Page 1 GAO-03-1152R USAID Operating Expenses 

A

United States General Accounting Office 

Washington, D.C. 20548 

September 30, 2003 

The Honorable Christopher Shays, Chairman 

The Honorable Dennis J. Kucinich, Ranking Minority Member 

Subcommittee on National Security, Emerging Threats, and 

International Relations 

Committee on Government Reform 

House of Representatives 

Subject: Foreign Assistance: USAID’s Operating Expense Account Does 

Not Fully Reflect the Cost of Delivering Foreign Assistance 

Humanitarian and economic development assistance has long been an 

important component of U.S. global security strategy. Since 1962, the U.S. 

Agency for International Development (USAID) has managed more than 

$273 billion in such assistance. In fiscal year 2003, USAID estimates that it 

will obligate about $13 billion for assistance programs in almost 160 

countries. In recent years, demands on USAID’s budget and workforce 

have increased as the agency strives to meet emerging requirements, such 

as reconstruction efforts in Afghanistan and Iraq and increased funding for 

health programs. However, USAID officials have expressed concern that 

funds provided for its administrative or operating expenses have not kept 

pace with the agency’s requirements. 

Since 1976, Congress has included a separate appropriation to consolidate 

USAID’s operating expenses into a single budget item. Congress intended 

that USAID pay for the administrative costs of delivering foreign assistance 

(its “cost of doing business”) from an operating expense account separate 

from its humanitarian and development assistance program funds. 1 These 

operating expenses are costs incurred primarily for the benefit of the 

United States rather than the foreign assistance recipient. In accordance 

with congressional guidance,2

 USAID reports all expenses related to U.S. 

direct-hire staff as operating expenses3 and, based on its guidance on what 

constitutes the cost of doing business, other operating expenses—from 

rent to office utilities and supplies. In fiscal year 2003, USAID estimates 

1

S. Rept. 94-704. 

2

H. Rept. 95-701 and S. Rept. 95-1194. 

3

USAID’s Automated Directives System, Functional Series 600, chapter 601 (Funding Source 

Policy). 

Page 1 GAO-03-1152R USAID Operating Expenses 
that it will obligate $668 million for its operating expenses. At your request, 

we examined (1) trends in USAID’s operating expenses since 1995 and (2) 

whether charges to USAID’s operating expense account reflect the agency’s 

actual cost of doing business. 

To accomplish our objectives, we interviewed cognizant officials in 

USAID’s regional bureaus and its bureaus for management and policy and 

program coordination. In connection with other work, we also conducted 

fieldwork at seven overseas missions. We reviewed budget and workforce 

data generated by USAID missions and headquarters offices from fiscal 

years 1995 to 2003. We present our analysis in obligations because this 

information was readily available in USAID’s annual congressional budget 

justifications. We converted the obligations data into constant year 2003 

dollars to adjust for inflation and better reflect the agency’s purchasing 

power over the period. 

Results in Brief	 According to data USAID reported, over fiscal years 1995 to 2003, USAID’s 

total obligated operating expenses have ranged from a low of $595.7 million 

in 1998 to a high of $654.8 million in 1995, and USAID estimates total 

obligations in 2003 will be about $668 million (in constant 2003 dollars). 

•	 The largest administrative category in USAID’s operating expense 

account is salaries and related support for U.S. direct-hire staff. 

Obligations for these expenses account for 43 percent ($277.7 million) 

of USAID’s estimated operating expenses for fiscal year 2003. However, 

funds obligated for direct-hire personnel declined during fiscal years 

1995 through 2001—from $302.5 million to $249.2 million—primarily 

due to declining levels of direct-hire staff during this period. But, in 

fiscal years 2002 and 2003, U.S. direct-hire personnel costs have 

increased over 11 percent. USAID expects these costs to continue rising 

as it continues its recent hiring efforts. 

•	 Three other administrative categories—other staff costs, information 

technology, and rent—account for about 33 percent ($216.5 million) of 

USAID’s estimated operating expenses for fiscal year 2003. Although 

these expenses varied from year to year, the net change in total from 

fiscal year 1995 was a decline of less than 1 percent. 

•	 Between fiscal years 1995 and 2002, operating expense obligations as a 

percentage of program obligations remained fairly level—averaging 

about 8.5 percent. However, in fiscal year 2003, the operating expenses 

Page 2 GAO-03-1152R USAID Operating Expenses 
to program funds ratio dropped to 5 percent due to large amounts of 

supplemental funding.

4 

USAID’s operating expense account does not fully reflect the agency’s cost 

of doing business primarily because the agency pays for some 

administrative activities done by contractors and other nondirect-hire staff 

with program funds. As we noted in our recent report,5

 USAID’s overseas 

missions have increasingly relied on personal services contractors— 

foreign national personal services contractors make up about 60 percent of 

its workforce—to manage USAID’s development activities due to declining 

numbers of U.S. direct-hire staff. Nondirect-hire staff may be paid with 

either program or operating expense funds. Many of these staff perform 

administrative duties that directly benefit the United States, and it is often 

difficult to distinguish between the administrative duties they perform and 

those done by U.S. direct-hire personnel. In four missions we visited, some 

foreign national personal services contractors were financial and 

procurement analysts, secretaries, and drivers. Although these analysts 

and support staff performed primarily administrative tasks for USAID’s 

benefit, some were assigned to specific technical teams, and their salaries 

and support costs were paid from program funds because USAID 

considered their services directly allocable to these activities and did not 

report them as operating expenses. According to USAID officials, based on 

data recently collected from its missions, USAID estimates that about $350 

million in program funds will be used to pay for nondirect-hire staff 

performing both administrative and technical support functions in fiscal 

year 2003. As a result, the operating expense account and other funds 

authorized for operating expenses do not fully reflect the cost of delivering 

foreign assistance. 

To help provide increased visibility over USAID’s operating expenses and a 

more realistic accounting of the agency’s cost of doing business, we 

recommend that the USAID Administrator identify all administrative costs 

that primarily benefit the United States—whether paid for with operating 

expense funds or program funds—and report this information to the 

4

Primarily, funding provided for relief and reconstruction activities in Iraq and the global 

initiative to fight human immunodeficiency virus/acquired immune deficiency syndrome. 

5

U.S. General Accounting Office, Foreign Assistance: Strategic Workforce Planning Can 

Help USAID Address Current and Future Challenges, GAO-03-946 (Washington, D.C.: 

Aug. 22, 2003). 

Page 3 GAO-03-1152R USAID Operating Expenses 
Congress in its annual budget requests for operating expense account 

appropriations. 

In commenting on a draft of this report, USAID fully agreed with our 

recommendation. USAID also stated that it is well aware of the issues 

raised and is taking corrective actions to fundamentally restructure 

financing for the administration of foreign assistance to reflect the full cost 

of assistance delivery and match resources with changing circumstances. 

Background	 Until the mid-1970s, about two-thirds of USAID’s operating expenses were 

funded from appropriations to program accounts, and the rest were funded 

from a separate administrative expenses account.6 In 1975, the House 

Appropriations Committee noted that when USAID was first established, a 

large percentage of direct-hire employees implemented assistance projects 

as technical specialists, and their salaries and support were paid from 

program funds because they were considered to be working primarily for 

the benefit of the recipient country.

7 USAID staff working for the benefit of 

both the recipient country and the U.S. government were also paid from 

program funds, while the remaining staff—whose activities were primarily 

in the interest of the United States—were paid from the administrative 

expense account. The Committee noted that this distinction became 

blurred as USAID delegated more program implementation responsibilities 

to third parties and its direct-hire staff took on more of a monitoring role. 

The Committee concluded that operating expense activities paid from 

program funds did not really differ from those paid from the administrative 

expenses account and suggested the creation of a separate account that 

would reflect all operating expenses. 

In 1976, Congress began providing a line-item appropriation for operating 

expenses separate from USAID’s humanitarian and economic development 

assistance programs.8 The accompanying Senate report noted that USAID’s 

cost of doing business would be better managed if these funds were 

6

The administration’s budget request for fiscal year 1975 identified 11 separate funding 

accounts from which administrative expenses would be funded. 

7

H. Rept. 94-53. 

8

P.L. 94-330. 

Page 4 GAO-03-1152R USAID Operating Expenses 
separately appropriated.9 Congress authorized USAID’s separate operating 

expense account the following year.

10 

USAID’s criteria for determining the expenses to be paid from operating 

expense funds are based on guidance it has received from Congress as well 

as its assessment of who benefits from a particular activity. A 1977 

congressional report stated that “operating costs include not only the 

traditional ‘administrative expenses,’ but also the substantial cost of 

support and management of programs and projects (such as technical 

planning and management of specific projects, contracting, procurement of 

commodities, engineering services, and handling of trainees from 

abroad).”11 Congressional reports in the late 1970s directed USAID to fund 

the costs of all full-time staff in permanent positions from the operating 

expense account. 12 

We also note that since 1976 Congress has approved funding sources other 

than USAID’s operating expense account appropriation to pay USAID’s 

operating expenses. For example, in fiscal year 2003, USAID’s estimated 

appropriations for operating expenses are about 86 percent ($572.2 

million) of the agency’s total estimated obligations, and other sources 

comprise the remaining 14 percent ($95.8 million). Other congressional 

sources of operating expense funds have included specific uses of program 

funds and specific amounts in supplemental appropriations for 

humanitarian and reconstruction assistance—$21 million for fiscal year 

2003. 

In addition, local currency trust funds generated by the sale of U.S. 

commodities, which totaled more than $27 million at 18 overseas missions 

in fiscal year 2003, can be used for their operating expenses. However, the 

Office of Management and Budget offsets the use of trust funds from 

USAID’s estimated operating expense account requirements. In addition, 

USAID regulations allow missions to charge a portion of leased office 

space, utilities, and maintenance costs to program accounts based on the 

number of program-funded personnel employed at the mission. 

9

S. Rept. 94-704.


10P.L. 95-88, Sec. 129, 22 U.S.C. 2427.


11H. Rept. 95-240.


12H. Rept. 95-701 and S. Rept. 95-1194.


Page 5 GAO-03-1152R USAID Operating Expenses 
Enclosure I provides more detail on USAID’s sources of funding for 

operating expenses in fiscal year 2003. 

Trends in USAID’s 

Operating Expenses 

Over fiscal years 1995 to 2002, USAID’s total obligated operating expenses 

in constant 2003 dollars have ranged from a low of $595.7 million in 1998 to 

a high of $654.8 million in 1995, and USAID estimates total obligations in 

2003 will be about $668 million.13 However, as table 1 shows, the various 

administrative categories have varied considerably over this period with 

the net changes resulting in a modest total decline of about 1.2 percent 

between fiscal years 1995 and 2003. 

•	 The largest administrative category in USAID’s operating expense 

account is salaries and related support for U.S. direct-hire staff— 

accounting for 43 percent of USAID’s estimated operating expenses in 

fiscal year 2003. However, funds obligated for direct-hire personnel 

declined during fiscal years 1995 through 2001, primarily due to 

declining levels of direct-hire staff during this period. But, in fiscal years 

2002 and 2003, U.S. direct-hire personnel costs have increased over 

11 percent. USAID expects these costs to rise as it continues its recent 

hiring efforts. 

•	 Three other administrative categories—other staff costs, information 

technology, and rent—accounted for about 33 percent of USAID’s 

estimated operating expenses for fiscal year 2003. Since fiscal year 

1995, rent has increased more than 10 percent while other staff costs 

and information technology declined 6 percent and 3.4 percent, 

respectively. Although these expenses varied from year to year, the net 

change in total from fiscal year 1995 was a decline of less than 1 percent. 

•	 Twelve other administrative categories account for the remaining 

operating expenses—about 24 percent in fiscal year 2003. Several 

categories varied widely over this period. Most notably land and 

structures ranged from a high of about $21 million in fiscal year 2000 to 

a low of $241,000 in 1996. Beginning in fiscal year 2004, most funding 

for new buildings will be provided from a newly established Capital 

Investment Fund. 

13Including a $21 million supplemental for operating expenses that USAID has not allocated 

to its administrative categories. 

Page 6 GAO-03-1152R USAID Operating Expenses 
Table 1: Table 1: Operating Expense Obligations by Administrative Category, Fiscal Years 1995-2003 (Constant 2003 dollars in 

thousands) 

Fiscal years 

Percentage 

change 

Administrative category 1995 1996 1997 1998 1999 2000 2001 2002 2003a 1995-2003 

U.S. direct-hire personnel 

costsb $302.5 $292.3 $268.2 $255.1 $255.2 $254.3 $249.2 $264.5 $277.7 

Other staff costsc 90.4 87.3 79.6 77.2 77.3 67.8 74.4 78.5 85.0 

Information technologyd 68.2 56.0 47.7 60.0 61.7 64.1 83.8 78.6 65.9 

Rente 59.4 55.2 54.7 56.8 59.3 57.3 61.6 62.8 65.7 

Goods and services from 

government accountsf 24.7 24.3 38.0 28.5 29.0 31.7 29.4 33.5 38.2 

Other USAID-contracted 

servicesg 19.5 14.6 19.4 32.5 38.5 20.0 21.5 21.1 22.3 

Operation and 

maintenance 14.2 14.3 11.4 11.8 10.8 8.6 11.1 14.0 15.7 

Communications and utilities 20.8 19.1 17.3 18.9 14.1 12.9 13.0 12.1 13.8 

Land and structures 0.7 0.2 9.8 1.9 12.2 21.0 3.5 4.3 13.3 1,715.1 

Security 6.8 7.6 6.8 6.8 7.7 8.2 10.4 9.8 11.6 

Equipment 11.8 19.5 30.0 14.4 19.4 18.3 25.3 18.3 10.1 

Transportation of goods 15.9 13.0 10.5 11.7 10.8 10.5 9.9 9.2 9.9 

Supplies and materials 11.8 8.9 9.6 10.5 10.7 11.1 10.9 10.3 8.8 

Training 5.7 5.9 5.9 8.9 5.5 7.2 10.2 7.0 8.4 

Claims and indemnities 0.6 1.0 0.7 1.1 2.3 0.4 4.1 0.6 0.6 

Grants, subsidies, 

and contributors 1.7 1.7 2.4 0 0.2 0.4 1.5 1.2 0 -100.0 

Total

h $654.8 $621.0 $612.2 $595.7 $614.5 $593.9 $619.9 $625.8 $647.0 

Source: GAO analysis of USAID data. 

Note: USAID data are taken from its congressional budget justification documents. 

a

We did not include $21 million provided to USAID in supplemental funding for operating expenses in 

fiscal year 2003 because USAID has not allocated it among the administrative categories. 

b

Includes compensation, benefits, training, and travel expenses, such as home leave, post-assignment 

travel, and travel expenses incurred for training. 

c

USAID funds many of its overseas non-U.S. direct-hire personnel using operating expenses because 

their tasks are administrative in nature, such as providing support to the executive office. 

d

Includes costs for computer equipment, systems design and analysis, maintenance, and support. 

e

Includes domestic and overseas rental payments. 

f

Includes USAID’s portion of administrative costs shared by U.S. agencies with an overseas presence 

and paid primarily to the Department of State. 

Page 7 GAO-03-1152R USAID Operating Expenses 

-8.2 

-6.0 

-3.4 

10.5 

54.6 

14.2 

10.8 

-33.5 

71.7 

-14.3 

-37.8 

-25.6 

47.7 

-6.4 

-1.2 
g

Includes operation and maintenance of facilities and goods, security costs, equipment, and 

transportation of household goods. 

h

Totals may not add due to rounding. 

As shown in figures 1 and 2, between fiscal years 1995 and 2002, USAID’s 

program obligations decreased at a faster rate than operating expense 

obligations, with fluctuations during this period. In constant 2003 dollars, 

USAID’s program obligations decreased by more than 10 percent—from 

almost $7.8 billion in fiscal year 1995 to about $6.9 billion in fiscal year 

2002. In fiscal year 2003, USAID’s estimated program obligations increased 

almost 88 percent to $13 billion because of $4.2 billion in supplemental 

funds for, among other things, relief and reconstruction activities in Iraq 

and the global initiative to fight human immunodeficiency virus/acquired 

immune deficiency syndrome. However, USAID’s estimated operating 

expense account obligations for fiscal year 2003 did not increase at a 

similar rate. Including $21 million in operating expense funds provided by 

supplemental legislation, estimated operating expenses increased less than 

7 percent. 

Page 8 GAO-03-1152R USAID Operating Expenses 
Figure 1: Program Obligations, Fiscal Years 1995 to 2003 

Notes: USAID data are taken from its congressional budget justification documents and the 

Emergency Wartime Supplemental Appropriations Act of 2003 (P.L. 108-11). Fiscal years 1995 to 

2002 are actual obligations adjusted to constant fiscal year 2003 dollars. Fiscal year 2003 data are 

estimated amounts. Fiscal year 2003 operating expenses include $21 million provided by 

supplemental legislation. Program data for fiscal years 2000 to 2003 include disaster recovery, 

emergency response, and supplemental funds. Program funding obligations sources include 

development assistance; child survival and health; development fund for Africa; international disaster 

assistance; transition initiatives; economic support funds; support for Eastern European democracy; 

Freedom Support Act; Public Law 480; Iraq relief and reconstruction fund; and credit program funds. 

Page 9 GAO-03-1152R USAID Operating Expenses 
Figure 2: Operating Expense Obligations, Fiscal Years 1995 to 2003 

Note: See figure 1 notes. 

As shown in figure 3, from fiscal years 1995 to 2002, USAID’s operating 

expense obligations fluctuated as a percentage of program obligations but 

averaged about 8.5 percent. In fiscal year 2003, estimated operating 

expense obligations dropped to about 5 percent of estimated program 

obligations, including the supplemental funding. 

Page 10 GAO-03-1152R USAID Operating Expenses 
Figure 3: USAID’s Operating Expense Obligations as a Percentage of Program 

Obligations, Fiscal Years 1995 to 2003 

Note: See figure 1 notes. 

USAID’s Operating 

Expense Account Does 

Not Include All 

Administrative Costs 

USAID’s operating expense account does not fully reflect the agency’s cost 

of doing business primarily because the agency pays for some 

administrative activities done by contractors and other nondirect-hire staff 

with program funds. As we reported in August 2003, as the number of U.S. 

direct hire foreign service officers has declined over the years, USAID 

missions have often hired personal services contractors—usually foreign 

nationals—to manage development activities and provide technical project 

support.14 Approximately 60 percent of USAID’s staff are foreign national 

personal service contractors. Many of these nondirect-hire personnel are 

engaged in activities that directly support USAID programs and are paid 

with program funds. 

14GAO-03-946. 

Page 11 GAO-03-1152R USAID Operating Expenses 
Many nondirect-hires perform administrative duties that directly benefit 

the United States, and it is often difficult to distinguish between the 

administrative duties they perform and those done by U.S. direct-hire 

personnel. These staff can be paid with program or operating expense 

account funds. In four missions we visited—the Dominican Republic, Mali, 

Peru, and Senegal—some foreign national personal services contractors 

were financial and procurement analysts, secretaries, and drivers. 

Although these analysts and support staff performed primarily 

administrative tasks for USAID’s benefit, some were assigned to specific 

technical teams and their salaries and support costs were paid from 

program funds because USAID considered their services directly allocable 

to these activities and did not report them as operating expenses. 

According to USAID officials, based on data recently collected from its 

missions, USAID estimates that about $350 million in program funds will be 

used to pay for personal services contractors performing administrative 

functions overseas in fiscal year 2003.

15 

Institutional contract staff also provide administrative and technical 

services in support of USAID programs. In 2002, for example, USAID 

estimated that 758 institutional contractor staff were involved in the 

administration of foreign assistance at an estimated cost of $95 million. Of 

this total staff, 450 positions were funded from operating expense 

appropriations ($56 million), and 308 positions were funded from program 

funds ($39 million).16 USAID is continuing its review of institutional 

contractors to decide how to characterize their work. 

A 2002 USAID team examining USAID’s operating expense account found 

that most of the agency’s evaluations and analyses have been paid with 

program funds, based on the rationale that these activities are intended to 

enable the agency to better serve its “ultimate beneficiaries.” But this may 

not be what Congress intended. 

15One senior level USAID program planning officer told us that about 10 to 15 percent of 

program funds may be a more realistic estimate of USAID’s cost of doing business 

(compared with the 8.5 percent average since 1995). 

16According to USAID, these figures were developed as part of a staff study of institutional 

contractors and were as of September 30, 2002. 

Page 12 GAO-03-1152R USAID Operating Expenses 
•	 The team’s report stated that “although strategy development, project 

design, evaluation and other activities relate to the agency’s cost of doing 

business, in the longer run they are essential building blocks of agency 

operations and are necessary for program oversight. Ultimately, the impact of 

improved strategies, design, and projects has an impact on the agency’s 

beneficiaries. In that sense, there clearly is a rationale for providing program 

funding for these activities.17” 

•	 In contrast, a USAID attorney assisting the team noted that a 1980 

Senate Appropriations Committee report stated that only such planning 

and evaluation activities that are project specific should be paid with 

program funds, but that activities with a primary objective of serving the 

agency, including analyses for development assistance policy planning, 

were part of the cost of doing business. 

Cognizant USAID officials contend that congressional intent has shifted 

and that from 1980 to the present, Congress has increasingly encouraged 

the agency to use program funds to support certain administrative costs. 

However, these officials also stated that the increased reliance on program 

funded staff for some administrative activities further demonstrates the 

need to restructure how operating expenses are accounted for to better 

reflect USAID’s cost of doing business. 

Conclusion	 Since 1976, Congress has provided a separate appropriation for USAID’s 

operating expenses and, over the years, has approved additional funding 

sources for operating expenses to separate administrative costs from 

USAID’s humanitarian and development assistance programs. However, as 

U.S. direct-hire staff levels have declined, overseas missions have hired 

personal services and institutional contractors and other nondirect-hire 

staff to manage development activities and perform various administrative 

duties, but pay for some of these services with program funds. But USAID 

has not fully identified or reported the extent of these costs. Therefore, 

separating USAID’s cost of doing business from its humanitarian and 

development programs is not always done. As a result, the operating 

expense account and other funds USAID has available for operating 

expenses do not fully reflect the cost of delivering foreign assistance. 

17U.S. Agency for International Development/Bureau for Policy and Program Coordination, 

USAID’s Operating Expense Account: Current Practices and Planned Reforms 

(Washington, D.C.: Oct. 7, 2002). 

Page 13 GAO-03-1152R USAID Operating Expenses 
Recommendation for 

Executive Action 

To help provide increased visibility over USAID’s operating expenses, 

better reflect what USAID spends on program administration, and provide 

a more realistic accounting of the agency’s cost of doing business, we 

recommend that the USAID Administrator identify all administrative costs 

that primarily benefit the United States—whether paid for with operating 

expense funds or program funds—and report this information to the 

Congress in its annual budget requests for operating expense account 

appropriations. Such an accounting should form the basis of USAID’s 

annual budget request for operating expense funds. 

Agency Comments	 USAID provided written comments on a draft of this report (see enc. II). It 

fully agreed with the recommendation. USAID acknowledged that the 

current structure of the operating expense account does not serve 

workforce planning needs or foreign policy objectives because (1) staffing 

decisions are often made according to funding source rather than 

workforce requirements and (2) as a result, the heavy reliance on shortterm contractors has limited USAID’s capacity to respond to foreign 

assistance needs. 

USAID also stated that it is well aware of the issues raised in the report and 

is taking corrective action. USAID noted that, within the past 18 months, it 

has completed assessments of operating expenses and overseas staffing, a 

survey of program-funded personnel, and an approach for full costing of 

assistance at a unit level. It has also initiated a long-term assessment of 

human resources. As a result of these efforts, USAID is reviewing ways to 

fundamentally restructure financing for the administration of foreign 

assistance to reflect the full cost of assistance delivery and match 

resources with changing circumstances. 

In addition, USAID officials provided clarification of certain technical 

matters that we have incorporated into this report, as appropriate. 

Scope and 	 To examine trends in USAID’s spending for operating expenses and 

program activities since 1995, we analyzed obligations data reported by Methodology	 USAID in its annual budget justification documents. We converted 

obligations for operating expenses and program activities into constant 

fiscal year 2003 dollars to adjust for inflation and better reflect the agency’s 

purchasing power during this period. We also met with cognizant budget 

officials at USAID to better understand the reported operating expense and 

Page 14 GAO-03-1152R USAID Operating Expenses 
program funding data. We did not verify the accuracy of USAID’s reported 

data. 

To determine whether USAID’s operating expenses reflect its cost of doing 

business, we reviewed USAID reports and annual budget justifications and 

met with knowledgeable officials in USAID’s Bureau for Policy and 

Program Coordination, the U.S. Department of State, and the U.S. Office of 

Management and Budget. In conjunction with other work,18 we conducted 

fieldwork at seven overseas missions—the Dominican Republic, Ecuador, 

Egypt, Mali, Peru, Senegal, and the West Africa Regional Program in Mali.

19 

We reviewed mission staffing reports to determine whether staff were 

funded from the operating expense account or program funds and 

discussed the duties of personnel with cognizant mission officials. 

Our review was conducted from May through September 2003 in 

accordance with generally accepted government auditing standards. 

We are sending copies of this report to appropriate congressional 

committees, the Administrator of USAID, the Secretary of State, and the 

Director of the Office of Management and Budget. We will also make 

copies available to others upon request. In addition, this report will be 

available at no charge on our Web site at http://www.gao.gov. 

18GAO-03-946. 

19We also examined documents and interviewed officials at USAID’s mission to Indonesia at 

its temporary location in Arlington, Virginia, following its evacuation in October 2002. 

Page 15 GAO-03-1152R USAID Operating Expenses 
If you or your staff have any questions concerning this report, please 

contact me at (202) 512-4268 or Al Huntington, Assistant Director, at (202) 

512-4140. Other key contributors to this report were Kimberley Ebner, 

Emily Gupta, and Audrey Solis. 

Jess T. Ford, Director 

International Affairs and Trade 

Page 16 GAO-03-1152R USAID Operating Expenses 
Enclosure I: Description of Sources of 

Funding for USAID’s Operating Expenses 

Fiscal Year 2003 

Since 1976, Congress has approved funding sources other than the U.S. 

Agency for International Development’s (USAID) operating expense 

account appropriation to pay for operating expenses. Although USAID 

reports these other funds as operating expenses, they are not part of its 

single budget item appropriation. As shown in table 2, for example, in 

fiscal year 2003, other sources comprised 14.2 percent ($95.8 million) of 

what USAID is estimating as operating expense obligations. 

Table 2: USAID’s Estimated Obligations for Operating Expenses in Fiscal Year 2003 

by Sources of Funding (Dollars in millions) 

Funding source Amount Percent 

Annual appropriation $572,200 

Unobligated balance 34,231 

Local currency trust funds 27,557 

Supplemental funding 21,000 

Authorized program funds 7,417 

Reimbursements 5,600 

Total $668,005 99.8a 

Source: USAID fiscal year 2004 congressional budget justification documents and the Emergency Wartime Supplemental 

Appropriations Act of 2003 (P.L. 108-11), which provided supplemental operating expense funding. 

a

Does not add to 100 percent due to rounding. 

Annual appropriation: These are funds for which USAID receives new 

budget authority every fiscal year and do not include supplemental 

appropriations for operating expenses obtained during the course of the 

fiscal year. 

Unobligated balance: The unobligated balance is of any unobligated funds 

that USAID has the authority to transfer to the following fiscal year’s 

operating expense account. 

Local currency trust funds:

20 U.S. commodity import programs normally 

generate this type of funding. In fiscal year 2003, 18 USAID missions have 

local currency trust funds. The Egypt mission’s trust fund is the largest 

20USAID cites a recurring provision in its appropriations bills as legal authority to use local 

currency trust funds. For fiscal year 2003, see Public Law 107-115, section 529. 

Page 17 GAO-03-1152R USAID Operating Expenses 

85.6 

5.1 

4.1 

3.1 

1.1 

0.8 
Enclosure I: Description of Sources of 

Funding for USAID’s Operating Expenses 

Fiscal Year 2003 

(almost $73 million in January 2003), and the mission uses it to pay for 

training, housing, and dependents’ education. 

Supplemental funding: Supplemental legislation for an emergency 

response or large-scale reconstruction generally specifies an amount that 

USAID may use as operating expenses in administering such activities. 

Authorized program funds: Some specific program funding can be 

transferred to the operating expense account. The amount varies 

according to different rules governing the transfer of program funding from 

each account. For example, USAID can transfer a limited amount of 

program funds to the operating expense account to finance travel to 

countries with USAID activities but no USAID field presence. Additionally, 

USAID has the authority to transfer larger program funding amounts from 

other accounts to the operating expense account, not to exceed 10 percent 

of the originating program account.21 But this action requires presidential 

approval and is rarely undertaken. 

Reimbursements: These funds are primarily generated internally by 

USAID. Examples include reimbursements to USAID from the its Office of 

the Inspector General or the Development Credit Program—units that 

receive separate operating expense appropriations—for services by 

USAID, such as computer services and rent. Proceeds from the sale of 

equipment overseas are also included in this category. 

21Foreign Assistance Act of 1961, as amended, title 22, section 610a. 

Page 18 GAO-03-1152R USAID Operating Expenses 
Enclosure II: Comments from the Agency for 

International Development 

Page 19 GAO-03-1152R USAID Operating Expenses 
Enclosure II: Comments from the Agency for 

International Development 

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Enclosure II: Comments from the Agency for 

International Development 

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