USAID Testimony: J. Brian Atwood, Administrator, March 3, 1999

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 International Relations Committee
March 3, 1999

Chairman Gilman, Congressman Gejdenson, 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 your advice, understanding and support for all the time we have worked together. In May, I will have been at USAID for 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.
And we have made important progress in those six years. Let me list a few examples.

We have, despite budget cuts that have reduced our staff by 35% since the start of this Administration, continued to meet our worldwide obligations. Although I believe we have cut past the fat, into bone, we are today a focused, better-managed, results oriented agency. We have reduced design time by 75 percent, cut regulations by 55 percent, cut competitive contract award time, put procurement information on the Internet, and worked with more than 800 new vendors in the past four years alone. We have also forged a new, closer, more effective partnership with the Department of State.
One of our most important achievements in the past six years has been to create the Center for Democracy and Governance, which now works in many nations to support civil society, democratic institutions, free elections and the rule of law, and the Office of Transition Initiatives, which helps nations make the difficult journey from conflict to peace. These programs add a new dimension to our work, by supplementing more traditional programs of development with new initiatives that address the inescapable role of democratic values in human affairs.
The news of the past five months, in the aftermath of Hurricane Mitch, has highlighted the fact that the United States continues to be the world leader in providing humanitarian response. We as a nation can take great pride in the fast, massive, bipartisan response that we made to the worst recorded natural disaster in Central America's history. And, as you know, the President has sent Congress a request for a supplemental appropriation to carry out a historic program of reconstruction in Central America.
We continue to be the world leader in the battle against infectious diseases like tuberculosis, polio, malaria and HIV/AIDS. In the last twenty years alone, life expectancy in the developing world has increased by more than ten years, smallpox has been eliminated, polio is all but eliminated, and infant mortality has dropped by more than ten percent - and our nation has played a major role in those historic achievements.
In the past year, working with other nations, private companies and international organizations, we began a worldwide program to save the lives of millions of children by addressing the vitamin A deficiency that plagues many developing nations. In 1998, the VITA Alliance operated in eleven countries, and reached an estimated twelve million children and their mothers. This is a solid start toward our goal of saving 650,000 lives each year by 2005.
USAID has worked in many ways to make sure that women are treated equitably in all our policies and programs. We have placed particular emphasis on increasing access to education for girls and women, who too often are denied it, and also on programs to increase women's legal rights and political participation around the world.
I am proud that, with strong Congressional support, we have greatly expanded the microenterprise programs that give millions of poor people a fighting chance to gain a foothold in their country's economic system. Last year alone, more than 1.6 million low-income entrepreneurs received loans from USAID-assisted institutions - two-thirds of them women, and most of the loans $300 or less.

In these and many other ways, USAID has maintained the U.S. role as the world's leading donor nation; despite the budget cuts of recent years. Last year, we marked the thirtieth anniversary of the first Tidewater Conference, the annual meeting of leaders of the world's donor nations, and the record showed that in those thirty years the world had moved from great pessimism about the future of the developing nations to a record of great progress in those nations.
In those thirty years, in the developing world, literacy rose by fifty percent, infant mortality was cut in half, the average woman went from having six children to having three children, life expectancy increased by ten years, and five million fewer children died each year.
That is a remarkable record of progress - there has never been anything like it in the history of the world - and it exists in large part because of American leadership. As I prepare to leave USAID, I think I am most proud that we have been able to maintain that U.S. leadership even in a time of severe budget cuts. Our nation has much to be proud of and again I thank you for everything you did to make this record of achievement possible.
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.
Mr. Chairman, the President has requested $21.3 billion for programs in international affairs in FY 2000. 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. This year's budget is an increase of $118 million, or less than two percent, over last year's appropriation. Let me outline some of our major budget requests.
Overall Development Assistance
The Administration is requesting a total of $1.848 billion for Sustainable Development Assistance programs in three accounts: the Development Assistance Account, at $780.4 million; the Child Survival/Diseases and Basic Education Account, at $555 million; and the Development Fund for Africa Account, at $512.56 million. This request, which is $59 million more than the amount appropriated in FY 1999, will fund projects that foster both democratic growth and economic progress.
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. The account includes support for the Office of Private and Voluntary Cooperation (PVC), which supports U.S. private voluntary organizations (PVOs) and cooperative development organizations (CDOs) to strengthen their capacities, and those of their local nongovernmental organizations (NGOs) partners to support grassroots development activities in USAID priority sectors.
Child Survival and Diseases Programs:
The FY 2000 request of $555 million for child survival and disease programs, which are up $10 million from the FY 1999 level, not including emergency funding. Of this, $445 million will be used for child survival, HIV/AIDS, infectious diseases and other health programs. The remainder will be used for basic education. These programs are an important element in promoting economic growth in the developing world. Experts say that USAID's child survival 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. We estimate that since 1985, these programs have saved 25 million children's lives. For example, deaths from measles have been cut in half, from more than two million to about 950,000 last year, and deaths from diarrhea are down by 30%, from 4.5 million to about three million last year.
The child survival request also includes $25 million for the Polio Eradication Initiative. We have played a major 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.
The budget requests $127 million to deal with HIV/AIDS, an increase of $2 million over the 1999 appropriation. 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.
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. The request for this account is $512.6 million, excluding funds for child survival. The total request for Africa of $818 million reflects the President's intent to return to historically high levels of support in Africa. The request includes $235 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. In addition to the DFA, Africa is scheduled to receive $232 million from the Child Survival and Diseases Program and $73 million from the Economic Support Fund. 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 $653.3 million. Of this, $233 million comes from the Developmental Assistance Account, $76.2 million comes from the Child Survival and Disease Account, $160.5 million is from the Economic Support Fund, $50 million is from International Narcotics Control funds, and $135.6 is from P.L. 480, Title II. 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, including HIV/AIDS, to support sound environmental practices, and to improve education.
Asia and the Near East:
The Administration is requesting a total of $2,499,835,000 for Asia and the Near East programs for FY 2000. Of this amount, $230.8 million is from the Development Assistance Account, $92.5 million is from the Child Survival Account, $2.07 billion is from the Economic Support Fund, and $106.6 million of from P.L. 480, Title II. These funds will be used 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 three Developmental Assistance accounts described previously include combined funding for the following activities:
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 for this initiative.
Economic growth funds budgeted at $457 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.
In FY 1999, our agriculture budget for all accounts was about $306 million. 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 that can increase the development impact of investment from both sides, and also gain access to markets for U.S. business. Advised by the Board for Food and International Development, we also work closely with the U.S. university community and NGOs to focus on the linkage between agriculture, economic growth and food security. Worldwide, USAID's programs work to: improve policies so farmers have incentives to produce more; strengthen adaptive research leading to new technologies for small farmers; create more environmentally sustainable farming practices; train farmers, researchers and small/micro rural business owners; and strengthen rural infrastructure and marketing. 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 1998, USAID's grants contributed to an estimated 1.6 million loans. Two-thirds of the borrowers are women and two-thirds of the loans in developing nations were $300 or less. In FY 1997, we funded $165 million for these programs, using about $20 million in carryover, and expect to keep pace with our five-year average of $138 million, funding $140 million in FY 1998.
The human impact of the microenterprise program was seen many times in the aftermath of Hurricane Mitch. For example, the vendors in the San Isidro Market, in Comayaguela, Honduras, had lost everything. The marketplace 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 market 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. Even before the hurricane, it had been an important source of credit to these micro-entrepreneurs. After the disaster, when these entrepreneurs desperately needed loans to rebuild, the foundation was there to help them.
Population/Health/Nutrition programs, budgeted at $804 million, support family planning programs, improve infant and child health nutrition, and reduce deaths as a result of childbirth. These are recognized worldwide as one of the most effective elements of U.S. foreign assistance. 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. More than 580,000 women die each year from pregnancy related causes and more than half their infants also die. 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.
Family planning is budgeted for $400 million from all accounts. 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 $148 million, 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.
Democracy and Governance programs, budgeted at $150 million in 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 attempted to embrace 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. Some of the countries we've worked in have been El Salvador, South Africa, Bolivia, Nigeria, Slovakia, Ukraine, Armenia, Philippines and the Dominican Republic. But work on elections constitutes only about fifteen percent of the Center for Democracy's activities. Among its other goals are supporting the rule of law, strengthening civil society and better governance.
USAID works on several fronts to encourage the rule of law. Legal reform may involve everything from drafting new constitutions to training judges, lawyers and prosecutors. USAID regards civil society as the political space where citizens can debate, join groups, and mobilize for change without being threatened or intimidated. We encourage civil society by supporting stronger NGOs, independent labor unions, women's organizations, business associations, and a free press. Our governance program focuses on strengthening legislatures, fighting corruption, civilian-military relations, improving policy implementation, and bolstering local and regional governments as a way to decentralize power.
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, 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 before we can exercise this authority 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.
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. Disaster assistance provides funds for temporary shelter, blankets, food and water, and medical supplies. The budget request also includes 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 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, testing new approaches, learning valuable lessons, and establishing international leadership. 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. These transition efforts will not always succeed. But OTI is breaking new ground in the meaning of foreign assistance.
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 environmental crises and such priorities as 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:

$1.943 billion to support the Middle East peace process. This includes $930 million for Israel ($150 million below FY 1999) which will be used to promote economic reforms and reinforce the peace process; $715 million for Egypt ($60 million below FY 1999) to promote economic growth, open markets, and population and environmental goals; $150 million for Jordan, for water management, economic growth and primary health care; and $100 million for the West Bank and Gaza for economic growth, water management, better governance, and community services and health care.
$126 million for other portions of the Asia/Near East region: for Asian economic recovery and bilateral programs in East Asia and South Asia; these include programs in family planning, democratic transition, health care, and legal reform.
$161 million for Latin America and the Caribbean: for Haiti, Guatemala, democracy programs and the Peru-Ecuador border dispute. One priority is support for the themes of the Summit of the Americas.

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. As with certain other programs funded by this account, this initiative is not administered by USAID. 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. This is $25 million below the 1999 level. The reduction is justified by the progress already made and by our commitment to a gradual reduction of assistance. Our goal is to help prevent war from returning to Bosnia and to help its ethnic communities become vested in peace.
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 a significant USAID proposal, the Trust for Civil Society in Central and Eastern Europe. This is a proposed a 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, we recognize that it may take a generation for some formerly communist countries to make the transition to democracy and open markets. For that reason, we are proposing the Trust, which would offer challenge grants, training, and other services to non-profit organizations, such as think tanks, professional associations, chambers of commerce and environmental groups - organizations that would serve as a force for transparency, accountability and democracy in the region. The proposed Trust would operate for fifteen years, with an independent Board of Directors, 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 Central and Easter European countries even after we no longer have missions operating on the ground.
P.L. 480 Food for Peace Programs
USAID's Food for Peace programs provide both humanitarian and sustainable development assistance in the form of U.S. agriculture commodities. In addition, P.L 480 also funds the farmer-to-farmer exchange program and a grant program to U.S. private voluntary organizations (PVOs) and cooperatives. Although requested through the Department of Agriculture, Titles II and III are administered by USAID.
Title II funds address food insecurity by emergency food aid response, including an annual contribution to the UN World Food Program, and by PVO development programs to increase agricultural productivity and improve household nutrition. These programs improve the food security of poor people, either by the direct distribution of agricultural commodities or the use of local currencies generated by the sale of those commodities in the host country. Title II also provides most of U.S. food assistance used to respond to emergencies and disasters around the world. The FY 2000 request is $787 million; however, this excludes $50 million of estimated carryover, which would permit an $837 million program. The Title III Food for Development program provides country-to-country grants of agriculture commodities. There is no request for Title III. However, the agency has transfer authority available if we decide to undertake Title III programs.
Operating Expenses
The FY 2000 request for Operating Expenses is $507.7 million. This is an increase from $493 million appropriated in FY 1999.These funds will maintain the agency's presence in key developing countries, continue to improve the agency's information technology and financial management capabilities, and provide training for staff. These funds cover the salaries, benefits, and other administrative costs associated with USAID programs worldwide, including those managed by USAID and financed through Development Assistance, the Economic Support Fund, the Support for Eastern European Democracy Act, the Freedom Support Act, and the International Disaster Assistance account. The request includes $7.7 million for costs associated with the Office of Security, previously funded from the account for Operating Expenses of the Office of the Inspector General. Operating expenses for USAID's Inspector General, and the costs of the administration of USAID's credit programs, are requested separately.
USAID will continue its efforts to reduce costs, in part by continuing staff reductions worldwide and consolidating administrative and program support functions for overseas operations. Greater efficiency will also be emphasized as we continue to improve our automated systems.
The total budget increase from FY 1999 to FY 2000 is less than 2%. The impact in FY 2000 of the FY 1999 Federal pay raise, plus the FY 2000 pay raise, combined with inflation in the cost of rent, overseas, travel, security guards, and other services, makes it necessary for us to reduce U.S. direct hire workforce levels. Even with such reductions, it will be difficult for the Agency to cover costs in FY 2000 at the request level and still cover the proposed January 2000 4.4% federal pay raise, as well as the impact of inflation worldwide on OE costs.
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 essential to USAID's operations; moving to replace the core financial system; and ensuring that the NMS and other existing systems would adequately support the Agency's operations until new systems could be installed.
We strengthened our capacity to manage our information systems work by obtaining the services of single prime contractor. We have completed Y2K repairs on 4 of our 5 missions-critical systems. Validation tests on these systems are underway. NMS is the largest and most complex of our mission-critical systems and the repair work is progressing. We hope to implement Y2K compliant version of NMS in July 1999, earlier than we had planned. This is due to our receipt of additional resources from the special Y2K supplemental.
We have improved the performance of NMS in support of agency operations in Washington. The NMS process taught us to carry out procurement faster and with fewer people. Our fiscal year-end closing process occurred a month earlier than last year and our financial reports were more accurately and efficiently prepared. We will continue to make incremental improvements to NMS. We have identified alternative approaches and systems for supporting our overseas missions, permitting to focus more resources on Y2K repairs and replacing the NMS core accounting system.
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 and simplified them. We transferred some of our core accounting functions to another federal agency and a private sector bank. Our goal has been to simplify our core accounting business needs so that we will be able to use a commercial, core accounting software product with few modifications. 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 all parts of the NMS and related systems all at once because of resource constraints. We are working on a modernization plan for our information systems. It will look at opportunities presented in the commercial marketplace and at other federal agencies for software products that were not available when we designed NMS. We will sequence our investments in manageable increments to assure success. We are committed to implement a new core financial system in Washington by the end of 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 being renovated and is to be implemented by July.
I want also to be sure that our overseas missions and the programs they manage will be able to continue operations next year. To this end, all of our field posts have reviewed their internal operations, including embedded chips used in buildings and other aspects of operation, and have made necessary corrections. We are setting aside 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, develop solutions and determine the priority of fixing each problem. These surveys also review the host-country environment to determine potential 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 of course 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, Dakar, 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 the arming of vehicles 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 and that there would be competition between security and public access. However, in the portion of the building occupied by USAID, the security requirements established after the Oklahoma City bombing have been implemented. These are 24-hour armed guard presence; package and visitor screening; 24-hour closed circuit camera and alarm coverage; and shatter resistant window film on all windows. We continue to look for ways to enhance 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 and less on input 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. We believe USAID is in the forefront of agencies in implementing the Results Act.
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 sometimes we 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 halfway there, and can get there with our help.
It is remarkable how much we have learned, and achieved, in a half century. Diseases wiped out, 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. But we must ask if we have the will.
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 for global progress, 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.

Last Updated on: July 18, 2001