7% of bilateral official development assistance in calendar year 2001 to an estimated 20% in 2006. Defense activities include the provision of humanitarian assistance and training in disaster response, counter-narcotics activities, and capacity building of foreign militaries.25 Much of this assistance is managed by the Defense Security Cooperation Agency (DSCA). The increased role of DOD in foreign assistance has been debated both within military and civilian circles. Secretary of Defense Robert Gates has stated that U.S. civilian development assistance agencies need to be reinvigorated, and that until they are strengthened, the military will have to engage in reconstruction activities. Advocates of a greater role for DOD argue that the military is often in the best position, with personnel on the ground, to provide timely assistance in conflict and post-conflict situations, and in response to natural disasters. Further, they say, DOD has more flexibility in the allocation of assistance. Finally, DOD has the resources and technical capacity to provide timely assistance in many cases. Those who are concerned about the increased DOD profile warn that it results from a diminution of personnel expertise at USAID and State, and that it will further contribute to this problem. Critics believe that DOD is supplanting and eroding the traditional role of the State Departmentand USAID, agencies that critics argue should be in charge of these types of policy decisions. Further, they caution that there may not be the degree of coordination among these three entities that they argue is necessary to achieve U.S. foreign policy objectives. Others believe, however, that requirements that involve the Secretary of State in the decision-making process ameliorate this concern. Still others contend that DOD programs can be duplicative and are better carried out by civilian agencies. Finally, many believe that aid programs detract from DOD‘s primarily military function.

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Any redesign of foreign aid programs would likely take into account the role of the Defense Department. Options for addressing the role of DOD include making the Defense Security Cooperation Agency a co-managed entity between the Department of Defense and the Department of State, or moving the DSCA into a new aid agency. Another option is to bring the DSCA under the control of an interagency coordinating mechanism.

Change Use of Multilateral Organizations

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In addition to bilateral assistance, the United States contributes to multilateral institutions that carry out development activities. These institutions include international and regional organizations, such as the United Nations and the Organization of American States, and multilateral banks, such as the World Bank, Inter American Development Bank, Asian Development Bank, African Development Bank, and European Bank for Reconstruction and Development. Since FY2000, the share of funds that the United States provides (not including assessed dues to some international organizations) has averaged a little less than 8% of the total amount appropriated for foreign assistance programs. The lowest point occurred in FY2003 with 6.8%. Previous to the 2000s, the United States contributed a higher share. The average during the 1980s was nearly 11%, and nearly 13% in the 1990s. Figure 5 shows the ratio of multilateral aid to total foreign aid since 1981. Decreases since 2003 can be attributed to the large increase in bilateral assistance in light of new initiatives such as PEPFAR and MCC.

Source: Enacted foreign operations appropriations bills, and CRS calculations. Notes: FY2008 is based on the budget request. Figures do not include supplementals and periodic IMF replenishments that occurred in 1981, 1984, 1993, and 1999. Figure 5. Share of Multilateral Assistance, FY1981-FY2008

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Congress may consider the desired level of U.S. contributions to multilateral institutions. There have been disagreements between the Administration and Congress on the use of multilateral institutions. The debate on funding levels for the U.S. contribution to the Global Fund for AIDS, Tuberculosis and Malaria is one example, where Congress has consistently provided more funds than requested by the Administration. Proponents of a greater use of multilateral institutions believe that these organizations are better suited to carry out development activities because they can pool the resources of member nations and, as a result, can bring more funds to any particular country or problem. They argue that these organizations often fund large infrastructure projects, activities in which USAID no longer engages.26 Others believe that they can tackle long-term development issues with a longer and more consistent commitment of resources. Some also contend that multilateral institutions often have better credibility in recipient countries and are not burdened by possibly poor relations that may exist between some donor and recipient countries. Those who advocate greater flexibilityobserve that multilateral assistance often is not subject to as many statutory restrictions in both appropriations and authorization legislation. Critics of multilateral institutions argue that they lack accountability and transparency in how funds are spent and how policy decisions are made. They believe that the United States would not have enough say in how assistance is provided and to whom, possibly resulting in situations where U.S. funds are going to support governments with which the United States has serious policy differences. Others contend that a greater use of multilateral institutions will mean that the United States will not get acknowledgment from the recipient countries for its foreign aid contributions.

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Create a Unified Budget In the parlance of the U.S. budget, international affairs comprises Function 150 spending, while the defense budget is considered Function 050. Function 150 is appropriated through the annual State Department, Foreign Operations, and Related Programs appropriations bill, while Function 050 is largely appropriated through the Defense and Military Construction appropriations bills. Programs in domestic agencies that provide some type of foreign assistance are not included in Function 150. Instead, those funds are requested and approved within their own budgets. This situation has led observers to criticize U.S. aid as being uncoordinated and lacking transparency, as there are no central reporting requirements. It is difficult to ascertain how much the United States spends in some sectors that receive assistance from various agencies, such as health(USAID, State, HHS, CDC), education (State, USAID, Department of Education), or environment (State, USAID, Department of the Interior, Department of Agriculture, EPA, NOAA, U.S. Forest Service, U.S. Fish and Wildlife Service), for example. There are several related proposals to create some sort of unified budget.

Unified Function 150 Budget or Budget Presentation One proposal is to include all foreign assistance spending in Function 150 with the budgeting process coordinated by the lead aid agency, although program specifics would be

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developed by the agency providing the assistance. Under this scenario, funds would still be part of the various agencies, but the budget request would be unified and presented by the head of the aid agency. A related option is to maintain the current function categories, but have the Administration present a congressional budget justification that includes all foreign assistance programs government-wide. Proponents believe such a unified budget, or presentation, would provide Congress with a fuller picture of the totality of foreign aid, and assist in making policy decisions. This option would also offer the possibility of being able to identify redundancies and inconsistencies in programs. Critics would argue that reorganizing budget functions would be time consuming, and that the issue of coordination could be achieved through other means.

Unified National Security Budget Another option is to combine Functions 050 and 150 into a national security budget. While the Defense base budget request for FY2008 totals $483.2 billion, the foreign aid budget of $24.4 billion pales in comparison. Combining the two would offer the advantage of coordinating the programs and funding levels among the three main agencies providing assistance. Proponents believe that this option would increase transparency, and reduce duplication of aid programs. Critics argue that including foreign assistance in a national security budget that consists mostly of defense spending would present the wrong image for USAID as an independent civilian agency, and one whose mission is fundamentally different from that of DOD. In addition, critics do not believe that the proposal would result in additional foreign assistance, unless the foreign aid budget is fenced within a national security budget.

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Restructuring Options Elevate USAID to Cabinet-Level Department The impetus behind the proposal to create a cabinet-level department is to put foreign assistance on an equal footing with diplomacy and defense, consistent with its elevation as a pillar of U.S. national security. In addition, other donor countries have, in recent years, given their aid agencies increased standing on a par with their foreign and defense ministries, the most often cited being the United Kingdom‘s Department for International Development (DFID).27 As a cabinet department, it is believed that a Secretary for Development would be better able to work as an equal with other department heads in order to coordinate aid programs government- wide. It would also operationalize the rhetoric of elevating the importance of global development. In addition, there is the possibility that a department would attract experienced development professionals, who have left USAID as its operating budget has continued to decline. Some critics oppose the idea on the grounds that other equally important agencies are not in the cabinet, and that USAID should remain under the foreign policy direction of the Secretary of State. Others believe that even as a cabinet agency, USAID would not be equal to the more powerful Departments of State and Defense. Some would also argue that USAID controls just 20% of foreign assistance,28 with the remaining controlled by the State

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Department and other independent aid agencies, such as the Millennium Challenge Corporation. In addition, the option does not formally provide for better government-wide coordination.

Merge USAID into State Department As currently structured, USAID is an independent agency, but as provided in reorganization legislation in 1998, it takes foreign policy guidance from the Secretary of State. Some observers have suggested that the F bureau‘s location in the State Department has made USAID a subordinate entity in terms of both policy and budgeting. Some have termed these events as a stealth merger. A previous attempt to merge USAID into the State Department failed in 1998, when the U.S. Information Agency (USIA) and the Arms Control and Disarmament Agency (ACDA) were abolished and their functions folded into State (P.L. 105-277). During the debate that unfolded over several years, proponents contended that better coordinationcould not be accomplished with USAID remaining an independent agency. As separate agencies, the State Department and USAID at times have had conflicting agendas, duplicative functions; USAID programs, according to reformers, did not at times properly reflect national priorities. They also maintained that having foreign assistance managed by the State Department would result in a better use of scarce resources. Both arguments are relevant in the current debate. Proponents note that the State Department‘s aid budget already dwarfs that of USAID, controlling nearly 64% of funds provided by foreign operations appropriations for FY2007.29 In addition, supporters contend that having the Secretary of State in charge of foreign assistance would raise its profile, and result in better coordination of programs located in other agencies. Current merger proposals call for the official in charge of aid at the State Department to have a high rank, and for a merger of the two foreign services so that USAID officials could be considered for ambassadorships. Opponents countered, then as now, that the State Department and USAID have different and distinct missions. The State Department primarily focuses on resolving short-term crises through diplomacy, while USAID pursues long-term development achievements that could be compromised by the Department‘s need to shift funds for crisis management. Critics believe that aid policy would be diminished within State, pointing out that moving USIA into State in 1998 did nothing to raise the profile of public diplomacy, and many would argue, did the exact opposite. Critics also argue that the State Department lacks both an interest in aid programs and the expertise in managing them, a view that was confirmed by a recent GAO report.30 Finally, a merger does not formally address the coordination of aid programs government-wide, instead relying on the level of prestige and interest of the Secretary of State. Create Aid Agency with Increased Jurisdiction Another possibility is to create an aid agency by giving it jurisdiction over all U.S. foreign assistance, including that provided by the State Department and domestic agencies. Under such a scenario, it may not be necessary to elevate it to the cabinet; its importance would derive from it having the full range of aid programs in its portfolio. To be successful, it is believed that a new agency would need to have all current USAID and State Department programs, including PEPFAR, as well as those of independent

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agenciesunder its umbrella, such as the Millennium Challenge Corporation, the Peace Corps, the Overseas Private Investment Corporation, and the Trade and Development Agency. Organizationally, it is suggested that the agency would have bureaus that correspond to functions, such as humanitarian assistance and disaster response, long-term development, health, security and military assistance, trade, and innovative programs, such as MCC and the Global Development Alliance (GDA).31 While it may be politically difficult to move the programs of domestic agencies into this new entity, a system of liaison offices could be instituted instead. For example, say proponents, a Centers for Disease Control and Prevention (CDC) and a Health and Human Services Department (HHS) liaison office co-located in the health bureau would increase coordination and programformation. With all aid programs in its portfolio, it is believed that the agency would be in a better position to monitor and evaluate program effectiveness. In this view, it would also be able to provide the coordination necessary to avoid duplication and programs working at cross purposes. Proponents say that a re-invented aid agency would be able to enhance its human capital capacity by bolstering its cadre of development experts, and that the agency would become the lead government entity on policy, implementation, and research. On the other hand, the proposal could be criticized for creating a large new bureaucracy that may be no better at managing foreign assistance than the current structure. Without a clearly thought out strategy and objectives to guide foreign aid, the organization of aid delivery would matter little. Others believe that independent agencies have been created with a specific mission and that those missions could well be downgraded or neglected in a larger organization. Still others contend that development assistance, with its focus on poverty alleviation and long-term development, should not be co-located with security and military assistance, much for the same reasons, they would argue, that USAID should not be merged with the State Department.

Improve Interagency Coordination There have been previous attempts to improve interagency coordination of aid programs; the most often cited are the Development Coordination Committee (DCC) and the International Development Cooperation Agency (IDCA). Both were considered unsuccessful. However, there are other examples of interagency coordinating mechanisms outside of the aid field, such as the National Security Council, the Director of the Office of National Drug Control Policy, and the Council on Environmental Quality.32 The need for some type of coordination is evidenced by the growth in the number of agencies and departments that administer some type of foreign assistance program. There is little coordination or joint policy development among these entities, leading many observers to characterize U.S. aid programs as fragmented and vulnerable to programs and agencies working at cross-purposes. In many cases, existing departments have adopted an aid component. In other cases, new independent agencies have been created with specific mandates, the most recent being the Millennium Challenge Corporation, created in 2004. The U.S. report to the OECD provides information on the contributions of various government entities providing aid. Those entities totaled 28 in calendar year 2006.33 The percentage of ODA provided in calendar year 2006 (Figure 6) from agencies other than the Department of State and USAID totaled 42%. The following entities, excluding the State Department and USAID, are drawn from the DAC report:

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

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

Cabinet-level departments.  Agriculture.  Defense.  Commerce.  Energy.  Health and Human Services.  Interior.  Justice.  Labor.  Treasury. Sub-cabinet organizations.  Centers for Disease Control and Prevention (CDC)  National Institute of Standards and Technology (NIST).  U.S. Patent and Trademark Office (PTO).  National Oceanic and Atmospheric Administration (NOAA).  U.S. Fish and Wildlife Service (USFWS).  U.S. Forest Service (USFS). Independent Agencies.  Millennium Challenge Corporation.  Environmental Protection Agency.  Peace Corps.  African Development Foundation.  Inter-American Development Foundation.  Trade and Development Agency.  Export-Import Bank.  Overseas Private Investment Corporation.  U.S. Institute of Peace.  National Science Foundation

The other category includes Departments of Commerce (0.04%), Energy (0.16%), Labor (0.29%), and the Interior (0.81%); African Development Foundation (0.08%); Inter-American Development Foundation (0.08%); Trade and Development Agency (0.22%); Environmental Protection Agency (0.31%); Export-Import Bank (6.7%); Millennium Challenge Corporation (0.65%); and the U.S. Institute of Peace (0.01%). It should be noted that ODA does not include military assistance programs such as Foreign Military Financing, and International Military Education and Training, managed by the State Department; nor does it include the costs of military operations.

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Source: USAID, report to the OECD. Notes: The OECD Development Assistance Committee (DAC) tracks disbursements on a calendar year basis, rather than appropriations on a fiscal year basis. Consequently, these figures do not align with ratios of State to USAID appropriations, because USAID implements many State programs, and would report the corresponding disbursements. Notwithstanding these issues, the data is a reliable source of information on the aid activities of all government agencies.

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Figure 6. Distribution of ODA by Agency, CY2006 (Percentage of Net ODA, Bilateral and Multilateral Assistance)

There are a number of options available to policy makers to improve interagency coordination. These options range from maintaining the current foreign aid structure, with possible modifications to improve coordination; creating a coordinating entity with the authority to marshal the resources of various government entities, or elevate USAID, or a successor aid agency, within the National Security Council structure.

Create a Coordinating Entity This option would be similar to the Development Coordination Committee (DCC), or the International Development Cooperation Agency (IDCA). The DCC was authorized by Sec. 640B as an amendment to the Foreign Assistance Act of 1961 to advise the President on the coordination of policies and programs affecting developing countries. The DCC was established by executive order in 1973, with the USAID Administrator as chair, and was later revoked by executive order in 1999.34 The DCC reportedly did not function well for a variety of reasons, including a lack of White House commitment to foreign aid programs, and the difficulty in having an agency (USAID) trying to coordinate the activities of Cabinet departments. The International Development Cooperation Agency was inspired by proposed legislation to coordinate all government foreign assistance programs. The agency created by President Carter in 1979 by executive order was a much weaker organization than that envisioned by its chief legislative sponsor, Senator Hubert Humphrey. Considered understaffed and with a jurisdictionlimited largely to just USAID, the IDCA ceased to function in the Reagan Administration.

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Any new coordinating entity would need a commitment from the White House, and strong leadership at its helm with the authority to coordinate across department jurisdictions. Consideration could also be given to providing the position with authority to coordinate the foreign aid budgets of all ODA-contributing agencies.

Elevate Aid Agency within NSC Structure The National Security Council (NSC) serves as the President‘s principal forum for considering national security and foreign policy issues, and coordinating policies among government agencies. The NSC was established by the National Security Act of 1947 (Stat.496; U.S.C. 402). By statute, members include the President, Vice President, Secretary of State, and Secretary of Defense, and by executive designation, the Secretary of the Treasury and the Assistant to the President for National Security Affairs. The Chairman of the Joint Chiefs of Staff is the statutory military advisor, and the Director of National Intelligence is the intelligence advisor. Other various department heads are invited to attend meetings as appropriate. USAID participates at the NSC through the Policy Coordination Committee (PCC), which is a unit of the NSC charged with policy coordination. The proposal to elevate a U.S. aid agency within the structure of the NSC is predicated on three observations. First, the U.S. National Security Strategy, as articulated in 2002 and restated in 2006, elevates global development as a third pillar, along with defense and diplomacy, of national security. Yet, little structural change has been made to reflect this elevation in the importance of USAID‘s work. Second, the lack of success in past attempts has been attributed to either a lack of interest on the part of the White House, and to the USAID Administrator lacking the rank necessary to coordinate other cabinet departments. Third, the current participation of USAID at the Policy Coordination Committee level may not be high enough to accomplish effective coordination. There are numerous possible mechanisms to raise the status of development within the NSC structure. Congress could statutorily designate the head of a U.S. aid agency, whether or not it is cabinet-level, to NSC membership. As such, this person would participate in all national security- related debates. Alternatively, Congress could designate an aid coordinator within the NSC with the authority to convene regular meetings with the relevant agency heads. Several committees exist within the NSC, such as the Committee on Transnational Threats, and the Committee on Foreign Intelligence. A possible option is to create a committee on foreign assistance with the central mission of developing aid policy and providing government-wide coordination. Maintain Status Quo with or without Minor Modifications Some policy makers may eschew the idea of a formal coordinating mechanism as creating an additional level of bureaucracy that would do little to improve aid effectiveness. Coordination exists at the field level among agencies represented at U.S. embassies. At a policy planning level, they can point to the development of interagency coordination that has arisen among Defense, State and USAID. At least two combatant commands (Southcom and Africom) are integrating civilian agencies at headquarters with the objective of coordinating aid activities better. At the newly operational Africom, plans are for a senior State Department foreign service officer to hold the position of deputy to the commander for civilmilitary activities.35 With the increase in DOD providing aid, both the State Department

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andUSAID have created offices (Office of Political- Military Affairs at State, and the Office of Military Affairs at USAID) to manage the relationship. Advocates of a less formal coordinating approach contend that aid levels of other agencies are a small fraction compared to that provided by USAID, State, and DOD combined, which reached 76% of ODA in calendar year 2006. There is also the possibility that the DFA‘s mandate could be expanded to include all U.S. foreign assistance, although such an approach, led by a sub-cabinet officer, may not result in the full cooperation of all cabinet departments.

Re-write the Foreign Assistance Act An issue in the current debate on foreign aid reform is whether it is necessary or practicable to replace the current law governing U.S. aid programs, the Foreign Assistance Act of 1961, (FAA) as amended. The debate may be resolved based on the degree of proposed reforms. The more ambitious, such as a Cabinet-level aid agency, would call for authorizing legislation. To refocus assistance, whether by region, sector, or purpose, may not require a new FAA. The Foreign Assistance Act of 1961 has not been comprehensively reauthorized since 1985. Instead, Congress has considered and enacted single-issue foreign aid legislation, some of which have been incorporated into the Foreign Assistance Act. These laws have authorized assistance to the former Soviet Union (FREEDOM Support Act), eastern Europe (SEED Act), and established new funding platforms, such as the President‘s Emergency Plan for AIDS Relief (PEPFAR), and the Millennium Challenge Corporation. Supporters of a comprehensive re-write of the FAA argue that the 1961 law is largely a Cold War document that is out of date with current issues and absent the policy direction needed to guide U.S. foreign assistance in the 21st Century. Many point out that the Act identifies over 33 major objectives, 75 priorities, and 247 directives36 for U.S. aid, many added through subsequent reauthorizations and amendments, but does not prioritize them. The history of changes to the FAA has also produced what many believe is a list of program restrictions, conditions, and reporting requirements that can be either outdated, conflicting, or both. They further argue that other statutes passed by Congress as stand-alone legislation (i.e., they were not incorporated into the FAA), complicate efforts to revise and update current law, to fully understand the implications of new legislation or the obstacles that exist in existing provisions, and to provide coordination and coherence to the complete complement of U.S. aid programs. Others believe that a complete re-writing of the FAA is not necessary, and that the political difficulties in passing such legislation may doom needed aid reforms. For any priority listed in the FAA, there are likely supporters who would oppose its removal, or a lessening of the priority accorded to it. Instead, they argue, reform efforts should focus on policy development, coordination, and implementation of existing programs. Even more ambitious reforms, except for the creation of a new assistance entity, could be accomplished within the existing statutory framework that grants the President the necessary authorities to administer foreign aid programs, and with single-issue legislation to authorize new initiatives.

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MAJOR REFORM REPORT RECOMMENDATIONS The recognition that foreign aid serves important national interests, together with annual increases in foreign aid budgets since 9/11, has produced several government- and nongovernmental-sponsored studies of how to raise the profile of foreign assistance, provide better coordination, and improve aid effectiveness. In the last year, several reports from three organizations have generated a considerable amount of interest. For clarity and comparability, each entity‘s recommendations, provided below, have been organized by the subject areas of budget, structure, and policy options, although some recommendations have implications for all three areas.

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HELP Commission The HELP Commission was created by the Helping to Enhance the Livelihood of People Around the Globe Commission Act (HELP Commission Act, 22 USC 2394b). Introduced by Representative Frank Wolf in October 2003, and passed by Congress as Sec. 637 of the Consolidated Appropriations Act, FY2004 (P.L. 108-199), the Act called for a commission to study and report on U.S. foreign development assistance programs. The Commission began operations in 2005 and issued its report, Beyond Assistance, in December 2007. The Commission was composed of 21 members: 6 appointed by the President, 4 each appointed by the Speaker of the House and Senate Majority Leader, and 3 each appointed by the House Minority Leader and Senate Minority Leader, with the Administrator of the U.S. Agency for International Development serving as an ex officio member. The Commission was charged with identifying past and present objectives of U.S. development assistance, analyzing whether such assistance should be used as a means to achieve U.S. foreign policy objectives, and considering how to evaluate the performance of aid programs. The Act called for a comprehensive review of policy decisions, delivery obstacles, and best practices. The Commission held a series of meetings with development experts, and conducted study missions to aid recipient countries. It looked at both the efficiency and effectiveness of aid programs government-wide, including development, security, humanitarian, and food assistance. Major HELP Commission recommendations include the following:

Policy In general, the HELP Commission recommends that there be a recognition that security and development reinforce each other.   

Rewrite the Foreign Assistance Act of 1961 to reflect current and anticipated world conditions. Build vibrant private sectors by increasing U.S. technical assistance and funding for small and medium businesses that do not have access to private capital. Renew efforts to improve agricultural productivity and related industries in the developing world, including taking actions to minimize the effects of domestic

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agricultural subsidies and to encourage G-8 countries to do the same. Increase the local purchase of food aid. Form partnerships with local public and private entities to increase demand- driven programs. Leverage non-governmental actors and growth in philanthropy and private investment through programs like the Global Development Alliance (GDA). Align U.S. trade and development policies. One suggestion is to allow duty-free, quota-free provisions for MCC-eligible countries and for the poorest countries with a per capita Gross Domestic Product below $2,000. Establish a Quadrennial Development and Humanitarian Assistance Review.

Structure The HELP Commission did not reach a consensus on an organizational structure, although the majority of commissioners supported a redesigned Department of State. A strong minority also supported the creation of a cabinet-level department for global development. 

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

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Create a new combined USAID and Department of State called the International Affairs Department to reflect the elevation of development as a pillar of national security. The new department would have four sub-cabinet agencies reporting to the Secretary: economic affairs, development, and trade; humanitarian services and stabilization; political and security affairs; and public diplomacy and consular affairs. The report argues that this is not to ― simply move USAID into the current Department of State. It would completely reorganize these and other agencies and departments by functions to ensure a coordinated, coherent approach.‖ (Page 15, Executive Summary.) Establish an entity to conduct research and development modeled on the Defense Advanced Research Projects Agency (DARPA) that would create and commercialize technological products that would benefit developing countries. Establish a high-level mechanism to coordinate aid policy for all government agencies in the Executive Office of the President, possibly within the National Security Council. Strengthen the Office of the Coordinator for Reconstruction and Stabilization, and implement the Administration proposal for a Civilian Response Corps.

Budget The HELP Commission recommends increases for the international affairs budget that could result in a doubling of foreign assistance funding. 



Create a unified national security budget combining Functions 050 and 150, and fencing as much as 10% for international affairs activities. Ten percent of such a budget would result in a doubling of current foreign aid levels. Improve the monitoring and evaluation, human resources, and procurement and contracting capabilities of U.S. international affairs agencies. This includes strengthening staff resources devoted to development and doing away with the Operating Expense account.

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Agree on uniform procedures for reprogrammings and congressional holds. Consolidate and realign the foreign aid account structure. Establish a permanent Humanitarian Crisis Response Facility funded at $500 million and a Transitional Security Crisis Fund. Clarify DOD‘s role in development assistance by ensuring adequate funding for State and USAID programs in areas in which DOD is engaged.

Senate Foreign Relations Committee The minority of the Senate Foreign Relations Committee issued two reports in the last two years on aspects of U.S. foreign assistance programs. The first, Embassies as Command Posts in the Anti-Terror Campaign (S. Prt. 109-52), was issued in December 2006 and focused on the growing role of the Department of Defense in foreign assistance programs. The second, Embassies Grapple to Guide Foreign Aid (S. Prt. 110-33), was issued in November 2007 and examined the implementation of the new Strategic Framework for Foreign Assistance from a field perspective. Both reports made reform recommendations.

Policy Similar to the HELP Commission report, the SFRC recommends a strategic approach that incorporates both security components and humanitarian programs. 

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



Design a foreign assistance strategy that integrates national security needs and a humanitarian imperative. Congress should  move expeditiously on ambassadorial nominations and funding decisions;  overhaul the Foreign Assistance Act of 1961, and implement a two-year reauthorization schedule; and  agree on reprogramming levels below which congressional notification is not required, on a three-year pilot program. Give ambassadors more decision-making authority over military-related assistance programs.

Structure The Senate report recommends separating the DFA and USAID Administrator‘s positions, and to reorganize USAID to give it a voice at higher levels of government, even while the Secretary would have enhanced authority over aid programs. 



Give the Secretary of State the authority to ensure all aid, government-wide, is in U.S. foreign policy interest. Secretary should provide strategic direction, transparency, and accountability. The F process should be redesigned to  make decision-making clearer and more accountable;  make the DFA a position on which the Senate would advise and consent as Deputy Secretary of State;

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give the DFA authority to prepare a unified aid budget and to referee funding disputes;  expand DFA‘s responsibility to all government aid programs, including DOD; and  create Deputy Assistant Secretary positions for programs at regional levels, similar to the State Department‘s SEED Coordinator. USAID should be reorganized to  separate the USAID Administrator‘s position from that of DFA;  give the USAID Administrator an independent presence on the President‘s highest level inter-agency councils on foreign aid issues, while still remaining under the policy guidance of the Secretary of State; and  give USAID officers more opportunities to achieve ambassadorships. Ambassadors and Deputy Chiefs of Mission (DCMs) should be trained in foreign assistance. 

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Budget Like the HELP Commission report, the Senate report supports the concept of a unified budget and increased resources for both aid programs and USAID operations.   

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

Create a unified aid budget managed by the DFA. Strengthen USAID‘s in-house expertise and increase its resources, including its Operating Expense account. Increase resources for function 150 accounts to prevent the migration of aid programs to the Department of Defense. Executive-legislative relations and communication should be improved as a way to lessen the need or motivation for congressional directives and limitations.

Center for Strategic and International Studies (CSIS) The CSIS Commission on Smart Power, chaired by Richard L. Armitage and Joseph S. Nye Jr., issued a report, A Smarter, More Secure America, in November 2007. The report‘s findings and recommendations are far-reaching and extend beyond foreign assistance. In general, the report advocates that hard power, as exercised by military might, be integrated with soft power, as conducted through diplomacy and development initiatives, thus resulting in ― smart power.‖ Among the recommendations with regard to foreign assistance are the following:

Policy The CSIS report recommends a more engaged U.S. foreign policy that encompasses all aspects of international relations. Like both the HELP Commission and SFRC reports, it recognizes the inter-relation between security and development. 

Make greater investments in multilateral institutions such as the United Nations, the World Bank, and IMF. With regard to the United Nations, the report recommends a

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 

greater use of U.N. vehicles in the areas of peacekeeping and peacebuilding, counterterrorism, global health, and energy and climate issues. Strengthen the G-8 summit process on routinely addressed issues, such as energy and climate, nonproliferation, global health, education, and the world economy. Work with local civil society and the private sector for more agile, innovative, and locally supported aid delivery systems.

Structure The CSIS report does not endorse a cabinet-level agency, but does recommend that it have a cabinet-level voice. Like both the HELP and SFRC reports, it endorses the elevation of development within the organizational structure of government in order to improve the coordination of development activities government-wide.      

Create a cabinet-level voice on global development. Unify all government assistance programs. Create a U.S. Global Health Corporation to build a more unified approach to development and health. Create a smart power deputy under the national security advisor and the director of the Office of Management and Budget. Improve inter-agency coordination by strengthening department executive secretaries with an adjunct standing coordination center. Establish a Quadrennial Smart Power Review.

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Budget Consistent with both the HELP and SFRC reports, the CSIS report recommends increased funding for foreign assistance programs. 

Elevate the development mission within the U.S. government by increasing the size of the development and humanitarian budget and increasing aid effectiveness.

Other organizations and think tanks have studies in various stages of development. Many hope to be able to offer viable options to a new Administration and Congress. Most of these organizations support both increased resources and an elevated visibility for assistance programs. Disagreement remains on whether a new structure and authorizing legislation is needed, and what any new structure would look like.

APPENDIX. ACRONYMS Funding Accounts: ACI Andean Counterdrug Initiative CSH Child Survival and Health DA Development Assistance DF Democracy Fund ERMA Emergency Refugee and Migration Assistance

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Foreign Aid Reform: Issues for Congress and Policy Options ESF FMF FSA GDA GHAI IDFA IMET INCLE MCC MRA NADR PEPFAR PKO PL 480 PMI SEED TI

Economic Support Fund Foreign Military Financing Assistance to the Independent States of the Former Soviet Union Global Development Alliance Global HIV/AIDS Initiative International Disaster and Famine Assistance International Military Education and Training International Narcotics Control and Law Enforcement Millennium Challenge Corporation Migration and Refugee Assistance Nonproliferation, Anti-Terrorism, Demining, and Related Program President‘s Emergency Plan For AIDS Relief Peacekeeping Operations Food aid President‘s Malaria Initiative Assistance for Eastern Europe and the Baltic States Transition Initiatives

Other: DFA AFR EAP EUR WH NE SCA OECD DAC

Director of Foreign Assistance Africa East Asia and Pacific Europe and Eurasia Western Hemisphere Near East South and Central Asia Organization for Economic Cooperation and Development tee

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End Notes 1

This list does not include all statutes authorizing foreign assistance, but is illustrative of some of the more recent legislation. See Legislation on Foreign Relations Through 2005, Volumes I-A and I-B, House Committee on International Relations, and Senate Committee on Foreign Relations, January and April 2006. 2 This very brief historical review of foreign assistance necessarily omits much of the nuance and detail of a 60-year program. For more information, see Foreign Aid: Diplomacy, Development, Domestic Politics, by Carol Lancaster; U.S. Development Aid—An Historic First, by Samuel Hale Butterfield; and CRS Report 88-285F Development Assistance Policy: A Historical Overview, by Theodor W. Galdi, April 6, 1988; CRS Report 88283F An Overview of U.S. Foreign Aid Programs, by Stanley J. Heginbotham and Larry Q. Nowels, March 30, 1988; and CRS Report 86-86F Foreign Aid: The Evolution of U.S. Programs, by Stanley J. Heginbotham. 3 Executive Office of the President, U.S. National Security Strategy 2002 and 2006, available at http://www.whitehouse.gov/nsc/nss/2006. 4 Adjusting for inflation, $13 billion in 1946 dollars would amount to approximately $137 billion in 2007 dollars. 5 Even while HIV/AIDS funding has increased, other programs have been cut in the FY2006 to FY2008 period, including those supporting basic education, agriculture productivity, water supply and sanitation, and family planning and reproductive health. 6 For more information, see CRS Report RL33485, U.S. International HIV/AIDS, Tuberculosis, and Malaria Spending: FY2004-FY2008, by Tiaji Salaam-Blyther.

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7

Susan B. Epstein and Connie Veillette

Security assistance is the total of Economic Support Funds (ESF), Foreign Military Financing (FMF), International Military Education and Training (IMET), Peacekeeping Operations (PKO), International Narcotics Control and Law Enforcement (INCLE), and Nonproliferation, Anti-Terrorism, Demining, and Related Programs (NADR) accounts. Some observers would not include all of ESF in this category since significant amounts are used for development purposes. 8 It is difficult to track sector allocations over time for a number of reasons. Some aid can be attributed to several sectors (water sanitation can be considered relating to health, agricultural productivity, and the environment, for example), but may not have been consistently reported as such from year to year. Also, USAID has changed the structure of its Congressional Budget Justification as a result of the Strategic Framework so that not all information is reported in the same format as in previous years. Finally, funds for some activities can be spread over various accounts. For example, health activities are funded from CSH, FSA, SEED, and GHAI. 9 See ―U SAID-US Government Coordination,‖ at http://www.usaid.gov/policy/coordination us_gov_ coordination.html. 10 The Strategic Framework is available at http://state.gov/f/reform/. 11 Such summits include the Millennium Summit in 2000; the Monterrey Conference on Financing for Development in 2002; and the Gleneagles Summit in 2005. The 2000 Summit adopted the U.N. Millennium Development Goals. The Monterrey Conference produced pledges to increase overall levels of aid, either by a monetary figure, or as a percentage of national income. Countries attending the Gleneagles Summit promised to double aid to Africa by 2010. A 2001 summit on HIV/AIDS and other infectious diseases provided the impetus for HIV/AIDS-related U.S. commitments. 12 The eight goals include to eradicate extreme poverty and hunger; achieve universal primary education; promote gender equality and empower women; reduce mortality in children under five years old; improve maternal health; combat HIV/AIDS, malaria, and other poverty related diseases; ensure environmental sustainability; and build a global partnership for development between industrialized and developing countries. 13 Owen Barder, ―A re The Planned Increases in Aid Too Much of a Good Thing,‖ Working Paper Number 90, Center for Global Development, July 2006. 14 See CRS Report RS22032, Foreign Aid: Understanding Data Used to Compare Donors, by Larry Nowels. 15 The highest level of U.S. aid since 1960 was 0.60% that occurred in 1963 with the Alliance for Progress program in Latin America. 16 Some studies, notably one from the Center for Global Development, calls into question the value of the 0.7% target and note the flawed process in which it originated. Michael A. Clemens and Todd J. Moss, ― Ghost of 0.7%: Origins and Relevance of the International Aid Target,‖ Working Paper Number 68, Center for Global Development, September 2005. 17 This calculation is based on the function 150 International Affairs section of the U.S. budget and excludes some international affairs spending by domestic agencies that is included in ODA figures reported to the DAC (see footnote below). 18 Data are drawn from Historical Tables, Budget of the U.S. Government, Fiscal Year 2008, Table 5.3 Percentage Distribution of Budget Authority By Agency, 1976-2012, page 105. 19 The most commonly accepted reporting framework is provided by the Organization for Economic Cooperation and Development (OECD). Its Development Assistance Committee (DAC) compiles calendar year disbursements of official development assistance data from donor countries and publishes the results annually. The latest available data are for calendar year 2006. See OECD announcement of preliminary 2006 data at http://www.oecd.org/document/17/ 0,3343,en_2649_201185_38341265_1_1_1_1,00.html. 20 Author interviews, Summer 2007. 21 For more information on these many efforts, see ―Forei gn Aid Reform Commissions, Task Forces, and Initiatives: From Kennedy to the Present,‖ by Larry Nowels, in Security by Other Means: Foreign Assistance, Global Poverty, and American Leadership, Lael Brainard (Ed.), Washington, D.C.: Center for Strategic and International Studies, Brookings Institution Press, 2007. 22 This approach is consistent with the Paris Declaration on Aid Effectiveness, signed by OECD members, including the United States, in 2005. The Paris Declaration calls for donor coordination, among other items, such as measuring progress and recipient country involvement in development planning. 23 ―S weden Cuts List of Foreign Aid Recipients to Focus on Africa,‖ Agence France Press, August 27, 2007. 24 ―FranceConsiders Tying Foreign Aid to Firm Conditions,‖ Agence France Press, July 17, 2007, ―A ide au développement—Les quatre conditionalités de la France,‖ All Africa, July 19, 2007. See also Overcoming 40 Years of Failure: A NewRoad for Sub-Saharan Africa, Standing Senate Committee on Foreign Affairs and International Trade, Senate of Canada, February 2007. 25 Foreign military capacity building is carried out under authority of Sec. 1206 and Sec. 1207 of the National Defense Authorization Act of 2006 (P.L. 109-163), as amended by the John Warner National Defense Authorization Act of 2007 (P.L. 109-364). DOD implements the IMET and FMF programs, although the funds are appropriated to the State Department with decisions on recipients made by the State Department. 26 It should be noted, however, that the United States does fund some large infrastructure projects through the Millennium Challenge Account. See CRS Report RL32427, Millennium Challenge Account, by Curt Tarnoff.

Foreign Aid Reform: Issues for Congress and Policy Options 27

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See Owen Barder, ― Reforming Development Assistance: Lessons from the U.K. Experience,‖ in Security by Other Means: Foreign Assistance, Global Poverty, and American Leadership, Lael Brainard (Ed.), Center for Strategic and International Studies, and the Brookings Institution Press, 2007. 28 Figures are based on the FY2007 foreign operations appropriated levels. USAID implements and co-manages some State Department aid programs, but many would argue that State decides the allocation of those funds. 29 State‘s aid portfolio has increased in recent years by the decision to locate large aid programs, such as GHAI, at the State Department. Other sizeable programs managed by State, although they may be implemented by other entities such as USAID and DOD, include FSA, SEED, ACI, ESF, FMF, IMET, INCLE, PKO, ERMA, and the Democracy Fund. 30 U.S. Government Accountability Office, Department of State: Human Capital Strategy Does Not Recognize Foreign Assistance Responsibilities, September 2007. 31 The Global Development Alliance forms partnerships with private capital to carry out aid activities. 32 For more information on coordinating mechanisms, see CRS Report RL31357, Federal Interagency Coordinative Mechanisms: Varied Types and Numerous Devices, by Frederick M. Kaiser. 33 The USAID website states that ―over50 separate government units carry out aid-related activities overseas,‖ but does not include a list of those entities. See ― USAID-US Government Coordination,‖ at http://www.usaid.gov/policy/ coordination/us_gov_coordination.html. In addition to the departments identified above, in calendar year 2004, the Department of Transportation and the Department of Homeland Security reported ODA contributions. Also not included are those agencies that are represented at U.S. embassies in a liaison capacity to foreign governments, such as the Federal Bureau of Investigation, and the Drug Enforcement Administration. 34 The DCC structure remains in the FAA as an unimplemented provision. 35 ―A frica Command Works to Become Effective,‖ Department of Defense Documents, American Forces Information Service News Articles, October 5, 2007, and ―Maki ng Room for Civilians, Southcom Organization Could Be ‗Model,‘‖ Inside the Army, October 8, 2007. 36 Steven Radelet, Center for Global Development, ―Forei gn Assistance Reforms: Successes, Failures, and Next Steps,‖ Testimony and Responses to Questions for the Record for the Senate Foreign Relations Subcommittee on International Development, Foreign Assistance, Economic Affairs, and International Environmental Protection, June 12, 2007.

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In: Foreign Aid Reform Editor: Finn C. Hudson

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Chapter 2

FOREIGN AID REFORM, NATIONAL STRATEGY, AND  THE QUADRENNIAL REVIEW Susan B. Epstein

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SUMMARY Several development proponents, nongovernmental organizations (NGOs), and policymakers are pressing the 111th Congress to reform U.S. foreign aid capabilities to better address 21st Century development needs and national security challenges. Over the past nearly 50 years, the legislative foundation for U.S. foreign aid has evolved largely by amending the Foreign Assistance Act of 1961 (P.L. 87-195), the primary statutory basis for U.S. foreign aid programs, or enacting separate freestanding laws to reflect specific U.S. foreign policy interests. Many describe U.S. aid programs as fragmented, cumbersome, and not finely tuned to address the existing needs and U.S. national security interests. Lack of a comprehensive congressional reauthorization of foreign aid for about half of those fifty years further compounds the perceived weakness of U.S. aid programs and statutes. The current structure of U.S. foreign aid entities, as well as implementation and followup monitoring of the effectiveness of aid programs, have come under increasing scrutiny in recent years. Criticisms include a lack of focus and coherence overall, too many agencies involved in delivering aid with inadequate coordination or leadership, lack of flexibility, responsiveness and transparency of aid programs, and a perceived lack of progress in some countries that have been aid recipients for decades. Over the last decade, a number of observers have expressed a growing concern about the increasing involvement of the Department of Defense in foreign aid activities. At issue, too, is whether USAID or the Department of State should be designated as the lead agency in delivering, monitoring, and assessing aid, and what should the relationship between the two.



This is an edited, reformatted and augmented version of a CRS Report for Congress publication, Report #R41173, dated April 12, 2010.

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Representative Berman, Chairman of the House Foreign Affairs Committee (HFAC), states on the committee Website that foreign assistance reform is a top priority.In 2009, he introduced H.R. 2139, Initiating Foreign Assistance Reform Act of 2009.Similarly, Senator Kerry, Chairman of the Senate Foreign Relations Committee (SFRC), Senator Lugar, Ranking Minority Member, and others introduced a reform bill, S. 1524, the Foreign Assistance Revitalization and Accountability Act of 2009. Other foreign aid reform legislation is expected to be introduced in 2010. The Senate is likely to consider H.R. 2410, the House-passed Foreign Relations Authorization Act of 2010 and 2011, that includes language requiring a national strategy for development, as well as a quadrennial review of diplomacy and development. The Obama Administration, with support from Secretary of State Hillary Clinton, Secretary of Defense Robert M. Gates, and USAID Administrator Rajiv Shah, announced action to seek solutions to the problems associated with foreign aid and begin the process of reform. Secretary Clinton announced in July 2009 that the Department of State would conduct a Quadrennial Diplomacy and Development Review(QDDR) to address issues involving State Department and USAID capabilities and resources to meet 21st Century demands. In August 2009, the President signed a Presidential Study Directive (PSD) on U.S. Global Development Policy to address overarching government department and agency issues regarding foreign aid activities and coordination. Both are scheduled to be concluded in 2010. This chapter will follow the activities in both Congress and the Executive Branch on foreign aid reform, a national strategy for development, the QDDR, and the PSD.

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INTRODUCTION For years, many foreign aid experts have expressed concern about ongoing inefficiencies associated with the overall organization, effectiveness, and management of U.S. foreign aid. Specific problems most commonly cited include the lack of a national foreign assistance strategy; failure to elevate the importance and funding of foreign aid to be on par with diplomacy and defense as a foreign policy tool; lack of coordination among the large number of cabinet-level departments and agencies involved in foreign aid, as well as fragmented foreign aid funding; a need to better leverage U.S. multilateral aid to influence country or program directions; and a lack of visibility at the cabinet level for the U.S. Agency for International Development (USAID) - the primary administrator of aid programs. Also related is the debate among some lawmakers and policymakers about how to strengthen USAID‘s role in aid planning, decision making, and implementation, as well as whether to designate it as the lead coordinator of all entities involved with U.S. development and humanitarian assistance programs in Washington and in aid recipient countries. Regarding aid programs, some cite a lack of flexibility and responsiveness of aid programs to react quickly to events and needs on the ground.Another criticism is a perceived lack of progress in some countries that have been aid recipients for decades. And a growing concern, especially on the part of the nongovernmental organization (NGO) community, is the increasing involvement of the Department of Defense (DOD) in disbursing foreign aid, rising from 29% in 2001 to 60% in 2007 (including aid to Iraq and Afghanistan).1

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The Foreign Assistance Act of 1961 (FAA), as amended (P.L. 87-195; 22 U.S.C. 2151 and following, the main statutory basis for aid programs), is viewed by most development experts as being outdated and not reflecting current international conditions. It contains an emphasis on the Cold War and communism with a multitude of goals and outdated priorities and directives, many of which have been appended piecemeal to the original act. In addition, Congress has enacted over 20 other pieces of legislation establishing foreign aid authorities outside the FAA, adding to the diffusion of aid responsibility and initiatives within U.S. foreign policy overall. Many claim that the FAA needs to be rewritten in order to streamline and add coherence to a piece of legislation that has been amended frequently since its enactment nearly 50 years ago. Recommendations on rewriting the FAA include stripping foreign aid legislation of fragmentary earmarks, aid restrictions, and aid procurement rules; refocusing aid on the core mission of poverty reduction; and restructuring aid legislation to set development goals based, not on outdated Cold War-era policy, but rather on the realities facing the United States in a post-9/11 environment. Anumber of nongovernmental organizations, development experts, and policy makers are pressing the 111th Congress and the Administration to takes steps to reform the U.S. foreign aid program. Several actions have already begun, including introduction of legislation to reform certain aspects of foreign aid, State Department announcement of a quadrennial review, and a Presidential Study Directive (PSD) on U.S. Global Development Policy.

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INTEREST IN ELEVATINGDIPLOMACY AND DEVELOPMENT Over the years, interest in diplomacy and development as foreign policy tools has crossed the political spectrum. The terrorist attacks in 2001, however, highlighted a renewed interest in the benefits of diplomacy and development working more effectively along with defense toward U.S. national security goals. Both the Bush and the Obama Administrations, as well as Republican and Democratic Members of Congress, have expressed support for strengthening these tools. Soon after the 9/11 terrorist attacks, the George W. Bush Administration directly linked diplomacy and development to national security interests of the United States and stated the importance of elevating diplomacy and development to be more on par with defense. In its 2002 National Security Strategy the Bush Administration stated, ― We will actively work to bring hope of democracy, development, free markets, and free trade to every corner of the world.‖2 Continuing that theme in the 2006 National Security Strategy, the Administration said, ― Development reinforces diplomacy and defense, reducing long-term threats to our national security by helping to build stable, prosperous, and peaceful societies. Improving the way we use foreign assistance will make it more effective in strengthening responsible governments, responding to suffering, and improving people‘s lives.‖3In the FY2007 foreign affairs budget request, the Bush Administration stated, ― There are no hard lines between our security interests, our development interests, and our democratic goals.‖4 Many observers, however, have questioned whether the rhetoric has been matched by related policies.

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Issues and Actions during the George W. Bush Administration By the first term of the George W. Bush Administration, after years of declining aid funding, there was widespread agreement that foreign aid was an important U.S. foreign policy tool and reform of it would be necessary for aid to achieve optimal effectiveness in its contribution toward U.S. foreign policy and national security goals. In August 2003, thenSecretary of State Colin Powell and USAID Administrator Andrew Natsios released their Strategic Plan, Fiscal Years 2004 – 2009, Aligning Diplomacy and Development Assistance.Its mission statement said, ― In the coming years, the principal aims of the Department of State and USAID are clear. These aims are anchored in the President‘s National Security Strategy and its three underlying and interdependent components – diplomacy, development, and defense.‖5 The Bush Administration made several changes to the foreign aid structure, in addition to significantly increasing its overall budget. The President‘s Emergency Plan for AIDS Relief (PEPFAR), the largest program targeting a single disease, was announced in 2003.In 2004, the Administration established the Millennium Challenge Corporation (MCC), an independent government entity that provides aid to countries that demonstrate good governance practices, economic reforms, and the capability to use aid effectively. In 2005, then-Secretary of State Condoleezza Rice announced the concept of transformational diplomacy and development to ― enhance the accountability, effectiveness, efficiency, and credibility of foreign assistance by introducing a system of coordinated planning, budgeting, and evaluation.‖6 Transformational development resulted in what was commonly referred to as the F process.In 2006, Secretary of State Condoleezza Rice created the Foreign Assistance (F) Bureau and a new position – Director of Foreign Assistance (DFA) – within the Department of State to more closely align the U.S. Agency for International Development (USAID) budget and activities with the State Department‘s foreign policy objectives. The F process was to develop a coherent, coordinated foreign assistance strategy; provide multiyear countryspecific assistance strategies; consolidate policy planning, budget, and implementation mechanisms to improve leadership in aid activities; and provide guidance for other government agencies involved in aid activities. The F Bureau developed a Strategic Framework for Foreign Assistance to align U.S. aid programs with strategic objectives. The Framework guided the writing of the FY2008 and FY2009 budgets under President Bush. During the Bush Administration an increasing portion of total aid was being delivered by DOD, largely due to the wars in Iraq and Afghanistan involving emergency humanitarian assistance, as well as reconstruction and stabilization activities.7 DOD‘s role in disbursing foreign aid has its advocates and detractors in State, DOD and the NGO community. NGOs increasingly have voiced their concern about people in military uniforms handing out American aid. Secretary of Defense Robert Gates has stated in the pastthat DOD personnel do not have expertise or the mission for delivering aid.

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Issues and Actions during the Obama Administration The Barack Obama Administration acknowledges the need to elevate diplomacy and development and, at the same time, acquire the right balance with defense. Transitioning into the Obama Administration, Secretary of Defense Robert Gates, a carryover member of the Bush Administration, stated in early 2009 that there needs to be a balance with development supporting diplomacy and working together with defense to achieve national security goals.8 In March 2009, during the FY2010 budget resolution process, Secretary Gates called Senator Conrad, the Chairman of the Senate Budget Committee, to lobby for increased allocations, not for defense, but for the foreign affairs budget.The Defense Secretary told the Chairman that ― it is in the Pentagon‘s interest to have a healthier foreign aid budget... and that there is a lot being spent out of the Defense Department budget that should be spent out of the State Department budget for Afghanistan and Iraq.9 Secretary of State Hillary Clinton, emphasizing better integration of defense, diplomacy and development, in July 2009 stated five approaches to smart power:10    

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

build stronger mechanisms of cooperation with our historic allies; lead with diplomacy, even with those with whom we disagree; elevate and integrate development as a core pillar of American power; coordinate and make complementary our civilian and military efforts where we are engaged in conflict; and strengthen our traditional sources of influence, i.e., economic strength and power of influence.

President Obama‘s FY2010 budget stated that, ― [It]reflects the Administration‘s commitment to strengthen diplomatic and assistance tools to address current and future challenges that impact the security of the United States.‖11 Additionally, some would argue, the Obama Administration indicated through its FY2009 foreign assistance supplemental request of $5.0 billion (including Food for Peace) and its FY2010 foreign assistance budget request of nearly $35.0 billion (33% higher than the Bush Administration‘s last foreign assistance regular funding request of $26.2 billion for FY2009), that it views U.S. foreign aid to be of key importance. On December 15, 2009, Secretary Gates sent a memo to Secretary of State Clinton proposing shared responsibility and pooled resources for cross-cutting security assistance managed by DOD and State. Two months later in a speech on security assistance, Secretary Gates stated that―…w hatever we do should reinforce the State Department‘s lead role in crafting and conducting U.S. foreign policy, to include foreign assistance, of which building security capacity is a key part.Proper coordination and concurrence procedures will ensure that urgent military capacity building requirements do not undermine America‘s overarching foreign policy priorities.‖12 In January 2010, Secretary of State Clinton outlined six steps that the Obama Administration is already taking to improve the aid program. Key elements include partnering with aid-recipient countries rather than dictating uses of aid; seeking a ― whole-ofgovernment‖ approach to integrate more fully and coordinate development activities among all aid-implementing agencies, but particularly those involved with defense and diplomacy;

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and targeting investment and technical support in a few sectors, such as agriculture, health, security, education, energy, and local governance. She emphasized that this does not mean the United States will give up long-term development goals for short-term objectives, or hand over more development work to diplomats and defense experts. ― What we will do is leverage the expertise of our diplomats and military on behalf of development, and vice versa. The three Ds (defense, diplomacy, development) must be mutually reinforcing.‖13 These statements, arguably, contribute to the heightened interest in establishing clear foreign aid goals, re-evaluating how effective aid programs are, and revamping how they are administered. Policy makers increasingly recognize the role that foreign assistance can play as a foreign policy/national security tool particularly within the current international environment characterized by regional conflicts, terrorist threats, weapons proliferation, disease pandemics, and persistent poverty. Reflecting this recognition, a number of recent high-profile studies have recommended specific reforms. Out of 14 foreign aid reform studies, 9 studies recommended elevating development to the level of diplomacy and defense, and 6 studies recommended establishing a national strategy for aid.14

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NATIONAL STRATEGY Several foreign aid experts and organizations assert that before foreign aid reform can be successful, a national strategy should be in place to identify the goals for reform and to be able to determine if reform is moving aid in the direction of those goals. The HELP (Helping to Enhance the Livelihood of People around the Globe) Commission, a 21-member bipartisan commission established by Congress in the Consolidated Appropriations Act, 2004 (P.L. 108199), reported that civilian foreign affairs would be well-served by imposing the same rigor to U.S. foreign assistance planning that is required in formulating the nation‘s security and defense policies. These security policies are guided by long-term strategies, developed by the executive branch, and presented regularly to the legislative branch. The Commission recommended requiring a National International Affairs Strategy to further elaborate U.S. international affairs objectives on both global and regional levels, as well as country-bycountry. The proposed strategy would also outline government-wide capabilities and assistance needed to achieve these objectives. This strategy would cover all efforts funded by the International Affairs (150) budget function.15 The Government Accountability Office ―recommends that the Secretary of State work with all U.S. government entities involved in the delivery of foreign assistance to develop and implement a comprehensive, government-wide foreign assistance strategy, complete with time frames and measures for successful implementation.Involving other agencies in this effort could include adopting key practices that we have found to sustain and enhance interagency coordination and collaboration in addressing common goals.‖16

LEGISLATION ON FOREIGN AID REFORM Many believe that mandating clear objectives for foreign aid, assessing whether or not aid is meeting those objectives, and then reporting on the findings are essential requirements for

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effective foreign aid reform. Establishing criteria and anticipated results for a more effective foreign aid program will result in elevating the status of development as a foreign policy tool, experts assert. Representative Berman states on the House Foreign Affairs Committee Website that foreign aid reform is a priority; Senator Kerry (Chair) and Senator Lugar (Ranking Member) of the Senate Committee on Foreign Relations, in a dear colleague letter, said: ― In order for foreign aid to play its critical role, we must ensure that it is both effective and efficient.‖17 Legislation currently before the 111th Congress includes some of those basic elements.Some have praised the measures as good first steps in reforming foreign aid. At the same time, others have criticized the legislation for not going far enough toward overhauling aid in order to elevate development‘s status to where it can help toward reaching U.S. foreign policy goals. Legislators have differing views on what is needed to adequately reform U.S. foreign aid, but generally agree that reform is needed. Representative Berman believes repealing the Foreign Assistance Act of 1961 and replacing it with a completely new act is necessary to achieve an aid program that reflects the challenges of the 21st Century rather than the old Cold War mentality.A new act could state the broad purposes of assistance, such as reducing poverty, advancing peace, supporting human rights and democracy, building strategic partnerships, combating transnational threats, sustaining the global environment, and expanding prosperity through trade and investment. Flexibility in Washington through broader aid waiver and transfer authorities and streamlined reporting requirements, as well as greater flexibility in providing aid to recipient countries could also be considered. Transparency for the American public to see how their tax dollars are being spent on foreign assistance is another possible goal. Additionally, Representative Berman supports elevating and strengthening USAID to play a greater global development leadership and coordination role.18 Senator Kerry, Chairman of the Senate Foreign Relations Committee, generally concurs stating in a Senate report that ― development is a third pillar of U.S. national security, but in resources and stature, our assistance programs are poor cousins to diplomacy and defense. Bolstering USAID‘s relevance is contingent on three areas: (1) attendance at Cabinet meetings; (2) direct access to OMB on USAID‘s budget matters; and (3) attendance at all relevant National Security Council meetings.‖ USAID also should take the lead in the field with the USAID mission director having primary responsibility for coordinating all U.S. development and humanitarian assistance activities in any recipient country, the report said.19 Senator Lugar, Ranking Minority Member of the Senate Foreign Relations Committee, agrees that USAID should be the leading development agency and urges building USAID capacity by increasing its staffing and training. ― To be a full partner in support of foreign policy objectives, USAID must have the capacity to participate in policy, planning, and budgeting.‖20 Both Senator Kerry and Senator Lugar support creating an independent evaluation group to measure and evaluate the impact of all U.S. foreign aid programs across all government entities. In comparison, a House Foreign Affairs Committee concept paper from the Republican minoritystates that comprehensive foreign aid reform should occur before increasing aid funding to avoid simply relabeling authorities without addressing the real challenges. Rewriting the Foreign Assistance Act of 1961 alone is not the answer, the paper states.Also, it notes that U.S. foreign aid needs to end ― top-down approaches,‖ giving aid to foreign

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government ministries‘ budgets with little real benefit to the poorest in the country. The Committee minority supports moving countries from aid toward trade and investment programs; efficiency and accountability should be required in determining the compensation of top staff of NGOs involved in foreign aid implementation; multilateral aid program reform should accompany U.S. foreign aid program reform; and objective criteria for assessing when aid recipient countries should graduate from U.S. programs should be included in any aid reform, it says.21 Legislation involving foreign aid reform provisions before the 111th Congress include: On June 10, 2009, the House passed the Foreign Relations Authorization Act, Fiscal Years 2010 and 2011 (H.R. 2410) that includes Sec. 302. Quadrennial Review of Diplomacy and Development (QRDD).This measure would require the President to develop a national strategy on diplomacy and development by December 1, 2010, conduct a quadrennial review every 4 years, and consult with Congress on developing the national strategy. S. 1524, the Foreign Assistance Revitalization and Accountability Act of 2009, was introduced by Senator Kerry, Senator Lugar and others on July 28, 2009.The Senate Foreign Relations Committee reported the bill on November 17, 2009.It would reestablish within USAID a Bureau for Policy and Strategic Planning (closed during the Bush Administration and replaced by F) to be responsible for developing and formulating development policy in support of U.S. policy objectives. The Bureau would ensure long-term strategic planning for development policy and programs across regions and sectors and would integrate monitoring and evaluation into overall decision making and strategic planning.Within that Bureau the bill would establish an Office for Learning, Evaluation, and Analysis in Development to develop, coordinate and conduct the monitoring of resources and evaluation of programs. The legislation seeks to strengthen and coordinate U.S. foreign aid overseas by directing USAID‘s mission director in each country to coordinate all U.S. development and humanitarian assistance there. Furthermore, the bill would establish an independent Council on Research and Evaluation of Foreign Assistance to objectively evaluate the impact and results of all development and foreign aid programs undertaken by the U.S. Government; and it would re-establish a center in USAID to build on what works and learn from what does not. The bill would improve USAID‘s human resources capacity with new hiring and training and, similar to H.R. 2139 (below), promote transparency regarding U.S. aid by requiring the President to publish information, on a program-by-program basis and country-by-country basis, in the Federal Register, including what projects are being implemented, as well as their outcomes.This would allow American taxpayers and recipients of U.S. foreign aid to have full access to information on foreign assistance expenditures. S. 1524 also urges the President to participate in multilateral efforts for international aid transparency, as established on September 4, 2008 at the Accra High Level Forum on Aid Effectiveness.22 H.R. 2139, Initiating Foreign Assistance Reform Act of 2009, introduced byRepresentatives Berman and Kirk on April 28, 2009 and referred to the House Committee on Foreign Affairs, would require the President to develop and implement, on an interagency basis, a ― National Strategy for Global Development,‖ develop a monitoring and evaluation system, and establish a foreign assistance evaluation advisory council.Like S. 1524, the bill states the sense ofCongress that American taxpayers and recipients of U.S. foreign aid should have full access to information on U.S. foreign assistance, that the President is required to publish on a program-by-program basis and country-by-country basis information in the

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Federal Register. The bill urges the President to participate in multilateral efforts to engage in international transparency, as agreed to on September 4, 2008 at the Accra High Level Forum on Aid Effectiveness. H.R. 2387, Strategy and Effectiveness of Foreign Policy and Assistance Act of 2009, introduced by Congresswoman Ros-Lehtinen and others on May 13, 2009 and referred to the House Committee on Foreign Affairs, states the sense of Congress that 1) the Secretary of State and USAID Administrator should make funding decisions on the basis of a long-term strategy that addresses national security, diplomatic, and foreign assistance objectives and the needs of the United States, and 2) foreign affairs agencies‘ budget requests should be more effectively integrated with national security objectives, program evaluation, and management.The legislation requires reports for both.

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THE QUADRENNIAL REVIEW In recent years, some foreign aid and national security experts have suggested that interagency cooperation on foreign policy objectives and improvements in U.S. national security with a ― whole-of-government approach‖ could emanate from a foreign affairs quadrennial review process similar to DOD‘s Quadrennial Defense Review (QDR) that assesses whether U.S. national defense strategy supports U.S. national security objectives.23In 2007, for example, the HELP Commission recommended a Quadrennial Development and Humanitarian Assistance Review (QDHR) to require that U.S. development efforts be reviewed every four years to evaluate their effectiveness. According to the Commission, this review should propose any needed changes to U.S. development objectives and how the government approaches them. The contents of this document should influence both the National Security Strategy (NSS) and the National International Affairs Strategy (NIAS) and should be modeled on the Quadrennial Defense Review. Reviews might also be conducted for other functions of civilian foreign affairs.24 Many in the 111th Congress and the Obama Administration agree on establishing a quadrennial review for the civilian foreign affairs agencies. While the President can establish a quadrennial review without congressional action, having it in statute would ensure that a review will take place every four years, regardless of future presidential priorities.

Congressional Action The House-passed Quadrennial Review of Diplomacy and Development (QRDD) measure (Sec. 302, H.R. 2410), in conjunction with requiring the President to develop a national strategy on diplomacy and development, would require the President to: 



conduct a review every 4 years during a year following a year evenly divisible by four, to determine how well the national diplomacy and development strategy is being met; report the findings of the QRDD to Congress and establish an independent panel to assess the findings.

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Susan B. Epstein The measure calls for first quadrennial review to occur in 2013 and include:    

all elements of the national diplomacy and development strategy, roles and responsibilities of Federal departments and agencies how they will coordinate and cooperate to implement the strategy, a projection of the budget needed to successfully execute the national diplomacy and development strategy, and recommendations that are not constrained by the President‘s budget request for the coming year.

Executive Branch Action

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On July 10, 2009, Secretary of State Clinton launched a new Quadrennial Diplomacy and Development Review (QDDR), modeled after the Pentagon‘s Quadrennial Defense Review.The primary goal of the QDDR, according to Department of State officials, is to strengthen the institutional capabilities of the civilian foreign affairs agencies to meet 21st Century demands.The focus, they say, will be on the diplomacy and development tools that currently exist and how to make them more effective, agile, and complementary. The review will also consider what State and USAID capabilities will be needed in ten years, and what needs to be done to achieve them.The intention, according to Secretary Clinton, is to elevate diplomacy and development as key pillars of our national security strategy. Initiating the QDDR is just the beginning of a longer-term process to institutionalize an ethic of review, analysis, and responsiveness, the Secretary believes.

QDDR Structure Jack Lew, the Deputy Secretary of State for Management and Resources, is leading the QDDR, along with Anne-Marie Slaughter, State‘s Director of Policy and Planning, and Rajiv Shah, Administrator of USAID, as co-chairs, under the direction of the Secretary of State.25The co-chairs established a QDDR team with senior level experts from State, USAID, and nongovernmental representatives.The Secretary of State, in consultation with the QDDR team, established five areas of strategic focus which became the five QDDR working groups.26They are: 

Building a Global Architecture of Cooperation. This working group is exploring what capabilities are needed to address global challenges and how to leverageinternational partnerships to provide solutions. Within this working group are four sub-groups: 1) bilateral mechanisms, 2) multilateral mechanisms, 3) partnerships beyond governments, and 4) strategic communications and technology.



Leading and Supporting Whole-of-Government Solutions. This working group is examining the institutional roles of USAID and the Department of State in implementing interagency, whole-of-government approaches to U.S. foreign policy; considering how to elevate and strengthen State and USAID in Washington and in the field, including integrating key government agencies‘ contributions such as

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civilian-military joint planning and coordinating of country teams and field operations. Three subgroups include: 1) defining internal State/USAID roles and promoting collaboration in policy, planning and solutions, 2) integrating contributions of key U.S. government stakeholders, and 3) organizing in the field. 

Investing in the Building Blocks of Stronger Societies. This working group is investigating the ability of State and USAID to have long-term impacts overseas and how current approaches can be improved to promote economic growth, food governance, and security. Two sub-groups are: 1) achieving development objectives and 2) building security capacity.



Preventing and Responding to Crises and Conflicts. This group is examining conflict prevention and response and how development and diplomacy tools can be quickly and efficiently deployed in a variety of situations and environments.This group is considering the building of civilian operations capabilities for humanitarian, stabilization and reconstruction challenges, as well as for civil-military interaction and cooperation to partner more effectively with the Department of Defense. Subgroups include 1) civilian capacity, 2) civil-military interaction, and 3) targeting prevention.



Building Operational and Resource Platforms for Success. This working group is assessing what changes are necessary toallow the Department of State and USAID to fully carry out their functions in U.S. foreign policy. Hiring and training of personnel, budget planning and process reporting, contracting, oversight and procurement systems are some of the elements being considered in this group. Subgroups include: 1) human resource strategic analysis, 2) outsourcing and contracting analysis, and 3) resource management analysis.

Timing of Report As of January 2010, reportedly, all working groups had submitted their interim reports and had their interim reports reviewed with the QDDR chairs and co-chairs.The working groups‘ findings will be summarized in one interim report that is expected to be sent to the House Foreign Affairs Committee (HFAC) and the Senate Foreign Relations Committee (SFRC) some time in April.The interim report will also be made available to the public. A final QDDR report is expected to be completed and released in September 2010. That may be too late for it to have an impact on the FY2011 budget and, with this year‘s compressed congressional schedule because of mid-term elections, it is unlikely that any related authorizations will be passed by Congress this year. Some do, however, expect the QDDR to have an impact on the FY2012 budget and may require new statutory authorities to be passed by the 112th Congress. Initial Concerns While many in the foreign policy and development community support having a quadrennial review, some have expressed concerns.Foreign aid reform proponents fear that the QDDR could be used as a stall tactic to wait for the review before passing a foreign aid

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reform package. Others are concerned that it could be used to weaken USAID. Having numerous staff work on a QDDR at a time when both the Department of State and USAID are short-staffed creates an opportunity cost of what those staff members could otherwise be doing. Further, some development experts are concerned that the quadrennial review will give a higher priority to short-term strategic diplomacy goals over long-term development goals. And some question whether Congress will be able respond to the findings by passing any necessary corresponding legislation to address the organizational structure issues, perceived shortage of USAID skilled personnel, and aid funding. Observers have cautioned against expecting too much from the QDDR. Both thenSecretary of State Powell‘s Fiscal Years 2004-2009 Strategic Plan (done in cooperation with USAID) and certain past Defense QDRs, for example, resulted in wish lists with little attention paid to reality and available resources, experts say. The possibility that a quadrennial review could be a one-time exercise that does not result in elevating status and resources for diplomacy and development causes some concern. Those who are familiar with DOD‘s QDR compare DOD‘s ability to set priorities with the difficulty that State and USAID have had in this area. The items and actions in DOD‘s program and budget (number of planes, number of tanks, more peace and stability in a war zone) are often measurable. The civilian foreign policy agencies, on the other hand, cannot always easily judge one country‘s development being more important than another or measure sustainable economic development.Since diplomacy and development success is harder to measure in four years, particularly if a country that is transitioning toward democracy has a setback, or a civil or natural emergency occurs, it may be more difficult to conduct a quadrennial review with clear conclusions that can be built upon every four years thereafter.

THE PRESIDENTIAL STUDY DIRECTIVE ON U.S. GLOBAL DEVELOPMENT POLICY On August 31, 2009, President Obama signed a Presidential Study Directive on U.S. Global Development Policy (PSD) authorizing a U.S. government-wide review of global development policy (http://www.modernizingforeignassistance.org/blog/2009/09/02/whitehouse-joins-the-party-on-development-policy/). This inter-agency review signals an interest in a more coordinated and strategic approach to development policy. It will evaluate existing U.S. development activities, going beyond the Department of State and USAID to include Departments of Defense, Treasury, Agriculture and others in seeking to meet the complex challenges of the day, including global poverty, hunger and disease, as well as conflicts in Iraq and Afghanistan. The PSD process is co-chaired by National Security Advisor James Jones and National Economic Council Director Lawrence Summers. An interagency committee representing 16 government departments and agencies is conducting the study. The committee is chaired by the National Security Council Senior Director for Development and Democracy, Gayle Smith.The committee‘s work will be reviewed by both the National Security Council and the National Economic Council. While the final study, which is expected in April 2010, will be provided exclusively to the President, the PSD team has consulted with House and Senate

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foreign affairs committee staff and will consult with those committees in the future on the findings, according to an NSC official involved with the PSD. Senator Lugar said in January 2010, however, that ―it is un certain when, or if, we will know the outcomes of the PSD.‖27 The PSD is being conducted at the request of the President to formulate a global development policy for the entire executive branch, unlike the QDDR which was initiated by the Secretary of State and is being conducted by the Department of State and USAID to improve their institutional capabilities and resources.According to Administration officials, the two processes are coordinated, complementary, and mutually reinforcing; senior officials leading the QDDR are also members of the committee carrying out the PSD.28

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CONCLUSION Whether or not the 111th Congress addresses foreign aid reform depends upon the time demands created by intervening domestic and international issues deemed by congressional leadership to have higher priority, such as financial reform, climate change, or appropriations bills on both House and Senate floors. Nevertheless, new foreign aid reform legislation is expected to be introduced in 2010. Beyond that, QDDR interim reports and final conclusions, as well as the conclusion of the PSD, may have funding implications for the FY2012 foreign affairs budget and may create a need for new authorizing legislation in the 112th Congress. Possible passage of legislation by the 111th Congress requiring a national strategy and putting in statute the QDDR could provide a greater understanding of the costs and benefits of diplomacy and foreign aid. Building on those efforts, congressional action on foreign aid reform, whether in the form of a ― first step‖ measure or landmark legislation might, in the short run, improve the cost effectiveness of foreign aid (with better monitoring and assessment of what works and what does not) and provide more performance-related results in future years - efforts, perhaps, that American taxpayers, national security experts, and development proponents could mutually support.

End Notes 1

Excluding aid to Iraq and Afghanistan, DOD disbursement of aid amounts to 38% of total disbursements in FY2007. For more detail, see CRS report Foreign Aid Reform: Agency Coordination by Marian Leonardo Lawson and Susan B. Epstein, August 7, 2009, p. 5. 2 The National Security Strategy of the United States of America, September 17, 2002, introductory statement by President George W. Bush. 3 National Security Strategy of the United States of America, March 2006, p. 33. 4 United States Department of State, The Budget In Brief, Fiscal Year 2007, p. 1. 5 Strategic Plan, Fiscal Years 2004 – 2009, Aligning Diplomacy and Development Assistance, August 2003, p. 1. 6 Laura Wilson, Former Senior Advisor to Ambassador Randall Tobias, Director of U.S. Foreign Assistance and Administrator, USAID, U.S. Department of State. See George Bush’s Foreign Aid, Transformation or Chaos, by Carol Lancaster, Center for Global Development, 2008, p. 33. 7 In addition, DOD provides military assistance and training to numerous strategic partners around the world, as well as emergency assistance to countries where natural disasters have occurred, such as the 2004 tsunami in the Indian Ocean and the 2010 earthquake in Haiti. For more on Haiti, see CRS Report R41023, Haiti Earthquake: Crisis and Response, by Rhoda Margesson and Maureen Taft-Morales. 8 Foreign Affairs, A Balanced Strategy: Reprogramming the Pentagon for a New Age by Robert M. Gates, January/February 2009, Vo. 88, Issue 1.

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Gates lobbies for more funds – for State, MarineCorpsTimes.com, posted March 30, 2009 http://www.marinecorps times.com/news/2009/03/military -gatesmoney -statedepartment_033009w/ 10 Smart power is the balance of hard power (coercive means such as military) and soft power (non-coercive means such as public diplomacy and foreign aid) as they apply to foreign policy.U.S. Department of State, Foreign Policy Address at the Council on Foreign Relations, July 15, 2009. http://www.state.gov/secretary/rm/2009a/ july/ 126071.htm 11 A New Era of Responsibility, Renewing America’s Promise, Office of Management and Budget, p. 87, February 26, 2009. 12 Remarks as delivered by Secretary of Defense Robert M. Gates, The Nixon Center, Washington, D.C., February 24, 2010. 13 ―D evelopment in the 21st Century,‖ prepared text of the U.S. Secretary of State Hillary Rodham Clinton speech delivered to the Center for Global Development in Washington, D.C., January 6, 2010. http://www.state.gov/secretary/rm/2010/01/13438.htm 14 CRS Report R40102, Foreign Aid Reform: Studies and Recommendations, by Susan B. Epstein and Matthew C. Weed. 15 Beyond Assistance, The HELP Commission Report on Foreign Assistance Reform, December 7, 2007, pp.95-96. 16 Government Accountability Office, Foreign Aid Reform: Comprehensive Strategy, Interagency Coordination, and Operational Improvements Would Bolster Current Efforts, April 2009, pp. 40-41. 17 U.S. Senate, ―S.1524: Foreign Assistance Revitalization and accountability Act of 2009‖ Dear Colleague letter. 18 Concept Paper for Foreign Aid Reform, House Foreign Affairs Committee, July 23, 2009. 19 http://www.congress.gov/cgi-lis/cpquery/R?cp111:FLD010:@1(sr122):S.Rept. 111-122 for S. 1524, Foreign Assistance Revitalization and Accountability Act of 2009, February 2, 2010, p. 3. 20 Senate Foreign Relations Committee Holds Hearing on Foreign Aid and Development, July 22, 2009, p. 4. 21 Republican Concept Paper, Reform of Foreign Assistance for Economic Growth and Opportunity, Minority views, House Foreign Affairs Committee fall 2009. 22 Ministers from one hundred countries (including the United States), heads of bilateral and multilateral donor agencies, as well as leaders of nongovernmental organizations met in Accra, Ghana in September 2008 to improve foreign aid effectiveness. 23 In 1993, DOD conducted its forerunner to the QDR— abottom up review ordered by then-Secretary of Defense, Les Aspin.The National Defense Authorization Act (NDAA) for 1997(P.L. 104-201) ordered the first QDR. The National Defense Authorization Act, FY2000 (P.L. 106-65) made the requirement permanent. U.S. Department of Defense, Defense Link, July 11, 2001,http://www.defenselink.mil/news/newsarticle. aspx?id=44739 24 Beyond Assistance, the HELP Commission Report on Foreign Assistance Reform, December 7, 2007, p. 96. 25 Alonzo Fulgham, Acting Administrator of USAID, initially acted as co-chair on the QDDR before Shah was sworn in as USAID‘s Administrator on January 7, 2010. 26 Information on the five working groups was provided in a December 29, 2009 email from the Quadrennial Diplomacy and Development Review Team, Office of Deputy Secretary Lew. 27 Speech by Senator Richard G. Lugar, Foreign Assistance and Development in a New Era, given at the Society for International Development, January 28, 2010. 28 Emailed information from the National Security Council, December 30, 2009.

In: Foreign Aid Reform Editor: Finn C. Hudson

ISBN: 978-1-61728-926-2 © 2010 Nova Science Publishers, Inc.

Chapter 3

FOREIGN AID REFORM: STUDIES  AND RECOMMENDATIONS Susan B. Epstein and Matthew C. Weed

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SUMMARY Both the 111th Congress and the Obama Administration have expressed interest in foreign aid reform and are looking at ways to improve and strengthen the U.S. Agency for International Development (USAID), coordination among implementing agencies, and monitoring effectiveness of aid activities. Since the terrorist attacks of September 11, 2001, the role of foreign assistance as a tool of U.S. foreign policy has come into sharper focus. President George W. Bush elevated global development as a third pillar of national security, with defense and diplomacy, as articulated in the U.S. National Security Strategy of 2002, and reiterated in 2006. In January 2006, Secretary of State Rice announced the ― transformational development‖ initiative to bring coordination and coherence to U.S. aid programs. She created a new Bureau of Foreign Assistance (F Bureau), led by the Director of Foreign Assistance (DFA), who also serves as Administrator of the U.S. Agency for International Development. F Bureau developed a Strategic Framework for Foreign Assistance (Framework, or F process) to align aid programs with strategic objectives. The Framework became a guiding force in the FY2008 and FY2009 budgets, as well as the FY2010 budget request. In recent years, numerous studies have addressed various concerns and provided recommendations regarding U.S. foreign aid policy, funding, and structure. Views range from general approval of the F process as a first step toward better coordination of aid programs and the need to build on it, to strong criticism of the creation of the F Bureau, its inadequacy in coordinating or reforming much of what is wrong with foreign aid, and the need to replace it with a cabinet-level department of foreign aid. 

This is an edited, reformatted and augmented version of a CRS Report for Congress publication, Report #R40102, dated July 28. 2009.

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While the 14 studies surveyed by the Congressional Research Service (CRS) emphasize different aspects of the importance of U.S. foreign assistance, all agree that foreign assistance must be reformed to improve its effectiveness. Of the 16 recommendation categories CRS identifies, only enhancing civilian agency resources has the support of all of the studies covered in this chapter. The next two most-often cited recommendations are raising development to equal status with diplomacy and defense, and increasing needs-based foreign aid, while encouraging recipient-government ownership of aid effectiveness. Half of the studies urge a greater congressional role in foreign aid budgeting and policy formulation. Because these studies were written for the purpose of reforming U.S. foreign aid, it is not surprising that none of them recommends maintaining the status quo. Given the current economic crisis and budget constraints along with other major concerns, such as health care, energy policy, and global warming, however, some Members of Congress may prefer a continuation of the existing foreign aid structure. This chapter is a review of selected studies written between 2001 and 2008 and will not be updated. For related information on foreign aid and foreign affairs budgets, see CRS Report RL34552, State, Foreign Operations, and Related Programs: FY2009 Appropriations, by Susan B. Epstein and Kennon H. Nakamura.

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INTRODUCTION There is continued interest among Members of Congress, the Obama Administration, and Nongovernmental Organizations (NGOs) to reform U.S. foreign aid. This section provides background information concerning the history of modern U.S. foreign aid. It continues with an explanation of the 2006 creation of the State Department‘s ― F Bureau‖ and the position of Director of Foreign Assistance (DFA), who heads that bureau and serves as administrator of the United States Agency for International Development (USAID). Next, the introduction discusses certain perceived problems with the so-called ― F process.‖ Finally, this section provides an overview of Congress‘s involvement in modern U.S. foreign aid.

Brief History of Modern U.S. Foreign Aid Modern U.S. foreign assistance programs had their beginnings shortly after World War II when the United States government responded to the potential spread of communism in postwar Europe by providing aid to vulnerable populations and governments for reconstruction and economic development. Beginning in 1947, when Great Britain could no longer afford to support governments in Greece and Turkey, the United States stepped in with economic assistance to stabilize those two governments and prevent communism from taking hold. Soon thereafter, the Marshall Plan, from 1948 to 1951, provided a total of $13.3 billion for economic recovery support to 16 Western European countries to bolster their governments, stem the spread of communism to those European countries, and strengthen potential trade capabilities. Over the years since the Marshall Plan, underlying reasons for U.S. foreign assistance have varied in response to world events. After the Marshall Plan ended, U.S. assistance focused on Southeast Asia to counter Soviet and Chinese influence. Under President

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Kennedy, with the Alliance for Progress program in Latin America and assistance to newly independent states in Africa, foreign aid rose to its highest historic amount (measured as a percentage of national income) since the Marshall Plan. Aid spending leveled off in the 1970s, even with spending for Middle East peace initiatives, and then rose again in the 1980s to address famine in Africa, continuing peace efforts in the Middle East, and the U.S. response to insurgencies in Central America. The 1990s saw U.S. aid fall to its lowest level, averaging approximately 0.14% of national income, partly due to the end of the anticommunism rationale for U.S. foreign assistance with the end of the Cold War. After the terrorist attacks of September 11, 2001, the Bush Administration elevated the significance of foreign assistance as a foreign policy tool. President George W. Bush elevated global development as a third pillar of national security, with defense and diplomacy, as articulated in the U.S. National Security Strategy of 2002, and reiterated in 2006. In the FY2009 budget request, the Bush Administration reiterated the importance of the Department of State and U.S. Agency for International Development (USAID) by saying that the FY2009 budget ― reflects the critical role of the Department of State and the U.S. Agency for International Development in implementing the National Security Strategy.... ‖1 At the same time that foreign aid is being recognized as playing an important role in U.S. foreign policy and national security, it also is coming under closer scrutiny by Congress, largely in response to a number of presidential initiatives (such as implementing the F process and creating the Millennium Challenge Account, or ― MCA‖2), and by critics who argue that the U.S. foreign aid infrastructure is cumbersome and fragmented, and without a coherent aid strategy. Furthermore, foreign aid experts and some lawmakers assert that Congress needs to dramatically update or rewrite completely the primary statute for U.S. foreign aid, the Foreign Assistance Act of 1961 (FAA), as amended (P.L. 87-195; 22 U.S.C. 2151 et seq.), which has not been comprehensively amended since 1985 and takes what many view to be a Cold War approach that is outdated for U.S. foreign aid in the 21st century.

Implementation of the F Bureau In January 2006, Secretary of State Rice announced the ― transformational development‖ initiative, or ― F process,‖ to foster greater aid program coordination and to achieve specified objectives. The Secretary created a new State Department Bureau of Foreign Assistance (the F Bureau) headed by the Director of Foreign Assistance (DFA) who also serves concurrently as Administrator of the U.S. Agency for International Development. In 2006 the F Bureau developed a Strategic Framework for Foreign Assistance (FAF) to align U.S. aid programs with American strategic objectives. The FAF is designed as a tool to help policy makers with strategic choices on the distribution of funds and to ensure that U.S. foreign assistance advances the Administration‘s foreign policy objectives. The FAF identifies as the ultimate goal ― to help build and sustain democratic, well-governed states that respond to the needs of their people, reduce widespread poverty and conduct themselves responsibly in the international system.‖3 Five transformational development objectives organize funding and programs to achieve that goal. The objectives are Peace and Security, Governing Justly and Democratically, Investing in People, Economic Growth, and Humanitarian Assistance. This

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Framework heavily guided the writing of the FY2008 and FY2009 budgets and the FY2010 budget request.

Criticisms of the F Bureau and U.S. Foreign Aid Overall

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While many today say that the F process was an important first step in coordination of U.S. foreign assistance, several criticisms have surfaced. Some say that the F Bureau covers only those aid programs controlled by the Department of State and USAID with no mention of coordinating the other numerous agencies involved with foreign aid. Others claim that Congress was not involved in shaping the F process. Many assert that the process does not incorporate leveraging U.S. assistance to multilateral organizations. Some commentators also criticize the F process for emphasizing Washington decision making over relying on expertise in the field. Beyond the F process in particular, many foreign aid experts perceive a number of ongoing problems with the overall organization, effectiveness, and management of U.S. foreign aid that, they believe, need to be reformed. Problems most commonly cited include the lack of a national foreign assistance strategy; failure to elevate the importance and funding of foreign aid to be on par with diplomacy and defense as a foreign policy tool; the FAA‘s outdated organization and strategic goals of foreign aid programs; a lack of coordination among the large number of cabinet-level departments and agencies involved in foreign aid, as well as fragmented foreign aid funding; and a need to better leverage U.S. multilateral aid to influence country or program directions. Furthermore, some express concern that very little monitoring of aid and its effectiveness has been done over the years to determine if goals and objectives have been met and if money has been well spent.

History of Modern Legislative Efforts to Reform Foreign Aid4 In general, Congress has the responsibility to authorize, appropriate funds for, and oversee U.S. foreign aid programs and related activities. Most appropriations for foreign aid are located in the provisions of annual foreign operations appropriations acts, which often have been combined with appropriations for related expenditures, such as Department of State diplomatic programs, and export financing. The Department of State, Foreign Operations, and Related Programs Appropriations Act, 2008 (Division J of P.L. 110-161), as extended by the continuing appropriations resolution contained in P.L. 110-329, contains the most recent set of foreign aid appropriations provisions. Although Congress has passed regular legislation appropriating funds for foreign aid, it has not passed annual foreign aid authorization legislation since 1985.5 Instead of independent authorization legislation, Congress provides its guidance for U.S. foreign aid activities through earmarks and other directives dictating or limiting uses of funds included in the yearly foreign operations appropriations acts.6 Congress has nonetheless passed a number of acts providing new authorizations for foreign assistance programs since 1985, including the Freedom for Russiaand Emerging Eurasian Democracies and Open Markets Support Act of 1992 (FREEDOM Support Act) (P.L. 102-511), the Support for East European Democracy (SEED)

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Act of 1989 (P.L. 101-179), the Millennium Challenge Act of 2003 (division D of P.L. 108199), and recent Security Assistance Acts for 2002, 2000, and 1999 (division B of P.L. 107228; P.L. 106-280; Title XII of H.R. 3427, enacted by reference in P.L. 106-113, respectively). Congress has undertaken reform of foreign assistance at various points since the authorization of the Marshall Plan through the Economic Cooperation Act in 1948. After the Marshall Plan ended in 1951, Congress passed the Mutual Security Act of 1951, which coordinated military and economic assistance with technical assistance programs. The Mutual Security Act of 1954 and its 1957 revisions contained the concepts of security and development assistance, and instituted authority central to providing loans to developing countries. These acts, however, did not create a long-term structure for U.S. foreign assistance. The historic passage of the Foreign Assistance Act of 1961 (FAA) provided the legislative vehicle for the core organization of U.S. foreign assistance that remains in effect to this day. The successful reform effort that resulted in passage and implementation of the FAA enjoyed both the ardent advocacy of President Kennedy from the time he came to office, as well as the solid support of Congress; Congress passed the legislation in the first year of the Kennedy Administration. This effort represents the most far-reaching and long-lasting reform of U.S. foreign aid, as the FAA originally organized disparate U.S. foreign aid efforts into a coherent whole, and authorized the President to choose an agency to implement the provisions of FAA. In November 1961, President Kennedy created via executive order the Agency for International Development, which later came to be known as USAID.7 The most recent successful major overhaul of foreign aid and the FAA occurred in 1973, when Congress passed the Foreign Assistance Act of 1973 (P.L. 93-189). This Act restructured development aid programs, shifting emphasis from a ― top-down‖ approach concentrating on aid to governments to develop infrastructure and fund large development projects, to a ― basic human needs‖ strategy that directly targeted the poorer segments of the population in developing countries. It reorganized foreign assistance into sectors including agriculture, education, and population, and certain development activities such as energy and environment. Administrations have undertaken numerous other foreign aid reform attempts over the years, receiving various degrees of congressional support. In 1969, President Nixon formed the Task Force on International Development, chaired by Rudolph A. Peterson. The Peterson Commission, which was made up of private individuals, examined U.S. foreign assistance as a whole, and made recommendations in 1970, which were turned into legislation proposed by the Administration. Congress did not support this legislation, however, and instead focused on passage of the 1973 reforms discussed above. In 1977, Senator Hubert Humphrey pushed legislation to elevate the importance of development in U.S. foreign policy and to coordinate the efforts of the multitude of government agencies involved in foreign assistance. The proposal did not become law, but in 1979 President Carter created an overarching agency for foreign assistance coordination called the International Development Cooperation Agency (IDCA) based on Humphrey‘s ideas. The IDCA was under-resourced from the outset, and the Reagan Administration effectively abandoned the IDCA, providing no staff to the organization. The IDCA ultimately failed to effectively coordinate aid authorized under the FAA. The Executive Order that

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created the entity was not rescinded, however, and the IDCA remained a dormant part of the foreign assistance structure until it was abolished in 1999.8 In his first term, President Reagan formed the Commission on Security and Economic Assistance, chaired by Deputy Secretary of Defense Frank Carlucci, to examine the role of security aid in relation to development assistance, the dissatisfaction of both Congress and the executive branch with foreign aid programs, and the distrust concerning foreign aid between the two. Although the Carlucci Commission issued recommendations in 1983, the effort did not lead to legislation. In 1987 the House Foreign Affairs Committee appointed Representatives Lee Hamilton and Ben Gilman to lead an effort to rewrite foreign assistance law to reflect new international political realities and to define core objectives of U.S. foreign aid. The Hamilton-Gilman Task Force also sought to simplify foreign aid legislation and remove the maze of congressional restrictions on the administration of aid programs. It was hoped that this restructuring would improve congressional attitudes toward foreign aid programs and congressional-executive relations regarding cooperation on foreign aid. The Committee endorsed the legislation incorporating the Task Force‘s recommendations, but Representative Gilman and other members disagreed with many of the measures suggested, and the effort did not result in substantive reforms. President Clinton appointed Deputy Secretary of State Clifford Wharton to head a review of foreign aid that would restructure aid after the Cold War and reform USAID. Wharton resigned before his report was released, but the Clinton Administration introduced legislation based on the report in late 1993. The Peace, Prosperity, and Democracy Act (H.R. 3765, 103rd Congress; S. 1856, 103rd Congress), however, did not move forward after being introduced in the Senate, and the Administration did not resubmit the bill after the Republicans took control of Congress in 1994. Later, the Clinton Administration proposed a reorganization of foreign affairs functions that included retaining USAID as an independent agency but placing USAID under the direct authority of the Secretary of State. Congress passed the Foreign Affairs Reform and Restructuring Act of 1998 (division G of P.L. 105-277), which contained the provisions extending the Secretary of State‘s authority over USAID. The Secretary of State subsequently delegated authority to the administrator of USAID in order for the administrator to carry out the mission of the Agency (State Department Delegation of Authority No. 145, as revised on March 31, 1999).

KEY RECOMMENDATIONS INCLUDED IN SELECTED FOREIGN AID REFORM STUDIES While U.S. foreign assistance throughout its history often has been of keen interest to the executive branch, Congress, and NGOs, a renewed vigor in the debate on foreign aid policy and structure has surfaced in post-9/11 years regarding foreign aid‘s role in meeting U.S. foreign policy and national security goals. As a result, several studies have been published since 2001 that have called for reform to improve the foreign aid structure in Washington and aid effectiveness in the field. To this end, these studies have heightened congressional interest in, and encouraged a re-examination of, U.S. foreign assistance policies, programs, funding,

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and organizational structure. The 14 studies assessed in this chapter are often referred to in aid reform discussions, and deal primarily with foreign aid reform issues; they include books, Senate committee reports, think-tank studies, NGO reports, and journal articles. Most of the studies considered present comprehensive approaches for foreign aid reform. CRS could not include every study and other publication related to such reform; it believes, however, that these 14 studies contain a representative range of viewpoints and recommendations from the foreign aid community.

STUDIES INCLUDED IN THIS CHAPTER Methodological Note: This CRS report follows from a 2008 congressional request asking CRS to sort through the various recommendations of several studies on U.S. foreign aid reform. The 14 studies included in this chapter were chosen partly because of that request, because of interest in them expressed by other Members of Congress or committees, and also because of their focus and comprehensive approach to reforming U.S. foreign aid, rather than focusing more heavily on defense and national security issues. The list of studies with CRS‘s abbreviations in parentheses follows for reference purposes: (Adams) Adams, Gordon, ― Don‘t Reinvent the Foreign Assistance Wheel.‖ Foreign Service Journal, vol. 85, no. 3 (March 2008).

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(AMN) Atwood, J. Brian, M. Peter McPherson, and Andrew Natsios. ― Arrested Development, Making Foreign Aid a More Effective Tool.‖ Foreign Affairs, vol. 87, no. 6 (November/December 2008). (BRK) Witness statement of Lael Brainard, Brookings Institution. U.S. Congress. House. Committee on Appropriations. Subcommittee on State, Foreign Operations, and Related Programs. Hearing on Foreign Aid Reform. 110th Congress, 2nd session, January 23, 2008. (BRK-CSIS) Brainard, Lael, ed. Security by Other Means: Foreign Assistance, Global Poverty, and American Leadership. Washington: Brookings Institution Press and Center for Security and International Studies, 2006. (CGD) Center for Global Development. Modernizing Foreign Assistance for the 21st Century: An Agenda for the Next U.S. President. (CGE) Center for U.S. Global Engagement. Smart Power: Building a Better, Safer World—A Policy Framework for Presidential Candidates. July 2007. (CSIS) Center for Strategic and International Studies. Integrating 21st Century Development and Security Assistance. January 2008.

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(HELP) United States Commission on Helping to Enhance the Livelihood of People Around the Globe. Beyond Assistance: the HELP Commission Report on Foreign Assistance Reform. December 7, 2007. (InterAction) American Council for Voluntary International Action (InterAction). Why the U.S. Needs a Cabinet-level Department for Global and Human Development. InterAction Policy Paper. June 2008. (OECD) Organization for Economic Co-Operation and Development. Development Assistance Committee Peer Review of the United States. December 2006. (Oxfam) Oxfam America. Smart Development, Why U.S. foreign aid demands major reform. February 2008. (SFRC1) U.S. Congress. Senate. Committee on Foreign Relations. Embassies as Command Posts in the Anti-terror Campaign. Committee print. 109th Congress, 2nd session, December 15, 2006. S.Prt. 109-52. Washington: GPO, 2006. (SFRC2) U.S. Congress. Senate. Committee on Foreign Relations. Embassies Grapple to Guide Foreign Aid. Committee print. 110th Congress, 1st session, November 16, 2007. S.Prt. 110-33. Washington: GPO, 2007.

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(State) Department of State, Advisory Committee on Transformational Diplomacy: Final Report of the State Department in the 2025 Working Group, January 28, 2008. Table 1 presents a matrix of foreign aid reform recommendations in the studies and other publications reviewed for this chapter. The 14 documents, listed in alphabetical order by their respective short forms (identified above and in Appendix A and Appendix B below) appear along the left side of the matrix from top to bottom. CRS identified 16 key recommendations which appear in more than one of the studies. The recommendations are located at the top of the matrix. They range from a complete replacement of the basic authority of the U.S. government to provide most types of aid, namely, the Foreign Assistance Act of 1961, to various degrees of restructuring the foreign assistance apparatus and organization within the executive branch, to new ideas and methods of funding, allocating, and evaluating the effect of foreign assistance. While recommendations have been divided into discrete categories, CRS notes that each study‘s support of any given recommendation may contain slight variations from the same recommendation supported by another study. A general discussion of the 16 key recommendations follows.9

Rewrite the Foreign Assistance Act of 1961 The Foreign Assistance Act of 1961 (FAA), as amended (P.L. 87-195), contains a multitude of goals and outdated priorities and directives, many of which have been appended piecemeal to the original Act. In addition, Congress has enacted over 20 other pieces of legislation establishing foreign aid authorities outside the FAA, adding to the diffusion of aid responsibility and initiatives within U.S. foreign policy overall. Several of the studies claim

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that the FAA needs to be rewritten in order to streamline and add coherence to a piece of legislation that has been amended frequently since its enactment nearly 50 years ago. Recommendations calling for rewriting the FAA include stripping foreign aid legislation of fragmentary earmarks, aid restrictions, and aid procurement rules; refocusing aid on the core mission of poverty reduction; and restructuring aid legislation to set development goals based not on outdated Cold War-era policy, but instead on the realities facing the United States in a post-9/11 environment. The Oxfam study, Smart Development, Why U.S. foreign aid demands major reform, specifically cites the need for effective congressional-executive cooperation to accomplish rewriting the FAA itself. Modernizing Foreign Assistance for the 21st Century: An Agenda for the Next U.S. President, the study from the Center for Global Development, calls for renewing the congressional-executive relationship in foreign aid policy implementation, by passing foreign aid legislation that provides substantially greater flexibility to the executive branch for aid delivery and development activities, while at the same time beefing up accountability of the executive branch to Congress via enhanced realtime oversight mechanisms. While these studies acknowledge the need for changes to the FAA, however, they also agree that a full rewrite of the Act would be very difficult to accomplish.

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Elevate Development to the Level of Diplomacy and Defense The 2006 U.S. National Security Strategy endorses raising the importance of international economic development within overall U.S. foreign policy and national security: ― Development reinforces diplomacy and defense, reducing long-term threats to our national security by helping to build stable, prosperous, and peaceful societies.‖10 Many commentators have taken up this newly iterated support for development to create the so-called ― 3D,‖ or three pillars, approach to national security, with development elevated to equal partner status with defense and diplomacy. A majority of the studies directly recommend the establishment of co-equal status for development alongside defense and diplomacy in the U.S. national security framework. Certain studies emphasize that the government must reorganize the international affairs functions of the government to prioritize development as a principal instrument of national security, not just as a secondary tool to ― reinforce‖ defense and diplomacy.

Establish a National Strategy for U.S. Foreign Aid U.S. foreign assistance policy is not currently based on any unified national strategy document. A strategy that encompasses all foreign aid activities and guides the decisions of U.S. policy makers would provide much-needed coherence to the currently fragmented system of foreign assistance and would help link U.S. foreign assistance with U.S. foreign policy goals, several studies argue.

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Adams AMN BRK BRK-CSIS CGD CGE CSIS HELP Inter- Action OECD Oxfam SFRC1 SFRC2 State X

X

X X

X X X X X X

X X X X X X X

X

X

X

X X X X

X X X X X

X X X

X X X X X X X X X X X X X X X X X

X X X X

X

X X X

X

X X

X X X

X X X X

X

X

X X X X X

X

X

X

X

X X

X X X X X X

Congress Should Play Bigger Role in Foreign Aid

Monitor Aid Impact

Increase/Leverage Multilateral Aid

Balance Long-Term Aid vs. Short-Term Aid

Multi-year Funding

Needs- Driven Aid Funding and/or Local Ownership

Createa UnifiedBudget

Increase Field vs. D.C. Input

Improve Policy and Agency Coordination

Increase Aid Resources to Civilian Agencies (i.e.,USAID or State)

Build on F Process

Give DOS Primary Authority for Aid

Create Cabinet- Level Status for Aid

Establish a Nat’l Strategy for Aid

Raise Development to Level of Diplomacy and Defense

Rewrite FAA 1961

The Studies

.

Table 1. Key Recommendations for Foreign Aid Reform

X X X X

X X

X

X X

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61

Some of the studies suggest that such a national foreign assistance strategy could explain and integrate foreign aid goals to strengthen U.S. national security by mitigating poverty and desperation that often leads to instability and conflict, and to fulfill a moral obligation to assist those in need by providing humanitarian aid and encouraging long-term overseas development. The CSIS study, Integrating 21st Century Development and Security Assistance, recommends an overall cross-agency strategy for security assistance in particular, to ensure proper distribution of authorities and responsibilities among defense and civilian actors, and the Oxfam study calls for a national development strategy that would balance short-term political and security goals with long-term development goals. Some of these studies place importance on national strategies that focus not just on foreign aid coherence but also on utilizing such policy coherence to meet the previously discussed goal of elevating development within overall U.S. foreign policy and national security. The CGE study, Smart Power: Building a Better, Safer World—A Policy Framework for Presidential Candidates, for instance, links creation of a coherent foreign assistance strategy with the institution of an overall national security strategy that fully integrates development with diplomacy, economic policy, defense, and intelligence.

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Create a Cabinet-Level Agency for Foreign Aid To address perceived shortfalls in managing foreign aid, most of the documents considered in this chapter call for better integration of government actors involved in providing foreign assistance. In her testimony before the Subcommittee on State, Foreign Operations, and Related Programs of the House Appropriations Committee, Lael Brainard of the Brookings Institution has asserted, ― Instead of the current spread of 50 offices managing aid, we should have one capable operational agency.‖ Half of the studies call specifically for a new cabinet-level agency to achieve this integration and ensure the importance of foreign assistance in relation to other foreign policy priorities. The joint Brookings-CSIS study, Security by Other Means: Foreign Assistance, Global Poverty, and American Leadership, for example, argues that a new cabinet-level department of global development is the only organizational reform that will meet the challenges facing the U.S. foreign assistance structure, including ensuring coherent policy, increasing aid effectiveness, and integrating foreign aid actors across the U.S. government. A cabinet-level department for foreign assistance could also encourage a balance between short-term political and security goals and long-term development objectives, the Oxfam study suggests. It argues that a new department with the requisite stature would not be overrun by State and Defense Department interests.

Give Department of State Lead Authority for Foreign Aid While the State Department retains primary formal authority over U.S. foreign assistance, concerns have arisen in recent years over the perceived erosion of the Department‘s lead foreign aid role, especially as compared to DOD‘s expanding role in assistance. The two reports from the Senate Foreign Relations Committee, Embassies as Command Posts in the Anti-terror Campaign (SFRC1), and Embassies Grapple to Guide Foreign Aid (SFRC2), as

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well as the Department of State‘s Advisory Committee on Transformational Diplomacy: Final Report of the State Department in the 2025 Working Group (State), all support a strong leadership role for the State Department for U.S. foreign assistance in general. The Committee reports contain focused recommendations concerning the authority of the State Department in relation to DOD regarding security assistance. Both Committee reports support the State Department‘s primary authority for Function 150 and 050 foreign assistance. These reports also state that authority for the security assistance budget, including security assistance provided under Section 1206 of the National Defense Authorization Act for Fiscal Year 2006 (P.L. 109-163), should remain with the State Department, with the DOD responsible only for implementation of security assistance policy and programs in limited areas. The SFRC2 report explained that State Department security-assistance authority should not be allowed to migrate from the State Department to DOD, and warned against annual State Department budget requests to Congress for security assistance that are inadequate to meet policy implementation goals.11 The State working group study recommends that it should have the lead authority regarding foreign aid policy. It calls for the integration of State Department and USAID functions and organizations that currently overlap, with such integration resulting in a concentration of foreign aid decision making being located in the State Department.

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Build on the F Process Secretary Rice‘s Transformational Development created within the State Department the Office of the Director of Foreign Assistance and the Foreign Assistance Framework (FAF, or F process), which is intended to provide coherence to U.S. foreign assistance policy, provide budget transparency, and allow for monitoring and evaluation of the effectiveness of foreign assistance programs. Three of the studies considered in this chapter endorse the enhancement and improvement of the Office of the Director of Foreign Assistance (F) within the Department of State. Gordon Adams‘s article, ― Don‘t Reinvent the Foreign Assistance Wheel‖ (Adams), discusses several criticisms of the F process, including a fear that the F Bureau concentrates too much power within the State Department and creates a Washingtonfocused, non-transparent, top-down foreign aid structure. Despite these perceived shortcomings, the article claims that the alternatives to the F process are even less attractive. Among other negative consequences, restoring independent status to USAID would simply reinvigorate past USAID-State Department clashes over foreign assistance; and a new cabinet-level foreign assistance department would weaken foreign assistance overall because it would place foreign assistance in direct policy battles with the State and Defense Departments, both of which would likely remain stronger than the new foreign assistance department. The Adams article calls for improvement of the F process through increasing the importance of the DFA, which it argues should be elevated to a Second Deputy Secretary of State position; continuing to establish capabilities within USAID and the regional bureaus within the State Department to increase F process effectiveness; and requiring F to link resource needs to strategic goals in the long-term. The three studies generally commend the institution of the F process and call for the process to extend its authority to include all U.S.

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foreign assistance actors, programs, and policies not currently covered. These changes would promote better coherence for U.S. foreign assistance as a whole, according to these materials. In addition, the State Department should make the F process more transparent concerning both the criteria for aid eligibility and how resources are allocated, one commentator argues, in order to encourage long-term development over short-term political gains, which are more prevalent under the current FAF.

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Enhance Resources in Civilian Agencies There is widespread consensus, both within the U.S. government and among foreign aid experts, that overall capacity to carry out foreign assistance programs is compromised due to underfunded and understaffed civilian aid agencies. All of the studies called for an increase in resources for civilian agencies involved in foreign assistance, often as a means to effecting other reforms. Some of the studies focus on the steep decline in personnel, expertise, and capabilities of USAID in recent years, and the reliance on outsourcing stabilization and reconstruction program implementation through ―m egacontracts‖ with private contractors. They claim that increasing resources in USAID and other civilian agencies will increase expert institutional capability within government to meet foreign assistance challenges. Certain recommendations call for employment of so-called ― smart power,‖ which would make foreign assistance provided through civilian agencies central to national security strategy, requiring greater funding than is currently provided. Others cite the increasing role and authority of the Department of Defense in provision of foreign assistance, and contend that responsibility for such assistance should be returned to civilian agencies with enhanced capabilities. These recommendations focus on increasing capacity and capability in the civilian foreign assistance agencies through funding for personnel increases, training, and expertise attraction and retention; and investing in core foreign assistance competencies including management, resource planning (including one call for a new operations budgeting bureau within State), monitoring and evaluation, human resources, procurement, and emergency response.

Improve Policy and Agency Coordination A majority of the studies argue that integration and coordination among foreign assistance actors within the U.S. government is essential to improving aid effectiveness. Some recommend policy and agency integration that would surpass the limited coordination of foreign assistance under the F process. Other studies, however, focus on integration between the State Department and USAID, the two primary actors currently participating in the F process. Certain studies recommend in addition that agencies involved in foreign assistance align their policy and programs with foreign trade, investment, technical assistance, debt relief, financial stabilization, and economic sanctions policy to create a seamless web of engagement with foreign countries that prevents U.S. government actors from implementing individual foreign assistance programs in isolation. Specially reserved funding structures

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requiring interagency cooperation prior to disbursement could incentivize such integration, some of the studies argue. Other studies focus specifically on foreign assistance related to security. These studies recommend maintaining civilian leadership for foreign assistance in the face of increased DOD involvement in aid delivery through establishing a defined, limited role for DOD foreign assistance activities; increasing State Department capacity for stabilization and reconstruction assistance; and integrating security assistance strategy government-wide. In addition to recommendations for better coordination of foreign assistance, policies and activities, many studies call for coordination among foreign assistance, trade, foreign investment, debt relief, financial stabilization, and economic sanctions policies in order to stop different agencies implementing strategies that work at cross-purposes, hindering the effectiveness of U.S. international development efforts. Lael Brainard of the Brookings Institution has testified before the Subcommittee on State, Foreign Operations, and Related Programs of the House Appropriations Committee that ― [t]he United States could wield greater influence per aid dollar spent than any other nation simply by deploying its influence in trade, investment, debt, and financial policies in a deliberate manner as a force multiplier.‖12

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Increase Input from the Field, Rather than in Washington There are concerns in the foreign aid community about the degree of interaction between policymakers in Washington and those implementing foreign aid programs in the field, as well as the level of feedback from the field in forming foreign aid policy. Four of the studies recommend increased input from the field concerning foreign assistance, arguing that policy formulation under the F process is centered too much in Washington. One study calls for creating a systematic, routinized structure of engagement between Washington and foreign assistance actors in the field. This structure would be based in the regional bureaus and country desks within the State Department, which would increase their foreign aid programming and budgeting expertise in order to properly evaluate and set aid priorities from reports and requests from the field.

Create a Unified Budget Currently, budgeting for foreign assistance primarily resides in the foreign affairs and defense budgets (and possibly in other appropriations), and budget determinations for foreign aid are not unified across the government. Three studies call for changes to budgets the President presents to Congress regarding foreign assistance funding requests. One calls for unifying all foreign assistance spending across government agencies and assistance types, including economic, development, humanitarian, security, and military assistance. A comprehensive foreign assistance budget would disburse funds solely from the current foreign assistance accounts administered by the State Department. Another recommendation suggests creating an overall national security budget to parallel a more comprehensive national security strategy. This national security budget would integrate diplomacy, economic

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policy, defense, development, and intelligence spending to encourage a smart power approach to U.S. national security.

Provide Greater Emphasis on Needs-Driven Aid Many observers criticize the current system of aid funding because it is based on restrictive funding categories that limit long-term development programs for developing countries. Instead of providing aid based on short-term political objectives, which results in a disproportionate percentage of aid being allocated to middle-income countries, aid recipient country needs should drive aid allocation, a majority of studies say. Many of these recommendations would place greater reliance on the unique circumstances of each country receiving aid. Assistance, they argue, should be tailored to fit the individual needs of each country, whether they be humanitarian- or development-based, short-term or long-term, in stable situations or in latent- or post-conflict situations. Levels of aid could also depend not only on needs but also on the commitment level to development that the recipient country has shown. In addition, direct aid to recipient governments should be increased when they show their ability to implement transparent, credible development strategies. Certain studies stress the importance of close, consistent coordination with the recipient country to ensure that the United States is providing the most effective combination of assistance to meet recipient country needs and also encourage local ownership of aid plus any ensuing benefits toward recipient country development.

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Provide Multiyear Aid Funding Congress currently approves foreign assistance budgets on a year-to-year basis and, during the George W. Bush Administration, through emergency supplemental appropriations. Four of the studies call for multiyear budgeting for foreign assistance that supports long-range strategic foreign assistance goals. Longer-term budgeting, some argue, would bring several benefits: it would ensure that an administration would define resource requirements for foreign assistance and align them with strategy and policy; it would provide aid predictability to both U.S. foreign assistance agencies and recipient countries; and it would balance longterm aid provided to countries in need of development with aid to countries with immediate humanitarian needs. One study suggests that this long-range budgeting process should be mandated by the President, and executed by the Director of Foreign Assistance at the State Department through the F process, in cooperation with the National Security Council and the Office of Management and Budget. Another calls for such multiyear budgeting to reside within a formal quadrennial foreign assistance review, which would encourage improvement of foreign assistance strategy with long-range budgeting as a key component. In general, these four studies argue that long-range aid budgeting would improve the effective allocation of U.S. foreign assistance and, hence, the likelihood of reaching overall U.S. strategic goals.

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Balance Long-Term Aid against Short-Term Aid Observers of U.S. foreign assistance have described an overemphasis on short-term assistance goals that detracts from the ability of the U.S. government to undertake and sustain effective long-term development programs. Several of the studies identify balancing shortterm and long-term aid as a priority in their calls for U.S. foreign aid reform. They assert that the short-term nature of national security and foreign policy imperatives, the central purviews of the Department of Defense and the Department of State, respectively, overwhelm and subsume the government‘s long-term development goals. Recent reliance on narrow aid initiatives, such as programs targeting HIV/AIDS, while high-profile and measurable, arguably detract from development objectives designed to bring permanent benefits to foreign societies. To remedy the problem, one study claims, the Economic Support Fund (ESF) account should be used exclusively for funding immediate economic needs, and remain separate from the Development Assistance (DA) account, whose funding for longer-horizon development programs should be isolated and protected. Different studies call for various approaches to balancing short-term and long-term aid. The 2005 OECD report, Development Assistance Committee Peer Review of the United States, argues that the U.S. government should increase long-term development aid to stable countries to counterbalance the increase in humanitarian and other short-term assistance to crisis countries. J. Brian Atwood, M. Peter McPherson, and Andrew Natsios, in an article entitled ― Arrested Development, Making Foreign Aid a More Effective Tool,‖ call as well for a balance of short-term assistance and development assistance within individual country aid plans, to address immediate needs whilst building the capacity of such countries to sustain themselves.

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Increase Participation in Multilateral Foreign Assistance Efforts A report from the OECD in 2005, Development Assistance Committee Peer Review of the United States, explains that the U.S. official development assistance (ODA) to multilateral organizations had fallen significantly as a percentage of total U.S. ODA. Two studies recommend an increase in funding for, and participation in, multilateral institutions that provide foreign assistance, and call for multilateral forms of aid to rise in priority within U.S. foreign assistance strategy. These studies claim the United States is missing a prime opportunity to shape global foreign assistance activities and strategies, as it wields more influence than any other country in multilateral institutions, and encourages greater aid contributions from other countries through its participation in such institutions. They state that the United States can better leverage the effectiveness of its foreign assistance funds by utilizing existing aid delivery and system capacity possessed by multilateral organizations and by pooling funds with other donor nations. One study suggests that increased U.S. participation in multilateral aid organizations would reduce the burden on recipient countries of meeting different aid eligibility requirements by reducing the number of donors.

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Monitor Aid Impact Many foreign aid experts view the U.S. government evaluation of the effectiveness of foreign aid programs to be inadequate. Eight of the reports call for better monitoring and evaluation of U.S. foreign assistance. These authors argue that assessment of foreign assistance should be based not on outputs, but on measurable impact affecting strategic goals and aid recipients. They recommend that any new system of assessment should be comprehensive and unified across foreign assistance programs and agencies to provide a results-based evaluation of the connection between strategic aid goals and aid funding. Two studies suggest adopting international standards evaluating aid, including those of the International Initiative for Impact Evaluation and the Paris Declaration on Aid Effectiveness. Others suggest involving Congress specifically in the evaluation process, by linking benchmarks and metrics measuring programs‘ recent effectiveness to subsequent budget requests in the case of security assistance, and by requiring biennial strategic planning and annual state-of-affairs reports to Congress concerning humanitarian aid. One report calls for increased assessment training for USAID and State Department personnel.

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Address Role of Congress in Foreign Aid Policy Congress‘s role in foreign aid is exercised primarily through the power of the purse. Half of the 14 studies recommend increasing the role of Congress in U.S. foreign assistance decision making. In general, these studies call for a more robust role for Congress through a renewed relationship with the executive branch on foreign assistance issues, increased oversight powers in exchange for greater flexibility for the executive branch, and consistent, sustained involvement in guiding foreign assistance strategies and spending. Recommendations include resuming the passage of annual foreign assistance authorization legislation, with new foreign assistance appropriations tied directly to current authorizations, abolishing restrictive agency operating accounts, restoring a presidential foreign aid contingency fund, and improving efficiency and accountability of reprogramming for foreign aid funds. Some studies recommend greater oversight through requiring comprehensive crossagency foreign assistance budgets to be submitted to Congress, as well as through creating congressional select committees on national security, with membership from all committees involved in foreign assistance, to promote an all-inclusive assessment of foreign assistance programs. Others call for establishing new permanent funds for humanitarian aid and for aid in response to sudden crises.

CONCLUSIONS Most development and foreign policy experts view U.S. foreign assistance as a valuable activity that addresses many important policy goals, including alleviating poverty and hunger overseas, acquiring a sense of self-worth by the American people, attaining a favorable image around the world, and promoting broader U.S. foreign policy and national security goals. While the 14 studies surveyed by CRS emphasize different aspects of the importance of U.S.

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foreign assistance, all agree that foreign assistance must be reformed to improve its effectiveness. Only one of the recommendation categories—enhancing civilian agency resources—has the support of all of the studies covered in this chapter. The next two mostoften cited recommendations are (1) raising development to equal status with diplomacy and defense; and (2) increasing the emphasis of U.S. foreign aid to be more needs-based, with recipient governments taking ownership of both identifying needs and taking responsibility for using aid to meet them. While these 14 studies do not heavily dwell on DOD‘s growing role in U.S. foreign assistance, many of them refer to that issue, which some see as an undesirable ―m ilitarization of foreign aid.‖ The role of Congress in foreign aid should expand, according to half of the studies reviewed. In addition to holding more foreign aid hearings, holding them earlier in the legislative process, and conducting greater oversight to encourage more effective coordination of policy and programming, some say Congress should become involved early in the budget process, negotiating with the executive branch on funding levels before the budget arrives on Capitol Hill early each year. Some of the recommendations can be carried out by the executive branch with little or no congressional involvement, such as establishing a national foreign aid strategy, building on the F process, emphasizing needs-based aid, and monitoring aid impact. Most, however, would require congressional action. For example, rewriting FAA, creating a cabinet-level department for foreign aid, enhancing resources to civilian agencies, creating a unified budget, and increasing multilateral aid, among other options, would all require legislation. Some of the recommendation costs could become burdensome, such as creating a cabinet-level department for foreign assistance. Others could have minimal costs, such as increasing field versus D.C. input; and some recommendations, such as creating a unified budget and improving agency coordination, could result in savings. Still other recommendations could encourage greater aid effectiveness, such as monitoring aid impact, balancing long-term versus short-term aid, increasing needs-driven aid and local ownership of aid programs, and multiyear funding. Since these studies were written for the purpose of making recommendations to reform U.S. foreign aid, it is not surprising that none of them recommend maintaining the status quo. The 111th Congress is considering the wide array of foreign aid reform possibilities and will decide which path it thinks U.S. foreign aid should take. It should be noted, however, that given the current economic environment and budget constraints along with the numerous other major concerns, such as two wars, health care, energy policy, and global warming, some Members in the 111th Congress may prefer a continuation of the existing foreign aid structure with minor modifications and increased or adjusted resources where possible.

APPENDIX A. CRS SUMMARIES OF REPORTS13 Adams—Adams, Gordon, ― Don‘t Reinvent the Foreign Assistance Wheel,‖ Foreign Service Journal, March 2008. Mr. Adams, Distinguished Fellow with the Henry L. Stimson Center, writes that establishing the F bureau is good and should be built upon. Adams identifies some concerns about the F process, including that 1) regional desk officers are concerned that aid funding

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they hope for would go somewhere else; 2) embassies feel left out of the process and demand greater transparency; 3) USAID worries that development funds would migrate to different strategic purposes in the Department of State; 4) everyone feels F bureau‘s creation was rushed, the system is too top-down, and transparency is inadequate; and 5) the relevant committees in Congress believe that they were not consulted early on in the creation of the F bureau and have had to figure out how the new structure fit the budget accounts established by legislation. He critiques some recommendations of others. For example, he states that reviving and beefing up USAID would just take us back to those days when USAID and State bickered on a regular basis. One side doesn‘t understand development; the other side doesn‘t understand strategic purposes, he writes. In addition, a cabinet-level Department of Development would worsen the problem by elevating disputes about assistance to senior policymakers, with State and Defense likely to carry more weight—the new agency would further disperse the civilian tools of our overseas engagement, as more entities vie to have input on policy direction and control resources; and foreign aid programs that have no or only partial development component, such as Economic Support Funds (ESF), targeted assistance to the Former Soviet Union, counternarcotics programs, counterterrorism, HIV/AIDS prevention and treatment, and peacekeeping training. Furthermore, development assistance does not have the heft and popularity among constituents and U.S. taxpayers. The result of creating a separate department could be the exact opposite of the goal—a dwindling away of development assistance, rather that its growth, according to Adams. The author asserts that implementing no reform could lead us backward and lead, instead, to enhancing the role of the DOD in delivering foreign assistance. He says there is a need for more integrated, long-term strategic vision for our diplomacy and foreign assistance. His recommendations follow:  





The State Department‘s best option is to build on F; State and USAID need to focus on making the process work better by assigning personnel who think strategically to the Office of Civil and Foreign Service and giving them training in planning, budgeting, and program management and evaluation; There needs to be structured, systematic engagement between Washington and the field with regional bureaus and country desks exercising their skills in programming and budgeting to review requests and set priorities. This could include a pilot project; and State and USAID need to work with Congress before submitting budgets.

The State Department needs to take further steps to:  Make the Director of Foreign Assistance a second Deputy Secretary of State, conferring clout to the position. The authority to implement this already exists in law, Adams says, but the State Department has not acted on it;  Transfer responsibility for operational budgeting to one who can be a Deputy Secretary of State for Operations. This move would give Congress better oversight and accountability, increasing its confidence and willingness for cooperation. (This responsibility is currently divided between the Under Secretary for Management and

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



the Resource Management Bureau, which lost its assistance budget function when F was created); Begin a pilot project in long-range strategic planning and budgeting, looking out over five years or more and defining resource requirements connected to long-term strategic objectives, something the F bureau does not do now. The White House should mandate a foreign assistance strategic planning and budget planning process, based in F and connected to senior officials at the National Security Council (NSC) and the Office of Management and Budget (OMB); and Beef up the resource planning capabilities inside the regional bureaus so that each has a robust capability to interact with the F process.

Such steps will help State become a more effective foreign relations department, one in which development, public diplomacy, and humanitarian assistance all have equal standing with political and strategic relations as tools with which to engage the world. Arrested AMN—Atwood, J. Brian, M. Peter McPherson, and Andrew Natsios. ― Development, Making Foreign Aid a More Effective Tool.‖ Foreign Affairs, Vol. 87, no. 6 (November/December 2008), pp. 123-132. This journal article by three former USAID Administrators argues that while U.S. foreign aid has increased from $10 billion in 2000 to $22 billion in 2008, the organizational structure and statutes governing U.S. foreign aid policy have become ― chaotic and incoherent due to 20 years of neglect.‖ The article emphasizes the need to either create a cabinet-level agency for U.S. foreign aid or restore USAID‘s autonomy. Either measure would afford greater stature to the U.S. foreign assistance structure in order to influence U.S. trade, investment, and environmental policy, and budgetary independence. Woven throughout, the article suggests:

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

      

possibly using the provisions of the Millennium Challenge Act of 2003 as a basis for broader aid eligibility provisions, and rewriting the Foreign Assistance Act of 1961, as it is a ―Cold Wa r artifact that has become obsolete‖; there is value in having development raised to the level of defense and diplomacy, which the Bush Administration did theoretically, but not in practice; creating a cabinet-level agency for development or recreating such stature in USAID, via increased authority and resources; giving USAID the authority to devise overall strategy on humanitarian and development assistance and coordinate activities of other agencies; increasing field office input rather than centralizing aid programs in Washington will improve effectiveness of aid programs; customizing aid to the recipient countries to improve potential for success; preventing funding of narrow, short-term aid programs at the expense of long-term development aid; and increasing Congress‘s role to include a mandate to establish a new USAID, make the executive branch accountable for results, and provide a new framework for legislators to earmark funds for specific purposes.

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BRK—Brookings Institution, Foreign Assistance: Reinventing Aid for the 21st Century, Testimony by Lael Brainard, Senior Fellow and Vice President and Director, Global Economy and Development, before the House Subcommittee on State, Foreign Operations, and Related Programs, January 23, 2008. Ms. Brainard‘s testimony states that U.S. foreign aid is a critical tool for not only helping the world‘s poor, but also promoting U.S. national security, interests, and values. The witness describes the outdated aid infrastructure and how it is based on Cold War thinking. The more than ― fifty separate units sharing responsibility for aid planning and delivery in the executive branch, fifty objectives, along with poor communication and coordination,‖ Ms. Brainard argues, produce inefficiencies, overlap, and result in units working at cross-purposes. The witness provides the following recommendations to reform U.S. foreign aid and concludes that conditions are favorable now for fundamental aid reform.      

elevate the development mission; invest in civilian capabilities; support country ownership; achieve coherence across policies (similar to that of U.K.‘s cabinet-level Department for International Development); reduce the number of agencies involved in foreign aid and clarify the remaining agencies‘ missions; create a cabinet-level voice for development (merging USAID into State would subordinate development to diplomacy).

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She also asserts that Congress has an integral role to play in holding hearings, mandating independent analysis of current operations, and seeking expert input on alternative organizational structures. BRK-CSIS—Brookings-CSIS Task Force. Security by Other Means: Foreign Assistance, Global Poverty, and American Leadership edited by Lael Brainard, 2007. Security by Other Means contains 11 chapters that together provide an overall review of the current state and the history of U.S. foreign assistance from multiple authors and through several different analytical approaches. Chapter topics include organizing and unifying U.S. foreign assistance efforts, strengthening development assistance, examining humanitarian and HIV/AIDS assistance and the U.S. assistance role, providing assistance in areas of current or potential conflict, analyzing security and strategic assistance, creating a more effective congressional-executive relationship for U.S. foreign assistance, and providing historical analysis of previous U.S. attempts at foreign aid reform, as well as the experience of reform in the United Kingdom. The book closes with a chapter containing conclusions and recommendations. The chapter states that U.S. hard power assets are currently stretched thin, requiring the use of soft power and foreign assistance to meet the security challenges facing the country. The foreign assistance structure, however, lacks effectiveness due to fragmentation and incoherence, according to the author, despite massive increases in overall foreign assistance funding largely due to the wars and reconstruction in Iraq and Afghanistan. In this last chapter, the Brookings-CSIS Task Force makes several recommendations to create a unified framework for U.S. foreign assistance and to organize it for effectiveness. It

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first calls for a unified framework that combines two concepts of foreign assistance across pertinent government actors, policy, and aid delivery: (1) a soft power tool to meet diplomatic and strategic ends, and (2) a development tool allocated according to policy effectiveness and human needs. This framework would integrate different types of assistance—including aid to deal with security threats, development goals, humanitarian needs, and transnational threats such as the global HIV/AIDS epidemic—to ensure that they are not implemented in isolation, but are provided as a coherent whole, tailored to the needs and objectives in each recipient country. Necessary support for repressive regimes in order to combat security threats would be integrated within a comprehensive country assistance package that also addresses economic and political issues. Foreign assistance policy and programs would be carried out through coordinated interagency action, with a fully funded and operational Office of the Coordinator for Stability and Reconstruction, and an engaged National Security Council, leading the multi-agency effort. Under the framework, Congress would integrate its committees that deal with the armed forces and foreign aid through joint hearings and other vehicles to allow for coherent policy and funding. It would also extend oversight over foreign assistance programs in exchange for greater flexibility for State, DOD, and USAID to adapt aid to changing conditions in the field. The book next provides recommendations for improving effectiveness of U.S. foreign assistance through better governmental organization of foreign assistance agencies and authorities, and an effective executive branch relationship with Congress. The final chapter identifies six central challenges to organizing foreign assistance within the executive branch: 

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Proliferation of stand-alone initiatives and foreign aid authority resting with over 50 separate government units requires rationalization of agencies, improved coordination, and mission clarification. Restructuring program design must be driven by objectives and needs, not restrictive funding categories. The United States must speak with one voice on foreign aid. Government must incentivize interagency cooperation and create a seamless web of foreign assistance, trade and investment, technical assistance, debt relief, and financial stabilization for coherence across all policies affecting poor countries. The United States must invest in core foreign assistance competencies, including infrastructure and stabilization and reconstruction, rather than relying on megacontracts with private companies that fail to draw on institutional knowledge and experience. The United States must truly elevate development alongside defense and diplomacy.

This chapter lays out four possible options for reorganizing U.S. foreign assistance: improving coordination while retaining decentralization, positioning USAID as an implementing arm of the State Department, merging USAID into State, or creating a new department for global development. This chapter recommends: 

Creating a new department, as it is the only solution that can meet all the challenges identified for aid reform, the Task Force argues.

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Congress pass annual foreign assistance authorization legislation instead of relying on narrow earmarks, and tie detailed, transparent appropriations to authorizations or recommendations from authorizing committees. Increasing flexibility for the use of appropriated funds, by abolishing restrictive operating accounts, restoring a small presidential contingency fund, and rationalizing the funds reprogramming process to make it accountable and efficient.

CGD—Center for Global Development. Modernizing Foreign Assistance for the 21st Century: An Agenda for the Next U.S. President. March 2008. This article by the Center for Global Development, a think-tank established in 2001 with a mission to reduce global poverty and inequality, states that the world has undergone significant changes since the post-World War II era, when modern foreign assistance programs first emerged as a foreign policy tool. It says that while the George W. Bush Administration took several steps toward increasing foreign assistance funding and establishing new programs, such as the President‘s Emergency Plan for AIDS Relief (PEPFAR) and the Millennium Challenge Account (MCA), these changes are not enough. The author recommends that the next President: 



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 

Develop a national foreign assistance strategy that elevates global development as critical to our national interest and lays out the principal missions and mandates for foreign assistance; Reform the organizational structure by merging most foreign assistance programs and related development policy instruments into a new cabinet-level department and strengthen the organization by expanding and deepening the professional staff, revamping delivery mechanisms, and building a serious monitoring and evaluation system; Rewrite the Foreign Assistance Act of 1961 to streamline procurement rules, earmarks, and restrictions, and to re-establish a strong partnership between the executive branch and Congress that allows greater flexibility to executive aid agencies provided there is greater accountability and responsiveness to Congress; Place a higher priority on multilateral channels of assistance; and Increase the quantity and improve the allocation of assistance, because, even with recent increases, U.S. foreign assistance is not great enough or unencumbered enough to meet our foreign policy goals.

The article goes on to assert that U.S. foreign assistance can be strengthened by improving the allocation of funding. The study says that typically 44% of U.S. foreign assistance goes to just six countries, all allies in the war on terror or the war on drugs. The other 56% of U.S. foreign aid goes to nearly 100 other countries, according to the author. ― One of the most striking patterns is that the United States provides 40% of its assistance to middle-income countries and just 34% to low-income countries. On average other donors do the reverse.... ‖ CGE—Center for U.S. Global Engagement. Smart Power: Building a Better, Safer World—A Policy Framework for Presidential Candidates. July 2007.

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This policy framework, intended for presidential candidates, asserts that the United States must work to build a ― better, safer world‖ because U.S. national security, economic growth, and moral leadership are directly tied to conditions in developing countries and countries in crisis. The United States must employ an integrated, ― smart power‖ approach that would include all the tools of statecraft, including diplomacy, development, economic policy, defense, and intelligence capabilities. CGE explains that the United States first must invest in the smart power approach, which foremost involves increasing diplomacy and foreign assistance capacity and resources. It asserts that current smaller investments in diplomacy and foreign assistance have already yielded important benefits, and that with increased resources and capabilities these benefits would grow. The smart power framework proposes that the United States use an improved diplomatic capacity to develop more highly integrated relationships with other countries and institutions to effectively meet challenges of development and security, while at the same time placing the United States in a strong position of leadership on these issues. Cultural and exchange programs, as well as the Peace Corps, should be expanded, and cooperation with non-governmental organizations (NGOs), universities, and the private sector should be strengthened. CGE recommends that the Administration:  

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reorganize national foreign policy that currently is not integrated, and the pieces of which often either act at cross purposes or duplicate work; authorize the President to develop a national security strategy that integrates diplomacy, development, economic policy, defense, and intelligence capabilities. An overall national security budget should reflect this new integration in yearly appropriations requests; elevate development to the level of defense and diplomacy in policy priority, and create a coherent foreign assistance strategy under the control of a new cabinet-level department, or other unifying innovation; create a flexible and agile diplomatic and foreign assistance corps that possesses the language, technical, cultural, and managerial skills needed to implement programs and build alliances effectively in the field; restructure the Foreign Service to align and cooperate better with regional military commands; increase foreign assistance funding to address stability in latent- and post-conflict states and other concerns, including health, education, and democracy-building; streamline the foreign assistance bureaucracy to make it flexible and able to meet challenges and crises as they arise; amendments to the Foreign Assistance Act should be made to implement this goal; align trade and agricultural subsidy policies with foreign assistance strategies to avoid conflicts and inefficiencies; and institute a quadrennial foreign assistance strategy review to articulate objectives and align them with budgets.

CSIS—Center for Strategic and International Studies. Integrating 21st Century Development and Security Assistance. January 2008.

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This final report of the CSIS Task Force on Nontraditional Security Assistance analyzes recent increased Department of Defense involvement in the provision of foreign assistance, specifically nontraditional security assistance including counter-terrorism capacity building, post-conflict reconstruction and stabilization, and humanitarian assistance. The Task Force discusses DOD‘s authority to provide foreign assistance, and the role of the new United States Africa Command (AFRICOM) in providing an opportunity for a new approach to the military‘s role in foreign assistance. The report finds primarily that DOD‘s involvement in nontraditional security assistance has skyrocketed while the Department of State‘s and USAID‘s abilities to provide foreign assistance have eroded. The Task Force recommends: 

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An overall strategy—that DOD continue to provide assistance for short-term contingency situations, but that an overall cross-agency strategy for security assistance be led by the State Department (namely, a fully-funded Coordinator for Reconstruction and Stabilization in the Office of the Secretary of State (S/CRS)) with the DOD role clearly defined and closely integrated into this overall strategy; Increased funding—as part of the overall strategy, State and USAID capabilities would be built up through increased funding to restore a balance among DOD, the State Department, and USAID; and Transparent plans and budgeting—providing cross-agency security assistance plans to Congress in order to ensure effective oversight and development of efficient budgeting models for comprehensive assistance funding, as well as benchmarks and metrics for assessment of assistance programs.

HELP—The HELP Commission Report on Foreign Assistance Reform, Beyond Assistance, December 7, 2007. This bipartisan, congressionally mandated commission interviewed many of the world‘s foremost experts on foreign assistance. ― Not one person appeared before this Commission to defend the status quo,‖ according to the report. The Commission states that it is in America‘s best interest to provide foreign aid, but it says the U.S. foreign assistance system is broken. Along with emphasizing long-term development as a valuable objective, the HELP Commission recommends: 

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Congress and the White House should work together to rewrite the Foreign Assistance Act of 1961, reflecting new development goals and programs and aligning it with the post-9/11 world; More assistance targeted to private sectors in developing countries, because business should be the engine of growth in the developing world; A new business model to engage new non-governmental partners—U.S. foreign aid should be conducted in concert with local private or public partners that are committed to development; Alignment of America‘s trade and development policies, which often conflict. For example, countries that are eligible for Millennium Challenge Corporation funding often pay more in tariffs than they receive in aid; Strengthened management capacity of U.S. assistance agencies. The United States should improve monitoring and evaluation, human resources, and procurement and

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contracting capabilities of agencies involved with foreign aid to improve the effectiveness of taxpayer dollars. Also, while the workload of foreign aid agencies has gone up, the staff has been cut, which hurts effectiveness of the programs; Reorganization of all U.S. international affairs functions to elevate foreign aid and development to equal status with defense and diplomacy. A new department would include USAID and all other U.S. development agencies, or a newly reorganized Department of State could include USAID; and Funding from the bottom up, based on the needs and commitment of developing countries and on the national and security interests of the United States.

To support its key findings, the Commission also urges:    

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forging a new executive/legislative branch relationship acknowledging the need for flexibility and accountability; bolstering humanitarian efforts and establishing a $500 million humanitarian fund as a permanent facility; creating a permanent $500 million foreign crisis fund; simplifying the funding account structure for more clearly defined responsibility and authority; clarifying DOD‘s role in development assistance; using public diplomacy and branding more effectively; and emphasizing the importance of local infrastructure and agriculture.

InterAction—Why the U.S. Needs a Cabinet-level Department for Global and Human Development, InterAction Policy Paper, June 2008. This policy paper discusses the haphazard evolution of U.S. foreign assistance and asserts that nearly five decades after the beginning of modern U.S. foreign aid, it is badly broken and needs to be repaired. Within the context of its primary recommendation to create a Cabinetlevel Department for Global and Human Development that would elevate development to the level of defense and diplomacy, the report weaves other recommendations in, such as:     

emphasis on collaboration and cooperation, both with the recipient country, but also among other U.S. government foreign aid agencies and programs; achievement of long-term objectives, which should not be sidetracked for short-term political agendas; a rewriting of the Foreign Assistance Act of 1961 to re-emphasize poverty reduction; promotion of local self-sufficiency by providing needs-based aid and building local capacity; and an increase in recruiting and training human resources to meet shortages, particularly in USAID.

OECD—Organization for Economic Co-Operation and Development. Development Assistance Committee Peer Review of the United States. December 2006. This OECD report provides an overview of U.S. foreign assistance, noting new initiatives such as the ― 3D‖ concept for U.S. foreign policy, Transformational Diplomacy at the State

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Department, the new Director of Foreign Assistance (DFA) position and Foreign Assistance Framework (FAF), and the growing role of the Defense Department in providing foreign aid. The report commends U.S. increases in overall official development assistance (ODA) and the U.S. status as the largest donor of official humanitarian assistance. The report notes the increase in ODA, however, has been concentrated in assistance to Iraq and Afghanistan, and does not represent growing predictability in U.S. aid. The OECD Development Assistance Committee (DAC) also finds deficiencies in many areas of the U.S. foreign assistance framework and strategy, including continuing organizational fragmentation and a lack of development policy coherence, as well as underutilization of multilateral avenues for delivery of assistance and coordination of development efforts. A reduction in the prominence of USAID in the provision of ODA, the diminishing importance of funding for economic development, and insufficient reliance upon results-based monitoring also figure among the report‘s concerns. With regard to the role of Congress, the report criticizes the current legislative web of earmarks and other directives, such as requiring use of U.S. products and services for aid (so-called ― tied aid‖), which reduce assistance flexibility and the ability to cooperate with multilateral institutions and international assistance partners. The DAC recommends several steps to improve U.S. foreign assistance overall:  

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raise development to an equal level with diplomacy and defense within U.S. foreign policy; broaden the Foreign Assistance Framework and the role of the DFA to oversee all government development actors, and improve public awareness of the importance of development programs; improve U.S. aid volume and distribution efforts by creating a long-term plan for ODA creating predictability and strategic allocation; balance aid for crisis countries and countries requiring long-term development assistance; play a stronger role in the multilateral assistance sphere; adopt a long-term plan for humanitarian assistance, increasing coherence in humanitarian aid policy, reforming food aid, and integrating humanitarian aid with longer-term development activities; and adopt a unified, results-based management approach, based on principles of the Paris Declaration on Aid Effectiveness for improved aid effectiveness.

Oxfam—Oxfam America, Smart Development, Why U.S. foreign aid demands major reform, February 2008. This chapter asserts that reform is necessary for two primary reasons. First, as development has become part of U.S. national security strategy, it has been increasingly integrated under military control in order to achieve short-term political and security goals. Short-term policy interests often are at the expense of longer-term development of the recipient country. Second, revamping U.S. foreign aid to strengthen recipient states and empower their citizens to free themselves from poverty and injustice will, in turn, make America safer. ― A more prosperous world with effective states accountable to their citizens is likely to be safer.‖ The report discusses ― the securitization of aid‖ saying, ― The new U.S. Army/Marine Corps Counterinsurgency Field Manual argues for a radical shift in strategy where the primary objective of any counterinsurgency operation ‗is to foster development of effective governance by a legitimate government.‘‖ The report discusses the increasingly

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military organization of aid, such as AFRICOM, and the heightened emphasis on security assistance in the budget, reflecting the increasing imbalance between short-term security and long-term development goals. The study recommends the following reform actions:        

prioritize development as a principal, rather than subordinate, element of our national security alongside defense and diplomacy; enact a new Foreign Assistance Act; create a new Department of Foreign Assistance; create a national development strategy; rebuild USAID or create a new foreign aid agency; increase nonproject aid to developing country governments that have credible and transparent and coherent development strategies; allow for multiyear U.S. foreign aid commitments so countries can make plans for future; and untie U.S. foreign aid.

SFRC1—Senate Foreign Relations Committee, Embassies as Command Posts in the Anti-terror Campaign, December 15, 2006. Points made in this committee report include:

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Among other measures to strengthen U.S. Embassies around the world, this chapter recommends that Ambassadors should be charged with the decision whether to approve all humanitarian and development assistance, and other related programs, as well as all military-related programs implemented in-country, including assistance provided under the enlarged authority in Section 1206 of the National Defense Authorization Act for Fiscal Year 2006 (P.L. 109-163) for DOD to provide security assistance. Some countries receive between a quarter and half of their U.S. assistance in the form of security assistance, and Section 1206 does not address immediate threats to the United States that cannot be included in the normal budget process. Therefore, the Secretary of State should insist that all security assistance, including Section 1206 funding, be included under the Secretary of State‘s authority in the new process for rationalizing and prioritizing foreign assistance. Country team meetings organized by the Director of Foreign Assistance should include military representatives in cases where the country is a recipient or potential recipient of military funding in order to get the civilian/military balance. Congress should fund the civilian foreign affairs agencies (DOS and USAID, in particular) at a minimum to the level requested by the President. The current 12:1 ratio of military to civilian foreign aid agencies risks the further encroachment of the military into areas where civilian leadership is more experienced. The Administration should develop a comprehensive budget for foreign assistance that incorporates economic, development, humanitarian, security and military assistance. All foreign assistance programs should be funded through the foreign assistance accounts, as administered by the Department of State.

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The Secretary of State should retain primary authority over its planning and implementation of both Function 150 and Function 050 assistance.

SFRC2—Senate Foreign Relations Committee, Embassies Grapple to Guide Foreign Aid, November 16, 2007. This chapter finds that the United States has failed as a government to agree on the importance or strategy of U.S. foreign assistance. It claims that overall agreement on foreign assistance between Washington and overseas posts is lacking, and field complaints on the F process center on a lack of transparency, extra paperwork, differing priorities, and inconsistent demands with an underlying problem about money. Despite these concerns, embassy officials believe they are coping well and welcome new programs that bring additional funding to the host country. The report recommends: 

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 

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The President should design a national foreign assistance strategy that explains both the national security requirement and the humanitarian imperative that drive the U.S. government‘s investment in foreign aid; The President should task the Secretary of State to work closely with the Administrator of USAID to implement the President‘s foreign assistance strategy, giving the Secretary of State explicit authority to ensure that all foreign aid is in the foreign policy interest of the United States; The Secretary of State, working with the USAID Administrator, should garner the foreign assistance funds necessary to carry out the President‘s strategy; The Secretary of State should provide strategic direction, transparency, and overall accountability to foreign assistance. The report states that her efforts to do so through the ― F‖ process have been flawed in implementation; USAID should be recognized for the indispensable role it plays in the effectiveness of U.S. development policy and should be strengthened and given resources to attract the world‘s best development experts; Ambassadors should take responsibility for the implementation of the President‘s foreign aid strategy, making certain that assistance is balanced and spent effectively in coordination with the host country and other donors; The President should continue to request and Congress should continue to provide funding for security assistance in the foreign affairs budget with some implementation by DOD; foreign assistance functions and authorities should not be migrated to DOD due to inadequate budget requests for funding in the proper account; and Congress should play an important role in ensuring that foreign aid is well spent.

State—Department of State, Advisory Committee on Transformational Diplomacy: Final Report of the State Department in the 2025 Working Group, January 28, 2008. The State 2025 Working Group expects that the world will radically change in the coming years and will require U.S. overseas presence, skilled personnel, knowledge, and policy insights as never before from the Department of State. The scale and complexity of anticipated global challenges and opportunities will demand a Department that is significantly

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more robust, better resourced, and more strategically focused. Among the ten recommendations in the report, those regarding U.S. foreign aid include: 



The State Department should work with the USAID and other U.S. government agencies, other nations, and multilateral organizations. Specifically, it should integrate planning offices and technology infrastructures of State and USAID, merge overlapping bureaus and functions, and co-locate related offices and personnel in Washington, D.C. to bring strategies and operations into alignment. Further, State should establish a senior-level responsibility and interagency authority for reconstruction and stabilization activities and fully develop State‘s planning and execution capacities in these areas. Both State and USAID should expand U.S. global presence, critical training and rotations, and improve their capacity to deploy integrated teams on short notice for short-term assignments. Specifically, among other things, the report recommends increasing the number of State‘s Foreign Service and Civil Service staff by 100% over ten years, and increasing USAID‘s deployable staff resources by 100% in three years.

APPENDIX B. BIBLIOGRAPHY (Adams) Adams, Gordon, ― Don‘t Reinvent the Foreign Assistance Wheel.‖ Foreign Service Journal, vol. 85, no. 3 (March 2008), pp. 41-50.

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(AMN) Atwood, J. Brian, M. Peter McPherson, and Andrew Natsios. ― Arrested Development, Making Foreign Aid a More Effective Tool.‖ Foreign Affairs, vol. 87, no. 6 (November/December 2008), pp. 123-132. (BRK) Witness statement of Lael Brainard, Brookings Institution. U.S. Congress. House. Committee on Appropriations. Subcommittee on State, Foreign Operations, and Related Programs. Hearing on Foreign Aid Reform. 110th Congress, 2nd session, January 23, 2008. At http://www.cq.com/display.do?dockey=/cqonline/prod/data/docs/html/testimonychild/110/ testimonychild110-000002661004.html@allchild&metapub=CQTESTIMONYCHILD&searchIndex=1&seqNum=4. (BRK-CSIS) Brainard, Lael, ed. Security by Other Means: Foreign Assistance, Global Poverty, and American Leadership. Washington: Brookings Institution Press and Center for Security and International Studies, 2006. (CGD) Center for Global Development. Modernizing Foreign Assistance for the 21st Century: An Agenda for the Next U.S. President. March 2008. At http://www.cgdev.org/content/publications/ detail/15561/. (CGE) Center for U.S. Global Engagement. Smart Power: Building a Better, Safer World—A Policy Framework for Presidential Candidates. July 2007. At http://www.usglobal

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engagement.org/portals/16/ftp/Center_for_US_Global_Engagement_Policy%20Framework.p df. (CSIS) Center for Strategic and International Studies. Integrating 21st Century Development and Security Assistance. January 2008. At http://www.csis.org/media /csis/pubs/080118-andrews-integrating21stcentury.pdf. (HELP) United States Commission on Helping to Enhance the Livelihood of People Around the Globe. Beyond Assistance: the HELP Commission Report on Foreign Assistance Reform. December 7, 2007. At http://www.helpcommission.gov/portals/0/ Beyond%20Assistance_HELP_Commission_Report.pdf. (InterAction) American Council for Voluntary International Action (InterAction). Why the U.S. Needs a Cabinet-level Department for Global and Human Development. InterAction Policy Paper. June 2008. At http://www.interaction.org/files.cgi/6305_Cabinetlevel_rationale_paper.pdf. (OECD) Organization for Economic Co-Operation and Development. Development Assistance Committee Peer Review of the United States. December 2006. At http://www.oecd.org/dataoecd/ 61/57/37885999.pdf.

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(Oxfam) Oxfam America. Smart Development, Why U.S. foreign aid demands major reform. February 2008. At http://www.oxfamamerica.orgnewsandpublications/publications/ briefing_papers/smart-development/smart-development-may2008.pdf. (SFRC1) U.S. Congress. Senate. Committee on Foreign Relations. Embassies as Command Posts in the Anti-terror Campaign. Committee print. 109th Congress, 2nd session, December 15, 2006. S.Prt. 109-52. Washington: GPO, 2006. (SFRC2) U.S. Congress. Senate. Committee on Foreign Relations. Embassies Grapple to Guide Foreign Aid. Committee print. 110th Congress, 1st session, November 16, 2007. S.Prt. 110-33. Washington: GPO, 2007. (State) Department of State, Advisory Committee on Transformational Diplomacy: Final Report of the State Department in the 2025 Working Group, January 28, 2008. At http://www.state.gov/ documents/organization/99879.pdf.

End Notes 1

Summary and Highlights, International Affairs Function 150, Fiscal Year 2009, Department of State, p. 6. The Millennium Challenge Account, administered by the Millennium Challenge Corporation, is designed to provide foreign aid to countries that make progress toward democratic and economic reform. President George W. Bush proposed it in 2002 and Congress authorized it in 2004. For more detail, see CRS Report RL32427, Millennium Challenge Corporation, by Curt Tarnoff. 3 Summary and Highlights, International Affairs Function 150, Fiscal Year 2008, Department of State, p. 13. 2

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Much of the information in this section is located in Security by Other Means, Chapter 9, and in USAID, ― USAID History,‖ at http://www.usaid.gov/about_usaid/usaidhist.html. 5 Numerous foreign aid authorization bills have been introduced in the intervening years, but have received relatively little attention or have passed in only one chamber of Congress. 6 Section 15 of the State Department Basic Authorities Act of 1956 (P.L. 84-885) and Section 10 of the Foreign Military Sales Act Amendments, 1971 (P.L. 91-672) prohibit expenditure of funds appropriated for foreign aid without having been duly authorized. To fund foreign aid without authorization, therefore, annual foreign operations appropriations acts contain a provision similar to Section 653 of the 2008 Foreign Operations Appropriations Act, which allows funds appropriated under the Act to be expended notwithstanding these two prohibitions on unauthorized foreign aid appropriations. 7 Administration of Foreign Assistance and Related Functions (Executive Order 10973; 27 F.R. 10469; November 3, 1961). 8 Sec. 1411(a) of the Foreign Affairs Reform and Restructuring Act of 1998 (division G of P.L. 105-277). 9 Appendix A provides more complete characterization of each of these studies and their recommendations. 10 The White House, The National Security Strategy of the United States of America, March 2006, p. 33. 11 For further information on DOD‘s foreign assistance role, see CRS Report RL34639, The Department of Defense Role in Foreign Assistance: Background, Major Issues, and Options for Congress, coordinated by Nina M. Serafino. 12 Witness statement of Lael Brainard, Brookings Institution, U.S. Congress, House Committee on Appropriations, Subcommittee on State, Foreign Operations, and Related Programs, Hearing on Foreign Aid Reform, 110th Congress, 2nd session, January 23, 2008. 13 Please note that CRS prepared these summaries; they were not provided by the authors.

In: Foreign Aid Reform Editor: Finn C. Hudson

ISBN: 978-1-61728-926-2 © 2010 Nova Science Publishers, Inc.

Chapter 4

FOREIGN AID REFORM: AGENCY COORDINATION Marian Leonardo Lawson, Susan B. Epstein

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SUMMARY In the decades since the Foreign Assistance Act of 1961 became law, Congress, various Administrations, and a number of Commissions, have reviewed U.S. foreign aid programs and proposed ways to improve the coordination and effectiveness of U.S. foreign assistance by consolidating or otherwise restructuring various agencies. Two recent trends in foreign assistance have renewed interest in this issue. First, foreign assistance funding has expanded considerably since the terrorist attacks of September 11, 2001, from just over $15 billion in FY2001 to more than $45 billion in FY2007, including supplemental appropriations. Second, there has been an increase during this same time period in the number of agencies implementing foreign assistance. U.S. foreign assistance has long been carried out by multiple U.S. government agencies, including the State Department (State), the U.S. Agency for International Development (USAID), the Department of Defense (DOD) and many others, to a lesser extent. In 2007, 24 U.S. government agencies reported disbursing foreign assistance resources. With so many entities administering foreign aid, often with different objectives, many aid experts have questioned whether these agencies are working at cross-purposes. Where agencies have similar objectives, there is concern that they may be duplicating each others‘ efforts. There is no overarching mechanism in place for coordinating or evaluating this broad range of activities. There are, however, several less-comprehensive systems of coordination in place among various departments and agencies, using means as varied as National Security Council policy coordination committees, new information-sharing technology systems, and interagency staff exchanges. There is little consensus among policy makers and aid experts about how best to improve coordination, or even the need for more formal coordination. Some argue that the multiple 

This is an edited, reformatted and augmented version of a CRS Report for Congress publication, Report #R40756, dated August 7, 2009.

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funding accounts and implementing agencies appropriately reflect the wide range of competencies that development programs require, as well as diverse U.S. foreign assistance objectives. Others say the lack of centralized coordination authority impedes U.S. foreign aid transparency, efficiency, and effectiveness. Still others argue that there has been insufficient evaluation of foreign assistance programs to know whether coordination is needed to improve program efficiency and effectiveness. Proposals aimed largely or in part at addressing these concerns include developing a national foreign assistance strategy, authorizing a new or existing agency to coordinate all foreign assistance programs, coordinating through the National Security Council, enhancing the ability of U.S. missions abroad to coordinate aid activities at the country level, separating strategic aid programs from development assistance programs, and enhancing monitoring and reporting activities. In the 111th Congress, foreign assistance reform proposals incorporating aid coordination provisions have been introduced by leaders of both the House Foreign Affairs and Senate Foreign Relations Committees. On the House side, H.R. 2410, the Foreign Relations Authorization Act for Fiscal Years 2010 and 2011, and H.R. 2139, the Initiating Foreign Assistance Reform Act of 2009, both include provisions to improve inter-agency coordination of foreign assistance. On the Senate side, coordination provisions are included in S. 1524, the Foreign Assistance Revitalization and Accountability Act of 2009.

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INTRODUCTION U.S. foreign assistance is carried out by the State Department, the U.S. Agency for International Development (USAID), the Department of Defense (DOD) and several other federal government agencies. Presidential initiatives, such as the Leadership and Investment in Fighting an Epidemic (LIFE) Initiative in the Clinton Administration and the Millennium Challenge Corporation (MCC) and President‘s Emergency Plan for AIDS Relief (PEPFAR) in the Bush Administration, have expanded foreign assistance outside the traditional foreign aid agencies. Additionally, the Department of Defense has participated in an expanding amount of aid activities, both military and non-military, since the wars in Iraq and Afghanistan began. In 2007 (the most recent year for which complete data are available), about 60% of U.S. foreign assistance was disbursed by the Department of Defense, 23% by USAID, and 7% by the Department of State (see Table 1, below). More than 20 other U.S. government agencies are responsible for the remaining 10% of foreign aid spending. There is no overarching mechanism in place to coordinate or evaluate the broad range of foreign assistance activities. Nor is there consensus about the need for better coordination, though congressional interest in the issue appears to be increasing.1 Provisions addressing agency coordination and structure are included in key foreign assistance reform proposals pending before the 111th Congress, including H.R. 2410, the Foreign Relations Authorization Act for Fiscal Years 2010 and 2011; H.R. 2139, the Initiating Foreign Assistance Reform Act of 2009; and S. 1524, the Foreign Assistance Revitalization and Accountability Act of 2009. Furthermore, Secretary of State Hillary Clinton testified at her confirmation hearing that her goal in regard to foreign assistance reform would be to ― maximize coordination, minimize redundancy and make the case for increased resources.‖2

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This chapter discusses the many agencies involved with U.S. foreign assistance, the mechanisms currently in place to coordinate foreign aid programs, particularly those related to development assistance, and agency coordination issues that Congress may consider as part of foreign assistance reform.

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A NOTE ABOUT DEFINING FOREIGN AID Some disparities in foreign aid statistics are caused by the various ways that foreign aid is commonly defined. The Foreign Assistance Act of 1961 (FAA), Section 634, defines foreign assistance as ― any tangible or intangible item provided by the United States Government to a foreign country or international organization under this or any other Act, including but not limited to any training, service, or technical advice, any item of real, personal or mixed property, and agricultural commodity‖ and clarifies that this ― includes, but is not limited to, foreign assistance provided by means of gift, loan, sale, credit, or guarantee.‖ This definition is used by USAID in preparing the ― Greenbook,‖ the database of annual U.S. foreign assistance obligations. This definition also aligns closely, though not exactly, with the ― foreign operations‖ activities funded through annual State-Foreign Operations Appropriations legislation. Many aid experts, however, feel that this definition is misleading because it includes funding for things such as the Export-Import Bank, the Overseas Private Investment Corporation, and certain agricultural commodity programs that are primarily intended to benefit U.S. commercial interests. Another common and much narrower definition used by the Organization for Economic Cooperation and Development (OECD) to track Official Development Assistance (ODA) is ― Grants or loans to developing countries which are undertaken by the official sector with promotion of economic development and welfare as the main objective and at concessional financial terms (having a grant element of at least 25 per cent). In addition to financial flows, technical co-operation is included in aid. Grants, loans and credits for military purposes are excluded.‖ The U.S. and most other donor countries use this definition when reporting annual aid activities to the OECD. However, critics of this definition claim that, by excluding military assistance in particular, ODA greatly underrepresents U.S. foreign assistance activities. ODA also excludes aid to developed countries, such as Russia, Israel, and Ireland. The period and stage of reporting may also shape assistance statistics. For example, ODA is reported by calendar year (starting January 1) while the Greenbook figures are reported by fiscal year (starting October 1). Similarly, many sources report aid data based on the level appropriated, which may vary considerably from Greenbook data, which reports aid when it is obligated, and ODA, which focuses on the point of disbursement. For this chapter, CRS uses data from the USAID Foreign Assistance Database based on the FAA definition of foreign assistance and disbursements by fiscal year, unless otherwise noted. Readers are advised that both aid levels and the agencies involved in aid activities would be different if based on ODA or other definitions of foreign aid.

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RECENT TRENDS IN FOREIGN ASSISTANCE The Foreign Assistance Act of 1961 (FAA), as amended, authorized the consolidation of most foreign assistance programs under a new agency that would become the U.S. Agency for International Development (USAID). It also called for the use of domestic agency expertise in foreign aid, stating that ― in such fields as education, health, housing, or agriculture, the facilities and resources of other Federal agencies shall be utilized when such facilities are particularly or uniquely suitable for technical assistance, are not competitive with private enterprise, and can be made available without interfering unduly with domestic programs. ‖3 The need for coordination of these activities was recognized by the FAA‘s drafters, who included a provision tasking the Department of State‘s Chief of Mission in each country with coordinating these functions among representatives of the United States Government.4 The FAA states that ― [n]othing in this Act shall infringe upon the powers or functions of the Secretary of State‖5 and specifies that the Secretary of State ― shall be responsible for the continuous supervision and general direction of economic assistance, military assistance, and military education and training programs....‖6 Intervening decades, however, have given rise to a range of foreign aid programs and activities that fall outside the scope of State Department/USAID authority. The Millennium Challenge Corporation and the Peace Corps are both independent aid agencies, and many other federal agencies primarily focused on domestic issues provide foreign assistance as well. Some examples include the Department of Agriculture‘s (USDA) technical assistance overseas on food safety and inspection; the Department of the Interior‘s Fish and Wildlife Service multinational species conservation assistance; and the Department of Health and Human Services‘ Center for Disease Control‘s (CDC) activities to fight HIV/AIDS, influenza, tuberculosis, and malaria around the world.

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Table 1. Disbursement of U.S. Foreign Assistance by Select Agencies, FY2001-FY2007 (in thousands of current US$) U.S. Agencies USAID State Dept Defense Dept Treasury Dept Agriculture Dept Dept of HHS Peace Corps Energy Dept MCC Other Total

FY2001

FY2002

FY2003

FY2004

FY2005

FY2006

FY2007

7,326,658 1,666,290 4,528,354 1,146,455

9,315,556 2,957,187 4,931,714 1,203,693

10,375,275 2,697,370 7,459,848 452,327

10,855,438 2,881,177 7,632,186 2,692,431

11,558,449 3,746,360 12,586,150 1,248,320

11,794,281 2,762,906 20,403,801 1,121,356

10,685,760 3,362,449 27,371,694 1,458,753

118,799

146,673

654,535

579,866

297,159

403,884

232,362

96,253 269,875 — — 220,715 15,373,399

396,311 273,665 — — 395,728 19,620,527

604,852 294,885 298,959 — 442,026 23,280,077

957,330 308,856 400,820 4,283 427,344 26,739,730

1,775,694 309,735 783,434 47,418 458,165 32,810,885

1,397,561 287,535 648,843 96,148 440,056 39,356,370

616,298 255,504 1,180,623 220,859 441,722 45,826,024

Source: USAID Foreign Assistance Database, May 19, 2009. Note: Disbursement of funds often takes place a year or more after such funds are appropriated. For example, the sharp increases in DOD disbursements reported for FY2005-FY2007 reflect large appropriations for the Iraq Relief and Reconstruction Fund in FY2004 and, subsequently, for the Iraq Security Forces Fund (ISFF). ― Other‖ includes all the other agencies reporting foreign assistance disbursement. For a complete list of agencies for FY2007, see Appendix A.

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Two key trends in foreign assistance in recent years have drawn attention to and renewed concerns about the fragmentation of aid and the possible need for better coordination. First, total U.S. foreign assistance spending across appropriations bills has grown considerably in current dollars since the September 11, 2001 terrorist attacks, from just over $15 billion in FY2001 to more than $45 billion in FY2007, including supplementals (Table 1). Second, it appears that the number of federal agencies playing a role in foreign assistance is growing. While some experts note that aid has always been fragmented, with domestic agencies moving in and out of the foreign assistance arena from year to year as the need for their expertise arises in the course of U.S. foreign relations and world events,7 there does appear to be an increase in agencies reporting aid expenditures over the last decade.8 For a complete list of foreign assistance disbursements reported by U.S. government agencies from FY2001 to FY2007, see Appendix A. Disbursement levels for almost all the primary agencies implementing foreign assistance rose, though sometimes erratically, between FY2001 and FY2007 (Table 1). Growth rates between agencies varied considerably, however, reflecting shifts in aid composition. DOD aid disbursement levels increased more than 500% during this time, to more than $27 billion, with much of this growth reflecting military assistance to Iraq and Afghanistan, as well as humanitarian disaster assistance in response to the December 2004 tsunami. The Department of Health and Human Services (HHS) also took on a larger role in foreign assistance, largely due to PEPFAR and responses to outbreaks of avian influenza, extremely drug resistant tuberculosis, and severe acute respiratory syndrome (SARS). HHS disbursement levels rose from $96 million to $1.77 billion (a 1,744% increase) between FY2001 and FY2005, and while they have declined from their FY2005 peak, the FY2007 level of $616 million is still a 540% increase over the FY2001 level. In contrast, State and USAID disbursement rates have increased since FY2001 at a slower rate than total foreign assistance (102% and 46%, respectively) with FY2007 disbursements of $3.4 billion and $10.7 billion, respectively. The Peace Corps was the exception to the growth, with FY2007 disbursement levels falling below the FY2001 level after several years of small increases. In FY2001, nearly half of U.S. foreign assistance was disbursed by USAID (48%), while the Department of Defense (DOD) disbursed 29%, the Department of State (DOS) disbursed 11%, the Treasury disbursed 7% and the remaining 5% was spread among several other agencies. In FY2007, the portion of U.S. foreign assistance disbursed by USAID dropped to 23% and the DOS portion shrunk to 7%, while the DOD‘s portion doubled to 60%. Treasury disbursements fell to 3% and the share disbursed by all other agencies increased to 7%. The increasing portion of assistance disbursed by U.S. military entities since FY2002 can be largely attributed to dramatic increases in military and reconstruction assistance associated with the wars in Iraq and Afghanistan, and appears to be on the decline. The impact of these wars on foreign assistance levels is demonstrated by Figure 2, which compares the same FY2001 agency disbursement chart in Figure 1 with a chart showing FY2007 disbursements without aid to Iraq and Afghanistan. Excluding funding to these two countries more than doubles the share of aid disbursed by State, from 11% to 25%, and gives DOD the third largest share, after USAID and State. Furthermore, it is important to note that much of the funding disbursed by DOD is military assistance, for which State plays a key role in allocation.

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Source: USAID Foreign Assistance Database, May 19, 2009; CRS calculations

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Figure 1. Total Foreign Assistance Disbursements by Select Agencies, FY2001 and FY2007

Source: USAID Foreign Assistance Database, May 19, 2009; CRS calculations. Figure 2. Comparing Total FY2001 Disbursements to FY2007 Disbursements, Excluding Iraq and Afghanistan

While the trend towards greater DOD involvement in foreign assistance has raised widespread concerns, Figure 2 demonstrates that outside of spending in Iraq and Afghanistan, DOD‘s share of foreign aid disbursement in FY2007 (21%) was actually less than it was in FY2001(29%). Nevertheless, the 369% increase in DOD non-military assistance disbursements between FY2001 and FY2007 makes DOD a much bigger player in the development assistance field (DOD disbursed nearly 16% of total U.S. economic assistance in FY2007, compared to 6.4% in FY2001) (Figure 3). As Iraq Relief & Reconstruction Funds are no longer available, however, and the Iraq Security Forces Fund declining, DOD‘s portion of foreign assistance disbursements can be expected to decrease in FY2008 and FY2009.

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Source: USAID Foreign Assistance Database, May 19, 2009; CRS calculations Figure 3. Economic Assistance Disbursements by Agency, FY2001-FY2007 (in thousands of current U.S. $)

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U.S. AID-RELATED ACTIVITIES, BY AGENCY With so many entities administering foreign aid, often with different objectives, many aid experts have questioned whether these agencies are sometimes working at cross-purposes. Where agencies have similar objectives, there is concern that they may be duplicating each others‘ efforts. A 2009 report on Afghanistan, for example, described how 15 U.S. agencies were working in the Afghan energy sector, each with its own vision, objectives, and procurement strategies.9 Critics assert that the decentralized U.S. aid structure is inefficient and confusing, particularly for implementing partners and recipient countries. Each agency has its own unique rules and procedures that recipient countries must follow, creating a significant administrative burden on countries trying to comply with the requirements not only of multiple U.S. agencies, but often of multiple donor countries. In Mozambique, for example, a Ministry of Planning and Development staff member explained that ― [d]ifferent U.S. agencies have different rules which create problems and add to confusion. The problem of multiplicity occurs even within single sectors. PEPFAR, just one of three big U.S. presidential initiatives in Mozambique, is itself implemented by five U.S. agencies: the CDC, USAID, the Defense Department, the State Department, and the Peace Corps. Insiders recognize the faulty communication while outsiders don‘t know whom to consult.‖10 On the other hand, many observers believe that foreign aid programs operate most effectively when administered by agencies and staff with expertise related to the type of foreign assistance provided. The diversity of U.S. foreign assistance leads some to question whether overarching coordination is necessary, or even desirable—why, for example, should programs to train law enforcement officers be coordinated with programs to support endangered species research? To centralize authority over these activities, some argue, would

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take authority away from those who best understand them. Some experts maintain that aid effectiveness has not yet been sufficiently studied to determine whether administering aid through multiple domestic agencies with sector-specific expertise is more or less effective than through a consolidated aid agency. Following is a discussion of the general types of foreign assistance that each agency provides, as well as how they relate to each other. For more information about specific foreign assistance programs and accounts, see CRS Report R40213, Foreign Aid: An Introduction to U.S. Programs and Policy, by Curt Tarnoff and Marian Leonardo Lawson.

USAID

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USAID is the primary agency tasked with implementing long-term development assistance programs intended to create sustainable economic development and improve government and non-governmental capacity to meet the basic needs of their population. USAID administers most child health and survival programs, basic education and literacy programs, and micro-enterprise programs, as well as democracy promotion and post-conflict stabilization activities. The agency plays a leading role in disaster relief and recovery operations, together with State and DOD, and often implements programs that are funded or directed through other agencies, such as HIV/AIDS programs using funds appropriated to the State Department and P.L. 480 food assistance appropriated through the Agriculture Appropriations bill. USAID also implements a large portion of strategic economic assistance, such as the Economic Support Fund, while the State Department maintains policy control, deciding the funding levels for various countries. Strategic economic assistance is often used for development projects, but motivated more by foreign policy objectives than by development objectives.

Department of State The Department of State‘s foreign assistance activities focus on refugee assistance, democracy promotion, post-conflict stabilization and reconstruction, international narcotics control and law enforcement, voluntary contributions to multilateral aid organizations, and supporting U.S. foreign policy objectives through economic assistance to strategic allies. The State Department has policy control over programs that are largely or entirely implemented by other agencies. As noted earlier, State allocates strategic economic assistance, which is primarily implemented by USAID, and State allocates military assistance implemented by the Department of Defense. State‘s policy authority is intended to ensure that foreign assistance programs are aligned with U.S. foreign policy priorities while utilizing the technical and operational resources of other agencies for implementation. As a result, the State Department has some authority over much of the foreign assistance funding disbursed by other agencies, but the coordination implications of this authority are hard to measure.

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Department of Defense The DOD provides foreign assistance largely through the security assistance accounts, which provide money for weapons and equipment purchases, training for foreign security forces, and support for international peacekeeping operations. Though State allocates funds for these programs and plays a role in selecting recipients, in consultation with DOD, the weapons and training programs are implemented by DOD‘s Defense Security Cooperation Agency. DOD also provides humanitarian and economic assistance, including health care, reconstruction, food aid, counterdrug activities and other forms of aid, generally in conjunction with military operations, as a means of establishing local support or meeting humanitarian needs in the event that the military is the first responder in a crisis situation. In addition, using funds appropriated through the Iraq Reconstruction and Rehabilitation Fund (IRRF) in FY2004, and subsequent security assistance accounts for Iraq and Afghanistan, the U.S. military has provided a wide range of assistance in these countries, from building schools to improving water sanitation. This type of DOD assistance activity, however, can be expected to decline now that IRRF funds are spent and security assistance funds for Iraq and Afghanistan are in decline. For a more detailed look at DOD foreign assistance activities, see CRS Report RL34639, The Department of Defense Role in Foreign Assistance: Background, Major Issues, and Options for Congress, coordinated by Nina M. Serafino.

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Department of Health and Human Services The Department of Health and Human Services (HHS) provides international assistance related to disease control, global health, and research and training through the Centers for Disease Control and National Institutes of Health, as well as refugee assistance. The portion of foreign assistance disbursed by HHS has expanded significantly in recent years with implementation of PEPFAR, programs to eradicate tuberculosis and malaria, and activities aimed at responding to and containing disease outbreaks, such as severe acute respiratory syndrome (SARS), avian influenza, and extremely drug-resistant tuberculosis. HHS not only implements PEPFAR programs funded through State, together with USAID, but also funds some PEPFAR and other international health activities through the Departments‘ own appropriations. HHS also implements global health research and surveillance programs using its own appropriated funds.

Department of Agriculture The Department of Agriculture funds emergency and development food aid programs, which USAID administers. This includes commodities donated for overseas school food programs (the P.L. 480 Food for Peace program) and maternal, child and infant nutrition programs through the Dole-McGovern Food for Education Act. Additionally, USDA provides food safety and inspection assistance to foreign governments. For more information on food assistance, see CRS Report RL33553, Agricultural Export and Food Aid Programs, by Charles E. Hanrahan.

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Department of the Treasury Treasury is the lead agency on U.S. contributions to multilateral development organizations, such as the World Bank, International Monetary Fund, and regional development banks. These contributions are policy driven and voluntary, in contrast with the assessed contributions to international organizations paid for through the State Department. The programs and projects funded by these contributions, together with those of other donor nations, focus on long-term development, much like USAID and MCC activities. Treasury also provides technical assistance to developing countries on the implementation of major economic reforms and debt relief.

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Millennium Challenge Corporation The Millennium Challenge Corporation (MCC), a Bush Administration initiative established in 2004, is designed to provide targeted aid to promote economic growth and poverty alleviation in select countries that have demonstrated good governance and a capacity to use aid effectively. The projects MCC supports are similar to the type of development activities that USAID supports, though MCC tends to focus more on infrastructure improvements. MCC and USAID implementation processes and objectives, however, are quite different. MCC funds large grants, called compacts, based on partner government performance indicators related to ruling justly, investing in people and fostering economic freedom. Host governments play the lead role in designing and implementing the compact agreement, with MCC support, to ensure that projects are aligned with host country priorities. USAID programs, in contrast, are generally implemented by U.S. contractors, sometimes with little direct host government participation. However, USAID implements MCC‘s ― threshold‖ program for countries that do not yet qualify for compacts. For more on the MCC, see CRS Report RL32427, Millennium Challenge Corporation, by Curt Tarnoff.

Peace Corps The Peace Corps, established in 1961, sends American volunteers into developing countries for a wide range of community-based projects. Peace Corps volunteers promote education and economic development, improve access to health care, restore the environment, and increase agricultural productivity. While Peace Corps projects often have much in common with USAID development projects, and are occasionally supported by USAID grants, the Peace Corps has unique objectives related to promoting cross-cultural understanding and goodwill through personal contact with volunteers. For more on the Peace Corps, see CRS Report RS21168, The Peace Corps: Current Issues, by Curt Tarnoff.

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Other Departments and Agencies

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Many other federal departments and agencies disburse funds for or administer some foreign assistance activities related to the expertise housed within that agency. In 2007, for example, the Environmental Protection Agency provided technical assistance for international environmental management and technology programs, while the Department of Interior participated in the Multinational Species Conservation Fund through the U.S. Fish and Wildlife Service. The Trade and Development Agency is tasked with economic development that advances U.S. commercial interests in developing and middle-income countries. The Department of Energy assists foreign states with nuclear non-proliferation efforts and participates in international energy conservation and clean energy partnerships, while the Department of Labor sponsors foreign programs designed to reduce the prevalence of child labor and programs to promote HIV/AIDS awareness through the workplace. The Department of Justice provides training on identity theft and cybercrime to foreign law enforcement personnel. The African Development Foundation and Inter-American Foundation provide small grants to community organizations and business enterprises that benefit underserved communities in their respective regions. The Export-Import Bank issues loan guarantees and insurance to commercial banks that make trade credits available to American exporters, the Department of Commerce provides technical assistance on commercial law development, the U.S. Institute of Peace promotes international peace through educational programs, conferences, and workshops, professional training, applied research, and dialogue facilitation in the United States and abroad, and the Department of Homeland Security provides technical assistance related to customs enforcement. Appendix A lists all agencies reporting foreign assistance disbursements between FY2001 and FY2007. A graphic depiction of the general types of assistance carried out by key agencies, and where they overlap, is attached as Appendix B.

EXISTING COORDINATION MECHANISMS Most foreign assistance funding, with the notable exception of Department of Agriculture food assistance and certain DOD accounts, is appropriated through the State-Foreign Operations Appropriations bill.11 While the common funding mechanism implies some level of legislative coordination, the coordination of policy and implementation in the field remains a different matter. No single overarching mechanism coordinates the whole range of U.S. foreign assistance policies and programs, but several less comprehensive systems of coordination exist among various departments and agencies, such as National Security Council policy coordination committees, new information sharing technology systems, and inter-agency staff exchanges. Furthermore, the government has demonstrated a capacity to establish extensive coordination mechanisms in situations where aid coordination issues are a high priority, such as during reconstruction activities in Iraq. This section reviews some of the coordination mechanisms that currently exist.

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National Security Council The policy coordination committees (PCC) of the National Security Council (NSC) are key to government policy coordination. During the Bush Administration, 17 such committees developed, implemented and managed cross-agency issues related to national security on a day-to-day basis, including an International Development and Humanitarian Assistance PCC. The Obama Administration has renamed this committee the ― Interagency Policy Committee for Development (Development IPC).‖ It is currently co-chaired by NSC Director Gayle Smith and USAID Acting Administrator Alonzo Fulgham, and the agencies are represented at the Assistant Secretary-level or equivalent.12 Under the Bush Administration, there were several informal Sub-PCCs within the Development PCC that met to focus on issues such as aid effectiveness, economic growth, investing in people, public-private partnerships, and public diplomacy. These Sub-PCCs were not prescribed by a National Security Directive, but were created as the need arose. For example, the Investing in People Sub-PCC began meeting in May 2008 for the purpose of improving collaboration of U.S. government agencies on water and health issues. A CivilianMilitary Cooperation Sub-PCC was established in October 2008 to address policy issues relevant to the coordination of foreign assistance activities among the Department of Defense and civilian agencies and departments. Some of these subcommittees are reportedly still meeting, and the Obama Administration has yet to determine if new subcommittees will be established. Participants at PCC/IPC meetings have suggested that the lack of overarching authority limits effective coordination. Each agency or department has an interest in protecting its own authority and funding, and none has the authority to impose requirements on the other. While disputes may be referred to higher levels within the NSC, observers have noted that officials tend to resolve disagreements at the lowest possible level to avoid the possibility of being overruled by their superiors or creating new conflicts through the involvement of higher authorities. As a result, the process relies on consensus decision-making that may emphasize more peripheral issues on which everyone can agree.

Director of Foreign Assistance and the F Process In 2006, the Bush Administration sought to increase coherence of foreign aid programs by creating a new State Department position, Director of Foreign Assistance (DFA), and the corresponding F Bureau. The restructuring was part of Secretary Rice‘s transformational development initiative that included a Strategic Framework for Foreign Assistance to align U.S. aid programs with American strategic objectives, transform recipient countries‘ economic development paths, and graduate countries from development aid. Until January 2009, when a separate acting DFA was appointed, the DFA served concurrently as the Administrator of USAID. Charged with coordinating U.S. assistance programs, the DFA has authority over most State and USAID programs and is tasked with providing guidance to other agencies that manage foreign aid activities. Nevertheless, major foreign aid programs, such as the Millennium Challenge Corporation and the Office of the Global AIDS Coordinator (OGAC), remain outside of the DFA‘s authority.13

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With the increasing number of domestic policy agencies involved in foreign aid programs, as well as the Department of Defense‘s growing role in reconstruction and stabilization work, many analysts believe the DFA controls too small a portion of foreign aid to effectively coordinate the development assistance programs, much less bring cohesion to a broader range of U.S. foreign aid activities. State Department and USAID disbursements represent only about 30% of total U.S. foreign assistance in 2007 and 64% of economic (nonmilitary) aid. Since the creation of the DFA position, the relevant FY2008, FY2009 and FY2010 budget requests were developed jointly by State Department and USAID teams in an attempt to provide better coordination and coherence at the program level. This coordination has been cited as a step toward developing and implementing an integrated overall foreign assistance budget. Further coordination emanates from the F Bureau‘s guidance on operational plans, which ― requires the State Department and USAID staff to describe how the programs of all other U.S. government agencies in the country are helping address, at the program area level, the goals in F‘s foreign assistance framework.‖14 The information sharing, however, may be hindered by a perception among officials from some other agencies involved with disbursing foreign aid that supporting the coordination effort through the F process creates an additional layer of work that is not regarded as a priority within their own agencies.15 Furthermore, some State and USAID officials in the field reported feeling that the F structure put more emphasis on decision making in Washington and reduced their role in policy formulation and priority setting.

FACTS /FACTS Info To facilitate the F Process, State and the F Bureau developed a new data information system, the Foreign Assistance Coordination and Tracking System (FACTS) in December 2006. FACTS is a database to collect foreign assistance and planning data. Although the intent was to include plans for implementing current-year budgets and planning and reporting data for all U.S. departments and agencies implementing foreign assistance programs, only programs under the authority of DFA are currently detailed in FACTS.16 A second system, FACTS Info, was deployed in October 2008 to aggregate, analyze, and report data on U.S. foreign assistance programs. Currently, only State and USAID use the system. The plan for FACTS Info to include comprehensive data from every agency involved in foreign assistance in any given country has reportedly been difficult to implement, since agencies each use different procedures for allocating resources and measuring results.17 In an effort to negotiate for cooperation, DFA has asked other agencies providing foreign assistance to submit their assistance data from prior years for entry into the FACTS database, in exchange for having access to FACTS.18 This move to align past resources to a country from different agencies is intended as a step towards aligning future activities and expenditures, as well as creating more comprehensive historic data on U.S. foreign assistance activities by country. Country Assistance Strategies The F Bureau has implemented a Country Assistance Strategy (CAS) pilot program to coordinate assistance at the country level. The CAS concept began in August 2007 to improve the long-term strategic planning process for State and USAID programs, but has since been

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broadened to reflect a ― whole of government‖ approach. All U.S. agencies providing assistance in the 10 countries in the pilot program19 are to work together to develop a 15 page-or-less CAS document that summarizes the specific U.S. foreign assistance goals in their respective countries, identifying priorities for a five-year period. As of January 2009, draft strategies for all ten pilot countries had been submitted to the F Bureau. As of July 2009, nine of them were approved and one remained under review. According to the Department of State, when all are approved it will conduct an after action review of lessons learned and determine best practices for ensuring future country level assistance coordination. No time frame has been established for implementing the CAS worldwide.20

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SEED and FSA Coordinators Both the Freedom Support Act (FSA) and Support for Eastern European Democracy (SEED) regional aid programs (combined in 2009 to create the Assistance for Europe, Eurasia and Central Asia account, or AEECA) were managed by a respective coordinator, as mandated by Congress in each program‘s authorizing legislation. Both are now under the authority of the Office of the Coordinator of U.S. Assistance to Europe and Eurasia,21 which is functioning as part of the F Bureau. The Coordinator is an example of a regionally-focused, cross-agency coordination authority, primarily tasked with ensuring that the work of dozens of agencies implementing programs in eastern Europe and the former Soviet states is consistent with U.S. foreign policy objectives. The Office of the Coordinator has been lauded for establishing credible economic and democratic reform measures, linking performance measurement data with the budget planning process, and reporting clear and timely data on U.S. assistance programs in the region.22 The coordinator has also been credited with resolving differences between different agencies working in the region using FSA and SEED funds, but has no authority in regard to significant agency aid activities funded outside of these accounts. Observers have noted that activities falling under the Coordinator‘s authority seemed to merge more easily than others into the F Process, and suggested that similar intermediate coordinators be established in other regions receiving substantial U.S. assistance.23 Critics, however, may view such a proposal as a new layer of bureaucracy that does little to address underlying structural incoherence.

Office of the Global AIDS Coordinator The Office of the Global Aids Coordinator (OGAC) coordinates and oversees the U.S. global response to HIV/AIDS, and could be a model for sector-based cross-agency coordination. The U.S. Global AIDS Coordinator reports directly to the Secretary of State. Among the coordinator‘s responsibilities are ensuring program and policy coordination among the relevant government agencies and departments and nongovernmental organizations, as well as coordinating with other countries and international organizations to avoid duplication of effort. The coordinator directly approves all activities of the United

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States relating to combating HIV/AIDS in the 15 PEPFAR focus countries, whether they are carried out by State, USAID, DOD, or CDC.

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Coordinator for Reconstruction and Stabilization (S/CRS) The Office of the Coordinator for Reconstruction and Stabilization (S/CRS) was created in 2004 within the State Department to improve the United States‘ ability to respond to crises involving failed or failing states and complex emergencies. Its creation was a means to establish more routine coordination of the situations previously addressed sporadically by the NSC Development PCC. The S/CRS mission is to lead, coordinate and institutionalize U.S. Government civilian capacity to prevent or prepare for post-conflict situations and help stabilize and reconstruct societies in transition from conflict to peace, democracy, and a market economy. The office facilitates the implementation of National Security Presidential Directive 44, issued December 7, 2005, which empowers the Secretary of State to lead and coordinate the U.S. government response in post-conflict environments across all involved agencies, and to work with the Secretary of Defense to harmonize civilian and military activities.24 Some experts claim that S/CRS has suffered from insufficient resources and support, has relied on borrowed personnel (112 interagency staff, as of January 2009), and has become dependent on DOD funding through a special authorization originating in the FY2006 National Defense Authorization Act.25 The fact that S/CRS was formally authorized through the FY2009 Defense Authorization Act has raised concerns about overemphasizing the military‘s role in post-conflict reconstruction. The office has been cited as a prime example of the imbalance of resources between the Defense and Foreign Affairs budget that some analysts believe erodes the authority of civilian aid entities and undermines their ability to lead and coordinate assistance activities government-wide.26 The Obama Administration has requested $323 million for the State Department in FY2010 to be used for S/CRS‘s Civilian Stabilization Initiative, potentially addressing these concerns. For more on S/CRS, see CRS Report RL32862, Peacekeeping/Stabilization and Conflict Transitions: Background and Congressional Action on the Civilian Response/Reserve Corps and other Civilian Stabilization and Reconstruction Capabilities, by Nina M. Serafino.

State/USAID Coordination with the Department of Defense In recent years, State and USAID have taken steps to improve coordination with the Department of Defense. In 2005, USAID created an Office of Military Affairs. As part of this formal structure, military liaison officers from each of the geographic Combatant Commands and the Special Operations Command are assigned to USAID, and senior USAID development officials have been assigned to the Commands, as well as to the Pentagon. While some observers have expressed concern about a perceived militarization of foreign aid, which could present security risks for aid workers in the field as well as alter perception of U.S. aid activities, others argue that this coordination mechanism ensures that development officials have a voice in assistance activities even when security or logistics challenges limit

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the role of civilian aid agencies. For more background information on the military role in foreign assistance, see CRS Report RL34639, The Department of Defense Role in Foreign Assistance: Background, Major Issues, and Options for Congress, coordinated by Nina M. Serafino. Congress has also created its own mechanism for coordination between State and DOD, authorizing the Secretary of Defense, with the concurrence of the Secretary of State, to train and equip foreign military and foreign maritime security forces in Section 1206 of the National Defense Authorization Act (NDAA) for Fiscal Year 2006. DOD has used this authority primarily to provide counterterrorism support. Section 1206 requires that State and DOD formulate programs together and coordinate their implementation. The resulting joint review process could serve as a model for other assistance programs and potentially other agencies. Programs are developed with the approval of both DOD and Department of State officials, with input from U.S. embassies and the military combatant commands. Both parties ―m ust approve each program explicitly in writing‖27 before the proposal is submitted to DOD and State Department staff in Washington, D.C. for their concurrence and, ultimately, the approval of the Secretaries of Defense and State.28

AID COORDINATION IN OTHER COUNTRIES

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More than 20 nations provided official development assistance (ODA) in 2007, according to the Organization for Economic Cooperation and Development (OECD), with a total value of more than $117 billion.29 The United States accounts for about 18.5% of that total. While the United States is the largest single donor in terms of value, many nations contribute a higher percentage of their gross domestic income to foreign aid, and most face similar public and political pressures as do American policymakers.

United Kingdom The United Kingdom is a major donor nation that has created the equivalent of a cabinetlevel international aid agency. The UK Department for International Development (DFID) was created in 1997 by the incoming Labour government, and is believed by some to be the most efficient and effective aid agency in the world.30 DFID encompasses all major bilateral and multilateral aid programs and unifies policy and implementation authority. One example of DFID‘s broad authority over development policy is that the Department is consulted on the approval of arms export license applications before they are issued.31 Some critics believe that the DFID model would not be appropriate for U.S. development programs. One reason cited is that DFID programs must have poverty alleviation as their primary objective,32 reflecting a singularity of purpose that is incongruent with the multitude of objectives driving U.S. foreign aid programs. Admirers of this model, however, say it has elevated the status and power of development programs within the UK government, leading to improved recruitment of high-quality personnel. One analyst has pointed out that since the creation of DFID, more new government management recruits in the U.K. apply to the development agency than to the Foreign Office or the Treasury, which were the prior

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favorites.33 This example may be of particular interest to U.S. policymakers with an interest in rebuilding the waning manpower of USAID as a component of foreign aid reform. Another notable aspect of the U.K. structural reform is the decreased centralization of aid management since the DFID‘s creation in 1997, an evolution that has given field offices expanded authority and, some say, enhanced partnering and stronger relationships with host countries.34

Germany Germany also has a cabinet-level Ministry of Economic Cooperation and Development that is independent of the Federal Foreign Office. The BMZ, as it is called, is responsible only for policy development, not implementation. Implementation is carried out through two separate organizations, one that manages capitol investments and program loans and another that manages grants and technical assistance. Like the U.S. State Department, Germany‘s Federal Foreign Office, rather than its Development Ministry, is in charge of humanitarian assistance.35

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The Netherlands and Denmark Both the Netherlands and Denmark use a structure in which foreign assistance programs are fully integrated into their respective ministries of foreign affairs. The Netherlands coordinates aid programs through a Coordinating Council for International Affairs and established a Policy Coherence Unit in 2002, tasked with contributing to policy formation in non-development fields and addressing cases of policy incoherence. A noted example of the Unit‘s work is a Memorandum on Coherence Between Agricultural and Development Policy signed in 2002 in conjunction with the mid-year review of the European Union‘s agricultural policy negotiations with the World Trade Organization.36 The Netherlands also established a Homogeneous Budget for International Cooperation in 1995, to ensure that all foreign assistance, including expenditures such as debt relief and domestic refugee costs, are part of the same planning framework.

France and Japan France and Japan both have highly decentralized foreign assistance structures in which policy decisions are made by a variety of ministers with responsibility for foreign affairs and finance, and largely administered by a number of sub-cabinet agencies, many of which have their own aid programs. However, in 1998 France created an Inter-Ministerial Committee for International Cooperation and Development (CICID) to establish objectives and instruments for France‘s international development programs and ensure coherence of geographic and sectoral priorities. CICID usually meets annually, with meetings of staff and senior officials more frequent.37 In Japan, coordination is managed through a Council of Overseas Economic Cooperation which holds ministerial-level meetings of the ministries involved in international

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development, supplemented by inter-ministerial meetings of development assistance directors and technical experts.38

Canada The Canadian model uses two sub-cabinet level agencies to administer bilateral assistance. The Canadian International Development Agency is responsible for project and program loans and grants, while the much smaller International Development Research Center is responsible for research and technical assistance. This structure is notable for protecting the funding and status of development-related research. There is no formal interagency coordination structure.

SELECTED COORDINATION OPTIONS39 In the decades since the Foreign Assistance Act of 1961 became law, Congress, various Administrations, and a number of Commissions have reviewed the foreign aid programs and proposed ways to improve the coordination of U.S. foreign assistance, usually by consolidating or otherwise restructuring various agencies.40 The following options to improve the coherency and coordination of U.S. foreign aid have been at the center of recent discussions on foreign aid reform. Some would require legislative action and are components of broader reform legislation, while others could be achieved in the Executive Branch.

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Enhance Coordination as Part of a National Foreign Assistance Strategy Many analysts believe that U.S. foreign assistance activities cannot be effectively coordinated or consolidated without a modern national foreign assistance strategy in place to define the objectives of that coordinated effort and every agency‘s role in achieving those objectives. The lack of a national strategy has been cited by many aid professionals as enabling the proliferation of incoherent development policies and aid programs. Several bills pending before Congress, addressed in the Legislative Activity section below, direct the Administration to create such a strategy as a first step towards foreign assistance reform. In addition, Secretary of State Hillary Clinton announced that the State Department will conduct a Quadrennial Diplomacy and Development Review (QDDR) as a means of developing clear national objectives relating to diplomacy and development, and emphasized the importance of inter-agency coordination to that effort.41

Empower One Entity to Coordinate All U.S. Foreign Aid Foreign aid experts most often suggest the adoption of a single foreign assistance entity to improve foreign aid coordination. Some development experts believe that a single lead entity coordinating all U.S. foreign assistance could improve the effectiveness of American

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foreign aid and result in budget savings through improved efficiency. Single agency coordination could be accomplished in a number of ways, some requiring congressional action, others not. The President could designate USAID as the agency responsible for coordinating all foreign aid, which some development advocates believe would give development programs stronger standing alongside diplomacy and defense. Alternatively, he could vest this authority in the State Department, which some experts argue would ensure that the Secretary of State has all the tools of foreign policy at her disposal. With USAID still led by an Acting Administrator many months into the Obama Administration, and Secretary of State Hillary Clinton announcing a Quadrennial Diplomacy and Defense Review to cover all State and USAID programs, development advocates have expressed concern that the latter seems more likely. Congress could also establish a new cabinet-level foreign assistance or development department, as did the United Kingdom, to take this lead role. Key to the success of this approach, experts agree, is ensuring that whichever entity is chosen to lead has the authority to enforce coordination of all foreign assistance programs, or at least development assistance activities, across the federal government in the face of agency resistance. The lack of such authority and scope is often cited as one reason some observers believe the F Process has met limited success to date.

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Build on White House/NSC Structures with Department/Agency Representatives The idea of the President establishing a White House/NSC committee that would represent all primary departments and agencies that conduct aid activities has surfaced in recent years. Such a committee could have greater authority than the exiting NSC IPC. The first order of business could be to pull together the information on what aid is being provided by which departments and agencies and create the national strategy previously discussed. Maintaining a standing committee of this type, some believe, would enable better interagency communication and regular review of policy priorities. Former USAID Administrator Brian McPherson suggests that such a committee, under the direction of the USAID Administrator, conduct a quadrennial international development review similar to the Quadrennial Defense Review of the Department of Defense.42 Congress could statutorily mandate such a review, as well as require other mechanisms of coordination. Section 302 of H.R. 2410, the Foreign Relations Authorization Act for Fiscal Years 2010 and 2011 approved by the House of Representatives on June 10, 2009, calls for a quadrennial review of diplomacy and development programs. In addition, Secretary of State Clinton recently announced her intent to institute such a quadrennial review.

Separate Strategic Assistance from Development Assistance The use of U.S. foreign aid both as a diplomatic (strategic) tool and for development goes back to the Marshall Plan after World War II. Problems can arise, however, when there are conflicting U.S. objectives in a recipient country, or when aid is allocated based on strategic interests but is evaluated based on development achievements. Some experts believe that U.S.

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aid effectiveness cannot be adequately evaluated as long as the purpose of the aid has not been clearly identified. ― The problem of separating decisions on the allocation of aid by the Department of State and its implementation by USAID has often led critics of foreign aid to blame USAID for development failures (to the detriment of the reputation and morale of USAID) and, more broadly, to reach the mistaken conclusion that aid for development is generally ineffective.‖43 Observers have suggested that part of the success of the U.K‘s Department for International Development can be attributed to its singular focus on poverty reduction. A realignment that groups aid programs targeted primarily on long-term development objectives (MCC and most USAID programs, for example) under a separate authority from those primarily motivated by diplomatic and security priorities (which are often under the purview of State and/or DOD), proponents argue, could eliminate the need for some interagency coordination, provide clarity of purpose and authority, and facilitate accurate evaluation of program effectiveness. Furthermore, if use of aid for U.S. national security becomes more transparent, the American public may better understand where and why their tax dollars are being spent overseas. On the other hand, the line between strategic and development aid is often unclear. Assistance given to a key ally for strategic purposes, for example, may be spent on the same basic education or water sanitation project that traditional development assistance funds might support. Furthermore, some analysts believe that delinking development assistance from the security rationale that underlies most strategic assistance would lessen political support for development programs that have little domestic constituency yet remain essential to supporting broad diplomatic and strategic goals.

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Enhance Coordination and Authority at the Country Level While some experts argue that consolidating authority in Washington would lead to greater coordination and coherence of foreign assistance, others want to put more emphasis on coordination at the country level, giving more authority to Ambassadors, as apparently envisioned by the drafters of the FAA. The latter argue that an in-country U.S. official is in a better position than officials in Washington to know what development or strategic assistance is most needed and/or most effective in their host country. As a Senate Foreign Affairs Committee report noted, ― in every embassy visited, ambassadors leading a strong front office were seen as clearly indispensible to a coordinated aid program.‖ Furthermore, while ― in 19 of the 24 embassies visited, there did seem to be an adequate coordination mechanism with strong oversight by the Ambassador,‖ in embassies that had been without an Ambassador for more than a year, ― coordination efforts were much more fractious.‖44 Members of the Senate may wish to address aid coordination issues during the ambassadorial confirmation process to inquire whether it is a priority of mission leaders. Another approach to strengthening countylevel coordination is to support the existing CAS program by implementing a timeline for evaluation of the pilot project and presenting a plan for global deployment of the CAS.

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Require Whole of Government Reporting Although multiple reporting requirements are a reason some aid professionals cite for needing better coordination of assistance programs, one central reporting requirement could be an important step towards better coordination of aid. Most agencies involved in foreign assistance currently report their activities to USAID‘s Office of Economic Analysis and Data Services for inclusion in the Foreign Assistance Database, from which the annual Greenbook and OECD reports are generated. Agency participation is not required, however, and the detail and format with which agencies report their activities is inconsistent. Congress could mandate that all agencies report their foreign assistance activities, at a specified level of detail, to a central office, and further require that this information be made publically available. Such uniform reporting, and perhaps additional resources, could make the data more complete and available for congressional and public access more quickly (a two-year lag that currently exist with the Greenbook), and make it easier for agency staff in the field or headquarters to see whole-of-government activities in their region. Critics may argue that such a requirement simply adds more administrative burdens to overstretched agency staff. Others foresee that comprehensive and uniform agency reporting would reduce the number of individual information requests to which staff must respond.

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Require Inspector General Reports on All Aid Activities A common mechanism for program review has been suggested as a means of coordinating all U.S. foreign assistance. Noting that State does very little auditing of programs while the USAID Inspector General‘s (IG) office is a presence in most countries receiving U.S. aid, at least one expert has proposed that Congress require all foreign assistance, no matter what agency implements the program, be audited by the USAID IG. Similarly, S. 1524, the Foreign Assistance Revitalization and Accountability Act, proposes the creation of a new cross-agency evaluation entity for foreign assistance. This approach has been suggested by former USAID Administrator Andrew Natsios as a means of ensuring that all programs are evaluated in a comparable manner.45 A possible model for this type of broader Inspector General role is the Special Inspector General of Iraq Reconstruction (SIGIR), which has cross-agency jurisdiction to conduct both financial audits and program assessments of all U.S. activities in Iraq. Many observers have credited SIGIR reports for providing insight into the complex relationships between the wide range of U.S. activities in Iraq, and for identifying which programs have been successful and which have not. Critics of this approach, however, may assert that a cross-agency auditing requirement would increase bureaucracy, divert funds away from program implementation, and would not, by itself, lead to better coordination.

LEGISLATIVE ACTIVITY In the 111th Congress, foreign assistance reform proposals incorporating aid coordination provisions have been introduced in both the House and Senate.

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H.R. 2139, the Initiating Foreign Assistance Reform Act of 2009, was introduced by House Foreign Affairs Committee Chairman Berman on April 28, 2009. The legislation directs the President to develop and implement a National Strategy for Global Development, which, among other things, would ― define the role of United States Government departments and agencies in carrying out global development policies and programs, such as trade policies, debt relief, climate change, and other polices... and create a process to enhance the interagency coordination among such departments and agencies to ensure policy and program coherence and avoid duplication and counterproductive outcomes among such policies and programs.‖46 The bill also requires the Strategy to address coordination among U.S. aid entities and ―m ultilateral, bilateral, and international organizations, host country governments, and civil society organizations, carrying out similar policies and programs to reduce poverty and contribute to broad-based economic growth.‖47 H.R. 2410, the Foreign Relations Authorization Act, Fiscal Years 2010 and 2011, was introduced by Chairman Berman on May 14, 2009 and approved by the House on June 22. Among other things, the bill requires the President to establish a national strategy for U.S. diplomacy and development by December 2010, and conduct a Quadrennial Review of Diplomacy and Development (QRDD). The language on coordination in H.R. 2139 is mirrored in provisions of H.R. 2410 addressing key elements required of the QRDD.48 The idea of a quadrennial review has gained some momentum, and Secretary of State Hillary Clinton announced on July 10, 2009, that the State Department will conduct a Quadrennial Diplomacy and Development Review (QDDR) for the first time. Among other reasons Clinton cited for the review was ― to coordinate our work and to accelerate transitions from old ideas and outmoded programs.‖ S. 1524, The Foreign Assistance Revitalization and Accountability Act of 2009, was introduced by Senate Foreign Relations Committee Chairman John Kerry and Ranking Member Richard Lugar on July 28, 2009. Among other things, the legislation would establish an Independent Evaluation and Research Innovation Group for Foreign Assistance tasked with ― research and analysis aimed at identifying ways of improving coordination of foreign assistance programs carried out by Federal agencies, including ways of coordinating research and development conducted by such agencies.‖49

APPENDIX A. FOREIGN ASSISTANCE DISBURSEMENTS BY AGENCY, FY2001-FY2007 (IN THOUSANDS OF CURRENT U.S. $) Agency USAID Agriculture Energy HHS State Treasury MCC Peace Corps DOD Inst. Of Peace African Dev. Foundation

FY2001 7,326,658 118,799 — 96,253 1,666,290 1,146,455 — 269,875 4,528,354 — 2,617

FY2002 9,315,556 146,673 — 396,311 2,957,187 1,203,693 — 273,665 4,931,714 — 15,204

FY2003 10,375,275 654,535 298,959 604,852 2,697,370 452,327 — 294,885 7,459,848 — 14,189

FY2004 10,855,438 579,866 400,820 957,330 2,881,177 2,692,431 4,283 308,856 7,632,186 3,000 17,553

FY2005 11,558,449 297,159 783,434 1,775,694 3,746,360 1,248,320 47,418 309,735 12,586,150 5,000 19,196

FY2006 11,794,281 403,884 648,843 1,397,561 2,762,906 1,121,356 96,148 287,535 20,403,801 1,540 20,455

FY2007 10,685,760 232,362 1,180,623 616,298 3,362,449 1,458,753 220,859 255,504 27,371,694 500 22,641

Foreign Aid Reform: Agency Coordination Broadcast Board of Gov. Commerce Homeland Security Justice Labor Interior Transportation EPA Fed. Trade Comm. Inter-American Foundation Nat. Science Foundation Open World Leadership OPIC Trade & Dev. Agency Postal Service Total

105

—

—

—

—

—

—

1,032

— —

— —

10 —

6,927 626

6,915 583

10,572 —

12,595 721

— — 142,740 — — —

— 91,028 178,594 — — —

4,098 125,222 201,485 6,103 — —

350 100,899 188,199 7,185 — 164

176 90,898 186,722 — 21,825 —

665 80,006 214,098 — 15,345 —

1,793 78,183 215,732 370 25,793 —

8,736

13,378

11,120

13,274

15,871

20,120

20,099

10,250

13,259

13,110

14,142

11,639

8,690

9,074

4,165

9,020

13,880

8,120

13,760

13,264

— 52,206

— 75,246

— 52,811

— 66,172

18,625 66,955

— 55,302

— 53,190

— 15,373,399

— 19,620,527

— 23,280,077

733 26,739,730

— 32,810,885

— 39,356,370

— 45,826,024

Source: USAID Foreign Assistance Database, May 19, 2009.

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APPENDIX B. OVERLAPPING AGENCY FOREIGN ASSISTANCE ACTIVITIES

Source: CRS.

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Notes: The size of the circles is not proportional to each agency‘s share of foreign assistance disbursements, which changes significantly from year to year. An attempt was made to roughly show the average relative size of agencies‘ foreign aid activities over the last decade. Areas of overlapping agency jurisdiction in this chart can mean two things. They can indicate a joint effort in a particular sector, and/or unrelated agency activities within the same sector. An example of the former is food aid, which is funded through the Department of Agriculture but implemented by USAID. The HIV/AIDS overlap is an example of the latter, with multiple agencies disbursing PEPFAR funds through their own programs. Sometimes both types of overlap occur simultaneously, as with MCC and USAID. MCC implements compact agreements independent of USAID, but compacts generally fund long-term development projects similar to those carried out by USAID, and the MCC threshold program is implemented by USAID.

End Notes

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1

House Foreign Affairs Committee Chairman Howard Berman said he intends in 2009 to overhaul the Foreign Assistance Act of 1961, which is the basis for the current foreign aid structure (speech before the Modernizing Foreign Assistance Network, June 10, 2008); Senate Foreign Relations Committee Chairman John Kerry, in a May 21, 2009 speech at the Brookings Institution, said that he intends to introduce both a Foreign Affairs Authorization bill and a foreign aid reform bill in the 111th Congress. 2 Statement of Secretary of State Hillary Clinton at her confirmation hearing before the Senate Foreign Affairs Committee, January 13, 2009, as reported by CQ.com. 3 Foreign Assistance Act of 1961, Sec. 621, 22 U.S.C. 2381. 4 Foreign Assistance Act of 1961, Sec. 622(b). 5 Foreign Assistance Act of 1961, Sec. 622(a), 22 U.S.C. 2382. 6 Foreign Assistance Act of 1961, Sec. 622(c). 7 For n historic perspective on foreign aid coordination, see ―Iss ues and Options in the Coordination of U.S. Foreign Aid Policy,‖ Committee Print prepared for the Committee on Foreign Affairs, U.S. House of Representatives, by the Congressional Research Service, May 1979 (GPO 44-401). The report discusses fragmentation and proposals for centralization that are similar to those often discussed today. 8 According to the contractor that manages the U.S. Foreign Assistance Database, discrepancies in data collection methods and reporting practices make data prior to 2001 less complete and reliable than post-2001 data, so changes in agency numbers from year-to-year could reflect inconsistent reporting. Still, in FY2007, 24 departments and agencies reported disbursing foreign assistance, compared with 16 in FY2001. New agencies, such as the Department of Homeland Security (DHS) and the Millennium Challenge Corporation (MCC), account for some of this expansion. The rest is from long-standing domestic agencies that are newly or sporadically involved in international activities. Reports on foreign aid reform that cite much larger numbers of U.S. government entities involved in foreign aid generally count cabinet departments as well as all the relevant agencies and offices within those departments. 9 Smart Development in Practice, Field report from Afghanistan, Field Report, Oxfam, 2009, p. 7. 10 Smart Development in Practice, Field report from Mozambique, Field Report, Oxfam, 2009, p. 6. 11 The State-Foreign Operations bill funds all International Affairs (150) budget account activities, with the exception of food aid. Between FY1999 and FY2004, between 5% and 10% of foreign assistance disbursements reported by agencies originated outside of the 150 account. In FY2006, this number rose to 34%, and to 44% in FY2007, almost entirely due to sharp increases in Army disbursements through the 050 Defense account. An increase in HHS disbursements originating from the 550 health budget account is notable in these years as well, though dwarfed by the 050 increase. 12 From e-mail exchange with senior staff at the Bilateral and Multilateral Donors Division, Office of Development Partners (ODP/BMD), USAID, July 2009. 13 Though the DFA has no direct authority over the MCC, the USAID Administrator and the Secretary of State are member of the MCC‘s Board of Directors. 14 Foreign Aid Reform: Comprehensive Strategy, Interagency Coordination, and Operational Improvements Would Bolster Current Efforts, The Government Accountability Office, GAO-09-192, April 2009, p. 23. 15 Ibid. p. 32. Officials included those from the Departments of Commerce, Energy, Health and Human Services, and the Treasury. 16 Foreign Assistance: State Department Foreign Aid Information Systems Have Improved Management Practices but Do Not Follow Risk Management Best Practices, The Government Accountability Office (GAO-09-52R), November 21, 2008, p. 2.

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17

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Foreign Aid Reform: Comprehensive Strategy, Interagency Coordination, and Operational Improvements would Bolster Current Efforts, The Government Accounting Office (GAO-09-192, April 2009, pp.13and 23. 18 Interview with F Bureau officials, December 22, 2008. 19 Countries chosen for the pilot phase include Tanzania, Mozambique, Democratic Republic of the Congo, the Philippines, Armenia, Bosnia, Morocco, Nepal, Jamaica, and Honduras. The USAID Office of Middle East Programs is participating as well. These countries were chosen for geographical diversity, range of foreign assistance programs, and their the desire of mission officials to participate. 20 Foreign Aid Reform: Comprehensive Strategy, Interagency Coordination, and Operational Improvements would Bolster Current Efforts, The Government Accounting Office (GAO-09-192, April 2009, pp. 25-26; Author‘s correspondence with F Bureau staff, July 30, 2009. 21 The function of the two coordinator positions were combined in 2001, as detailed by a presidential Memorandum on the Charter for the Coordinator of United States Assistance to Europe and Eurasia, July 25, 2001. 22 See program assessment of the Support Eastern European Democracy/Freedom Support Act at http://www.whitehouse.gov/omb/expectmore/summary/10001109.2004.html (as of 12/5/2008). 23 Embassies Grapple to Guide Foreign Aid, A Report to Members of the Committee on Foreign Relations, United States Senate, November 16, 2007 (S.Prt. 110-22) , p. 5, 18. 24 See ―Frequent ly Asked Questions‖ about S/CRS at http://www.state.gov/s/crs/66427.htm. 25 Section 1207 of the National Defense Authorization Act (NDAA) for Fiscal Year 2006 (P.L. 109-163) provided authority for DOD to transfer to the State Department up to $100 million in defense articles, services, training or other support in FY2006 and again in FY2007 to use for reconstruction, stabilization, and security activities in foreign countries. This authority was extended through FY2008 by Section 1210 of the FY2008 NDAA (P.L. 110-181) and through FY2009 by the Section 1207 of the FY2009 Duncan Hunter NDAA (P.L. 110417). The FY2009 Duncan Hunter NDAA provides special authority for $50 million to be spent under Section 1207 for Georgia in addition to the $100 million for other countries. 26 Testimony of Ann C. Richard, Vice President for Government Relations and Advocacy for International rescue Committee, before the Senate Homeland Security and Government Affairs Subcommittee, July 31, 2008. 27 FY2009 DOD Summary Justification, p. 103. 28 E-mail to CRS from the OSD/P, May 20, 2007. 29 See the OECD website at http://stats.oecd.org/wbos/Index.aspx?DatasetCode=TABLE1. 30 See Lancaster and Van Dusen, p. 43. 31 Barder, Owen, ―Reform ing Development Assistance: Lessons From the U.K. Experience,‖ in Security By Other Means, (The Brookings Institution, 2007) p. 291. 32 The United Kingdom‘s International Development Act of 2002 made it unlawful to provide aid for any purpose other than poverty reduction, eliminating, among other things, the practice of tying aid to the purchase of British goods and services. 33 Barder, pp. 277-278. 34 Ibid., p. 295. 35 Managing Aid: Practices of DAC Member Countries. DAC Guidelines and Reference Series, OECD Publishing 2005, p. 57. 36 Ibid., p. 20. 37 Ibid., p. 27. 38 Ibid., p. 55. 39 For more detail on restructuring options, see CRS Report RL34243, Foreign Aid Reform: Issues for Congress and Policy Options, by Susan B. Epstein and Connie Veillette. 40 For an overview of major reports and their recommendations, see CRS Report R40102, Foreign Aid Reform: Studies and Recommendations, by Susan B. Epstein and Matthew C. Weed. Recommendations to improve foreign aid generally include aspects related to improving foreign aid coordination. 41 A transcript of the Town Hall Meeting announcing the QDDR is available at http://www.state.gov/secretary/rm/ 2009a/july/125949.htm. 42 Former USAID Administrator M. Peter McPherson, prepared testimony before the House Foreign Affairs Committee on Foreign Assistance Reform: Rebuilding U.S. Civilian Development and Diplomatic Capacity, June 25, 2008. 43 See Lancaster, Carol and Van Dusen, Ann, Organizing U.S. Foreign Aid: Confronting the Challenges of the Twenty-First Century, The Brookings Institute (2005), p. 24. 44 Embassies Grapple to Guide Foreign Aid, A Report to Members of the Committee on Foreign Relations, United States Senate, November 16, 2007 (S.Prt. 110-22), p. 23. 45 Testimony at the Senate Foreign Relations Committee hearing on ― USAID in the 21st Century,‖ April 1, 2009. 46 H.R. 2139, 111th Congress, Sec. 2(c)(1). 47 H.R. 2139, 111th Congress, Sec. 2(c)(3). 48 H.R. 2410, 111th Congress, Sec.302(b)(2)(B). 49 S. 1524, 111th Congress, Sec. 6 (2)(A)(ii).

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In: Foreign Aid Reform Editor: Finn C. Hudson

ISBN: 978-1-61728-926-2 © 2010 Nova Science Publishers, Inc.

Chapter 5

FOREIGN AID REFORM: COMPREHENSIVE STRATEGY, INTERAGENCY COORDINATION, AND OPERATIONAL IMPROVEMENTS WOULD BOLSTER CURRENT EFFORTS United States Government Accountability Office

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WHY GAO DID THIS STUDY In January 2006, to better align foreign assistance programs with U.S. foreign policy goals, the Secretary of State appointed the Administrator of the U.S. Agency for International Development (USAID) to serve concurrently as Director of Foreign Assistance (DFA) and gave the DFA authority over all Department of State and USAID foreign assistance funding and programs. The Office of the Director of Foreign Assistance (State/F) was given responsibility for reforming foreign assistance by, among other things, consolidating State and USAID foreign assistance processes. GAO was asked to (1) examine State/F‘s key efforts to consolidate State and USAID foreign assistance processes and (2) identify any key challenges that affect State/F‘s reform of foreign assistance. GAO evaluated budget, planning, and other documents and interviewed agency officials in Washington, D.C.; Ethiopia; Haiti; Jordan; Kenya; Peru; and Ukraine.

WHAT GAO RECOMMENDS GAO is making seven recommendations to enhance State-USAID organizational transformation, interagency coordination and collaboration, planning processes, and workforce management. State and USAID generally acknowledged or agreed to consider six 

This is an edited, reformatted and augmented version of a U. S. Government Accountability Office publication, Report #GAO-09-192, dated April 2009.

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of the seven recommendations but asserted they had met the one related to regional planning. GAO maintains this recommendation is valid; it is important that an agency clearly capture all relevant programs and activities in its planning processes.

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WHAT GAO FOUND Since June 2006, in its efforts to consolidate State and USAID foreign assistance processes, State/F has implemented certain key practices that are characteristic of successful organizational transformations—for example, developing a mission statement and involving employees. In addition, State/F has taken several steps to consolidate State and USAID planning and budgeting processes—for example, instituting common program definitions for the use of foreign assistance funds to collect, track, and report on data related to program funding and results. State/F also began developing annual operational plans, based on the common program definitions, to serve as annual expenditure plans, performance plans, and performance reports for State and USAID foreign assistance projects worldwide and to provide descriptive information about other U.S. government agencies‘ foreign assistance programs. Moreover, State/F initiated a pilot program for developing a 5-year country assistance strategy (CAS) intended to provide a comprehensive view of all U.S. foreign assistance activities in every country in which U.S. resources are targeted. Further, beginning with fiscal year 2008, State/F implemented a joint State-USAID foreign assistance budget process to bring needed coherence of program activities and accountability for resources. Finally, State/F established an integrated State-USAID workforce to direct the consolidation of State and USAID foreign assistance operations. Despite this progress, State/F faces challenges that could constrain its efforts to reform foreign assistance. For example, State/F lacks time frames for developing a comprehensive U.S. foreign assistance strategy—one of its assigned responsibilities—and fully implementing the 5-year CAS. As a result, State/F has limited capacity to demonstrate progress in these key reform efforts. State/F also lacks a clear, consistent strategy for communicating with USAID and State employees about its efforts, leading to confusion among staff and hindering management-staff relations; although State/F has devised an initial plan to address this challenge, it has not yet carried out this plan. In addition, State/F‘s operational plans do not adequately describe some of USAID‘s regional foreign assistance activities, and consequently senior management may lack a holistic overview of foreign assistance resources needed to make informed trade-offs among various priorities. Further, the goals and measures in State/F‘s country operational plans sometimes do not align with those of other agencies providing foreign assistance in the country, limiting State/F‘s assurance that all U.S. foreign assistance funds in the country are strategically tied to broader U.S. foreign policy goals in the country. Finally, both a 2008 State/F internal review and GAO found that State/F had not yet clearly defined the roles of some of its employees and organizational units and had not matched all employees‘ skills with their positions. State/F has taken initial steps in response to the internal report‘s findings, including defining the roles and responsibilities of various executive and managerial positions and organizational units, but has not yet done so for all State/F staff, and has not developed a long-term workforce management plan to address workforce planning challenges.

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ABBREVIATIONS CAS COO CT DFA DOD FACTS foreign assistance framework GHAI MCC State State/F USAID WMD

country assistance strategy Chief Operating Officer counterterrorism Director of Foreign Assistance Department of Defense Foreign Assistance Coordination and Tracking System Framework for U.S. Foreign Assistance Global HIV/AIDS Initiative Millennium Challenge Corporation Department of State Office of the Director for Foreign Assistance U.S. Agency for International Development weapons of mass destruction

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April 17, 2009 The Honorable Robert Menendez Chairman Subcommittee on International Development and Foreign Assistance, Economic Affairs, and International Environmental Protection Committee on Foreign Relations United States Senate The Honorable Daniel K. Akaka Chairman Subcommittee on Oversight of Government Management, the Federal Workforce, and the District of Columbia Committee on Homeland Security and Government Affairs United States Senate The Honorable Howard L. Berman Chairman Committee on Foreign Affairs House of Representatives In January 2006, the Secretary of State announced a major transformation in the U.S. government‘s procedures for directing and managing foreign assistance programs. The Secretary noted that U.S. foreign assistance programs were fragmented among multiple Department of State (State) bureaus and offices and between State and the U.S. Agency for International Development (USAID). The Secretary observed that this fragmentation made it more difficult to plan coherently and risked conflicting or redundant efforts and wasted

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resources. To better align U.S. foreign assistance with broader foreign policy goals, the Secretary created the position of Director of Foreign Assistance (DFA),1 reporting to the Secretary of State at a level equivalent to the rank of Deputy Secretary of State. The Secretary gave the DFA authority over all State and USAID foreign assistance funding and programs and charged the DFA with providing overall leadership to foreign assistance delivered through other entities.2 In June 2006, State‘s Office of the Director of Foreign Assistance (State/F) was created to carry out the DFA‘s responsibilities and focus the use of foreign assistance on achieving the Secretary‘s transformational diplomacy goal: ― to help build and sustain democratic, wellgoverned states that will respond to the needs of their people, reduce widespread poverty, and conduct themselves responsibly in the international system.‖3 State/F was given responsibility for developing, among other things,   

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

a coherent, coordinated U.S. government foreign assistance strategy; multiyear country-specific assistance strategies and annual country-specific operational plans; consolidated policy, planning, budget, and implementation mechanisms and staff functions required to provide leadership to USAID and State foreign assistance; and guidance for foreign assistance delivered through other U.S. government agencies.

In this context, you asked us to (1) examine key actions that State/F has taken to reform and consolidate State and USAID foreign assistance processes and (2) identify any key challenges that affect State/F‘s reform of foreign assistance. At your request, in October 2008 we issued a legal opinion on the delegation of authorities to the DFA.4 Additionally, in November 2008, we issued a correspondence on State/F‘s foreign aid information systems recommending that the Secretary of State direct the DFA to use best practices for risk management procedures for two information systems currently managed by State/F.5 (See app. III for details on State/F‘s information systems and the status of our recommendations.) In preparing this chapter, we examined and analyzed budget, planning, management, and workforce plans and documents. We also interviewed officials at State and USAID headquarters in Washington, D.C., and at six U.S. embassies and USAID missions in Ethiopia, Haiti, Jordan, Kenya, Peru, and Ukraine; the USAID missions in Kenya, Peru, and Ukraine have responsibilities for activities in several countries throughout their respective regions. We conducted this performance audit from May 2008 to April 2009 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix I contains a more detailed description of our scope and methodology.

RESULTS IN BRIEF State/F has taken a number of actions to reform and consolidate State and USAID foreign assistance processes. These actions have included undertaking an organizational

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transformation, developing consolidated planning and budgeting processes, and creating an integrated State-USAID workforce to manage the foreign assistance reforms. 

Organizational transformation. In consolidating State and USAID foreign assistance processes, State/F has taken steps that are consistent with key practices that we have found to support successful organizational transformations. These practices include developing mission and vision statements and, to involve employees in the transformation, creating employee review teams and conducting ― after-action reviews‖ to obtain employee feedback.



Consolidated planning and budgeting processes. First, State/F instituted common definitions for requesting and reporting on foreign assistance funds—known as the standardized program structure—based on a framework that reflects the transformational diplomacy goal‘s five strategic objectives, to collect, track, and report on standardized data on program funding and results achieved with that funding. Second, in 2006, State began developing annual operational plans, based on the standardized program structure, that were intended to serve as annual spending plans, performance plans, and performance reports and thus strengthen the linkage between resources, activities, and results for State and USAID foreign assistance programs.6 The operational plans, which State/F has modified over time, reflect funding information for State and USAID foreign assistance projects worldwide; they also aim to provide information about other U.S. government agencies‘ foreign assistance activities and resources. Third, in 2008, State/F initiated a pilot program for developing a 5-year country assistance strategy (CAS) document designed to provide a comprehensive view of all U.S. agencies‘ foreign assistance programs in each country, including strategic approach, top priorities, and resource assumptions. State/F guidance encourages State and USAID to obtain input from other U.S. government agencies in developing the CAS. Fourth, beginning with fiscal year 2008, State/F implemented a joint State-USAID foreign assistance budget process, refining the process annually based on its after-action reviews.

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Integrated workforce. In early 2006, to support the consolidated budget, planning, and reporting processes for State and USAID foreign assistance programs, State/F established 88 employee positions to staff the new office. Sixty-five positions were to be filled by USAID personnel and 23 positions were to be filled by State personnel. In commenting on a draft of this chapter, State/F noted that, as of October 2008, it had created job descriptions for all of these new positions. Despite its progress in reforming State and USAID foreign assistance, State/F lacks implementation time frames, goals, and benchmarks for aspects of its foreign assistance reforms; does not have a clear, consistent communication strategy; and faces a number of challenges related to annual and multiyear planning, budgeting processes, and workforce management.



Lack of time frames, goals, and benchmarks. Time frames for developing and implementing a comprehensive, integrated U.S. foreign assistance strategy have not been established. According to State/F officials, State/F is awaiting direction and

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guidance on U.S. foreign assistance reforms from the new administration. In addition, State/F has not yet developed time frames for the full implementation of the CAS because it has not completed the pilot phase for implementing the CAS. We have previously reported that, without time frames for key transformation initiatives, agencies miss opportunities to determine—and focus attention on—critical phases of their transformation efforts and the essential activities that need to be completed.7 Moreover, without both a comprehensive, integrated U.S. foreign assistance strategy and guidance for other U.S. entities‘ foreign assistance, State/F lacks assurance that U.S. foreign assistance programs are strategically tied to overarching U.S. goals. Also, as of February 2009, State/F had not determined how it will measure the anticipated efficiency gains to be realized from developing its consolidated program management systems, the Foreign Assistance Coordination and Tracking System (FACTS) and FACTS Info.8 

Unclear communication strategy. State/F lacks a clear, consistent strategy for communicating about its planning and budgeting reforms. Communicating information early and often helps, among its other benefits, to build an understanding of the purpose of planned changes and build trust among employees and stakeholders. According to many officials in headquarters and in the six countries we visited, poor communication about the fiscal year 2007 operational planning process—for example, State/F‘s failure to clarify contradictory guidance—led to confusion among staff. In November 2008, State/F said that it would create a Communications Manager position to develop and implement more effective communications processes. As of April 2009, State/F had created but not yet filled this position.

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Annual planning challenges. First, State/F‘s operational plan, as designed, does not clearly capture all of the foreign assistance programs and services implemented by USAID‘s regional offices. As a result, senior State/F managers may lack the overview of foreign assistance resources that they need to make informed decisions. Second, State/F faces challenges in coordinating and collaborating with officials in other U.S. government agencies to obtain funding and performance information about these agencies‘ foreign assistance programs. For example, Department of Defense (DOD) staff responsible for implementing certain foreign assistance programs told us that the goals and measures in State/F‘s operational plans do not always align with the goals and measures articulated in DOD plans and strategies. Third, foreign assistance program definitions and categories used in State/F‘s operational plan sometimes overlap and do not always adequately describe program achievements. Fourth, although State/F encourages the use of customized, outcomeoriented indicators to measure program impact, its guidance does not describe how State/F will use this information. State/F uses the quantitative, output-oriented information from its standard output indicators to inform its resource requests and report to Congress and the American people. Fifth, State/F‘s planning process excludes State‘s and USAID‘s operating and administrative expenses for foreign assistance programs, constraining State/F‘s ability to ensure needed levels of administrative support for their foreign assistance programs.9

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Multiyear planning challenges. The 5-year CAS currently being piloted may not adequately replace USAID long-term country strategies as a day-to-day management tool for USAID country missions. According to some USAID and State officials, the CAS is a high-level document that includes overall objectives for the country but— unlike USAID‘s previous multiyear country strategies—lacks substantive content and details on how USAID is to achieve its objectives. Furthermore, the initial suspension of the development of USAID country strategies during the CAS pilot led to planning challenges at some USAID missions, particularly during 2006 and 2007—the first 2 years of State/F‘s existence. According to some USAID officials, until USAID issued its guidance for developing interim country strategies, uncertainty about USAID‘s long-term goals and strategies for the country hampered their ability to plan and manage project activities and reach long-term agreements with host country governments. In September 2008, USAID took a step to address USAID missions‘ concerns by issuing interim guidance for missions that had not yet developed a CAS, permitting them to extend and update their country strategies, if needed. The DFA also issued guidance in October 2008 outlining three strategic planning options regarding the development of interim country strategies. However, until State/F finalizes the CAS document and USAID fully develops and implements its new multiyear country strategies, the development of USAID country-specific strategic plans will remain an interim process.



Budget process challenges. First, although State/F intended the consolidated budget process in part to bring needed coherence and accountability to State and USAID foreign assistance programs, as of March 2009 the process included only about half of the funds appropriated to or administered by State and USAID for international affairs programs.10 Second, although there are benefits and drawbacks that must be considered and balanced in any budgeting system, aspects of State/F budget reforms may affect missions‘ ability to respond to unexpected events in a timely manner. State/F‘s budget process requires that all funds be committed in advance and at a finer level of detail than in the past. State and USAID officials in headquarters and the field described the process to approve changes in committed resources as lengthy and complex and expressed concern that these requirements could have the unintended effect of limiting missions‘ ability to respond to time-critical conditions, such as those caused by riots or natural disasters.



State/F workforce management challenges. First, State/F has not yet clearly defined the roles of some of its employees and organizational units and, second, it has not fully ensured that all of its employees have the skills needed to carry out their responsibilities—that is, to support and manage the consolidated budget, planning, and reporting processes for USAID and State foreign assistance programs. An October 2008 State/F internal management review noted, among other issues, that the roles of some State/F employees and organizational units were not well defined or understood and that employees‘ skills were not always well matched with their positions. Moreover, State and USAID officials in Washington, D.C., and the field told us that some State/F employees lacked experience with, and knowledge of, countries‘ foreign assistance needs. State/F has taken some steps in response to the

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United States Government Accountability Office internal report‘s findings, including defining the roles and responsibilities of its various executive and managerial positions and its organizational units. However, as of April 2009, State/F had not defined roles and responsibilities for some of its staff and had not developed a long-term workforce management plan for periodically reassessing its workforce capacity to carry out assigned responsibilities. We are making seven recommendations to enhance State-USAID organizational transformation, interagency coordination and collaboration, planning processes, and workforce management. In commenting on a draft of this chapter, State and USAID generally acknowledged, or agreed to consider, six of the seven recommendations but asserted that they had met our recommendation related to regional planning. We maintain that the operational plan structure does not adequately define regional activities and note that it is important that an agency clearly capture all relevant programs and activities in its planning processes.

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BACKGROUND In January 2006, the Secretary of State stated that America‘s current foreign assistance structure risks incoherent policies, ineffective programs, and wasted resources when spending is not strategically tied to overarching U.S. goals and foreign assistance is fragmented across numerous bureaus and agencies.11 At that time, the Secretary created the position of DFA to lead State/F‘s implementation of State and USAID‘s consolidated planning, budgeting, and reporting processes and also to serve concurrently as the Administrator of USAID, with both of these positions reporting directly to the Secretary. In addition, within the federal government and among interest groups, scholars, and others, an ongoing debate about how to improve the efficiency and effectiveness of U.S. foreign assistance has led to several proposals to reform U.S. foreign aid, ranging from, among others, elevating USAID to a cabinet-level agency to merging USAID with State. In January 2009, the new Secretary of State observed that the incoming administration is committed to reviewing ways to improve the distribution of U.S. foreign assistance. She stated that the administration should build on initiatives that had proven successful while determining whether poorly performing initiatives could be improved. The Secretary also noted that the incoming administration has emphasized, among other things, the need to coordinate and consolidate foreign assistance programs housed throughout executive agencies. Meanwhile, modernizing foreign assistance is a stated priority of the Chairman of the House Committee on Foreign Affairs.

Foreign Assistance Framework In 2006, to help align foreign assistance programs with the transformational diplomacy goal, State/F developed the framework for U.S. foreign assistance (foreign assistance framework). The framework ties this goal to five strategic objectives—peace and security, governing justly and democratically, investing in people, economic growth, and humanitarian assistance—to various category-country types, in an effort to move recipient countries to the

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next level. (See app. IV for a detailed description of the foreign assistance framework, including descriptions of the country categories.) Table 1. Budget Accounts and Authority under State/F Budget and Planning Approval Processes, Fiscal Year 2008

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Account name Andean Counterdrug Initiative Assistance for Eastern Europe and the Baltic States (formerly Support for Eastern European Democracy) Assistance for the Independent States of the Former Soviet Union Child Survival and Health Programs Conflict Response Fund Democracy Fund Development Assistance Development Credit Authority Economic Support Fund Foreign Military Financing International Disaster/Famine Assistance International Military Education and Training International Narcotics Control and Law Enforcement International Organizations and Programs Migration and Refugee Assistance Nonproliferation, Anti-Terrorism, Demining and Related Programs Peacekeeping Operations U.S. Emergency Refugee and Migration Assistance USAID Office of Transition Initiatives Total

Estimated fiscal year 2008 budget authority (current dollars in millions) 325 294 397 1,829a n/a 239b 1,624 8 5,323b 4,689b 650b 85 944b 317 1,338b 497b 261 76b 45 18,941

Sources: State Department and Congressional Research Service. Notes: In addition to having approval authority over these accounts, the DFA has authority to coordinate with, but not approve, State‘s Global HIV/AIDS Initiative account (approximately $4.7 billion in fiscal year 2008) and the Millennium Challenge Corporation (approximately $1.5 billion in fiscal year 2008). Public Law 480 Food Aid (approximately $2.1 billion in fiscal year 2008) is appropriated to the Department of Agriculture and its Title II programs (Food For Peace) is administered by the USAID Administrator, not the DFA (in the past, these positions were held by the same individual). In some cases, foreign assistance funds administered by State or USAID support programs are implemented by other agencies. For example, State administers funding appropriated for Foreign Military Financing and International Military Education and Training programs that are implemented by DOD. In administering these appropriations, State shares accountability for the proper use of these funds. GAO did not independently verify funding information provided by the Congressional Research Service. a This is an approximation of the portion of the Global Health and Child Survival appropriation apportioned to USAID. b The amounts for these accounts include funding provided in Supplemental Appropriations Act, Pub. L. No. 110-252, 122 Stat. 2323 (2008), and in the case of the Economic Support Fund, Disaster

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United States Government Accountability Office Relief and Recovery Supplemental Appropriations Act, Pub. L. No. 110-329, 22 Stat. 3585 (2008) as well. GAO has not independently verified amounts appropriated in these two acts.

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International Affairs Funding and State/F’s Budget and Planning Processes Funding for international affairs, which includes funding for foreign assistance, is provided through annual appropriations and an account structure reflected in reports of the appropriations committees.12 Of the $42.5 billion appropriated for programs classified as international affairs in fiscal year 2008, almost $36.6 billion was appropriated to accounts administered by State or USAID; the remaining $5.9 billion went to other departments, agencies, and organizations.13 For example, programs are implemented by the Departments of Defense (e.g., education and training); Agriculture (e.g., P.L. 480 food aid); and Treasury (e.g., technical assistance and debt restructuring). In addition to these agencies implementing programs classified as international affairs, a number of other federal entities are involved in providing foreign assistance (see app. II). Of the $36.6 billion appropriated to or administered by State and USAID, approximately half went through the new State-USAID consolidated budget, planning, and reporting processes in fiscal year 2008 (see table 1).14 State and USAID use several planning and budget documents in the consolidated planning and budget processes for State and USAID foreign assistance. Some were created by State/F, some predate State/F, and some are governmentwide documents (see table 2). The budget process for State and USAID‘s foreign assistance funds follows the traditional federal budget and appropriation process, with one important distinction: after Congress appropriates funds to programs authorized under the Foreign Assistance Act, USAID and State undergo a congressional notification process known as the 653(a) consultation process.15 In compliance with notification procedures established by law State/F notifies Congress of the type of assistance and level of funding to be provided to individual countries and international organizations. In practice, State and USAID foreign assistance funds generally are not made available for obligation until the reporting requirements are finalized.

State/F Information Systems In conjunction with USAID, State/F developed the FACTS I database to collect foreign assistance planning and reporting data, including plans for implementing current-year funds and performance planning and reporting data. According to numerous FACTS I users as well as our previous review, FACTS I was slow and unreliable during the first 2 years of the foreign assistance budget, planning, and reporting processes.16 State/F developed FACTS II to address these issues. State/F also created FACTS Info, a system that allows State/F to aggregate, analyze, and report data on many U.S. foreign assistance programs. During its pilot phase (September 2007–February 2009), FACTS Info was accessible to a limited number of users within State and USAID; State/F began to expand usage to additional State/F and USAID users in early 2009. Figure 1 depicts the data flow for both systems.

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Table 2. Key Foreign Assistance Planning and Reporting Documents Key State/F planning and reporting documents Document Description Primary purpose State/F annual In each country receiving U.S. assistance, an operating unit (i.e., Annual planning; operational country program, regional office, or Washington- based bureau) led by budgeting plan, the U.S. Ambassador compiles an annual operational plan, performance performance plan, and performance report in an effort to ensure that plan, and the activities of all U.S. agencies providing assistance in the country performance are coordinated and appropriately linked to foreign policy objectives. report These documents are intended to provide a comprehensive presentation of all foreign assistance resources planned for implementation in country; to strengthen the link between funding, activities, and results; and to collect standardized data about foreign assistance programs. State/F 5-year State/F is developing 5-year, country-specific strategies that aim to Strategic planning country bring together all U.S. agencies‘ foreign assistance activities in a assistance country regardless of funding source. The CAS document will be a strategy (CAS) maximum of 15 pages long, and will be developed separately from USAID‘s country-specific long-term strategies, which are currently being revised. Key pre-existing State and USAID foreign assistance planning and reporting documents USAID Prior to the creation of State/F, USAID missions routinely developed Strategic planning multiyear multiyear country strategies, which identified USAID goals and country strategic objectives and included detailed information on expected strategy results and how progress toward results would be measured.

Key dates Operating units began developing operational plans in October 2006.

In 2008, State/F began a pilot project in 10 countries to develop the CAS. State/F began an afteraction review in early 2009, to inform CAS development and implemen-tation going forward. In June 2006, State/F suspended the development of new country strategies. In September 2008, USAID issued guidance for developing interim strategies at missions where a CAS had not yet been developed. USAID plans to further develop final country Strategy guidance after the CAS roll-out is complete.

Table 2. (Continued) Description Annually, all U.S. overseas posts, whether they receive U.S. foreign assistance funding or not, are required to submit a 3-year MSP. The MSP is intended to enable posts to track progress toward missionspecific, high-level diplomatic and management goals. It includes a post‘s annual budget request for all State and USAID foreign assistance funding by program area, and for the investing in people strategic objective, by program element. Key governmentwide planning and reporting documents Congressional Agencies submit CBJs to the appropriations committees in support of Budget their annual budget requests. State/F‘s CBJ is linked to the foreign Justification assistance framework and consistent with the long-term considerations (CBJ) of the joint State-USAID strategic plan. Document Mission strategic plan (MSP)

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Performance and Accountability Report (PAR)

Called for by Office of Management Budget (OMB) guidance, the PAR combines the annual performance report required by the Government Performance and Results Act of 1993a with an agency‘s financial statements and accountability report. The PAR provides information on an agency‘s actual performance and progress toward achieving the goals in its strategic plan and performance budget. The majority of performance information for results achieved with State and USAID foreign assistance resources are extracted from the performance reporting information in State/F‘s FACTS database.

Sources: USAID, State, and OMB. a Pub. L. No. 103-62, § 4, 107 Stat. 285, 299-89 (1993).

Primary purpose Strategic planning; budgeting

Key dates This document was revised in 2007 to include a section on State/USAID foreign assistance.

Budgeting

Beginning with the CBJ for fiscal year 2008, State/F integrated foreign assis-tance resources into one joint document and submitted it in February 2007. Agencies were to transmit various aspects of their fiscal year 2008 PARs to the President, Congress, and OMB between December 2008 and January 2009.

Performance reporting

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Sources: GAO analysis of Department of State data; Nova Development (clip art). Notes: FACTS= Foreign Assistance Coordination and Tracking System OMB= Office of Management and Budget State= Department of State State/F= Office of the Director of Foreign Assistance USAID= U.S. Agency for International Development Figure 1. FACTS and FACTS Info Data Flow Chart

Key Practices for Agency Transformation Implementing a large-scale change management initiative such as the State-USAID foreign assistance organizational transformation is a complex endeavor that requires the concentrated efforts of both leadership and employees to accomplish new organizational goals. Experience shows that failure to adequately address—or, often, to consider— organizational culture is at the heart of unsuccessful mergers and transformations. We have reported on a number of key practices that have consistently been found in successful mergers, acquisitions, and transformations (see table 3).17

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Interagency Coordination and Collaboration Successful planning and implementation of multi-agency efforts such as foreign assistance reform is a challenge that requires interagency coordination and collaboration. We have previously reported on a range of barriers that agencies face when they attempt to collaborate.18 For example, agencies sometimes have missions and goals that may conflict, making reaching a consensus on strategies and priorities difficult. Also, interagency collaboration is often hindered by incompatible procedures, processes, data, and computer systems. As we have also previously reported,19 the following practices can help agencies sustain and enhance interagency collaboration: Define and articulate a common outcome. Establish mutually reinforcing or joint strategies. Identify and address needs by leveraging resources. Agree on roles and responsibilities. Establish compatible policies, procedures, and other means to operate across agency boundaries.  Develop mechanisms to monitor, evaluate, and report on results.  Reinforce agency accountability for collaborative efforts through agency plans and reports. Reinforce individual accountability for collaborative efforts through performance management systems.

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    

STATE AND USAID HAVE TAKEN STEPS TO SUPPORT ORGANIZATIONAL TRANSFORMATION, DEVELOP CONSOLIDATED FOREIGN ASSISTANCE PLANNING AND BUDGETING PROCESSES, AND ESTABLISH STATE/F WORKFORCE In consolidating their foreign assistance operations, State and USAID took several steps that our previous work has shown to support such an organizational transformation.20 State/F also took steps to develop consolidated State-USAID foreign assistance planning and budgeting processes. In addition, State/F took steps to establish an integrated State-USAID workforce.

Key State and USAID Efforts Supported Organizational Transformation Consistent with key practices that we have previously found in successful mergers and organizational transformations, State and USAID efforts to establish State/F have included (1) ensuring top leadership‘s involvement in the transformation, (2) establishing a mission statement, (3) developing key operating principles, (4) establishing key implementation goals and timelines, and (5) involving employees in the transformation.

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Table 3. Key Practices and Implementation Steps for Mergers and Organizational Transformations Key practice 1. Ensure that top leadership drives the transformation.

2. Establish a coherent mission and integrated strategic goals to guide the transformation. 3. Focus on a key set of principles and priorities at the outset of the transformation. 4. Set implementation goals and a timeline to build momentum and show progress from day one.

Implementation step  Define and articulate a succinct and compelling reason for change.  Balance continued delivery of services with merger and transformation activities. Adopt leading practices for results-oriented strategic planning and reporting. Embed core values in every aspect of the organization to reinforce the new culture.  Make public implementation goals and timeline.  Seek and monitor employee attitudes and take appropriate follow-up actions.  Identify cultural features of merging organizations to increase understanding of former work environments.

5. Dedicate an implementation team to manage the transformation process.

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6. Use the performance management system to define responsibility and assure accountability for change. 7. Establish a communication strategy to create shared expectations and report related progress.

8. Involve employees to obtain their ideas and gain their ownership for the transformation.

9.Build a world-class organization.

 Attract and retain key talent.  Establish an organization-wide knowledge and skills inventory to exchange knowledge among merging organizations.  Establish networks to support implementation team.  Select high-performing team members. Adopt leading practices to implement effective performance management systems with adequate safeguards.  Communicate early and often to build trust.  Ensure consistency of message.  Encourage two-way communication.  Provide information to meet specific needs of employees.  Use employee teams.  Involve employees in planning and sharing performance information.  Incorporate employee feedback into new policies and procedures.  Delegate authority to appropriate organizational levels. Adopt leading practices in acquisition management, financial management, human capital and information technology to build a world class organization.

Source: GAO. Note: We compared State and USAID efforts related to seven of the nine key practices developed in our past work on organizational mergers and transformations. These seven practices are shown in boldface type. Because of the evolving nature of State/F‘s organization and workforce, we did not review State and USAID efforts related to key practice 6 (― using the performance management system to define responsibility and assure accountability for change‖ ) or 9 (― building a worldclass organization‖ because of the evolving nature of State/F‘s organization and workforce).

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Top Leadership Involvement Top leadership at State and USAID articulated reasons for, and drove, the organizational transformation of State‘s and USAID‘s foreign assistance, beginning with the Secretary of State‘s 2006 announcement creating the DFA position. In April 2006, 2 months before State/F was officially established, the DFA appointed a Chief Operating Officer (COO), who was responsible for helping formulate the transformed organizational structure as well as developing and implementing State/F‘s reformed planning and budgeting processes. We have previously reported that appointing a COO or Chief Management Officer is one way to elevate attention on management issues and transformational change, integrate various initiatives, and institutionalize accountability for addressing them.21 Mission Statement State/F‘s top leadership and key staff established mission and vision statements to guide the organization‘s transformation. This effort began about 2 years after State/F was created, in response to findings from an April 2008 outside review of its organization and processes. According to the statement, State/F‘s mission, on behalf of the Secretary of State and the DFA, is to 



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



provide leadership, coordination, and strategic direction within the U.S. government and with external stakeholders to enhance foreign assistance effectiveness and integrate foreign assistance planning and resource management across State and USAID; lead strategic, operational, and performance planning of U.S. foreign assistance with a focus on aligning resources with policy priorities; develop and defend foreign assistance budget requests and allocate State and USAID foreign assistance funding to meet urgent needs and new opportunities and to ensure long-term sustainable investments; and promote good stewardship of foreign assistance funds by strengthening oversight, accountability, and transparency.

Key Operating Principles In addition to establishing mission and vision statements, State/F senior leaders and staff developed a key set of operating principles. These principles include   

being accountable to the American people for ensuring the effective use of foreign assistance resources, being constructive and cooperative partners with stakeholders, and valuing State/F‘s employees as its most important resource.

We have previously reported that operating principles articulating the core values of a new organization can, like the mission statement, serve as an anchor that remains valid and enduring while organizations, personnel, programs, and processes may change.22

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Implementation Goals and Timelines State/F set and met certain implementation goals and timelines for key aspects of its consolidated budget and planning processes. For example, State/F exceeded its goal of implementing country-specific operational plans—a key annual budget and planning document for the reformed performance budgeting process—to 67 pilot countries in its first year. In addition to those pilot countries, each USAID country mission, regional office, and Washington, D.C.-based bureau—collectively known as operating units—produced an operational plan for fiscal year 2007.23 All operating units produced operational plans for fiscal year 2008. State/F‘s COO told us that another key goal was submitting a joint StateUSAID foreign assistance budget request based on the new foreign assistance framework. State/F accomplished this goal even though the office was established after the fiscal year 2008 budget formulation process had begun.

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Employee Involvement State and USAID involved their employees in the transformation by using employee teams and by obtaining employees‘ ideas about the transformation. According to its COO, State/F created implementation teams at State/F‘s inception to focus on two key areas: (1) overseeing the organizational and administrative changes needed to create the new office and (2) developing and implementing the reformed planning and budgeting processes. Each year since its creation in 2006, State/F has conducted after-action reviews to seek employee feedback on how to improve various processes. For example, employee teams are currently reviewing State/F‘s core processes and identifying suggested improvements for each. According to State and USAID bureau and field staff with whom we met, State/F implemented several employee suggestions from these reviews. We have previously reported that employee involvement, such as State/F‘s use of employee teams and after-action reviews, strengthens the transformation process by including frontline perspectives and experiences.24

State/F Developed Consolidated State-USAID Foreign Assistance Planning and Budgeting Processes State/F developed a program configuration, known as the Standardized Program Structure and Definitions (standardized program structure), to provide a consistent way to categorize and account for State-USAID foreign assistance. State/F also began developing annual operational plans, performance plans and performance report based on the standardized program structure, to strengthen the link between foreign assistance funding, activities, and results.25 In addition, State/F initiated a pilot program for multiyear, countryspecific foreign assistance strategies, intended to take a comprehensive approach in describing overall U.S. strategic approaches and priorities, goals, and resource assumptions. Moreover, State/F implemented a consolidated budget process for State and USAID foreign assistance programs, beginning with the fiscal year 2008 budget request.

Standardized Program Structure To collect and track standardized data on program funding and results achieved with that funding, State/F instituted the standardized program structure. This structure provides

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common definitions for the use of foreign assistance funds and flows from the foreign assistance framework, using the framework‘s five program objectives plus one administrative objective. For each objective, State/F developed a common configuration of goals linked to implementing mechanisms. This program structure is the foundation of the annual operational plan and the performance report as well as the FACTS data system. (Figure 2 shows an excerpt of the configuration of goals for the governing justly and democratically program objective.) State/F also developed standard definitions and sets of indicators related to these goals. For example, State/F defines the human rights program element as ― advancing the protection of international human rights, including labor rights, by supporting governmental and nongovernmental organizations created to protect, promote, and enforce human rights.‖ One indicator related to this program element is ― the number of public advocacy campaigns on human rights supported by the U.S. government.‖

Source: State/F. Figure 2. Excerpt of State/F‘s Standardized Program Structure

Annual Country-Specific Operational Plans According to State/F‘s operational plan guidance, State/F‘s annual operational plans are intended to show how all U.S. government agencies‘ foreign assistance resources—including resources provided by U.S. agencies26 other than State and USAID—are being used to support the goals and objectives outlined in the foreign assistance framework. The operational plans, which operating units began developing in October 2006, were originally multifunctional, serving as annual spending plans, performance plans, and performance reports. According to State/F guidance, the plans were intended to strengthen the link between funding, activities, and results for joint State-USAID foreign assistance programs.

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State/F guidance notes that operational plans differ from other State and USAID planning and reporting requirements in that they provide detail about the specific uses of all available funds for the given fiscal year. State/F piloted the operational plan in 67 ―f ast track‖ operating units in fiscal year 2007 and required all 190 operating units, including country missions and regional and functional bureaus in State and USAID, to complete an operational plan in fiscal year 2008. Using the standardized program structure, the operational plan reflects funding information for individual State and USAID foreign assistance projects (i.e., at the implementing mechanism level).27 For each project, the operational plan shows the entities and individuals receiving funding, the amounts received, the activities being funded, and the expected results. We have previously reported that pursuing a closer alignment between performance planning and budgeting—much like State/F is attempting to do with its operational plans and standardized program structure—is essential in supporting the transition to a more results-oriented and accountable federal government.28 Developing a link between requested funding and expected performance goals is a critical first step in defining the performance consequences of budgetary decisions. By structuring the operational plan around the program configuration, State/F is able to collect standard funding and performance data on individual programs worldwide through FACTS and report on foreign assistance in the aggregate—something that was not possible prior to State/F‘s reforms. Although State and USAID are the only U.S. agencies currently entering data into and receiving reports from the FACTS and FACTS Info systems, State/F originally expected the systems to eventually include data from the more than 25 other U.S. entities involved in foreign assistance.29 State/F recognizes that doing so will be difficult because, among other reasons, different agencies use different procedures, processes, and systems to formulate budget requests, allocate resources, and measure results. In addition, the operational plans are intended to provide information about how all U.S. government agencies are coordinating and collaborating in each country to achieve short-term and long-term foreign assistance goals as well as information on other agencies‘ foreign assistance resources. State/F‘s operational plan guidance requires State and USAID staff to describe how the programs of all other U.S. government agencies in the country are helping address, at the program area level, the goals in State/F‘s foreign assistance framework.30 To obtain this information, State and USAID staff must work with other agencies. According to some USAID and State staff at field missions, the annual operational plan process has improved transparency among the various U.S. government agencies involved in U.S. foreign assistance activities in the country. For example, State officials in Ukraine stated that, because of going through the operational plan process with other U.S. agencies, State has a much better view of all U.S. agencies‘ programs in Ukraine, including some details about what activities other agencies‘ programs include. Also, USAID officials in both Haiti and Peru said that interacting and collaborating with other agencies that are implementing foreign assistance activities in the country during the operational plan process raised their own awareness of other agencies‘ program activities and goals. As a result, they said that they were able to make better-informed decisions for State/F‘s planning and budgeting processes. State/F has made several changes to the operational plan process. In response to findings in the 2007 after-action review, the process was split into two phases beginning in fiscal year 2008. The purpose of this two-part structure was to more evenly distribute the workload for State and USAID over time and to permit State and USAID project data to be provided later

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in the fiscal year, after each operating unit receives its allocations and has had the opportunity to plan their projects. According to State/F officials, after fiscal year 2008, State/F discontinued the two-phased approach and instead separated the operational plans from the performance plans and reports. The operational plans serve as annual spending plans and discuss planned activities and expected results from the current year appropriation; annual performance plans and reports capture fiscal year performance planning and performance reporting. State/F also made a number of changes to the information contained in the operational plans, based on feedback from the after-action reviews. For example, State/F eliminated the requirement for operating units to provide narrative information at the subelement level and made this information optional at the implementing mechanism level. It also eliminated performance indicators at the implementing mechanism level. These changes were in direct response to staff concerns that State/F was collecting detailed information that was not being used in decision making. Also, State/F now prepopulates certain data fields in the FACTS database with prior-year information; staff must re-enter prior-year information only if it has changed. According to USAID and State officials, these changes have reduced the workload burden for staff working on the operational plans, especially in field locations that experienced slow connections with the FACTS database. Finally, State/F adjusted some of the standard indicators to better fit programs and permits the use of custom indicators at the program element level to highlight the unique circumstances of a particular program or country in addition to the standard indicators.

5-Year Country-Specific Foreign Assistance Strategies In June 2006, State/F directed USAID to suspend any planned updates to its multiyear country strategies. State/F did so because it planned to replace the USAID-only country strategies with a joint State-USAID country assistance strategy (CAS). In August 2007, the DFA established a joint USAID-State task force to develop an approach for these strategies. The task force completed its efforts and, since February 2008, the DFA approved plans for new 5-year CAS that would take a comprehensive approach by including the efforts of all U.S. agencies providing foreign assistance in the country. According to State/F‘s guidance for developing a CAS document, each CAS should include, among other things, an overall strategic approach and priorities, a discussion of up to five priority goals, and resource assumptions.31 The guidance states that the CAS is meant to   

identify and describe U.S. foreign assistance goals in specific countries and provide a sense of prioritization among these goals; improve strategic and programmatic coordination, collaboration, and transparency within the U.S. government; and provide a comprehensive statement of overall U.S. foreign assistance priorities in a given country, regardless of funding source.

To achieve these goals, USAID and State are to consult with the host-country government, nongovernment and private sector organizations in the country, and other international donors. State/F guidance also encourages input from other U.S. government agencies.

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During 2008, State/F piloted the CAS in 10 countries.32 According to the pilot selection criteria, the countries chosen    

are broadly representative of the diversity of U.S. foreign assistance; are enthusiastic about participating in the pilot; have large, medium, and small programs; and receive funds through a large variety of accounts, including the Millennium Challenge Account Compact and Threshold Programs and the President‘s Emergency Plan for AIDS Relief.

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In the meantime, some USAID officials in Washington, D.C., and at field missions expressed concern that some USAID country strategies had become outdated and did not reflect the current political and developmental environment, creating a gap between countrylevel guidance for planning, programming, and budgeting and a longer-term view of a country‘s needs and strategies for meeting them. In September 2008, USAID issued guidance permitting field missions to develop interim country strategies until the CAS is fully developed and implemented. As of January 2009, all 10 pilot countries had submitted a draft CAS to State/F; as of April 2009, State/F had approved four of them and the remaining six were under review. According to State/F, when all 10 pilot CAS documents are approved, State/F plans to conduct an after-action review to determine best practices and lessons learned and then may consider initiating a subsequent follow-on pilot project. State/F has not established time frames for implementing the CAS worldwide.33

Consolidated Budget Process for State and USAID Foreign Assistance Programs State/F implemented a joint State-USAID foreign assistance budget process, beginning with the fiscal year 2008 budget request, and made subsequent changes to the process based on its experiences and feedback from after-action reviews. Initially, it focused on foreign assistance planned for individual countries based on a categorization of their development using the foreign assistance framework.34 State/F created country core teams for each country receiving foreign assistance and gave them the responsibility of recommending funding requests for each country, based on State/F‘s five strategic objectives and using the standardized program structure. These initial core teams consisted of a team leader from State/F, representatives from relevant regional and functional bureaus, a State/F Resources and Appropriations staff member, and other stakeholder U.S. government agencies. Because this process began after embassies and USAID missions submitted their funding requests for fiscal year 2008, embassy and mission staff were not initially assigned to country core teams. State/F‘s joint budget process increased the visibility of foreign assistance resources within State and USAID. According to State/F and USAID officials with whom we met, the new process had a positive effect on how foreign assistance budgets were presented and defended during the Secretary‘s review. Under this new process, comparable USAID and State bureaus present their foreign assistance budget proposals to the Secretary in a joint session. In the past, because the USAID Administrator also served as the DFA,35 the Administrator had an opportunity to participate in each session along with the Secretary, the Deputy Secretary of State, or the Under Secretary of State for Political Affairs. According to

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State/F officials, this process resulted in a better understanding of foreign assistance programs and priorities between State and USAID and provided the Secretary of State with a comprehensive overview of planned foreign assistance resource allocation. State/F responded to employee feedback from after-action reviews and made several changes to the fiscal year 2009 and 2010 budget processes. For fiscal year 2009, to better reflect the bureau structures of State and USAID, State/F replaced the country core teams, which focused on individual countries, with assistance working groups, which were composed of regional and functional bureau representatives and had greater knowledge of particular countries and programs. In addition to establishing the regional assistance working groups, State/F held a roundtable for each of the five strategic objectives. This allowed functional bureaus to incorporate cross-cutting and global priorities into country-focused funding proposals for the fiscal year 2009 budget request. For fiscal year 2010, the process was pared down further and regional bureaus were given primary responsibility for creating budget proposals, which reduced the time State/F officials had to spend reconciling regional and functional bureaus budget requests. State/F also created an intranet site to which it posted budget proposals, allowing regional and functional bureaus to comment on each other‘s budget proposal. The effect of this change remains to be seen.

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State/F Integrated Workforce State/F took several steps to establish its organizational structure and develop its human resource capabilities. In early 2006, State/F began to staff its new office. State reassigned 23 employee positions to State/F, and USAID assigned 65 employee positions to State/F.36 The 23 State positions were reassigned from various bureaus and units within State. The 65 USAID positions were reassigned from several USAID offices, including many from the Bureau for Policy and Program Coordination.37 USAID and State reached an agreement on the employee reassignments on June 1, 2006. By the end of March 2007, State/F had created new job descriptions and defined the skills and competencies needed for 16 of the 23 positions reassigned from State; State/F made minor or no changes to the rest of the existing position descriptions. New job descriptions for the 65 positions reassigned from USAID were approved in September 2007, 16 months after State/F began operations. In commenting on a draft of this chapter, State/F told us that, as of October 2008, it had created job descriptions for all of the new positions.

STATE/F FACES IMPLEMENTATION CHALLENGES RELATED TO ORGANIZATIONAL TRANSFORMATION, PLANNING AND BUDGETING, AND WORKFORCE Despite progress in its organizational transformation, developing consolidated planning and budgeting processes, and establishing an integrated State-USAID workforce, State/F faces implementation challenges related to these efforts. Specifically, State/F (1) lacks implementation time frames, as well as goals and benchmarks, for several aspects of its foreign assistance reform efforts; (2) lacks a clear and consistent strategy for communicating

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with staff and stakeholders about its transformation and reform efforts; (3) faces several challenges related to its annual planning processes; (4) faces challenges in developing and implementing its multiyear planning process; (5) faces challenges in its consolidated budget process; and (6) has not fully addressed concerns regarding management of its workforce.

State/F Lacks Implementation Time Frames for Comprehensive Foreign Assistance Reforms and Developing a Foreign Assistance Strategy and Country-Specific Strategies

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Although State/F has established time frames for certain key elements of foreign assistance reform, it has not established time frames for developing and implementing a comprehensive, integrated U.S. foreign assistance strategy covering all agencies involved in delivering U.S. foreign assistance, or for developing guidance for foreign assistance delivered through other U.S. government entities. According to State/F officials, State/F was awaiting direction and guidance from the incoming administration regarding its goals and priorities for U.S. foreign assistance reforms. In addition, because it has not completed the pilot phase for the 5-year CAS, State/F has not yet developed time frames for fully implementing the CAS. As our previous work suggests,38 without time frames for implementing the comprehensive and country-specific strategies, State/F lacks target dates needed as an objective means to track and report its progress. Moreover, until it develops and implements a comprehensive, integrated U.S. foreign assistance strategy, as well as guidance for other U.S. agencies‘ foreign assistance, State/F lacks assurance that State‘s, USAID‘s, and other agencies‘ programs are strategically tied to overarching U.S. goals.

State/F Lacks Goals and Benchmarks for Measuring Progress for Certain Reform Processes State/F has not defined goals for certain aspects of foreign assistance reform or developed benchmarks to gauge whether the reforms are successful. Without these key aspects of successful mergers and transformations, State/F is unable to pinpoint performance shortfalls and gaps and suggest midcourse corrections, and will not know what success looks like. For example, State/F‘s COO told us that State/F did not define what it wanted to achieve from restructuring and streamlining State and USAID mission and bureau plans and reports or determine how it would gauge progress toward those goals and define success. Without a clear picture of the results to be achieved, it is difficult to ensure that reforms are implemented in a way that achieves the desired results. Also, as of January 2009, State/F had not determined how it will measure the anticipated efficiency gains to be realized from developing consolidated program management systems. As a result, some State and USAID employees in Washington, D.C., and in the six countries we visited did not understand how their work was contributing to State/F‘s desired results and could not determine whether the reforms were helping State/F achieve its goals. For instance, according to State/F, one of the results expected from FACTS and FACTS Info was a substantial decline in ad hoc requests to embassies and missions for budget and performance

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information. However, USAID officials in all six countries we visited told us they have no way of knowing whether the data they enter into FACTS is being used because State/F does not disseminate information about the use of FACTS data. They also said that the number of USAID headquarters and State/F requests for information—known as taskers—had declined only slightly or not at all. On the other hand, State/F told us that although it does not track and communicate to the field the number of inquiries it handles at headquarters using FACTS or FACTS Info, its reliance on embassy- and mission-provided data has declined. State/F‘s Congressional Relations Specialist said that she frequently uses FACTS and FACTS Info to respond to information requests from congressional committees and rarely sends taskers to the field for information. She hypothesized that the taskers to the field may be from State and USAID bureau officials and that these requests would decline over time as FACTS and FACTS Info become more widely accessed and well known.

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State/F Lacks a Clear and Consistent Communication Strategy State/F lacks a clear, consistent strategy for communicating about its organizational transformation and planning and budgeting reforms. Communicating information early and often helps to build an understanding of the purpose of planned changes, builds trust among employees and stakeholders, cultivates a strong relationship with management, and helps gain employee ownership for a merger or transformation. According to officials in headquarters and in the six countries we visited, poor communication about the fiscal year 2007 operational planning process led to a great deal of confusion. For example, a USAID official in Jordan said that State/F repeatedly changed its guidance over a short period of time; at times, the updated guidance contradicted, instead of built on, previous guidance and staff were unsure which guidance to follow. In addition, many staff told us that when seeking clarification on the conflicting guidance, they had received either no response or an untimely response from State/F. Also, State/F officials told us that, in hindsight, it appeared that State/F could have benefited from fuller and earlier communication about its planning and budgeting reforms with Congress and other stakeholders, such as contractors and nonprofit organizations involved with program implementation. To address these challenges, in November 2008, State/F said that it would create a Communications Manager position to develop and implement more effective communications processes; as of March 2009, this position had been created but not yet filled.

State/F Faces Challenges in Its Annual Operational Planning Processes As with any planning structure, State/F‘s operational plans have several strengths but also present challenges. First, although regional missions complete operational plans, they do not clearly capture all of the foreign assistance programs and services implemented by USAID‘s regional offices. As a result, senior management may lack the holistic overview of foreign assistance resources needed to make informed decisions about trade-offs among various priorities. According to leading practices in federal strategic planning, an agency‘s strategic

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goals and objectives should cover its major functions and operations, and its annual performance plan should cover each program activity set forth in its budget.39 Like its country-specific, or bilateral, missions, USAID‘s regional offices provide foreign assistance programs, although these programs tend to operate across borders. Regional offices also implement and manage programs in limited presence countries40 and provide technical assistance and support to bilateral missions and programs. However, according to regional officials with whom we met, it is difficult to categorize and capture technical assistance in the operational plan. In addition, they stated that because the operational plan has a bilateral mission focus and distinguishes between programs in different sectors, it does not adequately describe regional offices‘ programs and services in multiple sectors for multiple limited presence countries. Senior leaders in State/F acknowledged that the operational plan‘s bilateral mission focus is problematic in this regard. In commenting on a draft of this chapter, State/F stated that regional activities can be and are captured in operational plans, noting that regional operating units produce operational plans. Based on our work, we maintain that the operational plan structure does not adequately capture regional activities. Second, State/F faces challenges in coordinating and collaborating with officials in other U.S. government agencies to obtain funding and performance information, at the program element level, about these agencies‘ foreign assistance programs. Officials from these agencies told us that State/F did not coordinate well with their agencies in planning for programs that these agencies implement with State or USAID funding. For example, DOD staff who implement Foreign Military Financing and International Military Training and Education programs told us during our site visits that State/F‘s goals and measures—as reflected by the standardized program structure in the operational plans—did not always align with the broader goals and measures articulated in DOD‘s own planning documents and strategies for its own programs. Moreover, officials from other U.S. government agencies implementing their own foreign assistance programs told us of challenges they face in providing information to State and USAID officials for inclusion in the operational plan. As a result, State/F cannot be sure, through its operational plan process, that governmentwide foreign assistance funds are strategically tied to overarching policy goals. At some field missions, officials from the Departments of Commerce, Energy, Health and Human Services, and the Treasury told us that providing support for State/F processes, such as the operational plan, creates an additional workload that is neither recognized by their agencies nor a factor in their performance ratings. We have previously reported that federal programs contributing to the same or similar results should collaborate to ensure that goals are consistent and, as appropriate, program efforts are mutually reinforcing.41 In addition, as a key collaboration practice, agencies can reinforce individual accountability for collaborative efforts through their performance management systems. Third, although the standardized program structure is generally a useful tool to categorize foreign assistance programs, its program structure categories sometimes overlap and in some cases, its performance indicators do not always adequately describe program achievements. State/F guidance does not discuss how to categorize programs within the standardized program structure, except to say that it is critical that funds be identified by what is being done, rather than why it is being done. 

Standardized program structure categories are not mutually exclusive. Staff from State and USAID told us that it is not always clear to them how to categorize

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

Standard indicators do not always capture program performance. Staff from State and USAID told us that they sometimes cannot find standardized performance the next best thing.‖ indicators to describe State/F programs and therefore choose ― As a result, State/F cannot ensure that its programs and projects are reported accurately and consistently. For example, a State official in Ethiopia told us that he and USAID officials whom he consulted were unable to find a performance indicator that accurately described training provided to Ethiopian police units for defusing bombs. Eventually, the State and USAID officials selected one indicator from several that related generally to police training, even though none accurately described the type of assistance being provided. In commenting on a draft of this chapter, State/F officials told us they have been working for the past year on a comprehensive review of the standardized program structure in order to clarify and update program definitions but that they would also review the standard indicators

These design weaknesses in the standardized program structure could compromise accuracy and data reliability in the operational plans, performance reports, FACTS, and FACTS Info, all of which are grounded in the standardized program structure. Fourth, as State/F itself recognizes, its required standard indicators are generally output oriented and therefore provide little information about program impact. State/F chose to use output measures, in part, to aggregate and report, at the agency level, quantitative information common to foreign assistance programs across countries. USAID staff at the six overseas missions we visited told us they saw this shift as a step backward from the progress some USAID missions had made over the years toward using more outcome-oriented measures to obtain information on program impact. State and USAID officials in headquarters and the field recognized the value of being able to aggregate information across countries at the agency level but questioned the usefulness of the output-oriented information collected with State/F‘s standard indicators. For example, a USAID official in Haiti told us that the USAID mission and its implementing partners have shifted their focus away from impact measures toward measures that provide less information on actual progress. In addition, USAID officials in Kenya expressed concerns that the quality and availability of the qualitative information needed to manage program activities had declined, reducing the mission‘s ability to measure, and respond to inquiries about, program impact. State/F‘s guidance encourages the use of custom indicators to establish targets and monitor the progress and impacts of their projects but it does not describe how State/F will use this information. Some State and

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USAID officials noted that although information related to program impact is important for managing programs and understanding the programs‘ effects, they were not sure how, or if, State/F uses such information. These officials observed that, in contrast, State/F‘s guidance says that the quantitative, output-oriented information collected with the standard indicators is used to inform its resource requests and report to Congress and the American people. Fifth, State/F‘s planning process excludes certain of State‘s and USAID‘s operating and administrative expenses for foreign assistance programs, constraining State/F‘s ability to ensure needed levels of administrative support for their foreign assistance programs.42 Although State/F plans and budgets for foreign assistance program funds, State‘s Resource Management Bureau and USAID‘s Management Bureau plan and request funds for operating and administrative expenses. As a result, senior management lacks a comprehensive view of the total resources needed to support their program activities.

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State/F Faces Challenges in Developing and Implementing Its Multiyear Planning Process State/F faces two key challenges related to its development of the 5-year CAS. First, the CAS may not adequately replace USAID‘s country strategies, as State/F initially planned. According to some USAID and State officials in Washington, D.C., and in the countries we visited, the CAS is a high-level document that includes overall objectives for the country but—unlike USAID‘s country strategies—lacks substantive content and details on how USAID is to achieve its objectives. For example, the CAS‘ content is limited to high-level information on (1) the country program and the overall U.S. strategic approach and priorities, (2) up to five priority goals, and (3) resource assumptions. In contrast, the 2002-2006 USAID country strategy for Peru, for example, includes, for each of Peru‘s seven objectives, a detailed discussion of the objective, the development challenge, performance measures, critical assumptions, commitment and capacity of other development organizations, and sustainability issues. To address USAID missions‘ concerns, in October 2008 the DFA issued an executive message that outlined three strategic planning options regarding the development of interim country strategies. The message stated that a USAID mission could (1) continue to use an existing country strategy; (2) develop an interagency CAS; or (3) develop an updated, USAID-specific country strategy if the existing strategy is no longer relevant and a CAS is not likely to be in place in fiscal year 2009. According to this guidance, these options would be available while the CAS is being piloted. As of March 2009, State/F officials told us that it had not yet completed an assessment of the CAS pilot. Second, State/F‘s suspension of the development of USAID country strategies led to planning challenges at some USAID missions, particularly during the first 2 years of State/F‘s existence. According to some USAID officials, until October 2008—when USAID issued guidance for developing interim country strategies—the absence of a long-term country strategy hampered their ability to plan and manage project activities. For example, in June 2008, USAID officials in Ethiopia told us that before their country strategy had expired, USAID and the Ethiopian government routinely agreed on program activities that USAID planned to carry out over the next several years, pending availability of funds. However,

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absent a current multiyear strategy, and because of the resulting uncertainty about USAID‘s long-term goals and strategies for the country, USAID officials were reluctant to reach preliminary agreements with various Ethiopian government ministries. In Ukraine, USAID officials told us that in June 2006, State/F suspended the mission‘s efforts to update its 20032007 country strategy. As a result, the officials said, USAID‘s strategy for Ukraine became outdated and did not reflect the current political, economic, and developmental environment in Ukraine, which had changed dramatically. They, too, were reluctant to execute agreements with the Ukrainian government without a clear understanding of how these projects link to a long-term strategy for the country. In contrast, USAID officials in Haiti told us that State/F‘s suspending development of new country strategies had not adversely affected them because a 3-year country strategy for 2007-2009 had been approved and implemented in August 2006. Although the guidance issued by USAID in September 2008 is a step forward in addressing USAID missions‘ concerns, the development of USAID country-specific strategic plans will remain an interim process until the CAS is finalized and USAID country strategies are fully developed and implemented.

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State/F Faces Challenges in Its Consolidated Budget Processes We identified two key concerns with State/F‘s consolidated budget processes. First, although State/F‘s consolidated budget process was in part intended to bring needed coherence and accountability to governmentwide foreign assistance programs, the process excludes billions of dollars both within and outside State and USAID‘s jurisdiction. For example, of the $36.6 billion appropriated to, or administered by, State and USAID, only about half went through the new State-USAID consolidated budget, planning, and reporting processes in fiscal year 2008. Further, according to State/F guidance, State/F coordinates with, but does not approve budget requests and resource allocations for, the Global HIV/AIDS Initiative (GHAI) or the Millennium Challenge Corporation (MCC); the appropriations act for fiscal year 2008 included $1.8 billion and $1.6 billion, for GHAI and MCC, respectively. State/F‘s process also does not include Pub. L. 480 Title II grants,43 for which almost $1.7 billion was appropriated in fiscal year 2008. Second, State/F‘s budget process reforms may affect a mission‘s ability to respond to unexpected events in a timely manner. Under State/F‘s operational plan process, funds are allowed and committed at lower levels—the element and subelement levels respectively— than they were with previous processes. This change allows State/F to report a finer level of detail regarding how funds are used. However, State and USAID officials, both in headquarters and the field, expressed concern that this change could have unintended impacts on a mission‘s ability to respond effectively to changing conditions, possibly hampering its ability to address time-critical issues such as riots or disasters. For example, officials in State‘s Bureau of Western Hemisphere Affairs, describing their efforts to identify funding for a new, multiyear administration initiative, said that before State/F was created, the bureau was able to quickly and easily reallocate funds to respond to unexpected events. Now, to address such an event, the bureau must request and receive approval to reallocate funds in the operational plan, because State/F requires all funds to be committed in advance. The officials said that they have found this to be a complex and lengthy process, requiring multiple levels

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of approval—often up to the DFA44—for a variety of funding changes. State/F has taken some steps to reduce the burden of its reallocation process. For example, it delegated authority to USAID mission directors to approve reallocation requests in certain instances. In addition, State/F decreased the number of reallocation requests that need to be approved by the DFA. In another example, USAID officials in the field described their efforts to respond to unexpected parliamentary elections in Ukraine while their operational plan was under review by State/F. According to these officials, the mission requested that State/F release some funds prior to approving the plan, so that the mission could develop and implement programs related to the Ukraine‘s upcoming elections. According to State/F‘s reprogramming guidance for fiscal years 2007 and 2008, this request required the signatures of 10 USAID and State officials (outside State/F) and 4 State/F officials, including the DFA. USAID officials said the approval took 6 weeks and that this limited their ability to develop and implement their programs.

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State/F Faces Challenges in Workforce Management Issues Although State/F has taken some steps to establish a workforce and organizational structure, including beginning to define the roles and responsibilities of its employees, our work and an October 2008 State/F internal management review found that State/F faces key challenges in managing its workforce. For example, the State/F internal management review found that (1) State/F had not yet clearly defined the roles of some of its employees and organizational units and (2) State/F had not ensured that its employees have the skills and competencies needed to manage foreign assistance programs. According to State/F officials, in an effort to demonstrate an impact on U.S. foreign assistance programs, State/F initially gave precedence to creating and deploying consolidated budget, planning, and reporting processes rather than to examining the workforce composition, defining roles and responsibilities, and ensuring needed skills and competencies. Although it is important for leaders to be decisive and deliver early successes, we have previously found that success in an organizational transformation or merger is more likely when positions are filled based on the competencies needed for the new organization.45 

Roles and responsibilities. The October 2008 internal management review noted that the roles of some State/F employees and organizational units were not well defined or understood; that the responsibilities of some offices overlapped; and that there was confusion about when, during the planning and budgeting processes, certain employees should be involved in various issues. Similarly, State and USAID officials in Washington, D.C., and most of the six countries we visited told us that State/F employees sometimes were unable to answer questions about operational plan guidance, FACTS, and FACTS Info and were unsure where in State/F to direct such questions so as to ensure timely, accurate answers.



Skills and competencies. State/F‘s internal management review noted concerns about whether some State/F employee skills are well matched with State/F‘s core functions. The review found that although State/F staff had strong skills, they either

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were not placed in positions where they could leverage these skills or their skills did not match the capabilities that State/F required. During our work, some State and USAID officials in Washington, D.C., and in the field echoed these concerns. Although State/F has taken some actions in response to its October 2008 internal review, it has not developed a long-term workforce management plan for addressing these challenges. During our review, State/F officials told us that they had initiated several corrective actions in response to recommendations in the internal review, such as defining roles and responsibilities for its various executive and managerial positions and its organizational units; developing plans to ensure that the current workforce is aligned to meet these needs; and improving training and professional development offered to its employees. However, State/F has not clearly defined roles and responsibilities for some of its employees. In addition, State/F has not developed a long-term workforce management plan to periodically reassess its workforce capacity to carry out assigned responsibilities, such as supporting and managing the consolidated budget, planning, and reporting processes for State and USAID foreign assistance programs. Our previous work has shown that many aspects of workforce planning and management require long-term strategies, to ensure that the agency‘s human capital program capitalizes on its workforce‘s strengths and addresses related challenges in a manner that is clearly linked to achieving the agency‘s mission and goals.46 Further, although State/F has defined its core functions and is ― translating them down to its various offices,‖ State/F officials told us that these definitions are considered an internal management tool and therefore have not been, and will not be, shared with State and USAID employees outside State/F. We have previously reported that having an effective and ongoing internal and external communication strategy is essential to making transformation happen;47 communicating with stakeholders should be a top priority and is central to forming the partnerships that are needed to develop and implement the organization‘s strategies. Moreover, we have observed that such communication is especially crucial in public sector organizational transformations, such as State and USAID‘s reform of foreign assistance. Policymaking and program management demand transparency, and stakeholders and interested parties are concerned not only about the results to be achieved but also about the processes to be used in achieving those results.

CONCLUSIONS State/F has taken important recent steps to align State and USAID foreign assistance activities with broader foreign policy goals. Several aspects of State/F‘s establishment—such as involving top leadership, developing a mission statement and operating principles, employing a Chief Operating Officer, and involving employees in the transformation process—are consistent with leading practices that we have previously found to increase the likelihood of success in such a large-scale transformation. Moreover, State/F‘s actions to consolidate and reform State and USAID planning and budgeting could help address program fragmentation; strengthen accountability; and tighten the link among strategic objectives, resource allocation, and program implementation. For example, by basing its annual operational plans and 5-year CAS on its standardized program structure, State/F is attempting

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to tie its planning and budgeting to strategic foreign policy objectives. Further, the CAS process has the potential to further transparency and enhance interagency coordination and collaboration by including the activities of all U.S. agencies providing foreign assistance in the country. If effectively implemented, the CAS could also be a first step in creating a comprehensive governmentwide strategy for U.S. foreign assistance. In other respects, State/F‘s initiatives are not well aligned with key practices that we have previously found in successful transformations and mergers. Without time frames, goals, and measures for defining success for all aspects of its foreign assistance reforms—including developing and implementing a comprehensive U.S. foreign assistance strategy, developing guidance for other U.S. entities‘ foreign assistance, and fully implementing its stated goal of multiyear comprehensive country assistance strategies—State/F‘s capacity to build momentum and demonstrate progress in these key reform efforts is limited. Lacking a comprehensive U.S. strategy, federal agencies risk implementing a fragmented patchwork of programs that could limit the overall effectiveness of the federal effort while failing to address the highest priorities. In addition, absent a clear, consistent strategy for communicating with staff about planning and budget reforms, State/F‘s communications with staff in Washington, D.C., and in the field may—despite initial steps to develop and implement more-effective communications processes—continue to cause confusion, constraining its ability to build management-staff relations and staff‘s sense of ownership for the reforms. Among the planning and budgeting challenges discussed in this chapter, it is particularly important to clearly capture all relevant programs and activities in an agency‘s planning process. Because State/F‘s operational plan does not clearly articulate the programs and services implemented by USAID‘s regional offices, senior management may lack a holistic picture of foreign assistance resources and may therefore lack important information needed to make informed decisions among competing priorities. Additionally, unless State/F ensures that the goals and measures in its operational plans are compatible with those articulated in the related plans and strategies of other U.S. entities delivering foreign assistance, it may continue to face challenges in obtaining information about these agencies‘ activities and, in the long term, may face challenges in collaborating with these agencies to develop a comprehensive governmentwide foreign assistance strategy. Finally, without a long-term workforce management plan for periodically assessing its workforce capacity to manage foreign assistance, including implementing strategies to fill any identified gaps in skills and competencies, State/F cannot ensure that its staff are prepared to meet the demands of reforming and consolidating foreign assistance processes.

RECOMMENDATIONS FOR EXECUTIVE ACTION We are making the following seven recommendations to the Secretary of State to further the reform of U.S. foreign assistance. Once the incoming administration has defined its overarching goals for foreign assistance, we recommend that the Secretary of State work with all U.S. government entities involved in the delivery of foreign assistance to take the following steps:

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

Develop and implement a comprehensive, governmentwide foreign assistance strategy, complete with time frames and measures for successful implementation. Involving other agencies in this effort could include adopting key practices that we have found to sustain and enhance interagency coordination and collaboration in addressing common goals. Develop and use compatible goals and measures to inform their planning, budgeting, and reporting for their respective foreign assistance programs.

If the administration decides to continue foreign assistance reform efforts consistent with the State/F reforms announced in January 2006, we recommend that the Secretary direct the DFA to  

  

establish a time frame for fully implementing all aspects of these reforms as well as benchmarks and goals to measure progress and define success; establish a time frame for developing and implementing multiyear, country-specific, foreign assistance strategies in all countries where U.S. departments, agencies, or organizations provide assistance; ensure that State/F‘s communication strategy encourages substantive, timely, twoway information exchanges between State/F and USAID and State employees; consider an operational plan structure that clearly portrays and accurately captures the functions and activities of regional programs and activities; and develop a long-term workforce management plan to periodically assess State/F‘s workforce capacity to manage foreign assistance.

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AGENCY COMMENTS AND OUR EVALUATION We provided a draft of this chapter to the Secretary of State and the USAID Administrator for review. State provided consolidated, written comments on behalf of both State and USAID that are reprinted in appendix V. In addition, State and USAID provided technical corrections and additional comments for our consideration, which we incorporated as appropriate. While State and USAID generally acknowledged or agreed to consider six of our seven recommendations, State and USAID officials said that they believed they had already met our recommendation to consider an operational plan structure that clearly portrays and accurately captures the functions and activities of regional programs and activities. In response to this comment, we clarified in our report that regional missions do in fact complete operational plans. However, as we note in our report, regional officials told us that it is difficult to categorize and capture key regional activities in the plan. Specifically, they said that because the operational plan has a bilateral mission focus and distinguishes between programs in different sectors, it does not adequately describe regional offices‘ programs and services in multiple sectors for multiple limited presence countries. Further, we note in our report that senior leaders in State/F acknowledged that the operational plan‘s bilateral mission focus is problematic in this regard. We believe that it is important to clearly capture all relevant programs and activities in an agency‘s planning process so that senior management

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has a holistic picture of foreign assistance resources—important information needed to make informed decisions among competing priorities. We therefore maintain that this recommendation remains valid. As agreed with your offices, unless you publicly announce the contents of this chapter earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this chapter to interested congressional committees, the Secretary of State, the Acting Administrator of USAID, and the Director of the Office of Management and Budget. We will also make copies available to others upon request. In addition, this chapter will be available at no charge on the GAO Web site at http://www.gao.gov.

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APPENDIX I. SCOPE AND METHODOLOGY The objectives of this study were to (1) examine key actions that the Office of the Director of Foreign Assistance (State/F) has taken to reform foreign assistance by consolidating the foreign assistance operations of the Department of State (State) and the U.S. Agency for International Development (USAID) and (2) identify any key challenges that affect State/F‘s implementation of these reforms. To accomplish both of these objectives, we obtained and analyzed various agency documents describing the creation of State/F and its workforce, including organizational charts, staffing charts, position descriptions, and changes in work responsibilities. We also obtained and analyzed various State/F documents describing its reformed planning, budgeting, and reporting processes, guidance for implementing these processes, and examples of the documents produced by these processes (e.g., Operational plans and Congressional Budget Justifications). We also obtained and reviewed the fiscal years 2007 and 2008 ― afteraction reviews‖ of the State/F‘s planning and budgeting processes conducted by State/F, as well as documents that describe changes to the processes based on these reviews. We conducted more than 40 interviews with State and USAID officials in Washington, D.C., involved in State/F‘s reforms, including officials in various State/F offices and in various State and USAID regional and functional bureaus. To gain an understanding of the field‘s involvement in and perspectives on State/F‘s reforms, we also conducted site visits at U.S. Embassies and USAID missions in six countries: Ethiopia, Haiti, Jordan, Kenya, Peru, and Ukraine. We selected these locations on the basis of the following factors:  



Funding levels. Each country‘s program was among the top recipients of U.S. funding in its geographic region. Regional responsibilities. USAID missions in three of the six countries—Kenya, Peru, and Ukraine—are also responsible for managing regional programs or programs in neighboring countries. Variety of foreign assistance activities. In all of the countries, a variety of foreign assistance activities are provided by State and USAID as well as by other federal agencies, including the Departments of Agriculture, Commerce, Defense, Energy, Health and Human Services, and the Treasury.

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At each embassy and mission, we met with officials involved in State/F‘s planning and budgeting processes. While most of these officials were from State and USAID, we also met with officials from other agencies that implement programs on their behalf or that coordinate with them, including the Departments of Agriculture and Defense. Finally, our review was informed by our past work. We reviewed our past reports related to State and USAID, as well as reports on strategic planning, performance budgeting, performance reporting, and interagency collaboration and coordination. We also selected seven of the nine key practices from our past work on organizational mergers and transformations to review State and USAID efforts to establish State/F. Our review did not include the practices of using the performance management system to define responsibility and assure accountability for change or building a world-class organization because of the evolving nature of State/F‘s organization and workforce.

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APPENDIX II. U.S. DEPARTMENTS, AGENCIES, AND OTHER ENTITIES THAT PROVIDE FOREIGN ASSISTANCE                           

African Development Foundation Centers for Disease Control and Prevention Department of Agriculture Department of Commerce Department of Defense Department of Energy Department of Health and Human Services Department of the Interior Department of Justice Department of Labor Department of State Department of the Treasury Environmental Protection Agency Export-Import Bank Inter-American Development Foundation Millennium Challenge Corporation National Institute of Standards and Technology National Oceanic and Atmospheric Administration National Science Foundation Overseas Private Investment Corporation Peace Corps USAID U.S. Fish and Wildlife Service U.S. Forest Service U.S. Institute of Peace U.S. Patent and Trademark Office U.S. Trade and Development Agency

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Note: Congressional Research Service presentation of Organization for Economic Cooperation and Development (OECD) data.

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APPENDIX III. STATE/F INFORMATION SYSTEMS To support State and USAID planning, budgeting, and reporting of foreign assistance under these reforms, State/F developed two new data information systems, the Foreign Assistance Coordination and Tracking System (FACTS) and FACTS Info.48 FACTS, which State/F began to develop in mid-2006, is a database used to collect foreign assistance planning and reporting data, including plans for implementing current-year appropriated budgets and performance planning and reporting data. FACTS Info, which State/F created in 2007, is a system used to aggregate, analyze, and report data on U.S. foreign assistance programs under the authority of the DFA. Although State and USAID are the only U.S. agencies currently using both systems, State/F expects the systems to eventually include data from other agencies involved in foreign assistance, including, among others, the Millennium Challenge Corporation and the Department of Treasury. In November 2008, in connection with our body of work addressing the management of State/F and at your request, we reported on (1) the creation and development of FACTS and FACTS Info and (2) whether State/F is following best practices for configuration management—the process of establishing and maintaining control over changes made to a system—and risk management of FACTS and FACTS Info.49 In conducting this work, we reviewed FACTS and FACTS Info system procurement, contract, development, performance, and assessment documents from State and USAID. We also reviewed State/F‘s configuration management and risk management procedures for consistency with industry best practices. FACTS has been developed in two phases, known as FACTS I and FACTS II. In conjunction with USAID, State/F developed FACTS I in December 2006 as a database to collect foreign assistance planning and reporting data, including plans for implementing current-year appropriated budgets and performance planning and reporting data for State, USAID, and the more than 25 other U.S. departments and agencies involved in providing foreign assistance.50 According to a State/F survey of over 100 State and USAID users in 2007, as well as our interviews with State and USAID officials in Washington, D.C., and the six countries we visited, FACTS I was slow and unreliable during the first 2 years of the new foreign assistance funding process. To remedy these problems, in February 2008, State/F hired a contractor to develop FACTS II, which was deployed worldwide in October 2008. State/F created FACTS Info to aggregate, analyze, and report data on U.S. foreign assistance programs under the authority of the DFA. During the initial pilot phase, which began in September 2007, FACTS Info was accessible to a limited number of State and USAID users. FACTS Info was expanded to include additional State/F and USAID users when the pilot phase ended in February 2009. FACTS II and the ongoing pilot of FACTS Info have recently implemented new configuration management processes, but both lack adequate risk management procedures, such as formalized procedures to plan for foreseeable risks. State/F has taken steps to address these challenges, such as updating the project management plan and implementing change tracking software to address certain weaknesses, particularly to both systems‘ configuration

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management. However, as of October 2008, State/F had not fully implemented improvements to the systems‘ risk management; State officials noted that they plan to complete these improvements by December 2008. Because both FACTS II and FACTS Info lack formal processes for risk management, State/F cannot ensure that risks are identified, analyzed, tracked, and mitigated, increasing the likelihood that potential problems become actual problems. Moreover, State/F was unable to mitigate a key risk that led to problems with the development of FACTS II. Without improved risk management processes, risks may not be effectively managed. In our November 2008 report, we recommended that, to help ensure that FACTS II and FACTS Info are implemented successfully and perform as designed, the Secretary of State direct the DFA to better utilize best practices for risk management procedures to both systems.51 In particular, we recommended that the DFA (1) identify and develop a comprehensive list of system development risks for FACTS II and FACTS Info; and (2) fully develop risk mitigation plans for FACTS II and FACTS Info. State has taken some actions in response to these recommendations. Specifically, State/F issued a risk registry that includes 27 systems development risks for both FACTS II and FACTS Info and how it had either already addressed or planned to address the risks. Also, State/F developed a draft of a combined risk management plan for both FACTS II and FACTS Info and, in February 2009, a State/F official told us that they expected the plan to be approved by the end of that month. However, as of April 2009, the plan had not yet been approved.

APPENDIX IV. FOREIGN ASSISTANCE FRAMEWORK

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Goal: To help build and sustain democratic, well-governed states that respond to the needs of their people, reduce widespread poverty and conduct themselves responsibly in the international system.

Country category and definition Rebuilding countries States in, or emerging from and rebuilding after, internal or external conflict.

Peace and security Prevent or mitigate state failure and/or violent conflict.

Governing justly and democratically Assist in creating and/or stabilizing a legitimate and democratic government and a supportive environment for civil society and media.

Developing countries States with low or lower-middle income, not yet meeting MCC performance and political rights criteria.

Address key remaining challenges to security and law enforcement.

Support policies and programs that accelerate and strengthen public institutions and the creation of a more vibrant local government, civil society and media.

Strategic objectives Economic Investing in people growth Start or restart the Assist in the delivery of critical construction or social services, reconstruction including health of key internal and educational infrastructure facilities, and and market beginbuilding or mechanisms to rebuilding stabilize the institutional economy. capacity. Encourage social Encourage policies that deepen economic the ability of policies and institutions to strengthen establish institutional appropriate roles capacity to for the public and promote broadprivate sector in based growth. service delivery.

Transforming countries States with low or lower-middle income, meeting MCCa

Nurture progress toward partnerships on security

Provide limited resources and technical assistance to reinforce

Provide financial resources and limited technical assistance to

Provide financial resources and technical assistance to

Humanitarian assistance Address immediate needs of refugee, displaced, and other affected groups.

Encourage reduced need for future HA by introducing prevention and mitigation strategies, while contin-uing to address emergency needs. Address emergency needs on a short-term basis, as necessary.

End goal of U.S. foreign assistance Stable environment for good governance, increased availability of essential social services, and initial progress in creating policies and institutions on which future progress will rest. Continued progress in expanding and deepening democracy, strength-ening public and private institutions, and supporting policies that promote economic growth and poverty reduction. Government, civil society, and private sector institutions capable of sustaining

Graduation trajectory Advance to ―devel oping countries‖ or ―t ransforming countries‖ category.

Advance to ―t ransforming countries‖ category.

Advance to ―sus taining partnership‖ category or graduate

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Governing justly and democratically democratic institutions. Address issues of mutual interest.

Table (Continued) Economic Investing in people growth sustain improved promote broadlivelihoods. based growth. Address issues of Create and mutual interest. promote sustained partnerships on trade and investment.

Country category and definition performance and political rights criteria. Sustaining partnershipcountries States with uppermiddle income or greater for which U.S. support is provided to sustain partnerships, progress, and peace. Restrictive countries States of concern where there are significant governance issues.

Peace and security and law enforcement. Support strategic partnerships addressing security, CT, WMD, and counternarcotics. Prevent the acquisition and proliferation of WMD and support CT and counternarcotics.

Global or regional

Activities that advance the five objectives, transcend a single country‘s borders, and are addressed outside a country strategy.

Foster effective democracy and responsible sovereignty. Create local capacity for fortification of civil society and path to democratic governance.

Address humanitarian needs.

Promote a market-based economy.

Humanitarian assistance

Address emergency needs on a short-term basis, as necessary.

Address emergency needs on a short-term basis, as necessary.

Source: Department of State. Notes: CT = counterterrorism, MCC = Millennium Challenge Corporation, WMD = weapons of mass destruction

End goal of U.S. foreign assistance development progress. Continued partnership as strategically appropriate where U.S. support is necessary to maintain progress and peace.

Graduation trajectory from foreign assistance. Continue partnership or graduate from foreign assistance.

Civil society empowered to demand more effective democracies and states respectful of human dignity, accountable to their citizens, and responsible towards their neighbors. Achievement of Foreign assistance goal and objectives.

Advance to other relevant foreign assistance category.

Determined based on criteria specific to the global or regional objective.

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APPENDIX V. COMMENTS FROM THE DEPARTMENT OF STATE

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END NOTES 1

In the past, the DFA has served concurrently as USAID Administrator, a position that also reports to the Secretary of State. 2 More than 25 U.S. government entities are involved in providing foreign assistance. See appendix II. 3 Strategic Plan Fiscal Years 2007-2012: Transformational Diplomacy, U.S. Department of State and U.S. Agency for International Development, revised May 7, 2007. The five strategic objectives of transformational diplomacy are achieving peace and security, governing justly and democratically, investing in people, promoting economic growth and prosperity, and providing humanitarian assistance. 4 We concluded that, with respect to functions originally conferred by statute either upon the Secretary or the President, the subsequent redelegation by the Secretary of these functions was authorized by law. See GAO, Delegation of Authorities to the Director of Foreign Assistance, GAO B-316655 (Washington, D.C.: Oct. 29, 2008).

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GAO, Foreign Assistance: State Department Foreign Aid Information Systems Have Improved Change Management Practices but Do Not Follow Risk Management Best Practices, GAO-09-52R (Washington, D.C.: Nov. 21, 2008). 6 After fiscal year 2008, the performance plan and performance report were removed from the operational plans; they are now a separate document. 7 GAO, Results-Oriented Cultures: Implementation Steps to Assist Mergers and Organizational Transformations, GAO-03-669 (Washington, D.C.: July 2, 2003). 8 FACTS, which State/F began developing in mid-2006, is used to collect foreign assistance planning and reporting data, including plans for implementing current-year appropriated budgets and performance planning and reporting data. FACTS Info, which State/F created in 2007, is used to aggregate, analyze, and report data on U.S. foreign assistance programs under the authority of the DFA. 9 In this chapter, references to operating and administrative expenses include amounts derived from State‘s Diplomatic and Consular Protection account and USAID‘s Operating Expense account but do not include program funds used to support administrative costs. 10 The process also excludes billions of dollars of foreign assistance funds for programs outside State and USAID‘s jurisdiction. 11 USAID, ―Rema rks by Condoleezza Rice, U.S. Secretary of State: New Direction for Foreign Assistance, January 19, 2006, U.S. Department of State, Washington, D.C.,‖ http://www.usaid.gov/press/speeches/2006/ sp060119.html (accessed Apr. 2, 2009). 12 Each appropriation account is also assigned to a budget function and subfunction used by the budget committees to develop an overall fiscal plan—a system to classify budget authority outlays, receipts and expenditures according to the national needs being addressed. Function 150, International Affairs, includes maintaining peaceful relations, commerce, and travel between the United States and the rest of the world and promoting international security and economic development abroad. 13 Congressional Research Service. GAO did not independently verify this funding information. 14 Accounts at State and USAID that are not reflected in State/F‘s budget and planning processes for fiscal year 2008 include State‘s Diplomatic and Consular Program ($6.8 billion), Contributions to International Organizations ($1.4 billion) and International Peacekeeping ($2 billion) accounts, and USAID‘s Operating Expense account ($801 million). 15 This process is named after Section 653(a) of the Foreign Assistance Act of 1961, now codified at 22 U.S.C, §2413(a). This section states that not later than 30 days after the enactment of a law appropriating funds to carry out a provision of this act (other than section 451 or 637 of the Arms Export Control Act), the President shall notify Congress of each foreign country and international organization to which the U.S. government intends to provide any portion of the funds under such law and the amount of funds under that law, by category of assistance, that the U.S. government intends to provide to each. 16 GAO-09-52R. 17 GAO-03-669. 18 GAO, Managing for Results: Barriers to Interagency Coordination, GAO/GGD-00-106 (Washington, D.C.: Mar. 29, 2000). 19 GAO, Results-Oriented Government: Practices That Can Help Enhance and Sustain Collaboration among Federal Agencies, GAO-06-15 (Washington, D.C.: Oct. 21, 2005). 20 GAO-03-669. 21 GAO, Organizational Transformation: Implementing Chief Operating Officer/Chief Management Officer Positions in Federal Agencies, GAO-08-34 (Washington, D.C.: Nov. 1, 2007). 22 GAO-03-669. 23 Although State/F uses the term ―count ry-specific operational plan,‖ operating units other than countries submit operational plans. For example, in fiscal year 2008, State/F listed 190 operating units—155 countries, 11 USAID regional offices, and 24 State and USAID regional and functional bureaus based in Washington, D.C.—that were required to submit operational plans. State/F defines an operating unit as the organizational unit responsible for implementing a foreign assistance program for one or more elements of the foreign assistance framework. 24 GAO-03-669. 25 Prior to fiscal year 2008, the operational plan included the performance plan and performance report; these are now published as a separate document. 26 See appendix II for a list of the more than 25 U.S. departments, agencies, and other entities involved in providing foreign assistance. 27 State/F‘s guidance for operational plans defines an implementing mechanism as a binding relationship established between a U.S. Government agency and an outside party to carry out U.S. Government-funded programs, by authorizing the use of U.S. Government funds for (1) acquisition of services or commodities; (2) the provision of assistance (a grant); or (3) to fulfill specific agreements such as cash transfers to host-country governments. For the purposes of this chapter, we refer to implementing mechanisms as projects.

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GAO, Managing for Results: Agency Progress in Linking Performance Plans with Budgets and Financial Statements, GAO-02-236 (Washington, D.C.: Jan. 4, 2002). 29 We acknowledged in November 2008 (GAO-09-52R) that FACTS does not include information from agencies other than State and USAID; however, we also noted that contractual documents for FACTS I and FACTS II state that one of the purposes of FACTS is to combine all U.S. government planning and reporting on foreign assistance activities into one central data system. 30 Prior to fiscal year 2008, this information was required at the program element level, which includes a finer level of detail than the program area level. 31 State/F guidance states that each CAS will be a maximum of 15 pages in length and consist of four major sections: (1) introduction (1.5 pages); (2) overall strategic approach and priorities (2 pages); (3) discussion of up to five priority goals 2-3 pages per goal); and (4) resource assumptions (1-2 pages). Each CAS will also include two appendixes: (1) a bibliography of relevant technical analyses and (2) country analyses requirements. 32 The countries are Armenia, Bosnia and Herzegovina, Democratic Republic of the Congo, Honduras, Jamaica, Morocco, Mozambique, Nepal, the Philippines, and Tanzania. 33 Some countries, including Afghanistan and Iraq, will be exempt from producing a CAS based on the size of their programs and other factors. 34 The five country categories are rebuilding countries, developing countries, transforming countries, sustaining partnership countries, and restrictive countries. A sixth category, global or regional, captures activities that cross a single country‘s borders. 35 Two USAID Administrators have served as DFA, from June 2006 to April 2007 and from November 2007 to January 2009, respectively. 36 In September 2007, State/F established additional positions, for a total of 97. An additional position was added in January 2008, resulting in a total of 98. As of February 2009, 15 of the 98 positions were vacant. 37 The Bureau for Policy and Program Coordination, which was abolished in 2006, included several offices that were responsible for allocation of resources, strategic planning, and related functions. 38 GAO-03-669. 39 Although the Government Performance and Results Act requires these practices at the department/agency level, we have previously reported that they can serve as leading practices for planning within lower levels within federal agencies. For example, see GAO, Pipeline Safety: Management of the Office of Pipeline Safety’s Enforcement Program Needs Further Strengthening, GAO-04-801 (Washington, D.C.: July 23, 2004). 40 A limited presence country is one in which USAID has limited or no official presence but to which a regional office provides some foreign assistance. 41 GAO-06-15. 42 In this chapter, references to operating and administrative expenses include amounts derived from State‘s Diplomatic and Consular Protection account and USAID‘s Operating Expense account. Program funds used to support administrative costs are included in the operational plan process. 43 Title II of the Agricultural Trade Development and Assistance Act of 1954 (a.k.a. Public Law 480) ch. 469, 68 Stat. 454 (1954), codified as amended at 7 U.S.C. § 1691a, provides U.S. food assistance in response to emergencies and disasters around the world, and provides development-oriented resources to help improve long-term food security. Title II funding is appropriated to the Department of Agriculture and administered by USAID. 44 State/F‘s guidance states that the DFA must approve changes to (1) the overall funding amount for an operating unit; (2) the amount of funding for any account within an operating unit; (3) the overall funding amount for an objective; and (4) funding related to ―prot ected‖ program areas, program elements, implementing mechanisms, and other items such as congressional directives and administration priorities. 45 GAO, Highlights of a GAO Forum: Mergers and Transformation: Lessons Learned for a Department of Homeland Security and Other Federal Agencies, GAO-03-293SP (Washington, D.C.: Nov. 14, 2002). 46 GAO, Human Capital: Key Principles for Effective Strategic Workforce Planning, GAO-04-39 (Washington, D.C.: Dec. 11, 2003). 47 GAO-03-293SP. 48 Neither FACTS nor FACTS Info is intended to serve as an accounting or financial tracking system. Both State and USAID have separate systems for these purposes. 49 GAO, Foreign Assistance: State Department Foreign Aid Information Systems Have Improved Change Management Practices but Do Not Follow Risk Management Practices, GAO-09-52R (Washington, D.C.: Nov. 21, 2008). 50 Only programs under the authority of the DFA are currently detailed in FACTS. 51 GAO-09-52R.

In: Foreign Aid Reform Editor: Finn C. Hudson

ISBN: 978-1-61728-926-2 © 2010 Nova Science Publishers, Inc.

Chapter 6

RESTRUCTURING U.S. FOREIGN AID: THE ROLE OF THE DIRECTOR OF FOREIGN ASSISTANCE IN TRANSFORMATIONAL DEVELOPMENT Connie Veillette

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SUMMARY The creation of a new State Department position — Director of Foreign Assistance — has sparked congressional interest regarding the management, budgeting, and proposals for reform of U.S. foreign aid programs. Charged with coordinating U.S. assistance programs, the Director of Foreign Assistance (DFA) will have authority over most State Department and U.S. Agency for International Development (USAID) programs, although major foreign aid programs, such as the Millennium Challenge Account and the Office of the Global AIDS Coordinator will remain outside of his scope. The DFA is also tasked with providing ― guidance‖ to other agencies that manage foreign aid activities. Some assistance programs are scattered throughout numerous domestic policy agencies and the Department of Defense. The restructuring is part of Secretary Rice‘s ― transformational development‖ initiative, that seeks to use foreign assistance to transform recipient countries‘ economic development paths, and to graduate countries from a dependence on aid. Details of the restructuring have been unveiled with the release of a new Strategic Framework for Foreign Assistance. The Framework links strategic objectives with categories of countries that have shared characteristics or development challenges. Operational plans would design country-specific aid programs to meet those challenges. The FY2008 budget request has been developed by joint State Department and USAID teams to provide better coordination and coherence. While the current restructuring requires no legislative action, it raises a number of questions with regard to the management of foreign aid programs, funding levels, and reform options that will confront the 110th Congress. Supporters argue that it is a long overdue 

This is an edited, reformatted and augmented version of a CRS Report for Congress publication, Report #RL33491, dated January 23, 2007.

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reform of fragmented and uncoordinated assistance programs that will focus aid on strategic objectives and make programs more accountable. Some critics contend that its piecemeal approach will not result in comprehensive reform. Others fear that it will politicize aid programs, and put the focus on short-term objectives rather than long-term development. Administration officials have said that the current effort is the first step in a more thorough overhaul of U.S. foreign assistance. Larry Nowels, who retired from CRS in 2006, was an original co-author of this chapter. The creation of a new State Department position — Director of Foreign Assistance — has sparked congressional interest regarding the management of U.S. foreign aid programs, its possible impact on funding levels, and any possible future reform of foreign aid operations and account structure. The Director of Foreign Assistance (DFA), who serves concurrently as Administrator of the U.S. Agency for International Development (USAID) is Randall Tobias, the former Global AIDS Coordinator. Charged with coordinating U.S. assistance programs, the DFA has authority over most State Department and USAID programs, and will provide ― guidance‖ to other agencies that have foreign aid programs. Details of the restructuring have been unveiled in the form of a new Strategic Framework for Foreign Assistance.1 The restructuring raises a number of questions with regard to how Tobias will be able to coordinate aid programs spread throughout almost every government department. Executive officials have said that the current restructuring is a first step in a more thorough overhaul of U.S. foreign assistance.

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TRANSFORMATIONAL DEVELOPMENT Announced on January 19, 2006, the restructuring is part of Secretary Rice‘s ― transformational development‖ initiative that seeks to use foreign assistance to transform recipient countries‘ economic development paths, with the goal of graduating countries from U.S. assistance. A 2004 USAID White Paper defined transformational development as going beyond a traditional focus on raising living standards and reducing poverty. It would ― transform countries, through far-reaching, fundamental changes in institutions of governance, human capacity, and economic structure that enable a country to sustain further economic and social progress without depending on foreign aid.‖2 In addition to promoting transformational development, the same paper identified four further challenges to which U.S. assistance programs are designed to respond: strengthening fragile states; providing humanitarian relief; supporting U.S. geostrategic interests; and mitigating global and transnational ills. The concept of transformational development already has been applied by the Millennium Challenge Corporation (MCC) which manages another Bush Administration foreign aid initiative that rewards ― best performing‖ countries through a competitive process measuring achievements in the areas of governance, economic policies, and social programs. Also announced at about the same time was a related ― transformational diplomacy‖ initiative that will reposition diplomats to ― critical emerging areas,‖ enhance language and regional skills, and emphasize outreach to foreign populations. In this new environment of seeking transformational change in recipient countries through both development and diplomacy, Secretary Rice has argued for better coordination and policy coherence of U.S. assistance programs, with an emphasis on both short-term, and long-term strategic goals at

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the country and global level. Secretary Rice contends that the DFA position will accomplish those goals. Both initiatives signal a more prominent role for foreign aid after the terrorist attacks of September 11, 2001 and the beginning of the global war on terrorism. Since 2002, development has been included as one of three pillars — with defense and diplomacy — upon which U.S. national security rests.3 Countries with high poverty levels and undemocratic governments are considered permissive environments for terrorism and criminal activities. Under such a doctrine, foreign aid has come to be seen as a tool to promote national security in addition to the traditional view of aid as a long-term humanitarian endeavor that will generate good will for the United States and promote eventual trading partners.

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THE ROLE OF DIRECTOR OF FOREIGN ASSISTANCE The DFA has been charged with two missions: to develop a coordinated U.S. foreign assistance strategy; and to direct a transformation of foreign assistance to achieve the President‘s Transformational Development Goals.4 As both the USAID Administrator and the DFA, Tobias serves at the level equivalent to Deputy Secretary, reporting directly to the Secretary of State. USAID is, and remains, an independent agency under the restructuring. While it is considered independent, the Administrator reports to, and serves under, the foreign policy guidance of the Secretary of State. In testimony before the House Foreign Operations Appropriations Subcommittee on April 26, 2006, Administrator Tobias identified a number of challenges that he has begun to address. Among those challenges are: a planning and budgeting process that is fragmented among numerous departments and agencies; duplication of programs; poor accountability; and the lack of linkage between strategic objectives and implementation. The DFA has authority over foreign assistance programs managed by USAID and the State Department. In addition, the DFA will ― provide guidance‖ for foreign assistance delivered through other government agencies. Some, like the Millennium Challenge Corporation (MCC), the Peace Corps, and Treasury Department-managed international financial institutions and debt policy activities, are funded through foreign policy budget accounts. Others are managed and funded through Defense Department and domestic agency appropriations. With the increasing number of domestic policy agencies involved in foreign aid programs, as well as the Department of Defense‘s growing role in reconstruction and stabilization work, the actual percentage may be lower. When looking at calendar year 2005 disbursements of just the State Department and USAID, their percentage of the total U.S. foreign aid budget is about 53%, or $13 billion. In the same year, the Defense Department disbursed roughly 24%, mainly for reconstruction work in Iraq and Afghanistan that was funded in the FY2004 Supplemental. Other departments and agencies disbursed about $5.6 billion, or 22% of total official development assistance.5 As the size of foreign aid budgets and the number of operational agencies have increased, especially in recent years, a number of observers have highlighted the fragmentation of programs and the possible lack of coordination among them. Some critics also argue that the Bush Administration, while launching a number of innovative and important initiatives, has

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not articulated a coherent foreign aid policy strategy or an integrated set of core objectives within which to operate efficient and well-coordinated assistance programs.

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State and USAID Programs USAID manages most U.S. economic assistance programs, in some cases directly and in other cases jointly with the State Department. In FY2006, USAID manages $4.347 billion for programs addressing economic growth, health programs, and disaster and famine assistance. In addition, some funds managed by the State Department are transferred to USAID. Examples include narcotics and law enforcement funds that USAID uses for alternative crop development programs. Economic Support Funds (ESF) are co-managed by the State Department and USAID and provide assistance to strategic partners for a wide variety of purposes. In FY2006, ESF is estimated at $2.621 billion. Programs that State manages directly include the Global HIV/AIDS Initiative, Foreign Military Financing, International Narcotics and Law Enforcement, Migration and Refugee Assistance, Nonproliferation, Anti-Terrorism, and Demining (NADR), and International Military Education and Training (IMET). In FY2006, funding for these State-managed programs amounted to $10.6 billion. In total, the two agencies manage foreign aid programs of roughly $19.6 billion. In addition, there are other foreign policy-related agencies providing foreign assistance, whose funds are not managed by the State Department, including the Millennium Challenge Corporation; the Peace Corps; the Department of Treasury, and the Trade and Development Agency. At his USAID confirmation hearing on March 7, 2006, before the Senate Foreign Relations Committee, Ambassador Tobias said that the DFA would have responsibility for all foreign aid funding accounts over which Secretary Rice maintains authority, and that the Secretary would delegate her authority to the DFA.6 Nevertheless, it appears from statements made by other Administration officials that the State Department‘s Office of the Global AIDS Coordinator will not be under the DFA‘s control. It is also unclear as to the relationship between the DFA and State‘s Office of the Coordinator for Reconstruction and Stabilization.7 Table 1. Foreign Aid Accounts Under DFA Direction All USAID accounts Economic Support Fund SEED FSA Narcotics (INL) & ACI Migration & Refugee Assistance Nonproliferation (NADR) IMET Foreign Military Financing Peacekeeping Operations

Outside of DFA Scope Millennium Challenge Corporation PEPFAR (State) Peace Corps Inter-American Foundation African Development Foundation Treasury Dept. Technical Assistance Treasury Dept. Debt Relief

SEED — Assistance for Eastern Europe and Baltic States; FSA — Assistance for the Independent States of the Former Soviet Union; IMET — International Military Education and Training; PEPFAR — President‘s Emergency Plan for AIDS Relief.

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Table 1 lists the programs over which the DFA will have responsibility as well as those that may, at least initially, remain outside of his portfolio. Programs under his direction total about $15 billion in FY2006 and a requested $15.6 billion in FY2007. An additional $4 billion in FY2006 and $6.5 billion in FY2007 for State Department programs would remain outside of his control.

Domestic Policy Departments with Aid Programs

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The degree to which the DFA will be able to guide and coordinate the programs of entities falling outside the State Department and USAID has not been fully articulated and is likely to be one of the most difficult challenges faced by the new Director. Ambassador Tobias said at his confirmation hearing that he hoped to put in place a ― formal process‖ for achieving the DFA‘s mandate of coordinating across the government.8 Similar approaches have been tried in the past, but with limited impact. An entity legislated in 1973 by Section 640B of the Foreign Assistance Act of 1961 (FAA) — the Development Coordinating Council (DCC) — was intended to coordinate government-wide foreign assistance activities. The DCC, however, rarely met and according to USAID, exists today ― only as an 9 unimplemented provision in the FAA.‖ Some type of foreign assistance program exists in nearly every department and agency. Major programs exist in the Department of Agriculture (P.L. 480 food aid), the Department of Health and Human Services, the Department of Energy and the Department of Labor. Smaller programs are located in the departments of Commerce, Homeland Security, Justice, Interior and Transportation. In calendar year 2005, disbursements from these agencies amounted to roughly $5.6 billion.10 This represents about 22% of total foreign aid disbursements made in calendar year 2005.

DOD Programs The Department of Defense is playing an increasing role in post-conflict situations, and has for many years maintained its own programs supporting U.S. humanitarian responses and narcotics interdiction. Many of the programs now conducted by DOD are similar to those provided by the State Department through FMF, IMET, and even ESF funds. Even though the DFA is to provide guidance for all foreign assistance programs, it is unclear how much influence he will have over DOD programs in such strategic places as Iraq and Afghanistan.

Iraq and Afghanistan Assistance Congress has given authority to DOD to carry out reconstruction and stabilization programs in Afghanistan and Iraq subsequent to military actions there. Many of these funds have been provided through emergency supplementals, but some funds were included in regular appropriation bills. First established in the FY2003 Emergency Wartime Supplemental Appropriation (P.L. 108-11), the Iraq Freedom Fund authorizes DOD to provide counter-terrorism training for foreign governments, subject to the concurrence of the

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Secretary of State. In the FY2006 Defense Appropriation Act (P.L. 109-148), Congress provided $4.66 billion. The Commanders‘ Emergency Response Program (CERP) enables U.S. military commanders in Iraq and Afghanistan to respond to urgent humanitarian relief and reconstruction requirements that will immediately assist the Iraqi people. For FY2006, Congress provided up to $500 million. In addition, the FY2005 Emergency Supplemental Appropriation Act (P.L. 109-13) provided DOD funds to train and equip security forces in Iraq ($5.7 billion) and Afghanistan ($1.3 billion). Other funds exist to repair oil facilities and related infrastructure in and around Iraq, to transfer defense articles to Iraq and Afghanistan, and to provide health care to Iraqi children injured as a result of Operation Iraqi Freedom.

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Military Assistance and Training Beyond Iraq and Afghanistan, Congress has authorized additional programs to train and equip other foreign militaries. The FY2006 National Defense Authorization Act (P.L. 109163) authorizes up to $200 million annually to build the capacity of foreign militaries to conduct counterterrorist operations, or to participate in or support military operations in which the United States is a participant. The same Act allows DOD, with the concurrence of the Secretary of State, to reimburse any key cooperating nation for logistical and military support provided in connection with U.S. military operations in Iraq, Afghanistan, or the global war on terrorism. The FY2006 Defense Appropriation Act (P.L. 109-148) provided $805 million for such reimbursements. The FY2006 authorization act also authorizes up to $100 million annually for services, defense articles, and funds to the Secretary of State to facilitate reconstruction, security, or stabilization assistance to a foreign country. Humanitarian Assistance Congress has also given DOD authority to provide humanitarian assistance in response to either military operations or natural disasters through a number of provisions in defense appropriation measures or authorization acts. For FY2006, Congress provided $61.5 million for humanitarian and civic assistance activities in host nations in conjunction with military operations. DOD is also authorized to provide transportation of humanitarian relief supplies, disaster assistance, and excess nonlethal supplies. Counter-Drug and Anti-Terrorism Assistance The Defense Department has taken on increasing responsibility for drug interdiction and anti-terrorism activities worldwide. For FY2006, DOD funding for such activities totaled $917.7 million. DOD counter-drug activities are authorized in Peru, Colombia, Afghanistan, Bolivia, Ecuador, Pakistan, Tajikistan, Turkmenistan, and Uzbekistan.

RESTRUCTURING FOREIGN AID MANAGEMENT AND PROGRAMS Administrator Tobias has taken two steps to accomplish his mission of providing better coordination of programs and to develop an overall strategy for U.S. foreign assistance. The first involves organizational measures to address a fragmented planning and budgeting process. The second involves potential changes in programs and implementation to achieve

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transformational development. While the second could very well involve a number of other departments and agencies that provide foreign assistance, recent Tobias statements indicate that his initial focus will be on coordinating USAID and State Department programs.

Organizational Reform Prior to the creation of the DFA Office, separate offices within State and USAID maintained independent budgeting and planning activities, resulting in possible duplication and lack of coordination. The DFA Office has drawn strategic, budget, and program planning staff from both State and USAID. The size of the office will range from 80 to 100 staff, with approximately 25 from the State Department‘s Bureau of Resource and Management and the office of Special Initiatives. The remaining staff will come from USAID. The centralized planning and budgeting operation is designed to provide coherence and coordination, and to reduce duplication among programs. It is also proposed as a better way to ensure easier tracking of foreign assistance, a problem that Congress has urged USAID to solve. The new office is overseeing the development by USAID missions of FY2007 operational plans for each country. This initial focus will be on USAID programs, but the plan envisions that 67 countries will have FY2007 operational plans that include all U.S. foreign assistance resources. Operational plans are to indicate the funding levels for various activities, as well as performance measures. Plans are to be reviewed in Washington for consistency with U.S. foreign policy goals before funds are allocated. The timetable is to have operational plans for every country with a USAID mission by January 2007.

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Programmatic Reform The second of Tobias‘ proposed reforms includes the recently unveiled Strategic Framework that establishes objectives for U.S. foreign assistance and goals and performance indicators for recipient countries. The Framework links transformational development goals with funding sources and activities. Tobias describes the Framework as a roadmap to establish goals and performance measurements, and to guide country teams in defining activities that will achieve those goals. The Framework is being used as the basis for integrated budget planning for State and USAID beginning with the FY2008 budget request. The current proposal creates five categories of countries.11 The first —Rebuilding Countries — would include post-conflict states such as Afghanistan, Haiti, Sudan, Iraq and Somalia. Transforming Counties would include low and lower-middle income countries that meet MCC performance criteria. The category of Sustaining Partnership Countries would include higher income countries with which the United States maintains economic, trade, and security relationships beyond foreign aid. Restrictive Countries would include authoritarian governments, most of which are ineligible for U.S. aid. Programs in these countries operate through nongovernmental organizations or through entities outside the country. The fifth category — Developing Countries — would include low and lower-middle income countries that are not yet meeting MCC performance criteria. A sixth category encompasses global or

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regional programs that transcend any one country‘s borders, or are addressed outside of a country strategy. Each category represents common challenges around which aid programs would be designed and coordinated. While the list of countries in each category has not been released, it is conceivable that some recipient countries might object to their categorization, particularly if they face more than one challenge to development. For example, some could argue that Colombia is a post-conflict state, while others would make the case that it is either transforming or a strategic partner. The framework includes five aid objectives around which programs are to be designed: peace and security; governing justly and democratically; investing in people; economic growth; and humanitarian assistance. Country teams would make recommendations on country-specific aid programs. Critics of the Framework have expressed concern that categorizing countries will result in unidimensional programs when development problems are often multidimensional. Others fear that the Framework is focused on strategic objectives to the neglect of poverty alleviation, which they contend is the underlying cause for instability. Still others believe that the restructuring advantages a short-term strategic approach over a long-term development perspective. The Administration counters that the Framework is flexible enough to deal with any number of development issues a country may have. Further, poverty reduction was recently incorporated as one of the end goals of aid, in response to criticism about its initial omission. They also contend that reaching short-term strategic goals will assist in long-term development.

The FY2008 Budget The DFA is overseeing the process of developing the FY2008 foreign aid budget for both the State Department and USAID. The process includes the coordination of both State and USAID functional bureaus into integrated teams that define program priorities for the strategic objectives and country categories, determining the array of programs for each category. Country-focused teams make country-specific recommendations that undergo senior review and presentation to the Secretary of State in an integrated budget format. The FY2008 budget will be presented to Congress in February 2007. The format of the final budget is unclear at this point, although DFA officials have said it will be one integrated document encompassing both State and USAID programs. No change to the account structure is occurring, but it is likely that the budget and accompanying budget justifications will be structured around the strategic objectives as represented in the new Framework. Until the budget is submitted, it is not possible to evaluate the effect of the Framework on program or country funding levels. The FY2007 ‘Fast-Track’ Process At the same time that the FY2008 budget is being planned, the DFA has undertaken a FY2007 ― fast-track‖ process for 67 countries. This process is meant to accelerate the implementation and development of country operational plans, that will also be eventually developed for all recipient countries. Country teams will review the FY2007 allocations for the 67 countries and will re-allocate some funding to reflect the new strategic framework. This review was scheduled to begin in late summer/early fall and to be completed by the end

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of the year. A request to reprogram these funds is expected to be sent to Congress after the FY2008 budget submission.

EARLIER ATTEMPTS AT FOREIGN AID REFORM While reforming U.S. foreign assistance strategy and programs has been a matter raised a number of times by past Administrations, members of Congress, public policy think-tanks, and American non-governmental organizations (NGOs), implementation of such initiatives has proved difficult. During the past two decades, Congress and the executive branch have considered three broad foreign aid reform proposals, each of which stalled.

Hamilton-Gilman Foreign Aid Reform Task Force

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With an increasing recognition of changing global conditions near the end of the Cold War and 14 years after the previous overhaul of U.S. foreign aid policy, two senior members of the House Foreign Affairs Committee — Representatives Lee Hamilton and Ben Gilman — were asked to shepherd a bi-partisan effort to re-write basic foreign aid laws. The initiative was intended to draft legislation that reflected new realities of U.S. foreign policy, narrow and more clearly define key American foreign aid objectives, streamline congressional restrictions placed on executive implementation of the program, and restore congressional confidence in the purpose and achievements of foreign assistance. Although the House Foreign Affairs Committee endorsed legislation reflecting most of the Task Forces‘ recommendations, key Members, including Representative Gilman, dissented from some of the major proposals. Without executive and Senate support, the initiative died.

Clinton Administration Initiative At the outset of the Clinton Administration in 1993, Deputy Secretary of State Clifford Wharton was named to lead a review of U.S. foreign aid policy that would design a post-Cold War policy framework and reform USAID. While the Wharton review never published a final report, in late 1993 the Administration submitted to Congress the Peace, Prosperity, and Democracy Act (PPDA), a bill that included many ideas that arose during the Wharton review. Congress raised concerns over proposals to increase Presidential flexibility in managing foreign aid programs and to consolidate funds into a more narrow set of appropriation accounts focused on strategic objectives as articulated by the executive branch. While the House passed a modified version of the PPDA, the bill stalled in the Senate and was not resubmitted by the Administration in the 104th Congress.

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Consolidation of USAID into the State Department Arguing that the Secretary of State should have more direct control over all tools of U.S. foreign policy, a number of analysts and members of Congress proposed in the mid-1990s to abolish the U.S. Information Agency (USIA), the Arms Control and Disarmament Agency (ACDA) and USAID, and consolidate their operations within the State Department. After three years of debate, Congress enacted legislation in 1998 (Division G of P.L.105-277), transferring USIA and ACDA into State, but retaining USAID as an independent agency. The legislation, however, further required that the USAID Administrator report to and serve under the foreign policy guidance of the Secretary of State. This remains the current relationship between USAID and the Department of State.

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ISSUES FOR CONGRESS As with any restructuring initiative, the creation of the DFA raises a number of questions with regard to implementation. The restructuring initiative has been applauded by many as marking the beginning of what they perceive as a long overdue effort to reform a cumbersome and fragmented U.S. foreign assistance program. Some supporters of the plan, however, believe it does not go far enough and that the Administration is missing an opportunity for launching a much bolder, and necessary reform effort. Some critics have expressed strong concern that the new initiative may lead to a greater degree of aid politicization and that USAID will be further marginalized as a key maker of U.S. development policy. As currently envisioned, Congress will not have a direct role in the restructuring, although key congressional committees are likely to maintain close oversight as the plan moves forward. The first formal opportunity for the 110th Congress to review the restructuring plan will be in February 2007 when the FY2008 budget is submitted to Congress. It is likely that a request to reprogram FY2007 funds to reflect the new strategic framework will be presented to Congress for approval soon after the FY2008 budget is unveiled.

Coordination of Programs Secretary Rice has argued that more coordination and coherence is needed in foreign assistance programs in order to meet transformational development goals. With some 18 foreign aid accounts in both the State Department and USAID appropriations, and numerous other programs scattered throughout other government agencies, Secretary Rice has not been the first to observe that the U.S. foreign aid apparatus is cumbersome and lends itself to inefficiency and redundancy. A number of programs have similar or identical purposes, but management is split between USAID and State. It is unclear at this point how much authority the DFA will have to coordinate activities, and what effect better coordination will have on funding levels. For example, counternarcotics and democracy programs are shared between USAID and State. Questions have been raised as to whether better coordination will produce efficiencies, reduce redundancy,

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and result in more effective programs. It is also unclear how much authority the DFA will have over State Department offices that are not formally a part of his portfolio. For example, the President‘s Emergency Plan for AIDS Relief (PEPFAR), administered by the Global AIDS Coordinator, is not formally a part of the DFA‘s budgeting authority. The Coordinator also reports directly to the Secretary of State. While the Director of Foreign Assistance has been granted authority over State Department and USAID aid programs, a number of other foreign aid agencies remain outside the scope of the Director‘s responsibility. As mentioned earlier, the largest is the Millennium Challenge Corporation, but several others, like the Peace Corps, the Overseas Private Investment Corporation, and the Trade and Development Agency maintain smaller but important aid activities. In addition, the Treasury Department is responsible for U.S. participation in the World Bank and a number of other international financial institutions. It is unclear how the DFA will provide ― guidance‖ to these types of programs in light of his mission to develop a coordinated U.S. foreign assistance strategy government-wide. There is also concern that if a truly coordinated foreign assistance strategy is achieved, countries that are not considered prime candidates for transformational development, but who nonetheless are in need, will see their assistance reduced in favor of those countries that are moving in the right direction.

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Politicization of Aid Programs and the Role of USAID Some critics of the restructuring fear that long-term development and poverty reduction goals, the traditional concern of USAID, will be overwhelmed by the demands of shorterterm strategic considerations, often of high priority for the State Department. The need to balance these often competing objectives will be challenging. Some observers have argued that USAID has lost considerable influence in past years due to the separation of policy and implementation in which the State Department, as the stronger agency, has gained significant authority over policy. Examples include creating coordinators at State to oversee aid programs in Eastern Europe and the former Soviet Union, shifting primary responsibility over international HIV/AIDS programs from USAID to the Global AIDS Coordinator at the Department, and dividing democracy promotion activities between the two agencies. Others fear that the role of USAID missions is being diminished in favor of a Washington-based planning process. The future of USAID is unclear at this juncture. Those who believe in USAID‘s traditional mission of promoting long-term development fear that the agency will be relegated to a position of solely implementing programs rather than shaping development policy. Secretary Rice and other senior Administration officials, however, contend that the reconfiguration will strengthen USAID‘s role and status. Since the DFA will also serve as USAID Administrator, they argue, USAID will more likely participate in the policy and budget decision-making process to a greater extent than at present. At his confirmation hearing, Ambassador Tobias noted that a difficulty faced by his predecessor at USAID, Andrew Natsios, was the time consumed negotiating with State Department officials over whom the Administrator had no authority. This would no longer be the case, he argued, since the DFA would have such authority.12

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Reforms Deferred and Subsequent Initiatives During the State Department‘s 2005 review of foreign aid reforms, a number of other policy options were considered, but either dropped or deferred until later. It appears that the Department seriously considered creating a more formalized position of either a Deputy Secretary of State or Undersecretary for foreign aid. Also planned but eventually dropped was a proposal to restructure the current appropriation accounts. This option would have required extensive review and ultimate approval by Congress. Administration officials have said that the current restructuring effort is only the first step in a more expansive reform of foreign aid, suggesting that issues considered but dropped may be part of subsequent initiative, perhaps in the 110th Congress. But a number of observers note that a piecemeal approach to comprehensively reorienting U.S. foreign aid is particularly difficult, especially in the final two years of an Administration. They argue that the State Department should have aimed for a much broader plan, consulted with Congress throughout the review process, and presented a complete legislative package for congressional approval this year.

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Congressional Priorities Even previous to the current aid restructuring, some observers have asserted that congressional earmarks hamper the Administration‘s flexibility to respond to changing world events and to prioritize aid objectives. Congress regularly exercises its prerogative to direct funds to certain countries and for certain objectives in the annual foreign operations appropriation bills that in many cases differ from the Administration‘s budget request. Because the initial framework is being implemented within existing appropriation accounts, and without legislation that would restructure foreign aid in general, it is possible that congressional priorities may not completely correspond to the strategic framework as developed by the DFA. For example, the FY2007 Foreign Operations bill reported by the Senate Appropriations Committee (S.Rept. 109-277) contains numerous directives with regard to the level of funding for programs and activities, as well as recipient countries. The Senate bill restructures some accounts, consolidating several programs into a $1 billion Democracy Fund, and putting all health related programs into the Child Survival and Health account. The House-passed bill (H.R. 5522/H.Rept. 109-486) creates a Trade Capacity Enhancement Fund that totals $522 million. How congressional priorities will be reflected in the framework and in the FY2008 appropriations bills is a challenge Congress and executive officials will have to confront.

End Notes 1

The Framework is available at [http://www.state.gov/f/]. U.S. Agency for International Development, ― U.S. Foreign Aid: Meeting the Challenges of the Twenty-first Century,‖ January 2004. 3 Executive Office of the President, U.S. National Security Strategy, 2002 and 2006. 4 U.S. Department of State Fact Sheet: New Direction for U.S. Foreign Assistance, January 19, 2006. 5 Calculations by CRS from information reported by the United States to the Development Assistance Committee (DAC) of the Organization for Economic Cooperation and Development (OECD) for calendar year 2005. 2

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DOD figures include supplemental funds that were appropriated for FY2004, but not disbursed until 2005, and represent a large increase from the previous year‘s level of $1.6 billion. 6 See exchange between Senator Sarbanes and Ambassador Tobias at the Senate Foreign Relations Committee hearing on March 7, 2006. 7 ―St ate Department Officials Hold a Background Briefing on U.S. Foreign Assistance -News Briefing,‖ Political Transcripts by CQ Transcriptions, January 19, 2006. In briefings to Congressional staff, department officials indicated that the exact accounts over which the DFA would have authority had not been fully determined. 8 See exchange between Senator Lugar and Ambassador Tobias at the Senate Foreign Relations Committee hearing on March 7, 2006. 9 See ― USAID History,‖ found at [http://www.usaid.gov/about_usaid/usaidhist.html]. 10 Calculated by CRS, from information reported by the United States to the Development Assistance Committee (DAC) of the Organization for Economic Cooperation and Development (OECD) for calendar year 2005. 11 This information is drawn from Stewart Patrick, ―Forei gn Aid Reform: The Latest Skinny from the Inside,‖ Center for Global Development, May 8, 2006. 12 See exchange between Senator Sarbanes and Ambassador Tobias at the Senate Foreign Relations Committee hearing on March 7, 2006.

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Chapter 7

OPENING STATEMENT OF CHAIRMAN JOHN F. KERRY, U.S. SENATE COMMITTEE ON FOREIGN RELATIONS, HEARING ON "REFORMING U.S. FOREIGN AID POLICIES"* WASHINGTON, D.C. Senate Foreign Relations Committee Chairman John Kerry (DMA) today chaired a hearing titled, Reform: Foreign Aid and Development ―The Case for reform, the Administration‘s new development process.

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Chairman Kerry’s opening statement as prepared is We are here today to continue an ongoing conversation on foreign aid reform. For the past six months, the administration has been busy laying the groundwork for a new development agenda. First, the President issued a bold 2010 international affairs budget that significantly increases funding for vital programs in Pakistan and Afghanistan, begins to rebuild our diplomatic and development capacity, and renews our commitment to essential programs from education to HIV/AIDS and hunger. Then, earlier this month, President Obama and other G8 leaders announced a $20 billion food security partnership to provide small farmers in poor countries with the seeds, fertilizers, and equipment they need to break a decades-long cycle of hunger, malnutrition and dependency. Finally, the State Department unveiled plans comprehensive assessment designed to improve policy, strategy, and planning at the State Department. And while we are still awaiting a nominee to head the U.S. Agency for International Development I am confident that a name will soon be forthcoming. These are welcome changes that demonstrate ocessthis and a bold development plan. Congress will be a strong partner in those efforts providing the resources, legislation, and authorities to ensure that our development programs are funded and designed to meet our *

This is an edited, reformatted and augmented edition of a statement given before the U.S. Senate Committee on Foreign Relations, dated July 22, 2009.

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John F. Kerry

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priorities. We look forward to actively working with the administration to shape the Quadrennial Diplomacy and Development Review and other important priorities. While there is some debate on what form foreign aid reform should take, there is a broad consensus in the development community about why reform matters. Experts agree that the strength of our development programs is directly linked to success or failure in front-line states like Afghanistan and Pakistan. They agree that USAID is more critical to achieving our foreign policy objectives than ever before yet it lacks the tools, capacity and expertise to fulfill its mission. They agree that too often decision-makers lack basic information about the actual impact of our development programs. They also agree that excessive bureaucracy and regulations and fragmented coordination are hampering our efforts to swiftly and effectively deliver assistance. And they agree that even as we plan for broad, fundamental reform, there are many steps we can take in the interim to dramatically improve the effectiveness of our foreign aid efforts. We assembled a small bipartisan Senate working group to formulate legislation that makes short-term improvements while setting the stage for longer-term reform. Senators Lugar, Menendez and Corker and I have been developing initial reform legislation that we believe goes a long way towards improving our short-term capacity to deliver foreign aid in a more accountable, thoughtful and strategic manner. One provision in the bill that we believe is particularly important establishes an independent evaluation group, based in the executive branch, to measure and evaluate the impact and results of all U.S. foreign aid programs, across all departments and agencies. This new institution can address a fundamental knowledge gap in our foreign aid programs quite simply, it will help us understand which programs work, which do not, and why. I want to emphasize, this legislation only represents the first step in a longer reform process. But we believe it sends an important bipartisan signal that foreign aid reform will be a priority for this committee in the years ahead.

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Chapter 8

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OPENING STATEMENT OF SENATOR RICHARD G. LUGAR, U.S. SENATE COMMITTEE ON FOREIGN RELATIONS, HEARING ON “THE CASE FOR REFORM: FOREIGN AID AND DEVELOPMENT IN A NEW ERA”* I thank the Chairman for calling this hearing, which comes at a critical time in the planning for the future of development assistance programs. The State Department currently is engaged in a quadrennial review of diplomacy and development. This review is likely to have far reaching implications for foreign assistance policy and organization. The basic question with respect to development is how we can best strengthen the capacity of USAID to run effective foreign assistance programs. Earlier the premier development agency in the world, both governmental and NGO. I want people coming here to consult with us about the best way to do anything expressed by Secretary Clinton, and I have confidence in the extraordinary development expertise housed at USAID. But during the last two decades, decision-makers have not made it easy for USAID to perform its vital function. Development resources declined precipitously in the 1990s and decisions to reorganize in pursuit of better coordination between the Department of State and policy capacity. Events since 2001 have spurred greater investments in foreign assistance. But many of these resources have been located outside USAID. Roughly two dozen departments and agencies have taken over some aspects of foreign assistance, including the Department of Defense. I believe the starting point for any future design of our assistance programs and organization should not be the status quo, but rather the period in which we had a wellfunctioning and well- resourced aid agency. To be a full partner in support of foreign policy objectives, USAID must have the capacity to participate in policy, planning, and budgeting. These functions have migrated to the State Department, feeding the impression that an independent aid agency no longer exists.

*

This is an edited, reformatted and augmented edition of a statement given before the U.S. Senate Committee on Foreign Relations, dated July 22, 2009.

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170

Richard G. Lugar

The President has advocated doubling foreign assistance over time. If the Administration pursues this goal, it is crucial that Congress has confidence that these funds will be used efficiently. USAID -- the agency housing most of our government‘s -- must have the capacity to evaluate programs anddevelopment experience disseminate information about best practices and methods and it must have a central role in development policy decisions. With these objectives in mind, I have been working with Senator Kerry, Senator Corker, Senator Menendez, and others on a bill that will strengthen USAID. We will introduce this bill soon. The draft bill has received strong initial support from outside groups lea by the Modernizing Foreign Assistance Network. Our witnesses today have all received a draft of the bill, and we look forward to their comments on it. The legislation that we have developed promotes capacity, accountability, and transparency in U.S. foreign assistance programs. There are three deficiencies we are trying to address. First, the evaluation of assistance programs and the dissemination of knowledge have deteriorated in the last couple of decades. While USAID was a respected voice in this regard during the 1980s, an evaluation capacity has been allowed to wither. The bill strengthens of an internal evaluation and knowledge center. The bill also re-establishes a policy and planning bureau, a function that has migrated to the Department of State. It is crucial that USAID be able to fully partner with the State Department in decisions relating to development. Second, U.S. foreign assistance programs are littered among some two dozen agencies with little or no coordination. We do not have adequate knowledge of whether programs are complementary or working at cross-purposes. The bill requires all government agencies with a foreign assistance role to make information about its activities publicly available in a timely fashion. It designates the USAID Mission Director as responsible for coordinating all development and humanitarian assistance in-country. And, it creates an independent evaluation and research organization that can analyze and evaluate foreign assistance programs across government. Third, staffing and expertise at USAID have declined since the early 1990s, even as funding for foreign assistance programs has increased. This decline in capacity has resulted in other agencies stepping in to fill the gap. While Congress has begun to provide the necessary resources to rebuild this capacity, the agency does not have a human resources strategy to guide hiring and deployment decisions. The bill would require such a strategy and a highlevel task force to advise on critical personnel issues. The bill also encourages increased training and inter-agency rotations to build expertise and effectiveness. It is especially important that Congress weigh in on this issue because the Administration has yet to appoint a USAID Administrator or fill any confirmable positions in the agency. Without an Administrator in place, USAID is likely to have less of a role in the current State Department review than it should have. The State Department review process should include strong voices advocating for an independent aid agency, and it is not clear that this is happening. Both Congress and the State Department should be offering proposals on how to improve development assistance. Our legislation does not rule out any options that the State Department may propose as a result of its review. But ultimately, Congress will have to make decisions on resources for development programs. Given budget constraints, it is essential

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that Congress has confidence in how development resources are spent. Building capacity at USAID will be an important part of this calculation. The issues that we face today from chronic poverty and hunger to violent acts of terrorism require that we work seamlessly toward identifiable goals. I look forward to working with colleagues on the Committee to advance our bill and to support the development mission that benefits our long-term security.

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Chapter 9

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TESTIMONY OF PETER MCPHERSON, PRESIDENT, ASSOCIATION OF PUBLIC AND LAND-GRANT UNIVERSITIES (APLU) AND FORMER ADMINISTRATOR, U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT (USAID), BEFORE THE U.S. SENATE COMMITTEE ON FOREIGN RELATIONS, HEARING ON “THE CASE FOR REFORM: FOREIGN AID AND DEVELOPMENT IN A NEW ERA”* I am pleased to appear before this committee again and I appreciate the attention the committee is giving to foreign aid reform. Let me start by urging the committee to pass out of committee the legislation you now are considering that would increase accountability; strengthen and coordinate U.S. foreign assistance in the field; and augment the technical capacity and human resources of the U.S. Agency for International Development (USAID). I have some specific suggestions and I think it is important the Committee act on these matters.

THE ORGANIZATION OF USAID AND RELATED MATTERS Former USAID Administrators Brian Atwood, Andrew Natsios and I provided our view in detail in the November 2008 edition of Foreign Affairs. We argued that a strong independent USAID is important for development to play its appropriate role in the three ― D s‖ of Defense, Diplomacy are widely held in theDevelopment. development community, with many believing that the head of USAID should be a member of the cabinet. I personally feel it is practical for the USAID Administrator to report to the Secretary of State but otherwise be separate from the U.S State Department. That was the structure when I *

This is an edited, reformatted and augmented edition of a statement given before the U.S. Senate Committee on Foreign Relations, dated July 22, 2009.

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Peter McPherson

was Administrator for almost seven years in the 1980s. I worked hard to respond to the needs of the Secretary of State but also led the development work. I had strong support from both Secretaries of State under whom I served. I know there were times when my greater freedom of action and independence was appreciated, e.g., some of our approaches to famine issues, etc. The Obama Administration has apparently decided a somewhat different approach to the State Department USAID relationship and, of course, I respect their right and responsibility to do so. However, I feel there are a number of steps that can be taken, many of them reflected in the bill before this committee, that can greatly strengthen USAID and benefit the State Department in leading U.S. foreign policy. It is important that the technical and senior career leadership of USAID be augmented with additional people. Not enough can happen without these people. In fact, if USAID had the sizeable technical and senior leadership workforce today that it did 20 years ago there would be less need for the legislation you are considering here. I believe the Committee, appropriators and the State Department support USAID‘s Leadership Initiative, as do I. This is a major step technical capacity. I applaud these provisions in the bill. Augmenting staff must be more than adding junior people. USAID needs to bring in senior staff while a new, younger workforce gains experience. A priority should be placed on recruiting excellent retirees for senior staff positions during the next few years. For example, USAID should look to senior university faculty with long experience working on agricultural issues in the developing world. I know this is easier to suggest than actually do, but our universities are populated with many experienced faculty willing to serve. My organization of the large public and land-grant universities would be happy to help USAID identify appropriate university people. USAID should consider using its Administrative Determination authority positions to make these appointments. This is a decades old authority for the explicit purpose of bringing in senior technical staff. The legislative authority is, however, fairly broad and has been used to recruit political appointees as well technical people and senior leadership. It is a flexible tool that is faster and more certain than the usual process and should be helpful for immediately building senior technical and leadership strength. It is critical that USAID have its own budget and policy capability, preferably in the same USAID office. USAID needs to be able to argue a coherent overall budget to the State Department in order for there to be a full voice for development. Budget and policy drive each other and are inextricably linked. I have both a management and finance background and know that USAID/development must have a role in creating their budget in order to sustain a coherent and sustained structure. A USAID budget function will not detract from the State Department‘s ability to consider those affairs budget. USAID must have a strong policy office to be a creditable organization, as your bill recognizes. The development agency has to be able to provide well-reasoned analysis and recommendations for the State Department to consider. I support the bill‘ s provision to reestablish a Bureau of Policy and Strategic Planning at USAID. The fear of a merger/closer integration of USAID into the State Department has always been that the immediate foreign policy concerns of the more powerful State Department would generally undermine the long-term development goals of USAID. Without budget and policy strength at USAID that scenario is more likely to happen. While foreign assistance is

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part of overall U.S. foreign policy, development must have a strong voice to articulate how a development strategy strengthens foreign policy goals. I applaud the bill‘s The function should never have been cut back atfocus on USAID. An organization that does not learn from its mistakes is bound to become sterile and ineffective. I suggest that the strong evaluation function be within USAID itself. It takes senior level attention but I think appropriate staffing can avoid some of the institutional bias and engender much genuine independent and constructive analysis. The evaluations, as suggested in the bill, should focus on a few key outcomes as recommended in the bill, not process and inputs. I support reestablishing the lessons learned center suggested in the bill, probably associated with the evaluation office. I also suggest that additional reflection be given on -agency evaluationthe bill‘s function. Even given the bill‘s safeguards, rlapping its functions with the Inspector Generals and Government Accountability Office (GAO). Instead, I recommend that the cross-agency office undertake major studies of issues and problems. I believe there is some thinking along these lines in the committee. This office could be something of a ―think tank‖ that is kept vibrant and relevant by a board from several agencies. This certainly is not full agency coordination, but it could contribute to that goal. A National Academy model could be considered, for example. Overall, I support the bill‘ s recommendation of coordination in the field. There needs to be someone in the field, frequently the USAID mission director, who is responsible for the overall coordination of U.S. assistance programs, and in turn, reports to the ambassador. The lack of this person is a major problem in many countries. I realize this gets complicated in individual countries but the problem must be dealt with. I applaud Secretary of State Hillary Clinton for the decision to undertake a Quadrennial Diplomacy and Development Review. This is a long overdue. It is important for development to have a senior voice in that review to achieve its goals.

THE DEVELOPMENT AGENDA I applaud the committee‘s earlier this year in passing S.384, The Global Foodleadership Security Act, authored by Sens. Richard Lugar and Bob Casey. While a number of factors were responsible for the acute global food crisis last year, one of the major causes was agricultural productivity in many developing countries. S.384 will commit the U.S. to increase investment in agriculture, in part by engaging U.S. colleges and universities in collaboration with higher education institutions in developing countries to build their research, training and outreach capacities. The President‘s and leadership on this issue is wise and also deeply appreciated. In general, I believe that during the last 20 years USAID has moved away from long-term development and more toward transferring goods and services. The issue is not easy because the immediate needs are so great. But it is important that long-term development not be crowded out and that is why I am pleased by the support for agriculture. Sustained progress usually comes by building human resources; creating and distributing technology; and building institutions, stable governments and reasonable economic policies. Often infrastructure plays a key role. There clearly needs to be a balance between programs for

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addressing urgent short-term human needs and longer term development activities to sustain progress. That is why the food security legislation passed earlier this year is so important. I note that much of the progress around the world in the last several decades has been in countries where leadership wanted to see better lives for their people and where the country has taken control of their own future. We need to do a better job of listening to these countries and how they define their needs to the extent practical as we plan our development program. This is the real strength of the Millennium Challenge Corporation (MCC). But we should not limit giving full consideration to needs as set forth by only MCC countries. There should be a its needs. Note that this is a ― presumption‖ are critical. I close by again congratulating the Committee for considering foreign aid reform legislation and for its earlier passage of S.384.

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Chapter 10

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STATEMENT OF PROFESSOR JEFFREY D. SACHS, DIRECTOR OF THE EARTH INSTITUTE AT COLUMBIA UNIVERSITY AND SPECIAL ADVISOR TO UN SECRETARY GENERAL BAN KI-MOON ON THE MILLENIUM DEVELOPMENT GOALS, BEFORE THE SENATE FOREIGN RELATIONS COMMITTEE, HEARING ON “THE CASE FOR REFORM: FOREIGN AID AND DEVELOPMENT IN A NEW ERA”* Mr. Chairman and members of the Committee, thank you for the honor of allowing me to testify today, and for your leadership in addressing the reform and upgrading of US official development assistance (ODA). ODA is an integral part of U.S. foreign policy. Yet it is currently too poorly directed, too small in scale, and too fragmented to play the role that it should. I make several specific recommendations to correct these problems.1

DIRECTION OF OFFICIAL DEVELOPMENT ASSISTANCE The core purpose of ODA should be to help low-income countries to overcome obstacles to Sustainable Economic Development. Sustainable economic development means the longterm process of economic advancement consistent with environmental and social sustainability. Obstacles to sustainable economic development may include: low levels of agricultural productivity, absence of infrastructure, vulnerability to natural conditions (climate, water, disease), excessive fertility rates and population growth, extreme deprivation of girls, women, or ethnic minorities, and poor public policies. Development assistance is highly effective when it is focused on these specific objectives. It is much less effective when it is diffuse and lacking in clear and quantified *

This is an edited, reformatted and augmented edition of a statement given before the U.S. Senate Committee on Foreign Relations, dated July 22, 2009.

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Jeffrey D. Sachs

goals. There are countless development aid successes in recent years, including disease control (malaria, measles, leprosy, guinea worm, and others), improved school enrolment and completion, increased agricultural output, and deployment of community health workers. The key to success is to combine good science, cutting-edge technology, and solid management of aid efforts at country level. The new $20 billion G8 initiative to promote smallholder agriculture could become another great success story, producing an African Green Revolution with the same significance as Asia‘s Green Part of the job of a good foreign assistance program is to diagnose the obstacles facing countries in achieving sustainable economic development. Diagnoses in the past have been simplistic, ideological, and narrowly focused on market reforms, rather than holistic, evidence based, and focused on environment, infrastructure, disease control, and science and technology, in addition to market reforms. Priority regions in need of US ODA include:

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   

Sub-Saharan Africa Central Asia Haiti The Andean Region

A special focus should be given to the Dry Land regions stretching across the Sahel of Africa (Senegal, Mali, Chad, Niger, Sudan, Ethiopia), the Horn of Africa, the Arabian Peninsula, Western Asia (Iran, Iraq), and Central Asia. The Dry Land region suffers multiple assaults of poverty, hunger, drought, and disease that lead to instability, conflict, human suffering, and vulnerability to terrorism. The conflicts in Darfur, the Ogaden desert, Somalia, Yemen, Iraq, Afghanistan, and the Northwest Frontier Provinces of Pakistan, are all examples of dry land crises. The overlap of global crisis and the dry lands is illustrated in Figure 1, taken from my recent book Common Wealth: Economics for a Crowded Planet. In order to maximize effectiveness, global leadership, and leveraging of US taxpayer dollars, the US foreign assistance program should specifically embrace major global development objectives to which the US is a signatory. Most importantly, these include:    

The Millennium Development Goals, adopted in 2000 to be achieved by 2015 The UN Framework Convention on Climate Change, The UN Convention to Combat Desertification Various G8 and UN General Assembly commitments on hunger, disease, environmental sustainability, and poverty alleviation

By taking the lead on global goals, especially the Millennium Development Goals and climate change, the US would achieve remarkable leverage in promoting rapid improvements in living standards and environmental sustainability. The world is hungering for that kind of US renewed leadership and engagement.

Statement of Professor Jeffrey D. Sachs, Director of the Earth Institute at Columbia... 179

SCALE OF US OFFICIAL DEVELOPMENT ASSISTANCE

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The scale of official development assistance, currently at around 0.20 percent of GDP and around 0.7 percent of US budget spending, is far too low. Doubling ODA by 2015 is a very worthy and politically challenging goal, but is unlikely to be sufficient to meet US foreign policy objectives. A part of the current military outlays, at roughly 5 percent of GNP, should be redirected to ODA, since effectively deployed ODA will give the US much more security than the marginal budget dollar spent on the military. The US is committed, as a signatory to the Monterrey Consensus (March 2002) to ― make concrete efforts towards the official development assistance.‖ unknown in(Paragraph the Congress and the American public, but is deeply embedded in international commitments, at the UN, G8, and other forums. 16 of the 22 donor countries in the OECD have set a timetable to reach 0.7 by acknowledge this international target is a point of continuing weakness of American global leadership. The 0.7 percent of GNP, which stretches back to 1970, and has been repeatedly confirmed in international gatherings, is not taken out of the air. Several comprehensive studies, including the UN Millennium Project report on Investing in Development: A Practical Plan to Achieve the Millennium Development Goals, have shown that 0.7 percent of GNP from all major donors is the magnitude of assistance needed to achieve the Millennium Development Goals and to address global emergencies requiring urgent foreign assistance. The global need for official development assistance in future years will rise, not fall, as climate shocks, rising population pressures, environmental degradation, and needs to adopt sustainable energy and water systems gain urgency. The US should be preparing now for this inevitable scaling up of needs. I strongly urge that the US adopt a strategy of meeting the 0.7 target by 2015, along side the European Union, which has set a specific timetable for accomplishing this target.

OVERCOMING FRAGMENTATION OF AID EFFORTS The current ODA efforts are divided among a dozen or so departments and agencies. There is a lack of strategy in directing our funds to foreign governments, multilateral agencies, and non-governmental organizations. The result is that the US development assistance programs achieve less than the sum of the parts in terms of US leadership, leveraging of taxpayer dollars, and efficacy of development programs. I recommend the following corrective steps: First, official development assistance programs should be reconstituted within a single agency, presumably the US Agency for International Development (USAID). The Administrator of USAID should be of cabinet rank, with a direct report to the President, as are at least half of the development ministers in the rest of the DAC donor countries. Of course, the Secretary of State would have final authority on foreign policy on behalf of the President, so that in practical terms the USAID Administrator would be subordinate to the Secretary of State in the implementation of ODA. Second, the US should recognize that it achieves maximum leverage, leadership, legitimacy, and efficacy when it operates its aid programs through multilateral institutions, as

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long as the US voice in those institutions is adequate. Great ODA successes in recent years include the Global Fund to Fight AIDS, TB, and Malaria (GFATM) and the Global Alliance for Vaccines and Immunizations (GAVI). Both GFATM and GAVI are donor pools, in which the US plays an important funding, steering, and leadership role. The new G20 initiative on smallholder farming is perfectly suited to such a multilateral approach. Successful multilateral initiatives, like GFATM and GAVI, have the following characteristics:       

Donors pool their financial resources Low-income countries submit National Action Plans (NAPs) for funding An Independent Technical Review Panel vets the NAPs for scientific, financial, and managerial coherence Cutting-edge and appropriate technologies are deployed (for example, medicines, high-yield seeds, innovative irrigation systems, renewable energy sources) Private-sector companies and NGOs are invited as participants in the national action plans The NAPs are specific, detailed, quantitative, and subject to review and audit All programs are monitored and evaluated

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Third, the US should reorganize a considerable amount of its development efforts around a few strategic programs linked to sustainable economic development, including:         

Agricultural productivity in low-income, food-deficit countries Primary health care and disease control Education for all Sustainable energy Sustainable water Basic infrastructure (roads, power grid, ports, airports, rail, connectivity) Integrated rural development Promotion of sustainable businesses Climate change adaptation

In each of these areas, the US should champion a rigorous, scaled, multilateral effort consistent with achieving the Millennium Development Goals, the Climate Change objectives, and the other globally agreed development objectives.

TEN SPECIFIC RECOMMENDATIONS 1. Focus US official development assistance on sustainable economic development, and make this goal explicit in US legislation 2. Embrace the globally agreed development goals, including the Millennium Development Goals, the UN Framework Convention on Climate Change, the UN Convention to Combat Desertification, and several UN and G8 commitments on global health

Statement of Professor Jeffrey D. Sachs, Director of the Earth Institute at Columbia... 181

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3. Focus development assistance on low-income regions in greatest need, including sub-Saharan Africa, Central Asia, Haiti, and the Andean region. 4. Launch a specific sustainable development initiative for the dry lands stretching across the Sahel, Horn of Africa, Arabian Peninsula, Western Asia, and Central Asia, addressing the intersecting challenges of hunger, disease, livelihoods, energy, and water scarcity. 5. Rebuild the analytical capacity of USAID to diagnose the obstacles to sustainable economic development, including cross-disciplinary expertise in agriculture, climate, hydrology, disease control, ecology, infrastructure, economics and other relevant areas. 6. Reorganize the aid programs to put ODA under one programmatic roof, under the leadership of USAID 7. Place the USAID Administrator at cabinet rank with a direct report to the President 8. Focus aid activities on a few strategic objectives, including sustainable agriculture, health, education, infrastructure, climate change, and business development. 9. Adopt the target of 0.7 percent of GNP in official development assistance by 2015, in line with the timetable adopted by the European Union. Reallocate part of the military budget (currently around 5 percent of GNP) for this purpose. 10. Leverage US leadership and finance through the increased use of multilateral institutions to pool donor finances in support of country-led plans of action, bolstered by independent technical review committees, audits, and monitoring and evaluation of programs.

Figure 1. The Dry Lands (shaded regions) and Conflict Zones (triangles)

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Jeffrey D. Sachs

End Notes

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1

Please note that I use the term ODA in the technical sense agreed by the Development Assistance Committee (DAC) of the Organization for Economic Cooperation and Development (OECD). It overlaps closely with the Government 150 account and some other aggregate assistance,‖ but is -interest loans with a developmentlimited to grants objective, as opposed, for example, to military support programs, aid to middleincome countries, and loans at market interest rates.

In: Foreign Aid Reform Editor: Finn C. Hudson

ISBN: 978-1-61728-926-2 © 2010 Nova Science Publishers, Inc.

Chapter 11

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STATEMENT OF REV. DAVID BECKMANN, PRESIDENT, BREAD FOR THE WORLD AND CO-CHAIR, MODERNIZING FOREIGN ASSISTANCE NETWORK, BEFORE THE U.S. SENATE COMMITTEE ON FOREIGN RELATIONS, HEARING ON “THE CASE FOR REFORM: FOREIGN AID AND DEVELOPMENT IN A NEW ERA”* Chairman Kerry, Ranking Member Lugar, and members of the Committee, thank you for inviting me to testify.I am David Beckmann, president of Bread for the World, a collective Christian voice urging our nation‘s decision makers to abroad.I also serve as co-chair of the Modernizing Foreign Assistance Network, a broad coalition of groups and individuals working to make U.S. foreign aid more effective in support of global development and the reduction of poverty. I am grateful for this hearing and for the draft legislation that Senators Kerry, Lugar, Menendez, and Corker have developed.I especially appreciate the fact that you are working in a bipartisan way on this issue.The institutional changes you legislate will be better and more long-lasting if members of both parties, conservatives and liberals, contribute their points of view. Now is the time for foreign aid reform.President Bush led a major expansion of foreign aid, and President Obama proposes to double foreign aid.A substantial majority of U.S. voters favor spending more on effective programs to reduce hunger, poverty, and disease in developing countries.It‘s the right thing to But we alldo and the know that foreign aid could be spent more effectively.If this administration and Congress manage to improve the effectiveness of U.S. assistance, our dollars will do more good for decades to come, and voters will continue to support increases in funding. In a recent survey, 85 percent of registered voters agreed that we ― need how foreign assistance is currently organized In a poll last November in the depths of the economic crisis

*

This is an edited, reformatted and augmented edition of a statement given before the U.S. Senate Committee on Foreign Relations, dated July 22, 2009.

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184

David Beckmann

87 percent agreed that this, we need to make foreign assistance more efficient and get more of our aid to people who really need it.‖ I applaud the Obama administration and this Congress for the attention you have already devoted to international development, including foreign assistance reform. When I testified before this Committee in March, you were considering the terrible setback in progress against world hunger that has taken place over the last several years.You passed the Global Food Security Act.In his inaugural address, President Obama promised people in poor countries to ― help make ‖ and the your administration led by Secretary Clinton has now launched a global food security initiative.The President was able to convince the other G8 nations to work with the United States to help farmers in poor countries increase their production. The administration‘s 2010 budget request assistance by 2015, including a major investment in global health and increased investment in agriculture. dget also proposes to bolster theThe capacity of USAID and the State Department to carry out their development and diplomatic missions. Secretary Clinton recently announced that the State Department and USAID are undertaking a quadrennial diplomacy and development review (QDDR).It will provide a short-, medium- and long-term blueprint for our country‘s efforts.This process will articulate a clear statement of foreign policy and development objectives, recommend management and organizational reforms, and propose performance measures. The QDDR process will incorporate perspectives from across the government, from Congress, and from nongovernmental experts. The House of Representatives has already passed a State Department Reauthorization Bill and a Pakistan bill. Chairman Howard Berman‘s stated priority for this Congress is foreign assistance reform, and, as of today, a bipartisan group of 83 members of the House have signed on as cosponsors of the Initiating Foreign Assistance Reform Act, H.R. 2139.Mr. Berman‘s staff are already working Act. Chairman Kerry, in your foreign policy address at the Brookings Institution in May you articulated the case for strengthening U.S. diplomacy and development assistance. With regard to foreign assistance reform, you called for clear goals, improved coordination, stronger development expertise and capacity, streamlined laws to untie the hands of aid professionals, and the empowerment of country teams to shape programs based on local needs. The draft legislation you have now developed with Senators Lugar, Menendez, and Corker is a major step forward.I love the statement of policy.It calls for a reform of USAID and related agencies in order to better serve the U.S. commitment to global development and the reduction of poverty and hunger. Much of your bill is focused on building the capacity of USAID, which is urgently required.USAID‘s operational has decayed.It no longer has budgeting orcapacity planning authority.It is not currently represented on the National Security Council.The Administrator position is still vacant, partly because several candidates have declined to take charge of such a weak agency. Under this administration, the State Department has demonstrated a deep commitment to global development and poverty reduction.But it is crucial that some funding be dedicated single-mindedly to development.When we try to achieve defense and diplomatic goals with the same dollars, aid is usually much less effective in reducing poverty.In my mind, that‘s we need a strong development agency, withthe basic reason its own capacity to plan and carry

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Statement of Rev. David Beckmann, President, Bread for the World...

185

out programs.These programs should be coordinated with other foreign policy purposes, but distinct from them. Your bill‘s section on transparency is especially important. President Obama has called for an ― elevated, streamlined, and empowered 21st century U.S. development agency‖ that will be ― accountable, flexible, and transparent.‖ The reform of U.S. foreign assistance gives us a chance to create a development agency that will be transparent to all Americans – to encourage public support and involvement in global poverty reduction and to facilitate publicprivate partnerships. Even more importantly, the transparency section of the bill will help people in developing countries know about U.S. assistance programs. If local people are more aware and involved, our aid programs will be more effective. My main request is that you introduce this bill as soon as possible.Quite a few organizations have helped their networks across the country understand that foreign assistance reform is important to future gains against hunger, poverty, and disease.These organizations include Bread for the World and many religious groups, InterAction, Oxfam, the ONE Campaign, Save the Children, Women Thrive Worldwide, Mercy Corps, CARE, the U.S. Global Leadership Coalition, World Wildlife Fund, the Centre for Development and Population Activities (CEDPA), the Center for Health and Gender Equity (CHANGE), the International Center for Research on Women, the International Women‘s Health the Global AIDS Alliance, and RESULTS. Coalition, Our coalition also includes opinion leaders at the Center for Global Development, the Center for American Progress, and Brookings.Thus, tens of thousands of people around the country are now informed and eager for a chance to have their say.Once your bill is introduced, they can ask their senators to cosponsor, thus building broad support for this on foreign assistance reform. As I said at the outset, now is the time for foreign assistance reform, and the main reason is leadership.We have a President and Secretary of State who are committed to reducing hunger and poverty in the world and to making our programs of assistance more effective.Your counterparts in the House have demonstrated their leadership on this issue.And this Committee has demonstrated exceptional ability to work together across the aisle on complex issues that are important to our nation and the world. May God continue to bless your leadership.

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INDEX 9 9/11, 2, 5, 28, 39, 56, 59, 75

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A access, 7, 28, 43, 44, 92, 95, 103 accountability, 7, 20, 30, 40, 44, 50, 59, 67, 69, 73, 76, 79, 110, 115, 117, 120, 122, 123, 124, 133, 136, 138, 142, 155, 170, 173 acquired immunodeficiency syndrome, 5 advocacy, 55, 126 Afghanistan, 6, 7, 11, 15, 18, 38, 40, 41, 48, 49, 71, 77, 84, 87, 88, 89, 91, 106, 152, 155, 157, 158, 159, 167, 168, 178 Africa, 2, 6, 7, 8, 9, 10, 14, 17, 18, 33, 34, 35, 53, 75, 134, 178, 181 AFRICOM, 75, 78 agriculture, 10, 33, 42, 55, 76, 86, 175, 178, 181, 184 AIDS, xi, 4, 6, 7, 9, 10, 11, 14, 15, 16, 20, 27, 33, 34, 40, 66, 69, 71, 72, 73, 84, 86, 90, 93, 94, 96, 106, 111, 117, 129, 136, 153, 154, 156, 163, 167, 180, 185 ambassadors, 30, 102 appropriations, x, 2, 3, 4, 5, 6, 10, 11, 19, 20, 22, 25, 49, 54, 64, 65, 67, 73, 74, 82, 83, 86, 87, 91, 117, 118, 120, 136, 155, 162, 164 Arabian Peninsula, 178, 181 armed forces, 72 Armenia, 107, 152 Asia, 6, 8, 9, 10, 33, 52, 96, 178, 181 assessment, 49, 67, 75, 107, 135, 143, 167 assets, 71 assumptions, 113, 125, 128, 135, 152 attacks, vii, ix, 1, 2, 39, 51, 53, 83, 87, 155 attitudes, 56, 123 authorities, 27, 39, 43, 47, 58, 61, 72, 79, 94, 112, 167 availability, 134, 135, 145

avian influenza, 87, 91 awareness, 77, 93, 127

B background, 52, 98, 174 background information, 52, 98 banks, 19, 92, 93 benchmarks, 12, 67, 75, 113, 130, 131, 140 bilateral aid, 9, 10 Bolivia, 158 Bosnia, 107, 152 Budget Committee, 41 budget resolution, 41 bureaucracy, 23, 26, 74, 96, 103, 168 business model, 75

C Cabinet, 21, 24, 25, 27, 43, 58, 60, 61, 76, 81 campaigns, 126 Canada, 34, 100 candidates, 74, 163, 184 capacity building, 18, 34, 41, 75 capital flows, 16 Capitol Hill, 68 categorization, 129, 160 category a, 145, 146 Central Asia, 9, 10, 33, 96, 178, 181 challenges, vii, viii, x, xi, 2, 3, 12, 13, 14, 17, 37, 41, 43, 46, 47, 48, 61, 63, 71, 72, 74, 79, 97, 109, 110, 112, 113, 114, 115, 130, 132, 133, 135, 137, 138, 139, 141, 143, 145, 153, 154, 155, 157, 160, 181 channels, 5, 73 China, 16 civil society, 32, 104, 145, 146 Civilian Response Corps, 29 Civilian Stabilization Initiative, 97 clarity, 28, 102

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188

Index

climate, 32, 49, 104, 177, 178, 179, 181 climate change, 49, 104, 178, 181 coherence, vii, viii, ix, xi, 1, 2, 6, 7, 12, 14, 18, 27, 37, 39, 51, 59, 61, 62, 63, 71, 72, 77, 94, 95, 99, 102, 104, 110, 115, 136, 153, 154, 159, 162, 180 cohesion, 95 Cold War, vii, viii, 2, 3, 6, 27, 39, 43, 53, 56, 59, 70, 71, 161 collaboration, 42, 47, 76, 94, 109, 116, 122, 128, 133, 139, 140, 142, 175 colleges, 175 Colombia, 18, 158, 160 commerce, 151 commercial bank, 93 communication, 31, 71, 89, 101, 113, 114, 123, 132, 138, 140 communism, 6, 12, 39, 52, 53 community, 3, 12, 14, 16, 38, 40, 47, 57, 64, 92, 93, 168, 173, 178 community support, 47 compensation, 44 competitive process, 154 complaints, 79 complement, 27 complexity, 79 compliance, 118 components, 30, 40, 100 composition, 4, 87, 137 compounds, viii, 37 computer systems, 122 confidence, 69, 161, 169, 170, 171 configuration, 125, 126, 127, 143 conflict, 7, 17, 18, 41, 47, 61, 65, 71, 74, 75, 90, 97, 122, 145, 157, 159, 160, 178 congressional budget, 3, 21 connectivity, 180 consensus, x, 29, 63, 83, 84, 94, 122, 168 Consolidated Appropriations Act, 5, 28, 42 consolidation, 86, 110 construction, 145 contingency, 67, 73, 75 control, 19, 56, 69, 74, 77, 90, 91, 143, 156, 157, 162, 176, 178, 180, 181 cost effectiveness, 49 costs, 7, 11, 16, 24, 49, 68, 99, 151, 152 counsel, 134 counterbalance, 66 counterterrorism, 69, 98, 111, 146 credibility, 20, 40 crisis management, 22 criticism, ix, 2, 11, 17, 38, 51, 160 critics, vii, xi, 1, 5, 8, 16, 18, 21, 53, 85, 98, 102, 154, 155, 162, 163

D data collection, 106 database, 85, 95, 118, 120, 128, 143 debt, 15, 63, 64, 72, 92, 99, 104, 118, 155 decision making, 38, 44, 54, 62, 67, 95, 128 decision-making process, 18, 163 decisions, 4, 18, 20, 21, 28, 30, 34, 45, 59, 99, 102, 114, 127, 132, 139, 141, 169, 170 defense, vii, viii, ix, 1, 2, 7, 20, 21, 26, 38, 39, 40, 41, 42, 43, 45, 51, 52, 53, 54, 57, 59, 61, 64, 68, 70, 72, 74, 76, 77, 78, 101, 107, 155, 158, 184 deficiencies, 77, 170 definition, 3, 85, 145, 146 delivery, 23, 28, 32, 42, 59, 64, 66, 71, 72, 73, 77, 123, 139, 145 democracy, 6, 7, 10, 39, 43, 48, 74, 90, 97, 145, 146, 162, 163 Denmark, 15, 99 Department of Agriculture, 20, 86, 91, 93, 106, 117, 142, 152, 157 Department of Commerce, 93, 142 Department of Defense, viii, x, xi, 3, 4, 5, 15, 17, 18, 19, 30, 31, 35, 37, 38, 47, 50, 63, 66, 75, 82, 83, 84, 87, 90, 91, 94, 95, 97, 101, 111, 114, 142, 153, 155, 157, 169 Department of Energy, 93, 142, 157 Department of Health and Human Services, 3, 4, 86, 87, 91, 142, 157 Department of Homeland Security, 35, 93, 106, 152 Department of Justice, 93, 142 Department of the Interior, 20, 86, 142 developed countries, 85 developing countries, 16, 25, 29, 34, 55, 65, 74, 75, 76, 85, 92, 145, 152, 175, 183, 185 development assistance, x, 3, 5, 10, 14, 15, 18, 23, 28, 30, 34, 55, 56, 66, 69, 70, 71, 76, 77, 78, 84, 85, 88, 90, 95, 98, 100, 101, 102, 155, 169, 170, 177, 179, 180, 181, 184 development banks, 92 development policy, 13, 44, 48, 49, 73, 77, 79, 98, 162, 163, 170 diplomacy, vii, viii, ix, 1, 2, 7, 13, 21, 22, 26, 29, 31, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 59, 61, 64, 68, 69, 70, 71, 72, 74, 76, 77, 78, 94, 100, 101, 104, 112, 113, 116, 150, 154, 155, 169, 184 directives, 31, 39, 54, 58, 77, 152, 164 directors, 100, 137 disaster, 3, 4, 18, 23, 87, 90, 156, 158 disaster relief, 4, 90 disbursement, 49, 64, 85, 86, 87, 88 disseminate, 132, 170

Index distribution, 9, 18, 53, 61, 77, 116, 141 District of Columbia, 111 diversity, 89, 107, 129 division, 55, 56, 82 domestic issues, 86 domestic policy, xi, 95, 153, 155 donors, 3, 4, 14, 16, 66, 73, 79, 128, 179 draft, 96, 113, 116, 129, 130, 133, 134, 140, 144, 161, 170, 183, 184 drought, 178 drugs, 73 duplication, 21, 23, 96, 104, 155, 159

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E East Asia, 10, 33 Eastern Europe, 33, 96, 107, 117, 156, 163 ecology, 181 economic assistance, 52, 55, 86, 88, 90, 91, 156 economic crisis, ix, 52, 183 economic development, xi, 3, 48, 52, 59, 77, 85, 90, 92, 93, 94, 151, 153, 154, 177, 178, 180, 181 economic growth, 7, 10, 14, 47, 74, 92, 94, 104, 116, 145, 150, 156, 160 economic performance, 12 economic policy, 61, 65, 74 economic reform, 40, 81, 92 economic reforms, 40, 92 economics, 181 economy, 32, 97, 145, 146 Ecuador, 158 Education, 9, 16, 20, 24, 33, 34, 91, 117, 133, 156, 180 emergency response, 63 employees, 110, 113, 114, 115, 121, 122, 123, 124, 125, 131, 132, 137, 138, 140 energy, ix, 32, 42, 52, 55, 68, 89, 93, 179, 180, 181 enforcement, 5, 89, 90, 93, 145, 146, 156 engagement, 63, 64, 69, 81, 178 environment, vii, viii, 2, 7, 20, 34, 39, 42, 43, 55, 59, 68, 92, 129, 136, 145, 154, 178 environmental degradation, 179 environmental policy, 70 Environmental Protection Agency, 24, 93, 142 environmental sustainability, 34, 178 EPA, 20, 105 equipment, 91, 167 Eurasia, 9, 10, 33, 96, 107 Europe, vii, 1, 5, 6, 8, 9, 10, 27, 33, 52, 96, 107, 117, 156, 163 European integration, 18 European Union, 15, 99, 179, 181 Executive Order, 55, 82 expenditures, 3, 44, 54, 87, 95, 99, 151

189

expertise, 4, 14, 18, 22, 31, 40, 42, 54, 63, 64, 86, 87, 89, 93, 168, 169, 170, 181, 184 experts, x, 14, 23, 28, 38, 39, 42, 43, 45, 46, 48, 49, 53, 54, 63, 67, 75, 79, 83, 85, 87, 89, 90, 97, 100, 101, 102, 134, 184 extreme poverty, 34

F failure, 38, 54, 114, 121, 145, 168 family planning, 33 famine, 8, 53, 156, 174 farmers, 167, 184 fear, xi, 47, 62, 154, 160, 163, 174 feedback, 64, 113, 123, 125, 128, 129, 130 fertility rate, 177 fertilizers, 167 finance, 99, 174, 181 financial institutions, 155, 163 financial resources, 145, 180 financing, 54 Fish and Wildlife Service, 20, 24, 86, 93, 142 flexibility, viii, 2, 18, 20, 37, 38, 43, 59, 67, 72, 73, 76, 77, 161, 164 focusing, 5, 57 food, 3, 10, 28, 29, 47, 77, 86, 90, 91, 93, 106, 118, 152, 157, 167, 175, 176, 180, 184 food safety, 86, 91 foreign affairs, ix, 5, 7, 39, 41, 42, 45, 46, 49, 52, 56, 64, 78, 79, 99 foreign investment, 64 formula, 17 France, 18, 34, 99 free trade, 39 freedom, 14, 92, 174 Freedom Support Act, 6, 96, 107 FREEDOM Support Act, 6, 27, 54

G GDP, 179 gender equality, 34 Georgia, 107 Germany, 99 global leaders, 178, 179 GNP, 179, 181 goods and services, 107, 175 governance, 3, 7, 9, 13, 18, 40, 42, 47, 77, 92, 145, 146, 154 government policy, 94 grants, 3, 9, 27, 92, 93, 99, 100, 136, 182 Great Britain, 52 Green Revolution, 178 groups, 46, 47, 50, 102, 116, 130, 145, 170, 183, 185

190

Index

growth, 7, 10, 14, 17, 23, 29, 47, 69, 74, 75, 87, 92, 94, 104, 116, 145, 146, 150, 156, 160, 177 guidance, xi, 13, 22, 31, 40, 54, 94, 95, 112, 113, 114, 115, 119, 120, 126, 127, 128, 129, 131, 132, 133, 134, 135, 136, 137, 139, 141, 151, 152, 153, 154, 155, 157, 162, 163

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H Haiti, x, 49, 109, 112, 127, 134, 136, 141, 159, 178, 181 hands, 184 headquarters, 26, 103, 112, 114, 115, 132, 134, 136 health, ix, 2, 3, 4, 5, 7, 8, 10, 11, 16, 20, 23, 32, 33, 34, 42, 52, 68, 74, 86, 90, 91, 92, 94, 106, 145, 156, 158, 164, 178, 180, 181, 184 health care, ix, 7, 16, 52, 68, 91, 92, 158, 180 health care system, 16 higher education, 175 HIV, 5, 6, 9, 10, 11, 14, 15, 16, 33, 34, 66, 69, 71, 72, 86, 90, 93, 96, 106, 111, 117, 136, 156, 163, 167 HIV/AIDS, 5, 6, 9, 10, 11, 14, 15, 16, 33, 34, 66, 69, 71, 72, 86, 90, 93, 96, 106, 111, 117, 136, 156, 163, 167 Honduras, 107, 152 host, 79, 92, 99, 102, 104, 115, 128, 151, 158 House, viii, x, 25, 26, 28, 33, 38, 43, 44, 45, 47, 48, 49, 50, 56, 57, 61, 64, 70, 71, 75, 80, 82, 84, 101, 103, 104, 106, 107, 111, 116, 155, 161, 164, 184, 185 housing, 86, 170 human capital, 23, 123, 138 human dignity, 146 human immunodeficiency virus, 5 human resources, 29, 44, 63, 75, 76, 170, 173, 175 human rights, 7, 10, 14, 43, 126 humanitarian aid, 61, 67, 77

I image, 21, 67 IMF, 6, 19, 31 immigrants, 16 immigration, 6, 12 immunodeficiency, 5 impacts, 47, 134, 136 implementation, viii, 5, 12, 23, 27, 30, 37, 38, 40, 42, 44, 55, 59, 62, 63, 79, 90, 91, 92, 93, 97, 98, 99, 102, 103, 112, 113, 114, 116, 119, 122, 123, 125, 130, 132, 138, 140, 141, 155, 158, 160, 161, 162, 163, 179 in transition, 97 inclusion, 103, 133

income, 8, 13, 15, 34, 53, 65, 73, 93, 98, 145, 146, 159, 177, 180, 181, 182 independence, 70, 174 indicators, 92, 114, 126, 128, 133, 134, 159 industry, 143 inefficiencies, 38, 71, 74 inefficiency, 162 inequality, 73 infectious disease, 34 information exchange, 140 information sharing, 93, 95 information technology, 123 infrastructure, vii, 1, 8, 10, 12, 17, 20, 34, 53, 55, 71, 72, 76, 92, 145, 158, 175, 177, 178, 180, 181 instability, 7, 8, 10, 61, 160, 178 institutional change, 183 institutions, 12, 16, 19, 20, 31, 66, 74, 77, 145, 146, 154, 175, 179, 181 instruments, 17, 73, 99 insurance, 93 integration, 18, 41, 61, 62, 63, 74, 174 intelligence, 26, 61, 65, 74 interaction, 47, 64, 81 interagency coordination, 17, 23, 25, 26, 42, 104, 109, 116, 122, 139, 140 inter-agency review, 48 interest groups, 116 interest rates, 182 international affairs, 5, 11, 20, 29, 34, 42, 59, 76, 115, 118, 167 international financial institutions, 155, 163 International Monetary Fund, 92 international relations, 31 international standards, 67 investment, 8, 29, 42, 43, 44, 63, 64, 70, 72, 79, 146, 175, 184 Iran, 178 Iraq, 7, 11, 15, 18, 38, 40, 41, 48, 49, 71, 77, 84, 86, 87, 88, 91, 93, 103, 152, 155, 157, 158, 159, 178 Ireland, 85 isolation, 63, 72 Israel, 10, 85 issues, viii, 4, 6, 10, 12, 14, 20, 25, 26, 27, 31, 32, 38, 48, 49, 57, 67, 72, 74, 85, 86, 93, 94, 102, 115, 118, 124, 135, 136, 137, 146, 160, 164, 170, 171, 174, 175, 185

J Jamaica, 107, 152 Japan, 99 Jordan, x, 109, 112, 132, 141 jurisdiction, 5, 14, 17, 22, 25, 103, 106, 136, 151 justification, 21

Index

K Kenya, x, 109, 112, 134, 141

L language, viii, 7, 38, 74, 104, 154 Latin America, 6, 8, 10, 34, 53 law enforcement, 5, 89, 90, 93, 145, 146, 156 laws, viii, 27, 37, 161, 184 leadership, viii, 12, 26, 37, 40, 43, 49, 62, 64, 74, 78, 112, 121, 122, 123, 124, 138, 174, 175, 176, 177, 178, 179, 181, 185 legislation, viii, 2, 6, 12, 20, 22, 25, 27, 32, 33, 38, 39, 43, 44, 45, 48, 49, 54, 55, 56, 58, 59, 67, 68, 69, 73, 85, 96, 100, 104, 161, 162, 164, 167, 168, 170, 173, 174, 176, 180, 183, 184 leprosy, 178 Liberia, 18 LIFE, 84 likelihood, 65, 138, 144 line, 102, 168, 181 linkage, 113, 155 links, xi, 13, 61, 153, 159 living standards, 154, 178 loans, 55, 85, 99, 100, 182 local government, 145

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M majority, 29, 59, 63, 65, 120, 183 malaria, 9, 34, 86, 91, 178 malnutrition, 167 management, xi, 22, 38, 45, 47, 54, 63, 69, 75, 77, 93, 98, 109, 110, 112, 113, 114, 115, 116, 120, 121, 122, 123, 124, 131, 132, 133, 135, 137, 138, 139, 140, 142, 143, 144, 153, 154, 162, 174, 178, 184 Marine Corps, 77 maritime security, 98 market, 97, 145, 146, 178, 182 market economy, 97 market-based economy, 146 measurement, 15, 96 measures, 5, 11, 42, 43, 56, 78, 96, 110, 114, 133, 134, 135, 139, 140, 158, 159, 184 media, 81, 145 membership, 26, 67 mergers, 121, 122, 123, 131, 139, 142 methodology, 112 Middle East, 6, 8, 53, 107 migration, 5, 12, 31 militarization, 68, 97

191

military, 3, 5, 8, 12, 16, 18, 23, 24, 26, 30, 31, 34, 40, 41, 42, 47, 49, 50, 55, 64, 74, 75, 77, 78, 84, 85, 86, 87, 88, 90, 91, 95, 97, 98, 134, 157, 158, 179, 181, 182 military balance, 78 minorities, 177 minority, 29, 30, 43 missions, x, 16, 22, 23, 28, 71, 73, 84, 112, 115, 119, 122, 127, 129, 131, 132, 133, 134, 135, 140, 141, 155, 159, 163, 184 model, 75, 96, 98, 100, 103, 175 momentum, 104, 123, 139 Morocco, 107, 152 mortality, 34 motivation, 31 Mozambique, 89, 106, 107, 152 multidimensional, 160 multilateral aid, 19, 38, 44, 54, 66, 68, 90, 98 multiplier, 64

N narcotics, 5, 12, 15, 18, 90, 146, 156, 157, 162 nation, 42, 64, 98, 158, 183, 185 National Defense Authorization Act, 34, 50, 62, 78, 97, 98, 107, 158 National Economic Council, 48 national income, 8, 15, 34, 53 National Institutes of Health, 91 national interests, 28 National Science Foundation, 24, 142 national security, vii, viii, ix, 1, 6, 7, 21, 26, 29, 30, 32, 37, 39, 40, 41, 42, 43, 45, 46, 49, 51, 53, 56, 57, 59, 61, 63, 64, 66, 67, 71, 74, 77, 78, 79, 94, 102, 155 National Security Council, x, 23, 25, 26, 29, 43, 48, 50, 65, 70, 72, 83, 84, 93, 94, 184 national strategy, viii, 38, 42, 44, 45, 49, 59, 100, 101, 104 natural disasters, 7, 11, 18, 49, 115, 158 negative consequences, 62 neglect, 70, 160 negotiating, 68, 163 Nepal, 107, 152 Netherlands, 15, 99 NGOs, viii, 37, 40, 44, 52, 56, 74, 161, 180 Norway, 15 nutrition, 91 nutrition programs, 91

O Obama Administration, viii, ix, 2, 38, 39, 41, 45, 51, 52, 94, 97, 101, 174

192

Index

objective criteria, 44 obligation, 13, 61, 118 obstacles, 27, 28, 177, 178, 181 OECD, 3, 8, 14, 23, 25, 33, 34, 58, 60, 66, 76, 81, 85, 98, 103, 107, 143, 164, 165, 179, 182 Office of Management and Budget, 32, 50, 65, 70, 121, 141 Official Development Assistance, 8, 85, 177, 179 oil, 158 omission, 160 Operation Iraqi Freedom, 158 opportunities, 31, 79, 114, 124 order, 14, 17, 18, 21, 25, 32, 39, 43, 55, 56, 58, 59, 63, 64, 70, 72, 75, 77, 78, 101, 134, 162, 174, 178, 184 Organization for Economic Cooperation and Development, 3, 14, 33, 34, 85, 98, 164, 165, 182 Organization of American States, 19 organizational culture, 121 overlap, 62, 71, 93, 106, 114, 133, 178 Overseas Private Investment Corporation, 4, 5, 23, 24, 85, 142, 163 oversight, 5, 47, 59, 67, 68, 69, 72, 75, 102, 124, 162 ownership, ix, 52, 65, 68, 71, 123, 132, 139

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P Pacific, 10, 33 Pakistan, 158, 167, 168, 178, 184 partnership, 34, 73, 145, 146, 152, 167 peacekeeping, 5, 32, 69, 91 Pentagon, 41, 46, 49, 97 performance, 2, 12, 13, 28, 49, 92, 96, 110, 112, 113, 114, 118, 119, 120, 122, 123, 124, 125, 126, 127, 128, 131, 133, 134, 135, 142, 143, 145, 146, 151, 159, 184 performance indicator, 92, 128, 133, 134, 159 performance ratings, 133 Peru, x, 109, 112, 127, 135, 141, 158 policy instruments, 73 policy makers, x, 12, 25, 26, 39, 53, 59, 83 policy options, 12, 17, 28, 164 political instability, 7, 10 politicization, 162 pools, 180 poor, 20, 43, 71, 72, 114, 132, 155, 167, 177, 184 population, 7, 55, 90, 177, 179 population growth, 7, 177 portfolio, 5, 22, 23, 35, 157, 163 poverty, viii, 2, 3, 7, 8, 10, 13, 17, 18, 23, 34, 39, 42, 43, 48, 53, 59, 61, 67, 73, 76, 77, 92, 98, 102, 104, 107, 112, 145, 154, 155, 160, 163, 171, 178, 183, 184, 185 poverty alleviation, 3, 8, 13, 23, 92, 98, 160, 178

poverty reduction, 17, 39, 59, 76, 102, 107, 145, 160, 163, 184, 185 power, 31, 32, 41, 50, 62, 63, 65, 67, 71, 72, 74, 98, 180 predictability, 65, 77 president, 183 President Clinton, 56 prevention, 9, 11, 47, 69, 145 private investment, 29 private sector, 15, 28, 32, 74, 75, 128, 145 procurement, 29, 39, 47, 59, 63, 73, 75, 89, 143 production, 6, 7, 184 productivity, 28, 33, 34, 92, 175, 177, 180 professional development, 138 programming, 64, 68, 69, 129 project, 69, 70, 100, 102, 115, 119, 127, 129, 135, 143 proliferation, viii, 2, 7, 14, 42, 93, 100, 146 prosperity, 43, 150 PSD, viii, 38, 39, 48, 49 public awareness, 77 public policy, 161 public sector, 138 public support, 185 public-private partnerships, 94, 185

R range, ix, x, 22, 25, 51, 57, 58, 65, 70, 83, 84, 86, 91, 92, 93, 95, 103, 107, 122, 159 reason, 12, 98, 101, 103, 123, 184, 185 recognition, viii, 2, 28, 42, 161 recommendations, iv, viii, ix, 2, 28, 30, 31, 46, 51, 52, 55, 56, 57, 58, 62, 63, 64, 65, 68, 69, 71, 72, 73, 76, 80, 82, 107, 109, 112, 116, 138, 139, 140, 144, 160, 161, 174, 177 reconstruction, 7, 11, 18, 40, 47, 52, 63, 64, 71, 72, 75, 80, 87, 90, 91, 93, 95, 97, 107, 145, 155, 157, 158 recovery, 52, 90 recruiting, 76, 174 redundancy, 84, 162 refining, 113 reflection, 175 reformers, 22 reforms, viii, 2, 3, 5, 12, 17, 27, 40, 42, 55, 56, 63, 92, 113, 114, 115, 127, 131, 132, 136, 139, 140, 141, 143, 159, 164, 178, 184 refugees, 5 region, 4, 9, 27, 96, 103, 141, 178, 181 regulations, 168 relationship, viii, 27, 37, 59, 67, 71, 72, 76, 132, 151, 156, 162, 174 relative size, 106

Index relief, 4, 15, 63, 64, 72, 90, 92, 99, 104, 154, 158 remittances, 16 renewable energy, 180 Republic of the Congo, 107, 152 reputation, 102 resistance, 101 resolution, 41, 54 resource allocation, 130, 136, 138 resource management, 47, 124 respect, 139, 150, 169, 174 respiratory, 87, 91 responsiveness, viii, 2, 37, 38, 46, 73 restructuring, ix, xi, 2, 4, 39, 56, 58, 59, 83, 94, 100, 107, 118, 131, 153, 154, 155, 160, 162, 163, 164 rights, iv, 7, 10, 14, 43, 126, 145, 146 risk, 17, 112, 139, 143, 144 risk management, 112, 143, 144 rotations, 80, 170 rule of law, 3 rural development, 180 rural poverty, 10 Russia, 54, 85

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S safety, 86, 91 SARS, 87, 91 savings, 68, 101 scaling, 18, 179 scarce resources, 22 school, 91, 178 Secretary of Defense, viii, 18, 26, 38, 40, 41, 50, 56, security assistance, 4, 11, 41, 61, 62, 64, 67, 75, 78, 79, 91 security forces, 91, 98, 158 selecting, 91 self-worth, 67 Senate, v, vi, viii, x, xi, 28, 30, 31, 33, 34, 35, 38, 41, 43, 44, 47, 48, 49, 50, 56, 57, 58, 61, 78, 79, 81, 84, 102, 103, 104, 106, 107, 111, 156, 161, 164, 165, 167, 168, 169, 173, 177, 183 Senate Foreign Relations Committee, vi, viii, x, 30, 38, 43, 44, 47, 50, 61, 78, 79, 84, 104, 106, 107, 156, 165, 167, 177 separation, 163 September 11, vii, ix, 1, 2, 7, 51, 53, 83, 87, 155 severe acute respiratory syndrome, 87, 91 shape, 66, 85, 168, 184 shaping, 54, 163 sharing, x, 71, 83, 93, 95, 123 skilled personnel, 48, 79 skills, 7, 69, 74, 110, 115, 123, 130, 137, 139, 154 social programs, 154 social services, 145

193

soft power, 31, 50, 71, 72 software, 143 Somalia, 159, 178 Southeast Asia, 6, 8, 52 sovereignty, 146 Soviet Union, vii, 2, 5, 6, 27, 33, 69, 117, 156, 163 species, 86, 89 spectrum, 39 speech, 41, 50, 106 speed, 7 stability, 7, 16, 48, 74 stabilization, 18, 29, 40, 47, 63, 64, 72, 75, 80, 90, 95, 107, 155, 157, 158 staffing, 43, 141, 170, 175 stakeholders, 47, 114, 124, 131, 132, 138 standards, 67, 112, 154, 178 statistics, 85 statute, 26, 45, 49, 53, 150 statutes, viii, 6, 27, 33, 37, 70 sterile, 175 strategic planning, 44, 67, 70, 95, 115, 123, 132, 135, 142, 152 strategies, 17, 40, 42, 61, 64, 65, 66, 67, 74, 78, 80, 89, 96, 112, 114, 115, 119, 122, 125, 128, 129, 131, 133, 135, 138, 139, 140, 145 strength, 41, 145, 168, 174, 176 stretching, 178, 181 structuring, 127 subgroups, 47 Sudan, 18, 159, 178 surveillance, 91 survey, 143, 183 sustainability, 13, 34, 135, 177, 178 sustainable development, 10, 14, 181 sustainable energy, 179

T Tajikistan, 158 tanks, 32, 48, 161 Tanzania, 107, 152 technical assistance, 28, 55, 63, 72, 86, 92, 93, 99, 100, 118, 133, 145 tensions, 6 terrorism, vii, 2, 6, 7, 12, 32, 75, 155, 157, 158, 171, 178 terrorist attacks, vii, ix, 1, 2, 39, 51, 53, 83, 87, 155 terrorist organization, 7 thinking, 71, 175 threats, viii, 2, 39, 42, 43, 59, 72, 78 threshold, 92, 106 time frame, 16, 42, 96, 110, 113, 129, 130, 131, 139, 140 Title I, 117, 136, 152

194

Index

Title II, 117, 136, 152 total revenue, 16 tracking, 143, 152, 159 trade, 3, 13, 23, 29, 39, 43, 44, 52, 63, 64, 70, 72, 74, 75, 93, 104, 110, 132, 146, 159 trade-off, 110, 132 trading partner, 155 trading partners, 155 training, 5, 18, 43, 44, 47, 49, 63, 67, 69, 76, 80, 85, 86, 91, 93, 107, 118, 134, 138, 157, 170, 175 training programs, 86, 91 trajectory, 145, 146 transformation, 109, 111, 113, 114, 116, 121, 122, 123, 124, 125, 130, 132, 137, 138, 155 transformations, 110, 113, 121, 122, 123, 131, 138, 139, 142 transition, 6, 10, 97, 127 transitions, 5, 104 transparency, viii, x, 2, 7, 20, 21, 30, 37, 44, 45, 62, 69, 79, 84, 124, 127, 128, 138, 139, 170, 185 transportation, 158 trends, ix, 83, 87 tuberculosis, 86, 87, 91 Turkmenistan, 158

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U U.S. policy, 44, 59, 99 UK, 98 Ukraine, x, 109, 112, 127, 136, 137, 141 UN, vi, 177, 178, 179, 180 uncertainty, 115, 136 uniform, 30, 103 uniform procedures, 30 United Kingdom, 21, 71, 98, 101, 107 United Nations, 15, 19, 31

United States, 3, 5, 7, 9, 10, 12, 13, 15, 16, 19, 20, 34, 39, 41, 42, 45, 49, 50, 52, 58, 59, 64, 65, 66, 72, 73, 74, 75, 76, 78, 79, 81, 82, 85, 86, 93, 97, 98, 104, 107, 111, 151, 155, 158, 159, 164, 165, 184 universities, 74, 174, 175 updating, 143 USDA, 86, 91 Uzbekistan, 158

V valuation, 44, 45, 67 variations, 58 vehicles, 11, 32, 72 vision, 69, 89, 113, 124 voice, 30, 32, 71, 72, 97, 170, 174, 175, 180, 183 vulnerability, 177, 178

W war, vii, 1, 48, 73, 155, 158 weapons, viii, 2, 7, 42, 91, 111, 146 weapons of mass destruction, 111, 146 Western Europe, 52 White House, 25, 26, 70, 75, 82, 101 WMD, 111, 146 work environment, 123 working groups, 46, 47, 50, 130 workload, 76, 127, 128, 133 World Bank, 19, 31, 92, 163 World Trade Organization, 99 World War I, vii, 1, 6, 7, 52, 73, 101 writing, vii, 1, 27, 40, 54, 98

Y Yemen, 178