Former Soviet Union: U.S. Bilateral Program Lacks Effective Coordination
(Letter Report, 02/07/95, GAO/NSIAD-95-10).
Since the Soviet Union was dissolved in late 1991, the newly independent
successor states have been trying to develop more efficient,
market-based economies and establish democratic governments. The United
States has strongly supported this transition, both diplomatically and
financially. The structure that the executive branch established to
coordinate, manage, and implement U.S. programs to help with this
enormous undertaking is both unique and complex. This report (1)
identifies the size, scope, and status of the various U.S. bilateral
programs for the former Soviet Union; (2) describes the structures
established for coordinating and managing these programs; and (3)
describes some of the coordination and structural problems the executive
branch has faced.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: NSIAD-95-10
TITLE: Former Soviet Union: U.S. Bilateral Program Lacks Effective
Coordination
DATE: 02/07/95
SUBJECT: Federal aid to foreign countries
Economic development
Foreign economic assistance
International cooperation
Interagency relations
Federal grants
International agreements
Developing countries
International economic relations
Operations analysis
IDENTIFIER: Soviet Union
DOD Cooperative Threat Reduction Program
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Cover
================================================================ COVER
Report to Congressional Requesters
February 1995
FORMER SOVIET UNION - U.S.
BILATERAL PROGRAM LACKS EFFECTIVE
COORDINATION
GAO/NSIAD-95-10
Coordinating U.S. Programs for the FSU
Abbreviations
=============================================================== ABBREV
CDC - Centers for Disease Control
CEA - Council of Economic Advisors
CTR - Cooperative Threat Reduction
DNA - Defense Nuclear Agency
DOD - Department of Defense
EPA - Environmental Protection Agency
FAPC - Food Assistance Policy Council
FDA - Food and Drug Administration
FSU - Former Soviet Union
NIS - New Independent States
NSC - National Security Council
OMB - Office of Management and Budget
PASA - Participating Agency Service Agreement
TDA - Trade and Development Agency
USAID - U.S. Agency for International Development
USDA - U.S. Department of Agriculture
Letter
=============================================================== LETTER
B-258739
February 7, 1995
Congressional Requesters:
In late 1991, the Soviet Union was dissolved, and the newly
independent states that succeeded it have been attempting to
transform their Soviet-era command economies into more efficient,
market-based economies and to establish more democratic governments.
The United States has strongly supported this transition process,
both diplomatically and financially. The structure that the
executive branch established to coordinate, manage, and implement
U.S. programs to help with this enormous undertaking is both unique
and complex. To help provide an understanding of the programs and
process, we undertook this study to (1) identify the size, scope, and
status of the various U.S. bilateral programs for the former Soviet
Union (FSU); (2) describe the structures established for coordinating
and managing these programs; and (3) describe some of the
coordination and structural problems the executive branch has faced.
We briefed your staffs on the results of this work during August and
September 1994. This report summarizes information in those
briefings.
BACKGROUND
------------------------------------------------------------ Letter :1
In December 1990, the United States began to provide limited
assistance to the Soviet Union to show support for reform efforts.
Following the dissolution of the Soviet Union in December 1991, the
United States increased its commitments of assistance to the
successor states. In October 1992, the Freedom for Russia and
Emerging Eurasian Democracies and Open Markets Support Act of 1992
(Public Law 102-511), commonly known as the Freedom Support Act, was
enacted, again increasing assistance to the FSU and establishing a
multi-agency approach to providing assistance. The act called for
the appointment of a coordinator within the Department of State whose
responsibilities would include designing an assistance and economic
cooperation strategy for the FSU and ensuring program and policy
coordination among federal agencies in carrying out the Freedom
Support Act policies.
The Freedom Support Act sets forth the broad policy outline for
helping the countries of the FSU implement both political and
economic reforms. It also authorized a bilateral assistance program
that is primarily being implemented by the U.S. Agency for
International Development (USAID). Additional bilateral programs,
including assistance in dismantling nuclear weapons in the FSU, and
credit and credit guarantees to promote the export of agriculture
products and other goods and services were authorized by other
legislation.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :2
This report points out that the coordination process has not always
worked smoothly--as could be expected for an undertaking of this
magnitude. Disputes have arisen between the Coordinator, USAID, and
other federal agencies over the appropriateness of various projects.
We have not judged the appropriateness of positions taken by various
agencies in these disputes. Although the various parties agree that
problems exist in the coordination process, there is no consensus as
to how the coordination process should change. We are not making any
recommendations in this report.
For fiscal years 1990 through 1993, 19 U.S. government agencies
committed a total of $10.1 billion for bilateral grants, donations,
and credit programs to the FSU. During the period, federal agencies
obligated
$1 billion and spent $434 million of the $1.8 billion authorized by
Congress for grant programs, obligated $1.6 billion, and spent $1.22
billion for the donation program,\1 and made $6.7 billion available
for direct loans, guarantees, and insurance agreements.
The structure for coordinating and managing U.S. bilateral programs
for the FSU starts with the National Security Council's Policy
Steering Group chaired by the Deputy Secretary of State. This is the
only place where all U.S. government policies and programs involving
the FSU come together and where all agencies report. The National
Security Council Directorate for Russian, Ukrainian, and Eurasian
Affairs, which provides staff support to the Policy Steering Group,
has itself played a coordinating role and was key in developing the
U.S. package of assistance first presented at the 1993 Tokyo
Economic Summit. The Policy Steering Group approved the package but
has very limited involvement in grant and credit program
implementation.
Pursuant to the Freedom Support Act, in May 1993, the President
designated a Coordinator within the Department of State and charged
him with (1) designing an overall assistance and economic cooperation
strategy for the FSU; (2) ensuring program and policy coordination
among agencies implementing the act; (3) pursuing coordination with
other countries and international organizations with respect to
assistance to the FSU; (4) ensuring proper management,
implementation, and oversight by agencies responsible for assistance
programs for the FSU; and (5) resolving policy and assistance program
disputes among U.S. agencies participating in the assistance
program. The Coordinator reports to the Deputy Secretary of State.
While the Freedom Support Act gives the State Department Coordinator
broad responsibility for U.S. bilateral programs with the FSU--and
calls on him to coordinate with other countries and international
organizations on aid programs to the FSU--we found that, in practice,
the Coordinator's role is much more limited. Other groups within the
executive branch have equal or greater influence and authority over
assistance to the FSU or function autonomously outside the
Coordinator's purview. In addition, the Coordinator has limited or
no authority to direct activities of the Cooperative Threat Reduction
program or worldwide programs with the FSU components, such as those
of the Export-Import Bank, the Overseas Private Investment
Corporation, and Department of Agriculture, and thus has no way of
ensuring that all programs for the FSU complement one another.
The only bilateral program wholly within the Coordinator's purview is
the program funded by the Freedom Support Act. All agencies, even
those with programs that are not under the purview of the
Coordinator, generally report on their activities in the FSU to the
Assistance Coordination Group, which the Coordinator chairs.
However, the Group is not a decision-making body but is essentially a
forum for sharing information and giving greater transparency to the
program.
Although the Coordinator has issued strategy papers\2 on assistance
to and economic cooperation with the FSU and Russia, these documents
focus primarily on technical assistance. They do not develop a
clearly articulated strategy for achieving the overarching goals of
the Freedom Support Act or for helping the countries of the FSU
achieve their reform objectives. For example, the strategy papers do
not discuss what role programs of the Export-Import Bank, the
Overseas Private Investment Corporation, or the Department of Defense
will play in achieving U.S. objectives in the FSU.
Other participants involved with U.S. assistance to the FSU have at
times resisted, hindered, or overruled the Coordinator's efforts to
develop a coherent and comprehensive assistance program for the FSU.
These include Cabinet and other agencies, the Gore-Chernomyrdin
Commission and Congress through congressional earmarks.\3 Regardless
of the merits of individual cases, the numerous efforts to work
outside the coordination process dilutes the Coordinator's ability to
coordinate the broad range of the bilateral program and to develop a
strategy that covers the full scope of U.S. economic cooperation
activities. (See apps. I and II for further information on the
coordination structure and process.)
The Coordinator's role has been further complicated by the existence
of serious disagreement between agencies over various aspects of the
program. USAID, a primary implementing agency for Freedom Support
Act programs, has been involved in numerous disputes with other
government agencies over money and policy.
Agencies complained that USAID often attempted to hinder their
participation in the program despite the Coordinator's instructions,
would not cooperate with them, and often ignored or overlooked
experience other government agencies had with the issues at hand.
USAID officials disagreed with this characterization. They said that
other agencies often want to use Freedom Support Act assistance funds
for purposes that are not consistent with priorities USAID believes
are appropriate. USAID believes it is responsible for maintaining
accountability over the program; however, USAID officials said that
sometimes other agencies do not understand USAID's accountability
requirements.
According to an official at the Coordinator's Office, disputes
between USAID and other agencies have required the Coordinator's
Office to spend an excessive amount of time dealing with high-level
political battles over small amounts of money instead of spending
time developing program goals and objectives. (See app. III for
information on implementation problems and app. IV for the status of
program obligations and expenditures.)
--------------------
\1 The donation program is tantamount to a grant program in that the
recipient receives food assistance and other goods without an
obligation to repay the donor. Donations generally do not require
new appropriations, as they use existing stocks or funds previously
made available. Donations include transportation cost, which would
generally require new appropriations.
\2 "United States Assistance and Economic Cooperation Strategy for
the New Independent States," U.S. State Department, Jan. 14, 1994,
and "United States Assistance and Economic Cooperation Strategy for
Russia," U.S. Department of State, May 19, 1994.
\3 The Gore-Chernomyrdin Commission was created in 1993 to overcome
trade barriers in the energy sector, but has expanded into other
areas, including business development, space, environment, science
and technology, health, and defense diversification.
SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :3
Our scope included U.S. bilateral programs to the FSU for the period
fiscal year 1990 through April 1994, and programs that involved the
Soviet Union from 1990 until its dissolution in December 1991.\4 We
identified a number of bilateral U.S. government programs for the
FSU; some have a grant or concessional element and fall within the
traditional definition of assistance, while others are ostensibly
commercial programs. We included in our scope all U.S. government
programs such as bilateral grant, donation, and credit programs.
We identified 19 agencies with program activities in the FSU. We
interviewed officials about their programs and used a questionnaire
to collect detailed information on their programs, including
obligations and expenditures covering the fiscal years 1990 through
1993. We developed the questionnaire after preliminary work revealed
the paucity of data available about the various program activities.
Appendix V contains details of the questionnaire development
methodology.
We did not obtain written agency comments on this report. However,
we discussed our findings with officials from the Office of the
Coordinator, USAID, the Department of Defense, and the Department of
Agriculture and incorporated their comments where appropriate.
We conducted our work from July 1993 to December 1994 in accordance
with generally accepted government auditing standards.
--------------------
\4 The newly independent states of the FSU are Armenia, Azerbaijan,
Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russian
Federation, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan.
---------------------------------------------------------- Letter :3.1
We are sending copies of this report to the Secretaries of State,
Defense, and Agriculture; the Administrator, Agency for International
Development; and the Director, Office of Management and Budget.
Copies will also be made available to others on request.
Please contact me at (202) 512-4128 if you or your staff have any
questions concerning this report. Major contributors to this report
are listed in appendix VI.
Harold J. Johnson, Director
International Affairs Issues
List of Addressees
The Honorable Jesse A. Helms
Chairman
The Honorable Claiborne Pell
Ranking Minority Member
Committee on Foreign Relations
United States Senate
The Honorable Benjamin A. Gilman
Chairman
The Honorable Lee H. Hamilton
Ranking Minority Member
Committee on International Relations
House of Representatives
The Honorable Bob Livingston
Chairman
The Honorable David R. Obey
Ranking Minority Member
Committee on Appropriations
House of Representatives
The Honorable Sam Nunn
United States Senate
STRUCTURE FOR DEVELOPING AND
COORDINATING THE U.S. PROGRAM TO
THE FORMER SOVIET UNION
=========================================================== Appendix I
PROGRAM COORDINATION MECHANISM
VARIES ACCORDING TO TYPE OF
PROGRAM
--------------------------------------------------------- Appendix I:1
In general, U.S. government monies\1 are provided to the countries
of the former Soviet Union (FSU) through two types of programs:
those with a specific FSU focus and those with a worldwide focus, of
which the FSU is a part. Coordination responsibilities and structure
are different, depending upon the type of program. Programs that
focus on the FSU have their own FSU-specific coordination mechanisms,
whereas programs that are geographically broader in scope use their
regular program-specific coordination mechanisms. There are some
minor exceptions to these two types of programs, such as programs to
contract for scientific cooperation (National Aeronautics and Space
Administration programs) and for technology acquisition (Departments
of Energy and Defense programs).
U.S. government programs that focus on the FSU include Freedom
Support Act activities and the Cooperative Threat Reduction program.
Worldwide programs with the FSU components include the U.S.
Department of Agriculture's (USDA) General Sales Manager 102 and
Public Law 480, title I programs, the Economic Support Fund financed
programs, USDA and Department of Defense (DOD) donations, as well as
programs of the Export-Import Bank, the Overseas Private Investment
Corporation, and other federal agencies. Between fiscal years 1990
and 1993, Freedom Support Act and Cooperative Threat Reduction (CTR)
program obligations made up only 5 percent of the grants, donations,
and authorized credits for the countries of the FSU.
--------------------
\1 Throughout this appendix, the words "money," " monies," "funds,"
and "funding" are abbreviations for "goods and services provided as
assistance through U.S. tax dollars."
COMPLEX STRUCTURE COORDINATES
FSU-FOCUSED PROGRAMS
--------------------------------------------------------- Appendix I:2
THE POLICY STEERING GROUP
------------------------------------------------------- Appendix I:2.1
As shown in figure I.1, the structure for coordinating U.S.
agencies' programs for the FSU is complex.
Figure I.1: FSU-Focused
Program Coordination
(See figure in printed
edition.)
\a U.S. Department of Agriculture (USDA), Overseas Private
Investment Corporation (OPIC), Export-Import Bank (ExImBank),
Department of Defense (DOD), Defense Nuclear Agency (DNA), U.S.
Agency for International Development (USAID), National Security
Council (NSC).
Source: GAO, based on information provided by agencies.
The National Security Council's (NSC) Policy Steering Group, chaired
by the Deputy Secretary of State, is at the top of the coordination
structure. The Policy Steering Group is the only group that
officially has oversight of all FSU programs. The Policy Steering
Group's Presidential charter states that:
In his capacity as chair of the group, Ambassador Talbott will
preside over the interagency process for all policies dealing with
the FSU.\2
The President directs all executive departments and agencies to treat
the group as the focal point for interagency deliberations on the FSU
and the principal channel for bringing policy options to the NSC.
It is the responsibility of the group to consider any executive
branch action that has significant implications for policy toward the
FSU. Therefore, the department and agency heads shall ensure that
all such actions under consideration by their departments and
agencies come before the group.
The Policy Steering Group has members representing the following
agencies, offices, and councils:
Office of the Vice President;
Department of Agriculture;
Arms Control and Disarmament Agency;
Central Intelligence Agency;
Department of Commerce;
Department of Defense (DOD);
Council of Economic Advisors (CEA);
Export-Import Bank;
Federal Bureau of Investigation;
U.S. Agency for International Development;
Joint Chiefs of Staff;
Office of Management and Budget (OMB);
National Economic Council;
National Security Council Directorate for Russian, Ukrainian, and
Eurasian Affairs;
Overseas Private Investment Corporation;
Department of State;
Department of Treasury; and
Coordinator of U.S. Assistance to the New Independent States.
The group meets about once a month and formally reports to the
Deputies' Committee of the NSC. Coordination of multilateral
assistance takes place through the Treasury Department, which is a
member of the Policy Steering Group.
--------------------
\2 Ambassador Strobe Talbott first chaired this group when he was
Ambassador-at-Large for the FSU. Since becoming Deputy Secretary of
State in February 1994, Mr. Talbott has remained in this role.
THE NSC DIRECTORATE FOR
RUSSIAN, UKRAINIAN, AND
EURASIAN AFFAIRS
------------------------------------------------------- Appendix I:2.2
The NSC Directorate for Russian, Ukrainian, and Eurasian Affairs
plays a key role in developing and coordinating the U.S. programs.
The Directorate provides staff support for the Policy Steering Group
and conducts day-to-day governmentwide business concerning FSU
issues. At key points, it has taken the lead in the interagency
coordination process. For instance, the Directorate took the lead in
an ad hoc group that put together the package of U.S. assistance
first presented at the 1993 Tokyo Economic Summit. The Directorate's
Senior Staff Director is the vice-chair of the Policy Steering Group
and of the Assistance Coordination Group. The Directorate also
convenes other interagency bodies such as the Safety, Security, and
Dismantlement Working Group. (The NSC Directorate provides some
staff support for U.S. members of the Gore-Chernomyrdin Commission,
and is itself a coordination mechanism.)
THE COORDINATOR AND THE
ASSISTANCE COORDINATION
GROUP
------------------------------------------------------- Appendix I:2.3
The Assistance Coordination Group received its charter from the
National Security Advisor, and reports to the Policy Steering Group.
It includes representatives of agencies expending funds in the FSU.
The State Department Coordinator, appointed pursuant to the Freedom
Support Act, chairs the Assistance Coordination Group. The group
ordinarily meets every 2 weeks.
The Assistance Coordination Group has sectoral working groups that
report either to the Coordinator directly or to the Assistance
Coordination Group. Staff from the Coordinator's Office either chair
the sectoral working groups or participate in them. The sectoral
working groups are usually focused on some sector or area of activity
such as the energy sector or democratization. Agencies working in a
sector, or that have an interest in the sector, usually send
representatives to the relevant working groups. The following were
the active sectoral working groups during 1994:
Agricultural Technical Assistance Working Group,
Anti-crime Working Group,
Caucasus/Tajikistan Working Group,
Democracy Working Group,
Energy Working Group,
Environment Working Group,
Enterprise Fund Working Group,
Financial Sector Working Group,
Food Aid Working Group,
Law Enforcement Working Group,
Rule of Law Working Group,
Trade and Investment Working Group, and
Russian Officer Housing and Retraining Working Group.
Some sectoral working groups develop strategies and programs for
their sectors, while others are mainly forums for discussions. The
strategy design is based on information from U.S. government
officials and U.S. contractors.
The Assistance Coordination Group is not a decision-making body but
is essentially a forum for sharing information and giving greater
transparency to the program. All agencies, even those with programs
that are not under the purview of the Coordinator, report their
activities in the FSU to the group so that all agencies can see what
others are doing. The Assistance Coordination Group's charter seems
to grant it more authority to consider issues related to the
bilateral assistance programs of the United States than the
Coordinator or the Group have exercised. The charter states that
"It is the responsibility of the Group to consider those
executive branch actions that have significant implications for
bilateral assistance for the new independent states of the FSU.
Therefore, the department and agency heads shall ensure that all
such actions under consideration by their departments and
agencies come before the Group in a timely manner."
The Coordinator from the State Department, in addition to being the
chair of the Assistance Coordination Group, is a key player in the
U.S. assistance program. The Freedom Support Act instructs the
President to designate a coordinator within the State Department
responsible for
(1)designing an overall assistance and economic cooperation strategy
for the independent states of the FSU;
(2)ensuring program and policy coordination among agencies of the
U.S. government in carrying out the policies set forth in the act;
(3)pursuing coordination with other countries and international
organizations with respect to assistance to independent states;
(4)ensuring that U.S. assistance programs for the independent states
are consistent with the act;
(5)ensuring proper management, implementation, and oversight by
agencies responsible for assistance programs for the independent
states; and
(6)resolving policy and program disputes among U.S. government
agencies with respect to U.S. assistance for the independent
states.\3
Although the charter seems to give the Coordinator and the Assistance
Coordination Group some say in determining how programs like USDA's
General Sales Manager program and DOD's Cooperative Threat Reduction
programs affect the overall assistance program of the U.S.
government. In practice, these and other agencies do not accept the
Coordinator's role in their programs.
--------------------
\3 See P.L. 102-511, 102(a), 22 USC 5812(a).
THE SAFETY, SECURITY, AND
DISMANTLEMENT WORKING GROUP
------------------------------------------------------- Appendix I:2.4
The Safety, Security, and Dismantlement Working Group is an NSC
working group that oversees the planning, negotiating, and
implementing of projects financed through the CTR program and reports
to the Policy Steering Group. CTR projects are dedicated to the
dismantlement and destruction of weapons of mass destruction (that
is, nuclear, chemical, and biological weapons) located on the
territories of the FSU.\4 The Safety, Security, and Dismantlement
Working Group is composed of representatives from the following
offices:
Office of the Secretary of Defense;
Joint Chiefs of Staff;
State Department's Office of Politico-Military Affairs;
Safety, Security, and Dismantlement Delegation for negotiating
agreements with FSU countries;
Department of Energy;
Central Intelligence Agency's Arms Control Support Staff; and
Arms Control and Disarmament Agency.
Representatives from USAID and other agencies attend working group
meetings as needed.
The Defense Nuclear Agency (DNA), under the Under Secretary of
Defense for Acquisitions, is the executive office for CTR projects,
and the Office of Special Coordinator for CTR, under the Under
Secretary of Defense for Policy, provides guidance to DNA.
--------------------
\4 The CTR program is sometimes referred to as the Nunn-Lugar
program.
THE GORE-CHERNOMYRDIN
COMMISSION
------------------------------------------------------- Appendix I:2.5
The Gore-Chernomyrdin Commission has no direct coordination
responsibility for the U.S. program to Russia. However, the
Commission does develop policies, and its scope includes areas of
activity in which bilateral assistance funds are spent, such as the
energy sector. Thus, while not a direct party to the Coordinator's
working groups, the Commission and its committees create a framework
of policy and U.S. governmental focus that have an impact on
bilateral programs with Russia.
The Commission was originally established to advance common interests
in energy, space, and science and technology, but it has been
expanded into other areas. It now consists of seven committees
chaired by agency heads. The committees cover business development,
energy, space, environment, science and technology, health, and
defense diversification. The committees are managed in a
decentralized manner. Each committee has a chair and point of
contact within an executive agency. The Office of the Vice President
does not get involved in the Commission's daily activities, but
depends on the points of contact for each committee to keep informed.
Coordination of the activities of the Commission with the U.S.
bilateral program takes place only at the highest levels. The Policy
Steering Group provides a key forum for linking the work of the
Commission and the U.S. bilateral assistance program. The NSC
Directorate for Russian, Ukrainian, and Eurasian Affairs provides
some staff support for the Commission. The State Department
Coordinator also sits in on the Commission meetings; however, at the
committee working level, there is minimal formal interaction between
the Commission and the Coordinator's Office. As a result, no one
person in either the Coordinator's Office or the Office of the Vice
President had complete knowledge of the Commission's ongoing
activities. This situation caused some problems for OMB and the
Coordinator's Office when they were unable to assemble a
comprehensive list of Commission activities prior to the President's
visit to Russia in January 1994. The effort was repeated more
successfully before the Commission's meetings in June 1994.
PROGRAM DEVELOPMENT AND
IMPLEMENTATION
========================================================== Appendix II
This appendix discusses how programs are developed and implemented
for the FSU under the Freedom Support Act, the CTR Program, and
USDA's worldwide food programs.
FREEDOM SUPPORT ACT PROGRAMS
-------------------------------------------------------- Appendix II:1
PROGRAM DEVELOPMENT
------------------------------------------------------ Appendix II:1.1
As indicated in figure II.1, coordination involves both program
planning and implementation.
Figure II.1: Freedom Support
Act Program Development and
Implementation
(See figure in printed
edition.)
\a U.S. Agency for International Development (USAID) and National
Security Council (NSC).
Source: GAO, based on information provided by agencies.
To illustrate how program planning occurs, this section discusses the
process for planning and developing the package of assistance
announced at the July 1993 Tokyo Economic Summit. During the
planning process, an ad hoc interagency working group, the Policy
Steering Group, and the President selected the general sectors and
the funding levels for projects in those sectors. The program
planning phase occurred before Congress enacted the fiscal year 1993
supplemental in September 1993. The program implementation phase
occurred after OMB apportioned money to USAID and other implementing
agencies.
The Freedom Support Act was enacted before the Clinton administration
took office, and the Tokyo initiative was the first program for the
FSU designed completely by the Clinton administration.\1 The Tokyo
initiative illustrates the process used to coordinate planning before
proposing the FSU assistance package to Congress. In designing the
program, the President wanted a program that would show strong U.S.
support for Russia and the other FSU states. In the end, the fiscal
year 1993 supplemental that put the package into law amounted to $1.6
billion.\2 This, combined with the fiscal year 1994 appropriation for
foreign operations of $904 million, totaled $2.5 billion for the FSU.
The package subsequently has been reduced by $55 million due to a
recision enacted in the Emergency Supplemental Appropriations for
fiscal year 1994.
The coordination process for the Tokyo package was as follows:
The NSC Directorate for Russian, Ukrainian, and Eurasian Affairs
formed an interagency working group to develop additional FSU
programs.
Agencies submitted the FSU program options to the interagency
working group for discussion.
The NSC Directorate and the State Department Coordinator's Office
took the lead in developing the final descriptions of the
various sector/area programs.
The Policy Steering Group settled disputes from the working group
and determined the contents of the final package, which it
submitted to the President.
The President and his staff were in contact with the NSC
Directorate on program components and funding. The President
decided on the package sent to Congress.
The Tokyo package was submitted to Congress in July 1993.
Supplemental information, which filled in details of the program
ideas on each sector and/or area in the July package, was
submitted in September 1993.
--------------------
\1 The Clinton administration had also presented an assistance
package at the earlier Vancouver Summit with President Yeltsin. This
package was largely formulated by the Bush administration.
\2 See P. L. 103-87, title II, 107 Stat. 931, 974-975.
PROGRAM IMPLEMENTATION
------------------------------------------------------ Appendix II:1.2
Once Congress appropriates Freedom Support Act funds, the
Coordinator's Office becomes responsible for dividing the money among
implementing agencies and designating lead agencies in the various
sectors. The Office of Management and Budget apportions the money to
USAID, as the U.S. government agency that implements foreign
assistance. Apportioning the money to USAID does not mean that the
money belongs to USAID. In its banking function (see below), USAID
transfers money to other agencies under the direction of the State
Department Coordinator.
The detailed program planning process begins in sectoral working
groups that are components of the Assistance Coordination Group. The
sectoral working groups bring together relevant agencies with staff
from the State Department Coordinator's Office to develop detailed
program plans for sectors and proposed projects within programs.
The Gore-Chernomyrdin Commission has also generated some project
ideas, and at times these ideas have been taken directly to the
Coordinator rather than to the sectoral working group. Sometimes
members of the Commission have taken ideas for new projects directly
to the Coordinator. In one instance, the Commission played a
significant role in the bilateral program by identifying areas in
which agency actions could promote U.S. interests.
THE COORDINATOR'S ROLE
---------------------------------------------------- Appendix II:1.2.1
As noted above, the Coordinator's responsibilities include
determining which projects will be implemented, who will implement
them, and how much money projects will receive. When the Coordinator
cannot resolve a dispute, the Policy Steering Group resolves
problems. Occasionally, an issue will remain unresolved after the
Policy Steering Group has heard it, and the issue will go to the
President for a decision. For example, the President decided that
the Export-Import Bank should receive $300 million from the $2.5
billion FSU assistance package for programming in fiscal year 1994.
The Coordinator receives input in several ways from all relevant
agencies as he makes decisions. Forms of input vary, as the
following examples show:
A sector working group under the Coordinator may define the program
scope for the sector and make specific project/program
recommendations on agency implementation responsibility and
funding to the Coordinator.
Agencies may propose specific projects directly to the Coordinator
as part of a sector program.
The Coordinator may give responsibility for a program or specific
project to an agency and allocate funding for it.
USAID has criticized this program decision-making process. In
USAID's view, program decisions have derived mainly from (1) the
Coordinator's views on individual agencies or (2) requests for
funding from individual agencies. Thus, according to USAID,
coordination has been budget-driven, rather than starting from an
analysis of the problems to be addressed and judgments about which
agencies possess the best capability to serve as lead agencies in
solving these problems.
THE AGENCY FOR
INTERNATIONAL DEVELOPMENT
---------------------------------------------------- Appendix II:1.2.2
USAID is the primary implementing agency, although it also acts as a
bank through which the State Department Coordinator distributes
money. USAID participates to varying degrees in all sectoral working
groups of the Assistance Coordination Group. It receives and reviews
proposed projects from U.S. government agencies and independent
contractors and provides advice to the Coordinator in the selection
of projects. USAID mission and headquarters officials meet with
officials of the FSU to gather information and strongly influence
project development. USAID is also accountable for ensuring (1) that
funds are properly transferred to other agencies through the
appropriate transfer mechanism, (2) that the proper Treasury accounts
are being used to effect a transfer, and (3) that transfers are
accurately reported. Because of USAID's role in negotiating
interagency agreements and transferring money to other agencies under
the Coordinator's guidance, it can administratively slow down the
work of the Coordinator's office if it disagrees with the
Coordinator's office. As discussed later, this situation has
occurred on several occasions.
USAID and officials from the Office of the Coordinator explained that
the Coordinator's Office should be primarily concerned with overall
policy and program development. After program design has been
approved, USAID is responsible for developing and implementing its
own programs authorized under the Freedom Support Act. As directed
by the Coordinator, USAID also transfers Freedom Support Act funding
to other agencies to implement programs. Depending on the type of
transfer instrument used, USAID can have a great deal or very little
input into the types of program activities undertaken by other
agencies receiving Freedom Support Act funds. When USAID is the lead
agency on a project, it may select the project implementor. The
implementor may be a U.S. government agency working under
interagency agreements or a private sector contractor.
USAID redesigned its regular program development process to
accommodate the need to provide assistance rapidly in the FSU. The
new process includes developing project memoranda, or project design
documents, before issuing a request for proposal for contracts and
grants to implement a project's component activities. Contractors
write proposals that develop the program concepts and provide
specific approaches to implementing activities outlined in the
request for proposal. USAID uses a variety of contract and grant
mechanisms: technical assistance contracts, grants to
nongovernmental organizations, transfers to U.S. government
agencies, umbrella contracts, and omnibus contracts, among others.\3
Large umbrella contracts provide mechanisms for contractors to
provide services in an area under a request for proposal, with
specific guidance from USAID provided in delivery orders.
U.S. government agencies also work under greater or lesser degrees
of USAID guidance through interagency agreements and other
mechanisms. USAID transfers money to agencies by agreements
authorized under either section 632(a) or section 632(b) of the
Foreign Assistance Act.\4 When funds are transferred from USAID to
other agencies under the authority of section 632(a), the transfer
agreements are brief documents that do not obligate funds. Instead,
these agreements are simply an allocation of funds from USAID to the
recipient agency. The allocated funds are available for direct
expenditure by the recipient agency, which may use (1) its own
authority, (2) authorities granted by the Foreign Assistance Act, or
(3) a combination of these authorities in implementing the agreement.
For example, in making procurements, an agency may follow its own or
USAID's regulations. Funds transferred by USAID under such
agreements are obligated by the recipient agency pursuant to its own
obligation process, and USAID has minimal management responsibility
for approving the activities.
When USAID transfers funds to another agency under the authority of
section 632(b), it essentially retains detailed control over how the
funds are used and accounted for. Funds transferred under these
agreements are directly obligated by USAID. The preparation of a
section 632(b) agreement between USAID and the recipient agency
involves detailed negotiations as to what the recipient agency is to
do under the program, and the agreement usually includes a
requirement that the recipient agency follow USAID's procurement and
reporting rules. The recipient agency "bills" USAID either by a
request for an advance or for reimbursement for the actual services
rendered.
As of September 30, 1993, most of the money transferred from USAID to
other agencies had followed the section 632(b) mechanism. Officials
stated that beginning in fiscal year 1994, more of the money would be
transferred through the section 632(a) mechanism.\5
--------------------
\3 The terms "omnibus contract" and "umbrella contract" are not
official USAID terminology but are used internally within USAID's
Europe and the Newly Independent States Bureau. The Bureau uses
omnibus contract when a solicitation results in several contracts
with different contractors to cover a large region for the same types
of activities; umbrella contract is used to describe a contract for a
specific type of work, with one contractor only and which is accessed
through task orders or amendments.
\4 See 22 U.S.C. 2392(a) and (b).
\5 In fiscal year 1992, a total of 21 section 632(b) agreements were
signed, obligating $64 million. In fiscal year 1993, 23 were signed,
for a total of $93 million. In fiscal year 1994, nine were signed,
for a total of $36 million. In fiscal year 1992, one section 632(a)
agreement was signed, allocating $40,000. In fiscal year 1993, four
were signed, totaling $24 million. In fiscal year 1994, 13
agreements were signed, for a total of $208 million.
COOPERATIVE THREAT REDUCTION
PROGRAM HAS AN INDEPENDENT
COORDINATION PROCESS
-------------------------------------------------------- Appendix II:2
As previously discussed, the NSC's Policy Steering Group heads the
structure for policymaking and guidance for U.S. relations with the
FSU. The Safety, Security, and Dismantlement Working Group of NSC
oversees the planning, negotiating, and implementing of programs
financed through the Nunn-Lugar transfer authority. The CTR program
is dedicated to the dismantlement and destruction of weapons of mass
destruction, that is, nuclear, chemical, and biological weapons, on
the territories of the FSU. The Safety, Security, and Dismantlement
Working Group reports to the Policy Steering Group.
Through the end of fiscal year 1993 and into the beginning of fiscal
year 1994, the planning and implementation process for CTR projects
can be divided into three somewhat overlapping phases.
PROJECT DEVELOPMENT
------------------------------------------------------ Appendix II:2.1
Project development is a complex, iterative process in which
technical teams of experts from the U.S. government meet with
officials of the governments of the newly independent states to
identify potential projects. Officials from the Office of the
Assistant Secretary for International Security Policy, Office of the
Secretary of Defense policy staff, usually accompany the technical
teams to guarantee that the projects suggested by the teams of the
FSU officials are within the parameters of the Nunn-Lugar
legislation, which inaugurated the CTR program.
The technical teams are staffed by U.S. government experts selected
by the CTR office in DNA. DNA reports to the Assistant Secretary for
Atomic Energy, which, in turn, reports to the Under Secretary for
Acquisition and Technology in the Office of the Secretary of Defense.
The selections are approved by the Secretary's Special Coordinator
for CTR in the Office of International Security Policy, which reports
to the Under Secretary for Policy. The teams report their findings
to the Special Coordinator for CTR. The Office of the Special
Coordinator reports the technical teams' findings to the Safety,
Security, and Dismantlement Working Group. The Safety, Security, and
Dismantlement Working Group assesses proposals submitted based on
information gathered by the technical teams and comments received
from each agency. The Safety, Security, and Dismantlement Working
Group then chooses the proposals to be funded, sets the funding
priorities, and determines the funding amount for each area. In this
connection, we recently reported that:
"Although the [CTR] program has thus evolved into a multiyear
effort, program officials have yet to adopt the planning tools
needed to guide such a program. These officials have not
established a process to ensure that annual budget requests are
driven by a long-range assessment of tasks that need to be
accomplished and have not estimated total requirements for
achieving CTR priority objectives."\6
We recommended that the Secretary of Defense institute a proactive,
long-term CTR planning process, which DOD has agreed to do; however,
we have not yet verified what steps DOD intends to take to establish
such a process.
The Safety, Security, and Dismantlement Working Group works
separately from the Assistance Coordination Group. The Coordinator,
who is appointed under the Freedom Support Act, occasionally attends
meetings of the Safety, Security, and Dismantlement Working Group,
but the Coordinator is not a regular member and has no authority over
CTR funds. Some of the DOD personnel involved in the various phases
of the CTR program participate in the Assistance Coordination Group.
--------------------
\6 Weapons of Mass Destruction: Reducing the Threat From the Former
Soviet Union (GAO/NSIAD-95-7, Oct. 6, 1994).
PROJECT NEGOTIATION AND
IMPLEMENTATION
------------------------------------------------------ Appendix II:2.2
The Safety, Security, and Dismantlement Working Group approves
written instructions for the Safety, Security, and Dismantlement
Delegation to use while negotiating agreements with the countries of
the FSU that have weapons of mass destruction on their territories.
Once project agreements have been negotiated, DOD's DNA, as the
designated executive agency, implements them, using project managers
and contract officers that are assigned to individual projects. For
much of the money, DNA acts as a conduit, transferring the money on
to other agencies such as the U.S. Army Corps of Engineers and the
Department of Energy. The Department of Energy also serves mainly as
a conduit for transferring money to the national laboratories. DOD's
Special Coordinator for CTR oversees the DNA's implementation work.
WORLDWIDE PROGRAMS HAVE
INDEPENDENT COORDINATION
MECHANISMS
-------------------------------------------------------- Appendix II:3
Several U.S. government agencies have worldwide programs of which
the countries of the FSU are a part. These agencies include the
Export-Import Bank, the U.S. Information Agency, and USDA. We will
illustrate the interagency coordination issues by describing how
USDA's food programs for the FSU are coordinated with the overall
U.S. effort.
USDA's General Sales Manager 102 program is a large, market-rate
export credit guaranty program that could potentially affect the
economic performance of a recipient country. Program registrations
for the FSU totaled $5.007 billion for fiscal years 1990-93. The
program is an export promotion program, not food assistance. The
USDA General Sales Manager identifies countries for the program, and
the process for deciding to extend the program's guaranties to any
country is internal to USDA. The program manager stated that it
would not be appropriate for the State Department Coordinator for the
FSU to have direct purview over the program. USDA keeps the
Coordinator's Office informed by reporting at meetings of the
Assistance Coordination Group, but does not engage in policy
discussions with that group. The Coordinator stated that the
informal consultations with USDA on individual FSU country programs
is necessary and has been effective. A subgroup of NSC reviews the
decisions of USDA regarding the extension of General Sales Manager
102 program credits to the FSU countries.
The General Sales Manager loan guaranties are reviewed by the
National Advisory Council on International Monetary and Financial
Policies. The Council is chaired by Treasury and consists of
representatives from State, Commerce, the U.S. Trade Representative,
the Federal Reserve, the Export-Import Bank, and USAID, with each
agency having one vote. The Council advises U.S. agencies on
proposals to provide credits, guaranties, or loans to foreign
countries.
Another example of a worldwide program that involves the FSU is the
Public Law 480 title I program. It is a long-term, concessional loan
program that also has a market development objective. In addition,
it promotes economic development through a development plan agreed to
by the recipient as part of the title I loan agreement.
Initial proposals for title I allocation are developed by USDA.
Countries must request a title I allocation and meet USDA's Foreign
Agricultural Service eligibility requirements. The proposed
allocations are submitted for approval to the Food Assistance Policy
Council (FAPC), consisting of representatives from USAID, OMB, USDA,
and the State Department. The FAPC determines initial country
allocations for Public Law 480 titles I and III resources and
approves transfers among titles and between countries. The State
Department representative on the FAPC is from the Economic Bureau.
In 1993, after lengthy negotiations, the Coordinator's Office was
included in the FAPC as an ex-officio representative at meetings
dealing with the FSU. Previously, the FAPC simply informed the
Coordinator of its decisions. The Coordinator stated that he is
satisfied with the current coordination mechanism, but acknowledged
that he is not the final authority on specific country allocations.
According to the Coordinator, the informal arrangement gives him
input into food aid program decisions. He said that this was a
successful way of resolving overlapping coordination
responsibilities.
COORDINATION PROBLEMS
========================================================= Appendix III
This appendix describes some of the coordination process and
structural problems we observed. In general, officials from the
Coordinator's Office, USAID, and the other U.S. government agencies
involved in the FSU program expressed frustration with the
coordination of U.S. programs. Despite widely varying perspectives
on the problems, officials agreed that the existing process needs
improvement. There was also consensus that overall program
coordination is better now than in the first year of the program.
Among the problems, we noted the following:
The Coordinator comes to the coordination task from a weak position
and finds his authority frequently challenged by various other
participants.
There were money and policy conflicts between USAID and the other
agencies participating in the program.
The Coordinator and USAID had differing perspectives on their
respective program policy and implementation roles.
THE COORDINATOR'S REAL
AUTHORITY IS LIMITED
------------------------------------------------------- Appendix III:1
Although the Freedom Support Act gives the Coordinator the primary
responsibility of designing a strategy for bilateral assistance and
economic cooperation activities and for coordinating all of these
activities, his role in practice is largely limited to the Freedom
Support Act bilateral programs; thus, he has no way of ensuring that
all programs for the FSU complement one another. Large portions of
U.S. programs with the FSU, not addressed in the Freedom Support
Act, are outside the purview of the Coordinator. For example, the
Coordinator has only nominal influence over the worldwide programs
with FSU country components and the CTR program. The Freedom Support
Act states that the Coordinator is responsible for coordinating U.S.
government activities and policies with respect to the states of the
FSU; however, the Freedom Support Act also gives responsibility to
the Secretary of Commerce for coordinating export promotion, and to
the Secretary of the Treasury for coordinating activities related to
U.S. participation in international financial institutions.
The strategy documents for the FSU and for Russia reflect the
limitations of the Coordinator's authority. The Coordinator's
"United States Assistance and Economic Cooperation Strategy for the
New Independent States," issued in January 1994, focuses on the role
of assistance in reaching U.S. objectives. The strategy document
notes that economic cooperation is essential, but does little to
develop in depth an economic cooperation strategy. The Russia
strategy document also focuses on programming technical assistance
and does not address in depth economic cooperation activities such as
the programs of the Export-Import Bank or the Overseas Private
Investment Corporation. Even for bilateral assistance, the Russia
strategy document specifically excludes any discussion of DOD
programs such as the CTR program.
It is important that the Coordinator remain informed about the issues
within those programs because some projects parallel bilateral
assistance projects that are clearly under the Coordinator's
authority. For example, the Defense Conversion project of the CTR
program is outside of the Coordinator's authority but related to
projects within his authority. Also, DOD plans to set up an
enterprise fund under the CTR program similar to funds being set up
by other U.S. government agencies to enable former Soviet
enterprises to move from manufacturing weapons of mass destruction to
civilian production. According to the Coordinator, the defense
conversion enterprise fund is discussed within the Enterprise Fund
Working Group; nonetheless, the Coordinator has no authority for
program development or coordination.
COORDINATOR'S SUCCESS VARIED BY
SECTOR
------------------------------------------------------- Appendix III:2
Not surprisingly, given the limitations of the Coordinator's
authority, we found his role constantly challenged by agencies and
other participants with their own agendas. Executive agencies, the
Gore-Chernomyrdin process and congressional earmarking have at times
resisted, hindered, influenced, or overturned the Coordinator's
efforts. It is not our intention to judge the efficacy of individual
attempts to work outside the Coordinator's authority; however, in
aggregate, the numerous efforts by other participants to resist the
Coordinator or work outside the coordination process he oversees
dilutes the Coordinator's ability to focus scarce resources on a
limited number of program objectives.
FOOD AID: SECTOR STRATEGY
HELPS COORDINATOR BRING USDA
INTO COORDINATION PROCESS
----------------------------------------------------- Appendix III:2.1
Coordination of food aid policy is an example of how the
Coordinator's efforts, along with the various agencies working
together to develop a sector strategy paper, worked well.
During the first year of the U.S. program, USDA formally coordinated
food aid decisions through two interagency bodies (as mentioned
earlier) rather than through the Coordinator's Office. According to
an official from the Coordinator's Office, the Coordinator would hear
about USDA food aid decisions only after they were made. For
example, Public Law 480, title I food assistance decisions for FSU
countries were made without input from the Coordinator's Office. To
help improve this situation, the Coordinator's Office, in conjunction
with USDA, OMB, CEA, and Treasury, produced a food aid strategy paper
after a series of lengthy and difficult interagency debates. A USDA
official told us that the Coordinator had to intervene personally to
get the strategy written, due to differences between USDA and some of
the other agencies. The strategy clarified the role of USDA and the
Coordinator's Office in food aid decisions for the FSU.
During the process of developing the strategy, USDA and the
Coordinator were able to define the role of the Coordinator's Office
by developing an informal coordination process. USDA officials did
not think they could give the Coordinator a formal role in the FAPC
created by an executive order implementing Public Law 480 and remain
within the law. However, the informal process allows officials from
the Coordinator's Office to attend Council meetings, which satisfied
the Coordinator. The Coordinator did not seek final say over
specific title I allocations to FSU countries. However, regular
consultation with USDA gives the Coordinator real input into food aid
program decisions.
The strategy also spelled out a series of policy objectives for FSU
food aid, but did not resolve each issue. For example, Treasury,
OMB, CEA, and USDA were unable to reach agreement on a policy for
monetization of proceeds from food aid commodities.\1 More
significantly, given the potential macroeconomic implications of the
money involved, issues regarding USDA's General Sales Manager program
were not included in the strategy because USDA did not want the
program included under the rubric of a food aid strategy. The
Coordinator has not sought to extend his formal authority over the
FSU component of the program; however, USDA now informally discusses
potential program decisions with the Coordinator.
Despite the sometimes contentious interagency process and the
inability to resolve differences between agencies on key policy
issues, developing a sector strategy paper helped form the basis for
improved coordination between agencies on food aid to the FSU. USDA
and State officials agree that coordination of food aid has improved
since the strategy was finalized in October 1993.
--------------------
\1 The local currency generated by the recipient government from the
sale of U.S. commodities is referred to as monetized proceeds.
Treasury, OMB, and CEA support the use of monetized proceeds to
finance budgetary expenditures to reduce inflation. USDA believes
such proceeds would be better used to fund economic and agricultural
development or social support programs.
AGRICULTURAL TECHNICAL
ASSISTANCE: COORDINATOR
UNABLE TO RESOLVE
INTERAGENCY DIFFERENCES
----------------------------------------------------- Appendix III:2.2
Agricultural technical assistance illustrates situations where the
Coordinator's Office was unable to resolve widely divergent policy
views among agencies. The ability of agencies to block consensus
resulted in a series of programs that, as the Coordinator said in
November 1993, "lack both concept and coherence" with "no consistent
rationale in terms of either policy or possibility." He said that
this remained the case through the early spring of 1994, but noted
the situation has improved since then, although tensions remain.
The three main implementing agencies in agricultural technical
assistance are the USAID-New Independent States (NIS) Task Force (now
the Bureau for Europe and NIS),\2 USAID-Office of Private and
Voluntary Cooperation, and USDA. Each has its own source of funds
and policy approach for its programs. USAID's Task Force had
available $89 million to promote its primary goal: improving the
agricultural input and output distribution elements of the food
system by developing agribusiness linkages between U.S. firms and
FSU private farms. USAID's Office of Private and Voluntary
Cooperation used $30 million set aside from the fiscal years 1992-94
Public Law 480 funds for a Farmer-to-Farmer program, to send U.S.
volunteers to assist in privatizing farms and agricultural
enterprises. USDA, acting under authorization from the Food,
Agriculture, Conservation, and Trade Act of 1990, budgeted $15.2
million in Commodity Credit Corporation funds from fiscal years
1992-94 for a variety of programs ranging from market development and
model farms to policy advisers in FSU agriculture ministries.
Officials from USDA, State, and the Coordinator's Office criticized
the USAID-NIS Task Force's exclusive focus on private-sector
linkages. In their opinion, U.S. agricultural technical assistance
should place greater emphasis on a person-to-person level, through
exchanges, extension, and technical assistance rather than relying
exclusively on U.S. private agribusiness. The Coordinator in
particular supported the use of linkages, but not as the sole focus
of U.S. agricultural technical assistance. USDA, State Department's
New Independent States Desk, and Coordinator's Office officials also
thought that USAID's Task Force attempted to exclude other agencies
from becoming involved in the program and was not taking full
advantage of expertise within the U.S. government.
However, USAID noted that its Food Systems Restructuring Project was
subject to an interagency review that included USDA and State. USAID
also contended that USDA does not submit the programs it funds to
interagency review. USAID-NIS Task Force officials thought the State
Department Coordinator was too involved in program implementation
details such as reviewing project proposals from contractors. They
also criticized USDA's extension program in Armenia as a slow
process, with questionable success at market development.
The Coordinator's Office made numerous attempts to build some degree
of consensus on these issues, but to no avail. In early 1993, the
Coordinator's Office chaired an interagency Agricultural Technical
Assistance Working Group, which developed a concept paper as an
interim step to a formal strategy paper. Subsequent attempts through
the spring of 1994 to develop a sector strategy paper foundered
because (1) the various agencies could not reach agreement and (2)
the Coordinator could not forge consensus.
The Coordinator recognized these problems. In November 1993, the
Coordinator stated: "I see no consistent rationale in terms of
either policy or possibility . . . none of us has a clear view of
where to go from here . . . [we need] to define where we should be
going." Attempts to resolve the interagency policy differences by
involving higher-level officials were not successful during the fall
of 1993.
The merger of the USAID-NIS Task Force with USAID's Europe Bureau
presented new opportunities for improved coordination. The
Coordinator's Office told us that coordination on agricultural
technical assistance has improved since the reorganization. However,
USDA officials reported that coordination problems with the
USAID-Europe and NIS Bureau have continued even after the
reorganization.
--------------------
\2 USAID's Private Sector Initiatives Office in the NIS Task Force
managed the Food Systems Restructuring Project until early 1994.
Under recent reorganization, this project has been moved to the
Agriculture and Agribusiness Division within the Bureau for Europe
and NIS, with new people in charge.
ENERGY: CONGRESSIONAL
EARMARK INCREASES PROGRAM
DISPERSION
----------------------------------------------------- Appendix III:2.3
The energy sector illustrates how congressional earmarks can
complicate the Coordinator's efforts to implement a coherent
strategy.
In fiscal year 1993, the development of the planned International
Science and Technology Center was delayed because of bureaucratic
delays in Russia. The purpose of the Center was to help Russian
weapons scientists find peaceful work. Faced with delayed operations
of the Center, three U.S. national laboratories (Sandia, Los Alamos,
and Lawrence Livermore) decided to undertake their own support of
scientists in the FSU's weapons institutes. The Department of Energy
confirmed this decision. The NSC Directorate for Russian, Ukrainian,
and Eurasian Affairs was informed of the arrangements.
The support of scientists was paid for in the following manner. The
U.S. laboratories continued to work on their assigned projects as
usual, following the usual financing procedures. When a procurement
or experiment was required under a specific project and the
laboratories believed the weapons institutes of the FSU could do the
work, the work was purchased from the institutes and the cost charged
to the assigned projects under the usual financing procedures.
Projects were also designed specifically for former Soviet
scientists. According to State Department and Department of Energy
officials, these were generally satisfactory relationships because
the U.S. laboratories accomplished necessary and valuable work at a
lower price, and the FSU scientists remained together without selling
their expertise to countries and agents of whom the U.S. government
would disapprove. The laboratories and the Department of Energy paid
for the contracts out of laboratory funds.
However, to satisfy the needs of the laboratories the Conference
Report on fiscal year 1994 foreign operations appropriations included
a provision specifying that $35 million from Freedom Support Act
funding should go for these contracts and for their expansion to
include the U.S. private sector. According to the Coordinator's
Office, they had not intended to provide funding for this activity.
They expressed concern that congressional designations such as this
contribute to diffusion of the overall program and limit funding
flexibility. They also feared that the funding was an example of the
Department of Energy supplementing its regular appropriation at the
expense of other aspects of the U.S. program in the FSU. USAID told
us that funding of such Department of Energy contracts reduced
funding for activities that contributed to U.S. assistance
objectives such as energy efficiency and alternatives to nuclear
power.
ENVIRONMENT:
GORE-CHERNOMYRDIN PROCESS
OVERRIDES COORDINATION
EFFORTS
----------------------------------------------------- Appendix III:2.4
The environmental sector illustrates how other participants, such as
those running the Gore-Chernomyrdin process, can affect the
Coordinator's control over a sector, and how the emergence of the
Commission's influence in this sector has complicated the program
planning process.
As in other sectors, the Coordinator's Office chaired an interagency
working group to discuss environmental sectoral assistance issues for
the entire FSU, to discuss specific assistance projects, and to
resolve interagency differences. Participation in this working group
generally included USAID, the Environmental Protection Agency (EPA),
and the Coordinator's Office.
The Coordinator's working group on the environment essentially
stopped working as a result of the creation of an environmental
working group as part of the Gore-Chernomyrdin process, which focuses
on relations with Russia. EPA and some Coordinator's office
officials told us that the Coordinator's working group has
essentially been preempted by the Gore-Chernomyrdin process.
Larger environmental policy issues are now discussed within the
Gore-Chernomyrdin working group on the environment. Although chaired
by the EPA Administrator, the working group agenda, according to EPA,
is driven by NSC, the Office of the Vice President, and elements of
the State Department outside the Coordinator's Office.
An EPA official told us the Coordinator's Environmental Working Group
had stopped meeting. According to the EPA official, the
Coordinator's Environmental Working Group ceased to meet before the
Gore-Chernomyrdin process got underway due to factors unrelated to
the Gore-Chernomyrdin Commission working group, such as time demands
on participants and the resolution of outstanding issues, but an
official from the Coordinator's Office said that once a U.S. working
group on the environment was created to serve U.S. participants in
the Gore-Chernomyrdin Commission's Environment Committee, the
Coordinator's interagency working group on the environment "withered
on the vine" and now meets only on an ad hoc basis. Both the
Coordinator and USAID stress that the Coordinator's Environmental
Working Group still exists; however, an official at EPA and another
official at the Coordinator's Office said that the working group does
not meet.
According to EPA, early in 1994, the Gore-Chernomyrdin working group
identified promoting biological diversity in the environment as a
priority. However, an official from the Coordinator's Office told us
that promoting biological diversity is not a program priority for the
U.S. assistance program. In addition, the Coordinator's
"Environmental Strategy for the NIS" does not mention promoting
biological diversity. Instead, the strategy calls for programs to
provide immediate environmental and health benefits and to assist in
the long-term development of an effective environmental management
structure. The Gore-Chernomyrdin working group initiated a series of
interagency discussions in which the Coordinator's Office and USAID
participated. Through those discussions, a small amount of fiscal
year 1994 funds was made available for biological diversity programs
in Russia.
Perspectives on the Commission's impact vary: An EPA official stated
that the Commission is broadly representative of various U.S.
agencies with experience and interests in Russia. USAID's Europe and
NIS Bureau, on the other hand, has noted a lack of coordination (1)
within the NSC and with the Office of the Vice President (two of the
principal U.S. participants in the Commission) in setting priorities
for the environmental program broadly and (2) between the NSC and the
Office of Vice President in working with the Coordinator and USAID to
set priorities in environmental programming.
USAID AND OTHER AGENCIES HAVE
NUMEROUS DISPUTES OVER POLICY
AND MONEY
------------------------------------------------------- Appendix III:3
Agency officials provided numerous examples of frequent and lengthy
disputes between USAID and other agencies over money and policy.
Many of the agencies we spoke with were highly critical of USAID and
expressed strong reservations and concerns about their relationship.
USAID in turn told us that although the Freedom Support Act creates
opportunities for other agencies to participate in the program, USAID
was concerned that other agencies were using FSU assistance monies in
lieu of funds from their own budgets. USAID also indicated that
other agencies do not understand the USAID process or USAID's need
for accountability. Officials at the Coordinator's Office were (1)
frustrated with the amount of time spent arbitrating these battles
and (2) concerned that this detracted from their ability to focus on
policy and planning issues.
We found that the disputes between USAID and other agencies were
rooted in three general areas: USAID's attempts to exclude other
agencies from areas despite the Coordinator's instructions, poor
relationships between USAID and other U.S. government agencies, and
USAID's use of private contractors rather than other agencies.
USAID ATTEMPTS TO EXCLUDE
OTHER AGENCIES
----------------------------------------------------- Appendix III:3.1
In several instances, despite the Coordinator's instructions, USAID
attempted to exclude other U.S. agencies from taking part in FSU
programs by not providing funds. The Coordinator could eventually
force USAID to transfer funds to other agencies, but only after much
struggle and high-level pressure. USAID officials see other agencies
as using political clout to obtain funds for questionable projects.
USAID's resistance to transferring funds came despite the
Coordinator's instructions and sometimes continued even after
interagency agreements were signed. In addition, a number of
agencies expressed concerns that USAID developed program guidelines
and objectives without consulting with agencies that had technical
expertise in the relevant area. We found examples of such disputes
at USDA, Commerce, and the Trade Development Agency (TDA).
COORDINATOR APPLIES
PRESSURE ON USAID TO FUND
USDA PROGRAM IN ARMENIA
--------------------------------------------------- Appendix III:3.1.1
In late 1991, the government of Armenia asked the Secretary of
Agriculture for assistance in establishing an agricultural extension
service. Later that year, the President announced that the U.S.
government would do extension work in Armenia. USDA proposed using
some of USAID's recently reprogrammed fiscal year 1992 Economic
Support Funds for this activity. USAID officials opposed giving
funds to USDA for this program. In their view, USDA's approach to
agricultural extension was long-term in nature and would not assist
in a quick conversion to a market economy. USAID officials also
thought the USDA's program would not meet an emergency situation.
However, high-level officials at State and USDA backed the Armenian
extension program. USDA, the Coordinator's Office, and USAID
officials told us that State had to force USAID into providing funds
for the program.
In May 1992, USAID signed a project authorization under which USAID
authorized the transfer of $3.75 million to USDA. With high-level
pressure from State, USAID actually transferred roughly a third of
this amount to USDA in June 1992. Under the terms of the interagency
agreement between USAID and USDA, additional funding from USAID was
contingent on availability of funds and the willingness of both USAID
and USDA to proceed with the program.
Implementation of USDA plans to help Armenia develop an extension
service was slow, in part because the Armenian government failed to
pass a budget to support the program. In April 1993, USAID officials
urged USDA to change the focus of the program from extension
infrastructure development to providing assistance to Armenian
farmers to increase food production. USDA changed the focus of the
program to providing survival assistance, in response to USAID's
concerns that the program address the emergency situation.
By late 1993 USDA was concerned that USAID would not provide
additional funds in time to get personnel into the field for the 1994
planting season. In fact, according to one USDA official, USAID
twice tried to kill the program over program management disputes.
High-level USDA officials intervened to keep the program alive. What
USDA saw as USAID's opposition to providing additional funds came
despite support for the program from a variety of places. Personnel
from the USAID mission and the Coordinator's Office gave the program
high marks.
Despite the positive reaction to the program, USAID resisted
providing USDA additional funds for the program. Before USAID would
provide additional funds for the program, it wanted to review the
program. Two reviews were conducted, one by USDA and one by USAID,
both in November 1993. The USAID mission official who reviewed the
program recommended some changes but found that "the project is a
most cost-effective use of USAID's limited resources and . . . the
effects are sustainable." USDA and the Coordinator's Office pushed
USAID to provide the funds, which meant the dispute kept getting
pushed upward. USDA was successful in obtaining an additional $1.245
million from USAID for the program in February 1994, but only after
pressure from a USDA Under Secretary and the Coordinator. USAID's
perspective was that, rather than opposing provision of additional
funds for the program, it was simply waiting for USDA to submit a
project proposal acceptable to USAID before agreeing to provide any
additional funds. USDA submitted a proposal acceptable to USAID in
January 1994.
An official from the Coordinator's Office told us the Armenia case is
an example of the amount of time the Coordinator's Office spends
dealing with high-level political battles over small amounts of
money. In this official's opinion, the time spent forcing USAID to
comply with policy decisions detracts from the Coordinator's ability
to focus on developing program goals and objectives. USAID's
perspective is that USAID ensured that the program complied with U.S.
regulations.
USAID DELAYS FUNDING
COMMERCE'S BUSINESS
CENTERS
--------------------------------------------------- Appendix III:3.1.2
The Freedom Support Act authorized the appropriation of up to $12
million in fiscal year 1993 for American Business Centers in the FSU,
which is a Commerce Department program. The fiscal year 1993 Foreign
Operations Appropriations Act provided for the use of up to $12
million for this purpose. The Freedom Support Act also required
USAID to conclude a reimbursement agreement with Commerce within 90
days after enactment, for Commerce's establishment and operation of
the centers. Commerce Department documents describe these as "nerve
centers" for U.S. public and private sector activities related to
business development, privatization, and defense conversion.
Officials from the Commerce Department put forward a project proposal
with a $12-million budget. USAID took the position that they did not
have to transfer any funds because Congress did not require that
USAID make funding available; however, they agreed to give $5
million. According to a Commerce official, a mid-level USAID
official countered Commerce's $12 million proposal by verbally
proposing that USAID give $5 million for the first year and $6.6
million in out years, contingent upon program success and funding
availability. USAID officials told us that Commerce should have been
responsible for providing the additional $7 million from its own
funds.
The Department of Commerce was frustrated by what it viewed as delays
on the part of USAID. USAID, in turn, was concerned about the
substance of the project and Commerce's implementation record. USAID
officials questioned the merits of having the U.S. government
provide 100 percent of the funding for business centers that
duplicated what the private sector was setting up. While not fully
satisfied with USAID's offer, Commerce agreed to this position.
On January 21, 1993, Commerce officials learned that a higher-level
USAID official had overturned the decision to add the $6.6 million in
out years. USAID instead returned to its initial $5 million
proposal. USAID transmitted this decision to Commerce via a draft
Memorandum of Understanding delivered at 6:30 p.m. on the last day
of the congressionally mandated deadline. This proposal covered only
$5 million with no additional funding provided. Commerce officials
rejected the USAID proposal and informed the Secretary of Commerce of
USAID's refusal to fund centers for the full $12 million. The
Commerce Secretary discussed the matter with the Secretary of State.
However, USAID continued to resist transferring the full $12 million.
The Secretary of Commerce then spoke with the Ambassador-at-Large for
the FSU and received his support for the $12-million transfer. It
was only after the Ambassador-at-Large for the FSU intervened that
USAID agreed to transfer the money to Commerce.
USAID officials believed the Coordinator could have been used to
address these issues. Instead, USAID pointed out that the Secretary
of Commerce spoke directly with the Ambassador-at- Large to obtain
the $12 million for the project.
USAID NEARLY CUTS OFF TDA
FUNDS
--------------------------------------------------- Appendix III:3.1.3
TDA funds feasibility studies for the energy and private sector
portions of the U.S. program. TDA initially submitted proposals to
the Coordinator's Office describing their projects and indicating the
amount of funding needed to support their projects. Although the
Coordinator approved the project proposal, USAID did not provide TDA
the funds. USAID believed that the major share of TDA's proposed
activities were intended to strengthen the government rather than the
private sector. USAID continued to refuse funding for the TDA
proposal despite a personal appeal by the then Coordinator. After
the new administration came into office, the then Ambassador-at-Large
also approved funding for the TDA proposal. USAID relented.
With their program seemingly funded, TDA officials traveled to Moscow
to sign a trade project agreement with the Ambassador and
high-ranking Russian officials. Although it was supposed to fund the
program, at the 11th hour USAID discovered a problem with a clause in
the interagency agreement related to environmental issues, and
withheld funds for the program. According to a USAID official, as a
general rule, the FSU Task Force did not invoke the "notwithstanding
authority" to waive the applicability of USAID's environmental
regulation under Interagency Agreements.\3 The USAID officials said
that TDA officials viewed this as a USAID excuse to delay the
transfer of funds, whereas they believed this was necessary to comply
with USAID's environmental regulations.
The then Ambassador-at-Large had to intervene personally and told
USAID's FSU program director to fund the TDA program. USAID released
the funds but the incident placed TDA in a potentially embarrassing
situation. A number of Russian officials had traveled from other
cities to sign the project agreement. If USAID had not funded the
agreement, the signing ceremony would have been canceled.
--------------------
\3 The Freedom Support Act, section 201 amends the Foreign Assistance
Act, chapter 11, section 498B to allow USAID to waive provisions of
law in providing assistance to the FSU using funds authorized by the
act for fiscal year 1993.
AGENCIES COMPLAINED OF POOR
WORKING RELATIONSHIP WITH
USAID
----------------------------------------------------- Appendix III:3.2
Agencies that worked with USAID told us that, in general, USAID does
not cooperate with them and relegates to them the role of contractor
rather than collaborator. Agencies across the government reported
problems with lack of interaction with USAID, inability to get phone
calls returned, delays in responding to project proposals, and lack
of substance during meetings. USAID officials, in turn, told us that
other agencies do not understand the USAID process or USAID's need to
maintain accountability for funds being well spent. They also told
us that USAID was overwhelmed with the responsibilities of program
implementation and lacked the time and staff to work with other
agencies. We found examples of poor relations between USAID and the
Department of the Treasury, EPA, and the Food and Drug Administration
(FDA).
FIVE-MONTH DISPUTE OVER
FUNDS FOR A TREASURY
PROGRAM
--------------------------------------------------- Appendix III:3.2.1
Treasury has received funds from USAID since fiscal year 1992 to
place resident advisers in finance ministries or central banks in FSU
states. In October 1993, Treasury submitted a request to USAID for
$10.8 million in additional funds for its resident adviser program.
This request was based, in part, on discussions Treasury had with FSU
officials about their need for resident advisers. In its request,
Treasury said it needed the additional funds by November 1993 to
ensure that advisers already placed in countries would not be
repatriated. According to a Treasury official, USAID did not respond
to Treasury's request until the Coordinator's Office intervened.
In a November 1993 memorandum to the Coordinator, USAID expressed
concern about Treasury's request for additional funds for the
program. In particular, USAID was concerned that Treasury was slow
in implementing the program and had a low expenditure rate of funds
already transferred. By the end of fiscal year 1993, Treasury had
expended $1.98 million of the $5 million transferred from USAID.
After a series of meetings, USAID agreed in December 1993 to provide
$2.1 million in new funds via an amendment to the existing
interagency agreement with Treasury. USAID transferred these funds
in January 1994. Treasury viewed this as an interim solution to keep
the existing program going and sought $8 million to expand the
program under another amendment to the interagency agreement. In
addition, three Treasury advisers already in the field did not sign
on for a second year with the program, in part because of the
uncertainties involved in the future of the program.
After a series of delays, meetings, and memorandums, USAID did not
formally respond to Treasury's request until February 1994. USAID
proposed giving Treasury $3 million and access to USAID's
contractors. Treasury still sought $8 million for its fiscal year
1994 program. The issue was finally resolved in March 1994 at a
meeting brokered by the Coordinator between the Treasury Under
Secretary for International Affairs and USAID's Assistant
Administrator for Europe and the NIS. Faced with high-level pressure
from Treasury, USAID agreed to transfer $8 million to Treasury.
Actual transfer of the funds did not take place until July 1994 due
to delays in the congressional notification process.
The 5-month negotiation between Treasury and USAID over funding for
the expanded financial adviser program strained relations between the
two agencies. Treasury wanted to quickly take advantage of
opportunities to place financial advisers with the FSU governments.
Instead, in Treasury's opinion, these opportunities were lost due to
the months-long negotiations with USAID, and program implementation
was delayed. In USAID's opinion, Treasury had sufficient funds to
place advisers and continue program implementation. This lengthy
process took place, in part because, although USAID officials did not
think further funding for the program was warranted, it could not
make this decision stand due to pressure from Treasury.
USAID RESISTS USING EPA'S
EXPERTISE
--------------------------------------------------- Appendix III:3.2.2
Determining EPA's role in the FSU environmental program and under
what conditions EPA would function was a source of significant
conflict in the start-up of the environmental program in the FSU.
EPA saw itself as having a strong and substantial role with
considerable independence based upon its expertise, while USAID
emphasized its own expertise and programwide responsibilities as
reasons to limit EPA's role. USAID's close management of EPA's
program development within the context of USAID's own management
start-up problems in the FSU led to friction and delays.
The EPA has been doing environmental work in the Soviet Union, and
later the FSU, under scientific cooperative agreements for the past
20 years. It had also more recently managed environmental assistance
programs in the industrialized countries of Central and Eastern
Europe. EPA officials suggested that this expertise should have
given the agency a strong and substantial role in implementing
environmental projects in the FSU. A USAID official countered that
while USAID did see a role for EPA in the FSU environmental program
and agreed that EPA did have experience in the FSU, EPA did not have
extensive experience managing technical assistance projects in the
FSU. A USAID official cited USAID's experience in the environmental
area in industrializing countries such as Indonesia and Thailand as a
basis for USAID's lead role in building an environmental program in
the FSU.
EPA agreed that it was USAID's and the State Department's
responsibility to set the context for developing specific projects
with a statement of major foreign policy and assistance objectives.
However, once EPA's participation in the program was set, according
to officials from EPA and the Coordinator's Office, USAID was
reluctant to give up program design and implementation
responsibilities. EPA officials and officials from the Coordinator's
Office described USAID as trying to use EPA as a contractor. For
instance, an EPA official stated that when EPA and USAID were
originally negotiating EPA's involvement in environmental programs in
the FSU, USAID wanted to closely manage EPA's input through a
Participating Agency Service Agreement (PASA). A PASA essentially
makes USAID responsible for initiating requests for services on the
part of the participating agency. According to the EPA official, EPA
resisted USAID's offer for a PASA because, in its opinion, EPA would
have less independence under a PASA than would a USAID contractor.
The final arrangement between USAID and EPA included both a PASA and
an interagency agreement.
A USAID official said that the agency does not try to use EPA as a
contractor. USAID stated that since USAID has management oversight
responsibilities, it must require monitoring and approval of the use
of funds appropriated through USAID. USAID did not disagree that it
originally tried to use EPA's expertise through a PASA, but it denied
that a PASA is more restrictive than a normal USAID/contractor
relationship.
At USAID's request, EPA eventually put together a $15-million
proposal, and with the help of the Coordinator, obtained agreements
from USAID for $13.2 million in funding. However, USAID continued to
closely manage EPA's program development. A USAID official stated
that, based upon its experience in Central and Eastern Europe with
EPA, USAID was concerned that EPA's project management capabilities
were weak and that EPA did not cooperate effectively with USAID field
offices. EPA asserted that evaluations of its Central and Eastern
Europe program found no such flaws.
USAID's close management of EPA in the context of its own management
problems slowed the implementation of EPA's programs. According to
one EPA official, implementation of environmental activities was
delayed for over a year while USAID searched for a contractor to
review EPA's plans. Additional delays resulted from EPA's need to
negotiate project approval both with the USAID-NIS Task Force in
Washington and the USAID Mission in Moscow. A USAID official
explained that the USAID-NIS Task Force environmental office
responsible for negotiating with EPA was understaffed, and that this
may have led to delays in reviewing EPA's submissions. A USAID
official acknowledged that a contractor had to be found to review
EPA's proposals and that EPA also had to negotiate with the USAID
mission in Moscow. However, the USAID official blamed some of the
delay on EPA's mistakes in following USAID's procedures for
submitting project work plans.
By spring 1994, USAID believed it had dealt with the understaffing
problems in its environmental office and had cleared up EPA's
confusion on how to submit project documents for review, and an EPA
official said their relations with USAID had improved. An EPA
official stated that USAID had accepted EPA, if not as a partner,
then as an independent agency with much to contribute.
USAID DELAYS TRANSFER TO
FDA FOR 6 MONTHS
--------------------------------------------------- Appendix III:3.2.3
In September 1993, the FDA entered into discussions with the Russian
government on Russian registration of U.S. drugs. Under a
Memorandum of Understanding finalized in February 1994, all
FDA-approved, U.S.-produced drugs will have an expedited (90-day)
registration procedure in the Russian Federation. This would make it
easier for the Russians to obtain much-needed drugs from the United
States. FDA, Commerce, and the State Department Coordinator's office
thought this was a good idea for trade and humanitarian reasons.
FDA conditioned its involvement in the negotiations on USAID's
agreement to provide the necessary funds. USAID had already
transferred $900,000 to FDA under a PASA for other activities. USAID
informed FDA in September 1993 that these would be the only funds
available for the negotiations. On October 8, 1993, FDA informed
USAID it had already committed the funds from this PASA for other
activities. FDA said it would be willing to use funds from the PASA
to carry out the negotiations, provided USAID made additional funds
available to replace those used for the negotiations. FDA did not
want to scale back the activities it had already committed to cover
the costs for the negotiations. Later that month, FDA sent a revised
budget to USAID requesting $289,000 in additional funds for carrying
out the negotiations.
On October 20, 1993, USAID agreed to allow FDA to use funds from the
existing PASA for the negotiations, thereby displacing already
planned activities. USAID also asked FDA for a list of the planned
activities under the PASA that would be displaced by the costs of
conducting the negotiations. USAID said it was their "intention to
consider" providing funding at a later date to cover the displaced
activities. Although FDA had told USAID the funds from the PASA had
already been committed, USAID officials told us that their records at
that time showed that FDA had sufficient funds available to conduct
negotiations without displacing other activities. USAID planned to
let FDA use funds from the existing PASA to cover the immediate costs
of the negotiations and later reimburse FDA through a new PASA.
However, FDA had been reporting actual expenditures, not accrued
expenditures, to USAID, and in a February 7, 1994, letter to USAID,
FDA reported it had actually exhausted the available funds. USAID
was unable to use fiscal year 1994 money to cover FDA's displaced
activities, due to a Senate Appropriations Committee hold. According
to USAID and FDA officials, FDA successfully pressured USAID to come
up with the money.
When FDA, with the support of the Commerce Department and the
Coordinator's Office, asked for additional funds to conduct
time-sensitive Memorandum of Understanding negotiations for medical
devices and food products, USAID agreed to provide funds, provided
that FDA submit additional documentation to meet USAID's internal
requirement. USAID also cautioned FDA against undertaking any new
Memorandum of Understanding negotiations until a new PASA was
developed. In response, on April 21, 1994, the Coordinator wrote a
memorandum to USAID's Assistant Administrator for the Bureau for
Europe and the NIS asking that "inherent bureaucratic delays . . .
be avoided," noting the time sensitive nature of such discussions.
The Coordinator also questioned the relevance of USAID's request for
further documentation from FDA. USAID noted that their contracting
office requires a statement of scope of work and budget to negotiate
an agreement with any agency.
FDA and USAID officials we spoke with expressed deep frustration with
the discussions between the agencies regarding funding for Memorandum
of Understanding activities. USAID officials said they resented
pressure from FDA and other agencies on USAID to provide the funding.
FDA officials in turn told us that USAID treated FDA "worse than a
contractor." Officials from both agencies said these differences were
not resolved at the Health Sector Working Group chaired by the
Coordinator's Office.
USAID DENIES CENTERS FOR
DISEASE CONTROL'S FUNDING
REQUEST
--------------------------------------------------- Appendix III:3.2.4
In 1992, the Ukrainian Ministry of Health asked the United States to
provide assistance to deal with the growing number of diphtheria
cases. The Centers for Disease Control (CDC), at USAID's request,
conducted a quick, 10-day assessment of Ukrainian vaccine needs in
October 1992. CDC officials came away from the trip realizing there
was an urgent need for epidemiological investigations in Ukraine and
requested additional funds from USAID for this purpose. USAID funded
a second trip in February 1993 but, according to a CDC official, did
not express much interest in continuing to use CDC. USAID focused
its resources on emergency support for the Caucasus nations and
Tajikistan. USAID cautioned CDC not to initiate activities in
Ukraine unless funding was secured.
Meanwhile, the number of diphtheria cases in Ukraine increased nearly
30-fold from 1990 to 1993. CDC officials were concerned about this
rapid increase, both for humanitarian reasons and the fear that
diphtheria in the FSU might spread to the United States. To address
these issues, CDC used its own funds to send a team to Ukraine in
February 1994. During the visit, a member of the CDC team met two
USAID officials who were also in Ukraine to examine the Ukrainian
health situation, clarify conflicting and confusing information about
health needs in Ukraine, and recommend possible courses of action.
The officials incorporated CDC data into their report to USAID, which
eventually formed the basis for a USAID request for applications from
private voluntary organizations to address health problems in Ukraine
with hepatitis B, diphtheria, and diabetes.
On April 1, 1994, USAID released the request for application to
implement the humanitarian assistance portion of the $15-million
humanitarian health assistance activity in Ukraine. A second portion
of the activity will focus on fostering local production of essential
drugs. CDC requested $8,100 of the humanitarian assistance funds
from USAID for a follow-on May 1994 visit. On April 25, 1994, USAID
informed CDC it would not support the proposed trip, but would
consider funding later visits under the authority of a PASA then
being negotiated. On April 28, 1994, a representative from a private
voluntary organization called CDC and told them his group had just
been awarded a $10-million cooperative agreement with USAID. The
private voluntary organization representative asked CDC if it could
provide any assistance on diphtheria in the Ukraine.
In May 1994, at USAID's request, the Department of Health and Human
Service's Office of International Health provided funding for the
follow-on CDC visit from money previously transferred from USAID to
support USAID activities in the FSU. USAID also provided some of its
own funds to support a CDC official taking part in the private
voluntary organization's assessment visit on hepatitis B in July
1994.
While CDC eventually received money for additional trips, the larger
issue of USAID and CDC's relationship remained. CDC was concerned
about the way USAID utilized expertise within the U.S. government
and the perceived reliance on private contractors. CDC officials
questioned why USAID used private organizations when expertise
already exists within the U.S. government. CDC officials also
expressed concern that USAID does not work with CDC when selecting
contractors. In their view, USAID lacks the expertise to understand
technical medical areas, yet awards contracts in these areas without
any input from CDC.
USAID officials said that the agency's continued commitment to fund
CDC activities in diphtheria and other areas demonstrates that USAID
values CDC's capacity and expertise. USAID points to recently signed
or pending agreements with CDC worth $8.2 million for work in the FSU
as examples of this commitment. USAID officials also told us that
officials from other agencies do not fully appreciate the processes
and requirements USAID has to adhere to, particularly when it comes
to selecting a contractor.
THE COORDINATOR AND USAID HAVE
DIFFERENT PERSPECTIVES ON THE
FSU PROGRAM
------------------------------------------------------- Appendix III:4
The Coordinator's Office and USAID have different views on a variety
of issues regarding the U.S. program that are at the core of their
relationship. The Coordinator has authority in areas where USAID
used to have purview, for example, in setting project funding levels.
Until USAID and the Coordinator's Office define their roles and come
to agreement on policy issues such as use of contracts, the length of
the program, and utilization of other U.S. agencies, the
coordination of U.S. programs for the FSU will continue to be
difficult.
USAID officials define the agency's role as implementing the
assistance program financed under the Freedom Support Act. They see
the Coordinator's role as setting overall policy governing the
implementation of the program. The Coordinator's Office agrees that,
theoretically, they should leave implementation to USAID and the
other implementing agencies. However, some of the actions USAID has
taken to implement the program, such as using large contracts or
relying on private contractors, raises apprehensions in the
Coordinator's Office. In particular, Coordinator's Office officials
were concerned that USAID's implementation of the program may, in
some instances, be at odds with U.S. policy. For example,
Coordinator's Office officials pointed to programs in commodity
storage and rule of law where actions by USAID or its contractors may
have been at odds with U.S. policy. Although frustrated with the
amount of time spent arbitrating interagency battles, Coordinator's
Office officials felt their involvement was necessary to ensure that
implementation matched policy. USAID officials expressed concern
that the continued intervention of the Coordinator's Office in
implementation disputes amounted to micromanagement, which delayed
program decisions and implementation and led to the inefficient use
of management resources.
The Coordinator's Office sees the FSU program as short term and
transitional. Officials there expressed concern that the actions of
USAID and some of USAID's contractors could draw the United States
into a long-term program. The Coordinator's Office is also
apprehensive about the role and impact of USAID's contractors in
politically sensitive areas such as democratization activities. The
result is that the Coordinator's Office attempts to closely monitor
and on occasion regulate what USAID considers its normal
implementation activities. For instance, until recently, the
Coordinator's Office insisted upon approving all travel to the FSU by
USAID or its contractors. The Coordinator's Office also cleared
USAID's cable traffic to the FSU and has become involved on occasion
in the contract award process. According to the Coordinator, recent
efforts to work out more flexible clearance processes have met with
mixed success.
USAID and the Coordinator's Office agreed that decisions on whether
to use U.S. agencies or the private sector should depend on program
objectives and the skills needed to carry out those objectives. In
practice, USAID and the Coordinator's Office differed at times when
making these decisions. On several occasions, USAID proposed
rejecting or partially funding requests from other agencies only to
have its position overturned by the Coordinator. The Coordinator was
more willing to use U.S. agencies than was USAID. Officials from
the Coordinator's Office told us that the FSU program is a U.S.
governmentwide program, not a USAID program. Therefore, USAID should
work more closely with other U.S. agencies. In USAID's opinion,
funding is not an entitlement for any agency.
SIZE, SCOPE, AND STATUS OF PROGRAM
FOR THE FSU
========================================================== Appendix IV
Table IV.1
U.S. Obligations and Expenditures by
Each Agency Implementing Grant Programs
in the FSU (Fiscal Years 1990 through
1993 as of 9/30/93)
(Dollars in thousands)
Percent
Percent of
of total obligatio
Obligated obligatio Expended n
Agency dollars ns dollars expended
---------------- --------- --------- --------- ---------
USAID\a $ 507,490 48.5 $160,448 31.6
USDA 123,599 11.8 50,080 40.5
Department of 102,654 9.8 45,386 44.2
Energy
DOD\b 100,094 9.6 48,801 48.8
U.S. Information 90,645 8.7 61,461 67.8
Agency
Department of 27,530 2.6 15,645 56.8
State
National 25,281 2.4 8,603 34.0
Aeronautics and
Space
Administration
Peace Corps 15,114 1.4 12,948 85.7
TDA 15,043 1.4 6,727 44.7
Department of 13,122 1.3 12,505 95.3
Health and
Human Services
Department of 10,873 1.0 2,423 22.3
Commerce
Treasury 3,747 0.4 2,096 55.9
Department
National Science 3,614 0.3 3,614 100.00
Foundation
EPA 3,564 0.3 1,889 53.0
Nuclear 1,899 0.2 716 37.7
Regulatory
Commission
Overseas Private 1,055 0.1 362 34.3
Investment
Corporation
Arms Control and 515 0.0 175 34.0
Disarmament
Agency
Department of 30 0.0 30 100.0
Transportation
Department of 24 0.0 24 100.0
Justice
============================================================
Total $1,045,89 100.0 $433,932 41.5
1
------------------------------------------------------------
\a Of the $702 million available to USAID for the FSU during the
period fiscal years 1990 through 1993, it obligated $507 million for
its own program. Of this amount USAID expended $160 million. USAID
transferred $135 million to other agencies, which in turn obligated
the funds to implement projects in the FSU. Of the $135 million, $79
million was expended. This does not include the $1.6 billion
supplemental for fiscal year 1993.
\b Congress authorized DOD to transfer up to $400 million for the CTR
Program in fiscal year 1992 and fiscal year 1993. DOD lost access to
$212 million of the 1992 CTR program transfer authority at the end of
fiscal year 1993 because it did not transfer the funding within the
allotted time. In addition to the CTR program, DOD implemented two
other programs in the FSU--the International Military Education and
Training Program and a science and technology acquisition program.
These two programs obligated $34 million.
Table IV.2
Agency Appropriations for FSU Programs
Excluding USAID and DOD (Fiscal Years
1990 through 1993)
(Dollars in thousands)
Obligation Expenditur
Implementing agency s es
------------------------------------ ---------- ----------
Department of Agriculture $ 80,045 $ 8,380
U.S. Information Agency 54,080 41,490
Department of Energy 48,035 19,255
National Aeronautics and Space 25,281 8,603
Administration
Peace Corps 14,802 12,698
Department of State 13,945 7,947
Department of Health and Human 10,958 10,958
Services
TDA 7,012 3,947
National Science Foundation 3,514 3,514
EPA 1,484 1,484
Arms Control and Disarmament Agency 185 125
Department of Justice 24 24
============================================================
Total $259,364 $118,424
------------------------------------------------------------
Table IV.3
Obligations and Expenditures in the FSU
by Program Area (Fiscal Years 1990
through 1993)
(Dollars in thousands)
Percent Percent
Obligated of total Expended of total
Program area dollars obligated dollars expended
---------------- --------- --------- --------- ---------
Private-sector $ 179,416 17.2 $ 53,154 12.2
development
Emergency 111,859 10.8 85,917 19.8
humanitarian
assistance
Nuclear weapons 102,746 9.8 38,146 8.8
and non-
nuclear defense
equipment
Exchanges and 99,954 9.6 62,179 14.3
training
Other 88,111 8.4 56,369 13.0
Food systems 75,285 7.2 18,052 4.2
improvement
Democratic 72,665 6.9 21,624 5.0
reform
Food aid 66,928 6.4 4,821 1.1
Environment 56,726 5.4 20,535 4.7
Energy 42,510 4.1 11,807 2.7
efficiency and
energy market
reform
Economic 38,111 3.6 9,344 2.2
restructuring
and finance
Health care 28,494 2.7 12,366 2.8
improvement
Space research 25,281 2.4 8,603 2.0
Housing sector 23,300 2.2 7,732 1.8
initiatives,
including
military
resettlement
U.S. export 15,043 1.4 6,727 1.6
market
development
Scientific 14,521 1.4 14,091 3.2
research awards
Defense 2,570 0.2 1,092 0.3
conversion
Military 1,372 0.1 1,372 0.3
education and
training
============================================================
Total $1,045,89 100.0 $433,923 100.0
1
------------------------------------------------------------
Table IV.4
Grant Program to the FSU: Expenditures
by Geographical Location (Fiscal Years
1990 through 1993)
(Dollars in thousands)
Percent of
Country Dollars expended expenditures
-------------------- ------------------ ------------------
Russian Federation $ 213,255 49.1
FSU-wide 80,602 18.6
Armenia 39,642 9.1
Ukraine 26,788 6.2
Georgia 13,710 3.2
Soviet Union 12,527 2.9
Kazakhstan 11,145 2.6
Belarus 7,378 1.7
Kyrgyzstan 6,125 1.4
Tajikistan 5,644 1.3
Uzbekistan 5,354 1.2
Moldova 5,118 1.2
Turkmenistan 2,540 0.6
States with nuclear 2,429 0.6
weapons
Azerbaijan 1,673 0.4
============================================================
Total $433,929 100.0
------------------------------------------------------------
Table IV.5
Expenditures\aof U.S. Donations of Food
and Excess Stocks to the FSU by
Geographical Location (Fiscal Years 1992
through 1993)
(Dollars in thousands)
FY 92-93 Percentage of FY
Country expenditures 92-93 expenditures
-------------------- ------------------ ------------------
FSU-wide $ 39,019 3.2
Armenia 149,204 12.2
Azerbaijan 10,112 0.8
Belarus 95,327 7.8
Georgia 11,909 9.2
Kazakhstan 41,561 3.4
Kyrgyzstan 85,745 7.0
Moldova 33,942 2.8
Russian Federation 525,424 43.1
Tajikistan 12,072 1.0
Turkmenistan 51,036 4.2
Ukraine 53,565 4.4
Uzbekistan 11,547 0.9
============================================================
Total $1,220,461 100.0
------------------------------------------------------------
\a Only two agencies made donations to the FSU--DOD and USDA. USDA
obligated $1.234 billion for its donation program (commodities valued
at $952 million and transportation costs of $282 million). USDA's
total expenditures were $905 million. USDA defines obligations for
donations as the estimated value of donation agreements signed during
the period fiscal year 1990 through fiscal year 1993. The obligation
for transportation costs represent the estimated costs for
transporting the donations covered by the signed agreements. DOD
obligated $363.6 million for the donation program, and expended $316
million. DOD's donations consisted of food, medicines, and field
hospitals.
Table IV.6
Face Value of Credit Agreements by
Country\a (Fiscal Years 1990\b through
1993)
(Dollars in thousands)
Country FY 91 FY 92 FY 93 Total
------------ ---------- ---------- ---------- ==========
Armenia $ 0 $ 0 $ 0 $ 0
Azerbaijan 0 0 0 0
Belarus 0 24,000 6,230 30,230
Georgia 0 0 7,579 7,579
Kazakhstan 0 0 24,855 24,855
Kyrgyzstan 0 0 0 0
Moldova 0 9,900 10,000 19,900
Russian 0 789,997 1,347,889 2,137,886
Federation
Soviet Union 1,956,298 1,829,920 0 3,786,218
Tajikistan 0 10,000 14,000 24,000
Turkmenistan 0 0 10,000 10,000
Ukraine 0 109,022 316,919 425,941
Uzbekistan 0 0 260,055 260,055
============================================================
Totals $1,956,298 $2,772,839 $1,997,527 $6,726,664
------------------------------------------------------------
\a The credit programs are focused in three sectors: $5.7 billion in
export market development, $591 million in food aid, and $391 million
in private sector development.
\b There were no credits in fiscal year 1990.
Table IV.7
Definition of Face Value by Program
Agency Program Face value definition
---------- ---------- ------------------------------------
USDA General Registration amount
Sales
Manager-
102
USDA Food aid Total loan amount
loans
Export- Loan Value of final commitment; actual
Import guaranties disbursement may occur later
Bank
Export- Direct Value of final commitment; actual
Import loans disbursement may occur later
Bank
Export- Insurance Value of goods shipped under policy
Import
Bank
Overseas Loan Value of commitment
Private guaranties
Investment
Corporatio
n
Oversea Insurance Value of policy committed to project
Private
Investment
Corporatio
n
------------------------------------------------------------
USDA provided $5.007 billion in loan guaranties as part of its
worldwide General Sales Manager 102 loan guaranty program. The bulk
of these guaranties were issued for the Soviet Union (prior to its
dissolution) and Russia, with Ukraine and Uzbekistan receiving
significantly smaller guaranties. General Sales Manager 102 is a
commercial program, with the loan guaranties covering market rate
loans from commercial lenders. USDA also provided $591 million of
concessional food aid loans under the title I and Food for Progress
programs. The Food for Progress program is funded by Commodity
Credit Corporation funds and USDA appropriations.
The Export-Import Bank provided $91 million in direct loans and $257
million in loan guaranties to support projects in Russia. In
addition, the Export-Import Bank insurance programs covered $389
million worth of goods shipped to Ukraine, Uzbekistan, Kazakhstan,
and Russia. These figures do not include the $2 billion oil-gas
framework agreement between Russia and the Export-Import Bank signed
early in fiscal year 1994.
OPIC provided $256 million in insurance for projects in Belarus,
Georgia, Russia, Ukraine, and Uzbekistan and $135 million in loan
guaranties for projects in Russia. The guaranties were used to
support the oil sector and a private Russia country fund.
OBJECTIVES, SCOPE, AND METHODOLOGY
=========================================================== Appendix V
In the absence of centrally available data on U.S. government
projects and programs related to the FSU, we undertook to catalog all
programs or projects that provided U.S. government money, goods, or
services to the countries of the FSU for fiscal years 1990 through
1993. We defined the FSU countries as Armenia, Azerbaijan, Belarus,
Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russian Federation,
Tajikistan, Turkmenistan, Ukraine, Uzbekistan, and the Soviet Union.
During our initial visits with agencies, we specified the financial
and programmatic data we needed.
We asked agencies to respond with automated data files that met the
data requirements contained in our data collection instrument or to
provide their responses by completing a data collection instrument
that we would provide.\1 During these visits, we learned that
collecting the assistance data would not be a straightforward process
because of several factors.
Most agencies do not have readily available, reliable, centrally
maintained data on their own total obligations and expenditures
related to the countries of the FSU. This eliminated the possibility
of acquiring one automated data source from each agency and using it
to answer our questions.
Agencies differed greatly in the terminology they used to refer to a
single set of assistance activities. We worked with each agency to
ensure that each reported information at a consistent level of
specificity. For example, the definition of "project" varied among
agencies. The Overseas Private Investment Corporation uses "project"
to denote an individual financial transaction, such as one direct
loan, and the term "program" to denote a cluster of similar projects.
On the other hand, at USAID, the term "project" means a sector of
assistance efforts. USAID has divided all assistance over the whole
FSU into 13 sectors. The sectors extend over regions of the FSU, not
relating to specific countries. Each sector represents a major line
of effort, with each sector containing a varying number of individual
activities and activity subsets or components.\2 Components are
roughly equivalent to the Overseas Private Investment Corporation
program category. In contrast, EPA considered a project to be equal
to one of USAID's individual activities and DOD considered a project
as equivalent to a cluster of individual efforts, for example,
multiple contracts to furnish armored blankets, as more akin to a
USAID component than to a USAID project.
The meaning of financial terms such as obligations and expenditures
also varied because of differing procedures and circumstances among
agencies. For the Department of Agriculture's Foreign Agricultural
Service, in many instances "obligation" was denoted by distribution
of a public notice of the start of a project. On the other hand,
obligations and expenditures were not meaningful terms at the
Overseas Private Investment Corporation but face value and set asides
(appropriately defined) were applicable counterparts to
characteristics of assistance programs.
USAID said that the term "allocation" does not apply at the
individual assistance activity level. Rather, they use the term
"planned obligations" for allocations. The Overseas Private
Investment Corporation said that for agencies providing commercial
programs, the terms allocations, original and actual obligations, and
reobligated funds were inappropriate because of the nature of their
mission.
Some agencies were unable to clearly distinguish between assistance
and cooperative projects. Projects that they initially said were
cooperative had many characteristics of assistance programs. In
addition, some cooperative projects had so strong an acquisition
element that they seemed to be neither cooperative nor assistance.
Three agencies are engaged in commercial programs providing loans,
food aid (loans), credits, guaranties, or insurance. The terminology
associated with commercial programs varies greatly from the
terminology associated with humanitarian or technical assistance
efforts. The Overseas Private Investment Corporation and the Foreign
Agricultural Service of the Department of Agriculture were especially
sensitive to this distinction.
In general, we defined "program/project" as "a set of activities
organized to achieve a common objective or set of objectives." We
defined "obligation" as the moment when U.S. government money was
legally committed to a project activity. We worked with DOD, the
Department Energy, and USAID to develop specific definitions for
"program/project" with each agency. Agencies whose collaborative or
cooperative projects did not have a strong assistance component had
those projects grouped into new program areas such as space research
or scientific research awards. We also developed a data collection
instrument specifically for commercial programs. For agencies whose
programs did not fall into any of these categories, we developed a
"generic" form. Each of these data collection instruments was
reviewed by knowledgeable agency officials for cogency and clarity.
We modified our data collection instruments to incorporate agency
comments.
We believe that we have captured a large majority of fiscal years
1990 through 1993 programs; however, some agencies were unable to
state definitively that they had identified and provided us
information on all agency programs and projects.
Although we tailored the data collection instruments to the agency,
the core questions related to finances remained the same in all
noncommercial forms. We distributed the data collection instruments
within the following agencies and obtained their answers:
Agency for International Development,
Arms Control and Disarmament Agency,
Department of Agriculture,
Department of Commerce,
DOD,
Department of Energy,
Department of Health and Human Services,
Department of Transportation,
Department of Treasury,
Department of State,
EPA,
Export-Import Bank,
National Aeronautics and Space Administration,
National Science Foundation,
Nuclear Regulatory Commission,
Overseas Private Investment Corporation,
Peace Corps,
TDA, and
United States Information Agency.
--------------------
\1 The data collection instruments were standardized forms that
defined the program and financial data we needed.
\2 USAID's nomenclature to describe its program activity in the FSU
is unique to the FSU program.
MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix VI
NATIONAL SECURITY AND
INTERNATIONAL AFFAIRS DIVISION,
WASHINGTON, D.C.
Louis Zanardi
Richard Boudreau
Marilyn Mauch
Eugene Beye
David Maurer
Elizabeth Nyang