United States General Accounting Office

GAO Testimony

Before the Committee on the Budget, U. S. Senate

For Release on Delivery

Expected at

2:00 p.m., EST

Thursday,

October 30, 1997

INTERNATIONAL AFFAIRS

BUDGET

Framework for Assessing

Relevance, Priority, and

Efficiency

Statement of Benjamin F. Nelson, Director, International

Relations and Trade Issues, National Security and

International Affairs Division

GAO/T-NSIAD-98-18

Mr. Chairman and Members of the Committee:

I am pleased to be here today to discuss the programs and activities

funded by the international affairs budget—the “function 150” account of

the federal budget. As you requested, my goal today is to help set the stage

for a thoughtful examination of the issues that should be raised in

assessing the current programs and activities on the books that support

U.S. foreign policy and economic objectives. To date, no one has

undertaken such a comprehensive review of 150 account activities. This

examination appears to be warranted in light of the dramatically changed

world environment and new budget realities and increased demand for

accountability for results. GAO’s 1996 symposium involving leading

academics and practitioners in the area of international affairs evidenced

the broad and significant changes that are taking place in the world in

terms of governance, finance, economics, and political-military affairs. I

will establish the context for my statement and provide an overview of six

categories into which we have placed the international affairs programs.

Then I will outline a framework for assessing these activities and their

funding. And finally, I will discuss some of the critical issues and questions

that should be examined in each of our six categories.

Summary It has become almost a cliché to talk about the end of the Cold War and its

impact on U.S. foreign policy objectives, goals, and priorities. Clearly, this

watershed event and its aftermath have changed the nature of U.S.

international interests and priorities. We now face the challenges involved

in North Atlantic Treaty Organization (NATO) expansion, assisting the

transition of former Communist countries, integrating China into the

world economic system, reforming the United Nations and the World

Bank, building a credible World Trade Organization, and attacking the

menace of illegal drugs and AIDS. These events necessitate a careful

rethinking of the programs, approaches, and activities at the U.S.

government’s disposal to advance its interests. Post-Cold War

complexities make such a task extremely difficult, particularly in view of

the transnational, and seemingly intractable, nature of some of the present

challenges. At the same time, the current environment also affords the

chance to reassess programs and activities on their merits and determine

if they are relevant in today’s world.

Page 1 GAO/T-NSIAD-98-18 International Affairs Budget
Funding in the 150 account, which totaled $18.1 billion1

 in fiscal 

year 1997, constitutes only 1 percent of the federal budget and just 3 to

4 percent of discretionary funding. Nonetheless, these expenditures fund

activities that are designed to influence world political and economic

agendas. To support its interests in such agendas, the U.S. government

maintains a worldwide infrastructure of embassies, missions, consulates,

and trade offices, with an overseas staff of more than 35,000. The 150

account funds a wide range of programs and activities—upwards of 70

separate line items ranging from food aid to antiterrorism assistance, to

U.S. contributions to multilateral financial institutions, to financing by the

U.S. Export-Import Bank (Eximbank). A large percentage of funds in the

account is directed by the Congress or the President for specific countries

and purposes, such as child survival and population programs.

Overview of International

Affairs Programs and

Funding

To facilitate the examination of 150 account funding, we have grouped

these various programs and activities into six categories (see fig. 1).

Figure 1: Distribution of 150 Account Funding for International Affairs Programs, Fiscal Years 1992-97

Bilateral assistance Foreign affairs Mgmt

ateral assista

Public diplomacy

Security and peaceke

Trade and investment

29.7% 13.5%

13.5%

6.4%

33.0%

Multilateral assistance 13.5%

Foreign affairs management 13.5%

Security and peacekeeping 33.0%

Trade and investment 3.9%

1

Dollar figures cited in this statement represent Office of Management and Budget (OMB) budget

authority data in fiscal year 1997 dollars, unless otherwise noted.

Page 2 GAO/T-NSIAD-98-18 International Affairs Budget
• Security and peacekeeping operations. This category includes funds to

support international peacekeeping efforts, foreign military financing, and

budget and economic assistance to countries critical to U.S. political and

security objectives.2

 Between fiscal year 1992 and 1997, this component

has represented 33 percent of total 150 account funding.3

 Funding for

security and peacekeeping has decreased in real terms by an average of

about 6 percent per year to its 1997 level of $6.3 billion.

• Bilateral assistance. This category includes development assistance,

assistance to economies in transition, humanitarian aid, and the operating

expenses of the U.S. Agency for International Development (USAID). During

the last 5 years, this component has represented about 30 percent of total

150 account funding. Funding for bilateral assistance has decreased in real

terms by an average of about 6 percent per year to its 1997 level of

$5.2 billion.

• Foreign affairs management. This category essentially funds the domestic

and overseas operations of the State Department for conducting foreign

relations, including coordinating and supporting various U.S. programs

and activities overseas. The State Department is the U.S. government’s

overseas landlord, providing space, equipment, and communications for

most agencies operating abroad, including the growing cadre of

nondiplomatic staff. Over the past 5 years, the Foreign Affairs

Management component has represented almost 14 percent of total 150

account funding. Funding for foreign affairs management has decreased in

real terms by an average of about 4 percent per year to its 1997 level of

$2.6 billion.

• Public diplomacy. This category comprises the domestic and overseas

operations and cultural and educational exchange programs of the U.S.

Information Agency (USIA). The USIA’s mission is to explain and advocate

U.S. policy to foreign publics, provide them with information about the

United States, and advise U.S. decisionmakers on foreign public opinion

and its implications for the United States. During the last 5 years, this

component has represented about 6 percent of total 150 account funding.

Funding for public diplomacy has decreased in real terms by an average of

about 6 percent per year to its 1997 level of $1.1 billion.

• Multilateral assistance. This category consists of funding for the U.N.

agencies and for multilateral financial institutions such as the World Bank.

During the last 5 years, this component has represented almost 14 percent

of total 150 account funding. Funding to support U.S. participation in

multilateral institutions has decreased in real terms by an average of about

6 percent per year to its 1997 level of $2.2 billion.

2

This assistance is provided through the Economic Support Fund.

3

Throughout this statement, the term “funding” refers to discretionary budget authority.

Page 3 GAO/T-NSIAD-98-18 International Affairs Budget
• Trade and investment. This category principally includes the activities of

the Overseas Private Investment Corporation (OPIC), the Eximbank, and

the Trade Development Agency. This component has represented almost 

4 percent of total 150 account funding during the last 5 years. Funding for

trade and investment has decreased in real terms by an average of 

4 percent per year to its 1997 level of about $700 million.

Between fiscal year 1992 and 1997, funding for the international affairs

account has declined in real terms an average of about 6 percent annually.

Funding in fiscal year 1997 was about $18.1 billion—23 percent lower than

it was in 1992 (see fig. 2). Under the recently concluded budget agreement,

international affairs funding was designated a priority and set at a level of

$19 billion for fiscal year 1998 (excluding payment of U.S. arrears to the

United Nations and other multilateral organizations and development

banks).4

 The 150 account is slated to experience cuts of over 13 percent in

real terms by the year 2002.

4

See H.R. Conf. Rep. 105-116, at 58 (1997) for 150 account discretionary totals (fiscal 

years 1997-2002) in 1998 Budget Resolution.

Page 4 GAO/T-NSIAD-98-18 International Affairs Budget
Figure 2: Trends in 150 Account

Funding for International Affairs

Programs, Fiscal Years 1992-97 (1997

dollars in millions)

1992 1993 1994 1995 1996 1997

0

5,000

10,000

15,000

20,000

25,000

Fiscal years

A large portion of the funds in the international affairs account supports

foreign policy and national security imperatives, which limits budget

options. Of the $19.5 billion5

 the executive branch sought in fiscal 

year 1998, fully one-third, or $6.4 billion, is devoted to supporting

international security objectives, including security assistance to Egypt

and Israel and U.S. peacekeeping contributions.

One of the more significant developments in the U.S. foreign aid program

is the participation of new recipients—the countries of Eastern Europe

and the former Soviet Union. Aid to these countries accounts for 

18 percent of all assistance since 1992 and is consuming a greater share of

a decreasing aid pie—from 8 percent of bilateral assistance in 1992 to 

20 percent in 1997. Aid for these countries includes grants for training and

technical assistance to facilitate development of democratic institutions

5

This excludes $3.5 billion in requested budget authority for the International Monetary Fund’s New

Arrangements to Borrow, an activity that does not result in an outlay of U.S. funds or increase the

deficit.

Page 5 GAO/T-NSIAD-98-18 International Affairs Budget
and market economies. Assistance to Bosnia is now the single largest

program of U.S. aid in this region—$240 million in fiscal year 1997. Of

course, this does not include $2.5 billion in incremental costs for

military-related operations.

Another noteworthy observation, we believe, is the amount of aid that has

gone to alleviate problems associated with localized conflicts—“hot spots”

such as Somalia, Bosnia, and Haiti. Since 1993, more than $1 billion has

been spent on such conflicts, including funds for humanitarian assistance

and food aid. Typically, USAID has been required to meet part of these

requirements by shifting funds from other ongoing bilateral assistance

programs.

Only a portion of total international affairs activities is funded through the

150 account. We have identified at least $7.6 billion outside the 150

account that seem to support internationally related initiatives and

programs. Appendix I of this testimony contains a list of these activities

and their funding levels. Neither the activities of the Commerce

Department’s International Trade Administration, including its overseas

offices, nor the Foreign Agricultural Service’s trade promotion programs

and overseas offices, nor the Defense Department’s security-related

assistance programs in former Communist countries are funded under the

150 account. These are just a few of the more visible activities I can

mention. Coming to an accurate understanding of just how much money

goes to international activities outside the 150 account is difficult because

of (1) the absence of broadly accepted criteria about what constitutes a

foreign affairs program or activity; (2) the lack of transparency over the

full range of international affairs-related activities and programs managed

by U.S. government agencies—that is, budget line item descriptions do not

clearly link to international programs or activities; and (3) the

interrelatedness of domestic and international activities. As I discuss

funding for specific categories of the 150 account later in this statement, I

will, where possible, also highlight examples of complementary funding

outside the 150 account.

How to Assess

International Programs

and Funding

In assessing 150 account activities, I would like to suggest using the

following analytical framework or series of questions: First, how relevant

are current programs and activities in today’s world? Second, how high a

priority do they deserve? And third, can those that meet these first two

tests be done more efficiently and effectively?

Page 6 GAO/T-NSIAD-98-18 International Affairs Budget
By relevance, I mean whether there have been changes in the underlying

assumptions or conditions that led to funding a program in the first place.

If a program does meet the relevance test, the Congress and the President

must also question how important it is relative to other programs from a

cost/benefit standpoint. Finally, the efficiency questions: Can program

goals be achieved more efficiently by taking advantage of technology

improvements or best practices?

The 150 account covers a wide range of activities. Because the range is so

broad, it is important that a regular reexamination of the results of each

program occurs to assess whether the program is successful. None of this

is easy. The Government Performance and Results Act process, with its

emphasis on setting priorities and measuring outcomes, should help in this

regard.6

GAO has completed a broad range of work related to efficiency and

effectiveness of international programs. This work, as well as recent

studies by other well-respected organizations, has identified opportunities

to reengineer foreign affairs structures and functions to eliminate overlap

and duplication and to bring them in line with best practices. For example,

a recent, widely distributed Council on Foreign Relations/Brookings

Institution study, which recommended additional funding for foreign

affairs, also suggested that over $1 billion could be saved through such

efforts.

The Congress and the executive branch are best suited to address the

issues of relevance and priority I have raised. The suggested framework, I

believe, is an appropriate starting point.

Critical Issues and

Questions

With this framework in mind, I will now return to the six categories of the

foreign affairs budget that I established earlier. I will note funding levels

and trends for activities in each category and then discuss the particular

set of issues and questions that could be raised with respect to relevance,

priority, and efficiency.

6

The Government Performance and Results Act of 1993, also know as the Results Act or GPRA, is the

primary legislative framework through which agencies will be required to set strategic goals, measure

performance, and report on the degree to which goals were met. The act requires agencies to

eventually develop and submit strategic plans, annual performance plans, and annual reports on

program performance.

Page 7 GAO/T-NSIAD-98-18 International Affairs Budget
Security and Peacekeeping

Operations

Security and peacekeeping activities represented 33 percent of the

international affairs’ fiscal years 1992-97 budget—the single largest

component of this account. Foreign military financing programs7

consumed the largest portion of this component—about

50 percent—followed by about 37 percent for economic support provided

primarily to Israel and Egypt (Economic Support Fund); about 9 percent

for multilateral peacekeeping operations; and about 3 percent for

programs to provide training and equipment to foreign governments to

combat crime, illegal narcotics, terrorism, and nuclear proliferation8

 (see

fig. 3).

Figure 3: Distribution of Security and Peacekeeping Funding, Fiscal Years 1992-97

Peacekeeping 8.9%

Anti-Crime, Terroris

Economic support

Foreign Military Fin

Other Military Progr

Peacekeeping

37.3%

50.2%

0.7%

8.9%

Anti-crime, terrorism, narcotics

and proliferation 2.9%

Other military programs 0.7 %

Foreign military finance 50.2%

Note: Totals may not add due to rounding.

Funding for the security and peacekeeping component of the international

affairs budget has declined in real terms an average of about 6 percent

during fiscal years 1992-97. The funding level for fiscal year 1997 of

7

These programs provide grants, loans, and loan guaranties to foreign governments to purchase U.S.

military equipment.

8

Totals may not add due to rounding.

Page 8 GAO/T-NSIAD-98-18 International Affairs Budget
$6.3 billion is almost 30 percent lower than in fiscal year 1992 (see fig. 4),

with the most significant reductions occurring in the Economic Support

Fund. This fund has been cut by over 33 percent, while foreign military

financing programs have shrunk by about 26 percent. Funding levels for

assistance to Israel and Egypt, the largest recipients, have remained

relatively constant during this period. The executive branch has proposed

a further real decrease of about 1 percent in funding for this component in

fiscal year 1998.

Figure 4: Trends in Security and

Peacekeeping Funding, Fiscal Years

1992-97 (1997 dollars in millions)

1992 1993 1994 1995 1996 1997

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Fiscal years

Trends in funding for this category have reflected shifting U.S. priorities to

some extent, but a large core of this component serves fundamental

security interests that have not changed significantly in many years.

Page 9 GAO/T-NSIAD-98-18 International Affairs Budget
• Are there opportunities to reduce security-related costs?

As of fiscal year 1997, support for long-standing commitments to achieve

lasting peace in the Middle East through financial assistance to Israel and

Egypt represents 85 percent of the security-related costs. This includes

Economic Support Fund grants and foreign military financing. The

Economic Support Fund was established to allow the United States to

promote economic and political stability in areas where the United States

has special security interests. It has been justified to the Congress on the

basis of its role in (1) strengthening the security of friendly and allied

countries and (2) benefiting the U.S. economy because funds are generally

spent on U.S. goods, services, and training. Since 1992, the Economic

Support Fund has been reduced by about one-third, with aid to countries

outside of the Middle East absorbing nearly all of these cuts. Decreases in

foreign military financing to specific countries outside the Middle East

have resulted from the end of the Cold War and the decline in regional

conflicts, primarily in Central America. Currently, the vast majority of

foreign military financing is devoted to Israel and Egypt, with most of the

remainder supporting partners in Central and Eastern Europe and the

Newly Independent States (NIS) of the former Soviet Union,9

 Greece, and

Turkey. Further cuts in these security-related components of the budget

would appear to be difficult without a major change to the U.S. policies

supporting the Middle East peace process and European security.

• Are there opportunities to reduce peacekeeping costs?

The United States currently contributes 25 percent of the costs of U.N.

peacekeeping operations and also supports, on a voluntary basis,

peacekeeping activities by other multinational organizations in Africa,

Latin America and the Caribbean, Europe, and the Middle East.

Considerable attention has been focused on the cost and effectiveness of

high-profile U.N. peacekeeping operations such as those in Bosnia, Haiti,

and Somalia. Less attention has been devoted to the costs and

effectiveness of long-standing but less visible U.N. peace missions, such as

those in India/Pakistan, Cyprus, and Angola. These eight long-standing

9

Significant security-related assistance being provided to the countries of Central and Eastern Europe

and the former Soviet Union is not included in the international affairs programs account. For

example, much of the U.S. funding for the Partnership for Peace program is included in the

Department of Defense budget request. Defense has programmed at least $160 million to help former

Soviet republics or former members of the now-defunct Warsaw Pact, including funding for

development of regional air traffic control systems, support for joint military exercises, and exchanges

of information concerning methodologies to manage defense resources. Defense has also programmed

about $1.9 billion to help Russia, Ukraine, Belarus, and Kazakstan reduce and control weapons of mass

destruction under the Cooperative Threat Reduction Program, generally referred to as the Nunn-Lugar

program.

Page 10 GAO/T-NSIAD-98-18 International Affairs Budget
missions cost the United States about $148 million annually, have been in

existence from 6 to nearly 50 years, and so far have cost over $6 billion.

They have evolved into open-ended commitments; diplomatic efforts to

resolve the underlying conflicts have stalled in nearly all of the operations,

and the situations have proven intractable. We recently recommended that

the Secretary of State develop plans and strategies to bring these missions

to closure.10 I want to emphasize that we do not mean these missions

should be ended immediately, but rather that concrete actions to address

the underlying conflicts should be developed. Success along these lines

could have budgetary implications, given the cost of these operations.

Funding in the 150 account by no means represents the sum total of U.S.

contributions to peacekeeping activities or U.S. support for international

security interests. From fiscal year 1992 to 1995, U.S. government agencies

spent over $6.6 billion to support U.N. peace operations in Haiti, the

former Yugoslavia, Rwanda, and Somalia; this figure includes $3.4 billion

in incremental costs incurred by the Department of Defense and funded

outside of the 150 account.

Bilateral Assistance Between fiscal year 1992 and 1997, about 30 percent of the international

affairs budget was spent on bilateral assistance programs. During this

period

• about 37 percent supported traditional development programs

administered primarily by USAID;

• about 21 percent funded food aid programs;

• about 18 percent was allocated for aid to Eastern Europe and the NIS;

• about 15 percent went for humanitarian aid, such as disaster relief; and

• about 9 percent funded USAID’s administrative costs (see fig. 5).

10U.N. Peacekeeping: Status of Long-standing Operations and U.S. Interests in Supporting Them

(GAO/NSIAD-97-59, Apr. 9, 1997).

Page 11 GAO/T-NSIAD-98-18 International Affairs Budget
Figure 5: Distribution of Bilateral Assistance Funding, Fiscal Years 1992-97

Administration

Eastern Europe/NIS

Food aid

manitarian Aid

Sustainable Developm

9.0%

18.1%

21.1%

14.5%

37.4%

Humanitarian aid 14.5%

Sustainable development 37.4%

Note: Totals may not add due to rounding.

Funding for the bilateral assistance component has declined in real terms

an average of 6 percent per year during fiscal years 1992-97 (see fig. 6). It

peaked in fiscal year 1993, but by fiscal year 1997 had returned to about

$5.2 billion—a level 17 percent lower than in fiscal year 1992. The

President has requested an increase of about 5 percent in funding for this

component for fiscal year 1998.

Page 12 GAO/T-NSIAD-98-18 International Affairs Budget
Figure 6: Trends in Bilateral

Assistance Funding, Fiscal Years

1992-97 (1997 dollars in millions)

1992 1993 1994 1995 1996 1997

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Fiscal years

One of the more significant developments in the U.S. foreign aid program

is the participation of new recipients—the countries of Eastern Europe

and the former Soviet Union. Aid to these countries accounts for 

18 percent of all assistance since 1992 and is consuming a greater share of

a decreasing aid pie—from 8 percent of bilateral assistance in 1992 to 

20 percent in 1997. Aid for these countries includes grants for training and

technical assistance to facilitate development of democratic institutions

and market economies. Assistance to Bosnia is now the single largest

program of U.S. aid in this region—about $240 million in fiscal year 1997.

Also of note is the amount of aid that has gone to alleviate problems

associated with localized conflicts—“hot spots” such as Somalia, Bosnia,

and Haiti. Since 1993, more than $1 billion has been spent on these three

conflicts, including funds for humanitarian assistance and food aid.

Typically, USAID has had to meet part of these requirements by shifting

funds from other ongoing bilateral assistance programs.

Page 13 GAO/T-NSIAD-98-18 International Affairs Budget
The one-third of bilateral assistance that supports sustainable

development efforts includes programs in health and population growth,

economic growth and agricultural development, democracy, education

and training, and the environment. As I said earlier, a large percentage of

sustainable development funding is directed by the Congress or the

President for specific purposes, such as child survival and population

programs. In 1997, about 70 percent of sustainable development assistance

was earmarked or directed in this way, up from about 60 percent in 1995.

The central issues surrounding bilateral assistance are, first, whether

economic development assistance either has had or can have a positive

impact on development and, second, how efficiently and effectively can

aid be delivered.

• How relevant are our foreign aid programs in the current environment?

Despite USAID’s attempt to better target its assistance, fundamental

questions remain about the effectiveness and relevance of U.S.

development assistance for purposes other than humanitarian relief.

Critics of foreign aid point to the end of Cold War imperatives, the absence

of conclusive evidence that aid makes a difference to countries’ economic

progress, the shift to a new development model that relies more on the

private sector, and the rapid growth in the flow of private capital to the

developing world as reasons to end traditional foreign aid. Proponents

stress the large number of outstanding needs and the value of assistance to

achieve certain foreign policy objectives; they generally call for reform and

revitalization—not elimination.

Our work on USAID’s Housing Guaranty Program11 highlights the

complexities in assisting development by using foreign aid. This program,

in place for over 30 years, has guaranteed about $5 billion in loans to

developing countries with the goal of stimulating increased private sector

investment in housing for the poor. The program’s original premise,

however, did not adequately take into account the real world limitations to

achieving this objective. In fact, it was not clear at the time of our work

that USAID was even pursuing the original goal anymore, but rather had

established new ones throughout the years in the face of a lack of

demonstrated progress in meeting program goals. Based on GAO’s work,

the Congress has dramatically reduced funding for this program.

11See Foreign Housing Guaranty Program: Financial Condition Is Poor and Goals Are Not Achieved

(GAO/NSIAD-95-108, June 2, 1995).

Page 14 GAO/T-NSIAD-98-18 International Affairs Budget
A consensus is emerging, however, regarding what seems to work and

what does not. Recent examinations by respected institutions have

concluded that the impact of economic assistance is modest and possible

only in countries with good fiscal, monetary, and trade policies and

effective governing institutions.

• Have clear priorities been established for foreign assistance programs?

In its 1997 strategic plan, developed in accordance with the Government

Performance and Results Act, USAID appears to have established as a

priority the importance of influencing domestic policy in the recipient

countries. Many of the strategies it has described for achieving its major

development goals involve persuading recipient countries to reform their

economic, judicial, health care, and education policies and regulations.

While USAID has attempted to incorporate consideration of whether a

recipient country has changed its policy environment into the process of

deciding how much further aid to give to that country, the quality of a

country’s reform efforts is not yet a guiding factor in this process. Our

analysis of USAID resource allocations for fiscal year 1996 does not show

any significant difference between the proportion of aid allocated between

the top performing countries in policy reform and the poorer performing

countries. USAID acknowledges that political and foreign policy

considerations continue to strongly influence USAID’s budgeting process.

Allocating foreign aid based only on policy performance would limit

flexibility and would require consensus—which would be very difficult to

achieve—that aid is only for the purposes of economic development and

not for achieving other foreign policy objectives.

The next critical question that needs to be asked in this regard is whether

USAID can continue to operate and be effective in a large number of

countries, given the diminishing amount of foreign aid funds available.

Despite having closed missions in 24 countries since 1993, USAID still has

programs in over 80 countries. Many of these countries have relatively

small programs. For example, in fiscal year 1996, 10 countries received

over 50 percent of all sustainable development assistance allocated to

specific countries, with the remainder spread among 42 countries. In

about half of these 42 countries, the United States is a relatively minor

donor, not even among the top three bilateral aid donors. USAID has made

some efforts to “graduate” its more successful aid recipients. Indeed, it has

discontinued programs in some countries, such as Chile and Thailand,

whose level of development no longer justifies foreign aid. However, USAID

Page 15 GAO/T-NSIAD-98-18 International Affairs Budget
has not established formal criteria for determining which countries should

continue to receive development assistance.

• Can we deliver foreign assistance at lower cost?

Despite the domestic skepticism attached to U.S. foreign aid in general,

there still remains broad support for some specific programs—child

survival and population programs are only two examples. For those

programs that the U.S. government continues to support—and that meet

the tests of relevance and priority—the next two questions should be

(1) how can they be delivered most efficiently and (2) what level of

accountability are we going to insist upon?

Four years of reform under the leadership of the USAID Administrator have

resulted in a smaller, more streamlined aid bureaucracy that has achieved

some operational efficiencies. USAID reengineering efforts have included

reorganizing missions and eliminating unnecessary administrative

requirements. USAID has also sought to focus its activities on a more

manageable set of strategic objectives. This process has been further

refined in USAID’s strategic plan.

Nevertheless, some continue to question the USAID structure in light of the

declining levels of U.S. aid and have suggested that other ways of

delivering bilateral assistance should be considered. The ratio of USAID’s

operating expenses—about $500 million—to the costs of the programs it

administers—about $4.9 billion—has been steadily increasing, with more

USAID dollars going to manage a smaller aid program. One of the many

options that have been discussed is the re-creation of USAID as a

foundation—providing aid through nongovernmental organizations and

without the hands-on implementation responsibilities and attendant

infrastructure it now has. Of course it is not clear what implications the

planned consolidation of some USAID and State Department administrative

functions will have on USAID’s operating expenses. The trade-off of this

approach, of course, is the risk of misuse of U.S. aid dollars and a loss of

accountability for program results, as well as perhaps more limited

opportunities to use U.S. assistance to support new or emerging foreign

policy objectives.

Foreign Affairs

Management

In recent years, about 14 percent of the international affairs budget has

been spent to fund activities related to the management of foreign affairs.

Nearly all of this funding goes to support State Department operations

Page 16 GAO/T-NSIAD-98-18 International Affairs Budget
(see fig. 7), including its headquarters, passport offices and other domestic

offices across the United States, over 250 embassies and consulates

overseas, and salaries for roughly 23,000 direct-hire employees worldwide.

The remainder—about 3 percent—supports the Arms Control and

Disarmament Agency (ACDA) and a variety of commissions and funds.

Figure 7: Distribution of Foreign

Affairs Management Funding, Fiscal

Years 1992-97 Arms Control and Dis

State Dept.

1.7% Commissions/Funds

97.3%

1.0%

State Department 97.3%

Arms control and

 disarmament 1.7% Commissions/funds 1.0% 

Funding appropriated to State for foreign affairs management has declined

in real terms by an average of 4 percent per year during fiscal 

years 1992-97 (see fig. 8). The fiscal year 1997 funding level of $2.8 billion

was about 15 percent lower than in fiscal year 1992. This decline has been

ameliorated somewhat by visa fees that State has been allowed to retain

since fiscal year 1995 to offset the cost of its operations—averaging about

$140 million per year.12 The administration has requested a 4.9 percent real

increase in appropriations for foreign affairs management in 1998. Under

the Illegal Immigration Reform and Immigrant Responsibility Act of 1996,

State’s work load will increase starting in April 1998. State will assume

responsibility for adjudicating all applications for border crossing cards

for Mexican nonresident aliens entering the United States, a responsibility

12When these funds are included, the real average annual decline is about 3 percent, and the real

funding level in fiscal year 1997 was 10 percent lower than in fiscal year 1992.

Page 17 GAO/T-NSIAD-98-18 International Affairs Budget
it had previously shared with the Immigration and Naturalization Service.

State estimates that it will need about 70 additional employees to handle

the increased workload.

Figure 8: Trends in Foreign Affairs

Management Funding, Fiscal Years

1992-97 (1997 dollars in millions)

1992 1993 1994 1995 1996 1997

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Fiscal years

Over the last several years, State has closed 30 overseas posts, reduced the

general work force by about 2,200 positions, lowered overseas allowances,

and cut operating budgets. A recent joint Brookings Institution/Council on

Foreign Relations study concluded that State’s ability to function

effectively has been eroded, citing the existence of shabby, unsafe, and

ill-equipped posts; obsolete information technology; and uneven staffing.

At the same time, GAO and others have raised concerns about the relevance

and priority of some of State’s activities and the efficiency with which it

operates. Although the State Department has reduced staff and

implemented some cost reduction measures, it has not undertaken a

fundamental rethinking of its foreign affairs and diplomatic structure or

Page 18 GAO/T-NSIAD-98-18 International Affairs Budget
significantly changed its business practices. This would involve

reassessing the rationale for the current overseas structure and staffing,

reviewing both the approach and the level of State’s involvement in some

functions and activities, and adopting better business practices.

Thus, some tough questions need to be asked:

• Does the United States need and can it afford all overseas posts as

currently staffed and structured?

Given the cost of our overseas infrastructure, the Congress and the

President need to make sure that State’s post and staff structure is

consistent with current U.S. foreign policy needs and that it makes the

best use of U.S. resources and staff. About $2 billion, or over 80 percent, of

the amount spent on the administration of foreign affairs is tied to the

operation of overseas posts. The current structure is based on State’s

policy of universality—a diplomatic presence in almost every country of

the world, even those that by State’s own admission are not critical to U.S.

interests. The costs of a U.S. overseas presence vary widely. For example,

in 1995 the post in Western Samoa cost $2.5 million to operate and the U.S.

mission in Germany cost over $90 million.

Changing U.S. interests—and the mutable nature of the world problems

the U.S. government faces—mean that we need to scrutinize U.S. presence

and staffing on a mission-by-mission basis. Closing posts would meet

opposition from various interests groups, and the savings from the closure

of small individual posts would not be substantial. Greater regionalization

of the U.S. diplomatic presence by having one ambassador accredited to

serve in multiple countries is an option that could be explored to increase

efficiency and lower costs. Taking advantage of modern

telecommunications technology may make it feasible for State to

consolidate a limited number of overseas posts. For example, the U.S.

embassy in Bridgetown, Barbados, has full diplomatic responsibilities for 

7 countries and partial diplomatic responsibility for 14 others in the

eastern Caribbean; likewise, British ambassadors are accredited to 3 to

4 countries each in Africa. These could serve as models for a U.S.

diplomatic reorganization in other regions beyond the Caribbean. We

calculated that if State closed 20 small embassies and employed the above

approach, State could reduce its costs by up to $40 million annually, after

closing costs were paid and U.S. direct-hire positions were eliminated.

Page 19 GAO/T-NSIAD-98-18 International Affairs Budget
• Can the State Department operate more efficiently?

The State Department is entering the 21st century with outdated and

costly-to-maintain communications systems and weak and outdated

management processes. State has not made the necessary investments to

modernize its information technology and is only now beginning a serious

attempt to improve its capabilities in this area. The success of those

efforts is critical to achieving long-term savings in information

management costs and to streamlining its business practices.

Our work has shown that State’s business processes could be made more

cost-effective. Just this month we reported13 that the introduction of

prevailing best management practices from the private sector into State’s

staff relocation process could save millions.

We have previously identified weaknesses in State’s management of its

overseas real estate portfolio and recommended a panel to review

properties. At the Congress’ direction, State has established such a panel,

including real estate experts from outside the Department. The panel has

begun its work, recommending properties for sale as well as those where

local conditions preclude a sale at fair price to the U.S. government. The

Congressional Budget Office estimated that State could generate

$150 million over the next 5 years by selling 100 properties that it has

identified for potential sale. According to State, last fiscal year the

Department executed final sales of over $60 million worth of properties

and reinvested those proceeds in needed facilities, which will also reduce

future rental costs.

• Is State efficiently structured, and are all of State’s functions and activities

needed?

Our work suggests that the answer to the first part of this question is “no,”

and the answer to the second is “not clear.” State maintains a headquarters

with 6 geographic and 15 functional bureaus, including a bureau for

international organizations. Some programs and administrative functions

overlap between geographic and functional bureaus. For example,

although State has a functional bureau with responsibility for

political-military issues, it also has 24 political-military positions in other

bureaus, including each geographic bureau. In a way, the geographic

bureaus operate as six micro-State Departments. Add to this mix the work

and policy interests of the bureau dedicated to working with international

13See State Department: Using Best Practices to Relocate Employees Could Reduce Costs and Improve

Service (GAO/NSIAD-98-19, Oct. 17, 1997).

Page 20 GAO/T-NSIAD-98-18 International Affairs Budget
organizations, and you have a complicated structure in which to develop

policy.

In addition to overlap within its own structure, State has bureaus, offices,

and activities that mirror those of many other parts of the federal

government, including agencies with primary responsibility for trade,

agriculture, labor, and environmental issues. While State has a critical role

in advancing U.S. interests in these increasingly international issues, it is

not clear if the current approach and level of staffing to support its

involvement are necessary.

As an illustration, although the Department of Labor is the lead U.S.

representative in multilateral forums on labor issues, several State bureaus

address these issues. To support work on labor issues, the State

Department has 45 labor attachés overseas that gather detailed

information on workers’ rights outside the United States and prepare

congressionally required reports. Work we completed in 199614 suggests

that the 45 attaché positions and their corresponding headquarters

complement may not be necessary because, according to several officials

at overseas posts, labor issues could be adequately covered by the State

Department’s political and/or economic officers as they are in countries

without attachés. The Congressional Budget Office estimated that

eliminating these positions through attrition over 5 years would produce

savings of $30 million. State has proposed abolishing or lowering the rank

of some labor attaché positions in the past but has encountered resistance

from the Department of Labor and organized labor.

There seems to be room to rethink State’s involvement in such functions

or at least its approach. The process specified in the Government

Performance and Results Act is a good vehicle to address this issue by

encouraging government agencies to improve coordination of

cross-cutting functions.15 However, we have examined the State

Department’s strategic plan and noted, among other concerns, that State

does not clearly indicate how it plans to provide leadership and coordinate

the programs of other agencies. In some cases, changing State’s

involvement may require congressional approval or interagency

agreement.

14See State Department: Options for Addressing Possible Budget Reductions (GAO/NSIAD-96-124, 

Aug. 29, 1996).

15See Managing for Results: Using the Results Act to Address Mission Fragmentation and Program

Overlap (GAO/AIMD-97-146, Aug. 29, 1997).

Page 21 GAO/T-NSIAD-98-18 International Affairs Budget
The problems with State’s organizational structure are widely recognized

within the Department, and the Secretary of State has expressed her

commitment to crafting a Department that functions better, faster, and

more flexibly as she consolidates State, USIA, and ACDA. To accomplish this,

the Secretary has established 15 employee task forces to examine all

aspects of State’s operations with the goal of reducing potential overlap

and improving the agency’s decision-making process. According to a

member of State’s Reorganization Secretariat, the objective of the

consolidation is to let the State Department spend less time negotiating

with itself and more time engaged with foreign governments.

• How well is the consolidation of foreign affairs agencies being managed?

The April 1997 decision to consolidate the State Department, the USIA, and

the ACDA and to integrate certain administrative functions of State and

USAID presents a major management challenge, but it also creates an

opportunity to achieve cost savings. Among the more straightforward

tasks will be consolidating the organizations’ similar administrative

functions, such as travel and payroll. However, the consolidation also

offers State a major opportunity to address potential overlaps and

duplication not only in the areas of public diplomacy and arms control but

also in all of the Department’s activities and functions. Creativity will be

needed to find a way of incorporating these functions into State’s

organization without taking the traditional approach of establishing

positions for public diplomacy and arms control positions within both the

functional and regional bureaus. If managed carefully and creatively, the

consolidation should produce efficiencies and cost reductions over the

long term.

Public Diplomacy Let me turn now to the public diplomacy category—essentially the

programs and activities of the USIA—which represents about 6 percent of

the funding for international affairs programs. USIA salaries and expenses

account for the bulk of public diplomacy funding; in fiscal years 1992-97,

40 percent was allocated for USIA personnel and operations at over 200

overseas locations and headquarters; about 38 percent for international

broadcasting operations including the Voice of America; and about

22 percent for exchange programs such as Fulbright scholarships (see 

fig. 9).

Page 22 GAO/T-NSIAD-98-18 International Affairs Budget
Figure 9: Distribution of Public

Diplomacy Funding, Fiscal Years

1992-1997

Exchanges Broadcasting21.9%

38.1%

USIA operations 40.0%

Funding for public diplomacy has declined in real terms an average of

about 6 percent annually during fiscal years 1992-97 (see fig. 10). Funding

peaked in fiscal year 1994 due primarily to increased funding for

educational and cultural exchange programs for the NIS and has declined

since. The fiscal year 1997 funding level of $1.1 billion was 25 percent

lower than it was in fiscal year 1992. The largest decrease, between fiscal

year 1995 and 1996, resulted from reductions in funding for exchanges,

salaries, and expenses and the consolidation of international broadcasting

activities. The executive branch has proposed a further 3.5 percent real

decrease in funding for public diplomacy for fiscal year 1998. Over the

years, the USIA’s programs have shifted in emphasis from one part of the

world to another in response to foreign policy initiatives and direction

from the executive branch as well as to congressional mandates.

Page 23 GAO/T-NSIAD-98-18 International Affairs Budget
Figure 10: Trends in Public Diplomacy

Funding, Fiscal Years 1992-1997 (1997

dollars in millions)

1992 1993 1994 1995 1996 1997

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Fiscal years

Even before the announcement of its consolidation with the State

Department, the USIA had cut staff, consolidated all nonmilitary

international broadcasting, and developed a strategy to downsize its

operations and reduce costs. However, difficult questions about the

continuing relevance of some public diplomacy programs remain. Many

USIA programs and the agency’s overseas structure and infrastructure were

established after World War II as the United States sought to counter the

Soviet bloc and encourage the development of democracy. Legislative

requirements have earmarked much of the USIA’s budget for specific

exchanges, broadcasting programs, and grantees. More radical changes in

USIA activities and programs would be needed to generate significant

additional cost reductions and would require the Congress to revisit some

of these legislative requirements. They would also require the USIA and the

State Department to change their traditional operating philosophy that the

USIA should be located wherever the State Department has a presence.

Page 24 GAO/T-NSIAD-98-18 International Affairs Budget
Regarding public diplomacy funding, the key questions are whether we

can continue to fund all USIA facilities abroad and whether we can achieve

greater efficiencies in USIA broadcasting.

• Do we need and can we afford all USIA facilities overseas?

The USIA spends about 30 percent of its budget on salaries, infrastructure,

and operating expenses for overseas installations—many in flourishing

democracies. For example, the USIA spent $9 million in 1995 for operations

in Germany, including six outreach centers. The 77 staff at these centers,

called “America Houses,” provide information on U.S. policy and business

and study opportunities and host cultural events. Much of the information

the USIA provides is also generated by the private sector, is available

electronically, and could be distributed by a private entity.

The USIA’s efforts to reform and relocate outreach centers (of which it

operates about 70) have reduced costs in some cases. The USIA estimated

that the 1995 decision to close an America House in Germany in favor of a

local government and business-supported German/American Cultural

Center saved about a million dollars per year. Also, in Singapore, the USIA

terminated a $455,000 yearly lease for a cultural center and moved into

embassy facilities. While the USIA should continue to explore such

opportunities, eliminating posts altogether in up to 67 countries that by

USIA’s own criteria are relatively less important to U.S. interests would

achieve more significant cost savings. The traditional belief that the USIA

should be located where the State Department has a presence has made

this difficult.

• Are all exchange programs essential, and are they targeted to meet U.S.

objectives?

The USIA manages a variety of exchange programs to foster mutual

understanding between the people of the United States and other

countries. In 1950, shortly after the U.S. government began funding

scholarships, it was the primary source of funding for 7.7 percent of

foreign students in the United States. In 1994, only 1.2 percent, or about

5,400, of the 453,000 foreign students attending U.S. high schools, colleges,

and universities received U.S. government funding as their primary source

of support. During this period other federal agencies, as well as state and

local governments and the private sector, have increased their roles in

funding exchanges. The USIA currently accounts for only one-fourth of the

funding for U.S. government exchange programs.

Page 25 GAO/T-NSIAD-98-18 International Affairs Budget
In 1996, the USIA acknowledged that non-USIA exchange opportunities were

plentiful in some regions such as Western Europe and that therefore it was

shifting exchange resources to regions that are not as fully represented by

other U.S. government agencies or the private sector. Since the end of the

Cold War, the Congress has appropriated funds to establish new exchange

programs, particularly in countries of Central and Eastern Europe and the

former Soviet Union.

Other agencies, including the Departments of Education and Defense, also

engage in exchanges and other educational efforts with funding outside

the 150 account. For example, the Department of Education funds a

program to help improve civics and economics education in Central and

Eastern Europe and the former Soviet Union. I would like to note that the

House of Representatives’ foreign affairs reform bill calls for the

establishment of a working group to improve the coordination and

effectiveness of U.S. government-supported exchanges.16

• Are there opportunities to achieve further efficiencies in international

broadcasting?

In the U.S. International Broadcasting Act of 1994, the Congress reaffirmed

the importance of continued U.S. broadcasts to further U.S. interests.

However, the Congress has reduced funding for most nonmilitary

international broadcasting activities and mandated their consolidation. In

1996, the United States broadcasted over 1,600 hours of radio

programming in 53 languages and over 400 hours of television in several

languages worldwide each week to support U.S. foreign policy objectives.

Only modest economies are possible by eliminating overlap and lessening

duplication among broadcasters. Achieving significant cost savings would

require a major reduction in the number of language services and

broadcast hours. However, past experience has shown that eliminating

even one language is a difficult process, due to the interest of the

Congress, the National Security Council, and others and could impinge on

the USIA’s readiness in a crisis situation.

Multilateral Assistance U.S. contributions to a variety of international organizations and programs

consumed about 14 percent of the international affairs budget from fiscal

year 1992 to 1997. Contributions to international organizations, including

the United Nations, represented about 44 percent; about 39 percent funded

16See Foreign Relations Authorization Act, Fiscal Years 1998 and 1999, H.R. 1757, 105th Cong., 

section 1406.

Page 26 GAO/T-NSIAD-98-18 International Affairs Budget
our participation in the World Bank group, primarily for concessional

(below-market interest rate) lending programs; and contributions to other

international financial institutions (including the African, Asian, and

Inter-American Development Banks and the European Bank for

Reconstruction and Development) accounted for the remaining 

17 percent. (See fig. 11.) The vast majority of funds the United States

provides to the World Bank is used to finance interest-free loans to the

poorest developing countries through the Bank’s International

Development Association (IDA). The two largest recipients are India and

China, which together received almost 30 percent of these loan funds—or

$2.4 billion each—in fiscal years 1994-96. As China continues to develop,

IDA lending to that country is being phased out and is slated to end in 1999.

Figure 11: Distribution of Multilateral Assistance Funding, Fiscal Years 1992-97

World Bank Group

Intl. Financia

Intl. Organizations 

39.1%

16.7%

44.2%

Other international financial institutions 16.7%

International organizations and programs 44.2%

Funding for multilateral assistance has declined in real terms an average

of about 6 percent per year during fiscal years 1992-97, as shown in figure

12. Funding peaked in fiscal year 1995, with larger than average

contributions to the World Bank. Since then, contributions to the World

Bank and other international financial institutions and the United Nations

have declined to almost $2.2 billion in fiscal year 1997—a level about 

27 percent lower than in fiscal year 1992. For fiscal year 1998, the

Page 27 GAO/T-NSIAD-98-18 International Affairs Budget
executive branch has requested a real increase of 32.5 percent for

multilateral assistance, largely to return annual funding of multilateral

organizations to traditional levels.17

Figure 12: Trends in Multilateral

Assistance Funding, Fiscal Years

1992-97 (1997 dollars in millions)

1992 1993 1994 1995 1996 1997

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Fiscal years

Concerning multilateral assistance, the key questions are whether such

assistance continues to serve U.S. interests and can be delivered more

efficiently.

• Are all of the multilateral organizations that we participate in still

relevant?

Reviewing multilateral assistance involves taking a hard look at the

continuing relevance of many international organizations and the extent to

17This does not include a requested advance appropriation of $921 million to clear U.S. arrears to the

United Nations and other multilateral organizations, which, if approved, would not be available until

fiscal year 1999. It also does not include $3.52 billion in budget authority for the International

Monetary Fund’s New Arrangements to Borrow (which would not result in budget outlays).

Page 28 GAO/T-NSIAD-98-18 International Affairs Budget
which they serve U.S. interests. The State Department believes that

ongoing U.S. membership in these organizations is important to the United

States because their activities contribute in varied ways to U.S. security,

prosperity, health, and safety. Our review of the operations of several of

these organizations indicates that their policies and agendas are consistent

with U.S. national security and foreign policy objectives and provide

significant benefits in such areas as development, global health, and

scientific research.18

The U.S. government participates in dozens of other international

organizations established to serve specialized but limited functions, such

as the World Road Association and the International Copper Study Group.

The United States provided about $11 million in 1995 to organizations that

the State Department viewed as making only limited contributions to U.S.

interests.19 In recent years, the United States has withdrawn from two

such organizations. State’s attempt to withdraw from at least one other

organization, the International Cotton Advisory Committee, met with

congressional opposition. A State official told us that other attempts

would likely meet the same type of resistance.

Support for the World Bank has been the subject of periodic controversy

in the United States. The purpose of the World Bank is to promote

economic growth and the development of market economies by providing

finance on reasonable terms to countries that have difficulty obtaining

capital. Critics of the Bank often cite the end of the Cold War, the recent

rapid increase in private investment in developing countries, and

weaknesses in project effectiveness and management reforms. In

September 1996, we reported that participation in the World Bank

furthered U.S. interests because it generally leverages other donors’ funds

for programs and geographical areas that the U.S. government wants to

support.20

• Can the efficiency and effectiveness of these organizations be improved?

The State Department acknowledges that some U.N. organizations are not

operating efficiently and effectively and that some of them have functions

18United Nations: U.S. Participation in Five Affiliated International Organizations (GAO/NSIAD-97-2,

Feb. 27, 1997) and International Organizations: U.S. Participation in the United Nations Development

Program (GAO/NSIAD-97-8, Apr. 17, 1997).

19State Department: U.S. Participation in Special-Purpose International Organizations

(GAO/NSIAD-97-35, Mar. 6, 1997).

20World Bank: U.S. Interests Supported, but Oversight Needed to Help Ensure Improved Performance

(GAO/NSIAD-96-212, Sept. 26, 1996).

Page 29 GAO/T-NSIAD-98-18 International Affairs Budget
that overlap. However, the organizations have begun to address

weaknesses in the management and administration of their operations and

programs that have been the subject of frequent criticism by the Congress

and others. The United States and other member states are continuing to

call for reforms in the belief that greater efficiency in these agencies could

reduce their cost. With U.S. encouragement and assistance, the United

Nations has embarked on a program of reform. Reforms could reduce

costs; however, their fate is uncertain, and they cannot be expected to be

completed anytime soon.

Regarding the World Bank, U.S. interests could be better served by the

World Bank if it could improve its record of effectiveness. Reforms have

been implemented and show some early signs of progress, but in some

areas major impediments still remain and improvements do not seem to

have taken hold. Through its leadership, the United States is positioned to

ensure that Bank reforms continue to progress and to have a positive

impact on development effectiveness. To this end, we recommended that

the Secretary of the Treasury monitor and periodically report to the

Congress measurable indicators of progress, such as the extent to which

the Bank allocates financing to those countries that make Bank-advocated

market and policy reforms.

Trade and Investment International trade and investment funding represented about 4 percent of

the international affairs budget in fiscal years 1992-97. Trade and

investment funding supported primarily the Eximbank, the Trade and

Development Agency, and the International Trade Commission. (See 

fig. 13). Figure 13 excludes OPIC because it returned net revenue to the U.S.

Treasury during this period. Related—and large—expenditures for trade

and investment activities and programs outside the 150 account include

the activities of the Commerce Department’s International Trade

Administration, the Office of the U.S. Trade Representative, the various

agricultural trade promotion and credit guaranty programs, and the

programs of the Small Business Administration.

Page 30 GAO/T-NSIAD-98-18 International Affairs Budget
Figure 13: Distribution of Trade and Investment Funding, Fiscal Years 1992-97

Trade and Developme

Internat'l Trade Com

ort-Import Bank

4.9%

89.6% Export-Import Bank 89.6%

International Trade Commission 4.9%

Trade Development Agency 5.5%

The largest increase in international trade and investment funding,

between fiscal year 1993 and 1994, was due primarily to higher funding for

programs in the NIS. Funding has continuously declined since reaching its

highest level in 1994, with the fiscal year 1998 request representing a

decrease of almost 20 percent in real terms over the preceding year. (See

fig. 14.)

Page 31 GAO/T-NSIAD-98-18 International Affairs Budget
Figure 14: Trends in Trade and

Investment Funding, Fiscal Years

1992-97 (1997 dollars in millions)

1992 1993 1994 1995 1996 1997

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Fiscal years

Eximbank and OPIC programs have become increasingly controversial in

recent years, generating questions about whether they continue to be

relevant and whether government costs and taxpayer risk can be reduced.

Both organizations provide loans, guarantees, and insurance to support

U.S. exports or market-oriented private investment. In some risky markets

where the Eximbank operates, some borrowers miss payments or default

on entire loans; such losses must be covered by the Eximbank, resulting in

subsidy costs to the federal government.

• Are the programs of the Eximbank and OPIC relevant in today’s

environment?

OPIC was created in 1969 to help mobilize U.S. capital and skills for the

economic and social advancement of developing countries—a major U.S.

foreign policy objective. The Eximbank’s creation was spurred by the

economic conditions of the 1930s, when exports were viewed as a

stimulus to economic activity and employment. The Congress continues to

debate the relevance of export promotion and investment programs, most

Page 32 GAO/T-NSIAD-98-18 International Affairs Budget
recently as it considered whether to reauthorize the Eximbank and OPIC.

The debate has centered on the need for government support and the

organizations’ costs and benefits. Critics question whether the U.S.

government should provide direct assistance to private exporters and

investors. They charge that expenditures to subsidize the transactions of

the Eximbank and OPIC amount to “corporate welfare.” In the case of the

Eximbank, critics claim that a substantial portion of its subsidy

expenditures and financing commitments is used to support the

operations of large exporting multinational firms that are experienced

exporters and have their own resources to export their products.

Moreover, the economic benefits of the programs are uncertain. Some

economists argue that the market is a much more efficient allocator of

resources than the government and that these programs cannot produce a

substantial change in employment levels. The nearly fivefold increase in

private investment flows to the developing world since 1990 may also raise

questions concerning the continued need for the Eximbank and OPIC, given

the private sector’s growing willingness to support trade and investment

transactions in some emerging markets.

Conversely, proponents of continued U.S. government support argue that

there is still a niche for the Eximbank and OPIC. Risky markets still exist

where the private sector is reluctant to operate or invest without public

financing. Concerning the Eximbank, our recent work indicated that

although definitive evidence about the economic impact of U.S.

government trade programs is lacking,21 perhaps the most compelling

argument in defense of the Eximbank is its role in helping to “level the

international playing field” for U.S. exporters. All major industrialized

countries operate similar programs and thus are primarily countered

through U.S. programs. Our recent work on OPIC suggests that, despite

increasing private capital flows to the developing world, there are still

markets where U.S. private firms are unwilling to participate without some

21We recently reported that, because of the continued expansion of U.S. exports, the share of exports

supported by the Eximbank has been decreasing over the years. It fell to less than 2 percent in 1995,

the lowest level of support provided by major industrial nations’ export credit agencies. The major

users of Eximbank financing include several large, well-known firms such as Boeing, Raytheon,

General Electric, Bechtel, and Asea Brown Boveri. During fiscal years 1994 through 1996, these and the

other top 15 users of Eximbank financing accounted for about $14.4 billion, or 38 percent, of the

Eximbank’s total export-financing commitments and about 27 percent of its total program budget, or

subsidies. Meanwhile, a growing level of support has been directed to small business—during fiscal

years 1994 to 1996, about 20 percent of the Eximbank’s total financing commitments went to support

small business. During fiscal years 1992 to 1996, subsidy costs averaged $750 million annually. See

Export-Import Bank: Key Factors in Considering Eximbank Reauthorization (GAO/T-NSIAD-97-215,

July 17, 1997) and Export-Import Bank: Options for Achieving Possible Budget Reductions

(GAO/NSIAD-97-7, Dec. 20, 1996).

Page 33 GAO/T-NSIAD-98-18 International Affairs Budget
form of public support, be it from OPIC, the Eximbank, foreign

governments, or multilateral organizations.22

Turning to OPIC, historically its combined finance and insurance programs

have been self-sustaining. OPIC’s net income from transactions with the

private sector amounted to about $43 million in fiscal year 1996.23 During

fiscal year 1996, approximately 18 percent of OPIC’s financing

commitments supported small businesses and cooperatives; the remaining

82 percent supported large businesses. The U.S. foreign policy objective of

promoting private investment in developing countries encourages OPIC to

underwrite risks that the private sector may not assume without public

support. OPIC, the State Department, and other U.S. government officials

consider OPIC to be a major tool for pursuing U.S. foreign policy goals,

such as assisting Russia in its transition toward achieving a free market

economy.

• Are there opportunities to support U.S. exports and investments while

reducing costs and risks?

If legislation is enacted reauthorizing Eximbank and OPIC, the question

becomes whether there are opportunities to reduce the costs of their

programs. The Eximbank and OPIC could undertake actions such as better

leveraging resources, decreasing portfolio risk, and lowering costs by

raising their fees, changing their portfolio mix, or changing the structure of

their transactions. For example, work we completed in 1996 identified two

options that would allow the Eximbank to reduce subsidies while

remaining competitive with foreign export credit agencies: (1) raising fees

for services and (2) reducing the risks of its programs; that is, limiting

program availability in certain high-risk markets. The Congressional

Budget Office estimated that increasing fees could save the Eximbank up

to $450 million over 5 years, and reducing program risks could save up to

$1.2 billion over 5 years. Some progress has been made: the Organization

for Economic Cooperation and Development, with U.S. leadership, has

now set a minimum fee for services effective in April 1999. This should

provide the Eximbank with the opportunity to further reduce the costs of

its operations.

22Overseas Investment: Issues Related to the Overseas Private Investment Corporation’s

Reauthorization (GAO/NSIAD-97-230, Sept. 8, 1997).

23OPIC’s net income was $209 million in fiscal year 1996 when $166 million in interest earned on

Treasury securities is included.

Page 34 GAO/T-NSIAD-98-18 International Affairs Budget
Our recent work suggests that OPIC could further reduce the risk in its

portfolio, given the private sector’s willingness to have greater

involvement in some emerging markets. For instance, OPIC could lower the

risks associated with its portfolio through increased use of reinsurance

and coinsurance and by decreasing project coverage or terms. However, if

OPIC is to continue pursuing its mission of promoting investment in risky

markets, its portfolio will always be considered more risky than the

portfolios of private sector insurers.

Mr. Chairman, this concludes my prepared remarks. I would be happy to

respond to any questions you or other Committee members may have. See

the end of this statement for a list of related products that GAO has recently

completed.

Page 35 GAO/T-NSIAD-98-18 International Affairs Budget
Appendix I 

Examples of Discretionary International

Activities Related to the 150 Account

This appendix contains two tables. Table I.1 shows international-related

programs with identified funding. Table I.2 shows international-related

programs where specific funding is not identified. These tables are

intended to illustrate the broad range of activities that support U.S.

international policy objectives and are funded outside the 150 account.

Table I.1: International Programs With Identified Funding

Program International role

FY 1998

request

(millions)

Executive Office of the President

National Security Council Advises the President on the integration of domestic, foreign, and military

policies relating to national security. Coordinates U.S. policy issues on

combating terrorism for federal efforts to respond to terrorist incidents

abroad or domestic incidents with foreign involvement.

$7

Office of Management and Budget: National

Security and International Affairs

Examines programs, budget requests, and management activities;

proposes changes; and participates in counterterrorism efforts.

7

Office of the U.S. Trade Representative Develops, coordinates, and advises the President on U.S. international

trade policy; conducts international trade negotiations; and conducts U.S.

affairs related to the World Trade Organization.

22

Department of Agriculture

Commodity Credit Corporation: Export

Loans Program

Administrative expenses only. Bulk of funding is mandatory. In order to

increase U.S. agricultural exports, the Corporation guarantees payments

due from foreign banks and buyers.

4

Foreign Agricultural Service Opens, expands, and maintains global market opportunities through

international trade, cooperation, and sustainable development.

147

Public Law 480 Title I Program Encourages export of agricultural commodities by financing sales to

developing countries and promotes foreign policy by enhancing the food

security of developing countries. Through the program, U.S. agricultural

commodities are sold to developing countries on long-term credit at

below-market interest rates.

90

Department of Commerce

Export Administration Enforces U.S. export trade laws consistent with national security, foreign

policy, and short supply objectives.

43

International Trade Administration Develops the export potential of U.S. firms in a manner consistent with

national security and foreign and economic policy and promotes an

improved trade posture for U.S. industry.

272

National Telecommunications and

Information Administration

Serves as principal adviser to the President on domestic and international

communications policy. Develops and advocates U.S. interests in

international telecommunications regulation and policy and helps oversee

the Communications Satellite Corporation (COMSAT), the U.S. signatory to

international satellite organizations.

5

Technology Administration Serves as the focal point for civilian technology and competitiveness in the

administration, improves U.S. industrial competitiveness and exercises

leadership as the private sector’s advocate, participates in international

science and technology groups and agreements.

9

(continued)

Page 36 GAO/T-NSIAD-98-18 International Affairs Budget
Appendix I 

Examples of Discretionary International

Activities Related to the 150 Account

Program International role

FY 1998

request

(millions)

Department of Defense

Defense Export Loan Guarantee Program

Account

Established in FY 1996 to issue guarantees for sale or long-term lease of

defense articles, services, or design and construction services to a NATO

member, non-NATO ally, and certain countries in Central Europe and Asia.

1

Drug Interdiction and Counter-drug Activities Assists U.S. and foreign government law enforcement agencies by

providing detection, monitoring, and tracking support; intelligence support;

planning assistance; and communications, logistics, and training support.

653

Former Soviet Union Threat Reduction Facilitates elimination, transportation, and storage of nuclear, chemical, and

other weapons; establishes programs to prevent proliferation; and trains

and supports defense personnel for demilitarization and protection of

weapons.

382

NATO Security Investment Program Acquires and constructs military facilities and installations and funds related

expenses for the collective defense of the North Atlantic Treaty Area.

176

National Security Education Trust Fund Funds international-related studies of U.S. students. 2

On-site Inspection Agency Supports international arms control treaty implementation, including

inspections of foreign facilities, territories, or events.

109

Overseas Contingency Operations Transfer

Fund

Funds Bosnia Peace Operation. Assumes June 1998 U.S./NATO military

pullout.

1,468

Support of Other Nations (Army) Provides U.S. financial contributions for the operation of the NATO

international military commands and facilities, the NATO Airborne Early

Warning and Control System, and the Central European Operating Agency

Pipeline System; supports U.S. personnel assigned to international

organizations; funds programs that further Army-to-Army cooperation with

allied and friendly nations; supports Latin American Cooperation activities

and the School of the Americas; and funds the Marshall Center (Institute for

Eurasian Studies), nonsecurity assistance of military groups, and

unreimbursed costs of foreign military sales activities.

305

Overseas humanitarian, disaster, and civic

aid

Funds two programs: general Humanitarian Assistance and Foreign

Disaster Relief Program and Humanitarian Demining Program.

80

Department of Education

International Education Exchange Helps improve civics and economics education in Central and Eastern

Europe, the former Soviet Union, and the United States.

5

Department of Energy

Falcon and Amistad Hydroelectric Facilities:

operation, maintenance, and emergency

expenses.

Most of funds given to International Boundary and Water Commission,

which assists in operating the facilities, through a reimbursable agreement

with EPA.

1

International clean coal technology Introduces U.S. clean coal technology in China for electricity production.

Electricity demand in China represents a significant market for U.S.

vendors. $50 million available October 1998.

50

International Nuclear Safety and Security Supports safety improvements; encourages development and continuation

of a U.S. equivalent nuclear safety culture at select Soviet-designed reactor

sites; addresses safety and nonproliferation concerns in the former Soviet

Union; supports closure of Chernobyl; and continues efforts at Argonne

National Laboratory regarding spent fuel.

81

(continued)

Page 37 GAO/T-NSIAD-98-18 International Affairs Budget
Appendix I 

Examples of Discretionary International

Activities Related to the 150 Account

Program International role

FY 1998

request

(millions)

Nonproliferation and National Security Provides policy, direction, technology development and implementation,

and leadership in national and international efforts to reduce the danger to

national security posed by weapons of mass destruction.

671

Large Hadron Collider Project Supports international agreement in physics. $394 million advance

appropriation requested for fiscal years 1999-2004.

35

Department of Health and Human Services

Fogarty International Center for Advanced

Study in the Health Sciences

Hosts symposiums, organizes cooperative research between the National

Institutes of Health and foreign scientists, provides fellowships to foreign

scientists in the United States, supports foreign research by U.S. fellows,

and hosts foreign visitors to the NIH.

17

Refugee Resettlement Assistance Provides assistance in order to help refugees achieve economic

self-sufficiency and social adjustment within the shortest time possible

following their arrival in the United States.

396

Department of the Interior

Compact of Free Association Funds economic assistance and necessary expenses for the Republics of

the Marshall Islands and Palau and the Federated States of Micronesia.

8

National Park Service - international Cooperates through training and technical assistance programs with

foreign park service and conservation personnel, participates in studies of

coastal resource management, and assists in protecting and managing

internationally significant sites.

2

North American Wetlands Fulfills obligations under the North American Waterfowl Management Plan

with Canada and Mexico. May fund projects in Canada or Mexico.

15

Department of Justice

Federal Bureau of Investigation (FBI) Total costs of international activities will be higher. Continues legal attaché

expansion plan, assigns additional agents overseas to fight drug trafficking,

and continues investigative efforts against drug trafficking and public

corruption along the Southwest border.

34

Interpol-U.S. National Central Bureau Serves as U.S. liaison to International Criminal Police Organization and

facilitates international law enforcement cooperation.

7

Department of Labor

International Labor Affairs Supports U.S. foreign policy objectives through relationships with

international organizations and foreign governments; provides analysis on

the labor market and economic impact of trade proposals and legislation,

and immigration-related initiatives; and does assessments of compliance

with worker rights provisions in U.S. trade law.

11

Department of State

International Boundary and Water

Commission

Negotiates and supervises joint projects with Mexico to solve international

problems and operate and maintain facilities.

18

International Boundary and Water

Commission: construction

Constructs projects to solve international problems of water supply and

quality, sewage treatment, and flood-damage reduction. EPA reimburses.

6

(continued)

Page 38 GAO/T-NSIAD-98-18 International Affairs Budget
Appendix I 

Examples of Discretionary International

Activities Related to the 150 Account

Program International role

FY 1998

request

(millions)

International commissions International Boundary Commission maintains boundary between the

United States and Canada. International Joint Commission approves,

regulates, and monitors structures in boundary waters and investigates

matters referred by the United States and Canada, mainly transboundary

environmental issues. Border Environment Cooperation Commission works

with states and local communities to develop solutions to environmental

problems in border regions.

6

International Fisheries Commissions Funds U.S. share of expenses for eight international fisheries commissions,

three international marine science sea organizations, one international

council, and the expenses of the commissioners.

15

Department of Transportation

Maritime Administration: Maritime

Guaranteed Loan (title XI) Program

Promotes growth of U.S. merchant marine and shipyards. Extended to

foreign purchasers and for conversion from military to international

commerce.

39

Maritime Security Program Replaces operating-differential subsidies. Maintains a U.S.-flag merchant

fleet crewed by U.S. citizens to serve U.S. commercial and national security

needs. Pays U.S. shippers engaged in U.S.-foreign trade.

54

Maritime Administration: operations and

training

Increases competitiveness and productivity of U.S. maritime industries and

provides manpower for emergencies. Funds administration and direction,

officer training, coordination of U.S. maritime industry activities under

emergency conditions; promotes port and intermodal development; and

undertakes technology assessment projects.

70

Department of the Treasury

Secretary - international activities Recommends and implements U.S. international tax, financial, fiscal, and

economic policies; maintains foreign assets control; manages development

financial policy; represents the United States on international monetary,

trade, and investment issues and treaties; oversees operations abroad; and

oversees law enforcement bureaus.

29

The Judiciary

U.S. Court of International Trade Exercises original and exclusive jurisdiction of civil actions against the

United States, and certain civil actions brought by the United States, arising

out of import transactions and federal statutes affecting international trade.

10

Independent

Intelligence Community Management

Account

Supports intelligence community. 96

NASA: Space Station Participates in international research project. 2,114

NASA: U.S./Russia Program Participates in joint space missions, including Mir. 7

Total funding request $7,579

Legend

EPA = Environmental Protection Agency

NASA = National Air and Space Administration

NATO = North Atlantic Treaty Organization

NIH = National Institutes of Health

Page 39 GAO/T-NSIAD-98-18 International Affairs Budget
Appendix I 

Examples of Discretionary International

Activities Related to the 150 Account

Table I.2: International-Related Programs Where Specific Funding Is Not Identified

Program International role

Executive Office of the President

National Economic Council Participates in setting and carrying out all international affairs goals.

Office of National Drug Control Policy Oversees international drug control programs. Develops U.S. national drug control

strategy and oversees and coordinates the drug control efforts of about 50 different U.S.

federal agencies engaged in implementing the strategy. Supports protection of U.S. air,

sea, and land borders from the importation of illegal narcotics.

Office of Science and Technology Policy Coordinates implementation of international science and technology agreements.

Unanticipated needs Furthers national interest, security, or defense at home or abroad.

Department of Agriculture

Alternative agricultural research Helps improve U.S. competitiveness abroad.

Animal and Plant Health Inspection Participates in foreign cooperative programs, inspections, and international trade in

certain endangered species.

Commodity Credit Corporation: supply and

foreign purchases

Procures goods from foreign and domestic sources for foreign and domestic use.

Farm Service Agency Supports Foreign Agricultural Service.

Food Safety and Inspection Inspects domestic plants involved in foreign trade and reviews foreign inspection

systems.

Grain inspection, packers, and stockyard Regulates weighing of grain and registers buyers in foreign commerce, briefs foreign

buyers, assesses foreign inspection and weighing techniques, and responds to foreign

complaints.

Office of the Chief Economist Collects and analyzes data on international food and agriculture.

Department of Commerce

Bureau of Economic Analysis Prepares international economic accounts that provide information on international

transactions in goods, services, investment income, and government and private

financial flows and are used to formulate and evaluate international economic policy.

Bureau of the Census Collects and publishes foreign trade statistics.

Minority Business Development Agency Expands international markets for minority-owned businesses.

National Institute of Standards and

Technology

Assists with international standardization certification.

National Oceanic and Atmospheric

Administration

Monitors compliance with select fisheries acts, monitors and predicts global

environments, and supports global environmental programs.

Patent and Trademark Office Develops and implements intellectual property policies and proposals abroad.

Department of Defense

Counterterrorism Combats terrorism; with the FBI, trains and equips former Soviet Union and Eastern

European law enforcement officials, judges, and prosecutors to counter nuclear material

smuggling and trafficking and chemical and biological weapons proliferation.

Other countries’ participation in joint

exercises

Supports foreign partners’ participation in joint exercises and projects, including the

Warsaw Initiative, Army’s Developing Countries Combined Exercise Program, and Joint

Contact Team.

Department of Education

Bilingual and immigrant education Assists local educators in providing high-quality instructional programs to children and

youth with limited English proficiency.

(continued)

Page 40 GAO/T-NSIAD-98-18 International Affairs Budget
Appendix I 

Examples of Discretionary International

Activities Related to the 150 Account

Program International role

International language and study Supports international education and foreign language study programs.

Department of Energy

Counterterrorism With others, trains personnel from six countries in the former Soviet Union on

investigating and prosecuting nuclear-related crimes; and reduces the opportunity for

terrorists to acquire nuclear materials.

Defense Environmental Restoration Receives and manages foreign research reactor spent nuclear fuel.

Energy Efficiency and Pollution Prevention Increases national security and creates jobs and global opportunities for U.S. firms.

Energy Information Administration Prepares reports on international matters.

Energy Supply Research and Development Improves prediction of global change, including climate; provides scientific contribution

to international activities and negotiations; enhances global sales of U.S. energy

products, and provides technical assistance.

International agreements Participates in the development and implementation of international agreements, such as

the Nuclear Safety Convention, the U.S./North Korean Agreed Framework on Nuclear

Issues, and the Agreement for Cooperation Between the United States and the European

Atomic Energy Community Concerning Peaceful Uses of Atomic Energy.

Nuclear Materials Management and

Safeguards System

Tracks civilian-use nuclear materials imported by the United States and exported to

foreign countries. Relies largely on data required to be reported under international

agreements for peaceful nuclear cooperation.

Office of Policy Formulates international energy policy, analyzes and assesses current world energy

situation, and participates in international efforts.

Strategic Petroleum Reserve Enables the United States to meet International Energy Agency’s emergency response

plans.

U.S. Bilateral Physical Protection Program Evaluates foreign countries’ physical protection systems, addresses emerging nuclear

proliferation threats and problems, promotes technical exchanges and cooperation for

physical protection, strengthens international cooperation and implementation of treaties

and agreements.

Western Area Power Administration Markets power from federally owned power plants, including the International Boundary

and Water Commission.

Department of Health and Human Services

Office of International and Refugee Health Promotes achievement of U.S. and international goals through participation in multilateral

health organizations, promotes cooperative health programs with other countries,

provides humanitarian and developmental assistance in health, and helps assure

appropriate policies and support on refugee health issues internationally.

Department of the Interior

Assistance to territories Supports operations and provides assistance to territories and freely associated states.

Fish and Wildlife Service: international Provides technical assistance, training, joint research, and personnel exchanges in

international fisheries and wildlife management efforts, including the protection of

biological diversity.

Fish and Wildlife Service: Rhinoceros and

Tiger Conservation Fund

Enhances compliance with international agreement on trade in endangered species.

Department of Justice

Counterterrorism Fund Supports efforts to counter, investigate, or prosecute domestic or international terrorism.

(continued)

Page 41 GAO/T-NSIAD-98-18 International Affairs Budget
Appendix I 

Examples of Discretionary International

Activities Related to the 150 Account

Program International role

Criminal Division Supports the formulation and execution of international criminal justice enforcement

policies; participates in the negotiation of international agreements and treaties relating

to criminal law enforcement, extradition, and mutual legal assistance; posts attorneys

abroad; enforces U.S. laws against importing goods made with prison labor by

prosecuting criminal cases; and prosecutes cases against international drug traffickers

and money launderers and seizes and forfeits their illicit proceeds and laundered assets

overseas.

Drug Enforcement Administration Conducts international investigations, posts staff overseas, coordinates drug

enforcement intelligence gathering overseas, conducts law enforcement operations, and

provides training to foreign government law enforcement personnel.

Drug Enforcement Administration: Violent

Crime Reduction Program

Participates in foreign cooperative investigations.

FBI Protects the United States from foreign hostile intelligence efforts. Assist international law

enforcement agencies. Combat terrorism; with others, train and equip former Soviet

Union and Eastern European law enforcement officials, judges, and prosecutors to

counter nuclear material smuggling and trafficking and chemical and biological

weapons proliferation.

Federal prison system Provides technical assistance and advice on corrections-related issues to foreign

governments.

Immigration and Naturalization Service Administers laws relating to the admission, exclusion, deportation, and naturalization of

aliens; posts staff abroad; and conducts investigations.

Legal activities Enforces U.S. laws against importing goods made with prison labor by prosecuting

criminal cases and defending Customs’ determinations; prosecutes cases against

international drug traffickers and money launderers and seizes and forfeits their illicit

proceeds and laundered assets domestically and abroad.

Department of Transportation

Coast Guard Conducts safety programs; supports international investigations; posts staff abroad;

eliminates maritime routes as a significant trafficking mode for the supply of illegal drugs

to the United States; and enforces treaties.

Federal Aviation Administration Conducts safety programs, supports international investigations, posts staff abroad,

provides technical assistance, oversees foreign carriers, and supports efforts to combat

terrorism domestically and abroad.

Federal Highway Administration Promotes U.S. businesses abroad and provides technical assistance to foreign

governments (reimbursed).

National Transportation Safety Board Helps to develop worldwide safety standards and practices in civil aviation,

disseminates accident and incident information, and helps foreign countries investigate

transportation accidents.

Office of International Aviation Negotiates bilateral aviation accords and addresses problems U.S. airlines face in doing

business abroad.

Transportation policy and planning Provides departmental leadership on aviation economic policy and international

transportation issues.

Department of the Treasury

Bureau of Alcohol, Tobacco, and Firearms Supports international law enforcement, posts staff abroad, and trains foreign law

enforcement officials.

Comptroller of the Currency Coordinates with foreign counterparts, participates in international banking agreements,

and charters and supervises foreign banks.

Debt Collection Improvement Account Settles international claims.

(continued)

Page 42 GAO/T-NSIAD-98-18 International Affairs Budget
Appendix I 

Examples of Discretionary International

Activities Related to the 150 Account

Program International role

Federal Law Enforcement Training Center Trains foreign law enforcement officials (reimbursable).

Financial Crimes Enforcement Network Identifies underlying criminal financial activity and emerging trends and patterns of

international money laundering investigations; empowers international law enforcement

to take action against financial criminals through the transfer of information and

expertise; and helps other countries meet international anti-money laundering standards.

Internal Revenue Service Assists international investigations, posts staff abroad, trains foreign law officials,

provides technical assistance to foreign governments, manages tax treaties, and

monitors compliance of foreign-controlled companies with relevant U.S. income tax laws.

U.S. Customs Service Processes persons and cargo entering the United States; enforces import and export

laws; collects and reports trade statistics; supports international investigations; enforces

international agreements; supports counterterrorism efforts; with others, trains personnel

from six former Soviet Union countries on investigating and prosecuting nuclear-related

crimes; and interdicts illegal drugs and investigates drug-smuggling organizations.

U.S. Secret Service Assists international investigations; posts staff abroad; provides technical assistance to

foreign governments; and protects select foreign visitors, foreign diplomatic missions in

the United States, and select U.S. officials abroad.

The Judiciary

U.S. Court of Appeals for the Federal Circuit Exercises jurisdiction over international trade cases.

Defender Services Compensates and reimburses travel expenses of guardians acting on behalf of

financially eligible minor or incompetent offenders in connection with transfers from the

United States to foreign countries.

Legislative

Legislative branch boards and commissions Participates in Commission on Security and Cooperation in Europe and House and

Senate international meetings.

Library of Congress: International Copyright

Institute

Trains nationals of developing countries in intellectual property laws and policies.

Library of Congress Operates overseas centers.

U.S. General Accounting Office Provides information on national security and international affairs and gives training to

foreign audit organizations.

Independent

Central Intelligence Agency Gathers intelligence abroad.

Commodity Futures Trading Commission Coordinates with international regulators.

Environmental Protection Agency Participates in international negotiations, provides technical assistance, opens

commercial opportunities for U.S. firms, supports international research, and supports

U.S.-Mexico Border Environmental Plan.

Federal Communications Commission Helps oversee COMSAT. Promotes competition in international telecommunications.

Federal Labor Relations Authority Resolves labor negotiation impasses, including those involving Panama Canal workers.

Federal Reserve System Self-financing entity but revenues contribute to total U.S. government revenues.

Conducts monetary policy (including helping to stabilize financial markets internationally

and to detect and combat counterfeiting of U.S. currency abroad), supervises and

regulates banks (including the foreign activities of member banks, U.S. operations of

foreign banks, and international banking agreements), and coordinates with international

counterparts.

Marine Mammal Commission Recommends international policies on marine mammals.

NASA: Commercial Technology Program Strengthens international competitiveness of key industry sectors.

(continued)

Page 43 GAO/T-NSIAD-98-18 International Affairs Budget
Appendix I 

Examples of Discretionary International

Activities Related to the 150 Account

Program International role

NASA: life and microgravity science Refines the experiment hardware planned for use on the International Space Station.

NASA: mission communication services Supports international space-faring agencies on a reimbursable basis.

NASA: Mission to Planet Earth Participates in global change research.

National Science Foundation: research Facilitates international scientific cooperation.

National Science Foundation: U.S. polar

research

Studies polar regions, which have a major influence on world weather and climate and

are considered as likely bellwethers of global climate change. Participates in

international cooperative efforts among nations with Arctic regions, or with Antarctic

interests.

Nuclear Regulatory Commission Renders services to foreign governments and international organizations; participates in

development and implementation of the Nuclear Safety Convention; and reviews

licenses to export nuclear materials. Some costs reimbursed.

Securities and Exchange Commission Coordinates with international counterparts to discuss securities developments,

development and implementation of cooperation agreements concerning securities, and

provision of technical assistance for the development of foreign securities markets.

Supervises and regulates securities markets to ensure fairness and competition and

meet changing international conditions.

Small Business Administration Encourages small business exports and improves access to capital for trade finance.

Smithsonian Institution Supports U.S. overseas research centers.

Page 44 GAO/T-NSIAD-98-18 International Affairs Budget
Page 45 GAO/T-NSIAD-98-18 International Affairs Budget
Page 46 GAO/T-NSIAD-98-18 International Affairs Budget
Page 47 GAO/T-NSIAD-98-18 International Affairs Budget
Related GAO Products

Security NATO Enlargement: Cost Implications for the United States Remain Unclear

(GAO/T-NSIAD-98-50, Oct. 23, 1997).

Combating Terrorism: Federal Agencies’ Efforts to Implement National

Policy and Strategy (GAO/NSIAD-97-254, Sept. 26, 1997).

Cooperative Threat Reduction: Review of DOD’s June 1997 Report on

Assistance Provided (GAO/NSIAD-97-218, Sept. 5, 1997).

NATO Enlargement: Cost Estimates Developed to Date Are Notional

(GAO/NSIAD-97-209, Aug. 18, 1997).

Military Offsets: Regulations Needed to Implement Prohibition on

Incentive Payments (GAO/NSIAD-97-189, Aug. 12, 1997).

NATO Enlargement: U.S. and International Efforts to Assist Potential New

Members (GAO/NSIAD-97-164, June 27, 1997).

Nuclear Nonproliferation: Implementation of the U.S./North Korean

Agreed Framework on Nuclear Issues (GAO/RCED/NSIAD-97-165, June 2, 1997).

Hong Kong’s Reversion to China: Effective Monitoring Critical to Assess

U.S. Nonproliferation Risks (GAO/NSIAD-97-149, May 22, 1997.)

Export Controls: Sales of High Performance Computers to Russia’s

Nuclear Weapons Laboratories (GAO-T-NSIAD-97-128, Apr. 15, 1997).

Cooperative Threat Reduction: Status of Defense Conversion Efforts in the

Former Soviet Union (GAO/NSIAD-97-101, Apr. 11, 1997).

Nuclear Safety: International Atomic Energy Agency’s Nuclear Technical

Assistance for Cuba (GAO/RCED-97-72, Mar. 24, 1997).

Weapons of Mass Destruction: DOD Reporting on Cooperative Threat

Reduction Assistance Has Improved (GAO/NSIAD-97-84, Feb. 27, 1997).

Nuclear Safety: Uncertainties About the Implementation and Costs of the

Nuclear Safety Convention (GAO/RCED-97-39, Jan. 2, 1997).

Nuclear Safety: Status of U.S. Assistance to Improve the Safety of

Soviet-Designed Reactors (GAO/RCED-97-5, Oct. 29, 1996).

Page 48 GAO/T-NSIAD-98-18 International Affairs Budget
Related GAO Products

Nuclear Weapons: Russia’s Request for the Export of U.S. Computers for

Stockpile Maintenance (GAO/T-NSIAD-96-245, Sept. 30, 1996).

Weapons of Mass Destruction: Status of the Cooperative Threat Reduction

Program (GAO/NSIAD-96-222, Sept. 27, 1996).

School of the Americas: U.S. Military Training for Latin American

Countries (GAO/NSIAD-96-178, Aug. 22, 1996).

Nuclear Nonproliferation: Status of U.S. Efforts to Improve Nuclear

Material Controls in Newly Independent States (GAO/NSIAD-96-89, Mar. 8,

1996).

Foreign Assistance: Controls Over U.S. Funds Provided for the Benefit of

the Palestinian Authority (GAO/NSIAD-96-18, Jan. 8, 1996).

Military Exports: Offset Demands Continue to Grow (GAO/NSIAD-96-65,

Apr. 12, 1996).

Foreign Military Sales (GAO/NSIAD-96-50R, Dec. 12, 1995).

Military Exports: A Comparison of Government Support in the United

States and Three Major Competitors (GAO/NSIAD-95-86, May 18, 1995).

Greece and Turkey: U.S. Assistance Programs and Other Activities

(GAO/NSIAD-95-100, Apr. 17, 1995).

Cost of Assistance and Sales Programs (GAO/NSIAD-95-110R, Mar. 2, 1995).

DOD Budget: Selected Categories of Planned Funding for Fiscal 

Years 1995-99 (GAO/NSIAD-95-92, Feb. 17, 1995).

Military Exports: Concerns Over Offsets Generated With U.S. Foreign

Military Financing Program Funds (GAO/NSIAD-94-127, June 22, 1994).

Foreign Military Sales: Use of FMS in Proposed Commercial Sale of

Airborne Self-Protection Jammer (GAO/NSIAD-94-202, June 16, 1994).

Military Sales’ Cash Flow Financing (GAO/NSIAD-94-102R, Feb. 8, 1994).

Security Assistance: Need for Improved Reporting on Excess Defense

Article Transfers (GAO/NSIAD-94-27, Jan. 18, 1994).

Page 49 GAO/T-NSIAD-98-18 International Affairs Budget
Related GAO Products

Foreign Military Aid to Israel: Diversion of U.S. Funds and Circumvention

of U.S. Program Restrictions (GAO/T-OSI-94-9, Oct. 27, 1993).

Military Aid to Egypt: Tank Coproduction Raised Costs and May Not Meet

Many Program Goals (GAO/NSIAD-93-203, July 27, 1993).

Military Sales to Israel and Egypt: DOD Needs Stronger Controls Over

U.S.-Financed Procurements (GAO/NSIAD-93-184, July 7, 1993).

Security Assistance: Excess Defense Articles for Foreign Countries

(GAO/NSIAD-93-164FS, Mar. 23, 1993).

Peacekeeping Bosnia: Cost Estimating Has Improved but Operational Changes Will

Affect Current Estimates (GAO/NSIAD-97-183, July 28, 1997).

Bosnia Peace Operation: Progress Toward the Dayton Agreement’s

Goals—An Update (GAO/T-NSIAD-97-216, July 17, 1997).

Bosnia Peace Operation: Progress Toward Achieving the Dayton

Agreement’s Goals (GAO/NSIAD-97-132, May 5, 1997).

U.N. Peacekeeping: Issues Related to Effectiveness, Cost, and Reform

(GAO/T-NSIAD-97-139, Apr. 9, 1997).

United Nations: Limitations in Leading Missions Requiring Force to

Restore Peace (GAO/NSIAD-97-34, Mar. 27, 1997).

U.N. Peacekeeping: Status of Long-standing Operations and U.S. Interests

in Supporting Them (GAO/NSIAD-97-59, Apr. 9, 1997).

Peace Operations: U.S. Costs in Support of Haiti, former Yugoslavia,

Somalia, and Rwanda (GAO/NSIAD-96-38, Mar. 6, 1996).

Peacekeeping: Assessment of U.S. Participation in the Multinational Force

and Observers (GAO/NSIAD-95-113, Aug. 15, 1995).

Peace Operations: DOD’s Incremental Costs and Funding for Fiscal 

Year 1994 (GAO/NSIAD-95-119BR, Apr. 18, 1995).

Page 50 GAO/T-NSIAD-98-18 International Affairs Budget
Related GAO Products

Drug Control Drug Control: U.S. Heroin Control Efforts in Southwest Asia and the

Former Soviet Union (GAO/NSIAD-97-148BR, May 9, 1997).

Drug Control: Long-standing Problems Hinder U.S. International Efforts

(GAO/NSIAD-97-75, Feb. 27, 1997).

Drug Control: U.S. Heroin Control Efforts in Southeast Asia

(GAO/T-NSIAD-96-240, Sept. 19, 1996).

Drug Control: Observations on Counternarcotics Activities in Mexico

(GAO/T-NSIAD-96-239, Sept. 12, 1996).

Bilateral Assistance Foreign Assistance: USAID’s Reengineering at Overseas Missions

(GAO/NSIAD-97-194, Sept. 12, 1997).

The Results Act: Observations on USAID’s November 1996 Draft Strategic

Plan (GAO/NSIAD-97-197R, July 11, 1997).

Foreign Assistance: Impact of Funding Restrictions on USAID’s Voluntary

Family Planning Program (GAO/NSIAD-97-123, Apr. 25, 1997).

Foreign Assistance: Harvard Institute for International Development’s

Work in Russia and Ukraine (GAO/NSIAD-97-27, Nov. 27, 1996).

USAID Democracy Contracts (GAO/NSIAD-97-19R, Nov. 27, 1996).

Foreign Assistance: Contributions to Child Survival Are Significant, but

Challenges Remain (GAO/NSIAD-97-9, Nov. 8, 1996).

Foreign Assistance: Status of USAID’s Reforms (GAO/NSIAD-96-241BR, Sept. 24,

1996).

International Relations: Food Security in Africa (GAO/T-NSIAD-96-217, July 31,

1996).

Former Soviet Union: Information on U.S. Bilateral Program Funding

(GAO/NSIAD-96-37, Dec. 15, 1995).

Foreign Housing Guaranty Program: Financial Condition Is Poor and

Goals Are Not Achieved (GAO/NSIAD-95-108, June 2, 1995).

Page 51 GAO/T-NSIAD-98-18 International Affairs Budget
Related GAO Products

Promoting Democracy: Foreign Affairs and Defense Agencies’ Funds and

Activities—1991 to 1993 (GAO/NSIAD-94-83, Jan. 4, 1994).

Foreign Affairs

Management

State Department: Using Best Practices to Relocate Employees Could

Reduce Costs and Improve Service (GAO/NSIAD-98-19, Oct. 17, 1997).

The Results Act: Observations on the Department of State’s May 1997

Draft Strategic Plan (GAO/NSIAD-97-198R, July 18, 1997).

State Department: Efforts to Reduce Visa Fraud (GAO/T-NSIAD-97-167, May 20,

1997).

Vietnamese Asylum Seekers: A Review of Selected Cases in Four

Southeast Asia Countries (GAO/NSIAD-97-51, Dec. 31, 1996).

Foreign Affairs: Perspectives on Foreign Affairs Programs and Structures

(GAO/NSIAD-97-6, Nov. 8, 1996).

State Department: Options for Addressing Possible Budget Reductions

(GAO/NSIAD-96-124, Aug. 29, 1996).

Overseas Real Estate: Millions of Dollars Could Be Generated by Selling

Unneeded Real Estate (GAO/NSIAD-96-36, Apr. 23, 1996).

Overseas Presence: Staffing at U.S. Diplomatic Posts (GAO/NSIAD-95-50FS,

Dec. 28, 1994).

State Department: Overseas Staffing Process Not Linked to Policy

Priorities (GAO/NSIAD-94-228, Sept. 20, 1994).

Public Diplomacy U.S. Information Agency: Options for Addressing Possible Budget

Reductions (GAO/NSIAD-96-179, Sept. 23, 1996).

Exchange Programs: Inventory of International Educational, Cultural, and

Training Programs (GAO/NSIAD-93-157BR, June 23, 1993).

Multilateral

Assistance

Multilateral Organizations: U.S. Contributions to International

Organizations for Fiscal Year 1993-95 (GAO/NSIAD-97-42, May 1, 1997).

Page 52 GAO/T-NSIAD-98-18 International Affairs Budget
Related GAO Products

International Organizations: U.S. Participation in the United Nations

Development Program (GAO/NSIAD-97-8, April 17, 1997).

Nuclear Safety: International Atomic Energy Agency’s Nuclear Technical

Assistance for Cuba (GAO/RCED-97-72, Mar. 24, 1997).

State Department: U.S. Participation in Special-Purpose International

Organizations (GAO/NSIAD-97-35, Mar. 6, 1997).

United Nations: U.S. Participation in Five Affiliated International

Organizations (GAO/NSIAD-97-2, Feb. 27, 1997).

United Nations: Status of Alternative Revenue Raising Proposals

(GAO/NSIAD-97-31, Nov. 8, 1996).

World Bank: U.S. Interests Supported, but Oversight Needed to Help

Ensure Improved Performance (GAO/NSIAD-96-212, Sep. 26, 1996).

Export Promotion and

Finance-Overall

Strategy and

Coordination

Export Finance: Federal Efforts to Support Working Capital Needs of

Small Business (GAO/NSIAD-97-20, Feb. 13, 1997).

National Export Strategy (GAO/NSIAD-96-132R, Mar. 26, 1996).

Government Reorganization: Observations About Creating a U.S. Trade

Administration (GAO/T-GGD-95-234, Sep. 6, 1995).

Government Reorganization: Issues Relating to International Trade

Responsibilities (GAO/T-GGD-95-218, July 25, 1995).

U.S. & Foreign Commercial Service: Comments on Proposed Transfer to

the Department of State (GAO/T-GGD-95-141, Mar. 21,1995).

Export Finance: Comparative Analysis of U.S. and European Union Export

Credit Agencies (GAO/GGD-96-1, Oct. 24, 1995).

Export Promotion: Rationales for and Against Government Programs and

Expenditures (GAO/T-GGD-95-169, May 23, 1995).

International Trade: U.S. Efforts to Counter Competitors’ Tied Aid

Practices (GAO/T-GGD-95-128, Mar. 28, 1995).

Page 53 GAO/T-NSIAD-98-18 International Affairs Budget
Related GAO Products

International Trade: Combating U.S. Competitors’ Tied Aid Practices

(GAO/T-GGD-94-156, May 25, 1994).

Export-Import Bank Export-Import Bank: Key Factors in Considering Eximbank

Reauthorization (GAO/T-NSIAD-97-215, July 17, 1997).

U.S. Export-Import Bank: Process in Place to Ensure Compliance with

Dual-Use Export Requirements (GAO/NSIAD-97-211, July 17, 1997).

Export-Import Bank: Reauthorization Issues (GAO/T-NSIAD-97-147, Apr. 29,

1997).

Ex-Im Bank’s Retention Allowance Program (GAO/GGD-97-37R, Feb. 19, 1997).

Export Finance: Federal Efforts to Support Working Capital Needs of

Small Business (GAO/NSIAD-97-20, Feb. 13, 1997).

Export-Import Bank: Options for Achieving Possible Budget Reductions

(GAO/NSIAD-97-7, Dec. 20, 1996).

Retention Allowances: Usage and Compliance Vary Among Federal

Agencies (GAO/GGD-96-32, Dec. 11, 1995).

Export Finance: Challenges Facing the U.S. Export-Import Bank

(GAO/T-GGD-94-46, Nov. 3, 1993).

Food Aid and Cargo

Preference

Food Aid: Competing Goals and Requirements Hinder Title I Program

Results (GAO/GGD-95-68, June 26, 1995).

Cargo Preference Requirements: Objectives Not Significantly Advanced

When Used in U.S. Food Aid Programs (GAO/GGD-94-215, Sept. 29, 1994).

Other Trade Related U.S. Agricultural Exports: Strong Growth Likely but U.S. Export

Assistance Programs’ Contribution Uncertain (GAO/NSIAD-97-260, Sept. 30,

1997).

Overseas Investment: Issues Related to the Overseas Private Investment

Corporation’s Reauthorization (GAO/NSIAD-97-230, Sept. 8, 1997).

Page 54 GAO/T-NSIAD-98-18 International Affairs Budget
Related GAO Products

Trade Liberalization: Western Hemisphere Trade Issues Confronting the

United States (GAO/NSIAD-97-119, July 21, 1997).

The Results Act: Observations on USTR’s September 1996 Draft Strategic

Plan (GAO/NSIAD-97-199R, July 18, 1997).

Customs Service: Office of International Affairs (GAO/NSIAD-97-146R, Apr. 25,

1997).

World Trade Organization: Observations on the Ministerial Meeting in

Singapore (GAO/T-NSIAD-97-92, Feb. 26, 1997).

U.S.-Japan Trade: U.S. Company Views on the Implementation of the 1994

Insurance Agreement (GAO/NSIAD-97-64BR, Dec. 20, 1996).

International Trade: Challenges and Opportunities for U.S. Businesses in

China (GAO/T-NSIAD-96-214, July 29, 1996).

U.S. Trade and Development Agency: Limitations Exist in Its Ability to

Help Generate U.S. Exports (GAO/GGD-94-9, Oct. 20, 1993).

International Trade Commission: Administrative Authority Is Ambiguous

(GAO/NSIAD-92-45, Feb. 25, 1992).

Transportation and

Telecommunications

International Aviation: Competition in the U.S.-U.K. Market

(GAO/T-RCED-97-103, June 4, 1997).

International Aviation: DOT’s Efforts to Promote U.S. Air Cargo Carriers’

Interests (GAO/RCED-97-13, Oct. 18, 1996).

Telecommunications: Competition Issues in International Satellite

Communications (GAO/RCED-97-1, Oct. 11, 1996).

International Aviation: DOT Needs More Information to Address U.S.

Airlines’ Problems in Doing Business Abroad (GAO/RCED-95-24, Nov. 29,

1994).

Food Safety Agricultural Inspection: Improvements Needed to Minimize Threat of

Foreign Pests and Diseases (GAO/RCED-97-102, May 5, 1997).

Page 55 GAO/T-NSIAD-98-18 International Affairs Budget
Related GAO Products

Food Safety: Procedures for Inspecting Canadian Meat Imports

(GAO/T-RCED-97-21, Apr. 2, 1997).

Finance International Financial Crises: Efforts to Anticipate, Avoid, and Resolve

Sovereign Crises (GAO/GGD/NSIAD-97-16, July 7, 1997).

Financial Crisis Management: Four Financial Crises in the 1980s

(GAO/GGD-97-96, May 1, 1997).

Foreign Banks: Opportunities Exist to Enhance Supervision Program as

Implementation Proceeds (GAO/GGD-97-80, May 9, 1997).

Foreign Banks: Implementation of the Foreign Bank Supervision

Enhancement Act of 1991 (GAO/GGD-96-187, Sept. 30, 1996).

Environment International Environment: Operations of the Montreal Protocol

Multilateral Fund (GAO/T-RCED-97-218, July 30, 1997).

International Environment: U.S. Funding of Environmental Programs and

Activities (GAO/RCED-96-234, Sept. 30, 1996).

Global Warming: Difficulties Assessing Countries’ Progress Stabilizing

Emissions of Greenhouse Gases (GAO/RCED-96-188, Sept. 4, 1996).

International Environment: Environmental Infrastructure Needs in the

U.S.-Mexican Border Region Remain Unmet (GAO/RCED-96-179, July 22, 1996).

Other International Space Station: Cost Control Problems Continue to Worsen

(GAO/T-NSIAD-97-177, July 18, 1997).

Overall Management

and Budget

Managing for Results: Using the Results Act to Address Mission

Fragmentation and Program Overlap (GAO/AIMD-97-146, Aug. 29, 1997).

Budget Issues: Fiscal Year 1996 Agency Spending by Budget Function

(GAO/AIMD-97-95, May 13, 1997).

Addressing the Deficit: Budgetary Implications of Selected GAO Work for

Fiscal Year 1998 (GAO/OCG-97-2, Mar. 14, 1997).

(711293) Page 56 GAO/T-NSIAD-98-18 International Affairs Budget
Ordering Information

The first copy of each GAO report and testimony is free.

Additional copies are $2 each. Orders should be sent to the

following address, accompanied by a check or money order

made out to the Superintendent of Documents, when

necessary. VISA and MasterCard credit cards are accepted, also.

Orders for 100 or more copies to be mailed to a single address

are discounted 25 percent.

Orders by mail:

U.S. General Accounting Office

P.O. Box 37050

Washington, DC 20013

or visit:

Room 1100

700 4th St. NW (corner of 4th and G Sts. NW)

U.S. General Accounting Office

Washington, DC

Orders may also be placed by calling (202) 512-6000 

or by using fax number (202) 512-6061, or TDD (202) 512-2537.

Each day, GAO issues a list of newly available reports and

testimony. To receive facsimile copies of the daily list or any

list from the past 30 days, please call (202) 512-6000 using a

touchtone phone. A recorded menu will provide information on

how to obtain these lists.

For information on how to access GAO reports on the INTERNET,

send an e-mail message with "info" in the body to:

info@www.gao.gov

or visit GAO’s World Wide Web Home Page at:

http://www.gao.gov

PRINTED ON RECYCLED PAPER
United States

General Accounting Office

Washington, D.C. 20548-0001

Official Business

Penalty for Private Use $300

Address Correction Requested

Bulk Rate

Postage & Fees Paid

GAO

Permit No. G100