FY 2005 Performance and Accountability Report

US AID

FY 2005 Performance and Accountability Report

Mon Dec 26, 2005 12:35

FY 2005 Performance and Accountability Report

The FY 2005
Performance and Accountability Report
http://www.usaid.gov/policy/par05/

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

USAID’s FY 2005 Performance and Accountability Report (PAR) provides performance results and audited financial statements that enable Congress, the President, and the public to assess the performance of the Agency in achieving its mission and stewardship of its resources. The report consists of the Management's Discussion and Analysis (MD&A), which serves as a brief overview of the entire PAR, followed by the Performance Section, Financial Section, and five appendices.

Printed versions of the FY 2005 Performance and Accountability Report are available. Please contact Nick Vivio, PPC/SPP, at 202-712-0175 or Beverly McDonald, M/CFO/APC, at 202-712-4061.

[Note: A fully Section 508-compliant document will be available later this month.]
http://www.usaid.gov/policy/par05/

http://www.usaid.gov/

USAID History Summary
http://www.usaid.gov/about_usaid/usaidhist.html

On September 4, 1961, the Congress passed the Foreign Assistance Act, which reorganized the U.S. foreign assistance programs including separating military and non-military aid. The Act mandated the creation of an agency to administer economic assistance programs, and on November 3, 1961, President John F. Kennedy established the U.S. Agency for International Development (USAID).

USAID became the first U.S. foreign assistance organization whose primary emphasis was on long-range economic and social development assistance efforts. Freed from political and military functions that plagued its predecessor organizations, USAID was able to offer direct support to the developing nations of the world.

The agency unified already existing U.S. aid efforts, combining the economic and technical assistance operations of the International Cooperation Agency, the loan activities of the Development Loan Fund, the local currency functions of the Export-Import Bank, and the agricultural surplus distribution activities of the Food for Peace program of the Department of Agriculture.

While some could argue that the creation of USAID simply represented a bureaucratic reshuffling, the agency, and the legislation creating it, represented a recommitment to the very purposes of overseas development. USAID was established to unify assistance efforts, to provide a new focus on the needs of a changing world, and to assist other countries in maintaining their independence and become self-supporting
Historical Perspective
The 1961 reorganization of America's foreign aid programs resulted from an increasing dissatisfaction with the foreign assistance structures that had evolved from the days of the Marshall Plan, to which USAID and U.S. foreign assistance policy traces its roots.

By the end of World War II, Europe had suffered substantial loses, physically and economically. Responding to Europe's calls for help, the international community established the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (the World Bank) on December 27, 1945. On April 2, 1948, through the enactment of the Economic Cooperation Act, the United States responded by creating the Marshall Plan. While the IMF and the World Bank were created as permanent institutions, the goal of the Marshall Plan was specific: To stabilize Europe, not as a permanent program for European recovery but as an emergency tool of assistance.

When the Marshall Plan ended on June 30, 1951, Congress was in the process of piecing together a new foreign aid proposal designed to unite military and economic programs with technical assistance. On October 31, 1951, this plan became a reality when Congress passed the first Mutual Security Act and created the Mutual Security Agency.

In 1953, the Foreign Operations Administration was established as an independent government agency outside the Department of State, to consolidate economic and technical assistance on a world-wide basis. Its responsibilities were merged into the International Cooperation Administration (ICA) one year later.

The ICA administered aid for economic, political and social development purposes. Although the ICA's functions were vast and far reaching, unlike USAID, ICA had many limitations placed upon it. As a part of the Department of State, ICA did not have the level of autonomy the USAID currently maintains. At the time, multilateral donors (such as those affiliated with the United Nations and the Organization of American States) were playing a greater role in foreign assistance.

The Mutual Security Act of 1954 introduced the concepts of development assistance, security assistance, a discretionary contingency fund, and guarantees for private investments. The Food for Peace program was implemented that year, introducing food aid.

Congressional approval of a revised Mutual Security Act in 1957 lead to the creation of the Development Loan Fund (DLF), which acted as the ICA's lending arm. The DLF's primary function was to extend loans of a kind that the Export-Import Bank and other donors were not interested in or prepared to underwrite - those repayable in local currencies. The DLF financed everything other than technical assistance but was most noteworthy for financing capital projects.

Neither the ICA nor the DLF addressed the need for a long-range foreign development program. That led to the creation of the U.S. Agency for International Development.
The 1961 Foreign Assistance Act

By 1960, the support from the American public and Congress for the existing foreign assistance programs had dwindled. The growing dissatisfaction with foreign assistance, highlighted by the book The Ugly American, prompted Congress and the Eisenhower Administration to focus U.S. aid to developing nations, which became an issue during the 1960 U.S. presidential campaign.

The new Kennedy Administration made reorganization of, and recommitment to, foreign assistance a top priority. It was thought that to renew support for foreign assistance at existing or higher levels, to address the widely-known shortcomings of the previous assistance structure, and to achieve a new mandate for assistance to developing countries, the entire program had to be "new."

In proposing a new United States foreign assistance program in 1961, President Kennedy provided a justification based on three premises: (1) then current foreign aid programs, "America's unprecedented response to world challenges", were largely unsatisfactory and ill suited for the needs of the United States and developing countries, (2) the economic collapse of developing countries "would be disastrous to our national security, harmful to our comparative prosperity, and offensive to our conscience", and (3) the 1960s presented an historic opportunity for industrialized nations to move less-developed nations into self-sustained economic growth.

Today, when foreign economic assistance programs are under scrutiny, it is worth quoting President Kennedy's remarks at length:

"For no objective supporter of foreign aid can be satisfied with the existing program--actually a multiplicity of programs. Bureaucratically fragmented, awkward and slow, its administration is diffused over a haphazard and irrational structure covering at least four departments and several other agencies. The program is based on a series of legislative measures and administrative procedures conceived at different times and for different purposes, many of them now obsolete, inconsistent, and unduly rigid and thus unsuited for our present needs and purposes. Its weaknesses have begun to undermine confidence in our effort both here and abroad.

"Although our aid programs have helped to avoid economic chaos and collapse, and assisted many nations to maintain their independence and freedom--nevertheless, it is a fact that many of the nations we are helping are not much nearer sustained economic growth than they were when our aid operation began. Money spent to meet crisis situations or short-term political objectives while helping to maintain national integrity and independence has rarely moved the recipient nation toward greater economic stability."

Why, then, should the United States continue a foreign economic assistance program?

"The answer is that there is no escaping our obligations: our moral obligations as a wise leader and good neighbor in the interdependent community of free nations--our economic obligations as the wealthiest people in a world of largely poor people, as a nation no longer dependent upon the loans from abroad that once helped us develop our own economy--and our political obligations as the single largest counter to the adversaries of freedom.

"To fail to meet those obligations now would be disastrous; and, in the long run, more expensive. For widespread poverty and chaos lead to a collapse of existing political and social structures which would inevitably invite the advance of totalitarianism into every weak and unstable area. Thus our own security would be endangered and our prosperity imperiled. A program of assistance to the underdeveloped nations must continue because the Nation's interest and the cause of political freedom require it."

The Foreign Assistance Act of 1961 that was enacted as a result of the legislative process begun by President Kennedy was a relatively concise document that recognized the economic and political principles expressed in the President's transmittal message. Development assistance consisted primarily of two programs: (1) a Development Loan Fund whose primary purpose was to foster plans and programs to "develop economic resources and increase productive capacities" (i.e., a significant amount of capital infrastructure), and (2) a Development Grant Fund, to focus on "assisting the development of human resources through such means as programs of technical cooperation and development" in less developed countries.

Three other significant economic assistance programs were included in the new FAA: (1) a guaranty program (now the Overseas Private Investment Corporation) to provide protection assuring United States business against certain risks of doing business overseas, (2) a "supporting assistance" program (now the Economic Support Fund program) to support or promote economic or political stability, and (3) an appropriated contingency fund.

The new directions most emphatically stressed were a dedication to development as a long-term effort requiring country-by-country planning and a commitment of resources on a multi-year, programmed basis. The new focus of development was to achieve economic growth and democratic, political stability in the developing world to combat both the perceived spread of ideological threats such as communism and the threat of instability arising from poverty. The economic development theory of W.W. Rostow, which posited "stages of economic development," most notably a "takeoff into growth" stage, provided the premise for much of the development planning in the newly-formed U.S. Agency for International Development.

In the final analysis, the greatest achievement of USAID and the Foreign Assistance Act of 1961 was that they addressed the goals of setting up country-by-country planning and long-term development planning mechanisms through solving the organizational problems in the then-existing foreign assistance programs.

Fowler Hamilton, who was appointed as USAID's first administrator, assumed his primary goal was to establish an agency founded on good, strong organizational principles that would stand the test of time.

One of the first programs undertaken by the fledgling USAID was the Alliance for Progress. Conceptually set-up in the fall of 1960 by the Act of Bogota and confirmed by the Charter of Punta del Este (Uruguay) in early 1961, the Alliance was a hemisphere-wide commitment of funds and effort to develop the nations of the Americas. The Alliance became the basis for USAID's programs in Latin America throughout the 1960s. President Kennedy promoted the Alliance in trips to Colombia and Venezuela in 1961.

In Asia, USAID's first emphases were on countering the spread of communism, particularly the influence of the People's Republic of China. This quickly ballooned into a large program of assistance based on counter-insurgency and democratic and economic development in Vietnam, which lasted until the withdrawal of American troops in 1975. In Africa, USAID focused on such initiatives as the education of the leadership of the newly-independent countries and meeting other economic and social imperatives.
Post-1960s Efforts to "Reform" Foreign Assistance

The Foreign Assistant Act (FAA), as originally enacted in 1961, contained very few restrictions on how assistance may be provided, and contained only general prescriptions on the kinds of factors that were to be taken into account (e.g., the extent to which the recipient has taken effective self-help measures) prior to the provision of assistance.

In the early 1970s foreign aid fell on hard legislative times to the point that, in 1971, the Senate rejected a foreign assistance bill authorizing funds for fiscal years 1972 and 1973. The defeat of the 1971 bill represented the first time that either House had rejected a foreign aid authorization since the program was first initiated as the Marshall Plan after World War II. Several themes merged to cause the defeat of the bill: (1) opposition to the Vietnam War, (2) concern that aid was too concerned with short-term military considerations, and (3) concern that aid, particularly development aid, was a giveaway program producing few foreign policy results for the United States.

Attempts to reform the foreign assistance program -- particularly the economic assistance program -- were led by the House Committee on Foreign Affairs. Assistance for the poorest sectors of developing nations ("basic human needs") became the central thrust of the reform. To extend assistance directly to the recipient nation's population, Congress replaced the old categories of technical assistance grants and development loans with new functional categories aimed at specific problems such as agriculture, family planning, and education. The aim of bilateral development aid was to concentrate on sharing American technical expertise and commodities to meet development problems, rather than relying on large-scale transfers of money and capital goods, or financing of infrastructure. The structure of the FAA remains today pretty much the way it was following these 1973 amendments.

Attempting to address concerns similar to those raised in 1961 by President Kennedy, legislation drafted at the request of Senator Hubert Humphrey was introduced in 1978 to reorganize the foreign assistance management structure. In the Humphrey bill, an International Development Cooperation Agency was established to coordinate foreign assistance activities as they related to bilateral programs administered by USAID, multilateral programs of international lending institutions then under the purview of the Department of the Treasury, voluntary contributions to United Nations agencies then administered by the Department of State, food programs then administered by USAID, and the activities of OPIC. An International Development Institute would be established within IDCA to address, among other things, private and voluntary organizations and with one of the Institute's constituent parts being the Peace Corps.

The Humphrey bill was not enacted into law. Bureaucratic obstacles within the Executive branch and in Congress operated to limit the statutory impact of the bill to changes in the policy statements contained in the FAA and less sweeping administrative changes.

The IDCA, however, was established by Executive Order in September, 1979. Up until that time, all authority to administer FAA pro