USAID Testimony: Before the Senate Appropriations Subcommittee on Foreign Operations, 6/9/98

This is an archived USAID document retained on this web site as a matter of public record.
Testimony of Administrator J. Brian Atwood
Before the Senate Appropriations Subcommittee on Foreign Operations
Washington, D.C., June 9, 1998
U.S. Agency for International Development

    Chairman McConnell, Senator Leahy, and other members of the subcommittee, I am pleased to be here today to present President Clinton's budget request for foreign assistance programs for fiscal year 1999. Certainly, the last several weeks have offered Americans a stark reminder of the importance of international affairs to this nation.
    From the testing of nuclear weapons on the sub-continent, to the still precarious situation in Indonesia, to flaring ethnic violence in Kosovo, to the volatile situation in the Middle East, we have seen powerful reminders that the United States has a real stake in our ability to promote peace and stability. America's continuing security, economic prosperity and public health clearly demand we exercise our international leadership on distant shores. The members of this committee have long understood the indispensable nature of America's international engagement, and I applaud your efforts to support U.S. assistance programs.
    However, as I appear before this committee today, I must say that I am gravely concerned. The current allocations of budget authority and outlays to this subcommittee, and the low levels given to your counterparts in the House of Representatives, would have a devastating impact on our ability to keep the United States engaged internationally during this perilous period.
    As you are aware Mr. Chairman, unless budget allocations for Foreign Operations are raised, the line items in the foreign operations bill will have to be cut significantly below this year's funding levels. Moreover, if the programs protected under last year's legislation continue to be protected, the cuts in the rest of the bill will be even more drastic.
    These cuts would come at a time when our international affairs programs are operating at historically lean levels. If we continue to allow this downward slide in our capacity to conduct diplomacy and development, we will be sacrificing our long-term national interests.
    Few areas of government have already done more to downsize and more efficiently conduct their operations. We have cut all the fat, now we are looking at bone. Between 1993 and 1998, the U.S. Agency for International Development (USAID) reduced its total staff by more than 3,300. This cut of more than 30 percent included a painful 1996 reduction in force of more than 160 employees.
    USAID's number of field missions and offices has also shrunk, going down from 97 in 1993, to 78 currently. This overall reduction is even more pronounced when one considers that it has occurred during a time when we opened a number of new missions in Eastern Europe and the New Independent States at the end of the Cold War. Mission closings would have to accelerate dramatically under the budget scenarios that we currently face. It has been field presence that has made USAID a global leader in development. There is no substitute for on-the-ground presence in designing and implementing effective assistance programs.
    Ironically, the agency has been called on to do more and more, with less and less, in a series of very high-profile foreign policy settings. We were the first on the ground to get reconstruction programs up and running in Bosnia. In Guatemala, we moved quickly to help secure that nation's historic peace accords. In the New Independent States, we have been on the cutting edge of helping secure a truly historic transformation toward democracy and free markets.   In Latin America we are translating the vision of the Summit of the Americas into a reality. In Africa we are helping that continent seize the opportunity of a new generation of leadership.
    I am extremely proud that USAID and its excellent employees have risen to every challenge that they have encountered. In the face of tremendous adversity and continual duress over the last several years, they have responded with professionalism and an unflinching ability to get the job done. But now, we are again faced with the prospect of a budget that will mean fewer vital programs, fewer overseas missions, fewer employees and a squandered opportunity for America to invest in her own future.
    The President requested $20.1 billion for programs in international affairs, of which the U.S. Agency for International Development (USAID) would manage $7.3 billion. That figure represents 36 percent of the international affairs account and includes both USAID programs and programs which our agency administers in cooperation with other agencies. This request is within the parameters of the balanced budget plan as agreed to by Congress and the Administration last year.
    President Clinton's request for FY 1999 programs managed by USAID provides a very modest $300 million increase over FY 1998 funding. The funding requested, however, is critical to our future. It is crucial to promoting American interests in developing countries, and in nations making the transition to democracy and free markets around the globe. Highlights of this request include:
    Three new initiatives, the Africa Trade Reform and Growth Initiative and the Americas Summit Initiative, for which the Administration is requesting $30 million and $20 million respectively under the Development Assistance and Child Survival accounts, and the African Great Lakes Justice Initiative, for which the Administration is requesting $30 million under the Economic Support Fund. In addition, we are asking for an additional $1 million to our food security initiative for Africa, bringing those funds to $31 million for FY 1999. An additional $155 million for programs in the New Independent States of the former Soviet Union;
    $94 million more for the Economic Support Fund, which includes the aforementioned Great Lakes Initiative;
    A separate request of $503 million for the Child Survival and Disease Program;
    A $15 million increase in International Disaster Assistance for transition initiatives for countries coming out of crisis; and,
    Economic growth activities aimed at improving food security in Africa to help feed the hungry and support for agricultural research through the agency's central Global Bureau.
    On balance, the USAID budget represents less than one-half of one percent of the federal budget. This is a bare-boned and balanced approach to development and humanitarian programs that will significantly contribute to achieving the administration's foreign policy objectives.
    However, the initial budget numbers we have seen in the Senate would not allow us to effectively carry out our development and humanitarian assistance programs. The total budget allocation for Foreign Operations, as it currently stands for budget authority, is nearly one billion dollars below the President's request. Even worse, because of subcommittee's outlay cap, our preliminary estimates are that actual budget authority permitted by the outlay ceiling could be on the order of $2 billion below the President's request in Foreign Operations alone. This is a nearly 15 percent cut across the board in Foreign Operations.
    The impact of cuts of this magnitude would devastate any number of programs. Because we expect that those accounts that enjoy wide Congressional support would likely be held largely protected from cuts, the impact on non-protected accounts would be even more severe, and I would find myself faced with the devil's dilemma of having to choose which vital programs to deeply cut.
    To illustrate the severity of this dilemma, we need to appreciate the magnitude of these cuts. A $2 billion cut is larger than our entire Development Assistance request for 1999. This figure is about 40 percent of all the activities managed by USAID. This cut represents about a ten percent cut from the President's entire request for all of international affairs. Such a cut alone could fund the entire Peace Corps for more than seven years at current levels.
    These deep cuts would devastate our international operations at the program level. These cuts would also require shutting down current programs which address poverty and hunger. We would be forced to make see deep cuts in agricultural research programs conducted by U.S. universities that are helping develop better crop varieties to combat hunger abroad. Over the long term, this would mean losing ground in the fight to battle malnutrition, and increased global tension over food insecurity and increased needs for emergency assistance. This would also mean American universities would lose much of their capacity to conduct this vital agricultural research.
    We would have to cut back sharply on microenterprise programs that have a proven track record in giving poor people their first opportunity at starting their own businesses and working their way out of poverty. More than a 100,000 people would lose access to small loans because of these cuts.
    Cuts in family planning would result in increasing numbers of unwanted pregnancies and fuel a dangerous spiral of additional deaths of both mothers and children. Cuts in disaster assistance would deny assistance to the most vulnerable victims of war, famine and other disasters. Efforts to prevent regional and civil conflicts through democracy programs would be delayed or terminated. Cuts in environmental programs would limit our ability to deal with the underlying causes of ecological crises such as the vast fires we have seen in Mexico in recent months.
    Economic growth programs in Latin America and Asia, already severely limited, would be cut further. Efforts to integrate Africa into the world economy would also suffer funding cuts. America's economy, American exporters and American consumers would ultimately pay the price for our collective failure to open new markets and promote international trade.
    Cuts in Economic Support Funds, an account already $1 billion less than 10 years ago, would probably mean no funding for economic stabilization programs in Latin America. Lower levels of funding for our programs in the New Independent States and SEED countries would put at risk vital progress in strengthening democracy and free markets in key strategic areas like Bosnia-Herzegovinia and Russia.
    Such a large cut would mean the elimination of all new initiatives, including those recently announced at the Summit of the Americas as well as the African Trade and Investment Policy Initiative -- both programs aimed directly at improving the lives of the poor.
    USAID operations worldwide would have to be scaled back, terminating the successful efforts of the United States to encourage other donor nations to share the burden of development.
    If the Operating Expense account is reduced below the President's request, the impact on overall agency operations and ability to provide oversight of foreign assistance programs would be severe, as that budget has already been cut severely in past years. From fiscal year 1993 to fiscal year 1997, operating expense-funded staff levels were cut by 34 percent, which included a very difficult reduction-in-force of 164 U.S. direct hire staff, early-outs, and buy-outs. We were able to plan an orderly process to achieve much of these reductions, including orderly closing of missions. Such orderly processes would be impossible with sharp fiscal year 1999 operating expense reductions. In order to absorb the high costs of shutting down missions -- including severance pay for foreign service nationals, contract termination costs, relocation costs and other factors -- the cuts would have to be completed very early in fiscal year 1999.   We are to far into the calendar year to make such reductions in an orderly way. Leading up to fiscal year 1997, the GAO confirmed that the agency could not operate at a level of $465 million without immediate large-scale cost-cutting early in the calendar year, including increasing the size of the Reduction in Force that had been planned at that time.
    These cuts in operating expenses would come at a time when the costs of doing business abroad are going up, not coming down. The agency is facing continuing cost increases due to the impact of inflation on foreign national pay, office and residential rents, utilities, and other overseas costs as well as federal pay raises and the impact of general inflation in the United States on Washington costs. Given that the operating expense account is driven by workforce levels, sharp workforce reductions would become necessary. Fewer people would make it impossible to manage existing programs, and would force the early termination of some activities. Operating expense cuts would also make it more difficult to keep the agency's information technology up and running, and would force us to sharply reduce many critical activities, such as training.
    We need to remember that these are not abstract cuts we are talking about. Our programs have a demonstrated track record in making a real difference around the world -- from saving lives to building more prosperous societies to creating jobs for the American people. USAID emergency relief programs provided food and other assistance to more than 28 million disaster victims in 1996. Our health and child survival programs, which you have so strongly championed, helped to save more than five million lives last year alone. Severe food shortages were averted in seven African countries, thanks to USAID efforts to establish regional capacities to anticipate and prevent famine.
    Our programs in Eastern Europe and the New Independent States helped privatize more than 26,000 state-owned enterprises in 1996 alone. In addition, we supported free and fair elections in 14 countries around the globe and assisted in the drafting and adoption of new constitutions in three countries. More than a million people received USAID microenterprise loans last year, and more than half of those clients were women. We helped farmers in Latin America choose alternatives to growing drugs, and cut the acreage in Peru devoted to coca production by 27 percent. USAID also contributed significantly to improving conservation on over 21,000 square miles of land in 14 different countries.
    We took a major step toward the worldwide eradication of polio with our support for national immunization days in Africa and Asia. The agency continued to help finance innovative public-private partnerships, such as the one that helped create vaccine vial monitors -- simple heat-sensitive tags that indicate when vaccines have become unusable, resulting in health savings in excess of $10 million a year.
    The Congress and the American taxpayer have every right to demand results for the dollars they put into foreign assistance, and I feel USAID is doing a better job than ever before in producing results that make a difference in today's world. The Administration is eager to work with you to improve this situation, and I hope that we can do so in the weeks and months ahead. I would also like to point out some particular issues from this year's budget request that I know are of particular interest.
Account Structure
    The fiscal year 1999 budget request brings with it a slightly different account structure. USAID is requesting 1999 funding for a separate Child Survival and Diseases account at a level of $502.8 million, which reflects strong support both within the Administration and this Subcommittee. The account includes $226 million for child survival activities, $121 million to combat AIDS, $30 million for other infectious diseases and $27 million for related health activities that complement our activities in child survival and infectious disease. Also included is $98.2 million in basic education programs. Education programs are one of the most powerful means we possess to promote lasting social and economic progress in the developing world.
    While this request of $502.8 million compares to a 1998 appropriated level of $550.0 million, I want to make one thing absolutely clear: this is not meant to signal a reduction in the importance USAID places on child survival programs. It has been our experience that to effectively combat both infant mortality and the spread of disease, we also need to address the underlying social and economic conditions that allow child mortality and infectious diseases to flourish, such as poverty, malnutrition, illiteracy, poor sanitation, overcrowding and environmental degradation. We use other portions of our budget to attack these problems.
    Just to cite one example, our urban programs that work in some of the worlds' largest and increasingly crowded mega-cities are not considered part of the child survival account. Yet these programs are helping to provide clean water and waste treatment facilities to millions of poor families, an effort that clearly improves the lives of children and reduces the spread of disease. Or consider education programs that appear in this account but do not fall under a strict definition of child survival programs: research shows that the child of a mother who has even a single year of education, has a 9 percent better chance to live to the age of five. Gains increase substantially with each additional year of schooling. So when you look at our programs in terms of child survival, I think we need to focus on their broad impact.

The Development Assistance Account: The Africa Trade and Investment Initiative and the Summit of the Americas
    President Clinton's trip to Africa, in which I participated, was an excellent opportunity for the world to focus on the immense potential and considerable challenges on the continent. I believe the trip will go a long way toward invigorating trade and development in Africa. I know that USAID will have its work cut out in responding and following up on the tremendous excitement generated by the trip. This trip offered ample evidence of what I have long argued -- that Africa is the world's last great developing market. As part of the Partnership for Economic Growth and Opportunity in Africa, announced in June 1997, USAID will help Africa integrate into the world markets through increased openness to international trade and investment. This type of reform and assistance program has already been proven to be a major ingredient in the recipe for economic progress and growth in other parts of the developing world. We hope the bill will pass the Senate and be enacted into law as soon as possible.
    The Partnership includes the following USAID components:
--   Technical assistance to help African governments liberalize trade and improve the investment environment for the private sector;
--   Assistance to catalyze relationships between U.S. and African firms through a variety of business associations and networks; and,
--   Funding of non-project assistance in conjunction with other bilateral and multilateral donors to help encourage aggressive economic reforms.
    The second regional initiative included in the Development Assistance account focuses on Latin America. As part of our effort to capitalize on regional cooperation, the budget proposal includes funds to support the initiatives and was endorsed at the second Summit of the Americas. USAID helped to define the agenda for the Summit, where the region's 35 presidents focussed on regional challenges, including economic integration, education, democratic institution building and poverty alleviation through microenterprise activities. USAID is requesting $20 million to support initiatives aimed at achieving these goals which will help remove the barriers to the participation of the poor in the national life of the 34 democracies represented at the second Summit of the Americas.
An Increased Emphasis on Agriculture and Education
    The Agency has intensified our strategic focus during the last year on two important areas of development: agriculture and education. Agriculture is now being pursued as a part of USAID's economic growth goal by refocusing on the links between agriculture, economic growth and food security. As part of this effort, USAID, at the World Food Summit in November 1996, highlighted the continuing food security issues of the over 800 million chronically undernourished people in the developing world. The proposed budget allocations for food aid are part of this Administration focus. Education has been promoted to the level of one of the agency's primary goals. USAID is working to improve basic education for both girls and boys, particularly in the poorer countries of sub-Saharan Africa. An important part of this effort is our continued focus on advocating that no children should be denied access to an education because of their gender, ethnicity or social status.
Increased Transition Activities
    Within USAID's 1999 budget is a $15 million increase to the International Disaster Assistance Account for Office of Transition Initiatives (OTI) efforts. This will increase the U.S. government's capacity to bring fast, direct, flexible assistance to priority countries in their transition from conflict, by addressing urgent needs. The United States continues to face the challenge of responding to increasing numbers of countries with complex emergencies. Many of these complex emergencies have come to be high priority foreign policy concerns of this Administration, such as those in Haiti, Bosnia, Congo, Liberia and Angola. Although relatively new and with limited resources to date, OTI has demonstrated a successful track record in assisting transitional countries: disbanding 200,000 paramilitary troops in Guatemala and demobilizing and resettling nearly 3,000 guerrillas; reaching 1.9 million people with mine awareness and helping create 590 projects in 270 villages in Angola; and implementing 650 grants in Bosnia to promote independent media and democratic reconciliation.
    We have learned from experience how valuable it is to have the resources and the flexibility of the International Disaster Assistance account in place to deal with these crises. It is an invaluable, innovative and cost-effective means to advance U.S. interests in these very dynamic settings. I also want to assure the Subcommittee that by increasing the funding for OTI, we in no way, shape or form are lessening the ability of our agency to provide immediate life-saving humanitarian relief through our Office of Foreign Disaster Assistance -- still one of the world's premier organizations for providing such assistance on the ground.
Infectious Diseases
    For fiscal year 1998, Congress, under this subcommittee's leadership, provided funding for USAID to take part in a global initiative to combat infectious diseases, joining with other U.S. Government agencies in this effort. USAID has developed a strategy for the initiative as an important complement to the other four objectives leading to USAID's goal to stabilize world population and protect human health, particularly efforts in child survival, maternal health and AIDS prevention. USAID's strategy has been developed in consultation with a wide cross section of global health experts, including staff from other U.S. government agencies, UNICEF, the World Health Organization, non-governmental organizations, academia and the private sector. In the spirit of true collaboration, these discussions created a strong consensus as to the strategy we would adopt , and clarification about USAID's role.
    USAID's strategy has four technical elements:
-- Slowing the emergence and spread of antimicrobial resistance, targeted at the principal microbial threats in the developing world: pneumonia, diarrhea, sexually transmitted diseases, tuberculosis and malaria.
-- Testing, improving and implementing options for tuberculosis control.
-- Implementing new and effective disease prevention and treatment strategies focused on malaria and other infectious diseases of major public health importance.
-- Strengthening health surveillance systems by building capacity at the country level to help create a global early warning system for disease.
    Programming of the funds into specific activities will follow shortly. The Centers for Disease Control and Prevention, the World Health Organization and UNICEF, among others, will certainly play key roles in our program, and a new Infectious Diseases objective has been included in the health portion of our request.
A Historic Transformation Continues
    The historic transformations occurring in Central and Eastern Europe and the former Soviet Union remain critical to U.S. national interests, and our requests for the Support for East European Democracy (SEED) and FREEDOM Support Act accounts reflect this high priority. These nations with whom we were once in a dangerous, expensive and ever-escalating arms race, are now emerging partners in the global economy. In Central Europe, we are seeing some of our allies successfully make the transition toward membership in NATO and the European Union. Across the region we are helping these nations create democratic societies and market economies which are increasingly based on Western values, and linked to us through trade and investment and through people-to-people, grassroots relationships.
    I know the situation in Ukraine is of particular interest to you, Mr. Chairman. As you know, Secretary Albright certified that Ukraine has made significant progress toward resolving longstanding U.S. investor disputes, having determined that seven of the twelve disputes in question had either been resolved or significant progress had been made toward resolving them. The Secretary made that determination after close scrutiny of these cases, as well as numerous consultations with the U.S. business community in Ukraine and with top Ukrainian Government officials.
    Having made this certification, the Secretary remains seriously concerned about the lack of improvement in Ukraine's investment climate and limited progress toward economic reform. Therefore, she has decided to temporarily withhold funds amounting to about $25 million for assistance in areas where lack of reform would make U.S. assistance ineffective. These funds will be reprogrammed to more productive uses within Ukraine if after several months' time the government does not implement the necessary reforms and take additional steps to resolve outstanding U.S. business cases in Ukraine.
    A great deal depends on the willingness of the Ukrainian government to move forward with reform. Our assistance can only be effective if there is real commitment in a host country to embrace change. To date, we have seen a number of promising steps toward comprehensive reform, including good progress in areas such as privatization, land titling and the means-testing of housing subsidies. The challenge now is for Ukraine's leadership to ensure that the momentum generated by these incremental reforms can be translated into widespread improvements in the lives of the Ukrainian people.
    In Central and Eastern Europe, the SEED request is focused on continuing our commitment to support the Dayton Peace Accords in Bosnia and Croatia. We are promoting reconciliation on the ground through economic revitalization efforts, job creation and democracy building efforts. It will take time to deepen and solidify this process. We are also supporting police monitors and police reform in Bosnia, a program critical to our ability to facilitate the return and reintegration of refugees and displaced persons into their communities. The U.S. military presence and economic assistance programs have been highly complementary, with peacekeeping troops assuring a sufficiently stable environment for recovery to take root. In turn, economic recovery is helping to bring about conditions that will make it possible for American troops to come home.
    In partnership with a number of pre-eminent American foundations, we are proposing to begin in the next fiscal year a $100 million trust -- with half, or $50 million, to be funded over four years by the U.S. government -- to promote deeper and more enduring civil societies in Eastern and Central Europe. We are joining with Rockefeller Brothers, Ford, Soros, Mott and others to create an evenly matched public-private endowment to encourage a range of economic think tanks, professional societies, chambers of commerce, interest groups and the like to be focussed and self-sustaining. Our goal ultimately is to stimulate an educated, activist citizenry that demands accountability and value from its government. Also, by breathing life and vibrancy into these new democracies, we can more readily count on their durability. With Congressional concurrence, our initial contribution would be $12.5 million from SEED funds, and we will be consulting with you on the best mechanisms for Congressional oversight of this process.
    In the New Independent States, we are requesting an increase in FREEDOM Support Act funds of $155 million above the 1998 level to expand the Partnership for Freedom initiative in Russia and across the New Independent States. In the 1998 budget, Congress endorsed the Partnership for Freedom's new focus on economic growth, civil society, and partnerships which create bonds between non-governmental organizations, businesses, universities, hospitals, professional associations and a myriad of grassroots organizations in the United States and in the region.
    FREEDOM Support Act funds will also help us redouble our efforts in Central Asia to further develop the business, legal and regulatory environment necessary to underpin the massive oil and gas investment which is likely over the next decade. As this Subcommittee saw during its trip to the Caucasus last summer, Central Asia and the Caucasus are critical to U.S. strategic interests and world energy supplies. We will continue supporting the Administration's TransCaspian initiative to facilitate East-West transport routes and environmentally sustainable approaches to energy development through bilateral and regional technical assistance.

    An important part of our work throughout Central and Eastern Europe and the New Independent States will be our anti-corruption efforts. USAID's assistance in the area of crime and corruption addresses the underlying causes of corruption, and complements the efforts of U.S. law enforcement agencies -- the Federal Bureau of Investigation and the Departments of State, Treasury and Justice -- to address specific crime and law enforcement needs. USAID helps set the rules of the road for business, and opens up to public scrutiny government's regulatory processes and businesses' decision-making. This means reducing inappropriate discretion exercised by government, so that opportunities for arbitrary, capricious or corrupt government actions are reduced. This also means improving the transparency of commercial transactions so corporate decisions are open to stockholder and public oversight and helping to foster an independent media to inform public decision-making.
USAID Management
    The Government Performance and Results Act directed that the foreign assistance program be driven by strategic focus and by results. At USAID, we have embraced this emphasis on results. USAID continues to introduce management reforms designed to deliver assistance faster and achieve results more cost-effectively. I want to underscore the importance that USAID has been placing on managing for results and improving program effectiveness. We were committed to this performance-based budgeting long before Congress passed the Government Performance and Results Act (GPRA) in 1993, reflecting our belief that Congress and the American people must see the specific results of our programs if these activities are to continue to receive your support. Some of USAID's activities -- such as reducing the spread of infectious diseases in developing countries -- are easier to quantify. Other equally important interventions -- such as assisting host governments to take steps to move toward a stable, market-based economy -- take more time to achieve. We are committed, however, to measuring, assessing, and reporting to Congress on the results of all of our program activities.
    During this last year, we have also continued to improve our working relationships with the Department of State. Foreign policy and development strategy are better coordinated at the policy level than ever before. USAID's Strategic Plan supports specific U.S. national interests as defined in the International Affairs Strategic Plan -- a document which the Department of State and USAID worked in close cooperation to prepare. USAID and the Department of State have also agreed upon ways to streamline and better align operations ranging from how we manage facilities to how we coalesce around specific country objectives.
    The cooperation between USAID and the Department of State is particularly close in the area of democracy and governance assistance. The Department of State's regional bureaus and its Bureau of Democracy, Human Rights and Labor (DRL) consult with USAID in programming the ESF regional democracy funds. USAID plays a prominent role in the DRL-chaired Democracy Core Group, an inter-agency council that ensures the tight coordination of policy and programs in key transition countries. And our two agencies work together in the annual reviews of USAID's country programs to further strengthen the coherence of our diplomacy and assistance.
    We recently submitted to Congress the initial version of USAID's Fiscal Year 1999 Annual Performance Plan. This plan provides specific benchmarks against which our performance can be assessed at the end of fiscal year 1999. We will also submit our self-assessment of performance through fiscal year 1999 at the end of March 2000 through our Annual Performance Report. Our Performance Report will comment on why we think our approaches did or did not work and what we will do to improve our performance. These plans and reports are important tools for helping our agency, and you, to determine the degree to which we have achieved the results that we had set out for ourselves. We look forward to consulting with you on our performance measuring and planning efforts.
    In conjunction with the Department of State and other agencies having an overseas presence, USAID implemented the International Cooperative Support Services, or ICASS, system effective October 1, 1997. Under this system, administrative support services at overseas posts will be provided by the agency best able to provide effective service at a reasonable cost. While any major change such as this is likely to face problems in the first year of implementation, the changeover from the old Foreign Affairs Administrative Support system to ICASS appears to be going very smoothly. All agencies, including USAID, are working to ensure that this new system is a success and that it will result in the end in better administrative support for all agencies at a lower cost.
    In other areas of management, two USAID task forces identified ways to streamline procurement processes and to better align our workforce to projected needs in developing countries. Our workforce planning task force recommended reducing the Washington staff over the next three years to meet tight Operating Expense levels while protecting the USAID field presence and permitting expanded staff training. These moves would not entail a reduction in force, but it is clear that managing Washington with a reduced staff will require streamlined processes and greater efficiency. The task force recommended that USAID field staff not be cut any further, and that staffing remain at approximately 700 U.S. direct hires in the field. However, we will be looking at how to more effectively manage our field presence.
    The initial action plan on procurement addresses three areas: strengthened teamwork, operational goals and administrative streamlining. We are reestablishing the Procurement Policy Advisory Panel which will provide for a wider vetting and understanding of procurement and assistance policies. Our operational goals are intended to establish benchmark time periods for effecting actions, such as procurement planning and operational year budget allocation and distribution which will hopefully stimulate earlier action on procurement and assistance actions, and even out the workload over the fiscal year.
    Completing the move of USAID headquarters to the Ronald Reagan International Trade Center last year was a sizable logistical challenge, but having all our agency's Washington staff together in one building -- for the first time in our history -- has greatly improved teamwork and collaboration among employees.
    Over the coming year, we will seek to further improve USAID's unique comparative advantage to rapidly and innovatively respond to diverse development and humanitarian needs. A further streamlining of USAID work processes could increase the amount of time available to build and nurture partnerships and coalitions with those willing to collaborate on development problems. It will also ensure that USAID maintains the technical breadth and on-the-ground developing country expertise in preparing responses closely attuned to local conditions.
    USAID's recognized excellence as a pre-eminent bilateral development organization will serve the United States well as we continue to lead other development organizations. U.S. leadership helps create a shared vision on development goals and approaches across the U.S. government, among donors, within the nongovernmental and business communities and with the countries in which we work. As hosts of the upcoming 30th anniversary Tidewater meeting of development ministers, we now turn our energies to jointly implementing the Development Assistance Committee 21st Century Strategy. Similarly, as part of the New Transatlantic Agenda of the European Union and the United States, USAID is now working closely with the European Commission on more than 60 joint development activities.
The New Management System
    I also must address an issue that has been of particular concern, the agency's New Management System (NMS). Last April, I made the difficult decision to suspend overseas operations of two modules of the New Management System. Communications problems, difficulties in transferring data and system problems, particularly with the USAID Worldwide Accounting and Control System (AWACS) financial management module, were forcing the agency to expend an inordinate amount of time responding to problems, particularly at our overseas missions.
    USAID contracted in the fall with a top-notch consulting team recommended by the General Services Administration, and led by IBM, to conduct a thorough assessment of the NMS. This independent assessment by the consulting team was completed in January and has been shared with Committee staff. This analysis identified the software flaws that have plagued NMS, particularly the AWACS module, and also identified areas where we could strengthen the management of our information systems.
    The report also carefully assessed the options for delivering the necessary business functionality in NMS for the agency to comply with the Government Performance and Results Act and other government-wide standards. The report recommended options for modifications of the operations, budget and assistance and acquisition modules, and replacement of the financial management module with one of the now-available commercial off-the-shelf financial packages that would be integrated with the other modules.
    Our agency staff has put a lot of work into making the NMS system function and I deeply appreciate their labors. This was not a wasted effort. The business area analysis process established a solid base for the development of each of the NMS modules. The vision of an integrated financial and information management system that would meet our needs into the 21st Century was, and remains, the correct vision. It is now clear, however, with the advantage of hindsight, that we were too ambitious. We knew that our old systems were inadequate so we rushed the effort to reach full compliance with government standards and with the business needs identified in the business area analysis. Basically, we were too ambitious; we felt we could not achieve the changes we wanted without activating the system prior to testing it on a smaller-scale basis.
    I must also point out that, when we began this process in 1993 at the start of the Administration, everyone from the Office of Management and Budget to Congress agreed that the agency's financial information systems were badly flawed and that immediate action needed to be taken. At that time, no commercial off-the-shelf packages existed that would meet our financial information systems needs. Our intentions were good in overhauling the agency's financial information systems, but with the benefit of hindsight, our method was flawed. For that I accept responsibility.
    What are our next steps? We have completed our assessment of the consultant's report and are defining a comprehensive plan that will assure us that the mission critical systems will meet the year-2000 compliance standards. The second priority is to have in place a financial management system that complies with federal standards that can produce an auditable consolidated financial statement. Third, we must deliver the basic business functionality and data integration planned for NMS.
    Our Management Bureau, in collaboration with the Capital Investment Review Board, has laid out internal management and external contracting strategy to achieve these goals. We are in the process of sharing that approach with this Committee and our other oversight Committees. We have invested significant resources in NMS development, and it is disappointing that we are not where we had hoped to be. The independent assessment, however, provides an invaluable analysis of our current situation and a clear description of the steps that we must take to achieve the original vision of the NMS. We now find ourselves with the opportunity to resolve our difficulties with the NMS and create a system that will allow you the transparency and accountability that should be the standard for government operations.
In Conclusion
    We know that the United States cannot fulfill its leadership responsibilities or pursue our values as a nation without an effective international cooperation program. Ultimately, development assistance administered by USAID improves the lives of people in developing countries and helps to strengthen their capacity to mobilize local resources and take ever greater responsibility for their own destinies. Foreign assistance is one of America's best and most cost-effective tools for building relationships among peoples and institutions that can endure and advance our interests.
    The lines between domestic and foreign affairs are increasingly blurred.   USAID bolsters America's domestic and foreign policy interests by capitalizing on the challenges and opportunities that are inherent in increased globalization and interdependence. When we look at the causes of the Asian financial crisis, we see how important USAID's development work is. A number of Asian countries embraced aggressive economic reforms, but were slower to embrace the open and transparent governance which is also essential for long-term economic growth and foreign investment. USAID is investing in the institutional structures, market reforms and grassroots development programs that lead to long-term stability and growth. These programs are even more critical to America's future now than during the Cold War.
    Referring to USAID's programs as foreign aid is increasingly anachronistic in this kind of environment. Neither the world's problems nor America's economic opportunities stop at our borders. Exports accounted for over one-third of America's growth during the past four years. Developing and emerging market countries accounted for more than half of that growth in exports. All spheres of activity in the United States demand an international reach, whether it be health, crime-prevention, environmental protection or job creation. The benefits of international cooperation are obvious -- the dangers of not cooperating to help other nations meet these challenges are too great to risk.
    I am eager to work with this committee to restore a budget that will accurately reflect our national interest in promoting development overseas. The stakes are simply too high for us to accept any other alternative. Again, I appreciate the opportunity to appear here today, and I look forward to working with you to help preserve America's international leadership.
    Thank you.
This is an archived USAID document retained on this web site as a matter of public record.

Last Updated on: July 18, 2001