A United States General Accounting Office Washington, D.C. 20548 September 30, 2003 The Honorable Christopher Shays, Chairman The Honorable Dennis J. Kucinich, Ranking Minority Member Subcommittee on National Security, Emerging Threats, and International Relations Committee on Government Reform House of Representatives Subject: Foreign Assistance: USAID’s Operating Expense Account Does Not Fully Reflect the Cost of Delivering Foreign Assistance Humanitarian and economic development assistance has long been an important component of U.S. global security strategy. Since 1962, the U.S. Agency for International Development (USAID) has managed more than $273 billion in such assistance. In fiscal year 2003, USAID estimates that it will obligate about $13 billion for assistance programs in almost 160 countries. In recent years, demands on USAID’s budget and workforce have increased as the agency strives to meet emerging requirements, such as reconstruction efforts in Afghanistan and Iraq and increased funding for health programs. However, USAID officials have expressed concern that funds provided for its administrative or operating expenses have not kept pace with the agency’s requirements. Since 1976, Congress has included a separate appropriation to consolidate USAID’s operating expenses into a single budget item. Congress intended that USAID pay for the administrative costs of delivering foreign assistance (its “cost of doing business”) from an operating expense account separate from its humanitarian and development assistance program funds. 1 These operating expenses are costs incurred primarily for the benefit of the United States rather than the foreign assistance recipient. In accordance with congressional guidance,2 USAID reports all expenses related to U.S. direct-hire staff as operating expenses3 and, based on its guidance on what constitutes the cost of doing business, other operating expenses—from rent to office utilities and supplies. In fiscal year 2003, USAID estimates 1 S. Rept. 94-704. 2 H. Rept. 95-701 and S. Rept. 95-1194. 3 USAID’s Automated Directives System, Functional Series 600, chapter 601 (Funding Source Policy). Page 1 GAO-03-1152R USAID Operating Expenses that it will obligate $668 million for its operating expenses. At your request, we examined (1) trends in USAID’s operating expenses since 1995 and (2) whether charges to USAID’s operating expense account reflect the agency’s actual cost of doing business. To accomplish our objectives, we interviewed cognizant officials in USAID’s regional bureaus and its bureaus for management and policy and program coordination. In connection with other work, we also conducted fieldwork at seven overseas missions. We reviewed budget and workforce data generated by USAID missions and headquarters offices from fiscal years 1995 to 2003. We present our analysis in obligations because this information was readily available in USAID’s annual congressional budget justifications. We converted the obligations data into constant year 2003 dollars to adjust for inflation and better reflect the agency’s purchasing power over the period. Results in Brief According to data USAID reported, over fiscal years 1995 to 2003, USAID’s total obligated operating expenses have ranged from a low of $595.7 million in 1998 to a high of $654.8 million in 1995, and USAID estimates total obligations in 2003 will be about $668 million (in constant 2003 dollars). • The largest administrative category in USAID’s operating expense account is salaries and related support for U.S. direct-hire staff. Obligations for these expenses account for 43 percent ($277.7 million) of USAID’s estimated operating expenses for fiscal year 2003. However, funds obligated for direct-hire personnel declined during fiscal years 1995 through 2001—from $302.5 million to $249.2 million—primarily due to declining levels of direct-hire staff during this period. But, in fiscal years 2002 and 2003, U.S. direct-hire personnel costs have increased over 11 percent. USAID expects these costs to continue rising as it continues its recent hiring efforts. • Three other administrative categories—other staff costs, information technology, and rent—account for about 33 percent ($216.5 million) of USAID’s estimated operating expenses for fiscal year 2003. Although these expenses varied from year to year, the net change in total from fiscal year 1995 was a decline of less than 1 percent. • Between fiscal years 1995 and 2002, operating expense obligations as a percentage of program obligations remained fairly level—averaging about 8.5 percent. However, in fiscal year 2003, the operating expenses Page 2 GAO-03-1152R USAID Operating Expenses to program funds ratio dropped to 5 percent due to large amounts of supplemental funding.4 USAID’s operating expense account does not fully reflect the agency’s cost of doing business primarily because the agency pays for some administrative activities done by contractors and other nondirect-hire staff with program funds. As we noted in our recent report,5 USAID’s overseas missions have increasingly relied on personal services contractors— foreign national personal services contractors make up about 60 percent of its workforce—to manage USAID’s development activities due to declining numbers of U.S. direct-hire staff. Nondirect-hire staff may be paid with either program or operating expense funds. Many of these staff perform administrative duties that directly benefit the United States, and it is often difficult to distinguish between the administrative duties they perform and those done by U.S. direct-hire personnel. In four missions we visited, some foreign national personal services contractors were financial and procurement analysts, secretaries, and drivers. Although these analysts and support staff performed primarily administrative tasks for USAID’s benefit, some were assigned to specific technical teams, and their salaries and support costs were paid from program funds because USAID considered their services directly allocable to these activities and did not report them as operating expenses. According to USAID officials, based on data recently collected from its missions, USAID estimates that about $350 million in program funds will be used to pay for nondirect-hire staff performing both administrative and technical support functions in fiscal year 2003. As a result, the operating expense account and other funds authorized for operating expenses do not fully reflect the cost of delivering foreign assistance. To help provide increased visibility over USAID’s operating expenses and a more realistic accounting of the agency’s cost of doing business, we recommend that the USAID Administrator identify all administrative costs that primarily benefit the United States—whether paid for with operating expense funds or program funds—and report this information to the 4 Primarily, funding provided for relief and reconstruction activities in Iraq and the global initiative to fight human immunodeficiency virus/acquired immune deficiency syndrome. 5 U.S. General Accounting Office, Foreign Assistance: Strategic Workforce Planning Can Help USAID Address Current and Future Challenges, GAO-03-946 (Washington, D.C.: Aug. 22, 2003). Page 3 GAO-03-1152R USAID Operating Expenses Congress in its annual budget requests for operating expense account appropriations. In commenting on a draft of this report, USAID fully agreed with our recommendation. USAID also stated that it is well aware of the issues raised and is taking corrective actions to fundamentally restructure financing for the administration of foreign assistance to reflect the full cost of assistance delivery and match resources with changing circumstances. Background Until the mid-1970s, about two-thirds of USAID’s operating expenses were funded from appropriations to program accounts, and the rest were funded from a separate administrative expenses account.6 In 1975, the House Appropriations Committee noted that when USAID was first established, a large percentage of direct-hire employees implemented assistance projects as technical specialists, and their salaries and support were paid from program funds because they were considered to be working primarily for the benefit of the recipient country.7 USAID staff working for the benefit of both the recipient country and the U.S. government were also paid from program funds, while the remaining staff—whose activities were primarily in the interest of the United States—were paid from the administrative expense account. The Committee noted that this distinction became blurred as USAID delegated more program implementation responsibilities to third parties and its direct-hire staff took on more of a monitoring role. The Committee concluded that operating expense activities paid from program funds did not really differ from those paid from the administrative expenses account and suggested the creation of a separate account that would reflect all operating expenses. In 1976, Congress began providing a line-item appropriation for operating expenses separate from USAID’s humanitarian and economic development assistance programs.8 The accompanying Senate report noted that USAID’s cost of doing business would be better managed if these funds were 6 The administration’s budget request for fiscal year 1975 identified 11 separate funding accounts from which administrative expenses would be funded. 7 H. Rept. 94-53. 8 P.L. 94-330. Page 4 GAO-03-1152R USAID Operating Expenses separately appropriated.9 Congress authorized USAID’s separate operating expense account the following year.10 USAID’s criteria for determining the expenses to be paid from operating expense funds are based on guidance it has received from Congress as well as its assessment of who benefits from a particular activity. A 1977 congressional report stated that “operating costs include not only the traditional ‘administrative expenses,’ but also the substantial cost of support and management of programs and projects (such as technical planning and management of specific projects, contracting, procurement of commodities, engineering services, and handling of trainees from abroad).”11 Congressional reports in the late 1970s directed USAID to fund the costs of all full-time staff in permanent positions from the operating expense account. 12 We also note that since 1976 Congress has approved funding sources other than USAID’s operating expense account appropriation to pay USAID’s operating expenses. For example, in fiscal year 2003, USAID’s estimated appropriations for operating expenses are about 86 percent ($572.2 million) of the agency’s total estimated obligations, and other sources comprise the remaining 14 percent ($95.8 million). Other congressional sources of operating expense funds have included specific uses of program funds and specific amounts in supplemental appropriations for humanitarian and reconstruction assistance—$21 million for fiscal year 2003. In addition, local currency trust funds generated by the sale of U.S. commodities, which totaled more than $27 million at 18 overseas missions in fiscal year 2003, can be used for their operating expenses. However, the Office of Management and Budget offsets the use of trust funds from USAID’s estimated operating expense account requirements. In addition, USAID regulations allow missions to charge a portion of leased office space, utilities, and maintenance costs to program accounts based on the number of program-funded personnel employed at the mission. 9 S. Rept. 94-704. 10 P.L. 95-88, Sec. 129, 22 U.S.C. 2427. 11 H. Rept. 95-240. 12 H. Rept. 95-701 and S. Rept. 95-1194. Page 5 GAO-03-1152R USAID Operating Expenses Enclosure I provides more detail on USAID’s sources of funding for operating expenses in fiscal year 2003. Trends in USAID’s Over fiscal years 1995 to 2002, USAID’s total obligated operating expenses in constant 2003 dollars have ranged from a low of $595.7 million in 1998 to Operating Expenses a high of $654.8 million in 1995, and USAID estimates total obligations in 2003 will be about $668 million.13 However, as table 1 shows, the various administrative categories have varied considerably over this period with the net changes resulting in a modest total decline of about 1.2 percent between fiscal years 1995 and 2003. • The largest administrative category in USAID’s operating expense account is salaries and related support for U.S. direct-hire staff— accounting for 43 percent of USAID’s estimated operating expenses in fiscal year 2003. However, funds obligated for direct-hire personnel declined during fiscal years 1995 through 2001, primarily due to declining levels of direct-hire staff during this period. But, in fiscal years 2002 and 2003, U.S. direct-hire personnel costs have increased over 11 percent. USAID expects these costs to rise as it continues its recent hiring efforts. • Three other administrative categories—other staff costs, information technology, and rent—accounted for about 33 percent of USAID’s estimated operating expenses for fiscal year 2003. Since fiscal year 1995, rent has increased more than 10 percent while other staff costs and information technology declined 6 percent and 3.4 percent, respectively. Although these expenses varied from year to year, the net change in total from fiscal year 1995 was a decline of less than 1 percent. • Twelve other administrative categories account for the remaining operating expenses—about 24 percent in fiscal year 2003. Several categories varied widely over this period. Most notably land and structures ranged from a high of about $21 million in fiscal year 2000 to a low of $241,000 in 1996. Beginning in fiscal year 2004, most funding for new buildings will be provided from a newly established Capital Investment Fund. 13 Including a $21 million supplemental for operating expenses that USAID has not allocated to its administrative categories. Page 6 GAO-03-1152R USAID Operating Expenses Table 1: Table 1: Operating Expense Obligations by Administrative Category, Fiscal Years 1995-2003 (Constant 2003 dollars in thousands) Fiscal years Percentage change Administrative category 1995 1996 1997 1998 1999 2000 2001 2002 2003a 1995-2003 U.S. direct-hire personnel costsb $302.5 $292.3 $268.2 $255.1 $255.2 $254.3 $249.2 $264.5 $277.7 -8.2 Other staff costsc 90.4 87.3 79.6 77.2 77.3 67.8 74.4 78.5 85.0 -6.0 d Information technology 68.2 56.0 47.7 60.0 61.7 64.1 83.8 78.6 65.9 -3.4 Rente 59.4 55.2 54.7 56.8 59.3 57.3 61.6 62.8 65.7 10.5 Goods and services from government accountsf 24.7 24.3 38.0 28.5 29.0 31.7 29.4 33.5 38.2 54.6 Other USAID-contracted servicesg 19.5 14.6 19.4 32.5 38.5 20.0 21.5 21.1 22.3 14.2 Operation and maintenance 14.2 14.3 11.4 11.8 10.8 8.6 11.1 14.0 15.7 10.8 Communications and utilities 20.8 19.1 17.3 18.9 14.1 12.9 13.0 12.1 13.8 -33.5 Land and structures 0.7 0.2 9.8 1.9 12.2 21.0 3.5 4.3 13.3 1,715.1 Security 6.8 7.6 6.8 6.8 7.7 8.2 10.4 9.8 11.6 71.7 Equipment 11.8 19.5 30.0 14.4 19.4 18.3 25.3 18.3 10.1 -14.3 Transportation of goods 15.9 13.0 10.5 11.7 10.8 10.5 9.9 9.2 9.9 -37.8 Supplies and materials 11.8 8.9 9.6 10.5 10.7 11.1 10.9 10.3 8.8 -25.6 Training 5.7 5.9 5.9 8.9 5.5 7.2 10.2 7.0 8.4 47.7 Claims and indemnities 0.6 1.0 0.7 1.1 2.3 0.4 4.1 0.6 0.6 -6.4 Grants, subsidies, and contributors 1.7 1.7 2.4 0 0.2 0.4 1.5 1.2 0 -100.0 h Total $654.8 $621.0 $612.2 $595.7 $614.5 $593.9 $619.9 $625.8 $647.0 -1.2 Source: GAO analysis of USAID data. Note: USAID data are taken from its congressional budget justification documents. a We did not include $21 million provided to USAID in supplemental funding for operating expenses in fiscal year 2003 because USAID has not allocated it among the administrative categories. b Includes compensation, benefits, training, and travel expenses, such as home leave, post-assignment travel, and travel expenses incurred for training. c USAID funds many of its overseas non-U.S. direct-hire personnel using operating expenses because their tasks are administrative in nature, such as providing support to the executive office. d Includes costs for computer equipment, systems design and analysis, maintenance, and support. e Includes domestic and overseas rental payments. f Includes USAID’s portion of administrative costs shared by U.S. agencies with an overseas presence and paid primarily to the Department of State. Page 7 GAO-03-1152R USAID Operating Expenses g Includes operation and maintenance of facilities and goods, security costs, equipment, and transportation of household goods. h Totals may not add due to rounding. As shown in figures 1 and 2, between fiscal years 1995 and 2002, USAID’s program obligations decreased at a faster rate than operating expense obligations, with fluctuations during this period. In constant 2003 dollars, USAID’s program obligations decreased by more than 10 percent—from almost $7.8 billion in fiscal year 1995 to about $6.9 billion in fiscal year 2002. In fiscal year 2003, USAID’s estimated program obligations increased almost 88 percent to $13 billion because of $4.2 billion in supplemental funds for, among other things, relief and reconstruction activities in Iraq and the global initiative to fight human immunodeficiency virus/acquired immune deficiency syndrome. However, USAID’s estimated operating expense account obligations for fiscal year 2003 did not increase at a similar rate. Including $21 million in operating expense funds provided by supplemental legislation, estimated operating expenses increased less than 7 percent. Page 8 GAO-03-1152R USAID Operating Expenses Figure 1: Program Obligations, Fiscal Years 1995 to 2003 Notes: USAID data are taken from its congressional budget justification documents and the Emergency Wartime Supplemental Appropriations Act of 2003 (P.L. 108-11). Fiscal years 1995 to 2002 are actual obligations adjusted to constant fiscal year 2003 dollars. Fiscal year 2003 data are estimated amounts. Fiscal year 2003 operating expenses include $21 million provided by supplemental legislation. Program data for fiscal years 2000 to 2003 include disaster recovery, emergency response, and supplemental funds. Program funding obligations sources include development assistance; child survival and health; development fund for Africa; international disaster assistance; transition initiatives; economic support funds; support for Eastern European democracy; Freedom Support Act; Public Law 480; Iraq relief and reconstruction fund; and credit program funds. Page 9 GAO-03-1152R USAID Operating Expenses Figure 2: Operating Expense Obligations, Fiscal Years 1995 to 2003 Note: See figure 1 notes. As shown in figure 3, from fiscal years 1995 to 2002, USAID’s operating expense obligations fluctuated as a percentage of program obligations but averaged about 8.5 percent. In fiscal year 2003, estimated operating expense obligations dropped to about 5 percent of estimated program obligations, including the supplemental funding. Page 10 GAO-03-1152R USAID Operating Expenses Figure 3: USAID’s Operating Expense Obligations as a Percentage of Program Obligations, Fiscal Years 1995 to 2003 Note: See figure 1 notes. USAID’s Operating USAID’s operating expense account does not fully reflect the agency’s cost of doing business primarily because the agency pays for some Expense Account Does administrative activities done by contractors and other nondirect-hire staff Not Include All with program funds. As we reported in August 2003, as the number of U.S. direct hire foreign service officers has declined over the years, USAID Administrative Costs missions have often hired personal services contractors—usually foreign nationals—to manage development activities and provide technical project support.14 Approximately 60 percent of USAID’s staff are foreign national personal service contractors. Many of these nondirect-hire personnel are engaged in activities that directly support USAID programs and are paid with program funds. 14 GAO-03-946. Page 11 GAO-03-1152R USAID Operating Expenses Many nondirect-hires perform administrative duties that directly benefit the United States, and it is often difficult to distinguish between the administrative duties they perform and those done by U.S. direct-hire personnel. These staff can be paid with program or operating expense account funds. In four missions we visited—the Dominican Republic, Mali, Peru, and Senegal—some foreign national personal services contractors were financial and procurement analysts, secretaries, and drivers. Although these analysts and support staff performed primarily administrative tasks for USAID’s benefit, some were assigned to specific technical teams and their salaries and support costs were paid from program funds because USAID considered their services directly allocable to these activities and did not report them as operating expenses. According to USAID officials, based on data recently collected from its missions, USAID estimates that about $350 million in program funds will be used to pay for personal services contractors performing administrative functions overseas in fiscal year 2003.15 Institutional contract staff also provide administrative and technical services in support of USAID programs. In 2002, for example, USAID estimated that 758 institutional contractor staff were involved in the administration of foreign assistance at an estimated cost of $95 million. Of this total staff, 450 positions were funded from operating expense appropriations ($56 million), and 308 positions were funded from program funds ($39 million).16 USAID is continuing its review of institutional contractors to decide how to characterize their work. A 2002 USAID team examining USAID’s operating expense account found that most of the agency’s evaluations and analyses have been paid with program funds, based on the rationale that these activities are intended to enable the agency to better serve its “ultimate beneficiaries.” But this may not be what Congress intended. 15 One senior level USAID program planning officer told us that about 10 to 15 percent of program funds may be a more realistic estimate of USAID’s cost of doing business (compared with the 8.5 percent average since 1995). 16 According to USAID, these figures were developed as part of a staff study of institutional contractors and were as of September 30, 2002. Page 12 GAO-03-1152R USAID Operating Expenses • The team’s report stated that “although strategy development, project design, evaluation and other activities relate to the agency’s cost of doing business, in the longer run they are essential building blocks of agency operations and are necessary for program oversight. Ultimately, the impact of improved strategies, design, and projects has an impact on the agency’s beneficiaries. In that sense, there clearly is a rationale for providing program funding for these activities.17” • In contrast, a USAID attorney assisting the team noted that a 1980 Senate Appropriations Committee report stated that only such planning and evaluation activities that are project specific should be paid with program funds, but that activities with a primary objective of serving the agency, including analyses for development assistance policy planning, were part of the cost of doing business. Cognizant USAID officials contend that congressional intent has shifted and that from 1980 to the present, Congress has increasingly encouraged the agency to use program funds to support certain administrative costs. However, these officials also stated that the increased reliance on program funded staff for some administrative activities further demonstrates the need to restructure how operating expenses are accounted for to better reflect USAID’s cost of doing business. Conclusion Since 1976, Congress has provided a separate appropriation for USAID’s operating expenses and, over the years, has approved additional funding sources for operating expenses to separate administrative costs from USAID’s humanitarian and development assistance programs. However, as U.S. direct-hire staff levels have declined, overseas missions have hired personal services and institutional contractors and other nondirect-hire staff to manage development activities and perform various administrative duties, but pay for some of these services with program funds. But USAID has not fully identified or reported the extent of these costs. Therefore, separating USAID’s cost of doing business from its humanitarian and development programs is not always done. As a result, the operating expense account and other funds USAID has available for operating expenses do not fully reflect the cost of delivering foreign assistance. 17 U.S. Agency for International Development/Bureau for Policy and Program Coordination, USAID’s Operating Expense Account: Current Practices and Planned Reforms (Washington, D.C.: Oct. 7, 2002). Page 13 GAO-03-1152R USAID Operating Expenses Recommendation for To help provide increased visibility over USAID’s operating expenses, better reflect what USAID spends on program administration, and provide Executive Action a more realistic accounting of the agency’s cost of doing business, we recommend that the USAID Administrator identify all administrative costs that primarily benefit the United States—whether paid for with operating expense funds or program funds—and report this information to the Congress in its annual budget requests for operating expense account appropriations. Such an accounting should form the basis of USAID’s annual budget request for operating expense funds. Agency Comments USAID provided written comments on a draft of this report (see enc. II). It fully agreed with the recommendation. USAID acknowledged that the current structure of the operating expense account does not serve workforce planning needs or foreign policy objectives because (1) staffing decisions are often made according to funding source rather than workforce requirements and (2) as a result, the heavy reliance on short- term contractors has limited USAID’s capacity to respond to foreign assistance needs. USAID also stated that it is well aware of the issues raised in the report and is taking corrective action. USAID noted that, within the past 18 months, it has completed assessments of operating expenses and overseas staffing, a survey of program-funded personnel, and an approach for full costing of assistance at a unit level. It has also initiated a long-term assessment of human resources. As a result of these efforts, USAID is reviewing ways to fundamentally restructure financing for the administration of foreign assistance to reflect the full cost of assistance delivery and match resources with changing circumstances. In addition, USAID officials provided clarification of certain technical matters that we have incorporated into this report, as appropriate. Scope and To examine trends in USAID’s spending for operating expenses and program activities since 1995, we analyzed obligations data reported by Methodology USAID in its annual budget justification documents. We converted obligations for operating expenses and program activities into constant fiscal year 2003 dollars to adjust for inflation and better reflect the agency’s purchasing power during this period. We also met with cognizant budget officials at USAID to better understand the reported operating expense and Page 14 GAO-03-1152R USAID Operating Expenses program funding data. We did not verify the accuracy of USAID’s reported data. To determine whether USAID’s operating expenses reflect its cost of doing business, we reviewed USAID reports and annual budget justifications and met with knowledgeable officials in USAID’s Bureau for Policy and Program Coordination, the U.S. Department of State, and the U.S. Office of Management and Budget. In conjunction with other work,18 we conducted fieldwork at seven overseas missions—the Dominican Republic, Ecuador, Egypt, Mali, Peru, Senegal, and the West Africa Regional Program in Mali.19 We reviewed mission staffing reports to determine whether staff were funded from the operating expense account or program funds and discussed the duties of personnel with cognizant mission officials. Our review was conducted from May through September 2003 in accordance with generally accepted government auditing standards. We are sending copies of this report to appropriate congressional committees, the Administrator of USAID, the Secretary of State, and the Director of the Office of Management and Budget. We will also make copies available to others upon request. In addition, this report will be available at no charge on our Web site at http://www.gao.gov. 18 GAO-03-946. 19 We also examined documents and interviewed officials at USAID’s mission to Indonesia at its temporary location in Arlington, Virginia, following its evacuation in October 2002. Page 15 GAO-03-1152R USAID Operating Expenses If you or your staff have any questions concerning this report, please contact me at (202) 512-4268 or Al Huntington, Assistant Director, at (202) 512-4140. Other key contributors to this report were Kimberley Ebner, Emily Gupta, and Audrey Solis. Jess T. Ford, Director International Affairs and Trade Page 16 GAO-03-1152R USAID Operating Expenses Enclosure I: Description of Sources of Funding for USAID’s Operating Expenses Fiscal Year 2003 Since 1976, Congress has approved funding sources other than the U.S. Agency for International Development’s (USAID) operating expense account appropriation to pay for operating expenses. Although USAID reports these other funds as operating expenses, they are not part of its single budget item appropriation. As shown in table 2, for example, in fiscal year 2003, other sources comprised 14.2 percent ($95.8 million) of what USAID is estimating as operating expense obligations. Table 2: USAID’s Estimated Obligations for Operating Expenses in Fiscal Year 2003 by Sources of Funding (Dollars in millions) Funding source Amount Percent Annual appropriation $572,200 85.6 Unobligated balance 34,231 5.1 Local currency trust funds 27,557 4.1 Supplemental funding 21,000 3.1 Authorized program funds 7,417 1.1 Reimbursements 5,600 0.8 Total $668,005 99.8a Source: USAID fiscal year 2004 congressional budget justification documents and the Emergency Wartime Supplemental Appropriations Act of 2003 (P.L. 108-11), which provided supplemental operating expense funding. a Does not add to 100 percent due to rounding. Annual appropriation: These are funds for which USAID receives new budget authority every fiscal year and do not include supplemental appropriations for operating expenses obtained during the course of the fiscal year. Unobligated balance: The unobligated balance is of any unobligated funds that USAID has the authority to transfer to the following fiscal year’s operating expense account. Local currency trust funds:20 U.S. commodity import programs normally generate this type of funding. In fiscal year 2003, 18 USAID missions have local currency trust funds. The Egypt mission’s trust fund is the largest 20 USAID cites a recurring provision in its appropriations bills as legal authority to use local currency trust funds. For fiscal year 2003, see Public Law 107-115, section 529. Page 17 GAO-03-1152R USAID Operating Expenses Enclosure I: Description of Sources of Funding for USAID’s Operating Expenses Fiscal Year 2003 (almost $73 million in January 2003), and the mission uses it to pay for training, housing, and dependents’ education. Supplemental funding: Supplemental legislation for an emergency response or large-scale reconstruction generally specifies an amount that USAID may use as operating expenses in administering such activities. Authorized program funds: Some specific program funding can be transferred to the operating expense account. The amount varies according to different rules governing the transfer of program funding from each account. For example, USAID can transfer a limited amount of program funds to the operating expense account to finance travel to countries with USAID activities but no USAID field presence. Additionally, USAID has the authority to transfer larger program funding amounts from other accounts to the operating expense account, not to exceed 10 percent of the originating program account.21 But this action requires presidential approval and is rarely undertaken. Reimbursements: These funds are primarily generated internally by USAID. Examples include reimbursements to USAID from the its Office of the Inspector General or the Development Credit Program—units that receive separate operating expense appropriations—for services by USAID, such as computer services and rent. Proceeds from the sale of equipment overseas are also included in this category. 21 Foreign Assistance Act of 1961, as amended, title 22, section 610a. Page 18 GAO-03-1152R USAID Operating Expenses Enclosure II: Comments from the Agency for International Development Page 19 GAO-03-1152R USAID Operating Expenses Enclosure II: Comments from the Agency for International Development Page 20 GAO-03-1152R USAID Operating Expenses Enclosure II: Comments from the Agency for International Development (320191) Page 21 GAO-03-1152R USAID Operating Expenses This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. 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Foreign Assistance: USAID's Operating Expense Account Does Not Fully Reflect the Cost of Delivering Foreign Assistance
Published by the Government Accountability Office on 2003-09-30.
Below is a raw (and likely hideous) rendition of the original report. (PDF)