The Treasury first began its technical assistance program in 1990 in Central Europe and then expanded it to include the countries of the former Soviet Union. The Treasury receives funds from USAID to pay for the cost of advisors. For fiscal years 1990-98, USAID transferred about $134.2 million to the Treasury to support the Treasury program. The Treasury had 39 resident advisors, as of September 1998, who covered 13 Central Europe or former Soviet Union countries. There are regional advisors in Budapest, Hungary, who are technical experts and assist where they are needed. In addition, the Treasury uses short-term advisors based in the United States. The overall strategy of the Treasury advisor program is to provide direct, technical advice to senior host-government officials on the development of laws and administrative procedures and institutions to promote fiscal stability, efficient resource allocation, transparent and democratic processes, and private-sector growth. The Treasury tries to obtain advisors who are experts in each of its five program areas. The program areas are (1) tax policy and administration, which is to help countries establish tax systems that are fair and objective and that generate necessary revenues for government operations; (2) financial institutions, policy, and regulation, which is to develop policies and activities relating to privatization of state-owned commercial banks and improve their management; (3) budget policy, formulation, and execution, which is intended to help strengthen ministries of finance by helping introduce modern budget processes; (4) government debt issuance and management, which is to provide advice to host-government officials on developing markets for the sale of government securities; and (5) law enforcement, which is to enhance enforcement capabilities of the government to address crimes that can undermine privatization, developing financial systems, and other economic reforms. The first four areas are each managed by an associate director in Washington, D.C., and a senior advisor in Budapest. The fifth program area is managed by a senior advisor based in Washington, D.C. The Treasury plans worldwide expansion of its advisor program. In the Omnibus Appropriations Act of 1999 (P.L. 105-277), Congress provided $1.5 million to the Treasury for its own advisor programs in countries outside Central Europe and the former Soviet Union. The programs in Central Europe and the former Soviet Union will continue to be funded through transfers from USAID. Treasury advisors’ contributions have ranged from the provision of policy advice on major initiatives, such as reform of a tax code or a budget system, to discrete projects such as the development of comparative analyses of how selected countries restructured insolvent banks, to the completion of a model to forecast gross domestic product (GDP). For the most part, Russian and Romanian officials complimented the Treasury advisors’ work. The following paragraphs contain a description, by country, of the Treasury advisors’ activities in Russia and Romania, including the Treasury program areas and specific activities and tasks. In Russia, OTA is providing technical assistance in three program areas—tax policy and administration, financial institutions, and government budgets. The development of a sound tax system to support economic initiatives and reforms in Russia is a high U.S. government priority. According to OTA’s Associate Director, Tax Advisory Program, the advisors’ most concerted efforts were in the preparation of draft tax legislation to reform the Russian tax code. In the tax policy and administration area, the Treasury advisors have helped analyze a proposed Russian tax code and have prepared memos for Russian officials on issues that included tax compliance, revenue forecasting estimates; property and business taxation, depreciation and investment issues, and formulation of a Russian-Cyprus tax treaty. As a general rule, advisors are not physically located within government ministries in Russia. Although one advisor told us that he did not have direct, daily contact with host-government officials and had received little feedback on how useful his work has been, the Russian Vice Minister of Finance told us that overall the Treasury’s tax advisors have been helpful to the State Tax Service and were completing a tax model for the Ministry. In addition, the Deputy Minister of Taxation noted that U.S. advisors from the Treasury and USAID were helpful in providing advice and assistance in all areas of tax aid. At the time of our work, the Russian government had not approved major tax reforms. OTA’s Associate Director, Tax Advisory Program, told us he believed that the advisors should continue providing tax assistance because tax reform is critical to Russia’s economic development. The financial institutions advisor in Russia was providing assistance on several banking issues, especially on how to deal with banking insolvencies—a widespread problem in Russia. Since the first financial institutions advisor was sent to Russia in December 1997, the objectives have evolved. Initially, the advisor was to work with the bank rehabilitation department of the Central Bank and focus on (1) identifying problems in the banking system, (2) providing recommendations for an early warning system regarding banks in financial trouble, and (3) making recommendations for dealing with banking problems before they reached a crisis stage. His Russian counterpart’s superior at the Central Bank was removed from office 2 months later, and the replacement official wanted assistance in other areas. Under the new official, the advisor was to (1) advise/prepare drafts of federal laws, programs, and regulations on bank restructuring, rehabilitation of problem banks, and liquidation of insolvent banks; (2) advise on establishing and managing a deposit guaranty system; and (3) advise and assist on training staff in bank rehabilitation and restructuring. At the time of our visit, the advisor was completing a comparative analysis of how 12 countries restructured their insolvent banks, to identify “lessons learned” for the Russian Central Bank. A Russian Central Bank official said he was satisfied with the assistance being provided by the Treasury advisor. This official told us that the Bank recognizes that the Treasury had a wealth of information on banking in other countries, that relations were good with the Treasury advisor, and the Bank has benefited from Treasury seminars, including one on the U.S. Resolution Trust Corporation. He said he and the advisor normally meet once a week and that there have been no Bank requests for assistance to which the Treasury advisor has not responded. The three budget advisors in Russia have primarily focused on devising statistical measures that provide data for budget formulation. A resident advisor who is a macroeconomist had spent most of his time developing a model to forecast GDP. Another advisor developed a consumer sentiment index to measure the attitudes and expectations of the Russian consumer, which provides indicators of potential economic growth and is relevant to budget planning. This particular budget advisor’s task at the time of our fieldwork was to analyze and monitor the savings behavior of the population for use by the Ministry of Finance. A third budget advisor prepared a study on standards of living in Russia that was discussed in hearings by the budget committee of the upper house of the parliament. The advisor is now completing a study for the budget committee on the relationship between standards of living and the allocation of federal funds among the regions. The Russian Vice Minister of Finance praised the assistance of the macroeconomist and told us that he uses the GDP model on a daily basis. The Vice Minister was highly complimentary of the advisors’ work on the consumer sentiment index. Also, the Chief of Staff of the parliament budget committee said the advisor’s report on standards of living in Russia was appreciated by the committee and by regional authorities throughout Russia. In Romania, OTA is providing assistance in four program areas—tax policy and administration, budgets, government debt issuance, and law enforcement. OTA suspended advisors’ work on financial institutions because it concluded that the government was not ready to move forward on reforms. In Romania, the tax advisor has provided assistance on ways to improve the Romanian tax system. The tax advisor had prepared a plan for a new national tax administration system that included recommendations for restructuring the lines of authority over tax administration at both the central government and local levels; identified the need for standard manuals, procedures, and processes for tax administration activities; and suggested the creation of a taxpayer service section to assist and educate the public and a training academy that would use a standard curriculum to teach procedures and methodologies of functions such as investigation and collection to tax administration staff. According to a cognizant official, the Ministry was undecided whether certain components of the proposed plan would be fully implemented. The tax advisor also has been helping Ministry staff prepare manuals for large audits and collections. In addition, she has provided comments on a proposed income tax law. The advisor told us that she spends about half of her time on her main assignment—the tax administration reorganization project—with the remaining time spent providing advice and assistance in other areas. For example, she told us that she has both arranged and taught courses for the Ministry’s tax controls department, presented a general management practices seminar, and was assisting in the development of a forms design workshop. She also organized study tours for Ministry staff to observe how tax administration is done in other countries, facilitated the participation of Ministry of Finance tax police in some of the Treasury’s law enforcement assistance training, and advised Ministry staff on assistance they could seek from other sources. The tax advisor, along with the Treasury’s budget advisor, was asked by the Finance Minister in 1998 to help prepare a reorganization plan for the entire Ministry of Finance. Their advice was used to develop a plan to streamline the management structure and eliminate some management positions that had been filled by political appointees. However, before more of the plan could be implemented, the Minister was replaced and the reorganization plan was suspended. The advisor told us that the new Minister did not accept the proposed changes and asked her to develop a new reorganization plan. A Ministry of Finance official, who was the liaison between the Treasury advisors and the Ministry officials, said he was very pleased with the advisor’s work. Also, the Romanian Ministry of Finance official in charge of information systems told us he was very pleased with the management seminar that the tax advisor had prepared for his staff.