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									    FY 2000
 Accountability
    Report




      U.S. Agency for
International Development
                              Foreword
The Fiscal Year (FY) 2000 Accountability Report is one of three reports the
United States Agency for International Development (USAID) prepares
annually to describe its financial position and the results of its operations.
For FY 2000, the two other reports are the Agency’s FY 2000 Performance
Overview and its FY 2002 Budget Justification.

The focus of the Accountability Report is on the Agency’s consolidated
financial statements and the adequacy of its controls over the obligation and
expenditure of budgetary resources. However, the Accountability Report also
includes brief descriptions of USAID and the results of its operations during
FY 2000, management’s discussion and analysis of the Agency’s financial
and program performance, the Inspector General’s reports on USAID’s
financial statements, internal controls and compliance, and USAID’s plans to
strengthen its financial systems. This additional information is intended to
help the public, the Administration and the Congress assess management
performance and stewardship. The Performance Overview and Budget
Justification documents, on the other hand, provide detailed descriptions of
the results achieved by USAID programs around the world at the country,
operating unit and strategic objective levels.

Electronic copies of all three of these documents are available through the
Agency’s World Wide Web site: www.usaid.gov.

All comments regarding the content and presentation of this report are
welcome. Comments may be addressed to:

                 U.S. Agency for International Development
                    Office of the Chief Financial Officer
                      1300 Pennsylvania Avenue, N.W.
                                 Room 210
                          Washington, DC 20523

For additional information about USAID, please contact:

                 U.S. Agency for International Development
                  Bureau for Legislative and Public Affairs
                      1300 Pennsylvania Avenue, N.W.
                          Washington, DC 20523
                                          100,000 home loans in Poland; and          closing a record number of audit
                                          brought an additional 12 million           recommendations —738. The audit
                                          hectares of land, primarily in Latin       recommendations closed in FY 2000
                                          America and Indonesia, under               resulted in collections or efficiencies
                                          improved management.                       valued at over $209 million.

                                          However, we were not always as             However, we must continue to
                                          successful as we had hoped to be.          address those management
                                          Depending upon the sector, up to 20        challenges that limit our ability to
                                          percent of our operating unit              manage our resources more
                                          objectives did not meet our                efficiently and effectively. We must
                                          performance expectations. We do            continue to improve our ability to
I am pleased to present the U.S.          not expect to meet all of our targets      recruit, train, and retain
Agency for International                  —this would mean we are not                appropriately skilled and
Development’s Accountability Report       challenging ourselves enough— but          knowledgeable people for all of the
for fiscal year (FY) 2000.                we will be using our performance           Agency’s jobs. We must increase the
                                          monitoring and evaluation processes        security of our computer systems as
In last year’s Accountability Report, I
                                          to enhance the performance of              well as our capacity to manage
said that we have solid success
                                          lagging objectives.                        knowledge and share it with our
stories to tell that will convince
                                                                                     partners without compromising
people that foreign aid is a good         A year ago, I also said that I believed
                                                                                     security. And, we must expand our
thing they can support. In our            that it was vitally important to the
                                                                                     ability to do business electronically.
reporting this year, we have tried to     Agency’s mission that we efficiently
make our successes more apparent          and effectively manage our programs        To meet these challenges, we
by focusing on the results achieved       to achieve a solid return on taxpayer      focused the management goal and
by our operating units at the field       funds. A critical step in this regard is   objectives of our revised strategic
level, rather than the higher-level       our use of a new core financial            plan on these challenges. We present
global goals included in our strategic    management system. We began                in this report our discussion of our
plan.                                     using this system on December 15,          FY 2000 management performance
                                          2000. It will greatly improve the          against our new management
On the ground, our successes range
                                          quality of our financial information.      objectives and performance goals.
from Agency efforts in Malawi,
                                          We were also able to establish,
which contributed to a 15% increase                                                  USAID remains committed to
                                          through collaboration with the Office
in rural incomes, to those that                                                      managing for results and to
                                          of the Inspector General, a basis for
prevented outbreaks of major                                                         conforming its systems and
                                          auditing our FY 2000 financial
diseases in Honduras and Nicaragua                                                   operations to Federal requirements
                                          statements. With these two steps and
following a devastating hurricane.                                                   and regulations. Although it will take
                                          the improvements achieved last year
They include, among others, those                                                    USAID several more years to
                                          to our program performance
that enabled 45 grassroots                                                           accomplish all that is required of it, I
                                          reporting systems, I believe that we
organizations to participate in Sierra                                               believe we made substantial progress
                                          are better able to report the results
Leone’s peace negotiations;                                                          against these requirements during FY
                                          and costs of our programs.
increased primary school                                                             2000.
                                          Nevertheless, we must do more to
enrollments among young girls in
                                          meet federal requirements for
Ethiopia, Malawi, Mali, South Africa,
                                          financial reporting fully, and we shall
Peru and Guatemala; reduced
                                          continue to work on this problem.
maternal mortality in Slovakia;
increased the number of births            We also moved to improve the               J. Brady Anderson
attended by medically-trained             Agency’s internal control                  Administrator
personnel in Indonesia, Uganda,           environment by eliminating three           U.S. Agency for International
Bolivia, and elsewhere; generated         management vulnerabilities and             Development
                                         USAID’s financial systems will            outsource selected Agency financial
                                         require continuing management and         operations. Through the Chief
                                         budgetary priority.                       Financial Officers’ Council, we
                                                                                   commissioned a study of the
                                         We continued to improve our
                                                                                   Agency’s financial management
                                         financial policies through new or
                                                                                   operations designed to introduce
                                         revised chapters in our Automated
                                                                                   “best practices” and make our
                                         Directive System (ADS) by
                                                                                   financial operations more efficient.
                                         publishing eight new ADS chapters
                                                                                   We transferred the processing of (1)
                                         and updating two existing ones. We
                                                                                   our payroll to the Department of
                                         improved the quality of our financial
                                                                                   Agriculture’s National Finance
                                         data by reducing the discrepancies
                                                                                   Center and (2) advances to our
                                         between USAID’s and the
As the Chief Financial Officer of the                                              grantees to the Department of Health
                                         Department of the Treasury’s records.
United States Agency for                                                           and Human Services. In
                                         We improved our loan management
International Development (USAID),                                                 collaboration with Treasury and the
                                         records. We adopted a new Standard
my goals are to provide high-quality                                               State Department, we established a
                                         General Ledger posting model for
financial services and information to                                              new Treasury Account to simplify
                                         credit programs, eliminated our
Agency managers, promote the                                                       program budget transfers to the State
                                         backlog of debt-rescheduling
efficient management of Agency                                                     Department. In other areas affecting
                                         notations, and migrated the new
resources, enhance the Agency’s                                                    Agency costs, 85 percent of USAID’s
                                         loan general ledger to the Phoenix
financial policies and systems, and                                                overseas missions were connected to
                                         system.
incorporate continual business                                                     the Agency’s central
process improvements. During fiscal      We improved our internal                  telecommunications network. The
year (FY) 2000, USAID emphasized         management controls by correcting         Agency adopted a policy of using
improving financial systems and          vulnerabilities related to financial      commercial off-the-shelf (COTS)
policies and revising its management     management policies, Year 2000            information management/technology
objectives to focus on those             (Y2K) compliance, and security and        packages to the maximum extent
functions that it must execute well to   access controls to our financial          possible, and the number of the
be a high-performing and efficient       information. Financial management         Agency’s mainframe computer
agency. Guidelines provided by the       policies and essential procedures         systems was reduced.
General Accounting Office and audit      were documented. Approximately
                                                                                   FY 2000 closed with USAID being
findings of the USAID Inspector          400 Agency employees were trained
                                                                                   closer to our goals of enhanced
General helped in this regard. I am      in the management of obligations,
                                                                                   financial policies, systems, and
pleased to report that we made           including expenditure projections
                                                                                   services and more efficient
significant progress in these areas.     and accruals, while 630 USAID
                                                                                   operations, but we have more to do
                                         Washington-based employees were
The core components of our new                                                     to be better managed. We look
                                         trained in operations, procedures,
financial management system,                                                       forward to continuing to implement
                                         and controls prior to implementation
known as “Phoenix,” were installed                                                 our financial modernization strategic
                                         of the Phoenix core financial system.
in fiscal year 2000 and began to                                                   plan (as described in Part E of this
                                         We closed a record number of audit
support the Agency’s Washington                                                    Report) and to reporting our
                                         recommendations (738), which
operations on December 15, 2000.                                                   additional progress next year.
                                         resulted in collections or efficiencies
Phoenix is paving the way for the        valued at more than $209 million.
worldwide integration of USAID’s         We came close to our FY 2000 target
financial information and will enable    for closing recommendations within        Michael T. Smokovich
our greater use of electronic            one year (90 percent planned versus       Chief Financial Officer
processing of financial and other        86.4 percent actual).                     U.S. Agency for International
business transactions. However, full                                               Development
modernization and integration of         We also continued to streamline and
                                                            Contents
                                                                                                                                                    Page

Foreword

Part A – Management Discussion and Analysis                                  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-1
     What Is USAID? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-2
     What Does USAID Do?                . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-2
     How Does USAID Work?                 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-3
     Managing USAID for Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-5
     USAID Program Results              . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-6
         A. Assessing Performance: A Revised Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-6
         B. Verifying Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-7
         C. Summary Performance Assessments                         . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-7
              1. Encourage Broad-Based Economic Growth and Agricultural Development                                             . . . . . . . . . . .A-8
              2. Strengthen Democracy and Good Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-8
              3. Build Human Capacity through Education and Training . . . . . . . . . . . . . . . . . . . . . . . . . .A-8
              4. Stabilize World Population and Protect Human Health . . . . . . . . . . . . . . . . . . . . . . . . . .A-8
              5. Protect the Environment for Long-Term Sustainability . . . . . . . . . . . . . . . . . . . . . . . . . . .A-8
              6. Promote Humanitarian Assistance                      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-8
              7. Achieve Management Excellence                      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-8
     Financial Highlights          . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-10
         A. Program Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-10
         B. Financial Statements              . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-10
         C. Limitations to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-11
     Management Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-11
         A. USAID’s Primary Accounting System                         . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-12
         B. USAID’s NMS Reporting and Resource Management Capabilities                                         . . . . . . . . . . . . . . . . . . . .A-12
         C. Information Resources Management (IRM) Processes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-12
         D. Computer Security Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-12
         E.    Material Nonconformance of Financial Management System . . . . . . . . . . . . . . . . . . . . . . . .A-12
         F.    Annual Assurance Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-13
     Audit Follow-Up Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-13
                                                             Contents
                                                                      (Continued)


                                                                                                                                                       Page

Part B – Financial Statements and Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-1
      Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-3
      Consolidated Statement of Net Cost                    . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-4
      Consolidated Statement of Changes in Net Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-5
      Consolidated Statement of Budgetary Resources                           . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-6
      Consolidated Statement of Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-7
      Statement of Supplemental Information by Major Appropriation                                   . . . . . . . . . . . . . . . . . . . . . . . . . .B-8


Part C – Summary of FY 2000 Program Performance by Operating Unit Objectives . . . .C-1
      Encourage Economic Growth and Agricultural Development (EGAD) . . . . . . . . . . . . . . . . . . . . . . .C-3
      Strengthen Democracy and Good Governance (DG) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .C-11
      Build Human Capacity through Education and Training (HCD) . . . . . . . . . . . . . . . . . . . . . . . . . . . .C-18
      Stabilize World Population and Protect Human Health (PHN) . . . . . . . . . . . . . . . . . . . . . . . . . . . .C-22
      Manage the Environment for Long-term Sustainability (ENV) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .C-41
      Promote Humanitarian Assistance (HA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .C-45


Part D – Inspector General Audit: Reports on USAID’s Consolidated Financial
        Statements, Internal Controls, and Compliance for Fiscal Year 2000 . . . . . . . . .D-1
      Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .D-7
      Report on USAID’s Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .D-15
      Report on USAID’sInternal Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .D-18
      Report on USAID Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .D-29


Part E – USAID’s Financial Remediation Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .E-1
      1. Overview        . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .E-3
      2. CFO Goals and Strategies               . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .E-4
      3. Audited Financial Statements                 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .E-13
      4. Financial Management Systems Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .E-14
      5. Grants Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .E-32
      List of Abbreviations and Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .E-34
 USAID Mission
   Statement
The mission of the
United States Agency
for International
Development is to
contribute to U.S.
national interests by
supporting the people
of developing and
transitional countries
in their efforts to
achieve enduring
economic and social
progress and to
participate more fully
in resolving the
problems of their
countries and the
world.
USAID FY 2000 Accountability Report   A-1




                             Part A
   Management Discussion and Analysis
A-2                                     USAID FY 2000 Accountability Report




         What Is USAID?                 summarized below for each of the             fostering transparent and
                                        Agency’s six principal areas.                accountable government,
The U.S. Agency for International                                                    improved legislative processes,
Development (USAID) is the U.S.         1. Encourage Broad-Based                     and genuine civilian control of
federal agency that implements             Economic Growth and                       the security sector.
America’s foreign economic and             Agricultural Development
humanitarian assistance programs.          (EGAD). To achieve the goal of       3.   Build Human Capacity through
USAID’s history goes back to the           broad-based economic growth               Education and Training (HCD).
Marshall Plan reconstruction of            and agricultural development,             To help develop human capacity
Europe after World War Two and the         USAID undertakes programs to              in USAID-assisted countries, the
Truman Administration’s Point Four         expand and strengthen private             Agency works to expand access
Program. In 1961, President John F.        markets, encourage more rapid             to quality basic education for
Kennedy signed the Foreign                 and enhanced agricultural                 under-served populations,
Assistance Act into law and created        development, and expand access            especially girls and women; and
USAID by executive order.                  to economic opportunity for the           to enhance the contribution of
                                           rural and urban poor. A strong policy     host-country colleges and
Since that time, USAID has been the        environment and strong                    universities to the process of
principal U.S. agency to extend            institutions within recipient             development. With regard to
assistance to countries recovering         countries are two of the most             basic education, USAID
from disaster, trying to escape            important determinants of the             concentrates on improving host-
poverty, and engaging in democratic        overall success of USAID                  country policies and institutions
reforms.                                   programs. Therefore, the Agency           that affect basic education,
                                           continues to place a high priority        supporting the adoption of
USAID is an independent federal            on EGAD programs that address             improved educational practices,
government agency that receives            policy and institutional reforms.         and increasing community
overall foreign policy guidance from                                                 participation in educational
the Secretary of State. The Agency      2. Strengthen Democracy and                  decision-making. Regarding
works in the following six principal       Good Governance (DG). To                  higher education, the Agency
areas, supporting sustainable              achieve the broad goals of                encourages the formation of
development, providing                     democracy, USAID supports                 effective partnerships between
humanitarian assistance, and               programs that strengthen                  U.S. and host-country institutions
advancing U.S. foreign policy              democratic practices and                  of higher education. In certain
objectives:                                institutions and that ensure the          countries, USAID also supports
                                           full participation of women and           improvements in the overall
• Economic growth and agricultural         other groups lacking full access          capacity and performance of
  development                              to the political system. The              colleges and universities.
• Population, health and nutrition         Agency’s programming reflects its
• Environment                              understanding that genuine            4. Stabilize World Population and
• Democracy and governance                 democracy requires not only              Protect Human Health (HPN).
• Education and training                   competitive political processes,         For several decades, USAID has
• Humanitarian assistance.                 but also respect for citizens,           been the leader among donors in
                                           human rights, and the right of           addressing the critical issues of
                                           dissent. It requires both a robust       family planning, health, and
      What Does USAID Do?                                                           nutrition in the developing world.
                                           civil society supported by the rule
USAID pursues its mission by               of law and citizen security              Success has come from
supporting a variety of activities         characterized by an independent          maintaining a field presence that
related to its six principal areas in      judiciary. USAID also supports           enables strong relationships with
presence and non-presence                  the promotion of good                    host country counterparts.
countries. Such activities are             governance through work                  Combining this front line
                                          USAID FY 2000 Accountability Report                                          A-3




   experience with programs to               urban environmental problems           field offices in many of the countries
   research and test innovative              such as sanitation and vehicular       where it has programs. It works in
   technologies has given USAID a            pollution are of particular            close partnership with private
   unique advantage in designing its         concern. In the Europe and             voluntary organizations, indigenous
   programs. In the five priority            Eurasia (E&E) region, programs         organizations, universities, American
   areas of international public             concentrate on policy issues and       businesses, international agencies,
   health—population, child health,          strengthening environmental            other governments, and other U.S.
   maternal health, HIV/AIDS and             standards. Supporting the              government agencies. It has working
   infectious diseases, with                 adoption of cleaner, more              relationships with more that 3,500
   concurrent investments in systems         efficient technologies for energy      American companies and more than
   development and sustainability—           production is an integral part of      300 U.S.-based private voluntary
   USAID is recognized as working            these policy-related efforts as is     organizations.
   at the forefront of technical             supporting industrialized urban
   innovation.                               applications of environmental          In Washington, USAID’s major
                                             practices, especially in the private   organization units are called
5. Protect the Environment for               sector.                                “bureaus.” Each bureau houses the
   Long-Term Sustainability (ENV).                                                  staffs responsible for major
   USAID provides technical and           6. Promote Humanitarian                   subdivisions of the Agency’s
   financial assistance in close             Assistance (HA). The Agency            activities. USAID has both
   partnership with a range of               provides essential food, shelter,      geographic bureaus (which are
   development partners, including           water, and health services to          responsible for the overall activities
   host country governments, non-            reduce suffering and save lives        in the countries where the Agency
   governmental organizations                during disasters. While providing      has programs) and functional
   (NGOs), donors, and                       the basics for survival, USAID         bureaus (which conduct Agency
   international organizations.              improves the capacity of               programs that are world-wide in
   USAID focuses its efforts where           countries to plan and prepare for      nature or that cross geographic
   the need is greatest and where            disasters, mitigate their impact,      boundaries). The Agency has four
   the Agency can have the most              and respond when disaster              geographic bureaus:
   long-term impact. USAID’s                 strikes. In addition, USAID
   approaches to addressing                  supports longer-term                   • Africa (AFR)
   environmental problems vary               rehabilitation and recovery for        • Asia and the Near East (ANE)
   according to the level of                 countries in transition, many of       • Latin America and the Caribbean
   environmental concern and                 which are emerging from                  (LAC)
   according to regional priorities. In      complex emergencies. Programs          • Europe and Eurasia (E&E)
   the Latin America and Caribbean           address the special needs of
   (LAC) region and Africa,                  countries emerging from crises         USAID has two functional bureaus:
   biological diversity and natural          caused by political and ethnic
   resource management programs              strife. USAID helps local              • Global Programs, Field Support
   dominate. Both these regions              institutions promote economic,           and Research (G)
   contain threatened forests that, in       political, and social stability.       • Humanitarian Response (BHR)
   many cases, are the last refuge for
   endangered species. In Africa,            How Does USAID Work?                   In addition, certain major functions
   USAID is giving particular                                                       which serve all bureaus and country
   attention to traditional               USAID is headed by an
                                                                                    programs are assigned to three
   community property rights, and         Administrator and Deputy
                                                                                    headquarters bureaus:
   emphasizes community-based             Administrator, who are appointed by
   natural resource management            the President and confirmed by the
                                                                                    • Management (M)
   approaches. In the Asia and Near       U.S. Senate. It is headquartered in
                                                                                    • Legislative and Public Affairs (LPA)
   East (ANE) and LAC regions,            Washington, D.C. and maintains
A-4                                                    USAID FY 2000 Accountability Report




                                                             Office of the Administrator
                                                               Deputy Administrator

                                                                 Executive Secretariat


                                             Chief                                                  Chief
                                           Financial                                             Information
                                            Officer                                                 Officer


                     Office of the                                                                                     Office
                      Inspector                                                                                          of
                       General                                                                                        Security




     Bureau for                                            Bureau for                                       Office of            Office of Small &
                              Bureau for                                         Office of the
  Policy & Program                                        Legislative &                                 Equal Opportunity         Disadvantaged
                             Management                                        General Counsel
    Coordination                                          Public Affairs                                   Programs              Business Utilization




                               Bureau for                                        Bureau for                                         Bureau for
     Bureau for                                            Bureau for                                    Bureau for Asia &
                            Latin America &                                      Europe &                                          Humanitarian
  Global Programs                                            Africa                                       the Near East
                             the Caribbean                                        Eurasia                                           Response



                                 Field                        Field                 Field                       Field                  Field
                                Missions                     Missions              Missions                    Missions               Offices




• Policy and Program Coordination                      carry out discrete functions for the            • Office of Equal Opportunity
  (PPC)                                                Agency. These five independent                    Programs (EOP)
                                                       offices are headed by Directors who             • Office of the General Counsel
Each bureau is headed by an                            are appointed by the USAID                        (GC)
Assistant Administrator who is                         Administrator.                                  • Office of Small and
appointed by the President and                                                                           Disadvantaged Business
confirmed by the U.S. Senate.                          • Office of the Executive Secretariat             Utilization/Minority Resource
In addition to these bureaus, USAID                      (ES)                                            Center (OSDBU)
has several independent offices that                                                                   • Office of Security (SEC)
                                                   USAID FY 2000 Accountability Report                                                    A-5




The Office of the Inspector General                    timely assistance is needed to            Agency strategic plans at least once
reviews the integrity of Agency                        reinforce institutions and national       every three years to focus its
operations through audits, appraisals,                 order.                                    management objectives much more
investigations, and inspections.                                                                 explicitly on challenges identified by
                                                    • USAID’s multi-country missions
                                                                                                 the Agency’s internal control review
                                                      administer USAID programs and
Finally, in Washington, two                                                                      process and external reviewers.
                                                      services involving multiple
legislatively mandated positions also                                                            These include financial management,
                                                      countries or provide regional
provide support to the Administrator.                                                            information management, human
                                                      services to other overseas
These are the Chief Financial Officer,                                                           capital and results reporting. The
                                                      organizations.
responsible for ensuring that                                                                    Agency also decided to continue to
management of the Agency’s                          • Various international development          emphasize improvements to its
finances conforms to federal                          organizations and bilateral donors         assistance and acquisition policies,
standards, and the Chief Information                  that represent U.S. and USAID              systems and procedures. The
Officer, responsible for ensuring the                 interests in development                   Agency’s FY 2000 achievements
Agency’s information management                       assistance matters. These offices          against these management
and technology conform to federal                     may be only partially staffed by           challenges are described in Section
standards.                                            USAID personnel and may be                 C.7 below. The Agency’s
                                                      headed by employees of other               management improvement plans are
USAID programs overseas are                           U.S. Government agencies.                  more fully described in its revised
grouped into various types of                                                                    Strategic Plan, while activities
                                                    • Field offices of the Inspector
country organizations:                                                                           planned for FYs 2001 and 2002 are
                                                      General (such as the following)
                                                                                                 described more fully in its FY 2000
                                                      carry out comprehensive programs
• Countries where USAID provides                                                                 Performance Overview.
                                                      of audits and investigations.
  an integrated package of
  assistance to sustainable                            ! Regional Inspector General for          The approach and philosophy
  development countries. Assistance                      Audit offices and                       embodied in USAID’s results-based
  is based on an integrated strategy                   ! Investigative Field Offices.            programming system evolved from
  that includes clearly defined                                                                  innovative techniques developed by
  program objectives and                              Managing USAID for Results                 USAID staff as they sought more
  performance targets.                                                                           effective ways to work in extremely
                                                    To maximize the return on taxpayers’         varied and changing development
• Countries where USAID’s
                                                    investments, USAID must plan,                environments. This system has five
  presence is limited, but where aid
                                                    implement, and assess its programs           objectives:
  to non-governmental sectors is
                                                    efficiently and effectively. This goal
  necessary to facilitate the
                                                    was part of the Agency’s 1997                • Establish strategic and budgetary
  emergence of a civic society, help
                                                    Strategic Plan. Since the Government           priorities for the Agency based on
  alleviate repression, meet basic
                                                    Performance and Results Act (GPRA)             U.S. national interests as reflected
  humanitarian needs, enhance
                                                    became law and USAID’s original                in USAID’s legislative mandates,
  food security, or influence a
                                                    Strategic Plan was prepared,                   the Strategic Plan for International
  problem with regional or global
                                                    concerns about how U.S. agencies               Affairs,2 and Congressional and
  implications.
                                                    can better manage for results have             Administration priorities.
• Countries that have recently                      become a more important element in
                                                                                                 • Within Agency-wide priorities,
  experienced a national crisis, a                  assessing agency performance.1
                                                                                                   limit the bureau approval process
  significant political transition, or a            Accordingly, USAID took advantage
                                                                                                   to higher-level objectives, as
  natural disaster and/or where                     of the GPRA requirement to update

     1
       See, for example, the General Accounting Office's list of major management functions for "high performing organizations (undated
exposure draft of "Determining Performance and Accountability and High Risks", page 2).
     2
         Strategic Plan for International Affairs, Department of State, February 1999.
A-6                                      USAID FY 2000 Accountability Report




  opposed to activity-level inputs
  and outputs                                                                           Mission/Vision/
                                                                                       Mission/Vision/
                                                                                         Core Values
                                                                                        Core Values
• Link bureau budget allocations to
  objectives and performance as
  opposed to activities with defined
  inputs and outputs

• Delegate activity design, approval,             Strategic Plans                                                       Communications
                                                                                                   g
  and budgeting decisions to                                                                     in                         in
                                                                                                                               g
  Operating Units                                              nn
                                                                  i ng       Targets
                                                                                            h ievults     Outcomes       ss
                                                                                                                       se & ning
                                                          Pl
                                                            a
                                                                                          Ac Res                     As ar
                                                                                                                        Le
• Establish teams that bridge                     Activity Plans                                                              Decisions

  organizational boundaries both
  within and outside of USAID as
  the basic organizational unit to
  manage development programs.
                                                                                         Management
                                                                                        Management
The system is designed to promote                                                          Initiatives
                                                                                         Initiatives

clarity in defining objectives at the
operating unit level and to provide                                      Figure A.1: Dynamic Management
flexibility in selecting and
                                         by USAID and other partners and                        achievement is not usually the result
implementing the activities to
                                         donors. These indicators are broad                     of only USAID programs and
achieve them. A dynamic cycle of
                                         development performance indicators.                    resources. In other words, they are
three management functions lies at
                                         They shed considerable light on the                    beyond its manageable interest. This
the heart of the system.
                                         results of overall efforts at                          drawback was acknowledged and
                                         development cooperation.                               discussed when USAID formulated
• Planning
                                         Furthermore, they are common                           its 1997 Strategic Plan.
• Achieving
                                         across countries, they are typically
• Assessing and Learning
                                         available from published sources,                      The obvious alternative has been to
                                         and they enable the Agency to report                   use actual operating unit strategic
 These three functions operate within
                                         on development performance in a                        objectives as the Agency
the context of two elements of
                                         fairly compact set of tables that can                  performance goals. Operating unit
management leadership–defining an
                                         be readily summarized and                              objectives, targets, and indicators
organizational mission and vision
                                         aggregated. Some of them                               highlight the specific results that
and taking management initiatives.
                                         correspond to internationally agreed-                  USAID seeks in country, regional, or
Figure A.1 illustrates this model.
                                         upon development goals and targets                     global settings. Indicators and targets
                                         that USAID supports.                                   are developed by individual
      USAID Program Results                                                                     operating units and their partners,
A. Assessing Performance: A              Notwithstanding these favorable                        with guidance and technical support
   Revised Approach                      attributes, there has been                             from Washington, and are reviewed
For each of its six principal areas,     considerable, valid criticism of using                 and approved in Washington.
USAID in 1997 identified a limited       these indicators and targets as the                    Through their Results Review and
set of performance goals and             ones against which Agency                              Resource Request (R4) Reports,
indicators. These goals, and the         performance would be judged,                           operating units report annually on
associated indicators and targets        because one cannot reasonably                          how their programs are progressing
typically capture progress at the        attribute overall country progress in                  relative to the agreed performance
country level. Such progress is          these areas to USAID programs                          targets. Their R4 reports include self-
mainly the result of self-help efforts   alone. While the Agency supports                       assessments of an objective’s
by the recipient country supported       and contributes to these goals, their                  performance based on reported
                                                USAID FY 2000 Accountability Report                                                    A-7




progress towards planned targets and            strategic objectives, rather than the               demographic and health surveys
other factors known to the operating            performance goals identified in the                 as well as educational
unit. These annual reports help form            FY 2000 Annual Performance Plan.                    achievement testing or agricultural
the basis on which operating units              The relative measure of the Agency’s                surveys. The Agency’s experience
request resources. Thus, the reports            FY 2000 performance is the                          is that the quality of primary data
inform the overall resource request             percentage of operating unit                        improves over the life of an
and allocation process.                         objectives that met or exceeded                     objective (or related objectives) as
                                                planned targets for the year. Detailed              the methodology improves and as
The main drawback is that there are             performance information for the                     data anomalies are identified and
many different objectives and                   operating units’ strategic objectives is            corrected.
performance indicators. Even though             provided in Part C, Summary of FY
the Agency explicitly and                       2000 Program Performance by                      • Partner data includes data coming
systematically uses these                       Operating Unit Objectives.                         from implementing partners,
performance measures to manage for                                                                 including contractors, cooperating
results, the measures—based on                  B. Verifying Performance Data                      agencies, and grantees. Line
programs that are tailored to local                                                                ministries, such as those of
                                                Agency policy encourages operating
needs and circumstances—typically                                                                  Health, Education, or Agriculture,
                                                units to assess data quality when
do not aggregate into a compact set                                                                may also provide partner data if
                                                establishing performance measures
of common performance indicators                                                                   USAID is working closely enough
                                                and data collection procedures
that can convey the cumulative                                                                     with the government body to have
                                                during their strategic planning
value-added of USAID’s assistance.                                                                 some control over its data
                                                process (which is when their
After years of effort, USAID has                                                                   collection, analysis, and reporting
                                                objectives are established). Data
found that as a general rule common                                                                processes. Partner data are
                                                quality and collection procedures are
indicators cannot be meaningfully                                                                  typically derived from ongoing
                                                further assessed after the unit’s
applied across programs that may be                                                                performance monitoring systems
                                                objectives are approved and while it
broadly similar but are designed to                                                                established as part of the
                                                establishes formal performance
respond to individual country                                                                      workflow of a particular activity.
                                                monitoring plans (PMPs) for each
circumstances.                                                                                     The Agency’s experience is that
                                                objective. These assessments are
                                                                                                   the quality of partner data
                                                intended to ensure that performance
Considering the advantages and                                                                     improves over the life of an
                                                information is sufficiently complete,
limitations of alternative approaches                                                              objective as data sets are
                                                accurate, and consistent and meet
to performance reporting, USAID                                                                    standardized and as collection
                                                the Agency’s indicator quality
will henceforth use the operating                                                                  and reporting procedures are
                                                standards.3
unit strategic objectives as the                                                                   regularized.
Agency’s annual performance goals               USAID operating units typically use
                                                                                                 • Secondary data comes from
for purposes of performance                     three different sources of data (each
                                                                                                   sources over which the Agency
reporting. Targets will be set for these        source has unique limitations).
                                                                                                   has no control. These typically
performance goals, and the Agency
                                                                                                   include government sources, such
is prepared to be held accountable              • In some instances, a mission will
                                                                                                   as Ministries of Finance or
for progress in achieving these                   contract for primary data to be
                                                                                                   Planning or the Central Bank,
targets.                                          collected scientifically to serve as
                                                                                                   where USAID cannot audit the
                                                  a baseline or as an interim or final
                                                                                                   sources or intensively review the
Accordingly, the Agency’s FY 2000                 evaluation of an operating unit’s
                                                                                                   data collection and analysis
Accountability Report reports                     objective’s achievement. Typical
                                                                                                   procedures. Some line ministries,
performance against operating unit                examples of these include


      3
        These standards are set forth in USAID's Automated Directive Systems (ADS), Section 203.3.6.3. These standards can be viewed
electronically at www.usaid.gov by clicking on the USAID Policies and Procedures choice.
A-8                                          USAID FY 2000 Accountability Report




  or some programs in line                    Agency’s financial position as of             3. Build Human Capacity through
  ministries may also be beyond               September 30, 2000, but it should be             Education and Training
  what USAID can reasonably                   recognized that the program results           A total of 23 Agency operating units
  inspect. Similarly, data from other         summarized herein were as of                  reported on 30 strategic objectives in
  bodies, such as the World Bank or           September 30, 1999 and were most              basic education. No operating unit
  the UN agencies, are also beyond            likely funded across several fiscal           reported specific objectives related
  USAID’s control. International              years.                                        to increasing the contribution of
  organizations, however, also use                                                          higher education institutions to
  the data that they report for               1. Encourage Broad-Based                      sustainable development. The net
  programming resources and,                     Economic Growth and
                                                                                            costs for these objectives were
                                                 Agricultural Development
  therefore, have a vested interest in                                                      $294.3 million and $125.5 million
  collecting and reporting the most           The Agency has a total of 152                 in FYs 1999 and 2000 respectively.
  current and reliable information            economic growth and agricultural              Ninety-five percent of basic
  available. Operating units                  development objectives carried out            education objectives met or
  typically use secondary                     by 75 operating units around the              exceeded operating unit expectations
  information of this type to                 world. The net costs for these                in FY 1999. Overall, USAID
  describe general trends within a            objectives were $2.9 billion and              objectives under the human capacity
  country or program and primary              $3.3 billion in FYs 1999 and 2000             development area are meeting
  data directly associated with               respectively. Eighty-eight percent of         expectations.
  specific objectives to assess the           EGAD objectives met or exceeded
  performance of these objectives.            operating unit expectations in FY             4. Stabilize World Population and
                                              1999. Overall, USAID objectives                  Protect Human Health
C. Summary Performance                        under the Economic Growth and                 The Agency has a total of 80 health,
   Assessments4                               Agricultural Development area are             population or nutrition objectives
The performance information                   meeting expectations.                         carried out by 60 operating units
summarized below is based upon R4                                                           around the world. The net costs for
reports submitted by the Agency’s             2. Strengthen Democracy and Good
                                                                                            these objectives were $1.0 billion
operating units to USAID/                        Governance
                                                                                            and $1.4 billion in FYs 1999 and
Washington during spring of                   The Agency has a total of 107                 2000 respectively. Ninety-four
calendar year 2000. The timing of             democracy and governance                      percent of HPN objectives met or
these submissions is geared to the            objectives carried out by 75                  exceeded operating unit expectations
annual budget cycle. Hence the                operating units around the world.             in FY 1999. Overall, USAID
results summarized below are as of            The net costs for these objectives            objectives under the health,
September 30, 1999. Detailed                  were $495.3 million and $349.6                population and nutrition area are
information describing the                    million in FYs 1999 and 2000                  meeting expectations.
performance of the strategic                  respectively. Eighty percent of
objectives of USAID’s operating units         Agency DG objectives met or                   5. Protect the Environment for
is provided in Part C of this Report.         exceeded operating unit expectations             Long-Term Sustainability
Typically, operating unit objectives          in FY 1999. Overall, USAID                    The Agency has a total of 48
are multi-year undertakings                   objectives under the democracy and            environmental objectives carried out
beginning in one fiscal year, ending          governance area are meeting                   by 36 operating units around the
seven to ten years later, and drawing         expectations.                                 world. The net costs for these
funds from different fiscal years. By                                                       objectives were $612.2 million and
convention, USAID’s FY 2000                                                                 $448.5 million in FYs 1999 and
Accountability Report focuses on the                                                        2000 respectively. Ninety-two


     4
       The summary performance assessments presented in this report are drawn from USAID's FY 2000 Performance Overview: Consolidated FY
2002 Annual Performance Plan/FY 2000 Annual Program Performance Report.
                                         USAID FY 2000 Accountability Report                                        A-9




percent of the ENV objectives met or       • Technical assistance on               • 85 New Entry Professionals
exceeded operating unit expectations         performance measurement for             (NEPs) joined the Agency during
in FY 1999. Overall, USAID                   operating units was expanded.           FY 2000.
objectives under the environmental         • New core financial system             • The Agency target for on-board
area are meeting expectations.               software was installed,                 Foreign Service Officers was
                                             configured, tested, and readied         met.
6. Promote Humanitarian                      to support Washington financial       • 101 senior executives were
   Assistance                                operations beginning in FY              trained.
The Agency had a total of 30                 2001.                                 • 140 supervisors were trained.
humanitarian assistance objectives         • A new Standard General Ledger         • 435 technical officers were
carried out by 27 operating units            posting model was adopted for           trained on obligations
around the world (excluding the              credit programs; the backlog of         management including
Bureau for Humanitarian Assistance).         debt rescheduling activities was        expenditure projections and
The net costs for these objectives           caught up; and the loan general         accruals.
were $823.6 million and $1.0 billion         ledger is ready to migrate to the     • Over 600 USAID Washington-
in FYs 1999 and 2000 respectively.           new automated core financial            based employees were trained
In FY 1999, eighty-seven percent of          system.                                 on the operations, procedures
HA objectives met operating unit           • First full year of loan servicing       and controls prior to
expectations. Overall, USAID                 by a commercial bank was                implementation of the Agency’s
objectives under the humanitarian            completed successfully.                 new core financial system.
assistance area are on track and           • 738 audit recommendations             • 80 percent of the Agency’s
meeting expectations.                        valued at more than $209                contract officers were certified.
                                             million, comprising $202.4            • 75 employees were trained in
7. Achieve Management Excellence             million in efficiencies and $6.6        management accountability and
During FY 2000, USAID revised                million in collections, were            control.
significantly its management                 closed.                               • The Agency’s payroll function
objectives and performance goals as        • At the end of FY 2000, 86.4             was outsourced thereby
part of its effort to update its             percent of the Agency’s open            reducing costs.
Strategic Plan. Nevertheless, many of        recommendations were less
the management activities included           than one year old, slightly off     c) Agency goals and objectives
in its FY 2000 performance plan              the Agency’s target of closing 90      served by well-planned and
went forward. The FY 2000 outputs            percent of audit                       managed acquisition and
of these activities are reported below       recommendations within one             assistance (A&A):
against the Agency’s revised                 year.                                  • 700 employees were trained in
management objectives.                     • The Agency expanded its                  A&A rules and procedures.
                                             capacity to plan, allocate, and        • 30% of FY 2000 funds was
a) Accurate program performance              report resources by                      obligated in first three quarters;
   and financial information reflected       Congressional directives.                the balance in the final quarter
   in Agency decisions:                    • Revised financial management             as follows: 14% in July; 27% in
                                             policies and procedures were             August, and 29% in September.
  • A new program performance                issued.                                • 80% of the Agency’s contract
    management workshop
                                           • An interim system to capture             officers were certified.
    curriculum was developed and
    implemented.                             field procurement data was
  • Agency policies and procedures           implemented.                        d) Agency goals and objectives
    on Managing for Results were                                                    supported by better information
    revised and reissued through its     b) USAID staff skills, Agency goals,       management and technology:
    Automated Directives System             and core values better aligned to       • Developed an information
    (Series 200).                           achieve results efficiently:              management strategic plan.
A-10                                    USAID FY 2000 Accountability Report




  • Developed a target information                  United States Agency for International Development
    architecture.                                     Net Cost of Operations by Fiscal Year Summary
  • Completed “Y2K” transition                                     (In millions, rounded)
    successfully.
                                               Goal Centers                                        FY 1999      FY 2000
  • Completed information system
                                               Encourage broad-based economic growth and             $2,979      $3,320
    security risk assessments at
                                               agricultural development
    three overseas missions.
                                               Strengthen democracy and good governance                 495         350
  • Developed a web-based
                                               Build human capacity through education and               294         125
    systems security course.
                                               training
  • Completed an analysis of
                                               Stabilize world population and protect                 1,048       1,437
    Agency connectivity options.               human health
                                               Protect the environment for long-term                    612         448
e) Collaboration with partners and             sustainability
   stakeholders strengthened:                  Promote humanitarian assistance                          824       1,056
                                               Less earned revenues not attributed to                     (3)        (6)
  • The new program process fully              programs
    incorporates development                   Net Cost of Operations                                $6,249      $6,730
    partners.                                * Source: FY 2000 Accountability Report, Statement of Net Costs
  • Communications with partners
    were expanded.                      $6.2 billion in FYs 2000 and 1999           Department of Treasury accounts
  • Training in managing for results    respectively. Net costs by Agency           from which USAID is authorized to
    and Agency systems                  goals are shown above.                      make expenditures and pay
    incorporates partners.                                                          liabilities. The majority of Credit
                                        B. Financial Statements                     Program Receivables are loans for
                                        USAID prepares consolidated                 which funds have been disbursed
       Financial Highlights                                                         under the Urban and Environmental
                                        financial statements that include a
A. Program Resources                    Balance Sheet, a Statement of Net           (UE), Micro and Small Enterprise
Congress appropriates resources to      Cost, a Statement of Changes in Net         Development (MSED), and Direct
USAID through several different         Position, a Statement of Budgetary          Loan programs.
accounts. USAID’s more traditional      Resources, and a Statement of
development work in the Third           Financing. These statements                 The assets line-item with the most
World is funded through the             summarize the financial activity and        significant change in activity from FY
Sustainable Development Assistance      position of the agency. Highlights of       1999 to FY 2000 is Accounts
(DA) and Economic Support (ESF)         the financial information presented         Receivable with the public. This line-
accounts. The Agency’s assistance to    on the principal statements are             item decreased 60 percent, from
the transitional economies and          provided below.                             $122.8 million to $48.6 million. This
societies of Eastern Europe and                                                     decrease is due to collections of $80
Eurasia is provided through the         Balance Sheet                               million during the year for the Polish
Support for East European                                                           American Enterprise Fund (PAEF).
                                        The Balance Sheet presents amounts
Democracy (SEED) and Freedom                                                        This collection caused a
                                        available for use by USAID (assets)
Support (FSA) Acts. USAID also                                                      corresponding decrease in an
                                        against the amounts owed (liabilities)
manages Public Law 480 resources                                                    intragovernmental liability for the
                                        and amounts that comprise the
appropriated to the U.S. Department                                                 same amount since the funds are to
                                        difference (net position). Two major
of Agriculture. In FY 2000, USAID’s                                                 be returned to Treasury.
                                        line items, Fund Balance with
available budgetary resources totaled   Treasury and Credit Program
$5.5 billion compared to $5.1 billion                                               Credit program liabilities represent
                                        Receivables, represent 92% of
in FY 1999. USAID’s net costs for                                                   82 percent of USAID’s total
                                        USAID’s assets. Fund Balance with
these years were $6.7 billion and                                                   liabilities. The bulk of these liabilities
                                        Treasury is funding available in the
                                                                                    are reported as Estimated Liability for
                                          USAID FY 2000 Accountability Report                                        A-11




Loan Defaults, Resources Payable to       Statement of Changes in Net              liquidate obligations from a prior
Treasury and Liability for Loan           Position                                 year and the remaining 13 percent
Guarantees. Estimated Liability for       This statement identifies those items    are available for new programming
Loan Defaults is an allowance             that caused USAID’s net position to      and obligating in future years.
established for potential defaults on     change from the beginning to the
loan guarantees obligated before          end of the reporting period. A           The Adjustment line-item on the
fiscal year 1992. Resources Payable       significant item to note is the 81       Statement of Budgetary Resources
to Treasury represents the cumulative     percent decrease in the Increase in      includes Actual Payments to Treasury,
difference between pre-fiscal year        Unexpended Appropriations line-          which were approximately $400
1992 credit program assets and            item from FY 1999 to FY 2000. This       million less in FY 2000 than in FY
liabilities, and revenue and expense,     $886 million decrease is primarily       1999. Payments to the Treasury were
that is considered payable to the U.S.    due to USAID receiving a new             unusually high in FY 1999 due to
Treasury. Liability for Loan              appropriation for the Central            increased collections in the Direct
Guarantees represents the estimated       America and Caribbean Emergency          Loan Liquidating account.
subsidy cost of loan guarantees           Disaster Recovery Fund and
obligated after fiscal year 1991, as      supplemental funds to provide            Statement of Financing
calculated in accordance with the         humanitarian assistance to Kosovo in     The Statement of Financing
Credit Reform Act of 1990.                FY 1999. No new appropriations or        reconciles proprietary information to
                                          supplemental funds were received by      budgetary accounting information.
The liabilities line-item with the most
                                          USAID during FY 2000.                    Refinements in reporting Credit
significant change in activity from FY
                                                                                   Reform amounts were made for the
1999 to FY 2000 is                        Another significant change in activity   FY 2000 reporting period. These
Intragovernmental Debt. The               from FY 1999 to FY 2000 is due to        changes in presentation account for
decrease in Intragovermental Debt         Imputed Financing. This line-item        the significant differences in activity
from $197.9 million to $116.5             increased by approximately 30            between FY 1999 and FY 2000
million is due to principal               percent. This increase is largely due    within the Resources That Do Not
repayments of $105 million made to        to the settlement of a class-action      Fund Net Cost of Operations section
the Treasury during the year, netted      suit brought on behalf of Foreign        of the statement.
against new borrowings from the           Service Officers who were separated
Treasury of $23 million, resulting in     from the Agency in a Reduction-In-       C. Limitations to the Financial
a total net reduction of $82 million.     Force (RIF). The Court approved the         Statements
                                          settlement amount of $5.5 million.       The financial statements have been
Statement of Net Cost
                                          This event was incorporated into the     prepared to report the financial
This statement provides the reader        financial statements and is reflected    position and results of operations of
with an understanding of the full cost    in the Imputed Financing line-item.      USAID, pursuant to the requirements
of operating USAID programs. In FY
                                                                                   of 31 U.S.C. 3515(b).
2000, approximately 90 percent of         Statement of Budgetary Resources         While the statements have been
all USAID costs incurred were
                                          The Statement of Budgetary               prepared from the books and records
directly related to support of USAID
                                          Resources provides information on        of the entity in accordance with the
programs. Costs incurred for the
                                          how budgetary resources were made        formats prescribed by the Office of
agency’s general operations (e.g.,
                                          available for the year and what the      Management and Budget (OMB). The
salaries, training, support for the
                                          status of budgetary resources was at     statements are in addition to the
Office of Inspector General)
                                          year-end. USAID obligated 70             financial reports used to monitor and
accounted for approximately 10
                                          percent of all available budgetary       control budgetary resources which
percent of the total USAID cost. This
                                          resources for the year. The remaining    are prepared from the same books
illustrates USAID’s commitment to
                                          30 percent of funds are unobligated.     and records.
efficiency and success in using
                                          17 percent of the unobligated funds
financial resources for the direct
                                          are available only to adjust or
promotion of its mission.
A-12                                    USAID FY 2000 Accountability Report




The statements should be read with      developing and implementing                 A. USAID’s Primary Accounting
the realization that they are for a     aggressive plans to identify and fix           System
component of the U.S. Government,       Y2K transition problems before              USAID’s primary accounting system
a sovereign entity. One implication     December 31, 1999. As a result, the         fails to comply with some important
of this is that liabilities cannot be   Agency’s critical systems incurred no       financial management systems
liquidated without legislation that     significant Y2K transition problems.        requirements, applicable federal
provides resources to do so.            On the third weakness, NMS security         accounting standards, and the U.S.
                                        and access controls, USAID                  Government Standard General
                                        eliminated the high-risk aspects of its     Ledger at the transaction level.
     Management Controls
                                        Washington-based financial system
USAID maintains an active
management control program in                                   Table A.1: Pending Material Weaknesses

response to the Federal Managers’                                                                                   Fiscal Year
Financial Integrity Act (FMFIA).                                                      Fiscal Year    Fiscal Year   Targeted for
USAID’s FMFIA program uses                                  Title                   First Reported    Resolved      Correction

external audits, annual internal         USAID's primary accounting system              1998                          2001
reviews conducted by each of its
operating units, special studies, and    Financial management procedures                1993             2000

observations of daily operations to      USAID's NMS security and access controls       1997             2000
identify control weaknesses. It then
                                         USAID's reporting and resource                 1997                          2001
develops and implements detailed
                                         management capabilities
corrective action plans for all
weaknesses identified. The Agency’s      Information resources management               1997                          2001
                                         processes
Management Control Review
Committee, chaired by the Deputy         Computer security program                      1997                          2003
Administrator, monitors the status of
                                         Year 2000 compliance                           1998             2000
corrective actions Agency-wide and
determines when they have been
successfully completed. Parallel        (NMS) through a series of actions           USAID expects to fully resolve this
committees operate within the           that enhanced database                      weakness by the end of FY 2001. To
Agency’s overseas operating units.      administrator accountability,               this end, during FY 2000, it installed,
During FY 2000, management              introduced audit trails of system           configured, tested, and readied new,
control assessments were conducted      activity, and implemented security          core financial system software. This
by the Agency’s operating units         enhancements relating to sensitive          new system began supporting
worldwide in compliance with            data and password controls. An              Washington financial operations on
Agency policy and FMFIA standards.      independent verification and                December 15, 2000. Key financial
                                        validation of NMS was completed in          data including obligation,
No new material weaknesses were         May 2000, resolving this material           expenditure and loan information
identified during FY 2000, while        weakness.                                   have been migrated to the new
three outstanding material                                                          system.
weaknesses were resolved                During FY 2000, the Agency also
successfully. A material weakness       continued to implement its plans to         B. USAID’s NMS Reporting and
related to the Agency’s financial       resolve four other material                    Resource Management
management procedures identified        weaknesses. The status of progress             Capabilities
in 1993 was resolved by issuing new     against these material weaknesses is        The Agency’s financial reports have
financial policies and procedures       as follows.                                 not always been timely, accurate or
guidance during FY 2000. Year 2000                                                  sufficiently useful to manage the
compliance was addressed by                                                         Agency. Numerous special query
                                         USAID FY 2000 Accountability Report                                                 A-13




capabilities and reports have been                   Table A.2: Summary of Agency Performance in Correcting Weaknesses
developed to lessen this weakness,
                                                            Material          Material            Material         Pending
but the Agency’s ability to use
                                            Fiscal        Weaknesses         Weaknesses         Weaknesses         Material
financial information for decision           Year      Beginning of Year       Added             Corrected        Weaknesses
making remains impaired. USAID’s
                                            1996                10                  -                 -                 10
long term strategy to address this
weakness is to implement its new,           1997                10                 4                  7                  7
integrated financial management and
                                            1998                 7                 2                  -                  9
accounting system. Progress made in
this regard is described in item A          1999                 9                  -                 2                  7
above. The target date for resolving
                                            2000                 7                  -                 3                  4
this weakness is FY 2001.

C. Information Resources                 its administrative policy, and                 F.   Annual Assurance Statement
   Management (IRM) Processes.           requirements of the OMB Circulars
USAID plans to implement by June         A-123, 127 and 130. The Agency’s
2001 (1) procedures to select,                                                           As of September 30, 2000, the
                                         progress has been noted throughout
manage, and evaluate information                                                         management accountability and
                                         the federal government. Recent
technology investments and (2) a                                                         control systems of the Agency for
                                         accomplishments include: (1)
means for senior managers to                                                             International Development provided
                                         establishing an effective Information
monitor the Agency’s progress in                                                         reasonable assurance that the
                                         Systems Security Office structure and
terms of costs, system capabilities,                                                     objectives of the Federal Managers'
                                         an advisory group to set strategy, (2)
timeliness, and quality. USAID’s                                                         Financial Integrity Act were
                                         developing a risk assessment to
Capital Investment Review Board,                                                         achieved, with the exception of the
                                         evaluate computer security, and (3)
Chief Information Officer and Office                                                     material weaknesses noted. This
                                         spearheading the Federal Best
of Information Management have                                                           statement is based on the results of
                                         Security Practices Initiative.
successfully achieved many of the                                                        an Agencywide management
Agency’s strategic plans to improve      E. Material Nonconformance of                   control assessment, inspector
its IRM processes as required by the        Financial Management System                  General audits, and input from
Clinger-Cohen Act. Internal                                                              senior officials
                                         USAID’s financial management
verification and validation of IRM       systems do not fully comply with
processes have demonstrated an 80        some federal financial management
percent rating in key processes and      system requirements, standards, and
progress is continuing.                                                                                      –J. Brady Anderson
                                         the U.S. Government Standard
Reengineering the Agency from a                                                                                   Administrator
                                         General Ledger at the transaction
systems integration organization to a    level. The Agency has identified the
technology acquisition organization      current primary accounting system as
will help in achieving a Software        a material weakness. It will be                                  U
                                                                                             Audit Follow-Up Program
Engineering Capability Maturity          replaced by a new core financial               The Office of the Inspector General
Model Level 2, a rating target           system, Phoenix, in the first quarter          (OIG) uses the audit process to help
representative of the top one-third of   of FY 2001.                                    USAID managers improve the
all technical organizations.
                                                                                        efficiency and effectiveness of
                                                                                        Agency operations and programs.
D. Computer Security Program
                                                                                        USAID management and OIG staff
USAID has targeted FY 2003 for                                                          work in partnership to ensure timely
implementing an information system                                                      and appropriate responses to audit
security program that complies with                                                     recommendations.
the Computer Security Act of 1987,
A-14                                    USAID FY 2000 Accountability Report




The OIG contracts with the Defense      closing 90 percent of audit                    financial management system while
Contract Audit Agency to audit U.S.-    recommendations within one year.               others are deficiencies that could not
based contractors and relies on         As regards the 60 recommendations              be corrected within one year.
nonfederal auditors to audit U.S.-      open for more than one year at the
based grant recipients. Foreign-based   end of FY 2000, the Agency must
organizations are audited by either     collect funds from contractors or
local auditing firms or the supreme     recipients to complete actions on 27
audit institutions of host countries.   of these recommendations. The
OIG staff conduct audits of USAID       remaining 33 require improvements
programs and operations, including      in Agency programs and operations.
the Agency’s financial statements,      Many of these are tied to the
related systems and procedures, and     implementation of an integrated
Agency performance in
implementing programs, activities, or
                                           Table A.3: Management Action on Recommendations That Funds Be Put to Better Use
functions.
                                                                                     Recommendations      Dollar Value ($000)
During FY 2000, USAID received           Beginning balance 10/1/99                           18                 194,660
593 audit reports; 528 of these          Management decisions during fiscal year              7                   8,380
reports covered financial audits of      Final action                                        21                 202,436
contractors and recipients and 65        Recommendations implemented                         21                 202,436

covered Agency programs or               Recommendations not implemented                       -                          -
                                         Ending balance 9/30/00                               4                        604
operations.

During FY 2000, the Agency closed
738 audit recommendations, 209                          Table A.4: Management Action on Audits with Disallowed Costs
more than it closed in FY 1999. Of
                                                                                     Recommendations Disallowed Costs ($000)
the audit recommendations closed in
                                         Beginning balance 10/1/99                         142                   17,433
FY 2000, 225 were from audits
                                         Management decisions during fiscal year           323                   23,182
performed by OIG staff and 513           Final action                                      327                    6,576
were from financial audits of            Collections/offsets/other                         303                    4,372
contractors or grant recipients. The     Write-offs                                          24                   2,204
Agency collected $6.6 in disallowed      Ending balance 9/30/00                            138                   34,039
costs and $202.4 million were put to
better use during the fiscal year.

At the end of FY 2000, there were
                                                               65
440 open audit recommendations,
183 fewer than at the end of FY
1999 (623). Of the 440 audit
recommendations open at the end of                                        OIG audits of Agency program/operations
FY 2000, only 60, or 13.6 percent,
                                                                           Financial audits of contractors/grantees
had been open for more than one
year. The number of
recommendations open for more
                                           528
than one year at the end of FY 2000
was one-third less than the number
at the end of FY 1999, and just shy                         Figure A.2: Audit Reports Issued in 2000
of the Agency’s FY 2000 target of
USAID FY 2000 Accountability Report   B-1




                         Part B
    Financial Statements and Notes
                                    USAID FY 2000 Accountability Report                                B-3




                        U.S. Agency for International Development
                                      Consolidated Balance Sheet
                        As of September 30, 2000 and 1999 (In Thousands)

                                                                            2000            1999
ASSETS (Note 19)
   Intragovernmental
      Fund Balance with Treasury (Note 2)                            $ 11,120,290      $ 10,726,448
      Accounts receivable (Note 3)                                          473,166         384,873
      Advances and prepayments (Note 4)                                      63,609          55,682
   Total Intragovernmental                                                11,657,065    11,167,003


      Accounts receivable (Note 3)                                           48,643         122,776
      Advances and prepayments (Note 4)                                     727,571         988,617
      Loans receivable (Note 5)                                            6,637,712     6,665,808
      Cash and other monetary assets (Note 6)                               153,170         179,614
      Operating materials and supplies (Note 7)                              21,122          18,270
      General property plant and equipment (Note 8)                          35,969          28,554
   Total Assets                                                           19,281,252    19,170,642


      LIABILITIES (Note 18 and 19)
   Intragovernmental
      Accounts payable (Note 9)                                              86,047         126,799
       Debt (Note 10)                                                       116,485         197,947
      Due to U.S. Treasury (Note 19)                                       6,374,536     6,194,940
      Other liabilities (Note 11)                                            98,067         128,549
   Total Intragovernmental                                                 6,675,135     6,648,235


      Accounts payable (Note 9)                                            1,287,152     1,411,599
      Liabilities for loan guarantees (Note 5)                             1,096,342     1,067,743
      Other liabilities (Note 11)                                           183,672         207,062
      Accrued unfunded annual leave and separation pay (Note 13)             25,825          26,468
      Accrued unfunded Workers Compensation Benefits (Note 14)               37,265          45,057
   Total Liabilities                                                       9,305,391     9,406,164


   Contingencies (Note 15)


      NET POSITION
   Unexpended appropriations (Note 16)                                     9,989,030     9,785,711
   Cumulative results of operations                                         (13,169)        (21,233)
Total net position                                                         9,975,861     9,764,478


      Total Liabilities and Net Position                             $ 19,281,252      $ 19,170,642




           The accompanying footnotes are an integral part of these financial statements.
B-4                                      USAID FY 2000 Accountability Report




                              U.S. Agency for International Development
                                     Consolidated Statement of Net Cost
                       For the Years Ended September 30, 2000 and 1999 (In Thousands)
      Costs:                                                                        2000    1999 Restated
      Encourage Broad-Based Economic Growth and Agricultural Development
         Intragovernmental                                                      $ 71,902        $ 60,098
         With the public                                                       3,261,285       2,936,766
               Total                                                           3,333,187       2,996,864
         Less earned revenues                                                   (13,165)            (17,618)
         Net program costs                                                     3,320,022       2,979,246

      Strengthen Democracy and Good Governance                                         -
         Intragovernmental                                                       53,463              39,175
         With the public                                                        296,158             456,093
               Total                                                            349,621             495,268
         Less earned revenues                                                          -                   -
         Net program costs                                                      349,621             495,268

      Human Capacity Built Through Education and Training                              -
         Intragovernmental                                                        7,129               5,223
         With the public                                                        118,463             289,164
               Total                                                            125,592             294,387
         Less earned revenues                                                          -                (56)
         Net program costs                                                      125,592             294,331

      Stabilizing World Population and Protecting Human Health                         -
         Intragovernmental                                                       89,107              65,292
         With the public                                                       1,362,322            986,000
               Total                                                           1,451,429       1,051,292
         Less earned revenues                                                   (14,368)             (3,404)
         Net program costs                                                     1,437,061       1,047,888

      Protect the Environment for Long-Term Sustainability                             -
         Intragovernmental                                                       73,502              54,846
         With the public                                                        376,486             560,833
               Total                                                            449,988             615,679
         Less earned revenues                                                    (1,442)             (3,493)
         Net program costs                                                      448,546             612,186

      Promote Humanitarian Assistance                                                  -
         Intragovernmental                                                       71,114              52,544
         With the public                                                       1,021,745            805,678
               Total                                                           1,092,859            858,222
         Less earned revenues                                                   (36,939)            (34,613)
         Net program costs                                                     1,055,920            823,609

      Less earned revenues not attributed to programs                            (6,294)             (3,205)
      Net Cost of Operations (Note 20)                                      $ 6,730,468       $ 6,249,323


                   The accompanying footnotes are an integral part of these financial statements.
                                   USAID FY 2000 Accountability Report                                B-5




                         U.S. Agency for International Development
                    Consolidated Statement of Changes in Net Position
               For the Years Ended September 30, 2000 and 1999 (In Thousands)

                                                                          2000          1999
Net Cost of Operations                                              $ (6,730,468)    $ (6,249,323)
Financing Sources (other than exchange revenues)
   Appropriations Used                                                   6,663,278      6,156,900
   Donations                                                               57,043           67,068
   Imputed Financing                                                       17,985           13,924
   Other Financing Sources                                                    226
Net Results of Operations                                                   8,064          (11,431)


Prior Period Adjustments                                                         -                -
Net Change in Cumulative Results of Operations                              8,064          (11,431)


Increase (Decrease) in Unexpended Appropriations                          203,319       1,090,265


Change in Net Position                                                    211,383       1,078,834


Net Position-Beginning of Period                                         9,764,478      8,685,644


Net Position-End of Period                                           $ 9,975,861      $ 9,764,478




          The accompanying footnotes are an integral part of these financial statements.
B-6                                          USAID FY 2000 Accountability Report




                               U.S. Agency for International Development
                             Consolidated Statement of Budgetary Resources
                      For the Years Ended September 30, 2000 and 1999 (In Thousands)

                                                                                      2000       1999 Restated
      Budgetary Resources: (Notes 21 and 22)


      Budget authority                                                         $ 6,823,903         $ 7,282,922
      Unobligated balances - beginning of period                                    1,957,279        1,789,481
      Spending authority from offsetting collections                                1,137,734        1,299,745
      Adjustments                                                                     106,820      (1,116,989)
      Total budgetary resources                                                    10,025,736        9,255,159


      Status of Budgetary Resources:


      Obligations incurred                                                          6,928,676        7,434,832
      Unobligated balances - available                                              2,098,471        1,028,019
      Unobligated balances - not available                                            998,589         791,830
      Total, status of budgetary resources                                         10,025,736        9,254,681


      Outlays:


      Obligations incurred                                                          6,928,676        7,434,832
      Less: spending authority from offsetting collections
      and adjustments                                                              (1,297,610)     (1,495,908)
      Obligated balance, net - beginning of period                                  9,306,691        8,441,197
      Obligated balance transferred, net                                                     -               -
      Less: obligated balance, net - end of period                                 (9,394,781)     (9,306,691)


      Total outlays                                                            $ 5,542,976         $ 5,073,430




                 The accompanying footnotes are an integral part of these financial statements.
                                     USAID FY 2000 Accountability Report                                 B-7




                          U.S. Agency for International Development
                                Consolidated Statement of Financing
                For the Years Ended September 30, 2000 and 1999 (In Thousands)

                                                                               2000           1999
Obligations and Nonbudgetary Resources


Obligations incurred                                                     $ 6,928,676      $ 7,434,832
   Less: Spending authority for offsetting collections and adjustments     (1,137,734)    (1,299,745)
Change in Unfilled Customer Orders                                                    -              -
Donations not in the budget                                                    56,800         67,035
Financing Imputed for Cost Subsidies                                           17,985         13,924
Exchange revenue not in the budget                                          (378,300)       (211,410)
Non-exchange revenue not in the budget                                                -              -
Total obligations as adjusted, and nonbudgetary resources                   5,487,427      6,004,636



Resources That Do Not Fund Net Cost of Operations


Change in amount of goods, services, and benefits ordered but
   not yet received or provided                                             (169,868)     (1,172,856)
Costs capitalized on the balance sheet                                      (281,986)        (64,000)
Financing sources that fund costs of prior periods                            (43,396)            57
Other                                                                       1,616,832      1,361,862
   Total resources that do not fund net cost of operations                  1,121,582        125,063


Costs That Do Not Require Resources


   Bad Debt Expense                                                                   -          (39)
   Depreciation and amortization                                                5,216          5,748
   Revaluation of assets and liabilities                                              -              -
   Other                                                                       40,659         39,960
        Total costs that do not require resources                              45,875         45,669


Financing Sources Yet to be Provided (Note 18)                                 75,584         73,954


Net Cost of Operations                                                   $ 6,730,468      $ 6,249,322




            The accompanying footnotes are an integral part of these financial statements.
                   B-8                                                           USAID FY 2000 Accountability Report




                                                                    U.S. Agency for International Development
                                                    Statement of Supplemental Information by Major Appropriation
                                                      For the Period Ended September 30, 2000 and 1999 (In Thousands)

                                                                                                                                                                                             Consolidated
                                                                                      Program Fund                                                         Operating Fund        Other          Total
                                                        1010          1021          1035        1037          1093        1095            1096         1000        4336
Budgetary Resources:
Budget authority                                      $ 423,105    $ 1,186,848   $ 227,014   $ 2,699,629   $ 506,592    $ 614,866            $-     $ 518,934    $ 480,783     $ 166,132 $ 6,823,903
Unobligated balances - beginning of period             140,254        134,384      71,886       359,633     215,613        28,055        100,333       36,311             -      870,810      1,957,279
Spending authority from offsetting collections                 -        3,963            -             -           -       10,500              -        8,088             -    1,115,183      1,137,734
Adjustments                                             13,890         25,407      35,003         9,683      31,011         2,492              9       28,129       46,030       (84,834)       106,820
Total budgetary resources                              577,249      1,350,602     333,903     3,068,945     753,216       655,913        100,342     591,462       526,813     2,067,291     10,025,736
Status of Budgetary Resources:
Obligations incurred                                   379,036      1,221,108     300,079     2,554,110     480,258       636,114        100,333     533,247       526,813       197,578      6,928,676
Unobligated balances - available                       197,234        128,907      33,824       514,405     272,463        19,799              9       56,921             -      874,909      2,098,471
Unobligated balances - not available                       979            587            -          430         495              -             -        1,294             -      994,804        998,589
Total, status of budgetary resources                   577,249      1,350,602     333,903     3,068,945     753,216       655,913        100,342     591,462       526,813     2,067,291     10,025,736
Outlays:
Obligations incurred                                   379,036      1,221,108     300,079     2,554,110     480,258       636,114        100,333     533,247       526,813       197,578      6,928,676
Less: spending authority from offsetting                       -
  collections and adjustments                          (13,890)        (3,963)           -      (10,270)    (31,011)      (12,992)           (9)     (36,224)      (46,031)   (1,143,220)    (1,297,610)
Obligated balance, net - beginning of period           510,740      1,969,641     337,084     3,214,728     751,718     1,030,248        469,980     211,419       415,264       343,035      9,253,857
Obligated balance transferred, net                             -             -           -             -           -             -             -            -             -              -             -
Less: obligated balance, net - end of period          (452,680)    (2,314,383)   (271,326)   (3,319,968)   (544,487) (1,154,232)       (408,185)    (170,996)     (505,211)    (253,313)     (9,394,781)


Total outlays                                         $ 423,206     $ 872,403    $ 365,837   $ 2,438,600   $ 656,478    $ 499,138      $ 162,119    $ 537,446    $ 390,835    $ (855,920) $ 5,490,142




                                 MAJOR FUNDS                                                                     OTHER FUNDS (con’t)
                                 Program Fund                                                                       Program Funds

                                     1010      Special Assistance Initiatives                                            0091 Debt Restructuring Program
                                     1021      Development Assistance                                                    1005 International Organizations and Programs
                                     1035      International Disaster Assistance                                         1012 Sahel Development Program
                                     1037      Economic Support Fund                                                     1014 Africa Development Assistance
                                     1093      Assistance for the N.I.S. Of The Former Soviet Union                      1023 Food and Nutrition Development Assistance
                                     1095      Child Survival and Disease Programs Funds                                 1024 Population and Planning & Health Dev. Asst.
                                     1096      Central America and Caribbean Emergency Disaster Relief                   1025 Education and Human Resources, Dev. Asst.
                                     1038      Central America Reconciliation Assistance

                                Operating      Fund                                                                       1040       Sub-Saharan Africa Disaster Assistance
                                   1075        Anti-Terrorism Demining
                                   1000        Operating Expenses of USAID                                               1500        Demobilization and Transition Fund
                                   4336        Commodity Credit Corporation (from U.S. Dept. of Agriculture)

                                OTHER FUNDS                                                                            Trust Funds
                                Credit Program Funds                                                                      8342 Foreign Natl. Employees Separation Liability Fund

                                     8502      Tech. Assist. - U.S. Dollars Advance from Foreign
                                     0400      Micro and Small Enterprise Development-Program                             8824       Gifts and Donations
                                     0401      Urban and Envoronmental-Program
                                     0402      Ukraine-Program                                                    Revolving Funds
                                     1264      Development Credit Authority
                                     4119      Israel Loan Guarantee Program                                             4175 Property Management Fund
                                     4103      Direct Loans-Liquidating                                                  4590 Acquisition of Property, Revolving Fund
                                     4137      Direct Loans-Financing
                                     4340      Urban and Envoronmental-Liquidating
                                     4344      Urban and Envoronmental-Financing                                  Operating Funds
                                     4341      Micro and Small Enterprise Development-Liquidating
                                     4342      Micro and Small Enterprise Development-Financing                           0113       Salaries & Expenses - Diplomatic Security
                                     4343      Micro and Small Enterprise Development-Financing                           0535       Acquisition & Maintenance Of Building Abroad
                                     4345      Ukraine-Financing                                                          1007       Operating Expenses of USAID Inspector General
                                     4266      Development Credit Authority-Financing                                     1032       Peacekeeping Operations
                                     1036 Foreign Service Retirement and Disability Fund
                               USAID FY 2000 Accountability Report                                   B-9




               USAID FY 2000 Footnotes to the Financial Statements

Note 1 – Summary of Significant Accounting Policies
A. Basis of Presentation
These financial statements report USAID’s financial position and results of operations. They have
been prepared using USAID’s books and records in accordance with Agency accounting policies,
the most significant of which are summarized in this note. The statements are presented in
accordance with the applicable form and content requirements of the Office of Management and
Budget (OMB) Bulletin 97-01, Form and Content of Agency Financial Statements, and the
Government Management Reform Act of 1994.

USAID accounting policies follow generally accepted accounting principles for the Federal
government, as recommended by the Federal Accounting Standards Advisory Board (FASAB). The
FASAB has been recognized by the American Institute of Certified Public Accountants (AICPA) as
the official accounting standard set for the Federal government. These standards have been agreed
to, and published by the Director of the Office of Management and Budget, the Secretary of the
Treasury, and the Comptroller General. Federal accounting standards are based on the following
hierarchy.

1. Accounting standards and principles, known as Statements of Federal Financial Accounting
   Standards (SFFAS), recommended by the Federal Accounting Standards Advisory Board (FASAB)
   and approved and issued by the above named officials.

2. Interpretations related to the SFFASs issued by OMB.

3. Form and content requirements in OMB Bulletin 97-01 and subsequent technical amendments.

4. Accounting standards contained in USAID’s accounting policy manuals and handbooks.

5. Accounting principles published by authoritative standard-setting bodies (such as the Financial
   Accounting Standards Board (FASB)) and other authoritative sources (1) when no guidance is
   available from the other sources listed and (2) when the use of such accounting standards
   makes these financial statements more meaningful.

B. Reporting Entity
Established in 1961 by President John F. Kennedy, USAID is the independent U.S. Government
agency that provides economic development and humanitarian assistance to advance United States
economic and political interests overseas.


Programs
The financial statements reflect the various program activities, shown by appropriation in the
financial statements, which include such programs as the Economic Support Fund, Development
Assistance, Assistance for the New Independent States of the Former Soviet Union, Special
Assistance Initiatives, International Disaster Assistance, Child Survival and Disease, Central
America and the Caribbean Emergency Disaster Recovery Fund, International Organizations and
Programs, and Direct and Guaranteed Loan Programs. This classification is consistent with the
Budget of the United States.
B-10                                    USAID FY 2000 Accountability Report




       Economic Support Fund
       Programs funded through this account provide economic assistance to select countries in support
       of efforts to promote stability and U.S. security interests in strategic regions of the world.

       Development Assistance
       This program provides economic resources to developing countries with the aim of bringing the
       benefits of development to the poor. The program promotes broad-based, self-sustaining economic
       growth and agricultural development, and supports initiatives intended to stabilize population
       growth and protect human health, protect the environment, foster increased democratic
       participation, and build host country capacity to respond to natural disasters in developing
       countries. The program is concentrated in those areas in which the United States has special
       expertise and which promise the greatest opportunity for the poor to better their lives.

       Assistance for the New Independent States of the Former Soviet Union
       This account provides funds for a program of assistance to the independent states that emerged
       from the former Soviet Union. These funds support U.S. foreign policy goals of consolidating
       improved U.S. security; building a lasting partnership with the New Independent States; and
       providing access to each other’s markets, resources, and expertise.

       Special Assistance Initiatives
       This program provides funds to support special assistance activities. The majority of funding for this
       program was for democratic and economic restructuring in Central and Eastern European countries
       consistent with the objectives of the Support for East European Democracy (SEED) Act. All SEED
       Act programs support one or more of the following strategic objectives: promoting broad-based
       economic growth with an emphasis on privatization, legal and regulatory reform and support for
       the emerging private sector; encouraging democratic reforms; and improving the quality of life
       including protecting the environment and providing humanitarian assistance.

       International Disaster Assistance
       Funds for the International Disaster Assistance Program provide relief, rehabilitation, and
       reconstruction assistance to foreign countries struck by disasters such as famines, floods, hurricanes
       and earthquakes. The program also provides assistance in disaster preparedness, prevention and
       mitigation, as well as the longer-term recovery efforts managed by the Office of Transition
       Initiatives.

       Child Survival and Disease
       This program provides economic resources to developing countries to support programs to improve
       infant and child nutrition, with the aim of reducing infant and child mortality rates; to reduce HIV
       transmission and the impact of the HIV/AIDS pandemic in developing countries; to reduce the
       threat of infectious diseases of major public health importance such as polio, and malaria; and to
       expand access to quality basic education for girls and women.

       Central America and the Caribbean Emergency Disaster Recovery Fund
       This program was established by a FY 1999 emergency supplemental bill and is for necessary
       expenses to provide relief for natural disasters in Central America, South America, and Columbia.
                                USAID FY 2000 Accountability Report                                     B-11




International Organizations and Programs
The United States makes assessed payments and contributes to voluntary funds of over twenty-five
international organizations and programs involved in a wide range of sustainable development,
humanitarian, and scientific activities.

Direct and Guaranteed Loans:
• Direct Loan. These loans are authorized under Foreign Assistance Acts, various predecessor
  agency programs, and other foreign assistance legislation. Direct Loans are issued in both U.S.
  dollars and the currency of the borrower. Foreign currency loans made “with maintenance of
  value” place the risk of currency devaluation on the borrower, and are recorded in equivalent
  U.S. dollars. Loans made “without maintenance of value” place the risk of devaluation on the
  U.S. Government, and are recorded in the foreign currency of the borrower.

• Urban and Environmental. The Urban and Environmental (UE) program, formerly the Housing
  Guarantee Program, extends guaranties to U.S. private investors who make loans to developing
  countries to assist them in formulating and executing sound housing and community
  development policies that meet the needs of lower income groups.

• Micro and Small Enterprise Development. The Micro and Small Enterprise Development (MSED)
  Program supports private sector activities in developing countries by providing direct loans and
  loan guarantees to support local micro and small enterprises.

• Israeli Loan Guarantee. Congress enacted the Israeli Loan Guarantee Program in Section 226 of
  the Foreign Assistance Act to support the costs for immigrants resettling to Israel from the former
  Soviet Union, Ethiopia, and other countries. Under this program, the U.S. Government
  guaranteed the repayment of up to $10 billion in loans from commercial sources, to be
  borrowed in $2 billion annual increments. Borrowing was completed under the program during
  Fiscal Year 1999, with approximately $9.2 billion being guaranteed. Guarantees are made by
  USAID on behalf of the U.S. Government, with funding responsibility and basic administrative
  functions resting with USAID.

• Ukraine Loan Guarantee. The Ukraine Export Credit Insurance Program was established with the
  support of the Export-Import Bank of the U.S. to assist Ukrainian importers of American goods.
  The program commenced operations in Fiscal Year 1996 and expired in Fiscal Year 1999.

• Development Credit Authority. The first obligations for USAID’s new Development Credit
  Authority (DCA) were made in FY 1999. DCA allows missions and other offices to use loans and
  loan guarantees to achieve their development objectives when it can be shown that: 1) the
  project generates enough revenue to cover the debt service including USAID fees, 2) there is at
  least 50% risk-sharing with a private-sector institution, and 3) the DCA guarantee addresses a
  financial market failure in-country and does not “crowd-out” private sector lending. DCA can be
  used in any sector and by any USAID operating unit whose project meets the DCA criteria. DCA
  projects are approved by the Agency Credit Review Board and the Chief Financial Officer.

Fund Types
The accompanying consolidated financial statements for USAID include the accounts of all funds
under USAID’s control. The agency maintains 28 general fund appropriations, 1 special fund, 12
revolving funds, 4 trust funds, and 4 deposit funds.
B-12                                   USAID FY 2000 Accountability Report




       General fund appropriations and the Special fund are used to record financial transactions under
       Congressional appropriations or other authorization to spend general revenue.

       Revolving funds are established by law to finance a continuing cycle of operations, with receipts
       derived from such operations usually available in their entirety for use by the fund without further
       action by Congress.

       Trust funds are credited with receipts generated by the terms of the trust agreement or statute. At
       the point of collection, these receipts are unavailable, depending upon statutory requirements, or
       available immediately.

       Deposit funds are established for (1) amount received for which USAID is acting as a fiscal agent
       or custodian, (2) unidentified remittances, (3) monies withheld from payments for goods or services
       received, and (4) monies held waiting distribution on the basis of legal determination.

       C. Basis of Accounting
       The accompanying financial statements have been prepared on an accrual basis. Under the accrual
       method of accounting, revenues are recognized when earned and expenses are recognized when a
       liability is incurred, without regard to receipt or payment of cash.

       Budgetary accounting facilitates compliance with legal constraints on, and controls of, the use of
       federal funds.

       D. Budgets and Budgetary Accounting
       The components of USAID’s budgetary resources include current budgetary authority (that is,
       appropriations and borrowing authority) and unobligated balances remaining from multi-year and
       no-year budget authority received in prior years. Budget authority is the authorization provided by
       law to enter into financial obligations that result in immediate or future outlays of federal funds.
       Budgetary resources also include reimbursement and other income (that is, spending authority
       from offsetting collections credited to an appropriation of fund account) and adjustments (that is,
       recoveries of prior year obligations).

       Pursuant to Public Law 101-510, unobligated balances associated with appropriations that expire
       at the end of the fiscal year remain available for obligation adjustments, but not new obligations,
       until that account is canceled. When accounts are canceled five years after they expire, amounts
       are not available for obligations or expenditure for any purpose and are returned to Treasury.

       Pursuant to Section 511 of USAID’s Appropriations Act for fiscal years 1994 through 1999, or
       Section 517 for USAID’s Appropriations Act for fiscal years 1987 through 1993, funds appropriated
       for certain purposes under the Foreign Assistance Act of 1961, as amended, shall remain available
       until expended if such funds are initially obligated within their period of availability.

       E. Revenues and Other Financing Sources
       USAID receives the majority of its funding through congressional appropriations —annual, multi-
       year, and no-year appropriations — that may be used within statutory limits. Appropriations are
       recognized as revenues at the time the related program or administrative expenses are incurred.
       Appropriations expended for capitalized property and equipment are not recognized as expenses.
       In addition to funds warranted directly to USAID, the agency also receives allocation transfers from
       the Commodity Credit Corporation and the Department of State.
                               USAID FY 2000 Accountability Report                                     B-13




Additional financing sources for USAID’s various credit programs and trust funds include amounts
obtained through collection of guaranty fees, interest income on rescheduled loans, penalty
interest on delinquent balances, permanent indefinite borrowing authority from U.S. Treasury,
proceeds from the sale of overseas real property acquired by USAID, and advances from foreign
governments and international organizations.

Revenues are recognized as financing sources to the extent that they were payable to USAID from
other agencies, other governments and the public in exchange for goods and services rendered to
others.

F. Fund Balances with the U.S. Treasury
Cash receipts and disbursements are processed by the U.S. Treasury. The balances with Treasury are
primarily appropriated funds that are available to pay current liabilities and finance authorized
purchase commitments, but they also include revolving, deposit, and trust funds.

G. Foreign Currency
The Direct Loan Program has foreign currency funds, which are used to disburse loans in certain
countries. Those balances are reported at the U.S. dollar equivalents using the exchange rates
prescribed by the U.S. Treasury. A gain or loss on translation is recognized for the change in
valuation of foreign currencies at year-end.

H. Accounts Receivable
Accounts receivable consist of amounts due mainly from foreign governments but also from other
Federal agencies and private organizations. USAID regards amounts due from other Federal
agencies as 100 percent collectible. The Agency establishes an allowance for uncollectible
accounts receivable for non-loan or revenue generating sources that have not been collected for a
period of over one year.

I.   Loans Receivable
Loans are accounted for as receivables after funds have been disbursed. For loans obligated before
October 1, 1991 (the pre-credit reform period), loan principal, interest, and penalties receivable
are reduced by an allowance for estimated uncollectible amounts. The allowance is estimated
based on a method prescribed by OMB that takes into account country risk and projected cash
flows.

For loans obligated on or after October 1, 1991, the loans receivable are reduced by an allowance
equal to the present value of the subsidy costs (due to the interest rate differential between the
loans and Treasury borrowing, the estimated delinquencies and defaults net of recoveries, the offset
from fees, and other estimated cash flows) associated with these loans. This allowance is re-
estimated when necessary and changes reflected in the operating statement.

Loans are made in both U.S. dollars and foreign currencies. Loans extended in foreign currencies
can be with or without “Maintenance of Value” (MOV). Those with MOV place the currency
exchange risk upon the borrowing government; those without MOV place the risk on USAID.
Foreign currency exchange gain or loss is recognized on those loans extended without MOV, and
reflected in the net credit programs receivable balance.
B-14                                   USAID FY 2000 Accountability Report




       Credit program receivables also include origination and annual fees on outstanding guarantees,
       interest on rescheduled loans and late charges. Claims receivables (subrogated and rescheduled)
       are due from foreign governments as a result of defaults for guaranteed loans. Receivables are
       stated net of an allowance for uncollectible accounts, determined using a country-specific
       identification methodology.

       While estimates of uncollectible loans and interest are made using methods prescribed by OMB,
       the final determination as to whether a loan is collectible is also affected by actions of other U.S.
       Government agencies.

       J. Advances and Prepayments
       Funds disbursed in advance of incurred expenditures are recorded as advances. Most advances
       consist of funds disbursed under letters of credit to contractors and grantees. The advances are
       liquidated and recorded as expenses upon receipt of expenditure reports from the recipients.

       K. Operating Materials and Supplies
       USAID has operating materials and supplies held for use that consist mainly of computer paper
       and other expendable office supplies not in the hands of the user. USAID also has materials and
       supplies in reserve for foreign disaster assistance stored at strategic sites around the world. These
       consist of tents, vehicles, and water purification units. The Agency also has birth control supplies
       stored at several sites.

       USAID’s office supplies are deemed items held for use because they are tangible personal property
       to be consumed in normal operations. Agency supplies held in reserve for future use are not
       readily available in the market, or there is more than a remote chance that the supplies will be
       needed, but not in the normal course of operations. Their valuation is based on cost and they are
       not considered “held for sale”. USAID has no supplies categorizable as excess, obsolete, or
       unserviceable operating materials and supplies.

       L. Property, Plant and Equipment
       USAID capitalizes all property, plant and equipment that has an acquisition cost of $25,000 or
       greater and a useful life of two years or more. Acquisitions that do not meet these criteria are
       recorded as operating expenses. Assets are capitalized at historical cost and depreciated using the
       straight-line method. Real property is depreciated over 20 years, nonexpendable personal property
       is depreciated over 3 to 5 years, and capital leases are depreciated according to the terms of the
       lease. The Agency operates land, buildings, and equipment that are provided by the General
       Services Administration. Rent for this property is expensed. Internally developed and contractor
       developed software is not capitalized because it is for internal Agency use only. Deferred
       maintenance amounts are immaterial with respect to the financial statements.

       M. Liabilities
       Liabilities represent the amount of monies or other resources that are likely to be paid by USAID as
       the result of transactions or events that have already occurred. However, no liability can be paid by
       the Agency without an appropriation or borrowing authority. Liabilities for which an appropriation
       has not been enacted are therefore classified as liabilities not covered by budgetary resources
       (unfunded liabilities), and there is no certainty that the appropriations will be enacted. Also, these
       liabilities can be abrogated by the U.S. Government, acting in its sovereign capacity.
                                 USAID FY 2000 Accountability Report                                     B-15




N. Liabilities for Loan Guarantees
The Credit Reform Act (CRA) of 1990, which became effective on October 1, 1991, has
significantly changed the manner in which USAID’s loan programs finance their activities. The
main purpose of CRA was to more accurately measure the cost of Federal credit programs and to
place the cost of such programs on a basis equivalent to other Federal spending. Consequently,
commencing in fiscal 1992, the loan program’s funding for activities changed so that activities are
funded through direct appropriation provided for that year only, rather than through cumulative
appropriations granted in prior years and accumulated under the Revolving Fund.

For USAID’s loan guarantee programs, when guarantee commitments are made, the program
records a guarantee reserve in the program account. This reserve is based on the present value of
the estimated net cash outflows to be paid by the Program as a result of the loan guarantees,
except for administrative cost, less the net present value of all revenues to be generated from those
guarantees. When the loans are disbursed, the Program transfers from the program account to the
financing account the amount of the subsidy cost related to those loans. The amount of the subsidy
cost transferred, for a given loan, is proportionate to the amount of the total loan disbursed.

For loan guarantees made before the CRA, liabilities for loan guarantees for pre-1992 loans
represent unfunded liabilities. Footnote 5 presents the unfunded amounts separate from the post-
1991 liabilities. The amount of unfunded liabilities also represents a future funding requirement to
USAID. The liability is calculated using a reserve methodology that is similar to OMB prescribed
method for post-1991 loan guarantees.

O. Annual, Sick, and Other Leave
Annual leave is accrued as it is earned and the accrual is reduced as leave is taken. Each year, the
balance in the accrued annual leave account is adjusted to reflect current pay rates. To the extent
that current or prior year appropriations are not available to fund annual leave earned but not
taken, funding will be obtained from future financing sources. Sick leave and other types of leave
are expensed as taken.

P. Retirement Plans and Post Employment Benefits
USAID employees are covered by one of four retirement plans. There are two Civil Service plans,
Civil Service Retirement System (CSRS) and Federal Employees Retirement System (FERS), and two
foreign service plans, Foreign Service Retirement and Disability System (FSRDS) and the Foreign
Services Pension System (FSPS). The Agency contributes approximately 7.5 percent of an
employee’s gross salary for CSRS and FSRDS, and approximately 24 percent of an employee’s gross
salary for FERS and FSPS.

Employees may elect to participate in the Thrift Savings Plan (TSP). Under this plan, FERS and FSPS
employees may elect to have up to 10 percent, but not to exceed $10,000, of gross earnings
withheld from their salaries and receive matching contributions from a minimum of one percent to
a maximum of 5 percent. CSRS and FSRDS employees may elect to have up to 5 percent of gross
earnings withheld from their salaries, but they do not receive matching contributions.

USAID funds a portion of employee post employment benefits (PEB) and makes necessary payroll
withholdings. It has no liability for future payments, nor is it responsible for reporting the assets,
accumulated plan benefits, or unfunded liabilities, if any, applicable to its employees for these
programs. Reporting of such amount is the responsibility of the Office of Personnel Management
B-16                                  USAID FY 2000 Accountability Report




       and the Federal Retirement Thrift Investment Board. Current year operating expenses are charged
       for the full amount of employer PEB costs with the unfunded portion being charged to Other
       Revenue Sources-Imputed Financing in accordance with SFFAS Numbers 5 and 7.

       Foreign Service National and Third County Nationals at overseas posts who were hired prior to
       January 1, 1984, may be covered under CSRS. Employees hired after that date are covered under a
       variety of local governmental plans in compliance with host country laws and regulations. In a
       limited number of cases where no plans are regulated by the host country or where such plans are
       inadequate, the employees are covered by a privately managed pension plan to conform to
       prevailing practices by employers.

       The Foreign Service National Separation Pay Trust Fund (FSNSPTF) was established in 1991 by
       public law 102-138 to finance separation payments for eligible individuals, primarily Foreign
       Service Nationals employed by USAID. The FSNSPTF finances separation liabilities to employees
       who resign, retire, or lose their jobs due to a reduction-in-force; and is applicable only in those
       countries that, due to local law, require a lump sum voluntary payment based on years of service.

       Q. Net Position
       Net position is the residual difference between assets and liabilities. It is composed of unexpended
       appropriations and cumulative results of operations.

       • Unexpended appropriations are the portion of the appropriations represented by undelivered
         orders and unobligated balances.

       • Cumulative results of operations are also part of net position. This account reflects the net
         difference between (1) expenses and losses and (2) financing sources, including appropriations,
         revenues and gains, since the inception of the activity.

              e
       R. Non-entity Assets
       Non-entity fund balances are amounts in Deposit Fund accounts. These include such items as:
       funds received from outside sources where the government acts as fiscal agent, monies the
       government has withheld awaiting distribution based on legal determination, and unidentified
       remittances credited as suspense items outside the budget. Non-entity governmental fund balances
       are disclosed in Note 2.

       Non-entity accounts receivable of $44 million as of September 30, 2000 are comprised of
       unavailable miscellaneous receipt funds which do not constitute budget authority and which must
       be returned to the Department of Treasury’s general fund when collected. In FY 1999 Non-entity
       accounts receivable were reported at $120.3 million. Non-entity governmental accounts receivable
       are disclosed in Note 3.

       During FY 2000, there are no non-entity intragovernmental assets.
                               USAID FY 2000 Accountability Report                                   B-17




S. Program Costs
Program costs are presented on the Statement of Net Cost by agency goal. The six agency goals
that support USAID objectives are:

1.   Encourage Broad-Based Economic Growth and Agricultural Development
2.   Strengthen Democracy and Good Governance
3.   Build Human Capacity Through Education and Training
4.   Stabilize World Population and Protect Human Health
5.   Protect the Environment for Long-Term Sustainability
6.   Promote Humanitarian Assistance

Mission related program expenses by goal area are obtained from the Mission Accounting and
Control system (MACS). USAID/Washington program expenses by goal area are obtained from the
New Management System (NMS). Expenses related to Credit Reform, trust funds, and revolving
funds are directly applied to specific agency goals based on their objectives. Overhead expenses
such as salaries and benefits, travel, and utilities are allocated to agency objectives based on a
weighted average of current year expenses by goal area.
B-18                                  USAID FY 2000 Accountability Report




       Note 2 – Fund Balances with Treasury (In Thousands)
       Entity and Non-Entity Fund Balances with Treasury as of September 30, 2000 and 1999 consisted
       of the following:

                                                                              2000               1999
       Funds Balances              Entity Assets   Non-Entity Assets          Total              Total

       Appropriated Funds        $10,131,380            $       -        $10,131,380        $ 9,932,192
       Trust Funds                    14,357                    -             14,357             14,213
       Revolving Funds               993,513                    -            993,513            799,007
       Other Funds                   (22,011)               3,051            (18,960)           (18,964)

       Total                     $11,117,239            $ 3,051          $11,120,290       $10,726,448

       As of September 30, 2000 there was a cash reconciliation difference of $18.7 million between
       USAID and the Department of Treasury’s Fund Balances. The difference as of September 30, 1999
       was $ 21.8 million. For FY 2000 and FY 1999 reporting purposes, USAID adjusted its fund balance
       downward by these differences to equal the Department of Treasury’s fund balance. By adjusting
       USAID’s fund balance to equal Treasury’s fund balance, there is consistency between various
       published reports. Also, based on past experience, the Department of Treasury’s balances are more
       accurate and the differences are usually cleared when USAID processes the required
       disbursements.

       The $18.7 million cash reconciliation difference was posted to separate Fund Balance sub-
       accounts and the cash differences remain identified as such. USAID is currently performing a
       reconciliation of the $18.7 million total amount in these accounts and will make adjustments
       accordingly.
                                 USAID FY 2000 Accountability Report                                      B-19




Note 3 – Accounts Receivable, Net (In Thousands)
The primary components of USAID’s accounts receivable as of September 30, 2000 and 1999 were
as follows:

                                                Receivable     Allowance      Receivable     Receivable
                                                  Gross        Accounts          Net            Net
                                                                                2000           1999
Entity
   Intragovernmental
       Appropriation Reimbursements
         from Federal Agencies                   $24,280               $-       $24,280          $414

      Accounts Receivable from
         Federal Agencies                        448,741                -       448,741          1,142

     Disbursing Authority Receivable
          from USDA                                 145                -           145        383,318
   Total Intragovernmental                     $473,166               $-      $473,166       $384,874

      Accounts Receivable                        $14,607         $9,957          $4,650        $2,465
                                                 $14,607         $9,957         $4,650*       $2,465*

   Total Entity                                $487,773          $9,957       $477,816       $387,339

Total Non-Entity                                 $45,500         $1,506        $43,994*     $120,310*

Total Receivables                              $533,273         $11,463       $521,810       $507,649

* Governmental accounts receivables total $48,643 and $122,776 for FY 1999 and FY 2000 respectively.


Reconciliation of Uncollectible Amounts (Allowance Accounts)

                                2000          1999
Beginning Balance              $9,746        $9,543
Additions                       1,936          1,507
Reductions                       (219)       (1,304)
Ending Balance                $11,463        $9,746

Entity Intragovernmental accounts receivable consist of amounts due from other U.S. Government
agencies. No allowance has been established for the intragovernmental accounts receivable, which
are considered to be 100 percent collectible. Disbursing Authority Receivable from USDA consists
of obligational authority from the U.S. Department of Agriculture’s Commodity Credit Corporation.
The authority is for payment of transportation costs incurred by USAID associated with the
shipment of P.L. 480, Title II and III commodities; Farmer-to-Farmer Technical Assistance Programs;
and for assistance to private voluntary organizations, cooperatives, and international organizations.
Collections against this receivable are realized when USAID requests a transfer of funds from
USDA to cover incurred expenses.

All other entity accounts receivable consist of amounts managed by missions or USAID/
Washington. These receivables consist of non-program related receivables such as overdue
advances, unrecovered advances, audit findings, and any interest related to these types of
B-20                                    USAID FY 2000 Accountability Report




       receivables. A 100 percent allowance for uncollectible amounts is estimated for governmental
       accounts receivable which are more that one year past due. Accounts receivable from missions are
       collected and recorded to the respective appropriation.

       Non-entity accounts receivables of $44 million for FY 2000 are comprised of unavailable
       miscellaneous receipt funds which do not constitute budget authority and which must be returned
       to the Department of Treasury’s general fund when collected. Non-entity accounts receivables
       reported for FY 1999 were $120.3 million.

       Interest receivable is calculated separately and there is no interest included in the accounts
       receivable listed above.



       Note 4 – Advances and Prepayments (In Thousands)
       Advances and Prepayments as of September 30, 2000 and 1999 consisted of the following:

                                                                                 2000             1999
       Intragovernmental

            Advances to Federal Agencies                                      $ 63,609           $55,682
       Total Intergovernmental                                                $ 63,609           $55,682



               Advances to Contractors/Grantees                                $723,745        $984,953
               Travel Advances                                                       12              17
               Advances to Host Country Governments and Institutions

               Prepayments                                                        2,091           3,635
               Advances, Other                                                    1,723              12
       Total                                                                   $727,571        $988,617

       Total Advances and Prepayments                                          $791,180      $1,044,299

       Advances to Host Country Governments and Institutions represent amounts advanced by USAID
       missions to host country governments and other in-country organizations, such as educational
       institutions and voluntary organizations. Other Advances consist primarily of amounts advanced for
       living quarters and home service.
                                 USAID FY 2000 Accountability Report                                      B-21




Note 5 – Loans Receivables and Liabilities for Loan Guarantees (In Thousands)
USAID operates the following loan and/or loan guarantee programs:

•   Direct Loan Program (Direct Loan)
•   Urban and Environmental Program (UE)
•   Micro and Small Enterprise Development Program (MSED)
•   Ukraine Export Insurance Credit Program (Ukraine)
•   Israeli Loan Guarantee Program (Israeli Loan)
•   Development Credit Authority Program (DCA)

Direct loans resulting from obligations made prior to FY 1992 are reported net of allowance for
estimated uncollectible loans. Estimated losses from defaults on loan guarantees resulting from
obligations made prior to FY 1992 are reported as a liability.

The Credit Reform Act of 1990 prescribes an alternative method of accounting for direct loans and
guarantees resulting from obligations made after FY 1991. Subsidy cost, which is the net present
value of the cash flows (i.e. interest rates, interest supplements, estimated defaults, fees, and other
cash flows) associated with direct loans and guarantees, is required by the Act to be recognized as
an expense in the year in which the direct loan or guarantee is disbursed. Subsidy cost is
calculated by agency program offices prior to obligation using a model prescribed by the Office of
Management and Budget (OMB). Subsidy relating to existing loans and guarantees is generally
required to be reestimated on an annual basis to adjust for changes in risk and interest rate
assumptions. Direct loans are reported net of an allowance for this subsidy cost (allowance for
subsidy). The subsidy costs associated with loan guarantees are reported as loan guarantee liability.

An analysis of loans receivable, loan guarantees, liability for loan guarantees, and the nature and
amounts of the subsidy costs associated with the loans and loan guarantees are provided in the
following sections.

The following net loan receivable amounts are not the same as the proceeds that USAID would
expect to receive from selling its loans. Actual proceeds may be higher or lower depending on the
borrower and the status of the loan.

Direct Loans Obligated Prior to FY 1992 (Allowance for Loss Method) as of September 30, 2000:

                                                                                     Value of Assets
                           Loans Receivable       Interest         Allowance        Related to Direct
Loan Programs                   Gross            Receivable      For Loan Losses          Loans

Direct Loan                   $9,994,966         $351,522          $3,989,920          $6,356,568
MSED                               1,872               19               1,747                 144
    Total                     $9,996,838         $351,541          $3,991,667          $6,356,712
B-22                                USAID FY 2000 Accountability Report




       Direct Loans Obligated Prior to FY 1992 (Allowance for Loss Method) as of September 30, 1999:

                                                                                     Value of Assets
                               Loans Receivable     Interest        Allowance       Related to Direct
       Loan Programs                Gross          Receivable     For Loan Losses         Loans

       Direct Loan               $10,773,631        $298,819        $4,790,877         $6,281,573
       MSED                            4,249              19             3,292                976
           Total                 $10,777,880        $298,838        $4,794,169         $6,282,549



       Direct Loans Obligated After FY 1991 as of September 30, 2000:

                                                                                     Value of Assets
                               Loans Receivable     Interest        Allowance       Related to Direct
       Loan Programs                Gross          Receivable      Subsidy Cost           Loans

       Direct Loan                  $166,240              $-            $162,471           $3,769
       MSED                            1,379             (92)                239            1,048
           Total                    $167,619            $(92)           $162,710           $4,817



       Direct Loans Obligated After FY 1991 as of September 30, 1999:

                                                                                     Value of Assets
                               Loans Receivable     Interest        Allowance       Related to Direct
       Loan Programs                Gross          Receivable      Subsidy Cost           Loans

       Direct Loan                  $218,463              $-            $135,825          $82,638
       MSED                            2,076              15                 376            1,715
           Total                    $220,539             $15            $136,201          $84,353



       Defaulted Guaranteed Loans from Pre-1992 Guarantees (Allowance for Loss Method) as of
       September 30, 2000:

       Loan                       Defaulted                                            Defaulted
       Guarantee               Guaranteed Loan      Interest       Allowance for    Guaranteed Loan
       Programs                Receivable, Gross   Receivable       Loan Losses     Receivable, Net

       UE                           $447,497         $45,670            $219,344        $273,823
            Total                   $447,497         $45,670            $219,344        $273,823
                               USAID FY 2000 Accountability Report                                    B-23




Defaulted Guaranteed Loans from Pre-1992 Guarantees (Allowance for Loss Method) as of
September 30, 1999:

Loan                        Defaulted                                                 Defaulted
Guarantee                Guaranteed Loan           Interest      Allowance For     Guaranteed Loan
Programs                 Receivable, Gross        Receivable      Loan Losses      Receivable, Net

UE                            $503,329             $31,567           $236,000             $298,896
     Total                    $503,329             $31,567           $236,000             $298,896



Defaulted Guaranteed Loans from Post-1991 Guarantees:

The Urban and Environment Credit Program experienced $1.5 million in defaults on payments that
were due in FY 2000 on post-1991 guaranteed loans. There were no defaults in FY 1999.



Guaranteed Loans Outstanding:
                                        2000                                     1999

                           Outstanding     Amount of             Outstanding            Amount of
                             Principal,    Outstanding             Principal,           Outstanding
                         Guaranteed Loans,  Principal          Guaranteed Loans,         Principal
Loan Programs               Face Value     Guaranteed             Face Value            Guaranteed

UE                          $2,250,363        $2,250,363          $2,294,560         $2,294,560
MSED                            27,691            15,075              40,160             20,080
Ukraine Export                       -                 -                   -                  -
Israel                       9,226,200         9,226,200           9,226,200          9,226,200
DCA                                  -                 -                   -                  -
     Total                 $11,504,254       $11,491,638         $11,560,920        $11,540,840

Loan Guarantees Outstanding are not presented on the face of the financial statement but instead
are used to calculate the liability for loan guarantees presented below.



Liability for Loan Guarantees (Estimated Future Default Claims pre-1992) as of September 30,
2000:

                           Liability for Losses         Liabilities for Loan
                              on Pre 1992 ,               Guarantees for
                               Guarantees                    Post-1991            Total Liabilities
                             Estimate Future                Guarantees                  for
Loan Programs                Default Claims                Present Value         Loan Guarantees
UE                             $441,469                       $65,507                $506,976
MSED                                     -                        2,633                  2,633
Ukraine Export                           -                             -                       -
Israel                                   -                    586,629                 586,629
DCA                                      -                          103                    103
     Total                     $441,469                      $654,872              $1,096,341
B-24                                    USAID FY 2000 Accountability Report




       Liability for Loan Guarantees (Estimated Future Default Claims pre-1992) as of September 30,
       1999:

                                  Liability for Losses          Liabilities for Loan
                                     on Pre 1992 ,                Guarantees for
                                      Guarantees                     Post-1991           Total Liabilities
                                    Estimate Future                 Guarantees                 for
       Loan Programs                Default Claims                 Present Value        Loan Guarantees

       UE                               $417,956                     $68,108              $486,064
       MSED                                    -                       1,935                  1,935
       Ukraine Export                          -                      30,054                 30,054
       Israel                                  -                     549,690                549,690
            Total                       $417,956                    $649,787             $1,067,743



       Subsidy Expenses for Post-1991 Direct Loans as of September 30, 2000:

       1. Current Year’s Direct Loans

          There were no subsidy expenses for FY 2000.

       2. Direct Loan Modification and Reestimates

          There have been no modifications and reestimates. However, see item number two at end of
          footnote for pending modifications which will affect UE program.

       3. Total Direct Loan Subsidy Expenses

          None.



       Subsidy Expenses for Post-1991 Direct Loans as of September 30, 1999:

       1. Current Year’s Direct Loans

          Loan Programs                 Interest Differential      Defaults            Fees         Total
          MSED                                  $(39)               $107                $-          $68
            Total                               $(39)               $107                $-          $68


       2. Direct Loan Modification and Reestimates

          There were no modifications and reestimates.

       3. Total Direct Loan Subsidy Expenses

          Total subsidy expenses in MSED were $68,000.
                              USAID FY 2000 Accountability Report                                 B-25




Subsidy Expenses for Post-1991 Loan Guarantees as of September 30, 2000:

1. Current Year’s Loan Guarantees

   Loan Programs                    Defaults          Fees         Interest Supplement    Total
   UE                               $4,452           $1,108                  $-          $3,344
   MSED                                160               53                   -             107
     Total                          $4,612           $1,161                  $-          $3,451

2. Loan Guarantee Modifications and Reestimates

   Loan Programs             Modifications           Reestimates
   UE                             $-                   $8,549
   MSED                             -                      982
     Total                        $-                   $9,531

   There were no modifications.

3. Total Loan Guarantee Subsidy Expenses

   Loan Programs
   UE                  $11,893
   MSED                  1,089
     Total             $12,982

Subsidy Expenses for Post-1991 Loan Guarantees as of September 30, 1999:

1. Current Year’s Loan Guarantees

   Loan Programs                    Defaults           Fees        Interest Supplement   Total
   UE                               $18,980           $7,910                $-         $11,070
     Total                          $18,980           $7,910                $-         $11,070

2. Loan Guarantee Modifications and Reestimates

   There were no modifications and reestimates.

3. Total Loan Guarantee Subsidy Expenses

   Total loan guarantee subsidy expenses for the UE program in FY 1999 were $11.1 million.

        Administrative Expenses                    2000              1999
   Loan Programs
   Direct Loans                                      $-                $-
   UE                                             5,112             5,435
   MSED                                             452               482
   Ukraine Export                                                      23
        Total                                  $5,564              $5,940
B-26                                  USAID FY 2000 Accountability Report




       Other Information
       1. Allowance for Loss for Liquidating account (pre-Credit Reform Act) receivables have been
          calculated in accordance with OMB guidance using a present value method which assigns risk
          ratings to receivables based upon the country of debtor. Eighteen countries are in violation of
          Section 620q of the Foreign Assistance Act (FAA), owing a total of $34,657,100.00 that is more
          than six months delinquent. Twelve countries are in violation of the Brooke-Alexander
          Amendment to the Foreign Operations Export Financing and Related Programs Appropriations
          Act, owing a total of $401,968,876.79 that is more than one year delinquent. Outstanding
          direct loans receivable for countries in violation of section 620q totaled $26,552,347.67.
          Outstanding direct loans receivable for countries in violation of the Brooke Amendment totaled
          $368,217,574.30.

       2. Certain credits in the Urban and Environmental Credit Program will be subject to Paris Club
          restructuring in FY 2001. The guarantees and rescheduled claims of six debtor nations totaling
          $169 million will be involved in debt reductions at rates between 50% and 80% of the
          outstanding receivables. The credit subsidy (cost to the US government) has been calculated at
          approximately $44 million.

       3. The MSED Liquidating Account general ledger has a loan receivable balance of $1.9 million.
          The Riggs Bank/Metavante loan servicing system shows loans receivable in the amount of $1.1
          million. The difference is due to the inclusion of two additional loans in the USAID general
          ledger totalling $792,174.39. While Loan Management Division is continuing to research the
          status of these loans, they are being carried at 100% bad debt allowance. Any necessary
          adjusting entries resulting from this research will be posted in FY 2001.

       4. The Ukraine program guarantees have expired. No defaults were experienced. Closeout is
          expected to take place in FY 2001.

       5. USAID has made certain adjustments to reduce its receivable balances as a result of the
          reconciliation and review process that took place concurrently with USAID’s outsourcing of its
          loan servicing operation. These entries total $ 265 million, and include adjustments for
          unapplied funds, unrecorded rescheduling transactions, and corrections to loan balances made
          by the loan servicing contractor. This amount also includes $ 85 million in unallocated
          adjustments made in order to reconcile the general ledger receivable balances to the loan
          servicing system. These entries are being made as a one-time adjustment.
                               USAID FY 2000 Accountability Report                                  B-27




Note 6 – Cash and Other Monetary Assets (In Thousands)
Cash and Other Monetary Assets as of September 30, 2000 and 1999 are as follows:



Entity Cash and Other Monetary Assets                             2000                1999
        Undeposited Collections                                       $-               $373
        UE and Micro and Small                                        50                 50
           Enterprise Fund Cash w/Fiscal Agent
        Foreign Currencies                                       153,119             179,191
Total Entity Cash and Other Monetary Assets                     $153,169            $179,614

Non-Entity Cash and Other Monetary Assets                              $-                  $-

Total Cash and Other Monetary Assets                            $153,169            $179,614

USAID has imprest funds in various overseas locations. These funds are provided by the
Department of State overseas U.S. Disbursing Officers to which USAID is liable for any shortages.
USAID’s portion of the Department of State imprest funds provided to USAID was $3 million in FY
2000 and $2.5 million in FY 1999. These imprest funds are not included in USAID’s Balance
Sheet. Foreign Currencies are related to Foreign Currency Trust Funds and this amounted to $153
million in FY 2000 and $179 million in FY 1999.
B-28                                  USAID FY 2000 Accountability Report




       Note 7 – Operating Materials and Supplies (In Thousands)
       Operating Supplies and Materials as of September 30, 2000 and 1999 are as follows:

                                                                2000                   1999
       Items Held for Use
           Office Supplies                                     $6,728                $6,628

       Items Held in Reserve for Future Use
           Disaster assistance materials and supplies           5,911                 5,104
           Birth control supplies                               8,482                 6,538

       Total                                                 $21,121                $18,270

       Operating Materials and Supplies are valued at historical cost and considered not held for sale.
                                USAID FY 2000 Accountability Report                                     B-29




Note 8 – Property, Plant and Equipment, Net (In Thousands)
The components of PP&E at September 30, 2000 were:

                                                       Accumulated       Net Book
                                        Useful Life       Cost          Depreciation       Value
Classes of Fixed Assets
    Equipment                         3 to 5 years         $35,718         $27,397        $8,321
    Structures, Facilities,               20 years          34,652          12,840        21,812
      & Leasehold Improvements
    Land                                      N/A            3,434               -          3,434
    Assets Under Capital Lease              2,424              460           1,964
    Construction in Progress                  N/A              439               -            439

        Total                                              $76,667         $40,697       $35,970



The components of PP&E at September 30, 1999 were:

                                                       Accumulated       Net Book
                                        Useful Life       Cost          Depreciation       Value
Classes of Fixed Assets
    Equipment                         3 to 5 years         $29,925         $24,936        $4,989
    Structures, Facilities,               20 years          31,116          13,086        18,030
      & Leasehold Improvements
    Land                                      N/A            3,706               -          3,706
    Assets Under Capital Lease              1,965              136           1,829
    Construction in Progress                  N/A                -               -                  -

        Total                                              $66,712         $38,158       $28,554

USAID PP&E includes assets located in Washington, D.C. offices and overseas field missions.

• For FY 2001, USAID capitalization criteria for assets was $25,000. Assets meeting this criteria
   are depreciated using the half-year straight line depreciation method.

• Equipment consists primarily of electric generators, ADP hardware, vehicles and copiers located
   at the overseas field missions.

• Structures and Facilities include USAID owned office buildings and residences at foreign
   missions, including the land on which these structures reside. These structures are used and
   maintained by the field missions. USAID does not separately report the cost of the building and
   the land on which the building resides.

• Land consists of property owned by USAID in foreign countries. Usually the land is purchased
   with the intention of constructing an office building at the site.
B-30                                   USAID FY 2000 Accountability Report




       Note 9 – Accounts Payable (In Thousands)
       The Accounts Payable covered by budgetary resources as of September 30, 2000 and 1999
       consisted of the following:

                                                                2000                 1999
       Intragovernmental

           Accounts Payable                                   $86,046             $126,683
           Disbursements in Transit                                 -                  116
       Total Intragovernmental                                 86,046              126,799



           Accounts Payable                                $1,285,063           $1,398,348
           Disbursements in Transit                             2,090               13,251
       Total                                               $1,287,153           $1,411,599

       Total Accounts Payable                              $1,373,199           $1,538,398

       Intragovernmental Accounts Payable are those payable to other federal agencies and consist mainly
       of unliquidated obligation balances related to interagency agreements between USAID and other
       federal agencies.

       All other Accounts Payable represent liabilities to other non-governmental entities.
                                USAID FY 2000 Accountability Report                                   B-31




Note 10 – Debt (In Thousands)
USAID Intragovernmental debt as of September 30, 2000 consisted of the following borrowings
from Treasury for post-1991 loan programs, which is classified as other debt:

                                Beginning Balance           Net Borrowing            Ending Balance

Urban & Environmental                 $48,000                 $(48,000)                      $-
Direct Loan                           148,234                  (33,462)                 114,772
MSED                                    1,713                         -                   1,713

Total Debt                          $197,947                  $(81,462)                $116,485

USAID Intragovernmental debt as of September 30, 1999 consisted of the following borrowings
from Treasury for post-1991 loan programs:

                                Beginning Balance           Net Borrowing            Ending Balance

Urban & Environmental                 $72,000                 $(24,000)                 $48,000
Direct Loan                           234,157                  (85,923)                 148,234
MSED                                    1,877                     (164)                   1,713

Total Debt                          $308,034                ($110,087)                 $197,947

Pursuant to the Credit Reform Act of 1990, agencies with credit programs have permanent
indefinite authority to borrow funds from the Treasury. These funds are used to disburse new direct
loans to the public and, in certain situations, to cover credit reform program costs. Liquidating
(pre-1992) accounts have permanent indefinite borrowing authority to be used to cover program
costs when they exceed account resources. UE Program debt includes amounts borrowed before
the effective date of the Credit Reform Act of 1990.

The above disclosed debt is principal payable to Treasury, which represents borrowings from the
Treasury. There is $6.4 million Due to Treasury, a cumulative liability account. Both of these
accounts are used exclusively for credit reform activity. All debt shown is intragovernmental debt.
B-32                                  USAID FY 2000 Accountability Report




       Note 11 – Other Liabilities (In Thousands)
       As of September 30, 2000 Other Liabilities consisted of the following:

                                                           Noncurrent           Current        Total
       Intragovernmental – 2000
           OPAC Suspense                                         $-           $(461)           $(461)
           Deposit and Clearing Accounts                      (774)             (774)
           Other                                                  -           99,301          99,680
       Total Intragovernmental                                   $-          $98,066         $98,445

           Accrued Funded Payroll/Benefits                       $-          $10,881         $10,881
           Deferred Credit                                        -            2,380           1,893
           Liability for Deposit Funds and
             Suspense Accounts – Non-Entity                       -            3,051           3,051
           Foreign Currency Trust Fund                             -         153,119         153,119
           Trust Fund Balances                                     -          14,235          14,235
           Unamortized Origination Fees                            -                -               -
           Other                                                   -               6               6
       Total                                                     $-         $183,672        $183,185

       Total Other Liabilities                                    $         $281,738        $281,630



       As of September 30, 1999, Other Liabilities consisted of the following:

                                                           Noncurrent           Current        Total
       Intragovernmental – 1999

           OPAC Suspense                                        $-            $3,688          $3,688
           Deposit and Clearing Accounts                     3,056             3,056
           Other                                                 -           121,805         121,805
       Total Intragovernmental                                  $-          $128,549        $128,549



           Accrued Funded Payroll/Benefits                      $-               $9,918       $9,918
           Deferred Credit                                   1,993                1,993
           Liability for Deposit Funds and
             Suspense Accounts – Non-Entity                       -            1,760           1,760
           Foreign Currency Trust Fund                             -         179,197         179,197
           Trust Fund Balances                                     -          14,193          14,193
       Total                                                     $-         $207,061        $207,061

       Total Other Liabilities                                  $-          $335,610        $335,610

       Intragovernmental Liabilities represent amounts due to other federal agencies. All remaining Other
       Liabilities are liabilities to non-federal entities.
                               USAID FY 2000 Accountability Report                                 B-33




Note 12 – Leases (In Thousands)
Leases as of September 30, 2000 and 1999 consisted of the following:

Capital Leases:                                                      2000                1999

          Buildings                                               $2,424               $1,965
          Accumulated Depreciation                                   460                  136

     Future Payments Due:

             Fiscal Year                                        Future Costs        Future Costs
                2000                                                 N/A              $1,757
                2001                                              $1,431               1,025
                2002                                               1,101                 832
                2003                                                 630                 504
                2004                                                  54                    -
                 2005                                                   -                N/A
          After 5 Years                                                 -                   -
          Total Future Lease Payments                             $3,216              $4,118
          Less: Imputed Interest                                     N/A                 N/A
                Executory costs                                      N/A                 N/A
     Total Capital Lease Liability                                $3,216              $4,118

     Covered by Budgetary Resources                               $3,216               $4,118

Operating Leases:                                                    2000                1999

     Future Payments Due:

              Fiscal Year                                       Future Costs        Future Costs
                 2000                                                 N/A             $52,174
                 2001                                             $59,333               50,599
                 2002                                              60,954               48,491
                 2003                                              58,422               46,781
                 2004                                              56,696               45,962
                 2005                                              53,839                  N/A
    After 5 Years                                                 218,867             180,958
    Total Future Lease Payments                                  $508,111            $424,965



Of the $508 million in future lease payments, $377 million is attributable to the Ronald Reagan
Building in Washington D.C., USAID’s headquarters. The remaining $130 million relates to other
USAID Washington activity and mission related operating leases.
B-34                                  USAID FY 2000 Accountability Report




       Note 13 – Accrued Unfunded Annual Leave and Separation Pay (In Thousands)
       Accrued unfunded benefits for annual leave and separation pay as of September 30, 2000 and
       1999 are:

                                                                                2000           1999
       Liabilities Not Covered by Budgetary Resources

               Accrued Annual Leave                                          $25,587          $26,004
               FSN Separation Pay Liability                                      238              464

       Total Accrued Unfunded Annual Leave and Separation Pay                $25,825          $26,468



       Note 14 – Accrued Unfunded Workers’ Compensation Benefits (In Thousands)
       The provision for workers’ compensation benefits payable, as of September 30, 2000 and 1999 are
       as follows:

                                                                             2000               1999
       Liabilities Not Covered by Budgetary Resources

           Accrued Unfunded Workers’ Compensation                           $7,445             $7,184
           Future Workers’ Compensation Benefits                            29,819             37,873

       Total Accrued Unfunded Workers Compensation Benefits                $37,264            $45,057



       The Federal Employees Compensation Act (FECA) program is administered by the U.S. Department
       of Labor (DOL) and provides income and medical cost protection to covered Federal civilian
       employees who have been injured on the job or have incurred a work-related occupational
       disease. Compensation is given to beneficiaries of employees whose death is attributable to a job-
       related injury or occupational disease. DOL initially pays valid FECA claims for all Federal
       government agencies and seeks reimbursement two fiscal years later from the Federal agencies
       employing the claimants.

       USAID’s total FECA liability is $37.2 million as of September 30, 2000 and comprises of unpaid
       FECA billings for $7.4 million and estimated future FECA costs of $29.8 million.

       For FY 1999, USAID’s total FECA liability was $45.0 million and comprised of unpaid FECA
       billings for $7.2 million and estimated future FECA costs of $37.8 million.

       Estimated future FECA costs are determined by the Department of Labor. This liability is determined
       using a paid losses extrapolation method calculated over a 37 year period. This method utilizes
       historical benefit payment patterns related to a specific incurred period to predict the ultimate
       payments related to that period. These annual benefit payments have been discounted to present
       value. The interest rate assumptions used for discounting were 5.50% in year 1 and year 2, 5.55%
       in year 3, and 5.60% in year 4 and thereafter.
                               USAID FY 2000 Accountability Report                                     B-35




Note 15 – Contingencies
USAID is involved in certain claims, suits, and complaints that have been filed or are pending.
These matters are in the ordinary course of the Agency’s operations and are not expected to have a
material adverse effect on the Agency’s financial operations.

USAID was involved in seven contract appeals before the Armed Service Board of Contract
Appeals, which total $7.9 million, exclusive of interest, and Equal Access to Justice Act Fees. On
October 13, 2000 a decision in favor of USAID was made for $4 million of this $7.9 million.
Motion for reconsideration was filed November 15, 2000. Opposition to motion for
reconsideration was mailed December 12, 2000. Trial is scheduled to commence in May 2001 for
the other $3.9 million. However, the likelihood of an unfavorable outcome for USAID has changed
from reasonably possible to remote.

USAID was involved in a case before the United States District Court for the District of Columbia
involving a class-action suit brought on behalf of some former Foreign Service Officers who were
separated from the Agency in a Reduction-In-Force (RIF). On January 31, 2000 a proposed
settlement was filed. On February 9, 2000, the Agency was advised that the agreement had been
reached between the parties concerning the settlement of the class action lawsuit. The Court
approved the settlement amount of $5.5 million, made from the Department of Justice’s Judgment
Fund (not by USAID). This event was incorporated into the financial statements as an adjusting
journal entry per guidelines provided in Interpretation of Federal Financial Accounting Standards
No. 2.

In addition, USAID is involved in a case before the US Court of Federal Claims which disputes
appropriate indirect cost rates to be charged where contract rates do not match Negotiated Indirect
Cost Rate Agreement (NICRA) rates. It is reasonably possible that USAID might lose this case, but if
that were to happen, the judgment would be paid out of the Department of Justice’s Judgment
Fund and not by USAID. In this case the amounts claimed are $2.2 million, exclusive of Equal
Access to Justice Fees. To date, the Government has contested the case vigorously. However, the
parties intend to recommence settlement discussions after the Court rules on dispositive motions,
which are to be filed by mid-January 2001.

The building in which USAID operates is leased by the General Services Administration (GSA).
USAID is charged rent intended to approximate commercial rental rates. Lease payments for FY
1999 and 2000 amounted to $26 million and $28.8 million respectively. GSA is requesting a 17%
increase that is projected to take effect in FY 2002, but this is being negotiated.
B-36                                  USAID FY 2000 Accountability Report




       Note 16 – Unexpended Appropriations (In Thousands)


       Unexpended Appropriations:
                                                                2000                      1999
          Unobligated
              Available                                      $2,100,163               $1,740,938
              Unavailable                                        84,276                   81,483
          Undelivered Orders                                  8,721,534                8,773,682

               Total                                       $10,905,973               $10,596,103

       Totals include non-appropriated Loan, Trust and Revolving unexpended funds.



                     e
       Note 17 – Non-entity Assets (In Thousands)
       The following information on non-entity assets is provided as of September 30, 1999:

       Non-entity Assets

          Intergovernmental:                                               2000                 1999
              Fund Balance with Treasury                                  $3,051                $1,760
          Total intra-governmental                                        $3,051                $1,760

          Accounts Receivable                                           $43,994               $120,310

          Total Non-entity Assets                                      $47,045             $122,070
          Total Entity Assets                                       19,234,207           19,048,572
          Total Assets                                             $19,281,252          $19,170,642



       Non-entity fund balances are amounts in Deposit Fund accounts. These include such items as:
       funds received from outside sources where the government acts as fiscal agent, monies the
       government has withheld awaiting distribution based on legal determination, and unidentified
       remittances credited as suspense items outside the budget.

       Non-entity accounts receivables of $44 million for FY 2000 and $120.3 million for FY 1999 are
       comprised of unavailable miscellaneous receipt funds which do not constitute budget authority
       and which must be returned to the Department of Treasury’s general fund when collected.
                                USAID FY 2000 Accountability Report                                B-37




Note 18 – Liabilities Not Covered by Budgetary Resources (In Thousands)
Liabilities not covered by budgetary resources as of September 30, 2000 and 1999 are as follows:

                                                                          2000         1999

    Liabilities for Loan Guarantees                                    $441,469     $417,956
    Accrued unfunded annual leave and separation pay                     25,826        26,468
    Accrued unfunded Workers Compensation Benefits                       37,265        45,057
Total Liabilities not covered by Budgetary Resources                  $504,560      $489,481
Total Liabilities covered by Budgetary Resources                      8,800,831     8,916,683
Total Liabilities                                                    $9,305,391    $9,406,164



All liabilities not covered by Budgetary Resources are governmental liabilities.

Note: The change in accrued unfunded annual leave and separation pay between FY 2000 and FY
      1999 is not shown on the Statement of Financing because of a reduction in the accrual.
B-38                                     USAID FY 2000 Accountability Report




       Note 19 – Required Supplementary Information (In Thousands)
       The following required supplementary information is provided as of September 30, 2000:

       Intra-governmental assets:

                                                         Accounts         Advances
                                     Fund Balance       Receivable,          and              Totals
       Agency                        with Treasury         Net           Prepayments

       Treasury                      $11,120,290               $-            $11,786       $11,132,076
       Dept of Agriculture -             465,162                -            465,162
       Dept of State                           -                -             17,462           17,462
       Dept of Commerce -                      -           10,659             10,659
       Other -                             8,004           23,703             31,707
       Total                         $11,120,290         $473,166            $63,610       $11,657,066


       Intra-governmental liabilities:

                                     Due to        Accounts
       Agency                       Treasury        Payable           Debt        Other          Totals

       Treasury                 $6,374,536                $-     $116,485             $-     $6,491,021
       Dept of Agriculture               -            16,438            -              -         16,438
       Other                             -            69,609            -         98,445        168,054
       Total                    $6,374,536           $86,047     $116,485        $98,445     $6,675,513


       The following required supplementary information is provided as of September 30, 1999:

       Intra-governmental assets:

                                                         Accounts         Advances
                                     Fund Balance       Receivable,          and              Totals
       Agency                        with Treasury         Net           Prepayments

       Treasury                      $10,726,448               $-            $12,456       $10,738,904
       Dept of Agriculture -             383,317           13,050            396,367
       Dept of State                           -                -              9,181             9,181
       Dept of Commerce -                      -           10,090             10,090
       Other -                             1,557           10,905             12,462
       Total                         $10,726,448         $384,874            $55,682       $11,167,004


       Intra-governmental liabilities:

                                     Due to        Accounts
       Agency                       Treasury        Payable           Debt        Other          Totals

       Treasury                 $6,194,940               $-      $197,947             $-     $6,392,887
       Dept of Agriculture               -           33,686             -              -         33,686
       Other                             -           93,113             -        128,549        221,662
       Total                    $6,194,940         $126,799      $197,947       $128,549     $6,648,235
                              USAID FY 2000 Accountability Report                                 B-39




Note 20 – Total Cost and Earned Revenue by Budget Functional Classification (In
Thousands)
Total Cost and Earned Revenue by Budget Functional Classification, as of September 30, 2000 are
as follows:

Function Classification            Gross Cost           Earned Revenue              Net Cost

International Affairs - 150        $6,800,874                 $72,208            $6,728,666
Income Security – 600                   1,802                       -                 1,802

Total                              $6,802,676                 $72,208            $6,730,468



Total Cost and Earned Revenue by Budget Functional Classification, as of September 30, 1999 are
as follows:

Function Classification            Gross Cost           Earned Revenue              Net Cost

International Affairs - 150        $6,310,185                 $62,390            $6,247,795
Income Security – 600                   1,527                       -                 1,527

Total                              $6,311,712                 $62,390            $6,249,322
B-40                                   USAID FY 2000 Accountability Report




       Note 21 – Statement of Budgetary Resources (In Thousansds)
       A. Net amount of budgetary resources obligated for undelivered orders at the end of the period:

                                                                      2000                       1999
               Undelivered Orders – Unpaid                         $7,926,726                $7,734,439
               Undelivered Orders – Paid                              794,808                 1,039,243
               Total Obligations for Undelivered Orders            $8,721,534                $8,773,682

       B. Information regarding borrowing authority at the end of period and the terms of borrowing
          authority used:

          No borrowing authority was utilized in FY 2000. The MSED credit program utilized $632
          thousand in permanent indefinite borrowing authority in FY 1999. The terms of this borrowing
          included an interest rate of 5.11% and a maturity of 4 years.

       C. Information about legal arrangements affecting the use of unobligated balances of budget
          authority:

          Pursuant to Section 511 of PL 105-118 funds shall remain available until expended if such
          funds are initially obligated before the expiration of their periods of availability. Any subsequent
          recoveries (deobligations) of these funds become unobligated balances that are available for
          reprogramming by USAID (subject to OMB approval through the apportionment process).

       D. Adjustments to Total Budgetary Resources are comprised of downward obligation adjustments
          to match unpaid unexpended obligations, cancelled authority, and budget resources rescinded
          by enacted legislation.
                               USAID FY 2000 Accountability Report                                     B-41




Note 22 – Differences between the Statement of Budgetary Resources and the
Budget of The United States Government (In Thousands)
Differences exist between the information presented on the Statement of Budgetary Resources and
the amounts described as “actual” in the Budget of the U.S. Government. These differences occur
because funds are appropriated to USAID and then allocated out to other agencies. In those cases,
the related funds are not included in the Agency’s Statement of Budgetary Resources but are
included in its part of the U.S. Budget. But sometimes funds that are appropriated to other agencies
are then allocated to USAID. In those cases, related funds are included in the Agency’s Statement
of Budgetary Resources but are not included in its portion of the Budget.

The amounts related to other agency activity as of September 30, 2000 were as follows:

                                                             Allocated to           Allocated from
                                                            Other Agencies          Other Agencies
Budgetary Resources
Budget Authority                                              $353,159                $480,782
Unobligated Balance                                             22,396                  10,793
Spending Authority from Offsetting Collections                       -                       -
Adjustments                                                          -                  46,164
Total Budgetary Resources                                     $375,555                $537,739

Status of Budgetary Resources
Obligations Incurred                                          $356,729                $533,926
Unobligated Balances Available                                   1,063                   3,813
Unobligated Balances Not Available                              17,763                       -
Total Status of Budgetary Resources                           $375,555                $537,739

Obligations Incurred, net of adjustments                      $356,729                $487,762
Obligated Balance, Net – Beginning of Period                    78,848                 421,423
Obligated Balance Transferred, Net                                    -                       -
Obligated Balance, Net – End of Period                          87,073                 505,805
Outlays                                                       $348,505                $403,381
B-42                                  USAID FY 2000 Accountability Report




       The amounts related to other agency activity as of September 30, 1999 were as follows:

                                                                  Allocated to           Allocated From
                                                                 Other Agencies          Other Agencies

       Budgetary Resources
       Budget Authority                                             $362,988               $402,915
       Unobligated Balance                                            22,288                 19,224
       Spending Authority from Offsetting Collections                      -                      -
       Adjustments                                                     4,137                 62,066
       Total Budgetary Resources                                    $389,413               $484,205

       Status of Budgetary Resources
       Obligations Incurred                                         $368,704               $473,412
       Unobligated Balances Available                                 14,390                 10,793
       Unobligated Balances Not Available                              6,319                      -
       Total Status of Budgetary Resources                          $389,413               $484,205

       Obligations Incurred, net of adjustments                     $364,566               $411,346
       Obligated Balance, Net – Beginning of Period                  119,256                540,138
       Obligated Balance Transferred, Net                                   -                      -
       Obligated Balance, Net – End of Period                         78,848                422,453
       Outlays                                                      $404,974               $529,031
USAID FY 2000 Accountability Report      C-1




                             Part C
          Summary of FY 2000 Program
         Performance by Operating Unit
                  Objectives
                                        USAID FY 2000 Accountability Report                                       C-3




Encourage Economic Growth               • Access to economic opportunity        fruit, coffee, or flowers not
and Agricultural Development              for the rural and urban poor          traditionally grown in the country,
           (EGAD)                         expanded and made more                but attractive for international
                                          equitable                             markets. Increases in agricultural
This section discusses the                                                      production also serve to raise farmer
performance of the EGAD objectives
of USAID’s operating units as of               Economic Growth Programs with Environmental Sustainability
September 30, 1999, drawing on the
self-assessments of these units. It       USAID develops and implements many activities that both stimulate
provides examples of results             economic growth and help preserve the environment. While programs can
achieved through USAID efforts           take a variety of different forms, depending on the needs of the country,
undertaken around the globe and          they often fall under one of two major focus areas:
discusses operating unit objectives
                                          Sustainable Agriculture and Natural Resource Management – Sustainable
that failed to meet expectations.        agriculture approaches aim to increase production, but through the
                                         adoption of sustainable agriculture practices. Use of appropriate
To achieve the goal of broad-based       technologies such as composting, tree planting, and building small dams
economic growth and agricultural         and rock lines serve to reduce soil erosion, increase soil fertility, and
development, USAID normally              protect watersheds. Farmers adopt the practices because they are simple
undertakes programs to expand and        and cost-effective and result in short-term economic benefits by increasing
                                         yields. Other natural resource approaches with economic benefits tend to
strengthen private markets,
                                         focus on the management and sustainable use of forests, coastal zones,
encourage more rapid and enhanced        and water resources.
agricultural development, and
expand equitable access to                Energy – Energy use, efficiency, and conservation are critical issues in
economic opportunity for the rural       many countries where USAID works, especially in the Eurasia region.
and urban poor. A strong policy          USAID approaches assist countries in the adoption of rational energy
environment and strong institutions      prices, sound national energy policies, and improved energy efficiency.
                                         Industries that adopt more efficient energy systems save on costs, helping
within recipient countries are two of
                                         to boost their profits, while reducing pollution emissions.
the most important determinants of
the overall success of USAID            For this reporting period, each         incomes, helping to ensure food
programs. Therefore, the agency         operating unit categorized its          security. Typically, agriculture and
continues to place a high priority on   programs as primarily under one of      food security programs fall under the
EGAD programs that address policy       the three EGAD objectives. The          second EGAD objective. Yet another
and institution reforms.                Agency has a total of 152 EGAD          intervention of the same program
                                        programs carried out in 75 operating    may involve small loans and
Program Objectives/Approaches           units around the world. Many of the     business training for the rural poor,
USAID supports broad-based              country programs emphasize a broad      helping to generate entrepreneurial
economic growth and agricultural        and comprehensive approach to           development and increase incomes.
development around the world            economic development, so that a         This purpose equates to the EGAD
through programs directed at three      single operating unit may               objective for expanded access to
broad objectives:                       simultaneously address multiple         economic opportunity for the poor.
                                        Agency objectives. An operating         Thus a USAID operating unit’s
• Critical private markets expanded     unit’s program may, for example,        program may encompass all three
  and strengthened                      seek to expand trade through policy,    Agency objectives, even though it
                                        legal, and regulatory reform to         will be categorized under only one,
• More rapid and enhanced               reduce barriers for exporters, an       representing the program’s major
  agricultural development and food     approach consistent with the first      area of emphasis.
  security encouraged                   EGAD objective. Also, the program
                                        may emphasize increased production      Further, USAID EGAD objectives and
                                        of agricultural commodities such as
C-4                                       USAID FY 2000 Accountability Report




activities can be combined with           been critical to the countries of         development services can be
other Agency goals in an integrated       Europe and Eurasia (E&E), where 19        clustered into several key areas:
strategy. For instance, operating units   of the 22 operating units are             market linkages, improved
often pursue goals for economic           pursuing it to accelerate economic        technologies, and better business
growth and environment together in        transition. Elsewhere, 11 of 32           practices. Technical assistance to
a single program by emphasizing an        operating units in Africa, 10 of 19 in    enterprises helps business owners
environmentally sustainable
approach to growth (see Box C.1).
                                                       Program Concentration               Number of Operating
Similarly, programs that strengthen                                                              Units
the free-market advocacy role of
                                               Development of Private Enterprises                     40
business associations and empower
the poor with opportunities to more            Fiscal Reform and Financial                            31
                                                Management
fully participate in the economy also
complement the development of an               Strengthening Financial Markets                        42
active civil society under the                 Privatization                                          32
Agency’s democracy and governance
                                               Facilitating Trade and Investment                      45
goal.
                                               This table shows the number of USAID operating units that pursue each
Self-Assessment of Performance by               major area of program concentration, either as a primary or secondary
Missions and Other Operating Units              purpose, within the strengthening markets objective. Many of the
                                                operating units address more than one area.
Eighty-eight percent of EGAD
objectives met or exceeded
expectations. Examples of both            Latin America and the Caribbean,          develop needed skills and
successful objectives and objectives      10 of 16 in Asia and the Near East,       knowledge for managing their
not met are discussed below:              and one central operating unit carry      operations and marketing products.
                                          out market-strengthening programs.        Programs work to strengthen
      USAID Operating Units Linked to                                               business and professional
      Economic Growth and Agricultural    USAID aims to effect change by            associations and work through them,
      Development
                                          facilitating development, reform, and     as well as service providers, to build
      Self Assessment Scores (FY 1999)
                                          strengthening of the various sectors      local capacity. For instance, reforms
                                          that constitute a market-based            can allow economic incentives for
                    EE*                   economy. Major areas of program           business growth, competition, and
          On      (21%)
        Track                             concentration include private-            reduced transaction costs.
        (66%)               Not Met       enterprise development, fiscal            Strengthening trade and professional
                             (13%)
                          N/A             reform, strengthening financial           associations to lobby governments
                         (<1%)            markets, privatization, and               leads to improvements in the
       * Exceeding expectations           facilitating trade and investment.        enabling environment for private
       Total SOs: 152
                                          Each is described below, along with       enterprise. Private-sector growth
                                          specific examples of USAID activities     helps to generate revenues for public
a. USAID Objective: “Critical             and accomplishments.                      expenditures and social transfers.
   Private Markets Expanded and
   Strengthened”
                                          Examples of USAID Program Results         USAID’s program in Ghana, as an
Of the 75 USAID operating units                                                     example, works to diversify and
                                          Development of Private Enterprises
promoting EGAD, just over two                                                       expand the economy by creating a
thirds have programs with a primary       USAID also undertakes policy, legal,
                                          and regulatory reform necessary for       more investor-friendly business
focus on strengthening markets. This                                                environment and by strengthening
objective accounts for just over 80       increasing trade competitiveness,
                                          attracting investment, and achieving      the private sector’s capacity to be
percent of the Agency’s EGAD                                                        more competitive. Progress achieved
budget. Regionally, this objective has    sustained economic growth. Business
                                          USAID FY 2000 Accountability Report                                          C-5




on policy reforms included                USAID emphasizes, among other              impact of fiscal policies on
streamlining tax revenue collection,      things, reform of tax policies to make     economic growth. One indication of
                                                                                     success is the size of the federal
           Business Training Spurs Computer and Internet Services                    budget deficit. In 1999, the
                                                                                     government budget deficit as a
  Arben Kote is the owner of Hard & Soft, a hardware, software, and                  percentage of gross domestic product
 computer services provider in the Albanian city of Elbasan. Through                 (GDP) was down to 2.7 percent—
 USAID-funded training in North Carolina and Texas, Mr. Kote learned                 less than the 3 percent of 1998 and a
 about software programming in support of the fields of construction, wood           fraction of the 12.5 percent of 1995.
 and metal processing, and accounting. He also acquired knowledge
 related to the Internet and hardware and software pricing strategy and
                                                                                     Strengthening Financial Markets
 marketing, as well as the profitable provision of computer support services.
 Soon after returning to his home town, Mr. Kote signed a contract with              The Agency addresses two major
 “ Albania On Line” and the City of Elbasan, which, through Mr. Kote’s               components of the financial sector—
 support, will be the first city after Tirana, Albania’s capital, to have a local    banking and capital markets.
 Internet server provider. Other local government offices are now setting up         Programs seek to improve private-
 Web pages and have turned to Kote for training.
                                                                                     sector access to a wide array of
  Hard & Soft’s business has increased more than 50 percent since Mr.                financial instruments at competitive,
 Kote’s visit to the United States. Kote says, “ Everyone is so excited about        market-determined rates. USAID
 Internet access. The Customs Agency in Elbasan is already communicating             assistance in many countries
 with its central office in Tirana and its border posts via e-mail.”                 supports a market-oriented legal and
                                                                                     regulatory framework for banking;
elimination of disincentives to           them more transparent, simple, and         developing bank regulatory
foreign investment, and an update of      equitable; improved tax                    authorities; strengthening bank
labor legislation. Agency activities      administration for collections and         infrastructure through training and
also included development and             enforcement; efficient budget              conversion to International
support of community tourism.             formulation and execution; revenue         Accounting Standards; drafting laws
Tourism to USAID-supported sites          sharing and spending authorities           on securities commissions and
increased by more than 30 percent         between national and subnational           securities and investment companies;
in 1999. The level of interest in         levels of government; and pension          establishing security trade
tourism, mostly Ghanaian, is serving      reform.                                    mechanisms and independent
to demonstrate to the rest of the                                                    securities regulators; and developing
country that tourism is a viable          For instance, the inadequacy of            markets for government securities,
industry for business and investment.     many social and public services in         commodities, and municipal bonds.
                                          Kyrgyzstan can be attributed, in part,
Fiscal Reform and Financial               to the problems with fiscal policies       In Ukraine, the challenge in the
Management                                and fiscal management. USAID is            financial sector is to transform a
Sound fiscal policies and practices       addressing the immediate and long-         mechanistic system of a centrally
are critical to private-sector growth     term needs by targeting three critical     planned economy to a service-
and the development of financial          areas: 1) tax administration, 2) tax       oriented sector based on market
markets. Financial management             policy, and 3) budget reform. The          principles, capable of providing
systems enhance public                    direct beneficiaries of such               financial support to consumers and
accountability and reduce                 improvements are the national and          businesses. The USAID program in
opportunities for corruption. Fiscal      local government agencies that need        Ukraine was designed to develop the
decentralization is also key for          tax revenues and sound budget              fundamentals (bank supervision,
strengthening local governments.          policies and those parties that are        accounting, and training) of a
Fiscal reform is especially critical to   owed money by the government.              functioning financial system. Major
the transition and sustainability of      Indirectly, all Kyrgyz citizens stand to   legislation was passed in 1999,
economies once centrally controlled.      benefit in the long run through the        including the adoption of a
C-6                                       USAID FY 2000 Accountability Report




bankruptcy law. Privately owned           concentrate on private-sector– led,       numerous policy reforms in 1999,
banks made significant progress in        export-oriented growth. Policy, legal,    including a product registry for
increasing their market share. The        and regulatory reforms lower trade        importers and exporters to streamline
ratio of combined total assets of the     barriers and eliminate cumbersome         inspections. USAID assistance also
10 largest privately owned banks          requirements for exporters. The           works with and through business
compared with those of government-        transfer and utilization of new           associations to train them to better
owned banks increased to 82               technologies enable the production        lobby for policy change. In addition,
percent, exceeding expectations and       of nontraditional goods for export.       activities provide technical assistance
well above the 66 percent of the          The provision of business services        and training to businesses in
previous year.                            and improved management practices         improved technologies and better
                                          builds the capacity of businesses to      management practices. In the sectors
Privatization                             grow. Partnerships with foreign           that USAID targets, the value of
Private ownership of productive           investors and access to market            private-sector exports (including
assets is critical to the formation of    information assist businesses to learn    fresh and processed agricultural
competitive markets, the                  about and develop new markets.            products, spinning/weaving products,
achievement of economic growth                                                      leather goods, and furniture) rose by
through private initiative, and the       USAID’s Global Technology Network         28 percent, from $361 million in
efficient mobilization of productive      (GTN) works to expand trade by            1998 to $462 million in 1999.
resources. Privatization of state-        matching an overseas company’s
owned enterprises helps to redefine       needs with small and medium-size          A comprehensive legal and
the role of government to a facilitator   U.S. firms that are equipped to           regulatory reform agenda in Jordan
of economic activity and a provider       provide the appropriate                   enabled it to qualify for World Trade
of essential services. Types of USAID     technological solutions. The network      Organization (WTO) accession in
assistance include privatization of       targets the agriculture, environment      1999. The WTO process required a
large enterprises and farms, land         and energy, health, and information       myriad of new and amended laws
privatization, and improving              technology sectors. An internet-          and regulations. Spurred on by
corporate governance.                     based matching system links firms         strong support at the highest levels of
                                          with compatible interests, facilitating   government, USAID assistance
Moldova has made significant strides      communication and partnering.             played an essential role in facilitating
in land privatization and is noted as     Partnership with 32 states, trade         Jordan’s application and ensuring its
a model for its achievement in the        offices and three regional offices        ultimate success. Participation in the
break-up of state and collective          facilitate U.S. firms exporting into      WTO will provide benefits to Jordan
farms and the issuance of                 developing and emerging markets.          for many years to come. USAID-
constitutionally valid tradable land      In 1999, the GTN recorded $120            funded technical assistance also
titles. USAID is working to help          million in completed business             enabled the government to transfer
complete the Moldovan land                transactions, up from $78 million the     $88.6 million in assets to private-
privatization program and assists the     previous year. The program’s              sector control.
government with the privatization of      innovation and success led to its
strategic enterprises. A total of 660     receiving the 1999 Public Service         Program(s) Failing to Meet
                                          Excellence International Award            Expectations
out of an estimated thousand state
and collective farms were broken up       sponsored by the Public Employees         Under the strengthening markets
in 1999. Concurrently, 956,000 new        Roundtable.                               objective, several USAID programs
land titles were issued to individuals.                                             failed to meet their goals. This was
                                          In Egypt, USAID is promoting              due to, in almost all cases, lack of
Facilitating Trade and Investment         export-oriented growth fueled by the      host government commitment to
While this category of programs has       private sector. Through the use of        reforms and, in some cases, to
considerable overlap with the ones        technical assistance, the Agency          political instability stemming from
mentioned above, these activities         helped the government adopt               government transition. In the E&E
                                                                                    region, USAID operating units in
                                         USAID FY 2000 Accountability Report                                           C-7




Albania, Armenia, Croatia,               banking system that resulted from           have worsened in large part because
Kyrgyzstan, Moldova, Tajikistan,         large-scale fraud. Four of the largest      of a sharp drop in export revenues
Turkmenistan, and Uzbekistan all         banks were closed, contributing to a        when Turkmenistan ceased exporting
faced difficulties. In other regions,    loss in consumer confidence. The            gas through the Russian pipeline
programs in Angola, Colombia, and        USAID program initially                     system. The government also has
Haiti fell short of expectations.        concentrated on strengthening the           failed to adopt progressive
                                         bank regulatory authority’s ability to      privatization or land reform.
In Armenia, performance of the           supervise commercial banks.                 Turkmenistan is the slowest country
economic restructuring portfolio         However, that effort was halted in          in the region to move toward market
during the past year did not meet        1997 because of a similar Finnish           liberalization. It has made little
expectations, primarily because of a     government effort and because the           progress in privatization and
range of major policy-level obstacles    central bank had started to develop a       financial-sector reform or in
that have yet to be resolved.            modernized bank supervisory                 liberalization of its trade regime.
Disappointing progress in areas such     capability. Without USAID assistance
as privatization, capital markets        for bank supervision reform,                After a movement in the mid-1990s
development, and the                     however, the Central Bank made              toward free-market reforms through
registration/sale of property            little progress toward achieving a          pricing and trade liberalization
continued to stifle private-sector       self-sustaining bank regulatory unit.       measures and tightened short-term
activity. Notwithstanding this           USAID has recently responded to a           fiscal and monetary management
negative performance and outlook,        host government request to restart          policies, the government of
the USAID program has had various        assistance as part of an effort to          Uzbekistan retreated in the late
activity-level accomplishments           tighten financial regulatory                1990s by restricting convertibility
that— if critical policy issues can be   guidelines and enhance monitoring           and access to foreign currency. This
resolved— will facilitate sustainable    capacity in the banking sector.             resulted in suspension of its
increases in employment and                                                          International Monetary Fund (IMF)
income in Armenia during the life of     Despite some individual                     Standby Arrangement. The lack of
this program.                            accomplishments, the growth and             convertibility, minimal progress
                                         development of Tajikistan’s private         toward privatization, and a near halt
In Croatia, USAID suspended              sector remained constrained by the          in other economic or fiscal reform
assistance under its financial-sector    uncertainty of the elections. Private-      are having a seriously debilitating
program in 1998 because the              sector growth is critical to rebuilding     effect on the Uzbekistan economy,
government showed no willingness         Tajikistan’s war-torn economy.              as well as a chilling effect on the
to engage in any meaningful              Although the economic policy                international donor community. This
economic reform. As a result, the        environment has improved                    led to a termination of USAID’s
economy became a major political         noticeably, chronic security                Fiscal Reform Project in early 2000.
issue in Croatia, eventually leading     problems continue to hold back
to the election of a new reform-         growth. Long-term USAID                     USAID’s program in Haiti
minded government. USAID Croatia         development activities are just             contributes to the maintenance and
is in the process of responding with     beginning. Although Tajikistan’s            improvement of the macroeconomic
immediate targeted support and will      government has demonstrated its             environment by encouraging
work with the government to              commitment to economic reform,              government reform through
reinstate sound management of the        the ongoing political instability limits    privatization of state-owned
economy.                                 USAID’s ability to provide technical        enterprises, civil service downsizing,
                                         assistance.                                 civil service reform in general, and
In Kyrgyzstan, progress was achieved                                                 improvement of the host
in developing an effective securities    The government of Turkmenistan              government’s public resource
market, but banking targets were not     faces a potentially severe fiscal crisis.   management. Privatization efforts in
met because of the crisis in the         The nation’s financial conditions           Haiti stalled because of lack of
C-8                                             USAID FY 2000 Accountability Report




government commitment to move                   Agriculture programs (not including              programs give priority to activities
forward; however, the government is             PL 480) receive 12 percent of                    that improve household nutrition and
making progress in some areas.                  USAID’s EGAD budget. USAID also                  agricultural productivity.
USAID will continue to work in                  uses nonemergency food aid as a
collaboration with other donors,                resource in needy countries for direct           Examples of USAID Program Results
including the IMF, to consolidate               feeding or monetizing (i.e., selling             In Malawi, USAID works to enable
gains and continue a reform process.            the food in recipient country                    small farmers to achieve economic
                                                markets) to generate local currency              diversification and increase incomes.
b. USAID Objective: “More Rapid                 for development activities.                      In the mid-1990s, USAID pursued a
   and Enhanced Agricultural
                                                                                                 policy reform agenda to help the
   Development and Food Security
                                                The Africa region predominates                   government of Malawi liberalize
   Encouraged”
                                                under this objective, with two thirds            markets. That groundwork has
The majority of people in the poorest           (12 of 18) of the total number of                created opportunities for small
countries, such as many in Africa,              Agency operating units having                    farmers in rural areas to increase
derive their livelihoods from                   agricultural development and food                productivity and market efficiency.
agriculture. Therefore, in the least            security programs as a primary                   USAID efforts helped contribute to
developed countries, the                        objective. The African continent,                an important 14.8 percent increase
transformation of agriculture and               even with significant recent growth              in rural incomes in Malawi from
food systems is an essential aspect of          in GDP, continues to be relatively               1998 to 1999. In 1999, 44 percent
broad-based economic growth. The                poor and agrarian (with agriculture              of the area of smallholder farms (up
shift from subsistence agriculture to           having an average value-added of 29              from 37 percent in 1998) had been
producing for off-farm markets and              percent of GDP1). Operating units in             diversified into crops such as rice,
consumers contributes to a more                 other regions, however, also carry               potatoes, and coffee.
prosperous rural environment and                out significant activities in the
generates additional opportunities for          agricultural and food security realm.            In Uganda, USAID works together
employment, and economic progress               Overall, a total of 58 Agency                    with the government and other
throughout the economy.                         operating units include this theme as            donors on a comprehensive Poverty
                                                either a primary or secondary                    Reduction Strategy. Among other
The concept of food security                    purpose of their program.                        things, USAID supported the
incorporates the traditional idea of
                                                                                                 International Institute of Tropical
ensuring food availability with the             Agency agricultural programs                     Agriculture and other
need for social and economic                    promote increased production and                 nongovernmental organizations to
conditions that enable families to              diversification of agricultural goods            introduce disease-resistant varieties
gain access to food. Access can be              for both local consumption and                   of cassava, a food crop widely
achieved either by producing food               export; strengthen public and private            consumed in the region and
themselves or earning income to buy             agricultural institutions; reform                generally less affected by drought.
food. It serves as a planning tool and          policies to provide incentives for               These efforts led to dramatic results,
framework for designing food                    farmers and agricultural                         with production of this crop
assistance and measuring impact.                entrepreneurs; promote research for,             increasing by more than 700 percent
USAID’s efforts promote long-term               and adoption of, improved                        in 1999 over the previous year!
food security and include a wide                agricultural practices and                       Overall, GDP growth in Uganda
array of measures aimed broadly at              technologies [e.g., through the                  stood at close to 8 percent in 1999.
eradicating poverty, increasing                 Consultative Group on International              Combined efforts of USAID and its
production, improving health and                Agricultural Research (CGIAR)]; and              partners have led to a remarkable
nutrition, and empowering women                 increase access to markets and                   evolution in Bangladesh, from a
as both food producers and                      market information. Food security                famine-prone country in the early
caregivers.

      1 World Development Indicators. World Bank. Data are for 1998. Compare this figure with that of the United States, where agriculture is
2 percent of the economy.
                                         USAID FY 2000 Accountability Report                                      C-9




1970s to a country now capable of        enable economically the poor,           popular tool among missions for this
managing food emergencies. USAID         women, and the disadvantaged.           purpose is microenterprise
food security efforts have served to                                             development, involving the provision
reform food policies, feed vulnerable    Globally, 68 USAID operating units      of financial services, such as savings
groups, improve disaster                 incorporated some features of this      products, micro-loans, leasing and
preparedness, and upgrade                objective into their programs, with     increasingly insurance products, and
community infrastructure. As a result    31 operating units considering it a     business development assistance to
of USAID’s continuous policy             primary objective. Six percent of the   microentrepreneurs and poor,
dialogue, the government of              Agency’s economic growth budget is      farming households. Programs also
Bangladesh has reoriented its large      counted as going toward these           work towards legal and regulatory
public food distribution system away     programs. LAC operating units, in       reform to improve the economic
from competition with the private        particular, have found this to be an    environment for small and micro
sector and more toward managing it       appropriate and successful objective,   enterprises.
as a food safety net for the poor,       with two thirds of them (13 of 19)
helping to reduce poverty. In 1999,      pursing it. Operating units in Africa   Examples of USAID Program Results
the government distributed 88            (7), Asia and the Near East (7),        Millions of poor households around
percent of public food to targeted       Europe and Eurasia (2), and USAID’s     the world participate in
programs for the poor, up from 76        Global Programs bureau also have        microenterprises to provide income
percent the previous year and double     strategies to increase economic         that pays for basic family expenses
the level of the early 1990s.            opportunities for the poor.             such as food, clothing, shelter,
                                                                                 school tuition, and medical bills. In
In Guatemala, access to land and         In pursuing this objective, missions    addition, many farming households
credit is out of reach for many living   may use a variety of interventions,     use microenterprises to balance
in rural areas. USAID supported the      employing human resources, ideas,       income flow and reduce risk.
creation of a land fund by the           and financing from both the             During times of crisis and economic
Guatemalan Congress. In                  agricultural and private sector         distress, additional households also
coordination with other donors,          development spheres. A particularly
USAID helped 3,973 small farm
families gain access to land. By                 Microfinance Fosters Business Growth and Land Ownership
1999, USAID implementing partners
had worked with 17,500 new               Crispina Canales started out in business with a small food stall in a rural
                                         community located in southern Mindanao, a large island of the Philippines.
producers (up from 4,000 in 1998) to
                                         The little restaurant served ten people at a time and featured five dishes,
adopt sustainable agriculture            including her specialty, roasted pig.
practices such as soil conservation
and organic fertilization.               Crispina learned that a local credit union, Nabunturan Integrated
                                         Cooperative (NICO) was offering loans to local businesses. NICO is part of
Program(s) Failing to Meet               an USAID-supported program called CUES (Credit Union Empowerment
Expectations                             and Strengthening) Philippines, run by the World Council of Credit Union
                                         (WOCCU) and Freedom from Hunger. Initially, Crispina deposited $7.50 in
All USAID programs under this
                                         share capital and attended the required pre-membership seminar. Almost
objective met expectations.              immediately she was eligible for a loan of $37.50. With the loan, she
                                         purchased better equipment and hogs. Instead of depending on a farmer to
c. USAID Objective: “Access to           supply her stock, she could raise her own. She quickly repaid the loan and
   Economic Opportunity for the          was granted a second loan of $125.
   Rural and Urban Poor Expanded
   and Made More Equitable”              Three years later the eatery sales had increased by 50 percent. Crispina had
The Agency’s third performance goal      saved so much that she was able to purchase over two acres of rice
under EGAD specifically targets the      farmland for $175. In 1999, Crispina took out a loan to expand the eatery,
alleviation of poverty by more           doubling its size. She now offers 30 different dishes daily and can feed 50
                                         people at a time.
directly providing opportunities to
C-10                                     USAID FY 2000 Accountability Report




use informal business activities to      USAID in Bolivia is also working           USAID facilitates business support
generate needed income.                  towards increasing the incomes of          services and greater access to
                                         the poor. Bolivia’s micro-finance          finance for entrepreneurs. As a result,
In FY 1999, the Agency’s                 sector as a whole was negatively           more than 25,000 jobs were created
microenterprise initiative, providing    affected by the country’s recent           in 1999. Entrepreneurs receiving
small loans to those in need,            severe economic recession.                 support from USAID’s business
benefited more than two million          Nonetheless, USAID microfinance            support centers were able to obtain
clients across the globe. Of those       activities helped Bolivia’s poor gain      $37 million in credit through 1999,
borrowers, the vast majority (70         access to financial services to            short of expectations but an increase
percent) were women. The average         support their entrepreneurial              over the $29 million they obtained
loan size was $329, reflecting the       businesses. Although the number of         in 1998. Women have received 71
Agency’s emphasis on poverty             borrowers was not as high as               percent of the loans that USAID-
lending— that is very small loans to     targeted, active borrowers under           funded partner organizations have
poor clients that, in the right          USAID-supported programs                   made to enterprises. Russia is
circumstances, can go a long way in      increased from 189,000 in 1998 to          gradually recovering from the
empowering them to help                  almost 215,000 in 1999.                    financial crisis that plagued it in
themselves. The 627 microenterprise      Furthermore, as successful                 1998; GDP grew at a modest 3.2
organizations supported by USAID         microfinance institutions graduate         percent in 1999.
also provide business development        from the need for regular and major
services to microentrepreneurs,          USAID support, their clients               Programs Failing to Meet
including training, counseling,          disappear from our figures, but            Expectations
product marketing, and assistance        remain important beneficiaries of          Programs in Eritrea, Namibia, and
with production technologies.            USAID support. In fact, microfinance       Haiti failed to meet Agency
                                         has flourished so successfully in          expectations. USAID’s Rural
In the aftermath of the destruction of   urban Bolivia that fierce competition,     Enterprise Investment Partnership in
Hurricane Mitch, USAID’s assistance      market saturation, and over-               Eritrea was at the point of
in Honduras is helping to create a       indebtedness in the absence of             contracting the advisors needed for
foundation for economic                  adequate credit bureau services are        its first loans when war broke out
reactivation, renewed growth, and        the new problems. As a result,             with Ethiopia. The war prevented
poverty reduction. USAID disbursed       Bolivia is serving as a learning           disbursement of funds under the
a $3 million Mitch Recovery Fund         laboratory for the entire sector in this   rural enterprise lending facility,
for microfinance. These resources        regard. Women borrowers accounted          technical assistance, and program
provided liquidity to support and        for 68 percent of the current total.       support components. An alternative
rehabilitate the enterprises of some                                                disbursement mechanism has
9,000 clients severely affected by       In more developed but severely             recently been put in place, and
Mitch. Those resources have been         stressed economies, such as those in       implementation picked up sharply in
complemented by some $8 million          Eastern Europe in the throes of            the middle of FY 2000.
of CACEDRF funds directed toward         conversion from a communist system
the expansion of microfinance            to free markets, there is a role for       In Namibia, the economic growth
services in areas notably affected by    micro and small businesses in the          rate fell to 1.8 percent in 1997 and
Mitch. By the end of 1999, USAID-        fight against poverty and economic         dropped again in 1998. While
supported micro-finance institutions     dislocation. In Russia, for example,       growth returned to 2.6 percent in
were providing services to 43            USAID helps to stimulate economic          1999, further deterioration may be
percent of all micro and small           growth as well as a private sector         expected as the effects of the
enterprises in Honduras, up from         mentality, by fostering the                Angolan conflict in northern
1998 when the percentage of              development of micro, small and            Namibia spill over onto business
coverage was 35 percent.                 medium-sized enterprises at selected       activity. As a result of the poor
                                         regional sites around the country.         business climate, USAID’s program
                                                                                    has not been meeting the targets set.
                                             USAID FY 2000 Accountability Report                                       C-11




The program has been revised to              discusses operating unit objectives          USAID Operating Units Linked to
focus on small and medium                    that failed to meet expectations.            Democracy and Governance
enterprises (SMEs), which represent                                                       Self Assessment Scores (FY 1999)

the most attractive targets-of-              Program Objectives/Approaches
opportunity for promoting economic                                                                       EE*
                                             Table C.1 shows the number of                             (17%)
growth and job-creation. As                  USAID operating units that pursue                 On                Not Met
                                                                                             Track                (12%)
reformulated, the strategy directly          each major area of program                      (63%)
addresses the need for private sector        concentration as a primary purpose                                N/A
managerial and entrepreneurial               within the democracy and                                          (8%)
skills, and for improved business            governance goal. Many of the
                                                                                            * Exceeding expectations
support services and technology              operating units have programs in               Total SOs: 107
linkages for SMEs.                           more than one area.
                                                                                     Self-Assessment of Performance by
As mentioned earlier, the                    For this reporting period, each         Missions and Other Operating Units
government of Haiti’s progress               operating unit categorized its          During 1999, 80 percent of Agency
toward economic reform,                      programs under one of the four          operating units met or exceeded
privatization, investment promotion          democracy and governance                targets in their democracy and
and secondary cities development             objectives. The Agency has a total of   governance strategic objectives;
was disappointing, leading to mixed          107 democracy and governance            however, in 11 countries,
results of USAID’s program to help           objectives carried out in 75            accomplishments failed to meet
increase incomes of the poor. Further        operating units around the world.       expectations. In Uzbekistan and
sustainable economic growth will                                                     Kazakhstan, government repression
not be possible if the government            In 1999, the unique role played by      and unfair presidential and
continues on a course of anti-               USAID democracy and governance          parliamentary elections undermined
investment policies and inaction.            programs was highlighted by the fact    strategic objective efforts to increase
                                             that 85 percent of all operating        citizen participation. Similarly, in
  Strengthen Democracy and                   units— more than in any other goal      Slovakia and Turkmenistan, efforts to
      Good Governance                        area— had linked their strategies to    promote increased citizen
                                             this Agency goal. In addition, 36       participation were undermined by
This section discusses the                   USAID Missions linked their             negative popular perceptions of
performance of the D&G objectives            democracy strategies to the             democratic reforms in the former
of USAID’s operating units as of             Department of State’s Mission policy    and a lack of government
September 30, 1999, drawing on the           planning document, thus indicating      acceptance of the nongovernmental
self-assessments of these units. It          that increased coordination and         organization (NGO) sector in the
provides examples of results                 collaboration of democracy support      latter. In Armenia, public perceptions
achieved through USAID efforts               are taking place in the field.          of corruption, citizen disengagement
undertaken around the globe and                                                      from the political process, and
                                                                                     ongoing political turmoil created an
                      Table C.1: Democracy and Governance Programs                   environment in which there was little
                              (Primary Framework Links Only)
                                                                                     chance of achieving the desired
                                         No. of Operating       No. of Strategic
                                                                                     democracy program impact. In
          Program Concentration                 Units             Objectives         Macedonia, the combination of
 Rule of Law/Human Rights                        20                    21            spillover effects of the Kosovo crisis,
 Politically Active Civil Society                37                    40            low levels of civic awareness, and an
 Accountable Government                          30                    36            adverse political culture negatively
 Institutions
                                                                                     affected efforts in areas critical to
 Credible Political Processes                    10                    10
                                                                                     achieving expected progress.
 Totals                                                               107
C-12                                     USAID FY 2000 Accountability Report




In Tanzania, implementation of its       protect and promote civil society,         and now several universities and
program to promote civil                 increased citizen participation in the     training centers include this
society– government partnerships fell    policy process and oversight of            methodology in their programs.
behind because of personnel              public institutions, increased
constraints and weakened citizen         institutional and financial viability of   Program(s) Failing to Meet
interest in such activities in the       civil society organizations, enhanced      Expectations
aftermath of the bombing of the U.S.     free flow of information, and              The consolidation of democracy
Embassy. In Liberia, the Mission’s       strengthened democratic political          takes many years, and civil society
democracy activities were severely       culture. Examples of USAID activities      efforts are often subject to significant
curtailed as a result of security        and accomplishments in these areas         setbacks during times of political
incidents, human rights violations,      are described below.                       instability. For example, the bombing
corruption, and the government’s         Examples of USAID Program Results          of the U.S. Embassy in Tanzania
assistance to rebels in Sierra Leone.    Increased Citizen Participation in the     weakened citizen interest in some
Finally, in Haiti and Nicaragua,         Policy Process and Oversight of            areas and transferred attention away
efforts to promote political             Public Institutions                        from civil society activities. This
participation and inclusive              The enabling environment for civil         helped limit the potential effects of
governance fell short of desired         society organizations has been             Mission civil society programming.
targets because of an overall            traditionally weak in Tanzania.            This experience indicates that civil
deterioration in democratic              During the past three years, USAID         society efforts require a long-term
institutions and processes in the        has worked with other donors to            and focused commitment by USAID
former and inadequate government         improve the regulatory framework for       and other donors, perhaps more
support and the slow recovery from       NGOs and to broaden access by              modest expectations of results, and
Hurricane Mitch in the latter.           civil society to policy discussions        adequate staff and other resources.
                                         and decision making. In a landmark         In Tanzania’s case, USAID has
a. USAID Objective: “The                 achievement in 1999, the                   responded by filling key staff
   Development of Politically Active     government and local NGOs finally          vacancies and strengthening Mission
   Civil Society Promoted”
                                         approved a policy paper that will          democracy and governance program
Of the 75 USAID operating units          provide the foundation for increased       functions.
with democracy and governance            civic involvement in policymaking
programs, 38 percent have a primary      and governance in the future.              b. USAID Objective: “More
focus on promoting a politically                                                       Transparent and Accountable
active civil society. Regionally, this   Strengthened Democratic Political             Government Institutions
                                         Culture                                       Encouraged”
objective has been critical to the
Europe and Eurasia countries, where      While the fragile political and            Of the 75 operating units promoting
17 of the 22 operating units are         economic situation in Slovakia             democracy and governance, 31
pursuing it to accelerate countries’     during the past year has limited the       percent have programs with a
democratic transitions. Elsewhere, 13    impact of USAID’s democracy and            primary focus on improving
operating units in Africa, 3 in Latin    governance program, meaningful             capacities of government institutions.
America and the Caribbean, 3 in          results have still been achieved.          Regionally, this objective has been
Asia and the Near East, as well as 2     According to the Mission, one of its       critical to the Europe and Eurasia
in the Global Bureau, report carrying    most significant activities was to         countries, where 12 of 22 operating
out civil society programs.              develop a national civic-education         units are pursuing it to accelerate
                                         training methodology aimed at              countries’ democratic transitions.
USAID aims to effect change by           promoting democratic attitudes and         Elsewhere, six operating units in
facilitating the development and         behaviors. In 1999, as a result of         Africa, seven in Latin America and
strengthening of the various elements    these efforts, the Ministry of             the Caribbean, four in Asia and the
of civil society. Major areas of         Education approved the inclusion of        Near East, and one in the Global
program concentration include            civic-education training as part of the    Bureau carry out programs to
improved legal frameworks to             recertification program for teachers,      strengthen government institutions.
                                          USAID FY 2000 Accountability Report                                        C-13




While many citizens of developing         assistance to prepare the new             A well-developed justice system
countries recognize the intrinsic         strategy and plans to fund new            serves as the underpinning of a
value of democracy, they are also         activities under it in the future.        democratic society and modern
concerned with a government’s             During 1999, moreover, related            economy. USAID works to improve
ability to function. In general,          USAID-supported anticorruption            respect for human rights and
governance issues pertain to the          efforts were also bearing fruit; for      strengthen the rule of law in order to
ability of government to develop an       example, as a result of work by the       help resolve conflicts and foster
efficient and effective public            newly established Department for          social interaction in accord with
management process. Because               Good Governance, two high-ranking         legal norms and societal values. The
citizens lose confidence in a             government officials and an               Agency also provides services in
government that is unable to deliver      influential representative of the         accord with societal demands and
basic services, the degree to which it    private sector were charged and           expectations and helps curb the
is able to carry out its functions at     jailed for corruption.                    arbitrary exercise and abuse of
any level is often a key determinant                                                power by other branches of
of a country’s ability to sustain         Program(s) Failing to Meet                government, elites, and privileged
democratic reform.                        Expectations                              groups. Major approaches used by
                                          All democracy and governance              operating units to support this
USAID works to effect change by           activities supported by foreign           objective include strengthening
facilitating the development and          governments are politically sensitive     justice-sector institutions, improving
strengthening of government               and are thus sometimes difficult to       legal frameworks and codifying
institutions. Major areas of program      manage. USAID’s effort to strengthen      human rights, and increasing
concentration include decentralizing      the legislature in Egypt did not meet     citizens’ access to justice. Examples
government functions and decision-        expectations in part because of           of USAID activities and
making processes, strengthening           government concerns that project          accomplishments in these areas are
legislatures, improving government        staff would have undue influence on       described below.
integrity, promoting more effective       legislature proceedings. After
policy implementation, and                protracted negotiations with              Examples of USAID Program Results
improving civilian– military relations.   government officials, the Mission         Strengthening Justice-Sector
An example of USAID activities and        agreed to take a new implementation       Institutions
accomplishments in these areas is         approach and extended the                 In Malawi, the Mission funded a
described below.                          legislative strengthening activity        comprehensive assessment of the
                                          through 2001.                             courts’ administrative and
Example of USAID Program Results                                                    management systems. Based on
Government Integrity                      c. USAID Objective: “Rule of Law          broad consultations, including the
                                             and Respect for Human Rights of
Corruption has long been a major                                                    full cooperation of the judiciary, the
                                             Women, as Well as Men,
problem in Tanzania; therefore,              Strengthened”                          assessment made comprehensive
USAID has focused its democracy                                                     recommendations for improving
                                          Of the 75 operating units with
and governance resources on                                                         these court systems. By the end of
                                          democracy and governance
promoting the development of a                                                      1999, the assessment’s key
                                          programs, just over 21 percent have
national anticorruption strategy for                                                recommendations had been
                                          a primary focus on strengthening the
the government. In response, during                                                 accepted by the judiciary and were
                                          rule of law and respect for human
the past year, the government                                                       placed on a priority list for
                                          rights. Operating units in all regions,
created a new Department for Good                                                   implementation. As a result, a five-
                                          including six in Latin America and
Governance within the President’s                                                   year schedule of activities has been
                                          the Caribbean, seven in Europe and
Office, which presented and gained                                                  established to overhaul and
                                          Eurasia, four in Asia and the Near
cabinet approval for a National                                                     streamline court management and
                                          East, one in Africa, and two in the
Anticorruption Strategy and Action                                                  administration.
                                          Global Bureau carry out rule of law
Plan. USAID provided technical
                                          and human rights programs.
C-14                                      USAID FY 2000 Accountability Report




Increasing Citizens’ Access to Justice    in the country has helped delay            Credible Electoral Administration
In Bangladesh and Tanzania,               expected constitutional reforms.           In support of the legislative and
Mission-funded activities have                                                       presidential elections that marked
                                          d. USAID Objective: “Credible and
helped increase citizen access to            Competitive Political Processes         the transition from military to civilian
justice through alternative dispute          Encouraged”                             rule in Nigeria, USAID-funded
resolution programs. In Bangladesh,                                                  contractors provided analytical
                                          Ten percent of USAID’s 75 Missions
more than 21,000 new cases were                                                      reports to the Independent National
                                          have programs in this objective area.
processed in mostly rural areas. In                                                  Electoral Commission. Commission
                                          Although no operating units in
Tanzania, in conjunction with the                                                    officials said that these reports
                                          Europe and Eurasia carry out
government’s introduction of                                                         helped them correct some of the
                                          programs in this area, three operating
alternative dispute resolution                                                       worst technical deficiencies in their
                                          units in each of the Agency’s other
procedures in all of the country’s                                                   system of electoral administration. In
                                          regions have programs focused on
courts down to the district level,                                                   addition, the Mission’s election
                                          enhancing political processes.
USAID provided training for 276                                                      assistance program became the
judges and magistrates. This training      Although other elements of                platform on which women were
and the increased use of alternative      democracy can develop before               mobilized to vote and women
dispute resolution has helped             competitive elections are held, a          leaders were drawn to run for office.
expedite case processing, reduce          country cannot be truly democratic         One USAID-assisted NGO network
costs, and build public confidence in     until its citizens have the opportunity    supported 24 women to run for local
the legal system.                         to freely and fairly choose their          council positions, and 16 of them
                                          representatives. However, free and         won election.
Program(s) Failing to Meet
                                          fair elections are not the be-all and
Expectations                                                                         Effective Oversight of Electoral
                                          end-all of competitive political
Nicaragua’s overall progress in its                                                  Processes
                                          processes. Other major political
democratic transition did not meet        institutions, such as political parties,   In Indonesia, USAID assistance
Mission expectations in 1999.             also have to be developed.                 helped the government to hold the
USAID and other donors’ efforts           Accordingly, USAID works to bring          most free and fair legislative election
were blocked by the combined              about credible and competitive             since 1955. Mission efforts included
effects of poor government                political processes through support        a massive election-monitoring
performance and the slow recovery         for electoral reform, voter education      program, which recruited more than
from Hurricane Mitch. For example,        programs, and strengthening political      600,000 nonpartisan volunteers who
recent changes in the membership of       parties. Examples of USAID activities      were trained and deployed to
the Justice Commission of the             and accomplishments in these areas         320,000 polling stations. The first
National Assembly have undercut           are described below.                       nationally representative statistical
political will in support of criminal                                                sample of the election results
procedure reform, making it               Examples of USAID Program Results          objectively and impartially
necessary to re-create a broad-based      Impartial Electoral Frameworks             confirmed the voting results, thus
consensus in favor of such efforts.                                                  disproving self-interested and
                                          USAID’s support to civil society
                                                                                     exaggerated claims of fraud.
                                          organizations in Benin helped
In Armenia, progress on the
                                          introduce key electoral reforms,           Informed and Active Citizens
Mission’s rule-of-law programs was
                                          including amending the electoral
slower than expected for most of                                                     Also in Nigeria, USAID supported a
                                          code and helping the autonomous
1999. For example, even though                                                       nationwide voter education program
                                          national electoral commission gain
legislative changes strengthened the                                                 in anticipation of the critically
                                          permanent status. These efforts
structural independence of the                                                       important national elections held in
                                          helped reduce electoral fraud,
judiciary, informal dependence on                                                    1999. Among this activity’s
                                          contributing significantly to the
historically strong prosecutors                                                      achievements were 184 radio and
                                          country’s successful legislative
continued. Similarly, political turmoil                                              television programs, which reached
                                          election in 1999.
                                          USAID FY 2000 Accountability Report                                     C-15




an estimated 12 million people. As a      discusses programs that failed to        Development (G/HCD) and for
result, voters were reportedly often      meet expectations, and reveals plans     Women in Development (G/WID).
more aware of electoral procedures        for further progress.
than many polling personnel.                                                       Of these 30 strategic objectives in
Moreover, a post-elections national            USAID Operating Units Linked to     basic education, 93 percent were
survey found that these voter                  Basic Education                     judged to have met or exceeded
                                               Self Assessment Scores (FY 1999)
education efforts had enhanced                                                     expectations for FY 1999. Those
citizen participation in the elections,                                            judged to have exceeded
as well as public confidence in the                           EE*                  expectations included programs in
                                                   On       (23%)
results.                                         Track                             Namibia, Jamaica, Nicaragua, and
                                                 (70%)
                                                                      Not Met      regional programs in Africa and in
A USAID-supported media and                                             (3%)       Latin America and the Caribbean.
                                                                   N/A
operations center became the hub                                   (3%)
for election communication and                  * Exceeding expectations           Program(s) Failing to Meet
information throughout Indonesia                Total SOs: 30                      Expectations
                                                Note: Basic Education SOs only.
and internationally, thereby helping                                               All USAID programs under the basic
ensure transparency in the 1999           Program Objectives/Approaches            education objective met or exceeded
elections. More than 150                                                           expectations.
                                          USAID supports human capacity
organizations from both electronic
                                          development around the world
and print media relied on this center                                              Country Focus of USAID Basic
                                          through programs directed at two         Education Programs
to get immediate results of the
                                          broad objectives:
election process. This helped                                                      As a general matter, USAID allocates
overcome possible threats to the                                                   its basic education funding among
                                          • Access to quality basic education
election’s legitimacy that otherwise                                               host countries on the basis of their
                                            for underserved populations,
often threatened past elections. In                                                educational needs and their
                                            especially for girls and women,
addition, Mission-funded voter                                                     commitment to reform. More
                                            expanded
awareness and education programs                                                   specifically, the Agency concentrates
introduced democratic concepts and        • The contribution of host-country       on countries with major
voting practices to 100 million (out        institutions of higher education to    inadequacies in access or quality at
of 110 million) eligible Indonesian         sustainable development                the primary level, but whose
voters in 26 provinces.                     increased                              governments demonstrate a clear
                                                                                   willingness to do what is necessary
                                          a. USAID Objective: “Access to           to reduce or eliminate those
Build Human Capacity through                 Quality Basic Education for           inadequacies. In this context, USAID
Education and Training (HCD)                 Underserved Populations,
                                                                                   pays special attention to educational
                                             Especially for Girls and Women,
This section discusses the                   Expanded”                             barriers affecting girls. Judgments
performance of USAID programs                                                      based on educational criteria must
                                          Self-Assessment of Performance by
under the human capacity                  Missions and Other Operating Units       then be weighed against similar
development (HCD) goal, drawing                                                    judgments regarding support for
                                          USAID Missions and other operating
on the self-assessments of                                                         program efforts in other goal areas,
                                          units reported a total of 30 strategic
performance by Missions and other                                                  the overall country assistance
                                          objectives in basic education: 10
operating units. It highlights the two                                             budget, the availability of funds for
                                          country programs plus a regional
HCD objectives and describes the                                                   basic education versus other goals
                                          program in sub-Saharan Africa; 2
approaches used by the Agency to                                                   for the Agency overall and in each
                                          country programs in Asia and the
accomplish these objectives. It                                                    region, and many other factors. The
                                          Near East; 7 country programs plus a
provides examples of results                                                       basic education countries identified
                                          regional program in Latin America
achieved through USAID efforts                                                     in this chapter’s section on country
                                          and the Caribbean; and the Global
undertaken around the globe,                                                       progress reflect the outcome of these
                                          Bureau Centers for Human Capacity
                                                                                   judgments.
C-16                                     USAID FY 2000 Accountability Report




Basic Education Program Clusters           children of the poor, and children       education. In FY 2000, only the
1. Basic education for children. The       of other disadvantaged groups            Missions in Nigeria and Guatemala
great majority of USAID’s funding                                                   sought funding for adult literacy
                                         • International agreements                 programs; these appropriations
and program efforts in basic
                                           supported by the United States           totaled $3 million, compared with
education support expanded and
                                           that recognize improved and more         the Agency total of $117 million in
improved basic education for
                                           accessible primary schooling as          support for basic education for
children. In principle, this category
                                           the proximate step toward                children
spans efforts in preprimary education
                                           achieving education for all
and other early childhood
                                                                                    Basic Education Program
development programs, primary            Of the 19 USAID country programs           Approaches
education, and secondary education.      working on basic education for
The common thread among these                                                       USAID uses four broad approaches
                                         children in FY 2000, all concentrated
elements is a concern that all                                                      to achieve results within basic
                                         mainly or exclusively on improving
children— girls and boys alike— gain                                                education. In keeping with the
                                         basic education at the primary level,
the core skills that they will need to                                              Agency’s overall focus, these
                                         based on the indicators chosen by
function effectively in all aspects of                                              approaches are mainly aimed at the
                                         the Missions to capture the impact of
later life: literacy, numeracy, and                                                 primary level, but could be adapted
                                         their programs.
habits of critical thinking. In                                                     to efforts aimed at other levels of
practice, USAID strongly                                                            basic education.
                                         Although conditions in most USAID-
concentrates on ensuring equitable       assisted countries confirm the need
access and improved quality in                                                      1. Policy reform efforts encourage the
                                         to concentrate on primary education,
primary education. The Agency’s                                                     host government to adopt and
                                         changes in those conditions can
focus on primary education reflects                                                 implement policies that promote
                                         cause a shift in program focus. For
the following:                                                                      access to basic education and
                                         example, in El Salvador, USAID is
                                                                                    improve educational quality at that
                                         currently developing a program to
• The especially high returns to                                                    level. These efforts often include
                                         improve the quality and availability
  improved and more accessible                                                      technical assistance in identifying
                                         of preschool care for young children
  primary schooling in most                                                         appropriate policies, based on
                                         in rural areas by developing
  developing countries, especially in                                               international experience. Missions
                                         curricula and training programs for
  the poor countries where most of                                                  also work to build support for
                                         caregivers in both public and private
  our basic education programs                                                      educational policy reform among
                                         settings. This shift reflects a judgment
  operate                                                                           local communities, the private sector,
                                         that the reform process in primary
                                                                                    and civil society.
                                         education has developed sufficient
• The wide-ranging impacts of
                                         momentum and acceptance that
  primary education in terms of                                                     USAID policy work in basic
                                         further steps should be left to the
  faster economic growth, reduced                                                   education rests on a broad
                                         national government, allowing
  income inequality, increased child                                                consensus about the following
                                         USAID to turn its attention to the
  survival and family health,                                                       overall policies needed to ensure
                                         next step: ensuring that rural children
  reduced fertility, improvement in                                                 equitable access to a basic education
                                         are mentally, emotionally, and
  the status of women, and                                                          of adequate quality:
                                         physically ready to learn by the time
  increased support for democracy
                                         they enter primary school.
  and civil liberties                                                               • Adequate support for education in
                                                                                      national, provincial, or local
• The recognition that better and        2. Adult literacy. In addition to
                                                                                      budgets
  more accessible primary schooling      USAID’s support for basic education
  is essential to ensure broad           for children, a few Missions support       • Use of available public funds to
  educational opportunity at all         efforts aimed at promoting literacy          subsidize primary and sometimes
  levels— especially for girls, the      among adults and adolescents who             lower-secondary schooling, with
                                         have missed out on a primary                 households shouldering more of
                                         USAID FY 2000 Accountability Report                                       C-17




  the costs of higher levels of          progress may be impossible to             both to increase the relevance of
  education                              achieve.                                  student skills to the demands of the
                                                                                   workplace and to adjust the pace
• Equity in allocating funds between     2. Institutional development involves     and sequence of teaching to what
  urban and rural areas                  efforts to help the host country build    children learn at different ages. This
                                         the institutional capacity to plan for,   includes supporting the development
• Adequate support for textbooks,
                                         provide, and assess basic education       of new textbooks and learning
  learning materials, and other
                                         services. Improving basic education       materials and helping build domestic
  nonsalary elements in the
                                         requires, along with appropriate          capacity to carry out these tasks.
  educational budget
                                         policies, that the host government        Also, Missions help host countries
USAID’s efforts to promote               effectively manage the financial and      develop cost-effective methods of
educational policy reform vary           human resources devoted to that           student assessment and encourage
widely, according to country             purpose. Doing so involves myriad         them to use appropriate kinds of tests
circumstances. In sub-Saharan            decisions on such issues as the siting    for different purposes.
Africa, USAID has relied heavily on      of new schools, trade-offs among
nonproject budgetary assistance to       student– teacher ratios, teacher pay      4. Promoting community
host governments, with                   scales, funding of teacher training,      participation entails trying to
disbursements tied to adoption of        funding of student testing, funding of    enhance the strength and
policy changes negotiated between        textbooks and materials, and more.        effectiveness of local communities’
USAID and the host government.           To help build institutional capacity,     role in the process of educational
This approach has the advantage of       USAID funds training for educational      decision making. The aim is to make
strengthening the position of reform     officials, provides management            the educational system more
advocates within the host                information systems, and sponsors         responsive to its ultimate
government, but it requires              regional partnerships to share            customers— parents seeking a decent
considerable budgetary flexibility       information and increase awareness        education for their children.
and careful monitoring of                of international best practices.
compliance. Another important                                                      Choices among these four broad
approach, used by Missions in all        3. Improving educational practices at     approaches (and the larger task of
regions, involves promoting public       the classroom level involves              designing an assistance strategy for
awareness of the need for                promoting the adoption of effective       basic education) require a careful
educational reform, through              teaching methods, learning                assessment of host-country
sponsorship of workshops and             materials, and educational                conditions: the government’s
conferences and through direct           technologies. In this area especially,    willingness to carry out needed
support for organizations lobbying       USAID supports applied research           reforms, the potential role of civil
for educational reform. Finally,         and pilot studies to identify             society in providing effective support
USAID’s access to grant funds often      educational practices that improve        for reforms, the current status of
places the Agency in a key position      learning. Under this approach,            system-level and student-level
to help leverage much larger flows of    Missions provide funding for in-          indicators, existing basic education
concessional lending by other            country teacher training, along with      policies and institutions, the
donors.                                  technical assistance to strengthen the    priorities and capacities of other
                                         capacity of local teacher training        donors, and other conditions. Some
Among the four broad program             institutions. In particular, USAID        of these conditions can be assessed
approaches, educational policy           promotes the adoption of teaching         from available objective data. Others
reform is often the most difficult and   methods that involve students in the      may require special data-gathering
usually takes longer to achieve.         learning process (traditional methods     efforts or on-the-ground familiarity
Nevertheless, experience shows that      often rely on rote).                      with political and bureaucratic
without reforming the underlying                                                   realities. In many countries, Missions
                                         The Agency also promotes                  have adopted an integrated approach
policies, sustainable educational
                                         improvements in curriculum content,
C-18                                     USAID FY 2000 Accountability Report




to basic education reform,               enrollments have increased from two       Mali, the Mission has provided
combining program elements drawn         of every five school-aged children to     communities with training in
from two or more of these                three in five in Tigray and to one in     governance to increase their capacity
approaches to address both access        two in SPNNR. The latter region           to manage primary schools.
and quality problems.                    recorded a 15 percent increase in
                                         enrollment in 1999 alone.                 In Morocco, USAID is helping the
Examples of Basic Education                                                        GOM and the Ministry of Education,
Program Results                          In Peru, the Mission has worked           under the new National Charter of
In Benin, the Mission has adopted an     closely with a national advocacy          Education and Training, to shift the
integrated approach to increase          group, the National Network for           manner in which the curriculum is
primary enrollments, particularly        Girls’ Education in Peru. The Mission     designed. For the first time, the GOP
among girls, and to improve              supported the Network in                  allows 30% of the curriculum of
educational quality through better       disseminating an agenda that              each region and its provinces to be
educational materials and methods        identified the impediments to             decided locally. Once this
of instruction. The program has five     expanding girls’ access and in            decentralized methodology for
interdependent key objectives: 1)        working with the government to            curriculum development is tested
improved key pedagogical systems         develop policies and programs to          and finalized, the localized curricula
and inputs, initially targeted toward    address those impediments. The            will be made available through
250 experimental schools, with           Mission has supported the                 education technology. USAID in
gradual adoption by the remaining        establishment of local networks to        Morocco has successfully promoted
4,000 primary schools; 2) increased      promote quality education for rural       information technology and multi-
equality of access; 3) government        girls in four provinces in Peru where     media centers within teacher training
maintenance of adequate financing        girls suffer particularly high rates of   colleges. Faculty, students preparing
for primary education; 4) increased      dropout from primary school. As a         to become teachers, and teachers in
community and government                 result, opportunities for basic           in-service training have made use of
participation in schools; and 5)         education in those areas have             the multi-media centers.
improved institutional capacity for      expanded, with the share of girls
educational planning, management,        enrolled at the appropriate grade in      In South Africa, the Mission has
and accountability. With strong          primary school rising from 20             supported the efforts of local NGOs
support from the central government,     percent in 1996 to 27 percent in          in improving classroom teaching.
this holistic approach has produced      1999. This case illustrates the need      The same NGOs have also helped
dramatic results. The overall            for broad participation by                build management capacity in
enrollment rate exceeded its target      stakeholders at all levels to push the    district education offices so that
by four percentage points, while the     educational reform process forward.       those offices can provide effective
improved quality of primary                                                        support to schools and be held
instruction and the availability of      In Malawi and Mali, USAID has             accountable for the quality of
new textbooks and workbooks for          supported the establishment of            schooling.
students helped raise the pass rate in   community schools to help increase
the experimental schools to 82           community participation in                In Guatemala, USAID is supporting
percent, compared with 70 percent        educational decision making, with         intercultural and bilingual primary
using the old curriculum.                the ultimate goal of increasing           education to achieve increased
                                         access and improving quality in           access for indigenous children in
In Ethiopia, the Mission has also        primary schooling. In Malawi, local       Quiche Province. Enrollment rates in
used an integrated approach to help      surveys and training of communities       the province have increased sharply
raise both enrollment and retention      have helped identify local constraints    among both boys and girls.
rates of students in targeted regions,   to educational quality; action plans
Tigray and the Southern Nations,         to address those constraints were         In the area of adolescent and adult
Nationalities, and Peoples Region        then developed and implemented. In        literacy, USAID has developed the
(SNNPR). Between 1995 and 1999,
                                        USAID FY 2000 Accountability Report                                                                           C-19




EDUCATODOS program in                   USAID’s basic education programs.                               education efforts are used in
Honduras to provide access to basic     For this reason, tables C.4 and C.5                             computing the aggregate enrollment
education for out-of school youth       are limited to listing representative                           figure.
and young adults. The program has       indicators of results in these areas to
exceeded its targets in expanding       help illustrate the range and extent of                         It must be emphasized that the
access among these groups.              results that Missions are targeting.                            figures in the “ implied-change”
Elsewhere, women’s literacy                                                                             column of table C.2 are estimates
programs delivered through NGOs         Changes in overall primary                                      only, shown to illustrate the
(e.g., in Nepal) and through private-   enrollment. Table C.2 summarizes                                aggregate impact of USAID
sector associations (e.g., in           changes in overall primary school                               programs. In contrast, most of these
Guatemala) have helped provide an       enrollment implied by Mission-                                  Missions are actually targeting
alternative means to expand access      reported changes in enrollment ratios                           changes in enrollment ratios, rather
to basic education among                during the last year for which data                             than specific numbers of children
disadvantaged groups.                   are available. In each case, the                                affected. With these caveats in mind,
                                        change in enrollment ratio is                                   the table implies a one-year increase
Basic Education Midlevel Results        multiplied by an estimate of the                                of between 800,000 and 900,000
Indicators                              number of children of primary                                   boys and girls enrolled in primary
Tables C.2 through C.5 summarize        school age within the target area to                            school in the five countries included
some of the indicators that USAID       produce an estimate of the change in                            in the total, as the result of increased
Missions are using to measure the       the number of children enrolled in                              enrollment ratios targeted by USAID
impact of their basic education         primary school implied by the                                   Missions. To the extent that these
programs; the tables cluster these      reported change in the enrollment                               one-year increases reflect permanent
indicators according to the kinds of    ratio. These estimates are added to                             improvements in access to primary
results that Missions are trying to     produce the estimated total number                              schooling resulting from USAID
achieve. For certain dimensions of      of children affected (shown at the                              basic education programs, the
progress in basic education, country-   bottom of the table). Almost all the                            number of children ultimately
level indicators can be aggregated
across programs into “ midlevel”                        Table C.2: Changes in Total Primary Enrollment/Access Targeted by USAID Basic
                                                                                      Education Programs
results indicators, which provide a
                                                                                                   Value of                           Implied
rough idea of the Agency’s overall                                                                 Measure,    Value of              Change in
                                                                                                    Latest     Measure,               Number      Used in
impact. In particular, changes in                                                   Children in    Available   Previous    Change in Enrolled/    Implied
overall and gender-specific                   Country        Enrollment Rates       Age Group        Year        Year      Measure    Affected     Total?
                                             Benin        GER                        1,070,309       77.0%       76.0%         1.0%      10,703     yes
enrollment typically lend themselves         Ethiopia     GER – national            14,722,762       45.8%       42.0%         3.8%     559,465
to adding up among country                                GER – Tigray                 728,127       58.4%       56.1%         2.3%      16,747     yes
                                                          GER – SNNPR                2,846,885       49.2%       47.9%         1.3%      37,010     yes
programs, as shown in tables C.2             Guinea       GER                        1,300,571       53.5%       51.0%         2.5%      32,514     yes
and C.3.                                     Mali         GER                        1,775,273       53.9%       50.0%         3.9%      69,236     yes
                                                          Gross access rate            295,878       52.9%       47.1%         5.8%      17,161
                                             Uganda       GER                        4,377,695      131.0%      115.0%        16.0%     700,431     yes
For other, equally important                              NER                        4,377,695       93.0%       85.0%         8.0%     350,216
                                             El Salvador Rural children aged 7–         N/A           82.4%       80.7%         1.7%      N/A
dimensions of educational                                10 attending school
                                             Implied total change in enrollment during previous year:                                   866,641
development, differences in the data
                                             GER = gross enrollment ratio; NER = net enrollment ratio. See section B for definitions.
available to measure progress
prevent meaningful aggregation.         countries shown in this table are in                            affected by those programs will be
Thus improvements in educational        sub-Saharan Africa, where Missions                              much greater.
quality, increased system efficiency,   are working to expand access to
and increased support and               primary schooling. In the case of                               Changes in primary enrollment by
involvement of parents and local        Ethiopia, only the reported increases                           girls. Table C.3 provides a similar
communities in basic education          in enrollments for the two regions                              aggregation of Mission-reported
usually resist aggregation, despite     where USAID concentrates its basic                              program results based on targeted
being at the center of several of
C-20                                                         USAID FY 2000 Accountability Report




changes in girls’ enrollment in                              at the primary level. Table C.4                        programs. In particular, educational
primary school. Two factors make it                          summarizes a third set of Mission-                     quality is the principal focus of most
difficult to compare the results                             reported results indicators, all                       USAID basic education programs in
shown in this table with those shown                         intended to measure gains in                           Latin America and the Caribbean,
in table C.2: first, many of the                             educational quality. These include                     where access to primary schooling
programs targeting girls outside of                          reduced grade repetition, increased                    tends to be less pressing an issue
sub-Saharan Africa concentrate on                            pass rates at the end of particular                    than in Africa and Asia and the Near
subnational areas, for which                                 grades or on school-leaving exams,                     East. The relative prominence of
estimates of the number of school-                           improved classroom practices, and                      enrollment indicators mainly reflects
age children were not yet available.                         an increased share of children                         the greater “ countability” of
Even more important, from a                                  completing particular grades. The last                 enrollment. In contrast, data on
                                                                                                                    student learning— the best measure
                            Table C.3: Changes in Girls’ Primary Enrollment/Access                                  of educational quality— are
                                Targeted by USAID Basic Education Programs
                                                                                                                    nonexistent or highly unreliable in
                                                        Value of                                 Implied
                                                        Measure, Value of                       Change in           most developing countries. As a
                                              Girls in   Latest   Measure,                       Number Used in
                                                Age     Available Previous Change in            Enrolled/ Implied   result, improvements in quality are
       Country        Enrollment Rates         Group      Year      Year    Measure              Affected  Total?
                                                                                                                    harder to capture with available
     Benin       GER – girls                   550,230     61.0%     60.0%      1.0%                 5,502  yes
     Ethiopia    GER – girls, national       7,361,381     45.8%     31.0%    14.8%             1,089,484           objective data, so fewer Missions
                 GER – girls, Tigray           359,264     53.8%     50.2%      3.6%               12,934   yes
                 GER – girls, SNNPR          1,378,746     33.5%     31.0%      2.5%               34,469   yes
                                                                                                                    include such measures in their
     Guinea      GER – girls                   650,285     40.0%     36.9%      3.1%               20,159   yes     results reporting, even when paying
     Mali        GER – girls                   879,887     44.4%     40.3%      4.1%               36,075   yes
                 Gross access rate – girls     146,648     45.7%     41.0%      4.7%                 6,892
                                                                                                                    careful attention to quality issues in
     Egypt       School enrollment of               N/A    69.8%     68.7%      1.1%                   N/A          the field. Identifying additional,
                 girls in Upper Egypt
                 Cumulative number of                       41,489    34,282          7,207        7,207            widely applicable measures of
                 girls benefiting from
                 USAID support through
                                                                                                                    educational quality and promoting
                 formal and nonformal                                                                               more widespread collection and
                 programs
     Morocco Girls’ enrollment ratio in             N/A     42.0%      47.0%         -5.0%           N/A            reporting of these measures by
                 pilot schools – 1st grade
                 Girls’ enrollment ratio in         N/A     34.0%      31.0%          3.0%           N/A
                                                                                                                    Missions are important issues for
                 pilot schools – 6th grade                                                                          USAID.
     El Salvador NER – girls, rural areas           N/A     83.5%      81.4%          2.1%           N/A
     Guatemala GER – girls, Quiche                  N/A     79.1%      64.7%         14.4%           N/A
                 Rural primary gender               N/A     78.1%      75.1%          3.0%           N/A
                 equity ratio in Quiche,
                                                                                                                    Decentralization and parental/
                 based on gross                                                                                     community support. Several USAID
                 enrollment ratios
     Implied total change in girls’ enrollment during previous year:                              88,980            Missions promote the
     GER = gross enrollment ratio; NER = net enrollment ratio. See section B for definitions.
                                                                                                                    decentralization of basic education
     Gross access rate = GER in first grade.
                                                                                                                    systems, along with a stronger role
quantitative standpoint, is the fact                         measure is used on the assumption                      for local communities and greater
that USAID/Uganda does not target                            that parents will keep their children                  support and involvement by parents
or report primary enrollment on a                            in school only as long as they                         in the educational process. Table C.5
gender-disaggregated basis; as a                             perceive that the school is providing                  shows a number of the indicators
result, we cannot know how many of                           an education worth postponing                          that Missions use to report these
the newly enrolled Ugandan                                   children’s entry into the labor force.                 efforts. As with educational quality,
children shown in the previous table                         Many of the quality indicators shown                   this table probably understates the
are girls. For the remaining four                            in the table apply specifically to                     priority that USAID places on this
countries, the estimated increase in                         schooling for girls.                                   issue, because many aspects of
girls’ primary enrollments during the                                                                               decentralization are qualitative and
past year— roughly 89,000— is just                           The table underrepresents USAID’s                      difficult to measure objectively.
over half of the combined increase                           emphasis on educational quality,
for boys and girls for those countries.                      which is a central concern in almost
Improvements in educational quality                          all of the Agency’s basic education
                                                   USAID FY 2000 Accountability Report                                                             C-21




            Table C.4: Representative Indicators of Improvement in Educational                              new curricula in public
                   Quality Targeted by USAID Basic Education Programs
                                                                                                            administration or agroforestry, and
                                                                         Rate or Value of Indicator         training human rights lawyers).
                                                                         Most                               Conversely, most USAID efforts to
                                                                        Recent  Previous
  Country                                                                Year     Year   Change
                                                                                                            strengthen a particular institution of
Benin       Primary school repetition rate                                26.0%    26.0%    0.0%            higher education choose that
            Pass rate on primary school leaving exam                      69.0%    67.0%    2.0%            institution on the basis of its
Ethiopia    Percentage of program-assisted schools with                   68.0%    67.0%    1.0%
                                                                                                            potential to contribute to USAID’s
            repetition rates less than 11% among 4th-grade girls:
            Tigray                                                                                          development goals (e.g., a business
            Percentage of program-assisted schools with                   52.2%       52.3%     – 0.1%      school, a law school, or a
            repetition rates less than 11% among 4th-grade girls:
            SNNPR                                                                                           department of agricultural science or
Ghana       Teachers in targeted schools using pupil-focused                37%         15%       25%       environmental studies).
            teaching practices
            Number of targeted schools pursuing community
            school improvement programs                                                                     Examples of Higher-Education
Uganda      Completion rate, grade 4                                       116%       106%        10%       Program Results
            Completion rate, grade 7                                        61%        53%          8%
                                                                                                            USAID support for higher education
Egypt       Pass rate among girls in USAID-supported schools                98%       100%        – 2%
Morocco     Girls’ 6th-grade completion rate, USAID-assisted                53%        26%        27%       contributes to results in all of the
            schools                                                                                         Agency’s strategic goals and
Haiti       3rd-grade pass rate in USAID-supported schools                  76%         71%           5%
                                                                                                            objectives. The varied nature of those
            Girls’ 3rd-grade pass rate in USAID-supported                   76%         68%           8%
            schools                                                                                         results, together with the fact that
Honduras    Pass rate among students in USAID-assisted                    66.4%       65.0%      1.4%       they are often viewed as a means to
            alternative education program
                                                                                                            achieve other development ends,
b. USAID Objective: “The                           Although distinguishing between                          makes it difficult to aggregate those
   Contribution of Host-Country                    these two approaches helps in                            results into meaningful measures of
   Institutions of Higher Education                articulating USAID’s work in higher                      impact at the Agency level. This is
   to Sustainable Development
                                                   education, in practice the two                           especially true of partnerships
   Increased”
                                                   approaches overlap in important                          involving higher education. The
Higher-Education Program
                                                   ways. Thus in supporting partnerships                    Center for Human Capacity
Approaches
                                                   involving host-country institutions,                     Development in USAID’s Global
USAID’s efforts to strengthen the                  USAID usually seeks to achieve                           Bureau administers a number of
development contribution of host-                  sustained improvements in their                          programs that link U.S. institutions of
country institutions of higher                     capacity to deliver results, especially                  higher education with host-country
education follow two broad                         results related to the immediate aim                     counterparts and tracks measures of
approaches:                                        of the partnership (e.g., developing                     the impact of these partnerships.
                                                   improved crop varieties, developing                      Since 1998 the Africa Bureau has
• Higher education as means:
  support for a wide range of                                       Table C.5: Representative Indicators of Decentralization and Parental/
  partnerships between host-country                                  Community Support Targeted by USAID Basic Education Programs
  and U.S. institutions of higher
                                                                                                                   Rate or Value of Indicator
  education, aimed at achieving
                                                    Country                                           Most Recent Year Previous Year          Change
  development results across the full               Ghana       Number of targeted schools                    40                18               26
  range of USAID’s Strategic Plan                               pursuing community school
                                                                improvement programs
                                                                Percentage of communities active            87%               11%              76%
• Higher education as end: a                                    in decision making in targeted
  narrower set of efforts aimed                                 schools
  specifically at strengthening the                 Guinea      Primary schools in targeted                  203               65              138
                                                                regions with active
  overall performance and                                       parental/community support
  capabilities of host-country                      Malawi      Percentage of schools with                 77.6%            13.2%            64.4%
                                                                functional school management
  institutions                                                  committees
C-22                                     USAID FY 2000 Accountability Report




provided support for sustainable         promote the importance of applied        of law, journalism, and social
partnerships with African universities   research, something of a new idea in     sciences.
under the Education for                  Egyptian higher education.
Development and Democracy                                                         Program(s) Failing to Meet
Initiative; impact measures, including   In South Africa, USAID has provided      Expectations
greater financial self-reliance and      grants to U.S. colleges and              Eritrea. Implementation of the
stronger emphasis on community           universities to work with historically   program just mentioned has been
service, have been identified, but the   disadvantaged institutions (HDIs) in     essentially suspended this year,
necessary data not yet collected.        areas such as financial management       pending a redesign and reorientation
Finally, the Bureau for Europe and       and internal control; supported eight    of the program. Although this
Eurasia has invested in helping          HDIs in upgrading their curricula in     strategic objective has failed to meet
colleges and universities in the         selected areas; and placed scholars      expectations overall, the portion
region become effective sources of       in the HDIs through the International    focused on higher education appears
training in business, law, and other     Foundation for Education and Self-       to have been an exception: the
fields critical to the transition to     Help. An evaluation (1999)               Mission reports that the redesigned
democratic governance and a market       concluded that these scholars have       program will place stronger
economy. Much of this investment         made significant contributions to        emphasis on human capacity
has been reported under budget           strengthening the host HDIs in           development. In the meantime, the
codes for economic growth,               research, management, curriculum,        University of Asmara has worked
democracy and governance, etc.,          and student development.                 with the Mission to put into place
based on the kind of training                                                     agreements with U.S. universities in
involved. Further information on         In Bulgaria, U.S. support for the        the fields of law, health, business,
these efforts is contained in the        American University of Bulgaria          and the social sciences.
Agency’s Budget Justification,           (AUBG) has produced a university
together with the annual results         that has become a regional center for
                                                                                  Stabilize World Population and
reports of these Bureaus and their       training young people to move into
                                                                                   Protect Human Health (PHN)
respective operating units.              leadership positions. AUBG
                                         launched a new leadership program        This section discusses the
Summarizing Agency impact is             in 1999 targeting Kosovars and           performance of the HPN objectives
somewhat easier in the case of           ethnic Albanians. This program           of USAID’s operating units as of
efforts aimed specifically at            provided an important opportunity        September 30, 1999, drawing on the
institutional strengthening, because     for the Kosovars to complete their       self-assessments of these units. It
of their smaller number:                 education in a secure multiethnic        provides examples of results
                                         and multicultural environment.
In Egypt, USAID has awarded 53                                                         USAID Operating Units Linked to
                                                                                       Population, Health, and Nutrition
linkage grants to support cooperative    In Eritrea, USAID has financed short-
                                                                                       Self Assessment Scores (FY 1999)
research by U.S. and Egyptian            term and long-term training of civil
universities to help solve problems      servants in various agencies of the                        EE*
facing Egyptian business and             Eritrean government— including the                       (20%)      Not Met
                                                                                                              (1%)
industry, 79 percent involving the       faculty and staff of the University of             On
                                                                                                               N/A
                                                                                          Track
private sector. Businesses benefiting    Asmara— through the Eritrean                     (74%)                (5%)
from the research have committed to      Technical Assistance Project (TAP)
covering the local currency costs of     and the Civil Society/Microenterprise
the research performed on their          Project. Among other elements, the              * Exceeding expectations
behalf and a mission. In addition to     program has included a linkage                  Total SOs: 80
the benefits to local industry and       program between the University of
Egyptian economic growth, the            Asmara and the University of North       achieved through USAID efforts
linkage grants program has helped        Carolina at Chapel Hill in the fields    undertaken around the globe and
                                         USAID FY 2000 Accountability Report                                           C-23




discusses operating unit objectives      spacing and by reducing the use of           had dropped from 3.6 children per
that failed to meet expectations.        abortion as a method of family               family in 1995 to 3.1 at the time of
                                         planning, especially in E&E.                 the pilot for the 2000 DHS.
Program Objectives/Approaches                                                         Contraceptive use by married
USAID seeks to help stabilize world      To address both types of results, the        women has increased by more than
population and protect human health      Agency concentrates on five key              one percentage point per year since
through programs directed at five        program areas:                               1992, when the level was 47
broad objectives:                                                                     percent. In Bangladesh, where
                                         • Access to, and demand for,                 USAID has been the largest donor
• Unintended and mistimed                  voluntary family-planning services         and has maintained a strong
  pregnancies reduced                      so that people can freely choose           partnership with the government
                                           the number and spacing of their            since the mid-1970s, there has been
• Infant and child health and              children                                   an astounding reduction in the total
  nutrition improved and infant and                                                   fertility rate. Overall births per
  child mortality reduced                • Improved quality, availability, and
                                                                                      woman decreased from 7– 8 to 3,
                                           acceptability of family-planning
• Deaths, nutrition insecurity, and                                                   and fertility in urban areas is now at
                                           and related reproductive services
  adverse health outcomes to                                                          the replacement level of 2.1 births
  women as a result of pregnancy         • A positive policy environment for          per woman.
  and childbirth reduced                   voluntary family-planning and
                                           reproductive health (FP/RH)                To assess USAID programs on an
• HIV transmission and the impact          services                                   annual basis, measures that are more
  of the HIV/AIDS pandemic in                                                         closely related to program activities
  developing countries reduced           • Enhanced long-term capacity of
                                                                                      are more useful than the TFR
                                           local institutions to design,
                                                                                      measure. The contraceptive
• The threat of infectious diseases of     finance, implement, and evaluate
                                                                                      prevalence rate (CPR) and couple-
  major public health importance           programs
                                                                                      year of protection (CYP) are widely
  reduced
                                         • Development and improvement of             accepted measures for this purpose.
Self-Assessment of Performance by          contraceptive technology                   Contraceptive prevalence is a proxy
Missions and Other Operating Units                                                    for fertility reductions because
                                         Examples of USAID Program Results            research shows that the correlation is
Throughout this discussion, examples
of program results include activities    Changes in fertility and contraceptive       strong. USAID uses sales and/or
that were on track, exceeded             prevalence are measured at the               distribution of contraceptives to
expectations, and missed                 country level every three to five            calculate CYP, a standardized
expectations. However, even if           years through demographic and                measure of the amount of
expectations were not met according      health surveys (DHSs). In countries          contraceptive use required to provide
to the quantitative measure for an       where DHSs were conducted, the               a year’s worth of protection against
activity, the overall strategic          1999 results showed that several             pregnancy. From the Agency’s
objective may be on track when all       countries have had rapid decreases           reports, it appears that program
activities contributing to the           in total fertility during the past five to   interventions are affecting CPR. For
objective are considered.                six years. Some of the results that          example, since 1995, availability of
                                         stand out are found in Nicaragua, El         family-planning services in Uganda
a. USAID Objective: “Unintended          Salvador, Egypt, and Bangladesh.             has doubled. The use of modern
   and Mistimed Pregnancies              For instance, total fertility rate (TFR)     contraception has increased 1.5
   Reduced”                              in Nicaragua dropped from 4.6 in             percent annually, resulting in an
USAID programs under this objective      1993 to 3.9 in 1998. In El Salvador,         overall CPR of 21 percent. In West
focus on helping families achieve        there was a decline from 3.9 in 1993         and Central Africa, a region that
their desired family size by reducing    to 3.5 in 1998. In Egypt, fertility rates    consistently underperforms in most
fertility and encouraging child          continued their steady long-term             indices, USAID’s program has made
                                         trend downward through 1999: TFR
C-24                                     USAID FY 2000 Accountability Report




significant progress, although CPR       to 8014 in 1999 based on Ministry          in seven countries were better able
remains low. For instance, in Cote       of Health (MoH) data. While less           to plan, implement, and evaluate
d’Ivoire, Cameroon, Togo, and            rapid than projected, the CYP              these services. The initiative trained
Burkina Faso, use of modern              increase is noteworthy, given the          1,700 persons in clinical FP services,
contraceptives has risen steadily        current state of military mobilization.    100 community-based peer
since our program’s inception and is     Two thirds of all health facilities with   educators in outreach, and 400
on track to reach a target CPR of 10     staff trained through USAID showed         community leaders in advocacy.
percent by the end of 2000. While        increased CYP, with a net increase
all four countries are showing gains,    overall. CYPs exceeded expectations        With USAID support, a program
the DHS data show that CPR               by 59 percent in Tanzania. New             sponsored by the Ethiopian
increased most dramatically in Cote      users of family planning reached           Evangelical Church increased
d’Ivoire, from 6 percent in 1994 to      nearly 1.1 million. CPR has                knowledge of at least one modern
10 percent in 1998/99.                   increased to 15 percent for modern         contraceptive to 90 percent of the
                                         methods, exceeding planned figures.        population in the focus area,
Guatemala is another one of our          Modern contraceptive use for               compared with the national average
population success stories, with CPR     married women in Zimbabwe has              of 63 percent. In the same area, CPR
increasing from 31 percent to 38         increased steadily, from 42 percent        increased from 4 percent at baseline
percent between 1995 and 1999 and        in 1994 to 50 percent in 1999. The         to 34 percent in FY 1999. Peer
exceeding the 2000 target of 35          number of users obtaining supplies         education programs emphasizing
percent. However, TFR decreased          from the private sector increased          reproductive health are multiplying
only modestly from 5.1 to 5.0 during     from 12 percent in 1994 to 17              in Mali. The government has
the same period, pointing to a need      percent in 1999, largely as a result of    expanded the target age range for
for additional analysis to understand    the USAID/DFID-cofinanced                  these programs to ages 10 to 24 in
these potentially conflicting results.   PROFAM activity that supplies low-         order to include vulnerable groups
In Haiti, the CPR for modern             priced contraceptives.                     such as adolescents and young
methods increased from 16 percent                                                   adults. This expansion has been an
in USAID project areas in 1997 to        Underpinning the moves to increase         important change. In 1999, USAID
25 percent in 1999. USAID had            contraceptive prevalence are               supported the training of more than
expected CPR to reach 27 percent by      programs that will heighten demand         2,500 peer educators, and 760 peer
1999, but achievement fell short in      through education and through              educators reached 100,000 youth
part because of high discontinuation     increased numbers of sites that offer      with reproductive health information.
rates, which are now being               quality services to both men and
addressed by USAID.                      women. In Jordan, USAID supported          In Malawi, access to the full range of
                                         an innovative communications               FP services increased. Twenty-eight
USAID estimates that in FY 1999          program aimed at men and religious         hospitals across the country are now
more than 4.6 million new                leaders. In surveys undertaken             providing comprehensive service. In
contraceptive users were reached in      following the program campaign, 90         Mozambique, the expansion of FP
11 countries. Much of the FY 1999        percent of the men interviewed             services in 1999 exceeded
increase has been realized in the        could correctly comprehend and             expectations. By the end of the year,
Africa region. For example, in Benin     explain family-planning messages.          150 health posts in the focus area
condom sales increased 65 percent        The percentage of men who want to          were providing FP services, up from
from 1998 to 1999, and oral              use family planning increased from         zero in 1997 and nearly double the
contraceptive sales exceeded targets     74 to 84 percent. To improve local         1998 figure. We continue to make
by 42 percent. In Eritrea, through the   access, the Agency has also helped         progress in increasing the number of
Agency’s efforts, around 90 percent      mobilize local mayors in Africa to         FP sites in Nigeria’s 14 states (out of
of the traditional outlets are now       support provision of reproductive          36) where modern contraceptives are
selling USAID-procured condoms.          health services to high-risk groups.       available. The number of
CYPs increased from 7247 in 1998         By 1999, 14 African municipalities         community-based distributors
                                          USAID FY 2000 Accountability Report                                     C-25




increased 14 percent from FY 1998,        mortality. In Russia, early 1999 saw    the 1999 reproductive health survey
and the number of sites offering          the completion of the women’s           among married women aged 15– 44,
clinical services increased 27            reproductive health initiative, which   modern contraception use increased
percent (from 44 in 1998 to 56 in         increased access to modern family-      from 14 to 30 percent since 1993.
1999).                                    planning services and information in
                                          14 oblasts (which are equivalent to     To strengthen host-country family-
Improving the quality of services is      large states in the United States). A   planning programs, USAID focuses
the linchpin for increasing access to,    1999 CDC reproductive health            on ways to build durable institutions,
and informed choice about,                survey found that contraceptive         policies, and practices that will
reproductive health services. This        prevalence continues to be very         continue to influence in-country
was the principal focus of an             high— at approximately 70 percent, a    decisions, regardless of donor
initiative in Brazil, PROQUALI,           level comparable to that found in a     presence. The opportunities vary,
which succeeded in establishing the       1996 CDC survey. In spite of this,      depending on the local politics and
first clinic-level accreditation          abortion rates in Russia remained       opportunities, and success takes
program in Latin America. The             among the highest in the world.         many forms. Some of the most
community-based network that has          Nevertheless, abortion had fallen in    powerful levers to achieve
emerged from this initiative is           the two project areas and not in the    sustainable programs are viable
working with municipal decision           control area.                           financing systems and organized
makers to increase funding of local                                               advocacy. Good examples of
health systems under Brazil’s newly       Results have been more encouraging      progress in these areas were reported
decentralized health program. In          in Central Asia where over the past     in 1999. Seven countries, Bolivia,
Tanzania, training of health workers      decade, there have been consistent      Ecuador, Egypt, India, Mexico,
in integrated reproductive health was     declines in abortion as more women      Philippines, and Turkey, either
successfully redirected to rural health   have had access to contraceptives. In   increased their financing for FP/RH
facilities that had demonstrated the      Uzbekistan, according to the            or improved resource mobilization.
largest need. This change led to a        Ministry of Health, the general         In Romania, family planning is now
significant increase in the percentage    abortion rate has continued to          included in a health insurance fee-
of government facilities with one         decline during the past five years,     for-service package.
trained service provider (from 59         from 20 per 1,000 in 1995 to 10 in      Also, a women’s election advocacy
percent in 1996 to 72 percent in          1999. In Kazakhstan, where the          strategy has been implemented by
1999). Other impressive gains came        leading cause of maternal mortality     the Romanian Reproductive Health
in the Kyrgyz Republic. Family            is abortion, the DHS                    Coalition and seeks to include
doctors from the newly formed             shows an                                women’s issues in the political
primary health care practices             improving picture from 1995 to          parties’ platforms. With USAID
completed USAID-sponsored                 1999. More couples are using            phasing out its support in the health
updates in contraceptive technology       modern contraceptive methods (52        and family-planning sectors in
(with average post-training scores of     percent of married women in 1999,       Ecuador after FY 2001, more
96 percent), making modern                compared with 46 percent in 1995),      emphasis has been placed on the
reproductive health services              and the abortion rate declined (57      sustainability of services. Innovative
available in virtually all 425            per 1,000 women aged 15– 45 in          health policy changes were made in
practices.                                1995, compared with 47 per 1,000        the MoH, including implementation
                                          in 1999). USAID’s effort in Romania     of fees for services in hospitals and
In the former Soviet bloc countries,      to promote the use of modern            the decentralization of MoH
USAID programs aim to educate             contraception as an alternative to      budgeting. In Morocco, the MoH
women to use contraception rather         abortion has shown its impact in        demonstrated continued
than abortion for family planning.        sharp declines in maternal mortality,   commitment to finance reproductive
This improves women’s reproductive        from 98/100,000 in 1990 to              and child health programs, actually
health and reduces maternal               41/100,000 in 1998. According to        spending more for contraceptives
C-26                                     USAID FY 2000 Accountability Report




than originally planned.                 • Promote establishment of an              community component in five
Furthermore, the financing of              enabling environment for the             LAC countries.
FP/MCH services is being diversified,      delivery of key interventions
with private-sector contraceptive                                                 • Expanding national vitamin A
sales increasing by 22 percent in        • Strengthen research on topics in         supplementation programs
1999. In Egypt there has been              child survival, including new            throughout Africa, in
continued progress in sustainability       vaccines, simple technologies,           collaboration with UNICEF and
indicators, with an increase in the        and service delivery approaches          WHO.
GoE’s percentage share of national
                                         Our programs also address key            • Developing infant feeding
family-planning program costs (from
                                         factors contributing to poor child         guidelines for use in high
49.5 percent in 1996– 97 to 52.9
                                         health, such as the need to improve        HIV/AIDS endemic areas.
percent in 1997– 1998).
                                         maternal health to protect the
                                         outcome of pregnancy                     • Developing and testing (initially
b. USAID Objective: “Infant and
                                                                                    for polio) a community-based
   Child Health and Nutrition
   Improved and Infant and Child         Examples of USAID Program Results          disease surveillance approach.
   Mortality Reduced”                    During 1999, USAID maintained its
                                                                                  • Providing the model for large-
USAID’s child health and survival        global technical leadership role in
                                                                                    scale quality assurance programs
programs focus on achieving              child survival. Many of our
                                                                                    funded by the World Bank in
reductions in infant and child           achievements were made possible
                                                                                    Indonesia, Niger, and Ecuador
mortality. The Agency works in seven     through collaborative work with
                                                                                    and for national programs in Chile
program areas to achieve these           other donors and have global or
                                                                                    and Costa Rica (polio cases
objectives:                              regional significance:
                                                                                    reduced by 85 percent since 1989
                                                                                    and transmission of the polio virus
• Expand access to, and use of, key      • Taking a leading role in a global
                                                                                    limited to only 30 countries).
  child health interventions that          initiative for injection safety (the
  prevent and control the five             Safe Injection Global Network,         Through 1998, while overall infant
  primary childhood illnesses:             “ SIGN” ).                             and under-5 mortality reductions
  diarrheal disease, acute respiratory                                            have been stagnant or increasing in
  infection, malnutrition, malaria,      • Assessing barriers to including
                                                                                  the Africa and E&E regions,
  and vaccine-preventable diseases         new vaccines in national
                                                                                  examples from ANE region reflect
                                           immunization programs in four
                                                                                  the gains being made there. At the
• Improve quality, availability,           countries, ensuring that findings
                                                                                  country level, 1999 DHS results from
  acceptability, and sustainability of     are integrated into investment
                                                                                  two countries showed encouraging
  key child survival interventions         strategies for the Global Alliance
                                                                                  progress in reducing child mortality.
                                           for Vaccines and Immunizations
                                                                                  When taken together with measures
• Improve child nutritional status,        (GAVI).
                                                                                  of USAID program interventions, the
  including improving breastfeeding
                                         • Defining the “ household/              impact can be linked to Agency
  patterns
                                           community” component of the            efforts. Cambodia, which started the
• Prevent the spread of childhood          Integrated Management of               period with the highest level of
  diseases by developing, testing,         Childhood Illness (IMCI) approach      under-5 mortality, was among the
  and replicating priority                 with an Interagency Working            countries in the region enjoying the
  environmental health                     Group, developing a structured         largest decline. Infant mortality
  interventions                            approach for its introduction and      declined significantly between 1990
                                           implementation, and with Pan           and 1999, in large part because of
• Strengthen the capacity of local                                                improved immunization coverage.
                                           American Health Organization
  institutions to provide quality                                                 However, exceptionally high rates of
                                           (PAHO) launching the household/
  child health interventions                                                      HIV/AIDs among adults threaten
                                                                                  these gains in Cambodia. According
                                         USAID FY 2000 Accountability Report                                       C-27




to the Egypt 1999 pilot mini-DHS,        percentage points to 33.2 percent in       46 percent of newborns were
under-5 and infant mortality declined    1999. The Mission conducted                vaccinated. In Uzbekistan, the
between 1998 and 1999, exceeding         research during FY 2000 and                government has changed its policy
planned targets. The small sample        discovered that the percentage of          as well, resulting in 25 percent of
size and number of deaths on which       fully immunized children and the           newborns being immunized against
mortality estimates are based dictate    percentage of live births covered by       hepatitis B in 1999, compared with
caution in interpreting short-term       tetanus toxoid increased slightly from     none in 1998.
change, but the survey did indicate      1999 to 2000. Almost 100 local
that a long-term decline is              governments, representing nearly           With a grant from USAID, UNICEF
continuing. Since 1982, under-5          90% of the population, are now             implemented immunization and
mortality has fallen from 151.5          combining staff and funds with             health education programs— as a
deaths/1,000 births to 53/1,000. The     USAID support in a program                 result of which, 80 percent of
infant mortality rate fell from          specifically focused on improving          Azerbaijan’s children are fully
94.9/1,000 in 1982 to 39.5/1,000.        this situation..                           immunized, 87 percent are
Despite these hopeful trends,                                                       immunized against measles, and 96
mortality levels are unacceptably        Many countries are having                  percent against polio.
high relative to the region (e.g., the   noteworthy successes with
IMR in Jordan is 30/1,000).              immunization initiatives. Thirty-five      USAID has been involved in the
                                         of 36 African countries now have           global campaign to eradicate polio
Programs to address vaccine-             national immunization plans, and           since 1988. When these efforts
preventable diseases are at the core     USAID successfully encouraged              began, there were 35,000 reported
of USAID’s child survival program        WHO/AFRO to produce a new                  polio cases, but WHO estimated that
and are designed to improve under-5      regional immunization strategy. In         there were actually 10 times this
mortality in the future. During 1999,    Zambia, a measles vaccination              number of cases. In 1999, there were
USAID Missions reporting on              coverage rate of 81 percent was            7,124 polio cases reported.
immunizations had generally positive     achieved.                                  Concurrently, the number of polio-
results, but there were some                                                        endemic countries declined to 30 in
disappointments in achieving targets     In the LAC region, targets were met        1999 (from 130 in 1988). The most
for full immunization coverage for       for measles vaccination (five/five         intensive eradication efforts are
children. During 1995– 99, complete      countries reached 95 percent               being conducted in 10 priority
vaccination coverage of children         coverage), and coverage with DPT3          countries: the polio reservoir
12– 23 months old increased from 43      and TT2 in eight child-survival            countries of Bangladesh, India,
percent to 60 percent, meeting the       emphasis countries rebounded after         Pakistan, Ethiopia, and Nigeria, and
original 2000 target. However, some      slippage in 1998. In Bolivia, USAID        the war-torn countries of
countries fell short of targets. For     was the major donor in this year’s         Afghanistan, Angola, the Democratic
instance, in Haiti, full immunization    national immunization campaign,            Republic of the Congo, Somalia, and
coverage was 56.2 percent, rather        which focused on eradication of            Sudan. USAID is a major donor in
than the 64 percent targeted. This       measles. The goal of 95 percent            seven of these countries. While
still represents progress over the       coverage was exceeded. In                  interruption of the transmission of
1994 rate of 30 percent, a significant   complementary activities, 62 percent       the wild polio virus will not be
gain given the political problems        of targeted children received a third      completed by the end of 2000, we
during this time period. In the          dose of DPT, exceeding the 1999            are on track, and the goal is within
Philippines, the percentage of fully     expected level of 46 percent.              our grasp. It is now clear that
vaccinated children has stalled at 64    As a result of USAID technical             interruption of the transmission can
percent in 1999, and the percentage      assistance to the government of the        be achieved by the end of 2001 or
of live births covered by tetanus-       Kyrgyz Republic (GOK), newborns            shortly thereafter.
toxoid may actually be declining.        are being immunized against
This was reported to be down 4.6         hepatitis B for the first time. In 1999,   During the past year, some of the
C-28                                     USAID FY 2000 Accountability Report




achievements in the campaign             in the strategy. Children under 2 are      program should result in a decrease
against polio in Africa included the     now targeted for take-home rations.        in infant mortality in the next few
national effort to immunize                                                         years. In Haiti, 1999 data showed a
approximately 90 percent of 10           AIN, a model preventive health and         continuing decline in malnutrition
million targeted children in the         nutrition intervention developed by        rates. Height-for-age measurements
Democratic Republic of the Congo.        USAID in Honduras, has proven so           revealed programwide improvement
House-to-house national-                 successful that the World Bank in          in chronic undernutrition of 10.8
immunization-day (NID) campaigns         now implementing it in Bolivia and         percentage points over two years,
for polio eradication in Nigeria led     Nicaragua. USAID will replicate the        from 37.8 percent in 1997 to 27
to 34.2 million and 35.4 million         model also in the Dominican                percent in 1999.
children receiving immunization          Republic. Designed to engage the
against polio during rounds one and      community and families of children         While malnutrition is usually
two of the campaigns, respectively.      under age 2 in joint efforts to            associated with a lack of food,
In Zambia, 96 percent of eligible        maintain adequate growth, it focuses       nutritional status is strongly
children in 34 districts received oral   on household health care practices         influenced by the presence or
polio vaccine. Nearly 4 million          such as breastfeeding, increasing          absence of essential micronutrients
children in Mozambique were              child feeding, home care of illness,       in the diet. USAID sponsors
vaccinated during NID campaigns          and health referrals. The emphasis on      supplementation and food
conducted by the MoH during 1999.        adequate monthly weight gain is a          fortification programs in many
Planning and logistical support from     shift from the traditional focus on        countries to improve food quality.
private voluntary organizations          nutritional status (a more static          Ever more countries are included in
(PVOs) contributed to the overall        measure of attained growth). In            programs to provide vitamin A to
effort. For the first time, the 1999     Honduras, the first year of                deficient populations. In 1998– 99,
NID campaigns also provided              implementation included these              USAID assisted 18 countries to add
vitamin A supplements, reaching 97       remarkable results:                        this nutrient to their national
percent of all children aged 6                                                      immunization day programs. In
months to 59 months.                     • Almost universal participation (98       Zambia, 84 percent of all children
                                           percent of those under 2)                under 5 receive these supplements as
The Agency is continuing its fight                                                  part of ongoing, routine health care
against child malnutrition.              • More children gaining weight             activities of the district health
Recognizing that moderate                                                           management teams. In Nepal, similar
                                         • In communities with the highest
malnutrition also has severe effects                                                distribution systems expanded from
                                           levels of malnutrition at baseline,
on childhood development, in the                                                    58 to 65 of the 75 districts and
                                           a decrease from 39 to 8 percent
past year we have shifted our child                                                 reached 90 percent of children in the
nutrition activities to concentrate on   • In communities with medium               targeted districts.
this aspect. USAID recommendations         levels of malnutrition, a decrease
for refocusing child nutrition             from 25 to 10 percent                    In the past few years, Honduras and
programs have been widely                                                           Guatemala have demonstrated that
disseminated to the PVO community.       • In communities with low levels at        the fortification of sugar can help
As a result, PVO Title II food aid         baseline, all children improved          improve the micronutrient status of
programs in India, Benin, Bolivia,                                                  the population. Nicaragua recently
Honduras, and Guatemala have             In Madagascar, where 1 in 10 babies        joined its neighbors in the universal
adapted the recommendations to the       dies before reaching its first birthday,   vitamin A/fortification of sugar.
specific program context. With the       regional data show that the                USAID provided technical assistance
support of other donors concerned        percentage of infants aged 0– 6            to the government and the six local
with a preschool nutrition program,      months who are exclusively                 sugar producers, who began
USAID-assisted programs in India         breastfed grew from 24 percent to 55       fortifying nearly all the sugar
successfully brought about a change      percent during 1996– 99. This              produced in Nicaragua, improving
                                         response to a USAID-supported
                                          USAID FY 2000 Accountability Report                                      C-29




the health of the two thirds of             Malawi’s largest agriculture firm     The exploratory study, conducted in
Nicaraguan children who suffer from         replicated the model and is now       February and March 2000, assessed
some degree of Vitamin A deficiency.        reaching a population of more         sustainability of child survival grants
                                            than 200,000 agricultural workers     in Bolivia and Bangladesh. The study
In Eritrea, all salt produced by large-     and their families. Project HOPE      included 14 PVOs and their NGO
scale producers is now iodized.             also replicated the model in          partners (a total of 8 in Bolivia and 6
UNICEF, with USAID funding,                 Guatemala, helping the                in Bangladesh) with grants that
distributed iodination equipment for        agricultural estates and other        started on (or before) 1985 and
small-scale producers in the                partner agencies to provide           ended by 1997. In general, results
Southern Red Sea Zone and has               services to the families of           indicate strong evidence of
resolved distribution obstacles in the      approximately 85,000 resident         sustainability in both countries.
Northern Red Sea Zone. At this              and migrant workers. USAID is         Major findings include the following:
point, more than 90 percent of all          interested in replicating the model
salt is iodized, and surveys show that      as a means to rebuilding health       • Through alternative sources of
iodine deficiency has been reduced          infrastructure in disaster-stricken     funding, many project activities
from 82 percent to 25 percent.              areas.                                  were continued after USAID
                                                                                    funding had ceased. Of eight
The examples from Nicaragua and           • Land O’Lakes (LOL) and its              PVOs in Bolivia, five continued
Eritrea point out that these programs       partner, Health Partners, a             activities for an average of two
not only meet the immediate needs           Minnesota-based health care             years with other sources of
of children but can also improve the        corporation, worked with                funding. Of six PVOs/NGOs in
capacity and performance of                 Ugandan dairy cooperatives to           Bangladesh, four continued most
established national industries. Local      assist them in opening a health         child survival services with private
salt and sugar producers changed            cooperative providing community-        funds. In Bolivia there was little
their traditional practices and             based health services to their          significant cost recovery because
introduced innovative approaches to         members. After their initial            government policy does not
solve their countries’ health               success, LOL expanded operations        support it. In Bangladesh, three
problems. We have seen similar              into Tanzania and conducted a           out of four organizations
innovations whereby the PVO                 seminar on dairy development            providing direct services reported
community partnered with large              and health for cooperative              from 3 to 40 percent recovery of
corporations in promoting truly             representatives from Uganda,            recurrent costs. The capacity built
entrepreneurial programs, whose             Kenya, Zambia, and Malawi to            through the child survival grants
designs have wide applicability             explore further expansion.              resulted in greater organizational
across the developing world. The                                                    capacity of PVOs and their local
                                          While partnering is an effective
results achieved are durable,                                                       partners, including technical and
                                          method for achieving sustainability,
responsive, and replicable. They                                                    managerial capacities, and
                                          PVOs have undertaken a variety of
demonstrate how public– private                                                     institutionalization of lessons
                                          approaches. A 1999 evaluation of
partnerships increase access to                                                     learned. In Bolivia, three
                                          the sustainability of PVOs that
services for previously underserved                                                 PVOs/NGOs used their child
                                          benefited from two USAID programs
populations and create economic                                                     survival grants to begin work in
                                          was assessed. The findings from this
opportunities:                                                                      the country for the first time. All
                                          study will be used to develop a cost-
                                                                                    three have remained and
                                          effective approach for the PVOs to
• Project HOPE/Malawi developed                                                     expanded their programs.
                                          measure sustainability within their
  a collaborative program with                                                      Thousands of government workers
                                          programs and for USIAD to
  private tea plantations to provide                                                in both countries have received
                                          determine how to track sustainability
  preventive health services for                                                    training in both curative and
                                          achievements across USAID
  women and children under 5.                                                       preventive health care and in
                                          programs.
  Seeing the success of this effort,                                                management.
C-30                                      USAID FY 2000 Accountability Report




• Community structures created or         • Ensure birth preparedness               In whatever setting, there is
  reinforced under the grant                                                        compelling evidence that when
  continued to function.                  • Improve treatment of life-              births are attended by medically
  Committees and volunteers                 threatening obstetrical                 trained personnel with needed
  continued to work in six areas            complications                           resources, risks to the mother are
  where PVO/NGO projects had                                                        reduced and outcomes are
                                          • Ensure safe delivery and
  operated (three in Bolivia and                                                    improved. Also, when women
                                            postpartum care
  three in Bangladesh).                                                             perceive that they are receiving
                                          • Improve long-term capacity of           quality care, they increase use of
• Five PVOs demonstrated sustained                                                  clinical services prior to delivery.
                                            local institutions
  impact in communities from two                                                    Survey data show that the number of
  to four years after the PVO-            Examples of USAID Program Results         births attended by medically trained
  initiated activities had been                                                     personnel is increasing in all regions,
                                          Provision of accessible, culturally
  discontinued. A new baseline                                                      except Africa. Many USAID
                                          sensitive, high-quality maternal
  study in Bolivia (with substantial                                                programs have shown excellent
                                          health services is crucial for
  overlap with old communities)                                                     results from programs to increase the
                                          promoting health and nutrition and
  found that oral rehydration                                                       percentage of deliveries with trained
                                          rapidly treating life-threatening
  therapy (ORT) use had been                                                        attendants and to improve the
                                          obstetric complications.
  sustained: 47 percent at baseline,                                                quality of service delivery. For
  77 percent at project end, and 71                                                 instance, in Indonesia, the
                                          The diversity of USAID’s programs
  percent two years later. A survey                                                 percentage of deliveries in South
                                          reflects differences in the health care
  in Bangladesh five years after the                                                Kalimantan managed by a trained
                                          infrastructure that exist in partner
  end of the project revealed that 79                                               midwife rose significantly from 37
                                          countries, as well as cultural
  percent of children were fully                                                    percent in 1996 to 58 percent in
                                          traditions of inpatient vs. home birth
  immunized in the project area,                                                    1999. USAID’s maternal and
                                          settings. At one end of the spectrum
  compared with 56 percent in                                                       neonatal program introduced an
                                          is the Kosice/Providence hospital
  adjacent communities.                                                             essential obstetrics training package
                                          partnership. It saved many lives by
                                          improving the clinical practice of        that has been adopted for use by the
Program(s) Failing to Meet
Expectations                              perinatal, neonatal, pediatric, and       MoH and other donors. In Uganda
                                          gynecological medicine in eastern         an increase in trained personnel
Examples are cited above of
                                          Slovakia. The partnership helped          matches an increase in demand for
activities in Haiti and the Philippines
                                          create a new infrastructure for           better care. The number of nurses
that did not meet expectations.
                                          clinical care, upgrades in nursing        and midwives trained to provide
                                          practice, and clinical protocols to       integrated RH/MCH services
c. USAID Objective: “Deaths,
   Nutrition Insecurity, and Adverse      control infection and manage              increased by 50 percent, bringing the
   Health Outcomes to Women as a          pharmacology. The perinatal               total trained to 936, and a greater
   Result of Pregnancy and                mortality rate in Kosice fell from        proportion of women delivered at
   Childbirth Reduced”                                                              health facilities (56 percent in 1999
                                          6.9/1,000 in 1995 to 4.1/1,000 in
The Agency’s maternal health              1997. The mortality rate in one           compared with 48 percent in 1995).
strategy aims to:                         referral hospital dropped from            The percentage of pregnant women
                                          15.1/1,000 to zero, and in another        who received at least one antenatal
• Increase access to, and use of,         from 8.4/1,000 to 1.3/1,000.              visit remained high (90 percent), and
  quality maternal and reproductive       Improved management of high-risk          72 percent received the minimum of
  health interventions at the             pregnancies resulted in a reduction       three antenatal visits recommended
  community, family, and individual       of the perinatal mortality rate in        by the MoH.
  levels                                  eastern Slovakia from 19.1 percent to
                                          5.15 percent, and the neonatal rate       Seven of 10 countries in the LAC
• Improve nutritional status                                                        region increased coverage of
                                          from 24.2 percent to 7.2 percent.
                                          USAID FY 2000 Accountability Report                                      C-31




deliveries with trained health            pregnancy from 13 percent in 1997        • Enhance the quality, availability,
personnel. Four now audit at least 20     to 18 percent in 1999. In addition,        and demand for sexually
percent of maternal deaths. In            more women report coming earlier           transmitted infection (STI)
Bolivia 51 percent of pregnant            for their first antenatal visit.           management and prevention
women received advice and                                                            services
assistance from competent attendants      Program(s) Failing to Meet
during birthing, exceeding the 45         Expectations                             • Increase NGO community and
percent target.                           But not all programs meet                  public- and private-sector
                                          expectations. In the Indian state of       organizations to prevent HIV
Furthermore, women who are                Uttar Pradesh, two National Family         transmission and to support
educated about their pregnancy and        Health Surveys show that the               persons with HIV/AIDS and their
possible risks are better able to make    percentage of deliveries attended by       caregivers, families, and survivors
decisions that will benefit their         health professionals increased from
                                                                                   • Improve the quality, availability,
health and the health of their baby.      17.2 percent in 1993 to 22.4 percent
                                                                                     and use of evaluation and
In Guatemala, a setting where 95          in 1998. However, a recent survey
                                                                                     surveillance information
percent of the births occur in the        indicated that this measure
home, information, education, and         decreased by 3.1 percentage points       USAID’s strategy is based on the
communication (IEC) programs in six       in 1999. The reasons for the decline     need to continue and expand efforts
districts have increased demand for       in the proportion of births attended     to prevent HIV transmission and to
and utilization of, hospital-based        by health professionals are not clear,   mitigate some of the worse
essential obstetric care services by      but the decline may be due to staff      consequences of the pandemic,
50– 77 percent. In Bolivia, at the        shortages in district hospitals. The     especially its impact on individuals,
community level, USAID focuses on         mission is actively trying to identify   families and communities. USAID
empowerment of women and                  the reasons for this decline and,        supports those interventions which
culturally appropriate approaches to      together with its implementation         have a proven, demonstrated impact
effective self-care and preparation for   partners, to take corrective action.     in preventing HIV/AIDS transmission:
birth. “ Autodiagnosis” has been          However, despite successful pilot
expanded to 513 communities and           programs, we will proceed                • Changing high-risk sexual
contributed to a 120 percent              cautiously as we scale up activities       behavior through education and
increase in attended deliveries in        to cover all of Uttar Pradesh during       counseling. In Uganda, HIV
health facilities in rural                the next several years.                    prevalence has been reduced by
municipalities over 10 years. This                                                   nearly 50 percent in young urban
was also supported by recent              d. USAID Objective: “HIV
                                                                                     women by promoting a delay in
extension of health insurance to             Transmission and the Impact of
                                             the HIV/AIDS Pandemic in                the outset of sexual activity and
cover maternity care. Women in                                                       the adoption of safer sex practices.
                                             Developing Countries Reduced”
Bolivia who heard the innovative
and very popular radio drama,             Under this objective, the Agency
                                                                                   • Reducing the prevalence of other
“ Destiny’s Diary,” aired in local        focuses on five key program areas:
                                                                                     sexually transmitted inflections
languages reaching 650,000 people,                                                   (STIs). A study in Tanzania
were more likely to recognize             • Increase the quality, availability,
                                                                                     demonstrated a 42 percent drop in
complications and plan for obstetric        and demand for
                                                                                     new HIV infections through
emergencies. USAID’s IEC activities         information/services to change
                                                                                     proper clinical management of
continue to be recognized as some           sexual risk behaviors and cultural
                                                                                     STIs.
of the most effective and successful        norms to reduce HIV transmission
in Uganda. Achievements include an                                                 • Increasing the distribution and use
                                          • Develop, test, and promote
increase in the number of women                                                      of condoms through social
                                            HIV/AIDS prevention and care
who can name at least three                                                          marketing programs which
                                            interventions
significant signs of a complicated                                                   increase both knowledge and
                                                                                     access to affordable condoms.
C-32                                     USAID FY 2000 Accountability Report




  Condom use represents one of the       Examples of USAID Program Results       development of an overall expanded
  most effective ways of preventing      USAID’s portfolio includes about ten    plan to combat the AIDS pandemic.
  HIV transmission.                      initiatives designed to carry out
                                                                                 Changing Behavior
                                         proven HIV/AIDS interventions and
• Reducing mother to infant HIV                                                  Changing the behavior of people at
                                         enhance the Agency’s response to
  transmission. USAID-supported                                                  high risk for transmitting or
                                         the epidemic. Cooperating agencies
  field work has demonstrated new                                                contracting HIV/AIDS is central to
                                         support Missions and countries in
  ways to reduce mother to infant                                                the Agency’s efforts. In India,
                                         implementing HIV prevention and
  transmission which accounts for                                                targeted USAID-funded HIV/AIDS
                                         mitigation programs, provide
  more than 10 percent of new HIV                                                prevention activities began in the
                                         regional and country HIV/AIDS
  infections.                                                                    State of Tamil Nadu in 1997. By the
                                         social marketing expertise, and
                                         develop and disseminate the most        end of 1998, all four high-risk groups
In addition to prevention programs,
                                         effective methods of combating          targeted by the program achieved
USAID supports efforts to mitigate
                                         HIV/AIDS through operations             significant and sustained changes in
the impact of the epidemic on
                                         research. The Joint United Nations      their sexual behavior. For example,
individuals and communities. These
                                         Programme on HIV/AIDS (UNAIDS),         condom use with a nonregular sex
include voluntary testing and
                                         the U.S. Bureau of the Census, and      partner increased among commercial
counseling programs, support to
                                         the Centers for Disease Control and     sex workers from 56 percent
faith-based groups and other
                                         Prevention also work with the           (baseline in 1996) to 80 percent and
community organizations providing
                                         Agency to coordinate national           by male factory workers from 17
care to individuals and families
                                         strategic planning for HIV/AIDS and     percent to 50 percent (source: AIDS
affected by HIV/AIDS, training for
                                         strengthen surveillance systems.        Prevention and Control Project,
public and private health care
                                                                                 Tamil Nadu, 1999). Thus the
providers and work with the Peace
                                         As of spring 2000, USAID was            program has shown a statistically
Corps, private voluntary
                                         working on HIV/AIDS programs in         significant increase in condom use
organizations, and others on support
                                         46 countries and had become the         among sex workers and their clients,
for orphans and other vulnerable
                                         global leader in this international     as well as the reduction of
children.
                                         fight, because of the Agency’s strong   nonregular partners (see table,
                                         field presence, technical leadership,   “ Condom Usage” ). Since sexually
An important program dimension is
                                         significant and sustained financial     transmitted diseases (STDs) increase
the emphasis on practical research,
                                         support, and its extensive, long-term   the likelihood of transmitting and
application of lessons learned, and
                                         relationships with host-country         acquiring HIV, an increase in care-
measuring results. USAID supports
                                         institutions. Relationships developed   seeking behavior is another
the U.S. Bureau of the Census
                                         in the field provide the foundation     important accomplishment of this
initiative to regularly update the
                                         for USAID’s track record for building   program. There was, however, a
HIV/AIDS International Surveillance
                                         sustainable systems, using highly       decline in care seeking between
Database, a unique resource that is
                                         participatory approaches, and           1998 and 1999. This may be
used by all international partners to
                                         applying lessons learned to enhance     attributable to the dramatic increase
track the HIV/AIDS pandemic and
                                         the effectiveness and efficiency of     in condom use and decreasing
the impact of interventions. USAID’s
                                         programs. USAID-sustained               number of STD infections.
global leadership in clinical and
operations research bolsters its         investments in Uganda have resulted
                                         in a reversal of the explosive upward   Other behavioral surveillance
prevention and mitigation strategies,
                                         trends, and in Senegal have kept        surveys conducted in Indonesia and
enabling it to provide assistance and
                                         prevalence low. Recent reports from     Senegal (1998) showed that between
support for state-of-the-art, cost-
                                         Zambia also suggest a reversal of the   1996 and 1998, there was increasing
effective services that directly reach
                                         epidemic with prevalence declines       condom use in some high-risk
individuals and communities.
                                         among 15– 19-year-olds. These           groups, but decreasing use in others.
                                         positive results have guided USAID’s    For instance, in Indonesia, the
                                       USAID FY 2000 Accountability Report                                       C-33




percentage of locally based female     million (source: Population Services      parliamentarians, government
sex workers in Jakarta using a         International, 2000). In Peru, USAID-     ministries, religious groups, and local
condom at last commercial sex          supported condom purchase and             leaders. USAID also supported the
dropped from 48 percent in 1996 to     distribution increased from 38.9          government with technical assistance
35 percent in 1998. However,           million in 1997 to 46.3 million in        to develop a draft national HIV/AIDS
condom use among female                1999. In Honduras, USAID’s NGO            strategy.
commercial sex workers increased       partner in HIV/AIDS prevention
sharply from 37% in 1998 to 48% in     reached full implementation,              In Malawi, USAID funding was
1999 thanks to expanded outreach       distributing almost 3 million             pivotal in supporting the
efforts and condom distribution. .     condoms.                                  development and launch of the new
                                                                                 five-year strategic framework for
Condom Sales                           High-Level Political Support              HIV/AIDS. The President of Malawi
Use of condoms is one of the           The successful results in Senegal,        gathered political, religious, and
primary prevention strategies. In      Uganda, and Zambia, are attributed        business leaders together to
1998– 99, USAID-supported              in part, to strong national leadership    personally launch the new plan and
programs continued to increase         at the highest level of government. In    call for concerted action to reduce
annual sales. Presently, USAID is      Zimbabwe, there was a major               the transmission of HIV/AIDS. One
supporting condom social marketing     breakthrough in publicly                  of the most encouraging
programs in 36 countries. During CY    demonstrating high-level support          developments is the increasing
1999, these programs sold a total of   with the launch of the USAID-             demand for voluntary counseling
348.9 million male condoms. If         funded National AIDS Policy by            and testing (VCT). Since 1992,
trends prior to the end of September   President Mugabe on World AIDS            USAID’s program has seen only
2000 continue, the number sold will    Day. The policy launch took place         modest increases in demand.
exceed 363 million— a 3 percent        after two-and-a-half years of             Following the President’s call for
increase.                              consultations involving more than         action, demand for VCT increased
                                       6,000 people and 84 meetings at the       considerably. The local NGO served
                                       national, provincial, district, and       5,663 clients in 1999, a 62 percent
USAID supports the introduction of     sectoral levels. In its 1999 budget       increase from 3,497 clients in 1998.
the female condom through social       statement, the government effected        The recent introduction of same-day
marketing programs. In 1999, these     its first “ AIDS Levy,” a 3 percent tax   results from blood tests is also
programs sold 871,000 female           on taxable earned income to finance       believed to be a contributing factor
condoms, and the current rate for      HIV/AIDS-related activities. The          and should increase demand even
2000 suggests that more than           Parliament approved the                   more in 2000.
938,000 will be sold by the end of     establishment of a National AIDS
the year— an 8 percent increase.       Council to facilitate a multisectoral     Diagnosis and Treatment of Sexually
                                                                                 Transmitted Infections (STIs)
                                       government approach to tackling
During 1996– 99 in the 16 African      HIV/AIDS.                                 USAID supports improved, expanded
countries included in the Leadership                                             STI control programs in 16 countries.
and Investment in Fighting an          USAID involvement has resulted in         Assistance ranges from developing
Epidemic (LIFE) initiative, condom     increased political commitment at         more effective national guidelines for
sales/distribution increased in all    the highest level in Ghana and has        the diagnosis and treatment of STIs
countries, except Malawi. In some      begun to generate a multisectoral         to training health workers and
countries (Mozambique and              response to the epidemic. This was        increasing demand for services
Rwanda), the increase was as high as   accomplished through presentations        among vulnerable groups.
fourfold. In Zimbabwe, condom          of a computerized AIDS impact
social marketing succeeded in          model during 1999. These enabled          During the first six months of FY
increasing condom sales/distribution   USAID to effectively advocate for an      1999, infectious syphilis cases in
38-fold, from 230,000 to almost 9      intensified response among                Jamaica were reduced by 40 percent
                                                                                 through prevention, detection, and
C-34                                     USAID FY 2000 Accountability Report




treatment programs. The program          e. USAID Objective: “The Threat of         malaria worldwide, and it has
focused on the high-risk group of STI       Infectious Diseases of Major            implications for reducing mortality in
clinic attendees. Routine HIV testing       Public Health Importance                the Mekong River area and other
                                            Reduced”
among sentinel groups has been                                                      regions. During 1999, we also
carried out in three parishes since      The Agency’s infectious-disease            established an important cross-
1990. Although there had been a          strategy focuses on four program           disciplinary electronic network that
steady increase between 1990 and         areas:                                     brings together malaria and maternal
1998 (from 3.1 percent to 7.1                                                       health experts to share technical
percent), HIV seroprevalence among       • Reduce antimicrobial resistance          information, program developments,
sentinel groups in 1999 remained at                                                 and research findings over a wide
                                         • Improve tuberculosis prevention,
the 1998 level.                                                                     area. The placental malaria network
                                           control, and treatment
                                                                                    is providing assistance to programs
In Ghana, USAID has been working                                                    in Burkina Faso, Tanzania, Zambia,
                                         • Improve malaria prevention,
with the government to educate                                                      and Kenya.
                                           control, and treatment
members of the army and national
police, as well as the general           • Improve local capacity for               USAID is heavily involved in the
population, in HIV/STI prevention          surveillance and response                effort to reduce the threat of the
and to provide improved STI control                                                 global tuberculosis epidemic. We are
services to those who are infected.      USAID has combined research with           funding the expansion of
While it is very unusual for USAID       global technical leadership and            tuberculosis treatment in South
to work with either of these groups,     partnerships to advance results at the     Africa by training staff in Directly
members of the army and police are       field level. Our global leadership is      Observed Treatment, Short-course
vulnerable to the disease and can        indicated by the development and           (DOTS) therapy. DOTS decreases
transmit the virus from one area of      adoption of Global Action Plans for        hospitalization and treatment time
the country to the other. As a result    the control of antimicrobial               and returns people to their
of the program, 12 police care           resistance and for TB, as well as by       communities more quickly. At the
providers have been trained in STI       the adoption by the WHO Roll Back          request of the National Tuberculosis
symptom management, and 65 peer          Malaria initiative of USAID’s basic        Program, we will expand support to
educators operate nationally. In the     approach to malaria. These plans will      reduce and manage multidrug-
military, 90 individuals have been       generate increased international           resistant tuberculosis. In India,
trained as condom sales agents to        attention to these areas and will          USAID has been working in
expand availability of condoms to        guide and accelerate coordinated           partnership with WHO to support
this vulnerable population.              responses from all major                   the development of the Model
                                         international partners.                    Center for Tuberculosis Control,
Care and Support Services                                                           Training, and Research in Tamil
USAID is funding programs that offer     Examples of USAID Program Results          Nadu. This program has been
HIV/AIDS care and support services       National achievements across all           extremely successful in
to individuals, families, and            USAID regions are improving                implementing DOTS, conducting
communities in 22 countries. These       conditions at the local level. For         demonstrations and training, and
include protection of human rights,      instance, in Nepal, infectious disease     strengthening TB control activities in
access to voluntary counseling and       and antimicrobial surveillance             surrounding areas.
testing, psychosocial support, basic     systems have been established.
medical and palliative care,             USAID has also developed and               Underpinning TB control programs is
treatment and prevention of              launched a new program to track            the need for trained personnel and
opportunistic infections (particularly   and combat malaria drug resistance         adequate laboratory equipment. In El
TB), community-based economic            along the Thai– Cambodia border.           Salvador, USAID targeted 59 out of
support, and support for children        Drug resistance is a tremendously          the 127 Ministry of Health
affected by AIDS.                        important issue for our ability to treat   laboratories across the nation for
                                          USAID FY 2000 Accountability Report                                         C-35




improved diagnostic equipment and         framework to prevent and control            delivery systems to providing clinical
better supervisory and technical          hepatitis. Three sites to verify, report,   training and basic quality
skills of lab personnel. During the       and track hepatitis cases were              improvement techniques to health
second month of TB treatment, 81          established this year. Hepatitis cases      care personnel.
percent of the cases in 2000 showed       are verified in the region’s first
improvements, compared with only          infectious disease reference                New Provider Payment Systems
66 percent in 1998.                       laboratory, equipped and opened             Provider payment systems that are
                                          with USAID support. This laboratory         based on providing cost-effective
In Russia, USAID is working in            has developed quality control               services are an important feature in
collaboration with the Ministry of        standards (reference panels) for            developing a sustainable health care
Health, CDC, WHO, and others to           diagnosing the various types of             system. In Central Asia, the Kyrgyz
control the tuberculosis epidemic in      hepatitis. USAID also helped set the        Republic and Kazakhstan are
three pilot areas. In the first region,   official practice guidelines on             undergoing complete transformations
the program has achieved successful       hepatitis for all health care workers.      of their health service delivery and
treatment levels of approximately 83                                                  financing systems. With USAID
percent, demonstrating that               f. USAID Initiatives in Health              technical guidance, physicians were
international TB treatment protocols         System Strengthening
                                                                                      trained to be specialists in primary
can work in Russia.                       The biggest challenge facing                care, established group practices
                                          developing countries is to make             outside of the polyclinics, and
USAID collaborated with the               optimal use of their scarce resources       became financially independent.
government of Kazakhstan (GOK) in         and to direct those resources in a          During 1999, 56 percent of these
1998 to develop the first policy on       way that will best meet the needs of        390 primary health care practices
tuberculosis treatment in the region      the population. USAID Missions              (PHCPs) in the Kyrgyz Republic were
consistent with the improved World        have recognized the importance of           paid by the Health Insurance Fund
Health Organization (WHO) Directly        establishing health systems and             under a capitated rate payment
Observed Treatment, Short-course          strengthening those that already exist      system that was designed with
(DOTS) approach. GOK started              in order to build a sustainable             USAID assistance. These reforms are
DOTS in 21 sites nationwide, and by       capacity for countries to provide           leading to a more cost-effective
1999, 14 of these sites were              health services. The types of changes       health care system as scarce health
achieving cures in at least 75 percent    that are possible depend on the local       care resources are redirected toward
of their patients with TB. USAID’s        economic, social, and political             the most pressing public health
substantial work with the GOK also        context, as well as the human and           concerns. Providers are using
paid off in the decline of TB deaths      institutional capacity.                     management information systems to
by 27.6 percent from 1998 to 1999                                                     understand the impact of the new
(38.4 deaths per 100,000 in 1998 to       Health system strengthening focuses         incentive payment systems and to
27.8 in 1999). However, successful        on improving the financing,                 operate more efficiently.
treatment of TB is dependent on           management, and delivery of health
many factors, including drug quality.     care services. Over time, the three         From 1998 to 1999, the total number
USAID’s assistance in the tendering       functions should be integrated for          of health care providers reimbursed
process in Kazakhstan resulted in the     available health care resources to be       by new payment systems in
purchase of high-quality TB drugs for     used most efficiently and effectively.      Kazakhstan increased from 134 to
the entire country, thus not wasting      We are pursuing many different              342 in two oblasts. Providers
money on ineffective drugs and            strategies to build on whatever             included hospitals, polyclinics, and
increasing the number of people           opportunities exist. During the past        primary health care practices. In
cured.                                    year, we have contributed to                these two oblasts, as a result of
                                          important advancements in                   attractive new payment methods, the
In the Kyrgyz Republic, USAID also        strengthening health systems, ranging       number of newly restructured
helped create a model surveillance        from establishing new financing,            primary health care practices
                                          provider payment, management, and
C-36                                       USAID FY 2000 Accountability Report




(PHCPs) tripled, from 151 to 453.          program is now progressing rapidly        program, assisted by USAID,
With increased numbers of PHCPs,           with new subscribers. The Ministry of     generated $10 million, up 15
more families have access to care. In      Health (MoH) is very committed to         percent from FY 1998, and exceeded
the three largest cities of these          expanding this program nationwide         its target.
oblasts, PHCPs now cover 85                and is working with USAID to
percent of the population. Besides         develop an effective strategy for         In Ethiopia, the national budget
access to care, the types of services      expansion.                                allocated to the health sector in
available affect the families’ quality                                               1999 nearly met its target and was
of health care. The percentage of          In Senegal, results from a pilot          maintained at the same level as FY
practices in urban centers that            program in health financing have          1998 in spite of the major increase
offered expanded services increased        been very positive in identifying         in defense spending to support the
from 36 to 71 percent in Zhezkazgan        innovative mechanisms for                 conflict with Eritrea. The government
and Satpaeva cities and from 71 to         increasing community ownership of         has raised the level of public
87 percent in Semipalatinsk.               all health activities. In 1999, local     resources allocated to primary and
Expanded services included                 contributions in the form of tax          preventive health care by an annual
treatment of childhood illnesses,          revenues represented 8.7 percent of       average of 11 percent during the past
sexually transmitted infections, and       the operating budgets at the health       three years.
reproductive health care.                  district level. In fact, the actual
                                           contribution of local tax revenues        Under the program established by
New Ways to Finance Health Care            increased by 39 percent from 1998         the district health teams in Malawi,
Services                                   to 1999. This significant increase is a   more than 400 communities (more
Initiatives to address the generation      direct outcome of the pilot program       than double the targeted number of
of resources to finance health care in     and is consistent with requirements       200) are now administering drug-
the developing world have taken            of new decentralization laws.             revolving funds that ensure an
many forms, including prepaid                                                        immediate supply of malaria
health insurance systems, new drug         In Romania, the Ministry of Health        medications and oral rehydration
financing funds, the introduction of       has decided to employ the USAID-          salts to children living in rural
user fees, and tax reform. Examples        funded hospital cost-containment          villages.
of important achievements during           model nationwide. The model, a
the past year that have the potential      diagnosis-related group (DRG)             In Guatemala, about 3.5 million
to reform the generation and use of        system, promotes efficient                inhabitants that did not have access
host-country health care budgets are       management of hospital resources,         to health care services in 1996 are
described below.                           the largest component of the health       now served under a new model
                                           care budget.                              based on public– private partnerships
In the Philippines, USAID supported                                                  whereby the MoH regulates the
the Friendly Care Foundation, Inc.         USAID support resulted in the             systems and provides financial
(FCFI) in an effort to boost the private   publication of Guidelines for             resources and supplies and NGOs
sector’s share in providing family         Achieving Equity: Ensuring Access of      provide the human capital and local
planning and maternal health               the Poor to Health Services Under         expertise.
services. FCFI provides financially        User Fee Systems. This cutting-edge
sustainable, demand driven                 guidebook, based on case studies in       Improving Management Skills
reproductive health services to            five countries, gives practical           The government of Albania is aware
middle income patients.                    guidelines for setting equitable user-    of the urgent need to revitalize and
                                           fee exemption systems for the poor.       modernize its health care system, but
In Rwanda, the USAID-financed pilot        It was distributed throughout Africa,     lacks resources and has been slow to
prepaid health program has enrolled        and Guinea and Mali are now testing       act. Working with USAID advisors,
more than 67,000 subscribers since         innovative equity strategies. The         key health care administrators are
August 1999, with 17,000 enrolling         government of Kenya’s cost-sharing        acquiring the knowledge and skills
during February 2000 alone. The
                                        USAID FY 2000 Accountability Report                                         C-37




needed to manage their scarce           it to other health centers and             hospitalizations from such crises
resources more efficiently and          hospitals in Rwanda in FY 2000.            have been reduced an impressive
effectively at the central level (the                                              92.5 percent.
Ministry of Health) and at the          The quality of services in South
district, hospital and polyclinic       Africa improved in 1999, with              Building Skills of Nurses
levels. Durres Hospital and             significant gains in the availability of   Albanian nurses from across the
University Hospital Center of Tirana    the seven essential drugs (from 43         country met with other nurses from
have implemented techniques to          percent in 1998 to 91 percent in           throughout Central Europe and the
improve hospital operations, which      1999). Management of critical health       former Soviet Union and returned
are beginning to serve as models for    conditions also improved, as               home to establish an Albanian
the rest of the hospital system.        evidenced by the increase in the           nursing association. This association
                                        management of STDs from 56                 will help the MoH to establish
Under the Communist system, there       percent to 70 percent.                     national standards for nursing
was an inappropriate allocation of                                                 accreditation. As part of the USAID
resources. The number of hospital       A greater proportion of trained            program, nurses are now receiving
beds is now being reduced to reflect    health staff in Uganda performed to        in-service training opportunities to
the shift toward a more responsive      standard (80 percent in 1999,              improve their skills and enhance
primary health care system. At          compared with 66 percent in 1998),         their status in the health care system.
Durres Hospital, where the main         indicating an increase in technical
building collapsed in 1995, a           competence and provision of quality        USAID is continuing to provide
strategic planning process has          services, as well as improved              limited support to three Nursing
matched available resources with a      interpersonal relations and                Learning Resource Centers (NLRCs)
long-range plan for a replacement       counseling of clients.                     in Central Asia. These centers serve
hospital. At the University Hospital                                               as important sources of information
Center, administrative and medical      In Tajikistan, a Family Medicine           and education for nurses. Also,
records were computerized. In both      Training Center opened in 1999, the        nurses from Tajikistan are now
hospitals, pharmaceutical and           result of a primary health care skills     participating in the Central Asian
medical supply purchasing and           building program developed by U.S.         Nursing Council, an organization
distribution have been computerized.    and Tajik partners. Other programs in      inspired by a U.S.– Central Asia
Several national conferences have       Tajikistan have improved access to         health partnership program.
been held to share the information      basic health services for 260,000
and management techniques               people and established 62 village          Using the Internet
developed at the pilot hospitals with   health committees covering                 A small, but high-impact USAID
more than 80 hospital managers and      approximately 85,000 beneficiaries.        activity in Ukraine has been the
administrators from all over Albania.   A revolving pharmaceutical fund            establishment of 12 Learning
                                        established with USAID support has         Resource Centers. They provide
Quality Improvement                     enabled 17,000 patients to purchase        Internet linkages to medical on-line
In Rwanda, an effort that has won       or receive needed medications.             sites. One of these centers, Odessa
customer appreciation for USAID is                                                 Oblast Hospital, was named one of
the quality assurance initiative,       In one region of Russia, more than         the top-20-visited Russian language
which has succeeded in improving        half of adult deaths were related to       medical sites. Such connectivity to
the organizational approach to          cardiovascular disease. More than 89       worldwide medical literature opens
service quality at the Central Kigali   percent of the hypertension patients       up new avenues of communication
Hospital and smaller health centers.    in the pilot sites are now managing        and moves the concept of
Plans are underway for the MoH to       their disease themselves, according        transparency forward.
replicate this success by               to international treatment protocols.
institutionalizing the quality          As a result, hypertensive crises have      Information Technology
improvement approach and applying       dropped 57 percent, and                    In East and South Africa, the number
C-38                                    USAID FY 2000 Accountability Report




of databases in priority development    Self-Assessment of Performance by          $33 million Global Conservation
areas increased to 32 in 1999,          Missions and Other Operating Units         Program. Jointly funded by USAID
exceeding the program target of 29.     The Global and E&E bureaus have            and leading private conservation
A database of more than a thousand      met 100 percent of their objectives.       organizations, this program
network members was established at      The LAC and ANE bureaus have               addressed threats to 18 biologically
the new Regional Center for Quality     made similar progress, meeting 96          rich sites around the world, notably
of Health Care at Makerere                                                         the Himalayas of Nepal, the
University, Uganda, to facilitate            USAID Operating Units Linked to       Amboseli-Kilimanjaro region of East
                                             Environment
dissemination of information and             Self Assessment Scores (FY 1999)
                                                                                   Africa, the Amazon, the Bering Sea,
support fundraising efforts for the                                                and the forests of the Lower Mekong
Center’s consulting needs.                                 EE*                     River. This new program represents
                                                         (23%)
                                                                    Not Met        an innovative partnership with
                                                   On                 (6%)
                                                 Track                             organizations such as the World
 Manage the Environment for                      (69%)              N/A
                                                                    (2%)           Wildlife Fund, The Nature
     t
Long-term Sustainability (ENV)
                                                                                   Conservancy, and Conservation
This section discusses the                    * Exceeding expectations             International. Once the program
performance of the ENV objectives             Total SOs: 48                        matures to the point where it can
of USAID’s operating units as of              Note: includes both primary and      produce results, it will be measured
                                              secondary links
September 30, 1999, drawing on the                                                 against already established baselines.
self-assessments of these units. It     percent (23 out of 24 primary or
provides examples of results            secondary coded environmental              In Botswana, USAID’s efforts over
achieved through USAID efforts          objectives). Finally, the Africa bureau    many years to promote community-
undertaken around the globe and         has met 89 percent of its objectives       based natural resource management
discusses operating unit objectives     (8 out of 9 primary or secondary           (CBNRM) are bearing fruit. Africa’s
that failed to meet expectations.       coded environmental objectives). The       largest herd of elephants is found in
                                        overall Agency environmental               the Chobe Enclave and the
Program Objectives/Approaches           performance total for FY 1999 is 92        surrounding Chobe National Park in
USAID seeks to protect the              percent, or 44 out of 48 primary and       Botswana. Communities surrounding
environment for long-term               secondary coded environmental              the park had been until recently only
sustainability around the world         objectives met or exceeded                 bearing the costs of living so close to
through programs directed at five       expectations.                              wildlife without reaping any
broad objectives:                                                                  monetary benefits. In 1989, the
                                        a. USAID Objective: “Biological            government of Botswana chose this
                                           Diversity Conserved”                    area as a pilot project for USAID.
• The threat of global climate
  change reduced                        USAID pioneered and now supports           With support from USAID, the
                                        one of the most comprehensive              Chobe Enclave Conservation Trust
• Biological diversity conserved        biodiversity conservation programs         (CECT), comprising five surrounding
                                        of any bilateral donor. The Agency         villages, was established to manage
• Sustainable management of             has contributed to safeguarding            the area. In 1999, the CECT
  urbanization, including pollution     biological diversity through its efforts   partnered with a safari firm to enable
  management improved                   to 1) improve the management of            local communities to profit from the
                                        biologically significant areas, 2)         conservation of the area’s
• Proportion of environmentally
                                        promote the sustainable use of             biodiversity. Between 1999 and
  sound energy services increased
                                        biological resources, and 3) support       2004, the CECT share of revenue
• Sustainability of natural resources   the conservation of genetic diversity.     generated from safari activities will
  management increased                                                             be about US$1 million. The CECT
                                        Examples of USAID Program Results          will then use these finances to fund
                                        In FY 1999, the Agency launched the        village infrastructure and fledgling
                                               USAID FY 2000 Accountability Report                                                  C-39




businesses. This CBNRM program                 cash dividends to households or for             energy technologies. In FY 1999,
thus provides local communities an             community development projects.                 TCAPP implemented 10 major
important incentive to conserve their          Wildlife population surveys indicate            investment activities and events
rich biodiversity.                             that key indicator species such as              worldwide, including business
                                               water buffalo and elephant                      matching programs, private-sector
Peru and USAID established a $24               populations have remained stable or             solicitations, policy reform actions,
million fund under the Americas’               increased. However, the Agency is               prefeasibility studies, and donor
Fund to support conservation,                  aware of the need to review activities          meetings. One notable program in
preservation, and protection-type              such as CAMPFIRE’s in the light of              FY 1999 helped develop regional
activities. USAID support has                  increased poaching and habitat                  technology priorities for the Southern
stimulated adoption of an array of             management challenges in some                   African Development Community.
environment and natural resource               areas of Zimbabwe.2
institutional and policy-related laws,                                                         The Agency’s work in Ukraine
regulations, and procedures. This has          b. USAID Objective: “The Threat of              exemplifies its efforts to increase
resulted in a policy shift away from              Global Climate Change                        participation in key climate change
                                                  Reduced”
traditional mitigation strategy to one                                                         negotiations. Through its Climate
where industrial pollution is reduced          USAID’s $1 billion Climate Change               Change Initiative, the Agency
at the source. Also, Peru has                  Initiative: 1998– 2002 expands the              provided technical assistance to help
increased the amount of protected              Agency’s efforts to help USAID-                 the formation of an Inter-Ministerial
natural areas to 17.9 hectares, which          assisted countries 1) reduce net                Committee for the Implementation of
is approximately equivalent to 14              greenhouse gas emissions, 2) reduce             the UNFCCC and the timely
percent of the national territory.             vulnerability to the threats posed by           submission of Ukraine’s National
                                               climate change impacts, and 3)                  Communication to the UNFCCC
Program(s) Failing to Meet                     increase participation in the United            Secretariat. Ukraine’s election to the
Expectations                                   Nations Framework Convention on                 Vice Presidency of the Conference of
In Zimbabwe, USAID has supported               Climate Change. Agency activities in            Parties confirms Ukraine’s active
the Communal Areas Management                  facilitating environmentally benign             participation in the international
Program for Indigenous Resources               energy services and its forestry and            response to global climate change.
(CAMPFIRE) since 1989. FY 1999                 land use activities also contribute to
targets for this program were not met          the goals of the Initiative.                    In the Philippines, the Agency’s
because of unexpected losses of key                                                            global climate change strategy is to
staff. CAMPFIRE was 12 percent                 Examples of USAID Program Results               mitigate greenhouse gas (GHG)
short of its revenue target of                 One of the major components of the              emissions from the power sector by
US$2,200,000. The Agency is aware              Agency’s Climate Change Initiative is           expanding the use of clean fuels and
that staff retention can be a problem          its involvement in Technology                   promoting more efficient electricity
for any program and makes every                Cooperation Agreement Pilot Project             generation, distribution, and
effort to plan accordingly.                    (TCAPP)— an interagency program                 consumption. The goal is to avoid
Generating income for local                    with the Department of Energy and               the release of some 20 million metric
communities, predominantly through             the Environmental Protection                    tons of carbon dioxide (CO2)-
fees from sport hunting, is a key              Agency. Designed to assist the                  equivalents into the atmosphere by
component of the program. The                  United States in meeting its                    2002 while maintaining energy
cumulative total generated during              obligations under the United Nations            production. By promoting a cleaner
the past decade is more than US$13             Framework Convention on Climate                 fossil fuel (natural gas) as an
million. Half of this total has been           Change (UNFCCC), TCAPP facilitates              alternative to coal, this reduction in
channeled into local communities as            international investment in clean               CO2-equivalents will be achieved in



     2 The World Wildlife Fund (WWF) issued a warning of poaching increases of many kinds of wildlife, including elephants, and rhinos
ensnared by accident. According to WWF, this poaching was linked to armed groups involved in land seizures.
C-40                                             USAID FY 2000 Accountability Report




2002 when the natural gas-fired                  expected to be generated in East and              Program(s) Failing to Meet
                                3
power plants become operational.                 West Java, which will both employ                 Expectations
                                                 locals and provide much needed                    In some cases, factors beyond the
Program(s) Failing to Meet                       improvements in access to water,                  Agency’s control can hamper
Expectations                                     shelter, and sewage facilities. In                meeting activity goals. In Ecuador,
According to the self-assessments                Morocco, Agency efforts to                        for example, USAID helped create
conducted by Missions and other                  strengthen local government and                   and worked through an NGO,
operating units, all programs met or             help it become more responsive to                 Oikos, to improve the capacity of
exceeded performance expectations.               environmental problems made                       selected public and private
                                                 demonstrable progress. Local                      institutions to prevent pollution.
c. USAID Objective: “Sustainable                 government officials met the need for             However, many industrial firms went
   Management of Urbanization,                   wastewater treatment in the Al-                   out of business during Ecuador’s
   Including Pollution Management,
                                                 Attaouia region through the                       serious political and economic crisis.
   Promoted”
                                                 construction of a cutting-edge                    This prevented the program from
USAID works with cities around the               treatment plant. The 15,000 residents             meeting all its goals. No major
world to improve the living                      of this region will no longer suffer              adjustments will be made to the
conditions of the urban poor and to              the health, aesthetic, and                        activity at this point, because it
protect the environment through                  environmental effects of the release              ended in September 2000. The
reducing pollution, saving energy,               of untreated wastewater in their                  primary focus now will be to ensure
and improving waste management.                  neighborhoods.                                    the sustainability of past efforts.
The Agency also works directly with
                                                                                                   Oikos should be well placed to
municipalities to enhance their                  Using the new Development Credit                  continue its work beyond USAID
ability to deliver environmental                 Authority (DCA) for the Agency’s                  support once the crisis in Ecuador
services. Promoting partnerships with            urban lending effort has led to                   ends, because it has been able to
the private sector to reduce pollution           impressive accomplishments in FY                  attract funding from other donors.
and manage waste treatment is                    1999. In South Africa, 22,000
another important component of                   previously neglected households                   d. USAID Objective: “Use of
USAID’s approach in cities.                      were provided with access to basic                   Environmentally Sound Energy
                                                 services. In Poland, a recently                      Services Increased”
Examples of USAID Program Results
                                                 completed eight-year program                      USAID energy programs assist
Working through its Regional Urban               generated a hundred thousand                      countries by 1) promoting energy-
Development Offices (RUDOs), the                 homeownership loans from 20                       sector reform, 2) establishing free
Agency reached 150 municipalities                commercial banks. PROMUNI, a                      market policies, 3) instituting
and national associations of                     municipal infrastructure finance                  improved energy standards, and 4)
municipalities during FY 1999. In                program in Central America, also                  strengthening institutions that
Indonesia, for example, the focus                recently came to an end, having                   enhance energy development
was on “ twinning” the goal of                   helped 867,490 families through                   through private-sector participation.
delivering environmental services                improved infrastructure. These efforts            In addition, USAID provides training
with job creation. Approximately                 improved the access to clean                      and technical assistance to
1,700 labor-intensive infrastructure             sanitation and water and the                      encourage legal and regulatory
projects were developed. In                      environment of the communities.                   reform, institutional development,
cooperation with the World Bank, 50                                                                and private investment in energy
million person-days of work are                                                                    infrastructure.


     3 A variety of gases (termed greenhouse gases) contribute to global climate change, with the most prevalent one, carbon dioxide,
produced primarily by the combustion of fossil fuels. Each greenhouse gas contributes to climate change to a different extent. CO2-equivalents are
used as a common measure of the climate change potential of these gases relative to that of CO2. Natural gas gives off only one half as much
carbon dioxide (CO2) per unit of energy produced as does coal and is made up predominantly of methane (CH4), which itself is a greenhouse gas
if it is released into the atmosphere.
                                         USAID FY 2000 Accountability Report                                       C-41




Examples of USAID Program Results        natural resource sustainability issues;   exercise to expel a logging
In Ghana, the Agency secured a $1.5      and 4) improved policy environment        concession from community-owned
million grant from the Africa Trade      and use of economic and financial         lands. Similarly, in another village,
and Investment Program in FY 1999        incentives.                               citizens prevented the entry of an oil
to assist the Economic Community of                                                palm plantation into their ancestral
                                         Examples of USAID Program Results         lands.
West African States (ECOWAS) to
develop training and technical           In FY 1999, an additional 12 million
                                         hectares, primarily in Latin America      Another USAID approach involves
assistance for the West African Gas
                                         and Indonesia, were brought under         raising community awareness of
Pipeline Project— a $1.8 billion U.S.
                                         improved management through               environmental issues through the use
public– private venture currently in
                                         Agency efforts. More specifically, the    of the mass media. In Egypt, for
development. This assistance has
                                         coastal zone of an entire province in     example, the Agency disseminated
improved the capacity of energy
                                         Indonesia, 19 new community forest        information on environmental issues,
officials in Nigeria, Togo, Benin, and
                                         districts in Nepal, and a large           using print, television, and radio,
Ghana to negotiate a commercially
                                         expanse of the Pantanal wetlands in       reaching approximately 32.9 million
developed and managed project with
                                         Bolivia were added in FY 1999.            persons, twice as many persons in
private-sector pipeline partners.
                                                                                   FY 1999 as in the previous year.
Expected benefits include greater
                                         In Nepal, working with the
availability of natural gas to meet
                                         government and groups of farmers in       In Peru, through USAID-funded
West Africa’s regional energy needs,
                                         FY 1999, USAID facilitated the            technical assistance, viable and
better access to electricity, and a 10
                                         transfer of irrigation management to      environmentally sound economic
percent reduction in greenhouse gas
                                         water users associations (WUAs)           alternatives to coca farming are
emissions from the flaring of natural
                                         composed of farmers. The West             being developed. Already, there are
gas in Nigerian oil fields.
                                         Gandak Irrigation System WUA saw          more than 8,000 participating
Program(s) Failing to Meet               its budget, generated through             Andean coffee farmers who receive a
Expectations                             irrigation service fees, increase an      premium price in return for quality
In Egypt, the Agency is working to       astounding 56-fold over three years.      beans and other crops destined for
increase the number of vehicles          The improved irrigation has led to        the U.S. and Lima markets. As a
using compressed natural gas (CNG)       increased farmer incomes from crop        result of the removal of key
as a fuel, thus reducing automobile      production and other home activities      constraints to on-farm production,
air pollution. Although ambitious        promoted by USAID, such as kitchen        USAID is now expanding into “ hard
1999 targets for CNG conversion          gardens. Replicability of this project    core” coca-producing areas, helping
were not met, the current rate of        is expected over much of Nepal’s          to reduce the supply of cocaine
conversion, facilitated through the      terai region, as 68,000 hectares of       destined for the United States.
import incentives of the U.S.            government-managed irrigated
                                                                                   Program(s) Failing to Meet
Commodity Import Program,                systems are being transferred to
                                                                                   Expectations
suggests that FY 2000 targets will be    private farmers’ groups during the
                                         next few years.                           According to the self-assessments
reached.
                                                                                   conducted by Missions and other
e. USAID Objective: “Sustainable         Mapping traditional lands and             operating units, all programs met or
   Management of Natural                 monitoring their resource use is a        exceeded performance expectations.
   Resources Increased”                  relatively recent practice. It is seen
The Agency’s natural resource            as an effective tool to institute              Promote Humanitarian
programs include 1) improved             participatory decision making within              Assistance (HA)
management of coastal zones,             the community and raise awareness
forests, and water resources; 2)         of environmental threats and ways to      This section discusses the
increased use of sustainable             conserve resources. For example, in       performance of USAID programs
agricultural practices; 3) enhanced      Indonesia, villagers used information     under the Humanitarian Assistance
public and community awareness of        generated by a recent mapping             goal, drawing on the self-assessments
C-42                                    USAID FY 2000 Accountability Report




of performance by missions and          Self-Assessment of Performance by         most significant accomplishment in
other operating units. It highlights    Missions and Other Operating Units        recent years, and in particular in FY
the two Humanitarian Assistance         All Missions and other operating          1999, was the effective application
objectives and describes the            units reported meeting expectations.      of prevention, mitigation, and
approaches the Agency uses to                                                     preparedness interventions with
accomplish these objectives. It         a. USAID Objective: “Urgent               relief activities. Disaster response
provides examples of results               Needs in Times of Crisis Met”          and operations are closely
achieved through USAID efforts             (Relief Assistance)                    coordinated with other U.S.
undertaken around the globe and         USAID provides humanitarian               agencies, including the Departments
reveals plans for further progress.     assistance in response to three types     of Defense and Agriculture, the U.S.
                                        of situations: natural disasters, man-    Geological Survey (USGS), the
Program Objectives/Approaches           made disasters, and complex               Centers for Disease Control and
USAID provides humanitarian             emergencies. Natural disasters are        Prevention (CDC), the U.S. Public
assistance to millions of people        caused by physical hazards such as        Health Service, and the National
around the world. The Agency            fire, flood, drought, earthquake, and     Oceanic and Atmospheric
supports humanitarian assistance        disease outbreak. Man-made                Administration (NOAA).
through programs directed at two        disasters are caused by human error,
broad objectives:                       such as a building collapse or            Public Law 480 (P.L. 480) Title II
                                        industrial accident. Complex              emergency food aid is managed by
     USAID Operating Units Linked to    emergencies may include natural           the Bureau for Humanitarian
     Humanitarian Assistance
                                        disasters such as droughts, but are       Response’s Office of Food for Peace
     Self Assessment Scores (FY 1999)
                                        frequently caused or complicated by       in coordination with USDA, regional
                                        civil strife. They are manifested in      bureaus, and Missions. USAID
                    EE*
                  (13%)                 armed conflict, displaced                 provides the majority of U.S. food
           On                N/A        populations, hunger, and death.           assistance used to respond to
         Track              (13%)
         (74%)                                                                    emergencies and disasters. In FY
                          Not Met       FY 1999 was a year of                     1999, USAID provided 792,116
                           (0%)         unprecedented crises that                 metric tons of emergency food aid,
                                        dramatically increased relief             valued at more than $513 million, to
       * Exceeding expectations
       Total SOs: 31                    assistance. The Bureau for                more than 30 countries. USAID
                                        Humanitarian Response’s Office of         programs implemented primarily by
• Urgent needs in times of crisis met   U.S. Foreign Disaster Assistance          U.S. PVOs and the World Food
                                        (OFDA) responded to 65 declared           Programme (WFP) reached at least
• Personal security and basic           disasters in more than 63 countries.      16 million beneficiaries, the majority
  institutions to meet critical         These included 17 complex                 of which were in Africa. USAID also
  intermediate needs and protect        emergencies, 41 natural disasters,        provided food aid for an additional
  human rights reestablished            and 7 man-made disasters. OFDA            10 million beneficiaries through
                                        obligated more than $294 million to       bilateral assistance programs to
The number of USAID operating
                                        respond to these disasters, compared      Ethiopia and Rwanda and to the
units (excludes Bureau for
                                        with $186 million in FY 1998 in           World Food Programme’s global
Humanitarian Response) with
                                        response to 87 disasters. OFDA            Protracted Relief and Recovery
strategic objectives that supported
                                        provided a wide range of emergency        Operations.
the humanitarian assistance goal and
                                        assistance that included search-and-
objectives increased from 20 the
                                        rescue operations; emergency health       In the Latin America and Caribbean
previous year to 24. The largest
                                        and medical services; therapeutic         region, major hurricanes devastated
increase was in Latin America and
                                        and supplemental feeding for the          Central America (Hurricane Mitch)
the Caribbean (from 1 to 8)— largely
                                        malnourished; and provision of            and the Caribbean (Hurricane
because of Hurricanes Mitch,
                                        potable water, sanitation facilities,     Georges) during September and
Georges, Lenny, and Floyd.
                                        shelter, clothing, and survival kits. A
                                         USAID FY 2000 Accountability Report                                       C-43




October 1998. The region suffered        more than $100 million of this            international disaster assistance
approximately $10 billion in             funding with the specific U.S.            funds. USAID collaborated on an
damages. USAID provided                  government agencies identified in         innovative $15 million small-scale
emergency food aid, shelter, water,      the Supplemental. It chairs sector        farmer recovery program with the
sanitation, and health services to       working groups, established under         sale of donated wheat, constructed
millions of people. The timeliness       the umbrella of the White House           3,000 temporary shelter units for
and scope of activities were critical    Interagency Working Group. As the         46,500 people, and repaired 32
in saving lives, reducing human          lead agency in disaster relief and        water systems for 17,500 individuals.
suffering, and preventing civil unrest   mitigation, USAID provided the
and widespread outbreaks of              initial leadership and guidance to        Besides responding to hurricanes in
diseases. In Honduras and                develop complementary work plans          the Latin American and Caribbean
Nicaragua, USAID’s role was critical     across implementing organizations.        region, USAID also assisted countries
in facilitating U.S. military            This set the stage for a well-            affected by natural disasters in other
participation in search-and-rescue       coordinated U.S. government               parts of the world. These include
activities, rapid assessments, and       reconstruction effort, working with       earthquakes (Afghanistan, Colombia,
delivery of relief commodities to        numerous government municipalities        Greece, India, Taiwan, Tajikistan,
areas cut off from major                 and nongovernmental and                   and Turkey), floods (Cambodia,
transportation routes. There was no      community-based organizations.            Chad, China, The Gambia,
major disease outbreak. This is          USAID initiated activities aimed at       Honduras, Hungary, Mali,
evidence of the effectiveness of         restoring economic and social             Mauritania, Mozambique,
preventive health measures and swift     indices to prehurricane levels.           Philippines, Republic of Korea,
action to restore water and sanitation   Programs are restoring basic              Thailand, and Vietnam), volcano
to affected areas.                       necessities that will mitigate health     (Cameroon), and drought (Ethiopia).
                                         risks, restore shelter and food-supply
In the aftermath of Mitch, USAID         levels, reactivate economic activities,    In the Europe and Eurasia region,
swiftly authorized the use of Title II   and improve disaster mitigation. The      the crisis in the Balkans was the
development food commodities             focus of programs is on disaster          most complex emergency in FY
already in-country. Airlifted food       preparedness and reconstruction,          1999. In spring 1999, 700,000
already prepositioned in U.S. ports      public health, economic reactivation,     Albanian Kosovars were forced to
arrived within a week after the          education, and housing. The               cross the borders into Albania,
hurricane. Through U.S. PVOs and         standard is to “ build back better.”      Macedonia, and the Federal
WFP, USAID distributed 132,700                                                     Republic of Yugoslavia Republic of
metric tons of emergency food aid        In the Dominican Republic, El             Montenegro. USAID response teams
(valued at more than $81 million) to     Salvador, Guatemala, Haiti,               provided emergency food rations,
2.3 million beneficiaries,               Honduras, and Nicaragua, USAID is         tents, blankets, plastic sheeting,
representing 94 percent of targeted      rebuilding homes, recovering              hygiene kits, and water jugs when
beneficiaries. As a result, their        agricultural productivity, and            other pipelines did not exist. These
nutritional status was maintained or     strengthening national- and               activities saved the lives and reduced
improved. Beneficiaries identified       community-level disaster                  the suffering of thousands of people.
food-for-work programs as critical for   preparedness. For example, in the         The shelter program, initiated in fall
rebuilding their communities. These      Dominican Republic, the recovery          and winter 1999, housed more than
programs rehabilitated more than         phase met the immediate needs of          290,000 people. USAID funded
13,108 kilometers of road and            more than 400,000 poor Dominicans         more than 50 percent of the
repaired more than 26,608 houses.        in the most severely affected areas.      agriculture rehabilitation effort,
                                         This was accomplished by the              revitalizing the livelihoods of more
In addition, Congress approved $621      effective reprogramming of existing       than 70,000 families. It provided
million in supplemental funding for      Mission funds and coordination with       more than 80,090 metric tons of Title
the LAC region. USAID implements         other funds such as Child Survival,       II emergency food commodities that
                                         P.L. 480, Section 416(b), and             benefited 2 million people. The
C-44                                      USAID FY 2000 Accountability Report




Refugee Nutrition Information             Program(s) Failing to Meet               OTI’s resources. In FY 1999, USAID
System (RNIS) of the UN reported          Expectations                             obligated more than $37 million in
that “ overall, the international         According to the self-assessments        response to these transitions
community was successful in               conducted by Missions and other          (compared with $15.7 million in FY
preventing acute malnutrition among       operating units, all programs met        1998).
the Kosovar refugees.”                    performance expectations.
                                                                                   Programs in transition countries were
In addition to the catastrophes           b. USAID Objective: “Personal            increasingly integrated into USAID
described above, USAID continued             Security and Basic Institutions to    Mission strategic frameworks
to respond to protracted complex             Meet Critical Intermediate Needs      following Agency guidance on
emergencies in sub-Saharan Africa            and Protect Human Rights
                                                                                   strategic planning. Thus transition
                                             Reestablished” (Transition
(Angola, Burundi, Liberia, Sierra                                                  activities were increasingly linked to
                                             Assistance)
Leone, Sudan, and Uganda) and in                                                   both longer-term development plans
                                          Postconflict transitions are
Asia and the Near East (Indonesia)—                                                and to the Mission Program Plans
                                          manifested in armed conflict, large-
which will be reported on next year.                                               coordinated by the Embassy.
                                          scale human rights abuses, and
As predicted in the previous year,
                                          destroyed infrastructure such as the
complex emergencies involving civil                                                Devastating natural disasters and
                                          institutions of governance.
conflict continued to consume                                                      continued conflict in transition
                                          Interventions link short-term
significant resources.                                                             countries in Latin America and the
                                          responses addressing immediate
                                                                                   Caribbean undermined progress
                                          postconflict rehabilitation needs to
The relief objective integrates                                                    toward sustainable development and
                                          longer-term sustainable development
approaches to strengthening capacity                                               threatened democratic gains. USAID
                                          approaches. Community impact is an
of institutions to conduct early                                                   responded to these deteriorating
                                          essential element of all transition
warning, disaster preparedness, and                                                conditions through peace building,
                                          approaches. Transition activities
mitigation. These efforts help predict                                             conflict resolution, and the
                                          create or support participatory
and lessen the impact of disasters                                                 promotion of democracy at the local
                                          mechanisms to address community
and improve countries’ ability to                                                  level. USAID’s transition program in
                                          needs in conflict-prone areas. This
cope with crises through training of                                               Guatemala reduced and mitigated
                                          fosters decision making at the
national and local governments and                                                 conflict in target communities.
                                          grassroots level on priority issues in
community-based organizations. The                                                 Training in conflict management of
                                          rehabilitation, recovery, and
Famine Early Warning System                                                        newly elected mayors and key staff
                                          reintegration. Focus on community-
(FEWS), operational in 17 countries                                                helped their relationship with local
                                          level participation improves long-
in Africa, contributes to drought and                                              communities and facilitated dialogue
                                          term prospects for peace and
disaster preparedness by improving                                                 on policies affecting their
                                          strengthens government delivery of
the quality and effectiveness of                                                   municipalities. Efforts in conflict
                                          municipal services. USAID included
information and response systems.                                                  mediation and community-led
                                          community impact activities in most
Information is produced in a timely                                                development activities reached
                                          transition country strategies.
manner and used extensively by                                                     6,396 families. In Haiti, community-
donors and governments to support                                                  level efforts reshaped public- and
                                          During FY 1999, USAID provided
target interventions that help to avert                                            private-sector relationships to
                                          transition assistance to 29 countries.
large-scale emergency food                                                         improve community services in
                                          The Bureau for Humanitarian
distribution. For example, FEWS                                                    education and health. For example,
                                          Response’s Office of Transition
promoted a consensus to the rise in                                                community mobilization efforts
                                          Initiatives (OTI) responded to 18
food insecurity in Ethiopia and                                                    resulted in democratically elected
                                          complex emergencies and
helped avert large-scale emergency                                                 PTA organizations that met several
                                          implemented nonemergency
food distribution in Kenya. It helped                                              times a year in 52 percent of the 788
                                          transitions in 12 other countries. Of
build consensus on the need to                                                     USAID-supported schools. The
                                          these, Indonesia, Nigeria, and
improve food aid targeting in East                                                 increased involvement of parents
                                          Kosovo consumed 60 percent of
Africa.
                                          USAID FY 2000 Accountability Report                                      C-45




and teachers improved attendance          peace-building network involving        selected and implemented projects
and made schools focal points of the      dozens of nongovernmental               and contributed at least 25 percent
community.                                organizations, communities, and         of the cost. This program involved
                                          local governments. This network         251 rural communities and 600,000
In sub-Saharan Africa, USAID’s            helped solve national, provincial,      people in basic infrastructure,
program results were tempered by          and community problems through          income-generation, civic
having to work in difficult and           participatory processes. Forty-nine     participation, and environmental
deteriorating conditions. Increases in    local activities improved rural         activities. The program reacts quickly
the number of refugees and IDPs, in       transportation systems, clinics, and    to new transition opportunities in the
conjunction with stalled democratic       markets. USAID strengthened local       country. For example, within two
progress in many transition               capacity by providing 750 extension     weeks of the withdrawal from
countries, complicated humanitarian       workers with a training package to      occupied areas in the South, USAID
and development responses. Despite        promote democracy, good                 helped local communities initiate 65
this, USAID and its partners              governance, and peace.                  new activities.
implemented and managed programs
that achieved positive and                USAID targeted communities in           Indonesia continued its democratic
meaningful results in moving from         Rwanda to strengthen links between      transition by holding legislative and
relief toward development                 relief and development and to build     national elections. New electoral
assistance, conflict resolution, crisis   local capacities for peace. USAID       laws permitted the formation of new
mitigation, and democracy building.       trained 15,000 newly elected            parties and reduced the military’s
                                          officials in 30 communes to manage      legislative representation. Citizen
Despite the conflicts and increased       local, small-scale development          confidence was achieved with the
insecurity in Angola, USAID met           projects and provided grants and        organization of an international
many of its targets. Thirty-four          technical assistance to women’s         observation Mission (managed under
communities established Community         associations in agriculture and         USAID mechanisms) and issuance of
Development Committees to                 livestock raising. In FY 1999, USAID    impartial reports on the process.
rehabilitate war-affected populations.    transitioned several relief-oriented    USAID supported local preelection
More than 350,000 children and            activities into longer-term             voter education coverage, grassroots
355,000 women received assistance.        development programs.                   political education, public service
In three provinces, USAID trained                                                 announcements reaching 130
480 community health workers to           Financial crisis— in combination        million citizens, and training for
provide and improve prenatal care of      with natural disasters, conflict, and   newly elected government officials
47 percent of women registered in         unconsolidated peace processes— in      and journalists. Broader sections of
the refugee camps. USAID assisted         transition countries in Asia and the    the public, particularly women, were
650,000 people through programs           Near East created opportunities for     represented through direct citizen
that rehabilitated or opened 74           democratic progress and movement        involvement and NGO activities.
schools, 5 grinding mills, 4 major        toward sustainable development.         USAID supported a program that
markets, 168 latrines, 415 kilometers     USAID programming in the region         enabled 800 subdistricts to voice
of roads, 81 bridges, 490 kilometers      responded to these opportunities        their opinions for the first time.
of irrigation canals, and sources of      through the promotion of democracy,     Community priorities are now
potable water.                            economic growth, and conflict           incorporated in the decision-making
                                          resolution at the local level.          process. Despite positive movement
In the Democratic Republic of the                                                 toward democracy and governance,
Congo, USAID helped maintain              In Lebanon, the Rural Community         however, increased insecurity
stability in a few areas under            Development aided the transition        continues to threaten the transition
extreme economic and political            process by returning rural              process in Indonesia.
duress. Programs emphasized               communities to economic and social
building a well-informed and vibrant      viability. Local citizen committees     International conflict and internal
C-46                                       USAID FY 2000 Accountability Report




civil strife in the Balkans and the rest   official acceptance of Serb presence
of Tajikistan continued in 1999. In        in Eastern Slavonia. Also, USAID
Bosnia/Herzegovina, Croatia,               increased by 25 percent its
Kosovo, and Tajikistan, USAID              assistance to clients in dealing with
responded to resulting humanitarian        legal matters related to return and
crises with programs that provided         fielded election monitors for each of
short-term relief and promoted             three elections.
economic growth and democracy at
the community level.                       In Kosovo, USAID supported
                                           programs that improved coverage of
USAID programs in Azerbaijan               Kosovar issues in the Federal
fostered self-sustaining, community-       Republic of Yugoslavia by fielding
based solutions to meet the needs of       journalists from Serbia and
people. Through small-scale income         Montenegro. USAID grants
generation projects, assistance to         strengthened linkages between
communities helped mobilize local          refugee camps and host communities
efforts and resources for business         in Montenegro, helped engage local
development and job creation,              communities in Kosovo in identifying
benefiting more than 35,000                and prioritizing community
individuals.                               improvement needs, and helped with
                                           election/civil registration activity
In Bosnia/Herzegovina, USAID’s             immediately following the cessation
programs have encouraged refugee           of the Kosovo conflict.
returns and provided incentives for
returnees to stay. Partnered with          USAID supported peace and
U.S.– SFOR troops and local                reconciliation in Tajikistan through
governments, USAID helped to               transition programs, such as the
restore community infrastructure and       Tajikistan Social Investment Fund,
create short-term employment               that mobilize communities to help
opportunities. For instance, 9,500         themselves on long-term
short-term jobs were created in            development issues and income
1999, and 17,000 people were               generation. More than 200,000 Tajik
permanently employed through work          citizens benefited from USAID
in reconstructed facilities. More than     assistance in 1999.
18,500 children attend reconstructed
schools, and repaired power systems        Program(s) Failing to Meet
are serving 25 percent of Bosnia’s         Expectations
population.                                According to the self-assessments
                                           conducted by Missions and other
In Croatia, USAID helped with              operating units, all programs met
increased integration of Serbian           performance expectations.
minorities into communities in
Eastern Slavonia. For instance,
USAID-sponsored Serb-language
radio broadcasts paved the way for
increased security within
communities by bringing together
different ethnic groups and promoted
USAID FY 2000 Accountability Report        D-1




                             Part D
     Inspector General Audit: Reports on
       USAID’s Consolidated Financial
      Statements, Internal Controls, and
       Compliance for Fiscal Year 2000
          USAID FY 2000 Accountability Report   D-3




        REPORTS ON USAID'S
CONSOLIDATED FINANCIAL STATEMENTS,
       INTERNAL CONTROLS,
AND COMPLIANCE FOR FISCAL YEAR 2000

          Report No. 0-000-01-006-F
             February 26, 2001




                  Washington, DC
D-4                        USAID FY 2000 Accountability Report




 U.S. AGENCY FOR
  INTERNATIONAL
   DEVELOPMENT


                                                                 February 26, 2001

       MEMORANDUM FOR M/CFO, Michael T. Smokovich

       FROM:       IG/A/FA, Alvin A. Brown

       SUBJECT:    Independent Auditor’s Reports on USAID’s
                   Consolidated Financial Statements, Internal
                   Controls, and Compliance for Fiscal Year 2000,
                   Audit Report No. 0-000-01-006-F

            The Office of Inspector General is transmitting its
       reports on the audit of U.S Agency for International
       Development’s (USAID’s) fiscal year 2000 financial
       statements, related internal controls, and compliance with
       applicable laws and regulations. As agreed, only selected
       items were reviewed, as set forth in the reports attached.
       An additional report on your Management Discussion and
       Analysis will be prepared and transmitted in spring 2001.

            Under the Government Management Reform Act of 1994,
       USAID is required to prepare consolidated fiscal year-end
       financial statements. USAID is required to submit audited
       financial statements to the Office of Management and Budget
       and the Department of the Treasury by March 1 following
       fiscal year end.

            We do not express an opinion on USAID’s fiscal year
       2000 consolidated financial statements because our audit
       scope was impaired. This impairment resulted because USAID
       has not implemented adequate financial management systems
       to produce complete, reliable, timely, and consistent
       financial information without making material year-end
       adjustments. Due to time constraints, we were unable to
       assess the reasonableness of the adjustments and the
       reliability of the balances reported.

            USAID’s internal controls have improved during the
       past 12 months. However, additional corrective actions are
                      USAID FY 2000 Accountability Report                 D-5




still needed to correct deficiencies reported in our
previous reports. USAID had not fully implemented adequate
internal controls to ensure that its financial information
was reliable, complete, timely, and consistent. Concerning
USAID’s compliance, we noted 3 material instances of
noncompliance with United States government laws and
regulations.

     Because USAID has embarked on a significant effort to
improve the systems that produce its financial statements
and has not fully implemented all corrective actions needed
to improve its accounting and financial systems, we agreed
that it would be most beneficial to concentrate fiscal year
2000 audit efforts in the following five significant areas:

      • Reporting credit program receivables,
      • Accounting for Advances to Grantees,

      • Calculating and reporting accounts payable and
         accrued expenses,

      • Reconciling and managing USAID’s fund balance with
         the U.S. Treasury, and

      • Preparing the Management Discussion and Analysis
         (MD&A) Section,

     We issued individual reports for the first four areas1
and you agreed to the recommendations contained within each
of the reports. We will issue a report for the MD&A
section in the spring of 2001.

     We have evaluated and incorporated comments provided
to our draft report in Appendix I & II.

     I would like to express my sincerest appreciation for
the courtesies extended by your staff to the auditors over

      1     (1)Audit on USAID’s Credit Programs and Related Internal
Controls for Fiscal Year 2000; (Audit Report No. 0-000-01-002-F),
issued February 15, 2001; (2) Audit of USAID’s Advances and Prepayments
for Fiscal Year 2000, (Audit No.0-000-01-003-F), issued February 15,
2001; (3) Audit of USAID’s Accounts Payable and Accrued Expenditures
for Fiscal year 2000 (Audit No. 0-000-01-004-F), issued February 15,
2001, and (4)Audit of USAID’s Fund Balance with Treasury for Fiscal
Year 2000, (Audit No. 0-000-01-005-F), issued February 15, 2001.


                                      2
D-6                     USAID FY 2000 Accountability Report




      the past year. The Office of the Inspector General is
      looking forward to working with you on the audit of the
      fiscal year 2001 financial statements and seeing improved
      systems and controls.




                                        3
                                USAID FY 2000 Accountability Report                                     D-7




                           EXECUTIVE SUMMARY



The Government Management Reform Act of 1994 requires the U.S. Agency for
International Development (USAID) to prepare and submit audited consolidated financial
statements for inclusion in the government-wide financial statements. This law and
applicable auditing standards require the Office of Inspector General to:

        1.       Audit the financial statements and issue an opinion on the fairness of
                 presentation in accordance with generally accepted accounting principles,

        2.       Report on related internal controls, and

        3.       Report on compliance with applicable laws and regulations.

For fiscal year 2000, the Office of the Inspector General agreed with USAID’s
management to focus our audit effort on the high-risk balance sheet line items, the
Management Discussion & Analysis (MD&A), general controls, and followup on prior
recommendations. We issued a series of reports that communicated the results of our
audits conducted on selected material line items reported in USAID’s fiscal year 2000
balance sheet. In the individual reports, we made recommendations to improve USAID’s
ability to calculate and report its balances at fiscal year end. (See Appendix IV for a
listing of reports issued for fiscal year 2000). Accordingly, we have not expressed an
opinion on the fairness of USAID’s financial statements.


Auditor’s Opinion on USAID’s Fiscal Year 2000 Financial Statements

We do not express an opinion on the consolidated financial statements2 for the fiscal
years ending September 30, 2000, because our audit scope was impaired. This
impairment resulted because USAID has not implemented adequate financial
management systems to produce complete, reliable, timely and consistent financial
statements without material year-end adjustments. In an effort to address a deficiency
reported in our previous audit reports, USAID changed its methodology for calculating
and reporting accounts payable, which resulted in a material adjustment being made,
which we were unable to validate.

        2          See Appendix VI for USAID’s Consolidated Financial Statements for Fiscal year 2000
that includes the balance sheet reviewed.



                                                    i
D-8                               USAID FY 2000 Accountability Report




      Further, the Department of Health and Human Services, the agency that provides
      payment and management services to USAID for its advances to grantees, experienced
      system problems during the third and fourth quarters of fiscal year 2000. As a result,
      USAID’s management had to develop a methodology to estimate the balances for the
      accrued expenses related to advances to grantees and the outstanding advances at
      yearend. This also resulted in material year-end adjustments being made, which we were
      unable to validate.

      Due to time constraints, we were unable to evaluate the reasonableness of the new
      methodologies and the reliability of the balances reported. In addition, USAID had not
      completed its implementation of our recommendations made to correct previously
      identified deficiencies. The uncorrected system deficiencies and material adjustments
      created a consequential risk that the financial statements could contain material
      misstatements. Accordingly, we have not expressed an opinion on the fairness of the
      financial statements. (See pages 3 to 5).

      Report on Internal Control Weaknesses

      We found that USAID made improvements in some significant areas of its financial
      statements. However, USAID has not implemented adequate financial management
      systems to produce complete, reliable, timely and consistent financial statements without
      material year-end adjustments. Although USAID has made some improvements in its
      financial management systems over the past year, management had not fully
      implemented corrective actions previously recommended. As a result, USAID continues
      to make material in excess of $3 billionadjustments to its year-end accounts payable
      and advances balances.

      In addition, USAID did not consistently report reliable financial information and
      computer security deficiencies continue to exist. Finally, USAID needs to strengthen its
      internal controls over the performance information reported in the MD&A. Detailed
      information concerning the selected material line items reported on the balance sheet and
      the computer security issues identified can be found in the reports identified in the
      appendices of this report.


             USAID Did Not Consistently
             Report Reliable Financial Information

      USAID did not consistently report reliable financial information. Although USAID has
      improved its credit program and fund balance internal controls, its managers need to
      strengthen their processes for recording and reporting financial information in accordance
      with generally accepted accounting principles. We found that certain financial
      information reported by USAID was not consistently complete, reliable, and timely. As a
      result, material adjustments were made after year-end. USAID reported that its financial
      management systems do not fully comply with some federal financial management
      system requirements, standards, and the U.S. Government Standard General Ledger at the


                                                  ii
                               USAID FY 2000 Accountability Report                                     D-9




transaction level. USAID has identified the current primary accounting system as a
material weakness in its fiscal year 1999 Accountability Report and has decided to report
these same material weaknesses in the fiscal year 2000 Accountability Report, which will
be issued on March 1, 2001.


        Computer Security
        Deficiencies Continue to Exist

 In the past year, USAID has made significant progress in improving its computer
security program. However, additional work is required to fully implement an effective
computer security program.

The OIG has issued several audit reports3 identifying computer security deficiencies that
expose USAID to unacceptable risks that resources and sensitive data might not be
adequately protected from loss or destruction. The deficiencies exist because USAID has
not implemented an effective computer security program as required by the Computer
Security Act and OMB Circular A-130 “Management of Federal Information Resources”.

Responding to OIG audits that identified computer security vulnerabilities, USAID
identified its overall computer security program and NMS security and access controls as
material weaknesses in its fiscal year 1997 Integrity Act Report, and its Accountability
Reports for fiscal years 1998 and 1999. However, in the draft Accountability Report for
fiscal year 2000, the NMS security and access controls weaknesses are no longer
considered a material weakness by USAID. However, USAID’s other computer security
program deficiencies still represent a material weakness. (See pages 6 to 16).


Report on Compliance with Laws and Regulations

USAID did not comply with provisions of three laws affecting the financial statements.
Consequently, USAID has no assurance that all transactions were executed in accordance
with:

        1. Laws governing the use of budget authority and other laws and regulations
           that could have a direct and material effect on the Principal Financial
           Statements or Required Supplementary Information.

        2. Other laws, regulations, and government-wide policies identified in Appendix
           C of OMB bulletin 01-02.

         3        Audit of USAID’s Progress Implementing a Financial Management System That Meets
Federal Financial Management Improvement Act Requirements (Audit Report No. A-000-99-003-P),
issued March 1, 1999; Audit of General Controls Over USAID’s Mainframe Computer Environment (Audit
Report No. A-000-99-004-P) issued March 1, 1999; Audit of General Controls Over USAID’s Client-
Server Computer Environment (Audit Report No. A-000-99-005-P), issued on March 1, 1999; and Audit of
USAID’s Actions to Correct Financial Management System Planning Deficiencies (Audit Report No. A-
000-00-003-P), issued August 24, 2000.

                                                 iii
D-10                                 USAID FY 2000 Accountability Report




       We have provided examples of noncompliance with the specific laws and regulations in
       the attached reports. (See pages 17 through 27).

       For our audit of USAID’s fiscal year 2000 financial statements, we statistically selected
       and reviewed the financial transactions at 10 missions. Specific details on reportable
       conditions found will be reported by the individual Regional Inspectors General to the
       responsible mission management officials.




       Office of Inspector General
       February 26, 2001




                                                     iv
                         USAID FY 2000 Accountability Report                  D-11




                             Table of Contents

                                                                       Page

EXECUTIVE SUMMARY                                                        i

INTRODUCTION                                                             1

REPORT ON USAID’S CONSOLIDATED
FINANCIAL STATEMENTS

    We Disclaim (Are Unable to Express) an Opinion on
    Whether the Financial Statements are Presented Fairly                3

REPORT ON USAID’S INTERNAL CONTROLS

    Background on Internal Controls                                      6

    Scope of Our Consideration of USAID’s Internal Controls              7

    Audit Finding

           USAID Has Made Some Improvements in Its Financial
           Management Systems But Additional
           Corrective Actions Are Needed                                 9

                    Computer Security Deficiencies Continue to Exist     13

                    Internal Controls Over MD&A Performance
                    Information Must be Strengthened                     15


REPORT ON USAID’S COMPLIANCE

    Chief Financial Officers Act of 1990                                 17

    Federal Financial Management Improvement Act of 1996                 18

    Computer Security Act of 1987                                        25
D-12                     USAID FY 2000 Accountability Report




                             Table of Contents
                                                               Page

       APPENDICES

       OIG EVALUATION OF MANAGEMENT COMMENTS                      I

       USAID MANAGEMENT COMMENTS                                 II

       STATUS OF UNCORRECTED FINDINGS AND
       RECOMMENDATIONS FROM PRIOR AUDITS
       THAT AFFECT THE CURRENT AUDIT OBJECTIVES                 III

       INTERNAL CONTROL REPORTS ISSUED FOR
       FISCAL YEAR 2000                                         IV
                                USAID FY 2000 Accountability Report                                   D-13




                                  INTRODUCTION




Background
The United States Agency for International Development (USAID) was created in 1961
to advance the United States’ foreign policy interests by promoting broad-based
sustainable development and providing humanitarian assistance. USAID has an overseas
presence in over 70 countries, 42 of which have fully operational and formal USAID
missions. In fiscal year 2000, USAID had total obligation authority of $7.5 billion.4

Under the Government Management Reform Act of 1994, USAID is required to submit
audited financial statements to the Office of Management and Budget (OMB) and
appropriate Congressional Committees. Pursuant to this Act, USAID has prepared for
FY 2000: (1) balance sheet, (2) statement of net cost, (3) statement of changes in net
position, (4) statement of budgetary resources, (5) statement of financing, (6) notes to the
principal statements, and (7) other accompanying information.




Objectives
OMB Bulletin No. 01-02 and related GAO guidance establish the minimum audit
requirements for federal financial statements. For fiscal year 2000, this Bulletin required
us to:

•       Determine whether USAID’s principal financial statements present fairly in all
        material respects, in conformity with federal accounting standards, the (1) assets;
        (2) liabilities and net position; (3) net costs; (4) change in net position; (5)
        budgetary resources; and (6) reconciliation of net costs and budgetary obligations.

•       Report on USAID’s internal control structure related to these financial statements,
        as well as, to the internal control structure related to the performance measures
        contained in the “USAID’s Management Discussions and Analysis” section.

         4        See Appendix V for USAID’s Consolidated Financial Statements for Fiscal year 2000
including its “Financial Report MD&A” section.


                                                   1
D-14                               USAID FY 2000 Accountability Report




       •      Report on USAID’s compliance with laws and regulations that could have a direct
              and material effect on the principal statements, and any other applicable laws and
              regulations.

       For the first objective, in agreement with USAID management, our fiscal year 2000 audit
       focus was placed on the following material line items in USAID’s balance sheet for
       which our audit risk was assessed as high: (1) Fund Balance with the U. S. Treasury; (2)
       Credit Programs; (3) Advances and Prepayments; and (4) Accounts Payable. If we were
       unable to determine whether, at a minimum, the financial statements were fairly
       presented, we would, to the extent practicable, obtain sufficient evidence about closing
       balances to help enable us to form an opinion on subsequent year’s financial statements.
       We were not able to fully implement this objective because the scope of our work was
       impaired.

       For the second objective mentioned above, we attempted obtained an understanding of
       the components of USAID’s internal controls relating to the existence and completeness
       assertions relevant to the financial statements and the performance measures included in
       the Management Discussion and Analysis.

       The third objective mentioned above included determining whether USAID’s financial
       management systems comply substantially with federal requirements for financial
       management systems, applicable federal accounting standards, and the U.S. Standard
       General Ledger at the transaction level, as required by Section 803(a) of the Federal
       Financial Management Improvement Act (FFMIA) of 1996. The scope of our work
       included those financial management systems that were operational in USAID during
       fiscal year 2000. To make this determination, we followed the implementation guidance
       for FFMIA issued by the OMB on September 9, 1997.

       In accordance with the OMB audit requirements for federal financial statements, this
       combined audit report includes our separate reports on USAID’s financial statements,
       internal control structure, and compliance with applicable laws and regulations.




                                                   2
                            USAID FY 2000 Accountability Report                              D-15




             REPORT ON USAID'S
     CONSOLIDATED FINANCIAL STATEMENTS


Based upon an agreement between USAID’s Management and the Office of the Inspector
General, we audited USAID’s Financial Statements for the fiscal year ended
September 30, 2000. USAID Management is responsible for the preparation of its
financial statements; our responsibility is to express an opinion on the financial
statements based on our audit. The opinions we can issue are:

•      Unqualified—if we find that the financial statements are presented fairly in all
       material aspects.

•      Qualified— if we find that the financial statements are fairly presented except for
       a material departure or exception that is explained in the report.

•      Adverse— if we find that the financial statements are not fairly presented.

Instead of issuing one of the three above opinions, we may choose not to give an opinion
because an audit of sufficient scope could not be conducted due to limitations or the
condition of the financial records.

We were unable to conduct our audit in accordance with generally accepted government
auditing standards and the OMB Bulletin 01-02 because we were unable to obtain
reasonable assurance about the financial information presented in USAID’s fiscal year
2000 Financial Statements. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether USAID’s Financial Statements was free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.

We could not express an opinion on USAID’s financial statements for the fiscal year
ended September 30, 2000, because our audit scope was impaired. USAID has not
implemented adequate accounting and financial management systems to produce
complete, reliable, timely and consistent financial statements without material year-end
adjustments. We found that USAID has changed its methodology for calculating accrued
expenses. However, USAID had not changed its methodology and systems for valuing
advances to grantees. As a result, USAID made about $3 billion in net (see Table 1




                                            3
D-16                                     USAID FY 2000 Accountability Report




       below) adjustments to the figure reported in its general ledger. We were unable to fully
       evaluate the reasonableness of those adjustments to determine the reliability of the
       balances reported.

                     USAID’s Net Adjustments to Balance Sheet Items Reviewed

                                                Net Adjusted

                         Line Item            Amounts (Billion)             Statements Affected

            Accounts Payable                       $2.350          Balance Sheet, Net Cost
            Advance and Prepayments                 0.767          Balance Sheet, Net Cost
            Credit Programs                         0.267          Balance Sheet, Net Cost
            Fund Balance with Treasury              0.018          Balance Sheet, Budgetary Resources
            Total Year-end Adjustments             $3.402

                                                       Table 1

       In addition, USAID had not completed its implementation of the recommendations made
       to correct previously identified deficiencies. The uncorrected system deficiencies created
       a consequential risk that the financial statements, including the performance MD&A
       information, could contain material misstatements.

       OIG and USAID officials agreed to focus the fiscal year 2000 audit efforts on the
       material line items on USAID’s balance sheet. We issued a series of reports that
       communicated the results of our audits conducted on selected line items reported in
       USAID’s fiscal year 2000 balance sheet. In the individual reports, we made
       recommendations, when applicable, to improve USAID’s ability to calculate and report
       its balances at fiscal year-end (See Appendix IV for a listing of reports issued for fiscal
       year 2000). Accordingly, we have not expressed an opinion on the fairness of the
       financial statements.

       Finally, with respect to the internal controls relating to the performance information
       reported in the Management Discussion and Analysis (MD&A), we attempted to gain an
       understanding of the design of the significant internal controls relating to the existence
       and completeness assertions as required by OMB Bulletin No. 01-02. However, our
       scope was impaired because we selected and reviewed a sample of Agency level
       performance indicators, which USAID officials informed us would be reported in the
       MD&A. Subsequently—after our fieldwork was almost complete—USAID officials
       informed us that the performance information previously identified would not be reported
       in the MD&A, but USAID officials instead decided to report on operating unit level
       indicators in the MD&A.




                                                            4
                                USAID FY 2000 Accountability Report                                     D-17




Based on OIG performance audits,5 we were able to comment on the internal controls
over the performance information reported in the MD&A. Based on those audits, we
know that USAID’s operating units did not consistently report credible performance
information—which was the basis for the MD&A. Also, based on our limited review, the
MD&A was not prepared in accordance with OMB Bulletin No. 97-01.6

The following Report on Internal Controls briefly discusses three significant problems:

        1.       The financial management systems at USAID cannot produce complete,
                 reliable, timely and consistent financial statements without material year-
                 end adjustments. (See table 1)

        2.       Computer security deficiencies continue to exist.

        3.       Internal controls over MD&A performance information must be
                 strengthened.

As described in the preceding paragraphs, the scope of our work was impaired to such an
extent that we are unable to express and do not express an opinion on the accompanying
balance sheet, un-audited financial statements, and their related footnotes, due to time
constraints, we were unable to evaluate the reasonableness of the material balance sheet
adjustments made by USAID. The table on the preceding page shows the adjustments
that were made to USAID’s account balances at the end of fiscal year 2000.




Office of Inspector General
February 26, 2001




        5         Audit of USAID/Malawi’s Performance Monitoring for Indicators Appearing in the
Fiscal Year 2002 Results Review and Resource Request Report; (Report No. 4-612-01-001-P), issued
October 19, 2000; Audit of Global Bureau’s Center for Economic Growth and Agricultural Development’s
Performance Monitoring for Indicators Appearing in the Fiscal Year 2002 Results Review and Resource
Request Report; (Report No. 9-000-00-003-P), issued September 26, 2000; Audit of USAID/Ghana’s
Performance Monitoring for Indicators Appearing in the FY 2001 Results Review and Resource Request;
(Report No. 7-641-00-007-P), issued June 30, 2000; Audit of USAID/Brazil’s Performance Monitoring for
Indicators; (Report No. 1-512-00-005-P), issued July 17, 2000.
         6        We reviewed and are commenting on the draft MD&A dated November 14, 2000.
Subsequent MD&As have been received; however, the contents of those subsequent MD&As have not
affected the results of our initial review.


                                                   5
D-18                               USAID FY 2000 Accountability Report




                                REPORT ON USAID'S
                               INTERNAL CONTROLS


       As stated previously, we attempted to audit the accompanying financial statements of
       USAID as of September 30, 2000 but our report on the financial statements disclaims an
       opinion on whether it was presented fairly because the scope of our work was impaired.
       In planning and performing our work to report on USAID’s financial statements, we
       obtained an understanding of the internal control structure by:

              •   reviewing the design of relevant policies and procedures,

              •   determining whether they have been placed in operation, and

              •   assessing control risk.

       We gained an understanding of the internal controls only to determine the extent of our
       auditing procedures for reporting on USAID’s fiscal year 2000 financial statements. We
       do not express an opinion on USAID’s overall internal control structure.

       As a result of problems noted in previous years’ audits, and because USAID had not yet
       completed actions to correct these deficiencies, the OIG agreed with USAID to focus the
       fiscal year 2000 audit efforts on the material line items on the balance sheet, the
       Management Discussion and Analysis, and compliance with applicable laws and
       regulations. We issued a series of reports that communicated the results of our audits
       conducted on the selected line items reported in USAID’s Fiscal year 2000 Balance
       Sheet. In the individual reports, we made recommendations to improve USAID’s ability
       to calculate and report its balances at fiscal yearend (See Appendix IV for a listing of
       reports issued for fiscal year 2000).


       Background on Internal Controls
       Under the Accounting and Auditing Act of 1950, the Federal Managers’ Financial
       Integrity Act (FMFIA) of 1982 and implementing policies established by the Office of
       Management and Budget (OMB), USAID’s management is responsible for establishing
       and maintaining effective systems of internal control. To fulfill this responsibility,


                                                   6
                               USAID FY 2000 Accountability Report                            D-19




management must make estimates and judgments to assess the expected benefits and
related costs of internal control policies and procedures. The General Accounting Office
has issued Standards for Internal Controls in the Federal Government that executive
agencies must follow in establishing and maintaining an effective internal control
structure as required by law and executive branch policies.

The objectives of an internal control structure, according to the OMB’s Bulletin No.
01-02, are to provide management with reasonable assurance about the:

       •   Reliability of financial reporting—transactions are properly recorded,
           processed, and summarized to permit the preparation of the Principal
           Statements in accordance with the federal accounting standards, and the
           safeguarding of assets against loss from authorized acquisition, use, or
           disposition.

       •   Reliability of performance reporting—transactions and other data that support
           reported performance measures are properly recorded, processed, and
           summarized to permit the preparation of performance information in
           accordance with criteria stated by management.

       •   Compliance with applicable laws and regulations—transactions are executed
           in accordance with (a) laws governing the use of budget authority and other
           laws and regulations that could have a direct and material effect on the
           Principal Statements, and (b) any other laws, regulations and government-
           wide policies identified by OMB in Appendix C of Bulletins 01-02.

Because of inherent limitations in any internal control structure, errors or irregularities
may still occur and not be detected. Also, predicting whether the internal controls will be
effective in the future is risky because changes in conditions may require additional
controls and the effectiveness of the design and operation of policies and procedures may
deteriorate.


Scope of Our Consideration of USAID’s Internal Controls
We obtained an understanding of the design of relevant policies and procedures and
whether they had been placed in operation to meet the objectives of an internal control
structure noted above. We also assessed control risk for the areas noted above.

Because USAID had not completed actions to correct deficiencies noted in previous
audits7 we focused our fiscal year 2000 audit efforts on selected material line items
reported on its balance sheet, the MD&A, general controls, and follow-up on prior
recommendations.


      7       See Appendix III of this report.


                                                 7
D-20                                USAID FY 2000 Accountability Report




       We do not express an opinion on the internal control structure because the purpose of our
       audit was to: (1) determine our auditing procedures for reporting on the financial
       statements, and (2) identify areas where we could assist the agency with improving its
       accounting policies and procedures and the reliability of its financial reports. We
       assessed control risk, performed tests, and issued a series of reports that communicated
       the results of our audits conducted on the selected material line items and made
       recommendations to improve USAID’s ability to calculate and report its balances at fiscal
       year end (See Appendix IV, for a listing of reports issued for fiscal year 2000). In
       assessing risks, we considered material internal control weaknesses identified by
       USAID’s management in its Accountability Report, and our prior and current audit
       efforts related to financial and internal control matters.

       We do not express an opinion on the performance information identified in the MD&A
       section of USAID’s financial statements, as the expression of such an opinion was not
       the purpose of our work. Although OMB requires the OIG to gain an understanding of
       internal controls over the performance information and report deficiencies that come to
       our attention, scope impairments prevented us from conducting our work as required.
       Nevertheless, we are able to comment on the internal controls related to the performance
       information reported in the MD&A. (See ‘’Internal controls over MD&A performance
       information must be strengthened” section of this report.)

       Even though our work was impaired as discussed above, we noted certain matters
       involving the internal control structure and its operation that we consider to be reportable
       conditions under standards established by the American Institute of Certified Public
       Accountants and OMB Bulletin No. 01-02. Reportable conditions involve matters
       coming to our attention relating to significant deficiencies in the design or operation of
       the internal control structure that, in our judgment, could adversely affect USAID
       management’s ability to demonstrate that the control objectives noted above were met.

       Some are serious enough to be considered material weaknesses. A material weakness is
       a condition in which the design or operation of one or more internal control elements
       does not reduce to a relatively low level the risk that errors or irregularities in amounts
       that would be material to the financial statements may occur and not be detected
       promptly by employees in the normal course of performing their duties.

       The following section briefly summarizes our findings for those matters that we consider
       to be reportable conditions and material weaknesses. Our work would not necessarily
       disclose all material weaknesses in the internal control structure.




                                                    8
                                 USAID FY 2000 Accountability Report                                         D-21




Audit Findings
USAID Has Made Improvements In Its
Financial Management Systems, But
Additional Corrective Actions Are Needed

USAID has made improvements in its financial management systems, but additional
corrective actions are needed to produce complete, reliable, timely, and consistent
financial information.8 USAID had not fully implemented corrective actions previously
reported and, as a result, made material year-end adjustments that may make the financial
statements unreliable. We found that USAID has made improvements in reporting its
Credit Program Receivables and reduced the differences between its records and the U.S.
Treasury’s records. However:

        •        Financial management systems still need improvements,

        •        Computer security deficiencies continue to exist, and

        •        Internal controls over MD&A performance information must be
                 strengthened.

We have provided additional information regarding these areas below. USAID reported
most of these material weaknesses in its fiscal year 1998, 1999, Accountability Reports
and in its 2000 Accountability Report, which will be issued on March 1, 2001. USAID
has also properly reported the systems deficiencies to OMB.


        USAID’s Financial Management
        Systems Still Need Improvements

Over the past year, USAID has continued to strengthen its financial management systems
related to reporting credit program receivables and fund balance with the U.S Treasury.
However, improvements are still needed for: (1) calculating and reporting accounts
payable and (2) accounting for advances to grantees with letter-of-credit agreements.
Appendix IV lists the reports that address each area in detail.




         8          See Appendix III for the status of uncorrected findings and recommendations from prior
audits that affect the current audit objectives.


                                                     9
D-22                                   USAID FY 2000 Accountability Report




       Reporting Credit Program Receivables - USAID continues to improve its processes
       and procedures for reporting credit program receivables. However, despite its
       improvements in this area, we identified significant discrepancies between the loan
       information maintained by Riggs Bank9 and USAID’s records. At September 30, 2000,
       USAID had absolute discrepancies totaling approximately $459 million ($267 million
       net) between its general and subsidiary ledgers.

       These discrepancies occurred because:

       •   Riggs Bank posted adjustments to its loan system throughout fiscal years 1999 and
           2000, under USAID direction, without adequate support.

       •   USAID used the September 30, 1999, closing balances from its legacy systems and
           adjusted those balances with only the current year activities recorded in Riggs Bank’s
           loan system to prepare its Credit Program trial balance for fiscal year 2000. USAID
           did not record all the adjustments posted to the Riggs Bank loan system during 1999
           and 2000.

       USAID identified and reconciled approximately $366 million ($182 million net) of the
       $459 million differences, which existed between its subsidiary and general ledger.
       USAID made the necessary adjustments for these differences. With our concurrence,
       USAID also posted a one-time unsupported adjustment of approximately $93 million
       ($85 million net) for the remaining unreconciled differences between its general ledger
       and its subsidiary ledger. These entries were necessary to bring USAID’s general ledger
       into agreement with its subsidiary ledger.

       Reporting Fund Balance with the U.S Treasury - USAID has also improved its
       internal controls in this area. However, we identified reportable conditions that if
       corrected, would enable USAID to provide a more reliable account of its Fund Balance
       with the U.S. Treasury and more reliable financial information to its oversight agencies at
       fiscal yearend. These reportable conditions do not have a material impact on the USAID
       Fund Balance with Treasury line item reported on its balance sheet. The significant
       reportable conditions are:

               •   USAID did not consistently and completely reconcile differences, of about
                   $18 million, between its records and the U.S. Treasury records, and

               •   USAID did not consistently comply with OMB reporting requirements for
                   submitting quarterly budgetary reports.


               9         In 1998, USAID entered into a contract with Riggs National Bank to provide loan
       servicing and financial management services for USAID’s loan portfolios. As of October 1, 1999,
       USAID’s legacy systems were discontinued and Riggs National Bank’s loan system became USAID’s
       subsidiary ledger for its loan portfolio.


                                                         10
                            USAID FY 2000 Accountability Report                               D-23




USAID needs to continue researching and resolving all outstanding reconciling items and
develop and implement procedures to obtain the necessary information needed from its
overseas missions to submit quarterly budget reports to OMB.

Calculating and Reporting Accrued Expenditures and Accounts Payable – We were
unable to determine whether USAID properly calculated and reported accounts payable
to permit the preparation of reliable financial statements as of September 30, 2000.
Initially, USAID’s plan was to calculate its accounts payable using a statistical model for
its Washington activities based on the obligations recorded in the New Management
System (NMS). However, USAID officials abandoned this plan because of uncertainties
about the reliability of the scheduled completion dates for the grants and contracts
recorded in NMS, needed for the model.

On December 12, 2000, USAID informed us that a new methodology was used to
calculate accounts payable, which resulted in an adjustment in excess of $1.9 billion.
Subsequently, on December 20, 2000, USAID informed us that this methodology was
further modified, and an additional adjustment of about $0.4 billion was recorded, for a
total adjustment of approximately $2.3 billion. The amount of substantive testing needed
to determine the reasonableness of the new methodology and the reliability of the
adjustment would have been prohibitive and unattainable by the statutory deadline for
submitting the audited financial statements to the Office of Management and Budget.
Accordingly, we were unable to determine the reliability of the amounts reported for
accounts payable. This is unacceptable under any conditions.

We were unable to determine whether USAID’s methodology for calculating accounts
payable for its Washington activities complied with the generally accepted accounting
principles. Under USAID’s planned statistical methodology, accounts payable estimates
calculated for its Washington activities would not be supported by actual or constructive
receipt of goods and services.

Under its new methodology, USAID’s Office of Financial Management performed a
trend analysis to establish its accounts payable balance for fiscal year 2000 based on the
accounts payable calculated and reported during fiscal years 1997 through 1999 and the
disbursements for the subsequent accounting periods. As a result of the new
methodology, for fiscal year 2000, USAID made an adjustment in excess of $2.3 billion
to more accurately report accrued expenditures and accounts payable balances in its
financial statements. Due to time constraints, we were unable to determine the
reasonableness of the new methodology and the reliability of the adjustment.

Accounting for Advances to Grantees – We were unable to determine whether
USAID’s advance account balance was reliable as of September 30, 2000, because:

       (1)     USAID’s use of the cash pooling method of accounting for advances may
               hinder its ability to report reliable status of financial and budgetary
               resources at the obligation and appropriation level.


                                            11
D-24                                    USAID FY 2000 Accountability Report




                (2)     USAID did not promptly record 603 grant agreements and modifications,
                        totaling approximately $633 million, in the grant financial accounting
                        system.

                (3)     USAID transferred unliquidated obligations totaling about $1.3 billion to
                        the Department of Health and Human Service’s Payment Management
                        System without verifying the accuracy of the transferred balances.

                (4)     USAID did not follow its established policy of performing a monthly
                        reconciliation between the advance subsidiary ledger and its general
                        ledger. At September 30, 2000, there was an unexplained difference of
                        $126 million between USAID’s general ledger and its advance subsidiary
                        ledger. USAID did not know which, if either, had the correct balance.

                (5)     USAID’s general ledger system did not provide an adequate audit trail for
                        the $1.3 billion advance balance reported.

                (6)     USAID did not promptly record expenses totaling about $767 million in
                        its general ledger.


       USAID agreed with our prior recommendations to change its methodology for disbursing
       advance to grantees, which would have corrected items one to four above. However, in
       fiscal year 2000, OMB issued a proposed amendment to Circular A-110 that proposed
       mandatory requirements for Federal Agencies to offer the pooled advance method to
       grantees. Because of this proposed change in regulations, USAID decided, with our
       concurrence, that the only practical course of action was to suspend its conversion of
       grantees to the obligation method of disbursing advances to grantees pending a final
       ruling by OMB. Therefore, USAID continues to use the pooled method for disbursing
       advances to grantees.

       To date, OMB has not issued a final ruling on the pooling of advance issue. However,
       per the Federal Register Notice on the Federal Financial Assistance Management
       Improvement Act of 1999 dated January 17, 2001, the CFO Council’s Grants
       Management Committee is clarifying differing positions on the pooled method issue for
       advances and will specify when pooling is applicable.

       Mission Activity – For fiscal year 2000, we statistically selected and reviewed financial-
       related activities at 10 USAID missions.10 The reportable conditions identified at the
       missions were communicated to management at the individual missions and are not
       repeated in this report.


                10       The ten missions selected for review were those in Jordan, Egypt, Ghana, Guinea, the
       Philippines, Indonesia, Russia, El Salvador, Botswana, and Mozambique.


                                                           12
                               USAID FY 2000 Accountability Report                                     D-25




Computer Security
Deficiencies Continue to Exist

Computer security deficiencies continue to exist at USAID. We have issued several audit
reports11 identifying certain computer security deficiencies that exposed USAID to
unacceptable risks that resources and sensitive data may not be adequately protected from
loss or destruction. The deficiencies exist because USAID has not implemented an
effective computer security program as required by the Computer Security Act and OMB
Circular A-130 “Management of Federal Information Resources”.

As previously stated, in its Accountability Reports, USAID identified its overall
computer security program and NMS security and access controls as material weaknesses
in its fiscal year 1997 Integrity Act Report, and its Accountability Reports for fiscal years
1998 and 1999. At the date of this report, the NMS security and access controls
weakness is no longer considered a material weakness because USAID made security
improvements to the NMS software, developed a detailed NMS Security Plan and
conducted a comprehensive Security Certification and Accreditation of NMS. Since
1997, USAID has also made progress in developing a computer security program. These
efforts, which include long-term and short-term improvements, are still underway.

The OIG identified general control weaknesses during three of the four audits mentioned
above, which were conducted at USAID/Washington during fiscal year 1999. During
fiscal year 2000, the OIG’s evaluation was based largely on USAID’s progress in
addressing the general control and security deficiencies identified in previous reports.
The review concluded that eleven of the recommendations, from the three general control
audit reports, were not closed until September 2000. More importantly, USAID’s own
computer security assessments identified numerous vulnerabilities through its network
scans of systems located in USAID/Washington and overseas missions. As a result,
USAID’s computer systems and the operations that rely on these systems were vulnerable
to disruption and misuse. Of particular concern is the need to improve and fully test
USAID’s plans for maintaining continuity of operations. In the event of a disaster,
USAID does not have an adequate disaster contingency plan that could affect its
continuing operations.

General controls are the structure, policies, and procedures that apply to an entity’s
overall computer operations. These controls create the environment in which application
systems and controls operate. If general controls are weak or ineffective, they severely
diminish the reliability of controls associated with individual applications. Without
effective general controls, application controls may be rendered ineffective by
circumvention or modification.
         11       Audit of USAID’s Progress Implementing a Financial Management System That Meets
Federal Financial Management Improvement Act Requirements (Audit Report No. A-000-99-003-P),
issued March 1, 1999: Audit of General Controls Over USAID’s Mainframe Computer Environment (Audit
Report No. A-000-99-004-P), issued March 1, 1999: Audit of General Controls Over USAID’s Client-
Server Computer Environment (Audit Report No. A-000-99-005-P), issued on March 1, 1999; and Audit of
USAID’s Actions to Correct Financial Management System Planning Deficiencies (Audit Report No. A-
000-00-003-P), issued August 24, 2000.

                                                 13
D-26                                  USAID FY 2000 Accountability Report




       Progress Correcting Financial Management System Planning Deficiencies - In
       August 2000, an OIG audit12 disclosed that USAID made progress in correcting the five
       financial management system planning deficiencies identified in a prior audit13, but only
       two of the five deficiencies have been fully corrected. The remaining three deficiencies
       have been only partially corrected by USAID management.

       The five planning deficiencies that were identified in the March 1, 1999, FFMIA audit
       report included the following:

               (1)   the lack of an agency-wide information technology target architecture,

               (2)   the lack of a financial management system portfolio that met OMB’s
                     guidelines for selecting information technology investments,

               (3)   the lack of a modular acquisition strategy,

               (4)   an inadequate financial management system remediation plan, and

               (5)   the lack of a program management office to oversee the development of an
                     integrated financial management system.

       Since we reported the above deficiencies, USAID has developed (1) an agency-wide
       information technology target architecture, (2) a financial management system portfolio,
       (3) a modular acquisition strategy, and (4) a financial management system remediation
       plan. USAID also established a program management office to oversee the development
       of an integrated financial management system.

       However, we found that USAID’s financial management system portfolio was not
       developed in accordance with OMB guidelines, and that the remediation plan was not
       adequate. In addition, we found that the lines of authority for the program management
       office need to be clarified.

       The OIG’s analysis of the FFMIA remediation plan in the USAID CFO FY 2002
       document14 disclosed that USAID’s remediation plan does not fully comply with OMB
       Circular No. A-11 requirements. There was significant improvement from the prior
       year’s plan in disclosing resources, remedies, and target dates; but, the world-wide
       deployment of the core financial system plan does not have specific target dates and
       required resources. The remediation plan states that USAID will achieve compliance

               12       Audit of USAID’s Actions to Correct Financial Management System Planning
       Deficiencies (Audit Report No. A-000-00-003-P), issued August 24, 2000.
               13       Audit of USAID’s Progress Implementing a Financial Management System That Meets
       Federal Financial Management Improvement Act Requirements (Audit Report No. A-000-99-003-P),
       issued March 1, 1999.
                14       USAID CFO FY 2002 Financial Management Budget Justification, dated January 2001.

                                                       14
                                     USAID FY 2000 Accountability Report                                           D-27




with FFMIA in FY 2003 by implementing an integrated financial management system at
USAID/Washington and 2 pilot Missions; however, USAID may not achieve this goal
until the system is implemented world-wide. In addition, the plan does not identify
officials responsible for bringing the system into compliance as required in the July 19,
2000 revision of OMB Circular No. A-11, “The Preparation and Submission of Budget
Estimates”.

The January 4, 2001, revision to Implementation Guidance for FFMIA of 1996, effective
for financial and audit reports for fiscal year 2000, requires auditors to report on agency
failures to meet deadlines in remediation plans. Our comparison of the prior and current
year’s remediation plans indicates that USAID will not meet milestones outlined in the
previous year’s plan. See table 2 below:

                  Comparison of Prior and Current Year’s Remediation Plans
                         System                                FY 2000 Target           FY 2001 Target
                                                                    Dates                   Dates
                                                              th                         st
  Core Financial System, USAID/W                             4 Quarter 2000            *1 Quarter 2001
  Managerial Cost Accounting System                          2000                      2002
  Procurement System                                         2002                      2003
                                                                                        th
  Core Financial System at 2 Pilot Missions                  March, 2001               4 Quarter 2001
                                                              th
  Core Financial System World-wide                           4 Quarter 2002            None

                                                     Table 2

USAID officials stated that the slippage of the target dates was primarily due to a re-
evaluation of their product acquisition process and a decision to mitigate the risk of
proceeding too quickly with the implementation of a complex and key system.


Internal Controls Over MD&A
Performance Information Must be Strengthened 15

USAID did not prepare the MD&A in accordance with OMB Bulletin No. 97-01, as
amended, “Form and Content of Agency Financial Statements,” dated October 16,1996.
For example, the MD&A did not:

       •        Compare actual results to goals or benchmarks or

       •        Report results that relate to the performance measures developed in USAID’s
                1997 Strategic Plan16, which was current for fiscal year 2000.


           15       The OIG will issue a separate audit report that will further explain the details relating to
this section.
          16        The USAID 1997 Strategic Plan was subsequently revised and the Agency began
           reporting against the objectives of the individual operating units.

                                                        15
D-28                                      USAID FY 2000 Accountability Report




       The Chief Financial Officer (CFO) worked collaboratively with USAID’s Bureau for
       Policy and Program Coordination (PPC) to develop a plan to prepare the MD&A for
       fiscal year 2000. As agreed to in the plan, PPC provided the CFO with USAID’s draft
       Performance Overview.17 However, because USAID’s draft Performance Overview did
       not include all of the information needed for the MD&A, the CFO was not able to
       prepare the MD&A in accordance with OMB Bulletin No. 97-01. As a result, USAID’s
       MD&A for fiscal year 2000 did not provide financial statement users with a fair
       presentation of its program performance.

       In addition, as discussed previously, we were not able to review the performance
       information because of the scope impairment. However, the OIG is conducting a series
       of audits relative to the operating units’ performance reports—which forms the basis of
       the performance information reported in the MD&A. Based on the audits completed to
       date,18 we determined that the operating units did not consistently report credible
       performance information as required by Automated Directives System E203.5.5,
       “Performance Monitoring”19. Credible performance information was not consistently
       reported because the operating units needed to develop and implement a proper system of
       internal controls for monitoring program performance. Specifically, operating units
       needed to prepare performance-monitoring plans and perform data quality assessments—
       two key elements of USAID’s performance monitoring system. As a result of USAID’s
       reliance on the operating units’ performance information, the MD&A may not
       consistently provide financial statement users with credible performance information for
       decision-making purposes.20




       Office of Inspector General
       February 26, 2001



                17       The Performance Overview, a Government Performance and Results Act of 1993
       document, is intended to discuss the performance of USAID’s programs in fiscal year 2000.
              18         Audit of USAID/Malawi’s Performance Monitoring for Indicators Appearing in the
       Fiscal Year 2002 Results Review and Resource Request Report; (Report No. 4-612-01-001-P), issued
       October 19, 2000; Audit of Global Bureau’s Center for Economic Growth and Agricultural Development’s
       Performance Monitoring for Indicators Appearing in the Fiscal Year 2002 Results Review and Resource
       Request Report; (Report No. 9-000-00-003-P), issued September 26, 2000; Audit of USAID/Ghana’s
       Performance Monitoring for Indicators Appearing in the FY 2001 Results Review and Resource Request;
       (Report No. 7-641-00-007-P), issued June 30, 2000; Audit of USAID/Brazil’s Performance Monitoring for
       Indicators; (Report No. 1-512-00-005-P), issued July 17, 2000.
                19       ADS E203.5.5 was superceded by sections of ADS 201 and 203 in August 2000.
       However, ADS E203.5.5 was effective at the time the performance reports were prepared.
              20     This finding is based on reports already issued which contained recommendations that
       are not repeated in this report.

                                                          16
                            USAID FY 2000 Accountability Report                               D-29




              REPORT ON USAID COMPLIANCE



We attempted to review USAID’s financial statements for the year ended September 30,
2000. Our report does not provide an opinion on the financial statements. Our objective
was to determine whether the account balances reported on USAID’s Fiscal year 2000
financial statements were accurately stated in all respects. USAID management is
responsible for compliance with applicable laws and regulations related to its financial
statements and balance sheet.

Although we were unable to fully audit and report on USAID’s compliance with laws
and regulations because of the limited scope of our review, instances of potential material
noncompliance came to our attention with regards to the requirements of the following:

•      Chief Financial Officers Act of 1990

•      Federal Financial Management Improvement Act of 1996

•      Computer Security Act of 1987

We have reported other instances of noncompliance with applicable laws and regulations
in the internal control section of this report. The following sections discuss instances of
potential noncompliance with laws and related regulations listed above.


Chief Financial Officers Act of 1990
USAID has not fully delegated sufficient responsibilities and authority to the Chief
Financial Officer (CFO) to successfully implement an integrated financial management
system required by the Chief Financial Officers Act of 1990 and executive branch policy.

The Chief Financial Officers Act of 1990 (Public Law No. 101-576) requires each federal
agency’s CFO to develop and maintain an integrated financial management system,
including financial reporting and internal controls which:

•      Comply with applicable accounting principles, standards, and requirements, and
       internal control standards.

•      Comply with such policies and requirements as may be prescribed by the Director
       of the Office of Management and Budget (OMB).


                                             17
D-30                                   USAID FY 2000 Accountability Report




       •       Comply with any other requirements applicable to such systems.

       •       Provide for: (1) complete, reliable, consistent, and timely information which is
               prepared on a uniform basis and which is responsive to the financial information
               needs of agency management; (2) the development and reporting of cost
               information; (3) the integration of accounting and budgeting information; and (4)
               the systemic measurement of performance.


       Federal Financial Management Improvement Act of 1996
       The Federal Financial Management Improvement Act of 1996 (FFMIA) requires USAID
       to implement and maintain a financial management system that complies substantially
       with: (1) Federal requirements for an integrated financial management system; (2)
       applicable Federal accounting standards; and (3) requirements to post transactions to the
       United States Standard General Ledger at the transaction level.21 These requirements are
       detailed in OMB Circular No. A-127, Financial Management Systems. Section 7 of this
       Circular identifies the requirements or characteristics that Federal financial management
       systems should possess. Other policy documents further detail these requirements.22

       The FFMIA also requires that our audit of USAID’s financial statements report on
       whether the financial management system complies with the above mentioned accounting
       and system requirements. The following information summarizes USAID’s
       noncompliance with those requirements.

               Nature and Extent of Noncompliance

       During fiscal year 2000, USAID’s financial management systems did not substantially
       comply with the FFMIA’s accounting and system requirements. Although USAID
       managers have committed to follow disciplined practices to modernize USAID systems
       and have taken several steps to do so, significant improvements are not achievable until
       existing systems are replaced or modernized. As a result, during fiscal year 2000,
       USAID’s financial management systems did not comply substantially with: (1) federal
       financial management system requirements, (2) applicable federal accounting standards,
       and (3) requirements that transactions be posted to the United States Standard General
       Ledger at the transaction level as required by FFMIA.

              21       In this section, we report on USAID’s compliance with Federal requirements for financial
       management systems rather than its compliance with the Act itself.
              22       Office of Management and Budget’s Circulars No. A-130, Management of Federal
       Information Resources, No. A-134, Financial Accounting Principles and Standards, No. A-11, Preparation
       and Submission of Budget Estimates, and No. A-34, Instructions on Budget Execution; U.S. Treasury’s
       Treasury Financial Manual. In particular, the Joint Financial Management Improvement Program has
       published several documents describing detailed functional requirements that systems should possess to
       perform effectively.


                                                          18
                                 USAID FY 2000 Accountability Report                                         D-31




Financial management systems’ deficiencies that we first reported during fiscal year 1997
continue to exist.23 This occurred because USAID’s New Management System (NMS)
did not operate effectively. Therefore, USAID has had to rely on a combination of
outmoded legacy systems, informal and unofficial records maintained by individual
managers or organizational units, and NMS—which suffers from technical and
operational problems.

However, during fiscal year 2000 and 2001 USAID installed, configured, tested, and
readied a new, core financial system software. This new system, Phoenix, began
supporting Washington financial operations on December 15, 2000. Key financial data
including obligation, expenditure, and loan information have been migrated to the new
system.

Federal Financial Management System Requirements – USAID’s financial
management systems did not substantially comply with Federal financial management
system requirements. These requirements are designed to enable agencies to provide
complete, reliable, timely, and consistent information to decision makers and the public.
Agencies, including Treasury and OMB, need this information to: (1) carry out their
fiduciary responsibilities; (2) deter fraud, waste, and abuse; (3) facilitate efficient and
effective delivery of programs; and (4) hold agency managers accountable for the way
government programs are managed. The Congress needs this information to oversee
government operations, and the public, to exercise their right of access to government
information. Thus, a key objective of financial management systems is to ensure that
reliable financial and program performance data are obtained, maintained, and reported.

During fiscal year 2000, our audits and USAID’s management assessments confirmed the
continuing existence of financial management system deficiencies that we reported
during fiscal year 1997.24 As a result, in fiscal year 2000, USAID’s financial
management systems did not substantially comply with Federal financial management
system requirements. For example, USAID:

     •        Lacked an agency-wide classification structure, which standardizes data
              definitions and formats for financial management systems.

     •        Relied on multiple incompatible systems that cannot exchange data and thus,
              did not have an integrated financial management system.

         23     Audit of the Extent to Which USAID’s Financial Management System Meets
Requirements Identified in the Federal Financial Management Improvement Act of 1996 (Audit Report No.
A-000-98-003-P) issued March 2, 1998.
        24      Audit of the Worldwide Deployment of the New Management System (NMS), (Audit Report
No. A-000-97-004-P), issued March 31, 1997, Audit of USAID’s Efforts to Resolve the Year 2000 Problem,
(Audit Report No. A-000-97-005-P), issued July 11, 1997; Audit of USAID’s Compliance with Federal
Computer Security Requirements, (Audit Report No. A-000-97-008-P), issued September 30, 1997; Audit of the
Internal Controls for the Operational New Management System, (Audit Report No. A-000-97-009-P), issued
September 30, 1997, and Audit of the Status of USAID’s New Management System (NMS), (Audit Report No.
A-000-97-010-P), issued September 30, 1997.

                                                    19
D-32                               USAID FY 2000 Accountability Report




           •      Had not implemented effective computer security controls.

           •      Did not have a financial system that met Joint Financial Management
                  Improvement Program requirements to (a) support the Prompt Payment Act,
                  (b) support external reporting needs, and (c) ensure that costs are accumulated
                  and reported with proper matching of periods, segments, and outputs.

           •      Had not implemented an effective accrual methodology.

           •      Did not have a financial system able to attribute costs to organizations,
                  locations, projects, programs, or activities.

           •      Did not record accounts receivable in accordance with the U.S. Standard
                  General Ledger at the transaction level.

       Federal Accounting Standards – USAID’s financial management systems may not
       comply with applicable Federal accounting standards. Specifically, we were unable to
       determine whether USAID financial management systems complied with the Statements
       of Federal Financial Accounting Standards No. 1, Accounting for Selected Assets and
       Liabilities. However, we determined that USAID financial management systems did not
       comply with Statements of Federal Financial Accounting Standards No. 4, Managerial
       Cost Accounting Concepts and Standards for the Federal Government.

               Accounting For Selected Assets and Liabilities

       Statement of Federal Financial Accounting Standard No. 1 states that when an entity
       accepts title to goods, whether the goods are delivered or in transit, the entity should
       recognize a liability for the unpaid amount of the goods. It adds that if invoices for those
       goods are not available when financial statements are prepared, the amounts owed should
       be estimated. We were unable to determine whether USAID’s methodology for
       calculating accrued expenditures and account payable for its Washington activities
       complied with generally accepted accounting principles.

       USAID initially planned to use a statistical model to calculate accounts payable for its
       Washington activities based on obligations recorded in the New Management System
       (NMS). This plan was abandoned due to USAID’s uncertainty, about the accuracy of the
       scheduled completion dates for contracts recorded in NMS. As a result of this
       uncertainty a new methodology was adopted by USAID to calculated accounts payable.

       Under its new methodology, the Office of Financial Management performed a trend
       analysis of the accounts payable calculated and reported during fiscal years 1997 through
       1999 and the disbursements for the subsequent accounting periods to establish its
       accounts payable balance for fiscal year 2000. As a result of the new methodology for
       fiscal year 2000, USAID made an adjustment in excess of 2.3 billion. Due to time



                                                    20
                             USAID FY 2000 Accountability Report                               D-33




constraints, we were unable to evaluate this new methodology and the reasonableness of
the adjustment.

        Managerial Cost Accounting Concepts and Standards for the Federal Government

USAID has not implemented Statement of Federal Financial Accounting
Standards No. 4. USAID did not comply with five fundamental elements of managerial
cost accounting:

    •      Requirement for cost accounting - Each reporting entity should accumulate
           and report the costs of its activities on a regular basis for management
           information purposes.

    •      Responsibility segments - Management of each reporting entity should define
           and establish responsibility segments.

    •      Full cost - Reporting entities should report the full costs of outputs in general
           purpose financial reports.

    •      Inter-entity costs - Each entity’s full cost should incorporate the full cost of
           goods and services that it receives from other entities.

    •      Costing methodology - Cost of resources consumed by responsibility
           segments should be accumulated by type of resource.

This standard requires federal agencies to be able to provide reliable and timely
information on the full cost of their programs, activities, and outputs by responsible
segments. The cost assignments should be performed using one of the following
methods listed in order of preference: (a) directly tracing costs wherever feasible and
economically practicable; (b) assigning costs on a cause-and-effect basis; or (c) allocating
costs on a reasonable and consistent basis. Cost information developed for different
purposes should be drawn from a common data source, and output reports should be
reconcilable to each other. Currently, USAID’s financial system is not able to attribute
costs to organizations, locations, projects, programs, or activities.

Use of United States Standard General Ledger at the Transaction Level - USAID did
not record Accounts Receivable, Mission activities, Non-Expendable Property, and Loans
in accordance with the United States Standard General Ledger at the transaction level.
USAID did not have an integrated accounting and financial management system.

        Cause of Noncompliance

Ineffective processes for managing information resources continue to be the primary
cause of USAID’s difficulties deploying effective information systems. USAID reported
deficiencies in its processes for managing information resources as a material weakness
in its fiscal year 1997, 1998, 1999, and planned 2000 reports under the Integrity Act.



                                             21
D-34                                  USAID FY 2000 Accountability Report




       Although USAID has taken steps to implement disciplined processes, and in September
       1999, awarded a contract for a commercial-off-the-shelf core accounting system to
       replace its current core accounting system, significant improvements are not achievable
       until (1) the new system is installed and made operational and (2) other financially-
       related systems are replaced or modernized. However, during FY 2000 and 2001 USAID
       installed, configured, tested, and readied a new core financial system software. This new
       system, Phoenix, began supporting Washington financial operations on
       December 15, 2000.

               Organization Responsible for Noncompliance

       The Clinger-Cohen Act of 1996 makes the head of each agency, in consultation with the
       Chief Financial Officer (CFO) and Chief Information Officer (CIO), accountable for
       establishing policies and procedures that ensure that: (1) agency information systems
       provide financial and program performance data for agency financial statements; (2)
       financial and performance data are provided to financial management systems in a
       reliable, consistent, and timely manner; and (3) financial statements support assessments
       and revisions of mission and administrative processes, and measurements of the
       performance of information technology investments. Thus, the CFO and the CIO,
       reporting to the Administrator, share responsibility for implementing and maintaining an
       effective and efficient financial management system that meets Federal requirements for
       financial management systems. At USAID, both the CFO and CIO positions are located
       within the Management Bureau.

               Recommendations

       In our March 1999 audit report, Audit of USAID’s Progress Implementing a Financial
       Management System that Meets Federal Financial Management Improvement Act
       Requirements, 25 we reported weaknesses in USAID’s FFMIA remediation plans. That
       report recommended that before acquiring any financial management system
       components, USAID should:

               1. complete an Agency-wide information technology target architecture,

               2. use the target architecture to define USAID’s financial management system
                  portfolio,

               3. complete a modular acquisition strategy, and

               4. revise its remediation plan and develop sufficiently detailed supporting plans.


               25        Audit of USAID’s Progress Implementing a Financial Management System that Meets
       Federal Financial Management Improvement Act Requirements, (Audit Report No. A-000-99-003-P),
       issued March 1, 1999.


                                                       22
                               USAID FY 2000 Accountability Report                                D-35




The report also recommended that USAID establish a strong program management office
with the responsibility, authority, and resources to apply disciplined practices to
implement financial management system improvements.

As of January 31, 2000, USAID had made management decisions to complete a modular
acquisition strategy and to revise its remediation plan and had taken final action to
complete an agency-wide information technology target architecture, to use the target
architecture to define the Agency’s financial management system portfolio, and to
establish a program management office to implement financial management system
improvements.

In an August 2000 report26, we followed-up on the open recommendations in the above
report. We reported that USAID should:

        (1)   Develop and implement a process for selecting information technology
              investments that meets requirements of OMB’s guidelines for Selecting
              Information Technology Investments and GAO’s Executive Guide: Leading
              Practices in Capital Decision Making27; and apply the process to prioritize
              USAID’s financial management system investments as part of a portfolio of
              planned information technology investments for USAID’s Fiscal Year 2002
              budget submission to OMB;

        (2)   Revise the financial management systems remediation plan to include the
              estimated resources, remedies, and intermediate target dates needed to
              implement an integrated financial management system as required by the
              Federal Financial Management Improvement Act of 1996; and

        (3)   Ensure that the Change Management Team and the Office of Financial
              Systems Integration collectively have the responsibilities, the authority, and
              the structure to direct the planning, design, development, and deployment of
              all financial and mixed financial system components of the Integrated
              Financial Management System Program.

We expect to report on our follow up work in the OIG’s next Semiannual Report to
Congress, which will cover the period ending March 31, 2001.

Progress Implementing an Integrated Financial Management System

The Federal Financial Management Improvement Act (FFMIA) requires that each agency
implement and maintain financial management systems that comply with Federal
financial management systems requirements including Office of Management and

        26       Audit of USAID’s Actions to Correct Financial Management System Planning
Deficiencies, (Audit Report No. A-000-00-003-P), issued August 24, 2000.

        27       Executive Guide: Leading Practices in Capital Decision Making (GAO/AMID-99-32,
December 1998)

                                                23
D-36                               USAID FY 2000 Accountability Report




       Budget’s Circular Number A-127. USAID’s goal is to implement an integrated financial
       management system in accordance with these requirements by fiscal year 2003.

       To attain this goal, USAID established the Office of Financial Systems Integration to
       plan for and acquire USAID’s financial systems. This Office, under the direction of the
       Chief Financial Officer and Chief Information Officer, is also preparing an overall plan to
       modernize USAID’s legacy systems as components of an integrated financial system.

       USAID is in the process of implementing an integrated financial management system
       using commercial-off-the-shelf software that will comply with the FFMIA and the
       Clinger-Cohen Act of 1996. Because USAID’s integrated system will include legacy
       system information, USAID will need to convert and move data from existing systems to
       the new core financial management system. This new system is being implemented in
       several phases.

              • Phase I focused on implementing the core financial accounting component of
                the new integrated financial management system (Phoenix). Deployment was
                initially scheduled for completion by October 1, 2000; however, USAID senior
                management delayed the start date. The actual deployment date was not until
                December 15, 2000.

              • Phase II is the pilot implementation of the core accounting system at two
                overseas missions (Egypt and El Salvador). This is scheduled for completion
                by April 1, 2001; however, phase II may also be delayed.

              • Subsequent phases will focus on deploying the new system to other missions.

       The OIG identified several concerns with the Phoenix implementation before the
       scheduled deployment. These include:

          •   Compressed and limited software testing of functional requirements and lack of
              parallel operations.

          •   Delays in migrating data from the old to the new system.

          •   Incomplete and untested contingency plan to ensure continued operation in the
              event of unforeseen problems occurring before or after deployment.

          •   Deferral of some system functionality until December 2000 and later.

          •   Uncertain attendance at user training sessions.

          •   No process to document the showstoppers and the final decisions authorizing
              deployment of the system.



                                                   24
                               USAID FY 2000 Accountability Report                                    D-37




The OIG expressed these concerns and recommended that USAID thoroughly test
Phoenix and work out any operational problems to better assure that the system will
operate effectively and provide reliable information to managers. To address such
concerns, USAID delayed the deployment, took action to conduct more testing, increased
users’ participation, and designed a project tool to assess the operational readiness of
Phoenix.


Computer Security Act of 1987
The Computer Security Act of 1987 (Public Law No. 100-235) requires Federal agencies
to protect information by: (1) identifying sensitive systems, (2) developing and
implementing security plans for sensitive systems, and (3) establishing a training
program to increase security awareness and knowledge of accepted security practices.
OMB Circular No. A-130 contains executive branch policy for implementing this law.

In September 1997, the OIG reported28 that management deficiencies had prevented
USAID from implementing an effective computer security program as required by the
Computer Security Act and the Office of Management and Budget. These deficiencies
exposed USAID to high risks that resources will not be adequately protected from fraud
or misuse. The deficiencies occurred because USAID did not implement an adequate
system of management controls to support an effective computer security program. In
this regard, USAID had not: (1) developed an organizational structure that clearly
delegated responsibility and provided appropriate authority; (2) established planning
policies needed to provide a foundation for an effective security program; and (3)
implemented key management processes to ensure that security requirements were met.

The OIG conducted a series of audits of USAID’s general computer security controls
during fiscal year 199929. The OIG found that USAID had not implemented effective
general controls over its mainframe, client server (which hosts the NMS), and USAID
Mission computer systems. Specifically, the OIG identified deficiencies in: (1) the
entity-wide security program and management; (2) access controls; (3) application
software development and change processes; (4) segregation of computer system duties;
(5) system software change controls; and (6) continuity of services controls. A primary
reason for ineffective general controls is the lack of an agency-wide security program
that includes clear security responsibilities and agency-wide security processes.

        28      Audit of USAID’s Compliance with Federal Computer Security Requirements, (Audit
Report No. A-000-97-008-P), issued September 30, 1997.
        29      Audit of USAID/Peru’s General Controls Over the Mission Accounting and Control
System, (Audit Report No. 527-99-001-P), issued December 30, 1998); Audit of Access and System’s
Software Security Controls Over the Mission Accounting and Control System, (Audit Report No. A-000-
99-002-P), issued December 31, 1998; Audit of USAID’s Progress Implementing a Financial Management
System That Meets Federal Financial Management Improvement Act Requirements, (Audit Report No. A-
000-99-003-P), issued March 1, 1999; Audit of General Controls Over USAID’s Mainframe Computer
Environment, (A-000-99-004-P), issued March 1, 1999; and Audit of General Controls Over USAID’s
Client-Server Environment, (A-000-99-005-P), issued March 1, 1999.

                                                 25
D-38                                 USAID FY 2000 Accountability Report




       During fiscal year 2000, the OIG’s review of audit recommendations that were intended
       to resolve the above general control weaknesses and USAID’s computer security
       assessments confirmed the continuing existence of general control weaknesses. For
       example, our review found that nineteen of the twenty recommendations contained in our
       1999 audit reports remained open during fiscal year 2000. More importantly, USAID’s
       assessment found that computer security vulnerabilities continue to exist at
       USAID/Washington and overseas Missions. To illustrate, the assessments conducted at
       the overseas missions ranged from high to low risk because local officials did not
       consistently implement the security practices.

       USAID has made significant progress in developing a program to improve its ability to
       protect computerized information. For example, USAID has updated security policies,
       developed a security evaluation process that requires certification by USAID
       management, developed and conducted on-site risk assessments at six missions, and
       performed security evaluations and certifications of NMS. Also, USAID officials have
       crafted a Model Information System Security Program. This program provides a
       framework for identifying and disseminating to other government agencies a complete set
       of ‘best practices’ for implementing an effective computer security program. The
       program has been recognized by the Chief Information Officers Council, General
       Services Administration, and others, as an innovative and comprehensive approach that
       could benefit the entire Federal Government.

       Although significant improvements in USAID Information Systems Security have
       occurred, much work remains to be done to fully implement an effective computer
       security program. USAID estimates that computer security vulnerabilities will not be
       fully corrected until 2003.




       Office of Inspector General
       February 26, 2001




                                                     26
                            USAID FY 2000 Accountability Report                              D-39


                                                                           APPENDIX I
                                                                             Page 1 of 1




                   OIG EVALUATION OF USAID
                   MANAGEMENT COMMENTS



USAID’s management agreed with the findings in this report and commented that they
are pleased to see that the OIG noted the improvements the Agency has made regarding
the two largest assets on the balance sheetFund Balance with the U.S. Treasury and
Credit Program Receivables. USAID management further agrees that additional work is
needed to improve the reporting of advances and accounts payable, the other two items
on the balance sheet reviewed by the OIG in the fiscal year 2000 audit. With our
concurrence, USAID’s management is waiting on the decision from the Chief Financial
Officer’s Council Grants Management Committee to determine whether the Agency will
convert all grants from the pooled method to the grant-by-grant basis. For accounts
payable, USAID’s management commented that the $2.3 billion adjusting entry,
developed using a trend analysis, was needed to correct the previously accrual calculated
by the New Management System. USAID will use the same trend analysis to develop its
accounts payable amounts for fiscal year 2001. The OIG plan to review this
methodology and any resulting adjustments in detail during our fiscal year 2001 GMRA
audit.

USAID management noted that they have revised the approach to performance reporting
in response to criticism about the manageability of its strategic plan. The revision was
incorporated in USAID’s fiscal year 2000 Strategic Plan to begin reporting at the
operating unit level in fiscal year 2000. USAID management further recognized our
observation about the credibility of the performance reporting in the fiscal year 2000
Accountability Report. In response to our observation, USAID noted that they are
implementing workshops worldwide for managing, planning, and offering technical
assistance to the operating units to improve quality control of its performance-monitoring
plan. As necessary, the OIG will evaluate the effectiveness of this implementation during
our fiscal year 2001 GMRA audit.

See Appendix II for USAID’s management comments.




                                            1
D-40         USAID FY 2000 Accountability Report


                                                   APPENDIX II
                                                     Page 1 of 2




       USAID'S MANAGEMENT COMMENTS




                             1
USAID FY 2000 Accountability Report                   D-41


                                      APPENDIX II
                                        Page 2 of 2




                2
D-42                               USAID FY 2000 Accountability Report


                                                                                 APPENDIX III
                                                                                    Page 1 of 9




               STATUS OF UNCORRECTED FINDINGS
              AND RECOMMENDATIONS FROM PRIOR
               AUDITS THAT AFFECT THE CURRENT
                       AUDIT OBJECTIVES




       Office of Management and Budget’s Circular No. A-50 states that a management
       decision on audit recommendations shall be made within a maximum of six months after
       issuance of a final report. Corrective action should proceed as rapidly as possible. The
       following audit recommendations directed to USAID remain uncorrected and/or final
       actions have not been completed as of September 30, 2000. We have also noted where
       final action was taken subsequent to fiscal year-end but prior to the date of this report.


       Reports on USAID’s Financial Statements, Internal
       Controls, and Compliance for Fiscal year 1996
       Audit Report No. 0-000-97-001-C February 24, 1997

       Recommendation No. 1:         We recommend that USAID’s Chief Financial Officer:

       1.1    Develop and implement procedures to ensure that journal vouchers for the general
              ledger are properly prepared by accounting staff and reviewed by supervisors;

       1.2    Require that journal vouchers be adequately supported prior to entering the
              financial data into the general ledger; and

       1.3    Provide adequate supervision to ensure that all adjusting entries entered into the
              general ledger system are supported and authorized.

       Recommendation is pending final action by USAID

       Recommendation No. 2:         We recommend that USAID’s Chief Financial Officer:

       2.2    Develop and implement detailed written procedures, which provide adequate
              guidance to the financial management staff for properly recording transactions as
              they occur;
                            USAID FY 2000 Accountability Report                             D-43


                                                                          APPENDIX III
                                                                             Page 2 of 9


Recommendation is pending final action by USAID


Audit of the Worldwide Deployment of the
New Management System (NMS)
Audit Report No. A-000-97-004-P March 31, 1997

Recommendation No. 2:            We recommend that USAID assign a senior manager to
manage the NMS project reporting directly to the CIO, AA/M, or USAID Administrator.
Direct the project manager to work with the CIO to prepare an implementation plan
identifying the steps, timeframes, and resources needed to: (1) analyze the technical and
implementation problems that currently limit NMS from achieving its full potential; (2)
implement disciplined IRM processes; and (3) identify alternative implementation
strategies, including pilot testing, prototyping, and incremental deployment of NMS
capabilities.

Recommendation is pending final action by USAID

Recommendation No. 3:          We recommend that USAID assign a senior manager to
develop and manage a performance-based acquisition plan that requires the contractor to
deliver a fully functioning system—or a subset of the system—that meets financial
management and USAID requirements.

Recommendation is pending final action by USAID


Audit of USAID’s Compliance with
Federal Computer Security Requirements
Audit Report No. A-000-97-008-P September 30, 1997

Recommendation No. 2:         We recommend that the Acting Assistant Administrator for
Management demonstrate support for an effective computer security program by taking
action to direct the computer security program manager to develop and implement an
effective computer security program by:

2.2    Ensuring that adequate resources and skills are available to implement the
       program.

2.3    Revising policies to incorporate a planning process that will provide a sound
       foundation for an effective computer security program.

2.4    Implementing disciplined processes to ensure compliance with the Computer
       Security Act of 1987 and OMB Circular A-130.

2.5    Bringing sensitive computer systems, including NMS, into compliance with
       computer security requirements by: (1) assigning security responsibility, (2)
D-44                               USAID FY 2000 Accountability Report


                                                                                 APPENDIX III
                                                                                    Page 3 of 9


              preparing security plans, (3) completing contingency/disaster recovery plans, (4)
              identifying technical controls, (5) conducting security reviews, and (6) obtaining
              management’s authorization before allowing systems to process data.

       Recommendation is pending final action by USAID


       Audit of the Internal Controls for the
       Operational New Management System
       Audit Report No. A-000-97-009-P September 30, 1997

       Recommendation No. 1:          We recommend that the Assistant Administrator for
       Management design, document, test, and implement a system of internal controls for the
       New Management System that complies with the General Accounting Office’s Standards
       for Internal Controls in the Federal Government.

       Recommendation is pending final action by USAID


       Reports on USAID’S Financial Statements,
       Internal Controls, and Compliance
       for Fiscal years 1997 and 1996
       Audit Report No. 0-000-98-001-F March 2, 1998

       Recommendation No. 3:       Until USAID implements a compliant accounting and
       financial management system, we recommend that the Chief Financial Officer develop
       and implement a methodology to accrue expenditures and adjust outstanding advances
       and prepayments to ensure that the financial statements are not materially overstated.

       Recommendation is pending final action by USAID

       Recommendation No. 5:         We recommend that the Assistant Administrator/Bureau for
       Policy and Program Coordination establish a common set of indicators for use by operating
       units to measure progress in achieving USAID’s strategic goals and objectives and that
       allow for the aggregation of program results reported by operating units.

       Recommendation is pending final action by USAID

       Recommendation No. 7:        We recommend that USAID:

       7.1    Establish procedures to ensure (1) operating units report results for the year ended
              September 30 and (2) results reported in the MD&A section of USAID’s financial
              statements and Annual Performance Report be clearly shown as achievements for
              that year.

       Recommendation is pending final action by USAID
                            USAID FY 2000 Accountability Report                                D-45


                                                                           APPENDIX III
                                                                              Page 4 of 9


Recommendation No. 8:         We recommend that the Chief Financial Officer:

Implement a comprehensive policy that will incorporate an automatic assessment of
interest charges against all delinquent receivables, and that these assessments are actively
monitored for managerial and statutory reporting purposes.

Recommendation is pending final action by USAID

Recommendation No. 9:        We recommend that the Chief Financial Officer develop and
implement policies and procedures to ensure adherence to the requirements of the Debt
Collection Act of 1982 and the Debt Collection Improvement Act of 1996. These policies
and procedures should at a minimum ensure that:

9.1    All billing offices incorporate due process rights into demands for payment;

All delinquencies in excess of 180 days are identified in a timely manner, and referred to
the United States Treasury; and

9.3    The issuance or guarantee of consumer credit is reported to consumer credit
       reporting agencies.

Recommendation is pending final action by USAID


Audit of the New Management System (NMS) Status
Audit Report No. A-000-98-004-P March 31, 1998

Recommendation No. 1:          We recommend that the Chief Information Officer complete
a detailed analysis of the costs, benefits, and risks to (1) implement commercial
procurement and budget packages and/or (2) use cross servicing for procurement and
budget functions before deciding to repair the NMS Acquisition and Assistance, and
Budget subsystems.

Recommendation is pending final action by USAID


Audit of Access and System Software Security Controls
Over the Mission Accounting and Control System (MACS)
Audit Report No. A-000-99-002-P December 31, 1998

Recommendation No. 1:        We recommend that the Director of IRM strengthen
MACS’ access and system software controls by developing and implementing standards
for access and system software installation and maintenance. These standards should
implement the agency’s policies pertaining to access and system software controls and
D-46                               USAID FY 2000 Accountability Report


                                                                                APPENDIX III
                                                                                   Page 5 of 9


       thus, provides step-by-step guidance to mission system managers in the implementation
       of these controls. These standards should specifically address the controls described in
       GAO’s Federal Information System Controls Audit Manual.

       Recommendation is pending final action by USAID


       Report on USAID’s Financial Statements,
       Internal Controls, and Compliance for Fiscal year 1998
       Audit Report No. 0-000-99-001-F March 1, 1999

       Recommendation No. 1:        Because the Chief Financial Officer lacks the authority
       called for in the CFO Act, we recommend that the Chief Financial Officer collaborate
       with the Assistant Administrator for Management, Chief Information Officer, and Bureau
       For Policy and Program Coordination to:

       1.1    Determine the specific responsibility, authority, and resources needed to meet the
              requirements of the Chief Financial Officers Act of 1990, which assigns the Chief
              Financial Officer responsibility to: (1) develop and maintain an integrated
              accounting and financial management system that meets federal financial system
              requirements, federal accounting standards, and the U.S. Standard General Ledger
              at the transaction level; (2) approve and manage financial management system
              design and enhancement projects; and (3) develop a financial management system
              that provides for systematic measurement of performance.

       Recommendation is pending final action by USAID


       Audit of General Controls Over USAID’s
       Mainframe Computer Environment
       Audit Report No. A-000-99-004-P March 1, 1999

       Recommendation No. 4:         To clarify security roles and responsibilities, we
       recommend that the CIO and CFO work with the Assistant Administrator for
       Management to determine the specific assignments of security roles and responsibilities
       needed to meet the requirements of the Chief Financial Officers Act of 1990 and OMB
       Circular A-130; and specifically delegate appropriate responsibility, authority, and
       resources to the Chief Financial Officer, other program managers, and technical and
       oversight staff.

       Recommendation is pending final action by USAID
                            USAID FY 2000 Accountability Report                              D-47


                                                                           APPENDIX III
                                                                              Page 6 of 9


Report to USAID Managers on Selected
USAID Internal Controls for Fiscal year 1998
Audit Report No. 0-000-99-002-F March 31, 1999

Recommendation No. 2:     We recommend that USAID’s Office of Financial
Management develop and implement procedures to:

2.1    Conduct, on a timely basis, accurate and complete reconciliation process.

Recommendation is pending final action by USAID

Recommendation No. 6:          Because USAID does not properly identify and record the
letter of credit disbursements, we recommend the Office of Financial Management:

Require all requests for advances through the letter-of-credit system include the specific
obligation number and amount of the advance requested;

6.2    Identify the record that the advances disbursed through the letter-of-credit system
       against the proper obligation at the time of the disbursement; and

Recommendation is pending final action by USAID

Recommendation No. 10:        We recommend that USAID’s Bureau for Policy and
Program Coordination:

10.2   Develop internal controls for identifying the full costs (USAID program and
       operating expenses and funding by other donors and host countries) of USAID
       programs, activities, and outputs.

Recommendation is pending final action by USAID


Audit on USAID’s Credit Programs and
Related Internal Controls Audit Report
No. 0-000-00-002-F, February 1, 2000

Recommendation No. 2:         We recommend that the Office of financial Management:

2.1    Complete the rescheduling and forward updated information on rescheduled loans
       to Riggs National Bank and ensure that the bank’s system reflects this
       information.

2.2    Research and make a determination about whether the adjustments recorded by
       Riggs National Bank was needed.
D-48                               USAID FY 2000 Accountability Report


                                                                                APPENDIX III
                                                                                   Page 7 of 9


       2.3    Direct Riggs National Bank to correct all adjustments that were not needed to the
              September 30, 1998 USAID Loan Accounting Information System (LAIS) loan
              balances.

       Recommendation is pending final action by USAID

       Audit on USAID’s Advances and
       Related Internal Controls Audit Report
       No. 0-000-00-003-F, February 1, 2000

       Recommendation No. 1:         We recommend that the Office of Financial Management
       develop procedures to reduce its backlog of unprocessed vouchers and establish a
       methodology of estimating incurred expenses that should be reported against the
       outstanding advances at fiscal year end.

       Recommendation is pending final action by USAID

       Recommendation No. 2:          We recommend that the Office of Financial Management
       develop procedures to ensure that grant agreements and amendments are promptly
       recorded in the financial systems and develop ways to integrate its financial systems.

       Recommendation is pending final action by USAID

       Recommendation No. 3:         We recommend that the Office of Financial Management
       perform a reconciliation to verify the accuracy of unliquidated obligation balances and
       related information transferred to the Department of Health and Human Services.

       Recommendation is pending final action by USAID

       Recommendation No. 4:         We recommend that the Office of Financial Management
       perform periodic reconciliations between its subsidiary ledger and general ledger.

       Recommendation is pending final action by USAID.


       Audit of USAID’s Accrued Expenses,
       Accounts Payable, And Related Internal Controls
       Report No. 0-000-00-004-F, February 9, 2000

       Recommendation No. 1:          We recommend that USAID’s Office of Financial
       Management Develop a methodology for calculating accrued expenses and accounts
       payable at fiscal year-end in accordance with the Federal Accounting Standards Advisory
       Board accounting standards.

       Recommendation is pending final action by USAID
                            USAID FY 2000 Accountability Report                               D-49


                                                                         APPENDIX III
                                                                            Page 8 of 9


Report on USAID’s Fund Balance with
the U.S. Treasury and Related Internal Controls
Report No. 0-000-00-005-F, February 17, 2000

Recommendation No. 4:          We recommend that the Office of Financial Management
record the liquidations of the advances disbursed against the 1998/1999 Development
Assistance appropriation (728/91021) to the benefiting appropriation and replenish those
funds to the 1998/1999 Development Assistance appropriation prior to the close of fiscal
year 2000 and implementation of the new accounting system.

Recommendation is pending final action by USAID


Audit of USAID’s Actions to Correct Financial
Management System Planning Deficiencies
Audit Report No.A-000-00-003-P August 24, 2000

Recommendation No. 1:         We recommend that the Chief Information Officer, in
conjunction with the Capital Investment Review Board and the Chief Financial Officer:

1.1    Develop and implement a process for selecting information technology investments
       that meets requirements of OMB’s guidelines for Selecting Information
       Technology Investments and GAO’s Executive Guide: Leading Practices in
       Capital Decision Making; and

1.2    Apply the process to prioritize USAID’s financial management system investments
       as part of a portfolio of planned information technology investments as part of a
       portfolio of planned information technology investments for USAID’s Fiscal year
       2002 budget submission to OMB.

Recommendation is pending final action by USAID

Recommendation No. 2: We recommend that the Chief Financial Officer revise the
financial management systems remediation plan (i.e., the Chief Financial Officer’s Five
Year Plan, Modernization Plan, and the Office of Management and Budget Circular A-11
budget schedules) to include the estimated resources, remedies, and intermediate target
dates needed to implement an integrated financial management system as required by the
Federal Financial management Improvement Act of 1996.

Recommendation is pending final action by USAID

Recommendation No. 3: We recommend that the Chief Information Officer and the Chief
Financial Officer work with the Assistant Administrator for management to ensure that the
Change Management Team and the Office of Financial Systems Integration collectively
have the responsibilities, the authority, and the structure to direct the planning, design,
D-50                             USAID FY 2000 Accountability Report


                                                                             APPENDIX III
                                                                                Page 9 of 9


       development, and deployment of all financial and mixed financial system components of
       the Integrated Financial management System Program.

       Recommendation is pending final action by USAID
                            USAID FY 2000 Accountability Report                            D-51


                                                                          APPENDIX IV
                                                                             Page 1 of 1




        INTERNAL CONTROL REPORTS ISSUED
              FOR FISCAL YEAR 2000



The following is a list of the individual reports issued on USAID’s fiscal year 2000
financial statements major line items:

       Audit on USAID’s Credit Programs and Related Internal Controls for Fiscal year
       2000, Report No. 0-000-00-002-F, February 15, 2001.

       Audit on USAID’s Advances and Related Internal Controls for Fiscal year 2000,
       Report No. 0-000-00-003-F, February 15, 2001.

       Audit of USAID’s Accrued Expenses, Accounts Payable, and Related Internal
       Controls for Fiscal year 2000, Report No. 0-000-00-004-F, February 15, 2001.

       Audit on USAID’s Fund Balance with the U.S Treasury and Related Internal
       Controls for Fiscal year 2000, Report No. 0-000-00-005-F, February 15, 2001.
USAID FY 2000 Accountability Report       E-1




                              Part E
     USAID’s Financial Remediation Plan
E-2                     USAID FY 2000 Accountability Report




                           TABLE OF CONTENTS


      1.        OVERVIEW
      2.        CFO GOALS AND STRATEGIES
      2.1       Background
      2.2       USAID CFO Vision
      2.3       USAID Strategic Goals and Management Objectives
      3.        AUDITED FINANCIAL STATEMENTS
      4.        FINANCIAL MANAGEMENT SYSTEMS STRUCTURE
      4.1       Current Financial Management Systems Structure
      4.2       Target Financial Management Systems Structure
      4.3       Financial Management Systems Strategy
      4.4       Planned Major Systems Investments
      4.5       FFMIA Remediation Plan
      5.        GRANTS MANAGEMENT

      List of Figures

      Figure   E.1   Current Financial Management Systems Structure
      Figure   E.2   FMIA Material Weaknesses
      Figure   E.3   IG Audit Findings and Recommendations
      Figure   E.4   Target Financial Management Systems Structure
      Figure   E.5   Logical Business Architecture
      Figure   E.6   Target Financial Management Systems Architecture
      Figure   E.7   Financial Management System Compliance
      Figure   E.8   FFMIA Remediation Planning

      List of Tables

      Table E.1 Planned Work to Achieve Substantial Compliance with FFMIA
      Table E.2 Financial Management Systems Remediation Plan Summary
                                         USAID FY 2000 Accountability Report                                       E-3




           1. Overview                   replaced and a new core financial       must play significant operational,
                                         system has been implemented in          advisory and liaison roles in
The need for cost-effective and          Washington. The new core financial      accomplishing results through the
reliable financial management            system implementation paves the         Agency’s management goal if
systems to support USAID’s               way for Agency-wide integration of      accurate program performance and
worldwide operations represents an       financial information. It will be an    financial information is to be
enormous challenge for the Agency.       enabler for linking Missions to         consistently reflected in agency
USAID’s Chief Financial Officer          customers through electronic            decisions.
(CFO) is charged with modernizing        processing of business transactions.
and integrating USAID’s financial        Fulfillment of the modernization plan   The government wide priorities of
management systems and the               will require sustained management       the CFO Council are reflected in this
business processes that depend on        focus and emphasis in each              plan. The Council’s priorities guide
them. The CFO specifically oversees      succeeding budget request over the      the Agency’s goals in recognizing the
the financial systems and operations     next five years.                        need for integrated processes and
of the Agency. The CFO in turn                                                   systems that, when implemented,
works with other Agency managers         USAID has made significant progress     solve end-user and customer
of systems with financial                in aligning its management goal and     problems, achieve performance
components to ensure these systems       objectives to focus on the basic        objectives, and gain compliance
are integrated with the financial        management functions that it must       with laws and regulations.
systems and provide reliable,            perform well to be a high performing
consistent and timely financial          and efficient organization. These       The plan sets out specific objectives,
information. The Agency’s financial      objectives recognize that USAID         intermediate results, and indicators
and administrative operations are        needs to apply technologies and         USAID will use to annually assess
critically dependent on the              process improvements through            progress or performance against the
implementation of modern systems,        expanded use of the Internet. The       objectives of the plan. Where
improved services, and proven            Internet can provide proven support     appropriate, the plan suggests
technologies that enable the Agency      solutions for internal and external     preliminary performance targets.
workforce to connect with and            work processes. Investing in systems    These targets will be refined and
deliver services to its customers,       and services that are generally         possibly modified through USAID’s
stakeholders, and partners through       available to commercial and             Annual Performance Plans. Results
more cost-effective business             Government users will deliver these     achieved by USAID against the plan
processes. This document sets forth      solutions and transform the way the     will be reported in its annual
near term plans and a target for         Agency conducts its business.           Accountability Report and its Annual
modernizing and integrating USAID’s                                              Performance Report.
financial management systems.            The objectives recognize the need
                                         for accountability and integrity in
The goal of the USAID CFO’s              meeting financial management
strategic plan is to dramatically        standards and performance               Michael Smokovich
improve financial accountability and     objectives in programs managed by       Chief Financial Officer
services throughout the Agency and       the CFO and others. The
to enable stakeholders and partners      accountability framework established
to exchange information and to           in the plan presumes strong
conduct business with USAID              collaboration between financial and
electronically. USAID’s                  program personnel and an
modernization plan for an integrated     overarching commitment to effective
financial management system is           working relationships with the
succeeding. Since its inception at the   Inspector General and stakeholders.
start of FY 2000, obsolete personnel     Accordingly, the CFO organization
and payroll systems have been
E-4                                             USAID FY 2000 Accountability Report




  2. CFO Goals and Strategies                    Management and Budget (OMB) in                   • Democracy and good governance
                                                 its Federal Financial Management                   strengthened.
2.1 Background
                                                 Status Report and Five-Year Plan.
The long-term goals of recent Federal            USAID’s financial management                     • Human capacity built through
legislation are to encourage Federal             improvement program (FMIP)                         education and training.
entities to disclose the results of their        performance goals are aligned to the
operations and financial position;                                                                • World population stabilized and
                                                 CFO Council’s priorities and the                   human health protected.
provide information which guides                 FMIP performance indicators address
the effective allocation of resources            key OMB objectives and significant               • The world’s environment
and enhances cost-effectiveness; and             financial management challenges                    protected for long-term
enables Congress, agency managers,               facing the Agency.                                 sustainability.
the public and others to assess
management performance and                       2.2 USAID CFO Vision                             • Lives saved, suffering associated
stewardship.1 Incomplete financial                                                                  with natural or man-made
                                                 The vision for USAID’s Chief
information and non-integrated                                                                      disasters reduced, and conditions
                                                 Financial Officer organization is to
financial systems compromise                                                                        necessary for political and/or
                                                 provide an environment in which
USAID’s ability to achieve the long-                                                                economic development re-
                                                 USAID officials use high quality
term goals envisioned by Congress. It                                                               established.
                                                 financial and performance
is the function and responsibility of
                                                 information to make and implement
the Chief Financial Officer working                                                               To achieve its management goal,
                                                 effective policy, management,
in concert with other Agency                                                                      USAID has identified five objectives.
                                                 stewardship, and program decisions.
bureaus, offices and missions to                                                                  These are:
                                                 This vision directly supports:
correct these problems. The
reference to CFO herein, unless                                                                   • Accurate program performance
                                                 • USAID’s mission and mandate as
indicated otherwise, reflects the                                                                   and financial information reflected
                                                   expressed in its Strategic Plan; and
combined efforts of the CFO and                                                                     in Agency decisions.
Agency staff engaged in financial                • Government-wide financial
                                                                                                  • USAID staff skills, Agency goals,
management stewardship.                            management improvement
                                                                                                    and core values better aligned to
                                                   programs
                                                                                                    achieve results efficiently.
In addition to these considerations,
USAID must align itself with                     2.3 USAID Strategic Goals and
                                                                                                  • USAID goals and objectives
government-wide financial                            Management Objectives
                                                                                                    served by well-planned and
management procedures and                        USAID recently revised its Strategic               managed acquisition and
improvement priorities as                        Plan to establish a new management                 assistance.
recommended by the Chief Financial               goal. Its new management goal is to
Officers’ Council. The CFO has kept              achieve its sustainable development              • USAID goals and objectives
this Council’s recommendations in                and humanitarian assistance goals in               supported by better information
mind as it developed the strategic               the most efficient and effective                   management and technology.
plan presented in this document. The             manner. USAID’s sustainable
CFO and USAID consider this                      development and humanitarian                     • Collaboration with partners and
strategic plan to be consistent with             assistance goals are:                              stakeholders strengthened.
government-wide priorities identified
by the CFO Council and to support                                                                 This strategy document focuses on
                                                 • Broad-based economic growth
objectives for implementing each                                                                  the objectives, intermediate results
                                                   and agricultural development
priority established by the Office of                                                             and activities planned by the CFO to
                                                   encouraged.


     1 Relevant legislation includes the Chief Financial Officer’s Act (1990), the Government Performance and Results Act (1993), Federal
Financial Management Improvement Act (1996), and the Government Management Reform Act (1994). See also Office of Management and
Budget Bulletin 97-01 and Circular A-127.
                                               USAID FY 2000 Accountability Report                                                       E-5




help achieve USAID’s first                     detailed under each intermediate                 Each of these IRs is discussed in
management objective; i.e., to                 result are largely for work to be                greater detail below.
provide accurate financial                     accomplished by the end of FY
information to USAID managers.                 2002.                                            IR 1.1: Improve Agency Financial
                                                                                                Accountability
2.4 CFO Strategic Objectives                   CFO Objective 1: USAID’s Financial               Background:
                                               Management Systems Effectively
The CFO has identified three                                                                    The Agency has reported a material
                                               Support Agency Decisions and
strategic objectives necessary to              Reporting.                                       weakness in its financial
improve the accuracy of USAID’s                                                                 management procedures under
                                               Progress against this objective will be
financial information. These are:                                                               Federal Managers’ Financial Integrity
                                               assessed using the following three
                                                                                                Act (FMFIA) since 1993. The
                                               indicators:
1. USAID’s financial management                                                                 Inspector General (IG) identified 83
   systems effectively support                                                                  open audit recommendations that
                                               • Indicator 1.1: USAID’s core
   Agency decisions and reporting.                                                              affected their FY 1999 financial
                                                 financial system compliant with
                                                                                                statement audit objectives2. The
2. USAID’s capacity to assess cost-              Federal requirements and
                                                                                                Agency classified 31 of these open
   effectiveness enhanced.                       standards.
                                                                                                audit recommendations as being
                                                                                                related to deficiencies in financial
3. USAID’s financial management                • Indicator 1.2: The security and
                                                                                                management policies and
   human resource capacity                       general control environment for
                                                                                                procedures.
   strengthened.                                 the Agency’s core financial system
                                                 and significant internal feeder
                                                                                                The IG did not express an opinion
These three CFO objectives fully                 systems are compliant with
                                                                                                on USAID’s FY 1999 financial
support the Agency’s Strategic Plan              Federal system security
                                                                                                statements because the Agency’s
and its management goal. They are                requirements and standards.
                                                                                                financial management systems could
also fully consistent with the
                                               • Indicator 1.3: USAID’s financial               not produce complete, reliable,
financial management improvements
                                                 information is complete, accurate,             timely, and consistent financial
and priorities recommended by the
                                                 reliable and timely.                           information (See Section 3). The
Chief Financial Officers’ Council.
                                                                                                Agency’s financial management
The CFO expects to accomplish
                                               To achieve this objective, the CFO               systems did not comply with Federal
these objectives over the five year
                                               plans to accomplish the following                financial management system
period between Fiscal Year (FY) 2001
                                               Intermediate Results (IRs).                      requirements, applicable federal
and FY 2005.
                                                                                                accounting standards and the U.S.
                                               IR 1.1: Improve financial                        Standard General ledger at the
The following discussion focuses on
                                                       accountability.                          transaction level. The CFO and the
the intermediate results, tasks and
                                               IR 1.2: Improve financial                        IG agreed to focus audit work on the
initiatives the CFO organization will
                                                       management systems.                      major Balance Sheet accounts. This
undertake independently or in
                                               IR 1.3: Improve management of                    focus should enable the Agency to
collaboration with other USAID
                                                       receivables.                             establish an improved opening
offices to achieve its objectives. The
                                               IR 1.4: Improve financial                        balance that in turn will greatly
discussion will also indicate how the
                                                       administration of grant                  increase the likelihood that the
CFO will measure progress against
                                                       programs.                                auditors will be in a position to
its planned results. While some
                                               IR 1.5: Expand use of electronic                 express an opinion on the FY 2001
performance indicators and targets
                                                       commerce for financial                   consolidated financial statements.
will require work in FY 2003 and
                                                       transactions.
beyond, the tasks and initiatives


     2 USAID OIG, Reports on USAID’s Consolidated Financial Statements, Internal Controls, and Compliance for Fiscal Year 1999, Report
No. 0-000-00-006-F, February 18, 2000.
E-6                                          USAID FY 2000 Accountability Report




In 1998, the Agency reported a                   remaining open audit                          ! Billings, Receivables and Debt
material weakness in program                     recommendations will be closed                  Collection
performance reporting requirements               in 2002 concurrent with Agency-               ! Payroll Related Activities
under the Government Performance                 wide implementation of                        ! Foreign Currency
and Results Act (GPRA). Program                  managerial cost accounting.                   ! Managerial Cost Accounting
performance reporting did not
adequately link the Agency’s                  • The Agency issued eleven (11)               • Assess impact of Phoenix
performance goals with its programs,            financial management chapters in              implementation on financial
nor did it ensure sufficiently current          its Automated Directives System in            management policies and
results or adequate performance                 FY 2000. The issuance of these                procedures and develop/revise
indicators. Similarly, the IG reported          chapters significantly reduces the            chapters where needed.
that USAID did not have adequate                materiality of the material
                                                weakness in financial                       Performance Indicators and Targets:
internal controls to measure and
report program performance under                management policies and                     • Indicator 1.1.1: Audit opinion on
GPRA. Specifically, USAID did not               procedures. The chapters include:             USAID financial statements.
have an effective system to measure
                                                 ! Financial Management                     • Target: Unqualified opinion for FY
and report achievements that are
                                                   Principles and Standards                   2001 financial statements.
attributable to USAID-funded
                                                 ! Obligations
activities. The Agency classified 13 of                                                     IR 1.2: Improve Agency Financial
                                                 ! Financial Management of
the 83 open IG audit                                                                        Management Systems.
                                                   Credit Programs
recommendations that affected the                                                           Background:
                                                 ! Local Currency Trust Fund
financial statement audit objectives                                                        The Agency has reported a material
                                                   Management
as being related to deficiencies in                                                         weakness in its primary accounting
                                                 ! Gifts and Donations and
program performance reporting.                                                              system under Federal Managers’
                                                   Dollar Trust Funds
Accomplishments:                                 ! Accounting for USAID-                    Financial Integrity Act (FMFIA) since
                                                   Owned/Controlled Property                1988. The A.I.D. Worldwide
• Agency performance reporting is
                                                 ! Payables Management                      Accounting and Control System
  no longer considered a material
                                                 ! Accruals                                 (AWACS) is the core accounting
  weakness. USAID clarified and
                                                 ! Financial Management Aspects             subsystem of the New Management
  streamlined reporting
                                                   of Travel                                System (NMS) and has served as the
  requirements to better link
                                                 ! Administrative Control of                Agency’s primary accounting system
  activities with the Agency’s
                                                   Funds                                    through FY 2000. NMS AWACS does
  strategic plan. Policies and
                                                 ! Program Funded Advances                  not comply with Federal core
  guidance were issued on the use
                                                                                            financial systems requirements,
  of indicators to measure
                                              • The Agency closed 15 of 31 open             produce accurate and timely reports,
  performance and performance
                                                audit recommendations in FY                 and contain adequate controls.
  data quality. Improved training
                                                2000 related to financial                   Although NMS AWACS principally
  programs have incorporated
                                                management policies and                     supports the Agency’s Washington
  revised materials on performance
                                                procedures that were impairing              financial operations, these
  measurement and reporting.
                                                the IG’s audit objectives.                  deficiencies are deemed to be
                                                                                            material to the Agency as a whole.
• The Agency closed 9 of 12 open
                                              • The Agency issued the FY 1999
  audit recommendations in FY
                                                Accountability Report.                      The IG reported in 19993 that the
  2000 related to performance
                                                                                            Agency’s remediation plan to correct
  reporting that were impairing the           Tasks and Initiatives:
                                                                                            financial management system
  IG’s FY 1999 financial statement            • Publish four additional ADS                 deficiencies was inadequate. The
  audit objectives. The three                   chapters in FY 2001:

     3 USAID IG, Audit of USAID’s Progress Implementing a Financial Management System That Meets Federal Financial Management
Improvement Act Requirements, Audit Report No. A-000-99-003-P, March 1, 1999.
                                               USAID FY 2000 Accountability Report                                                    E-7




Agency also lacked an information                 1999 financial management                   • A program office, reporting
technology architecture, a financial              systems inventory following an                directly to the CFO, oversees the
management systems portfolio that                 analysis of mission criticality and           IFMS Program and the Financial
met Office of Management and                      the cost-effectiveness of making              Systems Integration (FSI) Project
Budget’s (OMB) guidelines for                     them Year 2000 compliant. All                 acquiring and implementing the
selecting information technology                  remaining systems in the Agency’s             core financial system, Phoenix. An
investments, a modular acquisition                financial management systems                  executive level steering
strategy and a program management                 inventory were made Year 2000                 committee, consisting of the CFO,
office to oversee the development of              compliant.                                    Chief Information Officer (CIO)
an integrated financial management                                                              and the Assistant Administrator for
system. The IG reported in 20004 that          • The New Management System                      Management (AA/M) monitors
the Agency made progress in                      underwent a system security                    performance of program activities.
correcting these planning                        certification and accreditation
deficiencies. The accomplishments                process. A risk assessment was               • Updated the Agency’s Integrated
are noted below along with planned               conducted, system security                     Financial Management Systems
tasks to correct the remaining                   improvements were implemented,                 Modernization Plan. The IFMS
planning deficiencies.                           and internal controls were                     Modernization Plan provides an
                                                 strengthened. The CFO authorized               improved description of the
The Agency’s unsuccessful                        NMS to process sensitive and                   Agency’s target financial
experience with implementing NMS                 mission–critical financial                     management systems structure
in 1996 across its global                        information.                                   (see Section 4), projects, cost
telecommunication network                                                                       estimates, sequencing plans, and
                                               • Successfully acquired, configured              intermediate target dates.
demonstrated the enormous
                                                 and implemented in early FY
technical and business risks
                                                 2001 a modern core financial                 • Successfully implemented a cross-
associated with implementing an
                                                 system utilizing American                      serving agreement with the U.S.
Agency-wide integrated financial
                                                 Management Systems, Inc.                       Dept. of Agriculture’s National
management system (IFMS). The
                                                 Momentum® Financials software                  Finance Center (NFC) for
interplay of an evolving target
                                                 products certified compliant with              personnel and payroll transaction
enterprise-wide architecture,
                                                 Joint Financial Management                     processing services. The NFC
alternative concepts of operation, a
                                                 Improvement Program (JFMIP)                    provides improved service quality
diverse telecommunications
                                                 requirements. The system is                    at lower overall transaction costs.
infrastructure, disciplined system
                                                 referred to as Phoenix and is                  The Agency will retire its legacy
engineering practices, business
                                                 implemented initially to support               personnel and payroll systems and
process reengineering, alternative
                                                 the Agency’s Washington financial              the mainframe that supports them.
system designs, rigorous
                                                 operations.
configuration management, thorough                                                            • Received statutory authority to
testing, and change management are             • The Agency’s core financial                    establish a Working Capital Fund
critical to the successful                       system, Phoenix, received a                    (WCF) for the expenses of
implementation of an Agency-wide                 security certification and                     personal and non-personal
IFMS.                                            accreditation for Washington                   services and supplies for
                                                 operations in accordance with                  International Cooperative
Accomplishments:
                                                 Federal requirements and                       Administrative Support Services.
• Successfully retired 8 financial               coincident with the deployment of              The CFO has established a
  management systems on the FY                   Phoenix in early FY 2001.




     4 USAID IG, Audit of USAID’s Actions to Correct Financial Management System Planning Deficiencies, Audit Report No. A-000-00-003-P,
August 24, 2000.
E-8                                          USAID FY 2000 Accountability Report




  working group to develop the                   design, development, and                      system, Phoenix, in accordance
  operating procedures for the WFC.              deployment of all financial                   with the Agency-wide accounting
                                                 management systems6.                          classification structure (ACS).
• Successfully completed the
  second full year of loan servicing          • Implement an Enterprise Solution            • Further enhance the MACS
  under the outsourcing contract                Integration Lab (ESIL) and                    Auxiliary Ledger in FY 2001 and
  with a commercial bank. The IG                associated system engineering                 FY 2002 to support translation of
  has indicated that their audit work           practices in FY 2001 to support               the MACS accounting
  has determined that the credit                the planning, prototyping, design,            classification structure to the
  program balances are reasonably               configuration and testing of                  lower levels of the ACS (i.e.
  accurate.                                     components of the Agency’s IFMS.              strategic objective level),
                                                                                              allocation of costs to the strategic
• Documented “as-is” procurement              • During 2001 and 2002, conduct                 objective level, and generating
  business processes for acquisition            solution demonstrations to                    consolidated Agency-wide
  and assistance, conducted market              evaluate alternative concepts of              financial reporting at the strategic
  surveys, completed best practices             operation, system design                      objective level.
  surveys, and completed a                      concepts, reengineered processes,
  cost/benefit analysis of alternatives         and technologies to deliver                 • Implement electronic interfaces
  for improving the Agency’s                    business solutions for:                       between the core financial system
  procurement system. A                                                                       and significant internal feeder
  determination was made that a                  ! Piloting the Agency’s core                 systems (e.g. NMS Acquisition &
  commercial software product will                 financial system at two                    Assistance subsystem) and
  be acquired to replace the                       overseas accounting stations.              external feeder systems (e.g.,
  Agency’s custom-developed NMS                  ! The next generation                        Treasury Direct-Connect System,
  Acquisition & Assistance                         procurement system fully                   Riggs National Bank M&I System
  subsystem.                                       integrated with the Agency’s               for loan servicing, Dept. of Health
                                                   core financial system, Phoenix.            and Human Services Payment
Tasks and Initiatives:                           ! Integrating multiple financial             Management System for grantee
• Collaborate with the CIO to                      management data repositories               letters of credit processing, NFC
  develop and implement a process                  into a data warehouse                      Payroll System) in FY 2001. This
  for prioritizing and selecting                   architecture.                              will ensure efficient financial
  financial management system                    ! Third party electronic                     transaction entry, improved data
  investments within an IT portfolio               commerce applications                      quality, and reduced data
  in FY 20015.                                     operating over the Agency’s                reconciliation workload.
                                                   technical infrastructure.
• Collaborate with the CIO and                                                              • Enhance the systems security and
  others during FY 2001 to further            • Implement the Mission                         control environment at overseas
  define authorities, roles,                    Accounting and Control System                 accounting stations through risk
  responsibilities, and structure of            (MACS) Auxiliary Ledger in FY                 assessments, information
  the Change Management Team                    2001. The MACS Auxiliary Ledger               technology upgrades, training, and
  and Office of Financial Systems               will generate general ledger                  data encryption. Complete a
  Integration to direct the planning,           postings for the core financial               security certification and




     5 Audit Recommendation No. 1: IG, Audit of USAID’s Action to Correct Financial Management System Planning Deficiencies, Audit
Report No. A-000-00-003-P, August 24, 2000.

     6 Audit Recommendation No. 3: IG, Audit of USAID’s Action to Correct Financial Management System Planning Deficiencies, Audit
Report No. A-000-00-003-P, August 24, 2000.
                                       USAID FY 2000 Accountability Report                                       E-9




  accreditation of MACS at 38                " No new material                 • Utilized the Department of
  overseas accounting stations in              weaknesses identified             Treasury to cross service debt on
  2002.                                        during the life of this plan.     agency accounts receivable.

• During FY 2001, complete             IR 1.3: Improve Management of           • In FY 2000 USAID engaged a
  solution demonstrations, business    Receivables                               public accounting firm to assist in
  planning, and acquisition            Background:                               developing cash reconciliation
  planning for the Agency’s next       USAID continues to face challenges        procedures for Washington
  generation modern procurement        on reporting accounts receivable          operations, implementing these
  system.                              accurately and timely. The IG has         procedures and reducing the
                                       documented these challenges               balance of reconciling items. In
• During FY 2002, evaluate                                                       addition, the public accounting
                                       through audit recommendations and
  proposals, award contracts for                                                 firm was also engaged to assist
                                       external reporting. Much has been
  commercial software products and                                               USAID in reconciling its advance
                                       done since the IG first identified
  technical services, and begin                                                  balances with letter of credit
                                       these challenges in 1996. The
  software configuration for the new                                             recipients. Significant progress has
                                       Agency’s FMFIA material weakness
  procurement system.                                                            been made in reducing the value
                                       in its direct loan program was
                                       sufficiently corrected in FY 1999 to      of the cash reconciling items. The
• Update the Agency’s FFMIA
                                       remove this area as a material            absolute difference in cash
  Remediation Plan to implement
                                       weakness. The Agency has more to          between Treasury and USAID was
  an IFMS as part of the FY 2003
                                       do in the area of financial               reduced from $266 million at
  financial management budget
                                       management policies and                   September 30, 1999 to $83
  justification.
                                       procedures to implement the               million at September 30, 2000.
• The Agency will implement the        requirements of the Debt Collection     Tasks and Initiatives:
  WCF in three or four Missions in     Improvement Act of 1996.
                                                                               • In FY 2001, USAID will account
  FY 2001 and plans to expand its
                                       Accomplishments:                          for Washington issued bills for
  usage in future fiscal years.
                                                                                 collection using the core financial
                                       • The Agency’s new core financial
Performance Indicator and Targets:                                               system, Phoenix.
                                         system, Phoenix, implemented in
• Indicator 1.2.1: Compliance with       early FY 2001 includes a              • Continue on-going work to make
  Federal financial management           subsystem for receivables               further recoveries of Agency debt
  system requirements, accounting        management. The new system              through increased cross servicing
  standards and U.S. Standard            builds Agency capacity to               with the US Department of the
  General Ledger at the transaction      properly establish and report           Treasury.
  level.                                 outstanding accounts receivable.
                                                                               • Issue financial management
  ! Target: Substantially compliant    • USAID issued agency policies and        policies and procedures in FY
    by FY 2003.                          procedures governing the                2001 to ensure adherence to the
                                         management of loans and Agency          requirements of the Debt
• Indicator 1.2.2: Number of             account receivables.                    Collection Act of 1982 and the
  financial management system
                                                                                 Debt Collection Improvement Act
  material weaknesses.                 • During FY 2000 the Agency
                                                                                 of 1996. These policies and
                                         maintained accurate information
  ! Targets:                                                                     procedures will enable Agency
                                         on servicing direct loan
    " Material weaknesses                                                        management to close three IG
                                         receivables using Riggs National
        outstanding as of                                                        audit recommendations related to
                                         Bank to manage these accounts.
        September 30, 2000                                                       financial management policies
                                         USAID has $11 billion in loan
        resolved by FY 2003;                                                     and procedures.
                                         receivables under management.
E-10                                   USAID FY 2000 Accountability Report




• Implement an electronic interface      pooled advance methodology did        Management Strategic Plan, IFMS
  between the core financial system      not provide adequate internal         Modernization Plan, capital
  and the Riggs National Bank            controls over the grant payment       investment planning process and
  system in FY 2001.                     process. USAID suspended work         target enterprise-wide information
                                         on this project when OMB issued       technology architecture. Electronic
Performance Indicators and Targets
                                         an exposure draft revision to         commerce requires a specialized
• Indicator 1.3.1: Percent of            Circular A-110 making it              technical infrastructure, new
  reconciling amounts between            mandatory for federal program         technologies and application systems
  subsidiary ledger maintained at        agencies to offer the pooled          capable of interfacing with the
  Riggs National Bank and the            advance methodology to grantees.      systems of commercial service
  Phoenix general ledger.                USAID will determine further          providers. An Agency distributed
                                         action on this initiative once OMB    across the globe in over 70 locations
  ! Target: Reconciling amount to        makes a decision regarding its        with very diverse local technical
    no more than 3% of loan              proposed revision to Circular A-      infrastructure and system capabilities
    balance outstanding.                 110.                                  presents unique challenges for both
                                                                               implementing electronic commerce
IR 1.4: Improve Administration of      Tasks and Initiatives:
                                                                               solutions and realizing the promised
Agency Grant Programs
                                       • Implement an electronic interface     return on investments.
Background:
                                         between the core financial system
In 1999, the Agency entered into a       and the DHHS PMS in FY 2001.          The Agency’s core financial system,
cross-servicing agreement with the                                             Phoenix, utilizes automated form
Department of Health and Human         Performance Indicators and Targets:
                                                                               and workflow tools that come
Services (DHHS) for payment            • Indicator 1.4.1: Percent of           bundled with the American
services to recipient organizations.     reconciling amounts between           Management System Momentum®
The DHHS is serving as the fiscal        subsidiary ledger maintained at       Financials software and support
intermediary between the Agency          DHHS and the Phoenix general          some paperwork elimination goals
and its grantees. DHHS manages the       ledger.                               largely for Agency users. The Agency
payments against letters of credit                                             has concluded that it is more cost-
issued by USAID to grantees through      ! Target: Reconciling amount to
                                                                               effective and lower risk to work
its Payment Management System              no more than 3% of total
                                                                               through the government-wide
(PMS). This has greatly improved the       advances.
                                                                               Momentum Users Group to
timeliness and accuracy of grantee                                             influence and prioritize future
payments and data reconciliation.      IR 1.5: Expand Use of Electronic
                                       Commerce for Financial                  enhancements to the baseline
                                       Transactions.                           Momentum® Financials software
Accomplishments:
                                                                               instead of embarking on custom-
                                       Background:
• The Department of Health and                                                 developed solutions or alterations to
                                       The Debt Collection Improvement
  Human Services contracted to                                                 baseline software tailored to meet
                                       Act, the Government Paperwork
  process the draw-down and                                                    only Agency requirements for GPEA
                                       Elimination Act (GPEA), and
  liquidation of advances to                                                   compliance. Future releases of
                                       opportunities in the marketplace for
  grantees.                                                                    Momentum® Financials will provide
                                       electronic commerce have guided
                                                                               incremental enhancements in
• USAID began the process of           the CFO Council and OMB to adopt
                                                                               support of GPEA compliance and
  converting letter of credit          priorities and objectives for
                                                                               will be incorporated into subsequent
  recipients from the pooled           improving electronic services to
                                                                               releases of Phoenix.
  advance methodology to the           individuals and electronic payments
  individual grant methodology in      and collections. The Agency is
                                                                               Because USAID is a small agency, it
  FY 2000. This action was taken       addressing these legislative mandates
                                                                               will use larger agencies best
  based on an agreement between        and commercial opportunities within
                                                                               practices and proven solutions when
  the CFO and the IG that the          the framework of its Information
                                         USAID FY 2000 Accountability Report                                        E-11




implementing electronic commerce.        Performance Indicator and Target:         management performance and
The Agency will examine special          • Indicator 1.5.1: Agency executes a      stewardship. Against this backdrop,
targets of opportunity for innovative      comprehensive business plan for         the Office of Management and
electronic commerce solutions that         utilizing electronic commerce for       Budget (OMB) guidance encourages
respond to the Government’s                financial transactions.                 Federal agencies to develop and
strategies and initiatives. Solution                                               report information about the cost
demonstrations that ensure                 ! Target: Electronic Commerce           effectiveness of their programs.7
interoperability with Agency network         Plan developed and approved           Although USAID cannot now
systems without requiring significant        by FY 2002.                           attribute costs to its objectives,
capital investments will be used to                                                performance centers or goals, the
evaluate and select initiatives.         CFO Objective 2: USAID’s Capacity         financial management systems it is
                                         to Assess Cost-Effectiveness              building under CFO objective 1 are
Accomplishments:                         Enhanced.
                                                                                   designed to have the capacity to do
• plan considers costs,                  Progress against this objective will be   so. This objective, therefore, has a
benefits and risks at a high level for   assessed using the following              single intermediate result.
specific initiatives in response to      indicator:
GPEA.                                                                              Accomplishments:
                                         • Indicator 2.1: Costs attributable to    • accounting subsystem that is
Tasks and Initiatives:                     strategic objectives, performance         compliant with JFMIP
• Conduct feasibility studies,             centers, and USAID goals.                 requirements for cost
benefit/cost analyses, solution                                                      management.
                                         To achieve this objective, the CFO
demonstrations involving third party
                                         plans to accomplish the following         Tasks and Initiatives:
service providers of financial
                                         intermediate result:
transactions services that can be                                                  • During FY 2001, USAID is
implemented over the Agency’s                                                        developing and utilizing Phoenix
                                         IR 2.1: Agency financial
information technology architecture                                                  cost allocation subsystem and
                                                 management system
without significant capital                                                          other tools to allocate
                                                 captures and reports costs by
investments.                                                                         administrative costs to
                                                 objective, performance
                                                                                     Washington-based benefiting
                                                 center and USAID goal.
• USAID will implement IPAC                                                          organizations and strategic
  (Treasury system to perform intra-                                                 objectives. Washington-based
                                         IR 2.1: Agency Financial
  governmental transfers) on June 1,     Management System Captures and              operating units will be able to
  2001. IPAC will enable USAID to        Reports Costs by Objective,                 accurately determine
  collect information needed to          Performance Center and USAID                administrative and program cost
  record inter-agency transfers in a     Goal.                                       for their operations.
  timely manner and will help            Background:
  facilitate account reconciliation                                                • During FY 2002, USAID will
                                         Through the Chief Financial Officer’s
  with our governmental trading                                                      further extend these cost
                                         Act, Congress called for the
  partners.                                                                          allocation tools to utilize detailed
                                         production of financial statements
                                                                                     administrative and program cost
                                         that fully disclose a Federal entity’s
• Expand the use of credit cards for                                                 information from overseas
                                         financial position and results of
  reimbursing contractors and other                                                  accounting stations. This financial
                                         operations, and provide information
  recipients for work performed on                                                   information will be extracted from
                                         not only for the effective allocation
  USAID funded activities. Specific                                                  the MACS Auxiliary Ledger used
                                         of resources, but also with which
  proposals and pilot projects will                                                  in generating summary general
                                         Congress, agency managers, the
  be developed.                                                                      ledger postings in Phoenix.
                                         public and other can assess


     7 OMB Bulletin 97-01, pp. 11-12.
E-12                                      USAID FY 2000 Accountability Report




  Missions will be able to accurately     I.R. 3.1: USAID Recruitment and           journeyman (GS-5 to 12) and senior
  determine the costs of their            Retention Programs Maintain               level, i.e., GS-13/14 or 15. The
  program strategic objectives. The       Adequate Levels of Qualified              Agency also plans to hire 17 entry-
                                          Financial Managers.
  Agency will be able to capture                                                    level Foreign Service controllers in
  and report costs by strategic           Background:                               FY 2001 and recruit annually for this
  objective, operating unit, and          Retaining USAID’s highly skilled          category of financial management
  Agency goal.                            financial management staff and            employees to meet anticipated
                                          recruiting qualified financial            departures.
Performance Indicator and Target:         management personnel are among
• Indicator 2.1.1: Core financial         the significant challenges facing the     The CFO expects to achieve this
  system reports reflect costs by         Agency. The IG has reported to            objective through collaboration with
  strategic objective, operating unit,    Congress that continued staff             the USAID Office of Human
  and USAID goals.                        reductions and limited hiring could       Resources. Together, these offices
                                          greatly affect USAID’s capacity to        will pursue two intermediate results.
  ! Target: Such reports readily          operate effectively.
    available by FY 2002.                                                           Accomplishments:
                                          The Agency’s staffing levels have         • Financial manger needs assessed
CFO Objective 3: USAID’s Financial
                                          declined 38 percent over the past           and projected for Civil Service
Management Human Resource
Capacity Strengthened.                    eight fiscal years. It achieved these       and Foreign Service.
                                          lowered levels through attrition
Progress against this objective will be
                                          augmented by a major reduction-in-        • Financial managers’ recruitment
assessed using the following two
                                          force in FY 1996, early-out                 pipeline established.
indicators:
                                          retirement authority in FY 1996,
                                                                                    Tasks and Initiatives:
                                          1999 and 2000, and buyout
• Indicator 3.1: Percent of USAID                                                   • Bring on board by the end of FY
                                          authority in FY 1996 and FY 2000.
  financial managers professionally                                                   2001 17 new financial
                                          As a result of these actions, the
  certified.                                                                          professionals via the Foreign
                                          demographic make up of USAID’s
                                          staff has changed dramatically. At the      Service New Entry Professionals
• Indicator 3.2: Percent of
                                          start of FY 2001, the average               Program.
  designated strategic objective
  team leaders certified in financial     employee is age 49 with 19 years of
                                                                                    • Complete 15 Civil Service
  management.                             service. Thus, the Agency expects
                                                                                      recruitment actions in FY 2001.
                                          voluntary attrition to increase in each
To achieve this objective, the CFO        of the next five fiscal years.
                                                                                    • Develop a FY 2002 recruitment
plans to accomplish the following                                                     plan for Foreign Service New
intermediate results:                     These trends have affected USAID’s
                                                                                      Entry Professionals Program.
                                          financial management staff.
IR 3.1: USAID recruitment and             Accordingly, USAID’s Office of            • Develop a FY 2002 recruitment,
        retention programs maintain       Human Resources in cooperation              retention and development plan
        adequate levels of qualified      with the CFO has taken steps to fill        for Civil Service professionals.
        financial managers.               vacancies as quickly as possible by
IR 3.2: Training and                      establishing a recruitment pipeline       • Continue Civil Service recruitment
        communications promote an         for financial management staff. As a        efforts. Look at different entry
        understanding of financial        result, the Agency expects to reduce        routes including Presidential
        management policies and           the time it takes to complete the           Management Interns.
        procedures.                       currently on-going recruitment for 15
                                                                                    Performance Indicators and Targets:
                                          financial management positions.
Each of these IRs is discussed in                                                   • Indicator 3.1.1: Critical financial
greater detail below.                     The Agency’s recruitment efforts            manager positions filled.
                                          cover all grades, from entry level to
                                          USAID FY 2000 Accountability Report                                       E-13




  ! Target: At least 90% of critical        control program and their                financial personnel which will be
    positions filled annually.              responsibilities for implementing        implemented during FY 2001.
                                            and evaluating Agency controls.
IR 3.2: Training and                                                               • Additional workshops on
Communications Promote an                 • Over 600 USAID staff members             improving program performance
Understanding of Financial                  (e.g., technical officers, managers,     will be conducted for Agency
Management Policies and                     auditors, and others) received           employees and partners in FY
Procedures.
                                            training on the management of            2001.
Background:
                                            obligations. Among other things,
As USAID modernizes its financial           the training emphasized                • The Office of the CFO will
management systems, the financial           compliance with forward funding          continue to provide training in
management role of the Agency’s             guidelines and the de-obligation         Audit Management, FMFIA, and
technical officers is also being            of unnecessary funds.                    Obligations Management as well
changed. These individuals are now                                                   as provide support for staff to
more responsible for the obligation       • Over 630 USAID employees in              attend external training courses
of program funds, financial pipeline        Washington received training on          and events. In addition, training
management, and projecting                  Phoenix System operations,               courses are being developed for
expenditures (accruals). They need to       procedures and controls prior to         other financial management
understand their new responsibilities       the implementation of the System.        topics, in particular the financial
for financial management, financial                                                  management role in USAID for
data stewardship, and be trained in       • Over 200 USAID employees                 the contract technical officer.
the skills they need to fulfill these       received training on revised             Also, USAID will be developing
responsibilities. In addition, mainline     performance measurement and              internal training courses to
financial managers need to be               reporting policies and guidance.         compliment federal financial
trained on the use of the Agency’s          Another 100 employees and                management training courses
new financial systems.                      partners in Africa attended a            commercially available.
                                            workshop on improving program
Accomplishments:                            performance.                           • The Agency will provide regular
                                                                                     on-going user training for the core
• During fiscal year 2000, the            • Conducted a USAID Worldwide              financial system, Phoenix, and
  Agency provided training to               Controllers’ Conference in 2000          financial procedures supported by
  headquarters and overseas staff on        for over 90 USAID Controllers and        the system.
  audit management, management              over 30 foreign financial
  accountability and control, and           professionals leading and              Performance Indicators and Targets:
  the management of obligations. In         supporting the Agency’s financial      • Indicator 3.2.1: Quality of core
  collaboration with the Office of          operations. The conference gave a        financial system training rated by
  the Inspector General, over 1,000         broad cross-section of the               users.
  USAID staff and partners were             Agency’s financial managers an
  trained on the various aspects of         opportunity to learn about the           ! Target: Average rating of
  audit management. The training            Washington deployment of the               training by trainees is very
  has resulted in improved                  new core financial system, the             good or better.
  performance in the management             target financial management
  of audit recommendations.                 system strategy and an array of        • Indicator 3.2.2: Strategic objective
                                            electronic commerce options in           team leaders trained in their
• The Agency trained 180 people to
                                            the marketplace.                         assigned financial management
  date in a new course on
                                                                                     responsibilities.
  management accountability and           Tasks and Initiatives:
  control. The course is giving                                                      ! Target: Conduct five courses
                                          • A comprehensive course on
  USAID managers and staff a better                                                    per year.
                                            financial management for non-
  understanding of the management
E-14                                                USAID FY 2000 Accountability Report




          3. Audited Financial                      objective and will facilitate the                             As for the FY 2000 financial
              Statements                            preparation of financial statements.                          statements, we have again agreed
                                                    In the interim, we will continue to                           with the IG to focus on the major
USAID is required, under the                        work with the Inspector General to                            balance sheet accounts. At this time
Government Management and                           improve the overall process for                               it is too early in the audit process to
Reform Act of 1994 to: (1) prepare                  generating financial statements while                         know if the IG will be able to
consolidated audited financial                      we work to implement this new                                 express an opinion on the balance
statements each year, beginning with                system. For the FY 1999 statements,                           sheet. However, it is fairly certain
FY 1996; and (2) submit them to the                 we agreed with the Inspector                                  that the IG will not be able to
Office of Management and Budget                     General to focus audit work on the                            express an opinion on the statements
and the Department of Treasury.                     major Balance Sheet accounts. This                            as a whole. In fiscal 2001, the
USAID has prepared consolidated                     focus helped us to establish good                             Phoenix system will serve as the
financial statements for each fiscal                opening balances for FY 2000 as                               basis for preparation of the financial
year. However, the Agency Inspector                 well as helping to focus staff and                            statements. Since Phoenix will
General has been unable to express                  contractor resources towards                                  maintain all accounts in Standard
an opinion on the statements due to                 addressing the accounting and                                 General Ledger format, a transaction
deficiencies in accounting and                      control weakness associated with                              level basis, we are optimistic that the
financial management systems.                       these balance sheet accounts. In                              IG will be in a position to conduct a
                                                                                                                  full audit and express an opinion on
                                                                                                                  the FY 2001 statements as a whole.
                                                                                                    $


                                                                        NMS Legacy
                                                                       Financial Data
                             Procurement
                                                                                                Treasury
                                                                                                                     4. Financial Management
                                                                                                Systems                  Systems Structure
                                                                                                    $
      $                                                                                                           4.1 Current Financial Management
                                                        NMS A&A                                                       Systems Structure
   Treasury
                                                                                               USDA NFC           Baseline Financial Management
                                                                                           US Personnel Payroll
     ECS                        MACS
                                                                                                                  Systems
                                                       Auxiliary                                    $
                                                        Ledger
      $                                                                                                           In 1999 USAID selected the
                                                                                                                  American Management System’s
                                                                                               Riggs Bank
                                                                                               M&I System
                                                                                                                  (AMS) Momentum® Financials
 Dept of State
    RAMC                                                                                            $             product line as the Agency’s new
                      PSCPayroll/                                  Phoenix
                                       Travel Mgr
                       Personnel
                                                                                                                  core financial management system
                                                                                                                  and the cornerstone of its integrated
                                                                                                 DHHS
                                                                                           Payment Management     financial management system.
                    Property System                                                             System
                       Bar Scan                                    FM Users                                       USAID is now transitioning from its
                             Missions                         USAID/W                   Third Party Service
                                                                                             Providers            legacy financial management
                  2001 Financial Management System Application Architecture                                       systems to a financial management
                                                                                                                  structure built around Phoenix, other
              Figure E.1: Current Financial Management Systems Structure
                                                                                                                  commercial software products and
The Inspector General cited the lack                addition, placing the audit emphasis                          third-party service providers. The
of an integrated core accounting                    on the major balance sheet accounts                           major systems and their relationships
system as an impediment to                          helped establish accurate opening                             are shown in Figure E.1.
completing his audit. The lack of                   balances for FY 2000 and greatly
such systems, however, does not                     increases the likelihood that the                             Phoenix: Phoenix is the new core
preclude the preparation of                         auditors will be in a position to                             financial system of USAID. Phoenix
statements, which will continue. The                express an opinion on the FY 2001                             was implemented in Washington in
full implementation of a replacement                consolidated financial statements.                            December 2000. Phoenix will
financial management system is our                                                                                eventually replace MACS installed at
                                          USAID FY 2000 Accountability Report                                     E-15




overseas accounting stations. The           provided through spreadsheets          enhancements in parallel. These are
standard ad-hoc reporting tool for          and bureau systems until USAID         the MACS Auxiliary Ledger and
use with Phoenix is Business                acquires a standard budget             MACS Security Improvements:
Objects. The Phoenix application            formulation system and integrates
modules include accounts payable,           it with Phoenix.                       • MACS Auxiliary Ledger: The MACS
accounts receivable, automated                                                       Auxiliary Ledger is a new
disbursements, budget execution,          • Operations (OPS). The NMS                subsystem of Phoenix being
cost allocation, general ledger,            Program Operations module was            implemented in FY 2001. It will
planning, project cost accounting,          retired with the implementation of       provide a means of routing MACS
and purchasing.                             Phoenix. The establishment of            transaction data from the missions
                                            accounting structures for strategic      to Washington for summary-level
New Management System (NMS):                objectives will be done in               postings in Phoenix. The initial
The NMS is an integrated suite of           Phoenix. Strategic objective results     use will be for summarized
custom-built financial and mixed            will be reported through the             monthly reporting and Treasury
financial applications. Intended for        Results Reporting and Resource           reconciliation, replacing the
worldwide deployment, NMS has               Request (R4) that is sent annually       mainframe-based Country
been restricted to Washington               from operating units to                  Financial Reporting System
because of technical difficulties. Four     Washington. Plans for providing          (CFRS). Subsequently, the MACS
subsystems comprise NMS:                    for standardized management              Auxiliary Ledger will be enhanced
                                            tools and results reporting              through schedule releases to
• AID Worldwide Accounting and              mechanisms are still in the              provide cross-walks between the
  Control System (AWACS). AWACS             formulation stage.                       Phoenix accounting classification
  subsystem was replaced by                                                          code structure and MACS and
  Phoenix as the Agency’s primary         Mission Accounting and Control
                                                                                     improved management reporting.
  accounting system of record.            System (MACS): MACS will remain
  AWACS will remain in use for            the primary accounting system for        • MACS Security Improvements:
  reporting and queries against           field missions worldwide until             MACS security improvements will
  historical data until the AWACS         replaced by Phoenix. MACS                  enhance the systems security and
  historical data can be migrated to      incorporates allowance accounting,         control environment at overseas
  a data repository and AWACS             operating expense accounting,              accounting stations through risk
  retired in 2001.                        project accounting, and a feeder           assessments, information
                                          system to the Agency’s general             technology upgrades, training, and
• Acquisition and Assistance (A&A).       ledger. MACS was implemented in            data encryption. A security
  The A&A subsystem will be               1981 and has not been significantly        certification and accreditation of
  interfaced to Phoenix and will          enhanced over the years to remain          MACS at each (38) overseas
  continue to be used in                  fully compliant with Federal               accounting stations will be
  Washington to support                   requirements for a core accounting         completed in 2002.
  procurement until a replacement         system. MACS does not support the
  procurement system is                   Agency’s accounting classification       Business Support Services: The chief
  implemented and integrated with         structure thereby requiring ancillary    business support applications in the
  Phoenix in 2003.                        record-keeping systems to support        Agency’s financial management
                                          consolidated financial statement         systems inventory relate to travel
• Budget (BUD). The Budget                preparation and external reporting.      management and property
  subsystem was retired with the          The related MACS Voucher Tracking        management:
  implementation of Phoenix.              System (MACSTRAX) automates
  Phoenix will handle agency              voucher management and payment           • Travel Manager: The GELCO
  budget distribution and budget          scheduling. To ensure security and         commercial software products,
  execution. Support for agency           financial integration with Phoenix,        Travel Manager, is currently used
  budget formulation will be              USAID will undertake two key               in Washington and in missions to
E-16                                    USAID FY 2000 Accountability Report




  provide travel management             Third-Party Service Providers: As           advances and liquidations to the
  support. It is used either as a       part of its long-term information           DHHS Payment Management
  standalone application or             management strategy USAID has               System. An electronic interface to
  operating as a shared application     cross-serviced with other                   Phoenix will be implemented in
  over a local area network.            Government agencies or outsourced           FY 2001.
  Currently, Travel Manager does        to commercial organizations some of
  not have an electronic interface      its financial transaction processing      Other Baseline Financial
  with any Agency financial             requirements. This reflects an overall    Management Systems:
  systems.                              strategy of the Agency and is
                                        consistent with OMB guidance. The         • Mission Personal Services
• Non-Expendable Property (NXP):        chief third-party service providers         Contractor (PSC) Personnel and
  The NXP program is USAID’s            and their roles during the transitional     Payroll Systems: USAID missions
  custom-developed property             period are:                                 currently use a variety of systems
  management system. It is currently                                                to manage and pay PSC
  in use at many missions around        • Department of Agriculture                 personnel. These range from
  the world but is planned for            National Finance Center (NFC):            spreadsheets to custom-built
  replacement. It was implemented         USAID has cross-serviced its              applications and databases to
  in 1989 and is not compliant with       personnel and payroll processes           commercial off-the shelf packages.
  JFMIP requirements for a property       for US direct hire (USDH)                 Typically, US citizen PSC
  management system. NXP does             employees to NFC. The NFC                 employees and Foreign Service
  not have an electronic interface        systems, are executed at the NFC’s        National (FSN) PSC employees are
  with any Agency financial system.       New Orleans facility and at the           managed and paid through
                                          USAID Washington facility,                different systems. Some missions
• BAR/SCAN: USAID currently uses                                                    obtain FSN payroll services from
                                          maintain personnel records,
  the commercial software product,                                                  the US Department of State’s
                                          process employee time and
  BAR/SCAN, for property                                                            Regional Administrative
                                          attendance data, and transact
  management of non-expendable                                                      Management Centers (RAMC).
                                          payroll services. The payroll
  property in Washington.                                                           Some missions have developed
                                          accounting interface to Phoenix is
  BAR/SCAN maintains an inventory                                                   electronic interfaces from their
                                          automated.
  of bar-coded property. The                                                        payroll systems to MACS. USAID
  program is being piloted for use in   • Riggs National Bank: USAID has            is in the process of implementing
  missions as a replacement for the       outsourced standard Credit                a standardized mission developed
  Agency’s legacy NXP system.             Reform transactions to Riggs              and maintained FSN personnel
  BAR/SCAN is substantially               National Bank. The Riggs Loan             system with streamlined
  compliant with JFMIP                    Management System provides                procedures for State’s RAMC
  requirements for a property             services to the Agency for                payroll systems. State’s RAMC will
  management system. Currently,           collections, disbursements, claims,       become the standard Agency-wide
  BAR/SCAN does not have an               and year-end accruals. The                third party service provider for
  electronic interface with any           services have replaced the USAID          FSN PSC payroll processing.
  Agency financial systems.               Loan Accounting Information
  Missions will acquire and               System (LAIS) and the. Housing          • Mission Procurement Information
  implement the software as an            Guarantee Program Management              Collection System (MPICS):
  inexpensive non-integrated              System (HGPMS). The interface to          Pending the fielding of an Agency-
  solution to their property              Phoenix is automated.                     wide procurement system, a
  management needs. The budget                                                      manual procurement process is
  for this initial deployment is not    • Department of Health and Human            used in the missions. MPICS is the
  included in the estimated costs in      Services (DHHS): USAID has                data entry mechanism for USAID
  Table E.2.                              cross-serviced its letter of credit       field missions to enter their past
                                          (LOC) processing of grantee               and current award data into a
                                               USAID FY 2000 Accountability Report                                                    E-17




    single Washington database for                Information Management System              weakness. Figure E.2 indicates the
    reporting purposes.                           (CIMS).                                    current fiscal year for correction and
                                                                                             the fiscal years for correction in
• ProDoc and RegSearch: These                  Deficiencies in Baseline Financial
                                                                                             italics that was reported in the
  procurement support systems from             Management Systems
                                                                                             Agency’s FY 1999 Accountability
  Distributed Solutions Inc. (DSI) are         Material Weaknesses: Figure E.2 lists         Report.
  being deployed in Washington                 the material weaknesses identified by
                                                                                             Primary Accounting System: USAID
                FY 2000:                               USAID Reported Material               lacks an effective, integrated
G Year 2000 Compliance                                        Weaknesses                     financial management system.
G NMS Security (original target FY2001)                                                      AWACS does not (1) comply
G Financial Management Procedures                                                       10
                                                                                             substantially with federal financial
                                                                                        9
                FY 2001:
                                                                                             management systems requirements,
                                                                                        8
G   Primary Accounting System (original                                                 7
                                                                                             applicable federal accounting
    target FY2002)                                                                           standards, and the U.S. Government
G Information Resources Management                                                      6
                                                                                        5    Standard General Ledger at the
  Processes
G NMS Reporting and Resource                                                            4    transaction level; (2) produce
                                                                                        3    accurate and timely reports; (3)
    Management Capabilities (original target
    FY2002)                                                                             2    contain adequate controls; or (4)
                                                                                        1    allow for accurate and timely,
               FY 2003:
G   Computer Security Program                                                           0    documented migration of data from
                                                1999


                                                          2000


                                                                  2001


                                                                         2002


                                                                                 2003

                                                                                             legacy systems. The lack of an
                                                                  FY                         integrated financial system has
                                                                                             hindered the Agency’s ability to
                                                                                             manage assets effectively and
Figure E.2: Planned Corrections of Material Weaknesses Reported by USAID
                                                                                             efficiently.
    and the missions to generate               the Agency as required by the
    solicitations and awards. They will        Federal Managers’ Financial Integrity         Information Resources Management
    replace the Agency’s Document              Act. USAID has developed and is               Processes: The Agency identified a
    Generation System (DGS). These             implementing detailed corrective              material weakness in its information
    commercial software products               action plans for each material
    have capabilities that will enable
    the Agency to replace MPICS
    once ProDoc is fully                       q The OIG identified 83 open audit                   Targets to Correct Audit
                                                                                                       Recommendations
    implemented.                                   recommendation that affected their
                                                   FY 1999 financial statement audit                                                  90
                                                   objectives                                                                         80
• Legacy Financial Data Repository:                                                                                                   70
  The legacy Financial Data                                                                                                           60
  Repository enables access to                 q OIG recommendations address                                                          50
                                                   findings in:                                                                       40
  historical information from
  financial management systems
                                                         m Policies & Procedures                                                      30

  that have been retired. The data
                                                         m Core Financial System & Other                                              20
                                                            Feeder Systems                                                            10
  repositories include data from                         m Data Reconciliation                                                        0
                                                                                             1999


                                                                                                        2000


                                                                                                               2001


                                                                                                                      2002


                                                                                                                               2003




  systems (e.g., LAIS, LOCSS, and                        m Performance Reporting
  HGPMS), which were replaced by                         m System Security & Controls                          FY
  the third party service providers. It
  also holds data from the retired
  Financial Accounting and Control                          Figure E.3: Planned Corrections for OIG Audit Findings and
  System (FACS) and Contract                                                    Recommendations
E-18                                    USAID FY 2000 Accountability Report




resources management processes in       Security Program (ISSP) mandated by                                      statement audit objectives. The
1997. Considerable progress has         the Computer Security Act and                                            Agency developed a strategy and
been made improving general             various OMB Circulars. Substantial                                       plan to systematically correct many
controls over software, implementing    progress has been made in                                                of these deficiencies and close the
disciplined software practices,         institutionalizing disciplined system                                    audit recommendations. During FY
selecting IT investments in             security practices, identifying critical                                 2000, 38 of these audit
accordance with Federal                 and sensitive systems, assigning                                         recommendations were successfully
requirements, monitoring IT projects.   security responsibilities,                                               closed. All but three of the remaining
Additional work is planned in FY        implementing system security plans,                                      audit recommendations will be
2001 that will enable the Agency to     and conducting risk assessments of                                       closed in FY 2001. The remaining
close this material weakness.           Agency’s information systems.                                            three related to performance
                                        Additional risk assessments, system                                      reporting will be closed in FY 2002.
Reporting and Resource                  security certifications and
Management Capabilities: NMS was        accreditation of networks and                                            The following summarizes key
designed to replace or supplant         systems at overseas accounting                                           deficiencies highlighted in open
legacy information systems for
financial management, budgeting,
                                                                                         Extended Financial Management
procurement and program
operations; but the components of                                                                         Service and
                                                                                                          Performance
NMS operate only in                                                                  State                Management              Human
                                                                                                                                Resources
                                                                                     USDO                   of IFMS
                                                                                                                                and Payroll
USAID/Washington. Some aspects of                                                                                                Services
                                                                                                               TA L S
this weakness have been mitigated
                                                                  Treasury                        POR                                           FNS/USPC
                                                                                                                                                Personnel
through the implementation of a                                                                      ecords Man                                  Services
                                                                                                 cR               ag
system for capturing and reporting          External                                          oni                                                                     Resource
                                                                                                     OPERABI                                                         Management




                                                                                                                                 em
                                                                                          r




                                         Feeder System     Grantee
                                                                                        ct




                                                                                                   R
mission procurement actions. NMS                           Letter of                              E inancial Sy L                                        Property




                                                                                                                                   en
                                                                                     Ele




                                                           Credits                                         F                                            Management
                                                                                  I NT




                                                                                                                           IT
                                                                                                         e              s




                                                                                                                                     t
                                                                                                                                                          System
reports are not always timely,                           (DHH SPMS)
                                                                                                                         te

                                                                                                                               Y
                                                                                                    r
                                                                                                  Co




                                                                                                                           m
                                                                                                       • General Ledger
                                                                                                       • Funds Control
accurate, or sufficiently useful to

                                                                                                                                          use
                                                                                                       • Accounts Payable
                                                                                 K now




                                                                                                       • Accounts Receivable
                                                            Loan
manage the Agency. The financial                         Processing
                                                                                                       • Cost Accounting
                                                                                                       • Reporting                       eho
                                                           System                                                                                          Travel
management component of NMS
                                                                                   led




                                                                                                                                                          System
                                                                                                                                         ar

                                                         (Riggs M&I)
                                                                                                                                    W


                                                                                          e
                                                                                         g




does not always produce reliable                                                              M                                     ta
                                                                                                  an
                                                                                                       ag e m                  Da
obligation and expenditure                                                                                      ent                               Budget
                                                                   Acquisition                                                                  Formulation
information, forcing users to employ                                System                                                                        System

“ cuff record” systems to serve as                                               Assistance
                                                                                                                               Performance
                                                                                  System
                                                                                                                               Management
backups to NMS. The combined                                                                             Collaborative           System
                                                         Procurement                                         Zone                                 Program
implementation of the new core                           Management                                                                              Management

financial system with an interface to
the overseas accounting system and
                                         Figure E.4: Target Integrated Financial Management System Logical Model
a system for capturing mission
procurement information will            stations is planned for FY 2001 and                                      audit recommendations that will
substantially mitigate this material    FY 2002 to substantially mitigate this                                   largely be closed in FY 2001:
weakness. This work is planned to be    material weakness.
completed in FY 2001 and will                                                                                    • Policies & Procedures: Document
enable the Agency to close this         Audit Findings: During IG’s audit of                                       procedures and controls and
material weakness.                      the Agency’s FY 1999 financial                                             conduct training and supervision
                                        statements, 83 audit                                                       over journal vouchers postings to
Computer Security Program: In           recommendations were identified as                                         the general ledger. Develop a
1997, USAID did not have an             remaining uncorrected from prior                                           methodology for calculating
adequate Information System             audits that affected their financial                                       accruals. Implement policies and
                                         USAID FY 2000 Accountability Report                                                                                                 E-19




  procedures to ensure adherence to
  DCIA. Implement procedures to
                                               financial status                                  PROGRAM OPERATIONS
  ensure timely data reconciliation.           SO activity structure                                                                  skill requirements
                                                                                                      Program Performance
  Develop procedures to ensure                                        resource constraint
                                                                                                            System

  grant agreements and                                                     resource request

  amendments are properly                                                                   procurement              award
                                                                                            request
  recorded in financial systems.                                                                                                              HUMAN RESOURCES
                                                                BUDGET                         contract
  Establish a system to ensure data                                                            evaluation
                                                                                                                                                US Direct Hire Personnel/
                                                             Budget Formulation                                                                     Payroll System
  integrity at overseas accounting                                System                                                    PSC                    Mission Personnel/
                                                                                                 program                    employees               Payroll System
  stations. Clarify CFO authorities                                                              results

  and resources to carry out CFO              OYB                 financial status                                                                               staffing
                                              distribution
  Act responsibilities.                                                                             ACQUISITION AND
                                                                                                                                                                 strategy
                                                                                                      ASSISTANCE
                                                                      financial status                                               acceptance criteria         assignment
• Core Financial System & Other                                                                       Procurement System
                                                                                                                                                                 (travel/
                                                                                                                                                                 transportation)
  Feeder Systems: Apply disciplined                                                                                             notification of receipt
  practices to system planning,                                                      procurement
                                                                                     document                        property replacement
  project management and system                                                      payment authorization           needs
                                                          FINANCIAL                                                                            BUSINESS SERVICES
  development. Ensure core                               MANAGEMENT                            property asset accounting data
                                                                                                                                               Travel Management System
  financial system can manage and                      Core Financial System                   capitalized asset depreciation
                                                                                                                                                 Property Management
                                                                                                                                                        System
  report on interagency agreements.                                                            procurement (travel) document

  Record financial transactions in
                                                                                              payroll data
  accordance with the U.S.
  Standard General Ledger. Record                                        Figure E.5: Logical Business Architecture
  accruals in the general ledger.
                                           program. Ensure existing systems                                     remain focused on information needs
  Improve FFMIA Remediation Plan.
                                           are in full compliance. Strengthen                                   to support Agency decisions.
                                           MACS system security. Clarify
• Data Reconciliation: Ensure
                                           security roles and responsibilities.                                 The target financial management
  subsidiary ledgers and general
                                                                                                                system will:
  ledger reconcile. Complete loan
  rescheduling and ensure Riggs          4.2 Target Financial Management                                        • Provide complete, reliable, timely,
  National Bank system reflects this         Systems Structure                                                    and consistent information.
  information. Ensure adjustments
                                         The primary goal of financial
  are recorded at Riggs National
                                         management system modernization                                        • Apply consistent internal controls
  Bank. Verify unliquidated
                                         at USAID is a single, integrated                                         to ensure the integrity and security
  obligation balances at DHHS.
                                         financial management system that                                         of information and resources.
• Performance Reporting: Establish       supports the mission of the Agency
                                         and complies with Federal                                              • Utilize a common data
  common performance indicators
                                         requirements and standards. The goal                                     classification structure to support
  by operating unit. Identify the full
                                         is achieved by adherence to the                                          collection, storage, retrieval and
  cost of USAID programs, activities
                                         disciplines of architectural planning,                                   reporting of information.
  and outputs.
                                         capital investment planning, and
                                                                                                                • Provide an information portal to
• System Security & Controls:            systems engineering. This will ensure
                                                                                                                  the Agency’s financial
  Incorporate system security            that plans are business-driven rather
                                                                                                                  management data resources with
  requirements, processes and            than technology-driven, data-driven
                                                                                                                  a similar look and feel accessible
  resources in system planning, and      rather than process-driven,
                                                                                                                  wherever USAID operates.
  implementation processes. Ensure       developed by business
  adequate skills and resources are      representatives rather than
  assigned to the computer security      technology specialists alone and
E-20                                     USAID FY 2000 Accountability Report




• Utilize an open framework and          telecommunication infrastructure,         needs, developing performance
  industry standards for data            co-located facilities overseas and        measures, refining requirements,
  interchange and interoperability.      common financial transaction              improving the reliability of cost and
                                         processing services may suggest           schedule estimates, and assuring that
• Provide, on demand, value-added        alternative implementation strategies     planned returns on investment are
  information products and services.     for the IFMS. An interoperability         realized. The ESIL is a critical enabler
                                         framework consisting of policies,         for implementing an IFMS.
• Ensure standardized processes are
                                         standards, practices, hardware and
  utilized for similar kinds of
                                         software will enable the Agency to        4-3 Financial Management Systems
  transactions.                                                                        Strategy
                                         more effectively utilize commercial
• Remain flexible and modifiable to      software products and third party         The Agency’s financial management
  business changes.                      service providers to evolve the IFMS      system strategy is aligned to the
                                         as both technologies and service          Agency’s Strategic Plan, IM Strategic
• Support timely, accurate, and cost-    providers evolve.                         Plan, and Target Enterprise
  effective electronic exchange of                                                 Information Architecture and
  information with customers and         Enterprise Solution Integration Lab:      expressed in the IFMS Modernization
  external partners.                     Given the global nature of USAID’s        Plan. The essential elements of the
                                         mission, its overseas operations and      strategy:
To achieve this vision, the data,        diverse technical infrastructure an
systems, services and technical          enterprise systems engineering            • Utilize public and private sector
infrastructure must be engineered,       approach is needed for designing the        third party service providers
configured and optimized to operate      IFMS. This approach will involve            whenever cost-effective.
in an integrated fashion to deliver      users and technical staff in
Agency-wide financial management         evaluating alternative concepts of        • Require solution demonstrations
support. Figure E.5 describes the        operation, system design approaches,        to manage risks and engineer
logical business model that the target   reengineered processes, and new             system components within target
IFMS will support. A high-level target   technologies operating over the             enterprise architecture.
system architecture is shown in          Agency’s current and planned
Figure E.6. It is guided by and          network systems and                       • Acquire proven commercial
consistent with the Agency’s target      telecommunications infrastructure.          software products rather than
enterprise information architecture.     An Enterprise Solution Integration          build custom-developed
This target financial management         Lab (ESIL) and associated system            applications.
system architecture will be              engineering practices will be
                                                                                   • Re-engineer Agency business
implemented in a modular fashion to      established in FY 2001 to support the
                                                                                     processes before altering the
achieve the target financial             planning, prototyping, design,
                                                                                     baseline commercial software
management system structure and is       configuration and testing of
                                                                                     product.
described in more detail in the          components of the Agency’s IFMS.
Agency’s IFMS Modernization Plan.        This test-bed environment that            • Implement major systems in
                                         models the Agency’s current and             Washington before deploying
The business functions of the Agency     intermediate target architecture along      systems to missions.
will increasingly be supported by a      with disciplined engineering
combination of commercial software       practices will mitigate the significant   • Implement network and
products and third party service         risks of deploying the IFMS over the        telecommunication infrastructure
providers. Public sector and private     Agency’s global network. It will            upgrades to support the financial
sector third party service providers     provide a cost-effective approach for       management systems architecture.
will provide essential feeder systems    conducting solution demonstrations
to the Agency’s core financial           that validate the application of new      • Leverage the system architecture
system. The increasing reliance of       technologies for satisfying business        and the planned technology
foreign affairs agencies on shared
                                                                     USAID FY 2000 Accountability Report                                                        E-21




                                                                                                                                product and integrate it with
                                               INTEROPERABILITY FRAMEWORK
                                                                                                                 $
                                                                                                                                Phoenix.

                                               I   Knowledge
                                                                         Data
                                                                       Warehouse     I
                                                                                                                              4.4 Planned Major System
                                               N   Management                                  $
                                               T
                                                                                     N
                                                                                     T
                                                                                                          US PSC Payroll
                                                                                                          Service Provider
                                                                                                                                  Investments
                                               E                                     E
                                               R
                                               O
                                                                                     R                           $            The following paragraphs provide a
                                                   Exec. Info.          Document     O     Treasury
                                               P
                                               E
                                                    System             Management    P
                                                                                     E
                                                                                           Systems                            brief narrative of the approaches to
     FM User
                                               R                                     R
                           ISP                 A                                     A
                                                                                               $
                                                                                                             USDA NFC
                                                                                                                              implement the target financial
                         Internet              B                                     B                    Personnel/Payroll
                                               I
                                                   Property            Procurement
                                                                                     I                                        management system structure.
                                               L                                     L
                                               I                                     I   Riggs Bank
                                                                                                                 $
                                                                                                                              Implementing the target structure
                                               T                                     T   M&I System
  Data Repository
                                    Mission
                                               Y    Travel               Budget      Y                                        will take more than the 5-years
                                                   Manager             Formulation
                                      IFMS                                                     $
                                    Internet
                                               F
                                                                                                               DHHS           covered by this system plan. The
                                     Portal                                          F                       PM System
                                               R
                                               A
                                                                                     R
                                                                                     A
                                                                                                                              IFMS Modernization Plan provides
                                                                                                                 $
                                               M                                     M
                                               E                 Phoenix             E
                                                                                         Dept. of State
                                                                                         RAMC/USDO                            more detailed descriptions of
                                               W                                     W
    Document
                                               O                                     O         $
                                                                                                                              performance requirements, benefits,
                                               R                                     R                      e-Commerce
   Management
                                               K                                     K                    Service Providers   planned releases, compliance
                                                                                                                              requirements addressed,
                                                                                            Vendors
                                               INTEROPERABILITY FRAMEWORK                                                     dependencies, assumptions,
    Mission                                                USAID/W                               Third Party
                                                                                              Service Providers               schedules and costs.
                    2005 Financial Management System Application Architecture
                                                                                                                              Phoenix: Phoenix will be matured
          Figure E.6: Target Financial Management System Architecture                                                         over a series of releases to provide
                                                                                                                              support to all USAID missions and
  evolution of commercial software                                   • Financial Systems Integration                          locations and to interface with
  products.                                                            Project: Complete implementation                       significant feeder financial
                                                                       of Phoenix in Washington with                          management systems. Agency
• Utilize a data warehouse to                                          interfaces to major feeder systems                     financial transactions will be
  integrate information outside of                                     and pilot Phoenix at two missions.                     recorded in the Phoenix general
  the applications.                                                    Improve overall systems security                       ledger in Washington at a detail or
                                                                       at overseas accounting stations,                       summary level. Missions will interact
• Acquire system components in an
                                                                       certify and accredit MACS                              with Washington to reference and
  incremental fashion.
                                                                       security, and enhance MACS                             capture the financial data. The
• Plan enhancements to system                                          auxiliary ledger interface with                        concept of operation and the overall
  capabilities as releases within the                                  Phoenix.                                               distribution of data schema will be
  framework of enterprise                                                                                                     developed and refined. Phoenix will
                                                                     • Wide Area Renovation Project:
  configuration management                                                                                                    be piloted at two missions to
                                                                       Deploy dedicated, scaleable,
  practices.                                                                                                                  determine the architectural approach
                                                                       secure, manageable, and faster
                                                                                                                              and a feasible schedule for
During 2000, Agency business area                                      telecommunication services
                                                                                                                              transitioning mission accounting
representatives under the leadership                                   overseas.
                                                                                                                              support to Phoenix. Technical
of the Chief Information Officer                                                                                              options for fielding Phoenix include
                                                                     • NOS/Exchange Upgrade Project:
(CIO) ranked and sequenced the IT                                                                                             client-server deployment and web
                                                                       Upgrade overseas network
investment priorities for FY 2001                                                                                             browser application interface.
                                                                       operating systems and e-mail
through FY 2003. The significant IT                                                                                           Interoperability with feeder financial
                                                                       software.
projects that the Agency is requesting                                                                                        systems will be effected through a
funding in the FY 2002 budget                                        • Procurement Systems                                    commercially available AMS
submission include:                                                    Improvement Project: Replace                           Momentum® Application
                                                                       NMS A&A with a modern                                  Programming Interface (API) that
                                                                       commercial procurement software                        utilizes publish-subscribe queues
E-22                                       USAID FY 2000 Accountability Report




and message broker middle-ware to          various technology alternatives to          summary data on program
provide application transparency.          support budget formulation and              indicators, performance and the
This application-to-application            performance reporting.                      costs of Agency programs.
interface method will allow the
agency to support interoperability         Financial Management Data                   The data from core financial,
within the constraints of the low-         Warehouse: The Agency is currently          procurement, budget formulation,
bandwidth communications                   completing the retirement of legacy         performance, and property systems
environment it faces in many               financial management systems                along with data from third party
locations.                                 operating on the Agency’s mainframe         service providers will be
                                           and transferring data to a series of        extracted/collected, transformed, and
Procurement System: A commercial           data repositories. Third party feeder       loaded into the data warehouse. The
software product will be selected          systems will generate data that will        data warehouse will be web-enabled
that supports both acquisition and         need to be stored in data repositories      and available across the Agency. It
assistance procurement activities of       to support data reconciliation, audits,     will be the medium of integration
the Agency. This new procurement           ad hoc queries, and reporting               across the portfolio of financial
system will initially replace NMS          requirements. Other financial               management systems.
A&A in Washington, and be                  management systems will capture
integrated with Phoenix and various        data that will not be electronically        Executive Information Systems: With
contract writing tools. It will later be   exchanged with other systems and            the implementation of the financial
deployed Agency-wide along with            will need data repositories to              management data warehouse, the
Phoenix.                                   facilitate integrated reporting. USAID      Agency will be able to use
                                           will implement an enterprise-wide           commercial software products that
Budget Formulation System: USAID           data warehouse for financial                provide business consolidation, and
needs a set of tools and standard          management data that will link              financial intelligence with online
business processes to improve the          multiple data repositories using            analytical processing to view the
efficiency and effectiveness of            common data elements.                       business from many perspectives.
Agency-wide budget formulation,
budget consolidation, budget               USAID already utilizes a set of tools       Business Support Services: The
submission and loading of upper            for collecting, monitoring,                 major initiatives in the business
level budget information in Phoenix.       evaluating, and sharing program             services area will be enterprise-wide
USAID’s budget formulation process         results and indicator data.                 deployment of the Agency’s travel
is integrated with its program             Collectively these tools will continue      and property management systems.
operations and performance                 to support USAID’s performance              Current plans call for the Travel
management processes for collecting        reporting requirements and                  Manager and BAR/SCAN
information on the performance of          management decision-making.                 applications to become standard
its programs. USAID operating units        Performance data will be extracted,         enterprise applications. The Agency
submit annual Results Review and           transformed and loaded into the data        will rely on joint vendor efforts to
Resource Requests (R4s) that               warehouse and linked with cost data         integrate commercial software
describe any adjustments to the            through the use of common data              products with the AMS Momentum®
operating units strategic plans and        elements that conform to the                Financials commercial software
request funds for the strategic            Agency’s accounting classification          product. Future releases of Phoenix
planning period. This process has          structure (e.g. strategic objectives) for   will include these enhancements.
already been reengineered and              tracking and reporting program              Initially these applications will be
tailored to support USAID’s strategic      performance. While Phoenix will             deployed in each mission and will
planning and budget formulation            maintain the accounting                     not be integrated with Phoenix or
process. Solutions demonstrations in       classification structure for the            MACS.
the ESIL will be used to assess            Agency, the Agency’s data warehouse
feasibility, impacts and risks of          will capture and maintain detail and
                                          USAID FY 2000 Accountability Report                                                            E-23




• Travel Manager: The vendor,             providers NFC, Riggs National Bank,                systems have been prepared as part
  GELCO, is developing a version of       and DHHS for the foreseeable future.               of the IFMS Modernization Plan. The
  Travel Manager that will interface      Improvements to the interface                      FY 2001 and FY 2002 costs represent
  with AMS Momentum® Financials           mechanisms through the use of                      current year and budget year levels
  in a release planned for the 4th        intermediate data repositories will be             in the Agency’s FY 2002 budget
  quarter of FY 2001. It is expected      scheduled for implementation to                    submission, Exhibit 53 and Exhibit
  to use Momentum® Financials             improve the efficiency and                         300Bs. The FY 2003 through FY
  APIs and other middle-ware tools        effectiveness of data integration. In              2005 cost estimates for major
  to support electronic exchange of       the case of NFC, these include                     financial management systems will
  information. This version will          improving the agency’s current                     be included in subsequent budget
  bring Travel Manager tables and         methods of collecting time and                     submissions as projects are added to
  screens into agreement with the         attendance data and providing it to                the Agency’s IT portfolio and
  AMS Momentum® financial                 NFC. The agency also expects to take               approved for funding. Currently,
  structure. USAID plans to               advantage of improved functional                   multiple financial management
  implement this capability in a          capabilities as NFC makes them                     system modernization projects are
  release of Phoenix in the 4th           available. The Agency will continue                scheduled to begin in FY 2004 and
  quarter of FY 2001 to support           to rely on State’s RAMC for FSN PSC                FY 2005. Table E.2 details the costs
  USAID/Washington operations. A          payroll processing. The major new                  of achieving substantial compliance
  non-integrated version of Travel        initiative for the target financial                with FFMIA.
  Manager will continue to be used        system is the selection a third-party
  in some missions. Further               provider for US PSC personnel,                     4.5 FFMIA Remediation Plan
  integration engineering, central        payroll, and benefits processing                   The Federal Financial Management
  software license purchases and          services.                                          Improvement Act (FFMIA) requires
  training will be done coincident                                                           USAID to implement and maintain a
  with deployment of Phoenix
  Agency-wide.
                                           o Integrate target IFMS                                                 o Leverage audit work
• BAR/SCAN: USAID will field                 structure in architecture
                                           o Ensure IFMS investments
                                                                                                                   o Conduct compliance
                                                                                                                     reviews during:
                                                                            Architecture &      Compliance             G Acquisition Phase
  Bar/Scan to all missions to replace        create value
                                                                                                                       G Product Acceptance
                                           o Screen, rank and select
                                             projects based, in part, on
                                                                              IT Capital         Reviews               G Post-implementation
  the NXP program. Each mission              support for target structure      Planning                            o Focus on internal &
                                             & compliance                                                            external feeder systems
  will acquire and implement the
  software. Integration with other                                                       System
                                                                                        Life Cycle
  financial management systems             o CFO, CIO and AA/M leadership                              Policies,   o Policy formulation
                                             & oversight                                                           o Reengineer processes in
  will depend on AMS Momentum®             o IFMS Program Management          Project                Procedures,     conjunction with new
                                             Office:                                                                 technologies
  Financials product development               G Project Management         Management               Controls &    o Design training programs
                                               G System Design                                                       that ensure a stewardship,
  strategies, in part. Further                 G Risk & Configuration       & Oversight                Training      controls & accountability
                                                  Management                                                       o Conduct internal control
  investment analysis may suggest              G Quality Assurance                                                   reviews
                                               G Security
  that periodic data calls or
  capturing Agency-wide property
  data in the financial management                 Figure E.7: Life Cycle Approach to Financial Management System
  data warehouse for annual                                                   Compliance
  reporting requirements may be
                                                                                             financial management system that
  adequate for reporting the value of     Financial Management System                        complies substantially with:
  Agency property in the financial        Costs: Estimates for the costs for
  statements.                             major system planning,                             • Federal requirements for an
                                          modernization, enhancements and                      integrated financial management
Third-party service providers: The
                                          steady state operations for current                  system.
agency is expected to continue to
                                          and planned financial management
rely on its current third-party service
E-24                                                  USAID FY 2000 Accountability Report




• Applicable Federal accounting                       financial management systems in the           guidance suggests that a life cycle
  standards.                                          FY 1999 Accountability Report.                approach to financial management
                                                                                                    system compliance is needed to
• Requirements to post transactions                   Achieving Substantial Compliance              ensure that the Agency achieves and
  to the U.S. Standard General                        with FFMIA: The IG has identified             retains substantial compliance.
  Ledger at the transaction level.                    deficiencies in the Agency’s baseline         Life Cycle Approach to Financial
                                                      financial management systems that             Management System Compliance:
These requirements are further
                                                      encompass policies, procedures,               OMB guidance9 on implementing
detailed in OMB Circular A-127,
                                                      controls and practices. These are             FFMIA sets forth requirements and
Financial Management Systems. The
                                                      summarized in Section E.2 and                 indicators for substantial
IG is required under FFMIA to report
                                                      further detailed in Table E.1. Since          compliance. While the IG is required
on compliance with these
                                                      the IG has identified examples of             to report on the Agency’s compliance
requirements as part of the audit of
                                                      non-compliance and not necessarily            with FFMIA in the audit of the
USAID’s financial statements. In the
                                                      all instances of non-compliance,              Agency’s financial statements, OMB
audit of USAID’s FY 1999 financial
                                                      additional deficiencies may be                Circular A-127 also requires
statements8 the IG determined that
                                                      identified through additional audit           agencies to conduct reviews of their
USAID’s financial management
                                                      work or financial management                  financial management systems. The
systems did not substantially comply
                                                      system reviews. JFMIP issued an               increasing importance given to third
with FFMIA accounting and system
                                                      exposure draft in 1999 entitled,              party service providers to support
requirements. The Agency reported
                                                      “Financial Management Systems                 Agency financial management
the material non-conformance of its
                                                      Compliance Review Guide.” This                operations requires their systems to
                                                                                                    be periodically reviewed as well. The
                                                                                                    IG has identified examples of non-
                                 Improved Policies,              CFO A-11 Financial                 compliance and not necessarily all
                                 Procedures,                     Management Budget
   Compliance Review                                             Justification:
                                                                                                    instances of non-compliance. In
                                 Controls & Data
                                 Quality                         •   Goals & Strategies             order to ensure substantial
       OIG Financial                                             •   Audited Financial Statements
      Statement Audit            • Costs & Schedule              •   Current FMS & Target IFMS      compliance is achieved, the
                                                                 •   Assessment
   • Audit Findings &                                            •   Remediation Plans              prioritization and sequencing of
     Recommendations
   • Compliance with                                                                                planned system investments should
     laws & regulations               Remedies                                                      be informed by a program of USAID
     CFO Reviews                                                                                    financial management system
   • FMFIA Material                                                                                 reviews that leverages the valuable
     Weaknesses                       IFMS
   • Assessment of                 Modernization                       IT Capital Planning          role the IG will continue to play in
     baseline FMS                    Strategy                                                       compliance reviews.
     inventory


                                                                                                    Figure E.7 describes a system life
                                 Financial
                                 Management
                                                                                                    cycle approach to financial
                                 System Projects                                                    management system compliance that
                                 • Costs & Schedule                                                 USAID is developing. It integrates
                                                                                                    compliance reviews with IT portfolio
                                                                                                    reviews, ranking, funding,
                      Figure E.8: USAID FFMIA Remediation Planning
                                                                                                    acquisition planning, system




     8 USAID OIG, Reports on USAID’s Consolidated Financial Statements, Internal Controls, and Compliance for Fiscal Year 1999, Report
No. 0-000-00-006-F, February 18, 2000

       9 OMB Memorandum for Heads of Executive Departments and Establishments, Chief Financial Officers and Inspector Generals regarding
“ Revised Implementation Guidance for the Federal Financial Management Improvement Act” dated January 4, 2001.
                                         USAID FY 2000 Accountability Report                                         E-25




acceptance and post-implementation       compliance with FFMIA utilizing the      statements is low and adequate
reviews. The Agency has made             indicators provided by OMB. While        controls exist for ensuring data
progress in this effort by:              all of the policies and requirements     quality and reconciliation between
                                         in A-127 are important, some are         Phoenix and a feeder system then
• Acquiring commercial software          essential in addressing specific areas   manual processes involving
  certified compliant with               of non-compliance:                       duplication of transaction entry are
  applicable JFMIP requirements.                                                  acceptable.
                                         Common Data Elements: An Agency-
• Incorporating JFMIP requirements       wide standard accounting                 Application of the USG Standard
  and Federal accounting standards       classification structure and other       General Ledger at the Transaction
  in system acceptance test              common data elements will be used        Level: Reports produced by system
  scenarios and scripts.                 in the Agency’s financial                components of the Agency-wide
                                         management systems. Commercial           IFMS will provide financial data that
• Conducting risk assessments and
                                         software products and services will      can be traced directly to SGL
  evaluations of management,
                                         be acquired to the maximum extent        accounts. Financial transaction detail
  technical and operational controls
                                         possible that can capture or generate    in a feeder system or a
  as part of the system security
                                         financial data that meets these          corresponding data repository will
  certification and accreditation
                                         standards directly or through cross-     follow the same account descriptions
  process.
                                         walk tables. Data required for           and posting models/attributes that
Figure E.8 broadly describes USAID’s     external reporting or decision-          are reflected in the SGL.
approach to remediation planning. It     making that is not captured in the
relates remediation planning to the      Phoenix core financial system will       Federal Financial Management
Agency’s IT capital planning process     generally be collected, stored and       Requirements: Commercial software
and annual budget submission             retrieved in data repositories           products and services will be
process. During FY 2000, the Agency      integrated in a financial management     selected in part on their capability to
improved the quality and accuracy        data warehouse framework utilizing       support JFMIP requirements. Where
of its remedies, costs and               standards and common data                JFMIP requirements have not been
intermediate target dates. Planned       elements. Phoenix will not be            established, products and services
improvements in FY 2001 include          modified to add additional data          will be selected that support Agency-
further refinement of the scope of the   elements, if such changes would          wide information classification
remediation plan through further         require a unilateral modification to     structure, common transaction
system reviews, analysis, planning       the baseline AMS Momentum®               processing, consistent internal
and design of the Phoenix interface      software.                                controls, efficient transaction entry,
with MACS via the MACS Auxiliary                                                  transaction recorded consistent with
ledger and the financial management      Efficient Transaction Entry: Feeder      SGL rules, applicable Federal
data warehouse.                          systems will capture or generate         accounting standards and Computer
                                         financial and performance data that      security Act requirements.
FFMIA Remediation Strategy:              will be entered in either Phoenix
Section 4.3 outlines the elements of     core financial system or the financial   Federal Accounting Standards:
the target financial management          management data warehouse.               Financial data will be captured,
systems strategy. The FFMIA              Whenever appropriate and cost-           generated, and maintained in
Remediation Strategy embraces this       effective, Phoenix will be updated       accordance with standards
broader strategy and includes            electronically by these feeder           recommended by the Federal
additional elements that address         systems consistent with the timing       Accounting Standards Advisory
areas of non-compliance within the       requirements of normal                   Board and issued by OMB.
requirements set forth in Section 7 of   business/transaction cycles. When
OMB Circular A-127. Table E.2            the volume of financial data or its      Computer Security: Each financial
provides a summary of Agency             material impact on the financial         management system component will
E-26                                      USAID FY 2000 Accountability Report




be evaluated to determine if it           substantial compliance with FFMIA.
contains “ sensitive information” as      These judgements were made largely
defined by the Computer Security          on the materiality that the financial
Act. A formal system security             data in these systems have on the
certification and accreditation (C&A)     preparation of financial statements,
process will be followed for each         the documented deficiencies in these
system containing “ sensitive             systems, and the adequacy of current
information.”                             processes and systems. Future system
                                          reviews of existing financial
Financial Reporting: The Agency’s         management systems may disclose
financial management systems and          deficiencies in which the most cost-
data warehouse will provide               effective risk mitigation strategy
financial information to measure          involves accelerated implementation
program performance, financial            of planned systems. This would
performance and financial                 necessarily affect the scope,
management performance. Costs will        schedules and resource estimates in
attributable to and reported by           the Agency’s FFMIA Remediation
strategic objectives, performance         Plan.
centers and USAID goals.

Remedies, Resources and
Intermediate Target Dates: Table E.2
provides a summary of the remedies
and target dates for resolving specific
deficiencies against indicators and
compliance attributes provided by
OMB. Table E.2 provides a summary
of financial management system
modernization efforts and
enhancements that apply to specific
deficiencies reported by the IG. Table
E.2 also also provides a summary
estimates of system remediation costs
for fiscal years 2001, 2002, and
2003. The resource estimates for
these remedies reflect the acquisition
of software, hardware, and technical
services. Taken together these tables
and their associated subsidiary
worksheets constitute the Agency’s
FFMIA Remediation Plan.

The IFMS Modernization Plan
provides a more detailed treatment
of the major financial management
system projects, releases, and
milestones planned over the next five
years. Only a subset of these is
evaluated to be essential to achieve
                                     USAID FY 2000 Accountability Report                                                      E-27




                Table E.1: Planned Work to Achieve Substantial Compliance with FFMIA


                    Deficiencies                                    Planned Remedies & Targets
                  Federal Financial Management System Requirements:

Indicator: Documentation from reviews of financial systems describe how requirements, found in OMB Circular A-
127 that are considered applicable, have been implemented.

The Agency relies on a combination of annual FMFIA           See Table E.2 Financial Management Systems Remediation
management control reviews and IG audits of Agency's         Plan Summary for a description of planned remedies,
financial statements, systems and compliance with Federal    intermediate targets and resource estimates.
laws, requirements and standards.
                                                             Primary Accounting System Material Weakness: Implement
The IG audit of the Agency's FY 1999 financial statements    Phoenix in Washington and significant interfaces to internal
summarized areas of non-compliance with OMB Circular A-      and external feeder systems in FY 2001.
127 and indicated that USAID:
                                                             Reporting and Resource Management Capabilities Material
•    Lacked an Agency-wide classification structure;         Weakness: Implement Phoenix in Washington and MACS
•    Relied on multiple incompatible systems that cannot     auxiliary ledger enhancements to support Agency-wide
     exchange data.                                          financial reporting in FY 2001.
•    Had not implemented a computer security program;
•    Did not meet JFMIP requirements for prompt pay,         Computer Security Program Material Weakness: Complete
     external reporting, and cost accounting;                risk assessments, computer security training, staffing, and
•    Does not have an effective accrual methodology;         system security certifications & accreditation at all overseas
•    Is not able to attribute costs to organizations,        accounting stations in FY 2001 and FY 2002.
     locations, programs, and activities; and
•    Does not record accounts receivable in accordance
     with U.S. Standard General Ledger.

Agency reported material weaknesses in its FY 1999
Accountability Report that address the three areas covered
by FFMIA:
•    Primary Accounting System
•    Reporting and Resource Management Capabilities
•    Computer Security Program


Attribute: User access controls/passwords and user authorizations are authorized in writing and implemented and
other financial controls are in place and operating effectively.

The IG audit of the Agency's FY 1999 financial statements    During FY 2000, conducted a security risk assessment,
disclosed areas of non-compliance with the Computer          developed computer security plans and completed a
Security Act and indicated that USAID needs an effective     system security certification & accreditation for the New
computer security program to prevent unauthorized access     Management System. Corrected weaknesses in the
to financial data resources.                                 general client/server and mainframe control environments.
                                                                          st
The IG audit of the overseas accounting system, MACS,        During the 1 quarter of FY 2001, the Phoenix core financial
identified deficiencies in access and system software        system will be implemented guided by a system security
controls that could be remedied by developing and            plan and following a risk assessment and certification &
implementing standards and providing guidance to mission     accreditation of the system's security and control
system managers.                                             environment. Access controls/passwords and user
                                                             authorizations are issued in writing by an designated system
                                                             security officer.

                                                             During FY 2001 and FY 2002, complete system and general
                                                             control environment risk assessments, mitigate risks,
                                                             develop a MACS system security plan, conduct mission
                                                             computer security training, ensure delegation of authorities
                                                             and responsibilities for system security are implemented,
                                                             certify & accredit the security of the network systems, and
                                                             MACS at all overseas accounting stations.
E-28                                            USAID FY 2000 Accountability Report




                            Deficiencies                                       Planned Remedies & Targets

       Attribute: Budget execution is integrated in the core financial system with accounts payable, accounts receivable
       and general ledger.

       The Agency's primary accounting system and overseas              Implement Phoenix in the 1 st quarter of FY 2001 in
       accounting systems are not integrated. Standard budget           Washington as the Agency's fully integrated core financial
       execution information from overseas accounting stations is       system with budget execution, accounts payable, accounts
       not provided in a timely basis to enable the Agency to           receivable and general ledger.
       submit the Treasury reports in the timely manner
       requested.                                                       Utilize a feeder system, the MACS overseas accounting
                                                                        system, to record and report budget execution integrated
                                                                        with accounts payable financial transactions. A MACS
                                                                        Auxiliary Ledger interface to Phoenix will be implemented by
                                                                        the 4 th quarter of FY 2001 to post summary level financial
                                                                        data in Phoenix general ledger at the budget FY fund level.


       Attribute: Users have on-line access to the status of funds or receive daily reports on the status of funds to
       perform analyses or decision-making.

       Agency reported material weaknesses in its FY 1999               Implement Phoenix in the 1 st quarter of FY 2001 in
       Accountability Report covered by FFMIA in the area of            Washington with improved financial reporting and resource
       Reporting and Resource Management Capabilities.                  management capabilities for Washington financial
       Individual senior managers and program managers have             operations.
       access to timely financial information for their specific
       operating units and programs. To a lesser extent, senior         Utilize MACS at overseas accounting stations to provide
       managers and program managers in client missions of              overseas users with regular and ad hoc reports on the
       regional accounting centers have access to timely financial      status of funds. Enhancements to the MACS Auxiliary
       information following a normal monthly/quarterly business        Ledger interface to Phoenix will be fully implemented by the
       cycle. Washington senior managers do not have timely             4 th quarter of FY 2002 to support Agency-wide financial
       Agency-wide financial information by operating units and         reporting on the status of funds for decision making at
       programs.                                                        strategic objective or transaction level.


       Attribute: Feeder systems are integrated or electronically interfaced with the core financial system.

       The IG has issued audit findings and recommendations             During FY 2000, implemented improved reconciliation
       related to deficiencies in data reconciliation policies and      procedures and significantly reduced cash reconciling items.
       procedures that impair the financial statement audit
       objectives. The Agency's primary accounting system (i.e.         Implement electronic interfaces between Phoenix and
       NMS AWACS) and overseas accounting system (i.e.                  significant feeder systems with associated controls and
       MACS) were not integrated and interface was not                  reconciliation procedures by 4 th quarter of FY 2001.
       electronic. Furthermore, significant feeder systems to NMS
       AWACS and MACS did not have electronic interfaces. The
       manual interfaces require controls and compensatory
       procedures that were judged inadequate and labor
       intensive.


       Attribute: A common accounting classification structure is used.

       The IG audit of the Agency's FY 1999 financial statements        Implement a MACS Auxiliary Ledger interface to Phoenix by
       disclosed areas of non-compliance with FFMIA and                 the 4 th quarter of FY 2001 with cross-walk tables that have
       implementing policies which indicated that USAID lacked          the capability to translate the overseas accounting
       an Agency-wide accounting classification structure. The          classification structure into the Agency-wide upper-level
       accounting classification structure implemented in the           accounting classification structure.
       primary accounting system is different from the one used in
       the overseas accounting system.                                  Implement enhancements, reporting tools and updated
                                                                        cross-walk tables in the MACS Auxiliary Ledger interface to
                                                                        Phoenix by the 4 th quarter of FY 2002 to support Agency-
                                                                        wide financial reporting against the dimensions of the
                                                                        accounting classification structure.

                                                                        Implement accounting classification data standards and
                                                                        common data elements in financial data repositories derived
                                                                        significant feeder systems as part of a financial
                                                                        management data warehouse in FY 2002.
                                        USAID FY 2000 Accountability Report                                                        E-29




                     Deficiencies                                        Planned Remedies & Targets

Attribute: An audit trail exists from any summary data recorded in the core financial system to detailed source
transactions maintained in feeder systems.

The Agency has used manual interface procedures for               During FY 2001, policies and procedures will be issued to
posting summary level journal vouchers to the general             ensure that journal vouchers posted in the Phoenix general
ledger for financial transactions generated outside NMS in        ledger are properly prepared, supported by data from feeder
various feeder systems. The IG has documented findings            systems, reviewed for accuracy and authorized.
that journal vouchers postings to the NMS general ledger
were not adequately supported, reviewed and authorized.           The design of the Phoenix interfaces to feeder systems in
                                                                  FY 2001 will address controls, procedures and system
                                                                  requirements for audit trails.


Attribute: Debt referred for collection or offset by Federal collections is identified.

IG audit findings and recommendations indicate USAID is           During FY 2001, updated policies and procedures for
not in compliance with the Debt Collection Acts of 1982           billings, receivables and debt collection will be issued as an
and 1996. Specifically, USAID did have the policies and           update to the Agency's Automated Directives System.
procedures implemented to ensure those delinquent debts
in excess of 180 days are automatically referred to               During FY 2001 and FY 2002, continue on-going work to
Treasury for the recovery of debts.                               make further recoveries of Agency debt through the Dept. of
                                                                  Treasury.


Attribute: Interest on overdue payments and discounts is calculated.

The IG audit of the Agency's FY 1999 financial statements         The Phoenix core financial system is configured to comply
disclosed areas of non-compliance with FFMIA and                  with JFMIP requirements for payment management and will
                                                                                         st
implementing policies which indicated that USAID did not          be implemented in the 1 quarter of FY 2001.
comply with JFMIP requirements for prompt payments.


Indicator: The Agency can produce auditable financial statements based on data from the Agency's financial
system and provide reliable financial information for managing current government operations and preparing
financial reports.

The IG could not express an opinion on the Agency's FY            Implement the Phoenix core financial system in 1 st quarter
1999 financial statements because their audit scope was           of FY 2001 that calculates and reports accounts payable
impaired by a poorly functioning accounting and financial         and accrual expenses in compliance with Federal
management systems from which USAID was unable to                 requirements and standards.
produce accurate, complete, reliable, timely and consistent
financial information. The uncorrected system deficiencies        Implement MACS auxiliary ledger as an interface to Phoenix
created a consequential risk that the financial statements        for summary level postings to the general ledger in 4 th
could contain material misstatements.                             quarter of FY 2001 and make further enhancements to
                                                                  support Agency-wide financial reporting at strategic
Agency reported material weaknesses in its FY 1999                objective level by the 4 th quarter of FY 2002.
Accountability Report in its Primary Accounting System
and Reporting and Resource Management Capabilities.               Improve reconciliation and management of the fund balance
                                                                  with Treasury in FY 2000 and reduce the materiality of cash
                                                                  reconciling items in FY 2001.

                                                                  Implement in FY 2001, based on updated policy guidance
                                                                  from OMB, improvements in accounting for advances to
                                                                  grantees with letter-of-credit agreements to enable the IG to
                                                                  audit advance account balances.
E-30                                           USAID FY 2000 Accountability Report




                           Deficiencies                                      Planned Remedies & Targets

       Indicator: Existing reviews and audits required by A-130, Appendix 3, do not disclose material deficiencies.

       The IG audit of the Agency's FY 1999 financial statements      Substantial improvements in the Agency's information
       disclosed areas of non-compliance with the Computer            system security program were implemented in FY 2000 that
       Security Act (CSA) and implementing policies. USAID has        address organizational structure, policies and key
       not implemented an effective computer security program         management processes.
       with:
       •     An organizational structure that clearly delegated       During the 1st quarter of FY 2001, the Phoenix core financial
             responsibility and appropriate authority;                system will receive a system security certification and
       •     Planning policies to provide a foundation for an         accreditation by appropriately designated authorities
             effective security program; and                          following improved system security planning policies and
       •     Key management processes to ensure security              management processes.
             requirements are met.
                                                                      During FY 2001 and FY 2002, planned system and general
       USAID reported a material weakness in its FY 1999              control environment risk assessments at overseas
       Accountability Report in its computer security program.        accounting stations, risk mitigation, MACS system security
                                                                      planning, security training, delegation of authorities,
                                                                      certification and accreditation of the security of the network
                                                                      systems, and MACS at all overseas accounting stations will
                                                                      sufficiently reduce the materiality of this deficiency.


                                            Federal Accounting Standards:
       Indicator: An unqualified opinion or a qualified opinion or disclaimer issued by the auditor for reasons other than
       the Agency's ability to prepare auditable financial statements.


       The IG could not express an opinion on the Agency's FY         Implement the Phoenix core financial system in 1 st quarter
       1999 financial statements because their audit scope was        of FY 2001 that calculates and reports accounts payable
       impaired by a poorly functioning accounting and financial      and accrual expenses in compliance with Federal
       management systems from which USAID was unable to              requirements and standards.
       produce accurate, complete, reliable, timely and consistent
       financial information. The uncorrected system deficiencies     Improved reconciliation and management of the fund
       created a consequential risk that the financial statements     balance with Treasury in FY 2000 and reduce the materiality
       could contain material misstatements.                          of cash reconciling items in FY 2001.

       Agency reported material weaknesses in its FY 1999             Implement in FY 2001, based on updated policy guidance
       Accountability Report in its Primary Accounting System         from OMB, improvements in accounting for advances to
       and Reporting and Resource Management Capabilities.            grantees with letter-of-credit agreements to enable the IG to
                                                                      audit advance account balances.


       Indicator: The agency produces managerial cost information consistent with the standards in SFFAS4.

       The IG reported in the audit of the FY 1999 financial          Implement the Phoenix core financial system in 1st quarter
       statements that USAID did not comply with the five             of FY 2001 with a managerial cost accounting subsystem.
       elements of managerial cost accounting and had not
       implemented SFFAS No. 4. USAID's financial system is           Develop cost allocation models with cost drivers in FY 2001
       not able to attribute costs to organizations, locations,       to attribute costs to Agency goals.
       projects or activities.
                                                                      Implement the MACS Auxiliary Ledger as an interface
                                                                      between Phoenix and the overseas accounting system.
                                                                      Begin capturing transaction level detail in the MACS
                                                                      Auxiliary Ledger by 4 th quarter of FY 2001.

                                                                      Implement further enhancements to MACS Auxiliary Ledger
                                                                      to fully implement cross-walk tables between MACS ACS
                                                                      and Phoenix ACS to support mission strategic objective cost
                                                                      allocations by 4 th quarter of FY 2002.

                                                                      Update cost allocation model in FY 2002 to allocate the
                                                                      costs of Agency programs to the operating unit and strategic
                                                                      objective level.
                                        USAID FY 2000 Accountability Report                                                  E-31




                    Deficiencies                                       Planned Remedies & Targets

Indicator: The audit disclosed no material weaknesses in internal controls that affect the agency's ability to
prepare auditable financial statements and related disclosures, budget reports, or other financial information for
agency management decision-making purposes that are consistent with Federal accounting standards.


The IG audit of the Agency's FY 1999 financial statements      Remedies for specific deficiencies in performance and
identified deficiencies that represent material internal       financial information:
control weaknesses:                                            •    The IG and USAID reached agreement in FY 2000 on
•    USAID did not consistently report reliable                     a comprehensive plan to prepare the Overview section
     performance and financial information                          of the FY 2000 financial statements in accordance with
•    Computer security deficiencies continue to exist.              OMB Bulletin 97-01.
                                                               •    Acquire, configure, test and implement Phoenix in the
Additionally, the IG identified another internal control            1st quarter of FY 2001 in accordance with Federal
weakness that should have been considered in the                    requirements and standards for calculating and
Agency's FY 1999 Accountability Report :                            reporting accounts payable and accrual expenses in
                                                                    compliance with Federal requirements and standards.
•     USAID does not properly identify, record and report
                                                               •    Improved reconciliation and management of the fund
      advances processed through the Letter of credit
                                                                    balance with Treasury in FY 2000 and reduce the
      (LOC) system.
                                                                    materiality of cash reconciling items in FY 2001.

                                                               Remedies for computer security deficiencies:
                                                               •   During FY 2000 performed a system security
                                                                   certification and accreditation on NMS.
                                                               •   During the 1st quarter of FY 2001, complete a system
                                                                   security certification and accreditation for Phoenix.
                                                               •   During FY 2001 and FY 2002, complete certification
                                                                   and accreditation of the security of the network
                                                                   systems, and MACS at all overseas accounting
                                                                   stations.

                                                               A remedy was agreed to with the IG regarding the
                                                               identification, recording and reporting of advances
                                                               processed through the LOC system but final implementation
                                                               is awaiting an OMB update to Circular A-110.


    U.S. Government Standard General Ledger (SGL) at the Transaction Level:
Indicator: If transactions from feeder systems are summarized before recording in the core financial system, then
on-site feeder system demonstration or feeder system generated reports indicates that transactions are recorded
in a manner consistent with account definitions, posting models/attributes specified in the SGL and are traceable
to source documents.

                                                                                            st
The IG audit of the Agency's FY 1999 financial statements      Implement Phoenix in the 1 quarter of FY 2001 in
summarized areas of non-compliance with OMB Circular A-        Washington as the Agency's fully integrated core financial
127 and indicated that USAID does not reconcile and            system with accounts receivable integrated with general
record accounts receivable subsidiary ledger balances to       ledger configured to use posting models and attributes
the general ledger in accordance with U.S. Standard            consistent with those in the general ledger.
General Ledger.

Indicator: Transactions posted directly to the core financial system are traceable to source documents.


The Agency has used manual interface procedures for            During FY 2001, policies and procedures will be issued to
posting summary level journal vouchers to the general          ensure that journal vouchers posted in the Phoenix general
ledger for financial transactions generated outside NMS in     ledger are properly prepared, supported by data from feeder
various feeder systems. The IG has documented findings         systems, reviewed for accuracy and authorized.
that journal vouchers postings to the NMS general ledger
were not adequately supported, reviewed and authorized.        The design of the Phoenix interfaces to feeder systems in
                                                               FY 2001 will address controls, procedures and system
                                                               requirements for audit trails.
E-32                                   USAID FY 2000 Accountability Report




The important financial management         support costs allocated to the       remedies, resource allocations and
system remedies, planned releases          strategic objective level - 4th      intermediate target dates will
and milestones, and estimated costs        Qtr of FY 2002.                      constitute the Agency’s FFMIA
to achieve substantial compliance        ! Phoenix integrated with the          Remediation Plan supported by the
include:                                   Financial Management Data            IFMS Modernization Plan and
                                           Warehouse in FY 2003.                specific IT capital asset plans.
1. Core Financial System - Phoenix:
                                       • Modernization or enhancement           The estimated cost of remediation
• Planned Milestones and Releases:       costs by fiscal year ($ millions):     plan for the Agency’s financial
                                                                                management systems is $ 17 million
  ! Integrated Core Financial                                                   over the next three years. There are
    System, Phoenix, in USAID/W            2001     2002     2003     Total     risks to achieving the cost, schedule
    - 1st Qtr of FY 2001.                  $11       $2       $2      $15       and performance goals that will need
  ! Electronic interfaces to major                                              to be monitored and managed over
    feeder systems - 4th Qtr of FY     2. Financial Management Data             the next three years. There are also
    2001.                                 Warehouse:                            opportunities for accelerated
  ! MACS Auxiliary Ledger                                                       compliance.
    Interface to Phoenix to support    • Planned Milestones and Releases:
    ACS upper-level general ledger                                              Risks to Achieving Substantial
    postings - 4th Qtr of FY 2001.       ! Solution demonstration for
                                                                                Compliance: There are multiple risks
  ! Implement Enterprise Solution           data warehouse tools and
                                                                                that individually or in combination
    Integration Lab (ESIL) and              integration of multiple data
                                                                                could impact achieving substantial
    associated system engineering           repositories for reporting - 4th
                                                                                compliance and therefore will need
    practices to perform solution           Qtr of FY 2002.
                                                                                to be closely monitored and
    demonstrations - 3rd Qtr of FY       ! Integrate multiple data
                                                                                managed:
    2001.                                   repositories from financial
  ! Phoenix solution                        management feeder systems           • Budget Risks - Required budgetary
    demonstration and pilot                 into the data warehouse in FY         allocations for FY 2002 and
    deployment to two overseas              2003.                                 beyond are sustained and project
    accounting stations - 4th Qtr of     ! Extract, transform and load            budget risk reserves are sufficient
    FY 2001.                                Phoenix financial data into           to mitigate other risks that occur.
  ! Material weaknesses in the              data warehouse in FY 2003.
                                         ! Data warehouse system                • Schedule Risks - Multiple
    Agency’s primary accounting
                                            security C&A updated for              interdependencies in which one
    system and reporting and
                                            Agency-wide deployment in             project or sub-project delay can
    resource management are
                                            FY 2003.                              impact overall substantial
    corrected - 4th Qtr of FY 2001.
                                       • Modernization or enhancement             compliance target
  ! MACS system security
    certification & accreditation        costs by fiscal year ($ millions):     • Requirements Risks - Future
    (C&A) completed at all                                                        financial management system
                                           2001     2002     2003     Total
    overseas accounting stations -                                                reviews disclose additional
                                           $0        $0       $2       $2
    4th Qtr of FY 2002.                                                           material deficiencies.
  ! Material weakness in the
                                       Requested Revision Target Date for       • Technical Risks - Interoperability
    Agency’s computer security
                                       Substantial Compliance: The Agency         and integration of commercial
    program completed one year
                                       is requesting that the target date for     software products and systems of
    ahead of schedule - 4th Qtr of
                                       substantial compliance with FFMIA          third party service providers
    FY 2002.
                                       be changed to the 4th quarter of FY        implemented over Agency
  ! MACS Auxiliary Ledger
                                       2003. Subject to OMB approval of           network systems and
    Interface to Phoenix with ACS
                                       this revised target date, the planned      telecommunications infrastructure.
    crosswalk tables populated to
                                                 USAID FY 2000 Accountability Report                                                     E-33




                           Table E.2: Financial Management Systems Remediation Plan Summary
                                                      ($ in Millions)


                Areas of
                                                    FY 2001                        FY 2002                         FY 2003
             Non-Compliance
       USAID lacks an Agency-wide          Phoenix in USAID/W - 1st       MACS Auxiliary Ledger
       ACS, which standardizes             Qtr                            Interface to Phoenix with
       data definitions and formats                                       full ACS support - 4 th Qtr
       for financial management            MACS Auxiliary Ledger
       systems.                            Interface to Phoenix to
                                           support ACS upper-level
                                           general ledger postings -
                                           4th Qtr

       USAID Relies on multiple            Implement ESIL - 3rd Qtr       Solution demonstration for       Integrate multiple data
                                                                                            th
       incompatible systems that                                          data warehouse - 4 Qtr           repositories from financial
       cannot exchange data.               Phoenix interfaces to                                           management feeder
                                           significant feeder systems -                                    systems into the data
                                           4th Qtr                                                         warehouse

                                                                                                           Extract, transform and load
                                                                                                           Phoenix financial data into
                                                                                                           data warehouse
       USAID has not implemented           Phoenix security C&A - 1 st    MACS Security C&A                Agency-wide data
       an effective computer               Qtr                            completed - 4 th Qtr             warehouse security C&A
       security program.
                                           MACS security C&A - on-
                                           going
       USAID does not have a               Phoenix is JFMIP               MACS Auxiliary Ledger
       financial system that meets         compliant for Prompt Pay,      Enhancements support
       JFMIP requirements to (a)           external reporting and cost    cost allocations to SO level
                                                          st                 th
       support the Prompt Payment          accounting - 1 Qtr             - 4 Qtr
       Act, (b) support external
       reporting needs, and (c)
       ensure that costs are
       accumulated and reported
       with proper matching of
       periods, segments, and
       outputs.
       USAID has not implemented           Phoenix implements
       an effective accrual                accrual methodology - 1st
       methodology.                        Qtr
       USAID’s financial system is         Phoenix implements cost        MACS Auxiliary Ledger
       not able to attribute costs to      accounting system - 1 st Qtr   Enhancements support
       organizations, locations,                                          cost allocations to SO level
       projects, programs, or                                             - 4th Qtr
       activities.
       USAID did not record                Phoenix records
       Accounts Receivable in              receivables in accordance
       accordance with the U.S.            with US SGL, 1 st Qtr
       Standard General Ledger at
       the transaction level.

                                             [1]   $ 11                     [1]     $2                       [1]    $2
       System Remediation CostsJ
                                                                                                             [2]    $2

       Cost By Fiscal Year                         $ 11                             $2                              $4


       J
           Remediation Costs include only modernization or enhancement costs and do not include steady state costs for on-going or future
           maintenance and operations.

• Management Risks - Overall                       manage a complex series of                           management operations to
  program and project management                   interdependent projects.                             implement and support the target
  authorities, roles and                                                                                financial management system
                                                 • Organizational Risks - Changes to
  responsibilities to effectively                                                                       structure.
                                                   Agency-wide financial
E-34                                    USAID FY 2000 Accountability Report




    5. Grants Management                areas of concern. The Advisory
                                        Committee on Voluntary Foreign Aid,
USAID ensures consistency across its    chaired by a member of the recipient
programs through the issuance of        community, with a membership
policies and procedures for award       comprised of both recipient
and administration of assistance        organizations and USAID, provides
instruments. USAID’s Automated          input to USAID on issues that it is
Directives System (ADS) includes a      concerned about. USAID offices
chapter (ADS 303, Grants and            conduct outreach programs from
Cooperative Agreements to Non-          time-to-time that provide recipients
Governmental Organizations) that        the opportunity to discuss issues and
establishes requirements applicable     concerns.
to grants and cooperative agreements
with non-governmental organizations     USAID participates in an informal
under virtually all USAID assistance    group of grants policy professionals
programs except those that are          from virtually all the grant making
exempt by statute. The chapter sets     agencies. The group meets regularly
forth the requirements arising from     to discuss topics of interest to all
Federal statutes, regulation and        agencies. When USAID considers
management of USAID programs.           policy changes, the grants policy
                                        expert in the Office of Procurement
Except for programs that exclusively    generally researches regulations of
involve local organizations, ADS 303    other agencies and talks with
now requires utilization of the         contacts from other agencies to
standard government-wide                determine how they may have
application form, “ Application for     approached a similar problem.
Federal Assistance” (SF-424).
Financial reporting is limited to the
use of U.S. government standard
forms as well. ADS 303 includes the
standard provisions that are
applicable to USAID assistance
instruments. Agreement Officers do
not have the authority to make
changes in the standard provisions
for awards to U.S. organizations,
whether for a single award or a
group of awards, unless the Director
of the Office of Procurement
approves the deviation. All together
the requirements in ADS 303 go a
long way to ensuring that there is
substantial consistency of
requirements among USAID’s
programs.

USAID obtains feedback from
recipient organizations fairly
regularly which helps to identify
                    USAID FY 2000 Accountability Report            E-35




         List of Abbreviations and Acronyms
A&A      Acquisition and Assistance
ACS      Accounting Classification Structure
ADS      Automated Directives System
AIDS     Acquired Immunodeficiency Syndrome
ANE      Asia and the Near East
API      Application Programming Interface
APP      Annual Performance Plan
APR      Annual Performance Report
ASP      Agency Strategic Plan
AWACS    A.I.D. Worldwide Accounting and Control System
BHR      Bureau for Humanitarian Response
BJ       Budget Justification
BUCEN    U.S. Bureau of the Census
CFO      Chief Financial Officer
CFR      Country Financial Reporting Systems
CIMS     Contract Information Management Systems
CDIAC    Carbon Dioxide Information Analysis Center
CDIE     Center for Development Information and Evaluation
CIMS     Contract Information Management System
CIO      Chief Information Officer
CITES    Convention on International Trade in Endangered Species
CO       Contract Officer
CONOPS   Concept of Operations
COTS     Commercial Off-the-Shelf
CS       Civil Service
CTO      Cognizant Technical Officer
DA       Development Assistance
DCIA     Debt Collection Improvement Act
DGS      Document Generation System
DEC      Development Experience Clearinghouse
DFI      Direct Foreign Investment
E&E      Europe and Eurasia
EC       European Commission
EGAD     Economic Growth and Agricultural Development
ESF      Economic Support Fund
ESIL     Enterprise Solution Integration Laboratory
FACS     Financial Accounting and Control System
FFMIA    Federal Financial Management Improvement Act
FMFIA    Federal Managers Financial Integrity Act
FMIP     Financial Management Improvement Program
E-36                         USAID FY 2000 Accountability Report




       FP      Family Planning
       FS      Foreign Service
       FSA     Freedom Support Act
       FSI     Financial Systems Integration
       FSN     Foreign Service National
       FY      Fiscal Year
       GPEA    Government Paperwork Elimination Act
       GPRA    Government Performance and Results Act
       GTN     Global Technology Network
       HCD     Human Capacity Development
       HIV     Human Immunodeficiency Virus
       IDP     Internally Displaced Persons
       IFMS    Information Management Strategic Plan
       IG      Inspector General
       IT      Information Technology
       JFMIP   Joint Financial Management Improvement Program
       LAC     Latin American and Caribbean
       LAIS    Loan Accounting and Information System
       MACS    Mission Accounting and Control System
       MoH     Ministry of Health
       NEAP    National Environmental Action Plan
       NEP     New Entry Professional
       NER     Net Enrollment Ratio
       NFC     National Finance Center
       NGO     Nongovernmental Organization
       NIS     Newly Independent States
       NMS     New Management System
       NXP     Non-Expendable Property
       OFDA    Office of U.S. Foreign Disaster Assistance
       OIG     Office of the Inspector General
       OMB     Office of Management and Budget
       OTI     Office of Transition Initiatives
       OYB     Operating Year Budget
       P.L.    Public Law
       PAHO    Pan-American Health Organization
       PHN     Population, Health, and Nutrition
       PMP     Performance Monitoring Plan
       PMS     Payment Management System
       PPC     Bureau of Policy and Program Coordination
       PRM     Population, Refugees, and Migration
       PSC     Personal Services Contractor
       PVC     Private and Voluntary Cooperation
                     USAID FY 2000 Accountability Report                     E-37




PVO      Private Voluntary Organization
R4       Results Review and Resource Request
SEED     Support for East European Democracy
SFFAS    Statement of Federal Financial Accounting Standards
SO       Strategic Objective
State    U.S. Department of State
STD      Sexually Transmitted Disease
STI      Sexually Transmitted Infection
TEIA     Target Enterprise Information Architecture
TFR      Total Fertility Rate
UNAIDS   Joint United Nations Programme on HIV/AIDS
UNDP     United Nations Development Program
UNEP     United Nations Environment Program
UNESCO   United Nations Educational, Scientific, and Cultural Organization
UNFCCC   United Nations Framework Convention on Climate Change
UNICEF   United Nations Children's Fund
US-AEP   U.S.-Asia Environmental Partnership
USAID    U.S. Agency for International Development
USDH     United States Direct Hire
WCF      Working Capital Fund
WHO      World Health Organization
WID      Women in Development
                              The Development Context
      Economic Growth, 1990-1999                                            50
      GDP per capita index 1990=100, USAID-assisted countries                               GDP Per Capita, 1999
150                                                                         40              thousands $US current
                                                                                                                                                           United
                                           Europe/                                                                                                         States




                                                                                 Sub-Saharan Africa
100                                        Eurasia                          30




                                                                                                                         Europe/Eurasia

                                                                                                                                          Latin America/
                                                                                                      Asia/Near East
       Sub-Saharan       Asia/Near                            Latin
50        Africa            East                                            20
                                                            America/




                                                                                                                                          Caribbean
                                                            Caribbean
 0                                                                          10
                    1990          1999 (all charts)
      Source: IMF and World Bank                                            0



             Population, 1990-1999
             index, 1990=100, USAID-assisted countries and the U.S.
      150
                                                Europe/                                                                United
      125
                                                Eurasia                                                                States
      100
                                                                  Latin
             Sub-Saharan      Asia/Near
       75       Africa                                          America/
                                 East
                                                                Caribbean
       50
                        1990            1999 (all charts)
            Source: World Bank


             Agriculture, 1990-1998
             Agriculture, value added, per capita index, 1990=100, USAID-assisted countries and the U.S.
      120
              Sub-Saharan                       Europe/
      110
                 Africa                         Eurasia
      100
                                                                  Latin
                               Asia/Near                                                                               United
      90                                                        America/
                                  East                                                                                 States
                                                                Caribbean
      80
                        1990            1998 (all charts)
            Source: World Bank



             Democracy and Governance, 1990-1999
             Freedom House combined scores for political rights and civil liberties (1-14),
             USAID-assisted countries and the U.S.
        0                                                         Latin
        2 Sub-Saharan    Asia/Near       Europe/                America/
        4    Africa         East         Eurasia                                                                        United
        6                                                       Caribbean
                                                                                                                        States
        8
       10
       12
                    1990          1998 (all charts)
             Source: Freedom House Foundation
                           The Development Context
         Total Fertility Rate, 1990-1999
         estimated births per woman of child bearing age, USAID-assisted countries and the U.S.
 7
                                                            Latin
 6
                          Asia/Near         Europe/       America/                  United
 5
 4       Sub-Saharan         East           Eurasia       Caribbean                 States
            Africa
 3
 2
 1
                    1990           1999 (all charts)
         Source: US Bureau of the Census



          Under-5 Mortality Rate, 1990-1999
          estimated child deaths per 1,000 live births, USAID-assisted countries and the U.S.
 200
 150                          Asia/Near       Europe/         Latin                   United
           Sub-Saharan
 100          Africa             East         Eurasia       America/                  States
                                                            Caribbean
  50
     0
                     1990           1999 (all charts)
          Source: US Bureau of the Census



 Carbon Dioxide Emissions, 1990-1997
 Total emissions index, 1990=100, USAID-assisted countries and the U.S.
200
                                                     Latin
       Sub-Saharan Asia/Near          Europe/      America/                          United
150                                                                                  States
          Africa         East          Eurasia     Caribbean
100

50
                       1990           1997 (all charts)
          Source: US DOE, Carbon Dioxide Information Analysis Center (CDIAC)


          Adults Living with HIV/AIDS, 1997, 1999
          estimates (in millions), USAID-assisted countries and the U.S.
 25
           Sub-Saharan
 20        Africa
                              Asia/Near      Europe/          Latin                  United
 15                                                                                  States
                                 East        Eurasia        America/
 10                                                         Caribbean
  5
  0
          1997 1999       1997 1999        1997 1999       1997 1999              1997 1999
          Source: UNAIDS

								
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