[Congressional Record Volume 140, Number 146 (Saturday, October 8, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: October 8, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                EXPENDITURE OF AID TO RUSSIA AND THE NIS

                                 ______


                          HON. LEE H. HAMILTON

                               of indiana

                    in the house of representatives

                        Friday, October 7, 1994

  Mr. HAMILTON. Mr. Speaker, I have been concerned over the slow rate 
of expenditure of assistance funds for Russia and the New Independent 
States [NIS]. That assistance has been authorized by the Congress for 
the explicit purpose of facilitating the process of economic and 
political reform. If the money is not spent, it cannot assist reform.
  I have raise this issue many times with administration officials over 
the past several years. The administration has provided a paper 
explaining why obligation and expenditure of funds takes some period of 
time and that, in fact, the pace of spending funds is improving.
  I believe the administration is making some progress, but additional 
steps are necessary to make sure that assistance funds are spent well 
and spent rapidly.
  Perhaps the most important step the President can take to improve the 
effectiveness of assistance is to appoint a coordinator for assistance 
who sits in the White House. Only a coordinator in the White House can 
make sure that U.S. agencies are working together to spend funds 
wisely, effectively, and rapidly. I urge the President to fill this 
post as soon as possible.
  The text of the administration's paper on NIS assistance follows:

                   Financial Status of the Portfolio

       Since 1992, AID has been appropriated $2.7 billion for NIS 
     assistance program.\1\ Obligation and expenditure of these 
     funds has proceeded at a rapid pace. For example, our 
     expenditure rate is 5 times faster than the rate of other TA 
     programs. FY 94 is an extraordinary year, with appropriation 
     levels increasing seven fold. Expenditures, under these 
     unique circumstances, have slowed somewhat from previous 
     years, but the overall pace remains sound at an estimated 33% 
     of obligations. When obligations are adjusted to account for 
     a few projects that have had slower expenditures (for 
     example, we have not expended nuclear safety funds in Russia 
     due to U.S. contractor concerns about accident liability), 
     the estimated expenditure rate rises even higher.
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     \1\Another $300 million was directly appropriated to ExIm in 
     FY 94 and DOD retained $55 million of the $979 million 
     earmarked for NIS assistance in its FY 93 Supplemental. In 
     February, a recision reduced the FY 94 level by $55 million.
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                  legal and regulatory considerations

       The Freedom Support Act authorized a technical assistance 
     and training program for the NIS. Recognizing that structural 
     change in the NIS will cost hundreds of billions of dollars, 
     the FSA established a program to mobilize American expertise 
     to help the NIS countries tackle problems of structural 
     change and make the best use of their indigenous resources. 
     The nature of assistance under the FSA has direct 
     implications for the speed of expenditures:
       Both Congress and the Administration advocate long-term 
     relationships, not consultants that fly in and out. This 
     means that when long-term contracts are signed for 18-24 
     months, it will take 18-24 months to spend the money.
       Training programs must similarly be funded in advance. 
     Long-term training requires the full period of the training 
     program to spend the funds. Short-term programs must also 
     secure advance financing prior to selecting participants.
       Even after Congress appropriates funds, assistance monies 
     do not become immediately available. The Executive branch 
     must notify, and the Congress must approve, program details. 
     This approval process is taking several months.
       U.S. Government competitive contracting rules apply to all 
     NIS programs. Even when cut to the barest elements, they 
     require 5-7 months to issue new contracts: to advertise 
     activities, allow firms to submit proposals, and negotiate 
     the contracts. Once contracts are in place, funds can be 
     moved quickly.


                          fy 1992 and fy 1993

       In the first two years of the NIS program, appropriations 
     totalled $650 million, and an additional $60 million was 
     available from other sources. Of the $710 available for 
     obligation:
       $710 million has been fully obligated;
       $554 million, or 78 percent, has been expended as of June 
     30, 1994; and
       the remaining $156 million will be expended by the end of 
     the year.


                                fy 1994

       Appropriations made directly or transferred to USAID for FY 
     94 total $2.1 billion. Of this total, approximately $360 
     million will be transferred to other U.S. agencies, including 
     USIA, Department of Energy, Nuclear Regulatory Commission, 
     Department of Commerce, Peace Corps, TDA, OPIC and the 
     Department of Agriculture. The remaining $1.74 billion will 
     be obligated by USAID. To date:
       Congressional Notifications for $2.05 billion have cleared 
     the Congress. Of these, $1 billion cleared only as of early 
     July.
       Of the $2.05 billion available for obligation, $1.26 
     billion has been obligated or transferred to other agencies 
     as of September 8, 1994. The remaining amount will fund large 
     obligations such as enterprise funds for Western/NIS ($45 
     million); Central Asian Republics ($30 million); Russian 
     American Enterprise Fund ($56 million); Fund for Large 
     Enterprise Restructuring ($60 million) and EBRD ($27 
     million). These funds will provide equity and loan capital 
     for emerging and newly privatized businesses. Most of these 
     obligations should occur by the end of the fiscal year.
       Cumulative expenditures are expected to reach $700 million 
     by the end of the fiscal year. At the $700 million level--
     about 38 percent of obligations--the rate of expenditures in 
     the NIS remains one of the best in the Agency.


                          fy 1995 and fy 1996

       In the coming two fiscal years, appropriations levels are 
     expected to drop sharply from the FY 94 level of $2.1 billion 
     to about $850 million. Based upon these figures, and an 
     estimate of approximately $260 million which will carry over 
     from FY 1994, the ratio of obligations to expenditures should 
     change dramatically in the next few years.
       In FY 95, expenditures are expected to total close to $1 
     billion, which is almost equivalent to the total obligations 
     planned for this same period.
       In FY 96, the annual expenditure rate should increase by 
     another $500 million, to $1.5 billion, almost double planned 
     obligations for the year.

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