[Senate Hearing 113-256]
[From the U.S. Government Publishing Office]
S. Hrg. 113-256
A MORE EFFICIENT AND EFFECTIVE
GOVERNMENT: STREAMLINING OVERSEAS TRADE AND DEVELOPMENT AGENCIES
=======================================================================
HEARING
before the
SUBCOMMITTEE ON FINANCIAL AND
CONTRACTING OVERSIGHT
of the
COMMITTEE ON
HOMELAND SECURITY AND
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
DECEMBER 11, 2013
__________
Available via the World Wide Web: http://www.fdsys.gov
Printed for the use of the Committee on Homeland Security
and Governmental Affairs
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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
THOMAS R. CARPER, Delaware Chairman
CARL LEVIN, Michigan TOM COBURN, Oklahoma
MARK L. PRYOR, Arkansas JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri ROB PORTMAN, Ohio
JON TESTER, Montana RAND PAUL, Kentucky
MARK BEGICH, Alaska MICHAEL B. ENZI, Wyoming
TAMMY BALDWIN, Wisconsin KELLY AYOTTE, New Hampshire
HEIDI HEIKAMP, North Dakota
Richard J. Kessler, Staff Director
John P. Kilvington, Deputy Staff Director
Keith B. Ashdown, Minority Staff Director
Laura W. Kilbride, Chief Clerk
Lauren Corcoran, Hearing Clerk
SUBCOMMITTEE ON FINANCIAL AND CONTRACTING OVERSIGHT
CLAIRE McCASKILL, Chairman
CARL LEVIN, Michigan RON JOHNSON, Wisconsin
MARK L. PRYOR, Arkansas JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana MICHAEL B. ENZI, Wyoming
MARK BEGICH, Alaska KELLY AYOTTE, New Hampshire
TAMMY BALDWIN, Wisconsin
Margaret Daum, Majority Staff Director
Rachel Weaver, Minority Staff Director
Kelsey Stroud, Chief Clerk
C O N T E N T S
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Opening statement:
Page
Senator McCaskill............................................ 1
Senator Johnson.............................................. 3
WITNESSES
Wednesday, December 11, 2013
Hon. Elizabeth Littlefield, President and Chief Executive
Officer, Overseas Private Investment Corporation............... 4
Hon. Leocadia I. Zak, Director, U.S. Trade and Development Agency 7
Alphabetical List of Witnesses
Littlefield, Hon. Elizabeth:
Testimony.................................................... 4
Prepared statement........................................... 27
Zak, Hon. Leocadia I.:
Testimony.................................................... 7
Prepared statement........................................... 41
APPENDIX
Chart referenced by Senator McCaskill............................ 51
Responses to post-hearing questions for the Record:
Ms. Littlefield.............................................. 53
Ms. Zak...................................................... 64
A MORE EFFICIENT AND EFFECTIVE
GOVERNMENT: STREAMLINING OVERSEAS TRADE AND DEVELOPMENT AGENCIES
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WEDNESDAY, DECEMBER 11, 2013
U.S. Senate,
Subcommittee on Financial and Contracting Oversight
of the Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2 p.m., in
room 342, Dirksen Senate Office Building, Hon. Claire
McCaskill, Chairman of the Subcommittee, presiding.
Present: Senators McCaskill and Johnson.
OPENING STATEMENT OF SENATOR MCCASKILL
Senator McCaskill. Welcome, everyone. We are glad to see
you. Thank you for coming to the hearing today.
Our hearing today deals with streamlining and strengthening
oversight of overseas trade and development agencies. We are
here today to review the opportunities to improve the
efficiency and effectiveness in oversight of the Overseas
Private Investment Corporation (OPIC) and the U.S. Trade and
Development Agency (USTDA).
On January 13, 2012, President Obama requested authority
from Congress to reorganize and streamline agencies within the
Federal Government. The first proposal by the White House for
this reorganization authority was to reorganize six of the
Federal agencies that focus on business and trade--the
Department of Commerce's core business and trade functions, the
Small Business Administration's (SBA) trade functions, the
Office of U.S. Trade Representative, the Export-Import Bank,
OPIC and TDA.
OPIC and TDA serve an important role in our country's trade
and development goals.
OPICS position as a lender and insurer of last resort helps
U.S. businesses expand in areas that have potential but may be
too risky for other insurers and lenders.
Similarly, TDA's facilitation of partnerships between
foreign countries and U.S. business interests through
feasibility studies is important to growing U.S. exports.
Both agencies also report significant gains on investment.
For example, OPIC has returned millions of dollars earned on
its projects to the Treasury every year, and TDA's internal
audits show that the agency creates $73 in exports for every
dollar of programming.
As with every part of the Federal Government, however,
there is always room for improvement. And, as with every part
of the Federal Government, oversight is essential.
While OPIC and TDA appear to be very successful, I have
questions regarding their internal controls and oversight.
Neither agency has an independent inspector general (IG) or
processes to achieve independent audits and reviews of their
programs.
When I pushed to have a special inspector general installed
to oversee the Troubled Asset Relief Program (TARP), many
pushed back because they did not think it was necessary. And
just this weekend, the Washington Post reported that since 2008
the Office of the Special Inspector General for TARP has
pursued criminal charges against 107 senior bank officers, most
of whom have been sentenced to prison. That office's work has
resulted in $4.7 billion in restitution paid to the government
and to victims.
So I want to have a discussion today about the best way to
implement adequate oversight to ensure OPIC and TDA do the best
work they can on behalf of U.S. trade and development goals.
I also have questions regarding the work each agency does.
Under OPIC's mission statement, it is supposed to focus its
investment on ``less developed countries in areas and countries
in transition, from nonmarket to market economies.''
However, currently, only 0.2 percent of OPIC's 2012
spending and 6 percent of OPIC's total portfolio is invested in
low-income countries. It appears that approximately one-third
of OPIC's 2012 investments were made in countries where OPIC's
own guidelines say it should restrict spending.
I also have questions on how some of OPIC's specific
investments comport with its development mission. For example,
it has approved projects to finance a chain of Wendy's
restaurants in the country of Georgia, expand a Porsche-Land
Rover dealership in Ukraine, finance a Papa John's franchise
expansion in Russia and construct a shopping mall in Jordan,
expand billboard advertising in Ukraine and build a Marriott
Hotel in Armenia and Georgia, also to expand a technology
leasing company's operations in Portugal.
I also have questions about the transparency of awards. For
example, because TDA provides grants only to foreign entities,
their information is not provided to Grants.gov even though all
the funds are awarded directly back to U.S. companies. In
addition, their information is not available on the equivalent
website for grants to foreign entities, the Foreign Assistance
Dashboard, which is run by U.S. Agency for International
Development (USAID).
Although TDA has provided its data to be uploaded onto the
FA Dashboard every year as required, USAID has not on-ramped
USTDA onto the system.
In addition, as the President has noted, there are many
areas of overlap in the Federal Government's various agencies
that have trade functions. Despite the efforts of agencies like
OPIC and TDA to carve out a niche, there is a lot of potential
to streamline trade functions to ensure that there is as little
duplication as possible and also to give U.S. businesses, many
of them small businesses, a clear process to follow when
looking for opportunities.
U.S. businesses and all taxpayers deserve to have these
functions carried out as efficiently and effectively as
possible.
I look forward to a frank and open discussion of these
issues today, and I thank the witnesses for being here, and I
look forward to their testimony.
Senator Johnson.
OPENING STATEMENT OF SENATOR JOHNSON
Senator Johnson. Thank you, Madam Chairman.
I would also like to welcome the witnesses and thank them
for their testimony.
I appreciate the hearing, and I certainly also appreciate
your determination to make sure we get effective government.
As we consider consolidation of these agencies, which I
think on the surface really sounds like a good idea, we do need
to make sure that we actually get the efficiencies out of those
consolidations.
We are, obviously, serving on the Committee that oversees
the Department of Homeland Security. A decade ago, that was
consolidated--22 different agencies--and I have yet to convince
myself that we are actually saving money. I am concerned that
what we did is we just created a larger bureaucracy that is not
particularly functioning well.
I am hoping that in this potential consolidation that we
actually would look at consolidating functions and reducing
overall budgets if we do these types of consolidations.
Like I say, it sounds good, but sometimes making something
bigger does not make it better. And I am certainly hoping the
agencies are on guard about that eventuality.
But with that, I am looking forward to hearing the
testimony, and I apologize in advance for having to leave the
hearing a little bit early.
Thank you.
Senator McCaskill. No problem. Thank you, Senator.
Let me introduce the witnesses.
First, we have Elizabeth Littlefield. She is President and
Chief Executive Officer (CEO) of the Overseas Private
Investment Corporation. In this role, she also serves as Chair
of OPIC's Board of Directors.
Prior to joining OPIC, Ms. Littlefield was the CEO of a
policy center dedicated to financial services access, and
Director for the World Bank's Financial and Private Sector
Division.
Ms. Littlefield previously served as J.P. Morgan's Managing
Director of Emerging Markets in Europe, the Middle East and
Africa.
And Leocadia--did I say that correctly?
Ms. Zak. Yes, thank you.
Senator McCaskill. Leocadia I. Zak is the Director of the
U.S. Trade and Development Agency, TDA. She is responsible for
overseeing all of the agency's operations.
Prior to joining TDA, Ms. Zak worked as an attorney
practicing in the areas of corporate, municipal and
international finance, and is an adjunct professor of law at
Boston University and Georgetown.
It is the custom of this Subcommittee to swear in all
witnesses that appear before us. So, if you do not mind, I
would ask you to stand and take the following oath:
Do you swear that the testimony you are about to give
before this Subcommittee is the truth, the whole truth and
nothing but the truth; so help you, God?
Ms. Littlefield. I do.
Ms. Zak. I do.
Senator McCaskill. Let the record reflect the witnesses
have answered in the affirmative.
We would ask you that your oral testimony be limited to
around 5 minutes. We are pretty laid back here, and if it is a
little longer, no one is going to object.
And, obviously, you are welcome to put anything into the
formal record of the hearing that you would like.
And we will start with you, Ms. Littlefield.
TESTIMONY OF THE HON. ELIZABETH LITTLEFIELD,\1\ PRESIDENT AND
CHIEF OPERATING OFFICER, OVERSEAS PRIVATE INVESTMENT
CORPORATION
Ms. Littlefield. Thank you very much, Madam Chairman and
Ranking Member Johnson. Thank you, Members of the Subcommittee
as well. Thanks for inviting me here today alongside my good
friend and colleague, USTDA's Director Zak.
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\1\ The prepared statement of Ms. Littlefield appears in the
Appendix on page 27.
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I am Elizabeth Littlefield, President and CEO of the
Overseas Private Investment Corporation.
So, to begin, let me just share a couple of words about
OPIC and what we do.
OPIC is the U.S. Government's development finance
institution, and our mission is to support sustainable economic
development in the poor, but emerging, countries of Africa,
Asia, the Middle East, Europe--emerging Europe--and Latin
America.
We do that by catalyzing U.S. private capital investments
into projects that help solve these countries' important
development challenges, like access to energy and health
services. In so doing, of course, we help advance U.S. foreign
policy and national security objectives. At the same time, we
help U.S. businesses gain footholds in those fast growing,
emerging markets, which of course spurs growth and job creation
here at home.
And, as you know, nearly 95 percent of the world's
customers live outside the U.S. borders, and all of the 100 top
fastest growing economies last year were in emerging markets.
So helping U.S. businesses tap these markets is key to our own
growth.
So how do we support these businesses? OPIC provides, as
you said, Senator, companies and investors with market-based
long-term loans and guarantees as well as political risk
insurance. We work with a very broad range of U.S. clients, but
importantly, small and medium enterprises represent nearly
three-quarters of our projects.
Our development mission and mandate means that OPIC
projects build critical infrastructure, like roads and food
storage and housing, which improve low-income families' access
to energy, clean water, health services and schooling, for
example.
As you mentioned, Senator, OPIC charges fully cost-covering
fees and interest rates, and as a result, for more than 36
consecutive years, the agency has operated on a fully self-
sustaining basis at zero cost to the taxpayer, contributing to
deficit reduction in each of those years. This past fiscal
year, OPIC's income reduced the Federal budget deficit by $426
million.
I would like to just offer two quick examples of the range
of OPIC projects.
So, first, a Missouri-based company is using a $250 million
loan from OPIC to build and operate a 60-megawatt solar
photovoltaic plant in Boshof, in South Africa's Free State
Province.
At the other end of the spectrum and across the planet, a
Georgia-based family owned business that was selling low-cost
cotton pants throughout the world wanted to support the U.S.
Government's effort in Afghanistan. They came to us, and OPIC
lent this organization $3 million over time in a tranche-based,
performance-based loan, to have them build a factory outside of
Kabul to make uniforms for the Afghan military and police. The
factory employs 1,200 Afghan women, most of whom are war widows
and who are, for the first time ever, working outside of the
home, earning money to support their families.
With our operational budget of only $53 million, which pays
for our very small and highly specialized staff of only 225
people, the agency is able to execute around 100 such projects
in any given year.
Since the agency is profitable, on average, every single
dollar invested in OPIC's administrative or operating budget
results in $6 in income for deficit reduction--1 to 6.
With additional staff resources, OPIC could generate more
projects, support more U.S. businesses, contribute more to help
economic development in poor countries, all while contributing
even more to deficit reduction.
So I have addressed the agency's financial efficiency, but
I also want to underscore our commitment to operational
efficiency.
In the past 4 years, OPIC has been laser-focused on further
streamlining and strengthening the agency's already very strong
internal controls, and on improving and automating processes to
improve performance and oversight, all while cutting costs at
the same time. When working with a very small budget, every
single penny matters.
OPIC's consistent and very strong performance results can
be measured both transparently and tangibly in our bottom
line--our income every year. These results, of course, are
achieved thanks in part to this robust and state-of-the-art
system of oversight and internal controls with multiple and
reinforcing layers.
It is noteworthy that a full third of our staff work in the
areas of oversight and risk management, including policy and
legal compliance--a full third of our staff.
On top of that, OPIC has an independent 15-member board of
directors with both private and public sector members. The
board appoints an independent audit committee, and in addition,
the OPIC is currently served by the USAID inspector general.
So I have addressed the agency's financial effectiveness.
So consistent with private sector practice, OPIC's
financial statements are audited by an independent financial
auditor every single year, and we are very proud to have
received an unqualified audit every single, solitary year of
the agency's existence. This, along with our financial
performance and the fact that our defaults are less than 1
percent net of recoveries every year, I think speaks volumes
about the agency's performance, particularly in light of the
very difficult markets in which the agency operates.
We report regularly to Congress on our results, and in
fact, there are nine separate reports provided each year,
including six which are specifically related to OPIC's
financial risk and development impact.
As a small agency, OPIC works in close collaboration with
other agencies. We refer businesses that need feasibility
studies to the experts at USTDA, and we rely on the State
Department's economic officers to be our eyes and ears on the
ground.
We partner with other agencies to leverage our strengths
and our technical expertise for the benefit of U.S. companies
while at the same time, maximizing, as you said, Senator,
efficiency and agility, and maintaining the critical
differences that Congress intended when it established us as
separate entities.
So, just a couple of examples in closing.
Our friends and colleagues from TDA, Commerce and Ex-Im and
others have all participated in nearly every one of our
Expanding Horizons Workshops, which we carry out in cities
throughout the country, including St. Louis. This enables the
teams to show small businesses how they can actually access
services from the different specialized Federal agencies.
In the immediate aftermath of the Arab Spring and at the
request of the Administration and the State Department, OPIC
partnered together with USAID to establish small lending
facilities in Egypt and Jordan to address the needs of
stimulating private capital investment and job creation in
those critical markets.
And, of course, every single day of the week my teams are
in close contact with the excellent USAID, State Department and
Commerce officers in the embassies throughout the world where
we work.
So OPIC's model of leveraging private sector investment for
development is increasingly crucial at a time of constrained
public resources and when the private sector is playing an ever
greater role in international development and U.S. companies
are, at the same time, seeking growth opportunities in the
developing world.
Our model enables us to support low-income countries while
leveling the playing field for U.S. businesses and earning
incomes for the taxpayer at the same time. It fosters the kind
of foreign engagement that projects the best of American
values, standards and innovation and good will.
And, finally, I would like to say, Senators, that actually
the timing of this hearing is rather auspicious as next week is
the 30th anniversary of OPIC presenting its final check, which
manifested itself in a large cardboard piece of paper handed to
President Reagan, that final check to the U.S. Treasury which
paid back all of our original startup appropriations.
So I am thankful for the opportunity to lead an agency that
is having such a powerful impact around the world and using
such an efficient and effective business model to do so.
Thank you for your time, and I look forward to answering
any questions you may have. Thank you.
Senator McCaskill. Thank you very much. Ms. Zak.
TESTIMONY OF THE HON. LEOCADIA I. ZAK,\1\ DIRECTOR, U.S. TRADE
AND DEVELOPMENT AGENCY
Ms. Zak. Chairman McCaskill, Ranking Member Johnson and
Members of the Subcommittee, thank you for this opportunity to
testify about the U.S. Trade and Development Agency's mission,
operations, economic impact and oversight of funds. We
appreciate your invitation to describe our efforts to level the
playing field for U.S. companies overseas as well as to
describe the procedures by which we ensure the agency's
continuing efficiency and effectiveness.
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\1\ The prepared statement of Ms. Zak appears in the Appendix on
page 41.
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I would like to begin by offering a bit of a personal
perspective; I was raised by a family that owned a small
business. From a young age, I worked with my parents and
siblings in almost every aspect of my father's veterinary
clinic, from cleaning animal cages, to customer service, to
accounting. I learned from my parents, who grew up during the
Great Depression, to watch every penny.
I bring those values to everything I do, including managing
USTDA.
Congress established USTDA as an independent agency in 1992
in order to--and I quote from the statute--``promote United
States private sector participation in development projects in
developing and middle-income countries, with special emphasis
on economic sectors with significant United States export
potential.''
USTDA's dual Congressional mandate is unique among Federal
agencies in requiring that the Agency both provide foreign
assistance focused on economic development and support U.S. job
creation through exports.
USTDA engages the private sector in development activities
at critical early stages when technology options and project
requirements are being defined. By highlighting opportunities
for the use of U.S. expertise and technology when they can
effectively be incorporated into project planning, the agency
increases the likelihood that implementation will include U.S.
exports.
USTDA is a streamlined agency that takes rapid and targeted
action to create meaningful, project-building partnerships when
the need and opportunity are greatest.
USTDA provides early stage grant funding for projects that
may ultimately be financed by any number of entities, including
U.S. Government agencies like Ex-Im Bank or OPIC, multilateral
development institutions such as the International Finance
Corporation (IFC), or commercial banks.
Furthermore, the Agency can leverage financing from foreign
governments in developing and middle-income countries.
There is no U.S. private or public sector equivalent for
USTDA, as a grant-making agency for early project planning.
In the Agency's history of linking U.S. businesses to
export opportunities, USTDA has generated over $45 billion in
U.S. exports. In fiscal year 2013 alone, the Agency identified
nearly $3 billion of new exports, which has helped to support
approximately 14,000 jobs in the United States. This is a
tremendous return given the Agency's appropriation of $47.5
million last year.
The Agency's success, in part, results from its rigorous,
evidence-based decisionmaking processes. We continuously
evaluate our program tools to determine their overall
effectiveness. This exercise allows us to look both backward,
at past success as well as lessons learned, and forward, toward
forecasted trends and future opportunities, in order to
prioritize the countries and the sectors on which we will focus
in the coming year.
This data-driven approach also informs the Agency's project
preparation and selection processes. USTDA's talented, expert
staff prepares funding requests for specific program
activities. Each of these is reviewed and approved by the
Agency's senior management.
USTDA staff believes in, and is proud of, our robust system
of internal and external controls, which was designed to
prevent waste, fraud and abuse, as well as to maximize the
return on every U.S. taxpayer dollar the Agency spends.
USTDA closely monitors the use of both its program and
operating funds, and because we use the Interior Business
Center (IBC) of the U.S. Department of Interior as our paying
agent, there are additional checks on every payment made by the
agency.
Every year, we engage independent third-party companies,
mostly recently KPMG, to audit our financial statements. Since
1993, the first full year of operation, the Agency has received
unqualified audit opinions.
But we also evaluate our programs and processes regularly
by contracting with third-party companies to perform program
and process audits.
At USTDA, we pride ourselves on being efficient and
effective. We have a long history of streamlining the Agency's
functions through cost-effective arrangements with shared
service providers. For example, currently, we have agreements
with IBC for human resources management, staffing and personnel
matters, financial statements and payroll processing, as well
as for travel authorization and voucher processing.
Arrangements like these have allowed us to take advantage
of our providers' specialized technical expertise, allowing the
employees to focus on achieving our mission.
The Agency also continuously looks for additional ways to
save costs. For example, USTDA previously maintained its Oracle
financials on a standalone server hosted by IBC. We developed a
plan to migrate the Oracle server to a shared platform, thus
reducing our annual expenditures by 50 percent.
By identifying savings like these, we have been able to
streamline our operating expenses down the lowest levels and
still allow for the reasonable management of our program. In
fact, USTDA's operating expenses have remained flat-lined since
fiscal year (FY) 2010.
In a time when results are more important than ever, we are
providing our best results. As was indicated, the Agency's
current export multiplier, $73 in U.S. exports for every dollar
programmed, is the highest in USTDA's history.
The Agency is committed to remaining an agile, responsive
organization that supports U.S. jobs through exports while
simultaneously providing important early project planning
assistance to developing and middle-income countries.
Furthermore, I think it is very important for the American
public to have examples of agencies that are effective and
efficient and watch out for the taxpayer dollar. I truly
believe that USTDA is one of those agencies.
Madam Chairman, Members of the Subcommittee, this concludes
my remarks. I look forward to the questions.
Thank you very much.
Senator McCaskill. Thank you.
And, since Senator Johnson has another important hearing he
has to attend, I want to give him the opportunity to ask some
questions before he has to leave.
Senator Johnson. Thank you, Madam Chairman.
This is a question for both witnesses.
You both talked about controls and monitors and evidence-
based decisionmaking, program audits, process controls--those
types of things.
Can you just tell me what are the main criteria you use in
terms of grant-making or loan guarantees or loan-making?
Specifically, we will start with Ms. Littlefield.
Ms. Littlefield. Thank you very much, Senator.
So the No. 1 criteria is those countries and those
investments that our private sector clients are asking for. So
we tend to go where the markets would like us to go, where they
need our support.
We are open currently in about 161 countries, and that list
of places where we are open for business is determined by the
income level of the country, whether or not we have a bilateral
investment agreement and whether or not it is a country where
are prohibited from working. For example, China and Sudan are
both countries where we do not work for human rights reasons.
In China, we have been closed ever since Tiananmen Square.
So that is the eligibility. Beyond that, we looked for
three things.
One is whether or not the project proposed is going to have
a positive development impact on that country, whether the
client himself is eligible as a U.S. company, whether the
project is commercially viable and we are sure we can get paid
back, and then last, I would say we certainly make sure that
project is consistent with all of our environmental, human
rights, labor and other policies, as well as the policies that
relate to ensuring that our projects have no damage to the U.S.
economy or jobs.
Senator Johnson. Can you quickly describe some of the more
typical projects that you are dealing with?
Ms. Littlefield. So I mentioned a few in my testimony, but
I will mention just a few more if you would like.
For example, in Togo, the West African country of Togo,
which had severe energy deficits, we financed the creation of a
tri-fuel power plant that tripled the amount of power that
country was able to produce and enabled it to export to
neighboring countries, for example.
All the way at the other end of the continent, in Rwanda,
we have been financing just last year a man and his wife who
are horticulturalists, who became interested in that country
and in the very difficult time it is having feeding its own
people. They have now exported their own horticultural
technologies and have set up in Rwanda and are producing new
crops of bananas and pineapples that are 10 times as productive
as the crops that they replaced.
So that is just--one is a $150 million project, and one is
a $3 million project.
Senator Johnson. Are these always with some private sector
firm, or are they also sometimes loans with loan guarantees to
governments?
Ms. Littlefield. We are required by Congress and by statute
to involve the private sector in everything that we do.
Senator Johnson. OK. Ms. Zak, what about your criteria for
your grants?
Ms. Zak. Thank you very much.
As I mentioned, we have a very robust strategic planning
process where we annually look at where there are opportunities
from the host country that match with the U.S. businesses and
what it is that they have the ability to provide. And I think
that is very important.
So the criteria, one, include: Will there be mutual benefit
for meeting our dual mandate of economic development and jobs
here at the United States? So we want to make sure we have both
of those.
The other is we want to be sure that we are looking at
projects that have a reasonable likelihood of financing. They
are not just pie in the sky, but from our experts in our
office, they are projects that we believe have an opportunity
to be able to move forward, and we want to be sure to level the
playing field for those projects.
The other thing that we look at, as I indicated, was the
development impact in-country because we believe that this is a
good way to have a positive impact in the future with respect
to the U.S. economy.
And, finally, we also look at whether or not there is
competition from other countries. Our goal is to be able to
level the playing field for U.S. businesses in what it is that
we do, and it is also our goal to bring the private sector to
development so that there is a return to the U.S. economy from
development dollars.
Senator Johnson. Am I correct to assume that maybe your
agency would be the first on the ground in a particular country
and a particular opportunity, and then you would be working to
turn that over to Ms. Littlefield's organization? Is that how
it works?
Ms. Zak. Yes. We are often referred to as a SWAT team that
is first on the ground to be able to do an evaluation of
projects that are likely to be able to move forward with U.S.
exports. Sometimes those projects move forward with OPIC, but
oftentimes, those projects move forward with the Export-Import
Bank or the host country government or the multilaterals.
So one of the things that USTDA brings is the ability to
work with financing from a number of different institutions.
Senator Johnson. OK, then the last question for Ms.
Littlefield.
I love the fact that we have an agency that actually makes
a profit and returns money to the Federal Treasury, but at the
same time that sends off some bells and whistles, in my head at
least. Do you ever come under criticism for competing with the
private sector, and would that be a legitimate concern?
Ms. Littlefield. So, thank you for that question, Senator.
It is a question because, as you say, we are one of the few
agencies in the U.S. Government that do generate income. But,
actually, no, we do not compete with the private sector.
Statutorily, we do not compete with the private sector, but
we also require every one of our project sponsors to represent
that that financing is not available in the private markets.
Also, why doesn't the private market do this if it is so
attractive? And the reasons for that are quite straightforward.
One is because we are able to issue long-term debt we can
do very long tenors, and many of these projects in emerging
markets require long maturities that the banks cannot do.
Second, we have a 40-year track record in working in these
markets, and most banks do not have that.
Third, most of our clients are small businesses, and small
businesses, as you well know, have a very difficult time
getting bank finance anywhere.
So we do not compete with the private sector at all but
work closely with it.
And, in fact, we welcome the chance to work ourselves out
of business. We like creating new markets and forging ahead.
For example, we invented the political risk insurance product
several decades ago, and now we are doing less and less of it
as the private insurers are now coming in. So our political
risk business is actually restricted to the super risky
countries like the Afghanistans and Iraqs and Haitis and South
Sudans of the world.
But, if I may add, so the private sector we do not
duplicate or compete with. I hope that is clear.
But more concerning is--and Ms. Zak mentioned this when
talking about leveling the playing field. More concerning is
the public sector because every other G-8 country, G-7 country
and many others have the equivalent of OPIC in the public
sector that is designed to help their businesses invest in
emerging markets.
But, unfortunately, those other countries have agencies
that are far bigger than we are, and so we are not able to
invest--although their economies are far smaller than the U.S.
economy, not to mention--so, Europe. All the European agencies
tend to be larger than we are relative to our economy, and not
to mention the Chinese.
So it is not the private sector. The private sector we are
helping. It is the public sector that I worry about.
Senator Johnson. OK. Well, again, thanks for your testimony
and your answers to my questions.
Thank you, Madam Chairman.
Senator McCaskill. Thank you.
I have a lot of questions.
One of the reasons we are having this hearing today is I am
constantly challenging my folks to find places where we have
not taken a look. That does not mean that there is anything
that you are doing wrong, but everybody that operates within
the government should have oversight.
Everyone should have independent oversight, and frankly, if
you are doing really well, it is going to do nothing but make
you look even better.
So that is the reason we are here today, but I am very
curious about both of your agencies and the practical impact of
how you work.
And I guess my first question would be I am a small
business, and I have an interest in foreign investment and/or
exports. How in the world do I find you guys?
Who is it that brings me--I mean, I had never heard of you,
and I am fairly knowledgeable about the Federal Government,
certainly light years more knowledgeable than most of the small
businesses that operate in Missouri.
So who brings these businesses to you?
You are not telling me that some small business in Missouri
just picks up the phone and calls you, Ms. Littlefield. Who
brings them to your door?
Ms. Littlefield. So I am happy to start, and Lee, you may
want to add to this.
So you are absolutely right; it is difficult when we are as
small as we are and all based in Washington, DC, with the
exception of one person, to make sure that the markets that can
use our services know about us.
That is part of the reason we do these Expanding Horizons
conferences throughout the country, in cities throughout the
country, to advertise our services and those services of our
sister agencies.
But also, we find, frankly, we are pretty well known in the
emerging markets themselves because most of the other
development finance institutions such as ourselves in other
countries are quite active there. So we find that we are quite
well known outside the United States and in those emerging
markets.
Last, the way people often find out about our services--and
I suspect the same may be true of the USTDA--is the terrific
economic officers in the Foreign Commercial Service and the
USAID officers in our embassies are very good at making sure
that U.S. companies that are considering the possibility of
investing in a given country are aware of the services that we
can provide to facilitate that investment.
I just came back Monday from a trip to West Africa, in
Liberia and Ghana and Senegal, and the purpose there was to
make sure that we were doing everything we could to help U.S.
businesses that are interested in investing there. And, again,
the embassies are really terrific at identifying and supporting
those opportunities.
Senator McCaskill. Are there repeat customers?
And, by that, I mean in your loan portfolio, obviously, you
have some private participation, and I am assuming that these
are investment groups or banks that are coming to you with
people that have come to them and they are looking to offload
some of the risk, right?
Ms. Littlefield. That is right. And thank you for asking
that question.
We are very proud of the repeat customers that we have
because it suggests that they are getting a good service from
us. And so repeat customers is an important indicator to me of
our performance.
But you rightly mentioned that we do work with a number of,
for example, U.S. banks. As part of our attempt to be more and
more efficient and streamlined and cut costs, we use the
services of other financial institutions to help us originate
investment opportunities.
Senator McCaskill. What percentage of your investment
opportunities in the last two fiscal years were really led by
financial institutions coming to you, where they are doing a
piece of it and you are doing the lion's share?
Ms. Littlefield. Off the top of my head, I would say
probably--I would say between 5 and 10 percent of our business
in a given year has come through a U.S. private sector bank.
But most of our business--well, I would not say most. I
would say probably a third of it we are doing in conjunction
with other types of lenders, though.
Senator McCaskill. Hedge funds?
Ms. Littlefield. No, other types of lenders, for example,
other kinds of development finance institutions.
Senator McCaskill. Oh, I see. Like, give me examples.
Ms. Littlefield. Well, for example, we have negotiated an
arrangement with the other development finance institutions
such as the IFC of the World Bank, wherein we pre-agree on
legal documentation to the extent possible and policy reporting
requirements to the extent possible, such that we can share
risks among ourselves without burdening the client with
multiple reporting and documentation requirements, for example.
Senator McCaskill. No, I mean your business. I am trying to
get a handle on who is coming in your door.
So you are saying that most of your business is not really
generated through financial institutions that have a business
that they want to finance, but rather, it is coming in directly
with the businesses coming to you because they have made
contact with the embassies?
Ms. Littlefield. Most of the business that we do comes in
directly to us; that is correct.
Senator McCaskill. OK.
Ms. Littlefield. There are various, different avenues into
us, either direct--they have heard about us. They have heard us
speaking at a conference, the embassies' partner or repeat
business.
We have actually done this analysis, but I do not have the
numbers in front of me as to what the sources of people hearing
about us are.
Senator McCaskill. So would you agree that based on your
mission it is hard to say that you are being successful since
such a small percentage of your work is being done in what we
would consider really, truly developing countries?
Ms. Littlefield. Right now, we are actually very proud of
the amount of work that we are doing in less developed
countries. It has been consistently around 30 percent of our
business for the last----
Senator McCaskill. How much? Thirteen?
Ms. Littlefield. Thirty. Three-zero.
Senator McCaskill. Three-zero. Now why do I have a figure
of six?
Ms. Littlefield. I do not know where that number is, but I
can show you the reports that will indicate that it is more
like 30, plus or minus 1 or 2 percent.
Senator McCaskill. And that is where the purchasing power
is $1,200 or less?
Ms. Littlefield. We have an internal policy of focusing on
countries that have a gross national income (GNI) per capita of
$5,000--$15,000.
Senator McCaskill. Or less?
Ms. Littlefield. Or less.
Statutorily, the inflation-adjusted limit from the 1986
number when it was originally established would be $18,000 as a
limit, but we have reduced that to $15,000 and really focused
on those poorest countries.
I think an indicator of our focus on the poorest countries
is that Africa, which used to be around 6 or 7 percent of our
total a mere decade or so ago, is now over 25 percent of the
total portfolio. So Africa--Sub-Saharan Africa has grown from 4
or 5 percent to a full quarter of our business.
Senator McCaskill. OK. So the Foreign Assistance Act, you
have internally decided--even though it is a per capita
purchasing power in current dollars of $1,200 or less and to
restrict OPIC activities in countries where it is over $7,822,
you have just internally adjusted those numbers based on
inflation?
Ms. Littlefield. So the Foreign Assistance Act determined
in 1986 an upper limit on the countries that we would give
preference to. When you take those numbers forward, it comes to
around $1,800 in today's dollars.
We have determined that we wanted to focus on poorer
countries than that. So, internally, as a guiding policy, we
focus on those countries with GNI per capita of $15,000 instead
of $18,000.
I cannot reconcile the $12,000 number that you have right
now, but I would be happy to do so and do the crosswalk between
these numbers later on if that would be helpful.
Senator McCaskill. OK. And part of it is your website is
slightly confusing because your website says that you have
spent--$1 billion out of $16 billion is spent on low-income
countries.
Ms. Littlefield. I do not know why that number would be on
our website. It sounds like it is a misunderstanding or
misrepresentation in some way.
Senator McCaskill. Well, I think it is important because,
obviously, what you are trying to do is do what the private
markets cannot.
Ms. Littlefield. That is right.
Senator McCaskill. And that is to go into the high risk,
lower value in terms of return in order to really, in a way,
provide the financing that you could not--I mean, if this is
financing that is available in the private market, then it
should be in the private market.
Ms. Littlefield. Absolutely.
Senator McCaskill. Was there a special reason that we would
be in Israel or Portugal?
I mean, those countries do not strike me as places that it
would be difficult to get investment capital under any
circumstances--not high risk, certainly not developing, very
wealthy countries.
Ms. Littlefield. So--yes. Now, originally, our statute was
written in a way that exempted a few high-income countries for
historical reasons, such as Portugal and Northern Ireland. We
have not done any financing in those countries since I have
been in the office, except for one legacy small transaction
that was part of a multiple-country portfolio, I think, in
Portugal.
But other than that, as I say, our low-income portfolio has
increased dramatically, and our higher-income portfolio has
declined.
With respect to Israel, Israel is the one exception to our
$15,000 cap, and we--again, that is historical reasons.
But also, when we have done transactions in Israel, it has
been with they have other extenuating circumstances such as
being in the very high--very low-income, very poor northern
parts of Israel, in the Negev, or when it has particular
foreign policy considerations to it.
So, yes, we do indeed make exceptions to that voluntary
$15,000 cap, but they indeed are exceptions and need to have
overriding developmental or foreign policy justifications.
Senator McCaskill. And is there someone who approves those
exceptions, or is that all done internally?
Ms. Littlefield. Well, given that the $15,000 cap is an
internal policy, there is no official statutory change to our
policy by going above it.
The $18,000 cap is a policy that the board would have to
approve a change of.
Senator McCaskill. OK. So this is just board approval.
There is no White House approval. There is no--because this is
all supposed to be in support of the President's foreign
policy----
Ms. Littlefield. Yes.
Senator McCaskill [continuing]. Development goals.
When you all do one of these exceptions, is it just--as far
as it goes, is it either you are making a decision or the board
making a decision?
Ms. Littlefield. Any changes to our policies would go to
the board, and certainly, we would be consulting Congress with
that as well.
Senator McCaskill. OK. On the development goals, I notice
that on your checklist for potential funding applicants there
is not a single question about development. The questions
include whether the project is in a country in which you can do
business, whether a U.S. citizen or business has a meaningful
involvement in the project, whether the applicant has a
successful track record in the industry, but there is nothing
about what the project's development impact will be.
And some of the things I mentioned in the opening statement
seemed to have a very tenuous connection with development
goals, in terms of building energy or infrastructure.
Wendy's, Papa John's----
Ms. Littlefield. Right.
Senator McCaskill [continuing]. A Porsche dealership. I do
not see how those support the development goals that are
supposed to be one of the policy reasons for your agency's
existence.
Ms. Littlefield. So, yes, thank you for that.
That investor checklist that you have reviewed is really a
prescreener to help us weed out the multiple inquiries that we
have that do not qualify for even beginning a conversation with
us. So it is really a blunt instrument----
Senator McCaskill. OK.
Ms. Littlefield [continuing]. To weed out people that do
not have viable projects, frankly.
But the test of whether the development--the project has a
development impact is certainly subjective but something that
is the No. 1 goal of every one of our investment officers. So
we would not be considering a project unless it had a positive
development impact.
Some of the projects that you mentioned do, I agree, on the
surface look like they are less obviously developmental than a
health or education project might be. But I think it is
important to recognize that U.S. franchises in these markets
create enormous numbers of jobs in markets that may be unstable
because of unemployment, for example.
So Marriott in Georgia is an extremely important job
producer as well as, a standard bearer and a projection of
American values in a country that is of high strategic
importance to us and high foreign policy value, that was just
emerging from a conflict situation.
So each one of those stories, in and of themselves, one can
look at and understand the context--the foreign policy context,
the development context or the domestic economic context--in
which that project contributes to economic development.
But I can assure that as someone that has spent most of her
life in development and several years living in Africa, on
these matters, nothing matters to me more than having a
positive development impact and doing so while helping U.S.
businesses and do so in a sustainable way.
Senator McCaskill. I think some of this----
Ms. Littlefield. So I can assure you I am a good steward of
our development credentials.
Senator McCaskill. And I do not question that. I do not
question your motivation or your commitment to that.
But I guarantee you that $20 million for a Porsche-Jaguar
dealership in Ukraine probably makes you squirm a little bit,
too. I mean just on its face.
And some of this is--when you sit on this side of the desk,
you can engage in all kinds of cheap shots, and I do not mean
to be doing that. But, at the same time, some of these do give
the impression that--I mean, I know there is plenty of places
we can invest $20 million that would have more long-term value
to the Ukraine than somebody who is going to drive a Porsche or
a Jaguar.
And so, even those are--you know. I am sure that those
franchises would argue with me that that is upward mobility
that everyone aspires to, and that has other people look at
that, and they want to work harder so they can aspire to have
that also. I get that part.
Let me talk a little bit about the oversight issue, and
this is probably a little bit of stress here, about this.
I am a big believer, as you probably know, in inspectors
general and auditors. I am a big believer in independent
government auditors.
Spending as many years as I did as a government auditor,
there is a huge difference between an audit that an entity
hires to audit their books and an independent auditor coming in
from the outside, that does not report to the board, does not
report to the CEO but, rather, reports to the public, for
public agencies.
OPIC does not have its own inspector general. I know you
referenced a relationship with the inspector general.
But I know that you all tried to sit down and reach an
agreement on a risk assessment of your programs and up to one
performance audit. And, evidently, it is my understanding that
you decided not to go that route.
And I want to give you an opportunity to explain why and
what would be barriers to your having a more robust
relationship with an inspector general who would be making all
of the decisions as to what to look at, when and why.
Ms. Littlefield. Thank you for that question.
Yes, indeed, as I mentioned, we use the services or we are
the beneficiary of the services of USAID's inspector general
right now. That is part of the legacy of our having----
Senator McCaskill. Have they ever done any work there?
Ms. Littlefield. Yes, they have.
Senator McCaskill. So there is an audit they have done?
Ms. Littlefield. They have done a number of different
things. They have looked at two accusations of fraud, I
believe, as well as we have engaged them for a Federal
Information Security Management Act (FISMA) audit, which they
have done now, and they are doing fraud awareness training as
well.
That is a legacy of our having been part of the AID in the
beginning.
But, as you rightly said, I personally have an interest in
strengthening our oversight. I believe, as you mentioned, that
if you are doing well it is a good thing. And, frankly, it is
an extremely valuable management tool for management.
So we have been engaging with the Congress and in
particular with the Senate Foreign Relations Committee to
strengthen our oversight mechanisms and to ensure that the
skill set of our inspectors general comes with all the skills
that we need.
We are neither a pure development agency, like USAID, nor
are we a purely financial agency. So we need an inspector that
has tailored skills that are appropriate for this agency.
So we have been pursuing the avenue of a designated Federal
entity IG, which is similar to 35 other small Federal agencies
who are financial in nature, such as the Federal Reserve Board
(FRB), the Federal Housing Board, the Securities and Exchange
Commission (SEC) and others. So that is the avenue that we have
been pursuing now.
And I look forward to really benefiting from this oversight
because, frankly, as the CEO and President it would be nice to
have the assurances that these inspectors general would be.
So that is the avenue we have been pursuing. It will give a
Congress a one-stop shop of an independent entity that they can
check in with on all matters related to OPIC and oversight.
Senator McCaskill. OK. And I will look forward to getting
specifics of what you want.
And, if you are generating the kind of cash for the
Treasury that you are, I bet you I can talk folks into making
sure some of that is used to get you that oversight.
Ms. Littlefield. Thank you.
Senator McCaskill. It only makes sense, especially for both
of you. When you are committing resources far away, there is no
way you have the resources.
I mean, I have scars up and down my back from the oversight
in Iraq and Afghanistan, where we were spending billions of
dollars and too often had nobody on the ground paying attention
as to how those were being spent.
Now you have a little more ability, although with you, Ms.
Zak, probably not as much because it is grants as opposed to
loans and risk management.
But let's talk a little bit about failure. What happens
when you have a failure?
For you, Ms. Zak, how successful have you been at
recovering the money that has been expended when it has been
determined that the project was failing?
And, for you, Ms. Littlefield, how is the loss divided
between the private sector and the money that you have
guaranteed, that you have loaned? Is it pro rata, or is the
loss to the private sector first, or is the loss to the
government first?
I will start with you, Ms. Zak.
Ms. Zak. Thank you very much, Madam Chairman.
And I would just like to also address one thing that you
just mentioned with respect to following our grant funding.
As you mentioned earlier, with respect to our grant
funding, we do require that U.S. businesses participate and
perform the duties under the grants, and as a result, payments
are made directly here in the United States to those U.S.
businesses.
So we have significant oversight with respect to our
grantees overseeing a project as well as USTDA's program staff
overseeing a project as well as our Office of Grants
Management.
So, with respect to our grant activities, they benefit the
host country, but because we want to level the playing field
for U.S. businesses, the work is being performed by U.S.
companies and the money never leaves the United States.
With respect to recovery, one of the things we like to
ensure is that we do not have a loss. So we have significant
processes put in place with respect to every single performance
milestone in a grant, where there is review by the program
staff with respect to that particular performance and all the
way through the process to the end. When a project is complete,
our Office of Grants Management reviews the whole project.
However, as you indicated, there are times that when we get
to the very end we may have an issue that arises. It is rare.
But people are very much in tune to that, and we do a couple of
things.
One of the things we do is we often get outside auditors to
come in and review the project to determine how much money is
to be owed to us, and we then provide for demand letters from
our agency. However, if we are unable to collect from USTDA, we
have referred U.S. companies to the Department of Justice (DOJ)
to be able--and the Treasury--to collect on our behalf.
Senator McCaskill. And they have been successful?
Ms. Zak. They have been successful.
Senator McCaskill. OK. I am curious; if the money never
leaves the United States, are you saying because they use their
money over there?
Aren't these projects being done in other countries?
Ms. Zak. They are being done in other countries.
Senator McCaskill. But how----
Ms. Zak. They are being done by U.S. contractors or U.S.
businesses, often small businesses that are going abroad to
look at the specifications.
So these grants are often early project planning to be able
to develop procurements or specifications, and we want to
ensure that they are to the level that levels the playing field
and that U.S. goods and services could be used.
So the actual activities are being performed, the
feasibility studies are being written, by U.S. companies. They
are being overseen by the host country because we think that is
extremely important for their development, to oversee their
projects.
At each milestone, the grantee signs off on the invoice.
The contractor--U.S. contractor--certifies to the invoice. It
then comes to USTDA to be reviewed for proper payment.
Senator McCaskill. OK. I have lot of experience with money
being paid to American companies to be used in foreign
countries where it did not go well. So the picture you are
painting is remarkable, that it is so seamless, without a
problem.
Do you have people on the ground in these countries that
are looking at these projects--feet on the ground?
Ms. Zak. We have a couple different ways that we look at
these projects on the ground.
One is the fact that our program staff does travel to those
countries.
We also work very closely with the U.S. embassies and the
Commercial Service to oversee these projects.
We also, as a matter of fact, have a series of audits that
we perform annually--that we bring in, again, independent
companies to audit those projects, to be able to review them.
So it is a process of embassies, our staff, independent
auditors, to be able to look over and track the projects.
Senator McCaskill. Does every project get an independent
auditor hired?
Ms. Zak. Not, not every single project.
Senator McCaskill. What is the criterion to when you hire
an independent auditor and when you do not?
Ms. Zak. Annually, our Office of Grants Management goes out
to the staff of the agency to request whether or not there are
any anomalies, anything they are concerned about. That is the
beginning of a process.
We also go through a process by which we look at what the
risks are with respect to each project. It could be including
things like what country they are in, have they done work with
us before, have there been any concerns with lags with respect
to their invoices. And then, as a result of those indicators,
projects sort of rise to the top.
They are then presented to an audit working group that
reviews them. And as a result, outside auditors, which are
usually small businesses, are hired, and those outside auditors
will look at those specific projects.
Senator McCaskill. Are you hiring these outside auditors
in-country, or are you hiring people like KPMG and folks like
that?
Ms. Zak. We are hiring U.S. businesses--often, they are
smaller than KPMG--to do these particular audits, but they
travel in-country to be able to look at what is going on.
Senator McCaskill. And how many countries do you have these
projects in?
Ms. Zak. We currently have streamlined our processes to
where we have 18 priority countries.
Senator McCaskill. Eighteen countries.
And what--so how frequently--and how many people do you
have working at this agency?
Ms. Zak. We have 50 full-time equivalents (FTEs).
Senator McCaskill. You have 50 people, and you have 18
countries. And how many projects a year?
Ms. Zak. We have approximately--about 100 projects a year.
Senator McCaskill. So everybody--so how much travel--is
your travel budget extensive?
Ms. Zak. It is not extensive.
And, as matter of fact, one of the things that the agency
did is that, even before other people, they have tried to
economize with respect to their travel. And, when they may be
allowed to do things like travel business class because of the
length of time, our agency, beginning in 2009, volunteered to
cut down and to go coach so that they can do more trips.
So, with respect to our program staff, they travel at least
quarterly to their countries, and our evaluation staff also
travel to the countries.
Senator McCaskill. Do the auditors travel?
Ms. Zak. And the auditors travel on a separate audit
budget, but the auditors travel----
Senator McCaskill. Are they going coach?
Ms. Zak. They probably are going under the Federal rules,
which they are not.
Senator McCaskill. I bet they are.
And what about failure in your agency, Ms. Littlefield?
Ms. Littlefield. So, thank you.
You asked two questions. One is about the capital structure
and who loses first and second, and about failure. But since
you are asking failure now, I will address that first.
For me, there are two kinds of failure. One is failure to
achieve the development impact that we are aiming for, and
two--and related to that, of course--is failure to perform
financially.
With respect to failure to perform financially, we do find
that particularly the smaller businesses sometimes struggle and
need a lot of hand-holding. So our nonperforming loans can look
significant--say, 6, 7, 8 percent of our portfolio.
But, at the end of the day, we find that hard work with
those clients enables them to finally end up pulling themselves
together and performing, which results in our write-off rate,
as I mentioned earlier, of less than 1 percent net of
recoveries.
So, with respect to failure, we hope to have some failure.
If we are not failing sometimes, we are not taking enough risk.
But I do find it continually remarkable how rare that is that
we do have an actual write-off, particularly considering the
places that we are working.
The biggest effort I have put into marketing and working in
the last year or so has been in Afghanistan, in Haiti, in South
Sudan, Pakistan and elsewhere.
With respect to failure to achieve a development impact--
because, of course, you can perform financially but not have a
development impact--we are putting in place and have upgraded
our development monitoring system, and we do have development
analysts that travel to visit each of the projects and
determine what impact their having. And we are going to try to
do that over a much longer period of time once we have some
money to invest in that long-term evaluation.
With respect to whether the private sector and OPIC share,
pro rata or in some other way, any losses, normally the project
structure that we would work in would have the private sector
investing in the equity in a project, which is generally the 25
percent sort of first base loss, and then we would be the
financing on top of that.
So, in order for us to actually lose money, the private
sector partner would have to lose all of their money first. And
then we would kick into, of course, the other mechanisms for
getting paid back, whether it is collateral or personal
guarantees or other means of getting repaid.
But, yes, the bottom line is the private sector partners
have a lot of skin in the game, and they lose before we do.
Senator McCaskill. And that is huge, and that is probably
saving you a lot of money because they are going to do so much
due diligence because their skin is going to hurt first. That
is obviously the right way, and I appreciate that is the way
you are doing it.
In preparing for this hearing, it is very difficult to
figure out where the Federal Government is spending money on
trade and development. It takes work, a lot of work, to figure
it out.
Your websites are good sources of information on projects,
but neither of you are on ForeignAssistance.gov although I
understand it is due to USAID having trouble uploading the
information.
You have this chart,\1\ which is not big, but I had my
staff do this. And what this is, is you read across. This is
OPIC, TDA, Export-Import, SBA, USAID, US Trade Group,
Commercial Service in Commerce, Manufacturing and Service in
Commerce, Market Access and Compliance in Commerce, then
Commodity Credit in USDA, Foreign Market Development in USDA,
Market Access Program in USDA, Emerging Markets Program and
Export Credit Guaranty Program. OK?
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\1\ The chart referenced by Senator McCaskill appears in the
Appendix on page 51.
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So that is the full deck.
And then you go down as to what the responsibilities are.
And you see the Xs all over this thing?
I mean, it is a mess.
Now I talk to any individual, whether I am--I mean, both of
you are, obviously, highly competent and qualified and working
hard and trying to do the right thing.
And I talk to any of the agencies on this, and it is, oh,
man, we have it covered. Do not touch us. This is good.
But this has to be confusing for businesses.
And it is hard to get the information in a way that people
who sit in these chairs can really assess effectiveness and
whether or not--I mean, honestly, Ms. Littlefield, I think that
there--I have had an awful lot of interaction with USAID. I
would vote for giving you a lot more of their money. I mean
billions more of their money, in a heartbeat.
But most members will never even know who you are or what
you do because it is so fragmented and it is so niche-oriented
that we are losing, I think, a lot of the punch and power of
our development dollars.
What do you think you all can do to up the transparency and
up the coordination in a way that might bring more
effectiveness to this overall goal that both of you have?
You can go first.
Ms. Littlefield. I can maybe just start with that.
We have actually developed, along with Ex-Im Bank and
USAID, some simple marketing materials that show on one piece
of paper roughly what services you get from whom, and we found
that can be very helpful in explaining to companies where they
need to go for their specialized services.
We have also articulated in--I do not know how many fora we
have been sitting next to each other on a panel, describing
very much as you did, or Senator Johnson did, at the outset,
how USTDA's, for example, feasibility studies among other
things can give rise to an OPIC investment which then, of
course, creates a magnet for exports in the future that can be
financed through Ex-Im Bank. So that sort of stylized diagram,
if you will, of how we relay to one another I think is helpful
to people.
I also think some of the websites that have been launched,
and particularly concentrated with Business USA and Export.gov
from Commerce, will help, once they are fully up and running,
create a one-stop shop that does triage for businesses coming
in, to understand which agency they can go to for that
specialized expertise that they are looking for.
We find it looks complicated when you look at it on a
spreadsheet, but frankly, the ecosystem of U.S. business is
quite complex as well. So I think that is worth bearing in
mind--that it is a complicated world out there.
Senator McCaskill. OK.
Ms. Zak. May I also add to that?
I think--as Elizabeth had pointed out, I think it is true
that there are some websites, such as Business USA, Export.gov
that we do provide the information to and that does describe
the agencies and what they do.
I think a very important thing, though, that has happened
is that the agencies are working extremely closely together.
Matter of fact, some of the agencies, regularly meet. The heads
of the agencies regularly meet to make sure that our activities
are streamlined, make sure we know what is going on with
respect to the other agencies. So we work very closely
together.
As was mentioned, with respect to the public, I do think
that one of the things that has been very valuable is that
OPIC, Ex-Im Bank, Commerce Department, State Department have
both traveled within the United States and abroad as Team USA.
I think that is extremely important--that we are able to work
together, to show what we can do and how we can work together.
But I also think that at all levels of the agencies they
have been communicating extremely well, and I think it is
important for us through the websites to continue to
communicate to the public.
Senator McCaskill. And do you feel you have the same
communication even all the way into USDA?
Ms. Zak. As a matter of fact, we work with USDA, but we
also work with the Department of Energy (DOE).
Because of the amount of aviation work we do, we also work
very closely with the Federal Aviation Administration (FAA).
And, as a matter of fact, Administrator Huerta was just at one
of our workshops.
So, as a matter of fact, USTDA is a convener and works very
closely with many agencies, and so that is one of the things we
have had to do--is to leverage the other agencies. And we work
with a broad spectrum.
Senator McCaskill. How many other agencies--Federal
agencies--are doing feasibility studies in foreign countries?
Ms. Zak. I am not aware of any agencies. I know that
occasionally USAID may do feasibility studies that are not
focused necessarily on exports, the way that we do, but I am
not aware of anyone that focuses on feasibility studies that
are specifically focused on exports, which is our mission.
Senator McCaskill. OK. So the Foreign Commercial Service
Bureau within the Commerce Department or the International
Trade Administration is not doing feasibility studies?
Ms. Zak. Not to my knowledge.
Senator McCaskill. OK. Well, we think they are. So we will
double-check and let you know.
Ms. Zak. Thank you.
Senator McCaskill. If they are, then that is obviously a
problem----
Ms. Zak. I would like to know about it.
Senator McCaskill [continuing]. That you do not know it.
And I assume that you would say the difference between OPIC
and Ex-Im Bank is that you are focused on development goals and
they are not? [Pause.]
Because they do political risk insurance. They do
investments abroad. They serve as a lender and insurer of last
resort.
You read their goals, and they are very similar to yours
except with the development piece.
Ms. Littlefield. The instruments sound similar, but I would
say certainly they do not have a development mission, and we do
not have a primary export generation mission either.
So, as I have often explained it to our clients abroad, we
are financing flows of U.S. capital for development purposes
into emerging markets, and Ex-Im Bank is financing flows out of
those emerging markets to acquire U.S. goods and services.
Senator McCaskill. Well, what if we--just think about this
for a minute. OK? Like do not immediately say, no.
What if we combined your agency with Export-Import and
added development goals to their mission?
Ms. Littlefield. That is certainly something that has been
discussed, and I know the President has proposed this, of
course. And I think, as we have said, he has every right to
organize I believe his executive team the way he sees fit.
And I have no doubt that however any reorganization
happened it would be done in a way that enabled us to preserve
our development mission, but I feel it is also important to do
it in such a way that Ex-Im Bank preserves its export promotion
mission, too.
And sometimes it can be challenging to have mission
misalignment within one large entity.
Senator McCaskill. But other than what you see as maybe
some natural tension between exports and development goals, is
there any other really compelling reason that you would see
that they could not be combined?
Ms. Littlefield. I have not looked into it in any great
detail, but I have every faith that the President and the White
House will do it well if they decide to so.
Senator McCaskill. Well, unfortunately, for the President,
it is not up to him. This is one of those deals that he needs
Congress to help. And he would tell you, I am sure if he were
here, that has been challenging, at a minimum, to get Congress
to go along.
Let's talk a little bit about TDA's outside financial
auditors. I know that they report to your deputy financial
officer and to the chief operation officer (COO).
And your general counsel is serving as your inspector
general now; is that correct?
Ms. Zak. As you indicated, we do not have an inspector
general. As a result, our general counsel is a coordinator. If
there are any activities, they can be brought to our general
counsel. If there is a need to go to another agency with
respect to--as we referred to DOJ in the past, then she is able
to provide that information to others as well.
With respect to the outside auditors, the auditors do
report to our chief financial officer, but as a matter of fact,
the senior management team meets with our auditors to ensure
that we review all of the information that the auditors have
provided.
Senator McCaskill. OK. But I am assuming that neither one
of you would have a problem if we could figure out a way to
give you special--I mean your own designated inspectors general
to provide that independent, third-party, outside look at risk
assessment--most importantly, risk assessment--and then going
in and doing a deep dive in whatever areas they determined were
risk-worthy.
I am assuming you would be OK with that. You would not have
a problem with having an IG.
Ms. Littlefield. As I mentioned earlier----
Senator McCaskill. Right.
Ms. Littlefield [continuing]. That is the avenue that we
are pursuing with the Senate Foreign Relations Committee. I
think it is the solution that makes the most sense for a small
agency and one that enables us to ensure that we have the
relevant skills embodied in that IG.
Senator McCaskill. We have IGs in agencies, frankly, that
are much smaller than yours and have much less connection with
finances than yours.
I mean, there are some tiny agencies with IGs and that do
not have the financial impact that yours have.
Are you OK with an IG?
Ms. Zak. With respect to the attorney general, we have--or
inspector general, rather. We have spoken with both our
appropriators as well as our authorizers that are aware of our
size, the nature of the work that we do and the oversight that
we have.
And, with respect to the size, one of--the thinking is to
be able to have access and to continue with our audits as we
have performed them in the past.
But, basically, the issue has been sort of the size and
nature of the work.
Senator McCaskill. Right. OK. Is there anything that I have
not asked a question about that you wished I would have?
Ms. Littlefield. I, personally, cannot think of one. I
think you have been very thorough.
And we appreciate the time and attention you and your staff
have spent to understanding--I speak for Lee as well, I think--
our two small but vital agencies, both of which I believe are
punching well above their weight.
Senator McCaskill. I think that both of you are.
And this is one of those areas--and I will be honest with
you. When you are in this line of work--and I have a sense that
neither one of you are in your jobs because you are looking for
big money. I think both of you probably have the kind of
resumes that you could make much more money in other jobs.
One of the things that is really hard right now is the
cynicism that is out there about government and that government
does not do anything right and that government just pretty much
sucks and that government is the enemy and government is the
problem.
And, with more oversight, I think both of your agencies
would get more exposure to the work you are doing. I think both
of you are working very hard to make your agencies
appropriately risk-free and productive.
And there are two sides to oversight. One is that you
figure out when bad things are going on, and you get them
fixed. The other is you highlight agencies that are doing
things right.
My sense is that overall if you all had more aggressive
third-party oversight you would do very well, and that is good
for all of us--to have every once in a while some parts of
government that are doing what they should be doing.
We are going to continue to pursue, to the extent we can,
on consolidation of programs where it makes sense. There is, I
think, some value to making this a little less complicated to
someone who is not intimately involved in foreign development
and foreign investment.
It is complicated. And I know you all talk to each other,
but coming in from the outside as I did to this, I kind of
went, wow, this is a labyrinth.
To you, it seems simple because it is who you work with
every day and it is your areas of expertise, but I think to
most businesses it is much more complicated.
And I am going to continue to work on that and will look
forward to getting your input on it.
Generally, the problem with consolidation has nothing to do
with the agencies. It has to do with committee chairs that do
not want to give up their jurisdiction. That is a problem that
would be my responsibility to try to deal with.
Yes?
Ms. Zak. I just wanted to respond to your question of what
is a question that I wished you would have asked, and that is,
what do you need?
And I think one of the things that we do need is for people
to support the President's budget. I think both for OPIC and
for USTDA because I do think--and I really appreciate your
focusing on agencies that are effective. And I think we are
effective, and with the President's budget, we can be even more
effective.
Senator McCaskill. Well, we actually got a budget deal last
night, and it was not the President's budget, but it was a lot
closer than many of us thought we would get. So there is a
little glimmer of hope at the end of the tunnel that we are
going to be doing the shutdown dance again and that we will
begin to maybe get back to some regular order and begin
authorizing and appropriating the way the rules are designed.
So I really appreciate your time today.
We will have some followup questions for you. Particularly,
I want to get to the bottom of what percentage of your work is
actually in developing countries and what is the criteria and
how is that being decided and what does it relate to, to the
original authorization and how that was determined.
We are going to want to take a little bit deeper dive
around that and clear up some of the confusion that seems to
exist about how much of your body of work is actually being
done in developing countries.
Ms. Littlefield. Yes, I would welcome that. Thank you.
Senator McCaskill. OK. Thank you both.
[Whereupon, at 3:20 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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