[Senate Hearing 115-767]
[From the U.S. Government Publishing Office]





                                                        S. Hrg. 115-767
 
                  GLOBAL PHILANTHROPY AND REMITTANCES 
                     AND INTERNATIONAL DEVELOPMENT

=======================================================================

                                HEARING


                               BEFORE THE

                      SUBCOMMITTEE ON MULTILATERAL
                       INTERNATIONAL DEVELOPMENT,
                     MULTILATERAL INSTITUTIONS, AND
                    INTERNATIONAL ECONOMIC, ENERGY,
                        AND ENVIRONMENTAL POLICY


                                 OF THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS


                             FIRST SESSION
                               __________

                               MAY 3, 2017
                               __________


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                 COMMITTEE ON FOREIGN RELATIONS        

                BOB CORKER, Tennessee, Chairman        
JAMES E. RISCH, Idaho                BENJAMIN L. CARDIN, Maryland
MARCO RUBIO, Florida                 ROBERT MENENDEZ, New Jersey
RON JOHNSON, Wisconsin               JEANNE SHAHEEN, New Hampshire
JEFF FLAKE, Arizona                  CHRISTOPHER A. COONS, Delaware
CORY GARDNER, Colorado               TOM UDALL, New Mexico
TODD YOUNG, Indiana                  CHRISTOPHER MURPHY, Connecticut
JOHN BARRASSO, Wyoming               TIM KAINE, Virginia
JOHNNY ISAKSON, Georgia              EDWARD J. MARKEY, Massachusetts
ROB PORTMAN, Ohio                    JEFF MERKLEY, Oregon
RAND PAUL, Kentucky                  CORY A. BOOKER, New Jersey
                  Todd Womack, Staff Director        
            Jessica Lewis, Democratic Staff Director        
                    John Dutton, Chief Clerk        



           SUBCOMMITTEE ON MULTILATERAL INTERNATIONAL        
            DEVELOPMENT, MULTILATERAL INSTITUTIONS,        
              AND INTERNATIONAL ECONOMIC, ENERGY,        
                    AND ENVIRONMENTAL POLICY        

                 TODD YOUNG, Indiana, Chairman        
JEFF FLAKE, Arizona                  JEFF MERKLEY, Oregon
CORY GARDNER, Colorado               TOM UDALL, New Mexico
JOHN BARRASSO, Wyoming               CHRISTOPHER A. COONS, Delaware
ROB PORTMAN, Ohio                    EDWARD J. MARKEY, Massachusetts





                              (ii)        

  


                            C O N T E N T S

                              ----------                              
                                                                   Page

Young, Hon. Todd, U.S. Senator From Indiana......................     1

Merkley, Hon. Jeff, U.S. Senator From Oregon.....................     3

Osili, Una, Professor of Economics and Director of Research, The 
  Lilly Family School of Philanthropy, Indiana University, 
  Indianapolis, Indiana..........................................     3
    Prepared statement...........................................     7

Runde, Daniel F., William A. Schreyer Chair and Director, Project 
  on Prosperity and Development, Center for Strategic and 
  International Studies, Washington, DC..........................    15
    Prepared statement...........................................    18

Worthington, Sam, Chief Executive Officer, Interaction, 
  Washington, DC.................................................    27
    Prepared statement...........................................    28

Araia, Semhar, Managing Director, Diaspora and Multicultural 
  Partnerships, UNICEF USA, Washington, DC.......................    36
    Prepared statement...........................................    38

              Additional Material Submitted for the Record

The Committee Received No Responses From Daniel F. Runde for the 
  Following Questions Submitted by Senator Todd Young............    64

Responses of Sam Worthington to Questions Submitted by Senator 
  Todd Young.....................................................    65

The Committee Received No Response From Semhar Araia for the 
  Following Question Submitted by Senator Todd Young.............    68

                              (iii)        


   GLOBAL PHILANTHROPY AND REMITTANCES AND INTERNATIONAL DEVELOPMENT

                              ----------                              


                         Wednesday, May 3, 2017

                               U.S. Senate,
        Subcommittee on Multilateral International 
       Development, Multilateral Institutions, and 
 International Economic, Energy, and Environmental 
                                            Policy,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:05 a.m. in 
room SD-419, Dirksen Senate Office Building, Hon. Todd Young, 
chairman of the subcommittee, presiding.
    Present: Senators Young [presiding], Gardner, and Merkley.

             OPENING STATEMENT OF HON. TODD YOUNG, 
                   U.S. SENATOR FROM INDIANA

    Senator Young. Good morning. The hearing of the Senate 
Foreign Relations Subcommittee on Multilateral International 
Development, Multilateral Institutions, and International 
Economic, Energy, and Environmental Policy, hereinafter known 
as the ``subcommittee,'' will come to order.
    Today's hearing represents our subcommittee's first hearing 
of the year and the first hearing I have had the honor to chair 
in the U.S. Senate. I want to thank our ranking member, Senator 
Merkley, for joining me in leading this subcommittee. I look 
forward to working with you in a bipartisan manner to provide 
robust oversight and address the important priorities that are 
before this subcommittee.
    The topic for today's hearing is ``Global Philanthropy and 
Remittances and International Development.''
    We are joined by an impressive array of panelists this 
morning who will bring a diverse range of valuable 
perspectives. I am particularly excited to welcome Dr. Una 
Osili from Indiana University. Dr. Osili is the Professor of 
Economics and Director of Research at Indiana University's 
Lilly Family School of Philanthropy. As she notes in her 
prepared statement, the Lilly School is the world's first 
school dedicated solely to the study and teaching of 
philanthropy. As a Hoosier, I am very proud of the fact that 
the Lilly School of Philanthropy sets the international 
standard in the field of philanthropy research.
    We are also joined this morning by Dr. Daniel Runde, the 
William Schreyer Chair and Director of the Project on 
Prosperity and Development at the Center for Strategic and 
International Studies. Welcome.
    Mr. Sam Worthington, the Chief Executive Officer of 
InterAction, as well as Ms. Semhar Araia, the Managing Director 
for Diaspora and Multicultural Development at the United 
Nations Children's Fund.
    I welcome each of you.
    As I said, the purpose of today's hearing is to better 
understand the role that philanthropy and remittances play in 
international development. Much has changed in recent decades. 
According to the 2016 index on philanthropy and remittances, 84 
percent of all donors' total economic engagement with the 
developing world is through private financial flows, with only 
16 percent from government aid. While estimates may vary, the 
point is that corporations, foundation, not-for-profits, houses 
of worship, universities, families and individuals play an 
enormous role in global relief and development efforts.
    As a result, if we are going to address most effectively 
the development and humanitarian challenges of our time, we 
need to understand and facilitate the role of legitimate 
philanthropy and remittances in international development. That 
means seeking optimal public-private partnerships, as well as 
identifying and reducing unnecessary barriers to legitimate 
philanthropy.
    I hasten to note that I approach this topic as a strong 
believer in the U.S. Government's investments in diplomacy and 
development. These investments promote our security, 
prosperity, and values. Deep cuts to the U.S. Government's 
International Affairs Budget would be shortsighted, 
counterproductive, and even dangerous as Senator Durbin and I 
wrote in a letter last month to the Budget and Appropriations 
Committees. That letter was signed by 43 United States 
Senators. For that reason, I see philanthropy and remittances 
as valuable complements to, not substitutes for, robust U.S. 
Government investment in our international affairs budget.
    So with those ideas in mind, here are some of the related 
questions and issues that I am interested in exploring with our 
witnesses today.
    What is the scale and nature of global philanthropy and 
remittances, and what unique role do they play in international 
development?
    How can the United States Government more effectively 
partner with the private sector to promote international 
development?
    What unnecessary or unwise obstacles exist to legitimate 
philanthropy and remittances related to international 
development?
    And what can the U.S. Government learn from the private 
sector with respect to innovation in international development, 
including evidence-based and outcome-based approaches?
    I am interested in exploring these and other questions with 
you today.
    So without any further delay, I would now like to call on 
Ranking Member Merkley for his opening remarks. Senator 
Merkley?

                STATEMENT OF HON. JEFF MERKLEY, 
                    U.S. SENATOR FROM OREGON

    Senator Merkley. Thank you, Mr. Chairman. And I am pleased 
to be able to call you that in your first official chair role 
for a subcommittee. Congratulations. And it has been a pleasure 
to work with you. We had a chance to go up to the United 
Nations together, explore a bit of the conversation that the 
role that they are playing, and then this exploration. 
Certainly remittances and private philanthropy is an important 
component of the committee's and this subcommittee's 
investigation and understanding of international economic 
development.
    Across the globe, philanthropy and remittances are helping 
to lift people out of poverty, combat disease, provide 
resources necessary for sustainable development, whether it is 
CARE's work to empower women or the Gates Foundation efforts to 
eradicate malaria, global philanthropic organizations play a 
key role in alleviating human suffering and building a better 
future in the world's most vulnerable areas. Remittances, 
meanwhile, enable individuals to empower families and 
communities they left behind to build stronger and better 
societies.
    I just had the chance to travel with a trip sponsored by 
CARE in India and in Nepal to see many of these partnerships 
and to discuss the role of the private funding and the public 
funding, USAID's role, and also remittances. I visited a 
village in Nepal where the majority of men are working in the 
Middle East and it creates all kinds of challenges for those 
left behind, often for extended periods. And I saw the role 
that women were starting to adopt in filling the space of 
planting for the agriculture of the community, planting 
cooperatives, planting small businesses that they had not 
previously been involved in. And this work was being 
facilitated through philanthropic work.
    So without further ado, I look forward to learning from 
your insights and your organizations and your research today. 
Thank you.
    Senator Young. Well, I want to thank our witnesses again. 
Your full written statements will be included in the record. I 
welcome you to summarize your written statements in roughly 5 
minutes, please.
    Know that votes will be called in the course of this 
hearing. So I do not want anyone to be alarmed. You will be in 
very good hands as I vacate this chair and either hand over the 
gavel to one of my colleagues or recess briefly.
    For opening statements, let us go in the order that I 
introduced you. Dr. Osili, welcome. I only ask that before you 
get into your formal remarks, you introduce your son, who I 
understand is here with you today.

STATEMENT OF DR. UNA OSILI, PROFESSOR OF ECONOMICS AND DIRECTOR 
 OF RESEARCH, THE LILLY FAMILY SCHOOL OF PHILANTHROPY, INDIANA 
               UNIVERSITY, INDIANAPOLIS, INDIANA

    Dr. Osili. Thank you very much, Chairman Young and Ranking 
Member Merkley, and other distinguished members of the 
subcommittee.
    Before I begin, I would like to introduce my son who is 
here with me today. He is a junior at Le Boeuf Jesuit High 
School, and we are just so proud of Senator Young's work here 
in the U.S. Senate and proud to call him our Hoosier Senator. 
So thank you.
    Senator Young. It is great to have your son here, and thank 
you for being before the committee.
    Dr. Osili. Chairman Young, Ranking Member Merkley, and 
other distinguished members of the subcommittee, thank you for 
the opportunity to testify today. It is an honor to appear 
before you in the company of these distinguished witnesses.
    I am the Director of Research at the Indiana University 
Lilly Family School of Philanthropy. The school is the world's 
first school dedicated solely to the study and teaching of 
philanthropy. Indiana University has been at the vanguard of 
philanthropy education since the Center on Philanthropy's 
founding, the school's predecessor, in 1987.
    The school has recently been entrusted with the honor of 
researching and producing two leading research reports that 
provide a detailed picture of the role of global philanthropy, 
including its impact on international development and how 
national and international policies enable or limit such 
philanthropy. These two indices were founded and produced until 
recently by the Hudson Institute under the leadership of Dr. 
Carol Adelman, and the indices are the Index of Global 
Philanthropy and Remittances and the Index of Philanthropic 
Freedom.
    Private philanthropy plays an important role in American 
economic, social, and civic life serving vulnerable and 
marginalized groups, providing risk capital for innovation, 
building communities, and reinforcing a national value that 
emphasizes individual action in pursuing the public good.
    However, philanthropy today is increasingly global. Our 
research allows us to understand, perhaps for the first time, 
how philanthropic giving is reshaping foreign aid and global 
development. Today NGOs, foundations, individuals, 
corporations, and donors work collaboratively in far-flung 
corners of the globe alongside official development assistance.
    Several factors, including technological progress and the 
rapid pace of communication, make it easier to connect people 
around the world to address global problems through innovative 
approaches. To provide some numbers to ground our discussion, 
charitable contributions from U.S. individuals, estates, 
foundations, and corporations to U.S.-based international 
affairs organizations reached approximately $16 billion in 
2015. That represented an 18 percent increase in 2014. This 
growth outperformed the growth in giving to all other 
charitable subsectors in 2015. There were more than 6,300 
international charities in the U.S. in 2013. That represents 
about 2 percent of all reporting public charities.
    However, the smallest subsector witnessed the largest 
growth among all subsectors in the number of organizations at 
19 percent between 2003 and 2013. Many of these organizations 
are new. They have been formed in the last 2 decades. The 
revenues and assets of these international affairs public 
charities increased nearly 50 percent and 70 percent, 
respectively, between 2003 and 2013.
    So with all this information, you can see that the global 
development landscape has changed quite significantly over the 
past 2 decades.
    To understand these changes, we are increasingly looking at 
the entire landscape of economic engagement with developing 
countries to further demonstrate the importance of private 
flows, including private philanthropy in the international 
arena. The Index of Global Philanthropy reports a measure of 
economic engagement with the developing world that actually 
includes official aid, private philanthropy, remittances, and 
private capital flows. This approach offers a more complete 
picture of a country's total engagement with the developing 
world and takes into account the critical role that the private 
sector plays in saving lives in the international development 
landscape.
    According to the 2016 Index of Global Philanthropy report, 
total government aid from the U.S. and 38 other countries 
included in the report to the developing world was about $147 
billion in 2014, while private financial flows of capital 
investments, remittances, and philanthropy was about $801 
billion, more than five times official government aid.
    To provide more insight here, this includes $513 billion in 
private capital flows, $224 billion in remittances, and $64 
billion in private philanthropy. Private philanthropy alone 
accounts for 7 percent of total economic engagement with 
developing countries.
    Over the past decade, new forms of philanthropy are coming 
to light, such as impact investments and crowdfunding. These 
have led the private sector to take an increasingly large and 
visible role in global development. Collaborations between 
large-scale donors, governments, foundations, NGOs, businesses, 
social enterprises, and civil society organizations and others 
offer possibilities for improving billions of lives.
    Philanthropy plays a unique role. Both small and large 
gifts can actually help fuel scientific advances and serve as a 
catalyst for research in new areas of health, education, the 
environment, and other key sectors. Philanthropy can also fuel 
innovation and service delivery and in raising awareness around 
local and global health issues, including HIV/AIDS, malaria, 
education, as well as in new areas like female empowerment and 
the empowerment of young people.
    The Global Alliance for Vaccines and Immunisation, the 
GAVI, a global vaccine alliance, provides an example of 
innovation catalyzed by private philanthropy, with initial 
funding from the Bill & Melinda Gates in this case leading to 
an effective partnership model of vaccine development, 
production, and provision to developing countries. GAVI has 
helped approximately 580 million children in developing 
countries receive immunizations since its founding in 2000. 
Over 65 million children received immunizations with GAVI-
supported vaccines in 2015 alone.
    Among countless examples, private philanthropy has also led 
to an increase in agricultural productivity to transform the 
food systems in many developing nations, to help curb violence 
in places like Bangalore in India, to reduce meningitis and 
onchocerciasis as major health problems in sub-Saharan Africa 
and to respond quickly after disasters or even to prevent 
disasters, and finally to help expand access to quality 
education for children in remote areas who otherwise would not 
have access to education.
    In the U.S., government policy provides much freedom to 
allow and promote the growth of philanthropy and the 
development of a healthy nonprofit sector. The U.S. Government 
has also scaled up new forms of organizations and new ideas in 
response to social challenges both domestically and 
internationally. Globally, while some countries have witnessed 
an expansion of their nonprofit sector and growth in private 
philanthropy during recent years, there are also growing 
concerns about restrictive regulations on both domestic and 
cross-border philanthropy.
    The 2015 Index of Philanthropic Freedom report identified 
three major barriers to philanthropic freedom worldwide. These 
include: number one, foreign exchange regulations and capital 
controls which affect the ability to trade currencies and to 
move funds in and out of countries; second, overly broad 
application of illicit financial flows, IFF, legislation which 
has imposed onerous reporting requirements on civil society 
organizations that receive foreign funds; and third, existing 
and proposed laws in some countries designed to restrict the 
flow of foreign funds to human rights organizations and 
watchdog groups.
    The International Center for Nonprofit Law also identified 
four common challenges restricting the operation of 
international development nonprofits globally. These 
constraints include restrictive legal requirements for the 
registration and operation of nonprofit organizations, 
restrictions on foreign funding and affiliations, and overly 
broad counterterrorism laws and regulations constricting 
activities that further international development, as well as 
the lack of trust between governments and nonprofit 
organizations.
    The school's ongoing research finds that cross-border 
philanthropy is subject to stricter oversight in about 20 
countries where specific laws and regulations on foreign 
nonprofits have been passed or proposed since 2015. This 
increasing level of oversight towards foreign nonprofits has 
the potential to constrain philanthropic freedom globally and 
to greatly limit the ability of philanthropy to continue to 
fuel innovation and provide risk capital to address global 
challenges. More research is needed on global philanthropy and 
its role in international development and is crucial to 
creating awareness among leaders and policymakers about the 
critical role that philanthropy plays in promoting economic and 
social development around the world.
    Thank you for the opportunity to testify today. I would be 
happy and honored to respond to any questions you may have. 
Thank you.
    [The prepared statement of Dr. Osili follows:]

                  Prepared Statement of Dr. Una Osili
                  
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Senator Young. Thanks so much, Doctor.
    Mr. Runde.

  STATEMENT OF DANIEL F. RUNDE, WILLIAM A. SCHREYER CHAIR AND 
  DIRECTOR, PROJECT ON PROSPERITY AND DEVELOPMENT, CENTER FOR 
      STRATEGIC AND INTERNATIONAL STUDIES, WASHINGTON, DC

    Mr. Runde. Thank you. I am Daniel Runde. I hold the William 
A. Schreyer Chair and I am the Director of the Project on 
Prosperity and Development at the Center for Strategic and 
International Studies.
    Chairman Young, Ranking Member Merkley, distinguished 
members of the subcommittee, thank you for inviting me to 
testify before you today.
    I have had significant experience working with governments, 
the private sector, private philanthropy and observed closely 
the phenomenon of remittances in my roles at CSIS, the World 
Bank Group, and in the Bush administration at USAID.
    It is important to understand that financial resource flows 
from the United States to the developing world have radically 
changed since the 1960s when 70 percent of U.S. resources came 
from official foreign aid with 30 percent from various forms of 
private actors. Today less 10 percent of our economic 
engagement is from official foreign aid and 90 percent is from 
these other sources of economic engagement, including 
philanthropy, remittances, foreign direct investment, local 
capital market activities, and other economic activities.
    I have three main messages, though, for the subcommittee 
that I would like you to take away from my testimony.
    First, while remittances and private philanthropy suppress 
official U.S. foreign assistance, neither can supplant nor 
replace the specific roles and functions of American official 
development assistance. So we should leverage and partner with 
these additional forces. The growth of these private resources 
should not be an excuse for the U.S. to take the foot off the 
foreign assistance gas pedal. You cannot partner if you do not 
have some resources, some reach, and some expertise.
    That leads me to my second point. The wrong kind of merger 
or consolidation of USAID into the State Department endangers 
the ability of the U.S. to work in partnership with others. I 
used to run multisector partnerships in the Bush administration 
for AID. I built probably more partnerships than probably 
anybody in the U.S. Government in international development, 
and I speak from experience. The right kind of merger would 
elevate and empower the USAID Administrator as a Deputy 
Secretary of State and a Director of Foreign Assistance, who 
would coordinate and manage all foreign assistance spending 
that resides in over 15 government agencies. Just as we have a 
DNI for intelligence, we should have a DNI for our soft power.
    Finally, this is not your grandparents developing world. At 
least 50 countries are on their way to becoming developed 
countries. In the medium term, these countries will continue to 
require limited U.S. foreign assistance, but will shift towards 
a trade and cooperation relationship. Sadly, however, there are 
30 or 40 failed and failing states that are a source of 
America's biggest security problems, including terrorism, large 
migration flows, trafficking in persons, illegal drugs, gangs 
and pandemics. This second category of countries will require a 
steady mix of U.S. foreign assistance, security, and diplomacy.
    Do I think the current foreign assistance apparatus is 
arranged for these challenges? No. I would highlight Senator 
Young's proposed legislation for a national diplomacy and 
development strategy. A reorganization of resource allocation 
exercise should be done in conjunction with a broader strategic 
foreign policy and national security review.
    Do I think we could reduce the foreign aid budget in a 
gradual way by 10 or 15 percent via a top to bottom review of 
what we are doing? Yes, absolutely.
    Do I think the current the aid system needs big fixes? Yes, 
I do.
    Do I think the answer is folding USAID into State, 
downgrading the Administrator to a virtual Under Secretary, 
merger of all USAID regional bureaus into the regional bureaus 
at State, having USAID adopt State's generalist hiring Foreign 
Service hiring procedures, State's procurement procedures, and 
doing all this while absolutely doing nothing about the 15 
other agencies doing development? The answer is no.
    So let me spend some time on the first two points, on the 
points of philanthropy and remittances in this context.
    So on remittances, millions of individuals send funds via 
wire, mobile, and Internet connection to supplement income for 
the families, neighbors, and communities back home. Most 
remittances go to direct consumption of food, basic education, 
health, and housing. In 10 years' time, most remittances could 
be sent via mobile wallets in currencies that are based on the 
blockchain technology. At the end of the day, though, 
remittances hold many countries together through funding basic 
consumption needs, but on their own cannot transform a society.
    The other forces, philanthropy, overseas U.S. philanthropy 
can be categorized as corporate philanthropy, private and 
family foundations, religious giving, individual donations to 
NGOs and CSOs, and university scholarships.
    U.S. companies have a stake in the future of developing 
countries and are much more engaged than they used to be. 
Private and family foundations take long-term risks that the 
U.S. Government cannot, and they identify new and innovative 
ideas. Much of the great work in global health in the last 15 
years has come about because of a partnership between 
philanthropy and the U.S. Government.
    There is certainly religious giving. The U.S. Government 
works closely with these organizations.
    Most philanthropy comes from American individuals who give 
money to charities, to NGOs, and most development in the U.S. 
happens in partnerships with these groups who often implement 
U.S. Government or partially U.S. Government-funded projects.
    Finally, there is the area of scholarships provided by U.S. 
universities. One the best investments the U.S. can 
collectively make is to train the next generation of decision-
makers of developing countries.
    So in closing, you should consider three things. Do not 
reduce U.S. foreign aid on the premise that other financing, 
other private flows are going to fill the gap. That is an 
absolute mistake.
    Do bring all U.S. foreign assistance under an elevated 
USAID Administrator. So absolutely reorganize but do not do it 
in a stupid way.
    And then finally, do consider major reforms but carry out 
the right kind of reforms.
    So I want to leave you one last message. Neither 
remittances nor philanthropy can replace the role, the 
expertise, or other functions of official foreign assistance. 
Though imperfect and absolutely in need of thoughtful reform, 
American foreign assistance has been an important part of our 
ability to provide global leadership.
    Thank you.
    [The prepared statement of Mr. Runde follows:]

                 Prepared Statement of Daniel F. Runde

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Senator Young. Well, there you have it.
    [Laughter.]
    Senator Young. Thank you, Mr. Runde.
    Mr. Worthington.

    STATEMENT OF SAM WORTHINGTON, CHIEF EXECUTIVE OFFICER, 
                  INTERACTION, WASHINGTON, DC

    Mr. Worthington. Thank you, Chairman Young and Ranking 
Member Merkley.
    An elderly donor once told me that the most important thing 
that she had done in her life was to support programs that 
changed the lives of children living in some of the world's 
poorest places. She loved the fact that her money was matched 
by a USAID grant, and by responding to disaster overseas, she 
joined millions of Americans in giving a helping hand.
    InterAction is the largest alliance of U.S. NGOs. There are 
some 180 members. These are supported by millions of Americans 
like the one I have just mentioned. As the largest U.S. NGOs, 
they raise the vast majority of the $15.4 million in private 
funding that is committed to the NGO sector.
    For example, in 2013, InterAction's members pledged and 
then spent $1.8 billion in funding towards a global food 
security pledge to fight hunger, to build food security, and 
resilience. Members come from the faith community or a desire 
to advance human dignity.
    Assistance provided by the U.S. NGO sector promotes change 
at the grassroots level, a bottom-up change that builds and 
also improves on restructuring systems and institutions. 
Through private support, an ongoing presence, and ability to 
have relationships in these countries, we respond in a flexible 
and responsible manner.
    However, despite our capabilities, we need U.S. Government 
leadership. We all bring different types of capital to the 
table, some through investments, some through donations or 
large grants. Still others mitigate risk or bring in the 
private sector. All of these are needed. There is a positive 
symbiotic relationship here. Our privately funded programs are 
only able to build local capacity and solve local problems at 
scale when supported by U.S. Government leadership. If our 
country withdraws its leadership role, we would have to raise 
significantly larger amounts of private resources, which we 
think is an impossible scenario due to demographic giving 
trends. Without a U.S. Government framework and financial 
support for our efforts, U.S. NGOs cannot cover gaps and the 
systems to function in.
    I would now like to review several points on the U.S. 
Government's way to improve its partnership with private 
philanthropy represented by the NGOs in the context of a full, 
robust, and sustained support for international development 
assistance.
    The first point is about our relationship. U.S. NGOs 
occasionally act as a donor, for example, this pledge that I 
mentioned, this $1.8 billion pledge with the U.S. Government, 
and not solely an implementer of programs. However, USAID has 
no mechanism to recognize U.S. NGOs as donors and treats them 
differently than the private sector or foundations. Regulations 
state that unlike corporate funding, private NGO resources 
cannot be counted as a match. Currently USAID systems place 
NGOs as either a donor or implementer. You cannot be both. This 
illogical outcome is that the U.S. Government does not 
extensively leverage the private resources of U.S. NGOs.
    If USAID would like to leverage donations raised by 
nonprofits, it must seriously explore common objectives through 
grants and cooperative agreements based on partnerships as 
opposed to largely dictating the nature of programs as 
implementation through contracts. USAID should develop a 
mechanism explicitly set up to leverage the private resources 
of U.S. NGOs. This would enable USAID and NGOs to co-design 
programs, allow NGOs to spend resources contributed by AID, and 
require a match. Some form of revised global development 
alliance or global development mechanism would make sense, and 
USAID would have to tie resources to these new mechanisms.
    My second point is on de-banking. In recent years, 
international financial institutions have instituted stringent 
controls in response to understandable concerns regarding money 
laundering and illicit terrorist financing. However, banks are 
going beyond implementing controls and are implementing de-
risking measures that make it difficult for U.S. NGOs to 
transfer resources across borders even when we can vouch for 
the legitimate use of these resources.
    To address the concerns of de-banking and de-risking, bank 
examiner manuals and training should make evident that 
responsible NGOs should not be categorized as high risk.
    My final point is around our partner vetting system. It is 
a concept that has the unobjectionable goal of assuring that 
U.S. foreign dollars do not inadvertently fund terrorists. 
However, the implementation of this vetting system has been 
haphazard and imposes substantial security risks on NGOs. 
InterAction has recently released a report making 19 
suggestions on how to address some critical flaws, and some 
could be enacted by Congress, including in directing State and 
AID to examine critical and sensitive humanitarian democracy 
assistance from this program.
    Foreign assistance is much more than a gift from the U.S. 
Government. Combined with private philanthropy, it represents 
the American people choosing collectively to put our best face 
forward, an outstretched hand towards the world. Working 
together and when appropriate, we should deepen this U.S. 
Government-U.S. NGO partnership.
    And I thank you in closing remarks for your support to this 
response to the four famines that we are potentially facing 
around the globe.
    Thank you.
    [The prepared statement of Mr. Worthington follows:]

                 Prepared Statement of Sam Worthington

    Chairman Young, Ranking Member Merkley, and Members of the 
Committee, thank you for the opportunity to appear before you this 
morning to speak on the current state of global philanthropy, 
remittances, and international development. During a period in time 
when questions are being raised about the role of foreign assistance in 
U.S. policy, it is encouraging that the committee has created this 
opportunity to better understand the scale and scope of the American 
public's international priorities and generosity.
    For the past ten years, I have been fortunate to serve as CEO of 
InterAction, an alliance of over 180 member nongovernmental 
organizations (NGOs). Our members are headquartered across the nation 
and operate in every country that receives economic assistance from the 
United States. The organizations range in size from 4 employees to 
40,000 employees and are faith-based and secular. Prior to my work at 
InterAction, I was the CEO of Plan International USA, a member 
organization of InterAction focused on ending childhood poverty, for 13 
years. Plan was largely funded thanks to the generosity of American 
sponsors. My thoughts today draw on my experience with both 
organizations and through the multilateral dynamics of both leadership 
positions.
    InterAction's membership is as diverse as it is strong, and the 
views of our membership organizations are equally extensive. 
Consequently, my remarks today are informed by the experiences and 
lessons of InterAction's members, but they should not be taken to 
represent the specific view of any individual member organization.
    Of roughly $16 billion received by InterAction members, $5 billion 
is spent domestically, and $11 billion is spent overseas. This 
represents about 25% of the $43.9 billion spent on aid and remittances 
by private philanthropy according to the Hudson Institute Index of 
Global Philanthropy and Remittances.\1\ When private philanthropy is 
discussed, attention tends to be paid to large philanthropic 
foundations or their prominent sponsors. However, collectively, 
InterAction members represent the largest project capable group of 
entities delivering private development resources. Foundations are 
vital partners for NGOs but it is essential when assessing the state of 
private philanthropy overall to understand the significant role that 
millions of Americans play through their regular and frequent 
philanthropy via contributions to NGOs. InterAction represents the vast 
majority of the $15.4 billion committed to international development 
from private and voluntary organizations. These U.S. non-profits are 
commonly referred to non-governmental organizations or U.S. NGOs. The 
resources that we represent on behalf of American donors is the largest 
private amount able to deliver coordinated international development 
impact, more than any foundation or corporate actor.
    The philanthropy of the American public's implementation through 
U.S. NGOs, and its effectiveness, is highly reliant on the working 
partnership with the U.S. government. Therefore, in my testimony today, 
I would like to address I.) The Role of NGOs in International 
Development, II.) The Nature of NGOs' Partnership with the U.S. 
Government, III.) Obstacles to the Effectiveness of Partnerships, IV.) 
and Recommendations to Improve Effectiveness.
            i. the role of ngos in international development
    Many U.S. NGOs were founded to provide men, women and children 
living in impoverished conditions with a viable future, and to reduce 
the impact of conflict and mitigate suffering. They find their purpose 
from religious teachings or a desire to advance human dignity within 
the most marginalized people. Thanks to the compassion of the American 
people, we foster economic and social development, provide relief to 
those affected by disaster and war, assist refugees and internally 
displaced people, leverage innovations and facilitate partnerships with 
governments and corporations, and pursue other objectives related to 
the dignity and well-being of the world's vulnerable and poor 
populations. As citizen driven organizations, NGOs function as members 
of civil society both in the countries where they are headquartered and 
in the countries in which their resources are directed for 
international development and humanitarian aid program implementation. 
Relationships promoted by NGOs between countries operate as 
partnerships between these groups of civil society leaders. The 
assistance provided by U.S. NGOs therefore promote development at the 
grassroots level, providing bottom up change focused more on improving 
the conditions of individuals, even as they work to build, improve or 
restructure systems and institutions. Through the civil society 
engagement that is intrinsic to their programming, U.S. NGOs also 
promote local leadership in partner countries. This leads to greater 
societal ownership and sustainability in development programs. A higher 
level of country ownership and sustainability is more cost effective in 
the long term, ensures positive development trends will continue after 
a specific program ends, and aligns with U.S. government priorities for 
international development.\2\
    U.S. NGOs are able to maintain long term relationships with local 
actors in partner countries through the reliable generosity of millions 
of Americans via individual donations and other consistent private 
sources of funding or products, such as over $2.3 billion in gifts in 
kind received annually by InterAction members from corporations. These 
private sources include any spending that is not funded by a government 
or a multilateral institution. This includes programs funded by 
individual contributions, foundations or corporations.
    Private support provides many U.S. NGOs with a degree of 
institutional security, allowing for planning according to a longer 
time frame as opposed to relying on short-term partnerships for 
financing. The longer time frame allows for U.S. NGOs to pursue more 
complex and ambitious objectives and gives them the ability to 
cultivate relationships that lead to local ownership and 
sustainability.
    In addition to our long term development programs, U.S. NGOs are 
also the channel through which the American public responds to 
humanitarian crises. People in our country have a deep desire to help 
when others are suffering. This desire is particularly triggered during 
highly visible moments of crisis, such as a tsunami or other natural 
disaster, and the NGO community provides a framework and leadership to 
pledge support. Through our long established international presence and 
partnerships, we also offer means through which this assistance can 
effectively be provided alongside local implementers that are best 
positioned to operate immediately following a crisis. Recent notable 
pledges issued in immediate response to humanitarian crises, include 
among others:

      2004 Indian Ocean Earthquake and Tsunami--InterAction 
convened our members to contribute $1.775 billion alongside U.S. 
government and international support, totaling 41.9% of total private 
funds contributed in the United States towards relief from the 
disaster.\3\

      2010 Haiti Earthquake--InterAction members contributed 
$885 million of private raised resources, 94% of which was from 15 
organizations.\4\

      2016 Refugee and Humanitarian Assistance Pledge--
InterAction convened 32 of our members to commit $1.2 billion in 
private resources on global humanitarian and refugee assistance over 
the next three years.\5\

    None of these pledges would have been possible without aid 
commitment by the U.S. government. Our private supporters, established 
presence, and relationships around the world allows us to respond to 
crises in a flexible and fast manner. However, despite our 
capabilities, it would be impossible for us to maintain our programs 
over time or make a lasting impact in the wake of tragedy without the 
partnership of the U.S. government. Americans, who care about hunger or 
relief overseas, give more when they that know that a U.S. NGO is 
partnering with the U.S. government, foundations or corporations. They 
like the fact that resources are leveraged and often see government 
funding as adding credibility to an NGOs' programs.
     ii. the nature of ngos' partnerships with the u.s. government
    Like many non-profit American institutions, the U.S. NGO community 
is strongest when it cooperates with the U.S. government. A partnership 
between NGOs and the U.S. government can be broadly characterized as 
fitting under one of the three following scenarios; A) Partnerships 
operating with both private and public resources, B) Partnerships 
operating when it is impossible or difficult to raise private 
resources, C) Partnerships with NGO programs that operate and are 
resourced for a specific purpose.
A. Programs Operating With Both Private and Public Resources
    In the aftermath of the earthquake in Haiti, as I mentioned 
earlier, the U.S. NGO community pledged alongside the U.S. government 
to support those impacted and to help Haiti rebuild. With clear 
responsibility and accountability for the NGO sector through our 
pledge, we were able to address the impact of the disaster. We rebuilt 
houses, strengthened child survival systems, and saved lives. However, 
the earthquake's initial destruction was exacerbated by a cholera 
outbreak and larger institutional weaknesses in the country such as a 
lack of proper governance, weak and failing infrastructure, corruption, 
and other long-term development challenges. These challenges also made 
our initial response difficult. U.S. NGOs are not prepared nor do we 
have the resources to address these needs.
    The U.S. government's responsibilities began where our capabilities 
ended. Our partners in USAID and the U.S. Department of State provided 
a framework for our response, and the U.S. armed forces provided 
security for relief efforts. They allowed us to collaborate with local 
Haitian authorities on more systemic challenges highlighted by the 
earthquake. With two large rock crushing machines stuck in customs, 
Habitat for Humanity turned to the U.S. government for support. The 
housing program of Catholic Relief Services was able to scale to reach 
thousands thanks to USAID, and I watched the 82nd Airborne provide 
security as a massive CRS food distribution program fed thousands of 
people. And in partnership with USAID, Save the Children focused on 
rebuilding schools and proving safe places for children and 
International Medical Corps created anti-cholera centers. We were able 
to create bottom-up impact and identify how to help save individual 
lives, but our impact was only possible thanks to U.S. government 
leadership.
    These cases illustrate just one example of the impact of U.S. NGOs 
and the private philanthropy they represent. Other examples, include 
extensive work with the private sector, building value chains, support 
for health and agricultural systems, and a wide array of programs that 
help youth and children. Across these programs, we have learned that 
the work of U.S. NGOs is leveraged to reach more people when their 
mission is pursued in coordination and partnership with the U.S. 
government's programs. U.S. government assistance provides a framework 
that enables the work of NGOs, helps us coordinate and align resources, 
provides diplomatic support, and through additional resources increases 
our ability to reach and impact the lives of more people.
B. Partnerships Operating When It Is Impossible or Difficult To Raise 
        Private Resources
    Unlike natural disasters, after which American citizens are often 
extremely generous, it is much more difficult for NGOs to raise the 
sustained resources needed to address humanitarian crises in protracted 
conflict zones or other endemic challenges. These regions such as 
northern Syria, several nations in west Africa during the 2014 Ebola 
outbreak, South Sudan, and other parts of the world that surface in 
headlines for a variety of reasons can appear to the American public to 
be beyond the help of their direct contributions. In conflict zones, an 
individual's emotional motivation to act to help those who are 
suffering can be also allayed by concerns that one side or another of 
the conflict to ``blame'' for suffering in contrast to the aftermath of 
a natural disaster when those impacted are seen as victims. With no end 
in sight, protracted conflicts are seen as hopeless. Unfortunately, 
this means that we routinely do not have the private resources needed 
to help the people most affected by war, women and children.
    U.S. NGOs have the capability to respond to these crises, and we 
recognize their importance to U.S. national security, but we often 
cannot make a sustained, sizable impact unless the government also 
finances our response. There is a direct national interest for the U.S. 
government to support response to these crises and build partnerships 
with NGOs to address them. Reasons include preventing the growth of 
further instability or the spreading of conflict or disease that could 
eventually harm our country. Our established relationships and long 
record of working in countries, including in very fragile and difficult 
environments, provides greater insight into sustainable solutions than 
what our peers in the contracting industry may otherwise possess. 
Solutions from the U.S. NGO community are both more affordable and 
long-lasting.
C. Partnerships With NGO Programs That Operate and Are Resourced for a 
        Specific Purpose
    A significant portion of private resources that U.S. NGOs receive 
is dedicated towards a specific mission or cause. Many U.S. NGOs 
specialize at the organizational level or through a subset of their 
organization in these missions or causes. Most of the missions focus on 
addressing long-term development challenges with bottom up solutions; 
such as children's health, education, and hunger.
    In this scenario, U.S. NGOs operate in partnership with the U.S. 
government, both working together towards common objectives but not 
necessarily though the same work streams. The capability of U.S. NGOs 
is limited by the specific development objectives that they are being 
financed by private resources to achieve. In contrast to the example 
demonstrated by our work in Haiti, where we had open financing by our 
supporters to pursue the general mission of assisting Haiti, under this 
scenario what we can do is focused on a particular thematic topic and 
area of interest designated by a private donor. However, when we work 
in partnership with the U.S. government to achieve these objectives--
our work together can be amplified.
How NGO and U.S. Government Partnerships Are Carried Out
    Most U.S. NGO-U.S. government partnerships happen within specific 
programs. Child survival or education resources are matched or the NGO 
facilitates a tripartite partnership that includes the private sector. 
In many ways these multi-sectoral partnerships represent the future of 
development assistance. USAID has developed specific mechanism through 
the Global Development Lab and Global Development Alliance (GDA) to 
facilitate engagement with the private sector and U.S. NGOs often play 
a critical role in the shaping and implementation of these 
partnerships. Another example, are medication delivered through NGOs 
that specialize in gift in kind programs which complement PEFAR funded 
efforts.
    InterAction's participation in the Global Food Security and Global 
Nutrition Pledges on behalf of our member organizations demonstrates a 
model of how our member programs can operate successfully at scale 
towards a specific common purpose while remaining aligned and operating 
within a U.S. government framework. In 2013, InterAction's members 
pledged $1.5 billion in private funding towards the Global Food 
Security Pledge (ultimately spending over $1.8 billion in private 
resources), to fight hunger, and build food security and resilience. 
These resources significantly leveraged programs that are supported by 
the Global Food Security Act. Programs, implemented by World Vision, 
Catholic Relief, CARE, Lutheran World Relief, Heifer International, 
among other U.S. NGOs, funded local cooperatives and agricultural 
capacity. At times, this capacity was linked to private sector value 
chains and other large scale agriculture focused programs through Feed 
the Future. In 2014, InterAction pledged $750 million on behalf of 
members like Save the Children, Plan, ChildFund International, Helen 
Keller International, and others, towards the Global Nutrition Pledge, 
supporting projects such as promoting breast feeding, provision of 
micronutrients, and good nutritional practices overall. The U.S. 
government played a supportive role in shaping these pledges. In both 
cases, U.S. NGOs followed much larger commitments by the U.S. 
government through development assistance alongside the other G7 
nations. Through announcing a commitment of public resources and a 
leveraging of the U.S. government's international capacity in support 
of these two aims, food security and nutrition, NGOs are able to raise 
more money in private resources with an understanding that our programs 
would be able to build local capacity and solve local food security 
problems at scale under the U.S. government's leadership. For example, 
of the $400 million I helped raise from the American people, our most 
successful fundraising efforts were always ones that we could say were 
matched by USAID.
    Under the three previously discussed scenarios, the formal 
relationship between NGOs and the U.S. government function as either a 
contract, grant, or partnership cooperative agreement. All three of 
these arrangements ensure that the partnership is designed to deliver 
common objectives between the U.S. government and an implementing 
partner in order to leverage both of their potential.
    Under a contract, partners rely on the U.S. government to identify 
their objectives and the process in which they can pursue these 
objectives is often explicitly enumerated. Private resources play a 
limited role in contracts. In a relationship driven by a grant, the 
U.S. government identifies objectives that a partner should meet but 
the partners are empowered to pursue these objectives as they best see 
fit. In a cooperative agreement, a partner and the U.S. government have 
similar or identical objectives but a partner is able to leverage more 
private philanthropy resources in conjunction with any support they may 
receive through the U.S. government because private resources will 
often come with less restrictions than U.S. government support. In all 
three forms of relationship, U.S. government support or partnership can 
be catalytic in raising more private resources. U.S. NGOs typically 
favor grants and cooperative agreements because they have a greater say 
in the shaping of a program. The U.S. government's support of 
programming is a high-level endorsement of a partner because the public 
and other private donors trust the U.S. government's standards. U.S. 
government support will also often come with stringent reform and 
technical requirements for partners informed by the development 
expertise of USAID and other development agencies.
    The framework of U.S. leadership ensures that the NGO sector can be 
on the front lines of crisis and both ensure survival and advance human 
well-being. If our country's government withdrew from its leadership 
role, we would have to raise a significantly larger amount of private 
resources to maintain the same infrastructure that ensures our success. 
Raising more private resources is an unlikely scenario. Largely due to 
demographic trends, giving from the American public has stabilized and 
we will no longer see the significant increases that occurred between 
the 1990s and 2008. Without a U.S. government framework and financial 
support for our efforts, the charitable money raised by U.S. NGOs 
cannot cover any gaps caused by budget cuts.
          iii. obstacles to the effectiveness of partnerships
    Earlier in my statement, I described the nature of partnerships 
between private philanthropy, represented by U.S. NGOs, and the U.S. 
government including some of the difficulties that NGOs confront. I 
would like to now examine in more depth obstacles that limit the 
ability of NGOs to operate as independent actors or in partnership with 
the U.S. government towards international development. Of current 
interest to InterAction's membership include: A), Difficulty moving 
private resources internationally, B), Direct bureaucratic impediments 
in working with the U.S. government, and C), The limited scope and 
scale of NGO programming.
A. Difficulty Moving Private Resources Internationally
    In recent years, international financial institutions have 
instituted stringent controls in response to understandable concerns 
regarding money-laundering and illicit terrorist financing. However, 
these banks are going beyond implementing controls and are implementing 
``de-risking'' measures that are making it difficult for U.S. NGOs to 
conduct business.
    The nature of U.S. NGOs' work, collecting money in one country to 
assist those in another, requires transferring finances across borders 
between affiliates of the same organization or to implementing 
partners. In all of these cases we vouch for the legitimate use of the 
resources and routinely vet partners to ensure that they are not 
involved in any illicit activity. We operate in the neediest parts of 
the world and unfortunately, those are the countries that are most 
often associated with ``risk'' regarding anti-money laundering and 
combatting the financing of terror (AML/CFT). Even with no evidence of 
wrongdoing whatsoever, banks are choosing to refuse business or 
drastically slow the transfer of funds of U.S. NGOs operating in these 
parts of the world in a misguided response to these AML/CFT concerns. 
Confusing and incomplete guidance from the U.S. Department of Treasury 
and a fear of repercussions have driven these financial institutions to 
pursue these harmful measures, at times resulting in total ``de-
banking'' of U.S. NGOs, despite the NGOs following all financial and 
accounting practices that meet AML/CFT best practices.
    Banks efforts to ``de-risk'' themselves can lead to ``de-banking'' 
of NGOs, making it more difficult for NGOs to put the philanthropy of 
the American public to its intended purpose in deeply poor communities 
abroad. Steps taken by one bank can also trigger other banks to follow 
suit, making donors wary of contributing to an organization. According 
to a report by the Charity & Security Network, a significant proportion 
(2/3) of U.S. NGOs that conduct international work are experiencing 
these kind of obstacles in accessing financial services. At least a 
third of the organizations encountering these difficulties include 
organizations that the U.S. government has already vetted and 
financially supports to varying degrees.\6\
    If a humanitarian crisis occurs abroad and a U.S. NGO's ability to 
respond is slowed down improperly by a bank's ``de-risking'' measures, 
the delay could lead to the loss of lives. When a disaster strikes, 
every moment of our response matters. Delays can also occur when the 
U.S. government sees a legitimate risk of resources being diverted to 
terrorists. While no U.S. NGO will ever support the diversion of 
resources, we recognize that at times there is a tension between saving 
lives and anti-terror regulations. Getting the balance right is a 
delicate matter. This was vividly illustrated in 2011, when a famine 
struck in Somalia, and the delivery of desperately needed resources was 
delayed--exacerbating a crisis that ultimately took over a quarter 
million lives.\7\ Ultimately, only U.S. government resources saved 
lives as we did not receive the legal protections needed to use private 
resources in areas controlled by Al Shabab.
B. Direct Bureaucratic Impediments in Working With the U.S. Government
    USAID has no mechanism to recognize U.S. NGOs as donors in their 
own right and treats them differently than the private sector. While 
InterAction signed an MOU with USAID to align the private funds of 33 
U.S. NGOs with Feed the Future programs, there was no mechanism to 
implement this leveraging of private resources. At an operational 
level, USAID has been unable to move beyond seeing U.S. NGOs as 
implementing partners. Since U.S. NGOs routinely bid on projects and 
unlike foundations, they are often unable to put their private 
resources into a co-funding pool, it is easier for USAID to see NGOs as 
implementers of projects and not partners who bring their own resources 
to the table. In fact, GDA regulations state that unlike corporate 
funding, NGO private resources cannot be counted as a match. How can 
you both want to bid and implement U.S. government funded programs 
(like a contractor) and also have your own resources that you want to 
use (like a foundation)? Current USAID systems place you in one or the 
other camp. You cannot be both a donor and implementer of programs. 
There are ways around this challenge, such as a public-private 
partnership that involves USAID, a U.S. NGO and a U.S. corporation. The 
illogical outcome is that the U.S. government does not extensively 
leverage private NGO resources. There are exceptions, such as a large 
jointly funded effort with World Vision focused on education. USAID has 
developed mechanisms that circumvent this challenge but they are rare.
    Other bureaucratic impediments may be imposed directly by the U.S. 
government upon NGOs, making it more difficult to directly partner with 
the government, and in some particularly challenging contexts--actively 
driving NGOs away from partnering with the U.S. government.
    Perhaps the most illustrative example of this is partner vetting--a 
concept with the worthy and unobjectionable goal of assuring that U.S. 
foreign aid dollars does not inadvertently fund terrorists. However, 
the implementation of partner vetting has been haphazard, imposes 
substantial security risks and administrative burdens on NGOs that 
detract from programming, increases legal liabilities upon NGOs, and 
led directly to nine NGOs from accepting USAID funding in Afghanistan 
which required third party vetting.\8\ All U.S. NGOs are committed to 
vetting their partners and ensuring that they meet U.S. laws but we 
continue to object to vetting that is implemented in a manner that puts 
our staff at risk.
    As development and humanitarian NGOs, we will always be committed 
to delivering assistance and to working with the U.S. government where 
feasible. However, if the safety and security of our staff is 
jeopardized by U.S. regulations, we may not be presented with such a 
choice. If such bureaucratic hurdles keep mounting, then the 
efficiency, efficacy, and transparency of U.S. foreign assistance is 
eroded. And U.S. NGOs will limit when and where they partner with the 
U.S. government.
C. Even When we Bring our own Resources, we Count on the U.S. To Be 
        Present
    As previously discussed, the impact of the NGO community alone is 
scattered compared to what we are capable of in partnership with the 
U.S. government. By scale, our impact is in no way comparable with 
official development assistance (ODA) from the U.S. government. In 
2016, the most recent year for which the Hudson Institute Index of 
Philanthropy and Remittances has data; ODA from the United States 
totaled $43.9 billion while as mentioned earlier, the total amount of 
resources committed to international development from private and 
voluntary organizations totaled $15.4 billion (consisting of spending 
by InterAction members and other organizations).
    Another obstacle mentioned earlier is the difficulty that NGOs have 
raising sustaining private resources for war zones and other protracted 
crisis areas where aid is often needed most. Democracy and governance, 
health systems, and other complex programs also attract limited direct 
public support. In those instances, we rely heavily on the U.S. 
government to maintain consistent operation in these areas, limiting 
our independence and ability to best leverage our experience. 
InterAction represents the largest portion of private philanthropy that 
can be organized towards specific goals but we cannot operate if the 
U.S. government was to drastically cut its development and humanitarian 
assistance and surrender its leadership in shaping international 
development cooperation.
              iv. recommendations to improve effectiveness
    As I have established in my testimony, U.S. NGOs occupy a 
significant space in international development and humanitarian 
efforts, particularly due to our scale in channeling the private 
philanthropy of millions of members of the American public. We are most 
successful when we partner with the U.S. government, which enables us 
to leverage an even greater amount of private support and pursue 
sustainable solutions that empower our partners in countries that we 
assist. However, distinct steps should be taken by the U.S. government 
to ensure the private philanthropy that we represent achieves the best 
possible international development results.
    Regarding the nature of partnerships between NGOs and the U.S. 
government, the U.S. government has a trending bias towards working 
through contracts. USAID often prefers contracts due to perceived 
control of programming and the ease of dictating work instead of 
collaborating with partners. The distinction and selection criteria 
between contracts and cooperative agreements is set by the Federal 
Grant and Cooperative Agreement Act. USAID, over the years, has shifted 
away from the law by using contracts for work that should be 
implemented as a grant or cooperative agreement. USAID is using 
multimillion dollar contract awards (at times reaching over a billion 
dollars) to encompass global initiatives that should be cooperative 
agreements or grants. The size and breadth of these contracts is 
troubling given that development efforts are often very specific, based 
on country and cultural characteristics and smaller, tailored programs 
better serve these specialized needs. Contracts also operate within 
shorter time frames, not giving enough space to leverage relationships 
over time.
    The other two models that I described, grants and cooperative 
agreements contribute to more sustainable impact supporting both short 
and long-term goals. By their very nature, non-profits are invested in 
a country beyond a transactional relationship. These historic and 
established relationships ensure that development programs are best 
designed with local input and that humanitarian assistance is 
sustained. However, non-profits largely do not seek contract awards as 
such an agreement would designate the non-profit as an agent of the 
U.S. government. This designation may put non-profits at risk, 
especially in areas controlled by repressive regimes or conflict zones 
where U.S. agents are viewed as unfriendly.
    We must recognize that using grants and cooperative agreements is 
an efficient and effective way to use of taxpayer money. Portions of 
funds under contracts, implemented by contracting corporations, end up 
as profit instead of benefiting those in need. This, of course, in not 
the case for non-profits. Contracts do play an important role in U.S. 
foreign assistance (building a road or dictating specific program 
requirements) but grants and cooperative agreements, for which non-
profits compete, remain a good tool to utilize scarce government 
resources. If the government would like to best leverage philanthropy 
in international development, it must seriously explore collaboration 
with U.S. NGOs towards common objectives as opposed to largely 
dictating the nature of a program and implementation partnership. As 
donors, U.S. NGO can serve as an equal partner.
    USAID should develop a mechanism explicitly set up to leverage the 
private resources of U.S. NGOs. This mechanism should enable USAID and 
U.S. NGOs to co-design programs, allow the NGO to spend the resources 
contributed by USAID and could require a set match ratio (for example 
1:1). It would encourage U.S. NGOs with significant private resources 
but limited experience partnering with USAID to participate. One way 
that the U.S. government can work towards these forms of partnerships 
by creating more space for NGOs to operate in results based agreements 
with the U.S. government. The Global Development Alliance (GDA), an 
office of USAID that forges partnerships with the private sector, 
promotes innovative approaches to development challenges and does so at 
an affordable rate for the U.S. public. The mandate of the Global 
Development Alliance should be expanded to allow for NGOs to partner 
with the U.S. government in pursuit of strengthened and more equal 
partnerships. We propose a well-resourced GDA mechanism that counts NGO 
private funding as a match and that encourages USAID to leverage 
resources from both faith based and non-sectarian NGOs.
    Both grants and cooperative agreements have been used for this 
purpose in the past through the Private Voluntary Organization (PVO) 
program that functioned in the 1990s. In fact, USAID still vets U.S. 
NGOs, giving them PVO status and could leverage the private resourced 
vetted organizations. The program was canceled as USAID moved towards 
large bundled contracts. Our goal is to both increase the number of 
NGOs working with USAID and amount of private resources leveraged by 
the U.S. government. With support from Catholic Relief Services and 
World Vision, we recommended this idea at the beginning of the Obama 
administration but it was never implemented.
    To address concerns around ``de-banking'' and ``de-risking'', I 
would like to share recommendations from InterAction's peers at the 
Charity & Security Network. They recommend:

      bank examiner manuals and training be improved and 
clarified to make evident that NGOs should not automatically be 
categorized ``high risk'',

      a special banking channel be created to facilitate 
financial flows during humanitarian crises, and

      implementation of a real risk-based approach by financial 
institutions, which examines actual processes and standards of NGOs.

    When it comes to partner vetting, in December 2016, InterAction 
released a report which made 19 concrete suggestions to address 
critical flaws in existing vetting systems. Some can and should be 
enacted by Congress--such directing State and USAID to exempt critical 
and sensitive humanitarian and democracy assistance programs. Some 
recommendations are actually for the U.S. Department of State and USAID 
to implement existing Congressional directives--such as creating a 
single, coherent vetting system between the two agencies.
    Most importantly, we need to maintain U.S. government leadership in 
development cooperation. This is not just a matter of funding but also 
ensuring that any reform that our government may pursue is carried out 
in a responsible and educated manner. InterAction has actively pushed 
for effective U.S. foreign assistance and we recognize some 
redundancies. At the same time, many programs right now, doing 
important work saving lives and stabilizing areas in crisis, are 
reliant on ongoing processes and clear direction. The drawbacks if 
these programs are disrupted without cause or caution would outweigh 
whatever gains are achieved through hastened restructuring.
                             v. conclusion
    I wish to thank the committee for this opportunity to provide 
testimony. The millions of Americans who provide the members of 
InterAction with billions of dollars is a clear indication of the 
publics' support for international development and humanitarian aid. 
Americans who support U.S. NGOs come from different corners of our 
country and different faiths but they have all made it clear through 
their private philanthropy that effective foreign aid is aligned with 
their values. The U.S. NGO community has also enjoyed its greatest 
support by the public when our work has been matched by or aligned with 
the U.S. government's own. Foreign assistance is much more than a gift 
from the American government, through private philanthropy it is the 
American people choosing to collectively put our best face and an 
outstretched hand forward to the world. Where and when appropriate, we 
should deepen the U.S. government and NGO partnership.

------------------
Notes

    \1\ The Index of Global Philanthropy and Remittances 2016. Hudson 
Institute Center for Global Prosperity, 15 Feb. 2017. Web.
    \2\ https://www.usaid.gov/what-we-do/global-health/hiv-and-aids/
technical-areas/aid-investment.
    \3\ http://reliefweb.int/report/indonesia/south-asia-interaction-
tsunami-accountablity-report-relief-reconstruction.
    \4\ http://reliefweb.int/report/haiti/eu-us-aid-groups-pledge-
about-27-bln-haiti.
    \5\ https://www.interaction.org/newsroom/news-releases/ngo-
alliance-interaction-announces-12-billion-refugee-and-humanitarian.
    \6\ Eckert, Sue E., Kay Guinane, and Andrea Hall. Financial Access 
for U.S. Nonprofits. Charity & Security Network, Feb. 2017. Web.
    \7\ http://www.charityandsecurity.org/news/
US_law_hinders_aid_efforts_Somalia.
    \8\ Darter, Kimberly. Partner Vetting Independent Assessment: 
Insufficient Justification for a Global Rollout, Dec. 2017. Web.

    Senator Young. And thank you, Mr. Worthington.
    Ms. Araia.

  STATEMENT OF SEMHAR ARAIA, MANAGING DIRECTOR, DIASPORA AND 
     MULTICULTURAL PARTNERSHIPS, UNICEF USA, WASHINGTON, DC

    Ms. Araia. Mr. Chairman, Ranking Member Merkley, and 
members of the subcommittee, on behalf of nearly 1 million 
American supporters of UNICEF USA, thank you for the 
opportunity to highlight the United Nations Children's Fund and 
the significance of diaspora philanthropy in global 
development.
    The role of diasporas in philanthropy and global 
development cannot be overstated. It is a timely and growing 
phenomenon that is helping to address significant poverty 
challenges particularly in the Global South.
    UNICEF USA is an independent 501(c)(3) nonprofit 
organization that supports UNICEF's work through fundraising, 
advocacy, and education in the United States. We receive 
incredible backing from the American people and work with 
diverse partners such as corporations, foundations, faith-based 
communities, individuals, and affected communities.
    Since its creation in 1946, UNICEF has helped to save more 
children's lives than any humanitarian organization in the 
world. UNICEF staff work in 190 countries to help children 
survive and thrive from early childhood through adolescence. 
Thanks to the unique public-private partnership that UNICEF 
receives and support from the U.S. Government and the American 
people, we have seen the number of children dying before the 
age of five dropping more than half since 1990. We believe that 
it is possible to end preventable child deaths globally in a 
generation with continued investment and cost-effective, 
coordinated interventions for children and mothers.
    Given UNICEF's presence around the world and its wide range 
of programming, UNICEF USA has been fortunate to receive the 
support of diasporas for decades. The United States is home to 
at least 62 million members of the global diaspora, making it 
the largest diaspora population in the world. This includes 
Americans of all backgrounds, from first generation immigrants 
to the descendants of migrants.
    The diaspora experience is not new nor is it limited to a 
specific group of people. The term ``diaspora'' refers to 
people who are emigrants and their descendants who live outside 
the country of their birth or ancestry but maintain effective 
and material ties to their country of origin. The operative 
word within diasporas or the operative phrase is ``maintaining 
effective and material ties,'' and that is what we look for 
when we engage with diaspora communities.
    At UNICEF USA, we understand and value the critical role of 
diasporas and philanthropy. It exists for these communities on 
an ongoing basis. They are oftentimes the first responders, 
donors, and supporters for children and communities in need 
around the world.
    U.S.-based diasporas are having a direct impact on global 
development, and government organizations are beginning to 
recognize this, establishing policies and initiatives aimed at 
partnering with diasporas. For example, the U.S. Government has 
for years and continues to host the International Diaspora 
Engagement Alliance, the African Diaspora Marketplace, and the 
Global Diaspora Forum, all initiatives aimed at elevating the 
role of diasporas in development.
    For many diasporas, global development is also a personal 
reality. It directly affects their lives both here and abroad. 
As a result, they closely follow the needs of the communities 
they left behind. And this is especially true again for the 
diasporas from the Global South where systemic poverty persists 
and access to opportunity, capital, or growth may be limited.
    Whether it is natural or manmade disasters or systemic 
development challenges, diasporas are there responding with 
financial, humanitarian, and social support. As humanitarian 
crises have become more frequent, reoccurring and predictable, 
diasporas have had to become more responsive and prepared to 
provide philanthropic support during those sudden times of 
need. This includes fundraising campaigns, delivery of medical 
materials and supplies, emergency food assistance, humanitarian 
volunteering, and development initiatives.
    UNICEF USA believes in partnerships and works with 
diasporas for disaster response and long-term development. 
After the 2010 Haiti earthquake, the Haitian diaspora supported 
UNICEF USA and raised funds for UNICEF's post-earthquake 
recovery programming. This resulted in over $1 million from the 
diaspora community in addition to the total amount that was 
raised by all of UNICEF USA supporters.
    Similarly, when Typhoon Haiyan struck in the Philippines in 
2013, UNICEF USA worked with the Filipino diaspora to raise 
funds and mobilize emergency resources. Over $300,000 was 
donated in a matter of days from organizations that had readily 
been providing support as part of a larger $21 million UNICEF 
received. We are proud to see this kind of mobilization from 
communities that are connected.
    Another diaspora partnership which UNICEF USA continues to 
cultivate is with the Somali American community. The United 
States is home to one of the largest Somali diaspora 
populations in the world. These communities remain deeply 
connected and invested in supporting humanitarian and 
development initiatives inside Somalia. Of the $1.3 billion 
that is sent in annual remittances to Somalia every year, it is 
estimated that approximately $254 million comes from the Somali 
American community.
    When famine struck in Somalia in 2011, it was the 
remittances from Somali Americans that served as a major 
lifeline. UNICEF USA worked directly with the communities to 
raise awareness and support, and we continue to do so now with 
the current emergency affecting the country.
    In addition to Somalia, Yemen, Nigeria, and South Sudan are 
facing extreme crises where famine is looming. Not only is it 
already existing in parts of South Sudan but it is threatening 
the lives of 80 million across these four countries plus an 
additional eight. We are talking about a region and a swath 
from Nigeria to Yemen, and for Somalia, this projected number 
has increased by 50 percent in terms of the need since January.
    Within the humanitarian and development framework, 
remittances are a significant component of response. While 
UNICEF does not offer programming directly related to 
remittances, we do recognize this form of giving exists, most 
notably between households for basic necessities, and we expect 
that diaspora remittances will continue to respond.
    In its recent Global Philanthropy Report, the Hudson 
Institute found that diasporas in the United States send over 
$108 billion in remittances to 175 countries around the world. 
Given the sheer size and frequency of remittances, recipient 
countries such as Mexico, India, and the Philippines have 
adopted national policies designed to incentivize diaspora 
giving.
    UNICEF USA is proud to work with diaspora organizations, 
communities, and individuals, and we will continue to deepen 
our partnerships on behalf of children around the world. We 
believe all diaspora communities, whether first generation or 
multi-generational, are critical stakeholders for global 
development through philanthropy and partnership, and we look 
forward to working with them and others as we continue to stand 
up for children everywhere.
    We thank you for the opportunity to present our work, and 
we look forward to answering any questions you have.
    [The prepared statement of Ms. Araia follows:]

                   Prepared Statement of Semhar Araia

    Mr. Chairman and members of the Subcommittee, on behalf of nearly 
one million American supporters of UNICEF USA, thank you for the 
opportunity to highlight the United Nations Children's Fund (UNICEF) 
and the significance of diaspora philanthropy in global development.
    The role of diasporas in philanthropy and global development cannot 
be overstated. While the notion of diasporas is not new, their role in 
addressing global development is a timely and growing phenomenon that 
is helping to address significant poverty challenges, particularly in 
the Global South.
    Since its creation in 1946, UNICEF has helped to save more 
children's lives than any humanitarian organization in the world. 
UNICEF staff work on the ground in developing and transitional 
countries and territories to help children survive and thrive, from 
early childhood through adolescence. UNICEF supports prenatal care, 
child health and nutrition, clean water and sanitation, quality basic 
education for all boys and girls, and protecting children from 
violence, exploitation, and HIV/AIDS. We believe that it is possible to 
end preventable child deaths globally in a generation, with continued 
investment in cost-effective, coordinated interventions for children 
and mothers.
    UNICEF USA is a 501(c)3 non-profit organization that supports 
UNICEF's work through fundraising, advocacy and education in the United 
States. Together, we are working toward the day when no children die 
from preventable causes and every child has a safe and healthy 
childhood. UNICEF's funding comes from voluntary contributions from 
governments, businesses, foundations, and individuals. UNICEF USA 
receives incredible backing from the American people for our mission of 
child survival and development-from children participating in ``Trick 
or Treat for UNICEF'' and ``Kid Power,'' to major corporations donating 
money and products, and diasporas donating to support UNICEF's work in 
their ancestral homelands.
    The U.S. Government's longstanding and generous support for UNICEF 
also allows us to leverage private sector funding from corporations, 
foundations, and other donor governments and to work with U.S. 
Government programs to make a real difference in saving children's 
lives. Today, 29 percent of UNICEF's total funding comes from non-
governmental sources, including individuals, businesses, organizations 
and diaspora communities.
    This unique public-private philanthropic approach to our funding is 
critical to UNICEF's success in helping to save children's lives. For 
that reason, UNICEF makes sure its operations are efficient and focused 
on results where they matter--for vulnerable children around the world. 
90 per cent of UNICEF USA's funds directly support UNICEF's program 
activities.
    Thanks to this strong support for UNICEF and child survival, the 
number of children dying before age five has dropped by more than half 
since 1990, from an estimated 12.7 million deaths per year in 1990 to 
5.9 million currently.
               diaspora philanthropy in the united states
    The United States is home to at least 62 million members of the 
global diaspora, making it the largest diaspora population in the 
world.\1\ This demographic includes Americans of all backgrounds, from 
first-generation immigrants to the descendants of migrants who arrived 
over the past two hundred years.
    Given UNICEF's presence around the world and its wide range of 
programming, UNICEF USA has been fortunate to receive the support of 
diasporas for decades. We understand and value the critical role of 
diasporas in philanthropy, including disaster response, remittances, 
fundraising campaigns, community engagement, and development campaigns.
    We believe diaspora philanthropy and giving exists for these 
communities on an ongoing basis, in daily life, disaster response and 
long-term development. Whether it is with diaspora organizations 
fundraising for an emergency or a development goal, diaspora 
communities in the United States have proven to be consistent 
responders, donors and supporters for children and communities around 
the world.
    The diaspora experience is not new nor is it limited to a specific 
group of people.\2\ The term ``diaspora'' refers to people who are 
emigrants and their descendants, who live outside the country of their 
birth or ancestry, either on a temporary or permanent basis, but 
maintain affective and material ties to their countries of origin.\3\
    While it has existed for centuries, the role of United States based 
diasporas in global development is growing and having a direct impact 
on global development goals. Governments, organizations and even local 
municipalities recognize this and are partnering with diasporas for 
development. For instance, the U.S. Government has developed various 
policies and initiatives aimed at partnering with diasporas, including 
the International diaspora Engagement Alliance, the African Diaspora 
Marketplace competition, the Global Diaspora Forum, and the other 
public-private partnerships aimed at diaspora investment, 
entrepreneurship, humanitarian response and capacity building.
              diaspora philanthropy and global development
    For diasporas, global development is a personal reality. It 
directly affects their lives, both here and abroad. As a result, 
diasporas closely follow the needs of communities they left behind. 
This is especially true for diasporas from the Global South, where 
systemic poverty persists and access to opportunity, capital or growth 
may be limited.
    Whether it's natural or man-made disasters, or systemic development 
challenges, diasporas are often among the first responders. They 
provide financial, humanitarian, and social support to affected 
communities. As humanitarian crises have become more frequent, 
reoccurring and predictable, diasporas have also become more responsive 
and prepared to provide humanitarian and philanthropic support during 
those sudden times of need. These efforts include fundraising 
campaigns, delivery of medical materials and supplies, emergency food 
assistance, humanitarian volunteering, and development campaign 
initiatives.
    UNICEF USA believes in partnerships and works with diasporas for 
disaster response and long-term development. For example, after the 
2010 Haiti earthquake, Haitian-Americans mobilized to raise funds for 
UNICEF's post-earthquake recovery programming. UNICEF USA worked with 
communities and organizations with sizable Haitian-American membership, 
such as The Links, the Mass Emergency Relief for Haiti and the SEIU 
1199. Together, these diaspora efforts with UNICEF USA resulted in over 
$1 million being raised by diasporas for UNICEF Haiti's post-earthquake 
recovery programming. This is in addition to the total amount that was 
raised by all of our supporters.
    When Typhoon Haiyan struck the Philippines in 2013, UNICEF USA 
worked with the Filipino diaspora to raise funds and mobilize emergency 
resources. Within a matter of days, diaspora organizations, such as the 
Filipino Community in America and the Philippine Nurses Association of 
America helped to raise over $300,000 in funding for our emergency 
response, as part of the larger $21 million that was raised from 
individuals, communities and other donors.
    Another diaspora partnership UNICEF USA continues to cultivate is 
with the Somali-American community. The United States is home to one of 
the largest Somali diaspora populations in the world. These communities 
remain deeply connected and invested in supporting humanitarian and 
development efforts inside Somalia. Of the $1.3 billion dollars in 
diaspora remittances sent to Somalia every year, approximately $254 
million comes from the Somali-American community.\4\
    Just as we are seeing now, Somalia's devastating 2011 famine 
prompted diasporas around the world to respond to the crisis. When 
famine struck, it was the remittances from Somali-Americans that served 
as a major lifeline. UNICEF worked directly with Somali diaspora 
communities in the United States, raising awareness and support, to 
respond to the devastating famine.
    In development, diasporas provide post-conflict reconstruction 
support, through diaspora investments, entrepreneurship, knowledge 
transfer and capacity building. More recently, UNICEF Jamaica supported 
a special three-month effort by our corporate partner, Western Union, 
to raise funds in the diaspora for an initiative to boost school 
attendance in rural Western Jamaica. Together, these efforts all help 
to solidify diasporas as critical partners in global development and 
philanthropy.
                          diaspora remittances
    Within the humanitarian and development framework, remittances are 
one of the most recognizable forms of diaspora philanthropy but they 
are also the tip of the diaspora philanthropic iceberg. The diasporas' 
ability to leverage capital, networks, and resources exist far beyond 
remittances and governments, organizations and businesses should 
consider develop more frameworks for diaspora partnerships in 
philanthropy.
    For purposes of this topic, personal remittances are defined as 
transfers in cash or in kind made or received by resident households to 
or from nonresident households.\5\ They are most often sent to cover 
the costs for basic necessities, such as rent, clothing, and food, or 
for investments in human capital, such as education and small 
businesses.
    In its recent Global Philanthropy Report, the Hudson Institute 
found diasporas in the United States sent over $108 billion in 
remittances to 175 countries around the world.\6\ Given the sheer size 
and frequency of global remittances, recipient countries, such as 
Mexico, India and the Philippines, have adopted national policies 
designed to incentivize diaspora giving. Despite the growing efforts to 
maximize the impact of remittances, significant barriers still exist, 
including the lack of affordable, formal sending channels, limited 
reach and exorbitantly high transmission costs. While UNICEF does not 
offer programming directly related to diaspora remittances, the 
organization has launched partnership opportunities, campaigns and 
appeals aimed at diaspora giving for humanitarian and development needs 
of children around the world.
    UNICEF USA is proud to work with diasporas and we will continue to 
deepen our partnerships on behalf of children around the world. We 
believe all diaspora communities are critical stakeholders for global 
development, through philanthropy, investments, capacity building and 
exchange, and look forward to working with them and others as we 
continue to stand up for children everywhere.

------------------
Notes

    \1\ USAID (2016), USAID and Diaspora: Partners in Development. 
Washington, D.C.: USAID. Accessed April 28, 2017. https://
www.usaid.gov/sites/default/files/documents/15396/
usaid_diaspora16_web_spreadv3.pdf.
    \2\ Note from the author: The diaspora is a centuries-old, 
universal human experience, with the earliest recorded historical 
movements of Jewish, Arab, Asian and African populations, including the 
transatlantic slave trade where Africans were forcibly uprooted and 
migrated to the West. More recently, the 19th and early 20th century 
migration patterns to the United States included German, Polish, 
Italian, and Irish migrants, followed by successive post-colonization 
migration waves from Asia and Africa during the mid-20th century.
    \3\ International Organization for Migration (2013). Diasporas and 
Development: Bridging Societies and States, Diaspora Ministerial 
Conference, International Conference Centre Geneva (CICG), Geneva, 
Switzerland, June 18-19 2013. Geneva, Switzerland: International 
Organization for Migration.
    \4\ Keeping the Lifeline Open: Remittances and Markets in Somalia. 
Washington, D.C.: Oxfam International, 2013. Accessed April 28, 2017. 
https://www.oxfamamerica.org/static/media/files/somalia-remittance-
report-web.pdf.
    \5\ Migration and Remittances Factbook 2016, Third Edition. 
Washington, D.C.: World Bank, 2016. Accessed April 28, 2017. https://
openknowledge.worldbank.org/handle/10986/23743.
    \6\ The Index of Global Philanthropy and Remittances 2016. 
Washington, D.C.: Hudson Institute, 2016. Accessed April 28, 2017. 
https://www.hudson.org/research/13314-index-of-global-philanthropy-and-
remittances-2016.

    Senator Young. Thank you, Ms. Araia.
    I would like to begin this Q and A period by first 
anchoring our conversation in a clear understanding of the 
facts, many of which were laid out by Dr. Osili in her prepared 
remarks and also in her testimony here today.
    So, Dr. Osili, in summary fashion--I am going to ask you a 
few different questions here--maybe you could give me a minute 
response on each of them, if possible.
    First, can you briefly discuss the magnitude of private 
philanthropy and of all private financial flows to developing 
countries as compared to official development and assistance? I 
know Mr. Runde touched on this as well.
    Dr. Osili. Thank you, Chairman.
    Very quickly, the U.S. total engagement with the developing 
world is estimated at $365 billion. $33 billion, so 9 percent 
roughly, is official development assistance, and the rest of 
that 91 percent consists of private sector involvement, 
including private capital flows, remittances, and private 
philanthropy. Private philanthropy is estimated at about $44.5 
billion, with the largest of that coming from U.S. NGOs, and I 
would say the second largest would be U.S. corporations and 
then foundations at $4.5 billion. That is the total engagement 
with the developing world.
    Because we are also talking about American households, I 
will just give some anchoring statistics there. About under 10 
percent of U.S. households give to international organizations. 
The average contribution on an annual basis is about $100. That 
is from our philanthropy panel study. In international 
disasters, we see a much larger response. As an example, about 
a third of U.S. households gave to the Asian tsunami in 2004, 
and the average contributions there were about $100 on average.
    Senator Young. How does the United States compare to other 
OECD countries with respect to using a broader measure of 
development assistance as examined in the Index of Global 
Philanthropy and Remittances?
    Dr. Osili. Excellent question. As all of us perhaps know, 
when we look at overall official development assistance, just 
in sheer numbers, the U.S. leads. But as a share of our GDP, we 
are ranked much lower, 18th in the sample that is studied in 
the index. When the broader measure of total engagement is 
used, the U.S. moves from 18th to 8th. So we become one of the 
top engagers as a fraction of our GDP in terms of our total 
engagement. And in dollars, we are still at the very top.
    This broader measure of total engagement also improves the 
rankings of several other countries, not just the U.S. Germany 
certainly improves, the United Kingdom, and many other 
countries. So the measure of total engagement gives us a much 
more complete and comprehensive view of all of the ways that 
the U.S., both individuals, corporations, foundations, our 
private sector, as well as our government, are engaging with 
the developing world.
    Senator Young. What are the trends over time in private 
philanthropy for our international development assistance?
    Dr. Osili. Excellent question as well, Mr. Chairman.
    We have seen private philanthropy grow during this period. 
As an example, between 2000 and 2014, private sector 
contributions increased by about 88 percent. In this same 
context, official development assistance increased by about 50 
percent. So we are seeing private sector flows increasing much 
faster than official development assistance in the same time 
period.
    To anchor it, again looking at U.S. households, in 2000, we 
had about 1 percent of American households giving to 
international organizations. Today that is closer to 10 percent 
of U.S. households, 1 out of every 10 contributing to 
international affairs organizations. So much more engagement in 
terms of international philanthropy both with U.S. households, 
corporations, foundations, the private sector, as well as we 
can see, the community as a whole.
    Senator Young. Thank you.
    Mr. Runde, do you have anything to add to the numbers that 
were just laid out and some of the trend lines we have seen?
    Mr. Runde. Just that I do think it is important for us to 
understand the totality of our engagement. It is very 
important.
    I want to just emphasize that other financing is not going 
to replace the role of the U.S. Government.
    And I would also add that international development, 
countries that have developed because of good governance and 
because of a growing formal private sector. So these are very 
important flows, but ultimately it is a function of good 
governance and a growing formal private sector. If you look at 
South Korea, if you look at China, if you look at Costa Rica, 
if you look at Chile, you look at Poland, these are all 
countries--there were good policies and a formal private 
sector.
    I would also say the following, that these really important 
forces--and I have built many partnerships--are not going to be 
able to fill the gap on things like elections monitoring or 
democracy promotion. I know that something that you care a lot 
about is the issue of how we are going to deal with famines. 
Famines do not happen in dictatorships. Well, if we want to 
have multi-party democracies, that requires the National 
Endowment of Democracy institutions like the International 
Republican Institute and the National Democratic Institute. 
They have a very hard time--those institutions--raising money 
for private philanthropy and certainly not corporate 
philanthropy. There is no money for that.
    If the world is going the way I have described it as--and I 
submitted for the record a report looking at how the developing 
world is going. I call it Tail of Two Paths----

    [The material referred to above can be accessed at the 
following unit:]
    https://www.csis.org/analysis/tale-two-paths

----we have countries going towards wealth, towards 
development, and we have countries that are failed and failing 
states. I would argue that we are going to have to put a lot 
more of our official aid in these failed and failing states.
    So I think these are very important numbers.
    I would also argue, though, that I think luckily the 
international conversation is moving away from should we be 
spending 0.7 percent of our official development assistance, 
but they are interested in what kind of impact we are making 
and how effective we are. And so I think that is a good thing. 
So I do think this broader picture is helpful for that as well.
    Thank you.
    Senator Young. Thank you, Mr. Runde.
    For those tens of people who just tuned into C-SPAN 2 to 
watch this subcommittee hearing----
    [Laughter.]
    Senator Young. I do think it is important for me to 
emphasize as well something I said in my opening remarks, which 
is that official government assistance is going to continue to 
play an important role. I would add our contributions to 
multilateral institutions will continue to play an important 
role. We need to optimize those programs. I think to the extent 
we can leverage philanthropy, remittances, and even foreign 
direct investment in creative ways, we can help effect change 
in those areas leading to better outcomes to our diplomacy and 
development.
    Dr. Osili, moving on. U.S. private philanthropy to 
international causes you indicated has grown over time. That 
leads to a natural question. Why?
    Dr. Osili. Great question, once again, Mr. Chairman.
    This is something that our research has focused a lot on 
understanding the whys. There are several reasons for this 
increasing trend.
    The first is the improvement in technology and 
communication, allowing donors in every part of the country, in 
the U.S., today to send a donation to support a cause or even 
to engage in an issue they care about wherever it is, whether 
that is in Latin America, in sub-Saharan Africa, in Europe, et 
cetera. So our improvement in technology has allowed us to 
reach the far-flung corners of the globe. I think that is one.
    The second factor that is important is that we live 
increasingly global lives. People travel. They are exposed to 
individuals throughout the world. Many of our global companies 
are working in communities around the world. This also creates 
an environment where there is an interest in causes around the 
world.
    And third, I do not think we can rule out the role that 
some of our leaders have played in raising awareness around the 
global issues with Bill and Melinda Gates at the forefront of 
many health and education issues globally, as well as Warren 
Buffett. I would even add Mark Zuckerberg and his wife, 
Priscilla Chan, have really raised awareness around the need to 
invest but also to help improve lives in our back yard but also 
in communities around the world.
    So I think we have several factors that have aligned to 
create this interest in global philanthropy. And, of course, 
many of the products we consume today, the music we listen to, 
our lives are informed by a much more global culture than ever 
before.
    Senator Young. The next question will be addressed to all 
of you. We are getting down to brass tacks here. So what 
unnecessary or unwise obstacles exist to legitimate 
philanthropy and remittances related to international 
development? What, if any, specific steps do you believe we in 
Congress should take legislatively to address these obstacles? 
And we will begin with whomever would like to pipe up. Mr. 
Worthington?
    Mr. Worthington. Well, thank you for the question because 
ultimately the success of global development in this new 
approach where you have resources flowing from the private 
sector, from NGOs, individuals, corporations, grants--it is a 
much more complex environment. We need tools that allow us to 
leverage each other. Right now, there is a tendency for groups 
to operate within their lane. The U.S. Government is looking at 
its programs, NGOs looking at their programs. How these 
programs leverage each other so that you are not spending $10 
million in one place and $10 million in another but you have a 
broader program that is leveraging each other. This requires 
the ability to co-design programs between the private sector, 
NGOs, and others. There is a lot of work that has been started 
in this area, but we could go much, much further.
    The second is the U.S. Government has a whole series of 
rules. In many ways it is easier for the NGO sector to work 
with corporations and engage with foundations and private 
philanthropy. That enables us to be more flexible in so many 
ways. But we know that the main energy of global development is 
coming from the U.S. Government. There need to be mechanisms 
built around cooperative agreements and grants. There is a 
tendency of the U.S. Government to dictate what it wants and 
then deliver that and ask for a contract or contractor-like 
body to deliver it. That is important in certain circumstances. 
But if you are a World Vision or a Save the Children or CARE, 
you have your own programs. You are looking at some form of 
entity to partner with you in delivering those programs and 
bringing in a major corporation as well. That is the change of 
mindset that is needed to do this.
    Some of these are times where our members are involved in 
humanitarian disasters and so forth, and you know that to get 
U.S. Government resources, there is a series of vetting 
requirements that we believe are necessary but they are being 
placed on the back of the NGOs. We say U.S. Government, State 
Department, AID, do your own vetting. Make sure we are working 
with the right people. But do not put us in a situation where 
we are having to play that role for you because it harms the 
trust we have with local populations.
    So in many ways this shift of mindset is a shift of 
recognizing that we are simply one of many dollars leveraging 
each other and building the mechanism around doing that. A push 
from Congress to have resources that are focused on this type 
of leveraging would, in essence, have every U.S. dollar going 
into AID or other places multiplied many times over.
    Mr. Runde. I would like to make a point about grants and 
contracts. We wrote a report at CSIS that I want to submit for 
the record on the U.S. development ecosystem.

    [The material referred to above can be accessed at the 
following url:]
    https://csis-prod.s3.amazonaws.com/s3fs-public/
legacy_files/files/publication/
130304_Nesseth_DevCouncilReport_Web.pdf.

    We should think about our U.S. development ecosystem of 
for-profit contractors and nonprofits the way we think about 
our defense industrial base. We have a defense industrial base, 
and it is a strategic asset of the United States. And we have a 
development industrial base, which is a strategic asset of the 
United States. It is an important force multiplier of our 
engagement in the world. That may not necessarily be how the 
development community would think about it, but I think that is 
an easy way for us to get our brains why it is important and 
why we should think about it as something that is important.
    I do think in a world of middle income countries, I think 
the use of grants and cooperative agreements is much more 
likely because in a way we are going to be transitioning having 
an assistance relationship with middle income countries. But I 
think sadly in fragile and failed states, I think there is 
going to be increasing pressure by U.S. policymakers to have 
very specific outcomes in fragile and failed states. And I 
think you are going to see more contracts in that context.
    At the same time, I would make one other point. In an 
environment where there is potentially less foreign assistance 
money, there is going to be an additional incentive to find 
other partners to leverage money with.
    I will stop there.
    Senator Merkley [presiding]. Thank you all.
    So I am going to continue, and I may be asking some of the 
same questions that the chair asked since I missed his 
questions.
    But I want to start, Dr. Osili, with a question that comes 
out of your testimony where you note that illicit financial 
flow legislation creates significant challenges. And can you 
expand on that a little bit? And specifically, I imagine that 
the effort is to avoid or decrease corruption, which can be a 
devastating impact on development. But if that is not the 
reason, can you give us a sense of the point you are making?
    Dr. Osili. Thank you.
    I think the big question is how can we enhance or, I would 
say, optimize the flow of funds to developing countries without 
imposing overly broad restrictions on flows of funds to 
legitimate causes. So we have set up very stringent rules for 
good reasons often here in the U.S. and elsewhere to restrict 
the flow of funds to terrorism-related causes and other related 
causes. However, how can we prevent the overly broad 
application of these laws? And I think in some countries, it is 
extremely difficult for U.S.-based organizations to send 
transfers. And it is also very difficult for NGOs who are 
working on human rights, education, disaster relief to receive 
those funds from foreign-based sources.
    So I think this is looking at the legislation in such a way 
that we can keep the most stringent rules in place to prevent 
the bad actors but do not restrict these flows in cases where 
we can identify that they are flowing to legitimate 
organizations, causes, and to help support development 
objectives. So right now it is almost one-size-fits-all in 
terms of the policies that we have in place, and it would be, I 
think, optimal to look at these on a country-by-country basis 
and find out if there are ways to provide more ease and 
transparency in the application of these rules so that it is 
not a one-size-fits-all approach.
    Senator Merkley. Thank you.
    I know that Mercy Corps in its work in Turkey, for example, 
to fund support for 350,000 refugees in Syria--one of the 
things that the Turkish Government has challenged them on is 
whether they have receipts to document every transaction. They 
are doing a lot of purchases in markets where receipts are not 
part of the everyday function of life. Is that one of the 
examples of onerous reporting that you are referring to?
    Dr. Osili. Yes. And actually in our report--and I think 
that can be available for you to review--we looked at this on a 
country-by-country basis and flagged the countries where these 
reporting requirements are so burdensome that NGOs end up 
spending a lot of time on reporting requirements and, 
obviously, at some cost to the actual work that they need to do 
in disaster relief, education, human rights, and so forth.
    I know that my colleague here on the panel may also have 
some specific examples. The report actually outlines countries 
where this is an impediment or a constraint to the flow of 
funds for development activities.
    Senator Merkley. How much of that is U.S. requirements 
versus foreign government requirements?
    Dr. Osili. I think they have both. Certainly the foreign 
requirements are there, and many of those countries are 
pronounced in the report and called out. In the U.S., we also 
have some requirements that do impede flows to some countries 
for good reasons, and I think it is really thinking about where 
we can have exemptions around humanitarian relief and disaster 
relief and also for development objectives.
    Senator Merkley. Yes. Please go ahead, Mr. Worthington.
    Mr. Worthington. Just to build on this, it is an issue of 
risk. Banks are looking at transferring resources. They are 
transferring trillions of dollars around the world. They are 
taking resources from Mercy Corps or CARE. They are moving them 
from here in the U.S. to refugee camps around Syria or programs 
in complex environments. Each transfer has to be justified 
where it is going, what it is being used for. And this could be 
money coming from the State Department, AID, or private 
resources.
    When they look at the flow of these resources, there is a 
high risk associated with resources going to dangerous places, 
and there is a tendency then to put more regulation, more 
caution on the movement of these resources beyond the rules 
that exist in the Treasury Department because they fear finding 
themselves in an environment where inadvertently some resources 
are badly transferred.
    As a result, you had this sort of movement towards de-
risking where banks are pulling back from moving legitimate 
resources, including resources from the U.N., paying staff of 
U.S. embassies, other places where they fear there is a greater 
risk associated with this.
    We have come back with Treasury and the banking system and 
said these are legitimate institutions with deeply established 
systems. Can we create mechanisms to address these concerns? 
Because right now, with no wrongdoing and no problems found 
around us, we are being, in essence, de-risked out of this 
where some institutions are completely unable to transfer 
resources.
    What the diaspora community then does is moves it by cash 
legally across borders. And this, from security professionals, 
is the wrong way to move resources out of this country to help 
people. We need those resources to flow through the banking 
system but through legitimate organizations that are then able 
to deliver programs.
    Senator Merkley. So when you are talking about the diaspora 
community, you are talking about remittances.
    Mr. Worthington. Remittances would be an example, but even 
organizations beyond remittances that are looking to deliver 
programs. If you cannot bank from one place to the other, 
people will move the money through cash.
    Senator Merkley. So I am imaging when you are talking about 
this, you are talking about a bank that says we have to know 
more about the recipient before we are willing to make the 
transfer. Is that the main issue?
    Mr. Worthington. That is just normal business. They will 
come back. They need to know more about the recipient, check it 
against the terrorist list and so forth. That is just normal 
business. This is when they say actually a whole region--it is 
just too tricky to work with NGOs that are dealing with famine 
in Somalia in potentially al-Shabaab areas. We negotiate with 
Treasury and what access we have because we are, unfortunately, 
in the most dangerous places on earth.
    How we move resources to those areas, banks want to be 
assured that they are not going to be in a situation where they 
have said that they have somehow transferred resources at some 
degree of risk. So it is very difficult to get resources in. 
You mentioned Mercy Corps. They are moving 700 tons of wheat 
into northern Syria and programs in northern Syria. That has to 
be accounted for. This is U.S. Government money. The challenge 
is the banks do not like moving money in this way.
    Ms. Araia. And if I could just add to that. On this example 
of the cash that is sent from diasporas, we learned in 2011 at 
the height of that famine in Somalia, the Somali American 
communities that were sending money were overwhelmingly sending 
it through informal networks, and for those that were the 
banks, they found themselves under significant scrutiny.
    This is why we have a targeted focus on diaspora 
philanthropy at UNICEF USA so that we can help the diasporas 
continue to send the support that they are sending but through 
formal, transparent, and accountable mechanisms that we 
provide. What we are seeing now is another impending crisis in 
Somali and many other countries, Yemen and Nigeria and South 
Sudan and across a whole swath. And this means that more 
diasporas are going to want to send money, but because of their 
proclivity to send it through informal networks, it may not 
actually be able to reach those most in need.
    So for organizations that are on the ground that are 
operating, providing immediate assistance and long-term 
support, it is critical that we have more mechanisms where 
diasporas can send their financial support to organizations 
they trust. Our experience at UNICEF is that American diaspora 
communities are very familiar with the organization. There is a 
trust factor there. There is a familiarity with the programs.
    And at this particular time, we would hate to see another 
emergency growing the way that it is and the support that is 
ongoing to suddenly be stopped as it happened in 2011. Already 
Somalia's projected needs have shot up. We see a projected 
number of children who are or will be acutely malnourished, 
reaching 1.4 million this year, including 275,000 that will 
suffer life-threatening acute malnutrition.
    What we know also about severely malnourished children is 
they are nine times more likely to die than a healthy child. 
And so these communities that want to respond to that 
emergency, we need them to know that it is possible to send 
their funds through trusted networks, through transparent 
networks. And at UNICEF, we are actively working with 
organizations over the years, and so we are ringing the alarm 
particularly in those communities as well.
    Senator Merkley. Well, you mentioned informal networks. And 
we have heard that one of the informal strategies is to move 
cash with people who are traveling back. But are we also seeing 
a significant movement to things such as bitcoin?
    Ms. Araia. We have not had any experience doing bitcoin-
related work. But certainly the use of mobile has allowed for 
more transmissions of remittances. There is a platform such as 
IMPESA. There are other companies that are exploring the 
bitcoin experience. But overwhelmingly remittances are sent 
through informal channels. It is either through a courier or a 
person that is trusted or it is sent through the merchant 
service banks that have been operating and providing 
remittance-sending services for years.
    Senator Merkley. I want to turn to a different question. As 
I came in, I believe that, Mr. Worthington, you were talking 
about the vetting issue. I know this has been a big deal. I 
thought we did a provision in the appropriations bill, some 
guidance that I was involved in to try to protect the NGOs from 
this rule. Where do we stand right now?
    Mr. Worthington. First, thank you very much for this 
provision. I think that the Senate has been providing key 
guidance in this area.
    The first bit is that USAID and the State Department are 
finishing a pilot. We have found that that pilot was sort of 
haphazardly applied to certain places, some organizations, not 
others. And in looking at the organizations involved in those 
pilot countries, we came up with a series of recommendations.
    I think the core disagreement we have with USAID on this 
one is not around vetting. Vetting has to happen and there has 
to be appropriate vetting or partners. It is asking the NGOs to 
do the vetting because we are set up in a relationship where we 
need this trusted relationship with a local partner. We could 
point them to AID to get the information, the dynamics of that 
information into a vetting system. But the moment we are asked 
to provide that information, we are perceived as an extension 
of the U.S. Government, and as a result, staff could get 
potentially killed and so forth. In fact, a large number of 
major NGOs in Afghanistan stopped taking money from USAID 
because of the vetting requirement. So I think there is a 
philosophical issue and the feedback from the U.S. Government, 
AID is, one, this is of cost.
    Senator Merkley. So let us continue the conversation beyond 
this hearing as we have the coming appropriations period. I 
thought we had largely fended off the challenge or the problem, 
but it is sounding like we have more work to do in that regard.
    Senator Young [presiding]. Well, I gather that the 
conversation has continued. It has been very informative with 
respect to some of the barriers to philanthropic giving that 
furthers international development goals.
    I would only add, as we move on to other lines of 
questioning, that if you have specific legislative proposals 
that you would like to submit to this subcommittee, I would 
certainly welcome those. Submit those for the record after the 
hearing. That would be most helpful to us.
    Moving on, how can the United States Government more 
effectively partner with the private sector to promote 
international development? Mr. Runde, in your prepared remarks, 
you note that the U.S. Government has partnered with private 
sources of finance for many years, but you suggest we could do 
more. Could you expound on that, sir?
    Mr. Runde. Thank you.
    So I used to run and I helped grow USAID's Global 
Development Alliance Initiative. It is their initiative to work 
more closely with philanthropy and the private sector and other 
of these forces we have been talking about. It was started by 
Foreign Service officers and quickly adopted by then Secretary 
of State Colin Powell and then Administrator of USAID, Andrew 
Natsios.
    I recently wrote a report a couple of years ago--I 
submitted it for the record--looking at USAID's partnership 
opportunities. And I also co-directed a bipartisan commission 
looking at the role of private sector in development 2013 that 
I have also submitted for the record about this very important 
issue.
    In a world of less resources and a world where official 
assistance is a catalyst, then partnership should be a starting 
point for almost any problem-solving exercise by the U.S. 
Government. But we should not be doing partnerships for 
partnerships' sake. There are going to be some issues where we 
are going to have to go it alone. There are going to be few 
hands going up to work on improving tax system strengthening or 
rule of law training. There is certainly a role for the private 
sector or philanthropy in these sorts of issues, but they are 
really secondary roles.
    But for the U.S. to partner, it has to have some resources. 
It has to have some expertise. It has to have some reach. And 
so if we cut the foreign assistance budget willy-nilly or we 
break our ability to do development by doing a poorly thought 
out merger, we are not going to have the ability to work in 
partnership with others. And I speak from experience saying 
that. So I worry that reorg decisions and budget decisions will 
break our ability to partner.
    Also, though, our systems and people and a mindset of 
official assistance needs to move away not just in the U.S. 
system but also in the multilateral development banks--move 
away from a mindset that we are the largest wallet in the room 
and move to a mindset where we are the most catalytic wallet in 
the room.
    I will stop there.
    Senator Young. So in addition to budget decisions, are 
there other things that Congress can be doing to encourage 
these sorts of partnerships?
    Mr. Runde. Oh, I am so glad you raised that. Senator, thank 
you.
    I think one of----
    Senator Young. With the understanding that there is 
probably a fulsome explication of some of these ideas in what 
you----
    Mr. Runde. No, no. I actually was going in a different 
direction, sir.
    I would suggest I think it would be most important for the 
full Senate Foreign Relations Committee to hold a hearing on 
this proposed merger between AID and the State Department. I am 
very concerned. I think our ability to work with these other 
forces is going to be very negatively impacted by the rumored 
merger. I am very much in favor of reform. I am very much in 
favor of strengthening assistance. But I am concerned that this 
is a problem. I think there has been some very helpful language 
put in by the Senate asking questions. I do not know if Senator 
Graham put them in or not most recently I guess in the 
continuing resolution asking about reform and asking hard 
questions about this budget. So I think it is going to be very 
important that the Senate and the House play important roles.
    I do also think, when we think about foreign assistance, we 
think about----
    Senator Young. So if I could interject, your point is, if I 
could perhaps restate it, we are the authorizing committee for 
the State Department of the United States, for USAID. And as we 
contemplate perhaps the most revolutionary restructuring of 
both of those entities in generations, it is your opinion that 
we should hold full public hearings about these restructurings, 
the implications of any proposed restructurings, the rationale 
behind them, the resources needed, the objectives as we move 
into a new sort of global environment, the objectives of those 
entities, and all sorts of other related matters. Is that your 
opinion?
    Mr. Runde. Yes, sir.
    Senator Young. Okay. Thank you.
    Yes, Mr. Worthington.
    Mr. Worthington. Just to build on this, in many ways we 
focus on the budget, how much money there is to do these 
things. But from the perspective of the NGO sector, it is the 
framework and the skill set that we have through the U.S. 
Government, is having diplomats in a diplomatic lane creating 
space for us to operate in difficult environments where we 
could call on the State Department, is having experts within 
USAID who are able to both catalyze other resources or bring 
them together. It is these three sort of forces coming 
together. When we have the private sector coming in, the NGO 
sector coming in, and USAID, we get sort of a perfect 
tripartite relationship with types of programs that to me are 
the programs of the 21st century. They all need a diplomatic 
space to function, particularly in fragile and conflict 
environments.
    The more you pull USAID and the State Department together, 
the more you are blurring skill sets. And our fear is that a 
lot of the skill sets that have been developed by development 
professionals in USAID will be lost. And in many ways the goals 
become more short-term. You are trying to achieve a diplomatic 
goal in the 3/4-year period. Development is happening and 
having impacts over a 5, 10, 15-year period. If you shorten 
those goals and you say we want to impact--I remember an 
ambassador calling me on Pakistan--we want to impact 53 million 
people in Pakistan and doing it in 2 years so that they have a 
positive image. And my answer was it is a laudable goal, but 
add a zero to this. This is a long-term effort of trying to 
make human change and cannot be exactly commingled with the 
goals of the State Department. They can be aligned, but you 
need two separate functioning systems to make them work.
    Senator Young. Any other thoughts on what role Congress 
should play in facilitating, catalyzing these types of 
partnerships between private--that is nongovernmental 
entities--and State, USAID in furtherance of our development 
and diplomatic objectives?
    Mr. Worthington. So breaking this into two parts, the first 
is AID has tended to focus on public-private partnerships with 
the private sector, which makes sense because they are getting 
new resources in. They have not tended to focus on public-
private partnerships with the private and the NGO sector in 
pulling multiple actors in. There are actually more resources 
to do it that way. Some of these new mechanisms, the Global 
Development Alliance, the Global Development Lab, and so forth, 
exist but they are woefully under-resourced, and most resources 
go through traditional means.
    So if you move more resources--let us say we had far more 
leveraging and then we would encourage the calling of hearings 
to look at any consolidation between AID and State. Where are 
you dismantling capacity that already exists, and where are you 
actually getting rid of some redundancies that need to be taken 
care of?
    Senator Young. Are there instances in which State or 
USAID--probably in most cases USAID--should not partner with 
international NGOs, with NGOs more generally? And if your 
answer is those instances are very limited, I would envision a 
protocol of sorts where you would ask a series of questions. I 
have a military background. We would checklist almost 
everything. So before you decide to spend a dollar of taxpayer 
money, you ought to ask are there NGOs that we might consider. 
Do they have sufficient resources? Are their objectives aligned 
with our own? Do they have the capacity to actually implement 
the sorts of services? These may not be the right questions, 
but it gives you some sense of the protocols that might be 
institutionalized, if they are not already, in the departments. 
Maybe you could speak to this.
    Mr. Worthington. I mean, there are clear places were AID or 
State Department need work government to government. There are 
clear places--for me, it is sort of use the expertise of your 
lane. We talked with AFRICOM. There are places where you are 
looking at the role that AFRICOM is playing in training of 
police and so forth. We need the security lanes to be 
functioning to be able to operate. So we full recognize these 
different roles that the U.S. Government can play, and we need 
a coordination of some of the diplomatic norms to allow us to 
function.
    Many countries are restricting the ability of U.S. NGOs to 
actually have a footprint in countries. We are being squeezed 
out because it is easier for them to say let us run the 
resources through us. As the government, we will manage our own 
resources. Our point often is there is a population that is 
underserved or you are part of the problem in a conflict 
environment, and we have direct access.
    So I think it really does come to this question of doing an 
assessment. And I go to my friend Dan Runde's comments. It is 
about the leveraging of multiple resources from multiple 
places. And AID tends to look at things as if they have the 
most dollars in the room instead of stepping back saying who 
else is investing in this. Where are those resources coming 
from, and how can we bring those resources together to achieve 
a common aim that is bigger than if we designed our own program 
to do something? And that is a significant mindset shift.
    Senator Young. Thank you.
    Senator Merkley?
    Senator Merkley. Well, continuing to explore this question 
of how we can restructure State and AID in the proposal to 
merge it, Director Runde, I believe the current language in the 
law is that AID will be set up as an entity, which I am told 
means that essentially the administration could act without 
congressional action because of the lack of crispness in 
defining what an entity is, and it could be a subsection of 
State. But I think the general point that I am hearing, and I 
think I heard this from you, Mr. Worthington, if I understand 
your point, is that creating a short-term diplomatic objective 
behind USAID is different than an international economic 
development motivation behind international aid, and that that 
is where the primary concern comes from.
    As you all were presenting on this, I was thinking about a 
trip I took to look at aid projects in Africa a year and a half 
ago, and we saw China building prestige projects. In Ethiopia, 
they had built the headquarters for the Pan African Union or 
something of that nature.
    Dr. Osili. African Union.
    Senator Merkley. African Union. And I believe in Gabon it 
was a big soccer stadium.
    Mr. Runde. And everybody knows the Chinese did it. Right? 
They all know. All the taxi drivers will point to it and say 
the Chinese did it.
    Senator Merkley. That is right. I think in Senegal it was a 
big road that had been built through the middle of Dakar.
    And one of the things that we were looking at, we were 
looking at our aid projects that were helping a little bit of 
micro-enterprise over here to empower women, maternity care 
over here, addressing drought or starvation over here. And the 
question was there has always been some diplomatic element to 
our international aid, but it was just kind of a recognition 
that most of the things we do do not embed a recognition that 
the United States is behind this. And I just thought some other 
foreign powers are increasing their foreign presence and their 
leverage. If any insights on this general point.
    Mr. Runde. If I may, this is not your grandparents' 
developing world. It is richer, freer. Developing countries 
have more options. They do not have to work with the United 
States. They can take their business down the street to China. 
And so we can cut the budget. We can pull back, but these 
societies are in the process of looking for partners. And so if 
we are not going to be there for them, they are going to take 
their business to China.
    I was in China last week. I met with the chair of the China 
Ex-Im Bank, which is the largest financier. It is far larger 
than the World Bank now at this point. Some of the largest 
infrastructure projects in Africa.
    We can choose. Leadership is a choice. One form of our 
leadership is our soft power. It is a very important part of 
our power whether we are confronting radical extremist 
terrorists or confronting pandemics, but there is a competition 
out there of competing narratives. And so we can choose. We can 
step back, but that does not mean these countries are helpless. 
They have other options.
    I want to make two other points to your point, Senator 
Merkley.
    One is that there are two cultures. There is--sorry-- three 
professions. There is a military profession that is recognized. 
There is a diplomacy profession that is recognized, and then 
somewhat reluctantly less so, there is a development 
profession. There are schools of international development. 
There are people who focus on international development 
economics. But I think there has been some reluctance in the 
U.S. foreign policy system to fully recognize that.
    We need to recognize if we are going to do some sort of 
reorganization, understand one of the principles is that 
development is a full-on profession, and these sorts of things 
have a longer timeline. The Green Revolution took 20 years. The 
sort of bending of the curve that you are seeing on HIV/AIDS 
and malaria, that has been a 15-year project. The bending of 
the curve in Plan Colombia, beating the bad guys in Colombia, 
that took 15 years. That was development. That was diplomacy, 
and that was the military all working together. That is a 15-
year project. That is not a 3-year project.
    So we have to think differently about how we align our 
human resources, how we contract our work, and that is 
different than a diplomacy timeline. Diplomacy timelines are in 
weeks or in months.
    So finally, I would add one other thing, which is if we are 
going to reorganize, we should certainly make the AID 
Administrator explicitly a Deputy Secretary. On the books, the 
person is a Deputy Secretary, but oftentimes the State 
Department will not recognize that it is a Deputy Secretary. 
Why? Because Under Secretaries and Assistant Secretaries of the 
State Department want to lead delegations, and if they 
recognize that the AID Administrator is a Deputy Secretary 
equivalent, they do not get to lead the delegations. It sounds 
like a silly diplomatic thing to me, but I think that is truly 
what is going on.
    Second, we have 15 government agencies doing different 
forms of development. That is crazy. President Kennedy, when he 
put together the Foreign Assistance Act in 1961, said we have 
too many agencies doing development work. There were four 
agencies then. We now have 15. This is nuts.
    Senator Merkley. So I want to have that be a point that 
sits with us because in your original testimony, you said one 
thing we should do is bring all the foreign aid under a single 
administrator. You are talking about the economic development 
aid, I assuming not the military aid and so forth.
    Mr. Runde. Yes, sir. I am talking about things that the 
Department of Agriculture does, the Department of Labor does. 
There are a series of specialized agencies some of which do 
very important work. I was appalled to see that they were going 
to zero out OPIC and the Trade Development Agency. The Trade 
Development Agency is an agency tailor-made for the Trump 
administration. All the money stays in the United States. It is 
about construction and building, buy American, hire American. 
This is a great agency and it leverages money at 87 times what 
we put in. And it is all sorts of industries that would be very 
appealing to many people in the United States outside of the 
beltway.
    Senator Merkley. I think you are referring to an item in 
the skinny budget, and that is just a starting point for 
discussion.
    [Laughter.]
    Mr. Runde. We are relying on the legislative branch to 
deliberate.
    Senator Merkley. Well, we appreciate your making your 
points. I really want to follow up. I will have something 
interest in this question of how we consolidate our foreign aid 
administration. And I realize that the world of agriculture has 
their own stake in this and so on and so forth, but surely 15 
is too many. But let us have further discussion on that. Thank 
you.
    Senator Young. Thank you, Senator.
    I want to turn to what the United States might learn from 
the private sector with respect to innovation in international 
development, including evidence-based outcomes and outcome-
based approaches. Anyone can answer this.
    Ms. Araia. I think I can take that question and also circle 
back with Senator Merkley's question about our footprint.
    In terms of innovation, I think diaspora philanthropy, 
diasporas and development is an innovative space.
    And to the point about U.S. foreign assistance or U.S. 
engagement on this question, the work of the Global Lab--there 
is a commitment to frontier partnerships, which includes 
diaspora partnerships, as well as financial inclusion. That is 
exploring how we can advance development objectives globally 
through more innovative, inclusive, and diverse ways.
    Examples include--I worked on a project before joining 
UNICEF where USAID was looking at Bangladeshi American 
communities and their contributions to Bangladesh, as American 
taxpayers, what would they be willing to do. And in this study, 
we saw that, one, there are already many NGOs that are either 
diaspora-led or with significant Bangladeshi American size that 
are providing direct programming and operations and activities.
    But, two, there is also a space of innovation where as 
Americans we are actually contributing to the brand of the 
United States, as well as a global leader, through innovations. 
You know, YouTube--one of the three founders is a Bangladeshi 
American. And the significance of that in terms of a footprint 
for a country like Bangladesh is huge. And so in my time in 
Dacca, people were speaking at length about what Bangladeshis 
in the United States have done and are doing.
    The same can be said for countries throughout Africa where 
Africa is the fastest growing population in the world. We are 
looking at a population doubling to 2.1 billion by 2040. And 
that also means that Africans abroad are not only sending 
remittances but they are looking at how they can alleviate that 
massive growth, that massive impending growth.
    So with China, the examples you have included are 
significant. But what is also very significant about China's 
role is that China sends its laborers to do these projects. 
That footprint is the face.
    So with diasporas and development what entities like USAID, 
what UNICEF USA is doing--we are looking at how do we export 
the diaspora contribution and highlight it as an American 
contribution. This includes hiring practices, diversity in 
development. It includes expats of significant origin. I spent 
10 years working abroad as an Eritrean American, and that had 
significant reach as an American, as a person of Eritrea 
origin. It really opened the doors set a footprint.
    The last thing I will say is in terms of innovation is 
philanthropy is about foreign aid. It is about the cash and the 
dollars that are being spent. But philanthropy, especially for 
diasporas--it is their time, talent, and treasure. This means 
volunteering. This means the face of America. This means 
embracing it and putting it out there as something to be proud 
of.
    So with UNICEF, what we are seeing is that many of the 
countries we work in, not only are the staff of our country 
offices predominantly nationally led, but also we see the 
contributions coming from the United States in an unprecedented 
way, and there is a significant chunk of innovation that we are 
exploring of how to export and strengthen the influence and the 
impact that diasporas are having.
    I would encourage the subcommittee to look at USAID's work 
with diasporas. There is also the Global Partnership's office 
in the State Department which are exploring the innovation of 
how the contributions are being made.
    Senator Young. On the issue of innovation, Mr. Worthington.
    Mr. Worthington. USAID has started to move into this space 
with the Global Development Lab that they have created to start 
innovation. I will use sort of an extreme example of innovation 
with the U.S. Government. I was, about a year ago, in the Gaza 
Strip visiting a program called Gaza Geeks, which was a 
partnership between Google and Mercy Corps identifying parts of 
the population in Gaza that wanted to focus around innovation 
and social services within the broader community. They were 
probably the most moderate group that existed in the place.
    Part of innovation with private resources is the 
willingness to fail, the willingness to set up a lab that tries 
something that does not work, that measures it, that then comes 
back and so forth. Most of the major NGOs have set up these 
labs that are focusing on what is and is not working, and most 
of these innovations are in partnership with major U.S. 
corporations. So it is creating a different mechanism, not just 
delivering a service, but testing different ways of delivering 
that service.
    The Global Development Lab has created a whole slew of 
innovations coming out there. I think the challenge they have 
is to then take those innovations and bring them to scale. 
There is no shortage of small-scale innovations in the 
development space. What is missing is the willingness of the 
U.S. Government to then say, okay, these innovations seem to be 
working. Let us drop these other things. Let us move on these 
and move them to scale, and you will then achieve things that 
you cannot at this point.
    Dr. Osili. I think one other area--I am glad you brought up 
testing because that is one place where I think private 
philanthropy can really help accelerate development.
    So just to put this in a broader framework, when we think 
about philanthropy, we are thinking about private action for 
the public good. That includes time, talent, and treasure.
    But one new area that I think philanthropy has provided a 
whole new way of doing business in development is around 
measurement and evaluation with introduction of RCT trials from 
everything ranging from mosquito bed nets to deworming 
medicine. We have countless examples to date of what works and 
what does not work on a small scale certainly but then 
increasingly on larger scale.
    I think we have examples today of things that work. And the 
challenge is how do we bring that research, that body of work 
together in a cohesive way. As a researcher, I think there is a 
need for much of, I would say, almost an effort to bring 
together these best examples, whether it is in health, in 
education, disaster relief, so that practitioners across the 
sector can learn from them.
    Senator Young. So, Dr. Osili, we just passed some 
legislation that I introduced related to--we call it a What 
Works Clearinghouse in the area of our own domestic poverty 
challenges and other social pathologies. And it is designed to 
do exactly that and serve as a collection bin or repository for 
best practices, and others can tap into it. Would something 
like be helpful to your mind?
    Dr. Osili. Absolutely. There are examples of those types of 
initiatives in the development space already where you can 
click on an organization and see to what extent they have 
evidence-based practices, what works, what does not work. And I 
think the next stage is how to broadly disseminate this work, 
and I think there our development agencies can be good 
partners.
    I guess one other point that I would mention around Senator 
Merkley's bigger point about China is that what we see also--
another point that I should mention is how local 
philanthropists can partner with USAID and other big donors. 
And an example there would be in agriculture where we saw the 
Gates Foundation take the lead with AGRA and USAID, but 
increasingly that program is being funded by African 
philanthropists and local donors. So the other big question is 
in terms of partnerships, how do we start to build 
sustainability down the road with some programs.
    Mr. Runde. Senator, I think learning and solutions cross 
borders, and I think there is an opportunity for the sort of 
clearinghouse that you suggested that we do here in the United 
States or that you have enacted. There is a lot of learning 
across borders. There is a lot of things around micro-finance 
or the sorts of work that has been done on demobilizing 
soldiers that may have some applicability in this country as 
well. So the learning goes both ways. So I really appreciate 
your leadership on that, and I think that is something that 
could also be looked at in the international development sphere 
as well.
    If I could make a couple other points about innovation, if 
I might, sir. The issue of innovation--I do think the Global 
Development Lab has been very important. One of the most 
important roles for private foundations, private and family 
foundations--we need to remember that if you look at Dr. 
Osili's data, about $4 billion a year is spent on international 
development activity by organizations like the Gates Foundation 
and about $30 billion is spent by official development 
assistance.
    But what is special about private and family foundations is 
that they are willing to take bigger risks that other 
organizations like governments sometimes are not able to take. 
And they also have the ability to take a longer view. They can 
focus on a problem for 10 or 20 years. That is why we have the 
Green Revolution which saved hundreds of millions of people in 
South Asia in the 1960s. It is because the Ford Foundation, in 
partnership with USAID, spent 20 years working on increased 
agricultural productivity.
    Senator Young. Before I turn it over to Senator Merkley, 
for everyone's edification, the Global Development Lab, 
according to USAID's website, serves as an innovation hub 
taking smart risks to test new ideas and partner with the 
agency and other actors to harness the power of innovative 
tools and approaches that accelerate development impact. So we 
can perhaps talk more about that in a moment.
    Senator Merkley. So I wanted to go back to the issue 
related to the partner vetting system. The language that we had 
asked to be included--and I thought it was included, but I am 
trying to have that checked right now--was that in establishing 
a system, the committee requires the preservation of important 
and sensitive relationships with grantees and contractors.
    Now, the partner vetting system--was that the effort to get 
the nonprofits to do the vetting, or was that the effort for 
the State Department to have a system that bypassed the 
nonprofits?
    Mr. Worthington. So this is one system, and the question is 
who is implementing that system. So the general frame of having 
the State Department and AID ideally have a common system that 
assesses who and where resources are spent and whether those 
individuals are vetted----
    Senator Merkley. So let me put the question differently 
then. Under the PVS pilot, is it the nonprofits that are being 
required to do this or is the State Department or USAID doing 
it directly?
    Mr. Worthington. So in the PVS pilot, AID chose not to do 
direct vetting themselves. They chose to have the vetting be 
done through nonprofits, and that has been our main complaint 
of the pilot. We have asked them to test in certain 
environments what we call direct vetting where they set up a 
portal. We have a partner go to that portal, enter the data, 
have that data reviewed by the U.S. Government against the 
terror list and so forth. That mechanism can and should be 
tested.
    At this point in time, they deemed that it is better to 
simply use the system and have nonprofits themselves do this. 
And as a result, a number of nonprofits have chosen not to work 
with the U.S. Government. So we end up with a sort of not 
complete pilot.
    Senator Merkley. I noticed the additional paragraph that we 
had proposed, again, that I thought had been included, but as I 
mentioned, we are checking on that, was that the USAID and 
Department of State shall make a direct vetting option 
available in the five pilot countries and in Afghanistan. And 
it makes reference to the risk to organizations and individuals 
who may be targeted for retaliation if they had to do the 
targeting themselves.
    So this has been a topic of conversation I guess in the 
Appropriations Committee, and I will want to continue to raise 
this issue and work with you all based on what we have learned 
since the last time we had this conversation a year ago to see 
if we need to do additional work on that.
    Mr. Worthington. Thank you, Senator.
    Senator Merkley. Dr. Osili, in your testimony, I think if I 
have the numbers right, $16 billion was from American citizens 
to international organizations----
    Dr. Osili. Yes.
    Senator Merkley.--out of a total from U.S. citizens of $373 
billion. So somewhere below 5 percent, or $1 out of $20 to 
international organizations.
    But then you mentioned that this was the fastest growing 
category. And I thought there are many reasons that it might be 
growing quickly. So I just ask you. One is more expatriates 
sending money back through international aid organizations. 
Another might be a response to international events where there 
is a lot of troubled terrain around the world and a lot of 
reason for just general citizens to be sending funds to assist 
in this part of the world or that part of the world.
    But what is driving the increase in donations to 
international organizations if there is a little picture we can 
paint of how American citizens are responding?
    Dr. Osili. Let me clarify. In terms of the $16 billion, 
this is what U.S. households are sending to international 
organizations based here in the U.S. So that would not include 
transfers to organizations outside the U.S. or family transfers 
and so forth.
    In terms of what is explaining the growth in the 
international affairs subsector, that is compared to, say, 
giving to religious organizations, giving to education, giving 
to health. So that is the benchmark. It is the fastest growing 
in that charitable nonprofit sector space.
    In terms of understanding what is driving this, you are 
actually right on. Your answers are very close to what we have 
seen in the research.
    Number one, increased communication and technology which 
allow people to, one, learn about causes around the world, 
whether that is a natural disaster or humanitarian crisis. In 
any part of the globe, Americans can learn about them, can 
investigate, and do their research, and can from the comfort of 
their own homes, click on a mouse or from their mobile phones 
make a donation. These kinds of possibilities simply were not 
available 10 years ago, 20 years ago, the ease of being able to 
give. So that you would think about is more on the household 
side of things.
    The second factor is one that you alluded to, the ties that 
we all have that are increasingly global, whether those are 
family members living abroad, travel abroad, time spent abroad, 
work abroad. Our lives are increasingly multidimensional and 
complex, meaning that some people have relatives, friends, or 
others that are touched by disasters.
    That touches on our migrant population but that is beyond 
people who are first generation migrants, could include second 
generation or third or higher who might have linkages with 
causes around the world.
    And then the last factor is what we talked about, I think 
when you stepped out, the role that our leaders are playing 
nationally and internationally. I mentioned the role of Bill 
and Melinda Gates in raising the visibility of the challenges 
facing the world's poorest populations, whether it is malaria 
or water and sanitation. We have various sectors that are 
coming together, corporations, private philanthropists, but 
also our civic and national leaders to raise the visibility of 
many of these international issues.
    And all of those factors combined I think help explain why 
international giving continues to be one of those fastest 
growing subsectors within the American charitable landscape.
    Senator Merkley. So we have seen a lot of private fortunes 
through the Internet companies, social media companies, kind of 
that whole set of worlds where you create an app, and 6 months 
later, you are a multi-millionaire. It is a beautiful world. I 
have not been part of it myself.
    Dr. Osili. Yes. The tech sector is also playing a role 
here. We have platforms like GoFundMe, Kiva, bulk global giving 
that make it much easier for us to support causes around the 
world. And certainly we have the rise in these national, 
international, and humanitarian crises.
    I mentioned from our household data, the philanthropy panel 
study that looks at American families over time, about 10,000 
families. We know that 1 out of 10 Americans gives to an 
international organization. And that fraction has increased 
rapidly since 2000.
    Senator Merkley. Well, that was part of my question. You 
find ordinary individuals, kind of working America, giving 
more, or is it mostly driven by newly affluent individuals who 
are able to give tens of millions of dollars, if you will?
    Dr. Osili. So we do see a mix of both. Certainly the 
philanthropy panel study tells us the story of everyday 
Americans, and in that group, we are seeing a rise in 
international giving.
    In the broader landscape, when we look at just those top 
givers, the million dollar and above gifts, there we also see a 
growth in gifts that are going to international causes. And 
health is one of the largest recipient areas. And so I think it 
makes sense when you put this picture together to say that 
Americans are increasingly reaching out to various parts of the 
world to make a difference.
    Ms. Araia. Could I just also add on this point about 
increase in American giving? There are a couple factors here.
    One, there are some generational points. More and more 
Americans in the millennial generation are already thinking in 
a globally minded manner and they are connected. So with the 
advent of technology and the Internet we are seeing a 
generation that is really borne into a life that is globally 
aware.
    Secondly, a higher percentage of millennials are 
multiracial or come from at least one parent that is of an 
immigrant background. And so these are also households that 
have a connection around the world.
    And lastly this point on first and second generationers, 
when we talk about migrants or diasporas, it is not necessarily 
just the first immigrants. It is not the immigrant themselves. 
It is the children who are oftentimes more educated, more 
exposed, being able to navigate the multiple environments, and 
they are also looking at how to leverage their own connection 
to the country. So second generation Indian Americans are 
giving at an incredible rate to the country, and as a result, 
these countries are starting to create incentives to attract 
younger Americans who are children of immigrants and beyond.
    So we need to really look at the generational demographic 
and the diversity within that and the linkages they already 
have around the world.
    Senator Merkley. So I am going to just make one point here 
going back to the pilots before I turn this back over to the 
chair. And, Mr. Worthington, you may have a follow-up point but 
you can perhaps wait until it is my opportunity again.
    But this is the language that we got into the actual law in 
fiscal year 2016. It says in carrying out the PVS pilot program 
required by subsection (e), the Department of State and USAID 
are directed to include a direct vetting option that does not 
require prime awardees to collect, verify, or submit sub-
awardee data. The Department of State and USAID should ensure 
that all individuals vetted through such pilot are able to 
obtain information on how data is used by the U.S. Government.
    So I thought we had addressed this issue, but it is 
sounding like from your responses, that perhaps the language 
that we included in law may not have been fully implemented.
    Mr. Worthington. We are not seeing a clear and consistent 
application of a vetting system by AID in alignment with your 
language.
    Senator Young. We are just discussing the timeline here. As 
so often happens, we get double, triple, sometimes quadruple 
booked up here, and I regret we have some pressing matters.
    But I would like to pose a question to Ms. Araia that I 
have been intending to communicate to you. So I would like to 
follow up on diaspora communities and your thoughts on 
expatriates and how they might serve as effective diplomats to 
promulgate our values and advance U.S. interests. And I 
actually have some policy ideas that might facilitate that if 
in fact they are effective ambassadors based on, if not 
consensus opinion, some of the strong opinions of scholars.
    But yesterday, more immediately, UNICEF put out a press 
release saying that the projected number of severely 
malnourished children in Somalia has shot up by 50 percent 
since the beginning of the year to 1.4 million children, 
including 275,000 who have or will suffer life-threatening, 
severe, acute malnutrition in 2017.
    Ms. Araia, can you provide any additional details on the 
situation there?
    Before you do, I will just say I understand that UNICEF has 
treated over 56,000 severely malnourished children this year 
there. Yet, we know more can be done. According to the press 
release, UNICEF has received $78.7 million of its $148 million 
appeal. So there is a 47 percent gap in funding.
    And it is also my understanding UNICEF this morning that if 
the funding gap is filled, UNICEF could reach up to 1 million 
additional children in Somalia with lifesaving interventions, 
measles vaccinations, access to safe water, sanitation and 
hygiene, treatment of cholera cases, and prevention and 
treatment of nutrition services.
    So if you can provide any additional details and raise the 
profile of this, as I apologize for leaving and turn the reins 
over to Mr. Merkley, I would be most appreciative.
    Ms. Araia. Thank you very much, Chairman Young.
    The situation in Somalia is nearly catastrophic. A drought 
that is quickly worsening into an impending famine is 
threatening the lives of millions. There are currently 6.2 
million people facing acute food insecurity in Somalia, 
including 3.7 million children. The number of people in need of 
water and sanitation will reach 4.5 million people by this 
month actually. If the funding gap is closed, UNICEF could 
reach up to 1 million additional children with these 
interventions.
    We learned in 2011 around the famine that struck Somalia 
that up to 260,000 children died from preventable reasons such 
as diarrhea and measles. And it is at this stage when we are 
raising the alarm that the most effective response that we can 
provide as an international community is in the preventable 
measures. It is much more cost-effective. It ensures that 
children can not only survive through this crisis but possibly 
thrive. And so what we see now is there are over 275,000 
children who have or will suffer life-threatening, severe, 
acute malnutrition in 2017.
    We also know that this emergency is not just about the 
immediate food assistance that is needed and the interventions. 
It is also about the consequences of a prolonged drought and 
worsening crisis. This includes massive displacement. We are 
already seeing from January and February 3,770 people have 
arrived in Ethiopia. 75 percent of them are malnourished 
children. And these are people who are not only suffering the 
crisis as it exists inside Somalia, but they are walking and 
journeying through thousands of miles to these camps that are 
quickly growing.
    So we are also recognizing this as a regional crisis, and 
for that reason, we are urging the international community to 
respond on behalf of the 80 million people across all these 
countries, including in Somalia. And remember, in South Sudan, 
famine has been declared. And where famine is existing, that is 
where the greatest needs are provided.
    We know that also another prolonged consequence of drought 
and famine is also just the child's access to learn and 
education and have the chance at a thriving life afterwards. So 
UNICEF has already been able to provide not only 1 million 
people with temporary access to safe water and sanitation. We 
have reached 380,000 children and women with lifesaving health 
services, including emergency vaccinations. But we have also 
been able to provide 190 schools reaching 20,000 children with 
safe drinking water, learning spaces, which reached 40,000 
children, and we have been able to provide emergency cash 
grants for children who are at the highest risk of dropping 
out.
    So this emergency in its worst case is about making sure 
that children and their communities can survive. But we are 
also looking at the long-term effects of what this drought and 
famine could lead to.
    Senator Merkley [presiding]. Mr. Runde?
    Mr. Runde. Thank you, Senator Merkley.
    I would just add that we have the largest number of 
refugees and internally displaced people in the world right now 
since World War II, 65 million. That number is going to 
increase because of food in security and because of famines. 
People move. There are large movements of populations. So this 
is not just a humanitarian emergency in the region. It is going 
to have all sorts of implications not just in the horn of 
Africa but also in the Middle East and Europe as well.
    Senator Merkley. Yes, Mr. Worthington.
    Mr. Worthington. I was in a meeting last week in Geneva 
with the heads of the different U.N. agencies focusing on this 
response.
    The first, this is again a disaster happening in four 
places. It is northeast Nigeria. It is Yemen. It is Somalia, 
and it is South Sudan. There are severe conditions just before 
drought in all four places, and we may be looking at--drought 
before famine. We may be looking actually at famine in Nigeria, 
though the government has not declared that.
    In all four cases, conflict is the main driver behind this. 
We know how to deal with situations of drought. The situations 
of drought and conflict are critical. There are, again, 20 
million people at risk in these countries. This situation is 
only going to get worse. Depending how the Saudis behave in 
Yemen in terms of the port and the ability to get resources 
into the port, another 7 million people could be at risk there.
    At this point, again, the U.N. coordinator of humanitarian 
affairs noted that about 70 percent of the response on the 
ground are NGOs. We have U.S. NGOs operating in areas near Boko 
Haram in northeastern Nigeria. But our biggest challenge is 
access. In the past period of time, some 62 humanitarian 
workers have been killed trying to gain access in response to 
this humanitarian catastrophe.
    Senator Merkley. Obviously, it is a huge challenge. And I 
listen to the millions here, millions there numbers. This is 
why we pressed for additional assistance to be in the bill that 
we will be passing tomorrow, I anticipate, for the last 5 
months of this fiscal year. I am not sure of the exact amount 
of money that was additionally dedicated to these four nations. 
$990 million, so almost $1 billion.
    But the point that several of you have made is that access 
is critical. I know that there is an amendment or a bill being 
circulated that basically makes military aid to Saudi Arabia 
contingent upon Saudi Arabia cooperating to open the ports in 
Yemen, being able to facilitate the passage of emergency aid.
    So how much of the issue is the amount of resources? And is 
what the U.S. is doing with this additional $990 million a fair 
participation, or should we be doing more or should we be 
calling on the rest of the world to do more? And how much is it 
really more a problem of logistics, the chaos of war, folks 
intercepting the aid, appropriating it, reselling it, making 
sure it does not get to the enemy, if you will, whoever they 
are fighting against, all of that chaotic battlefield 
challenge?
    Mr. Worthington. So perhaps it is four countries, four 
different short answers.
    In Somalia, more resources is the primary impediment. There 
is significant local capacity to address this and programs 
could be significantly expanded.
    In South Sudan, there are parts of the country where there 
is simply a total acting of impunity and disregard for 
international humanitarian law by both sides, both the 
Government of South Sudan and the rebels. And in that case, the 
primary barrier in certain areas of Sudan is access.
    In northeastern Nigeria, there are significant areas of 
access, but in many ways, it is the Nigerian military 
forbidding access to humanitarian actors in certain areas. So 
you there also have a political challenge.
    In Yemen, in many ways, the NGOs are functioning, but it is 
the flow of resources getting through the port and the, at 
times, indiscriminate bombing targeting humanitarian--that end 
up targeting humanitarian convoys. So there it is also a 
combination of resources and access.
    Senator Merkley. Quite challenging. And I think your short 
answers reflect the complexity of the situation on the ground 
in different locations and the combination of politics, greed, 
warfare, all mixing together.
    So thank you all for your expertise. We are going to 
adjourn the committee unless anyone has a final comment that 
they would like to make.
    Was that a nod, yes, a final comment, or a nod, yes, you 
are done.
    I want to enter for the record a folder of documents. So 
with unanimous consent, I would like to have this folder of 
documents provided to me by Senator Young's staff included in 
the record. Is there an objection?
    [No response.]
    Senator Merkley. Hearing none, they are included.
    [Laughter.]

    [The information referred to was not available at the time 
of print.]

    Senator Merkley. And I thank you all for the work you are 
doing in international economic development.
    Earlier the description was of folks who were working in 
different types of fields. And I was in the international 
economic development field. That is what I studied as an 
undergraduate and as a graduate student. I had a chance to be 
in India, to live in West Africa, to work on a number of 
various projects. And I thought I was going to spend my life 
working overseas in these types of projects dealing with the 
type of issues that you have been talking about.
    But as often happens in life, I took a turn and a door 
opened to work on strategic nuclear policy at a time when we 
were worried about the world being blown up by nuclear weapons.
    And so I did not end up in the world that you all inhabit, 
but I greatly, greatly appreciate the work that you all are 
doing and to help us understand how the United States can be 
the best possible partner with the rest of the world in 
addressing these complex and difficult and important issues, 
economic development on one hand, humanitarian support in 
crises as well.
    So we are going to keep the record for the committee open 
for 48 hours for members of the committee to submit additional 
questions for the witnesses or for anything else you all would 
like to add to the record. Thank you.
    Adjourned.
    [Whereupon, at 12:00 p.m., the hearing was adjourned.]
                              ----------                              


              Additional Material Submitted for the Record


   The Committee Received No Responses From Daniel F. Runde for the 
          Following Questions Submitted by Senator Todd Young

    Question. In Mr. Worthington's prepared remarks, he discusses 
USAID's use of contracts versus grants or cooperative agreements. Can 
you provide more details on trends that you are observing? What 
explains the increased use of contracts--as opposed to grants or 
cooperative agreements--and do you believe this is a problem?

    [No Response Received]

    Question. In Mr. Worthington's prepared statement, he writes, 
``USAID should develop a mechanism explicitly set up to leverage the 
private resources of US NGOs.'' he proposes the expansion of the Global 
Development Alliance's mandate to allow for NGOs to partner with the 
U.S. government. Can you discuss that proposal in more detail?

    [No Response Received]

    Question. Mr. Runde, in your prepared remarks, you note how 
dramatically the international development world has evolved in recent 
decades, but you say that ``the corresponding [U.S. government] 
systems, procurement, planning, and resource allocation have not been 
updated.'' Do you have specific recommendations for how these areas can 
be reformed and updated to perform more optimally?

    [No Response Received]

    Question. Mr. Runde, in your prepared remarks, you express concern 
about ``the wrong kind of merger of USAID into the State Department.'' 
What would the wrong kind of merger in your mind look like? You note 
that there are at least 15 U.S. government agencies delivering some 
form of foreign assistance. Can you briefly describe some of the 
agencies other than USAID engaged in foreign assistance? You call for 
all foreign assistance to be placed under one person. You believe that 
person should the USAID Administrator. Why do you believe that would be 
the best approach?

    [No Response Received]

               Responses of Sam Worthington to Questions 
                    Submitted by Senator Todd Young

    Question. Mr. Worthington, in your prepared remarks, you discuss 
USAID's use of contracts versus grants or cooperative agreements. Can 
you provide more details on trends that you are observing? What 
explains the increased use of contracts--as opposed to grants or 
cooperative agreements--and why do you believe this is a problem?

    Answer. USAID has explicit guidelines on its selection between 
acquisition and assistance mechanisms (ADS 304). However, poor 
understanding and implementation of the guidelines by USAID staff often 
provides for the wrong instrument being selected. The InterAction 
community has advocated for USAID to better enforce the guidelines and 
better train staff.
    The proper instrument is important to non-profits. Many NGOs refuse 
to compete for contracts as a contractor status would make an 
independent organization an agent of the U.S. Government. The status 
separation from the U.S. government is often a factor when concerned 
with security concerns and NGO access within fragile states or conflict 
zones. Therefore, when contracts are the preferred instrument, NGOs 
largely won't compete.
    In recent years, USAID has used a contract mechanism--Indefinite 
Duration Indefinite Quantity Contracts (IDIQs)--to implement large, 
global programs. USAID has issued a rule of law IDIQ and a youth 
focused IDIQ worth hundreds of millions of dollars. The use of IDIQs is 
easier for USAID as the agency doesn't have the capability to implement 
programs in-house and has to outsource such activity. However, due to 
the inherent nature of the contracting process, more taxpayer money 
goes to corporate profits under IDIQs and acquisition mechanisms than 
they would under assistance programs implemented by non-profits. USAID 
has forecasted two large IDIQs for democracy, rights and governance 
programming and another supporting the Global Food and Security Act. 
These are potential worth $2 billion and, again, the non-profit 
community will not bid on these contracts in order to preserve 
independence and separation from the government.
    Finally, it is hard to gain a complete understanding of procurement 
trends as type of instrument information is not readily available to 
the public. For example, USAID has an internal system, Global 
Acquisition and Assistance System (GLAAS) that tracks the information. 
However, type of instrument data is not made available to the public. 
InterAction has advocated to USAID to make such information available 
on foreignassistance.gov.

    Question. Mr. Worthington, in your prepared statement, you write, 
``USAID should develop a mechanism explicitly set up to leverage the 
private resources of US NGOs.'' You propose the expansion of the Global 
Development Alliance's mandate to allow for NGOs to partner with the 
U.S. government. Can you discuss that proposal in more detail?

    Answer. There is no mechanism for a non-profit partner to leverage 
privately raised funds with the U.S. government. We feel this in due to 
the incorrect notion that the non-profit community depends on U.S. 
government funding. This is not the case as in recent decades non-
profits have shifted away from government funds and rely on direct 
donations from U.S. citizens. Today, according to Global Giving, 
private funds and philanthropy exceeds U.S. overseas assistance. 
However, the U.S. government's relationship with non-profits remains 
transactional and in order for a non-profit to leverage money with the 
U.S. government, it has to do so through the Global Development 
Alliance only under a corporate partner. Congress can urge USAID to 
better work with non-profits so that total resources are better 
utilized by having USAID expand the capabilities of the Global 
Development Alliance so that non-profits enter into agreements directly 
with the U.S. government.

    Question. Mr. Worthington, in your prepared statement, you make the 
following comment, ``At an operational level, USAID has been unable to 
move beyond seeing US NGOs as implementing partners.'' You continue, 
writing, ``Current USAID systems place you in one or the other camp. 
You cannot be both a donor and implementer of programs.'' As a result, 
you say the U.S. government does not utilize NGO resources to optimal 
effect. Can you describe this problem in more detail? You write in your 
prepared statement that ``USAID has developed mechanisms that 
circumvent this challenge but they are rare.'' Why do you believe USAID 
has not found a more systematic way to solve this challenge?

    Answer. This problem is demonstrated through two previously 
discussed and related but distinct challenges; the treatment by USAID 
of NGOs as akin to contractors and the lack of effort on the part of 
USAID to leverage NGO resources in the co-creation of projects.
    Overtime, USAID's management bureau has shifted to using a greater 
amount of controls when working with implementing partners due to the 
controls creating leading to less perceived risk and being more 
directive. NGOs are being told to think like a contractor in its 
management of projects and in its relationship with USAID, not as a 
full partner. The preference towards avoiding risk and increasing 
control in operations results in a de facto contradiction of the spirit 
of the original laws providing for NGO-USAID partnership.
    NGO funds are also not counted in the co-creation of projects. 
Implementing partners, such as NGOs, are by statute not permitted to 
co-finance development projects except if the partner is from the 
private sector and participating in a Global Development Alliance. NGOs 
are currently not covered by GDAs partially due to the preference of 
previous USAID leadership to view NGOs akin to contractors, discounting 
the significant amount of resources our organizations would be able to 
contribute to help financially supplement USAID's work. A strategic 
priority towards leveraging NGO resources would result in mechanisms 
such as GDAs being available to NGOs. Currently, NGOs are able to 
receive grants, but the restrictions attached to grants prioritize NGOs 
carrying out USAID objectives as opposed to the institutional 
objectives of NGOs. Our inability to pursue our institutional goals on 
work financed by grants limits our ability to fundraise private 
resources to contribute further to a project's scale.
    USAID has not found a more systematic way to solve these challenges 
because there is currently a cultural bias, coming from Congress, 
towards short-term incentivizes in US government supported development. 
Additionally, development work in Iraq and Afghanistan, which has been 
focused on short-term political products rather than long- term 
development goals, has altered the overall expectations within 
government towards what constitutes successful development work. When 
priorities are placed on demonstrating short-term results, a contractor 
is better positioned to meet deadlines but when priorities are on 
achieving actual, transformative change in development; NGOs are better 
resourced to make an impact.

    Question. Mr. Worthington, in your prepared statement, in the 
context of moving resources internationally, you mention ``confusing 
and incomplete guidance from the U.S. Department of Treasury . . .'' 
Can you describe this confusing and incomplete guidance and do you have 
any specific suggestions for how the Treasury Department can provide 
clearer guidance?

    Answer.
                   the ffeic bank examination manual
    The confusing and incomplete guidance from banking regulators is 
best reflected in the Bank Examination Manual's current section on 
nongovernmental organizations. The manual guides bank examiners in 
their regular reviews, making it the most immediate and primary guide 
for both examiners and banks. The introductory text implies that NGOs 
are high-risk customers by definition, stating ``Because NGOs can be 
used to obtain funds for charitable organizations, the flow of funds 
both into and out of the NGO can be complex, making them susceptible to 
abuse by money launderers and terrorists.'' \1\ According to a February 
2017 report by the Charity & Security Network, ``The routine second 
guessing of FIs' decisions and treatment of certain clients as 
categorically high risk by bank examiners requires FIs to undertake 
extensive steps to mitigate those risks, tipping the risk-reward scale 
toward exiting such relationships.'' \2\
    This broad brush statement is inconsistent with the international 
standard for AML/CFT regulation, as seen in the Financial Action Task 
Force's 2016 revision of Recommendation 8 (R8) on nonprofit 
organizations, which stresses a proportionate, risk-based approach. The 
revised R8 states:

         ``Countries should review the adequacy of laws and regulations 
        that relate to non- profit organisations which the country has 
        identified as being vulnerable to terrorist financing abuse. 
        Countries should apply focused and proportionate measures, in 
        line with the risk-based approach, to such non-profit 
        organisations to protect them from terrorist financing abuse . 
        . .''

    The current Examination Manual fails to differentiate the level of 
risk associated with individual NGO bank customers or to identify 
factors banks could use in a risk analysis. It lists ``Risk 
Mitigation'' measures that are vague and do not clarify the extent to 
which a bank is expected to conduct an independent investigation of an 
NGO's governance, finances and activities. For example, it says 
adequate bank due diligence on an NGO customer should include review of 
its ``donor and volunteer base.'' How far is a bank expected to go in 
such a review? Should they ask for information on individual donors (as 
some banks have done) or a general description of the NGO's funding 
sources?
    The manual goes on to require ``stringent documentation'' of high 
risk accounts, including evaluation of the principals, reviewing audits 
and verifying source and use of funds. There is no guidance on what 
``stringent documentation'' means, leaving banks to guess at how deep 
their investigations must go.
    In response to these problems, regulators are now considering 
amendments to the Bank Examination Manual to update it and bring it 
into line with the risk-based approach. Both NGOs and banks are 
providing input via a multi-stakeholder dialogue sponsored by the World 
Bank and Association of Certified Anti-Money Laundering Specialists. 
Regulator participation in this process is a positive step toward 
providing banks with greater clarity on regulatory expectations in 
relation of NGO customers that conduct international transactions.
 2016 guidance from regulators has proved insufficient to change bank 
                     behavior toward ngo customers
    Guidance issued by Treasury in 2016 has failed to provide banks 
with a level of clarity and security sufficient to reverse the course 
of narrowing financial access for NGO customers. These document are 
described below. While they are helpful, none carry the weight of the 
Bank Examination Manual or the strict standards set in statutory 
language. As the Financial Action Task Force pointed out in its 
December 2016 evaluation of U.S. compliance with its AML/CFT 
recommendations, `` . . . violations of TF-related TFS are strict 
liability offenses . . .'' \3\ As the Charity & Security Network's 
report referenced above noted that ``Despite reassuring statements from 
government officials, FIs [financial institutions] perceive a clear 
disconnect between what policy officials say and what happens at the 
individual bank examination level . . . .'' \4\

     A Joint Fact Sheet on Foreign Correspondent Banking \5\ 
and accompanying blog, \6\ published on August 30, 2016 by the 
Department of Treasury and Federal Banking Agencies, was intended to 
clarify regulatory expectations by dispelling the myth that banks 
should conduct due diligence on the customers of foreign banks (known 
as ``Know Your Customer's Customer, or KYCC).

     The Office of Comptroller of the Currency issued guidance 
in October 2016 on regulatory expectations for banks' assessment of 
risks associated with correspondent banking. It summarized current 
expectations and provided due diligence ``best practices'' for banks to 
consider in these evaluations.\7\

     In various public remarks Treasury officials have stated 
that the U.S. ``has never advocated a standard of perfection'' for bank 
due diligence.\8\

     In a Joint letter to the Charity & Security Network in May 
2016 Treasury DAS Terrorist Financing and Financial Crimes Jennifer 
Fowler and State DAS Economic and Business Affairs Andrew Keller May 
13,, 2016 stated ``It is important to emphasize the Treasury 
Department's view that the charitable sector as a whole does not 
present a uniform or unacceptably high risk of money laundering, 
terrorist financing or sanctions violations. As we have noted before, 
the Treasury Department expects banks to apply their due diligence 
obligations reasonably--not that they be infallible in doing so--and 
Treasury believes that banks that establish and maintain appropriate 
risk-based anti-money laundering and counter terrorist financing 
controls and compliance programs will be well- positioned to manage 
their accounts appropriately, detect illicit transactions, and avoid 
enforcement actions.'' \9\
                  recommendations for clearer guidance
    1. Treasury should continue to pursue revision of the FFEIC Bank 
Examination Manual, with input from the banking and nonprofit sectors.
    2. Treasury should ensure that federal bank examiners are informed 
of and trained to implement the revised FATF Recommendation 8's 
proportionate, risk-based approach.
    3. The principles in the various 2016 guidance statements from 
Treasury should be formalized in law or regulation so that banks can 
rely on it without risk or fear of sanctions.

------------------
Notes

    \1\ FFEIC BSA/AML Examination Manual Page 320-22.
    \2\ Sue Eckert, Kay Guinane and Andrea Hll, Financial Access for 
U.S. Nonprofits'' Charity & Security Network February 7, 2017 http://
www.charityandsecurity.org/FinAccessReport p. 92.
    \3\ Financial Action Task Force, ``Mutual Evaluation of the United 
States'' Dec. 1, 2016 p. 234.
    \4\ p. 92.
    \5\ See ``Joint Fact Sheet on Foreign Correspondent Banking,'' U.S. 
Department of the Treasury, press release, October 30, 2016.
    \6\ Nathan Sheets, Adam Szubin and Amias Gerety, ``Complementary 
Goals-Protecting the Financial System from Abuse and Expanding Access 
to the Financial System'' August https://www.treasury.gov/connect/blog/
Pages/Complementary-Goals-Protecting-the-Financial-System-from-Abuse-
and-Expanding-Access-to-the-Financial-System.aspx.
    \7\ OCC BULLETIN 2016-32, Risk Management Guidance on Periodic Risk 
Reevaluation of Foreign Correspondent Banking, October 5, 2016, https:/
/www.occ.gov/news-issuances/bulletins/2016/bulletin-2016-32.html.
    \8\ Szubin remarks, November 16, 2015.
    \9\ See, Charity & Security Network, ``Response letter to NPO on 
reduced access to financial services, '' May 2016.
                               __________

The Committee Received No Response From Semhar Araia for the Following 
                Question Submitted by Senator Todd Young

    Question. Ms. Araia, in your prepared statement, you note that 29% 
of UNICEF's total funding comes from non-governmental sources. What can 
other agencies and organizations learn from UNICEF in terms of private 
philanthropy?

    [No Response Received]