prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 1.

Report 1: Congress passed the Community Reinvestment Act of 1977 (CRA; P L  95-128 , 12 U S C  §§2901-2908) in response to concerns that federally insured banking institutions were not making sufficient credit available in the local areas in which they were chartered and acquiring deposits  According to some in Con gress, the granting of a public bank charter should translate into a continuing obligation for that bank to serve the credit needs of the public where it was chartered  Consequently, the CRA was enacted to "re-affirm the obligation of federally chartered or insured financial institutions to serve the convenience and needs of their service areas" and "to help meet the credit needs of the localities in which they are chartered, consistent with the prudent operation of the institution " The CRA requires federal banking regulators to conduct examinations to assess whether a bank is meeting local credit needs  The regulators issue CRA credits, or points, where banks engage in qualifying activities—such as mortgage, consumer, and business lending; community investments; and low-cost services that would benefit low- and moderate-income (LMI) areas and entities—that occur within assessment areas (where institutions have local deposit-taking operations)  These credits are then used to issue each bank a performance rating from a four-tiered system of descriptive performance levels (Outstanding, Satisfactory, Needs to Improve, or Substantial Noncompliance)  The CRA requires federal banking regulators to take those ratings into account when institutions apply for charters, branches, mergers, and acquisitions, or seek to take other actions that require regulatory approval  Congress became concerned with the geographical mismatch of deposit-taking and lending activities for a variety of reasons  Deposits serve as a primary source of borrowed funds that banks may use to facilitate their lending  Hence, there was concern that banks were using deposits collected from local neighborhoods to fund out-of-state as well as various international lending activities at the expense of addressing the local area's housing, agricultural, and small business credit needs  Another motivation for congressional action was to discourage redlining practices  One type of redlining can be defined as the refusal of a bank to make credit available to all of the neighborhoods in its immediate locality, including LMI neighborhoods where the bank may have collected deposits  A second type of redlining is the practice of denying a creditworthy applicant a loan for housing located in a certain neighborhood even though the applicant may qualify for a similar loan in another neighborhood  This type of redlining pertains to circumstances in which a bank refuses to serve all of the residents in an area, perhaps due to discrimination  The CRA applies to banking institutions with deposits insured by the Federal Deposit Insurance Corporation (FDIC), such as national banks, savings associations, and state-chartered commercial and savings banks  The CRA does not apply to credit unions, insurance companies, securities companies, and other nonbank institutions because of the differences in their financial business models  The Office of the Comptroller of the Currency (OCC), the Federal Reserve System, and the FDIC administer the CRA, which is implemented via Regulation BB  The CRA requires federal banking regulatory agencies to evaluate the extent to which regulated institutions are effectively meeting the credit needs within their designated assessment areas, including LMI neighborhoods, in a manner consistent with the federal prudential regulations for safety and soundness   The CRA's impact on lending activity has been publicly debated  Some observers are concerned that the CRA may induce banks to forgo more profitable lending opportunities in nontargeted neighborhoods by encouraging a disproportionate amount of lending in LMI communities  Furthermore, some argue that the CRA compels banks to make loans to higher-risk borrowers that are more likely to have repayment problems, which may subsequently compromise the financial stability of the banking system  For example, some researchers have attributed the increase in risky lending prior to the 2007-2009 recession to banks attempting to comply with CRA objectives  Others are concerned that enforcement of CRA objectives has not been stringent enough to compel banks to increase financial services in LMI areas  Almost all banks receive Satisfactory or better performance ratings (discussed in more detail below) on their CRA examinations, which some may consider indicative of weak enforcement  This report informs the congressional debate concerning the CRA's effectiveness in incentivizing bank lending and investment activity to LMI customers  It begins with a description of bank CRA examinations, including how a bank delineates its assessment area; the activities that may qualify for points under the three tests (i e , lending, investment, and service) that collectively make up the CRA examination; and how the composite CRA rating is calculated  Next, the report analyzes the difficulty in attributing bank lending decisions to CRA incentives  For example, the CRA does not specify the quality and quantity of CRA-qualifying activities, meaning that CRA compliance does not require adherence to lending quotas or benchmarks  Without explicit benchmarks, linking the composition of banks' loan portfolios to either too strong or too weak CRA enforcement is difficult  Banks are also unlikely to get CRA credit for all of the loans they make to LMI customers  Specifically, higher-risk loans that banking regulators explicitly discourage are unlikely to be eligible for CRA consideration  Furthermore, greater mobility of lending and deposit-taking activity across regional boundaries due to various financial market innovations has complicated the ability to geographically link various financial activities  Hence, many banks' financial activities occurring in a designated assessment area that are eligible for CRA consideration may simply be profitable, meaning they may have occurred without the CRA incentive  Finally, this report summarizes recent policy discussions regarding modernization of the CRA  As noted above, the federal banking regulators conduct regular examinations of banks to assess whether they meet local credit needs in designated assessment areas  The regulators issue CRA credits, or points, when banks engage in qualifying activities—such as mortgage, consumer, and business lending; community investments; and low-cost services that would benefit LMI areas and entities—that occur within assessment areas  Regulation BB provides the criteria that a bank's board of directors must use to determine the assessment area(s) in which its primary regulator will conduct its CRA examination  The assessment area typically has a geographical definition—the location of a bank's main office, branches, and deposit-taking automatic teller machines, as well as surrounding areas where the bank originates and purchases a substantial portion of loans  Assessment areas must generally include at least one metropolitan statistical area (MSA) or at least one contiguous political subdivision, such as a county, city, or town  Regulation BB also requires that assessment areas may not reflect illegal discrimination, arbitrarily exclude LMI geographies, and extend substantially beyond an MSA boundary or a state boundary (unless the assessment area is located in a multistate MSA)  Banking regulators regularly review a bank's assessment area delineations for compliance with Regulation BB requirements as part of the CRA examination  Instead of a more conventionally delineated assessment area, certain banking firms may obtain permission to devise a strategic plan for compliance with Regulation BB requirements  For example, wholesale and limited purpose banks are specialized banks with nontraditional business models  Wholesale banks provide services to larger clients, such as large corporations and other financial institutions; they generally do not provide financial services to retail clients, such as individuals and small businesses  Limited purpose banks offer a narrow product line (e g , concentration in credit card lending) rather than provide a wider range of financial products and services  These banking firms typically apply to their primary regulators to request designation as a wholesale or limited purpose bank and, for CRA examination purposes, are evaluated under strategic plan options that have been tailored for their distinctive capacities, business strategies, and expertise  The option to develop a strategic plan of pre-defined CRA performance goals is available to any bank subject to the CRA  The public is allowed time (e g , 30 days) to provide input on the draft of a bank's strategic plan, after which the bank submits the plan to its primary regulator for approval (within 60 days after the application is received)  Regulation BB does not impose lending quotas or benchmarks  Instead, Regulation BB provides banks with a wide variety of options to serve the needs of their assessment areas  Qualifying CRA activities include mortgage, consumer, and business lending; community investments; and low-cost services that would benefit LMI areas and entities  For example, banks may receive CRA credits for such activities as investing in special purpose community development entities (CDEs), which facilitate capital investments in LMI communities (discussed below); providing support (e g , consulting, detailing an employee, processing transactions for free or at a discounted rate, and providing office facilities) to minority- and women-owned financial institutions and low-income credit unions (MWLIs), thereby enhancing their ability to serve LMI customers; serving as a joint lender for a loan originated by MWLIs; facilitating financial literacy education to LMI communities, including any support of efforts of MWLIs and CDEs to provide financial literacy education; opening or maintaining bank branches and other transactions facilities in LMI communities and designated disaster areas; providing low-cost education loans to low-income borrowers; and offering international remittance services in LMI communities  The examples listed above are not comprehensive, but they illustrate several activities banks may engage in to obtain consideration for CRA credits  The banking regulators will consider awarding CRA credits or points to a bank if its qualifying activities occur within an assigned assessment area  The points are then used to compute a bank's overall composite CRA rating  Regulators apply up to three tests, which are known as the lending , investment , and service tests, respectively, to determine whether a bank is meeting local credit need in designated assessment areas  The lending test evaluates the number, amount, and distribution across income and geographic classifications of a bank's mortgage, small business, small farm, and consumer loans  The investment test grades a bank's community development investments in the assessment area  The service test examines a bank's retail service delivery, such as the availability of branches and low-cost checking in the assessment area  The point system for bank performance under the lending, investment, and service tests is illustrated in Table 1   The lending test is generally regarded as the most important of the three tests, awarding banks the most points (CRA credits) in all rating categories  As shown in Table 1 , banks receive fewer credits for making CRA-qualified investments than for providing direct loans to individuals under the lending test  In some instances, an activity may qualify for more than one of the performance tests  Federal banking regulators evaluate financial institutions based upon their capacity, constraints, and business strategies; demographic and economic data; lending, investment, and service opportunities; and benchmark against competitors and peers  Because these factors vary across banks, the CRA examination was customized in 1995 to account for differences in bank sizes and business models  In 2005, the bank size definitions were revised to include small , intermediate small , and large banks  The bank regulators also indexed the asset size thresholds—which are adjusted annually—to inflation using the Consumer Price Index  As of January 1, 2019, a small bank is defined as having less than $1 284 billion in assets as of December 31 of either of the prior two calendar years; an intermediate small bank has at least $321 million as of December 31 of both of the prior two calendar years but less than $1 284 billion as of December 31 of either of the prior two calendar years; and a large bank has $1 284 billion or more in assets  Small banks are typically evaluated under the lending test  Regulators review (1) loan-to-deposit ratios; (2) percentage of loans in an assessment area; (3) lending to borrowers of different incomes and in different amounts; (4) geographical distribution of loans; and (5) actions on complaints about performance  Intermediate small banks are subject to both the lending and investment tests  Large banks are subject to all three tests  As mentioned previously, direct lending to borrowers, taking place in what is referred to as primary lending markets , qualify for CRA credit under the lending test  Investments taking place in secondary lending markets , in which investors purchase loans that have already been originated (such that little or no direct interaction occurs between investors and borrowers), qualify for CRA credit under the investment test  Secondary market investors may assume the default risk associated with a loan if the entire loan is purchased  Alternatively, if a set of loans are pooled together, then numerous secondary investors may purchase financial securities in which the returns are generated by the principal and interest repayments from the underlying loan pool, thereby sharing the lending risk  Direct ownership of loans or purchases of smaller portions (debt securities) of a pool of loans, therefore, are simply alternative methods to facilitate lending  As shown in Table 1 above, a bank may receive CRA consideration under the lending test for making a loan to LMI individuals that is guaranteed by a federal agency, such as the Federal Home Administration (FHA)  If, however, a bank purchases securities backed by pools of FHA-guaranteed mortgage originations, this activity receives credit under the investment test  Thus, the bank receives less CRA credit when the financial risk is shared with other lenders than it would for making a direct loan (and holding all of the lending risk) even though it would still facilitate lending to LMI borrowers  In 2005, the activities that qualify for CRA credit were expanded to encourage banks to make public welfare investments  More specifically, qualifying activities include a public welfare investment (PWI) that promotes the public welfare by providing housing, services, or jobs that primarily benefit LMI individuals; and a community development investment (CDI), economic development investment , or project that meets the PWI requirements  Examples of CDI activities include promoting affordable housing, financing small businesses and farms, and conducting activities that revitalize LMI areas  Banks may engage in certain activities that typically would not be permitted under other banking laws as long as these activities promote the public welfare and do not expose institutions to unlimited liability  For example, banks generally are not allowed to make direct purchases of the preferred or common equity shares of other banking firms; however, banks may purchase equity shares of institutions with a primary mission of community development (discussed in more detail in the Appendix ) up to an allowable CDI limit  The Financial Services Regulatory Relief Act of 2006 ( P L  109-351 ) increased the amount that national banking associations and state banks (that are members of the Federal Reserve System) may invest in a single institution from 10% to 15% of a bank's unimpaired capital and unimpaired surplus  CDIs that benefit a bank's designated assessment area may qualify for CRA credit  For CRA purposes, the definition of a CDI was expanded in 2005 to include "underserved and distressed" rural areas and "designated disaster areas" to aid the regional rebuilding from severe hurricanes, flooding, earthquakes, tornados, and other disasters  The disaster area provision allows banks anywhere in America to receive consideration for CRA credit if they facilitate making credit available to a distressed location or geographic area outside of their own assessment areas  Thus, the 2005 revisions to the PWI and CDI definitions made more banking activities eligible for CRA credits  The banking regulators would consider awarding full CRA credits under the lending test to banks that make CDI loans directly in their assessment areas  Under the investment test, however, the banking regulators may choose to prorate the credits awarded to indirect investments  The Appendix provides examples of CDI activities that would qualify for CRA consideration under the investment test  Any awarded CRA credits could be prorated given that investing banks typically would have less control over when and where the funds are loaned  The CRA was revised in 1989 to require descriptive CRA composite performance ratings that must be disclosed to the public  The composite ratings illustrated in Table 2 are tabulated using the points assigned from the individual tests (shown in Table 1 above)  Grades of Outstanding and Satisfactory are acceptable; Satisfactory ratings in both community development and retail lending are necessary for a composite Satisfactory   Large banks must receive a sufficient amount of points from the investment and service tests to receive a composite Outstanding rating  Regulators include CRA ratings as a factor when lenders request permission to engage in certain activities, such as moving offices or buying another institution  Denying requests, particularly applications for mergers and acquisitions, is a mechanism that may be applied against banking organizations with ratings below Satisfactory   In 2005, the banking regulators also ruled that any evidence of discrimination or credit practices that violate an applicable law, rule, or regulation by any affiliate would adversely affect an agency's evaluation of a bank's CRA performance  Applicants with poor ratings may resubmit their applications after making the necessary improvements  Covered institutions must post a CRA notice in their main offices and make publicly available a record of their composite CRA performance  Given that the CRA is not a federal assistance program and that several regulators implement it separately, no single federal agency is responsible for evaluating its overall effectiveness  In 2000, Congress directed the Federal Reserve to study the CRA's effectiveness  The Federal Reserve's study reported that lending to LMI families had increased since the CRA's enactment but found it was not possible to directly attribute all of that increase to the CRA  For example, advancements in underwriting over the past several decades have enabled lenders to better predict and price borrower default risk, thus making credit available to borrowers that might have been rejected prior to such technological advances  This section examines the difficulty linking bank lending outcomes directly to the CRA, considering questions raised about the subjectivity of the CRA examination itself, whether prudential regulators use CRA to encourage banks to engage in high-risk lending, and whether the increased lending to LMI borrowers since CRA's enactment can be attributed to other profit-incentives that exist apart from the CRA  Questions have been raised as to whether the CRA examination itself is effective at measuring a bank's ability to meet local credit needs  For example, the CRA examinations have an element of subjectivity in terms of measuring both the quality and quantity of CRA compliance  In terms of quality, regulators determine the "innovativeness or flexibility" of qualified loan products; the "innovativeness or complexity" of qualified investments; or the "innovativeness" of ways banks service groups of customers previously not served  The number of points some CRA-qualifying investments receive relative to others is up to the regulator's judgment given that no formal definition of innovativeness has been established (although regulators provide a variety of examples as guidelines for banks to follow)  In terms of quantity, there is no official quota indicating when banks have done enough CRA-qualified activities to receive a particular rating  Without specific definitions of the criteria or quotas, the CRA examination may be considered subjective  Almost all banks pass their CRA examinations  Figure 1 shows the average annual composite scores of banks that received CRA examinations as well as the annual number of bank examinations by size  In general, most banks receive a composite Satisfactory or better rating regardless of the number of banks examined in a year  For all years, approximately 97% or more of banks examined received ratings of Satisfactory or Outstanding   Whether the consistently high ratings reflect the CRA's influence on bank behavior or whether the CRA examination procedures need improvement is difficult to discern  Another issue raised is whether the CRA has resulted in banks making more high-risk loans given that it encourages banks to lend to LMI individuals (perhaps under the presumption that LMI individuals are less creditworthy relative to higher-income individuals)  Since passage of the CRA, however, innovations have allowed lenders to better evaluate the creditworthiness of borrowers (e g , credit scoring, the adoption of automated underwriting), thus enhancing credit availability to both high credit quality and credit-impaired individuals  Credit-impaired borrowers can be charged higher interest rates and fees than those with better credit histories to compensate lenders for taking on greater amounts of credit or default risk  Nontraditional loan products (e g , interest-only, initially low interest rate) allow borrowers to obtain lower regular payments during the early stages of the loan, perhaps under the expectation that their financial circumstances may improve in the later stages as the loan payments adjust to reflect the true costs  The ability to charge higher prices or offer such nontraditional loan products may result in greater higher-risk lending  Because these technological developments in the financial industry occurred after enactment of the CRA, banks' willingness to enter into higher-risk lending markets arguably cannot be attributed solely to the CRA  Regulators arguably are more reluctant to award banks CRA credit for originating higher-risk loans given the scrutiny necessary to determine whether higher loan prices reflect elevated default risk levels or discriminatory or predatory lending practices  Primary bank regulators are concerned with both prudential regulation and consumer protection  It is difficult for regulators to monitor how well borrowers understood the disclosures regarding loan costs and features, or whether any discriminatory or predatory behavior occurred at the time of loan origination  Regulators use fair lending examinations to determine whether loan pricing practices have been applied fairly and consistently across applicants or if some steering to higher-priced loan products occurred  Nevertheless, although it is not impossible for banks to receive CRA credits for making some higher-priced loans, regulators are mindful of practices such as improper consumer disclosure, steering, or discrimination that inflate loan prices  Prudential regulators are also unlikely to encourage lending practices that might result in large concentrations of high-risk loans on bank balance sheets  Hence, certain lending activities—subprime mortgages and payday lending—have been explicitly discouraged by bank regulators, as discussed in more detail below  Although no consensus definition has emerged for subprime lending, this practice may generally be described as lending to borrowers with weak credit at higher costs relative to borrowers of higher credit quality  In September 2006, the banking regulatory agencies issued guidance on subprime lending that was restrictive in tone  The guidance warned banks of the risk posed by nontraditional mortgage loans, including interest-only and payment-option adjustable-rate mortgages  The agencies expressed concern about these loans because of the lack of principal amortization and the potential for negative amortization  Consequently, a study of 2006 Home Mortgage Disclosure Act data reported that banks subject to the CRA and their affiliates originated or purchased only 6% of the reported high-cost loans made to lower-income borrowers within their CRA assessment areas  Banks, therefore, received little or no CRA credit for subprime mortgage lending  Instead, federal regulators offered CRA consideration to banks that helped mitigate the effects of distressed subprime mortgages  On April 17, 2007, federal regulators provided examples of various arrangements that financial firms could provide to LMI borrowers to help them transition into affordable mortgages and avoid foreclosure  The various workout arrangements were eligible for favorable CRA consideration  Banks are unlikely to receive CRA consideration for originating subprime mortgages going forward  The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act; P L  111-203 ) requires lenders to consider consumers' ability to repay before extending them mortgage credit, and one way for lenders to comply is to originate qualified mortgages (QMs) that satisfy various underwriting and product-feature requirements  For example, QMs may not have any negative amortization features, interest-only payments, or points and fees that exceed specified caps of the total loan amount; in most cases, borrowers' debt-to-income ratios shall not exceed 43%  QM originations will give lenders legal protections if the required income verification and other proper underwriting procedures were followed  Given the legal protections afforded to QMs, some banks might show greater reluctance toward making non-QM loans  With this in mind, the federal banking regulators announced that banks choosing to make only or predominately QM loans should not expect to see an adverse effect on their CRA evaluations; however, the regulators did not indicate that CRA consideration would be given for non-QMs  Arguably, the federal banking regulators appear less inclined to use the CRA to encourage lending that could be subject to greater legal risks  Banks have demonstrated interest in providing financial services such as small dollar cash advances, which are similar to payday loans, in the form of subprime credit cards, overdraft protection services, and direct deposit advances  However, banks are discouraged from engaging in payday and similar forms of lending  Legislation, such as the Credit Card Accountability Responsibility and Disclosure Act of 2009 ( P L  111-24 ), placed restrictions on subprime credit card lending  In addition, federal banking regulators expressed concern when banks began offering deposit advance products due to the similarities to payday loans  Specifically, on April 25, 2013, the OCC, FDIC, and Federal Reserve expressed concerns that the high costs and repeated extensions of credit could add to borrower default risks and issued final supervisory guidance regarding the delivery of these products  Many banks subsequently discontinued offering deposit advances  In general, these legislative and regulatory efforts explicitly discourage banks from offering high-cost consumer financial products and thus such products are unlikely to receive CRA consideration  When various financial products are deemed unsound by bank regulators and not offered by banks, a possible consequence may be that some customers migrate to nonbank institutions willing to provide these higher-cost products  Accordingly, the effectiveness of the CRA diminishes if more individuals choose to seek financial products from nonbank institutions  In general, it can be difficult to determine the extent to which banks' financial decisions are motivated by CRA incentives, profit incentives, or both  Compliance with CRA does not require banks to make unprofitable, high-risk loans that would threaten the financial health of the bank  Instead, CRA loans have profit potential; and bank regulators require all loans, including CRA loans, to be prudently underwritten  As evidenced below, it may be difficult to determine whether banks have made particular financial decisions in response to profit or CRA incentives in cases where those incentives exist simultaneously  For example, banks increased their holdings of municipal bonds in 2009  Although banks may receive CRA consideration under the investment test for purchasing state and local municipal bonds that fund public and community development projects in their designated assessment areas, banks may choose this investment for reasons unrelated to CRA  During recessions, for example, banks may reduce direct (or primary market) lending activities and increase their holdings of securities in the wake of declining demand for and supply of direct loan originations that occur during economic slowdowns and early recovery periods  In addition, a provision of the American Recovery and Reinvestment Act of 2009 ( P L  111-5 ) provided banks with a favorable tax incentive to invest in municipal bonds in the wake of the 2007-2009 recession  Hence, determining whether banks increased their municipal holdings because of a turn to securities markets for higher yields following a recession, a favorable tax incentive, or the CRA incentive is challenging  Similarly, banks increased their investments in Small Business Investment Corporations (SBICs, defined in the Appendix ) in 2010  Investments in SBICs allow banks to provide subordinate financing (rather than senior debt) to businesses  Senior lenders have first claims to the business's assets in case of failure; however, subordinate financiers provide funds in the form of mezzanine capital or equity, requiring a higher return because they are repaid after senior lenders  Banks generally are not allowed to act as subordinate financiers because they are not allowed to acquire ownership interests in private equity funds, unless such investments promote public welfare  Hence, attributing community development financing activities, such as SBIC investments, to CRA incentives may arguably be easier (relative to other financing activities) because the ability to engage in subordinate financing activities typically represents a CRA exemption from ordinary permissible banking activities  Following the 2007-2009 recession, however, U S  interest rates dropped to historically low levels for an abnormally long period of time  Because low-yielding interest rate environments squeeze profits, banks were likely to search for higher-yielding and larger-sized lending opportunities, such as investments in SBICs  Hence, it remains difficult to determine whether a particular bank's decision to increase SBIC financing activities was driven by normal profit or CRA-related incentives  Between June 2016 and June 2017, more than 1700 U S  bank branches were closed  Many branch closings occurred primarily in rural and low-income tract areas, raising concerns that banks would be able to circumvent their CRA obligation to lend and be evaluated in these areas  A traditional bank business model, however, relies primarily on having access to core deposits , a stable source of funds used to subsequently originate loans  Banks value geographic locations with greater potential to attract high core deposit volumes, which is also consistent with the CRA's requirement that assessment areas include at least one MSA or contiguous political subdivision (as previously discussed)  Furthermore, using FDIC and U S  Census Bureau data, the Federal Reserve noted that the number of branches per capita in 2017 was higher than two decades ago  Hence, determining whether branch closures reflect a bank's intentions to circumvent CRA compliance or to facilitate its ability to attract core deposits is challenging  On April 3, 2018, the U S  Department of Treasury (Treasury) released recommendations to modernize CRA in a memorandum to the federal banking regulators (OCC, FCIC, and the Fed)  Treasury highlighted four of its recommendations, summarized below  When the CRA was enacted in 1977, banks received deposits and made loans primarily through geographical branches  Assessment areas defined geographically arguably may not fully reflect the community served by a bank because of technology developments, such as the internet and mobile phone banking, prompting Treasury to call for revisiting the approach for determining banks' assessment areas  In 2016, the banking regulators issued Interagency Questions and Answers (Q&As) to provide banks guidance pertaining to CRA-eligible activities; however, Treasury noted that each regulator provides its examiners with additional guidance  Also, the Interagency Q&As illustrate past CRA-qualifying activities, but Treasury noted that no formal process currently exists to help determine whether potential (complex, innovative, or innovative) activities would qualify for CRA credit  Treasury recommends establishing clearer standards for CRA-qualifying activities and flexibility (expanding the types of loans, investments, and services that qualify for CRA credit), which may encourage banks to venture beyond activities that typically receive CRA credit  Treasury reports that each bank regulator follows a different examination schedule; the examinations are lengthy; and delays associated with the release of performance evaluations may limit the time banks can react to recommendations before their next CRA examination  Treasury recommends increasing the timeliness of the CRA examination process  Treasury recommends incorporating performance incentives that might result in more efficient lending activities  For example, CRA-qualifying loans may receive credit in the year of origination, but equity investments may receive credit each year that the investment is held  Treasury recommends consistent treatment of loans and investments, which may encourage banks to make more long-term loans (rather than sequences of short-term loans for the sake of being awarded CRA credits at each CRA examination)  On August, 28, 2018, the OCC released an Advance Notice of Proposed Rulemaking (ANPR) to seek comments on ways to modernize the CRA framework  The ANPR solicited comments on the issues raised by Treasury among other things  The OCC's ANPR does not propose specific changes, but its content and the questions posed suggest that the OCC is exploring the possibility of adopting a quantitative metric-based approach to CRA performance evaluation, changing how assessment areas are defined, expanding CRA-qualifying activities, and reducing the complexity, ambiguity, and burden of the regulations on the bank industry  When the comment period closed on November 19, 2018, the OCC had received 1584 comments  The Federal Reserve and the FDIC did not join the OCC in releasing the ANPR  The Federal Reserve System, however, did host research symposiums around the country to gather comments pertaining to CRA reform  As reported by the Federal Reserve, some banking industry comments suggested, among other things, the need for consistency of the CRA examinations to facilitate CRA compliance  Yet some tailoring may still be necessary with respect to determining assessment areas that better reflect each bank's business models, particularly for models that use technology to deliver products and services  The regulators also heard from community and consumer groups  While expressing the need to retain focus on the historical context of the CRA, these groups highlighted the need to address issues pertaining to banking deserts in underserved communities  Community development investments (CDIs) that meet public welfare investment (PWI) requirements are those that promote the public welfare, primarily resulting in economic benefits for low- and moderate-income (LMI) individuals  This appendix provides examples of CDI activities that would qualify for consideration under the CRA investment test  In many cases, covered banks are more likely to take advantage of these optional vehicles to obtain CRA credits if they perceive the underlying investment opportunities to have profit potential  Loan Participations Banks and credit unions often use participation (syndicated) loans to jointly provide credit  When a financial firm (e g , bank, credit union) originates a loan for a customer, it may decide to structure loan participation arrangements with other institutions  The loan originator often retains a larger portion of the loan and sells smaller portions to other financial institutions willing to participate  Suppose a financial firm originates a business or mortgage loan in a LMI neighborhood  A bank may receive CRA investment credit consideration by purchasing a participation, thus becoming a joint lender to the LMI borrower  An advantage of loan participations is that the default risk is divided and shared among the participating banks (as opposed to one financial firm retaining all of the risk)  CRA consideration is possible if the activity occurs within the designated assessment area  For all participating banks to receive credit, some overlap in their designated assessment areas must exist  An exception is made for participations made to benefit designated disaster areas, in which all participating banks would receive CRA consideration regardless of location  State and Local Government Bonds State and local governments issue municipal bonds, and the proceeds are used to fund public projects, community development activities, and other qualifying activities  The interest that nonbank municipal bondholders receive is exempt from federal income taxes to encourage investment in hospitals, schools, infrastructure, and community development projects that require state and local funding  Legislative actions during the 1980s eliminated the tax-exempt status of interest earned from holdings of municipal bonds for banks  Although banks no longer have a tax incentive to purchase municipal bonds, they still consider the profitability of holding these loans, as they do with all lending opportunities  Furthermore, banks receive CRA investment consideration when purchasing state and local municipal bonds that fund public and community development projects in their designated assessment areas  CRA-Targeted Secondary Market Instruments Secondary market financial products have been developed to facilitate the ability of banks to participate in lending activities eligible for CRA consideration, such as purchasing mortgage-backed securities (MBSs) or shares of real estate investment trusts (REITs)  A MBS is a pool of mortgage loans secured by residential properties; a multifamily MBS is a pool of mortgage loans secured by multifamily properties, consisting of structures designed for five or more residential units, such as apartment buildings, hospitals, nursing homes, and manufactured homes  CRA-MBSs are MBSs consisting of loans that originated in specific geographic assessment areas, thereby allowing bank purchases into these pools to be eligible for CRA consideration under the investment test  Similarly, REITs may also pool mortgages, mortgage MBSs, and real estate investments (e g , real property, apartments, office buildings, shopping malls, hotels)  Investors purchase shares in REIT pools and defer the taxes  Banks may only invest in mortgage REITs and MBS REITs  Similar to the CRA-MBSs, the REITs must consist of mortgages and MBSs that would be eligible for CRA consideration  The Community Development Trust REIT is an example of a REIT that serves as a CRA-qualified investment for banks  Community Development Financial Institutions and Equity Equivalent Investments The Community Development Financial Institutions (CDFI) Fund was created by the Riegle Community Development Regulatory Improvement Act of 1994 (the Riegle Act; P L  103-325 )  The CDFI Fund was established to promote economic development for distressed urban and rural communities  The CDFI Fund, currently located within the U S  Department of the Treasury, is authorized to certify banks, credit unions, nonprofit loan funds, and (for-profit and nonprofit) venture capital funds as designated CDFIs  In other words, a bank may satisfy the requirements to become a CDFI, but not all CDFIs are banks  The primary focus of institutions with CDFI certification is to serve the financial needs of economically distressed people and places  The designation also makes these institutions eligible to receive financial awards and other assistance from the CDFI Fund  In contrast to non-CDFI banks, some CDFI banks have greater difficulty borrowing funds and then transforming them into loans for riskier, economically distressed consumers  The lack of loan level data for most CDFI banks causes creditors to hesitate in making low-cost, short-term loans to these institutions  Specifically, the lack of information on loan defaults and prepayment rates on CDFI banking assets is likely to result in limited ability to sell these loan originations to secondary loan markets  Consequently, the retention of higher-risk loans, combined with limited access to low-cost, short-term funding, makes CDFI banks more vulnerable to liquidity shortages  Hence, CDFIs rely primarily on funding their loans (assets) with net assets , which are proceeds analogous to the equity of a traditional bank or net worth of a credit union  CDFI net assets are often acquired in the form of awards or grants from the CDFI Fund or for-profit banks  Funding assets with net assets is less expensive for CDFIs than funding with longer-term borrowings  Banks may obtain CRA investment credit consideration by making investments to CDFIs, which provides CDFIs with net assets (equity)  Under PWI authority, banks are allowed to make equity investments in specialized financial institutions, such as CDFIs, as long as they are considered by their safety and soundness regulator to be at least adequately capitalized   Furthermore, the final Basel III notification of proposed regulation (NPR) allows for preferential capital treatment for equity investments made under PWI authority, meaning equity investments to designated CDFIs may receive more favorable capital treatment  Consequently, banks often provide funds to CDFIs through equity equivalent investments (EQ2s), which are debt instruments issued by CDFIs with a continuous rolling (indeterminate) maturity  EQ2s, from a bank's perspective, are analogous to holding convertible preferred stock with a regularly scheduled repayment  Hence, banks may view EQ2s as a potentially profitable opportunity to invest in other specialized financial institutions and receive CRA consideration, particularly when the funds are subsequently used by CDFIs to originate loans in the banks' assessment areas  Small Business Investment Companies The Small Business Administration (SBA) was established in 1953 by the Small Business Act of 1953 (P L  83-163) to support small businesses' access to capital in a variety of ways  Although issuing loan guarantees for small businesses is a significant component of its operations, the SBA also has the authority to facilitate the equity financing of small business ventures through its Small Business Investment Company (SBIC) program, which was established by the Small Business Investment Act of 1958 (P L  85-699)  SBICs that are licensed and regulated by the SBA may provide debt and equity financing and, although not a program requirement, educational (management consulting) resources for businesses that meet certain SBA size requirements  Banks may act as limited partners if they choose to provide funds to SBICs, which act as general partners  Banks may establish their own SBICs, jointly establish SBICs (with other banks), or provide funds to existing SBICs  SBICs subsequently use bank funding to invest in the long-term debt and equity securities of small, independent (SBA-eligible) businesses, and banks may receive CRA investment consideration if the activities benefit their assessment areas  Community banks invest in SBICs because of the profit potential as well as the opportunity to establish long-term relationships with business clients during their infancy stages  Banks that are considered by their regulators to be adequately capitalized are allowed to invest in these specialized financial institutions under PWI authority, but the investments still receive risk-based capital treatment  SBIC assets, similar to CDFIs, are illiquid given the difficulty to obtain credit ratings for SBIC investments; thus, they cannot be sold in secondary markets  Because banks risk losing the principal of their equity investments, they are required to perform the proper due diligence associated with prudent underwriting  Tax Credits The low-income housing tax credit (LIHTC) program was created by the Tax Reform Act of 1986 ( P L  99-514 ) to encourage the development and rehabilitation of affordable rental housing  Generally speaking, government (federal or state) issued tax credits may be bought and, in many cases, sold like any other financial asset (e g , stocks and bonds)  Owners of tax credits may reduce their tax liabilities either by the amount of the credits or by using the formulas specified on those credits, assuming the owners have participated in the specified activities that the government wants to encourage  For LIHTCs, banks may use a formula to reduce their federal tax liabilities when they provide either credit or equity contributions (grants) for the construction and rehabilitation of affordable housing  If a bank also owns a LIHTC, then a percentage of the equity grant may be tax deductible if the CDFI uses the funds from the grant to finance affordable rental housing  Furthermore, banks may receive consideration for CRA-qualified investment credits  After a domestic corporation or partnership receives designation as a Community Development Entity (CDE) from the CFDI Fund, it may apply for New Markets Tax Credits (NMTCs)  Encouraging capital investments in LMI communities is the primary mission of CDEs, and CDFIs and SBICs automatically qualify as CDEs  Only CDEs are eligible to compete for NMTCs, which are allocated by the CDFI Fund via a competitive process  Once awarded an allocation of NMTCs, the CDE must obtain equity investments in exchange for the credits  Then, the equity proceeds raised must either be used to provide loans or technical assistance or deployed in eligible community investment activities  Only for-profit CDEs, however, may provide NMTCs to their investors in exchange for equity investments  Investors making for-profit CDE equity investments can use the NMTCs to reduce their tax liabilities by a certain amount over a period of years  As previously discussed, a bank may receive CRA credit for making equity investments in nonprofit CDEs and for-profit subsidiaries, particularly if the investment occurs within the bank's assessment area  Furthermore, banks may be able to reduce their tax liabilities if they can obtain NMTCs from the CDEs in which their investments were made 


Report 2: U S  foreign aid is the largest component of the international affairs budget, for decades viewed by many as an essential instrument of U S  foreign policy  Each year, the foreign aid budget is the subject of congressional debate over the size, composition, and purpose of the program  The focus of U S  foreign aid policy has been transformed since the terrorist attacks of September 11, 2001  Global development, a major objective of foreign aid, has been cited as a third pillar of U S  national security, along with defense and diplomacy, in the national security strategies of the George W  Bush and Barack Obama Administrations  Although the Trump Administration's National Security Strategy does not explicitly address the status of development vis-à-vis diplomacy and defense, it does note the historic importance of aid in achieving foreign policy goals and supporting U S  national interests  This report addresses a number of the more frequently asked questions regarding the U S  foreign aid program; its objectives, costs, and organization; the role of Congress; and how it compares to those of other aid donors  It attempts not only to present a current snapshot of American foreign assistance, but also to illustrate the extent to which this instrument of U S  foreign policy has evolved over time  Data presented in the report are the most current, consistent, and reliable figures available, generally updated through FY2017  Dollar amounts come from a variety of sources, including the U S  Agency for International Development (USAID) Foreign Aid Explorer database (Explorer) and annual State, Foreign Operations, and Related Programs (SFOPS) appropriations acts  As new data are obtained or additional issues and questions arise, the report will be revised  Foreign aid abbreviations used in this report are listed in Appendix B   In its broadest sense, U S  foreign aid is defined under the Foreign Assistance Act of 1961 (FAA), the primary legislative basis of foreign aid programs, as any tangible or intangible item provided by the United States Government [including "by means of gift, loan, sale, credit, or guaranty"] to a foreign country or international organization under this or any other Act, including but not limited to any training, service, or technical advice, any item of real, personal, or mixed property, any agricultural commodity, United States dollars, and any currencies of any foreign country which are owned by the United States Government     (§634(b)) For many decades, nearly all assistance annually requested by the executive branch and debated and authorized by Congress was ultimately encompassed in the foreign operations appropriations and the international food aid title of the agriculture appropriations  In the U S  federal budget, these traditional foreign aid accounts have been subsumed under the 150 (international affairs) budget function  By the 1990s, however, it became increasingly apparent that the scope of U S  foreign aid was not fully accounted for by the total of the foreign operations and international food aid appropriations  Many U S  departments and agencies had adopted their own assistance programs, funded out of their own budgets and commonly in the form of professional exchanges with counterpart agencies abroad—the Environmental Protection Agency, for example, providing water quality expertise to other governments  These aid efforts, conducted outside the purview of the traditional foreign aid authorizing and appropriations committees, grew more substantial and varied in the mid-1990s  The Department of Defense (DOD) Nunn-Lugar effort provided billions in aid to secure and eliminate nuclear and other weapons, as did Department of Energy activities to control and protect nuclear materials—both aimed largely at the former Soviet Union  Growing participation by DOD in health and humanitarian efforts and expansion of health programs in developing countries by the National Institutes of Health and Centers for Disease Control and Prevention, especially in response to the HIV/AIDS epidemic, followed  During the past 15 years, DOD-funded and implemented aid programs in Iraq and Afghanistan to train and equip foreign forces and win hearts and minds through development efforts were often considerably larger than the traditional military and development assistance programs provided under the foreign operations appropriations  The recent decline in DOD activities in these countries has sharply decreased nontraditional aid funding  In FY2011, nontraditional sources of assistance, at $17 3 billion, represented 35% of total aid obligations  By FY2017, nontraditional aid, at $9 7 billion, represented 19% of total aid, still a significant proportion  While the executive branch has continued to request and Congress to debate most foreign aid within the parameters of the foreign operations legislation, both entities have sought to ascertain a fuller picture of assistance programs through improved data collection and reporting  Significant discrepancies remain between data available for traditional versus nontraditional types of aid and, therefore, the level of analysis applied to each  (See text box , "A Note on Numbers and Sources," below ) Nevertheless, to the extent possible, this report tries to capture the broadest definition of aid throughout  Foreign assistance is predicated on several rationales and supports a great many objectives  The importance and emphasis of various rationales and objectives have changed over time  Throughout the past 70 years, there have been three key rationales for foreign assistance National Security has been the predominant theme of U S  assistance programs  From rebuilding Europe after World War II under the Marshall Plan (1948-1951) and through the Cold War, U S  aid programs were viewed by policymakers as a way to prevent the incursion of communist influence and secure U S  base rights or other support in the anti-Soviet struggle  After the Cold War ended, the focus of foreign aid shifted from global anti-communism to disparate regional issues, such as Middle East peace initiatives, the transition to democracy of eastern Europe and republics of the former Soviet Union, and international illicit drug production and trafficking in the Andes  Without an overarching security rationale, foreign aid budgets decreased in the 1990s  However, since the September 11, 2001, terrorist attacks in the United States, policymakers frequently have cast foreign assistance as a tool in U S  counterterrorism strategy, increasing aid to partner states in counterterrorism efforts and funding the substantial reconstruction programs in Afghanistan and Iraq  As noted, global development has been featured as a key element in U S  national security strategy in both Bush and Obama Administration policy statements  Commercial Interests  Foreign assistance has long been defended as a way to either promote U S  exports by creating new customers for U S  products or by improving the global economic environment in which U S  companies compete  Humanitarian Concerns  Humanitarian concerns drive both short-term assistance in response to crisis and disaster as well as long-term development assistance aimed at reducing poverty, hunger, and other forms of human suffering brought on by more systemic problems  Providing assistance for humanitarian reasons has generally been the aid rationale most broadly supported by the American public and policymakers alike  The objectives of aid generally fit within these rationales  Aid objectives include promoting economic growth and reducing poverty, improving governance, addressing population growth, expanding access to basic education and health care, protecting the environment, promoting stability in conflictive regions, protecting human rights, promoting trade, curbing weapons proliferation, strengthening allies, and addressing drug production and trafficking  The expectation has been that, by meeting these and other aid objectives, the United States will achieve its national security goals as well as ensure a positive global economic environment for American products, and demonstrate benevolent and respectable global leadership  Different types of foreign aid typically support different objectives  But there is also considerable overlap among categories of aid  Multilateral aid serves many of the same objectives as bilateral development assistance, although through different channels  Military assistance, economic security aid—including rule of law and police training—and development assistance programs may support the same U S  political objectives in the Middle East, Afghanistan, and Pakistan  Military assistance and alternative development programs are integrated elements of American counternarcotics efforts in Latin America and elsewhere  Depending on how they are designed, individual assistance projects can also serve multiple purposes  A health project ostensibly directed at alleviating the effects of HIV/AIDS by feeding orphan children may also stimulate grassroots democracy and civil society through support of indigenous NGOs while additionally meeting U S  humanitarian objectives  Microcredit programs that support small business development may help develop local economies while at the same time enabling client entrepreneurs to provide food and education to their children  Water and sanitation improvements both mitigate health threats and stimulate economic growth by saving time previously devoted to water collection, raising school attendance for girls, and facilitating tourism, among other effects  In 2006, in an effort to rationalize the assistance program more clearly, the State Department developed a framework that organizes U S  foreign aid around five strategic objectives, each of which includes a number of program elements, also known as sectors  The five objectives are Peace and Security; Investing in People; Governing Justly and Democratically; Economic Growth; and Humanitarian Assistance  Generally, these objectives and their sectors do not correspond to any one particular budget account in appropriations bills  Annually, the Department of State and USAID develop their foreign operations budget request within this framework, allowing for an objective and program-oriented viewpoint for those who seek it  An effort by the State Department to obtain reporting from all departments and agencies of the U S  government on aid levels categorized by objective and sector is ongoing  USAID's Explorer website (explorer usaid gov) currently provides a more complete picture from all parts of the U S  government (see Table 1 )  The 2006 framework introduced by the Department of State organizes assistance by foreign policy strategic objective and sector  But there are many other ways to categorize foreign aid, one of which is to sort out and classify foreign aid accounts in the U S  budget according to the types of activities they are expected to support, using broad categories such as military, bilateral development, multilateral development, humanitarian assistance, political/strategic, and nonmilitary security activities (see Figure 1 )  This methodology reflects the organization of aid accounts within the SFOPS appropriations but can easily be applied to the international food aid title of the Agriculture appropriations as well as to the DOD and other government agency assistance programs with funding outside traditional foreign aid budget accounts  In FY2017, these many aid accounts provided $49 9 billion in obligated assistance  For FY2017, U S  government departments and agencies obligated about $16 2 billion in bilateral development assistance, or 33% of total foreign aid, primarily through the Development Assistance (DA) and Global Health (Global Health-USAID and Global Health-State) accounts and the administrative accounts that allow USAID to operate (Operating Expenses, Capital Investment Fund, and Office of the Inspector General)  Other bilateral development assistance accounts support the development efforts of distinct institutions, such as the Peace Corps, Inter-American Foundation (IAF), U S -African Development Foundation, Trade and Development Agency, Millennium Challenge Corporation (MCC), and National Endowment for Democracy (NED)  Development assistance programs aim to foster sustainable broad-based economic progress and social stability in developing countries  This aid is managed largely by USAID and is used for long-term projects in a wide range of areas  Many programs share the objective in the State Department framework of "promoting economic growth and prosperity " Agriculture programs focus on reducing poverty and hunger, trade-promotion opportunities for farmers, and sound environmental practices for sustainable agriculture  Private sector development programs include support for business associations and microfinance services  Programs for managing natural resources and protecting the global environment focus on conserving biological diversity; improving the management of land, water, and forests; encouraging clean and efficient energy production and use; and reducing the threat of global climate change  Programs supporting the objective of "governing justly and democratically" include support for promoting rule of law and human rights, good governance, political competition, and civil society  Programs with the objective of "investing in people" include support for basic, secondary, and higher education; improving government ability to provide social services; water and sanitation; and health care  By far the largest portion of bilateral development assistance is devoted to global health  These programs include treatment of HIV/AIDS and other infectious diseases, maternal and child health, family planning and reproductive health programs, and strengthening the government health systems that provide care  Most funding for HIV/AIDS, malaria, and tuberculosis is directed through the State Department's Office of the Global AIDS Coordinator to other agencies, including USAID and the Centers for Disease Control and Prevention  The latter agency and the National Institutes for Health also conduct programs funded by Labor-Health and Human Services (HHS) appropriations  In addition to providing emergency food aid in crisis situations, a portion (about 25% in FY2017) of the Food for Peace (FFP) Title II international food aid program (also referred to as P L  480, named after the 1954 law that authorized it)—funded under the Agriculture appropriations—provides nonemergency food commodities to private voluntary organizations (PVOs) or multilateral organizations, such as the World Food Program, for development-oriented purposes  FFP funds are also used to support the "farmer-to-farmer" program, which sends hundreds of U S  volunteers as technical advisors to train farm and food-related groups throughout the world  In addition, the McGovern-Dole International Food for Education and Child Nutrition Program, a program begun in 2002, provides commodities, technical assistance, and financing for school feeding and child nutrition programs  A share of U S  foreign assistance—4% in FY2017 ($2 1 billion)—is combined with contributions from other donor nations to finance multilateral development projects  Multilateral aid is funded largely through the International Organizations and Programs (IO&P) account and individual accounts for each of the Multilateral Development Banks (MDBs) and global environmental funds  For FY2017, the U S  government obligated $2 1 billion for development activities managed by international organizations and financial institutions, including contributions to the United Nations Children's Fund (UNICEF); the United Nations Development Program (UNDP); and MDBs, such as the World Bank  The U S  share of donor contributions to each of the MDB concessional (subsidized) and nonconcessional (market rate) loan windows varies widely  For the largest MDB, the World Bank, the United States has contributed about 20 5% to the nonconcessional lending window (the International Development Associations [IDA]) and about 17 3% to the nonconcessional lending window (the International Bank for Reconstruction and Development [IBRD])  In determining the U S  share of donor contributions to the various multilateral institutions, the U S  faces the challenge of finding the right balance between the benefits of burden sharing and the constraints of sharing control when determining multilateral priorities  For FY2017, obligations for humanitarian assistance programs amounted to $8 9 billion, 18% of total assistance  Unlike development assistance programs, which are often viewed as long-term efforts that may have the effect of preventing future crises from emerging, humanitarian assistance programs are devoted largely to the immediate alleviation of human suffering in emergencies, both natural and man-made, as well as problems resulting from conflict associated with failed or failing states  The largest portion of humanitarian assistance is managed through the International Disaster Assistance (IDA) account by USAID, which provides relief and rehabilitation efforts to victims of man-made and natural disasters, such as the economic and social dislocations caused by the 2014/2015 Ebola epidemic, and the ongoing crises in Syria, South Sudan, Yemen, and Venezuela  A portion of IDA is used for food assistance through the Emergency Food Security Program  Additional humanitarian assistance goes to programs administered by the State Department and funded under the Migration and Refugee Assistance (MRA) and the Emergency Refugee and Migration Assistance (ERMA) accounts, aimed at addressing the needs of refugees and internally displaced persons  These accounts support a number of refugee relief organizations, including the U N  High Commission for Refugees and the International Committee of the Red Cross  The Department of Defense provides disaster relief under the Overseas Humanitarian, Disaster, and Civic Assistance (OHDACA) account of the DOD appropriations  (For further information on humanitarian programs, see CRS In Focus IF10568, Overview of the Global Humanitarian and Displacement Crisis , by Rhoda Margesson ) The bulk of FFP Title II Agriculture appropriations—$1 3 billion in obligations, about 75% of total Food for Peace Act in FY2017—are used by USAID, mostly to purchase U S  agricultural commodities, for emergency needs, supplementing both refugee and disaster programs  (For more information on food aid programs, see CRS Report R45422, U S  International Food Assistance: An Overview , by Alyssa R  Casey ) A few accounts promote special U S  political and strategic interests  Programs funded through the Economic Support Fund (ESF) account generally aim to promote political and economic stability, often through activities indistinguishable from those provided under regular development programs  However, ESF is also used for direct budget support to foreign governments and to support sovereign loan guarantees  For FY2017, USAID and the State Department obligated $4 8 billion, nearly 10% of total assistance, through this account  For many years, following the 1979 Camp David accords, most ESF funds went to support the Middle East Peace Process—in FY1997, for example, 87% of ESF went to Israel, Egypt, the West Bank and Jordan  Those proportions have declined significantly in recent decades  In FY2007, 22% of ESF funding went to these countries and, in FY2017, 25%  Since the September 2001 terrorist attacks, ESF has largely supported countries of importance in the U S  global counterterrorism strategy  In FY2007, for example, activities is Afghanistan and Pakistan received 17% of ESF funding (25% in FY2017)  Over the years, other accounts have been established to meet specific political or security interests and then were dissolved once the need was met  One example is the Assistance to Eastern Europe and Central Asia (AEECA) account, established in FY2009 to combine two aid programs that met particular strategic political interests arising from the demise of the Soviet empire  The SEED (Support for East European Democracy Act of 1989) and the FREEDOM Support Act (Freedom for Russia and Emerging Eurasian Democracies and Open Markets Support Act of 1992) programs were designed to help Central Europe and the newly independent states of the former Soviet Union (FSA) achieve democratic systems and free market economies  With funding decreasing as countries in the region graduated from U S  assistance, Congress discontinued use of the AEECA account in the FY2013 appropriations  Increasing requests and appropriations for countries in the former Soviet Union threatened by Russia, however, led to its re-emergence in the FY2017 and succeeding SFOPS appropriations  In the recent past, several DOD-funded nontraditional aid programs directed at Afghanistan also supported development efforts  The Afghanistan Infrastructure Fund and the Business Task Force wound down as the U S  military presence in that country declined; the Commander's Emergency Response Program (CERP) still exists  The latter two programs had earlier iterations as well in Iraq  Several U S  government agencies support programs to address global concerns that are considered threats to U S  security and well-being, such as terrorism, illicit narcotics, crime, and weapons proliferation  In the past two decades, policymakers have given greater weight to these programs  In FY2017, they amounted to $2 9 billion, 6% of total assistance Since the mid-1990s, three U S  agencies—State, DOD, and Energy—have provided funding, technical assistance, and equipment to counter the proliferation of chemical, biological, radiological, and nuclear weapons  Originally aimed at the former Soviet Union under the rubric cooperative threat reduction (CTR), these programs seek to ensure that these weapons are secured and their spread to rogue nations or terrorist groups prevented  In addition to nonproliferation efforts, the Nonproliferation, Anti-Terrorism, Demining and Related Programs (NADR) account, managed by the State Department, encompasses civilian anti-terrorism efforts such as detecting and dismantling terrorist financial networks, establishing watch-list systems at border controls, and building developing country anti-terrorism capacities  NADR also funds humanitarian demining programs  The State Department is the main implementer of counternarcotics programs  The State-managed International Narcotics Control and Law Enforcement (INCLE) account supports counternarcotics activities, most notably in Afghanistan, Pakistan, Peru, and Colombia  It also helps develop the judicial systems—assisting judges, lawyers, and legal institutions—of many developing countries, especially in Afghanistan  DOD and USAID also support counternarcotics activities, the former largely by providing training and equipment, the latter by offering alternative crop and employment programs  The United States provides military assistance to U S  friends and allies to help them acquire U S  military equipment and training  At $14 5 billion, military assistance accounted for about 29% of total U S  foreign aid in FY2017  The Department of State administers three programs, with corresponding appropriations accounts that are then implemented by DOD  Foreign Military Financing (FMF) is a grant program that enables governments to receive equipment and associated training from the U S  government or to access equipment directly through U S  commercial channels  Most FMF grants support the security needs of Israel, Egypt, Jordan, Pakistan, and Iraq  The International Military Education and Training program (IMET) offers military training on a grant basis to foreign military officers and personnel  Peacekeeping funds (PKO) are used to support voluntary non-U N  peacekeeping operations as well as training for an African crisis response force  Since 2002, DOD appropriations have supported FMF-like programs, training and equipping security forces in Afghanistan and Iraq  These programs and the accounts that fund them are called the Afghanistan Security Forces Fund (ASFF) and, through FY2012, the Iraq Security Forces Fund (ISFF)  Beginning in FY2015, similar support was provided Iraq under the Iraq Train and Equip Fund  The DOD-funded programs in Afghanistan and Iraq accounted for more than half of total military assistance in FY2017  How and in what form assistance reaches an aid recipient can vary widely, depending on the type of aid program, the objective of the assistance, and the agency responsible for providing the aid  Federal agencies may implement foreign assistance programs using funds appropriated directly to them or funds transferred to them from another agency  For example, significant funding appropriated through State Department and Department of Agriculture accounts is used for programs implemented by USAID (see Figure 2 )  The funding data in this section reflect the agency that implemented the aid, not necessarily the agency to which funds were originally appropriated  For 50 years, USAID has implemented the bulk of the U S  bilateral economic development and humanitarian assistance  It directly implements the Development Assistance, International Disaster Assistance, and Transition Initiatives accounts, as well as a USAID-designated portion of the Global Health account  Jointly with the State Department, USAID co-manages ESF, AEECA, and Democracy Fund programs, which frequently support development activities as a means of promoting U S  political and strategic goals  Based on historical averages, according to USAID, the agency implements more than 90% of ESF, 70% of AEECA, 40% of the Democracy Fund, and about 60% of the Global HIV/AIDS funding appropriated to the State Department  USAID also implements all Food for Peace Act Title II food assistance funded through agriculture appropriations  USAID obligated an estimated $20 55 billion to implement foreign assistance programs and activities in FY2017  The agency's staff in 2018 totaled 9,747 , of which about 67% were working overseas, overseeing the implementation of hundreds of projects undertaken by thousands of private sector contractors, consultants, and nongovernmental organizations  DOD implements all SFOPS-funded military assistance programs—FMF, IMET, PKO, and PCCF—in conjunction with the policy guidance of the Department of State  The Defense Security Cooperation Agency is the primary DOD body responsible for these programs  DOD also carries out an array of state-building activities, funded through defense appropriations legislation, which are usually in the context of training exercises and military operations  These sorts of activities, once the exclusive jurisdiction of civilian aid agencies, include development assistance to Iraq and Afghanistan through the Commander's Emergency Response Program (CERP), the Iraq Relief and Reconstruction Fund, and the Afghanistan Infrastructure Fund, and elsewhere through the Defense Health Program, counterdrug activities, and humanitarian and disaster relief  Training and equipping of Iraqi and Afghan police and military, though similar in nature to some traditional security assistance programs, has been funded and implemented primarily through DOD appropriations, though implementing the Iraq police training program was a State Department responsibility from 2012 until it was phased out in 2013  In FY2017, the Department of Defense implemented an estimated $14 50 billion in foreign assistance programs  The Department of State manages and co-manages a wide range of assistance programs  It is the lead U S  civilian agency on security and refugee related assistance, and has sole responsibility for implementing the International Narcotics and Law Enforcement (INCLE) and Nonproliferation, Antiterror, and Demining (NADR) accounts, the two Migration and Refugee accounts (MRA and ERMA), and the International Organizations and Programs (IO&P) account  State is also home to the Office of the Global AIDS Coordinator (OGAC), which manages the State Department's portion of Global Health funding in support of HIV/AIDS programs, though many of these funds are transferred to and implemented by USAID, the National Institutes of Health, and the Centers for Disease Control and Prevention  In conjunction with USAID, the State Department manages the Economic Support Fund, AEECA assistance to the former communist states, and Democracy Fund accounts  For these accounts, the State Department largely sets the overall policy and direction of funds, while USAID implements the preponderance of programs  In addition, the State Department, through its Bureau of Political-Military Affairs, has policy authority over the Foreign Military Financing (FMF), International Military Education and Training (IMET), and Peacekeeping Operations (PKO) accounts, and, while it was active, the Pakistan Counterinsurgency Capability Fund (PCCF)  These programs are implemented by the Department of Defense  Police training programs have traditionally been the responsibility of the International Narcotics and Law Enforcement (INL) Office in the State Department, though programs in Iraq and Afghanistan were implemented and paid for by the Department of Defense for several years  State is also the organizational home to the Office of U S  Foreign Assistance Resources (formerly the Office of the Director of Foreign Assistance), known as "F," which was created in 2006 to coordinate U S  foreign assistance programs  The office establishes standard program structures and definitions, as well as performance indicators, and collects and reports data on State Department and USAID aid programs  The State Department implemented about $7 66 billion in foreign assistance funding in FY2017, though it has policy authority over a much broader range of assistance funds  The U S  Department of Health and Human Services implements a range of global health programs through its various component institutions  As an implementing partner in the President's Emergency Plan for Aids Relief (PEPFAR), a large portion of HHS foreign assistance activity is related to HIV prevention and treatment, including technical support and preventing mother to child transmission of HIV/AIDS  The Centers for Disease Control and Prevention participates in a broad range of global disease control activity, including rapid outbreak response, global research and surveillance, information technology assistance, and field epidemiology and laboratory training  The National Institutes of Health (NIH) also conduct international health research that is reported as assistance  In FY2017, HHS institutions implemented $2 66 billion in foreign assistance activities  The Department of the Treasury's Under Secretary for International Affairs administers U S  contributions to and participation in the World Bank and other multilateral development institutions  In this case, the agency manages the distribution of funds to the institutions, but does not implement programs  Presidentially appointed U S  executive directors at each of the banks represent the United States' point of view  Treasury also deals with foreign debt reduction issues and programs, including U S  participation in the Highly Indebted Poor Countries (HIPC) initiative, and manages a technical assistance program offering temporary financial advisors to countries implementing major economic reforms and combating terrorist finance activity  For FY2017, the Department of the Treasury managed foreign assistance valued at about $1 85 billion  Created in February 2004, the Millennium Challenge Corporation (MCC) seeks to concentrate significantly higher amounts of U S  resources in a few low- and lower-middle-income countries that have demonstrated a strong commitment to political, economic, and social reforms relative to other developing countries  A significant feature of the MCC effort is that recipient countries formulate, propose, and implement mutually agreed multi-year U S -funded project plans known as compacts  Compacts in the 27 recipient countries selected to date have emphasized construction of infrastructure  The MCC is a U S  government corporation, headed by a chief executive officer who reports to a board of directors chaired by the Secretary of State  The Corporation maintains a relatively small staff of about 300  The MCC obligated about $1 01 billion in FY2017  A number of other government agencies play a role in implementing foreign aid programs  The Peace Corps, an autonomous agency with FY2017 obligations of $445 million, supports about 7,300 volunteers in 65 countries  Peace Corps volunteers work in a wide range of educational, health, and community development projects  The Trade and Development Agency (TDA), which obligated $58 million in FY2017, finances trade missions and feasibility studies for private sector projects likely to generate U S  exports  The Overseas Private Investment Corporation (OPIC) provides political risk insurance to U S  companies investing in developing countries and finances projects through loans and guarantees  Its insurance activities have been self-sustaining, but credit reform rules require a relatively small appropriation to back up U S  guarantees and for administrative expenses  The Better Utilization of Investments Leading to Development Act of 2018 (BUILD Act), signed into law in October 2018 ( P L  115-254 ), authorized consolidation of OPIC and USAID's Development Credit Authority into a new U S  International Development Finance Corporation (IDFC), which is expected to become operational in fall 2019  For FY2017, as for most prior years, OPIC receipts exceeded appropriations, resulting in a net gain to the Treasury  The Inter-American Foundation and the African Development Foundation, obligating $25

ground_truth: The Community Reinvestment Act (CRA; P.L. 95-128, 12 U.S.C. §§2901-2908) addresses how banking institutions meet the credit needs of the areas they serve, particularly in low- and moderate-income (LMI) neighborhoods. The federal banking regulatory agencies—the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC)—currently implement the CRA. The regulators issue CRA credits, or points, where banks engage in qualifying activities—such as mortgage, consumer, and business lending; community investments; and low-cost services that would benefit LMI areas and entities—that occur with a designated assessment area. These credits are then used to issue each bank a performance rating. The CRA requires these ratings be taken into account when banks apply for charters, branches, mergers, and acquisitions among other things. The CRA, which was enacted in 1977, was subsequently revised in 1989 to require public disclosure of bank CRA ratings to establish a four-tiered system of descriptive performance levels (i.e., Outstanding, Satisfactory, Needs to Improve, or Substantial Noncompliance). In 1995, the CRA examination was customized to account for differences in bank sizes and business models. In 2005, the bank size definitions were revised and indexed to the Consumer Price Index. The 2005 amendments also expanded opportunities for banks to earn CRA credit for public welfare investments (such as providing housing, services, or jobs that primarily benefit LMI individuals). Qualifying activities under the CRA have evolved to include consumer and business lending, community investments, and low-cost services that would benefit LMI areas and entities. Congressional interest in the CRA stems from various perceptions of its effectiveness. Some have argued that, by encouraging lending in LMI neighborhoods, the CRA may also encourage the issuance of higher-risk loans to borrowers likely to have repayment problems (under the presumption that low-income is correlated with lower creditworthiness), which can translate into losses for lenders. Others are concerned that the CRA is not generating sufficient incentives to increase credit availability to qualified LMI borrowers, which may impede economic recovery for some, particularly following the 2007-2009 recession. This report informs the congressional debate concerning the CRA's effectiveness in incentivizing bank lending and investment activity to LMI borrowers. After a discussion of the CRA's origins, it presents the CRA's examination process and bank activities that are eligible for consideration of CRA credits. Next, it discusses the difficulty of determining the CRA's influence on bank behavior. For example, the CRA does not specify the quality and quantity of CRA-qualifying activities, meaning that compliance with the CRA does not require adherence to lending quotas or benchmarks. In the absence of benchmarks, determining the extent to which CRA incentives have influenced LMI credit availability relative to other factors is not straightforward. Banks also face a variety of financial incentives—for example, capital requirements, the prevailing interest rate environment, changes in tax laws, and technological innovations—that influence how much (or how little) they lend to LMI borrowers. Because multiple financial profit incentives and CRA incentives tend to exist simultaneously, it is difficult to determine the extent to which CRA incentives have influenced LMI credit availability relative to other factors.

prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 2.



Report 2: 8 million and $20 2 million, respectively, in FY2017, finance small-scale enterprise and grassroots self-help activities aimed at assisting poor people  Most U S  assistance is now provided as a grant (gift) rather than a loan, so as not to increase the heavy debt burden carried by many developing countries  However, the forms a grant may take are diverse  The most common type of U S  development aid is project-based assistance (77% in FY2017), in which aid is channeled through an implementing partner to complete a project  Aid is also provided in the form of core contribution to international organizations such as the United Nations, technical assistance, and direct budget support (cash transfer) to governments  A portion of aid money is also spent on administrative costs ( Figure 3 )  Within these categories, aid may take many forms, as described below  Although it is the exception rather than the rule, some countries receive aid in the form of a cash grant to the government  Dollars provided in this way support a government's balance-of-payments situation, enabling it to purchase more U S  goods, service its debt, or devote more domestic revenues to developmental or other purposes  Cash transfers have been made as a reward to countries that have supported the United States' counterterrorism operations (Turkey and Jordan in FY2004), to provide political and strategic support (both Egypt and Israel annually for decades after the 1979 Camp David Peace Accord), and in exchange for undertaking difficult political and economic reforms  Assistance may be provided in the form of food commodities, weapons systems, or equipment such as generators or computers  Food aid may be provided directly to meet humanitarian needs or to encourage attendance at a maternal/child health care program  Weapons supplied under the military assistance program may include training in their use  Equipment and commodities provided under development assistance are usually integrated with other forms of aid to meet objectives in a particular social or economic sector  For instance, textbooks have been provided in both Afghanistan and Iraq as part of a broader effort to reform the educational sector and train teachers  Computers may be offered in conjunction with training and expertise to fledgling microcredit institutions  Since PEPFAR was first authorized in 2004, antiretroviral drugs (ARVs) provided to individuals living with HIV/AIDS have been a significant component of commodity-based assistance  Although once a significant portion of U S  assistance programs, construction of economic infrastructure—roads, irrigation systems, electric power facilities, etc —was rarely provided after the 1970s  Because of the substantial expense of these projects, they were to be found only in large assistance programs, such as that for Egypt in the 1980s and 1990s, where the United States constructed major urban water and sanitation systems  The aid programs in Iraq and Afghanistan supported the building of schools, health clinics, roads, power plants, and irrigation systems  In Iraq alone, more than $10 billion went to economic infrastructure  Economic infrastructure is now also supported by U S  assistance in a wider range of developing countries through the Millennium Challenge Corporation  In this case, recipient countries design their own assistance programs, most of which, to date, include an infrastructure component  Transfer of knowledge and skills is a significant part of most assistance programs  The International Military Education and Training Program (IMET) provides training to officers of the military forces of allied and friendly nations  Tens of thousands of citizens of aid recipient countries receive short-term technical training or longer-term degree training annually under USAID programs  More than one-quarter of Peace Corps volunteers are English, math, and science teachers  Other aid programs provide law enforcement personnel with anti-narcotics or anti-terrorism training  Many assistance programs provide expert advice to government and private sector organizations  The Department of the Treasury, USAID, and U S -funded multilateral banks all place specialists in host government ministries to make recommendations on policy reforms in a wide variety of sectors  USAID has often placed experts in private sector business and civic organizations to help strengthen them in their formative years or while indigenous staff are being trained  While most of these experts are U S  nationals, in Russia, USAID funded the development of locally staffed political and economic think tanks to offer policy options to that government  USAID, the Inter-American Foundation, and the African Development Foundation often provide aid in the form of small grants directly to local organizations to foster economic and social development and to encourage civic engagement in their communities  Grants are sometimes provided to microcredit organizations, such village-level women's savings groups, which in turn provide loans to microentrepreneurs  Small grants may also address specific community needs  Recent IAF grants, for example, have supported organizations that help resettle Salvadoran migrants deported from the United States and youth programs in Central America aimed at gang prevention  Under the Foreign Assistance Act of 1961, the President may determine the terms and conditions under which most forms of assistance are provided  In general, the financial condition of a country—its ability to meet repayment obligations—has been an important criterion of the decision to provide a loan or grant  Some programs, such as humanitarian and disaster relief programs, were designed from the beginning to be entirely grant activities  During the past two decades, nearly all foreign aid—military as well as economic—has been provided in grant form  While loans represented 32% of total military and economic assistance between 1962 and 1988, this figure declined substantially beginning in the mid-1980s, until by FY2001, loans represented less than 1% of total aid appropriations  The de-emphasis on loan programs came largely in response to the debt problems of developing countries  Both Congress and the executive branch have generally supported the view that foreign aid should not add to the already existing debt burden carried by these countries  In the FY2019 budget request, the Trump Administration encouraged the use of loans over grants when providing military assistance (Foreign Military Financing), but Congress did not include language in support of that proposal in the enacted FY2019 appropriation ( P L  116-6 )  Although a small proportion of total current aid, there are significant USAID-managed programs that guarantee loans, meaning the U S  government agrees to pay a portion of the amount owed in the case of a default on a loan  A Development Credit Authority (DCA) loan guarantee, in which risk is shared with a private sector bank, can be used to increase access to finance in support of any development sector  The DCA is to be transferred from USAID in 2019 to the new IDFC, established by the BUILD Act of 2018 ( P L  115-254 ), to enhance U S  development finance capacity  Under the Israeli Loan Guarantee Program, the United States has guaranteed repayment of loans made by commercial sources to support the costs of immigrants settling in Israel from other countries and may issue guarantees to support economic recovery  USAID has also provided loan guarantees in recent years to improve the terms or amounts of financing from international capital markets for Ukraine and Jordan  In these cases, assistance funds representing a fraction of the guarantee amount are provided to cover possible default  Between 1946 and 2016, the United States loaned $112 7 billion in foreign economic and military aid to foreign governments, and while most foreign aid is now provided through grants, $9 18 billion in loans to foreign governments remained outstanding at the end of FY2016  For nearly three decades, Section 620q of the Foreign Assistance Act (the Brooke amendment) has prohibited new assistance to the government of any country that falls more than one year past due in servicing its debt obligations to the United States, though the President may waive application of this prohibition if he determines it is in the national interest  The United States has also forgiven debts owed by foreign governments and encouraged, with mixed success, other foreign aid donors and international financial institutions to do likewise  In some cases, the decision to forgive foreign aid debts has been based largely on economic grounds as another means to support development efforts by heavily indebted, but reform-minded, countries  The United States has been one of the strongest supporters of the Heavily Indebted Poor Country (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI)  These initiatives, which began in the late 1990s, include participation of the World Bank, the International Monetary Fund, and other international financial institutions in a comprehensive debt workout framework for the world's poorest and most debt-strapped nations  The largest and most hotly debated debt forgiveness actions have been implemented for much broader foreign policy reasons with a more strategic purpose  Poland, during its transition from a communist system and centrally planned economy (1990—$2 46 billion); Egypt, for making peace with Israel and helping maintain the Arab coalition during the Persian Gulf War (1990—$7 billion); and Jordan, after signing a peace accord with Israel (1994—$700 million), are examples  Similarly, the United States forgave about $4 1 billion in outstanding Saddam Hussein-era Iraqi debt in November 2004 and helped negotiate an 80% reduction in Iraq's debt to creditor nations later that month  Most development and humanitarian assistance activities are not directly implemented by U S  government personnel but by private sector entities, such as individual personal service contractors, consulting firms, universities, private voluntary organizations (PVOs), or public international organizations (PIOs)  Generally speaking, U S  government foreign service and civil servants determine the direction and priorities of the aid program, allocate funds while keeping within legislative requirements, ensure that appropriate projects are in place to meet aid objectives, select implementers, and monitor the implementation of those projects for effectiveness and financial accountability  Both USAID and the State Department have promoted the use of public-private partnerships, in which private entities such as corporations and foundations are contributing partners, not paid implementers, in situations where business interests and development objectives coincide  In FY2017, the United States provided some form of bilateral foreign assistance to more than 150 countries  Aid is concentrated heavily in certain countries, reflecting the priorities and interests of United States foreign policy at the time  Table 2 identifies the top 15 recipients of U S  foreign assistance for FY1997, FY2007 and FY2017  As shown in the table above, there are both similarities and sharp differences among country aid recipients for the three periods  The most consistent thread connecting the top aid recipients over the past two decades has been continuing U S  strategic interests in the Middle East, with large programs maintained for Israel and Egypt and, for Iraq, following the 2003 invasion  Two key countries in the U S  counterterrorism strategy, Afghanistan and Pakistan, made their first appearances on the list in FY2002 and continued to be among the top recipients in FY2017  In FY1997, one sub-Saharan African country appeared among leading aid recipients; in FY2017, 7 of the 15 are sub-Saharan African  Many are focus countries under the PEPFAR initiative to address the HIV/AIDS epidemic; South Sudan receives support as a newly independent country with multiple humanitarian and development needs  In FY1997, three countries from Eastern Europe and the former Soviet Union made the list, as many from the region had for much of the 1990s, representing the effort to transform the former communist nations to democratic societies and market-oriented economies  None of those countries appear in the FY2017 list  In FY1997, four Latin American countries make the list; no countries from the region appear in FY2017  On a regional basis, the Middle East/North Africa (MENA) region has received the largest share of U S  foreign assistance for many decades  Although economic aid to the region's top two recipients, Israel and Egypt, began to decline in the late 1990s, the dominant share of bilateral U S  assistance consumed by the MENA region was maintained in FY2005 by the war in Iraq  Despite the continued importance of the region, its share slipped substantially by FY2017 as the effort to train and equip Iraqi forces diminished  Since September 11, 2001, South and Central Asia has emerged as a significant target of U S  assistance, rising from a roughly 3% share 20 years ago to 16% in FY2007 and 15% in FY2017, largely because of aid to Afghanistan and Pakistan  Similarly, the share represented by African nations has increased from 10% and 19%, respectively, in FY1997 and FY2007, to 25% in FY2017, largely due to the HIV/AIDS initiative that funnels resources mostly to African countries and to a range of other efforts to address the region's development challenges  Meanwhile, the share of aid to Europe/Eurasia, which greatly surpassed that of Africa in FY1997, has declined significantly in the past decade, to about 4% in FY2017, with the graduation of many East European aid recipients and the termination of programs in Russia  The Ukraine was responsible for about one third of aid to that region in FY2017  East Asia/Pacific has remained at a low level during the past two decades, while Latin America's share has risen and fallen based on U S  interest in Colombia and a few Central American countries as aid has shifted to regions of more pressing strategic interest (see Figure 4 )  There are several methods commonly used for measuring the amount of federal spending on foreign assistance  Amounts can be expressed in terms of budget authority (funds appropriated by Congress), obligations (amounts contractually committed), outlays or disbursements (money actually spent)  Assistance levels are also sometimes measured as a percentage of the total federal budget, as a percentage of total discretionary budget authority (excluding mandatory and entitlement programs), or as a percentage of the gross domestic product (GDP) (for an indication of the national wealth allocated to foreign aid)  By nearly all of these measures, foreign aid resources fell gradually on average over several decades since the historical high levels of the late 1940s and early 1950s ( Appendix A )  This downward trend was sporadically interrupted, largely due to major foreign policy initiatives such as the Alliance for Progress for Latin America beginning in 1961, the infusion of funds to implement the Camp David Middle East Peace Accords in 1979, and an increase in military assistance to Egypt, Turkey, Greece and others in the mid-1980s  The lowest point in U S  foreign aid spending since World War II came in 1997, when foreign assistance obligations fell to just above $20 billion (in 2017 dollar terms)  ( Figure 5 ) While foreign aid consistently represented just over 1% of U S  annual gross domestic product in the decade following World War II, it fell gradually to between 0 2% and 0 4% for most years in the past three decades  Foreign assistance spending has comprised, on average, around 3% of discretionary budget authority and just over 1% of total budget authority each year since 1977, though the percentages have sometimes varied considerably from year to year  Foreign aid dropped from 5% of discretionary budget authority in 1979 to 2 4% in 2001, before rising sharply in conjunction with U S  activities in Afghanistan and Iraq starting in 2003  As a portion of total budget authority, foreign assistance reached 2 5% in 1979, but has hovered below 1 5% since 1987  In 2017, foreign assistance was estimated to account for 4 1% of discretionary budget authority and 1 2% of total budget authority ( Figure 6 ; Appendix A )  As previously discussed, since the September 11, 2001, terrorist attacks, foreign aid funding has been closely tied to U S  counterterrorism strategy, particularly in Iraq, Afghanistan, and Pakistan  Bush and Obama Administration global health initiatives, the creation of the Millennium Challenge Corporation, and growth in counter-narcotics activities have driven funding increases as well  The Budget Control Act of 2011, and the drawdown of U S  military forces in Iraq, and to some degree Afghanistan, led to a notable dip in aid obligations in FY2013, but aid levels have risen again with efforts to address the crisis in Syria, counter-ISIL activities, and humanitarian aid  The use of the Overseas Contingency Operations (OCO, discussed below) designation has enabled this growth despite the BCA limitations  Figure 7 shows how trends in foreign aid funding in recent decades can be attributed to specific foreign policy events and presidential initiatives  The Obama Administration's FY2012 international affairs budget proposed that the overseas contingency operations (OCO) designation, which had been applied since 2009 to war-related Defense appropriations, including to DOD assistance programs such as ISFF, ASFF and CERP, be extended to include "extraordinary, but temporary, costs of the Department of State and USAID in the front line states of Iraq, Afghanistan and Pakistan " Congress not only adopted the OCO designation in the FY2012 SFOPS appropriations legislation, but expanded it to include funding for additional accounts and countries  In every fiscal year since, a portion of certain foreign assistance accounts—primarily ESF, FMF, IDA, MRA and INCLE—has been appropriated with the OCO designation  The OCO designation is significant because the Budget Control Act of 2011 (BCA), which set annual caps on discretionary funding from FY2013 through FY2021, specified that funds designated as OCO do not count toward the discretionary spending limits established by the act  OCO designation makes it possible to prevent war-related funding from crowding out core international affairs activities within the budget allocation  The OCO approach is reminiscent of the use of supplemental international affairs appropriations for the first decade after the September 11, 2001, terrorist attacks  Congress appropriated significant emergency supplemental funds for foreign operations and Defense assistance programs every year from FY2002 through FY2010 for activities in Iraq, Afghanistan, and elsewhere, which were not counted toward subcommittee budget allocations  Since the OCO designation was first applied to foreign operations in FY2012, supplemental appropriations for foreign aid have declined significantly  In the FY2019 and FY2020 budget requests, the Trump Administration did not request OCO funding within the international affairs budget, but did request OCO funding for the Department of Defense, including for DOD aid accounts  Congress used the OCO designation for both DOD and State/USAID accounts in the FY2019 appropriation, P L  116-6 , but a smaller portion of aid was designated as OCO compared to FY2018  It remains to be seen whether this is the beginning of a downward trend in OCO use for foreign aid  Congress historically sought to enhance the domestic benefits of foreign aid by requiring that most U S  foreign aid be used to procure U S  goods and services  The conditioning of aid on the procurement of goods and services from the donor-country is sometimes called "tied aid," and while quite common for much of the history of modern foreign assistance, has become increasingly disfavored in the international community  Studies have shown that tying aid increases the costs of goods and services by 15%-30% on average, and up to 40% for food aid, reducing the overall effectiveness of aid flows  The United States joined other donor nations in committing to reduce tied aid in the Paris Declaration on Aid Effectiveness in March 2005, and the portion of tied aid from all donors fell from 70% of total bilateral development assistance in 1985 to an average of 12% in 2016  However, an estimated 32% of U S  bilateral development assistance was tied in 2016, the highest percentage among major donors, perhaps reflecting the perception of policymakers that maintaining public and political support for foreign aid programs requires ensuring direct economic benefit to the United States  About 67% of U S  foreign assistance funds in FY2017 were obligated to U S -based entities  A considerable amount of U S  foreign assistance funds remain in the United States, through domestic procurement or the use of U S  implementers, but the portion differs by program and is hard to identify with any accuracy  For some types of aid, the legislative requirements or program design make it relatively easy to determine how much aid is spent on U S  goods or services, while for others, this is more difficult to determine  USAID  Most USAID funding (Development Assistance, Global Health, Economic Support Fund) is implemented through contracts, grants, and cooperative agreements with implementing partners  While many implementing partner organizations are based in the United States and employ U S  citizens, there is little information available about what portion of the funds used for program implementation are used for goods and services provided by American firms  Procurement reform efforts initiated by USAID in 2010 have aimed to increase procurement and implementation by host country entities as a means to enhance country ownership, build local capacity, and improve sustainability of aid programs  Food assistance commodities, until recently, were purchased wholly in the United States, and generally required by law to be shipped by U S  carriers, suggesting that the vast majority of food aid expenditures are made in the United States  Starting in FY2009, a small portion of food assistance was authorized to be purchased locally and regionally to meet urgent food needs more quickly  Successive Administrations and several Members of Congress have proposed greater flexibility in the food aid program, potentially increasing aid efficiency but reducing the portion of funds flowing to U S  farmers and shippers  To date, these proposals have been largely unsuccessful  Foreign Military Financing , with the exception of certain assistance allocated to Israel, is used exclusively to procure U S  military equipment and training  Millennium Challenge Corporation  The MCC bases its procurement regulations on those established by the World Bank, which calls for an open and competitive process, with no preference given to donor country suppliers  Between FY2011 and FY2017, the MCC awarded roughly 15% of the value of compact contracts to U S  firms  Multilateral development aid  Multilateral aid funds are mixed with funds from other nations and the bulk of the program is financed with borrowed funds rather than direct government contributions  Information on the U S  share of procurement financed by MDBs is unavailable  In addition to the direct benefits derived from aid dollars used for American goods and services, many argue that the foreign aid program brings significant indirect financial benefits to the United States  For example, analysts maintain that provision of military equipment through the military assistance program and food commodities through the Food for Peace program helps to develop future, strictly commercial, markets for those products  More broadly, as countries develop economically, they are in a position to purchase more goods from abroad and the United States benefits as a trade partner  Since an increasing majority of global consumers are outside of the United States, some business leaders assert that establishing strong economic and trade ties in the developing world, using foreign assistance as a tool, is key to U S  economic and job growth  Since World War II, with the exception of several years between 1989 and 2001, during which Japan ranked first among aid donors, the United States has led the developed countries in net disbursements of economic aid, or "Official Development Assistance (ODA)" as defined by the Organization for Economic Cooperation and Development's (OECD) Development Assistance Committee (DAC)  In 2017, the most recent year for which data are available, the United States disbursed $34 12 billion in ODA, or about 24% of the $144 71 billion in total net ODA disbursements by DAC donors that year  Germany ranked second at $24 16 billion, the United Kingdom followed at $18 59 billion, Japan ranked fourth at $11 85 billion, and France rounded out the top donors with $11 03 billion in 2017 (see Figure 8 )  While the top five donors have not varied for more than a decade, there have been shifts lower down the ranking  For example, Turkey has become a much more prominent ODA donor in recent years (ranked 6 th in 2017, with $9 08 billion in ODA, compared to 21 st in 2006), reflecting large amounts of humanitarian aid to assist Syrian refugees  Even as it leads in dollar amounts of aid flows to developing countries, the United States often ranks low when aid is calculated as a percentage of gross national income (GNI)  This calculation is often cited in the context of international donor forums, as a level of 0 7% GNI was established as a target for donors in the 2000 U N  Millennium Development Goals  In 2017, the United States ranked at the bottom among major donors at 0 18% of GNI, slightly lower than Portugal and Spain (0 18% and 0 19%, respectively)  The United Arab Emirates, which has significantly increased its reported ODA in recent years, ranked first among top donors at 1 03% of GNI, followed by Sweden at 1 02% and Luxembourg at 1 00%  There has also been an increase in ODA from non-DAC countries  Between 2000 and 2014, China spent $81 1 billion in ODA, more than tripling its ODA commitments during this period  While reported Chinese ODA is still relatively small compared to that of major donor countries, policymakers are paying increasing attention to growing Chinese investments in developing countries that do not meet the ODA definition  China has touted its "Belt and Road" initiative as an effort to boost development and connectivity across as many as 125 countries to create "strategic propellers" for its own development  However, China has provided little official aggregate information on the initiative, including on the number of projects, countries involved, the terms of financing, and metrics for success  Numerous congressional authorizing committees and appropriations subcommittees maintain responsibility for U S  foreign assistance  Several committees have responsibility for authorizing legislation establishing programs and policy and for conducting oversight of foreign aid programs  In the Senate, the Committee on Foreign Relations, and in the House, the Committee on Foreign Affairs, have primary jurisdiction over bilateral development assistance, political/strategic and other economic security assistance, military assistance, and international organizations  Food aid, primarily the responsibility of the Agriculture Committees in both bodies, is periodically shared with the Foreign Affairs Committee in the House  U S  contributions to multilateral development banks are within the jurisdiction of the Senate Foreign Relations Committee and the House Financial Services Committee  The large nontraditional aid programs funded by DOD, such as Nunn-Lugar Cooperative Threat Reduction programs and the military aid programs in Afghanistan and Iraq, come under the jurisdiction of the Armed Services Committees  Some global health assistance, such as research and other activities done by the Centers for Disease Control and Prevention, may fall under the jurisdiction of the House Energy and Commerce and Senate HELP committees  Traditionally, most foreign aid appropriations fall under the jurisdiction of the SFOPS Subcommittees, with food assistance appropriated by the Agriculture Subcommittees  As noted earlier, however, certain military, global health, and other activities that have been reported as foreign aid have been appropriated through other subcommittees in recent years, including the Defense and the Labor, Health and Human Services, Education and Related Agencies subcommittees  (For current information on SFOPS Appropriations legislation, see CRS Report R45168, Department of State, Foreign Operations and Related Programs: FY2019 Budget and Appropriations , by Susan B  Epstein, Marian L  Lawson, and Cory R  Gill ) The most significant permanent foreign aid authorization laws are the Foreign Assistance Act of 1961, covering most bilateral economic and security assistance programs (P L  87-195; 22 U S C  2151); the Arms Export Control Act (1976), authorizing military sales and financing (P L  90-629; 22 U S C  2751); the Agricultural Trade Development and Assistance Act of 1954 (P L  480), covering food aid (P L  83-480; 7 U S C  1691); and the Bretton Woods Agreement Act (1945), authorizing U S  participation in multilateral development banks (P L  79-171; 22 U S C  286)  In the past, Congress usually scheduled debates every two years on omnibus foreign aid legislation that amended these permanent authorization measures  Congress has not enacted into law a comprehensive foreign assistance authorization measure since 1985, although foreign aid authorizing bills have passed the House or Senate, or both, on numerous occasions  Foreign aid bills have frequently stalled at some point in the debate because of controversial issues, a tight legislative calendar, or executive-legislative foreign policy disputes  In contrast, DOD assistance is authorized in annual National Defense Authorization legislation  In lieu of approving a broad State Department/USAID authorization bill, Congress has on occasion authorized major foreign assistance initiatives for specific regions, countries, or aid sectors in stand-alone legislation or within an appropriation bill  Among these are the SEED Act of 1989 ( P L  101-179 ; 22 U S C  5401); the FREEDOM Support Act of 1992 ( P L  102-511 ; 22 U S C  5801); the United States Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003 ( P L  108-25 ; 22 U S C  7601); the Tom Lantos and Henry J  Hyde United States Global Leadership Against HIV/AIDS, Tuberculosis, and Malaria Reauthorization Act of 2008 ( P L  110-293 ); the Millennium Challenge Act of 2003 (Division D, Title VI of P L  108-199 ); the Enhanced Partnership With Pakistan Act of 2009 ( P L  111-73 ; 22 U S C  8401); the Global Food Security Act of 2016 ( P L  114-195 ; 22 U S C  9306), and the BUILD Act ( P L  115-254 )  In the absence of regular enactment of foreign aid authorization bills, appropriation measures considered annually within the SFOPS spending bill have assumed greater significance for Congress in influencing U S  foreign aid policy  Not only do appropriations bills set spending levels each year for nearly every foreign assistance account, SFOPS appropriations also incorporate new policy initiatives that would otherwise be debated and enacted as part of authorizing legislation  Appendix A  Data Table Appendix B  Common Foreign Assistance Abbreviations
Report 2:  According to DHS documentation, the task orders associated with DEFEND are to be issued between the second quarter of fiscal year 2018 and the second quarter of fiscal year 2024  FISMA requires that DHS provide operational and technical assistance to agencies in implementing policies, principles, standards, and guidelines on information security  Toward this end, DHS has available training and guidance related to the implementation of the capabilities of NCPS (i e , EINSTEIN) and CDM  Specifically: According the DHS officials, the department offers training and guidance to agencies on EINSTEIN 1 implementation  For example, DHS established a program in which the Software Engineering Institute will provide training and mentoring to agencies looking to enhance their understanding of, and proficiency with, the EINSTEIN 1 capability (e g , network traffic information)  NCPS program officials stated that agencies can use this service, which is available at no charge to them, on an unlimited basis as long as the requests relate to EINSTEIN 1  According to the officials, training and guidance related to EINSTEIN 2 and EINSTEIN 3 Accelerated is limited because DHS intentionally restricts the amount of data provided to agencies  According to DHS officials, the department also offers training and guidance to assist agencies with the implementation and use of resources associated with the CDM program, including webinars, guides, and computer-based training  The DEFEND contracts that the department awarded also include a mechanism for agencies to procure specialized tailored training, such as on the use of CDM tools  The department also offers customer advisory forums every other month that agencies are invited to attend  According to CDM program officials, the program’s governance, among other topics, is commonly discussed during these forums  Further, the department provides agencies with guidance, such as various governance documents, best practices, and frequently asked questions, through a web portal that is made available by OMB  In addition, US-CERT offers the CDM training program, which is to provide CDM implementation resources  Nevertheless, most agencies told us that they wanted DHS to provide more training and guidance as it relates to their implementation of the capabilities made available by NCPS and CDM  Specifically, Officials from 16 of 23 agencies reported that they wanted to receive additional training on NCPS capabilities  For example, officials at 5 agencies stated that they would like to receive training related to using network traffic information, understanding alerts, or implementing capabilities for cloud services  The officials also stated that they wanted training specific to agency security personnel  Officials from 19 of 23 agencies stated that they wanted to receive additional guidance related to NCPS’s capabilities, but not all of the 19 provided specific details  For example, officials from at least 3 agencies stated that they wanted additional guidance such as, “how to” documents, descriptions of architecture details, or guidance documents that explain NCPS’s capabilities so that agencies can gauge the gap between the security that the system provides and the security being provided by their own agency’s capabilities  Officials from 21 of 23 agencies reported that they wanted to receive additional training on implementing CDM at their agencies  For example, officials from 7 agencies suggested that additional training on the use of the tools would be beneficial  Officials from 22 of 23 agencies stated that they wanted additional guidance as it relates to CDM implementation  For example, officials from one agency stated that they would like examples of best practices and successful deployments  These requests for additional training and guidance demonstrate that agencies are either unaware of the available training and guidance, or that the training may not meet their needs  Until DHS coordinates with agencies to determine if additional training and guidance are needed, agencies may not be able to fully realize the benefits of the capabilities provided by the NCPS and CDM programs  Although OMB took steps to report on agencies’ implementation of intrusion detection and prevention capabilities, it did not report on all required actions  For example, the office did not submit DHS’s intrusion plan to Congress as required by the Federal Cybersecurity Enhancement Act of 2015  In addition, OMB provided various reports to Congress that described agencies’ intrusion detection and prevention capabilities, but the reports did not always include all information required by the act  Further, OMB developed a draft policy and strategy that were intended to improve agency capabilities, but it had not finalized these documents  The Federal Cybersecurity Enhancement Act of 2015 requires OMB to submit the intrusion assessment plan developed by DHS to the appropriate congressional committees no later than 6 months after the date of enactment of the act  The act also required OMB to submit to Congress a description of the implementation of the intrusion assessment plan and the findings of the intrusion assessments conducted pursuant to the intrusion assessment plan no later than 1 year after the date of enactment of the act, and annually thereafter  Although DHS developed and documented an intrusion assessment plan, which described a defense-in-depth approach to security, OMB did not submit the plan to Congress, as called for in the act  Even though DHS submitted the plan to OMB in January 2017, OMB had not submitted it to Congress as of October 2018 (21 months after DHS submitted the plan and 28 months past the due date)  On the other hand, OMB did submit its own reports to Congress which generally described elements of the implementation of DHS’s intrusion assessment plan and intrusion assessment findings  In September 2017, OMB issued its analysis of agencies’ implementation of intrusion detection and prevention capabilities, or more specifically, agencies’ implementation of the various versions of NCPS  In addition, the office’s annual FISMA report, issued most recently in March 2018, generally covered elements of the intrusion assessment plan  OMB personnel within the Office of the Federal CIO believed that these two reports, along with a process the office had initiated to validate incidents across the government, addressed the requirement for OMB to submit to Congress a description of the implementation of the intrusion assessment plan and the findings of the intrusion assessments conducted pursuant to the plan  However, the September 2017 and March 2018 reports did not address other elements described in DHS’s intrusion assessment plan  For example, OMB did not describe agency roles associated with segmenting their networks, identifying key servers based on threat and impact, ensuring all applications are appropriately tracked and configured, and categorizing and tagging data based on threat and impact  While OMB has provided important information to congressional stakeholders through its own reports, until it submits the plan and addresses all elements described in DHS’s intrusion assessment plan, it will continue to be remiss in providing timely and sufficiently detailed information regarding the intrusion assessment plan to congressional stakeholders to support their oversight responsibilities  The Federal Cybersecurity Enhancement Act of 2015 also required that OMB submit an analysis of agencies’ application of the intrusion detection and prevention capabilities to Congress no later than 18 months after the date of enactment of the act, and annually thereafter  OMB was to include a list of federal agencies and the degree to which each agency had applied the intrusion detection and prevention capabilities in this analysis  As discussed previously in this report, OMB issued its analysis of agencies’ implementation of intrusion detection and prevention capabilities in September 2017  However, the analysis did not include the degree to which agencies had applied the intrusion detection and prevention capabilities  For example, the analysis did not reflect that not all agencies were using this capability on all information traveling between their systems and any system other than an agency system, as required by the act  Until OMB includes the degree to which agencies have applied intrusion detection and prevention capabilities in its analysis, it cannot provide congressional stakeholders with an accurate portrayal of the extent to which the capabilities are detecting and preventing potential intrusions  The Federal Cybersecurity Enhancement Act of 2015 further required that the Federal Chief Information Officer, within OMB, submit a report to Congress no earlier than 18 months after the date of enactment, but no later than 2 years after that date, assessing the intrusion detection and intrusion prevention capabilities that DHS made available to agencies  The act required that the report address (1) the effectiveness of DHS’s system used for detecting, disrupting, and preventing cyber-threat actors, including advanced persistent threats, from accessing agency information and agency information systems; (2) whether the intrusion detection and prevention capabilities, continuous diagnostics and mitigation, and other systems deployed are effective in securing federal information systems; (3) the costs and benefits of the intrusion detection and prevention capabilities, including as compared to commercial technologies and tools, and including the value of classified cyber threat indicators; and (4) the capability of agencies to protect sensitive cyber threat indicators and defensive measures if they were shared through unclassified mechanisms for use in commercial technologies and tools  In a report issued in September 2018 (about 8 months past the required due date), the Federal Chief Information Officer provided Congress an assessment of intrusion detection and intrusion prevention capabilities across the federal enterprise  The report pointed out, among other things, that agencies did not possess or properly deploy capabilities to detect or prevent intrusions or minimize the impact of intrusions when they occur  In addition, the report acknowledged the need to improve the effectiveness of intrusion detection and intrusion prevention capabilities and stated that OMB would track performance through the CAP goal and annual FISMA reports  However, the report did not address all of the requirements specified in the act  For example, the report did not address whether DHS’s system (i e , NCPS) was effective in detecting advanced persistent threats  In addition, the report did not include a comparison of the costs and benefits of the intrusion detection and prevention capabilities versus commercial technologies and tools, or the value of classified cyber threat indicators  Further, the report did not address the capability of agencies to protect sensitive cyber threat indicators and defensive measures  Until OMB updates the Federal CIO report to address all of the requirements specified in the act, it will continue to be remiss in providing timely and sufficiently detailed information, such as that related to costs and benefits, among other elements in the act, to congressional stakeholders to support their oversight responsibilities  In addition to OMB’s responsibilities in the Federal Cybersecurity Enhancement Act of 2015, OMB has initiated plans for further improving agencies’ intrusion detection and prevention capabilities  In response to a tasking in Executive Order 13800, the Director of the American Technology Council coordinated the development of a report to the President from the Secretary of DHS, the Director of OMB, and the Administrator of the General Services Administration, regarding the modernization of federal information technology (IT)  The report, Report to the President on Federal IT Modernization, identified actions that OMB should take for (1) prioritizing the modernization of high-risk, high-value assets and (2) modernizing the Trusted Internet Connection (TIC) program and NCPS to improve protections, remove barriers, and enable commercial cloud migration  For example, OMB was to take the following actions subsequent to the December 13, 2017 report issuance date: Within 60 days: Update a TIC policy to address challenges with agencies’ perimeter-based architectures, such as the modernization of NCPS  In addition, introduce a “90 day sprint” during which approved projects would pilot proposed changes in TIC requirements  Within 90 days: Update the annual FISMA and CAP goal metrics to focus on those critical capabilities that were most commonly lacking among agencies and focus oversight assessments on high-value assets  Within 120 days: In conjunction with DHS, develop a strategy for optimally realigning resources across agencies to reduce the risk to high-value assets and respond to cybersecurity incidents for those assets  OMB has taken steps toward implementing several, but not all, of these actions  For example, it introduced a “90 day sprint” and, according to knowledgeable OMB staff, the outcomes of this action are directly informing changes in TIC requirements  In addition, OMB updated the annual FISMA and CAP goal metrics by including several metrics that focus on high-value assets  The updated FISMA and CAP goal metrics went into effect in April 2018  However, while OMB had taken steps toward updating the TIC policy and developing a strategy for optimally realigning resources, the policy and strategy were in draft and had not yet been finalized as of October 2018  The agency did not specify a time frame for finalizing the policy and strategy  Until OMB finalizes the TIC policy and the strategy for optimally realigning resources, the enhancements offered through the policy and strategy are unlikely to be realized  FISMA requires agencies to provide information security protections to prevent unauthorized access to their systems and information  Officials from the 23 selected agencies reported to us that they generally took steps to meet this requirement by augmenting the tools and services provided by DHS with their own intrusion detection and prevention capabilities  However, agencies did not consistently implement five key capabilities specified by DHS and NIST guidance  In addition, most of the agencies did not fully implement any of the phases of DHS’s CDM program that is intended to improve their capabilities to detect and prevent intrusions  Binding Operational Directive (BOD) 18-01 instructs agencies to enhance email security  These enhancements include enabling encrypted email transmission, ensuring that receiving mail servers know what actions the agency would like taken when an email falsely claims to have originated from the agency, and removing certain insecure protocols, among others  The final deadline for implementing all BOD 18-01 requirements was October 16, 2018  Additionally, NIST SP 800-53 Revision 4 recommends that security awareness training include training on how to recognize and prevent spear-phishing attempts  As of September 2018, only 2 of the 23 agencies reported implementing all of the email requirements  For the remaining 21 agencies: 9 agencies stated that their agency had plans to implement all enhancements by the October 2018 deadline, 1 agency was uncertain whether it would meet the deadline, and 11 stated they would not be able to meet the deadline  By contrast, the majority of agencies (22 of 23) reported that they had trained staff on spear-phishing exercises, as recommended by NIST SP 800-53 Revision 4  Officials at the remaining agency told us that the agency planned to have spear-phishing exercises in fiscal year 2019  Such training should help ensure that phishing will be a less effective attack vector against the majority of agencies  While agencies benefit from secure protocols and spear-phishing training, implementing the remaining BOD 18-01 email requirements would provide additional protection to agency information systems  NIST recommends that federal agencies deploy intrusion detection and prevention capabilities  These capabilities include monitoring cloud services, using host-based intrusion prevention systems, monitoring external and internal network traffic, and using a security information and event management (SIEM) system  However, in our semi-structured interviews of the 23 agencies, officials told us that they often had not implemented many of these capabilities  Such inconsistent implementation exposes federal systems and the information they contain to additional risk  As part of their continuing oversight efforts, OMB and DHS can use the information below to work with agencies to identify obstacles and impediments affecting the agencies’ abilities to implement these capabilities  NIST SP 800-53 Revision 4 states that agencies should monitor and control communications at the external boundary of the network  However, as of June 2018, fewer than half of the agencies that used cloud computing services were monitoring cloud traffic  Specifically: 10 of 22 agencies that used Infrastructure as a Service were monitoring inbound and outbound Infrastructure as a Service traffic, 7 of 21 agencies that used Platform as a Service were monitoring inbound and outbound Platform as a Service traffic, and 10 of 23 agencies that used Software as a Service were monitoring inbound and outbound Software as a Service traffic  Without monitoring traffic to and from cloud service providers, agencies risk a greater chance of malicious cloud activity detrimentally affecting agency information security  NIST SP 800-53 Revision 4 states that agency internal monitoring may be achieved by utilizing intrusion prevention capabilities  These capabilities include using host-based intrusion prevention systems to provide defense at an individual system or device level by protecting against malicious activities  Host-based capabilities include memory-based protection and application whitelisting  As of June 2018, officials at the 23 agencies reported the following to us: 16 agencies used host-based intrusion prevention capabilities, 15 agencies used memory-based protection, and 8 agencies used host-based application whitelisting  Until host-based intrusion protections are fully deployed, agencies will be at greater risk of malicious activity adversely affecting agency operations  NIST SP 800-53 Revision 4 also states that agencies should monitor and control communications at the external boundary of the network and at key internal boundaries (e g , network traffic)  NIST guidance also stated that an agency should deploy monitoring devices strategically within the network to detect essential information  However, the agencies in our review did not always monitor external and internal traffic  For example, of the 23 agencies: 5 reported that they were not monitoring inbound or outbound direct connections to outside entities  11 reported that they were not persistently monitoring inbound encrypted traffic  8 reported that they were not persistently monitoring outbound encrypted traffic  In addition, 13 agencies reported they were not using a network-based session capture solution  Of the 10 agencies that reported using this solution, officials from 2 agencies stated that they were not capturing workstation-to-workstation connections  Without thorough monitoring of external and internal traffic, agencies will have less assurance that they are aware of compromised or potentially compromised traffic within their network  NIST SP 800-53 Revision 4 states that agencies should establish enhanced monitoring capabilities  Such capabilities should include automated mechanisms that collect and analyze incident data for increased threat and situational awareness  According to NIST, a security information and event management (SIEM) system analyzes data from different sources and identifies and prioritizes significant events  Sources of data used by SIEM systems include logs from database systems, network devices, security systems, web applications, and workstation operating systems  Of the 23 agencies that we reviewed, 21 reported using a SIEM capability  Over half of the agencies employing a SIEM used one or more of their logs to match against known vulnerabilities and advanced persistent threats, as well as to create real-time alerts  For example, of the 21 agencies: 14 agencies reported collecting database logs, but only 7 agencies reported using the logs to match against known vulnerabilities and persistent threats and to create real-time alerts; 20 agencies reported collecting network logs, but only 13 agencies reported using them to match against known vulnerabilities and persistent threats and to create real-time alerts; 21 agencies reported collecting security logs, but only 13 reported using them to match against known vulnerabilities and persistent threats and to create real-time alerts; 15 agencies reported collecting web application logs, but only 9 agencies reported using them to match against known vulnerabilities and persistent threats and to create real-time alerts; and 13 agencies reported collecting workstation logs, but only 8 agencies reported using them to match against known vulnerabilities and persistent threats and to create real-time alerts  Only 5 agencies collected all 5 types of logs and used them to match against known vulnerabilities and persistent threats and to create real- time alerts  By not fully using SIEM capabilities, agencies will have less assurance that relevant personnel will be aware of possible weaknesses or intrusions  To further enhance their intrusion detection and prevention capabilities, the 23 civilian CFO Act agencies were in the process of implementing DHS’s CDM program  As previously discussed, Phase 1 of the program involves deploying products to automate hardware and software asset management, configuration settings, and common vulnerability management capabilities  Phase 2 intends to address privilege management and infrastructure integrity by allowing agencies to monitor users on their networks and to detect whether users are engaging in unauthorized activity  Phase 3 is intended to assess agency network activity and identify any anomalies that may indicate a cybersecurity compromise  As of June 2018, most agencies had not fully implemented any of the three phases  As shown in Figure 7, 15 agencies had partially implemented phase 1, 21 had partially or not yet begun to implement phase 2, and none of the agencies had fully implemented phase 3  Agencies’ implementation status has been affected, at least in part, due to delays in DHS’s deployment of the program phases  As a result, federal systems will remain at risk until the program is fully deployed  Many agencies have not effectively implemented the federal approach and strategy for securing information systems  For example, the inspectors general for 17 of the 23 selected agencies reported that their agencies had not effectively implemented their information security programs and had significant information security deficiencies associated with internal control over financial reporting  In addition, CIOs for 17 agencies reported not meeting all nine targets for the cybersecurity cross- agency priority goal  Further, OMB determined that that only 13 of the 23 agencies were managing risks to their overall enterprise, while the other 10 agencies were at risk  Until agencies more effectively implement the government’s approach and strategy, federal systems will remain at risk  DHS and OMB have initiatives underway that are intended to further improve agencies’ security posture  However, although DHS had provided training and guidance for NCPS and CDM, agencies expressed the need for more  In addition, OMB had also not finalized its policy and strategy aimed at addressing challenges with perimeter security and protecting high value assets, respectively  OMB had also not provided useful information to Congress, such as a description of agencies’ implementation of DHS’s intrusion assessment plan, the degree to which agencies are using NCPS, a complete analysis of agencies’ implementation of DHS’s intrusion assessment plan, or the costs and benefits of using commercial tools  Although agencies’ officials reported various efforts underway to enhance their agency’s intrusion detection and prevention capabilities, implementation efforts across the federal government were not consistent  OMB and DHS can use the information provided in this report to work with agencies to identify obstacles and impediments affecting the agencies’ abilities to implement these capabilities  We are making a total of nine recommendations, including two to DHS and seven to OMB  Specifically: The Secretary of DHS should direct the Network Security Deployment division to coordinate further with federal agencies to identify training and guidance needs for implementing NCPS and CDM  (Recommendation 1) The Secretary of DHS should direct the appropriate staff to work with OMB to follow up with agencies to identify obstacles and impediments affecting their abilities to implement intrusion detection and prevention capabilities  (Recommendation 2) The Director of OMB should submit the intrusion assessment plan to the appropriate congressional committees  (Recommendation 3) The Director of OMB should report on implementation of the defense- in-depth strategy described in the intrusion assessment plan, including all elements described in the plan  (Recommendation 4) The Director of OMB should update the analysis of agencies’ intrusion detection and prevention capabilities to include the degree to which agencies are using NCPS  (Recommendation 5) The Director of OMB should direct the Federal CIO to update her report to Congress to include required information, such as detecting advanced persistent threats, a comparison of the costs and benefits of the capabilities versus commercial technologies and tools, and the capability of agencies to protect sensitive cyber threat indicators and defense measures  (Recommendation 6) The Director of OMB should establish a time frame for finalizing the Trusted Internet Connections policy intended to address challenges with agencies’ perimeter-based architectures and issue it when finalized  (Recommendation 7) The Director of OMB should establish a time frame for finalizing the strategy for realigning resources across agencies to protect high- value assets and issue it when finalized  (Recommendation 8) The Director of OMB should direct the Federal CIO to work with DHS to follow-up with agencies to identify obstacles and impediments affecting their abilities to implement intrusion detection and prevention capabilities  (Recommendation 9) We provided a draft of this report to OMB and the 23 civilian CFO Act agencies, including DHS, covered by our review  In response, OMB provided comments via email, and DHS and three other agencies (the Department of Commerce, Social Security Administration, and U S  Agency for International Development) provided written comments, which are reprinted in appendices V through VIII, respectively  The 19 remaining agencies (the Departments of Agriculture, Education, Energy, Health and Human Services, Housing and Urban Development, the Interior, Justice, Labor, State, Transportation, the Treasury, and Veterans Affairs; as well as the Environmental Protection Agency, General Services Administration, National Aeronautics and Space Administration, National Science Foundation, Nuclear Regulatory Commission, Office of Personnel Management, and Small Business Administration) stated via email that they had no comments  In its comments, which the OMB liaison provided to GAO via email on December 7, 2018, OMB did not state whether it agreed or disagreed with the seven recommendations that we made to it  Rather, according to the liaison, OMB agreed with the facts in our draft report, but found that the report did not reflect the agency’s rationale for not submitting the DHS intrusion assessment plan to Congress and a report on the implementation of the plan, as required by the Federal Cybersecurity Enhancement Act of 2015  The liaison stated that OMB is working closely with DHS to provide strategic direction in assessing gaps in, and modernizing, the manner in which intrusion detection and prevention capabilities are delivered to the federal government  Further, in a subsequent email on December 10, 2018, OMB said it believes the Federal CIO’s September 2018 report to Congress, along with data provided in OMB’s fiscal year 2017 FISMA report to Congress, achieves the outcomes sought by the Federal Cybersecurity Enhancement Act of 2015 and demonstrates OMB's continuous engagement with DHS across the evolution of the intrusion detection and prevention program  As stated in our report, we acknowledge that OMB has provided important information to congressional stakeholders through its reports  However, OMB’s reports did not cover all outcomes described in the act  For example, as we pointed out, these reports did not fully address implementation of the defense-in-depth strategy described in DHS’s intrusion assessment plan  In addition, although OMB reported on several elements required by the Federal Cybersecurity Enhancement Act of 2015, it did not report on all of the required elements  For example, the reports did not address whether DHS’s NCPS was effective in detecting advanced persistent threats  The reports also did not include a comparison of the costs and benefits of the intrusion detection and prevention capabilities versus commercial technologies and tools, or the value of classified cyber threat indicators  Further, the reports did not address the capability of agencies to protect sensitive cyber threat indicators and defensive measures  Accordingly, we maintain that our recommendations for OMB to report on required elements in the Federal Cybersecurity Enhancement Act of 2015 are warranted  In addition, OMB suggested that we revise our recommendations to the agency to include a shared responsibility with DHS to help drive desired outcomes  However, six of the seven recommendations we are making to OMB are related to specific OMB responsibilities cited in either the Federal Cybersecurity Enhancement Act of 2015 or the Report to the President on Federal IT Modernization  As such, we believe the recommendations are appropriately addressed to OMB  Furthermore, our recommendations do not prevent OMB from working with DHS to implement them  Our seventh recommendation to OMB—to work with DHS to follow up with agencies to identify obstacles and impediments affecting their abilities to implement intrusion detection and prevention capabilities—includes a shared responsibility with DHS  OMB also provided technical comments, which we incorporated into the report, as appropriate  Subsequent to providing initial comments on our draft report, OMB issued a memorandum intended to provide a strategy for realigning resources across agencies to protect high-value assets  This action addresses our recommendation 8, which called for the Director of OMB to establish a time frame for finalizing the strategy for realigning resources across agencies to protect high-value assets, and to issue the strategy when finalized  In its comments, DHS stated that it concurred with the two recommendations we made to the department  DHS stated that it expects to implement the recommendations in 2019  The Department of Commerce commented that the report was reasonable and that the department agreed with the findings and recommendations  In its comments, the Social Security Administration stated that protecting its networks and information is a critical priority  According to the agency, it continued to make improvements in fiscal year 2018, such as improvements and progress in securing applications, leveraging the cloud, managing its assets and vulnerabilities, strengthening its network and incident response capabilities, improving its security training, and enhancing the overall effectiveness of its cybersecurity program  Finally, the U S  Agency for International Development commented that its inspector general had improved the agency’s capability maturity ratings for core security functions in fiscal year 2018  The agency also pointed out that it was the only selected agency in which fiscal year 2017 indicators of effectiveness in implementing the federal approach and strategy for securing information systems were all positive (as noted in Appendix III)  We are sending copies of this report to appropriate congressional committees, the Director of OMB, the heads of the 23 civilian CFO Act agencies and their inspectors general, and other interested congressional parties  In addition, the report is available at no charge on the GAO website at http://www gao gov  If you or your staff have any questions about this report, please contact Gregory C  Wilshusen at (202) 512-6244 or wilshuseng@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  GAO staff who made key contributions to this report are listed in appendix IX  The Federal Cybersecurity Enhancement Act of 2015, which was enacted December 18, 2015, included a provision for GAO to report on the effectiveness of the federal government’s approach and strategy for securing agency information systems, including intrusion detection and prevention capabilities  The objectives of our review were to assess: (1) the reported effectiveness of selected agencies’ implementation of the federal government’s approach and strategy to securing agency information systems; (2) the extent to which the Office of Management and Budget (OMB) and the Department of Homeland Security (DHS) have facilitated the use of intrusion detection and prevention capabilities to secure federal agency information systems; and (3) the extent to which selected agencies reported implementing intrusion detection and prevention capabilities  Selected agencies for our review were the 23 civilian agencies covered by the Chief Financial Officers Act of 1990 (CFO Act)  We did not include the Department of Defense because the Federal Cybersecurity Enhancement Act of 2015 only pertains to civilian agencies  Because we focused our work on the 23 civilian agencies, results from these reviews are not generalizable to the entire federal government  To assess the reported effectiveness of agencies’ implementation of the federal government’s approach and strategy to securing agency information systems, we described the federal government’s approach and strategy by summarizing the Federal Information Security Modernization Act of 2014 (FISMA), Executive Order 13800, Strengthening the Cybersecurity of Federal Networks and Critical Infrastructure, and the National Institute of Standards and Technology’s (NIST) Framework for Improving Critical Infrastructure Cybersecurity (cybersecurity framework)  assessed the reported effectiveness of agencies’ implementation of the approach and strategy by reviewing annual reports from OMB and the inspectors general (IG) of the 23 civilian CFO Act agencies regarding the reported implementation of FISMA for fiscal year 2017  We described the IG reported maturity levels, including the Office of Inspectors General FISMA Reporting Metrics definition of “effectiveness ” These maturity levels are based on security domains aligned with the five core functions in NIST’s cybersecurity framework  We also summarized IG reported conclusions on the effectiveness of agencies’ information security programs for fiscal year 2017  reviewed the fiscal year 2016 and 2017 financial statement audit reports for each of the 23 civilian CFO Act agencies to identify the extent to which any significant deficiencies or material weaknesses related to information security over financial systems had been reported and to identify information security control weaknesses reported by the IGs  identified whether agencies had met the targets for the cybersecurity- focused cross-agency priority goal for fiscal years 2016 and 2017 by examining agency-reported performance metrics for fiscal years 2016 and 2017  evaluated OMB’s agency risk management assessment ratings to make a determination on how agencies were managing risk to their enterprise  These conclusions were based on FISMA metrics, and are aligned with the five core security functions defined in the cybersecurity framework  interviewed knowledgeable OMB officials and staff to obtain their views on the reported effectiveness of the federal government’s approach and strategy to securing agency information systems  To assess the extent to which OMB and DHS have facilitated the use of intrusion detection and prevention capabilities to secure federal agency information systems, we determined the extent OMB and DHS fulfilled their requirements described in the Federal Cybersecurity Enhancement Act of 2015 by collecting and reviewing artifacts from OMB and DHS and comparing them to the provisions outlined in the act  We also interviewed knowledgeable officials from OMB and DHS regarding their efforts to fulfill their requirements described in the act  determined the effectiveness of corrective actions taken by DHS to address nine previously reported recommendations we made in our report related to NCPS  Specifically, we collected appropriate artifacts and assessed the artifacts against the criteria used in that report, and determined the extent to which the actions taken by DHS met the intent of the recommendations, and we met with DHS staff responsible for the remediation activities and obtained their views of the status of actions taken to address the recommendations  held semi-structured interviews with knowledgeable officials from the 23 civilian CFO Act agencies  During these interviews, we obtained the agency’s views on whether they need more training and guidance from DHS for NCPS and CDM  We also interviewed knowledgeable officials and staff at DHS to obtain their views on how DHS had improved the intrusion detection and prevention capabilities it provides to federal agencies  We also interviewed DHS officials to obtain their views on the training and guidance that the department makes available to agencies  To assess the extent to which selected agencies reported implementing intrusion detection and prevention capabilities, we described the reported intrusion detection and prevention capabilities implemented by the 23 civilian CFO Act civilian agencies by summarizing implemented intrusion detection and prevention capability information obtained from the semi-structured interviews at the 23 civilian CFO Act agencies described above; identifying the extent to which the 23 civilian CFO Act agencies were in compliance with DHS’s binding operating directive (BOD) pertaining to enhanced email and web security (BOD 18-01) by collecting and summarizing Cyber Hygiene Trustworthy Email reports from the 23 agencies and determining the extent to which the agencies had taken required actions to implement the BOD  During the semi-structured interviews, we also obtained the agency’s views and experiences with other programs and services provided by DHS, including the extent to which agencies had implemented the tools offered by the department’s Continuous Diagnostics and Mitigation (CDM) program  To determine the reliability of submitted data and obtain clarification about agencies’ processes to ensure the accuracy and completeness of data used in their respective FISMA reports, we analyzed documents and conducted interviews with officials from 6 of the 23 civilian CFO Act agencies  To select these six agencies, we sorted agency fiscal year 2017 information technology budget data from highest to lowest amount and then divided the data into three tiers: high spending, medium spending, and low spending  We then randomly selected two agencies from each of the three tiers  The selected agencies were the Departments of Agriculture, Commerce, Housing and Urban Development, Transportation, and Veterans Affairs, and the U S  Agency for International Development  While not generalizable to all agencies, the information we collected and analyzed about the six selected agencies provided insights into various processes in place to produce FISMA reports  Based on this assessment, we determined that the data were sufficiently reliable for the purposes of our reporting objectives  We conducted this performance audit from December 2017 to December 2018 in accordance with generally accepted government auditing standards  Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives  We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives  The National Institute of Standards and Technology established the cybersecurity framework to provide guidance for cybersecurity activities within the private sector and government agencies at all levels  The cybersecurity framework consists of five core functions: identify, protect, detect, respond, and recover  Within the five functions are 23 categories and 108 subcategories that define discrete outcomes for each function, as described in table 7  The federal approach and strategy for securing information systems is prescribed by federal law and policy, including the Federal Information Security Modernization Act of 2014 and the presidential executive order on Strengthening the Cybersecurity of Federal Networks and Critical Infrastructure  Accordingly, federal reports describing agency implementation of this law and policy, and reports of related agency information security activities, indicated the effectiveness of agencies’ efforts to implement the federal approach and strategy  Table 8 summarizes the reported effectiveness of the 23 civilian Chief Financial Officers Act of 1990 agencies to implement the government’s approach and strategy to securing information systems  The President’s Management Agenda identifies cross-agency priority (CAP) goals to target areas where multiple agencies must collaborate to effect change  The agenda issued in fiscal year 2018 established an information technology modernization goal that includes a cybersecurity objective with specific priority areas and performance indicators  This cybersecurity-focused goal is intended to drive progress in the government’s efforts to modernize information technology to increase productivity and security  Figure 8 describes the 3 updated cybersecurity- focused cross-agency priority areas and 10 performance indicators  Each federal agency is expected to meet one of the 10 new performance indicators by the end of fiscal year 2018 and the remainder by 2020  In addition to the individual named above, Jeffrey Knott (assistant director), Daniel Swartz (analyst-in-charge), David Blanding, Chris Businsky, Kristi Dorsey, Di’Mond Spencer, Priscilla Smith, and Edward Varty made key contributions to this report  West Coile, Franklin Jackson, and Chris Warweg also provided assistance 

ground_truth: Foreign assistance is the largest component of the international affairs budget and is viewed by many as an essential instrument of U.S. foreign policy. On the basis of national security, commercial, and humanitarian rationales, U.S. assistance flows through many federal agencies and supports myriad objectives. These include promoting economic growth, reducing poverty, improving governance, expanding access to health care and education, promoting stability in conflict regions, countering terrorism, promoting human rights, strengthening allies, and curbing illicit drug production and trafficking. Since the terrorist attacks of September 11, 2001, foreign aid has increasingly been associated with national security policy. At the same time, many Americans and some Members of Congress view foreign aid as an expense that the United States cannot afford given current budget deficits. In FY2017, U.S. foreign assistance, defined broadly, totaled an estimated $49.87 billion, or 1.2% of total federal budget authority. About 44% of this assistance was for bilateral economic development programs, including political/strategic economic assistance; 35% for military aid and nonmilitary security assistance; 18% for humanitarian activities; and 4% to support the work of multilateral institutions. Assistance can take the form of cash transfers, equipment and commodities, infrastructure, or technical assistance, and, in recent decades, is provided almost exclusively on a grant rather than loan basis. Most U.S. aid is implemented by nongovernmental organizations rather than foreign governments. The United States is the largest foreign aid donor in the world, accounting for about 24% of total official development assistance from major donor governments in 2017 (the latest year for which these data are available). Key foreign assistance trends in the past decade include growth in development aid, particularly global health programs; increased security assistance directed toward U.S. allies in the anti-terrorism effort; and high levels of humanitarian assistance to address a range of crises. Adjusted for inflation, annual foreign assistance funding over the past decade was the highest it has been since the Marshall Plan in the years immediately following World War II. In FY2017, Afghanistan, Iraq, Israel, Jordan, and Egypt received the largest amounts of U.S. aid, reflecting long-standing aid commitments to Israel and Egypt, the strategic significance of Afghanistan and Iraq, and the strategic and humanitarian importance of Jordan as the crisis in neighboring Syria continues. The Near East region received 27% of aid allocated by country or region in FY2017, followed by Africa, at 25%, and South and Central Asia, at 15%. This was a significant shift from a decade prior, when Africa received 19% of aid and the Near East 34%, reflecting significant increases in HIV/AIDS-related programs concentrated in Africa between FY2007 and FY2017 and the drawdown of U.S. military forces in Iraq and Afghanistan. Military assistance to Iraq began to decline starting in FY2011, but growing concern about the Islamic State in Iraq and Syria (ISIS) has reversed this trend. This report provides an overview of the U.S. foreign assistance program by answering frequently asked questions on the subject. It is intended to provide a broad view of foreign assistance over time, and will be updated periodically. For more current information on foreign aid funding levels, see CRS Report R45168, Department of State, Foreign Operations and Related Programs: FY2019 Budget and Appropriations, by Susan B. Epstein, Marian L. Lawson, and Cory R. Gill.