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USAID: From The American People
USAID's 50th Anniversary

This is an archived USAID document retained on this web site as a matter of public record.

Testimony of J. Brian Atwood, Administrator

before the House Appropriations Subcommittee on Foreign Operations
March 25, 1999

Chairman Callahan, Congresswoman Pelosi, and members of the committee. It's a pleasure to be here this morning to present the President's fiscal year 2000 budget request for foreign assistance programs.

As you know, this is likely to be my final appearance before you, and I want to thank you for all your advice, understanding and support. I have been at USAID for nearly six years, and that is a long time in a job like this. It hasn't always been easy but it has always been rewarding, because I believe that our work is of the highest importance, both to our own country and to the world. We could not have made the progress we have made without the understanding and support of this committee.

I particularly want to thank you, Mr. Chairman, for your leadership. In 1997, the foreign assistance bill passed with more votes - 375 to 49 -- than it had ever received before. Your colleagues trust your judgment and so do I. Your child survival account, which includes resources to combat the diseases and conditions that kill children, and the resources to educate children, is now a fixture in our legislation. And it is a reflection of the humanitarian values that you and the vast majority of Americans share. So I thank you, Mr. Chairman, for your friendship, your support and your leadership.

I want to thank and salute you as well, Congresswoman Pelosi. You have been a strong and tireless champion of development assistance, in many areas but most particularly in the worldwide fight against the HIV/AIDS pandemic, and in such other areas as family planning, women in development, and human rights. Like the Chairman, you have traveled to see our programs for yourself, including your visit to Central America in the aftermath of Hurricane Mitch. All my colleagues at USAID join me in thanking you, and the Chairman, for your friendship and your support of our work.

For me, as I prepare to leave USAID, this is a time for reflection. Fifty years ago, with the Marshall Plan and the Point Four program, the United States began a great experiment in foreign assistance. These were always pragmatic programs, based on a belief that by helping others we would also help ourselves, with new markets, better neighbors and international stability. Over the years, working with successive Congresses and with other nations, we have greatly expanded the developing world's food production, eradicated smallpox and nearly eradicated polio, increased literacy by fifty percent, reduced the average number of children born to women in the developing world from six to three, increased life expectancy by ten years, and seen the world's wealth grow from a 1948 global GNP of $4.4 trillion -- measured in 1998 dollars - to $47.6 trillion last year.

This is a remarkable record - there has never before been such progress in any fifty-year period in human history - and it exists in large part because of American leadership. Even in a time of severe budget restraints, we have been able to maintain American leadership in foreign assistance. We provide only about ten percent of all of the developed world's foreign aid, but other countries continue to follow our lead in defining the goals and techniques of assistance. Again, I thank you for the bipartisan support that has helped maintain our leadership.

We have seen, in recent months, an outstanding example of American leadership. I refer to the aftermath of Hurricane Mitch, which took at least nine thousand lives and did billions of dollars in damage to homes, farms, schools, health clinics, roads and entire communities in Central America. The United States, with bipartisan support in Congress, and working with other nations and private organizations, moved quickly to provide food, shelter and medicine, and to prevent the epidemics that were at first feared. Now plans are underway for a massive reconstruction effort. Several of these countries have recently emerged from civil war and need our help in building democracy and open markets. I know that this subcommittee supports this important initiative.

I also want to mention that USAID's microenterprise program, budgeted for FY 2000 at $135 million from all accounts, has continued to expand and give millions of poor people a chance to gain a foothold in the marketplace. In FY 1997, a record 1.4 million low-income entrepreneurs received loans from USAID-assisted institutions - and two-thirds of the recipients were women, and most of the loans were for $300 or less. In recent years, as loans have been repaid, a multiplier effect has taken place, as the same money is used over and over to make new loans and help new people. For example, the 1.4 million poor people who had active loans from USAID-supported institutions in FY 1997 represented an increase of 47 percent from the previous year. During the same period, the value of those loans increased from $301 million to $645 million, or 113 percent.

In human terms, the impact of the microenterprise program was seen many times in the aftermath of Hurricane Mitch. For example, the San Isidro Market, in Comayaguela, Honduras, was covered with mud and debris. The vendors, most of them women, had nothing to sell and no way to make a living. But less than three months later the marketplace was back in business, its stalls once again filled with food, clothing, pottery and other goods. One reason the market was reborn was because of the Covelo Foundation, which receives USAID funding. Before the hurricane, it had been an important source of credit to these micro-entrepreneurs. After the disaster, when they desperately needed loans to rebuild, the foundation was there to help them. Often these are very small loans. A person with no collateral might first receive a loan of $50, then when that was repaid another loan of $100 might be extended. But these very small loans can change people's lives.

Mr. Chairman, for FY 2000, the President has requested $21.3 billion for programs in international affairs. Of that amount, USAID will manage $7.2 billion or 34 percent, which includes both programs that we administer and those we administer in cooperation with the Department of State and other agencies. The FY 2000 USAID budget request is an increase of $118 million, or less than two percent, over the previous year's appropriation.

Let me start by mentioning several programs that I know are of special interest to you, Mr. Chairman, and to Congresswoman Pelosi.

Child survival and disease programs. The FY 2000 request includes $555 million for child survival and disease programs, an increase of $10 million from the FY 1999 level, excluding the supplemental. Of that amount, $445 million will be used for child survival, HIV/AIDS, infectious diseases and other health programs, and $110 million will be used for basic education.

Since 1985, with the support of Congress, USAID has spent $3 billion on child survival programs. Experts say that these programs save more than three million lives a year, and have helped drop infant mortality rates in the developing world to their lowest levels ever. For example, deaths from measles have been cut in half, from more than two million to about 950,000 last year.

USAID's child survival strategy focuses on innovative, affordable and effective interventions in countries of greatest need. These include immunizations, oral rehydration therapy, Vitamin A delivery, expanded breastfeeding, and treatment of malaria and respiratory disease. USAID has spearheaded the drive to have Vaccine Vial Monitors (VVMs) included on all non-freeze dried EPI vaccines supplied to UNICEF for 1999, to ensure that vaccines are fully potent when delivered.

The child survival request includes $25 million for the Polio Eradication Initiative. We have played a leadership role in the near-eradication of polio from the world. The Americas were certified polio free in 1994, and the number of reported cases elsewhere in the world has declined in the past decade from about 35,000 to about 3000 last year, with total eradication within view. In this campaign, USAID and Rotary International forged the most successful public-private partnership for public health in history. Last year, more than 450 million children were immunized against polio during national immunization days. In the largest public health event in history, India immunized more than 130 million children on a single day, December 7, 1997.

In the past year, working with other nations, private companies and international organizations, USAID began a worldwide program to save the lives of millions of children by addressing the vitamin A deficiency that plagues many developing nations. Just last week, the leaders of about fifteen major U.S. corporations met in Washington with Hillary Rodham Clinton to pledge their support for the program, which will include fortifying the food that children eat. The corporations included Land O'Lakes, Proctor & Gamble, Kellogg, Roche Vitamins, BASF, and Tate & Lyle. In 1998, the VITA Alliance operated in eleven countries, and reached an estimated twelve million children and their mothers. We estimate that this program will save 650,000 lives each year by 2005.

USAID has been a leader in maternal health and nutrition, providing innovative in-service training for thousands of health workers, and other programs in more than twenty countries. We expect to spend about $50 million in FY 2000 for improving maternal health and reducing deaths as a result of pregnancy and childbirth. USAID works with international partners and other donor nations to support programs of nutrition, birth preparedness, treatment, and postpartum and newborn care. Since 1985, such programs have contributed to dramatic reductions in infant mortality rates. Immunization programs have reduced deaths among children under five by twenty to twenty-five percent. By its support of the development and delivery of oral rehydration solution (ORS), USAID has prevented one million childhood deaths from diarrheal diseases each year.

We continue to be the world leader in the battle against infectious diseases like tuberculosis, polio, malaria and HIV/AIDS. I know how much you care about the HIV/AIDS programs, Congresswoman Pelosi. This budget requests $127 million to deal with HIV/AIDS, an increase of $2 million over the 1999 appropriation, excluding the supplemental. During my time at USAID, the agency has become the lead donor for the response to the global HIV pandemic. We have spent nearly $1 billion dollars for the prevention and mitigation of this epidemic in the developing world. USAID presently supports over 300 major activities in 47 countries around the world and over the next five years we expect to provide life saving services to over 50 million men and women.

The worldwide AIDS pandemic is extremely serious, but there have been signs of success in the battle against it. We now have abundant evidence that public health programs can change sexual behavior and thereby save lives. In Senegal, Philippines and Indonesia, early, comprehensive HIV intervention programs that USAID supported have helped prevent a major epidemic. In another set of countries - Uganda, Dominican Republic and Thailand - intensive HIV/AIDS programs were launched after major epidemics had begun, but the number of new infections is actually coming down.

For example, surveillance in rural and urban Ugandan antenatal clinics shows that the rate of HIV has fallen by 35 percent among women aged 15-24. Also in Uganda, surveys show that HIV among urban antenatal women has been cut in half - from 30 percent in 1992 to 15 percent in 1997 - and that the HIV rate of all adults nationwide has fallen from 12.1 percent in 1994 to 9.5 percent in 1997. These are extremely important achievements, just as significant as the progress in HIV treatment in our own country. By our work in HIV/AIDS prevention abroad, we are not only reducing death and suffering there, we are lessening the dangers to our own country.

Following are highlights of the entire budget proposal.

Sustainable Development Assistance

The Administration is requesting a total of $1.848 billion for Sustainable Development programs in three accounts: the Development Assistance Account, at $780.4 million; the Child Survival/Diseases and Basic Education Account, outlined above, at $555 million; and the Development Fund for Africa Account, at $512.6 million. The overall request is $109 million more than the amount appropriated in FY 1999, excluding the FY 1999 supplemental for Child Survival.

Development Assistance Account:

The requested $780.4 million is an increase from $733.86 million appropriated in FY 1999. Of this amount, $26.5 million will be used to address the Asian financial crisis, and $4.4 million will be used for a Latin American initiative related to tropical forest fires. This account supports programs that promote economic growth and agricultural development, human capacity development, environmental sustainability, and democracy and governance in some of the poorest countries in the world.

Regional Programs

Development Fund for Africa:

USAID is renewing its request for a separate appropriation for the Development Fund for Africa, or DFA. This reflects the high priority the Administration places on achieving sustainable growth in Africa, and has pursued with bipartisan support in Congress. The request for this account is $512.6 million. The total request for Africa of $818 million, which includes $232 million from the Child Survival and Diseases program and $73 million from the Economic Support Fund, reflects the President's intent to return to historically high levels of support in Africa. The DFA request includes $233 million for economic growth and agricultural development, $34 million for human capacity development (other than basic education), $73 million for population programs, $99 million for management of the environment, and $72 million for building democracy. Within these categories, $45 million (an increase of $15 million over FY 1999) is included for an expanded African Food Security Initiative. This is the ten-year initiative announced by President Clinton during his 1998 trip to Africa. The initiative is part of our response to the goals of the 1996 World Food Summit. Two goals underlie U.S. foreign policy in Africa: to accelerate Africa's integration into the global economy and to combat serious transnational security threats there, including HIV/AIDS and outbreaks of violence. Africa today presents both urgent problems and great opportunities. We see extreme poverty, widespread hunger, a terrible HIV/AIDS problem, political instability and war. At the same time, we see economic growth and movement toward democracy. As I have said before, Africa is the world's last great developing market. We will continue to support improved agriculture, to work for an improved environment for investment and trade, and to encourage civil society and democracy.

Latin America and the Caribbean:

The budget request for the Latin America and Caribbean region for FY 2000 totals $519.7 million. Of this, $233 million comes from the Developmental Assistance Account, $76.2 million comes from the Child Survival and Disease Account, and $160.5 million is from the Economic Support Fund. In addition, $50 million is requested by the Department of State, for programs managed by USAID, from International Narcotics Control funds.

The funds will support programs to carry out the goals of the Summit of the Americas and its follow-up process. Additionally, the request will contribute to reconstruction in the Central American and Caribbean countries hard-hit by Hurricanes Mitch and Georges. The funds will also be used to promote democracy and human rights, to expand economic growth, to reduce illegal immigration into the U.S., to halt the flow of illegal drugs into the U.S., for health care programs, to support sound environmental practices, and to improve education.

Asia and the Near East:

The Administration is requesting a total of about $2.4 billion for Asia and the Near East programs for FY 2000. Of this amount, $231 million is from the Development Assistance Account, $92.5 million is from the Child Survival Account, and $2.07 billion is from the Economic Support Fund. These funds will be used to continue support for the Middle East peace process, and to finance programs that facilitate economic reforms and increase access to markets, with particular emphasis on those countries hardest hit by the Asian financial crisis. The goal will be to raise growth rates, create jobs, and promote the prosperity that is essential to free market economies. The funds will also be used to reduce population growth, improve maternal health, and combat the spread of HIV/AIDS; to improve energy efficiency, urban waste management and water resource management; improve the management of forest and coastal resources, and to reduce the growth of greenhouse gas emissions.

The FREEDOM Support Act Account

The FY 2000 request for the FREEDOM Support Act for the New Independent States totals $1.032 billion. This includes $241 million for the Expanded Threat Reduction Assistance Initiative, which will address security questions that may have been worsened by the economic crisis. The request for Freedom Support Act development funds totals $791 million, or $10 million less than the FY 1999 appropriation, not including emergency funding. Funds will be used to support the transition to democracy and free markets in the former Soviet states, including help for elections in several NIS countries this year. The NIS region has been hit hard by the Russian financial crisis. Programs will emphasize support for NGOs and the private sector, while reducing assistance to central governments. There will be regional initiatives to facilitate trade and investment outside the capital cities as well as support for small and medium sized businesses through training and greater access to credit.

Support for East European Democracy Account

The Support for Eastern European Democracy (SEED) Act is the cornerstone of U.S. assistance to Eastern Europe and the Baltic States. SEED is a transitional program, intended to aid Central and Eastern European countries through the difficult passage to democracy and market economies. The FY 2000 SEED request is $393 million, $37 million below the 1999 level. The request includes $175 million for reconstruction and democratic reform in Bosnia, $20 million below the 1999 level. The reduction is justified by the progress already made and by our commitment to a gradual reduction of assistance. The request includes $218 million for other counties in the Northern and Southern tiers, with $50 million for Kosovo, to be used for humanitarian support, community building, local elections and support of an independent media. The budget reflects a shift in program activities from "graduating" Northern tier countries to Southern tier countries that have farther to go in their political and economic transformation. Hungary and Latvia graduated from the SEED program in FY 1998. Poland, Lithuania and Slovakia will graduate in FY 1999. In FY 2000, focus will be give to democratic transition and market reforms in Romania, Bulgaria and Albania. In that connection, I would like to mention USAID's proposed Trust for Civil Society in Central and Eastern Europe. This is a proposed public-private partnership between our government and four American foundations. As you know, SEED is a transition program and we have a graduation plan for closing USAID missions. Still, it may take a generation for some formerly communist countries to make the transition to democracy and open markets. The Trust would offer challenge grants, training, and other services to non-profit organizations that would serve as a force for transparency, accountability and democracy in the region. It would operate for fifteen years, and USAID would match private contributions up to $50 million over a multi-year period. The Trust would enable us to continue as a force for democratic change in the area even after we no longer have missions there.

Sectoral Priorities.

The three Sustainable Development programs include funding for the following goal areas:

Environmental funds, with overall funding of $290 million, support international efforts to reduce the threat of global climate change, conserve biological diversity, support sound energy services, and manage natural resources. Our environmental programs continue to be the best in the world, helping nations achieve economic growth while reducing greenhouse gasses and cleaning up urban pollution. Examples of USAID's environmental work in the past year have included improving natural resources conservation on an additional 1.7 million acres in tropical forests, coral reefs and grasslands; creating five new partnerships, under the International Resource Cities Program, between U.S. cities and cities in developing and transitional countries; and implementing sustainable energy technologies, policies and practices that resulted in cuts of more than 2.7 million tons of CO2 emissions.

Last year USAID launched its five-year, $1 billion Climate Change Initiative, to carry out President Clinton's commitment to reduce the threats posed by climate change in developing and transition nations. Through programs in 44 countries, we have helped developing nations to participate in the United Nations Framework Convention on Climate Change, to decrease net greenhouse gas emissions, and to adapt to climate vulnerability. The budget request includes $150 million from all USAID-managed accounts for this initiative, of which $112 million is Development Assistance.

Economic growth funds budgeted at $458 million, will expand and strengthen private markets, support agricultural development and microenterprise programs, and build access to economic opportunity for the rural and urban poor.

The importance of agriculture was underlined last year both by Hurricane Mitch, which devastated farming in Central America, and by the Asian financial crisis, which has increased food insecurity in that region. We continue to work closely with various U.S. private agricultural interests to develop a stronger public-private partnership and also gain access to markets for U.S. business. The new alliance with food companies for the worldwide Vitamin A program is an example of that partnership. We are refocusing on the links between agriculture, economic growth and food security. As was underscored at the 1996 World Food Summit, there are an estimated 800 million malnourished people in the world, and the United States, with the international community, is committed to cutting that figure in half in the next twenty years.

USAID's microenterprise program, budgeted at $135 million, from all accounts, works to increase the flow of credit to small businesses in developing countries. Helping poor but enterprising men and women build their own businesses is a key element of USAID's grassroots growth strategy. The microenterprise initiative started in 1994 with 331,000 low-income borrowers; in FY 1997, USAID's grants contributed to an estimated 1.4 million loans.

Of these, 67 percent were poverty loans, which means they were below $300 in Africa, Latin America, the Caribbean, Asia and the Near East, or were below $1000 in Europe and the New Independent States. Poverty lending increased from 58 percent of microfinance funding in FY 1996 to 68 percent in FY 1997. Also, in FY 1997, there were 2.1 million clients participating in the savings programs of USAID-supported institutions. These clients had $373 million in savings, an impressive achievement for people living on the margin of survival. Microenterprise development has emerged as an agency priority because it can so often help poor people work their way out of poverty, and we appreciate the strong bipartisan support it has enjoyed in Congress.

Family planning is budgeted for $400 million from all accounts, including $355 million in Development Assistance. Well over fifty million couples in the developing world use family planning as a direct result of USAID-supported programs. We estimate that as a result of USAID population programs there were 7.9 million fewer unwanted pregnancies, 3.2 million fewer abortions, 3.8 million fewer unwanted births, and 15,000 fewer maternal deaths last year. Since the mid-1960s, fertility rates in countries where USAID has been a major family planning donor - such as Indonesia, Bangladesh, Colombia, Mexico, Kenya and Egypt - have declined by more than a third.

Human Capacity Development, budgeted at $147 million, of which $110 million is requested within the Child Survival, Diseases and Basic Education Account, and $37 million is requested within Development Assistance, focuses on basic education as a central element of development. The program recognizes that for many poor people, and particularly women, illiteracy and the lack of a basic education are insurmountable barriers to a decent life. Many countries have policies that limit access to education to women and the poor. USAID is working with policymakers in several counties in Africa and Latin America to begin classroom programs designed to improve the quality of education for the poor and particularly for girls and women.

The inferior status that women occupy in most developing countries not only contributes to individual suffering, but also represents a wasted resource and holds back national economic growth. We are working to change this with technical assistance and leadership provided by our Global Bureau's Office of Women in Development (WID), which in 2000 is again budgeted at about $10 million. WID's goals include overcoming gender-based constraints to economic growth; improving education for girls; protecting women's legal rights; and creating greater consideration of gender in all aspects of the agency's work.

This year USAID is proposing a new initiative that would be a first step in a global campaign against abusive child labor. It has been estimated that at least 250 million children are performing child labor around the world, many of them as young as eight or nine. We are requesting $10 million for a three-year program, with most of the money to be used to support four pilot projects, two in Asia and the Near East, one in sub-Saharan Africa, and one in Latin America and the Caribbean. The projects would include outreach and incentives to parents, improved teacher training, quality learning opportunities, and work with local communities. The goal would be to keep young people in school, or to get them back to school, at least to age fourteen.

Democracy and Governance programs, budgeted at $149 million in Development Fund for Africa and Development Assistance funds, work to build democracy, support human rights, strengthen the rule of law, create a strong, politically active civil society, and combat corruption around the world. Never before in human history have more nations embraced democracy. More than fifty have successfully made the transition in the past fifteen years. But many fledgling democracies are vulnerable to military coups, corruption, organized crime, civil strife and economic chaos. Such counties are the focus of programs carried out by USAID's Center for Democracy and Governance and by our overseas missions. Since 1993, USAID has assisted in more than one hundred elections around the world, sixteen on them last year alone. Other programs support the rule of law, strengthen civil society and foster better governance.

USAID Credit Programs

USAID's credit programs address a variety of sustainable development objectives, including economic development, a sustainable environment, and protecting human health. USAID believes there are many instances when development priorities can best be funded through credit, especially in emerging market counties and those moving toward graduation status. Credit programs use the leveraging of private sector resources to support sustainable development and to enable USAID to reach people it would not otherwise be able to reach. The Urban and Environmental Credit Program, budgeted at $8 million for subsidy costs and administration, provides loan guarantees that help market based financial institutions and instruments needed to address key development issues such as the adequate provision of water, sewer, sanitation and housing for the urban poor. The budget also requests authority to transfer up to $15 million to the Development Credit Authority. We hope to receive the certification from OMB required by Congress later this month. DCA authority, unlike other credit programs, is not restricted to any one sector and can be used where credit is the best vehicle to achieve development goals. The Micro and Small Enterprise Development Program request is $2 million for credit subsidies and program administration.

International Disaster Assistance Account

The FY 2000 request for International Disaster Assistance is $220 million, a $20 million increase over the FY 1999 appropriated level. This request includes $165 million for the Office of Foreign Disaster Assistance (OFDA) to support emergency relief and rehabilitation programs in response to natural and manmade disasters and other emergencies that displace large numbers of people. This compares to $160 million in FY 1999. In the post-Cold War era, there have been a growing number of civil conflicts, and OFDA has spent significantly more time and money confronting humanitarian needs caused by man rather than by nature. Our government's ability to respond rapidly to emergencies is known and respected worldwide, and was seen in Central America after Hurricane Mitch. The budget request reflects a $5 million increase in disaster assistance to assist victims of nuclear, biological and chemical incidents abroad.

The Office of Transition Initiatives (OTI) is budgeted at $55 million for FY 2000, up from $40 million in FY 1999, because of its successes and the increased demand for its assistance. OTI was established in 1994, in response to the fact that, in today's world, many nations are undergoing the difficult passage from war to peace. The United States has a vital interest in seeing nations successfully complete those transitions. For five years, OTI has moved aggressively in transitions such as Guatemala, Bosnia and Rwanda. OTI focuses on the special case of recovery from disasters brought on by political conflict, which unfortunately has been the dominant form of disaster in the post-Cold War era. In Montenegro and Bosnia, we have worked to bring about popular participation in national recovery from regional conflict and authoritarianism. In the Philippines and Guatemala, OTI has reinforced peace agreements. Often it focuses on programs to reconcile old enemies, as former combatants put down their arms and reenter civilian life, often aided by job training.

Economic Support Fund Account

The Economic Support Fund, budgeted at $2.389 billion, will be used to support the Middle East peace process, to assist countries in transition, to promote democracy worldwide, and to promote stability in such countries as Ireland and Cyprus. Funds will also be used to support the Holocaust Fund and the Human Rights Fund, and to respond to global crises and such development priorities as child survival, public health, climate change and biodiversity. The request does not include the supplemental being requested in connection with the implementation of the Wye Memorandum to support Middle East peace.

In summary, the request includes:

Operating Expenses

The FY 2000 request for Operating Expenses is $507.7 million, which is used to manage USAID's $7.2 billion program. Of this amount, $7.7 million is for costs associated with the Office of Security, previously funded by the Inspector General, for which the Agency is assuming responsibility this year. The balance of the Operating Expense request -- $500 million -- covers the cost of salaries, benefits, and other administrative costs associated with USAID's worldwide programs, including efforts to improve the agency's information technology and financial management capabilities and improve training for agency staff. Factoring in other funding sources, such as local currency trust funds and prior year funds carried forward, the increase from FY 1999 to FY 2000 in funds available for total recurring operating costs is less than 2%. With a projected FY 2000 Federal Pay Raise of 4.4%, the impact on FY 2000 costs of the FY 1999 Federal pay raise, combined with the impact of inflation in Washington and overseas on the cost of rent, utilities, travel, security guards, and other support costs, actual costs will increase considerably more than 2%.

To accommodate these increased costs, USAID will continue its efforts to reduce costs and increase efficiency in order to meet the most critical management challenges still facing us. These efforts include examining the potential for consolidating support activities in fewer locations, greater reliance on International Cooperative Administrative Support Services where this system will provide cost savings, and examining the organizational structure of the Agency, particularly in Washington.

However, these economies alone will not be sufficient to offset expected cost increases, which means that the Agency will have to make still more staff reductions in order to operate at the requested level. Given that USAID has already reduced its U.S. direct hire staff by 35% since start of this Administration, determining precisely which parts of the Agency will have to absorb further reductions, and the size of each reduction, will be a difficult task. I have been actively engaged with senior managers of the Agency in reviewing various options for distributing further staff reductions, and I want to ensure that these reductions are made in a way that minimizes the impact on our most critical operations.

New Management System (NMS) and Y2K

A year ago, we received an independent assessment of NMS. The report detailed many recommendations for modernizing our information systems. Our analysis indicated that we couldn't implement the recommendations, including replacing our core accounting system, by September 1999. We knew we had a great deal of work to repair Year 2000 system problems.

I directed that we focus our information technology resources on three priorities: completing Y2K repairs for our mission-critical systems; moving to replace the core financial system; and ensuring that the NMS and our other systems continue to support our Agency's operations.

We strengthened our capacity to manage our information systems work by obtaining the services of a single prime contractor. We have improved the performance of NMS in support of agency operations in Washington. Our fiscal year-end closing process occurred a month earlier than the previous fiscal year and our financial reports were more accurately and efficiently prepared. We have identified alternative approaches and systems for supporting our overseas missions. For example, we have found more cost-effective ways for obtaining information from some of our overseas missions without using NMS.

The work on replacing the NMS core accounting system has been comprehensive and systematic. We are in the process of completing an agency-wide architecture or blueprint to guide our decision on this investment. We have completed an extensive review of our core accounting business processes. We have simplified them so that we will be able to use a commercial, core accounting software product with few modifications. We transferred some of our core accounting functions to another federal agency and a private sector bank. We are creating a strong program management office under our new Chief Financial Officer to implement the new core accounting system.

It will not be possible to modernize or replace NMS and related systems all at once because of resource constraints. We are working on a modernization plan for our information systems using products from the commercial marketplace and at other federal agencies. We will sequence our investments in manageable increments to assure success. We are committed to implement a new core financial system in Washington during FY 2000 as the first incremental investment. Phased implementation overseas will occur in FY 2001 and FY 2002. The other components of NMS will also be addressed in this plan.

Y2K Compliance: Making our critical systems Y2K compliant is our top IT priority. As of today, four of five such systems are renovated and are being tested. We had planned that three of these systems would be fully implemented by the end of this month but because of problems encountered during the testing phase it may take until May to implement the four systems. The fifth, NMS, is the largest and most complex of our mission-critical systems and Y2K repair work is progressing. We hope to implement Y2K compliant version of NMS in July 1999, earlier than we had planned. The acceleration of the compliance date is due to our receipt of additional resources from the special Y2K supplemental.

Overseas, all of our field posts have reviewed their internal operations. We have set aside up to five percent of our development assistance program funds in FY 1999 for use in correcting Y2K problems discovered in IT applications that are part of our assistance programs. We have contacted more than 50 overseas posts to identify Y2K problems and develop solutions. These surveys also review the host-country environment to determine risks that might affect USAID operations. We are working closely with the Department of State and other agencies to assure that our operations will continue on January 1, 2000.

Security

We are concerned about the security of our missions overseas in the aftermath of last year's bombings in Kenya and Tanzania. The $3 billion advance appropriation requested by the Department of State addresses its planning for new construction and rehabilitation of about 45 diplomatic posts overseas. It does not explicitly include USAID-related costs. We are working with OMB and the Department of State to prioritize other planned projects, to identify specific USAID funding requirements, and to ensure that USAID is included in all future planning and funding requests.

We plan to use $27.5 million in security supplemental funds appropriated by FY 1999 to accomplish the most urgent re-location and security rehabilitation projects abroad. These funds have been allocated for enhanced security or relocation costs in Rabat, Luanda, Nairobi, and Kampala, with other locations under review; also for design or land purchase costs for new office buildings in Nairobi and Dar Es Salaam; and other security upgrades worldwide. Additionally, we have conducted a comprehensive review of all 82 current USAID facilities overseas. We expect that in the future, as the Department of State constructs new facilities that meet all security standards, USAID will be co-located in these new facilities.

With regard to our new offices in the Ronald Reagan Building, we recognized from the first that the building is required to be open to the public, as was provided for by Congress. However, in the portion of the building occupied by USAID, the security requirements established after the Oklahoma City bombing have been implemented, including 24-hour armed guard presence; package and visitor screening; and 24-hour closed circuit camera and alarm coverage. We continue to look for ways to strengthen the security of our offices.

The Results Act

USAID is committed to managing for results, and to implementing both the letter and the spirit of the Government Performance and Results Act. We have reformed USAID to focus more on results management. Over the past year, reporting of performance data by all operating units increased from 40% to 64%. For the past two years, when performance data are combined with other information on a USAID objective in a country, field staff and Washington technical reviewers agreed about 80% of the time on what performance had been toward achieving the objective. The agency's results reporting system is not yet where it should be; this is not surprising, given the lack of timely, comprehensive and quality economic and social data available about developing countries. We have streamlined agency processes relating to performance monitoring, reporting and reviewing, and work has begun to clarify guidance for preparing strategic plans.

Conclusion

It has been a great privilege to head the U.S. Agency for International Development at this challenging time in its - and the world's - history. I don't expect ever to meet a more talented and dedicated group of men and women than my colleagues at USAID.

During the past six years, we have seen our share of controversy, criticism and setbacks - that is inevitable. But we also need to step back and consider the remarkable progress we have made. It was only fifty years ago that our nation created the concept of foreign assistance, with the Marshall Plan for Western Europe and the Point Four technical assistance plan for all developing nations. In time, America was not acting alone but was leading the developed nations of the world in assistance to the developing nations.

Now we have begun to complement traditional programs with efforts to prevent problems and build democratic institutions. It is an imperfect process. Some nations, for various reasons, are not ready for democracy. But others are struggling toward democracy and sometimes our help can make the difference.

It is remarkable how much we have learned, and achieved, in a half century. Ancient diseases wiped out or curtailed, life expectancies increased, agriculture revolutionized, lifestyles changed, democracies launched. Perhaps the most important lesson is simply that strong, democratic and transparent institutions are the soundest vehicles for social progress.

There is no limit to what we might achieve in the 21st century if we are willing to invest in the lessons we have learned in the past fifty years. To turn away from the great experiment we embarked on fifty years ago would be a tragic mistake. The post-Cold War era offers unlimited possibilities for American political and economic leadership. If we turn away from the developing world, we invite more failed nations, more suffering, more disease, more civil wars and terrorism. We risk exposing ourselves to dangers from which all our military might cannot protect us.

I hope to see the day when our foreign assistance budget is far greater than it is today. I think that is the best investment we could make in the future of our children and grandchildren.

I'm proud to have spent these years with an agency that works so hard to improve the lives of people all over the world and I thank you again for all that you have contributed to our success.

This is an archived USAID document retained on this web site as a matter of public record.

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Last Updated on: July 18, 2001