[Senate Hearing 112-]
[From the U.S. Government Publishing Office]



 
  STATE, FOREIGN OPERATIONS, AND RELATED PROGRAMS APPROPRIATIONS FOR 
                            FISCAL YEAR 2012

                              ----------                              


                        TUESDAY, APRIL 12, 2011

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 10:02 a.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Patrick J. Leahy (chairman) 
presiding.
    Present: Senators Leahy, Mikulski, Kirk, and Tim Johnson.

               U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT

STATEMENT OF DR. RAJIV SHAH, ADMINISTRATOR

             OPENING STATEMENT OF SENATOR PATRICK J. LEAHY

    Senator Leahy. Good morning.
    Today we are going to hear testimony from Dr. Rajiv Shah, 
Administrator of the United States Agency for International 
Development (USAID), on the Agency's fiscal year 2012 budget 
request. Most of us know Dr. Shah well, and welcome him here.
    About 15 months ago the Administrator took charge of an 
agency that has struggled for many years with serious 
management and programmatic weaknesses. At the time, I offered 
him congratulations and condolences, but I was delighted he 
accepted the challenge.
    When he first testified here, last April, I said that too 
often this subcommittee and others had encountered at USAID 
instances of arrogance and detachment from the impoverished 
reality of the people in countries where USAID operates, and 
we'd encountered poorly designed projects, mega-contracts that 
were touted as success stories, but which enriched the 
contractors more than they helped the intended beneficiaries, 
and taxpayer money was wasted.
    If you want to change the bureaucracy--any bureaucracy, 
changing the culture takes time. I continue to believe strongly 
that USAID needs to become a more efficient, accessible, 
flexible, and less risk-averse agency that rewards creativity 
and focuses on building the capacity of local people and 
governments in countries where the United States has interests. 
That's just about everywhere in the world. But I have seen 
steady process under Administrator Shah. And I compliment you 
for that. I mentioned out back when we were talking, I've read 
your speeches. You have not whitewashed problems the way some 
others did in the past. You've talked about them, you've 
addressed them directly, and I think that's why we see 
improvements. But USAID still has a long way to go.
    As long as I've been either chairman or ranking member of 
this subcommittee I have said that, contrary to what some say, 
USAID has an essential role to play in projecting U.S. global 
leadership and helping to protect U.S. interests around the 
world. I hear that from people in business and from our 
military. Anyone who doubts that has not seen what I've seen, 
whether it's when President George H. W. Bush asked me to go to 
Vietnam and see whether we could use the Leahy War Victims Fund 
there, or to the West Bank, or to Afghanistan, to so many other 
places. There are countless examples where USAID has had a 
profound, positive impact in ways that directly advance United 
States interests.
    Recently I was in Haiti. That country's going to face 
daunting challenges for years to come and no one can dispute 
that USAID is helping to save lives and helping the Haitian 
people of the country recover.
    So, it's not a question of whether your mission is integral 
to our national security--everyone from President Reagan to 
General Petraeus has recognized it is. But I want to know, Dr. 
Shah, how you're making the changes to ensure that USAID 
carries out that mission in the most cost-effective way.
    Senator Graham's staff, my staff, and their counterparts in 
the House have been working extraordinarily hard to try to, 
one, stay within our budget constraints, but also make sure we 
spend the money wisely. More than one-half of fiscal year 2011 
is past. We're only now finalizing the budget, which is going 
to require USAID, like other agencies, to scale back.
    The President has requested significant increases in 
funding for USAID in fiscal year 2012 because of our security 
interests around the world. I believe much of what he requested 
is justified. I believe it is in our national interest to do 
more to help build stable democracies and vibrant economies 
around the world. But, I don't see those increases coming.

                           PREPARED STATEMENT

    Senator Blunt regrets he could not be present, but has 
submitted a prepared statement for the record. Senator Kirk is 
here. Senator Graham's schedule suddenly changed, and I 
understand that. I'll yield to Senator Kirk, and then we'll go 
to questions.
    [The statement follows:]
                Prepared Statement of Senator Roy Blunt
    Thank you Mr. Chairman, and thank you Director Shah for being here 
today. You and I had a chance to visit last week in my office and I 
appreciated the chance to hear from you directly on some of these 
topics.
    Obviously your organization's mission to promote development and 
provide aid of all kinds to areas of the world in need is something 
that is both morally right and helps improve America's image in the 
world.
    Unfortunately our budget realities mean that we just can't do as 
much for as many people as we would like to.
    I appreciate hearing about your efforts to bring greater efficiency 
to United States Agency for International Development (USAID) and 
implement policies you've witnessed firsthand while working in the 
private sector and with private sector partners. I've always said that 
government is the last place where you measure how much you care about 
something by how much money you spend on it instead of the results you 
see. I believe USAID should be focused on results and I hope that's the 
direction you're taking the agency.
    I mentioned this during our meeting the other day, but I want to 
get it in the record. There's a program at USAID called Scholarships 
for Education and Economic Development and it has a partnership with 
St. Louis Community College. I believe this partnership has been 
successful and I believe the leaders of that community college want to 
see it continue. So I'm hopeful it will and that these students from 
Latin America will continue to benefit from spending time in the St. 
Louis community learning from my constituents about a lot of very 
practical skills that they can take back to their own communities.
    I encourage you to continue working closely with other U.S. 
Government agencies. We hear a lot from our military and security 
leaders that USAID programs are a real added value to our efforts 
wherever U.S. troops are engaged. I believe that when our diplomatic, 
aid, and military agencies operate jointly and seamlessly, that is the 
best way to ensure that taxpayer dollars are being well-spent and with 
the maximum input of leaders with all kinds of experience. I know that 
bureaucratic challenges await every effort to integrate these agencies 
and I want to emphasize that the Congress should be doing everything it 
can to back up leaders who want to see these agencies better cooperate.
    I also hope you'll continue to keep the Congress apprised of your 
programs in parts of the world that we need to be paying a lot of 
attention to. I know you've already briefed me personally on ongoing 
efforts in some particularly challenging places like Egypt, Yemen, 
Afghanistan, and Iraq. I appreciate that and will look forward to your 
feedback as those programs and many others are implemented in the 
months and years ahead.
    Thank you again for your time today and I'm looking forward to 
hearing from you and asking some questions.

                     STATEMENT OF SENATOR MARK KIRK

    Senator Kirk. Thank you, Mr. Chairman. And we're looking 
forward to Senator Graham leading our side.
    I'm new to this subcommittee, but not to this bill. I think 
the first foreign operations bill I worked on was the fiscal 
year 1984 supplemental 27 years ago, and remember USAID 
administrators who have come and gone--I think my first one was 
Peter McPherson that I worked with as a staffer with the House 
International Relations Committee, helped to draft the 
legislation that made you part of the State Department. And I 
think that was because of critical problems that USAID 
basically told the State Department in critical moments in our 
history, like in El Salvador, that they could jump off our 
cliff, and, it was not in our budget, it was not part of the 
development goals, and so we weren't going to provide critical 
assistance needed to help the El Salvador peace process. And I 
think for leaders of the Congress at the time, that's why we 
rolled you into the State Department--to make you a tool of the 
Secretary of State, rather, sort of, as a lone ranger out there 
in bureaucracy land, which is what USAID had been.
    We're pretty proud of the USAID team in Benghazi right now 
and the support that you're giving, although I'm very worried 
about the sustainability of your effort. Should Ajdabiya fall, 
my guess is that you guys are going to bug out, and then the 
question is, what happens to everyone else? I think that's 
because of a critical lack of United States air power that will 
be unable for us to protect the humanitarian mission, which, as 
my understanding was, the whole point of this operation in 
Libya.
    I've also been worried about sustainability of USAID 
efforts elsewhere. The heart and soul of USAID is its immediate 
disaster response and support for the enabling environment 
around U.S. troops. And oftentimes we've seen that when the 
security environment gets robust, as we would say, USAID and 
its partners bug out. We saw the collapse of alternative 
development programs in Helmand province, which was the central 
core of the effort for the U.S. military, and the lack of USAID 
and its partners being able to hang in there with U.S. troops 
was disturbing.
    We also saw USAID trying to electrify Western Afghanistan--
a key part of the effort--with a project at Kajaki Dam, but 
they've been unable to actually carry that out. And I think we 
have largely abandoned the last turbine that was supposed to go 
in there. And it's been a very long and tortured effort to get 
power to Kandahar, which, as General McChrystal and General 
Petraeus have said, is the central focus of our efforts in 
Afghanistan, and I've been worried about just how slow USAID 
has been in providing that effort.
    But I'm most worried about USAID abandoning, apparently, a 
Partner Vetting System (PVS) to make sure that funds stay out 
of terrorist hands in the West Bank in Gaza. We have the 
distinct possibility, according to USAID inspector general 
audits at West Bank in Gaza, that we may be funding both sides 
of this conflict, and I will be asking you later why you have 
failed to meet commitments and timelines that you set before me 
when I was a House Member, and look very much forward to your 
answers on that.
    And, Mr. Chairman, back to you, thank you.
    Senator Leahy. Thank you.
    Dr. Shah, please feel free to go ahead, Sir.

                  SUMMARY STATEMENT OF DR. RAJIV SHAH

    Dr. Shah. Thank you, Mr. Chairman, and members of the 
subcommittee. I appreciate the chance to be here today, and I 
want to thank you all for your commitments to U.S. engagement 
efforts around the world, and to USAID in particular.
    As the chairman noted, I've been in this role now for more 
than 15 months. The first 2 to 3 of those months were certainly 
consumed by managing an interagency response to the tragic 
earthquake in Haiti. While that was an all-consuming exercise 
for me, it was also an opportunity for me to see what Senator 
Kirk just referred to as the heart and soul of our efforts--our 
ability to move quickly in times of humanitarian crises, and 
our willingness to take on risks in order to serve some of the 
most vulnerable people around the world.
    Following that experience we launched two major efforts 
last year--a Presidential Study Directive on development and a 
Quadrennial Development and Diplomacy Review (QDDR), both of 
which were designed to evaluate and assess how we could do a 
better job executing our mission abroad.
    The Presidential Study Directive set some clear strategic 
guidelines for us to build on the development of sustainable 
systems, build local capacity around the world, and move away 
from service delivery that just requires ongoing investment 
without building that kind of sustained local capacity. It also 
directed us to be more focused on growth and good governance as 
major underlying factors for successful development, and 
encouraged us to make science, technology and innovation a 
major focus of how we try to bring the cost of achieving 
results down on a sector-by-sector basis.
    The QDDR resulted in part in endorsing a set of reforms 
I've called USAID Forward. Those reforms cover budget, policy, 
human resources, procurement, science and technology, and 
evaluation. And in each of those areas I think we've made real 
progress in implementing a new strategic direction and new 
operating principles for our Agency and our teams around the 
world.
    I look forward to discussing them with you, and I recognize 
that this kind of complete reform of a Federal bureaucracy is a 
difficult task to undertake.
    I want to take this opportunity to thank the staff at USAID 
which has across the board been supportive of the efforts we're 
undertaking--especially certain members of our teams, both here 
in Washington and around the world, that have really become 
champions for the USAID Forward reform agenda, and taken it 
upon themselves to be creative and use their insights in 
implementing these guidances in case after case after case.
    Ultimately, the purpose of these efforts is to drive better 
results, and to drive them in areas such as our Feed the Future 
program. I had the chance to visit a new partnership we've 
developed with Walmart that is allowing communities in the 
Guatemalan highlands in the western part of that country to 
escape a decades-long situation of poverty and child hunger and 
malnutrition.
    I've had a chance to see our Global Health Initiative in 
action. We are now looking at data coming back from the 
President's malaria initiative that shows a 30 percent 
reduction in the number of children under the age of 5 who die 
from all causes because of our efforts to get a low-cost, 
insecticide-treated bed net, some indoor residual insecticide 
spraying, and improved treatments to hospitals and communities 
where kids get malaria and often die.
    And I've had the chance to deeply engage with our 
Afghanistan, Pakistan, Haiti, and other missions. My most 
recent trip was to Afghanistan. While I was there I had the 
chance to sit with a group of women who had come together in a 
shura that was part of a program called the National Solidarity 
Program of which USAID has been a strong supporter. They 
represented many of the positive attributes of our new gender 
policy across the Agency and in that country.
    I understand that our reforms are critical because our 
mission is critical. We need to be an ever-improving partner to 
the United States military in national security operations. We 
want to be continually more effective in places around the 
world, like El Salvador, which has become one of the 
Partnership for Growth countries where we are essentially 
coordinating the interagency partnership with El Salvador to 
help build on the track record of building local institutions 
and allowing that country to have a more dynamic, growth-
oriented economy that can serve as a pillar for the region of 
Central America.
    And I recognize that these reforms will not happen 
overnight. It takes a lot of hard work. It takes people being 
willing to try things differently. It takes wonderful and 
committed partners in the Congress in both the Senate and the 
House to both give the reforms a chance and to continue to 
encourage us with your guidance and your support and your 
specific comments regarding issues upon which we need to take 
action on in order to accelerate our reform agenda.

                           PREPARED STATEMENT

    At the end of the day this country deserves an outstanding 
and premier development Agency that needs to be aligned 
absolutely with the Secretary of State and our State 
Department's diplomatic priorities. It needs to work in a 
spirit of partnership with the military. And I think in all of 
those areas we've improved our performance significantly. But 
ultimately we want to deliver real results for the American 
people. We think we're on that path. And I look forward to your 
continued guidance and support.
    Thank you.
    [The statement follows:]
                  Prepared Statement of Dr. Rajiv Shah
                              introduction
    Thank you very much Chairman Leahy, Ranking Member Graham, and 
members of the subcommittee. I am honored to join you here today in 
support of the President's fiscal year 2012 budget request.
    Before beginning my testimony, I want to briefly comment on the 
U.S. Agency For International Development's (USAID) response to the 
devastating earthquake and subsequent tsunami in Japan and the 
remarkable events taking place in the Middle East.
    In Japan, USAID is leading the United States Government's response, 
coordinating an interagency effort with the Nuclear Regulatory 
Commission, and the Departments of State, Energy, Defense, and Health 
and Human Services. We also have deployed a Disaster Assistance 
Response Team--including urban search and rescue specialists and 
nuclear experts--to support Japanese emergency response efforts. I'd 
like to thank the brave men and women on these teams for their enormous 
courage. USAID has provided 10,000 personal protective equipment sets--
including suits, masks, gloves, decontamination bags, potassium iodide, 
and other supplies--to help those working near the contaminated zone in 
Fukushima Prefecture.
    Our thoughts and prayers are with the Japanese people at this time, 
and we will continue to work closely with the Government of Japan to 
respond to their requests for assistance as quickly as possible.
    USAID also has led the humanitarian response to recent events in 
the Middle East. As we speak, USAID teams are working on the Tunisian 
border with Libya and in Egypt, helping deliver assistance to those 
affected by conflict. In Eastern Libya, we have delivered health kits 
capable of providing basic care to 40,000 people, with more en route. 
We have also provided key support to the World Food Programme, which 
has moved more than 10,900 tons of food in and around Libya, enough to 
feed more than 650,000 people.
    We will work with counterparts to help the people of the region 
realize their democratic aspirations through a credible transition. 
Drawing on experience USAID has gained over decades, we will help 
countries strengthen civil society, extend the rule of law, and create 
more transparent and accountable democratic governance.
                                results
    Both the President and Secretary Clinton have emphasized that 
development is as important to our Nation's foreign policy as diplomacy 
and defense, and as a result have actively championed the goal of re-
establishing USAID as the world's premier development agency.
    Representing less than 1 percent of the Federal budget, the 
President's fiscal year 2012 request balances difficult trade-offs with 
a clear-eyed assessment of where we can most effectively achieve 
dramatic, meaningful results for the American people and the developing 
world.
    The President's request includes significant investments in 
bipartisan initiatives promoting global health and food security, the 
foundations of which were laid by the previous administration and 
bipartisan supporters in the Congress.
    Representing the largest portion of the President's budget request 
for foreign operations, the $8.7 billion USAID and State are requesting 
for the Global Health and Child Survival account will allow us to 
transform HIV/AIDS from a death sentence to a manageable disease for 
more than 4 million HIV-positive patients, reduce the burden of malaria 
by one-half for 450 million people and prevent hundreds of millions of 
child deaths from preventable diseases by providing them vaccines and 
bed nets.
    Our Global Health Initiative is designed to efficiently deliver 
these results. Rather than create separate facilities to treat separate 
diseases, we will save money and expand the reach of coverage by 
integrating treatments into single points-of-care. In Kenya, we worked 
with President's Emergency Plan for AIDS Relief to couple HIV/AIDS 
treatment with maternal and child health services. As a result, we've 
extended the availability of reproductive health services from two to 
all eight of the country's districts, at no increase in cost.
    We can also help countries develop their own agricultural sectors, 
so they can feed themselves. For the $1.1 billion we are requesting for 
bilateral agricultural development programs, we will be able to help up 
to 18 million people in up to 20 countries--most of them women--grow 
enough food to feed their families and break the grips of hunger and 
poverty.
    We chose these potential countries for our Feed the Future 
initiative selectively, based on their own willingness to invest in 
agriculture, undertake reforms, and encourage coordinated investment 
from other donors, foundations and private companies, leveraging our 
investments several-fold. We have worked closely with these countries 
to develop rigorous agricultural strategies that will bolster the 
success of our initiative.
    But our foreign assistance will not just assist people abroad; it 
will benefit us here at home.
           from the american people, for the american people
    Our assistance represents the spirit of our country's generosity; 
captured in USAID's motto: ``From the American People''. Recent events 
underscore the critical importance of our humanitarian assistance 
request.
    But now more than ever, it is critical that the American people 
understand that our assistance also delivers real benefits for the 
American people: it keeps our country safe, and develops the markets of 
tomorrow.
Keeping America Safe
    By elevating the role of democracy, human rights and governance, we 
help to consolidate freedom in new and fragile democracies and expand 
liberty in authoritarian and semi-authoritarian countries. We also 
support the rebuilding of failed and fragile states during and after 
conflict, forging new compacts between State, civil society and the 
private sector that lead to increased stability and ultimately keep 
Americans out of harm.
    As Secretary of Defense Gates, Joint Chiefs Chairman Admiral 
Mullen, and General Petraeus have all emphasized, we need a fully 
engaged and fully funded national security presence, including the core 
components of our Nation's civilian power: the State Department and 
USAID.
    This year, for the first time, the President's budget designates 
$1.2 billion of USAID funding for Afghanistan to a separate account 
called the Overseas Contingency Operation account. This transparent 
approach, modeled upon the Defense Department's well-established 
example, distinguishes between temporary costs and our existing budget 
in an effort to consistently budget for Defense, State, and USAID 
spending.
    In the most volatile regions of Afghanistan, USAID works side-by-
side with the military, playing a critical role in stabilizing 
districts, building responsive local governance, improving the lives of 
ordinary Afghans, and--ultimately--helping to pave the way for American 
troops to return home.
    For example, we are helping to improve agricultural yields in the 
Arghandab Valley. As a result, farmers shipped the first agricultural 
exports out of Kandahar in 40 years. We have also helped rebuild the 
civil service in the Southeast and helped fuel a 40 percent reduction 
in the growth of opium poppies that fund Taliban operations.
    In Northwest Pakistan--the current base of operations for al Qaeda 
and the Pakistani Taliban--USAID staff and partners undertake enormous 
personal risk administering more than 1,400 small-scale development 
projects. In the Malakand province, they have helped rebuild 150 
schools so children there can become productive members of their 
economy, instead of turning to extremist madrassas.
    Our work in promoting national security is not just limited to 
active zones of conflict. Throughout the world, USAID is deploying 
development specialists today to strengthen democracies, rebuild 
livelihoods and build strong health and educational systems so that we 
do not have to deploy our troops tomorrow. As Secretary Gates has said: 
``Development is a lot cheaper than sending soldiers.''
    In Southern Sudan, the USAID mission worked with partners to 
design, procure, and pre-position ballots and supplies months before 
the recent referendum on independence. That foresight helped ensure the 
referendum, which many predicted would never occur, proceeded 
peacefully and successfully, but also left us prepared in the event it 
would not.
Developing the Markets of Tomorrow
    In addition to strengthening our national security, USAID's work 
also strengthens America's economic security.
    Today, long-time aid recipients like India, Indonesia, Poland,South 
Korea, and other emerging economies have become America's fastest 
growing markets. Exports to developing countries have grown six times 
faster than exports to major economies and today they represent roughly 
one-half of all U.S. exports.
    In 2009, we exported more than half-a-trillion dollars in American 
goods and services to those countries, and 97 percent of those 
exporters were small-and-medium sized U.S. companies. That is why for 
every 10 percent increase we see in exports, there is a 7 percent 
increase in the number of jobs here at home.
    We need to accelerate the economic growth of tomorrow's trade 
partners, ensuring those countries grow peacefully and sustainably.
    But beyond these impacts, winning the future will depend on 
reaching the 2-3 billion people currently at the bottom of the pyramid 
who will come to represent a growing global middle class. By 
establishing links to these consumers today, we can effectively 
position American companies to sell them goods tomorrow.
    Make no mistake: our success is intertwined with the progress of 
those around us. By fully funding the $2.9 billion USAID is requesting 
for its Development Assistance account, we will save lives, expand 
global freedom and opportunity and crucially strengthen America's 
national and economic security.
                                 reform
    Because development is critical to our national security and future 
prosperity, USAID has worked tirelessly to change how we work with all 
of our partners.
    Consistent with the President's Policy Directive on Global 
Development and the Quadrennial Diplomacy and Development Review 
(QDDR), we have launched a series of reforms we call USAID Forward.
Learning, Monitoring, and Evaluation
    To ensure our assistance is effective, we are taking monitoring, 
evaluation, and transparency seriously. In 1994, USAID conducted nearly 
500 independent evaluations. By the time I arrived, only 170 
evaluations were submitted to Washington, despite a threefold increase 
in programs managed. In many instances, these evaluations were 
commissioned by the same organizations that ran the programs.
    To end this practice, we introduced a new evaluation policy that is 
quickly setting a new standard in our field. We are requesting $19.7 
million to implement this policy and provide performance evaluations 
for every major project, conducted by independent third parties, not by 
the implementing party themselves. And we will release the results of 
all of our evaluations within 3 months of their completion, whether 
they tell a story of success or failure.
Combating Fraud, Waste, and Abuse
    We are fighting vigorously to prevent and respond to fraud, waste 
and abuse, and to ensure a culture of vigilant oversight. I have 
created a new suspension and debarment task force led by our Deputy 
Administrator Don Steinberg and staffed with talent across our agency. 
This task force will provide a coordinated effort to closely monitor, 
investigate and respond to suspicious activity.
Private Sector Partnerships
    We are also placing a renewed emphasis on economic growth, driven 
by private sector investment. In all aspects of our work, we are 
relying much more on leveraging private sector investment and building 
public-private partnerships in countries committed to good governance 
and pro-business reforms.
    For example, through the Feed the Future initiative, we have 
launched groundbreaking new partnerships with Kraft, General Mills, and 
Wal-Mart in Ghana, Tanzania, El Salvador, and Guatemala to connect poor 
farmers to local and international food markets. And in Haiti, we are 
supporting Coca-Cola's initiative to promote the Haitian mango juice 
industry.
    These efforts strengthen the sustainability of our economic growth 
work, while also improving the bottom line for American companies.
Science, Technology, and Innovation
    Across our portfolio, we are seeking new ways to harness the power 
of science, technology and innovation. For our request of $22.1 
million, we will recapture USAID's legacy as the leader in applying 
scientific and technical solutions to the challenges of development.
    We have developed a new venture capital-style investment fund--the 
Development Innovation Ventures Fund--so we can support start-ups, 
researchers, and nonprofits focused on the problems of the developing 
world. We are requesting $30 million to continue using this simple, but 
highly competitive business model to sustainably scale innovative 
solutions to development challenges.
    By providing seed capital to incentivize the emergence of these 
innovations, we practice development with an exit strategy. This fund 
has already funded several projects, including an easy-to-use self-
administered test for pre-eclampsia, the leading cause of maternal 
mortality in the world.
    In Haiti, instead of rebuilding brick-and-mortar banks devastated 
by the earthquake, we are partnering with the Gates Foundation to begin 
a mobile banking revolution in the country. By allowing Haitians to 
save money and make transactions on their cell phones, we are 
encouraging local wealth creation and cutting back on corruption and 
wage-skimming.
    This approach forms the foundation of a new series of grant 
challenge partnerships USAID introduced just last month. Rather than 
building hospitals and power plants throughout the developing world, 
USAID will partner with foundations, foreign governments, inventors and 
engineers to generate new, low-cost innovations that can help countries 
skip the need for some of this physical infrastructure.
Procurement
    Fundamentally, all of the reforms I have outlined are designed to 
achieve the same result: to create the conditions where our assistance 
is no longer necessary.
    The President's budget request puts this approach into practice. It 
cuts development assistance in at least 20 countries by more than one-
half, including 11 countries where all bilateral Development Assistance 
has been eliminated. It also terminates USAID missions in three 
countries. And it reallocates almost $400 million in assistance and 
shifts 30 Foreign Service positions toward priority countries and 
initiatives.
    USAID must continue to do its work in a way that allows our efforts 
to be replaced over time by efficient local governments, thriving civil 
societies and vibrant private sectors. That is why we have launched the 
most aggressive procurement and contracting reforms our agency has ever 
seen. Instead of continuing to sign large contracts with large 
contractors, we are accelerating our funding to local partners and 
entrepreneurs, change agents who have the cultural knowledge and in-
country expertise to deliver lasting, durable growth.
    These procurement reforms are crucial to delivering assistance in a 
much more effective and evidence-based way, generating real results 
faster, more sustainably and at lower cost so more people can benefit.
    To implement the QDDR and USAID Forward, implement our procurement 
reforms and deliver development gains more cheaply and efficiently for 
the American people, it is crucial that USAID's fiscal year 2012 
operational request of $1.5 billion is fully funded.
    We can only make these reforms meaningful if we can bring in the 
contracting officers, controllers, and technical advisors who can 
provide accountability and oversight over our contracts and grants and 
safeguard taxpayer funds.
    As we continue the Development Leadership Initiative begun under 
President Bush, with strong support from the Congress, we plan on 
filling key staffing gaps in priority countries and frontline States. 
By bringing in experts in conflict and governance, global health, 
agriculture, education, economics and engineering, we can restore the 
technical capacity our agency has lost over time, and has had to 
contract at far greater expense.
                               conclusion
    The evidence is clear: development saves lives, strengthens 
democracies and expands opportunity around the world. It also keeps our 
country safe and strengthens our economy. But our development 
assistance also expresses our American values.
    When we protect girls from sex trafficking in Asia, stop 
deforestation in Latin America or help Afghan girls return to school, 
we express American values.
    When Americans see a neighbor in need, or witness suffering and 
injustice abroad, we respond; we mobilize; we act. We are a generous 
people. That fact was never clearer than when 20 million American 
families donated money to Haiti relief; more than watched the Super 
Bowl.
    USAID is proud to put American values into action--distributing 
antimalarial bed nets donated by school children, supporting faith-
based organizations that help ease suffering abroad, and engaging all 
Americans in solving the greatest global challenges and generating 
results.
    Right now is a critical moment in our country's history. As a 
Nation, we are making a lasting determination about the future of our 
country, and the future of our global leadership.
    Now is the time when America must decide whether it will engage and 
lead the world, actively using its tools of development, diplomacy, and 
defense to improve human welfare and freedom across the globe . . . or 
whether it will retract, leaving many of its poorest, most fragile 
global partners without assistance, and leaving other emerging global 
powers like China to promote alternative economic and political models.
    Budgets are an expression of policy; they are an expression of 
priorities. But fundamentally, they are an expression of values.
    Thank you.

    Senator Leahy. Thank you very much, Dr. Shah.

                        CUTBACKS IN FOREIGN AID

    You'd mentioned that some people are misinformed about what 
foreign aid is. A recent national poll said that most Americans 
think it accounts for between 20 percent and 40 percent of our 
budget. Of course, it's less than 1 percent. And they assume 
that it's a form of charity, a giveaway. But USAID spent $1.6 
billion on goods manufactured in the United States--100 times 
more than it spent on goods manufactured outside the United 
States. That's why everybody--Presidents, Republicans and 
Democrats, and our military leaders--have supported it. But 
there is going to be, there will be cutbacks, I assume. There 
will be programs eliminated.
    Give me a couple of good reasons to support foreign aid, 
and what you think may be cut.

            NATIONAL SECURITY AND JOBS IN THE UNITED STATES

    Dr. Shah. Well, I appreciate the comment and the question. 
I believe our performance in places like Afghanistan and 
Pakistan are central to our national security priorities. Over 
the last 15 months we have dramatically increased our oversight 
capabilities and operational presence in those places, 
consistent with an integrated civilian-military plan that we 
are enacting with General Petraeus in Afghanistan and with our 
colleagues in Pakistan.
    We have pursued--I think to great effect--a strategy and an 
approach in Southern Sudan that enabled our diplomatic efforts 
to be successful by supporting a peacefully conducted 
referendum. We now keep our fingers crossed and continue to 
work in partnership to ensure an effective and nonviolent 
resolution to the succession of South Sudan.
    And I think in Haiti we're making real progress in certain 
areas. I'm proud of our efforts in mobile banking that I think 
are going to develop an innovative and important mechanism for 
banking and financial transactions based on mobile phones that 
will reach many, many more clients than older traditional 
systems. We've seen our efforts to get clean water to people, 
and to build basic systems that do that generate real results 
and help prevent the further spread of critical diseases like 
cholera. And we know we are making progress on efforts like the 
industrial park in the North that will create 20,000 jobs and 
bases for improved housing and economic opportunity.
    In all of these settings, our work contributes to and is a 
critical part of our national security. And it is how we 
project our values abroad. It is enabling our economy to be 
more vibrant and dynamic, and it's helping to create jobs at 
home.

             EXAMPLES OF BUSINESS--CORPORATE--PARTNERSHIPS

    I was with the President in India when we were launching a 
unique partnership as part of our Feed the Future Program, and 
we visited a micro-irrigation provider who was selling small-
scale farmers a very cheap micro-irrigation plastic piping 
technology that was powered by a solar panel, and they've sold 
hundreds of thousands of those in India. Well, the solar panels 
are made in Georgia, and now they're building a plant in 
Michigan. And it allows us to reach a market of very poor 
farmers throughout rural South Asia, while creating hundreds of 
jobs here in the United States.
    That's just one example. Across the board, our businesses 
are telling us that they want to engage in real partnerships so 
that they can cultivate the markets of the future and they can 
be active participants. And they find our partnerships ever 
more streamlined and efficient in helping them make those 
engagements--businesses like Walmart, PepsiCo in Ethiopia, and 
a number of other major firms in the southern part of----

                    USAID'S RESPONSE TO BUDGET CUTS

    Senator Leahy. But, what are some of the things that will 
have to be cut if your budget falls short?
    Dr. Shah. Well, they're really in two categories. One is, 
we've proposed a set of reallocations and we've used our new 
budget capability to really identify tough tradeoffs that we've 
made in order to move money to better-performing efforts. We've 
proposed in the fiscal year 2012 budget request a series of 
investments that continue to build on the most results-oriented 
programs.
    The ones I'm most focused on with respect to your question 
are programs like the President's malaria initiative, which has 
shown a tremendous capability to reduce child death in Africa. 
That program will expand into new countries like Ethiopia and 
the Democratic Republic of Congo, really going after big 
reservoirs of high-malaria-prevalence communities. And we would 
not be able to expand a program that works and generates 
results without that.
    The other area would be our Feed the Future initiative. 
We've seen how high food prices in 2008 led to more than 36 
food riots around the world and real instability in countries 
where people spend a huge percentage of their income securing 
food and feeding their families. Feed the Future is a program 
that works. It's targeting 18 million people, to move them out 
of poverty and hunger, in 20 countries. But we simply won't be 
able to continue the program and the investments in those 20 
countries if we're not able to secure the fiscal year 2012 
budget as the President has proposed.

                   PROCUREMENT REFORMS AND MONITORING

    Senator Leahy. In your congressional budget justification 
there is a statement that USAID is conducting a series of 
business process reviews; key management processes and 
functions to support the Agency's development outcomes more 
effectively; to accomplish this, USAID is utilizing a 
systematic repeatable approach, including diagnosis, 
optimization, implementation, and assessment--this bureaucratic 
gobbledygook doesn't tell us anything.
    I tried to find a coherent description of these reforms. I 
couldn't. Now, I was not an English major in college, but I do 
read a lot and I wish you would just tell us in English--what's 
your most important procurement reform?
    And then when you talk about monitoring--we had the 
problem, of course, at Afghanistan's central bank prior to your 
being here--USAID had a $92 million, 5-year contract with them, 
with Deloitte. And, I assumed that they would tell us if they 
saw fraud. They never did. The inspector general said USAID 
found out about the fraud when The Washington Post ran an 
article about it. They issued $850 million in fraudulent loans.
    If we're going to be doing this, how do we make sure the 
contractors are honest? How do we--I don't want 
``optimization'' and ``robustibadation'', and the rest of the 
stuff. I want to know who's there with the green eyeshades 
keeping track of things?
    Dr. Shah. Senator----
    Senator Leahy. It's a general question.
    Dr. Shah. On your----
    Senator Leahy. Good luck.
    Dr. Shah. Thank you, Sir.
    On your point on congressional budget justifications, 
you're absolutely right. I have myself struggled greatly with 
the way they read. And we are taking the guidance from your 
team very seriously and will in future submissions have a more 
plain-English approach to that--which is something I'm seeking 
across every effort in our bureaucracy and across the Federal 
Government.

                EXAMPLES OF REFORMS USAID HAS UNDERTAKEN

    With respect to procurement reform, we've really taken on 
some very fundamental reforms. The first is building local 
capacity development teams in our missions around the world. We 
have a plan for expanding the numbers that we do. But what we 
do is we build a team that includes a first tour officer, a 
more seasoned Foreign Service officer, local staff that 
understand the context and institutions locally; have them 
develop a game plan for getting a higher percentage of total 
USAID commitments directly to local institutions and 
organizations. And that's making a big difference.
    I had a chance personally to meet with the first 50 or so 
members of these teams, and I really believe, I mean, they have 
a huge amount of passion and commitment to this. They're doing 
important work and innovative work. We've made a number of 
specific policy changes in order to enable them to be 
successful. And----
    Senator Leahy. I want that work to show. I mean, I don't 
want it to get----
    Dr. Shah. Absolutely. Yes.
    Senator Leahy [continuing]. Consumed in this.
    Dr. Shah. As another example, we've been breaking down 
these Indefinite Quantity Contract (IQC), which are these very 
big contracts, into smaller chunks and into things that are 
more broadly competed and allow for more firms to be 
essentially winners within an IQC. There's a good example of 
that with respect to our construction and vertical structures 
programs in Afghanistan, where they worked hard to break a big 
IQC into four smaller components--three or four smaller 
components--that have a greater amount of competition to get 
you better results for American taxpayers.
    Third, we've created a board on acquisition and review of 
large contracts, and a suspensions and debarments task force. 
And we have been aggressive about pursuing enhanced 
accountability across all kinds of partners--public and private 
sector.

                   MONITORING PROGRAMS IN AFGHANISTAN

    With respect to Kabul Bank, we have canceled the component 
of the contract that I believe you were referring to. We do not 
believe that Deloitte, or USAID, or the U.S. Government writ 
large could have stopped the massive fraud that existed there. 
But, the concern that I had was that the structure of the 
project----
    Senator Leahy. But nobody knew about it. That's the 
problem.
    Dr. Shah [continuing]. Precluded--exactly--precluded 
information from coming to sources it should have been coming 
to. And that's just wrong. So, we're reviewing a broad range of 
our efforts there.
    In Afghanistan, we've launched a project that we call A-
cubed, or, Accountable Assistance for Afghanistan, and I look 
forward to talking a little bit more about the different 
programs within that.
    But I think over the past 15 months the progress and the 
improvement in contract management and oversight in Afghanistan 
has been tremendous. I believe there's still a long way to go, 
and I welcome the cases where we find things that we can then 
go after or cancel, so that we can keep the teams really 
focused on implementing the A cubed initiative and doing that 
aggressively. Thank you.
    Senator Leahy. Thank you.
    Senator Kirk, I've gone way over my time and I apologize. 
Please go ahead.
    Senator Kirk. No. Thank you, Mr. Chairman.

                      PVS--SENATOR KIRK'S INQUIRY

    In November 2007, the USAID Office of Inspector General 
said that ``our audit determines that USAID's policies, 
procedures and controls are not adequate to ensure against 
providing assistance to terrorists on the West Bank.'' USAID 
properly responded in July of that year with a PVS, and you 
spent $2.5 million taxpayer dollars on setting that system up.
    In September--or, I'm sorry. Then you, in January 2009, 
USAID published its final rule on the vetting system. In May, 
Jacob Lew testified before my old committee that this PVS is in 
the rulemaking process, and it's our intent to become final.
    In June 2009, the PVS rule was made final. In March 2010, 
you appeared before me when I was a House Member and you said, 
``We are prepared for USAID programs, for the PVS to roll out 
this year''--that was 2010--``and we will come out with very 
specific plans on March 16.'' That was March 16, 2010.
    On April 2, then, in a response to a letter from me, you 
said, you wrote in writing to me that ``We will be putting this 
out within 1 month, and should be ready to launch the program 
by the end of the summer.'' Meanwhile, you've just been getting 
pounded by your own inspector general, who says that ``We have 
no way to ensure compliance in March 2011.'' Your inspector 
general said that the program was vulnerable to inadvertently 
providing material support to organizations for persons who 
commit, threaten--or, threaten to commit or support terrorism 
without the knowledge of USAID in the West Bank and Gaza. You 
also--the inspector general also said that, ``Our Office of 
Compliance specialists provided mission management summary 
reports of instances of noncompliance with vetting 
requirements. However, the position now has been vacant since 
March 1, 2010. Mission management no longer receives any of 
these reports.''
    Boy, this is not looking good for your running of this 
program--like, really terrible. How do you answer?

             USAID'S PVS AND OTHER ANTI-TERRORIST PROGRAMS

    Dr. Shah. Well, the PVS in West Bank and Gaza has been up 
and running. It has not stalled. We are seeking a new person to 
fill the position, but we're able to continue to implement the 
program with respect to that point.
    The point that you referred to about our prior conversation 
on this I can speak to. As you know all of our missions 
complete antiterrorism risk-based assessments on an annual 
basis, and----
    Senator Kirk. No, I----
    Dr. Shah [continuing]. We check our partners----
    Senator Kirk [continuing]. Don't--I'm asking----
    Dr. Shah [continuing]. Against lists maintained by the 
Office of Foreign Asset Control. And before awards are made, 
nongovernmental organizations (NGOs) are required to certify 
that they do not provide any material support to terrorists. In 
addition, we require partners to adhere to basic U.S. law 
which, of course, forbids furnishing of assistance to terrorist 
entities. And we've established the mechanism that you 
described in the West Bank and Gaza, which we feel is 
effective, and the inspector general has supported that. We've 
also applied that mechanism in different forms to Somalia, 
Yemen, and Afghanistan.
    At the beginning of this administration, USAID had 
developed--and in the context of those conversations--a very 
specific PVS program to test out more broadly. At approximately 
that time, the Congress passed an annual appropriations bill 
which directed us to apply the program equally to State and 
USAID, and Jack Lew, who was the Deputy Secretary at the State 
Department at the time, and I worked through carrying out that 
directive for many, many months.
    Since that time, we've worked to develop a very specific 
joint pilot program with the State Department. We propose to 
roll it out in five or so countries. We've tried to assess a 
range of threat environment----
    Senator Kirk. So, wait a minute. So, after promising me 
that you would roll it out as of May 16, 2010, you're now 
promising to re-roll it out a year later?
    Dr. Shah. Well, I'm, well, what I wanted to suggest is, we 
have the pilot designed, ready to go with the State Department 
as we were directed to do. And we would like to----
    Senator Kirk. Well, let me go back. Why----
    Senator Leahy. Let him finish.
    Senator Kirk. Yes.
    Senator Leahy. I'll give you a chance to go back.
    Dr. Shah. And we would at this point like to consult with 
the Congress. But the specific congressional directive around 
this particular pilot is something we are committed to do in a 
manner that covers both State and USAID, and covers similar 
types of projects and programs in a range of threat 
environments as is our interpretation of the guidance.
    That has not stopped us from being ever more aggressive 
about partner vetting--especially in specific high-threat 
environments in Afghanistan, Yemen, and Somalia where the West 
Bank, Gaza PVS approach has been one that we've been more 
aggressively pursuing in those places.
    And frankly in Afghanistan in particular, where through the 
terrorist threat financing cell task force 2010 and the 
Accountable Assistance for Afghanistan program, we have a very 
robust effort that identifies individuals, brings in the U.S. 
intelligence community, as well as the military, in that 
process. And that's been a real priority for us over the last 
15 months.
    So I just want to make the distinction between the pilot 
congressional directive, which we are trying to meet in a joint 
State-USAID manner, and the efforts in Afghanistan and other 
places, where we're trying to be very robust on our own in the 
context of accountable assistance for these particular 
environments there.
    Senator Kirk. I didn't ask about Afghanistan.
    Dr. Shah. Okay.
    Senator Kirk. So let's go back to May 16. Why did you miss 
the target?
    Dr. Shah. Well, I did not mean to mislead in any context. 
My understanding at that point in time was we had a pilot ready 
to go. I didn't know what it would take to turn that into a 
joint State-USAID pilot. It took longer than I think any of us 
would have liked. But we're at that point now where we have it. 
It's ready. It's designed. And we seek congressional 
consultation before rolling it out.
    Senator Kirk. So can you give me a date now that's more 
valid than the date you gave me?

          ANTICIPATING THE ROLL-OUT DATE OF THE PILOT PROGRAM

    Dr. Shah. Sir, I have learned from this exercise not to 
pick a date here. But we certainly have a----
    Senator Kirk. Just let me----
    Dr. Shah [continuing]. A proposal that we'd like to have 
feedback on.
    Senator Kirk. So you are unable to give a date to assure--
you've got a $495,000--or $95 million funding request, and you 
are unable to say that you will put in a previously designed 
and paid-for system in place to ensure--or let me ask you this. 
How many UNRWA unions are controlled by Hamas right now?
    Dr. Shah. Well let me answer--I can't answer the second 
question. Let me try to answer the first. I would like us to 
implement this pilot as has been directed as quickly and 
efficiently as possible.
    Obviously, my desire to get there was delayed by the 
efforts we undertook to make this a joint State and USAID 
pilot, and we do want to do this in a manner that has 
appropriate congressional consultation so that we know that the 
countries we've selected and the range of threat environments 
and the data that come back from the pilot meet all of the 
needs, and help us learn about how to then roll this out in a 
broader way. So----
    Senator Kirk. So it could be another year.
    Dr. Shah. I don't think it will be another year. I think we 
can come up here right away with the actual consultation on the 
pilot plan, and based on feedback from our partners in the 
Congress, then roll it out.
    Senator Kirk. Thank you, Mr. Chairman.
    Senator Leahy. Okay. Thank you, Senator Kirk.
    Senator Mikulski.
    Senator Mikulski. Thanks, Mr. Chairman. And really thank 
you and your staff for your, just, steadfast work, not only in 
this budget, but in all others, really, to look out for the 
poor and marginalized in the world.
    Dr. Shah, I'd like to first of all welcome you to the 
Agency.
    Dr. Shah. Thank you.
    Senator Mikulski. You have a unique background with your 
M.D., your work with the Gates Foundation, your initiatives in 
global health, and now this very hands-on experience. So we're 
glad to see you.
    During this time when Federal employees are being so bashed 
and trashed, I would like to thank the staff of USAID, both 
here and those who serve abroad, for, really, what they do. 
Many serve in harm's way. If you're an USAID worker you're 
always in a place that's either dirty or dangerous or both. And 
I just want to--I'm going to express my appreciation to them.
    As the Senator from Maryland, I represent many faith-based 
organizations that are deeply involved with USAID--Catholic 
Relief, Lutheran Refugee Services, and others. So we know what 
you do, and we know what you're supposed to do. And I'm going 
to make sure you have the right resources to really do the job.

 THE IMPACT OF BUDGET CUTS ON USAID'S PROGRAMS, ESPECIALLY IN NICARAGUA

    I want to get right to the impact of cuts in foreign aid. I 
just mentioned Catholic Relief, and I know that they operate a 
$7 million program in Nicaragua, helping close to 6,000 women 
participate in growing coffee. They actually cultivate hundreds 
of acres, and they even signed a U.S. Fair Trade deal or a 
United States--there's this whole one group that's a United 
States, United States Fair Trade-certified company. They, 
themselves, have been empowered. They're now creating jobs in 
Nicaragua, and they're also helping create jobs in this 
country.
    Could you tell us, with the impending cuts, will you be 
able to sustain the Nicaraguan Empowerment Initiative--not only 
the Catholic Relief, but--there? And also, how do these cuts 
focus particularly on these empowerment initiatives that lead 
to economic self-sufficiency, which is one of the, is always 
one of the most potent forces in a country?
    Dr. Shah. Thank you, Senator. And I want to thank you 
specifically for your comments about our staff and our and 
their efforts around the world at this challenging time.
    With respect to how these cuts would affect us, and your 
specific question about Nicaragua, we really would not be in a 
position to, at this point, suggest any program could be 
protected. We don't, of course, know what the range of the cuts 
might look like, and we don't know exactly where our fiscal 
year 2011 reality will put us. So we will work through that in 
the coming days and weeks.
    But it is certainly fair to say that the things that are 
most at risk are the initiatives that have been started or 
expanded, really, over the last 3 to 5 years, since much of 
this discussion does seem to start with a 2008 baseline 
conversation. And in that respect the programs that would be 
most vulnerable are unfortunately some of the most efficient 
programs because, on a bipartisan basis, starting with 
President Bush and continued by President Obama, we have 
proposed increases in specifically those areas where we believe 
we get the most bang for our buck, and where, as you put it, we 
are able to get real economic empowerment that allows us to 
have an exit strategy on our assistance.

                         FTF AND FOOD SECURITY

    The, perhaps the most important example of that is the Feed 
the Future initiative, which builds on President Bush's 
significant budget proposal between fiscal year 2008 and fiscal 
year 2009 to really re-energize American assistance in the area 
of agriculture and food security around the world--the project 
you mentioned sounds like it's one of those--and was in 
response to the 2008 food price crisis that moved 100 million 
people back into a state of chronic daily hunger.
    Today we face a similar issue with food prices and with the 
consequence of it, and we've structured, I think, a very 
effective program in 20 countries, where countries, in order to 
participate, have made their own commitments to dramatically 
expand their investment, have committed to reform their laws to 
allow for improved foreign direct investment and local private 
sector investment, and where our dollars leverage other donors 
and the private sector quite dramatically. And it's precisely 
those efforts, efforts like our major WalMart partnership in 
Central America that will reach tens of thousands of farm 
households and allow for real sustained economic development at 
very high leverage to the U.S. taxpayer, because we only pay to 
help the farmers plug into the WalMart purchasing agreement.
    You know, that's, those are the types of programs that----
    Senator Mikulski. Well, I want to come back and talk 
about----
    Dr. Shah [continuing]. Will unfortunately be at risk.

             USAID'S RELIEF AND ASSISTANCE EFFORTS IN HAITI

    Senator Mikulski [continuing]. Partnerships in a minute. 
But I'd like to go now--first of all, I think, I appreciate 
that answer. I'd like to go to Haiti. You know, there are so 
many headline issues, my gosh, the Jasmine Revolution, the 
terrible tragedy unfolding in Japan. But there is Haiti that 
had a tremendous response of the United States of America. Our 
Government's involved, we are working through these fantastic 
faith-based NGOs.
    Could you tell us where you see in 2012 the sustained 
effort in Haiti and what you think, in order to keep that 
commitment to a country in our own hemisphere, what we need to 
ensure?
    Dr. Shah. Certainly, we have a, we've had a very structured 
and focused effort in Haiti. We have spent considerable time 
designing an international development strategy for Haiti that 
is Haitian-led and that is implemented in tight coordination 
with an institution called the Interim Haiti Reconstruction 
Corporation that essentially helps integrate and ensure 
coordination is effective across international partners.
    Our efforts focus in areas like agriculture, an industrial 
park in the North, expanding access to energy to create the 
basis for economic growth, and health and education.
    You know, all of these efforts are pretty fundamental to 
the future of Haiti being able to be a more dynamic, more 
viable, more economically self-sufficient country. And in many 
of these areas we're starting to see some early results--like 
in agriculture, where our efforts have, in certain areas, 
demonstrated the doubling of total productivity for a country 
that is still very much an agrarian economy. And we've worked 
with partners like Coca-Cola to help them engage in Haiti and 
create a real supply chain, especially around mango juice and 
products like Haiti Hope, which get us more leverage on our 
dollars.
    Senator Mikulski. Well, first of all, my time is up and 
thank you for that answer. We want to have ongoing 
conversations with you. I'll be meeting with these NGOs next 
week.

                  PARTNERSHIPS FOR FUTURE CONVERSATION

    Mr. Chairman, I know my time is up, but there, you should 
know there are two partnerships on, you know, that I want to 
have further conversation.
    First of all, the women of the Senate on a bipartisan basis 
are going to be getting together, working with the Secretary, 
then back to you with ideas on, really, what's going on in the 
Middle East, and that we don't lose ground with women. So we're 
doing that on a bipartisan basis, led by Senator Hutchison and 
myself.
    The second thing is, will be these private sector 
partnerships. That's another conversation.

                    PROGRAMS TO AID HAITIAN AMPUTEES

    But, Mr. Chairman, on Haiti, you'd be interested to know, 
under your good work we took an idea that you're known for--so 
many of the problems that happened in Haiti led to the building 
collapses, led to the horrific amputations of people. You 
remember when we were in Africa together, so many years ago, 
and I saw the outstanding job you did by creating a local 
facility where people had lost their legs and ankles due to 
land mines. Under Senator Leahy's leadership--he'll be too 
modest to tell you--we actually--he actually helped fund, 
creating a factory where they made low-cost limbs to put people 
literally back on their feet again.
    We took that idea, and through the advice of the John 
Hopkins School of Public Health found out who else was doing 
that, and we're now doing that in Haiti. So I took your idea, 
went to the Bloomberg School of Public Health to see what 
others were working on it, and we're doing that. And 
literally--it's not a big initiative, Sir, but, you know, your 
idea, I think, had such great impact, and, my God, to lose a 
leg, and not being able to work or farm or whatever.
    So I just wanted to mention that to you because of your 
leadership in this area.
    Senator Leahy. Well, I would thank you.
    And I might say to Senator Johnson, too, I was just down in 
Haiti a couple weeks ago and visited one of the areas where 
they give prosthetics to amputees. I saw children the age of my 
grandchildren who've lost arms and legs and learning how to 
walk and then people my age who've lost arms and legs and 
learning how to walk.
    But I mentioned, Dr. Shah, one of the--basically a 
volunteer, a doctor from Belgium who's there, so we could speak 
in French--and when I thanked him for what he was doing he 
grabbed my arm and he said, ``Pour les enfants''--For the 
children.
    And it's a very difficult, very difficult time. Johns 
Hopkins is, of course, I can't--I stand behind nobody in my 
admiration of Johns Hopkins. I'm glad we've done that.
    Senator Johnson, you've been waiting patiently. Please go 
ahead, Sir.
    Senator Tim Johnson. Thank you, Mr. Chairman.
    Dr. Shah, thank you for coming before the subcommittee here 
today.
    I'm pretty new here in town. But I guess I'd first of all 
like to second Senator Mikulski's comments regarding USAID 
workers. On a recent trip to Pakistan and Afghanistan I met 
some USAID workers, and they're just fine individuals. They're 
working hard to try and do good things, and I certainly believe 
that U.S. foreign aid can be a real positive influence 
throughout the world, enhance the reputation of the United 
States.
    But I think it's unfortunate with our fiscal situation, 
where we're running $1.5 trillion or more annual deficits, 
money's extremely tight. So, it's just critically important 
that any funds that we do expend are done in an incredibly 
efficient and effective manner.
    So, I guess the first question I have is, your total budget 
is about $24 billion, is that correct? Just, you----
    Dr. Shah. Yes.

           REALLOCATIONS OF FUNDS AND THE NEED FOR EFFICIENCY

    Senator Tim Johnson. Okay. Do we have any sense for how 
much of that money really is siphoned off, that really is not 
going for what it's intended?
    Dr. Shah. Certainly. I would step back a moment and say, 
across our requests, especially in fiscal year 2012, we've 
tried to be very rigorous about finding reallocations within 
our portfolio. So instead of asking for additional resources 
for core priorities and for the types of results we've been 
talking about, we've really looked hard at the things we do, 
things we can stop doing, and areas we can get efficiencies.
    Examples of that include eliminating a number of positions 
in Western Europe and Japan and places where we have 
development counselors working with other donor countries--not 
to say their activities weren't important, but the costs of 
keeping them there were very high, and we think we can do that 
work virtually based out of our team in Washington.
    We have proposed shutting down a number of our missions 
around the world in order to lower the overall cost basis of 
our operating expenses, and we've proposed major reductions--
more than 50 percent programmatic reductions--in a range of 
small programs and smaller missions in order to really be more 
focused and selective in how we apply our investment and our 
resources.
    In addition to that, we've proposed $400 million of 
specific cuts and reallocations in the fiscal year 2012 budget, 
and I could walk through examples of that. But they are all 
designed to allow our portfolio to be more optimized against 
the results we seek in terms of reduction of hunger, promotion 
of child survival, improving democratic governance and 
opportunities for that, especially in the Middle East, and 
fulfilling our core national security priorities in places like 
Afghanistan and Pakistan.

                   OVERSIGHT OF FUNDING REALLOCATION

    Senator Tim Johnson. Okay. But, again, that's speaking to 
efficiency, which is extremely important. But the question I 
asked really had to do with just funds going to--like Senator 
Kirk was talking about--potentially, foreign terrorists. I 
mean, going to uses for which they're not intended. I mean, 
have you, do you have any estimate on that at all? Is there any 
study that's been prepared within your agency to try and figure 
out what that potential number might be out of $24 billion?
    Dr. Shah. Well, I'll say, when we identify those cases we 
go aggressively into canceling those programs, seeking 
prosecution, as we have done in a number of instances this past 
year and as we are doing more aggressively now that we've 
implemented some of the aspects of our procurement reform and 
contract oversight efforts. So, we don't have an aggregate 
number if we knew a certain amount of money was going for an 
inappropriate and illegal purpose, we would immediately cancel 
that project or program and immediately seek restitution and 
prosecution, no matter who the partner was, in terms of 
exploring that.
    I've told the teams this. In Federal Government in general, 
I think, there's sometimes a reluctance to have bad news 
highlighted. I've said I want to see these examples because the 
more of these we find and the more we can ferret out, and the 
more we can seek restitution, prosecution--whatever is most 
appropriate--is part of our measure of success in improving our 
accountability. And that's what we're trying to do with our 
procurement reforms and our Accountable Assistance for 
Afghanistan program.

                   CONSEQUENCES OF CONTRACT VIOLATION

    Senator Tim Johnson. So, have your team, or has your team 
brought you, brought to your attention those types of 
instances? And give us a couple examples.
    Dr. Shah. Well, they certainly have this past year. Some of 
what is currently under consideration are ongoing suspensions 
or legal cases that I, perhaps, can't really speak to in a 
public setting. But some of them are publicly acknowledged. We 
had malfeasance in certain programs in Afghanistan and 
Pakistan. We shut down those contracts and programs, and 
together with the Department of Justice, sought restitution 
from a number of partners. We have changed the way accounting 
and reporting takes place with respect to partners in those 
settings, so that we have more visibility on subcontracts and 
subcontracts of subcontracts, and tried to collapse the number 
of layers in our contracting so that we simply have more 
visibility. That has helped us identify even more cases where 
we are actively seeking actions against them.
    I don't know if it would be appropriate for me to describe 
them in this setting, but I'm happy also to speak privately or 
come back to your office with some of the cases----
    Senator Tim Johnson. Okay.
    Dr. Shah [continuing]. And how we've tried to handle them.
    Senator Tim Johnson. Fair enough.

            SPENDING PRIORITIZATION AND ALLOCATION OF FUNDS

    With a $24 billion a year budget, what method do you use, 
or, how do you prioritize your spending? I mean, are you 
familiar with Bjorn Lomborg's work in terms of, you know, cost 
benefit and actually putting dollars to where it has the most 
benefit?
    Dr. Shah. I am. In fact I worked very closely with Bjorn 
when I was at the Gates Foundation because our basic approach 
was about allocating resources against where you get the best 
results. I think you've seen that in how we've structured our 
food security program, where we find it is more efficient, more 
results-oriented and more sustainable for us to invest in 
agricultural development in low-income countries than in 
either, you know, basic food aid--although we need to be able 
to respond to emergencies in that context--or in dealing with 
the consequences of large-scale hunger and famine. So, we've 
focused on 20 specific countries where our money gets leveraged 
by others, and where we can document very specific results in 
terms of people moved out of poverty, and children who are 
moved out of a state of hunger and stunting.
    In health we've done the same thing. We've looked across 
every business line in our global health portfolio, identified 
where we not only save the most lives, but where we do it at 
the lowest unit cost, and proposed a strategic approach forward 
that prioritizes immunization, malaria, HIV prevention, and a 
number of other areas where we think we can bring the cost 
structure of getting the outcomes down significantly. And in 
areas like tuberculosis, for example, we've restructured our 
efforts to invest in new diagnostic technologies, because 
that's part of getting the whole cost structure to be more 
effective in that space. So, those are just examples. We're 
doing that across all of our areas, like water and education, 
and a number of other priorities.
    But, I'd be remiss if I didn't also note that some of our 
budgeting at a macro level is, of course, tied to national 
security priorities, and so it's a combination. In certain 
accounts we can be very focused on sheer numbers and unit 
costs, and in other accounts there are a broader set of 
considerations that are taken into account that define 
allocation.
    Senator Tim Johnson. Okay. Thank you, Dr. Shah.
    Thank you, Mr. Chairman.
    Senator Leahy. Thank you, Senator.

                 EFFICIENCY AND EFFECTIVENESS IN HAITI

    We talked about Haiti, we talked about overhead. I was in 
Haiti a couple of weeks ago and one of the things I looked at, 
because we'd seen a New York Times article was the fact that 
Sean Penn's organization, which manages one of Haiti's largest 
camps of displaced persons, is doing rubble removal and home 
reconstruction, and spends only 3.2 percent on overhead. You 
have an area where there's been a flood--you walk through a few 
days later and they can point to the mark where the water was, 
but the water's gone. The rubble, in a lot of these streets, 
was way over my head and had to be removed with picks and 
shovels and wheelbarrows and they've cleared street after 
street.
    Now, if they can do that with only 3.2 percent overhead, 
why can't other USAID grantees and contractors operate like 
that in Haiti and other countries?
    I say this because I know a lot of people, well-known 
people, go to Haiti for a day or so and say, ``Oh, we've got to 
do something'', and talk about it and leave, but Mr. Penn has 
lived in those camps for months. He's out there working every 
day with the people, and they're actually getting things done. 
Why can't that be replicated? Of course, it would help if you 
had a government that cared more about the Haitian people than 
about itself.
    Dr. Shah. Well, you know, with respect to Haiti in 
particular we have been trying to assess--as a criteria for 
letting contracts and exercising programs--overhead costs, and 
using that as a core criteria for resource allocation. It's 
hard----
    Senator Leahy. Yes, but it's been 2 years. It's time to get 
it done. I mean they----
    Dr. Shah. Well, and we are. And we are. We're able to do 
that.
    Senator Leahy. Cholera season is coming.
    Dr. Shah. I will say that it's hard to know. What different 
people count in overhead is very different, and I have found 
that the biggest disparities are often not quite as large as 
they appear.
    That said----
    Senator Leahy. Was the New York Times wrong in that 3.2 
percent?
    Dr. Shah. I don't know the details of----
    Senator Leahy. Okay.
    Dr. Shah [continuing]. Sean Penn's organization. I give him 
a huge amount of credit for both his efforts and what J/P 
Haitian Relief Organization is doing, and we've been partnering 
with them, as you know, Sir, in a number of different effective 
efforts.

                  USAID'S APPROACH TO CONTRACT REFORM

    But overall, you're absolutely right to highlight this. And 
what we've done is, we've actually mapped out the flow of a 
development dollar through different systems--the contract 
system, the grants assistance system, cooperative agreements, 
tools like our Development Credit Authority that get us more 
private sector leverage from the spending of our resources. And 
in our budget allocations, we're now using the basic cost of 
doing business as criteria to propose reallocations.
    The other thing we're doing in our contracting reform is 
basically setting guidelines to reduce the overheads that are 
embedded in contractors. We're able to do that more generally 
in some specific contexts. It's harder to do in security threat 
environments where those overheads can be very large, but are 
required to be able to conduct the work in insecure settings.
    Senator Leahy. Everybody wants to help out in a tragedy. I 
just want to make sure that it's the people that get helped 
out.
    Dr. Shah. Sir, and I----

                          GOVERNMENT IN HAITI

    Senator Leahy. In Haiti, where I see a lot of expensive 
vehicles and operations, I also see a lot of people living 
under tarps and trying to bathe in polluted streams and it's 
almost overwhelming. It was a poor country to begin with, and 
now it's worse. Do you think with a new government things will 
improve? Do you have any early sense about that?
    Dr. Shah. Well, it undoubtedly is too early to tell, and I 
should probably leave it at that, in the sense that we're at a 
provisional result at this point.
    Senator Leahy. Will you be working--when the new government 
is sworn in, will you be working--will USAID be working with 
them?
    Dr. Shah. Absolutely.
    Senator Leahy. Okay.
    Dr. Shah. And we have been working through the Interim 
Haiti Recovery Commission with the Prime Minister, with the 
government very, very closely. And we do that, of course, hand-
in-glove with the State Department to manage that relationship 
and to make sure that it's effective.
    I will just validate your point that on case after case, we 
achieved big breakthroughs in things like rubble removal when 
the government stepped in and made some decisions. Sometimes 
that took time to get there, but we do see real progress once 
those decisions are made and once they enable that.
    So the point about working in partnership not only applies 
in Haiti, but applies everywhere we work, and we've really 
changed--frankly, we've changed our promotion precepts and how 
we allocate our senior managers to different mission director 
posts, and made the number one criteria for both promotion and 
for how we allocate our people, a criteria we call ``inclusive 
leadership,'' but, essentially, a measure of whether people are 
effective at working well in the interagency, and being good 
partners with NGOs and private firms and local governments.

                SUSTAINABLE DEVELOPMENT AND AFGHANISTAN

    Senator Leahy. I think USAID is being asked to do the 
impossible in Afghanistan. I've talked to General Petraeus. 
I've talked to others about this. That's a country with every 
imaginable problem. The ingredients for sustainable development 
really don't exist. You're being pressed to spend money as fast 
as possible. I think in a few years there may be little to show 
for the huge amount of money spent there.
    I'm for helping Afghanistan, but the government's not a 
reliable partner. I've visited there. I've talked with our men 
and women in uniform. They're trying to do the impossible. 
They're doing it bravely. But I wonder if their short-term 
goals are really compatible with long-term sustainable goals.
    What are USAID's long-term goals? Ten years after 9/11, 
having borrowed for the first time in American history, for a 
war, we borrowed the money--instead of having a surtax or 
something to pay for it--we borrowed the money for two $1 
trillion wars, and we've not got an awful lot to show for it. 
What are we going to see 5 years from now in Afghanistan?
    Dr. Shah. Well, Sir, I would start with the findings of 
this year's Afghanistan and Pakistan annual review that the 
President conducted, and concluded that our core area where we 
need to improve our progress in Afghanistan is in making the 
gains that have been realized in security, development, and 
governance more sustainable and more durable.
    Senator Leahy. How are you going to do that when a 
government in Kabul turns power over to warlords, and 
oftentimes corrupt groups in other parts of the country, and 
say, ``Here, go ahead and have Sharia law. Do whatever you 
want.''
    Dr. Shah. So, to implement----
    Senator Leahy. ``But we're living well in Kabul.''

      IMPLEMENTATION OF AFGHANISTAN PROGRAMS--GOALS AND CHALLENGES

    Dr. Shah [continuing]. This approach, we've been more 
focused on accountability in our assistance--and I talked 
through our A-cubed effort. We are also working in closer 
partnership with the government on improving delivery of 
assistance into districts and into provincial implementation 
mechanisms. And some examples of that are areas like 
agriculture, where I think we've seen real progress since we've 
made a strategic shift to invest more in that area. We're 
seeing improved yields, and we're seeing improved aggregate, 
economic activity in the agriculture sector, and we're starting 
to see real exports in that sector. I just visited a program 
that will have lasting, decades-long benefit where entire 
regions of Nangarhar province are developing vegetables, and 
now they're meeting higher processing and packaging standards, 
and selling to----
    Senator Leahy. And they were a huge export market for much 
of that part of the world. But the transmission lines aren't 
there. I mean, is it going to continue, that the water can be 
shut off if bribes aren't paid? It worries me that----
    Dr. Shah. Well, look, I would just say--we know that this 
is a difficult environment in which to work. We've implemented 
what we call a sufficiency audit, or a sustainability audit, 
across all our programs to be able to prioritize those that 
meet the President's guidance of sustainability and durability 
in benefit.
    The areas where we're optimistic we'll have strong programs 
include agriculture, power and roads, health and education, a 
mobile payment system that will improve the way the civil 
servants are paid and reduce graft and corruption, and programs 
like the National Solidarity Program that just went through a 
pretty rigorous third-party review and showed good results.
    So, we are doing this as part of an integrated civilian-
military plan. The goal is to resource transition--and we know 
that USAID and the civilian side of this is an important 
partner to the military in achieving that goal. And we're 
trying to be the voice for effective sustainability of 
programs.
    Senator Leahy. I think with our diplomats and our military 
you have very good partners. I don't see it on the other side. 
I hope you're right. I must admit that I'm virtually at the end 
of being willing to support activities in Afghanistan when 
we're not getting the support we should from the Afghan 
Government.
    I look at what's happening in Pakistan. They tell the 
Central Intelligence Agency yesterday--don't attack those 
people who are out there killing you, or we'll allow people to 
kill those who are bringing oil to your soldiers who are 
risking their lives, and we'll just kill the truck drivers, as 
they have several times.

                     ACCESS TO SAFE DRINKING WATER

    I mean, my frustration level is very, very high, and that's 
a New England understatement. But we also have, I hear about 
cutting funding for international family planning, and I think 
about safe drinking water. You may wonder how those go 
together. The world's population is destined to go to 9 billion 
or higher. Millions of people have no safe water. Many others, 
usually women and children, have to walk long distances to get 
small amounts of it, sometimes through minefields. I think 
you're going to find wars being fought over water within a 
decade, just as they now fight over oil. I think you're going 
to find--and we already have regional conflicts over water. 
Anything you can do to stop that? We are just tossing all the 
problems of the world on you, Dr. Shah, so tell us how we 
approach that one.
    Dr. Shah. Well, first, I very much appreciate your raising 
that issue. It is very important to us, and the Secretary in 
particular has issued a number of statements on the subject of 
safe drinking water and available water.
    The way we are approaching it is really through a new 
approach. We're in the process of developing a new strategy 
that more closely ties investments in clean drinking water and 
water that's available for productive uses--agriculture and 
others--to core goals around saving lives, reducing labor spent 
collecting water--mostly women and girls' labor--and improving 
economic productivity, mostly in the agriculture sector. And we 
think by tying our programs to those three specific outcomes, 
we will be more effective at both implementing programs, 
getting results, reporting those results, and building support 
for a more effective effort there.
    Senator Leahy. Well, the implementation--that's not a one-
size-fits-all thing. I mean, the implementation might be 
different in Southern Africa than it might be in the Middle 
East. It might be----

  SAFE DRINKING WATER--APPLICATION OF TECHNOLOGY AND ENTREPRENEURSHIP

    Dr. Shah. Absolutely. And in fact, this is an area where 
our new focus on science and technology, which frankly is not 
new for the Agency--this was an agency that did a lot of work 
in science and technology decades ago--but our new focus there 
has real potential and real promise.
    I have just recently reviewed a series of clean water 
purification strategies that would lower the costs of some of 
our programs significantly if we could validate and get those 
technologies out there--everything from a low-cost ceramic 
filter that can be locally developed, to UV water purification 
systems where local communities can install them and they can 
be self-sustaining over time.
    And I think you, in our prior hearing highlighted an 
article about entrepreneurship in development. And this is an 
area in particular--since the poor tend to pay, frankly, more 
than the middle class pays per unit of clean drinking water in 
most developing countries--this is an area that's very ripe for 
the kind of entrepreneurship you've championed. And we took 
your guidance seriously and have developed a series of 
programs, like the Development Innovation Venture Fund and 
others, that we think will meet that gap and enable more 
experimentation, but also better outcomes at lower costs in 
this particular field.
    Senator Leahy. Thank you.
    Senator Johnson.
    Senator Tim Johnson. Thank you again, Mr. Chairman.
    I'd first like to say, I believe the United States on the 
whole has a very positive impact on the world. We're extremely 
compassionate people, so the purpose of the foreign aid is 
certainly, first of all, to help people in a very meaningful 
way hopefully to have very long-term consequences on their 
countries and on their lives.

           PROMOTION OF AMERICAN IMAGE THROUGH USAID EFFORTS

    I think the question I have is, you know, it's, definitely 
a secondary purpose, though, of U.S. foreign aid is so the 
United States gets credit for it--so it enhances our 
reputation; so that people around the world think kindly of the 
compassion that the American people share with them. So, I 
mean, we spend $24 billion a year through your agency. That 
doesn't even count the amount of money we spend through our 
military help when disaster strikes.
    So I guess that's the first question I have, is, what are 
we doing within your Agency to make sure that we do obtain 
maximum credit for what our efforts are, and for, really, the 
sacrifice the American people are making in providing that 
foreign aid?
    Dr. Shah. Well, you know, we believe that that secondary 
purpose is important. And we need to be focused on how to make 
that real, as a realized benefit of our investments abroad. 
Sometimes the strategy prioritizes branding and clear 
visibility for specific projects, commodities, individuals that 
are part of large-scale relief efforts--most notably after, for 
example, the Pakistan floods where we saw, because of a very 
strong United States response where we were the first partner 
with the most capability, but also a real spirit of history and 
partnership with the Pakistani relief agencies, that we 
actually saw significant increase in the Pakistani people's 
appreciation for the United States Government role there. And 
so we understand that and take that seriously.
    I personally believe that a big part of what will 
ultimately garner the credit that we seek is the sincerity and 
the way in which we conduct the work. And that is why we've 
taken the Secretary's guidance, the President's guidance to be 
good partners pursuing mutual accountability far more 
seriously. And, you know, just around the world in our projects 
and programs, we're consulting with heads of state, we're 
consulting with local communities, we're consulting with small-
scale farmers and local civil society organizations.
    That sometimes slows down the implementation of programs. 
But, frankly, it helps us build the kind of partnership, and 
helps us learn in a way that improves, I think, the 
effectiveness of those programs and the sustainability over 
time of those efforts. So in general, that's a trade-off we've 
been willing to make in order to get a better outcome over 
time. And I think where we've done that, the feedback I've 
gotten, certainly, has been that that has been appreciated and 
that people see this as a different way of working that is 
something that garners us more recognition and more value.

                     LONG-TERM GOALS OF FOREIGN AID

    And then the final thing I'd say is, I think you get more 
credit by taking on big things and leaving benefits that are 
lasting that people can point to. South Asia certainly 
remembers that the United States was the primary partner in the 
Green Revolution, helped build universities and train hundreds, 
if not thousands, of fellows and technical experts, and build 
those rich university partnerships with the United States.
    We're re-casting ourselves, and doing that again in the 
context of our Feed the Future program, so that we can leave 
the kind of human capital and local leadership that can sustain 
over time and have all of these really capable, well-educated 
technical leaders that can say they were the beneficiaries of 
concrete U.S. investments. And that's something that we've have 
more focused on--especially in areas like food and health, but 
also in terms of our science and technology partnerships with a 
number of countries around the world. So, to me that's how you 
sort of live out good practice, and then get credit and 
attribution for those felt behaviors.
    Senator Tim Johnson. I would just encourage you to make 
that a priority, because I think from the American people's 
standpoint probably their greatest frustration--in addition to 
the fact that it's getting more and more difficult to afford 
this--but, the fact that we're not liked very well around the 
world, even though we expend so much money trying to help 
people out.
    So--and speaking of frustration, let me have that be my 
final question here, is, you've been on the job now for 15 
months. I mean, what's your greatest frustration trying to work 
within USAID to accomplish your objective?
    Senator Leahy. Now, here's your chance to give a very 
straightforward question--or, very straightforward answer. It 
may get you fired, but go ahead. Let loose.
    Dr. Shah. Can I give you two?
    Senator Tim Johnson. It's on your nickel here.
    Dr. Shah. Well----
    Senator Tim Johnson. What I want you to be is honest.

                   COMPLEXITY OF PROCUREMENT SYSTEMS

    Dr. Shah. Well, personally, I've found, the two 
frustrations I've found are--the procurement system and the way 
it operates I think is far more complex than it needs to be. 
And at first, I thought, well that's about efficiency, so one 
of those business process reviews generated this report that is 
our game plan for cutting our procurement cycle time by almost 
one-half. And they're all actions that we can take without 
congressional activity, et cetera.
    But what I realized over time is the complexity of the 
system doesn't cost more and lengthens the time from idea to 
action, and therefore impact. It actually pushes off some of 
the most creative and innovative partners--whether they are 
large businesses, or small entrepreneurs, or local NGOs, or 
government ministries--that, we really should be thinking about 
how we're building capacity so that we can achieve the 
President's goal of leaving a vibrant civil society, effective 
private sector, and real capable local governments, and we 
have, over time, an exit strategy.
    So I realize it's a much more fundamental thing than 
procurement reform--and I almost regret that I called it 
``procurement reform'', because it's really about how we 
deliver assistance and how partners around the world that 
either work with us or don't, feel who we are, what we value, 
what we care about.
    Our teams have made some real progress and done some really 
courageous things to create new procurement tools that are more 
like results-based payment systems for small grants and small 
projects, as opposed to the kind of, do a big contract and then 
count every single process input, which costs a huge amount of 
money and doesn't tell you if you're necessarily getting the 
result you seek.
    So I think the reform of our procurement system to me has 
been probably the most exciting opportunity born out of the 
greatest frustration.

 HUMAN RESOURCE MISMANAGEMENT AND CREATION OF INCENTIVES FOR INNOVATION

    On the second thing I would just say--and this might get me 
fired--it's just, the way human resources are managed in the 
Federal Government is a very complex, challenging issue. And 
you really want to reward performance; you want to reward 
people who've taken real risks. We have really innovative 
leaders who've gone out to Afghanistan, who've gone to Haiti 
and, in very difficult environments, have done very creative 
things. And we're trying to come up with ways to recognize that 
kind of leadership and reward it and to incentivize that kind 
of leadership in our junior officers--who frankly bring a lot 
of their own creative non-Government experience to the task. 
And I've worked hard to create systems that get them more 
exposure and more ability to connect their ideas to impact.
    But those are two things that I find challenging, but also 
as big fundamental opportunities. And I thank our teams in 
those areas for time and again coming up with creative 
solutions to help us do some of the more innovate things we've 
done. For example, we just launched this great partnership 
called Saving Lives at Birth with five other partners, where 
for every $1 we spend, we get $3 of theirs, and we're really 
targeting the 1.6 million women and children who die either 
during childbirth or in the first 48 hours. And it's going to 
be a fantastic lifesaving effort at very low cost. And our 
procurement and general counsel and acquisition teams came up 
with creative solutions to allow us to do that. So, we've just 
got to keep working at it and we'll stay very focused on that.
    Senator Tim Johnson. Well, I've been here a little more 
than 3 months--that's a pretty common theme. You're not--
unfortunately you're not alone in your frustration.
    Thank you, Mr. Chairman.
    Senator Leahy. Thank you.

               SMALL-SCALE IMPACT OF AMERICAN AID EFFORTS

    Certainly, Senator Johnson raises a question about whether 
we're liked or not liked. I was struck by what you're saying 
about things that people can really see, and sometimes it's a 
small thing. I complimented you earlier on one that did that 
will have a real impact. You worked with the Smithsonian to 
save some treasured murals, which they thought were lost when 
one of the cathedrals collapsed in Haiti. These will be--that's 
part of their patrimony. It's a relatively small amount of 
money, but a generation from now people will still talk about 
the fact the Americans saved it.
    When I was first in the Senate, 30 years after World War II 
was over, and going through Europe and elsewhere, and having 
people come up and say, ``You know, the Americans came in and 
they helped us plant gardens, they did--I mean, some were 
spectacular things like the Berlin airlift, but others were 
smaller ways of helping us.'' This is in countries that we had 
fought against. And now these are the same people whose sons 
and daughters are in the government and we have to work with, 
and who created a NATO alliance that eventually saw the 
collapse of the Warsaw Pact.
    Sometimes its small things. You don't necessarily get your 
return that year, or 20 years, or 30 years. But it's like 
Fulbright scholarships. I find so many times in other parts of 
the world, you find that the finance minister, or the deputy 
defense minister, or others had studied, or members of their 
families had studied here, and they have personal ties.
    I know there have been several times recently in some very 
tough spots in the world--and you can imagine which they are--
where people here in the United States were having private 
conversations with either their counterparts, or others in 
these countries, lowering the tension because of the exchange 
programs that we've done.

                     IMPORTANCE OF SMALL PROPOSALS

    I'll finish with this on the small issues. One complaint I 
get about USAID is that an individual, or a small organization 
may have a very creative, unsolicited proposal. It comes in, 
and USAID looks at it, redesigns it, requests more proposals, 
and bigger contractors come in. The big contractor comes in, 
``Oh, yes, you wanted to do a whiz bang 1, but I can do a whiz 
bang 5, which is 10 percent better--it's going to cost you 300 
percent more and take longer to implement'', and so on.
    And we talked about the War Victims Fund with prosthetics 
and all. They wisely kept that small, using local materials, 
not going to people who make the $300,000 prosthetics, but 
something that could be made locally, and it worked.
    President George H.W. Bush had wanted to do something in 
Vietnam, and he had asked me about using it there. We worked it 
through an NGO--the Vietnam Veterans of America Foundation. And 
I'll just tell one story that's always stuck with me. My wife 
and I, John Glenn and his wife, and a couple of others went 
outside Saigon to where they were building prosthetics and 
wheelchairs. Not buying them, but building them there, hiring 
the people. You'd pay a couple thousand dollars for a 
wheelchair in a hospital but here they were making them 
probably for under $100.
    The thing that struck me, there was a small man, he had 
lost his legs and had been crawling for decades. He was sitting 
there and he was going to get one of the wheelchairs. And he 
just stared at me as they explained the Leahy War Victims Fund 
and so on--and I remember going back and telling President Bush 
about this after. When they finished the speeches, they asked 
me to pick him up and carry him to his wheelchair. He just 
stared at me. And I thought he must hate me--my size, 
everything else, an American. I picked him up. I carried him to 
the wheelchair. I put him down in it. I was wearing an open-
necked shirt. I started to get up. He grabbed my shirt, pulled 
me down and kissed me.
    You know, there are things that can be done, that can make 
a difference.

                     ADDITIONAL COMMITTEE QUESTIONS

    So look at those small proposals. This was one of them. If 
you or I lost a leg, it would be a bad thing, but we'd go and 
our insurance company would pay part of it, and they'd say, 
``Well, you know, a couple thousand dollars more and you can 
get even a better one.'' We'd take out our checkbook and pay 
for it.
    Here, we're talking about people with a few hundred dollars 
a year in income. Let's do the things that work, because that 
builds respect for our country. But more than just building 
respect--let's be altruistic. We're the wealthiest, most 
powerful nation on earth. We have certain moral 
responsibilities and we sometimes forget about that.
    Dr. Shah, thank you very much for being here.
    Dr. Shah. Thank you.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]
            Questions Submitted by Senator Daniel K. Inouye
                              afghanistan
    Question. It is my understanding that the Karzai government's 
threat to impose back taxes on private security firms has many of those 
contractors threatening to withdraw from Afghanistan. I am concerned by 
reports from aid workers in the country about observed empirical 
increases in the number of kidnappings in areas like Kabul. Could you 
please explain what U.S. Agency for International Development (USAID) 
is doing to ensure the safety of foreign and Afghan locals working on 
development projects? Also, would you please explain what steps, if 
any, are being taken by USAID in conjunction with the Department of 
State to address the matter of alleged criminal involvement by Afghan 
Government officials?
    Answer. Over the first 5 months of calendar year 2011, there has 
been an average of 30 security incidents per month involving USAID 
implementing partners, making 2011, to date, the second most active 
year since 2003 when incidents were first collected. During calendar 
year 2010, the monthly security incidents involving USAID implementing 
partners almost doubled from 2009, to 57 from 29, respectively.
    With the increase of attacks, USAID has taken steps to improve the 
security of our implementing partners. Our goal is to provide rapid and 
accurate security assistance information to implementing partners, 
improve the ability of United States Government and International 
Security Assistance Force (ISAF) personnel to respond effectively to 
emergency situations, and raise the confidence and preparedness of 
implementing partners so they can continue to operate in higher-risk 
environments.
    USAID issued a data call, and our security unit is now maintaining 
a database of approximately 250 implementing partner locations 
throughout Afghanistan to facilitate communication. We have placed a 
Regional Security Safety Officer (RSSO) in RC-South, and are in the 
process of assigning RSSOs to the other regional commands. These 
officers will help coordinate with ISAF/USFOR-A and partners at the 
field level to improve responsiveness to implementing partner requests 
for assistance. On May 9, 2011 Mission Director Earl Gast issued a 
mission order, establishing a Vetting Support Unit that will screen 
non-U.S. parties, and will actively engage with the Afghan Finance 
Threat Cell and CENTCOM vetting systems. This system will help us 
identify potential malignant actors, and prevent them from gaining 
access to USAID assets.
    Question. I commend you for your efforts to reform USAID's business 
processes and systems. Implementing reforms and a change in culture is 
always a challenging endeavor. What is your vision for, and where do 
you hope to see, USAID in 5 years?
    Answer. My vision is that USAID will be among the world's premier 
development agencies playing a critical role in our Nation's prosperity 
and security as we contribute to a more secure and prosperous world for 
all. I recognize this is a broad goal and, as always, success is in the 
details. Here is how we will move forward on those details in the next 
5 years:
  --We will hire and retain the most talented foreign service officers, 
        training them to work in a world that presents new challenges 
        and demands the best from all of us.
  --We will focus on investing in sustainable solutions including 
        strengthening host country systems and local institutions so 
        that the U.S. taxpayer reaps the benefits of countries that are 
        excellent trading partners and allies.
  --We recognize that development has become a high priority for many 
        small and large companies, philanthropists, and nongovernmental 
        organizations. We will broaden and deepen our partnerships with 
        them, leveraging their expertise and financial resources to 
        drive the most cost effective and sustainable results for our 
        foreign policy objectives.
  --We will work seamlessly with all United States Government agencies 
        deployed abroad as the principal voice for the importance of 
        development as a way to demonstrate our values and support the 
        growing number of emerging democracies and markets.
  --We will report regularly and transparently on the results we 
        achieve, dollar for dollar, and talk openly about those 
        failures or shortfalls that we must learn from and remedy. To 
        achieve this ambitious goal, we will streamline our reporting 
        systems to make them more understandable to the lay person 
        whose tax dollars support our efforts abroad.
  --And last but not least, we will be recognized for our cutting-edge 
        activities and tools that mobilize the best solutions the 
        United States can bring to the world in solving problems such 
        as fragile democratic governments, malnutrition, illiteracy, 
        endemic illness, climate change, as well as other challenges.
                             pacific basin
    Question. The Pacific Basin, particularly countries in the Western 
Pacific were cited as an area that the United States would like to re-
engage in a meaningful way. The Western Pacific is of significant 
strategic importance to the United States in a manner that may have 
been forgotten toward the end of the cold war.
    From a national security point of view the Western Pacific is a 
counterbalance to China's growing influence in the region particularly 
with respect to sea lane access. With the emphasis on leveraging both 
hard power, force projection by the Department of Defense (DOD), and 
soft power, diplomatic and foreign assistance, please elaborate on 
plans, if any, for USAID activities in this area of the Pacific.
    Answer. USAID plans to open an office in Port Moresby, Papua New 
Guinea in 2011 under the authority of USAID's mission in Manila, 
Philippines to oversee programs in the Pacific region.
    One program-funded staff will manage USAID's regional environmental 
programs and the HIV/AIDS program in Papua New Guinea.
    USAID programs in the Pacific are regionally focused, but target 
Western Pacific countries, including Papua New Guinea, Republic of the 
Marshall Islands, Federated States of Micronesia, Kiribati, Samoa, 
Solomon Islands, Fiji, and Tonga.
    Environmental degradation threatens the existence of some Pacific 
island-nations and is the top priority for the region in this century. 
USAID's environmental programs will mitigate the effects of weather-
related disasters, support climate change adaptation strategies, reduce 
greenhouse gas emissions and protect tropical forests in the Pacific 
islands.
    USAID funding will also develop the technical capacity and 
coordination of two key regional organizations: the Secretariat of the 
Pacific Community and the Pacific Regional Environmental Program.
    Papua New Guinea is the most populous country in the South Pacific 
and has the highest rate of HIV/AIDS in East Asia and the Pacific. 
USAID's HIV/AIDS programming will strengthen Papua New Guinea's health 
system, promote awareness and prevention activities, and provide 
treatment for HIV-positive individuals.
                              coordination
     Question. I truly appreciate your initiative and efforts to ensure 
me and my staff are kept informed of USAID's activities following the 
devastating earthquake and tsunami in Japan. As the lead agency on 
coordination of the U.S. response to international disaster assistance, 
I am curious to learn your thoughts on how that coordination went in 
the immediate aftermath. In addition, I am interested to find out how 
you believe coordination may be improved, and any lessons learned from 
Haiti and Japan.
     Answer. The U.S. Government response to the recent earthquake and 
tsunami in Japan required immediate and close coordination between 
United States Government agencies and the Government of Japan. The 
United States typically would not be requested to assist in a country 
with significant domestic response capacity. The magnitude and nature 
of the disaster in Japan (earthquake, tsunami, and nuclear crisis), 
coupled with the United States Government's unique capabilities, led to 
a robust, well-coordinated multi-agency response tailored to the unique 
circumstances presented by this crisis.
    Just more than 1 hour after the earthquake struck, USAID's Office 
of Foreign Disaster Assistance (USAID/OFDA) activated a Response 
Management Team (RMT) in Washington, DC, and two Urban Search and 
Rescue Teams and a Disaster Assistance Response Team (DART) for 
deployment to Japan to coordinate the response efforts. At the same 
time as the United States Government and the Government of Japan were 
focused on the immediate lifesaving response, the potential nuclear 
disaster quickly became a main focus. USAID augmented the DART and RMT 
with experts from the U.S. Nuclear Regulatory Commission (NRC), the 
U.S. Department of Energy (DOE) and the U.S. Department of Health and 
Human Services (HHS) Federal Occupational Health to provide urgent 
technical assistance. The DART, including the team of nuclear experts, 
coordinated daily with their counterparts in the Japanese Government.
    In addition to coordinating the nuclear issues, USAID's DART 
conducted assessments and worked to ensure that essential relief items 
reached those most in need. This required coordination between the 
Government of Japan, USAID and the DOD. While most of the supplies for 
the relief effort were already in the country, there were logistical 
problems in transporting relief supplies due to fuel shortages and 
damaged roads. The DART, which included three USAID military liaison 
officers, utilized the Mission Tasking Matrix system to confirm 
humanitarian needs and or requests, identify organizations that had 
supplies to transport and task DOD with transport of goods utilizing 
their extensive lift capacity in the region. The speed and efficiency 
of this coordination was essential not only to ensure that needed 
supplies quickly reached affected areas, but also to avoid a flood of 
well-intended, but poorly coordinated material aid from outside Japan, 
which would have overwhelmed an already strained transport system in 
the early days of the response.
    Very early in the response, multiple Japanese ministries requested 
support from numerous United States Government entities on an ad hoc 
basis, which created a risk that urgent requests for relief or 
technical assistance could be missed and not reach those most in need. 
USAID met daily with DOD, DOE, HHS, NRC and other agencies, as well as 
the Government of Japan, to share information and reinforce the DART as 
the central coordinating body through which all requests to the United 
States Government were evaluated. The DART also worked with the Embassy 
to establish a single point of contact to receive requests from the 
Government of Japan.
    As assistance to the earthquake, tsunami, and nuclear events 
transitioned from emergency response to the current phase, USAID 
collaborated with the United States Embassy in Tokyo to form the 
Bilateral Assistance Coordination Cell (BACC), the current United 
States Government focal point for receiving, vetting, and responding to 
the Government of Japan requests for continued technical assistance to 
respond to the nuclear issues. The BACC systematized the coordination 
of the response to the Fukushima Daiichi nuclear power plant crisis 
through the formation of technically oriented working groups, such as 
radiation monitoring, data sharing, stabilization of the reactors, and 
broader strategy for joint nuclear response. These groups meet 
regularly with the Government of Japan counterparts. The meetings occur 
at the political, working, and technical levels to coordinate the 
nuclear response activities. The United States Government has provided 
the Government of Japan with data and specialized monitoring equipment 
and training that demonstrate our ongoing commitment to Japan and 
provide the United States Embassy continued access to critical 
monitoring data with potential implications for the people of Japan, 
including United States citizens.
    As seen in the response to the earthquake in Haiti, the United 
States Government responses to significant disaster events are 
increasingly interagency in nature. The United States Government 
learned from the Haiti response that we must develop a flexible and 
clearly articulated United States Government response strategy that 
assigns responsibilities to appropriate participating agencies based on 
the unique circumstances presented in a given crisis. The Japan 
response demonstrated the effectiveness of the interagency approach 
where host country requests and United States and international offers 
of assistance are channeled through a central coordinating body.
                   research and development programs
    Question. There are many people who may not know about USAID's 
research and development programs. I am curious to learn of USAID's 
current efforts in research and development, and where you hope to 
steer them in 5 years.
    Answer. USAID has a strong history of transforming development 
through science and technology--from the successful use of oral 
rehydration therapies to the Green Revolution. As USAID expands and 
deepens its internal science and technology capabilities, the agency 
will support and expand technical expertise through access to 
analytical tools like Geospatial Information Systems (GIS). Over the 
next 5 years, the agency will continue to build science and technology 
capacity in developing countries through cooperative research grants, 
by improving access to scientific resources, by providing expanded 
opportunities for higher education and training, and by enabling 
entrepreneurs in the public and civil sectors to use technology to 
reach rural populations that have previously been difficult to reach. 
Several key efforts are outlined below.
    An investment in agricultural research today contributes to the 
growth and resilience of the food supply tomorrow. USAID's Feed the 
Future initiative is launching an agricultural research strategy this 
summer that will focus on ways to improve long-term yields, transform 
production systems, and enhance nutrition and food security. Combined 
with other agricultural investments, improved technologies and 
practices will help feed an ever growing global population despite 
depleted land availability, threatened water supplies, and a highly 
unpredictable climate.
    USAID's Grand Challenges for Development (GCD) provide a framework 
to focus the agency--and development community--on solvable problems 
with key scientific and technical barriers to their solution. This is a 
multi-year approach that incorporates and encourages innovative science 
and technology-based answers to both newly emerging and age-old 
questions. USAID issued the first Grand Challenge for Development in 
Global Health--``Saving Lives at Birth'', which was launched on March 
9, 2011, in partnership with a host of other bilateral and multilateral 
donors. More information on the Grand Challenges can be found at: 
http://www.savinglivesatbirth.net/. Over the next several years, USAID 
will expand GCD, leveraging the resources of other development partners 
around other solvable development challenges.
    Through the Partnerships for Enhanced Engagement in Research (PEER) 
program, USAID will provide grants to developing country researchers 
collaborating with NSF-funded researchers in the United States. Funds 
will help equip laboratories, provide stipends for graduate students, 
and support training and other activities associated with research. 
Projects will focus on topics of interest to USAID, such as food 
security, water, biodiversity, and climate change adaptation. The 
program intends to build relationships between researchers and 
institutions that will endure over time. This program will leverage 
more than $100 million of NSF research funding in developing countries.
    USAID assesses health conditions in developing countries and 
develops, tests, adapts, and introduces appropriate products and 
interventions within the context of strengthening local health systems. 
Key highlights of USAID's current health research and development 
activities include:
  --Support for the Center for the AIDS Program of Research in South 
        Africa, which in 2010 provided the first proof of concept that 
        a microbicide could safely and effectively reduce the risk of 
        heterosexual transmission of HIV from men to women.
  --The USAID-supported International AIDS Vaccine Initiative study 
        which provided the first evidence that a new vaccine technique 
        could effectively control viral replication in vaccinated 
        animals.
  --The development of new antimalarial drugs, and their subsequent 
        submission for regulatory approval.
  --Support for research that improves, reduces costs, and speeds up 
        diagnostics for tuberculosis.
  --Support for a clinical trial of a female-controlled, long-acting 
        contraceptive that does not require daily attention from women 
        or the availability of trained health providers.
  --Research on the most effective lifesaving postnatal practices in 40 
        high-mortality countries.
  --Studies that demonstrated the effectiveness, cost-effectiveness, 
        and feasibility of community-based care in promoting neonatal 
        health and survival.
  --Applied research to increase the availability and uptake of oral 
        rehydration solution treatment to reduce diarrhea-related 
        morbidity and mortality in more than one dozen countries.
  --Studies on the effectiveness of community-based treatment of severe 
        pneumonia in Pakistan.
  --The establishment and strengthening of surveillance systems to 
        sample and test the quality of medicines throughout the world.
                                 ______
                                 
            Question Submitted by Senator Richard J. Durbin
                   haiti reforestation--supplemental
    Question. Last year's supplemental appropriation included $25 
million specifically for reforestation in Haiti. However, it appears 
that such funds may instead be being used by United States Agency for 
International Development (USAID) for loosely defined reforestation 
programs that do not include the actual long-term replanting of 
sustainable trees. Can you please elaborate on how USAID is using these 
specific supplemental Haiti reforestation funds, including how much of 
the $25 million is being spent on the actual replanting of sustainable 
tree cover?
    Answer. USAID shares your concern about deforestation, and we are 
committed to an appropriate and sustainable natural resources 
management program. Through the use of funds provided in the fiscal 
year 2010 supplemental appropriation, we plan to address the underlying 
causes of deforestation:
  --acute poverty;
  --rapid population growth; and
  --unplanned urbanization.
    USAID has learned from experience in Haiti that classic 
reforestation approaches are not effective. When planted trees provide 
little or no economic incentive to farmers they are typically replaced 
with a crop that does. In Haiti, successful reforestation has occurred 
where hillside farming is replaced by tree crops or improved pasture 
that provide income while improving soil conservation and controlling 
erosion.
    USAID-funded projects have in recent years increased tree crop 
cover by planting high-value trees, such as mango, cacao, coffee, and 
avocado. For example, a USAID initiative, known as the Watershed 
Initiative for National Natural Environmental Resource (WINNER), has 
expanded perennial cover on hillsides to reduce erosion and improve 
soil conservation, while promoting alternative energy sources to lower 
the demand for charcoal and fuel wood. During fiscal year 2010, the 
first full year of operations, WINNER planted about 1 million trees, of 
which 30 percent were fruit trees and 70 percent were multi-purpose 
trees.
    Reforestation programs funded by the fiscal year 2010 supplemental 
appropriation will contribute over the long term to replanting 
sustainable trees for mango and cacao in Haiti by using a value-based 
approach that strengthens tree crop value chains and assists in 
producing seedling stock.
    USAID anticipates that at least 50 percent, or $12.5 million, of 
the $25 million in natural resources management funds provided by the 
supplemental appropriation will support activities related to tree 
planting, including agro-forestry, reforestation, shade-grown cacao, 
and mango, and other related programs designed to increase forest 
cover.
                                 ______
                                 
                Questions Submitted by Senator Mark Kirk
                         ninevah plains region
    Question. The U.S. Congress has appropriated around $30 million 
since fiscal year 2008 to assist vulnerable religious communities in 
Iraq, especially in the Nineveh Plains region. As you may know, last 
November, a bipartisan group of Members of Congress and Senators 
requested that the Government Accountability Office (GAO) conduct an 
audit of these funds, following concerns from community leaders that 
the funds designated by the Congress have either not reached their 
intended recipients or they were unaware of funding and grant 
opportunities. How have United States Agency for International 
Development (USAID) efforts to date been successful in reaching the 
objectives set out by the Congress to assist vulnerable communities in 
the Nineveh Plains in a transparent and effective manner? Has USAID 
engaged directly with these minority groups in rendering decisions on 
relevant grants and their recipients?
    Answer. USAID has posted a representative at the Provincial 
Reconstruction Team (PRT) in Mosul and in Erbil since 2007 and will 
have a representative at the consulate in Erbil who will provide 
coverage for Ninevah after the PRTs close down at the end of June 2011. 
USAID PRT representatives meet with Iraqi counterparts and 
beneficiaries whenever possible and work through our implementing 
partners to ensure effective assistance to all Iraqi beneficiaries 
including ethnic and religious minorities and other vulnerable 
populations. The Iraq Rapid Assistance Program (IRAP) which was 
completed in September 2010 provided grants to local Iraqi 
nongovernmental organizations implementing community development 
programs including in Ninevah. The process of grant making included 
formal explanations to organizations whose proposals were turned down.
                    fiscal year 2008 base directive
    The Congress inserted its first $10 million funding directive for 
Iraq's religious and ethnic minorities in the fiscal year 2008 base 
appropriations. USAID/Iraq agreed to meet this directive through 
existing programs. These included:
  --the Community Stabilization Program (CSP);
  --Community Action Program (CAP);
  --Provincial Economic Growth (Tijara);
  --Agribusiness (Inma); and
  --the Iraq Conflict Mitigation Program.
    The CSP worked to achieve economic and social stability in urban 
Iraqi communities. The CSP program helped meet the fiscal year 2008 
base directive through activities that achieved:
  --More than 51,900 long-term jobs;
  --Disbursing grants than totaled $78.6 million for nearly 10,300 
        businesses;
  --Graduated nearly 41,500 Iraqis from vocational training courses;
  --Created 9,930 apprenticeships; and
  --Assisted 339,000 young people through sports and arts programs.
    This project activity was focused in urban areas where religious 
and ethnic minorities coexisted.
    CAP worked at the grassroots level to foster citizen involvement 
and assist local communities to clearly identify their priorities, 
develop local solutions, and use their skills to mobilize their 
resources to meet their needs. For the fiscal year 2008 base directive, 
CAP worked with religious and ethnic minority communities to improve 
health and education, small-scale infrastructure, and income generation 
through local apprenticeships in local communities where religious and 
ethnic minorities exist.
    The Provincial Economic Growth (Tijara) program supported the 
directive and continues to provide loan capital through microfinance 
institutions, as well as training and technical assistance which 
benefit all Iraqis, including ethnic and religious minorities. 
Previously, the Al-Tadhamun institution in Northern Iraq dedicated 
funds to ethnic and religious minorities from a $2 million grant. USAID 
helped Al-Tadhamun establish its office and recruit its staff and board 
of directors.
    USAID/Iraq's Agribusiness Program (Inma) worked to increase the 
competitiveness and profitability of the Iraqi agricultural sector by 
raising productivity and lowering costs. Some 175 members of the 
minority community living near the Bartilla and Al-Qosh feedlots in 
Northern Iraq benefited from training in record keeping, animal health 
and selection, red meat production, and ruminant nutrition.
    Through USAID Inma's microcredit initiative with Al-Thiqa in 
Northern Iraq, more than 562 people were trained to provide additional 
credit for minority borrowers. Some 240 people were trained in hay and 
alfalfa production at the Elya forge production facility in Ninawa 
Province. Other minority groups were trained in olive oil production 
and marketing by the Zayton Olive Association in Northern Iraq.
    The Iraq Community-based Conflict Mitigation Program (ICCM) focused 
on assessing local communities throughout Iraq where conflict existed 
and then worked with the community on projects that would help mitigate 
tensions.
    In fiscal year 2008, ICCM completed conflict assessments in 
Bartilla and Tal Kayf communities where religious and ethnic minorities 
were under pressure. Based on the assessments' results, ICCM designed 
projects to mitigate the primary conflict factors in these and other 
communities, with a special focus on youth programs which helped to 
create tolerance in the community for all religious groups.
    USAID continues to track funding for this directive through the 
CAP. As of May 2010, USAID has tracked more than $17 million in funding 
to the fiscal year 2008 base appropriations directive, which is $7 
million more than the requirement.

------------------------------------------------------------------------
                      USAID program                           Funding
------------------------------------------------------------------------
Community Stabilization Program.........................      $2,500,000
Community Action Program II.............................       2,000,000
Community Action Program III............................       7,063,072
Provincial Economic Growth--Tijara......................       2,000,000
Agribusiness--Inma......................................       3,115,000
Community-based Conflict Mitigation.....................         500,000
                                                         ---------------
      Total.............................................      17,178,072
------------------------------------------------------------------------

                fiscal year 2008 supplemental directive
    The Congress inserted an additional $10 million directive for 
Iraq's religious/ethnic minorities in the fiscal year 2008 supplemental 
appropriations bill. The Department of State and USAID agreed to 
support this directive together. The Department of State and USAID met 
the fiscal year 2008 supplemental directive of $10 million for 
religious and ethnic minorities by programming through the Provincial 
Reconstruction Teams' (PRT) Quick Response Fund (QRF)/Iraq Rapid 
Assistance Program (IRAP). The remainder of the directive was fulfilled 
through the U.S. Office for Foreign Disaster Assistance (USAID/OFDA) 
and through USAID's Civil Society and Conflict Mitigation program.
    USAID's IRAP program supported economic and social development 
programs and civil society conflict-mitigation efforts country-wide 
through regional centers. IRAP assistance to Iraqi minorities focused 
on the Ninawa Plain which is home to many minority groups including the 
Shabaks, Turkmens, Christians, and Yazidis.
    IRAP support included the establishment of water networks, road 
repairs, school buildings, microfinance programs, income generation 
initiatives, health awareness, and agricultural support for minority 
farmers. Examples of assistance include:
  --water network projects in Tal Keif and Tal Usqof districts of 
        Ninawa;
  --primary schools in predominantly Christian, Turkmen, and Shabak 
        communities; and
  --the restoration of a destroyed Shabak village in Ninawa Province.
    Since 2003, USAID's OFDA has provided humanitarian assistance 
throughout Iraq, mainly supporting conflict affected Internally 
Displaced Persons (IDPs) and other vulnerable populations with disaster 
relief. In fiscal year 2009, USAID/OFDA in the Northern Iraq districts 
of Tal Kayf and Hamdanya, distributed nonfood items (blankets, etc.), 
food Items and hygiene kits to about 2,000 Iraqi minority families.
    USAID's Civil Society and Conflict Mitigation (CSCM) program helped 
provide grants to minority communities for conflict mitigation projects 
such as providing human rights and rule of law education, community-
building activities focusing on religious tolerance, and promoting 
religious tolerance through youth activities in minority communities.

------------------------------------------------------------------------
                      USAID program                           Funding
------------------------------------------------------------------------
Iraq Rapid Assistance Program...........................      $8,367,329
Civil Society and Conflict Mitigation...................         314,032
U.S. Office of Foreign Disaster Assistance..............         629,000
                                                         ---------------
      Total.............................................       9,310,361
------------------------------------------------------------------------

                            fiscal year 2010
    In the fiscal year 2010 base appropriations the Congress again 
inserted a $10 million directive for Iraq's religious/ethnic 
minorities:
    The Department of State is planning to meet this $10 million 
directive through its QRF program. The PRT in Ninawa is working with 
local minority community organizations to develop project proposals for 
funding.
                            fiscal year 2011
    USAID/Iraq continues to assist communities where religious and 
ethnic minorities exist through the Community Action Program III (CAP). 
As mentioned earlier, the CAP program works with local communities to 
help identify needs and build their capacity by working with their 
local councils. In Ninawa and Kirkuk, the CAP program continues to work 
with local communities on small-scale infrastructure projects such as 
educational facilities and other public spaces, improving health, water 
and electricity services, and apprenticeships that offer income-
generation skills.
    In addition, USAID's new Access to Justice Program will assist 
Iraq's religious and ethnic minorities. The Access to Justice program 
will assist professional legal associations, nongovermental 
organizations (NGOs) offering legal assistance, civic education and 
advocacy, law schools and government institutions improve their support 
and services to vulnerable and disadvantaged Iraqis, including women, 
widows, orphans, religious and ethnic minorities, the impoverished, 
internally displaced people and refugees, detainees, and the 
incarcerated (including juveniles).
    In November and December 2010, OFDA assisted 331 of 762 Christian 
families displaced from Baghdad and Mosul with nonfood relief items 
including blankets, stoves, mattresses, and kitchen sets. OFDA assisted 
143 families in Ninawa, 80 families in Erbil, 59 families in 
Sulaymaniyah, and 49 families in Dahuk.
                            nagorno-karabakh
    Question. As you know, Nagorno-Karabakh continues to face serious 
humanitarian and economic development challenges. Since 1998, USAID has 
spent $35 billion in assistance to Nagorno-Karabakh to address these 
challenges, which represents around 60 percent of what the U.S. 
Congress has authorized you to spend over this period. What are the 
notable achievements of USAID efforts to aid Nagorno-Karabakh since 
1998? Does the discrepancy between the amounts authorized and spent 
represent that USAID efforts have been able to ``do more with less'' ? 
If not, how can the U.S. Government more effectively aid the people of 
Nagorno-Karabakh?
    Answer. Since 1998, the United States has provided more than $35 
million in humanitarian assistance to victims of the Nagorno-Karabakh 
(NK) conflict, including food, shelter, emergency and medical supplies, 
access to quality healthcare and water, and demining projects.
    United States Government assistance in Nagorno-Karabakh has 
achieved notable impact in targeted areas of support.
    Health.--108 health facilities were renovated and supplied with 
basic medicine, equipment, and furniture, including 5 Regional 
Maternity Houses; training was provided to medical professionals 
throughout Nagorno-Karabakh; and mobile medical teams visited 16 
communities to provide basic health services benefiting 6,200 people.
    Infrastructure/Shelter.--1,533 shelters, 3 community centers, and 5 
schools were renovated.
    Microfinance.--More than 3,000 women received loans to support 
subsistence agriculture.
    In Water.--60 potable water systems were renovated and upgraded, 
including 4 irrigation canals. Currently, the United States Government 
is supporting a new potable water project that is helping to expand 
access to clean water in the city of Stepanakert.
    Demining.--The ongoing demining activity has resulted in the 
clearance of 72 percent of the battle area and 93 percent of anti-
personnel and anti-tank mines, returning lands to the rural population 
for agricultural use.
    Programs in Nagorno-Karabakh are funded through a Eurasia Regional 
budget line within the overall Assistance to Europe, Eurasia and 
Central Asia (AEECA) account; this budget line funds a number of other 
regional priorities, including the U.S. contribution to the 
Organization of Security and Cooperation in Europe. Since 2001, there 
has been more than a 60 percent decline in the overall AEECA account, 
as well as a sharp decline in the Eurasia regional budget. Despite the 
budget decreases and competing priorities, the level of U.S. support to 
Nagorno-Karabakh has remained constant, and the programs continued to 
achieve notable accomplishments during that period as noted above.

                         CONCLUSION OF HEARINGS

    Senator Leahy. Without anything further, we'll stand in 
recess.
    [Whereupon, at 11:26 a.m., Tuesday, April 12, the hearings 
were concluded, and the subcommittee was recessed, to reconvene 
subject to the call of the Chair.]
