PUBLIC POLICY UPDATE April 12, 2013 WASHINGTON UPDATE InterAction Budget and Appropriations Update On Wednesday, , the

Obama Administration unveiled its $3.77 trillion budget proposal for fiscal year (FY) 2014. It includes $52 billion for the International Affairs Budget (150 account), account of which $48.2 billion is in the base budget and $3.8 billion is in Overseas Contingency Operations (OCO). Presidents ts Request Moves OCO Funding into the Base International Affairs Budget For supporters of the 150 account, the presidents base budget of $48.2 billion for the 150 account compares favorably to both the House and Senate budget committee blueprints, which have allocated only $38.7 billion and $45.6 billion respectively to the 150 base account (they have not released recommendations on funding levels for OCO). As OCO funding declines, eclines, it is critical that base funding for critical development and humanitarian programs is increased to avoid deep and disproportionate cuts in future years. Modest Request Reflects Current Tight Fiscal Constraints Compared to recent years, the presi presidents FY2014 request for the 150 account is 7% lower than the FY2013 request ($56.2 billion) and 11% lower than FY2010 enacted ($58.6 billion). billion) While the FY2014 request is lower, it is still bett better than the final FY2013 CR postsequestration equestration (FY2013 hereafter) International Affairs base budget, which was down 19% from FY2010 10 levels. Development Accounts Generally Fare Well Compared to FY2013 13 CR Postsequestration Post The he presidents recommendations for health and a number of development accounts are higher than previous enacted levels, as well as the postsequestration levels for FY2013 13. Under the presidents plan, for example, Global Health ($8.3 billion overall) would receive a 3.4% bump over FY2013, and the president resident requested $1.65 billion for the Global Fund to Fight AIDS, Tuberculosis and Malaria. Preliminary numbers appear to be low, however, for other TB funding and for PEPFAR; we e will provide more details as they become available. Several everal other accounts would receive increases over the seques sequester levels, , including the Millennium Challenge Corporation, the International Development Association, the Global Agriculture and Food Security Program, the International Fund for Agricultural Development and the McGovern-Dole McGovern International Food for Education ion and Child Nutrition program program, , though they would receive flat funding compared with presequestration sequestration levels levels. The he overall Development Assistance (DA) number, while higher than last years at first blush, is actually somewhat inflated by the presidents proposed food aid reform (discussed below). So while the overall DA proposed funding level of $2.84 billion is 5% higher than the FY2013 post sequestration level of approximately $2.8 billion billion, , without the additional funding for food aid, it would be just $2.59 billion, or 4% less than the FY2013 funding level. Proposed Levels for Humanitarian Accounts are a Cause for Concern Compared to final FY2013 13 funding, h humanitarian accounts appear to be receiving steep cuts under the presidents proposal. Overall, the four humanitarian humanitarian-focused focused accounts of International 1

Disaster Assistance, Migration and Refugee Assistance, Emergency Refugee and Migration Assistance and Food for Peace Title II would be cut by at least $1.25 billion, and maybe more, in FY2014 compared with FY2013 even after sequestration and proposed changes in Food for Peace Title II. As a result, there are concerns that the presidents funding levels may not be adequate to meet global needs, especially as the world faces ongoing crises in places like Syria and Mali. The Migration and Refugee Assistance (MRA) account would receive the largest cut, coming in $900 million lower than even the postsequestration funding level in FY2013 ($2.66 billion in FY2013 compared with $1.76 billion in FY2014). And while the overall number for the International Disaster Assistance (IDA) account has been increased to $2.045 billion, it is in reality a smaller allocation than last year because it now includes $1.416 billion for food aid (further analyzed below) and just $629 million for the primary function of the account, the Office of Foreign Disaster Assistance (OFDA). The OFDA allocation for FY2013 was approximately $1.15 billion, so the FY2014 funding level for OFDA would represent a $523 million cut in the core OFDA budget. While the request proposes a significant increase from $100 million to $250 million to the Emergency Refugee and Migration Assistance account, it is a relatively small account compared to IDA and MRA. Food Assistance Reform Proposal: an Encouraging Start The last of the four humanitarian accounts, Food for Peace Title II, has probably received the most attention in the run-up to the budgets release, as the president outlined a reform proposal for these programs in his budget. Leading NGOs have agreed on a set of principles to help guide efforts to reform food assistance programs, and initial analysis indicates the proposed reforms would be largely consistent with this set of principles if Congress transfers all of the money as proposed and creates the legislative authority to protect the core purposes of both the emergency and developmental programs under Food for Peace Title II in the new accounts. These principles include making sure any reforms protect the core focus and effective elements of existing food assistance programs, increase the number of people helped, improve the flexibility of programs, and are made in an open, transparent and inclusive process. As outlined, the administrations proposed reforms to U.S. food assistance programs would reportedly allow lifesaving assistance to reach an additional 2-4 million people as well as make gains in flexibility, timeliness and efficiency of these programs. The reforms would zero out the P.L. 480 Title II Food for Peace account and transfer funding from the jurisdiction of the Agriculture Appropriations Subcommittee to three USAID accounts under the jurisdiction of the State and Foreign Operations (SFOPS) Appropriations Subcommittee. A total of $1.416 billion was transferred to three USAID accounts, including $1.116 billion to the International Disaster Assistance account, $250 million to the Development Assistance account (DA), and $75 million to create a new account, the Emergency Food Assistance Contingency Fund. (The $1.116 billion transfer to IDA combined with $300 million that is currently implemented under IDA for cashbased emergency food assistance would result in the aforementioned $1.416 billion for food assistance under IDA). For FY2014, no less than 55% of this funding will be used for the purchase, transport, and related costs of U.S. commodities. The $250 million transfer to DA, combined with an additional $80 million in DA from Bureau for Food Security resources, would result in a total of $330 available for the Community Development and Resilience Fund (CDRF). CDRF would be managed by USAIDs Office of Food for Peace to address chronic food insecurity in areas of recurrent crisis. 2

An additional $25 million would also be transferred from the P.L. 480 Title II Food for Peace account to the Department of Transportations Maritime Administration. All of these reforms and changes will, of course, require congressional action, both in allocating the funding to the SFOPS subcommittee, rather than Agriculture through the so-called 302(b) allocation and in writing the actual reforms into law. InterAction will continue to monitor this closely and keep our members, Congress and other interested parties informed as the budget process and food aid reform progress. UPCOMING HEARINGS Hearing: Examining Ongoing Conflict in Eastern Congo Committee: Senate Committee on Foreign Relations Subcommittee on African Affairs Witnesses: John Prendergast, Enough Project Mvemba Dizolele, Eastern Congo Initiative Father Ferdinand Muhigirwa, Centre dEtudes Pour lAction Sociale, Kinshasa Federico Borello, Humanity United When: Tuesday, Apr. 16, 9:45 a.m. Where: Senate Dirksen 419 Contact: 202-224-4651 http://www.foreign.senate.gov Hearing: Budget Hearing Committee: House Committee on Appropriations Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Witnesses: Tom Vilsack, secretary, Department of Agriculture Dr. Joseph Glauber, chief economist, Department of Agriculture Michael Young, budget officer, Department of Agriculture When: Tuesday, Apr. 16, 10:00 a.m. Where: 2362-A Rayburn Contact: 202-225-2771 http://appropriations.house.gov Hearing: Securing U.S. Interests Abroad: The FY 2014 Foreign Affairs Budget Committee: House Committee on Foreign Affairs Witnesses: John Kerry, secretary, Department of State When: Wednesday, Apr. 17, 10:00 a.m. Where: 2172 Rayburn Contact: 202 225-5021 http://foreignaffairs.house.gov Hearing: Budget Hearing Committee: House Committee on Appropriations Subcommittee on State, Foreign Operations, and Related Programs Witnesses: John Kerry, secretary, Department of State When: Wednesday, Apr. 17, 2:00 p.m. Where: 2359 Rayburn Contact: 202-225-2771 http://appropriations.house.gov

HEARING SUMMARIES U.S. Foreign Assistance: What Oversight Mechanisms are in Place to Ensure Accountability? House Committee on Oversight & Government Reform April 10, 2013 Witnesses: Ambassador Harold W. Geisel, deputy inspector general, Department of State Ambassador Kenneth Moorefield, deputy inspector general for special plans and operations, Department of Defense Michael G. Carroll, deputy inspector general, USAID John F. Sopko, special inspector general for Afghanistan reconstruction Paul Cooksey, special inspector general for Iraq reconstruction Opening Statements: Chairman Darrell Issa (R-CA) Right now billions of tax dollars are being used to fund corruption that includes immediate members of President Karzais family in Afghanistan. $1.1 billion from a U.S. tax-funded program was supposed to go to petroleum, oil and lubricants but there are no records from 2006 to 2011 because all of the records were shredded. This is a problem. Our government has an obligation to ensure oversight mechanisms are put in place to hold the Karzai administration accountable. Ranking Member Elijah Cummings (D-MD) Sopko has drawn attention to issues in Afghanistan and improved oversight and accountability of reconstruction funds. Cookseys office has overseen tens of billions of dollars worth of reconstruction for Iraq. Purpose of assistance is to help the Afghan people learn how to improve their systems. They are not yet ready to handle billions of dollars in assistance without oversight mechanisms. Sopko suggests seven key questions in his quarterly report, which cover a range of issues including our nations strategic objectives, host countrys capacity to sustain the project, etc. Supports Food for Peace program. o Continues to support U.S. farms and has written to President Obama with bipartisan support. Rep. Jason Chaffetz (R-UT) Afghanistan is the most corrupt nation and the U.S. is giving them billions of dollars. o Gave them $50 billion in assistance in FY2011. What is USAIDs suggestion on how to do this better? USAID Forward give the money directly to them with less oversight. Frustrated that USAID wants to increase direct payments, knowing that this is one of the most corrupt government. Thats offensive.

John Sopko The impending end of the mission in Afghanistan has led some to believe the reconstruction efforts are also waning. o Afghanistan will remain the largest recipient of U.S. foreign assistance for years to come. A significant portion of the funds already provided by Congress have yet to be spent. Despite its potential benefits, there are concerns about direct assistance to Afghanistan. o The Afghan government may not have the capacity to manage an account of billions of dollars. o Pervasive corruption may pervert its intended use. These concerns have been heightened recently after USAID completed assessments of 13 ministries. o A review of these ministries has raised red flags. o Special Inspector General for Afghanistan Reconstruction (SIGAR) intends to continue the audit of these assessments. Direct assistance must be accompanied by strict mechanisms established by the U.S. and other international donors to protect funds and ensure they go to the most qualified contractors. Funding should be conditioned not on just meeting measurable outcomes but on providing the U.S. and international donors timely access to books, employees, records, projects and programs financed by U.S. assistance. Michael Carroll When the agency uses U.S.-based contractors, they operate under U.S. law and are subjected to U.S. law enforcement. o When dealing with local implementers the one concern is holding local citizens, grantees and companies accountable when fraud is found. When an assessment identifies vulnerabilities, it is critical that the agency takes the time to work with those industries to mitigate those vulnerabilities. Ambassador Kenneth Moorefield Although ministries have improved over the last two years, they still need to develop greater capacity. A lack of qualified Afghan personnel has been a major obstacle. Paul Cooksey The U.S. lacked leverage over Iraq. o The U.S. could withhold aid, but once money was spent it was spent. o The U.S. had difficulty enforcing conditions. Aside from SIGAR, no U.S. agency checked the status of a project once it was turned over to Iraqi control. There are three major funds: Iraq Relief and Reconstruction Fund; Commanders Emergency Response Fund; Iraq Security Forces Fund. o All of these funds had management problems and had limited established support.

Questioning: Chairman Darrell Issa (R-CA) 1. Views Iraq through a prism of its $143 billion GDP (one-third flows from government and oil revenues) the Iraqi government has a lot of money. Afghanistan is different. 5

Afghanistan has a $20 billion GDP: $2 billion in revenue, $50 billion of military activity and $2-3 billion of economic aid. The U.S. is paying everything that country runs on. Is that a rough statement? Sopko: o The Afghan government collects $2 billion in revenue. $4-6 billion is used just for the security forces. 2. Afghanistan reconstruction is actually constructing a country that never was. Is that correct? In the case of Kabul Bank, $1 billion was lost. With $2 billion of their own money and $50 billion of U.S. money floating around, is there any likelihood that some of the money lost was American? Sopko: o Not certain but it had a major impact on the Afghan economy. We had to put money back in and that money had to come from somewhere. 2. Ultimately a Ponzi scheme including high-ranking people took out money and spent it on luxury homes, and we essentially bailed out their central bank. Sopko: o The money had to come from somewhere. Since the U.S. was supplying most of the money to Afghan economy, its a logical assumption. 3. Can the U.S. transfer money to this government and trust that it will not be stolen by corrupt individuals? Sopko: o If there are enough mechanisms on oversight and if USAID and State Department officials can get out there to look at sites, it will be spent correctly. But without security, we cannot look at the sites. Ranking Member Elijah Cummings (D-MD) 1. How do we ensure recipient governments put these oversight mechanisms in? Where is the hammer behind our request that holds their feet to the fire? Sopko: o This is a necessary precursor to giving the money to the Afghan government. We have to be strong enough to say, No, we are not giving you the money if they refuse. o There were initially supposed to be audit requirements for the Kabul Bank, but the bank did not fulfill them. Once we stood firm and held back money, all of a sudden they did the audit. 2. In a recent comprehensive report, where your primary job was to answer what happened to billions of U.S. taxpayer dollars spent to rebuild Iraq, you revealed that 15% of reconstruction funds were subject to waste. Do you see a parallel with regard to Afghanistan? Cooksey: o An integrated effort among U.S. government participants is necessary, but there were no integrated efforts or planning. o Another major problem was that the U.S. did not consult with and get buy-in from Iraqi government officials we were giving them projects they did not want and did not ask for. Rep. Jason Chaffetz (R-UT) 1. In your 2011 report following a run on Kabul Bank, you wrote that the Afghan government had changed its position. What happened there?

Sopko: o They decided to do the audit but didnt give it to us. 2. How closely does the U.S. monitor the Afghan banking system? Sopko: o Did an audit in July 2011 and found there were serious weaknesses in coordination of U.S. government efforts. Our oversight was inadequate at that time. Carroll: o The Department of Treasury was the primary U.S. entity responsible for monitoring the banks. USAID also had a contract with Deloitte for monitoring inside the bank. Rep. Gerry Connolly (D-VA) 1. What is the accurate percentage of the $100 billion that is attributable to USAID? Carroll: o $2.13 billion (2010), $2.18 billion (2011), $1.84 billion (2012). 2. How well did the Commanders Emergency Response Program (CERP) go, and is there reason to be concerned? Sopko: o Money did disappear. There was a lack of coordination. Cooksey: o CERP was a new, cash program. When the program was small, it seemed to work well. Rep. John Mica (R-FL) 1. Afghans cannot manage the funds and there is a high level of corruption do you see these concerns? Geisel: o As of December 2012, Congress appropriated $90 billion for reconstruction. $51 billion went to security. 2. There is a huge amount of money going to nonsecurity issues, astronomical in relation to the normal amount of money in their budget. There were 20 contractor suspensions during 2011. Geisel: o That was just in Afghanistan. 3. Does that include USAID too? Geisel: o No. 4. Do you have an estimate of how many suspensions there were? Geisel: o No. Rep. Jackie Speier (D-CA) 1. How long were the 20 suspensions? Were there illegal acts uncovered, and were any of the contractors debarred? Geisel: o During 2008-2010 there were two debarments. From FY2011 to present, there have been 81 suspensions and debarments. Moorefield: o The Defense Criminal Investigative service found 216 debarments. 7

2. What is that as a percentage of number of contractors? Moorefield: o Unknown. Sopko: o By the time we get into suspension and debarment, weve lost the money. Rep. Mark Meadows (R-NC) 1. How can we get to the problem before the money is gone? Sopko: o Have to put it in appropriations language and need to incentivize doing good. 2. If we find out requirements arent being met, what do we do? Sopko: o May want to ask the Army Corps what the incentive is not aware of any terminations based on poor performance. 3. Do we address this through contract changing with penalties? Sopko: o Yes need a top to bottom review. Rep. Tammy Duckworth (D-IL) 1. Why cant we go after the U.S. contractors? How many times cumulatively has KBR or DynCorp been recommended for suspension or debarment? Why are we still paying KBR money to do this when they have ripped off the taxpayers? Sopko: o We instituted a policy of Afghan first, so most of our primes are non-U.S. contractors. How do you prosecute them? You cannot prosecute them in U.S. court; you must prosecute them in Afghan court. 2. Do we have a system in place to make sure these primes are not all relatives of President Karzai? Sopko: o Dont have a list of all the contractors (prime and sub) in Afghanistan, but USAID has a list of the primes. We are going to try to get one. 3. Is there a list of all of the times that U.S. contractors have been found to have mismanaged or overcharged contractors? Why do we not know what that amount is? Cooksley: o You have different accounts that are paying for these contracts, which makes it difficult to go from reconstruction money to funds we dont have jurisdiction to review. Rep. Tim Walberg (R-MI) 1. Are we succeeding with our current goals in Afghanistan? Is there a reasonable chance for success in Afghanistan or Iraq with present policies in place? Sopko: o I define success by what the administrations goals are (to ensure Afghanistan is not haven for terrorist organizations) it appears we are succeeding at this. We could do it better, though. Rep. Doug Collins (R-GA) 1. Is it a matter of lacking training? How do we train the officers, and how do we get across that there is a stewardship factor here? 8

Geisel: o Part of the procurement process involves the contracting officer representative, who is on the ground and assures the contracting officer that the work has been done satisfactorily.

Rep. Peter Welch (D-VT) 1. There are a lot of NGOs doing good work in Afghanistan, and they believe in a lot of things like local control and capacity building. Is there anything we can learn from them about how to do this right? Sopko: o Met with some NGOs and was impressed many were on the ground in a low-key way while the Taliban was there. Should consider relying more on smaller organizations. Rep. Jason Chaffetz (R-UT) 1. What mechanisms are in place to make sure the International Narcotics Control and Law Enforcement Affairs (INCLE) is held accountable? Geisel: o Have conducted two audits. 2. What mechanisms are in place moving forward? Geisel: o If they get funding, well do audits. We also do inspections. Rep. Eleanor Holmes Norton (D-DC) 1. What is your forecast for how the host country will respond if they are in charge of getting rid of corruption? Sopko: o Very concerned weve tried to work with the Afghan Ministry of Justice. 2. Are there people in the country working to bring the rule of law? Sopko: o There are some brave Afghans trying to do this. We have to try to help these people, which will be extremely difficult. Rep. Kerry Bentivolio (R-MI) 1. What are your suggestions to incentivize? Sopko: o We do have programs set up (referenced statute set up around the 1860s). 2. What about SIGARs authority? Sopko: o We like that we are a temporary agency. 3. What are other incentives? Carroll: o There are systems in place. Our audits disclose corruption and we act on that. Rep. Steven Horsford (D-NV) 1. As discussed earlier, Cookseys report finds that 15% of reconstruction funds were subject to waste. What is being done to keep this from happening elsewhere? To what extent has the issue of the burning pits been examined? Is there any coordination with the State

Department, Department of Defense, and Department of Veterans affairs, and do we know the extent of exposure of U.S. troops? Sopko: o Will issue a report. We have discovered poor procurement. Most of the incinerators dont work or havent been used. 2. When will this report be issued and can we get a copy? Sopko: o It will be issued at the end of the month. Rep. James Lankford (R-OK) 1. Step one for the U.S. is to send less money out the door right now (until we can oversee what we are sending out). What would you recommend is the second step? Carroll: o We are providing oversight; its a large portfolio. Not all 13 ministries have gotten money. The agency is trying to be thoughtful about this. Rep. Cynthia Lummis (R-WY) 1. Has Secretary Hagel read the SIGAR report? Moorefield: o Unknown. 2. Who is responsible for bringing it to his attention? Moorefield: o SIGAR has the capability and access. It could be brought by this committee. 3. Does Secretary Kerry know about this report? Geisel: o Unknown. 4. Who in the White House knows about this report? Sopko: o Unknown. 5. Who in the White House knows about SIGARs work? Sopko: o Unknown. 6. Would you provide us the names of the people you have briefed on the SIGAR report? Cooksey: o Deputy Secretary Burns at the State Department and others. 7. Has anyone been briefed at the House Appropriations Committee? Cooksey: o Yes. Both subcommittees on Appropriations (SFOPs House Majority Staff was briefed). 8. What are some ways to attach appropriators to these reports? Sopko: o Language was inserted into the appropriations bill and dealt with direct government assistance. o In that language they put in a requirement that before doing direct assistance there had to be a review of the recipient agency and determine how capable they are. o Did anyone follow up? 9. Does it need to be annually reinserted?

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Sopko: o Yes. Carroll: o USAID is incorporating this into their business practices. ARTICLES AND REPORTS

Devex Apr. 8, 2013 Qatar Goes Big on Darfur Pledges for aid to Darfur have reached $600 million for reconstruction and recovery. The largest pledge came from Qatar, which committed $500 million. These pledges will start the implementation of some foundational and short-term activities that have been mentioned in the Darfur development strategy paper. Apr. 9 The Iron Ladys legacy on international development U.K. prime minister from 1979 to 1990, Margaret Thatcher has been an iconic figure symbolizing strength internationally. Her work contributed to one of the biggest donors in the world, the U.K.s Department for International Development, which in the past year spent $13.7 billion in official development assistance. IRIN Apr. 4, 2013 Global aid drops as rich nations struggle As a result of a global financial crisis many wealthy countries are struggling to provide aid according to Organization for Economic Co-operation and Development. Aid fell 4% from 2011 to 2012. Most foreign aid comes from members of the OECDs Development Assistance Committee, but other nations have become vital in providing assistance. Reuters Apr. 9 South Sudan ambush kills five U.N. peacekeepers, seven civilians Seven civilians working for the UN and five UN peacekeepers were killed and at least nine additional peacekeepers and civilians were injured in an ambush in South Sudan on Tuesday. Guardian Apr. 8 Talk point: focus on modern-day slavery In 2011, 21 million people were enslaved, according to the International Labor Organization. The U.S. Department of State says that in that year, there were 4,000 convictions for sex trafficking and 320 convictions for labor trafficking worldwide. Guardian Apr 10 Ethiopia heralds its lead role in expansion of Africas bamboo sector Ethiopia is looking to its huge amount of bamboo to increase growth, reduce deforestation and cut carbon emissions. Foreign investors are eager to get in on the booming industry.
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